Waugh Chapel South, LLC v. United Food and Commercial
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:11-cv-00841-WDQ. [999180338]. [12-1429]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1429
WAUGH CHAPEL SOUTH, LLC; WCS LLC; WCS PROPERTIES BUSINESS
TRUST; ELG INGLEWOOD LLC,
Plaintiffs – Appellants,
v.
UNITED FOOD AND COMMERCIAL WORKERS UNION LOCAL 27; UNITED
FOOD & COMMERCIAL WORKERS UNION, LOCAL 400; MID−ATLANTIC
RETAIL FOOD INDUSTRY JOINT LABOR MANAGEMENT FUND,
Defendants – Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
William D. Quarles, Jr., District
Judge. (1:11-cv-00841-WDQ)
Argued:
May 16, 2013
Decided:
August 26, 2013
Before KING, DIAZ, and FLOYD, Circuit Judges.
Affirmed in part, vacated in part, and remanded by published
opinion. Judge Diaz wrote the opinion, in which Judge King and
Judge Floyd joined.
ARGUED:
Ira Lee Oring, FEDDER & GARTEN, PA, Baltimore,
Maryland, for Appellants.
Michael Timothy Anderson, MURPHY
ANDERSON PLLC, Washington, D.C., for Appellee United Food and
Commercial Workers Union Local 27; Sharon McNeilly Goodman,
SLEVIN & HART, P.C., Washington, D.C., for Appellee Mid−Atlantic
Retail Food Industry Joint Labor Management Fund.
ON BRIEF:
Neil Dubovsky, FEDDER & GARTEN, PA, Baltimore, Maryland, for
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Appellants.
Arlus J. Stephens, Lorrie E. Bradley, MURPHY
ANDERSON PLLC, Washington, D.C., Joel A. Smith, David Gray
Wright, KAHN, SMITH & COLLINS, P.A., Baltimore, Maryland, for
Appellee UFCW Local 27; Carey R. Butsavage, John A. Durkalski,
BUTSAVAGE & ASSOCIATES, P.C., Washington, D.C., for Appellee
UFCW Local 400; Barry S. Slevin, Laura O. Aradi, SLEVIN & HART,
P.C., Washington, D.C., for Appellee MRFI JLM Fund.
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DIAZ, Circuit Judge:
Waugh Chapel South, LLC, WCS LLC, WCS Properties Business
Trust (collectively “WCS”) sued the United Food and Commercial
Workers Union Locals 27 and 400 (“UFCW”) and the Mid-Atlantic
Retail Food Industry Joint Labor Management Fund (the “Fund”)
under the Labor Management Relations Act (the “LMRA”), 29 U.S.C.
§ 187, which provides a cause of action for victims of “unfair
labor practices” as defined by the National Labor Relations Act
(the “NLRA”), 29 U.S.C. § 158(b)(4).
In its complaint, 1 WCS
alleges that the defendants orchestrated fourteen separate legal
challenges against their commercial real estate project in order
to
force
WCS
to
terminate
their
relationship
with
a
non-
unionized supermarket--conduct that WCS alleged was an illicit
“secondary boycott” under § 158(b)(4)(ii)(B).
The defendants moved to dismiss the complaint under the
Noerr-Pennington 2 doctrine, claiming that their First Amendment
right to petition the courts insulated their litigation activity
from liability.
Alternatively, the Fund moved to dismiss the
1
Plaintiff ELG Inglewood LLC (“ELG”) also sued the unions
(Count II), alleging similar actions with respect to a related
commercial real estate development.
As discussed below, those
claims were dismissed in part, and ELG has since waived decision
on its appeal.
2
See United Mine Workers of Am. v. Pennington, 381 U.S. 657
(1965); E. R.R. Presidents Conference v. Noerr Motor Freight,
Inc., 365 U.S. 127 (1961).
3
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complaint on the basis that it was not a “labor organization”
under the NLRA.
The district court agreed with both arguments
and granted the motions to dismiss.
This appeal followed.
We agree with the district court that the Fund is not a
“labor
organization”
Noerr-Pennington
spare
the
complaint.
may
under
doctrine
remaining
the
does
NLRA,
not
defendants
but
(at
from
conclude
least
the
at
that
this
allegations
the
stage)
of
the
Although the courts are a medium by which citizens
exercise
their
First
Amendment
right
to
petition
their
government, the act of petitioning those courts may not serve as
the means to achieve illegal ends.
Cal. Motor Transp. Co. v.
Trucking Unlimited, 404 U.S. 508, 515 (1972).
Under this “sham
litigation” exception to the Noerr-Pennington doctrine, we 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.
We therefore affirm in
part, vacate in part, and remand to the district court for a
determination of whether the unions waged a secondary boycott in
the manner alleged in the complaint.
I.
WCS and ELG are commercial real estate developers of two
respective shopping centers in Anne Arundel County, Maryland:
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(1) the Village at Waugh Chapel South (“Waugh Chapel”); and (2)
the Woodmore Towne Centre (“Woodmore”). 3
Both companies planned
to lease a storefront unit in each of their shopping centers to
Wegmans
chain
Food
does
Markets,
not
Inc.
employ
Because
organized
the
labor,
Wegmans
both
supermarket
projects
were
opposed by the defendant unions.
