Mel Croan Motors, Inc.

National Labor Relations Board - Board Decisions

Mar 14, 1969

174 N.L.R.B. 1189 (N.L.R.B. 1969)

MEL CROAN MOTORS, INC.
Mel Croan Motors, Inc. and Robert A. Fersti. Case
23-C A-2360
March 14, 1969
SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN MCCULLOCH AND MEMBERS
BROWN AND ZAGORIA
On March 27, 1967, the National Labor
Relations Board issued a Decision and Order in the
above-entitled case,' which was enforced in material
part by the United States Court of Appeals for the
Fifth Circuit by a decree entered June 10, 1968.2 In
its Decision the Board found, inter alia, that
Respondent discharged Robert A. Ferstl and Jesse
Frields, in violation of Section 8(a)(1) of the
National Labor Relations Act, as amended.
Respondent was directed to make an offer of
immediate and full reinstatement to the
discriminatees to their former or substantially
equivalent positions and to make them whole for
any loss of pay suffered by reason of the
discrimination against them.
Pursuant to a backpay specification and
appropriate notice issued by the Regional Director
for Region 23, a hearing was held before Trial
Examiner Henry L. Jalette for the purpose of
determining the amount of backpay due the
discriminatees.3
On December 9, 1968, Trial Examiner Henry L.
Jalette issued his attached Supplemental Decision, in
which he found that discriminatee Ferstl was
entitled to net backpay of $7,035.01. Thereafter,
Respondent filed exceptions to the Decision and a
supporting brief.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the
National Labor Relations Board has delegated its
powers in connection with this case to a
three-member panel.
The Board has reviewed the rulings of the Trial
Examiner made at the hearing and finds that no
prejudicial error was committed. The rulings are
hereby affirmed. The Board has considered the Trial
Examiner's Supplemental Decision, the exceptions,
brief, and the entire record in the case and hereby
adopts the findings,4 conclusions, and
recommendations of the Trial Examiner
1163 NLRB No 77
'395 F 2d 154
'The specification also claimed backpay for Jesse Frields However, at
the hearing, upon representation of General Counsel that Respondent had
satisfied its backpay liability to Frields, and there being no objection, the
Trial Examiner granted General Counsel's motion to withdraw those
allegations of the specifications relating to him, and removed Frields' name
and case number of his charge from the caption See footnote I of the
Trial Examiner's Supplemental Decision
'in adopting the Trial Examiner's Supplemental Decision, we do not rely
on the Trial Examiner's method of computing potential sales for 1967,
ORDER
1189
Pursuant to Section 10(c) of the National Labor
Relations Act, as amended, the National Labor
Relations Board adopts as its Order the
Recommended Order of the Trial Examiner, and
hereby orders that Respondent, Mel Croan Motors,
Inc., Houston, Texas, its officers, agents, successors,
and assigns, shall make Robert A. Ferstl whole by
payment to him the amount set forth in the attached
Trial Examiner's Supplemental Decision.
from purchases (Trial Examiner's Supplemental Decision, p 4, footnote 5),
as such method is not in accord with the standards described in this record,
and there is no showing that it was the formula utilized by Ferstl
TRIAL EXAMINER'S SUPPLEMENTAL
DECISION
STATEMENT OF THE CASE
HENRY L JALETTE, Trial Examiner This is a
proceeding to determine the amount of backpay due
Robert A Ferstl, an individual, who the Board found in a
Decision and Order issued on March 27, 1967, had been
discharged by Mel Croan Motors, Inc., hereinafter called
Respondent, in violation of Section 8(a)(1) and (3) of the
Act Pursuant to such Decision and Order, on September
3, 1968, the Regional Director for Region 23, issued a
backpay specification detailing the sum of money due
Robert A Ferstl for backpay.' On October 8 and 9, 1968,
the case was tried in Houston, Texas.
Upon the entire record,' including my observation of
the witnesses, and after due consideration of the briefs
filed by General Counsel and the Respondent, I make the
following
Findings of Fact
1. PRELIMINARY STATEMENT
The specification alleges, the answer admits, and I find
that the backpay period is from February 25. 1966, to
June 26, 1968.
