Patrick & Co.

PATRICK & CO. Patrick & Company and Department Store Employ- ees Union Local 1100, United Food and Com- mercial Workers, AFL-CIO. Case 20-CA- 16978(E) 15 November 1985 DECISION AND ORDER BY CHAIRMAN DOTSON AND MEMBERS DENNIS AND JOHANSEN On 17 June 1983 Administrative Law Judge Rus- sell L. Stevens issued the attached supplemental de- cision under the Equal Access to Justice Act (EAJA).' The Applicant filed exceptions and a supporting brief and the General Counsel filed an answering brief. On 8 December 1983 the Board remanded this proceeding to the judge for the purpose of con- ducting a hearing to resolve issues raised by the Applicant. The judge thereafter issued the attached second supplemental decision on 23 July 1985. The Applicant filed exceptions and a supporting brief and the General Counsel filed cross-exceptions and a supporting brief. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has considered the supplemental deci- sion, the second supplemental decision, and the record in light of the exceptions and briefs and has decided to affirm the judge's rulings, findings, and conclusions2 and to adopt the recommended Order. i On 24 March 1983 the judge issued his decision in this proceeding in which he recommended dismissal of the complaint in its entirety. The complaint alleged that the Respondent violated Sec. 8(a)(3) and (1) of the Act by discharging John Pesch The judge found that Pesch was a super- visor under Sec. 2(11) and therefore excluded from the coverage of the Act. No exceptions were filed to the judge's decision and by order of 28 April 1983 the Board adopted the judge's findings and recommendations and dismissed the complaint in its entirety. :a We believe that Congress, in revising the Equal Access to Justice Act, 5 U.S.C. § 504 (1982), as amended by Pub. L. 99-80, 99 Stat 183 (Aug. 5, 1985), did not alter, but merely clarified, the definition of "sub- stantially justified." "Substantially justified" means more than "mere rea- sonableness." H R Rep. 99-120, p. 9. We agree with the judge that the General Counsel was substantially justified in issuing the complaint and thereby placing the sole issue of al- leged discrimmatee Pesch's employee status before him However we dis- avow the judge's implication that determinative weight should be placed on the fact that the Applicants refused to submit its responses to the Charging Party's sworn affidavit in like format In the instant case we note that even if the Applicant' s witnesses Jim Patrick and Harry Chan had sworn, to their versions of Pesch's status, the issue as to whether Pesch possessed any Sec. 2(11) indicia would still have been in doubt. The General Counsel was thus substantially justified in issuing a com- plaint and proceeding to a hearing in order to resolve the credibility issues central to Pesch's employment status. Because we agree with the judge's findings on substantial justification, we find it unnecessary to address his findings on the Applicant's eligibil- ity under the Equal Access to Justice Act. See Stonehouse Coal Co, 276 NLRB 1258 (1985) 477 ORDER IT IS HEREBY ORDERED that the application of the Applicant, Patrick & Company, San Francisco, California, for an award under the Equal Access to Justice Act is denied. SECOND SUPPLEMENTAL DECISION Equal Access to Justice Act STATEMENT OF THE CASE RUSSELL L. STEVENS, Administrative Law Judge. The complaint in Case 20-CA-16978, issued May 24, 1982, al- leged that Patrick & Company (Applicant) had violated Section 8(a)(1) and (3) of the National Labor Relations Act (the Act). The case was tried in San Francisco, Cali- fornia, on January 18-21, 1983, and a decision was issued by me on March 24, 1983. The principal issue was the alleged supervisory status of employee John Pesch. The decision included a recommendation that the complaint be dismissed in its entirety, based on a finding that Pesch was a supervisor at the time he was discharged by Pat- rick, and was not covered by the Act. No exception to the decision was filed by the General Counsel or the Charging Party (Department Store Employees Union Local 1100, United Food and Commercial Workers, AFL-CIO), and by Order dated April 28, 1983, the Na- tional Labor Relations Board adopted my findings and conclusions and dismissed the complaint in its entirety. By document dated May 18, 1983, Patrick's attorney ap- plied to the Board for award of attorney fees and other expenses pursuant to the Equal Access to Justice Act (EAJA)' and the Board's Rules and Regulations applica- ble.2 By Order dated May 25, 1983, the Board referred the