That
opposition
leadership
“set[]
commenced
its
antagonistic campaign.
in
sights
J.A. 14.
December
on
2006
Wegmans”
when
to
union
mount
an
According to WCS, a union
executive threatened WCS that if Wegmans did not unionize, “we
will fight every project you develop where Wegmans is a tenant.”
J.A. 18.
The unions thereafter directed and funded a barrage of
legal challenges at every stage of the projects’ development.
The first of these challenges occurred in August 2008, when
UFCW
Secretary-Treasurer
attorney
G.
Macy
Nelson,
George
Murphy,
petitioned
the
represented
Anne
by
Arundel
his
City
Council (the “Council”) to revoke its decision to rezone the
Waugh Chapel site from agricultural and residential to mixed-use
commercial.
WCS argued that Murphy lacked standing.
3
The day
We recite the facts here as a prelude to deciding whether
Noerr-Pennington warrants dismissal of the claims.
For reasons
described below, we treat the district court’s dismissal as a
grant of summary judgment to the unions, and therefore consider
all facts and reasonable inferences therefrom in the light most
favorable to WCS, the non-moving party.
Bonds v. Leavitt, 629
F.3d 369, 380 (4th Cir. 2011).
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before a scheduled hearing on the merits, Murphy withdrew the
petition and effectively ceded that he was not an “aggrieved
party.”
J.A. 441.
After this petition failed, the union employed surrogate
plaintiffs to pursue their legal challenges.
years,
Nelson
proceedings
centers,
Three of
would
objecting
with
those
the
represent
to
unions
challenges
before us on appeal.
the
plaintiffs
development
allegedly
pertained
For the next few
in
of
directing
to
sixteen
the
the
Woodmore
other
shopping
litigation.
and
are
not
We summarize the thirteen other challenges
to Waugh Chapel below.
•
In December 2009, Paul Gilliam, Tracee Gilliam, and the
environmental organization “Patuxent Riverkeeper” appealed
the Council’s decision to extend the time for WCS to post
fees and bonds for the project. WCS later posted the bonds
and fees, mooting the case.
•
In March 2010, Robert Smith and Madonna Brennan sued in
Maryland state court to enjoin the Council’s approval of
“Tax Increment Financing” (“TIF”) bonds, arguing that the
Council did not conduct the requisite hearing. The Council
did indeed fail to conduct a hearing, a failure it remedied
by holding another hearing in May to reauthorize the TIF
bonds. The case was then dismissed as moot.
•
In June 2010, Smith and Brennan sued several defendants
associated with the development project, including the
Council and the Maryland Department of Energy (“MDE”),
alleging the development had caused a nuisance.
After
a
brief period of discovery in which Smith and Brennan
proffered expert testimony, the parties moved for summary
judgment. The state court found that there was no nuisance
and dismissed the suit.
•
In July 2010, Smith and Patuxent Riverkeeper filed a state
court petition to vacate the MDE’s issuance of a mining
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permit to WCS. They filed an identical petition in August
when the MDE issued an amended mining permit.
The state
court dismissed the July petition as based only on the
“conjecture” and “speculation” of affidavits provided by
plaintiffs.
J.A. 196-97.
After this dismissal, the
plaintiffs voluntarily dismissed their August petition.
•
From May to July 2011, Smith, Sandra Bowie, and Rosie
Shorter appealed the grant of nine separate building and
grading permits issued by the Council to WCS.
They
withdrew the appeals after WCS subpoenaed the unions’
financial records.
On March 31, 2011, WCS and ELG sued the unions under the
LMRA, 29 U.S.C. § 187, alleging two counts of secondary boycott
activity under § 158(b)(4)(ii)(B).
Count 1 of the complaint
pertained to the Waugh Chapel shopping center (WCS), while Count
2 pertained to the Woodmore Towne Center (ELG).
the
district
court
categorized
the
fourteen
As to Count 1,
legal
challenges
directed against Waugh Chapel as follows: (1) one “successful
petition” to appeal the issuance of the TIF bonds, J.A. 55, (2)
two environmental suits dismissed for lack of standing, and from
which the court would not infer baselessness, (3) ten grading
and building “petitions withdrawn to avoid subpoenas” from which
the
court
would
not
infer
baselessness,
J.A.
57,
(4)
one
petition appealing the extension of time for WCS to post bonds
and pay fees that became moot, and (5) one environmental suit
dismissed on the merits “after thoughtful consideration,” J.A.
58.
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The Fund successfully moved to dismiss the complaint under
Federal Rule of Civil Procedure 12(b)(6), arguing that it was
not a “labor organization” subject to the LMRA.
And because the
district court concluded that none of the prior legal challenges
to the development of Waugh Chapel were objectively baseless, it
dismissed Count I on Noerr-Pennington grounds.
While the court
allowed a portion of Count II to survive the unions’ motion to
dismiss, 4 a subsequent consent order also dismissed that count.
II.
Before reaching the merits of this appeal, we first address
the procedural posture of this appeal and our jurisdiction to
decide it.
A.
