Memorandum for Respondent — Britt v. United States

Page

Statement_....--------------.------------------------- 1

A. The underlying facts__-.-------------~--------- 2

B. The state court and other proceedings------------ 8

Discussion.......-----------------------+-------------- 12

Conclusion_....----.---------------------+------------ 25

CITATIONS

Cases :

American Smelting and Refining Co., 92 NLRB 1451-- 17

Bank of United States v. Planters’ Bank of Georgia,

a stan 19, 21, 23

Brown Shipbuilding Co., 87 NLRB 326...------------ 17

Ps Employees v. Missouri, 3174 U.S. 74------ Siena | a

California v. Taylor, 353 U.S. 553---.-----~------+--- 23

Carbide and Carbon Chemical Corp., 73 NLRB 134--- 17

Civilian Cafeteria Board, 106 NLRB 208--~--------- 18

Copolymer Corp., 52. NLRB 578.------------------- 17

Cosmopolitan Shipping Co., 2 NLRB 159------------ 17

Creekmore v. Public Belt B.R. Comm'n of New Or-

leans, 134 F. 2d }76, certiorari denied, 320 US. 742... 18

Division 1267 v. O1dman, 320 F. 24 T29-.------------ 2,11

Emergency Fleet Corp., U--ited States Shipping Board

v, Western Union Tel. ('0., 275 U.S. 415------------ 2A

Fruco Construction Co. v. McClelland, 192 F. 2d 241-_- 17

Garner Aviation Service Corp., 101 NLRB 517------ 17

Geronimo Service Co., 129 NLRB 366_-------------- 17

Hoosier Veneer Co,, 21 NLRB 907, modified and en-

forced, sub nor:. National Labor Relations Board v.

Bachelder, 120 F. 2d 574, certiorari denied, 314 U.S,

CF incincccaumenmamiiants PR ete NOE ON 22

Int'l Brotherhood of Electrical “Workers, Al J.

Schneider Co. 81 NLRB 99--..------------------ 18, 23

Middle Dept. Assoc. of Tire Underwriter, 122 NLRB

BB nce cceeee ee nddbeqnacnpsageeneeneg~nees 19

Mobile Steamship Association, 8 NLRB 1297------- 18

Montgomery Steel Products Corp., 94 NLRB 225---- 18

National Faod Corp., 88 NLRB 1500_-------------- 18

758-580—_64—_1 (1)

a |

Cases-—Continued

National Labor Relations Board v. Atkins & Co., 331

National Labor Relations Board v. Bank of ‘ merica,

etc., 130 F. 2d 624, certiorari denied, 318 U.S. 791_-

National Labor Relations Board v. Carroll, 120 F. 2d

National Labor Relations Board v. Concrete Haulers,

Ine., RR ee one ee

National Labor Relations Board v. Jones & Laughlin

Beees Carp, BH TE, Gi cc sceienncctccdicmsanine

National Labor Relations Board v. Lund, 103 F. 2d

New Jersey Turnpike Authority, 33 LRRM 1528__---

Ownard Harbor District, 34 NLRB 1285_...-._.----

Parden v. Terminal Railway of the Alabama State

Docks Department, 377 U.S. 184.----------------

Patton v. Roane-Anderson Co., 192 F. 2d 965_.-------

Peter D. Furness, 117 NLRB 437, enforced sub nom.

National Labor Relations Board v. Local Union No.

SEB, Bi, FO FB Bi ncntinnicniincsiodiminanace

Plumbers’ Union v. Door County, 359 U.S. 354_-..---

Public Service Corporation of New Jersey, 72 NLRB

Retail Clerks v. Schermerhorn, 373 U.S. 746_-------

Reconstruction Finance Corporation v. Merryfield, 134

Roane-Anderson Co., 95 NLRB 1501__-------

Sloan Shipyards v. United States Shipping Board,

Emergency Fleet Corp., 258 U.S. 549...--------

State v. Dade County, 142 So. 2d 79_---------------

Tampa Shipbuilding Co., Inc., 62 NLRB 954_-..----

Thiokol Chemical Corp., 113 NLRB 547_---.--------

Toledo Board of Trade, 117 NLRB 1504___-_-_-_---

Tri-County Electric Membership Corp., 145 NLRB No.

I ‘

Cases—Continued

Page

United States v. United Mine Workers, 330 U.S. 258__ 22, 23

War Hemp Industries, Inc., 57 NLRB 1709____._____ 17

Statutes:

National Labor Relations Act, as amended (61 Stat.

136, 73 Stat. 519, 29 U.S.C. 151, et seg.) :

Section 2(1)- cen analntieneeibeneniamiimnmmaaiei 23

Section 2(2)..-___ 2,9, 10, 18, 14, 15, 16, 19, 22, 28, 94, 95

Section at eiesnninanastemtinccniiasatnilcniesinsaim 11

cn RE ELOISE ae 10

I I a cescssncersetsctnicninnistrennioneshvcsarensa rene 10

Section 8(a)(5)----..-_________ tineninhsdbitehinaten tines 10

Section 8(b) (4)- ~~ a

Section 10(b)- 11

Urban “{sss Transportation Act of 1964, 78 Stat. 302

et 8eq.:

I 12

4” iT ae 12

Miscellaneous :

109 Cong. Rec. 5672-5674_..............__._._ 12

Fordham, Revenue Bond Sanctions, 42 Col. L. Rev.

