Rogan Brothers Sanitation, Inc. (02-CA-040028)

United States Government

National Labor Relations Board

OFFICE OF THE GENERAL COUNSEL

Advice Memorandum

DATE:

May 11, 2017

TO:

Karen P. Fernbach, Regional Director

Region 2

FROM:

Barry J. Kearney, Associate General Counsel

Division of Advice

SUBJECT: Rogan Brothers Sanitation, Inc.

Case 02-CA-040028

177-1667-0100-0000

601-5050-1500-0000

601-7515

625-4412

625-4417-2500-0000

625-4417-2800-0000

750-2533

750-2550

750-2567

750-5025

762-8000

787-6000

This case was submitted for advice as to whether the Region should pursue

proceedings to hold R&S Waste Services, LLC (“R&S”) liable as a Golden State1

successor for the unfair labor practices committed by Rogan Brothers Sanitation, Inc.

(“Rogan Brothers”). We conclude that R&S is a Golden State successor because it was

on notice of the unfair labor practice charge against Rogan Brothers before it

foreclosed on its security interest in Rogan Brothers or, in the alternative, before it

entered into an enforceable security agreement. We further find that R&S can be

held responsible for its predecessor’s violations notwithstanding that it was never

named as a respondent in the unfair labor practice proceeding and an administrative

law judge has already determined that it was not a Burns2 successor.

1 Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973).

2 NLRB v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272 (1972).

that R&S can be

held responsible for its predecessor’s violations notwithstanding that it was never

named as a respondent in the unfair labor practice proceeding and an administrative

law judge has already determined that it was not a Burns2 successor.

1 Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973).

2 NLRB v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272 (1972).

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FACTS

Rogan Brothers was engaged in the collection and disposal of residential and

commercial waste in Westchester County, New York and in New York City. As of

early 2011, Teamsters Local 813 (“Union”) represented a bargaining unit of about 25

to 30 truck drivers and helpers. At that time, the parties’ collective-bargaining

agreement was an unenforceable members-only contract and only eight unit

employees who were Union members were paid in accordance with the contract.

First Unfair Labor Practice Proceeding Against Rogan Brothers (Rogan Bros. I)

In January 2011, Rogan Brothers entered into an informal settlement

agreement to resolve a charge alleging that it discriminatorily discharged three

employees in July 2010 and made various unlawful threats and statements.

Although Rogan Brothers reinstated one discriminatee, it subsequently requested

that the settlement agreement be withdrawn and indicated that it would not comply

with its backpay obligations. The Region revoked its approval of the settlement

agreement and issued complaint pursuant to the default provisions of that

agreement. The Board granted summary judgment in favor of the then-Acting

General Counsel and rejected the Employer’s various defenses, including its request

that the matter be deferred to the grievance-arbitration procedures.3 Despite

subsequent enforcement of that Board order by the Second Circuit Court of Appeals,

the Region has been unable to recover any backpay for the discriminatees and has

exhausted efforts to locate assets to satisfy the liability

n-Acting

General Counsel and rejected the Employer’s various defenses, including its request

that the matter be deferred to the grievance-arbitration procedures.3 Despite

subsequent enforcement of that Board order by the Second Circuit Court of Appeals,

the Region has been unable to recover any backpay for the discriminatees and has

exhausted efforts to locate assets to satisfy the liability.

R&S’s Takeover of Rogan Brothers’ Operations4

By early 2011,5 Rogan Brothers was experiencing significant financial

difficulties and sought assistance from Joseph Spiezio, a so-called “vulture capitalist”

who acquires failing companies by making high interest loans with terms providing

for acquisition of the business and its assets if the borrower defaults.6 Spiezio owns

3 Rogan Bros. Sanitation, Inc. (Rogan Bros. I), 357 NLRB 1655, 1656-57 (2011),

enforced mem., No. 12-236 (2d Cir. Mar. 22, 2012).

4 The facts in this section are largely drawn from the Board’s decision in Rogan Bros.

Sanitation, Inc. (Rogan Bros. II), 362 NLRB No. 61 (Apr. 8, 2015), enforced, 651 F.

App’x 34 (2d Cir. 2016).

