United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 19, 2006 Decided March 16, 2007
No. 05-1416
CARPENTERS AND MILLWRIGHTS, LOCAL UNION 2471,
AFFILIATED WITH UNITED BROTHERHOOD OF CARPENTERS
AND JOINERS OF AMERICA,
PETITIONER
v.
NATIONAL LABOR RELATIONS BOARD,
RESPONDENT
A. J. MECHANICAL, INC., ET AL.,
INTERVENORS
Consolidated with
06-1098
On Petitions for Review of an Order of the
National Labor Relations Board
Osnat K. Rind argued the cause and filed the briefs for
petitioner.
2
Ruth E. Burdick, Attorney, National Labor Relations Board,
argued the cause for respondent. With her on the brief were
Ronald E. Meisburg, General Counsel, John H. Ferguson,
Associate General Counsel, Aileen A. Armstrong, Deputy
Associate General Counsel, and Julie B. Broido, Senior
Attorney.
William H. Andrews was on the brief for intervenors A.J.
Mechanical, Inc., et al.
Before: RANDOLPH, GARLAND, and GRIFFITH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GARLAND.
GARLAND, Circuit Judge: The National Labor Relations
Board found that a company and its two owners committed a
series of flagrant violations of the National Labor Relations Act.
Although the Board ordered the company to provide backpay to
the victims of its unfair labor practices, by that time the co-
owners had distributed all of the company’s funds to themselves.
In a subsequent compliance proceeding, an administrative law
judge pierced the corporate veil and imposed personal liability
on one of the owners. The Board, however, reversed. Because
the Board failed to cite evidence sufficient to support the
findings upon which it based its refusal to pierce the veil, and
further failed to explain why it disregarded significant contrary
evidence, we set aside that aspect of the Board’s order.
I
A.J. Mechanical, Inc. was a Florida company that
specialized in refurbishing gas turbines. William A. Greene and
James Sanders founded the company and were its sole
stockholders and directors. Throughout their stewardship of
3
A.J. Mechanical, Greene and Sanders commingled their personal
funds and assets with those of the company, disregarded
corporate formalities and procedures, failed to maintain separate
corporate records, and kept the company in an undercapitalized
state.1
In late 1998, petitioner Carpenters and Millwrights, Local
Union 2471 launched a campaign to organize the employees of
A.J. Mechanical. The company actively opposed the union’s
organizing efforts through a variety of tactics, many of which
were clear violations of the National Labor Relations Act
(NLRA), 29 U.S.C. § 151 et seq. As the National Labor
Relations Board (NLRB) subsequently found, those violations
included: barring employees from speaking about the union;
interrogating employees about their membership in and support
for the union; promising benefits for ceasing pro-union activity
and threatening reprisals for continuing such activity;
threatening employees with plant closure, loss of jobs, loss of
benefits, and discharge because of their activities on behalf of
the union; and laying off or firing employees, and refusing to
consider job applicants, because of their support for the union.
The company’s unlawful conduct began in October 1998 and
continued through May 1999. Much of it took place between
December 1998 and early February 1999, and much of it
involved Greene and Sanders personally.
1
The facts set forth in Part I of this opinion are taken from the
Board’s initial and supplemental decisions, and from the
administrative law judge’s supplemental decision. See Supplemental
Decision and Order, A.J. Mechanical, Inc., 345 NLRB No. 22, at 1-5
(Aug. 26, 2005) (Board); Decision and Order, A.J. Mechanical, Inc.,
330 NLRB No. 178 (Apr. 14, 2000) (Board); Supplemental Decision,
A.J. Mechanical, Inc., 345 NLRB No. 22, at 6-12 (Jan. 23, 2002)
(ALJ). None of these facts were disputed in the Board’s supplemental
decision and order, which is on review here.
4
In the midst of their battle against the union, Greene and
Sanders wrote themselves a series of checks on the company’s
bank account. In the first distribution, made on February 16,
1999, each received $225,000. Over the next ten months, both
Greene and Sanders received nine additional distributions. The
total paid to each man exceeded $1.8 million.
