Evans Plumbing Co. And Its Alter Ego Evans Services, Inc.

National Labor Relations Board - Board Decisions

Jan 17, 1986

278 N.L.R.B. 67 (N.L.R.B. 1986)

EVANS PLUMBING CO.
Evans Plumbing Co. and its alter ego Evans Serv-
ices, Inc. and Jack T. Lee. Case 10-CA-15507
17 January 1986
SUPPLEMENTAL DECISION AND
ORDER
By CHAIRMAN DOTSON AND MEMBERS
DENNIS AND JOHANSEN
On 3 September 1985 Administrative Law Judge
Lawrence W.' Cullen issued the attached supple-
mental decision. The Respondent filed exceptions
and a supporting brief, and the General Counsel
filed an answering brief.
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 rul-
ings , findings,2 and conclusions, and,to adopt the
recommended Order.
ORDER
The National Labor Relations Board adopts the
recommended Order of the administrative law
judge and orders that the Respondent, Evans
Plumbing Co. and/or its alter ego and/or successor
Evans Services, Inc., Birmingham, Alabama, its of-
ficers, agents, successors, and assigns , shall pay to
Jack T. Lee as net backpay the sum of $37,909, and
shall pay, to Fired J. Meeks as net backpay the sum
of $3909.40, with interest, less tax withholdings re-
quired by Federal, or state law.
1 The Respondent has requested oral argument The request is denied
as the record, exceptions, and briefs adequately present the issues and the
positions of the parties.
2 No exceptions were filed with respect to the judge 's findings con-
cerning mitigation of backpay.
Richard P. ProwelL Esq., for the General Counsel.
Sydney F. Frazier Jr., Esq. (Cabaniss, Johnston, Gardner,
Dumas and O'Neal), of Birmingham, Alabama, for the
Respondent.
SUPPLEMENTAL DECISION AND BACKPAY
PROCEEDINGS
STATEMENT OF THE CASE
LAWRENCE W. CULLEN, Administrative Law Judge.
This supplemental proceeding was heard before me on
27 March 1985 at Birmingham, Alabama, to determine
the amount of backpay, if any, due to the discriminatees
Fred J. Meeks and Jack T. Lee under a Decision and
Order issued by the National Labor Relations Board on
13 November 1980 and enforced by the Court of Ap-
peals for the Fifth Circuit on 7 April 1981 wherein Re-
67
spondent, Evans Plumbing Company, was found to have
unlawfully discharged and refused to reinstate Meeks and
Lee.' , '
Upon the entire record, including my observation of
the demeanor of the witnesses and after due consider-
ation of -the brief filed- by the General. Counsel, I make
the following2^
FINDINGS AND CONCLUSIONS OF LAW
In Administrative Law Judge, Hutton S. Brandon's 30
September 1980 decision and his order adopted by the
Board, Respondent was found to have violated Section
8(a)(3) and (1) of the Act by discharging Jack T. Lee
and Fred J. Meeks on 15 February 1980. Respondent
was ordered to offer Fred J. Meeks and Jack-T. Lee im-
mediate and full reinstatement to their former jobs or, if
their jobs no longer existed, to substantially equivalent
positions, ;without prejudice to their seniority or other
rights and privileges, and to make, them whole for their
loss of earnings. There are several issues set out by the
General Counsel in its brief and raised by the parties at
the hearing.
A. The General Counsel's Contentions that Evans
Services, Inc. is the ,Alter Ego and/or the Successor
Employer of Evans Plumbing Company and that
Individual Liability Should Be Extended to Elizabeth
Mancin (Rutledge) and L. John Mancin III '
At the hearing testimony was adduced from Charles
Denaburg, an attorney, and John Mancin III that L.
John Mancin Jr. (the original' owner of Evans Plumbing
Company and husband of Elizabeth Mancin (Rutledge)
and the .father of John Mancin III), died in 1975 or 1976
and that the corporation was placed in trust for Eliza-
beth Mancin -(Rutledge) with Denaburg as trustee of the
stock of the corporation. Denaburg thereafter served as a
member of the board of directors of the corporation until
the fall of 1980 when Evans Plumbing Company filed a
petition for bankruptcy.
