Supreme Court Finds NLRB Standard for Retaliatory Suits Invalid
 
October 7, 2002
 

Imagine the following scenario. A union pickets your business, claiming that you do not employ union labor. You sue the union under the antitrust laws to recover for the damage caused to your business. You have a reasonable basis for your lawsuit, but also file it in an effort to get back at the union. You end up losing the lawsuit. What risks do you face?

Until recently, the National Labor Relations Board (the Board) has ruled that an employer who files an unsuccessful suit against a union for a retaliatory purpose violates Section 8(a)(1) of the National Labor Relations Act (NLRA) – even if the employer had a reasonable basis to file the suit. As a remedy, the Board has required the employer to pay the union’s attorneys’ fees. This has been a particularly significant risk, because the Board has been willing to find that an employer sued for retaliatory reasons on rather flimsy evidence, including the fact that the suit was unsuccessful.

Recently, however, the United States Supreme Court gave substantially more protection to employers who sue unions. In BE&K Construction Co. v. NLRB et al., (June 24, 2002), the Court ruled that an employer who sues a union violates the NLRA only if the suit is filed for a retaliatory purpose and is objectively baseless.

BE&K Construction Co. (the Company), a nonunionized firm, won a contract to modernize a steel mill in California. According to the Company, various unions engaged in illegal activities in an attempt to delay the project because the Company’s employees were nonunion. In response, the Company initially sued the unions under the Labor-Management Relations Act, but subsequently amended its complaint to allege antitrust claims under the Sherman Act. The United States District Court for the Northern District of California dismissed most of the claims against the unions and the Company dropped the rest of its claims.

After the federal proceedings were completed, two of the unions lodged complaints with the Board. The Board held that the Company violated §8(a)(1) of the NLRA by filing and maintaining a suit against the unions with a retaliatory motive. Affirming the Board’s ruling, the United States Court of Appeals for the Sixth Circuit held that if an employer’s lawsuit proves to be unsuccessful, the Board can find an unfair labor practice as long as there is evidence that the suit was filed for a retaliatory motive.

The Supreme Court disagreed, and ruled that a reasonably based lawsuit cannot violate the NLRA, even if it is brought for a retaliatory purpose. In reaching this decision, the Court relied on two of its previous decisions addressing baseless or sham litigation, Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc. and Bill Johnson’s Restaurants, Inc. v. NLRB. In Professional Real Estate Investors, the Court had ruled that a party may violate the antitrust laws by engaging in sham litigation only if: (1) the suit is objectively baseless and (2) the party intended to interfere with a competitor by tying it up in litigation. In Bill Johnson’s, the Court applied this test to a union’s request that the Board enjoin an ongoing lawsuit against the union. The Court held that the Board could enjoin only those ongoing lawsuits that are baseless and brought with a retaliatory purpose.

Noting that these prior rulings limited regulation only to suits that were both objectively baseless and subjectively motivated by an unlawful purpose, the Court stated that the NLRA could not be read to prohibit reasonably based lawsuits, even if they had a retaliatory motive. Rather, a union must show both that the suit was filed in retaliation for the union’s activity and there was no reasonable basis for the suit. Importantly, the Court further stated that a suit is not baseless simply because it is unsuccessful.

The Supreme Court’s decision is very important for employers as it protects their right to seek judicial assistance in the labor context. Prior to this decision, the Board’s standard – which essentially imposed liability if the suit was unsuccessful — deterred employers from taking legal action to protect themselves from vicious union corporate campaign tactics. Employers will now have the freedom to go to court and stop reasonably believed unfair union tactics without the threat of Board action.

For more information, contact Mark A. Spognardi, toll free at 888-688-8500, or via e-mail at mark.spognardi@hklaw.com.