Esmark, Inc.

National Labor Relations Board - Board Decisions

Dec 16, 1994

315 N.L.R.B. 763 (N.L.R.B. 1994)

763
315 NLRB No. 108
ESMARK, INC.
1 Esmark, Inc. v. NLRB, 887 F.2d 739 (1989).
2 On June 27, 1991, Administrative Law Judge William F. Jacobs
issued the attached supplemental decision. The General Counsel filed
exceptions and a supporting brief; the Charging Party filed cross-ex-
ceptions and a supporting brief; the Respondent filed an answering
brief to the exceptions and cross-exceptions; and the Charging Party
filed a reply brief to the Respondent’s answering brief.
The Board has considered the decision and the record in light of
the exceptions and briefs and has decided to affirm the judge’s rul-
ings, findings, and conclusions and to adopt the recommended Order
only to the extent consistent with this decision.
The Charging Party has excepted to the judge’s grant of the Re-
spondent’s petition to revoke parts of its subpoenas of documents
which SIPCO had attempted to introduce into evidence in a civil
lawsuit between Esmark and SIPCO, which the parties dropped on
September 14, 1990. The Charging Party contends that SIPCO’s po-
sition in that lawsuit was that relieving Esmark of liability for the
closing of the Moultrie and Guymon plants would be contrary to
public policy as Esmark had been instrumental in the closings. With-
out passing on the propriety of the judge’s summary grant of the Re-
spondent’s petition to revoke parts of the Charging Party’s subpoe-
nas, we decline to reconsider his action. In our view, even if the evi-
dence obtainable through the subpoenas were to demonstrate the
facts argued by the Charging Party, such evidence would not, under
the law of the case, establish a violation of Sec. 8(a)(5) on Esmark’s
part.
3 Swift Independent Corp., 289 NLRB 423 (1988). In this case, the
Board found that Swift, Esmark, and other companies had violated
the Act. Esmark is the only respondent who is a party to this petition
for review.
4 These plants were operated by Swift & Co., an Esmark subsidi-
ary, at Guymon, Oklahoma, and Moultrie, Georgia.
5 The subsidiary was SIC/SIPCO/New Sipco. SIC was a holding
company wholly owned by Esmark until April 11, 1981. SIC’s as-
sets consisted of the stock of SIPCO, a corporation operating fresh
meat packing plants previously owned by Swift, and New Sipco, a
corporation operating the two fresh meat plants at Moultrie, Georgia,
and Guymon, Oklahoma, also previously owned by Swift. SIC,
SIPCO, and New Sipco were former Respondents in the instant case
and, with Esmark, were found to have violated Sec. 8(a)(5), (3), and
(1). The other Respondents having reached a settlement, only
Esmark’s liability under the Act remains at issue.
6 The court majority’s characterization of the ‘‘direct participa-
tion’’ theory is discussed in sec. A,1, below.
7 In addition to the issues discussed here, the court upheld the
Board’s findings that the complaint is not barred by Sec. 10(b); that
the sham closing of the Moultrie and Guymon plants was inherently
destructive of employees’ Sec. 7 rights under NLRB v. Great Dane
Trailers, 388 U.S. 26 (1967); and that Esmark’s argument that
SIPCO is its successor respecting Moultrie and Guymon by virtue
of the transfer of about 65 percent of Esmark’s stock so that the law
of successorship applies to SIPCO is without merit.
8 Esmark, Inc., supra, 887 F.2d at 759.
9 Judge Cudahy dissented and would have enforced the Board’s
Order in its entirety. Id. at 759.
Esmark, Inc. and United Food and Commercial
Workers International Union, AFL–CIO. Case
13–CA–21156–S
December 16, 1994
SUPPLEMENTAL DECISION AND ORDER
BY CHAIRMAN GOULD AND MEMBERS DEVANEY
AND BROWNING
The issue in this case, before the Board on remand
from the Court of Appeals for the Seventh Circuit,1 is
the liability of a parent corporation for unfair labor
practices in which its wholly-owned subsidiary en-
gaged.2 On June 29, 1988, the Board issued a Decision
and Order3 in which it found, inter alia, that the Re-
spondent Esmark, a holding company, violated Section
8(a)(3) and (1) by virtue of its direct participation in
the decision to close two plants4 of a subsidiary5 and
terminate the unit employees in order to evade contrac-
tual obligations and violated Section 8(a)(5) and (1) by
its direct participation in the subsidiary’s decision to
abrogate the contract at the facilities when they re-
opened. The Board ordered Esmark, inter alia, to make
the employees whole for their losses resulting from the
unfair labor practices.
On October 6, 1989, the court of appeals granted
Esmark’s petition for review and remanded the case to
the Board for ‘‘further factual development’’ of the
‘‘direct participation’’ theory on which the Board had
based its finding that Esmark was liable for the viola-
tions arising out of the subsidiaries’ closing and re-
opening of the facilities. Accordingly, the Board re-
manded the case to the judge, who, after hearing addi-
tional testimony and reviewing the prior record, found
nothing in the record not considered by the Board or
the court and recommended dismissal of the complaint
as to Esmark.
We agree in part and disagree in part with the judge.
Accepting as the law of the case the court majority’s
characterization of the ‘‘direct participation’’ theory,
we agree with the judge that the record does not sup-
port a finding that Esmark violated Section 8(a)(5) and
we adopt his dismissal of the 8(a)(5) allegations.6 We
disagree, however, with the judge’s dismissal of the
8(a)(3) allegations, and, without relying on the direct
participation theory, we find that the record contains
ample evidence of Esmark’s liability under Section
8(a)(3) and (1) of the Act. Accordingly, we find that
Esmark violated Section 8(a)(3) and (1) and we shall
order it to take appropriate action to remedy its unfair
labor practices. Our reasons follow.
A. The Law of the Case and the Issues Remaining
on Remand7
1. The alleged violations of Section 8(a)(5)
In its decision, the court unanimously held that the
Board’s basis for finding Esmark liable for its subsidi-
aries’ unfair labor practices, Esmark’s direct participa-
tion in the transactions involved, ‘‘is a viable theory
of intercorporate liability which may be employed by
the Board to hold a parent corporation . . . liable for
the unfair labor practices of a subsidiary corpora-
tion.’’8 The court majority, Judges Easterbrook and
Flaum,9 however, found that the Board had failed to
make ‘‘specific findings that [Esmark’s] power of con-
764 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
10 Id. at 758, 760.
11 Id. at 758, discussing Riley Aeronautics, 178 NLRB 495 (1969).
12 Id at 757.
13 Sec. 8(a)(5) prohibits an employer from ‘‘refus[ing] to bargain
collectively with the representative of his employees . . . .’’
14 Sec. 8(a)(3) makes it an unfair labor practice for ‘‘an employer’’
‘‘by discrimination in regard to hire or tenure of employment or any
term or condition of employment to encourage or discourage mem-
bership in any labor organization . . . .’’
