National Labor Relations Board v. Lily Transportation Corp. ( 2017 )

United States Court of Appeals
For the First Circuit
No. 15-2398
NATIONAL LABOR RELATIONS BOARD,
Petitioner,
v.
LILY TRANSPORTATION CORPORATION,
Respondent.
APPLICATION FOR ENFORCEMENT OF AN ORDER
OF THE NATIONAL LABOR RELATIONS BOARD
Before
Kayatta, Circuit Judge,
Souter, Associate Justice,*
and Selya, Circuit Judge.
Jared David Cantor, Counsel, with whom Kira Dellinger Vol,
Supervising Attorney, Richard F. Griffin, Jr., General Counsel,
Jennifer Abruzzo, Deputy General Counsel, John H. Ferguson,
Associate General Counsel, and Linda Dreeben, Deputy Associate
General Counsel, were on brief, for petitioner.
Kay H. Hodge, with whom Alan S. Miller, Katherine D. Clark,
and Stoneman, Chandler & Miller LLP were on brief, for
respondent.
March 31, 2017
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. The National Labor
Relations Board applies for enforcement of its bargaining order
against Lily Transportation Corporation. We grant the
application.
I.
Pumpernickel Express, Incorporated, carried automotive
parts from warehouses in Mansfield, Massachusetts, to Toyota and
Chrysler dealerships in the region. Pumpernickel's drivers were
represented by the International Association of Machinists and
Aerospace Workers, AFL-CIO, District Lodge 15, Local 447.
In October 2013, Pumpernickel filed for bankruptcy,
and Lily subsequently obtained the portion of Pumpernickel's
business that involved distributing parts for Toyota. Lily
hired many of Pumpernickel's former employees, including
drivers, and began operations in November 2013. The Union
promptly demanded that Lily recognize it as the drivers'
bargaining representative, but Lily refused. Lily later
produced signed statements it allegedly had received from a
majority of the drivers saying that they no longer wished to be
represented by the Union.
The Union filed an unfair labor practice charge with
the National Labor Relations Board, claiming that Lily's refusal
to bargain violated Sections 8(a)(1) and 8(a)(5) of the National
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Labor Relations Act.1 After a hearing, the Administrative Law
Judge found that in distributing for Toyota, Lily was a
"successor employer" to Pumpernickel, that is, an employer who
"makes a conscious decision to maintain generally the same
business and to hire a majority of its employees from the
predecessor," Fall River Dyeing & Finishing Corp. v. NLRB, 482
U.S. 27, 41 (1987); accord Asseo v. Centro Médico Del Turabo,
Inc., 900 F.2d 445, 450-51 (1st Cir. 1990). The Judge held that
Lily, as a successor, was required under Fall River to recognize
and bargain with the Union, and rejected Lily's position that
its refusal to bargain about terms of employment in the affected
unit was justified by the signed employee statements of
repudiation. Rather, the Judge explained, under the "successor
bar doctrine," as adopted by the Board in UGL-UNICCO Service
Co., 357 N.L.R.B. 801 (2011), an incumbent union is entitled to
represent a successor employer's employees for a reasonable
period of time for bargaining before its majority status may be
questioned.
The Board affirmed, agreeing with the Administrative
Law Judge that insofar as Lily was a successor employer, it was
1
Section 8(a)(1) makes it an unfair labor practice for an
employer "to interfere with, restrain, or coerce employees in
the exercise of [their organizational] rights." 29 U.S.C. §
158(a)(1). Under Section 8(a)(5) it is an unfair labor practice
for an employer "to refuse to bargain collectively with the
representatives of his employees." Id. § 158(a)(5).
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obligated to bargain with the Union, and that UGL barred Lily
from challenging the Union's majority status until a reasonable
period of time for bargaining had elapsed. The Board
accordingly ordered Lily to recognize and bargain with the
Union.
The Board now asks this Court to enforce its order
over Lily's objection. Lily submits that the Board erred in
relying on UGL's successor bar doctrine and that we should
instead substitute only a rebuttable presumption of majority
union support under the rule of MV Transportation, 337 N.L.R.B.
770 (2002), of the kind the Board adopted and enforced prior to
its rejection in UGL. Lily also says that it has rebutted that
presumption with its documentary evidence that a majority of the
affected drivers no longer support the Union.
