National Labor Relations Board v. Thermon Heat Tracing Services, Inc.

EMILIO M. GARZA, Circuit Judge,

dissenting:

The majority opinion fails to discuss McNeely’s status as a paid informant. Because his testimony is the crux of this case, I respectfully dissent.

Ours is but a limited role when called upon to enforce an order of the National Labor Relations Board (the “Board”): we will sustain an order that is supported by substantial evidence on the record considered as a whole. See 29 U.S.C. § 160 (e); Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 , 71 S.Ct. 456, 459 , 95 L.Ed. 456 (1951); TRW, Inc. v. NLRB, 654 F.2d 307, 310 (5th Cir.1981). Though we might reach a contrary result if we were to decide an issue de novo, we defer to plausible inferences drawn by the Board from the evidence in the record. See NLRB v. United Ins. Co. of Am., 390 U.S. 254, 260 , 88 S.Ct. 988, 991 , 19 L.Ed.2d 1083 (1968); TRW, 654 F.2d at 310 . “In assessing the substantiality of the evidence, however, we must consider not only those facts that support the Board’s decision, but also those facts and inferences that militate against it.” TRW, 654 F.2d at 310 .

Although our ability to reevaluate MeNeely’s credibility is limited, we can evaluate whether, McNeely’s status as a paid informant precludes the Board from relying on his testimony. Our resolution of this issue is important because the Board and its ALJs recently have heard a spate of eases involving .witnesses paid by unions. 1 See Contrac *189 tor Servs., Inc., 324 N.L.R.B. No. 189, 1997 WL 724879 (N.L.R.B. Nov. 8, 1997); M.J. Mechanical Servs., Inc., 324 N.L.R.B. No. 130, 1997 WL 667581 (N.L.R.B. Oct. 24, 1997); Industrial Constr. Servs., Inc., 323 N.L.R.B. No. 179, 1997 WL 345616 (N.L.R.B. June 19, 1997) (involving McNeely in a similar undercover role). The ALJs and the Board in these cases have allowed the introduction of testimony of these witnesses without any discussion as to whether such testimony is admissible under the Federal Rules of Evidence. See Contractor Servs., 1997 WL 724879 , at *1, *6; M.J. Mechanical Servs., 1997 WL 667581 , at *2-*3; Industrial Constr. Servs., 1997 WL 345616 , at *2. Moreover, in none of the above cases has a court of appeals yet issued a decision enforcing the order. Therefore, as the first court to decide this issue and because we are called upon to enforce the Board’s orders, we must be satisfied that it is proper to allow such testimony. See NLRB v. Houston Distrib. Serv., Inc., 573 F.2d 260, 265 (5th Cir.1978) (reviewing ALJ’s evaluation of a witness’s competency to testify in a hearing under Fed.R.Evid. 601).

Our duty to evaluate the admissibility of a witness’s testimony arises from § 10(b) of the National Labor Relations Act, 29 U.S.C. § 160 (b), which provides that “[a]ny such proceeding shall, so far as practicable, be conducted in accordance with the rules of evidence applicable in the district courts of the United States.” 2 Id. In NLRB v. Capitol Fish Co., 294 F.2d 868, 872 (5th Cir.1961), we stated that although the rules of evidence “are considerably relaxed in such hearings, on the theory that the examiner is more sophisticated than a juror and will not attach improper weight to such testimony,” we will reverse and remand an order that relies upon evidence of a type that would mandate reversal if relied upon by a district court. Id. More recently, we stated that “[tjhere is no conceivable reason why NLRB proceedings should not be conducted under the accepted rules of competency.” Houston Distrib. Serv., 573 F.2d at 265 .

Although Thermon bitterly assails the Board’s reliance on McNeely’s testimony, it has not assisted this court in formulating a principled framework for analyzing paid informant cases. 3 The parties agree that McNeely was a fact witness and that the union compensated him to gather information. McNeely testified before the ALJ that *190 the union paid him two dollars per hour to do so. After Thermon Heat Tracing drew out this fact, however, it ceased this line of questioning; accordingly, the record is silent as to whether his compensation continued during the period in which he testified or whether his payments were contingent upon the information that he gathered.

There are, however, three possible ways in which the union’s payments to McNeely could appropriately be characterized as payments for MeNeely’s testimony. First, the union put McNeely in a position not only where he could gather information, but which would enable him to testify as well. McNeely testified as to conversations among Ther-mon foremen on walkie-talkies and to his trips outside,his work area to see if Thermon would apply the rule to him. McNeely’s testimony was essential for the union: he was the only one who could have testified to many of these events. Without his testimony, this evidence could not have been introduced. Thus, although the union may have formally paid McNeely only for gathering information, in reality, the union’s payments to McNeely may reflect both a component for gathering information and for testifying. Second, McNeely may have received an additional “payment” from the union in the form of potential employment in the future .as a paid informant; that this potential employment benefit is tangible is reflected in the fact that the very next year after McNeely worked as a paid informant for the union in this case, he worked for the union as a paid informant in another case. See Industrial Constr. Servs., 1997 WL 345616 , at *4-*5. Finally, McNeely’s compensation format— payment on an hourly basis — may have given him an incentive to attempt to create evidence favorable to the union because his continued employment as a paid informant may have depended upon the information he gathered.