15 Esmark, Inc., supra, 887 F.2d at 753 fn. 22.
trol [as a stockholder] was exercised through improper
means’’ and to provide adequate factual support of its
finding that ‘‘Esmark made SIPCO’s decisions for it,
without any concern for SIPCO’s separate legal iden-
tity,’’ so as to justify establishing liability under this
‘‘limited, transaction-by-transaction theory of piercing
the corporate veil.’’10 The court noted that the Board
has held a stockholder liable for unfair labor practices
‘‘nominally carried out by a corporation’’ when two
elements are present: the shareholder participated ac-
tively in the decision to commit the particular wrong
and the shareholder’s control was exercised ‘‘‘di-
rectly,’ outside the normal channels of corporate deci-
sionmaking.’’11 The court found these holdings con-
sistent with the corporate law principle that, although
corporations meeting certain criteria, as Esmark does
here, are not customarily held liable for subsidiaries’
wrongful acts, courts will impose liability where the
parent directly participates in the wrong. The court em-
phasized that stock ownership alone is insufficient, but
a parent’s disregarding orderly corporate procedures
and intermeddling in the transactions of the subsidiary
at issue can be a basis for liability. Thus, the court
unanimously approved the Board’s policy of finding,
in extraordinary cases, that a parent corporation is de-
rivatively liable for a subsidiary’s wrongdoing even
where the parent did not directly injure the third party.
The court majority, however, found that the Board had
failed to show, not just that the parent had actively
participated in the transaction, but that its participation
was ‘‘impermissibly direct,’’ i.e., that the parent dis-
regarded its subsidiary’s separate legal identity and
‘‘decisionmaking ‘paraphernalia.’’’12
We view the court’s remand of the 8(a)(5) issue
under the court majority’s characterization of the ‘‘di-
rect participation’’ theory as requiring a showing that,
with respect to the closing and reopening of the
Moultrie and Guymon plants, Esmark and its managers
actively stepped into the shoes of SIPCO’s board and
officers and controlled their actions to the point of by-
passing SIPCO’s leadership and ignoring such accept-
ed procedures of corporate administration as the elec-
tion of a board and appointment of officers; the hold-
ing of board meetings and voting on resolutions; and
the direction of the subsidiary’s activities by its own
officers. The court majority seeks evidence that
Esmark officials bypassed the subsidiaries’ corporate
structures in an improper manner. This last factor is
not present here. The record does not contain sufficient
evidence, not already considered by the court, to sup-
port a finding under the law of the case that the
Esmark officials’ control of the close and reopen
scheme was procedurally improper, in the sense of by-
passing corporate formalities, so that Esmark would be
liable under Section 8(a)(5). Thus, we adopt the
judge’s dismissal of that allegation.
2. The alleged violations of Section 8(a)(3)
and (1)
The court also remanded for different reasons the
Board’s finding that Esmark violated Section 8(a)(3)
by its direct participation in the sham closing and re-
opening of the Moultrie and Guymon plants. Noting
that the language of 8(a)(5), which requires an em-
ployer to bargain in good faith with respect to ‘‘his
employees,’’13 differs from that of Section 8(a)(3),
which prohibits discrimination by ‘‘an employer,’’14
the court commented:
We recognize that Esmark was also found liable
for related violations of [Section] 8(a)(3). And it
may be that [Section] 8(a)(3) does not narrowly
confine liability to one who is the employer of the
employees aggrieved by a particular unlawful
course of conduct. However, it is unclear whether
the Board would have entered the same remedial
order in the absence of its finding of a [Section]
8(a)(5) violation, and we therefore assume that, if
the [Section] 8(a)(5) finding is improper, a re-
mand to the Board will be necessary to redeter-
mine the extent of Esmark’s liability.15
We agree with the court that Section 8(a)(3) permits
a finding of liability with respect to employers not
standing in a direct employment relationship with af-
fected employees. We note that such a policy comports
with settled Board precedent, as our discussion of
cases, below, demonstrates. We find no basis in the
court’s decision for Esmark’s claim that the court
found that Esmark can be liable under Section 8(a)(3)
only as a ‘‘direct participant.’’ Rather, we read the
court’s comments as stating that, in its view, the limit-
ing language of Section 8(a)(5) requires a factual basis
for piercing Esmark’s corporate veil and bypassing
Esmark’s shareholder immunity from its subsidiary’s
obligations to find it liable for SIPCO’s violation of
that provision. The court explicitly allowed for the
possibility that Section 8(a)(3) imposes no such re-
quirement, and, as noted above, we agree with the
court. We find that under the law of the case, the
Board could find that a parent corporation should not
be permitted to act through its subsidiaries to the det-
riment of the subsidiaries’ work force and yet escape
liability for acts it has mandated, and that if the Board
765ESMARK, INC.
16 The master agreement was a collective-bargaining agreement ne-
gotiated by the Union and Swift & Co. and Estech, another Esmark
subsidiary. The relevant agreement was in force from September
1979–September 1982. The record indicates that Esmark representa-
tives participated in negotiating the master agreement’s benefits pro-
visions.
17 Esmark, Inc., supra, 887 F.2d at 751.
18 Unless otherwise noted, all subsequent dates are in 1980.
19 Sullivan was formerly president of Estech and a member of the
Esmark management committee.
20 Copeland acknowledged in the reopened hearing that his new
functions involved a conflict of interest with his actual employer,
Swift, and that he could not perform them if he were to report to
Swift’s president. His testimony reflects his lack of involvement with
Swift and its corporate structure during the process of building the
sale package: ‘‘Only conversations I can remember having with
Swift & Company was dividing up the staffs in the areas we had
to staff ourselves.’’ Copeland’s testimony indicates that he went di-
rectly to Esmark with questions or issues involving the structure of
the sale package.
21 Kelly announced at the April 25 meeting that he was consider-
ing using an employee stock ownership plan, or ESOP, to rid
Esmark of the fresh meats division. Becker worked out the details
of the ESOP proposal and the Esmark board of directors approved
the plan on May 29. Esmark Vice President Palenchar acted as the
spokesman for Esmark’s effort to persuade the Union to accept the
ESOP proposal.
22 This decision was made by Esmark and Kelly. According to
Swift President Sullivan’s testimony, he did not participate in it.
23 Minutes, meeting of Esmark, Inc., board of directors, June 26,
1980. Esmark retained complete control over the decision as to
which facilities would remain in Swift and which would go into the
sale package. As Copeland testified: ‘‘Swift went to Esmark and
asked if they could keep the San Antonio plant, but we prevailed.
. . . We wanted it and we got Esmark to agree that we could take
it. . . . they [Esmark] made a decision on every unit we took. [Q.
And who at Esmark . . . ultimately approved your recommendations
. . . ?] Well, I can’t imagine that Don Kelly didn’t have somebody
bring him in and say this is what the company is asking for and give
his views and he would eventually say yes or no because I just can’t
believe the corporation would work where you’re just selling major
facilities without chief executives knowing about it.’’
can demonstrate Esmark’s liability under Section
8(a)(3), the court would be receptive to such findings
and enforcement of an order of the appropriate reme-
dial acts. We make such a finding here.
B. Facts
Esmark’s role in transforming employment condi-
tions in the bargaining units at the Moultrie and
Guymon plants from those set by the master agree-
ment16 to terms more favorable to management is well
documented in the Board’s 1988 decision. Briefly, to
increase the value of its stock, Esmark decided in 1980
to divest some of its assets, including the fresh meats
division of its subsidiary Swift & Company, a packer
of fresh and processed meats. Accordingly, Esmark di-
vided Swift into two new corporations, the first a proc-
essed meat packer, which remained part of Esmark,
and the second a fresh meats packer, some stock of
which Esmark offered to the public in April 1981 ‘‘as
an ongoing, self-sufficient enterprise,’’17 and which
were respectively christened Swift and SIC/-
SIPCO/New Sipco (SIPCO). The operative facts arise
from the creation of the second entity, the SIPCO sale
package. The process of setting up and marketing
SIPCO involved many steps, briefly highlighted here,
some of which are alleged to have violated the Act.