Sian nila pte daiihihdheceemthininia tecesithinaiainemnnesons 20

Lag. Hist. of the Labor Management Relations Act,

nS eA 15, 16

Leg. Hist. of the National Labor Relations Act, 1935

IN MN iaiiihialaitestechinhccicicnisaienitaeinictansienen academe 15

Nehemkis, The Public Authority: Some Legal and

Practical Aspects, 47 Yale L.J. 14..-....-________ 20

En the Sugreme Gourt of the United States

Ocrongr TERM, 1964

No. 388

AMALGAMATED ASSOCIATION OF Srruer Execrric Rat-

way aND Motor CoacH EMPLOYEES OF AMERICA,

Division 1267, PETITIONER

v.

Dape County, a PoirricaL SUBDIVISION OF THE STATE

or Forma, AND THE MeErropouitaNn Dave County

Transit AuTHORITY, A GOVERNMENTAL ENTITY OF

Dave County, FLoripa

ON PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF FLURIDA

MEMORANDUM FOR THE NATIONAL LABOR RELATIONS BOARD

STATEMENT

This memorandum is filed pursuant to the request

of the Court for the government’s views on the issues

raised by the Union’s peution for certiorari. The

petition seeks review of a judgment of the State courts

of Florida declaring that Dade County and its Trans-

it Authority are not permitted, under State law, to

recognize and bargain with the Union as the collec-

(1)

2

tive bargaining representative of the Transit Author-

ity’s employees, and enjoining the Union from engag-

ing in strike action to compel such recognition or

bargaining (Pet. 5-6; Pet. App. A3-A4, A12-A13,

AJ4, A47-A48). The basic question presented is

whether Dade County and its Transit Authority in

their operation of a traasit system in Miami, Florida,

are removed from the coverage of the National Labor

Relations Act by the governmental exemption in Sec-

tion 2(2) of the Act. That section provides:

The term ‘‘employer’’ includes any person

acting as an agent of an employer, directly or

indirectly, but shall not include the United

States or any wholly owned Gevernment cor-

poration, or any Federal Reserve Bank, or any

State or political subdivision thereof * * *.

A. THE UNDERLYING FACTS

In the summer of 1960, the Board of County Com-

missioners for Dade County, Florida, enacted an ordi-

nance creating the Metropolitan Dade County Transit

Authority, composed of five members, appointed by

the County Commissioners (R. 1389-1390; J.A. 33).’

The Transit Authority is empowered, under the ordi-

nance, to perform functions with respect to ‘‘the ac-

quisition, establishment, financing, operation, mainte-

nance, control and expansion of a mass transit sys-

1“R.” refers to the portions of the record in the court below filed

with the petition. “J.A.” refers to the joint appendix to the briefs

in Division 1267 v. Ordman (infra, p. 11), which is an item

listed in the index to the transcript of record. However, since

a copy of the joint appendix apparently has not been trans-

mitted, we are filing a copy thereof with this memorandum.

3

tem * * *, under the direct supervision and control

of the Board of County Commissioners’’ (R. 1390;

J.A. 35). Approximately a year after enactment of

the ordinance, the County, on the recommendation of

the Transit Authority, entered into an agreement for

the purchase of four private transit companies from

W. D. Pawley (R. 1401, 1405; J.A. 62).

Under the purchase arrangements, Pawley trans-

ferred his shares in the companies to the County at

an agreed valuation of $7,705,274, minus the liabilities

outstanding at the time of closing (R. 1405-1406;

J.A. 63). The County did not pledge its faith and

credit, or taxing power for payment of this price

(J.A. 64, 140). Instead, the County issued Special

Revenue Transit bonds in the aggregate principal

amount of $9,000,000 (R. 1407; J.A. 64). Out of this

total issue, the County paid Pawley the bulk of the

purchase price for his transit companies, i of

the appropriate principal amount (R. 1 :

J.A. 63-64).2 The balance of the bonds, over and

above the purchase price, were sold for cash at face

value to customers supplied by Pawley, and the pro-

ceeds of these sales were put into the operation of

the transit system (R. 1407, 1409; J.A. 64, 65, 74).

The bonds pay five percent interest annually and

mature serially within the 15 years between 1962 and

1977 (R. 101-102; J.A. 79). Upon specitie authoriza-

tion by County ordinance, however, the bond debt

?Thé only part of the purchase price that Pawley did not re-

ceive in bonds was $300,000, which the County paid in cash

from the proceeds of the sale of certain transit properties not

needed for the County’s operations (R. 1426; J.A. 74).

as eee eis Sent n Pees ee ae ee + eee + +

4

may be refunded up to 40 years (J.A. 88-89). Bond

principal and interest payments are to be met exclu-

sively from the revenues of the transit system, which,

under the terms of a Trust Agreement (discussed

below), are to be held in trust pending the retirement

of all bonds (R. 1407, 1564; J.A. 64-65, 74a, 138-139).

Although the bonds constitute a first lien on the tran-

sit revenues (J.A. 74b, 112-113, 121), they are not

to be “construed * * * as conveying or mortgaging

the Transit System or any part thereof’ (R. 1578;

J.A. 140, 64-65). Thus, when Pawley, on February

9, 1962, relinquished full ownership of the transit

companies and their assets to the County, he was

remitted solely to the rights of a bondholder (R. 1460;

J.A. 240-241).

Pawley~and the other bondholders have extensive

protection for their investment under the Trust

Agreement for the transit revenues (R. 1564-1568;

J.A. 71-141). The Bankers Truzt Compary and the

Miami Beach First National Bank are named as

trustee and co-trustee under this Agreement (R. 1564;

J.A. 72). Their function is to act as custodians of

the revenues, chsuneling sums into the various ac-

counting funds,* in accordaace with the requirements

of the Trust Agreement and the current county

budget, and paying moneys out of these funds upon

requisitions signed by the County Finance Director

* These funds include an operating fund, a damage reserve

account, a construction fund, an eqaipment reserve fund, an im-

provement fund, a special reserve fund, a revenue bond interest

and sinking fund, and a renewal and replacement fund (J.A.

