35 W. WACKER DRIVE CHICAGO IL CALIFORNIA STREET SAN FRANCISCO, CA

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1 35 W. WACKER DRIVE CHICAGO IL PARK AVENUE NEW YORK, NY L STREET, N.W. WASHINGTON, DC TH FLOOR, 333 SOUTH GRAND AVE LOS ANGELES, CA CALIFORNIA STREET SAN FRANCISCO, CA AVENUE VICTOR HUGO PARIS, FRANCE RUE DU RHONE 1204 GENEVA, SWITZERLAND American Bar Association Section of Labor and Employment Law 2003 Annual Meeting San Francisco, California To Sue or Not to Sue: A Lawyers Dilemma -- Will It Be An Unfair Labor Practice? How Will The NLRB Interpret BE&K Construction Co. v. NLRB? Joseph J. Torres Winston & Strawn 35 West Wacker Drive Chicago, Illinois (312) jtorres@winston.com 2003 WINSTON & STRAWN 1

2 I. Introduction The Supreme Court's decision in BE&K Construction Co. v. NLRB, 536 U.S. 516 (2002) considered the circumstances under which the National Labor Relations Board ("NLRB") could find a lawsuit pursued in state or federal court violated Section 8(a)(1) of the National Labor Relations Act ("NLRA"). In doing so, the Court revisited its prior decision in Bill Johnson's Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983), which had confronted the same issue under the NLRA almost 20 years earlier, as well as series of Supreme Court decisions which considered the same issue under the federal antitrust laws. The dispute before the Court in BE&K presented an issue of significant constitutional dimension -- to what extent may the First Amendment Right to Petition the government for redress of grievances be burdened by a determination that such conduct violates the federal labor laws. As discussed infra, the Court avoided this constitutional dilemma by deciding BE&K on narrower statutory construction grounds. Depending on one's reading of BE&K, this decision has all but resolved the issue or, conversely, left a great many issues unresolved and squarely in the lap of the NLRB for further consideration. While the NLRB ponders these weighty matters, this paper provides an analysis of BE&K, identifies a number of issues that may be unresolved in the aftermath of that decision and discusses a number of viewpoints that have been offered by the General Counsel and several Administrative Law Judge as to the state of affairs post-be&k. II. Background At the time Bill Johnson's was decided, the NLRB's test for whether a lawsuit violated the NLRA focused solely on the question of whether the suit was filed for a retaliatory 2

3 purpose without regard to whether or not the suit actually had any merit. Id. at , citing Power Systems, Inc., 239 NLRB 445 (1978), enf. denied, 601 F.2d 936 (7th Cir. 1979). The specific issue before the Court was whether the NLRB could enjoin a lawsuit under this test. While recognizing an employer could potentially use a lawsuit to coerce or retaliate against employees for exercising their Section 7 rights, the Court also recognized "weighty countervailing considerations" that would argue against permitting the NLRB to enjoin the prosecution of a civil lawsuit. Bill Johnson's, 461 U.S. at Specifically, citing to its prior precedent regarding sham lawsuits in the antitrust context, 1 the Court observed that the First Amendment right of access to court was "too important to be called an unfair labor practice solely on the ground that what is sought in the court is to enjoin employees from exercising a protected right." Id. at 741. In light of this interest, as well as the States' compelling interest in protecting the health and well-being of its citizens through the maintenance of domestic peace, the Court concluded the NLRB's construction of the NLRA was untenable and concluded as follows: Id. at The filing and prosecution of a well-founded lawsuit may not be enjoined as an unfair labor practice, even if it would not have been commenced but for the plaintiff's desire to retaliate against the defendant for exercising rights protected by the Act. However, the Court quickly added that the same conclusion may not apply with respect to the prosecution of a baseless lawsuit, as such claims fell outside the scope of First 1 Id. at 741, citing California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972) 3

