Eberhard Foods, Inc.

National Labor Relations Board - Board Decisions

Sep 27, 1968

173 N.L.R.B. 5 (N.L.R.B. 1968)

EBERHARD
Eberhard Foods, Inc., 363 State Inc. and Wyoming
Food City, Inc. and Retail Store Employees Union
Local No. 20, Retail Clerks International Associa-
tion , AFL-CIO. Case 7-CA-6202
September 27, 1968
DECISION AND ORDER
BY MEMBERS BROWN, JENKINS, AND ZAGORIA
On May 15, 1968, Trial Examiner Milton Janus
issued his Decision in the above-entitled proceeding,
finding that the Respondent had not engaged in
certain alleged unfair labor practices and recommend-
ing that the complaint herein be dismissed in its
entirety, as set forth in the attached Trial Examiner's
Decision. Thereafter, the Charging Party filed excep-
tions to the Decision, together with a supporting
brief, and the Respondent filed an answering brief.
Pursuant to Section 3(b) of the National Labor
Relations Act, as amended, the National Labor
Relations Board has delegated its powers in connec-
tion with this case to a three-member panel.
The Board has reviewed the rulings of the Trial
Examiner made at the hearing and finds that no
prejudicial error was committed. The rulings are
hereby affirmed. The Board has considered the Trial
Examiner's Decision, the exceptions and briefs, and
the entire record in this case, and hereby adopts the
findings, conclusions,' and recommendations of the
Trial Examiner.
ORDER
Pursuant to Section 10(c) of the National Labor
Relations Act, as amended, the National Labor
Relations Board hereby adopts as its Order the
Recommended Order of the Trial Examiner, and
orders that the complaint herein be, and it hereby is,
dismissed in its entirety.
1 We find it unnecessary to our Decision to pass upon or adopt the
Trial Examiner 's comment in his Decision , that if Eberhard were to buy
out the two stores involved in this proceeding they would "again
become part of the bargaining unit "
Member Zagoria , in adopting the Trial Examiner 's conclusion that
the two stores involved herein were no longer part of the multistore unit
of Eberhard stores , relies, in addition to the factors specified by the
Trial Examiner , on the fact that there was no continuity of employee
complement at these stores , inasmuch as all Eberhard employees at
these stores were offered an opportunity to transfer to other Eberhard
stores in the unit , and virtually all of them did so transfer.
TRIAL EXAMINER'S DECISION
STATEMENT OF THE CASE
MILTON JANUS, Trial Examiner: The General Counsel is-
sued his complaint in this proceeding on December 29, 1967,
after a charge filed on August 3, 1967, by the Union named in
FOODS 5
the caption. The complaint alleges that the three named Re-
spondents (referred to hereafter as Eberhard, 363 States and
Wyoming) constitute a single integrated business enterprise or,
alternatively, that 363 State and Wyonung are the alter ego of
Eberhard, and that they have refused to bargain with the
Charging Union, in violation of Section 8(a)(5) and (1) of the
Act. Respondents' answers deny the commission of any unfair
labor practices.
I conducted a hearing in this matter at Grand Rapids,
Michigan on February 5 and 6, 1968. Briefs have been received
from the General Counsel and the Respondents, and have been
fully considered.
Upon the entire record in the case, and from my observa-
tion of the witnesses and their demeanor, I make the
following:
FINDINGS OF FACT
I THE BUSINESS OF THE RESPONDENTS
Each Respondent admits that it is a Michigan corporation,
that during a representative period of a year or less it had gross
revenues from the sale of foodstuffs and other merchandise in
excess of $500,000 and that it received directly or indirectly
from points outside the State of Michigan, foodstuffs and
other merchandise valued in excess of $10,000. Each Respond-
ent admits, and I find, that it is engaged in commerce within
the meaning of the Act.
II. THE LABOR ORGANIZATION INVOLVED
Retail Store Employees Union Local No. 20, Retail Clerks
International Association, AFL-CIO, referred to hereafter as
Local 20 or the Union, is a labor organization within the
meaning of Section 2(5) of the Act.
