GOLDEN STATE BOTTLING CO. v. NLRB

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Argument of Morton Jackson

Chief Justice Warren E. Burger: We will hear arguments in 72-702, Golden State Bottling Company against the Labor Board.

Mr. Jackson you may proceed whenever you are ready.

Mr. Morton Jackson: Mr. Chief Justice, thank you and may it please the Court.

I would like to address myself briefly, if the court please to the general approach taken by the board, arguing in support of its point of view with respect to the two specific limitations on its power.

I'm speaking of the limitation contents in Section 10 (c) of the Act itself.

The limitations contained in rule 65 particularly 65 (d) of the Federal rules of civil procedure.

I think those limitations are the ones that the board has attempted to dispense with in reaching the result that it's reached in this case on a successorship issue which is the heart of this case.

The board and the writers tend to sweep these limitations aside.

Of course the 10 (c) the heart of that again is that states that the board's remedial powers must be exercised only against those who have actually engaged in unfair labor practices or are engaging in them.

And the language of Section 65 (d) which had such penetrating analysis in the Regal Knitwear case has to do with the circumstances under which a successor or an assigned maybe drawn within the ambit of an order directed to a wrong doer.

Now, as I see the board tends to shut these off really by saying, first it is also in the same Section 10 (c) given broad remedial powers to effectuate the policies of the Act and consider them in light of this.

At the end, it has in mind really justifies the means as taken.

And it tends to treat the limitations imposed by the two Sections I just mentioned as something rather technical or rather arbitrary and arbitrary but technical at any rate, and something that must give away before an argument addressed to considerations of substance such as effectuating the policies of the Act.

In answer to that, I would say it first and I think again this is fundamental.

That both of these sections are not technical.

Their terms and body provisions are of fundamental substance and they articulate fundamental protections.

I think throughout it is well to bear in mind that what we are talking about is affording a party hearing, yes.

And that one of the vices inherent in what the board has done is to deny a party a hearing, but even more fundamental than that and even more profound a vice is the vice which lies in imposing sanctions for illegal conduct for wrong doing against the party who is guiltless of any wrong doing who is totally innocent of any wrongful conduct.

This is what we are getting at.

So these are not just technical limitations, they're limitations which contain the expression, the embodiment of protections of considerable substance and can't simply be swept aside.

This --

Unknown Speaker: Is there any disagreement as to the applicability of Federal rule 65 (d) to the Labor Board?

Mr. Morton Jackson: I think not Your Honor.

It certainly was -- sort of went without saying in the Regal Knitwear case.

The language successors and the signs is regularly been used in these orders and that the --

Unknown Speaker: Of course by its terms I always thought that Federal rules are applicable to the Federal Courts?

Mr. Morton Jackson: This is true, but I think that what the Court addressed itself to in the Regal Knitwear case was the fact that the courts are going to be called upon to enforce these orders and what Justice Jackson said in Regal Knitwear was that no order can be enforced, no order which contains language which exceeds the limitations of rule 65 (d) can be enforced by a court.

And to the extent that the court's enforcement powers are limited, quite clearly they apply to the Labor Board also.

However, an answer to each of these considerations if each on its merit that the board is advanced is again contained in this very remarkable decision in the Regal Knitwear case.

I would invite the court's attention first off to a very transient statement of policy made by the Court in the Southern Steamship case, where it says it is sufficient for this case, this Court speaking again on this and justifying the means argument.

It is sufficient for this case to observe that the board has not been commissioned to effectuate the policies of the National Labor Relations Act so single-mindedly that it may ignore the equally important congressional objectives.

Justice Jackson echoes this sentiment when he says in Regal Knitwear that this language about broader media powers in order to effectuate policies of the Act containing its own limitation.

He points out in the following language that these powers must be exercised within the limits of the authority bestowed by the statute.

Administrative agencies have considerable latitude to shape their remedies within the scope of their statutory authority.

And then it goes on the say the courts may not grant in the celebrated language an enforcement order or an injunction so broad as to make punishable, a conduct the persons who act independently and whose rights have not been adjudged according to law.

Now, again it is suggested that by the writers and notably Professor Goldberg and the North Western Law Review who was cited by board and its brief at page 21 and indeed whose views find reflections throughout on the board's brief that Regal Knitwear doesn't really mean what it says, and in any event it has left the door open by language in giving two examples.

The court gives two examples, it suggests for example the successive concept could apply in a situation where the successor was merely a disguised continuance of the predecessor, and therefore has a substantial identity with him or where the succession itself, the transfer has been utilized simply as a means of evading or avoiding trust to the force of the order.

Unknown Speaker: Is there an issue here both your client's liability for pre-merger, pre-acquisition back pay and post acquisition back pay.

Mr. Morton Jackson: Yes, Your Honor.

Unknown Speaker: And reinstatement.

Mr. Morton Jackson: That is correct.

The successor --

Unknown Speaker: Now for pre-acquisition, back pay there had been an adjudicated liability?

Mr. Morton Jackson: That is correct and that is not disputed as far as the predecessor is concerned.

Unknown Speaker: Yes I understand, they owe that.

Mr. Morton Jackson: That is --

Unknown Speaker: They owe that.

Mr. Morton Jackson: We do not dispute that personal method of computation has been disputed.

Unknown Speaker: Now in mergers normally under state law you can't get away with evading your clear debts by transferring away your property and did the succeeding corporation here assume any debts of the predecessors?