On May 24, 1999, the union filed the first of a series of
charges with the NLRB, alleging that A.J. Mechanical had
committed unfair labor practices in violation of the NLRA. In
July 1999, the union prevailed in a representation election and
was certified as the representative of a unit of A.J. Mechanical
employees. Later that month, the NLRB’s General Counsel
issued the first of two complaints against the company.
On or about September 11, 1999, A.J. Mechanical ceased
all operations. Immediately thereafter, it auctioned off all of its
property and equipment. Greene and Sanders executed a
resolution to liquidate the company on December 2, 1999, and
filed articles of dissolution with Florida’s Secretary of State on
June 16, 2000.
Meanwhile, A.J. Mechanical failed to answer the General
Counsel’s unfair labor practice complaints. After several
months of silence, the General Counsel moved for summary
judgment, and the NLRB issued a notice to show cause why that
motion should not be granted. The company again failed to
respond. On April 14, 2000, the Board found that A.J.
Mechanical had engaged in the above-described unfair labor
practices, and that Greene and Sanders were personally involved
in many of them. The Board ordered the company to provide
backpay to its employees to make them whole for the losses they
sustained as a result of the company’s unlawful conduct. The
United States Court of Appeals for the Eleventh Circuit enforced
the Board’s order in full. See Decision and Order, A.J.
5
Mechanical, Inc., 330 NLRB No. 178 (Apr. 14, 2000), enforced,
No. 00-14628I (11th Cir. Oct. 23, 2000) (unpublished
judgment).
Thereafter, disputes arose over the amount of backpay due
under the Board’s order and whether Greene, Sanders, and their
wives (who shared equally in the distributions) were personally
liable for the company’s obligations. In February 2002, Sanders
and his wife agreed to pay $112,500 to settle any backpay
claims against them. The Greenes did not settle. In October, the
Board’s Regional Director initiated a compliance proceeding to
determine two issues: (1) “the amount of backpay due
employees who suffered financial consequences as a result of
the unfair labor practices of the now-defunct” company; and (2)
whether Greene and his wife “should be held personally liable
for such backpay.” Supplemental Decision and Order, A.J.
Mechanical, Inc., 345 NLRB No. 22, at 1 (Aug. 26, 2005).
Although the company failed to answer the compliance
specification, the Greenes appeared personally and testified at
the compliance hearing.
Following the hearing, the administrative law judge (ALJ)
issued a supplemental decision, in which he determined that the
total amount of backpay owed was $462,755 and that Greene
and his wife were personally liable for repayment.
Supplemental Decision, A.J. Mechanical, Inc., 345 NLRB No.
22, at 6-12 (Jan. 23, 2002). In deciding to “pierce the corporate
veil,” the ALJ applied the test adopted by the Board in White
Oak Coal Co.:
[T]he corporate veil may be pierced when: (1) the
shareholder and corporation have failed to maintain
separate identities, and (2) adherence to the corporate
structure would sanction a fraud, promote injustice, or
lead to an evasion of legal obligations.
6
318 NLRB 732, 732 (1995). After reviewing Greene’s “misuse
of the corporate assets and form” and the large cash distributions
that he received in 1999, the ALJ found that both prongs of the
White Oak test were satisfied. 345 NLRB No. 22, at 10-11. The
ALJ concluded: “the Greenes along with James Sanders,
engaged in blurring the separate corporate entity of A.J.
Mechanical, Inc.[,] and their misuse of the corporate assets and
form[] is unfair, unjust, and has resulted in an evasion of A.J.
Mechanical’s remedial and backpay obligations for unfair labor
practices that . . . Greene and others[] committed.” Id. at 11. In
reaching this decision, the ALJ determined that Greene “was not
credible,” and stated that he did “not credit any of [Greene’s]
testimony, except that which other, credited, evidence
corroborates or that which constitutes an admission against
interest.” Id. at 9.