III. THE ALLEGED UNFAIR LABOR PRACTICES
General Background , Issue and Contentions
A predecessor of Local 20 was certified in 1958 as exclusive
bargaining representative for a unit of all grocery and produce
department employees at all Eberhard stores located in Kent
County, Michigan, which is the metropolitan area of Grand
Rapids. Since 1960, Local 20 has entered into successive
contracts with Eberhard, including one which had just been
negotiated at the time of this hearing, in February 1968, and
was about to be signed. Since the execution of the last
preceding contract which ran from July 1, 1964 through June
30, 1967, Eberhard had closed one store and had sold, or
otherwise disposed of five stores which had been previously
included in the Kent County unit. Two of these stores, at 363
State Street, Grand Rapids, and at 830-28th Street, Wyoming,
Michigan,were transferred respectively by Eberhard to the two
corporations named as party Respondents here, namely 363
State Inc. and Wyoming Food City, Inc. Respondent Wyoming
began operating its store on or about December 1, 1966, and
363 State assumed operation of its store about July 5, 1967.
No question is raised by the General Counsel with respect to
i As corrected and amended at the hearing.
173 NLRB No. 2
6 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
the sale of the other three stores and their consequent removal
from the bargaining unit. After the disposition of these six
stores, Eberhard still operated seven retail grocery stores in the
Grand Rapids area, as well as a number of other stores outside
Kent County.
The only issue in this case is whether Respondent Eberhard
has violated Section 8(a)(5) and (1) by refusing to bargain with
the Union for the appropriate store employees employed by
the other two Respondents.
It is the contention of the General Counsel that the three
Respondents together constitute one employer, and that
Respondents 363 State and Wyoming are the alter egos of
Respondent Eberhard, because the transfer of the stores did
not divest Eberhard of the controls and indicia of ownership
which serve to establish, under Board precedents, that separate
business entities are in fact integrated operations of a single
employer. The General Counsel does not contend that 363
State or Wyoming is individually obligated to bargain with the
Union as a successor of Eberhard.
Respondents contend that the two stores involved here
were sold in bona fide, economically motivated transactions,
without intent to avoid contractual or statutory bargaining
obligations, and that the admitted indirect and partial common
ownership of Eberhard and the other Respondents did not
transform the separate corporations and separately conducted
businesses into a single, integrated enterprise.
Eberhard Foods, 363 State and Wyoming have individual
memberships in Spartan Stores, which each acquired through
its purchase of the necessary qualifying stock. 363 State is also
a member of an organization of eight or nine stores, each
individually owned and operated and members of Spartan
Stores, which advertises jointly under the trade name of
Shop-Rite. The sales plans and advertising layouts for the
Shop-Rite group are prepared for it by an employee of Spartan
Stores. A different employee of Spartan Stores' advertising
department performs a similar service for Wyoming. Eberhard
has its own advertising department and prepares all its own
sales plans and advertising material for use in newspapers, radio
and television. Eberhard also does all its own accounting, and
for a fee, performs accounting for Wyoming. 363 State, which
is a much smaller operation than either of the other two
Respondents uses one of its own employees to do bookkeeping
work, and relies on Spartan Stores for preparation of tax
returns and accounting analyses of its operations. For these
services, it pays Spartan a monthly fee. Payroll and payments
to suppliers are handled by 363 State through its own checking
account which is under the immediate control of Frank Clark,
the "purchaser" of that store. The issuance of checks for
Wyoming's payroll and payments to suppliers are handled
through Smith, who is comptroller of Eberhard and treasurer
of Wyoming. Walter Meier, the "purchaser" of Wyoming, does
not sign checks.
Operations of L V. Eberhard, the Respondents,
and Spartan Stores, Inc
L. V. Eberhard, who has been in the retail grocery business
for 50 years, controls a number of enterprises in or related to
the retail sale of food products around Grand Rapids. These
are Eberhard Foods, which operates food supermarkets,
Eberhard Realty, which owns the buildings and ground on
which some of these stores are located, Food Equipment,
which owns and leases store fixtures and equipment, and
Christiansen Ice Cream Co., a distributor of ice cream and a
source of funds for investment in enterprises other than the
above, in which L V. Eberhard has an interest 2
Spartan Stores, Inc., is a wholesaler of food products,
owned cooperatively by its more than 400 members who
operate retail food outlets in Western Michigan. It offers them,
in addition to centralized buying and distribution from its own
warehouse, the benefits of preparing advertisements, printing,
advice on merchandising, and various forms of accounting
services. All members of Spartan Stores must purchase shares
of stock to evidence their participation in the cooperative, and
agree to buy their grocery merchandise from it. It can also
supply them with meats and bakery products, although
apparently they may utilize other sources of supply. Advertis-
ing, accounting, and other store services are available to any
individual member on a fee basis.
