Pierre Pellaton Enterprises, Inc.

National Labor Relations Board - Board Decisions

Jan 5, 1979

239 N.L.R.B. 1211 (N.L.R.B. 1979)

PIERRE PELLATON ENTERPRISES, INC.
Pierre Pellaton Enterprises, Inc.; Pierre Pellaton
Apartments at Mineola, Inc.; Pierre Pellaton Apart-
ments, Inc.; Pierre Pellaton at Clinton Avenue,
Inc.; Fardale Apartments Corp.; Pierre Pellaton an
Individual, and Estate of Pierre Pellaton; and Mi-
chael Kluger, Fred Seldenfeld and Aaron Sokol, a
co-partnership doing business as S.K.S. Associates
and Local 307, Service Employees International
Union, AFL-CIO. Case 29-CA-2670
January 5, 1979
SECOND SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN FANNING AND MEMBERS MURPHY
AND TRUESDALE
On September 1, 1978, Administrative Law Judge
Max Rosenberg issued the attached Decision in this
proceeding. Thereafter, Respondent Michael Kluger,
Fred Seidenfeld and Aaron Sokol, a co-partnership
doing business as S.K.S. Associates, filed exceptions
and a supporting brief.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the Na-
tional Labor Relations Board has delegated its au-
thority in this proceeding to a three-member panel.
The Board has considered the record and the at-
tached Decision in light of the exceptions and brief
and has decided to affirm the rulings, findings, and
conclusions of the Administrative Law Judge and to
adopt his recommended Order, as modified herein.
The Administrative Law Judge recommended that
interest on the backpay award be computed as set
forth in Florida Steel Corporation, 231 NLRB 651
(1977). However, the method of determining the in-
terest rate set forth in that decision is not applicable
in cases in which an earlier Order of the Board pro-
viding for a different interest rate has been enforced
by a court of appeals. Accordingly, we shall order
interest to be paid at the rate of 6 percent, as ordered
in our original Decision and Order and enforced by
the court of appeals.
ORDER
Pursuant to Section 10(c) of the National Labor
Relations Act, as amended, the National Labor Re-
lations Board adopts as its Order the recommended
Order of the Administrative Law Judge and hereby
orders that the Respondent Michael Kluger, Fred
Siedenfeld and Aaron Sokol, a co-partnership doing
business as S.K.S. Associates, Great Neck, New
York, its officers, agents, successors, and assigns,
take the action set forth in the said recommended
Order, except that interest is to be paid at the rate of
6 percent per annum as stated in our original Deci-
sion and Order.
SECOND SUPPLEMENTAL DECISION AND
ORDER
MAx ROSENBERG. Administrative Law Judge: On January
24, 1973, the Board issued its original Decision and Order
in this proceeding in which it found that Respondent, Pier-
re Pellaton Enterprises, Inc., et al., herein called Pellaton,
had violated Section 8(a)(3) of the Act by discriminatorily
discharging William Blackman, Donald McCullough, Ber-
nard Short, and Rufus P. Short.' It therefore ordered Pella-
ton, its officers, agents, successors, and assigns, to offer the
four discriminatees immediate reinstatement and to mlke
them whole for any loss of pay which they may have suf-
fered. That Order was enforced by the United States Court
of Appeals for the Second Circuit on January 29, 1974.
On October 23, 1974, the Regional Director for Region
29 issued an amended backpay specification naming as Re-
spondents both Pellaton and S. K. S. Associates, Inc.,
herein called S. K. S., which has acquired the properties of
Pellaton on September 15, 1972. Prior to the opening of the
backpay hearing on January 21, 1975, the estate of Pierre
Pellaton entered into a settlement stipulation with the Gen-
eral Counsel, Local 307, Service Employees International
Union, AFL-CIO, the Charging Party herein, and the four
discriminatees, but without the concurrence of S. K. S.,
pursuant to which it paid $12,000 to the discriminatees for
the period from the commencement of its backpay liability
until September 15, 1972, the date on which it sold its prop-
erties to S. K. S.2 When the backpay hearing opened on
January 21, 1975, the General Counsel submitted the set-
tlement stipulation into evidence, withdrew from the
amended backpay specifications the allegations pertaining
to Pellaton, and proceeded solely against Respondent S. K.
