Petition for a Writ of Certiorari — Darlington Manufacturing Co. v. National Labor Relations Board

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Supreme Court of the Hnited States

OCTOBER TERM 1968

DARLINGTON MANUFACTURING COMPANY,

Petitioner,

v.

NATIONAL LABOR RELATION® BOARD, Respondent.

PETITION OF DARLINGTON MANUPACTUBING OOM-

PANY FOR WRIT OF CERTIORARI TO THE UNITED

pint COURT OF APPEALS FOR THE FOURTH

Txornton H. Brooxs,

440 West Market Street,

Greensboro, N.C.

Hvuex B. Cox,

Brice M, Cuacett,

Grorcs V. Atten, Jr.,

701 Union Trust Building,

Washington, D.C. 20005.

Attorneys for Darlington

Manufacturing Co.

November 8, 1968

PPR Ney i a BAY ube OE Bes nn PE NAL ORT ALDOR.

TABLE OF CONTENTS

Page

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Reasons for Granting the Writ ................... 11

1. The Board’s Finding of Unlawful Intent on the

Part of Roger Milliken Alone Does Not Satisfy the

Requirement of This Court That the Chilling Pur-

pose Must Have Been Shared by ‘‘the Persons

Exercising Control Over’’ the Plant Closing. .... 13

2. The Court of Appeals’ Decision Assumes Findings

Which the Board Did Not and Could Not Make. . 19

ree ree rr on i i ee 22

TABLE OF CASES

Denver & R.G.W. R.R. v. United States, 387 U.S. 485,

NE a PhS aern gigs oe) ee 17

NLRB v. Meiropolitan Life Ins. Co., 380 U.S. 438. .. 19

SEC v. Chenery Corp., 318 U.S. 80 .......... 12, 19, 21, 22

Texas Gas Transmission Corp. v. Shell Otl Co. 363

if RR ari ree ey Soe eee 19

Textile Workers Union v. Darlington Mfg. Co., 380

| 3 _ ERE ar ape cniparan seek 3515 8, 9, 11, 12, 14, 15, 17, 21

(1)

I ETS 2h RETR ELOS We, TE, hes & A > OG,

Supreme Court af the United States

OCTOBER TERM 1968

No.

DARLINGTON MANUFACTURING COMPANY,

Petitioner,

v.

NATIONAL LABOR RELATIONS BOARD, Respondent.

PETITION OF DARLINGTON MANUFACTURING COM-

PANY FOR WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE FOURTH

CIRCUIT.

Petitioner, Darlington Manufacturing Company (here-

inafter ‘‘Darlington’’), petitions the Court for a writ of

certiorari to review a decree of the United States Court of

Appeals for the Fourth Circuit upholding a decision by

the National Labor Relations Board (hereinafter ‘‘the

Board’’) that Derlington, in liquidating its only plant and

terminating permanently, its corporate existence, violated

section 8(a(3) of the National Labor Relations Act.

Opinions Below

The majority and minority opinions of the Court of

Appeals are reported at 397 F.2d 760 and appear at the

beginning of the Appendix accompanying this petition.’

1The Appendix is a joint Appendix accompanying both this petition

and the separate petition of Deering Milliken, Inc., seeking review of the

same judgment.

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2

The decision and order of the Board (165 NLRB No. 100)

appear in the Appendix beginning at page 4ia. This

Court’s previous opinion in this case is reported at 380

U.S. 2€3. The Court of Appeals’ earlier opinion previ- |

ously vacated by this Court is reported at 325 F.2d 682. |

The Board’s first decision and order are reported at 139

NLRB 241.

Jurisdiction

The decree of the Court of Appeals was entered on May

31, 1968. A timely petition for rehearing was denied by

that court on August 29, 1968. The jurisdiction of this

Court is invoked under 28 U.S.C. § 1254(1).

Questions Presented °

1. Whether the Board properly applied the rule of law

previously laid down by the Court in this case by holding

that a company faced with substantial losses violated sec-

tion 8(a)(3) of the National Labor Relations Act by liqui-

dating its only plant and permanently terminating its

own corporate existence, merely on the basis of a find-

ing that the motive of a single officer and director, owning

less than five per cent of the corporation’s stock, in propos-

ing liquidation of the business was, in part, to chill union-

ism in other plants, with no finding that his motive was

communicated to the other directors and stockholders or

that he dominated or controlled their decision.

2. Whether the Court of Appeals may sustain the

Board’s order on the basis of findings not made by the

Board.

2 To avoid unduly lengthening these petitions Darlington does not reit-

erate points urged by Deering Milliken in its separate petition. However, ,

since the points urged by Deering Milliken require reversal of the Board’s

order as to both respondents, Darlington relies upon and incorporates by

reference the arguments made by Deering Milliken.

