Djamshid Mahban

National Labor Relations Board - Board Decisions

Nov 5, 1987

286 N.L.R.B. 809 (N.L.R.B. 1987)

DA VINCI FASHIONS
Da Vinci Fashions , Inc.; VIP Enterprises d/b/a
Princess Isabella Da Vinci; Princess Vera
Nocce; and Alexander Mahban a/k/a Djamshid
Mahban and General Sales Drivers , Delivery
Drivers and Helpers , Local #14, affiliated with
International Brotherhood of Teamsters , Chauf-
feurs, Warehousemen and Helpers of America.
Case 31-CA-11733
5 November 1987
SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN DOTSON AND MEMBERS
JOHANSEN AND 13ABSON
On 28 April 1987 Administrative Law Judge
Clifford H. Anderson issued the attached supple-
mental decision." The General Counsel filed excep-
tions and a supporting brief, and counsel for Re-
spondents Princess Vera Nocce and Alexander
Mahban a/k/a Djamshid Mahban filed an answer-
ing brief. The Respondents filed a motion to strike
the General Counsel's brief and the General Coun-
sel filed a response to the Respondents' motion.2
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has considered the supplemental deci-
sion and the record in light of the exceptions and
briefs and has decided to affirm the judge' s rulings,
findings, and conclusions and to adopt the recom-
mended Order.3
ORDER
The recommended Order of the administrative
law judge is adopted and the backpay specification
to all parties is dismissed.
' On 16 December 1982 Administrative Law Judge Timothy D
Nelson issued his decision in the underlying unfair labor practice case
On 18 January 1983 the Board adopted that decision in an unpublished
order The order was then enforced, without modification, by the United
States Court of Appeals for the Ninth Circuit on 16 December 1983
2 The Respondent 's motion to strike the General Counsel's brief in sup-
port of her exceptions because it exceeded the 50-page limit is denied
Counsel for the General Counsel states in her response to the Respond-
ents' motion that the total page length of the General Counsel 's brief is
46 pages, an actual count revealed the brief was 47 pages In either case
the brief meets the requirements of Sec 102 46(j) of the Board 's Rules
and Regulations
2 In adopting the judge's recommended Order we emphasize the par-
ticular and highly unusual circumstances of this case
Hope Singer, Esq., for the General Counsel.
Lester A. Berman, Esq. (Gibbons & Berman), of Las
Vegas, Nevada, for Respondents Princess Vera Nocce
and Alexander Mahban.
Scott Mahoney, Esq. (Rogers, Moore & Mahoney), of Las
Vegas, Nevada, for Respondent VIP Enterprises.
SUPPLEMENTAL DECISION
STATEMENT OF THE CASE
809
CLIFFORD H. ANDERSON, Administrative Law Judge.
On 18 January 1983 the Board in an unpublished order
approved the 16 December 1982 decision of Administra-
tive Law Judge Timothy D. Nelson in the matter of Da
Vinci Fashions, Inc. and General Sales Drivers, Delivery
Drivers and Helpers, Local #14, affiliated with Interna-
tional Brotherhood of Teamsters, Chauffeurs, Ware-
housemen and Helpers of America. That Order was en-
forced without modification by the United States Court
of Appeals for the Ninth Circuit on 16 December 1983.
The Order directed Da Vinci Fashions, Inc., inter alia, to
take the following affirmative action:
(2)(a). Immediately reopen the manufacturing oper-
ation formerly done under the business name "Da
Vinci Fashions" and conduct it as it was operated
immediately before November 20, 1981; and offer
immediate, full and unconditional reinstatement to
the persons named below to their former position
within such reopened operation, without prejudice
to their seniority or other rights and privileges; and
make them whole, with interest, for losses they suf-
fered as a result of its unlawful changes beginning
on November 20, 1981 , including its termination of
them on or about November 23, 1981 in connection
with its unlawful closing of said manufacturing op-
eration. The persons to whom such reinstatement
must be offered and other make whole relief pro-
vided are:
Maria Lords Norte Aguirre
Therese A. Cordasco
Jenny L. Curcio
Pauline Damelio
Kathleen Ann Duffy
Sandra Hovi
Rosann Romano
Following enforcement of the Order several disputes
arose regarding its provisions and their consequences to
the Respondents. As a consequence of these disputes, the
Regional Director for Region 31 of the National Labor
Relations Board issued a backpay specification and
notice of hearing on 29 January 1986 and amended that
specification on 3 March 1986. Timely answers were
filed by Respondents Da Vinci Fashions, Inc., Princess
Vera Nocce, and Alexander Mahban. Trial opened on 18
March 1986 and, following a lengthy continuance, was
concluded in 17 days of trial spread over the months of
August and September 1986.
On the entire record, including able posthearing briefs
submitted by the General Counsel, Respondents Princess
Vera Nocce and Alexander Mahban, jointly, and Re-
spondent VIP Enterprises, and from my observation of
the witnesses and their demeanor, I make the following
286 NLRB No. 89
810 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
FINDINGS AND CONCLUSIONS
I. ISSUES AND CONTENTIONS
The instant backpay specification presents a variety of
complex legal issues involving different parties with sub-
stantially different stakes in the resolution of those issues.
