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National Labor Relations Board v. Sally Lyn Fashions Inc.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


July 23, 1982

NATIONAL LABOR RELATIONS BOARD
v.
SALLY LYN FASHIONS, INC., ET AL.

Author: Durkin

DURKIN, Magistrate, Acting as Special Master: --

INTRODUCTION

Before the court is a petition by the National Labor Relations Board (NLRB) for an adjudication in civil contempt and for other and further civil relief against Sally Lyn Fashions, Inc. (Sally Lyn), Hamlin Sportswear, Inc. (Hamlin), Mr. Michael, Inc. (Mr. Michael), Salvatore Farruggia, and 590 Sportswear, Inc. (590, Inc.) (Doc. No. 1);*fn1 a motion by the NLRB to amend the petition for adjudication in civil contempt and for other civil relief (a) to change respondent, "590 Sportswear, Inc.," to "590, Inc.," and (b) to add Farruggia Brothers Electric, Farruggia Brothers Realty Co., and Gioacchino (Steve) Farruggia, as respondents in contempt, jointly and severally liable for compliance with the court's judgments (Doc. No. 18); and a motion by the NLRB to correct the transcript of hearing held before the magistrate. (Doc. No. 21).

By way of background, on April 3, 1981, the NLRB filed a petition for adjudication in civil contempt and for other relief against Sally Lyn, Hamlin, Mr. Michael, Salvatore Farruggia, and 590, Inc. The petition was based upon the failure of these garment manufacturers to comply with the court's judgments of January 3, 1979 (No. 78-2481), and October 1, 1980 (No. 80-2067), to make backpay, offer reinstatment, and take other action with respect to the improper termination of the employment of Loretta Yurgousky and Annabelle Eskra. The court directed the respondents to show cause why the petition should not be granted. Thereafter, some difficulties arose with respect to whether or not the respondents were or would be represented by counsel, and with respect to the obtaining of an answer from the respondents, either on a pro se basis or through counsel. Pursuant to an order of court, the Office of the General Counsel of the NLRB submitted a letter dated June 12, 1981, recommending that Salvatore Farruggia's letter reply filled pro se be treated as a general denial. The NLRB further noted that it had been informed that certain counsel who had tentatively agreed to represent 590, Inc., had indicated that they would not be representing that concern, and that apparently the owner, Steve Farruggia, would also be appearing pro se. The NLRB, therefore, recommended that in view of the pro se appearances, the return date be rescheduled and that the case be referred to a magistrate as a Special Master. (Doc. No. 1, atts).

Pursuant to that recommendation, the court, on June 26, 1981, entered an order permitting Salvatore Farruggia an extension to and including July 15, 1981, to obtain counsel and file an answer, and indicated that no additional extensions would be granted. The court also specifically adopted the other recommendations in the order of the NLRB dated June 12, 1981. Finally, the court in that order referred the case to the magistrate to act as Special Master.(Doc. No. 1, atts.). By letter dated June 30, 1981, and in accordance with directions from the Clerk of the United States Court of Appeals for the Third Circuit, the Office of the General counsel of the NLRB advised Steve Farruggia and Salvator Farruggia of the provisions of the court's order and, in particular, that they had until July 15, 1981, to file an answer. (Doc. No. 3).

By letter dated July 14, 1981, the NLRB informed the magistrate that on June 16, 1981, it had received from Steve Farruggia an attached letter which the NLRB later learned was meant to be the pro se answer of 590, Inc., Sally Lyn, Hamlin, and Mr. Michael, and is to be construed as a general denial pursuant to the court's June 26, 1981, order. The NLRB also advised the magistrate that it had previously received a letter dated May 13, 1981, from Salvatore Farruggia, which was thereafter forwarded to the Court of Appeals, and that the NLRB had been informed that that letter was likewise meant to be Salvatore Farruggia's pro se general denial. The NLRB also indicated that it was attempting to arrange a settlement conference with the respondents. (Doc. No. 5).

Thereafter, the magistrate engaged in a series of correspondence with the NLRB regarding the status of settlement discussions. (Doc. Nos. 6-11). In a letter dated October 5, 1981, the NLRB advised the magistrate that it was awaiting papers from Steve and Salvatore Farruggia to verify certain information submitted to the NLRB during settlement discussion, but that if the magistrate desired to set a hearing date, a date in late November would be agreeable to the NLRB. (Doc. No. 11). By order dated October 14, 1981, the hearing date was set for November 18, 1981.(Doc. No. 12).

The evidentiary hearing was held on November 18, 1981, at which time testimony and documentary evidence were received. At that hearing, William F. Anzalone, Esq., appeared and indicated that although the respondents had contacted him in July, 1981, at no time had he officially represented either Salvatore or Steve Farruggia, or any of the companies with which they may be associated. Mr. Anzalone stated, however, that he had agreed to attend the hearing on their behalf and he wanted the record to reflect that his appearance was very limited in nature and was only for the purposes of the hearing. (TR., pp. 6-7).

At the conclusion of the hearing, however, Mr. Anzalone indicated that he would continue to represent the respondents with respect to completing the record by subsequent submission of the documentary evidence and in the filing of a brief and proposed findings of fact and conclusions of law. The magistrate had indicated that after the record was complete, a briefing schedule would be established. (TR. 238-245; 285-288). However, Mr. Anzalone forwarded certain documents necessary to complete the record,*fn2 and at the same time forwarded proposed findings of fact and conclusions of law, and objections to the NLRB's motion to amend, but no brief. (Doc. No. 19, A-D).

Although the magistrate had contemplated that the NLRB as the moving party would first be required to submit proposed findings, conclusions, and a brief, with respondents given an opportunity to respond and the NLRB an opportunity to reply, the magistrate informed the parties that Mr. Anzalone's premature filing might necessitate a reversal of this procedural plan (Doc. No. 20), and the parties did not object. The NLRB, after being granted an extension (Doc. No. 27). Although Mr. Anzalone specifically requested an opportunity to file a reply brief (Doc. No. 22) and this request was granted (Doc. No. 24), no reply brief was filed.

PROCEDURAL MATTERS

As noted above, the NLRB filed a motion to correct the transcript, and specifically to correct page 13, line 7, of the transcript of hearing of November 18, 1981, which now reads "March 21, 1981," and should read "March 21, 1979." (Doc. No. 21). The requested amendment is in accordance with the context of the documentary evidence and other matters being inquired of at that point in the transcript. Further, the motion is unopposed. It should, therefore, be granted.

As noted above, the NLRB also filed a motion to amend the petitio for adjudication in civil relief (1) to change respondent, "590 Sportswear, Inc.," to "590, Inc.," and (2) to add Farruggia Brothers Electric, Farruggia Brothers Realty Company, and Gioacchino (Steve) Farruggia as respondents in contempt, jointly and severally liable for compliance with the court's judgment. The court referred the motion to the magistrate as Special Master to conduct a hearing, including the taking of evidence in connection with the motion and any defense thereto which respondents may offer. (Doc. No. 18).

With respect to part (1) of that motion, respondents state they have no objection (Doc. No. 19D), and thus that part of the motion should be granted.

Before discussing the merits of part (2) of the motion, by way of background, at the hearing counsel for the NLRB asked a series of questions concerning the incompleteness of the corporate records of 590, Inc., and on the basis of the answers to these questions, made an oral motion to amend the Board's contempt petition to add as respondent Steve Farruggia for individual liability on the basis of, among other things, Steve Farruggia's failure to maintain the distinction between his corporate personality and his individual personality and his individual personality. (TR. 57-58). Respondents' counsel objected on the basis that Steve Farruggia, an "incorporator" and president of 590, Inc., appeared at the hearing to represent the interests of 590, Inc., and had no advance notice that the NLRB would attempt to add him as a respondent in his individual capacity. (TR. 58). Counsel for the NLRB then stated that he would withdraw the motion for the time being and consider whether or not it would be appropriate to file it some time at the end of the proceeding, "with a continuance for the presentation of the defense," or whether it would be more appropriate to file it as an additional motion or petition before the Court of Appeals. Counsel for respondents then indicated that although 590's corporate records were incomplete, testimony will show that Steve Farruggia is the sole shareholder and president of the entity.

