Patrick & Co.

National Labor Relations Board - Board Decisions

Nov 15, 1985

277 N.L.R.B. 477 (N.L.R.B. 1985)

PATRICK & CO.
Patrick & Company and Department Store Employ-
ees Union Local 1100, United Food and Com-
mercial Workers, AFL-CIO. Case 20-CA-
16978(E)
15 November 1985
DECISION AND ORDER
BY CHAIRMAN DOTSON AND MEMBERS
DENNIS AND JOHANSEN
On 17 June 1983 Administrative Law Judge Rus-
sell L. Stevens issued the attached supplemental de-
cision under the Equal Access to Justice Act
(EAJA).' The Applicant filed exceptions and a
supporting brief and the General Counsel filed an
answering brief.
On 8 December 1983 the Board remanded this
proceeding to the judge for the purpose of con-
ducting a hearing to resolve issues raised by the
Applicant. The judge thereafter issued the attached
second supplemental decision on 23 July 1985. The
Applicant filed exceptions and a supporting brief
and the General Counsel filed cross-exceptions and
a supporting brief.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has considered the supplemental deci-
sion, the second supplemental decision, and the
record in light of the exceptions and briefs and has
decided to affirm the judge's rulings, findings, and
conclusions2 and to adopt the recommended
Order.
i On 24 March 1983 the judge issued his decision in this proceeding in
which he recommended dismissal of the complaint in its entirety. The
complaint alleged that the Respondent violated Sec. 8(a)(3) and (1) of the
Act by discharging John Pesch The judge found that Pesch was a super-
visor under Sec. 2(11) and therefore excluded from the coverage of the
Act. No exceptions were filed to the judge's decision and by order of 28
April 1983 the Board adopted the judge 's findings and recommendations
and dismissed the complaint in its entirety.
:a We believe that Congress, in revising the Equal Access to Justice
Act, 5 U.S.C. § 504 (1982), as amended by Pub. L. 99-80, 99 Stat 183
(Aug. 5, 1985), did not alter, but merely clarified, the definition of "sub-
stantially justified." "Substantially justified" means more than "mere rea-
sonableness." H R Rep. 99-120, p. 9.
We agree with the judge that the General Counsel was substantially
justified in issuing the complaint and thereby placing the sole issue of al-
leged discrimmatee Pesch's employee status before him However we dis-
avow the judge's implication that determinative weight should be placed
on the fact that the Applicants refused to submit its responses to the
Charging Party's sworn affidavit in like format In the instant case we
note that even if the Applicant' s witnesses Jim Patrick and Harry Chan
had sworn, to their versions of Pesch's status, the issue as to whether
Pesch possessed any Sec. 2(11) indicia would still have been in doubt.
The General Counsel was thus substantially justified in issuing a com-
plaint and proceeding to a hearing in order to resolve the credibility
issues central to Pesch's employment status.
Because we agree with the judge's findings on substantial justification,
we find it unnecessary to address his findings on the Applicant's eligibil-
ity under the Equal Access to Justice Act. See Stonehouse Coal Co, 276
NLRB 1258 (1985)
477
ORDER
IT IS HEREBY ORDERED that the application of
the Applicant, Patrick & Company, San Francisco,
California, for an award under the Equal Access to
Justice Act is denied.
SECOND SUPPLEMENTAL DECISION
Equal Access to Justice Act
STATEMENT OF THE CASE
RUSSELL L. STEVENS, Administrative Law Judge. The
complaint in Case 20-CA-16978, issued May 24, 1982, al-
leged that Patrick & Company (Applicant) had violated
Section 8(a)(1) and (3) of the National Labor Relations
Act (the Act). The case was tried in San Francisco, Cali-
fornia, on January 18-21, 1983, and a decision was issued
by me on March 24, 1983. The principal issue was the
alleged supervisory status of employee John Pesch. The
decision included a recommendation that the complaint
be dismissed in its entirety, based on a finding that Pesch
was a supervisor at the time he was discharged by Pat-
rick, and was not covered by the Act. No exception to
the decision was filed by the General Counsel or the
Charging Party (Department Store Employees Union
Local 1100, United Food and Commercial Workers,
AFL-CIO), and by Order dated April 28, 1983, the Na-
tional Labor Relations Board adopted my findings and
conclusions and dismissed the complaint in its entirety.
