Sav-On Drugs

National Labor Relations Board - Board Decisions

Oct 31, 1990

300 N.L.R.B. 691 (N.L.R.B. 1990)

691
300 NLRB No. 78
SAV-ON DRUGS
1 Sav-On Drugs, 253 NLRB 816 (1980), enfd. 728 F.2d 1254 (9th Cir.
1984).
2 A further issue concerning successor American Stores Company’s liability
was also open. The judge found it liable and there are no exceptions to the
finding.
3 Regarding the stock option plan, par. 18(a) of the amended backpay speci-
fication states:
[I]n a unit of 425 eligible pharmacists during 1982, with a possible total
stock purchase power of 106,250 shares, only twenty-six (26) pharmacists
availed themselves of the plan for a total stock purchase of 2,043 shares.
The formula applied to reasonably determine the number of shares each
discriminatee, including Lipton, would have purchased, divided the actual
stock purchased (2043 shares) into the total stock available (106,250) to
arrive at a percentage figure which represents the percentage of available
stock purchased by the unit employees. This percentage is 1.92 percent.
The percentage figure of 1.92 percent was then multiplied by the number
of maximum shares available to each person (250) to arrive at a stock
purchase amount for each person available to purchase stock in the unit,
or 4.80 shares per person, rounded off to 5 shares. Each discriminatee,
including Lipton, was then given credit for having purchased that number
of shares during 1982 at $30.88 per share x 5 shares = $154.40, and sell-
ing all 5 shares at $75.00 per share, or $375.00, on November 16, 1984
when Respondent Jewel was acquired by Respondent American and all
shares were called. Therefore, Lipton’s shares were worth $220.60, the
difference between $375.00, the sell price, and $154.40, the purchase
price, plus $20.79 in returns and stock purchase discounts, for a total of
$241.39.
Par. 18(b) of the specification alleges that, in 1983, one employee purchased
250 shares, and in 1984, two employees purchased a total of 200 shares. It
further states that because this amounted to ‘‘de minimis’’ participation, ‘‘no
shares were credited for those years.’’
Sav-On Drugs, Inc.; Jewel Companies, Inc.; Amer-
ican Stores Company; Osco Drug, Inc. and
Howard A. Lipton. Case 31–CA–9143
October 31, 1990
SUPPLEMENTAL DECISION AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
CRACRAFT AND DEVANEY
On May 24, 1989, Administrative Law Judge Rich-
ard D. Taplitz issued the attached supplemental deci-
sion. The Charging Party filed exceptions.
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 has decided to af-
firm the judge’s rulings, findings, and conclusions only
to the extent consistent with this Supplemental Deci-
sion and Order.
In the underlying case,1 the Board found that Re-
spondent Sav-On Drugs, Inc., violated the Act by dis-
charging employee pharmacists, including Charging
Party Howard Lipton, and ordered that those employ-
ees be made whole. After enforcement of the Board’s
Order, Sav-On entered into a settlement agreement,
pursuant to which four checks totaling $48,326.79
were sent by letter dated January 15, 1986, to Lipton’s
attorney. This amount included $241.39 as a stock op-
tion payment. Lipton, however, never agreed to the
settlement and has consistently asserted that he is due
more than the $241.39 for the stock option payment.
The checks were never cashed by Lipton nor returned
to the Respondent.
Following the Board’s denial of Lipton’s motion for
clarification on July 21, 1986, he filed a petition for
review with the Ninth Circuit Court of Appeals. On
October 15, 1987, the court remanded the proceeding
for an evidentiary hearing on the Charging Party’s con-
tentions. By unpublished order of April 20, 1988, the
Board accepted the Ninth Circuit’s decision as the law
of the case and remanded the case to the Regional Di-
rector for the purpose of arranging a hearing.
At the hearing the parties stipulated as to certain
amounts owed to Lipton ($2114 more than offered by
settlement in January 1986). They left open issues con-
cerning additional backpay from the stock option plan
and Lipton’s entitlement to additional interest since
1985.2
Lipton contended that he should have received more
backpay from the stock option plan than provided for
in the backpay specification.3 He claimed that he
would have purchased the maximum number of shares
in the years 1982, 1983, and 1984, and that, rather
than cash them in when they were called in November
1984, he would have converted them to American
Stores common and preferred stocks. At the time of
the hearing, he contends, he was entitled to more than
$46,000 plus dividends from the stock option plans.
The judge found that Lipton introduced evidence
clearly supporting his assertion that he was in a finan-
cial position to participate in the Jewel stock option
plan to the maximum extent. The judge also found that
Lipton had worked for employers who had stock op-
tion plans twice before and that he had participated in
both of those plans. The first employer was Sav-On,
which offered a stock option plan in 1968. The second
employer was Lucky Stores, which offered plans in
1983, 1984, and 1985; Lipton had participated as a
manager in those plans.