Denaburg testified as follows: In its early history,
Evans Plumbing Company had been primarily a plumb-
ing service company performing small jobs and home
repair service. It subsequently expanded into small com-
mercial:jobs and kitchen and bathroom remodeling jobs
and later into some large commercial jobs. As a result of
large losses incurred on some large commercial jobs and
other losses in the kitchen and bathroom remodeling
business, the corporation's finances suffered. In early
1979, Evans Plumbing owed a substantial amount of
money and borrowed $57,000 from Elizabeth Mancin's
(Rutledge's) personal funds "to continue the operation of
the business and keep the doors open." This loan was se-
cured by a- recorded security agreement of "various
assets" of Evans Plumbing to protect, the interest of Eliz-
abeth Mancin (Rutledge). These assets consisted of "All
'1 NLRB Case 10-CA-15507; U.S. Court of Appeals for the Fifth Cu-'
cult unit B number 81-7001.
2 Respondent's brief was untimely and was returned to Respondent by
me without consideration thereof., Sec, 102 42 of the Board 's Rules and
Regulations ; Teamsters Local' 79 (Carl Subler Trucking), 269 NLRB 1132
fn. 1 (1984)
278 NLRB No. 9
68 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
of the 'assets of the corporation"-inventory, equipment,
fixtures, furniture, accounts receivable, and all other
goods of a like nature. This was a secondary position to
the position, another position, that was held by a bank.
The funds secured from the loan by Elizabeth Mancin
(Rutledge) were used for working capital in the corpora-
tion. The economic condition of Evans Plumbing Com-
pany continued to deteriorate, and on 11 April 1980, its
board of directors (consisting of Denaburg, Elizabeth
Mancin (Rutledge), and John Mancin III) passed a reso-
lution authorizing its president John Mancin III to file a
petition under Chapter 7or 11 of the Bankruptcy Act if
it became necessary.
On 4 May 1980 Elizabeth Mancin (Rutledge) fore-
closed her security interest for nonpayment of the loan
by Evans Plumbing, and she personally obtained the
assets used to secure that loan. Evans Services, Inc.
(named as alter ego of Evans Plumbing in the complaint
and contended by the General Counsel at the hearing to
be a successor of Evans Plumbing), was incorporated on
5 May 1980. Evans Services, Inc. was capitalized by the
contribution by Elizabeth Mancin (Rutledge) of the
assets she had taken at the foreclosure sale subject to an
existing lien on these assets and by the contribution of
$10,000 by Lois Mancin, the wife of John Mancin III.
John Mancin III was president, Elizabeth Mancin (Rut-
ledge) was vice president, and Lois Mancin was secre-
tary-treasurer of Evans Services, Inc., which commenced
its operations in the same facilities as Evans Plumbing.
These premises are owned by the estate of L. J. Mancin
Jr. and leased to Evans Services, Inc. Evans Plumbing
Company filed a voluntary petition in bankruptcy on 18
August 1980.
John Mancin III also testified that prior to the death
of his father in 1975 or 1976, he and his father, L. J.
Mancin Jr., were directors of Evans Plumbing Company
of which L. J. Mancin Jr. was president and sole share-
holder and Elizabeth Mancin (Rutledge) was secretary.
Following the death of his father, the stock in the corpo-
ration was placed in trust for his mother Elizabeth
Mancin (Rutledge). In 1978 John Mancin III also ac-
quired some stock. Following the death of his father,
Elizabeth Mancin (Rutledge) became chairman of the
board and secretary-treasurer of Evans Plumbing Com-
pany and John Mancin III became president thereof.
