Marino Electric, Inc.

National Labor Relations Board - Board Decisions

Aug 19, 1987

285 N.L.R.B. 344 (N.L.R.B. 1987)

344 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Marino Electric, Inc. and its alter ego, Marin Elec-
tric, Inc., and Marin Holding Company and
International Brotherhood of Electrical Work-
ers, Local Union No. 716, AFL-CIO. Case 23-
CA-10000
19 August 1987
DECISION AND ORDER
BY CHAIRMAN DOTSON AND MEMBERS
STEPHENS AND CRACRAFT
On 30 April 1986 Administrative Law Judge
Richard J. Linton issued the attached decision. The
General Counsel and the Charging Party filed ex-
ceptions and supporting briefs, and the Respond-
ents filed cross-exceptions and a supporting and an-
swering brief. Amicus curiae briefs were filed by
the International Brotherhood of Electrical Work-
ers, AFL-CIO, and the Chamber of Commerce of
the United States. The General Counsel filed a
brief in response to that of the Chamber of Com-
merce.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has considered the decision and the
record in light of the exceptions and briefs and has
decided to affirm the judge's rulings, findings,' and
conclusions and to adopt the recommended Order.
ORDER
The recommended Order of the administrative
law judge is adopted and the complaint is dis-
missed.
' Although we agree with the judge that the General Counsel failed to
establish that Marro Electric, Inc was the alter ego of Marino Electric,
Inc, we find 0 Vorhees Painting Co, 275 NLRB 779 (1985), on which he
relied in part, to be inapplicable There, a panel majority reversed a
judge's finding of alter ego status partly because one of the employers in
question had a nationwide business while its alleged alter ego operated
only locally In the instant case, however, the nationwide operations of
Marino Electric, Inc have never included its employment of electricians
to perform work of the type performed by its bargaining unit employees
The relevant comparison here, therefore, is only between the local oper-
ations of the alleged alter ego companies
The judge stated at one point that J C Marino was not a director of
Marro Electric, Inc , and later that he was The latter is correct
Robert S. Breaux, Esq., for the General Counsel.
James V Carroll III, Esq. (Andrews & Kurth), of Hous-
ton, Texas , for Respondent Marino Electric and Marin
Holding Company.
Marcia Ann Cain Graham , Esq. (Andrews & Kurth), of
Houston , Texas, for Respondent Marin Electric.
Patrick M. Flynn, Esq. (Watson, Flynn & Bensik), of
Houston , Texas, for the Charging Party, IBEW Local
716.
DECISION
STATEMENT OF THE CASE
RICHARD J LINTON, Administrative Law Judge. This
is an alleged alter ego case. Is Marin Electric, Inc.
(Marin) the alter ego of Marino Electric, Inc. (MEI)?
Did J. C. Marino (Marino), the real owner of both
MEI and Marin, form Marin as part of a scheme ( using a
holding company) to enable MEI to escape the burdens
of its contract with IBEW Local 716?
Or is Marin operated separately from MEI and with a
different purpose so that it is not the "disguised continu-
ance" of MEI7
The issue is very close. Because I conclude that the
answer to the last question is yes, I answer the first two
questions no, and I dismiss the complaint.'
This case was tried before me in Houston, Texas, on 4
and 6 September, 28-31 October, and 1 and 4 November
19852 pursuant to the 17 May 1985 complaint and the 16
October 1985 amended complaint issued by the General
Counsel of the National Labor Relations Board through
the Regional Director for Region 23.3 The amended
complaint (complaint) is based on a charge filed 29
March 1985 by International Brotherhood of Electrical
Workers, Local Union No. 716, AFL-CIO (Union or
Local 716) against Marino Electric Inc. and its alter ego
Mann Electric Inc (Respondent).4
In the complaint the General Counsel alleges that the
Respondent violated Section 8(a)(1) of the Act in Octo-
ber when Vice President Thomas N. Fitch told employ-
ees that MEI had to go nonunion under Marin in order
to get sufficient work, that Marin was MEI's open shop,
and that MEI had to close and reopen as Marin in order
to continue in business as an electrical contractor; Sec-
tion 8(a)(3) and (5) of the Act when Marin failed to
honor MEI's collective-bargaining agreement (CBA)
with Local 716, by Marin's failing to pay contract rates,
and by MEI's terminating 13 named employees on vari-
ous dates between 16 October 1984 and 18 January 1985.
' The caption of the complaint reads, in part, MEI "and its Alter Ego"
Mann I have not deleted the "and its Alter Ego" phrase from the cap-
tion, although leaving the phrase in the caption seems questionable in
view of my dismissal of the complaint On the other hand, presence of
the phrase immediately alerts readers to the nature of the case
2 The first 2 days of the hearing, 4 and 6 September, were very short
No witness testified, and the discussion was devoted mainly to resolving
issues concerning inspecting and copying subpoenaed documents Pro-
ceedings during these 2 days in September generated only 25 pages of the
transcript and are marked as volumes I and 2 For the October resump-
tion, the court reporting service inadvertently began again with volume
1, page 1 In light of the limited nature and brevity of the September pro-
ceedings, I have disregarded those pages when making references to the
transcript in this decision The parties did likewise in their briefs Thus,
references hereafter to volume i refer to 28 October 1985 References to
the transcript are by volume and page
3 At the beginning of the Monday, 28 October 1985 resumption, coun-
sel for the General Counsel, Robert S Breaux, announced that Clifford
W Potter, the first Regional Director for Region 23, had died the pre-
ceding Friday Attorney Breaux expressed tribute to the memory of
former Regional Director Potter, for whom memorial services were con-
ducted that day (1 6-7)
4 All dates are for 1984 unless otherwise indicated I refer to Marino
Electric, Inc as MEI and to Marin Electric, Inc as Marro Thus,
"Marino" refers to J C Marino, the person who owns the controlling
stock
285 NLRB No. 53
MARINO ELECTRIC 345
By its answer Respondent admits certain factual mat-
ters but denies violating the Act.
On the entire record, including my observation of the
demeanor of the witnesses, and after due consideration of
the briefs filed by the General Counsel , the Union, and
the Respondent, I make the following
FINDINGS OF FACT
1. JURISDICTION
Both MEI and Marin are 'Texas corporations head-
quartered in Houston, Texas. Each is engaged in the
building and construction industry as an electrical con-
tractor. During 1984 MEI purchased and received in
Texas goods and materials valued in excess of $50,000
from Texas suppliers, which suppliers, in turn, had pur-
chased such items from points located outside Texas.
During ' the past 12 months Marin purchased and re-
ceived in Texas goods and materials valued in excess of
$50,000 from Texas suppliers, which suppliers, in turn,
had purchased such items from points located outside
Texas. I find that MEI and Marin, and therefore Re-
spondent, are each employers within the meaning of Sec-
tion 2(2), (6), and (7) of the Act.
11I. LABOR ORGANIZATION INVOLVED
Respondent admits, and I find, that I-BEW Local 716
is a labor organization within the meaning of Section
2(5) of the Act.
III. THE ALLEGED UNFAIR LABOR PRACTICES
A. Facts
1. From Wohlt Electric to Marin Electric
This case revolves around J. C. Marino and the four
corporations that he either owns or controls. MEI, the
first of Marino's companies, was chartered by the State
of Texas on 27 January 1978 (G.C. Exh. 2-1). After serv-,
ing nearly 18 years with WohIt Electric, Inc., Marino
launched his own entrepreneurial career in the electrical
contracting business with MEI. Marino and his wife
Judith have been the only directors of MEI, and from
MEI's inception Marino has owned the controlling
shares of stock (R-O-10).5
Marino ran MEI from his home or some other tempo-
rary location for the first few months. In June 1978 MEI
moved to its permanent quarters at 615 Hartman and
mailed copies of an announcement to that effect (6:1546).
Aside from listing MEI's name, logo, address, telephone
number, and officers, 6 the announcement declared MEI
to be (R-O-15):
5 Exhibits of MEI are designated as R-O with trailing sequence
number, and Marin's exhibits bear the prefix R-N (3 603, 613). R-0-10 is
a chart showing a history of the directors, officers, and stockholders of
the four corporations (6.1505).
6 The officers named were J. C. Marino, president, and Tom Fitch,
vice president . Fitch also had been at Wohlt Electric with Marino and
,had joined MEI shortly after its creation. Fitch joined as part owner,
purchasing 16,000 of the 82,000 shares around Easter 1978 (5:1254).
A new electrical contracting firm specializing in de-
signing and building quality commercial and indus-
trial construction.
As we shall see, the nature of MEI's work, or the
market it specialized in, is a key point in the evidence be-
cause that specialty is contrasted with the so-called com-
petitive market in which Marin operates.
