Amicus Curiae Brief — U. S. Marine Corp. v. National Labor Relations Board

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F a oe.

No. 91-1006 JAN 22 1992

OFFICE OF THE Gio

IN THE

Sigreme Court of the Wuited States

OCTOBER TERM, 1991

U.S. MARINE CORPORATION and

BAYLINER MARINE CORPORATION,

Petitioners,

NATIONAL LABOR RELATIONS BOARD and

INTERNATIONAL UNION, ALLIED INDUSTRIAL WORKERS

oF AMERICA, AFI-CIO,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF OF

NATIONAL ASSOCIATION OF MANUFACTURERS

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

Of Counsel:

JAN S. AMUNDSON

General Counsel

QUENTIN RIEGEL

Deputy General Counsel

NATIONAL ASSOCIATION OF

MANUFACTURERS

1331 Pennsylvania Ave., N.W.

Suite 1500—North Lobby

Washington, D.C. 20004-1703

(202) 637-3058

January 22, 1992

MAURICE BASKIN *

LAWRENCE S. WESCOTT

VENABLE, BAETJER, HOWARD

& CIVILETTI

1201 New York Avenue, N.W.

Washington, D.C. 20005

(202) 962-4800

Attorneys for Amicus Curiae

National Association of

Manufacturers

* Counsel of Record

WILSON

- EPes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

}

QUESTIONS PRESENTED

The Amicus adopts the questions presented set forth in

the Petition.*

* Although the Amicus believes that both questions presented

raise important issues worthy of review by this Court, the focus of

this brief will be on the rights of a successor employer to set its

own initial terms and conditions of employment, which NAM be-

lieves to have been improperly infringed by the decision below.

(i)

TABLE OF CONTENTS

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STATEMENT OF INTEREST AND SUMMARY OF

a a asncecesea bata neisrcwsiverrrssveenvonnes

REASONS FOR GRANTING THE WRIT ........000...

II.

III.

THE DECISION BELOW CONFLICTS WITH

THE HOLDINGS OF OTHER CIRCUITS AS

TO THE RIGHTS OF SUCCESSOR EMPLOY-

ERS, A QUESTION OF SUBSTANTIAL IM-

EAE Ee REALISES oo

THE DECISION BELOW HAS ERRONE-

OUSLY APPLIED THE NATIONAL LABOR

RELATIONS ACT TO THE CIRCUM-

STANCES OF THIS CASE ......0000000.00000000000.--

ABSENT REVIEW BY THIS COURT, THE

DECISION BELOW WILL HAVE A CHILL-

ING EFFECT ON CAPITAL INVESTMENT

IN FAILING COMPANIES ..........0000000000200..2.-

(iii)

TABLE OF AUTHORITIES

CASES Page

Bellingham Frozen Foods, Inc. v. NLRB, 626 F.2d

eh a re a eierngeannenen 4

Brotherhood of Railways, etc. v. REA Express,

Inc., 23 F.2d 164 (2d Cir.), cert. denied, 423

= EF, | NRE: Eee cae ere De Corer

H.K. Porter v. NLRB, 397 U.S. 99 (1970) ............

International Association of Machinists v. NLRB,

595 F.2d 664 (D.C. Cir. 1978) .................. eee 4

Kallman v. NLRB, 640 F.2d 1094 (9th Cir. 1981).. 4

NLRB v. Backrodt Chevrolet Co., 515 F.2d 512

(7th Cir.) (unpublished order) cert. denied, 423

U.S. 927 (1975) ........... RS a8 Aas ae EES te ee ee 4

NLRB v. Burns International Security Services,

| oe a nee enene 2

NLRB v. Strong, 393 U.S. 357 (1969) .................... 5

Nazareth Regional High School v. NLRB, 549

re ee ee isaac Srapotaeiesestencecteness 4

Saks & Co. v. NLRB, 634 F.2d 681 (2d Cir. 1980) .. 4

Spitzer Akron, Inc. v. NLRB, 540 F.2d 841 (6th

Cir.), cert. denied, 429 U.S. 1040 (1976) ........... 4

Spruce Up Corp. v. Fowler, 209 NLRB 194 (1974),

enforced without opinion, 529 F.2d 516 (4th Cir.

os casas: eR Pe SRE CERN rd ENED VA rn Se DE

Sure-Tan, Inc. v. NLRB, 467 U.S. (1984) -............

