National Labor Relations Board v. PDK Investments, L.L.C.

Case: 10-60705 Document: 00511547905 Page: 1 Date Filed: 07/21/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 21, 2011
No. 10-60705
Lyle W. Cayce
Clerk
NATIONAL LABOR RELATIONS BOARD,
Petitioner,
versus
PDK INVESTMENTS, L.L.C.,
Respondent.
On Application for Enforcement of
an Order of the National Labor Relations Board
No. 16-CA-26292
Before SMITH and STEWART, Circuit Judges.*
JERRY E. SMITH, Circuit Judge:**
The National Labor Relations Board (the “Board”) held PDK Investments,
*
Judge Garwood was a member of this panel but died, after oral argument, on July 14,
2011. This matter is decided by a quorum. See 28 U.S.C. § 46(d).
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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L.L.C. (“PDK”), in violation of the National Labor Relations Act (“NLRA”) for
refusing to provide information about its operations to the union representing
its employees. Because it was reasonable for the Board to conclude that the
requested information was relevant to the union’s duties to police its collective
bargaining agreement, we grant the application for enforcement.
I.
PDK is an electrical contractor in the construction business in the Dallas
area. It has previously done business under the name “Guild Electric.” It is a
member of the North Texas Chapter of the National Electrical Contractors Asso-
ciation (“NECA”) and, as such, was a party to the collective bargaining agree-
ment in effect in 2008 between NECA and the International Brotherhood of Elec-
trical Workers, Local Number 20 (“the union”). As part of that agreement, PDK
agreed to accept the union as the exclusive collective bargaining representative
of its electrical workers in the union’s jurisdiction.
A.C. McAfee, the business manager and secretary of the union, testified
to the NLRB about reports from a former PDK employee that led him to “be con-
cerned” that PDK “was operating an alter ego” that employed non-union employ-
ees in violation of its contract with the union. According to McAfee, former PDK
employee and union member Rudy Ayala told the union that PDK had offered
him a job on the “nonunion side” of the company. Ayala also allegedly said that
a company called Guild Commercial and Tenant Services (“GCATS”) was oper-
ating out of the same location with the same officers as PDK. PDK says that
what Ayala told the union was not credible because, after a project run by Ayala
went 185% over budget, PDK had demoted him from foreman to journeyman
electrician, after which he quit. According to PDK, Ayala was merely spreading
false rumors to retaliate against PDK for his demotion.
Shortly after his conversation with Ayala, McAfee sent a letter to PDK’s
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part-owner Keith Zagar saying that the union “has become aware that your com-
pany has been operating [GCATS] as a nonunion company” and requesting infor-
mation “concerning [PDK’s] relationship with [GCATS] for the purpose of admin-
istering the [collective bargaining] Agreement.” McAfee attached a question-
naire with seventy-nine questions seeking detailed information about PDK’s
relationship with its purported nonunion affiliate.
After sending the letter, McAfee further investigated the possible connec-
tion between PDK and GCATS. He said that he found a websiteSSwhich he did
not identifySSthat showed a number of companies with the “Guild” name operat-
ing out of PDK’s address, with common officers. He also assigned union officer
Chris Williams to observe PDK’s facilities and work sites. According to McAfee,
Williams reported seeing GCATS performing electrical work at buildings at
which PDK had previously worked and a truck with the word “Guild” on the side
delivering materials to both union and non-union jobs.
In addition, McAfee testified that PDK employee and union member
Benny Terrell gave him a written statement (which McAfee submitted to the
Board) alleging that PDK’s part-owner, Paul Prachyl, had earlier informed Ter-
rell and employee Tom McMann that “Guild Commercial and Guild Electric [as
PDK was previously known] would be splitting up and not share [sic] the same
office space.” Guild Commercial would remain with the “open,” i.e., non-union,
shop, and “the union side” would change its name to PDK and find new office
space. Prachyl also allegedly told Terrell that the “union side would sub work
from the open shop side as needed.” Terrell says Prachyl instructed him to paint
over the “Guild name on our ladders and tools and mark PDK” but that the
trucks would continue to bear the “Guild” name. PDK argues that Terrell’s
statements were not credible because, like Ayala, Terrell had been demoted for
large project overruns and was merely trying to retaliate against PDK for his
demotion.
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Zagar responded to McAfee’s letter by asking for the “particular relevance”
of McAfee’s questions. McAfee responded by letter explaining that “it was
brought to Local 20’s attention that furloughed union members were being
encouraged to perform work for the nonunion side of the shop” and that “the
alleged nonunion side has been performing work that in the past has been per-
formed union.” He further explained that “Guild Electric, Guild Technologies,
PDK Investments, and/or GCATS Investments have been sharing the same
office, mailing address, website, warehouse, equipment and personnel.” He said
that it had come to his attention that the companies in question had made sev-
eral “operational changes” since his previous letter, and he requested that PDK
apprise him of those changes.