The original unfair labor practice litigation named as its
single Respondent the Nevada corporation, Da Vinci
Fashions . That corporation was obligated in the original
order to reopen its facility and make certain individuals
whole . The backpay specification named Da Vinci Fash-
ions , Inc. and seeks an order making employees whole
for the period 23 November 1981-31 December 1985 re-
serving later periods for subsequent litigation as neces-
sary . As will be discussed in detail, infra, Da Vinci Fash-
ions while technically retaining a corporate life, is for all
practical purposes defunct . The backpay specification
names three other Respondents . It seeks to jointly and
severally obligate two corporations , VIP Enterprises and
Princess Vera Nocce , to the obligations of Da Vinci
Fashions, including the reopening order. Further, the
General Counsel seeks to pierce the corporate veil with
respect to Da Vinci Fashions and jointly and severally
obligate an individual , Alexander Mahban , to Da Vinci
Fashions ' obligations under the original order and the
backpay specification.
Da Vinci Fashions , the original Respondent, is a
Nevada State corporation wholly owned by a British
Columbia , Canada corporation , Vogue Fashions, Inc.'
Vogue Fashions , the Canadian corporation , also appar-
ently remains in corporate existence , but has been denied
trading status under appropriate Canadian law and is un-
disputably defunct . Service was effected on Da Vinci
Fashions by service on the attorney who represented the
entity in the original unfair labor practice proceeding.2
That counsel appeared at the hearing , accepted service
on behalf of his former client , filed an answer , and, on 14
April 1986, formally withdrew from the case . Counsel's
withdrawal letter contained the following statement:
This [withdrawal] is based on the fact that there has
been virtually no communication between [Da
Vinci Fashions] and the undersigned or his office,
that [Da Vinci Fashions] is defunct and its parent
corporation 's trading privileges on the Vancouver-
British Columbia exchange have been suspended.
There are no current officers or directors with
whom the undersigned can communicate.
Neither Da Vinci Fashions nor Vogue Fashions partici-
pated further in the proceedings and it seems certain that
any order directed against either would be without prac-
tical significance or effect absent some mutual obligor.
Respondents Princess Vera Nocce and Alexander
Mahban each appeared and participated throughout the
backpay specification hearing contending that the Gener-
al Counsel 's theories of derivative liability were without
factual or legal merit . Respondent VIP Enterprises ap-
1 This corporate name may have been changed at a later date
2 See the Board 's doctrine as set forth in Hopkins Hardware, 280
NLRB 1296 (1986)
peared specially through counsel in the middle of the
proceeding challenging service on it of the backpay
specification . The issue of service was litigated separately
by the General Counsel and Respondent VIP Enter-
prises, with VIP Enterprises declining to otherwise par-
ticipate or defend itself on the merits.9
The circumstances described above present separate
issues that may be best addressed seriatim.
H. THE OBLIGATIONS OF DA VINCI FASHIONS
A. The Events Involving Da Vinci Fashions
Alexander Mahban came to the United States in the
early 1970s and became involved in various enterprises
selling Persian and Oriental products , including rugs, in
Las Vegas, Nevada . As part of his commercial enter-
prises , he leased a facility at 1304 Las Vegas Boulevard
South, Las Vegas , Nevada. Over time Alexander Mah-
ban's family joined him in the Las Vegas area . Alexander
Mahban 's father , Safar Mahban , came to hold the right
to use Butterick Fashion Magazine 's trade name , "Vogue
patterns," in the United States . These rights were later
transferred to Alexander Mahban . Alexander Mahban de-
termined it would be profitable to franchise retail fashion
shops selling garments under the Vogue name pursuant
to the trademark rights he acquired from his father.
After consultation with others , a Nevada Corporation,
Vogue, Inc., was established in 1977, with Alexander
Mahban as president . Alexander Mahban and his family
held the bulk of shares in the corporation . As part of the
consideration for obtaining these holdings , Mahban's
rights to use of the "Vogue" name were assigned to a
Nevada corporation . As part of the ongoing plan for
capitalizing the franchising venture , a Canadian corpora-
tion , Vogue Fashion , Inc., of Canada, was formed. The
Nevada corporation was wholly acquired by the Canadi-
an corporation in exchange for stock . Alexander Mahban
thereby acquired a substantial interest in the Canadian
corporation.
Prior to publicly trading shares of the Canadian corpo-
ration and thereby raising needed capital, it was deter-
mined that the corporation must be an operating busi-
ness .4 Accordingly, the Nevada corporation acquired
garment manufacturing equipment and a modest garment
factory was established at the Las Vegas Boulevard facil-
ity. Manufacturing actually started on a limited basis in
1979. In 1980 the Canadian corporation started publicly
trading its stock and Alexander Mahban in late 1980 so-
licited and advertised for individuals interested in obtain-
ing Vogue brand retail garment franchises . Approximate-
ly 2000 applications were received in a short time. It ap-
peared that the venture was to be a brilliant success and
a financial triumph. In early 1981, however , the right of
the Nevada corporation to use the Vogue name was
3 If VIP Enterprises prevails in its argument that service of the back-
pay specification was not effected until midway through the lengthy liti-
gation , all parties agreed that due process would require that VIP Enter-
prises be afforded a de novo hearing on the backpay allegations against
it
* Apparently securities regulations made this necessary
DA VINCI FASHIONS 811
challenged by a separate corporation, Conde Nast, in a
trademark infringement lawsuit.5
The settlement of this lawsuit in May 1981 resulted in
a discontinuance by the Canadian and Nevada corpora-
tions of the use of the Vogue name as well as an aban-
donment by them of any claim of right to use the Vogue
name either on garments or in retail store franchising. As
part of the settlement the Nevada corporation's name
was changed from Vogue, Inc. to Da Vinci Fashions,
Inc. on 10 June 1981.