4 Amendment protection. Id. at 743. Such claims could be enjoined where they were pursued with the intent of retaliating against the exercise of Section 7 rights. Id. The Court turned next to the question of what the Board must find before it could enjoin a pending suit. Id. at 744. Rejecting the position of both parties, 2 the Court held that if the employer could show the lawsuit raised genuine issues of material fact the Board could not enjoin the suit but instead would have to stay its proceedings pending conclusion of the lawsuit. Id. at Having articulated the standard for enjoining a lawsuit prior to its conclusion, the Court proceeded to opine as to how the Board should evaluate whether a concluded lawsuit violated the NLRA. The Court recognized that if the employer prevailed in the lawsuit no unfair labor practice could be found, even if the suit had a retaliatory motive. Id. at 747. Conversely, "[i]f judgment goes against the employer or if his suit is withdrawn or is otherwise shown to be without merit " the NLRB was entitled to consider whether the suit violated the NLRA. Id. In determining whether the suit had been filed for a retaliatory purpose, the Court suggested the NLRB could take into account the fact that the lawsuit had been found to be unmeritorious. Id. In the aftermath of Bill Johnson's, the Board, recognizing the First Amendment concerns raised by the Court with respect to enjoining pending litigation, adopted a preference of holding Bill Johnson's charges in abeyance until the challenged litigation was completed. See General Counsel Memorandum (September 20, 2002), available at nlrb.gov/gcmemo/gc02-09.html. As for completed litigation, the Board interpreted Bill 2 The employer argued that the Board's inquiry could go no further than an examination of the complaint to determine whether it sought lawful relief that the court had jurisdiction to grant. Id. Conversely, the Board envisioned no limits on the scope of its inquiry. Id. 4

5 Johnson's as focusing on whether the litigation was successful without regard to whether the suit had a reasonable basis in law and fact when it was initially commenced. See generally Diamond Walnut Growers, Inc. v. NLRB, 53 F.3d 1085, 1088 (9th Cir. 1995); Petrochem Insulation, Inc. v. NLRB, 240 F.3d 26, 32 (D.C. Cir. 2001). See also Carol Rice Andrews, After BE&K: The "Difficult Constitutional Question" of Defining The First Amendment Right to Petition Courts, 39 Hous. L. Rev. 1299, (2003). Under this interpretation, whether a suit was reasonable in fact or law only came into play when determining whether a claim could be enjoined. See Diamond Walnut, 53 F.3d at The validity of this interpretation came into question in the aftermath of the Supreme Court s subsequent decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993). That case considered the circumstances under which the pursuit of a lawsuit violated the federal antitrust laws. Unlike the specific facts of Bill Johnson s, however, Professional Real Estate Investors involved a challenge to a lawsuit that had already been concluded. The Court articulated a two-part test for determining whether the completed litigation was a sham and therefore not entitled to First Amendment protection. First, the suit must be shown to be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. Id. at Second, the subjective motivation of the person filing the suit must concea[l] an attempt to interfere directly with the business... of a competitor... through the use [of] the governmental process -- as opposed to the outcome of that process -- as an anticompetitive weapon. Id. (emphasis in original). Thus, the Professional Real Estate Investors test for concluded antitrust litigation established a much higher level of protection for lawsuits than Bill Johnson s win or lose test 5

6 in the NLRA context. Since the Supreme Court s discussion in Bill Johnson s regarding the test for evaluating completed litigation was dicta, the inevitable question arose as to whether Bill Johnson s had at least in part been overruled by Professional Real Estate Investors. The Court was obviously aware of its Bill Johnson s decision. In fact, the Court in Professional Real Estate Investors cited to Bill Johnson s concerning the applicable test for enjoining pending litigation. Professional Real Estate Investors, 508 U.S. at 59 ( by analogy to Noerr s sham exception, we held that even an improperly motivated lawsuit may not be enjoined under the [NLRA] unless such litigation is baseless. ). Depending on one s view as to the wisdom of the Bill Johnson s win or lose test for concluded litigation, the Court s failure in Professional Real Estate Investors to acknowledge its dicta from Bill Johnson s was either a rejection sub silento of that discussion or an acknowledgement that the different policies and considerations underlying the federal antitrust and labor laws allowed for the existence of different tests for evaluating sham litigation. While the appellate courts generally to defer to the NLRB s interpretation of Bill Johnson s after Professional Real Estate Investors, see e.g., Diamond Walnut, 53 F.3d at 1088, the D.C. Circuit opined that a clarification by the Supreme Court as to why seemingly different sham litigation tests were appropriate in the antitrust and NLRA context might be in order. Petrochem, 240 F.3d at 32. After the Sixth Circuit again declined to import the Professional Real Estate Investors test into the NLRA context in BE&K Construction Co. v. NLRB, 246 F.3d 619 (6th Cir. 2001), the Supreme Court granted certiorari to address the following question: Did the Court of Appeals err in holding that under Bill Johnson s Restaurants, Inc. v. NLRB the NLRB may impose liability on an employer for filing a losing retaliatory lawsuit, even if the 6

