GAUGING MERIT UNDER THE FIRST AMENDMENT: BE&K v. NLRB

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1 GAUGING MERIT UNDER THE FIRST AMENDMENT: BE&K v. NLRB Mark A. Carter HEENAN, ALTHEN & ROLES, LLP BB&T Square 300 Summers Street, Suite 1380 P.O. Box 2549 Charleston, WV Telephone: (304) Fax: (304)

2 GAUGING MERIT UNDER THE FIRST AMENDMENT: BE&K v. NLRB Our doubts are traitors And make us lose the good we oft might win By fearing to attempt William Shakespeare, Measure for Measure, Act I, Scene 4 At this writing, The United States Supreme Court of Appeals is considering the appeal of BE&K Construction 1 to a Sixth Circuit decision upholding the NLRB=s Bill Johnson=s Restaurants standard. 2 At the presentation of this paper, the Court likely has issued its opinion upholding, modifying or overruling the Agency=s standard in determining when civil litigation can constitute an unfair labor practice. As such, any speculation offered in this paper, and considered by the reader, on the outcome of the Court=s considerations is necessarily a use of time much better spent actually reading the case. Of more use to the reader, even with the extant opinion available, is an analysis of how the NLRB arrived at the Bill Johnson=s Restaurants standard and why the standard is antiquated in a labor climate dominated by the Acorporate campaign@ 3 as per the traditional labor strike. 1 BE&K v. NLRB, 246 F.3d 319 (6 th Circuit 2001 ) 2 Bill Johnson=s Restaurants, Inc. v. NLRB, 461 US 731 (1983) 3 Food Lion v. UFCW, 103 F.3d 1007, 1014 n. 9 (D.C. Cir. 1997) 2

3 The Bill Johnson=s Standard The Bill Johnson=s standard, in its June 1, 2002 NLRB permutation, holds that all civil litigation initiated by an employer or its agents against a Union, or its agents, affecting Section 7 rights of employees, which does not result in a verdict on all counts for the employer, is meritless. As such, the aggrieved employees and/or unions are entitled to remedies under the Act including attorney fees expended in defense of the claim. 4 At issue in the case is whether the rule=s foundation, a footnote in the US Supreme Court=s 1983 opinion, is dicta or controlling precedent. The pragmatic impact of this decision, obviously, is that employers are profoundly reticent to initiate a civil action when, absent the guarantee of their lawyers that every count will result in a verdict for the employer, they face the prospect of paying the adversary=s attorney fees. Hence, the argument by the Petitioner and amici; that the Bill Johnson=s rule, as interpreted by the Agency, impermissibly chills the First Amendment rights of employers in seeking recourse through the courts. The position of the Agency is that the rule does not impermissibly chill constitutional rights as, in effect, all the employer has to do to avoid attorneys fees awards is win. Bill Johnson=s, moreover, allows litigants who file non-frivolous suits to proceed to discovery, through which they may obtain sufficient evidence to win their case and insulate themselves from liability... Respondent NLRB=s Brief pp , BE & K v. NLRB, No (US Supreme Court) 4 Bill Johnson=s Restaurants, supra. at note 2. 3

4 The Petitioner advocated, and the Supreme Court accepted certiorari on, the issue of whether the Agency must modify its standard concerning when an employer, union or employee has filed litigation: Did the Court of Appeals err in holding that under Bill Johnson=s Restaurant=s, Inc. v. NLRB, 461 US 731 (1983) the NLRB may impose liability on an employer for filing a losing retaliatory lawsuit, even if the employer could show the suit was not objectively baseless under professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 US 49 (1993)? In Professional Real Estate Investors, the U.S. Supreme Court reaffirmed the right of citizens under the First Ammendment to petition the courts for relief, and underscored the substantive protections afforded to citizens to insure those rights and not infringed. 5 The Court recited the litany of opinions safeguarding the right to sue concluding Our decisions therefore establish that the legality of objectively reasonable petitioning directed toward obtaining governmental action is not at all affected by any anti-competitive purpose [the actor] may have had... 6 The Court went on to explain that no Plaintiff should be held liable for instituting a civil action, be it for damages or an injunction, unless it is objectively baseless, expressly referencing the decision in Bill Johnson=s....we have consistently assumed that the sham exception contains an indispensable objective component...whether applying Noerr as an antitrust doctrine of invoking it for other contexts, we have repeatedly reaffirmed that evidence of anti-competitive intent or purpose alone cannot transform otherwise legitimate activity into a sham. Indeed, by analogy to Noerr=s sham exception, we held that even an Aimproperly constructed@ lawsuit may not be enjoined 5 PRE v. Columbia Pictures, 508 US 49 (1993) 6 Id. at 59 3