Despite these findings, the judge was ‘‘unable to de-
termine whether Lipton would have purchased Jewel
stock under the stock option plan if he had an oppor-
tunity to do so, or what amount he would have pur-
chased if he had participated.’’ The judge then con-
cluded that the formula used for computing the back-
pay owed Lipton was reasonable. He awarded Lipton
the stipulated amount of $50,442 in net backpay, plus
interest on only $2114, the difference between the
amount awarded and the amount tendered Lipton in
mid-January 1986, rather than on the entire amount of
backpay owed.
Lipton excepts to the judge’s findings on two mat-
ters—the formula for determining the backpay compo-
nent attributable to the stock option plan and the find-
ing that interest should be awarded only on the dif-
ference between what Lipton was originally offered in
692 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
4 Lipton did not except to the judge’s finding that Lipton was not entitled
to increases in the stocks value due to the takeover by American Stores.
settlement and what the Board determines he is owed.
We find merit in both exceptions.
1. As the judge found, evidence submitted by Lipton
clearly supported his assertion that he had the cash re-
serves necessary to purchase the stock offered by
Jewel during the 1982–1984 period in question, and he
had a history as a substantial investor in stocks. Fur-
ther, the evidence showed that he bought stock under
a stock option plan offered by Sav-On in 1968, which
he retained for 3 years before selling it. Similarly,
while working as a manager for Lucky Stores, he pur-
chased stock under its stock purchase plan in 1983,
1984, and 1985, and kept it until it was recalled and
he was required to sell it.
We agree with the judge that this evidence does not
require a finding that Lipton would have, as he testi-
fied, participated in the plan to the maximum extent
possible and would have converted the Sav-On shares
to American Stores stock in 1984. Nonetheless, be-
cause Lipton has a demonstrated record as a stock in-
vestor, it is unreasonable to determine the extent of his
likely investment on the basis of an average that in-
cludes employees who chose not to participate in the
plan at all. It is, however, reasonable to infer that he
would have participated in the stock option plan for
the 3 years at the same rate as the average employee
in the subgroup of those who chose to participate in
the plan. We therefore find that the amount due him
with respect to the plan should be determined by cal-
culating the average amount of stock purchased by
those who purchased stock in the plan during 1982,
1983, and 1984, and that it should be assumed that he
would have sold that amount of stock at $75 a share
on November 16, 1984, when the shares were called
in by American.4
2. In excepting to the judge’s determination of inter-
est due on backpay, Lipton argues that the judge erred
in awarding interest only on the difference between the
amount tendered by the Respondents pursuant to the
settlement agreement and the larger amount found by
the Board to be due him. He contends that he should
receive interest on the entire amount due him.
In finding merit to this exception, we note at the
outset that, although the checks sent to Lipton’s attor-
ney were not returned to the Respondents, they were
never cashed by Lipton, because he contended that
they were for an amount less than he was owed. The
Respondents were on notice at all times that Lipton
was contesting the amount, and they knew that he had
not cashed the checks soon after receiving them. At no
time did they demand that the checks be returned. Be-
cause we have now found that Lipton is correct in con-
tending that he was entitled to a significant additional
amount from the stock option plan, Lipton was under
no obligation to accept the lesser amount tendered by
the Respondents. As a result of Lipton’s refusal to ac-
cept what he alleged was an inadequate tender, the Re-
spondents could have demanded return of the checks
and have had the use of that money. Therefore, we do
not find it inequitable now to require the Respondents,
as the wrongdoers, to pay interest on the entire amount
of backpay owed Lipton.
We will leave the determination of the amount of
backpay owed Lipton pursuant to our findings here to
further compliance proceedings.
ORDER
The Respondents, Sav-On Drugs, Inc.; Jewel Com-
panies, Inc.; American Stores Company; Osco Drugs,
Inc., Los Angeles, California, their officers, agents,
successors, and assigns, shall satisfy their obligation to
make Howard A. Lipton whole by payment to him of
net backpay in an amount to be determined in further
compliance proceedings pursuant to this supplemental
decision.
Mori Pam Rubin, Esq., for the General Counsel.
Timothy F. Ryan, Esq. (McLaughlin and Irvin), of Los Ange-
les, California, for the Respondents.
Dennis F. Moss, Esq., of Sherman Oaks, California, for the
Charging Party.
SUPPLEMENTAL DECISION
RICHARD D. TAPLITZ, Administrative Law Judge. This
supplemental proceeding to determine the ‘‘backpay due’’
Howard A. Lipton was heard in Los Angeles, California, on
January 19, 1989. Briefs, which have been carefully consid-
ered, were filed by the Charging Party and the Respondents.