7 employer could show the suit was not objectively baseless under Professional Real Estate Investors III. BE&K In BE&K, the Court found that the test used by the NLRB to assess whether concluded litigation violated the NLRA was invalid because the class of litigation potentially rendered unlawful included reasonably based but unsuccessful lawsuits. BE&K, 536 U.S. at 536. However, despite the suggestion by the Court s grant of certiorari that it intended to resolve the conflict (or lack thereof) between Bill Johnson s and Professional Real Estate Investors, the Court resolved the case before it on much more narrower grounds. Indeed, as reflected by the concurring opinions of Justices Scalia and Breyer the application of the Professional Real Estate Investors sham litigation test to cases arising in the NLRA context remains unresolved. A review of the majority and concurring opinions demonstrates the competing arguments in favor of and against importing the antitrust test into the NLRA context. A. Justice O'Connor's Opinion Justice O Connor wrote the majority opinion. While all nine Justices concurred in the judgment, only Chief Justice Rhenquist and Justices Scalia, Kennedy and Thomas fully joined in Justice O Connor s opinion. BE&K, 536 U.S. at 519. Justice Breyer, joined by Justices Stevens, Souter and Ginsburg, wrote a separate opinion concurring in print and concurring in the judgment. Id. Justice Scalia, joined by Justice Thomas, also wrote a separate concurring opinion. Id. Justice O'Connor first reviewed the First Amendment right to petition and the court s historical treatment of that right in the antitrust context, culminating in the Court s two- 7

8 part test for sham litigation in Professional Real Estate Investors. BE&K, 536 U.S. at Justice O Connor then turned to a discussion of Bill Johnson s. Notably, Justice O Connor began by emphasizing the related nature of the issue underlying both Bill Johnson s and Professional Real Estate Investors and the fact that the Court had resolved the issue in Bill Johnson s (i.e., the ability to enjoin pending litigation) by analogizing to the antitrust context. BE&K, 536 U.S. at 526. Thus, BE&K expressly affirmed that the standard for enjoining litigation in the NLRA context mirrored the standard for enjoining completed litigation in the antitrust context. Id. at 527. The Court then turned to Bill Johnson s discussion of the test for evaluating completed litigation and clearly and unequivocally declared that portion of Bill Johnson s to be dicta. BE&K, 536 U.S. at 528. Having done so, the Court turned to the question before it -- whether the NLRB could impose liability for the pursuit of a retaliatory lawsuit that was reasonably based but unsuccessful. In addressing this question, Justice O'Connor first described with approval the Professional Real Estate Investors test, noting that its objective component protected petitioning activity that was reasonably based, while its subjective component protected petitioning that, reasonably based or not, was unmotivated by a retaliatory purpose. BE&K, 536 U.S. at 528. The Board argued such broad protection for petitioning, while perhaps necessary under a statute that allowed private suits, extensive discovery and treble damages, was unnecessary in the NLRA context given that an unfair labor practice proceeding could only be initiated by the General Counsel, discovery was limited and damages were much more limited. Id. at In response, Justice O'Connor observed that such distinctions merely suggested the threat of an antitrust suit may impose a greater potential burden on petitioning activity then the threat of an 8

9 NLRA prosecution, not that the burdens imposed by a finding of NLRA liability raised no First Amendment concerns. Id. at 529. Justice O'Connor turned to the issue of what burdens may be imposed by a finding of liability under the NLRA. Putting aside the question of whether the Board had the authority to award attorneys' fees where it finds a suit violates the NLRA, Justice O'Connor concluded a finding of NLRA liability in and of itself constituted a burden on petitioning activity, given the resulting declaration of illegality, any ensuing legal consequence and the threat of reputational harm. Id. at Having found that a burden existed, Justice O'Connor next considered whether the petitioning activity being burdened was protected by the First Amendment Petition Clause. Because the lawsuit at issue in BE&K was reasonably based, Justice O'Connor found the Court's holding in Bill Johnson's that baseless suits fell outside the First Amendment to be of little help in resolving this case. Id. at 531. As to whether the class of reasonably based but unsuccessful suits fell outside the ambit of the First Amendment's Petition Clause, Justice O'Connor found this issue raised a "difficult constitutional question" because of the following considerations: The class of lawsuits at issue, while unsuccessful, included a "substantial proportion" of all suits based on genuine grievances because the sincerity of a grievance does not turn on the ultimate success of the suit; Even unsuccessful, albeit reasonably based, suits advance some First Amendment interests, such as the public airing of disputes, the evolution of the law and the promotion of the legal systems as an alternative to force; While baseless suits can be analogized to false statements, such an analogy would not necessarily extend to reasonably based but unsuccessful lawsuits because losing does not automatically equate with a false proposition. 9