Mr. Morton Jackson: It assumed specified obligations only.

There were certain specified obligations set out in the sale agreement and it assumed only though --

Unknown Speaker: Which would certainly be normal?

Mr. Morton Jackson: That is customary.

This was an asset purchase Your Honor.

It was not a merger, not a statutory merger such as the --

Unknown Speaker: It was an asset purchase and you assume certain --

Mr. Morton Jackson: Certain specified obligations only.

The successor did all American and these were specifically enumerated, this particular item was not one of them.

The predecessor --

Unknown Speaker: And I suppose, perhaps under State law if the predecessor didn't pay it, you might have to.

I mean just as a --

Mr. Morton Jackson: No, I think under the cases we've cited that for this particular type of obligation the reverse would be truly Your Honor, because --

Unknown Speaker: Under State law?

Mr. Morton Jackson: Under State law, yes.

Unknown Speaker: Even though it was an adjudicated liability of the predecessor?

Mr. Morton Jackson: That is correct.

Even --

Unknown Speaker: You mean under State law a --

Mr. Morton Jackson: We've cited one case in our brief is --

Unknown Speaker: A seller of assets can avoid the payment of a judgment by --

Mr. Morton Jackson: Not the seller, Not the seller.

I beg our pardon I misunderstood your honor.

The seller certainly cannot avoid.

Unknown Speaker: Well, I know, but wouldn't it remain a claim on the assets he conveys away?

Mr. Morton Jackson: Not if a lien has not been established against those assets prior to the time they conveyed.

Unknown Speaker: I thought that was fundamental and fraudulent conveyance?

Mr. Morton Jackson: If it's a fraudulent conveyance -- if the conveyance is made with the intent of defrauding creditors Your Honor, I think indeed and the purchaser is not an innocent purchaser and is a party that, I think the --

Unknown Speaker: By any event the board purported to make the successor liable for back pay based on labor policy, right?

Mr. Morton Jackson: That is correct and we --

Justice Potter Stewart: The predecessor here remained in business as a corporation.

Mr. Morton Jackson: That is correct the predecessor had other business interests.

Justice Potter Stewart: And was actively in business and it wasn't just an empty shell.

Mr. Morton Jackson: That is correct -- did not go out of business, it had other interest they were not in the soft drink field.

Justice Potter Stewart: But was a corporation in being with assets and with --

Mr. Morton Jackson: That is correct Your Honor.

Chief Justice Warren E. Burger: Did the transfer of assets and the contracts relating to this transaction include an agreement to indemnify?

Mr. Morton Jackson: It did not include an agreement indemnify as such Your Honor.

It includes, Mr. Chief Justice the customary warranty against the pending litigation and against all litigation except that specifically disclosed to the purchaser.

As the record discloses, in this case the pendency of this litigation had slipped everybody’s mind, and was not specified in the agreement.

So it's pendency and the liability attaching, would ordinarily constitute a breach of that warrant, a giving rise to --

Chief Justice Warren E. Burger: And to catch all indemnity clause would cover then, I take it?

Mr. Morton Jackson: Well, as between the parties, any liability that was imposed against all American would be the subject of indemnification by Golden State to the extent that All American was held liable, yes.

I believe that's a fair statement.

Chief Justice Warren E. Burger: And this liability would not depend on any fraud on the part of the seller or any participation in that fraud on the part of the buyer.

Mr. Morton Jackson: I should say it was contractual and that it stands from the breach of that warranty.

Thus, if All Americans suffered financial loss of any kind as a consequence of the existence of litigation which had been warranted not to exist, I take it that the Golden State Bottling Co. would have to indemnify for it, or against that loss.

Unknown Speaker: Was this case before the board pre Burns?

Mr. Morton Jackson: It was You Honor, in the course --

Unknown Speaker: But in the Court of Appeals post Burns.

Mr. Morton Jackson: It was post Burns in the Court of Appeals after the briefs were filed, I believe -- the Burns case was I believe was dealt with in the briefs and it was a subject -- with the Court.

Unknown Speaker: Do you think Burns resolved in some new rules of the road with respect to successorships and the obligation of a successor to hire a predecessor's employees?

Mr. Morton Jackson: I did not myself read Burns as having a bearing on the successor’s obligation to hire a predecessor’s employees Your Honor, but I believe that point was not --

Unknown Speaker: Do you think that under pre Burns’s law that you would've had to hire your predecessors’ employees unless you could fire them for a cause under the collective bargaining contract?

Mr. Morton Jackson: I think under the present state of the law I don't read Burns is changing that the successor is under no obligation other things being equal to hire any other's predecessors employees that if I may cite a case --

Unknown Speaker: Yes, will I think I understand it, was that through pre Burns?

Mr. Morton Jackson: I believe so, and there is the Tri-State Maintenance case which rejected a counter suggestion by the board and the board has since taken that view that there is no obligation on the successor other things being equal to hire any of the employees of the predecessor.

I believe Mr. Come will concur with that view, and I'd be happy to cite for the --

Unknown Speaker: If this man had been reinstated before the transfer --

Mr. Morton Jackson: Yes.

Unknown Speaker: Would you have to keep him on?

Mr. Morton Jackson: No, I believe not.

Unknown Speaker: But the argument is that because he wasn't --

Mr. Morton Jackson: Because the unfair practice remained un-remedied in this respect.