2 Besides his controlling interest in those stores operated directly by
Eberhard Foods, L. V. Eberhard , or members of his family , also have a
substantial interest in other supermarket chains outside of Kent County.
To the extent that acquisition or divestiture of retail outlets of these
chains may be relevant in establishing how and why L. V. Eberhard
bought and sold stores in Kent County , the facts relating thereto will be
set out later.
3 The Wyoming store's loss between July 1 and November 19, 1966,
Transfer of the Wyorrung and State Street Stores
Because of their unprofitability, L. V. Eberhard decided to
get rid of certain stores in Kent County.3 In May 1966, the
Plainfield store was closed. In November 1966, the 28th Street
store in Wyoming was transferred to Walter Meier, or more
accurately, to a corporation in which an Eberhard subsidiary
had the majority stock interest and Meier had a minority
interest 4 In the first half of 1967, two stores were sold to
Market Development Co., a subsidiary of Spartan Stores, the
State Street store was transferred to a new corporation in
which Frank Clark had a minority stock interest, and, in
August 1967, the Madison Avenue store was sold to Madison
Square Food Town. It is known from the record that the
Eberhard employees at the Wyoming and State Street stores
were transferred to other Eberhard stores in accordance with
the provisions of the contract. As for the other three Eberhard
stores transferred during this period, no contention is made
that they are still in the Eberhard bargaining unit or that
Eberhard has any bargaining obligation with respect to them.
The Wyoming Store-The building occupied by the
Wyoming store was leased by Eberhard Realty from the owner,
who is not identified but is not connected with the Eberhard
interests. Shortly after L. V Eberhard let it be known in the
grocery trade in Kent County that he wanted to get rid of the
Wyoming store, he began negotiating with Meier, who had 25
years experience in the grocery business and who was then
was over $31 ,000. State Street lost almost $4 ,000 in the year ending
July 1, 1967.
4 To avoid any undue coloration of the issue , I will use the neutral
term "transfer " to describe the acquisition of the stores by the two new
corporations , thus not committing myself as yet to whether it might be
more accurately described as a bona-fide sale (as contended for by the
Respondents ) or as an insubstantial shift of assets between Eberhard
controlled entities (as contended for by the General Counsel).
EBERHARD FOODS 7
employed as a divisional manager for another food chain in the
area Meier had never worked for any Eberhard enterprise.
Meier's employer was then engaged in selling its own stores in
Grand Rapids to still another chain, and Meier was slated to be
transferred to Detroit. He preferred to stay in Grand Rapids
and to put his experience to work in a business of his own The
deal which Eberhard and Meier negotiated for the Wyoming
store was as follows A corporation was organized to take over
the assets and operation. Christiansen Ice Cream, an Eberhard
subsidiary, put up 55 percent of the investment, Meier
obligated himself by cash and notes for 35 percent, and three
men whom Meier was going to hire as department managers
put up the money for the remaining 10 percent None of these
were then employed at the store The owner of the building
spent $40,000 remodeling the premises which was then leased
to Eberhard Realty. Food Equipment, an Eberhard subsidiary,
spent $50,000 for new fixtures for the store All the Eberhard
private brand merchandise was removed, an inventory of the
remaining merchandise was made, and was valued at its retail
price less 15 percent The sale price for the merchandise was
slightly more than $32,000.
Eberhard Realty subleased the store to Wyoming for a
12-year term at a monthly rental of $1716.80, adjustable
upward in accordance with changes in the Consumer Price
Index, and with an option on Wyoming's part to extend the
lease for an additional 10 years. Wyoming also leased the
fixtures from Food Equipment for a 5-year term at a rental of
1 percent of net sales It was also given the option of installing
its own fixtures and equipment at any time, and of removing
them on expiration of the store lease. The lease for the
property contains detailed provisions as to the allocation
between the parties of taxes, special assessments, water and
sewage rates.
