W. C. McQuaide, Inc.

National Labor Relations Board - Board Decisions

Jun 14, 1984

270 N.L.R.B. 1197 (N.L.R.B. 1984)

W. C. MCQUAIDE, INC.
W. C. McQuaide, Inc. and Robert V. Lesnak and
International Brotherhood of Teamsters, Chauf-
feurs, Warehousemen and Helpers of America,
Local Union No. 110. Cases 6-CA-7509(E) and
6-CA-7770(E)
14 June 1984
SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN DOTSON AND MEMBERS
ZIMMERMAN AND HUNTER
This case' raises two questions concerning the
eligibility of a corporation seeking an award of fees
and expenses under the Equal Access to Justice
Act, 5 U.S.C. § 504 (EAJA); NLRB Rules and
Regulations, § 102.143: (1) whether accumulated
depreciation may be considered in calculating the
net worth of a corporation and (2) whether a cor-
poration must meet both EAJA criteria, i.e., its net
worth is $5 million or less and it has not more than
500 employees.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
Consistent with the judge's supplemental deci-
sion, we conclude that accumulated depreciation
may not be used to determine a corporation's net
worth; that net worth is determined by subtracting
total liabilities from total assets; and that assets are
valued exclusively at their acquisition cost, not at
their fair market value. The Respondent's net
worth, therefore, exceeds the EAJA qualifying
standard of $5 million.
The Respondent excepted to, inter alia, the
judge's failure to find a corporation is eligible for
an EAJA award if it meets but one of the two
EAJA standards, that is, its net worth is $5 million
or less and its employee complement is less than
500 employees. The Respondent contends that, be-
cause it has less than 500 employees, it qualifies for
relief under EAJA. We find no merit to the Re-
spondent's contention. EAJA defines a "party" eli-
gible for reimbursement of legal fees and expenses
as "[a] corporation . . . but excludes (i) any . . .
corporation . . . whose net worth exceeded
$5,000,000 at the time the adversary adjudication
was initiated . . . and (ii) any . . . corporation ...
having more than 500 employees at the time the
adversary adjudication was initiated." 5 U.S.C. §
504(b)(1)(B). The Board's Rules and Regulations
define as eligible corporations those "with a net
i On 7 June 1983 Administrative Law Judge Benjamin Schlesinger
issued the attached supplemental decision. The Respondent filed excep-
tions and a supporting brief, and the General Counsel filed an answering
brief.
worth of not more than $5 million and not more
than 500 employees." NLRB Rules and Regula-
tions, § 102.143(c)(5). The plain language of 5
U.S.C. § 504(b)(l)(B) and our rules shows that a
corporation must have a net worth of $5 million or
less and not more than 500 employees to be eligible
for an EAJA award from the Board.2 As a corpo-
ration must satisfy both criteria to be eligible for an
EAJA award in proceedings before the Board and
as the Respondent's net worth exceeds the statuto-
ry limit, the judge properly found the Respondent
ineligible for an EAJA award. Accordingly, the
Board has decided to affirm the judge's rulings,
findings, and conclusions and to adopt the recom-
mended Order.
ORDER
The recommended Order of the administrative
law judge is adopted and the application of Re-
spondent W. C. McQuaide, Inc. for attorney fees
and expenses under the Equal Access to Justice
Act is denied, and the confidential financial state-
ment attached to and incorporated in the Respond-
ent's application for feess shall be sealed and with-
held from public disclosure, under the provision of
29 CFR §102.147(g) (1982).
2 A parallel statute. Title 28, provides for reimbursement of fees and
expenses incurred in civil actions "brought by or against the United
States or any agency and any oficial of the United States acting in his or
her official capacity in any court having jurisdiction of such action." 28
U.S.C. § 2412(a). The Title 28 EAJA applicable to court proceedings de-
fines an eligible party as "a . . . corporation . . . whose net worth did
not exceed $5,000,000 at the time the civil action was filed . . . or .. . a
. . . corporation . . . having not more than 500 employees at the time
the civil action was filed .... 28 U.s.C. I 2412(dX2XB). We need not
analyze why the two EAJA statutes, although seemingly similar, contain
different conjunctions. We merely note the distinction and abide by the
plain language of Title 5, the statute applicable to our proceedings.