And because the successor is the only party capable of fulfilling the remedy in this aspect, then it must be against this party that this aspect to the remedy is invoked.

The board does not consider and this of course goes only to the reinstatement aspect of it.

This argument of course does not pertain to the financial aspect of it, the back pay aspect of it.

At least certainly not as to that portion of it that accrued up to the time of sale.

There is again a question as to whether the successor should be liable for all of the back pay liability even before the time of sale.

This is not the right way of looking at it.

Have I answered Your Honor's question?

Unknown Speaker: Well, yes, but as I understand the board’s position in Burns, the board was arguing that the successor assumed the collective bargaining contract?

Mr. Morton Jackson: Well, this again it has to do with the obligation of bargain and I think the two can't be --

Unknown Speaker: Well, it has to do with the obligations under collective bargaining contract.

One of which is you don't fire without cause.

Mr. Morton Jackson: Well this is true.

At Burns --

Unknown Speaker: Rather substantial position.

Mr. Morton Jackson: Yes indeed, but then again would be a matter of contract Your Honor which does not bear upon the present case.

Now, Burns was considered as having some bearing in this case since it threw light upon the significance of the Wiley against Livingston decision on which the board in turn based its change of course in Perma Vinyl.

And Burns was read by Judge Kilkenny who dissented it in the Court of Appeals, as narrowing the scope of Wiley in its application to this type of case, and in fact excluding its application to cases involving liability for unfair practices as distinct from the succession to the obligation of bargain, or the obligation of a collective bargaining agreement that resulted from a bargaining arrangement of the predecessor.

To return to the point I was making the argument of Justice Jackson or the language of Justice Jackson.

He touched down, I think is found as I say, Professor Goldberg suggests that there is an open door which leaves it wide open for other situations including the one before us that of an innocent successor.

But we suggest that is foreclosed by the language of the succeeding paragraph in which he points out the common aspect to both of these examples he is given.

He says "In both of these cases, the reference is not merely to succession, but to a relation between the defendant and the successor which might of itself establish liability within the terms of rule 65."

We suggest we urge to the Court that that says plainly as anything could that an innocent successor as against to him, there is no independent basis for assessing liability who's guilty of no wrong.

Who is not in the league with the predecessor or assisting him to evade the order or conspiring with him in a collusive manner to carry out this type of conduct.

The term successor on a sign cannot reach out and bind such a person, because to do so would be offensive to due process, and to exceed the scope of that section.

We urge therefore that these limitations are limitations of substance and cannot be swept aside or cannot be ignored in view of the other limited considerations which the board has advanced.

And may suggest that to do so, amounts really to an exultation not merely a form, but of doctrine, at the sacrifice of fundamental law and of substantive right.

If I may briefly address myself to 1 or 2 of the practical or what we called in our brief, the policy considerations -- by the board.

I would like to point out, if I may that the enforcement of the reinstatement remedy whether it's against a original employer, this is a well settled remedy and one with which we have no quarrel.

But in any event, and particularly against a successor who as we see has other than being no obligation whatever to hire any of his predecessor's employers.

It does work a hardship on the innocent employee who has to be displaced to make way for the rehired discriminatee.

The argument is frequently seen only from the stand point of the discriminatee who is out of a job, who wants to be reinstated, and who is now remedied less because the business has changed counts.

It must be remembered that in order to accommodate even a respect, somebody else is going to have to be laid off.

Also the argument that a successor can hire and that will work no hardship, and then if he proves to be a non-satisfactory employee, may fire him for cause.

In such circumstances where the board tends to try as it's indicated in this case must frequently attempted to establish as board policy, a presumption that the successor is going to continue the unfair practices of the predecessor.

And given the burden which the employer has under this Court's Great Dane case to in effect establish that this discriminatory reason was not the reason for the discharge.

I think this is not a realistic argument, because with the tract record such as this, which is going to be raised against him, a successes is going to have a very difficult time discharging for cause and making it stand up against an 8 (a) (3) charge a purely practical matter. This is the way it works.

Also, by insisting on this type of remedial action, we should like to suggest again that a practical result if this were to become settled policy.

That successors would in examining this, to the extent that they were aware of it, would be more inclined to other things being equal to hire none of the predecessor's employees, and instead of promoting stability, he is likely to promote just the opposite result in order to avoid being classified as a successor, or in order to avoid being projected in to this uncertain and potentially expensive situation.

I think to most of the further questions, I would conclude with that to open end, if the Court please, reserve the balance of my time for reply.

Chief Justice Warren E. Burger: Very well, Mr. Jackson.

Mr. Come.

Argument of Norton Come

Mr. Norton Come: Mr. Chief Justice and may it please the court.

The principal question here is whether the board may properly require one who acquires through a bona fide sale, a business and continues it in substantially unchanged form using the same workforce.

To reinstate with back pay an employee whom the predecessor employer has discharged in violation of the Act.

Where at the time of the sale, the successor employer has knowledge of the unfair labor practice and of the predecessor's failure to remedy it.

Justice Potter Stewart: The concluding clause of yours is one that's very much in dispute despite the findings below, we're told they're clearly erroneous, wholly without support in the record.

Mr. Norton Come: That is an issue that is up.

Justice Potter Stewart: So the question you stated is assumes the answer to another issue in this case?

Mr. Norton Come: Well, I would agree that both of those issues are here and I'll try to answer them.

