Developer's Suit Against Union May Proceed under Sham Litigation Exception to Noerr-Pennington Doctrine: Fourth Circuit | Practical Law

Developer's Suit Against Union May Proceed under Sham Litigation Exception to Noerr-Pennington Doctrine: Fourth Circuit | Practical Law

In Waugh Chapel South, LLC v. UFCW, the US Court of Appeals for the Fourth Circuit reversed the district court's dismissal of a real estate developer's suit alleging that unions brought 14 separate legal challenges to force the developer to end its relationship with a non-unionized supermarket in violation of the National Labor Relations Act's (NLRA) secondary boycott prohibitions.

Developer's Suit Against Union May Proceed under Sham Litigation Exception to Noerr-Pennington Doctrine: Fourth Circuit

by Practical Law Labor & Employment
Published on 05 Sep 2013 • USA (National/Federal)
In Waugh Chapel South, LLC v. UFCW, the US Court of Appeals for the Fourth Circuit reversed the district court's dismissal of a real estate developer's suit alleging that unions brought 14 separate legal challenges to force the developer to end its relationship with a non-unionized supermarket in violation of the National Labor Relations Act's (NLRA) secondary boycott prohibitions.
On August 26, 2013, in Waugh Chapel South, LLC v. UFCW, the US Court of Appeals for the Fourth Circuit issued an opinion reversing the district court's dismissal of a real estate developer's suit alleging that local unions brought 14 separate legal challenges against their commercial real estate project to force the developer to end its relationship with a non-unionized supermarket in violation of the NLRA's secondary boycott prohibitions. The Fourth Circuit concluded that although, under the Noerr-Pennington doctrine, parties have a First Amendment right to petition the government by filing lawsuits, the district court should not have applied it to dismiss the developer's lawsuit. The employer should have been permitted to:
  • Make a case that the local unions filed or directed the litigations without regard for the merits and for the purpose of effecting secondary boycotts prohibited under the NLRA.
  • Invoke the sham litigation exception to Noerr-Pennington doctrine.
Maryland real estate developer Waugh Chapel South, LLC and related entities (WCS) sued two local unions and a union benefit fund (Fund) under the LMRA, alleging that the unions brought 14 separate legal challenges against their commercial real estate project to force WCS to terminate its relationship with non-unionized supermarket chain Wegmans. WCS alleged that this conduct constituted an illegal secondary boycott under the NLRA.
The unions and Fund moved to dismiss the complaint under the Noerr-Pennington doctrine, stating that under this doctrine, it had a First Amendment right to petition the government by filing these lawsuits. Additionally, the Fund moved to dismiss the complaint on the basis that it is not a "labor organization" under the NLRA. The district court agreed with both arguments and granted the motions to dismiss. WCS appealed to the Fourth Circuit.
The Fourth Circuit held that:
  • The Fund is not a "labor organization" under the NLRA.
  • The Noerr-Pennington doctrine does not insulate the unions' litigation activity from liability.
  • Under the sham litigation exception to the Noerr-Pennington doctrine, the unions' alleged litigation record is sufficient to show that the unions might have abused their First Amendment right to petition the courts.
The Fourth Circuit considered the sham litigation tests established in two separate precedential cases, Professional Real Estate Investors, Inc. v. Columbia Pictures Indus. (PREI), and California Motor Transport Co. v. Trucking Unlimited. The Fourth Circuit concluded that:
  • The PREI sham litigation test, which the Fourth Circuit has only ever applied to a situation where a party has alleged a single sham proceeding, is inappropriate to test whether a series of legal proceedings constitute sham litigation.
  • When the alleged sham litigation encompasses a series of legal proceedings rather than a single litigation, the sham litigation test established in California Motor should govern.
Under the California Motor test:
  • The focus should not be on any single case.
  • A district court should conduct a full evaluation of whether "the administrative and judicial processes have been abused" (California Motor).
  • The focus should be on the pattern of the legal proceedings, rather than their individual merits.
Considering this test, as well as the union's poor litigation record and alleged bad-faith petitioning, the Fourth Circuit concluded that the pleadings raise a genuine issue of material fact as to whether the unions indiscriminately filed a series of legal proceedings without regard for the merits and for the purpose of effecting secondary boycotts unlawful under the NLRA.
The Fourth Circuit held that the district court erred in dismissing WCS's claims against the unions and remanded the case for further proceedings.
Court documents: