United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 17, 2001 Decided June 29, 2001
No. 00-1388
Pennsylvania Transformer Technology, Inc.,
Petitioner
v.
National Labor Relations Board,
Respondent
United Steelworkers of America,
Intervenor
On Petition for Review and Cross-Application
for Enforcement of an Order of the
National Labor Relations Board
Clare M. Gallagher argued the cause for the petitioner.
Patrick L. Abramowich and Brian Seth Roman were on brief
for the petitioner.
Eric D. Duryea, Attorney, National Labor Relations
Board, argued the cause for the respondent. Leonard R.
Page, General Counsel, John H. Ferguson, Associate General
Counsel, Aileen A. Armstrong, Deputy Associate General
Counsel, and Charles P. Donnelly, Attorney, National Labor
Relations Board, were on brief.
David R. Jury argued the cause for the intervenor. David
I. Goldman entered an appearance.
Before: Henderson, Tatel and Garland, Circuit Judges.
Opinion for the court filed by Circuit Judge Henderson.
Karen LeCraft Henderson, Circuit Judge: The petitioner,
Pennsylvania Transformer Technology, Inc. (PTTI), petitions
the court for review of a decision and order of respondent
National Labor Relations Board (NLRB or Board), reported
at 331 N.L.R.B. No. 151 (Aug. 25, 2000). In that decision, the
Board affirmed and adopted, with modifications, the decision
of the Administrative Law Judge (ALJ), who held that PTTI
violated section 8(a)(1) and 8(a)(5) of the National Labor
Relations Act (NLRA or Act), 29 U.S.C. s 158(a)(1) & (5), by
refusing to recognize the United Steel Workers of America,
AFL-CIO (Union) as the collective-bargaining representative
of PTTI's production and maintenance employees pursuant to
a recognition request made on March 30, 1998. PTTI main-
tains that the Board erred in determining that it was a
successor to Cooper Industries, Inc. (Cooper) and that it had
hired a substantial and representative complement of employ-
ees as of April 1, 1998. The Board cross-applies for enforce-
ment. For the reasons set forth below, we deny PTTI's
petition for review and grant the Board's application for
enforcement.
I. Background
Beginning in 1985, Cooper owned and operated a plant in
Canonsburg, Pennsylvania where it produced core electric
transformers and shell form transformers. Cooper also sold
spare parts to customers. In 1994 Cooper employed between
750 and 880 employees. Its employees were represented by
different locals of the Union in three separate collective-
bargaining units. In April 1994 Cooper announced to the
Union that it planned to close the facility unless a purchaser
could be found by the end of 1994. Although the Union and
its three locals formed a committee to find a buyer, none was
found and on November 22, 1994 the plant closed. Cooper
and the Union entered into a "closing agreement" that pro-
vided for recognition of the Union in the event Cooper
reopened within two years. Cooper retained a skeleton crew
to maintain the facility and to provide spare parts to its utility
customers. Several former union presidents, state and local
officials and members of the local Chamber of Commerce
formed a new search committee to find a buyer. Ultimately
the committee helped to bring about the sale of the plant to
Ravindra Nahl Rahangdale.
In 1995 Rahangdale began negotiations to acquire Cooper's
plant and equipment. On August 9, 1996 he acquired all of
the assets of the Canonsburg plant, which he combined with
another company he owned to form PTTI. PTTI commenced
operations in August 1996 and hired its first employees on
September 1, 1996. In January 1997 the company produced
its first transformers, utilizing about one-half of the plant
space previously used by Cooper and most of the same
equipment. PTTI obtained its employees from Bedway Tem-
porary Services (Bedway), which had also assisted Cooper
with staffing. Applicants for employment were interviewed
by PTTI personnel but hired by Bedway. Employees worked
under the supervision of PTTI as probationary employees for
three to six months, at which time they were eligible to
become permanent employees of PTTI.
In a letter dated March 30, 1998, the Union requested
PTTI to recognize and bargain with it as the exclusive
bargaining representative of the company's employee units.
As of that time, approximately 82 production employees
worked at the plant, 58 of whom, or 72 per cent, were former
Cooper employees. Of the 68 production workers on the
company's payroll, 54 were former Cooper employees. PTTI
refused to recognize the Union, prompting the Union to file
an unfair labor practice charge. The Board subsequently
issued a complaint alleging that, beginning April 1, 1998,
PTTI had unlawfully refused to recognize and bargain with
the Union in violation of sections 8(a)(1) and 8(a)(5) of the
Act. By the time of the hearing, which was held on July 7,
1998, PTTI had hired approximately 100 production and
maintenance employees, a majority of whom were former
Cooper employees.