It is undisputed that All American acquired through a bona fide a sale, the plant, the machinery, the accounts receivable, the trade name, and other assets of the Golden State Bottling operation that is retained virtually all of Golden State's employees.

Including the 12 distributors and all of Golden State's supervisory and managerial employees.

Including the General Manager, Eugene Schilling who is the one who discharged the employee in question when he was general manager for Golden State.

And it's further undisputed that All American continued to manufacture the same products, the same location, the same plant, and distribute them to the same customers.

I think we're all agreed on that.

Thus, All American would be a successor employer for purposes of the act not only under the test of the majority of the court in Burns, but also under the more stringent test of the dissenting Justices in Burns, which requires that the new employer not only take over the same employee complement, but he also succeed to some the tangible or intangible assets of the predecessor company.

We have got that here.

Now, petitioners deny that All American had knowledge at the time of the sale of Golden State's un-remedied, unfair labor practices.

The board found that the contrary in the Court of Appeals sustained that finding and normally under Universal Camera that issue would not be open.

However, it was raised as a question in the petition and the grant of certiorari does not exclude it.

So therefore, that issue is up here.

Now, with respect to that, we submit that there is adequate evidentiary support for the board's finding that All American had knowledge.

As I indicated before All American retained a general manager of the Bottling Operation, Eugene Schilling who had committed the unfair labor practice in question.

Schilling participated in one of the sale negotiating sessions with All American, at which among other things his retention as general manager was discussed.

Shortly thereafter with still before the sale was concluded, he met in the plant with a representative of All American and discussed general operations and “future plans”.

He also signed the sales agreement of January 31, 1968 which agreement specifically provided for his retention as general manager.

In these circumstances we submit that the board could reasonably infer as it did.

That Schilling had conveyed his knowledge of the pending unfair labor practice proceeding to All American at or before the consummation of the sale, or at a very least that Schilling’s knowledge thereof could properly be imputed to All Americans.

Justice Potter Stewart: Now, how was that?

How can you impute his knowledge, if he had knowledge as an employee of Golden State was it not?

And the very mere fact that Schilling was later hired by All American means that Schilling's knowledge means that prior knowledge meant that Golden State had prior knowledge?

Mr. Norton Come: Well --

Justice Potter Stewart: That's a very -- isn't that a very odd application of agency law?

Mr. Norton Come: We submit that it is not.

Here, you had a man who was intimately involved in the unfair labor practice that was not only needed to just come on board after the sale was consummated.

He was in negotiations with All Americans (Voice Overlap)

Justice Potter Stewart: Yes, you tell us to the fact he was in negotiations would allow a permissible inference on the part of the board that he imparted this information which to me is quite a big step.

But then you said that his knowledge as an employee of Golden State could be imputed to All American and that to me, I was surprised or I found that rather an impossible step as a matter of agency law.

Mr. Norton Come: Well, I think as of the time that he became an employee of All American, it could be imputed All American and that took --

Justice Mr. Justice Rhenquist: (Inaudible)

Mr. Norton Come: Well, we have some cases that we've cited in our brief, but I think that I have to rest on that position but I think that it's reasonable to infer knowledge from the circumstances.

Justice Mr. Justice Rhenquist: (Inaudible)

Mr. Norton Come: Yes, in view of Schilling’s contact with All American officials prior to the consummation of the sale.

Unknown Speaker: Well of course the deals agreed with you, didn't it?

Mr. Norton Come: It did Your Honor.

Furthermore, I should like to point out that although Golden State President Crofoot and Schilling testified that they did not tell All American prior to the consummation of the sale.

The trial examiner discredited these denials and I submit that there was ample basis for his action in doing so in view of the fact --

Unknown Speaker: -- the burden of proof?

Excuse me I didn't --

Mr. Norton Come: Yes, Your Honor, we do have the burden of proof and this is not one of those cases where you have direct evidence.

I think which -- it's a situation which you have very often in many cases particularly Labor Board cases where you have to draw inferences from the total circumstances.

And one of these circumstances in addition to the previous one that I had outlined, is the fact that the denials were discredited by the trial examiner for the reason that he found that not only had Crofoot and Schilling contradicted themselves in their testimony before him, but there were a series of documents that they had signed in the course of this litigation which either concealed or failed to disclose the sale of All American, to both the board and to the Court of Appeals.

Thus, in November 1968, more than six months after the sale and his authority to act for Golden State had entered, Schilling executed a letter and substitution of counsel in the Court below as General Kyle, manager of Golden State Bottling company.

On December 11, 1968 as President of Golden State, he signed a notice to employees required by the board’s order and sent the board a certification to that effect in the same day.

On behalf of Golden State he offered Baker the wrongfully discharged employee reinstatement as a driver salesman not withstanding the fact that almost a year ago or previous his authority to act in behalf of Golden State had ended.

And on November 24th 1969 more than 21 months after the sale, Crofoot as President of Golden State verified under penalty of perjury, the answer to the board's original back pay specification.

And that answer made no mention of the sale.

Alleged that Golden State had offered Baker reinstatement on December 11th more than 10 months after he'd gone out of the Bottling business.

On the basis of all of these factors, we submit that the trial examiner was warranted in discrediting the denials of Crofoot and Schilling that they did not tell.

Justice Potter Stewart: Alright, that discredits the denial and that leaves the state of the evidence in equipoise.

He discredits the denials because of the inferences that you said he was permitted to draw and so now it's an equipoise, and who had the burden of proof.