In April 1980,18 Esmark President Kelly informed
Swift vice president Copeland of the decision to divest
Swift of its fresh meats division. Kelly announced that
he was appointing a new Swift president, Sullivan,19
and ordered Copeland to formulate a plan to transform
Swift’s fresh meats division into a separate company
to be sold by Esmark. Further, Kelly instructed
Copeland that henceforth he would report, not to Sulli-
van, but to Kelly himself.20 Kelly and Copeland main-
tained a ‘‘very informal type reporting relationship,’’
but Kelly ‘‘expected [Copeland] to keep him posted,’’
and Copeland testified that he and his team cleared all
decisions respecting the new company with Kelly or
other Esmark executives: ‘‘Esmark [sic] we were
working hand in glove with them. I was working di-
rectly for Don Kelly, and we were trying to put to-
gether a company that we were going to offer for sale
so you bet. I was there talking to them constantly.’’
Other Esmark executives were involved in structuring
the sale package, most notably Esmark Assistant Gen-
eral Counsel Karl Becker, whose duties included over-
seeing the divestiture’s financial structuring. Richard
Knight, a Swift vice president, later became the new
company’s vice president for beef, lamb, and labor.
J. Douglas Gray, a former executive in the fresh meats
division, also worked with Copeland and later became
vice president of SIC.
After the Union rejected Esmark’s proposal for an
employee purchase plan of the fresh meats division in
June,21 Kelly and Esmark management decided that
the division should close down.22 Copeland, who had
anticipated the ESOP’s failure, had other ideas. He
proposed a plan, approved first by Kelly and then by
Esmark’s board on June 26, to close or dispose of
some fresh meats ‘‘facilities of Swift & Company . . .
and facilities which do not fit into its long-range plans,
and the payment of transitional costs . . . . The re-
maining units of Swift Fresh Meats Division to be-
come a separate company, to be sold by Esmark with
Esmark possibly retaining an ownership position.’’23
As further discussed below, however, Esmark changed
its strategy during the latter half of 1980 and deter-
mined that a public offering of some of the stock in
the new corporation, rather than an outright sale of the
business, would provide a greater return on the sale
package.
The plants to be closed were viewed as troubled op-
erations whose inclusion in the sale package would de-
tract from its sales appeal. The Moultrie and Guymon
plants were to close because they operated under the
766 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
24 See fn. 16, supra.
25 At this point, the sale package began to be called SIPCO, al-
though SIPCO still did not exist as a corporation. Esmark’s continu-
ing involvement in the setting of policies for the gradually forming
entity is reflected in an August 8 memorandum of J. D. Gray:
‘‘SIPCO intends to rely on Esmark/Swift for counsel and review of
all major decisions . . . .’’
26 Anderson was adamant that the Union would not alter the mas-
ter agreement. The Union’s insistence on holding the employer to
the terms of the master agreement was matched by the Company’s
determination to get rid of it. Knight testified that early in the proc-
ess of negotiating with Anderson, the SIPCO team viewed the mas-
ter agreement as ‘‘dead’’ at Moultrie and Guymon.
27 Knight testified that he explicitly told the Union that Esmark
was going to close the plants. He amplified: ‘‘We were still Esmark.
I was Esmark, in my view. We were going to close; then I was
going to be Swift Independent Packing Company [SIPCO] . . . and
we were going to open it.’’
28 Anderson became increasingly convinced that the arrangement
was in fact unlawful after he was informed that a stock offering was
contemplated.
29 Consistent with our earlier finding that closing Moultrie and
Guymon and discharging the employees was inherently destructive
of employee rights and the court’s affirmance of that finding, we do
not now inquire into the motivation for the sham closing and the dis-
charges.
30 Thus, as Judge Cudahy noted, the prospectus ‘‘lays out in detail
what will happen and why it will happen months in advance of the
events themselves.’’ Esmark, Inc., supra, 887 F.2d at 759.
master agreement,24 which, in light of their locations
and other circumstances, meant that their labor costs
were higher than desirable. Copeland soon became
convinced that Moultrie and Guymon were viable
plants and their inclusion would increase the value of
the sales package.
On June 30, Knight told the Union that some plants,
including Moultrie and Guymon, would close Decem-
ber 28. In August, however, Union official Anderson
was informed that the Moultrie and Guymon plants
were suitable for inclusion in SIPCO25—except for the
high cost of the master agreement. Copeland asked if
the Union would modify the agreement and reduce
wages and benefits at Moultrie and Guymon; if the
Union agreed, the plants would be kept open and re-
tained in the SIPCO package. Anderson refused.26 In
July, in response to Kelly’s directions, Copeland and
others prepared a brochure on the fresh meats oper-
ation for Kelly to show to European investors. The
brochure stated that if the Union would not grant mid-
term concessions at the Moultrie and Guymon plants
they would be closed, but could be reopened shortly
after purchase with lower labor costs. In September, as
the Union maintained that the master agreement would
not be modified, Copeland and other officials told An-
derson that Esmark’s plan was to close the plants; once
Esmark sold SIPCO, the plants would be reopened
under less costly local agreements.27
Although the Union adamantly opposed modifying
the master agreement, it did not initially oppose the
close and reopen plan, always providing, Anderson
cautioned, that the arrangement was lawful.28 When
Knight and Copeland first discussed with the Union
their desire to get rid of the master agreement, Esmark
had not finally decided to offer its stock to the public.
Throughout the summer, Knight, Copeland, and Ander-
son were apparently discussing a reopening by a suc-
cessor employer, a purchaser of the business. Knight’s
testimony indicates that he had nothing to do with the
decision to substitute a stock offering for the sale of
the business and that he and Anderson worked on the
assumption that the business would be sold. Neither he
nor Copeland himself learned for certain until late Oc-
tober that Esmark was planning a public offering of
SIPCO stock. Copeland testified that ‘‘during the sum-
mer, as we were developing final plans for the com-
pany that was going to be offered for sale, the Esmark
people became more and more impressed . . . and a
couple of times they said that maybe we ought to talk
about this as a public offering.’’29
Thus, Copeland, Knight, and the SIPCO sale team
were attempting to ready the business for sale. Esmark,
on the other hand, was acting directly and alone in ar-
ranging the financial structuring of the deal that ulti-
mately became the public offering of SIC stock.
Esmark Financial Vice President Briggs had authority
to approve the deal and worked with outside under-
writers to arrive at an offering attractive to investors.
The record indicates that appeal to investors was the
paramount consideration with respect to every aspect
of the arrangements. For example, Esmark based its
decision on the debt it would take back from SIPCO
on how it would affect SIPCO’s market appeal. Becker
testified that ‘‘the overriding factor would be [the]
load on the new company. We’re attempting to create
a company that would be viable. If that company were
saddled with . . . heavy [debt] . . . it would cause
problems in trying to market the stock.’’ Becker also
prepared the prospectus used by Esmark for the stock
offering. In connection with its preparation, Becker
discussed the ‘‘labor situation’’ at the Moultrie and
Guymon plants with Knight. The prospectus, released
at the time of the stock sale, reiterated the plan for the
Moultrie and Guymon plants, but with a new twist: in-
stead of being reopened by a purchaser, the Moultrie
and Guymon plants were to be reopened by an Esmark
subsidiary:
[L]abor costs at these plants under the Master
Agreement . . . were significantly higher than
those prevailing at many plants in their respective
areas. A new subsidiary of the Company intends
to open Guymon and Moultrie shortly after com-
pletion of this offering with the objective of
achieving competitive labor costs at these facili-
ties.30
767ESMARK, INC.