Although the parties do not address it, we must determine
our appellate jurisdiction to entertain this appeal under 12
U.S.C. § 1291, as “we are bound in all cases to ascertain our
own
appellate
jurisdiction
before
4
reviewing
a
district
court
As to ELG’s Count II, the district court concluded that
one of the three underlying legal proceedings allegedly
instigated by the unions was objectively baseless. Accordingly,
the court granted the unions’ motion to dismiss as to two of the
three alleged ‘sham’ suits, but allowed this one portion of
Count II to survive.
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Reid v. Angelone, 369 F.3d 363, 374 n.7 (4th Cir.
2004).
“With
few
narrow
exceptions,”
including
certain
interlocutory and collateral orders, “our jurisdiction extends
only to appeals from all final decisions of the district courts
of the United States.”
United States v. Myers, 593 F.3d 338,
344 (4th Cir. 2010).
In this case, after the district court
dismissed WCS’s Count I and most of Count II with prejudice, ELG
and the unions entered into a consent order, which purported to
dismiss
the
prejudice,
remainder
but
proceeding.”
of
without
J.A. 68.
Count
II
prejudice
of
to
the
complaint
refiling
in
any
“with
other
“This kind of split judgment ordinarily
would not be considered ‘final’ and therefore appealable under
28
U.S.C.
§
1291
because
it
does
litigation in the district court.”
not
wind
up
the
entire
Palka v. City of Chicago,
662 F.3d 428, 433 (7th Cir. 2011); see also GO Computer, Inc. v.
Microsoft Corp., 508 F.3d 170, 175-76 (4th Cir. 2007).
Several of our sister circuits have held that litigants may
not
use
voluntary
jurisdiction
dismissals
for
interlocutory orders.
as
reviewing
a
subterfuge
otherwise
to
manufacture
non-appealable,
See Gannon Int’l, Ltd. v. Blocker, 684
F.3d 785, 791-92 (8th Cir. 2012); Rabbi Jacob Joseph School v.
Province
of
Mendoza,
425
F.3d
207,
210
(2d
Cir.
2005);
LNC
Investments LLC v. Republic of Nicaragua, 396 F.3d 342, 346 (3d
9
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Cir. 2005); Marshall v. Kansas City S. Ry. Co., 378 F.3d 495,
499-500 (5th Cir. 2004); James v. Price Stern Sloan, Inc., 283
F.3d 1064, 1070 (9th Cir. 2002); CSX Transp., Inc. v. City of
Garden City, 235 F.3d 1325, 1327 (11th Cir. 2000); ITOFCA, Inc.
v. MegaTrans Logistics, Inc., 235 F.3d 360, 365 (7th Cir. 2000);
Cook v. Rocky Mountain Bank Note Co., 974 F.2d 147, 148 (10th
Cir. 1992).
“Tolerance of that practice would violate the long-
recognized policy against piecemeal appeals,” Rabbi Jacob Joseph
School, 425 F.3d at 210, and would allow “an end-run around the
final judgment rule.”
Palmieri v. Defaria, 88 F.3d 136, 140 (2d
Cir. 1996).
ELG confesses that its Rule 41(a)(2) voluntary dismissal
was
intended
to
allow
interlocutory order.
appellate
review
of
an
otherwise
See Appellants’ Br. at 3 n.1 (“The claims
relating to one of those actions was dismissed by the March 29,
2012 Consent Order to allow for a final judgment.”).
Under these circumstances, the question of remedy
looms. In most cases, the proper remedy will be to
reverse the Rule 41(a)(2) order and remand for
completion of the case, without considering the merits
of the earlier interlocutory order(s). We may also
deem the ambiguous voluntary dismissal of Count [II]
to be with prejudice and go on to consider the appeal
from the district court’s dismissal of all remaining
claims.
Madsen v. Audrain Health Care, Inc., 297 F.3d 694, 698 (8th Cir.
2002) (internal quotations omitted).
As did the Eighth Circuit,
we choose the latter remedy here, as it polices the boundaries
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of our appellate jurisdiction without punishing the litigants in
this appeal.
Accordingly, we deem ELG’s voluntary dismissal of
Count II to be with prejudice and proceed to consider WSC’s
appeal of its remaining claims.
B.
We next address a procedural wrinkle regarding the district
court’s Rule 12(b)(6) dismissal.
While we have since questioned
our decision to do so, see IGEN Int’l, Inc. v. Roche Diagnostics
GmbH, 335 F.3d 303, 311 (4th Cir. 2003), we have held that the
Noerr-Pennington doctrine is an affirmative defense, 5 N.C. Elec.
Membership Corp. v. Carolina Power & Light, 666 F.2d 50, 52 (4th
Cir.
1981).
The
district
court,
however,
purported
to
adjudicate the merits of the unions’ Noerr-Pennington defense
under Rule 12(b)(6), which is a procedure that tests only the
sufficiency of a complaint and “cannot reach the merits of an
5
In IGEN Int’l, the defendant Roche Diagnostics GmbH failed
to raise the Noerr-Pennington doctrine until after the district
court denied its motion to dismiss.
335 F.3d at 308-10.
On
appeal, Roche challenged the district court’s decision to deny
its Noerr-Pennington argument as untimely. While conceding that
“[t]his circuit has previously characterized Noerr-Pennington as
an affirmative defense,” the panel nonetheless stated in dicta
that “Roche was not required to plead [Noerr-Pennington] as an
affirmative defense.” Id. at 311.