83, 105).

5

and the transit superintendent (R. 1565-1566; J.A.

92, 93-94, 102-103, 104-105, 109, 111, 112).

In addition, the County is obligated by the Trust

Agreement to employ a designated “management

agency” (National City Management Ccrapany) and

a designated firm of “‘consulting engineers” (Cover-

dale & Colpitts), for the transit operation (J.A. 116-

117).*. The primary function of the management

agency is to provide the professional and supervisory

personnel who direct “day-to-day” transit opera-

tions (R. 1545-1547; J.A. 177-178). It is authorized,

for example, to prepare a proposed annual operating

budget, subject to review- by the Transit Authority

and the Board of County Commissioners; to recom-

mend changes in routes, schedules, and fares ; to estab-

lish equipment maintenance and repair procedures;

to assign transit drivers to their runs; to keep attend-

ance schedules; and generally to implement the labor

policies established by the County Personnel Depart-

ment (R. 1437, 1545-1547; J.A. 177-181, 189-191).

‘The written approval of the trustee is needed before the

County is authorized to employ anyone other than the com-

panies designated, as management agency or consulting en-

gineers (J.A. 116-117). The trustees themselves are removable

by a vote of the holders of not less than a majority of the out-

standing bonds or for breach of duty, by any court of compe-

tent jurisdiction upon the application of the Board of County

Commissioners—or the holders of not less than five percent of

the outstanding bonds (R. 1577-1578; J.A. 132). New trustees

may be-named by the Board of County Commissioners or by

the holders of a majority of the bonds with the latters’

choice taking precedence in the event of a disagreement (J.A.

132-134).

The cousulting engineers are concerned with the

general financial and operational policies of the

Transit System (J.A. 95, 96, 97, 114, 117-118, 121-

122). For exampie, the County covenants in the

Trust Agreement to begin operations charging the

same transit rates that were in effect under private

operation, or “‘such other rates’’ as are approved by

the consulting engineers (R. 1567; J.A. 94-95).°

Thereafter, the County is obligated not to reduce

rates without the consulting engineers’ assent (R.

1569-1570; J.A. 96, 97). Although the County may

refuse to institute rate increases recommended by the

consulting engineers or may institute increases that

are not recommended, it is encouraged to follow the

recommendations of the consulting engineers by a

provision in the Trust Agreement that excuses any

default in bond payments provided these recommenda-

tions have been followed (R. 1571; J.A. 97-98).

Finally, the Trust Agreement contains certain

covenants of sound operation. The County agrees

that ‘‘all compensation, salaries, fees and wages paid

by the Transit Authority * * * will be reasonable,

that no more persons will be employed * * * than

are necessary for the efficient and economical opera-

tion of the Transit System, that it will maintain and

operate the Transit System in an efficient and eco-

° The approval of the consulting engineers is also needed for

any change in the transit routes (J.A. 117), or any alienation

of the transit system’s assets (J.A. 121-122). Similarly, the

Transit Authority must secure the approval of the consulting

engineers for a transit system insurance program and for the

plans and specifications of a central transit system garage

(J.A. 117-118, 114).

nomical manner * * * and that, from the Revenues

thereof, it will at all times maintain the same in good

repair and in sound operating condition * * *”’

(J.A. 115-116). If the County defaults in the ‘‘due

and punctual performance” of any of these covenants,

the trustee may, and upon written request of the

holders of not less than 20 percent of the outstanding

bonds shall, declare the principal on all bonds to be

immediately due and payable (J.A. 126). Further,

the trustee may, and upon the written request of the

holders of not less than 10 percent of the outstanding

bonds shall, proceed to protect and enforce the rights

of the bondholders by such ‘‘suits, actions or special

proceedings in equity or at law, either for the specific

performance of any covenant or agreement con-

tained * * * [in the Trust Agreement] or in aid or

execution of any proper legal or equitable remedy, as

the Trustee, being duly advised by counsel, shall

deem most effectual to protect and enforce such

rights”’ (J.A. 127).

The County has ultimate control of the Transit

System’s labor relations. Thus, the County Person-

nel Department handles all matters connected with

the hiring of the transit system’s employees, inelud-

ing the taking of job applications, the giving of com-

petitive examinations, and the establishment of hiring

standards (R. 1545-1547; J.A. 189-191). The Person-

nel Department also has authority io fire, promote, and

discipline employees (J.A. 178-181, 190-191). In Oc-

tober 1961, the County and the Transit Authority dis-

tributed Working Rules and Regulations that were

ABSIT BRA aint BAP Pa hp

patterned on the contract terms, including pay scales,

previously negotiated between the Union and the

private transit companies, prior to the County’s take-

over of the system (J.A. 177, 188-189, 269-270).

These rules provide that the employees of the Transit

Authority shall be county employees, generally inte-

grated into the classified civil service; that, as county

employees, they may belong to unions that do not

assert a right to strike against the County or ‘‘to

force collective bargaining procedure’’; and that the

employees, or their representatives, may participate

in the public hearings that are to be held prior to

periodic revisions of ‘‘the rules and regulations relat-

ing to the working conditions of employees of the

Authority” (J.A. 267-268). The rules further pro-

vide that, whenever practical, promotional positions

will be filled by competitive examinations under the

personnel rules for the classified civil service set out

in the Code of Metropolitan Dade County (J.A. 270-

271, 266).