II.
Lily's objection to the successor bar implicates some
doctrinal history. The National Labor Relations Act provides
neither bar nor presumption to address the unstable labor
climate that can develop in successor employment, a silence the
Board has seen as leaving a statutory gap needing to be filled.
In 1999, it adopted a successor bar partially resembling its
present iteration, in St. Elizabeth Manor, Inc., 329 N.L.R.B.
341 (1999). There, the Board held that "once a successor
employer's obligation to recognize an incumbent union attaches
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[under Fall River], the union is entitled to a reasonable period
of time for bargaining without challenge to its majority
status." Id. at 341. The Board recognized that it was
overruling its previous decision of some twenty-four years
earlier in Southern Moldings, Inc., 219 N.L.R.B. 119 (1975),
which had held that at the beginning of a successorship
situation a union generally enjoys only a rebuttable presumption
of continuing majority membership support. St. Elizabeth Manor,
329 N.L.R.B. at 341.
Just three years later, though, in MV Transportation,
337 N.L.R.B. 770, the Board overturned St. Elizabeth Manor in
favor of the rebuttable presumption. The Board declared that
the presumption represented the appropriate balance between the
two "fundamental purposes" of the National Labor Relations Act,
that is, "employee freedom of choice and the maintenance of
stability in bargaining relationships." Id. at 772-73. In some
circumstances, it said, the successor bar could preclude
employees from making a choice of representation "for as long as
several years," id. at 773, and as an example it cited the
possible combination of the successor bar and a bar running for
three years from the execution of a collective bargaining
agreement, id. One Board member dissented, however, citing the
dramatic increase in the number of corporate mergers and
acquisitions over the previous twenty-five years, and taking
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that as a reason to argue that "the interest of stability should
be given greater . . . weight in shaping national labor policy."
Id. at 776-77 (Member Liebman, dissenting).
Nine years afterwards, in UGL, 357 N.L.R.B. 801, the
Board changed course again, citing the figures from the MV
Transportation dissent along with current statistics. It
observed that successorship situations had become increasingly
common owing to a rising level of corporate merger and
acquisition activity, id. at 801 & n.4, 805 & n.17, and held
that the bar "better achieves the overall policies of the Act,
in the context of today's economy," than a rebuttable
presumption does, id. at 801. The Board did not, however,
merely reinstate the St. Elizabeth Manor bar, which it modified
in two respects. It defined the previously unspecified
"reasonable period" of time for bargaining after the successor's
arrival as being between six months and a year, depending on the
circumstances. Id. at 808-09. The Board also provided a
special variant of the bar for successorship situations that
involve successorship followed by execution of a collective
bargaining agreement. It reduced that latter bar's duration to
two years, so as to mitigate the limitation on employee choice
(or other challenges) that could previously have resulted from
adding the contract and successor bars together. Id. at 810.
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It is the successor bar thus doubly modified that is at stake
here.
III.
Lily attacks the Board's reliance on UGL's successor
bar on two grounds: (1) that a bar to challenging the union's
support, as distinguished from a rebuttable presumption,
deserves no judicial deference under Chevron U.S.A. Inc. v. Nat.
Res. Def. Council, Inc., 467 U.S. 837 (1984), because it flatly
violates employees' rights under Section 7 of the National Labor
Relations Act to choose or reject union representation;2 and (2)
that the Board's irregularity in successor cases, switching back
and forth between rebuttable presumption and bar rules, most
recently in the St. Elizabeth Manor, MV Transportation, and UGL
sequence, independently disentitles the current bar rule to the
judicial deference that an otherwise lawful administrative rule
of decision would deserve if consistently applied.
2 Section 7 provides that
[e]mployees shall have the right to self-organization,
to form, join, or assist labor organizations, to
bargain collectively through representatives of their
own choosing, and to engage in other concerted
activities for the purpose of collective bargaining or
other mutual aid or protection, and shall also have
the right to refrain from any or all of such
activities except to the extent that such right may be
affected by an agreement requiring membership in a
labor organization as a condition of employment as
authorized [elsewhere in] this title.