John Mancin III testified that of the 12 motor vehicles
listed on the 3 May 1980 inventory of Evans Plumbing
Company, he, himself, was personally paying the notes
on some of the vehicles. When Evans Services, Inc.
commenced operations, it used these vehicles and- Evans
Services, Inc. commenced to pay some of the notes and
he continued to personally pay others of them: These ve-
hicles had been registered with the State of Alabama as
owned by Evans Plumbing Company and some were still
so registered at the date of the hearing. A number of the
employees of Evans Plumbing Company were retained
as employees of Evans Services, Inc. (i.e., Earl Meeks as
service manager). There was also no change in telephone
numbers or in post office box numbers when Evans
Services, Inc. commenced business. John Mancin III tes-
tified further that Evans Plumbing Company had been
engaged in large plumbing work whereas Evans Serv-
ices, Inc. "is strictly a service type business." It is undis-
puted that both corporations performed plumbing work.
Evans Plumbing Company employed 50 field personnel
and 8 or 9 office personnel whereas Evans Services, Inc.
employs 15 field and 4 office personnel, a majority of
whom were employees of Evans Plumbing Company.
Based on the foregoing, the General Counsel contends
that Evans Services, Inc. is the alter ego, of Evans
Plumbing Company. I'fmd that the evidence overwhelm-
ingly demonstrates that Evans Services, Inc. is the alter
ego of Evans - Plumbing Company because it demon-
strates factors of common management control existing
within a small family corporation,. a common business
purpose of a plumbing concern (notwithstanding the
nonengagement of Evans Services, Inc. in large commer-
cial plumbing jobs), common premises and equipment, a
carryover of supervisory and certain other employees,
and a closely held ownership arrangement whereby the
shares of Evans Plumbing Company had been held in
trust for Elizabeth Mancin and she now holds 80 percent
of the stock of Evans Services, Inc. following the trans-
fer of the assets of Evans Plumbing Company to Evans
Services, Inc. See Fugary Continental Corp., 265 NLRB
1301 (1982), enfd. 725 F.2d 1416 (D.C. Cir. 1984); South-
eastern Envelope Co., 246 NLRB 423, 425-428 (1979);
American Pacific Concrete Pipe Co., 262 NLRB 1223,
1226 (1982); Crawford Door Sales Co., 226 NLRB 1144
(1976).
Assuming arguendo that Evans Services, Inc. is not
the alter ego of Evans Plumbing Company, I find that
the evidence demonstrates that Evans Services, Inc. is a
successor employer to Evans Plumbing Company as it
clearly stepped into the shoes of Evans Plumbing Com-
pany by taking over its operations, hiring a majority of
its employees from the complement of the employees of
Evans Plumbing Company, and had knowledge of the
unfair labor practices committed by Evans Plumbing
Company. See Perma Vinyl Corp., 164 NLRB 968 (1967);
Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973). I
further find that the bankruptcy proceeding has no effect
on this obligation. International Technical Products-Corp.,
249 NLRB 1301 (1980).
I reject the General Counsel's contention, initially
made shortly prior to the close of the hearing, that indi-
vidual liability should be extended to Elizabeth Mancin
(Rutledge) and L. John Mancin III as I find they were
never named as parties to this proceeding and Elizabeth
Mancin (Rutledge) was not present nor represented indi-
vidually at the hearing. Basic due process dictates that
no order, decision, or judgment can'issue against an indi-
vidual who has not been made a party to a proceeding
and afforded an opportunity to fully litigate his or her in-
terest therein. See Sachs Electric Co., 248 NLRB 669, 670
fn. 5 (1980); George C. Shearer Exhibitors, 246 NLRB 416
(1979). See also Marine Machine Works, 243 NLRB 1081
(1979); but see Dews Construction Corp., 246 NLRB 945,
946 (1979).
EVANS PLUMBING CO. 69
B. Whether Alleged Offers of Reinstatement Were
Effective to Preclude Substantial Amounts of Backpay
to Meeks and Lee
Respondent alleges, and contended at the hearing, that
during the week following their illegal discharge Lee
and Meeks both received offers to return to work by Re-
spondent's service manager, Earl Meeks Jr., the uncle of
Meeks and who is also related to Lee by marriage. The
discriminatees, Lee and Meeks, denied that such an offer
had been made. The General Counsel contends this de-
fense is barred by res judicata contending that this issue
was resolved at the initial hearing in Case 10-CA-15507.