On appeal, the Board’s supplemental decision and order
affirmed the backpay judgment against the company, but
reversed the ALJ’s decision to hold the Greenes personally
liable. Supplemental Decision and Order, A.J. Mechanical, Inc.,
345 NLRB No. 22, at 1-5 (Aug. 26, 2005); see Revised
Supplemental Order, A.J. Mechanical, Inc. (NLRB Mar. 17,
2006) (unpublished). The Board did not question the ALJ’s
credibility determinations. 345 NLRB No. 22, at 1 n.1. And it
accepted “arguendo the judge’s conclusion . . . that the separate
legal identity of Respondent A.J. Mechanical, Inc. had not been
maintained under the first prong of the White Oak Coal
standard.” Id. at 3. Nonetheless, the Board concluded that the
second prong of the White Oak test was not satisfied,
disagreeing with the ALJ that “adhering to the corporate form
would permit a fraud, promote injustice, or lead to an evasion of
legal obligations.” Id. (internal quotation marks omitted).
Specifically, the Board held that “the timing of the
corporate distributions does not support the judge’s conclusion
7
that adherence to the corporate form would lead to the evasion
of legal obligations.” Id. The Board noted that “[t]he unfair
labor practice charges were filed in May 1999 and the complaint
was issued in July 1999,” and found that “it was not until these
dates that . . . Greene was aware that the [company’s] actions
were being challenged and that monetary liability could result.”
Id. It also found that “the process of closing down (and the
attendant distribution of assets to shareholders) began before
those dates.” Id. Hence, in the Board’s view, the distributions
did not constitute an evasion of the company’s legal obligations.
This matter is before us on the Board’s application for
enforcement of its August 26, 2005 supplemental decision and
order against A.J. Mechanical, and the union’s petition for
review of the veil-piercing component of that decision and
order. We will not waste ink on the Board’s application for
enforcement against the company. A.J. Mechanical did not
contest the issue, and it is our longstanding rule that “[t]he
Board is entitled to summary enforcement of the uncontested
portions of its order[s].” Flying Food Group, Inc. v. NLRB, 471
F.3d 178, 181 (D.C. Cir. 2006). We therefore turn to the only
contested issue: the Board’s refusal to pierce the corporate veil.
II
“We must uphold the judgment of the Board unless, upon
reviewing the record as a whole, we conclude that the Board’s
findings are not supported by substantial evidence, or that the
Board acted arbitrarily or otherwise erred in applying
established law to the facts of the case.” Mohave Elec. Coop.,
Inc. v. NLRB, 206 F.3d 1183, 1188 (D.C. Cir. 2000) (internal
quotation marks and citation omitted); see 29 U.S.C. § 160(e),
(f). As the Supreme Court held in Universal Camera Corp. v
NLRB, “[t]he substantiality of evidence must take into account
whatever in the record fairly detracts from its weight.” 340 U.S.
8
474, 488 (1951). Thus, where the record evidence is in conflict,
the substantial evidence test requires the Board “to take account
of contradictory evidence,” Lakeland Bus Lines, Inc. v. NLRB,
347 F.3d 955, 962 (D.C. Cir. 2003), and to explain why it
rejected evidence that is contrary to its finding, see Int’l Union,
UAW v. Pendergrass, 878 F.2d 389, 392 (D.C. Cir. 1989)
(noting that, to withstand substantial evidence review, an agency
must “present its reasons for rejecting significant contrary
evidence” (internal quotation omitted)). Similarly, to avoid a
determination that it has acted arbitrarily, “the Board, like every
other administrative agency, must provide a logical explanation
for what it has done.” Lee Lumber & Bldg. Material Corp. v.
NLRB, 117 F.3d 1454, 1460 (D.C. Cir. 1997) (citing Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983)).
Our review of the Board’s refusal to pierce A.J.
