Phil Smidt & Son, Inc.

National Labor Relations Board - Board Decisions

Sep 30, 1985

276 N.L.R.B. 1157 (N.L.R.B. 1985)

PHIL SMIDT & SON
Phil Smidt & Son, Inc . and Hotel , Motel and, Res-
taurant Employees and Local Bartenders Inter-
national Union , Local No. 103, AFL-CIO. Case
13-CA-18480(E)
30 September 1985
SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN DOTSON AND MEMBERS
DENNIS AND BABSON
On 25 March 1985 Administrative Law Judge
Benjamin Schlesinger issued the attached supple-
mental decision . The. Applicant filed exceptions
and a supporting brief, and the General Counsel
filed an answering brief to the Respondent's excep-
tions.
The National Labor Relations Board has delegat-
ed. 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 briefs and has
decided to affirm the judge's rulings, findings, and
conclusions' and to adopt the recommended
Order.
ORDER
The National Labor Relations Board adopts the
recommended Order of the administrative law
judge and orders that the Applicant, Phil Smidt &
Son, Inc., Whiting, Indiana, for an award under the
Equal Access to Justice Act is dismissed.
i Unlike the judge , we find that in the particular circumstances of this
case the Respondent may have been a prevailing party in the backpay
proceeding Nevertheless , in agreement with the judge and for the rea-
sons stated in his supplemental decision , we find that the General Coun-
sel's position in issuing the backpay specification and proceeding to a
hearing was "substantially justified" within the meaning of EAJA We
believe that Congress in the amendments to EAJA (Pub L 99-80, 99
Stat 183, et seq , 5 U S C § 504) did not alter but merely clarified that
the definition of "substantially justified " means more than "mere reason-
ableness" H R 99-120 at 9 Accordingly , we adopt the judge 's recom-
mendation to dismiss the Applicant 's application
Alan M. Kaplan, Esq., of Chicago, Illinois , for the Gener-
al Counsel.
Timothy F Kelly, Esq. (Beckman, Kelly and Smith), of
Hammond , Indiana , for the Respondent.
SUPPLEMENTAL DECISION ON
APPLICATION FOR AWARD OF
ATTORNEYS FEES AND EXPENSES
BENJAMIN SCHLESINGER , Administrative Law Judge.
On January 16, 1985, Applicant Phil Smidt & Son, Inc.
filed with the National Labor Relations Board an appli-
cation for award of fees and expenses under the Equal
Access to Justice Act, Pub. L. 96-481, 94 Stat. 2325 (the
EAJA) and Section 102.143 of the Board's Rules and
Regulations claiming attorney 's fees of $9675 , attorney's
1157
expenses of $588, and expert witness' fees of $3200, total-
ing $13 ,463. On February 12, 1985, the General Counsel
moved to dismiss the application on numerous grounds,
including the contentions that the General Counsel's
processing of this proceeding was substantially justified
and that' it was the prevailing party i Because I find
merit in these contentions, the motion is granted.
'Applicant seeks reimbursement of its fees and expenses
only for the compliance portion of the underlying pro-
ceeding. Before the expenses claimed herein were in-
curred, Applicant was found to have violated the Na-
tional Labor Relations Act, -29 U.S.C. § 151 et seq.,
before an administrative law judge, the Board, and a
court of appeals. On March 4, 1982, the Board issued its
Decision and Order, affirming the findings of the admin-
istrative law -judge, finding that Applicant discharged
employee Josephine Faught in violation of Section
8(a)(1) of the Act, and ordering Applicant to make her
whole for any loss of wages and other compensation or
benefits she may have suffered as a result of her unlawful
suspension and discharge. (260 NLRB 668.) On February
14, 1985, the United States Court of Appeals for the Sev-
enth Circuit granted enforcement of the Board's Order.
(729 F.2d 1464.) An issue thereafter arose concerning the
appropriate amount of backpay due to Faught; and on
May 11, 1984, the Acting Regional Director issued a
backpay specification, claiming that Applicant's gross
backpay liability was $3229.28, with interest from Febru-
ary 23, 1979.
During the backpay hearing, Applicant placed in evi-
dence an offer of compromise, whereby it offered to pay
in full settlement of the claim the sum of $611.93, with
interest. That offer was rejected; and on December 21,
1984, I issued a supplemental decision, JD-482-84, find-
ing backpay liability in the sum of $430.17, with interest.
No exceptions were filed, and on January 22, 1985, the
Board issued an order adopting the findings, conclusions,
and recommendations of my decision.2 Applicant claims
that if its offer of compromise had been accepted it
would not have incurred its expenses and that the Gener-
al Counsel unreasonably and without substantial justifica-
tion proceeded to hearing on the backpay liability, thus
entitling Applicant to all the fees and expenses it in-
curred.3
The-Board in Carthage Heating & Sheet Metal Co., 273
NLRB 120 (1984), adopted my decision in which I
wrote:
In Section 202(a) of the EAJA, the Congress
found that certain individuals , partnerships , corpo-
rations, and labor and other organizations may be
i Sec 203(a)(1) of the EAJA provides that only prevailing parties are
entitled to awards and that, even if Applicant prevailed , it may not be
awarded fees and expenses if the Government 's position was substantially
justified
2 Applicant 's application was filed prior to the Board 's Order Howev-
er, on February 15, 1985 , Applicant refiled its application , which was re-
ceived by the Board on February 19, 1985 Although the General Coun-
sel contests the prematurity of the original application , for the purposes
of this decision , I will deem that Applicant has adequately corrected
whatever procedural error it may have made
3 Of course , if the offer had been accepted , the issue would be raised
as to what, if any, fees and expenses would be due under the EAJA
276 NLRB No. 122
1158 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
deterred from seeking review of, or defending
against , unreasonable governmental action because
of the expenses involved in securing the vindication
of their rights in civil actions and in administrative
