Darlington Manufacturing Co. v. National Labor Relations Board

325 F.2d 682

• Court: Court of Appeals for the Fourth Circuit
• Decided: November 15, 1963
• Docket: Nos. 8790, 8861, 8906
• Status: Published

Opinions

ALBERT V. BRYAN, Circuit Judge.

The National Labor Relations Board in these consolidated cases has made these pivotal decisions¹ :

1. Darlington Manufacturing Company committed an unfair labor practice under the National Labor Relations Act, Section 8(a) (3) ² — forbidding discrimination in regard to tenure of employment — by closing and liquidating its only plant, and discharging its employees, in 1956 because of the election of Textile Workers Union of America, AFL-CIO as bargaining representative for the employees ;

2. Darlington must pay all of such discharged employees their wages, less current net earnings, “until the discharged employees are able to obtain substantially equivalent employment” or until they are put on a preferential hiring list by Deering Milliken, Inc.; and

3. Deering Milliken, Inc. and its affiliates are liable for the payment of these wages on the ground that Darling-ton, with others, was such an affiliate of Milliken and together they constituted a single employer.

In petition No. 8790 Darlington and Milliken seek to vacate these Board orders. In No. 8861 the Union, which was the charging party before the Board, prays that the orders be enlarged to require also the reopening of the Darling-ton plant with reinstatement of the employees, and that Roger Milliken, president of both Darlington and Milliken, notwithstanding the contrary decision of the Board, be held personally liable to satisfy the orders. In No. 8906 the Board seeks enforcement against Milliken of the Darlington liabilities.

As these actions have common issues they have been argued and considered together. We decline to enforce these orders of the Board against Darlington and Milliken.

Darlington, chartered under the laws of South Carolina, operated a print cloth mill there, manufacturing and selling cotton greige goods. It had no other plant. In 1937 Darlington went through a Section 77B bankruptcy proceeding, 11 U.S.C. § 207 (1937 ed.). Milliken, then known as Deering Milliken & Co., Inc., as one of the largest creditors, received in payment of its debt about 41% of Darlington’s common stock. When Darlington was liquidated in 1956, as previously mentioned, there were outstanding 150,000 shares of common stock owned as follows:

In March 1956 the Union commenced a campaign to organize the Darlington employees and to become their bargaining representative. An election conducted under the direction of the Board was called for September 6, 1956. The Union won, 258 to 252.

On September 12 Darlington filed objection to the election. A conference was requested- on the same day by the Union to discuss a collective bargaining agreement. The request was refused by Darlington on the ground the election protest had not been decided and the Union had not been certified.

Also on September 12, the Board of Directors met, with all of them present. Following a brief discussion of the business status of Darlington, they resolved to recommend to the stockholders the liquidation and dissolution of the corporation. A meeting of the stockholders to act upon the resolution was called for October 17. Employees of Darlington were at once told of the recommendation. While no new ones were accepted, the plant continued to fill the orders then in hand. The objection of Darlington to the election was overruled on October 8, and the Union shortly certified as the bargaining representative.

With the stockholders on October 17 adopting the recommendation of the Board of Directors by a vote of 134,911 shares to 3,774 the officers proceeded with the liquidation. Discharge of employees occurred over a span of about six weeks: from 510 employees on October 13, the payroll dropped to 460 on October 20, to 345 on October 27 and to none when the plant closed on November 24. The machinery and equipment were sold at auction on December 12 and 13, 1956. Since that time Darlington has not operated any plant in South Carolina or elsewhere ³.

Deering Milliken & Co., Inc.’s capital stock was owned in a majority amount by the members of the Milliken family. In addition they were the major (but by no means the only) shareholders in Darlington and in certain other textile corporations. The latter are the corporations referred to by the Board and in this opinion- — somewhat imprecisely — as “affiliated corporations” of Milliken. Prior to 1960 Deering Milliken & Co., Inc. was not a manufactory. It was the exclusive sales representative of the producing corporations controlled by the Milliken family.

In June 1960 Deering Milliken & Co., Inc. was merged into the Cotwool Manufacturing Corporation, and the latter’s name then changed to Deering Milliken, Inc., herein known as Milliken. A majority of its stock was owned by the Milliken family. After the merger Milliken carried on the textile manufacturing formerly pursued by Cotwool.

The finding of the Board — that the decision to close the mill was an unfair labor practice under § 8(a) (3) — was spelled out in this way:

“Darlington discriminated in regard to its employees’ tenure of employment by closing its plant — thereby discharged the employees — and, because the plant closing was the direct result of the employees’ selection of the Charging Union as their collective bargaining representative, Darlington’s retaliation against the employees for their activities in behalf of the Union discouraged the employees’ continued membership in the Union.”

