KOONS FORD OF ANNAPOLIS, INC., PETITIONER V. NATIONAL LABOR RELATIONS BOARD, ET AL. No. 87-1305 In the Supreme Court of the United States October Term, 1987 On Petition for a Writ of Certiorari to the United States Court of Appeals For the Fourth Circuit Brief for the National Labor Relations Board in Opposition TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Statement Argument Conclusion Appendix OPINIONS BELOW The opinion of the court of appeals (Pet. App. A1-A6) is reported at 833 F.2d 310 (Table). The decision and order of the National Labor Regulations Board, including the findings and recommendations of the administrative law judge (Pet. App. A30-A45, A46-A133), are reported at 282 N.L.R.B. No. 88. JURISDICTION The judgment of the court of appeals was entered on October 28, 1987. A timely petition for rehearing was denied on December 11, 1987 (Pet. App. A136). The petition for a writ of certiorari was filed on February 4, 1988. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether, in the circumstances of this case, the court of appeals properly enforced the bargaining order issued by the National Labor Relations Board without requiring the Board to reopen the record so that petitioner could adduce evidence of post-hearing employee turnover and change in owenership and management. STATEMENT 1. In November 1982, District 65, United Automobile, Aerospace and Agricultural Implement Workers of America (the Union), began an organizational campaign among petitioner's service department employees (Pet. App. A58). By mid-December 1982, the Union had obtained authorization cards from at least 38 of the 66 unit employees (id. at A39). On petition by the Union, the National Labor Rela ions Board scheduled a representation election for January 12, 1983 (id. at A118). Petitioner's officials, however, learned of the Union's organizational drive and, as a consequence, on approximately 26 occasions between mid-November 1982 and January 12, 1983, "either threatened employees with plant closure, discharge, and layoff, more onerous working conditions and stricter work rules leading to the discharge of employees, and loss of privileges and benefits; interrogated employees concerning their union sympathies and the organization campaign; or unlawfully solicited employees to campaign against the Union" (Pet. App. A134-A35; see also id. at A72-95). Specifically petitioner's President, John Koons Jr., announced to an employee whom he was interrogating about the Union that " he didn't need the dealership and he would close it down and turn it into an apartment building or an office building" (id. at A35, 76); moreover, he told several other employees that he did not need the dealership and "could close the doors and move to Florida and that life would go on without Koons Ford" (id. at A35, A75-A76). Petitioner's Service Department Manager, Ned Tomarchio, in turn told an employee that President Koons could easily close down the dealership and warned two mechanics that unionization would mean that employees could be fired or otherwise disciplined for arriving late to work, for making unsatisfactory repairs, or for requesting additional time to complete a job (id. at A35-A36, A85-A88). Likewise, petitioner's Make-Ready Manager, Irv Sherbert, warned two mechanic's helpers that employees would receive more severe discipline if the Union was selected as their collective bargaining representative, with the result that employees could be fired for a single misstep (id. at A36, A80); he also told the two least senior employees in his department that they would be laid off in the event of unionization (id, at A36, A78). Tomarchino, Sherbert, and General Manager Ronald Hendrick similarly threatened small groups of employees that valued employee privileges would be taken away if the employees elected to unionize (id. at A36, A83, A89-A90, A91-A95). Finally, on January 6, 1983, just six days before the representation election, petitioner increased the wages of its body-shop employees -- by granting their long-standing demand that their compensation formula be returned to the system that had been in effect prior to April 1982 -- and gave pay increases, averaging between 25 and 60 cents per hour, to 15 used car, parts, and make-ready department employees (id. at A36-A37, A97-A103, A107-A118). The Union lost the January 12, 1983 election, with 27 employees voting in its favor, and 39 employees voting against it (Pet. App. A47). It then filed unfair labor practice charges and objections to the election with the Board, contending that petitioner's pre-election misconduct had precluded a fair election (id. at A47-A48). In response to these charges, the General Counsel issued a complaint against petitioner (id. at A48). 