Taking A Page From The Unions' Playbook: Employers Litigating Against Union Corporate Campaigns

Sunday, April 1, 2007 - 00:00

As a result of organized labor's well-publicized difficulties in organizing workers through secret ballot elections, the American Labor Movement now fully supports the use of card-checks, rather than secret ballot elections, to organize employees. Under a card-check process, a union is recognized as the exclusive representative of an employer's employees - at various or all locations - once a majority of employees in an appropriate bargaining unit signs union authorization cards.

The union initiated proposed legislation "The Employee Free Choice Act," among other provisions, would provide for government certification of a union based upon a card-check - whereas presently a union can become the bargaining representative of employees through a secret ballot election or through the consent of the employer pursuant to a card-check. The Employee Free Choice Act passed the House of Representatives by a vote of 241 to 185, and Senator Edward Kennedy plans to introduce a Senate version of the bill in the very near future. The White House, however, has stated that the President would veto the Act if it is put before him. Therefore, until the passage of such legislation, labor will continue to focus their efforts on organizing via card-checks by placing pressure on employers to recognize unions based upon card-checks. This ongoing scenario presents an interesting labor relations chess-match in which employers are becoming more aggressive.

Many unions - especially those unions that comprise the Change-to-Win Coalition that have split from the AFL-CIO - now attempt to organize employers rather than employees. Specifically, unions will engage in corporate campaigns against an employer until the employer agrees to a card-check agreement. In addition, unions often compel employers to sign a neutrality agreement - preventing any employer campaigning against the union's organizing effort.

Corporate campaigns are comprised of many different tactics, but, generally, include the filing of various charges with the government (unfair labor practice charges with the National Labor Relations Board, Wage and Hour claims with the Department of Labor, etc.); other forms of litigation; the creation of broad-based community coalitions with religious leaders, politicians and other community leaders; and the publication of negative information by both the union and proxy groups through traditional and on-line media (including the creation of websites). Pressure also is placed on business partners, leading shareholders and other corporate shareholders in an attempt to compel them to pressure the targeted company to comply with the union's demands. Unions utilize these tactics as a prelude to card-check agreements, paving the way for the unionization of its employees.

Traditionally, many employers have attempted to repel corporate campaigns by reacting defensively - utilizing public relations strategies to rapidly respond to union statements and vigorously defending against union-initiated litigations. Often times, the defense against unions' filing legal challenges to a company's policies and practices involves demonstrating that the filings are merely part of a strategic organizing campaign by the union, and not a true belief that any law has been violated. Such a defense was successfully employed by Cintas in defending against a frivolous securities action regarding aspects of the company's proxy statement brought by UNITE-HERE. In rejecting UNITE-HERE's motion for a temporary injunction against Cintas, Judge Cote of the Southern District of New York held "it appears that the plaintiff [UNITE-HERE] had no genuine belief in the merits of its claims, but brought this lawsuit as part of a campaign to harass a corporation and gain leverage in a unionization struggle."1 Consequently, UNITE-HERE withdrew its securities complaint against Cintas.2

Recent trends, however, demonstrate employers taking a page from the unions' corporate campaign playbook and engaging in offensive litigation strategies to combat the unions' tactics. Such employer litigation strategies include filing unfair labor practice charges with the National Labor Relations Board; state law actions such as defamation, tortious interference with contracts/business, and trespass; invasion of privacy and related claims; RICO actions (Racketeer Influenced and Corrupt Organizations Act); and antitrust complaints.

Litigating against organizing campaigns received increased legal protection from the U.S. Supreme Court in 2002. In BE&K Construction Co.,3 the Supreme Court made clear that, due to the First Amendment's requirement that parties have access to the courts, the National Labor Relations Board only may declare completed lawsuits unlawful if they were filed both for a retaliatory motive and were objectively and subjectively baseless. The Court held that an employer did not violate the National Labor Relations Act by filing a federal anti-trust complaint against a group of unions in connection with the unions' lobbying, litigating and engaging in other concerted actions against the company.4 In so holding, the decision safeguarded an employer's constitutional right to utilize the judicial system as long as its claims have a reasonable basis. Consequently, employers have been filing an increased number of lawsuits against organizing tactics.

