Pierre Pellaton Enterprises, Inc.

PIERRE PELLATON ENTERPRISES, INC. Pierre Pellaton Enterprises, Inc.; Pierre Pellaton Apartments at Mineola , Inc.; Pierre Pellaton Apart- ments, Inc.; Pierre Pellaton at Clinton Avenue, Inc.; Fardale Apartments Corp.; Pierre Pellaton, an Individual, and Estate of Pierre Pellaton ; and Mi- chael Kluger, Fred Seidenfeld and Aaron Sokol, a co-partnership doing business as S.K.S. Associates and Local 307, Service Employees International. Union, AFL-CIO. Case 29-CA-2670 January 23, 1976 SUPPLEMENTAL DECISION AND ORDER BY CHAIRMAN MURPHY AND MEMBERS FANNING AND WALTHER On January 24, 1973, the National Labor Rela- tions Board issued its Decision and Order in the above-entitled proceeding,' directing the Respon- dent, Pierre Pellaton Enterprises, Inc., its officers, agents, successors, and assigns, inter alia, to offer four employees reinstatement and to make them whole for their losses resulting from the unfair labor practices found to have been committed by Pierre Pellaton Enterprises, Inc., in violation of Section 8(a)(1) and (3) of the National Labor Relations Act, as amended. Thereafter on January 15, 1974, the Board's Order was enforced by the United States Court of Appeals for the Second Circuit by default judgment. Pursuant to an amended backpay specification and appropriate notice issued by the Regional Direc- tor for Region 29, a hearing was held on January 21-24, 1975, before Administrative Law Judge Max Rosenberg, for the purpose of determining the back- pay due the discriminatees. On May 30, 1975, the Administrative Law Judge issued the attached Supplemental Decision. Thereaf- ter, Respondent S.K.S. Associates filed exceptions and a brief in support thereof. The General Counsel filed a brief in support of the Supplemental Decision of the Administrative Law Judge. Pursuant to the provisions of Section 3(b) of the National Labor Relations Act, as amended, the Na- tional Labor Relations Board has delegated its au- thority in this proceeding to a three-member panel. The Board has considered the record and the at- tached Supplemental Decision in light of the excep- tions and briefs and has decided to affirm the rulings, findings,' and conclusions of the Administrative Law Judge, and to adopt the Supplemental Order.' 201 NLRB 409 (1973). 2 The Respondent has excepted to certain credibility findings made by the Administrative Law Judge . It is the Board 's established policy not to over- ORDER 555 Respondent Michael Kluger , Fred Seidenfeld and Aaron Sokol , a co-partnership doing business as S.K.S. Associates, Great Neck, New York, its agents, successors, and assigns, shall pay to William Black- man, Donald McCullough, Bernard Short , and Ru- fus P. Short, the amounts specified in the Backpay Specification, as amended, plus interest thereon at the rate of 6 percent per annum , calculated in the manner set forth in Local 138, International Union of Operating Engineers, AFL-CIO, et al. (Nassau and Suffolk Contractors' Association, Inc.) 151 NLRB 972 (1965), less any lawfully required tax withholding, and such additional backpay and interest as shall ac- crue because of the continued failure and refusal of Respondent to make valid offers of reinstatement to the discriminatees. rule an Administrative Law Judge 's resolutions with respect to credibility unless the clear preponderance of all of the relevant evidence convinces us that the resolutions are incorrect . Standard Dry Wall Products, Inc., 91 NLRB 544 ( 1950), enfd. 188 F.2d 362 (C.A. 3, 1951). We have carefully examined the record and find no basis for reversing his findings. 3 S.K.S. Associates contends that it was improper for the General Counsel to settle with the Pellaton parties. Inasmuch as the settlement agreement is not before us, we express no opinion as to the propriety of the General Counsel's action in settling with the Pellatan parties or the acceptability of the terms of that agreement . Furthermore , inasmuch as the Pellaton parties are not before us, our decision herein is limited to a resolution of the issue of S.K .S.' liability. Our decision, therefore , is not to be construed as a find- ing or a determination that the Pellaton parties are absolved from primary responsibility for making whole the discriminatees for any losses they may have sustained following S.K.S. Associates' successorship . See, e .g., Golden State Bottling Co., Inc. v. N.L.R. B., 414 U .S. 168 (1973 ); Perma Vinyl Corpo- ration, et al., 164 NLRB 968 (1967). Member Fanning does not join in