3

Statute Involved

The questions discussed in this petition involve applica-

tion of section 8(a)(3) of the National Labor Relations

Act, printed at App. 85a.’

Statement of the Case

For the past twelve years Darlington has been a re-

spondent before the Board in this proceeding. The Board

has twice upheld a claim by the Textile Workers Union

that following its election as bargaining agent for Darling-

ton employees Darlington violated section 8{a)(3) of the

National Labor Relations Act by ceasing to conduct an

unprofitable business and terminating its cerporate exist-

ence.

Facts Giving Rise to the Controversy

Darlington was chartered by the laws of South Carolina

in 1883. (R. 479.) It operated a single cotton miil in

Darlington, South Carolina, which was built about 1888.

It had no other plant or physical assets. (See R. 391.)

As a result of Darlington’s vankruptcy in 1937, about 41

per cent of its common stock passed to Deering Milliken,

Inc., which had been a major creditor. (R. 391.)* By the

1950’s Darlington was again in serious difficulties. The

3 Unless otherwise noted, record citations herein (“R.”) are to the Joint

Appendix printed in the Court of Appeals and included as part of the

record in this case. “App.” refers to the Appendix accompanying this

petition.

*By 1956 a majority of Deering Milliken’s stock was, in turn, owned

by members of “the Milliken family,” a group defined as “the lineal

descendants of Seth Milliken.” (App. 46a.) The same was true in 1956

of Cotwool Manufacturing Co., which then owned 18.3 per cent of Darling-

ton’s stock. Individual members of the Milliken family owned only 6.4

_per cent of Darlington’s stock directly. Deering Milliken owned 41.4

per cent. The remaining 33.9 per cent was owned by more than 200 non-

Milliken shareholders seattered throughout ihe United States and abroad.

R. 1310.

4

principal causes were declining textile prices, resulting

from the introduction of more efficient equipment by United

States manufacturers and the importation of low-cost for-

eign textile products, and shifting patterns of textile con-

sumption in the United States away from the kinds of

textiles Darlington’s obsolescent equipment was designed

to produce. (R. 53, 411-421, 444, 461-464.)

In 1952 Darlington began a program of capital improve-

ment. (R. 444, 1283-85.) Darlington’s ancient building

made the introduction of new methods and equipmedt dif-

ficult and exceedingly costly. (See R. 58.) Competitive

mills were able to proceed toward modernization more

rapidly and cheaply. (R. 404, 407-09, 2758.) Between 1952

and 1956, Darlington’s cost per unit produced remained

unacceptably high, while its average return on invested

capital (2.8 per cent) was less than half that for the in-

dustry as a whole. (See App. 47a; R. 392, 400, 404, 2164,

2183-85.)

In 1955 a study by Barnes Textile Associates, Inc., textile

engineering consultants, confirmed that structural deficien-

cies in the plant building were the cause of Darlington’s

inability to bring costs into line with those of competitive

mills. (R. 400-01.) The consultants’ report recommended

that an investment of approximately 1.2 million dollars be

made in structurally improving and air conditioning Dar-

lington’s plant. (R. 399, 2166, 2171, 2759.)

Darlington’s seven-member board of directors met in

January of 1956 to consider these recommendations. The

directors rejected them because, in their view, neither pres-

ent nor anticipated future economic performance at Dar-

lington justified an investment of that magnitude in un-

salvageable structural modifications of the fundamentally

unsound plant building. (R. 400, 416, 461.) Instead, the

Darlington board determined upon a compromise under

5

which a smaller investment would be made in the renova-

tion and purchase of equipment. The equipment could be

removed if it proved unsuccessful to operate the mill com-

petitively. Darlington’s directors then believed that Dar-

lington’s economic prospects ‘‘did not justify making an

investment that was permanent in nature, one that once

made could not be taken out.’’ (R. 399.) As Chief Judge

Haynsworth recognized, ‘‘everything in this record points

to the conclusion that Darlington’s days were numbered.’’

(App. 34a.)

In March 1956, two months after this meeting, the Textile

Workers Union began an election campaign at Darling- |

ton. The campaign was based primarily on the union’s

promise that it would prevent Darlington from carrying

out the changes in work assignments and procedures which

had attended the installation of new equipment in accord-

ance with decisions made by the Darlington board in Jan-

uary. (R. 422-23, 457, 469, 472, 1275-80.) The union won

a narrow victory in an election held on September 6, 1956.

The Darlington board again met on September 12, 1956,

to consider liquidation of the corporation. (R. 279-80.)

This meeting was called by Roger Milliken, who was one

of Darlington’s seven directors. He owned about 4.7 rer

cent of its stock. (R. 388.) He held the title of President,

and as such presided at the directors meetings; but Dar-

lington’s chief executive officer was its Treasurer, James

Oeland. (See R. 120, 268-69, 561, 583, 1134.)

