NEW YORK PARTY SHUTTLE, L.L.C., doing business as ONBOARD TOURS; WASHINGTON DC PARTY SHUTTLE, L.L.C., doing business as ONBOARD TOURS; ONBOARD LAS VEGAS TOURS, L.L.C., doing business as ONBOARD TOURS; NYC GUIDED TOURS, L.L.C.; PARTY SHUTTLE TOURS, L.L.C. v. NATIONAL LABOR RELATIONS BOARD
No. 20-61072
United States Court of Appeals for the Fifth Circuit
November 22, 2021
versus
NATIONAL LABOR RELATIONS BOARD,
Respondent/Cross-Petitioner.
Petition for Review of an Order and Decision of the National Labor Relations Board NLRB No. 20-61072
Before CLEMENT, SOUTHWICK, and WILLETT, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
After New York Party Shuttle, LLC (“NYPS“) fired Fred Pflantzer for attempting to unionize, the NLRB held an unfair labor practice proceeding. The Board concluded that NYPS committed an unfair labor practice and ordered NYPS to reinstate Pflantzer and make him whole. NYPS appealed the Board‘s liability finding but failed to file an opening brief;
I.
NYPS provided sightseeing bus tours in New York City. In October 2011, NYPS hired Fred Pflantzer to serve as a tour guide. As a tour guide, Pflantzer conducted three to four tours a week, with each tour lasting five to six hours. He was paid $20 an hour and approximately $35 in tips. Pflantzer also created his own tour company, New York See Tours, which he operated exclusively on Saturdays that he was not working for NYPS. In February 2012, NYPS terminated Pflantzer.
Following Pflantzer‘s termination, the NLRB held an unfair labor practice proceeding. According to NYPS, Pflantzer was an independent contractor who was discharged after management learned that he was operating a competing business. The NLRB rejected NYPS’ version of events and instead determined that Pflantzer was an employee who was fired for talking to fellow employees about unionizing in violation of
On its unfair labor practices appeal, NYPS failed to file its opening brief. The court consequently entered default judgment against NYPS, thereby affirming the Board‘s 2013 merits order. It then denied NYPS’
During the compliance proceeding phase, the Board‘s regional director issued a compliance specification. The specification calculated the backpay NYPS owed Pflantzer. In the third amendment to the compliance specification, the director asserted that New York City Guided Tours, LLC (“NYCGT“), OnBoard Las Vegas Tours, LLC (“OBLV“), Party Shuttle Tours, LLC (“PST“), and Washington DC Party Shuttle, LLC (“DCPS“) (collectively, “non-NYPS petitioners“) were one single employer with NYPS.1 In response, petitioners filed a motion challenging, among other things: (1) the board‘s jurisdiction over the non-NYPS petitioners; and (2) the validity of the 2013 merits order given the holding in NLRB v. Noel Canning, 573 U.S. 513, 519 (2014). The Board rejected petitioners’ challenge, dismissed petitioners’ attempts to relitigate the underlying merits, and found that it lacked jurisdiction to modify the 2013 merits order. The compliance proceeding then went to a hearing before an ALJ.
At the hearing, the ALJ found that the backpay calculation was reasonable, petitioners constituted a single employer, and Pflantzer reasonably mitigated his damages. The Board affirmed the ALJ‘s rulings,
II.
Congress afforded the NLRB broad discretion, with limited judicial review, when fashioning backpay awards. See Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 216 (1964). As such, the court should not disturb an order “unless it can be shown that the order is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the Act.” Id. (quoting Va. Elec. & Power Co. v. NLRB, 319 U.S. 533, 540 (1943)). So long as the Board “was not arbitrary in the selection of [its backpay] formula, its choice may not be rejected.” NLRB v. Charley Toppino & Sons, Inc., 358 F.2d 94, 97 (5th Cir. 1966).