The General Counsel moved at the instant hearing to
strike this allegation from Respondent's answer and to
strike testimony presented by Respondents in support of
their position in this regard.
In discussing this issue, it is necessary to set out the
background of this case. In the complaint for the under-
lying unfair labor practice case (G.C. Exh. 14), it was al-
leged that Respondent about 15 February 1980 "dis-
charged and thereafter failed and refused to reinstate"
Lee and Meeks. In its answer of 10 April 1980 to this
complaint, Respondent admitted this allegation. Thus,
the issue of immediate reinstatement was joined by Re-
spondent's answer to the complaint allegation in the un-
derlying unfair labor practice proceeding. At the under-
lying unfair labor practice proceeding, Respondent's
counsel made a limited appearance to advise that Re-
spondent had filed a voluntary petition in bankruptcy,
pursuant to Chapter 11 of the United States Bankruptcy
Code, 11 U.S.C. § 1 et seq. and to file a written docu-
ment received in the record in the initial proceeding. Re-
spondent contended that the filing. of the petition in
bankruptcy operated as a stay to the commencement of
any judicial, administrative, or other proceedings against
the bankrupt and "prayed" that the Board stay any other
proceedings in the instant case until the bankruptcy court
had, granted it relief. The General Counsel opposed this
motion and contended that the filing of the bankruptcy
petition did not operate to stay the Board's proceedings.
Administrative Law Judge Brandon sustained the Gener-
al Counsel's position and, following this ruling, Respond-
ent's counsel departed the hearing and the hearing pro-
ceeded with no further participation therein by Respond-
ent. Based on the record before him, Administrative Law
Judge Brandon found that Respondent had violated the
Act by discharging Lee and Meeks on 15 February 1980
and recommended in his order that Respondent should
offer Meeks and Lee immediate and full reinstatement to
their former jobs or, if those jobs no longer existed, to
substantially equivalent positions without prejudice to
their seniority or other rights and privileges, and make
them whole for their loss of earnings in the manner set
forth in the remedy.
Based on the foregoing, I find that Respondents' de-
fense raised in the backpay proceeding that it offered full
reinstatement to Meeks and Lee is barred as the matter is
res judicata as it was raised initially in the underlying
unfair labor practice proceeding by the complaint, specif-
ically admitted by Respondent Evans Plumbing Compa-
ny's answer and implicitedly found by the judge in his
decision that there had been no offer of reinstatement.
Big Three Industrial Gas Co., 263 NLRB 1189, 1206
(1982); NLRB v. Laredo Packing Co., 730 F.2d 405 (5th
Cir. 1984). I thus sustain the General Counsel's motion to
strike that portion of Respondents' answer which alleges
as an affirmative defense that the discriminatees were of-
fered reinstatement and to strike the testimony adduced
by Respondents in support thereof as this defense is
barred by res judicata.
C. Whether Meeks and Lee Failed to Make
Reasonable Searches for Work During the Backpay
Period
Respondents contend that Meeks and Lee did not
make an adequate search for work during the backpay
period. Both Meeks and Lee testified at the hearing that
immediately following their discharge they signed the re-
ferral list at the union hall in an attempt to secure' interim
employment.3 They also signed the out-of-work list at
the State's unemployment office. At the time of their dis-
charge, Meeks was an apprentice and Lee was a journey-
man. The Board has traditionally held that employees
who seek work through a union hiring -hall have engaged
in' a reasonable search for employment. Big Three Indus-
trial Gas Co., supra at 1198; Seafarers Atlantic District
(Isthmian Line), 220 NLRB 698 (1975). Meeks testified
that he totally relied on the Union's referral system to
secure new employment and was successful following 9
weeks of unemployment. Lee testified that in addition to
his reliance on the Union's r"eferral system to secure in-
terim employment he also contacted individual employ-
ers during his period of unemployment. Respondents
failed to show that the discriminatees rejected any em-
ployment that was available at the time.