Roger Milliken testified that he believed the union’s elec-

tion warranted another review by: Darlington’s directors

of ‘‘all of the economic factors affecting the company and

the prospects of profitable operations in the future.’’ (R.

475.) The union’s victory was concededly a factor that,

in Roger Milliken’s view, was relevant to the question of

liquidation. The Darlington board had concluded in Jan-

6

uary that labor costs had to be cut through the introduc-

tion of new equipment if there were to be any possibility

of reducing costs to the point where the plant could con-

tinue in business. (R. 402-03, 422-24.) Yet the union had

promised Darlington employees that it would oppose such

changes. (R. 402-03, 422-24, 457, 469.)

In addition, the economic prognosis at Darlington had,

by September, worsened in almost every respect. Textile

prices had steadily declined from January levels. (R. 60,

418-21.) Costs had not improved, despite an investment

of about $400,000 in the first nine months of that year in

equipment improvements designed to cut labor costs. And

a general wage increase was imminent. (R. 469-470, 1274.)

At mid-year Darlington’s Treasurer had estimated that

the results for the fiscal year ending December 2 would

show a loss of $40,000 (R. 61, 427, 443, 2757), and a loss of

nearly a quarter of a million dollars was projected for fiscal

1957. (R. 441-42, 463, 476, 2695, 2757.) The Board recog-

nized these facts. (App. 47a-48a. )

The loss projected for the then-current fiscal year was

a substantial one, almost one-third of the preceding year’s

profit. The loss projected for fiscal 1957 was staggering—

approximately double the greatest profit Darlington had

made in any one of the previous five years, save one. (See

R. 441-42.)

Darlington’s seven direc’»rs, on September 12, 1956,

unanimously recommended that the corporation be liqui-

dated. (R. 2696.) A stockholders’ meeting was duly called

for October 17, 1956, and proxies were solicited authorizing

the holder, without discretion, to vote the proxy as marked,

for or against liquidation. (See R. 2699, 2761-62.) The

recommendation to liquidate was carried by the vote of

134,911 shares for liquidation (97 per cent) to 3,774 shares

against. (R. 1265.) Each of Darlington’s seven directors,

and every stockholder called to testify, testified that in

voting for liquidation he exercised his own independent

judgment, based upon his assessment of Darlington’s eco-

homic future; and each categorically denied that in cast-

ing his vote for liquidation he gave any consideration what-

soever to any possible effect that the liquidation of Darling-

ton might have at any other mill.5 This testimony, the

Board concedes, ‘‘stands uncontradicted in the record’?

(App. 68a) as to every director and shareholder except

Roger Milliken.

Prior Proceedings

The Board’s first report and order, rendered October 13,

1962, recognized Darlington’s serious economic problems

over an extended period. Yet the Board’s decision was

that because the liquidation decision was, in the Board’s

view, prompted in part by the union’s election, it violated

section 8(a)(3)—whether or not ‘‘genuine economic fac-

tors’’ were also ‘‘responsible for the closing of the mill

. .’—-and whether or not the advent of the union was

itself genuinely regarded by Darlington, as Darlington

had urged, as simply one of a number of objective factors

impinging upon the company’s prospects for profitable

operations in the future. 139 NLRB at 245-246.

The Board thus took the position that an employer can

never lawfully regard a union campaign and attendant

promises as an ‘‘economic factor,’’ even in a decision per-

manently and completely to liquidate an unprofitable busi-

ness. Nowhere in its 1962 report and order did the Board

suggest that the decision to liquidate Darlington was in-

tended to have an effect on union activity elsewhere than

at Darlington.

5 R. 2696-99, 2729-30, 2740-41, 2745-50, 2755-61, 2763, 2773, 2783,

3100-02, 3106, 3108, 3112, 3165-66, 3170-71, 3177-78, 3182, 3314-16,

33h1-52, 3361, 3363-64, 3414-16, 3424, 3452-54, 3469, 3414-16, 3424.

pe ee ee 7

8

The Board held that liability could be imposed on Deer-

ing Milliken as well as on Darlington on the theory that

the various corporations with Milliken family majority

ownership constituted a ‘‘single employer.’’

The Court of Appeals denied enforcement. Its decision,

rendered November 15, 1963, stressed that the Darlington

liquidation was ‘‘an actual, unfeigned and permanent end

of operations ...’’; that ‘‘the mill was not transplanted else-

where, and its sale was concededly entire, bona fide and

irrevocable.’’ 325 F.2d at 685-686. The court reasoned

that the statute does not ‘‘command an employer to stay

in business ...’’ (id. at 687) or ‘‘compel cne to become or

remain an employer’’ (id. at 685), and suggested that any

other construction of the statute would render it ‘‘of doubt-

ful validity.’’ Ibid.