Despite the discretion afforded to the Board, it does not receive a blank check. The court must ensure that the Board‘s factual findings are supported by “substantial evidence on the record considered as a whole.” NLRB v. McCullough Env‘t Servs., Inc., 5 F.3d 923, 927 (5th Cir. 1993) (citing NLRB v. Delta Gas, Inc., 840 F.2d 309, 311 (5th Cir. 1988)). When findings of fact concern credibility determinations, however, the court defers to the Board and should only disregard a determination if it is contradictory, “based on an inadequate reason, or no reason at all.” Id. at 928 (quoting NLRB v. Moore Bus. Forms, Inc., 574 F.2d 835, 843 (5th Cir. 1978)).
Because the Board‘s single employer finding necessarily affects our Noel Canning analysis, we review that finding first.2 We hold that substantial evidence supports the Board‘s single employer finding.
Several nominally separate business entities are considered “to be a single employer where they comprise an integrated enterprise.” Alcoa, Inc. v. NLRB, 849 F.3d 250, 255 (5th Cir. 2017) (quoting S. Prairie Constr. Co. v. Loc. No. 627, Int‘l Union of Operating Eng‘rs, 425 U.S. 800, 802 n.3 (1976) (per curiam)). “To determine whether several entities are a single employer within the meaning of the Act, the Board looks to four factors: (1) common ownership; (2) interrelation of operations; (3) common management; and (4) centralized control of labor relations.” Id. (citing Radio & Television Broad. Technicians Loc. Union 1264 v. Broad. Serv. of Mobile, Inc., 380 U.S. 255, 256 (1965) (per curiam)). No one factor is controlling, and all factors do not need to be present, but the last three factors are considered the most important. Id.; see also Oaktree Cap. Mgmt., L.P. v. NLRB, 452 F. App‘x 433, 438 (5th Cir. 2011) (per curiam) (citing Covanta Energy Corp., 356 NLRB 706, 726 (2011)) (same). Ultimately, single employer status “depends on ‘all the circumstances of the case’ and is characterized as an absence of an ‘arm‘s
A.
Substantial evidence supports the Board‘s finding that there is common ownership and financial control among petitioners. As the Board found and the record confirms, PST owns 100% of OBLV and NYCGT; 92.46% of NYPS; and nearly 99% of DCPS. Furthermore, Charles Thomas Schmidt—the CEO or former CEO of every involved company—owns 69.44% of Infinity Trade Capital, which respectively owns over 70% of PST. The Board also found that Schmidt exercises “almost unfettered control over the financial aspects of all five entities.” Records demonstrate hundreds of banking transactions and expenditures through PST. Similarly, the Board found a significant amount of outstanding monetary loans from PST to DCPS, NYCGT, NYPS, and OBLV absent any formal loan agreements.
Government‘s exhibit 73 confirms the Board‘s finding of common financial control—although the Board itself did not rely on such evidence. In 2012, for instance, PST had a total of $866,581.79 in outstanding loans to petitioners. In 2013, those outstanding loans rose to $1,245,892.44. And, by 2016, PST‘s outstanding loans rose to a total of $3,189,661.95. The Board concluded that its findings evidenced a lack of an arm‘s length relationship between petitioners, which, in turn, evidenced common ownership and financial control. Thus, notwithstanding petitioners’ claim that “no two petitioners have common ownership,” — which Schmidt‘s own testimony at the compliance proceeding directly contradicted—the Board‘s finding of
B.
The Board also found an interrelation of operations between all five petitioners, which substantial evidence supports. To determine whether there is an interrelation of operations, the Board considers, among other things, “whether the subject entities hold themselves out to the public and employees as a single business and whether the [entities] actually deal with one another at arm‘s length.” Alcoa, 849 F.3d at 256 (citations omitted).
In support of its determination that there is an interrelation of operations between petitioners, the Board found that:
- Company buses from NYPS, DCPS, and even OBLV were transferred between companies during busy seasons;
- A PST employee established a call center in Houston to accept calls from NYPS, DCPS, and OBLV customers;
- The same call center was used to monitor sales agents and provide training;
- The OnBoard website included information and promotions for NYPS, DCPS, OBLV, and NYCGT;
- Less than arm‘s length loans were routinely transacted between petitioners;
- Policies, procedures, employee conduct guides, training, and even uniforms overlapped between NYPS, DCPS, and OBLV; and
All petitioners shared the same bookkeeping company, which was wholly owned by Schmidt.