application of Patrick's attorney to me for disposi- tion. By undated document filed with me on June 17, 1983, the General Counsel moved to dismiss the applica- tion of Patrick's counsel. On June 17, 1983, I issued my decision, recommending that the EAJA application be denied on the basis that the General Counsel's actions in the matter substantially had been justified. Applicant filed exceptions to that decision, and the General Coun- sel replied. On December 8, 1983, the Board remanded the matter to me for a hearing. On January 23, 1984, the General Counsel filed an answer to the EAJA applica- tion, and on February 7, 1984, Applicant filed a reply to the answer. A remand hearing was held on November 15 and 16, 1984. Background Much of the General Counsel's argument is addressed to the unfair labor practice trial, and counsel concludes "indeed, it is submitted that if all the General Counsel's witnesses at trial had been fully credited, a prima facie case would have been established that Pesch was at most a leadman and not a supervisor." i Pub L 96-481, 94 Stat 2325 2 Sec 102 143 et seq. 277 NLRB No. 51 478 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Applicant's argument primarily is confined to pretrial matters, it being contended that "the General Counsel did not establish that it had a reasonable basis in fact for issuing complaint." So far as I am concerned , extensive argument about trial events is unnecessary . In the supplemental decision issued June 27, 1983, it was stated, "In this case, trial was the key in determining whether or not counsel for Gen- eral Counsel acted reasonably, and it is found that he did." That supplemental decision was limited mostly, but not entirely, to facts disclosed during trial of the issues of the unfair labor practice case. In the Board's remand of December 8, 1983, I was in- structed to conduct a hearing "on the issues raised by the application of Patrick and Company." Since the supple- mental decision addressed only the matter of "substantial justification," it having been considered unnecessary to reach procedural arguments of the General Counsel's motion to dismiss , it became necessary under the remand to hear presentations of counsel for both sides, relating to pretrial conduct of the General Counsel in the unfair labor practice case. As a result of an informal conference held on July 12, 1984, by me with counsel for the Gener- al Counsel and counsel for Applicant, the General Coun- sel obtained release of some, but not all, of the docu- ments relating to pretrial investigation of the unfair labor practice charge and issuance of the complaint. Counsel later stipulated to the introduction into evidence of docu- ments for use in the remand hearing. Although some procedural matters were subjected to trial inquiry, as more fully discussed infra, the principal subject of the remand hearing was the substantial justifi- cation argument applied to events prior to trial of the unfair labor practice complaint. As noted, I already had concluded in the supplemental decision that the General Counsel substantially was justified in pursuing the com- plaint, based on what developed at trial of the unfair labor practice issues. That conclusion carefully has been reviewed and is reaffirmed. The remand hearing had the benefit of information not disclosed as of the date the supplemental decision was issued. This supplemental de- cision, therefore, principally is addressed to matters that were not in evidence prior to the remand hearing. Events Prior to Issuance of Complaint Prior to issuance of the unfair labor practice com- plaint, counsel for General Counsel had before him: (a) A letter dated March 23, 1982, from the Union's at- torney wherein, inter alia, Dick Williams (a union repre- sentative), Betsey Blum (another union representative), and an unnamed employee who replaced Pesch were suggested as possible sources of information because of their knowledge of the circumstances surrounding Pesch's work for and departure from Respondent's em- ployment. (b) Pesch's affidavit dated April 20, 1982, taken by NLRB Agent Robert Buffin. The affidavit was inconclu- sive in that it set forth facts that could be construed as indicative of either supervisory or leadman status.3 (c) The affidavit of Williams, dated April 20, 1982, dis- cussed, inter alia, Pesch's role in contract negotiations betweeen Respondent and the Union. (d) Buffin's undated "memo to file," summarizing his telephone conversation with Jim Patrick. The conversa- tion was inconclusive and general in nature. The memo stated, among other