Urban Laboratories

National Labor Relations Board - Board Decisions

Sep 16, 1992

308 N.L.R.B. 816 (N.L.R.B. 1992)

816
308 NLRB No. 109
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 In its answering brief, the Charging Party requested attorney’s
fees based on Tiidee Products, 194 NLRB 1234 (1972), which pro-
vides for reimbursement of certain litigation costs when a party en-
gages in frivolous litigation. We do not find that an award of attor-
ney’s fees would be appropriate under that standard in this case. See
generally Heck’s, Inc., 215 NLRB 765 (1974).
2 In his response, Respondent Burke alleges that the Charging Par-
ty’s brief is based ‘‘on its counsel’s racial prejudice and his personal
vendetta.’’ We have carefully examined the brief and the entire
record and find no basis to support this allegation.
3 Respondent Burke has excepted to some of the judge’s credibility
findings. The Board’s established policy is not to overrule an admin-
istrative law judge’s credibility resolutions unless the clear prepon-
derance of all the relevant evidence convinces us that they are incor-
rect. Standard Dry Wall Products, 91 NLRB 544 (1950), enfd. 188
F.2d 362 (3d Cir. 1951). We have carefully examined the record and
find no basis for reversing the findings.
Additionally, Respondent Burke asserts that the judge’s decision is
arbitrary and biased. After a careful examination of the entire record,
we are satisfied that this allegation is without merit.
4 Although the General Counsel did not use the term ‘‘alter ego,’’
we find that he argued this theory of liability both in his compliance
specification and his brief to the judge when he claimed that the Re-
spondent corporation effectively dissolved and that Respondent
Burke carried on the business.
5 Urban Laboratories, 246 NLRB 590 (1979), enfd. (Nos. 80–7095
and 80–7164) (unpublished) (9th Cir. Jan. 13, 1981).
6 Urban Laboratories, 254 NLRB 515 (1981), enfd. (No. 81–7328)
(unpublished) (9th Cir. June 25, 1981).
Urban Laboratories, Incorporated and Hotel and
Restaurant Employees and Bartenders Union
of San Diego Local 30, AFL–CIO
Gerald Burke, Lemont Combs, Jr., and Carl J.
Brown, Parties Charged with Derivative Liabil-
ity and Urban Laboratories, Inc., and Gerald
G. Burke and Lemont Combs, Jr. and Carl J.
Brown, Parties Charged with Derivative Liabil-
ity and Carolyn Ramseur and National Mari-
time Union of America, AFL–CIO, ITPE Divi-
sion and Jacqueline C. Williams and Esperanza
Rodriguez. Cases 19–CA–20948, 19–CA–20949,
(formerly 21–CA–18910, 21–CA–19213), 19–
CA–20950 (formerly 21–CA–25279; formerly 1–
CA–14531), 19–CA–20951 (formerly 21–CA–
25280; formerly 1–CA–14554), 19–CA–20952
(formerly 21–CA–25281; formerly 1–CA–14587),
and 19–CA–20953 (formerly 21–CA–25282; for-
merly 1–CA–14588)
September 16, 1992
SECOND SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
DEVANEY AND OVIATT
On February 14, 1992, Administrative Law Judge
James M. Kennedy issued the attached decision. Re-
spondent Gerald G. Burke, a party charged with deriv-
ative liability, filed exceptions and a supporting brief.
ITPE Division of District Number 1, MEBA/NMU,
AFL–CIO (successor to the National Maritime Union,
ITPE Division), one of the Charging Parties, filed a
brief in opposition.1 Respondent Burke filed a response
to the Charging Party’s brief.2
The National Labor Relations Board has delegated
its authority in this proceeding to a three-member
panel.
The Board has considered the second supplemental
decision and the record in light of the exceptions and
briefs and has decided to affirm the judge’s rulings,
findings,3 and conclusions as modified and to adopt his
recommended Order.
The judge found that Respondent Urban Labora-
tories, Incorporated is liable for the total amount of
backpay due the discriminatees, as set forth in the
compliance specifications. There is no exception to this
finding, and we therefore adopt it.
The judge further found that Respondent Gerald G.
Burke is personally liable for the full backpay amount.
In his exceptions, Respondent Burke argues, inter alia,
that he is insulated from liability because at all rel-
evant times he was acting as an officer of a viable cor-
poration, Respondent Urban Laboratories. We disagree.
As discussed below, the record supports the judge’s
critical finding that beginning in January 1980 Re-
spondent Urban Laboratories effectively ceased to
exist, i.e., ‘‘it was only a shell and a front for [Re-
spondent Burke’s] real [business].’’ We further find,
for the reasons set forth below, that Respondent
Burke’s ‘‘real business’’ operated as an alter ego of
the defunct corporation. On this basis, we conclude
that Respondent Burke is personally liable for the
backpay due, and we find it unnecessary to rely on the
alternative theories of liability set forth in the judge’s
decision.4
Respondent Urban Laboratories was incorporated in
1977 for the purpose of bidding on mess and dining
contracts at various military posts throughout the
United States. When it obtained a contract, Respondent
Urban Laboratories would take over an existing mess
hall and operate it. Respondent Burke was the presi-
dent of Respondent Urban Laboratories. Initially, he
was one of three equal stockholders, but the stockhold-
ers agreed that he would become the majority stock-
holder because of his ‘‘services in terms of putting the
corporation together.’’
Commencing in 1978, Respondent Urban Labora-
tories violated the Act in its relations with employees
at a Groton, Connecticut facility.5 In 1980, Respondent
Urban Laboratories again violated the Act in its rela-
tions with employees at a San Diego, California facil-
ity.6
Respondent Urban Laboratories is now defunct and
unable to remedy the unfair labor practices it commit-
ted. The question before us is whether Respondent
817URBAN LABORATORIES
7 In support of his exceptions, Respondent Burke filed certain
‘‘supplemental information,’’ including an alleged copy of the Cer-
tificate of Administrative Dissolution of Urban Laboratories, Inc., ef-
fective December 30, 1983. This document was not introduced into
evidence at the hearing. Respondent Burke also submitted for the
first time a 1981 affidavit of Robert C. Halliburton. The Charging
Party has moved to strike all references to the alleged 1983 dissolu-
tion of Respondent Urban Laboratories, the affidavit, and other fac-
tual matters that were not first presented to the judge. The motion
is granted. See Weldment Corp., 275 NLRB 1432 fn. 1 (1985).
8 The agreement stated that as of December 26, 1979, the corpora-
tion had in its bank account approximately $110,000 and, in addi-
tion, indicated that the accounts receivable exceeded anticipated li-
abilities through December 31, 1979, by more than $50,000.
9 On the day of the hearing, Respondent Combs and the General
Counsel entered into a partial settlement agreement which provided
for payment of $10,000 to be apportioned among the discriminatees.
The settlement further provided that the payment constituted Re-
spondent Combs’ entire liability but that the potential liability of
other Respondents was not affected. At the Board’s direction, the
judge approved the settlement. See Urban Laboratories, 305 NLRB
987 (1991).
10 We note that the judge totally discredited Respondent Burke’s
claim that the corporate records disappeared as a result of two al-
leged burglaries.