the the above and would affirm the Administrative Law Judge without addi- tional comment. SUPPLEMENTAL DECISION MAx ROSENBERG, Administrative Law Judge: With All parties represented, this proceeding was heard before me in Brooklyn, New York, on January 21, 22, 23, and 24, 1975, on an amended Backpay Specification filed by the General Counsel of the National Labor Relations Board and an answer filed thereto by Pierre Pellaton Enterprises, Inc.; Pierre Pellaton Apartments at Mineola, Inc.; Pierre Pella- ton Apartments, Inc; Pierre Pellaton Apartments at Clin- ton Avenue, Inc.; Fardale Apartments Corp.; Pierre Pella- ton, an Individual, and Estate of Pierre Pellaton, herein called Pellaton Enterprises, and Michael Kluger, Fred Seidenfeld and Aaron Sokol, a co-partnership doing business as S.K.S. Associates, herein called S.K.S. or the Respondent. This backpay litigation finds its origin in a 222 NLRB No. 88 556 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Board Decision and Order rendered on January 24, 1973,1 which directed Pellaton Enterprises to compensate Donald McCullough, William Blackman, Bernard Short, and Ru- fus P. Short for any loss of pay which they may have suf- fered as a result of Pellaton Enterprises' discrimination practiced against them in violation of Section 8(a)(3) of the National Labor Relations Act, as amended. Thereafter, on January 29, 1974, the United States Court of Appeals for the Second Circuit entered a decree enforcing the backpay provision of the Board's Order. Following the court's decree, a controversy arose over the amount of backpay owed to the discriminatees. In con- sequence of the dispute, the Regional Director for Region 29 issued his amended backpay specification and notice of hearing on October 23, 1974. Pellaton Enterprises and Re- spondent interposed their answers to the foregoing affirma- tive pleadings. Prior to the opening of the hearing, and on January 21, 1975, Pellaton Enterprises entered into a settlement stipu- lation with the General Counsel and the Charging Party, Local 307, Service Employees International Union, AFL- CIO, herein called the Union, pursuant to which it fulfilled its backpay liability to the discriminatees from the com- mencement of the backpay periods until September 15, 1972, the date on which Pellaton Enterprises sold the above-mentioned properties to Respondent, by the pay- ment of the following sums to the claimants: William Blackman $2,696 Donald McCullough 3,934 Bernard Short 1,443 Rufus P. Short 3,927 Accordingly, when the hearing commenced on January 21, 1975, only S.K.S. was before the bar, and only two issues remained for consideration, namely, whether S.K.S. was a bona fide successor to Pellaton Enterprises which should be held responsible for remedying the unlawful conduct of its predecessor, by reinstating the discrimmatees, and mak- ing them whole for any loss of pay since the date it suc- ceeded to Pellaton Enterprises' business, and, whether cer- tain of the General Counsel's calculations of backpay were appropriately made. I turn next to a consideration of these issues. A. Successorship In Perma Vinyl Corporation,2 the Board, with court ap- proval, set forth its policy regarding the responsibility of a successor to remedy the unfair labor practices of its prede- cessor, and announced the reasons therefor. Thus, the Board stated that: To further the public interest involved in effectuating the policies of the Act and achieve the "objectives of national labor policy, reflected in established princi- ples of federal law," we are persuaded that one who acquires and operates a business of an employer found guilty of unfair labor practices in basically unchanged form under circumstances which charge him with no- tice of unfair labor practice charges against his prede- '201 NLRB 409 (1973). 2 164 NLRB 968, 969 (1967), sub nom , United States Pipe and Foundry Company, enfd. 398 F.2d 544 (C.A. 5, 1968) cessor should be held responsible for remedying his predecessor's unlawful conduct. In imposing this responsibility upon a bona fide purchaser, we are not unmindful of the fact that he was not a party to the unfair labor practices and con- tinues to operate the business without any connection with his predecessor. However, in balancing the equi- ties involved there are other significant factors which must be taken into account. Thus, "It is the employing industry that is sought to be regulated and brought within the corrective and remedial provisions of the Act in the interest of industrial