Mechanical’s corporate veil focuses on two findings that
undergird the Board’s conclusion that declining to pierce the
veil would not “sanction a fraud, promote injustice, or lead to an
evasion of legal obligations.” 345 NLRB No. 22, at 2 (internal
quotation omitted). Those two findings are: (1) that “it was not
until” the union filed unfair labor practice charges on May 24,
1999, that “Greene was aware that . . . monetary liability could
result” from the company’s conduct; and (2) that “the process of
closing down (and the attendant distribution of assets to
shareholders) began before” that date. Id. at 3. The Board’s
conclusion that Greene did not “strip[] the Company of its assets
in order to defeat a Board Order,” id. at 4, and hence that
recognizing the corporate form would not permit an evasion of
the corporation’s legal obligations, depends upon the validity of
those findings.
9
A
We begin with the Board’s finding that Greene was
unaware that A.J. Mechanical’s conduct could result in
monetary liability until the union filed its first unfair labor
practice charges in May 1999. Neither the Board’s opinion nor
its appellate brief cited any evidence supporting that finding.
The alternative view, urged by the union, is that Greene knew
that the company could be held liable as soon as he and his
agents engaged in patently illegal conduct -- well before the first
distributions of the company’s cash.
Surely it is reasonable to infer that a thief who robs a bank
in broad daylight knows well before the date of his indictment
that he may one day face criminal liability. The corporate
conduct at issue here was the labor-law equivalent of a daylight
robbery. It was neither subtle nor close to the line of legality.
The Board found that the company had, among other things:
prohibited employees from speaking about or soliciting for the
union; interrogated employees about their and other employees’
membership in and support for the union; promised employees
benefits if they ceased their activities on behalf of the union; and
threatened employees with unspecified reprisals, plant closure,
loss of jobs, loss of benefits, and discharge because of their
activities on behalf of the union. 330 NLRB No. 178, at 1-2.
The Board also specifically found that the company fired two
employees, laid off and refused to recall or rehire a dozen
employees, and refused to consider hiring twenty-three
employees, all “because the named employees formed and
assisted the Union and engaged in concerted activities, and to
discourage employees from engaging in these activities.” Id. at
3. Much of the unlawful conduct took place between December
1998 and early February 1999, see id. at 1-3, before the first
distribution of the company’s cash on February 16, 1999.
10
Moreover, the NLRB found that Greene had personally
engaged in many of the company’s unlawful acts, again well
before he began writing company checks to himself. On two
occasions in December 1998 and one in early January 1999,
Greene “threatened [company] employees with plant closure and
loss of jobs because of their activities on behalf of the Union.”
Id. at 2. On two occasions in December and two in January, he
told “employees that [the company] was not hiring any more
employees who supported the Union.” Id. On two days in
December and one in January, he “threatened [company]
employees that he would shut down the job and reopen using
employees who did not support the Union.” Id. At the end of
December and in mid-January, Greene “threatened that [the
company] would move its business if the employees did not
cease their activities on behalf of the Union.” Id. On January
16, he “discarded numerous application[s] because [the]
applicants indicated support for the Union.” Id. And on five
occasions between December 18 and February 1, Greene told
“employees that it would be futile for them to select the Union
as their bargaining representative.” Id. at 1.
It is hard to believe that anyone in Greene’s position could
have been unaware that the conduct just described could result
in monetary liability for A.J. Mechanical. In any event, the
Board did not explain why it reached the contrary conclusion.
At oral argument, Board counsel insisted that there are no cases
in which unfair labor practices alone were found to put a
company or its owner on notice of potential liability. Nor,
however, are there any cases holding that such practices are
insufficient to do so. The Fullerton case cited by counsel at oral
argument is plainly inapposite. See NLRB v. Fullerton Transfer
& Storage Ltd., Inc., 910 F.2d 331 (6th Cir. 1990). Although the
unfair labor practices at issue there did take place before the
company began winding up its operations, the court declined to
pierce the corporate veil because all of the company’s assets
11
were used to pay its bona fide creditors; none were distributed
to its owners. See id. at 334-35, 341-42.
The NLRB’s Regional Director, at least, thought that a
notice theory based on the owners’ unlawful conduct could be
applied in this case. His compliance specification stated:
Since about January 1999, Respondent[s] Greene and
James Sanders, in their respective capacities as
shareholders, directors, officers and supervisors of
[A.J. Mechanical], were on notice of the potential
liability of [the company] for its unfair labor practices,
as a direct result of their personal involvement,
management and commission of [A.J. Mechanical’s]
unfair labor practices as found in the Board’s Order.