A. Statement of the Case and Background
In the underlying case, Sav-On Drugs, 253 NLRB 816
(1980), enfg. 728 F.2d 1254 (9th Cir. 1984), the Board found
that Sav-On Drugs, Inc. (Sav-On) violated the Act by dis-
charging two pharmacy managers (who were held to be em-
ployees rather than supervisors) and by thereafter firing 59
pharmacists (including Howard A. Lipton, the Charging
Party) when they struck to protest the discharge of the phar-
macy managers. The Board ordered Sav-On, its officers,
agents, successors, and assigns to make those employees
whole for any loss of earnings which they may have suffered
by virtue of the discrimination against them by paying them
an amount equal to what they would have earned from the
date of discharge to the date they were offered reinstatement
together with interest calculated in accordance with the pol-
icy of the Board, as set forth in Florida Steel Corp., 231
NLRB 651 (1977), and Isis Plumbing Co., 138 NLRB 716
(1962). In addition the Board held that other pharmacists
whose names were then unknown but who were allegedly
discharged because they engaged in the strike could have
their rights litigated in a backpay proceeding.
While the matter was pending before the Ninth Circuit,
Sav-On entered into a settlement agreement which resolved
the litigation with regard to 61 out of a total of 67
693SAV-ON DRUGS
1 Apparently six formerly unknown names were added to the original 61
pursuant to the procedure set forth in the Board Order.
2 The settlements were entered into between another charging party, the
Guild for Professional Pharmacists, and Sav-On. They were approved by the
Regional Director. The 61 discriminatees received a total of $3,987,849 and
later 5 other discriminatees received a total of $581,098.
discriminatees.1 After enforcement of the Board Order, Sav-
On entered into a settlement2 that on its face resolved the
litigation with regard to all remaining six discriminatees in-
cluding Lipton. Pursuant to that settlement agreement, Sav-
On forwarded checks dated January 13, 1986, to the compli-
ance officer of Region 31 for distribution to the
discriminatees. By letter dated January 15, 1986, the compli-
ance officer sent four checks to Lipton’s attorney. They were
$14,647.56 for interest; $7,053.63 for profit-sharing payment;
$614.76 for medical expense payment; and $17,934.26 which
was calculated by adding $25,769.45 for wages to $241.39
for stock option payment (total of $26,010.84), and sub-
tracting $8,076.58 for normal tax withholding. In sum,
Lipton’s share of the settlement was $48,326.79 from which
normal withholding taxes were deducted. However, Lipton
never agreed to the settlement. He consistently claimed that
he was due substantially more money. He neither cashed the
checks nor returned them to Sav-On. As of the date of the
trial, he (either directly or through his attorney) still had pos-
session of the checks. The checks stated that they were for
full and complete payment.
On June 25, 1986, Lipton served a motion for clarification
on the Board and on Sav-On. On July 21, 1986, the Board
denied the motion.
On September 11, 1986, Lipton filed a petition for review
with the Ninth Circuit Court of Appeals seeking review of
the General Counsel’s decision to approve the settlement. In
an order filed on October 15, 1987, in Howard Lipton, Peti-
tioner v. NLRB, Respondent, Case 86–7573, the court re-
manded the case to the Board for the purpose of arranging
a hearing, holding:
This case presents a single issue: to what extent does
the Board have the power to approve settlements of un-
fair labor practice claims without the charging party’s
consent and without providing the charging party an
evidentiary hearing to consider the charging party’s
version of the facts? We hold that when a charging
party raises a material issue of disputed fact regarding
an unfair labor practice, the Board cannot approve a
settlement over the charging party’s objections without
first granting an evidentiary hearing.
The decision as a whole dealt with the right of a charging
party to an evidentiary hearing and there is nothing in the
decision to indicate whether Lipton’s claim that he was enti-
tled to more than was provided for in the settlement agree-
ment was or was not a valid one. In accordance with the
court’s decision, the Board on April 20, 1988 remanded the
case to the Regional Director for Region 31 for the purpose
of arranging a hearing before an administrative law judge on
Lipton’s objections which raised material issues of disputed
fact. That hearing was held before me on January 19, 1989.
B. Agreed-Upon Matters and the Remaining Issues
At the outset of the hearing the parties were able to nar-
row the issues. They entered into the following stipulation:
The Administrative Law Judge may issue an order find-
ing that Respondents’ obligation for gross backpay, all
interest through July 12, 1985, profit-sharing and med-
ical benefits will be discharged by payment to Lipton
of the following gross sums, $14,600 as interest, $7,000
as profit-sharing, $27,500 as backpay and $1,100 as
medical benefits.
The parties further stipulated that that sum was greater than
the amount previously offered to Lipton.