2. After a hearing, an administrative law judge (ALJ) held that, by engaging in the aforementioned acts, petitioner had violated Sections 8(a)(1), (a)(3), and (a)(5) of the National Labor Relations Act, 29 U.S.C. 158(a)(1), (a)(3)and (a)(5) (Pet. App. A46-A130). As a remedy, the ALJ recommended: (a) that petitioner by order to cease and desist from the aforementioned acts; (b) that the results of the January 12, 1983 election be set aside; and (c) that petitioner be ordered to recognize and bargain with the Union as the representative of the service department employees (id. at A126-A130). In recommending that a bargaining order issue, the ALJ noted both that "(t)he applicable standard is set forth in the landmark case of N.L.R.B. v. Gissel Packing Company, 395 U.S. 575, 613-615 (1969)," and that, under this standard, a bargaining order may issue where a union has at one point enjoyed majority support and the employer's unfair labor practices have rendered the possibility of conducting a fair rerun election too slight (Pet. App. A121, A122). The ALJ then found that petitioner "ha(d) engaged in a pattern of unremedied unfair labor practices which effectively destroyed the conditions (necessary) for a free and fair election, that those conditions probably cannot and will not be restored at any time in the foreseeable future, and that therefore a bargaining order is warranted, based on the Union's majority status as of November 23 and 24" (id. at A123). The ALJ explained (id. at A123-A124 (footnotes omitted)): The present case presents an almost textbook example of the 'fist inside the velvet glove.' N.L.R.B. v. Exchange Parts, 375 U.S. 405, 409 (1964). (Petitioner thought its supervisory personnel repeatedly hammered home the theme that uninoinzation would per se result in the loss of a wide range of privileges and benefits which were important to the employees, e.g., job secuirty, employer assistance, access to management, hobby night, working on cars outside the job, parts discount, opportunity for schooling advancement, drinking beer after work and the annual Christmas party. These threats for all practical purposes nullified (petitioner's) belated assertion that it would bargain in good faith. Moreover the employees were well aware that retention of some of these privileges and benefits ere dependent on employer good will or other subjective or variable factors within (petitioner's) control, e.g., the extent to which the service manager might grant more time to a mechanic on a flat rate job. Therefore, it is unlikely that the posting of a Board notice (and that essentially is all that conventional Board order could provide in this case) would offer much assurance to the employees. . . . Most serious, however, were the pay increases granted shortly before the election. In these cases, . . . (e)ssentially all the Board can do is to tell the employer not to do it again. . . . The impact of such actions, coupled with (petitioner's) unlawful threats, cannot easily be forgotten. . . . The ALJ added (id. at A125) that "neither the passage of time nor employee turnover is likely to result in conditions which would allow uncoerced employee choice in a free and fair election," noting that (id. at A125-A126): (Petitioner) presented evidence that as of the close of the hearing (October 18, 1983), 24 of the 66 employees in the unit as of January 10 were no longer employed by (petitioner), and one was no longer in the unit. The evidence indicates that there is substantial turnover among (petitioner's) younger, unskilled employees, e.g., porters, helpers and make-ready employees. However the evidence also indicates that there is much greater stability at higher levels of progression, particularly among the line mechanics and those on commission. . . . These employees included the principal union adherents and employees who where direct targets of (petitioner's) unfair labor practices. . . . Accordingly, the ALJ concluded that "it will be a long time before the 1982-83 election campaign is forgotten at the Company and before the effects of the Company's unlawful conduct can be dissipated" (id. at A126). 