Island Architectural Woodwork, Inc. and Verde Demountable Partitions, Inc, Alter Egos, (2016)

Docket Number:29-CA-124027
 
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NOTICE: This opinion is subject to formal revision before publication in the bound volumes of NLRB decisions. Readers are requested to notify the Executive Secretary, National Labor Relations Board, Washington, D.C. 20570, of any typographical or other formal errors so that corrections can be included in the bound volumes.

Island Architectural Woodwork, Inc. and Verde Demountable Partitions, Inc., Alter Egos and Northeast Regional Council of Carpenters. Case 29–CA–124027

August 12, 2016

DECISION AND ORDER

BY CHAIRMAN PEARCE AND MEMBERS HIROZAWA AND MCFERRAN

On May 8, 2015, Administrative Law Judge Raymond

P. Green issued the attached decision. The General Counsel and the Charging Party Northeast Regional Council of Carpenters (“the Union”) each filed exceptions and a supporting brief. Respondents Island Architectural Woodwork, Inc. (“Island”) and Verde Demountable Partitions, Inc. (“Verde”) each filed an answering brief.

The National Labor Relations Board has delegated its authority in this proceeding to a three-member panel.

The Board has considered the decision and the record in light of the exceptions and briefs and has decided to affirm the judge’s rulings,1 findings,2 and conclusions only to the extent consistent with this Decision and Order.

This case centers on the relationship between Respondents Island and Verde. The General Counsel and Charging Party except to the judge’s finding that Island and Verde are not alter egos and the resultant findings that Verde did not violate Section 8(a)(5) and (1) of the Act by failing to apply the terms of the collectivebargaining agreement covering Island’s bargaining unit to employees performing bargaining-unit work at Verde, and that Island did not violate Section 8(a)(5) and (1) when it insisted in successor contract negotiations that the Union agree to exclude Verde’s employees from the unit. For the reasons discussed below, we reverse the judge and find that the Respondents are alter egos and that they violated the Act, as alleged.

1 We deny the General Counsel’s exception that the judge erred by failing to rule on the General Counsel’s motion to correct the record; that motion was granted.

2 The Union has implicitly excepted to some of the judge’s credibility findings. The Board’s established policy is not to overrule an administrative law judge’s credibility resolutions unless the clear preponderance of all the relevant evidence convinces us that they are incorrect. 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.

  1. FACTUAL BACKGROUND

    A. The Creation of Island and its Operations

    Island produces custom wood cabinetry and other millwork for financial institutions. Edward Rufrano and Roger Stevens co-founded Island in 1993. Since 1995, the Union has represented Island’s production employees and installers. At the time of the February 2015 hearing in this case, Island was owned by Rufrano, Stevens’ sons, and Angelo DeMarco. Rufrano served as president and CEO, and DeMarco was his second-in-command. Rufrano, DeMarco, Stevens, and Stevens’ sons jointly owned the three buildings where Island historically operated: the “main,” “back,” and “side” buildings, all of which adjoined a parking lot.

    In 2007, Island started producing custom wood office partitions. Island obtained about 65 percent of its work through a large architectural firm (“the Firm”).3 The Firm typically designed products for a customer, and would then hire Island to manufacture the product. The Firm asked Island to mass-produce a particular version of its custom wood partitions, known as the “Island Verde Green Demountable System.” The idea was not feasible, however, due to Island’s high production costs. Nonetheless, to accommodate the Firm, Island continued to produce the desired partitions on a custom basis. When the Firm continued to press Island to mass-produce the demountable partitions, Rufrano contacted three companies about selling the demountable partition line in order to accommodate the Firm and to recoup Island’s investment in designing and manufacturing the product. Ultimately, however, he was unsuccessful in finding a suitable purchaser.