This Court’s decision, rendered March 29, 1965, re-

manded the case for further proceedings. The Court agreed

with the Court of Appeals that an employer may per-

manently close its entire business for any reason, but did

not agree that a ‘‘partial closing,’’ even though permanent,

could never be unlawful. 380 U.S. at 274. Writing ‘‘in the

context of the Board’s finding that Darlington was part

of a larger single enterprise controlled by the Milliken

family . . .,’’ this Court ruled:

‘‘If the persons exercising control over a plant that

is being closed for antiunion reasons (1) have an

interest in another business, whether or not affiliated

with or engaged in the same line of commercial activity

as the closed plant, of sufficient substantiality to give

promise of their reaping a benefit from the discourage-

ment of unionization in that business; (2) act to close

their plant with the purpose of producing such a result;

and (3) occupy a relationship to the other business

which makes it realistically foreseeable that its em-

9

ployees will fear that such business will also be closed

down if they persist in organizational activities, we

think that an unfair labor practice has been made out.’’

380 U.S. at 275-276.

The Court held that there was a ‘‘fatal defect’? in the

Board’s decision in that its ‘‘findirgs as to the purpose

and foreseeable effect of the Darlington closing pertained

only to its impact'on the Darlington employees.’’ 380

US. at 276. (Emphasis by the Court.)

This Court stressed that a decision to permanently close

down one’s business, whether in whole or in part, ‘‘trenches

. . . Closely upon otherwise legitimate employer preroga-

tives. ...’’ Id. at 276. For this reason the opinion specifi-

cally cautioned the Board: ‘‘[I]t does not suffice to estab-

lish the unfair labor practice charged here to argue that

the Darlington closing necessarily had an adverse impact

upon unionization in... other plants’’ owned by the single-

employer entity hypothesized by the Board. Ibid. The

opinion thus makes it clear that ‘‘legitimate employer pre-

rogatives’’ were inextricably involved in the challenged

act, and that liability was not lightly to be inferred by

the Board in the absence of affirmative evidence establish-

ing the factors of ‘‘purpose’’ and ‘‘effect’’ described in the

opinion—‘‘ vital requisites,’’ the Court emphasized, ‘‘of the

general principles that govern a case of this kind.’’ Ibid.

Proceedings on Remand

The case was remanded to the Board for a determination

whether these ‘‘vital requisites’? existed in this case.

Pursuant to this remand, hearings were held before ex-

aminer Buchanan, who had conducted all the previous hear-

ings in the case. On August 10, 1966, the examiner issued

a decision (R. 1920-2075) finding, after a careful and ex-

10

haustive analysis of the record, (1) that the persons exer-

cising control over Darlington did not act to close that

mill in order to discourage unionism at other plants in

which the Millikin family owned interests, and (2) that the

evidence adduced did ‘not indicate that it was realistically

foreseeable that employees at otker plants would fear that

their place of employment wouid be closed down if they

persisted in organizational activities 02 that such employees

were in fact led so to fear.

On June 27, 1967, the Board brushed aside the findings

and recommendations of the examiner and again held that

the decision to liquidate Darlington violated section

8(a)(3). The Board based its decision on a finding that

Roger Milliken had the unlawful purpose required by this

Court, but did not dispute the testimony of each other

participant in the decision to liquidate that he exercised

his own independent judgment and had not considered the

impact of the closing on unionism elsewhere. (App. 68a-

7la.) There was no finding, and no evidence, that any

other director or shareholder of Darlington (1) shared

Roger Milliken’s prohibited motive, (2) knew of that mo-

tive, or (3) was dominated or controlled by Roger Milli-

ken in reaching his decision.

The Court of Appeals, on May 31, 1968, upheld the

Board on the assumption that the Board had based its

decision on evidence and findings that Roger Milliken exer-

cised control or domination over other Darlington direc-

tors. In addition, the Court of Appeals offered as an

alternative basis for upholding the Board a finding, not

made by the Board, that Roger Milliken controlled the

vote of a majority of the Darlington stock for liquidation.

(App. 23a.) Judges Bryan and Boreman dissented on the

6 The jurisdiction of the Court of Appeals to review the Board’s deci-

sion was conferred by 29 U.S.C. § 160(f).

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ground that the Board had failed properly to apply the

rule laid down in this Court’s decision, particularly be-

cause the Board ignored the motives of all the directors

and shareholders other than Roger Milliken. (App. 37a.)

Chief Judge Haynsworth filed a separate concurring opin-

ion expressing ‘‘misgivings’’ about the decision. (App.

33a.) On September 11, 1968, Chief Judge Haynsworth

entered an order staying the court’s mandate conditioned

upon the filing of petitions for certiorari in this Court

within sixty days.