5 PRE, 508 US at under the National Labor Relations Act as an unfair labor practice unless such litigation is The Court in PRE held that Aobjectively and Anon are synonymous and mean that PRE, 508 US at 55 n.3 no reasonable litigant could realistically expect success on the merits [at the time the suit was filed]. Success, expressly does not mean >win=, but rather, whether the suit involved a reasonable or genuine effort to invoke the judicial process. Id., 508 US at 60 n.5. Bill Johnson=s History The bright line test currently employed by the NLRB has not been consistently employed by the NLRB. As early as 1950, the NLRB first articulated when, and how, malicious use of the judicial system could constitute an unfair labor practice. W. T. Carter & Brother, 90 NLRB 2020 (1950). In Carter the NLRB held that an employer which had successfully obtained an injunction against organizational picketing in state court had violated ' 8(a)(1). Id. The Board held that the employer=s motive in seeking the injunction retaliated against the employees protected ' 7 activity of peacefully picketing and found a violation of the Act. By 1952, the Board added another element to this analysis. In Texas Foundries, Inc,. 101 NLRB 1642 (1952), the NLRB held that an employer had not violated the Act where its suit for an injunction was based upon probable cause and was not motivated by malicious, abusive or bad faith bases. As such, as early as 1952, the Board held that only suits which are groundless 4

6 and brought for improper reasons violate the NLRA. By 1960, the NLRB held that the actual filing of a civil action could never constitute an unfair labor practice regardless of its merits. Clyde Taylor, 127 NLRB 103, (1960). This bright line NLRB test was premised upon a private party=s constitutional rights to free access to the Courts, and was upheld for more than 15 years. See generally, Fashion-Fair, Inc., 159 NLRB 1435, 1449 (1966), United Aircraft Corp., 192 NLRB 382, 384 (1971). In 1976, the Board again modified its test based upon two civil suits brought by unions. Television Wisconsin, Inc., 224 NLRB 722 (1976), and Int=l Organization of Masters, Mates and Pilots (AIOMMP@), 224 NLRB 1626 (1976). In these two cases the NLRB resuscitated the two pronged test requiring the charging party to demonstrate that the civil action lacked a good faith basis in law and that it was brought for an improper motive to violate the Defendant=s rights under the NLRA. The NLRB=s decision in Bill Johnson=s itself was upheld by the Seventh circuit because the employer=s lawsuit lacked a reasonable basis in fact and that it was filed to penalize [the employees] for engaging in protected activity. The U. S. Supreme Court maintained the two pronged test requiring a showing that the suit lacks reasonable basis in law or fact, and was brought for an improper motive, to support an injunction against the suit by the federal court. Id. at 713 In footnote 15 of the Bill Johnson=s decision, in what is arguably dicta, the Court discussed a situation unlike the case it was ruling upon where the civil action had been completely litigated. In this footnote, the Supreme Court anticipated that the NLRB could determine that civil litigation resulting in a loss by the employer could support a ' 8(a)(1) 5

7 finding and appropriate remedies. It did not hold that the fact that a civil action was unsuccessful mandated a determination that the suit was filed without merit. Id. at 747. A[i]f judgment goes against the employer in the... court, however, or if his suit is withdrawn or is otherwise shown to be without merit, the employer has had its day in court, the interest of the State in providing a forum for its citizens has been vindicated, and the Board may then proceed to adjudicate the '8(a)(1) and '8(a)(4) unfair labor practice case...@ On remand, and thereafter, the NLRB has consistently held that where an employer does not prevail in the underlying civil action which is subject to a Bill Johnson=s charge, the civil action was necessarily without merit, and the union wins. Bill Johnson=s Restaurants, Inc., 290 NLRB 29, (1988). The Impact of Bill Johnson=s In The Age of Corporate Campaigns A corporate campaign is a coordinated attack by a union using a variety of economic, legal, political, and psychological weapons against a corporation that has opposed unionization, refused to agree to the union=s bargaining demands, or in some other way refused to yield on some issue of great importance to the labor organization waging the campaign. The attack is waged in numerous forums, including regulatory agencies and the courts. The attack is intended to tarnish the image, and undermine the reputation, of the targeted company through constant and unyielding pressure and to cause so much disruption that management is forced to surrender to the union=s demands. 7 But most of all, it is warfare which unions have chosen to undertake outside the confines of the representational procedures of the Act. 7 See generally, J. Manheim, The Death of A Thousand Cuts: Corporate Campaigns and The Attack on the Corporation (2001). 6