STATUTES

National Labor Relations Act, 29 U.S.C. 158

CRs. ph: 2 Ul: SiAReh Re Sah Ome sean 2

or w

IN THE

Siuyrenwe Court of the United States

OCTOBER TERM, 1991

No. 91-1006

U.S. MARINE CORPORATION and

BAYLINER MARINE CORPORATION,

“ Petitioners,

NATIONAL LAPOR RELATIONS BOARD and

INTERNATIONAL UNION, ALLIFD INDUSTRIAL WORKERS

OF AMERICA, AFL-CIO,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF OF

NATIONAL ASSOCIATION OF MANUFACTURERS

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

STATEMENT OF INTEREST AND

SUMMARY OF ARGUMENT

The National Association of Manufacturers of the

United States of America (“NAM’’) is a voluntary busi-

ness association of approximately 12,000 companies and

subsidiaries, employing eighty-five percent of all manu-

facturing workers and producing over eighty percent of

the nation’s manufactured goods. More than 158,000 ad-

ditional businesses are affiliated with NAM through its

Associations Council and National Industrial Council.

NAM and these councils are vitally interested in a bal-

anced and proper interpretation of the principles of labor

law that apply when the assets of one company are pur-

chased to be used in the development of a new commercial!

enterprise.

NAM supports the Petition in this case because it pre-

sents an issue of substantial importance to NAM’s mem-

bers left open by this Court’s decision in NLRB v. Burns

Int'l Security Services, Inc., 406 U.S. 272 (1972). The

6-5 decision below reflects a conflict among the circuits as

to the right of a successor company to change its union-

ized predecessor’s terms and conditions of employment, as

long as such changes are annouced prior to the hiring of

the predecessor’s employees. The Seventh Circuit’s en-

forcement of the order of the National Labor Relations

Board here has the effect of retroactively abrogating the

right of a successor employer to set its own terms of em-

ployment, a punitive result not contemplated by the Na-

tional Labor Relations Act (“the Act’). Absent review

and reversal by this Court, potential business investors

will be deterred from providing needed capital to strug-

gling enterprises due to the uncertainty over their ability

to establish their own terms and conditions of employment.

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW CONFLICTS WITH HOLD-

INGS OF OTHER CIRCUITS AS TO THE RIGHTS

OF SUCCESSOR EMPLOYERS, A QUESTION OF

SUBSTANTIAL IMPORTANCE.

In NLRB v. Burns Intl Security, Services, Inc., 406

U.S. 272 (1972), this Court held that a successor em-

ployer of a unionized facility was entitled unilaterally to

change preexisting terms and conditions of employment

without first bargaining with a union representing the

predecessor’s emp'oyers. The Court recognized that re-

quiring any successor to adopt a predecessor’s collective

bargaining agreement, unless the successor chose to do so,

would hamstring business purchasers generally by pro-

hibiting them from making changes needed to justify their

capital investments.' The Court further held that, absent

any preexisting relationship between the successor and the

bargaining unit, there was no basis for imposing pre-

existing terms on the successor, under the settled princi-

ples of H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970).

The Burns court did express the view that it would be

“appropriate” for a successor to “consult”? with a union

in “instances in which it is perfectly clear that the new

employer plans to retain all of the employees in the

unit...” Jd. at 294-95. However, in the years since

Burns was decided, the National Labor Relations Board

has interpreted the Court’s holding to mean that a suc-

cessor employer who intends to commence operations with

a full complement of employees of its predecessor may still

offer new terms and conditions of employment to those

employees, so long as it does so prior to the employees’

acceptance of the successor’s employment. Thus, in

Spruce Up Corp. v. Fowler, 209 NLRB 194 (1974), en-

forced without opinion, 529 F.2d 516 (4th Cir. 1975), the

Board explained:

When an employer who has not yet commenced oper-

ations announces new terms prior to or simultane-

ously with his invitation to the previous workforce

to accept employment under those terms, we do not

think it can fairly be said that the new employer

“plans to retain all of the employees in the unit,”

as that phrase was intended by the Supreme Court.

The Second Circuit cited the Spruce Up decision with

approval in Brotherhood of Railways, ete. v. REA Ex-

press, Inc., 523 F.2d 164 (2d Cir.), cert. denied, 423 U.S.

'As the Court stated: “A potential employer may be willing to

take over a moribund business only if he can make changes in cor-

porate structure, composition of the labor force, work location, task

assignment, and nature of supervision. Saddling such an employer

with the terms and conditions of employment contained in the old

collective bargaining contract may make these changes impossible

and may discourage and inhibit the transfer of capital ...” 406

U.S. at 287-88.

1017 (1975), and reiterated that approval in both Naza-

reth Regional High School v. NLRB, 549 F.2d 873, 881

(2d Cir. 1977) and Saks & Co. v. NLRB, 634 F.2d 681,

687 (2d Cir. 1980). The Ninth Circuit approved the

Board’s position in Bellingham Frozen Foods, Inc. v.