31 SIPCO declared a dividend to Esmark on October 27 of the
processed meats division stock. That stock formed the new Swift &
Co. SIPCO was now complete except for the disposition of Moultrie
and Guymon.
32 Unless otherwise noted, all subsequent dates are in 1981.
33 The requests to delay the closings or to reopen the plants before
the ostensible change in ownership were motivated by Copeland and
Knight’s care to ensure that the value of the sale package—including
Moultrie and Guymon—be undiminished, or, as Knight put it, ‘‘to
launch the company in a better light.’’ As Knight testified: ‘‘the ob-
jective was not to have the plants close down or idle . . . any longer
than a week or two . . . . [W]e would lose supply of livestock sales
and that was a very great concern for John Copeland.’’ Another key
reason for keeping the plants’ idle period as short as possible was
to retain the experienced labor force, as Knight testified.
34 The closing of Guymon and Moultrie, scheduled to coincide
with the sale of the stock of the new company, had to be delayed,
because, as Becker testified, ‘‘[t]he people at Esmark were working
on preparing the documents, the registration statement, for the public
offering and had some substantial responsibility in connection with
these documents. They weren’t being prepared as fast as was origi-
nally planned.’’
35 At the end of the sale Esmark controlled about 35 percent of
SIC stock.
SIC was entirely an Esmark creation. Becker personally selected
SIC’s incorporator and instructed him as to the details of the ar-
rangement; selected SIC’s initial director; and initially drafted the
minutes of SIC’s meetings before the director’s signature was af-
fixed.
36 Esmark paid the costs of the plant closings in full. Judge
Cudahy commented that Esmark has nowhere explained this action,
‘‘which would suggest that the entire transaction [the close and open
scheme] was intended to benefit Esmark directly, and that Esmark
undertook a direct obligation to the displaced workers.’’ Esmark,
Inc., supra, 887 F.2d at 759.
37 See id. at 745 fn. 4.
38 See Swift Independent Corp., 289 NLRB 423, 430 fn. 18 (1988).
In late October, SIPCO was born; on October 24,
Swift’s name was changed to SIPCO; on October 27,
Swift’s directors resigned from the SIPCO board and
Copeland appointed a new board, including two mem-
bers designated by Kelly.31 On October 28, Anderson
was told that Moultrie and Guymon would close De-
cember 28 but would reopen in January, free of the
master agreement, after SIPCO’s stock was sold to the
public.
In December, the Union was told that SIPCO had
become a separate corporation on October 27 and that
the process of making SIPCO ‘‘truly independent’’ of
Esmark—for Esmark owned 100 percent of 6-week-old
SIPCO—would be completed in Spring 1981.32 The
Union was reminded of the plan to close the Moultrie
and Guymon plants in December 1980, all costs paid
by Esmark, and to reopen them in early 1981 ‘‘as non-
master agreement units’’ and was told that if Esmark’s
transforming SIPCO into a ‘‘publicly held independent
corporation’’ (i.e., the public offering of SIPCO stock)
took longer than expected after the plants were re-
opened, they would operate under the master agree-
ment for the duration.33
SIPCO’s maturation into a ‘‘truly independent’’ cor-
poration continued into 1981. To avoid keeping the
plants closed for a long time before they reopened,
Knight asked Anderson on December 17, 1980, to
agree to reopen the Moultrie and Guymon plants be-
fore the stock sale, rescheduled for March.34 Anderson
refused, reiterating that the close and reopen scheme
was unlawful. Ultimately, Esmark sold 65 percent of
the stock in SIC (the Esmark subsidiary holding the
corporations encompassing the fresh meats oper-
ations)35 to the public on April 22, during the week
after the Moultrie and Guymon plants were closed and
the unit employees discharged on April 17.36
The Moultrie and Guymon plants reopened in early
May as operations of ‘‘New SIPCO,’’ a wholly owned
subsidiary of SIC. For the newly hired ‘‘New Sipco’’
employees, who were virtually all unit employees dis-
charged by SIPCO, only one aspect of their employ-
ment changed after their termination and rehire: they
no longer enjoyed the terms of the master agreement.37
SIC/New SIPCO enjoyed reductions in labor costs by
virtue of the new terms of employment of about $4
million annually.
C. Conclusions and Applicable Law
As noted above, our reexamination of the record
pursuant to the remand has led us to agree with the
judge that the record does not support a finding of a
violation of Section 8(a)(5) under the direct participa-
tion theory as enunciated by the court majority. How-
ever, we have found no basis to disturb our earlier
finding that Esmark played a key causal role in the un-
lawful transactions delineated in our previous deci-
sion38 and that Esmark, through its vigorous and de-
tailed exercise of its right of ownership over Swift’s
fresh meats division, violated Section 8(a)(3) and (1)
of the Act. As discussed in section A, above, our reaf-
firmation of our earlier finding is entirely consonant
with the court’s discussion of the 8(a)(3) issue. We in-
terpret the court’s remand as requiring the Board to
clarify the ‘‘extent of Esmark’s liability’’ by dem-
onstrating (1) a basis in the factual record for a finding
that Esmark is liable under the direct participation the-
ory for an 8(a)(5) violation against ‘‘his employees,’’
viz., the unit employees at the Moultrie and Guymon
plants and/or (2) the extent of Esmark’s liability under
Section 8(a)(3). We pursue the latter course here.
The linchpin of Esmark’s argument that it should
not be held liable for the unlawful sham closing is its
insistence that it did not close the two plants directly;
they were closed by SIC/SIPCO/New Sipco. But that
argument will not shield it from liability in light of the
facts outlined above; under Board law, Esmark can be
liable for discrimination against employees of another
employer if under certain circumstances it caused that
employer to violate the Act. ‘‘The Board has consist-
ently held that an employer under Section 2(3) of the
768 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
39 International Shipping Assn., 297 NLRB 1059, 1059 (1990) (ci-
tations omitted).
40 Dews Construction, 231 NLRB 182, 182 fn. 4 (1977), enfd.
mem. 578 F.2d 1374 (3d Cir. 1978) (citations omitted).
41 Id.
42 International Shipping Assn., supra, 297 NLRB at 1059.
43 See Dews Construction, supra, 231 NLRB at 182 fn. 4 (a gen-
eral contractor held liable where it caused a subcontractor to
discriminatorily discharge an employee), and International Shipping
Assn., supra, 297 NLRB at 1059 (a company held liable where it
caused a manpower firm to discriminatorily withdraw employees
from the company’s facilities).
44 Esmark, Inc., supra, 887 F.2d at 749.
45 See id., 887 F.2d at 749.
46 Id., 887 F.2d at 749–750; see also the Board’s previous deci-
sion, Swift Independent Packing, supra, 289 NLRB at 430 fn. 15.
