Metropolitan Teletronics Corp.

National Labor Relations Board - Board Decisions

Jul 19, 1991

303 N.L.R.B. 793 (N.L.R.B. 1991)

793
303 NLRB No. 135
METROPOLITAN TELETRONICS CORP.
1 We have amended the caption to track the General Counsel’s compliance
specification caption.
2 The General Counsel filed a special appeal from the judge’s refusal to
grant a motion to strike par. II of the Respondents’ answer to the compliance
specification. The judge stated in fn. 7 of her decision that the motion was
still pending before the Board when her decision issued. The General Counsel
withdrew the appeal, however, on March 18, 1989.
3 The Respondents have excepted to some of the judge’s credibility findings.
The Board’s established policy is not to overrule an administrative law judge’s
credibility resolutions unless the clear preponderance of all the relevant evi-
dence convinces us that they are incorrect. Standard Dry Wall Products, 91
NLRB 544 (1950), enfd. 188 F.2d 362 (3d Cir. 1951). We have carefully ex-
amined the record and find no basis for reversing the findings.
4 279 NLRB 957 (1986), enfd. 819 F.2d 1130 (2d Cir. 1987).
5 In finding that Kavountzis commingled corporate and personal funds, the
judge specifically referred to only one occasion on which Kavountzis depos-
ited into his own account a check payable to Metropolitan. The record shows,
however, that Kavountzis deposited a company check into his personal account
at least twice, once while he was in Jersey City and once while in Union City.
As further evidence of Kavountzis’ failure to maintain separate accounts for
corporate and personal affairs, we rely on Lewison’s testimony that while Met-
ropolitan was still his tenant, Kavountzis occasionally paid the rent for the
business out of his personal account.
Metropolitan Teletronics Corp., and its alter egos
and successors, Capitol Electronics of 4109
Inc., and Alpay Kabountzis, a/k/a Alpay
Kavounzis, a/k/a Alpay Kavountzis,1 a/k/a Al
Kay, an Individual and Amalgamated Indus-
trial Union 76B and its Divisions, Affiliated
with International Union of Electrical Workers,
AFL–CIO. Cases 22–CA–17446 (1–2)
July 19, 1991
SUPPLEMENTAL DECISION AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
CRACRAFT AND OVIATT
On April 19, 1991, Administrative Law Judge
Arline Pacht issued the attached supplemental decision.
The Respondents filed exceptions and a supporting
brief.
The National Labor Relations Board has delegated
its authority in this proceeding to a three-member
panel.
The Board has considered the decision and the
record in light of the exceptions and brief and has de-
cided to affirm the judge’s rulings,2 findings,3 and con-
clusions and to adopt the recommended Order.
We agree that Respondent Capitol Electronics of
4109 Inc. (Capitol) is the alter ego of Respondent Met-
ropolitan Teletronics Corp. (Metropolitan) for the rea-
sons stated by the judge. In agreeing with the judge
that Respondent Alpay Kavountzis is the alter ego of
Metropolitan and Capitol and jointly and severally lia-
ble for backpay owed to the former Metropolitan em-
ployees, we emphasize the judge’s finding that
Kavountzis’ intent in creating Capitol was to evade
complying with the Board’s remedy in the underlying
unfair labor practice case.4
The Board has stated that it will look beyond orga-
nizational form to hold an individual officer of a com-
pany liable for that company’s backpay liability when
the individual is ‘‘no more than an alter ego . . . or
was in active concert or participation in a scheme or
plan of evasion . . . .’’ Riley Aeronautics Corp., 178
NLRB 495, 501 (1969). We find the evidence—among
other things, Kavountzis’ sole responsibility for the un-
fair labor practices, his intent in creating Capitol, his
evasive and uncooperative behavior throughout these
proceedings in the face of documentary evidence that
he commingled personal and corporate funds—estab-
lishes that Kavountzis actively engaged in a scheme to
evade complying with Metropolitan’s backpay obliga-
tion. Therefore, we agree with the judge that Alpay
Kavountzis is the alter ego of Capitol and Metropolitan
and find him jointly and severally liable with Capitol
for satisfaction of the Board’s remedial order against
Metropolitan.5
ORDER
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge and
orders that the Respondents, Metropolitan Teletronics
Corp., Jersey City, New Jersey, Capitol Electronics of
4109 Inc., and Alpay Kabountzis, a/k/a Alpay
Kavounzis, a/k/a Alpay Kavountzis, a/k/a Al Kay, an
Individual, Union City, New Jersey, their officers,
agents, successors, and assigns, shall take the action
set forth in the recommended Order.
MEMBER OVIATT, concurring.
I fully agree with my colleagues in adopting the
judge’s conclusion that Capitol Electronics of 4109
Inc. is the alter ego of Respondent Metropolitan
Teletronics Corp. and is therefore jointly and severally
liable for backpay owed to the former Metropolitan
employees in accordance with the Board’s initial deci-
sion in this case (279 NLRB 957 (1986)).
I also concur in finding that Alpay Kavountzis is the
alter ego of Capitol and Metropolitan and that he is
also jointly and severally liable as an individual for
backpay under the Board’s remedial order against Met-
ropolitan.
In addressing this latter issue, I begin with the fun-
damental premise that ‘‘the insulation of a stockholder
from the debts and obligations of his corporation is the
norm, not the exception.’’ NLRB v. Deena Artware,
Inc., 361 U.S. 398 (1960) (citation omitted). As this
Board has noted, ‘‘Easily the most distinctive attribute
of the corporation is its existence in the eye of the law
as a legal entity and artificial personality distinct and
separate from the stockholders and officers who com-
pose it.’’ Riley Aeronautics Corp., 178 NLRB 495,
501 (1969) (citation omitted). In Riley, as in this case,
the General Counsel sought for the first time in the
compliance proceeding to impose personal liability for
backpay on an individual, Jack Riley, who was presi-
dent and controlling stockholder of several corpora-
794 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 This case was transferred from the Board’s Regional Office in New York
to Newark, New Jersey. Prior to transfer, it originally was designated 2–CA–
1975 and 2–CA–19657.
