Marsco, Inc.

MARSCO, INC. Martin Arsham Sewing Co., a/k/a Marsco, Inc. and International Ladies ' Garment Workers Union, Local 29. Case 8-CA- 11894 31 May 1985 ORDER DENYING MOTION BY CHAIRMAN DOTSON AND MEMBERS HUNTER AND DENNIS On 7 September 1979 the National Labor Rela- tions Board issued its Decision • and Order' in the above-entitled proceeding finding, inter alia, that the Respondent had discriminatorily discharged certain employees and ordering that the Respond- ent offer reinstatement to and make whole the dis- criminatees for losses 'resulting from the Respond- ent's unfair labor practices in violation of Section 8(a)(1), (3), and (5) of the National Labor Relations Act. On 30 March 1982 the Board issued a Supple- mental Decision and Order2 granting the General Counsel's unopposed .Motion for Summary Judg- ment based on a backpay specification issued in March 1981.3 The Board ordered that the Re- spondent, "its officers, agents, successors, and as- signs," pay backpay -to 15 named employees in amounts which totaled $31,940.39. On 3 December- 1984 the General Counsel filed with the Board a 'Motion for Determination of Per- sonal Liability alleging that Martin Arsham (Arsham), as president and plant manager of the Respondent, is personally liable to the Board and to the Respondent's employees, pursuant to the backpay order mentioned above. The General Counsel contends that Arsham converted the assets of the Respondent to his own personal use" and intermingled his personal and corporate financial affairs with the intention of frustrating the Board's backpay order by rendering the Respondent bank- rupt and insolvent. In particular, the General Counsel submits that as of November 1981 the ap- praised value of - the Respondent's assets was $14,576. In a state court proceeding commenced in early December, Arsham alleged that "Marsco, Inc." failed to comply with the terms of a cognovit promissory note from the Respondent to Arsham. The court, on 17 December, awarded Arsham judgment in the amount of $45,530.29 plus interest and costs.4 According to the General Counsel, be- tween 7 and 30 December the Respondent's board of directors (consisting of Arsham and his wife) au- thorized Arsham "to peacefully repossess all securi- 'i244 NLRB 918 (1979) 2 260 NLRB 1309 (1982) 3 All dates are 1981 unless otherwise indicated 4 Arsham's claim was processed by the Court of Common Pleas for Cuyahoga County, Case No CB-36846 633 ties of Respondent, which was done." About 30 December the Respondent filed a petition for vol- untary bankruptcy identifying Arsham as the sole secured creditor and listing four unsecured credi- tors, including the Board (in the amount of the backpay order) and Arsham (in the amount of $33,705.25).5 In February 1982 Region 8 of the Board filed a Proof of Claim with the Bankruptcy Court. About 28 March 1982 Arsham "sold all assets recovered from Respondent" to Drape Fac- tory, Inc. (Drape), an Ohio corporation, for the sum of $20,000.6 On 18 January 1983 the Bankrupt- cy Court discharged the trustee and closed the estate in the Respondent's bankruptcy proceeding without awarding reimbursement to any of the se- cured or unsecured creditors. The General Counsel requests that Arsham be held personally liable under the Board's backpay order in the amount of $20,000, the amount involved in the Drape transac- tion or, in the alternative, that a hearing be ordered to resolve the matter. The Respondent did not file a response to the General Counsel's motion. We find that the General Counsel has not dem- onstrated that Arhsam committed any act which would justify piercing the veil of the corporate Re- spondent to reach Arsham as an individual under the principles set forth in Riley Aeronautics Corp., 178 NLRB 495 (1969), and Chef Nathan Sez Eat Here, Inc., 201 NLRB 343 (1973).7 Thus, there is no factual assertion which could warrant a finding that Arhsam perpetrated a fraud, dissipated or di- verted corporate assets, intermingled personal and corporate affairs, or otherwise attempted to thwart the Respondent's backpay liability. Not only do we find no basis for granting the General Counsel's motion to impose personal liability, we also con- clude that the General Counsel's alternative request for a hearing is insufficiently supported. In denying the motion, we note