Act may violate Section 8(a) not only with respect to
its own employees but also by actions affecting em-
ployees who do not stand in such an immediate
employer/employee relationship.’’39 In cases where
violations of Section 8(a)(3) are alleged, ‘‘[a]n em-
ployer violates the Act when it directs, instructs, or or-
ders another employer with whom it has business deal-
ings to discharge, layoff, transfer, or otherwise affect
the working conditions of the latter’s employees be-
cause of the union activities of said employees.’’40
Under this theory, the Board has found liable, e.g., a
general contractor for pressuring a subcontractor to
discharge union employees,41 and an employer using
contract labor for informing the manpower company
that it should not send union members to the employ-
er’s facility.42
Imposition of liability on this basis does not require
a finding either that Esmark and SIC/SIPCO/New
Sipco were single or joint employers or a piercing of
the corporate veil to find that Esmark exercised its
powers of ownership improperly. Rather, Board prece-
dent specifically acknowledges and accounts for the
detrimental effect of the influence on a company’s
labor policies of certain ‘‘business dealings’’ by an
outside employer on employees’ right to be free from
discrimination for their protected activities. In this
case, where the business dealings between Esmark and
the nascent SIPCO consisted, until April 1981, of
Esmark’s right as sole owner to determine the contin-
ued existence or demise of the company, and given the
nature of those dealings as outlined above, the applica-
bility of such precedent—and the necessity for apply-
ing it—are clear.
The frequency with which employers depend on the
good will of other employers for survival necessitates
imposing liability under Section 8(a)(3) on third-party
employers under certain circumstances. A contrary
practice of limiting liability to the immediate employer
when another employer has caused it to discriminate
against its employees would place limitations on em-
ployee freedom from discrimination under Section
8(a)(3). The Board has found that the statutory purpose
of protecting employees from discrimination is served
by holding liable a general contractor for knowingly
using economic power to cause other employers to dis-
criminate.43 It follows that this purpose will be served
all the more directly by a finding of liability here,
where the unfair labor practices were initiated while
the third party, the parent company, was in the process
of determining the extent and nature of the direct em-
ployer’s continued existence. Indeed, the third party
had some involvement in negotiating the abrogated
agreement, and it found its net worth significantly and
directly enhanced by the unfair labor practices. As the
court noted in affirming the Board’s finding that the
unlawful conduct in this case was inherently destruc-
tive of employee rights: ‘‘Workers would wonder . . .
why collective representation, with its attendant costs,
is worthwhile if their employer can manipulate things
so easily by selling assets and restructuring the holding
company hierarchy.’’44 The Act permits a finding of
liability under Section 8(a)(3) outside the direct
employer/employee relationship and we find these
words especially resonant here in view of the facts
summarized above. Thus, in our view, the record and
our policy of protecting employees’ Section 7 rights
fully justify holding Esmark liable for the sham clo-
sure of the Moultrie and Guymon plants and the dis-
charge of the unit employees.
Esmark’s divestiture of Swift’s fresh meats division
followed two lines of development that converged at
the public offering on April 11: Copeland’s structuring
of SIPCO and Esmark’s marketing of the sale package.
These lines progressed unevenly over several months,
but had the key common purpose of obtaining for
Esmark the maximum return for its sale of SIPCO.
The abrogation of the master agreement at the Moultrie
and Guymon plants was one result of Esmark’s deter-
mination to augment the value of the SIPCO sale pack-
age and ultimately of its own stock. Esmark stood to
benefit by offering purchasers and, as plans changed,
investors a company that included the Moultrie and
Guymon plants—with the skilled employees, but with-
out their inconvenient statutory and contractual rights.
Esmark’s decision to reject selling the fresh meats di-
vision as a business in favor of offering SIC’s stock
altered the shape and significance of the SIPCO deal.
When Esmark perceived that its interests would be bet-
ter served by a stock sale, the closing of the plants
with the intent to reopen them outside the master
agreement became a sham,45 because, as the Board and
court held, SIPCO could not be its own successor.46
Thus, the master agreement was still applicable, and
the discharge of the employees for no other reason
than that the master agreement had been negotiated,
with Esmark’s participation, on their behalf, violated
Section 8(a)(3) and (1).
769ESMARK, INC.
47 As Judge Cudahy commented, ‘‘Esmark’s securities counsel evi-
dently required a fullness of disclosure which is now embarrassing
to its labor counsel.’’ Esmark, Inc., supra, 887 F.2d at 759.
Moreover, Esmark had anticipated the closing of the
Moultrie and Guymon plants and the discharge of the
employees to get rid of the master agreement for
months, as it had involved itself in the sham closing
from start to finish on three distinct levels. First,
Kelly’s course of conduct enmeshed Esmark. Kelly,
Esmark’s president, acting in his official capacity, gave
the initial marching orders that resulted in the sham
closing, clothed Copeland with the authority to dispose
of assets and otherwise to structure the sale package,
received reports directly from Copeland regarding the
arrangements, and represented to prospective buyers
that the Moultrie and Guymon facilities could be
closed and then reopened without the master agree-
ment. Indeed, the record demonstrates that Esmark, di-
rectly through its president, Kelly, was responsible for
the plan to maximize profits on the sale of the Swift
fresh meats division and knew that part of the plan in-
volved freeing the Moultrie and Guymon plants from
the perceived liability of the master agreement. Al-
though Copeland may have originated and promoted
the idea of keeping the Moultrie and Guymon plants
in the sale package, his determination that the way to
do so was to abrogate the contract was a direct re-
sponse to the theme played through every aspect of the
divestitures: i.e., maximize the package’s market ap-
peal. It was also a mark of his obedience to the ex-
plicit orders of his superior and business associate,
Kelly, to transform the fresh meats division into an at-
tractive saleable unit. Other options existed but were
not ultimately chosen because, as Knight testified, the
intentions and desires of SIPCO’s architects were both
emphatic and specific. They wanted to augment the
sale package with two modern, efficient plants with
modest labor costs—but not, however, with the
Moultrie and Guymon plants as they actually existed,
complete with wage and benefit rates negotiated less
than a year before.
Second, the record also demonstrates that Esmark’s
executives and its board of directors furthered
Esmark’s involvement in the Moultrie and Guymon
deal by ratifying decisions made by the SIPCO team,
both through official acts and through their course of
conduct. Kelly and the Esmark board officially passed
on all major decisions of the sales team, as Copeland’s
testimony and the minutes of the board meetings dem-
onstrate. Further, as its own written materials show,
Esmark had actual knowledge of the close and reopen
scheme and openly expressed approval of it, embraced
the plan as its own, and used it as a selling point in
its efforts to market the fresh meats division, including
a discussion of it in the sales brochures Copeland pre-
pared for prospective buyers of the business and Beck-
er prepared for the public offering of SIC stock.
Third, this executive and structural involvement was
deepened and focused by the need of Esmark’s execu-
tives, in preparing for the stock offering, to know the
facts of the SIPCO deal, including the details of the
effort to get out from under the master agreement.
Esmark, not SIPCO, offered SIC’s stock to the public,
and Esmark bore the responsibility under the securities
laws of disclosing all facts relevant to the value of the
stock. The record shows that when Esmark executives
needed to know what was going on with Moultrie and
Guymon, they asked, and were fully briefed by
Copeland’s team. Becker testified explicitly that he had
reviewed the labor situation at the Moultrie and
Guymon plants with Knight to prepare for the public
offering.47 Most importantly, Esmark executives knew
of and were involved in the deal encompassing the
sham closing both before and after the decision to use
a stock transfer to market the fresh meats division.
Thus, Esmark, more than any other entity involved in
the divestiture, was aware of and ultimately controlled
both the overall shape of the deal and the details of
the close and reopen scheme. It also was the only
party that could have acted to avert the sham closings.