Employers have been successful in litigating against defamatory statements made in the course of organizing campaigns despite specialized pleading requirements for defamation actions against unions.5 For example, in July of this past year, a California jury awarded $17.3 million to a hospital that was defamed by one of the nation's largest labor unions, and the leading union in the fashion, garment and hospitality industries, UNITE HERE.6 The jury found that the union committed libel during a labor dispute with the hospital's provider of laundry service by mailing consumers postcards claiming the hospital's laundry service "does not ensure that 'clean' linens are free of blood, feces, and harmful pathogens. Protect your newborn. Choose your birthing center wisely."7

Similarly this past September, a jury in Lake County, Illinois awarded $2.35 million in damages against the Chicago Regional Council of Carpenters for defaming a local home builder.8 During an alleged campaign for higher wages and benefits, the union had picketed and distributed handbills that suggested the plaintiff, J. Maki Construction Co., built homes of inferior quality and rhymed "Maki" with "crappy."9 The jury rejected the union's defense that the alleged defamatory actions were part and parcel of a legitimate labor dispute.10 Although there was no award of compensatory damages, the jury found the union liable for $2.25 million and three union organizers individually liable for $45,000, $35,500 and $22,500, respectively, in punitive damages.11

Actions based on privacy protection laws also are utilized in efforts to combat corporate campaigns. In August of this past year, the U.S. District Court for the Eastern District of Pennsylvania held that UNITE-HERE violated the federal Driver's Privacy Protection Act of 1994 (DPPA)12 by obtaining home addresses of Cintas' employees from motor vehicle records.13 The DPPA prohibits persons from obtaining or disclosing personal information contained in motor vehicle records with fourteen enumerated exceptions.14 In preparation for its Cintas organizing campaign in early 2003, UNITE-HERE had union representatives record license plate numbers in Cintas' parking lot and then used Westlaw to trace the plate numbers to individuals and obtain the contact information of approximately two thousand employees.15

The District Court found the union's purpose of "furthering its organizing campaign" to be outside the exceptions enumerated in DPAA, and, thus, held the unions actions to be unlawful.16 The Court stated: "we will not engraft upon the DPPA a 'labor exception' that would permit unions to acquire and use employees' personal information, obtained from motor vehicles records, to contact them during organizing campaigns."17 Continuing, the Court held that neither the litigation nor government agency exceptions to the DPAA applied because UNITE was merely contacting employees with the "speculative hope" of "fishing" out complaints that would assist in the campaign against Cintas.18 Moreover, the Court held that even if one of the statutory exceptions applied, such a permissible use would not excuse the impermissible use of furthering the union's organizational campaign.19 The financial consequences of the decision could be large for UNITE-HERE - the federal judge awarded $2,500 in statutorily mandated liquidated damages to each of the nine named plaintiffs.20 If the plaintiffs' motion for class certification is granted, the total damages could exceed $4 million.21

In defending against aggressive organizing tactics, employers also pursue RICO claims, such as the one approved by a Delaware district court in Bayou Steel Corp. v. United Steelworkers of America.22 Spurred by failed labor negotiations, the Steelworkers waged a brutal four-year corporate campaign against Bayou Steel that involved a strike, considerable violence, and the filing of multiple complaints with various state and federal agencies. Bayou Steel filed a federal RICO action alleging that the Steelworkers and the AFL-CIO were engaging in a "'Corporate Campaign' of harassment and violence as a result of failed labor negotiations between plaintiff and defendants, with the intention of taking over or destroying plaintiff." Prior to the parties settling the matter, the district court held that Bayou Steel alleged sufficient facts for a RICO claim to survive summary judgment.23