S. on the ground that it had become a bona fide successor
to Pellaton on and after September 15, 1972, and therefore
was responsible as such for remedying Pellaton's unfair la-
bor practices on and after that date. On May 30, 1975, I
issued a Supplemental Decision and Order finding that S.
K. S. was a bona fide successor to Pellaton and assessing
backpay against it to be paid to the discriminatees in the
amounts set forth in the amended backpay specification.
Thereafter, on January 23, 1976, the Board adopted that
Supplemental Decision and Order.;
On May 13, 1976, the Board filed an application for
enforcement of its Supplemental Order with the United
States Court of Appeals for the Second Circuit. However,
on August 26, 1976, the Board and S. K. S. entered into a
stipulation pursuant to which the Board's application for
enforcement was withdrawn and S. K. S. was to be afford-
ed an opportunity to present its position to the Board con-
cerning the propriety of the settlement stipulation which
the General Counsel had entered into with Pellaton, the
1201 NLRB 409.
2Pierre Pellaton. after whom the various entities listed in the case caption
were named, died at some time prior to the backpay proceeding.
3222 NLRB 555.
1211
DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Charging Party, and the four claimants. Subsequently, on
March 25, 1977, the Board issued a Notice To Show Cause
why it should not find that' Pellaton and S. K. S. were
jointly and severally liable for the backpay accruing after
September 15, 1972.' Responses were filed thereto by the
General Counsel, Pellaton, and S. K. S. and, on July 21,
1977, the Board issued an Order reopening record in which
it remanded this proceeding for the sole purpose of receiv-
ing evidence on the questions of the acceptability and ef-
fect of the January 21, 1975, settlement stipulation, and the
putative liability of Pellaton for backpay accruing after
September 15, 1972.
At the hearing on remand, counsel for S. K. S. sought to
relitigate the successorship issue which had already been
adversely determined against it both in the Supplemental
Decision and Order of May 30, 1975, and in the Board's
adoption of that Decision on January 23, 1976, in another
attempt to immunize his client from any backpay liability
as a successor after September 15, 1972. Although counsel
was permitted to adduce newly discovered evidence bear-
ing on this issue, his attempt to do so proved abortive.
Counsel thereupon urged that S. K. S.'s backpay liability, if
any, should be jointly shared with Pellaton after that date
on a 50-50 basis, although, apart from argumentative as-
sertion, he proffered no evidence to support this thesis. Be-
fore the close of the hearing, the General Counsel intro-
duced into evidence a document which he had received
from the Division of Corporations and State Records, De-
partment of State of New York on May 23, 1974, reporting
that a certificate of dissolution of the corporate structure of
Pellaton had been filed on May 16, 1974.
In Golden State Bottling Co., Inc. v. N. LR.B.,5 the
United States Supreme Court ruled that it was within the
Board's remedial powers under Section 10(c) of the Act to
issue a reinstatement and backpay order against a bona
fide successor, such as S. K. S. herein, which did not itself
commit the unfair labor practices charged. In that case,
both the predecessor and the successor remained in busi-
ness, and the Board ordered both firms jointly or severally
to award backpay to the discriminatee involved. In approv-
ing these remedial measures, the Court noted that, in strik-
ing a balance between the conflicting legitimate interests of
the bona fide successor, the public, and the affected employ-
ees,
The ultimate problem is the balancing of the conflict-
ing legitimate interests. The function of striking that
balance to effectuate national labor policy is often a
difficult and delicate responsibility, which the Con-
gress committed primarily to the National Labor Re-
lations Board, subject to limited judicial review.
N.LR.B. v. Teamsters Local 449, 353 U.S. 87, 96
(1957).
Echoing the concern for the victimized employees which
the Board expressed in Perma Vinyl Corporation that:
Especially in need of help, it seems to us, are the em-
ployee victims of unfair labor practices who, because
4228 NLRB 1070.
3414 U.S. 168, 181 (1973).
of their unlawful discharge, are now without mean-
ingful remedy when title to the employing business
operation changes hands, 6
the Court drew upon its observation in John Wiley & Sons,
Inc. v. David Livingston 7 that:
Employees ... ordinarily do not take part in nego-
tiations leading to a change in corporate ownership.
