NLRB v. I.W.G., Inc.

• Court: Court of Appeals for the Tenth Circuit
• Decided: May 18, 1998
• Docket: 96-9548
• Status: Published

Opinion

F I L E D United States Court of Appeals Tenth Circuit PUBLISH MAY 18 1998 UNITED STATES COURT OF APPEALS PATRICK FISHER Clerk FOR THE TENTH CIRCUIT _________________________

NATIONAL LABOR RELATIONS BOARD,

Petitioner, v. No. 96-9548

I.W.G., INC.; CON-BRU, INC., doing business as AAA FIRE SPRINKLER, INC.; ROBERT B. GORDON, an individual; and ARLENE, INC., doing business as AAA FIRE SUPPRESSION, INC.,

Respondents.

ROAD SPRINKLER FITTERS LOCAL UNION 669, U.A., AFL-CIO,

Intervenor. _______________________________

ROBERT B. GORDON,

Petitioner, v. No. 96-9550

Respondent.

Intervenor. APPLICATION FOR ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD (Nos. 27-CA-11771 and 27 CA-11870 for Case No. 96-9548) and PETITION FOR REVIEW OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD (322 NLRB No. 12 for Case No. 96-9550)

James W. Bain (Peter A. Gergely with him on Petitioner Gordon’s Opening Brief), Brega & Winters P.C., Denver, Colorado, for Robert B. Gordon.

Vincent J. Falvo, Jr., Attorney (Frederick L. Feinstein, General Counsel; Linda Sher, Associate General Counsel; Aileen A. Armstrong, Deputy Associate General Counsel; Charles Donnelly, Supervisory Attorney; and Robert J. Englehart, Attorney, on the brief), National Labor Relations Board, Washington, D.C., for National Labor Relations Board.

William W. Osborne, Jr. (Robert H. Morsilli with him on the brief), Osborne Law Offices, P.C., Washington, D.C., for Intervenor Road Sprinkler Fitters Local Union No. 669, U.A., AFL-CIO.

Before PORFILIO, McKAY, and LUCERO, Circuit Judges.

McKAY, Circuit Judge.

The National Labor Relations Board [NLRB or Board] petitions this court

for enforcement of its order against Robert B. Gordon, I.W.G., Inc. [I.W.G.],

Con-Bru, Inc. [Con-Bru], and Arlene, Inc. [Arlene]. Respondent, Mr. Gordon,

cross-petitions this court for review of the Board’s decision. The case came

-2- before the Board on a complaint issued by the General Counsel, following an

investigation of charges filed by Road Sprinkler Fitters Local Union No. 669,

U.A., AFL-CIO [the Union]. After an administrative law judge [ALJ] conducted

a hearing on the charges set forth in the Board’s complaint, the Board adopted the

ALJ’s decision with a slight modification. The Board essentially decided that

Respondent “abandoned and subsequently created” several corporations, namely,

I.W.G., Con-Bru, and Arlene, “primarily to avoid paying his employees pursuant

to an extant collective-bargaining agreement and to evade a statutory obligation to

bargain with the Union over the terms and conditions of employment.” I.W.G.,

Inc. , 322 N.L.R.B. No. 12, 1997-1998 NLRB Dec. (CCH) ¶ 16,108, at 33,441

(Aug. 27, 1996). We assume jurisdiction pursuant to 29 U.S.C. § 160(f).

Respondent claims that there is a procedural impediment to the Board’s

conclusion that Arlene was an alter ego of I.W.G. and Con-Bru. 1 He contends

that because the unfair labor practice complaint filed September 2, 1993, did not

allege that Arlene was an alter ego, he was not given notice sufficient to

adequately prepare and present a defense to a charge that Arlene was an alter ego

1 I.W.G., Con-Bru, and Arlene all failed to file exceptions with the Board to the ALJ’s recommended decision and order against them. None of them filed an answer to the Board’s application for enforcement of its order. Since the Arlene alter ego issue was never pled, we will not enter a default judgment on that issue. In all other respects, we grant the Board’s Motion for Entry of Default Judgment against those corporate respondents. See Fed. R. App. P. 15(b); NLRB v. Bell Co., 561 F.2d 1264, 1266 n.2 (7th Cir. 1977).