It is well established that although an employer may
mitigate his backpay liability by showing that a discri-
minatee willfully incurred a loss by an unjustified refusal
to take new employment, this is an affirmative defense
and must be established by- a respondent. In this case,
Respondents wholly failed to do so and did not meet
their burden by presenting any evidence therein. It is
also well established-that any uncertainty with respect to
the evidence in a backpay case must be decided and re-
solved against the wrongdoer. Big Three Industrial Gas
Equipment Co., supra; NLRB v. Miami Coca-Cola Bot-
tling Co., 360 F.2d 569 (5th Cir. 1966); Southern House-
hold Products Co., 203 NLRB 881 (1973). Under all the
circumstances, I find that Respondents have failed to
prove and sustain their affirmative defense that employ-
ees Meeks and Lee have engaged in willful idleness
during the backpay period.
D. Whether Meeks and Lee Had Additional Interim
Earnings During the Backpay Period Which Should
Be Deducted from Gross Backpay
It is well established that a respondent has the burden
of proof to show interim earnings above and beyond
those admitted by the backpay specification. Sioux Falls
Stockyard Co.,' 236 NLRB 543 (1978). This, Respondents
3 The employees were initially referred to the employer through the
referral system of the Plumbers and Steamfitters Union, Local 91
70 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
totally failed to do in this case. The evidence adduced by
Respondents at the hearing showed that employee Lee
performed weekend work on a project referred to as the
"Coosa River" job on weekends while working full time
at an interim employer. Lee' testified that this work was
performed on weekends. I credit Lee's testimony which
was unrebutted and I, accordingly, find that such earn-
ings are not deductible as interim earnings. Sioux Falls
Stockyard Co., supra; Miami Coca-Cola Bottling Co., 151
NLRB 1701, 1710 (1965), enfd. with respect to this issue
360 F.2d 569, 573 (5th Cir. 1966). Respondent additional-
ly adduced testimony from Lee that he cleared land on
his property and worked without pay on a fire station
building project and performed plumbing work in return
for carpentry work with a carpenter with respect to the
construction of his home. Lee also testified that he had
engaged in these activities for substantial periods of time
including that period while he was employed full time by
Respondent Evans Plumbing Company. I credit his testi-
mony in this regard. Respondents have failed to demon-
strate these activities were not in fact supplemental as
contended by Lee, and have failed to demonstrate the
amount of time they occupied or whether they otherwise
properly constituted deductible interim earnings. I ac-
cordingly find that Respondents have not sustained their
burden of proof and have not shown that Lee had any
interim earnings beyond that admitted in the backpay
specification. Respondents presented no evidence con-
cerning any additional interim earnings of, Meeks other
than that admitted in the backpay specification.
E. Whether Mileage Expenses Should Be Deducted
from the Interim Earnings of Frederick J. Meeks
During the Second Quarter of 1980
The backpay specification, as amended (G.C. Exh.
1(j)), sets out that during the second quarter of 1980,
Meeks had interim earnings of $4816, Meeks testified at
the hearing that approximately 1 May 1980 he secured
this employment at a location which was 121 miles from
his home and which required a round-trip drive by per-
sonal auto 6 days per week. He further testified that the
distance from his residence to Evans Plumbing was 12
miles . His interim job was thus an additional 109 miles
away and he drove an additional 218 miles per day. As
he worked 6 days per week, he drove a total of an addi-
tional 1308 miles per week. He testified that he com-
menced this interim employment following 9 weeks of
unemployment checks and thus began his interim em-
ployment about 1 May 1980. Accordingly, he drove an
additional 11,772 miles during this 9-week period in this
quarter.
I find the testimony of Meeks in this regard is unrebut-
ted and should be credited. During the time period in-
volved with respect to this interim employment, the rate
allowed to Federal employees was 20 cents per mile pur-
suant to the rules established by the General Services
Administration and is properly to be applied in this in-
stance . See "NLRB Administrative Policies and Proce-
dures Manual Title 12 1980." This calculates out to the
amount of $2354.40 (11,772 miles x 20 cents) and this
total should be deducted, from the interim earnings of
Meeks during the second quarter of 1980. Thus, the
backpay due Meeks during the second quarter of 1980 is
$1534.40 (gross backpay of $3996 less net interim earn-
ings of $2461.60) and the total amount of backpay due
Meeks is $3904.40, plus interest. See Kartarik, Inc., 111
NLRB '630 (1955), enfd. 227 F.2d 190 (8th Cir. 1955);
Rice Lake Creamery Co., 151 NLRB- 1113 (1965), mod.