The specification alleges, the answer admits, and I find
that the gross backpay due Ferstl for each of the quarters
of the backpay period is as follows for the first quarter
1966, $808, for all the remaining quarters except the iast,
$2,236, and for the last quarter, i.e., the second quarter
1968, $2,161
The specification admits to no interim earnings for the
first quarter 1966, to interim earnings of $1,021.99 for the
second quarter, 1966; and to interim earnings of $1,500
for each of the remaining quarters.
The specification also claimed backpay for Jesse Frields , another
individual found to have been discriminatorily discharged in the same
Decision and Order At the trial, upon representation of General Counsel
that Respondent had satisfied its backpay liability to Frields, and there
being no objection, I granted General Counsel ' s motion to withdraw those
allegations of the specifications relating to him Accordingly, I have
removed Frields' name from the caption of the case , as well as the case
number of his charge , 23-CA-2360-2
'At the trial , two ledger sheets from the general ledger of Robert A
Ferstl ' s business were marked for identification as Resp Exh 7 and 8,
although properly identified, they were not offered into evidence,
apparently through inadvertence As no grounds exist for excluding them,
they are hereby received in evidence
174 NLRB No. 178
1190 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
The Respondent contends, in substance, that (1) Ferstl
should be awarded no backpay because of a willful
concealment of his true interim earnings;' (2) Ferstl had
interim earnings during the first two quarters of 1966 not
conceded in the specification, and (3) Ferstl removed
himself from the labor market for the 2-month period
between the date of his discharge and his going to work
for an interim employer
II. THE EVIDENCE
A The Alleged Willful Concealment of Interim
Earnings
During the backpay period , apart from his employment
by North American Aviation , Inc. from April 27, 1966, to
June 11, 1966 , Ferstl ' s only employment was
self-employment in the operation of a garage for the
repair of automobiles.
Ferstl had been employed as a mechanic by
Respondent , a Volkswagen dealer While employed by
Respondent , Ferstl had also maintained a garage at
LaPorte, Texas, under the business name Continental
Sports Cars of Houston, a partnership . The garage had
been maintained principally to service cars which Ferstl
and his partner raced Immediately after his discharge and
before he was employed by North American Aviation on
April 27, 1966, Ferstl advised the operator of a gas station
next door to his garage that he was going to be at the
garage and if there was any automobile repair work to be
done , which the gas station could not handle , to send it
over to his garage He stayed at the garage until he went
to work for North American After Ferstl left North
American , he decided that thereafter he would try to
make a living out of operation of the garage. The garage
was located in the 28 hundred block of Highway 146 in
LaPorte , and Ferstl remained in business there for about a
year when the business was moved up the street to a
bigger place The business was operated there for about a
year and a half and then moved to another building in
Webster, Texas
For purposes of this proceeding , Respondent
subpoenaed all of the personal and business bank
statements of Ferstl, his federal or state tax returns with
any supporting documents , financial reports, copies of
application for employment , correspondence and
documents filed with the Texas Employment Commission,
employment and partnership agreements , notice of
discharges and disciplinary action relating to the period of
February 25, 1966, through June 26, 1968
Ferstl responded to the subpoena by producing a
combination general ledger (that is , a cash receipt and
cash disbursements journal), check stubs, personal income
tax returns for 1966 and 1967, and certain other records
not specifically identified in the record
Ferstl did not produce personal bank account
statements for the first two quarters of 1966 and 1968; nor
did he produce cancelled checks for the first two quarters
of 1968; nor did he produce the income tax returns of the
partnership.,
According to entries in the general ledger that had been
maintained for the partnership, the partnership had begun
1967 with a parts inventory of $425.63 During 1967,
ledger entries indicated parts purchases of $15,501 69 The
inventory at the end of 1967 was entered as $484 07.