2 279 NLRB 957.
3 819 F.2d 1130 (unpublished order).
4 Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973).
5 The name of the individual who admittedly was and is the sole officer and
shareholder of Respondents Metropolitan and Capitol, is Alpay Kavountzis.
(See Respondent’s answer, par. 7.) For convenience sake, he was addressed
as Al Kay throughout the instant proceeding.
6 On December 7, 1990, the Honorable Harold A. Ackerman, U.S. District
Court for the District of New Jersey, granted the petition of the Regional Di-
rector for Region 22 for a temporary restraining order prohibiting Respondents
in this case from dissipating assets and requiring, inter alia, access to Respond-
ents’ books and records. Following an evidentiary hearing on December 21,
1990, the court issued an oral decision, supplemented by a written, unpub-
lished opinion granting the Region’s motion for a preliminary injunction pur-
suant to Sec. 10(j) of the Act. Pascarell v. Metropolitan Teletronics Corp.
(D.N.J. 1990). Under Third Circuit precedent, injunctive relief is limited to 6
months, although extensions may be obtained under certain circumstances. The
Court’s opinion is entered into the record of this case as ALJ Exh. 1.
tions and who personally had committed the unfair
labor practices. In addition, the Board found that Jack
Riley had ‘‘a penchant’’ for setting up corporations,
involving one corporation in the affairs of another, re-
organizing corporate functions and activities, and using
one corporation to assist or rescue another. Nonethe-
less, the Board rejected the imposition of individual li-
ability finding that:
To require him to make good the corporation’s
backpay liability out of his personal funds would
operate to defeat the very purpose of his incor-
porating the business to escape individual liability.
If the corporate funds are insufficient to meet the
backpay obligation, the Board’s recourse is that of
a ‘‘creditor,’’ which includes enforcing the claim
in insolvency or bankruptcy proceedings.
Nathanson v. NLRB, 344 U.S. 25, 27. Ibid. [Cita-
tion and footnote omitted.].
In this case, the judge found that Kavountzis im-
peded the Board’s efforts to obtain relevant business
records. The General Counsel nonetheless was able to
uncover some financial data to the effect that
Kavountzis on some occasions commingled funds.
Kavountzis failed to produce additional documentation
to rebut the inferences of commingling. Further, on the
basis of her credibility resolutions, the judge found that
Kavountzis ‘‘engaged in the obstructive and
duplicitous conduct . . . to deliberately frustrate en-
forcement of the Board’s Order against Metropolitan.’’
In light of the judge’s specific findings of obstructive
behavior and under the particular circumstances in-
volved, I find this case to be the exception in which
‘‘piercing the corporate veil’’ is warranted. Riley Aero-
nautics, supra at 501. Were these findings and cir-
cumstances not in this case, I would honor the sanctity
of the corporate veil.
Dorothy Karlebach, Esq., for the General Counsel.
Robert Ferris, Esq., of New York, New York, for the Re-
spondent.
SUPPLEMENTAL DECISION
STATEMENT OF THE CASE
ARLINE PACHT, Administrative Law Judge. On May 19,
1986, the National Labor Relations Board (the Board), issued
a Decision and Order1 in the above-captioned case2 holding
that Respondent, Metropolitan Teletronics Corp. (Respondent
Metropolitan), violated Section 8(a)(l) and (5) of the National
Labor Relations Act (the Act) by failing to bargain over the
effects of its decision to relocate from New York City to Jer-
sey City, New Jersey. The Board ordered Respondent Metro-
politan, inter alia, to make whole all employees in the bar-
gaining unit represented by the Amalgamated Industrial
Union Local 76B and its Divisions, affiliated with the Inter-
national Union of Electrical Workers, AFL–CIO (the Union),
from May 24, 1986 until the occurrence of one of a number
of alternative events specified in the Board’s Order, for
losses caused by Respondent’s relocation. Thereafter, on
April 7, 1989, the United States Court of Appeals for the
Second Circuit entered a judgment enforcing in full the
Board’s Order, including its backpay provisions.3
Subsequently, a controversy developed over the amount of
backpay due the employees. Consequently, on December 6,
1990, the Regional Director for Region 2 issued a compli-
ance specification and notice of hearing alleging that Re-
spondent Metropolitan, its alter ego or Golden State suc-
cessor,4 Capitol Electronics of 4109 Inc., and Alpay
Kavountzis, in his individual capacity, owed the affected em-
ployees $1,090,163, plus interest. The compliance specifica-
tion notified Respondent that an answer was required with 21
days in conformance with Section 102.54 of the Board’s
Rules and Regulations.
When Respondent failed to submit a timely answer, the
Regional Director notified Respondents of the failure and
granted an extended period for such filing. On January 21,
1991, Respondents filed an answer which, apart from pro-
viding the proper spelling of Alpay Kavountzis’ name and
admitting his relationship to Respondents Metropolitan and
Capitol5, generally denied the allegations in the compliance
specification. After receiving Respondent’s answer and con-
cluding that it did not comply with Section 102.54 of the
Board’s Rules, Region 22 advised Respondents by mail of
the deficiencies in their answer, together with a copy of the
applicable rules and regulations and a case citation to Board
precedent involving a similar issue. The Region’s letter fur-
ther advised Respondents that if a legally sufficient answer
was not submitted by February 5, 1991, a Motion for partial
Summary Judgment would be filed. Notwithstanding this no-
tice, Respondents failed to file an amended answer. Because
the Region was seeking expedited relief,6 it submitted to me
a motion to strike paragraphs I, II, and III of Respondent’s
answer, rather than moving for summary judgment before the
Board. The Respondents filed an opposition to the motion.