Even before MEI moved to its permanent quarters at
615 Hartman, Marino, in the spring of 1978, signed the
Letter of Assent-A agreeing to be bound by the CBA of
the Southeast Texas Chapter, National Electrical Con-
tractors Association, Inc. (NECA) (5:1440-1441). Soon
thereafter MEI joined NECA, and Respondent admits to
this fact in its answer to complaint paragraph 10. On
signing the letter' of assent at Local 716, Marino was
given the opportunity to choose his first two electricians
by name, and he selected Gary Kaminsky and John LeB-
lanc-foremen at Wohlt Electric (5:1322, 1441). Fitch
testified that Kaminsky was the first to start, and that he
began about May 1978 (5:1256). Thereafter MEI called
the Union when it needed to hire electricians.
Joseph D. Meyer also worked at Wohlt Electric when
Marino and Fitch were there. Indeed, in early 1962
Marino hired Meyer to work as an estimator at Wohlt
Electric (3:686-687). Meyer testified that he joined MEI
in March 1979 (3:688; 4:971) and was promoted to vice
president of engineering and sales in the summer of 1979
(3:689).'
From its beginning, as previously noted, MEI special-
ized in designing and building quality commercial and in-
dustrial construction (1:21; 6:1590). Respondent's wit-
nesses refer to this as the design/build market. Marino
described the nature of the design/build concept as a
team concept, pioneered by Wohlt Electric, in which an
owner engages an architect to prepare preliminary plans
and specifications. The selected general contractor calls
in the electrical contractor. The owner would then take
the final plans to his bank. All of this, Marino testified,
was on a negotiated basis; that is, there was no bidding
by competitors (6:1547-1548).
Bernard M. Kalmans gave a similar description of the
design/build concept, a format he used at his own elec-
trical contracting company, Kalmans Electric Company,
before selling his assets to a Dallas firm in May 1984
(3:552-554). He sold out because his business (40 to 50
percent of which was design/build) became unprofitable
(3:555, 556). Beginning in 1983, Kalman testified, his
customers switched from negotiated contracts (design/-
build) to the competitive market in which the lowest bid
gets the job (3:554, 556).
Although the record contains several references to
lowest price getting the job, that shorthand reference
must give way to the more complete statement of other
witnesses that the lowest responsible (i.e., reliable) bidder
is awarded the job. These' witnesses , estimators for differ-
' Minutes of a special joint meeting of MEI's shareholders and direc-
tors held 12 October 1979 at Lake Tahoe, Nevada, reflect that Meyer
was elected to the vice president position "effective May 1979" (G C.
Exh 2-2), and the May 1979 date is reflected in the chart summary (R-
0-10)
346 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
ent general contractors in Houston, include Curtis L.
Trenkelbach (4:857, a project manager), Dan Sterling
(4:885, 890, 893), Gordon Albrecht (4:908), and Mark
Gartrell (4.925). Even Meyer, who initially testified that
bottom dollar takes the job (3:697), subsequently modi-
fied that to say customers are primarily interested in the
bottom dollar, but that no one wants shoddy materials or
workmanship (4:1004-1005).
Before 1983 MEI was quite successful, and it awarded
bonuses to employees and donated to charities. By 1983,
however, two adverse developments had occurred in
Houston. First, the oil-based economy had begun suffer-
ing and construction soon felt the pain. Second, non-
union electrical contractors multiplied (1:112; 2:326,
Marino; 3.556, 565, Kalmans; 3:696, Meyer). The conse-
quences of the downturn in the oil-based economy are
reflected in statistics appearing in the record (R-O-12;
R-O-14), and reports about the events appear in both na-
tional publications, such as Newsweeks and the Wall
Street Journal,9 as well as in local publications such as
the Houston Chronicle. i o
Nonunion contractors were paying their electricians
about $10 to $12 an hour, and even when a company
added medical benefits the total cost came to no more
than about half the $24 hourly cost (including benefits)
for union scale (1:126-127, Marino; 3:564, Kalmans;
3:724, Meyer)." The difference in labor cost put a
severe squeeze on union contractors, for as Marino
(1:115) and Kalmans (3:563) testified, the principal cost
factor difference between union and nonunion contrac-
tors is the labor cost The cost of materials is essentially
the same for both groups (1:115) Because of the squeeze,
Kalmans sold out in early May 1984 (3:553, 565). And
Wohlt Electric, the union contractor who pioneered the
design/build concept, appears to have closed its doors in
1985 (6:1549, Marino).
MEI took several steps in an effort to survive. First, it
reduced various items of overhead expense, including
consolidating some office jobs, laying off employees,
dropping bonuses and eliminating advertising in the
yellow pages, cutting or freezing some salaries, and
more. Second, it attempted to enter the competitive
a The Great Texas Oil Bust, Newsweek, March 21, 1986 at 16 Thus,
above at 17, "Industry statistics tell the story In December 1981, the
number of rotary-drill rigs operating in Texas peaked at 1,448-but by
the end of 1982 that number had been cut in half" And at 18 above,
"Houston and its real-estate boom were heavily dependent on oil In 1982
alone, Houston lost an estimated 100,000 jobs as drilling activity dried
11up
9 Frazier, City Under Stress Houston Falls Into a State of Mental De-
pression, Wall Street J , March 25, 1986 at 1, col I
10 Drummond, Construction on Offices at Virtual Standstill, Houston
Chronicle, Nov 10, 1985, sec 5 at I Drummond reports, "During the
historic burst in office construction in 1982 and 1983, developers com-
pleted buildings equal to half the office space in the entire city Today,
office construction is at a virtual standstill " As anyone would expect,
"Houstonians have embarked on a massive diversification effort to ensure
that the city's economy will be as bright in the future as it has in the
past " Sheridan, Houston A Plan For Diversification, SPIRIT (Southwest
Airlines), April 1986 at 81, 82
11 The relevant CBA is effective 14 February 1983 to 27 August 1986
(G C Exh 7) MEI is a signatory The CBA provides for a journeyman
wage rate (not including benefits) of $17 88 effective 2 March 1983 and a
rate of $17 98 effective 31 August 1983, with a wage rate effective 29
August 1984 to be determined in reopener negotiations (G C Exh 7 at
30)
market based on two agreements NECA negotiated with
the Union. These agreements allowed contractors to pay
lower rates for certain work. One of these agreements
was called the Market Recovery Agreement (MRA), and
it provided for a $12 hourly rate for journeymen (1:131;
2:275). The other was the Ship Channel Recovery
Agreement (SCRA), which allowed an hourly rate of
$14.30 (6:1576). The MRA (and presumably the SCRA)
was effective from November 1983 to 1984 (1:131;
6:1533). The cost of benefits, however, was based on the
higher wage scale of the CBA, and this resulted in a
total cost of about $15 to $16 under the MRA (2:275,
280-281). Because everyone was unhappy with the MRA
and, presumably, the SCRA, these two side agreements
were not renewed.
The electricians did not like the MRA for obvious rea-
sons, and MEI did not like it for two reasons. First, the
total rate was still too high for MEI to compete with
open shop contractors and, second, the dissatisfaction of
the electricians manifested itself in lower productivity,
higher turnover, and increased attendance problems.
Third, in its efforts to enter the competitive market
MEI reduced its normal overhead factor when bidding,
and on a very few jobs actually submitted a bid at less
than its cost simply in an effort to get a start. MEI was
unsuccessful in its efforts to penetrate the competitive
market (1:112; 6:1549-1550, Marino).12
A last hope MEI had was that the Union would agree
to NECA's request for a 15-percent reduction in the
wage-benefit package to be effective 29 August 1984.
The Union declined to agree to the reduction, and the
matter was submitted to the contractual arbitrator, The
Council on Industrial Relations (CIR) in Washington,
D.C. On 28 August 1984 the parties learned that the CIR
had upheld the Union's refusal to agree to a rollback in
labor costs (R-O-18). Even so, Meyer testified that a 15-
percent reduction would have been too little to help
(3:707, 763), and Marino testified that for MEI to com-
pete it needed a labor cost factor in the $10- to $12-an-
hour range (1.131).
There is no question that MEI's fortunes were declin-
ing. The firm incurred a net loss of $7207 for calendar
year 1983, and in 1984 the news was even worse with a
net loss of $35,587 (G C. Exh. 2-10). The backlog of job
awards is, of course, an indication of a firm's economic
prospects for the coming months. MEI's backlog history,
downright gloomy on entering 1984, reflects the follow-
ing (R-N-23):
As of Amount
31 December 1981 $2,466,838
31 December 1982 538,123
31 December 1983 293,040
31 August 1984 94,487
In the 8-month period ending 31 August 1984, MEI
was unsuccessful on at least 32 bids totaling over
$2,385,000 (R-O-16)
12 MEi did secure a few contracts, but the dollar volume and profits
were far too small
MARINO ELECTRIC 347
In view of all the economic problems facing MEI it is
not surprising that for several months before the CIR's
decision, Fitch, Meyer, and Marino had discussed the
possibility of forming a separate company to operate in
the competitive market. On 29 August 1984, following
receipt of the CIR's decision that the contractual wage
rates would remain the same for another year, Marino
decided to curtail MEI's operations and to create a sepa-
rate company that would operate in the competitive
market (1:103, 123-125, 144; 2:277; 6:1574). Marino testis
fled that he and his wife Judith selected the name of
Marin for the new company (2:315). That name is simply
Marino with the letter "o" dropped.