-3- of I.W.G. and Con-Bru, and that Respondent was personally liable for Arlene’s

unfair labor practices. The Board urges us to hold that, regardless of whether the

Arlene alter ego issue was specifically pled, it was properly decided by the Board

because it was fully and fairly litigated. See NLRB Br. at 26-28; Facet Enters.,

Inc. v. NLRB , 907 F.2d 963, 972 (10th Cir. 1990); NLRB v. Tricor Prods., Inc. ,

636 F.2d 266, 271 (10th Cir. 1980); NLRB v. Thompson Transp. Co. , 421 F.2d

154, 155 (10th Cir. 1970). As we explained in Facet Enterprises , “variation

between an unfair labor practice charged in the complaint and one found by the

Board does not deprive a respondent of due process where it is clear that the

respondent ‘understood the issue and was afforded full opportunity to justify [its

actions].’” Facet Enters. , 907 F.2d at 972 (quoting NLRB v. MacKay Radio &

Tel. Co. , 304 U.S. 333, 350 (1938)).

After reviewing the record and the Board’s contentions, we hold that

Respondent was not accorded his due process rights as to the Arlene alter ego

claim. In its Decision and Order, the NLRB found that the Arlene alter ego claim

had a sufficient connection to the complaint for Respondent to anticipate the

Arlene alter ego issue. See I.W.G., Inc., 1997-1998 NLRB Dec. (CCH) at 33,443.

The Board articulated two reasons for its decision: (1) Arlene was named as a

respondent in the proceeding along with I.W.G., Con-Bru, and Respondent Mr.

Gordon; and (2) “the gravamen of the General Counsel’s complaint is that Gordon

-4- created and abandoned corporate entities in order to evade I.W.G.’s contractual

and statutory obligations to its employees and the Union.” Id. The Board’s

summary of the complaint is inaccurate; nowhere does the complaint allege

Respondent “created and abandoned” Arlene. Id. We agree with the Board’s

dissenting opinion that the General Counsel’s complaint drew a clear distinction

between (1) I.W.G. and Con-Bru and (2) Arlene. Id. at 33,448 (Member Cohen,

dissenting). The complaint alleged that Con-Bru, I.W.G., and Respondent were a

single employer or alter egos. See Petitioner’s App., Vol. I at 165 (Order

Revoking Settlement Agreement and Amended Consolidated Complaint and

Notice of Hearing at 2(d)). Arlene was only alleged to be a successor to

I.W.G./Con-Bru with notice of their potential liability to remedy unfair labor

practices, i.e., a Golden State successor. See id. at 2(e)-(g); Golden State Bottling

Co. v. NLRB, 414 U.S. 168, 184-85 (1973). Our review of the record leads us to

conclude that Respondent read the complaint to mean what it said; the complaint

did not give Respondent notice of an implied and unalleged theory of creating and

abandoning multiple corporate entities.

The Board’s second articulated basis for concluding Respondent had notice

was the naming of Arlene in the complaint. The fact that Arlene was named in

the complaint does not by itself provide a sufficiently close connection to the alter

ego claim to warrant adequate notice of that unalleged claim against Arlene. Our

-5- review of the facts of this case convinces us that Respondent was unaware that

the Arlene alter ego claim was raised in the proceeding. Even during the course

of the evidentiary hearing, Respondent received no notice of the claim that Arlene

was an alter ego. Although the General Counsel amended the complaint to

dismiss Connie Gordon as a party, see Petitioner’s App., Vol. I at 196, he

intentionally did not amend the complaint to add the Arlene alter ego claim. See

Petitioner’s App., Vol. II at 687; NLRB v. Tamper, Inc., 522 F.2d 781, 788 n.9

(4th Cir. 1975). The ALJ never advised the parties that he would consider an

alter ego claim against Arlene. As in NLRB v. Pepsi-Cola Bottling Co. of

Topeka, Inc., 613 F.2d 267, 274 (10th Cir. 1980), the “case was complex and

confusing . . . [with] not only a number of charges but [] change[s] of ownership.”

Like the respondent in Pepsi, Respondent tried to resolve the confusion about the

General Counsel’s litigation theories. See id. at 273. Respondent’s counsel

specifically asked “if in the brief we have to address an alter ego claim between

I.W.G., Con-Bru, and Arlene, or just a successorship claim against Arlene.”

