Riley Aeronautics Corp.

RILEY AERONAUTICS CORP. 495 Riley Aeronautics Corporation , Riley International Corporation, and their Agent , Jack M. Riley, President and Donald A. Depew and Fred Lee, Jr. and Wallace J. Nelson and Sigmund R. Nied and Homer D . Sapp. Cases 12-CA-3055-I, 12-CA-3055-2, 12-CA-3055-3, 12-CA-3055-4, and 12-CA-3055-5 September 18, 1969 SUPPLEMENTAL DECISION AND ORDER BY MEMBE RS FANNING, BROWN, AND JENKINS On August 9, 1965, the National Labor Relations Board issued a Decision and Order in the above-entitled proceeding,' finding, inter alia. that the Respondent, Riley Aeronautics Corporation, had discriminatorily discharged Donald A. Depew, Fred Lee, Jr.. Wallace J. Nelson , Sigmund R . Nied, and Homer D . Sapp, in violation of Section 8(a)(3) and (1) of the National Labor Relations Act, as amended . and directing that Respondent make an offer of immediate and lull reinstatement to these discriminatecs to their former or substantially equivalent positions and to make them whole for any loss of earnings suffered by reason of the discrimination against them . On June 28 , 1967, the Board' s Order was enforced by the United States Court of Appeals for the Fifth Circuit.' A backpav specification and notice of hearing and an amended backpay specification and notice of hearing were issued by the Regional Director of Region 12. and pursuant thereto a hearing was held February 18 through 20, 1969, before Trial Examiner Samuel M . Singer for determination of the amounts of backpay due to the above-named discriminatees, and Respondents liability for the backpay. On May 23, 1969, the Trial Examiner issued the attached Supplemental Decision. in which he found that the discriminatees were entitled to the amounts of backpay therein set forth; that the Board reserve the right to modify the backpay and reinstatement provisions set forth therein if such modifications became necessary by a change of circumstances; and that the General Counsel 's claim that Jack M. Riley is personally liable for the backpay due the discriminatees be dismissed . Thereafter, the General Counsel filed exceptions to the Supplemental Decision and a supporting brief. Pursuant to the provisions of Section 3(b) of the Act, the Board has delegated its powers in connection with this case to a three-member panel The Board has reviewed the rulings made by the Trial Examiner at the hearing and finds that no prejudicial error was committed . The rulings are '154 NLRB 360 'N L R B , Riley Aeronautics Corporation , 337 F.2d 557 hereby affirmed. The Board has considered the entire record in this case, including the Trial Examiner's Supplemental Decision, the exceptions and brief, and hereby adopts the findings, conclusions, and recommendations of the Trial Examiner. SUPPLEMENTAL ORDER Pursuant to Section 10(c) of the National Labor Relations Act, as amended, the National Labor Relations Board hereby orders that Respondents. Riley Aeronautics Corporation and Riley International Corporation, Fort Lauderdale. Florida, their officers, agents, successors, and assigns, shall pay to each discriminatee as net backpay the amounts set forth as the amounts determined to be due by the Trial Examiner in his attached Supplemental Decision. TRIAL EXAMINER'S SUPPLEMENTAL DECISION STATEMMLNT OF THE CASE SAMUEL M . SINGER, Trial Examiner - This is a proceeding on backpay specifications issued by the National Labor Relations Board's Regional Director for Region 12, pursuant to Section 102 52, et seq . of the Board's Rules and Regulations The purpose of the proceeding is to determine: (a) the amount of backpay , if any, due to five employees whom the Board found were unlawfully discharged . and (b ) Respondents' responsibility for the backpay. The Board' s Order, dated August 9, 1965, adopting Trial Examiner Arthur E. Reyman's Decision dated May 12, 1965 ( 154 NLRB 360), was enforced on June 28, 1967 , by a decree of the Court of Appeals for the Hith Circuit (337 1-.2d 557). The hearing on the backpay specifications was held belore me in Miami , Florida, on February 18 through 20, 1969. Only one of the three Respondents . Jack M. Riley, appeared .' A brief was received from General Counsel and a "memorandum" from Respondent Jack M. Riley. Upon the entire record ' and from my observation of the witnesses , I make the following FINDINGS AND CONCLUSIONS I. BACKGROUND: THE ISSUES The Board found that on October 26, 1964, Riley Aeronautics Corporation (hereafter called Aeronautics) discriminatorily discharged five employees for the purpose of discouraging their union activities. The Board's Order directs Aeronautics, "its officers, agents, successors, and assigns," to offer reinstatement to the five discriminatees to their former or substantially equivalent positions and to make them whole for any loss of earnings they may have 'Attorney Jenkins, who appeared for Mr Riley, represented all three Respondents prior to the hearing (he filed answers to the backpay specifications for the two corporations as well as the individual) At the hearing, Jenkins stated that "there was no point in making any defense in this matter for the corporations because they are both defunu as far as I can tell " 'Transcript corrected by my order on notice dated May 2, 1969 178 NLRB No.76 496 DECISIONS OF NATIONAL LABOR RELATIONS BOARD suffered by reason of the discrimination against them. In the backpay specifications, issued on August 23, 1968. the Regional Director alleged that Respondent Riley International Corporation (hereafter called International), "as successor to, and/or alter ego of Aeronautics, is responsible with Aeronautics and Jack M Riley, jointly and severally, for remedying the unfair labor practices of Aeronautics."' In customary fashion, the specifications set out, by calendar quarters, the gross backpay allegedly due each employee, the formulae used in determining the amounts, the expenses for which compensation is claimed, the discriminatees' interim earnings. and the net backpay allegedly due them. Prior to the hearing. General Counsel filed motions to strike Respondents' answers (or portions thereof) and for summary judgment on all or portions of the issues, based upon Respondents' failure to respond as required to the backpay specifications. On the other hand, Respondents International and Riley filed motions to dismiss the backpay specifications insofar as they were concerned. on the ground that they were not parties to the unfair labor practice proceeding By orders dated October 22 and November 18, 1968, Trial Examiner Charles W Schneider (a) granted in part and denied in part General Counsel's motion for summary judgment, and (b) denied, without prejudice to renewal at the hearing, the motions of International and Riley to dismiss the backpay specifications Trial Examiner Schneider's rulings precluded litigation of the allegations in the backpay specifications as to the reasonableness of the formulae used by the Regional Director in determining claimed backpav and the accuracy of certain computations made. Respondents were permitted to litigate (a) tact questions such as the true amount of the discriminatees' interim earnings, expense items. willful loss (if any) of wages, etc , and. (b) responsibility of International and Riley for remedying the unfair labor practices. At the hearing before me, the major question litigated was the responsibility issue. Since the disposition of this issue has a material bearing on the extent and amount of backpav due the claimants, it will be treated first.' 