Further, employers may find relief from corporate campaign tactics under federal antitrust laws. Federal antitrust laws generally do not regulate regular union activities under the labor exemption from the antitrust prohibitions.24 Nonetheless, unions may lose their exemption when they step out of their traditional roles and activities. Most relevant to the tactics associated with a corporate campaign, unions may lose the protection of the labor exemption by conspiring with non-labor organizations or engaging in secondary boycotts not otherwise protected by the National Labor Relations Act.25

Indeed, at least one recent anti-trust complaint concerning a union's corporate-campaign-type activities of joining with employers to exclude plaintiff from receiving business was found to state a cause of action by both the District Court and the National Labor Relations Board's Division of Advice.26 Unions conspiring with religious or community organizations - as is often done in the course of a corporate campaign - may be held to the same scrutiny under the anti-trust laws as unions conspiring with other non-labor groups.27

Similarly, if a union threatens to conduct an illegal secondary boycott by dissuading a secondary employer from carrying the primary employer's products for example, such pressure constitutes an unfair labor practice under federal labor law and also implicates antitrust laws, as well as actions under 303 of the Labor-Management Relations Act.28 Thus, unions that engage in any form of unlawful secondary boycotts under the National Labor Relations Act could be susceptible to anti-trust complaints.29

Until, and if, the Employee Free Choice Act becomes law, unions will continue to pressure employers to recognize them via card-check agreements. Based on the recent litigation record, employers are increasingly utilizing litigation to fight back against such pressure.1 See Union Withdraws Securities Suit Against Cintas Corp., Employment Law 360 (Oct. 13, 2006) (citing UNITE HERE v. Cintas Corp., No. 06-07061 (S.D.N.Y. 2006)) (hereinafter Union Withdraws).

2 Id.

3 536 U.S. 516 (2002).

4 Id. at 519.

5 The Supreme Court set stringent standards for a defamation action against a union in Linn v. United Plant Guard Workers of America, Local 1114, 383 U.S. 53, 61, 70 (1966).

6 See The National Law Journal, Nov. 6, 2006, pgs. 1 & 18 (discussing Sutter Health v. Unite Here, No. S-CV-17938, Placer Co., Calif. Super. Ct.).

7 Sutter Health v. UNITE HERE, 2005 WL 1925910 (E.D. Cal. Aug. 10, 2005.)

8 See Michael Bologna, Jury Awards $2.35 Million to Home Builder in Suit Against Chicago Carpenters Unions, 185 DLR A-9, Daily Labor Report (Sept. 25, 2006) (discussing J. Maki Constr. Co. v. Chicago Reg'l Council of Carpenters, Ill. Cir. Ct. Lake Cty., No. 05 L 503, verdict 9/20/06).

9 Id.

10 Id.

11 Id.

12 18 U.S.C. 2721 et seq.

13 Pichler v. UNITE, 446 F.Supp.2d 353 (E.D. Pa. Aug. 30, 2006); amended by Pichler v. UNITE, 2006 WL 2987784 (E.D. Pa. Oct. 17, 2006)..

14 18 U.S.C. 2721 et seq. (2006).

15 Pichler, 446 F.Supp.2d at 367-68 (stating that plaintiffs and Cintas claim UNITE accessed the records of between 1,758 to 2,005 Cintas employees or their relatives or friends).

16 Pichler, 446 F.Supp.2d at 366-68.

17 Id.

18 Id. at 368-71.

19 Id. at 367 (finding that if UNITE had three purposes for obtaining or using plaintiffs' personal information and two of those were permissible uses but the third was not, UNITE would still be liable for the third purpose.)

20 Pichler v. UNITE, 2006 WL 2987784, *4 (E.D. Pa. Oct. 17, 2006).

22 Id. at *5.

22 1996 WL 76344, at *2 (D. Del. Jan. 11, 1996).