peace." When a new employer is substituted in the employing industry there has been no real change in the employing indus- try insofar as the victims of past unfair labor practices are concerned, or the need for remedying those unfair labor practices. Appropriate steps must still be taken if the effects of the unfair labor practices are to be er- ased and all employees reassured of their statutory rights. And it is the successor who has taken over con- trol of the business who is generally in the best posi- tion to remedy such unfair labor practices most effec- tively. The imposition of this responsibility upon even the bona fide purchaser does not work an unfair hard- ship upon him. When he substituted himself in place of the perpetrator of the unfair labor practices, he be- came the beneficiary of the unremedied unfair labor practices. Also, his potential liability for remedying the unfair labor practices is a matter which can be reflected in the price he pays for the business, or he may secure an indemnity clause in the sales contract which will indemnify him for liability arising from the seller's unfair labor practices. On August 25, 1972,3 Administrative Law Judge Lloyd Buchanan issued the initial decision in this proceeding in which he found that Pellaton Enterprises had discriminato- rily discharged William Blackman, Donald McCullough, Bernard Short, and Rufus P. Short. He therefore ordered that Pellaton Enterprises make them whole for any loss of pay sustained by reason of the discrimination practiced against them, and to offer them immediate and full rein- statement to their former positions or, if those positions no longer existed, to substantially equivalent positions, with- out prejudice to their seniority or other rights and privi- leges. William H. Burke, the general organizer and secre- tary for the Union, received a copy of Judge Buchanan's decision about a day or two following its rendition. Burke testified credibly and I find that, having learned that S.K.S. was one of the potential buyers of Pellaton's apartment houses, he telephoned Aaron Sokol, a partner in S.K.S., on or about August 27, and informed the latter that the Union had won the pending unfair labor practice case against Pellaton Enterprises; that Judge Buchanan's decision or- dered that Blackman, McCullough, Bernard Short, and Rufus P. Short be awarded backpay and reinstated; and, that Pellaton Enterprises bargain with the Union. Burke added that, in the event S.K.S. acquired the properties of Pellaton Enterprises, S.K.S. might be liable for remedying Pellaton Enterprises' unfair labor practices. Sokol re- sponded that he had been working on a clause in the con- s Unless otherwise indicated, all dates herein fall in i972 PIERRE PELLATON ENTERPRISES, INC. templated purchase contract with Pellaton Enterprises which would hold S.K.S. harmless for any liability which the former company may have incurred under the Act. Burke further credibly testified and I find that, on Sep- tember 7 or 8, he again telephoned Sokol and once more advised of the Administrative Law Judge's decision, even reading portions of it to Sokol. Sokol replied that he did not believe S.K.S. would be responsible for Pellaton Enter- prises' illegal labor acts in the event he purchased its apart- ment houses, and remarked that he had decided to refrain from any discussions with the Union concerning the dis- criminatees or from negotiating with the Union. On September 7, S.K.S. and Pellaton Enterprises execu- ted a purchase agreement pursuant to which S.K.S. bought the apartment buildings here involved, with a closing date set for September 15. On September 12, pursuant to Burke's instructions,- the Union's attorney wrote to Ber- nard Langweiler, S.K.S.'s counsel, informing the latter of the terms of Administrative Law Judge Buchanan's deci- sion and requesting that Langweiler contact the Union's law firm to discuss those terms. The letter was received by Langweiler on September 13, 1972.4 At the closing on September 15, Sokol and his counsel sought to obtain a clause in the purchase agreement pur- suant to which Pellaton Enterprises would shoulder the burden of liability after that date for its antecedent unfair labor practices. However, the representatives of Pellaton Enterprises demurred at this request and, because S.K.S. would lose a large money deposit if it failed to sign the contract and because Sokol believed that he had arrived at a good business deal, he decided legally to close on the agreement. Thereafter, in