Mr. Norton Come: Well, we submit that we sustained the burden of proof by Schillling's contact with officials of All American prior to the consummation of the sale which warranted the inference that he conveyed his knowledge to them.

Further factor here is that the officials of All American were not called to testify although certainly Golden State and its attorneys could have done so.

Justice Potter Stewart: Well so could you if you had the burden of proof?

Mr. Norton Come: Well, we thought that we had had sustained it by the circumstances.

Justice Potter Stewart: Despite the fact that the only actual evidence in the record on this issue was that there was no knowledge.

Mr. Norton Come: Well, we believe that --

Justice Potter Stewart: I mean, other than the inferences you're talking about.

Mr. Norton Come: That is correct Your Honor.

Justice Potter Stewart: But the testimonial evidence was all of it un-contradicted was that was no knowledge, correct?

Mr. Norton Come: That is correct.

That testimonial evidence was discredited and the --

Justice Potter Stewart: Wasn't that it was disbelieved, you said.

Mr. Norton Come: It was disbelieved and we felt that the circumstances were sufficient to carry the burden of proof.

Maybe if we were trying the case today we might have done differently.

But this is the state of the record and it did pass muster in the Court of Appeals.

Of course if we lose on that issue then we don't need to reach the further question that I now want to get to.

As to the propriety of the board's legal position that a successor employer with knowledge can be required to remedy the predecessor’s unfair labor practice.

Section 10 (c) of the Act authorizes the board the issue of remedial the orders against any person named in the complaint who was engaged in any unfair labor practice.

However, from the beginning, board orders have covered not only the person found of committed the unfair labor practice, but its officers, agents, successors, and assigns.

And this Court has recognized that those orders could be applied not only to one who is merely a diguised continuance of the old employer, but also inappropriate circumstances, and I'm reading from Regal Knitwear.”

To those to whom the business may have been transferred, whether as a means of evading the judgment, or for other reasons”.

Now the question whether a successor was in the meeting of the board’s order, they properly include not only an alter ego, or an aider, or a better of the old employer, but also a bona fide purchaser where it continues the employing entity which was the locus of the unfair labor practices, and it acquires that entity with knowledge that the predecessor has failed to remedy those unfair labor practices, turns on an appraisal or the policies of the Act and also of Rule 65 (d) of the Federal Rules of Civil Procedure.

Now as to the policy to the Act, in Burns, this Court held that the policies of the Act were effectuated by imposing on a wholly independent new employer.

The old employer’s bargaining obligation where he was a successor employer for purposes of the Act and we have that here even under the centers of more stringent test.

Justice Mr. Justice Rhenquist: (Inaudible)

Mr. Norton Come: That is correct Your Honor.

There is no collective bargaining contract here.

There wasn't any union in the picture.

Baker was discharged because he was spearheading an organizational drive and union never got into this plant.

So we don't have any question of continuity of a bargaining relationship or a collective bargaining agreement.

Unknown Speaker: What's the argument Mr. Come, that Burns put a different light on this case?

What is the argument?

You mean -- I'm sure you don't -- but the dissenting Judge below thought that Burns did make a difference in this case?

Mr. Norton Come: I submit that the dissenting Judge misconceived the effects of Burns.

I think that if anything Burns furnishes support for the board's position here because it does recognize that the concept of successor employer has validity for purposes of the National Relations Act

Unknown Speaker: But how did he recognize that?

How did Burn recognize that?

Mr. Norton Come: Well, it recognized that insofar as it held that an independent new employer who merely went as far as continuing the same bargaining unit and taking over a majority of the predecessor’s workforce, had a bargaining -- had succeeded to the predecessor's bargaining obligation.

Unknown Speaker: Well, I'm not sure that was because he was a successor.

Mr. Norton Come: Well, I know that the dissenter is in Burns' point out that the majority does not use the word successor.

However, in the latter part of the majority opinion in Burns, when we come to the discussion of the unilateral action, the word successor employer is used quite frequently.

Unknown Speaker: Well, my question is, my question is that is whether or not arguably Burns does have a bearing on the case and the board should look at it again in the light of Burns.

This was the board acted pre Burns.

Yes.

Mr. Norton Come: That is correct, but there --

Unknown Speaker: Both you and your opponent rely on the Regal case.

Mr. Norton Come: Yes, Your Honor.

Unknown Speaker: And if that, if that issue disposed off it, in favor of either one of you just the 10 (c) argument, well I suppose there's no need to go back to the Board, is there?

Mr. Norton Come: No, Your Honor.

I do not see that Burns would effect the board’s application of this case, the principles of the board applied in this case.

The only part of Burns that could be deemed to have a bearing on this case is that the board relied very heavily on the Wiley against Livingston decision.

That is the policy reflected in Wiley against Livingston for holding that the new employer could be bound to the contract.

Unknown Speaker: (Inaudible)

Mr. Norton Come: That is correct.

But since we don't have any effort here to bind the new employer to the predecessor's collective bargaining agreement since there was none.

You do not have in the board's policy of requiring the successor, the remedy, the unfair labor practices.

Any collision with the freedom of contract policy reflected in 8 (d)of the statute.

Unknown Speaker: If the predecessors here had reinstated this employee one day before the sale, the successor needn't have kept him on.

Mr. Norton Come: He needn't have kept him on if he had good cause for --

Unknown Speaker: Oh!

No, now Mr. Come he doesn't need to hire anybody.