Joint Appendix (J.A.) 235a-b (emphasis added).2 Perhaps the
Board had some reason for concluding that the conduct at issue
here was insufficient to put Greene on notice of the company’s
potential liability. Or perhaps the Board concluded that, as a
matter of law, even blatantly unlawful conduct is insufficient to
do so. But if it reached either conclusion, the Board did not say
so, let alone provide a logical explanation for such a
counterintuitive result. Without such an explanation, its
decision cannot stand.
2
The specification further alleged that Greene and Sanders were
“additionally on notice of the potential liability” as of the dates when
the union first filed unfair labor practice charges and when the Board
issued its first complaint. J.A. 235b. At oral argument, Board counsel
stated that, the “General Counsel . . . typically “leave[s] in [its]
compliance allegations . . . three variations of points of notice --
[unfair labor practice] conduct, the charge, the complaint -- . . .
because there [are] Board decisions that have found [notice] at various
different points.” Oral Arg. Recording 34:17-34:39.
12
B
We turn next to the Board’s determination that “the process
of closing down (and the attendant distribution of assets to
shareholders) began before” the union filed unfair labor practice
charges on May 24, 1999. 345 NLRB No. 22, at 3.
As the use of the word “attendant” suggests, the principal
justification for the Board’s determination that the decision to
close the company was made before May 1999 is its assumption
that the decision preceded the distributions, which began in mid-
February. See also id. at 4 (“[T]he decision to close, which
triggered the distributions, took place long before any unfair
labor practice charges were filed . . . .” (emphasis added)). But
the Board cited no evidence to support this assumption, other
than the fact of the distributions themselves. This amounts to
little more than assuming the conclusion, since the question at
issue is whether the owners made the distributions incident to a
bona fide decision to close the company, or instead as a strategy
for evading the company’s liability to its employees.
Nor have we been able to find any documentary evidence
that the owners made a decision to close the company before
they began distributing its assets.3 There are no documents
characterizing the distributions as part of a wind-down. Indeed,
the first document reflecting a decision to close is a bill from
A.J. Mechanical’s law firm that lists a fee for a July 1999
discussion with Greene about “sale terms and dissolution of
corporation.” J.A. 720. All the other relevant documents --
3
Greene did testify at the compliance hearing that the decision to
close the company was made in late 1998. See J.A. 301. But the ALJ
expressly discredited that testimony, see 345 NLRB No. 22, at 9, and
the Board found “no basis for reversing” the ALJ’s credibility
determinations, id. at 1 n.1.
13
auction notices, id. at 567, 575, state filings, id. at 563, 714, and
a corporate resolution, id. at 559 -- are dated even later than
July.
The Board also asserted that “[e]arly in 1999, the
[company] ceased pursuing new work and decided to complete
only projects already underway.” 345 NLRB No. 22, at 3. Once
again, the Board cited no evidence to support that proposition,
and we have found none that does. In its brief, Board counsel
offered four citations to support the assertion that the company
ceased pursuing new work “[i]n early 1999.” Resp. Br. 10.
Two of those citations are to testimony by Greene, who was
discredited by the ALJ and the Board. The other two are to
statements by Greene’s co-owner, Sanders. Although Sanders
was not discredited, he did not say that the company stopped
pursuing new work in early 1999. See J.A. 615-16 (stating that
the decision to close the company was made long before
December 1999, but not specifying when); id. at 618-19
(explaining that his health problems played a part in his decision
to close the company, without stating when that was).
More important, the Board’s opinion failed to take account
of significant record evidence that is contrary to its conclusion
that the company decided to close before it began distributing
funds on February 16, 1999. One piece of evidence is the
statement of Sue Crochet, an NLRB field examiner, who
testified at the compliance hearing. Crochet testified that
Greene had told her, on April 21, 1999, that he did not want an
election and intended to “fight to the bitter end.” According to
Crochet, Greene said “that he could move the job, that the job
was portable, that he didn’t need any union people[, and] that he
could shut down the business or sell it.” J.A. 329 (emphasis
added). These statements suggest that, as of April 1999, Greene
had not yet decided that he would close the company.