Reasons for Granting the Writ

The Board’s decision cannot be reconciled with the prin-

ciples laid down, for the guidance of lower courts and the

Board, by this Court in its prior opinion. This case, as the

Court recognized, was the first to place in issue the law-

fulness of a partial ciosing of a business allegedly moti-

vated by a purpose to chill unionism elsewhere. Pointing

out that this is an area which ‘‘trenches .. . closely upon

otherwise legitimate employer prerogatives .. .,’’ the Court

carefully formulated a rule intended to serve as a line

of demarcation between those prerogatives and the right

of employees to bargain collectively.

The Board has misunderstood and misapplied the de-

marcation line fashioned by the Court, and has done so in

a way that, if not corrected, will seriously disturb the

proper balance between the important interests involved.

This Court held that a plant closing is unlawful if and only

if ‘‘the persons exercising control over’’ the closing act

for the purpose of chilling unionism in other businesses

in which they have an interest. The Board has held that

the Court’s test is satisfied if a single director-shareholder

secretly hevbors the proscribed purpose, even though his

vote was not essential to the closing of the plant and even

12

though he did not dictate or control the vote of the other

directors and shareholders, who are shown by uncontra-

dicted evidence to have voted to liquidate for reasons un-

related to any purpose to chill unionism in other plants.

The findings on which the Board based its decision fall

far short of those required to satisfy the standard that

this Court laid down. The Board’s misapplication of that

standard, if allowed to stand as a precedent, will have

wide consequences, for the United States textile industry,

and for other industries similarly faced with new competi-

tive pressures that make existing production procedures

and facilities uneconomical.’ The authority to liquidate one

of a group of plants because its continued operation will re-

sult in substantial losses is a prerogative of corporate man-

agement that is frequently exercised. It is a prerogative

of substantial importance in any economy that depends

primarily upon private initiative for the efficient alloca-

tion of effort and resources. The Board decision would

substantially impair this prerogative. The decision as-

sumes that a majority of those controlling a corporate

business may not lawfully exercise the prerogative, even

though their motives are lawful, if there is evidence that

a single member of management was prompted by an un-

disclosed and unlawful purpose. Any such rule of de-

cision is inconsistent with the careful balance of com-

peting interests that this Court attempted to achieve in

its earlier decision.

The Court of Appeals sustained the Board’s result on

the basis of findings which the Board did not make and

which the evidence would not have supported. In so doing

7 The record in this case shows that economic change has required wide-

spread adjustment throughout the textile industry, with attendant liquida-

tion of existing plant facilities at a rate which by 1956 exceeded one

hundred plants a year. R. 416-17.

ce ee rs Ne I kn

13

the Court of Appeals violated principles that are essential

to the orderly process of judicial review of administrative

action. Its decision is in direct conflict with the decision

of this Court in SEC v. Chenery Corp., 318 U.S. 80, and

supplies a distinct and compelling reason for review by

this Court.

Because the Court of Appeals and the Board indies

sought to hold Darlington’s liquidation unlawful on differ-

ent grounds, we shall consider first whether the Board’s

order can be sustained on its own terms, and second,

whether the Court of Appeals erred in attempting to sus-

tain the Board on the basis of assumed findings that the

Board in fact did not make.

1. The Board’s Finding uf Unlawful Intent on the Part of

Roger Milliken Alone Does Not Satisfy the Requtre-

ment of This Court That the Chilling Purpose Must

Have Been Shared by ‘‘the Persons Exercising Con-

trol Over’’ the Plant Closing. :

The decision to liquidate Darlington was made by its

seven directors unanimously, and by its shareholders by

a 97 per cent vote. Each of these decisions was made by

vote at a meeting after full discussion of the factors weigh-

ing both for and against closing the plant. Directors and

shareholders who had no interest in any other Deering

Milliken mill, and who thus could not possibly have had

the prohibited motive, participated and concurred in the

decision to liquidate.

At the remand hearing all seven Darlington directors

testified extensively, on direct and cross, as to their pur-

poses and motives in recommending liquidation. (R. 2695-

97, 2740-41, 2760-51, 3100-01, 3363-64, 3414-16, 3424, 3452.)

As these directors were also stockholders, many of them

also testified concerning those same matters in relation

14

to- the steckholders’ meeting where the directors’ recom-

mendation was adopted. (R. 2699, 2763, 3102, 3315-16,

3454.) In addition, other Darling‘on stockholders, includ-

ing the largest individual stockholder (holding about 13 per

cent, R. 1214), also testified. (R. 3101-02, 3163-66, 3170,

3178.)

The boards of directors of Deering Milliken, Inc., and

of Cotwool Manufacturing Corporation, the two largest

shareholders of Darlington, also met and determined to

vote the Darlington stock held by their corporations in

favor of liquidation. (R. 2699, 2742, 2761-62, 3362-63.)