11 In sec. II,B, par. 20, the judge stated that Lemont Combs testi-
fied that the Navy contracting officer contacted Burke and asked him
to take over the contract. We note that it was Burke, whose testi-
mony the judge has generally discredited, rather than Combs, who
testified that the Navy contracting officer asked Burke to take over
the contract.
Burke should be held individually liable for the cor-
poration’s backpay obligations.
The following relevant principles were recently set
forth by the Board in Greater Kansas City Roofing,
305 NLRB 720 (1991), and quoted with approval by
the Ninth Circuit in NLRB v. O’Neill, 965 F.2d 1522,
1531 (1992):
Section 10(c) of the Act empowers the Board
with broad authority to fashion appropriate rem-
edies to meet the needs of a particular situation so
that ‘‘the victims of discrimination may be treated
fairly.’’ Phelps Dodge Corp. v. NLRB, 313 U.S.
177 (1941). . . . When the incentive value of lim-
ited liability to corporations and their owners is
outweighed by the competing value of basic fair-
ness to parties dealing with a corporation, the
Board should look past that corporation’s formal
existence and hold controlling individuals liable
for ‘‘corporate’’ obligations.
Also pertinent to the instant case is the Fourth Cir-
cuit’s observation that ‘‘in applying the . . . ‘alter
ego’ doctrine, the courts are concerned with reality and
not form.’’ DeWitt Truck Brokers v. W. Ray Flemming
Fruit Co., 540 F.2d 681, 685 (4th Cir. 1976).
Here, Respondent Urban Laboratories may have
continued in existence in form after 1979,7 but the re-
ality is that on December 27, 1979, the stockholders
agreed to dissolve it and liquidate its assets.8 This
stockholders’ agreement provided that all corporate
stock would be retired. After repayment of loans and
other obligations, the corporate assets, including 10
military contracts, were to be divided between the two
principal stockholders, Respondents Gerald G. Burke
and Lemont Combs Jr.9
Although the stockholders’ agreement provided that
the corporation would be dissolved no later than Sep-
tember 30, 1980, the judge found that ‘‘the corporation
was actually dissolved almost immediately after the
execution’’ of the stockholders’ agreement. The record
supports that finding. Thus, Respondent Combs testi-
fied that shortly after the stockholders’ agreement was
signed, no funds remained in the corporate bank ac-
count. In addition, at the hearing Respondent Burke
failed to produce any corporate records showing that
Respondent Urban Laboratories continued in exist-
ence.10 Burke’s and Combs’ conduct subsequent to
their signing of the stockholders’ agreement further
supports a finding that the corporation was effectively
dissolved in December 1979: they divided the 10 mili-
tary contracts between themselves and they each
formed a new company in an effort to take the con-
tracts over from Respondent Urban Laboratories. A
January 1980 addendum to the stockholders’ agree-
ment specifically stated that ‘‘it is the further and con-
sistent intention of the parties to express and to estab-
lish the fact that there is no continuing business rela-
tionship between Combs and Burke.’’
In light of the foregoing, we find, in agreement with
the judge, that Respondent Urban Laboratories was ef-
fectively dissolved at the end of 1979. Of course, once
the corporate entity effectively ceased to exist, so, too,
did the protection from personal liability it provided its
corporate officers, such as Respondent Burke.
Shortly after the execution of the stockholders’
agreement, Respondent Burke’s and Combs’ plan to
substitute newly formed companies to perform the
mess contracts encountered what the judge termed a
‘‘serious snag’’: the military contracting officers re-
fused to recognize the new entities. The judge found
that beginning in January 1980 these individual Re-
spondents attempted ‘‘to get around the Navy’s oppo-
sition’’ by ‘‘ma[king] it appear as if Respondent cor-
poration was still operating,’’ whereas ‘‘it had actually
been dissolved.’’ The judge further found that Re-
spondent Urban Laboratories’ bank accounts were used
‘‘as a conduit to receive money from the govern-
ment.’’ In sum, the judge found, and we agree, that
during this period the Respondent corporation was
‘‘only a shell and a front for [Burke’s and Combs’]
real businesses.’’
In April 1980, Respondent Burke took over the San
Diego, California contract and ousted Combs.11 By let-
ter dated April 14, 1980, Respondent Burke advised
the disbursing officer for the Naval facility in San
818 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 As noted, infra, Respondent corporation did not even file an an-
swer to the San Diego complaint issued in August 1980. There is
reason to think the corporation was defunct even before that date.
Diego that he was the only individual authorized to
pick up contract reimbursement checks for the San
Diego contract. The letter was on Urban Laboratories
stationery and was signed by Burke as president. The
unfair labor practices committed at the San Diego fa-
cility occurred after Burke began running the oper-
ation. Burke also personally took over the remaining
military contracts and operated them in the name of
the defunct corporation.
On these facts, we have little difficulty in conclud-
ing that by virtue of his 1980 operations Respondent
Burke is the alter ego of Respondent Urban Labora-
tories. Notwithstanding the effective dissolution of the
corporation, Respondent Burke continued to control
and manage the performance of the same military con-
tracts at the same facilities for the same patrons in the
same apparent manner. See Crawford Door Sales Co.,
226 NLRB 1144 (1976) (test of alter ego status is
whether there is ‘‘substantially identical management,
business purpose, operation, equipment, customers, and
supervision, as well as ownership’’). As an alter ego,
Respondent Burke is individually responsible for the
obligations of Respondent Urban Laboratories.
IMCO/International Measurement Co., 304 NLRB 738
(1991). Accordingly, we agree with the judge that Re-
spondent Burke is jointly and severally liable with Re-
spondent Urban Laboratories for remedying the unfair
labor practices found in the court-enforced Board deci-
sions.
ORDER
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge and
orders that the Respondent, Urban Laboratories, Incor-
porated, Tacoma, Washington, its officers, agents, suc-
cessors, and assigns, and Gerald G. Burke, an individ-
ual, jointly and severally, shall pay the amounts as pre-
scribed in the judge’s second supplemental decision.
Daniel R. Sanders, for the General Counsel.
John J. O’Connell, of Tacoma, Washington, for Derivative
Respondent Lemont Combs Jr.
Gerald G. Burke, of Tacoma, Washington, Derivative Re-
spondent, pro se.
Carl J. Brown, of Bellevue, Washington, Derivative Re-
spondent, pro se.
Sidney H. Kalban (Phillips, Cappiello, Kalban, Hoffman &
Katz), of New York, New York, for National Maritime
Union of America, AFL–CIO, ITPE Division.
SECOND SUPPLEMENTAL DECISION
JAMES M. KENNEDY, Administrative Law Judge. This
compliance matter was heard before me in Seattle, Washing-
ton, upon consolidated backpay specifications issued by the
Regional Directors for Regions 1 and 21 of the National
Labor Relations Board on April 30 and May 13, 1986, re-
spectively. In addition to seeking to liquidate the backpay,
the trust fund contributions, and the back union dues
amounts required to remedy the unfair labor practices, the
specifications allege that three individuals, Gerald G. Burke,
Lemont Combs Jr., and Carl J. Brown are derivatively liable,
jointly, and severally, for the amounts due.
