H. P. Hood & Sons, Inc.

National Labor Relations Board - Board Decisions

Aug 27, 1973

205 N.L.R.B. 833 (N.L.R.B. 1973)

H. P. HOOD & SONS
H. P. Hood & Sons, Inc. and Milk Wagon Drivers and
Creamery Workers Union, Local 380, a/w Interna-
tional Brotherhood of Teamsters , Chauffeurs, Ware-
housemen and Helpers of America. Case
1-CA-7113
August 27, 1973
DECISION AND ORDER
BY CHAIRMAN MILLER AND MEMBERS FANNING
AND JENKINS
On March 30, 1973, Administrative Law Judge Ha-
rold X. Summers issued the attached Decision in this
proceeding. Thereafter, Respondent filed exceptions
and a supporting brief, the Charging Party filed cross-
exceptions to the Decision and a supporting brief; the
Respondent then filed an answering brief to the
Charging Party's cross-exceptions to the Decision,
and the Charging Party filed an answering brief to
Respondent's exceptions.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the Na-
tional Labor Relations Board has delegated its au-
thority in this proceeding to a three-member panel.
The Board has considered the record' and the at-
tached Decision in light of the exceptions and briefs
and has decided to affirm the rulings, findings, and
conclusions of the Administrative Law Judge and to
adopt his recommended Order.
ORDER
Pursuant to Section 10(c) of the National Labor
Relations Act, as amended, the National Labor Rela-
tions Board adopts as its Order the recommended
Order of the Administrative Law Judge and hereby
orders that Respondent, H. P. Hood and Sons, Inc.,
Boston, Massachusetts, its officers, agents, successors,
and assigns, shall take the action set forth in said
recommended Order.
CHAIRMAN MILLER, concurring:
I concur in the result. I agree with the Administra-
tive Law Judge's conclusion that Respondent did not
want its burden of showing a clear and present danger
of conflict of interest on the part of Local 380, and
that, therefore, Respondent had inadequate justifica-
tion for refusing to bargain with Local 380.
I append this special concurrence only to say that,
had I participated in the underlying representation
case herein, I am not at all sure that I would not have
dismissed Local 380's petition for an election. While
I do not believe that this Board was required by any
833
mandate of the statute so to do-and it, of course, did
not-my own view would be that it might well have
been a wiser exercise of administrative discretion to
have done so. There may be some question whether
such administrative discretion would have to be exer-
cised in a rulemaking proceeding or whether it could
be done by decision on a case-by-case basis. But pass-
ing that issue for the moment, I would think it might
be healthy for this Board to refuse to process petitions
filed by any labor organization seeking to represent
the employees of an employer if it is shown to us that
that labor organization, its affiliates, or any trust fund
of which officers or agents of the labor organization
or its affiliates are trustees, has any financial interest
(equity or not) in a business owned and operated by
a competitor.
I would make clear that in this case there is not a
scintilla of evidence that Local 380 yielded to any
temptation that the rather remote suggestion of a pos-
sible conflict of interest might have created. But why,
I wonder, should we, in the exercise of our administra-
tive discretion, permit even that possible temptation
to exist? A rule or decision of the type I have suggest-
ed could prevent any such temptation and would have
obviated the need for the long and wasteful litigation
of which this particular case is only a part.
i Respondent has requested oral argument This request is hereby denied
as the record, the exceptions, and the briefs adequately present the issues and
positions of the parties
DECISION
HAROLD X. SUMMERS, Administrative Law Judge: In this
proceeding, the General Counsel of the National Labor
Relations Board (herein called the General Counsel and the
Board, respectively) issued a complaint,' later amended,
alleging that H. P. Hood & Sons, Inc. (herein called Re-
spondent), had engaged in and was engaging in unfair labor
practices within the meaning of Section 8(a)(5) and (1) of
the National Labor Relations Act (the Act). The answer to
the amended complaint, itself amended, admitted some of
the allegations, denied others, and pleaded affirmatively; in
effect, it denied the commission of any unfair labor practic-
es.
Pursuant to notice, a hearing was held before me at Bos-
ton, Massachusetts, on 16 days between December 16, 1970,
and March 12, 1973, inclusive; all parties were afforded full
opportunity to call and examine and to cross-examine wit-
nesses, to argue orally, and thereafter to submit briefs.
Upon the entire record in the case,2 including evaluations
1 The complaint was issued on June 3, and amended on June 10, 1970 The
unfair labor practice charge initiating the proceeding was filed on May 13,
1970.
2 By stipulation of the parties, the following cases are incorporated in and
made a part of this proceeding David Buttrick Co, 154 NLRB 1468, remand-
Continued
205 NLRB No. 132
834 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
of the witnesses based upon my observation of their demea-
nor, and upon due consideration of briefs filed, I make the
following:
FINDINGS OF FACT
I JURISDICTION
Respondent is a Massachusetts corporation with its prin-
cipal office and place of business at Charlestown, Massa-
chusetts, where it is engaged in the manufacture, sale, and
distribution of milk and related dairy products, ice cream,
food products, and citrus products. In the course of conduct
of its business , it causes, and continuously has caused at all
times relevant herein, large quantities of milk, milk bypro-
ducts, and food products used by it in its operations to be
purchased and transported from and through various States
of the United States other than the Commonwealth of Mas-
sachusetts-for example, it annually purchases dairy and
food products having a value well in excess of $50,000,
which are received at Charlestown from points outside the
Commonwealth of Massachusetts-and it causes, and con-
tinuously has caused at all times relevant herein, substantial
quantities of its finished products to be transported from its
plant at Charlestown to States of the United States other
than the Commonwealth of Massachusetts.
Respondent is an employer engaged in commerce within
the meaning of the Act.
II THE UNION
The Charging Party herein, Milk Wagon Drivers and
Creamery Workers Union, Local 380, a/w International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and
Helpers of America (hereinafter called Local 380), is a labor
organization within the meaning of the Act.' Luke Kramer,
executive officer, is its principal agent.
III THE ALLEGED UNFAIR
LABOR PRACTICES
A. The Prima Facie Case
The complaint and answer having been admitted into
evidence, the General Counsel rested his case in chief.
ed 361 F 2d 300 (C A 1, 1966), David Buunck Co, 167 NLRB 438, enfd 399
F 2d 505 (C A I, 1968), and H P Hood & Sons, Inc, 182 NLRB 194
On or about December 7, 1971, counsel for Respondent filed what was,
in effect, a motion to correct the transcript herein No opposition was filed
The motion is hereby granted, and the corrections sought therein are hereby
ordered made (The motion is hereby received into the record as ALJ Exh
2)
In its answer, Respondent denied the complaint's allegation that Local
380 was a labor organization within the meaning of Sec 2 (5) of the Act
"insofar as it is implied that [Local 380] is qualified to act as the collective
bargaining representa tive of the employees [ in the bargaining unit] " I regard
this partial denial as being encompassed within the question raised by
Respondent's affirmative defense which is treated in detail below There is
no doubt, on the record before me, that Local 380 is an organization in which
employees participate and which exists for the purpose, in whole or in part,
of dealing with employees concerning grievances , labor disputes , and work-
ing conditions (See Alto Plastic Manufacturing Corporation, 136 NLRB 850,
852)
On the basis of the allegations of the complaint and an-
swer, as supported by the Board's findings in an earlier
representation case 4 and/or by stipulations, concessions,
and credible related evidence herein, I find that:
(1) The unit described in the complaint:
All production workers, mechanical maintenance
workers, equipment sanitation workers, route loaders,
platform and chest employees, hardening room em-
ployees, trailer drivers, route drivers, and special deliv-
ery drivers at the Respondent's Roland Street,
Charlestown, Massachusetts location, exclusive of all
part-time employees, seasonal employees and tempo-
rary employees, laboratory technicians, refrigeration
employees, call order department employees, clerical
employees, professional employees, guards and super-
visors as defined in the Act, and all other employees at
all other branches or locations or substations of the
Respondent,
is a unit appropriate for collective-bargaining purposes.
(2) The plant referred to in the above unit description is
commonly called Respondent's "Boston Ice Cream" plant,
and the employees in the unit are in that division of Respon-
dent engaged in the manufacture and distribution of ice
cream.
(3) On October 22, 1968, a majority of the employees in
the unit described above, by a secret-ballot election con-
ducted under the supervision of the Regional Director for
Region I of the Board (hereinafter called the Regional Di-
rector), selected Local 380 as their representative for the
purpose of collective bargaining, a selection certified to by
the Board on April 28, 1970.
(4) By letter dated May 4, 1970, Local 380 requested
Respondent to bargain collectively about rates of pay, wag-
es, working hours, and other conditions of employment for
the employees in the above unit. By letter dated May 11,
Respondent refused to comply with the request and, since
that time, it has continued to refuse to recognize and to deal
with Local 380 as exclusive bargaining representative of
these employees.
B. The Defense
The major issue here is set up by affirmative pleadings in
Respondent's amended answer to the complaint.
The amended answer directs itself toward what amounts
to the single contention that Local 380, at the time of
Respondent's refusal to bargain, was disqualified from act-
ing as collective-bargaining agent of the employees involved
herein for the following reasons or a combination thereof:
(1) Certain outstanding loans by an affiliate of Local 380 to
a competitor of Respondent were in default or in danger of
default, by virtue of which and by virtue of their lacking
adequate security the interest of the creditor was rendered
"clearly equity-like" in nature; and (2) subsequent to the
Board's certification of Local 380 as Respondent's employ-
ees' bargaining agent and prior to Respondent's refusal to
bargain, Local 380's parent organization, through an inter-
mediate body, directly and extensively participated in, and
determined and controlled the outcome of, Local 380's col-
4 Case 1-RC-10106
H. P. HOOD & SONS
lective bargaining with other of Respondent's competitors,
which participation, determination, and control (as expli-
cated by Respondent in its response to a Motion for Sum-
mary Judgment filed by the General Counsel-see
infra-and also in arguments presented at the hearing and
in its brief herein) were motivated by factors related to
"protecting" the above-mentioned loan.
In sum , Respondent's defense herein is based upon the
contention that the existence and status of the loans to
Respondent's competitor, especially in the light of the relat-
ed involvement of Local 380's parent and its intermediate
body in Local 380's collective-bargaining processes, demon-
strate a conflict of interests on the part of Local 380, a
conflict which disqualifies it from acting as bargaining
agent for the involved employees.
At the hearing, the General Counsel and Local 380 vigor-
ously denied any such disqualification on Local 380's part.
Thereupon, all parties, in extensive detail, introduced evi-
dence and offered arguments in support of their respective
positions.
The issue thus raised, sometimes referred to herein as the
conflict-of-interests issue, is the major one in this proceed-
ing, although, in the course of the hearing, certain other
questions were injected by one or another of the parties
herein; and, almost invariably, with respect to these ques-
tions, there was heated controversy as to the propriety of
their injection into the present proceeding or their effect
upon the lawfulness of Respondent's refusal to bargain with
Local 380. The respective positions and arguments thereon,
and my rulings, appear at appropriate places hereinbelow.
C. Background and Setting
Since 1910, Local 380 has represented the employees of
various milk companies in the Boston area. One of these
companies, since at least the 1950's, was Whiting Milk Com-
pany (hereinafter called Whiting).
During or around 1960, after a corporate reorganization
under the auspices of a Federal District Court, Whiting
came under new management and financing was secured
through a short-term bank loan. In 1962, sources of longer-
term financing were explored, and Whiting's board chair-
man, becoming interested in the possibility of borrowing
money from one or another of the pension funds serving
members of Local 380's parent body (herein referred to as
either the Teamsters or the International), approached a
business agent of Local 380 for an introduction to James R.
Hoffa, then the Teamsters general president. He met with
Hoffa in July 1962, then with the trustees of the so-called
Central States, Southeast & Southwest Areas Pension Fund
(hereinafter called, simply, the Fund) in September, and
finally, again with Hoffa in the spring of 1963, all in pur-
suance of the desired loan.
Local 380 played no part in any of these loan negotia-
tions. Nor were its members served by this particular fund;
because of the geographical area which it covered, it did not
belong to any of the "Area Conferences" of the Internation-
al whose members were the beneficiaries.
In the spring of 1963, the Fund loaned $4 million to
Whiting, the loan being secured by mortgages of real and
personal property, including goodwill, a pledge of stock
835
owned by the major stockholding family, open -end resigna-
tions of principal officers and directors , and the right to
operate the debtors ' business in case of default of any obli-
gation "without restrictions or limitations of any kind."
A year later, in July 1964, application was made to the
Fund for an additional $700,000 for expansion into the
distribution of refrigerator foods. The additional loan was
granted in January 1965, upon security similar to that appli-
cable to the original loan.
In September 1964, Whiting had discussions with Local
380 about reducing the workweek of its retail delivery em-
ployees and eliminating some jobs , in order to make its
operations more efficient and improve its ability to compete
with other dairies . At the time , Local 380 took no position
on the subject and raised no objection to Whiting 's discuss-
ing the proposed changes directly with its employees. Whit-
ing did engage in such discussions and, early in 1965,
apparently made "some changes" without protest from Lo-
cal 380 and without the requisite notice to the creditor-
Fund.
In March 1965 , Whiting, which had thus far dealt with
Local 380 as part of a multiemployer association , withdrew
from the joint bargaining arrangement and entered into
individual bargaining with Local 380.
Meanwhile , on August 18, 1964 , Local 380 filed a petition
for certification-Case 1-RC-8005-seeking certification
as bargaining representative for a unit of employees of Da-
vid Buttrick Company (hereinafter called Buttrick).5 At the
hearing in that case , the employer raised the question of
Local 380's asserted conflict of interests and adduced evi-
dence bearing upon its alleged subservience to the Interna-
tional , in the light of the Fund-to-Whiting loan. Concluding
that these circumstances did not serve to disqualify Local
380 from acting as bargaining representative for Buttrick's
employees , the Regional Director (later affirmed on appeal
to the Board) directed that an election be held; and, Local
380 having received a majority of the votes cast in the elec-
tion , he certified Local 380 as exclusive bargaining represen-
tative of the employees there involved on November 27 of
that year. On December 8, seeking to test the certification,
Buttrick rejected Local 380 's request to bargain on the
ground that the certification was invalid for the reasons it
had presented at the representation case hearing.
Buttrick's refusal to bargain was the subject of an unfair
labor practice charge-Case 1-CA-4816. After investiga-
tion , the Regional Director issued a complaint therein, al-
leging a violation of Section 8(a)(5) and ( 1) of the Act. On
September 23, 1965, in a Decision and Order reported at 154
NLRB 1468 , the Board affirmed the Decision of Trial Ex-
aminer Eugene F. Frey in which he had found the violation
as alleged and had recommended that Buttrick be ordered
to bargain with Local 380.
Buttrick declined to comply with the Board 's Order, and
enforcement was sought in the United States Court of Ap-
peals for the First Circuit.
(In May 1966, while that proceeding was pending,
Dairymen 's League Cooperative Association , Inc., herein-
after called Dairylea , purchased Whiting's assets and set up
5 Buttrick, a dairy products processor and distributor in the Boston area,
was not a party to the instant proceeding
836 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Whiting Milk Company, Inc., as the surviving entity;
among other things , the new company assumed its
predecessor 's obligation to the Fund. I shall continue to use
the term "Whiting" as referring to the successor-employer,
except that, when it is necessary to refer to one as opposed
to the other Whiting , I shall use the terms "Whiting -Prede-
cessor" and "Whiting-Successor.'
On May 26 , 1966, the circuit court , in N. L.R.B. v. David
Buttrick Co., 361 F .2d 300 (an opinion which has come to
be known , and will sometimes be referred to herein, as
Butirick 1) refused to enforce the Board's Order; rather,
expressing disagreement with the approach taken by the
Board , it remanded the matter for action consistent with its
own views : instead of measuring whether Local 380 was
directly involved in the loan and whether the International,
in any respect , had actually influenced Local 380 in its
bargaining to protect the loan , a determination ought be
made as to whether there was an "innate " or "proximate"
danger that the International , through its constitutional
powers, would subject Local 380's bargaining conduct to
the advancement of an "ulterior" purpose of loan protec-
tion.7 The remand directed the Board to assess the "poten-
tial, not merely the actuality , of conflict of interests," to
consider the "feasibility of devising reasonable proscrip-
tions and safeguards ," and to "frame an order which, hope-
fully , will balance the legitimate interest of the Fund,
Buttrick , Teamsters , Local 380 , and Buttrick's employ-
ees." 8
On September 15, 1967 , the Board issued a Supplemental
Decision and Order in the Buttrick case .9 Accepting the
court's views as the proper standards to be applied, the
Board made the assumption that the object of the loans to
Whiting was to secure maximum gain at minimum risk for
the Fund 's beneficiaries and that the International's presi-
dent, as one of 16 trustees of the Fund , had an interest in
seeing Whiting prosper in order to implement that object;
and it proceeded to gauge the likelihood that either he or the
general executive board , through the exercise of authority
under the International 's constitution , could or would pur-
sue a loan protection interest by altering Local 380's bar-
gaining conduct . In brief , the Board concluded that the
possibility of intervention in local bargaining was too re-
mote to disqualify Local 380 from representing Buttrick's
employees : enumerating the powers given to the
International 's president by its constitution , the Board
found that , except for the power to impose a trusteeship,
there was but limited , procedurally safeguarded authority to
restrain a local 's bargaining activities ; it perceived nothing
indicating that he had been tempted by the Fund 's loans to
Whiting to exercise these limited constitutional powers over
Local 380 or , in fact , that he had ever sought to alter Local
380's bargaining conduct for any reason. Then:
The possibility that [Hoffa] might intervene in Local
6 Neither Dairylea, Whiting-Predecessor , nor Whiting-Successor was a
party to the instant proceeding
r Buttrick I at 307
8IL at 308-309.
9 167 NLRB 438.
3 80's negotiations and submerge the employees ' repre-
sentational interests in favor of protecting the Whiting
loans is , in our opinion , too remote to justify overturn-
ing the employees ' clear-cut selection of Local 380 as
their bargaining agent.... We shall be most sensitive
to future conduct evidencing pressure , constitutional or
other, to bend Local 380's bargaining course towards
loan protection . Existing procedures are available un-
der the Act to curtail such pressure or, if necessary,
even to withdraw Local 380 's certification in the event
of impermissible pressures . But, as this record stands,
it does not support disqualification of Local 380.10
Once again , the Buttrick case traveled to the First Circuit.
This time , on August 22, 1968, the court , in 399 F.2d 505
(C.A. 1, 1968 ) (often called Buttrick II), enforced the
Board 's bargaining order . Noting that "There is a strong
public policy favoring the free choice of a bargaining agent
by employees . . . [a choice] not lightly to be frustrated," it
concluded that Buttrick had not met its burden, a "consid-
erable one" in such a situation , of coming forward with a
showing that "danger of a conflict of interest interfering
with the collective bargaining process is clear and present";
and that the Board 's judgment as to the possibilities of the
exercise of power with which the Court, in Buttrick I, had
been concerned could not be denominated as capricious or
unsupported . The court continued:
Even assuming, arguendo, that the Board erred in its
conclusion that the possibility of International's con-
trol of Local 380 is too remote to have any significance,
there is no showing that Whiting 's financial situation
was such as to be likely to give the Fund an equity-like
interest in it . All that the Fund is entitled to receive
from Whiting under the loan agreement is full repay-
ment of the principal plus interest in fixed monthly
installments . So long as Whiting does not go out of
business or its assets fail to cover its liabilities , the Fund
would not be concerned with the everyday fluctuations
in Whiting's business . The loans appear to be heavily
secured and [Buttrick] offered no evidence that Whit-
ing was in danger of default. On this record we cannot
find a proximate danger of infection of the bargaining
process. [Pp. 507-508 . Footnote omitted.]
It was just before the issuance of Buttrick II that Respon-
dent entered the picture . On May 27, 1968 , Local 380
launched the representation case which is the genesis of this
proceeding by filing the petition in Case 1-RC-10106.
D. Earlier Stages of This Proceeding
At the initial set of hearings in Case 1-RC-10106, Re-
spondent did not raise the conflict of interests in the issue.
But, on August 28, 1968 , following the issuance of Buttrick
II, it moved that the record be reopened so that it might
1 ° Id at 439.
H. P. HOOD & SONS
develop additional facts made relevant by that decision.
The Regional Director denied the motion, without preju-
dice to the right of the Respondent to raise the matter, if it
desired, in the form of an objection to any election which
might be directed. Shortly thereafter, he issued a Decision
and Direction of Election.
The election was held on October 22, 1968. Of approxi-
mately 156 eligible voters, 87 cast ballots for representation
by Local 380, 57 cast ballots against, I ballot was void, and
the ballots of 6 were challenged. Thereupon, Respondent
filed timely objections to the election, contending that Local
380 was disqualified to represent the involved employees by
reason of the indebtedness of Whiting to the Fund-a con-
tention which, except for an updating here of the factual
situation, is substantially the same as Respondent's position
in the instant case.
A hearing on the objections was conducted by Hearing
Officer Robert C. Rosemere, and, on July 22, 1969, he is-
sued his Report and Recommendation, finding that there
had been no showing of a "clear and present danger of a
conflict of interest [on Local 380's part] interfering with the
collective-bargaining process"; thereupon, he recommend-
ed that Respondent's objections to the election be overruled
and that Local 380 be certified as bargaining representative
of the involved employees. On April 28, 1970, in a Decision
published at 182 NLRB 194, the Board, without necessarily
adopting all of his reasoning, affirmed the Hearing Officer's
findings and recommendations and certified that Local 380
was the exclusive representative of the involved employees.