5 All dates hereinafter are in 2011, unless otherwise noted.

6 Rogan Bros. II, 362 NLRB No. 61, slip op. at 30-31.

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Spiezio Organization, a management firm that operates several of Spiezio’s

businesses, including Pinnacle Equity Group (“Pinnacle”), a business financing

services company. Spiezio agreed to extend Rogan Brothers an $850,000 loan,

financed through Pinnacle, and Rogan Brothers entered into an agreement whereby

Spiezio would serve as its consultant, including for the purpose of retaining counsel

for labor related matters and negotiating with the Union

ral of Spiezio’s

businesses, including Pinnacle Equity Group (“Pinnacle”), a business financing

services company. Spiezio agreed to extend Rogan Brothers an $850,000 loan,

financed through Pinnacle, and Rogan Brothers entered into an agreement whereby

Spiezio would serve as its consultant, including for the purpose of retaining counsel

for labor related matters and negotiating with the Union.

In a letter dated January 1, Spiezio stated that, due to Rogan Brothers’

financial troubles, he would require a security agreement for the loan that would

cover “all of the commercial sanitation customers, contracts and containers,

compactors, accounts receivable and vehicles.” Spiezio also indicated that he

intended to form his own waste company to assume the Westchester operations in the

event Rogan Brothers defaulted on the loan. The security agreement, executed on

January 3, granted Pinnacle a security interest in the collateral set forth in “Exhibit

A,” however no such document has ever been produced by Rogan Brothers or R&S.7

Rather, as discussed more fully below, there exists a document entitled “Schedule A,”

which is a Uniform Commercial Code (“UCC”) financing statement that lists the

loan’s collateral and is dated several months after the security agreement was signed.

Events that would trigger default under the security agreement included, among

other things, nonpayment of any principal or interest due, as well as false statements,

representations, and warranties. Among the debtor representations and warranties

contained in the security agreement, Rogan Brothers declared that it was not in

default on any other instrument and that it was the owner of the collateral free and

clear of any liens or other encumbrances.

In a letter dated February 1, Spiezio stated that it had “not been easy” to

understand how Pinnacle would secure the loan and also informed Rogan Brothers

that the loan would be capped at $800,000

the security agreement, Rogan Brothers declared that it was not in

default on any other instrument and that it was the owner of the collateral free and

clear of any liens or other encumbrances.

In a letter dated February 1, Spiezio stated that it had “not been easy” to

understand how Pinnacle would secure the loan and also informed Rogan Brothers

that the loan would be capped at $800,000. He indicated that Rogan Brothers would

need to execute UCC documentation, which would itemize the trucks, customer lists,

containers, and account receivables. Spiezio indicated that the UCC filing “will list it

all out clearly.”

Pursuant to Spiezio’s consultant role, he was copied on Rogan Brothers’

February 28 request to withdraw the above-mentioned unfair labor practice charge

that had been informally settled in January. That same day, Spiezio forwarded the

withdrawal request to the Union’s business agent via email.8 Over the course of the

7 In addition to the security agreement, Pinnacle and Rogan Brothers also executed

a promissory note and a demand note on January 3. Neither of these documents

describes the collateral for the loan.

8 See GC Exhibit 93 in Rogan Bros. II.

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next few months, Spiezio repeatedly implored the Union to withdraw the charge and

resolve it through the grievance-arbitration process to no avail.

By letter dated March 2, Spiezio informed Rogan Brothers that “some serious

discoveries have been made that would truly force me to take a position for security

and disposition thereof.” He also indicated that he would apply for a waste hauling

license with the Westchester County Solid Waste Commission, which he did around

this time.

On May 25, Pinnacle filed a UCC financing statement listing the collateral for

the loan

ormed Rogan Brothers that “some serious

discoveries have been made that would truly force me to take a position for security

and disposition thereof.” He also indicated that he would apply for a waste hauling

license with the Westchester County Solid Waste Commission, which he did around

this time.

On May 25, Pinnacle filed a UCC financing statement listing the collateral for

the loan. According to this filing, the collateral included: all commercial routes, all

customer lists, 450 roll off dumpsters, 35 compactors, 800 garbage containers,

computers, office furniture, and 19 vehicles listed by VIN numbers. At some point,

someone handwrote “Schedule A” at the top of this UCC financing statement.

By letter dated June 1, Spiezio informed Rogan Brothers of his discovery of

certain outstanding debts and liens, which constituted a breach of Rogan Brothers’

representation and warranty obligations under the security agreement. Spiezio

asserted that such breach triggered default on the Pinnacle loan. He also informed

Rogan Brothers that he had filed the UCC form in May and would assign the debt

over to R&S by July 31, 2011. On June 30, R&S received its waste hauling license,

and the next day Spiezio declared Pinnacle’s loan to Rogan Brothers in default. That

same day, Spiezio contracted with Rogan Brothers to perform waste removal services

on behalf of R&S.