10 Id. at Having identified these considerations, Justice O'Connor did not attempt to determine whether their existence mandated First Amendment protection for reasonably based but unsuccessful lawsuits. Instead, Justice O'Connor explored whether there were other aspects of the Board's sham litigation test that sufficiently narrowed the category of petitioning affected so as to avoid the constitutional issue she had identified. Justice O'Connor noted that as a further limitation to the class of lawsuits targeted, the NLRB only sought to penalize unsuccessful suits that it also found to be retaliatory. Id. at 533. However, after reviewing the manner in which the Board had interpreted the term "retaliation" in the aftermath of Bill Johnson's (a term Justice O'Connor noted the Court had specifically not defined in that case), Justice O'Connor found that the difficult constitutional question remained. Id. at This was because the Board's expansive definition of retaliation encompassed a significant portion of "genuine petitioning." Id. at 533. Specifically, Justice O'Connor noted that the Board regarded a suit as retaliatory if it was intended to interfere with the exercise of Section 7 rights. Id. However, Justice O'Connor opined that even if a suit interfered with or deterred an employee in the exercise of their NLRA rights, it may still have been motivated by a subjective and sincere desire to challenge the legality of that conduct. If the employer's belief in initiating that suit was "subjectively genuine and objectively reasonable," then declaring such a suit to be unlawful under the NLRA impacted "genuine petitioning." Id. at Similarly, Justice O'Connor noted that the NLRB in BE&K had relied upon evidence of antiunion animus to infer a retaliatory intent. Id. at 534. However, the existence of 10

11 such ill will, something very common in litigation, did not mean that the suit was contrived. Id. Rather, "[a]s long as a plaintiff's purpose is to stop conduct he reasonably believes is illegal, petitioning is genuine both objectively and subjectively." Id. (emphasis in original). Finally, Justice O'Connor noted the inherent problems in attempting to regulate even conduct admittedly entitled to little if any First Amendment protection based solely on the presence of "ill will." Id. Given the overexpansive application of the Board's definition of "retaliation" to genuine petitioning, Justice O'Connor concluded that this additional limitation failed to resolve the constitutional question presented. Id. at Thus, the difficult constitutional question remained: "whether a class of petitioning may be declared unlawful when a substantial portion of it is subjectively and objectively genuine." Id. at 535. However, Justice O'Connor expressly declined to answer this question. Id. Noting that the Court had avoided a constitutional issue in a prior NLRA case by narrowly construing the statutory provision at issue, Justice O'Connor similarly interpreted Section 8(a)(1) to exclude from its coverage all reasonably based but unsuccessful suits: Id. at 536. Section [8(a)(1)'s] prohibition[s] [are] facially broad. And while it might be read to reach the entire class of suits the Board has deemed retaliatory, it need not be read so broadly. Indeed, even considered in context, there is no suggestion that these provisions were part of any effort to cover that class of suits Because there is nothing in the statutory text indicating that [Section 8(a)(1)] must be read to reach all reasonably based but unsuccessful suits filed with a retaliatory purpose, we decline to do so. Because the Board's standard for imposing liability under the NLRA allows it to penalize such suits, its standard is thus invalid. 11

