Morris Road Partners, LLC v. National Labor Relations Board

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 15-1470
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MORRIS ROAD PARTNERS, LLC;
*LEDERACH ELECTRIC, INC.,
Petitioners
v.
THE NATIONAL LABOR RELATIONS BOARD,
Respondent
*(Amended per the Clerk’s 4/13/15 Order)
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No. 15-1884
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THE NATIONAL LABOR RELATIONS BOARD,
Petitioner
v.
MORRIS ROAD PARTNERS, LLC & LEDERACH ELECTRIC, INC.,
Respondents
On Petition for Review of an Order of the
National Labor Relations Board
(NLRB No. 04-CA-037725)
Submitted Pursuant to Third Circuit LAR 34.1(a)
November 12, 2015
Before: CHAGARES, RENDELL, and BARRY, Circuit Judges.
(Filed: January 19, 2016)
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OPINION
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CHAGARES, Circuit Judge.
Morris Road Partners, LLC (“MRP”) and Lederach Electric, Inc. (“LEI”) filed a
petition for review of a National Labor Relations Board (“NLRB”) Order holding that the
petitioners were a “single employer,” and therefore jointly and severally liable for LEI’s
previously determined back pay liability of $122,229.06. The NLRB cross-petitioned to
enforce its order. For the following reasons, we will deny the petition for review and
grant the petition to enforce the NLRB’s Order.
I.
We write solely for the parties and therefore recite only the facts necessary to our
disposition. In the underlying matter, on March 4, 2013, the NLRB held that LEI owed
$122,229.06 in backpay for laying off certain employees for engaging in protected labor
practices. Appendix (“App.”) 33. On September 24, 2013, the NLRB’s Regional
Director of the Fourth Region pursued compliance proceedings to determine whether
MRP and LEI were a single employer and jointly and severally liable for the backpay.
App. 43-46. After a hearing, Administrative Law Judge Arthur J. Amchan found that

This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
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LEI and MRP were not a single employer, but on February 3, 2015, the NLRB reversed,
holding that LEI and MRP were a single employer, and therefore jointly and severally
liable for the unfair labor practices at issue. App. 3-5. This Second Supplemental
Decision and Order (“Order”) was the NLRB’s final order. On February 23, 2015, MRP
petitioned this Court for review of the Order, and on April 10, 2015, the NLRB cross-
petitioned for enforcement of its Order against the parties. App. 1-2.
LEI was an electrical contractor incorporated in Pennsylvania. App. 59. When
LEI dissolved in late 2012, James Lederach owned 100% of its stock. App. 59. James
Lederach and Judy Lederach were the sole officers of LEI. James exercised complete
managerial, financial, and operational control of LEI, and Judy signed LEI’s checks.
App. 59. From 1986 until it dissolved in late 2012, LEI leased an office in the Lederach
Commons Building, which is owned by MRP. App. 59-60.
MRP is a real estate property management company incorporated in Pennsylvania.
App. 60. James and Judy each own 50% of the shares of MRP, and have been its only
managers, running its day-to-day business. App. 60. Judy signs all of MRP’s checks.
App. 60. MRP has never had any employees. App. 60. MRP and LEI share the same
post office box. App. 59-60. MRP and LEI have separate bank accounts, pay their bills
separately, and file separate tax returns. App. 19. Occasionally, MRP’s tenants dropped
off their rent payments at LEI’s office, and sometimes James used LEI’s phone for MRP
business, instead of his cell phone as he usually did for MRP business. App. 15.
LEI had a rental lease with MRP and was required to pay $3,000 a month for rent.
App. 62-74. Sometime around 2008 and 2009, LEI’s financial situation began to
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deteriorate. App. 16. James said that LEI did not pay MRP rent because he knew MRP
would not sue LEI for rent, but, of course, LEI’s other creditors could sue LEI if it failed
to meet its obligations. App. 18-19. Subsequently, from January 1, 2009 through March
2012, LEI accumulated a debt of $62,000 in rent owed to MRP, inconsistently paying
rent, if at all. App. 60, 75-78. Even when LEI paid rent, it did so in a piecemeal way.
For example, in 2010, LEI failed to pay rent for eight different months but paid $25,000
in the month of December. App. 76. LEI decided to wind down in 2011, paying its
oldest debtors first. App. 19. The remaining debtors were MRP and the parties
associated with this matter. App. 19.
II.
The NLRB had jurisdiction pursuant to the National Labor Relations Act
(“NLRA”), 29 U.S.C. § 160(a), which empowers the NLRB to prevent unfair labor
practices that affect commerce. This Court has jurisdiction to review the final orders of
the NLRB pursuant to 29 U.S.C. §§ 160(e), (f).
“We afford considerable deference to the Board.” Grane Health Care v. N.L.R.B.,
712 F.3d 145, 149 (3d Cir. 2013). We will uphold “the Board’s interpretation of the
NLRA as long as it is rational and consistent with the Act.” 800 River Rd. Operating Co.
LLC v. N.L.R.B., 784 F.3d 902, 906 (3d Cir. 2015) (citations omitted) (quotation marks
omitted). “‘[I]f the Board’s application of such a rational rule is supported by substantial
evidence on the record,’” we will enforce the Board’s order. Id. (quoting Fall River
Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 42 (1987)). Substantial evidence
means “‘such relevant evidence as a reasonable mind might accept as adequate to support
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a conclusion.’” Id. (quoting Consolo v. Fed. Maritime Comm’n, 383 U.S. 607, 620
(1966)). Our Court has held that “we defer to the Board’s credibility determinations,”
and we will reverse them “only if they are inherently incredible or patently
unreasonable.” Grane Health Care, 712 F.3d at 149 (quotation marks omitted).
