Evans Plumbing Co. And Its Alter Ego Evans Services, Inc.

EVANS PLUMBING CO. Evans Plumbing Co. and its alter ego Evans Serv- ices, Inc. and Jack T. Lee. Case 10-CA-15507 17 January 1986 SUPPLEMENTAL DECISION AND ORDER By CHAIRMAN DOTSON AND MEMBERS DENNIS AND JOHANSEN On 3 September 1985 Administrative Law Judge Lawrence W.' Cullen issued the attached supple- mental decision. The Respondent filed exceptions and a supporting brief, and the General Counsel filed an answering 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 and the record in light of the exceptions and briefs' and has decided to affirm the judge's rul- ings, findings,2 and conclusions, and,to adopt the recommended Order. ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge and orders that the Respondent, Evans Plumbing Co. and/or its alter ego and/or successor Evans Services, Inc., Birmingham, Alabama, its of- ficers, agents, successors, and assigns, shall pay to Jack T. Lee as net backpay the sum of $37,909, and shall pay, to Fired J. Meeks as net backpay the sum of $3909.40, with interest, less tax withholdings re- quired by Federal, or state law. 1 The Respondent has requested oral argument The request is denied as the record, exceptions, and briefs adequately present the issues and the positions of the parties. 2 No exceptions were filed with respect to the judge's findings con- cerning mitigation of backpay. Richard P. ProwelL Esq., for the General Counsel. Sydney F. Frazier Jr., Esq. (Cabaniss, Johnston, Gardner, Dumas and O'Neal), of Birmingham, Alabama, for the Respondent. SUPPLEMENTAL DECISION AND BACKPAY PROCEEDINGS STATEMENT OF THE CASE LAWRENCE W. CULLEN, Administrative Law Judge. This supplemental proceeding was heard before me on 27 March 1985 at Birmingham, Alabama, to determine the amount of backpay, if any, due to the discriminatees Fred J. Meeks and Jack T. Lee under a Decision and Order issued by the National Labor Relations Board on 13 November 1980 and enforced by the Court of Ap- peals for the Fifth Circuit on 7 April 1981 wherein Re- 67 spondent, Evans Plumbing Company, was found to have unlawfully discharged and refused to reinstate Meeks and Lee.' , ' Upon the entire record, including my observation of the demeanor of the witnesses and after due consider- ation of -the brief filed- by the General. Counsel, I make the following2^ FINDINGS AND CONCLUSIONS OF LAW In Administrative Law Judge, Hutton S. Brandon's 30 September 1980 decision and his order adopted by the Board, Respondent was found to have violated Section 8(a)(3) and (1) of the Act by discharging Jack T. Lee and Fred J. Meeks on 15 February 1980. Respondent was ordered to offer Fred J. Meeks and Jack-T. Lee im- mediate and full reinstatement to their former jobs or, if their jobs no longer existed, to substantially equivalent positions, ;without prejudice to their seniority or other rights and privileges, and to make, them whole for their loss of earnings. There are several issues set out by the General Counsel in its brief and raised by the parties at the hearing. A. The General Counsel's Contentions that Evans Services, Inc. is the ,Alter Ego and/or the Successor Employer of Evans Plumbing Company and that Individual Liability Should Be Extended to Elizabeth Mancin (Rutledge) and L. John Mancin III ' At the hearing testimony was adduced from Charles Denaburg, an attorney, and John Mancin III that L. John Mancin Jr. (the original' owner of Evans Plumbing Company and husband of Elizabeth Mancin (Rutledge) and the .father of John Mancin III), died in 1975 or 1976 and that the corporation was placed in trust for Eliza- beth Mancin -(Rutledge) with Denaburg as trustee of the stock of the corporation. Denaburg thereafter served as a member of the board of directors of the corporation until the fall of 1980 when Evans Plumbing Company filed a petition for bankruptcy. Denaburg testified as follows: In its early history, Evans Plumbing Company had been primarily a plumb- ing service company performing small jobs and home repair service. It subsequently expanded into small com- mercial:jobs and kitchen and bathroom remodeling jobs and later into some large commercial jobs. As a result of large losses incurred on some large commercial jobs and other losses in the kitchen and bathroom remodeling business, the corporation's finances suffered. In early 1979, Evans Plumbing owed a substantial amount of money and borrowed $57,000 from Elizabeth Mancin's (Rutledge's) personal funds "to continue the operation of the business and keep the doors open." This loan was se- cured by a- recorded security agreement of "various assets" of Evans Plumbing to protect, the interest of Eliz- abeth Mancin (Rutledge). These assets consisted of "All '1 NLRB Case 10-CA-15507; U.S. Court of Appeals for the Fifth Cu-' cult unit B number 81-7001. 