11. RESPONI)I-NTS' RI SPONSIBI I iTY FOR REMEDYING THE LNFAIR LABOR PRA('T1CFS5 A. Aeronautics 1. Its operations and interrelationship with other Riley enterprises Although Aeronautics' responsibility to remedy the unfair labor practices is unquestioned (the discriminatees were on its payroll when discharged), a description of its operations and relationship to International and Riley is essential to determining the issue of International's and Riley's obligations respecting the remedy 'Unless otherwise indicated , Jack M Riley will hereafter be referred to as Riley Only Riley and four of the five discriminatees (made available by General Counsel ) testified at the hearing One of the live (Lee ) no longer resides in the Miami area (the locale of the unfair labor practices), having moved to Kansas General Counsel produced and made available for Respondents inspection materials on the basis of which Lee 's (and the other discriminatees') earnings were arrived at (e g , social security and employer reports) 'Practically all (if not all ) the evidence on the responsibility issue consists of testimony and documentary evidence supplied by Riley Aeronautics, founded by Riley in 1961 or 1962, was engaged in the business of general repair, modification, and maintenance of aircraft until July 1967.° It sometimes also refurbished and sold used aircraft, rented out aircraft, and supplied gas and oil services at the Executive Airport (in Fort Lauderdale, Florida) where it was located prior to July 1967.' Occasionally it farmed out work. Products Aeronautics worked on before July 1967 included Dove conversions, rocket conversions, turbochargers produced by another Riley owned company (Ralay Corporation, infra ), and the Dellaviland Heron. Riley was Aeronautics' president and controlling stockholder. Although owning only 10 percent of Aeronautics stock directly, he owned over S0 percent of the stock of Riley (Kelly) Aircraft, Inc. (a Bahamas corporation doing business in the United States as Riley Aircraft, Inc-hereafter referred to as Bahamas) which, in turn, owned about three-fourths of Aeronautics stock.' Riley was president of Bahamas as well as of Aeronautics. Bahamas acquired its interest in Aeronautics several years ago, apparently before commission of the unfair labor practices by Aeronautics in 1964 In order "to get additional dollars into the [Aeronautics] manufacturing," Riley at that time "segregated" its manufacturing from sales operations- i.e., Aeronautics took over Bahamas' "rights and supplemental type certificates and work and investment" and Bahamas " in turn took over the sales rights [on Aeronautics] on a commission basis." As part of this transaction, Bahamas received "about three-fourths" of Aeronautics stock, the remaining quarter being sold to other subscribers It is clear, however, that at times Aeronautics continued to handle its own sales. Contracts to be performed by Aeronautics were usually made directly between Aeronautics and the purchaser of the product or service,' but some were executed with Bahamas which in turn passed them on to Aeronautics. As president and controlling stockholder, Riley had "the final say" on Aeronautics operations. He was chairman of its board of directors Although his "prime function was sales and finance." Riley exercised lull authority over his managers, having "release[d]" several of them when circumstances dictated it. He also had final control over labor policy Riley also had a controlling interest in Rajay Corporation (a California Company with which Aeronautics did business), holding about 69 percent of its stock.10 Prior to July 1967 Rajay designed, engineered. and built turbochargers Bahamas, and sometimes Aeronautics, handled sale, for Rajay In addition, Aeronautics "at times would work on some turbocharger systems for Ralay." Rajay did not do any modification work, although it owned supplemental certificates, some of which it transferred to Aeronautics." Riley testified that while Rajay "was making money" prior to July 1967. Aeronautics did not. Riley still ownes Rajay, but, as hereafter indicated _(section (f, 2), he recently sold its ""Modification " work means work performed pursuant to certificates (or supplemental type (ertificates) issued by the Federal Aviation Agency authorizing the certificate holder to perform particular work 'Aeronautics initially operated at the International Airport in Broward County, Florida 'Riley testified that about 10 individuals owned "possibly" 20 percent of the remaining Aeronautics stock 'Aeronautics procured its business through advertisements in trade journals, direct mail, and personal contact with corporations or private owners of aircraft "At one point Riley testified , " I own Raiay Corporation " without any qualification "These certificates (which as previously noted were issued by a RILEY AERONAUTICS CORP. 497 "turbocharging manufacturing function" to Tex Star Corporation, with Rajay apparently retaining royalty rights.' 2 2. Sale of Aeronautics As noted, Riley testified that Aeronautics "never made" money. He claimed that all of its income was being used to meet payroll and business expenses; that he lent it money personally or through Bahamas (which he controlled) to keep it going; that he lost his entire investment in Aeronautics-aggregating $500,000 over the years (1961-1967); and that Aeronautics had a $2.5 to S3 million outstanding indebtedness in July 1967-S500.000 owed Riley and $2 5 million to Associates Discount Corporation on a loan which he personally endorsed. However, he also indicated that at one time Bahamas owed Aeronautics $750,000 which Aeronautics never got back;" and that an account receivable in the amount of S201,000 was due Aeronautics from Rajay (then admittedly "making money"), but that he (Riley) could not tell whether it was "ever realized" by Aeronautics. On July 6, 1967, Riley "individually"y and as president of Aeronautics executed an agreement with Home Builders Acceptance Corporation (HBAC) whereby Aeronautics agreed to sell to HBAC its assets (machinery and equipment, tools, fixtures, aircraft, a turbocharger, automobiles, etc.), supplemental certificates (on Riley Heron, Riley Dove. etc.), and "corporate goodwill."" As consideration, HBAC agreed to deliver HBAC capital stock (1,447,051 shares) to Aeronautics. half of it to be held in escrow by two individuals (Meriwether and Wade) to secure payment of outstanding Aeronautics obligations. The sales contract referred to another agreement by which Riley was to have obtained from Associates Discount (Aeronautics' chief creditor) (1) a moratorium