Whatever reasons Esmark may have had for allowing
the close and reopen scheme to continue after the
change to a public offering, the record contains no
basis for excusing Esmark from responsibility for its
pivotal role in the unlawful acts.
In light of this overwhelming evidence, Esmark’s ar-
guments in its defense are unpersuasive. Esmark con-
tends that it had nothing to do with the close and open
decision and argues that Kelly accorded Copeland rel-
ative freedom of action. We do not accept Esmark’s
assessment of the significance of Kelly’s style of man-
agement. In Esmark’s view, the relationship between
Copeland and Kelly adds up to nothing: no authority,
no subordination, no instructions, no reporting. The
record, however, belies this view. It indicates, instead,
that Kelly clearly clothed Copeland with the authority
to act on Esmark’s behalf in preparing the fresh meats
operations for sale. Copeland’s authority to create the
new company, appoint its directors, and dispose of its
assets derived solely and entirely from Kelly’s per-
sonal appointment of him to exercise Esmark’s power
of ownership over the division. The record further
demonstrates that Kelly, having issued a mandate to
his experienced and resourceful subordinate, allowed
him to carry out his mission without ‘‘micromanag-
ing’’ his activities, but that Kelly was never out of
touch with Copeland and maintained an unflagging in-
terest and involvement in exactly what Copeland was
doing in structuring SIPCO. Further, Copeland’s own
testimony about his relationship with Kelly belies the
assertion that Kelly had no responsibility for the
SIPCO deal and those aspects of it that were unlawful
770 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
48 Copeland’s conclusory testimony in the reopened hearing to the
effect that Esmark did not influence his actions is repeatedly contra-
dicted by his earlier testimony regarding the facts of the structuring
of SIPCO and his relationship with Kelly and Esmark. See discus-
sion of his testimony, supra. Although we do not discredit or dis-
count his testimony at the reopened hearing, we accord greater
weight to his earlier attestation of the facts as he experienced them
than to his repetition of statements amounting to legal interpretations
and conclusions at the reopened hearing.
49 As the court noted, Esmark admitted in connection with its
10(b) defense, rejected by the Board and the court, that the ‘‘deci-
sion to reopen the plants and repudiate the master agreement was fi-
nally made before the installation of the new board of directors for
the entity owning the plants.’’ 887 F.2d at 747 fn. 10. Although it
notes at fn. 9 of its answering brief that ‘‘SIPCO did not assume
that name [or, we note, a separate corporate identity] until October
of 1980,’’ Esmark sees fit throughout its arguments to attribute ac-
tions taken as early as June 1980 to SIPCO. Like the court, we pre-
fer, in analyzing the record, to consult the calendar rather than to
rely on Esmark’s self-serving nomenclature.
50 Esmark, Inc., supra, 887 F.2d at 757.
51 We adhere to our earlier order and find that Esmark is jointly
and severally liable with the other respondents found to have vio-
lated Sec. 8(a)(3) and (1). Thus, we reject Esmark’ arguments to the
contrary; the cases cited in its brief are not on point. Moreover,
SIC’s entry into a settlement agreement with respect to its monetary
liability for these violations does not change our result. See Urban
Laboratories, 305 NLRB 987 (1991).
As we noted in our previous Order, interim earnings shall include
payments of closing benefits by Esmark pursuant to the terms of the
master agreement. We agree with the General Counsel that Esmark’s
backpay liability extends until the discriminatees obtain substantially
equivalent employment. On the evidence before us, we do not con-
sider the rehire of the unit employees at terms and conditions of em-
ployment markedly inferior to those they enjoyed before the unfair
labor practices to be substantially equivalent employment.
52 283 NLRB 1173 (1987).
53 If this Order is enforced by a judgment of a United States court
of appeals, the words in the notice reading ‘‘Posted by Order of the
National Labor Relations Board’’ shall read ‘‘Posted Pursuant to a
Judgment of the United States Court of Appeals Enforcing an Order
of the National Labor Relations Board.’’
under 8(a)(3).48 As Copeland expostulated, it is simply
incredible that a chief executive like Kelly would
countenance unreviewed and uncoordinated decision-
making by a subordinate, no matter how capable, in
connection with a set of business deals instrumental in
the corporation’s plans to restructure and increase its
total value. Yet such is Esmark’s theory of the case:
Copeland and SIPCO acted on their own, without ac-
countability or connection to Esmark. To the contrary,
the evidence shows only that Kelly trusted and re-
spected Copeland’s abilities, not that Copeland acted
alone. Finally, Esmark’s arguments are defeated by its
own admission that Copeland’s acts were ratified ex-
plicitly by both Kelly and the Esmark board—a step
without which Copeland’s plans could not have been
executed.49
Although we emphasize again that a finding of ‘‘di-
rect participation’’ under the court majority’s theory is
not necessary to find Esmark liable under Section
8(a)(3), and we do not find that Esmark violated Sec-
tion 8(a)(5) under the majority’s test, we find the
court’s comments in finding that 8(a)(5) liability may
be assessed against parent companies under some cir-
cumstances relevant to a consideration of Esmark’s
8(a)(3) liability. Thus, the court stated: ‘‘The NLRB
could permissibly find that a parent corporation should
not be permitted to act through its subsidiaries to the
detriment of the subsidiaries’ workforce and yet escape
liability for acts which it has mandated.’’50 We con-
clude that such a policy effectuates fundamental poli-
cies of freedom from discrimination on the basis of
union activities under Section 8(a)(3) of the Act no
less than it furthers the right to collective bargaining
under Section 8(a)(5). Thus, we believe that this policy
and our finding here that Esmark is liable for the sham
closing, discharge, and reopening scheme that discrimi-
nated against the employees at Moultrie and Guymon
furthers the fundamental purposes of the Act. At the
same time our findings are fully consistent with the
economic necessity of providing, in most cir-
cumstances, corporate shareholders with protection
from liability for the acts of the corporation.
ORDER51
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge and
orders that the Respondent, Esmark, Inc., Chicago, Illi-
nois, its officers, agents, successors, and assigns, shall
1. Cease and desist from
(a) Causing facilities in Guymon, Oklahoma, and
Moultrie, Georgia, to be closed and employees at those
facilities to be terminated for the purpose of evading
obligations under the 1979–1982 master collective-bar-
gaining agreement with the United Food and Commer-
cial Workers International Union, AFL–CIO.
(b) In any like or related manner interfering with,
restraining, or coercing employees in the exercise of
the rights granted them by Section 7 of the Act.
2. Take the following affirmative action necessary to
effectuate the policies of the Act.
(a) Make the unit employees of the Guymon, Okla-
homa, and Moultrie, Georgia plants of SIC/-
SIPCO/New Sipco, Inc. whole for any losses of earn-
ings and other benefits suffered as a result of the dis-
crimination against them as prescribed in F. W. Wool-
worth Co., 90 NLRB 289 (1950), with interest as com-
puted in New Horizons for the Retarded.52
(b) Mail a copy of the attached notice marked ‘‘Ap-
pendix’’ to all unit employees of the Guymon, Okla-
homa, and Moultrie, Georgia plants affected by this
Order at their home addresses, and post at its facilities
in Chicago, Illinois, copies of the attached notice
marked ‘‘Appendix.’’53 Copies of this notice, on forms
provided by the Regional Director for Region 13, after
being signed by the Respondent’s authorized represent-
ative, shall be posted by the Respondent immediately
771ESMARK, INC.
