Harter Tomato Prod v. NLRB

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 11, 1997 Decided January 23, 1998
No. 96-1326
Harter Tomato Products Company,
Petitioner/Cross-Respondent
v.
National Labor Relations Board,
Respondent/Cross-Petitioner
On Petition for Review and Cross-Application for
Enforcement of an Order of the
National Labor Relations Board
Warren Davison argued the cause for petitioner/cross-
respondent. With him on the briefs was Mary E. Bruno.
David A. Seid, Attorney, National Labor Relations Board,
argued the cause for respondent/cross-petitioner. With him
on the brief were Linda Sher, Associate General Counsel,
Aileen A. Armstrong, Deputy Associate General Counsel, and
Fred Cornnell, Supervisory Attorney.
Before: Williams, Henderson and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: After a company which processed
tomato paste, tomatoes, and other fruits halted operations,
petitioner leased all of its facilities, continuing only tomato
paste processing. Applying the successorship doctrine, the
National Labor Relations Board found that petitioner com-
mitted an unfair labor practice by refusing to bargain with
the union recognized by the predecessor. Agreeing with the
Board that direct purchase of the predecessor's assets is not a
prerequisite for successor status and finding that the Board's
application of the successorship test is supported by substan-
tial evidence, we deny the petition for review and grant the
Board's cross-application for enforcement.
I
Harter, Inc., the predecessor company, processed industrial
tomato paste, prunes, canned tomatoes, and canned peaches
in Yuba City, California. Employing about 1200 people,
Harter was a member of a multiemployer association that
entered into a series of collective bargaining agreements with
the International Brotherhood of Teamsters, an association
composed of various labor organizations, including Cannery,
Dried Fruit & Nut Workers' Union, Local 849.
In July 1993, Harter sold its facilities and equipment--
including a tomato paste processing plant, a nonoperational
whole peeled tomato canning plant, a building for processing
peaches and prunes, and a warehouse--to a general partner-
ship which then leased them to petitioner Harter Tomato
Products Company ("HTPC"), a recently incorporated enter-
prise previously unrelated to Harter. Through the lease,
HTPC also obtained the right to use the "Harter" corporate
name.
Like its predecessor, HTPC processes tomato paste, using
the same equipment and production methods previously em-
ployed by Harter. Unlike Harter, HTPC processes no toma-
toes, peaches, or prunes. During the 1993 season, HTPC
employed about seventy people, two-thirds of whom had
previously worked for Harter; it also employed seven former
Harter managers--including its general manager, chief finan-
cial officer, and tomato processing plant manager--as its
administrative team. Nearly sixty percent of HTPC's cus-
tomers previously bought tomato paste from Harter. HTPC
produced almost the same amount of tomato paste, making
nearly the same amount of money from its tomato paste sales
as Harter had in the previous year.
About two weeks after HTPC began processing tomato
paste, the Union asked HTPC to recognize and bargain with
it as the exclusive representative of HTPC's employees.
HTPC refused. Instead, it filed a petition for a Board-
conducted election. The Board held HTPC's petition in
abeyance because the day after the company filed it, the
Union charged HTPC with violating sections 8(a)(1) and (5) of
the National Labor Relations Act, 29 U.S.C. s 158(a)(1), (5)
(1994), which prohibit employers from "refus[ing] to bargain
collectively with the representatives of [their] employees."
Id. s 158(a)(5). Some two weeks later, HTPC's employees
signed a petition stating that they no longer wished to be
represented by the Union.
On May 8, 1995, an Administrative Law Judge found that
HTPC was a successor to Harter and had therefore violated
the Act by refusing to bargain with the Union. Appealing to
the Board, Harter argued that the successorship doctrine
should not apply when the alleged successor merely leases
the assets of the predecessor company, that the ALJ failed to
consider important differences between the two companies in
finding successor status, and that HTPC believed in good
faith that a majority of its employees no longer supported the
Union. The Board rejected all of these arguments. To begin
with, it held that "the direct transfer of assets to the succes-
sor is not a prerequisite to [successor] status" and that HTPC
was "clear[ly]" a successor employer. Harter Tomato Prod-
ucts Co., 321 N.L.R.B. 901, 901-902 (1996). In reaching this
conclusion and analyzing the transition from Harter to HTPC
from the employees' perspective, the Board found that HTPC
"took over a distinct segment of Harter Inc.'s business,
operating it in the same manner using the same equipment
and the same employees, selling to many of the same custom-
ers, with no hiatus in operations." Id. at 903. The Board
also found that HTPC's election petition and the employees'
anti-union petition were "tainted by [HTPC's] unfair labor
practice and ... not reliable indicators of the employees'
sentiments." Id. at 903 n.16.