Mr. Norton Come: Well, that is correct.

I mean he needn't have kept him on, but --

Unknown Speaker: At all.

Mr. Norton Come: But he could not have fired him for a union reason, because he would have committed a new unfair labor.

Unknown Speaker: I'll agree with that Mr. Come, but all he would have had to done is say "I do not want you."

Mr. Norton Come: That is correct.

However, if you get somebody fired the day after he's put on.

Unknown Speaker: No, he'd be -- Would be hired.

He's just not hired by a successor who just bought the assets.

Mr. Norton Come: That is correct.

Unknown Speaker: Now you seem to agree with that?

Mr. Norton Come: Yes I do.

But the point is that the successor here took over not only the assets, but he took over the whole workforce.

Unknown Speaker: But nevertheless, if he had been reinstated the day before, this man would not need to have been kept on by the successor.

Mr. Norton Come: Well, that is correct, as a matter of fact the --

Unknown Speaker: But he wasn't put back on and you say "Therefore he must be hired."

Mr. Norton Come: That is correct, because there is an unremedied, unfair labor practice here that the successor is the only person that can only fully remedy as long as he is continuing the same employee enterprise.

Justice Mr. Justice Rhenquist: What does that mean, employee enterprise?

Mr. Norton Come: Well, the employee enterprise, I think is fairly easy to describe here, because what he has done is, he is continuing exactly the same business that the Golden State had.

The same plant, the same equipment, the same assets and in addition to that it is taken over the entire workforce including the managerial force.

So that --

Justice Mr. Justice Rhenquist: (Inaudible)

Mr. Norton Come: Well, it has been a word of art that I guess goes back to the old Sixth Circuit case, NLRB against Colten.

But it's synonymous with when you have a new employer who has identified himself with the predecessor to a sufficient extent to be considered a successor for purposes of the Act.

Justice Mr. Justice Rhenquist: An employing enterprise is what a successor continues.

Mr. Norton Come: Well, and if he continues enough of it to become a successor for purpose of the Act, he has carried on the employing enterprise.

But I don't want to get bogged down in the semantics of it, because I think that under any standard in this case at least.

If you are ever going to find a continuation of the enterprise or a successor for purposes of the Act you have it here.

Now, in terms of the hardship on the successor, if you apply the board's principle that he has to have knowledge, and whether you have it here of course is another question.

He -- yes Your Honor.

Justice Thurgood Marshall: The man was on a one year leave of absence, and the successor knew it, and the leave came up one month after the successor took over.

And the successor said "I just don't want you."

What would happen?

Mr. Norton Come: This was a dischargee who was a --

Justice Thurgood Marshall: No, he was just on leave.

I would have problems with that one.

Mr. Norton Come: I would too.

I don't know exactly what the answer to that one --

Unknown Speaker: With that if he just said "I don't want you."

Well, it's just like he wouldn't need to hire anybody else any other prior employee.

Mr. Norton Come: If he -- we're assuming a situation where there has been no discharge at all.

Unknown Speaker: (Inaudible) no unfair labor practice?

He just doesn't?

He says, when the fellow comes back he says, "You're among those that I don't want to hire."

Mr. Norton Come: Well I think that that would probably be alright.

That is not this case.

Now with respect to the successor as I started to say that if he is required to have knowledge of the unfair labor practice, he can protect himself by either negotiating an allowance in the sales price to cover his liability, or an indemnity agreement as was true here.

It's not only an indemnity that flows from the sales agreement, but also at the board hearing.

The president of Golden State orally agreed to indemnify All American for any backpay liability that might be imposed upon it.

Before sitting down, I want to address myself --

Unknown Speaker: Mr. Come just one last question.

If he need not take him on it all, why if he does take him on must he take him on with this albatross around his neck?

Mr. Norton Come: Well, when I say that he need not take him on, I have been assuming a situation where there is no un-remedied unfair labor practice.

If there is an un-remedied unfair labor practice --

Unknown Speaker: He must take them on you'll say?

Mr. Norton Come: Yes.

Unknown Speaker: Can you say Regal Knitwear actually settles that?

Mr. Norton Come: Well I want to address myself to Regal Knitwear --

Justice Potter Stewart: He must take them on if afforded by the board to do so.

Mr. Norton Come: That is correct.

Justice Potter Stewart: If the board has part of the remedy orders reinstatement that's --

Mr. Norton Come: That is correct.

Have I answered your question or have I confused you?

Unknown Speaker: (Inaudible) your position?

Mr. Norton Come: Yes, yes it is.

I think I've appeared to give inconsistent answer, because at one time, I was assuming we were dealing with an employee who was not the victim of an unfair labor practice, and at other times, I've been switching to the situation that we have here.

But I do want to say a word about Regal Knitwear.

Regal Knitwear says, and although the court was not really addressing itself to the problem that we have here.

In Regal Knitwear, the Court had a very academic question to decide.

Namely, whether the term successors, and assigns, and the board order should just be stricken.

And in the course of answering that question, the Court said "Well, we will leave it in there because in any event you can't breathe more life into in Rule 65 (d) of the Federal Rules of Civil Procedure would permit you to do."

Now Rule 65 (d) says that an injunctive order shall be binding on the parties of the action and persons acting in concert, and participation with them.

Unknown Speaker: Would receive actual notice?

Mr. Norton Come: Would receive actual notice.

Yes, Your Honor.