Specifically, government counsel alleged in the motion to
strike that by entering a general denial, Respondent had
failed to comply with the Board’s rules requiring specificity
with regard to paragraph I, the backpay period, paragraph II,
measurement of the backpay liability period, and paragraph
III, the measure of gross backpay. At counsel’s request for
795METROPOLITAN TELETRONICS CORP.
7 By motion dated February 8, 1991, Board counsel filed a request for spe-
cial permission to appeal from ruling of the administrative law judge. That
motion currently is pending before the Board.
8 Board exhibits will be referred to as Bd. Exh.; Joint Exhibits as Jt. Exh.
and Respondent’s Exhibit as R. Exh.
9 Respondent first purchased the Jersey City buildings, but later, after selling
them to a partnership called 975 Garfield Avenue Associates, continued to oc-
cupy the same space as a tenant. In 1987, Paul Lewison, one of the Garfield
Avenue Associates, contracted to purchase the complex from his partners.
10 The Board noted that on moving to Jersey City, a State agency authorized
Respondent to sell almost a million dollars in tax exempt bonds so that it
could prepare the new facility for expanded production which would pave the
way for new jobs. The Company was unable to sell any of the bonds and the
planned expansion had not taken place at the time of the trial in the underlying
unfair labor practice proceeding. 279 NLRB at 957 fn. 4.
an expedited determination, I issued an oral ruling during a
telephonic pretrial conference call with the parties which I
restated on the record on February 19, 1991, the first day of
trial, granting the motion as to paragraphs I and III. How-
ever, I reserved ruling on paragraph III on the grounds that
Respondents Capitol and Kavountzis, in his individual capac-
ity, were not named in the underlying complaint; therefore,
until evidence was adduced at the compliance proceeding
which proved their alter ego status, their liability for payment
and the corollary question as to the duration of the backpay
period, could not be determined. See Denart Coal Co., 301
NLRB 391 (1991).7
This matter was tried before me in Newark, New Jersey,
on February 19, 20, and 25, at which time the parties were
afforded full opportunity to be heard, to call and examine
witnesses, and to argue orally on the record. Thereafter, both
parties submitted briefs which have been carefully consid-
ered.
Having granted Board counsel’s motion to strike para-
graphs I and III, the two issues which remained to be re-
solved on the basis of the pleadings and the entire record8
in this case were: (1) whether Respondents Capitol and
Alpay Kavountzis were alter egos of Respondent Metropoli-
tan with joint, several, and individual liability for the back-
pay owed to the employees, and (2) the accuracy of the
discriminatees’ interim earnings as alleged in paragraph IV
and set forth in the appendices to the compliance specifica-
tion.
FINDINGS OF FACT
Background: The Unfair Labor Practice Case
As detailed in the underlying Board decision, until 1983,
Respondent Metropolitan reconditioned and sold used tele-
phones at two plants, one in New York City where approxi-
mately 40 production employees were represented by Local
76B and the other in Union City, New Jersey, where bar-
gaining unit members were represented by sister Local 148.
Suffering severe financial reverses, Respondent was com-
pelled to sell its New York facility. Without affording the
New York City employees an opportunity to transfer, or dis-
closing its move and bargaining with Local 76B about the
decision to relocate or its effects in a timely manner, Re-
spondent transferred its operations from New York and
Union City to another, larger facility at 975 Garfield Street,
Jersey City, New Jersey. The Board found that Respondent
had no duty to bargain about the relocation decision itself
and acted lawfully in recognizing Local 148 as the bar-
gaining representative for unit employees at the Jersey City
facility. However, the Board held that the Company violated
the Act by failing to bargain with Local 76B over the effects
of its relocation decision. 279 NLRB supra at 957.
To remedy this wrong, the Board ordered Respondent not
only to engage in effects bargaining with the Local, but also
to make the employees whole for losses suffered as as result
of its unlawful conduct from 5 days after the date of its deci-
sion until occurrence of the earliest of the following condi-
tions: (1) the date the Company bargained to agreement with
the Local as to the effects of the plant shutdown on the em-
ployees; (2) a bona fide impasse in bargaining occurred; (3)
the Union failed to request bargaining or commence negotia-
tions within 5 days of the Company’s offer to bargain; and
(4) the Local failed to bargain in good faith. Id. at 961, cit-
ing Transmarine Navigation Corp., 170 NLRB 389 (1968).
Respondent’s failure to comply with any one of these condi-
tions and its insistence that Metropolitan ceased doing busi-
ness in 1988 led to the issuance of the compliance specifica-
tion in this proceeding.
Metropolitan’s Jersey City Operations
Throughout the time that Metropolitan occupied the Jersey
City premises, from April 1983 to the beginning of 1989,
Kavountzis, Respondent’s owner and sole shareholder, con-
tinued the same business: the repair, refurbishing, repack-
aging, and resale of secondhand telephones.9 The Garfield
Street premises were spacious enough to accommodate a
great amount of equipment as well as an expanding work
force. Thus, uncontroverted evidence establishes that Re-
spondent first owned and then leased three contiguous build-
ings which were part of a nine building complex at the Gar-
field Street address. Workbenches were housed in all three
buildings at which employees reprocessed phones using a va-
riety of small, hand-held tools such as grip blasting and
polishing equipment, paint brushes, and stamping presses.