29 U.S.C. § 157.
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The claim of a Section 7 violation on these facts is
untenable. To be sure, we can imagine bars on challenges to
unions so patently arbitrary as to run afoul of the Section 7
guarantee; a ten-year bar following certification, say. The bar
choice here, however, is for a newly limited period (alone or in
tandem with the contract bar), a fact that Lily disregards on
the apparent absolutist theory that duration is not of the
essence: in its view, any bar, no matter its length, would
unlawfully burden Section 7 rights. But the assumption that a
bar per se patently trespasses on Section 7 while some
rebuttable presumptions would not does not survive scrutiny. If
we compare a two-year bar with a two-year presumption, we may
easily suspect that the burdens of the bar on employees' Section
7 rights would be demonstrably the heavier of the two
alternatives and require a comparatively more powerful
justification to fall within the zone of reasonable agency
action. But if the comparison is between a six-month bar and a
rebuttable presumption for the same period, the bar could turn
out to be the lighter of the two, given the added burden of
rebuttal that would come with the presumption, which could
increase litigation time and expense, as against a proceeding
free of the presumption. Thus, Lily's argument that any bar is
forbidden because it burdens the exercise of Section 7 rights is
in tension with its favored alternative of a rebuttable
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presumption, which does the same and could be the more onerous
of the two depending on the time period involved.
The Board is thus within the zone of reason in
rejecting a neat, categorical distinction between the two
species of rules. Each serves the obviously legitimate
objective of stability in labor and management relations during
a period in which the entrance of new management can destroy the
prior modus operandi among union, employer, and employees. See
Fall River, 482 U.S. at 39-40. In those circumstances, for
example, there may well be a risk that employees will, rightly
or wrongly, blame the incumbent union for the demise or
departure of the old employer, or will fear that support for a
union will jeopardize jobs with the new boss. See id. Thus,
some limited discouragement of an unduly hasty reexamination of
a prior Section 7 choice serves to provide time for second
thoughts, a subject the statute does not directly address in
successor cases, but which falls within its "underlying
purpose." Brooks v. NLRB, 348 U.S. 96, 103 (1954); accord NLRB
v. Beverly Enters.-Mass., Inc., 174 F.3d 13, 32 (1st Cir. 1999).
Since neither of the competing means to further this legitimate
objective, then, is categorically forbidden, the only remaining
question in this case goes to the adequacy of the Board's
justification for deciding to impose the newly adjusted bar
rule, with particular attention to Lily's claim that the Board
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has undercut its entitlement to deference by blowing hot and
cold in its choices of successor rules.
This inconsistency challenge to UGL calls to the fore
the Supreme Court's recent leading case on agency reversal of
prior interpretive doctrine, FCC v. Fox Television Stations,
Inc., 556 U.S. 502 (2009); see also Encino Motorcars, LLC v.
Navarro, 136 S. Ct. 2117, 2125-26 (2016) (discussing Fox).3 The
Court in Fox was unanimous in its acceptance of the view, often
expressed, that an agency is not forever bound by an earlier
resolution of an interpretive issue, but that a change must be
addressed expressly, at least by the agency's articulate
recognition that it is departing from its precedent. See Fox,
556 U.S. at 514-15; id. at 535 (Kennedy, J. concurring); id. at
549 (Breyer, J., dissenting); see also Nat'l Ass'n of Home
Builders v. EPA, 682 F.3d 1032, 1038 (D.C. Cir. 2012) (stating
that the "core requirement that Fox makes clear an agency must
meet when changing course" is to "'provide reasoned explanation
for its action,' which 'would ordinarily demand that it display
awareness that it is changing position'" (quoting Fox, 556 U.S.
at 515)). There was disagreement between majority and dissent,
however, on the detail necessary to justify an overruling
decision, compare Fox, 556 U.S. at 514-16, with id. at 549-50
3
Because the authorities on which Lily rests for its
inconsistency challenge to UGL antedate Fox, there is no need to
discuss their holdings.