12 deciding: Id. at However, Justice O'Connor hastened to also identify what the Court was not We do not decide whether the Board may declare unlawful any unsuccessful but reasonably based suit that would not have been filed but for a motive to impose the costs of the litigation process, regardless of the outcome, in retaliation for NLRA protected activity, since the Board's standard does not confine itself to such suits. Likewise we need not decide what our dicta in Bill Johnson's may have meant by "retaliation." Finally, nothing in our holding today should be read to question the validity of common litigation sanctions imposed by courts themselves -- such as those authorized under Rule 11 of the Federal Rules of Civil Procedure -- or the validity of statutory provisions that merely authorize the imposition of attorney's fees on a losing plaintiff. Justice O'Connor's opinion spawned a debate between Justice Scalia and Justice Breyer as to what standard should apply in the future. The Court having answered the question presented by invalidating the NLRB's standard on narrow statutory construction grounds, both Justices agreed the question of what standard should apply was not before the Court. Id. at 537 (Scalia, J., concurring) and 539 (Breyer, J., concurring). Nonetheless, both Justices proceeded to opine as to what that standard should be. B. Justice Scalia's Concurrence Justice Scalia's short concurrence emphatically declared that which he noted the Court had scrupulously avoided: in a future appropriate case, we will construe the [NLRA] in the same way we have already construed the Sherman Act: to prohibit only lawsuits that are both objectively baseless and subjectively intended to abuse process. Id. at 537 (emphasis is in original). 12

13 Justice Scalia then addressed Justice Breyer's contention that the test for sham litigation from the antitrust context should not be applied in the NLRA context because the differences between the two statutes demonstrated a greater First Amendment right to file a lawsuit under the antitrust laws than the federal labor laws. Id. at 537. Rather that rebut the specific points made by Justice Breyer, Justice Scalia noted that Justice Breyer had overlooked a significant difference between the NLRA and the antitrust laws that in fact mandated the exact opposite conclusion. Id. at Specifically, Justice Scalia argued that because antitrust claims were determined by an independent Article III court while labor claims were resolved by an executive agency whose determinations were largely insulated from judicial review by the "substantial evidence" standard, there was, at a minimum, a difficult question under the First Amendment as to whether an executive agency had the power to punish a reasonably based suit filed in an Article III court. Id. at 538. C. Justice Breyer's Concurrence In contrast to Justice Scalia, Justice Breyer's concurrence disputed the notion that the Court would inevitably apply the antitrust sham litigation standard in the NLRA context. Id. at Justice Breyer agreed the NLRB could not declare a lawsuit retaliatory under the NLRA based solely on the "simple fact that the employer filed a reasonably based but unsuccessful lawsuit and the employer did not like the union." Id. at 539. Beyond that, however, Justice Breyer was unwilling to concede that the question Justice O'Connor noted remained open (i.e., whether reasonably based suits filed only to impose litigation costs regardless of the outcome violated the NLRA) would necessarily be resolved 13

14 pursuant to the standard enunciated in Professional Real Estate Investors. 3 Id. In fact, Justice Breyer suggested that many of the questions Justice O'Connor declared to be unanswered were in fact already answered by Bill Johnson's. Id. at Even if the issues were open, however, Justice Breyer challenged Justice Scalia's proposition that their resolution would necessarily be controlled by application of the antitrust sham litigation standard. Id. at 541. Justice Breyer proceeded to review the difference between the federal antitrust and labor laws and concluded that these distinctions required the application of a less stringent sham litigation test in the NLRA context. Id. at Thus, with the constitutional question the Court avoided looming in the background, a number of specific issues remain open in the aftermath of BE&K: What is the proper interpretation of the term "retaliation"? What authority does the NLRB have to order attorneys fees upon the finding of a violation? Will the NLRB now adopt the sham litigation test from the antitrust context? To date, much of the focus of the debate has centered on the last issue. While the Board has yet to weigh in on this issue in the aftermath of BE&K, those who have offer, predictably, arguments that mirror the diametric views of Justices Scalia and Breyer. IV. Subsequent Developments A. BE&K On Remand 3 Additionally, Justice Breyer suggested another open issue was whether the NLRB could condemn suits an employer brought "as part of a broad course of conduct aimed at harming the unions and interfering with employees' exercise of their rights under [Section 7]." Id. 14

15 BE&K is currently pending before the Board on remand from the Sixth Circuit. BE&K Construction Co. v. NLRB, 51 Fed. Appx. 571, 2002 WL (6th Cir. Nov. 21, 2002). The Sixth Circuit's order expressly frames the issue for resolution in the context of the antitrust sham litigation test, while also directing the Board to explore the proper contours of the "retaliation" concept in light of the Supreme Court's decision. Specifically, the Board has been directed to determine the following issues: 1. Whether BE&K had a subjectively genuine belief that the union conduct that precipitated the company's civil suit against the unions was not protected under the National Labor Relations Act. 2. Whether BE&K had an objectively reasonable belief that the union conduct that precipitated the company's civil suit against the union was not protected under the National Labor Relations Act. 3. Whether BE&K filed the civil suit against the unions only to impose the cost of such a litigation process, regardless of the outcome, on the unions in retaliation for union activity protected by the National Labor Relations Act and, if so, whether the Board considers such a suit to violate the principles of the National Labor Relations Act. B. General Counsel Shortly after BE&K was decided the General Counsel offered his first observations as to the implications of that decision on future NLRB decisions. See Memorandum GC (September 20, 2002), available at After briefly reviewing the Court's decision in Bill Johnson's and BE&K, the General Counsel noted the following: While the full implications of BE&K will only be discerned through individual cases over time, it is clear that the Court's decision will affect the treatment of both "reasonable basis" and retaliatory motive. First, BE&K concerned a lawsuit that, although ultimately non-meritorious, was, in the Court's view reasonably 15