Within a year following the move to Jersey City, the work
force expanded to over 60 employees, but by the end of
1988, the number had dwindled to approximately 10 employ-
ees.
The diminishing work force apparently reflected Respond-
ent Metropolitan’s economic decline at the Jersey City facil-
ity.10 As a result, Kavountzis and Paul Lewison, Respond-
ent’s landlord, were locked in a continuing controversy over
Metropolitan’s failure to pay its rent on time. In an effort to
collect rent due, Lewison often visited the Garfield Street
site, becoming familiar with the operations and with the
faces of the employees.
Toward the latter part of 1988, Kavountzis informed
Lewison that he intended to move Metropolitan. In fact, by
the end of that year, Respondent had ceased doing business
at the Garfield Street location. However, it took much longer
for Kavountzis to remove the balance of Metropolitan’s ma-
terial and equipment from the facility. Lewison did not re-
strict his access, so for months after the move, Kavountzis
returned to the Garfield Street plant and took van loads of
material away with him. Even so, he left much behind.
Therefore, in order to ready the premises for a new tenant
in mid-1989, Lewison had his own employees remove three
or four trailer loads of Respondent’s materials from the Jer-
sey City plant and deliver, unload, and store them in the
796 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
11 In October 1989, Lewison filed a pro se complaint in a New Jersey Supe-
rior Court, seeking compensatory and punitive damages against Alpay
Kavountzis, Metropolitan Telectronics and Capital Electronics, Inc. At the time
of trial in the instant case, this action still was pending. See R. Exh. 1.
12 Before coming to the United States from Puerto Rico, Pabaon obtained
a 2-year degree in industrial engineering.
13 Bd. Exh. 4, attachment 32, shows that July 25, 1989, is the last date that
the name Metropolitan Teletronic Corp. appears stamped on a UPS record.
basement of Respondent’s new business in Union City, New
Jersey.
Respondent’s Union City Facility
Because Respondent left Jersey City still owing rent for
the Garfield Street premises, Lewison pursued Kavountzis to
his new Union City address, a single building with two en-
trances; one at 4105 Bergenline Avenue and the other at 502
Forty-First Street. Lewison sought Kavountzis at that build-
ing on at least a half dozen occasions. After recovering pay-
ment for a $1500 bounced check in April 1989, he took legal
action to collect other moneys allegedly owed to him.11
Lewison testified that he had ample opportunity to observe
Respondent’s facility and operations during his repeated dun-
ning expeditions to Union City. He stated that the building,
which bore a sign identifying it as Capitol Electronics,
housed a retail store where a few clerks sold televisions,
camcorders, and other electronic equipment. Lewison further
described another area to the rear of the retail portion of the
store, where approximately 20 to 30 feet of workbenches,
presumably some of the same ones previously used at the
Garfield Avenue plant, were installed. He observed a half
dozen workers, two of whom he recognized from the Gar-
field Street location, refurbishing telephones—‘‘taking the in-
nards of the telephones . . . hooking them up . . . cleaning
and checking the ringers.’’ (Tr. 107). Although Lewison did
not see the basement at this building, he believed there was
one because he understood that his employees had trans-
ferred equipment there from the Jersey City facility. More-
over, on one occasion, he saw Al Kay descending the steps
to the basement. In short, according to Lewison, Respond-
ent’s employees, several of whom had previously worked for
Metropolitan, apparently were working for Capital, per-
forming the same work at the new Union City location as
they had at the Jersey City plant, albeit on a reduced scale.
Mario Pabon, a driver for United Parcel Service (UPS),
confirmed salient portions of Lewison’s testimony. Thus, like
Lewison, he testified that a retail operation involving the sale
of VCRs, components, and other electrical equipment, occu-
pied the front portion of the building on Bergenline Avenue.
In the rear, however, where he reported on a daily basis to
pick up and deliver packages, he saw a few employees fixing
what he believed to be broken telephones.12 He recalled that
until 3 or 4 months prior to the instant trial, packages to and
from this location bore the name of Metropolitan. Since that
time, he indicated the name, Capitol Electronics, was affixed
to the packages.
Metropolitan and Capitol shared more than a common
situs. Documents introduced into evidence deomonstrated
that Metropolitan and Captitol used the same UPS customer
identification shipping number in 1989, notwithstanding the
fact that UPS requires that each of its customers maintain a
separate number.13 Kavountzis offered two explanations for
this anomaly. First, he claimed that the business name, Met-
ropolitan Teletronic, had been prestamped on the UPS
records. Therefore, he continued to use these prestamped
forms for convenience sake until they were exhausted. Sec-
ond, he suggested that he never bothered to obtain a new
customer shipping number because the deposit required by
UPS, varying from $1000 to $5000, was prohibitive.
The use of the same shipping number to identify the pack-
ages which were sent to and from Metropolitan and Captiol
does not, of itself, definitively establish that they shared a
common business purpose. In proving that Capitol functioned
as Metropolitan’s alter ego, it is far more important to deter-
mine what those packages contained.
To this end, Corrections Officer Anthony Stefanini, a pur-
chasing officer for the Telecommunications Division of the
New York City Department of Corrections for the past 5
years, provided telling evidence. Stefanini testified that he
purchased reconditioned telephone bodies and telephone parts
such as jacks, dials, receivers, transmitters, and touchtone
pads from Metropolitan, dealing solely with Kavountzis at
both the Jersey City and Union City addresses. Sometime in
1989, Kavountzis told him that Metropolitan was going to
close down. Nevertheless, Stefanini continued to purchase
the same products from Capitol that he had from Metropoli-
tan. He explained, however, that in recent years, in addition
to ordering telephones and telephone parts, he also ordered
other equipment, including tape recorders, camcorders, and
cassettes. Until 1991, when his department’s purchases from
Respondent sharply declined, Stefanini maintained that the
dollar volume of purchases for reconditioned phones and re-
lated parts from Metropolitan and Capitol remained substan-
tially the same.