On 29 August Marino went to his corporate attorney
who, on that date, prepared the articles of incorporation
for a holding company, Marin Holding Company (Hold-
ing) and for Marin Electric, Inc. (1:143-144). Two days
later, 31 August 1984, the Secretary of State for Texas
issued a charter to Holding.(G.C. Exh. 4-1) and one to
Marin (G.C. Exh. 3-1).13
On 10 September certain stock purchases and ex-
changes occurred as a result of the organizational meet-
ings that date of Holding and Marin. Marino, Fitch, and
Meyer (the only stockholders of MEI) exchanged their
shares of MEI stock for an equal number of shares in
Holding, with Holding becoming the sole stockholder of
both Marino and Marin(R-O--10). From 10 September to
the present (actually, to the close of the hearing insofar
as the record can show), the initial and only directors of
Holding have been J. C. Marino and Judith Marino,14
and the only officer Holding has had has been Marino as
president and secretary (R-O-10; complaint par. 2, ad-
mitted).
From its 10 September organizational meeting for-
ward, Marin's officers have 'been: Phillip Steffek, presi-
dent; Thomas N. Fitch, vice president and secretary;
Joseph D. Meyer, vice president (R-O-10; G.C. Exh. 3-
2). And its directors have been (R-O-l0; G.C. Exh. 3-2)-
J. C. Marino
Judith I. Marino
Phillip Steffek
Joseph D. Meyer
Thomas N. Fitch'
Charles H. Barineau,
Jr.
10 Sept. 1984 to present
10 Sept. 1984 to 1 Aug.
1985
1 Aug. 1985 to present
I Aug. 1985 to present
1 Aug. 1985 to present
1 Aug. 1985 to 24 Sept.
1985
From 10 September forward the 82,000 shares of
Holding have been owned as follows (G.C. Exh. 4-2; R-
0-10; 1: 119-120):
J. C. Marino 59,200-72.2%
Thomas N. Fitch 16,000-19.5%
Joseph D. Meyer 6,000-8.3%
82,000-100.0%
13 Earlier in 1980, Marino had formed J. C. Marino Interests , Inc (In-
terests) that, as the record reflects, owns and leases equipment and other
property, first to MEI, and later, to Mann. From the inception of Inter-
ests, Marino has been the sole stockholder, director, and officer (R-O-10;
1:175-179; 5.1415)
14 Marino and his wife have been the only directors MEI has had from
its inception.
Thus, although J. C. Marino has never been an officer
or director of Marin, he has potential control of Marin
by virtue of being the majority stockholder of Holding
(he and his wife Judith constitute Holding's board of di-
rectors) which in turn owns all the shares of both Marin
and MEI (1:122).
2. MEI before Marin
In the months before Marin was created, MEI operat-
ed as follows. Marino made all major decisions, handled
the public and customer relations work, set the labor re-
lations policies,15 and served as the project manager on
the larger jobs. Fitch testified that on the larger jobs the
foremen had more contact with Marino than with him
(5:1261, 1264). As Marino described his function as of
1984, "I was Mr. Everything" in running the corpora-
tion, serving as project manager, and working with the
employees and job foremen (1:157-158).
Assisting Marino in operating MEI were Thomas N.
Fitch, Joseph D. Meyer, and Phillip, Steffek. Fitch was
vice president of operations and production, Meyer was
vice president of engineering and sales, and Steffek was
the controller. Unlike Marino, Fitch, and Meyer, Steffek
held no shares of MEI's stock.
In practical terms, Fitch was the shop superintendent
whose primary duty was to oversee the job foremen and
to keep the crews balanced on the various jobs (1:158,
160; 5:1259). Meyer was in charge of estimating and en-
gineering design (1:158; 3:689, 718), and Steffek ran the
office and accounting function (1:163). 16 Because Marino,
was personally involved in just about everything at MEI,
there' were no rigid organizational lines. Thus, Larry
Anders handled estimating and some service work, and
reported to both Marino and Meyer (1:159; 5:1297).
Anders testified he did estimating at Marino and that it
was not until the summer of 1984 that he was given
charge over the service department, a task which, he tes-
tified, had been handled previously by Fitch (4:1072;
5:1230).1 ° All these persons, and perhaps others at, MEI,
had worked with Marino at Wohlt Electric. Indeed,
some had been hired by Marino at Wohlt Electric.
Other names from Marino's overhead (office) staff ap-
pearing in the record include Raymond Adams, a drafts-
man and estimator who assisted Meyer, and Maurice
Garrett, a material expeditor (1:161). Suzan L. Steffan,
the office manager, worked under the supervision of
Steffek (1:34; 6:1517).
3. Events after 10 September 1984
On I1 September Meyer became Marin's first employ-
ee. He soon was followed by Fitch and Steffek. The top
management of Marin consists of Steffek, president;
Meyer, vice president; and Fitch, vice president and sec-
retary. Steffek directs the office staff and the financial
and accounting aspects, Fitch is in charge of the field op-
15 Of course, many aspects of labor relations were controlled by the
CBA with Local 716.
is Marino, Fitch, and Meyer testified, but Steffek did not.
17 Marano testified that during the cost-reduction layoffs of early 1983
Fitch took over the additional responsibility of the service trucks
(6 1518)
348 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
erations, and Meyer handles the estimating, bidding,
project management, and public and customer relations.
The titles of Mann's officers are rather misleading, for
Meyer (3:719; 4:984) and Fitch (5:1298-1299) testified
that the three work together but none reports to anyone.
Marino describes Marin's top management as a "three-
headed deal" (1:163). According to Meyer, Marino exer-
cises no supervision over any member of Marin's trium-
virate (3:719, 730).
Since 1978 Marino has personally owned the facility at
615 Hartman. He leased it to MEI (G.C. Exh. 2-13).
When Marino decided in late August to curtail his ef-
forts to enter the competitive market with MEI, and to
form a separate company for that purpose, he recognized
that it meant MEI's space needs would be smaller. Ac-
cordingly, about 1 October MEI moved about two to
four blocks to an office located at 702 Leverkuhn.18
Marino then leased space in his 615 Hartman building to
Marro effective 1 October 1984 (G.C Exh. 5-7).19
Of MEI's overhead (office) staff, only Larry Anders
remained with MEI and moved with Marino to the Le-
verkuhn address where he ran the service department.
The others transferred to Marin and remained at 615
Hartman. The electricians, being union, remained with
MEI and moved to 702 Leverkuhn.
Marino also had occasion to be at 615 Hartman on oc-
casion, for his leasing firm, Interests, has an office there
(1:69, 132, 183). Indeed, at one point in his testimony
Marino referred to that as his "corporate" office (1:183-
184).
Over the years MEI has participated in or bid on joint
venture projects in other cities or States, usually with an
out-of-state firm. For example, MEI and Hatfield Elec-
tric of Columbus, Ohio, are engaged in a joint venture
on a 37-story office building in Columbus. Marino refers
to these projects as MEI's national joint venture work
After September MEI continued pursuing its national
joint venture business and what service work it had. Fol-
lowing 6 weeks or more of intensive estimating, MEI
was unsuccessful on its December bid (actually a joint
venture bid with Hatfield Electric) for the electrical
work on the new George Brown Convention Center in
Houston. Former Job Foreman Arthur Wayne Boulet
testified, in his opinion, if MEI had been awarded the
convention center job the Company would have re-
mained open (i.e., had business for the electricians), but
when it lost that bid "they" (meaning Marino and
Anders, apparently) no longer seemed to care (2.436).
Boulet is one of 13 employees named in complaint
paragraph 17 as having been terminated unlawfully be-
tween 16 October 1984 and 18 January 1985. Whether
the 13 were laid off or quit and the legal effect of their
departure are matters the parties dispute. Regardless of
the merits of that debate, there is no dispute that the oc-
18 Marino dates the move about 1 October (1 51, 92), and Anders
places it about the third or fourth week of September (5 1215)
19 Although the lease bears an execution date of 15 October 1984,
Marino concedes that it was not actually signed until January or Febru-
ary 1985 (1 91) Because so many events were transpiring in the fall of
1984, Marino testified, it was not until January or February 1985 that he
was able to catch up on the legal paperwork involving leases and other
items (2 306)
casion for the 13 leaving was MEI's declining amount of
work. Indeed, about mid-January 1985 Anders left MEI
and went to work for Marin as manager of the service
department Since the pay period ending 22 January
1985, Marino has been MEI's only employee (1.166;
2:259-260).
How did Marin get started9 In two ways First, while
still employed at MEI, Meyer bid on two jobs when
Marino decided that MEI could not afford to do the
work because of the competitive pricing of the jobs. The
two projects are described as the Ferranti International
Controls job and the Pasadena Interfaith Phase II job.
As Marino testified, MEI declined to bid against the
competitive pricing on the Pasadena job (2:295-297;
5:1433) and, in the face of economic reality about the
competitive market, decided to withdraw MEI's bid on
the Ferranti job (2:275-278).