The motion was then formally filed on December 3, 1981, and referred to the magistrate on December 15, 1981 (Doc. No. 18), and included a request not only to add Steve Farruggia as a respondent, but also to add Farruggia Brothers Electric and Farruggia Brothers Realty Co. The NLRB based that motion upon evidence that unfolded at the hearing which would permit a finding that those two entities and Steve Farruggia constituted alter egos, or instruments of evasion, of 590, Inc., Sally Lyn, Hamlin, Mr. Michael, and Salvatore Farruggia. The evidence cited in support of the motion was not only the incompleteness of the corporate records of 590, Inc., but also the common interests and endeavors of Steve and Salvatore Farruggia in the various corporate entities initially named as respondents and other related Farruggia enterprises, and the failure to maintain lines of distinction among the business dealings of the various Farruggia enterprises. In the motion, the NLRB indicated that it did not object to reconvening the hearing to allow the additional respondents to present whatever evidence they desired in defense of these new allegations. (Doc. No. 18).

Respondents filed objections to this proposed amendment. However, the only objection now raised is that any claim against Farruggia Brothers Electric and Farruggia Brothers Realty Co. is barred by the applicable statute of limitations. No mention is made of objection to the joinder of Steve Farruggia, individually. (Doc. No. 19D). Respondents, however, cite no authority in support of their argument that this amendment is barred by the statute of limitations. As the NLRB points out, there is a statute of limitations governing administrative cases before the Board, 29 U.S.C.A. § 160(b), but it does not apply to proceedings under the court's contempt power under 18 U.S.C.A. § 401. See United States v. Fidanian, 5 Cir. 1972, 465 F.2d 755, 757, 20 WH Cases 800. Further, one who aids, abets, or assists, or acts in concert with, a person who has been enjoined in violating an injunction, subjects himself to civil as well as criminal proceedings for contempt, even though he was not named or served with process in the suit or even served with a copy of the injunction. Reich v. United States, 1 Cir. 1957, 239 F.2d 134, 137, cert. denied, 352 U.S. 1004; accord Chase National Bank v. City of Norwalk, 1934, 291 U.S, 431, 436-437. As discussed in more detail, infra, the evidence shows that Steve Farruggia, Farruggia Brothers Realty Co., and Farruggia Brothers Electric, together with Salvatore Farruggia and the other respondents, are part of a single enterprise that has systematically attempted to avoid the court's judgments, and at all times had knowledge of the court's judgments. At this point, however, the question is only whether the amendment should be allowed and the additional respondents have not requested that the hearing be reopened to consider additional evidence relating to the attempt to impose liability upon them. In view of these factors and the fact that additional respondents' specific objection goes only to the attempted assertion of claims against them being barred by the statute of limitations, the amendment should be allowed.

PROPOSED FINDINGS OF FACT

A. The Alter Ego Status of Sally Lyn Fashions, Inc., Salvatore Farruggia, Hamlin Sportswear, Inc., 590, Inc., Steve Farruggia, Farruggia Brothers Realty Co., and Farruggia Brothers Electric; the Successor Status of Mr. Michael, Inc., and 590, Inc.

1. As found in the underlying proceedings, Sally Lyn manufactured women's sportwear at a plant located at Route 590, Hamlin, Pennsylvania. (Doc. No. 14, ALJD, p. 2).*fn3

2. Salvatore Farruggia was the record owner and president of Sally Lyn, was directly responsible for its day-to-day operations, and is individually liable under the October 1, 1980, supplemental judgment. (TR. 65-66, B-11, B-25).

3. Salvatore Farruggia's brother, Steve Farruggia, was second in command Sally Lyn, was actively involved in Sally Lyn's day-to-day operations, and spent the same amount of time at the plant as Salvatore Farriggia. (TR. 66, 83-84, 86, 150).

4. On February 2, 1977, and April 29, 1977, respectively, Loretta Yurgousky and Annabelle Eskra, active supporters of union organizational and recognitory efforts at Sally Lyn, were laid off for lack of work. (Doc. No. 14, ALJD).

5. Thereafter, although several employees were recalled and new employees were hired, Eskra and Yurogousky were not among them. (Doc. No. 14, ALJD).

6. When it was suggested to Salvatore Farruggia that the failure to call Eskra and Yurgousky could constitute discrimination in violation of the union contract and the National Labor Relations Act, Salvatore Farruggia stated in May of 1977 that "[i]f I have to, I can close this shop down and I'll open it under a different name," and that he could "always get someone to cover" for him. (Doc. No. 14, ALJD, p. 7).

7. In July 1977, charges were filed with the National Labor Relations Board, and in September 1977, Sally Lyn ceased its garment manufacturing operations. (TR. 66).

8. In September 1977, Hamlin began manufacturing women's sportswear at the plant formerly operated by Sally Lyn. (TR. 66, 90-91).

9. Hamlin operated the plant with the same employees Sally Lyn had used.(TR. 67).

10. Hamlin operated the plant with the same equipment Sally Lyn had used. (TR. 67).

11. Hamlin sold the women's sportswear it manufactured to the same jobbers to whom Sally Lyn had sold. (TR. 115).

12. Salvatore and Steve Farruggia ran the day-to-day operations of Hamlin just asthey had when Sally Lyn operated the plant. (TR. 66-67, 83-83).

13. Hamlin issued no stock. (TR. 90-91, 101).

14. There was no sales contract between Sally Lyn and Hamlin for the purchase of the former's business. (TR. 90-91).

15. Salvatore Farruggia organized Hamlin and recruited Michael LoPresto to be its president in an effort to avoid problems with unions and his liability to the National Labor Relations Board. (Tr. 89-90).

16. Michael LoPresto knew that Salvatore Farruggia was having "union problems" and agreed to "front" for Salvatore Farruggia in part because Lopresto was anti-union and wanted to "get back at the union." (TR. 90, 117).

17. Michael LoPresto received no salary or other remuneration for serving as Hamlin's president.(TR. 90-91, 116-118).

18. Michael LoPresto had minimal duties in the operation of Hamlin, until the business started losing money, and thereafter he traveled to New York from time to time to get "work." (TR. 90, 102, 116, 118).

19.Michael LoPresto was only the titular president of Hamlin, but in any event, in April 1978 was advised of the ALJ's order and the duty of Hamlin to offer reinstatement to the former employees in question. (TR. 100, B-1).

20. Accordingly, Hamlin is the alter ego of Sally Lyn and Salvatore Farruggia. (Factual conclusion based on findings 1-19).

21. In January 1979, Salvatore Farruggia sold Hamlin's business to Mr. Michael. (Tr. 67-68, 91).

22. Mr. Michael paid only $13,000 of the agreed purchase price of $35,000 for Hamlin's business. (TR 91, 97, 1930.

23. Michael LoPresto owned Mr. Michael, and was responsible for its day-to-day operations. (TR. 67-68, 105-106, B-16).

24. A written sales contract for the purchase of Hamlin's business by Mr. Michael was not prepared because Salvatore Farruggia and Michael LoPresto could not agree on who would bear liability for the backpay due under the National Labor Relations Act. (TR. 92-94).