Respondent's refusal to bargain, the filing of the instant
unfair labor practice charge, and the issuance of the com-
plaint herein took place on May 11, May 13, and June 13,
1970, respectively.
Respondent's affirmative pleading in its original answer
confined itself to the assertion that Local 380 was disquali-
fied to act as its employees' bargaining agent by virtue of
the fact that Whiting's loan to the Fund was either in default
or in danger of default and was inadequately secured, there-
by rendering the Fund's interest as "clearly equity-like" in
nature. Responding, the General Counsel moved the Board
to render summary judgment against Respondent on the
ground that it, by its answer, was seeking to relitigate issues
already disposed of during the representation proceeding
with no contention that evidence it now wished to offer was
either newly discovered since the Board's certification or
unavailable at the time of the hearing leading to that certifi-
cation. Before the Board ruled on the motion, Respondent
filed an amended answer, adding the assertion that, subse-
quent to the hearing which led to the Board's certification
in the representation case, the Teamsters had interfered
with Local 380's collective bargaining with competitors of
Respondent, "thereby eliminating a factor (i.e., the alleged
absence of any evidence of such participation) on which the
Board placed substantial reliance in concluding that the
Union was not disqualified to represent Respondent's em-
ployees." Then, in its opposition to the General Counsel's
Motion for Summary Judgment, Respondent called the
Board's attention to this additional assertion in its amended
answer ; and, reiterating that it considered the Board's certi-
fication to have been erroneous at any rate, it contended
that, in addition matters arising subsequent to the last hear-
837
ing in the representation case needed airing in the instant
proceeding: for example, bringing out the current situation
with respect to the Fund-to-Whiting loan and the conse-
quent developing and current situation with respect to the
temptation on the part of the Teamsters to interfere with
Local 380's collective bargaining. It offered to demonstrate,
at any hearing to be held in this matter, that the Internation-
al had engaged in certain conduct interfering with Local
380's bargaining subsequent to the hearings in the represen-
tation case, and it further emphasized the necessity for a
hearing so that it might avail itself of procedures which
would enable it to procure and to introduce relevant testi-
mony about facts which, it had reason to believe, were in
the peculiar possession of parties other than itself.
On October 9, 1970, the Board denied the General
Counsel's Motion for Summary Judgment and remanded
the proceeding to the Regional Director for appropriate
action.
Thereupon, the Regional Director issued a notice of hear-
ing herein.
E. Facts Bearing on the Conflict-
of-Interests Issue
The Board, in its Supplemental Decision and Certifica-
tion of Representative issued in the representation case
from which the instant case stems, read the Buttrick court
opinions as requiring it "to carefully scrutinize and weigh
elements of both power [i.e., the power of the International
to influence Local 380's collective bargaining] and tempta-
tion [to exercise such power], and, from this overall apprais-
al, determine the proximity of the danger that a remote
financial interest will infect the bargaining process." With
this in mind, and with an awareness that the parties here
have incorporated by reference the Buttrick proceedings, I
am constrained to take into consideration the entire history
of the Fund-to-Whiting loan and of the Teamsters involve-
ment with Local 380's affairs, even that which predated the
holding of the first Hood hearing. II I shall not, however,
repeat the pre-Hood history here-basically, the facts are
recited in the subsection, supra, on "Background and Set-
ting"-but shall content myself with noting the "new" facts:
(1) those developed at the hearings leading to the Board's
certification in the Hood representation case and (2) those
developed at the instant hearing.
1. Facts developed in the representation case
The terms of the original loan agreement (as amended in
January 1965) between the Fund and Whiting had called
only for the payment of interest on the $4.7 million until
April 1965; and, thereafter, for monthly payments of ac-
crued interest, plus specified principal payments in excess of
$60,000 each, until the loan was repaid.
On April 5, 1965-before the first principal payment had
been made-Whiting asked for a revision of the schedule of
11 In this sense, at least, I reject Respondent' s argument-if so intended-
that only the situation based upon developments occurring between the close
of that hearing and Respondent's formal refusal to bargain with Local 380
has any relevance.
838 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
payments: starting immediately, Whiting was to make
monthly principal payments of $10,000, plus interest and
plus contributions to an escrow account covering taxes,
insurance, and sewer charges, fora period of 2 years; over
the next 6 years, monthly principal payments of $37,000,
plus interest and escrow charges; and, in April 1973, a final
"balloon" payment of the $1,796,000 balance.
There is no conclusive evidence in the records to which
I have been referred that Whiting's proposed revision of the
schedule of payments was ever formally accepted and writ-
ten into the loan agreement; but, beginning in April 1965,
the Fund submitted monthly invoices to Whiting, and Whit-
ing remitted and the Fund accepted monthly payments, in
accordance with the proposed schedule.
It was during the first 2 years of the thus-revised sched-
ule-the period during which $10,000-plus monthly pay-
ments were being made-that Whiting-Successor, wholly
owned by Dairylea, took over from Whiting-Predecessor.
The Fund gave its assent to the transaction, and Dairylea
agreed that it would provide a $500,000 fund for the benefit
of secured creditors of Whiting, disbursement to be made
according to their indebtedness proportions.
Thereupon, Whiting (-Successor) continued to make pay-
ments to the Fund under the revised schedule.
As of the close of the objections hearing in the Hood
representation case-April 16, 1969-principal payments
were still being made under the revised schedule-now in-
creased to $37,000 monthly; and, in addition, Whiting had
paid the Fund $70,000 realized from the sale of assets which
had been part of the security for the debt. On December 17,
1968, the unpaid balance on the loan was $3,615,000.12
But, between January 1 and March 31, 1968, Whiting had
an operating loss of some $110,000. As a result, the above-
noted principal payments had been largely financed out of
depreciation charges and the sale of assets. In addition,
there had been a growing deficit in working capital;13 at the
end of this period, it came to $1,330,550. Moreover, under
standard interpretive financial ratios used by security ana-
lysts, Whiting appeared to be in far poorer position than the
average dairy throughout the industry and, specifically,
than the one of comparable size with which Whiting could
be fairly compared. Finally, in view of the revised, scaled-
down schedule of payments (1) Whiting's debt-interest ex-
pense had increased, and (2) inevitably, the date on which
Whiting would be faced with the payment of the final prin-
cipal balance came closer and closer.
Among the facts developed at the objections hearing were
some which-as characterized by the Board-displayed a
"brighter side to the Whiting financial picture." For one
thing, it was noted that Whiting had met every payment of
principal and interest called for by the revised schedule and
that there was no indication that the Fund had ever ex-
pressed doubt or concern over the continuation of these
timely payments.14 Also, according to the Board's findings
12
As of March 31 of that year, the balance had been $3,953,086, as of
October 31, $3,692,486
13
Current assets less current liabilities
14 The Hearing Officer, in his report on the objections hearing, had found
that Whiting was not in default of its obligation to the Fund , his reasoning
being that Whiting-Successor had adhered faithfully to the revised schedule
which was already in effect when it entered the picture But the Board found
and conclusions, Whiting's 1965-68 experience had not
been "entirely adverse." The fiscal year ending March 31,
1968 had brought a profit, before taxes, of $171,000;15 and
between June 30, 1966, and October 31, 1968, Whiting
stockholders' equity had increased by about $96,000 and its
long-term debt had been reduced by $1,320,000-facts pro-
viding "some basis" for Whiting's avowed hopes of future
improvement, hopes supported by the backing of its parent,
Dairylea, which had a stake in keeping Whiting healthy to
provide an outlet for its members' milk products; and final-
ly, even absent these indications of a rosier future, Whiting's
assets were adequate to cover its liabilities in the event of
liquidation.16
So much for the status of the loan. Now, for the evidence
of developments as to allegedly loan-related pressures exert-
ed on Local 380's course of bargaining.
I have already noted that, late in 1964, without apparent
resistance from Local 380, Whiting had made "some
changes" in connection with its desire to reduce the work-
week of retail delivery employees and/or to eliminate
"some" jobs. These facts-as found in the Buttrick proceed-
ing-lack further details. However, evidence as to later ac-
tions , and the part played therein by International
representatives, was brought out at the hearing on objec-
tions in the Hood representation case.
There was testimony at the objections hearing that, early
in 1966, the then majority stockholder of Whiting sought the
assistance of the then president of the Teamsters in bringing
about a change from a 7- to a 6-day home delivery week;
the effort, consisting of a short meeting, culminated in "very
little encouragement from anybody." Later that year, in
November, Whiting requested a reopening of the collective-
bargaining agreement with Local 380 to make the desired
change, and, in a letter dated December 9, it pointed out to
Local 380 that its retail routes, goodwill, and customer lists
were part of the security pledged for the Fund' s loans and
that "every effort must be made by the Company and [Local
380] to protect and enhance the value of these assets so that
the most advantageous disposition of them can be made."
Failing to secure Local 380's agreement to the request, the
company announced its intention to discontinue its retail
home deliveries. Thereupon, Local 380 called upon sister
locals who dealt with Dairylea, Whiting's parent, to enlist
their aid in the matter. Representatives of these locals, in-
cluding Local 380, met with representatives of Whiting and
it unnecessary to decide whether there had been a legal default on the
obligation "There has been no court ruling that default exists and both
Whiting and the Fund had conformed their conduct to the revised terms over
a period of several years Our task here is to ascertain the likelihood of
Fund-International intervention into Local 380 bargaining, not to resolve
questions of creditors' rights In our view, the fact that the Fund has accepted
the revision and has never suggested that Whiting was in default diminishes
the likelihood of a technical default being seized upon as a ground for
intervention In other words , it is too conjectural to infer that the Fund,
despite its past acceptance , might some day seize upon the revision as a
'default'justifying an assumption of control over Whiting." (182 NLRB 194,
fn 21 )
15 Unmentioned but undisturbed by the Board was the Hearing Officer's
additional finding that the first 8 months of the fiscal year beginning April
1, 1968-beyond which period no testimony was there taken-showed a
profit.
16 This last conclusion was based, presumably, upon the Board's adoption
of the Hearing Officer's finding that , as of October 31 , 1968, the loan balance
of $3,692 486 was secured by assets worth $4,083,009.
H. P. HOOD & SONS 839
of Dairylea, as well as among themselves, a number of
times, with John Hartigan, director of the dairy division of
the International's Eastern Conference, acting as the locals'
spokesman and chairman. Various other industry problems,
as well as that out of which the current dispute arose, were
discussed; and, among other things, Hartigan told Whiting
and Dairylea that any problem affecting one of the locals
concerned all of them. Finally, in October 1967, in return
for substantial concessions in the direction of improving
Whiting's employees' working conditions, Local 380 agreed
that Sunday deliveries could be discontinued.
2. Facts developed at the instant hearing,
prior to reopening
a. Chronology of events
As earlier indicated, the election upon which the instant
case is based was held on October 22, 1968. Within days-
although it had already raised the question of Local 380's
right to represent its employees and although it was to con-
tinue to press such objections-Respondent invited Local
380 to meet and discuss subjects other than recognition. Two
meetings were held. During the first, the so-called "most-
favored-nations" i' clause came up for discussion; and Lo-
cal 380 informed Respondent that it had no such clause in
any of its collective-bargaining agreements. At the second,
the Union submitted the then existing "ice cream industry
agreement" as its set of proposals, suggesting that Local
380's contracts with Borden and Sealtest (ice cream manu-
facturers and distributors) should be the basis upon which
negotiations should proceed. On December 27, counsel for
Respondent wrote to Local 380, stating-and I para-
phrase-that it had given consideration to Local 380's pro-
posals, proposals which purported to confine themselves to
the nonrecognition area, and had decided that it was impos-
sible to continue discussions along these lines because any
candid airing of the Union's proposals would be intertwined
with areas involving recognition and, consequently, would
be inconsistent with and prejudicial to Respondent's posi-
tion in the current litigation; and that, therefore, no useful
purpose would be served by meeting further unless and until
a court of appeals had ruled adversely to the company's
contentions or unless, by some other means, the litigation
had become moot. Moreover-the letter continued-since
it appeared that a substantial period of time would pass
before there could be a final resolution of the conflict-of-
interests matter, Respondent had decided that there was no
valid reason precluding it from presently extending its nor-
mal companywide wage and benefit policies to its employ-
ees at the Boston ice cream plant-in fact, the company was
about to announce certain changes in wages and benefits.
Attached to the letter was a bulletin to employees to be
posted on December 30, 1968, telling them of the pending
litigation and of Respondent's opinion that the litigation
would take a long time to resolve, and announcing that,
17 The reference, obviously, was to a provision sometimes found in collec-
tive-bargaining agreements insuring an employer that, notwithstanding the
specific terms of an agreement to which he is party, he will receive the benefit
of more favorable terms given by the union signatory to any other employer
therefore, in order to keep up with its competitors with
respect to employees' working conditions, it was planning
to apply its normal wage review policies to employees in the
instant bargaining unit."
Now, several months pass, and the action shifts to Whit-
ing.
From April 16, 1969-the close of the objections hearing
in the Hood representation case-through January 1970,
Whiting continued to make the $37,000-plus monthly prin-
cipal payments to the Fund in accordance with the schedule
of payments last revised in April 1965; and, during the same
period, in accordance with the terms of the original loan
agreement, it continued to furnish financial statements to
the Fund every 6 months.
As of the payment made on January 5, 1970, the balance
owed the Fund was $3,135,690.
But, whereas, during the fiscal year ending March 31,
1968, and during the first 8 months of the following fiscal
year, Whiting's operations had been profitable, a turna-
round occurred toward the end of November 1968; thereaf-
ter, for at least the next 18 months, losses were sustained and
Whiting's general financial situation deteriorated. (Details
are given infra.)
During 1969, Whiting's management undertook a review
of the worsening situation and, by the fall of that year, had
come to the conclusion that the principal, if not the sole,
cause of the company's difficulties was the unprofitable
nature of its retail home deliveries. Thereupon, an effort was
made to dispose of that operation, without fruitful results.
On November 5, 1969, Whiting advised Local 380 that it
intended to abandon home deliveries effective January 4,
1970; but Local 380, strongly objecting and citing the so-
called "status-quo" provision of its collective-bargaining
agreement with Whiting-section 31, which required that
no changes affecting working conditions be made, other
than by agreement between the company and the union,
until a decision had been obtained through arbitration-
caused the dispute to be referred to arbitration.
Meanwhile, Whiting management, convinced that the eli-
mination of home delivery routes was essential to the
company's well-being, informed the Fund's trustees, by let-
ter dated November 26, 1969, of its desire and intention to
terminate home deliveries; in the same letter, it advised the
trustees that the implementation of the plan would involve
the disposition of assets and a temporary diminution of cash
flow, and it asked consideration to a moratorium of from
6 months to 1 year on its obligation to make principal
payments of the Fund's loan. As a result of the letter and
of a number of followup communications, it was arranged
that officials of Whiting could bring the matter before the
trustees of the Fund, who were scheduled to meet at Miami
Beach, Florida, during January 1970.
On January 22, C. B. Schusterbauer, then Whiting's pres-
ident, and Charles E. Goodhue III, a director and a partner
in the law firm which was Whiting's counsel, met with the
trustees. They reviewed the situation outlined in the No-
vember 26 letter and advised that their plans for establishing
a profitable operation involved securing the necessary flexi-
bility to discontinue their home deliveries either by their
18 This action is not one of the subjects of the instant complaint
840 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
prevailing in the pending arbitration proceeding with Local
380 or by resolving the matter favorably in the set of collec-
tive-bargaining negotiations leading to the next contract.
The discontinuance of home deliveries, Schusterbauer said,
would enhance the prospects of an improved profit-and-loss
picture; likewise, he said, the grant of the requested morato-
rium would contribute to this end. To the extent it may be
relevant, I find that neither Schusterbauer nor Goodhue
"offered" anything in return for a grant of the moratorium
other than the prospect of a more profitable operation. One
or another of the trustees asked questions, primarily con-
cerning Whiting's prior record of meeting its obligations to
the Fund,19 and then the two Whiting representatives were
asked to wait outside. Shortly, they were advised that the
trustees had agreed to grant a 6-month moratorium on prin-
cipal payments; if, in the future, an additional 6 months'
extension were required, a reapplication could be made at
an appropriate time.
There was no written confirmation of the new arrange-
ment, but the monthly invoices submitted by the Fund to
Whiting, February 1970, did not call for any payment on the
principal loan. Thereafter, at least through May 1970, Whit-
ing made no payments on the principal. (It did continue to
make monthly interest payments and monthly payments
into the escrow account, and it did continue to submit semi-
annual financial information.) The loan balance as of the
end of January-$3,135,690-remained unchanged at least
through May.
At or about the same time, the wheels had been set in
motion for the negotiation between Whiting and Local 380
of a collective-bargaining agreement which would succeed
the current one, scheduled to expire on March 31, 1970. In
an exchange of letters dated early December 1969 and Janu-
ary 26, 1970, respectively, Local 380 and Whiting notified
each other of their desires to insert changes in the new
collective-bargaining agreement.
On February 4, Schusterbauer met with union representa-
tives to discuss the terms of the new agreement. At that time,
he proposed that it contain a provision expressly recogniz-
mg Whiting's right to discontinue its retail operations; and
he confirmed this position by letter next day. Local 380, as
it had earlier 20 rejected the proposal.
Meanwhile, another development was unfolding.
During December 1969, Dairylea, Whiting's parent, hav-
ing been apprised of Schusterbauer's plan to dispose of the
retail milk business, commissioned a management analysis
firm, Lybrand, Ross Brothers, and Montgomery (hereinaf-
ter, Lybrand-Ross) to make "a preliminary review to de-
termine the profitability of [Whiting]". Pursuant to the
assignment, that firm made a field survey, visiting all
branches of Whiting over a period of the next several
months.
19 There was no discussion as to details of the current financial position
of Whiting As noted earlier, Whiting had been furnishing the Fund with
semiannual financial statements.
20 It appears-although this record is far from clear on this aspect-that
the arbitration proceeding mentioned earlier eventually resulted in an award
finding that , during the life of the contract then in existence , Whiting was
not entitled to terminate its retail delivery service without Local 380's con-
sent
In mid-February 1970, representatives of Lybrand-Ross
presented a report to the directors of Dairylea (orally, but
subsequently confirmed in writing). The report pointed out
a number of problems and contained a number of recom-
mendations, the most important of which, from the stand-
point of laying out a chronology of relevant events, was that
top management at Whiting be replaced.
Thereupon, Harold W. Masteller, an area marketing
manager for, and long-time employee of, Dairylea, was of-
fered the job as president of Whiting. On March 1, 1970, he
replaced Schusterbauer, and he brought in as the new vice
president an individual who had worked with him for Dai-
rylea.
The task which had been assigned Masteller by Dairylea's
directors was to take whatever steps were necessary to make
Whiting a profitable operation: i.e., to implement such rec-
ommendations of the Lybrand-Ross report and of his own
as he believed to be appropriate and necessary. His first
order of business upon taking over the helm of Whiting was
to make an intensive study of the Whiting operation; and,
during the first 2-plus months of his administration, he
formed certain conclusions, took certain steps, and made
plans for the taking of additional steps. Further details ap-
pear herembelow, but, suffice it to say at this time that he
disagreed with Schusterbauer's earlier proposal that
Whiting's retail home milk deliveries be terminated; in-
stead, he believed that there had to be certain changes in the
retail-and also in the wholesale-situation, changes which
would call for consultation with Local 380.
With the new objectives called for by the conclusions he
had reached, Masteller, along with his new management
team , took over the new-contract negotiations with Local
380. In effect, bargaining started anew.
There were 18 negotiating sessions between March 12 and
May 13, inclusive. (Relevant details of the negotiations ap-
pear hereinbelow.) By the latter date , issues were resolved,
and a new collective-bargaining agreement, to be effective
from April 1, 1970, through March 31, 1972, was execu-
ted-a term coinciding with those applicable to all contracts
negotiated between Local 380 and the "milk industry" em-
ployers with whom it had collective-bargaining relations.
And, finally, we come to what has been referred to-from
the title of a pamphlet widely distributed by Local 380-as
"The Sealtest Story."
During the spring of 1970, collective-bargaining agree-
ments between Local 380 and "ice cream industry" employ-
ers with whom it dealt were in midterm. These agreements
provided, however, that the question of wages could be
reopened upon request, at or about this time; and Local 380
availed itself of this right.
At an early meeting occasioned by the reopening, one of
the ice cream manufacturers-Sealtest Foods Division of
Kraftco Corporation (hereinafter, Sealtest)-conditioned
its willingness to discuss any wage change upon Local 380's
willingness to give up certain contractual rights; and, on
June 15, after a period of fruitless discussions, Local 380
called a strike. (The parties hereto introduced testimony as
to circumstances preceding and accompanying the strike,
which are recited in detail below.) Thirteen days later, all
issues resolved, the strike ended.
H. P. HOOD & SONS
b. Whiting's financial state as of May 11, 1970 21
and other factors bearing on the safety of the Fund's loan
I have noted that a turnaround in Whiting's affairs oc-
curred toward the end of November 1968. Whereas, during
the fiscal year ending March 31 of that year, Whiting had
enjoyed a net profit of $171,580 and, during the first 8
months of the fiscal year ending March 31, 1969, a profit of
$146,720, the latter year ended with a loss of $141,920, and
the fiscal year ending March 31, 1970, brought an additional
loss of $785,620.22 And, of course, the stockholders' working
capital deficit rose accordingly; on March 31, 1970, it came
to $1,710,301.