Thus, McNeely may have been a fact witness compensated for' his testimony. The common law rule in civil cases in most jurisdictions prohibited the compensation of fact witnesses. 4 See 14 Williston on Contracts § 1716 (3rd ed. Model Rules of Professional Conduct Rule 3.4(b) cmt. 3 (1983)). As one court has stated:

[Pjayment ... to a witness to testify in a particular way, payment of money to prevent a witness’s attendance at a trial and the payment.... to make him “sympathetic” ... are all payments which are absolutely indefensible ... The payment of a sum of money to a witness to “to tell the truth” is as clearly subversive of the proper administration of justice as to pay him to testify to what is not true.

In re Robinson, 151 A.D. 589 , 136 N.Y.S. 548, 556 (N.Y.App.Div.1912), aff'd 209 N.Y. 354 , 103 N.E. 160 (1913). The policy motivations lying behind this rule apply to both the contingent and noncontingent compensation of fact witnesses, see Hamilton v. General Motors Corp., 490 F.2d 223, 228 (7th Cir.1973); Hare v. McGue, 178 Cal. 740 , 174 P. 663, 664 (1918), and have led courts to hold that an agreement between a party and a fact witness to compensate the witness for her testimony is unenforceable on public policy grounds. See Hamilton, 490 F.2d at 228 ; Alexander v. Watson, 128 F.2d 627, 630 (4th Cir.1942); see also 81 Am.Jur.2d, Witnesses § 69 (1992). With several statutory exeep- *191 tions, the common law rule has been partially enacted into federal law in 18 U.S.G. § 201, which makes it a felony to compensate or to offer to compensate a fact witness for testimony given at trial, although at least in dicta the Eleventh Circuit has limited this statute to the procurement of false testimony. See United States v. Moody, 977 F.2d 1420, 1425 (11th Cir.1992). The rule also exists as an ethical rule for attorneys in Model Rules of Professional Conduct Rule 3.4(b). See Model Rules of Professional Conduct Rule 3.4(b); Model Code of Professional Responsibility DR 7-109(c) (1980); see also Rentclub, Inc. v. Transamerica Rental Fin. Corp., 811 F.Supp. 651, 654-55 (M.D.Fla.1992), aff 'd 43 F.3d 1439 , 1440 (11th Cir.1995) (disqualifying attorney for compensating a fact witness); ABA Comm, on Professional Ethics and Grievances, Formal Op. 402 (1996) (holding that payments by an attorney to compensate a witness for losses due to time spent preparing for testimony at trial do not violate Model Rules of Professional Conduct Rule 3.4(b)).

If the union violated the common law rule by compensating McNeely for his testimony, we must next consider the appropriate remedy. In one of the reward cases discussed ante at n. 4, for example, a circuit held that in a civil case, a compensated fact witness is competent to testify as long as the fact that payments were made to that witness is disclosed to the trier of fact. See Jamaica Time Petroleum, 366 F.2d at 158; Goldstein v. Exxon Research and Eng’g Co., No. 95-2410, 1997 WL 580599 , *6 (D.N.J. Feb. 28, 1997); New York v. Solvent Chem. Co., 166 F.R.D. 284, 291 (W.D.N.Y.1996). In another reward case, by contrast, another circuit held that disclosure is not a sufficient remedy, and that payments by a party to a witness render that witness incompetent to testify. 5 See Golden Door Jewelry Creations, Inc., 865 F.Supp. at 1524-26, aff'd in relevant part 117 F.3d 1328 , 1335 n. 2 (11th Cir.1997) (barring party from introducing testimony of a fact witness as a sanction for compensating that witness). Still other courts reprimand or disqualify attorneys who pay or attempt to pay witnesses for factual testimony, even if true. See Rentclub, 811 F.Supp. at 654-55 ; Wagner v. Lehman Bros. Kuhn Loeb, Inc., 646 F.Supp. 643, 659-60 (N.D.Ill.1986).

The task before us is difficult, as the differences between the Tenth and Eleventh Circuits on the appropriate remedy to adopt with regard to paid witness testimony illustrate. I believe, however, that we should retain the common law approach and hold that paid fact witnesses are presumptively incompetent to testify. This approach-sweeps broader than reliance upon Model Rules of Professional Conduct Rule 3.4(b), which the Eleventh Circuit relied upon in Golden Door Jewelry. See Golden Door Jewelry, 865 F.Supp. at 1524-26. As the case here suggests, reliance upon Rule 3.4(b) would not solve the problem where a non-attorney procures the paid witness’s testimony because that rule applies only to attorneys. Moreover, the approach that I suggest would prevent the possible corrosive effects of a perception among the public that justice can be bought and sold. See United States v. Cervantes-Pacheco, 826 F.2d 310, 316 (5th Cir.1987) (en banc) (Goldberg, J., dissenting). Accordingly, I believe that paid fact witnesses should presumptively be incompetent to testify.

