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National Labor Relations Board v. Calvert

United States District Court, S.D. Indiana, Indianapolis Division

March 31, 2017




         Presently before the Court is an appeal by the National Labor Relations Board (“NLRB”) [Docket No. 1], filed on January 20, 2016, challenging the decision of the Bankruptcy Court issued on December 21, 2015. For the reasons detailed below we AFFIRM the Bankruptcy Court's decision.

         Factual Background

         Debtor-Appellee Edward L. Calvert was the sole owner and president of ELC Electric Inc. (the “Company”), an electrical contracting company operating in the Indianapolis area. In July 2002, the International Brotherhood of Electrical Workers, Local 481 (the “Union”) sought to become the certified bargaining representative for the Company's rank-and-file electricians. An election to determine whether a majority of the electricians desired to be represented by the Union was scheduled by the NLRB for September 26, 2002. Prior to election, Calvert became aware that the rank-and-file electricians were attempting to organize; thus, in anticipation of the upcoming election, Calvert launched a campaign against the Union's certification because he wanted the Company to remain union-free.

         On September 26, 2002 the Union lost the election, failing to gain a majority of support from the electricians. Shortly thereafter, the Union filed objections with the NLRB alleging that the Company had engaged in conduct that unduly influenced the election results in violation of the National Labor Relations Act (the “Act”), 29 U.S.C. § 101, et seq.

         Following the Union's loss in the September 2002 elections, but prior to any decision by the NLRB on the challenges to its results, in January, February, and March of 2003, the Company laid off sixteen of its bargaining-unit electricians and promoted the only two remaining electricians, leaving the Company with no rank-and-file workforce.

         Calvert testified that he understood that by laying off the rank-and-file electricians, the Company would no longer have obligations to pay them or provide them with other benefits such as health insurance or retirement contributions. In addition, it was his understanding that the layoffs left the Company with no rank-and-file employees who could form a bargaining unit, but that, at the time he made the decision to lay off the electricians, he did not know whether there would be future attempts to unionize workers at the Company.

         He testified further that the Company had laid off the employees to save money. Specifically, at the time of the layoffs, the Company was contracted for several “prevailing wage projects” such as schools and hospitals for which the Indiana Department of Labor was conducting audits that were costing the Company money and manpower, and which would, according to Calvert, “inevitably” lead to the Department discovering a problem with the Company's payment of wages, provision of benefits, or classification of workers. As a result, the Company chose to shift its operations to the use of temporary workers, whereby the Company would contract with an outside labor provider, who would be responsible for the provision of wages, benefits, and taxes, and, most importantly, would be responsible for any further audits by the Indiana Department of Labor. According to Calvert, this decision “saved the Company a ton of money.” Bankr. Dkt. 56 at 6. The Company sent each of the affected workers a letter explaining the decision on March 7, 2003, a week prior to the layoffs.

         In response to the early 2003 layoffs, the Union filed additional charges with the NLRB alleging that, by discharging the entire rank-and-file workforce, the Company had unlawfully discriminated against its electricians for engaging in their statutorily-protected right to organize. Pursuant to the charges filed by the Union, the NLRB instituted administrative proceedings against the Company for alleged violations of §§ 8(a)(1) and (3) of the Act. A trial was conducted in Indianapolis before an Administrative Law Judge (“ALJ”) appointed by the NLRB, and, on April 7, 2004, the ALJ issued a decision holding that the Company's actions had violated §§ 8(a)(1) and (3) of the Act. On July 29, 2005, the NLRB affirmed the ALJ's rulings, findings, and conclusions as modified, adopted the recommended order as modified, and adopted the ALJ's recommendation that the September 26, 2002 election be set aside and a new election be held.

         In reaching its conclusion that the Company, through unfair labor practices, had interfered with the election results, requiring that they be set aside and a new election be held, the NLRB found that the Company discriminatorily discharged all sixteen of its bargaining-unit employees and that Calvert had personally made the decision to discharge the Company's thirteen electricians on March 14, 2003.[1] The NLRB also found that Calvert's intent in discharging these employees was to thwart their pursuit of union representation, given that he continued to avail himself of their services after their termination by contracting with the labor contractors for whom they worked. The NLRB also noted that it was unpersuaded by Calvert's explanations for the Company's actions, finding instead that Calvert's actions were based on unlawful antiunion animus. The NLRB ordered the Company, its officers, agents, successors, and assignees, to make whole through the payment of backpay the sixteen employees who had been unlawfully discharged in violation of the Act.