on Riley and Aeronautics obligations for 6 months, and (2) an agreement canceling the entire $2.5 million indebtedness to Associates Discount upon payment of $400,000 within 6 months from June 26, 1967.15 Finally, the July 6 contract provided that financial management in the new enterprise (HBAC) "be placed in the hands" of Meriwether and Wade and that Riley remain a full-time employee of HBAC (and its successors and assigns) for 4 years Options to acquire HBAC stock at specified prices within 5 years were accorded Meriwether, Wade, and three others, including Richard Prigmore (HBAC's president). The above sales contract was finalized by a deed recorded on July 21, 1967, by which Aeronautics conveyed governmental agency to authorize particular aircraft work) were transferrable and could be sold at a fixed price "rhe record indicates that prior to July 1967 Riley had interests in other enterprises in the aircraft business, including a facility at Sebring, Flonda, which worked on turboprop Dove modifications , but this facility operated for only 1-1/2 years, Riley was not sure whether it was owned by Aeronautics or Riley Aircraft Engineering (a corporation owned 50 percent by Riley) which is no longer functioning Riley also had an interest in Air Components, a corporation owned by Aeronautics which manufactured modification kits "According to Riley, Bahamas (like Aeronautics) never made money and at one time "carried forward" an $800,000 loss "While certain items (equipment, tools, supplemental certificates, etc.) were to be free and clear of encumbrances, aircraft and other vehicles were taken subject to "present liens and encumbrances " "According to the agreement, Riley was also to cancel Aeronautics' indebtedness to Riley, except for the $400,000 he was to pay to Associates Discount to HBAC (already known as International)." by separate instruments, "any and all its machinery and equipment, tools, furniture and fixtures ... including but not limited to the items described on ... attached 44 pages"; tooling, dies, jigs, templates; parts, components, supplies, and other inventory; aircraft and motor vehicles; lease, buildings, and improvements; and "any and all Supplemental Type Certificates." Riley testified that HBAC (a Colorado corporation) was a mortgage and loan company, not theretofore engaged in the aircraft business: that although it had 100 to 300 stockholders, it was nothing more than "a shell," raising money through the sale of stock to the public; and that in consummating the sale, HBAC parted with three-quarters of its issued stock, a quarter still remaining among stockholders other than Aeronautics. Although he could place no money value on the acquired HBAC stock, he stated that "the purpose of the transaction was to try to salvage something for Riley Aeronautics' stockholders and creditors by making . . : possible for ... some outside funds in the way of stock investments and loans [-] which Riley Aeronautics because of its defunct position could not accomplish." No cash money was involved in the transfer. Apparently, according to Riley, Aeronautics' accounts receivables were not transferred," nor its accounts payable. Further, according to Riley, HBAC did not assume Aeronautics' S2.5 million debt to Associates Discount. Riley testified that although in his July 6, 1967, agreement with HBAC (supra) he agreed to obtain cancellation of that debt on paying $400,000 to this creditor,1s he was unable to make more than $100.000 payment and, hence, that Aeronautics' debt (and his own since he personally endorsed the original note) "reverted" back to $2 million. B. International 1. Initial operations As previously noted (footnote 16), soon after acquiring Aeronautics' assets HBAC assumed the name Riley International Corporation (International). International, as Aeronautics, operated in the aircraft industry assembling and manufacturing kits and performing modification work-the latter involving major changes and conversions. It admittedly employed "substantial numbers of former supervisors and employees of Aeronautics," using employees in modification work "for a period of one year" after taking over Aeronautics ; i.e., until July 1968. Unlike Aeronautics, however, International did not work on Rajay turbochargers, "a phase of [Aeronautics] business . not sold" to it. Like Aeronautics, International sold its products through Bahamas. At times, Riley (who was in charge of sales for International as well as Aeronautics) sold International products through Aeronautics, which, as we shall see (infra, sec. C, "The deed shows that by this time HBAC changed its name to Riley Aeronautics International Corporation , this was shortly afterward changed to Riley International Corporation "Riley testified that he could not recall any transfers other than items listed in the contract and deed, neither of which listed accounts receivable He specifically recalled that notes receivable were not transferred and surmised that accounts such as prepaid interests and utility deposits were later sold to Aeronautics' successor "According to Riley, Associates Discount, knowing that it "didn 't stand a ghost of a chance" to collect $2 5 million , was willing to "forgive" it if he personally paid it $400,000 cash, in accordance with an agreed time schedule 498 DECISIONS OF NATIONAL LABOR RELATIONS BOAR D 3), continued as an entity alter selling its physical assets to International. International continued to perform Aeronautics' business at the latter's location (the Executive Airport), having taken over Aeronautics' lease there. In January 1968 it moved its operation to Southwest 33d Street, near the International Airport19 where it manufactured and assembled kits and worked on aircraft, leasing hangar facilities from others at the airport. Riley, as he testified, remained active in International until July 1968 when he relinquished his position as International's president. Edith Roberts, Aeronautics' secretary-treasurer, continued in that position for International until April or May 1968 Wade, one of the two men contemplated by the July 6, 1967, sales contract (supra. section A, 2) to retain financial control over international. was vice president and treasurer for an undetermined period-until he left the Company. In the beginning, Wade signed all International checks along with one other official, including Riley, but "[f]or a period after Wade left" the Company, Riley assumed full financial control.20 As International president, Riley also possessed final control over managerial and personnel policies. He was the majority stockholder of International by virtue of his interest in Aeronautics which received' three-fourths of International (formerly HBAC) stock on the sale of Aeronautics' assets.21 2. Financial position Riley testified that although International continued to operate substantially the same type of business as Aeronautics, including aircraft conversion, its "prime interest" from the start was to become "more or less a holding company," by subcontracting out its manufacturing work