B. THE JUDICIAL AND ADMINISTRATIVE PROCEEDINGS

On November 30, 1961, prior to the actual transfer

of Pawley’s assets and the commencement o/ operations

by the County, the County and the Transit Authority

instituted the present suit in the Cireuit Court of Dade

County (R. 12; J.A. 149, 163). The complaint stated

that the Union had demanded that the County and

the Transit Authority recognize it as the exclusive

bargaining representative of all Transit Authority

employees; that they assume the obligations of the

employer under the existing labor agreements be-

tween the Union and the private transit companies ;

and that they enter into negotiations looking toward

the execution of a new collective bargaining agreement

with the Union (Pet. App. A5; R. 19-20; J.A. 156).

The plaintiffs asked the court to enjoin a strike

threatened in support of these demands and prayed

for a judgment declaring that State law bars Dade

County and the Transit Authority from recognizing

the Union, or bargaining or entering into an agree-

ment with it, as the collective bargaining representa-

tive of the transit employees (Pet. App. A5-A6, A9-

A10). The Union moved to dismiss the suit on the

ground, inter alia, that the rights of the transit em-

ployees were protected by the National Labor Rela-

tions Act, and that the State court the:efore lacked

jurisdiction of the subject matter (Pet. App. A7; R.

“163; J.A. 28).

The county court rejected the Union’s contention.

It held that, although the purchase agreement left

Pawley with substantial financial or operational con-

trol of the transit system, this was not sufficient to

divest the County of the governmental immunity pro-

vided by Section 2(2) of the National Labor Relations

Act. The court further ruled that, under State law,

the County and the Transit Authority were not obli-

gated to bargain with the Union on behalf of the

transit employees and the Union did not have the

right to strike for that purpose. It issued a declara-

tory judgment to that effect, and an injunction re-

straining the Union from striking to obtain recognition

758-580—_64-—__2

10

or a contract from the County (Pet. App. A19-A53).

On November 1, 1963, this decision was affirmed on

appeal by the Florida District Court of Appeals

(Pet. App. A2—A18).°

While the State court proceeding was pending, the

Union filed with the Board unfair labor practice

charges against W. D. Pawley, Dade County, and the

Transit Authority. These charges alleged that the ob-

ject of the transfer agreement was to enable Pawley

to evade the statutory obligation to bargain with the

Union and to deprive the employees of their right to

strike; that, pursuant to this agreement, the charged

parties had refused to bargain with the Union, and

had made employment in the transit system condi-

tional on relinquishment of the right io strike; and

that the charged parties had thereby violated Sections

8(a) (5), (3) and (1) of the National Labor Relations

Act (R. 173-176, 306-307 ; J.A. 9-18).

On March 2, 1962, the Regional Director of the

Board notified all parties by letter that he had decided

not to issue a complaint on the Union’s charges be-

cause “in the present posture of the case the County

is the employer of the employees who are or will be

engaged in the operation of the transferred transit

lines,” and the statutory exemption in Section 2(2)

*The lower court had held that the transit employees, al-

though County employees, were not eligible under State law

to be included in the classified civil service (Pet. App. A20).

The appellate court reversed this ruling, remanding the case

for a determination of the rights of the employees who ac-

cepted employment with the County to classified civil service

status and other benefits under State law (Pet. App. A15-A16).

Senha DAE 0 ae Siay I Bilin STEM aD re ede 2 She “ a. . “ Sk Nt ed AAR Bin Si A

11

of the Act was therefore applicable. The letter

added, however, that the charges would not be dis-

missed at that time because the outcome of the pend-

ing State litigation might “conceivably have an im-

pact” on the issues raised by the charges, and dismis-

sal prior to completion of the State proceeding might

therefore prejudice the rights of the charging parties

under the limitations period imposed by Section 10(b)

(Pet. App. A7—A8; R. 292-293).". On June 21, 1962,

the General Counsel of the Board affirmed this ruling

(J.A. 23-24).

On November 7, 1962, the Union filed suit in the

United States District Court for the District of Col-

umbia against the General Counsel, seeking a judg-

ment declaring that the arrangements for purchase of

the transit system by Dade County did not remove

that system from the coverage of the National Labor

Relations Act. The district court dismissed the com-

plaint for want of jurisdiction over the action (Pet.

19). On appeal by the Union, the Court of Appeals

for the District of Columbia Circuit affirmed. It held

that the complaint failed to state a claim warranting

relief because ‘‘[t]he General Counsel’s decision to

defer action on the Union’s charge was within

[his] * * * jurisdiction [under Section 3(d) of the

Act].’? Division 1267 v. Ordman, 320 F'. 2d 729, 730.

7 Section 10(b) of the National Labor Relations Act pro-

vides that “no complaint shall issue based upon any unfair labor

practice occurring more than six months prior to the filing of

the charge with the Board * * *.”

12

DISCUSSION

It is, of course, clear that the provision of the Na-

tional Labor Relations Act exempting governmental

employers from coverage is fully applicable to an en-

terprise which was once in private hands but has been

transferred to public control. Indeed, Congress has

anly recently recognized that consequence when it

enacted the Urban Mass Transportation Act of 1964

78 Stat. 302, providing, inter alia, for grants and

loans “to assist State and local public bodies and

agencies thereof in financing the acquisition * * * of

facilities and equipment for use * * * in mass trans-

portation service in urban areas * * *’’ (Sec. 3(a)).

See 109 Cong. Rec. 5672-5674." The only question

here is whether there has been a sufficient transfer of

the transit systems involved to Dade County so as to

make it the employer.