HTPC now petitions for review of the Board's order. The
Board cross-applies for enforcement. We review the Board's
factual conclusions for substantial evidence, Universal Cam-
era Corp. v. NLRB, 340 U.S. 474, 488 (1951), defer to NLRB
rules if they are "rational and consistent with the Act," Fall
River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 42
(1987), and uphold the Board's application of law to facts
unless arbitrary or otherwise erroneous, Teamsters Local
Union No. 515 v. NLRB, 906 F.2d 719, 722 (D.C. Cir. 1990).
II
The National Labor Relations Act's overriding purpose is
the promotion of "industrial peace." Brooks v. NLRB, 348
U.S. 96, 103 (1954). To achieve this goal, a union certified
by the Board as a bargaining-unit representative enjoys a
conclusive presumption of majority status for one year and a
rebuttable presumption thereafter. NLRB v. Burns Int'l
Sec. Servs., Inc., 406 U.S. 272, 279 n.3 (1972). An employer
can rebut this presumption if on the basis of objective evi-
dence, it has a good faith belief that the union no longer
enjoys majority support. Lee Lumber and Bldg. Material
Corp. v. NLRB, 117 F.3d 1454, 1458 (D.C. Cir. 1997). Be-
cause transitions from one employer to another are particu-
larly threatening to industrial peace, the rebuttable pre-
sumption of majority status continues despite a change of
employers. Fall River, 482 U.S. at 39-41. Moreover, "the
new employer has an obligation to bargain with [the] union
so long as the new employer is in fact a successor of the old
employer and the majority of its employees were employed
by its predecessor." Id. at 41.
The successorship question turns on whether, in view of the
"totality of the circumstances," there is "substantial continui-
ty" between the new and predecessor employers. Id. at 43. More specifically--and central to this case--the Board asks
whether the new company " 'acquired substantial assets of its
predecessor and continued, without interruption or substan-
tial change, the predecessor's business operations.' " Id.
(quoting Golden State Bottling Co. v. NLRB, 414 U.S. 168,
184 (1973)). To answer this inquiry, the Board must consider
"a number of factors," including "whether the business of
both employers is essentially the same; whether the employ-
ees of the new company are doing the same jobs in the same
working conditions under the same supervisors; and whether
the new entity has the same production process, produces the
same products, and basically has the same body of custom-
ers." Id. at 43. The ultimate question is this: Will the
employees "understandably view their job situations as essen-
tially unaltered"? Golden State Bottling, 414 U.S. at 184; see
also International Union of Petroleum & Indus. Workers. v.
NLRB, 980 F.2d 774, 779 (D.C. Cir. 1992) ("The fact-intensive
inquiry into 'substantial continuity' is undertaken with an
emphasis on the employees' perspective.") (quoting Fall Riv-
er, 482 U.S. at 43).
Emphasizing Fall River's use of the word "acquired,"
HTPC argues that it cannot be a successor because it only
leased Harter's assets from a third party rather than pur-
chasing them directly from Harter. Like the Board, we
disagree. Nothing in the definition of "acquire"--"to come
into possession, control, or power of disposal of often by some
uncertain or unspecified means"--excludes leasing as a means
of obtaining control. Webster's Third New International
Dictionary of the English Language Unabridged 18 (1993).
Although we have never squarely addressed this question,
two of our sister circuits have held that a direct purchase of
assets is not a prerequisite for successorship. See NLRB v.
Houston Bldg. Serv., Inc., 936 F.2d 178, 180-81 & n.2 (5th
Cir. 1991) (finding successorship when new company took
over services contract of the predecessor but did not acquire
predecessor's assets); Saks & Co. v. NLRB, 634 F.2d 681, 687
(2nd Cir. 1980) ("[W]hile a transfer of assets may be evidence
of the requisite continuity of business operations, it has not
been thought to be a necessary condition ...."). HTPC's
rigid definition of "acquired," moreover, conflicts with Fall
River's twin holdings that the Board must examine "a num-
ber of factors" when determining successorship and that the
inquiry's touchstone is whether the employees perceive their
job situations as essentially unchanged. Fall River, 482 U.S.
at 43. We therefore hold that if other factors demonstrate
substantial continuity and if employees perceive their new
jobs as highly similar the fact that the second company leased
the assets of its predecessor from a third party rather than
purchasing them directly from the predecessor does not
preclude the Board from finding successorship status. See
id. at 44 n.10 ("So long as there are other indicia of 'substan-
tial continuity,' the way in which a successor obtains the
predecessor's assets is generally not determinative of the
'substantial continuity' question.").
