Motion for a TRO Within an Otherwise Non-frivolous Case can be the Basis of ULP for Retaliatory Litigation: NLRB

Practical Law Legal Update 0-517-1770 (Approx. 5 pages)

Motion for a TRO Within an Otherwise Non-frivolous Case can be the Basis of ULP for Retaliatory Litigation: NLRB

by PLC Labor & Employment

Key Litigated Issues

The NLRB issued a decision in Milum Textile Services Co., dated December 30, 2011, where it found that an employer violated the NLRA by seeking a temporary restraining order (TRO) against a union engaged in a corporate campaign. The key litigated issue in this case was the allegation that the employer's application for a TRO in US District Court could constitute an unfair labor practice (ULP) for retaliatory litigation when it was a component of an otherwise non-frivolous litigation against the union.

Background

This case arose out of the union's efforts beginning in February 2006 to organize approximately 70 commercial laundry workers employed by the employer, Milum Textile Services Co. (Milum). The union launched a corporate campaign, including a negative publicity campaign that:

Sought to educate the public about its efforts and gain public support.
Included letters and handbills directed to customers and to the public that made allegedly untrue allegations about the quality of Milum's services.

A few months later, Milum filed a charge with the NLRB:

Alleging that the union's communications violated the NLRA by discouraging customers and the public from purchasing Milum's services.
Requesting an injunction.

While the NLRB charge was still pending, Milum filed a complaint against the union in Federal district court, citing diversity jurisdiction. The complaint:

Alleged that the union:
- engaged in an illegal secondary boycott;
- intentionally interfered with economic relations;
- intentionally interfered with prospective economic advantage; and
- engaged in libel and fraud.
Sought:
- a preliminary and permanent injunction enjoining the union from directly or indirectly communicating with Milum's customers; and
- damages, costs and attorney's fees.

With the complaint, Milum filed a motion for a TRO based exclusively on Section 303 of the Labor-Management Relations Act that sought to enjoin the union from "picketing and distributing leaflets" to customers and from distributing "false materials."

At the hearing on the motion, Milum:

Conceded that it could not obtain an injunction under Section 303.
Argued for an injunction under its pendent state law tortious interference and libel claims.

The court denied the motion, finding that:

The expressive activity that Milum sought to enjoin arose out of a labor dispute.
Milum failed to make the required offer of proof about the union's malice and its actual damages.
The relief that Milum sought would be a highly disfavored prior restraint on speech.

The District Court dismissed Milum's lawsuit, without prejudice, at Milum's request.

An NLRB administrative law judge (ALJ) found that the counsel for the NLRB's General Counsel failed to show that the employer's lawsuit lacked a reasonable basis, but found that it committed a ULP by bringing a retaliatory TRO application. The ALJ also found that the employer committed other ULP's, applying extant NLRB precedent. The parties appealed different parts of the decision by filing exceptions to the five-member panel (Board) heading the NLRB's judicial functions.

Outcome

A three member panel of the Board reviewed the exceptions to the ALJ's decision. In a two to one decision, (Member Hayes dissenting), the Board:

Found that Milum's filing and maintenance of the motion for a TRO was a retaliatory lawsuit that violated the NLRA.
Remanded the case back to the ALJ to analyze whether the remaining aspects of the litigation were similarly unlawful under Allied Mechanical Services, Inc.

The Board majority reasoned that the ALJ correctly found the filing and maintenance of the motion for a TRO separate from the latter phase of the same action. It found that separate consideration is appropriate under Grinnell Fire Protection Systems Co., where the court considered separate federal and pendent state law claims, some of which were allegedly baseless, rather than separate phases of the same litigation.

In finding the pursuit of the motion for the TRO unlawful, the Board majority used the framework established under BE&K Construction Co. v. NLRB and Allied Mechanical Services, Inc. (for a discussion of this case, see Legal Update, NLRB Sets Factors to Assess Employer Motive for Lawsuits Alleged to Interfere with Protected Rights). Applying BE&K and Allied Mechanical, the Board found that the General Counsel had shown that the TRO motion both:

Lacked a reasonable basis.
Was filed with retaliatory intent.

Member Hayes dissented from the finding that Milum's TRO application had violated the NLRA, and from the Board majority's remand consideration of the lawfulness of the remainder of the lawsuit, stating that:

Milum was exercising its First Amendment rights when it petitioned a court for redress against the union.
Milum withdrew the lawsuit without prejudice, shortly after the court denied the request for the TRO.
The TRO motion should not have been treated as a lawsuit separate from one that the ALJ found was not baseless.
The lawsuit was not filed for a retaliatory purpose.
The Supreme Court, in BE&K rejected the rationale, relied on by the majority in this case, that the motion was retaliatory because it sought to enjoin protected activity.
A remand to the ALJ was unwarranted in light of the ALJ's conclusion that the remainder of the lawsuit was not baseless.

Practical Implications

For the first time the Board:

Parsed out the fragments of a valid lawsuit that are unsuccessful.
Imposed ULP liability for pursuing a poorly-framed injunction application against a union within a non-frivolus lawsuit.

This decision continues to change the landscape of "retaliatory" lawsuit analysis (see Legal Update, NLRB Sets Factors to Assess Employer Motive for Lawsuits Alleged to Interfere with Protected Rights).

In light of the Board's decision here, in Allied Mechanical Services, Inc. and Dilling Mechanical Contractors, Inc. employers should be increasingly concerned about potential ULP liability when setting litigation strategy against a union (see Legal Update, NLRB Holds Employer's Discovery Requests in State Court Action Against Union Violate the NLRA).

Motion for a TRO Within an Otherwise Non-frivolous Case can be the Basis of ULP for Retaliatory Litigation: NLRB | Practical Law