Amicus Curiae Brief — Koons Ford of Annapolis, Inc. v. National Labor Relations Board

FIL EBD

: i MAR 4 1988

No. 87-1305

JGh er ESE AMIOU JR,

CLERK

IN THE

Suprenw Court of the Wuited States

OCTOBER TERM, 1987

KOONS FORD OF ANNAPOLIS, INC.,

Petitioner,

y.

NATIONAL LABOR RELATIONS BOARD,

and

DISTRICT 65, UNITED AUTOMOBILE,

AEROSPACE AND AGRICULTURAL

IMPLEMENT WORKERS OF AMERICA,

Respondents.

On Petition for a Writ of Certicrari to the United States

Court of Appeals for the Fourth Circuit

BRIEF FOR MARYLAND NEW CAR

AND TRUCK DEALERS ASSOCIATION AND THE

NATIONAL AUTOMOBILE DEALERS ASSOCIATION

AS AMICI CURIAE SUPPORTING THE PETITIONER

EARLE K. SHAWE *

STEPHEN D. SHAWE

ARTHUR M. BREWER

ERIC HEMMENDINGER

FRANCES TAYLOR

SHAWE & ROSENTHAL

Sun Life Building

20 South Charles Street

Baltimore, MD 21201

* Counsel of Record (301) 752-1040

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

TST ors

QUESTION PRESENTED

Whether the Court of Appeals denied the Employer a

fair hearing and undermined the sound public policy

favoring settlements by sua sponte using a settlement

agreement which contained a ‘‘non-admissions” clause to

find that the Employer had engaged in the misconduct

resolved by the settlement.

(i)

is ——y a

3 - —_ - _

7 bia i? os -

TABLE OF CONTENTS

Page

QUESTION PRESENTED .......................... aiialecamacae i

TABLE OF AUTHORITIES .................... ecahuslanibdiceideadens iv

INTEREST OF THE MARYLAND NEW CAR AND

TRUCK DEALERS ASSOCIATION AND THE

NATIONAL AUTOMOBILE DEALERS ASSOCIA-

ITT waidiricdccsinenenins DED ictia tat tistciladessaicvenuctiiecdsibenndieesas 1

STATEMENT OF THE CASE 2

REASONS THE WRIT SHOULD BE GRANTED ...... 4

Dee ee i ceabepiesuanwunna ieuisblcooiaclaeats mes 9

(iii)

iv

TABLE OF AUTHORITIES

Cases: Page

Breuer Electric Mfg. Co. v. Toronado Systems of

America, Inc., 687 F.2d 182 (7th Cir. 1982) _.... 5

Burns v. City of Des Peres, 534 F.2d 103 (8th

Cir.), cert. denied, 429 U.S. 861 (1976) _............ 6

General Steel Products, Inc. v. NLRB, 445 F.2d

0 MR , ) eee en eee 3

Home Insurance Co. v. Baltimore Warehouse Co.,

et I co ee ee 6

NLRB v. Apple Tree Chevrolet, Inc., 671 F.2d 838

EA As I casacaesctnseccunscaduciaseseneninideesoeonemnmunsccsens 3

NLRB v. Bangor Plastics, Inc., 392 F.2d 772 (6th

RAI ~ MMII osc, snicias vile ue biccniehidendsaiainseeapeintade in oeenaieeiatenans 6

NLRB v. Gissel Packing Co., 395 U.S. 575 (1969) .. 2

NLRB v. Indiana & Michigan Electric Co., 318

I I I gic an ae 7

NLRB v. Metropolitan Life Ins. Co., 380 U.S. 438

(| Ee aE a ire RL REE PE Pr oe ie) A 7

NLRB v. United Food & Comm’l Workers Union,

U.S. , 108 S.Ct. 413 (1987) .................. 8

Ohio Bell Telephone Co. v. Public Utilities Comm.

of Ohio, 301 U.S. 292 (1987) .............................. 7

Schware v. Board of Bar Examiners, 353 U.S. 232

“tg AURA Siaamatecett anne RR Winey ene ate 7

SEC v. Chenery Corp., 317 U.S. 80 (1943) _.......... 7.