Implementing this objective towards the end of 1967,22 International entered into a contract with Hayes International, an Alabama company, under which Hayes would do all modification work for International under supplemental type certificates. To "induce" Hayes to execute this contract, the Riley owned Rajay Corporation endorsed and guaranteed International's performance. Riley testified that in April or May 1968 International found itself without sufficient funds to operate. unable to "Sometime prior to January 1968 International sold the Executive Airport lease to an independent corporation for $200,000 Riley testified that he had intended to use this money to construct a new hangar for International at the International Airport, but because of Internal Revenue "pressures" used part of it (S94,000) for back taxes The balance (5106,000 ) was used to pay creditors and to meet business expenses "Riley could not recall when Wade quit International , stating only that Wade left "[a]fter there was no money to pay him," probably in March or April 1968 Explaining why Wade was put in charge of linances in the first instance, Riley testified, 'Wade was a financial man and a former banker and supposedly a conservative person that could handle a dollar' and in whom "future investors" could place trust, in contrast to himself who "couldn't do any worse." "Aeronautics apparently retained the same proportionate holdings until a later foreclosure of the stock, discussed infra, section C, I According to Riley, International did not issue new stock , or increase its stuck, but a realignment in the 25 percent stock held by holders other than Aeronautics took place through transfers and resales At least two individuals accorded stock options by the July 6 sales contract, exercised them-former HBAC President Prigmore obtaining (at 50 cents par value) 20,000 shares on September 27 and 10,000 more on December 31, 1967, of the total 35,000 shares alloted him, and an associate of Pngmore (Lupton) 15,000 of his alloted 35,000 shares on the same dates "Riley could not give the particular month, but indicated that it could have been as late as December pay taxes and telephone bills. He indicated that he had to pledge Aeronautics stock even before that time to secure an International loan of $150,000 from a group of International stockholders residing in Honolulu, headed by David Nakano. Actually, however, only 5130,000 of this loan netted International." According to Riley, International continued to be in financial straits and accordingly he decided to use Rajay ("a corporation that I own") "to salvage something even after this $130,000.. . was paid ... into Riley International." In April or May 1968 Rajay entered into a licensee agreement with International to utilize the supplemental type certificates (STC's) owned by International, Rajay undertaking to pay a license lee for all modifications and kits requiring International STC's. Rajay also agreed to pay cash for parts obtained from International inventory, to lease International machinery for $300 a month, and to pay International's rent, "and assume International's obligation there " Riley testified that under these arrangements International "would need no employees, it would need no funds for operating because they would have no operation," although it would still "need some funds to pay their liabilities." He further testified that while the license fees and funds obtained from Rajay ..were used by International to pay some of their obligations . . . they had so many obligations that it became necessary for Rajay to even make additional advances or repay royalties" so that "Rajay is presently owed" some 5100.000. C. Current Status of Riley Enterprises 1. International Although Riley testified that international stopped doing business and using employees in July 1968, he conceded that it still has assets at Southwest 33d Street, near the International Airport It also has stockholders, the controlling stockholder (David Nakano) residing in Honolulu. According to Riley, the Honolulu group, headed by Nakano, acquired control over International by foreclosing the stock Aeronautics had pledged to secure the Nakano group's $150,000 loan to International in April or May 1968 (supra, fn. 23).2a International's ledger books, produced by Riley at the hearing, show entries in various accounts subsequent to July 1968, the time International ceased doing business according to Riley. August 31, 1968, appears to be the last entry date for most accounts (payroll, direct labor, work in progress, telephone, office and general salaries. withholding and FICA taxes, purchasing and receiving. etc.). International's "Aeronautics" account appears to establish active dealings with Aeronautics up to September 30, 1968, but three later entries (October 29 and November 30, 1968, and January 31, 1969) are also shown-the last one crediting Aeronautics with S75,000 commission on sales for International'2` The final (November 30, 1968) entry in International's "Accounts "The Honolulu group consisted of transferees of stock originally held by HBAC According to Riley, James M Riley (no relation to Respondent Jack M Riley), an Illinois resident, was elected International president by "direction' of the Honolulu group, "one of the requirements for them making the loan [being] that he be president " As presently shown, this group subsequently loreclosed the stock "Riley testified that Nakano now owns 1,300,000 shares plus an additional (undisclosed ) amount he previously owned "A single entry in a 'Raiay" account for January 31, 1969, shows 51 17,503 due Rajay for various bills pd on A; C Payable" - presumably RILEY AERONAUTICS CORP. 499 Receivables" shows a S28,523 balance. Final bank deposit account entries show the following balances on the dates indicated Fort Lauderdale Natl. Bank-Regular Account 8/31/68 -$49,048 Same Bank-Payroll Account 9/30/68-980 Amer Natl. Bank & Trust-Cash 10/31/68-9256 City Bank, Honolulu (Hawaii) 9/30/68-26.188 Asked to explain why International's books showed post-July 1968 entries if, as he claimed, the corporation ceased doing business in July, Riley surmised that these may have been "closing entries." He also disclaimed responsibility for these entries, stating that he had disassociated himself from international in July. 1-urthermore, Riley claimed that the records which he produced (from storage in Fort Lauderdale) were "not up-to-date," additional ones being in possession of the Honolulu stockholders Riley testified that as representative of Aeronautics he brought suit in Honolulu to compel production of International's latest records and that when finally allowed to inspect them, recalled seeing a balance of only $50 in International 's bank account.36 2 Ralay In November 1968 Rajay (which in April or May 1968 began to use International 's supplemental type certificates (STC's) under a license agreement with International, supra, section B, 2). sold its turbocharging manufacturing operation in California to Tex Star. a conglomerate About the same