25. Mr. Michael manufactured women's sportswear at the same plant Sally Lyn and Hamlin had used. (TR. 97, 115).

26. Mr. Michael operated with the same employees Sally Lyn and Hamlin had employed. (TR. 68-69, 108).

27. Mr. Michael used the same equipment Hamlin and Sally Lyn had used. (TR. 95, 106, 109).

28. Mr. Michael sold the women's sportswear it manufactured to basically the same jobbers to whom Sally Lyn and Hamlin had sold. (TR. 115).

29. Mr. Michael was a successor to Hamlin and knew of Hamlin's unfair labor practice liability before taking over Hamlin's business. (Factual conclusion based on findings 15-28).

30. Mr. Michael ceased its garment manufacturing operations in June 1979. (TR 95).

31. In July 1979, Salvatore Farruggia padlocked the plant which had been used by Mr. Michael.(TR 95).

32. In January 1980, 590, Inc., began manufacturing women's sportswear at the plant formerly operated by Mr. Michael. (TR 49, 209, 273).

33. The Articles of Incorporation of 590, Inc., were signed by Matilda Spencer, the floor lady at 590, Inc. (TR. 69, 263-266, B-27).

34. 590, Inc., operates the plant with the same employees Mr. Michael had employed. (TR. 70).

35. 590, Inc. operates the plant with the same equipment Mr. Michael had used. (TR. 70, 267).

36. 590, Inc., sells the women's sportswear it manufactures to many of the same jobbers to whom Mr. Michael sold. (TR. 67, 70, 115).

37. 590, Inc., has issued no stock. (TR. 57-58, 266).

38. 590, Inc., has not paid-in capital. (TR. 267, 280).

39. 590, Inc., has had no corporate meetings. (TR. 57-58, 266).

40. There was no sales contract between Mr. Michael and 590, Inc., for the purchase of the former's business. (TR. 280).

41. After the resumption of manufacturing operations at the plant, located at Route 590, Hamlin, Pennsylvania, by 590, Inc., attorneys representing Salvatore Farruggia wrote to the landlord of the plant objecting to the landlord's alleged failure to maintain the premises and related matters. (TR. 160, B-18, B-20, B-21, B-22).

43. Salvatore Farruggia took possession of checks delivered on account to 590, Inc., by its jobbers. (TR. 70).

44. In August 1980, Salvatore Farruggia fired 590, Inc.'s floor lady, Matilda Spencer, and hired Donna Seney, who had formerly worked for Sally Lyn, Hamlin, and Mr. Michael, to work as the floor lady for 590, Inc. (TR. 65-69, 81).

45. Salvatore Farruggia has significant responsibility for the day-to-day operations of 590, Inc. (TR. 69-72, B-15).

46. Salvatore Farruggia is president of 590, Inc. (TR. 34-35, B-13).

47. Steve Farruggia is vice-president of 590, Inc. (B-13).

48. Steve Farruggia signs 590 Inc.'s, tax returns. (TR. 50).

49. In September 1981, Steve Farruggia discharged Donna Seney as floor lady of 590, Inc. (TR. 70-71).

50. Steve Farruggia has signifcant responsibility for the day-to-day operations of 590, Inc. (TR. 69-71, B-15).

51. Salvatore Farruggia's wife, Columbia, did the payroll and accounts for Sally Lyn and Hamlin and continued to do them for 590, Inc. (TR. 71-73, 150, 278).

52. Michael LoPresto has no interest in 590, Inc. (TR. 111-112).

53. 590, Inc., is the alter ego of Salvatore Farruggia, Sally Lyn, and Hamlin. (Factual conclusion based on findings 2-52).

54. Salvatore and Steve Farruggia knew of the unfair labor practice liability of Salvatore Farruggia, Sally Lyn, Hamlin, and Mr. Michael, prior to January 1980. (TR. 151-154, 270-271; see also findings 71 through 84, infra).

55. 590, Inc., is a successor to Mr. Michael that had prior knowledge of the unfair labor practice liability of Salvatore Farruggia, Sally Lyn, Hamlin, and Mr. Michael. (Factual conclusion based on findings 2-54).

56. Farruggia Brothers Realty Co. is a partnership composed of Salvatore Farruggia, Salvatore's wife, Columbia, Steve Farruggia, and Steve Farruggia's wife, Linda Endres Farruggia. (TR. 30, 150, 156-157, 178-179).

57. The machinery used by Sally Lyn, Hamlin, and 590, Inc., to manufacture women's sportswear has been owned at all material times by Farruggia Brothers Realty Co. (TR. 156, 267).

58. Sally Lyn, Hamlin, and 590, Inc., have paid no rent to Farruggia Brothers Realty Co. for the use of the above machinery. (TR. 164, 281).(There is no direct evidence that Sally Lyn did not pay rent on the machinery; the finding that it did not is inferred from the fact that Hamlin, which was identical to Sally Lyn, did not pay rent and is supported by the fact that 590, Inc., also does not pay rent. (TR. 164, 281).

59. In September 1975, the plant later used by Sally Lyn, Hamlin, Mr. Michael and 590, Inc., was leased from Henry and Edna Andracki, its owners, to Hamlin Enterprises, Inc. (not to be confused with Hamlin Sportswear, Inc., supra), whose president was Michael LoPresto. (TR. 97-98, B-12, B-17).

60. The above lease contains an option to purchase the plant, which gives the lessee credit towards the $95,000 purchase price of all money paid as rent less the lessor's expenditures for taxes and insurance. (TR. 99, 131-133, B-12).

61. In July 1976, Hamlin Enterprises, Inc., by its president, Michael LoPresto, assigned, in writing, its rights under the above leasee and option to purchase to Sally Lyn. (TR. 131-132, B-12).

62. At some unspecified time, Sally Lyn allegedly attempted to orally assign its rights under the above lease, including the option to purchase, to Farruggia Brothers Realty Co. for the nominal consideration of one dollar; Sally Lyn continues to own the enforceable rights of the option to purchase. (TR. 195-96). (The assignment, if it were made, was admittedly oral. Doc. No. 19A, Respondents' proposed finding of fact No. 4 Pennsylvania law requires that an assignment of an option to purchase real estate be in writing and signed by the party creating the right (assignment) in order to be enforceable. Stevenson v. Titus, 1938, 332 Pa. 100, 2 A. 2d 853, 856; see Stephens v. Carrara, 1979, 265 Pa. Super. 102, 401 A. 2d 821. Accord: 2 Corbin on Contracts, § 418(1950). Thus, Sally Lyn continues to own the only enforceable option to purchase and, in fact, Sally Lyn is currently engaged in litigation to enforce the option. B-12).

63. In March 1978, a month after the ALJ's decision in the underlying case issued, Salvatore Farruggia and his wife, Columbia, transferred various real estate jointly owned by them to the partners of Farruggia Brothers Realty Co. for the nominal consideration of one dollar. (TR. 28-31, 228).

64. Utility bills for real estate owned by Farruggia Brothers Realty Co. are mailed to Salvatore Faruggia alone and list him as the sole debtor for the bill. (Doc. No. 19C; see TR. 261 for designation as D-12).

65. Farruggia Brothers Realty Co. is the alter ego of Salvatore Farruggia, Sally Lyn, Hamlin and 590, Inc., and exists for the purpose of keeping their assets beyond the reach of their creditors and thereby attempting to defeat the court's judgments against them. (Factual conclusion based on previous findings of fact and especially findigns 56-64).

66. Farruggia Brothers Electric Service is an electrical contracting partnership consisting of Salvatore Farruggia and his brother, Steve Farruggia, and its address is 109 Tompkins St., Pittston, Pa. (TR. 149-150, 178-178, D-3, B-17).