All parties agreed that there were only three issues remain-
ing to be resolved. They were: (1) whether American Stores
Company is jointly and severally liable for backpay with the
other companies named in the caption; (2) whether Lipton is
entitled to additional backpay because of the provisions of a
stock purchase plan; and (3) whether Lipton is entitled to in-
terest from July 12, 1985, until payment is made.
C. American’s Liability
The amended backpay specification alleges, the amended
answer to that specification admits, and I find that on or
about November 6, 1980, Jewel Companies, Inc. (Jewel) pur-
chased Sav-On; that on or about November 16, 1984, Jewel
was purchased by American Stores Company (American);
that on or about February 2, 1986, American caused Sav-On
to merge with Osco Drug, Inc. (Osco) and that Jewel, Amer-
ican, and Osco are successors of Sav-On for the purposes of
remedying the reinstatement and make-whole provisions of
the Board’s Order and judgment.
While admitting that American is a successor to Jewel and
Sav-On for the purposes of remedying the reinstatement and
make whole provisions, the answer denies that American
purchased Jewel with full knowledge of the pending unfair
labor practice litigation in this matter. However, the parties
entered into a stipulation as follows:
Respondents Sav-On Drugs, Inc.; Jewel Companies
Inc.; American Stores Company; and Osco Drugs, Inc.,
Charging Party Howard A. Lipton and the General
Counsel for the National Labor Relations Board hereby
stipulate the following.
The supervisors, managers and agents of Sav-On
Drugs, Inc., who participated in the decision in or about
January/February 1979 to terminate the pharmacists (in-
cluding Howard A. Lipton) who were the subject of the
National Labor Relations Board matter of Sav-On
Drugs, Inc. and Guild for Professional Pharmacists and
Howard A. Lipton Cases No. 31–CA–8641 et al, and
the supervisors, managers, and agents of Sav-On Drugs,
Inc. who implemented or had knowledge of said deci-
sion were substantially the same supervisors, managers
and agents who continued to work for Jewel Compa-
nies, Inc. and also for American Stores Company when
it purchased Jewel Companies, Inc. (in November
1984).
In the light of that stipulation, an inference is warranted that
American did have knowledge of the unfair labor practice
694 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
litigation. The answer admitted such knowledge with regard
to Jewel and Osco and also admitted the legal conclusion
that Jewel, American, and Osco were successors for the pur-
pose of remedying the unfair labor practices. Sav-On, Jewel,
American, and Osco (jointly referred to as the Respondents)
offered no evidence with regard to the issue of joint and sev-
eral liability and I find that they are so liable. Croley Coal
Corp., 280 NLRB 899 fn. 3 (1986); Cumberland Nursing
Center, 263 NLRB 428, 434 (1982).
D. The Stock Purchase Plan
Beginning in March 1982, Jewel made available to its em-
ployees and those of its affiliated companies a stock purchase
plan which allowed employees to purchase up to 250 shares
of Jewel stock per year per employee. If Lipton had not been
unlawfully discharged, he would have been eligible to par-
ticipate in that stock option plan. Under that plan, Lipton, if
he had been an employee of Sav-On, would have had the op-
tion of buying up to 250 shares a year during 1982, 1983,
and 1984. The shares were available on the open market to
anyone who cared to purchase them but through the plan, the
employee could obtain a discount of $2 a share or 5 percent,
whichever was less. In addition the employee was given up
to 100 weeks to pay for the stock. However if an employee
who purchased stock in one year wanted to purchase stock
in the following year, he had to complete payment on the
first purchase before making the second purchase. Once full
payment was made, dividends were paid from the date of
original purchase. No brokerage commission was charged.
The General Counsel in the amended backpay specifica-
tion asserts that Lipton would be made whole with regard to
the stock purchase plan by the payment of $241.39. In sub-
stance the General Counsel took the position that there was
no way of ascertaining what Lipton would have purchased or
how long he would have held whatever he did purchase and
that it was reasonable to take an average of the stock pur-
chase participation of all similarly situated employees and
use that as a basis for approximating the amount that Lipton
should receive. The calculation is set out in paragraph 18 and
appendix D of the amended backpay specification.
Paragraph 18 of the amended backpay specification states:
18 (a) Beginning in March 1982, Respondent Jewel
made available to its employees a stock option plan
which allowed employees to purchase company stock,
up to 250 shares per year, per employee. Appendix D,’’
attached hereto and made a part hereof, shows that in
a unit of 425 eligible pharmacists during 1982, with a
possible total stock purchase power of 106,250 shares,
only twenty-six (26) pharmacists availed themselves of
the plan, for a total stock purchase of 2043 shares. The
formula applied to reasonably determine the number of
shares each discriminatee, including Lipton, would have
purchased, divided the actual stock purchased (2043)
shares into the total stock available (106,250) to arrive
at a percentage figure which represents the percentage
of available stock purchased by the unit employees.