1 289 NLRB 423 (1988).
2 Herein called Esmark or Respondent.
3 887 F.2d 739 (7th Cir. 1989).
4 All dates are in 1980 unless otherwise noted.
upon receipt and maintained for 60 consecutive days in
conspicuous places including all places where notices
to employees are customarily posted. Reasonable steps
shall be taken by the Respondent to ensure that the no-
tices are not altered, defaced, or covered by any other
material.
(c) Notify the Regional Director in writing 20 days
from the date of this Order what steps the Respondent
has taken to comply.
APPENDIX
NOTICE TO EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government
The National Labor Relations Board has found that we
violated the National Labor Relations Act and has or-
dered us to post and abide by this notice.
WE WILL NOT cause other employers to close facili-
ties and terminate employees for the purpose of evad-
ing obligations under the 1979–1982 master collective-
bargaining agreement with the United Food and Com-
mercial Workers International Union, AFL–CIO.
WE WILL NOT in any like or related manner interfere
with, restrain, or coerce employees in the exercise of
the rights guaranteed them by Section 7 of the Act.
WE WILL make whole the employees of the
Guymon, Oklahoma, and Moultrie, Georgia plants of
SIC/SIPCO/New Sipco, Inc. for any loss of earnings
and other benefits suffered as a result of the discrimi-
nation against them, with interest.
ESMARK, INC.
Jeffrey Wolf, Esq., for the General Counsel.
Peter Woodford, Esq. and Douglas A. Darch, Esq. (Seyfarth,
Shaw, Fairweather & Geraldson), of Chicago, Illinois, for
the Respondent.
Irving M. King, Esq. (Cotton, Watt, Jones & King), of Chi-
cago, Illinois, for the Charging Party.
SUPPLEMENTAL DECISION
STATEMENT OF THE CASE
WILLIAM F. JACOBS, Administrative Law Judge. On June
29, 1988, the National Labor Relations Board issued a Deci-
sion and Order1 in this proceeding in which the Board found
that Esmark, Inc.2 violated Section 8(a)(3) and (1) of the Act
by actively participating in the decision to close Sipco’s fa-
cilities at Guymon, Oklahoma, and Moultrie, Georgia, and
terminating the employees at those facilities for the purpose
of evading obligations under the master collective-bargaining
agreement covering them and violated Section 8(a)(5) and
(1) of the Act by actively participating in the decision to ab-
rogate the provisions of the master agreement at those facili-
ties when they reopened. The Board ordered that the Re-
spondent cease and desist therefrom and take certain affirma-
tive action to remedy the unfair labor practices.
On October 6, 1989, the United States Court of Appeals
for the Seventh Circuit granted the Respondent’s petition for
review and remanded the case to the Board.3 The court re-
manded this proceeding to the Board for ‘‘further factual de-
velopment’’ concerning the Board’s ‘‘direct participation’’
theory of liability on the part of Esmark for the unfair labor
practices found against Sipco.
The Board thereafter accepted the court’s remand and after
giving due consideration to the record and to the decision of
the court of appeals decided to remand the case to me for
the purposes of considering the evidence previously adduced
and of reopening the record for further hearing on the issue
of Esmark’s liability in light of the court’s decision.
On July 30, 1990, the Board issued its order remanding
proceeding to the administrative law judge for further hear-
ing directing me to reopen the record in this proceediny and
hold further hearings for the purpose of taking additional evi-
dence consisent with the court’s opinion.
In accordance with the Board’s Order, on September 6,
1990, I reopened the record and after several delays, occa-
sioned by the filing of various motions and settlement at-
tempts, heard additional testimony on March 19, 1991, then
once again closed the hearing.
After carefully reviewing the evidence submitted during
the initial hearing, I have determined that there is nothing in
that record which was not fully considered by the Board in
its Decision and Order dated June 29, 1988, or by the Sev-
enth Circuit in its decision dated October 6, 1989.
At the reopened hearing on March 19, 1991, neither the
General Counsel nor the Charging Party called any witnesses
to offer testimony in support of the Board’s ‘‘direct partici-
pation’’ theory of liability on the part of Esmark for the un-
fair labor practices found against Sipco. Similarly, neither the
General Counsel nor the Charging Party offered any docu-
mentation which might tend to support the Board’s theory or
undermine the court’s decision which specifically found that
it was the Board’s responsibility to make explicit and com-
prehensive findings that Esmark ignored its subsidiaries’ sep-
arate decision making ‘‘paraphernalia,’’ if liability were to be
imposed on Esmark under the ‘‘diect participation’’ theory,
and that the Board’s findings on this central issue were inad-
equate.
Respondent, on the other hand, called as its sole witness,
John Copeland, who retired in March 1986 as chairman and
chief executive officer of Swift Independent Corporation.
Copeland credibly testified that prior to April 25, 1980,4 he
had been president of the fresh meats division of Swift &
Company and had the responsibility of reporting directly to
the president of Swift.
On April 25, however, a meeting was called at which, Don
Kelly, chief executive officer of Esmark advised Copeland
that both Esmark and Swift Company were getting out of the
fresh meat business, effective immediately, and that hence-
forth Copeland would be reporting directly to Kelly. Kelly
informed Copeland that in order to make it possible to sell
off the fresh meat division, Copeland should form a corpora-
772 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
5 Employee stock ownership plan. See the original decision in 289
NLRB 423 for details of the ESOP offering.
6 Herein called the Union.
tive structure with its own general counsel, personnel direc-
tor, and other officers to be sold as a unit.
After April 25, Copeland proceeded to set up the new cor-
poration as Kelly had instructed with very little or no inter-
ference from Kelly. The latter did not tell Copeland what to
do nor did he ever call him into his office to discuss
Copeland’s progress. On two occasions Copeland called
Kelly to have lunch together where he brought him current
with the progress he was making with the realignment. Occa-
sionally, Kelly would visit Swift & Company, still located in
the same building where Copeland was working, and they
would, by chance, run into each other and exchange a few
words relative to Copeland’s project. Once, Kelly visited
Copeland in his office. Other than these few meetings,
Copeland would call Kelly less than once a month to advise
him how matters were progressing. There was no formal
schedule of meetings, reports, or specific directions from
Kelly to Copeland.
During the several months following, Copeland gave Kelly
his ideas on the new entity, Sipco, but not in great detail.
Personnel to fill the various offices were discussed and
Copeland advised Kelly whom he had selected, to fill them.
The information was offered in passing, not as a report, since
Copeland and Sipco were in the process of separating and
would be gone in a few months. By that time Copeland
would be the head of Sipco and Sipco would be out from
under the Esmark umbrella.
During this period of time, Copeland was being paid by
Swift a Company’s fresh meat division and was still on its
board of directors. His only boss was Kelly. According to
Copeland’s credited testimony, Kelly never once told him
how to set up the new corporation, never gave him an order,
and never got involved.
In planning the new corporation, Copeland had to decide
which plants he would retain and which of these he would
continue in operation and which he would close. He also had
to determine how much financial aid he could expect from
Esmark and which of Swift & Company’s officers he would
be permitted to take with him to man Sipco’s management.
On this latter problem, he worked with Esmark’s corporate
personnel manager, Bob Palenchar, who had the final deter-
mination on whether or not to grant Copeland’s requests.