67. During the period from July 1976 to the date of the hearing, the rent on the plant at Route 590, Hamlin, Pennsylvania, was paid for in twelve separate months with checks drawn against the account of Farruggia Brothers Electric Service; in the other months the rent checks were drawn against the accounts of Farruggia Brothers Realty Co., Sally Lyn, or Hamlin. (TR. 208-209, B-17).

68.Salvatore Farruggia admitted at the hearing that he considered Farrugia Brothers Realty Co. and Farruggia Brothers Electric to be interchangeable. (TR. 208-209).

69. Farruggia Brothers Electric is the alter ego of Salvatore Farruggia, Sally Lyn, Hamlin, 590, Inc., and Farruggia Brothers Realty Co. (Factual conclusion based on findings 66-68).

70. Steve Farruggia is the alter ego of Salvatore Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., and Farruggia Brothers Electric Service. (Factual conclusion based on findings 1-20 and 32-69).

B. Knowledge of the Court's Judgments

71. On January 3, 1979, the clerk of the Court of Appeals sent a copy of the court's January 3, 1979, judgment to the counsel of record for Sally Lyn. (TR. 10, B-2).

72. On March 19, 1979, an agent of the NLRB sent letters to Salvatore Farruggia and Michael LoPresto attempting to secure compliance with the court's January 3, 1979, judgment. (TR. 11, B-3).

73. On February 21, 1980, an agent of the NLRB sent letters to Sally Lyn (c/o Salvatore Farruggia), Mr. Michael (c/o Michael LoPresto), and Salvatore Farruggia attempting to secure compliance with the court's January 3, 1979, judgment. (TR. 19, B-4).

74. On March 4, 1980, an agent of the NLRB sent letters to Sally Lyn (c/o Salvatore Farruggia), Hamlin (c/o Salvatore Farruggia), Mr. Michael (c/o Michael LoPresto), and Salvatore Farruggia attempting to secure compliance with the court's January 3, 1979, judgment. (TR. 20, B-5).

75. On October 1, 1980, the Clerk of Court of Appeals sent a copy of the court's October 1, 1980, supplemental judgment to Sally Lyn (c/o Salvatore Farruggia), Hamlin (c/o Salvatore Farruggia), Hamlin, (c/o Salvatore Farruggia), Mr. Michael (c/o Salvatore Farruggia), and Salvatore Farruggia. (TR. 20-21, B-6).

76. On December 3, 1980, an agent of the NLRB sent letters to Salvatore Farruggia and Mr. Michael, Inc. (c/o Michael LoPresto) setting forth the terms of the judgment and attempting to secure compliance. (TR. 21-22, B-7).

77. On January 28, 1981, an agent of the NLRB sent letters to Salvatore Farruggia and Mr. Michael (c/o Michael LoPresto) attempting to secure compliance with the court's supplemental judgment.(TR. 24, B-8).

78. Each of the above correspondence was mailed in a properly addressed prepaid envelope, and received in the due course of the mail. (TR. 10-25, B-2, B-3, B-4, B-5, B-6, B-7, B-8).

79. On March 21, 1979, an agent of the NLRB talked over the telephone to Salvatore and Steve Farruggia in an attempt to secure compliance with the court's January 3, 1979, judgment, at which time Steve Farruggia accused the agent of persecuting his brother. (TR. 11-15).

80. On July 10, 1979, an agent of the NLRB talked over the telphone with Salvatore Farruggia in an attempt to secure compliance with the court's judgment of January 3, 1979. (TR. 16-18).

81. On January 26, 1981, an agent of the NLRB talked over the telphone with Salvatore Farruggia in an attempt to secure compliance with the court's October 1, 1980, supplemental judgment. (TR. 22-24).

82. Salvatore Farruggia knew about the court's judgment of January 3, 1979, and October 1, 1980. (TR. 151-154).

83. Steve Farruggia knew about the court's judgments of January 3, 1979, and October 1, 1980. (TR. 11-15, 270-271).

84. Salvatore Farruggia, Sally Lyn, Hamlin, Mr. Michael, Salvatore Farruggia, 590, Inc., Farruggia Brothers Realty Co., Farruggia Brothers Electric, and Steve Farruggia had notice and actual knowledge of the terms of the court's judgments of January 3, 1979, and October 1, 1980. (Factual conclusion based on findings 71-83).

C. Non-Compliance with the Court's Judgments

85. Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, Mr. Michael, 590, Inc., Farruggia Brothers Realty Co., and Farruggia Brothers Electric have not offered reinstatement to Annabelle Eskra as required by the court's judgments. (TR. 27).

86. Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, Mr. Michael, 590, Inc., Farruggia Brothers Realty Co. and Farruggia Brothers Electric have refused to pay Annabelle Eskra and Loretta Yurgousky the amounts due them under the court's supplemental judgment. (TR. 27).

D. Ability to Pay

87. In early 1978, Henry Andracki, who owns the plant referred to in finding 59, froze Salvatore Farruggia's bank accounts to collect overdue rent. (TR. 125-127, B-17).

88. After his bank accounts were frozen, Salvatore Farruggia promised that he would keep his money in the cellar and not in a bank so that his assets could never again be frozen. (TR. 126-127).

89. During the period that Mr. Michael was in operation, Michael LoPresto usually paid his monthly rent to Salvatore Farruggia in cash. (TR. 100).

90. Salvatore Farruggia's monthly income exceeds $2500; but he deposits on the average $380 a month to his bank accounts, a relatively modest deposit. (D-3).

91. On October 9, 1981, Steve Farruggia, acting on behalf of Salvatore Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., and Farruggia Brothers Electric, offered to pay Henry Andracki over $40,000 (TR. 130) in "cold cash" for the plan referred to in finding 59. (TR. 129-130, 267). (Andracki testified that on October 9, 1981, Steve Farruggia offered to purchase Andracki's plant for "cold cash" [as opposed to a cash and mortgage arrangement provided for in the option, B-12], and said that he would get "two State Policemen to escort [Andracki] to the bank." (TR. 129-130). Steve Farruggia admitted offering to purchase the plant for $95,000 less the money we have paid" as rent. (TR. 267). Steve Farruggia did not dispute Andracki's testimony that Steve's offer was for "cold cash." Five year's rent at $800 a month (B-17) is $48,000. THis means that the Farruggias' offer would have required a payment of at least $47,000 ($95,000 minus $48,000) in cash. Thus, it is undisputed that Steve Farruggia offered Andracki a sufficient amount of cash to satisfy the court's judgments).

92. Salvatore Farruggia has attempted to conceal his assets and the assets of his businesses by operating on a cash basis as much as possible; he has or can obtain sufficient cash to satisfy the court's judgments against him. (Factual conclusion based on findings 87-91).

93. Salvatore Farruggia jointly owns the following real estate with his wife, Columbia (TR. 28, 30-32):

1.109 Tompkins Street, Pittson, a double residence.

2. 1st Street, Avoca.

3. 8 Skyline Drive, Hughestown.

4. 96 Williams Street, Pittston.

94. Sally Lyn owns the enforceable option to purchase the plant located at Route 590, Hamlin, Pennsylvania (finding 62). Because the option to purchase gives the owner of the option credit for all money paid as rent, less the cost of taxes and insurance, the owner of the option has substantial equity in the option. (TR. 131-134, 269, B-12).

95. Under the terms of the option to purchase, the owner of the option must pay the Andrackis $30,000 as a downpayment on the purchase price of the plant. (TR. 128-129, 134, B-12).

96. Sally Lyn is suing the Andrackis in state court in an attempt to obtain specific performance on the option to purchase. (TR. 33, 131-134, B-12).