In late July, R&S made final preparations to implement its takeover of the

Westchester operations. Spiezio and Rogan Brothers discussed how to divide up the

assets and assigned customer accounts between the two entities. On July 26, R&S

sent a letter to Rogan Brothers’ customers indicating that R&S would service their

accounts, effective immediately

e removal services

on behalf of R&S.

In late July, R&S made final preparations to implement its takeover of the

Westchester operations. Spiezio and Rogan Brothers discussed how to divide up the

assets and assigned customer accounts between the two entities. On July 26, R&S

sent a letter to Rogan Brothers’ customers indicating that R&S would service their

accounts, effective immediately. On July 31, Pinnacle, R&S, and Rogan Brothers

executed a Surrender of Collateral in Satisfaction of Debt, which stated that Pinnacle

agreed to accept the collateral “as listed on Schedule A of the Security agreement

dated January 3, 2011 and the UCC filed May 25, 2011.” Around this time, Rogan

Brothers laid off most of its workforce, save a few drivers who performed work under

the subcontracting arrangement with R&S and continued to service their same routes

with the same trucks.

On August 1, R&S commenced operations servicing most of Rogan Brothers’

customers and using a work force consisting mainly of former employees of Rogan

Brothers who were not Union members. R&S paid its drivers and helpers the same

wages they earned at Rogan Brothers, and they reported to work at the same truck

yard as they always had. Spiezio relied on Rogan Brother’s former general manager

to help him run R&S’s day-to-day operations, which included assigning work to Rogan

Case 02-CA-040028

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Brothers’ employees and then discharging them at Spiezio’s direction, and rehiring at

least one driver as an R&S employee.

At the end of September, the Union requested that R&S meet and bargain, but

R&S refused.9 The Union also demanded that Rogan Brothers cease undermining the

collective-bargaining agreement by transferring work to R&S. As a result, Rogan

Brothers decided to stop performing subcontracted work for R&S as of October 4

piezio’s direction, and rehiring at

least one driver as an R&S employee.

At the end of September, the Union requested that R&S meet and bargain, but

R&S refused.9 The Union also demanded that Rogan Brothers cease undermining the

collective-bargaining agreement by transferring work to R&S. As a result, Rogan

Brothers decided to stop performing subcontracted work for R&S as of October 4.

Around this time, three drivers who had been performing R&S work while on Rogan

Brothers’ payroll were pressured to resign their Union membership in order to retain

employment or secure jobs with R&S, and they were discharged or laid off from Rogan

Brothers. One of these drivers was hired by R&S only after agreeing to withdraw

from the Union. Another decided not to apply because he did not wish to resign his

Union membership.10

After the split with R&S, the owner of Rogan Brothers continued to be involved

in the waste business, either through Rogan Brothers or another entity, but on a

reduced scale.

Second Unfair Labor Practice Proceeding Against Rogan Brothers with R&S as Co-

Respondent (Rogan Bros. II)

The Union filed unfair labor practice charges against Rogan Brothers and R&S

challenging, among other things, the October discharges and the imposition of

discriminatory conditions of employment, as well as R&S’s refusal to recognize the

Union. Based on its finding of common ownership and financial control, interrelation

of operations, common control of labor relations, and common management, the Board

determined that Rogan Brothers and R&S operated as a single employer from about

March 1 to October 4, 2011.11 As such, they were jointly liable for the October

discriminatory discharges and refusal to hire. The administrative law judge also

ruled that R&S was not a Burns12 successor because there was no continuity of

9 Shortly thereafter, R&S recognized a different union as the representative of its

drivers

R&S operated as a single employer from about

March 1 to October 4, 2011.11 As such, they were jointly liable for the October

discriminatory discharges and refusal to hire. The administrative law judge also

ruled that R&S was not a Burns12 successor because there was no continuity of

9 Shortly thereafter, R&S recognized a different union as the representative of its

drivers.

10 The third employee chose not to apply for work with R&S based on his

dissatisfactory experience working for Rogan Brothers.

11 Rogan Bros. II, 362 NLRB No. 61, slip op. at 3.

12 Burns, 406 U.S. at 280-81 (holding that a successor employer is obligated to

recognize and bargain with the union representing the predecessor’s bargaining unit

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representation.13 Although a majority of R&S’s drivers and helpers were former

Rogan Brothers employees, only a small minority were actually represented by the

Union and paid wages set forth in the members-only collective-bargaining agreement.

The then-Acting General Counsel did not except to this ruling. The Board adopted

the dismissal of the Section 8(a)(5) allegations on the basis that the collective-

bargaining agreement was unenforceable and did not comment on the judge’s finding

that R&S was not a Burns successor.