By document dated May 18, 1983, Patrick's attorney ap-
plied to the Board for award of attorney fees and other
expenses pursuant to the Equal Access to Justice Act
(EAJA)' and the Board's Rules and Regulations applica-
ble.2 By Order dated May 25, 1983, the Board referred
the application of Patrick's attorney to me for disposi-
tion. By undated document filed with me on June 17,
1983, the General Counsel moved to dismiss the applica-
tion of Patrick's counsel. On June 17, 1983, I issued my
decision, recommending that the EAJA application be
denied on the basis that the General Counsel's actions in
the matter substantially had been justified. Applicant
filed exceptions to that decision, and the General Coun-
sel replied. On December 8, 1983, the Board remanded
the matter to me for a hearing. On January 23, 1984, the
General Counsel filed an answer to the EAJA applica-
tion, and on February 7, 1984, Applicant filed a reply to
the answer. A remand hearing was held on November 15
and 16, 1984.
Background
Much of the General Counsel's argument is addressed
to the unfair labor practice trial, and counsel concludes
"indeed, it is submitted that if all the General Counsel's
witnesses at trial had been fully credited, a prima facie
case would have been established that Pesch was at most
a leadman and not a supervisor."
i Pub L 96-481, 94 Stat 2325
2 Sec 102 143 et seq.
277 NLRB No. 51
478 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Applicant's argument primarily is confined to pretrial
matters, it being contended that "the General Counsel
did not establish that it had a reasonable basis in fact for
issuing complaint."
So far as I am concerned , extensive argument about
trial events is unnecessary . In the supplemental decision
issued June 27, 1983, it was stated, "In this case, trial was
the key in determining whether or not counsel for Gen-
eral Counsel acted reasonably, and it is found that he
did." That supplemental decision was limited mostly, but
not entirely, to facts disclosed during trial of the issues of
the unfair labor practice case.
In the Board's remand of December 8, 1983, I was in-
structed to conduct a hearing "on the issues raised by the
application of Patrick and Company." Since the supple-
mental decision addressed only the matter of "substantial
justification," it having been considered unnecessary to
reach procedural arguments of the General Counsel's
motion to dismiss , it became necessary under the remand
to hear presentations of counsel for both sides, relating
to pretrial conduct of the General Counsel in the unfair
labor practice case . As a result of an informal conference
held on July 12, 1984, by me with counsel for the Gener-
al Counsel and counsel for Applicant, the General Coun-
sel obtained release of some, but not all, of the docu-
ments relating to pretrial investigation of the unfair labor
practice charge and issuance of the complaint. Counsel
later stipulated to the introduction into evidence of docu-
ments for use in the remand hearing.
Although some procedural matters were subjected to
trial inquiry, as more fully discussed infra, the principal
subject of the remand hearing was the substantial justifi-
cation argument applied to events prior to trial of the
unfair labor practice complaint. As noted, I already had
concluded in the supplemental decision that the General
Counsel substantially was justified in pursuing the com-
plaint, based on what developed at trial of the unfair
labor practice issues. That conclusion carefully has been
reviewed and is reaffirmed. The remand hearing had the
benefit of information not disclosed as of the date the
supplemental decision was issued. This supplemental de-
cision, therefore, principally is addressed to matters that
were not in evidence prior to the remand hearing.
Events Prior to Issuance of Complaint
Prior to issuance of the unfair labor practice com-
plaint, counsel for General Counsel had before him:
(a) A letter dated March 23, 1982, from the Union's at-
torney wherein , inter alia, Dick Williams (a union repre-
sentative), Betsey Blum (another union representative),
and an unnamed employee who replaced Pesch were
suggested as possible sources of information because of
their knowledge of the circumstances surrounding
Pesch's work for and departure from Respondent's em-
ployment.
(b) Pesch's affidavit dated April 20, 1982, taken by
NLRB Agent Robert Buffin. The affidavit was inconclu-
sive in that it set forth facts that could be construed as
indicative of either supervisory or leadman status.3
(c) The affidavit of Williams, dated April 20, 1982, dis-
cussed , inter alia, Pesch 's role in contract negotiations
betweeen Respondent and the Union.