Based on these entries, it appeared that even if made at
cost sales should have amounted to $15,443 25. However,
the entries in the ledger showed total sales of only
$13,568, and Ferstl admitted that his markup on parts
was 40 percent or more
Henry Pridgen, a certified public accountant, testified
that on the basis of the records presented to him (that is,
the one produced by Ferstl at the trial) an audit of Ferstl's
business would not be performed He further testified that
on the basis of the 1967 parts purchases and the beginning
inventory, assuming a 40 percent markup, the potential
sales figure was $25,738 Since the ending inventory was
only $484 07 and sales recorded at $13,568, $12,170 of
potential sales were unaccounted for 5 Pridgen could only
speculate as to the reasons for the discrepancy, namely,
failure to report sales, understatement of inventory,
diversion to personal use, or lost inventory
Pridgen had examined the books and records produced
by Ferstl for the first time from 9 45 to 10 50 a.m on the
second day of the trial. The general ledger was not
introduced into evidence, and the foregoing figures are
based on pages selected and extracted from the ledger by
Respondent. Out of a ledger containing a substantial
number of pages, only 10 pages were placed into evidence.
The ledger had been maintained for Ferstl by
accountant Jerry Jordan during the period from January
1967 to February 1968 ' Jordan, who was called as a
witness by Respondent, disputed the validity of Pridgen's
speculations As he stated to counsel for Respondent,
"You are taking two sections out of the general ledger
and you are trying to comment on those And you are
unfair to Mr Pridgen. " Jordan then proceeded to
explain that under the heading of purchases during 1967,
had been included items such as gas and oil, wrecker
charges, tools oxygen and acetylene for welding Jordan
explained that the books had not been kept according to
generally accepted accounting procedures, that they had
been kept as a favor to Ferstl, and that they were made to
prepare tax returns, payroll reports and the like
According to Jordan, the general ledger was adequate to
determine Ferstl's net income from the operation of a
business in 1967.
B Ferstl 's Interim Earnings During the First Two
Quarters of 1966
The specification concedes no interim earnings for the
first quarter of 1966 and only $1,021 99, the wages earned
by Ferstl with North American Aviation, Inc., for the
second quarter of 1966
'Respondent also contends that Ferstl forfeited all rights to backpay
because ( 1) while still employed by Respondent , he diverted income from
his employer by working on cars in his own shop , (2) he violated the laws
of the State of Texas by buying parts for his race cars without paying sales
taxes Neither of these contentions, if established , would warrant the denial
of backpay In any event , there is no evidence that any income derived by
Ferstl while still employed by Respondent was derived by diverting
Respondent ' s customers to his own business Ferstl obtained a business
name and tax number to purchase parts at cost , not to avoid the payment
of taxes
'Although Ferstl ' s business was referred to throughout the proceeding as
a partnership , it was only nominally so, because Ferstl alone operated the
business and drew the income
'According to my calculations , 40 percent of $15,927 (1967 parts
purchases and $425 63 beginning inventory ) is $6,370, with a resultant
potential sale figure of $22,297, and approximately $8245 of potential sales
unaccounted for
'In 1966 , Ferstl ' s books had been kept by a woman operating as Hughes
Bookkeeping , LaPorte , Texas, and she apparently ceased operations
because of ill health
MEL CROAN MOTORS, INC.
According to Ferstl's general ledger, he drew $555 from
the partnership for the period from March 8, 1966, to
March 31, 1966, and he drew $245 for the period from
April 6, 1966, to April 20, 1966
C Ferstl's Alleged Removal from the Labor Market
Between the Date of his Discharge and his
Employment by an Interim Employer
According to Ferstl, on the Monday immediately
following his discharge, he checked with the other
Volkswagen dealers in Houston to determine whether or
not they were in need of a mechanic. His checking
consisted in calling the dealers on the telephone and
asking them if they needed a mechanic, advising them that
he was an expert Volkswagen mechanic In addition, he
checked with a Volkswagen dealer in Baytown, Texas All
of these dealers indicated they had no openings and he did
not file any written applications During that same week,
he filled out an application for employment at North
American Aviation, Inc, in Houston. About 2 weeks
later, he made another check with the Volkswagen
dealers, with the exception of the one in Baytown, and
was again advised that they had no openings
On April 27, as a result of the application filed the
week following his discharge, Ferstl went to work with
North American Aviation, where he was employed until
June 21, when he was laid off for lack of work.