the belief that it had no responsi- bility to rectify the unfair labor practices committed by Pellaton Enterprises, S.K.S. declined to reinstate the dis- criminatees or bargain with the Union following Septem- ber 15. Accordingly, I find and conclude that S.K.S. acquired the properties of Pellaton Enterprises on September 15 with full prior knowledge that the seller had previously en- gaged in unremedied unfair labor practices. Moreover, I am convinced and find that, with the change in ownership which occurred on September 15, no concomitant change in the "employing industry" by S.K. S.'s acquisition of Pellaton Enterprise's properties resulted. Sokol testified that it was the policy of S.K.S. that, when it acquired additional rental properties, "The usual thing is, when you're taking over a building, you are not making changes right away." Thus, Sokol retained the building su- perintendents who had been employed by Pellaton Enter- prises, and hired two employees of Pellaton Enterprises. 4 In his testimony, Sokol claimed that he first became aware that Pellaton Enterprises had committed violations of the Act on either September 20 or 22, almost a week after S K.S. acquired the apartment houses I credit Burke's contrary testimony, not only because he impressed me as a sincere and forthright witness, but also because I deem it implausible that Sokol's attorney would have failed to apprise him of the letter from the Union which his attorney received on September 13, 2 days prior to the closing 557 Hence, it is not unreasonable to assume that, had the dis- criminatees been working for Pellaton Enterprises on Sep- tember 15 when S.K.S. acquired the apartment houses, they would have been retained by S.K.S. While it is true that S.K.S. instituted changes regarding the duties and re- sponsibilities of the superintendents, and increased the centralization of its business operations at the four loca- tions, I am not persuaded that these alterations in operat- ing procedure changed the essential character of the "em- ploying industry" in any significant respect. In short, I find and conclude that, on and after Septem- ber 15, S.K.S. became a bona fide successor to Pellaton Industries and, as such, became responsible for remedying the unfair labor practices committed by Pellaton Industries which persisted after that date, under the teachings of Per- ma Vinyl Corporation.' B. Backpay Calculations Respondent, at the hearing, had no substantial quarrel with the backpay calculations set forth in the Backpay Specification .6 It did, however, protest the award of mone- tary amounts for rentals of apartments and the services of laundry, although Respondent agreed as to the value of the laundry offered to the men in the past. However, Respon- dent adduced no testimony relating to whether or not it provided laundry services to its employees. Moreover, with respect to the sum of $400 per month which the General Counsel claimed as the appropriate amount paid to em- ployees for rentals of apartments, this figure was obtained from Respondent's complaint in a local suit which was brought to evict the superintendents from their quarters in Respondent's buildings. Accordingly, I adopt the backpay calculations contained in the Backpay Specification. ORDER? Having found and concluded that Respondent, S.K.S. Associates, Great Neck, New York, became the bona fide successor to Pellaton Enterprises on September 15, I shall order that it pay to William Blackman, Donald McCul- lough, Bernard Short, and Rufus P. Short, the amount specified in the Backpay Specification, as amended, plus interest thereon at the rate of 6 percent per annum, calcu- lated in the manner set forth in Local 138, International Union of Operating Engineers, AFL-CIO, et al, 151 NLRB 972 (1965), less any lawfully required tax withholding, and such additional backpay and interest as shall accrue be- cause of the continued failure and refusal of Respondent to make valid offers of reinstatement to the discriminatees. 5 See In , 4 supra 6 In its brief, Respondent failed to take issue with the propriety of any of the General Counsel's calculations 7 In the event no exceptions are filed as provided by Sec 102 46 of the Rules and Regulations of the National Labor Relations Board, the findings, conclusions , and recommended Order herein shall, as provided in Sec 102.48 of the Rules and Regulations, be adopted by the Board and become its findings, conclusions, and Order, and all objections thereto shall be deemed waived for all purposes.