On cross-examination, Stefanini testified that when he vis-
ited Metropolitan’s premises in Jersey City, he observed a
factory where the telephones such as those he ordered, were
being reconditioned. However, he stated that on a visit to Re-
spondent’s Union City building, he did not see any place
where phones were being reconditioned. All he observed was
a retail operation in the front of the building with a ware-
house to the rear. If phones were being revamped there, that
was not visible to him.
Testimony offered by Frank Riccio, secretary-treasurer of
the Local union which formerly represented employees at the
Jersey City facility, was consistent with Stefanini’s observa-
tions of Capitol’s operations. Riccio stated that he had visited
the Jersey City factory on a monthly basis and knew all of
the employees working there. He further testified that some-
time in early 1989, he made one 30-minute visit to the Union
City building expressly to investigate whether Metropolitan
was still in business there. He saw only a retail outlet at-
tached to a warehouse facility and, in addition to Kavountzis,
one unknown employee serving as a retail clerk. Riccio fur-
ther testified that he thought his Local’s business agent also
determined that Capitol was not reconditioning telephones,
although he was uncertain that the matter actually had been
investigated.
Although neither Stefanini nor Riccio observed a factory
operating at the Union City facility, business records of the
New York City Department of Corrections, establish that
Stefanini continued to purchase reconditioned telephones and
related parts from Metropolitan and Capitol from May 1987
to May 23, 1990. These documents, created close in time to
the events in question and for purposes independent of this
797METROPOLITAN TELETRONICS CORP.
14 In an earlier part of his testimony, Kavountzis admitted that the New
York City Department of Corrections was the only former Metropolitan cus-
tomer which Capitol still served.
15 Kavountzis acknowledged that the New York Department of Corrections
was one of Metropolitan’s four customers. The others were department stores:
Korvette, Two Guys, and Mays.
litigation, prove beyond question that throughout this period
of time, the New York City Department of Corrections pur-
chased reconditioned phones from the Respondents, for ship-
ment by UPS. (See Bd. Exhs. 2 & 4 (33),(35)).
Notwithstanding this documentary proof, Kavountzis in-
sisted that when Metropolitan went out of business and left
the Garfield Avenue location in late 1988, he ceased recondi-
tioning phones. He asserted that he opened Capitol Elec-
tronics in Union City exclusively as a retail store where he
employed four to six clerks, depending on the season, to sell
electronic equipment. He denied that he maintained a work-
shop in the rear of the Union City building. Conceding that
he had a few workbenches in the area behind the store,
Kavountzis explained that as a trained technician, he worked
there himself when making minor adjustments to the VCRs,
televisions, microwave ovens, and camcorders that are sold
retail. All that he used in making these minor adjustments
were simple tools such as as screwdrivers; he said he had no
need for the presses and drills used at the Jersey City plant.
In fact, he maintained that he sold all of the machinery and
equipment from the Jersey City factory as scrap to Taiwan.
However, Respondent did not produce any documentation of
such sales.
In an effort to refute the real evidence showing that Cap-
itol continued to supply one of Metropolitan’s major cus-
tomers, Kavountzis claimed that Capitol sold reconditioned
telephones on only one occasion.14 Thus, he alleged that
after a prison fire, he helped the Department of Corrections
deal with what was an an emergency situation by ordering
reconditioned phones from another supplier of such merchan-
dise, a company he identified only as K.M. Enterprises, pur-
portedly located in some unspecified place in Alabama.15 Al-
though Kavountzis indicated he would furnish documentation
to support this contention, none was forthcoming. Not a sin-
gle purchase order, sales slip, or shipping receipt was intro-
duced to corroborate Kavountzis’ bare allegation that Capitol
merely served as a conduit. Moreover, Kavountzis’ claim
that he furnished reconditioned phones to the Department of
Corrections on only one occasion was flatly contradicted by
the Department of Corrections’ purchase orders. These
records establish that Capitol sold reconditioned phones and
parts to this client on a recurring basis at least until May
1990, in dollar amounts similar to those paid to Metropolitan
in the past.
Whether Capitol also sold reconditioned phones to other
customers is a matter of speculation. However, there is some
evidence which points in that direction; namely, UPS pickup
records showing that Respondent Capitol sent lightweight
packages to such businesses as JM Telephone, Bargain
World, EMS Communications, TIEA Teleco, and Mid-State
Corrections Facility. (See Bd. Exhs. 4, (21), (23), (38), (41),
& 56).) Packages delivered to these businesses weighed
much the same as those sent to the New York Department
of Corrections, indicating that the contents were not products
sold in Respondent Capitol’s retail store such as television
sets, camcorders, and video tape players.
Board counsel apparently had difficulty in obtaining addi-
tional records documenting Capitol’s or Metropolitan’s busi-
ness dealings. In a Federal district court opinion granting the
Board a temporary injunction under Section 10(j) of the Act,
enjoining the Respondents in this case from dissipating assets
or destroying financial records pending the outcome of the
instant administrative hearing, the Honorable Harold Acker-
man wrote:
I have listened to the testimony of Mr. Kay and I have
had the opportunity to observe his demeanor, tears and
all. His testimony strains the Court’s credibility. For ex-
ample, I do not know where the records of Metropoli-
tan are. Mr. Kay has stated that he left them on Gar-
field Avenue. I find that very difficult to accept. I fur-
ther asked Mr. Kay who his accountant was. Mr. Kay
stated that he cannot remember who his accountant
was. I questioned Mr. Kay about who his accountant is
now. Mr. Kay said his account (stet) is an individual
named Mario. Mr. Kay does not know Mario’s last
name (or his) . . . whereabouts, except for the fact that
Mario allegedly lives in a house in Jersey City and op-
erates out of his residence. Mr. Kay was unable to pro-
vide the Court with any other information about Mario.