Four of the twelve participants in these two directors’

meetings testified.

Each participant in these decisions testified emphati-

cally that he did not vote to close the Darlington plant

because of any effect ihe closing might have upon union

activity elsewhere; each denied that the possibility that

the Darlington closing would have an «fect upon employee

organizational activity at any other plant had been dis-

cussed or considered. Each testified that in voting as a

director or stockholder he exercised his own independent

judgment, based on the economic situation at Darlington.

Several participants testified that they considered the im-

pact of the union’s election at Darlington upon the com-

pany’s efforts there to bring costs into line with other

mills.®

The Board does not question any of this testimony on

the part of any of the participants except Roger Milliken.

8R. 2695-99, 2729-30, 2737-42, 2745-50, 2755-61, 2763, 2773, 2783,

3160-02, 3106, 3112, 3165-66, 3170-71, 3177-78, 3182, 3314-16, 3351-52,

3361-64, 3414-16, 3424, 3452-54, 3469. Much of this testimony was given

prior to the time this Court laid down its “chilling purpose” test in the

present case and before anyone could have known that such a test was part

of our law. R. 7-9, 55, 57-66, 291-92, 422-31.

15

The Board simply disregards it and announces that, in its

view, ‘‘the critical purpose is the one which moved Roger

Milliken.’’ (App. 68a.) =

In holding the decision to liquidate Darlington unlawful

because of the alleged motive of Roger Milliken: alone,

the Board fails to satisfy the explicit test laid down by

this Court. The crucial language of this Court’s decision

required the Board to find that ‘‘the persons exercising

control over’’ Darlington acted ‘‘to close their plant’’ for

the specific purpose of deterring unionism at other plants

in which they had a substantial interest. Roger Milliken

alone did not exercise control over the closing of Darling-

ton and the Board does not find that he did, Nor does the

Board find thet the other Darlington directors and share-

holders, who with Roger Milliken shared control over Dar-

lington, were subject to Roger Miiliken’s dictation, direc-

tion or control. Indeed, the Board makes no finding that

any other director or shareholder of Darli:yton even knew

that Roger Milliken had the prohibited motive.

The Board’s own language betrays its concession that

Roger Milliken was by no means the sole ‘‘person exer-

cising control over’’ the Darlington closing. The Board

speaks of ‘‘Roger Milliken and the Milliken family’’ as

‘¢those in control of Darlington’’ (App. 51a), and elsewhere

defines ‘‘the persons exercising control over’’ Darlington

as ‘‘the Milliken family, as advised and influenced by Roger

Milliken.’’ (App. 52a.) More specifically, the Board recog-

nizes that the votes of four Milliken family directors, of

whom Roger was but one, were ‘‘the only votes necessary

to carry the resolution’’ of liquidation. (App. 69a.) The

Board’s ultimate finding was that ‘‘those exercising control

ovex Darlington, especially in the person of Roger Milli-

ken,’’ had the prohibited purpose. (App. 84a.) This ultimate

16

finding is not supported by specific findings of fact, and is

expressly contradicted by the Board’s concession that there

is no evidence in the record to impeach the testimony of

each other director-shareholder, including that of each other

Milliken family director of Darlington, that he did not act

with the intent to chill union activity in other plants.°

Since the Board recognizes that other persons besides

Roger Milliken were in the group ‘‘exercising control over’’

the closing, and since everywhere but in its ultimate con-

clusory finding the Board concedes that there is no basis

in the record to justify a finding that any other member

of the group acted with the proscribed purpose (App. 68a),

the Board was faced with a failure of proof that had to

be bridged somehow if liability was to be imposed. The

only logical way this gap could be bridged was by a finding

that Roger Milliken dictated or controlled the decision of

the other directors, so that his purpose alone was the

operative or effective purpose. But this finding the Board

did not and could not make; the record is as devoid of any

hint of such dictation or control as it is of evidence that

other directors or shareholders harbored the proscribed

intent themselves. Indeed, the record flatly negatives any

such dictation or control through a wealth of unchallenged

evidence to the contrary, which, again, the Board does not

challenge or reject. (R. 424-31, 2696, 2699, 2740-41, 2760-61,

2763, 2773, 3102, 3166, 3314-15, 3452.)

® Probably the most revealing and eriticai ianguage in the Board’s

opinion is this (App. 682): “We are aware of the testimony by the mem-

bers of the board of directors and stockholders (including Roger Milliken)

that they did not intend, by the votes they casi, to chill unionism elsewhere,

and that such a prospect was nct discussed at the two meetings. While

the Trial Examiner did not expressly find this testimony credible, neither

- Gid he diseredit it, and it stands uncontradicted in the record. Bvt we

find it of little moment that there was such testimony ‘yom the other

directors for we believe that the critical purpose is the one which moved

-Roger Milliken.”