The Board’s view is that under settled principles

the question should be answered affirmatively.

1. Dade County has made a bona fide purchase of

the transit lines formerly owned by W. D. Pawley.

Although, instead of paying cash, the County issued

bonds that are redeemable over a 15-year period out

of the revenues of the transit system, the transfer is

*In order to cushion this result, the new law provides that

it “shall be a conditien of any assistance under this Act that

fair and equitable arrangements are made, as determined by

the Secretary of Labor, to protect the interests of employees

affected by such assistance,” including “(1) the preservation of

rights, privileges, and benefit. <including continuation of pension

rights and benefits) under existing collective bargaining agree-

ments or otherwise; (2) the continuation of collective bar-

gaining rights * * *” (Sec. 10(c)).

13

complete. There is no evidence that the transaction

was arranged to evade the requirements of the Na-

tional Labor Relations Act in an invidious sense. The

record indicates only that the parties were aware of

the exemption provided governmental employers un-

der Section 2(2) of the Act and regarded the resulting

freedom from strikes and collective bargaining as

among the advantages of State ownership and opera-

tion of the transit system (J.A. 55-57). In short,

we are not confronted with the question of the effect

of a sham transaction in pursuance of a collusive plot

to defeat National Labor Relations Act coverage.

2. Nor is this a case where government has shared

emplorer controls with a private party. In the

Board’s judgment, the controls reserved by Pawley,

though substantial, do not have a sufficiently direct

bearing on employment conditions to make Pawley a

co-employer of the transit employees.’ There is no

evider.xe that Pawley can directly countermand the

labor policy fixed by the County Personnei Depart-

ment, or otherwise directly regulate the working con-

ditions of the transit employees, who are paid by the

County. If Pawley believes that the County is pay-

ing too much of the transit revenues out in wages, he

could, through his contro] over the trustees, presum-

ably induce them to bring a suit against the County

for breach of the trust covenants; but, in order to

succeed, he would have to satisfy the court that the

®* Whether one is an employer of particular employees for

purposes of the Act is ordinarily determined by whether he has

power directly to control their employment conditions. See

infra. pp. 15-17.

14

wages were not ‘‘reasonable’’ (J.A. 115). More-

over, it does not appear that Pawley has any control

of the employment relation through the management

agency or the consulting engineers. First, these firms

are not themselves vested with employer controls under

the Trust Agreement.” Second, although Pawley ap-

proved the firms selected for these positions, they are

independent companies which have other clients.

There is no reason to believe that they would be sub-

servient to Pawley’s wishes. And, if the County is

satisfied with their services, no provision is made in

the Trust Agreement for their displacement by the

bondholders; the trustee’s power to approve other

firms to be employed as management agency or con-

sulting engineers comes into play only if the Coun’y

desires to make a change.

3. Th» Union does not seriously contend that the

County or the Transit Authority shares the employer

controls with Pawley or any private entity. Rather,

the Union’s basic position is that the governmental

immunity conferred by Section 2(2) of the Act is

lost whenever a State agency enters into a joint

venture with private interests, and that the County

has done so here by vesting private parties with sub-

1° Of the private interests involved, the management agency

has the closest contact with the transit employees. It sets bus

routes, assigns drivers, keeps attendance records, and estab-

lishes procedures for the regular maintenance and repair of the

equipment. But, so far as labor relations are concerned, the

management company’s employees simply implement policies

established by the County and the Transit Authority in much

the same way thet any supervisory employee carries out the

policies of his employer.

a

15

stantial powers (albeit not power over employment

conditions and labor relations) in respect to the oper-

ation of the transit system. Accordingly, the issue

comes down to whether a governmental agency loses

the immunity conferred by Section 2(2) of the Act

whenever it shares control with private interests, or

only when it gives up control over employiaent con-

ditions and labor relations to a private party. The

Board is of the view that Section 2(2) immunity is

lost only in the latter case, and that, since there was

no sharing of employer controls with private interests

here, the State courts correctly concluded that the

County-operated transit system was removed from the

coverage of the National Labor Relations Act.

Section 2(2) provides that the term employer shall

not include ‘‘the United States or any wholly owned

Government corporation, or any Federal Reserve

~~Bank, or any State or political subdivision thereof.’’

This exemption appeared in the original Wagner Act,

except for the phrase ‘‘or any wholly owned Govern-

ment corporation, or any Federal Reserve Bank,”’

which was added in 1947. The legislative history of

the provision is sparse, but it indicates that Congress’

purpose was to avoid intrusion upon relations be-

tween the federal, State and municipal governments

and their em; !vyees, who traditionally were denied

the right to strike against the government.” Con-

"See Leg. H.st. of the National Labor Relations Act, 1935

(G.P.@., 1949) 1117, 2653; Leg. Hist. of the Labor Manage-

ment Relations Act, 1947 (G.P.O., 1948) 1535.

The addition in 1947 was designed to make clear that the

exemption extended to such governmental entities as TVA or

16

sistent with this objective, the immunity should apply

only where the government can directly control the

employment conditions of the employees involved;

t.e., where the government, under the tests for deter-

mining employer status under the Act,” would be re-

garded as the employer or a co-employer of the em-

ployees. For only where the government was able to

exercise such control over employment conditions

would the Act’s requirements be likely to impinge on

contrary governmental policies respecting collective

bargaining and strike activity by employees.

The Board has applied the governmental exemption

in Section 2(2) in accordance with this view. Its pre-

cedents in this area may be divided into two categories.