97. Salvatore Farruggia avers under oath in the complaint in the still pending state court proceedings that Sally Lyn is "ready and willing" to tender the agreed purchase price. (B-12).

98. Salvatore Farruggia, Sally Lyn, Hamlin, and 590, Inc., have the ability to pay the court's judgments.(Factual conclusions based on findings 87-97).

99. The assets of Steve Farruggia, Farruggia Brothers Realty Co., and Farruggia Brothers Electric, are available to satisfy the court's judgments. (Factual conclusion based on alter ego findings, supra).

100. Farruggia Brothers Realty Co. owns the following real estate (TR. 28-31, 248, 252):

1. 111 Tompkins Street, Pittson, a double residence.

2. 114 Williams Street, Pittston, an apartment building with three apartments.

3. 89-91 Williams Street, an apartment building with four apartments.

101. As found in finding 57, Farruggia Brothers Realty Co. also owns the machinery used by Sally Lyn, Hamlin, Mr. Michael, and 590, Inc., in the manufacture of women's sportswear. (TR. 156-158, 267).

102. Salvatore Farruggia stated this machinery was worth "a lot of money." (TR. 157-158).

103. In June 1981, Salvatore Farruggia offered to make a $30,000 downpayment to the Andrackis for the purchase of the plant. (TR. 128-129).

104. Steve Farruggia admits offering the Andrackis $95,000 for the plant in October 1981 less the money "we have paid in" as rent. (TR. 267).

105. Salvatore Farruggia admits that if the option to purchase the plant is effected, Farruggia Brothers Realty Co. will attempt to raise the money required under the option agreement by mortgaging the plant or by putting second or third mortgages on other properties owned by Farruggia Brothers Realty Co. (TR. 225-226).

106. Steve Farruggia jointly owns his residence at 8 North View Rd., Stauffer Heights, Hughestown, Pa., with his wife, Linda Endres. (TR. 262).

107. Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., and Farruggia Brothers Electric, have the ability to pay the court's judgments. (Factual conclusion based on findings 87-106).

Discussion

The overall issue in this case is whether respondents are in contempt of court for failing to take the actions directed in its judgments. Subissues relate to the alter ego status of Sally Lyn, Slavatore Farruggia, Hamlin, Steve Farruggia, Farruggia Brothers Realty Co., and Farruggia Brothers Electric Service, and the successor status of Mr. Michael and 590, Inc.; the knowledge of the court's judgments by the respondents; non-compliance with the court's judgments by the respondents; and the ability to pay the amounts directed in the court's judgments by Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., and Farruggia Brothers Electric Service.

To meet its burden of proof in this proceeding, the NLRB is required to produce "clear and convincing evidence" that the respondents have engaged in "contemptuous conduct." NLRB v. J.P. Stevens & Co., Inc., 2 Cir. 1972, 464 F.2d 1326, 1328, 80 LRRM 3126, cert. denied, 410 U.S. 926, 82 LRRM 2597. Accord: Schauffler v. Local 291 International Longshoremen's Association, 3 Cir. 1961, 292 F.2d 182, 188-190, 48 LRRM 2434. However, it need not show willfulness. As the Supreme Court stated in McComb v. Jacksonville Paper Co., 1949, 336 U.S. 187, 191, 8 WH Cases 500:

"The absence of willfulness does not relieve from civil contempt. Civil as distinguished from criminal contempt is a sanction to enforce compliance with an order of the court or to compensate for losses or damages sustained by reason of non-compliance. . . .Since the purpose is remedial, it matters not with what intent the defendant did the prohibited act."

The NLRB has submitted detailed proposed ultimate and subsidiary findings of fact, referenced to the record, proposed conclusions of law, and a brief.(Doc. No. 27). The magistrate has reviewed each of these proposed ultimate and subsidiary findings of fact against the record and essentially finds in accordance with these proposed findings, although some adjustments have been made. Indeed, on the record before the magistrate, findings substantially contrary to those proposed by the NLRB would not be warranted. On the other hand, the respondents have submitted very few proposed findings of fact and conclusions of law, and no brief. (Doc. No. 19A & B). The proposed findings submitted by respondents are in the form of ultimate findings, do not contain subsidiary findings, and are not referenced to the record. Moreover, respondents' proposed findings and conclusions do not address all issue as related to all parties. It may well be that in view of clear and substantial evidence militating against respondents' position, that is the best that respondents' counsel could do. In any event, to dispel any doubt as to whether the magistrate gave close consideration to respondents' findings and conclusions, they will be discussed.

In respondents' findings and conclusions,they do not ask the court to find that Sally Lyn, Salvatore, Farruggia, Hamlin, and Mr. Michael, are not bound by the court's judgments, or did not have knowledge of what was required of them. Rather, respondents apparently request the court to find only that Salvatore Farruggia does not have the ability to pay. No mention is made of the ability of the other entities to pay. Although not so stated in respondents' proposed findings and conclusions, they apparently contend that Salvatore Farruggia does not have the ability to comply with the injunctive features of the court's judgments, that is, the order of reinstatement and the like, because he is currently connected with no entity which would permit him to comply with the injunctive features in that he has nothing at all to do with 590, Inc., and Steve Farruggia's conduct of that business.

Other than the above, the principle thrust of the respondents' proposed findings and conclusions is that Steve Farruggia is the sole moving force behind 590, Inc.; that Steve Farruggia was in no way associated with Sally Lyn, Hamlin, or Mr. Michael, or with his brother, Salvatore Farruggia during Salvatore Furruggia's association with certain of those entities; that Steve Farruggia at the time he commenced business at 590, Inc., was not aware that Sally Lyn or any other predecessors to 590, Inc., had committed an unfair labor practice, or were bound by the court's judgments; and that Steve Farruggia and 590, Inc., cannot be held to be bound by the court's judgments and in contempt thereof.

The alter ego status of Farruggia Brothers Realty Company and Farruggia Brothers Electric Service is not addressed in the respondents' proposed findings and conclusions.

With respect to the alter ego or successor status of Steve Farruggia and 590, Inc., as well as Farruggia Brothers Electric Service and Farruggia Brothers Realty Co., a successor corporation is responsible to remedy its predecessor's unfair labor practices, either as a successor to or alter ego of them. Successorship is not based on fault-all that is required is that a bona fide purchaser of the business continue it substantially unchanged, with knowledge of the predecessor's unfair labor practices.In essence, the successor takes the business with its assets and liabilities, including the duty to remedy unfair labor practices. Golden State Bottling Co. v. NLRB, 1973, 414 U.S. 168, 84 LRRM 2839.

In addition, 590, Inc., could be liable as an alter ego or disguised continuation of the predecessor companies or as an instrument of evasion by the court's decrees. See NLRB v. Deena Artware Corp., 1960, 361 U.S. 398, 45 LRRM 2697; Southport Petroleum Co. v. NLRB, 1942, 315 U.S. 100, 9 LRRM 411; NLRB v. Ozark Hardwood Co., 8 Cir. 1960, 282 F.2d 1, 46 LRRM 2823.*fn4 While Steve Farruggia claims to be 590, Inc.'s, sole owner, this fact is less significant than the control that Salvatore Farruggia continues to exercise over 590, Inc. NLRB v. Hopwood Retinning, 2 Cir. 1939, 104 F.2d 302 at 304, 4 LRRM 555; NLRB v. Rapid Bindery, Inc., 2 Cir. 1961, 293 F.2d 170, 48 LRRM 2658; Reynolds Pallet & Box Co. v. NLRB, 6 Cir. 1963, 324 F.2d 833, 834, 54 LRRM 2452; NLRB v. Herman Bros. Pet Supply, Inc., 6 Cir. 1963, 325 F.2d 68, 71, 54 LRRM 2682; NLRB v. Lewis, 9 Cir. 1957, 246 F.2d 886, 887, 40 LRRM 2371. In the final analysis, the key consideration is whether, in the totality of the circumstances, there has been an absence of arm's length dealing. NLRB v. Big Bear Supermarkets, 9 Cir. 1980, 640 F.2d 924, 928, 930, 103 LRRM 3120.