17

The Board attempted to bridge the gap in the evidence

by finding that Roger Milliken ‘‘advised and influenced’’

the other directors and then concluding that this in some

Way was enough to make his purpose determinative and

theirs irrelevant, even though they concededly voted in-

dependently and for their own reasons, and even though if

Roger Milliken held a chilling purpose he carefully concealed

it from the others. The Board’s reasoning is inconsistent

with the standard laid down by this Court in its prior

opinion. That standard was stated in terms of control not

advice or influence. Cf. Denver & R. G. W. R.R. v. United

States, 387 U.S. 485, 501. If a person was one of those who

controlled the Darlington closing—and by the Board’s own

admission at least the four Milliken family directors were in

this group—then his purpose is relevant unless he himself

was controlled by another.

The Board’s findings do not face the issues squarely.

The findings contain a number of statements with respect

to the position of Roger Milliken but there is no direct

unequivocal finding that Roger Milliken dominated or con-

trolled the other directors or that he communicated his

alleged unlawful intent to them. Instead the Board speaks

of Roger Milliken as ‘‘the chief figure in the family hier-

archy’’ (App. 46a); the ‘‘appointed steward of the Milli-

ken family interests.’’ (App. 47a.) ‘‘He held the obvious

position of power in the corporate organization, he convened

the meeting, he offered the resolution, and he advised why

the resolution should be accepted.’’ (App. 68a.) From this

the Board concludes that ‘‘Roger Milliken’s denial of illicit

purpose is the one which must survive the weight of the

other evidence... .’’ (App. 70a-71a.)

The conclusion is a complete non sequitur and distorts

the standard this Court formulated. Roger Milliken could,

as he did, make recommendations to the other Darlington

18

directors; but whether they accepted them or not was a

matter for their own decision in the exercise of their fiduci-

ary duty to all the shareholders, Milliken and non-Milliken.

The Board does not challenge the testimony of each partic-

ipant in the crucial decision to liquidate Darlington that he

exercised his own independent judgment in voting for

liquidation. Thus, Roger Milliken may or may not have been

the family’s ‘‘chief figure’’ or ‘‘steward’’ in other, more

routine undertakings, in the day-to-day management of

many of the family investments; but in liquidating Darling-

ton each Milliken director participated deliberately and in-

dependently ; each acted for his ‘‘own reasons,’’ about which

every director testified at length (e.g., R. 2747-50) ; and each

emphatically denied that he was ‘‘taking orders from any-

body.’’ (#.g., R. 2699.) There is no evidence and no find-

ing to the contrary.

The Board makes no findings that the other directors

and shareholders habitually followed advice they received

from Roger Milliken, or that they had no other sources

of advice and influence, including one another. Indeed, at

the Darlington directors’ meeting which voted for liqui-

dation several other directors, including non-Milliken

directors, also ‘‘advised’’ why they thought the plant

should be closed. (R. 2694-95, 2739, 2757-59, 3100.) And the

Board does not find that their advice was without influence.

Whatever the Board means by ‘‘advised and influenced,”’

it cannot mean either that the vote of any other Milliken

director was dictated or controlled by Roger Milliken or

that any other Milliken director or shareholder believed

that the purpose of liquidation was to deter unionism at

any other plant. The ‘‘advice’’ that Roger Milliken gave

was that it seemed hopeless to expect that Darlington could

become profitable and it should therefore be liquidated.

(R. 2692, 2738, 2773-74, 3106, 3108, 3314, 3462-63.) If he

19

had a chilling purpose, he kept it completely to himself.

There is no finding that he ‘‘advised and influenced’’ any

other participant in the liquidation decision, director or

shareholder, Milliken or non-Milliken, to close the plant

as a deterrent to unionism at other mills. Hence the Board’s

decision cannot be sustained on a theory that Roger Milli-

ken’s fellow directors somehow accepted or ratified his

chilling purpose by acting with him, oe that he was

acting for that purpose.

The Board seeks support for its aie? in the fact that

Roger Milliken ‘‘voted a majority of the stock in Darling-

ton in favor of liquidating the plant.’’ (App. 23a.) It

is true that Roger Milliken voted shares other than his

own, as one of two persons named as proxies by Darling-

ton’s shareholders. But as proxy Roger Milliken had no

discretion whatever; the fact that he rather than some

other person was named as proxy is without legal or prac-

tical significance. The controlling purposes were those

of the persons who authorized that their shares be voted

for liquidation. In the case of the shares owned by Deering

Milliken, Inc. and Cotwool Manufacturing Company, which

together comprised over 50__ er cent of the stock of Darling-

ton, the record shows that the directors of these corpora-

tions instructed the proxy-holders to vote the Darlington

stock in favor of liquidation. (R. 2699, 2761-62.)