On September 30, 1998 the ALJ issued his findings of fact
and conclusions of law, finding, in pertinent part, that PTTI
was a successor employer under the Act. The ALJ ordered
PTTI to recognize the Union, to bargain collectively with the
Union and to post an appropriate notice. PTTI filed timely
exceptions to the ALJ's decision. On December 10, 1998
PTTI also filed a motion to reopen the record to introduce
evidence that it had 130 production and maintenance employ-
ees, only 62 of whom were former Cooper employees and that
former members of the Cooper production and maintenance
unit became a minority of PTTI's production workers as of
October 29, 1998. JA 409. The Board's General Counsel
filed limited cross exceptions challenging the ALJ's failure to
find specifically that as of April 1, 1998 PTTI had hired a
substantial and representative complement of employees.
The Board denied PTTI's exceptions and its motion to reopen
the record, adopted the ALJ's findings, rulings and order
with slight modifications and corrections and granted the
General Counsel's cross-exceptions. The Board held that (1)
PTTI was a successor to Cooper, (2) PTTI had hired a
substantial and representative complement of employees as of
April 1, 1998 and (3) PTTI violated the Act by refusing to
recognize and bargain with the Union. PTTI challenges all
three determinations.
II. Analysis
A new employer is a successor to a former employer if
there is "substantial continuity" between the enterprises.
Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27,
43 (1987). "Substantial continuity exists when the new com-
pany has 'acquired substantial assets of its predecessor and
continued, without interruption or substantial change, the
predecessor's business operations.' " CitiSteel USA, Inc. v.
NLRB, 53 F.3d 350, 353 (D.C. Cir. 1995) (quoting Golden
State Bottling Co., Inc. v. NLRB, 414 U.S. 168, 184 (1973)).
"The essential inquiry is whether operations, as they impinge
on union members, remain essentially the same after the
transfer of ownership." International Union of Elec., Radio
& Mach. Workers (IUEW) v. NLRB, 604 F.2d 689, 694 (D.C.
Cir. 1979). The analysis is undertaken with an "emphasis on
the employees' perspective." Fall River, 482 U.S. at 43. The
implied statutory goal is to promote "industrial peace." "If
the employees find themselves in essentially the same jobs
after the employer transition and if their legitimate expecta-
tions in continued representation by their union are thwarted,
their dissatisfaction may lead to labor unrest." Id. at 43-44.
Thus the union certified as the collective bargaining represen-
tative of the predecessor employer's employees presumptively
retains its certification if the majority of employees after the
change of ownership worked for the predecessor employer.
See NLRB v. Burns Int'l Sec. Servs., Inc., 406 U.S. 272, 279
(1972).
We will uphold the Board's "successorship determination
unless it is not supported by substantial evidence or the
Board acted arbitrarily or otherwise erred in applying estab-
lished law to the facts of the case." CitiSteel, 53 F.3d at 354.
To determine whether a "substantial continuity" exists, courts
and the Board consider
whether the business of both employers is essentially the
same; whether the employees of the new company are
doing the same jobs in the same working conditions
under the same supervisors; and whether the new entity
has the same production process, produces the same
products, and basically has the same body of customers.
Fall River, 482 U.S. at 43 (citations omitted). While the
Board does not afford controlling weight to any single factor,
"[t]he ultimate question is this: Will the employees 'under-
standably view their job situations as essentially unaltered?' "
Harter Tomato Prods. Co. v. NLRB, 133 F.3d 934, 937 (D.C.
Cir. 1998) (quotation omitted).
When a new employer is a successor, it has an obligation to
bargain with the certified union so long as "the majority of its
employees were employed by its predecessor." Fall River,
482 U.S. at 41. The Board has adopted the "substantial and
representative complement" rule for fixing the moment that
the determination as to the composition of the successor's
work force is to be made. Id. at 47. In deciding when a
"substantial and representative complement" exists after a
change in employer, the Board examines a number of factors:
It studies "whether the job classifications designated for
the operation were filled or substantially filled and
whether the operation was in normal or substantially
normal production." See Premium Foods, Inc. v.