The result of these actions was a total collapse of the
franchising plan. While the new corporate name, Da
Vinci, was initially held out as an alternative to the
Vogue name, it proved unsuccessful. The Vogue name
had been the critical drawing factor for potential franchi-
sees . The Canadian corporation, faced with a loss of the
use of the Vogue name and the end of any possibility of
franchising, suspended trading in 19131. Alexander
Mahban testified that the Canadian corporate officials re-
signed and that bankruptcy was discussed. The Nevada
corporate officers, however, determined to proceed
under the new corporate name.
In 1981 Da Vinci Fashions virtually exclusively mar-
keted its manufactured garments through two retail fa-
cilities in Las Vegas.6 One was operated by VIP Enter-
prises . That entity was incorporated on 10 March 1980
and opened its store under the name Princess Isabella Da
Vinci about February 1981. A separate corporation,
Princess Vera Nocce, opened its retail facility in the
same shopping mall on 19 June 1981. After the June 1981
corporate name change, Da Vinci Fashions suffered con-
tinuing losses on a massive scale . The financial records in
evidence reveal the manufacturing operation had no pos-
sible prospect of becoming profitable, rather its relatively
small and shrinking retail base and its ongoing operating
losses pointed to a financial disaster.
In November 1981 the events that underlay the unfair
labor practice case in the instant matter occurred. As set
forth in Judge Nelson's decision, the manufacturing em-
ployees of Da Vinci Fashions selected a union to repre-
sent them. About 23 November 1981, Da Vinci Fashions
closed its manufacturing facility and discharged the
seven individuals named above all in violation of Section
8(a)(1), (3), and (5) of the Act.7
On 5 December 1981 a previously scheduled stock-
holders meeting of both the Canadian and Nevada cor-
porations was held. By vote of the stockholders present
the decision to close the manufacturing facility was rati-
fied and it was decided that all corporate operations
would be discontinued. Thereafter, the inventory of Da
Vinci Fashions was sent to the retail outlets described
above. Certain revenues were collected and certain liabil-
5 Conde Nast, publisher of the magazine "Vogue," argued that the
Vogue name in association with garments belonged exclusively to it The
rights, if any, that Vogue Fashions, Inc held, Conde Nast argued, were
limited to dress patterns rather than garments Insofar as the record re-
flects, the lawsuit was settled in a manner consistent with Conde Nast's
theory of the case
A few sales were also made to other shops A separate attempt to
market garments through a wholesale mart in California was attempted,
but was later abandoned
' These events and their consequences will be discussed in greater
detail, infra
ities were reduced. In essence the corporations were
abandoned. The final result after the shutdown was that
substantial corporate liabilities remained unsatisfied, a
condition that existed at the time the instant hearing
closed.
B. The Board's Order
Based on the original charge, the General Counsel
issued a complaint against the Nevada corporation re-
garding the November 1981 events . The matter came on
to hearing before Judge Nelson on 2 November 1982,
i.e., almost 1 year after the corporation had ceased busi-
ness . At that hearing, Da Vinci Fashions , the Nevada
corporation, appeared through counsel and, following
unsatisfactory attempts to settle the case during off-the-
record negotiations with the General Counsel and the
Charging Party, entered into an agreement whereupon it
withdrew its answer and admitted the allegations of the
amended complaint . The then current financial state of
Da Vinci Fashions was only indirectly discussed on the
record. Judge Nelson's decision contains the following
reference at ALJD p. 12:
I note as well that Respondent has conceded
through Counsel at trial that a re -opening remedy
may appropriately be ordered as consistent with the
undenied complaint allegations even though Coun-
sel further argued that , if such a remedy were or-
dered, "it would be a physical and/or financial im-
practicality or impossibility to do so due to the fin-
anical status of the corporation." But where the
question of Respondent 's financial health was not
litigated, the "impracticality" issue must necessarily
be deferred to the compliance stage , and may not
be resolved in Respondent 's favor at this point.
C. The Arguments of the Parties Regarding the
Liability of Da Vinci Fashions Under the Backpay
Specification s
The General Counsel assumes, with very little, if any,
argument on brief, that Da Vinci Fashions was obligated
to reopen its facility during the entire backpay period
and that, consequently , its backpay obligation continued
for the entire period . Thus, the General Counsel assumes
any financial impracticality defense is without merit.9
Respondents Princess Vera Nocce and Alexander
Mahban argue with force that Da Vinci Fashions bears
no monetary liablity under the Board's order given the
events subsequent to the closure . 10 Thus these Respond-
8 Respondents did not challenge the backpay specification either as to
the gross income, interim earnings , or expenses of particular discnmina-
tees
9 The backpay specification seeks backpay through calendar year 1985
with an explicit reservation that subsequent backpay specifications may
become necessary to liquidate later backpay that, the General Counsel al-
leges, will continue until the facility is reopened and the discrimmatees
are offered reinstatement
10 These same Respondents also argued that the Board's original order
should not be binding on them because the entire proceeding was in the
nature of a default judgment against Da Vinci Fashions, undertaken at a
time when Da Vinci Fashions had in essence no real stake in the litiga-
Continued
812 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
ents argue that Da Vinci Fashions was in such dire finan-
cial straits at the time of the shutdown that "backpay for
wrongfully discharged employees would have terminated
upon the date of the shutdown." They further argue, in
the alternative,
that the liability for back pay terminated on Decem-
ber 5, 1981, and that any back pay award rendered
by this tribunal, if any, should only be predicated
on wages which could have been earned by the dis-
criminatees between the time of the adjudicated
unfair labor practice about November 22, 1983
through December 5, 1981.