Second, until money started flowing in from advance
billings and work on the Ferranti and Pasadena jobs,
Marin needed operating cash. That initial cash was ad-
vanced from Holding to Marro beginning with a $1000
payment on 21 September. By 26 October Holding had
loaned Marin $33,500 (G.C. Exh. 4-8). During approxi-
mately the same period (from 19 September to 26 Octo-
ber), MEI transferred $34,000 to Holding (G.C. Exh. 4-
8). As Marin's operation became successful over the next
few months it repaid Holding.
Payments were made by offsetting journal entries. As
explained by Respondent's certified public accountant
(CPA), Charles H Barineau Jr., it is a common practice
on intercompany dealings between wholly owned firms
to handle transactions (purchases, loans, and payments)
by offsetting journal entries because one item simply can-
cels out the other (5:1395). Barineau testified that this
procedure cannot be followed in companies with minori-
ty shareholders, who should be compensated (with inter-
est) for the use of their money, but that it makes no dif-
ference when the firms are owned 100 percent by one
entity (5:1398, 1417).
Marin has been successful, and in 1985 it not only
repaid MEI and Holding, but it also began advancing
funds to Holding. In turn, Holding loaned the money to
MEI. By 30 September 1985, as CPA Barineau testified,
such funds exceeded $115,000 (5.1352, 1359).
During its startup period, Marin purchased much of
MEI's office furniture, tools, and equipment. The re-
placement cost for the tools was ascertained, and MEI
discounted that figure by 75 percent to reach the market
value for used tools Marin eventually paid MEI that dis-
counted sum by offsetting the journal entry (2:313-314,
380-381; 4.987; 5.1373). The furniture was also paid by
offsetting journal entry (5.1366, 1394).
In the weeks and months after MEI's office staff (with
the exception of Marino and Anders) departed to join
Marin, some of that same staff continued to provide serv-
ices to MEI as needed by their former employer-for a
fee paid by MEI to Mann Thus, Steffek and Steffan pro-
vided accounting and bookkeeping services at the rate of
$1500 per month ,20 and Meyer, Fitch, and others pro-
20 See 1 184, 2 288 , 316-317, 360, 3 730, 733, 5 1225, 5 1367, 1374
MARINO ELECTRIC
vided engineering , estimating , bidding, and troubleshoot-
ing services at $1500 a month , or $50 an hour, paid by
offsetting journal entries compensating Marin for the
time of its employees.21
MEI and Marin have separate bank accounts, books
and records, tax returns , and insurance . However,
Marino is covered under the medical policy protecting
Mann's employees . MEI pays Marin for Marino 's cover-
age on a quarterly basis (5:1376) and charges the cost to
Marino's salary draw (2:357-359). Although the record
does not give the reason for Marino's inclusion , I assume
he is included in order that he may obtain a lower rate
available under group coverage.
During its first year of operation (from about Septem-
ber 1984 to 30 September 1985) Marin developed a cus-
tomer list of 68 firms in the Houston area , with 26 being
companies who were past customers of MET (R-N-3;
3:745; 4:1056, Meyer). The total dollar volume of Marin's
contracts and service work during its first year was
$2,025,582, with $959,845 (47.4 percent) of that sum
coming from former customers of MEI (R-N-3).
Marin operates strictly in the Houston area (3:797;
4:1015, 1067). Although MEI does joint venture work,
most of it outside either Houston or Texas'22 Meyer tes-
tified that Mann works mostly in the competitive bid
market, has. no joint ventures , and most of its jobs are
small (3:797). CPA Barineau gave confirming testimony
(5:1387).
4. Allegedly unlawful statements
a. Introduction
Complaint paragraph 16 alleges that Respondent vio-
lated Section 8(a)(1) of the Act when Thomas N. Fitch
allegedly:
(a) About October 12, 1984 , informed an employee
that Respondent Marino had to go "nonunion " under the
name of Respondent Marin in order to get sufficient
work as an electrical subcontractor.
(b) About October 20, 1984, informed an employee
that Respondent Marin was the open shop of Respondent
Marino and was created so that Respondent could stay
in business.
.(c) About October 24, 1984 , told an employee that Re-
spondent Marino had to close down and open up at Re-
spondent Marin in order to continue doing business as an
electrical contractor.
The General Counsel apparently relies on the testimo-
ny of Ernest Dale Worthan and Carl Smith to support
the allegations . Apparently the General Counsel relies on
the remarks principally in relation to the subject of
MEI's alleged motive to evade the CBA with the Union.
Respondent did not object to the variance in the dates
of some of the evidence, and it does not specifically ad-
dress the paragraph 16 allegations in its brief.
21 See 2 286-293, 369; 3 732-734, 4 997- 1003 , 5 1313-1314, 5 1367,
1374-1375
22 As CPA Barineau testified, during the first 9 months of 1985, 90
percent of MEI's income derived from joint venture projects (5 1384, R-
N-25).
349
b. The evidence
Union member Carl Smith testified that about mid-Oc-
tober Fitch hired him in a telephone conversation. When
Smith reported for work the next morning , Fitch asked if
he was a union member. "Yes ," said Smith . Fitch said he
was too. Fitch added that "they" previously had been
Marino Electric and had decided to open Marin Electric
to cut "their" costs (3:645-647).23 Fitch was not asked
about this conversation during his testimony.
Ernest Dale Wortham , a member of Local 716, visited
Marin 's office in early November and left his name and
telephone number as an electrician seeking work (3:576-
578). About 19 November Fitch telephoned Wortham
and inquired whether he was still looking for work.
"Yes," Wortham said . Fitch spoke of a certain job and
said he was looking for someone to run it for $13 an
hour.24 According to Wortham , Fitch added that Marin
was a branch of Marino which "they" ("we?") had
formed to stay in business , that Fitch held a union card
and there was no reason for Wortham to drop his union
membership . Wortham said he would call him back
(3:579). On cross-examination Wortham admitted that in
his 12 April 1985 pretrial affidavit he reported Fitch as
saying "Marin is the open shop of Marino Electric," that
Fitch said they had "formed the nonunion side in order
to stay in business ," and that Wortham said he would get
back with him the next day (3:603-604).
The following day, 20 November , Wortham and Fitch
held a telephone conversation that Wortham tape record-
ed. The transcript of the conversation is in evidence as
Charging Party Exh. 3. In the tape recorded conversa-
tion of 20 November Fitch states, "See we're just kinda
starting out and uh-I mean we ain 't new to the business,
but Marin Electric is new." (C.P. Exh. 3 at 3.)
A couple of exchanges later finds Wortham asking
whether Marin foresees much work, and Fitch replies af-
firmatively, adding (C.P. Exh. 3 at 3):
FITCH: We, well I may have told you yesterday,
but we used to be Marin Electric.
WORTHAM: Yeah.
FITCH : And see, Marino's union.
WORTHAM: Yeah.
FITCH: Well it's doing business , but uh-we
formed an open shop to try and stay in business.
Fitch testified that when he referred to "we" in the 20
November telephone conversation , he meant that Meyer
and the others who had come over to Mann from MEI
were not a bunch of upstarts, but were people who had
previously worked at MEI (5:1288). The thrust of Fitch's
testimony seems to be that he attempted to convey the
message that the people staffing Mann were the experi-
enced former staff of MEI.
2 3 No doubt Fitch actually would have used the pronouns "we" and
"our " Indeed , as we shall see, Fitch testified that he used "we" in a dif-
ferent conversation with employee Wortham.
24 As Marino testified (1.163; 6 1568), the record reflects that the par-
ties use the term "job runner" interchangeably with "foreman "
350 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
c. Conclusions
I credit the testimony of employees Smith and
Wortham. I do not credit Fitch's testimony regarding the
intention of his remarks to the extent no such intention is
conveyed in his tape recorded words. Nevertheless, I
find no violation in Fitch's remarks, and I shall dismiss
complaint paragraphs 16(a), (b), and (c).
5. August 1984 remarks of J. C. Marino
The record contains evidence of a conversation in
August 1984 between Local 716 member Arthur Wayne
Boulet and J. C. Marino concerning an open shop and
Marino's plans regarding MEI.25 There is no allegation
or contention that Marino's remarks were independently
unlawful, but the General Counsel and the Union rely on
them, in part, to show that Respondent was unlawfully
motivated in establishing Marin.
There is no dispute that on an unspecified date in
August 1984 Boulet and Marino had a conversation at
MEI's 615 Hartman location. What differs is the testimo-
ny regarding the contents of the conversation.
Because he had heard rumors about an open shop,26
Boulet asked Marino how the work picture looked. "Not
good," replied Marino. Boulet then asked Marino about
the open shop matter. According to Boulet, Marino said
he was going to establish an open shop in order to sur-
vive because he could not get jobs by bidding on union
rates. Marino, Boulet continued, said he would keep
MEI in business until the end of 1986, and that if MEI
could not survive after that then he would close MEI
and join the open shop that, as Boulet understood, would
already be in existence.27
Marino offered Boulet $20 an hour to work at the
open shop to be established, saying that he could pay his
top people that much and still achieve a lower average
by paying the other electricians a reduced figure. Boulet
replied that he would remain union because he had been
a union man all his working life. Marino said he too was
union and that it hurt him to do it (2:396-397, 430-433,
437-442).
