KB In & Out, Inc. dba Century Car Wash

363 NLRB No. 156 NOTICE: This opinion is subject to formal revision before publication in the bound volumes of NLRB decisions. Readers are requested to notify the Ex- ecutive Secretary, National Labor Relations Board, Washington, D.C. 20570, of any typographical or other formal errors so that corrections can be included in the bound volumes. KB In & Out, Inc. d/b/a Century Car Wash; Steven Rushtabadi d/b/a Lax Century Car Wash; K&G Franchise Corp. d/b/a National Car Wash; Ken- ny Gharib, an Individual Charged with Personal Liability; Steven Rushtabadi a/k/a Steven Rush, an Individual Charged with Personal Liability and Carwash Workers Organizing Committee of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service Workers International Union, AFL– CIO, CLC. Cases 31–CA–076280, 31–CA– 078621, 31–CA–078622, 31–CA–082049, and 31– CA–091603. March 30, 2016 SUPPLEMENTAL DECISION AND ORDER BY CHAIRMAN PEARCE AND MEMBERS HIROZAWA AND MCFERRAN The General Counsel seeks a default judgment in this case on the ground that KB In & Out, Inc. d/b/a Century Car Wash; Steven Rushtabadi d/b/a LAX Century Car Wash; K&G Franchise Corp. d/b/a National Car Wash; and Kenny Gharib and Steven Rushtabadi a/k/a Steven Rush, individuals (collectively the Respondents), have failed to file an answer to the compliance specification. On April 23, 2014, the Board issued an Order1 that, among other things, ordered the Respondent KB In & Out, Inc. d/b/a Century Car Wash (KB In & Out), to of- fer reinstatement to discriminatees Julio Ponce and Isaac Alvarez and make them whole for any loss of earnings and other benefits resulting from their unlawful dis- charges in violation of Section 8(a)(3) and (1) of the Act. On July 7, 2014, the United States Court of Appeals for the Ninth Circuit entered its judgment enforcing in full the remedial requirements of the Board’s Decision and Order.2 A controversy having arisen over the amount of back- pay due the discriminatees, on October 30, 2015, the Acting Regional Director for Region 31 issued a compli- ance specification and notice of hearing alleging the amount of backpay due under the Board’s Order and notifying the Respondents that an answer must be filed by November 20, 2015, in conformity with the Board’s Rules and Regulations. Although not parties to the orig- 1 Unpublished Order, adopting, in the absence of exceptions, the de- cision of Administrative Law Judge Dickie Montemayor issued on March 19, 2014 (JD(SF)–08–14). 2 No. 14–71501. inal unfair labor practice litigation, Respondents Steven Rushtabadi d/b/a LAX Century Car Wash (LAX Centu- ry) and K&G Franchise Corp. d/b/a National Car Wash (K&G), were added to the compliance specification and are alleged to be jointly and severally liable for KB In & Out’s unfair labor practices because Respondents KB In & Out, LAX Century, and K&G constitute a single- integrated business enterprise and alter egos within the meaning of the Act; Respondents KB In & Out and LAX Century constitute a single employer; and Respondent LAX Century is a successor to Respondent KB In & Out. In addition, Respondents Kenny Gharib and Steven Rushtabadi aka Steven Rush, individuals, are alleged to be personally liable, jointly and severally, to fulfill the remedial obligations of the Board’s Order as alter egos of Respondents KB In & Out and K&G. The compliance specification additionally sets forth the following allegations. Relationships among the Respondents 1. Operations of the Respondents (a) Since about August 2010, and continuing through about May 25, 2014, Respondent KB In & Out was a corporation with a place and business at 4700 West Cen- tury Boulevard, Inglewood, California and engaged in the operation of a carwash. (b) Since about April 3, 2013, and continuing through about May 25, 2014, Respondent LAX Century was a sole proprietorship with a place of business at 4700 West Century Boulevard, Inglewood, California, and engaged in the operation of a carwash. (c) Since about November 6, 2009, and at least through the date of the compliance specification’s issu- ance, Respondent K&G has been a corporation with a place of business at 9001 National Boulevard, Los Ange- les, California engaged in the operation of a carwash. 2. Respondent LAX Century and Respondent KB In & Out—Single Employer/Alter Ego and Successor (a) Since about April 3, 2013, and continuing through May 25, 2014, Respondents KB In & Out and LAX Cen- tury had substantially identical management, business purposes, operations, equipment, customers, supervision, and ownership. (b) About April 3, 2013, Respondent LAX Century was established by Respondents KB In & Out and Steven Rushtabadi as a disguised continuance of KB In & Out. (c) Since about April 3, 2013, and continuing through May 25, 2014, Respondents KB In & Out and LAX Cen- tury were affiliated business enterprises with common ownership, management, supervision, and financial con- trol; had formulated and administered a common labor policy; shared common premises, facilities, equipment, and personnel with each other; had interrelated opera- DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 2 tions with common businesses of operating a carwash; and held themselves out to the public as a single- integrated business enterprise. (d) About April 3, 2013, Respondent LAX Century took over the business of Respondent KB In & Out and continued to operate the business of KB In & Out in ba- sically unchanged form. (e) Before engaging in the conduct described above, Respondent LAX had actual notice of KB In & Out’s potential liability in Cases 