We, however, remain bound by our earlier precedent that the
Noerr-Pennington
doctrine
is
an
affirmative
defense.
See
McMellon v. United States, 387 F.3d 329, 333 (4th Cir. 2004).
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affirmative defense . . . .
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[unless] all facts necessary to the
affirmative
defense
clearly
appear
on
the
face
of
the
complaint.”
Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th
Cir. 2007) (en banc) (internal quotations omitted).
While WCS’s complaint alleges that the unions directed a
series of adverse lawsuits in order to wage a secondary boycott,
the mere reference to the purportedly sham proceedings does not
show--on
the
face
of
the
complaint--whether
bars WCS’s claims as a matter of law.
relevant
evidence
that
the
district
Noerr-Pennington
In fact, much of the
court
considered
on
the
point consisted of materials 6 the parties appended as part of
the “Rule 12(b)(6) motion to dismiss, which is not a pleading.”
Mellon
Bank,
N.A.
v.
Ternisky,
999
F.2d
791,
795
(4th
Cir.
1993).
We also note that when “matters outside the pleadings are
presented to and not excluded by the court, the [Rule 12(b)(6)]
motion must be treated as one for summary judgment under Rule
56,” and “[a]ll parties must be given a reasonable opportunity
to present all the material that is pertinent to the motion.”
6
These documents principally concerned the underlying
administrative and state court proceedings and consisted of
permit applications, legal filings, administrative hearings,
judicial orders, deposition excerpts, and affidavits. The unions
attached these materials to their motion to dismiss, as did WCS
to their response to that motion.
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R.
formally
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Civ.
P.
convert
12(d).
the
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Here,
unions’
the
motion
district
to
court
dismiss
did
one
to
not
for
summary judgment, believing instead that it could adjudicate the
unions’
motion
incorporated
under
into
Rule
the
12(b)(6)
complaint
by
by
considering
reference,
documents
and
taking
judicial notice of the purported sham proceedings.
It is not obvious to us that incorporation by reference is
appropriate in this context given our holding in Goodman that a
district court may consider only “the face of the complaint.”
Goodman, 494 F.3d at 464.
as
an
expedient
for
Nor should “judicial notice” be used
courts
to
consider
“matters
beyond
the
pleadings” and thereby upset the procedural rights of litigants
to present evidence on disputed matters.
Greater Balt. Ctr. for
Pregnancy Concerns, Inc. v. Mayor & City Council of Baltimore,
___ F.3d ___, 2013 WL 3336884, slip op. at 10 (4th Cir. July 3,
2013) (en banc) (internal quotations omitted); see Haavistola v.
Cmty. Fire Co. of Rising Sun, Inc. 6 F.3d 211, 218 (4th Cir.
1993).
But the bottom line is that the district court did allow
the parties to supplement the record before ruling on the motion
to dismiss.
Moreover, the parties did not request discovery or
otherwise object to the court’s procedural management of the
unions’ motion to dismiss.
As we have stated before,
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we are not bound by the label that the district court
places upon its disposition of the case.
Whenever
outside matters are presented to and not excluded by
the trial court, the motion to dismiss should be
considered on appeal as one for summary judgment even
though the trial court characterized its action as a
dismissal of the case for failure of plaintiffs to
state a claim upon which relief can be granted.
The
record in this case shows that both parties were given
a reasonable opportunity to present evidence upon
which the trial court could properly determine whether
summary judgment should be entered.
Therefore, it is
proper for this court on appeal to consider this as a
motion for summary judgment.
Dean v. Pilgrim’s Pride Corp., 395 F.3d 471, 474 (4th Cir. 2005)
(internal quotations omitted).
We conclude that the principle
announced in Dean applies directly here, and so we too will
consider
the
unions’
motion
to
dismiss
based
on
the
Noerr-
Pennington doctrine as one for summary judgment.
As
to
therefore,
the
we
dismissal
will
of
“review
the
the
Fund
under
district
Rule
court’s
12(b)(6),
grant
of
a
motion to dismiss de novo,”
McCauley v. Home Loan Inv. Bank,
F.S.B.,
(4th
710
F.3d
551,
554
Cir.
2013),
accepting
the
allegations of WCS’s complaint as true, Trail v. Local 2850 UAW
United Def. Workers of Am., 710 F.3d 541, 543 (4th Cir. 2013).
But because we have refashioned the district court’s dismissal
of the claim against the remaining defendants as a grant of
summary
judgment,
we
review
de
novo
whether
there
are
any
genuine issues of material fact for the trier of fact to resolve
and, if not, whether the unions were entitled to dismissal as a
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matter of law.
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Reynolds v. Am. Nat’l Red Cross, 701 F.3d 143,
149 (4th Cir. 2012).
III.
We first consider the district court’s decision to dismiss
the claim against the Fund on the basis that it is not a “labor
organization” under the NLRA subject to the secondary boycott
prohibitions
of
the
LMRA.
The
NLRA
defines
a
“labor
organization” as “any organization of any kind, or any agency or
employee representation committee or plan, in which employees
participate and which exists for the purpose, in whole or in
part,
of
dealing
disputes,
wages,
with
rates
conditions of work.”
employers
of
concerning
pay,
hours
of
grievances,
labor
employment,
or
29 U.S.C. § 152(5).
We have “given a broad interpretation to the ‘dealing with’
requirement.”