14
The most significant evidence is Greene’s own testimony in
response to questions at a May 6, 1999 representation hearing.
In that testimony, Greene could not have been more emphatic in
insisting that the company was not going out of business:
Q: Are you going out of business?
A: No, I’m not going out of business.
...
Q: And you’re looking for new work. You want to
stay here and continue to do new work. Correct?
A: I’m going to stay in business.
...
Q: And you haven’t gone out and told people, We’re
out of business; we’re no longer accepting work; we
don’t want to know about bids that are coming in. You
haven’t done that. Correct?
A: I’d be foolish to do that.
Q: Of course not, because you want more work.
Right?
A: Yes.
...
Q: And you are taking steps consistent with your desire
to have more work. Right? You’re letting people
know you’re in this business to do the work.
A: Yes.
...
Q: [A]nd it is your plan to continue to bid on other jobs
in the future. Correct? Isn’t that your objective, to
stay in business?
A: Today it is. Yes.
J.A. 111-20. The record thus contains Greene’s clear admission
that he had not decided to close the business (and was still
pursuing new work) as late as May 6, months after he and
Sanders began distributing cash to themselves. This directly
15
contradicts the Board’s finding that the decision to close was
made before the distributions began. Indeed, it suggests that the
decision was not made before the union filed formal unfair labor
practice charges on May 24, just eighteen days after Greene
testified, as there is no indication that the co-owners made any
decision about dissolution during that interval.
The Board’s opinion offered no explanation at all for
rejecting this contrary evidence. In its appellate brief, Board
counsel suggested that the Board may have disregarded
Greene’s statements in light of “the administrative law judge’s
determination . . . to discredit Greene’s testimony, ‘except that
which other, credited evidence corroborates.’” Resp. Br. 30-31.
But this quotation omits the balance of the quoted sentence. The
ALJ’s full statement was: “I shall not credit any of his
testimony, except that which other, credited evidence
corroborates or that which constitutes an admission against
interest.” 345 NLRB No. 22, at 9 (emphasis added). Greene’s
testimony that he had not decided to close the business in May
1999, months after the distributions began, is such an
admission.4
In sum, the Board’s opinion failed to identify evidence
sufficient to support its finding that the company had decided to
shut down before it began distributing cash to its owners, and
likewise failed to explain why it rejected evidence that is
contrary to that finding. Those failures require us to set aside
4
At oral argument, Board counsel tried another tack, suggesting
that Greene’s statements at the May 1999 hearing were “not against
his interest” because the date of the decision to close “was not at
issue” at that hearing. Oral Arg. Recording 23:02-23:13. But there is
nothing in the decision of either the Board or the ALJ suggesting this
meaning of “admission against interest,” and nothing in the Board’s
decision explaining why it disregarded the May testimony.
16
the Board’s decision. See, e.g., Lakeland Bus Lines, 347 F.3d at
961-64; Pendergrass, 878 F.2d at 392-96.
III
The NLRB held that William Greene and his company
committed egregious violations of the labor laws, and it adopted
the ALJ’s determination that Greene’s testimony was unworthy
of belief. Nonetheless, the Board accepted Greene’s contentions
that he was unaware his conduct could subject his company to
monetary liability until the union filed formal charges, and that
he distributed all of the company’s assets pursuant to a bona fide
decision to close the business made long before those charges
were filed. Based on those two findings, the Board refused to
pierce the corporate veil and hold the Greenes personally liable
for the backpay order that it had issued against the by-then
defunct company. The Board failed to cite evidence sufficient
to support those findings and failed to explain why it
disregarded evidence that contradicts them. We therefore grant
the union’s petition for review, vacate the Board’s refusal to
pierce the veil, and remand for further proceedings. At the same
time, we grant the Board’s cross-application for enforcement
against A.J. Mechanical.
So ordered.