III.
When the NLRB determines two entities are a single employer, both are jointly
and severally liable for the unfair labor practices committed by either. Id. at 150.
Whether there is single employer status depends on “‘all the circumstances of the case’”
and is “‘characterized as an absence of an arm’s length relationship found among
unintegrated companies.’” Id. at 150 (quoting N.L.R.B. v. Browning–Ferris Indus. of
Pa., Inc., 691 F.2d 1117, 1122 (3d Cir. 1982)). Four factors are considered to determine
whether single employer status exists: “‘(1) functional integration of operations; (2)
centralized control of labor relations; (3) common management; and (4) common
ownership.’” Id. at 150 (quoting Browning–Ferris Indus. of Pa., Inc., 691 F.2d at 1122).
No one factor by itself is controlling, but the first three factors, especially centralized
control over labor relations, are considered “more compelling” than the fourth factor,
common ownership. Id.
Two of the factors for single employer status do not appear to be in dispute in this
case — common ownership and common management. The NLRB called these factors
“clearly established,” App. 4, and we agree. James Lederach owned LEI, and he owned
MRP together with his wife. That establishes common ownership. James managed and
controlled LEI, and he and Judy managed MRP. That establishes common management.
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The remaining two factors for single employer status are functional integration of
operations and centralized control over labor relations. See Grane Health Care, 712 F.3d
at 150. Sufficient evidence supported the NLRB’s determination that there was
functional integration of operations. LEI amassed a debt to MRP of $62,000 in back rent
over approximately three years. MRP never attempted to recover it. There is no
evidence in the record that MRP attempted to evict LEI. The pattern of rent payment —
months of paying no rent, and then a huge lump sum payment of $25,000 in December
2010, for example — suggests interrelated operations between the companies. MRP
argues that LEI stopped making rent payments to MRP to pay its other creditors first,
demonstrating a lack of self-dealing and interrelatedness. According to MRP, had LEI
first paid MRP, it would have been a self-dealing transaction—and grounds to attack
MRP or the Lederachs for defrauding other creditors. But the fact that MRP took no
action to remedy the failure to pay rent, including eviction or threat of legal action,
support a finding that there was functional integration of the operations.
Other evidence supports the determination that the operations were functionally
integrated. MRP and LEI shared a post office box, and Judy Lederach signed both
companies’ checks. MRP’s tenants occasionally dropped off their rent at LEI’s office,
and James Lederach sometimes used LEI’s phone for MRP’s business. MRP calls these
facts “trivial and insignificant,” noting for example, separate bank accounts and assets,
separate offices, and no common business purpose. 1 But taken into consideration with
1
We reject LEI’s contention that it and MRP cannot be a single employer because they
are not engaged in the same business. See, e.g., Mini-Togs, Inc., 304 N.L.R.B. 644, 646
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the rent arrangement, these facts in their entirety support a finding of single employer
status. See, e.g., Grane Health, 712 F.3d at 150 (“Single employer status ultimately
depends on all the circumstances of the case and is characterized as an absence of an
arm’s length relationship found among unintegrated companies.”).
We agree with the NLRB that even though there is no evidence of the remaining
factor, centralized control of labor relations, that is not fatal to the finding that there is
single employer status. MRP makes much of the importance of this factor, arguing that it
is “key” and the “most critical.” However, centralized control of labor operations is not
determinative or controlling. See, e.g., Grane Health Care, 712 F.3d at 150. Considering
all of the circumstances, it may be appropriate to find single employer status even when
there is no centralized control of labor relations, as is the case here.
The NLRB held that the control over labor relations factor is afforded less weight
when one of the entities has no employees, like MRP. App. 4. MRP makes policy
arguments that this finding goes against the purpose of the NLRA, which regulates labor
activity, and should not apply to an entity that has no employees, like MRP. However,
we agree with the authority cited by the NLRB. See, e.g., Three Sisters Sportswear Co.,
312 N.L.R.B. 853, 863 (1993) (“[the] centralized control of labor relations . . . factor
becomes less important where some of the companies have no employees”) (citations
(1991) (finding that a company that manufactures children’s clothing, a company that
manufactures baby bottles, and a company that offers embroidery services, are single
employers); D & S Leasing, 299 N.L.R.B. 658, 660 (1990) (finding that a trucking
company, a parent company, and a dockwork company, are single employers), enforced,
954 F.2d 366 (6th Cir. 1992).
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omitted), enforced, 55 F.3d 684 (D.C. Cir. 1995); see also Bolivar-Tees, Inc., 349
N.L.R.B. 720, 722 (2007) (“Our finding of single-employer status is not undercut by the
lack of specific evidence indicating centralized control of labor relations.”), enforced, 551
F.3d 722 (8th Cir. 2008). In addition, as noted earlier, our case law is clear that no one
factor, including control of labor, is necessary to a finding of single employer status. See,
e.g., Grane Health Care, 712 F.3d at 150. Therefore, the NLRB did not err in
downplaying this factor in the circumstances of this case.
Considering the business arrangements in their entirety, and in light of the factors
to be analyzed in determining single employer status, substantial evidence supports the
NLRB’s finding that there was a single employer relationship between LEI and MRP.
IV.
For the foregoing reasons, we will deny the petition for review and grant the
petition to enforce the NLRB’s Order.
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