RYAN, Circuit Judge.
This case involves an NLRB petition to enforce a decision and order finding unfair labor practices against respondent Edward Cooper Painting, Inc. (the Corporation), and its alleged alter ego, Cooper & Cooper Painting (the Partnership). The NLRB unfair labor practice proceeding was filed because the Corporation unilaterally terminated the collective bargaining agreement it had with the International Brotherhood of Painters and Allied Trades of the United States and Canada, Local 768 (the Union). After the NLRB proceeding was initiated, the Corporation filed for bankruptcy. The three primary issues presented are: (1) whether this court has jurisdiction to determine whether the automatic stay of judicial proceedings created by 11 U.S.C. § 362(a)(1) when the Corporation filed for bankruptcy applied to the NLRB proceeding; (2) whether the NLRB proceeding was stayed by operation of § 362(a)(1); and (3) whether the NLRB's order is enforceable against the Corporation, or against the Partnership, its alleged alter ego.
For reasons discussed more fully below, we conclude: (1) we have jurisdiction to determine whether the automatic stay applied to the NLRB proceeding; (2) the proceeding was excepted from the stay by operation of 11 U.S.C. § 362(b)(4); and (3) the NLRB's order is enforceable against both the Cooper corporation and the Cooper & Cooper partnership. Therefore, the NLRB's decision is affirmed.
The findings of fact of the NLRB are conclusive if supported by substantial evidence. 29 U.S.C. § 160(e). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)). The following facts are adopted from the Board's decision, and are supported by substantial evidence.
Henry Edward Cooper was the only shareholder and sole manager of the Corporation, which did business in Lexington, Kentucky. In 1981, he employed as many as six people, including his son, David Cooper, who was working foreman of the Corporation's painting operations. Prior to 1981, the Corporation negotiated and signed two collective bargaining agreements with the Union.
On July 24, 1981, the Corporation unilaterally terminated both collective bargaining agreements effective August 1, 1981. This action violated the agreements and was an unfair labor practice in violation of the National Labor Relations Act. Henry Cooper informed Walter Young, Jr., that he could continue to work if he was willing to work under non-union conditions. Young declined the offer, and the Union filed an unfair labor practice complaint with the NLRB. On September 17, 1981, the NLRB filed unfair labor practice charges against the Corporation, seeking backpay on behalf of Walter Young, Jr., and other unnamed employees, as well as equitable relief.
After termination of its relationship with the Union, the Corporation continued in the painting business. The business was operated essentially the same as before the union agreement was terminated, except that non-union employees replaced union employees. The offices, secretary, and telephone number of the business remained the same. The same type of painting work was performed. David Cooper continued as foreman, and Henry Edward Cooper remained owner and operator.
In November of 1981, Henry Edward and David Cooper began operating their business as a partnership under the name Cooper & Cooper Painting. After this organizational change, David Cooper received a salary instead of an hourly wage, participated in partnership decisions, and shared in the Partnership's profits on a forty percent basis. The Partnership continued the painting business previously carried on by the Corporation.
On December 4, 1981, the Corporation filed a petition in bankruptcy under Chapter 11 of the Bankruptcy Code. Although the Board had filed proof of claims with the bankruptcy court in the aggregate amount of $120,296, representing backpay due Walter Young, Jr., and other unnamed employees, the Corporation had been liquidated and the estate closed by order of the bankruptcy court by the time the Board rendered its decision and order on February 12, 1985.
On May 17, 1982, Henry Edward Cooper, an individual, filed for bankruptcy under Chapter 7 of the Bankruptcy Code and was discharged in bankruptcy on December 30, 1982, prior to the Board's decision and order. While the NLRB had notice of Henry Edward Cooper's personal bankruptcy, the Partnership did not raise his bankruptcy as a defense to enforcement of the NLRB's order.
The Cooper & Cooper partnership ended operations on November 4, 1982. Apparently, its business has been taken over by a new corporation.
The Board's order
The first issue for consideration is whether this court, or the bankruptcy court, has jurisdiction to determine whether the automatic stay provision of 11 U.S.C. § 362(a)(1) applies to the NLRB proceeding. The automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362, provides, in pertinent part:
When the Corporation filed for bankruptcy, § 362(a)(1) automatically stayed "the commencement or continuation ... of a judicial, administrative, or other proceeding against the debtor...." In addition, § 362(a)(2) prohibited the enforcement of any judgment against the Corporation which was obtained prior to the filing of the petition in bankruptcy. However, § 362(b)(4) provides that the automatic stay does not affect "an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power...." Finally, § 362(b)(5) allows governmental units to enforce any judgment obtained in the exercise of their police or regulatory power, with the exception of a money judgment.
Respondent contends that the bankruptcy court has exclusive jurisdiction to determine the coverage, modification, or termination of the automatic stay. Therefore, respondent argues, we should "remand" this case to the bankruptcy court for a determination of whether the NLRB proceeding was excepted from the stay. We disagree, because the applicability of the automatic stay to an unfair labor practice proceeding is an issue of law within the competence of this court. See In re Baldwin-United Corp. Litigation, 765 F.2d 343, 347 (2d Cir.1985).
Respondent cites our decision in NLT Computer Services Corp. v. Capital Computer Systems, Inc., 755 F.2d 1253 (6th Cir.1985) for the proposition that only the bankruptcy court has jurisdiction to determine the applicability of the exceptions to the automatic stay. Respondent places particular reliance on our statement in NLT Computer that "[t]he stay provisions of section 362 are automatic and self-operating and those who have knowledge of the pendency of a bankruptcy action and stay are bound to honor the stay unless and until it is properly lifted." Id. at 1258.
Respondent's reliance on this passage is misplaced because the statement was grounded on the assumption that the stay otherwise applied to the non-bankruptcy judicial proceeding, and that the bankruptcy
Id. at 1256 (emphasis added). None of the litigants in NLT Computer asserted that the non-bankruptcy judicial proceeding was excepted from the automatic stay. The statement on which respondent relies was made in a non-bankruptcy judicial proceeding that was not even arguably excepted from the automatic stay.
Here, the NLRB contends that its proceeding against the Corporation is excepted from the § 362(a)(1) automatic stay because the NLRB proceeding is "an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power," and, as such, excepted from the automatic stay by § 362(b)(4).
The decision of the Second Circuit in Baldwin-United Corp. is the only case which has explicitly held that the district and circuit courts have jurisdiction to determine the applicability of the automatic stay. However, in the context of an NLRB petition for enforcement of an unfair labor practice decision and order, two other circuit courts have assumed they had jurisdiction to answer the question and proceeded directly to the merits. See Ahrens Aircraft, Inc. v. NLRB, 703 F.2d 23 (1st Cir.1983); NLRB v. Evans Plumbing Co., 639 F.2d 291 (5th Cir.1981). Evans Plumbing was the first circuit court decision to hold that an NLRB unfair labor practice proceeding was excepted from the automatic stay under § 362(b)(4).
We agree with the statement by the court in Baldwin that:
Baldwin-United Corp., 765 F.2d at 347 (footnote omitted). We hold that we have jurisdiction to determine whether the NLRB unfair labor practice proceeding was subject to the automatic stay.
Respondent next argues that the NLRB's order is void because the NLRB failed to petition the bankruptcy court for relief from the automatic stay before it proceeded with the unfair labor practice hearing. It also argues that the NLRB was required to petition the bankruptcy court for relief from the stay even though it believed that its proceeding was excepted from the stay. This contention has no support in the case law, and we conclude that a governmental unit which determines that its police power or regulatory proceeding is excepted from the automatic stay under § 362(b)(4) is not required to petition the bankruptcy court for relief from the stay prior to continuing its proceeding.
Section 362(b)(4) provides that the filing of a petition in bankruptcy "does not operate as a stay ... of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power." The statute provides that governmental actions to enforce police or regulatory powers are automatically excepted from the operation of the automatic stay. There is no occasion therefore to seek relief from a stay which has no application to the proceeding in question.
In addition, the legislative history of the Bankruptcy Act of 1978 evinces a congressional intent that "an action by a governmental unit seeking to enforce its regulatory power is not automatically stayed by reason of the provisions of subsection (b)(4) but might nonetheless be enjoined by the [bankruptcy] court in appropriate circumstances."
We hold that the NLRB, acting on the belief that its unfair labor practice proceeding was excepted from the operation of the automatic stay, permissibly proceeded with the hearing without obtaining relief from the stay in the bankruptcy court. However, the NLRB proceeded at its own risk. If it was later determined that the proceeding was not excepted from the automatic stay, the entire NLRB proceeding would be void ab initio as an act taken in violation of the stay.