W.B. Johnston Grain Co. v. NLRB, 365 F.2d 582

pa an ets Se ir RR SS JBN ky eet 7

West v. Smith, 101 U.S. 263 (1879) ..........2.00000....... 6

Statutes and Rules:

National Labor Relations Act, 29 U.S.C. § 151,

et seq.:

BR i Tt 7. | PRR peneceremuen anyone 8

Rs Oe ks OO issn sss citlaceeoshccsnomene 5

§ 10(c), 29 U.S.C. 160(c) _............ ER RRE AP IEEICARL 5

Sen a eee ee 5

Vv

TABLE OF AUTHORITIES—Continued

Page

Federal Rules of Evidence, 28 U.S.C.A.

BI TI a cncucneicrnanicsscasteoeanadiennip toutntenlapediadéseaateaneeonaiee 6

BPI vc connlaceincnGionivesttindcinieceeaieummasioaties jc aasaeinamaea 5, 6

IE DEE coi ciccsstinccachecobudceainewucaguninecsdssadadeaaaaiaiaaael 5

Rules of the Supreme Court, 28 U.S.C.A.

SE FD - cacesccccevsaseneceuitnbeennndsamaenteas 5

Miscellaneous:

NLRB General Counsel’s Report Summarizing

Operations in Fiscal Year 1986, 124 L.R.R. 158.. 8

Cleary, McCormick on Evidence (2d ed. 1972) ...... 6

Maguire, Evidence—Common Law and Common

Eb ¢ MRE ne rent LSE R USOT 6

Moore & Bendix, Moore’s Federal Practice (1987).. 6

We FH coins vibcckindaccsenistiunsinnaeeitudeaueee nas 6

eS GR witeiitentadecin one 6, 7

IN THE

Supreme Court of the Wuited States

OCTOBER TERM, 1987

No. 87-1305

KOONS ForpD OF ANNAPOLIS, INC.,

> Petitioner,

NATIONAL LABOR RELATIONS BOARD,

and

DisTRICT 65, UNITED AUTOMOBILE,

AEROSPACE AND AGRICULTURAL

IMPLEMENT WORKERS OF AMERICA,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF FOR MARYLAND NEW CAR

AND TRUCK DEALERS ASSOCIATION AND THE

NATIONAL AUTOMOBILE DEALERS ASSOCIATION

AS AMICI CURIAE SUPPORTING THE PETITIONER

INTEREST OF

NATIONAL AUTOMOBILE DEALERS ASSOCIATION

AND MARYLAND NEW CAR AND

TRUCK BEALERS ASSOCIATION

The National Automobile Dealers Association

is a trade association with offices in Washington, D.C.,

representing over 20,000 franchised automobile and

truck dealers located throughout the United States. The

Maryland New Car and Truck Dealers Association is a

trade association with offices in Baltimore, Maryland,

2

representing over 300 automobile and truck dealers lo-

cated in Maryland. Both associations have a strong

interest in labor relations issues that impact upon their

members. In this particular case, both associations ap-

prehend that the decision below poses a threat to their

members’ ability to voluntarily settle unfair labor prac-

tice cases before the National Labor Relations Board

without the disquieting risk that such a settlement will

subsequently be interposed as proof of wrongdoing in

other proceedings. The associations seek to participate as

amici curiae in support of the Petitioner because they

believe the experience of their members in participating

in cases before the National Labor Relations Board would

be instructive in reaching an appropriate resolution of the

issues presented by the Petition for Writ of Certiorari.

STATEMENT OF THE CASE

On January 12, 1983, the National Labor Relations

Board (“NLRB”) conducted an election among service

employees of Koons Ford of Annapolis, Inc. (“Koons” or

“the Employer”) to determine whether they wished to be

represented by District 65, United Automobile, Aerospace

and Agricultural Implement Workers of America (“the

Union”). Koons’ employees rejected the Union by a

vote of 39 to 27. (A. 47.) The Union filed objections to

the election and unfair labor practice charges, and on

May 30, 1984, an NLRB Administrative Law Judge

(“ALJ”) issued a recommended decision finding that

Koons had committed unfair labor practices. The ALJ

recommended that the NLRB issue an order directing

Koons to recognize and negotiate with the Union, pur-

suant to NLRB v. Gissel Packing Co., 395 U.S. 575

(1969). (A. 46-133.)