The first case arose at the U.S. Navy Submarine Base in
Groton, Connecticut, and resulted in a Board Decision and
Order dated November 28, 1979. Urban Laboratories, 246
NLRB 590. On January 13, 1981, that order was enforced
by an order of the United States Court of Appeals for the
Ninth Circuit. The second case originated in San Diego,
California. The Board issued its decision and order in that
matter on January 14, 1981. Urban Laboratories, 254 NLRB
515. The Ninth Circuit enforced that order on May 22, 1981.
Respondent Urban Laboratories did not file answers to the
backpay specifications, apparently because well before 1986
it had become defunct.1 However, the Derivative Respond-
ents did file answers. Thereafter, the matters having been
consolidated in Region 21, the General Counsel filed a mo-
tion to strike portions of the answers and a Motion for Partial
Summary Judgment. On July 13, 1989, the Board, in a Sup-
plemental Decision, denied those motions and directed that
a hearing be held on the issues of the monetary amounts due
pursuant to its earlier orders and whether Respondents Burke,
Combs, and Brown were derivatively liable. On August 23,
1990, the matter having been transferred to Region 19, the
director for that Region commenced to schedule the hearing
directed by the Board. The hearing was held on April 24,
1991.
Immediately prior to the hearing, Respondent Combs and
counsel for the director reached a settlement in principle. The
agreement was not reduced to writing until May 22, 1991,
whereupon it was submitted for my approval. I initially de-
clined to approve it, but upon a directive of the Board
(Urban Laboratories, 305 NLRB 987 (1991)), did so on Jan-
uary 9, 1992. The approval of the Combs settlement agree-
ment effectively removes Combs from the case and no sup-
plemental order regarding him is now being sought or con-
templated. The issues remaining for resolution are the liq-
uidation of the amounts due and whether Burke and Brown
are individually liable for any or all of that sum.
I. THE MONETARY AMOUNTS
The Groton backpay specification alleges that there are
three different types of loss to Respondent’s Groton employ-
ees. The first is the unlawful deduction of certain insurance
premiums from employee pay. The second is the loss of half
an hour’s pay per day for a large number of Groton employ-
ees. The third is reimbursement to employees Jacqueline C.
Williams, Carolyn Ramseur, and Esperanza Rodriguez for
the discriminatory loss of certain pay. These three employees
had been placed on unpaid ‘‘on call’’ status for a period; ad-
ditionally, Ramseur’s work schedule was wrongfully reduced
by an additional half hour for a period of slightly over 5
months.
With respect to calculating the amounts due, the then com-
pliance officer for Region 1, Charles McElroy, testified that
he was the individual who drafted the Groton backpay speci-
fication and did some of the calculations; he also supervised
819URBAN LABORATORIES
2 It should be observed here that during the hearing counsel for the
director corrected Exh. A upon observing that employee Iva
Dantzler’s name appears twice. The first time it is incorrectly spelled
as ‘‘Ivan’’ Dantzler. For that reason counsel for the director has
stricken that paragraph, leaving the second, correct version. Dantzler
is alleged to be due $1771.60. Since that amount appears improperly
twice, I have deducted it from the total amount due under the Groton
specification.
others who performed the remaining calculations. McElroy
testified that based upon his investigation he concluded that
the backpay period for the Groton employees was January 1,
1978, to December 27, 1979. Insofar as the actual calcula-
tions are concerned, he testified they were relatively straight-
forward, since the records no longer exist. With respect to
the unlawful deduction of insurance premiums, McElroy sim-
ply calculated the deduction at 16 cents per hour on a
straight-time basis for each quarter of the year during the
backpay period. He observed that the Urban Laboratories
work force, for the most part, was divided into three cat-
egories: ‘‘top’’ (i.e., 8 hours per day), ‘‘split’’ (6 hours per
day) and ‘‘part-time’’ (3 hours per day). Placing each em-
ployee in the appropriate category, McElroy simply multi-
plied the number of hours they would have worked per quar-
ter during the backpay period by 16 cents.
The lost half hour was treated similarly. Here, however,
the so-called part-time employees did not lose that period of
employment. Accordingly, the only persons entitled to back-
pay under this theory were the top and split employees. Ac-
cording to McElroy, there were 519 workdays during the
backpay period. He noted that an hourly wage increase,
granted on October 1, 1978, was factored into the calcula-
tions at that point. Between January 1 and October 1, 1978,
he calculated that each employee who lost the half hour per
day was entitled to an additional $1.94 for each of the days
he or she probably worked. The rate was increased to $2.25
per half hour from October 1, 1978, through December 27,
1979. This rate was applied by quarters; moreover, he took
into consideration such questions as whether or not the em-
ployee was hired or terminated during the backpay period.
The last category of calculation, the named individuals, was
also straightforward. Williams and Ramseur lost 5 days of
work while Rodriguez only lost 3 because she had quit.
McElroy simply calculated the actual lost pay for those days
(less the half hour already accounted for in the previous cat-
egory). All the calculations are set forth in Exhibit A at-
tached to the Groton backpay specification. It covers some
96 employees.2
With respect to the San Diego specification, the Board
found in the underlying unfair labor practice proceeding that
Respondent had failed to comply with certain terms of the
extant collective-bargaining contract it had with the Hotel
and Restaurant Employees and Bartenders Union of San
Diego, Local 30, AFL–CIO. That contract required Respond-
ent, under a dues-checkoff arrangement, to deduct from the
employees’ pay certain monthly union dues and to remit
them to that Union. The contract also required Respondent
to pay certain moneys to the San Diego Bartenders and Cul-
inary Workers Insurance and Pension Trust Fund for each of
the employees covered by the contract. As a remedy, the
Board has ordered Respondent to remit the dues to the Union
and to make the appropriate payments to the trust fund.
Kevin Steen, the compliance official from Region 21, tes-
tified that he drafted the specification and did the calcula-
tions. He observed that the period of dues delinquency was
the months of July, August and September 1980. Since the
dues were $10 per employee per month and since there were
66 employees, he simply multiplied those two figures to ob-
tain the monthly dues amount of $660. As 3 months were
involved, he multiplied $660 by three for a total of $1980.
With respect to the trust fund payments, Steen observed that
the delinquent months were March, April, May, June, July,
August, and September 1980 and that the monthly rate for
each employee was $43.25. He simply multiplied 66 employ-
ees times $43.25 to obtain a monthly amount of $2854.50.
Since 7 months were involved, he multiplied that figure by
seven for a total of $19,981.50.
Both compliance officials were severely handicapped by
the fact that Respondent’s payroll and business records were
not available. There is some evidence in the record that Re-
spondent’s headquarters in Tacoma, Washington, may have
been burglarized in August 1979. Its former president, Ger-
ald G. Burke, asserts that there was another burglary as well.
In both cases, he says he believes the bank and payroll
records were stolen. I find that explanation for the missing
records to be most unimpressive. Burglars do not twice steal
paperwork having no sale value. As will be seen, Burke has
his own motives to declare the books and records nonexist-
ent.
In any event it is clear that the compliance officials re-
sponsible for determining the amounts due under the Board
orders were operating without perfectly accurate records, al-
though they did have some employee supplied exemplars.
