Southland Manufacturing, Corp.

National Labor Relations Board - Board Decisions

Nov 25, 1970

186 N.L.R.B. 792 (N.L.R.B. 1970)

792 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Southland Manufacturing, Corp . and Propper Interna-
tional, Inc.' and United Hatters , Cap and Millinery
Workers International Union , AFL-CIO. Cases
24-CA-1980, 24-CA-1984, 24-CA-2007, and
24-CA-2030
November 25, 1970
SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN MILLER AND MEMBERS
FANNING AND JENKINS
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the
National Labor Relations Board has delegated its
powers in connection with this case to a three-member
panel.
The Board has reviewed the rulings of the Trial
Examiner made at the hearing and finds that no
prejudicial error was committed. The rulings are
hereby affirmed. The Board has considered the
Decision on Supplemental Hearing and the entire
record in this case, including the exceptions and brief,
and hereby adopts the findings, conclusions, and
recommendations of the Trial Examiner.
On April 1, 1966, the National Labor Relations
Board issued a Decision and Order in the above-
entitled case, finding that Respondent Southland
Manufacturing Corp., hereafter Southland, had dis-
criminated against certain employees in violation of
Section 8(a)(1), (3) and (5) of the National Labor
Relations Act, as amended.2 The Board's Order
directed, inter alia, that the Respondent place certain
named discriminatees on a preferential hiring list, and
in the event it resumed operations,3 offer immediate
and full reinstatement to said discriminatees and
bargain with the Union as the exclusive bargaining
representative of its employees, and make whole these
discrinatees and an additional group who had been
unlawfully locked out.
Subsuquent to the Board's Decision, Propper
International, Inc., hereafter Propper, acquired the
facilities previously utilized by Southland and en-
gaged in substantially similar operations as more fully
detailed in the attached Trial Examiner's Decision on
Supplemental Hearing. Thereafter, a controversy
arose as to Propper's responsibility for remedying the
unfair labor practices of Southland.
On June 13, 1968, the Acting Regional Director for
Region 24 issued and served on Propper and
Southland a Notice of Supplemental Hearing. On
June 28, 1968, Propper filed a motion for more
definite statement which was denied. Upon appropri-
ate notice, a hearing was held before Trial Examiner
Scharnikow for the purpose of determining Propper's
responsibility for remedying the unfair labor practices
involved. All parties were afforded full opportunity to
be heard, to examine and cross-examine witnesses,
and to adduce evidence bearing on the issues to be
heard.
On July 15, 1969, the Trial Examiner issued his
Decision on Supplemental Hearing finding that
Propper was not the successor of Southland and
therefore was not required to comply with the
affirmative remedy provisions of the Board's Order
against Southland. Thereafter, the Union filed excep-
tions to the Trial Examiner's Decision on Supplemen-
tal Hearing and a supporting brief.
186 NLRB No. I l l
ORDER
It is hereby ordered that the application of the
General Counsel and the Union that Propper Interna-
tional, Inc., be required to comply with the affirma-
tive remedy provisions of the Board Order issued
against Respondent Southland Manufacturing Corp.
be, and hereby is, denied.
Joined as a party pursuant to National Labor Relations Board Rules
and Regulations , as amended , Section 102 . 8. See Webb Tractor and
Equipment Company and Inland Machinery Co., 181 N LRB No. 39.
2 157 NLRB 1356.
' At the time of issuance of the Board 's Order, it appeared that
Southland had ceased operations.
TRIAL EXAMINER'S DECISION ON
SUPPLEMENTAL HEARING
STATEMENT OF THE CASE
WILLIAM F. SCHARNIKOw, Trial Examiner: An Order
having been issued by the Board against the Respondent
Southland Manufacturing Corp., in the above-entitled case
on April 1, 1966,1 and the Order having been enforced by
the Decree of the Court of Appeals for the District of
Columbia Circuit on March 23, 1967,2 the Board's Acting
Regional Director on June 13, 1968, issued and served on
Propper International, Inc., a Notice of Supplemental
Hearing to be held on September 16, 1968, before a Trial
Examiner of the Board for the purpose of determining:
1. Whether Propper International, Inc., is a successor
operator of the military cap manufacturing business
formerly conducted by the Respondent Southland Manu-
facturing Corp. at Mayaguez, Puerto Rico.
2. Whether and to what extent, Propper International,
Inc., should be required to comply with the affirmative
remedy provisions of the Board Order issued in the above
proceedings against the Respondent Southland Manufac-
turing Corp., in the event that said Propper International,
Inc., is found to be the successor operator of the
Respondent Southland's military cap manufacturing busi-
ness in Puerto Rico.
In response to a Motion for a more definite statement
made by counsel for Propper International, Inc., on June
1 157 NLRB 1356.
2 375 F.2d 325.
SOUTHLAND MANUFACTURING CORP. 793
28, 1968, the Regional Director replied by letter dated July
2, 1968:
... that the purpose of the supplemental hearing, as
indicated by the Notice , is to determine whether
Propper International , Inc. should be included as an
additional party Respondent and named as such in the
order issued by the Board in the Southland Manufac-
turing Corp . proceedings if it is found by the Board to
be a successor of the Southland 's business operations.
This special type of supplemental proceeding is that
suggested by the Board in the case upon which we are
relying, namely Perma Vinyl Co., 164 NLRB No. 119.
The grounds relied upon are those which are indicated
by the policy statement made by the Board in the Perma
Vinyl case.
By letter dated July 10, 1968, the Board 's associate
executive secretary further advised counsel for Propper
International , Inc., that:
In view of the Regional Director 's letter to you of July
2, 1968 advising you of the purpose of the supplemental
hearing, your motion has become moot.
Pursuant to the Notice of Supplemental Hearing and
subsequent orders rescheduling the hearing , the hearing
was held at Hato Rey, Puerto Rico, on November 18, 19,
and 20 , 1968, before me.' The General Counsel , Propper
International , Inc. (hereinafter referred to as Propper, as is
also William S. Propper , its principal stockholder and
president), and United Hatters , Cap, and Millinery
Workers International Union, AFL-CIO ( the Charging
Party hereinafter referred to as the Union ), appeared by
counsel and were afforded full opportunity to be heard, to
examine and cross-examine witnesses, and to introduce
evidence upon the questions raised by the Notice of
Supplemental Hearing.
On the written application of counsel for Propper made
during the hearing , I issued subpoenas ad testificandum
directed to Regional Director Raymond J. Compton and
Regional Attorney Vincent M. Rotolo and a subpoena duces
tecum directed to Regional Director Raymond J . Compton.
Counsel for Propper also submitted in evidence a copy of a
telegram sent by him to General Counsel Arnold Ordman
asking for permission in writing (as required by Section
102.118(a ) of the Board's Rules and Regulations ) to take
their evidence . In view of a lack of a reasonable time for
receipt of a reply to this request and the fact that all other
evidence which counsel intended to present had already
been submitted , I deferred ruling on a motion by trial
counsel for the General Counsel that the subpoenas be
revoked , and at the end of the hearing day of November 20,
1968, I closed the hearing without prejudice to a later
application for its reopening to take evidence from the
Regional Director and the Regional Attorney , should I
eventually deny the motion to revoke the subpoenas.
On November 27, 1968 (following my return to
Washington ), the General Counsel , by letter, granted leave
to the Director and the Regional Attorney to give such
relevant evidence as was sought under the subpoenas.
Thereafter the General Counsel withdrew his motion to
revoke the subpoenas. In response to letters sent by me to
all counsel, I was also advised by them that they were
attempting to reach an agreeable stipulation setting forth
the substance of the evidence of the Regional Director and
the Regional Attorney in lieu of their appearances as
witnesses.3 On April 30, 1969, I received such a stipulation
signed i by All counsel] in j the I case! and; have marked and
admitted it in evidence as Trial Examiner's Exhibit 1.4
Accordingly, in addition to the transcript of the evidence
and the exhibits received at the supplemental hearing in
November 1968, I include the stipulation as an evidentiary
element in the record of this case and have considered it.
Since the completion by counsel of the evidence
submitted by them at the hearing and in their subsequent
stipulation, briefs have been received from the General
Counsel, counsel for Propper, and counsel for the Union,
and I have considered them.
Upon the entire record before me in the case and from
my observation of the witnesses, I make the following:
FINDINGS OF FACT AND CONCLUSIONS .
I. SOUTHLAND' S OPERATION OF ITS BUSINESS UNTIL THE
SPRING OF 1967
A. Unfair Labor Practice and Ancillary Proceedings
Against Southland
In the original stages of the unfair labor practice
proceedings in this case the Board issued its Decision and
Order against the Respondent, Southland Manufacturing
Corp., on April 1, 1966,5 and the Court of Appeals for the
District of Columbia Circuit issued a decree enforcing the
Board 's Order on March 23 , 1967.6
The Board and the court affirmed the unfair labor
practice findings and conclusions made by Trial Examiner
Max Rosenberg in his Trial Examiner's Decision on
September 15,1965, following a hearing before him in
February 1965. The Board and the court therefore
concluded , as the Trial Examiner had found , that in the
operation of its plant at Mayaguez , Puerto Rico, the
Respondent had committed unfair labor practices inter alia
by (1) refusing to bargain in good faith with the Union as
the exclusive representative of an appropriate bargaining
unit of its production and maintenance employees in
violation of Section 8(a)(5) and (1) of the Act; and (2)
discharging one employee , refusing to reinstate her and 49
other strikers on various dates in October 1964, and locking
out these and the rest of its employees from December 7,
1964, to January 11, 1965, all in violation of Section 8(a)(3)
and (1) of the Act.
