Investment Advisors at Risk in Unfair Labor Practices Disputes
BY JOHN W. SIMMONS, MEMBER, KIESEWETTER WISE KAPLAN PRATHER PLC
The concept of being a “single mployer” under the National Labor Relations Act (NLRA), the
federal law governing the unionization
of employees in the private sector,
has developed in a manner that
essentially allows the National Labor
Relations Board (NLRB) to ignore
corporate formalities and impose
liability on entities when traditional
concepts of corporate veil-piercing
liability would not apply. The NLRB,
the U.S. government agency charged
with enforcing the NLRA, recently
found an investment advisor to be
liable as a “single employer” with the
entity that was found to have engaged
in unfair labor practices, and this
extension of liability was recently
upheld and enforced by the 5th U.S.
Circuit Court of Appeals. Oaktree
Capital Management, L.P. v. National
Labor Relations Board 2011 U.S. App.
LEXIS 19686 (5th Cir. Sept. 26, 2011).
showed that after the expiration of
the collective bargaining agreement
on November 25, 2003, and after
a union rally on the premises on
February 12, 2004, disrupted a wedding
party, union representatives who
were on the premises on February
14 and 18, 2004, to conduct usual
union business were accused of
trespassing and were told to leave
the premises. Police also were called.
In April 2004, union representatives
were told they could not collect union
dues from employees at the resort.
been conceded and were no longer
contested on appeal included
unlawful prohibitions on employees’
soliciting one another on union
matters and distributing union
literature, surveillance of union
representatives, videotaping peaceful
union demonstrations, preventing
access to public beaches to union
representatives and employees,
threats to close the resort in retaliation
for protected activity, failure to
provide information requested
by the union in the bargaining
process, and bad faith bargaining.
When the case reached the 5th U.S.
Circuit Court of Appeals, it centered on
Oaktree’s liability for conduct found
to have given rise to various unfair
labor practices under the NLRA, three
of which were still disputed and the
remainder of which had been conceded.
The NLRB affirmed an administrative
law judge’s ruling that this conduct
violated Sections 8(a)( 1), ( 3), and ( 5)
of the NLRA and that TBR was an
Oaktree Capital Management, L.P.,
was the investment advisor to three
funds: Oaktree Capital Management
Real Estate Opportunities Fund A,
L.P.; Oaktree Capital Management
Real Estate Opportunities Fund B, L.P.;
and Gryphon Domestic VII, LLC. As
an investment by the funds, Oaktree
had purchased entities that owned
the Kuilima Resort Company, which
in turn owned the Turtle Bay Resort
on the island of Oahu in Hawaii.
Kuilima leased the property to TBR
Property, LLC, which then entered
into a management agreement with
Benchmark Hospitality Inc. to manage
Turtle Bay Resort. The ownership
structure is set forth in Figure 1.
Oaktree is G.P.
of Fund A
Oaktree is G.P.
of Fund B
Oaktree is Investment
Advisor to Gryphon
OCM Real Estate
Opportunities Fund A, L. P.
OCM Real Estate
Opportunities Fund B, L.P.
Turtle Bay Holding LLC
Turtle Bay A.J. Plaza LLC
A.J. Plaza Hawaii Co., LTD.
Kuilimn Resort Company
TBR Property, LLC
Turtle Bay Hotel and Resort had entered
into a collective bargaining agreement
with UNITE Here! Local 5, which
represented about 360 employees at
the resort. Facts established during
the unfair labor practices hearing
Benchmark Hospitality, Inc.
Turtle Bay Resort