         On March 25, 2006, nearly eight months after the NLRB ordered the payment of backpay, the Company ceased operations, prompting the NLRB to conduct a subsequent proceeding intended to address who was to become responsible for paying the Company's backpay liability. On November 8, 2012, an ALJ issued a Supplemental Decision and Order finding that Calvert had created new corporate identities for the express purpose of avoiding the Company's liability for payment under the NLRB's original order, that the new corporate identities were alter-egos of the Company, and that Calvert had disregarded the separateness of the corporations and comingled and diverted funds in order to “evade his legal obligations to the backpay owed to the 16 discriminatees.” Tr. Ex. 4 at 15. The ALJ held that the corporate veil should be pierced and Calvert should be held personally liable for $437, 427 in backpay and interest to be paid to the sixteen discharged employees. The Order was modified, affirmed, and enforced by the Seventh Circuit on July 23, 2013. Tr. Ex. 5.

         Five months thereafter, on December 19, 2013, Calvert filed a Chapter 7 bankruptcy petition seeking discharge of his debts. In response, the NLRB initiated the present adversary proceeding seeking to have its claim for the unsatisfied payment of backpay adjudicated as nondischargeable pursuant to 11 U.S.C. § 523(a)(6) and to have Calvert deemed ineligible for discharge pursuant to 11 U.S.C. § 727(a)(3) and (4).

         On June 5, 2015, the NLRB moved the Bankruptcy Court for entry of summary judgment on grounds that its § 523(a)(6) claim for nondischargeability, which requires a showing of willfulness, deliberate injury, and malice, had been fully adjudicated in the NLRB's unfair labor practice proceedings and therefore the Bankruptcy Court should rely on the findings and conclusions in the NLRB's Decision and Order. The Bankruptcy Court denied the motion on September 1, 2015, holding that “the level of ‘mens rea' required for a determination of nondischargeability is not the same with respect to an unfair labor practice determination under §8(a) of the National Labor Relations Act.” Bank. Dkt. 39 at 4-5. Accordingly, the Bankruptcy Court held that the finding of antiunion animus in the NLRB decision did not necessarily compel a finding that Calvert had the subjective intent required by § 523(a)(6); however, the Bankruptcy Court held that any “specific findings” made by the ALJ with regard to Calvert's intent to cause injury to the electricians were entitled to preclusive effect under the doctrine of collateral estoppel, but upon review of the prior decisions, found that the NLRB adjudications lacked sufficient “specific findings” as to Calvert's intent so as to enable the Bankruptcy Court to give preclusive effect to the to the legal issues of liability and nondischargeability. The Bankruptcy Court held that it would instead analyze whether the facts proven at trial would support a conclusion of nondischargeability under § 523(a)(6) of the Bankruptcy Code.

         A trial on the issue of nondischargeability was held on September 23, 2015, after which, on December 21, 2015, the Bankruptcy Court issued its Findings of Fact and Conclusions of Law, holding that, based on the evidence adduced at trial, Calvert's debt to the NLRB was not excepted from discharge pursuant to 11 U.S.C. § 523(a)(6). The Bankruptcy Court concluded: (1) that Calvert's decision to promote or lay off all of the Company's bargaining-unit employees prevented them from exercising their legal rights to organize under the NLRA and therefore caused a cognizable injury under § 523(a)(6); (2) that Calvert understood that there would be no bargaining-unit employees who could exercise their legal right to organize at the Company once they were all either laid off or promoted and therefore he acted with requisite willfulness under § 523(a)(6); and (3) that Calvert's testimony that the Company switched to temporary employees from labor providers in order to avoid costly audits by the Indiana Department of Labor in confluence with the fact that he made the decision to switch to temporary employees more than a year prior to the ALJ's decision to set aside the first election's results and order a second election sufficiently refuted the NLRB's claim that, at the time the decision to lay off the workforce was made, it was more likely than not that Calvert consciously disregarded the organizational rights of the Company's employees. See Bankr. ...

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