The record substantiates these findings.
Petitioners disagree with the Board‘s findings and argue that “multiple witnesses consistently testified that there was no interrelation of operations.” Petitioners’ arguments are unavailing. For one, petitioners themselves stipulated that they “engaged in consistent, significant transfers of funds of at least $50,000 per year.” And, though not discussed in the Board‘s order, there is a litany of additional evidence that supports the Board‘s conclusion. As general counsel argued, and the record confirms: “Employees have onboardtours.com email addresses“; “Buses in New York and Washington use the OnBoard Tours logo, as do documents setting out employee policies and concierge commissions“; and “NYPS, [DCPS], and [NYCGT] all use Schmidt‘s Houston address as their business or mailing address.” Contrary to petitioners’ arguments, substantial evidence supports the Board‘s finding.
C.
The Board similarly found that a common cast of characters, who operate on a “readily fungible” team, manage the companies. The Board made the following record-supported findings. Schmidt, the manager and designated CEO of PST, is also the CEO of OBLV, DCPS, NYCGT, and the former CEO of NYPS. Mengel, an investor in PST, worked in management positions for OBLV and DCPS. Lockhart worked for DCPS and holds a general power of attorney for NYCGT. Lockhart also served in a managerial
Petitioners disagree with the Board‘s findings and assert that “voluminous” witness testimony—from the likes of White, Moskowitz, Lockhart, Cook, and Schmidt—warrants a contrary finding. According to petitioners, the witnesses testified that they were each responsible for operations at their own companies; thus, there could not have been common management. Not so. As we have previously held, “day-to-day control of operations is not required to find that two entities are a single employer under the NLRA.” Alcoa, 849 F.3d at 257 (citing Oaktree Cap., 452 F. App‘x at 442). Thus, even if it is true that there is some unique day-to-day management for each entity, petitioners cannot escape the otherwise overwhelming evidence that there is a common team overseeing operations. See Id. at 258 (“[O]verwhelming control is not required.“) (first citing Spurlino Materials, 357 NLRB at 1516 (holding that there were interrelated operations even though the involved entities were “created and licensed separately, [were] geographically removed and serv[ing] different markets in different states, and ha[d] their own personnel and equipment“); then citing Royal Typewriter Co., 209 NLRB 1006, 1010 (1974)
D.
While the aforementioned factors are relevant to determining whether petitioners constitute a single employer, “centralized control of labor relations is of particular importance.” Alcoa, 849 F.3d at 258 (quoting Oaktree Cap., 452 F. App‘x at 438). “The fundamental inquiry is whether there exists overall control of critical matters at the policy level, not whether there is control over day-to-day labor decisions.” Id. (citation and internal quotation marks omitted). Substantial evidence once again supports the Board‘s findings that there is centralized control over critical policy matters.
According to petitioners, “[e]ach company recruited, hired, trained, set salaries, disciplined, and fired its own employees with complete autonomy from the other companies.” The record tells a different story. For example, the record evinces that Schmidt was involved in hiring, promoting, and reassigning managers at PST, DCPS, NYPS, OBLV, and NYCGT, including Cook, Lockhart, and White. To be sure, the Board noted that the local management teams generally hired tour guides and drivers. But the record reflects that Schmidt was still involved in disciplining and rehiring some of the same drivers and guides. Aside from Schmidt‘s involvement, the record reveals a centralized process for hiring, customer service, behavioral policies and procedures, and even uniform requirements. The Board also cited the Houston call center as evidence of centralized control of labor
IV.
Petitioners next argue that the underlying 2013 merits order is void ab initio because of the Supreme Court‘s holding in Noel Canning. We disagree.
