Tired of unions exercising their “right” to file numerous lawsuits as part of a corporate campaign? Secondary employers targeted by this union tactic may have a cause of action where those union-initiated suits are baseless. In Waugh Chapel South, LLC v. UFCW Local 27, Case No. 12-1429 (4th Cir. Aug. 26, 2013), the Fourth Circuit reinstated a complaint brought by two real estate developers against two UFCW locals alleging they violated Section 303 of the Labor Management Relations Act by engaging in unlawful secondary boycott activity against the plaintiffs in violation of Section 8(b)(4)(ii)(B) of the National Labor Relations Act.
Plaintiff developers each were building a shopping center wherein they intended to lease space to a non-union supermarket. According to the complaint, the UFCW, which had threatened one of the developers that the union would “fight every project you develop where [the non-union supermarket] is a tenant,” lived up to its promise: The unions directed and funded fourteen legal challenges at every stage of the projects’ development to try to force the developers to drop the supermarket as a tenant. Many of the challenges were brought by surrogate plaintiffs directed by the unions and represented by the union’s attorney. With one exception, the cases were dismissed, mooted or withdrawn without any success.
The district court dismissed most of the initial complaint, finding that the legal challenges, with one possible exception, were not objectively baseless. Thus, the court found the unions were immune from liability for all but the one possible baseless suits under the Noerr-Pennington doctrine, which safeguards the First Amendment right to “petition the government for a redress of grievances” by immunizing citizens from the liability that may attend to the exercise of that right.
Applying the “sham litigation” exception to the Noerr-Pennington doctrine, the Fourth Circuit disagreed and reinstated the complaint. The court followed the Second and Ninth Circuits in applying a less stringent, multi-litigation standard instead of the more stringent single litigation test in determining whether the “sham litigation” exception should apply. In sham litigation situations involving multiple lawsuits, a court should conduct a holistic evaluation of whether the administrative and judicial processes have been abused. The pattern of the legal proceedings, not their individual merits, centers the analysis. While the subjective motive of the litigant and the objective merits of the cases are relevant, other signs of bad faith litigation also can be probative.
In this case, the unions’ “one-out-of-fourteen batting average” at least suggested a policy of starting legal proceedings without regard to the merits and for the purpose of violating the law. Ten of the fourteen cases also were withdrawn under “suspicious circumstances” — including nine appeals of building and grading permits (which the court found would have been subject to collateral estoppel anyway) that allegedly were voluntarily dismissed to avoid complying with subpoenas for financial records that would show the unions paid for the litigation. Given these facts and other indicia of bad faith litigation, the court believed there were genuine issues of material fact upon which a fact finder could conclude the unions had abused their right to petition the courts.
This is a good decision for employers, particularly where the “win-at-all-costs” strategy perfected by the Change to Win unions is employed in the form of litigation against companies and employers who have only a secondary relationship to the primary employer who is being targeted by the union campaign.