ACTION

We conclude that the Region should pursue proceedings to hold R&S jointly

and severally responsible as a Golden State successor for the unremedied liabilities in

Rogan Bros. I because R&S was on notice of the allegations before it foreclosed on its

security interest in Rogan Brothers or, in the alternative, before it entered into an

enforceable security agreement. We further find that neither the failure to name

R&S in the original unfair labor practice proceeding, nor the conclusion that R&S was

not a Burns successor, do not absolve R&S of responsibility for remedying the

violations found in Rogan Bros. I

s before it foreclosed on its

security interest in Rogan Brothers or, in the alternative, before it entered into an

enforceable security agreement. We further find that neither the failure to name

R&S in the original unfair labor practice proceeding, nor the conclusion that R&S was

not a Burns successor, do not absolve R&S of responsibility for remedying the

violations found in Rogan Bros. I.

In Golden State, the Supreme Court approved the Board’s Perma Vinyl Corp.14

holding that an employer that acquires a business in “basically unchanged form”15

with knowledge of the predecessor’s unfair labor practices can be held liable for the

predecessor’s remedial obligations.16 The Court agreed with Perma Vinyl’s rationale

that a purchaser-successor who is on notice is in the best position to redress the

violations without being unduly burdened because it can adjust the purchase price to

reflect its potential liability or arrange other indemnification by the offending seller.17

employees where the bargaining unit remains unchanged and a majority of the

employees hired by the new employer are represented by the union).

13 Rogan Bros. II, 362 NLRB No. 61, slip op. at 31-32.

14 164 NLRB 968 (1967), enforced sub nom. U.S. Pipe & Foundry Co. v. NLRB, 398

F.2d 544 (5th Cir. 1968).

15 Id. at 969.

16 Golden State, 414 U.S. at 171-72 & n.2, 184-85.

17 Id. at 171 n.2, 185.

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To be a Golden State successor, the new employer must first maintain

substantial continuity of the employing enterprise after the transfer of business.18 In

determining whether “substantial continuity” exists, the Board considers factors such

as continuity in business operations, location, work force, jobs and working

conditions, supervisors, equipment and methods of production, product or service, and

customers.19 Second, as stated above, Golden State liability requires evidence that

the successor took over the predecessor’s business with knowledge of the potential

liabil

tial continuity” exists, the Board considers factors such

as continuity in business operations, location, work force, jobs and working

conditions, supervisors, equipment and methods of production, product or service, and

customers.19 Second, as stated above, Golden State liability requires evidence that

the successor took over the predecessor’s business with knowledge of the potential

liability. The burden is on the successor to demonstrate that it lacked actual or

constructive knowledge.20 The Board will draw reasonable inferences from the record

as a whole to support finding notice.21 Knowledge is established if the successor was

aware of the conduct underlying the unfair labor practice; the successor need not be

aware of particular unfair labor practice charges or complaints.22

18 See Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 43 (1987) (focus of

successorship analysis is “on whether the new company has ‘acquired substantial

assets of its predecessor and continued, without interruption or substantial change,

the predecessor’s business operations,’” i.e., “whether there is ‘substantial continuity’

between the enterprises”) (quoting Golden State, 414 U.S. at 184, and Aircraft

Magnesium, 265 NLRB 1344, 1345 (1982), enforced mem., 730 F.2d 767 (9th Cir.

1984)); Commercial Forgings Co., 315 NLRB 162, 166 (1994) (finding continuity of

operations for purpose of Golden State successorship based on conclusion that

continuity in employing enterprise existed under Burns), enforced per curiam sub

nom. Forgings Forever, Inc. v. NLRB, 77 F.3d 482 (6th Cir. 1996).

19 Fall River Dyeing, 482 U.S. at 43 (citing Aircraft Magnesium, 265 NLRB at 1345);

Hot Bagels & Donuts, 244 NLRB 129, 130 (1979), enforced, 622 F.2d 1113 (2d Cir.

1980).

20 S. Bent & Bros., 336 NLRB 788, 790-91 (2001) (“concept of constructive knowledge

incorporates the notion of ‘due diligence’”); Robert G. Andrew, Inc., 300 NLRB 444,

444 (1990).

21 Robert G. Andrew, 300 NLRB at 444

96).

19 Fall River Dyeing, 482 U.S. at 43 (citing Aircraft Magnesium, 265 NLRB at 1345);

Hot Bagels & Donuts, 244 NLRB 129, 130 (1979), enforced, 622 F.2d 1113 (2d Cir.

1980).