On January 4, 2012, then-President Obama appointed three individuals to the National Labor Relations Board, invoking the Recess Appointments Clause. Noel Canning, 573 U.S. at 520. After the appointment, a three-member panel of the newly configured Board found that Noel Canning, a Pepsi-Cola distributor, committed an unfair labor practice. Id. Noel Canning appealed, arguing that the three Board members were unconstitutionally appointed because the Senate was convening every
After interpreting the scope of the phrases “the recess of the Senate” and “vacancies that may happen during the recess of the Senate,” and calculating the length of the Senate‘s recess, the Court held that the President appointed the three Board members during pro forma sessions, not periods of recess. Id. at 550. The Court consequently concluded that the President violated the Recess Appointments Clause and that the Board lacked a quorum, nullifying its prior order. Id. at 557; see also New Process Steel, L.P. v. NLRB, 560 U.S. 674, 687-88 (2010) (holding that the Board cannot exercise its powers absent a lawfully appointed quorum).
Petitioners claim that Noel Canning necessarily invalidates the 2013 merits order because the same unconstitutionally appointed Board issued the order. The Board issued its 2013 merits order on May 2, 2013. The court granted default judgment against NYPS on November 19, 2013. See New York Party Shuttle, LLC v. NLRB, No. 13-60364 (5th Cir. Nov. 19, 2013) (per curiam). The Supreme Court handed down Noel Canning on June 26, 2014. Thus, as an initial matter, petitioners are correct that the Board acted without authority. The Board undoubtedly lacked a quorum with only two constitutionally appointed members. See
Unlike the respondent in Noel Canning, however, petitioners did not immediately assert this constitutional defect. Rather, petitioners waited until the compliance phase of the bifurcated proceedings to challenge a procedural issue with the liability findings. Now, some seven years later, petitioners assert that this court acted without jurisdiction when entering default judgment, that they did not waive their Appointments Clause objection, and that they are not bound by res judicata. Thus, they (implicitly) argue that we should recall our 2013 mandate. We decline to do so. See 5TH CIR. R. 41.2 (stating that the court will only recall an issued mandate to “prevent injustice“); see also Calderon v. Thompson, 523 U.S. 538, 550 (1998) (stating that the power to recall a mandate is to be used only as a “last resort,” and should be “held in reserve against grave, unforeseen contingencies“).
Petitioners’ arguments fly in the face of well-settled law. Take petitioners’ jurisdictional argument first. While Noel Canning was pending before the Supreme Court, we were tasked with determining whether we needed to consider the constitutionality of a Board member‘s appointment for jurisdictional purposes. D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 351 (5th Cir. 2013). We held that we did not. Id. Pursuant to
The same jurisdictional principle applies here, though for slightly different reasons. Here, the Board did not file a petition to enforce an order under
Similarly, petitioners’ argument that they could not have waived an Appointments Clause objection is without merit. In Freytag v. C.I.R., 501 U.S. 868, 870 (1991), the Supreme Court was asked “whether the authority that Congress has granted the Chief Judge of the United States Tax Court to appoint special trial judges transgresses our structure of separated powers.” Before holding that there was no separation of powers issue, the Court first addressed whether the petitioners waived their right to challenge the constitutional propriety of § 7443A—the relevant grant of appointment power—by, among other things, failing to timely object. Id. at 878.
To answer this question, the Court began by considering the structural and political roots of the Appointments Clause. The
NYPS filed its petition for review on May 31, 2013. After it failed to file an opening brief, the court entered default judgment, affirming the Board‘s 2013 merits order on November 19, 2013. NYPS never raised an Appointments Clause challenge before the court. In fact, in its December 20, 2013 proposed brief—which NYPS filed with its subsequent motion for reconsideration—it made no mention of the Appointments Clause. There is no excuse for NYPS’ failure to raise a constitutional defect argument at that time.
As of December 3, 2013, the Board‘s constitutionality was widely disputed with multiple pending lawsuits alleging an Appointments Clause violation. See, e.g., D.R. Horton, 737 F.3d at 351 (Dec. 3, 2013); NLRB v. RELCO Locomotives, Inc., 734 F.3d 764, 793-96 (8th Cir. Aug. 20, 2013); NLRB v. Enter. Leasing Co. Se., LLC, 722 F.3d 609, 632 n.14 (4th Cir. Jul. 17, 2013); GGNSC Springfield LLC v. NLRB, 721 F.3d 403, 406-07 (6th Cir. Jul.