23 Id.

24 See 15 U.S.C. 17 (Section 6 of the Clayton Act); Meat Cutters v. Jewel Tea, 381 U.S. 676 (1965); U.S. v. Hutcheson, 312 U.S. 219 (1941).

25 See Connell Const. Co., Inc. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616 (1975) (holding that the agreement between the union and contractor whereby the contractor agreed to deal only with mechanical subcontractors which were parties to the union's current multiemployer CBA was not entitled to a nonstatutory exemption from the antitrust laws); U.S. v. Hutcheson, 312 U.S. 219, 232-34 (1940) (stating in dictum that a union's motives are irrelevant under Section 20 of the Clayton Act "[s]o long as a union acts in its self-interest and does not combine with non-labor groups."). See also, Great Atlantic & Pacific Tea Co. v. Amalgamated Meat Cutters & Butcher Workmen, Local 88, 410 F.2d 650, 653 (8th Cir. 1969) (union said to lose exemption if it conspires with business people); U.S. v. Employing Lathers Ass'n, 212 F.2d 726, 729-30 (7th Cir. 1954) (unions conspired with business contractors to suppress competition); Harlem River Construction Co-op v. Assoc. Grocers, 408 F. Supp. 1251 (S.D.N.Y. 1976) (holding that the union could not claim antitrust immunity under section 6 of the Clayton Act where the union conspired with a competing grocery store to make the plaintiff grocery store less profitable); Associated Orchestra Leaders v. Philadelphia Music Soc'y, 203 F.Supp. 755, 759 (E.D. Pa. 1962) (exemption said to be lost when union conspires with employers to restrain competition). See generally C. Edward Fletcher III, Article, The Corporate Campaign - Labor's Ultimate Weapon or Suicide Bomb?, 65 N.C.L. Rev. 85, 115 & n. 218 (explaining the ways in which unions could be liable or exempt from liability under federal antitrust law).

26 See Cool Wind Ventilation Co. v. Sheet Metal Workers Int'l Assoc., Local Union No. 28 et al., No. CV-00 3678 (E.D.N.Y. 2001) (denying the defendants' motion to dismiss for failure to state a cause of action where Cool Wind alleged that Local 28 entered into a conspiracy to restrain trade and monopolize sheet metal and duct work in the City of New York and Nassau and Suffolk counties, excluding non-Local 28 contractors like Cool Wind from the market); Cool Wind Ventilation Co., NLRB GC Div. of Advice Mem., 29-CA-25439 (Jan. 7, 2005).

27 Fletcher, supra, at 115, n. 220 (citing court cases that have left open the possibility that a conspiracy with a nonbusiness, nonunion groups could destroy the union's exemption).

28 Fletcher, supra, at 111; See National Labor Relations Act, 8(b)(4)(ii). See 303 of the Labor-Management Relations Act, 29 U.S.C. 187.

29 See, e.g., Connell, supra, at 625 (holding that the union violated the Sherman Act by causing a direct restraint on the product market); Duplex Printing Press Co. v. Deering, 254 U.S. 443, 473-77 (1921) (holding that neither section 6 nor section 20 of the Clayton Act exempts labor unions' secondary boycott activities from antitrust liability); Lawlor v. Loewe, 235 U.S. 522, 534 (1914) (holding that secondary boycott activities are illegal under the Sherman Act).

Paul Salvatore is a Partner and Brian Rauch is an Associate in Proskauer Rose LLP's Labor and Employment Law Department. Both represent employers in union/management relations, collective bargaining, and all aspects of employment counseling and litigation. The authors thank Jacqueline Dorn, an Associate at Proskauer, for her assistance in preparing this article. Please refer to our website, www.metrocorpcounsel.com, for the citations to which the footnotes in this article refer.

Please email the authors at psalvatore@proskauer.com or brauch@proskauer.com with questions about this article.