Golden State Bottling Co., Inc. v. NLRB
414 U.S. 168 (1973)

Annotate this Case

U.S. Supreme Court

Golden State Bottling Co., Inc. v. NLRB, 414 U.S. 168 (1973)

Golden State Bottling Co., Inc. v. NLRB

No. 72-702

Argued October 11, 1973

Decided December 5, 1973

414 U.S. 168

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

Petitioner All American Beverages, Inc. (All American), purchased the soft drink bottling and distribution business of petitioner Golden State Bottling Co. (Golden State) after the National Labor Relations Board (NLRB) had ordered Golden State, "its officers, agents, successors, and assigns" to reinstate with backpay a driver-salesman whose discharge by Golden State was found to have been an unfair labor practice. In a subsequent back-pay specification proceeding to which both firms were parties, upon finding that All American, after the acquisition, continued the business without interruption or substantial change in operations, employee complement, or supervisory personnel, and that, hence, All American, having acquired the business with knowledge of the outstanding NLRB order, was a "successor" for purposes of the National Labor Relations Act (NLRA) liable for the reinstatement of the driver-salesman with backpay, the NLRB ordered All American to reinstate him and both firms jointly or severally to pay him a specified sum of backpay. The Court of Appeals enforced the order.

Held:

1. The Court of Appeals did not err in determining that, on the record as a whole, substantial evidence supported the NLRB's finding that All American purchased the business with knowledge of the unfair labor practice litigation, since it cannot be said on the basis of the record that the Court of Appeals "misapprehended or grossly misapplied" the standard of review. Universal Camera Corp. v. NLRB,340 U. S. 474. Pp. 340 U. S. 172-174.

2. The issuance of a reinstatement and backpay order against a bona fide successor that did not itself commit the unfair labor practice does not exceed the NLRB's remedial powers under § 10(c) of the NLRA, since such powers include broad discretion to fashion and issue such an order in order to achieve the ends and effectuate the policies of the Act. Pp. 414 U. S. 175-177.

Page 414 U. S. 169

3. Federal Rule Civ.Proc. 65(d), which provides that injunctions and restraining orders shall be binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order, does not bar judicial enforcement of the NLRB order running to All American, since a bona fide successor, acquiring, with knowledge that the wrong remains unremedied, the employing enterprise which was the locus of the unfair labor practice, may be considered in privity with its predecessor for purposes of Rule 65(d). Pp. 414 U. S. 177-181.

4. The NLRB properly exercised its discretion in issuing the order against All American by striking an equitable balance among the conflicting legitimate interests of the bona fide successor, the public, and the affected employee for purposes of effectuating the national labor policies of avoiding labor strife, preventing a deterrent effect on the exercise of rights guaranteed employees by § 7 of the NLRA, and protecting the victimized employee, such policies being achieved at a relatively minimal cost to the bona fide successor. Pp. 414 U. S. 181-185.

5. The NLRB did not err in ordering both firms jointly or severally to pay the driver-salesman a specified sum of backpay, since an offending predecessor employer should at least be required to make the dischargee whole for any loss of pay suffered by reason of the discharge until such time as he secures substantially equivalent employment, since joint and several liability will more fully insure that the employee is fully recompensed by protecting him against, e.g., the successor's insolvency, and since the possibility that the successor will unjustifiably delay reinstatement to the predecessor's prejudice can be met by a protective provision in the contract of sale. Pp. 414 U. S. 186-187.

6. The fact that the driver-salesman, but for his discharge as an ordinary employee would, under Golden State's policy, have become a distributor about a year later, and, as an independent contractor, would have been excluded from NLRA coverage, did not preclude the NLRB from including in the gross backpay computation the dischargee's putative earnings as a distributor, since a reinstatement and backpay order is aimed at restoring the status quo that would have obtained but for the employer's unfair labor practice. Pp. 414 U. S. 187-189.

467 F.2d 164, affirmed.

BRENNAN, J., delivered the opinion for a unanimous Court.

Page 414 U. S. 170

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The principal question for decision in this case is whether the bona fide purchaser of a business, who acquires and continues the business with knowledge that his predecessor has committed an unfair labor practice in the discharge of an employee, may be ordered by the National Labor Relations Board to reinstate the employee with backpay.