Moreover, during fiscal 1969, the cash generated by oper-
ations (consisting of the company's depreciation charges of
$836,090, reduced by the year's operating loss of $141,920)
fell to $694,200, a figure adjusted downward by $625,000
because, during the same year, Whiting paid that amount in
cash for new assets acquired; the resulting amount of avail-
able cash-$69,200-was completely inadequate to allow
meeting the year's debt requirements-$670,000-and the
discrepancy was cured by increasing the working capital
deficit. Likewise, in fiscal 1970, the cash available from
operations, derived from depreciation charges of $847,500,
less the $785,620 loss for the year, came to $61,880, far short
of the $706,000 in payments called for during the year-a
problem met by (1) in December 1969, Whiting's taking
over and eliminating the obligations of its Middlebury,
Connecticut, operation and (2) early in 1970, its obtaining
the moratorium on principal payments to the Fund noted
earlier.
This record reveals further that there were additional op-
erating losses of $84,208 during April 1970 and $31,338
during May; and that the working capital deficit as of May
31 was $1,746,780.23
In Whiting's balance sheet as of May 31, 1970 24 -ac-
cepting as accurate the book values contained there (of
which, more later)-the company's net worth showed up as
$1,420,520; its assets came to $10,661,030, and its liabilities,
including its $3,135,690 obligation to the Fund, amounted
to $9,240,510.
But a correction is called for at the outset. Included
among Whiting's assets-and hence its net worth-is the
figure, $856,610, representing Whiting's "Investment in
Wholly-Owned Subsidiaries": Merchant's Leasing Compa-
ny (hereinafter, Merchant), Whiting-Braintree Realty Trust
21 In agreement with Respondent , I find that this is the crucial date upon
which the extent of Local 380's conflict of interests, if any, must be de-
termined But I also find, contrary to Respondent 's original position herein,
that testimony as to circumstances which may have preceded or have fol-
lowed this date , to the extent that it provides illumination thereon, is also
relevant
22 This, despite the fact that gross sales for the year were slightly higher
than in the previous year Also, it should be noted, the loss figure includes
an "extraordinary item" consisting of a $78 ,000 loss incurred (or, rather,
about to be incurred) by Braley's Creamery, a subsidiary of Whiting which
had just discontinued its operations
23 These and prior figures given are based upon Whiting's financial state-
ments, some audited and others unaudited None of the parties here contends
that the latter are any the less reliable because of the lack of auditing
24 The parties agreed, and the related testimony corroborates, that
Whiting's situation remained substantially the same, for purposes of this
proceeding, throughout the month of May
841
(Whiting-Braintree), Mayflower Creamery, Inc. (Mayflow-
er), and Braley's Creamery, Inc. (Braley), all Massachusetts
corporations. The above-mentioned balance sheet, which
also lists the assets and liabilities of the subsidiaries, shows
that the actual stockholders' equities in the four subsid-
ianes-accepting their book values-came to $42,970,
$71,380, $78,480, and $33,600, respectively, or a total of
$226,430. Moreover, Donald Hanson, treasurer of Whiting,
subpenaed by Respondent, testified that Braley was no lon-
ger actively engaged in business and, in the disposition of
its assets, had suffered a $78,000 loss not yet reflected in this
balance sheet. I find, therefore, that Whiting's total equity
in its subsidiaries, as of May 31, 1970, amounted to but
$148,435.
Why, then, does this "Investment" account show
$856,610 instead of $226,430 (book value of the four subsid-
iaries' "Stockholders Equity," before allowance for the Bra-
ley loss)? The answer, it appears, lies in the fact that the
account is comprised of a mixed bag: it includes, in addition
to Whiting's equity in its subsidiaries, certain moneys due
it from the subsidiaries. These obligations, reflected as lia-
bilities on the books of the respective subsidiaries and thus
reflected in their net worth (stockholders' equity), properly
appear as assets on Whiting's balance sheet; and this is the
account in which they have been placed 25 On the other
hand, the financial records available to me, and the related
testimony, account for but $389,830 of such obliga-
tions-$174,380 due from Merchant, $197,950 due from
Whiting-Braintree, and $17,500 due from Mayflower-an
amount insufficient to raise the total to $856,610.
I therefore adjust the account downward to reflect only
Whiting's equity in its subsidiaries ($148,435) and the above
sums due from Merchant, Whiting-Braintree, and May-
flower ($389,830). Having made such adjustment, I find that
Whiting's "Investment in Wholly-Owned Subsidiaries" is
$538,265, and I conclude that Whiting's net worth and as-
sets, as revealed by its books, should each be reduced by
$319,345-to $1,101,175 and $10,341,685, respectively.
So much for the book value of Whiting's general assets
as bearing on its ability to meet its obligations.
Zeroing in on assets specifically set aside for repayment
of the debt owed the Fund, we next consider the value of
the security therefor.
The security for the Fund's loan, as fixed by the last loan
agreement and subsequent commitments, consisted of:
(1) The assets of Whiting, except for its trade accounts
receivable, and including
(a) certain real and attached personal property-spe-
cifically, that located at Charlestown, Massachusetts,
at Worcester, Massachusetts, Duxbury, Massachusetts,
and at Bradford, Vermont;
but excluding other real and attached personal property;
and further including
(b) Whiting's equities in its wholly-owned subsid-
25 This account should not be confused with another , "Due from Subsid-
iary Companies " Presumably, the latter is normally used for current (under-
one-year) receivables from subsidiaries , while "Investments" is used to show,
in addition to stockholder-equity-interests, longer-term subsidiary obliga-
tions to Whiting (It should be noted that, with respect to Whitings advances
to its subsidiaries , no formal loan agreements are executed and there are no
formal payment schedules)
842 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
iaries-Merchant, Whiting-Braintree, Mayflower, and
Braley.
(2) The automotive fleet owned by Merchant.
(3) That part of a $500,000 "security fund" set up by
Dairylea in 1966-when Dairylea bought out Whiting-
Predecessor's interest-which was represented, at any given
time, by the current balance due the Fund, in proportion to
the current balance of certain other obligations specifically
declared to be secured by the "security fund" at the time of
its creation.
The book value 26 of Whiting's assets standing as security
for the Fund's loan as of May 31, 1970, came to $6,740,985.
This figure is broken down as follows:
Cash $ 124,580
Due from subsidiaries 259,950
Inventories:
Materials and products 347,560
Supplies and repair parts 372,830
Prepaid insurance, taxes,
and other expenses 91,980
Long-term notes receivable 82,560
Investment in subsidiaries 5'8,265
Other investments '220
Deferred charges $ 119,170
Property, plant, and
equipment 4,765,060 27/
Goodwill _ 47,050
Total $6,749,225
Less: Value of prior
debts secured by the
same assets 8,240
Net total $6,740,985 28/
On Merchant's books as of May 31, 1970, that company's
automotive fleet was valued at $88,750. But, while I make
note of this fact, I shall not treat the item as a separate
component of the secunty for the Fund's loan, since it al-
ready appears as a part of Whiting' s assets, above, as a part
of Whiting's equity in its subsidiaries.27 28
26 Except as to Whiting's investment in subsidiaries, this figure is modified
as earlier explained
27 These are Whiting's so-called capital assets In arriving at this figure, I
have omitted the book value ($33,560) of those of Whiting's real properties,
and attached personal properties, not standing as security for the Fund's
loan locations at Marblehead , Oak Bluffs, and Nantucket, Massachusetts,
and at North Randolph and lrasburg, Vermont
28 Hanson , in testifying on this subject , arrived at a net total of $6,134,535
Perhaps inadvertently , he included the value of the real properties which were
not part of the Fund's secunty-see last prior footnote-and, having down-
valued the $856,610 worth of Whiting 's investment in its subsidiaries to the
$148,435 which represented the total of Whiting's equities therein, he failed
to put back the debt obligations from subsidiaries discussed above, he did
not include prepaid insurance , taxes, and other expenses because (he testi-
fied) their value , "in the event of liquidation ," would be "minimal", and he
likewise omitted the deferred charges and good will because , in the same
event, they would have "no tangible value " For purposes of this finding at
this time , as I have indicated , I am relying on Whiting's and its subsidiaries'
Finally, as of May 1970, that part of the Dairylea
$500,000 "security fund" which stood as security for the
Fund's loan to Whiting amounted to $494,500.29
This means that-within the terms defined above-the
total value of the security for Whiting's obligation to the
Fund came to $7,235,485 on May 31, 1970.
Extensive testimony was introduced as to steps taken by
Whiting in the spring of 1970 and of its plans for the future
as of May 1970. General findings based on this testimony
appear in the chronology of events appearing earlier, but a
more detailed discussion is called for at this time.
It was in the latter part of 1969, at or about the midpoint
of the 18-month period of financial losses, that Whiting's
then management decided that its retail home deliveries
were the cause of the company's difficulties. Subsequent-
ly-as related above-Whiting's management (1) sought
unsuccessfully to persuade Local 380 to permit it to aban-
don the operation during the period of the collective-bar-
gaining agreement then in effect; (2) was successful in
procuring from the Fund's trustees a 6-month moratorium
on principal payments, and (3) thereupon launched an ef-
fort to get Local 380 to permit the change during the period
to be covered by the next collective-bargaining agreement.
It was also at or about this time that Dairylea, Whiting's
parent, engaged the services of Lybrand-Ross to come up
with recommendations designed to make Whiting once
again a profitable operation.
In addition to recommending that new top management
be installed at Whiting, Lybrand-Ross made a number of
other recommendations. One set, epitomized by the recom-
mendation to change the top officials, had to do with man-
agement generally: that the number of key executives be
reduced from nine to five in order to sharpen lines of com-
munication; that the two existing maintenance groups be
consolidated into one; that pricing policies be pinpointed to
take into consideration individual products and individual
customers instead of relying on what Lybrand-Ross called
the present "hit-or-miss" pricing policies; that management
take a firm hand with respect to the problem of employee
absenteeism; and, above all, that management face up to
and resist union pressures.
Another set of recommendations-to create a "flying
squad" in order to reduce overtime; to shorten the workday
and to eliminate idle time between shifts; to reduce home
deliveries from three times a week to once or twice a week;
to reduce the number of wholesale delivery routes and to
increase the number of stops per truck on each of these
routes; to provide for the preloading of trucks and otherwise
to eliminate multiple handling of merchandise; and to over-
haul paperwork and clerical procedures-was aimed at re-
ducing the number of employees-most of them in the
involved bargaining unit-from 796 to 531. The savings
envisioned by Lybrand-Ross, if these recommendations
were put into effect, would basically take the form of a cut
in payroll. If these recommendations were implemented
within a reasonable time, Lybrand-Ross projected
Whiting's profit picture would gradually change from the
books and records
29 The obligation to the Fund, as of this date, constituted 98 9 percent of
the outstanding debts which, by the terms of the original document setting
up Dairylea's fund, were secured thereby
H. P. HOOD & SONS
$60,000-per-month loss then being suffered to a break-even
point within 4 months, after which profits would be realized
and would gradually increase until, by the end of the next
4-month period, they would amount to $60,000 to $75,000
per month.
I have noted that, as an early result of Lybrand-Ross'
report, Harold Masteller took over the presidency of Whit-
ing with the responsibility of making whatever changes,
including those recommended by Lybrand-Ross, he be-
lieved to be appropriate and necessary.
Between March 1, 1970, when he took over the helm, and
May 30, Masteller formed a number of conclusions: that
equipment in the processing plant had deteriorated greatly
due to improper maintenance; that the materials-handling
equipment (which was leased, not owned, by Whiting) was
basically obsolete in view of the facts that it was largely
manual rather than mechanical and that much of it was
designed for glass bottles, the use of which was rapidly
declining; that the automotive fleet was in deplorable con-
dition and/or was totally antequated in that the wholesale
delivery trucks were too small to carry economically feasi-
ble loads and in that all trucks suffered from lack of mainte-
nance; and that the retail home delivery operation was
uneconomical in that too many deliveries were made to too
few customers.
In Masteller's opinion, there were a number of remedies
for these problems: the installation of high-speed processing
machinery, coupled with mechanized materials-handling
equipment, with the ultimate objective of shortening the
processing day from 18 to 20 hours to 10 hours without loss
of production; the elimination of bottling in glass; the re-
placement of the equipment maintenance manager; the sub-
stitution of new and larger vehicles for existing wholesale
trucks; the division of the wholesale routes into those serv-
ing chain stores and those serving other institutional cus-
tomers (thereby separating the large volume from the small
volume deliveries), accompanied by a conversion of the
wholesale truckdrivers' method of payment from a commis-
sion to an hourly basis; the installation of a "three-sided"
home delivery operation instead of the existing "two-sided"
one;30 and the placement of emphasis upon a truck mainte-
nance program.
The effectuation of these remedies called for the fixing of
an order of priorities. In Masteller's opinion, the first
change called for was the overhaul of the wholesale delivery
system by revamping the routes and by converting the driv-
ers' pay basis from compensation by commission to com-
pensation by the hour; at the same time (if union opposition
could be overcome), the change in home delivery operation
from a two-sided to a three-sided system would be put into
effect; as soon as possible, new wholesale trucks would
replace the old, and all trucks would be put into good condi-
tion; and, later the rehabilitation of the plant would take
place.
30 The three-sided system contemplated was an arrangement whereby a
given route would embrace three different territories , each of which would
be serviced twice a week , whereas the existing two -sided system involved
deliveries on a given route to two territories of customers three times a week
In other words , the change from a two -sided to a three-sided system would
reduce the delivery service to each customer but would increase the total
volume per route
843
The immediately contemplated steps, among other
things, called for consultation with and persuasion of Local
380. As earlier indicated, Masteller and his associates took
over the negotiations for a new contract on March 12, 1970.
Local 380 had earlier presented a list of proposals which
accorded with those presented to other employers in the
industry. (At or about this time, Local 380 was engaged in
bargaining for new contracts with all the milk producers
and distributors whose employees it represented.) At one of
the early sessions in which Masteller was involved, Whiting
asked for negotiations on an individual rather than an in-
dustrywide basis, a request to which Local 380 voiced no
objection. Thereupon, Masteller, citing economic necessity,
explained that he wished to revise the wholesale distribution
system, a revision which made it necessary to change route
boundaries and to change the method of pay from a com-
mission basis to an hourly basis. Union representatives ac-
quiesced. Then, and then only, the employer representatives
were ready to discuss the retail situation, a subject which
Local 380 had attempted to bring up several times. (It
should be remembered that Whiting's latest position-
posed by its former management-was that it was de-
termined to discontinue the retail operation.) They now
indicated that Whiting was willing to continue to make
retail home deliveries, provided that agreement could be
reached on a "three-sided route" concept. Once again, Lo-
cal 380 agreed. And, to the extent that any of these changes
might be affected by the "status quo" provision of this and
past contracts, it was agreed that the provision would not
stand in the way of the changes. Finally, as earlier noted,
a new collective-bargaining agreement was executed by
mid-May.
And so, by early in May, Local 380 had been persuaded
to make the changes applicable to the wholesale and retail
delivery operations. By the end of May, Whiting had or-
dered 24 new wholesale delivery trucks; the changes con-
templated for the wholesale route operations had been
implemented; and the three-sided system was installed for
home deliveries. In addition-also by the end of May-
Masteller had decided to double Whiting's purchases of raw
milk from its parent, Dairylea-then 16 percent of its total
purchases.31 All other plans described above were still on
the planning boards as of that date.
In the period since the end of May 1970, Whiting has
acquired 21 new 24-foot diesel-powered trucks and 12 18-
foot standard power trucks for wholesale delivery; new and
refurbished vehicles for retail delivery have been ordered;
the plan to double purchases from Dairylea has been put
into effect; bottling in glass has been discontinued; and
some new equipment has speeded up processing operations.
It was Masteller's belief, as of the end of May, that,
making allowances for the period of time he considered
necessary to introduce the remainder of his proposed
changes-and assuming a continuation of the moratorium
on principal payments to the Fund until at least July and,
perhaps, for 6 months thereafter-there would continue to
be operational losses, on a diminishing scale, until the end
of March 1971, after which there would be gradually using
31 Actually, since most of the wholesale price of raw milk is Federally
regulated , the saving here would be confined to the cost of milk collection,
a figure which came to but 10 percent of the selling price.
844 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
profits, the extent of which he was unable to specify.
My conclusions as to the significance of the new plans
already put into effect and still contemplated as of May
1970, and of management 's expectations of profits to be
realized therefrom, appear hereinbelow. But I do find at this
point that, to the extent Lybrand-Ross' plans and pro-
jections differed from those of Masteller, the latter had
supplanted the former.32
With respect to Masteller's profit projections as of May
1970, I find that they were based, at least in part, on the
existence at that time of the moratorium on principal pay-
ments to the Fund; and I find also that, because the near-
term implementation of his future plans involved the outlay
of cash, they were based, in part, upon the future grant of
at least another 6-month extension. With respect to the
grantmg of the original moratorium, I find that it resulted
in an increase in Whiting's interest expense and in an en-
largement-to the extent payments were forgiven-of the
balloon amount scheduled to be paid in April 1973; and
that, to the extent that the moratorium may have been ex-
tended beyond August 1970-and, of this, there was no
evidence at the instant hearing-there would be a further
increase in interest expense 33 and a further enlargement of
the balloon amount due. 34
(1) Respondent's attack, accepting
Whiting's book values
Respondent's defense took a number of forms, each of
which, or at least the combination of which, it was argued,
supported the claim that Local 380 was tainted with a con-
flict of interest disqualifying it from representing employees
of a competitor of Whiting.
First, testimony was introduced designed to persuade
32 It should be noted that Lybrand-Ross' projections as to future profits
to be derived from the implementation of its recommendations suffered from
a rather simplistic treatment of the subject Apparently, they were based
solely upon a mathematical computation of the earnings of those employees
whose jobs would be eliminated if and as its recommendations should be
implemented . No allowances were made , for example , for any increase in the
wage bill (for the employees remaining after the layoffs) which might be-
and which was in fact-negotiated; for the possible effects on home milk
sales of a reduction in the number of deliveries per week, or for potential
business hazards unrelated to the recommended changes
33 The additional interest expense incurred as a result of the 6-month
moratorium was $7,215, if an additional 6 months were given, another $7,215
would be added
34 Respondent here introduced a chart demonstrating that, because of
earlier revisions in the payment schedule, plus the 6-month moratorium, the
sum of $1 ,951,686 would be due and payable on March 31, 1973 , as opposed
to the fact that full adherence to the original terms of the loan agreement
would have seen the loan fully paid up by that date- thereupon labeling the
$1,951,686 an "accumulated deficiency." If my finding that there would need
to be an additional 6-month extension of the moratorium is correct, the
accumulated deficiency would be even greater-$2,173,686. But the chart
ignores that all revisions other than the moratorium were put into effect in
April 1965 and were known to the Board and the court in the Buttrick
proceeding, wherein it was found that there was no conflict of interests on
Local 380's part The only change since has been the moratorium . In order
to ascertain the relevant "accumulated deficiency," then , the benchmark for
comparison should more appropriately be the $1,796,000 balloon payment
which would have been due in April 1973 under the revisions preceding the
moratorium , using this standard the "accumulated deficiency" would be
$165,000 if there were no renewal of the moratorium and $397,000 if there
were.
that, even if Whiting be considered as a "going concern"
and even if its and its subsidiaries' books be taken at face
value, there were abundant, unmistakable "red flags" which
would lead a prudent investor in the position of the Fund
to regard his investment in such jeopardy as to convert his
interest in Whiting to equity-like-rather than debt-like-in
character, in terms of the principles laid down by Buttrick
I and II.
In this respect, Dr. Lee Bodenhamer was Respondent's
key witness.3 Having given his definition of an equity or
equity-like interest:
[It] is an interest of a security, a claim, against a corpo-
ration which takes on the characteristics of ownership,
capital interest, [to] a degree [at] which it is effected by
the risk of the business and future operating results of
the business. This is true whether that claim is in the
form of common stock, preferred stock, or debt. I am
using the term in the financial sense to denote a securi-
ty form which is effected by the risk of the business to
the extent . . . normally associated with the ownership
.... If [a creditor's] ability to expect repayment of [a
loan of more than trivial proportions, made to a job-
holder] was in question, serious question, then it be-
comes in effect a risk investment in [the debtor's] occu-
pation [and] it is equity-like. . . . It is measured by [the
creditor's] concern [or] nervousness. . . . The test .. .
is how a prudent, intelligent, reasonable creditor would
feel about the risk he is assuming. . . . I do not believe
that [the situation] has to get to a point where [the
creditor] feels that "something must be done" ... such
as foreclosure or bankruptcy,
he explained that, between the extremes of what is obviously
a debt-like interest and what is clearly an equity-like inter-
est, there is a spectrum within which one must look at not
one but a number of factors, before the proper label can be
appended. The basic question to be asked in the case of a
corporation, he said, is whether the stockholders' equity-
the difference between the corporation' s assets and its liabil-
ities-constitutes a sufficient "cushion" to reassure a cred-
itor, current or prospective, of the repayment of his loan
without his being required to assume some of the risks nor-
mally associated with the stockholders only.