things, "Patrick says he will not give an aff . . . that he will tell his side of the story at the hearing." This refusal by Patrick to give an affidavit, which he acknowledges, is discussed infra. (e) Buffin's "memo to file" dated May 11, 1982, sum- marizing his conversation of that date with Pesch. Ap- parently the conversation was a brief one and, again, it was inconclusive so far as determining what Pesch's status was. (f) Buffin's "memo to file" dated May 11, 1982, sum- marizing his conversation with Patrick on that date. During that conversation Patrick amplified some of his earlier statements concerning Pesch's authority but, as was the case earlier, Patrick's statements did not put the matter to rest. Those statements could have applied to a leadman, as well as to a supervisor. Much more was re- quired in order to resolve the controversy since, as noted in the supplemental decision of June 27, 1983, even though Pesch called himself a supervisor ". . . being a supervisor is not necessarily being a supervisor within the meaning of the Act . . . cases relating to supervisory status attest the detailed examination necessary to deter- mine that status." (g) Patrick's letter dated May 13, 1982, addressed to Mark Berman, a Board supervisory attorney. That letter, written pursuant to Patrick's telephone conversation of May 11, 1982, with Berman set forth several (alleged) "specific facts" concerning Pesch's supervisory author- ity. The letter may have been persuasive, provided the "specific facts" were known to be true. However, be- cause those "specific facts" apparently negated much of Pesch's affidavit given under oath in affidavit form, and were not, themselves, given under oath, the General Counsel was placed in a rather difficult position . Because Patrick had refused to present his side of the issue under oath in affidavit form as Pesch had done, it would have been unfair and unwise for the General Counsel to have credited Patrick over Pesch and closed the case. Patrick preferred to present his case at trial, and the General Counsel was justified in accepting that challenge, be- cause the issue clearly was drawn as of that moment. The General Counsel did not, however, conclude that a trial was inevitable. The matter was pursued further. (h) Buffin's "memo to file" dated May 17, 1982, sum- marizing his conversation that day with Pesch. Accord- ing to Buffin's memo, Pesch denied most of the conten- tions made in Patrick's letter of May 13, 1982, and set forth in some detail Pesch's version of events, which tended to show leadman, rather than statutory superviso- ry status. The General Counsel then was in an even more doubtful situation, since the conflicting positions vast majority of indicia of supervisory status delineated in Section 2(11) of the Act " That argument, of course, is irrelevant. The Act clearly pro- 3 In the General Counsel's brief, it was stated, "The affidavit of Pesch vides, as the Board and courts consistently have stated, that supervisory revealed that, with respect to his status, Pesch clearly did not possess the indicia are disjunctive in nature, not conjunctive. PATRICK & CO. were sharp and clear, Respondent has shown no reasona- ble basis on which to conclude that the General Counsel should have disregarded Pesch's earlier sworn statement and adopted Patrick's unworn version of events.4 (i) Buffin's "memo to file" dated May 18, 1982, sum- marizing his telephone conversation that day with Harry Chan, manager of Respondent's Market Street store. Ac- cording to the memo, Chan corroborated much of what Patrick had said concerning Pesch's authority, and Chan refused to give Buffin a sworn statement, saying "he did not believe [sic] an affidavit was necessary." (j) Buffin's "memo to file" dated May 19, 1982, sum- marizing his telephone conversation that day with Pesch. According to the memo, Buffin and Pesch discussed Buf- fin's conversation with Chan on the preceding day, and Pesch refuted much of what Chan had said. The complaint was issued May 24, 1982. Issuance of the Complaint Applicant's principal argument is that the General Counsel, in filling the complaint, "relied on the single af- fidavit of alleged discriminatee John Pesch as its sole basis for issuance of complaint," and that, in so doing, the General Counsel failed to follow its own casehan- dling, procedures. It is noted, first, as outlined above, that the General Counsel relied on considerably more than Pesch's affida- vit. It is noted, second, that NLRB Casehandling Manual is "designed only to provide procedural and operational guidance for the