My conclusion after hearing Mr. Kay testify is that the
Court is dealing with a very intelligent and a very eva-
sive witness, who is, of course, a party to this case.
Pascarell v. Metropolitan Teletronics Corp., supra at 9.
Board counsel was able to produce canceled checks paid
by the City of New York to both Metropolitan and Capitol
which revealed that Kavountzis did not invariably treat these
Companies’ finances as separate and unrelated. Some checks
made payable to Metropolitan were endorsed either by Cap-
itol alone or by both Metropolitan and Capitol, and deposited
into Capitol’s account. (See Bd. Exhs. 3A (18), (19) & (20).)
On one occasion, Kavountzis endorsed a check payable to
Metropolitan in his own name and deposited it in his per-
sonal account. (Bd. Exh. 3A (17).)
Discussion and Concluding Findings
The Question of Liability
The Board has long held that an employer which commits
an unfair labor practice may not avoid a remedial order sim-
ply by establishing a new business identity. Where the evi-
dence establishes that the new employer is, in fact, ‘‘merely
a disguised continuance of the old employer’’ the Board’s
order will issue not only to the immediate employer but to
the employer’s alter ego as well. Southport Petroleum Co. v.
NLRB, 315 U.S. 100, 106 (1942). The principal issues here
are to determine, as the compliance specification alleges,
whether (1) Respondent Capitol is Respondent Metro-
politan’s alter ego and thereby liable for the judgments in the
Board’s unfair labor practice proceeding, as enforced by the
court of appeals and (2) whether Alpay Kavountzis may be
held individually liable for rectifying the unfair labor prac-
tices committed by his Company.
Legal Standards Governing Alter Ego Status
In resolving questions concerning an alleged alter ego sta-
tus, the Board consistently considers the following factors,
798 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
16 None of these witnesses had the opportunity to observe the basement of
the Union City building.
none of which are necessarily controlling: whether the two
employers were under the same ownership and management;
shared substantially the same business purpose in whole or
in part; utilized the same operations, methods and equipment
in the same premises, producing the same product for the
same market or customers; and was created to evade its re-
sponsibilities under the Act. Better Building Supply Corp.,
283 NLRB 93, 94 (1987); Watt Electric Co., 273 NLRB 655,
658 (1984); William B. Allen, 267 NLRB 700, 705 (1983),
enfd. 758 F.2d 1145 (6th Cir. 1985); Custom Mfg. Co., 259
NLRB 614 (1981).
Capitol is Metropolitan’s Alter Ego
As discussed below, the more credible evidence in this
case, evaluated in light of the factors outlined above, sustains
the conclusion that Metropolitan continued to exist in the
guise of Capitol Electronics, albeit on a much reduced scale.
Turning to the first element of common ownership and
management, it is undisputed that Kavountzis was the sole
shareholder and president of both corporations. As several
witnesses attested who dealt with him on a frequent basis,
and as Kavountzis himself acknowledged, he was a hands-
on manager who always was on the scene. Unquestionably,
Capitol functioned as a retail store, whereas Metropolitan did
not. However, the addition of this new aspect to Respond-
ent’s business, which could be likened to a division within
a single enterprise, does not defeat a finding that another part
of Capitol’s operations was no different than that of
Metroplitan, except in scope. Custom Mfg. Co., supra at 615.
To the extent that Capitol continued to recondition and sell
telephones and related parts, just as Metropolitan did, the two
businesses shared a common business purpose. In finding
that Capitol refurbished secondhand phones, I rely heavily on
Board Exhibit 2 which shows beyond dispute that one of
Metropolitan’s major customers continued to purchase such
equipment from Capitol. Given these records whose authen-
ticity was unchallenged, Kavountzis’ denial that Capitol en-
gaged in the phone reconditioning business must be dis-
counted. Clearly, the records of the New York City Depart-
ment of Corrections and the testimony of its purchasing offi-
cer prove that he ordered the same reconditioned phones and
related parts from Metropolitan and then from Capitol at the
Union City location. In attempting to meet this compelling
evidence by inventing a supplier in Alabama, Kavountzis
only cast additional doubt on his credibility. Making matters
even worse, he failed to produce a shred of corraborative
documentation as he offered to do.
I also rely on Lewison’s testimony that he observed on
perhaps six different occasions, some half dozen employees
in Capitol’s back room performing the same work he had
seen them do while Metropolitan still was located in Jersey
City. At the time of the instant proceeding, Lewison was
suing Metropolitan, Capitol, and Kavountzis for debts in-
curred while Metropolitan was his tenant. Thus, it could be
argued that he was a biased witness who arranged his testi-
mony to conform to the theory of his own civil action
against the Respondents. However, while recognizing the
possibility of bias, Lewison’s calm and cogent manner per-
suaded me that whatever hostility he may have harbored
against Respondents did not affect his account in this pro-
ceeding. This is not to say that I disbelieve Stefanini and
Ricci, both of whom testified truthfully that they saw no em-
ployees refurbishing phones when they visited Capitol. I can-
not account for this conundrum except to note that they each
visited Capitol only once on an unidentified date whereas
Lewison appeared at the Union City premises on more than
several occasions.16
Board Exhibits 2 and 4 also demonstrate that Capitol not
only supplied at least one-fourth of the consumers previously
served by Metropolitan, but also shared the same address.