HTPC next argues that the Board misapplied the succes-
sorship test, claiming that the agency " 'effectively disregard-
ed' the substantial continuity prong of the successorship
analysis." Again, we disagree. Drawing its factual findings
from the parties' joint stipulation of facts, the Board faithfully
applied Fall River's multifactored successorship test, analyz-
ing the results from the perspective of HTPC's employees.
The Board found many factors weighing in favor of successor-
ship: HTPC leased Harter's facilities, used its equipment,
engaged in tomato paste processing, employed the same
production method as Harter, hired Harter's management
team for similar positions, and sold to Harter's customers. A
majority of HTPC's employees previously worked for Harter,
and HTPC began its operation shortly after Harter went out
of business. Harter Tomato, 321 N.L.R.B. at 902-03. Given
these many similarities, we find the Board's successorship
conclusion supported by substantial evidence and neither
unreasonable nor arbitrary.
Pointing to differences in size, wages, benefits, training,
customer base, managerial philosophy, and supplier contracts,
among others, HTPC argues that the two companies are
substantially dissimilar and that HTPC's employees would
perceive a material difference between the two. Though
plausible, this argument is unresponsive to the question we
face. We ask not whether HTPC's view of the facts supports
its version of what happened, but rather whether the Board's
interpretation of the facts is " 'reasonably defensible.' "
Pittsburgh Press Co. v. NLRB, 977 F.2d 652, 654 (D.C. Cir.
1992) (quoting Ford Motor Co. v. NLRB, 441 U.S. 488, 497
(1979)). If so, the case is over, even if HTPC's version might
support a contrary result. Because we find that the Board
reached a reasonable conclusion based on evidence in the
record, we need not consider HTPC's alternative interpreta-
tion. See International Union of Elec., Radio & Mach.
Workers v. NLRB, 604 F.2d 689, 694-95 (D.C. Cir. 1979)
(internal organizational alterations do not preclude successor-
ship finding when other factors are present).
III
HTPC argues that, even if it were a successor, it had no
obligation to recognize the Union (and that its election peti-
tion should proceed) because it had a good faith belief that
the Union no longer enjoyed majority support among its
employees. According to the Board, the employees' anti-
union petition, on which HTPC primarily relies for its asser-
tion of good-faith, was tainted by HTPC's refusal to bargain.
Harter Tomato, 321 N.L.R.B. at 903 n.16. We have specifically
upheld the Board's presumption that an employer's unlawful
refusal to bargain taints a subsequent anti-union petition.
Lee Lumber, 117 F.3d at 1458-59. We have also upheld its
ruling that an employer can rebut this presumption only by
showing that employee disaffection arose after it resumed
recognition of the union and bargained for a reasonable time
without committing additional unfair practices adversely af-
fecting the bargaining, id. at 1458, a situation quite unlike this
case.
Relying on the Board's holding that the rebuttable pre-
sumption will not operate in "unusual circumstances," Lee
Lumber and Bldg. Material Corp., 322 N.L.R.B. 175, 178 & n.24
(1996), aff'd in part and remanded in part, 117 F.3d 1454 (D.C. Cir. 1997), HTPC argues that the presumption should
not apply here because, among other reasons, "the size of the
bargaining unit fluctuated radically within a short time." But
HTPC failed to present this argument to the Board. Al-
though the Board issued Lee Lumber approximately three
weeks after its decision in this case, HTPC could have filed a
petition for rehearing. Having failed to do so, it cannot
present its argument here. 29 U.S.C. s 160(e) (1994) ("No
objection that has not been urged before the Board ... shall
be considered by [a reviewing] court [absent] extraordinary
circumstances."); Woelke & Romero Framing, Inc. v. NLRB,
456 U.S. 645, 666 (1982).
HTPC's final argument, that it had a good faith belief in
the Union's nonmajority status because it leased Harter's
assets and because its workforce was smaller than Harter's,
suffers from the same defect. Although advancing this argu-
ment to the Board in general terms, HTPC never identified
specific reasons for its good faith belief, contending only that
it rested on "objective evidence" and "objective factors."
Because HTPC failed to present this argument to the Board
clearly enough, we cannot consider it now. Consolidated
Freightways v. NLRB, 669 F.2d 790, 793 (D.C. Cir. 1981)
("Cases interpreting section 10(e) look to whether a party's
exceptions are sufficiently specific to apprise the Board that
an issue might be pursued on appeal.").
We deny the petition for review and grant the Board's
cross-application for enforcement.
So ordered.