In its Decision , issued on April I. 1966, the Board noted
that it had appeared during ancillary proceedings before
the United States District Court of Puerto Rico under
3 Copies of the originals of the General Counsel's letter permitting the
regional officials to give evidence, of the General Counsel's withdrawal of
his motion to revoke the subpoenas, and of my exchanges with counsel in
connection with the possible stipulation have been deposited in the Board's
formal file for this case in Washington without special markings as
exhibits.
4 In the meantime, not having received advice from counsel that such a
stipulation would be reached. I issued a telegraphic order on March 7,
1969. directing that the hearing be reopened on April 9, 1969. On April 7,
1969. however, having been then advised by counsel that the stipulation
was agreed on and would be forwarded to me, I issued a further
telegraphic order canceling further hearing.
157 NLRB 1356.
s 375 F.2d 325.
794 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Section 10(j) of the Act in December 1965, that Southland
had "closed down its plant for economic reasons in
February 1965" and that it was "doubtful whether the
Respondent [Southland] will ever resume operations." For
this reason, the Board modified the Trial Examiner's
recommendations for an order requiring Southland to
bargain immediately with the Union and to reinstate the
strikers immediately with backpay, but "expressly reserved
the right [further] to modify the backpay and reinstatement
provisions of this Decision and Order if made necessary by
a change of conditions in the future, and to make such
supplements thereto as may hereafter become necessary in
order to define or clarify their application to a specific set
of circumstances not now apparent."
Accordingly, the Board's Order and Court's enforcing
decree directed Southland "its officers, agents, successors
and assigns" to cease and desist from a continuance of the
unfair labor practice found, and, affirmatively, (1) to make
whole the discharge employee and the strikers, and the
employees locked out on December 7, 1964, for their loss of
pay up to the date of the economic shutdown of the plant in
February 1965, the exact date to be determined in
compliance proceedings; and (2) "I[f ] and when the
Respondent [Southland] reopens its plant:"
(a) "To create a preferential hiring list" of these
employees and offer them full reinstatement in the order in
which their names appeared on such list; and
(b) To bargain with the Union as the exclusive bargaining
representative of the employees in the appropriate bargain-
ing unit.
During the pendency of the unfair labor practice
proceedings before the Board and the enforcement
proceedings in the Court of Appeals, the United States
District Court for Puerto Rico (on December 3, 1965) and
then the Court of Appeals (on September 20, 1966) issued
orders against Southland Manufacturing Corporation "its
officers, agents, servants, employees, attorneys and all
affiliates and persons acting in concert or participation with
it or with them," enjoining them from:
(a) In any manner or by any means selling, transferring
or otherwise disposing of any of its assets including, but
not limited to, machinery, equipment, raw materials,
and finished products except as it may be required to do
so pursuant to any conditional sales contract of record
or bona fide lien of record, recorded prior to the filing of
the charges involved herein, except that Respondent
may sell or transfer its assets for a full, fair and present
consideration actually paid to said Respondent, provid-
ed that the receipts from any such sale or transfer shall
be held intact and not be disbursed except to the extent
that it is necessary to do so to pay current business
operating expenses such as rent, utilities, maintenance,
insurance, salaries, legal fees and expenses or to satisfy
bona fide liens of record or judgments of record which
were recorded prior to the filing of the charges therein;
(b) In any manner by any means entering into any
arrangement or agreement providing for, or which
7 See pps. 3 and 4 of the findings made by the Board of Contract
Appeals which is in evidence in the present supplemental proceeding as
G.C. Exh. 10.
8 Ibid., and see also Trial Examiner Rosenberg's findings in his
Decision.
would result in, a lien on any of the Company's current
assets or pledging any of its current assets as security or
encumbering any of its current assets ; pending further
order of this court.
B. Southland's Operations at Mayaguez
Southland, whose corporate officers and managers were
Morris Milstein and Bertha Milstein, his wife, began the
manufacture of military hats and caps at a plant in
Mayaguez, Puerto Rico, in 1960. From the beginning, it
was accorded tax exempt status by the Insular Government
and produced military headgear under contracts from the
United States Defense Supply Agency. In 1963, Fomento,
an Insular agency established to foster industrial expansion
and increase employment, acquired land and constructed a
new Mayaguez plant building which Southland thereupon
leased from PRIDCO, another Insular agency, and began
occupying in early 1964. About this time , Southland
purchased additional new machinery and equipment,
including 350 sewing machines which were financed under
a chattel mortgage on a loan from the Small Business
Administration, herein called SBA.
Southland's expansion with this assistance was accompa-
nied by an increase of defense contracts from a total of $1
million in the year ending in April 1964 to $2,741,000 in the
3-month period ending in October 1964. Until this increase
in defense contracts, Southland's production force re-
mained approximately what it had been in 1963, that is,
between 160 and 210. For, at the time of the Board
representation election won by the Union on April 2, 1964,
there were still only 191 employees who were eligible to
vote in the bargaining unit . However, despite the strike
which began on June 1, 1964, and which is described in
Trial Examiner's Rosenberg's Decision, Southland rapidly
increased the number of employees on its payroll until,
according to Morris Milstein' s later statement to the Armed
Services Board of Contract Appeals, its plant shut down on
December 6, 1964, affected 350 employees.7
As a result of the plant shut down and Milstein's failure
to comply with a 10-day notice to resume production, the
Defense Supply Agency terminated Southland's defense
contracts on December 22, 1964.8
Although Southland did reopen its plant on January 11,
1965, it never thereafter secured any further defense
contracts which had been its principal source of work, and
from that time forward, in the unfulfilled hope of sometime
reacquiring its defense contracts, it employed a dwindling
staff in the production of small orders for P.X.'s and other
civilian, nongovernmental customers. Thus, by February
1965, and from then until February 16, 1966, at the latest, it
never employed more than 15 operators.9 Thereafter, and
until August 17, 1966, the number of employees varied from
3 to 15; and after August 17, 1966, and until January 11,
1967, the number on each weekly payroll was only either 2
or 1. Finally, on January 11, 1967, Southland's employment
records show that it stopped production completely and
9 The maximum figure is supplied by the testimony of Rosario Martinez
de Moreno who worked for Southland until June 1966. Exact employment
figures for the period after February 16, 1966, however, are furnished by
Southland's employment records.
SOUTHLAND MANUFACTURING CORP. 795
never resumed. Three weeks later, on January 31, 1967, the
Armed Services Board of Contract Appeals dismissed
Southland's appeal from the Defense Supply Agency's
default termination of its government contracts.
By this time , Southland was seriously in default in its rent
to PRIDCO and in its payments to the Small Business
Administration on the loan secured by the chattel mortgage
of the 350 sewing machines.
II. PROPPER 'S COMING TO PUERTO RICO IN 1967
A. William Propper's Prior Business Interests
William S. Propper is a St. Louis businessman who, in the
latter part of 1966, was the principal investor in, and the
managing officer of, three companies engaged in the textile
and garment industry. One of them was the Laddonia
Garment Company which employed from 35 to 50 workers
in the manufacture of plant work clothes at a plant in
Laddonia, Missouri. Another was the William S. Propper
Company which also employed 50 workers at a St. Louis
plant in the manufacture and dyeing of synthetic yarn, and
whose business involved it to some extent in dealings under
Government contracts. The third company was the Propper
Gale Corporation which was engaged in St. Louis in the
merchandising, but not the manufacture, of ladies'
sportswear. The first two of these companies were still in
business at the time of the supplemental hearing in
November 1968. The Propper Gale Corporation, however,
discontinued business in the beginning of 1967.
Before 1967, Propper had been connected with no
business engaged in the manufacture of military headwear.
He had no business dealings with Milstein, Southland, or
either the Atlantic Headwear Company or the M. and B.
Company which had been operated by Milstein in
Richmond, Virginia, before Milstein came to Puerto Rico
in 1960.10 In December 1966, however, the Propper Gale
Corporation had received an invitation from the Defense
Supply Agency to bid upon a defense contract for the same
type of military headwear which Southland had manufac-
tured. On behalf of his Company, Propper had submitted
and bid but was not awarded the contract. At the hearing,
Propper testified, and I credit his testimony, that if the bid
had been accepted, it was his intention to subcontract the
work to one of three midwest manufacturers with whom the
Propper Gale Corporation had had an association "in the
yarn business" but which had no business relations with
either Southland or Milstein.
B. Propper's Consideration and Development of a
Puerto Rico Business Operation
1. December 1966 conversation with Milstein in
Washington
In December 1966 Propper in St. Louis heard a rumor
which "was rife in the entire cap industry" of "the possible
sale of equipment of (the Southland) plant in Mayaguez,"
because the plant had had "labor troubles" and "was about
to be closed by the government." Propper thereupon
telephoned Morris Milstein, whom he did not know, and
asked if they could meet. The two men arranged a meeting
later that same month (December 1966) when Milstein said
he expected to be in Washington.