16 GC based. The Court did not discuss how, if at all, its analysis of retaliatory motive in that context affects the Board's retaliatory motive analysis with respect to baseless suits. Second, given the Court's rejection of the previously sanctioned approach to concluded suits, the Board can no longer be satisfied with determining merely that the suit ultimately proved nonmeritorious, before turning to an analysis of retaliatory motive. Rather, even with respect to concluded suits, the Board must determine whether the suit was baseless or reasonably based. As to the first point, the General Counsel has determined that the tests for retaliatory motive differ depending on whether or not the suit at issue is reasonably based. See Report on Casehandling Developments R-2488 (May 2, 2003), available at Given the distinction the Court in BE&K acknowledged between reasonably based and baseless litigation, the General Counsel has concluded that the "retaliatory motive" test articulated in BE&K is applicable only to reasonably based lawsuits. Id. To the extent a lawsuit is found to be baseless, the General Counsel will evaluate the existence of a retaliatory motive under existing Board standards -- that is, the mere fact a suit targets protected activity will be sufficient to establish a retaliatory motive. Id. A number of Advice Memorandum issued by the General Counsel's office since GC have further elaborated on the General Counsel's view on a number of other issues. In Dilling Mechanical Contractors, Inc., Case No. 25-CA-25094, et al., 2002 WL (December 11, 2002), the General Counsel stated his view that the standard for determining whether a suit was baseless remained unchanged after BE&K. After reviewing the Court's prior discussion of this point in Bill Johnson's, the General Counsel reaffirmed the applicable test: 16

17 a lawsuit can be deemed baseless only if it presents unsupportable facts or unsupportable inferences from facts, or if it depends upon "plainly foreclosed" or "frivolous" legal issues. Dilling, 2002 WL at *4. The General Counsel's assessment of the merits of Dilling is also instructive as to his post-be&k treatment of the "reasonable basis" and "retaliatory" concepts. Dilling came before the Division of Advice after the case had been remanded by the Board to the ALJ for further consideration in light of BE&K. The ALJ had originally found the employer's lawsuit against the union and one of its organizers was not reasonably based because the suit had been dismissed by the Indiana court of appeals. Dilling, at *2. The ALJ had further found the suit was retaliatory because of various evidence of anti-union animus and other conduct that the ALJ believed demonstrate ill will. Id. Upon further consideration, the General Counsel decided that, contrary to his prior position, the lawsuit in question was reasonably based and there was insufficient evidence of retaliation to argue that the lawsuit violated the Act. As to the first point, the General Counsel noted that the employer had articulated a discrete privacy interest underlying its decision to initiate the lawsuit, there was no Indiana case law directly on point and while the Indiana court of appeals ruled against the employer, the employer had prevailed before the trial court. Id. at 4. As for the issue of retaliation, the General Counsel found the evidence cited by the ALJ of retaliatory motive failed to meet the test offered by the Court in BE&K -- that the lawsuit would not have been filed "but for a motive to impose the costs of the litigation process, regardless of the outcome." Id., citing BE&K, 536 U.S. at The General Counsel further noted that it would be "very difficult to prove that the Employer was motivated, at least in part, 17