agency's staff," and that "the guides are not General Counsel or Board rulings or directives and are not a form of authority binding upon the General Counsel or the Board."5 In EAJA cases, the test for substantial justification is not whether an agency strictly adhered to its casehan- dling, manual, but rather whether or not its position sub- stantially was justified.6 Whether or not the General Counsel took affidavits from persons other than Pesch prior to issuance of the complaint is immaterial. The parties were at issue on the contentions with Pesch on the one hand, and Patrick and Chan on the other. As it developed at trial, Patrick and Chan prevailed, but that, too, is immaterial for purposes of this discussion. No one knew in advance of trial how the dispute would be resolved. Prior to issuance of the complaint, Patrick and Chan withheld from the General Counsel the principal tool he needed to resolve conflict- ing statements, i.e., sworn affidavits. Pesch stepped for- ward and swore to his version of the controversy. Pat- rick and Chan did not-they took a chance that the Gen- eral Counsel would rely on their unsworn statements 4 The General Counsel asked for a finding that Respondent 's refusal to give or permit sworn affidavits warrants denial of an award due to "spe- cial circumstances." That request is denied. There is no legal or moral requirement that affidavits be given in advance of trial . However, consid- erations of "substantial justification" must include all facts, and it is clear that the General Counsel's accordance of weight to sworn statements in the face of contradictory unsworn statements is proper procedure. 6 NLRB Casehandlmg Manual (Part One) Unfair Labor Practice, In- troduction and Purpose 6 Iowa Parcel Service, 266 NLRB 392 (1983), enfd sub nom Iowa Ex- press Distribution v. NLRB, 739 F 2d 1305 (8th Cir. 1984) 479 rather than on Pesch's affidavit, and they lost. Other wit- nesses were called at trial, but they were on the periph- ery of the dispute, not at its core. The General Counsel took the chance that those other witnesses would bolster Pesch at trial, but they did not, and the General Counsel lost. Again, that fact is immaterial . What is material is the fact that the General Counsel's evidence principally consisted of unsworn statements refuting sworn state- ments. Credibility issues thus raised in the unfair labor practice case properly rested with the administrative law judge at trial, where witnesses all would be heard under oath, subject to examination and cross-examination.7 The General Counsel substantially was justified in issuing a complaint designed to obtain resolution of those credibil- ity issues. Events Following Issuance of Complaint By letter dated November 1, 1982, to NLRB, Patrick requested a "pretrial settlement conference," at which he hoped "to win a dismissal of the subject complaint." By letter dated November 12, 1982, the Board notified Patrick that a "Settlement Conference" would be held on November 23, 1982. The conference was held as scheduled, attended by several representatives of NLRB and Patrick & Compa- ny After preliminary opening remarks by the regional attorney of the Board's Regional Office, Patrick made a formal presentation of his argument that Pesch was a statutory supervisor. The presentation closely paralleled the contentions of Patrick and Chan made to the NLRB prior to issuance of the complaint, and those made at trial. Not much was presented that the General Counsel did not alredy know, so far as the contentions of Patrick and Chan were concerned. However, Patrick's presenta- tion almost entirely was conclusory. He gave the names of potential witnesses for his argument that Pesch had authority to hire, fire, discipline, transfer, and promote employees, but none of those witnesses were present at the conference. He gave the names of others who, he said, could verify other arguments he presented.8 He said he had proof of Pesch's authority to pledge the credit of Patrick & Company, but that proof was not of- fered. In short, Patrick did little more than make a state- ment that resembled an opening trial statement, or per- haps an outline of proposed proof made during a judicial pretrial conference. The General Counsel did not re- spond by presenting a summary of its case, nor was there any requirement that he do so. The General Counsel still was left with Patrick's unsworn contentions and could smoke out the facts only through trial. Counsel for Applicant argues that the General Counsel should have dug deeper, and should have interviewed witnesses named