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(Breyer, J., dissenting), with Justice Kennedy's view (generally
in the majority) taking the position that reversing course
requires reasoned explanation, id. at 535 (Kennedy, J.,
concurring). Nonetheless, all views were in accord that an
about-face on a rule owing to facts changed from those
underlying the prior view requires that the new facts be
addressed explicitly by reasoned explanation for the change of
direction. See id. at 515-16 (majority opinion); id. at 535-36
(Kennedy, J, concurring); id. at 550-51 (Breyer, J.,
dissenting); see also Modesto Irrigation Dist. v. Gutierrez, 619
F.3d 1024, 1034 (9th Cir. 2010) (describing Fox as holding that
"an agency [must] provide a greater justification for changing a
policy" when the new policy rests upon changed facts).
This is such a case. Changes from the significant
factual bases of the earlier rule were essential to the Board's
departure from precedent in UGL, where two such developments
received attention.
The first concerned corporate business activity, as
the Board in UGL emphasized the fact stressed by the dissenting
Board member in MV Transportation: merger and acquisition
activity was much increased from the quieter heyday of the
presumption rule of Southern Moldings. UGL, 357 N.L.R.B. at
801. In UGL, the Board majority brought the supporting
statistics up to date, and showed, in this respect, that the
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volume of mergers and acquisitions had not substantially
declined since the MV Transportation majority ignored them. Id.
at 805 n.17. The UGL Board noted that, in 1975, merger and
acquisition announcements numbered 2,297, with transactions
valued at $11.8 billion; that in 2000, two years before MV
Transportation was decided, the numbers had increased to 9,566
and $1.3 trillion; and, finally, that following a drop after
2000, the numbers had "ris[en] again, peaking in 2007, before
another decline, which now seems over." Id. The Board also
cited an article claiming that conditions were ripe for a
"[b]oom" in mergers and acquisitions in 2011, the year in which
the UGL Board was writing. Id. (citing Frank Aquila, Conditions
are Ripe for an M&A Boom in 2011, Bloomberg Business Week (Dec.
22, 2010)).
Lily tries to disparage the Board's reliance on these
statistics by asking what they are supposed to prove. But we do
not think the decision gets a failing grade for dereliction in
spelling out the point the Board was making, since it seems
clear enough that the corporate activity in question carries
significant consequences under the Fall River successor rule.
The greater the number of mergers and acquisitions, the greater
the number of those that will produce a Fall River successor
employer. The greater the number of successor situations with
unionized employees, the greater the potential volatility in
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union-management relationships across the national labor market.
The greater the level of that instability, the greater the
likelihood of precipitate disruption in litigation challenging
union support during the unsettled period with the new employer.
This risk would not only affect the actual employment relations
in the market overall owing to the quantity of successorships,
but by the same token would also portend a heavier burden on the
administrative law machinery, including the Board itself, in
administering the National Labor Relations Act.
These obviously apparent consequences answer not only
Lily's objection to the reliance on the statistics, but its
attempt to distance this case from their threat by pointing out
that its own successor status follows neither a merger nor an
acquisition. But how the fact of successor employment comes
about is not to the point. What does matter is simply the
probable volume of hasty challenges to union support. It is
this that makes the merger and acquisition facts relevant in
reexamining the MV Transportation rule and in concluding that a
bar would serve stability in labor relations better in a market
likely to be fraught with higher numbers of upsets than in the
world of forty years ago.4
4We are mindful of the Supreme Court's observation in
Encino Motorcars that a reviewing court passes on the adequacy
of an agency's reasoning, without authority to inject new
reasons of its own. 136 S. Ct. at 2127 (citing Motor Vehicle
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The UGL Board relied on another set of changed facts
in justifying its return to a successor bar. These facts are
notable in that they were actually subject to the Board's
control, which the Board exercised by modifying its own rules in
respects not independently challenged here. The MV
Transportation majority justified its rejection of a bar rule by
showing how long a period of union immunity to challenge might
stretch out if the St. Elizabeth Manor successor bar period of a
"reasonable" but unspecified time was combined with other bars.
The MV Transportation Board explained in this way:
It is possible . . . that the successor bar could
preclude the employees' exercise of their Section 7
rights for as long as several years. For example, a
successor employer could engage in bargaining with the
incumbent union and, prior to the expiration of a
"reasonable period of time," reach agreement with the
union on a new collective-bargaining agreement, which
then would serve as a bar to a representation petition
for the duration of the contract, up to a period of 3
years. Moreover, the incursion on the employees'
freedom of choice could be even more severe (up to 6
years) if the union and the predecessor employer were
parties to a collective-bargaining agreement that
served to bar any employee efforts to remove or
replace the Union prior to the successor's assumption
of operations.