Thus, Respondents Princess Vera Nocce and Alexander
Mahban seek to establish that, at a date coterminous with
the unfair labor practices, or at least as of 5 December
1983, the plant shutdown would have occurred in any
event terminating all obligations of Respondent Da Vinci
Fashions to make offers of reinstatement to the discri-
minatees or to pay them backpay. Respondent VIP En-
terprises, consistent with its position on the merits gener-
ally, took no position with respect to the case against Da
Vinci Fashions.
D. Analysis and Conclusions Regarding the
Obligations of Da Vinci Fashions
The decision of Judge Nelson adopted by the Board
and enforced by the circuit court of appeals specifically
reserved to the compliance stage of this proceeding liti-
gation of the financial inability defense to the reopening
obligation imposed by the Order. Both the answer of Da
Vinci Fashions, which was filed by counsel for Respond-
ent immediately before his withdrawal from the case as
described above, and the answers of Respondent Alexan-
der Mahban and Respondent Princess Vera Nocce raise
this defense. As noted, the General Counsel was essen-
tially silent on this question on brief even though, in my
concluding remarks from the bench, I solicited the posi-
tion of the parties and argument on the issue. The Gov-
ernment's position must be taken to be that no valid de-
fense to a continuing reinstatement and reopening order
was established.
Before considering the financial circumstances operat-
ing on Da Vinci Fashions' manufacturing facility in No-
vember 1981, it is well to consider its history and pur-
pose. Initially the garment assembly equipment located at
the Las Vegas Avenue facility was installed by Alexan-
der Mahban's father and was a noncommercial arrange-
ment for the pleasure of Safar Mahban and not part of
Alexander Mahban's enterprises. Thereafter the manufac-
turing facility was created by Da Vinci Fashions not as
an ongoing enterprise designed to be independently prof-
itable, but rather as a model or show enterprise designed
to satisfy certain perceived securities trading require-
ments. As an artificial construct designed to meet legal
requirements, the facility never was commercially viable
tion being for all intents and purposes nothing but an insolvent shell The
General Counsel opposed any attempt to relitigate the original unfair
labor practice case under any theory arguing that , for the purposes of the
backpay specification, the original Board order as enforced by the circuit
court was res,ludicata as to all parties See further discussion, supra
as an independent entity.'' When the franchise scheme
died with the loss of the Vogue name , its reasons for
being ended.
It is true that in June 1981 the Nevada corporation
name was changed to Da Vinci Fashions and an attempt
was made to achieve marketing success under that trade
name . The record is clear, however, that the Da Vinci
name was not a successful substitute for the Vogue name
and, without apparent exception evident on this record
or suggested by the General Counsel, the manufacturing
operation continued on a dismal spiral of increasing
losses in the last half of 1981. Irrespective of the depth of
capitalization that might have been available to support
or subsidize the manufacturing operations, the financial
records in evidence make it clear that at all times there
were both significant operating losses and no reasonable
prospect of a positive change in economic circumstances
for the manufacturing operation.
From all the above and the record as a whole, it is
clear and I find that the manufacturing operation could
not and would not have remained open through the
backpay period alleged in the specification as contended
by the General Counsel. Even had Da Vinci Fashions
been endowed with unlimited funds, the economic reality
of the continuing losses without any reasonable prospect
of making the operation profitable would have mandated
closure of the operation. This being so, it is unnecessary
to determine if at any given time extra moneys could
have been made available to Da Vinci Fashions, to main-
tain the operation. It was not financial inability in the
sense of lack of operating capital that doomed Da Vinci
Fashions, although this is also advanced as a defense by
Respondents and will be discussed in greater detail, infra.
It was the simply unchallenged fact that the sole eco-
nomic purpose of the manufacturing operation was de-
stroyed with the settlement of the trademark litigation
denying Respondent Da Vinci Fashions the use of the
Vogue trademark on garments and in franchising retail
facilities.
Having found that Respondents' defense of financial
inability, as discussed above, is an effective defense to
the reopening order and operates to toll the backpay of
Da Vinci Fashions, a second, critical question remains:
On what date would the facility have been shut down as-
suming the unfair labor practices found in the Board's
original order had not occurred? That is, and as to this
element of the case the burden is on Respondents; when
would "financial necessity" have required the shutdown
of the manufacturing operation and the termination of
the employees involved had not the protected concerted
union activities of the employees generated the illegal
conduct undertaken by Da Vinci Fashions, as found by
Judge Nelson?
One day of significance to the British Columbia and
Nevada corporations was 5 December 1981. On that date
a corporate stockholders meeting was held' 2 and the
11 What the manufacturing operation might have become had a signifi-
ciant number of franchises been created is immaterial inasmuch as such a
situation never occurred.