Petitioners are Golden State Bottling Co., Inc. (Golden State), and All American Beverages, Inc. (All American). All American bought Golden State's soft drink bottling and distribution business after the National Labor Relations Board had ordered Golden State, "its officers, agents, successors, and assigns" to reinstate with back pay a driver-salesman, Kenneth L. Baker, whose discharge by Golden State was found by the Board to have been an unfair labor practice. [Footnote 1] In a subsequent backpay

Page 414 U. S. 171

specification proceeding to which both Golden State and All American were parties, see 29 CFR §§ 102.52-102.59, the Board found that All American continued after the acquisition to carry on the business without interruption or substantial changes in method of operation, employee complement, or supervisory personnel. In that circumstance, although All American was a bona fide purchaser of the business, unconnected with Golden State, the Board found that All American, having acquired the business with knowledge of the outstanding Board order, was a "successor" for purposes of the National Labor Relations Act and liable for the reinstatement of Baker with backpay under the principles announced in Perma Vinyl Corp., 164 N.L.R.B. 968 (1967), enforced sub nom. United States Pipe & Foundry Co. v. NLRB, 398 F.2d 544 (CA5 1968). [Footnote 2] The Board therefore ordered that

Page 414 U. S. 172

All American reinstate Baker and that Golden State and All American jointly or severally pay Baker a specified sum of net backpay. 187 N.L.R.B. 1017 (1971). The Court of Appeals for the Ninth Circuit, one judge dissenting, enforced the order, 467 F.2d 164 (1972). We granted certiorari, 410 U.S. 953 (1973). We affirm.

I

There is a threshold question of whether the Court of Appeals erred in determining that the evidence

"offered substantial support for the Board's finding that All American purchased [the bottling business] with knowledge of the unfair labor practice litigation."

467 F.2d at 165. We address that question mindful of the congressionally imposed limitation on this Court's review of the Court of Appeals' determination:

"Whether on the record as a whole there is substantial evidence to support agency findings is a question which Congress has placed in the keeping of the Courts of Appeals. This Court will intervene only in what ought to be the rare instance when the standard appears to have been misapprehended or grossly misapplied. 340 U. S. v.

Page 414 U. S. 173

NLRB,340 U. S. 474, 340 U. S. 491 (1951). (Emphasis added.)"

Thus limited, we cannot find fault with the Court of Appeals' conclusion that, on the record as a whole, substantial evidence supported the Board's finding that All American purchased the business with knowledge of the unfair labor practice litigation. Eugene Schilling, Golden State's secretary and manager of the bottling business, who had discharged Baker and then closely followed the progress of the litigation, continued with the enterprise under All American's ownership with the title of general manager and "president." Indeed, All American's purchase of the business was conditioned on Schilling's staying on in a managerial capacity; the sales contract expressly stipulated that Schilling "shall have agreed to be employed by [All American] for a period of one year after the Closing Date as General Manager. . . ." Schilling participated on at least one occasion with Golden State's president, Edwin J. Crofoot, in the sale negotiations. Even if strict agency principles would not impute Schilling's knowledge to All American until Schilling actually entered its employ, see Restatement (Second) of Agency § 9(3) (1958); Thomas Engine Corp., 179 N.L.R.B. 1029, 1042 (1970), enforced sub nom. UAW v. NLRB, 442 F.2d 1180 (CA9 1971), the Court of Appeals cannot be said to have "misapprehended or grossly misapplied" the governing standard in appraising this evidence as sufficiently substantial to support an inference that Schilling informed his prospective employer of the litigation before completion of the sale. It is true that both Schilling and Crofoot testified at the hearing in the specification proceeding that they had not informed All American of the litigation before the sale was completed. But the trial examiner refused to credit their testimony in light of documentary evidence from which he inferred that the Golden State officials had

Page 414 U. S. 174

attempted to conceal the sale from the Board, 187 N.L.R.B. at 1021. The examiner also refused to credit Crofoot's testimony that, while All American expressly asked him whether any litigation was pending, he did not mention the unfair labor practice case because he had forgotten it, although admitting that he had authorized payment of substantial fees in connection with it. Ibid. Finally, the examiner inferred from the unexplained failure of All American to produce its negotiators as witnesses that their testimony would not have supported All American's disclaimer of knowledge. [Footnote 3]

On this state of the record, there is no justification for this Court's intervention, since Universal Camera precludes us from substituting our judgment for that of the Court of Appeals.