8 Courts are beginning to acknowledge the tactic. The Court of Appeals for the District of Columbia Circuit defined corporate campaigns as: a wide and indefinite range of legal and potentially illegal tactics used by unions to exert pressure on an employer. These tactics may include, but are not limited to, litigation, political appeals, requests that regulatory agencies investigate and pursue employer violations of state or federal law, and negative publicity campaigns aimed at reducing the employer=s goodwill with employees, investors, or the general public. Food Lion, Inc. v. United Food & Commercial Workers, 103 F.3d 1007, 1014 n.9 (D.C. Cir. 1997). However, long before this, unions themselves have described the strategy more succinctly: [C]orporate campaigns...swarm[] the target employer from every angle, great and small, so that corporate officers are always aware of the effects of their decreased on the rank and file. It=s the death of a thousand cuts rather than a single blow. Union Officials Stress International Scope of Organizing, Bargaining Campaigns, Daily Lab. Rep. (BNA) (at A-5 Nov. 16, 1992). one which: The AFL-CIO Industrial Union Department (AIUD@) defines a corporate campaign as Applies pressure to many points of [corporate] vulnerability to convince the company to deal fairly and equitably [from the union=s point of view] with the union.... It means vulnerabilities in all of the company=s political and economic relationshipcwith other unions, shareholders, customers, creditors, and government agenciescto achieve union goals. Developing New Tactics: Winning with Corporate Campaigns, Industrial Union Department, AFL-CIO at 1 (1985). And, according to Ray Rogers, who claims to have initiated corporate 7

9 campaign strategies: A[W]e develop a campaign strategy that has a beginning point A and an end point Z. Point Z is total defeat or annihilation of your adversary.@ Quoted in, D. La Botz, The Troublemaker=s Handbook at 128, (A Labor Notes Book 1991). According to The Troublemaker=s Handbook, such campaigns Aare effective when they inflict costly consequences on the target company or its allies.@ Id. at 127. Manuals, such as Developing New Tactics: Winning with Corporate Campaigns and The Troublemaker=s Handbook, have been published by several union-affiliated organizations, individual unions, and the AFL-CIO to guide local unions in waging corporate campaigns. These manuals explain the rationale behind corporate campaigns and provide tactical suggestions and organizational templates. It is clear from the manuals that unions view federal and state law as a means to harass employers: Both public institutions and private companies are subject to all sorts of laws and regulations, from the Securities and Exchange Commission to the Occupational Safety and Health Act, from the Civil Rights Act to the local fire codes. Every law or regulation is a potential net in which management can be snared and entangled. A Troublemaker=s Handbook, supra. at 127. Part of ensnaring management is using regulatory agencies to harass management. The IUD=s manual, Developing New Tactics: Winning with Corporate Campaigns, supra, phrased it this way: Businesses are regulated by a virtual alphabet soup of federal, state, and local agencies, which monitor nearly every aspect of 8

10 corporate behavior. Although these watchdog agencies employ inspectors to monitor compliance by companies, most rely on employees and other individuals to file complaints about violations. Once the regulators are alerted by a company, they sometimes assume an adversarial relationship toward the offender. Id. at 6. The Service Employees International Union=s (ASEIU@) Manual clearly sums up the purpose for which unions utilize regulatory agencies in corporate campaigns: Moreover, even if the violations are completely unrelated to bargaining issues, your investigations may give management added incentive to improve its relationship with you. Management officials may find that... the employer now is facing.... CExtra expense to meet regulatory requirement or qualify for necessary permits and licenses. CCostly delays in operations while those requirements are met. CFines or other penalties for violating legal obligations. CDamage to the employer=s public image, which could jeopardize political or community support, which in turn could mean less business or public funding. SEIU Contract Campaign Manual, 3-21 (1988). As these manuals demonstrate, in a typical corporate campaign, unfair labor practice charges are filed with the NLRB, safety complaints with the Occupational Safety and Health Administration (AOSHA@), charges generated with the Environmental Protection Agency (AEPA@), and protests filed to petitions for local building permits, sometimes by cooperating Apublic interest@ groups. Expensive litigation and bad publicity for corporations frequently result. Employers victimized by illegal and unprotected corporate campaign tactics are unable in the vast majority of situations to seek relief before the NLRB, and are subject to sanction by the 9