3. The Board affirmed the ALJ's decision and adopted, with minor modifications not material here, his recommended order (Pet. App. A30-A45). The Board noted that "(b)oth the courts and the Board have long recognized the threats of job loss (i.e., plant closure, discharge, and layoff) because of union activity are among the most flagrant interference with Section 7 rights and are more likely to destroy election conditions for a lengthier period of time than other unfair labor practices" (id. at A37-A38) (footnote ommitted)). It then determined that "the natural and likely result of the threats found here was to reinforce the employees' fear and they would lose employment if they persisted in their union activity," particularly since "these violations were commited by Koons, the (petitioner's) top official, and two department managers of the union employees" (id. at A38). The Board described the wage increases awarded to 24 unit employees six days before the election as "an equally serious violation" (ibid.), noting that "such conduct must, of necessity have a strong coercive effect on the employees' freedom of choice, serving as it does to eliminate, by unlawful means and tactics, the very reason for a union's existence" (id. at A38-A39 (footnote omitted)), and that "(w)age increases in particular have a potenntial long-lasting effect, since the Board's traditional remedies do not require (petitioner) to withdraw the benefits from the employees" (id. at A39 (footnote omitted)). Finally the Board found that petitioner's "careful orchestration and general campaign to destroy employee support for the Union" resulted in a "clear dissipation of union support during the period of (petitioner's) almost egregious violations" (ibid.) and that "the inhibitive effects of these unfair labor practices are likely to persist despite a substantial level of turnover and concomitant passage of time" (id. at A40). In this latter regard, the Board noted that "a substantial portion of the turnover occurred among (petitioner's) younger less skilled employees, while many of the older more sileed employees, who were the direct targets of many of the threats, are still employed" (Pet. App. A40). Moreover, "(i)n light of the extensive and repetitive nature of the violations, in particular the threats engaged in at general department meetings," the Board was unwilling to "assume that other employees were unaffected" (id. at A41). It concluded that "(t)he continued presence of these employees creates a potential that the inhibitive effect of the unfair labor practices remain, preventing the possibility of a fair election" (ibid.). Finally, it refused to reopen the record so that petitioner might adduce evidence of post-hearing turnover in employees and changes in ownership and management, including the transfer of ownership and the presidency to Joseph Koons, finding that "the evidence sought to be adduced would not require a different results" (id. at A40 n.18). 4. In an unpublished per curiam opinion, the court of appeals enforced the Board's order (Pet. App. A1-A6). It noted petitioner's contention that the Board had erred by failing to reopen the record in this case to receive petitioner's evidence concerning employee turnover and changes in ownership and management (id. at A4). It similarly noted the Board's contention that it was "not required to reopen the record to consider post-hearing evidence of changed circumstances" and that, in any event, it "actually did consider this evidence" (id. at A5 (emphasis in original)). But the court concluded (ibid.) that it did not have to resolve these issues. It noted that "a bargaining order is in the nature of an equitable remedy" (ibid.); that an employer who "continues to act with disdain or disregard for this country's labor laws . . . presents the most cogent possible evidence that there could not be a free and fair second election" (ibid.); and that "(o)nly if the employer has clean hands can there by any reason to look at changed circumstances and determine whether they should affect the enforcement of the bargaining order" (id. at A5-A6). It then concluded that petitioner did not have such clean hands, noting that "unfair labor practices charges had been filed against (petitioner) after the Board issued its order in this proceeding," that "(t)hese charges were disposed of by a settlement stipulation providing for the entry of a Board Order and a Court Judgment enforcing the order," and that, while "the settlement stipulation . . . did not" include an admission that petitioner had violated the statute, it did include "an extensive order requiring compliance with the Act and providing for full and immediate reinstatement, and for any loss of earnings or other benefits suffered by reason of the discharging of three specific complainants in the proceeding" (id. at A6). /1/ Having "reviewed in this appeal the record in the other proceeding between the parties," the court was certain that "(petitioner) (could not) meet the clean hands requirement" (ibid.). Accordingly, it held that "(i)t would be a waste of judicial time to remand this cause to the Board to consider the 'clean hands' issue" (ibid.). Argument The court below reached the correct result in this case. Its decision does not conflict with any decision of this Court or of any other court of appeals. Accordingly review by this Court is not warranted. 