NLRB, 626 F.2d 674, 678 (9th Cir. 1980). Similarly, the

D.C. Circuit approved the position in International As-

sociation of Machinists v. NLRB, 595 F.2d 664, 674-75

(D.C. Cir. 1978) .*

The decision of the court below conflicts with this sub-

stantial body of precedent by permitting the Board to im-

pose preexisting terms of employment on a successor em-

ployer notwithstanding the successor’s timely announce-

ment of new terms prior to any offers of employment.

Specifically, under the Seventh Circuit’s holding and that

of the Board, a successor is being forced to adopt pre-

existing terms of employment as a remedy for alleged

unfair labor practices in the hiring of its employees. This

retroactive mandate is being imposed upon the successor

in this case even though the new employer never misled

anyone about its intentions to hire its workforce under

new terms and conditions of employment, in full compli-

ance with Spruce Up Corp. and the cases cited above.

The Seventh Circuit’s decision also conflicts with the de-

cision of the Ninth Circuit in Kallmann v. NLRB, 640

F.2d 1094, 1102-03 (9th Cir. 1981), which concluded that

an identical Board “remedial” order against a successor

who engaged in discriminatory hiring practices was

~Indeed, the sole situation in which the courts have found a

successor to have had “perfectly clear” intent to hire the preexisting

workforce under preexisting conditions has arisen when the Board

found that the successor “‘misled’’ the employees by “tacit inference”

into believing that they would be retained without changes in their

conditions of employment. NLRB v. Backrodt Chevrolet Co., 515

F.2d 512 (7th Cir.) (unpublished order), cert. denied, 423 U.S. 927

(1975) ; Spitzer Akron, Inc. v. NLRB, 540 F.2d 841 (6th Cir. 1976) ;

cert. cenied, 429 U.S. 1040; see also Spruce Up Corp., supra, 209

NLRB at 195.

actually an unlawful penalty.* The Ninth Circuit denied

enforcement of the Board’s order, noting that “the func-

tion of the remedy in unfair labor cases is to restore the

situation, as nearly as possible, to that which would have

occurred but for the violation.” Jd. at 1103. In the pres-

ent case, on the other hand, the court below rejected the

Ninth Circuit’s analysis in favor of upholding an ad-

mittedly “imprecise remedy” fashioned by the Board.

(App. 38a).*

Thus, a conflict clearly exists between the majority de-

cision below and the holdings of other courts of appeals.

The Petition should be granted so that his conflict can be

resolved.

II. THE DECISION BELOW HAS ERRONEOUSLY

APPLIED THE NATIONAL LABOR RELATIONS

ACT TO THE CIRCUMSTANCES OF THIS CASE.

In addition to presenting a conflict with other circuits

on the successorship issue, this Court should review the

decision of the court below because the Seventh Circuit

has reached a manifestly improper result which misap-

plies Burns and the Act. As its stated justification for

imposing preexisting conditions on the successor employer

in the present case, the court below held that the successor

somehow forfeited its right to set initial terms or to rely

on the Board’s Spruce Up holding:

3 It is well settled that the National Labor Relations Act is a

remedial statute only and that the Board is not permitted to levy

punitive orders against labor law violators. See Sure-Tan, Inc. v.

NLRB, 467 U.S. 883, 900-01 (1984); NLRB v. Strong, 393 U.S. 357

(1969).

4 The resulting conflict has been accurately described by the five

dissenting justices in the decision below: “If, as four other Courts

of Appeal hold, U.S. Marine was entitled to implement new terms

when it took over, no matter how many of Chrysler’s workers it

expected to hire, then these terms establish the bench mark that the

Board is entitled to restore.” (App. 56a).

In Spruce Up, there was a legitimate ambiguity as

to whether the new employer would in fact be able

to hire the predecessor’s employees because the new

terms were substantially different from those of the

predecessor. The employer did not refuse unlawfully

to hire its predecessor’s employees in order to avoid

having to recognize and bargain with the union. By

contrast, U.S. Marine, by its illegal activity, has

created any ambiguity as to whether all or nearly

all Chrysler employees would have accepted positions.

That ambicuity must be resolved against it.

(App. 35a) (emphasis in original).

The court of appeals has failed to make clear, however,

why the type of unfair labor practice allegedly committed

here should have altered the obligation of a successor un-

der the principles set forth in Burns and Spruce Up. In

Burns itself, for example, the Board found that the suc-

cessor committed unfair labor practices in its treatment

of the predecessor’s employees.* However, while acknow]l-

edging the unfair labor practices, the Court in Burns

nevertheless reversed the Board’s finding that the suc-

cessor was bound to maintain the terms and conditions of

the predecessor’s collective bargaining agreement. 406

US. at 292.