time, it arranged that a new corporation (Turbo Propulsion ) assume the STC licenses on manufacturing aircraft Turbo Propulsion has taken over a few Rajav employees , using them in California until they can be moved to Texas. Turbo',, intended location. According to Riley. at the time of the hearing Turbo Propulsion was operating on borrowed moneys. was incorporated at Riley's request , and as yet issued no stock He stated that " [i]t may be that Rajay will be forced to he an investor because of their royalty" arrangement . Turbo Propulsion also uses or leases space in Wichita Falls, Texas, where it intends to perform the same types of aircraft work that International and Aeronautics had performed 3. Aeronautics and Bahamas Although Riley testified that Aeronautics and Bahamas were "dormant" and had no employees at the time of the hearing, he stated that they still exist, that he is still president of both, and that he sometimes takes orders and sells through these corporations Thus, he indicated that he would buy and resell a plane in the name of Aeronautics. as well as farm out work (such as work on a Rajay turbocharger) to a fixed base operator in the name for bills Rajay had paid on behalf of International The same figure appears as the balance in International 's 'Accounts Payable Trade" on lanuary 31, 1969 "Riley was unsure of the date when the S50 balance was shown, first stating that he "didn't notice ' the date and was interested only in the "final balance," but then added that this was as of November 1968 Asked which bank account showed the $50 balance, he stated that he saw "the cancelled checks" of the bank statement of "City National Bank " It is not clear whether Riley referred to the City Bank of Honolulu which showed a $26, 188 balance on September 30, 1968, or the Fort Lauderdale National Bank with a $49,048 balance on August 31, 1968 Riley did not produce the court order pursuant to which he allegedly inspected International's books of Aeronautics. As previously noted, International's Aeronautics account showed active dealings between international and Aeronautics through Septmeber 30, 1968. Although Riley insisted that Aeronautics was bankrupt, with a S2 million deficit, he stated that Aeronautics never attempted to go through formal insolvency or bankruptcy proceedings D. Conclusions Concerning Respondents' Recponsibiltty for Remedying the Unfair Labor Practicer 1 Aeronautics and International The Board's August 9, 1965, Order, as enforced on June 28. 1967, requires Aeronautics, "its officers, agents, successors, and assigns." to offer reinstatement to the five discriminatees (discharged on October 26, 1964) to their former or substantially equivalent positions and to make them whole for any loss of earnings they may have suffered by reason of the discrimination against them. There is no question about Aeronautics' liability for remedying the unfair labor practices since it committed them and the order specifically runs against it. See Pertna Vinyl Corporation, Dade Plastics Co and United States Pipe and Foundry Company, 164 NLRB No. 119, enfd. 398 F 2d 544 (C..A 5) Nor is there any serious question concerning International's liability to remedy the unfair labor practices as successor, with knowledge of the unremedied violations at the time it acquired Aeronautics The uncontradicted evidence establishes that in July 1967 International took over practically all of Aeronautics' assets (machinery and equipment, furniture and fixtures, inventory, buildings, etc ) and "corporate goodwill " It continued in substantially the same (aircraft) business as Aeronautics, at the same location, and under Aeronautics' lease. It employed "substantial numbers" of Aeronautics supervisors and employees, including employees in jobs occupied by the discriminatees Riley, president of Aeronautics (and perpetrator of the unfair labor practices), became president of International. He was the controlling stockholder of Aeronautics and retained controlling interest in International by reason of acquired International (IIBAC) stock Although for a time after the transter, financial control rested with another official (Wade). Riley later assumed complete control in this area also. Lastly, he retained linal control over managerial and personnel policies and, as in Aeronautics, was in charge of sales, employing two other Riley owned corporations (Bahamas and sometimes Aeronautics itself) to sell International products Under these circumstances, it is clear, and I find, that Aeronautics and International are jointly and severally liable for remedying the unfair labor practices. See Regal Knitwear Conipanv v. N.L R B. 324 U.S. 9. Perma Vinyl Corporation, .supra, 164 NLRB No. 119, enl'd. 398 F.2d 544 (C.A. 5)." The fact that International was not named respondent in the complaint proceeding is of no consequence in view of the opportunity here afforded it (but not availed of) to litigate the question of responsibility See Pertna Vinyl. supra, 398 F.2d at 546; Mastro Plastics, supra, 354 I- 2d at 180. '[D]erivative liability for compliance with a judicially enforced unfair-labor-practice order may be imposed upon parties not themselves charged in the initial proceedings." "See also N L R B v. Tempest Shirt Manufacturing Companv, Inc, 285 F 2d I (C A 5), N L R B v Mastro Plastics Corporation . 354 F 2d 500 DECISIONS OF NATIONAL LABOR RELATIONS BOARD N.L.R.B. v. C C.C. Associates, Inc , 306 F 2d 534, X39 (C.A 2). The record establishes, however, that although Aeronautics still exists and sells for Riley, it no longer manufactures aircraft and has no employees. The same is true of International, its successor, which ceased using employees in July 1968.=" For reasons hereafter indicated, I find that the two corporations have discontinued their manufacturing operations for economic reasons and not to evade remedying the unfair labor practices. In view of the changed circumstances, therefore, it will be recommended that Aeronautics and International not be required to reinstate the five discriminatees as provided in the Board's August 9, 1965, reinstatement order. The "Board will naturally not require action now impossible for respondent[s] to perform." N.L.R B. v Ephraim Haspel, 228 F.2d 155, 156 (C.A. 2)." However, it will also be recommended that if, in the future, Aeronautics, International, or their successors and assigns resume manufacturing each of the ' discriminatees shall be reinstated as soon as available positions become open, in the manner provided in the Board's August 9, 1965, Order. With respect to backpay, it will be recommended that the cutoff date be fixed as of the end of the second quarter of 1968 (June 30, 1968) when the discriminatees would have lost their employment for nondiscriminatory reasons. Although Riley contended that neither International nor Aeronautics was currently able to meet the backpay obligations, portraying each as hopelessly insolvent and bankrupt, 30 his testimony on the recent fiscal positions of the corporations was too general, vague, and confusine to warrant