According to Respondent, there was other employment
available for Ferstl as a mechanic at the time of his
discharge, and his failure to obtain it was willful and was
not excused on the ground of bona fide self-employment
because Ferstl was not at that time engaged in bona fide
self-employment 7
The assertion that other employment as a mechanic was
available is based on the testimony of Barney Garver, who
was regional wholesale sales manager for the Volkswagen
distributorships in a five state area, including Houston,
during a major part of the backpay period, and that of
Paul Ehrig, service manager of one of the Volkswagen
dealers in Houston
According to Garver, the Volkswagen industry in the
entire area suffered from a shortage of men with Ferstl's
skill, and in his experience, most dealers are looking for
mechanics 80 percent of the time
Paul Ehrig testified that his company always needed
mechanics, that he had no recollection of a call from
Ferstl, and he did not recall rejecting any mechanic who
called for a job
The assertion that Ferstl was not engaged in bona fide
self-employment during this period is predicated on
Ferstl's testimony that he did not decide to enter the
garage business as a means of making a living until after
he was laid off by North American, and the evidence that
his only effort to solicit business after his discharge was to
tell the gas station operator next door to send over repair
work he could not handle. No ads were placed in
newspapers and no business sign was put up
'This argument appears to be limited to the period from the date of
discharge to April 27, 1966, when Ferstl obtained employment with North
American Aviation At least , Respondent ' s brief does not expressly
challenge the bona fides of Ferstl 's self-employment after his layoff by
North American Did it do so, I would reject the challenge as the evidence
is clear that Ferstl was engaged in bona fide self -employment after his
layoff by North American
III. ANALYSIS AND CONCLUSIONS
1191
The logical starting point of analysis is Respondent's
contention that Ferstl has been guilty of a willful
concealment of interim earnings It this contention is
factually established, it follows, as Respondent contends,
that Ferstl should be denied backpay. M J McCarthy
Sales Co , 147 NLRB 605 The contention has two
branches Ferstl failed to produce records in order to
avoid discovery of his income, and the records that were
furnished show a manipulation of his books to understate
income I reject both branches of the argument. First of
all, I credit Ferstl in his testimony that he produced at the
trial all the records which he was able to find in order to
comply with the subpoena dueces tecum served on him by
Respondent The records were relatively voluminous and
had to be carried in two trips They included many items
not identified in the record, and while they did not include
such documents as partnership returns for 1966 and 1967,
they did include such highly relevant documents as Ferstl's
personal income tax returns and the general ledger used
by Ferstl's accountant to prepare the partnership's income
tax return. Moreover, Ferstl testified credibly that he had
moved recently and this accounted for his inability to
locate all his records. From my observation of Ferstl on
the witness stand, he was sincerely attempting to assist
Respondent in developing what information it could from
his books and records, and nothing in his demeanor
suggested that he was lying about the absence of the other
records sought by Respondent
The contention that the records available to determine
Ferstl's income show an understatement of income
through manipulation of the parts accounts is based on
analysis by C.P A Pridgen of the parts purchases
reflected in Ferstl's general ledger as described above
However, Pridgen's testimony on its face represented his
speculations about the meaning of the entries in the
general ledger, and I accord no weight to them Pridgen
admittedly had no foreknowledge of Ferstl's records and
his testimony was nothing more than a professional
opinion about records which he had not had the
opportunity to examine in depth That the records were
insufficient for Pridgen to perform an audit is no grounds
to deny Ferstl backpay where there is no evidence that
records were withheld or destroyed to avoid an audit
To my mind, whatever "discrepancies" that may have
appeared in the parts purchases entries were satisfactorily
explained by Jordan, the accountant who had maintained
the general ledger to prepare Ferstl's tax returns His
testimony that the books kept for a small businessman are
not models of accounting school procedures struck me as
possibly a truism Respondent contends, however, that I
should not credit Jordan, because his testimony was
colored by his friendship for Ferstl and his explanation of
the discrepancies produces an inherently improbable
result
Initially, I would state that Jordan appeared to me to