As arranged, the meeting took place in Washington in
December 1966 between Propper and Morris Milstein, who
was accompanied by his wife, Bertha, and Milstein's
attorney, Robert Rollnick. During their conversation,
Propper asked Milstein the general questions whether
Milstein had the right to sell his plant, whether he wanted to
sell, and whether he could sell free of "any possible
encumbrances." At this initial exploratory stage of a
possible business deal, according to Propper's testimony, he
was concerned with the willingness of Milstein to sell and
his ability to sell the plant or equipment free of
encumbrance, and not with the details of possible obstacles
which could be left to further examination and discussion.
Accordingly, neither he nor Milstein referred to South-
land's loss of government contracts, its financial straits, or
labor difficulties, of which Propper had heard rumors. Nor
at that time did Propper know of, nor did Milstein refer to,
the Board Order against Southland, nor any specific
encumbrances. Although the men had a long conversation,
it was inconclusive. For, although Milstein said he might be
interested in selling, he said he could give no answer as to
whether he had the right to sell or whether he could sell free
of encumbrances. The meeting ended merely with the
understanding that when the time came that Milstein could
be specific as to his right to sell his equipment "without
encumbrance," he would inform Propper and they could
meet again.
2. Propper's first trip to Puerto Rico in March or
April 1967
Receiving no word from Milstein during the next few
months, Propper made a trip to Puerto Rico in March or
April 1967. His first step was to seek information from
various government officials in San Juan. At the offices of
Fomento and PRIDCO (a subsidiary corporation), he
asked John Elwin , Jr., one of their officials, about the
conditions , incentives , locations , and terms available to
possible investors in the garment industry in Puerto Rico,
and the status of Southland's operations . Elwin gave
Propper the general information requested. He also said
that Southland "had been defunct as a going operation"
and that "there would be a public auction held [by the
SBA] for the sale of the assets of Southland ." Propper
thereupon telephoned , and then visited, the San Juan
offices of SBA. He was told that there would be a public
auction of some of Southland 's equipment under a claim of
$42,000 and, upon his request , that the SBA would notify
Propper when the auction would be held . Propper
suggested that the SBA might sell him Southland 's note for
the balance due, but was later informed by the SBA
officials that their superiors in Washington had said this
could not be done and that the equipment would have to be
sold at auction.
Having completed these governmental inquiries in San
10 See fn 2 and the related text of Trial Examiner Rosenberg's
Decision (157 NLRB at 1364)
796 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Juan, Propper flew to Mayaguez where he was met at the
airport by Milstein and taken to the Southland plant and
then to Milstein's home. There were no employees at the
plant but Milstein showed Propper the plant and the
equipment, and Propper and Milstein thereupon resumed
their earlier conversation first at the plant and then at
Milstein's home where Propper was introduced to Mrs.
Milstein. In their conversation, Propper again asked
Milstein whether it would be possible to purchase
Southland's physical assets without encumbrances. But
Milstein said that he was interested only in selling "the
corporation" at its "net worth" as set forth in a financial
statement which he showed to Propper. In this connection,
there was some discussion of "encumbrances" but at no
point in the conversation was there any mention of
Southland's labor difficulties nor a discussion of South-
land's general liabilities. The conversation ended with
Proppper insisting that he was interested only in buying
Southland's physical assets free of encumbrance and
Milstein's insisting that he would only sell "the corpora-
tion" at its "net value."
Before returning home from this visit to Puerto Rico,
Propper went to the employment office of the Department
of Labor for the Commonwealth in Mayaguez. He asked a
Mrs. Vidal, assistant to the director, whether there were
sewing machine operators available in the area and was
told that there was a large labor pool of experienced
operators. Neither he nor Mrs. Vidal made any reference to
Southland.
3. Propper's later trips to Puerto Rico in 1967,
his purchase of the sewing machines at foreclosure
sale on June 12, 1967, and his execution of a
lease from PRIDCO of the former Southland plant
on August 7, 1967
On May 29, 1967, the SBA published a newspaper notice,
and gave separately mailed notice also to Propper, that
there would be a public auction on June 12, 1967, of
Southland's 350 sewing machines on the foreclosure of the
chattel mortgage held by the SBA. Propper came to Puerto
Rico before the sale, introduced himself to Stanley Segal (a
San Juan attorney whom Propper had not met but who
Milstein said had represented him in a number of matters),
and retained Segal to appear with him at the public sale and
handle any language or legal problems that might arise
during the bidding.
Propper and Segal accordingly attended the auction
together on June 12, 1967. Milstein, whom Propper had not
seen nor heard from since his previous visit to Puerto Rico,
was also there. There were a number of other bidders at the
sale-manufacturers and machine dealers from the States
and one from San Juan-and the bidding was active.
Propper made the highest bid of $42,000, the. amount due
on Southland's note to the SBA and, in due course, received
a bill of sale for the 350 sewing machines.
As Propper explained in his testimony, which I credit, he
bought the sewing machines at the foreclosure sale because
he thought that the price was a good price and he could
either resell them at a profit in the open market, or use some
or all of them in any garment manufacturing plant either in
the States or in Puerto Rico. With the last possibility in
mind, before he again returned home, he spoke with
Milstein about Milstein 's acting as his manager but
Milstein refused. And he also began talks (apparently in
June 1968) with officials of Fomento and PRIDCO
concerning Propper's taking a lease of one of three other
available plants in Puerto Rico or the Southland plant in
Mayaguez. When it came to considering a possible lease of
the Mayaguez plant, Milstein was brought into the
discussions because, although $11,000 or $18,000 in arrears
in its rent payments, Southland still held the lease . Propper
would not consider taking over Southland's lease or
assuming the obligation of its rent default. Nor did he enter
into the discussion between Milstein and Fomento's
representative of the difficulties presented. Since these
difficulties remain unsolved, PRIDCO's and Fomento's
representative could not make any offer at that time to
lease the plant to Propper. And although some attempts at
drafting a lease were made, it was not until several months
later that Fomento and PRIDCO actually presented a lease
of the Southland plant without any reference to Southland's
obligations. Propper thereupon signed this lease on August
7, 1967, and on August 23, 1967, through Propper
International, Inc., began operations at the Mayaguez plant
with a small staff of newly hired employees.
Before Propper actually signed the lease of the former
Southland plant on August 7, 1967, however, the Union
and the Board's Regional Office had raised questions as to
whether he might not be held accountable for some of
Southland's obligations with respect to its employees and
the Union as their representative. Thus, on June 27, 1967,
Vincent Rotolo, the Board's Regional Attorney in San
Juan, telephoned Attorney Federico Ramirez, a partner of
Stanley Segal who had appeared with Propper at the SBA
foreclosure sale. And on July 31, 1967, at the Regional
Attorney's suggestion, Propper and Attorney Segal met and
had a lengthy conversation with Regional Director Ray
Compton and Regional Attorney Rotolo at the Board's
Regional Office in San Juan. Even before this, the Union
had written to Propper on June 15, 1967, and, as a result,
Propper met at various times with the Union's officials
between July 5, 1967, and December 8, 1967. The next two
sections of this Decision present the substance of the
communications between Propper, the Board's Regional
officials, and the Union's officials.
4. The Regional Office's communication with
Propper
There is no dispute as to the substance of Regional
Attorney Rotolo's telephone conversation with Attorney
Ramirez on June 27, 1967, nor as to the substance of the
Regional Director's and the Regional Attorney's confer-
ence with Propper and Attorney Segal on August 3, 1967.
Indeed, counsel for the General Counsel, Propper, and the
Union have executed a stipulation setting forth the
substance of these conversations which I adopt verbatim as
the basis for the following findings:
On June 27, 1967, Regional Attorney Rotolo called
Attorney Federico Ramirez Ros of the law firm of Ramirez,
Segal & Latimer, local attorneys for Mr. William Propper.
The call was made to ascertain whether Propper had
decided to use the machinery which he had purchased at
SOUTHLAND MANUFACTURING CORP. 797
the foreclosure sale of the Small Business Administration to
reestablish the Southland plant and to continue manufac-
turing military caps in the same manner as had been done
by the Southland Manufacturing Co. Ramirez advised that
it was true that Propper had purchased the machinery, but
that he had not as yet made a decision as to whether he
would establish a plant in Puerto Rico to manufacture
military caps He further stated Propper had not as yet
signed any documents to lease the former Southland plant
premises from Fomento (Commonwealth Development
Corp.), the owner of the building. Rotolo then informed
Ramirez that if Propper should decide to establish the same
type of business at the same place, there was the possibility
that the Board would hold Propper to be a successor of the
Southland business and that he would be required to
remedy the unfair labor practices committed by Southland.
Rotolo informed Ramirez that he had called to be fair with
Propper to let him know about a recent change in Board
policy dealing with bona fide purchasers of businesses who
had knowledge of unfair labor practices committed by the
seller. Rotolo then mentioned the Perma Vinyl decision of
the Board in which the Board required a bona fide
purchaser of a business to offer employees unlawfully
discharged by the seller reinstatement in accordance with
the requirements of a Board Order issued against the seller.
Rotolo told Ramirez that he could not tell how far the
Board's new policy would go, but he expressed the opinion
that if Propper established his plant in the same building,
producing the same product with the same equipment,
there was a good possibility that the Board would at least
require him to contact the former Southland employees
who had been discriminated against by Southland and offer
them reinstatement or preferential hiring privileges. Rotolo
then suggested that Ramirez bring Propper to the Regional
Office to discuss the whole matter with the Regional
Director before he made a final decision to take over the
plant premises. Ramirez agreed this was a good decision.