Accordingly, each was forced to make estimates. The San
Diego figures would appear to be the most likely to be accu-
rate since they were done on a monthly basis. The Groton
figures are subject to a larger error factor because the time
records were not available and the actual hours worked by
each of the employees is no longer known. However,
McElroy and his subordinates appear to have done the best
they could in the circumstances.
None of the Respondents has actually challenged the com-
pliance officials’ methods or mathematics. Burke contends he
is unable to do so because he, like the compliance officials,
has no access to the underlying records. He has merely and
cursorily questioned whether the top employees at Groton
would actually have worked 40-hour weeks; even so, he has
offered no substitute method for calculation.
It is clear that both the Groton and San Diego backpay
specifications are reasonable estimates of the monetary
amounts due. Even if the actual timecards or time records
had been available, there is no reason to think that the cur-
rent estimates would be greatly different from those which
might have been gleaned from the time records themselves.
It has long been held that the backpay specifications need not
be perfect; only that they be reasonable approximations.
NLRB v. Brown & Root, 31l F.2d 447, 452 (8th Cir. 1963);
NLRB v. Iron Workers Local 378, 532 F.2d 1241, 1242 (9th
Cir. 1976). I can find nothing which the compliance officials
have done which would warrant the conclusion that these
specifications are unreasonable. Indeed, given the difficulties
presented, the passage of time and the lost records, their
work seems to be remarkably able.
820 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
3 In pertinent part that rule reads:
[I]f the respondent disputes either the accuracy of the figures in
the specification or the premises on which they are based, the
answer shall specifically state the basis for such disagreement,
setting forth in detail the respondent’s position as to the applica-
ble premises and furnishing the appropriate supporting figures.
Moreover, Board Rule 102.56(b)3 requires any respondent
who wishes to challenge a backpay calculation to explain in
its answer why the compliance official’s calculations or for-
mulae are unreasonable and must also propose an alternative.
No Respondent has taken either step. I conclude, therefore,
that the Groton (as corrected) and San Diego backpay speci-
fications offer an appropriate means of determining the total
amounts of money due the discriminatees in both those loca-
tions. I recommend that the Board adopt them in their en-
tirety. Since no calculation has been challenged, it will serve
no purpose to reiterate what readily appears in appendix A
of the Groton backpay specification and in paragraphs 8 and
9 of the San Diego specification. The totals, less interest, are
as follows: Groton: $61,527.49; San Diego: union dues:
$1980; trust fund payments: $19,981.50. The total is
$83,488.99.
II. THE DERIVATIVE LIABILITY OF CERTAIN INDIVIDUALS
A. Contentions
Both backpay specifications allege that Gerald G. Burke,
Lemont Combs Jr., and Carl J. Brown are derivatively liable,
on a joint and several basis, for the monetary sums due
under the specifications. As previously noted, Combs has
separately settled the case against him. Any remaining re-
spondent is entitled to an offset of the amount which Combs
has actually paid under the terms of his settlement. Further-
more, there is no doubt that the corporate respondent has al-
ways been liable for the entire amount. The difficult ques-
tions are presented by the cases of Burke and Brown.
Both Burke and Brown appeared pro se in this matter.
Subsequent to the demise of the corporate Respondent, Burke
went to law school and eventually became admitted to the
practice of law in the State of Washington. He has filed an-
swers to both specifications and during the hearing filed a
motion to dismiss based on the statute of limitations, Section
10(b) of the Act. After the hearing closed he filed another
motion to dismiss, a brief in support of the motion, and a
posthearing brief. Burke now asserts that the case against
him should be dismissed not only on 10(b) grounds, but also
on the business judgment rule and the equitable doctrine of
laches, i.e., inordinate delay.
Brown, a layman, filed an answer to the Groton backpay
specification which I have read and deem equally applicable
to the San Diego specification. Among other things, it can
be read as a request that the complaint be dismissed as to
him on 10(b) grounds. He also asserts that he was essentially
a creditor of Respondent corporation and the money he re-
ceived was only the repayment of a loan.
Both assert that they are not proper parties to the action
not having been named until the issuance of the backpay
specifications in 1986. Since that postdates the filing of the
unfair labor practice charges by 7 years or more, they assert
that they cannot be added to the case now. The Board has
already held, however, that in derivative liability allegations,
Section 10(b) is not a valid defense. Coast Delivery Services,
198 NLRB 1026, 1027 (1972); Southeastern Envelope Co.,
246 NLRB 423 (1979). That reasoning is based on the public
policy that victims of unfair labor practices are entitled to a
public remedy and, to the extent that individuals have im-
properly obtained money from employers who have a duty
to remedy unfair labor practices, the money can be sought
from them whether or not those individuals were named in
the underlying charge or complaint. That is not to say that
an individual who obtains money from a convicted corpora-
tion must necessarily be found liable for the corporation’s
wrongdoing, but does mean he cannot assert the statute of
limitations as a defense. Other defenses remain available.
One remedy which is not available, however, is that of
laches. The reasoning is the same. Public policy requires the
vindication of the rights of the employees who have been
victimized by an employer committing unfair labor practices.
The Supreme Court has held that such equitable defenses are
not generally available in these circumstances. NLRB v. J. H.
Rutter-Rex Mfg. Co., 396 U.S. 258, 264–265 (1969). Accord-
ingly, the Section 10(b) and laches defenses are rejected as
a matter of law and the motion to dismiss on those grounds
is denied.
B. The Facts
Both Burke and Brown also interpose factual defenses, in-
cluding Burke’s claim that he, as corporate president, was
only acting pursuant to the business judgment rule. That rule
generally holds that a corporate officer, acting in his cor-
porate capacity, cannot be held personally liable for the acts
he committed as a corporate officer if he was exercising pru-
dent business judgment. It is simply a restatement of the
commonly seen rule prohibiting plaintiffs from piercing the
corporate veil to reach the personal assets of corporate direc-
tors, officers, or shareholders. That, of course, is the norm.
See Justice Douglas’ observation in NLRB v. Deena Artware,
361 U.S. 398, 402–403 (1960), where he said, ‘‘The insula-
tion of a stockholder from the debts and obligations of his
corporation is the norm, not the exception.’’ Also Anderson
v. Abbott, 321 U.S. 349, 362 (1944). Thus, Burke is simply
defending on the ground that he had done nothing to warrant
piercing the corporate veil and he therefore is not personally
liable.
The facts, although not in dispute, are in large part nebu-
lous. Some instances involve finger pointing between Burke
and Combs. Much of that, in the final analysis, is not par-
ticularly relevant to the Board’s inquiry or even to Burke’s
business judgment rule argument. The latter is not applicable
because Burke is being pursued for taking corporate assets
upon the corporation’s dissolution, not because of any unfair
labor practice he may have authorized in his capacity as a
corporate owner, officer, or director.
In any event, reciting facts which are not in significant
dispute, it appears that Respondent Urban Laboratories, Inc.,
was incorporated in the State of Washington in March 1977
with the specific purpose of bidding on mess and dining con-
tracts at various military posts throughout the United States.
Upon obtaining a contract with one of the military branches,
Respondent would take over an existing mess hall and oper-
ate it pursuant to the agreement.