NLRB v. Peninsula Gen. Hosp. Med. Ctr., 36 F.3d
1262, 1270 (4th Cir. 1994).
“dealing
through
with”
which
phraseology
an
employee
But we have also explained that the
denotes
entity
and
a
“bilateral
management
mechanism”
reciprocally
interact:
As we understand this “bilateral mechanism” analysis,
several
general
principles
are
readily
apparent. . . :
(1) while the term “dealing with”
connotes activity which is broader than collective
bargaining, an employer does not necessarily “deal
with” its employees merely by communicating with them,
even
if
the
matters
addressed
concern
working
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conditions; (2) “dealing” occurs only if there is a
“pattern or practice” over time of employee proposals
concerning working conditions, coupled with management
consideration thereof; [and] (3) isolated instances of
the conduct described in number two do not constitute
“dealing[.]”
Id. at 1271-72.
An employee entity may be a “labor organization” if its
purpose or activity involves “dealing with” employers.
1270 n.6.
Id. at
Yet the Fund satisfies neither of these criteria.
First, WCS’s own complaint alleges that the Fund is prohibited
under
its
charter
indirectly . . . in
Second,
while
the
from
union
“participating
collective
“question
of
directly
activities.”
whether
an
organization
‘labor organization’ is primarily one of fact,”
36
F.3d
at
1269,
the
only
fact
J.A.
suggesting
or
13.
is
a
Peninsula Gen.,
any
interactions
between the Fund and an employer concerns the alleged secondary
boycott.
There is plainly no “bilateral mechanism” when the
only alleged contact between an employee entity and management
is an unfair labor practice directed against an employer.
Although
the
Fund
has
organization”
for
purposes
designated
of
tax
itself
liability,
as
a
this
“labor
is
not
sufficient to render it a “labor organization” for the purposes
of
labor
distinct
law.
The
definition
Internal
of
“labor
Revenue
Code
(“I.R.C.”)
organization.”
§ 501(c)(5); 26 C.F.R. § 1.501(c)(5)-1(a).
16
See
26
has
a
U.S.C.
The First Circuit
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refused
to
borrow
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the
NLRA
definition
of
“labor
organization” to determine the meaning of that term under the
I.R.C.
Tupper v. United States, 134 F.3d 444, 446 n.1 (1st Cir.
1998).
We agree with our sister circuit that the “I.R.C. and
the
NLRA
have
very
different
objectives,”
and
we
similarly
decline “to import definitions from statutes with unrelated or
cross-purposes.”
Id.
Because Plaintiffs fail to allege that the Fund has engaged
in a pattern or practice of “dealing with” employers, it is not
a “labor organization” under the NLRA and is not subject to the
conditions
of
the
LMRA.
We
therefore
affirm
the
district
court’s decision to dismiss the complaint against the Fund.
IV.
A.
We
next
dismissed
consider
the
whether
claim
the
against
district
the
court
remaining
correctly
defendants.
Plaintiffs allege that the unions’ various legal challenges to
the
Waugh
provision
Chapel
of
the
development
NLRA,
violated
which
the
extends
to
secondary
efforts
boycott
to
“exert
pressure on an unrelated, secondary or neutral employer in order
to
coerce
primary
the
secondary
employer,
indirectly.”
R.L.
employer
thereby
Coolsaet
to
cease
advancing
Constr.
17
Co.
the
v.
dealing
with
union’s
Local
150,
the
goals
Int’l
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Pg: 18 of 30
Union of Operating Eng’rs, AFL-CIO, 177 F.3d 648, 655 (7th Cir.
1999) (internal quotations omitted).
The
unions
counter
that
their
litigation
activity
is
protected by the Noerr-Pennington doctrine, which safeguards the
First Amendment right to “petition the government for a redress
of grievances,” U.S. Const. amend. I, by immunizing citizens
from the liability that may attend the exercise of that right.
See Noerr, 365 U.S. at 136-39; Pennington, 381 U.S. at 669.
The
principle
originated
from
Noerr,
where
the
Supreme
Court extended First Amendment protection to lobbying efforts
for anti-competitive legislation, explaining that “mere attempts
to influence the passage or enforcement of laws” cannot comprise
a violation of antitrust law.
Noerr, 365 U.S. at 135.
The Court has since expanded Noerr-Pennington immunity to
alleged labor law violations, BE & K Constr. Co. v. NLRB, 536
U.S. 516, 526 (2002), and to “the approach of citizens or groups
of them to administrative agencies . . . and to courts, the
third
branch
However,
the
“petitioning
of
Government.”
First
Cal.
Amendment
activity
ostensibly
Motor,
offers
404
no
directed
U.S.
at
protection
toward
510.
when
influencing
governmental action, is a mere sham to cover . . . an attempt”
to violate federal law.
Columbia
Pictures
Indus.
Prof’l Real Estate Investors, Inc. v.
(“PREI”),
(internal quotations omitted).
18
508
U.S.
49,
56
(1993)
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The Supreme Court’s first engagement with this exception
occurred in California Motor, where highway carriers instituted
a slew of “state and federal proceedings to resist and defeat
applications by respondents to acquire operating rights or to
transfer
or
Respondents,
antitrust
register
a
suit
group
those
of
claiming
rights.”
rival
this
anti-competitive conduct.
