USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 93-2026
NATIONAL LABOR RELATIONS BOARD,
Petitioner,
v.
HOSPITAL SAN RAFAEL, INC.,
AND CENTRO MEDICO DEL TURABO, INC., AND ITS SUBSIDIARIES,
TURABO MEDICAL CENTER LIMITED PARTNERSHIP AND
HOSPITAL INTERAMERICANO DE MEDICINA AVANZADA,
Respondents.
____________________
ON APPLICATION FOR ENFORCEMENT OF AN ORDER OF
THE NATIONAL LABOR RELATIONS BOARD
____________________
Before
Breyer,* Chief Judge,
___________
Boudin and Stahl, Circuit Judges.
______________
____________________

David A. Grant with whom Betty Southard Murphy, Jean H. Baker,

_______________
_____________________ _____________
Baker & Hostetler, Heber E. Lugo-Rigau and Ledesma, Palou &
__________________
____________________
_________________
Miranda were on brief for respondents.
_______
Fred L. Cornnell with whom Frederick C. Havard, Supervisory
_________________
____________________

Attorney, Daniel Silverman, General Counsel, Linda Sher, Acting

_________________
___________
Associate General Counsel, and Aileen A. Armstrong, Deputy
_____________________
Associate General Counsel, National Labor Relations Board, were
on brief for petitioner.
____________________
December 12, 1994
____________________
____________________

*Chief Judge Stephen Breyer heard oral argument in this matter,

but did not participate in the drafting or the issuance of the
panel's opinion.
The remaining two panelists therefore issue
this opinion pursuant to 28 U.S.C.
46(d).

BOUDIN, Circuit Judge.

______________

This is a

difficult labor-law

case made even more difficult because the pertinent doctrines

have

confusing

labels,

occasionally mutate.
history,

overlap

with

one

another

We begin with the facts and

and

procedural

and then address the legal issues and the claims of

error.
I.
For

many

years,

Hospital

San

Rafael,

Inc.,

("San

Rafael")
Rico.

operated a neighborhood

In 1978,

bought
owned

two doctors--Jaime Soler and

Jose Badillo--

somewhat over 80 percent of San Rafael's stock; Soler

about 70

about 30
as

hospital in Caguas, Puerto

the

percent of

percent.

the joint

The doctors then

hospital's

president.

holdings and

Badillo

hired Joaquin Rodriguez

These

three

individuals

comprised the hospital's board.

San
the

Rafael was in poor financial shape, and in mid 1978

Puerto Rico

health authorities

would have to remedy

its

eligibility

patients

accounted

occupancy.

the hospital

problems in its physical plant

to

treat
for

Medicare

almost

half

patients.
of

the

or lose
Medicare

hospital's

Soler, Badillo and Rodriguez began to discuss the

construction of a new hospital.

corporation

said that

would be established,

itself could not obtain

It was conceived that a new

partly because San Rafael

loan funds, and in addition

-2-2-

the new

hospital was expected to be more than a local hospital and to

draw patients from the Caribbean basin.
Centro Medico was created in
proposed

new hospital under the name Hospital Interamericano

de Medicina Avanzada ("Hospital

Soler

August 1978 to operate the

had 40 percent of

Rodriguez

Interamericano").

the shares, Badillo

20 percent.

Ultimately,

In

1981,

20 percent and

Soler's ownership

was

reduced to 38 percent, Badillo and Rodriguez each owned about

19

percent, and 19 percent was acquired by Carlos Pineiro, a

longtime associate
was

of Rodriguez.

Centro Medico's

From the

president, and

start Rodriguez

Soler and

Badillo were

among the board members.

At various times, Rodriguez spoke about the new hospital
as if it were an expansion of San Rafael, and San Rafael made
interest-free cash

advances for the construction

hospital

other steps

San

and took

Rafael

was

deficiencies
Later,

San

granted

because of

waiver

the plans

Rafael agreed

operate a hospital,

to support
as

its development.
to

its

to open a

to surrender

of the new

Medicare

new hospital.

its own

in order to facilitate the

license to
licensing of

the new hospital.

San Rafael ceased
November 18, 1988, the

operation on November

14, 1988.

new Centro Medico hospital, operating

as Hospital Interamericano, opened to the public.