(Asked to comment on a hypothetical situation in which
a firm has $10 million worth of assets and $9.5 million worth
of debt claims "legally" secured 36 by a specified $9.5 mil-
lion worth of the assets, Bodenhamer stated that, "in
banker's terms," the margin of resources over the amount
of this debt was much too slim to be considered safely
35 Without going into detail as to his background, I have no hesitation in
finding Dr Bodenhamer to be qualified as an expert witness in the field of
investment analysis And, recognizing that he was paid for his services by
Respondent and that he was well aware of wherein lay the best interests of
Respondent in this case , I nevertheless find, not only on the basis of his
demeanor while testifying but also because, at various points, he gave testi-
mony which might be considered adverse to Respondent' s interests , that, at
all times, he sought to be accurate and truthful
36 Bodenhamer explained that, in the context as to which he was testifying,
his use of the terms "secure " or "security" (or lack of same) related to the
basis for a lender's expectation of repayment (or nonrepayment) of a debt
and not to any legal security for repayment.
H. P. HOOD & SONS
secured and that, therefore, the creditors' interest would
take on some of the business risk of the firm and would be
considered equity-like-but, if the company had been con-
sistently earning large profits and generating a great deal of
cash in its operation, the loan(s) might be considered very
safe and secure and the creditors' interest a debt-like inter-
est.)
Disclaiming that one can intelligently say precisely when
the color in the financial interest spectrum changes, he testi-
fied that the normal investment procedure is, first, to exam-
ine relationships found in the debtor's financial picture and
compare them with ones prevalent in its industry; next, to
compare the operating characteristics and past operating
history of the debtor with those of his industry; and, finally,
to identify companies fairly similar to the debtor in order
to compare his with their relationships historically found to
be acceptable in terms of debt and equity.
Bodenhamer then stated, with respect to Whiting's finan-
cial situation as of May 1970, that he had performed the
type of analysis about which he had been speaking, and he
produced a number of charts.
The first purported to make a comparison of certain as-
pects of Whiting's financial situation as of March 31, 1970,
with a large number of companies engaged in various as-
pects of the dairy industry as of periods covering that date.37
Without here going into detail, it is clear, and I find, that
Whiting fell within the fourth quartile, financial security
wise , of the involved companies in current ratio,3B quick
ratio,39 liabilities as a percentage of total assets, stockhold-
ers' equity as a percentage of total assets, ratio of current
debt to tangible net worth,40 ratio of fixed assets to tangible
net worth,4 and ratio of net profit (or deficit) after taxes,
to net sales . With respect to current ratio-which Boden-
hamer testified was the most commonly used test of liquidi-
ty or solvency-the chart showed that the medians among
the various groups ranged from 2.4 to 1.4, whereas
Whiting's ratio was .72. With respect to the ratio of current
debt to tangible net worth, he cited "Guide to Credit Ana-
lysts" put out by Dun & Bradstreet as the source of a "rule
of thumb" to the effect that, "Ordinarily a business begins
to pile up trouble when this relationship exceeds 80 per-
cent"; and he pointed out that the 552-percent figure appli-
cable to Whiting exceeded 80 percent by six- or sevenfold.
Also, citing Dun & Bradstreet's guide as saying, "Ordinarily
[the ratio of fixed assets to tangible net worth] will not
3' The chart was based upon statistics furnished by a number of financial
or credit institutions and sources were cited. The names of the companies
from whom the information had been gathered were not revealed in the
chart , and there is some question as to how many there were . One of the
groups purported to cover 16 companies, another 121, another 70 manufac-
turers, 106 wholesalers , and 24 retailers, and another did not give the num-
bers involved , moreover , there was no way of knowing whether there were
duplications as between the various groups Nor did Bodenhamer know
whether Whiting itself was one of the companies contained in any of the
studies.
38 Current assets-those normally converted into cash within 1 year-
divided by current liabilities-those becoming due and payable within I year.
39 Liquid assets-cash , marketable securities , and accounts receivable-
divided by current liabilities
40 Current liabilities divided by tangible net worth-i e , assets, excluding
assets such as goodwill, deferred charges, and patents, which have no real
value except to the company in question as a going concern
41 Assets other than current divided by tangible net worth
845
exceed 100 percent for a manufacturer or 75 percent for a
wholesaler or retailer," he pointed out that Whiting's ratio
was 539 percent.
Recognizing "some of the difficulties in relying exclusive-
ly on generalized averages," Bodenhamer next presented
charts comparing certain financial relationships present at
Whiting with those applicable to identified companies in the
same general business. These charts culminated in one
which made comparisons between Whiting and the aver-
ages of three other companies of the same general size in
terms of sales and total assets-Penn Dairies Inc., Crowley's
Milk Co., Inc., and Deltown Foods, Inc. Once again, in the
various respects as to which the comparisons were made-
here, interest expense as a percentage of earnings before
interest and taxes, current ratio, liabilities as a percentage
of total assets, equity as a percentage of total assets, and
ratio of equity to liabilities-Whiting showed up in a con-
siderably worse light than the (averages of the) three compa-
nies; the current ratio of Whiting, for example, was .7 and
that of the three companies 1.7.
In none of these charts was the raw material made avail-
able-only the ultimate numbers were given. But Boden-
hamer testified that these numbers, computed as described,
were drawn, respectively, from Whiting's March 31, 1970,
financial statement and from identified, publicly available
information about the companies with which comparison
was being made. In the absence of any evidence to the
contrary, I find that the figures given are accurate.
Bodenhamer went on to say that, in the case of a typical
mortgage loan-and he regarded the Fund's loan to Whit-
ing as typical-the terms of repayment are normally such
that the fixed assets acquired with the borrowed funds are
sufficiently profitable operating assets to generate a cash
flow adequate to meet the terms of repayment.
Based upon the information at his disposal-presumably,
all that which is recited hereinabove-and his analysis of
this information, Bodenhamer expressed the opinion that
Whiting's past (i.e., pre-May 31, 1970) operations did not
produce sufficient cash generation in the normal course of
business to meet the debt-service requirements of its obliga-
tion to the Fund; that, given Whiting's operating history
and the financial data revealed by the charts he had intro-
duced, he would seriously question (as of May 31, 1970)
whether Whiting's future operations would generate suffi-
cient funds to service the debt; and that (as of the same
date) the Fund's loan had risk characteristics normally asso-
ciated with equity securities-hence, constituted a risk-capi-
tal or equity-like interest on the Fund's part.
(2) Respondent's attack on the validity
of Whiting's book-values and on availability
of assets to repay Fund
As the next prong of its defense, Respondent urged that,
for purposes of assessing the character of the Fund 's claim
against Whiting based upon the financial status of that
company as of May 31, 1970, Whiting must be viewed, not
as a going concern, but as a concern on the eve of liquida-
tion; in essence , it mounted a frontal attack upon the evalua-
tions, for liquidation purposes, of certain of Whiting' s assets
as they appeared on the company books on that date.
846 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
As a foundation, Respondent relied on testimony given
by Donald Hanson (Whiting's treasurer), who had been
subpenaed by Respondent.42
In general terms , Hanson testified that, except for the
amount of cash shown, the values carried on Whiting's
books bore no necessary relation to the recoverable value of
such assets in the event of liquidation; and, in addition,43
that certain listed assets had minimal or no tangible value
in the event of liquidation.
Hanson then went into particulars, the first area being the
inventories of "Materials and Products" appearing on both
Whiting's and Mayflower's books 44 He said that approxi-
mately 30 percent of Whiting's such inventory, altogether
book-valued at $347,560, consisted of fluid unprocessed
milk and the rest were processed but as yet unpackaged milk
and branded packages of milk, cream, eggs , butter, and
other products sold on the company's routes; and that
Mayflower's $133,210 of "Materials and Products" consist-
ed of packaged products bearing the Mayflower and other
brand names. That part of the inventories consisting of
milk, he said, was valued on the books at the so-called class
2 price; this unprocessed fluid could easily have been sold
at that price in the event of a liquidation of business-there
were a number of dealers who would have bought it. The
remainder of Whiting's product inventory, Hanson contin-
ued, could be sold at the class 1 price, approximately 30
percent higher than book value; assuming normal condi-
tions-and the whole inventory constituted no more than 2
days' supply-it would bring a gross revenue above book
value of $138,000, from which would have to be deducted
additional packaging costs of $6,000 or $7,000 a day and
delivery expenses of $15,000 a day. In other words, the
$347,560 of Whiting's product inventories could have
brought in the sum of $442,560. Finally, Hanson's testimo-
ny went on, Mayflower's packaged milk, eggs, butter, etc.-
which would last approximately 3 weeks, or much more
than that if refrigerated-could have been disposed of to
normal customers through Mayflower's regular franchise
drivers, even under conditions of liquidation; if so, the
$133,210 figure would be worth about 6 percent more, or
$141,200.
Hanson went on to testify about Whiting's inventory of
supplies and repair parts, valued on the books at $372,830.
He broke the item down into $125,000 worth of general
supplies, $52,000 worth of garage supplies, $10,000 worth of
glass bottles, and $185,000 worth of so-called "Pure-Pack"
cases.
A "goodly portion" of the $125,000 worth of general sup-
plies, he testified, consisted of Pure-Pack cartons. He de-
scribed the Pure-Pack cartons as plastic containers bearing
the names of Whiting, White Brand, or Purity Supreme, and
carrying from 8 ounces to 8 gallons of a product. Most of
42 1 have already made findings based upon Hanson's testimony-for ex-
ample, as set forth earlier herein, I adjusted downward Whiting's "Invest-
ment in Wholly-Owned Subsidiaries" from $856,610 to $538,265
43 See fn 28 hereof.
44 Strictly speaking, testimony offered as to the validity of book values
appearing on the books of Mayflower or of any of the other subsidiaries
might not be deemed to fall under the hearing of attacking the book value
of Whiting 's assets . But, since one of Whiting's assets is its equity in these
subsidiaries, and since a devaluation of subsidiaries ' assets will reduce that
equity, it is treated in this subsection
these , he said, could be used up in a week and the rest in
2 weeks at the most; and the remainder of the general sup-
plies, consisting of cleaning equipment, could be utilized
even during the last several weeks of the life of the business.
As for the $10,000 worth of glass bottles, Hanson said
that they were no longer being used by Whiting-but he
said nothing about their having been disposed of.
Proceeding to the final component of Whiting's supplies
and repair parts, the $185,000 worth of Pure-Pack cases,
Hanson described them as Whiting-branded carriers capa-
ble of holding 9 half gallon or 16 quart Pure-Pack cartons.
In this respect, he said, they were similar to the milk cases
used to carry glass bottles, which were listed under
Whiting's fixed assets-see infra.
Hanson went on to the item "Prepaid Insurance, Taxes
& Other Expense," valued on Whiting's books at $91,980,
and he said that these had no tangible value in the event of
liquidation. He explained that the account included, among
other things, prepaid group life insurance in the amount of
$4,400; auto registration, $19,300; approximately 2-1/2
months of real estate taxes, $23,000; interest, $7,800; rent-
als, $2,000; a covenant by Whiting-Predecessor not to com-
pete for a period of years, $20,000; and miscellaneous,
$15,000.
Hanson then turned to the so-called fixed or capital assets
of Whiting, testifying about the account labeled "Property,
Plant & Equipment," appearing on Whiting's books as
worth $4,798,620.
First, he spoke about the real properties owned by Whit-
ing. He noted that they were broken down on the company's
books into "Land" ($413,720) and "Buildings & Improve-
ments" ($2,622,880); that, in addition to a milk plant and
a refrigerated warehouse which stood on the Whiting's
home property at Charlestown, there were other Massachu-
setts facilities consisting of a wooden frame home delivery
distribution station (which had once been a car barn) locat-
ed at Marblehead, wood frame retail and wholesale distri-
bution stations at Duxbury and Oak Bluffs, the same plus
a residential dwelling at Nantucket, a cinderblock wholesale
distribution station at Worcester, a plant for manufacturing
cream cheese and related products at Bradford, and, in
Vermont, so-called "country" milk-receiving stations at
North Randolph and Irasburg (the former not in operation
on May 31, 1970), all with appropriate storage and refriger-
ating facilities; and that the values of these as they appeared
on Whiting's books represented the costs to Whiting, in-
cluding installation expenses but allowing for depreciation.
Hanson gave certain specifics with respect to the milk-
processing plant at Charlestown, which made up more than
half of Whiting's evaluation of its "Buildings/Improve-
ments": The plant was comprised of a series of contiguous
structures, of varying ages and with different floor levels.
There were storage tanks, some of which were outside the
building and some partially enclosed by building walls-in
other words, protruding through the walls. In the main pro-
cessing area, there was heavy equipment typical of a milk
plant, including tanks used in processing; formerly, at least,
there had been an access opening through which the ma-
chinery and tanks could be removed 45
45 Hanson did not know if the opening still existed
H. P. HOOD & SONS
Taking a short detour, Hanson alluded to two properties
used by Whiting but owned by Whiting- Braintree : distn-
buting stations for wholesale and retail routes located at
Braintree and at Hyannis, Massachusetts. He said that the
building on the Braintree property was of cement block
construction and that at Hyannis of brick; both built in
1962, each was comprised of a refrigerator chest, provision
for dry storage, office facilities, loading platform, and vehi-
cle maintenance garage.
Returning to Whiting's capital assets as they appeared on
its books, Hanson supplied a number of details about
Whiting's automotive fleet. He testified that the automotive
units listed on its "fixed asset register" were in fact the retail
delivery trucks; and that the register reflected original costs,
less depreciation figures on a straight-line method.46 He
testified further that the trucks used by Whiting for whole-
sale deliveries were, in fact, owned by Merchant; that Mer-
chant used the same method of arriving at book values; and
that, for example, Merchant's 1962 12-foot trucks 47 were
within 2 months of being depreciated to 0 value.
The last asset listed on Whiting's balance sheet of May
31, 1970, was "Good Will," there valued at $47,052. As
noted earlier, Hanson testified that this would have no
tangible value in the event of liquidation.
The above are the assets about which Hanson testified.
Additionally, in the course of his testimony, he treated with
an item appearing as one of the liabilities on Whiting's
balance sheet of May 31, 1970-specifically, "Other Ac-
crued Expenses"-noted therein as amounting to
$212,740.48 Hanson testified that this $212,740 consisted of
the following: $10,000 worth of unpaid auto excise taxes;
$2,000 due Massachusetts Milk Control Board; $2,000
worth of telephone expenses; $2,000 worth of power expen-
ses, $4,000 in legal fees; $9,000 in water and sewer costs;
$2,000 in auditing fees; and $180,000 in casualty insurance
premiums.
It is the last item with respect to which there was extended
(and somewhat confusing) testimony. In short, Hanson ex-
plained that the figure was based upon the "standard" pre-
mium for each month that had passed (up to May 31, 1970),
but that it did not take into consideration the credit on
premiums which Whiting might receive depending on its
casualty loss experience. Based upon such experience in
past years and up to the end of May, Hanson testified, if
Whiting had terminated its operations as of the end of that
month, it would have received a rebate of approximately
$110,000 as a rebate; therefore, he said, the actual accrued
insurance expense as of May 31 was $180,000 less $110,000,
or $70,000.
The next witness in this line of Respondent's defense was
Harold Masteller (Whiting's president), who, like Hanson,
testified under subpena.
I have already made findings on the basis of Masteller's
46 Downgraded at a constant monthly rate , computed on the basis of the
estimate life of each vehicle
47 These constituted 78 of Merchant's 102 units
48 Even though the item here under discussion is not an asset, it is included
at this point because testimony as to the "real value" of a liability-affecting,
as it does, Whiting's net value-has a result equivalent to measuring the book
value of an asset
847
testimony-for example, that, between March 1 and May
30, 1970, he had come to the conclusion that equipment in
the processing plant had deteriorated greatly due to improp-
er maintenance; that the materials-handling equipment was
basically obsolete in view of the facts that it was largely
manual rather than mechanical and that much of it was
designed for glass bottles, the use of which was rapidly
declining; that the automotive fleet was in deplorable con-
dition and/or was totally antiquated in that the wholesale
delivery trucks were too small to carry economically feasi-
ble loads and in that all trucks suffered from lack of mainte-
nance, and that, as of May 1970, he made plans to purchase
24 new wholesale trucks and, within the same calendar year,
he did place orders for new trucks.
Subsequently recalled to the witness stand by Local 380,
he explained that, when he was speaking about the whole-
sale trucks' being too small, he was speaking of the 12-foot
trucks; and, as to these, he testified, some had been disposed
of during or since May 1970, at prices ranging from $150 to
$250 apiece. As for the 16- and 18-foot wholesale trucks, he
now said that they were of an adequate size and that, while
he had had no occasion to sell vehicles of this type in the
Boston area, he felt there would be a ready market for them.
On the other hand, he said that even the 16- and 18-foot
trucks, while "in fair condition ... weren't up to my stan-
dards."
As for his description of certain trucks as antiquated, he
said that he had been speaking of the 12-foot trucks used
for retail deliveries. Since May 1970, he testified, some of the
inoperable ones-the number unspecified- were sold for
$25 to $50 apiece.
A key link in this chain of Respondent's defense was the
testimony of Carl A. Blanchard, Respondent's chief engi-
neer.
Having recited his qualifications 49 he testified that, in
supervising a staff of several professional engineers and an
installation crew of approximately 30 employees, he had the
responsibility of evaluating the company's plant facilities
from time to time and to make decisions with respect to the
discontinuance or disposition of facilities and equipment,
respectively. In the course of his duties, he said, he had
become familiar with the costs of and trends in manufactur-
ing processes in the dairy industry.
As one of the bases for his subsequent testimony, Blanch-
ard reviewed what he considered to be the state of the dairy
industry and some of the general trends therein.50 Overall,
competition has stiffened. Whether because of the growth
of vertical integration-supermarket chains, for example,
have been building their own dairy processing plants-or
for other reasons, there have been increased pressures to-
ward more efficient operations. There have been consolida-
tions and mergers, with the result that there are fewer, but
larger, dairy processors; new plants have been built, old
plants have been modernized, and marginal plants have
been closed down.
49 He received a B.S in mechanical engineering from Tufts in 1938, at
which time he went to work for Respondent In 1946, he became a state-
registered professional engineer and, in 1951, he received an M.S in business
and engineering administration from Massachusetts Institute of Technology.
50 As a witness at the objections hearing, he had testified on the same
subject; in effect, he said, he was bringing his prior testimony up to date.
848 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Blanchard testified further that the volume, if not the
dollar value, of goods sold has increased. Perhaps because
of the extension of the shelf life of products, there has been
a tendency toward fewer, but larger, deliveries per week per
customer. The move has been in the direction of larger
packages, even for home delivery, and toward paper or
single trip plastic containers rather than returnable or reusa-
ble containers . Processing/storage tanks have grown in size,
matched by the growth of milk-transport vehicles. In an
effort to avoid multiple handling of products, interchangea-
ble trailer equipment has increasingly replaced chest facili-
ties which required unnecessary loading and unloading;
and loading or distribution stations away from the mother
plant have become fewer and more streamlined."
Thereupon, Blanchard was questioned as to the value of
certain of Whiting's assets.52 The questions, and his an-
swers, were generally framed in the context of a "forced
liquidation"-i.e., sale upon relatively short notice-and it
should be understood that, unless indicated otherwise, this
is the basis for his various evaluations. He did express the
opinion, on cross-examination, that, in a situation in which
a seller can afford to wait a reasonable period of time for
a buyer, in his words, in a "consignment" rather than an
"auction" sale-perhaps the selling price would be 20 per-
cent greater.
First, Blanchard testified about Whiting's inventories of
"Materials and Products," which Hanson had previously
broken down into 30 percent fluid unprocessed milk (book
valued at $104,270) and 70 percent branded packaged prod-
ucts ($234,290). He raised no question as to these propor-
tions (or these evaluations) or as to the increase in worth of
these products which their eventual sale would bring, as
testified to by Hanson, supra, but he took note that, as had
been alluded to by Hanson, the revenue from the sale of
these products would take the form of an increase in
Whiting's accounts receivable rather than cash-of which,
more later. Likewise, with respect to the $133,210 worth of
packaged products appearing on the books of Mayflower-
also the subject of testimony by Hanson-he said that this
too would be converted only to accounts receivable.
Blanchard was asked next about Whiting's inventory of
"Supplies & Repair Parts" (which Hanson had broken
down into general supplies, garage supplies, glass bottles,
and Pure-Pack cases). As for the "goodly portion" of the
$125,000 worth of general supplies which Hanson had testi-
fied consisted of Pure-Pack cartons, Blanchard said that,
except to the extent used in "winding-down" sales, they
would become valueless in the event of an instant cessation
of the business because they were branded. But he had no
basis to know, or to testify, what portion of the general
supplies consisted of these cartons.
As for that part of this evaluation which was applicable
51 Subsequently, Bodenhamer also was asked about trends in the milk
industry He said that, in studying financial reports , he had been unable to
discern any substantial changes since the objections hearing herein , except
that the industry "seemed to be somewhat more profitable " on the one hand
and that there was "some moderate increase in the level of debt ... appar-
ently from the level of expansion of assets-acquisition of new plant equip-
ment and so forth" on the other
52 In what follows I shall discuss the testimony as to the assets in the order
they appear on Whiting 's books rather than in the order they were treated
by Blanchard.
to Whiting's "repair parts for dairy equipment"-and Han-
son had not testified about these, Blanchard expressed the
opimon that, if they were unused, they would probably have
full value.
With respect to the $185,000 worth of Pure-Pack cases, he
said that any potential buyer would have to be willing to
accept the brand name "Whiting" on the case in order for
them to have any saleability; they are carved on trucks in
full view of the public, and eliminating or changing the
name would be very difficult. It was his opinion that they
had no value at all in a liquidation situation.53
Blanchard's attention was next turned to Whiting's "Pro-
perty, Plant & Equipment," valued on the company's May
31, 1970, balance sheet at $4,798,620.
