NATIONAL LABOR RELATIONS BOARD, Petitioner, v. NEW COLUMBUS NURSING HOME, INC., Respondent, 720 F.2d 726

LEVIN H. CAMPBELL, Chief Judge. This is an application by the NLRB for enforcement of an order requiring New Columbus Nursing Home (“New Columbus”) to bargain with the Teamsters. The Teamsters (“the union”) conducted a representation election campaign in three proposed bargaining units of New Columbus’s employees. New Columbus mounted a campaign attacking the union’s poor fiscal condition and alleges that it “sensitized” the workers to the issue. New Columbus sent letters to its employees indicating that the union’s balance sheet showed total liabilities equal to three times its total assets.

Four days before the election, the union sent a letter to the employees in which the union claimed that it “finished in the black after only one year of [the new secretary treasurer’s] Administration.” The union won the election, but New Columbus objected to certification on the ground that the union’s' letter was misleading regarding its solvency. In certifying the union over the company’s objection, the Board, under the standard of Hollywood Ceramics Co., 140 NLRB 221 (1962), looked into the truth or falsity and seriousness of thé alleged union misrepresentations.

The Board concluded that despite the union’s negative net worth as indicated by its balance sheet, the union’s letter was accurate if viewed as relating only to its income statement, which showed a positive cash flow for the prior year. Following certification of the union, the Board overruled the Hollywood Ceramics standard in Midland National Life Insurance Co., 263 NLRB No. 24, 110 L.R.R.M. (BNA) 1489 (1982), and indicated that it was returning to a position described in Shopping Kart Food Market, Inc., 228 NLRB 1311 (1977).

Under Shopping Kart, the Board will not review the substance of the alleged misrepresentations, but rather will set aside an election only if a party has used forged documents or altered Board documents during its campaign. New Columbus refused to bargain with the union, and the union filed an unfair labor practice complaint with the Board. New Columbus defended on the ground of the union’s election misrepresentation. The Board applied the Midland (i.e., Shopping Kart) rule and refused to examine the substance of the alleged misrepresentation.

Since the union had not used forged documents in the campaign, the Board again approved the election and ordered New Columbus to commence bargaining. The courts will enforce a Board order unless such order has “no reasonable basis in law.” Ford Motor Co. v. NLRB, 441 U.S. 488, 497, 99 S.Ct. 1842, 1849, 60 L.Ed.2d 420 (1979); NLRB v. Hearst Publications, Inc., 322 U.S. 111, 131, 64 S.Ct. 851, 861, 88 L.Ed. 1170 (1944). This inquiry can be resolved into two main elements: 1) whether the Board acted within an area of regulation committed to it by Congress, NLRB v.

Insurance Agents, 361 U.S. 477, 499, 80 S.Ct. 419, 432, 4 L.Ed.2d 454 (1960); and 2) whether the Board properly applied the correct legal standard, Chemical Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 166, 92 S.Ct. 383, 391, 30 L.Ed.2d 341 (1971). The first element is- clearly satisfied in the instant case. It is well settled that “Congress has entrusted the Board with a wide degree of discretion in establishing the procedure and safeguards necessary to insure the fair and free choice of bargaining representatives by employees.” NLRB v. A.J.

Tower Co., 329 U.S. 324, 330, 67 S.Ct. 324, 328, 91 L.Ed. 322 (1946). Thus in adopting and applying the Midland rule, the Board was functioning within its established area of regulation. With respect to the correctness of the legal standard, the relevant law in this case is

section 7 of the National Labor Relations Act which provides that “[e]mployees shall have the right to self-organization ... . ” 29 U.S.C. § 157. This

section has been interpreted as guaranteeing the “unhampered freedom of choice” of employees in selecting a bargaining representative. International Association of Machinists Lodge No. 35 v. NLRB, 311 U.S. 72, 80, 61 S.Ct. 83, 88, 85 L.Ed. 50 (1940). While the Board insists that it continues to recognize its duty to protect employee free choice, we must decide whether this statutory obligation has been adequately satisfied.