404
highway
litigation
U.S.
at
carriers,
activity
509.
filed
an
constituted
The Court concluded that the facts
alleged came within the “sham” exception to the Noerr-Pennington
doctrine,
pattern
explaining
of
baseless,
that
sham
repetitive
litigation
occurs
where
claims . . . emerge[s]
“a
which
leads the factfinder to conclude that the administrative and
judicial processes have been abused.”
Id. at 513.
The Supreme Court revisited the sham litigation standard in
PREI,
which
involved
a
defendant’s
counterclaim
that
the
copyright action it was defending was a sham suit designed to
violate antitrust law.
In examining the applicability of Noerr-
Pennington, the Court set forth a “two-part definition of ‘sham
litigation.’
First, the lawsuit must be objectively baseless in
the sense that no reasonable litigant could realistically expect
success on the merits.”
inquiry
focuses
PREI, 508 U.S. at 60.
on
the
“litigant’s
The second
subjective
motivation . . . [and] whether the baseless lawsuit conceals an
attempt
to”
violate
federal
law
19
“through
the
use
of
the
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governmental
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process.”
Id.
Pg: 20 of 30
at
60-61.
Because
“the
sham
exception contains an indispensable objective component,” id. at
58,
“even
an
improperly
enjoined . . . as
an
litigation is baseless,”
motivated
unfair
labor
lawsuit
practice
may
not
unless
be
such
id. at 59.
It is unclear whether PREI distinguished or displaced the
sham litigation test first propounded in California Motor.
Two
of our sister circuits, however, “reconcile” the two cases “by
reading them as applying to different situations.
Professional
Real Estate Investors provides a strict two-step analysis to
assess
whether
petitioning. . . .
a
single
action
constitutes
sham
California Motor Transport deals with the
case where the defendant is accused of bringing a whole series
of legal proceedings.”
USS–POSCO
Indus. v. Contra Costa Cnty.
Bldg. & Const. Trades Council, AFL-CIO (“POSCO”), 31 F.3d 800,
810-11 (9th Cir. 1994); accord Primetime 24 Joint Vent. v. Nat’l
Broad. Co., 219 F.3d 92, 101 (2d Cir. 2000).
We have not had occasion to confront this issue, as our
precedent has applied PREI only where a party has alleged a
single sham proceeding.
See IGEN Int’l, 335 F.3d at 307-08;
Baltimore Scrap Corp. v. David J. Joseph Co., 237 F.3d 394, 39798 (4th Cir. 2001).
Nevertheless, we agree with the distinction
adopted by our sister circuits.
In the absence of any express
statement that the sham litigation standard in PREI supplanted
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California Motor, we are obligated to “follow the case which
directly
controls,
prerogative
of
leaving
overruling
to
its
th[e]
own
[Supreme
decisions.”
Court]
the
Rodriguez
de
Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989). 7
We
distinguish
PREI
because
it
is
ill-fitted
to
test
whether a series of legal proceedings is sham litigation.
When
a party contends that it is defending a sham lawsuit, it is
relatively simple for a judge to decide whether the singular
claim it is presiding over is objectively baseless.
508 U.S. at 59-61.
to
collaterally
administrative
See PREI,
But it is an entirely different undertaking
review--as
lawsuits
for
here--fourteen
baselessness.
It
state
is
and
especially
difficult to do so where the presiding tribunal in those cases
had no occasion to measure the baselessness of the suit because
7
While the parties fully briefed and argued this issue in
the court below, WCS has not pressed for a different sham
litigation standard on appeal.
Nevertheless, “we possess the
discretion under appropriate circumstances to disregard the
parties’ inattention to a particular argument or issue.” United
States v. Ashford, ___ F.3d ___, 2013 WL 3069778, slip op. at 2
(4th Cir. June 20, 2013) (internal quotations omitted).
In
order to properly assess whether WCS’s complaint should be
dismissed because of the Noerr-Pennington doctrine, we believe
it is necessary to apply the correct sham litigation standard,
and we exercise our discretion to do so.
At oral argument, the unions sensed our inclination to sua
sponte address this question, and requested that we allow
supplemental briefing on this point.
We deny this request, as
we have reviewed the parties’ briefing at the district court on
this issue and find it more than sufficient.
21
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it
had
no
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inkling
that
Pg: 22 of 30
the
action
comprised
a
possible
campaign of sham litigation, and (2) the plaintiffs preempted an
assessment of frivolity by prematurely withdrawing some of their
suits.
Accordingly, when purported sham litigation encompasses a
series of legal proceedings rather than a singular legal action,
we conclude the sham litigation standard of California Motor
should govern.
In this context, the focus is not on any single
case.
a
Rather
district
court
should
conduct
a
holistic
evaluation of whether “the administrative and judicial processes
have been abused.”
Cal. Motor, 404 U.S. at 513.
The pattern of
the legal proceedings, not their individual merits, centers this
analysis:
One claim, which a court or agency may think baseless,
may
go
unnoticed;
but
a
pattern
of
baseless,
repetitive
claims
may
emerge
which
leads
the
factfinder to conclude that the administrative and
judicial processes have been abused.
That may be a
difficult line to discern and draw.
