Publications: Labor board finds lawsuit lacks merit

Labor disputes, by their very nature, can be emotional, high octane affairs that often degenerate into charges, counter charges and litigation. Employers need to be cautious, however, that the lawsuits they file against unions or employees in the heat of a labor dispute do not themselves give rise to meritorious claims of unlawful retaliation under the National Labor Relations Act (NLRA). Such was the case in Allied Mech. Servs. Inc., 357 NLRB No. 101, decided by the National Labor Relations Board (NLRB) on Oct. 25, 2011.  

Allied, in southwest Michigan, is a heating, ventilation and air conditioning company. Its sheet metal workers are represented by the Sheet Metal Workers Local 7. 

Allied had contentious relationships with other unions that attempted to organize its other employees. Significantly, it engaged in a long-running, tumultuous feud with Local 357 of the Plumbers and Pipefitters Union that was trying to represent Allied’s plumbers and pipefitters. Allied at one point during the 1990s agreed to recognize Local 357 after the NLRB issued an unfair labor practice against the company, but then later withdrew that recognition, an action the board ultimately found to be unlawful. 

Shortly after withdrawing recognition from Local 357, Allied initiated a lawsuit against it, Local 7 and their respective international unions in federal district court. Local 7 was a participant in a job-targeting program whereby funds collected from union members were remitted to unionized contractors to subsidize the contractors’ bids on construction jobs. These union-sponsored subsidized payments made the unionized construction companies more competitive with nonunion contractors and, so the idea went, resulted in more work for union workers.

Allied’s lawsuit alleged that Local 7 illegally had frozen Allied out of the job-targeting program and that Local 357 had threatened and coerced Local 7 to keep Allied out of the program. Allied sought “all actual and compensatory damages, including attorney fees and costs incurred in bringing this action.”

The unions moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion, finding that Allied’s complaint did not state any legally cognizable claim against any of the unions. The 6th U.S. Circuit Court of Appeals affirmed the dismissal. 221 F.3d 1333 (6th Cir. 2000).

The unions filed unfair labor practice charges against Allied with the NLRB, claiming that Allied’s lawsuit was retaliatory in violation of the NLRA. An NLRB administrative law judge (ALJ) heard evidence in the case and issued opinions finding a violation. The board, in a 2 to 1 decision, affirmed the ALJ’s decision.

The law, at least since 1983, has recognized that a lawsuit brought during a labor dispute can violate the act where the lawsuit is without merit and filed with a retaliatory motive. Bill Johnson’s Restaurants, Inc. v. NLRB. 461 U.S. 731 (1987). The board in BE&K Construction Co., 351 NLRB 451 (2007) refined the rule, deciding that for a lawsuit to violate the act, there must be findings that the lawsuit was improperly motivated and that “no reasonable litigant could realistically expect success on the merits” of the action. This was the standard the board majority claimed to apply in finding Allied’s lawsuit violative of the NLRA.

Specifically, the board majority found first that no reasonable litigant could possibly have expected to win on the Allied lawsuit’s merits. Noting that the lawsuit’s mere dismissal on a Rule 12(b)(6) motion itself did not meet the test, the board majority, reviewing the complaint’s allegations, nevertheless concluded that Allied’s claim both lacked merit and could not even be the basis of a good faith argument for an extension or modification of the law.

The board majority then went on to determine that Allied harbored retaliatory animus against the unions which motivated it to file the lawsuit. The evidence for this conclusion? Primarily the parties’ past history, which included the multiple incidences in which the NLRB previously had determined Allied’s conduct toward the unions and especially Local 357 to have violated the NLRA.

The board majority further reasoned that Allied’s retaliatory motive was proven by the fact that Allied was complaining about the unions’ entirely lawful conduct in participating in the job-targeting program and Allied’s request in the lawsuit for its legal fees.

The board’s order, most significantly, requires Allied to pay the unions’ “legal and other expenses” incurred in the defense of the lawsuit.

Board member Brian Hayes dissented. He questioned the majority’s finding of Allied’s retaliatory motive, noting that Allied’s prior unfair labor practices had been committed years before Allied filed the offending lawsuit. He further observed that “personal animosity, ill will and heated exchanges are routine features of labor disputes” that are not necessarily retaliatory.

The dissent further cautioned that board members, as political appointees, need to be careful in these cases to not trod upon significant First Amendment rights. In the dissent’s view, the evidence must be compelling that the litigant’s motivation in filing its complaint was a desire to “abuse process through the imposition of litigation costs, rather than a genuine desire to test the lawfulness of particular conduct.” That standard, Hayes wrote, was not met here.

The lesson of Allied? If you are going to sue during a labor dispute, make sure that you can at least survive a motion to dismiss.

Allied’s appeal to a federal court of appeals is expected.

Reprinted with permission from Chicago Daily Law Bulletin.