Boulet concedes that in his pretrial affidavit he placed
the conversation in October.28 He testified that after in-
specting his checkstubs he now places the conversation
in August, although he remains uncertain about the date.
He also concedes that in his pretrial affidavit he states
that Marino said, "I will keep my open shop and the
closed shop. If work is good and I can get jobs I will
stay union." (2:443-444)
According to Marino, he and Boulet did discuss MEI's
work prospects. Marino remarked to Boulet that open
25 Boulet was one of the first electricians hired by MEI in 1978
(2.392). Marino testified that he met Boulet at Wohit Electric (6.1525).
Boulet sometimes worked as a foreman at MEI, but it appears that the
last few months he worked on a service truck as a skilled, but nonsuper-
visory, journeyman or leadman assisted by an apprentice
26 In June Fitch had remarked to Boulet that if MEI were an open
shop it could hire cheaper labor to perform the less skilled work (2:399-
400, Boulet).
29 Boulet was uncertain whether Marino referred to the end of 1986 or
until the CBA expired He testified that he did not know when the CBA
expired (2.441) The scheduled expiration date is 27 August 1986 (G.C.
Exh. 7)
2 s Boulet's pretrial affidavit is dated 2 May 1985 (2 411).
shop companies were underbidding MEI even though
they paid their leadmen $20 an hour. They could do this,
Marino explained, and still reach a low average pay be-
cause the lesser skilled electricians were paid reduced
rates. Marino denies offering Boulet a job at Marin. He
also denies saying he was going to establish an open shop
or that he would try to keep MEI going until the end of
1986 (5:1432).
Bearing on the timing of the Boulet-Marino conversa-
tion is a conversation Boulet had with Fitch about going
to work at the new company. Boulet places the Fitch
conversation at the 615 Hartman location about 2 weeks
after the Marino conversation (2:398). Boulet testified
that he asked Fitch about the open shop. Fitch replied
that if he could have Boulet, Gary Kaminsky, and Rich-
ard Spade he could pay them $16 an hour and the lesser
skilled employees a lower scale (2:398-399).
According to Fitch, the conversation occurred in Oc-
tober after he already was employed by Marin, and that
on this occasion he offered to hire Boulet at $16 an hour.
Boulet either declined outright or said he would think
about it - (5:1290). Fitch did not explain, at the hearing,
what Boulet, as an employee of MEI (whose office by
then was at 702 Leverkuhn), was doing at the 615 Hart-
man location.
I credit Boulet regarding these conversations with
Marino and Fitch. In so doing, I consider only one
aspect of Marino's remarks as tending to support the
General Counsel 's case regarding a motive by MEI to
evade its CBA with the Union. That aspect is the fact
that Marino made a job offer-indicating that Marino
viewed the yet-to-be created company as an entity he
would control.
As for Marino's comments about operating an open
shop and a unionized firm at the same time, and giving
MEI until the end of 1986 "to sink or swim, those re-
marks support Respondent's defense that Marino merely
established a lawful, double-breasted operation when he
formed Marin, and that Marino's intent from the begin-
ning was that MEI survive if it could.
B. Analysis and Conclusions
1. Applicable legal principles
The General Counsel alleged and litigated this case on
the alter ego doctrine. Thus, complaint paragraph 14 spe-
cifically alleges that Marin, "as alter ego of Respondent
Marino," is bound by the CBA, which binds MEI. As
for intent or purpose, the General Counsel alleges, in
paragraph 4:
(a) At all times material herein, Respondent
Marino and Respondent Marin, under the aegis of
Marin Holding Company, have been under common
management and ownership; shared a common busi-
ness purpose by virtue of their nature of operations
and supervision; shared and intermingled properties,
business accounts, credits and purchases; had
common customers; and are in the same business in
the same market.
(b) Respondent Marin and Marin Holding Com-
pany were created and came into existence in an un-
MARINO ELECTRIC 351
lawful effort to circumvent the collective bargain-
ing agreement obligations of Respondent Marino,
which obligations are referred to below in para-
graphs 11 through 14.
An employer cannot evade its obligations under the
Act-including its commitments under a binding CBA-
by forming what appears to be a new company but what
in fact is a "disguised continuance," or alter ego, of the
primal firm. Howard Johnson Co. v. Hotel Employees, 417
U.S. 249, 259 In. 5 (1974); Southport Petroleum Co. v.
NLRB, 315 U.S. 100 (1942); Mar-Kay Cartage, 277
NLRB 1335 (1985).
In determining whether one employer is the alter ego
of another the Board considers several factors, no one of
which is controlling. Fugmy Continental Corp., 265
NLRB 1301 (1982), enfd. 725 F.2d 1416 (D.C. Cir. 1984).
The Board generally finds alter ego status when two fa-
cially independent employers have substantially identical
ownership, management , supervision, business purpose,
operation, equipment, custortlers, and business in the
same market.29 Watt Electric Co., 273 NLRB 655 (1984);
Advance Electric, 268 NLRB 1001, 1002 (1984). Addition-
ally, the Board considers whether the purpose behind the
creation of the new firm was legitimate or whether it
was an intent to evade responsibilities under the Act.
Mar-Kay Cartage, Watt Electric; and Advance Electric.
Regarding the last factor, the second circuit recently
stated that although antiunion animus or an intent to
evade may be germane, "or, even a sufficient basis for im-
posing alter ego status," it is not a necessary finding.
Goodman Piping Products v. NLRB, 741 F.2d 10 (2d Cir.
1984). In a careful analysis of the cases, the Sixth Circuit
made a similar conclusion. NLRB v. Allcoast Transfer,
780 F.2d 576 (6th Cir. 1986), enfg. 271 NLRB 1374
(1984). See also Apex Decorating Co., 275 NLRB 459 fn.
3(198 5).
Antiunion animus, of course, does not necessarily ' ac-
company an intent to evade. In Watt Electric, 273 NLRB
655 (1984), the owner, John 0. Watt,, held no personal
animus toward the union. He simply wanted to escape
the economic burden of the union contract. A similar
motivation existed in Advance Electric, 268 NLRB 1001,
1004 (1984).
A majority of the court in Denzil S. Alkire v. NLRB,
716 F.2d 1014 (4th Cir. 1983), phrased the test as fol-
lows:
When business operations are transferred, the initial
question is whether substantially the same entity
controls both the old and new employer. If this
control exists, then the inquiry must turn to wheth-
29 Several factors are common to an analysis of allegations of alter
ego, single employer, or joint employer status However, the three doc-
trines, although related and similar in some respects , are conceptually dis-
tinct one from the other. Thus, alter ego is different from single employ-
er. Iowa Express Distribution v. NLRB, 739 F 2d 1305 (8th Cir. 1984); Air-
port Bus Service, 273 NLRB 561 (1984). And single employer is different
from joint employer. NLRB v Browning-Ferris Industries, 691 F 2d 1117,
1121-1124 (3d Cir. 1982), Aspen Leasing Systems, 271 NLRB 1536 fn. 1
(1984). Because a joint 'employer is, in fact, two separate firms jointly
controlling labor relations, the joint employer concept is significantly dif-
ferent from that of alter ego
er the transfer resulted in an expected or reasonably
foreseeable benefit to the old employer related to
the elimination of its labor obligations.
The court in Alkire went on to state that linking em-
ployer motivation for the transfer of its business to ob-
taining a future benefit represents a broader standard
than that of requiring antiunion animus or intent to evade
labor organizations, even though in many cases the em-
ployer's intended benefit may be, in fact, evasion of a
labor obligation. "In other cases, however, the employer
may intend no evasiveness or subterfuge, but merely
seeks what it believes is a legitimate benefit offered by a
strategic business reorganization." Alkire, above.
In our case Respondent's position is that there was no
transfer of business or assets (except for arm's-length
sales of tools and equipment) from MEI to Marin.
As the Board observed in Mine Workers District 23
(Kentucky Lake), 271 NLRB 461 fn. 1 (1984), in some in-
stances the factors considered have been equated with
the four basic indicia for finding a single employer: (1)
interrelation of operations, (2) centralized control of
labor relations, (3) common management, and (4)
common ownership or financial control. However, the
Board observed that more must be shown to establish
that one is the alter ego of the other.30 The reason more
must be shown is that a single employer finding does not
automatically bind both firms to the existing CBA,
whereas an alter ego finding does bind the new company
to the CBA of the old enterprise. Watt Electric Co., 273
NLRB 655, 658 fn. 15'(1984); Victor Valley, supra.
Aside from the additional factors considered in the
alter ego situation, the analytical focus is different from
that in single employer cases. In the latter the focus is
"the interrelatedness of the employers," whereas for alter
ego analysis the focus "is on the existence of a disguised
continuance or an attempt to avoid the obligations of a
collective bargaining agreement through a sham transac-
tion or technical change in operations." Carpenters Local
1846 v. Pratt-Farnsworth, 690 F.2d 489 (5th Cir. 1982).