The court however, goes on to add that Rule 65 (d) really reflects the old common law of policy that an injunction can't go beyond binding the parties to the action, and those persons in privity or legally identified with them.

Now, and furthermore that the reason that you have that limitation is that you don't want an injunction binding someone whose rights have not been adjudicated by the court.

Now, we believe that the board's -- the principle the board is applying here comports with the basic policies underlying 65 (d) in that that a successor employer for purposes of the act, the kind of employer that I have been talking about at least the one in this case, could be found to be in privity or legally identified with the original party of this action.

Unknown Speaker: Well, your opponent says that under State law that is not so.

That this successor if you want to call him a successor would've not been liable for any back pay to this employee.

It was just wasn't one of those obligations for which he would've been liable.

Mr. Norton Come: I'm not --

Unknown Speaker: -- and so what law are you referring to when you say --

Mr. Norton Come: I am referring to the labor policy.

Unknown Speaker: Well, that's bootstrapping then, because that's the issue in the case, that does labor law impose an obligation?

Mr. Norton Come: Well, that is why I felt that it was necessary to show and I've done so in more detail in our brief that simply as a matter of effectuating the policies of the National Labor Relations Act.

It is reasonable and proper to impose on a successor employer the obligation to remedy the predecessor’s unfair labor practices.

Unknown Speaker: And you say there's room within the rule for that.

Mr. Norton Come: That is correct to find the --

Unknown Speaker: And that Regal allows that much room with them.

Mr. Norton Come: That is correct and furthermore, with respect to that part of Regal that attempts to ensure that you won't hold somebody whose rights have not been adjudicated, the board does not hold a successor until the successor is given notice of its intention to apply the order to it, and a opportunity at a hearing to show that it is not a successor.

That it did not take with knowledge and that it would otherwise be inappropriate to apply the order to it.

That opportunity was fully afforded All American here, and it took full advantage of the opportunity.

So we believe that if we're right on the policies underlying the National Labor Relations Act that 65 (d) would afford no obstacle to holding the successor in this case.

Justice Mr. Justice Rhenquist: The successor doesn't have the opportunity though to litigate the merits of the board's determination that there was an unlawful discharge.

Mr. Norton Come: That is correct.

He might however have the opportunity to show that he would have no room to take him back which might affect whether or not the reinstatement obligation would apply to him, or whether he would merely be required to put him on a preferential hiring list in the case any vacancies open up.

Chief Justice Warren E. Burger: Thank You Mr. Come.

Mr. Jackson you have 8 minutes of comment.

Rebuttal of Morton Jackson

Mr. Morton Jackson: Thank you Mr. Chief Justice.

I should like to correct a misstatement of the fact.

Quite unintentional I'm sure on the part of Mr. Come.

There was another union here, the issue one of the issues in the original unfair practice case is the question of domination of that union which has resolved.

Unknown Speaker: Was there a collective bargaining?

Mr. Morton Jackson: And there was a collective bargaining agreement.

There was no issue as to the obligation of the successor to abide by it, the successor of the organization did.

Unknown Speaker: Did you assume it?

Mr. Morton Jackson: Yes we did.

Unknown Speaker: Was that one of the --

Mr. Morton Jackson: It was not one of the specific obligations assumed as I recall.

I'm --

Unknown Speaker: Did you negotiate a new one or did you just assume it.

Mr. Morton Jackson: It just simply assumed the obligations under the old one.

Unknown Speaker: And which included into the –-

Mr. Morton Jackson: And continued right on with the --

Unknown Speaker: Which included the provision that I suppose you won't fire without cause.

Mr. Morton Jackson: I don't honestly recall Your Honor exactly what it did provide in this respect.

Unknown Speaker: Well let's assume --

Mr. Morton Jackson: It was not an issue in this case, so it --

Unknown Speaker: Mr. Jackson, it may not be an issue in the case before now.

Mr. Morton Jackson: Well, I mean it was not major issue below.

I don't mean to say that it cannot be an issue --

Unknown Speaker: Let's assume that any other employee you had decided you didn't want to take on, and you had no reason whatsoever for it.

You would have been in trouble with the union, wouldn't you?

Mr. Morton Jackson: I believe not.

Unknown Speaker: Why not?

Mr. Morton Jackson: Because I believe that the assumption of the agreement was not a matter of the sale contract, it was a voluntary assumption by the successor after having taken over, but I think --

Unknown Speaker: Well, I still think that if you assumed it with the union and one of its members you decided not to take on for no reason, you would've been in some trouble?

Mr. Morton Jackson: I think that's undoubtedly true.

After those obligations attached and after we would assume them without question if the –-

Unknown Speaker: Well what about this fellow?

Mr. Morton Jackson: If he had been a member of the workforce and we had contrary to the provisions of the collective bargaining agreement, which we had assumed attempted to discharge him without cause, it would've given rise to a cause of grievance under the contract without question.

Unknown Speaker: Yes.

I gather, this fellow was a member of the unit?

Mr. Morton Jackson: He was indeed.

Unknown Speaker: (Inaudible)

Mr. Morton Jackson: Yes, Your Honor.

Unknown Speaker: What was the union (Inaudible)

Mr. Morton Jackson: It was an independent union, yes.

Unknown Speaker: (Inaudible)

Mr. Morton Jackson: Yes, and the original case, which largely disposed off those domination charges.