Later on the same day Attorney Fuste, Mr. Ramirez's
assistant, called to request the citation of the Perma Vinyl
decision and of the Board and court citations of the
Southland case These were given to him. Subsequently a
copy of the court decree issued against Southland was
requested, which was also furnished.
On August 3, 1967, Attorney Stanley Segal, law partner
of Attorney Ramirez, appeared at the Regional Office with
Propper to confer with the Regional Director concerning
the impact of the Board's Perma Vinyl policy on his
situation. Propper informed the Regional Director that he
had not as yet made a decision as to whether he would
establish a plant at the former site of the Southland Co. to
manufacture military caps, and that he had not as yet
signed any papers with the Commonwealth Development
Corp., the owner of the plant building. The Regional
Director advised him and Segal that under the Board's
Perma Vinyl policy, there was a possibility that if Propper
used the machinery which he had purchased at the Small
Business Administration foreclosure sale to establish a
plant in the same building to manufacture military caps for
the Government, the Board would require him to comply
with the requirements of the Board Order issued against
Southland. Each of the requirements of the Board, i.e.,
union recognition, reinstatement of employees, and back-
pay was discussed. Propper said he would have to get an
opinion from his stateside attorney, Frank Constangy,
before he took a final step in the direction of establishing a
business at the former Southland plant. He promised to
advise the Regional Director of his future plans in this
respect.
5. Contacts between the Union and Propper
As already found, the Union' s contacts with Propper
began with a letter written to Propper on June 15, 1967, 2
days after Propper had bought Southland's 350 sewing
machines at the SBA foreclosure sale. It was signed and
mailed by Vice President and Executive Secretary Gerald
R. Coleman at the Union's New York City office, and its
full text was the following:
We learned within the last few days that you have
purchased the business of Southland Manufacturing
Corporation at Mayaguez, Puerto Rico. As you have
already been advised orally, the United Hatters, Cap
and Millinery Workers International Union, AFL-CIO,
is the certified bargaining representative of the
production and maintenance employees at Southland's
plant in Mayaguez. Since your company is the successor
employer of that business, you will, of course, be
required to recognize and bargain with the union on
behalf of such employees.
It is our understanding that you intend to resume this
operation in the near future. Accordingly, it is essential
that we meet with you promptly at a mutually
acceptable time and place so that we may confer
concerning the resumption of operations, recall of
employees, the terms and conditions of their employ-
ment, and other outstanding legal obligations flowing
from your successorship.
Needless to say, we are delighted that you plan to
operate in Mayaguez and provide much needed work
opportunities for the employees we represent. We look
forward to a long and mutually beneficial relationship.
On June 30, 1967, Propper telephoned Vice President
Coleman and, stating that he was troubled by Coleman's
letter because its language was similar to a communication
received from the NLRB,ii arranged to meet Coleman at
the Kennedy Airport in New York on his way to Puerto
Rico on July 5.
As arranged, Coleman, accompanied by Nicholas Gyory,
the Union's vice president, met with Propper at the airport
on July 5. Propper told the union officials he had heard
some things about the Union's difficulties with Southland
and wanted to hear the Union's version . Coleman briefly
related the Union's problems with Southland and an earlier
tenant of the same plant . Propper asked whether the Union
had had any tentative agreement with Milstein of
Southland and was told that Secretary-Treasurer Al Smoke
of the Union had negotiated an agreement with Attorney
Robert Rollneck of Washington who had acted on
Ii it will be noted that this was 3 days after Regional Attorney Rotolo
had spoken with Propper's San Juan attorney Federico Ramirez
798 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Milstein's behalf, but that Milstein had then refused to sign
it.12 Coleman then spoke of some provisions such as a
health and welfare plan and a minimum with Attorney
Robert Rollnick of Washington who had acted on
Milstein's wage which the Union would want in a contract
with Propper. Propper said he wanted time to think about
the matter.
Propper met again with Coleman and Gyory at the
Kennedy Airport on July 13. Again the men generally
discussed some of the terms of a possible contract such as
its duration, the wage rate in excess of the prescribed
minimum rate, and a contract reopening clause. No
contract language was proposed or discussed. At Propper's
request, Gyory agreed to send Propper a sample, standard
contract and also variations of the possible reopening
clauses to be drafted by the Union's attorneys.
Gyory mailed Propper a sample standard form of
contract, apparently on July 17. About the same time,
Propper telephoned Coleman and suggested that he meet
thereafter with Secretary-Treasurer Al Smoke who had
represented the Union in the negotiations with Milstein and
was presumably familiar with the problems that might
arise. Coleman agreed and arranged for a meeting between
Smoke and Propper at the Union's New York City office on
Sunday, July 30, when Propper would be in New York on
his way to or from Puerto Rico.
As arranged, Propper did meet with Smoke at the latter's
New York City office on Sunday, July 30. It will be noted
that this was only a few days before Propper and his San
Juan attorney conferred with the Board's Regional Director
and Regional Attorney on August 3, and roughly a week
before Propper accepted and executed a lease with
PRIDCO for the former Southland plant. In his meeting
with Smoke on July 30, Propper denied that there was any
relationship between him and Milstein, and said that,
although he had discussed with Milstein the possibility of
Milstein's acting as his plant manager, Milstein had
rejected the suggestion. Propper produced, and gave Smoke
a copy of, a 6-page typewritten "Memorandum," which set
forth the substance of the advice given to him by his
Atlanta, Georgia, labor counsel; his consideration of the
options which appeared to be open to him; and a "Contract
Offer" which he asked the Union, through Smoke, to
"either reject or accept by July 31."
According to this "Memorandum" given by Propper to
Smoke, Propper's attorney had advised him, "after making
a thorough research on the situation," that Propper would
not be "a successor to Southland," but that, although the
"chances ... of his prevailing" in any possible litigation
would be "about 4 to 1" in his favor, such litigation would
involve time and attorney's fees. The "Memorandum" also
stated in substance that, in view of his attorney's further
advice that no possible charge of successorship would
succeed if Propper leased a plant other than Southland's,
Propper had decided to lease the Southland plant rather
than another plant only if he could "make an immediate
satisfactory agreement with [the union] by next Monday,
July 31." The "Memorandum" then set forth an uncompli-
mentary appraisal of the Union's chances of organizing
employees in Mayaguez "without company cooperation"
and various economic arguments why the terms of the
included "Contract Offer" were the best that Propper could
suggest to the Union.
At the end of the "Memorandum," Propper detailed his
"Contract Offer," setting forth provisions with respect to
such matters as union security ( 120 days after hire), wage
rates, holidays, vacation pay, pregnancy pay, a hospital and
medical fund , hours of work , and a no-strike provision
coupled with arbitration. Finally, in the form of an
apparent addendum to the "Contract Offer," Propper
certified that he and his company had never had, nor ever
would have, "any association with the Southland Manufac-
turing principals" and conditioned his "Contract Offer"
upon both the Union's advising the Board, and the Board's
acquiescence to the Union 's advice and commitment, that
there would be no "attempt to hold [Propper or his]
company liable for the obligations of Southland" as a
"successor."
In proffering the contract to the Union upon these
general terms and conditions , Propper's "Memorandum"
agreed that he "would enter a contract immediately for a
period of 5 years and from year to year thereafter" subject
to a 90-day notice of termination prior to the end of the
contract period or any extension , and that "An agreement
would be worked out between the union and company
lawyers concerning union representation for all
[production] employees...."
In their discussion of the substance of the
"Memorandum" and its included "Contract Offer" on July
30, Smoke told Propper he disagreed with Propper's
statement that there could be no enforceable claim of
"successorship" if Propper should lease and use a plant
other than the Southland plant. Propper testified, but
Smoke denied, that in their conversation he told Smoke that
he was offering the Union a contract "provided they [the
Union] were successful in an election that [should be] held
by the union in Mayaguez." On this conflict I find that
Propper's testimony presents the substance of his remarks
with Smoke and the intendment of the "Memorandum."
For in spite of his denial of the ultimate point involved in
Propper 's testimony , Smoke further testified that he
understood that his negotiations with Propper would leave
the question of "recognition" to be worked out by the
lawyers, that "Propper had pointed out that one of the
problems in the successorship matter was that he did not
want his company to be . . . [held liable] for moneys due to
the striking workers . . . and therefore he did not want to
make an open admission of successorship . . ."; that "the
point raised [by Propper] was, how do we go about
recognizing the union without my having to take on
additional liabilities and it was for that reason that the
matter [of the basis and manner of recognition ] was left to
the lawyers to work it out."
In answer to Propper's request on July 30, that the Union
accept or reject the "Contract Offer" by July 31 because
Propper had to decide within a short time whether to sign a
lease with PRIDCO for the former Southland plant, Smoke
said that it was a new matter so far as he was concerned and
12 See the finding of Trial Examiner Rosenberg to this effect in his
Decision.
SOUTHLAND MANUFACTURING CORP.
he could not make a decision that quickly. He therefore
asked Propper for more time. Propper agreed to an
additional day and then, at Smoke's suggestion, agreed to
ask PRIDCO for a 5-day extension during which time
Smoke and Propper could be in touch with each other by
telephone.