31–CA–076280, et al. because Steven Rushtabadi, the sole proprietor of LAX Century, was a corporate officer of Respondent KB In & Out and witnessed the commission of some of KB In and Out’s unfair labor practices alleged in the charges. (f) Based on the operations and conduct described above in paragraphs 1(a) through (b), and 2(a) through (c), Respondent KB In & Out and Respondent LAX Cen- tury are, and have been at all material times, alter egos and a single employer within the meaning of the Act. (g) Based on the operations and conduct described above in paragraphs 1(a) through (b), and 2(d) through (e), Respondent LAX Century continued the employing entity with notice of Respondent KB In & Out’s potential liability to remedy its unfair labor practices, and Re- spondent LAX Century is a successor to KB In & Out. (h) Based on the operations and conduct described above in paragraphs 1(a) through (b), and 2(a) through (g), and below in paragraphs 3 through 5, Respondent LAX Century is jointly and severally liable with the oth- er named Respondents for remedying Respondent KB In & Out’s unfair labor practices, including the payment of backpay, interest, and other relief required by the Board’s Order as enforced by the Court. 3. K&G and KB In & Out/LAX Century—Single- Integrated Business Enterprise/Alter Ego (a) At all material times, Respondents KB In & Out, LAX Century, and K&G have been affiliated business enterprises with common financial control, management, and supervision; and have provided financial assistance to each other without documentation or corporate resolu- tions. (b) Based on the operations described above in para- graphs 1(a) through (c), 2(a) through (e), and 3(a), Re- spondents KB In & Out, LAX Century, and K&G consti- tute a single-integrated business enterprise. (c) At all material times, Respondents KB In & Out, LAX Century, and K&G have been under the financial and operational control of Respondents Kenny Gharib and Steven Rushtabadi. (d) Based on the operations and conduct described above in paragraphs 1, 2, and 3(a) through (c), Respond- ents KB In & Out, LAX Century, and K&G are, and have been at all material times, alter egos within the meaning of the Act. (e) Based on the operations and conduct described above in paragraphs 1, 2, and 3(a) through (d), and below in paragraphs 4 through 5, Respondent K&G is jointly and severally liable with the other named Respondents for remedying Respondent KB In & Out’s unfair labor practices, including the payment of backpay, interest, and other relief required by the Board’s Order as enforced by the Court. 4. Individual Liability of Kenny Gharib (a) At all material times, Kenny Gharib, an officer of Respondents KB In & Out and K&G, was personally involved in the commission of the unfair labor practices by Respondent KB In & Out. (b) At all material times, Kenny Gharib, as president and sole owner of Respondents KB In & Out and K&G, has controlled the day-to-day management, labor rela- tions policies, business operations, and financial re- sources of Respondents KB In & Out and K&G. (c) At all material times, Respondent Gharib failed to adhere to corporate formalities in the management and direction of Respondents KB In & Out and K&G by: (i) failing to maintain an arm’s length relationship be- tween Respondents KB In & Out, K&G, and himself; (ii) commingling and using his personal assets in the operation of Respondents KB In & Out and K&G; (iii) commingling and using corporate assets of Re- spondents KB In & Out and K&G for his personal use and the personal use of his brother, Steven Rushtabadi; and (iv) diverting corporate funds to his personal accounts and using corporate funds to pay for personal expenses. (d) Respondent Kenny Gharib engaged in the conduct alleged in paragraph 4(c) in order to render Respondent KB In & Out insolvent and make it incapable of fulfilling its obligation to pay backpay to employees, including by transferring corporate funds and corporate assets to him- self and to Respondent LAX Century without fair con- sideration. (e) By the conduct described above in paragraphs 3 and 4(a) through (d), Kenny Gharib, individually, acted as an alter ego of Respondents KB In & Out and K&G, and is therefore an individual Respondent who is person- ally liable, jointly and severally, with the other named Respondents for remedying Respondent KB In & Out’s unfair labor practices, including the payment of backpay, interest, and other relief required by the Board’s Order as enforced by the Court. KB IN & OUT, INC. 3 5. Individual Liability of Steven Rushtabadi (a) At all material times, Respondent Steven Rushtabadi was the sole proprietor and officer of LAX Century. (b) At all material times, Respondent Steven Rushtabadi was an officer and agent of Respondents KB In & Out and K&G, and controlled the assets and finan- cial resources of Respondents KB In & Out and K&G. (c) At all material times, Respondent Steven Rushtabadi failed to adhere to corporate formalities in the management of KB In & Out and K&G by: (i) failing to maintain an arms’ length relationship be- tween Respondents KB In & Out, K&G, and himself; (ii) failing to maintain adequate corporate records; (iii) commingling and using corporate assets of Re- spondents KB In & Out and K&G for his personal use and the personal use of his brother, Kenny Gharib; (iv) diverting to himself the assets of Respondents KB In & Out and K&G; and (v) transferring corporate assets without fair considera- tion. (d) Respondent Steven Rushtabadi had knowledge of Respondent KB In & Out’s liability in Board Case 31– CA–076280, et al. as