In the first category are cases involving agreements by

government with private independent contractors for

the performance of services or the supplying of goods.

There, the Board has inquired who has the relevant em-

ployer controls. If governm at alone possesses them,

the Board has held that the statutory exemption at-

RFC, but did not include an essentially private corporation

merely because the United States happened to own some stock

therein. See Leg. Hist. of the Labor Management Relations

Act, 1947 (G.P.O., 1948) 303, 536, 1605-1606; and National

Labor Relations Board v. Bank of America, etc., 130 F. 2d

624, 627, n. 4 (C.A. 9), certiorari denied, 318 U.S. 791, decided

prior to enactment of the amendment.

12 See National Labor Relations Board v. Lund, 103 F. 2d

815, 819 (C.A. 8); National Labor Relations Board vy. Con-

densor Corp., 128 F. 2d 67, 71-72 (C.A. 3); National Labor

Relations Board v. Concrete Haulers, Inc., 212 F. 2d 477, 479

(C.A. 5); Public Service Corporation of New Jersey, 72

NLEB 224, 225-226.

17

taches to deprive it of jurisdiction.” If the independ-

ent contractor has the employer controls, the Board

has ruled that he comes within the coverage of the

Act, even though government holds title to all prop-

erty, the contract is on « cost-plus-fixed fee basis, and

cost items (including wages) are subject to govern-

mental review and approval.* And, where the em-

ployer controls are shared by government and a

private entity, the Board has concluded that the Act’s

coverage is limited ‘‘to those aspects of the labor

relations’ within the control of the private entity.

Tampa Shipbuilding Co., Inc., 62 NLRB 954, 961.”

8 Roane-Anderson Co., 95 NLRB 1501, 1503. See, also Fruco

Ccnstruction Co. v. McClelland, 192 F. 2d 241, 244-245 (C.A.

8): Patton v. Roane-Anderson Co.. 192 F. 2d 965, 967-968

{C.A. 6).

1* Thiokol Chemical Corp. 113 NLRB 547, 548; Carbide and

Carbon Chemical Corp., 73 NLRB 134, 135-136; Garner Avia-

tion Service Corp. 101 NLRB 517, 518; American Smelting

and Refining Co., 92 NLRB 1451, 1452; Cosmopolitan Shipping

Co., 2 NLRB 759, 761-762. See, also, National Labor Relations

Board v. Carroll, 126 F. 2d 457 (C.A. 1); Geronimo Service

Co.. 129 NLRB 366, 368; War Hemp Industries, Inc., 57 NLRB

1709, 1710, n. 3; Brown Shipbuilding Co.. 57 NLRB 326, 328;

Copolymer Corp., 52 NLRB 578, 579.

13 See National Laber Relations Board v. Atkins & Co., 331

U.S. 398, 412-413, 414-415: “We cannot say that the Board was

without. warrant in law or in fact in concluding that respondent

retained ‘a sufficient residual measure of control over the terms

and conditions of employment of the guards’ so that they might

fairly be described as employees of respondent. The most im-

portant incidents of the employer-employees relationship * * *

remamed matters to be determined by respondent rather than

by the Army. * * *

“Here we have the Board's considered * * * judgment that

miiltarized plant guards may safely be permitted to-ein unions

and bargain collectively and that their military duties

18

In the second category of cases, someone who con-

trols the employment relationship contends that it is

an arm or instrumentality of government and, as such,

is entitled to the exemption. The Board has sustained

this contention where the entity claiming the statu-

tory exemption has been created directly by the State,

or is administered by State appointed or publicly

elected individuals. On the other hand, where the

State has merely lent a label to the entity or has

and obligations do not suffer thereby * * *. [Consistent

with this judgment, the] regulations and directives [of the War

Department] have clearly acknowledged the feasibility of recog-

nizing collective bargaining rights of these guards during war-

time, provided only that no encroachment is made upon mili-

tary necessities.” See, also, National Labor Relations Board v.

Jones & Laughlin Steel Corp., 331 U.S. 416, 425426; Mont-

gomery Steel Products Corp., 94 NLRB 225, 226, n. 2.

16 Mobile Steamship Association, 8 NLRB 1297, 1305, 1308

(State Docks Commission held division of the State of Ala-

bama); Oanard Harbor District, 34 NLRB 1285, 1290 (Harbor

District held political subdivision of the State of California) ;

New Jersey Turnpike Authority, 33 LRRM 1528, April 16,

1954, Administrative Decision, not officially reported (Turn-

pike Authority entitled to employer exemption under Sec. 2

(2)); /ntl Brotherhood of Electrical Workers, Al J. Schneider

Co., 87 NLRB 99, 100 (Board of Education held pol cal sub-

division of the Commonwealth of Kentucky); New Bedford,

Wood’s Hole, Martha’s Vineyard, etc., 127 NLRB 1322,

13824 (Advisory Opinion, Steamship Authority held po-

litical subdivision or instrumentality of the Common-

wealth of Massachusetts) ; Civilian Cafeteria Board, 106 NLRB

208 (Cafeteria Board held agency of the United States). Cf.

National F v0d Corp., 88 NLRB 1500, 1501 (Pentagon Post

Restaurant held government agent, but management services

performed by National Food Corporation found to entail em-

ployer controls bringing corporation itself within coverage of

the Act). See, also, Creekmore v. Public Belt R.R. Comm'n of

19

simply exercised certain regulatory controls over an

essentially private operation, the claim of immunity

has been denied. Randolph Electric Membership

Corp., 145 NLRR No. 79, pending on petition for

enforcement with a companion case, Tri-County Elec-

tric Membership Corp., 145 NLRB No. 10, (C.A. 4),

Nos. 9437, 9438; Middle Dept. Assoc. of Fire Under-

writers, 122 NLRB 1115; Toledo Board of Trade, 117

NLRB 1504, 1506-1507.