11 NLRB for pursuit of a remedy before the Courts, thereby destroying the parity sought by federal labor law between labor and management. Unions are not protected by the NLRA when they take actions solely to injure an employer. In Tradesmen Int=l Inc., 332 NLRB No. 107 (Oct. 31, 2001), a union organizer participated in a public hearing before the City of Lorain, Ohio. The organizer testified that Tradesmen should be subject to a city ordinance which required certain contractors to post surety bonds when doing business in the city. The organizer subsequently applied for employment with Tradesmen, a corporate campaign tactic known as Asalting,@ and was not hired. The organizer alleged successfully before the NLRB that the employer had refused to hire him based upon his testimony to the city, and that the conduct was protected activity under the Act as it was engaged in for the mutual aid and protection of employees. The D. C. Circuit vacated the decision of the NLRB as the conduct of the organizer in publicly criticizing the employer was not for the mutual aid and protection of employees and therefore was not protected by the Act. The Court focused on the desired impact of the organizer=s conduct in resolving the mater, noting that A[i]n the present case, Oakes=s activity was not an effort to improve any employees= (union or non-union) working conditions. So far as the record shows, it was solely an effort to raise Tradesmen=s costs.@ See Tradesmen Int=l v. NLRB, 275 F.3d 1137, 1143 (D. C. Cir. 2002). As noted, unions admit that they design corporate campaign tactics to create unnecessary expenses for employers. See Contract Campaign Manual, 3-21 supra. Where this is the sole motivation for the union=s, or its agent=s conduct, the D. C. Circuit concluded accurately that the union loses its ' 7 NLRA protections: 10

12 The Board=s decision suggests a new standard that any activity that raises a non-union employer=s costs Alevels the playing field@ between union and non-union employers, even if unrelated to working conditions or union/non-union status, and is therefore protected under the Act...But such a standard effectively erases any line between acceptable and unacceptable activity directed toward an employer=s economic health. We reject this sweeping and unprecedented expansion of Aconcerted activity for mutual aid or protection.@ Tradesmen Int=l, 275 F.3d at The D.C. Circuit in Tradesmen was correct in rejecting the Aunprecedented expansion of concerted activity for mutual aid or protection= that is implicit in the core definition of corporate campaigns. At oral argument Justice Kennedy focused on the predicament of employers confronted by a coordinated attack in the courts. Justice Kennedy focused on how the Agency could conclude that an employer=s lawsuit, seeking to protect itself from corporate campaign, could be Aretaliatory.@ But it can be retaliatory for the employer to protect its business against suits by the union which are brought by the union for the motive of weakening the employer[?] That=s retaliatory[?] [Transcript, BE&K v. NLRB, p. 18 (US Supreme Court)] While the predicament of the employer does not establish a constitutional right, it does underline the impact of the rule on the proverbial Alevel playing field@ the Agency seeks to maintain between the parties in the resolution of labor disputes. It is beyond honest dispute that a core tactic of organized labor in perpetrating a corporate campaign is an onslaught of litigation directed at the employer. As the litigation directed at the employer ordinarily does not involve the '7 rights of employees, but rather alleges regulatory, wage payment or other infractions, the Union=s exposure to Bill Johnson=s charges is nominal at most. Conversely, were the employer 11

13 to reciprocate, as anticipated by the Alevel playing model, it necessarily exposes itself to the English Rule of attorneys fees. This has indeed, as counsel for the Agency admitted to Justice O=Conner during oral argument, a chilling impact on employer=s First Amendment rights. 8 As such, the employer, unlike the Union, faces a substantial punitive club before the agency in exercising its constitutional right to petition the courts. The model in place defies the notion of a Alevel playing field@ in the age of the corporate campaign. Conclusion By the time of the paper=s publication, the United States Supreme Court will likely have addressed, if not resolved, the standard of Bill Johnson=s Restaurants. However, even armed with the definitive resolution, the Agency must craft a working standard for the resolution of Bill Johnson=s (or ABE&K@) charges based upon its interpretation of the decision. That interpretation should take into account the Agency=s historical administrative process and the Areal world@ impact of the standard on all parties. A truly level playing field can be created only when this analysis is accomplished. 8 Transcript of BE&K v. NLRB oral argument, p. 16. Counsel for the Agency initially denied the remedy was punitive (Id., p.14) but later conceded the chilling impact of the remedy. (Id., p.16). O=Conner: [Id.] Well, does that have the necessary effect of at least chilling some conduct that is protected by the First Amendment? I mean, it seems to me it does. You have to - - you would have to concede that it does. Mr. Wallace: But it... it=s a far less daunting situation than what the Court was faced with under the antitrust laws in the Professional Real Estate Investors case

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SUPREME COURT OF THE UNITED STATES

SUPREME COURT OF THE UNITED STATES Cite as: 536 U. S. (2002) 1 NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of