Moreover, Lewison observed some workbenches, lighting,
and tools installed in the Capitol building which he believed
to be the same as those used in the Jersey City plant.
It cannot be denied that Capitol’s facility was much small-
er than Metropolitan’s, fewer employees were engaged in re-
furbishing telephones there, and its operations appear to be
much reduced in scale. However, the Board has held that
none of these factors is sufficient to effectively overcome a
finding of alter ego status where there was substantial con-
tinuity in ownership and management and where the former
business purpose was continued as part of the succeeding op-
eration. See Better Building Supply Corp., supra at 95; Wil-
liam B. Allen, supra at 706; Custom Mfg. Co., supra at 615.
Although the final factor, unlawful intent, is not critical to
finding alter ego status, it, too, may be present here inferen-
tially. The evidence suggests that Metropolitan was not a
successful business: the number of Metropolitan employees
at the Jersey City factory fell from a high of 60 or 70 in
1983 to a low of 10 by late 1988; Kavountzis lost the Jersey
City property by foreclosure and then, as a tenant, found it
difficult to pay the rent there. Thus, Kavountzis probably was
responding to Metropolitan’s declining fortunes by moving to
the smaller Union City building, cutting the work force in
half, and opening a retail store. If that was all that he did,
Metropolitan’s liability to comply with the Board’s remedy
in this matter would have ended when it ceased doing busi-
ness in Jersey City in December 1988. But there was more.
In addition to running a retail enterprise, Capitol continued
the same operations, in a scaled-down form, as those once
performed by Metropolitan. Kavountzis’ failure to produce
any records which would refute compelling documentation
proving that he continued in the phone refurbishing business
leads to the inference that Respondents engaged in subter-
fuge to evade complying with the Board’s remedy in the un-
derlying unfair labor practice case.
In sum, I conclude that Capitol Electronics is the alter ego
of Metropolitan Teletronics. As such, Capitol is derivatively
liable to provide the remedy required by the Board.
Kavountzis is Individually Liable for Backpay Due
Metropolitan Employees
The compliance specification also alleges that Alpay
Kavountzis is the alter ego of Respondents Metropolitan and
Capitol and as such, personally liable for the backpay due to
the former Metropolitan employees. As a general rule, indi-
vidual stockholders are insulated from the obligations in-
curred by their corporations. See NLRB v. Deena Artwear,
Inc., 361 U.S. 398, 402–403 (1960). However, the Board has
carved exceptions to this rule and held individual respond-
ents and their corporate entities liable for backpay remedies
where the individual has actual operational and financial con-
799METROPOLITAN TELETRONICS CORP.
17 See also Campo Slacks Inc., 266 NLRB 492 (1983); Bryar Construction
Co., 240 NLRB 102 (1979); Ogle Protection Service, 149 NLRB 545, 546
(1947), cited in Weldment Corp, supra.
18 Having concluded that Metropolitan, Capitol, and Kavountzis are alter
egos, accountable jointly and severally for complying with the Board’s rem-
edy, it is unnecessary to reach the question of whether the Respondents also
are liable as successors under the Supreme Court’s holding in Golden State
Bottling Co. v. NLRB, 414 U.S. 1681 (1973).
19 Hacienda Hotel & Casino, 279 NLRB 601, 603 (1986); Laborers Local
38 (Hancock-Northwest), 268 NLRB 167, 168–169 (1983).
trol of the enterprise. Weldment Corp., 275 NLRB 1432,
1433 (1985);17 Master Food Services, 262 NLRB 804, 811–
812 (1982). The Board also will overcome its reluctance to
pierce the corporate veil where:
it is employed to perpetrate fraud, evade existing obli-
gations or circumvent a statute. . . . Thus, in the field
of labor relations, the Courts and the Board have
looked beyond organization form where an individual
or corporate employer was no more than an alter ego
. . . or was in active concert of participation in a
scheme or plan or evasion . . . or siphoned off assets
for the purpose of rendering insolvent and frustrating a
monetary obligation such as backpay . . . or so inte-
grated or so intermingled his assets and affairs that ‘‘no
distinct corporate lines are maintained.’’
Concrete Mfg. Co., 262 NLRB 727, 729 (1982) (quoting
Riley Aeronautics Corp., 178 NLRB 495, 501 (1969)).
Here, the evidence is uncontroverted that Kavountzis, the
only stockholder in both Metropolitan and Capitol, was in
sole control of and responsible for the operations of Metro-
politan and Capitol. He alone was responsible for the com-
mission of the unfair labor practice that led to the Board’s
remedial order. He alone decided to move from the Jersey
City location and claim that Metropolitan was defunct, when,
in fact, he continued doing business as Metropolitan and then
as Capitol in Union City.
Further, Kavountzis has impeded the Board’s efforts to ob-
tain all of the relevant business records which might shed
light on the extent to which Capitol continued Metropolitan’s
business. Nevertheless, Board counsel was able to uncover
some financial data pertaining to Metropolitan and Capitol
which tended to show that Kavountzis sometimes commin-
gled the funds of his companies and on at least one occasion,
deposited corporate funds in his own accounts. By failing to
produce additional documentation to rebut the inference of
commingling as evidenced in Board Exhibit 3A, Kavountzis
has made it difficult to determine whether the corporations’
assets and affairs were separately and distinctly maintained.
As discussed above, it is fair to infer that Kavountzis en-
gaged in the obstructive and duplicitous conduct outlined
above to deliberately frustrate enforcment of the Board’s
order against Metropolitan. Accordingly, I agree with Board
counsel that he is the alter ego of Capitol. It follows that he
is jointly and severally liable with his Company for backpay
owed to the former Metropolitan employees. The backpay
period which began on May 24, 1986, 5 days after the
Board’s decision and order issued, continues to such time as
Respondents Capitol and Kavountzis bargain with the Union
as provided in the Board’s remedial order.18
The Employees’ Interim Earnings are
Correctly Specified
The legal principles which govern resolution of backpay
disputes are firmly entrenched in Board and court precedent.