Soler and

On

Badillo continued

to hold their

-3-

Rodriguez,

prior positions.

-3-

Pineiro,

who

since

1987

relations at San Rafael,

vice
and

president.
most of

had been

responsible

for

labor

became the new hospital's executive

A majority of the supervisors of San Rafael

the

other

employees

transferred to

the

new

hospital.
Against
led

this background

labor disputes

to the present litigation.

Nacional

de

Trabajadores

union")

became

representative

the
of

de

la Salud,

certified

two units

professional unit (e.g.,

____

In January

to August

Local

of

San Rafael

1199

("the

bargaining

employees:

registered nurses) and

a technical

San Rafael and the union

an agreement effective from

31, 1987, also

1984, the Union

collective

unit that included other employees.

entered into

developed that

September 1, 1984,

agreeing that this

contract would

continue until a new contract replaced it.

San

Rafael employee Milton Suarez

had been a leader in

the organization of the union and had been discharged for his
organizing

activities, although

later

reinstated.

Suarez

helped negotiate

the September 1984 contract

union's chief steward.

Rafael about the

memorandum

In 1985, Suarez began to question San

effect that the planned

have on job security.

to San

and became the

new hospital would

On August 30, 1985, Rodriguez issued a

Rafael

employees stating

"on behalf

of

Hospital San Rafael and of Centro Medico del Turabo" that the

-4-4-

employees

would be

"transferred" with

the same

salary and

benefits to the new hospital.

In May 1987, the union
a new

contract and

Rafael and
that Centro
union

sought to begin negotiations for

proposed

Centro Medico as

an agreement
parties.

Medico would not

because it was certified

employees.
or "NLRB")

San

San

Rafael indicated

recognize or bargain

with the

only to represent San Rafael

The National Labor Relations

issued a complaint

naming both

Board (the "Board"

charging that San

Rafael and

Centro

Medico were a single employer and alter egos, and had

unlawfully

refused

to

bargain

with

the

union

over

the

inclusion of Centro Medico.

The

union reached

separate settlement

San Rafael and Centro Medico in

to

San Rafael agreed

negotiate in good faith with the union, and Centro Medico

promised
95

May 1988.

agreements with

to hire on a

percent

of San

hospital; Centro
agreeing

nondiscriminatory basis and to retain

Rafael's employees

Medico stipulated

to recognize the union.

the settlements, withdrew its

to

work at

that it was

the new

not thereby

The union, in exchange for

unfair labor practice charges,

and the NLRB then withdrew the complaint.

Negotiations between the union and the two hospitals did
not

prove

petition
agreements

fruitful.
with

the

set

In October
NLRB

seeking

aside, and

the

1988,
to

the union

have

the

filed a

settlement

pre-agreement unfair

labor

-5-5-

practice

charges

reopened,

because

San

Rafael

had

not

complied

with the settlement agreement.

district

court granted

Centro

Medico to

affirmed.

preliminary injunction

bargain

See Asseo
___ _____

In August 1989, the

in

good

faith, and

requiring
this

court

v. Centro Medico del Turabo, Inc., 900

_______________________________

F.2d 445 (1st Cir. 1991).

From the outset
claimed

in 1988, the new Centro Medico hospital

that it was free to alter working conditions at will

and that it need not recognize the union.

Rafael employees were hired
not.

by the new hospital,

Suarez was

Neither were four other employees who had been closely

connected
another

with union
as

hospital

activities and
In

these

not formally

refuse

to

did

Centro

acted at

union stewards.

several were told that

but

Although most San

Medico then

one time

five cases
hire the

or

the new

employees;

their applications were under review,

took

no

official

action

on

union

filed

new unfair

the

applications.
In

December

practice charges.

1989, the

labor

These included charges that both hospitals

had failed to bargain in good faith and had engaged in unfair

labor practices
employees.
May 4,

by refusing

to hire the

five union-related

A Board complaint was filed in February 1989.

1989, an

conditionally

administrative law

setting

aside

the

-6-6-

judge entered
settlement

On

an order

agreements,

reinstating the
ones.

old charges and consolidating

them with new

Hearings were held between May 1989 and May 1990.