Koons filed exceptions to the ALJ’s recommended deci-

sion and order. On three separate occasions while the

exceptions were pending before the NLRB, Koons filed

motions to reopen the record and to introduce evidence of

3

changes in ownership, management and employees at the

dealership. The motions were intended to show to the

NLRB that circumstances had changed sufficiently to per-

mit and require a re-run election, instead of the more

drastic remedy of a bargaining order. The NLRB is-

sued its decision on December 24, 1986, affirming the

ALJ’s finding and issuing a bargaining order. The

NLRB summarily denied the three motions to reopen the

record on the grounds that “the evidence sought to be

adduced would not require a different result.” (A. 40 n.

18.) The Employer and the NLRB petitioned the United

States Court of Appeals for the Fourth Circuit for review

and enforcement, respectively, of the NLRB’s order.

While the case was pending before the Court of Ap-

peals, the Employer and the NLRB settled other unfair

labor practice charges alleged in a separate proceeding.

The duly executed settlement stipulation contained a

“non-admissions” clause expressly stating that the Em-

ployer did not admit the charges. Pursuant to the Em-

ployer’s and the NLRB’s stipulation, the Settlement

Agreement was filed with the United States Court of

Appeals for the Fourth Circuit for pro forma enforce-

ment of its remedial provisions.

In its opposition to enforcement of the bargaining or-

der, Koons argued to the Court of Appeals that the NLRB

had erred in not taking into account changes in circum-

stances which, according to Koons, made the bargaining

order inappropriate. Koons cited General Steel Products,

Inc. v. NLRB, 445 F.2d 1350 (4th Cir. 1971) and NLRB

v. Apple Tree Chevroiet, Inc., 671 F.2d 838 (4th Cir.

1982), as authority for the proposition that the NLRB

must consider evidence of changed circumstances in de-

ciding whether to issue a bargaining order.

Without addressing whether the NLRB had adequately

considered Koons’ proffered evidence of changed circum-

stances, the Court of Appeals rejected Koons’ argument

and enforced the bargaining order. The Court of Appeals

4

stated that a bargaining order is in the nature of an

equitable remedy, and that the employer who seeks to re-

verse such an order must therefore have “clean hands.”

The Court found that review of the previously enforced

settlement agreement revealed that Koons’ hands were

not “clean.” The Court of Appeals stated that while

Koons did not admit the violations settled by the stipula-

tion, Koons had “consented to an extensive order requir-

ing compliance with the Act and providing for full and

immediate reinstatement” and back pay.! (A. 6.) Stat-

ing that it had reviewed the record of the settled pro-

ceedings, the Court concluded that summary enforcement

was appropriate because it would be “a waste of judicial

time to remand this cause to the [NLRB] to consider the

‘clean hands’ issue.” (A. 6.) In short, the Court of Ap-

neals clearly relied upon a settlement stipulation contain-

ing a non-admissions clause as evidence that the Em-

ployer had committed the misconduct covered by the set-

tlement agreement.

REASONS THE WRIT SHOULD BE GRANTED

The Court of Appeals concluded from a_ settlement

agreement that the Employer had engaged in the mis-

conduct alleged in the settled proceedings and thus had

“unclean hands.” The Court’s use of the settlement agree-

ment for this purpose was improper because settlement

agreements are not competent evidence from which to

conclude that a party engaged in misconduct. The Court

of Appeals’ error is plain, as is the inescapable conclu-

sion that the Court abused its discretion by disregarding

settled rules of law, depriving the Employer of a fair

hearing. By “so far depart{ing] from the accepted and

1 Rather than requiring the Employer to offer reinstatement, the

stipulation and the order simply recognized that the Employer had

offered reinstatement, that the employees had declined the offer, and

that specified sums would be paid them as “backpay.” (A. 11 and

22-23.)

5

usual course of judicial proceedings... ,” the Court of

Appeals’ decision calls for an exercise of this Court’s

power of supervision. Sup. Ct. R. 17.1(a).

The decision below impairs the ability of any respond-

ent in a Board proceeding to enter into a settlement

agreement without taking the risk that the agreement

will be viewed as an admission. This undermines the

strong public policy supporting voluntary settlement of

disputes, particularly labor relations disputes. The case,

therefore, raises fundamentally important issues that

warrant review by this Court.

1. Evidence of Settlement is Not Competent as Evidence

That a Party Committed the Wrong Alleged.

