Nathanson v. National Labor Relations Board/Opinion of the Court

by William O. Douglas

United States Supreme Court

344 U.S. 25

Nathanson  v.  National Labor Relations Board

 Argued: Oct. 23, 1952. --- Decided: Nov 10, 1952

Respondent, the National Labor Relations Board, issued a complaint against the present bankrupt company alleging unfair labor practices, and, after appropriate proceedings, ordered the bankrupt to pay certain employees back pay which they had lost on account of an unfair labor practice of the bankrupt. Before the order was enforced by the Court of Appeals an involuntary petition had been filed against the company. Thereafter the Court of Appeals entered its decree, enforcing the Board's order. In due course the Board filed a proof of claim for the back pay which was disallowed by the referee. The District Court set aside the disallowance. 100 F.Supp. 489. The Court of Appeals affirmed, 194 F.2d 248, holding that the Board's order is a provable claim in bankruptcy, that the Board can liquidate the claim, and that it is entitled to priority as a debt owing to the United States under § 64, sub. a(5) of the Act, 11 U.S.C.A. § 104, sub. a(5). The petition for certiorari was granted because of a conflict on the question of priority between that decision and National Labor Relations Board v. Killoren, 122 F.2d 609, decided by the Court of Appeals of the Eighth Circuit.

We think the Board is a creditor as respects the back pay awards, within the meaning of the Bankruptcy Act. ^[1] The Board is the public agent chosen by Congress to enforce the National Labor Relations Act, 29 U.S.C.A. § 151 et seq. Amalgamated Utility Workers v. Consolidated Edison Co. of New York, 309 U.S. 261, 269, 60 S.Ct. 561, 565, 84 L.Ed. 738. A back pay order is a reparation order designed to vindicate the public policy of the statute by making the employees whole for losses suffered on account of an unfair labor practice. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 197, 61 S.Ct. 845, 854, 85 L.Ed. 1271. Congress has made the Board the only party entitled to enforce the Act. A back pay order is a command to pay an amount owed the Board as agent for the injured employees. The Board is therefore a claimant in the amount of the back pay.

The claim is provable as a debt founded upon an 'implied' contract within the meaning of § 63, sub. a(4) of the Bankruptcy Act. ^[2] It is an indebtedness arising out of an obligation imposed by statute-an incident fixed by law to the employer-employee relationship. A liability based on quasi-contract is one on an 'implied' contract within the meaning of § 63, sub. a(4) of the Bankruptcy Act. See Brown v. O'Keefe, 300 U.S. 598, 606-607, 57 S.Ct. 543, 548, 81 L.Ed. 827.

We do not, however, agree with the lower court that this claim, enforceable by the Board, is a debt due to the United States within the meaning of R.S. § 3466, 31 U.S.C.A. § 191, and therefore entitled to priority under § 64, sub. a(5) of the Bankruptcy Act. It does not follow that because the Board is an agency of the United States, any debt owed it is a debt owing the United States within the meaning of R.S. § 3466. The priority granted by that statute was designed 'to secure an adequate public revenue to sustain the public burthens and discharge the public debts.' See United States v. State Bank of North Carolina, 6 Pet. 29, 35, 8 L.Ed. 308. There is no function here of assuring the public revenue. The beneficiaries of the claims are private persons as was the receiver in American Surety Co. v. Akron Savings Bank, 212 U.S. 557, 29 S.Ct. 686, 53 L.Ed. 651.

It is true that Bramwell v. U.S. Fidelity & Guaranty Co., 269 U.S. 483, 46 S.Ct. 176, 70 L.Ed. 368, extended the priority to a claim of the United States for Indian moneys. But that case rests on the status of the Indians as wards of the United States, see Bowling v. United States, 233 U.S. 528, 34 S.Ct. 659, 58 L.Ed. 1080 and the continuing responsibility which it has for the protection of their interests. See United States v. Rickert, 188 U.S. 432, 444, 23 S.Ct. 478, 483, 47 L.Ed. 532; Board of Commissioners of Creek County v. Seber, 318 U.S. 705, 63 S.Ct. 920, 87 L.Ed. 1094. We cannot extend that reasoning so as to give priority to a claim which the United States is collecting for the benefit of a private party. See American Surety Co. v. Akron Savings Bank, supra. The beneficiaries here are not wards of the federal government; they are wage claimants who were discriminated against by their employer. The Board has eliminated the discriminated by the back pay order; and enforcement of its order has been directed by the Court of Appeals. The full sanction of the National Labor Relations Act has therefore been placed behind the order. The Board argues that the interest of the United States in eradicating unfair labor practices is so great that the back pay order should be given the additional sanction of priority in payment. Whether that should be done is a legislative decision. The contest now is no longer between employees and management but between various classes of creditors. The policy of the National Labor Relations Act is fully served by recognizing the claim for back pay as one to be paid from the estate. The question whether it should be paid in preference to other creditors is a question to be answered from the Bankruptcy Act. When Congress came to claims for unpaid wages it did not grant all of them priority. It limited the priority to $600 for each claimant and even then only allowed it as respects wages earned within three months before the date of the commencement of the proceedings. § 64, sub. a(2). We would depart from that policy if we granted the priority to one class of wage claimants irrespective of the amount of the claim or the time of its accrual. The theme of the Bankruptcy Act is 'equality of distribution', Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215, 219, 61 S.Ct. 904, 907, 85 L.Ed. 1293; and if one claimant is to be preferred over others, the purpose should be clear from the statute. We can find in the Bankruptcy Act no warrant for giving these back pay awards any different treatment than other wage claims enjoy.