2 Respondent's brief was untimely and was returned to Respondent by me without consideration thereof., Sec, 102 42 of the Board's Rules and Regulations; Teamsters Local' 79 (Carl Subler Trucking), 269 NLRB 1132 fn. 1 (1984) 278 NLRB No. 9 68 DECISIONS OF NATIONAL LABOR RELATIONS BOARD of the 'assets of the corporation"-inventory, equipment, fixtures, furniture, accounts receivable, and all other goods of a like nature. This was a secondary position to the position, another position, that was held by a bank. The funds secured from the loan by Elizabeth Mancin (Rutledge) were used for working capital in the corpora- tion. The economic condition of Evans Plumbing Com- pany continued to deteriorate, and on 11 April 1980, its board of directors (consisting of Denaburg, Elizabeth Mancin (Rutledge), and John Mancin III) passed a reso- lution authorizing its president John Mancin III to file a petition under Chapter 7or 11 of the Bankruptcy Act if it became necessary. On 4 May 1980 Elizabeth Mancin (Rutledge) fore- closed her security interest for nonpayment of the loan by Evans Plumbing, and she personally obtained the assets used to secure that loan. Evans Services, Inc. (named as alter ego of Evans Plumbing in the complaint and contended by the General Counsel at the hearing to be a successor of Evans Plumbing), was incorporated on 5 May 1980. Evans Services, Inc. was capitalized by the contribution by Elizabeth Mancin (Rutledge) of the assets she had taken at the foreclosure sale subject to an existing lien on these assets and by the contribution of $10,000 by Lois Mancin, the wife of John Mancin III. John Mancin III was president, Elizabeth Mancin (Rut- ledge) was vice president, and Lois Mancin was secre- tary-treasurer of Evans Services, Inc., which commenced its operations in the same facilities as Evans Plumbing. These premises are owned by the estate of L. J. Mancin Jr. and leased to Evans Services, Inc. Evans Plumbing Company filed a voluntary petition in bankruptcy on 18 August 1980. John Mancin III also testified that prior to the death of his father in 1975 or 1976, he and his father, L. J. Mancin Jr., were directors of Evans Plumbing Company of which L. J. Mancin Jr. was president and sole share- holder and Elizabeth Mancin (Rutledge) was secretary. Following the death of his father, the stock in the corpo- ration was placed in trust for his mother Elizabeth Mancin (Rutledge). In 1978 John Mancin III also ac- quired some stock. Following the death of his father, Elizabeth Mancin (Rutledge) became chairman of the board and secretary-treasurer of Evans Plumbing Com- pany and John Mancin III became president thereof. John Mancin III testified that of the 12 motor vehicles listed on the 3 May 1980 inventory of Evans Plumbing Company, he, himself, was personally paying the notes on some of the vehicles. When Evans Services, Inc. commenced operations, it used these vehicles and- Evans Services, Inc. commenced to pay some of the notes and he continued to personally pay others of them: These ve- hicles had been registered with the State of Alabama as owned by Evans Plumbing Company and some were still so registered at the date of the hearing. A number of the employees of Evans Plumbing Company were retained as employees of Evans Services, Inc. (i.e., Earl Meeks as service manager). There was also no change in telephone numbers or in post office box numbers when Evans Services, Inc. commenced business. John Mancin III tes- tified further that Evans Plumbing Company had been engaged in large plumbing work whereas Evans Serv- ices, Inc. "is strictly a service type business." It is undis- puted that both corporations performed plumbing work. Evans Plumbing Company employed 50 field personnel and 8 or 9 office personnel whereas Evans Services, Inc. employs 15 field and 4 office personnel, a majority of whom were employees of Evans Plumbing Company. Based on the foregoing, the General Counsel contends that Evans Services, Inc. is the alter ego, of Evans Plumbing Company. I'fmd that the evidence overwhelm- ingly demonstrates that Evans Services, Inc. is the alter ego of Evans - Plumbing Company because it demon- strates factors of common management control existing within a small family corporation,. a common business purpose of a plumbing concern (notwithstanding the nonengagement of Evans Services, Inc. in large commer- cial plumbing jobs), common premises and equipment, a carryover of supervisory and certain other employees, and a closely held ownership arrangement whereby the shares of Evans Plumbing Company had been held in trust for Elizabeth Mancin and she now holds 80 percent of the stock of Evans Services, Inc. following the trans- fer of the assets of Evans Plumbing Company to Evans Services, Inc. See Fugary Continental Corp., 265 NLRB 1301 (1982), enfd. 725 F.2d 1416 (D.C. Cir. 1984); South- eastern Envelope Co., 246 NLRB 423, 425-428 (1979); American Pacific Concrete Pipe Co., 262 NLRB 1223, 1226 (1982); Crawford Door Sales Co., 226 NLRB 1144 (1976). Assuming arguendo that Evans Services, Inc. is not the alter ego of Evans Plumbing Company, I find that the evidence demonstrates that Evans Services, Inc. is a successor employer to Evans Plumbing Company as it clearly stepped into the shoes of Evans Plumbing Com- pany by taking over