Christiansen put up $11,000 of the total capitalization of
$20,000. By the date of the hearing, Meier had paid up his
share, amounting to $7,000 Christiansen and Meier each have
first refusal on the purchase of the other's stock at its book
value plus 10 percent. Christiansen also lent money to
Wyoming in addition to the stock investment The loan is
being currently repaid. Wyoming operated at a loss for the first
9 months of operations but is now showing a profit. Meier
agreed dunng the negotiations for the transfer to limit his
remuneration to $300 per week plus a percentage of the profits
When Eberhard ceased operations at the Wyoming Store in
November 1966 it transferred the three supervisors and eight
employees who were there to its other stores. Meter hired all
his own employees with the help of a Spartan Store official.
He neither sought, `nor was offered, any assistance by the
personnel department of Eberhard. Meier decided what to pay
his employees, what their fringe benefits were to be, and set all
their terms and conditions of employment. At the time of the
hearing, Wyoming employed about 60 full- and part-time
employees 5
Three of the four directors of Wyoming represent the
Eberhard interests. Meier is the fourth director. The four
officers are Meier, Maloney, one of the minority stockholders,
L. V Eberhard, and Smith, comptroller of Eberhard.
The 363 State Street Store-About the time that L. V.
Eberhard sold two of the Grand Rapids stores to another area
chain, he was also looking for a purchaser of the State Street
Store Frank Clark, who was then employed by Drackett, a
manufacturer of kitchen products, was interested, and negoti-
ated a deal with Eberhard. Clark is a fairly young man who had
begun working for Eberhard Foods while still in high school,
and had risen to an assistant manager's position before leaving
to go with Drackett The terms of their agreement were as
follows A new corporation was formed, capitalized at
$5,000. Amos A Stagg, the son-in-law of L. V Eberhard, vice
president and director of Eberhard Foods, and the manager of
operations for all the Grand Rapids stores, invested $2,750.
Clark put up the remaining $2,250, most of which he
borrowed from a relative The corporation gave Eberhard
Foods a note for $22,000, payable at the rate of $1,000 per
month plus interest. By the date of the hearing, $5,000 had
been paid on the note
The store building is owned by Eberhard Realty, and is
leased to 363 State for a 5-year term at a rental of $750 per
month, with an option to renew for an additional 5-year term
at the same rental The store equipment is owned by Food
Equipment and is leased to the corporation at a rental of one
percent of net sales The lessee has the option of purchasing
the equipment at the end of the first year for $20,000
The agreement between L. V. Eberhard and Clark also
provided for a mutual option between Stagg and Clark as to
the purchase of each other's stock holdings at 110 percent of
book value, with the limitation that Stagg could exercise
his option only in the event of Clark's death, gross misconduct
or negligence, while Clark could exercise his option to buy
Stagg out only after the company had paid off its outstanding
debts to Eberhard. Their agreement also provided for a sliding
scale of remuneration to Clark, based on the store's weekly
volume, plus a bonus based on its net annual profit
The transfer of the 363 State store occurred over the July
4th weekend in 1967, and the store reopened the next day
with the Eberhard private brand merchandise removed. The
Eberhard employees who wished to transfer to other Eberhard
stores were permitted to do so, and Clark began his operations
with three employees, one of whom had been working at the
store for Eberhard and whom Clark wished to hire In the next
few weeks Clark personally hired additional employees, one of
whom came to him from another Eberhard store The 363
State Store now has 12 or 13 employees Clark does his own
luring without assistance or supervision from Eberhard, and at
wage rates which he himself has set.
Organization and Management of
Eberhard Foods
After September 1967, Eberhard Foods operated seven
stores in Kent County and four in other areas. Through one or
more subsidiaries, it also operated a number of stores under
various trade names. No issues in this case are relevant to the
operation of the subsidiaries' stores except insofar as one of
these corporations, Eberhard-Byerley, illustrates a pattern of
acquisitions and divestitures of individual stores by the
Eberhard interests
L. V. Eberhard is the operating head of Eberhard Foods.
Reporting to him are his son-in-law, A. A Stagg, who is
5 The substantial difference between the figure of 8 nonsupervisory
employees who were at the store in November 1966, and the 60
employees who were there in February 1968 is unexplained . It may be
that the 8 employees did not include part-time workers , while the
figure of 60 does, and that the latter also includes supervisors.
8 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
directly in charge of the Kent County stores, and his son, R.