Referring to "Land," the first item thereunder, Blanchard
testified that he knew of no reason to doubt the validity of
the $413,720 book evaluation, even if the pieces were sold
at auction. On cross-examination as to the possibility that
the land might be worth even more than book value, he
stated that he did not claim to be an expert on appraising
real estate but that part of his function was to make evalua-
tions with respect to proposed acquisitions and dispositions
of property and that, in particular, he had knowledge of
land-sale transactions in the Charlestown area; based upon
his experience and knowledge, he was satisfied that the
value appearing on Whiting's books for the land there
($400,500) was neither overstated nor understated, and he
had no specific knowledge on the basis of which he would
question the book values given other of Whiting's land hold-
ings. In specific reference to the land at the Marblehead
location, book-valued at $2,000, he said that, although he
had not visited the site, he believed that the property would
go for approximately this amount.
Blanchard then proceeded to the next of Whiting's capital
assets , its Buildings & Improvements," book-valued at
$2,622,880 as of May 31, 1970.
He dealt first with the Charlestown milk plant, the book
value of which ($1,652,460) constituted almost two-thirds of
the whole. He testified that, considering the fact that this
was a special purpose building, the plant itself was worth no
more than $331,050 (instead of $881,050); that the book
value of its steam and water piping ($241,250) would be
completely wiped out; that the refrigeration piping and elec-
tnc wiring (book-valued at $193,000 and $255,725, re-
spectively) were worth but $50,000 for salvage; and that,
while the sprinkler system, paved driveways, and fencing
(respectively booked at $20,870, $30,900, and $6,430) would
bring full value, the rest of the "improvements"-installed
drains concrete bulk head, track-extension, etc. (on the
books at $23,240 altogether)-appeared to be composed of
past costs of items designed to maintain the building and,
as such, were of no value at all in a sale such as he was
talking about. In summary, he said that, granting that the
construction was typical and assuming good condition with
adequate maintenance, the Charlestown milk plant building
was worth $512,488.54
53 He also said that listing these under current assets was "unusual " Han-
son had testified that, while a Pure-Pack case had a normal life of over a year,
it was treated as a current asset because of the likelihood of its loss within
a year
5° This is the figure Blanchard cited in an exhibit purporting to summarize
H. P. HOOD & SONS
Having thus testified, Blanchard was asked whether his
opinion would still be the same in view of Masteller' s testi-
mony that he had found the plant to be "in very poor
condition" and Hanson's testimony as to the configuration
of the Charlestown milk plant building and the placement
of various milk storage tanks there. His response was that,
relying less on Masteller's testimony than on Hanson's as to
the differing ages of the building, the varying floor levels,
the varying number of stones, the penetration of plant walls
by storage tanks, and the limited access to the processing
area for removal of equipment, he was of the opinion that
the plant would quite likely have to be torn down in the
event of a liquidation sale; he would now cut the value of
the Charlestown milk plant and its improvements to 0.
Blanchard raised no questions with respect to the book
value ($770,490) of the so-called Mayflower building and
equipment, a separate refrigerated warehouse (occupied by
Mayflower), standing on the same property as the Charles-
town milk plant. Even though this was a special purpose
building, he said, there was a substantial demand for refri-
gerated buildings among nondairy as well as dairy enter-
prises; in this case, he said, the special purpose aspect would
not serve to make the property worth less.
Turning to Whiting's exurban locations-listed earlier-
Blanchard testified that the various structures-five tradi-
tional milk distribution stations, two milk-receiving stations
out in the country, and an old cheese manufacturing plant-
had little or no value beyond the land upon which they
stood, for reasons he had given earlier in discussing trends
in the industry. (He testified that Respondent, for example,
had recently disposed of receiving stations in country areas
only by giving them to the towns in which they sat.) There-
fore, even assuming that these buildings were well main-
tained and in good condition as described by Hanson, he
believed that their entire book value should be eliminated
from the list of Whiting's fixed assets.
(On cross-examination, his attention specifically called to
the Worcester facility, Blanchard said that, although he had
never been there, he was relying on Hanson's description;
and that, from this description, he knew of no reason why
the value of this facility should be treated differently from
that he had given the other ones.)
In summary, Blanchard testified that he would down-
grade the value of all Whiting's "Buildings & Improve-
ments," as of May 31, 1970, from $2,622,880 to $1,259,737,
even if they all were well maintained and in good condition.
In this connection, Blanchard was asked to testify as to
the value of the land and buildings of Whiting- Braintree-
located at Braintree and at Hyannis, Massachusetts--car-
ried on the books of that company as of May 31, 1970, at
$59,000 for both pieces of land and $512,090 for the build-
ings on both pieces. Once again, Blanchard raised no ques-
tion as to the book value placed on the land but, because
he regarded both buildings-and he had seen them-as
special purpose structures, he expressed the belief that both
buildings together, assuming good condition and adequate
his testimony in this respect My own rounded-off computations indicate that
he had down -valued the building to $439,250, but, for the purposes of this
case, the difference is immaterial
849
maintenance , would have a total value of $290,000.
Thereupon, Blanchard's attention was called to the item
in Whiting's May 31, 1970, balance sheet, "Machinery and
Equipment," evaluated on Whiting's books in its summary
of capital assets as of May 31, 1970, at $1,100,760.55 On
almost any kind of a sale, "crash" or "consignment," he
testified that this was worth no more than 10 percent of the
book value. Although he had not seen the Whiting equip-
ment, he was treating it as a "class of assets . . . in mint
condition" and had arrived at this figure in view of the facts
that the demand for used dairy equipment was very small
due to reasons he had given in describing the state of the
industry-and he added that dairy magazines were full of
advertisements offering second-hand equipment; that, at
that very time, the Borden Company was trying to sell much
of its equipment; and that, only recently, Respondent itself
had encountered difficulties in moving used equipment
from its own consolidated plants.
Hanson was questioned with respect to the "Machinery
& Equipment" appearing on Mayflower's books as of May
31, 1970, as being worth $7,270. Assuming that this "Ma-
chinery & Equipment" was the same as that which had been
described at the objections hearing-and book-valued as of
March 31, 1968, at $10,700-he would give it no salvage
value whatsoever. Some of the items, he said, might have
some value, but others would cost money to remove; treat-
ing the whole as a "class of assets," he would value
Mayflower's "Machinery & Equipment" at 0.
Once again Blanchard was asked whether Masteller's tes-
timony-that he had found the equipment in the plant to be
in very poor condition and in need of substantial modifica-
tion, that, among other things, the material-handling sys-
tems were obsolete, packaging lines had been permitted to
deteriorate as a result of improper maintenance, and much
of the equipment was designed for glass bottling-would
cause him to make any changes in the testimony he had just
given. Yes, he said, it would. Assuming Masteller's testimo-
ny to be true, Blanchard said that he would reevaluate the
machinery and equipment at the Charlestown milk plant to
0. A number of pieces, he conceded, might have some value,
but this would be offset by the fact that other pieces would
be worth less than nothing because there would be an ex-
pense involved in carrying them away.
Blanchard's attention was next turned to the "real value"
of Whiting's automotive fleet, i.e., its retail delivery trucks,
which had appeared on Whiting's books as of May 31, 1970,
as worth $419,585.
He testified that, on the basis of his examination of the
assets register as of that date, he found that there were about
441 such automotive units, 71 less than at the time of the
objections hearing. If these were "in mint condition," he
said, they would be worth only about $500 per unit on the
average, in view of the general trend in the industry toward
larger trucks. In sum, he testified that the lot was worth
$210,000.
(The asset register did not show truck sizes, but, Blanch-
55 About 82 percent of this amount was attributable to the machinery and
equipment located at the Charlestown milk plant; 5 percent was in the
Mayflower warehouse, and the rest was spread throughout Whiting's out-of-
town locations
850 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
and testified, he knew the kind of trucks Whiting had and
had a general idea of the sizes, based upon the fact that he
could see them from where he worked next door.)
An additional reason for the downgrading, he testified,
was that these were special purpose trucks, in addition to
their being of inadequate size. He cited incidents in which
his own employer (Respondent) had had to dispose of home
delivery vehicles; some were sold, some were given away as
gifts, and others were completely junked.
Blanchard was then asked whether Masteller's testimo-
ny-that the automotive fleet was in deplorable condition
and antiquated and rapidly approaching the stage of being
inoperable-would cause him to reevaluate. His answer was
in the affirmative; he stated that, under such circumstances,
the trucks would be worth junk value only; he had had
occasion to sell trucks for junk as part of his job, and it was
his belief that the junk value of these trucks would be about
$50 each-a bit of testimony by which he reduced the liqui-
dation value of the fleet to $21,000.56
Blanchard's testimony about Whiting's wholesale trucks,
i.e., those owned by Merchant, took a similar turn. In good
condition, but of inadequate size, he said the 104 units were
worth $500 apiece as of May 31, 1970; in poor condition,
as described by Masteller, he said they would have brought
a junk price of $50 each. Thus, he was downgrading the
book value of $88,750, first to $52,000, then to $5,200.57
(At one point in the hearing, counsel for Respondent
quoted Blanchard as having testified that Mayflower's auto-
motive fleet, book-valued at $12,970, was worth nothing. I
believe that the item is being confused with his testimony,
supra, about Mayflower's Machinery & Equipment," book-
valued at $7,270.)
The next of the capital assets appearing on Whiting's
fixed asset register was "Leasehold Improvements," origi-
nally costing $15,200, but valued on May 31, 1970, at
$2,950. Stating that leasehold improvements consisted gen-
erally of improvements on leased property which could not
be moved or sold, Blanchard testified that, while they might
be worth full book value to a "going business," they were
worth absolutely nothing on liquidation-in fact, they
might have a negative value if the lease required that the
premises be put back into their original condition.
Blanchard next testified with respect to the value of the
"Chests and Cabinets," valued on Whiting's books as of
May 31, 1970, at $142,970. Blanchard testified that these
consisted of pieces of equipment generally in the hands of
customers, such as cream dispensers furnished to customer
restaurants. In the event of a liquidation, he said, there
would be a problem of recovery and of ownership, a circum-
stance which might possibly make it not worthwhile to seek
to recover the items. As a class of assets, Blanchard testified,
the "Chests and Cabinets" would be worth about 10 percent
of their book value, or $14,300.
"Milk Cases," on Whiting's fixed asset register, carried a
book valuation of $51,300 as of May 31, 1970. Blanchard
56 In setting this evaluation, he presumed that each truck could be driven
to the junkyard or could be towed there by another of Whiting's trucks so
that there would be no towing costs
57 He rounded off the figure, in his summarizing testimony, to $5,000 In
my own findings, I have rounded off all figures to the nearest $10
testified that, since these bore the Whiting name on them
and, more important, since they were for glass containers,
fast going out of style, he would give them no value whatso-
ever.58
As for Whiting's "Office Furniture and Fixtures," book
valued as of May 31, 1970, at $44,480, Blanchard testified
that he thought that the office furniture and fixtures were
removable, could easily be disposed of, and were correctly
appraised. Likewise, he saw no reason to question the book
value ($470) of Mayflower's office equipment.
A summary of Blanchard's testimony bearing upon the
value of Whiting's or its subsidiaries' assets can be found in
Chart 1, infra.
Having addressed itself to the validity of the book value
of Whiting' s assets, Respondent next turned to the availabil-
ity of certain assets, either as part of the security for the
obligation to the Fund or as a source of payment for the
claims of Whiting's general creditors, including the Fund for
any part of its balance which might be unpaid out of the
Fund's security.
Under a revolving loan agreement between New England
Merchant's National Bank of Boston (hereinafter called the
Bank) on the one hand and Whiting, Mayflower, and Braley
on the other, executed on September 8, 1967, at which time
the Bank loaned Whiting $1,386,000, the Bank was granted,
with respect to any balance owed it during the life of the
agreement, a security interest in any of Whiting's,
Mayflower's, or Braley's current notes or accounts receiva-
ble arising out of goods sold by them.
As of May 31, 1970, the loan agreement was still in effect,
and Whiting owed the Bank $1.3 million.
It is Respondent's argument that, because of Whiting's
obligation to the Bank as of May 31, 1970, the value of the
trade accounts and notes receivable of Whiting, Mayflower,
and Braley as of that day should be excluded in evaluating
Whiting's financial condition for the purpose of measuring
the character of the Fund's interest in Whiting's affairs;
nor-the argument continues-does it matter that these re-
ceivables may have exceeded the balance owed the Bank:
until the Bank is repaid, all the receivables must remain
earmarked for that repayment and for that repayment only.
Respondent further contends that, to the extent -as earli-
er testified-that Whiting's and Mayflower's product inven-
tories on hand as of May 31, 1970, might have been sold at
prices exceeding the products' book values, the revenue
from the sales would have taken the form of trade accounts
receivable, adding to the security for the satisfaction of the
obligation to the Bank, but subtracting from the amount
available to repay the Fund.
As of May 31, 1970, Whiting's notes and accounts receiv-
able, less provision for doubtful accounts, came to
$3,559,910; and Mayflower's were $205,613. As for the
product inventories on that day, had they been disposed of
by sale, they might have been expected to bring in, accord-
ing to Hanson (supra), $442,560 and $14,200, for Whiting
and Mayflower, respectively.
The testimony, offered in support of that part of
58 These cases should not be confused with Pure-Pack cases, earlier de-
scribed as carriers for plastic cartons and carried on Whiting' s books among
its current assets Blanchard's testimony as to their "real value" appears
heremabove
H. P. HOOD & SONS 851
Respondent's defense to which this part of this subsection
relates-that of Hanson, Masteller, and Blanchard-was
brought together, amplified, and "wrapped up" by the wit-
ness, Bodenhamer.
He first fixed his attention on the Whiting account, "Due
From Subsidiary Companies."
Of the $856,610 shown on Whiting's books as due from
subsidiaries, $115,680 consisted of an obligation of Braley.
Dr. Bodenhamer, accepting Braley's book values of its as-
sets other than that attributed to "Good Will" (which he
eliminated) and to its "Property, Plant and Equipment"
(which he cut to the amount actually received from the sale
thereof), and deducting a small priority claim , concluded
that only $70,830 was available to pay Braley's debt to
Whiting.
He then turned to Mayflower, which owed $144,270 to
Whiting and $151,500 to Merchant. Eliminating values at-
tributed on Mayflower's books to its goodwill and treasury
stock, because they were intangible and/or worthless, elimi-
nating its trade accounts receivable because they were
pledged to the Bank, eliminating Mayflower's inventory of
products on the assumption that it could be sold and, if sold,
would be converted to accounts receivable pledged to the
Bank , and, finally, eliminating the total value of
Mayflower's machinery and equipment in accordance with
Blanchard's prior testimony, he found the "realizable" va-
lue of Mayflower's assets to be $49,570 (as opposed to the
book value of $483,030, and he deducted from this amount
such priority claims as those due for payrolls and taxes. He
thereupon found that only $43,730 would be available for
the payment of claims of general creditors, including Whit-
ing and Merchant, altogether amounting to $398,710.
Therefore, he concluded, these creditors would receive but
$.1097 on each dollar; and, specifically, that Whiting would
receive only $15,830 of its $144,270 claim and Merchant
would receive but $16,620 of its $151,500 claim.
Bodenhamer then examined the value of Whiting's equity
in Merchant. The book value of Merchant' s assets as of
May 31, 1970, was $252,970, but Dr. Bodenhamer's "as-
sumed value" was $112,470. (He arrived at this figure by
eliminating prepaid expenses of $5,625 as being of no value
in a liquidation situation ; and he cut down the $151,500
noted as due from Mayflower to $16,620, for reasons stated
in the last prior paragraph.) He then eliminated the value of
the automotive fleet because this was part of the security for
Whiting's obligation to the Fund.59 His "assumed" value of
Merchant's assets was now $23,720; and, in view of the fact
that Merchant's liabilities other than Whiting's claim came
to $35,625, he concluded that the stockholders' ( i.e.,
Whiting's) equity in Merchant was a negative $11,905.
He next performed a similar operation with respect to
Whiting-Braintree. He devaluated that company 's asset
book value of $574,490 to what he called an "estimated
realizable" value of $362,400, by adopting Blanchard's ap-
praisal of Whiting-Braintree 's "Property, Plant and Equip-
59 In so doing, he did not rely on Blanchard's testimony as to the value of
Merchant 's automotive fleet He explained that he was giving it full book
value ($88,750) despite Blanchard's appraisals ($52,000 if these trucks were
in good condition, or $5,200 if they were in poor condition) because, for
purposes of this analysis, he was asked to do so by counsel for Respondent.
ment" ($359,000 instead of $571,090); and he thereupon
subtracted the company's obligations (other than to Whit-
ing) of $305,160 to arrive at a net worth, or equity, of
$57,240.
Based upon the foregoing, Dr. Bodenhamer then purport-
ed to summarize the value of Whiting's total equity in its
subsidiaries. From the $598,770 which he read as the total
book value of this equity, he came to an "actual" value of
negative $15,665. In so doing, it should be noted, he consid-
ered that Merchant's long-term indebtedness to Whiting
was a part of Whiting's equity therein and that Merchant's
prepaid expenses and automotive equipment should not be
counted, the former because it was worthless on liquidation
and the latter because the value of the trucks was considered
as having been transferred to the Fund; that Whiting-
Braintree's long-term indebtedness to Whiting was likewise
a part of its equity and that Whiting-Braintree's real proper-
ties were worth $359,000 rather than $571,090; that
Mayflower's property was worthless and its goodwill and
treasury stock of no tangible value; and that Braley's good-
will was worthless and its property worth only $68,000, the
sale price therefor, instead of $144,770, its book value.
As the next link in the chain, Dr. Bodenhamer computed
the liquidation values of the assets standing as security for
the Fund's loan, again attributing no value to prepaid insur-
ance, taxes and other expense or to goodwill. (A summary
appears in Chart 2, infra.) He concluded that , whereas the
total book value of these assets exceeded the Fund's loan
balance by more than $4 million, the liquidation value fell
below that balance by either $110,000 or $900,000, depend-
ing upon the version of the condition of the assets which one
adopts.
Thereupon, having demonstrated to his satisfaction that,
in a liquidation situation, the realizable value of the assets
standing as security for the obligation to the Fund, whether
these assets be considered in good or in poor condition, was
insufficient to cover the balance owed on May 31, 1970, Dr.
Bodenhamer proceeded to demonstrate how the Fund
would fare with respect to the balance of its loan unsatisfied
by its security, which balance would now be lumped with
the rest of Whiting's general unsecured claims.
He first made a computation of the trade receivables
which would be available for payment of the claims of
general creditors, including the Fund's balance remaining
after using up its security. He concluded-see Chart 3, in-
fra-that, after the Bank, which had first claim on these
receivables, was paid in full, $2,372,740 worth of receivables
would be available for Whiting's general creditors.
Thereafter, he proceeded to ascertain how much
Whiting's general creditors (including the Fund to the ex-
tent its claim had not been satisfied by assets specifically
pledged for its repayment) might expect to realize, in a
liquidation situation, out of all of Whiting's assets remain-
ing after all secured obligations had been satisfied to the
extent allowed by those assets standing as security therefor.
Implicit was the assumption that some formal action, such
as a bankruptcy proceeding, was called for; and he sought
to make allowance for the expenses involved in such a pro-
ceeding.
Chart 4, infra, summarizes Dr. Bodenhamer' s testimony
as to the cents per dollar available to general creditors be-
852 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
fore allowing for bankruptcy expenses. In brief, he conclud-
ed that the payoff would be $0.548 per dollar if Whiting's
fixed assests were in good condition or $0.464 if in poor
condition. Next, he testified as to the realizable amount
after bankruptcy expenses were deducted; and he conclud-
ed-see Chart 5, infra-that the amount left for distribution
would be but $0.214 or $0.213 per dollar, respectively.
Using Dr. Bodenhamer's testimony as a basis, my own
computations indicate that, in the event of the liquidation
of Whiting as of May 31, 1970, the Fund would have re-
ceived, in payment of its $3,135,686, the following sums in
full payment:
The lesson Respondent would have me draw from this
picture is clear: that, faced with a loss, depending on the
validity of any one of a number of assumptions , of from
$50,000 to $717,000 on a $3,136,000 loan a prudent investor
in the Fund's shoes would take an interest in the debtor's
enterprise of a nature akin to that of an equity holder. And,
more explicitly, Respondent takes the position that, on
whatever assumption questions were framed and answers
given, the one most supported by the evidence is that
Whiting's assets were in poor condition and that Whiting,
as of May 31, 1970, was in the position of a bankrupt, the
disposition of whose assets would involve formal bankrupt-
If assets are in If assets are in
good condition and poor condition
as appraised by and as appraised
witnesses by witnesses
From assets standing as security
for the obligation
Balance from residual assets, as
general creditor, without
bankruptcy expense
Total received
Loss to Fund, with
no bankruptcy expense
From assets standing as security
for the obligation
Balance from residual assets, as
general creditor , with bankruptcy
expense
Total received
Loss to Fund, with
bankruptcy expense
cy action, with its attendant costs-and that , therefore, the
loss most likely to be sustained by the Fund was the
$717.000.
(3) Value of asset on rebuttal and surrebuttal
After Respondent had put in its defense, Local 380 intro-
duced evidence as to the value of certain assets which Re-
spondent had sought to downgrade.
Robert Foster, a real estate appraiser and consultant,
testified about Whiting's Charlestown properties and about
Whiting-Braintree 's facilities at Hyannis and Braintree.