"This is not the place . . . to reverse a Court of Appeals because, were we in its place, we would find the record tilting one way, rather than the other. . . ."

NLRB v. Pittsburgh S.S. Co.,340 U. S. 498, 340 U. S. 503 (1951); see Central Hardware Co. v. NLRB,407 U. S. 539, 407 U. S. 548 (1972).

II

The Board has pursued an uneven course in its treatment of a bona fide successor's liability to remedy the unfair labor practices of its predecessor. In 1944, the Board determined that liability would not be imposed on a bona fide successor, South Carolina Granite Co., 58 N.L.R.B. 1448, enforced sub nom. NLRB v. Blair Quarries, Inc., 152 F.2d 25 (CA4 1945). In 1947, the Board abandoned that view and determined that joint and several remedial responsibility would be imposed upon a bona fide successor who had knowledge of the seller's unfair labor practice at the time of the purchase, Alexander

Page 414 U. S. 175

Milburn Co., 78 N.L.R.B. 747. When, however, two Courts of Appeals refused to enforce remedial orders against bona fide successors, NLRB v. Birdsall-Stockdale Motor Co., 208 F.2d 234 (CA10 1953), and NLRB v. Lunder Shoe Corp., 211 F.2d 284 (CA1 1954), the Board, in 1954, reexamined and overruled Alexander Milburn Co., declaring, in Symns Grocery Co., 109 N.L.R.B. 346, that

"[n]o provision of the [National Labor Relations] Act authorizes the Board to impose the responsibility for remedying unfair labor practices on persons who did not engage therein."

Id. at 348. Finally, in 1967, in yet another turnabout, the Board overruled Symns Grocery Co. in Perma Vinyl, supra, and announced that, in circumstances there defined, seen 2, supra, remedial orders would be imposed upon bona fide successors for the unfair labor practices of their predecessors.

We must consider at the outset whether the issuance of a reinstatement and backpay order against a bona fide successor exceeds the Board's remedial powers under § 10(c) of the Act, 29 U.S.C. § 160(c). Section 10(c), in pertinent part, provides:

"If upon the preponderance of the testimony taken, the Board shall be of the opinion that any person named in the complaint has engaged in . . . any such unfair labor practice, then the Board . . . shall issue and cause to be served on such person an order requiring such person to cease and desist from such unfair labor practice, and to take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of this Act. . . ."

(Emphasis added.) The Board's restrictive view in Symns Grocery Co. of its remedial powers derived from a limitation perceived to inhere in the words "any person named in the complaint has engaged in . . . any such unfair labor practice"

Page 414 U. S. 176

(emphasis added). These words were regarded as precluding authority to issue remedial orders against persons, like bona fide successors, who had not perpetrated the unfair labor practice. In Perma Vinyl, however, the Board found a broader authority in the words of the section authorizing the Board "to take such affirmative action . . . as will effectuate the policies of this Act." These words were construed as granting

"broad administrative power . . . to frame such remedial orders . . . not, of course, restricted to requiring remedial action by the offending employer alone,"

164 N.L.R.B. at 969, as were necessary to further the public interest subserved by the Act. See NLRB v. Colten, 105 F.2d 179 (CA6 1939).

We agree that the Board's remedial powers under § 10(c) include broad discretion to fashion and issue the order before us as relief adequate to achieve the ends, and effectuate the policies, of the Act. Early on, this Court recognized that § 10(c) does not limit the Board's remedial powers to the actual perpetrator of an unfair labor practice, and thereby prevent the Board from issuing orders binding a successor who did not himself commit the unlawful act. We have said that a Board order that, as in this case, runs to the "officers, agents, successors, and assigns" of an offending employer may be applied not only to a new employer who is "merely a disguised continuance of the old employer," Southport Petroleum Co. v. NLRB,315 U. S. 100, 315 U. S. 106 (1942), but also,

"'in appropriate circumstances . . . , [to] those to whom the business may have been transferred, whether as a means of evading the judgment or for other reasons.'"