Briefly stated, they provide:
in a backpay proceeding, the sole burden on the Gen-
eral Counsel is to show the gross amount of backpay
due. . . . Once that is established, the burden is upon
the employer to establish facts which would mitigate
that liability.19
As explained above, I granted Board counsel’s motion to
strike the Respondent’s answer as deficient with respect to
paragraphs I and III of the compliance specification; i.e., the
backpay period and the measure of gross backpay, respec-
tively. Having resolved any question regarding the validity of
the gross backpay figures as set forth in the compliance spec-
ification appendix, the remaining issue, for which the Re-
spondents bore the burden of proof, concerned the
discriminatees’ interim earnings. In meeting this burden Re-
spondents were entitled to produce evidence to show that the
claimants ‘‘willfully incurred a loss of earnings during the
backpay period or for some other reason [are] not entitled to
receive backpay’’ during the relevant period. Original Oyster
House, 281 NLRB 1153, 1154 (1986), enfd. 822 F.2d 412
(3d Cir. 1987).
Prior to the start of the instant hearing, Board counsel fur-
nished to Respondent the names and current addresses of the
12 former Metropolitan employees who had been located.
The Respondents subpoenaed five of these claimants and ad-
duced testimony from four of them in order to prove either
that they had failed to search diligently for new employment
or that they had not accurately reported the interim earnings
as set forth in the appendix to the compliance specification.
Respondent did not succeed in this effort.
Respondent admittedly confronted a difficult situation in
examining the discriminatees. Several appeared not to under-
stand certain questions as originally posed; their answers
often were difficult to understand since they spoke heavily
accented English which was their second language. However,
their inability to answer questions on the first round had
nothing to do with their credibility. Before their testimony
was concluded, each of them had credibly confirmed the ac-
curacy of the interim earnings data presented in the appendix
to the compliance specification. Thus, Respondent was un-
able to prove that any of them had failed earnestly to seek
alternative employment or that had not accurately reported
their interim earnings to the Board. Indeed, apparently recog-
nizing that the four discriminatees were struggling to answer
questions as honestly and forthrightly as they could, Re-
spondent chose not to call a fifth subpoenaed claimant and
did not even address the issue of interim earnings in its brief.
In sum, Respondents have failed to show that the claimants
who were located did not make a good-faith search for em-
ployment during the backpay period or that their interim
earnings were not accurately reported in the compliance
specification appendix.
800 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
20 If no exceptions are filed as provided by Sec. 102.46 of the Board’s Rules
and Regulations, the findings, conclusions, and recommended Order shall, as
provided in Sec. 102.48 of the Rules, be adopted by the Board and all objec-
tions to them shall be deemed waived for all purposes.
21 In the compliance specification, the Regional Director for Region 2, notes
that he has been unable to locate some of the above-named employees; specifi-
cally, Berenice Aracena, Juan Aybar, Jennifer Dolphin, Maria Elizondo, Julia
Fernandez, Lillian Fernandez, Maday Garcia, Mercedes George, Myrna Gill,
Pedro Gonzalez, Illera Idalra, Nelson Marraquin, Angel Martinez, Julio Novas,
Mayra Nunez, Vyachelov Patish, Altagracia Perez, Daniel Pimental, Almarie
Pryce, Josephine Rodriguez, Maria Rey, Sonia Rosario, Edith Seinman, Israel
Serrano, Mario Soto, Huong Kim Tang, Tamara Uretskaya, and Luz Webb.
Accordingly, in accordance with Board procedures, the net backpay amounts
set forth in par. VIII of the compliance specification, will be retained in es-
crow for a period not to exceed 1 year. The escrow period shall begin after
Respondents comply with the Board’s Order by payment into escrow or the
date the Board’s Supplemental Decision and Order in this case become final,
including enforcement thereof, whichever is later, to permit further efforts to
locate and distribute to these employees the money owed them. See Starlight
Cutting, 284 NLRB 620 (1987).
Accordingly, on these findings of fact and conclusions of
law and on the entire record, I issue the following rec-
ommended20
ORDER
The Respondents, Metropolitan Teletronics Corp., Capitol
Electronics of 4109, Inc., and Alpay Kavountzis, an Indi-
vidual, Union City, New Jersey, their officers, agents, suc-
cessors, and assigns, shall make whole Berenice Aracena,
Juan Aybar, Flor Baez, Catherine Brockington, Jennifer
Dolphon, Maria Elizondo, Julia Fernandez, Lillian
Fernandez, Rosa Florindo, Maday Garcia, Maria Garcia,
Mercedes Georges, Myrna Gill, Orlando Gomez, Pedro Gon-
zalez, Illera Idalra, Kyriakos Katsaras, Nelson Marroquin,
Angel Martinez, Fernando Montoya, Julio Novas, Mayra
Nunez, Samuel Paige, Vyacheslow Patish, Altagracia Perez,
Daniel Pimental, Bayron Plaza, Almarie Pryce, Bievenido Ri-
vera, Josephina Rodriguez, Maria, Rey, Carmen Rojas, Sonia
Rosario, Edith Seinman, Israel Serrano, Maria Soto, Huang
Kim Tang, Tamara Uretskaya, Luz Webb, and Marek
Wisniewski, by paying them the sums listed in paragraph
VIII of the compliance specification, which total $1,090,163
plus interest thereon, accrued to the date of payment and
computed in the manner set forth in New Horizons for the
Retarded, 283 NLRB 1173 (1987).21