20 S. Bent & Bros., 336 NLRB 788, 790-91 (2001) (“concept of constructive knowledge

incorporates the notion of ‘due diligence’”); Robert G. Andrew, Inc., 300 NLRB 444,

444 (1990).

21 Robert G. Andrew, 300 NLRB at 444. See also Wyandanch Engine Rebuilders,

Inc., 328 NLRB 866, 874 (1999) (presumption of knowledge where predecessor’s

president became manager of successor and personally participated in unfair labor

practices); Golden State, 414 U.S. at 173 (evidence supported inference that manager

of predecessor informed his prospective employer of the unfair labor practice

litigation prior to the sale).

22 S. Bent & Bros., 336 NLRB at 790; Robert G. Andrew, 300 NLRB at 444; Signal

Communications, 284 NLRB 423, 429 (1987) (company that took over predecessor’s

business operation before NLRB charge was filed against predecessor, but with

knowledge of predecessor’s unlawful conduct, was Golden State successor).

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Although Golden State and Perma Vinyl involved sales of businesses, the Board

has imposed remedial liability on employers where no purchase of a business or its

assets took place.23 The Board has merely required that there be “some pecuniary or

security interest, or other ‘clearly identifiable and connecting interest’ between the

predecessor and the successor.”24 Where there is such a connection, the Board

examines the nature of that relationship to determine if the successor could have

effectively insulated itself from liability for the predecessor’s unfair labor practices.25

Generally, if the successor lacked the opportunity to shield itself, the Board will not

find Golden State successorship.26

23 See Hot Bagels & Donuts, 244 NLRB at 131 (successor was former predecessor

who returned as lessee after bank foreclosure); Ponn Distributing, Inc., 232 NLRB

e

effectively insulated itself from liability for the predecessor’s unfair labor practices.25

Generally, if the successor lacked the opportunity to shield itself, the Board will not

find Golden State successorship.26

23 See Hot Bagels & Donuts, 244 NLRB at 131 (successor was former predecessor

who returned as lessee after bank foreclosure); Ponn Distributing, Inc., 232 NLRB

312, 313-15 (1977) (successor cancelled its security interest and retook

distributorship), enforcement denied on other grounds sub nom. NLRB v. Cott Corp.,

578 F.2d 892 (1st Cir. 1978); Martin J. Barry Co., 278 NLRB 393, 394 n.4 (1986)

(reduced management fee effectively constituted payment for business); Evans

Plumbing Co., 278 NLRB 67, 67-68 (1986) (successor formed using capital obtained

from creditor’s foreclosure on security interest in predecessor’s assets is Golden State

successor if not alter ego), enforced in relevant part sub nom. Evans Servs., Inc. v.

NLRB, 810 F.2d 1089 (11th Cir. 1987).

24 S. Bent & Bros., 336 NLRB at 792 (quoting Glebe Electric, 307 NLRB 883, 885-86

& n.27 (1992) (subcontractor who completed final phase of electrical project for

general contractor after prior subcontractor decided to go out of business not a

Golden State successor because there was “total absence of any business

relationship” between the two subcontractors)).

25 Id. (Golden State successorship found notwithstanding that banks arranging sale

were purportedly unwilling to negotiate where buyer never requested a lower price

and, in fact, purchased the assets at a discount in excess of the predecessor’s

liabilities)

f business not a

Golden State successor because there was “total absence of any business

relationship” between the two subcontractors)).

25 Id. (Golden State successorship found notwithstanding that banks arranging sale

were purportedly unwilling to negotiate where buyer never requested a lower price

and, in fact, purchased the assets at a discount in excess of the predecessor’s

liabilities). See also Lebanite Corp., 346 NLRB 748, 749-50 (2006) (no Golden State

successorship where lease of operations was terminable on 30 days’ notice and

indemnification clause impractical because predecessor was financially precarious);

Hill Industries, 320 NLRB 1116, 1116-17 (1996) (no Golden State successorship

where purchase of materials was small compared to potential unfair labor practice

liabilities).

26 S. Bent & Bros., 336 NLRB at 792. But see Eldorado, Inc., 335 NLRB 952, 952 n.1

(2001) (unnecessary to find successor had opportunity to indemnify itself or

negotiate a price reduction where successor’s president was on both sides of

transactions between the two companies; president of successor co-owned

predecessor company and retained stock and assets as collateral after sale).

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I.