12 It seems clear the corporate meetings were scheduled well before
Da Vinci Fashions ' knowledge of employees' union activities and are
hence not susceptible to attack as improperly scheduled
DA VINCI FASHIONS
closure of the manufacturing facility was ratified by
stockholders present and voting. The uncontradicted evi-
dence of the meeting makes clear that there was no addi-
tional money forthcoming from stock sales and that the
entire operation was overwhelmed with debt and entirely
bleak of prospect. It was at this meeting that the further
decision was made to, in essence, abandon all corporate
operations. i 3 Based on an essentially uncontradicted
record, I find that by 5 December 1981 the financial situ-
ation of Da Vinci Fashions, had collapsed and that ac-
quiescence in the closure was a necessary decision by the
voting stockholders. There is no ev iaence that illegal
motivations were involved in this decision. Accordingly,
in agreement with Respondents, [ find that, at least by 5
December 1981, Da Vinci Fashions would have closed
its manufacturing operations under any circumstances.
Accordingly, I find that, at least by 5 December 1981,14
backpay for the discriminatees was tolled and the re-
opening order obviated.
Respondents Princess Isabella Da Vinci and Alexander
Mahban argue further, however, that even before 5 De-
cember 1981 Da Vinci Fashions' manufacturing facility
would have been closed based entirely on financial and
economic considerations independent of any motivations
found by Judge Nelson to violate the Act in the original
unfair labor practice proceeding. Thus, Respondents
assert the unchallenged testimony of Alexander Mahban
that on the day the manufacturing operation closed, he
received a report from Ursala Gallagher that the corpo-
ration was unable to pay its suppliers or its consulting
professionals, and without additional funds from the Ca-
nadian corporation, could not even meet its payroll.
Mahban further testified that he told Gallagher if the em-
ployees could not be paid they should be laid off and the
facility closed. In response the shutdown occurred. It
was this phone call, in Mahban's testimony, that caused
him to contact his counsel about initiating a permanent
closure. Counsel's advice to him was to delay submitting
any permanent closure decision to the stockholders until
the 5 December meeting, which had been previously
scheduled.
I have found the 5 December 1981 decision to perma-
nently close the facility was made for financial reasons
and was not based on improper considerations. Alexan-
der Mahban's testimony regarding the closure decision
itself was not challenged by the General Counsel and
would seem to extend the timing of the benign motiva-
tion for closure to the very day of the closure itself. It is
on this evidence that Respondents argue that there
should be no backpay obligation whatsoever in as much
as, at the time of the closure, any reopening was made
impossible by the economic circumstances extant at that
time.
13 One of the issues litigated at length in the backpay specification was
the transference of certain physical assets from Da Vinci Fashions to
other corporate entities or to Mahban family enterprises Without resolv-
ing those issues, it was at all times clear that the monetary value of the
disputed items, while not trivial, was small The General Counsel seems
to make no contention, nor would the evidence support a finding , that in
any significant way the assets of Da Vinci Fashions, following its essen-
tial abandonment , were diverted to other entities
14 5 December being a Saturday , the Friday before, 4 December 1981,
would have been the last working day under this finding
813
Judge Nelson's Order, as approved by the Board and
the court, is binding on Da Vinci Fashions in this pro-
ceeding, which is a supplemental proceeding based on
the original Board Order. It is res judicata as to the find-
ing made . Judge Nelson's Order specifically found the
closure decision to have been illegally motivated. Is not
the evidence tendered by Respondents as discussed
above inadmissible because its sole effect must be to
challange Judge Nelson's decision regarding the closure
motivation? Put another way, as the General Counsel im-
plicitly argues, does the original decision by its terms
preclude any claim of financial inability existing as of the
date of closure?
The General Counsel objected to evidence offered by
Respondents to challenge the underlying unfair labor
practice findings. I sustained that objection. 1 s I reaffirm
my ruling that the original unfair labor practice case de-
cided the issue of closure motivation. As noted above,
however, the original decision explicitly reserved for
later consideration the question of financial inability. I
find that there is no chronological limitation or bar on
Respondents offering evidence to show that, as of any
given point in time , no reopening was possible because of
financial inability. In this limited sense the closure events
may be relitigated. This apparent mixing of issues be-
tween the compliance stage and the unfair labor practice
stage is not unusual . The Board has long held certain de-
fenses must be reserved to the compliance stage and, fol-
lowing an unfair labor practice decision and order, the
litigation of such a defense at the compliance stage may
result in a complete elimination of any backpay obliga-
tion despite contrary findings in the original decision and
order. See, for example , Trident Seafoods Corp., 244
NLRB 566 (1979), enfd. 642 F.2d 1148 (9th Cir. 1981),
backpay specification dismissed 275 NLRB 25 (1985).
Accordingly, I do not find Respondents precluded from
offering evidence in support of their argument that eco-
nomic factors would have rendered closing necessary
under all circumstances on the date of the closure itself.