Section 362(b)(4) explicitly provides that proceedings undertaken by a governmental unit in the exercise of its police power are unaffected by the automatic stay.
Arguably, a more orderly procedure would require the NLRB to petition the bankruptcy court for permission to proceed.
Our conclusion does not leave the trustee or debtor-in-possession unable to halt the unfair labor practice proceeding. The legislative history of the Bankruptcy Act of 1978 states:
S.Rep. No. 989, 95th Cong., 1st Sess. (1978), reprinted in 1978 U.S.Code Cong. & Ad.News at 5837. The bankruptcy courts have concluded that 11 U.S.C. § 105 gives them the power to stay NLRB proceedings that are excepted from the operation of the automatic stay by § 362(b)(4) if the assets of the debtor's estate are threatened. See, e.g., In re GHR Energy Corp., 33 B.R. 449, 450-51 (Bankr.D.Mass.1983). Cf. In re Organized Maintenance, Inc., 47 B.R. 791, 797-98 (Bankr.E.D.N.Y.1985).
Respondent also argues that the NLRB proceeding was "an attempt to enforce a money judgment" and was therefore subject to the automatic stay by operation of § 362(b)(5). We disagree, and hold, on the facts of this case, that the NLRB unfair labor practice proceeding was excepted from the operation of the automatic stay under § 362(b)(4) and was not an attempt to enforce a money judgment under § 362(b)(5). The NLRB proceeding was wholly unaffected by the automatic stay which went into effect when the Corporation filed for bankruptcy.
Not every action or proceeding by a governmental unit is excepted from the automatic stay. The legislative history to the Bankruptcy Act of 1978 provides that, under § 362(b)(4),
H.R.Rep. No. 595, 95th Cong., 1st Sess. 343 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6299. The courts which have considered this issue have generally concluded that NLRB unfair labor practice proceedings are excepted from the automatic stay by § 362(b)(4).
The bankruptcy courts have not yet developed a consistent test for determining whether an action by a particular governmental unit falls within the automatic stay. However, even under the narrowest reading of § 362(b)(4), the NLRB unfair labor practice proceeding in this case is within the exception.
Generally, one of two tests has been applied to determine whether a particular governmental action was excepted from the automatic stay: the pecuniary purpose test or the public policy test. See In re Herr, 28 B.R. 465, 468-69 (Bankr.D.Me.1983). Under the pecuniary purpose test, the court asks whether the governmental proceeding relates primarily "to the protection of the [government's] pecuniary interest in the debtors' property and not to matters of public safety and health." In re State of Missouri, 647 F.2d 768, 776 (8th Cir.1981), cert. denied, 454 U.S. 1162, 102 S.Ct. 1035, 71 L.Ed.2d 318 (1982). The former purpose would subject the proceeding to the stay provision of § 362; the latter would not. In contrast, the public policy test "distinguishes between proceedings that effectuate public policy and those that adjudicate private rights: only the former are excepted from the automatic stay." In re Herr, 28 B.R. at 468.
The NLRB proceeding challenged herein passes muster under either test. First, an NLRB unfair labor practice proceeding is one which imposes sanctions on an employer for violations of the federal labor law. The Board's decision in this case is an adjudication that the Corporation violated federal labor law embodied in the National Labor Relations Act. It is not a proceeding for the primary purpose of protecting the government's claim of entitlement to a pecuniary interest in the debtor's estate. Second, the NLRB does not proceed on behalf of private persons:
In re Adams Delivery Service, 24 B.R. 589, 592 (Bankr. 9th Cir.1982) (citation omitted). Congress has entrusted the NLRB with enforcement of the nation's labor laws, and has also committed "the matter of adjudicating unfair labor practices to the jurisdiction of the N.L.R.B." In re Nicholas, Inc., 55 B.R. at 215. See also, Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261, 264-65, 60 S.Ct. 561, 563, 84 L.Ed. 738 (1940).
In NLRB v. Evans Plumbing Co., the court stated:
639 F.2d at 293 (footnote omitted). We agree with the Evans Plumbing court, and hold that the NLRB's unfair labor practice complaint against respondent was excepted from the automatic stay under § 362(b)(4).