But once it is
drawn, the case is established that abuse of those
processes
produced
an
illegal
result,
viz.,
effectively barring respondents from access to the
agencies and courts. Insofar as the administrative or
judicial processes are involved, actions of that kind
cannot acquire immunity by seeking refuge under the
umbrella of “political expression.”
Id.
Of course, the subjective motive of the litigant and the
objective merits of the suits are relevant, but other signs of
bad-faith litigation--including those present in this case--may
also be probative of an abuse of the adjudicatory process.
22
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B.
We
test. 8
now
a
review
the
unions’
motion
to
dismiss
under
this
Accordingly, we ask whether the record evidence presents
genuine
issue
indiscriminately
of
material
filed
(or
fact
as
to
directed)
whether
the
unions
series
of
legal
a
proceedings without regard for the merits and for the purpose of
violating federal law.
In
our
view,
the
failed demonstrably.
We conclude that it does.
vast
majority
of
the
legal
challenges
In fact, it appears that only the March
2010 suit to enjoin the approval of TIF bonds could be called
successful.
The
plaintiffs
objectively
lacked
standing
in
the
proceedings to rescind the rezoning decision by the Council, as
Maryland law requires a party to attend the public hearing of an
administrative body in order to have standing as an aggrieved
party.
See, e.g., Cnty. Council v. Billings, 21 A.3d 1065, 1075
(Md. 2011).
Two additional suits regarding the MDE issuance of surface
mining permits were dismissed as “based in critical part only on
8
“Although we could remand to the district court for
reconsideration under the appropriate standard of review, doing
so would serve no useful purpose. . . . The validity vel non of
a summary judgment entails a pure question of law and,
therefore, we are fully equipped to resolve the question as a
matter of first-instance appellate review.” Piccicuto v. Dwyer,
39 F.3d 37, 40 (1st Cir. 1994).
23
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conjecture,” J.A. 196, as the petitioners supplied only their
own
conclusory
scientific
affidavits
data
of
or
testimony.
expert
environmental
harm
Finally,
with
no
collateral
estoppel would have barred the nine appeals of the building and
grading
permits,
as
the
petitioners
simply
repeated
the
substance of their nuisance claim--dismissed weeks earlier--that
the developments caused environmental harm to their property.
While there is no particular win-loss percentage that a
litigant
must
Amendment,
a
achieve
to
secure
the
one-out-of-fourteen
protection
batting
of
average
the
First
at
least
suggests “a policy of starting legal proceedings without regard
to
the
merits
and
for
the
purpose
of
[violating
the
law].”
POSCO, 31 F.3d at 811; cf. Kaiser Found. Health Plan, Inc. v.
Abbott Lab. Inc., 552 F.3d 1033, 1046-47 (9th Cir. 2009) (no
sham litigation where plaintiffs “won seven of the seventeen
suits” and eight of the ten defeats concerned novel or close
questions of law); POSCO, 31 F.3d at 811 (no sham litigation
where fifteen out of twenty-nine suits succeeded); Twin City
Bakery Workers & Welfare Fund v. Astra Aktiebolag, 207 F. Supp.
2d 221, 224 (S.D.N.Y. 2002) (no sham litigation where the court
allowed
“four
of
the
six
asserted
patents
to
proceed
beyond
summary judgment.”).
Of course, some of the legal challenges directed by the
unions may have been justifiable in one sense or another.
24
For
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example, the petition appealing the issuance of TIF bonds could
be characterized as successful.
Nevertheless, the fact that
there may be moments of merit within a series of lawsuits is not
inconsistent with a campaign of sham litigation, for “even a
broken clock is right twice a day.”
POSCO, 31 F.3d at 811.
We note some other indicia of bad-faith litigation.
there
was
a
perverse
nature
to
the
environmental
First,
litigation
directed by the unions to enjoin the commercial development.
Because WCS and MDE entered into a consent decree to remediate
preexisting
have
environmental
terminated
the
contamination,
consent
decree
an
injunction
and
would
prevented
any
environmental remediation from actually occurring.
Second, plaintiffs withdrew ten of the fourteen suits under
suspicious
circumstances.
UFCW
Secretary-Treasurer
Murphy’s
eleventh-hour withdrawal of the August 2008 petition occurred a
day before a hearing on the merits and after WCS had expended
significant resources opposing the petition.
appeals
of
voluntarily
the
building
dismissed
and
their
grading
And in the nine
permits,
suits--according
to
plaintiffs
WCS--to
avoid
complying with subpoenas of financial records that would have
revealed
that
litigation.
the
unions
were
directing
and
paying
for
the
While third-party financing of legal proceedings
does not itself demonstrate an illegal purpose or render those
suits sham, see Balt. Scrap, 237 F.3d at 400-01, a reasonable
25
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factfinder could credit this evidence in deciding whether “the
administrative and judicial processes have been abused.”
Cal.
Motor, 404 U.S. at 513.
The unions’ post hoc justifications for these suits, as
well as their alternative theories for why the sham litigation
exception should not apply, fail to persuade us that dismissal
of WCS’s complaint is appropriate.
We first reject the notion
that because no attorney or union member faced liability for
sanctions
imposing
or
an
federal
abuse
of
process
liability
for
sham
tort
under
Maryland
litigation
law,
“[u]ndermines
[f]ederalism” and the autonomy of states to regulate access to
their courts.