2. The Court of Appeals’ Decision Assumes Findings

Which the Board Did Not and Could Not Make.

The Board’s order must stand or fall on its own terms.

The Court of Appeals, in attempting to sustain the Board’s

result on the basis of findings which the Board did not

and could not make, has committed a clear violation of

the principles laid down by this Court in SEC v. Chenery

Corp., 318 U.S. 80, and consistently reaffirmed in subse-

20

quent decisions. E.g., NLRB v: Metropolitan Life Ins. Co.,

380 U.S. 438, 443-444; Texas Gas Transmission Corp. v.

Shell Oil Co., 363 U.S. 263, 270. These principles are at

the very heart of the orderly process of judicial review

of administrative action. The Court of Appeals’ violation

of them in this case is itself a oe reason for review

by this Court.

The Court of Appeals deals with the problems raised

by the Board’s exclusive reliance upon the alleged motive

of Roger Milliken in a single paragraph of its opinion.

(App. 23a.) In that paragraph the-eourt notes the Board’s

finding that ‘‘Milliken interests controlled Darlington,’’

and seems either to assume or to supply -two additional

findings which the Board did not make. These are: (1) a

finding that Roger Milliken, who according to the court

‘‘occupied a dominant role in the management and control

of these interests,’’ controlled other Darlington directors

in the decision to liquidate the mill; and (2) a finding that

the controlling ‘‘Milliken interests’’ in any event ‘‘ulti-

mately liquidated the corporation’’ by voting ‘‘a majority

of the stock for liquidation,’’ the court implying here that

the Board had based its decision upon an alternative theory

that Roger Milliken controlled the Darlington stock, even

if he did not control the Darlington board, or that a

majority of the stockholders who voted for liquidation

shared his allegedly unlawful purpose.

The suggested finding that Roger Milliken somehow

dominated or controlled the other directors in their deci-

sion to vote to liquidate Darlington is one which, as we

have seen, the Board was simply unwilling to make on the

record before it. No such finding could be supported by

the record, as the Board was plainly well aware.

The court observed that ‘‘the Board did not have to

shut its eyes to the fact that corporate directors are

21

frequently responsive to interests that control the ma-

jority of a corporation’s stock.’? But the Board did not

and could not find that any director was ‘‘responsive’’ to

Roger Milliken in the sense that his exercise of his own

independent judgment was dictated or controlled. More-

over, this comment of the court ignores the fact—never

controverted by the Board—that the other members of

the Milliken family who sat on Darlington’s beard repre-

sented the majority ‘‘interests’’ just as much as Roger

Milliken did.

In offering as an alternative ground for decision the

fact that ‘‘it was the stockholders who ultimately liqui-

dated the corporation,’’ the court departs even more

sharply from the findings and theory advanced by the

Board. General Counsel never attempted at the remand

hearings to establish the ‘‘ purpose’’ element of this Court’s

test by treating as the decisive act of liquidation the stock-

holders’ ratification of the directors’ decision to initiate

liquidation. The Board made no specific finding that any

stockholder shared Roger Milliken’s allegedly unlawful

purpose and never suggested as an alternative ground for

decision that the persons who controlled the Darlington

stock, and authorized it to be voted for liquidation, did so

with the purpose required by this Court’s decision. In

fact the only evidence of record bearing on the stockhold-

ers’ purpose in voting for liquidation shows that the stock-

holders exercised an independent judgment and that a

majority of the stock was voted for liquidation for reasons

which the Board does not and cannot question.”

In Chenery it was made clear that, even where the re-

10R. 2699, 2763, 3102, 3165-66, 3178, 3454. General Counsel sought

to exclude stockholder testimony with the concession: “We don’t profess

that a single stockholder who went along with a recommendation of dis-

solution had a motive to discourage organization throughout the Milliken

mills in the entire area.” R, 3178.

22

viewing court attempts to ground its decision upon ‘‘find-

ings’’ or ‘‘considerations’’ which ‘‘might have been made”’

or ‘‘disclosed’’ by the agency, it cannot do so, if these were

not the grounds upon which the agency itself based its

action. 318 U.S. at 87-88, 90. In this case the Court of

Appeals’ violation of Chenery principles is far more

serious, since the court has based its decision upon supplied

or assumed findings which the Board not only did not make

but clearly recognized it could not make.

Conclusion

For the foregoing reasons this petition for a writ of

certiorari should be granted.

Respectfully submitted,

THornton H. Brooks,

440 West Market Street,

Greensboro, N.C.

Hveu B. Cox,

Brice M. CuaGett,

Grorce V. ALLEN, JR.,

701 Union Trust Building,

Washington, D.C. 20005.

Attorneys for Darlington

Manufacturing Co.

November 8, 1968