he was present at the March 2012 meeting where Respondent Kenny Gharib engaged in conduct which the Board found violated Section 8(a)(1) of the Act. (e) Respondent Steven Rushtabadi engaged in the conduct alleged in paragraph 5(c) in order to render Re- spondent KB In & Out insolvent and make it incapable of fulfilling its obligation to pay backpay to employees, including by transferring corporate funds and corporate assets to himself and to Respondent LAX Century with- out fair consideration. (f) As sole proprietor of LAX Century, and by the conduct described in paragraphs 2, 3, and 5(a) through (e), Steven Rushtabadi, individually, acted as an alter ego of Respondents KB In & Out and K&G, and is therefore an individual Respondent who is personally liable, joint- ly and severally, with the other named Respondents for remedying Respondent KB In & Out’s unfair labor prac- tices, including the payment of backpay, interest, and other relief required by the Board’s Order as enforced by the Court. Failure to file an answer Although properly served with a copy of the compli- ance specification, the Respondents failed to file an an- swer. By letter dated November 23, 2015, counsel for the General Counsel advised the Respondents that no answer to the compliance specification had been re- ceived, and that unless an answer was filed by December 7, 2015, a motion for default judgment would be filed. The Respondents failed to file an answer. On December 14, 2015, upon learning that Respondent Kenny Gharib was incarcerated in the Los Angeles Met- ropolitan Detention Center (LAMDC), counsel for the General Counsel sent Gharib a second letter informing him that he had until December 28, 2015, to file an an- swer to the compliance specification. However, Gharib failed to file an answer. Motion and Order On January 25, 2016, the General Counsel filed with the Board a Motion to Transfer and Continue Matter be- fore the Board and for Default Judgment, with exhibits attached. On January 28, 2016, the Board issued an or- der transferring the proceeding to the Board and a Notice to Show Cause why the motion should not be granted. On February 24, 2016, the Board issued an Order Cor- recting and Supplemental Notice to Show Cause why the motion should not be granted, correcting the error in the prior order regarding the date the General Counsel’s mo- tion was filed, and setting a new response date. The Re- spondents filed no response. The allegations in the mo- tion and in compliance specification are therefore undis- puted. The National Labor Relations Board has delegated its authority in this proceeding to a three-member panel. Ruling on the Motion for Default Judgment Section 102.56(a) of the Board’s Rules and Regula- tions provides that a respondent shall file an answer within 21 days from service of a compliance specifica- tion. Section 102.56(c) provides that if the respondent fails to file an answer to the specification within the time prescribed by this section, the Board may, either with or without taking evidence in support of the allegations of the specification and without further notice to the re- spondent, find the specification to be true and enter such order as may be appropriate. According to the uncontroverted allegations of the mo- tion for default judgment, the Respondents, despite hav- ing been advised of the filing requirements, have failed to file an answer to the compliance specification. In the absence of good cause for the failure to file an answer, we deem the allegations in the compliance specification to be admitted as true, and we grant the General Coun- sel’s Motion for Default Judgment. Accordingly, we conclude that the Respondents are jointly and severally liable for the backpay due Ponce and Alvarez as de- scribed in the compliance specification and we will order the Respondents to pay those amounts to the discriminatees, plus interest accrued to the date of pay- DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 4 ment. Further, we find that backpay, expenses, and in- terest continue to accrue until the Respondent makes a valid offer of reinstatement to the discriminatees. ORDER The National Labor Relations Board orders that the Respondents, KB In & Out, Inc. d/b/a Century Car Wash; Steven Rushtabadi d/b/a LAX Century Car Wash; K&G Franchise Corp. d/b/a National Car Wash; Kenny Gharib and Steven Rushtabadi aka Steven Rush, individ- uals, Inglewood and Los Angeles, California, their offic- ers, agents, successors, and assigns, shall make whole discriminatees Julio Ponce and Isaac Alvarez, by paying them the amounts following their names, plus additional net backpay which accrues to the date the Respondent makes them valid offers of reinstatement, plus interest accrued to the date of payment as prescribed in New Ho- rizons, 283 NLRB 1173 (1987), compounded daily as prescribed in Kentucky River Medical Center, 356 NLRB 6 (2010), and minus tax withholdings required by Feder- al and State laws:3 3 As set forth in the compliance specification, the Respondents are also liable for the adverse tax consequences for any discriminatee re- ceiving a lump-sum backpay award. These amounts may be updated to reflect the actual date of payment. Employee Backpay owed Excess Tax Amount Julio Ponce $40,246 $1504 Isaac Alvarez $22,103 $720 Totals $62,349 $2224 Total amount due: $64,573 Dated, Washington, D.C. March 30, 2016 ______________________________________ Mark Gaston Pearce, Chairman ______________________________________ Kent Y. Hirozawa, Member ______________________________________ Lauren McFerran, Member (SEAL) NATIONAL LABOR RELATIONS BOARD