R&S Knew of Charge in Rogan Bros. I Prior to Foreclosure

This case turns on whether R&S had the requisite knowledge under Golden

State, since the Board’s factual findings in Rogan Bros. II amply demonstrate that

R&S continued Rogan Brothers’ operations in essentially unchanged form.27 We

conclude that R&S had timely notice of the charge in Rogan Bros. I such that

imposition of Golden State liability will not produce an unfair hardship.

In Ponn Distributing,28 the successor employer, essentially a franchisor,

cancelled its predecessor’s distributorship, foreclosed on its security interest, and

continued to operate the business essentially without change

changed form.27 We

conclude that R&S had timely notice of the charge in Rogan Bros. I such that

imposition of Golden State liability will not produce an unfair hardship.

In Ponn Distributing,28 the successor employer, essentially a franchisor,

cancelled its predecessor’s distributorship, foreclosed on its security interest, and

continued to operate the business essentially without change. It was undisputed that

the successor was aware of the unfair labor practices “at the time of its foreclosure on

its security interest.”29 The Board rejected the defense that the successor had no

opportunity to insulate itself from the predecessor’s liabilities since there was no sale

of assets.30 It held that a purchase was not a prerequisite for Golden State

successorship, and it found the security interest to be sufficiently analogous to a

purchase.31 Moreover, the Board found no undue hardship since the successor, as a

franchisor, maintained some control over the predecessor’s manner of operation and it

assumed operations in order to safeguard its own investment; thus, it was not a

“totally disinterested party” when it foreclosed.32

Likewise, in Evans Plumbing,33 the Board found Golden State successorship

following foreclosure on a security interest. There, an official of the predecessor

company made a loan to the company that was secured by a recorded security

27 In this regard, there was no hiatus in operations and R&S’s work force consisted

mostly of former Rogan Brothers employees. Its drivers and helpers earned the

same pay, performed the same work, reported to the same yard, used the same

trucks, worked under the same manager, and serviced mainly the same customers.

28 232 NLRB 312.

29 Id. at 314.

30 Id.

31 Id. at 314-15.

32 Id.

33 278 NLRB 67.

his regard, there was no hiatus in operations and R&S’s work force consisted

mostly of former Rogan Brothers employees. Its drivers and helpers earned the

same pay, performed the same work, reported to the same yard, used the same

trucks, worked under the same manager, and serviced mainly the same customers.

28 232 NLRB 312.

29 Id. at 314.

30 Id.

31 Id. at 314-15.

32 Id.

33 278 NLRB 67.

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agreement.34 After the official foreclosed her security interest, she purchased the

company’s assets at the foreclosure sale and used them to capitalize a new

company.35 The Board adopted the administrative law judge’s conclusion that the

newly-formed company was an alter ego or, alternatively, a Golden State successor.36

On appeal, the Eleventh Circuit enforced the successorship determination on the

Board’s alternative ground.37 Moreover, it rejected the successor’s claim that it

lacked notice under Golden State because the unfair labor practices occurred well

after the secured loan was made to the predecessor company.38 Instead, the Court

determined that notice should be judged at the time the successor company was

formed, since that was when the official could choose how to apply her acquired assets

or the sale’s proceeds.39 At that point, the official could have decided not to continue

the business in basically unchanged form, or she could have taken the cost of the

potential unfair labor practice liability into account when buying the assets at the

foreclosure sale.40

Here, R&S can be held responsible for Rogan Brothers’ outstanding unfair labor

practice liabilities because R&S was on notice of the NLRB charge well before it

foreclosed on the loan and formally took over business operations in July and August.

In his capacity as consultant, Spiezio was well aware of the charge in Rogan Bros. I

during the months leading up to the foreclosure

e sale.40

Here, R&S can be held responsible for Rogan Brothers’ outstanding unfair labor

practice liabilities because R&S was on notice of the NLRB charge well before it

foreclosed on the loan and formally took over business operations in July and August.

In his capacity as consultant, Spiezio was well aware of the charge in Rogan Bros. I

during the months leading up to the foreclosure. The earliest proof of his knowledge

is from February, when Spiezio forwarded to the Union the letter Rogan Brothers

sent to the Region requesting withdrawal from the settlement agreement. Although

34 Id.

35 Id. at 68.

36 Id.

37 Evans Services, 810 F.2d 1089, 1091 n.2.

38 Id. at 1093-94.

39 Id. at 1093.

40 Id. at 1093 n.5. See also Darta, Inc., 36-CA-5578, Advice Memorandum dated Apr.

21, 1988, at 2-3 & n.8 (concluding that regional office should pursue compliance from

successor entity, presuming it had knowledge of predecessor’s unfair labor practices

at the time it foreclosed on its sales contracts, because it could have avoided Golden

State liability by either permitting the predecessor to pay off its debt rather than

foreclosing on its security interest or liquidating the predecessor’s assets after

foreclosure).