The Court’s finding of misconduct based on a settle-

ment agreement violated well established rules of law

and sound public policy. Assuming arguendo that the

Court of Appeals could make de novo findings of fact,’

its fact-finding is subject to the Federal Rules of Evi-

dence. Fed. R. Evid. i1101(a). See also 29 U.S.C.

§$ 160(b). Rule 408 of the Federal Rules of Evidence

directs in unambiguous terms that “[e]vidence of ...

accepting ... consideration in compromising ... a claim

which was disputed .. . is not admissible to prove liability

for... the claim....” See also Breuer Electric Manu-

facturing Co. v. Toronado Systems of America, Inc., 687

F.2d 182, 185 (7th Cir. 1982) (“Rule 408 controls when

evidence of settlement attempts is offered ‘to prove lia-

* The National Labor Relations Act (‘‘the Act’) commits the fact-

finding function to the NLRB or its agents. 29 U.S.C. § 160 (b)

& (c). Where the taking of additional evidence after an appeal is

deemed appropriate, the Act instructs a court of appeals to remand

the case to the NLRB for the necessary findings. 29 U.S.C. 160(e).

There is no support, nor did the Court cite any, for its making

de novo findings of fact. That error is particularly critical where—

as here—newly found facts constitute the sole basis for a judicial

decision.

6

bility’ . . .’) (emphasis in original); Burns v. City of

Des Peres, 534 F.2d 103, 112 & n.9 (8th Cir.), cert.

denied, 429 U.S. 861 (1976) (settlements and settlement

negotiations are encompassed in Fed. R. Evid. 408).

This rule embodies the well established* and incon-

trovertible recognition that the motivation prompting a

settlement is ambiguous and an attempt to settle may

support multiple and contradictory inferences. Thus, set-

tlement may indicate a party’s view either that over-

coming an opponent’s claim is unlikely or, on the other

hand, that peace now is preferable to victory later. Fed.

R. Evid. 408, Advisory Committee Notes; E. Cleary, Mc-

Cormick on Evidence §§ 74, 274 (2d ed. 1972). In light

of this inherent ambiguity, the reliability of such evidence

to prove the underlying claim is at best suspect. See

J. Maguire, Evidence—Common Sense and Common Law,

20, 118, 201-202, 208-209 (1947). For this reason, the

use of a settlement to establish the underlying liability

defeats the central purpose of the rules of evidence—the

ascertainment of truth. Fed. R. Evid. 102. See 10 J.

Moore, H. Bendix, Moore’s Federal Practice § 102.02

(1987) (hereafter “Moore’s Federal Practice’).

Rule 408 also serves the strong public policy favoring

settlement of disputed claims. Fed. R. Evid. 408, Ad-

visory Committee Notes. The rule encourages settlements

by protecting settlement agreements, as well as settlement

negotiations, from being used to establish the disputed

claims. See 10 Moore’s Federal Practice § 408.02.

Despite this sound and unequivocal bar to inferring

liability for a settled claim from the fact of settlement,‘

3 The rule barring the admission of settlements and offers to

settle is a longstanding one. See, e.g., West v. Smith, 101 U.S. 263,

272-273 (1879); Home Insurance Co. v. Baltimore Warehouse Co.,

93 U.S. 527, 548 (1876).

4The Court of Appeals’ ruling is in direct conflict with rulings

in other circuits. See, e.g... NLRB v. Bangor Plastics, Inc., 392 F.2d

772, 775 (6th Cir. 1967) (settlement agreement does not amount to

7

the Court of Appeals drew just such an inference and

relied on it exclusively in finding “unclean hands.” * This

Court has long recognized that such a fundamental de-

parture from established law may give rise to a finding

that the right to a fair hearing has been denied. See,

e.g., Schware v. Board of Bar Examiners, 353 U.S. 232

(1957) (petitioner deprived of due process by State’s

decision based on record which had no evidence that ra-

tionally justified its findings); Ohio Bell Telephone Co.

v. Public Utilities Comm. of Ohio, 301 U.S. 292 (1937)

(decision based on evidence petitioner was given no op-

portunity to challenge denies due process and cannot be

cured through use of “judicial notice”). The decision by

the Court of Appeals deviates substantially from estab-

lished rules and concepts of fundamental fairness * and

warrants this Court’s review, as requested by Petitioner.