Typically an alter ego is established for the purpose of
evading the original employer's responsibilities under its
CBA. Watt Electric Co., 273 NLRB 655 (1984). Conse-
quently, substantial identity of ownership can be an im-
portant factor for the obvious reason that the very con-
cept of intent usually requires a continuation of owner-
ship, or financial control, to implement that intent. Watt
Electric is an example (the Watt family), as is Advance
Electric, 268 NLRB 1001 (1984) (the Shoots family), and
Crawford Door Sales Co., 226 NLRB 1144 (1976) (the
Cordes family).
But a substantial identity of ownership does not always
mean that the new employer is an alter ego. This is so
because the new employer may be a significantly differ-
ent business and, therefore, not a "disguised continu-
ance" of the original employer. Thus, the facts must
reveal a common business purpose before an alter ego
finding can be made. O. Voorhees Painting Co., 275
30 Citations by the Board include Victor Valley Heating, 267 NLRB
- 1292, 1296-1297 ( 1983).
352 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
NLRB 779 (1985); Fred E. Fugazzi Jr., Trustee, 273
NLRB 501 (1984).
2. Discussion
a. Ownership
The holding company arrangement here is perhaps
unique. Nevertheless, as J. C. Marino owned the con-
trolling interest in MEI, so also he does with Holding,
and Holding, in turn, owns all of Marin's stock (1:122).
Marino testified that Holding is just a paper corpora-
tion with no employees (1:148; 2:317)._ It exists, CPA
Barineau testified, to assist MEI and Marin in financial
operations (5:1354). That, typically, involves moving
funds between the subsidiaries, MEI and Marin, a prac-
tice Barineau described as typical of affiliated companies,
particularly in startup situations (5:1357-1358, 1414,
1421). When subsidiaries are wholly owned, Barineau tes-
tified, the parent firm takes the view that it owns all the
cash. (5:1414).31
As Marino is the president and secretary of Holding,
and he and his wife the only directors of Holding, it is
clear that for the purposes of alter ego analysis, J. C.
Marino is the majority owner of Marin and potentially
can exercise financial control and any other kind of con-
trol over Marin.
Respondent cites several cases for the proposition that
the control, to be meaningful, must be actual, not merely
potential, and that this factor is considered less important
than the criteria indicating operational integration, Many
of these cases involve an analysis of single employer situ-
ations such as in Milo Express, 212 NLRB 313 (1974),
and Gerace Construction, 193 NLRB 645 (1971).
As previously discussed, the focus here is somewhat
different from that of the single employer analysis, and I
have discussed the reason why substantially identical
ownership can be important. However, common sense
'attaches more significance to this factor when the major-
ity owner exercises the control that attends his owner-
ship. The question, then, is the extent to which Marino
exercised his right' of control. That question leads to an
inquiry of how involved Marino was in the affairs of
Marin. We need to couple this inquiry with consideration
of the management factor.
31 For background reading on the purposes, advantages, and disadvan-
tages of holding companies see, for example, Bonbnght and Means, The
Holding Company.- It's Public Significance and Its Regulation (1932, 1960;
reprinted 1969, Augustus M Kelley, New York), and Wert and Hender-
son, Financing Business Firms, 473, 495-514 (6th ed 1979) Bonbright and
Means at 12, explain that in America the holding company is used pri-
marily for one or more of four purposes. (1) to combine independent
companies under a centralized management or control; (2) to achieve a
unified financial structure, (3) to recapitalize the financial structure of one
or more enterprises through a substitution of the securities of the holding
company for the securities of the subsidiary companies, and (4) to pyra-
mid the voting control so as to give to the organizers of the holding
company control over the subsidiaries with a minimum amount of invest-
ment.
b. Management
(1), Discussion
At MEI Marino was closely involved with all aspects
of the operation, and he made all important decisions.
Even so,- Marino could not do everything, and he relied
for assistance on his department managers: Steffek, Fitch;
and Meyer.
Marino has never been an officer or employee of
Marin (1:83),32 and Steffek, Fitch, and Meyer constitute
Marin's ostensible management. However, Marino has
been a director of Marin ever since its organizational
meeting of 10 September 1984 (1:82, 128; R-0-10; G.C.
Exh. 3-2a). Respondent describes Marino's role as that of
a "passive investor." (Br. at 33.) As we have seen, al-
though Marin's management uses the traditional titles of
president (Steffek), vice president and secretary (Fitch),
and vice president (Meyer), Respondent's witnesses dis-
claim the normal chain of command and contend that
none of the three has a boss or reports to either of the
other two. The Union calls this ridiculous (Br. at 4) ar-
guing, in essence, that no one is a boss at Marin any
more than he was at MEI because Marino remains the
boss. 33
In support of its argument the Union points to the ad-
mission of Fitch that salary increases at Marin in 1985
were decided at a meeting of the shareholders (5:1311).
Holding owns all Marin's shares, and we know that
Marino is the majority owner of Holding. Thus, J. C.
Marino determined the early 1985 salary increases of
Marin 's officers.34 The General Counsel argues that
Marino "has considerably more actual influence over the
day-to-day operations of Marin than Respondent cares to
admit." (Br. at 5.)
Nevertheless, Marino has never been to a Marin job-
site (1:127; 6:1582, Marino), and he is not a signatory to
Mann's bank account (3:722, Meyer). Steffek hires and
directs the office personnel, and Fitch hires and directs
the electricians. Marino testified that he assumes Fitch
sets the wages of the electricians (6:1583). According to
Marino (1:127) and Meyer (3:718), Marino simply is not
involved in the daily affairs of Marin. Marino testified
32 In Samuel Kosoff & Sons, 269 NLRB 424 (1984), Allen Kosoff (simi-
lar to J. C. Marino here) held an office in both the old and new corpora-
tions That is only a surface distinction from our case, however.
33 The Union's argument of "ridiculousness" also refers to the peculiar
fact that Steffek, although president, is paid less than either of Marin's
vice presidents. Thus, during late 1984 Mann's officers were paid hourly
rates equating to annual salaries of (2:261-263):
Steffek $36,244
Fitch 62,296
Meyer 77,740
34 Notwithstanding MEI's financial plight in 1985, Marino's own
salary at MEI was increased on 22 January 1985 from a yearly figure of
$174,200 to $204,152 (2:259-260). As earlier noted, in 1985 Mann began
to transfer funds to MEI through Holding so that, as CPA Barmeau testi-
fied, by 30 September 1985 MEI owed Holding ( i.e., Marin) $115,000
(5.1352-1353, 1359, R-N-20 and R-N-22) To CPA Barineau these cash
advances are a normal fact of life with a parent and wholly owned sub-
sidiaries (5.1357;1395, 1414-1415), one purpose being to save the interest
which otherwise would be payable on a bank loan (5.1415). To the Gen-
eral Counsel and the Union the "machinations" represent the self-dealing
of an alter ego
MARINO ELECTRIC
that he does not seek to obtain new business for Marin
(6:1583).
The General Counsel contends that Marino is able to
remain out of Marin's daily affairs only because he "dep-
utized" well trained "surrogates" to act in his stead by
simply transferring the top three executives (after
Marino) from MEI to Marin (Br. at 19).
Even though Marino does not appear to involve him-
self in the daily routine of managing Marin, he admitted-
ly, as a director, keeps abreast of the financial affairs of
Marin by receiving and reviewing monthly accounts re-
ceivable, quarterly financial statements, reports from
Steffek on new contracts, and by conferring from time to
time with Fitch and Meyer (1:127, 164; 6:1620).
On one occasion in December 1984 Marino had lunch
with Paul Bryant, a representative of IBS, the contractor
on the Ferranti project. Bryant apparently informed
Marino about some changes on the project, and Marino
charged the lunch to his MEI American Express card.
On other occasions when he would run into IBS Presi-
dent Metzger, Marino would ask him how the Ferranti
project was going and whether it was on schedule
(2:283-286, 379). At $611,405 (G.C. Exh. 8), the Ferranti
project is, by far, Marin's biggest job.35 Moreover, IBS
has proved to be Marin's biggest job source.36 In late
December 1983, IBS notified its subcontractors, includ-
ing MEI, that henceforth all jobs would have to be com-
petitively bid, and that there would be no more negotiat-
ed (design/build) work (6:1555-1556). Marino testified
that the Ferranti job is the only Marin job he has dis-
cussed at a meeting with a customer/contractor (2:380).
(2) Conclusions regarding ownership and
management
J. C. Marino is clearly more than a "passive investor"
in Marin. Marino testified that he looked on the Ferranti
job as an opportunity for "my new company" (Marin) to
enter the competitive market (2:277). Counsel for the
Union is doubtlessly correct when he writes (Br. at 5),
"It would be naive to think that J. C. Marino would
take a back seat to anyone in controlling the thrust and
direction of Marin Electric." Indeed, I find that Marino
in fact does set and control the thrust and direction of
Marin.
However, most of the corporate formalities are ob-
served, and the record reflects that Marino infrequently
injects himself in the daily affairs of managing Marin. As
a director of Mann he normally would be entitled to ex-
ercise some interest in Mann's affairs. His position as a
director begs the question, however, and I do not over-
look that he controls Marin through Holding.