1. In NLRB v. Gissel Packing Co., 395 U.S. 575, 613-614 (1969), the Court approved issuance by the Board of bargaining orders in both "exceptional" cases marked by "outrageous" and "pervasive" unfair labor practices and also "in less extraordinary cases marked by less pervasive practices which nonetheless still have the tendency to undermine majority strength and impede the election processes." A bargaining order may therefore issue "where there is a showing that at one point the union had a major ity" and "the Board finds that the possibility of erasinng the effects of past practices and of ensuring a fair election (or a fair rerun) by the use of traditional remedies, though present, is slight and that employee sentiment once expressed through cards would, on balance, be better protected by a bargaining order . . ." (id. at 614-615). In this case the Board found that petitioner's unfair labor practices had dissipated a card majority and that the effects of the unfair labor practices could not be erased by traditional remedies (so that a fair election could be held). Accordingly, it is clear that a bargaining order would ordinarily be justified. See e.g., NLRB v. Air Products & Chemicals, Inc., 717 F.2d 141, 144-147 (4th Cir. 1983); Piggly Wiggly, Tusalossa Div. v. NLRB, 705 F.2d 1537, 1540-1543 (11th Cir. 1983); Chromalloy Mining & Minerals v. NLRB, 620 F.2d 1120, 1130 (5th Cir. 1980); NLRB v. Eagle Material Handling, Inc., 558 F.2d 160, 167-169 (3d Cir. 1977). 2. In the court below, petitioner contended (Pet. Br. 15-28) that a bargaining order was not justified because of post-hearing turnover in employees and changes in management and ownership and that the Board had erred in issuing the bargaining order without reopening the record so that petitioner could adduce evidence of these post-hearing events. But, as the Board noted (Pet. App. A40 n.18), "the evidence sought to be adduced would not require a different result" "(A) substantial portion of the turnover occurred among (petitioner's) younger less skilled employees, while many of the older more skilled employees, who were direct targets of many of the threats, are still employed"; "(t)he continued presence of these (and other) employees create(d) a potential that the inhibitive effect of the unfair labor practices (would) remain, preventing the possibility of a fair election" (id. at A41 (footnote omitted)). Moreover, the only significant change in management and ownership occurred when Joseph Koons succeeded his brother, John Koons, Jr., as the dealership's owner and president, and Joseph Koons did not disavow the prior coercive acts of petitioner's officials or communicate to the employees in the bargaining unit that he had taken steps to assure that their rights would be respected in the future. See C.A. App. 77-79, 82-85, 117-140. Accordingly, it was reasonable for the Board to conclude that, notwithstanding the alleged post-hearing events, a fair election was not possible and a bargaining order should still issue. See NLRB v. Keystone Pretzel Bakery, 696 F.2d 257, 265 (3d Cir. 1982); Bandag, Inc. v NLRB, 583 F.2d 765, 772 (5th Cir. 1978); NLRB v. Ace Comb Co., 342 F.2d 841, 844 (8th Cir. 1965); Granite City Journal, 262 N.L.R.B. 1153, 1158 (1982). 3. The court below rested its judgment, however, on the alternative ground that petitioner did not have "clean hands" warranting reopening the record to take evidence of post-hearing events, because in fact unfair labor practice charges based on alleged post-hearing events had been filed against petitioner and settled by an order approved by the Board and enforced by this court. Even though the results below can stand on the grounds discussed by the Board, petitioner contends (Pet. 8-17) that this Court's review is warranted, because in relying on the settlement stipulation the court of appeals violated the established principle that a settlement agreement with a "nonadmission clause" may not be used to "impute guilt" to a party entering into that settlement. But the court below did not use the settlement agreement to "impute guilt" to petitioner. It merely concluded that the existence of a settlement, and the unfair labor practice charges underlying it, made it appropriate not to require a new evidentiary hearing to enable petitioner to show that post-hearing events had made a fair election possible. That conclusion