Respondent’s first owners and officers were Burke,
Combs, and one Robert Halliburton. According to Burke, he
was to be the ‘‘majority’’ stockholder and president. Initially,
821URBAN LABORATORIES
4 This is standard Board injunctive language and tracks, for the
most part, Rule 65(d) of the Federal Rules of Civil Procedure, the
rule applying to Federal court injunctions.
5 The others were located at the Navy’s New London (Connecti-
cut) Submarine Base; Bergstrom A.F.B., Texas; Reese A.F.B.,
Texas; Eglin, A.F.B., Florida; Kirtland A.F.B., New Mexico; Pope
A.F.B., South Carolina; Travis A.F.B., California; Santa Cruz Island
(California) Naval Base; and the Fort Vancouver (Washington) Na-
tional Historic Site.
6 Brown’s recollection was understandably vague. The dissolution
agreement and probability place the date of the loan in mid- to late-
1979 and in the amount of $10,000.
7 Brown gave oral testimony only upon Burke’s request; much of
his evidence consisted, by stipulation, of the adoption of his letter-
style answer to the Groton specification.
8 From all that appears, the corporation was actually dissolved al-
most immediately after the execution of the settlement agreement,
long before the agreement’s deadline.
however, all three had equal shares in the firm. Burke served
as president, Halliburton as vice president, and Combs as
secretary-treasurer. At some point in 1978 Halliburton’s in-
terest was terminated. Thereafter it was operated solely by
Burke and Combs. It was during 1978 that Halliburton ap-
parently committed the unfair labor practices which were the
subject of the Groton case. Charges were filed between May
and June 1978 and a complaint issued in July. It resulted in
the December 11, 1978 hearing before Administrative Law
Judge Elbert D. Gadsden. No one appeared at the hearing on
Respondent’s behalf. Judge Gadsden rendered his decision on
July 6, 1979, and Board affirmed it, as modified, on Novem-
ber 28, 1979.
The unfair labor practices at San Diego did not begin until
March 1980. The first charge was filed in April 1980; subse-
quent charges were filed in June. A consolidated complaint
was issued on August 4, 1980, but Respondent did not file
an answer. That resulted in the General Counsel’s Motion for
Summary Judgment which the Board ultimately granted on
January 18, 1981. In each case the Board’s order was di-
rected at Respondent and ‘‘its officers, agents, successors and
assigns.’’4
While this litigation was going on, the corporation was
coming apart at the seams. In mid-1979, Burke and Combs
began a bitter dispute over the percentage of ownership
which each owned. Burke had issued himself additional
stock, supposedly in return for his services, despite the fact
that he was also receiving a salary. Combs became suffi-
ciently angry over Burke’s apparent self-dealing that a phys-
ical altercation, perhaps involving the brandishing of a fire-
arm, occurred. Burke barred Combs from the premises and
lawsuits were commenced against each other.
In the meantime, the corporation was attempting to run the
mess contracts at 10 separate military installations throughout
the United States. Two of these were the ones at Groton and
at San Diego,5 although Groton by that time may have been
terminated or was winding down.
According to Burke, the contracts were becoming exceed-
ingly difficult to fulfill. He observes that these contracts are
labor intensive, in the sense that most of the money used to
run the businesses goes for the wages of the mess employ-
ees. He says each month the military issued checks to cover
those wages and even before the pendency of the dispute be-
tween himself and Combs, cash flow problems were com-
mon. While it is not clear whether their dispute exacerbated
the cash flow difficulty, it is possible that it did. At one point
there seems to have been an argument over who should sign
what sort of checks; on the other hand it appears from some
documentary evidence that several of the contracts were op-
erating at a loss. Burke testified that the way the corporation
normally handled cash flow difficulties was to obtain short-
term loans from its bank. This required the signatures of both
Combs and Burke. When their dispute began, Combs either
would not or could not sign and the bank would no longer
lend money to cover temporary shortfalls.
Burke says he then sought out Brown, apparently some-
time in mid-1979, and obtained a loan for $10,000. Brown
puts the loans somewhat earlier saying it was ‘‘in late 1978
or early 1979’’ and that the figure was actually $11,000.6 No
current paperwork appears to exist describing the nature of
the loan, although no one disputes that it occurred.
Brown never participated in the day-to-day operation of
the business. Apparently, however, in the late summer of
1979, when things had come to a severe impasse between
Burke and Combs, Burke asked Brown if he would join the
board of directors. Brown agreed and at some point became
the owner of some stock.
The amount of stock Brown held is unknown, as is its
value. Whether his ownership of stock was simply to permit
Brown to legitimately serve on the board of directors or
whether it was considered a pledge to secure the loan is also
unknown. No party asked these questions.7 What is clear is
that the corporate books and records have long since dis-
appeared. The board of directors minutes no longer exist.
Burke claims that at some point Brown became secretary to
the corporation; Brown said all he ever did was serve as re-
cording secretary for the board of directors during the two
or three brief meetings which may have occurred and which
Burke apparently dominated. Nor is there any oral evidence
regarding what transpired at any of these board meetings.
Also during 1979, at a point not clear in the record, Burke
fired Combs from his capacity as director of field operations.
Brown credibly denies participating in that decision. Combs’
dismissal left Burke in sole charge of the business, with
Combs on the outside looking in.
A series of meetings then ensued over the lawsuits, i.e.,
how to work out an arrangement which would accommodate
the two main owners. Combs’ lawyer, Ralph H. Baldwin,
eventually drafted a settlement agreement in which the two
principals were to divide the corporation’s assets. Although
Baldwin was able to propose language which was satisfac-
tory to both Burke and Combs, he had no access to revenue
figures, which were provided solely by Burke. Both Baldwin
and Combs say that the figures Burke gave them turned out
to be grossly inaccurate.
In any event, on December 27, 1979, the three signed the
settlement agreement in which they divided the assets of the
corporation using Burke’s figures. One of the provisions rec-
ognized that Brown owned some of the capital stock of the
corporation (but does not recite how much) and was a mem-
ber of the board of directors. An additional term provided
that the corporation would be dissolved no later than Sep-
tember 30, 1980.8 They further agreed all corporate stock
would be retired and the corporation would transfer to the
stockholders all its assets, subject to its liabilities. This was
followed by three schedules which described the property, in-
822 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
9 These were not immediately paid because the military authorities
demanded reimbursement for what they believed they had been over-
charged during the course of the contract. This dispute resulted in
some litigation, the results of which are unclear.
cluding the military contracts, to be distributed to the three
individuals.
The provision relating to Brown stated that he would re-
ceive $11,000 in cash at 15-percent interest per annum on
the unpaid balance from August 15, 1979, until paid in full.
This is where, I find, that Brown recalled the $11,000 figure.
In fact, it represents a $10,000 loan, plus $1000 interest. In-
deed, it is not clear why the August 15 date was chosen. It
may be that recollections are now so faulty that now that no
one can recall that was the day the loan was actually made.
Or, possibly that was the day Brown obtained the stock; or
that he became a member of the board of directors; conceiv-
ably it is an arbitrary date. Most probably, it is the date of
the loan and I so find.