On August 3, 1967, Smoke told Propper over the
telephone that the Union was prepared to make a
counterproposal and wanted to discuss the matter with
Propper. Apparently at least part of the counterproposal
was discussed and Propper said he would have to take up its
feasibility with his attorney and his accountants.
During the next 10 or 12 days, there were further
telephone conversations between Smoke and Propper until
the Union's representative in Puerto Rico reported to
Smoke that Propper was hiring employees other than the
strikers listed in the Board's Order against Southland.
Acting on this report, Smoke wrote the following letter to
Propper on August 21, 1967:
As you will remember, on or about June 15, 1967, the
United Hatters, Cap and Millinery Workers Interna-
tional Union, AFL-CIO, requested a meeting to
discuss, among other things, the recall of employees of
Southland Manufacturing Corporation. We have now
been informed by our members that you have already
recalled certain supervisory personnel of Southland and
are making arrangements to recall production and
maintenance employees.
In the light of these developments we hereby reiterate
our formal request, on behalf of all employees of
Southland represented by the union, that they be
recalled and reinstated to their former positions, in
accordance with their rights under law and priorities
established under the outstanding NLRB orders, with
respect to all bargaining unit jobs at the Southland
plant.
On September 9, 1967, Propper wrote Smoke a note
apologizing for failing to reply earlier, and explained the
delay as being caused by the absence of his Atlanta
attorney, Frank Constangey, at an American Bar Associa-
tion convention and the attorney's subsequent illness.
Propper said also in this note that his attorney would be in
touch with the Union's attorney very shortly.
On September 19, 1967, Smoke wrote Propper the
following letter:
Our General Counsel Isadore Katz informs me that he
has been contacted by Frank Costangey's office I
understand that the delay was caused by Constangey's
illness.
I believe that we should try to finalize our understand-
ing as quickly as possible. Nick Gyory tells me that he
sent you a copy of a contract at the time you were
meeting with him. This contract should be modified in
accordance with our understanding
We continue to maintain contact with our members in
Mayaguez, P. R. According to information we have
received, you have hired sixteen workers, only two of
which are union members. We are asking that when you
hire additional workers, you select our members. I
799
believe that approximately twenty-five of them applied
forjobs.
I am aware that there are problems in obtaining an
award for a government contract. Our Union may be
able to help you, but I feel that it is important that we
first reach full agreement and sign a collective
bargaining agreement with you.
I will try to reach you by phone. If I have been unable to
do so by the time you receive this letter, I would
appreciate your calling me.
Following this letter, there were a number of telephone
conversations between Smoke and Propper, in which
Smoke asserted that there was "possible discrimination" in
Propper's hiring his Mayaguez staff and Propper said that
he was hiring people according to their qualifications and
was leaving the matter entirely in the hands of a Mrs.
Rosario Martinez who "was acquainted with these
people." 13 In the last of these telephone conversations in
November, Propper agreed to meet with Smoke on
December 7 at the airport in Miami where Smoke would be
attending an AFL-CIO convention.
Confirming this appointment, Smoke wrote Propper the
following letter on November 30, 1967:
In accordance with our phone conversation, we will
meet at the Miami airport on Thursday, December 7th
at 12:10 P.M., Eastern Airlines, Flight 958. I will look
for you as you disembark from the plane.
I hope we can resolve our differences and leave it to
Frank Costangy and Elliot Bredhoff to draft an
acceptable agreement.
May I again request that you reinstate Bartolo. I believe
he was employed as a presser and is entitled to an
opportunity to prove himself. As you know, there still
remains the legal question whether your firm is the
successor to Southland. If so, Bartolo would be entitled
to reinstatement under the N.L.R.B. order. You must
realize that if we ignore the few loyal union members
that remain withoutjobs, the settlement, no matter how
good the economic terms, would not be an honorable
one.
In the event there is any change in plans, you can
contact me at the Singapore, Bal Harbor, Florida.
In accordance with a last minute postponement, the
meeting between Smoke and Propper actually took place at
the Miami Airport on December 8, instead of December 7.
Smoke was accompanied by Executive Vice President
Nicholas Gyory and the Union's attorney Elliot Bredhoff.
The men never did speak on this occasion about
resolving the terms of any possible contract between
Propper and the Union. For Smoke immediately expressed
his concern about Propper's not having "reinstated" the
Union members who had previously been employed by
Southland. And, in the discussion which followed, Propper
told the Union's representatives that the Union "did not
represent a majority of the workers in the factory." Smoke
asked Propper, "Do you mean to say that after we have
gone through all this we are now expected to organize the
workers in your factory?" Propper's reply was, "Yes, that is
11 Mrs Martinez' role on behalf of Propper is discussed in the next
section of this Decision
800 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
up to you-if you want to go ahead and organize and get
them to sign the cards then we can bargain." With this, the
meeting broke up.
Following this brief meeting on December 8, 1967, there
were no further contacts or communications between
Propper and any of the Union's officials.
Ill. THE BUSINESS OPERATIONS OF PROPPER SINCE
AUGUST 7, 1967
During the period of these exchanges between Propper
and the Union, Propper leased the former Southland plant
from PRIDCO on August 7, 1967, hired Mrs. Rosario
Martinez de Moreno as his first personnel and production
manager,, and, through her, his first employees who began
working for him at the plant on August 23, 1967.
Starting with 17 employees for the first weekly payroll
ending on August 28, 1967 and conducting the business
through Propper International, Inc., he has since produced
the same type of military cap that had been produced by
Southland. For the remaining few months of 1967, his
production was solely for civilian customers and by the end
of the year he employed 21 workers. In January 1968, as the
result of a series of successful bids which he began
submitting to the Department of Defense in the end of
October 1967, Propper began producing these caps under
the same type of defense contract that Southland had lost in
December 1964. He thereupon increased his production
staff until, by the time of the hearing in mid-November
1968, there were 114 employees on Propper's payroll and
his production under defense contracts amounted to 65
percent of his total production.
Mrs. Martinez,14 whom Propper hired to recruit his
production staff in August 1967 and who is still employed
by him as his personnel manager, had worked for
Southland from some time in 1960, first as a stock clerk,
then as an office clerk in charge of production records, and
finally as "assistant personnel manager" under Mrs. Bertha
Milstein. While serving in this last capacity under Mrs.
Milstein, she had followed the lead of the Milsteins in their
commission of unfair labor practices (as Trial Examiner
Rosenberg found in his Decision) by telling employees on
April 2, 1964 that Milstein would close the plant or refuse to
bid for more work if the Union won the representation
election that day; by urging working employees to
counterpicket the strikers in June 1964; and, upon specific
instructions from Mrs. Milstein, by telling each of the 50
strikers who applied for reinstatement on October 12, 1964
pursuant to the strike settlement agreement, that Southland
was under no obligation to reinstate them. Upon my
appraisal of Mrs. Martinez' participation in the Milsteins'
chain of unfair labor practices as found by Trial Examiner
Rosenberg, it appears that her role was comparatively a
minor one, that she was simply following the course laid
down and required by her employers, the Milsteins, and
that she took no such action on her own initiative as would
indicate her own personal commitment to the suppression
of union activities or union representation. Thus the acts
14 Although Rosario Martinez de Moreno was addressed by counsel as
"Mrs. Moreno" during her testimony in the instant supplemental hearing,
Trial Examiner Rosenberg referred to her in his Decision as "Rosario
Martinez," and, for clarity and consistency, she is accordingly referred to
committed by her, although supporting the Milsteins'
unfair labor practices, contrasted with the acts of various
production supervisors such as Raymond Valez (or Velez),
Angel Vazquez, and Dixon Ortiz, which as found by Trial
Examiner Rosenberg show that these men acted upon their
own initiative and, with an apparent personal antiunion
zeal not attributable to Mrs. Martinez, extended the effort
of the Milsteins by instigating and participating with the
employees in threatening to fight the union pickets and in
marching on the Governor's mansion in a mock funeral
procession on August 7, 1964.
In any event, after Mrs. Martinez quit her job with
Southland in June 1966, she went to work for United
Pharmacal 15 as a production supervisor, and when she left
that job and was hired by Propper in August 1967 more
than a year later, it was not the result of her being sought
out by Propper nor her being recommended by the
Milsteins or by anyone familiar with the role she had
played in supporting their unfair labor practices in 1964.
Instead, hearing from a friend that Propper was hiring, she
made inquiry of Mrs. Vidal, the assistant director of the
employment office of the Commonwealth Department of
Labor (to whom Propper had already spoken about his
needs) and was referred to Propper by Mrs. Vidal.
Upon this referral, Mrs. Martinez was interviewed and
hired by Propper. Since then she has hired all of Propper's
employees. Except in the beginning when she hired "a few
friends," all her hiring has been through the Insular
Department of Labor in Mayaguez with the result that 95
percent of all Propper's hiring has been on referral by the
Department of Labor. When applications were made
directly to Mrs. Martinez acting on behalf of Propper, she
sent them to the Department of Labor for a referral and
considered their applications only upon their returning with
such a referral. Several of the former striking Southland
employees, having made such direct applications to Mrs.
Martinez and having been sent to the Labor Department,
never came back with a referral and were therefore not
hired.