Regal Knitwear Co. v. NLRB,324 U. S. 9, 324 U. S. 14 (1945) (emphasis added); see also NLRB v. Ozark Hardwood Co., 282 F.2d 1, 5 (CA8 1960). If the words "person named in the complaint has engaged in . . . any . . . unfair labor practice" in § 10(c) do not restrict Board authority to prevent

Page 414 U. S. 177

orders running to the offending employer's successors and assigns who have acquired the business as a means of evading the Board order, we do not see how those words may be read to bar the Board from issuing reinstatement and backpay orders against bona fide successors when the Board has properly found such orders to be necessary to protect the public interest in effectuating the policies of the Act. The Board's orders run to the evader and the bona fide purchaser, not because the act of evasion or the bona fide purchase is an unfair labor practice, but because the Board is obligated to effectuate the policies of the Act. Construing § 10(c) thus to grant the Board remedial power to issue such orders results in a reading of the section, as it should be read, in the light of "the provisions of the whole law, and . . . its object and policy.'" Mastro Plastics Corp. v. NLRB,350 U. S. 270, 350 U. S. 285 (1956); see NLRB v. Lion Oil Co.,352 U. S. 282, 352 U. S. 288 (1957).

It is also argued, however, that Fed.Rule Civ.Proc. 65(d), in any event, is a bar to judicial enforcement of a Board order requiring that a bona fide successor reinstate with backpay an employee illegally discharged by its predecessor. We disagree. [Footnote 4] Rule 65(d) provides that

Page 414 U. S. 178

injunctions and restraining orders shall be

"binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise."

See generally O. Fiss, Injunctions 691-700 (1972). We reject petitioners' contention that Real Knitwear Co. v. NLRB, supra, at 14, supports the argument that this Rule is a bar to judicial authority to enforce Board orders against bona fide successors. In Real Knitwear, the Court refused the offending employer's application to strike the phrase "successors and assigns" from the Board's order, citing Walling v. James v. Reuter, Inc.,321 U. S. 671 (1944), which involved an injunction against violation of the Fair Labor Standards Act. Real Knitwear treated a Board cease and desist order as "somewhat analogous" to such an injunction, and stated:

"'Not only is such an injunction enforceable by contempt proceedings against the corporation, its agents and officers and those individuals associated with it in the conduct of its business, but it may also, in appropriate circumstances, be enforced against those to whom the business may have been

Page 414 U. S. 179

transferred, whether as a means of evading the judgment or for other reasons.' . . ."

"We do not undertake to decide whether or under what circumstances any kind of successor or assign will be liable for violation of a Labor Board order. . . . [W]hether one brings himself in contempt as a 'successor or assign' depends on an appraisal of his relations and behavior, and not upon mere construction of terms of the order."

324 U.S. at 324 U. S. 14-15.

Plainly then, Regal Knitwear recognizes that Rule 65(d) is not a bar to enforcement of all Board orders running to successors or assigns not themselves offending employers. The Court simply left open the question of whether the Rule precludes the enforcement of remedial orders running to a successor who is a bona fide purchaser. We answer that question today by holding that the Rule is not a bar to judicial enforcement of the Board order entered against the bona fide successor in this case.

Rule 65(d)

"is derived from the common law doctrine that a decree of injunction not only binds the parties defendant, but also those identified with them in interest, in 'privity' with them, represented by them or subject to their control."

Regal Knitwear, 324 U.S. at 324 U. S. 14. Persons acquiring an interest in property that is a subject of litigation are bound by, or entitled to the benefit of, a subsequent judgment, despite a lack of knowledge. Restatement of Judgments § 89, and comment c (1942); see 1 J. Story, Equity Jurisprudence § 536 (14th ed.1918). This principle has not been limited to in rem or quasi in rem proceedings. Restatement of Judgments, supra, § 89, comment d; see ICC v Western N.Y. & P. R. Co., 82 F.192, 194 (WD Pa. 1897). We apply that principle here in order to effectuate the public policies of the Act.

"Courts of equity may, and frequently

Page 414 U. S. 180

do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved."

Virginian R. Co. v. System Federation,300 U. S. 515, 300 U. S. 552 (1937); see Walling v. James v. Reuter, Inc., 321 U.S. at 321 U. S. 674-675. We hold that a bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied, the employing enterprise which was the locus of the unfair labor practice, may be considered in privity with its predecessor for purposes of Rule 65(d). Cf. United States v. Hall, 472 F.2d 261, 266-267 (CA5 1972); Rivera v. Lawton, 35 F.2d 823 (CA1 1929); United States v. Dean Rubber Mfg. Co., 71 F.Supp. 96 (WD Mo.1946); United Gilpin Corp. v. Wilmore, 100 Colo. 453, 68 P.2d 34 (1937); 7 J. Moore, Federal Practice

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