Under these precedents, the County, in its operation

of the transit system, is entitled to the immunity con-

ferred by Section 2(2). It possesses the relevant

controls over employment conditions and labor rela-

tions, and does not share them with Pawley (see

supra, pp. 7-8). Moreover, the County is 2 polit-

ical subdivision of the State and operates through

publicly elected officials, and the Transit Authority

was directly created by the County.

There is no merit to the Union’s argument (Pet.

25-26) that the specific exclusion for “any wholly

owned Government corporation’? indicates that im-

munity is not afforded where government shares

‘ownership controls” with private persons, as here.

As noted (n. 11, p. 15, supra), that provision,” which

was added in 1947, was designed to make clear that

the exemption in Section 2(2) extended to such gov-

New Orleans, 134 F. 2d 576, 577-578 (C.A. 5), certiorari de-

nied, 820 U.S. 742.

17'The provision ap ears to reflect the rule of such early de-

cisions as Bank of the United States v. Planters’ Bank of

Georgia, 9 Wheat. 398, 399, that a private corporation does not

acquire governmental status just because the government grants

it a charter or owns some of its stock, infra, p. 23.

MR OY A, NR le

20

ernmental entities as TVA or RFC, but did not in-

clude an essentially private corporation merely be-

cause the United States happened to own some stock

therein. The present situation is not analogous to

that in which the government merely holds stock in a

private corporation. Here, the government owner-

ship is total rather than partial. The County holds

title to all transit system assets, and, although Pawley

and the other bendholders have power to mature the

bonds should the County default or breach the cove-

nants of the Trust Agreement, they have no owner-

ship interes’ in the Transit System assets; rather, the

interest of the bondholders, including Pawley, is essen-

tially merely that of a preferred creditor.” Cf. Re-

construction Finance Corporation v. Merryfield, 134

F. 2d 998, 991-992 (C.A. 1), where the financial in-

** Contrary to the Union (Pet. 8-9), the power of the bond-

holders to call up all the bonds in the event of a default. and

to institute, through the trustee, suits for specific performance

of the covevants of the Trust Agreement does not give Pawley

a right of reversion in the Transit System upon default in the

bond payments or breach of the covenants of sound operation.

Under the Agreement for Delivery of Possession, Pawley is

deemed to have relinquished full ownership of the Transit Sys-

tem and its assets to the County and is remitted solely to the

rights of a bondholder. Although the bonds issued entitled

Pawley and the other bondholders to a first lien on the transit

revenues for payment of the bond principal plus interest, they

specifically recite that they are not to be “construed * * * as

conveying or mortgaging the Transit System or any part there-

of.” See p. 4, supra, and the discussion such provisions

in Fordham, Revenue Bond Sanctions, 42 Col. Li. Rev. 395, 431,

433, and Nehemkis, The Public Authority: Some Legal and

Practical Aspects, 47 Yale L. J. 14, 23-24. See, also, State v.

Dade County, 142 So. 2d 79, 88 (S.Ct. Fla.) validating the

Transit Revenue Bonds.

21

terest and control of the RFC in the affairs of a shoe

corporation was held not to create an employer-em-

ployee relationship within the coverage of the Fair

Labor Standards Act.”

The cases relied on by the Union do not require 4

contrary conclusion. In Bus Employees Vv. Missouri,

374 U.S. 74, the Court held that the State could not,

through its strike seizure procedure, defeat the Sec-

tion 7 right of public utility employees to strike.

However, the Court emphasized that (374 U.S. at

81):

* * * the State’s involvement fell far short of

creating a state-owned and operated utility

whose labor relations are by definition excluded

from the coverage of the National Labor Rela-

tions Act. The employees of the company did

not become employees of ‘Missouri. Missouri

did not pay their wages, and did not direct or

supervise their duties. No property of the

company was actually conveyed, transferred,

or otherwise turned over to the State. Mis-

souri did not participate in any way in the

actual management of the company, and there

was no change of any kind in the conduct of

the company’s business. * * *

Here, on the other hand, the employees of the tran-

sit system became County employees, the County paid

1#In any event, even if the trust for the bondholders could

be analogized to a corporation in which the bondholders par-

ticipate as shareholders with the County, by virtue of their

right to receive interest and to enforce the covenants protecting

the security of their investment, any waiver of the County’s im-

munity which could be inferable from its joint participation

therein (cf. Planters’ Bank, pp. 23-24, infra) would appear to

be applicable only to proceedings against the trust itself, which

is certainly not an employer under the Act.

22

their wages and supervised their duties, and the prop-

erty was actually conveyed, transferred, and other-

wise turned over to the County.

In United States v. United Mine Workers, 330 U.S.

258, the government seized the coal mines under an

arrangement whereby it “substituted itself for the pri-

vate employer in dealing with those matters which

formerly were the subject of collective bargaining

between the union and the operators,’’ negotiating a

new collective agreement with the union. In these

circumstances, the Court held that the government be-

came the employer of the employees, with the result

that a strike could be enjoined wihout regard to the

Norris-LaGuardia Act, notwithstanding that the gov-

ernment retained the private managers of the mines

with substantially the same functions and authority

as before;” that “none of the earnings or liabilities

resulting from the operation of the mines, while under

seizure, are for the account or at the risk or expense

of the Government; that the companies continue to

be liable for all Federal, State, and local taxes; and

that the mining companies remain subject to suit”

(230 U.S. at 287, 288). The governmental involve-

ment here is far greater and has none of the tempo-

rary features present in Mine Workers.” Moreover,

2° The Court noted that the government retained ultimate

control, since its regulations provided for remove! of the man-

agers at the discretion of the Coal Mines Administrator.