2. The Court of Appeals’ Decision Impairs the Ability of

Parties to Settle Without Being Charged With An

Admission.

The Court of Appeals’ decision poses a palpable threat

to the settlement process in NLRB cases. Implicit in any

a finding or admission that respondent has committed an unfair

labor practice); W.B. Johnston Grain Co. v. NLRB, 365 F.2d

582, 587 (10th Cir. 1966) (settlement agreement is “not an admis-

sion that the Company had been guilty of an unfair labor prac-

tice”). See also, NLRB v. Indiana & Michigan Electric Co., 318

U.S. 9, 18 (1943) (an unfair labor practice charge is not proof of

the commission of an unfair labor practice).

5 There is no question that the underlying claims were “disputed”

or that they were compromised within the meaning of the rule.

(A. 13, 16.) See 10 Mcore’s Federal Practice § 408.02.

® The Court simply ignored the parties’ contentions with respect

to the merits of the case and imposed a bargaining obligation on

the Employer. (A. 4-6.) The rationality of the NLRB’s decision and

the substantiality of its evidentiary support have never been

assessed. Instead, the decision has been upheld in reliance on

“evidence” never even considered by the NLRB. Cf. NLRR v. Metro-

politan Life Insurance Co., 380 U.S. 438 (1965); SEC v. Chenery

Corp., 317 U.S. 80 (1943).

8

settlement agreement is the promise that the settlement

agreement itself will not be treated as evidence of wrong-

doing. Typically, as was the case here, the parties make

that promise explicit, by agreeing to a non-admissions

clause. The Court of Appeals’ decision, if left to stand,

undermines that promise and its incentive to settle by

putting the party who has settled at a continued risk of

being branded a law-breaker. Such an approach also

undermines the bargaining process itself by preventing

the parties from receiving the benefit of their bargain—

that is, the negotiated promise that the settlement will

not be treated as an admission.

The undesirability of such a situation cannot be over-

estimated. Settlements—particularly in the labor rela-

tions setting—are critical. As this Court has recognized,

“settlements constitute the ‘lifeblood’ of the administra-

tive process, especially in labor relations.” NLRB v,

United Food & Commercial Workers Union, USS.

, 108 S. Ct. 413, 423 (1987) (emphasis supplied).

That conclusion is compelled not only by the sheer volume

of cases which are channeled away from litigation by set-

tlement ‘ but also by the unquestioned need for the par-

ties to a labor dispute—employers, employees, and unions

—to restore harmony and return to normalcy as quickly

as possible. If, as the National Labor Relations Act says,

industrial peace is at the very core of the Act,* it is hard

to imagine how peace can be furthered by converting a

“neace treaty” into a weapon that can be used against

one of the disputants.

7TIn 1986, 91.7% of the unfair labor practices charged were

settled, while in 1985, the rate was even higher, at 94.4%. NLRB

General Counsel’s Report Summarizing Operations in Fiscal Year

1986, 124 L.R.R. 158, 160 (1987).

829 U.S.C. §151(b) (the Act “safeguards commerce . . . by en-

couraging practices fundamental to friendly adjustment of indus-

trial disputes arising out of differences as to . . . working condi-

| Bae as ©

9

Given the critical role of settlements in the labor rela-

tions field, the Court of Appeals’ decision undermining

the viability of the settlement process is unwise and dan-

gerous.

In sum, the lower court’s decision seriously under-

mines the security of settlement agreements and dis-

courages the parties’ resort to settlement as a means of

amicably and finally resolving their disputes without the

need for litigation. The importance of the settlement

practices which are jeopardized by the Court of Appeals

compels the review requested by Petitioner.

CONCLUSION

For the reasons stated above, the National Automobile

Dealers Association and the Maryland New Car and

Truck Dealers Association request that this Court grant

the Petitioner’s request for a Writ of Certiorari.

Respectfully submitted,

EARLE K. SHAWE *

STEPHEN D. SHAWE

ARTHUR M. BREWER

ERIC HEMMENDINGER

FRANCES TAYLOR

SHAWE & ROSENTHAL

Sun Life Building

20 South Charles Street

Baltimore, MD 21201

* Counsel of Record (301) 752-1040