On

June 19,

Centro

Medico

employer;

1991, the

were

alter

ALJ found

that San

egos

comprised

alternatively, Centro

and
Medico

Rafael and

was found

single
to be

successor employer to San Rafael.

The ALJ found that the San

Rafael

been entered

settlement agreement

faith

and should

found that

had

be permanently

The

bad

ALJ also

the hospitals had violated their duty to bargain,

29 U.S.C.

158(a)(5), and Centro

four of the

five employees

Id.
___

set aside.

into in

Medico's failure to

was also found

to be

hire

wrongful.

158(a)(3).
On

review, the

Board,

acting

through three

members,

found that the two hospitals were a single employer and alter
egos but
Board

did not reach

the successor-employer

agreed with the ALJ

failed to bargain with

issue.

The

that the hospitals had improperly

the union and that Centro

Medico had

unilaterally changed employee working conditions.

Failure to

rehire all five

employees was

divided vote, the

found to be

Board held that the San

improper.

By

Rafael settlement

agreement was properly set aside.

The Board entered

a remedial order containing

specific

provisions designed to compel Centro Medico to bargain and to

provide redress for the five employees.
broadly

forbade

future

The Board order also

infringement

of

worker

rights

-7-7-

protected under
then filed in
its order.

"section 7."

157.

The Board

this court the present application

to enforce

29 U.S.C.

29 U.S.C.

160(e).

The hospitals

opposed the

application.
II.
In this court, the main issue raised by the hospitals is
whether

San

present

purposes as if they were one

critical

Rafael and

because

the

Centro

only

Medico can

signed

entity.

be

treated for
This issue is

collective

agreement is between the union and San Rafael.

bargaining

Centro Medico

is

required to

respect that

making

unilateral

Centro

Medico is an extension

begin

changes

agreement, and

by describing

in working

bargain before

conditions,

of San Rafael.

three different

only if

We therefore

but related

labor-law

doctrines considered by the agency.

One

concept,

known

colloquially

as

the

alter

ego

doctrine, says that in certain situations one employer entity

will

be regarded as a continuation of a predecessor, and the

two will be treated

labor laws.
entity
of

interchangeably for purposes of applying

The easiest

example is a case where the

is created by the owners of the first for the purpose

_______

evading

labor

law

responsibilities;

ownership, management, work force,

also

second

relevant.

See
___

but

identity

of

business and the like are

C.E.K. Indus. Mechanical Contractors,

______________________________________

Inc. v. NLRB, 921 F.2d 350 (1st Cir. 1990).

____
____

-8-8-

A second rubric--the "single employer" doctrine--has its

primary

office in the

the NLRB wishes

case of two

ongoing businesses which

to treat as a single employer

on the ground

that they are owned and operated as a single unit.

Papers, Inc. v. NLRB,
___________
____

706 F.2d 18 (1st Cir.),

464 U.S. 892 (1983).

Most of the alter ego

relevant but

motive is normally considered

cert. denied,
____________
criteria remain

irrelevant.

consequences of single employer and alter ego

necessarily the same.
A

final,

Penntech
________

The

status are not

See C.E.K., 921 F.2d at 354.

___ ______

narrower

"successor" companies.

doctrine
Where,

applies

for

to

so-called

unionized

example,

business is acquired by a new owner unaffiliated with the old

one,

the new

employer

may not

bargaining agreement with

Sec. Servs.,
____________

406

continuity exists
owner

U.S.
in the

may, without

treat the

any

union as the

the old
272

be

bound by
one.

(1972).

business and

collective

See
___

NLRB v.
____

Burns
_____

But

where

enough

work force, the

new certification,

be required

recognized bargaining agent.

Fall River Dyeing & Finishing Corp. v.

______________________________________

new

NLRB, 482
____

to

E.g.,
____
U.S. 27

(1987).
This overview of

the three doctrines imparts

to them a

neatness that is not borne out by the circuit caselaw or even

the Board's

decisions.