This percentage is 1.92 percent. The percentage figure
of 1.92 percent was then multiplied by the number of
maximum shares available to each person (250) to ar-
rive at a stock purchase amount for each person avail-
able to purchase stock in the unit, or 4.80 shares per
person, rounded off to 5 shares. Each discriminatee, in-
cluding Lipton, was then given credit for having pur-
chased that number of shares during 1982 at $30.88 per
share X 5 shares = $154.40, and selling all 5 shares at
$75.00 per share, or $375.00, on November 16, 1984
when Respondent Jewel was acquired by Respondent
American and all shares were called. Therefore,
Lipton’s shares were worth $220.60, the difference be-
tween $375.00, the sell price, and $154.40, the purchase
price, plus $20.79 in returns and stock purchase dis-
counts, for a total of $241.39.
(b) For the calendar year 1983, only one (1) unit em-
ployee purchased stock, for a total purchase of 250
shares for 1983, and in 1984, only two (2) unit employ-
ees purchased stock, for a total purchase of 200 shares
for 1984. As participation for those years was de mini-
mus, no shares were credited for those years.
Lipton vigorously opposes the General Counsel’s position.
He asserts that he was in a financial position to exercise the
stock option to its maximum extent; that he would have pur-
chased all the stock under the plan that he could have; and
that he would have held on to the stock and converted it to
the stock of a successor company when the original stock
was called in. He testified that he would have bought 250
shares a year in 1982, 1983, and 1984. His computations
were as follows: The average of the highest and lowest
prices for the stock for the first quarter of 1982, 1983, and
1984 were respectively $31.37, $44.75, and $46.13; the cost
of the 250 shares in each year’s first quarter would be $250
times the average cost in each of the first quarters, which
came to $7,842.50 for 1982, $11,187.50 for 1983, and
$11,531.25 for 1984; the discount from those prices would
be 5 percent or $2 a share, whichever was less (which would
have amounted to discounts of $392 in 1982, $500 in 1983,
and $500 in 1984) so that he would have paid a total of
$30,561 minus $1392 or $29,169 for the stock; he would
have had to pay $30,561 plus brokerage commission if he
had bought the same stock on the open market; he would
have kept the stock until November 16, 1984, when Amer-
ican purchased Jewel and gave all stockholders the option of
either receiving $75 per share or converting their stock to
American stock; at that time he would have converted his
750 shares of Jewel stock to 324 shares of American Stores
common, 673 shares of American Stores preferred A, and
195 shares of American Stores preferred B; on August 15,
1988, American bought back the preferred B stock of which
he would have had 195 shares at $55.60 a share for a total
of $10,842; he would have kept the remaining stock con-
sisting of 324 shares of American Stores common which as
of the date of the trial was worth $59.75 a share or $19,359;
and his remaining stock consisting of 673 shares of Amer-
ican preferred A was at the time of the trial worth $67.50
or $45,427.50. Adding up the figures given by Lipton, it ap-
pears that he is contending that the total value of the stock
and the money he received from stock sales would have
amounted to $75,628.50. In addition he contends that he
should be paid an amount equal to the dividends distributed
from all the stocks that he would have held. Though Lipton
has not added up the figures in his brief, it appears that be-
cause of the stock purchase plan he is seeking the difference
between the purchase price of $29,169 and the value at the
695SAV-ON DRUGS
3 In addition the plans were not comparable in that the Lucky plan provided
for a substantially greater discount on the purchase of shares than did the
Jewel plan.
time of the trial of $75,628.50 for a total of $46,459.50 plus
dividends.
Respondents contend that any additional award to Lipton
on the stock purchase plan would be based on pure specula-
tion because there is no reliable evidence that he would have
participated in the plan at all. Respondents also argue in sub-
stance that the General Counsel’s formula was reasonable
and that in any event even if Lipton is entitled to money
under the plan, mitigating factors have to be addressed.
Pursuant to the direction of the Ninth Circuit and the
Board, Lipton was permitted to develop evidence on the
record with regard to what he as an individual would have
done if he had been permitted to participate in the stock pur-
chase plan.
He testified that he was in a financial position to partici-
pate in the plan to the maximum extent. He introduced evi-
dence of other stock market transactions and his income tax
returns that clearly supported that assertion. He was a sub-
stantial investor in the stock market and had reserves that
could easily have met the cash needs for purchasing some
$30,000 worth of Jewel stock under the plan from 1982
through 1984.
The remainder of the evidence in this regard consisted of
Lipton’s testimony that he would have purchased the 250
shares per year of Jewel stock in 1982, 1983, and 1984; that
he would have held on to all of that stock until it was called
in by American; and that he would have converted the
called-in stock for American stock. The testimony with re-
gard to his intentions was supported by evidence concerning
his conduct with prior employers where he had taken full ad-
vantage of stock option plans offered by those employers.