(d) Buffin's undated "memo to file," summarizing his
telephone conversation with Jim Patrick. The conversa-
tion was inconclusive and general in nature. The memo
stated, among other things, "Patrick says he will not give
an aff . . . that he will tell his side of the story at the
hearing." This refusal by Patrick to give an affidavit,
which he acknowledges, is discussed infra.
(e) Buffin's "memo to file" dated May 11, 1982, sum-
marizing his conversation of that date with Pesch. Ap-
parently the conversation was a brief one and, again, it
was inconclusive so far as determining what Pesch's
status was.
(f) Buffin's "memo to file" dated May 11, 1982, sum-
marizing his conversation with Patrick on that date.
During that conversation Patrick amplified some of his
earlier statements concerning Pesch's authority but, as
was the case earlier, Patrick's statements did not put the
matter to rest. Those statements could have applied to a
leadman, as well as to a supervisor. Much more was re-
quired in order to resolve the controversy since, as noted
in the supplemental decision of June 27, 1983, even
though Pesch called himself a supervisor ". . . being a
supervisor is not necessarily being a supervisor within
the meaning of the Act . . . cases relating to supervisory
status attest the detailed examination necessary to deter-
mine that status."
(g) Patrick's letter dated May 13, 1982, addressed to
Mark Berman, a Board supervisory attorney. That letter,
written pursuant to Patrick's telephone conversation of
May 11, 1982, with Berman set forth several (alleged)
"specific facts" concerning Pesch's supervisory author-
ity. The letter may have been persuasive, provided the
"specific facts" were known to be true. However, be-
cause those "specific facts" apparently negated much of
Pesch's affidavit given under oath in affidavit form, and
were not, themselves, given under oath, the General
Counsel was placed in a rather difficult position . Because
Patrick had refused to present his side of the issue under
oath in affidavit form as Pesch had done, it would have
been unfair and unwise for the General Counsel to have
credited Patrick over Pesch and closed the case. Patrick
preferred to present his case at trial, and the General
Counsel was justified in accepting that challenge, be-
cause the issue clearly was drawn as of that moment.
The General Counsel did not, however, conclude that a
trial was inevitable. The matter was pursued further.
(h) Buffin's "memo to file" dated May 17, 1982, sum-
marizing his conversation that day with Pesch. Accord-
ing to Buffin' s memo, Pesch denied most of the conten-
tions made in Patrick's letter of May 13, 1982, and set
forth in some detail Pesch's version of events, which
tended to show leadman, rather than statutory superviso-
ry status. The General Counsel then was in an even
more doubtful situation, since the conflicting positions
vast majority of indicia of supervisory status delineated in Section 2(11)
of the Act " That argument, of course, is irrelevant. The Act clearly pro-
3 In the General Counsel's brief, it was stated, "The affidavit of Pesch vides, as the Board and courts consistently have stated, that supervisory
revealed that, with respect to his status, Pesch clearly did not possess the indicia are disjunctive in nature, not conjunctive.
PATRICK & CO.
were sharp and clear, Respondent has shown no reasona-
ble basis on which to conclude that the General Counsel
should have disregarded Pesch's earlier sworn statement
and adopted Patrick's unworn version of events.4
(i) Buffin's "memo to file" dated May 18, 1982, sum-
marizing his telephone conversation that day with Harry
Chan, manager of Respondent's Market Street store. Ac-
cording to the memo, Chan corroborated much of what
Patrick had said concerning Pesch's authority, and Chan
refused to give Buffin a sworn statement, saying "he did
not believe [sic] an affidavit was necessary."
(j) Buffin's "memo to file" dated May 19, 1982, sum-
marizing his telephone conversation that day with Pesch.
According to the memo, Buffin and Pesch discussed Buf-
fin's conversation with Chan on the preceding day, and
Pesch refuted much of what Chan had said.
The complaint was issued May 24, 1982.