NLRB, 709 F.2d 623, 628 (9th Cir. 1983). In addition, it
takes into consideration "the size of the complement on
that date and the time expected to elapse before a
substantially larger complement would be at work ... as
well as the relative certainty of the employer's expected
expansion." Id.
Fall River, 482 U.S. at 49; see Sullivan Indus. v. NLRB, 957
F.2d 890, 896 (D.C. Cir. 1992) (separating out five factors set
forth in Fall River).
PTTI complains that the Board erred in determining that it
was a successor to Cooper and in fixing the date of April 1,
1998 as the moment at which it had hired a "substantial and
representative complement" of employees. It alleges numer-
ous factual discrepancies in the Board's findings and charges
that the Board failed to consider evidence that would have led
it to reach a different result. We now examine these claims.
Successorship analysis is "primarily factual in nature and is
based upon the totality of the circumstances of a given
situation." Fall River, 482 U.S. at 43. Accordingly, we
"must examine in detail the facts found by the Administrative
Law Judge (ALJ) and adopted by the Board." CitiSteel, 53
F.3d at 351. Applying the successorship factors enunciated
in Fall River, we conclude that substantial evidence supports
the Board's determination that PTTI was a successor to
Cooper. First, the business of both employers is essentially
the same. In August 1996 PTTI purchased all of Cooper's
facilities and assets used in the manufacture of electrical
transformers and began production using most of the equip-
ment in January 1997. Although PTTI's workforce is much
smaller than Cooper's, it is in the same line of business
(transformer production). Like Cooper, PTTI also supplies
spare parts for its customers. See Pennsylvania Transform-
er Tech., Inc., 331 N.L.R.B. No. 151, slip op. at 3 (filed Aug.
25, 2000).
Second, although working conditions are somewhat differ-
ent at PTTI--significantly fewer job classifications and in-
creased employee responsibility and flexibility--employees
continue to do the same work. They use the same skills and
expertise they used at Cooper and use the same process and
equipment, often under the same supervisors (although there
are fewer supervisors). Significantly, PTTI did not train
workers but instead relied on the experienced workforce left
by Cooper. Id. at 4.
Third, PTTI has a similar production process, produces
similar products and retains many of the same customers.
Although PTTI uses only 45 per cent of Cooper's floor space
and although it sold or removed two ovens, two winding
machines and one or two drill presses used by Cooper, it uses
the same transformer production process to make transform-
ers. Id. at 4. It made few improvements to the physical
plant, which nowhere near approached the $25 million spent
by the alleged successor in CitiSteel (a case on which PTTI
relies) to refurbish and modernize the CitiSteel plant, trans-
forming it from a steel mill to a "minimill." 53 F.3d at 352.
While at the time of the hearing PTTI had not yet begun
production of shell transformers and had produced few large
core transformers (the bread and butter of Cooper's produc-
tion), PTTI affirmed that it planned to aggressively pursue
both product lines. And although PTTI did not acquire
Cooper's customer or vendor lists, a majority of PTTI's
customers are former Cooper patrons. See Pennsylvania
Transformer Tech., Inc., 331 N.L.R.B. No. 151, slip op. at 4.
As the Board found, the company "[had] filled a vacuum in a
market left by Cooper and [was] in the process of rapidly
expanding in the manufacture and sale of the same products."
Id. at 1.
Most of the differences noted by PTTI--differences in size,
facilities, work force, managerial philosophy, customer base--
were rejected by this court in Harter, which decision ex-
plained that "[p]ointing to differences in size, wages, benefits,
training, customer base, managerial philosophy, and supplier
contracts, among others, ... is unresponsive to the question
we face. We ask not whether [the petitioner's] view of the
facts supports its version of what happened, but rather
whether the Board's interpretation of the facts is 'reasonably
defensible.' " 133 F.3d at 938 (quotation & citation omitted).
Although the differences PTTI points to may support its view
on successorship, we conclude that substantial evidence sup-
ports the Board's successorship determination. We arrive at
this conclusion notwithstanding the two-year hiatus between
the time Cooper ceased manufacturing transformers and
PTTI began production.1 A hiatus in operations is "relevant
only when there are other indicia of discontinuity." Fall
River, 482 U.S. at 45; see United Food & Commercial
Workers Int'l Union (UFCW) v. NLRB, 768 F.2d 1463, 1472
(D.C. Cir. 1985). In CitiSteel we found "abundant other
indicia of discontinuity to make the impact of the hiatus on
the workers' expectation of rehire relevant." 53 F.3d at 356.