365 F.2d 888- (D.C. Cir. 1966).
F. The Laches Issue
Respondent contends that the General Counsel is
barred from proceeding in this case as a result of the
delay between the entry of the enforcement of the
Board's decision against Evans, Plumbing Company and
the filing of this backpay proceeding . However, it is well
established that such a defense is not available to extin-
guish the claim of a discriminatee awarded backpay in an
unfair labor practice proceeding by the Board . NLRB v.
Rutter-Rex Mfg. Co., 396 U.S. 258 (1969); NLRB v. Iron
Workers Local 480, 116 LRRM 2289 (1984).
G. The Backpay Calculations
The amended backpay specification (G.C. Exh. 1(j))
was received in evidence at the hearing subject to Re-
spondent's verification of the amounts and calculations
thereof. Respondent has not disputed or specifically
denied the mathematical correctness of the gross back-
pay as set out in the backpay- specification although it
has raised defenses about interim earnings as discussed
supra. Section 102.54 of the Board's Rules and Regula-
tions, provides, in pertinent part, as follows:
(b) . . . The respondent shall specifically admit,
deny, or explain each and every allegation of- the
specification, unless the respondent is without
knowledge, in which 'case the respondent shall so
state, such statement operating as a denial. Denials
shall fairly meet the substance of the allegations of
the specification denied. When a respondent intends
to deny only a part of an allegation, the respondent
shall specify so much of it as is true and shall deny
only the remainder. As to all matters within the
knowledge of the respondent, including but not lim-
ited to the various factors entering into the compu-
tation of gross backpay, a general denial shall not
suffice. As to such matters, if the respondent dis-
putes either the accuracy of the figures in the speci-
fication or the premises on which they are based, he
shall specifically state the basis for his disagreement,
setting forth in detail his position as to the applica-
ble premises and furnishing the appropriate support-
ing figures.
(c) . . . If the respondent files an answer to the
specification but fails to deny any, allegation of the
specification in the manner required ' by subsection
(b) of this section, and the failure so to deny is not
adequately explained, such allegation shall be
deemed to be admitted to be true, and may be so
found by the Board without the taking of evidence
supporting such allegations and the respondent shall
be precluded from introducing any evidence contro-
verting said allegation. `
EVANS PLUMBING CO. 71
In the instant case, Respondents' failure to specifically
deny and state the basis for their disagreement if any
does not conform to the requirements of Section 102.54.
Furthermore, Respondents were specifically given the
opportunity at the hearing to bring any inaccuracy to my
attention and failed to' do so, but rather relied on their
motion to dismiss the backpay specification for failure of
proof by the General Counsel. Accordingly, I find that
the allegations of gross backpay are true and accurate.
Master Transmission Rebuilders, 269 NLRB 93 (1984). I
also find that the amounts shown as interim earnings and
related expenses and the net earnings set out in the calcu-
lation are true and accurate and find that net backpay in
the amount of $37,909 is due to Lee and $3909.40 is due
to Meeks.
On these findings of fact and conclusions of law and
on the entire record, I issue the following recommend-
ed4
ORDER
Respondents Evans Plumbing Company and/or its
alter ego and/or successor, Evans Services, Inc., shall
pay to Jack T. Lee as net backpay the amount of $37,909
and shall pay to Fred J. Meeks as net backpay the sum
of $3909.40. Interest is to be added as set out in Florida
Steel Corp., 231 NLRB 651 (1977). 'See generally Isis
Plumbing Co., 138 NLRB 716 (1962). There shall be de-
ducted from this amount any tax withholding required
by law.
4 If no exceptions are filed as provided by Sec. 102.46 of the Board's
Rules and Regulations , the findings , conclusions, and recommended
Order shall, as provided in Sec. 102 48 of the Rules, be adopted by the
Board and all objections to them shall be deemed waived for all pur-
poses.