Issuance of the Complaint
Applicant's principal argument is that the General
Counsel, in filling the complaint, "relied on the single af-
fidavit of alleged discriminatee John Pesch as its sole
basis for issuance of complaint," and that, in so doing,
the General Counsel failed to follow its own casehan-
dling , procedures.
It is noted, first, as outlined above, that the General
Counsel relied on considerably more than Pesch's affida-
vit.
It is noted, second, that NLRB Casehandling Manual
is "designed only to provide procedural and operational
guidance for the agency's staff," and that "the guides are
not General Counsel or Board rulings or directives and
are not a form of authority binding upon the General
Counsel or the Board."5
In EAJA cases, the test for substantial justification is
not whether an agency strictly adhered to its casehan-
dling, manual, but rather whether or not its position sub-
stantially was justified.6
Whether or not the General Counsel took affidavits
from persons other than Pesch prior to issuance of the
complaint is immaterial. The parties were at issue on the
contentions with Pesch on the one hand, and Patrick and
Chan on the other. As it developed at trial, Patrick and
Chan prevailed, but that, too, is immaterial for purposes
of this discussion. No one knew in advance of trial how
the dispute would be resolved. Prior to issuance of the
complaint, Patrick and Chan withheld from the General
Counsel the principal tool he needed to resolve conflict-
ing statements, i.e., sworn affidavits. Pesch stepped for-
ward and swore to his version of the controversy. Pat-
rick and Chan did not-they took a chance that the Gen-
eral Counsel would rely on their unsworn statements
4 The General Counsel asked for a finding that Respondent 's refusal to
give or permit sworn affidavits warrants denial of an award due to "spe-
cial circumstances ." That request is denied . There is no legal or moral
requirement that affidavits be given in advance of trial . However, consid-
erations of "substantial justification" must include all facts, and it is clear
that the General Counsel's accordance of weight to sworn statements in
the face of contradictory unsworn statements is proper procedure.
6 NLRB Casehandlmg Manual (Part One) Unfair Labor Practice, In-
troduction and Purpose
6 Iowa Parcel Service, 266 NLRB 392 (1983), enfd sub nom Iowa Ex-
press Distribution v. NLRB, 739 F 2d 1305 (8th Cir. 1984)
479
rather than on Pesch's affidavit, and they lost. Other wit-
nesses were called at trial, but they were on the periph-
ery of the dispute, not at its core. The General Counsel
took the chance that those other witnesses would bolster
Pesch at trial, but they did not, and the General Counsel
lost. Again, that fact is immaterial . What is material is
the fact that the General Counsel's evidence principally
consisted of unsworn statements refuting sworn state-
ments. Credibility issues thus raised in the unfair labor
practice case properly rested with the administrative law
judge at trial, where witnesses all would be heard under
oath, subject to examination and cross-examination.7 The
General Counsel substantially was justified in issuing a
complaint designed to obtain resolution of those credibil-
ity issues.
Events Following Issuance of Complaint
By letter dated November 1, 1982, to NLRB, Patrick
requested a "pretrial settlement conference," at which he
hoped "to win a dismissal of the subject complaint."
By letter dated November 12, 1982, the Board notified
Patrick that a "Settlement Conference" would be held
on November 23, 1982.
The conference was held as scheduled, attended by
several representatives of NLRB and Patrick & Compa-
ny After preliminary opening remarks by the regional
attorney of the Board's Regional Office, Patrick made a
formal presentation of his argument that Pesch was a
statutory supervisor. The presentation closely paralleled
the contentions of Patrick and Chan made to the NLRB
prior to issuance of the complaint, and those made at
trial. Not much was presented that the General Counsel
did not alredy know, so far as the contentions of Patrick
and Chan were concerned. However, Patrick's presenta-
tion almost entirely was conclusory. He gave the names
of potential witnesses for his argument that Pesch had
authority to hire, fire, discipline, transfer, and promote
employees, but none of those witnesses were present at
the conference. He gave the names of others who, he
said, could verify other arguments he presented.8 He
said he had proof of Pesch's authority to pledge the
credit of Patrick & Company, but that proof was not of-
fered. In short, Patrick did little more than make a state-
ment that resembled an opening trial statement, or per-
haps an outline of proposed proof made during a judicial
pretrial conference. The General Counsel did not re-
spond by presenting a summary of its case, nor was there
any requirement that he do so. The General Counsel still
was left with Patrick's unsworn contentions and could
smoke out the facts only through trial.