18 by a desire to protect its legitimate privacy rights." Dilling, 2002 WL at *4. As discussed infra, the ALJ in Dilling declined to adopt the General Counsel's view of BE&K. Subsequent Advice Memorandum have consistently interpreted the reasonable basis and retaliation concept in line with the above discussion. A review of these Memos highlight the difficulty in sustaining a charge post-be&k given the heightened standard for retaliation, which focuses on the reasonableness of the employer's belief that he was challenging conduct that was unlawful. See, e.g., Cal Sierra Development, Inc., Case No. 20-CA-29561, 2003 WL (Jan. 14, 2002) (no retaliatory motive where evidence showed employer had genuine desire to enforce what they believed to be their property rights and avoid potential liability for nearby unsafe conditions); Overnite Transportation Co., Case No. 20-CA-30935, 2003 WL (Jan. 17, 2003) (seeking treble damages in RICO suit against union does not establish retaliatory motive because such damages are provided for by that statute); Stonegate Construction, Inc., Case No. 20-CA-30724, 2003 WL (Jan. 23, 2003) (arrest for trespass was not retaliatory in the absence of evidence employer did not genuinely seek to prohibit conduct it believed was illegal); United States Postal Service, Case No. 30-CA-15830, 2003 WL (March 24, 2003) (causing arrest of union business agent was not retaliatory; employer's immediate phoning of police at the time of incident showed employer reasonably believed conduct was sufficiently threatening so as to require police protection). Absent evidence of a "high degree of retaliatory motive," IBP, Inc., Case No. 19-CA-28469, 2003 WL , *2 (May 20, 2003), the General Counsel is unlikely to find a charge to have merit. 18

19 The Report on Casehandling Developments cited supra also offers some additional observations as to what issues remain open after BE&K and describes a number of cases the Board may use to clarify those issues. The General Counsel identified the open issues as follows: Whether the Board should adopted the Professional Real Estate Investors test for sham litigation; What standard the Board should use to determine if a reasonably based lawsuit is retaliatory; Whether a reasonably based but unsuccessful lawsuit can still be found to be an unfair labor practice where the evidence of retaliatory motive is "strong enough;" Three of the cases described by the General Counsel are now the subject of administrative law judge decisions. A brief summary of those cases will further explore the General Counsel's view of BE&K and the extent to which the Board's ALJ's have agreed with his interpretation. C. Administrative Law Judge Decisions Research has uncovered three reported ALJ decision where the import of BE&K was considered in cases that the Board remanded for that purpose: (a) Hannah & Sons Construction Co., Inc., Case No. 4-CA-28916, 2003 WL (JD-19-03) (Feb. 24, 2003); (b) Dilling Mechanical Contractors, Inc., Case No. 25-CA-25094, 2003 WL (JD-24-03) (Feb. 28, 2003); and (c) Allied Mechanical Services, Inc., Case No. 7-CA-41687, et al., 2003 WL (JD(ATL)-40-03) (June 10, 2003). 1. Hannah & Sons 19

20 In Hannah & Sons, the ALJ originally had concluded the employer violated Section 8(a)(1) by filing a state court lawsuit alleging four claims of interference with contractual relations and a common law antitrust violation. The employer had filed this action after the union allegedly refused to enter into a labor contract that was a precondition to the employer receiving a subcontract to perform certain construction work. The union claimed it never entered into the contract because the employer refused to respond to the union's requests for information regarding the employer's history as a union employer. The state court dismissed the contract claims as preempted and dismissed without prejudice with antitrust claim on the basis that it raised a federal cause of action, though the employer never refiled the antitrust claim in federal court. On remand, the General Counsel argued the ALJ's prior ruling should stand. The General Counsel maintained his position that the Bill Johnson test for determining baselessness continued to control. See Report on Casehandling Developments at pp In addition, because the General Counsel had concluded the lawsuit was baseless, he further argued that the BE&K "retaliatory motive" standard was inapplicable. Id. at p. 7. Instead, the mere fact that the lawsuit targeted protected activity was sufficient to establish the requisite retaliatory intend. See discussion supra. The ALJ agreed with the General Counsel and adhered to his prior finding that the lawsuit violated the Act. As for whether the claims were reasonably based, the ALJ found 4 of the employer's claims baseless because they were preempted by the NLRA and "there were no material factual issues or unsettled legal principles upon which to base these claims." Hannah, 2003 WL at p. 4. Since the state court had simply dismissed without prejudice the 20