Abridged and as pertinent here the terms of § 8(a) (3) are these:

“It shall be an unfair labor practice for an employer — by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization.”

In this determination the Board acknowledged, as the Trial Examiner had found, that there were economic considerations sufficient in themselves to support the decision by Darlington to terminate operations. However, both the Examiner and the Board concluded that “the decision to close the mill was not a fact based on economic factors, and that, but for the Union’s election victory, that decision would not then have been made.”

Upon this premise the Board declared all the closure discharges to be unlawful, justifying the usual remedy of reinstatement and reimbursement for loss of pay. But with the shutdown complete and permanent reinstatement not achievable, the relief was necessarily directed primarily to restitution of wages. The monetary redress was awarded by the Board as follows:

“[W]e shall therefore order the Respondent, Darlington, to provide back pay until the discharged employees are able to obtain substantially equivalent employment”. [Accent added.]

Further, the Board overruling the Trial Examiner found that “Darlington occupied a single employer status with Deering Milliken and its affiliated corporations”. On this basis Milliken and its affiliates were declared “liable for back pay to the same extent as we have heretofore directed with respect to Darlington” and were ordered to place the discharged employees on a preferred hiring list. Additionally, Milliken was commanded to offer employment to these discharged workers in its other mills in South Carolina or nearby States, without prejudice to their seniority and other privileges.

All of these orders were qualified by the proviso that if no work was available .at the Milliken mills, then the accumulation of back pay would be tolled as and when the dischargees were put upon Milliken’s preferential hiring list.

I. Our opinion is that the decision to •close the plant was not an unfair labor practice. In this we accept the findings ■of fact made by the Board. While, as .just observed, the evidence discloses substantial economic reasons warranting the determination to close the plant without reference to the entry of the Union into the plant, we accede arguendo to the contention of the Board that these reasons were not acted upon. Even if they were, however, we shall assume, again arguendo, with the Board that if unionization also played a part in the resolve to close the plant, then the contribution of this factor may be considered as responsible for the cessation.

To go out of business in toto or to discontinue it in part permanently at any time, we think was Darlington’s absolute prerogative. The fundamental purpose of the National Labor Relations Act is to preserve and protect the rights of both industry and labor so long as they are in the relationship of employer and employee. But the statute's scope does not exceed that province. It does not compel a person to become or remain an employee. It does not compel one to become or remain an employer. Either may withdraw from that status with immunity, so long as the obligations of any employment contract have been met. Such withdrawal, alone and of itself, does not create any obligation of either the employer or the employee to the other under the Act. Cf. Dissenting opinion of Board Member Rodgers in the present case. If a cessation of business is adopted to avoid labor relations, the proprietor pays the price of it: permanent dissolution of his business, in whole or in part. A statute authorizing an order forcing the continued pursuit of operations in these circumstances would be of doubtful validity. Consider the consequences of an attempt to punish as contempt a violation of such an order, and its fatal infirmity is revealed : the proprietor would be jailed or otherwise penalized for not reopening a demised business reinstating employees.

Of course, the right of discontinuance which we here uphold, means an actual, unfeigned and permanent end of operations — not a removal, nor subcontract, nor a change merely in the form of the corporate entity. No ruse or subterfuge is suggested here. Darlington’s was an absolute desistenee,'not a temporary intermission as apparently was contemplated in N. L. R. B. v. Norma Mining Corp., 206 F.2d 38 (4 Cir. 1953). There was no provisional lockout, the mill was not transplanted elsewhere, and its sale was coneededly entire, bona fide and irrevocable. The Trial Examiner demonstrated beyond debate that Darlington was not a “runaway” plant — that is, a plant having another existence in another form-finding that Darling-ton was not hidden among the other Milliken corporations. No disagreement with this finding was or on substantial evidence could have been, expressed by the Board.

“There is no decided case”, the Board candidly states, “directly dispositive of Darlington’s claim that it had an absolute right to close its mill, irrespective of motive”. While a number of the decisions on the point mention the presence of a legitimate economic reason in connection with the right to close, an analysis of them discloses that they do not declare the existence of such a reason to be indispensable to the validity of the closing. See, e. g., N. L. R. B. v. Preston Feed Corp., 309 F.2d 346, 352 (4 Cir. 1962); N. L. R. B. v. New England Web, Inc., 309 F.2d 696, 700 (1 Cir. 1962); N. L. R. B. v. Rapid Bindery, Inc., 293 F.2d 170, 175 (2 Cir. 1961); Union Drawn Steel Co. v. N. L. R. B., 109 F.2d 587, 592 (3 Cir. 1940). Nor are they precedents for the proposition that an owner or operator cannot go out of business at his option if the closure is intended to be, and is in truth, absolute and permanent. These authorities, we think, support the view that if the termination is without intent to resume the business elsewhere — as a runaway — the power to close, even if spurred by unionization, is not precluded by the Act.

