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In re Calvert

United States Court of Appeals, Seventh Circuit

January 22, 2019

In Re: Edward L. Calvert, Debtor-Appellee. Appeal of: National Labor Relations Board

          Argued January 8, 2018

          Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:16-cv-00161-SEB-MJD - Sarah Evans Barker, Judge.

          Before Easterbrook and Sykes, Circuit Judges, and Bucklo, District Judge. [*]


         Edward Calvert was the sole owner and president of E.L.C. Electric, Inc., an electrical contracting company. After a labor organization unsuccessfully campaigned to unionize his company's workforce, Calvert laid off most of E.L.C. Electric's rank-and-file electricians, which effectively prevented future unionization attempts. The National Labor Relations Board ("NLRB") determined that the company violated the National Labor Relations Act ("NLRA"), which prohibits discrimination against workers for exercising their statutory rights. See 29 U.S.C. § 158(a)(3). The Board ordered E.L.C. Electric to compensate the electricians with backpay.

         Calvert tried to avoid the order by shifting his company's operations to two new corporate entities. He didn't succeed. The NLRB discovered Calvert's plan and held him personally responsible for the backpay award. Facing more than $400, 000 in liability, Calvert filed for Chapter 7 bankruptcy.

         The Board challenged Calvert's attempt to discharge the backpay liability, arguing that the debt was not dischargeable because it arose from a willful and malicious injury. See 11 U.S.C. § 523(a)(6). Calvert conceded the willfulness element but denied that he acted maliciously. The Board countered by asserting that Calvert was collaterally estopped from litigating the malice issue, but it made little effort to establish the elements of the doctrine. Indeed, the Board did not identify any specific findings in the NLRB ruling that should be given preclusive effect. The bankruptcy judge declined to apply collateral estoppel and instead held a bench trial on the issue of malice. Based on the trial evidence, the judge found that Calvert had not acted maliciously and thus ruled that the debt was not exempt from discharge.

         On appeal to the district court, the Board again raised collateral estoppel but failed to analyze the elements of the doctrine or provide citations to the relevant parts of the agency record. The district judge noted these deficiencies and affirmed.

         We likewise affirm. The Board does not challenge the evidence at trial or the bankruptcy judge's factual findings. Instead it stakes its entire case on collateral estoppel. But it persists in providing only a generalized discussion of preclusion doctrine that is untethered to specific findings in the NLRB proceeding. That's not enough to establish that Calvert is precluded from contesting the malice issue under § 523(a)(6).

         I. Background

         In July 2002 the International Brotherhood of Electrical Workers, Local 481, campaigned to become the certified bargaining representative for E.L.C. Electric's rank-and-file electricians. Calvert launched his own campaign to oppose the Union's efforts. When the Union lost, it filed an objection with the NLRB, demanding a new vote on the ground that E.L.C. Electric had unlawfully meddled in the election.

         While this objection was pending, E.L.C. Electric promoted two of its bargaining-unit electricians and fired the remaining sixteen, leaving the Union without a rank-and-file workforce at the company to unionize. The Union filed a second charge with the NLRB alleging that E.L.C. Electric unlawfully fired the electricians for exercising their right to unionize.

         After a trial in April 2004, an administrative law judge ruled that E.L.C. Electric violated sections 8(a)(1) and (3) of the NLRA, 29 U.S.C. § 158(a)(1), (3). The NLRB affirmed the ALJ's ruling a year later. E.L.C. Elec., Inc., 344 N.L.R.B. 1200 (2005). It determined that E.L.C. Electric violated § 158(a)(3) of the NLRA by firing the electricians to prevent them from organizing. The NLRB ordered the company to compensate the electricians with backpay.

         E.L.C. Electric never paid the award. It ceased operations in March 2006. The ALJ initiated supplemental proceedings and concluded that Calvert shuttered the firm to avoid paying the electricians. The judge pierced the corporate veil and held Calvert personally liable for $437, 427 in backpay and interest. The NLRB adopted the judge's findings and ...

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