Here, on the other hand, the court below relied com-

pletely on the illegal activities of the successor to justify

its holding, without citing any connection between those

activities and the successor’s prior announcement of new

5 Burns supplied the predecessor’s employees with membership —

cards in another union and informed them that they must become

members of that union in order to work for Burns. The successor

also indicated that the employees would not receive uniforms unless

they signed the cards and that Burns could not live with the exist-

ing contract between the predecessor and the union. Burns then rec-

ognized the second union on the theory that it obtained a card

majority. The Board subsequently found that the employer’s actions

towards its predecessor’s employees viclated the Act, a finding not

disputed before this Court. 406 U.S. at 275-6.

terms and conditions of employment. Even assuming

that the successor did discriminate against the predeces-

sor’s employees in the hiring process, its logical goal in

doing so would have been to avoid “‘successorship” status

and its attendant bargaining obligation. The Petitioner

did not need to engage in discriminatory conduct in

order to set its own starting terms for the bargaining

process, because it could have done so even if it had

hired all of its predecessor’s employees.

Thus, if the Board’s true purpose were to deprive the

Petitioner of the “benefit” of its discriminatory activities

(App. 32a-33a), then a bargaining order would certainly

have been a sufficient and appropriate remedy, as the

avoidance of bargaining was the only unlawful “benefit”

which the successor conceivably could have hoped to

achieve. Imposing the additiona! penalty of depriving the

successor of its preexisting right to announce new terms

from which to start the bargaining process, however, is

nowhere justified in the decision below.*

It is clear that the Petitioner announced new terms

and conditions of employment before it hired any em-

ployees, and those were the terms and conditions from

whieh any negotiations with a collective bargaining agent

would have begun, regardless of Petitioner’s other con-

duct. Petitioner certainly did not “mislead any em-

ployees into believing that they would all be retained

without change in their wages, hours or conditions of

® The dissenting judges correctly analyzed the situation as fol-

lows:

The Board found that U.S. Marine discriminated against 34 of

the 257 applicants. The remedy for this sin is to hire the 34;

it is not remedial to augment the offer to the other workers or

to give these 34 terms better then they would have had if U.S.

Marine had hired them in 1984. Had U.S. Marine hired these

34 (rather, had it evaluated their applications without discrimi-

nation), the terms afforded all workers still would have been

those U.S. Marine set, not those Chrysler set.

(App. 57a).

employment” (Spruce Up Corp., supra, 209 NLRB at

195) thereby adopting the predecessor’s collective bar-

gaining agreement. Any unfair labor practices which

were alleged occurred after the establishment of the

new wages, hours and working conditions. Accordingly,

the Petition should be granted so that the erroneous

decision of the court below may be reversed.

III. ABSENT REVIEW BY THIS COURT, THE DECI-

SION BELOW WILL HAVE A CHILLING EFFECT

ON CAPITAL INVESTMENT IN FAILING COM-

PANIES.

As a consequence of the decision below, successor em-

ployers will have no way of knowing whether an an-

nounced intention to hire employees under new employ-

ment terms will be retroactively reversed in an unfair

labor practice proceeding, at substantial cost. In addi-

tion, because of the conflict in the circuits with regard

to the proper application of this Court’s Burns decision,

potential purchasers will lack the guidance necessary to

make significant capital investments.

NAM believes that the five dissenters have accurately

described the likely effects of the Seventh Circuit’s deci-

sion to uphold the Board, absent review and reversal

by this Court:

[Tjhe Board’s pretense of “remedy” has produced

an order that may make profitable production im-

possible. By approving this masquerade we preserve

featherbedding, increase the risks of taking over

foundering firms, and frustrate the revival of aging

plants. Neither American workers nor American

consumers will welcome this consequence.

(App. 60a)

NAM strongly urges the Court to correct the mistaken

views expressed in the decision below, in order to prevent

an unwarranted, crippling effect on our nation’s already

troubled economy. The clear conflict in the circuits, the

erroneous nature of the Seventh Circuit’s decision and

the importance of the issue to industry as a whole all

support the granting of the writ.

CONCLUSION

The decision of the Seventh Circuit is in direct con-

flict with four other Circuit Courts of Appeals. The

question of the obligation of a successor either to adopt

the terms and conditions of a predecessor’s collective bar-

gaining agreement or initiate its own new terms and

conditions of employment must be resolved. The reme-

dies applied by the NLRB and the Seventh Circuit must

be considered a penalty, since the true reestablishment

of the status quo ante under the conditions in this case

would not require Petitioners, under the Burns doctrine,

to adopt the terms and conditions of the predecessor’s

collective bargaining agreement. The Court should grant

the Petition for Writ of Certiorari in order to clarify and

insure proper application of the Burns doctrine.

Respectfully submitted,

Of Counsel: MAURICE BASKIN *

JAN S. AMUNDSON . LAWRENCE S. WESCOTT

General Counsel VENABLE, BAETJER, HOWARD