The negotiations will ordinarily not concern the well-
being of the employees, whose advantage or disadvan-
tage, potentially great, will inevitably be incidental to
the main considerations. The objectives of national la-
bor policy, reflected in established principles of feder-
al law, require that the rightful prerogative of owners
independently to rearrange their businesses and even
eliminate themselves as employers be balances by
some protecticn to the employees from a sudden
change in the employment relationship.
Finally, in Golden State the Court pointed out that all of
the important objectives of the Act in this area might be
achieved at a relatively minimal cost to the bona fide suc-
cessor. Thus, once having received notice that his predeces-
sor had been ordered to remedy unfair labor practices by
the Board, the successor's potential liability for remedying
those statutory intrusions could be reflected in the price
which he paid for the business, or he could obtain an in-
demnity clause in the contract of sale which would immun-
ize him for any liability arising from the seller's unfair la-
bor practices.
In the instant case, I have heretofore found, with Board
approval, that S. K. S. was timely notified by the Union
prior to its purchase of Pellaton's enterprises on September
15, 1972, that the former might be responsible for rem-
edying Pellaton's antecedent unfair labor practices by of-
fering reinstatement to the four discriminatees and award-
ing them whatever sums of backpay which might thereafter
accrue. I have also found, with the concurrence of the
Board, that at the sale closing on September 15, 1972,
S. K. S. sought to obtain a clause in the purchase agree-
ment pursuant to which Pellaton would shoulder the bur-
den of liability after that date for the unfair labor practices
which Pellaton had committed. However, when the repre-
sentatives of Pellaton demurred, S. K. S. voluntarily opted
to close on the sales' agreement in the belief that it has
obtained a sound a lucrative business deal.
At the very inception of its successorship, S. K. S. pos-
sessed ample opportunity to shield itself against the contin-
uing accrual of backpay by offering reinstatement to the
four claimants, a course which it deliberately eschewed. 8
Moreover, pursuant to the terms of the contract of sale,
6 164 NLRB 968, 969 (19 67 )., sub norm. United States Pipe and Foundry
Company [Perma Vinyl Corpl. Dode Plastics Co.l, enfd. 398 F.2d 544 (5th
Cir. 1978).
7376 U.S. 543, 549 (1964).
8 At the hearing on remand, S. K. S. submitted into evidence letters which
it mailed on July 31, 1975, to discriminatees William Blackman, Donald
McCullough, Bernard Short, and Rufus P. Short, purporting to offer them
reinstatement to their former or substantially equivalent employment. Al-
though not germane to the Board's demand, I admitted these documents
into evidence to facilitate any future compliance proceedings. If these offers
of reinstatement are ultimately deemed to be valid, S. K. S. could conceiv-
ably be relieved of any backpay liability after that date.
1212
PIERRE PELLATON ENTERPRISES, INC.
S. K. S. ostensibly was invested with the right to recoup
from Pellaton any sums of backpay for which it might be
liable at any time after September 15, 1972, in view of the
contractual language that:
It is understood that the indebtednesses of the various
corporations shall be certified by the seller [Pellaton]
and said sum shall be as of the date of the transfer of
the stock. In the event it shall be subsequently de-
termined that there are accounts not set forth in said
certification, that were due and payable as of the date
of the transfer of the stock . . . they shall nevertheless
remain the liability of the seller and in the event the
seller shall fail to make payment of same, the purchas-
ers [S. K. S.] shall have the right to pay same and
charge off the payment first as against interest due on
account of the notes hereinafter set forth and in the
evnet the interest shall be insufficient to satisfy said
amounts, then the purchasers shall have the right to
deduct from the lien of said notes the additional
amounts paid by them.
Furthermore, nothing in the contract of sale barred S. K. S.
from bringing suit against Pellaton for whatever sums of
backpay which had accrued following the sale.