my crediting it No records were produced such as balance sheets and profit-and-lots statements to support Riley's conclusory allegations. On the other hand, Riley's own testimony indicates that Riley is currently still using Aeronautics as a sales outlet and that Aeronautics had retained its account receivables when it sold its assets to International. According to International's ledger book, Aeronautics appears to have actively transacted business with International, presumably as the latter's sales agent. until October 1968. One transaction alone (a sale on behalf of International in January 1969), netted Aeronautics S75,000 in commissions, more than sufficient to satisfy the backpay claim of all five discriminatees." Riley could not recall whether a $201,000 account receivable due Aeronautics from Ralay (a still functioning and solvent Riley enterprise) when Aeronautics was still manufacturing was "ever realized." As to International , it is impossible to appraise the fiscal solvency of that corporation from the incomplete records produced at the hearing. (Riley claimed that some of International's books were in the custody of the current controlling Honolulu stockholder 170, 179-I80 (C A 2), N L R B v Frontier Guard Patrol, Inc, 399 F.2d 716 (C A. 10) "Although the record indicates that international changed its method of operations (shifting from manufacturing to contracting out manufacturing work to Hayes ) at the end of 1967, Riley conceded that it continued to use employees in modification work until July 1968, when he disassociated himself with International Since absence of available jobs is an affirmative defense which the offending employer must prove, a finding here that there was insufficient work for the discruninatees prior to July 1968 is unwarranted See N L R B v. Mastro Plastics Corporation . 354 F.2d 170, 175-176 (C A 2). N L R B v Interurban Gas Corporation , 354 F 2d 76, 77 (C A 6). "See also Southport Petroleum Company v N L R B 3 t5 U S 100, 106, N L R B v. Talladega Cotton Factory . Inc, 213 F 2d 208, 217-218 (C A 5). N L R B. v Acme Mattress Co. 192 F 2d 524, 528 (C.A. 7) Nakano ). Even so, International ' s accounts showed substantial cash balances in four banks as much as $49,048 in one on August 31, 1968. Furthermore, International admittedly still has assets at its location in Fort Lauderdale, Florida -part or all of which can be liquidated to meet backpay obligations. In any event, even if the two corporations were shown to be insolvent, this would not justify withholding a backpay order . To begin with , "impossibility [of performance] may be raised by respondent [s] as a defense if a contempt action is brought against [them] by the Board '" N.L.R.B. v Kostilnik , d/b/a Pacific Banking Company, 405 F.2d 733, 735 (C.A. 3): N. L.R.B v Somerset Classics, Inc, 193 F.2d 613, 616 (C.A. 2). Moreover, the Board is entitled to file a claim in bankruptcy to recover part or all "owed the Board as agent for the injured employees ." Nathanson v. NL.R.B., 344 U.S. 25, 27; see also Utah Plumbing and Heating Contractors Association , 142 NLRB 379. However, as already stated, the record developed in this proceeding is too meager and incomplete for passing on the question of the corporations' present ability to meet backpay "Of course, the Board [could have had] access" to additional records on International and Aeronautics, "but it is the employer who kept the records" and who must produce them "to explain them and to interpret any ambiguities they may contain . [T]his factor [is] a persuasive reason for requiring the employer to come forward with proof" in support of an affirmative defense. NL.R B v. Mastro Plastics Corporation . 354 F.2d 170, 176 (C.A. 2). 2. James M. Riley General Counsel seeks to hold Riley personally answerable for the unfair labor practices on the theories: (a) that he was Aeronautics president, its principal stockholder, and perpetrator of the unfair labor practices: and (b) that he was part of "a single intergrated employer" comprising Aeronautics, International. and Riley. At the outset it should be noted that Riley's alleged liability is not based on a successorship theory Cf. Regal Knitwear Co v. N.L.R.B, 324 U.S. 9: Perma Vinyl Corporation, supra, 164 NLRB No. 119. In any event, it has not been shown that Riley obtained or succeeded to the assets and business of Aeronautics and International. Nor was Riley named individually or as employer in the unfair labor practice charge and complaint. He was named for the first time in the backpay specifications, but only in the representative capacity of "agent" and "president" of the two corporations. Cf. Darlington Manufacturing Company; Roger Milliken, Deering. Milliken & Co, Inc, 139 NLRB 241, 259-260, remanded on other grounds 380 U.S. 263.32 In issue here is the nature and extent of Riley's liability for remedying the unfair labor practices, particularly the backpay award. "Thus, Riley explained that international was in the hands of the Honolulu group as the result of a stock foreclosure and that it had only a $50 bank balance in January 1969; and that Aeronautics had a S2 million deficit "The record does not disclose how the $75,000 income was disposed of, i e , whether Riley pocketed it or used it to pay off corporate debts or expenses Riley did not produce Aeronautics' records "Cf Industrial Fabricating. etc and Frank M Afackneish . 119 NLRB 162, cnfd 272 F 2d 184 (C.A. 6), Bon Hennings Logging Co. a corporation, and Clanton Knowles. 132 NLRB 97, enfd 308 F 2d 548 (C.A 9); Ogle Protection Service, Inc, and James L Ogle, 149 NLRB 545, modified on other grounds 375 F 2d 497 (C A. 8), The L. B Hosiery RILEY AERONAUTICS CORP. "[E]asily the most distinctive attribute of the corporation is its existence in the eye of the law as a legal entity and artificial personality distinct and separate from the stockholders and officers who compose it." Wormser, Disregard of the Corporate Fiction and Allied Corporation Problems (Baker, Voorhis and Company, 1927). p. 11. "The insulation of a stockholder from the debts and obligations of his corporation is the norm, not the exception." AT.L.R.B. v. Deena Artware, Inc , 361 U.S. 398, 402-403. Nevertheless, the corporate veil will be pierced whenever it is employed to perpetrate fraud, evade existing obligations, or circumvent a statute. Isaac Schieber, et al, individually , and Allen Hat Co., 26 NLRB 937, 964, enfd. 116 F.2d (C.A. 8).J3 Thus, in the field of labor relations, the courts and Board have looked beyond organizational form where an individual or corporate employer was no more than an alter ego or a "disguised continuance of the old employer" (Southport Petroleum Co v. N L R.B., 315 U.S. 100, 106). or was in active concert or participation in a scheme or plan of evasion (N L.R.B. v. (Hopwood Retinning Co., 104 F.2d 302, 304 (C.A. 2): or siphoned off assets for the purpose of rendering insolvent and frustrating a monetary obligation such as backpay (N.L.R.B. v. Deena Artware. Inc., supra, 361 U.S. 398); or so integrated or intermingled his assets