Zagar responded in a letter calling the questionnaire a “fishing expedi-
tion.” He admitted that PDK had moved offices recently to get closer to custom-
ers and “hopefully grow its business” but stated that PDK had not made any
other changes to its business. PDK refused to provide any more information.
II.
The Board’s General Counsel filed a complaint, later amended, alleging
that PDK had violated section 8(a)(1) and (5) of the NLRA, 29 U.S.C. § 158(a)(1)
and (5). Those provisions make it “an unfair labor practice for an employer—
(1) to interfere with, restrain, or coerce employees in the exercise of the rights
guaranteed in Section 7 of this title1” and “(5) to refuse to bargain collectively
1
Section 7 says,
Employees 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
(continued...)
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with the representatives of his employees, subject to the provisions of section
9(a) of this title [29 U.S.C. § 159(a)].”
An administrative law judge (“ALJ”) held a hearing and issued a decision
from the bench that PDK was in violation of section 8(a)(1) and (5) from the date
of its last letter refusing to provide the information requested by the union. The
ALJ ordered PDK to furnish the union with the information requested in its
letter—i.e., to answer the union’s seventy-nine questions—and to bargain
collectively in good faith with the union. A then-two-member NLRB (Chairman
Liebman and Member Schaumber) affirmed and adopted the ALJ’s decision,
with the exception of the order to bargain collectively in good faith with the
union, because that was “not warranted to remedy this information request
violation.”
Following New Process Steel, L.P. v. NLRB, 130 S. Ct. 2635, 2638 (2010),
holding that a Board consisting of merely two members does not have the statu-
tory authority to exercise the delegated powers of the full Board, a three-member
panel (Chairman Liebman and Members Schaumber and Pearce) adopted and
incorporated by reference the previously-vacated two-member decision.
III.
The issue is whether the Board reasonably held that the union satisfied
its burden of proof to show that it was entitled to the information it requested.
We review the Board’s legal conclusions de novo, but we will uphold its construc-
tion of a statute if it is “reasonably defensible.” Sara Lee Bakery Grp., Inc. v.
NLRB, 514 F.3d 422, 428 (5th Cir. 2008). We review its factual findings under
1
(...continued)
a condition of employment as authorized in section 8(a)(3) [29 U.S.C. § 158-
(a)(3)].
29 U.S.C. § 157.
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a substantial-evidence standard. Id. Substantial evidence means “‘more than
a scintilla. It means such relevant evidence as a reasonable mind would accept
to support a conclusion.’”2
A.
The duty to bargain collectively includes the duty “to provide information
needed by the bargaining representative for the proper performance of its
duties.” NLRB v. Acme Indus. Co., 385 U.S. 432, 435-36 (1967). That duty
“unquestionably extends beyond the period of contract negotiations” and, as
here, “applies to labor-management relations during the term of an agreement.”
Id. at 436.
Refusal to furnish information to a bargaining representative “may consti-
tute a breach of the employer’s duty to bargain in good faith.” NLRB v. CJC
Holdings, Inc., 97 F.3d 114, 117 (5th Cir. 1996) (per curiam) (internal quotation
marks and citation omitted). The “key inquiry” is whether the information the
union seeks is “relevant to its duties.” NLRB v. Leonard B. Hebert, Jr. & Co.,
Inc., 696 F.2d 1120, 1124 (5th Cir. 1983). Relevance is judged by a “liberal, dis-
covery-type standard,” id. (citing Acme, 385 U.S. at 438 & n.6), according to
which the union, in making its request, must have been “‘acting upon the proba-
bility that the desired information was relevant and that it would be of use to
the union in carrying out its statutory duties and responsibilities.’” Sara Lee,
514 F.3d at 430-31 (quoting Acme, 385 U.S. at 437).
The union bears the burden of showing relevance where, as here, the
requested information is “not ordinarily pertinent” to the union’s performance
as a bargaining representative but is “alleged to have become relevant due to
2
Selkirk Metalbestos, N. Am., Eljer Mfg., Inc. v. NLRB, 116 F.3d 782, 786 (5th Cir.
1997) (per curiam) (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951)).
6
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particular circumstances.”3 The union must make two showings to satisfy its
burden: First, it must demonstrate that, at the time of the information request,
it articulated a legitimate purpose for seeking the information. Sara Lee, 514
F.3d at 431. Post hoc theories of relevance cannot justify information requests.