The evidence overwhelmingly compels a finding and conclusion that Steve Farruggia is closely associated and allied with Salvatore Farruggia, for their common benefit and the benefit of their wives, not only in the operation of 590, Inc., but also in the operation of predecessor and other interconnected entities, such as Farruggia Brothers Realty Co. and Farruggia Brothers Realty Service, and that they have used these entities to avoid compliance with the court's judgments. The labor problems which are the subject of the court's judgments first arose during the operation of Sally Lyn. Donna Seney, who was hired as a floor lady by Sally Lyn in the summer of 1977, testified that she took order from both Salvatore and Steve Farruggia. (TR. 66).Later, when Salvatore Farruggia carried through on his threat to dissolve Sally Lyn and open under a different name (Doc. No. 14, att. ALJD, p. 7). Hamlin was formed with Michael LoPresto as a "front," and began to manufacture garments at the same location and with the same employees, equipment and customers. Donna Seny testified that she continued to take orders at Hamlin from Salvatore Farruggia, and on occasion from Steve Farruggia. (TR. 66). When Mr. Michael took over the same garment operation ostensibly under the sole control of Michael LoPresto,*fn5 Donna Seney testified that she only worked for Mr. Michael for 6 weeks before leaving to go to another concern. Donna Seney testified that when Mr. Michael went out of business and 590, Inc., sprung up in the same building and with the same employees, machinery, and customers, she was approached by Salvatore Farruggia to come back as floor lady, although she was subsequently fired by Steve Farruggia. While she was at 590, Inc., the payroll and accounts were done by Columbia Farruggia, Salvatore Farruggia's wife. Seney testified that when she was hired by 590, Inc., the employees there were just about the same as "when I had left." She also testified that when checks were received from jobbers made out to 590, Inc., Salvatore Farruggia would pick up the checks.

As a fringe benefit of her employment at 590, Inc., Seney was allowed to use an apartment in the upstairs over the garment factory. (TR. 70-71, 79). After her employment was terminated at 590, Inc., she received a letter from an attorney by the name of George E. Clark, who stated that he represented "Mr. Steven Farruggia and Mr. Salvatore Farruggia for whom you were formerly employed at the dress factory at Route 590, Hamlin, Pa." The attorney directed Seney to vacate the apartment. Respondents' counsel objected to this letter on the basis that it was not written by Mrs. Seney. However, it was a letter that she clearly identified as having received from the attorney who described himself as attorney for both Salvatore and Steve Farruggia, Donna Seney's "employers."

At the hearing, respondents' attorney attempted to negate the significance of this letter on the basis that the building in which all of these garment enterprises had been located was under a lease held by Sally Lyn, and that Sally Lyn had ostensibly assigned that lease, in writing, to Farruggia Brothers Realty Co., and that Attorney Clark's reference to representing Salavatore Farruggia and Steve Farruggia could well have meant that his representation of then was through Farruggia Brothers Realty Co., and not through 590, Inc.However, although respondents' counsel was to produce the written assignment, if one existed, in the proposed findings of fact filed subsequent to the hearing, respondents' counsel stated that the assignment from Sally Lyn to Farruggia Brothers Realty Co. was oral. (At the time of the hearing before the magistrate in this matter, a lawsuit was pending in a county court with Sally Lyn as the plaintiff. That lawsuit involves a dispute over the exercise of an option in the lease to purchase the building by Sally Lyn). In any event, through 1979 and 1980 the rent on the building was variously paid by Farruggia Brothers Electric Service in which Steve and Salvatore are partners, or by Farruggia Brothers Realty Co., in which Steve and Salvatore, as well as their wives, are partners.

Farruggia Brothers Realty Co. owns the machinery used by Sally Lyn, Hamlin, and 590, Inc., although those concerns have paid no rent to Farruggia Brothers Realty Co. for the use of the machinery. In March 1978, a month after the administrative law judge's decision in the underlying case, Salvatore Farruggia and his wife, Columbia, transferred various real estate jointly owned by them to the partners of Farruggia Brothers Realty Co. for the nominal consideration of $1.00. Salvatore Farruggia testified that all real estate that is purchased is bought in "the four names." (TR. 157). Although he claimed that there is a written partnership agreement for Farruggia Brothers Realty Co., respondents never produced the agreement. In short, this evidence and other such evidence referred to in the magistrate's findings of fact establish both directly and by inference that Salvatore and Steve Farruggia were intimately connected with all entity repsondents in this case which Salvatore Farruggia alleged were his alone, and with 590, Inc., which Steve Farruggia alleged was his alone.

The respondents would have the court find that Salvatore Farruggia was not connected with 590, Inc., and that Steve Farruggia was not connected with any of the garment entities which preceded 590, Inc., solely on the basis of their bald testimony to that effect, and to a certain extent on the testimony of Michael LoPresto. They ask the court to disregard the testimony of Donna Seney to the contrary on the basis that she was fired by Steve Farruggia at 590, Inc., and therefore, has an "ax to grind." (See e.g., Doc. 19A, proposed finding 11). In effect, they ask the court to fully credit their testimony despite the strong evidence to the contrary.

However, Donna Seney's testimony was not the only evidence connecting Salvatore Farruggia and Steve Farruggia to all of these various enterprises. Rather, the matters discussed above and other matters set forth in the magistrate's findings of fact, including the common location of the various garment enterprises, the same employees, machinery and customers, the interrelated "partnerships," and the like, clearly establish that Salvatore Farruggia and Steve Farruggia are intimately involved in all of these enterprises for their own benefit and the benefit of their wives, and for avoidance of the court's judgments. Many of these matters have not even been addressed in the respondents' proposed findings and conclusions, and thus will not be further discussed here at length.

Moreover, the magistrate found the testimony of Donna Seney to be straightforward and completely credible. She was subpoenaed to the hearing by the NLRB. Although she was fired from her job at 590, Inc., when asked on cross examination whether she left 590, Inc., with any unpleasant feelings as a result of being fired, she answered that she did, but when asked whether she still had some bitterness, she answered that she did not because she now has a better job.

Conversely, as noted above, the respondents' proposed findings and conclusions to the effect that Salvatore Farruggia had not connection 590, Inc., and that Steve Farruggia had no connection with the prior enterprises, are supported only by the testimony of Salvatore Farruggia and Steve Farruggia, and to a lesser extent the testimony of Michael LoPresto. The magistrate, however, does not credit this testimony. Salvatore Farruggia's testimony was vague and evasive. Many of his answers were "I don't remember." Many times he would answer a question with a question.On many occasions, the magistrate had to admonish Salvatore Farruggia to give a direct answer to a question. At one point, Salvatore Farruggia's counsel also admonished him to "answer the questions in a respected manner" (TR. 155), and at another point during the testimony of Steve Farruggia, Salvatore Farruggia's counsel had to caution Salvatore Farruggia to refrain from any gestures. (TR. 268). Salvatore Farruggia's demeanor suggested he was treating the proceeding quite lightly, and was attempting to obtain "laughs" from those in attendance.