It is useful to note that the settlement agreement, dated
December 27, 1979, occurred about a month after the Board
issued its decision and order in the Groton case. It is further
useful to note that the settlement agreement made no specific
provision whatsoever for compliance with that order, al-
though the ‘‘subject to liability’’ clause may be so read.
Even so, it does not discuss outstanding liabilities to employ-
ees in any meaningful way.
Instead, the two principal stockholders, Burke and Combs,
pursuant to their settlement, proceeded to divide the military
contracts between themselves and to attempt to novate them-
selves or their newly created corporations to take those con-
tracts over from Respondent corporation. Combs got the San
Diego contract, among others. However, a serious snag de-
veloped.
None of the military contracting officers would recognize
the new entities. In Combs’s case it was a company called
Lemac, and in Burke’s situation the company he created was
called Urban Enterprises. For a short while, in order to save
the contracts, the two made it appear to the military as if Re-
spondent corporation was still operating the business. They
used Urban Laboratories bank accounts as a conduit to re-
ceive money from the Government. Payroll continued to be
issued on Respondent corporation checks, despite the fact
that the corporation had been dissolved and all corporate
stock retired. This togetherness continued, at San Diego at
least, until Combs was ousted altogether in April 1980. Even
after that, Burke continued the practice of issuing payroll
checks in the now-defunct corporation’s name.
Additional difficulties occurred when it became apparent
to Combs in early 1980 that the figures used in the settle-
ment agreement to describe the profitability of the contracts
which he had taken were woefully inadequate. Instead of
showing profitability, they showed severe losses. He had no
personal assets to cover them and was about to default on
the San Diego contract. Indeed, other contracts elsewhere had
already defaulted.
There are two different stories regarding how Burke repo-
sitioned himself to run Combs’s San Diego contract, but it
is clear that he did so. He contends Combs asked him to
come back as a ‘‘consultant.’’ Combs says that is simply un-
true; that the Navy contracting officer contacted Burke and
asked him to take over the contract. In any event, on April
14, 1980, utilizing Urban Laboratories, Inc., stationery,
Burke, signing himself as president, wrote a letter to the dis-
bursing officer for the Naval facility in San Diego stating
that he was the only individual who was authorized to per-
sonally pick up contract reimbursement checks for that con-
tract. After that occurred, Combs says he was effectively fro-
zen out of the receipt of any corporation accounts receivable.
Later, also utilizing Urban Laboratories’ stationery, Burke on
two separate occasions, August 13 and October 30, 1980,
billed the Navy for wage reimbursement and for the bonus
which normally comes at the end of the contract term.9
Burke asserts that the bonus is really the only way that any
contractor ever makes any money because, until that time,
the contracts are essentially a wash between accounts receiv-
able and accounts payable.
It was during this period, after Burke began running San
Diego, that the San Diego unfair labor practices occurred.
Beginning in April, after Burke seized sole control over its
income, Respondent corporation began defaulting on its obli-
gations to the trust, and no trust payments were made for the
months of March, April, May, June, July, August, or Sep-
tember. Furthermore, Respondent corporation failed to pay
the union dues it had withheld for the months of July, Au-
gust, and September.
September 30, 1980, was the end of the San Diego con-
tract with the Navy. At that point the contract was awarded
to someone else. As noted, the unfair labor practice charges
were filed in April and June 1980, and the consolidated com-
plaint issued on August 4, 1980. The Board’s Order covering
the San Diego operation did not issue until January 18, 1981,
and was not enforced by the Ninth Circuit until May 22,
1981.
III. ANALYSIS
Unlike the issues of liquidation of net backpay amounts,
proving interim earnings, or challenging the formula or the
calculations, the burden of proving the derivative liability of
individuals rests with counsel for the Director for he is the
party making the assertion. Senco, Inc., 177 NLRB 882, 887
(1969); Dews Construction, 246 NLRB 945 (1979); Sheet
Metal Workers Local 13 (Sheet Metal Contractors Assn.),
266 NLRB 59 (1983); and Eldridge Bros. Coal Co., 269
NLRB 536 (1984). The question therefore is whether or not
counsel for the director has proven that Brown and Burke are
derivatively liable at all. I conclude that counsel for the di-
rector has failed to meet his burden with respect to Brown,
but has done so with respect to Burke.
A. Carl J. Brown
The principal problem with the Regional Director’s case
with respect to Brown is that there is no evidence dem-
onstrating what Brown’s ownership interest in Respondent
corporation was. We do know that he lent $10,000 to that
firm, apparently serving as a substitute lender for a bridge
loan when the bank would not lend without Combs’ signa-
ture. At that point Brown was simply an unsecured creditor.
By his answer, and by his testimony as well as that of Burke,
it is apparent that he did obtain some stock in the corpora-
tion. Neither he, Burke, nor anyone seems to know when or
how much. We also know that the loan and the stock are not
necessarily of congruent value. There is nothing to show that
his entire $10,000 was converted to stock. A common re-
823URBAN LABORATORIES
10 Washington State law does not require stock ownership as a
condition for membership on the board of directors. See R.C.W.
23A.08.340 (which was in effect from 1967 through 1989) and its
successor, R.C.W. 23B.08.020, adopted in 1989. These statutes both
permit corporations to require stock ownership as a condition of be-
coming a director. Any further citations to Washington statutes here-
in will refer to the statutes in effect in 1979 and not to the 1989
amendments.
11 See R.C.W. 23A.28.160.
12 It is not clear to me that the issuance of a Board order clearly
places the Board in the shoes of a judgment creditor even if the fig-
ures are known. Its order must be enforced by the Court of Appeals
before there is an actual right to coerce payment. See Sec. 10(e) of
the Act. In that sense, the Board order in the Groton case was not
enforced until well after Brown obtained repayment of his loan. In-
deed, the amount due remains unliquidated until the conclusion of
the instant proceeding. In that circumstance it seems to me that the
Board was far too late to compete with Brown. This circumstance
could have been avoided by a timely protective order under Sec.
10(j) or (e) of the Act; it appears, however, that no such order was
ever sought.
13 However, Washington insolvency proceedings do not follow the
Federal example with regard to avoidable preferences. See Post v.
Fischer, 191 Wash. 577, 71 P.2d 659 (1937).
quirement of corporate charters is that to be a member of the
board of directors, one must hold at least one share of the
corporate stock.10
Thus, Brown’s ascension to the board may have been
based simply on his ownership of one share, not the number
of shares which $10,000 may have purchased. Of course it
is equally true that we do not know, because the corporate
records no longer exist, how many shares of stock were actu-
ally authorized or issued or what percentage Brown may
have acquired, or even whether the corporate bylaws even re-
quired directors to own some stock.
Although Brown’s testimony seems to be to the contrary,
he may have been put on the board of directors simply to
assist Burke with his management problems involving
Combs. Combs, having a nearly equal amount of stock with
Burke, had the undoubted right to sit on the board of direc-
tors. That, of course, meant, because of their quarrel, no cor-
porate business could be performed, particularly if a quorum
of more than one was required. A third board member was
obviously necessary to break deadlocks or constitute a
quorum. Another possibility is that the stock which was sub-
scribed to Brown was simply an informal pledge to secure
the loan. The difficulty with that observation, though not in-
surmountable, is that no stock certificates were ever issued
to anybody, including Brown. The stock ownership appears
to have taken place as a paper transaction in the corporate
records. Obviously Brown could not have taken possession
of stock as in a true pledge.