Following the above practice, Mrs. Martinez hired 17
employees for Propper's first payroll for the week ending
August 28, 1967. All but two of them, had been employees
of Southland preceding the 1964 strike but none had been
strikers. Between August 23, 1967 and December 29, 1967,
during which time Propper engaged solely in civilian
production, Mrs. Martinez was his only supervisor as well
as his personnel manager, and with the departure of two of
the original employees and Mrs. Martinez' hire of five new
employees, Propper's working staff increased to 21, of
whom 18 were former Southland employees other than the
1964 strikers. From the beginning of January 1968 until the
last payroll preceding the November 1968 supplemental
hearing, during which time Propper became predominantly
engaged in production under defense contracts, Propper's
production staff, as the result of further hiring by Mrs.
Martinez offset only in part by quits, numbered 114, of
whom only 44 had previously worked for Southland and
in the present Supplemental Decision as "Mrs. Martinez."
15 Her interim employer is not otherwise described in the present
record.
SOUTHLAND MANUFACTURING CORP.
none of whom had apparently engaged in the 1964 strike.
Of 140 employees who had worked for Propper at sometime
during this penod of approximately 10 months but had left
his employ before the supplemental heanng,i6 25 had been
former Southland employees but, again, none had appar-
ently been strikers.
As already found, Mrs. Martinez acted as Propper's
personnel manager and only supervisor until the end of
December 1967. After January 1, 1968, when Propper
began production under defense contracts, Mrs. Martinez
continued as "personnel manager" and continued to do all
the hiring but Propper also hired a number of production
supervisors beginning on January 1968 and a production
manager, Bonk E. Bendien, who has since been in daily
direct charge of the plant, with Propper himself as the
nominal plant manager. So far as the record shows,
Bendien had had no relationship to Southland. Of the first
five supervisors hired by Propper on or before April 1, 1967,
four had been nonsupervisory employees of Southland but
had not been strikers. At the time of the supplemental
hearing in November 1968, Propper employed seven
supervisors including Mrs. Martinez. Three of them had
been former Southland nonsupervisory employees and only
two of them (Mrs. Martinez and Santos Martinez, a cutting
supervisor) had been Southland supervisors. None of the
former Southland supervisors who were activists in their
support of the Milsteins' unfair labor practices (i.e.,
Raymond Valez, Angel Vazquez, or Dixon Ortiz) were
hired by Propper either as supervisors or as nonsupervisory
employees. One other former Southland supervisor, Israel
Velez, was hired by Propper as a nonsupervisory employee
but not a supervisor. From Trial Examiner Rosenberg's
findings in his Decision, it appears that Israel Velez, like
Mrs. Martinez, played only a minor role in the Milsteins'
unfair labor practices. For, according to these findings, his
only involvement was to tell one of the strikers she should
abandon the strike because Milstein would not negotiate
with the Union and would refuse to give references to the
strikers.
A. Conclusions
The present supplementary proceeding was instituted by
the Regional Director to determine, in accordance with the
Board's policy statement and criteria set forth in its Perma
Vinyl decision,17 whether Propper is the "successor" of the
Respondent Southland and as such "successor" should be
required to comply with any or all of the affirmative
bargaining, reinstatement, and backpay provisions of the
order issued by the Board, and enforced by the Court of
Appeals, against Southland as the result of Southland's
commission of extensive unfair labor practices.18 Consist-
ent with the special application of the Perma Vinyl
principle, neither the General Counsel nor the Union
16 See p 59 , 1 20 of the present transcript relating to these people,
wherein the word , "natives" should be corrected, and is hereby corrected,
to read "mac[rves "
11 Permit Vinyl Corporation, et at, 164 NLRB No 119, enfd 398 F 2d
544 (C A 5)
18 Southland Mfg Corp, 157 NLRB 1356, enfd 375 F 2d 325
(CADC)
19 The Board has thus reverted to essentially its original position in The
Alexander Milburn case, 78 NLRB 747 (1948) and has specifically overruled
801
contends that Propper has acted in concert with Southland
or is in any sense Southland's alter ego. They contend
merely (as the General Counsel states in his brief) that
Propper should be bound to comply with the affirmative
provisions of the Board's order because Propper "has
become the successor employer of the same employing
industry which had been conducted by the Southland
Corporation at the time it committed the unfair labor
practices found by the Board and that it had full knowledge
of the requirements of the Board order when it became such
successor employer."
Perma Vinyl sets forth the current position of the Board
extending the reach of a Board unfair labor practice order,
in each case upon a proper balancing of relevant interests,
to a "successor" who is the "bona fide purchaser of a
business'; with knowledge of its predecessor's unfair labor
practices.19 In reaching this conclusion, the Board noted
that the Act was intended to regulate "the employing
industry . . in the interest of industrial peace," 20 and that
in its recent opinion in the Wiley case 2i holding that a
contractual grievance and arbitration provision survived
both a change in corporate ownership and the term of the
contract, the Supreme Courthad stated:
Employees . . . ordinarily do not take part in
negotiations leading to a change in corporate owner-
ship. The negotiations will ordinarily not concern the
wil '•eing of the employees, whose advantage or
d advantage, potentially great, will inevitably be
ii..idental to the main considerations. The objectives of
national labor policy, reflected in established principles
of federal law, require that the rightful prerogative of
owners independently to rearrange their businesses and
even eliminate them as employers be balanced by some
protection to the employees from a sudden change in
the employment relationship.
In the light of this language which it quoted from the
Wiley opinion the Board then set forth in the following
passages of its Perma Vinyl decision the basis and the
general criteria upon which it would hold a bona fide
purchaser of a business responsible for remedying his
predecessor's unfair labor practices:
.. . Especially in need of help, it seems to us, are the
employee victims of unfair labor practices who, because
of their unlawful discharge, are now without meaning-
ful remedy when title to the employing business
operation changes hands.
We believe that the Board is empowered to require
more effective action in the matter of remedying unfair
labor practices. We find this authority in the Act's
delegation of broad administrative power to the Board
to frame such remedial orders "as will effectuate the
policies of the Act." In the exercise of this authority the
Board is not, of course, restricted to requiring remedial
Symns Grocer Co, 109 NLRB 346 (1954) which, in the meantime, had
limited the reach of Board orders to "successors" who, consistent with Rule
65(d) of the Federal Rules of Civil Procedure, either were alter egos of, or
collusive active participants with, their predecessors in the commission of
the unfair labor practices, or the evasive transfer or operation of the
businesses See Regal Knitwear Co v N L R B, 324 U S 9 (1945)
20 N L R B v Cotten, 105 F 2d 179,183 (C A 6)
21 John Wiley & Sons, Inc v Livingston. 376 U S 543, 549
802 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
action by the offending employer alone; hence its
orders run to such employer's successors and assigns as
well. . . . To further the public interest involved in
effectuating the policies of the Act and achieve the
"objectives of national labor policy, reflected in
established principles of federal law," we are persuaded
that one who acquires and operates a business of an
employer found guilty of unfair labor practices in basically
unchanged form under circumstances which charge him
with notice of unfair labor practice charges against his
predecessor should be held responsible for remedying his
predecessor's unlawful conduct.
In imposing this responsibility upon a bona fide
purchaser, we we are not unmindful of the fact that he
was not a party to the unfair labor practices and
continues to operate the business without any connec-
tion with his predecessor . However, in balancing the
equities involved there are other significant factors which
must be taken into account.... When a new employer is
substituted in the employing industry there has been no
real change in the employing industry insofar as the
victims of past unfair labor practices are concerned, or
the need for remedying those unfair labor practices.
Appropriate steps must still be taken if the effects of the
unfair labor practices are to be erased and all employees
reasured of their statutory rights. And it is the successor
who has taken over control of the business who is
generally in the pest position to remedy such unfair labor
practices most effectively. The imposition of this responsi-
bility upon even the bona fide purchaser does not work an
unfair hardship upon him. When he substituted himself in
place of the perpetrator of the unfair labor practices, he
became the beneficiary of the unremedied unfair labor
practices. Also, his potential liability for remedying the
unfair labor practices is a matter which can be reflected in
the price he pays for the business, or he may secure an
indemnity clause in the sales contract which will indemnify
him for liability arising from the seller's unfair labor
practices. (Footnotes omitted; emphasis supplied.)
In 1967, Perma Vinyl thus extended to a "successor,"
whenever required upon "a balancing of the equities
involved," the obligation of remedying the known unfair
labor practices of his predecessor, including specifically an
indemnification and reinstatement of employees unlawfully
discharged by the predecessor. Even before as well as since
Perma Vinyl, however, the Board relying upon the language
of the Wiley decision in a line of cases beginning with
Chemrock Corporation in 1965,22 had similarly extended
and enforced by its bargaining orders the obligation of a
"successor" to recognize and bargain with a union whose
status as statutory exclusive bargaining representative of an
identifiable continuing employee bargaining unit had been
22 151 NLRB 1074.
23 Quaker Tools and Die Company, 162 NLRB 1307 enfd. 403 F.2d 1021,
69 LRRM 2728 (C.A. 6); Ideal Laundry Corp., 172 NLRB No. 138;
International Chemical Workers Union v. N.L.R.B., 395 F.2d 639, 68 LRRM
2065 (C.A.D.C.); Webster Wood Industries, Inc., 169 NLRB No. 14. And
see also the earlier decisions to the same effect in Johnson Ready Mix Co.,
142 NLRB 437 and Maintenance Incorporated, 148 NLRB 1299.
24 Chemrock Corp., supra, 151 NLRB at 1075-1080; Martin Marietta
Corp., 159 NLRB 905; Valleydale Packers, Inc., 162 NLRB 1486, enfd.