With regard to each of his claims, there is some grounds for
skepticism.
Lipton worked for employers who had stock option plans
twice before the incidents in this case took place. The first
time was for Sav-On which offered a stock option plan in
1968. Lipton testified that he participated to the maximum
extent possible in that plan. There is very little evidence in
the record to indicate the details of the plan or to establish
whether Lipton bought the stock because of the company
plan or simply because it was one of many trades that he
thought was worthwhile and that he would have purchased
on the open market with or without the plan. The stock pur-
chase order does indicate that he bought 50 shares of Sav-
On stock on October 16, 1968, at $22 a share for a total pur-
chase price of $1100 with no deduction for commission, so
apparently there was at least a commission-free aspect to the
plan. However the record also shows that Lipton sold those
50 shares on October 28, 1971, for a net amount of
$1,252.53 after paying $19.81 commission. That sale under-
mines to some extent Lipton’s contention that he would have
held on to the Jewel stock if he had purchased it in 1982,
1983, and 1984. The evidence supplied by Lipton establishes
that Lipton bought and sold when he thought market condi-
tions warranted action. Even if he bought stock as part of a
stock purchase plan, there was no incentive in such a plan
to keep the stock after it had been purchased. At that point
ordinary business considerations were controlling. In any
event the fact that he thought it good business to purchase
$1100 worth of Sav-On stock in 1968 does not give much
weight to Lipton’s argument that he would have purchased
almost $30,000 worth of stock in Sav-On’s successor com-
pany from 1982 through 1984. In 1971 Lipton demonstrated
a lack of confidence in Sav-On by selling its stock. More-
over, even though Lipton made substantial trades on the mar-
ket, he was still a person to whom there was a very sizeable
difference between an $1100 purchase and a $30,000 one. He
might have bought no stock, $1100 worth of stock, or
$30,000 worth of stock in 1982–1984 but it is not possible
from his prior conduct to tell just what action he would have
taken.
The second company that Lipton worked for that had a
stock purchase plan was Lucky Stores. While he was em-
ployed there as a manager in 1983, 1984, and 1985, he pur-
chased 25 shares each year at $337.50 per year for a total
of $1,012.50. He kept that stock until it was recalled and he
was required to sell it. The record is not clear as to whether
there was a successor company to Lucky with stock that
could have been purchased on the open market. If there was
then the situation would be similar to that which would have
taken place when American succeeded Jewel. Lipton testified
that he would not have taken the money for the Jewel stock
but would have reinvested it in the American stock. With the
Lucky stock he apparently took the money and there is no
indication he reinvested it in any successor stock. Here
again, however, the purchase of the Lucky stock is simply
not comparable to the situation in the instant case. The total
purchase at Lucky was $1,012.50 and the purchase involved
in the instant case was almost $30,000. Lipton’s past prac-
tices do not indicate what he would have done in the instant
case.3
The only other evidence indicating what Lipton would
have done with regard to the Jewel purchase option plan was
the testimony of Lipton himself. He is a stock market inves-
tor who was testifying with all the advantages of hindsight
as to what trades he would have made years ago. It is very
difficult to be objective in such circumstances. Stocks can go
up as well as down. Respondents are required to put Lipton
in the position he would have been in if he had not been un-
lawfully discharged. If Lipton had bought $30,000 worth of
Jewel stock under the plan from 1982 through 1984 and the
stock had gone down, a serious argument could have been
made that the amount of the loss could have been deducted
from Lipton’s backpay and he would still have been made
whole. In such circumstances it is difficult to picture Lipton
testifying during this trial that he would have made those
purchases. It is equally difficult to give full weight to his tes-
timony at the trial, at a time when he knew that the value
of the stock had exploded in an upward direction, that he
would have purchased the maximum amount under the plan.
The fact is that Lipton could have bought all the stock on
the open market in 1982 through 1984 for only slightly more
than it would have cost him through the plan. The amount
involved in the $2 per share or 5-percent discount could have
been made up or lost in a few days trading. It was a mar-
ginal amount rather than one which would have made a
$30,000 stock purchase a good or a bad investment. Even if
we assume that such a minimal incentive would have in-
duced Lipton to purchase the $30,000 worth of stock at a
time when he did not consider it a good enough investment
to buy on the open market, the incentive would have dropped
696 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
4 At another point in his testimony he averred that he purchased stock at
companies with which he worked because he wanted to be part of those com-
panies. I am unable to give that assertion much weight. His testimony as a
whole indicates that he is a very astute stock market investor who puts his
money to work for him on the basis of business judgment rather than emo-
tional ties to an employer.