W. Eberhard, in charge of the other stores Reporting to Stagg
and L V. Eberhard are various operating and staff officials,
constituting a level between them and the individual store
managers and their department heads These officials operate
out of the chain's central office, and are responsible at the
product level, for meats, groceries and produce, and at the
staff level for security, sales planning, advertising, personnel
and "front-end operations " Stagg and the divisional managers
visit the Grand Rapids stores frequently, and actively exercise
day-to-day supervision over the store managers. All the
Eberhard stores in the Grand Rapids area have uniform price
schedules, advertise under and display Eberhard emblems and
slogans, and are presented to the public through all media of
communication as a single, unified chain-store operation.
None of these divisional managers visit, oversee or advise
Meier or Clark on any operations at their respective stores.
Meier and Clark hire and discharge the employees at their
store, set their wage rates, fix their own price schedules,
advertise solely on their own behalf, and actively seek to
present an image of themselves to the public which is unrelated
to and independent of that presented by Eberhard Foods.
I have already mentioned that in 1967, Eberhard Foods
disposed of three other Kent County stores besides Wyoming
and 363 State The three stores were apparently sold outright
or without substantial financial investment on Eberhard's part.
In the preceding past 6 or 8 years, L. V. Eberhard, through his
Eberhard-Byerley subsidiary also transferred a number of
stores to other parties while retaining some financial interest in
the form of capital investment or loans Stores in Holly and
Montrose, Michigan, were transferred to newly established
corporations in which Eberhard-Byerley had a 55-percent
stock interest, and the operator of the store purchased 45
percent of the stock In both cases, the operator and minority
stockholder has since bought out Eberhard-Byerley's interest
Other Eberhard-Byerley stores were transferred on the same
basis, and in some of these cases, the arrangement remains
unchanged, that is, the operator is still the minority stock-
holder Yet other stores have been sold outright or closed
because of unprofitability At least one store, that at Owosso,
was sold by Eberhard-Byerley without making any capital
investment in the succesor but accepting as part of the
purchase price, notes on the equipment and inventory.
The Alleged Refusal to Bargain
Sometime in October 1966, Rehkopf, the president of the
Union, heard that the Wyoming store was going to be sold to.
Meier. When he called Mrs. DeVries, personnel director of
Eberhard, about it, she confirmed the story and told him that
the employees would be transferred out of the store in
accordance with the seniority provisions of the agreement By
letter dated November 1, 1966, Eberhard advised the Union
that it was planning to close the Wyoming store for economic
reasons about November 12, that it would provide employ-
ment for employees covered by the contract, and offered to
discuss with it the plans for the shutdown of the store and the
6 B & B Industries, Inc et al, 162 NLRB No 79
7 California Footwear Company, 114 NLRB 765, enfd as mod
246 F 2d 886 (C A 9), Herman Brothers Pet Supply, Inc, 138 NLRB
1087 , enfd 325 F 2d 68 (C A 6), Garwin Corporation, 153 NLRB 664,
enfd as mod . 347 F 2d 295 (C.A.D C )
8 Royal Oak Tool & Machine Company, 132 NLRB 1361, enfd 320
transfer of the employees . The Union did nothing further at
the time
The following June , when Rehkopf and DeVries met to
negotiate a new agreement to become effective July 1, 1967,
Rehkopf asked her why the checks issued by Wyoming were
being made out by Eberhard She said that she did not know,
but that the Wyoming store had been sold During the
negotiations , DeVries told the Union that the 363 State store
was to be sold about July 1. Thereafter , during the course of
the negotiations the Union claimed to be bargaining on behalf
of these two stores, while Eberhard insisted that they had been
sold and were excluded from the bargaining unit.
