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Adams & Westlake v. National Labor Relations Board

decided: March 5, 1987.


Petition for Review of an Order of the National Labor Relations Board.

Coffey and Ripple, Circuit Judges, and Campbell, Senior District Judge.*fn*

Author: Ripple

RIPPLE, Circuit Judge.

This case is a petition for review of a National Labor Relations Board (NLRB or Board) order denying an application for attorneys' fees and expenses made by Adams & Westlake, Ltd. (AWL or the Company) pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504 (Supp. III 1985). The Board found that the position taken by the NLRB's General Counsel was substantially justified. AWL challenges this order on a number of grounds. For the reasons set forth below, we affirm the Board's order.



A. Background

Adams and Westlake Company (Adlake) was an Elkhart, Indiana company that produced transportation sash and railway accessories. Until 1978, Midwest Management Corporation (Midwest) owned all of Adlake's stock. In that year, the controlling interest in Adlake passed to a single outside party, Mr. Richard Champlin. Tr. 279-80. Mr. Champlin served as president of Adlake from December 1978 to November 1982. During this time, "Midwest was effectively deprived of any control" of Adlake. Adams & Westlake, Ltd., No. 25-CA-15316, Decision of ALJ at 3 (Apr. 5, 1984) [hereinafter cited as ALJ Decision of Apr. 5, 1984].

In 1982, Adlake began to suffer financial difficulties. In February of that year, it engaged in concession bargaining with the International Union United Automobile and Agricultural Implement Workers of American and its Local No. 1367 (Union). These negotiations resulted in a concession agreement concerning the reduction of wages and fringe benefits. On May 1, 1982, the parties agreed to extent their 1980-1982 contract, with modifications imposed by the concession agreement, for another two years until 1984.

After liquidating the assets used in two of its three product lines and failing to obtain more concessions from the Union, Adlake agreed, on October 28, 1982, to sell its railway hardware product line to Midwest. Midwest later assigned its rights under the contract to a newly-formed, wholly-owned subsidiary, AWL, Ltd. (later renamed Adams and Westlake, Ltd.). The actual sales transaction was consummated on December 2, 1982. On the same date, Adlake formally terminated all of its employees.

On December 6, 1982, AWL commenced operations. Mr. Leroy Ott, who had served as Adlake's executive vice-president and general manager, was hired as general manager. A small workforce, completely composed of former Adlake employees, was hired. All of the materials produced by AWL had formerly been produced by Adlake. AWL used the same machinery and essentially the same vendors and sold these materials to essentially the same customers as Adlake. However, AWL used only a fraction of the space formerly used by Adlake because it was producing only one of the three product lines that Adlake had produced. Its production and maintenance employees were paid lower wages, received fewer benefits, and operated under different work rules than those provided for in the Adlake-Union contract.

In December 1982, Union representative, James Kurtz sent a letter to Mr. Ott requesting information from which the Union could make a determination whether AWL was an alter ego or a successor to Adlake.*fn1 Mr. Ott forwarded the letter to Frank Krok, Midwest's president. Mr. Krok furnished the requested information and stated that, in his opinion, AWL was not the alter ego of Adlake. Mr. Kurtz, the union representative then telephoned Mr. Ott on January 7, 1983 to obtain additional information. In testimony specifically credited by the ALJ, Mr. Kurtz stated that Mr. Ott told him that AWL planned to talk with the Union that had represented the clerical employees at Adlake. ALJ Decision of Apr. 5, 1984 at 5 n.3. Mr. Kurtz asked, "Well, then, what about us?" Ott replied, "I expect that we should sit down and talk some time." Tr. 161. On January 17, 1983, the Union requested that the Company recognize and bargain with the Union. On February 7, Mr. Krok informed the Union that he had been advised by counsel that he was not obligated to bargain with it.

B. The Unfair Labor Practice Charge

On February 23, 1983, the Union filed unfair labor practice charges with the Board alleging that the Company had violated section 8(a)(1) and (5) of the National Labor Relations Act, 29 U.S.C. § 158(a)(1) and (5), by failing to honor a collective bargaining agreement and by failing or refusing to bargain collectively with the Union. On March 23, 1983, the Company responded to these charges with a statement of position. The majority of the statement addressed whether the Company was an alter ego or successor of Adlake. The Company also raised, for the first time, the defense that it had a good faith doubt regarding whether a majority of its employees desired the Union's representation. The Company also filed an "RM petition,"*fn2 seeking an election among AWL's employees because of the Company's doubt as to the majority status of the Union. In its position statement, the Company based its good faith doubt defense upon five reasons, only one of which is important here: that General Manager Ott had had conversations with at least half the employees of AWL, and that, during these conversations, the employees indicated to Mr. Ott ...

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