its operations, hiring a majority of its employees from the complement of the employees of Evans Plumbing Company, and had knowledge of the unfair labor practices committed by Evans Plumbing Company. See Perma Vinyl Corp., 164 NLRB 968 (1967); Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973). I further find that the bankruptcy proceeding has no effect on this obligation. International Technical Products-Corp., 249 NLRB 1301 (1980). I reject the General Counsel's contention, initially made shortly prior to the close of the hearing, that indi- vidual liability should be extended to Elizabeth Mancin (Rutledge) and L. John Mancin III as I find they were never named as parties to this proceeding and Elizabeth Mancin (Rutledge) was not present nor represented indi- vidually at the hearing. Basic due process dictates that no order, decision, or judgment can'issue against an indi- vidual who has not been made a party to a proceeding and afforded an opportunity to fully litigate his or her in- terest therein. See Sachs Electric Co., 248 NLRB 669, 670 fn. 5 (1980); George C. Shearer Exhibitors, 246 NLRB 416 (1979). See also Marine Machine Works, 243 NLRB 1081 (1979); but see Dews Construction Corp., 246 NLRB 945, 946 (1979). EVANS PLUMBING CO. 69 B. Whether Alleged Offers of Reinstatement Were Effective to Preclude Substantial Amounts of Backpay to Meeks and Lee Respondent alleges, and contended at the hearing, that during the week following their illegal discharge Lee and Meeks both received offers to return to work by Re- spondent's service manager, Earl Meeks Jr., the uncle of Meeks and who is also related to Lee by marriage. The discriminatees, Lee and Meeks, denied that such an offer had been made. The General Counsel contends this de- fense is barred by res judicata contending that this issue was resolved at the initial hearing in Case 10-CA-15507. The General Counsel moved at the instant hearing to strike this allegation from Respondent's answer and to strike testimony presented by Respondents in support of their position in this regard. In discussing this issue, it is necessary to set out the background of this case. In the complaint for the under- lying unfair labor practice case (G.C. Exh. 14), it was al- leged that Respondent about 15 February 1980 "dis- charged and thereafter failed and refused to reinstate" Lee and Meeks. In its answer of 10 April 1980 to this complaint, Respondent admitted this allegation. Thus, the issue of immediate reinstatement was joined by Re- spondent's answer to the complaint allegation in the un- derlying unfair labor practice proceeding. At the under- lying unfair labor practice proceeding, Respondent's counsel made a limited appearance to advise that Re- spondent had filed a voluntary petition in bankruptcy, pursuant to Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1 et seq. and to file a written docu- ment received in the record in the initial proceeding. Re- spondent contended that the filing. of the petition in bankruptcy operated as a stay to the commencement of any judicial, administrative, or other proceedings against the bankrupt and "prayed" that the Board stay any other proceedings in the instant case until the bankruptcy court had, granted it relief. The General Counsel opposed this motion and contended that the filing of the bankruptcy petition did not operate to stay the Board's proceedings. Administrative Law Judge Brandon sustained the Gener- al Counsel's position and, following this ruling, Respond- ent's counsel departed the hearing and the hearing pro- ceeded with no further participation therein by Respond- ent. Based on the record before him, Administrative Law Judge Brandon found that Respondent had violated the Act by discharging Lee and Meeks on 15 February 1980 and recommended in his order that Respondent should offer Meeks and Lee immediate and full reinstatement to their former jobs or, if those jobs no longer existed, to substantially equivalent positions without prejudice to their seniority or other rights and privileges, and make them whole for their loss of earnings in the manner set forth in the remedy. Based on the foregoing, I find that Respondents' de- fense raised in the backpay proceeding that it offered full reinstatement to Meeks and Lee is barred as the matter is res judicata as it was raised initially in the underlying unfair labor practice proceeding by the complaint, specif- ically admitted by Respondent Evans Plumbing Compa- ny's answer and implicitedly found by the judge in his decision that there had been no offer of reinstatement. Big Three Industrial Gas Co., 263 NLRB 1189, 1206 (1982); NLRB v. Laredo Packing Co., 730 F.2d 405 (5th Cir. 1984). I thus sustain the General Counsel's motion to strike that portion of Respondents' answer which alleges as an affirmative defense that the discriminatees were of- fered reinstatement and to strike the testimony adduced by Respondents in support thereof as this defense is barred by res judicata. C. Whether Meeks and Lee Failed to Make Reasonable Searches for Work During