F.2d , 69 LRRM 2622 (C.A. 5); K.B. & J. Young's Supermarkets,
Inc., 157 NLRB 271, 273, 277, enfd. 377 F.2d 463 (C.A. 9) cert. den. 389 U.S.
established during the predecessor's operation of the
business either by Board certification23 or by the
predecessor's recognition or contract with the Union.24
And the Board has also further held with judicial approval,
that a successor was also bound to bargain with a union
which his predecessor had refused to recognize in violation
of the Act.25
Both Perma Vinyl and the Chemrock line of decisions
apply only to successorship situations where (as the Board
said in Perma Vinyl and has repeated in substance in its
other decisions) the new employer is one who has acquired
and operated the "business" of his predecessor in "basically
unchanged form ." In making this determination , the Board
and the courts have considered whether or not he took over
the business as a "going concern" 26 and whether or not
there has been a continuity of the corpus and operation of
the business as an enterprise "in the employing industry" as
disclosed not only by some essential elements of a
substantial continuity in the work force and a similarity or
identity of product or services, but also, of lesser but still
substantial importance, by possible additional elements of
continuity in plant location , management, supervision,
equipment, and methods of production.27
But even when these elements of continuity substantially
appear after the transfer of a business, it must also appear,
as the Board said in Perma Vinyl, that a "balancing of the
equities" justifies a remedial order against the putative
successor in the business. This balancing process may
require the Board to consider different factors, to ascribe
varying degrees of importance to the usual elements
indicating the continuity or lack of continuity of the
',usiness enterprise, and even to come to different
conclusions in any given situation with respect to imposing
a mere bargaining obligation upon a particular "successor"
and imposing the obviously more onerous and restrictive
obligation of reinstating with backpay employees whom his
predecessor had unlawfully discharged. For the competing
"equities" to be considered by the Board may not in every
case be limited to those of the predecessor's employees and
their representative union and those of the "successor." As
in the present case , there may also be reasons for
considering the "equities" not only of the "successor's"
newly hired employees but also of other parties with
indirect but nevertheless substantial interests in the
business such as the landlord of the plant and encumbranc-
ers of the predecessor's equipment.
For example, with respect to the possible imposition of
the predecessor's bargaining obligation upon the successor,
the Board is concerned in a situation like the one in the
present case with the propriety of imposing a bargaining
representative on employees in a substantially changed
unit. In such a situation, the determinant could well be
841; Glenn Goulding, 165 NLRB No. 22; Randolph Rubber Company, Inc.,
152 NLRB 496; Overnite Transportation Co. v. N.L.R.B., 372 F.2d 765
(C.A. 4) cert. den. 389 U .S. 838.
25 Makela'Welding Inc. v. N.LR.B., 387 F.2d 40, enfg. as modified in
another respect 159 NLRB 964.
26 Martin Marietta Corp., 159 NLRB 905. 905-907.
27 See for example Chemrock, supra, 151 NLRB at 1078 ; Randolph
Rubber Company, Inc., 152 NLRB 496; Glenn Goulding, 165 NLRB No. 22;
Webster Wood Industries, Inc., 169 NLRB No. 14; N.L.R.B. V. John Stepp's
Friendly Ford, Inc., 338 F.2d 833; International Chemical Workers Union v.
N.L.R.B., 395 F.2d 639.68 LRRM 2065 (C.A.D.C.).
SOUTHLAND MANUFACTURING CORP.
whether the "successor" in his hiring had discriminated
against the predecessor's union employees and had thus
prevented the union's retention of a majority designation in
the otherwise continuing bargaining unit.28 In making this
determination or any other determination affecting a
continuing bargaining obligation, it would be of little or no
importance whether there was a sale of the business or
equipment by the predecessor to the successor and
therefore privity between them.29 What is important is the
continuance of essentially the same business as a "going
concern" without significant interval, as disclosed by the
other usual elements of continuity including, as one
essential, at least an identifiable continuing bargaining unit.
On the other hand, with respect to the imposition of the
burden of reinstatement and backpay upon a "successor,"
the "equities" may be quite different. For, following the
Board's reasoning and language in Perma Vinyl, it would
certainly "work an unfair hardship" upon the putative
successor if, under circumstances such as those presented in
the instant case, either (1) the "successor" had not become
"the beneficiary of the [predecessor's] unfair labor
practices" because a substantial time gap following the
predecessor's cessation of business and his employment of
any production staff, made it necessary for the "successor"
to start and develop the business and its staff anew, or (2)
the "successor," not having in fact acquired the business or
equipment on a sale by the preceding owner (i.e., having
had no "privity" with him), had been unable to adjust "the
price he [paid] for the business, or . . [to] secure an
indemnity clause in the sales contract which [would]
indemnify him for liability arising from the seller's unfair
labor practices." Moreover, when as in the present case, the
"successor" has merely bought the bulk of equipment he is
now using, not from the predecessor in the business but on
a foreclosure sale of a chattel mortgage, and has merely
rented the plant previously used by the predecessor from a
third party landlord, the "equities" of such a mortgagee and
landlord, particularly after lengthy defaults by the prede-
cessor in the business, must also be considered. For there
can be no question that the imposition of a reinstatement as
well as a backpay obligation, would so seriously limit the
normal freedom of possible purchasers of the equipment
and users of the plant in a rebirth of the former business as
to diminish, substantially, the value of the mortgagee's
security and the rental value and possible user of the plant.
Turning now to the interplay of these various considera-
tions in the instant case, the facts already found present
some of the ordinary, but not necessarily controlling,
indicia of a "successorship" by Propper to the Southland
business. For as both the General Counsel and the Union
point out, in starting and continuing to operate his own
business at Mayaguez since August 1967, Propper (1) has
used the same plant and equipment; (2) has manufactured
the same product; (3) has delegated hiring and some
supervision to a supervisor (Mrs. Martinez) who had the
same or similar authority during her employment by
Southland until June 1966; (4) has employed the same type
of workers to perform the same tasks; and (5) has served the
28 See International Association of Machinists, District Lodge 94,
AFL-CIO, et at v N L R B, ( especially Judge Leventhal's concurring
opinion and cases therein cited), 4141F 2d 1135, 71 LRRM 2130 (C A D
803
same type of customers-civilians and government-with
government defense contracts eventually predominating as
was the case with Southland.
But, as Propper points out in his brief, the Board in
determining whether Propper is Southland's responsible
successor under the Perma Vinyl principle, must also
consider and weigh "the equities," the time gap between the
businesses, the absence of any privity on a direct transfer of
business or assets, and the change in personnel in the
corresponding bargaining units. Propper contends that a
consideration of these factors requires the conclusion that
he was not, and is not, Southland's successor and that he
should therefore not be required to remedy Southland's
unfair labor practices by bargaining with the Union or
giving preferential hiring right and backpay to Southland
employees under the Board's order against Southland.
In their briefs, the General Counsel and the Union have
submitted a chain of arguments to overcome Propper's
defense and to affirmatively establish his responsible
"successorship" to Southland notwithstanding the time
gap, the absence of a direct transfer of business or assets,
and the difference in unit composition. The substance and
bases of their arguments, as more fully developed in the
Union's brief, are that (I) the hiatus between the businesses
was too short to be material ; (2) Propper intended to
purchase either Southland's business or its equipment and
thus to take the usual route to "successorship" but this was
made impossible because of Southland's unfair labor
practices; (3) in any event Propper intended to become, and
has in fact become, Southland's successor, "in the
employing industry"; (4) Propper was actually ready and
willing to bargain and enter into a contract with the Union
if relieved of the burden of paying Southland's employees
their backpay; and (5) Propper refused to hire, and
"unlawfully refused to bargain" with the Union concerning
the hire of the Southland employees embraced by the
Board's Order.
In the circumstances shown by the evidence in the case,
and for the following reasons, I find these arguments of the
General Counsel and the Union to be without ment, not
only so far as they are directed to the general question of
Propper's successorship under the Perma Vinyl principles
but also as they are intended to have a specific bearing
upon the ultimate questions of Propper's responsibility
under either the reinstatement and backpay provisions or
the bargaining provisions of the Board's Order against
Southland.
The hiatus between Southland's operation of its business
and Propper's starting his own business was at least 7
months (if we count only the months in 1967 when the plant
was completely shut down) but realistically and actually it
was the 2-1/2 years from February 1965 after which
Southland practically shut down its plant that had
employed more than 300 workers on government contracts
by employing only a skeleton staff which dwindled from 15
to 2 until in mid-January it ceased employment and
production completely. As a result, and also because it
could not pay the chattel mortgage on its equipment nor its
C May 2,1 1969).
29 See Maintenance Incorporated, 148 NLRB 1299, 1301
804 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
rent on the plant , Southland had no business nor any
equipment or other assets which it could sell to Propper.