The right is implicitly recognized in Southport Petroleum Co. v. N. L. R. B., 315 U.S. 100, 106, 62 S.Ct. 452, 456, 86 L.Ed. 718 (1942), with Justice Jackson saying, “Whether there was a bona fide discontinuance and a true change of ownership — which would terminate the duty of reinstatement” was a question of fact determinable by the Board or the Court on contempt proceedings. [Accent added.] Bona fides does not mean exclusively an economic ground, but as well that the termination was, as here, not merely a gesture but an actuality,

Lower courts have long given explicit sanction to the right of discontinuance, Over 20 years ago the Fifth Circuit said in N. L. R. B. v. Tupelo Garment Co., 122 F.2d 603, 606 (5 Cir. 1941):

"The stockholders of Tupelo Garment Co., had the absolute to dissolve corporation and the Board was without authority to prevent this."

Recently the Sixth Circuit put it this way in N. L. R. B. v. R. C. Mahon Co. F.2d 44 47 (6 Cir 1959):

We find nothing in the National Labor Relations Act which forbids a company, in line with its plans for operation, to eliminate some division of it's worth. As held in National Labor Relations Board v. Adkins Transfer Company, Inc., supra, [6 Cir. 226 F-2d 324] an employer faced with tlle practical choice, either of Paying enhanced wage rates demanded by a union or of discontinuing a department of its business, is entitled to discontinue.”

Other courts have spoken in like manner and as emphatically, e. g., N. L. R. B. v. New England Web, Inc., supra, 309 F.2d 696, 700; Jays Foods, Inc. v. N. L. R. B., 292 F.2d 317, 320 (7 Cir. 1961); N. L. R. B. v. New Madrid Mfg. Co., 215 F.2d 908, 914 (8 Cir. 1954); N. L. R. B. v. Caroline Mills, Inc., 167 F.2d 212, 214 (5 Cir. 1948); Atlas Underwear Co. v. N. L. R. B., 116 F.2d 1020, 1023 (6 Cir. 1941).

To be sure, there are decisions adjuding the employer liable even upon an absolute disposition of all or a part of the business equipment: N. L. R. B. v. Kelly & Picerne, Inc., 298 F.2d 895 (1 Cir. 1962); N. L. R. B. v. Missouri Transit Co., 250 F.2d 261 (8 Cir. 1957); N. L. R. B. v. Bank of America, 130 F.2d 624 (9 Cir.), cert. denied, 318 U.S. 791, 63 , 87 L.Ed. 1157 (1942). Upon examination, however, it will be observed that these cases did not involve the ex-tinguishment altogether of the business and the end of further participation by the employer in his former sphere. The predominant element of the principle we maintain is that the business is no longer extant and the owner has forfeited the penalty for withdrawing, that is, he has foregone the privilege of further pursuit of his business.

II. The doctrine of single employer, heretofore noted, was used by the Board to project Darlington’s liability as determined by the Board, upon Milliken. See N. L. R. B. v. Gibraltar Industries, Inc., 307 F.2d 428, 431 (4 Cir. 1962), cert. denied, 372 U.S. 911, 83 S.Ct. 724, 9 L.Ed.2d 719 (1963); N. L. R. B. v. Deena Artware, Inc., 361 U.S. 398, 80 S.Ct. 441, 4 L.Ed.2d 400 (1960). Our decision that Darlington is without liability, of course, bars such expansion of responsibility. Furthermore, even if Darlington was a division of Milliken, the transfer of Darlington’s liability to Milliken upon the single employer principle is precluded because, as we have stated, a part, like the whole, of a business may be abolished when the extinction is consummated in circumstances like the present.

III. In its petition the Union asked us to enlarge the Board’s order to include Roger Milliken individually in the orders of restoration of wages entered by the Board. This prayer like the further prayer of the Union that Darlington be required to reopen its plant is, obviously denied by our acquittal of Darlington of liability.

The Board sustained the Trial Examiner in finding that Darlington had violated § 8(a) (1) in pre- and post-election statements and urging a repudiation of the Union. Likewise § 8(a) (5) — wherein refusal to bargain is made an unfair practice — was found contravened by Darlington. Remedies for these offenses are not now available as Darlington is no longer alive.

Power to command an employer to stay in business indefinitely, or assess him with damages for permanently going out of business, is not a National Labor Relations Board prerogative. Assumed by the Board in these cases, it is denied here.

Enforcement of Orders Denied.

1 . 139 NLRB No. 23, decided October 18, 1962.

2 . 29 U.S.C. § 158(a) (3).

3 . A concise history of the proceedings in this case appears in Judge Haynsworth’s opinion for this Court in Deering Milliken, Inc. v. Johnston, 295 F.2d 856 (1961).