Concluding Findings
Although many of the cases relied on by the General
Counsel to establish a connection between Respondent
Eberhard and the other two Respondents pose the question of
liability on the part of a successor, or the survival of a
bargaining obligation for a "runaway shop," the General
Counsel recognizes that these cases are not directly apposite
Thus, -the General Counsel does not argue that Wyoming or
363 State is individually required to bargain with the Union on
behalf of its employees as successors of Eberhard, nor is it
suggested that Eberhard transferred two of its many stores to
the other Respondents only to evade bargaining with the
Union for them However, the successor and "runaway shop"
cases relied on by the General Counsel, do involve as here, the
survival of a bargaining obligation after a sale or other transfer
of assets from a predecessor to a successor organization. The
elements to be considered are similar, although their relative
importance may vary, in cases where the question presented is
whether formally separate business entities constitute a single
employer for jurisdictional or unit purposes,6 or whether a
successor is a disguised extension or continuance of the
predecessor, ' or whether an existing employer is obligated to
continue bargaining for operations which it has transferred to
newly formed allegedly independent entities.8
They have recently been restated in a jurisdiction case, 9
but are also applicable in a case such as this where the issue is
whether an existing organization remains obligated to continue
bargaining with a union for operations which it has "spun-off"
to formally separate business organizations Whether the
formally separate business organizations constitute a "single
employer" turns on the extent of their interrelationship of
operations, their centralized control of labor relations, their
common management, their common ownership or financial
control, and their representation to the public as a single
integrated enterprise.
I consider it of little significance in determining whether the
three Respondents constitute a single employer that Wyoming
and 363 State continue to operate as food markets on the
same premises where Eberhard Foods operated. Eberhard
could expect to obtain a better recovery on its investment in
merchandise and store fixtures if the stores could be sold as
food markets rather than for some other type of business.
Much more significant is the fact that though the premises
F.2d 77 (C A 6), Hemisphere Progressive Corp, 154 NLRB 711, and
Manley Transfer Company, Inc 164 NLRB No 21, enfd. 390 F 2d 777
(C A 8)
9 International Union of Operating Engineers, Local 428, AFL-
CIO, 169 NLRB No. 30.
EBERHARD FOODS 9
continue to be used as food markets they show no outward
connection with the Eberhard chain either by the use of
Eberhard private brands, signs or emblems, or by common
advertising. To the public they appear as separate entities and
competitors. Although they purchase from a common supplier,
Spartan Stores, and are members of that cooperative whole-
saler, that establishes neither an interrelationship of operations
nor common management, since Spartan is clearly separate
from, and independent of, each of them.
There is no persuasive evidence that Eberhard officials
manage the day-to-day operations of Wyoming or 363 State in
any fashion, nor do either of these Respondents have any
connection with each other, besides their possible common
involvement with Eberhard. When Wyoming and 363 State
were Eberhard stores, their managers were salaried employees
of Eberhard subject to the supervision of L. V. Eberhard, A. A.
Stagg and the Eberhard divisional managers. The hiring of
employees was subject to Eberhard control, prices of com-
modities were set by Eberhard, and the stores did not advertise
separately. They were, in the eyes of the public, their
employees, vendors, and creditors, units of a single, coordi-
nated business operation. Now, on the other hand, no
supervisory official of Eberhard ever visits Wyoming, and
Stagg's infrequent visits to 363 State and his examination of its
sales and financial reports can be explained by his interest in
his financial investment.
The evidence also shows that Meier and Clark decide how
many employees to hire and in what categories The Eberhard
personnel office does not interview applicants for them, does
not make or keep schedules of hours of work, and exercises no
function over their selection, discipline or termination. The
present employees at Wyoming or 363 State were never told
that they were working for Eberhard, and they and Eberhard
employees are never interchanged.
The major thrust of the General Counsel's argument that
the three Respondents constitute a single employer is directed
at the financial arrangements between the Eberhard interests
and the other two corporations. Eberhard's financial involve-
ment is at different levels. As to both stores, Eberhard
corporations are lessors or sublessors of the realty, lessor of the
store equipment, creditors and investors. At each of these
levels, there is a possibility of Eberhard's exercising control
over Meier's or Clark's independent interests. That every aspect
of Eberhard's financial involvement is clearly and carefully
spelled out, and that Meier's and Clark's rights and interests are
described and safeguarded impresses me that their negotiations
with L V. Eberhard were at arms-length even though it is
fairly obvious that Eberhard held most of the financial cards.
Meier and Clark did not have much money, but they were
willing to invest their experience and motivation to turn
unprofitable stores into profitable ones, something which
Eberhard had not been unable to accomplish.
There are not, in this case, devices of the sort by which a
former owner seems to transfer to a financially irresponsible
newcomer an interest in a going business with no intention of
ever permitting a real transfer of assets to take place. The
emphasis here is quite to the contrary. The terms of the realty
and equipment leases are for fixed periods, the rental is set at
fixed sums which cannot be increased except, in the case of
Wyoming, after an increase in the Consumers Price Index, the
allocation of future increased costs, such as taxes, is deter-
mined in advance, and the options for extension or for
purchase are left with the new corporations. There is no way
by which Eberhard may force Meier or Clark out by arbitrary
cancellations of the leases.