We do not find such abundant indicia here.2 Unlike in
__________
1 During the hiatus, however, a skeleton crew made the necessary
repairs and supplied parts to former customers. Id. at 4.
2 The facts here are more similar to those in UFCW than those in
CitiSteel. In UFCW, there was an eighteen-month hiatus after
which the successor employer invested $1.3 million in capital im-
provements, purged most of the former upper management, made
changes to the production process, attracted new customers and lost
others, contracted with new suppliers, and down-sized its operation,
using only a portion of the former facility. Nonetheless we held
that the new employer was a successor because "[t]he focus of the
analysis ... is not on the continuity of the business structure in
CitiSteel, there were no "significant changes" to the facility
and, although PTTI's production process and customer bases
have differences, they are not as significant as the total
reformation (e.g., extensive plant renovation, formal job train-
ing, changed production process and new customer base) that
occurred in CitiSteel. Most importantly, unlike the union in
CitiSteel, which closed its union hall and foresaw "dim possi-
bilities at best for the plant's reopening," id. at 355-56, here
the union actively participated in finding a purchaser to
reopen the facility.3 Based on all the evidence, we conclude
that the Board reasonably determined that, despite the
lengthy hiatus, employees had "legitimate expectations in
continued representation by their union." Fall River, 482
U.S. at 43.
Having concluded that substantial evidence supports the
Board's successorship determination, we now review the
Board's application of the "substantial and representative
complement" rule. Substantial evidence also supports the
Board's finding that PTTI had hired a substantial and repre-
sentative complement of employees as of April 1, 1998. PTTI
had hired workers for both of its job classifications--trans-
former technician and apprentice--as of the date of the
recognition demand. See Pennsylvania Transformer Tech.,
__________
general, but rather on the particular operations of the business as
they affect the members of the relevant bargaining unit." UFCW,
768 F.2d at 1470. There, employees used the same skills and worked
under essentially the same conditions. Id. at 1474. We reach the
same conclusion here.
3 PTTI points to a Union press release urging its members to
seek other employment or remain in school while the Union contin-
ued its efforts to find a purchaser for the plant. While the press
release shed light on whether the Union thought the plant would
reopen, it also recognized the Union's efforts to recruit prospective
purchasers, lobby representatives of the Commonwealth of Pennsyl-
vania for assistance, persuade Cooper to sell the facility to a
purchaser that would resume operations, assist PTTI in obtaining
financing and encourage its members to apply for employment
while at the same time it kept the community and news media
informed about its campaign. See JA 24-33, 376-79.
Inc., 331 N.L.R.B. No. 151, slip op. at 2. PTTI had also
begun "substantially normal production" as of April 1, 1998.
It had produced its first transformer in late April 1997 and
between August 1997 and June 1998 PTTI's monthly sales
figures showed signs of relative stability. JA 382. Although
PTTI predicted significant growth between 1999 and 2001,4
the August 1997-June 1998 sales figures indicate that the size
of workforce was sufficiently large to enable the company to
begin normal production of electric transformers. As the
court acknowledged in Fall River in rejecting a "full" comple-
ment standard, the expansionist dreams of many entrepre-
neurs necessitate that the court fix the moment in time when
a business has begun its normal production. 482 U.S. at 51.
Accordingly, we affirm the Board's finding that PTTI had
hired a substantial and representational complement of em-
ployees by April 1, 1998. Because as of that date a majority
of PTTI's employees were former Cooper employees, PTTI
had an obligation to recognize the Union as the collective
bargaining representative of its employees. By not doing so,
it violated section 8(a)(1) and (a)(5) of the NLRA.
III. Conclusion
In sum, substantial evidence supports the Board's determi-
nation that PTTI was a successor to Cooper and that PTTI
had hired a substantial and representational complement of
employees by April 1, 1998. Accordingly, we deny PTTI's
petition for review and grant the Board's cross-petition for
enforcement.
So ordered.
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4 PTTI refers to non-record material throughout the portion of it
brief, see, e.g., Pet. Br. 15 & n.4, 16-18, yet it did not challenge the
Board's denial of its motion to reopen the record. We also deny
PTTI's motion to supplement the record with a Union pamphlet;
assuming arguendo its materiality, PTTI failed to adduce the
evidence before the Board.