Because the Board’s order did not address this' issue, however, I would remand to the Board for a factual determination as to McNeely’s competence to testify. See Teamsters Local Union 769, 532 F.2d at 1392 (vacating and remanding a Board order because the Board failed to address evidentiary questions and articulate a reason for allowing the introduction of certain evidence). In accepting the testimony of McNeely without comment, I believe that the Board erred. The majority opinion’s unquestioning acceptance of McNeely’s testimony duplicates the Board’s error.

Accordingly, I respectfully dissent.

. Paid union witnesses come in many variants. One type of paid union witness is a "salt." Salts are union organizers (who may or may not disclose their union affiliation) who aim to organize *189 non-unionized employers by getting themselves hired by non-unionized employers and then talking to other employees, emphasizing the benefits of unionization, and keeping the union abreast of their progress. Because prevailing wage rates are often less at nonunionized employers, the unions may subsidize the salts by paying them the difference between the rate that their employer pays them and the rate that they would be making if they worked at a unionized employer. See M.J. Mechanical Servs., Inc., 324 N.L.R.B. No. 130, 1997 WL 667581 , at *1 (N.L.R.B. Oct. 24, 1997); see also NLRB v. Town & Country Elec., Inc., 516 U.S. 85, 87-88 , 116 S.Ct. 450, 452-53 , 133 L.Ed.2d 371 (1995) (discussing salting activities of unions and holding that salts are "employees" as defined in the National Labor Relations Act, 29 U.S.C. § 152 (3)). By contrast, in this case, the Union used McNeely to gather information. McNeely thus received a payment for his information gathering services, rather than a subsidy to offset a possible lower wage rate at Thermon.

. Prior to 1947, § 10(b) provided that “the rules of evidence prevailing in courts of law or equity shall not be controlling.” See Universal Camera Corp., 340 U.S. at 477 , 71 S.Ct. at 456 . Congress amended § 10(b) in 1947, stating its reasons for doing so as

[T]he [unamended] act gives the Board great latitude in choosing the evidence that it will believe and gives great effect to findings that rest on that evidence.... These clauses of the act have resulted in what the courts have described as "shocking injustices" in the Board’s rulings.... The bill does this, by providing in section 10(b) of the amended Labor Act that "so far as practicable," the new Board’s proceedings shall be conducted "in accordance with the rules of evidence applicable in the district courts of the United States under the rules of civil procedure."

H.R.Rep. No. 80-245, at 41 (1947). Both the Supreme Court and this circuit have held that Congress intended to strengthen judicial oversight and control of Board proceedings when it enacted the 1947 amendments to § 10(b). See Universal Camera Corp., 340 U.S. at 487-88, 71 S.Ct. at 464-65 ; NLRB v. Capital Fish Co., 294 F.2d 868, 872 (5th Cir.1961).

. Thermon has argued to this court that McNeely's testimony is not substantial evidence supporting the Board’s order because he is a paid informant. This argument presupposes that McNeely is competent to testify.

. "Compensation” has usually been defined so as to exclude: (1) reasonable expenses that a witness incurs in attending or testifying at a legal proceeding; (2) reasonable compensation for losses due to a witness’s attendance or testimony at a legal proceeding; or (3) reasonable payments to an expert witness. 33A Fed.Proc, L.Ed. § 80.364 (1995); see also 18 U.S.C. § 201 (d) (setting forth exceptions from bribery statute). In other respects, exactly who is a "compensated fact witness” for purposes of the common law rule is sometimes unclear. The rule clearly covers the payment of money to witnesses for their testimony during trial. Less clear is whether the rule covers payments to persons made prior to the commencement of litigation. For example, the circuits have split on the admissibility of testimony by a witness who has been paid a reward prior to the commencement of trial by a party. Compare Jamaica Time Petroleum v. Federal Ins. Co., 366 F.2d 156, 158 (10th Cir.1966) with Golden Door Jewelry Creations, Inc. v. Lloyd's Underwriters Non-Marine Ass’n, 865 F.Supp. 1516, 1524-26 (S.D.Fla.1994), aff'd in relevant part, 117 F.3d 1328 , 1335 n. 2 (11th Cir.1997). The rule does not appear to cover situations where a party’s payment to a witness is unrelated to the witness’s testimony or the fact that they are testifying (i.e., an employee who testifies at a trial yet who continues to be paid a salary in his or her unrelated capacity as an employee).

. This case relied upon Model Rules of Professional Conduct Rule 3.4(b). As the union is not an attorney, this rule presumably would not apply. I express no opinion as to whether this rule would prevent attorneys employed by the Board from using testimony procured in this manner by a union.