A few examples will suffice. After a discussion in which respondents' counsel agreed to have Salvatore Farrugia attempt to locate an alleged written assignement from Sally Lyn to Farruggia Brothers Realty Co. of the lease on the building housing the various garment entities, the Board's counsel indicated that he had only one or two more questions and at that point he was interrupted by Salvatore Farruggia who stated, "[n]o sardines." The Board's counsel replied, "[e]xcuse me," and Salvatore Farruggia answered, "[n]o sardines." When the Board's counsel asked Mr. Farruggia what he was talking about, Salvatore Farruggia replied, "[s]ardines." The questioning then proceeded. (TR. 201). At another point, when asked whether there was a mortgage on a certain property, his answer was "Mama Mia," and he had to be admonished by the magistrate to answer the question. (TR. 255).

The testimony of Steve Farruggia was caustic and in many instances vague. Steve Farruggia also had to be admonished on several occasions to answer questions directly. At one point when Steve Farruggia was asked whether he knew about Salvatore's problems with the NLRB, he answered, "[n]ot until I received letters to try to come into 590, I thought it was dead, forgot about it." (TR. 270-271).The import of this answer was that until the NLRB began to press to have 590, Inc., comply with the court's judgments, he thought the matter "was dead," but this in itself implied that he had prior knowledge of Salvatore Farruggia's problems. When counsel for the Board pressed for a more specific answer, respondents' counsel stated that he believed Steve Farruggia had answered the question, "that he learned about it when 590 got involved." At that point, counsel for the Board accused respondents' counsel of instructing Steve Farruggia on how to answer the follow-up question, and then Steve Farruggia interjected that he found out about Salvatore's problems only after 590, Inc., began operating. (TR. 270-271). However, as noted above, this is contrary to his previous answer that he thought the problem "was dead."

Although Michael LoPresto testified that in his association with Salvatore Farruggia at Hamlin, and in his allegedly independent operation of Mr. Michael, Steve Farruggia would visit the plants only as Salvatore Farruggia" "tag along," and that all of LoPresto's dealings were with Salvatore Farruggia, this testimony, too, is not credible. In addition to being contrary to the various matters set forth in the magistrate's findings, Michaels LoPresto testified that he has long known Salvatore and Steve Farruggia. It was Michael LoPresto who originally had a lease on the building in which these various garment enterprises were located, and it was he who assigned the lease to Sally Lyn. (Exhs. B-12 and B-17). After the NLRB began pressing Sally Lyn on the Union problems which gave rise to this case, Hamlin replaced Sally Lyn in a clear attempt to avoid the effect of the Board's proceedings. Michael LoPresto testified that when he agreed to become president of Hamlin, he knew that Salvatore Farruggia had a "problem" with the NLRB (TR. 90), and when asked if he was doing this as a "front," he replied, "[w]ell, I say as a front in the sense that he had promised me that he got out of the business I would have first crack at it." (TR. 117). When asked if that was the only reason he associated himself with Salvatore Farruggia, he added, "[p]lus that we were anti-Union and I wanted to get back at the Union; that was one reason." (TR. 117). He testified that when Hamlin first began operations, he had practically no duties and it was not until business later started picking up that he did some work in the form of obtaining customers.

Further, when Michael LoPresto allegedly opened Mr. Michael on an independent basis, he paid only $13,000 of an alleged agreed purchase price of $35,000 for Hamlin's business. LoPresto testified that a written sales contract for the purchase of Hamlin's business by Mr. Michael was not prepared because Salvatore Farruggia and Michael LoPresto could not agree on who would bear liability for the back pay due under the National Labor Relations Act. (TR. 92-94). Michael LoPresto testified that in June or July of 1979, Mr. Michael's work ran out and a few weeks later, when he found another jobber and went back to the plant, he found that the plant was padlocked. LoPresto testified that he thought this was a joke, and when he talked to Salvatore Farruggia, he was told that Salvatore had padlocked the place to protect the machinery. (TR. 95-96). LoPresto testified that he talked to a magistrate about this situation, and was told to kick the door down, but afterward when he talked to Salvatore Farruggia, he told Salvatore he was not going to do that and Salvatore replied that "[w]hen you're ready to get in, you let me know." (TR. 110-111). Strangely, however, LoPresto did nothing more, and when he found out in early 1980 at a "diner" that 590, Inc., had begun operations in the same building, he later talked to Salvatore Farruggia to find out "where my money was that I had given," and at that point, Salvatore showed LoPresto a number of bills that had been incurred, including a $3,500 bill due the IRS. When asked whether he ever got any money back, he answered, "[a]t the present time, no." (TR. 96-97). Although this would indicate that there seemed to be a dispute among the parties with respect to their rights under the Mr. Michael purchase agreement, at the time of the hearing Mr. LoPresto had done nothing to assert any rights that he thought he might have had, nor did Salvatore Farruggia assert any rights that he thought he might have had. Salvatore Farruggia merely testified that "[y]ou take the loss, you walk away, he take the loss, everybody walk away. It's finished business." (TR. 162-164). This certainly would not seem like arm's length business transactions, and the testimony of LoPresto, including his admission that he agreed to "front" for Salvatore Farruggia, cannot be deemed independent testimony that can be credited.

As noted above, one of the few issues addressed in the respondents' proposed findings of fact and conclusions of law is whether or not Steve Farruggia had knowledge of the court's judgments before engaging in the operation of 590, Inc. Steve Farruggia's testimony, cited above, to the effect that shortly after the time he allegedly began operations at 590, Inc., he though that Salvatore Farruggia's problems with the Board were a "dead issue, certainly would imply that he knew of these problems prior to his involvement with 590, Inc. Further, Donald Spooner, a compliance supervisor for the NLRB, testified that on March 21, 1979, some 9 months before 590, Inc., had begun operations, he had spoken over the telephone with both Salvatore and Steve Farruggia about the judgments. Finally, it is possible to infer from all of the common dealings of Salvatore Farruggia and Steve Farruggia in their various companies and partnerships that Steve had knowledge of the court's judgments.

The final issue that appears to be raised in the respondents' proposed findings of fact and conclusions of law is whether Salvatore Farruggia has an ability to pay the judgments. The ability of the other respondents to pay the judgments has not been directly addressed in these proposed findings and conclusions. The burden is on the respondents to show categorically and in detail why they are not able to comply with back pay order. NLRB v. Trans. Ocean Export Packing, Inc., 9 Cir. 1973, 473 F.2d 612, 616, 82 LRRM 2259; Hodgson v. Hotard, 5 Cir. 1971, 436 F.2d 1110, 19 WH Cases 855 order to succeed in this defense, the respondents must also show that at no time since entry of the judgment were they capable of satisfying any part of the decree and that the sum of their present resources of all kinds is insufficient to even partially satisfy the judgments. See In Re. Byrd Coal Co., 2 Cir. 1936, 83 F.2d 256. Respondents must demonstrate that satisfaction of the judgments would be impossible even if all their property was sold or mortgaged. Hodgson v. Hotard, supra. Financial hardship caused by the order is not a valid basis on which to deny the employees their remedy or to allow a wrong aginst the public to go uncorrected.Hodgson v. A-1 Ambulance Service, Inc., 8 Cir. 1972, 455 F.2d 372, 375, 20 WH Cases 456. A claim that a respondent does not hold property in his own name does not establish financial inability since it does not exclude the probability that he could hold property jointly with others including his wife. Hodson v. Hotard, supra.