s The Respondent filed directly with the Board a "Motion for Leave
to File an Alternative Net Worth Exhibit," in which it seeks to submit a
net worth statement for 24 September 1974 when the original complaint
issued. The Respondent's application, however, is for fees and expenses
incurred in litigating a backpay proceeding. Sec. 102.143(d) of the
Board's Rules and Regulations provides that "[flor the purpose of eligi-
bility, the net worth . . of an applicant shall be determined as of the
date of the complaint in an unfair labor practice proceeding or the date
of the notice of the hearing in a backpay proceeding." Because the Re-
spondent is seeking attorney fees and expenses in connection with the liti-
gation of the backpay proceeding, the appropriate date for determining
the Respondent's net worth is the date the backpay notice of hearing
issued. As the notice of hearing issued on 7 May 1981, it is the 1981 date,
for which the Respondent filed its original net worth statement, rather
than the 1974 date, that is the only appropriate date for determining
whether the Respondent is eligible for an EAJA award. Accordingly, we
deny the Respondent's motion.
SUPPLEMENTAL DECISION ON
APPLICATION FOR AWARD OF ATTORNEY
FEES AND EXPENSES
BENJAMIN SCHLESINGER, Administrative Law Judge.
The General Counsel moves to dismiss on various
grounds the application of W. C. McQuaide, Inc. (Re-
270 NLRB No. 180
1197
DECISIONS OF NATIONAL LABOR RELATIONS BOARD
spondent) for attorney fees and expenses pursuant to the
Equal Access to Justice Act, 5 U.S.C. §504 (EAJA). I
have considered only the contention that Respondent's
net worth exceeds the sum of $5 million; I find that it
does and that Respondent is ineligible for any award
under EAJA; and I grant the motion.
Section 504(b)(1)(B) of EAJA provides that an organi-
zation may be eligible for an award of attorney fees and
expenses if its net worth did not exceed the sum of $5
million at the time adversary adjudication was initiated.'
See also Section 102.143(c)(5) of the Rules and Regula-
tions of the National Labor Relations Board. Pursuant to
Section 102.147(f) of said Rules, Respondent submitted a
statement of its assets and liabilities, showing its net
worth as $2,260,048, arrived at by subtracting its total li-
abilities from its total assets. In computing this amount,
there was deducted from its assets accumulated deprecia-
tion of property, plants, and equipment of $3,638,093,
which, if added to the "net worth," increases the latter
figure to $5,898,141, well in excess of EAJA's $5 million
limitation.
That increase is required, the General Counsel con-
tends, because both the House and Senate Judiciary
Committee Reports state that net worth shall be calculat-
ed by subtracting total liabilities from total assets and
that assets should be valued at their acquisition cost
rather than their fair market value. H.R. Rep. No. 96-
1418 at 15, House Judiciary Committee Report on S. 265
(Sept. 26, 1980); S. Rep. No. 96-253 at 17, Senate Judici-
ary Committee Report on S. 265 (July 20, 1979).
Three administrative law judges have uniformly
agreed with the General Counsel's contention. Malcomb
Boring Co., JD-(SF)-80-82; Sentle Trucking Corp., JD-
54-83; Glenmar Cinestate, Inc., JD-171-83. These deci-
sions concluded that Congress' failure to refer to depre-
ciation was purposeful; that Congress meant what it said;
that Congress opted for a simple and readily verifiable
method to compute that value of an organization at-
tempting to utilize EAJA; and that Congress did not
desire that EAJA applications become bogged down
either with contested appraisals of the fair market value
of property or with determination of the propriety of dif-
ferent methods of depreciation, such as straight line, de-
clining balance, double declining balance, or sum-of-the-
year's digits.
The enactment of EAJA was admittedly an experi-
ment, altering the normal American rule which provides
that any party to litigation, successful or unsuccessful,
pays its own legal expenses. H.R. Rep. 96-1418, supra at
13. In. setting up the experiment, Congress established the
rules, including who should be entitled to obtain the ben-
efits of EAJA. I agree with the cited decisions that there
is nothing in the rules established by Congress that per-
' The proceeding heard by me involved solely the issue of backpay
under and compliance with the Board's earlier decision in 220 NLRB 593
(1975), 237 NLRB 177 (1978), and 239 NLRB 671 (1978). The parties
have apparently assumed that the backpay proceeding, which com-
menced on May 7, 1981, is separate and distinct from the underlying
unfair labor practice proceeding, which was instituted on September 27,
1974. Thus, no question has been raised as to the propriety of Respond-
ent's submission of a statement of its financial condition as of April 30,
1981.
mits the use of depreciation to reduce an organization's
net worth.