Counsel for Applicant argues that the General Counsel
should have dug deeper, and should have interviewed
witnesses named by Patrick. Possibly the General Coun-
sel could have done more than was done, but degree, not
principle, would have been involved. It was Patrick and
Chan who supervised Pesch, and it was they who gave
Pesch whatever authority Pesch held. Regardless of
7 Charles H. McCauley, 269 NLRB 791, 793 fn 11 (1984), International
Maintenance Systems, 267 NLRB 1136, 1136-1139 (1983).
s It is noted that Patrick & Company did not call any witnesses at trial,
other than Patrick and Chan
480 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
what other witnesses may have said, the issue created by
the differences between the contentions of Patrick and
Chan and Pesch still would have to be resolved. No
agreement was reached at the settlement conference, and
the General Counsel referred the matter for trial. In that,
the General Counsel substantially was justified. Prior to
trial, counsel for the General Counsel interviewed poten-
tial witnesses, and took the sworn affidavit of Robert
Grimes, a sales clerk who had worked for Patrick &
Company approximately 30 years. Grimes substantially
supported Pesch's version of the latter's limited, leadman
type of authority. It is apparent that trial preparation by
counsel for the General Counsel did not convince him
that he was embarked upon a hopeless quest.
The Trial
As noted above, this supplemental decision mostly is
limited to pretrial matters because those were the matters
principally addressed during the remand hearing and in
arguments of Patrick & Company's counsel.
At trial, the Respondent's motion to dismiss after the
close of the General Counsel's presentation of his case in
chief was denied. Assessment of credibility of witnesses
was of considerable import . Counsel for Patrick & Com-
pany acknowledged at the time that the issue was a
doubtful one.
Nothing was disclosed during the remand hearing that
dictates a different conclusion , so far as the trial is con-
cerned . For reasons stated in the supplemental decision
of June 27, 1983, the General Counsel substantially was
justified , on the basis of the record existing at that time,
in his trial decisions and conduct.
Eligibility for an EAJA Award
During the remand proceeding, the General Counsel
sought by subpoena a vast amount of detailed accounting
information concerning the years 1981, 1982, and 1983
for Patrick & Company, Patrick, personally, and seven
subsidiary businesses. Included were all ownership
records, balance sheets, account ledgers, state and Feder-
al income tax returns, canceled checks, investment and
asset records, bank accounts, accounting and auditing
records, tax audits and assessments, all offers to buy and
sell Patrick & Company or any affiliates thereof, all
records relating to business relationships, and many other
matters.
The subpoenas were quashed by me as being burden-
some and oppressive. They amounted to a fishing expedi-
tion. Had the subpoenaed material been produced, it
could have entailed much time, effort, transportation dif-
ficulty, and space on the part of the persons and compa-
nies involved. Further, their use at trial would have
opened up a subsidiary subject of considerable complex-
ity, difficulty, and length, all without knowing in ad-
vance what it was, if anything, that may be relevant. In
all probability, a full-blown accounting trial would have
been ensued. The only question would have been wheth-
er or not the EAJA applicant had a net worth of not
more than $5 million and an employee complement of no
more than 500 persons, and the General Counsel showed
no substantial reason to doubt the figure on the applica-
tion.
The Board's rules provide, in applicable part:9
(b) The application shall include a statement that
the applicant's net worth does not exceed . . . $5
million . . . . 10
(f) Each applicant . . . must provide with its ap-
plication a detailed exhibit showing the net worth
of the applicant and any affiliates (as defined in sec.
102.143(g)) when the adversary adjudicative pro-
ceeding was initiated. The exhibit may be in any
form convenient to the applicant that provides full
disclosure. . . . The administrative law judge may
require an applicant to file such additional informa-
tion as may be required to determine its eligibility
for an award.
Applications must be signed as true, under oath or penal-
ty of perjury, by an authorized person.