I recognize that Burke had control of the corporate records
and has a strong motive to cause them to disappear. He did
not want to give Combs any information which Combs might
use against him; he undoubtedly does not want to provide
similar ammunition to the Board, either. That, however, does
not help counsel for the director in his assertion that Brown
was a significant owner of the Company. The one thing that
Brown, Burke, and Combs have all agreed upon was that
Brown could get his loan out of the corporation, together
with interest, upon the execution of the settlement agreement.
Indeed, Brown was not even a signer of two addenda exe-
cuted a few days later. That treatment leads me to the con-
clusion that the other two regarded him either as some sort
of straw man within the corporation or an outsider such as
a creditor. Once the corporation was dissolved, pursuant to
the terms of the December 27, 1979 settlement agreement,
those two were able to proceed to try to run the contracts
which they had obtained. Brown was simply repaid, together
with interest. He was well out of the picture by the time the
San Diego unfair labor practices were committed.
Furthermore, there is no evidence that Brown even knew
of the earlier NLRB action at Groton. There is no proof that
he knew of the Groton situation at the time he made his
loan. When he finally joined the board of directors in the fall
of 1979, it is conceivable that he learned of the Board order;
yet there is no actual proof of that fact. He only sat on the
board of directors for a very short time, the fall of 1979 to
December 27, 1979, the date of the dissolution agreement.
Neither did he take any management role. It therefore seems
unlikely that his investment was ever a capital one. The loan
had preceded his stock ownership, and it was mere conven-
ience that he became a member of the board of directors at
all.
I am therefore unable to conclude that the $11,000 which
Brown obtained pursuant to the terms of the dissolution
agreement was anything other than repayment of his original
loan. Compare Ford v. Magee, 160 F.2d 457 (2d Cir. 1947)
(opinion of L. Hand, J.), cert. denied 332 U.S. 759 (1947).
There the court held that a shareholder/officer/director had
the right to prove that his true interest in the corporation was
that of a creditor rather than an owner, and could seek to bar
the trustee in bankruptcy from recouping money which the
bankrupt estate had conveyed to him.
Here I think counsel for the Director has failed to prove
that the loan was not bona fide. That being the case, Brown’s
acceptance of the repayment was perfectly proper. At that
point, it is true that the National Labor Relations Board had
issued its decision and order in the Groton matter but its
rights and Brown’s rights were not really equal. At best they
both stood in the shoes of unsecured creditors, yet the
Board’s claim, unlike Brown’s, remained unliquidated. In
1980, had the matter gone through bankruptcy court or
Washington State insolvency procedures, which follow bank-
ruptcy rules,11 they would not have been equally preferred
for a liquidated sum is generally required. Brown’s claim
would have had priority. Therefore, it is clear that Brown’s
acceptance of this money was not a fraud on any judgment
creditor.12
In any event, counsel for the director has cited no author-
ity which declares the Board order to have precedence over
an ordinary creditor. Usually the rule is ‘‘first in time is first
in right,’’ unless bankruptcy or insolvency proceedings are
invoked. The bankruptcy act does permit a reachback by de-
fining as avoidable preferences certain prefiling convey-
ances.13 No such filing occurred here and Brown was clearly
first. Moreover, counsel for the director has not shown that
the repayment of the loan to Brown rendered the corporation
insolvent. It is entirely likely that this corporation was in fi-
nancial difficulty; even so, it may have been technically sol-
vent.
In his brief, counsel for the director has referenced several
Washington statutes in support of his argument that the pay-
ments to both Brown and Burke are recoverable under a
824 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
14 Brown’s situation contrasts markedly from that of the inside
creditor and semisecret successor in Greater Kansas City Roofing,
305 NLRB 720 (1991).
fraudulent conveyance theory. In general, the statutes do not
assist him in that regard. The first is R.C.W. 23A.08.420.
This statute, by its terms, refers only to the improper pay-
ment of dividends which would render the corporation insol-
vent. Since dividends are not at issue here, the statute cannot
apply. The second is R.C.W. 23A.44.100 which holds per-
sons personally liable for the unauthorized use of corporate
powers. This statute is directed at persons holding themselves
out as the corporation during the corporate formation proc-
ess. Although having language appeal, contextually it does
not apply to persons exercising corporate powers during a
windup. The third statute is R.C.W. 23A.08.450(3). This stat-
ute would hold directors personally liable for distribution to
shareholders during liquidation for those debts which the liq-
uidation procedures had not made provision. However, it
makes the directors liable to the corporation, not to third
party creditors. Moreover, since there has been no showing
that the payment to Brown rendered the corporation insol-
vent, the fraudulent conveyance argument has no merit.
There is no statutory warrant for me to set aside that convey-
ance in favor of the Board.
Furthermore, nothing in the Board’s order itself gives the
Board any greater priority over any other bona fide creditor.
It only prohibits transfers which are designed to evade its
order. The language of Federal Rule 65(d) ordering Respond-
ents, their ‘‘officers, agents, successors, and assigns’’ to take
certain affirmative action including payment of backpay,
does not operate to create a greater right to be paid debts
over and above any other legitimate creditor. It is aimed only
at persons involved in the underlying action, not outsiders.
Regal Knitwear v. NLRB, 324 U.S. 9 (1945). As one district
court has said:
The provision relating to ‘‘officers, agents, servants,
employees, etc.,’’ was inserted merely to make the de-
cree effective as against the named defendants, adopt-
ing to a great extent, the language of Rule 65(d) . . .
Such clauses are a standard provision in injunction de-
crees and do not impose any liability which would not
exist without them. United States v. Wilhelm Reich
Foundation, 17 F.R.D. 96 at 101 (S.D. Me. 1954), affd.
per curiam sub nom. Baker v. United States, 221 F.2d
957 (1st Cir. 1955), cert. den. 350 U.S. 842. [Emphasis
added.]
Accordingly, I conclude that counsel for the director has
failed to prove that the money which Brown obtained was
anything other than the innocent repayment of his $10,000
loan, plus interest. He was, in reality, an outsider—a credi-
tor—and not personally subject to the Board order.14 By def-
inition, he was not evading it. Brown is therefore not person-
ally liable for the debts of Respondent corporation.
B. Gerald G. Burke
Probably the most striking characteristic Burke showed
during the hearing was artful glibness. His testimony in
every respect was aimed at dodging any responsibility for his
own or his company’s actions. He blamed Combs for failing
to appear at the Groton unfair labor practice hearing; he ac-
cused Combs of being incompetent with company money;
and he asserts it is the Navy which is entirely responsible for
Respondent corporation’s demise.
Some of his contentions may be partly true. What is also
true, however, is a great deal of evidence which adds up to
a showing that Burke has a deceitful side and regularly uses
it. The first, and most noteworthy, is his claim that essential
corporate records have disappeared. He argues that their dis-
appearance is an event beyond his control and responsibility.
Therefore, he says, he should not bear any consequences of
that happening—particularly since the office was burglarized.