See,
___

e.g., 4 T. Kheel,
____

Labor Law
_________

17.02 (1994).
related

and

In

part,

similarly

the difficulty

named

is

concepts are

that
being

several
used

to

-9-9-

address

different
_________

controversies

aggregation,

maintenance

businesses,

inherited

of

(e.g.,
____

parallel

liability

inherited contractual obligations,

jurisdictional

union

for

and non-union

past

misconduct,

carry-over obligation

to

bargain, etc.).
___
In

all events, the Board's order here in dispute can be

sustained

on

the alter

doctrine,

as it

ego

theory.

has developed

little application

The

historically, seems

to this case--which does

ongoing businesses coordinated

single employer

by a common

to have

not involve two

master.

See
___

Dariano & Sons, Inc.

_____________________

v. District Council of Painters,

_____________________________

F.2d

Cir.

514,

519

(9th

1989);

A.
__
869

International Union of
________________________

Operating Eng'rs v. Centor Contractors, Inc., 831 F.2d 1309,

________________
_________________________
1313 n.2 (7th

Cir. 1987).

As for

"successor" status,

any

relief available under this theory would be less far reaching

than that based on the alter ego theory.
In determining alter ego status, the NLRB and the courts
have, as

noted in

C.E.K., considered
______

range of

criteria

including the similarity between the old and new companies in

relation

to

management,

equipment, customers
In

most cases,

alter

business

purpose,

and supervision, as well

further important

factor in

operation,
as ownership.
determining

ego status is whether the alleged alter ego entity was

created and

maintained in order to

avoid labor obligations.

In a rare discussion of the doctrine, the Supreme Court said:

-10-10-

It is important to emphasize that this is not

a case where the successor corporation is the
"alter ego" of the predecessor, where it is "merely
a disguised continuance of the old employer."

Southport Petroleum Co. v. NLRB, 315 U.S. 100, 106

________________________________
(1942). Such cases involve a mere technical change
in the structure or identity of the employing
entity, frequently to avoid the effect of the labor
laws,
without any substantial
change in its
ownership or management.
In these circumstances,
the courts have had little difficulty holding that
the successor is in reality the same employer and
is subject to all
the legal and contractual
obligations of the predecessor.
Howard Johnson Co. v. Hotel Employees, 417 U.S. 249, 259 n.5
___________________
_______________
(1974).
Howard Johnson supplies
_______________
alter ego doctrine,
between subjective
matters,

we

obligations

motive

for

is an

and objective

because
the

purpose
_______

unsympathetic

formal alteration, and faced

transfer
weight

of assets--the
to

the

purpose for

the

and also helps sort out the relationship

think,

transformation

an animating

other

criteria.

corporate
of

transfer

or

labor

law

respecting

the

avoiding

case

for

Motive

with a subterfuge--e.g., a sham

____

courts

reasonably

need give

"identity" criteria.

See
___

less

Penntech
________

Papers, 706 F.2d at 24.

______
But
to

in our own case the decision of San Rafael's owners

establish

new

hospital occurred

operational

reasons

that

relations.

The union did

have

nothing to

not even exist

plans for the new hospital were laid.

Centro Medico's "purpose" was not

for

financial
do

with

and
labor

when the original

The Board's claim that

improper at the outset but

-11-11-

became

improper

bargain

simply because

makes little sense in

doctrine.
egos,

After

Centro

liabilities of
improper

all, if
__
Medico's
San Rafael

Centro

Medico

the context of

the two companies

desire

to

would be

motive in creating the

resist

declined to
the alter ego

were not

alter

obligations

understandable.

new entity were

or

If an

a sine qua
________

non of the alter ego doctrine, then we think the Board

___

would

be hard-pressed to defend its order in this case.

In Howard Johnson, however,
______________
wrongful

motive is

"frequently"

cases; it did not say "always."

"[n]o

present in

the alter

ego

Similarly, we have said that

one factor is controlling, and all need not be present

to support a
F.2d at

the Supreme Court said that

354.

finding of
After all,

`alter ego status.'"

if a

company merely

C.E.K.,
______

921

changed its

corporate form for legitimate tax or corporate reasons, it is

hard to see why the new entity should be able to disregard an

existing

collective bargaining

agreement or

claim immunity

when told to reinstate a worker wrongly fired by the old one.