5 As indicated above, I believe the evidence warrants the conclusion that
even if Lipton had participated in the stock option plan, he would have sold
his shares at $75 a share on November 16, 1984, when they were called in
by American.
out at the point that the Jewel stock was called in when
American purchased Jewel. At that point Lipton was no dif-
ferent than any other stockholder who had purchased shares
on the open market. Lipton did not purchase American
shares on the open market and his contention that he would
have used the $75 per share he was offered for the Jewel
stock to reinvest in American stock (at a time when there
was no stock purchase plan incentive to do so) is highly sus-
pect. Even if I were to find that Lipton would have pur-
chased the maximum amount of Jewel stock under the plan,
I would still find that that stock would have been valued at
$75 per share, which was its value when it was called in on
November 16, 1984, and that Lipton was not entitled to any
increase in the value of American stock.
Lipton testified that his investment strategy in 1982, 1983,
and 1984 was to look for sound investments with high yields
which would diversify his holdings. He also averred that he
considered the tax consequences of investments.4 He testified
that he would have made the purchases under the Jewel stock
purchase plan because the store was growing and adding new
stores and the profits and sales were going up. However,
those considerations were not sufficient to prompt Lipton to
buy the stock on the open market where he could have done
so without substantially greater cost. Indeed, in 1982, 1983,
and 1984 he could have hedged on the relatively small addi-
tional cost of the stock by purchasing the stock on the open
market and then claiming in the unfair labor practice pro-
ceedings that he was entitled to the discount and the broker’s
fee. He did not do so.
There is also reason to question whether the purchase of
$30,000 worth of Jewel stock would have fit into Lipton’s
overall investment strategy. He was extremely concerned
with the tax consequences of his investments as indicated by
the tax returns for 1982, 1983, and 1984 that he introduced
into evidence. Lipton’s Federal return for 1982 showed
wages of $43,614, interest income of $6357 and dividend in-
come of $2265. That return showed an investment loss on
schedule E of $15,101. The return for 1983 showed an even
more substantial loss. Wages were $46,460, interest $2536
and dividends $3941 with the schedule E loss of $23,500.
For tax purposes, 1984 was a banner year. The return
showed wages of $50,221, interest of $1571, and dividends
of $5148 with the schedule E loss of $51,407. If Lipton had
purchased $30,000 worth of Jewel stock during that 1982
through 1984 period, any profits he made on the sale would
have been exposed to full capital gains tax and he would not
have been able to shelter his regular income with that invest-
ment.
After fully considering the testimony of Lipton and the
other evidence in the record, I am unable to determine
whether Lipton would have purchased Jewel stock under the
stock option plan if he had an opportunity to do so, what
amount he would have purchased if he had participated, or
whether he would have held on to the stock for any length
of time if he had purchased it.5 Under such circumstances
the General Counsel is put in an extremely difficult position
when he has to set forth a rational formula in a backpay
specification. As a general principle, doubts should be re-
solved in favor of a wronged party rather than a wrongdoer.
United Aircraft Corp., 204 NLRB 1068, 1069 (1978). How-
ever, the backpay specification must be based on something
more than sheer speculation. As the court held in Trinity Val-
ley Iron & Steel Co. v. NLRB, 410 F.2d 1161, 1177 fn. 28
(5th Cir. 1969), where the backpay liability basis cannot be
established precisely, the Board is only required to employ
a formula reasonably designed to produce approximate
awards due. The General Counsel has met that requirement
in the backpay specification. For the reasons set forth above,
the evidence does not establish that Lipton would have acted
differently than other employees with regard to the stock pur-
chase plan. It was therefore reasonable for the General Coun-
sel to assign to Lipton the same benefits that the other em-
ployees, on average, obtained from the stock purchase plan.
The General Counsel’s computation is set forth in detail in
section D above where it is concluded that Lipton was enti-
tled to $241.39 in order to be made whole with regard to the
stock purchase plan. I find that that was all Lipton was enti-
tled to with regard to that plan. That was also the amount
that was tendered to Lipton when he was given the checks
dated January 13, 1986, as part of the $48,326.79 which was
Lipton’s share in the settlement agreement.