Case 02-CA-040028

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there was no sales price to adjust or indemnity clause to negotiate at the time of

foreclosure, R&S could have avoided Golden State liability by liquidating the

foreclosed assets rather than continuing the business in basically unchanged form.

Moreover, as in Ponn, R&S was not a totally disinterested party when it foreclosed,

since Spiezio essentially managed Rogan Brothers’ operations in the months prior to

the foreclosure and R&S assumed those operations in order to protect Spiezio’s

investment. Thus, imposing liability on R&S does not work an unfair hardship,

especially considering that it reaped the benefits of the unfair labor practices by

taking over a business with fewer Union members earning contract wages.41

II

ezio essentially managed Rogan Brothers’ operations in the months prior to

the foreclosure and R&S assumed those operations in order to protect Spiezio’s

investment. Thus, imposing liability on R&S does not work an unfair hardship,

especially considering that it reaped the benefits of the unfair labor practices by

taking over a business with fewer Union members earning contract wages.41

II.

Alternatively, R&S Knew of Charge in Rogan Bros. I Prior to

Formation of an Enforceable Security Agreement

Even assuming that notice must be established such that a creditor-successor

can adjust its security agreement to account for potential liabilities in the same way a

purchaser-successor adjusts a sales contract, R&S should still be treated as a Golden

State successor. Under New York law, security agreements of the type involved in

this case must describe and reasonably identify the collateral in order to be

enforceable.42 Here, Spiezio failed to adequately identify the collateral for the loan

until May, when he filed the UCC financing statement, and there is no evidence that

Spiezio properly identified the collateral so as to establish an enforceable security

interest prior to that time.43 Indeed, Spiezio effectively acknowledged that the UCC

filing would serve as the collateral description in his February 1 letter.

Furthermore, the security agreement executed in January granted Pinnacle a

security interest in the collateral listed in “Exhibit A,” but no such document

apparently exists. Rather, “Schedule A” is handwritten on the May UCC filing, and

the July Surrender of Collateral in Satisfaction of Debt also referred to “Schedule A”

and the May UCC filing in describing the collateral. Thus, the evidence plainly

establishes that May is the earliest point at which Spiezio might have held an

enforceable security interest in Rogan Brothers’ assets.44

41 See Golden State, 414 U.S

is handwritten on the May UCC filing, and

the July Surrender of Collateral in Satisfaction of Debt also referred to “Schedule A”

and the May UCC filing in describing the collateral. Thus, the evidence plainly

establishes that May is the earliest point at which Spiezio might have held an

enforceable security interest in Rogan Brothers’ assets.44

41 See Golden State, 414 U.S. at 171 n.2, 184 (“[T]he successor may benefit from the

unfair labor practices due to a continuing deterrent effect on union activities.”).

42 N.Y. U.C.C. LAW §§ 9-108(a), 9-203(b)(3)(A) (McKinney, Westlaw through 2017).

43 Normally, a UCC financing statement merely serves to “perfect” a security

interest; it is not necessary to create an enforceable security interest. See N.Y.

U.C.C. LAW § 9-310(a).

44 Whether a security agreement that was executed months before the collateral

description was formalized is, in fact, enforceable under New York law is irrelevant

Case 02-CA-040028

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Here there was ample opportunity to adjust the loan terms to account for the

unfair labor practice liability stemming from Rogan Bros. I since R&S had notice of

that liability prior to May, as described above. Thus, Spiezio could have negotiated

with Rogan Brothers to increase the collateral necessary for the loan. Even assuming

Rogan Brothers had no more assets that could be used as collateral, e.g., because

other lenders may have had liens on the assets, Spiezio could have protected R&S by

decreasing the amount of the loan while maintaining the same collateral. Indeed,

Spiezio was well aware of this possible approach for reducing his liability, given that

he capped the loan at $800,000 in February. Thus, even though an indemnification

clause would have probably been futile given Rogan Brothers’ precarious financial

position,45 R&S had other ways to effectively insulate itself from the outstanding

unfair labor practice liabilities but failed to do so

ndeed,

Spiezio was well aware of this possible approach for reducing his liability, given that

he capped the loan at $800,000 in February. Thus, even though an indemnification

clause would have probably been futile given Rogan Brothers’ precarious financial

position,45 R&S had other ways to effectively insulate itself from the outstanding

unfair labor practice liabilities but failed to do so. Accordingly, Golden State liability

would impose no undue hardship on R&S.