At the outset, he explained that he had been asked by
Local 380 to arrive at a "fair market value" for each such
property-a value he described as one reached , not under
involuntary liquidation or "sacrifice" conditions , but, rath-
$3,026,028 $2,237,702
60.093 416.665
$3,086,121 $2,654,367
49.565 $ 481,319
$3,026,028 $2,237,702
23.467 181.271
$3,049,495 $2,418,973
$ 86.191 $ 716.713
er, making allowances for the existence of a reasonable time
in which to "merchandise" the property to make it saleable,
in other words, the highest price one might reasonably ex-
pect60 But , he made clear, he was not asked to arrive at-
nor did he arrive at-"liberal" or, for that matter, "conser-
vative" appraisals.
He listed the various approaches normally used in the
appraisal of properties: the market data approach, based
upon a study of the sales of comparable properties; the cost
summation approach, involving, first, an evaluation of the
land through the market data approach and, then, adding
to that the costs of reproducing the existing improvements,
making allowances for their deterioration, depreciation, and
60 This was the value , he testified , which was used in condemnation cases
H. P. HOOD & SONS
obsolescence ; and the income approach , under which the
appraisal is reached by establishing the income-producing
capability of the property , using for this purpose the rentals
received for comparable properties , and thereupon capital-
izing this capability over the expected economic life of the
property , a process which calls for the taking into consider-
ation of such factors as interest rates.
Each of these approaches , Foster conceded , had limita-
tions, the most significant being the difficulty of finding
precise supporting data. The best approach in a given situa-
tion, he said , depended upon the individual circumstances,
but in any situation , he continued , the utilization of more
than one of them could be helpful , since ( 1) any sharp
variance in the results attained by using the different ap-
proaches could be a signal that there was an error some-
where or, more important , (2) the basic principle of
substitution would dictate that no prospective buyer would
pay the price indicated by one approach if the price reached
by another approach was lower.
He used the income approach in appraising Whiting's
milk-processing plant at Charlestown . For purposes of this
evaluation , he assumed that the building would be used for
nondairy purposes and would , therefore , require changes.
He regarded as a disadvantage the existence, in one area or
another, of multiple stories in a time in which one -stones are
the trend for industry , and he gave little credence to book
costs noted for such things as the sprinkler system and the
steam water piping . On the other hand , he regarded the
location as an up -and-coming one for industrial purposes,
and he made the assumption that the cooler facilities, if not
needed by a particular buyer, could be rented out by him.
All things considered , he concluded that a fair rental value
would be $100,000 per year , which , capitalized at 10 per-
cent, meant that this property was worth $1 million.
He had checked this evaluation , he said, by using the
market data approach for the land-he was unaware of the
rental market for any comparable buildings. Recent sales of
land in the area , he said, brought slightly in excess of $2 a
square foot , meaning that the land supporting the plant was
worth $500 ,000, an evaluation he considered fairly to repre-
sent one half the value of the land with improvements. Also,
he testified he had "mentally" utilized as a check the cost
approach , having arrived at an income approach valuation,
he translated that part attributable to the building into a
cost per unit , a cost which he found , "roughly in my mind,"
to be comparable with building costs known to him.
Of course , he said , the property would be worth "substan-
tially" more to a purchaser for dairy purposes , but he did
not know how much more.
On cross-examination , Foster conceded that the building
had characteristics which might be undesirable to one or
another potential buyer, characteristics which might , in that
case , require alteration . He was not prepared to say what
any such alteration would cost-he was not an expert on
construction costs-and he conceded that if, for any partic-
ular customer , the cost of rehabilitation would exceed a
seller's price based on his (Foster 's) evaluation , the sale
would fall through.
Passing on to the refrigerated warehouse on the same
land area as the milk plant-the one occupied by Mayflow-
er-Foster said he used the cost approach here; in the case
853
of relatively new buildings such as this, he said , reproduc-
tion costs were more readily available.
This building , he noted , was a modern high -stud one-
story refrigerated building for which there was ample de-
mand.
In reliance upon per-cubic-foot costs given him by
(named) persons who owned similar buildings and who
were presently engaged in constructing a building of a simi-
lar type and size , which costs generally accorded with those
of other modem refrigerated buildings within his knowl-
edge , he had arrived at a building -and-land appraisal of
$1,258,000.
On cross-examination , he said he had not checked this
result against either of the other approaches . He was aware,
he said , that some parts of the building were rented out at
approximately $2.75 per square foot , but he did not utilize
this information because it was his understanding that the
lessees had some sort of financial ties with Whiting or May-
flower and , therefore , he believed that the rent paid would
have no probative value. Nor, when he consulted with the
persons from whom he procured the construction costs, did
he make inquiry as to the vacancy factor in the buildings
they already owned.
With respect to Whiting-Braintree's Hyannis and Brain-
tree properties , Foster likewise testified that his approach in
evaluating them was solely that of reproduction costs, since,
like the Mayflower warehouse , the buildings on those prop-
erties were relatively new. (They were built in 1962.) In
ascertaining the costs of reproduction , he testified, he had
consulted the actual builder of the buildings on the two
properties , both as to the original and as to 1970 costs. Then,
having ascertained what he considered to be the 1970 cost
of constructing comparable buildings, he made deductions
for depreciation or unneeded improvements , such as refrig-
eration for a purchaser who needed no refrigeration.
Describing the Hyannis property as 6-plus acres of land
with 670 front feet, with a 21,540 square -foot one-story
building with space for storage , refrigeration, garage, and
loading and office facilities , he concluded that the value of
the property (including the land) to one who could use its
refrigerated space ( 15 percent of the building) was $648,000;
to one who could not, $537,000 ; and to one who could use
some but not all of it , somewhere in between.
The Braintree facility, Foster said , was similar to that at
Hyannis except that the land consisted of approximately 3
acres with 465 front feet and that the building contained
24,000 square feet , 25 percent refrigerated.
Foster appraised the Braintree property as worth
$555,000 as a dairy distribution center or to one who could
use its refrigeration facilities, and $430 ,000 for one who
could not ; once again, to the extent that a prospective pur-
chaser could use some but not all of the refrigeration facili-
ties , the value would be somewhere in between these two
figures.
As part of its rebuttal, Local 380 also called Richard
MacDonald, presently supervisor of Whiting 's branch man-
agers and , as of May 1970, a branch manager himself.
Among other things, MacDonald testified further about
Whiting-Braintree's Hyannis property. He said that a por-
tion of the refrigerated space at that location was in fact
used by someone other than Whiting : approximately half of
854 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
it was being used by Respondent for the storage of ice
cream-at a rental, he believed, of $150 per month.
MacDonald testified also with respect to several other
involved properties. On December 1, 1970, he said, Whiting
had stopped using the Duxbury station. Somewhat earlier it
had obtained an appraisal of that property,61 after which
Whiting took steps to dispose of it. It had been on the
market for 7 or 8 months when, early in July of 1971 one
McKinsey, not in the dairy business, offered $80,000 for the
property, which offer was accepted.
MacDonald testified further that Whiting had ordered
and had received, an appraisal of its Nantucket property:
$5,000 for the land, $20,000 for a building thereon which
was formerly used as a residence by the branch manager,
$12,000 for a separate building housing,the feezer, cooler,
and office area, and $1,000 for the platform and shed
area-$38,000 altogether. At the time he was testifying,
MacDonald said (i.e., on July 28, 1971), this property was
up for sale.
In surrebuttal, Respondent introduced testimony by Da-
vid Carey, real estate appraiser, whose firm had been re-
tained by Respondent to conduct an appraisal of the
Charlestown, Hyannis and Braintree properties as of May
1970. Carey was the one who conducted the appraisal,
which, he said, had a three-fold objective: to arrive at the
fair value of the properties with Whiting in full operation;
to arrive at their fair market value as general industrial
properties for general use, put up for sale unoccupied and
with ample time for merchandising; and to arrive at a fair
liquidation value, i.e., the value in a forced sale.
Carey testified as to the three appraisal approaches such
as had Foster, with some amplification. For example, he
explained that the market-data approach is normally used
for evaluating land and residential properties; and that
"over-improvements" in property are a form of obsoles-
cence.
He testified first about the Charlestown property-that
containing both the milk plant and the refrigerated ware-
house.
Using the market approach, he concluded that the land
was worth $1.75 per foot and that therefore, the 309,000
square feet were worth $541,000.
As for the milk plant, he concluded that its highest and
best use was that to which it was now being put but that it
had no value in that use except to Whiting. Then, acting on
information of any prospective buyer,62 he concluded that
these costs would exceed those of constructing a building
61 The written appraisal , made by a realtor, is in this record as an exhibit
Stating that the cost-summation approach had been the one used , the ap-
praiser concluded that , as of September I, 1970, the land was worth $15,000
and the improvements were worth $88,818
62 Charles Logue, building contractor , had been his source of information
in this respect Logue also testified herein he had been retained by Carey
to estimate how much it would cost to renovate the Charlestown milk plant
and he explained that, after an inspection , he had arrived at a "conservative"
cost of $5 per square foot , or $500,000 I noted a number of questions ansing
out of a comparison between the testimony of Carey and of Logue-Carey
had testified that the cost of renovation included leveling all floors, while
Logue said it did not, Carey had implied that columns would have to be
moved for an effective rehabilitation, while Logue said his estimate did not
cover this-but I attribute this only to some lack of communication between
the two in connection with the request for an estimate
suitable to new owners and, therefore, that the mill property
was worth no more than the value of the land less the cost
of demolition of the building.
Asked if this would be true even as to continued use by
Whiting itself, he disclaimed knowledge-he did not know
enough about Whiting's operation. But he said that it was
inconceivable to him that any other dairy of a size who
could use this property-and there were only three or
four-would think of operating in this type of building.
In arriving at his decision, Carey said, he had also used
the income approach as a check. Using rental paid for
(named) comparable properties, and considering the fact
that, as of May 1970, there was an abundance of vacant
rental space on the market, he had fortified his conclusion
that the highest and best use of the Charlestown property
to the buying public would take the form of a new building
in place of the milk plant.
Temporarily, he turned to the refrigerated warehouse at
Charlestown, which, he testified, was being put to its highest
and best use in its present form. In appraising it, he relied
basically upon the reproduction cost approach ; in agree-
ment with Foster, he considered this the most useful ap-
proach in the evaluation of a comparatively new-the
warehouse had been built in 1962 or 1963-structure.
He testified 63 that the reproduction cost of the warehouse
was $1,187,820; deducting 20 percent for depreciation, he
concluded that the present building was worth $950,256. To
this he added the appraised value of the supporting land
($155,750) and land improvements such as paving, allowing
for depreciation ($160,850), arriving at a total value of the
warehouse with its land of $1,111,106.
He then proceeded to place a value on the entire Charles-
town property, including the milk plant portion. He added
to the last-noted figure the value of the remaining land
(220,000 square feet @ $1.75, or $385,000) and subtracted
the cost of demolishing the milk plant ($70,000) to arrive at
a total value for the Charlestown land and improvements of
$1,426,000.
But he did not stop here. On the basis of his information
as to the income per square foot being earned at the May-
flower warehouse 64 and as to the "normal" vacancy factor
at similar properties-20 percent-he concluded that the
building would bring $156,000 per year with a vacancy loss
of $31,000; and that, allowing for expenses, it would net
about $75,000. Capitalized at 10 percent, he said, this meant
a value for the building and land of $772,500. This, he said,
constituted the value of both the building and its portion of
the land, using the income approach.
Contrasting the results achieved with the two approaches,
he expressed the opinion that the typical buyer would adopt
the lower of the two-that derived from the income ap-
proach. The fair market value as of May 1970 then (he
testified) would be $772,500.
Asked about the "liquidation" value, he expressed the
opinion that, in a forced sale, the property would bring in
30 percent less.
On cross-examination, Carey conceded that $2.75-
per-square-foot gross was less than rentals paid for similar
63 Again , on information from Logue
64 The tenants were Purity Supermarkets and Rath Meats, each paying
$2 75-per-square-foot gross, i e , including "handling" costs involved
H. P. HOOD & SONS
properties in the area-there were rentals of $2.75 net-but
his conclusion was that there must be something "wrong"
with this particular refrigerated warehouse. He said he did
not know whether any of the present tenants was a customer
of Whiting-as had been implied by Foster-but, he said,
even if this were a fact, it would not have caused him to
make a closer examination.
Asked on further cross-examination about Blanchard's
estimate,65 Carey said he had not heard that testimony;
continuing, he said that he would respect Blanchard's opin-
ions, as an engineer, on dairy processing information, but
he knew nothing of Blanchard's qualifications as an ap-
praiser of property.
Carey next testified about the Hyannis and Braintree
properties, with respect to which, he testified, he used simi-
lar methods of appraisal. He used the market data approach
for the pieces of land and, since the buildings were relatively
new, he used the reconstruction cost approach for them
As an assist with the former, he consulted with a sampling
of local realtors about recent comparable land sales and, for
the latter, he used the same builder who had computed the
renovation costs of the Charlestown milk plant.
With respect to Hyannis, he concluded that, as of May
1970, the land was worth $1.75 a square foot, for a total of
$205,000; that the cost of replacing the building, less depre-
ciation, was $45,400 67 ; and that $4,000 must be deducted
for overimprovements which prospective purchasers would
not need6 Therefore, he said, the fair market value for the
whole was $246,000, but, he continued, the liquidation value
was $172,000.
As for Braintree, Carey concluded that the fair market
value of this property as of May 1970 was $281,500 and that
its liquidation value $197,000.
c. Local 380's collective bargaining
On the basis of uncontradicted testimony herein, I find
that no representative of the International or of the Fund
was present at either of the two "nonrecognition" meetings
between Respondent and Local 380 which took place dur-
ing the latter part of 1968. Nor were any such representa-
tives involved in any way; in fact, they were not aware that
the meetings were being held.
As for the February-May 1970 negotiations leading to a
new collective-bargaining agreement between Whiting and
Local 380, the formulation of Local 380's demands took
place at a series of special meetings of the Local's member-
ship assembled for that purpose, and actual bargaining on
behalf of Local 380 was conducted by Luke Kramer, the
Local's executive officer, and William Graham, its business
65 $770,490 for the warehouse building alone See supra
66 Besides , he had no data as to recent sales of like buildings in the two
areas involved
67 Logue testified that he had broken down the Hyannis structure into its
component parts, had arrived at an overall cost, had reduced this cost by 10
percent to allow for the 14 months which had passed between May 1970 and
the date of his computations, and had reduced this net figure to unit costs
These unit costs, he said, were the ones he used at Braintree and for the
Mjfower building as well
For example, he said, there was an excessive number of electrical plugins
into which a delivery truck can connect
855
agent, accompanied, on several occasions, by a committee
of Whiting employees who rendered assistance on specific
limited subjects. I find further that, in conformity with es-
tablished procedures, the eventual agreement reached be-
tween representatives of Whiting and of Local 380 was
ratified by the membership of the Local at a special meeting
called for the purpose.
During the negotiations, representatives of Whiting, in
effect, "pleaded poverty," but (I find on the credited testi-
mony) (1) Masteller, principal spokesman for Whiting, in-
jected the plea as a "bargaining technique" and (2), in
Kramer's experience, many, if not all, employees with
whom the Local dealt made similar pleas. I credit testimony
that, throughout the discussions, the company' s negotiating
team stressed the fact that the changes they sought were
essential if Whiting were to continue to operate but that
they were not asking for "special treatment" because of the
company's debts-rather, they were seeking a contract
which would make Whiting "competitive." There was no
mention, during the negotiations, of Whiting's obligations
to the Fund or of the fact that a moratorium on payments
was in existence at that time. On the other hand, although
their respective testimony on this point was somewhat con-
fusing, I am persuaded, and I find, that both Masteller and
Kramer were well aware, during the negotiations, of the
existence of both Whiting's obligation to the Fund and the
moratorium.
As earlier indicated, Local 380, in these negotiations,
agreed to a number of Whiting's proposed changes from the
conditions set forth in the expiring contract: that negotia-
tions be conducted on an individual rather than an indus-
trywide basis; that there be a revision of the wholesale
distribution system, including the introduction of flexibility
into route boundaries and a change in the type of compen-
sation of wholesale drivers from payment on commission to
payment by the hour; that there be a change from a 2-sided
to a 3-sided route in retail home deliveries; and that, to the
extent necessitated by these changes, the "status quo" provi-
sion be modified; all this, with the knowledge of both par-
ties to the negotiations that the changes would result in a
reduction of jobs in the bargaining unit. On the other hand,
the hourly rate for wholesale drivers was fixed at $4.25 per
hour (with appropriate provisions for overtime pay), the
average increase per driver amounting to $8 per week; the
formula arrived at for determining the wages of the retail
drivers permitted them to receive an average increase of $7
per week; and the employees in the milk-processing plant
received a 25-cent-per-hour increase. In addition, all em-
ployees were to receive a $10 across-the-board wage in-
crease during the second year of the contract. And, finally,
with respect to Local 380's acquiescence to the alteration of
retail routes, it should be noted that, during the negotia-
tions, there had been discussion of a 5-sided route before
agreement was reached on a 3-sided system; that, moreover,
the change was not a "breakthrough" for management-for
example, Hood, Respondent here, had itself been operating
under the 3-sided route system for several years; and that,
in any event, the change constituted a savings for the com-
pany which enabled it to give increased wages.
I find that no representative of the Fund or of the Interna-
tional played any part in this series of negotiations, either
856 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
directly or indirectly. And, while I regard as somewhat hy-
perbolic Kramer's testimony that the new contract was "a
one-way street going the wrong way, as far as the company
was concerned," I perceive nothing in the negotiations or in
the terms of the contract reached which gives color to any
claim that Local 380's related actions were or may have
been motivated by desires to "protect" the Fund's loan.
And, finally, we come to the details of "The Sealtest
Story."
At the time that Local 380 served notice on employers in
the ice cream industry of its desire to reopen the question
of wages under their contracts, it was embroiled in negotia-
tions for a new contract with employers in the milk industry
in the area; therefore, having served the requisite notice, the
Local was willing to await the disposition of the milk negoti-
ations before meeting upon the ice cream wages. But Seal-
test-and Sealtest alone, insofar as can be inferred from this
record-insisted on an early meeting with Local 380, and it
was at this meeting that Sealtest, as a condition for discuss-
ing wages as called for by the reopener, insisted upon the
deletion of certain employees' benefits in the contract which
Local 380 considered essential to their well-being. The
company's demand-the witness, Kramer, referred to it as
an "ultimatum"-still blocking discussion of wages through
a period of bargaining, Local 380 prepared for a strike. As
required by the International's constitution, Joint Council
No. 10 of the Eastern Conference of Teamsters and the
International itself were alerted to the intended action, and,
as earlier noted, the strike began on June 15, 1970. Shortly
Local 380 called for the assistance of other locals repre-
senting employees at Sealtest ice cream manufacturing
plants. On June 17, a "war council" of representatives of
these locals met, with Robert Dietrich, director of the dairy
division of the Eastern Conference of Teamsters in atten-
dance, and plans were made for supportive strike action, if
necessary, against Sealtest's other plants. For a short period
thereafter, Local 380's negotiations with Sealtest were con-
ducted by a committee composed of Kramer, representa-
tives from five Sealtest plants throughout the eastern
seaboard, and Dietrich. Kramer was the main spokesman,
but, at one point, Dietrich informed Sealtest that it must
withdraw its demands upon Local 380 or be confronted with
the might of the Eastern Conference and, if necessary, of the
countrywide International. This announcement having had
no effect, the "war council" met in New York City with
Joseph Trerotola ("Joe T."), International vice president
and director of the Eastern Conference,69 to inform him of
tactics to be used in a strike to be expanded to all of the
locals involved; but Joe T., advising patience, volunteered
to confer with the president of Sealtest, whom he had known
for many years through earlier contract negotiations. As a
result of his intervention, Sealtest, on September 23, with-
drew its condition for discussing wages, but it refused to
accede to Local 380's wage demand.
On June 26, the International gave its approval for the
extension of the picket line to cover 1,227 additional mem-
69 1 find that, by virtue of Local 380's original notification of intention to
strike and by virtue of the fact that Joe T. was Dietnch's immediate superior,
Joe T. had been and continued to be aware of all developments in connection
with this dispute
bers of locals other than Local 380. But it was never neces-
sary to take advantage of this approval, for agreement on
wages was quickly reached and, on Sunday, June 28, Local
380's strike ended.
With respect to the Sealtest incident, I find that, although
Local 380 was most immediately concerned, it was actively
assisted by representatives of sister locals of the Eastern
Conference and of the International.
d. Whiting and Respondent as "competitors"
Although, at an earlier stage of this proceeding, the par-
ties had stipulated that Respondent and Whiting were com-
petitors in the processing and distribution of fluid milk and
related products, in the wholesale and retail sale of ice
cream, and in the manufacture and sale of ice cream "mix,"
Local 380 contended that the requisite degree of competi-
tion does not exist to support a finding of conflict of inter-
ests within the meaning of the Buttrick principle. Over
Respondent's objections, Local 380 introduced testimony in
this respect.
Local 380, at all pertinent times, has had a "milk industry
contract" and an "ice cream industry contract" with the two
respective groups of employers with whom it dealt; and the
expiration date on the first set of contracts differed from
that applicable to the second set. (As of May 1970, it was
party to a "milk industry contract" with Whiting and-but
for Respondent's refusal to bargain-would have used the
"ice cream industry contract" as a basis for negotiating with
Respondent.) But, although the two contract forms differed
with respect to details such as specific jobs, they were sub-
stantially similar in basic provisions normally found in col-
lective-bargaining agreements.