the lack of certain information critical to our granting the relief requested by the General Counsel. For instance, although the Gen- eral Counsel indicated that Arsham was listed in the' bankruptcy proceeding as the Respondent's sole secured creditor, there is no evidence as to the amount of Arsham's -claim or whether it was con- tested in the bankruptcy proceeding. Further, there is no evidence regarding the status in the bankrupt- cy proceeding of Arsham's.state court judgment, the relative priorities of the unsecured. claims, or 6 The petition was filed in the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division, Case No B81-5312 sub nom "Marsco, Inc, aka Martin Arsham Sewing Company " 6 Although Arsham and his wife are the only owners, employees, and officers of Drape, the General Counsel does not contend that Drape is in any manner liable for the Respondent's backpay obligation ' See also Concrete Mfg Co, 262 NLRB 727 (1982), and Contris Pack- ing Co, 268 NLRB 193 (1983) 275 NLRB No. 90 634 DECISIONS OF NATIONAL LABOR RELATIONS BOARD the ultimate disposition of the Respondent' s assets by-the Bankruptcy Court. We also note the lack'of any evidence as to whether the Drape transaction was subject to, the jurisdiction of .the Bankruptcy Court' or was considered by -that forum. According to our interpretation. of the General Counsel's rep- resentations, Arsham, in selling "assets recovered from Respondent," might as a secured creditor have lawfully transferred outside the scope of the bankruptcy • proceeding ; those -"securities" -he had "peacefully repossessed." Finally, the -General Counsel -'has provided no explanation why -the issues now presented to the Board should 'not more appropriately be resolved in the, bankruptcy pro- ceeding in which Region 8 of the Board filed its Proof of Claim. Inasmuch as there is insufficient evidence that the Board or the discriminatees were in any way prejudiced by Arhsam's actions or that Arsham caused -the financial demise of the Re- spondent or otherwise acted unlawfully, as alleged by the General Counsel, the Motion for Determi- nation of Personal Liability shall be denied.8 ORDER It is ordered that the General Counsel's Motion for 'Determination of Personal Liability be denied. MEMBER DENNIS, dissenting. - My colleagues once again mount a defense for-an employer that does not bother to present its own.' This time, however, my colleagues not only put on the employer's defense, but also deny the General Counsel a chance to rebut it. - The General Counsel requests, in an unopposed motion, that Martin Arsham be held personally liable for the Respondent Company's -backpay -li- 8 We take issue with our dissenting colleague's statement that our ruling provides an unsolicited defense for the corporate Respondent or for Arsham as an individual The General Counsel has the exclusive burden to support the present motion before the Board The fact that the General Counsel's motion is unopposed is insufficient basis to-grant the relief requested when, as a matter of law, the motion is not supported by evidence critical to a finding on the merits Here, the General Counsel has failed to allege facts which establish that Arsham unlawfully repos- sessed and sold secured assets Our dissenting colleague, however, would have us defeat the apparently uncontested claim of a secured creditor which had priority over the Board's backpay claim in the bankruptcy proceeding The fact that neither the Respondent corporation nor Arsham responded to the facially defective motion under consideration does not warrant this disregard of bankruptcy law and those proceedings Our colleague seriously misunderstands our ruling on the present motion by claiming that, in not ordering a hearing, we "totally exoner- ate" Arsham A hearing now on Arsham's personal liability, where the General Counsel has presented no evidence of misconduct by Arsharn, would be no more than a fishing expedition Our ruling does not preclude the General Counsel from refiling a motion with the appropriate eviden- tial support and, therefore, we find that the General Counsel is in no re- spect prejudiced by our order Finally, we regret that our colleague has chosen to inject into her dissent the'wholly unwarranted and gratuitous comment that our decision is the result of "zeal to both