Appellee’s Br. at 32.
Maryland courts have the
authority to police litigation abuses, Felder v. Casey, 487 U.S.
131,
138
(1988),
but
no
state
may
dictate
the
terms
of
a
litigant’s First Amendment right to petition its courts by the
operation of this power.
See Harman v. Forssenius, 380 U.S.
528, 540 (1965) (“State[s] may not impose a penalty upon those
who exercise a right guaranteed by the Constitution.”).
Just as we do not trespass on the prerogative of Maryland
to police access to its courts, a state court’s decision of
whether or not to penalize sham litigation cannot control our
determination
protection.
of
whether
we
should
afford
it
constitutional
It would make little sense to cede that federal
question to state law proceedings that involve issues that are
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distinct from our inquiry under California Motor.
See Keller v.
State Bar of Cal., 496 U.S. 1, 11 (1990) (“Of course the Supreme
Court of California is the final authority on the ‘governmental’
status of the State Bar of California for purposes of state law.
But its determination . . . is not binding on us when such a
determination
is
essential
to
the
decision
of
a
federal
question.”).
In any event, while a state court’s appraisal of the merits
of litigation aids the sham exception inquiry, see Balt. Scrap,
237 F.3d at 399-400, the plaintiffs in the majority of the cases
withdrew
their
suits
before
an
adjudication.
Moreover,
WCS
could not pursue sanctions against the unions, as they were not
parties to the litigation.
And even in the cases that reached
an adjudication, we accord slight significance to the absence of
a formal declaration of baselessness by the presiding tribunal
where--as here--the defendants and the court did not have reason
to suspect an improper motive behind the suits.
Cf. PREI, 508
U.S. at 51-55.
The
unions
“effectively
courts.”
also
bar[]
Cal.
emphasize
[WCS]
Motor,
404
from
U.S.
that
access
at
sham
to
513.
litigation
the
But
agencies
this
must
and
“access-
barring” language cannot mean that litigation must reach such a
crescendo
as
to
literally
incapacitate
27
the
legal
system
and
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prevent another
Instead,
Filed: 08/26/2013
litigant from
legal
[litigants]
challenges
in
their
use
Pg: 28 of 30
receiving their
need
of
only
day in court. 9
“harass
administrative
and
and
deter
judicial
proceedings so as to deny them ‘free and unlimited’ access to
those tribunals.”
Id. at 511 (emphasis added).
It is enough
that WCS alleged that the series of legal challenges threatened
their
$260
million
commercial
increased risk and costs.
development
with
substantially
If any of those suits had succeeded
in staying the project, even momentarily, WCS may have succumbed
to the boycott and replaced Wegmans with a unionized tenant.
For this reason, we reject the unions’ final argument that
their series of legal challenges was not access-barring as a
matter
of
shopping
law
because
centers.
If
it
did
not
anything,
block
the
development
of
the
ineffectiveness
of
the
lawsuits in this case tends to prove, not dispel, the charge of
9
We disagree with the unions that either Racetrac
Petroleum, Inc. v. Prince George’s County, 601 F. Supp. 892 (D.
Md. 1985), aff’d on its reasoning, 786 F.2d 202 (4th Cir. 1986),
or Pendleton Construction Corp. v. Rockbridge County, Virginia,
652 F. Supp. 312 (W.D. Va. 1987), aff’d on its reasoning, 837
F.2d 178 (4th Cir. 1988), stand for such a proposition.
These
cases neither involved a pattern of litigation nor adopted the
suggestion that litigation cannot be sham where a litigant
ultimately received a fair adjudication.
In fact, we rejected
such a literal conception of access-barring in Hosp. Building
Co. v. Trs. of Rex Hosp., concluding that access-barring occurs
“if the proof establishes . . . intent to delay approval of
HBC’s application for a certificate of need and thereby delay
its entrance into the Raleigh market.”
691 F.2d 678, 687 (4th
Cir. 1982) (emphasis added).
28
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sham litigation.
Because successfully halting the project would
defeat any
litigation
sham
argument
in
the
first
place,
see
Balt. Scrap, 237 F.3d at 399 (“By definition, a winning lawsuit
is a reasonable effort at petitioning for redress and therefore
not a sham.” (internal quotations omitted)), this “heads I win,
tails you lose” theory of access-barring would nullify the sham
litigation exception altogether.
We conclude that there remains a genuine issue of material
fact as to whether the pattern of litigation alleged in WCS’s
complaint derived from “a policy of starting legal proceedings
without regard to the merits and for the purpose of” waging a
secondary boycott.
litigation
record
POSCO, 31 F.3d at 811.
and
the
signs
of
In light of the poor
bad-faith
petitioning,
a
factfinder could reasonably conclude that the unions have abused
their
right
to
petition
the
courts
and,
as
forfeited the protection of the First Amendment.
district
court
erred
in
dismissing
WCS’s
a
result,
have
Therefore, the
claims
against
the
unions.
V.
For the foregoing reasons, we affirm the district court’s
dismissal
of
WCS’s
complaint
as
29
to
the
Fund,
vacate
the
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dismissal
of
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WCS’s
complaint
Pg: 30 of 30
as
to
the
remaining
union
defendants, and remand for further proceedings.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
30
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