This view--that a wrongful
by

most other circuits.

motive is not required--is shared

See Note,
___

86 Mich. L. Rev. 1024,

______________

1045 (1988) (collecting cases).1

____________________
1Since our

discussion in Penntech and C.E.K. has given rise

________
______
to some uncertainty about this court's position on the role
of wrongful motive in alter ego cases, this opinion has been
circulated prior to filing to all active judges of this
court, and no member of the court expressed disagreement with
the panel's
treatment of
the issue.
This informal
circulation is without prejudice to a petition for rehearing
-12-12-

The problem here, as so often

in

how far to

Howard Johnson,
_______________
substantial
___________

carry the notion

417

continuity

U.S.
but

at
also

with similar concepts, is

of "disguised continuance,"
249

n.5,

some
____

where

limited

there

is

change

in

ownership and operations.

Continuity of ownership,

perhaps

the most important predicate, does exist in this case.

Soler

and Badillo owned 87 percent of the stock in San Rafael;

the

same individuals

stock in

came to

own about

60 percent

Centro Medico, their proportionate

remaining the same.

The two

and

of the

shares inter se
________

other important stockholders of

Centro Medico, Rodriguez and Pineiro, were closely associated

with San Rafael.
Other criteria of identity
In upper

point in the same direction.

management, Rodriguez

San Rafael and Centro Medico.

served as president
Soler, Badillo,

Pineiro were directors, officers

entities.

more

Rodriguez and

or both in each of

the two

The ALJ found that about 85 of the 102 lower level

supervisors at
the

both of

old one.

the new hospital had also been supervisors at

The new hospital

of the old hospital's

agreed to hire 95 percent or

employees and the

ALJ said that

this had occurred.

The two
in

the

same

hospitals are in the same

community.

It

is

true

business and operate

that Centro

Medico

____________________
or suggestion of en banc reconsideration on any issue in the
case.
See Trailer Marine Transport Corp. v. Rivera Vazquez,
___ ______________________________
______________
977 F.2d 1, 9 n.5 (1st Cir. 1992).
-13-13-

operates

300-bed tertiary

draws from a
with

just

larger area;
over

care

hospital

San Rafael was

100 beds.

Little

of

and presumably

a local

hospital

the equipment

was

transferred from one to the other and doctors' privileges had

to

be renewed.

But

hospital, helped
the

new one

San Rafael effectively

finance it, and surrendered

could obtain

function, the

planned the new

license.

its license so

Both in

new hospital is essentially

origin and

an enlargement of

the old one.

Thus,
between
senior

the

substantial--not
two hospitals

management,

geographic location

a complete--identity

along

supervisory

every

axis:

and basic business function.

devised by the Board with

the courts,

agency

and

the

latitude in applying

is entitled

its own doctrine.

Dodge Corp. v. NLRB, 313 U.S. 177

___________
____
ego doctrine can be
may be open
limits.

ownership,

management, employee

ego doctrine has been

to

approval of
a

reasonable

See generally Phelps

_____________ ______

(1941).

but this case

base,

The alter

Whether the alter

stretched much beyond the present

to debate,

exists

is within

facts

reasonable

Next,

San

Rafael

claims

in

agreement

between the union and San Rafael.

Board has

agreement

set

has

the

May

the

warranted

the

setting aside

that

aside settlements

been

materially

Board

19, 1988,

was

not

settlement

In prior cases,

where the

breached

and

settlement
the

party

-14-14-

responsible entered
an

intention to

into the agreement in

carry out

Concrete Materials, 282

__________________

its

bad faith without

commitments.

N.L.R.B. 289 (1986).

E.g., Norris
____ ______
In this case,

the ALJ set the settlement agreement aside on the ground that
San Rafael entered into it in bad faith and then breached the
agreement.

The Board sustained this determination by

a two-

to-one vote, one member dissenting on this issue alone.

We

review the findings

of the Board

whether

they

by

U.S.C.

160(e).

are supported

only to determine

substantial

The ALJ, whose rationale was

evidence.