The trustee claims that the liquidation of the back pay award should not have been referred to the Board. Section 10(c) of the National Labor Relations Act authorizes the Board, once an unfair labor practice has been found, to require, inter alia, the person who committed it to 'take such affirmative action, including reinstatement of employees with or without back pay, as will effectuate the policies of this Act.' The fixing of the back pay is one of the functions confided solely to the Board. At the time an order of the Board is enforced the amount of back pay is often not computed. Once an enforcement order issues the Board must work out the details of the back pay that is due and the reinstatement. of employees that has been directed. This may be done by negotiation; or it may have to be done in a proceeding before the Board. The computation of the amount due may not be a simple matter. It may require, in addition to the projection of earnings which the employee would have enjoyed had he not been discharged and the computation of actual interim earnings, the determination whether the employee wilfully incurred losses, whether the back pay period should be terminated because of offers of reinstatement or the withdrawal of the employee from the labor market, whether the employee received equivalent employment, and the like. See Phelps Dodge Corp. v. National Labor Relations Board, supra, 313 U.S. at page 190 et seq., 61 S.Ct. at page 850 et seq. Congress made the relation of remedy to policy an administrative matter, subject to limited judicial review, and chose the Board as its agent for the purpose.

The bankruptcy court normally supervises the liquidation of claims. See Gardner v. State of New Jersey, 329 U.S. 565, 573, 67 S.Ct. 467, 471, 91 L.Ed. 504. But the rule is not inexorable. A sound discretion may indicate that a particular controversy should be remitted to another tribunal for litigation. See Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 483, 60 S.Ct. 628, 630, 84 L.Ed. 876. And where the matter in controversy has been entrusted by Congress to an administrative agency, the bankruptcy court normally should stay its hand pending an administrative decision. That was our ruling in Smith v. Hoboken R. R. Warehouse & S.S.C.onnecting Co., 328 U.S. 123, 66 S.Ct. 947, 90 L.Ed. 1123 and Thompson v. Texas Mexican R. Co., 328 U.S. 134, 66 S.Ct. 937, 90 L.Ed. 1132, where we directed the reorganization court to await administrative rulings by the Interstate Commerce Commission before adjudicating the controversies before it. Like considerations are relevant here. It is the Board, not the referee in bankruptcy nor the court, that has been entrusted by Congress with authority to determine what measures will remedy the unfair labor practices. We think wise administration therefore demands that the bankruptcy court accommodate itself to the administrative process and refer to the Board the liquidation of the claim, giving the Board a reasonable time for its administrative determination.

In summary, we agree with the Court of Appeals that the claim was provable by the Board and that the computation of the amount of the award was properly referred to the Board. But since we disagree with the ruling on the priority of the claim we reverse the judgment and remand the cause for proceedings in conformity with this opinion.

It is so ordered.

Reversed and remand with directions.

Mr. Justice JACKSON, with whom Mr. Justice BLACK joins, dissenting.

Notes

1. "Creditor' shall include anyone who owns a debt, demand, or claim provable in bankruptcy, and may include his duly authorized agent, attorney, or proxy'. 11 U.S.C. § 1(11), 11 U.S.C.A. § 1(11).
2. 'Debts of the bankrupt may be proved and allowed against his estate which are founded upon * * *; (4) an open account, or a contract express or implied'. § 63, sub. a(4), 11 U.S.C. § 103, sub. a(4), 11 U.S.C.A. § 103, sub. a(4).