    B. The Creation of Verde and its Operations

    For some time, Jeffrey Brite, a former Firm employee, had discussed with Rufrano ways in which Brite could become personally involved with the demountable partition business. The idea to create Verde arose from these conversations, but Rufrano did not want an ownership stake in the new venture. At some point, Rufrano’s daughter, Tracy D’Agata, became involved.4 Although D’Agata worked as a project manager for Island, she was not particularly knowledgeable about the partition line’s production processes. Accordingly, Rufrano, DeMarco, and an Island foreman informally agreed to assist with Verde’s operations, an understanding that the Respondents later codified in written agreements. Brite then pur

    3 The parties stipulated that the name of the Firm would remain confidential.

    4 Rufrano testified that D’Agata had worked with the Firm for years in her capacity as an Island project manager and that it was thought that she would be a “very good face of Verde.”

    sued other investors to join him and D’Agata, leading to Verde’s commencement of operations in October 2013. At the time of the hearing, D’Agata and her sister Jessica Ondrush, a long time bookkeeper at Island, each owned 32 percent of Verde; the Firm, Brite, and Rufrano’s friend Allan Schatten owned the remaining 36 percent. D’Agata, Ondrush, Brite, and Schatten were directors, with D’Agata serving as president and Ondrush as secretary and treasurer.

    Prior to the formation of Verde, Island began investigating ways to maximize its manufacturing efficiency. As a result of these efforts, the bulk of the work that had been taking place in the back building was moved to the main building. By October 2013, only a handful of Island’s bargaining-unit employees were still working in the back building. At some point in October, Island transferred the remaining bargaining-unit employees to the main building. Later that month, Verde began operations out of the back building with two employees who had performed bargaining-unit work for Island, as well as several of Island’s non-unit personnel, including D’Agata, Ondrush, a foreman, and an engineer who had helped design the demountable partitions. Verde also hired several production employees who had never worked for Island.

    C. The Relationship Between Verde and Island Although Verde began operations in October 2013, the agreements formalizing Verde’s relationship with Island were not signed until much later, in most cases as long as 1 year afterward. It was agreed that Verde would acquire the demountable partition business with the intent to mass-produce those partitions. For its part, Island continued custom-producing other types of wood partitions and other millwork, as well as providing assistance and expertise to Verde, as further described below. On October 28, 2014, the Respondents produced, pursuant to the General Counsel’s investigatory subpoena, the documents structuring the spin-off. All of these documents were signed by Rufrano and D’Agata. All but one are dated the day before the Respondents produced them, and all but one contain backdating provisions.5 The record establishes that the agreements were drafted some time prior to October 2014, but were not signed until October 27. Island asserts that the delay in drafting and

    5 The asset purchase agreement, equipment lease, transitional services agreement, mutual supply agreement, promissory note, and officer’s certificate are all dated October 27, 2014, and are either expressly backdated to October 1, 2013, or expressly reference another agreement that is backdated. The assignment and assumption agreement is dated October 27, 2014, and backdated to July 30, 2013. The lease of the back building is dated June 1, 2014, and does not include a backdating provision.

    DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD

    signing the agreements was a result of its attempts to make the partitions at a profit before ultimately deciding to sell that part of its business.

    Pursuant to these agreements, Verde purchased the intangible wood partition assets and leased the back building and equipment therein from Island.6 As a condition of the asset transfer, the Respondents agreed to provide each other with various services and supplies through December 31, 2015. In particular, Island agreed to assist Verde with management, operations, estimating, back office functions, drafting, engineering, and purchasing. Island also agreed to provide Verde with sales training, trucking, production management functions, equipment repairs and maintenance, and warehousing. Island further agreed, among other things, to manufacture veneer panels; prime, face, press, and sand doors; and manufacture moldings for Verde.7 Verde, in turn, agreed to provide Island with various manufacturing and related services, including partition, door, hardwood, and molding production and warehousing materials.8

    D’Agata, Ondrush, Brite, and the Firm contributed an unspecified amount of financial assistance to help start Verde. Although Rufrano did not directly provide his daughters with start-up funds, the lengthy grace periods in the asset agreement and equipment lease with Island amounted to hundreds of thousands of dollars in deferrals to Verde. Also, Verde was able to operate in the back building, which Rufrano partially owns, rent-free for some 8 months.

    From its inception, Verde has worked jointly with Island to produce wood partitions.9 Because of lowerthan-expected demand, Verde has not yet begun to massproduce the partitions as desired by the Firm, so the pro

    6 Verde agreed to pay Island $750,000 for the intangible...

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