Instead, the legislative indicates to the contrary. By re-
jecting the notion that assets could appreciate in value,
Congress made a judgment that it was disinterested in an
organization's actual market value for the purposes of
qualifying under EAJA. Because appreciation could not
be utilized, the most that any asset could be worth is its
acquisition cost. If Congress rejected actual fair market
value as a gauge for evaluating an organization's net
worth, it seems improbable that it intended to permit the
use of the more unrealistic accounting method of depre-
ciation.2 For example, Respondent, a trucking firm, has
fully depreciated many of its trucks which, according to
its accounting statement, have no value. Yet, they clearly
have some value, perhaps greater to Respondent than on
the open market; but Congress has stated that market
value may not be used, which results in a choice be-
tween one of two alternatives: the cost of acquisition, in-
flated because most assets lose value the moment they
are brought, or a depreciated amount, which is merely a
tax accounting concept. By omitting any reference to de-
preciation, I conclude that Congress intended that only
the acquisition cost basis may be used.
Respondent contends that this is inequitable, but I find
that it is merely the result of Congress' choice between
various options. EAJA was intended to protect smaller
organizations from the burden or unjustified legal action
by the Government. Congress' selection for EAJA cov-
erage of only organizations with net worths of less then
$5 million does not appear particularly significant. Con-
gress could just as well have picked net worths of $6
million or $2 million; but, because of the choice that
Congress made, organizations with $1 more than $5 mil-
lion net worth may believe the law wholly unfair, and
those with $1 dollar less may believe the law amply jus-
tified. Similarly, the failure to utilize depreciation or
market value may not favor organizations with heavy in-
vestments in machinery or property which does not ap-
preciate in value; but a real estate company may benefit
from excess appreciation and still be covered under
EAJA.
The point is that Congress established a cutoff amount
and the way that assets should be valued. By mandating
the use of acquisition cost, Congress chose a simple
method to value assets in order that administrative agen-
' In Fribourg Navigation Ca v. Commissioner, 383 U.S. 272, 276-277
(1966), the Supreme Court stated:
In United States v. Ludey, 274 U.S. 295, 300-301, the Court described
depreciation as follows:
"The depreciation charge permitted as a deduction from the gross
income in determining the taxable income of a business for any
year represents the reduction, during the year, of the capital assets
through wear and tear of the plant used. The amount of the allow-
ance for depreciation is the sum which should be set aside for the
taxable year, in order that, at the end of useful life of the plant in
the business, the aggregate of the sums set aside will (with the sal-
vage value) suffice to provide an amount equal to the original
cost."
See also Detroit Edison Co v. Commissioner, 319 U.S. 98, 101. In so
defining depreciation, tax law has long recognized the accounting
concept that depreciation is a process of estimated allocation which
does not take account of fluctuations in valuation through market ap-
preciation.
1198
W. C. MCQUAIDE, INC.
cies and the courts might more expeditiously cross the
hurdle of establishing an organization's eligibility under
EAJA and deal with the gist of the proceeding-wheth-
er the organization was adversely affected by unjustified
and unreasonable Government prosecutions which
EAJA was partially intended to remedy by reimbursing
leal fees and expenses to the prevailing party.
On the foregoing findings and conclusions and on the
entire record, I issue the following recommended s
S If no exceptions are filed as provided by Sec. 102.46 of the Board's
Rules and Regulations, the findings, conclusions, and recommended
Order shall, as provided in Sec. 102.48 of the Rules, be adopted by the
ORDER
The application of W.C. McQuaide, Inc. for attorney
fees and expenses under the Equal Access of Justice Act
is denied; and the confidential financial statement at-
tached to and incorporated in Respondent's application
for fees shall be sealed and withheld from public disclo-
sure, under the provisions of 29 CFR § 102.147(g) (1982).
Board and all objections to them shall be deemed waived for all pur-
poses.
1199