The application of Patrick & Company on its face ap-
pears to be in proper order. Required exhibits were at-
tached to the application. Patrick credibly testified at the
remand hearing that the exhibits were financial records
kept and maintained by Patrick & Company accountants
pursuant to regular company practice and in accordance
with standard and proper accounting methods and proce-
dures;ll that the exhibits had not been altered in any
manner for purposes of the application; and that the
same information as that attached to the application was
used in preparing all state and Federal tax returns.12
The General Counsel argues that the exhibits do not
include one piece of property; that accumulated depre-
ciation erroneously was included; that Patrick personally
owned a one-third interest in NTG Associates which, in
turn, owns nondisclosed property leased to Patrick &
Company affiliates; that the application includes a dispar-
ity in assessed tax evaluations ; and that there were cer-
tain minor accounting discrepancies that would change
the exhibits, including figures relating to depreciation re-
serve, reserve for bad debts, inventories, and good will.
Finally, the General Counsel challenged inclusion for
fees of amounts claimed for time spent by Patrick and
four of the applicant 's employees, in work related to the
application. 13
e Board's Rules and Regulations , Sec. 102 147
to The fact that the applicant does not have more than 500 employees
is not in serious dispute.
11 Patrick & Company employs a CPA for all tax work. Internal audits
are performed by in-house accountants.
12 Several references were made during the remand hearing to "Pat-
rick Consolidated " Counsel for the General Counsel often referred to
"Patrick Consolidated" as though Patrick & Company treated it as a sep-
arate legal entity. It is clear, as explained by Patrick, that "Patrick Con-
solidated" is nothing more than an accounting label, used as an umbrella
for accounting convenience to denote the financial status of Patrick &
Company together with all its subsidiaries and affiliates.
13 Some claimed items were reduced or eliminated at the remand hear-
ing. Counsel for both the General Counsel and Patrick & Company were
given leave to submit some postremand hearing material to me That ma-
terial has been carefully reviewed, and it is included in the record.
PATRICK & CO.
Other than the matter of fees for employees , including
Patrick, the arguments of the General Counsel ' are not
pursuasive . Patrick credibly testified that the greatest net
worth ever owned by the components of Patrick Con-
solidated , including the present time, was approximately
$3.13 million , and that figure encompasses all accounts de-
clared on tax returns, as reflected in regularly prepared
accounting statements , financial reports, and audits for
Patrick & Company and all its subsidiaries and affiliates.
That testimony is deemed by me to be adequate for the
purpose of these proceedings , because there is no reason-
able basis for considering the testimony to be wrong.
The General Counsel contends that the testimony is
wrong , and that the applicant's eligibility for an award is
in doubt. There is no reasonable basis for concluding that
Patrick altered or concealed any figure or figures in
order to file an EAJA claim . Hence, proof of error
would require an exhaustive audit of all accounts for sev-
eral years , maintained by Patrick & Company, seven of
its affiliates , and possibly Patrick himself. Such an audit
would cost far more than the award that is sought, and is
not deemed necessary or desirable.
So far as fees claimed for Patrick , Chan, Thelma Mon-
taya, Joann Groaver , and Shirley Edelson are concerned,
all of them are employees of Patrick & Company, and
none of them is an attorney, agent, or expert witness
481
within the meaning of the statute and rules,14 so far as
this record shows. None is entitled to fees under EAJA.
All other claimed fees and expenses15 are proper for
inclusion within the application.
Findings relative to eligibility of Patrick & Company
discussed above are advisory only because they are not
necessary to the decision recommended. As found above,
the General Counsel substantially was justified in his ac-
tions at all times during the investigative and litigation
phases of these proceedings.
On these findings of fact and conclusions of law and
on the entire record, I issue the following recommend-
ed16
ORDER
The application of Patrick & Company for attorney
fees and expenses under the Equal Access to Justice Act
is denied.
14 5 U.S C. § 504(a)(2); Board Rules and Regulations, Sec. 102 . 145(a)
15 As modified during trial
is If no exceptions are filed as provided by Sec. 102.46 of the Board's
Rules and Regulations, the findings , conclusions , and recommended
Order shall, as provided in Sec 102.48 of the Rules, be adopted by the
Board and all objections to them shall be deemed waived for all pur-
poses.