the Backpay Period Respondents contend that Meeks and Lee did not make an adequate search for work during the backpay period. Both Meeks and Lee testified at the hearing that immediately following their discharge they signed the re- ferral list at the union hall in an attempt to secure' interim employment.3 They also signed the out-of-work list at the State's unemployment office. At the time of their dis- charge, Meeks was an apprentice and Lee was a journey- man. The Board has traditionally held that employees who seek work through a union hiring -hall have engaged in' a reasonable search for employment. Big Three Indus- trial Gas Co., supra at 1198; Seafarers Atlantic District (Isthmian Line), 220 NLRB 698 (1975). Meeks testified that he totally relied on the Union's referral system to secure new employment and was successful following 9 weeks of unemployment. Lee testified that in addition to his reliance on the Union's r"eferral system to secure in- terim employment he also contacted individual employ- ers during his period of unemployment. Respondents failed to show that the discriminatees rejected any em- ployment that was available at the time. It is well established that although an employer may mitigate his backpay liability by showing that a discri- minatee willfully incurred a loss by an unjustified refusal to take new employment, this is an affirmative defense and must be established by- a respondent. In this case, Respondents wholly failed to do so and did not meet their burden by presenting any evidence therein. It is also well established-that any uncertainty with respect to the evidence in a backpay case must be decided and re- solved against the wrongdoer. Big Three Industrial Gas Equipment Co., supra; NLRB v. Miami Coca-Cola Bot- tling Co., 360 F.2d 569 (5th Cir. 1966); Southern House- hold Products Co., 203 NLRB 881 (1973). Under all the circumstances, I find that Respondents have failed to prove and sustain their affirmative defense that employ- ees Meeks and Lee have engaged in willful idleness during the backpay period. D. Whether Meeks and Lee Had Additional Interim Earnings During the Backpay Period Which Should Be Deducted from Gross Backpay It is well established that a respondent has the burden of proof to show interim earnings above and beyond those admitted by the backpay specification. Sioux Falls Stockyard Co.,' 236 NLRB 543 (1978). This, Respondents 3 The employees were initially referred to the employer through the referral system of the Plumbers and Steamfitters Union, Local 91 70 DECISIONS OF NATIONAL LABOR RELATIONS BOARD totally failed to do in this case. The evidence adduced by Respondents at the hearing showed that employee Lee performed weekend work on a project referred to as the "Coosa River" job on weekends while working full time at an interim employer. Lee' testified that this work was performed on weekends. I credit Lee's testimony which was unrebutted and I, accordingly, find that such earn- ings are not deductible as interim earnings. Sioux Falls Stockyard Co., supra; Miami Coca-Cola Bottling Co., 151 NLRB 1701, 1710 (1965), enfd. with respect to this issue 360 F.2d 569, 573 (5th Cir. 1966). Respondent additional- ly adduced testimony from Lee that he cleared land on his property and worked without pay on a fire station building project and performed plumbing work in return for carpentry work with a carpenter with respect to the construction of his home. Lee also testified that he had engaged in these activities for substantial periods of time including that period while he was employed full time by Respondent Evans Plumbing Company. I credit his testi- mony in this regard. Respondents have failed to demon- strate these activities were not in fact supplemental as contended by Lee, and have failed to demonstrate the amount of time they occupied or whether they otherwise properly constituted deductible interim earnings. I ac- cordingly find that Respondents have not sustained their burden of proof and have not shown that Lee had any interim earnings beyond that admitted in the backpay specification. Respondents presented no evidence con- cerning any additional interim earnings of, Meeks other than that admitted in the backpay specification. E. Whether Mileage Expenses Should Be Deducted from the Interim Earnings of Frederick J. Meeks During the Second Quarter of 1980 The backpay specification, as amended (G.C. Exh. 1(j)), sets out that during the second quarter of 1980, Meeks had interim earnings of $4816, Meeks testified at the hearing that approximately 1 May 1980 he secured this employment at a location which was 121 miles from his home and which required a round-trip drive by per- sonal auto 6 days per week. He further testified that the distance from his residence to Evans Plumbing was 12 miles. His interim job was thus an additional 109 miles away and he drove an additional 218 miles per day. As he worked 6 days per week, he drove a total of an addi- tional 1308 miles per week. He testified that he com- menced this interim employment following 9 weeks