Petitioner’s App., Vol. II at 689. The ALJ responded, “[T]he Board cases are

clear -- you look to the pleadings.” Id. Because Respondent never received

notice of the Arlene alter ego claim through the pleadings, the first time

Respondent was informed that an alter ego claim was alleged against Arlene was

in the Union’s posthearing brief filed prior to the ALJ’s decision. Cf. Stokely-

-6- Van Camp, Inc. v. NLRB, 722 F.2d 1324, 1331 (7th Cir. 1983) (identical conduct

held to be a “clear violation of [Respondent’s] due process rights”). Although the

ALJ indicated that he would only address the claims in the pleadings, he

recommended liability against Respondent on a claim unalleged in the complaint.

Clearly, the Arlene alter ego theory was not fully and fairly litigated. The

NLRB asserted in its order that the Arlene claim was fully and fairly litigated

because “considerable evidence” relevant to the Arlene alter ego claim was

presented and challenged at the hearing. I.W.G., Inc., 1997-1998 NLRB Dec.

(CCH) at 33,443. “But the simple presentation of evidence important to an

alternative claim does not satisfy the requirement that any claim at variance from

the complaint be ‘fully and fairly litigated’ in order for the Board to decide the

issue without transgressing [Respondent’s] due process rights.” NLRB v. Quality

C.A.T.V., Inc., 824 F.2d 542, 547 (7th Cir. 1987) (quoting Pepsi-Cola Bottling

Co., 613 F.2d at 274); see Conair Corp. v. NLRB, 721 F.2d 1355, 1372 (D.C. Cir.

1983) (“‘[T]he introduction of evidence relevant to an issue already in the case

may not be used to show consent to trial of a new issue absent a clear indication

that the party who introduced the evidence was attempting to raise a new issue.’”)

(quoting Cioffe v. Morris, 676 F.2d 539, 542 (11th Cir. 1982)), cert. denied sub

nom. Local 222, Int’l Ladies’ Garment Workers’ Union, AFL-CIO v. NLRB, 467

U.S. 1241 (1984); Montgomery Ward & Co. v. NLRB, 385 F.2d 760, 763 (8th

-7- Cir. 1967) (“‘Evidence without a supporting allegation cannot serve as the basis

of a determination of an unfair labor practice.’”) (quoting Engineers &

Fabricators, Inc. v. NLRB, 376 F.2d 482, 485 (5th Cir. 1967)). This court has

stated, “Failure to clearly define the issues and advise an employer charged with a

violation of the law of the specific complaint he must meet and provide a full

hearing upon the issue presented is, of course, to deny procedural due process of

law.” J.C. Penney Co. v. NLRB, 384 F.2d 479, 483 (10th Cir. 1967). From the

facts of this case, we think it is clear the Board made a finding which was neither

charged in the complaint nor litigated at the hearing.

The Board contends that even if Respondent was denied due process, the

remedy of another hearing is unnecessary because Respondent has not identified

specific, unconsidered evidence that contravenes the Arlene alter ego theory. See

NLRB Br. at 32. We disagree. In his brief, Respondent articulates unconsidered

evidence with sufficient specificity to merit a hearing that adequately comports

with procedural due process. See Robert B. Gordon’s Opening Br. at 30-31.

Under the facts of this case, 2 we agree with our sister circuits that “[s]peculation

2 We recognize that NLRB v. Jordan Bus Co., 380 F.2d 219, 223-24 (10th Cir. 1967), appears to stand for a contrary view. However, we note that the issue of whether due process was accorded is heavily dependent upon the circumstances of each case. See Pergament United Sales, Inc. v. NLRB, 920 F.2d 130, 136 (2d Cir. 1990) (“[W]hether a charge has been fully and fairly litigated is so peculiarly fact-bound as to make every case unique; a determination of whether there has been full and fair litigation must therefore be made on the record in each case.”).