His testimony and argument must both be rejected. Even
if one or more burglaries happened, there is no reason to
think the types of records with which the current litigants are
concerned were stolen. They were corporate records and
bank statements, having no intrinsic value to a thief. More-
over, according to the police report, the first burglary oc-
curred on August 25, 1979, during the height of Burke’s
quarrel with Combs. Despite the loss of these important pa-
pers, Burke did not even make an effort to obtain copies
from other sources, such as the bank. Nor is there any evi-
dence that substitute recordkeeping—new minute books, for
example—were begun. Moreover, the later records are sup-
posedly not available either. Burke says a second burglary
took place, but no police report appears to have been filed.
It certainly seems unlikely to me that the exact same kind
of records would have been appropriated again.
Later, Burke moved the entire office to another location,
but declined to tell Combs where it was. He claims he did
not do so because he believed Combs was removing material
without his knowledge and without reporting what he was
taking to the clerical staff.
After the Board orders were enforced in 1981, an NLRB
investigator questioned Burke about Respondent’s assets,
some of which were thought to have been transferred to his
new company, Urban Enterprises. In an affidavit, he claimed
to have sold that business to another person, but he specifi-
cally declined to reveal that individual’s name. He also omit-
ted any mention of his supposed ‘‘consultancy’’ to Combs at
San Diego. When he testified, however, he denied ever sell-
ing Urban Enterprises to anyone. Furthermore, he insisted
that he had given a supplemental affidavit describing his sta-
tus as a consultant. His testimony here is more than lame;
it is patently deceitful. There is no evidence that a second
affidavit ever existed. He was interviewed only once. More-
over, this testimony is belied by his correspondence with the
Navy in April when he told the disbursing officer he was the
only person authorized to receive the checks. That supports
Combs’s testimony that Burke froze him out, hardly consist-
ent with a consultant’s station.
Burke also says he failed to pursue his claims against the
Navy for nonpayment of the last portion of the contract even
though he had received a favorable decision, dated June 27,
1984, from a panel of administrative judges for the Armed
Services Board of Contract Appeals. This claim was sup-
posedly worth several hundred thousand dollars. His indiffer-
ence is inexplicable. Did he give this testimony because he
has actually been paid and does not want Combs or anyone
else, such as the Board, to know?
Based on Burke’s testimony and his behavior, I must con-
clude that he is not to be believed regarding monetary trans-
825URBAN LABORATORIES
15 If no exceptions are filed as provided by Sec. 102.46 of the
Board’s Rules and Regulations, the findings, conclusions, and rec-
ommended 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 purposes.
fers or the supposed lack of them. The disappearance of the
bank records is far too convenient to his purposes. Therefore,
I find that their disappearance is connected to his dispute
with Combs and is his effort to hide income from Combs or
any other claimant such as the Board; he is engaged in an
enterprise aimed at covering up his financial circumstances
and concealing the truth from anyone wishing to learn it.
Indeed, both he and Combs have admittedly attempted to
deceive the Navy regarding the true nature of their business
arrangements after December 27, 1979. When they tried to
substitute either themselves or their newly formed companies
for Respondent in the performance of the mess contracts, the
Navy balked. To get around the Navy’s opposition, they
made it appear as if Respondent corporation was still operat-
ing. As we now know it was only a shell and a front for
their real businesses. This fooled not only the Navy, but
seems to have been aimed at Local 30 as well.
I think it is clear, therefore, that Burke has engaged in
conduct designed to evade the Board’s court-enforced orders;
indeed, he has been evading everybody insofar as taking re-
sponsibility for his actions is concerned. On that ground
alone he is derivatively liable to remedy the unfair labor
practices.
With respect to the San Diego matter, it is quite clear that
Burke, as an individual, was in charge of the operation be-
ginning at least on April 14 and thereafter. It was at that
time that the March payments to the trust became due. He
held the money that came from the Navy at that time and
declined or refused to pay the trust. He continued to hold
himself out as if he were Respondent corporation, even
though Respondent corporation was essentially dissolved. In
doing so he subjected himself to personal liability for the un-
fair labor practices which were committed during that period
of time. Also, because of his personal takeover of the San
Diego contract, Burke is a successor within the meaning of
Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973),
and Perma Vinyl Corp., 164 NLRB 968 (1967), enfd. sub
nom. U.S. Pipe & Foundry v. NLRB, 398 F.2d. 544 (5th Cir.
1968). As such he is personally liable to remedy not only the
corporation’s unfair labor practices at Groton, but those he
committed as an individual at San Diego. Whether Combs
would have been liable for that amount as well is immaterial
at this stage as Combs has now bought his peace by settle-
ment.
The most significant item, however, is the settlement
agreement itself. It specifically provides that Burke (and
Combs) are to take corporate assets upon dissolution subject
to the liabilities of the corporation. That language itself is
sufficient to warrant a finding that Burke is personally liable
for the debts of the corporation which have not been paid
and which were not taken into account by the agreement. In
a very real sense it is a third party beneficiary contract in
which Burke agreed to pay the debts of the corporation in-
cluding those which were then inchoate such as the backpay
due under the Board’s Groton order. Burke can have no
complaint about such a finding. He has, in essence agreed to
it.
Therefore, on four grounds I find Burke to be personally
liable. First, the settlement agreement makes him liable; sec-
ond, the Board order runs to him as an ‘‘assign.’’ The Rule
65(d) language used by the Board easily reaches him. See
the discussion, supra, regarding Brown. Unlike Brown, Burke
was a corporate insider. Moreover, he has used all sorts of
devices to evade responsibility. He hid his real self from the
Navy, Local 30 and the Board. He claimed to those three en-
tities that beginning in January 1980 Respondent corporation
continued to exist and utilized checks and other paperwork
to make it appear as if it did when it had actually been dis-
solved. Later, he hid the office from his former business
partner Combs so Combs could not obtain information re-
garding any legitimate claims he may have had. In doing so,
all of the corporate records conveniently disappeared while
in his custody. Third, he is the individual, who although
using the corporation’s name, actually committed the San
Diego unfair labor practices. Fourth, he is a ‘‘successor’’
under the Golden State Bottling and Perma Vinyl rules obli-
gated to remedy the unfair labor practices at Groton.
Burke’s defenses do not offer him any shield here. He is
personally liable for the entire backpay amounts outstanding
‘‘less’’ any credit for the amount paid by Combs.
Accordingly, I make the following recommended find-
ings.15
1. The unfair labor practices found by the Board in the un-
derlying complaint cases, will be remedied by payment of
the following sums:
a. To the Groton employees as set forth in the Groton
backpay specification, as corrected the sum of: $61,527.49.
b. To Hotel and Restaurant Employees and Bartenders
Union of San Diego, Local 30, AFL–CIO, the sum of:
$1980.
c. To the San Diego Bartenders and Culinary Workers In-
surance and Pension Trust Fund the sum of: $19,981.50.
Total: $83,488.99.
2. Respondent Urban Laboratories, Inc., is wholly liable
for payment of the entire amount.
3. Respondent Gerald G. Burke is wholly liable for the en-
tire amount.
4. Respondent Carl J. Brown is not obligated to pay any
of the above amounts.
5. Interest and/or penalties (if called for by the trust’s
rules) on said amounts is still accruing per the original Board
orders.