2 Cf. Hoosier Veneer Co., 21 NLRB 907, 935-937, modified

and enforced sub nom. National Labor Relations Board v.

Bachelder, 120 F. 2d 574 (C.A. 7), certiorari denied, 314 US.

647, also cited by petitioner (Pet. 23-24), where a court-ap-

pointed receiver was found to be a “person acting in the in-

terest of an employer,” under Section 2(2) of the Wagner Act.

Mine Workers shows, contrary to the Union’s conten-

tion, that governmental immunity is not automatically

lost where the government shares some of the inci-

dents of ownership and control with private interests.

Petitioner also relies on cases in which coverage of

the States and their subdivisions is implied in the

absence of any statutory exemption for such govern-

mental entities (Pet. 21, 22, 23, 24, 27). Parden v.

Terminal Railway of the Alabama State Docks De-

partment, 377 U.S. 184, 188-189 (Federal Employers’

Liability Act); California v. Taylor, 353 U.S. 553,

564-565 (Railway Labor Act). These decisions have

little bearing on the issue of coverage under the Na-

tional Labor Relations Act which expressly excludes

from the definition of employer in Section 2(2) ‘fany

State or political subdivision thereof.” ” Similarly

the language in Bank of United States v. Planters’

Bank of Georgia, 9 Wheat. 398, 399, that ‘“‘when a

government becomes a partner in any trading

company, it divests itself, so far as concerns the urans-

22. Plumbers’ Union v. Door County, 359 U.S. at 354, 358-

359, and Al J. Schneider Co., 81 NLRB 99, 100-101, cited by

petitioner (Pet. 21-22). These cases involve the definition of

“person” under Section 2(1) of the Act which does not extlude

governmental entities. Thus, the question there presented was the

right of political subdivisions to the protection against second-

ary pressure afforded “person[s]” under Section 8(b) (4). As

the Board stated, in a case involving the exey») tion of govern-

mental employers in Section 2(2), such hold. \ “are inapposite

as they involve action directed against, rather than jurisdiction

over, governmental agencies.” New Bedford, Wood's Hols,

Martha’s Vineyard, etc., 127 NURB 1822, 1323-1324. See, also,

Peter D. Furness, 117 NLRB 437, 439-441, enforced, sub nom.

National Labor Relotions Board v. Local Union No. 313, ete.,

254 F. 2d°221 (C.A. 3), overruling Al J. Schneider, Co.,

supra.

ee CO |

24

actions of that company, of its sovereign character,

and takes that of a private citizen,” is addressed to

a totally different problem. As indicated, supra, n. 17,

p. 19, the question there was simply whether a suit

against a bank was a suit against the State, and thus

barred under the Eleventh Amendment to the Constitu-

..tion, because the State had issued incorporation papers

to the bank and owned some of its stock. The Court held

that those circumstances were insufficient to cloak the

corporation with the sovereignty and immunities of the

State. Here, on the other hand, the question is not

whether a private corporation acquires governmental

immunity because the government is a participant,”

but, rather, whether the government itself loses its

immunity with respect to an euuerprise which it

wholly owns, and exercises employer control over,

merely because, instead of paying cash for the assets,

it buys on the installment plan and accords the bond-

holders certain financial controls as security for the

debt: owed them.

4. The decisions requiring State courts te stay their

hand in matters “arguably”’ within the jurisdiction of

the Board are inapposite here. The underlying facts

are not disputed and the issue is the scope of the stat-

utory exemption for governmental employers. The

8 Cf. also the cases cited at p. 24, n. 10 of the petition. Com-

pare Emergency ivleet Corp., United “tates Shipping Board v.

Western Union Tel. Co., 275 U.S. 415, 422-423, 425-426 (Pet. 24)

with Sloan Shipyards v. United States Shipping Board Emer-

gency Fleet Corp., 258 U.S. 549, 567-568 (Pet. 22) for the differ-

ing treetment that a claim of sovereign privilege by a wholly

owned government corporation may receive in different contexts.

See the express exemption accorded “wholly owned Government

corporation[s]” in Section 2(2) of the Act.

at ele hE,

25

‘General Counsel—whose decision bars the Board from

taking jurisdiction—has declined to act on the express

ground that the employer in suit is outside the scope

of the Act. And, with the benefit of the fully developed

record here, the Board itself has now expressed its view

to the same effect. Whatever the ‘‘arguability’’ of the

question when the Florida courts first asserted juris-

diction, it is now the Board’s considered submission

that they did not invade a pre-empted area. Cf.

Retail Clerks v. Schermerhorn, 373 U.S. 746, 755-756.

In closing, we note that the Board is not aware of

any similar case in which the present question is

presented.

CONCLUSION

For the foregoing reasons, the Board believes that

the Florida courts correctly concluded that the transit

system operated by Dade County was removed from

the National Labor Relations Act by the governmental

exemption in Section 2(2).

Respectfully submitted.

ARCHIBALD Cox,

Solicitor General.

ARNOLD ORDMAN,

General Counsel,

Dominick L. MANOLI,

Associate General Counsel,

Norton J. CoME,

. Assistant General Counsel,

Marion L. GRIFFIN,

Attorney,

National Labor Relations Board.

DECEMBER, 1964.

U.S. COVER™ MENT PRINTING OFFICE: 1964