That Propper might at some time have considered buying
either the Southland business or its equipment directly from
Southland is therefore immaterial because in fact he did not
and could not do so. What is material is that , under the
circumstances , Propper in order to go into the headgear
business , was forced to start and develop his own business
and not Southland's business. Accordingly, in view of the
substantial hiatus in business operations during which
Southland's business had actually become extinct, in no
sense can it be said that the hiatus was too short to be
significant , or that, Propper took over the Southland
business as "a going concern."
Nor can it be said, as the General Counsel and the Union
argue, that, although he may not be regarded as continuing
Southland's "business ," Propper should still be held
responsible as Southland 's "successor" because he intended
to become , and has become , the substitute for Southland
"in the employing industry." For despite the use of this
shorthand phrase by the Board , it is clear from the Board's
more exact language and the results of its decisions ,30 that
what the Board has been doing is to hold a new employer
responsible for the obligations of his predecessor upon
taking over the predecessor 's "business" or "enterprise" "in
the employing industry" and'then only after due considera-
tion of the "equities" in the situation.
More complicated questions are raised by the General
Counsel's and the Union's related arguments based on
Propper's alleged discriminatory refusal to hire, or even
bargain about the hire of, any of the former Southland
employees covered by the provisions of the Board's Order,
and his asserted willingness to enter into a contract with the
Union provided he was released from any obligation under
the reinstatement and backpay provisions. The intent of
these arguments is to establish Propper 's acceptance of a
general obligation to recognize the Union under the order,
and his inconsistent attempt at the same time completely to
avoid both his full bargaining obligation and his reinstate-
ment and backpay obligation as Southland's successor by
discriminatorily refusing to hire the Southland group and
by then claiming that because of this exclusion it was
doubtful that the Union represented a majority of the
employees in the Propper bargaining unit.
In my view , the evidence does not support the essential
factual premises relied upon by the General Counsel and
the Union in these arguments and at some points the
arguments become circular in their implicit assumption that
Propper was Southland's fully obligated successor. At no
point did Propper 's actions given any ground for a finding
that he was accepting or willing to accept responsibility as
Southland's successor under either the bargaining provision
or the reinstatement and backpay provisions of the Board's
Order. On the contrary, his "Memorandum" delivered to
Union Secretary Smoke with his offer of contract terms on
July 30, 1967, as well as his statements to Smoke at that
time , made it clear that he was rejecting the Union 's claim
and the Regional Director's warning that he might be
Southland 's successor , and that , although as a layman he
was willing to sign a contract with the Union on the terms
outlined , it would necessarily include "an agreement .. .
worked out between the union and company lawyers
concerning union representation for all employees,"
another way of his telling Smoke , as I have found he
actually did at the time , that the contract would depend
upon the Union 's being "successful in an election held by
the Union in Mayaguez ." Similarly , as Smoke 's as well as
Propper 's testimony showed , Propper made it clear that he
did not , and would not accept responsibility as a
"successor" for Southland 's obligation to reinstate the
Southland employees named in the Board's Order with
backpay. With respect to Propper 's asserted "unlawful
refusal to bargain" with the Union concerning the hire of
these employees , the Union's argument to this effect
assumes either that Propper had voluntarily accepted a
bargaining responsibility as Southland's successor under
the Board's Order (contrary to the conclusion I have just
reached) or that Propper, regardless of his stated position,
was, as a matter of law , Southland 's successor under the
circumstances of this case and therefore bound to bargain
with the Union and reinstate the Southland employees with
backpay under the Board's Order, which is the very point at
issue in this supplementary proceeding.
Finally, with respect to Propper's asserted discriminatory
refusal to hire the Southland group and thus intentionally
depriving the Union of a continuing rightful majority in the
Propper employees' bargaining unit, the Union's argument
is based not only again in part upon an assumption of the
point in issue (i.e., that Propper was Southland 's successor
and as such was obligated under the Order against
Southland to reinstate or hire the Southland employees on
the Union's requests in its letter of August 21 and
September 19, 1967), but also in part upon a factual premise
which in my opinion is unsupported by the evidence. For
the evidence shows, as I have found , that Mrs. Martinez has
hired all of Propper 's employees starting with an initial staff
of 17 on August 23, 1967 ; that although she at first hired a
"few friends," all her hiring thereafter has been through the
Insular Department of Labor with the result that 95 percent
of Propper's hiring has been on referral by the Department
of Labor ; that direct applicants for employment were sent
to the Department of Labor for referral ; that several of
them were former striking Southland employees who were
not hired because they did not return with such referral;
that in following this course of a required referral practice
through Mrs . Martinez, Propper has not hired any of the
former Southland strikers named in the Board's preferential
hiring order against Southland although 15 of the 17
employees on his payroll on August 28, 1967, 18 of 21 on
December 29, 1967 and 44 of 114 in November 1968 were
other former Southland employees who had been neither
strikers nor supervisory activists in Southland's unfair labor
practices ; and that , although Mrs. Martinez through whom
Propper had done all this hiring had been Southland's
"assistant personnel manager" until a year before being
hired by Propper, she had not planned or participated in
Southland 's unfair labor practices in any such manner or to
any such extent as would indicate her own personal
commitment to the suppression of union activities or union
representation . This evidence, in my opinion , indicates in
30 See for example the basic Perma Vinyl decision , supra.
SOUTHLAND MANUFACTURING CORP
general such a reasonable fair course of nondiscriminatory
hiring practice that precludes the finding urged by the
Union and the General Counsel that Propper discriminated
against the former Southland strikers and union members
and thereby intentionally prevented the Union from
retaining the majority it apparently had had in the
bargaining unit during Southland's operation.
All the material circumstances in the case, most
important of which was the complete extinction of the
Southland business in the 2-1/2 years before Propper began
his business, negate the General Counsel's and the Union's
claim that Propper became Southland's "successor" under
the Perma Vinyl doctrine. Certainly, Propper did not take
over Southland's business as a "going concern." Nor did he
take over Southland's staff. Instead, he began his own
business, recruited his own staff almost entirely through the
Department of Labor, bought his initial equipment not
from Southland, but on the Small Business Administra-
tion's foreclosure, and made his own lease with PRIDCO.
Moreover, he took no customers from Southland but
developed his own business until, apparently meriting
confidence through his own performance, he has been able
to procure the government contracts that Southland had
lost because of its stubborn, foolish persistence in its
unlawful course of conduct Finally, although we may
sympathize with Southland's strikers and the Union's
attempt to remedy the wrongs done to them by Southland,
we cannot overlook the "equities" in the situation which
would make any imposition of Southland's remedial
obligations upon Propper not only "unfair" to Propper who
had nothing to do with Southland's unlawful conduct and
should therefore be accorded the fullest possible lawful
"enterpreneurial freedom" of operating his own business
efficiently, but also to Propper's employees, the Small
Business Administration, and PRIDCO.31 For with respect
to Southland's bargaining obligation under the Board's
Order, since it does not appear Propper discriminatorily
excluded any of Southland's employees from hire nor that a
majority of Propper's production employees since August
23, 1967 have ever indicated the Union to be their choice as
bargaining representative, it would be improper to impose
the Union upon Propper's employees as their statutory
exclusive bargaining representative.32 Finally, with respect
to Southland's obligation to give preferential hiring rights
and backpay to its strikers under the Board's Order, it
11 The International Association of Machinists, District Lodge 94,
AFL-CIO v N LRB, supra, 414'F2011351, 71 LRRM 2150 (CA DC,
May 2 1969)
805
would be "unfair" to the legitimate interests of Propper, the
Small Business Administration, and PRIDCO, were the
Board to adopt any rule which would impose liability upon
Propper for complying with these provisions of the Order.
For in view of the fact that Propper neither took over
Southland's business as a "going concern" nor made any
purchase of the business or assets from Southland, it cannot
be said that he benefited from Southland's unfair labor
practices or that he was in a position to make provision for
Southland's bearing the burden of compliance with the
Board's Order either through an adjustment of price or an
indemnification as part of a transfer agreement. Even
further than this, to make a new employer in Propper's
situation responsible for reinstatement and backpay would
substantially restrict the use of equipment and plant to
purposes other than that of the former operator of the
business, and would seriously diminish the value of the
security of a chattel mortgagee such as the Small Business
Administration and the rental value of the plant. The policy
for protecting such a mortgagee and landlord is particularly
strong in the present case since the Small Business
Administration and PRIDCO are public agencies which
have been entrusted with the function and power of
promoting the general public interest.
For the foregoing reasons, I conclude upon the facts
shown by the evidence and the arguments made by the
parties, that:
1. Propper International, Inc., is not within the intent of
the Perma Vinyl doctrine a successor operator of the
military cap manufacturing business formerly conducted
by the Respondent Southland Manufacturing Corp. at
Mayaguez, Puerto Rico.
2. Propper International, Inc., should therefore not be
required to comply with the affirmative remedy provisions
of the Board Order issued in the above proceeding against
the Respondent Southland Manufacturing Corp.
RECOMMENDED ORDER
Upon the basis of the foregoing findings of fact, the
conclusions, and the entire record in this supplementary
proceeding, it is recommended that the application of the
General Counsel and the Union that Propper International,
Inc. be required to comply with the affirmative remedy
provisions of the Board Order issued against the Respon-
dent Southland Manufacturing Corp., be denied.
12 /bid And see also Gari in Corporation , et al , v N L R B, 374 F 2d
295 (C A -D C ) cert denied 387 U S 942