As heretofore chronicled, the corporate structure of Pel-
laton was placed in dissolution on May 16, 1974, in accor-
dance with the laws of the State of New York. So far as this
record stands, Pellaton thereafter ceased to exist.9
In my opinion, the evidence adduced on the record as a
whole dictates that, under the circumstances of this case,
the settlement stipulation should be accepted by the Board,
and S. K. S. should be held severally accountable for the
reinstatement of the four discriminatees and the award of
such sums of backpay as shall have accrued from Septem-
ber 15, 1972, until such time as S. K. S. has made valid
offers of reinstatement to them. In light of the dissolution
of Pellation on May 16, 1974, of which I find S. K. S. was
fully aware, this circumstance is not unlike the one postu-
lated by the Supreme Court in its Golden State decision
when it stated that "joint and several liability will more
fully insure that the employee is fully recompensed by pro-
tecting him, e.g., against the insolvency of the successor." '0
Although in the instant case it is the predecessor rather
than the successor which vanished from the scene, the logic
is the same, and there is no persuasive reason why the
protection afforded to the victimized employees should not
be the same. Because Pellaton ceased to exist on and after
May 16, 1974, I perceive no viable basis for imposing joint
or several liability on that defunct enterprise as S. K. S.
Thlat S. K. S. was not unaware of the impending dissolution of Pellaton
i demonstrated by certain filing certificates dated as early as April 1973
which it introduced into evidence. These certificates manifested Pellaton's
intention to dissolve its corporate structure.
°414 U.S. 168. 187 (1973).
urges. Moreover, in view of the demise of the corporate
Pellaton as well as its individual owner, the payment of the
sum of $12,000 to the claimants pursuant to the settlement
stipulation could only inure to the benefit of S. K. S., for, if
the backpay litigation had proceeded against both Respon-
dents without the settlement stipulation, S. K. S. might
conceivably have been held responsible for the payment of
this sum as well.
In sum, I find and conclude that, as S. K. S. purchased
the corporate structure and assets of Pellaton with full
knowledge that it might be saddled with the responsibility
for complying with the Board's Order to reinstate the dis-
criminatees and award them backpay from the date of its
purchase; as S. K. S. knowingly traded off an indemnity
clause in its contract of sale with Pellaton to shield it
against any backpay liability because the price was right;
as S. K. S. might have pressed a claim or brought suit
against Pellaton prior to the latter's dissolution for any ac-
crued backpay liability; as S. K. S. could have foreclosed
any backpay liability following its successorship on Sep-
tember 12, 1972, by making a valid offer of reinstatement
to the discriminatees; and, as Pellaton no longer existed
when the settlement stipulation was executed and had paid
over the sum of $12,000 to the claimants which otherwise
might have been exacted from S. K. S., the settlement stip-
ulation should be accepted and S. K. S. should be held
accountable for the reinstatement of the four discrimina-
tees and payment of the necessary sums of backpay to
them.
ORDER"
Having found and concluded that Respondent S. K. S.
became the bona fide successor to Pellaton on September
15, 1972, that the settlement stipulation executed by the
General Counsel, the Union, Pellaton, and the four claim-
ants should be adopted, and that Respondent S. K. S. is
responsible for making those individuals whole for any loss
of pay which they may have suffered since that date, I shall
order that it pay to William Blackman, Donald McCul-
lough, Bernard Short, and Rufus P. Short, the amounts
specified in the amended backpay specification, with in-
terest thereon to be computed in the manner prescribed in
Florida Steel Corporation, 231 NLRB 651 (1977), 2 less any
lawfully required tax withholding, plus such additional
backpay and interest as has accrued until such time as
S. K. S. makes, or has made, valid offers of reinstatement to
the discriminatees.
" In the event no exceptions are filed as provided by Sec. 102.46 of the
Rules and Regulations of the National Labor Relations Board, the findings.
conclusions, and recommended Order herein shall, as provided in Sec.
102.48 of the Rules and Regulations, be adopted by the Board and become
its findings, conclusions, and Order, and all objections thereto shall be
deemed waived for all purposes.
12 See, generally. Iiu Plumbing A Heating Co.. 138 NLRB 716 (1962).
1213