21 antitrust claims, the ALJ was required to undertake a more substantive analysis of the applicable legal principles. Id. at pp After doing so and considering the employer's arguments, the ALJ again concluded that the antitrust claims were baseless because the employer was unable to articulate any facts in support of these causes of action. Id. at 5. Turning to the issue of retaliatory motive, the ALJ did not expressly address the General Counsel's argument that a different retaliation test applied when the lawsuit was found to be baseless. However, the ALJ's ultimate conclusions -- that the lawsuit was directed at conduct protected by the Act and that retaliation could be inferred by the fact that the claim was without merit -- is consistent with that approach. 2. Dilling Mechanical Contractors As discussed above, the General Counsel in Dilling took the position on remand that the complaint should be dismissed because the suit was reasonably based and, under the BE&K standard, there was no evidence of retaliatory motive. After reviewing the three opinions in BE&K, the ALJ rejected the General Counsel's position and reaffirmed a finding of a violation based on the position articulated by Justice Breyer in his concurrence. The ALJ found that the majority opinion in BE&K, while rejecting the Board's interpretation of Bill Johnson's as it related to unsuccessful but reasonably based lawsuits, did not articulate an alternative standard. Dilling, 2003 WL at p. 3. As such, the ALJ believed it was within his discretion to choose "from among the reasonable interpretations of a Supreme Court decision, that interpretation which leaves intact a greater measure of the Board's precedent." Id. (citations omitted). 21

22 Turning to that task, the ALJ concluded that Justice Breyer's view of the Court's decision in BE&K was preferable: Id. at p. 4. the view expressed by Justice Breyer is more in keeping with Board precedent since it only invalidates the Board's standard for what constitutes a sufficient retaliatory motive to warrant finding a violation, whereas Justice Scalia's view would invalidate both the Board's standard for what is sufficiently retaliatory and also its standard for what is sufficiently lacking in merit. Thus, the ALJ interpreted BE&K as leaving intact the "win lose" test of Bill Johnson's for determining whether a suit is reasonably based. Id. The ALJ embraced this test, despite all the problems identified by the Court in BE&K with such an approach, because it allowed the Board to rely entirely on the determination of the court hearing the lawsuit. Id. In contrast, the ALJ felt that adopting the antitrust sham litigation test, per Justice Scalia, would required the Board to enter "unfamiliar territory in order to make its own determination about whether an unsuccessful lawsuit was objectively baseless." Id. In addition, the ALJ agreed with Justice Breyer that the differences between federal antitrust and federal labor laws warranted a more stringent test for sham litigation in the NLRA context. Based on these determinations, the ALJ concluded that a violation of the Act could still arise where the completed lawsuit was "unsuccessful and the evidence of retaliation is stronger ". Id. at pp The General Counsel has filed exceptions in this case, arguing that the ALJ erred by failing to consider whether the lawsuit was reasonably based and for adopting Justice Breyer's 22

23 interpretation of BE&K, which the General Counsel noted reflected a view that had been "clearly rejected by the majority." See Report on Casehandling Developments at p Allied Mechanical In Allied, the ALJ had previously found the employer's federal lawsuit violated Section 8(a)(1). Upon remand, the ALJ, in agreement with the General Counsel, reaffirmed her prior conclusion. However, unlike the ALJ in Dilling, the ALJ in Allied interpreted BE&K as requiring a consideration of whether the lawsuit was reasonably based. Allied, 2003 WL at p. 4 ("[BE&K] therefore requires a more detailed analysis of the first prong of the test enunciated in Bill Johnson's, whether the law was reasonably based. The standard is an objective one, whether a reasonable litigant could realistically expect success on the merits."). The ALJ reviewed the Section 8(b)(4) and contract claims the employer had pursued and found they lacked legal or factual support. Id. at 4-5. Having found the claims to be baseless, the ALJ, consistent with the General Counsel's view of the appropriate test, further concluded the suit was retaliatory because it targeted Section 7 activity. Id. at 5. V. Conclusion As the foregoing discussion demonstrates, much arguably remains for the NLRB to resolve and clarify. As for the primary question that remains open, the countervailing viewpoints, as reflected by the concurring opinions of Justices Scalia and Breyer, allow for the possibility that the Board could either adopt the antitrust sham litigation test or maintain the Bill Johnson's "win lose" test along with a heightened scrutiny into the retaliation inquiry. 23

24 My prediction is that Justice Scalia's has accurately identified what will happen given the way in which Justice O'Connor uses the antirust sham litigation test as a touchstone for her analysis. Moreover, the constitutional problems outlined by Justice O'Connor persist to the extent a "win lose" approach is used, given the amount of genuine petitioning that remains burdened under that approach. See discussion supra. However the Board rules, we can be sure that the final chapter is this ongoing saga has yet to be written. 24