The origin --

Unknown Speaker: (Inaudible)

Mr. Morton Jackson: That is correct Your Honor That was the thrust of the original case.

The discharge was an issue in that, but it was not one of the principal issues.

Unknown Speaker: But, you just said this was not a part of the merger or part of the sale proposition.

This was just a way --

Mr. Morton Jackson: No, Your Honor.

Unknown Speaker: About hiring and arranging your labor affairs?

Mr. Morton Jackson: Yes, I believe not.

Unknown Speaker: Independently with the union?

Mr. Morton Jackson: That is correct.

I would like if I may, in the time remaining to address myself to the two questions posed by Mr. Justice White.

First, the question of the significance of the Burn’s case in this case, and Judge Wiley, or Judge Kilkenny's reliance upon it.

We have prefaces by recalling that the board’s original position was premised on Wiley, or in the Regal Knitwear and the Symns Grocer decision of the board was premised on Regal Knitwear and the Birdsall-Stockdale cases that came as a consequence of it.

The change of position in Perma Vinyl in the board's rationale did not deal with these cases but went instead to the language of Wiley to support its change of course.

Burns contained language which suggested that Wiley did not support that view, in this language.

We do not find Wiley controlling in the circumstances here.

Wiley arouse in the context of the Section 301 suit to compel arbitration, not in the context of an unfair practice proceeding where the board is expressly limited by the provisions of Section 8 (d) The decision emphasized the preference of National Labor Policy for arbitration as a substitute for a test of strength and so forth.

But that language in Burn suggested that Wiley was not authority for imposing successorship by ability for unfair labor practices, but that it was confined to this question of an assumption of contractual obligations which is the Court in Mailey said were essentially consensual in origin.

To the other question posed by Mr. Justice White concerning a common law -- State law regarding the obligations of a successor.

We have cited two cases in our brief, we have not quoted extensively from them.

They're on page 37 of our opening brief Schwartz against McGraw-Edison, and Kloberdanz against Joy.

But I'd like if I may to quote from those cases as we did in our brief before the Court of Appeals.

In the McGraw case, which was a California case, there was this language "We find that the criteria again are very similar to those outlined by the Court in Regal Knitwear."

As a general rule where a corporation sells or otherwise transfers all its assets, its transferee is not liable for the debts and liabilities of the transferor.

And that liability of a new corporation for the debts of another corporation does not result from the mere fact the former's organize to succeed the latter.

It is generally held that if one corporation purchases the assets of another and pays a fair consideration, therefore, no liability for the debts of the selling corporation exists in the absence of fraud, or agreement to assume the debts.

There are certain instances however, in which the purchaser or transferee may become liable and then they go on to specify a few of these where there is an expressed or implied agreement of assumption.

But the transaction amounts to a consolidation or merger, but the transaction was fraudulent where some elements of the purchase of good faith were lacking.

Unknown Speaker: Yes, but was the sales law your --

Mr. Morton Jackson: We do indeed, yes.

Unknown Speaker: You have to give notice to creditors.

Mr. Morton Jackson: Yes of about or otherwise -—

Unknown Speaker: Was there notice to creditors in this case?

Mr. Morton Jackson: I believe there was.

I believe that law was complied with.

It's presumed fraudulent otherwise.

Unknown Speaker: And this gives creditors the opportunity to make --

Mr. Morton Jackson: Exactly.

Unknown Speaker: -- sure that their debts are going to be paid?

Mr. Morton Jackson: Yes, so to speak -- to assert their claims, or assert any liens if they have them.

Unknown Speaker: That's right.

Mr. Morton Jackson: Surely.

Unknown Speaker: Lastly, I would like to draw for just a moment on this criterion for successorship.

We indicated that the identity of the unit before and after the transfer is of course pertinent in determining whether or not a new expression of employee choice for the bargaining representative, would have go through this exercise, and this makes sense.

But in applying this to determine whether or not a person is a successor and has becoming a term of art, for purposes of liability.

I suspect as practical matter, the board has said to itself, if there is substantial identity of unit, and of personnel, and of work then it's highly probable that but for this discrimination the man would've been hired, and I suggest this is probably the reason for this criterion.

On the implied or the imputation of knowledge argument, I should like, if I may to point out to the Court, that one of the principal arguments advanced for this knowledge requirement is that if affords to the purchaser the ability to protect himself against this possible liability by indemnity agreements in this sort of thing.

However, by resorting to this imputation argument, which the board in effect is taking away this protection, because by having to resort to such a fictional device in order to result in a finding of knowledge.

The board is in effect seeding effect that no actual knowledge existed on the part of this purchaser.

And therefore this opportunity to protect itself and to investigate the possibility of the extent to which this might result in liability, did not in fact exist.

And I think this is another aspect of the thing which argues the frailty of this argument.

I would point out lastly that Regal Knitwear, this all for other reasons language to be found at the tail end of this one example given by Justice Jackson, does not open the door to any other thing --

Chief Justice Warren E. Burger: Just an internal code anyway.

Mr. Morton Jackson: Exactly, and -—

Chief Justice Warren E. Burger: From a case in somewhat different area for every standards.

Mr. Morton Jackson: In the succeeding paragraphs, he points out and this is the limit of language that both of these situations are those in which the relationship is one, which might have itself, established liability, and I think this is the touchstone.

Thank you very much Your Honor.

Chief Justice Warren E. Burger: Thank you Mr. Jackson.

Mr. Come.

The case is submitted.