and affairs that "no distinct corporate lines are maintained" (Id at 403). Applying these legal principles to this case, I cannot find that Riley is personally liable for the backpay due the discriminatees. The record does not support General Counsel's suggestion that he had embarked upon a scheme to deplete or divert to himself the assets of the offending Employer (Aeronautics) in order to thwart that Employer's backpay obligations. Nor has it been shown that the successor corporation (International) was only a front for the predecessor. There is no substantial credible evidence supporting a finding that Riley willingly concealed or secreted Aeronautics and International assets, or that he engaged in other chicanery. To be sure, the evidence tends to support General Counsel's allegation that he had "a penchant" for setting up corporations, involving one in the affairs of another, reorganizing corporate functions and activities (e.g., confining Aeronautics to manufacturing and the Bahamas to sales), and using one corporation to assist or rescue another (e.g., Rajay advancing money and supplying work to International), but no fraud, concealment, or purpose to defeat backpay obligation has been established. There is ample evidence (documentary as well as testimonial) that Aeronautics was in financial straits prior to its July 1967 sale to International (HBAC). In so far as appears, the sale was bona fide and at arms length. involving strangers to Riley. The coincidence of time (within a month after the court handed down its decision enforcing the Board Order) is suspicious, but not fatal. The interrelationship between Aeronautics and International appears to be substantially a business or fiscal one - the common denominator in the two and other affiliated corporations Co. Incorporated and Lee Maisel, ere, 88 NLRB 1000, enfd 187 F.2d 335 (C A 3); New Madrid Manufacturing Company, a corporation, and Harold Jones, 215 F 2d 908, 915 (C A 8) "As stated in Schieber, quoting from United States v. Milwaukee Refrigerator Transit Co , 142 Fed 247, 255 (E D Wise ), "when the notion of legal entities is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons." 501 (e.g Bahamas and Rajay) being ownership and business control by Riley - factors in themselves insufficient to establisha single employer status. See_V".L.R.B v. Jordan Bus Company and Denco Bus Lines, Inc., 380 F.2d 219, 221-222 (C.A. 10).3° Indeed, the close functional integration and fiscal dealings between Aeronautics on the one hand and Bahamas and Rajay on the other -together with common ownership by Riley - provide stronger support for a single (Aeronautics - Bahamas -- Rajay) enterprise finding, but General Counsel has requested no such finding and Bahamas and Rajay have not been named respondents for remedial or other purposes. The same may be said for the relationship between International (after it took over Aeronautics) and other Riley enterprises. As I see it, absent the special circumstances already referred to (e.g., where the corporate officer is the disguised continuance of the corporation, or dissipates corporate assets, or intermingles personal and corporate affairs, or attempts to evade backpay obligation), the corporate officer is responsible only for taking necessary steps to effectuate the Board order. See Isaac Schieber, supra, 26 NLRB at 968. This is particularly so where, as here, he is named only "in his representative capacity as president [and agent]" and not "as an employer separate and apart from his position as president." Cf. Darlington Manufacturing Company, Roger Milliken, Deering. Milliken & Co.. Inc., 139 NLRB 241, 259-260, remanded on other grounds 380 U.S. 263. If he refuses to discharge his duty as officer to satisfy a court-enforced order, including disbursing corporate funds to meet the corporate backpay obligation, he risks punishment for contempt. N.L.R.B. s. Hopwood Retaining Co, 104 F.2d 302, 304-305 (C.A. 2); NL.R.B v. West Texas Utilities Co., 206 F.2d 442, 445 (C.A.D.C.). To require him to make good the corporation's backpay liability out of his personal funds would operate to defeat the very purpose of his incorporating the business to escape individual liability. If the corporate funds are insufficient to meet the backpay obligation, the Board's recourse is that of a "creditor," which includes enforcing the claim in insolvency or bankruptcy proceedings. Nathanson v. N.L.R.B., 344 U.S. 25, 27.35 I conclude that Riley is not personally liable for the backpay due to the employees discriminated against "Factors which the Board weighs in determining whether a single employer enterprise exists (in addition to common ownership and financial control) include interrelationship of operations , centralized labor relations, common supervisory personnel , employee interchange or transfer, uniformity of working conditions, geographical proximity, and centralized recordkeeping See Twenty-First Annual Report of the NLRB (1956), pp 14-15, N L.R B v Calcasieu Paper Co., 203 F.2d 12, 13 (C.A. 5), Sakrete of Northern California, Inc . 332 F 2d 902, 905 (C A 9), Darlington Manufacturing Company. supra. 139 NLRB at 255-258 Not all of these factors need be present, of course, to justify a finding of single employer status. "For the reasons already indicated, I cannot accept General Counsel's contention (br p. 26) that Riley must be made personally liable because he, more than Aeronautics and International, "is the one who is able to take the remedial action " I am also forced to reject his argument (ibid ) that "equity and justice" dictate that Riley pay the price, since it was he who committed the unfair labor practice and delayed complying with the Board Order until the corporate respondents got into financial difficulties To begin with , the backpay specifications fixing the amount of liability was not issued until August 23, 1968. Furthermore, General Counsel has not shown that he was unable to take appropriate legal measures to attach the corporate assets pending determination of backpay liability 502 DECISIONS OF NATIONAL LABOR RELATIONS BOARD III. BACKPAY CALCULATIONS A. Donald A Depew. Fred Lee, Jr, and Homer D Sapp The backpay specifications. as amended, allege that these three discriminatees are entitled to the following backpay (plus interest) from October 26, 1964 (the date of discrimination) through September 30, 1968 (the date to which computations were made). Depew $6.438.32; Lee $2,457.80; Sapp S15,765.04. Respondents did not dispute the correctness of these computations. Since I have found that the corporate Respondents are liable for backpav only up to the time International (successor to Aeronautics) discontinued business in Jul), 1968, 1 find that the backpay (exclusive of interest), due each of the three employees up to July 1968 is as follows." Depew- $6,045.16 Lee - $2,457 80 Sapp - $14,986 81 B Wallace J Nelson and Sigmund R Nied The specifications, as amended, give the following net backpay for these two discrimmatees for October 26, 1964 - September 30, 1968. Nelson - $16,747 50: Nied- $8,334.87. At the hearing Respondents claimed that these amounts should be offset or reduced in the lollowing respects 1. Value of assets remaining after discontinuance of a !Nelson-:'Vied partnership operated during the period of discrimination In the third quarter of 1965 (July) Nelson and Nied opened an aircraft repair business (Aircraft Engine Service) which they operated until about October 1966. According to the backpay specifications, each drew $125 or $150 per week "out of profits"-a total of $7,700 by each partner from the 1965 third quarter through the 1966 third quarter. These drawings were deducted from the gross pay each would have earned during the period in question to arrive at net backpay due each At the hearing Respondents contended that a further deduction should be made for the value of leftover parts and equipment divided between the partners when they wound up the business. Although the value of these assets is not clear, "final" entries in the partnership books give evaluations of S3,530.24 for "Parts Inventory" and S913.18 for "Shop Equipment " I reject the contention that the value of the remaining partnership assets should be offset against backpay. Absent evidence to the contrary, it must be presumed that these assets were realized from initial investment of the partners and not partnership earnings or profits. The burden of proof to establish an offset against gross backpay rests upon Respondents. The "burden is placed on the respondent to establish that its liability be reduced and, if so, to what extent." N L R.B v. Interurban Gas Corporation, 354 F.2d 76, 77 (C.A. 6). See also N.L R.B. v. Moonei Aircraft, Inc , 366 F 2d 809. 812-813 (C.A. 5) 2. Nelson's $967 50 claim for work prior to discharge. In addition to listing gross backpay due for the first quarter after his discharge (fourth quarter of 1964), the specifications alleged a S967 50 "balance due" Nelson on "These amounts represent the total net backpay set forth in the backpay specifications , as amended, less backpay (if any ) claimed for them for the third quarter of 1968 "contract work for Riley." Nelson testified that prior to his discharge he agreed to do a job for Aeronautics at a fixed price He completed it on his own (after working) hours and hired tyro employees to assist him, however, Nelson used company facilities, tools, and materials. Objecting to inclusion of this item in the specifications since it pertained to predischarge earnings ("prior to any period in dispute or in question"), Respondents contended at the hearing that it was not the function of a backpay proceeding "to collect bills." In his brief (p. 2), Gerieral Counsel suggests that these earnings represented wages rather than contract earnings. likening them "to other earned fringe wage" allowances (such as vacations, insurance benefits, . profit-sharing bonus) recoverable after discharge. I do not agree. Whether considered as wages or contractor earnings, it is clear that the $967.50 claim is based upon work completed before Nelson's unlawful discharge, that the claim is not attributable to the unfair labor practices committed by the Employer, and that it represents nothing more than a debt "irrelevant to these backpay proceedings ",Cf. P's L.R.B. v. Mooney Aircraft, Inc , 366 F.2d 809, 811 (C.A. 5). Accordingly, Nelson's net backpay is subject to a $967 50 deduction. 3 iNied's reduced interim earnings due to accidental injury. During his interim employment at Sunny South in 1967 Nied sustained an injury which required hospitalization and therapeutic treatment. On his physician's advice, Nied procured "lighter work" at McLeod International Corp, resulting in lower interim earnings there than at Sunny South. Although eliciting these facts at the hearing, Respondents apparently did not claim that Nied's backpay he adjusted to reflect lower earning, during the disability period" In any event, I find that his backpay should not he reduced to reflect the lower interim earnings due to disability. To begin with. one cannot assume that Nied would have suffered the disability at Aeronautics, particularly since he was performing heavier work at Sunny South (where he suffered the injury) Cf American Manufacturing Company of Texas, 167 NLRB No. 71. Furthermore, Nied's credited testimony indicates that he could have satisfactorily performed his former (lighter) job at Aeronautics even with his impairments In view of the foregoing, I find that Nied and Nelson are entitled to backpay in the following amounts (or the period October 26, 1964--June 30. 1968 (plus 6-percent interest as hereafter indicated) 'e Nied -$7,957.46 Nelson - $14,857 38 CONCLUSIONS 1 Aeronautics (as the offending Employer) and international (as successor to Aeronautics) are jointly and severally responsible for remedying the unfair labor practices, including loss of earnings incurred by the live discrim inatees. "Respondents' memorandum to the Trial Examiner is confined to the issue of responsibility for remedying the untair labor practices "These amounts reflect deductions (5377 41 for Nicd and $922 62 for Nelson ) for the 1968 third quarter improperly included in the backpay specifications (supra fn 36) and the additional $967 50 improperly credited to Nelson for work prior to his discharge RILEY AERONAUTICS CORP. 2. The five discriminatees are entitled to be made whole for the period beginning October 26, 1964 (the date of their discriminatory discharge ) until July 1, 1968, when International ceased using employees. 3. In view of the discontinuance of their manufacturing operations, Aeronautics and International are not required to reinstate the five discriminatees to their former or substantially equivalent positions at Aeronautics , unless and until either or both resume such operations , in which event they shall offer the discriminatees reinstatement as soon as appropriate positions become available, in the manner provided in the Board ' s August 9, 1965, Order. 4. Riley is not responsible out of his own personal lunds for the backpay due the discriminatees RECOMMENDED SUPPLEMENTAL ORDER Upon the foregoing landings and conclusions and the entire record , and pursuant to Section 10(c) of the Act, it is recommended that Riley Aeronautics Corporation and Riley International Corporation , their officers, agents, successors, and assigns, shall pay to each discriminatee the 503 amounts set forth below opposite their names, with interest at the rate of 6 percent per annum on each of the quarterly sums set forth in the backpay specifications (as herein modified), less lawfully required tax withholdings: Donald A Dcpew-$6,045.16 Fred Lee, Jr-$2,457.80 Wallace J. Nelson-$14 ,857.38 Sigmund R Nicd-$7,9 7.46 Homer D. Sapp-$14.986.81 IT IS ALSO RECOMMENDED that the Board reserve the right to modify the backpay and reinstatement provisions herein if such modifications become necessary by a change of circumstances. IT IS FURTHER RE, COMMi- Ni )l I) that General Counsel' s claim that Jack M Riley is personally liable for the backpay due the discriminatees he dismissed.