III. R&S’s Defenses Lack Merit

In relevant part, R&S argues that it should not be held liable as a Golden State

successor based on the doctrines of laches, res judicata, and collateral estoppel. In

addition, it argues that Golden State is inapplicable because Rogan Brothers

continued to operate after the foreclosure and Rogan Brothers has the resources to

remedy the backpay order. As explained below, none of these defenses absolve R&S

of liability for remedying the unfair labor practices found in Rogan Bros. I.

R&S’s contention that it should not be held accountable for Rogan Brothers’

unfair labor practices because the Region waited six years before prosecuting R&S is

without merit. The General Counsel may choose to litigate successor liability at the

compliance stage rather than naming the successor as a respondent in the underlying

unfair labor practice proceeding.46 Here, Rogan Bros. I was fully briefed to the Board

for purposes of determining R&S’s Golden State liability and beyond the scope of this

memorandum.

45 See Lebanite, 346 NLRB at 750.

46 2 Sisters Food Group, Inc., 361 NLRB No. 152, slip op. at 1 (Dec. 16, 2014) (finding

no deprivation of due process rights notwithstanding the region’s failure to include

the Golden State successor in the underlying unfair labor practice proceeding). See

also Golden State, 414 U.S. at 181 (successor had no due process complaint where it

was named in the compliance specification).

at 750.

46 2 Sisters Food Group, Inc., 361 NLRB No. 152, slip op. at 1 (Dec. 16, 2014) (finding

no deprivation of due process rights notwithstanding the region’s failure to include

the Golden State successor in the underlying unfair labor practice proceeding). See

also Golden State, 414 U.S. at 181 (successor had no due process complaint where it

was named in the compliance specification).

Case 02-CA-040028

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prior to R&S’s takeover of Rogan Brothers’ operations.47 Unfortunately, the Region’s

efforts to secure Rogan Brothers’ compliance with the resulting Board order have

been unsuccessful. Thus, the Region reasonably seeks to hold R&S accountable for

the outstanding unfair labor practice liabilities, and the delay in naming R&S does

not preclude such prosecution under the doctrine of laches. Laches generally does not

apply to the Board as a federal government agency enforcing a public right.48 And

even assuming it did apply, R&S cannot show that it has been prejudiced by the

delay.49 In Rogan Bros. II, R&S extensively litigated the circumstances surrounding

its takeover of Rogan Brothers. Therefore it has no claim that its Golden State

defense would suffer from spoliation of evidence or otherwise.

Likewise, the administrative law judge’s conclusion in Rogan Bros. II that R&S

was not a Burns successor does not bar litigation of R&S’s status as a Golden State

successor, even assuming the Board adopted that conclusion. Burns and Golden State

successorship are separate legal determinations whose analytical factors are not

congruent. They share only one element: continuity of operations.50 Here, the judge’s

ruling on R&S’s status as a Burns successor did not turn on this element. Rather, the

judge found no Burns successorship solely due to the fact that a minority of R&S’s

work force consisted of Union-represented employees

tate

successorship are separate legal determinations whose analytical factors are not

congruent. They share only one element: continuity of operations.50 Here, the judge’s

ruling on R&S’s status as a Burns successor did not turn on this element. Rather, the

judge found no Burns successorship solely due to the fact that a minority of R&S’s

work force consisted of Union-represented employees. Since R&S’s status as a Golden

State successor was not “actually litigated,” nor was there an adverse determination

concerning the continuity of operations after R&S’s takeover, collateral estoppel does

not apply here.51

47 In any event, prosecutorial decisions by regional directors and the General

Counsel are not adjudications and have no preclusive effect on future actions.

O’Dovero v. NLRB, 193 F.3d 532, 536 (D.C. Cir. 1999). Thus, the failure to involve

R&S in the unfair labor practice proceeding would not prevent litigation against it at

a later time.

48 See Roofing, Metal & Heating Associates, 304 NLRB 155, 160 (1991), enforced

mem. sub nom. NLRB v. Roofers Local 30, 975 F.2d 1551 (3d Cir. 1992).

49 See United Electrical Contractors Assn., 347 NLRB 1, 2-3 (2006) (complaint not

barred by laches because General Counsel’s inordinate delay did not cause spoliation

of evidence or otherwise hamper respondent’s defense).

50 See, e.g., Commercial Forgings, 315 NLRB at 165-66.

51 See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979) (“Under the

doctrine of collateral estoppel . . . judgment in the prior suit precludes relitigation of

issues actually litigated and necessary to the outcome of the first action.”).