And, if D.R. Horton and Freytag were not enough, res judicata also counsels us against entertaining petitioners’ Noel Canning challenge. “[U]nder the doctrine of res judicata, a judgment ‘on the merits’ in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action.” Lawlor v. Nat‘l Screen Serv. Corp., 349 U.S. 322, 326 (1955); see also Nilsen v. City of Moss Point, 701 F.2d 556, 559 (5th Cir. 1983) (en banc) (discussing the same preclusive effect). “[A] default judgment is a judgment ‘on the merits’ for purposes of res judicata.” Jones v. U.S. ex rel. Farmers Home Admin., No. 94-60391, 1995 WL 29363, at *1 (5th Cir. Jan. 20, 1995) (citing Moyer v. Mathas, 458 F.2d 431, 434 (5th Cir. 1972)). Four conditions must be established for res judicata to apply: (1) the parties in the present action must be the identical parties, or parties in privity with one another, from the prior action; (2) a competent court must have rendered a judgment in the prior action; (3) the prior action must have concluded with a final judgment on the merits; and (4) the same claim or cause of action must now be raised in the present action. Id.
The court already affirmed the Board‘s 2013 merits order; thus, petitioners are precluded from relitigating, even indirectly, the default
Further, this court, which had appellate jurisdiction over the 2013 merits order, rendered judgment. That judgment was final and on the merits. Finally, the same claim is being asserted on appeal: namely, the claim that the 2013 merits order is unenforceable. This time, rather than attacking the merits, petitioners allege that because the constitutional process for appointing the Board members was disregarded, the order must be void. But that is just another issue that is directly subsumed within their main cause: nullifying the order. Petitioners cannot now litigate this issue when it could have been raised on the initial appeal. See Federated Dep‘t Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981).
V.
Finally, we consider the validity of the backpay award itself. The Board ordered petitioners to pay Pflantzer $91,912 in backpay, plus interest compounded daily, accrued to the date of payment, and minus tax withholding required by law. We affirm the Board‘s order, save the portion
A.
Pursuant to
B.
We turn first to petitioners’ argument that the Board abused its discretion by selecting the comparator method as its backpay formula. General counsel—through a compliance officer—consulted the Board‘s Compliance Casehandling Manual (“Compliance Manual“) and selected the comparable-employee formula, or comparator method, to calculate gross backpay. The officer chose this formula to account for the seasonal considerations and fluctuating hours that characterize the tour business. While the Board recognized that the comparator method produces an average, “not an exact science,” it nonetheless accepted the method—one of the three basic methods the Compliance Manual endorses—as a reasonable means of approximating what petitioners owed Pflantzer. The Board‘s adoption of the comparator method was not arbitrary, and neither was its choice of comparator.
When choosing a comparator, the compliance officer “looked at other tour guides at NYPS with similar hours during the same period as Pflantzer and concluded that Edwin Jorge [] had similar hours to Pflantzer in 2014.”
C.
Petitioners’ next argument concerns Pflantzer‘s mitigation of damages. Once general counsel proves a backpay calculation, the burden shifts to the employer to mitigate damages, including proving that the employee failed to make a good-faith effort to mitigate losses. See Miami Coca-Cola Bottling Co., 360 F.2d at 575. If an employer can prove that the employee incurred a willful loss of earnings, then the employee is not entitled to backpay. See Phelps Dodge Corp., 313 U.S. at 198. Citing this burden-shifting framework, the Board found that petitioners “failed to satisfy [their] ultimate burden of showing that Pflantzer failed to mitigate damages.” Petitioners appeal that finding, but we find no merit in their argument.
D.
Next, petitioners argue that the Board abused its discretion when it awarded Pflantzer backpay for the period of October 2014 through 2018. Because we agree with petitioners that the Board engaged in impermissible speculation when calculating backpay for this period, we reverse and remand on this issue.