In light of the foregoing, l find the ownership and
overall management factors to be indicative here of an
alter ego status. The daily management and routine su-
pervision (discussed next) are indicative of independent
companies.
35 The next largest is the Pasadena Interfaith Phase II job at $208,900
(R-N-2). As previously discussed, these two jobs, plus startup loans from
Holding, launched Marin
36 From inception to 30 September 1985, Marco's subcontracts with
LBS total $775,998 out of all contracts totaling $1,840,940 (R-N-2).
353
c. Supervision and workforce
The employee complement and terms and conditions
of employment differ dramatically between MEI and
Marin.37 Of the approximately 50 electricians who have
been hired at Marin, only Richard Spade, a foreman,
ever worked for MEI (1:162; 3:724; 5:1285). As of the
date of his appearance as a witness, Fitch testified that
Marin employed about 18 electricians (5:1285).
Except for Richard Spade, none of Mann's foremen
ever worked for MEI. Fitch manages Marin's field oper-
ations. At MEI Fitch was in charge of the field oper-
ations, but Marino also was closely involved. Although
Marino admittedly has an occasional conversation with
Fitch concerning Marin's field operations,,it is only (so
far as the record shows) the general interest of a director
and, through Holding, owner. By contrast, when Fitch
was at MEI he and Marino frequently made joint deci-
sions on such matters as which foreman to assign to
which job. When Fitch was at MEI, Marino was the
project manager on the larger jobs and was personally
involved with the work and the workers on those jobs.
Marino does none of that at Marin. With a qualification,
there' has been no interchange of electricians, supervisors,
or others (3:729, 735). The qualification is that MEI pays
a fair market fee to Marin for accounting/clerical serv-
ices ($1500 a month), and for occasional engineering and
troubleshooting services ($1500 a month). Such fee-paid
services have not converted the companies as alter egos
in other cases. Aspen Leasing Systems, 271 NLRB 1536,
1538, 1542 (1984). There has been no subcontracting of
jobs between MEI and Marin (5:1286, Fitch).
d. Equipment and customers
Marin obtained its initial supply of tools, equipment,
and furniture,by purchasing the items from MEI. Al-
though the purchase of the tools at 25 percent of the es-
timated replacement cost may sound generous toward
Marin, there is no evidence controverting the testimony
of Respondent's witnesses that such formula is the cus-
tomary method in the industry for establishing fair
market value.
Marin leases certain items, such as a computer, from
Interests. Although some payments have been late, they
have been made. The evidence reflects that the leasing
fees are at fair market value.
MEI moved to a different facility shortly after Marin
was organized. Because of difficulties of moving the tele-
phone equipment and its telephone number to its new
office at 702 Leverkuhn, MEI left such items at the 615
Hartman office, and Marin succeeded to. them. There is
no evidence that Respondent had much control over the
telephone situation.38 Marin supposedly referred MEI's
calls to MEI.
37 Because MET operated under the CBA with the Union, and Marin
operated as an open shop utilizing very few employment formalities, the
terms and conditions of employment between the two firms are vastly
different.
38 It was too late in the year to cancel MEI's listing of the old tele-
phone number in the new telephone directory.
354 ,DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Marin's customer base and dollar value of contracts
with former customers of MEI, as a percentage of
Marin's business,39 are within tolerances approved by
the Board in other cases. See, for example, T. E. Eleva-
tor Corp., 268 NLRB 1461 (1984) (15-of 28 customers, or
53.6 percent), and Pinter Bros., 263 NLRB 723, 738
(1982) (312 of 842, or 37 percent, were customers of the
old firm). And they are significantly short of the high
numbers indicating an alter ego as found in Advance Elec-
tric, 268 NLRB 1001, 1002-1003 (1984).40
To the extent there have been deviations from a strict-
ly arm's-length handling of sales and leases of tools,
equipment, and furniture, I find them to be of only, mar-
ginal significance. Regarding the matter of customers,
the numbers are within permissible limits. Although it is
clear that Marin's first two jobs, Ferranti and Pasadena,
allowed Marin to get a running start in the electrical
contracting business, it also is true that Marino decided
that it would not be economically feasible for MEI to do
these jobs .41
e. Business purpose
MEI and Marin are electrical contractors. Marin was
created to operate in the competitive market where price
is the primary consideration . MEI was formed to enter
the design/build, negotiated bid, high quality, new con-
struction market where price is a secondary consider-
ation. When MEI entered this market in 1978 business
was booming , particularly in Houston . Even so, MEI ex-
panded its operations to other cities and States in joint
ventures.
The boom started to fade in 1982. For 1983 MEI's
Houston operations suffered a net loss of $237,622 while
its national joint venture operations realized a net income
of $224,377 (5:1379-1381; R-N-24).42
This trend increased in 1984 with MEI's Houston op-
erations showing a net loss of $368,530 and its joint ven-
tures having a net gain of $248,802 (R-N-24). Overall
for 1984 MEI suffered a net loss of $34,587 (G.C. Exh.
2-10). ^
MEI's backlog, as already noted, dropped from
$2,466,838 at the end of 1981 to $293,040 _by the close of
1983. As of 31 August 1984 MEI's backlog stood at
$94,487 (R-N-23). The deteriorating backlog is a reflec-
tion of the fact that by 1983 MEI's traditional market
39 Of Marin 's 68 customers, 26 (38 2 percent) are former customers of
MEI, and 47 4 percent of the dollar value of Mann's work is attributable
to former customers of MEI (R-N-3)
4° In Advance Electric about 75 percent of the new employer's custom-
ers previously were customers of the original firm,-and over 93 percent
of the dollar volume of the new firm 's business was attributable to the
former customers of the old firm.
41 MEI never bid the Pasadena job, and it withdrew its bid on the Fer-
ranti job.
42 Gross revenues are shown (on documents and in the testimony of
CPA Barineau) to be reduced by expenses . However, the only expense
subtracted from the point venture income was $23,541, representing the
dollar amount of time (a ratio of salary and benefits) J C. Marino spent
on the one project in Ohio. All other overhead was assigned to the Hous-
ton operation There was no testimony on the subject of whether any
other Houston overhead (such as a percentage of Marino's office rent)
should have been charged to the joint venture income . Whatever the-
proper allocation , MEI's overall operations resulted in a net loss of $7207
for 1983 (G.C Exh 2-10).
was just about gone. By 1984 MEI's Houston operations
consisted mostly of an unsuccessful effort to enter the
competitive bid market. MEI was unsuccessful because
its bids were too high to be awarded any jobs. Its bids
were too high because its labor costs, based on the CBA,
were nearly double that of the nonunion contractors.43
Meyer testified that Marin's hourly labor burden (wages
and benefits) has varied from $12 to $14 (3:724, 773,
780).
As early as 1983 Marino considered forming a compa-
ny to enter the competitive bid market. Finally respond-
ing to the urging of Meyer and Fitch, and to the finan-
cial facts facing MEI, in August 1984 Marino decided to
cease MEI's efforts at penetrating the competitive, bid
market and to restrict MEI to its fairly successful joint
ventures plus what service work it could hold or obtain.
Contrasted with MEI, Marin has always confined its
efforts to the Houston area where it operates in the com-
petitive bid market in which price is the primary consid-
eration and the lowest qualified bidder gets the job.
Marin has been successful in that market because its
labor costs are that of a nonunion contractor. MEI 'and
Marin are not competitors.
The General Counsel (Br. at 14-15, 23-24, 30) and the
Union (Br. at 7) argue, in effect, that Respondent's differ-
ent markets contention is so much flimflam. As the Gen-
eral Counsel sees it, as of 1984 MEI was a competitive
bid contractor which also provided some engineering
and consulting services on a national basis. Agreeing
with that assessment, the Union adds that Marin is just as
much a national joint venture contractor as is MEI be-
cause of MEI's use of Meyer and Fitch.
The latter point overlooks that MEI compensated
Marin at fair market value for the services of Meyer and
Fitch, and the first point disregards the fact that MEI's
traditional work evaporated, that MEI never successfully
entered the competitive market, and that MEI was re-
duced to a national joint venture by economic forces
beyond its control.
The Union would distinguish O. Voorhees Painting Co.,
275 NLRB 779 (1985), on the basis that one company
there was a remodeling contractor operating nationwide,
whereas the other firm was a local painting contractor.
Even if there is no distinction here in the work of MEI
and Marin (although I would find a distinction), the
panel majority in Voorhees PaintingTound it inappropriate
to conclude that the two companies there should be
treated as one entity "particularly where one company
operates nationally and one company operates locally."
Voorhees Painting, above.
In our case MEI remains a viable corporation . Should
its traditional market, that of design/build, reappear (an
improbable event in the foreseeable future), there is
every indication that MEI would apply the CBA to its
43 The market recovery agreement (MRA) provided for lower rates
but still left the hourly cost of wages and benefits several dollars higher
than that of the nonunion contractor . The MRA had many restrictions,
and no one liked it . In July Marino, through his position as president of
NECA's Southwestern Chapter, learned that the MRA would not be re-
newed after its scheduled expiration in November Thus, Marino had to
plan for the future on the basis that not even the MRA would be avail-
able.