Respondent argues that the NLRB proceeding against it was an attempt to reduce an unfair labor practice charge to a dollar amount for the benefit of private persons, namely the Union and those employees who lost wages. We reject this argument, primarily for the reason that "once proceedings are excepted from the stay by section 362(b)(4), courts have allowed
At most, the NLRB unfair labor practice proceeding against respondent resulted in the entry of a money judgment. Section 362(b)(5) provides that only attempts to enforce money judgments are subject to the automatic stay. In Penn Terra Ltd. v. Department of Environmental Resources, 733 F.2d 267, 275 (3d Cir.1984), the court examined the meaning of the phrase "enforcement of a money judgment," as it is used in § 362(b)(5):
We find the Penn Terra analysis of § 362(b)(5) persuasive, and hold that the Board's determination that the Corporation owed backpay to its former employees was excepted from the automatic stay by operation of § 362(b)(4). We thus affirm the entry of a money judgment, but do not enforce that judgment. See In re D.M. Barber, Inc., 13 B.R. 962, 963-64 (Bankr.N.D.Tex.1981).
Respondent argues that Henry Edward Cooper's discharge in bankruptcy bars enforcement of the Board's order against the Cooper & Cooper partnership. The Board argues that we should not review this claim because respondent failed to present it to the Board as required by 29 U.S.C. § 160(e).
Nonetheless, we affirm the Board's conclusion that its order may be enforced against the Cooper & Cooper partnership. The Partnership was a party to the proceeding below, where it was found to be the alter ego of the Cooper corporation, a conclusion that is supported by substantial evidence.
For all the foregoing reasons, the Board's decision is AFFIRMED.
CONTIE, Senior Circuit Judge, concurring.
While I agree with the majority's disposition of this case and its analysis in Parts I, II and III, I do not join in Part IV of the majority's opinion concluding that we have jurisdiction to consider the effect of Henry Edward Cooper's discharge in bankruptcy.
Whereas the "Plea in Abatement Due to Bankruptcy" can be construed as drawing into question the issue of the automatic stay, it is clear that the effect of the discharge in bankruptcy was never raised below, probably in view of the fact that the discharges occurred in the course of the proceedings before the Board. The failure of respondent to raise particular issues before the Board deprives this court of jurisdiction to consider such contentions. Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 665-66, 102 S.Ct. 2071, 2082-83, 72 L.Ed.2d 398 (1982). Pursuant to 29 U.S.C. § 160(e), "[e]xtraordinary circumstances for these purposes exist only if there has been some occurrence or decision that prevented a matter which should have been presented to the Board from having been presented at the proper time." NLRB v. Allied Products Corp., 548 F.2d 644, 654 (6th Cir.1977). Since the respondent did not raise the discharge issue in the proceedings below, and there are no "extraordinary circumstances" for having failed to present this issue to the Board, I would conclude that we lack jurisdiction to consider this argument on appeal.
The Bildisco Court held that after filing the petition for reorganization in bankruptcy, the debtor-in-possession is not required to bargain with the union, and may unilaterally terminate its labor contract. In later reviewing the termination of the labor contract, the bankruptcy court would have to "weigh several equitable considerations to vindicate the prior labor contract abrogation." Gregory, The Congressional Response to NLRB v. Bildisco and the Constitutional Subtleties of the Nondelegation Doctrine, 62 U.Det.L.Rev. 245, 246 (1985).
S.Rep. No. 989, 95th Cong., 1st Sess. (1978), reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5837-38 (emphasis added).
The Theobald court found that the NLRB proceeding at issue related primarily to pecuniary, rather than governmental, interests, and therefore was not excepted from the automatic stay. The holding of the case, which enjoined the NLRB proceeding, was based on the injunctive power of 11 U.S.C. § 105, rather than § 362.
29 U.S.C. § 160(e).
Nelson Electric v. NLRB, 638 F.2d 965, 968 (6th Cir.1981). The Board found that there were only two differences between Edward Cooper Painting, Inc. and the Cooper & Cooper partnership: One, the partnership does not hire union employees. Two, David Cooper acquired an ownership interest in the Partnership, whereas Edward Cooper was the sole owner of the Corporation. Since all other aspects of Edward Cooper Painting, Inc. were carried over to Cooper & Cooper, and the Partnership began operations before the Corporation filed for bankruptcy, the Board's alter ego conclusion is supported by substantial evidence.
Ky.Rev.Stat.Ann. § 362.220 (Baldwin 1983). "It is ... the general rule that the partnership creditor having obtained a judgment may at his option proceed against joint or separate property or both by way of levy and execution to enforce his judgment." Richardson, Creditors' Rights and the Partnership, 40 Ky.L.J. 243, 256 (1951) (footnote omitted).