ON APPLICATION FOR ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD (Board Nos. 22-CA-7485 and 22-CA-7486)
Before Seitz, Chief Judge, and Garth and Sloviter, Circuit Judges.
This case is before the court on the application of the National Labor Relations Board (the Board) for enforcement of an order directed against Scott Printing Corporation (Scott Printing) and J & J House of Composition (J & J). The Board adopted the findings, conclusions, and order of the administrative law judge (ALJ), who held that the sale of Scott Printing's composing room to J & J was a sham transaction and that Scott Printing had refused to bargain with Jersey City Typographical Union No. 94 (the Union) in violation of §§ 8(a)(5) and (a)(1) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(5), (a)(1) (1976).
Scott Printing has operated a commercial printing plant in Jersey City for over forty years. The controversy here centers on the sale of Scott Printing's composing room, whose employees have constituted a bargaining unit represented by the Union for approximately ten years. At all times material to this case, Scott Printing's day to day operation has been managed by Gerald Scott (Scott), its executive vice-president and part owner. During the past decade technological advances in the industry have made it possible for many of Scott Printing's customers to do work themselves that formerly was done in the composing room. Consequently, there has been a steady decrease in the demand for composition work, and the number of men employed by Scott Printing in its composing room has declined from over 50 in 1967 to 3 in 1976. Because of the unprofitability of the composing room, in mid-1976 Scott decided to sell it. In October 1976, he placed advertisements in two newspapers, but was unsuccessful in finding a buyer.
The most recent in a series of collective bargaining agreements between Scott Printing and the Union covering the composing room employees expired on December 31, 1976. Pursuant to Union demands, Scott entered into negotiations for a new agreement on November 30, 1976. At this initial meeting Scott and the Union discussed several proposals submitted by the Union, including requests for increases in pension benefits and wages.
The same parties met again on December 20, 1976. Scott informed the Union of the poor market demand for composition work and that he was having difficulty competing with non-union composition done in New York. At this meeting the Union withdrew most of its proposals and began to negotiate from the old contract. Although there was conflicting testimony, the ALJ credited the testimony of Scott, who stated that he informed the Union of his plan to sell or to close down the composing room for the first time at this meeting. A letter from Scott to the Union dated December 22, 1976, confirmed these plans.
In light of this disclosure, the focus of the negotiations shifted at the third bargaining session held on December 27, 1976. The Union bargained for extension of severance pay and pension and welfare benefits beyond the expiration of the current contract. Because he still had not found a buyer, Scott suggested a two week extension of the old contract. The Union proposed a one month extension, which included the wage increases for which it had been bargaining, and the parties agreed to so extend the contract until January 28, 1977.
Directly after the December 27 meeting, Union representatives met with Varsalona, Peters, and Lane, the three composing room employees. The employees were informed of Scott's plan to sell or to shut down the composing room. When they asked about other employment opportunities, they were told that no permanent positions were open and that they would have to take their chances substituting at another shop.
In mid-January, Varsalona approached Scott and asked him if he would consider an offer to buy the composing room from himself and Peters.*fn1 Scott expressed interest, and during the next two weeks Varsalona and Scott discussed the basic terms of the sale in several informal meetings. Scott then instructed his attorney to draft a contract for the sale. While the attorney was performing this task, representatives of Scott Printing and the Union met for the last time on January 25, 1977. Most of the discussion at this meeting focused on severance pay, and the Union still did not know that Scott had been negotiating with the composing room employees about a sale.
On January 31, 1977, Scott presented Varsalona and Peters with the written contract. It provided that Varsalona and Peters, acting as J & J House of Composition, would buy the composing room and take over its operation. The contract on its face was a standard one, the only unusual term being that the initial down payment was only $1,000 for the purchase of a going concern priced at $30,000. Varsalona and Peters also agreed to pay $9,000 to rent space in Scott Printing's production room for the first year.
On the same day that the contract was signed, the Union learned about the sale. After Scott confirmed the transaction, the Union called the new owners of the composing room and asked Varsalona to negotiate a collective bargaining agreement. Varsalona refused, stating that he and Peters did not want union representation and that they were going to drop out of the Union. Approximately two weeks later, both Varsalona and Peters did resign from the Union.
The Union filed unfair labor practice charges against Scott Printing and J&J alleging that both companies had unlawfully refused to bargain with it. After a hearing on the Board's complaint, the ALJ concluded that the sale of the composing room was a sham and that J&J was operating as Scott Printing's alter ego. Because he found that Scott Printing had created J&J to evade its duty to bargain with the Union, the ALJ ordered that the sales contract be rescinded, that the management of the composing room be restored to Scott Printing, and that Scott Printing resume bargaining with the Union. The Board affirmed the ...