proceedings. Thus, Congress expressed in, Section
202(b) that it was the purpose of the EAJA_ to di-
minish the deterrent effect of seeking review of or
defending against governmental action by providing
in specified situations for an award of attorney's
fees, expert witness fees, and other costs against the
United States.
The Committee on Small Business in its report H.
Rep. 96-1005,• part 1, 96th Cong. 2d Session, p. 5,
noted that the legislation was intended to respond
to a chronic problem small business owners have in
contesting or challenging the unreasonable exercise
of governmental authority because of the time and
expense required to challenge the vast resources- of
the Federal Government. The report noted: "It is
expected that this bill will cause agencies to be
more deliberate in their regulatory activity." Fur-
thermore the committee noted, p. 7:
In cases involving Government action, small
business does not have the resources to defend itself
against unjustified claims. Further, the cost of vindi-
cation routinely exceed the amounts at stake.
Lastly, the Government does not have the econom-
ic incentive or disincentive to closely evaluate the
resonableness of its case before proceeding. For
these reasons it appears that the American Rule
[that each party must bear his/her own cost of liti-
gation] is inappropriate in actions involving- the
Government and individuals or small businesses.
And at page 8, the Committee wrote: ,
It must be noted that the real aim of this legisla-
tion is not to spend great sums to pay the costs of
fighting unwarranted Federal action: Rather,,-it-Rather it is
intended that the act will force the Federal depart-
ments and agencies to substantially improve the
quality of their enforcement and other proceedings.
But let there be no mistake, your committee clearly
intends that where a small business or individual
prevails against the Government either in toto or in
substance, reasonable costs and fees shall. be paid to
him unless the Government can show that its action
was substantially justified. -
Thus, the essence of the EAJA is not only to reim-
burse those who have been taken advantage of be-
cause of the greater resources and expertise of the
United States but also to deter the United States
from taking advantage of ,small businesses and other
organizations by ensuring that the Government
carefully reviews and evaluates those matters which
it ultimately seeks to litigate.
There were four defenses interposed by Applicant in
the backpay proceeding: (1) that. the backpay 'period
lasted only 90' days from February. 23, 1979, (2) that
Faught was entitled to nothing, because she withdrew
from the labor market; (3) that the specification errone-
ously used the earnings of another employee to project
what Faught would have earned had she been employed
during the backpay period; and (4) that Faught' s interim
earnings exceeded Applicant's backpay obligation to her
for three of the five quarters alleged in the backpay
period I found that the first three grounds had no merit.
Accordingly, the General Counsel prevailed on a sub-
stantial portion of the backpay specification.
However, I agree with Applicant's fourth contention
and found greater interim earnings than had been alleged
by the General Counsel That does not mean that Appli-
cant, is entitled to some portion of its fees and expenses.
The finding of an unfair labor practice is "presumptive
proof that some backpay is owed." Mastro Plastics Corp.,
354 F.2d 170, 178 (2d Cir. 1965), cert. denied 384 U.S.
972 (1966). The General Cousel bears the, burden of
proving the applicable backpay period and an appropri-
ate formula for computing backpay. It is the respondent
which bears the burden to prove interim earnings.
NLRB v. Brown & Root, 311 F.2d 447, 454 (8th Cir.
1963); DeLorean Cadillac, 231 NLRB 329 (1977), enfd. in
relevant part 614 F.2d 554 (6th Cir. 1980); NLRB v. Izzi,
395 F.2d 241, 244 (1st Cir. 1968); NLRB v. McCann Steel
Co., 570 F.2d 652, 655 (6th Cir. 1978); NLRB v. Mercy
Pennisula Ambulance Service, 589 F.2d 1014, 1017 (9th
Cir. 1979).
Thus Applicant's principal contention that Faught's in-
terim earnings were not analyzed with the care and scru-
tiny that Applicant applied has no-merit. It may have
been incumbent on the General Counsel in a backpay
proceeding to go forward with testimony from Faught as
to her interim earnings, but the ultimate burden of proof
on this subject must be on Applicant. NLRB v. Izzi,
supra. Applicant was not taken advantage of by the insti-
tution of the compliance proceeding. Rather, it caused
the proceeding,to be instituted by its unlawful discharge
of'.Faught. The General Counsel, having determined that
Faught was not in Applicant's employ for five quarters,
was justified in issuing the backpay specification. Fur-
thermore, with respect to the specification which the
General Counsel had the burden to prove (the backpay
period and the formula), the General Counsel proved
them and the Applicant's attack on those specifications
failed. Accordingly, the General Counsel was the pre-
vailing party.4 . - . - ,
S In light of this conclusion , it is unnecessary to dispose of the numer-
- ous issues raised in the General Counsel 's motion to dismiss . However, it
appears firmly established that, until issuance of a complaint in an unfair
labor practice proceeding, no previously incurred expenses may be
awarded in an EAJA application Carthage Heating & Sheet Metal Co
Similarly, until' the issuance of a backpay specification , here May 11,
1984, no fees and expenses may be awarded
PHIL SMIDT & SON 1159
On the foregoing findings of fact and conclusions of
law, and upon consideration of the Application , the Gen-
eral Counsel 's motion to dismiss , and Applicant 's reply,
and pursuant to Section 10(c) of the Act , I issue the fol-
lowing recommeded5
ORDER
The Application is dismissed.
5 If no exceptions are filed as provided by Sec. 102.46 of the Board's
Rules and Regulations , the findings , conclusions , and recommended Board and all objections to them shall be deemed waived for all pur-
Order shall , as provided in Sec. 102.48 of the Rules, be adopted by the poses.