29

adopted in a

condensed form

by

the Board

hospitals had to know of

therefore, knew or

majority,

said that

the

two

their own internal relationship and

should have known

their legal status

as

alter egos; that the promise by San Rafael to bargain in good

faith therefore included a commitment to bargain on behalf of
Centro

Medico; and

obligation

it

that

must

because San

never

have

Rafael resisted

meant

to carry

out

that
this

attributed commitment.
We think that this reasoning is unpersuasive and that no
other evidence shows
bad faith.
duty to
Rafael

that the agreement was entered

There is proof that San Rafael knew that it had a

bargain for Centro

"should

status, but
identical

into in

have known"

we do not
in

Medico.

every

of

its

The ALJ said

that San

prospective alter

ego

see why.

The two hospitals

are not

respect,

no

formula

mathematical

-15-15-

determines
Bad

alter ego status, and

faith is

more

than mere

this case is

negligence.

See

a close one.
Voccio

v.

___
Reliance Ins. Cos.,
___________________

703 F.2d

Board's brief hints that

bad faith

1, 2

(1st Cir.

bad faith may not be

was the only

basis given

______
1983).

The

required, but

in this case.

SEC
___

v.

Chenery Corp., 318 U.S. 80, 88 (1943).

_____________
However,

there is no showing

setting aside of the settlement

the Board's
of

its

settlement

order.

Conduct

agreement was
charges

the

in December

failure to bargain and

These

agreement had any effect

on

other determinations or on any of the provisions

remedial

practice

by the hospitals that the

occurring

subject of
1988.

after
_____

new unfair

the
labor

These included

both

discrimination against union members.

charges are amply supported by the record even if only

conduct after May 1988 is the focus of consideration.

On

the

persistently
after the
the

failure
refused to

bargain
recognize

charge,

Centro

Medico

the union

and,

shortly

new hospital opened, it made unilateral changes in

employees'

bargain.

to

working

conditions

without

attempting

to

Since we have upheld the alter ego theory advanced

by the Board, we think that it follows that Centro Medico was

obligated to recognize

and bargain with

was bound by the collective

the union; that

it

bargaining agreement to the same

extent as San Rafael; and that it was subject to the ordinary

obligations of an employer with a union contract to negotiate

-16-16-

about changes.
charges.

Good faith is not generally a defense to such

ILGWU v. NLRB, 366 U.S. 731, 738-40 (1961); NLRB v.

_____
____
____

Cooke & Jones, Inc., 339 F.2d 580, 581 (1st Cir. 1964).
___________________
The Board
the

also had ample evidence for

its finding that

five named union members not rehired were the subject of

anti-union discrimination by Centro Medico.

to

say

union,
refused

that all

five

employees were

no persuasive reason appears

a position at the

It is sufficient

identified

why any of

new hospital, and

evasions practiced by Centro

with the

them was so

the excuses or

Medico in dealing with

each of

the five affirmatively suggests that discrimination was being

practiced.

The Board

and administrative law judge decisions

adequately set forth the circumstances.

We

turn now

employees was

remedy.

The

treatment of

egregious enough to justify

remedial direction
infringing

to

"in any

that the hospitals cease

other

manner" on

the

five

the Board's broad

and desist from

employees' section

rights.

The hospitals

prohibit Centro Medico

say that a proper order

from acting "in

would merely

any like or

manner," but

the broader version--carrying with

of

sanctions--has

contempt

employer's

violations

Wyman-Gordon Co. v.
_________________
1985).

are

been
either

NLRB, 654
____

found

it the risk

proper

repeated

F.2d 134,

related

where

or

the

egregious.

146-47 (1st

Cir.

None of the other remedial provisions are challenged,

-17-17-

and each other

remedy appears

justified by

post-settlement

misconduct by the hospitals.

III.
To

sum up,

we agree

faith finding as to
aside

of

the

San

supported.

We

are

employer"

doctrine

with the

hospitals that

the May 1988 settlement and

Rafael

settlement

also
could

doubtful
be

a basis

the setting

agreement
whether
for

the bad

the

are

not

"single

sustaining

the

Board's

order.

applies; the

But

the

alter

ego

unfair labor practice

doctrine

reasonably

findings are

adequately

supported by the post-settlement misconduct; and the remedies

ordered are

within the Board's discretion.

enforce the Board's order as written.

It is so ordered.
________________

-18-18-

Accordingly, we