Mfrs. Ass'n, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983)); see also River St. Donuts, LLC v. Napolitano,
558 F.3d 111, 115 (1st Cir. 2009) ("This Court cannot 'attempt
to supply a reasoned basis for the action that the agency itself
has not given.'" (quoting Citizens Awareness Network v. U.S.
Nuclear Regulatory Comm'n, 59 F.3d 284, 291 (1st Cir. 1995))).
We regret that the Board did not do a more extensive job
spelling out what it meant, but because we think that the point
of its reliance on statistical fact justification is so obvious,
we hold the explanation merely laconic, not inadequate.
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337 N.L.R.B. at 773. The Board in UGL treated this as a serious
objection, see 357 N.L.R.B. at 808, to which it responded by
decreeing the following modifications of bar rules as previously
imposed. First, as to the successor bar, the Board tightened
the formerly undefined "reasonable period" of time, setting it
at a six-month minimum but no longer than a year, depending on
circumstances. Id. at 808-09. Second, the Board modified the
contract bar doctrine, holding that where a first contract is
reached between the successor employer and the incumbent union
within the successor bar's newly specified reasonable time, and
where there was no open period permitting the filing of a union
challenge petition during the final year of the predecessor
employer's bargaining relationship with the union, the contract-
bar period would be a maximum of two years, instead of three.
Id. at 810.
Thus, in responding to the MV Transportation majority
objection, the Board changed the consequences the earlier rules
might produce. It did not merely revert back to the
interpretive regime imposed or assumed by St. Elizabeth Manor,
but devised a new scheme to produce a shorter period of union
protection and a correspondingly earlier opportunity to
challenge the ensconced union, whether by employees in the
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exercise of Section 7 rights, or by the successor or a competing
union.
In sum, we find that the Board has explained its
reason for changing course and has marshalled new factual
support for its doctrinal move. It brought up to date the
commercial reality ignored by the MV Transportation majority and
changed the factual consequences of the successor bar by
modifying the terms on which the bar was previously imposed.
The result is an adequately explained interpretive change
reflecting the Board's judgment of a reasonable balance between
the Section 7 right of employee choice and the need for some
period of stability to give the new relationships a chance to
settle down.
The need to strike such a balance is not itself
challenged, and hardly could be. We see no cause to doubt that
the Board's position taken here is within the scope of reasoned
interpretation and thus subject to judicial deference under
Chevron, 467 U.S. at 842-45.
IV.
Lily raises three additional challenges to the
successor bar, and we reject them. Lily contends that the bar
is inconsistent with references to a presumption rule in Fall
River and NLRB v. Burns International Security Services, Inc.,
406 U.S. 272 (1972). But the language in those cases on which
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Lily relies simply describes the legal landscape at the time.
See Fall River, 482 U.S. at 41 & n.8; Burns, at 278-79, 279 n.3.
Neither case holds that a rebuttable presumption, rather than a
bar, is required in a successorship situation. Second, Lily
argues that the bar is inconsistent with the Act's requirement,
in Section 10, that the Board support its factual findings with
"substantial evidence on the record," 29 U.S.C. § 160(e)-(f).
The successor bar, however, is a legal rule, not a factual
finding, and therefore the substantial evidence requirement is
not on point. Finally, Lily argues that the bar (and, in fact,
any bar) is inconsistent with this court's holding in Big Y
Foods, Inc. v. NLRB, 651 F.2d 40 (1st Cir. 1981). That
argument, too, fails, as Big Y concerned the Act's requirement,
not at issue here, that the Board determine the appropriate
bargaining unit "in each case." Id. at 45-46 (quoting 29 U.S.C.
§ 159(b)).
V.
Because we see no error in the Board's adherence to
UGL's successor bar doctrine, we need not reach Lily's arguments
that it would prevail if that doctrine were rejected in favor of
a rebuttable presumption of majority support for the Union. The
Board's application for enforcement of its bargaining order
against Lily is granted.
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