The facts here are straightforward. Faced with no tour guide hour data after October 20, 2014, general counsel calculated Jorge‘s hours from October 2013 to September 2014 and then pasted those hours into the period
While the Board is entitled to some discretion in calculating backpay, it is not permitted to arbitrarily calculate backpay. Charley Toppino, 358 F.2d at 97. But that is exactly what it did here. Consider the compliance officer‘s testimony in this case. The compliance officer was explicitly asked why it was important to have comparator data that spanned the entirety of the backpay period. Citing the Board‘s Compliance Manual, she stated:
I reviewed the compliance manual first, regarding the specific calculation method and it said specifically that it‘s important for the comparator employee to have data spanning the entire backpay period and the reason is that you don‘t want to project. If your comparator stops working for some reason, part way through the backpay period, then you‘re guessing as to what that comparator would have earned for the rest of the backpay period.
ROA.148 (emphasis added). By extrapolating a one-year period across a four-year span, the Board openly disregarded its own Compliance Manual and engaged in impermissible speculation. The arbitrariness of the Board‘s calculation is all the more apparent when the reasoning supporting the selection of the comparator method is considered: seasonality and fluctuating hours. The Board intentionally selected a formula that was meant to account for an industry rife with inconsistent hours; yet, the same Board used that formula to project across a four-year period.
The Board‘s decision is also an “obvious attempt to further ends other than those which can fairly be said to effectuate the policies of the Act.”
Second, while it seems unfair to Respondent NYPS that [the compliance officer] used Jorge‘s work hours for the last complete year (October 2013-2014) and applied those earnings through 2018 when NYPS was closing its operations by 2014, it is reminded that it was Respondent NYPS that violated the Act when it twice discharged Pflantzer and it is grossly more unfair that Pflantzer has not been remedied for the unlawful discharges.
ROA.4325. Congress authorized the NRLB to award backpay to restore the discriminatee‘s situation to “that which would have [been] obtained but for the illegal discrimination.” Phelps Dodge, 313 U.S. at 194. Rather than aiming to make Pflantzer whole, however, the Board relied on the retributive effect of its “unfair” award as a defense. Such a rationale does not effectuate the purposes of the Act.
E.
Lastly, we turn to petitioners’ evidentiary arguments. Petitioners claim that the ALJ erred in his credibility determinations, his refusal to allow petitioners to recall the compliance officer to testify, and his backpay, tax, tip, and moonlighting calculations. The ALJ weighed Pflantzer‘s testimony and explicitly addressed his faulty memory and the inaccuracies in his tax returns. After weighing these discrepancies against his demeanor, the fact that he was under oath and could be prosecuted for perjury, and the fact that there was a
Moreover, the Board did not rely solely on Pflantzer‘s tax returns in calculating the backpay award as petitioners argue. Rather, the Board considered findings from investigative interviews along with Pflantzer‘s testimony, 1099 forms, and tax returns. The Board made the same reasoned finding when it came to the inclusion of an average tip amount for the backpay calculation—a calculation based on testimony from Pflantzer that the ALJ found to be credible. And it made the same reasoned findings when calculating Pflantzer‘s moonlighting earnings. The Board weighed Pflantzer‘s testimony, reviewed the tax records it possessed, accounted for time he did not work, and then approximated his moonlighting earnings to account for fluctuations and, at times, a lack of self-reporting.
Further, the ALJ did not abuse his discretion when he did not permit petitioners to recall the compliance officer on these subjects. See Miami Coca-Cola Bottling Co., 360 F.2d at 577. Petitioners were permitted to fully cross examine the officer on each issue, and they did exactly that.
*
*
*
IT IS ORDERED that the Board‘s backpay award for the period of October 2014 to 2018 is REVERSED and the case is REMANDED for recalculation of the backpay damages in keeping with this opinion.
IT IS FURTHER ORDERED that the remainder of Board‘s backpay award is AFFIRMED.