Both Respondent and Whiting, as of May 1970, were
processors and distributors of milk and related products in
the Boston area , operating at both the wholesale and the
retail levels. Respondent, with 5,000 employees throughout
New England, including approximately 1,000 in Boston and
vicinity, was the largest dairy in the Northeast, and Whiting,
with just under 1,000 employees in Boston, may well have
been the largest in that Metropolitan area.
In addition to milk, Respondent, in a so-called ice cream
division to which 435 to 440 of its 5,000 employees were
assigned, processed its own ice cream, mainly for wholesale
distribution to food stores but partly for retail selling
through ice cream truck vendors in a separate division of
Respondent. The Boston ice cream plant operated within
the ice cream division,70 with 190 to 195 employees-118
engaged in the manufacture of various ice cream products
and 35 in the transporting of these products (these two
groups constituting the bargaining unit for which Local 380
here seeks bargaining rights and the only organized employ-
ees among Respondent's 5,000), and approximately 40 other
sales personnel, clericals, and executives.
Whiting, on the other hand, manufactured no ice cream.
(It did purchase and distribute, at both wholesale and retail,
ice cream purchased from an outside maufacturer. Subse-
quent to May 1970, it stopped wholesaling such ice cream,
70 Respondent also operated two other ice cream plants, one in western
Massachusetts, the other in Maine
H. P. HOOD & SONS
but it continued to make retail sales off its milk wagons.) It
did, however, produce ice cream mix, an ingredient neces-
sary to the manufacture of ice cream products, which it sold
to processors.
Dunng the three summer months, Whiting's production
of ice cream mix consumed 120 employee hours per week;
during the rest of the year, the figure fell to 30.
At all pertinent times, Respondent's Boston ice cream
plant 71 also made ice cream mix. In May 1970, approxi-
mately 85 percent of this mix was used at the plant itself in
the making of its own ice cream; the rest was sold at whole-
sale to "outside" customers, including its sister, the dairy
division. Late in July, though, the sale to others ceased;
thenceforth, Boston-plant-made mix was used exclusively in
the processing of Boston-plant-made ice cream.72 As the
sale-to-others activity was phased out, the dairy division at
Boston which had been one of the purchasers for resale of
the ice cream plant's mix, itself began to manufacture ice
cream mix to sell to its customers; in effect, the dairy divi-
sion succeeded the ice cream division in this aspect.
The man-hours per week consumed in the manufacture
by Respondent of ice cream mix were 100 in the summer
and 60 in the winter.
Respondent ran-and runs-a highly centralized opera-
tion. Its ice cream division, along with its other operating
arm, the dairy division,73 is subject to and the beneficiary
of companywide policies and services, respectively. There
are common personnel policies, trucking is often shared,
and employees are freely interchanged. And, for example,
the entire corporation is served by a single policy commit-
tee, personnel department, comptroller, payroll division,
public relations unit, purchasing department, and-al-
though its facilities are scattered-vehicle and garage de-
partment.
3. Facts developed at the reopening
After 15 sessions, the hearing herein was closed on Sep-
tember 30, 1971. Under date of February 23, 1973, Respon-
dent filed a motion to dismiss the complaint or,
alternatively, to reopen the hearing, based upon new devel-
opments allegedly bearing upon the issues in this matter-
all centering upon the representation that Whiting had per-
manently discontinued its operations on February 17, 1973.
Local 380 filed a statement of opposition in which, conced-
ing that Whiting had closed its business as of February 17
but characterizing all other factual representations in
Respondent's motion as immaterial, it contended that
Respondent's defense in this case was now rendered moot.
Local 380 filed a further response as well, in which it point-
ed out that, contrary to the position Respondent had taken
up to this point, it was now seeking to introduce evidence
of events occurring subsequent to May 1970; it questioned
factual representations in the motion; it contended that
Respondent was making the motion in order further to
71 As well as the other two of Respondent's ice cream plants72
Respondent's other two ice cream plants continued, and continue, to sell
part of their mix to outside customers
73 There were also a number of wholly owned subsidiaries engaged in the
distribution of various foods.
857
delay the issuance of a Decision in this matter; it argued
that the facts sought to be introduced by the motion serve
no useful purpose because, whatever their bearing upon the
situation as of May 1970, they clearly demonstrated that
there was no longer any conflict of interests; and it ex-
pressed agreement with the representation in the motion
that Local 380 "bargained for the best possible contracts
with Whiting and never sacrificed the interests of its mem-
bers for any extraneous consideration." 74 The General
Counsel also filed a response to the motion, contending, in
effect, that the facts sought to be introduced merely de-
monstrated that any impediment to collective bargaining
was now removed.
I granted the motion to reopen the hearing for the limited
purpose of receiving evidence surrounding the termination
of Whiting's operations. At the reopened hearing, a number
of facts were established, basically by stipulation of the
parties:75
During the fiscal year ending March 31, 1971, Whiting
suffered an operating loss of $1,467,280.
The original hearing sessions in this matter ended on
September 30, 1971, and briefs were originally filed by the
parties on or about December 1, 1971.
In October 1971, Whiting ceased making principal pay-
ments to the Fund.76 At that time, the balance due the Fund
was $2.7 million .77
During the fiscal year ending March 31, 1972, Whiting
lost $1,779,000.
Dunng the 9-month period between April 1 and Decem-
ber 31, 1972, Whiting-according to unaudited financial
statements-lost $1,283,960. At the end of that period, it
was estimated that the fiscal year ending March 31, 1974
would show an operating loss in excess of $3 million .71
In November 1972, Harold Masteller, president of Whit-
ing, notified representatives of Local 380 that Whiting could
no longer stay in business in view of its losses . There was
a discussion of alternatives, but Local 380 would agree to
none of these alternatives.
By letter dated November 24, 1972, Whiting' s largest cus-
tomer, First National Stores, insisted on a reduction in the
price of milk in order to meet competition.
During November and December 1972 and January
1973, there was a series of meetings between representatives
of Whiting and of Local 380, in which the former told of the
necessity to discontinue Whiting's operations because of
74 The quotation is Local 380's, not Respondent's.
75 The stipulation was that witnesses, if called, would testify to the follow-
ing effect No witnesses were actually called, either to support or to modify
the facts here recited
76 It should be noted that the 6-month moratorium which was in effect in
May 1970, supra, was scheduled to expire at the beginning of August 1970,
this record contains no details as to whether the moratorium was extended,
but-all parties agreed-at one point or another prior to October 1971, the
paiment of principal installments by Whiting had been resumed.
7 Local 380, in stipulating to this fact, made the "assumption" that, even
though it stopped making principal payments, Whiting continued to make
payments on interest, taxes, and insurance ; but Respondent was unwilling
to make the same assumption For purposes of this case, I indicated, and I
here confirm , that the difference in the two versions has no effect on the
decision herein
78 Local 380 pointed out (1) that this "fact" was based upon an "expecta-
tion" and (2) that the true figure was $3 million instead of "m excess of" $3
million , Respondent clung to the interpretation as above stated. I pointed out
then, and I here confirm, that the conflict has no significance in this matter.
858 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
operating losses. Among other things, Whiting's representa-
tives said that they had tried unsuccessfully to find a pur-
chaser, and they asked Local 380 to try to find one.
On December 20, 1972, Whiting's board of directors
passed a resolution to the following effect: Unless a way
could be found to avoid a loss during fiscal 1974, the busi-
ness would have to be discontinued within 60 days of the
passage of this resolution. Local 380 was given a copy of the
resolution I week later.
Between January 1 and February 9, 1973, Whiting met
with Local 380, with its employees, and with the mayor of
Boston and officials of the city government in order to seek
a solution to its financial problems.
Under date of January 10, 1973, First National Stores
sent a second letter to Whiting, pressing for a price decrease.
On January 15, Whiting did reduce the price of milk to First
National Stores. This action, it was estimated, would in-
crease the operating loss for the fiscal 1974 by $400,000.79
On January 26, 1973, Whiting notified Local 380 of the
necessity for a meeting on the subject of its going out of
business . The meeting was held on February 5, at which
time Whiting's representatives gave specific notice of its
intention and stated that, therefore, its employees were
about to be laid off on a permanent status. At or about the
same time, the same notification was given to management
employees of Whiting.
By letter dated February 1, a customer of Whiting, Ian-
colli Markets, cancelled its business relationship with Whit-
ing as of February 13. It was estimated that this action
would cost Whiting $170,000 during fiscal year 1974.80
On February 6, 1973, in a Massachusetts state court ac-
tion brought by Local 380, a temporary restraining order
was issued prohibiting Whiting from going out of business.
On February 9, 1973, Whiting filed a motion to dissolve
the temporary restraining order. In support thereof, it sub-
mitted an affidavit of Harold Masteller-the contents of
which affidavit are the source of many of the above find-
ings-in which he said, among other things, that Whiting
was then losing $50,000 per week, a weekly loss which was
expected to increase . The order was dissolved on February
15.
By notice dated February 15, Whiting announced that it
was discontinuing operations as of February 17. This notice
was published in the "Boston Herald-American" on Febru-
ary 16
Saturday, February 17, was the last day of operations by
Whiting.
On February 22, 1973, the Fund filed suit in the Massa-
chusetts state courts against Whiting; it asked for a declara-
tory judgment that Whiting was in default on its obligation
to the Fund, and it sought an injunction against Whiting's
disposing of assets . (The foregoing appeared in a news item
in the "Boston Globe" of February 23). On the same day,
79 Local 380 contended that this additional loss would fall within the $3
million mentioned earlier, Respondent said that it would be in addition
thereto I indicated then, and I confirm now that the difference has no
sigsmficance herein
0 Once again, Local 380 contended that this would be a part of the $3
million loss alluded to earlier, Respondent took the position that it was in
addition thereto I indicated then, and I here confirm, that the difference was
not a substantial element herein
a temporary restraining order along the lines sought was
issued; a hearing thereon was scheduled for February 28, at
which time the matter was further continued until March
20. As of March 12, the operating assets of Whiting were
being preserved in accordance with the temporary re-
straining order.
By undated letter, but from its contents and the surround-
ing circumstances, I find it to have been sent out subsequent
to February 17 and prior to March 12, 1973, Masteller
notified Whiting's ex-customers of his version of the reasons
for Whiting's closedown (as the only organized dairy in
Boston, the company had been plagued with high costs and
a consequent lack of flexibility in management, efforts to
correct which had been only partially successful; its parent
having given notice that it was unwilling to underwrite fur-
ther losses, Whiting had unsuccessfully sought changes by
agreement with its union; and, consequently, Whiting had
lost customers). He sought to explain why the addressees
had not received advance notice of the termination of oper-
ations (there had been a temporary restraining order sus-
pending Whiting's plan to shut down); he expressed the
hope that they had been able to make appropriate arrange-
ments to handle the situation; he stated that Whiting's cor-
porate structure would be maintained for a period sufficient
to handle "necessary business objectives"; and, in conclu-
sion, he expressed his opinion that Whiting had been de-
stroyed by predatory competition and union positions not
forced upon competitors.
By letter dated February 26, Dairylea, Whiting's parent,
notified the Fund that, in order to facilitate the disposition
of Whiting's assets, it was willing to assume Whiting's full
obligation to the Fund, in connection with which offer (1)
it proposed that it be permitted to substitute, for the assets
presently standing as security for the obligation, certain
properties (specified in the letter and noting the purported
net values thereof), (2) it confirmed a "previous agreement"
that the Hyannis and Braintree properties would be dis-
posed of as soon as possible, the proceeds, after payment of
prior liens, to be turned over to the Fund to reduce the loan
balance, and (3) it proposed a new payment schedule adher-
ence to which would wipe out the obligation on or before
March 4, 1981
F. Discussion, Factual Conclusions, and
Applicability of the Law
Respondent's first contention is that the Board's certifica-
tion of April 28, 1970, was erroneous. My authority therein
being limited to the consideration of evidence bearing on
the certification which was not available to the parties at
that time, I find and conclude that there was no such evi-
dence. I would leave the certification undisturbed.
Respondent contends that whether or not Whiting and
Respondent were competitors within the meaning of the
Buttrick principles is not properly a part of this stage of the
proceeding. In support of this argument, it points out that
the areas to be covered by this hearing were circumscribed
by the order of the Board which denied General Counsel's
motion for summary judgment and remanded the proceed-
ing for hearing: referring only to matters raised in
Respondent's response to the General Counsel's motion, it
H. P. HOOD & SONS
thereby impliedly limited the hearing on remand to those
matters, and at no place in these documents is there any
mention of the factor of Local 380 stipulated at the original
representation hearing that Whiting and Respondent were
competitors, and (2) the Hearing Officer at the objections
hearing, in his report on the objections, found that there was
the requisite degree of competitiveness, a finding left undis-
turbed by the Board in its Supplemental Decision.
The General Counsel and Local 380, on the other hand,
point out that the Board specifically disclaimed that it was
passing upon this question in its Supplemental Decision,
and Local 380 argues further that the actual facts as of the
date of the demand and refusal speak more loudly than the
stipulation earlier made.
As indicated earlier, I received testimony on the issue
over the objection of Respondent because I believed that
the Board's order denying the General Counsel's motion for
summaryjudgment did not limit the scope of the hearing as
urged by Respondent; on the contrary, it was, and is, my
belief that the Board wanted a full record upon which to
base its decision in this matter.81
I have earlier recited the facts surrounding the issue, and
I shall not repeat them here.
Local 380's basic argument is that, with respect to the
bargaining unit involved in this matter, Whiting and Respon-
dent , as of May 1970, were not competitors: Whiting was
engaged in processing and distributing milk, and Respon-
dent, in the bargaining unit involved, was engaged in pro-
cessing and distributing ice cream; the extent to which they
performed an identical function-the manufacture of ice
cream mix-constituted a miniscule part of their respective
operations. More properly, it is argued, Whiting should
have been considered a competitor of other producers and
distributors of milk and Respondent a competitor of other
producers and distributors of ice cream instead of each
other.
Respondent, without waiving its position as to the im-
proper injection of the issue into this stage of the proceed-
ing, argues, among other things, that, if Whiting were in
such a financially unstable situation as to create in the Fund
an equity-like interest of the kind contemplated in the But-
trick decision-an interest which would evoke the tempta-
tion, likelihood, or incentive for a prudent investor in the
place of the Fund to interfere with the collective bargaining
of Local 380-then one of the potential actions of Local 380,
under pressure by the Fund, would be that, in the guise of
bargaining collectively with Respondent but with the actual
object of protecting the security of Whiting's obligation to
the Fund, Local 380 would extend the use of its economic
weapons, such as picketing, beyond Respondent's ice cream
plant-specifically, to its (unorganized) milk plant. As I
understand it, Local 380 would engage in such "bizarre"
and "patently unlawful" action such as that described by
Respondent.
The short answer is that such conduct would not neces-
sarily be bizarre or unlawful. It has been engaged in, and its
legality has been tested. It has been held 82 that a union may
91 Moreover, it is quite clear that, in its Supplemental Decision the Board
did not pass on this issue 182 NLRB 194, fn 24
82 International Brotherhood of Teamsters, Chauffeurs, Warehousemen and
859
lawfully extend its economic pressures designed to achieve
objectives in a given bargaining unit to other "allied" em-
ployers or, a fortiori, to other units of the same employer.
I do not find the possibility bizarre, and, in accepting, as I
do, the possibility of engagement in such conduct, I am not
imputing illegal motivations to Local 380.
I find and conclude that the requisite degree of competi-
tiveness exists between Whiting and Respondent.
A large part of Respondent's case was based upon its
contention that Whiting's assets, as of May 1970, should
have been evaluated in terms of their worth on liquidation
of the company.
As noted by the Board in its Supplemental Decision in the
representation case related hereto, issued on April 28, 1970,
Whiting was still "a going concern." Although this conclu-
sion was based upon record facts available only on or before
April 16, 1969 (the date of the close of the objections hear-
ing), nothing was developed at this hearing which would
indicate that Whiting was not still a going concern in May
1970.83 In fact, Whiting continued operating for 21 months
thereafter.
In my opinion, there is no justification for generally
downgrading the value of Whiting's assets to that which
would have been realized on liquidation. As of May 1970,
I find, Whiting was using a course-of-business method of
book evaluating accepted by certified public accountants 84
and by the Internal Revenue Service; and I find that a
prudent investor would likewise have used these book val-
ues as the basis for his financial analysis.81
This does not mean that, if this were the crucial issue, I
would have accepted without question all ofWhiting's book
values as of May 1970. On Masteller's own testimony as to
the condition of and his short-run plans with respect to
Whiting's automotive fleet, I would have discounted the
book values thereof-although not necessarily to the extent
that Blanchard did; since post-May 1970 sales of wholesale
trucks, according to Masteller, brought from $150 to $250
apiece and sales of inoperable retail trucks brought $25 to
$50 each, I would have thought that an evaluation of at least
$100 apiece is more realistic than Blanchard's $50. With
respect to Whiting's-but not Mayflower's-machinery
and equipment, as to the deteriorated condition of which
Masteller had testified, I would accept Blanchard's apprais-
al of no value. Otherwise, I would accept Whiting's book
values.86
Helpers of America, AFL-CIO, and Local 179 (Alexander Warehouse & Sales
Company), 128 NLRB 916
83 The eventual closedown of operations in February 1973 might well have
a bearing upon the question of what Whiting's future prospects were as of
May 1970-as to which more infra-but it does not reflect on whether
Whiting was in active operation in May 1970
84 it is to be noted that, at one point, Bodenhamer testified that he pre-
ferred to accept the certified public accountants treatment of a particular
item (accrued casualty insurance expense) over the testimony of a witness
(Hanson) as to the true worth thereof
85 Blanchard, upon whose evaluations Respondent heavily relied, testified
that the book values computed in the manner used by Whiting, "probably"
reflected the "real values" as a "going business " Bodenhamer himself said
that, in analyzing a company for lending purposes, he would normally evalu-
ate it as a going concern
86 1 was less than fully impressed by Blanchard as an evaluator. (So, appar-
ently, was Carey, an appraiser called by Respondent, when his attention was
called to Blanchard's appraisal of the Mayflower refrigerated warehouse )
Continued
860 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Without belaboring the point , I do not believe that the
"liquidation" approach was warranted as of May 1970.
Nor do I believe , as urged by Respondent , that , as of May
1970, a prudent lender would have eliminated all consider-
ation of Whiting's and its subsidiaries ' trade accounts and
notes receivable as sources of payment for Whiting 's obliga-
tion to the Fund . True , these receivables stood as security
for the Bank 's loan , but they far exceeded that loan in
value-$4,222 ,280 87 as contrasted with $1 ,300,000 . Even if
Whiting were in a liquidation situation-which it was not-
there was no evidence or contention , in this case of great
disputation over asset values, that the value of these receiva-
bles on the companies ' books-making allowances , as they
did, for uncollectibles-was anything less than fully accu-
rate.
In sum , I do not believe that the fact that the Bank had
a prior claim on the receivables removes the surplus of
receivables from the "pot" available to repay the Fund.88
But the hindsight given us by the evidence received at the
reopened hearing fully clarifies Whiting 's financial situation
as of May 1970. 9
Taking advantage of such hindsight , I find and conclude
that that part of Dr . Bodenhamer 's testimony 90 in which,
His testimony, mostly about assets which he had never seen, was vague and
overgeneralized , he repeatedly made reference to "a class of assets " On
occasion, he used different approaches without adequate explanation for the
differences he said that Whiting 's machinery and equipment were worth but
10 percent of book value in good condition , while Mayflower's machinery
and equipment-about which there had been no derogatory testimony-was
worth nothing , also, having explained that Whiting 's out-of-Boston proper-
ties were worth no more than the supporting pieces of land , yet, with respect
to Hyannisport and Braintree , he only downgraded the collective value of the
buildings there from $512,090 to $ 131,000 Besides, credited rebuttal testimo-
ny belied some of his estimates Whiting's Worcester property , which he had
reduced to its land value only (book-valued at $5,000 ), was being sold a year
later for $48,840 , a figure which fairly matched the May 1970 book value of
the whole , making allowances for the additional depreciation , Duxbury,
which he had downgraded to its $2,250 book value of the land alone, sold
16 months later for $80,000, and Nantucket, downgraded to its land book
value of $ 1,200, was professionally appraised 16 months later , in preparation
for sale , at $38,000 . His attention called to the differences between his esti-
mates given at the objections hearing and at this hearing about 2 years
later-e g ., the Charlestown milk plant building "in good condition " then was
worth $476 ,920 (instead of book value, $976,920) and now was worth
$331,000 (instead of book value, $881,000)-he was unable cogently to ac-
count for the substantial variance Finally, although he had testified twice on
the same subject , it was only under repeated questioning that he conceded
that he was aware that lowering the value of Whiting 's assets would be
advantageous in this proceeding to his employer , Respondent
87 Whiting's receivables , $3,559,910, Mayflower 's, $205,610 , respective ad-
ditions thereto which would have come from sales of on-hand product inven-
tones (assuming , as urged by Respondent , that the revenues from these sales
would have taken the form of receivables rather than cash), $442,560 and
$14200
sj Note that the Board , in its Supplemental Decision in the representation
case ( 182 NLRB 194, fn 21), refused to pass on the question of whether there
had been a "default" on Whiting's obligations on the Fund 's loan based on
the fact that the payment schedule had been revised "Our task here is to
ascertain the likelihood of Fund -International intervention into Local 380
barpinmg, not to resolve questions of creditors rights "
8 If I have not already done so, I here make clear that, as I see it, May
1970 is the critical date herein To the extent that I permitted , as I did permit,
the introduction of testimony of pre- and post -May 1970 developments, I did
so for the light it might throw upon the situation as of that date Nor does
it matter whether, as charged , one or another of the parties herein may have
switched its position on this issue
90 Characterized by him as being the most important part although it
consumed but 10 percent of his time on the stand
accepting Whiting 's book values , he dealt with the inferenc-
es to be drawn from the various financial ratios to which
investment analysts give weight . He correctly discounted
future prospects of profitability , and, more important, he hit
the nail on the head when he expressed the opinion, based
on his analysis of these ratios and of Whiting 's pre-May
1970 failure to produce sufficient cash generation in the
normal course of business to meet the debt -service require-
ments of its obligation to the Fund , that there was a serious
question as to whether Whiting , in the future , could gener-
ate sufficient funds to service the debt . He concluded that,
as of May 1970, the Fund's loan had risk characteristics
normally associated with equity securities-hence , consti-
tuted a nsk-capital or equity -like interest on the Fund 's part.