About this time, consideration as being given to the cre-
ation of a ESOP5 whereby stock in the newly created cor-
poration would be offered to Sipco employees. Before pro-
ceeding with the ESOP plan, however, it would be necessary
to discuss the matter with the Union.6 To this end, on June
10 the ESOP plan was offered to the Union. On June 23,
however, it was rejected.
The morning after the Union rejected the ESOP plan,
Kelly called a management meeting at which he advised
Copeland that he was closing down the fresh meat operations
and would be giving notice to the Union to this effect, in ac-
cordance with the labor agreement then in effect.
That afternoon, however, after discussing the situation
with the staff of the fresh meat division, Copeland, for the
first time, informed Kelly of his idea of creating an entirely
new corporation to be sold as a unit; the new corporation to
include certain profitable plants while excluding the less
profitable ones. This idea was solely Copeland’s with input
from members of his fresh meat division but none from
Kelly or any member of Esmark management. According to
Copeland he had not sought nor received advice from the
Swift & Company staff outside the fresh meat division in
formulating his plan. When Copeland presented his plan to
Kelly, the latter determined that it had merit. He called in
his chief financial officer and the president of Swift & Com-
pany, Joseph Sullivan, and it was decided that Copeland
should pursue his plan and that the closing notices should not
be sent out as had been decided earlier that day.
After Kelly’s decision, on June 4, to permit Copeland to
pursue his plan, Copeland was given free reign to decide
which fresh meat facilities to keep open and which to close.
On June 30, the announcement of plant closings was sent to
the Union. This announcement reflected the decisions of
Copeland and his staff from the fresh meat division. At the
time the announcement was sent, it was not Copeland’s in-
tention to reopen any of the facilities listed and it had not
yet been decided whether or not the new company would
take the closed Guymon and Moultrie plants. Copeland testi-
fied, however, that he told his staff that if Esmark would let
him have these two plants without any additional cost, Sipco
should take them because they had value. Copeland testified
that, in the back of his mind, he felt that he might be able
to open them on a competitive basis in the future and, if not,
they could always be sold. It was Copeland’s understanding
that the notice of closing with respect to Guymon and
Moultrie could always be revoked. Esmark made no decision
on behalf of Sipco with respect to these matters. Copeland
did not report to Kelly his decision to close Guymon and
Moultrie but eventually Kelly became aware of Copeland’s
plan regarding these plants.
The notice of the closure of Guymon and Moultrie was
initially a 6-month notice but there were several extensions.
Meanwhile, Copeland and his staff changed their plans with
respect to these plants. They decided that the two plants fit
into Sipco’s ‘‘long-range scheme of things’’ and that they
should do everything they could to retain these plants and to
try to open them on a competitive basis and make them part
of the new company. In making this decision neither
Copeland nor any member of his staff consulted with Kelly
or with anybody else at Esmark. Nor did they ask for advice
from them on this matter. Neither Kelly nor anyone else in
Esmark’s corporate family told Copeland to take Guymon
and Moultrie into the new company; nor did they exert any
pressure or influence on them to do so. Indeed, according to
Copeland, neither Kelly nor anyone else at Esmark ever ex-
pressed any interest to him on the subject of whether Sipco
should or should not take Guymon and Moultrie into the new
company. Likewise they expressed no interest in Sipco’s de-
cision as to which plants to close or keep open. These were
totally Sipco’s decision.
While still in the process of deciding whether or not to
keep the Guymon and Moultrie plants, Copeland met several
times with representatives of the Union in order to keep them
informed of progress being made toward the creation of the
new company and to seek relief at certain noncompetitive
plants including Guymon and Moultrie which were under the
master agreement. The Union, however, was adamant about
no granting relief during midterm of the contract.
773ESMARK, INC.
7 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.
Faced with the unyielding position of the Union, Copeland
and his staff determined, nevertheless, to keep Guymon and
Moultrie but to close them, then later reopen them after
Sipco had been split off from Swift & Company and Esmark
and was under new ownership. Copeland credibly testified
that the decision to close and later reopen Guymon and
Moultrie was made solely by him and his staff without con-
sultation with anyone else. Kelly did not tell Copeland to re-
open the two plants, nor did he or anyone else from Esmark
exert any pressure on Copeland to do so. Copeland did not
seek advice rom Kelly or others at Esmark as to whether he
should or should not reopen Guymon and Moultrie or as to
when he should do so; nor did he later seek approval of his
decisions on these matters.
Copeland testified that he and Sipco’s staff decided that
the terms and conditions of employment established at
Guymon and Moultrie should be other than those contained
in the master agreement, and determined what those terms
and conditions of employment should be. Neither Kelly nor
anyone from Esmark ever tried to tell Copeland what terms
and conditions to establish at the two plants; nor did they tell
Copeland to avoid applying the terms of the master agree-
ment. No consultation took place between Sipco management
and Kelly or Esmark management on these subjects.
Analysis
Copeland’s testimony covered two general areas. The first
consisted of a chronological description of events reflecting
the circumstances involved in the establishment of Sipco.
The second concerned the lack of involvement of Kelly and
Esmark’s management in Copeland’s and Sipco’s decisions
to establish a new independent corporation, to take posses-
sion of certain fresh meat plants, to continue to operate cer-
tain of these plants and to close others, to close and later to
reopen certain plants including Guymon and Moultrie and, fi-
nally, to establish new terms and conditions of employment
at these plants different than those provided by the master
agreement.
Copeland’s testimony concerning the chronology of events
was not exhaustive and was, quite clearly not meant to be.
Rather, it was a mere synopsis of the testimony offered by
Copeland and other witnesses at the original hearing which
was exhaustively covered in the decision of the administra-
tive law judge, in the decision of the Board and in the
Board’s presentation before the Seventh Circuit. This testi-
mony was offered only as a backdrop to Copeland’s testi-
mony concerning the involvement of Kelly and Esmark in
the decisions of Copeland and Sipco. As such, it contained
nothing new and can therefore be legitimately disregarded in
the search for additional evidence to support the Board’s de-
cision in which it found Esmark in violation of the Act.
With regard to Kelly’s and Esmark’s involvement in the
actions take by Sipco, Copeland testified, as noted above,
that neither Kelly nor Esmark had very much to do with the
structuring of Sipco. They had no input into which of the
plants would be part of Sipco, which would remain open,
and which would be closed. They had nothing to do with the
decision to close Guymon and Moultrie or with the decision
to reopen them again. Finally, they had nothing to do with
the decision to refrain from applying the terms and condi-
tions of the master agreement at Guymon and Moultrie nor
with the establishment of the new terms and conditions im-
plemented there by Sipco.
In summary, after carefully reviewing the record evidence
presented at the initial hearing and giving careful consider-
ation to that which was offered at the supplementary hearing,
I conclude that, as a result of these supplementary proceed-
ings, there has been no ‘‘further factual development’’ con-
cerning the Board’s ‘‘direct participation’’ theory of liability
on the part of Esmark for the unfair labor practices found
against Sipco. Consequently, I recommend dismissal of the
complaint.
CONCLUSIONS OF LAW
1. Respondent is an employer engaged in commerce within
the meaning of Section 2(2), (6), and (7) of the Act.
2. The Union is a labor organization within the meaning
of Section 2(5) of the Act.
3. The Respondent did not, as alleged in the complaint,
engage in conduct violative of Section 8(a)(1), (3), and (5)
of the Act.
On the basis of these findings of fact and conclusions of
law, and on the entire record, I issue the following rec-
ommended7
ORDER
The complaint is dismissed in its entirety.