Although the Board announced in Midland a broad rule “that we will no longer probe into the truth or falsity of the parties’ campaign statements, and that we will not set elections aside on the basis of misleading campaign statements,” 263 NLRB No. 24 at 21, 110 L.R.R.M. (BNA) at 1494 (footnote omitted), that rule is implemented through the Board’s case-by-case adjudication of labor disputes. In passing on the validity of the rule, therefore, we do so only with respect to the situation arising in the instant case.

The Board in Midland balanced “the possibility that some voters may be misled by erroneous campaign propaganda,” against the “impediments to free speech,” the impairment of the finality of election results, and the lack of uniformity in national labor laws spawned by Hollywood Ceramics. Midland, 263 NLRB No. 24 at 17-20, 110 L.R.R.M. (BNA) at 1492-93. The Board concluded that the balance favored not reviewing the substance of campaign misrepresentations. As applied to campaign statements of the type presented in the instant ease, we cannot say the Board violated

section 7 by following the Midland rule. The Board’s duty to protect employees’ right to self-organization encompasses a variety of factors including the safeguarding of free campaign speech, the finality of election results and the swift effectuation of employees’ choices. The alleged misrepresentation concerning the union’s solvency was the kind of statement not easily categorized as being either true or false. In any case, it was scarcely likely to have affected the employees’ free and fair choice.

As to such a statement the Board could reasonably refuse to take the time and trouble to adjudicate its truth or falsity, believing that refusal to do so would better accommodate the other interests included within its duty to protect employees’ right to self-organization. In so holding, however, we do not necessarily endorse application of the Midland rule to situations involving charges of more fundamental and clear-cut misrepresentations.

The Board has a duty to provide reasonably for the employees’ “unhampered freedom of choice.” International Association of Machinists Lodge No. 35, 311 U.S. at 80, 61 S.Ct. at 88. Some misrepresentations may be so material and fraudulent as to undermine the employees’ freedom of choice, rendering their

section 7 right to self-organization a nullity. Were this such a case, the Board’s flat insistence, under Midland, upon certifying the results of the fraudulent election might constitute legal error. Here, however, we cannot say that the Board’s approach was inconsistent with the employees’ right to exercise a “fair and free choice” in the selection of a bargaining representative. See, e.g., A.J. Tower Co., 329 U.S. at 330, 67 S.Ct. at 328. We therefore uphold the Board. New Columbus also objects to the retroactive application of Midland to the election campaign.

The Board clearly intended Midland to apply retroactively “ ‘to all pending cases in whatever stage.’ ” 263 NLRB No. 24 at 21 n. 24, 110 L.R.R.M. (BNA) at 1494 n. 24 (quoting Deluxe Metal Furniture Co., 121 NLRB 995, 1006-07 (1958)). According a newly adopted rule retroactive effect is proper unless “manifest injustice” results. Bradley v. School Board of Richmond, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974); New England Power Co. v. United States, 693 F.2d 239, 244 (1st Cir.1982). We see nothing like that here. See NLRB v. Monark Boat Co., 713 F.2d 355, 361 (8th Cir.1983).

The Board’s order is enforced. . Two circuits have since upheld the application of the Midland rule. NLRB v. Yellow Transportation Co., 709 F.2d 1342 (9th Cir. 1983); NLRB v. Monark Boat Co., 713 F.2d 355 (8th Cir.1983). . “[F]aimess in elective process demands here, as it does in public or corporate elections, the opportunity of contesting parties to communicate their respective positions to the electorate.” NLRB v. Hanes Hosiery Division — Hanes Corp., 384 F.2d 188, 191 (4th Cir.1967), cert. denied, 390 U.S. 950, 88 S.Ct. 1041, 19 L.Ed.2d 1141 (1968). .

The Board may adopt a rule prohibiting post-election challenges to voter eligibility because such challenges “destroy the finality of the election result [and] invite unwarranted and dilatory claims by defeated candidates NLRB v. A.J. Tower Co., 329 U.S. 324, 331, 67 S.Ct. 324, 328, 91 L.Ed. 322 (1946).