Having considered the essentially unchallenged evi-
dence that the manufacturing operations in the latter half
of 1981 were in essence on an uncontrollable downward
spiral and that, as found above, the November closure
was confirmed at a 5 December 1981 stockholders meet-
ing, I further find, in agreement with Respondents, and
specifically noting that they have sustained their burden
of proof in this regard, that economic factors independ-
ent of the unfair labor practices enumerated in Judge
Nelson's decision prevented the closed operations from
reopening at any time. I find the financial inability ex-
tended to the date of the closure and that, irrespective of
the unfair labor practices found by Judge Nelson, the fa-
cility would have closed on 23 November under any cir-
cumstances. Thus, I find that Respondents have sustained
their defense of financial inability as of the time of the
closure. The consequences of this determination are that
there are no obligations on the part of Da Vinci Fashions
rs Even were that bench decision in error, it could not be easily reme-
died here For to reverse the decision that the original unfair labor prac-
tice litigation does not bind all parties would require that the hearing be
reopened to allow the parties to offer evidence for that purpose
814 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
either to reopen the facility or to pay backpay to any of
the backpay claimants. This is true because at no time
was Respondent Da Vinci Fashions financially able to
reopen or employ the discriminatees after the closure or
after their illegal termination. Accordingly, there being
no obligation under the backpay specification attaching
to Da Vinci Fashions, I shall dismiss the backpay specifi-
cation with respect to it.
III. THE OBLIGATIONS OF RESPONDENTS PRINCESS
VERA NOCCE AND ALEXANDER MAHBAN
The General Counsel seeks to hold Princess Vera
Nocce and Alexander Mahban liable to the obligations of
Da Vinci Fashions under theories of alter ego, single em-
ployer, joint employer and, as to Mahban, through a
piercing of the corporate veil theory. The great bulk of
the very substantial record on these issues consists of a
close examination of the financial transactions between
the Mahban family and the various individuals, enter-
prises, and corporations in contest. The record was made
somewhat obscure by: (1) thefts and burglaries of docu-
ments, (2) the mysterious disappearance and reappear-
ance of other documents, (3) the death under mysterious
circumstances of the accountant for Da Vinci Fashions
and, finally, (4) the complexity and informality of many
of the transactions and recordation of transactions be-
tween and among the parties to the litigation. Close and
difficult questions of fact and law were ably argued by
the parties both at hearing and on brief regarding these
issues. In light of my findings, above, that Respondent
Da Vinci Fashions has no liability under the backpay
specification, it is unnecessary to resolve these complex
issues . This is so because, irrespective of any outcome
under the General Counsel's theories of derivative liabil-
ity, the absence of any liability by Da Vinci Fashions
creates no potential liability for the others. Accordingly,
with respect to both Princess Vera Nocce and Alexander
Mahban, I shall dismiss the backpay specification.
IV. THE OBLIGATION OF RESPONDENT VIP
ENTERPRISES
Judge Nelson's decision in the original case specifically
found that VIP Enterprises was a single enterprise and a
single employer as well as, in the alternative, a joint em-
ployer with Da Vinci Fashions until on or about January
or February 1982. Judge Nelson's remedial Order, how-
ever, does not name VIP Enterprises as a respondent or
otherwise hold it liable. Further there is no evidence that
VIP Enterprises was served with original charge or
original complaint in this case, or that it appeared at the
original hearing or was served with copies of the deci-
sion of the Board or court.
Respondent VIP Enterprises did not appear until
midway through the trial of the backpay proceeding.
Counsel for VIP Enterprises then appeared specially and
argued that VIP had never been served with the back-
pay specification or the amendment to the backpay speci-
fication and that, accordingly, it could not be obligated
to appear and participate in the hearing nor could the ab-
sence of any answer filed by it be held against it. Fol-
lowing lengthy discussions both on or off the record, all
parties agreed that it would be impossible to allow VIP
Enterprises to join in the litigation as of that time simply
because of the length and complexity of the record then
concluded. I ruled preliminarily that should VIP Enter-
prises be found not to have been properly served the
backpay specification as to it would be dismissed.' a I
further ruled that if service was found against VIP it
would be susceptible to a ruling on the merits based on
the record before me even without VIP Enterprises' full
participation on all issues. I thus suggested that VIP En-
terprises might wish to fully participate in the hearing
from that time forward to protect its record. Respondent
VIP Enterprises, through counsel, heard these prelimi-
nary rulings and elected to adduce evidence on and
argue only the service issue. Accordingly, following the
conclusion of the hearing with respect to all other Re-
spondents, Respondent VIP Enterprises and the General
Counsel adduced evidence bearing solely on the service
question and both the General Counsel and VIP Enter-
prises briefed the service issue to me.
Substantively the General Counsel's theories of liabil-
ity regarding VIP Enterprises are generally the same as
those described, above, regarding Princess Vera Nocce.
The General Counsel's case with regard to VIP Enter-
prises, however, is somewhat different in light of the
findings made in Judge Nelson's original order with re-
spect to VIP Enterprises.
Given my findings, above, regarding the liability of Da
Vinci Fashions, my findings with respect to VIP Enter-
prises must be either: (1) a finding that service was inad-
equate with a concomitant dismissal of the backpay spec-
ification or, alternatively, (2) a finding of sufficient serv-
ice and a dismissal based on the lack of primary liability
by Da Vinci Fashions, Inc. 17 Given that a dismissal will
result under any resolution of the service issue, a ques-
tion arises whether it is necessary to determine the serv-
ice issue at all with respect to VIP. I find that it is not
only appropriate but necessary to decide the service
question simply because service is the predicate to any
and all findings regarding VIP Enterprises' liability
under the backpay specification. Accordingly, and de-
spite the apparent mootness of the analysis, I shall ad-
dress the arguments and evidence presented on the serv-
ice issue and make findings and conclusions with respect
thereto before making any further conclusions with re-
spect to VIP Enterprises' liability under the backpay
specification.