raise ,and adopt Arsham's possible defenses " - ' See also R L. Broker & Co, 274 NLRB 709 (1985) ability to 15 discriminatees whom Arsham himself discharged from the, Company in a .1978 ' mass firing.2 The General Counsel asks, 'inI the alterna- tive, that a'hearing be ordered "should Respondent represent to the Board that any material fact al- leged herein is iil dispute." I According to the General Counsel's undisputed allegations, Martin Arsham and his 'wife are the sole directors of Respondent Martin Arsham Sewing Co., a/k/a Marsco, Inc. The Board's deci- sion in the underlying unfair labor practice case re- ferred to Arsham as the - "owner" of- the Compa- ny. 3 - , • - On 4 November 1981 the -General Counsel filed a Motion for Summary Judgment against the Com- pany on the outstanding backpay specification. The Company did not respond to -the motion;4 but Arsham quickly obtained a 'state court judgment in his favor against the Company for money the Com- pany allegedly owed him personally. Sometime be- tween 7 and' 30 December 1981, `Arsham and his wife, acting as the Company's directors, voted to turn, the Company's assets "over, to Arsham, and Arsham took the assets. About 30 December the Company filed a petition,for voluntary bankruptcy; the bankruptcy proceeding eventually yielded nothing' to the Company's creditors, including the Board. On 28 March 1982 Arsham sold for $20,000 the assets that he had-removed from the Company before bankruptcy. The assets were 'sold to 'a new corporation, Drape Factory, Inc., owned and con- trolled entirely by Arsham and his wife. While the General Counsel claims nothing from Drape Facto- ry, Inc., she does seek the $20,000 Arsham re- ceived from the sale of Respondent Company's assets to Drape Factory. Although neither the Respondent Company.nor Arsham opposes the General Counsel's motion to make Arsham personally liable, my colleagues deny the motion. In so doing, they cite the lack of "critical" information concerning the Company's bankruptcy proceeding. Contrary to my colleagues, I find the missing information about the bankruptcy case irrelevant as a matter of law. Neither Arsham nor the Respondent Company obtained a discharge of the backpay obligation from: the bankruptcy court,-5 and under these circumstances, I-know of 2 Martin Arsham Sewing Co., 244 NLRB 918 (1979). 3Id 4 The uncontested motion was granted Martin Arsham Sewing Co, 260 NLRB 1309 (1982) 5 Because Arsham was not a "debtor" in the bankruptcy proceeding, he could not obtain a discharge See II U S C § 727(a) The Respondent Company was also prohibited from obtaining a discharge , as the Bank- ruptcy Code denies such relief to any debtor who is "not an individual " 11 U S C § 727(a)(1) See generally II U S C §§ 524(a) and 727(a) and (b) MARSCO, ZINC. no legal impediment to the Board's determining Arsham's personal liability on the General Coun- sel's uncontested allegations. The-- General Coun- sel's motion on its face alleges facts sufficient- to find Arsham personally liable. See Concrete Mfg. Co., 262 NLRB 727, 729 (1982). Assuming arguendo the relevancy of the addi- tional information my colleagues; claim to need, there - is no excuse for their refusal to grant the General Counsel's alternative request for a hearing. Rejecting the General Counsel's hearing request, Chairman Dotson and Member Hunter totally ex- onerate Arsham: [T]here is insufficient evidence that the Board or the discriminatees were in any way preju- diced by,Arsham's actions or that Arsham 635 caused the financial demise of the Respondent or otherwise acted unlawfully. . . If there is allegedly "insufficient evidence" on the present record to find Arsham personally liable, there is certainly no evidence in Arsham's favor. Yet, Chairman Dotson and Member Hunter not only assert defenses for Arsham, but also find the defenses meritorious without giving the General Counsel a chance to respond. While I believe the defenses are legally without merit, I find most dis- turbing the majority's refusal to accord the General Counsel an opportunity to address them. In their zeal to both raise and adopt Arsham's possible de- fenses, Chairman Dotson and Member Hunter sum- marily deny justice to the discriminatees whom Arsham -unlawfully discharged in a mass firing 7 years ago. I dissent from this action.