of unemployment checks and thus began his interim em- ployment about 1 May 1980. Accordingly, he drove an additional 11,772 miles during this 9-week period in this quarter. I find the testimony of Meeks in this regard is unrebut- ted and should be credited. During the time period in- volved with respect to this interim employment, the rate allowed to Federal employees was 20 cents per mile pur- suant to the rules established by the General Services Administration and is properly to be applied in this in- stance. See "NLRB Administrative Policies and Proce- dures Manual Title 12 1980." This calculates out to the amount of $2354.40 (11,772 miles x 20 cents) and this total should be deducted, from the interim earnings of Meeks during the second quarter of 1980. Thus, the backpay due Meeks during the second quarter of 1980 is $1534.40 (gross backpay of $3996 less net interim earn- ings of $2461.60) and the total amount of backpay due Meeks is $3904.40, plus interest. See Kartarik, Inc., 111 NLRB '630 (1955), enfd. 227 F.2d 190 (8th Cir. 1955); Rice Lake Creamery Co., 151 NLRB- 1113 (1965), mod. 365 F.2d 888- (D.C. Cir. 1966). F. The Laches Issue Respondent contends that the General Counsel is barred from proceeding in this case as a result of the delay between the entry of the enforcement of the Board's decision against Evans, Plumbing Company and the filing of this backpay proceeding . However, it is well established that such a defense is not available to extin- guish the claim of a discriminatee awarded backpay in an unfair labor practice proceeding by the Board. NLRB v. Rutter-Rex Mfg. Co., 396 U.S. 258 (1969); NLRB v. Iron Workers Local 480, 116 LRRM 2289 (1984). G. The Backpay Calculations The amended backpay specification (G.C. Exh. 1(j)) was received in evidence at the hearing subject to Re- spondent's verification of the amounts and calculations thereof. Respondent has not disputed or specifically denied the mathematical correctness of the gross back- pay as set out in the backpay- specification although it has raised defenses about interim earnings as discussed supra. Section 102.54 of the Board's Rules and Regula- tions, provides, in pertinent part, as follows: (b) . . . The respondent shall specifically admit, deny, or explain each and every allegation of- the specification, unless the respondent is without knowledge, in which 'case the respondent shall so state, such statement operating as a denial. Denials shall fairly meet the substance of the allegations of the specification denied. When a respondent intends to deny only a part of an allegation, the respondent shall specify so much of it as is true and shall deny only the remainder. As to all matters within the knowledge of the respondent, including but not lim- ited to the various factors entering into the compu- tation of gross backpay, a general denial shall not suffice. As to such matters, if the respondent dis- putes either the accuracy of the figures in the speci- fication or the premises on which they are based, he shall specifically state the basis for his disagreement, setting forth in detail his position as to the applica- ble premises and furnishing the appropriate support- ing figures. (c) . . . If the respondent files an answer to the specification but fails to deny any, allegation of the specification in the manner required ' by subsection (b) of this section, and the failure so to deny is not adequately explained, such allegation shall be deemed to be admitted to be true, and may be so found by the Board without the taking of evidence supporting such allegations and the respondent shall be precluded from introducing any evidence contro- verting said allegation. ` EVANS PLUMBING CO. 71 In the instant case, Respondents' failure to specifically deny and state the basis for their disagreement if any does not conform to the requirements of Section 102.54. Furthermore, Respondents were specifically given the opportunity at the hearing to bring any inaccuracy to my attention and failed to' do so, but rather relied on their motion to dismiss the backpay specification for failure of proof by the General Counsel. Accordingly, I find that the allegations of gross backpay are true and accurate. Master Transmission Rebuilders, 269 NLRB 93 (1984). I also find that the amounts shown as interim earnings and related expenses and the net earnings set out in the calcu- lation are true and accurate and find that net backpay in the amount of $37,909 is due to Lee and $3909.40 is due to Meeks. On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed4 ORDER Respondents Evans Plumbing Company and/or its alter ego and/or successor, Evans Services, Inc., shall pay to Jack T. Lee as net backpay the amount of $37,909 and shall pay to Fred J. Meeks as net backpay the sum of $3909.40. Interest is to be added as set out in Florida Steel Corp., 231 NLRB 651 (1977). 'See generally Isis Plumbing Co., 138 NLRB 716 (1962). There shall be de- ducted from this amount any tax withholding required by law. 4 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.