by Patrick. Possibly the General Coun- sel could have done more than was done, but degree, not principle, would have been involved. It was Patrick and Chan who supervised Pesch, and it was they who gave Pesch whatever authority Pesch held. Regardless of 7 Charles H. McCauley, 269 NLRB 791, 793 fn 11 (1984), International Maintenance Systems, 267 NLRB 1136, 1136-1139 (1983). s It is noted that Patrick & Company did not call any witnesses at trial, other than Patrick and Chan 480 DECISIONS OF NATIONAL LABOR RELATIONS BOARD what other witnesses may have said, the issue created by the differences between the contentions of Patrick and Chan and Pesch still would have to be resolved. No agreement was reached at the settlement conference, and the General Counsel referred the matter for trial. In that, the General Counsel substantially was justified. Prior to trial, counsel for the General Counsel interviewed poten- tial witnesses, and took the sworn affidavit of Robert Grimes, a sales clerk who had worked for Patrick & Company approximately 30 years. Grimes substantially supported Pesch's version of the latter's limited, leadman type of authority. It is apparent that trial preparation by counsel for the General Counsel did not convince him that he was embarked upon a hopeless quest. The Trial As noted above, this supplemental decision mostly is limited to pretrial matters because those were the matters principally addressed during the remand hearing and in arguments of Patrick & Company's counsel. At trial, the Respondent's motion to dismiss after the close of the General Counsel's presentation of his case in chief was denied. Assessment of credibility of witnesses was of considerable import. Counsel for Patrick & Com- pany acknowledged at the time that the issue was a doubtful one. Nothing was disclosed during the remand hearing that dictates a different conclusion , so far as the trial is con- cerned. For reasons stated in the supplemental decision of June 27, 1983, the General Counsel substantially was justified, on the basis of the record existing at that time, in his trial decisions and conduct. Eligibility for an EAJA Award During the remand proceeding, the General Counsel sought by subpoena a vast amount of detailed accounting information concerning the years 1981, 1982, and 1983 for Patrick & Company, Patrick, personally, and seven subsidiary businesses. Included were all ownership records, balance sheets, account ledgers, state and Feder- al income tax returns, canceled checks, investment and asset records, bank accounts, accounting and auditing records, tax audits and assessments, all offers to buy and sell Patrick & Company or any affiliates thereof, all records relating to business relationships, and many other matters. The subpoenas were quashed by me as being burden- some and oppressive. They amounted to a fishing expedi- tion. Had the subpoenaed material been produced, it could have entailed much time, effort, transportation dif- ficulty, and space on the part of the persons and compa- nies involved. Further, their use at trial would have opened up a subsidiary subject of considerable complex- ity, difficulty, and length, all without knowing in ad- vance what it was, if anything, that may be relevant. In all probability, a full-blown accounting trial would have been ensued. The only question would have been wheth- er or not the EAJA applicant had a net worth of not more than $5 million and an employee complement of no more than 500 persons, and the General Counsel showed no substantial reason to doubt the figure on the applica- tion. The Board's rules provide, in applicable part:9 (b) The application shall include a statement that the applicant's net worth does not exceed . . . $5 million . . . . 10 (f) Each applicant . . . must provide with its ap- plication a detailed exhibit showing the net worth of the applicant and any affiliates (as defined in sec. 102.143(g)) when the adversary adjudicative pro- ceeding was initiated. The exhibit may be in any form convenient to the applicant that provides full disclosure. . . . The administrative law judge may require an applicant to file such additional informa- tion as may be required to determine its eligibility for an award. Applications must be signed as true, under oath or penal- ty of perjury, by an authorized person. The application of Patrick & Company on its face ap- pears to be in proper order. Required exhibits were at- tached to the application. Patrick credibly testified at the remand hearing that the exhibits were financial records kept and maintained by Patrick & Company