The same is true as to Eberhard's status as a creditor of
Wyoming and 363 State. Lenders, whether they are govern-
ment agencies, financial institutions, or vendors who have not
yet been fully paid, insist on security and protection for their
loans, and one common type of safeguard is a restriction on
what the borrower may draw out in personal remuneration.
Limitations on salary, the right to inspect financial statements,
or even insistence on the power of approving expenditures do
not, of themselves, prove that the borrower is only an alter ego
of the lender The question to be answered is really whether an
underfinanced investor, such as Meier or Clark, can reasonably
expect to pay off the loans and thereby exclude the lender
from exercising further control over his operations. I am
satisfied that both Meier and Clark are in that position, and
that as a matter of fact, the current repayment of their loans
proves that their indebtedness to the Eberhard interests was
not devised as a means of keeping them permanently depend-
ent on Eberhard
There is finally the question whether the stock holdings of
the Eberhard interests in Wyoming and 363 State, amounting
in each case to 55 percent of the total capitalization is
sufficient, either alone or in combination with its involvements
as lessor and creditor, to justify a finding that the three
Respondents are a single employer. A majority stockholder has
the potential for full control of a corporation, through the
election of a majority of the board of directors, and their
selection of the officers and operating officials. Although the
possibility of a takeover of the positions held by Meier and
Clark exists, it strikes me as a remote and doubtful eventuality.
In two cases when Eberhard-Byerley took a majority stock
interest in a newly formed corporation organized to buy a
store from it, the minority stockholders who actually operated
the stores have since bought it out, and in two other cases, the
original arrangement remains unchanged. If past experience is a
guide, Meier and Clark are more likely to buy out Eberhard
than the reverse. And, of course, if Eberhard does buy them
out, the stores would again become part of the bargaining unit.
If common ownership or financial control were the sole
criteria in determining whether separate business entities are in
effect a single employer, then the Eberhard financial interests
through leases, loans and stock ownership would arguably
sustain a finding that Meier's and Clark's interests were not
substantial enough for separate employer status. But the Board
considers this as only one of the factors to be considered in
deciding whether businesses which are financially related are in
fact substantially independent of each other. I have taken
these other factors into account-the interrelationship of
operations, centralized control of labor relations, common
management, and representation to the public as a single
integrated enterprise, and I find that the elements of common
ownership of the three Respondents, or the financial control
potentially exercisable by the Eberhard interests over the
affairs of Wyoming or 363 State are not sufficient to overcome
the virtual absence of the other equally important indicia of
single employer status.
As neither Wyoming nor 363 State is the alter ego of
Eberhard Foods, and is not affiliated with it otherwise for
bargaining purposes, it follows that the latter Respondent did
not violate Section 8(a)(5) by insisting that it had no further
obligation to recognize the Union as the representative of the
employees at those locations after the new corporations began
10 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
operations I shall recommend that the complaint be dismissed
10in its entirety.'
CONCLUSIONS OF LAW
I Eberhard Foods, Inc., 363 State Inc., and Wyoming
Food City, Inc., are employers engaged in commerce and in
activities affecting commerce within the meaning of Section
2(6) and (7) of the Act.
2 Retail Store Employees Union Local No. 20, Retail
Clerks International Association, AFL-CIO, is a labor orgam-
zation within the meaning of Section 2(5) of the Act.
3. Eberhard Foods, Inc. has not violated Section 8(a)(5)
and (1) of the Act by refusing to recognize the Union as the
bargaining representative for the employees of 363 State Inc.,
or Wyoming Food City, Inc.
4. The Respondents have not engaged in any unfair labor
practices alleged in the complaint.
RECOMMENDED ORDER
It is hereby recommended that the complaint be dismissed
in its entirety.
I0It is therefore not necessary to consider the validity of the
contention made by Wyoming and Eberhard that Section 10(b) of the
Act barred the issuance of a complaint against them , since the charge
was filed more than 6 months after the Union became aware that
Eberhard had sold the 28th Street store to Wyoming, and had
transferred all the employees at that location to its other stores