I agree . In retrospect, I find that a prudent investor in the
place of the Fund , as of May 1970 , would have considered
itself to be the holder of an equity-like rather than a cred-
itor-like interest ; and, following Buttrick, I conclude that
this would have created the temptation , likelihood , or incen-
tive for the Fund to have affected , if it could affect, Local
380's bargaining to protect its loan to Whiting.91
But, in my opinion , this is not diapositive of the case.
I cannot believe that the Buttrick court , had it reached
this point , would not have measured the capacity or fulfill-
ment of the temptation , likelihood , or incentive.
For Local 380 is at least twice removed from the Fund.
In the precendents cited to me, I have seen no evidence of
past domination by the Fund over the International or by
either over Local 380 , collective-bargaining-wise. The
Board , in its Supplemental Buttrick Decision 93 found "that
the constitutional powers [of the International] permit only
a limited entry into local bargaining activity and that the
local constitutes the initiating and pervasive force in deal-
ings with employers," and it found further that there was no
evidence that the International had been tempted actually
to exercise its limited powers to interfere with Local 380's
bargaining-a decision which the Court of Appeals for the
First Circuit , in Buttrick II, affirmed.
In its certification of Local 380 as bargaining agent for
the employees in the bargaining unit involved here-no
additional evidence having been introduced as to the
Fund 's or the International's power to interfere with Local
380's collective bargaining-the Board found "nothing in
the course of 1966-67 negotiations themselves or in the final
91 Local 380 argues in its brief, among other things , that if in fact Whiting
was in a bad way in May 1970, the Fund had no way of knowing this-the
only pertinent information in its possession was that contained in Whiting's
financial statements which had been furnished semiannually in accordance
with the loan agreement But this argument loses significance in view of the
facts that ( I) these were the sole documents in the witness Bodenhamer's
possession when he concluded-correctly , as I have found-that Whiting
was in financial straits, and (2), more important , in the Buttrick case itself,
the court indicated a readiness to resolve the question of conflict of interests
even though , there , as here , the Fund had no more information than that
contained in the statements furnished by Whiting.
92 In Buttrick I at 309, the court said , "We therefore remand the matter to
the Board . in order that it may assess the potential , not merely the
actuality , of conflict of interest and frame an order which , hopefully, will
balance the legitimate interests of the Fund, [Buttnck], International, Local
380, and [Buttrick's] employees " In my view, the use of the word "potential"
involves consideration of what might not be done to protect the loan as well
as what might be done
" 167 NLRB 438
H. P. HOOD & SONS
agreement on retail routes which indicates pressure or influ-
ence toward loan protection." 94
And I perceive nothing in the course of Local 380's bar-
gaining as demonstrated by the evidence introduced at this
hearing-my findings as to which appear in subsection E,
3, hereof-which demonstrates any loan protection interfer-
ence in Local 380's affairs.95
But the crowning touch lies in the evidence introduced
upon the reopening of this hearing. Here again, hindsight
enhances vision.
In Buttrick, it was unnecessary for either the Board or the
court to go so far, but, as a logical extension of the Buttrick
principle, I would accept the proposition that if, as I have
found, Whiting's May 1970 situation was so desperate as to
create an equity-like interest on the part of the Fund, then
Local 380, although twice removed, must be presumed to be
in the position of being willing to cooperate with its affiliate
to take steps to protect the Whiting-to-Fund obligation.
But, in my opinion, the presumption is a rebuttable one.
The thrust of the argument to which Luke Kramer, Local
380's executive officer and one of the parties hereto, ad-
dressed himself time and time again during this hearing, was
that (1) Local 380 was not under any temptation to protect
the loan, (2) it was not subjected to pressure in this direc-
tion, and (3) it was not susceptible to any such pressure.
On this record, I am persuaded that he is correct.
If anything, Whiting was a union-dominated company. If
anything (whether because of its indebtedness to the Fund
or for some other reason), Whiting failed to resist the pres-
sures of Local 380. And, if anything, Local 380 relentlessly
pursued its course of bargaining on behalf of Whiting's
employees in the face of Whiting's mounting losses, in the
face of threatened shutdown, and, eventually, in the face of
a realization of that threat.
To the extent that there be any presumption that Local
380 would or could be tempted to cooperate with the Fund
or with the International to alter its collective bargaining to
protect the Fund's loan to Whiting, or would itself be sub-
ject to the temptation to alter its course of bargaining to the
same end, I find that the presumption is completely rebut-
ted. Respondent has not met its "considerable burden to
show a clear and present danger of conflict."
On the basis of what I believe to be a fair preponderance
of the credible evidence herein, I find and conclude that
Local 380 did not, either on May 11, 1970, or thereafter,"'
suffer from a conflict of interests which disqualified it from
96 182 NLRB 194, 195.
95 As for "the Sealtest Story," for example , I see in it International assis-
tance to, rather than interference with , Local 380's bargaining objectives
(The story bears striking resemblances to International assistance rendered
by the International to Local 380 in its 1966-67 dispute with Whiting over
the latter's expressed intention to discontinue home deliveries .) And I do not
see what Respondent characterizes as the "stark contrast" between Local
380's dealings with Sealtest and its almost contemporaneous dealings with
Whiting. In the first case, it adamantly clung to rights it enjoyed under an
existing contract , in the other-after adamantly refusing to give up rights
enjoyed under an existing but about-to-expire contract-it made certain
concessions in the new contract , concessions which were already enjoyed by
competitors of Whiting (including Respondent), but only in return for sub-
stantial concessions by Whiting
96 To the extent relevant , I am persuaded of the cogency of Local 380's
argument made in its brief (as supported by the precedents there cited) that,
while a certification of a labor organization as bargaining representative of
861
acting as bargaining representative for the involved employ-
ees; and that Respondent, in refusing to recognize and to
bargain with Local 380 as bargaining representative of these
employees on and after May 11, 1970, was engaging in
unfair labor practices within the meaning of Section 8(a)(5)
of the Act.
Upon the foregoing factual findings and conclusions, I
come to the following:
CONCLUSIONS OF LAW
1. Respondent is an employer engaged in commerce
within the meaning of Section 2(6) and (7) of the Act.
2. Local 380 is a labor organization within the meaning
of Section 2(5) of the Act.
3. A unit consiting of:
All production workers, mechanical maintenance
workers, equipment sanitation workers, hardening
room employees, trailer drivers, route drivers, and spe-
cial delivery drivers at the Respondent's Roland Street,
Charlestown, Massachusetts location, exclusive of all
part-time employees, seasonal employees and tempo-
rary employees, laboratory technicians, refrigeration
employees, call order department employees, guards
and supervisors as defined in the Act, and all other
employees at all other branches or locations or substa-
tions of the Respondent,
constitutes and at all times material herein constituted a
unit appropriate for the purposes of collective bargaining
within the meaning of Section 9(b) of the Act.
4. On October 22, 1968, a majority of the employees in
the unit described above, by a secret-ballot election con-
ducted under the supervision of the Regional Director for
Region 1 of the Board (hereinafter called the Regional Di-
rector), selected Local 380 as their representative for the
purpose of collective bargaining, a selection certified to by
the Board on April 28, 1970.
5. At all times since October 22, 1968, Local 380 has been
the representative for the purposes of collective bargaining
of a majority of the employees in said unit, and, by virtue
of Section 9(a) of the Act, has been and is now the exclusive
bargaining agent of all the employees in said unit for the
purposes of collective bargaining with respect to rates of
pay, wages, working hours, or other conditions of employ-
ment.
6. By letter dated May 4, 1970, Local 380 requested Re-
spondent to bargain collectively about rates of pay , wages,
working hours, and other conditions of employment for the
employees in the above unit. By letter dated May 11, Re-
spondent refused to comply with the request and, since that
time, it has continued to refuse to recognize and to deal with
Local 380 as exclusive bargaining representative of these
employees.
7. By thus rejecting Local 380's request for recognition,
Respondent refused to bargain collectively with the repre-
sentative of employees in an appropriate bargaining unit,
within the meaning of Section 8(a)(5) of the Act, on and
employees may be withheld or revoked because of a disqualifying factor such
as a conflict of interests, the emergence, if any, of such factor during the hfe
of a certification will result, at most, in a suspension of bargaining rights
during the life of the disqualifying factor
862 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
after May 11, 1970.
8. The aforesaid refusal to bargain is an unfair labor
practice affecting commerce within the meaning of Section
2(6) and (7) of the Act.
THE REMEDY
Having found that Respondent has engaged in certain
unfair labor practices, I shall recommend that it be ordered
to cease and desist therefrom and to take certain joint and
several affirmative actions in order to effectuate the policies
of the Act.
Upon the basis of the foregoing findings of fact and con-
clusions of law and upon the entire record in the case, I
hereby recommend that the Board issue the following rec-
ommended:
ORDER97
Respondent, H. P. Hood & Sons, Inc., Boston, Masachu-
setts , its officers , agents , successors , and assigns , shall:
1. Cease and desist from refusing to bargain collectively
with Milk Wagon Drivers and Creamery Workers Union,
Local 380, a/w International Brotherhood of Teamsters,
Chauffeurs, Warehousemen and Helpers of America, as the
exclusive collective-bargaining representative of its employ-
ees in the following appropriate bargaining unit:
All production workers, mechanical maintenance
workers, equipment sanitation workers, hardening
room employees, trailer drivers, route drivers, and spe-
cial delivery drivers at its Roland Street, Charlestown,
Massachusetts location, exclusive of all part-time em-
ployees, seasonal employees and temporary employees,
laboratory technicians, refrigeration employees, call
order department employees, guards and supervisors as
defined in the Act, and all other employees at all other
branches or locations or substations of the Respon-
dent.
2. Take the following affirmative action which is neces-
sary to effectuate the policies of the Act:
(a) Upon request, bargain collectively with the above-
named labor organization as the exclusive representative of
all employees in the appropriate unit with respect to rates
of pay, wages , hours of employment, and other terms and
conditions of employment, and embody in a signed agree-
ment any understanding reached.
(b) Post at its Boston ice cream plant copies of the at-
tached notice marked "Appendix." 9 Copies of said notice,
on forms provided by the Regional Director for Region 1,
after being duly signed by an authorized representative of
the Respondent, shall be posted by the Respondent immedi-
ately upon receipt thereof in conspicuous places, including
all places where notices to employees are customarily post-
ed. Reasonable steps shall be taken by the Respondent to
insure that said notices are not altered, defaced, or covered
by any other material.
(c) Notify the Regional Director for Region 1, in writing,
within 20 days from date of this Order what steps the Re-
spondent has taken to comply herewith.
97 In the event no exceptions are filed as provided by Sec . 102.46 of the
Rules and Regulations of the National Labor Relations Board , the findings,
conclusions , and recommended Order herein shall , as provided in Sec 102 48
of the Rules and Regulations , be adopted by the Board and become its
findings, conclusions , and Order, and all objections thereto shall be deemed
waived for all purposes
98 In the event that the Board 's Order is enforced by a Judgment of a
United States Court of Appeals, the words in the notice reading "Posted by
Order of the National Labor Relations Board" shall read "Posted Pursuant
to a Judgment of the United States Court of Appeals Enforcing an Order of
the National Labor Relations Board."
APPENDIX
NOTICE To EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government
WE WILL NOT refuse to bargain collectiely with Milk
Wagon Drivers and Creamery Workers Union, Local
380, a/w International Brotherhood of Teamsters,
Chauffeurs, Warehousemen and Helpers of America as
the exclusive collective-bargaining representative of all
the following employees:
All production workers, mechanical maintenance
workers, equipment sanitation workers, route load-
ers, platform and chest employees, hardening room
employees, trailer drivers, route drivers, and special
delivery drivers at our Boston ice cream plant, exclu-
sive of all part-time employees, seasonal employees
and temporary employees, laboratory technicians,
refrigeration employees, call order department em-
ployees, clerical employees, professional employees,
guards and supervisors as defined in the Act, and all
other employees at all other branches or locations or
substations of the Respondent.
Upon request, WE WILL bargain collectively with the
employees in this unit, and, if an understanding is
reached, we will sign a contract with the Union.
H. P. HOOD & SONS, INC
(Employer)
Dated By
(Representative) (Title)
This is an official notice and must not be defaced by
anyone.
This notice must remain posted for 60 consecutive days
from the date of posting and must not be altered, defaced,
or covered by any other material. Any questions concerning
this notice or compliance with its provisions may be direct-
ed to the Board's Office, 7th Floor, Bulfinch Building, 15
New Chardon Street, Boston, Massachusetts 02114, Tele-
phone 617-223-3300.
H. P. HOOD & SONS 863
Chart 1. Value of certain of Whiting
and subsidiaries' assets , according to Blanchard
Item Net Book
Value
Value as class of Value based
assets of typical on prior
constr., good cond., testimony
well maintained
(Whiting)
Inventories-Supplies
& Repair Parts:
General Supplies:
Pure-Pack cartons
Other $ 125,000 a/ b/
Garage supplies 52,000 a/ $ 52,000
Glass bottles 10,000 0
Pure-Pack cases 185,000 a/ 0
Capital assets:
Land 413,720 a/ 413,720
Buildings/ Improve-
ments 2,622,880 $1,259,740 770,490
Machinery
ment
& Equip-
1,100,760 110,080 0
Automotive 419,590 210,000 21,000
Leasehold
ments
Improve-
2,950 0 a/
Chests & Cabinets 142,970 14,300 a/
Milk Cases 51,300 0 0
Office Furniture
& Fixtures 44,480 44,480 a/
(Whiting-Braintree)
Capital assets:
Land 59,000 a/ 59 , 000
Buildings/Improve-
ments 512 ,090 290,000 290,000
(Mayflower)
Capital Assets:
Machinery & Equipment 7,270 0 0
(Merchant)
Capital Assets:
Automotive 88,750 52,000 5,200
a/ Not applicable.
b/ Would give 0-evaluation to that portion of this account
consisting of Pure-Pack cartons , but does not know what
that portion amounts to.
864 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Chart 2. Value of Whiting' s assets standing as security
for Fund' s loan , as computed by Bodenhamer
Book value On testimony, On testimony,
in good cond. in poor cond.
Cash $ 124,578 $ 124,578 $ 124,578
Due from Subsidiaries 259,950 86,658 86,658
Inventory, Products 347,557 0 00a/
Inventory, Supplies 372,827 52,540 52,540
Notes Receivable
(nontrade) 82,564 82,564 82,564
Property, Plant &
Equipment b/ 4,853 ,810 2,136,188 1,347,862
Equity in Subsidiaries 856,611 57,244 57,244
$6,897,897 $2,539,772 $1,751,446
Less: Prior-secured
debts 8,244 8.244 8.244
$6,889 ,653 $2,531,528 $1,743,202
Plus : Fund' s share of
"security fund" c/ 494.400 494.400 494,400
$7,384,153 $3,026,028 $2,237,702
Less: Fund's loan
balance 3.135.686 3.135.686 3.135.686
Excess (or deficiency)
of value of security over
(under ) Fund balance $4,248,467 ($109,658) ($897,984)
a/ Assumes all fluid milk packaged and sold in orderly liquidation, with
proceeds converted into Trade Receivables, hence pledged for Bank's
loan and omitted here.
b/ Includes automotive equipment of Merchant; excludes real estate not
subject to Fund' s mortgage--Marblehead, Oak Bluffs, Nantucket, North
Randolph, and Irasburg.
J Pledged fund set up by Dairylea; Fund's May 31, 1970 share computed
at 98.9 percent of same.
H. P. HOOD & SONS 865
Chart 3. According to Bodenhamer, value of receivables
available (1) for payment of bank loan; (2) next, for payment
of priority claims; and (3) finally, for general creditors.
Markup of product Book value adjusted
Book value inventy. for sale of inventy.
Trade receivables 53,767,992 $3,767,992
Product inventy
available for sale:
Whiting 347,557 5140,000 a/ 458,791 c/
Mayflower 133,213 7,093 b/ 132,875 c/
$4,359,658
Less: Claim of bank,
secured by trade
receivables
Less: Priority claims
(payroll, taxes ) 557,505
+43,000 d/
1,386,410
32,973,247
600,505
Amount available
for general creditors $2,372,742
a/ Based on Hanson's testimony of markup on product inventory which could have
been sold, in orderly liquidation.
b/ Markup of 6 percent, as per Hanson's testimony, in orderly liquidation.
c/ Based on Hanson's testimony that sales revenues would become trade receiv-
ables. Amounts represent gross sales prices, less 5.9 percent for
uncollectible receivables (based on Whiting's experience with receivables
as shown on books).
d/ Increase of priority claims arising out of Hanson's estimate of Packaging
and Delivery Expenses which would be required for 2-day period required to
liquidate Whiting's product inventory. [See my fn. a/ in ch. 4 herein.]
866 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Chart 4. According to Bodenhamer, estimated distribution
available for general creditors, on liquidation of Whiting
but with no bankruptcy expenses.
I. General creditors' claims:
A. Other than Fund's
claim, before sale of
product inventory plus:
B. Additional nonpriority
claims arising out of
inventory sales plus:
C. Claim of Fund unsat-
isfied by its security
(from Ch. 2)
D. Total
II. Estimated amount available
for general creditors:
A. Trade receivables
after secured claims
paid ( from Ch. 3) plus:
B. Other assets, after
secured claims paid b/
C. Total
III. Estimated distribution
available to general
creditors for each $1
of claims (IIC/ID)
Assuming fixed
assets in good
condition
Assuming fixed
assets in poor
condition
$4,152,670 $4,152,670
76,600 a/ 76,600 a/
1091658 897,984
$4,338,928 $5 , 127 , 254
$2,372,742 52 372,742
4,872 4,872
52,377,614 52,377614
S 0.548 S 0.464
a/ Purportedly based on Hanson 's testimony as to expenses associated with
selling inventory products on liquidation. Bodenhamer concludes from
this testimo ny that these sales would result in a markup of the inventory's
book value of $140,000 but would involve $116,000 in additional costs, of
which S43,000 would consist of priority claims---see Ch. 3---and $73,000 of
nonpriority claims. [I confess some mystification at these figures, since
Hanson actually testified that the gross profit would be 5135,000, from
which must be deducted 2 days' packaging costs @56,000 to $7,000 and 2 days'
delivery expenses @$15,000.1 To these nonpriority claims, Bodenhamer here
adds $2,600 for 2 days' interest expense [ as to which he gave no explanation]
and an "arbitrary estimate" of 51,000 for 2 days' general and administrative
expense.
b/ Estimated liquidation value, based on Hanson's testimony (full value for land,
no value for buildings/improvements) of real estate not subject to Fund's
mortgage---at Marblehead, Oak Bluffs, Nantucket, North Randolph, and Irasburg.
H. P. HOOD & SONS
Chart 5. According to Bodenhamer , estimated
distribution available for general creditors on
liquidation, allowing for bankruptcy expenses.
I. Estimated bankruptcy
expenses:
A. Receivables of
B. Value of assets
standing as security
for Fund's obligation.
(From Ch. 2)
C. Value of other assets
(from Ch. 4)
D. Gross proceeds from
liquidation of assets
E. Allowance for bank-
ruptcy expenses (21
percent of D b/)
II. Bankruptcy expenses per
$1 of general creditors'
claims:
A. Total general creditors'
claims (from Ch. 4)
B. Bankruptcy expenses
(I E, above )
C. Bankruptcy expenses
per $1 of general
creditors' claims (B/A)
III. Estimated net distribution
to general creditors for
each $1 of claims:
A. Before bankruptcy
expenses (from Ch. 4)
B. Bankruptcy expenses
(II C, above)
C. Net distribution
Assuming
fixed assets in
good cond .
Assuming
fixed assets in
poor cond.
$4,359,658 $4,359,658
2,539,772 1,751,446
4,872 4,872
$6,904,302 $6,115,976
$1,449,903 $1,284,355
$4,338,928 $5,127,254
1,449,903 1,284,355
$ 0.334 $ 0.251
$ 0.548 $ 0.464
0.334 0.251
$ 0.214 $ 0.213
866a
a Full net book value---no deduction made for that part used to satisfy
secured obligation of Bank.
Average costs (in percentage of gross proceeds from liquidation of
assets ) in :Massachusetts cases, Table F --5, Table of Bankruptcy Statistic
for year ending June 30, 1969, published by Administrative Office of
United States Courts.