At relevant times since 1982 VIP Enterprises has been
in essence a shell corporation not engaged in any busi-
ness other than maintaining its compliance with the regu-
latory requirements of the State of Nevada. The corpora-
tion is owned by Grady Sanders and his wife, Cherie
Sanders, who are the sole corporate officials. There was
no dispute that at relevant times the Sanders were the
16 Such a dismissal would not necessarily end the matter The backpay
specification would be susceptible to renewal by subsequent service of
the backpay specification and the holding of a hearing on proper notice.
17 In the unusual circumstances of this case, granting a default against
VIP Enterprises based on its failure to file an answer would be inappro-
priate No Motion for Summary Judgment against VIP Enterprises was
ever made Nor, I believe, did the parties ever contemplate such a poten-
tial ruling in the case
DA VINCI FASHIONS 815
only individuals authorized to receive service on behalf
of VIP Enterprises.
Until June 1985, VIP Enterprises' corporate offices
were located at 1850 East Flamingo Road , Las Vegas,
Nevada . At that time its offices were moved to 2920
Maryland Parkway, Las Vegas, Nevada. Each location
also served as the headquarters of other enterprises
owned by the Sanders family . As part of the corporate
relocation , change of address forms were filed with the
U.S. Postal Service by VIP Enterprises as well as by
other enterprises owned by the Sanders family. The
change of address card requested that all mail addressed
to the Flamingo Road location be forwarded to P.O.
Box 19658. This single post office box was used by VIP
Enterprises and the other Sanders ' enterprises as their of-
ficial address . Insofar as the record reflects , only the
Sanders ' enterprises had use of, or access to, the post
office box.
Employed at all relevant times by Grady Sanders and
certain of his enterprises other than VIP Enterprises was
Bonnie D. Hannifin . Hannifin testified without dispute
that she has no "official connection " with VIP Enter-
prises.
The General Counsel introduced documentary evi-
dence supporting its contention that the General Counsel
accomplished service on VIP Enterprises on two occa-
sions . The first document was it large brown envelope
containing the backpay specification addressed to Cherie
Sanders , President , VIP Enterprises , 1850 East Flamingo
Road, Suite 125, Las Vegas, NV 89109. The envelope
bears a certified mail label and a penciled line across the
address with the entry " 19658 ." The front of the enve-
lope bears a claim check stub with the entry "first notice
2-1-86." Again in handwriting on the face of the enve-
lope is the word "refused." The General Counsel also
placed into evidence a certified mail return receipt post
office form received by the General Counsel 's office
bearing the matching certified mail number on the enve-
lope with the rubber stamp notation by the U.S. Post
Office on the receipt that the letter had been "refused."
The second series of exhibits offered were an affidavit
of service and a return receipt certificate from the U.S.
Post Office . The affidavit of service indicates the amend-
ment to the backpay specification was mailed on 3
March 1986 to VIP Enterprises at 3200 Las Vegas Bou-
levard South, Las Vegas, Nevada, by certified mail
return receipt requested . The corresponding return re-
ceipt bears the handwritten signature "Bonnie Hannifin"
and a date of delivery of 3-11-86. Hannifin and the
Sanders testified that they had absolutely no memory of
receiving either the backpay specification or an amended
backpay specification and equally had no memory of re-
fusing receipt of such documents. Grady Sanders testi-
fied that, as a man of some experience in business and
litigation , he would under no circumstances put his busi-
ness interests at potential risk by ignoring such legal doc-
uments . Hannifin testified that , although she picks up
mail at the post office box in question , she is not author-
ized to and does not receive mail for VIP Enterprises.
Furthermore , she testified that she did not have any
recollection of signing a certified receipt for the docu-
ment in issue . Shown the signed receipt and the signature
thereon , she testified the signature did not seem to be
hers. She also noted the signature did not include her
middle initial , which initial she habitually includes when
signing her name.
Uncontested testimony was received from a knowl-
edgeable U.S. Post Office official regarding U.S. Postal
Service practices and procedures with respect to deliv-
ery of certified mail, forwarding address procedures, and
post office box procedures . The official testified that
when a change of address form is supplied to the U.S.
Post Office, letters and packages addressed to the previ-
ous location are transferred to the new location and the
forwarded packages are marked in pencil as was the en-
velope described above . He further testified that U.S.
Post Office boxes are provided with locks and are not
accessible to the public generally but are rather accessi-
ble only to those who have possession of a key or combi-
nation to the particular box. He testified that with re-
spect to certified mail, a post office slip indicating that a
certified letter was at the postal desk would be left in the
appropriate post office box. He testified that only when
such a slip has been presented to the postal clerk would
the package be turned over to the presenting individual
for inspection and acceptance or refusal of the item. The
official testified that the designation "refused" is different
from a separate designation "unclaimed" in postal par-
lance and that a "refusal" requires a specific affirmative
refusal by the addressee to accept delivery of the item
rather than a simple omission to claim the item . Thus, if
a certified package is "refused," some individual had to
present the certified mail notice slip, inspect the package,
and then return it as refused . With respect to the certi-
fied mail receipt entered into evidence , the postal official
testified that a signature on such a receipt could be ob-
tained only upon presentation of the Post Office notice
of mailing form to the postal clerk and positive accept-
ance of delivery of the item.