-8- by reviewing courts regarding whether additional evidence might exist is a chancy

endeavor at best, and it is one we refuse to undertake where the complete lack of

notice entirely disabled [Respondent’s] counsel from taking any steps at the

evidentiary hearing to defend against the unannounced claim.” Quality C.A.T.V.,

Inc., 824 F.2d at 548; accord Drug Package, Inc. v. NLRB, 570 F.2d 1340, 1345

(8th Cir. 1978) (due process violation merits new hearing if company “might have

litigated the matter differently”) (emphasis added); Rodale Press, Inc. v. F.T.C.,

407 F.2d 1252, 1257 (D.C. Cir. 1968) (“The evil . . . is not remedied by observing

that the outcome would perhaps or even likely have been the same. It is the

opportunity to present argument under the new theory of violation, which must be

supplied.”) (emphasis added). But see NLRB v. Jordan Bus Co., 380 F.2d 219,

223-24 (10th Cir. 1967).

The Board pierced the corporate veils of each of the three corporate

respondents to find Respondent Mr. Gordon personally liable. Whether a

In Jordan Bus Co., we concluded that the respondent had received a meaningful opportunity to prepare and present its case. See Jordan Bus Co., 380 F.2d at 224. In that case, unlike this one, the respondent was afforded actual notice in time to present evidence on the issue at the evidentiary hearing. See id. at 223. Because the respondent had actual notice prior to the evidentiary hearing, we proceeded to determine whether the evidentiary record was complete with regard to the challenged issue and whether any prejudice to the respondent resulted. In the case at bar, however, Respondent never had any chance to present evidence because he never received notice of the unalleged claim until after the close of the evidentiary hearing.

-9- corporate veil ought to be pierced is a question of law, and we give “great

weight” to the Board’s determination that the situation justified piercing and

uphold that determination if it is within “reasonable bounds.” NLRB v. Greater

Kansas City Roofing, 2 F.3d 1047, 1051 (10th Cir. 1993) (internal quotations

omitted). The factual findings of the Board are conclusive “if supported by

substantial evidence on the record considered as a whole.” 29 U.S.C. § 160(e).

It is impossible for us to accurately review the Board’s veil-piercing

analysis because it is based in substantial part on the unlitigated conclusion that

Arlene is a single employer/alter ego of I.W.G. and Con-Bru. The two-prong

analysis provided by Greater Kansas City Roofing for veil piercing was not

applied to each corporate respondent individually; rather, evidence of the

operations of I.W.G., Con-Bru, and Arlene was combined to support the Board’s

conclusion that the situation justified piercing. See I.W.G., Inc., 1997-1998

NLRB Dec. (CCH) at 33,446. We therefore remand the issue of Respondent’s

personal liability to the Board to be analyzed in light of this opinion.

In his petition for review, Respondent Mr. Gordon complains that there was

no specific allegation in the complaint addressing the failure of Con-Bru and

Arlene to apply the union contract terms to their non-union employees. In his

Decision, the ALJ acknowledged that this issue was not specifically alleged by

the Board. Attach. to Robert B. Gordon’s Opening Br. (I.W.G., Inc., 322 NLRB

-10- No. 12, at 23-24). However, since none of the respondents, including Respondent

Mr. Gordon, filed exceptions with the Board asserting a due process violation,

see R., Vol. VI, Doc. 10, at 40-45, we will not review Respondent Mr. Gordon’s

due process contentions on appeal. See Micheli v. Director, Office of Workers’

Compensation Programs, 846 F.2d 632, 635 (10th Cir. 1988). Additionally,

because neither Con-Bru nor Arlene filed exceptions with the Board or filed an

answer to the Board’s application for an enforcement order, we will not review

the Board’s reasoning for applying the “make whole” remedy to the Con-Bru and

Arlene employees.

We deny Respondent’s Motion to Strike the Union-Intervenor’s Brief. We

also deny Respondent’s Motion to Supplement the Record with his Post-Hearing

Brief to the ALJ because that brief was unnecessary to our determination of this

case. We hold that, based on the record on appeal, the notice to Respondent and

Arlene with respect to the Arlene alter ego claim was insufficient to satisfy due

process standards and that this issue was not fairly and fully litigated. 3 The

Board’s order is enforced in part and denied in part, in accordance with the

3 We are not persuaded by, and do not discuss at length, Respondent’s argument that the Board engaged in misconduct justifying an equity court in refusing relief because of bad faith or unclean hands. See Robert B. Gordon’s Reply Br. at 19.

-11- views expressed in this opinion. We remand for proceedings consistent with this

opinion.

-12-