Id. Second, the union must show that the information requested bears a logical
relationship to that legitimate union purpose. Id.The union satisfies its burden of showing a legitimate union purpose only
by demonstrating “‘a reasonable belief supported by objective evidence for
requesting the information.’”4 In the case of a suspected alter-ego or single-
employer relationship,5 that means that the union must have a “reasonable
3
See Leonard B. Hebert, 696 F.2d at 1124 (holding that the union “has the initial bur-
den of showing relevancy” where it alleges that the employer is using “double breasted opera-
tions” to evade contractual obligations with the union, i.e., the employer is allegedly operating
two corporations, one hiring strictly union employees, and the other, nonunion employees, to
compete for both union and nonunion work); Shoppers Food Warehouse Corp., 315 N.L.R.B.
258, 259 (1994) (“[W]here, as here, the information sought concerns matters outside the bar-
gaining unit, such as those related to single employer or alter ego status, a union bears the
burden of establishing the relevance of the requested information.”).
4
Advanced Constr. Servs., Inc. v. NLRB, 247 F.3d 807, 812 (8th Cir. 2001) (quoting
Shoppers Food Warehouse, 315 N.L.R.B. at 259). We have used somewhat different language,
namely, that the union must provide a “reasonable basis to suspect” that labor violations
occurred. Leonard B. Hebert, 696 F.2d at 1125 (internal quotation marks and citation omit-
ted). But the Board employs the “reasonable belief” standard in its brief and in its decision,
PDK Invs., LLC, 354 N.L.R.B. No. 1 (Apr. 24, 2009). It is also the standard of preference in
its caselaw. See, e.g., Disneyland Park, 350 N.L.R.B. 1256, 1257-58 & n.4 (2007) (asking
whether the union demonstrated “a reasonable belief, supported by objective evidence, that
the requested information is relevant” and stating that “the Board applies a uniform standard
for evaluating the relevance of information requests involving matters outside the bargaining
unit, although it has sometimes articulated this standard using slightly different language.”).
Because the Board’s legal standard is “reasonably defensible,” it applies. Sara Lee, 514 F.3d
at 428; see Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 982 (2005)
(“A court’s prior judicial construction of a statute trumps an agency construction otherwise
entitled to Chevron deference only if the prior court decision holds that its construction follows
from the unambiguous terms of the statute and thus leaves no room for agency discretion.”).
5
An “alter ego” relationship refers to “the relation between an employer and a substan-
tially identical corporate predecessor, where the change in corporate form is attributable to
anti-union animus.” Advanced Constr. Servs., 247 F.3d at 812. By contrast, “if the companies
(continued...)
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belief, supported by objective evidence, that [the entities at issue] were alter
egos” or a single employer. See Advanced Constr. Servs., 247 F.3d at 812. The
meaning of the phrase “a reasonable belief supported by objective evidence” is
the focus of our discussion.
PDK argues that the union’s evidence is insufficient to establish a “reason-
able belief supported by objective evidence,” because it is all unreliable hearsay.
The Board counters that hearsay can be objective evidence sufficient to support
a reasonable belief. The Board points to its many decisions holding that a union
may rely on hearsay and need not show that its evidence is “accurate or ulti-
mately reliable.” E.g., Shoppers Food Warehouse, 315 N.L.R.B. at 259. The
issue is one of first impression in our circuit.
PDK is correct that the reliability of the union’s evidence matters, and
there are limits on how unreliable the evidence, on which the union bases its
information request, can be. Otherwise, unions could harass or otherwise
improperly burden employers with spurious, yet onerous, information requests.
Thus, a union must rely on “objective evidence” for its information request where
it bears the burden of proof to show relevance, Advanced Constr. Servs., 247 F.3d
at 812, which means it must rely on evidence external to its “‘own (subjective)
impressions.’”6 Secondly, the union must rely on enough evidence, and reliable
enough evidence, that its belief that an alter ego or single-employer relationship
exists is “reasonable.” See id.But allowing hearsay at the information-request stage in the complaint
5
(...continued)
are operated simultaneously rather than successively, the term ‘single employer’ would gener-
ally be used.” Id.6
See NLRB v. B. A. Mullican Lumber & Mfg. Co., 535 F.3d 271, 280 (4th Cir. 2008)
(emphasis omitted) (“Objective evidence is evidence ‘external to the employer’s own (subjective)
impressions.’” (quoting Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 368 n.2
(1998))); cf. Sara Lee, 514 F.3d at 431 (holding that a “‘bare assertion’ of relevancy falls short”
of satisfying the union’s burden).
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process is consistent with the “liberal, discovery-type standard” for information
requests that the Supreme Court has adopted.7 Hearsay is not being introduced
at this stage to establish the truth of the union’s claims, but only to show the
reasonableness of the union’s belief that a violation occurred, thereby justifying
its request for further information.8 It is not per se unreasonable for a union to
believe an employer has an alter ego based purely on hearsay. Rather, the rea-
sonableness of the union’s belief must depend, case-by-case, on the overall
strength of the evidence on which it relies.