In proposed findings of fact No. 16, respondents state that their Exhibit D-3 prepared by the Internal Revenue Service in June 1981 evidences the outstanding indebtedness of Salvatore Farruggia as of that date, together with the various interests in real estate which he had as of that date. In proposed finding of fact No. 17, respondents state that the exhibit being submitted contemporaneously with the proposed findings of fact and conclusions of law also clearly indicates that the amount of outstanding indebtedness which Salvatore Farruggia presently is liable for, greatly exceeds any interest he may have in any real estate holdings or otherwise. Finally, in proposed findings of fact No. 18, the respondents state that the testimony at the hearing established that ". . . in addition to the various mortgages and assets in which Mr. Salvatore Farruggia has a part interest, in addition to outstanding indebtedness as set forth in Respondents' Exhibit-attached hereto," there are a number of judgments which are then set forth. (Doc. 19A).

However, to the extent that repsondents contend that their Exhibit D-3, exhibits submitted with the findings of fact and conclusions of law, and the amounts listed in proposed finding of fact No. 18, constitute a compilation of separate debts, such a contention is not borne out by the record. For example, the Internal Revenue Service form, Exhibit D-3, referred to in proposed finding No. 16, lists liabilities in the categories of accounts payable, notes payable, and judgments. A supporting schedule under Accounts Payable lists an amount owed to Power Electric of $16,880.56. The exhibit referred to in finding of fact No. 17 lists this same debt (see Doc. No. 19D), and the compilation contained in proposed finding of fact No. 18 lists this debt as a judgment. Thus, these are not separate debts, but rather the accounts payable may now have been reduced to judgment, and would not alter the amount of the overall liabilities. The same is true with other such items. Curiously, the Internal Revenue Service form lists an amount of $16,000 due to the NLRB which appears to be the very debt that the respondents are resisting in this case. In any event, these overlapping exhibits or compilations do not satisfy respondents' burden to show categorically and in detail why they are unable to comply.

Indeed, it is almost impossible from these exhibits to determine what the total indebtedness is, much less what the assets are. For example, with respect to the assets, the Internal Revenue statement, to which Salvatore Farruggia signed his name and attested that the statement was true and correct, and which purported to list all of Salvatore Farruggia's assets, whether individually or jointly held, or in partnership, listed machinery and equipment at a value of only $250. (D-3). A supporting schedule indicated that that equipment consisted of electric drills and hand tools owned by a partnership, apparently Farruggia Brothers Electric Service. (D-3, att. E). However, Salvatore Farruggia also testified that Farruggia Brothers Realty Co. owns the machinery located in the garment plant which was used by these various entities. (TR. 156). When asked how much capital Steve Farruggia contributed toward the purchase of that machinery, Salvatore Farruggia answered, "[i]ts a lot of money." When pressed further on this, he stated that he could not remember. Yet, this plant machinery which is worth "a lot of money" was not listed in the Internal Revenue Service form. (TR. 157).

On the other hand, the testimony and other evidence at the hearing indicated that Salvatore Farruggia and the other respondents in this case not only have substantial assets but there may be some hidden assets. That evidence is set forth in the "ability to pay" section of the magistrate's proposed findings of fact, and thus will not be repeated here at length. Suffice to say that the Farruggias' offer to Andracki to buy the garment plant alone indicates that the Farrugias felt that they could raise sufficient money in excess of what is required to pay the court's judgments in the instant case. Although Salvatore Farruggia indicated that if he prevailed in the lawsuit involving this option, he would have to attempt to mortgage some properties to exercise the option, it would appear that he should also attempt to mortgage these properties, having substantial value (see, e.g., D-3), to comply with the court's judgments.

PROPOSED CONCLUSIONS OF LAW

1. The motion by the NLRB to amend the petition in civil contempt and for other civil relief (a) to change respondent, "590 Sportswear, Inc.," to "590, Inc.," and (b) to add Farruggia Brothers Electric Service, Farruggia Brothers Realty Co., and Gioacchino (Steve) Farruggia, as respondents in contempt, jointly and severally liable for compliance with the court's judgments, is granted.

2. The motion of the NLRB to correct page 13, line 7, of the transcript of hearing of November 18, 1981, which now reads, "March 21, 1981," and should read "March 21, 1979," is granted.

3. Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., and Farruggia Brothers Electric Service, are in civil contempt of the court's January 3, 1979, and October 1, 1980, judgments.

4. Mr. Michael is in civil contempt by default for having failed to answer the Board's petition for an adjudication in contempt as ordered by the court. (Although Michael LoPresto appeared at the hearing, he did so pursuant to a subpoena of the NLRB and did not attempt to defend on behalf of Mr. Michael).

5. To purge the contempt, Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., Farruggia Brothers Electric Service, and Mr. Michael, their agents, successors, alter egos, assigns, and heirs, should be jointly and severally ordered to:

(a) Cease and desist from failing and refusing to take the actions required by the judgments of January 3, 1979, and October 1, 1980, and conduct themselves in all respects consistently with the judgments of January 3, 1979, and October 1, 1980, and not in any way by action or inaction committing, engaging in, inducing, encouraging, permitting, or condoning any violation of said judgments;

(b) Offer Annabelle Eskra immediate and full reinstatement to her former job, or if it no longer exists, to substantially equivalent employment, without prejudice to her seniority or other rights and privileges;

(c) Forthwith pay to the Board on behalf of discriminatees, Loretta Yurgousky and Annabelle Eskra, the sum of $15,712.97, plus interest accrued under the judgment to the date of payment less withholdings required by federal and state law;

(d) Pay the Board all costs and expenses, including attorneys' salaries, incurred by the Board in the investigation, preparation, and final disposition of this proceeding for an adjudication in civil contempt, to be fixed by further order of the court upon submission by the Board of a verified statement of costs and expenses;

(e) Make Annabelle Eskra whole for any loss of pay or benefits she may have suffered since January 1, 1979, as a result of the discrimination practiced against her, for the amount, unless agreed upon, to be fixed by the Board in a back pay proceeding subject to review by this court;

(f) Preserve and, upon request, make available to the Board or its agents, for examination and copying, all payroll records, social security records and reports, and all other records necessary or useful in analyzing the amount of back pay due herein, or in monitoring compliance with the court's orders;

(g) Post at the Route 590, Hamlin, Pennsylvania, facility of 590, Inc., in conspicuous places, including all places where notices to employees are customarily posted, for a period of sixty (60) consecutive days, copies of the contempt adjudication and of an appropriate notice in the form prescribed by the Board, signed by the respondent corporations, businesses, and Salvatore Farruggia and Gioacchino (Steve) Farruggia, individually, which states that the named corporations, businesses and individuals, have been adjudged in civil contempt of this court for violating and disobeying the judgments of January 3, 1979, and October 1, 1980, and that the named corporations and businesses, their officers and agents, and Salvatore Farruggia and Gioacchino (Steve) Farruggia, will undertake the action in purgation directed by the court, and by maintaining such notices and a copy of the contempt adjudication in clearly legible condition throughout such posting period and insuring that they are not altered, defaced, or covered by any other materials; and

(h) File sworn statements with the Clerk of the Court with a copy to the Director of the Fourth Region of the Board, within ten (10) days after entry of the adjudication and every 30 days thereafter, showing what steps they have taken to comply with the court's directions.

6. To assure that Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., Farruggia Brothers Electric Service, and Mr. Michael, purge the contempt, it is further recommended that the court order that:

(a) A compliance fine of $1,000 be jointly and severally levied against Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., Farruggia Brothers Electric Service, and Mr. Michael, at the expiration of each full week after entry of the contempt order until full payment is made under the decree. The amount asessed under this provision shall be subordinated to the amount due to employees under the decrees; and

(b) The court reserves jurisdiction to issue writs of body attachment and take such other action as the court may deem appropriate against Salvatore Farruggia, Steve Farruggia, Sally Lyn, Hamlin, 590, Inc., Farruggia Brothers Realty Co., Farruggia Brothers Electric Service, Mr. Michael, and any other person acting in concert with some or all of them for noncompliance with this order.


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