was eminently sensible: the settlement did not insulate the post-hearing events from any possible consideration in connection with determining the appropriateness of a bargaining order. Petitioner argued below (Pet. Br. 26, 27) that a fair election could be held because "(t)he record does not reflect that (petitioner) has committed an(y) unfair labor practices since the accession of Joseph Koons" and is "devoid of any evidence tending to reveal any anti-union animus on the part of (petitioner's) current management." The court of appeals was not obliged to make that claim at face value when the settlement was a matter of record and the court knew that at any reopened hearing the claim of no "evidence . . . of anti-union animus" would be swiftly dashed. 4. Petitioner also suggests (Pet. 9, 18-20) that the decision below violates the principle of administrative law enunciated by this Court in SEC v. Chenery Corp., 318 U.S. 80, 87 (1943), to wit, that the validity of agency action ordinarily must be judged solely by the grounds invoked by the agency. But the court here was not affirming an exercise of agency discretion on grounds other than those that supporting the actual exercise of that discretion. It merely concluded that it was "obvious," on the basis of information it had before it, that further proceedings would be "a waste of judicial time" (Pet. App. A6). At worst, it might be said that the court gave excessive weight to the existence of post-hearing charges in concluding that a reopened hearing would be futile. That judgment, highly specific to this case, does not warrant this Court's review in this case, where the Board's conclusion was amply justified by the reasons it itself gave, and where the court of appeals' opinion is unpublished. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. CHARLES FRIED Solicitor General ROSEMARY M. COLLYER General Counsel JOHN E. HIGGINS, JR. Deputy General Counsel ROBERT E. ALLEN Associate General Counsel NORTON J. COME Deputy Associate General Counsel LINDA SHER Assistant General Counsel National Labor Relations Board MARCH 1988 /1/ The court was referring to the unfair labor practice charges underlying the complaint that the General Counsel filed against petitioner on March 5, 1987. This complaint, which is attached as an appendix to this brief, alleged that, on August 5, 1985, petitioner held a meeting at which its then-president, Joseph Koons: (a) promised to provide employees with raises and a pension plan if they abandoned their support for the Union; (b) solicited employees to persuade other employees to abandon their support for the Union; (c) informed employees that it would be futile to support the Union; (d) informed employees that petitioner would not bargain with the Union; (e) solicited employees to decertify the Union as their collective-bargaining representative; and (f) offered to assist employees to decertify the Union (App., infra, 5a-6a). The complaint also alleged that, at the same meeting, Joseph Koons threatened employees with discharge if they engaged in union activities, and that other supervisory personnel threatened employees with discharge because of their union activity during the period January 15 through January 21, 1986 (id. at 6a). Finally, the complaint alleged that the discharges on March 30, 1986 of three employees -- Ricky Kubert, Fred Pierson, and Joseph Smith -- were due, inter alia, to their activities on behalf of the Union, including testifying in the unfair labor practice proceedings in the instant case (id. at 4a-5a). The complaint was settled by a stipulation in which petitioner agreed to the entry of a Board order requiring it: (a) to cease and desist from engaging in the conduct alleged to have occurred at the August 5, 1985 meeting held by Joseph Koons; (b) to cease and desist from discharging or otherwise disciplining or discriminating against its employees because of their protected activity or because "they have filed charges or given testimony under (the Act)"; and (c) to offer reinstatement and certain sums of backpay to the three discharged employees (Pet. App. All). The settlement stipulation contained a non-admission clause stating that "by entering (into) this Stipulation, (petitioner) does not admit in violated the (Act)" (id. at A13). Finally, the settlement provided that petitioner was waiving all defenses to the entry of a judgment by the appropriate court of appeals enforcing the Board's order (ibid.). The Board approved this settlement on May 28, 1987, and entered the agreed-upon order (Pet. App. A19-A27). The court of appeals then enforced the Board's order on August 6, 1987 (id. at A28-A29). APPENDIX