B.
The evidence that the union relied on is “objective” in the relevant sense:
McAfee testified about what union members told him they heard from PDK man-
agement, about what he saw on a website, and what his subordinate said he saw
PDK doing. Those hearsay statements may be factually inaccurate, but they
involve sensory observations of facts, not mere subjective “impressions” about
what PDK might have been up to.9
Secondly, a “reasonable mind would accept” the NLRB’s conclusion that
the union reasonably believed that an alter-ego or single-employer relationship
existed.10 Although the evidence supporting the union’s request was hearsay,
7
See Leonard B. Hebert, 696 F.2d at 1124 (noting the Court’s “liberal, discovery-type
standard” (citing Acme, 385 U.S. at 438 & n.6)).
8
See Acme, 385 U.S. at 437 (explaining that “[t]his discovery-type standard decide[s]
nothing about the merits of the union’s contractual claims”); Dodger Theatricals Holdings,
Inc., 347 N.L.R.B. 953, 969 (2006) (“[T]he issue here is not whether the [trade journal] article
is or is not accurate, but whether the Union acted reasonably in relying on the article.”).
9
See B.A. Mullican, 535 F.3d at 280 (holding that employees’ statements that they no
longer supported the union were “objective evidence” despite being hearsay).
10
See Selkirk Metalbestos, 116 F.3d at 786 (explaining that the agency must provide
only “‘such relevant evidence as a reasonable mind would accept to support a conclusion’”
(continued...)
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and some of McAfee’s sources may have had axes to grind with PDK, McAfee
relied on multiple sources who gave detailed and consistent information about
PDK’s alleged wrongdoing, as well as the union’s own independent investigation,
to reach his conclusion.
McAfee said Ayala told him that he was offered a job with the “nonunion”
side of PDK, that it was called GCATS, and that it was run out of the same loca-
tion and by the same officers as PDK. McAfee then said he found a website list-
ing a number of companies with the “Guild” name operating out of the same
address as PDK and with common officers. In addition, he said his subordinate
saw GCATS working at former PDK jobs and “Guild” trucks catering to union
and non-union jobs. Terrell’s written statement also corroborated Ayala’s claims
and gave additional information, and PDK’s admission that it had moved offices
corroborated Terrell’s statement. And the ALJ found McAfee credible. On the
sum of that evidence, the NLRB’s conclusion that the union had a legitimate
purpose for seeking information is reasonable.
C.
The last issue is whether the information the union requested in its letter
(i.e. the seventy-nine questions) bears a logical relationship to its legitimate pur-
pose. We give “‘great weight’” to the Board’s determination that information is
relevant, because it is “‘a finding on a mixed question of law and fact which is
within the particular expertise of the Board.’” Sara Lee, 514 F.3d at 431 (quoting
NLRB v. Brazos Elec. Power Coop., 615 F.2d 1100, 1101 (5th Cir. 1980)).
Even PDK concedes that the same seventy-nine questions were upheld
10
(...continued)
(quoting Universal Camera, 340 U.S. at 477)).
10
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previously by the Board in alter ego/single employer contexts.11 PDK argues
only that, because its collective-bargaining agreement does not prohibit subcon-
tracting or double-breasting, many of the questions are irrelevant. But the ALJ
found, and the Board agreed, that all the requested information related to the
factors that the Board would consider in an alter-ego or single-employer case.12
We defer to the Board’s finding that the questions bear a logical relationship to
the union’s legitimate purpose.
The application for enforcement of the order is GRANTED.
11
Resp’t’s Br. 22 (citing Pub. Serv. Elec. & Gas co., 323 N.L.R.B. 1182, 1186-88 (1997),
enf’d, NLRB v. Pub. Serv. Elec. & Gas Co., 157 F.3d 222 (3d Cir. 1998)); see also Brisco Sheet
Metal, Inc., 307 N.L.R.B. 361, 361 (1992) (ordering responses to questions because of a possible
alter ego relationship); Resp’t’s Br. 27 (conceding that Brisco involved the same seventy-nine
questions).
12
For example, determining whether an alter ego relationship exists requires deciding,
among other things, whether the “two enterprises have substantially identical management,
business purpose, operation, equipment, customers, supervision, and ownership.” J. Vallery
Elec., Inc. v. NLRB, 337 F.3d 446, 451 (5th Cir. 2003). Determining single-employer status
involves similar considerations. See NLRB v. DMR Corp., 699 F.2d 788, 790-91 (5th Cir.
1983).
11