Given all the above, I find that both the original back-
pay specification and the amendment to backpay specifi-
cation were forwarded pursuant to U.S. Post Office
practice to the post office box used by VIP Enterprises.
I further find that a person unknown had occasion to
take the post office slips indicating that the backpay
specification was available at the postal desk and that the
person or persons unknown in fact went to the post
office desk, was presented with the original backpay
specification envelope, and affirmatively refused to
accept service, thus causing the post office to physically
mark the envelope "refused" and return it to the General
Counsel's Regional Office. Likewise, I find that the
amended backpay specification was forwarded to the
new post office box address of VIP Enterprises and that
a notice of delivery was placed in the VIP post office
box. I further find that a person unknown , possessing
access to the post office box, received the slip indicating
that an item awaited delivery at the post office desk,
went to the post office desk, took possession of the
816 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
amended backpay specification, and signed the return re-
ceipt with the name Bonnie Hannifin.' 8
The General Counsel correctly argues that "refused"
service is sufficient service under Board law citing Pasco
Packing Co., 115 NLRB 437 (1956), and Garden Fashions,
231 NLRB 72 (1977). The General Counsel also argues
that "any of Sanders' employees who picked up mail at
the post office box inherently had the authority to also
pick up or refuse VIP Enterprises' mail. Ann Arbor Press,
85 NLRB 58, 60 (1944)." In Ann Arbor Press, an individ-
ual employer was served with a copy of the Board's
charge by registered mail that was delivered to the cor-
rect address and receipted for by the individual employ-
er's son . The Board held that because mail was in fact
regularly accepted by persons other than the individual
employer, and, despite the employer's denial that anyone
else was authorized to do so, that his son was authorized
to act on his behalf, the charge was therefore properly
served. It is thus the General Counsel's argument that, be
it Hannifin or anyone else, despite the absence of any ex-
plicit authority to do so, the person who had access to
the post office box utilized that access to sign for and
refuse the General Counsel's service documents and
acted with the actual or apparent authority of VIP En-
terprises. The Board cases cited by the Government are
in point and, if somewhat old, appeared to be unmodified
by subsequent decisional law. Relying on the cited cases,
I find that VIP Enterprises, through the actions of
Bonnie Hannifin or others not apparent on this record,
but who in any event had unchallenged access to the
post office box used by Sanders' enterprises including
VIP Enterprises, received the amended backpay specifi-
cation and refused the original backpay specification and
notice of hearing. I find, therefore, that Respondent VIP
Enterprises was properly served and had legal notice of
the instant proceedings so that no dismissal of the back-
pay specification is justified based on lack of service.
As noted above, however, I shall not grant summary
judgment against VIP Enterprises for failure to file an
answer to the backpay specification. At no time did the
General Counsel move for summary judgment against
VIP Enterprises, nor in the extensive discussions regard-
ing the procedures to be utilized in the litigation of the
service issue, was there any argument that VIP Enter-
prises should be found in default as a result of not filing
an answer in the instant litigation. Rather, as I believe all
parties understood and as I now rule , VIP Enterprises,
having been properly served, is held to the record made
by other Respondents and the General Counsel and I
shall decide the case as to VIP Enterprises based on that
record.
As noted above, I have decided that the backpay spec-
ification as to Da Vinci Fashions creates no backpay li-
ability to discriminatees and creates no obligation to
reopen the facility. Based on that analysis, I shall dismiss
the backpay specification as to Da Vinci Fashions. I
have further decided that it is unnecessary to decide
whether Princess Vera Nocce or Alexander Mahban
have derivative liability for the obligations of Da Vinci
Fashions because, simply put, Da Vinci Fashions has no
liability to share with those entities. Accordingly, I shall
dismiss the backpay specification as to Princess Vera
Nocce and Alexander Mahban. VIP Enterprises, having
been found to have been properly served, stands in the
same position as those entities. Therefore, it is unneces-
sary to decide if VIP Enterprises, either as a result of the
original order or under the derivative liability theories
advanced by the General Counsel and litigated in the in-
stant case, is liable for the obligations of Da Vinci Fash-
ions . This is so because, once again , Da Vinci Fashions
has no obligation to be shared. Accordingly, I find VIP
Enterprises has no obligation under the backpay specifi-
cation. Accordingly, and despite my having found that
VIP Enterprises was properly served with the backpay
specification and the amended backpay specification, I
shall dismiss the backpay specification as to VIP Enter-
prises.
On the basis of the foregoing and pursuant to Section
10(c) of the Act, I recommend that the Board issue the
following
ORDER")
IT IS RECOMMENDED that the backpay specification
shall be dismissed with respect to Da Vinci Fashions,
Inc., VIP Enterprises d/b/a Princess Isabella Da Vinci,
Princess Vera Nocce, and Alexander Mahban a/k/a
Djamshid Mahban.
18 Were it necessary to decide , based on the demeanor of the witnesses 19 If no exceptions are filed as provided by Sec 102 46 of the Board's
and an inspection of the signature on the return receipt as well as the Rules and Regulations, the findings, conclusions , and recommended
exemplars submitted by Respondent VIP Enterprises and the General Order shall , as provided in Sec 102 48 of the Rules, be adopted by the
Counsel , I would find that the certified mail receipt was in fact signed by Board and all objections to them shall be deemed waived for all pur-
Hannifin poses