MARINO ELECTRIC 355
resumed operations. In the meantime -MEP, vastly scaled
back in size, survives on its national joint venture work.
Based on the different business purpose of the firms
(MEI as a design/build contractor, and Marin as a com-
petitive bid contractor) and the different geographical
areas currently served by the firms (MEI on a national
basis with Marin restricted to the Houston area), I find
that this critical factor indicates a finding of separate
companies.
f. Purpose or motive
When MEI's traditional market dried up in Houston,
and after it failed to penetrate the local competitive bid
market, MEI was left with its joint ventures, some serv-
ice work, and with providing some engineering services.
The service work ended in January 1985, and the last en-
gineering services were in May 1985 (R-N-25). MEI did
not become dormant as did the original firm in Watt
Electric, 273 NLRB 655 (1984). It remained active in
1985 and was so as of the hearing. Because of the re-
stricted areas of its operation, MEI seldom, if ever, hires
electricians . In its joint ventures MEI's partner supplies
the electricians. The record is a bit unclear whether elec-
tricians would be hired for the payroll of MEI or its
joint venture partner, Hatfield Electric, in the event the
bid had been successful on the Brown Convention
Center in Houston. Richard Spade briefly participated in
the bid estimating, and it was planned that he would be
the general foreman (5:1315; 6:1632). Presumably, there-
fore, the electricians would have been hired and super-
vised by MEI.
That is in keeping with the statements Marino made to
Wayne Boulet in August 1984. A significant aspect of
Marino's remarks on that occasion is that Marino wanted
to see MEI survive even though he planned to create, in
the meantime, an open shop to enter the competitive
market. That is, Marino intended to go double-breast-
ed.44
Concerning this factor it is difficult to discern a bright-
line distinction among the cases. In some cases the exist-
ence of a desire to form a second firm to operate as an
open shop contractor was found to be an intent by the
original firm to evade its CBA with a union notwith-
standing the absence of any union animus. Compare, for
example, Mar-Kay Cartage, 277 NLRB 1335 (1985); Watt
Electric Co., 273 ' NLRB 655 (1984); Samuel Kosoff &
Sons, 269 NLRB 424 (1984); and Advance Electric, 268
NLRB 1001 (1984), in which an intent to evade was
found, with Best Mechanical Contractors, 273 NLRB 83
(1984); Commercial Decorating, 272 NLRB 1366 (1984);
Victor Valley pleating, 267 NLRB 1292 (1983); and United
Constructors, 233 NLRB 904 (1977), when there was no
finding of an intent to evade even though the new com-
pany typically was established so that a family member
could start his own business on an open shop basis.
There is no question that in our case Marin was estab-
lished to operate in the competitive bid market because
MEI could not compete by bidding under the labor costs
imposed by its CBA with the Union. Marino, in effect,
concedes that fact (1:103, 113, 125, 130; 2:322-323). Al-
though the competitive bid market does not exclude
unionized firms, as a practical matter an open shop
market generally means that the competing firms are op-
erating nonunion. Do these facts of themselves consti-
tute, as a matter of law, an intent by MEI to evade its
CBA with the Union? If so, how could an owner lawful-
ly form a second company to operate in the open shop
market when his unionized firm is fading because of eco-
nomic forces beyond his control?
Based on the objective facts, I And that Marino cre-
ated Marin in order to 'have a double-breasted operation
(i.e., MEI union and Marin open shop). I further find
that the, withering away of MEI's use of (union) electri-
cians was an incidental effect of economic forces beyond
MEI's control rather than the result of MEI's achieving
the illegal object of diverting business, through a sham
transaction, from its unionized self to its nonunion self.
Accordingly, I find that the intent or motivation factor,
although a very close issue,45 does not indicate alter ego
status.
3. Conclusions ,
As the Board observed in 0. Voorhees Painting Co.,
275 NLRB 779 (1985), certain factors here would sup-
port a finding of alter ego status. Mann's biggest custom-
er,,IBS Contractors, Inc., had been an important custom-
er of MEI, and the ownership and overall management
factors are indicative of alter ego status.
Some of the minor indicia are consistent with an alter
ego finding. For example, Marin's startup funding came
from MEI through Holding. Yet assistance in the forma-
tive stage is not determinative. L & J Equipment Co., 274
NLRB 20 (1985). The sales of tools, equipment, and fur-
niture were made without the benefit of appraisal by an
independent firm. Favors and courtesies have been ex-
changed, but they are consistent with industry practice
and such are not strong factors in any event. L & J
Equipment, id. Some of the paperwork evidencing vari-
ous transactions or events was not prepared for weeks or
even months. For example, leases were not prepared
until January or February 1985 for October 1984 events,
and the September 1984 resignations of Meyer and Fitch
from MEI were not memorialized by written statements
until the summer of 1985.
On the other hand, lag time between events and cor-
porate paperwork was not unprecedented. Thus, al-
though Meyer became a vice president of MEI in May
1979, MEI's shareholders and directors, as previously
noted, did not make it official until their joint meeting 5
months later at Lake Tahoe, Nevada. Finally, on a very
few occasions Marino has become directly involved in
the affairs of Marin. He had lunch with a customer (IBS)
and discussed the Ferranti job. He offered Boulet a posi-
tion at the yet-to-be formed Marin , and he later offered
Larry Anders a position at Mann. Anders subsequently
left MEI and became the service manager at Marin. He
44 "Double breasted" describes a contractor who operates two compa-
nies, one unionized and the other open shop . Watt Electric, 273 NLRB
655 fn. 11 (1984)
45 To borrow a line from the Persian, Omar the tentmaker, "A hair,
they say, divides the false and true " (Quatrain 50, 2d ed )
356 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
also discusses matters from time to time with Meyer and
Fitch. However, he has never visited a Marin jobsite,
and'there is no evidence that he has been active in assist,
ing Fitch in selecting or assigning job foremen, assisting
Meyer in obtaining new work, entertaining and customer
relations, in directing Marin's office staff, in discussing
wages, grievances, labor relations, or any other routine
business Marin personnel must perform on a daily basis.
Because I find that the business purpose and motiva-
tion factors are indicative of independent companies, I
conclude that the evidence falls short of showing the
"disguised continuance" test sanctioned by the Supreme
Court in Southport Petroleum Co. v. NLRB, 315 U.S. 100;
106 (1942), and reiterated in Howard Johnson Co. v. Hotel
Employees, 417 U.S. 249, 259 fn. 5 (1974). Accordingly, I
shall dismiss the refusal-to-bargain allegations of the
complaint.
The General Counsel's theory regarding the 8(a)(3) al-
legations is that MEI curtailed its work in order to
divert its business to Marin as part of a calculated
scheme whereby MEI could escape the burdens of the
CBA yet, through Marin, continue to enjoy the fruits of
that business (Br. at 25, 36).46 The theory is sound, and
the issue is close. But the evidence falls short chiefly be-
cause it appears that J. C. Marino simply established a
new company to operate in the competitive bid market-
a market MEI could not compete in successfully.47 I
4s As phrased by the Union (Br at 15), it was "sham transaction
whereby Marino Electric's owners created a 'paper' holding company de-
signed for the sole purpose of giving birth to Mann Electric, and laun-
dering Marino's money, to yield a company free of the union contract."
41 MEI still functions in the joint venture market, but it no longer at-
tempts to enter the competitive market and therefore employs no electri-
therefore find the 8(a)(3) allegations to be without merit,
and I shall dismiss the complaint.
CONCLUSIONS OF LAW
1. Marino Electric, Inc. and Marin Electric, Inc. is
each an employer within the meaning of Section 2(2),
(6), and (7) of the Act.
2. International Brotherhood of Electrical Workers,
Local Union No. 716, AFL-CIO is a labor organization
within the meaning of Section 2(5) of the Act.
On these findings of fact and conclusions of law and
on the entire record, I issue the following recommend-
ed48
ORDER
The complaint is dismissed.
clans. If the traditional market were to revive (an improbable prospect),
MEI could resume operations in that design/build market, hire electri-
cians through the Union's hiring hall, and otherwise comply with the
terms of the CBA. "Simply established" is perhaps the wrong phrase in
view of the holding company. CPA Banneau attempted to explain that
the advantage of the holding company was to aid in the overall financing
of the enterprises (5:1421) Although Barineau 's explanation does not
answer every question, the fact remains that Respondent saw a business
purpose in forming a holding company See the discussion earlier in this
decision concerning holding companies. Although the holding company
procedure incidentally lends itself to the "machinations" argument of the
General Counsel (Br. at 16) and the Union (Br at 2), that criticism would
be just as vigorous if funds flowed' direct between MEI and Marin
48 If no exceptions are filed as provided by Sec 102 46 of the Board's
Rules and Regulations, the findings, conclusions, and recommended
Order shall, as provided in Sec 102 48 of the Rules, be adopted by the
Board and all objections to them shall be deemed waived for all pur-
poses.