It is noted that even if Lipton’s contentions were fully ac-
cepted, there would be great difficulty in determining the
amount due on the stock purchase plan. Where an unlawfully
discharged employee spends his time earning money at an-
other job, that money constitutes interim earnings that must
be deducted from the backpay. An analogy can be drawn to
money earning money. Lipton had $30,000 worth of money
working for him that he would not have had available if he
had spent it on the Jewel stock. It is not possible on the
present record to determine what investments Lipton would
have had to forgo in order to use the $30,000 for the Jewel
stock. That $30,000 might have given him an even better re-
turn on the investments he made with it than if he had used
it for the Jewel stock. On the other hand, he might have lost
money on those investments. It is quite possible that ‘‘in-
terim earnings’’ in terms of profits from the $30,000 invest-
ment would have to be set off against the amount due. It is
apparent that there are many too many ‘‘ifs’’ in this case,
which gives added impetus to the conclusion that the General
Counsel’s ‘‘averaging’’ formula is a reasonable one. Where
reasonable, the General Counsel’s formula for backpay
should be entitled to great weight. The General Counsel is
enforcing public rather than private rights. NLRB v. Fant
Milling Co., 360 U.S. 301, 307–308 (1959).
E. The Interest Due
As is set forth above, the parties are in agreement that I
may issue an order finding that Respondents’ obligation for
gross backpay, all interest through July 12, 1985, profit-shar-
ing and medical benefits will be discharged by payment to
Lipton of the following gross sums, $14,600 as interest,
$7000 as profit-sharing, $27,500 as backpay and $1100 as
medical benefits. That amounts to a total of $50,200. In addi-
697SAV-ON DRUGS
6 283 NLRB 1173 (1987). Interest on and after January 1, 1987, shall be
computed at the ‘‘short-term Federal rate’’ for the underpayment of taxes as
set out in the 1986 amendment to 26 U.S.C. § 6621. Interest on amounts ac-
crued prior to January 1, 1987 (the effective date of the 1986 amendment to
26 U.S.C. § 6621), shall be computed in accordance with Florida Steel Corp.,
231 NLRB 651 (1977).
7 If no exceptions are filed as parovided 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 purposes.
tion I have found that Lipton is entitled to $241.39 to make
him whole with regard to the stock purchase plan. That
brings the total to $50,441.39. He is entitled to that amount
from which normal withholding taxes must be deducted. The
only remaining question relates to the amount of interest that
Lipton is entitled to from July 12, 1985, until payment is
made.
The checks dated January 13, 1986, which Lipton still
holds, are for $48,326.79 minus normal withholding taxes.
The difference between the amount due (not including pos-
sible interest after July 12, 1985) of $50,441 and the amount
tendered to Lipton in mid-January 1986 of $48,326.79 (from
which normal withholding taxes were deducted) was
$2,114.21. The years of litigation after Lipton rejected the
settlement has resulted in an increase due to Lipton of
$2,114.21, which is about 4.4 percent more than the
$48,326.79 he would have received if he had accepted the
settlement and cashed the checks. Lipton has not prevailed
in his contention that he was entitled to a very substantial
sum because of the stock option plan. The $241.39 that he
is entitled to was tendered to him as part of the settlement
in mid-January 1986. Yet he seeks interest not only on the
$2114 increase the litigation brought him but on the entire
$50,200. Whether or not Lipton had an obligation to return
the checks that he retained in his possession, I believe it
would be inequitable to require Respondents to pay interest
on the entire amount. The Board encourages settlements rath-
er than litigation. Here the settlement offer covered 95.6 per-
cent of the amount that was eventually held to be due. The
settlement was satisfactory to the General Counsel and the
Board. As the United States Supreme Court held in NLRB
v. Fant Milling Co., supra, ‘‘The Board was created not to
adjudicate private controversies but to advance the public in-
terest in eliminating obstructions to interstate commerce.’’
As held by the Ninth Circuit, the charging party was enti-
tled to an evidentiary hearing. That hearing has been held
and the charging party has not prevailed in establishing that
the settlement agreement was substantially inadequate. I shall
therefore award interest only on the $2114, which is the
amount by which the money due exceeds the settlement
offer.
F. Conclusionary Findings
In sum, I find that Respondents’ obligation to Lipton will
be discharged by the payment to him of $14,600 as interest
through July 12, 1985, $7000 as profit sharing, $27,500 as
backpay, and $1100 as medical benefits. In addition, Re-
spondents are to be ordered to pay Lipton $242 in order to
make him whole with regard to the stock purchase plan and
to pay interest on $2114 to accrue commencing July 13,
1985, and continuing until the date this decision is complied
with, in the manner prescribed in New Horizons for the Re-
tarded.6
On the basis of these findings and conclusions and on the
entire record of this proceeding, I issue the following rec-
ommended7
ORDER
The Respondents, Sav-On Drugs, Inc.; Jewel Companies,
Inc.; American Stores Company; and Osco Drugs, Inc., Los
Angeles, California, their officers, agents, successors, and as-
signs, shall satisfy their obligation to make Howard A.
Lipton whole by payment to him of net backpay in the
amount of $50,442, plus interest on $2114, in the manner set
forth in the section of this decision entitled ‘‘Conclusionary
Findings,’’ minus any tax withholding required by Federal
and state laws.