be completely open and forthright in his explanation of
the way Ferstl's books were kept and in his reasons for
not adhering to accepted accounting procedures, and I
credit him fully. Apart from my reliance on Jordan's
demeanor, I rely on the fact that the ledger entries
adverted to by Respondent to discredit Jordan reflect an
incomplete picture of Ferstl' s business transactions and
are based on extracts from the general ledger selected by
Respondent Jordan testified, in effect, t!iat a true picture
of Ferstl's income required consideration of the entire
ledger I believe him
1 192 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
In the final analysis, however, the same result would
obtain even if I were to discredit Jordan. The burden is on
Respondent to show that Ferstl has not disclosed all of his
interim earnings or that he has manipulated his accounts,'
and Respondent has not met that burden on the basis of
the speculations of Pridgen, who expressly disclaimed any
claim of fraud In short, I find no evidence of the
fraudulent concealment of earnings or the manipulation of
accounts Accordingly, M J McCarthy Sales Co., supra,
is inapposite. While Ferstl may have kept poor records
and was unable to produce all his records, he testified
openly and fully to the best of his recollection In similar
circumstances, the Board has held that a respondent has
not met its burden. Arduini Manufacturing Corp., 162
NLRB No 90, see also Pat Izzi Trucking Company, 162
NLRB No 15
In view of the foregoing, I find that Ferstl is entitled to
backpay during the backpay period previously described
Inasmuch as Respondent has not shown that Ferstl had
interim earnings during any quarter greater than those
conceded in the specification for all the quarters of the
backpay period after the second quarter, 1966, I find that
Ferstl is entitled to net backpay of $736 for each quarter
beginning with the third quarter 1966 and ending with the
first quarter, 1968, and net backpay of $661 for the
second quarter 1968 Total net backpay for that period is
$5,813
As to the first two quarters of 1966, it was noted above
that, according to Ferstl's general ledger, during the first
quarter of 1966, he drew $555 from the partnership, and
during the second quarter, $245. Ferstl admitted to no
expenses to offset these draws as interim earnings.
Although the specification concedes other interim
earnings. General Counsel takes no position about these
draws in his brief. Ferstl did testify that the business had
no profits during the period between his discharge and his
employment by North American, but this does not explain
the source of the monies drawn from the business On
their face, these draws appear to be income, and I shall
deduct them from the gross backpay due Ferstl and his
net backpay for these quarters is as follows First quarter:
gross backpay $808, less $555 interim earnings, equals
$253, net backpay; Second quarter: gross backpay, $2,236,
less $1021.99 and $245 interim earnings, equals $969.01,
net backpay.
In view of the finding that Ferstl had the foregoing
interim earnings from self-employment during the period
immediately following his discharge on February 25, 1966,
Respondent's remaining contention that he had removed
himself from the labor market must be rejected.
Additionally I credit Ferstl's testimony about his efforts
to find employment as a mechanic after his discharge on
February 25, and in the circumstances, I attach no
significance to the fact that his oral contacts were not
followed up by written applications The testimony of
Garver about the industry's need for mechanics, in my
opinion, had no probative value Nor was Service
Manager Ehrig's testimony persuasive The fact that he
did not recall a telephone call from Ferstl 2 1/2 years
earlier is insufficient basis to find that Ferstl did not make
the call I cannot help but note that no evidence was
offered to show that Ehrig did in fact hire mechanics
during the time in question, and no advertisements were
offered. Finally, however lackadaisical Ferstl's efforts to
procure business may appear, they met with some success
as witnessed by my finding above that he immediately
began drawing income from the partnership
RECOMMENDED ORDER
Upon the basis of the foregoing findings and
conclusions, I recommend that the Board issue the
following
SUPPLEMENTAL ORDER
Respondent , Mel Croan Motors, Inc , its officers,
agents, successors , and assigns , shall pay to Robert A
Ferstl as net backpay $7,035 01, less any tax withholding
required by the laws of the United States or the State of
Texas, plus interest thereon at the rate of 6 percent per
annum in accordance with the formula prescribed in Isis
Plumbing & Heating Co, 138 NLRB 716
'Brown & Root , Inc, 132 NLRB 486, enfd 311 F 2d 477 (C A 8),
N L R B v Mooney Aircraft, Inc, 366 F 2d 809 (C A 5), Mastro Plastics
Corp, 136 NLRB 1342, enfd 354 F 2d 170 (C A 2)