Fed. Court Undercuts Union Self-Protection Effort

Little to Celebrate on Labor Day

Unions have yet another thing not to celebrate on Labor Day – a decision by a federal appellate court that further undercuts labor’s efforts to protect dwindling union jobs.

A three-judge panel of the U.S. District Court of Appeals for the Fourth Circuit in Richmond, VA, ruled last week that two union locals  in Maryland can be sued for allegedly orchestrating an illegal “secondary boycott”  campaign in violation of the Labor Management Relations Act  (LMRA) to prevent a real estate developer from leasing space to a non-unionized supermarket chain.

A secondary boycott occurs when unions exert pressure on an unrelated, secondary or neutral employer to coerce it to cease dealing with the primary target, hereby advancing the union’s goals indirectly.

In this case, Waugh Chapel South, LLC,  (“WCS),  a developer of a $260 million commercial real estate project, alleged the food worker union locals  engaged in a campaign of sham litigation to block a shopping mall project where it planned to lease space to a non-union grocery store chain.

The appeals court ruled that the organization that appears to have funded the alleged campaign,  the Mid-Atlantic Retail Food Industry Joint Labor Management Fund  (“Fund”),  is not a union organization and therefore  is not subject to the secondary boycott provisions of the LMRA.

The Court said the other defendants,  United Food and Commercial Workers Union Locals 27 and 400 – which allegedly backed the Fund –  are potentially liable for violating the  LMRA secondary boycott provision.

A non-union supermarket  obviously poses a threat to unionized supermarkets which typically pay higher salaries and benefits to workers.

WCS planned to lease a storefront at a commercial real estate development  in Anne Arundel County, Maryland to Wegmans Food Markets, Inc., which the appeals court characterizes  as a supermarket that  “does not employ organized labor.”

WSC completed the development, Waugh Chapel Towne Centre, last Fall  and Wegmans opened as planned.

WCS alleges that a union executive threatened that if Wegmans did not unionize “we will fight every project you develop where Wegmans is a tenant.”   According to the appellate court, the unions “thereafter directed and funded a barrage of legal challenges at every stage of the projects’ development.”

A district court dismissed WCS’s complaint against both the Fund and the union locals , holding that the Fund is not a labor organization subject to secondary boycott restrictions nd the unions have a First Amendment right to petition the courts to address grievances.

The appellate court last week partially reversed the lower court by ruling that  WCS can pursue its claim that the unions engaged in an illegal secondary boycott:  “[W]e hold that the pleadings and the concomitant record evidence in this case, if credited by a factfinder, are sufficient to show that the unions have abused their right to petition the courts beyond the point of constitutional protection.”

The appeals court said the union used “surrogate plaintiffs” to file 14 lawsuits against WCS.

The appeals court acknowledged that one of the lawsuits was successful.  Two plaintiffs, Robert Smith and Madonna Brennan, successfully sued in Maryland state court in March 2010 to enjoin the Town Council’s approval of “Tax Increment Financing” (“TIF”) bonds for the WCS development, arguing that the Council did not conduct the requisite hearing. The Council was required to hold a hearing in May 2010 to reauthorize the TIF bonds.

The court also noted that the district court  judge found that none of the legal challenges to the WSC development  were “objectively baseless.”

The appeal court said “moments of merit”  in a lawsuit are not sufficient to justify a pattern of sham litigation. It ruled the proper standard to assess whether the unions engaged in a pattern of sham litigation was not to look at the cases individually but to conduct a “holistic evaluation” of whether the administrative and judicial processes were abused. The court concluded: “In light of the poor litigation record and the signs of bad-faith petitioning, a factfinder could reasonably conclude that the unions have abused their right to petition the courts and, as a result, have forfeited the protection of the First Amendment.”

The decision was written by Judge Albert Diaz and joined by Judges Robert B. King and Henry F. Floyd.   The case is Waugh Chapel, South, LLC’; WCS LLC; WCS Properties Business Trust; ELG Inglewood, LLC v. United Food and Commercial Workers Union Local 27; United Food and Commercial Workers Union Local 400; Mid-Atlantic Retail Food Industry Joint Labor Management Fund.  

Union membership in the private sector has fallen to under 7 percent — levels not seen since 1932 – which is far lower than other industrialized countries.  And the Economic Policy Institute reports that a single parent making the minimum wage, working full-time, year round, earns a wage that is  $745 below the poverty line.