accountants pursuant to regular company practice and in accordance with standard and proper accounting methods and proce- dures;ll that the exhibits had not been altered in any manner for purposes of the application; and that the same information as that attached to the application was used in preparing all state and Federal tax returns.12 The General Counsel argues that the exhibits do not include one piece of property; that accumulated depre- ciation erroneously was included; that Patrick personally owned a one-third interest in NTG Associates which, in turn, owns nondisclosed property leased to Patrick & Company affiliates; that the application includes a dispar- ity in assessed tax evaluations; and that there were cer- tain minor accounting discrepancies that would change the exhibits, including figures relating to depreciation re- serve, reserve for bad debts, inventories, and good will. Finally, the General Counsel challenged inclusion for fees of amounts claimed for time spent by Patrick and four of the applicant's employees, in work related to the application. 13 e Board's Rules and Regulations , Sec. 102 147 to The fact that the applicant does not have more than 500 employees is not in serious dispute. 11 Patrick & Company employs a CPA for all tax work. Internal audits are performed by in-house accountants. 12 Several references were made during the remand hearing to "Pat- rick Consolidated " Counsel for the General Counsel often referred to "Patrick Consolidated" as though Patrick & Company treated it as a sep- arate legal entity. It is clear, as explained by Patrick, that "Patrick Con- solidated" is nothing more than an accounting label, used as an umbrella for accounting convenience to denote the financial status of Patrick & Company together with all its subsidiaries and affiliates. 13 Some claimed items were reduced or eliminated at the remand hear- ing. Counsel for both the General Counsel and Patrick & Company were given leave to submit some postremand hearing material to me That ma- terial has been carefully reviewed, and it is included in the record. PATRICK & CO. Other than the matter of fees for employees , including Patrick, the arguments of the General Counsel ' are not pursuasive. Patrick credibly testified that the greatest net worth ever owned by the components of Patrick Con- solidated, including the present time, was approximately $3.13 million, and that figure encompasses all accounts de- clared on tax returns, as reflected in regularly prepared accounting statements , financial reports, and audits for Patrick & Company and all its subsidiaries and affiliates. That testimony is deemed by me to be adequate for the purpose of these proceedings, because there is no reason- able basis for considering the testimony to be wrong. The General Counsel contends that the testimony is wrong, and that the applicant's eligibility for an award is in doubt. There is no reasonable basis for concluding that Patrick altered or concealed any figure or figures in order to file an EAJA claim. Hence, proof of error would require an exhaustive audit of all accounts for sev- eral years, maintained by Patrick & Company, seven of its affiliates, and possibly Patrick himself. Such an audit would cost far more than the award that is sought, and is not deemed necessary or desirable. So far as fees claimed for Patrick, Chan, Thelma Mon- taya, Joann Groaver, and Shirley Edelson are concerned, all of them are employees of Patrick & Company, and none of them is an attorney, agent, or expert witness 481 within the meaning of the statute and rules,14 so far as this record shows. None is entitled to fees under EAJA. All other claimed fees and expenses15 are proper for inclusion within the application. Findings relative to eligibility of Patrick & Company discussed above are advisory only because they are not necessary to the decision recommended. As found above, the General Counsel substantially was justified in his ac- tions at all times during the investigative and litigation phases of these proceedings. On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed16 ORDER The application of Patrick & Company for attorney fees and expenses under the Equal Access to Justice Act is denied. 14 5 U.S C. § 504(a)(2); Board Rules and Regulations, Sec. 102 . 145(a) 15 As modified during trial is If no exceptions are filed as provided by Sec. 102.46 of the Board's Rules and Regulations, the findings , conclusions, and recommended Order shall, as provided in Sec 102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed waived for all pur- poses.