No. 96-1740 IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1996 GESKE AND SONS, INC., PETITIONER v. NATIONAL LABOR RELATIONS BOARD, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT BRIEF FOR THE NATIONAL LABOR RELATIONS BOARD IN OPPOSITION WALTER DELLINGER Acting Solicitor General Department of Justice Washington, D.C. 20530-0001 (202) 514-2217 FREDERICK L. FEINSTEIN General Counsel LINDA SHER Associate General Counsel NORTON J. COME Deputy Associate General Counsel JOHN EMAD ARBAB Attorneys National Labor Relations Board Washington, D.C. 20570 ---------------------------------------- Page Break ---------------------------------------- QUESTIONS PRESENTED 1. Whether the National Labor Relations Board reasonably concluded that petitioner violated Section 8(a)(1) of the National Labor Relations Act, 29 U.S.C. 158(a)(l), by bringing a baseless lawsuit against the unions to retaliate against their lawful picketing. 2. Whether the National Labor Relations Board properly exercised its remedial power by ordering petitioner to reimburse the unions for the attorneys' fees incurred in defending against the retaliatory lawsuit. (1) ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Opinions below . . . . 1 Jurisdiction . . . . 1 Statement . . . . 2 Argument . . . . 6 Conclusion . . . . 13 TABLE OF AUTHORITIES Cases: ABF Freight Sys., Inc. v. NLRB, 51 U.S. 317 (1994) . . . . 11 Bill Johnson's Restaurants, Inc. v. NLRB, 461 61 (1993), enforced, 53 F.3d 1085 (9th Cir. 1995) . . . . 3-4, 6, 7, 9, 10 Diamond Walnut Growers, Inc., v. NLRB . . . . 11 61 (1993), enforced, 53 F.3d 1085 (9th Cir. 1995) FW/PBS, Inc. v. City of Dallas, 493 U. S. 215 (1990) . . . . 10 Fibreboard Paper Prods, Corp. v. NLRB, 379 U.S. 203 (1964) . . . . 11 Gibson Greetings, Inc. v. NLRB, 533 F.3d 385 (D.C. Cir. 1995) . . . . 11 Heck's, Inc., 215 N.L.R.B. 765(1974) . . . . 12 Johnson & Hardin Co., 305 N. L. R. B. 690 (1991), enforced in part and order vacated in part, 49 F..3d 237 (6th Cir. 1995) . . . . 13 49 F.3d 237 (6th Cir. 1995) . . . . 12 Lechmere, Inc. v. NLRB, 502 U.S. 527 (1992) . . . . 11 Montgomery Ward & Co., 288 N.L.R.B. 126 (1988), remanded, 904 F.2d 1156 (7th Cir. 1990), modified, 307 N.L.R.B. 764(1992) . . . . 12 NLRB v. Babcock & Wilcox Co., 351 U. S. 105 (1956) . . . . 11 Professional Real Estate Investors, Inc. v. Columbia Pictures Indus. ,Inc., 508 U.S. 49 (1993) . . . . 8 (III) ---------------------------------------- Page Break ---------------------------------------- IV Cases-Continued: Page Sears, Roebuck & Co. v. San Diego County Dist. Council of Carpenters, 436 U.S. 180 (1978) . . . . 11 Taylor v. Freeland & Kronz, 503 U.S. 638 (1992) . . . . 10 Tiidee Prods., Inc., 194 N.L.R.B. 1234 (1972) enforced as modified, 502 F.2d 349 (D.C. Cir.), cert. denied, 417 U.S. 921 (1974) . . . . 12 Vee See Constr. Co. v. Jensen & Halstead, Ltd., 399 N.E.2d 278 (111. APP. Ct. 1979) . . . . 6 Zipp v. Geske & Sons, Inc., 103 F.3d 1379 (7th Cir. 1997) . . . . 5 Statutes: National Labor Relations Act, 29 U.S.C. 151 et seq.: 8(a)(l), 29 U.S.C. 158(a)(l) . . . . 3, 4, 6, 7, 10 10(j), 29 U.S.C. 160(j) . . . . 5 ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1996 No. 96-1740 GESKE AND SONS, INC., PETITIONER v. NATIONAL LABOR RELATIONS BOARD, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT BRIEF FOR THE NATIONAL LABOR RELATIONS BOARD IN OPPOSITION OPINIONS BELOW The opinion of the court of appeals (Pet. App. la- 23a) is reported at 103 F.3d 1366. The decision and order of the National Labor Relations Board (Pet. App. 24a-31a), and the decision of the administrative law judge (Pet. App. 32a-120a), are reported at 317 N.L.R.B. 28. JURISDICTION The court of appeals (Pet. App. 162a) entered its judgment on January 9, 1997. On March 20, 1997, Justice Stevens extended the time within which to (1) ---------------------------------------- Page Break ---------------------------------------- 2 file a petition for a writ of certiorari to April 30, 1997, and the petition was filed on that date. The jurisdic- tion of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT 1. Petitioner is engaged in asphalt paving and the manufacture of asphalt mix. Pet. App. 35a. On August 19, 1991, Operating Engineers Local 150, assisted by Teamsters Local 301 (the Unions), began picketing petitioner's facility, seeking recognition as the representative of petitioner's employees. Id. at 2a, 42a, 43a. Six to twelve pickets patrolled along a public roadway running in front of the plant, carrying picket signs that read "I.U.O.E. LOCAL 150 ON STRIKE AGAINST GESKE FOR RECOGNITION AS MAJORITY BARGAINING REPRESENTA- TIVE OF COMPANY'S OPERATING ENGI- NEERS." Id. at 42a-43a. 2. In September 1991, petitioner fi1ed suit in state court against the Unions, alleging trade libel, tor- tious interference with contractual relations, and tortious interference with prospective advantage. Pet. App. 3a, 63a-64a. The complaint requested in- junctive relief and damages "incidental to [the] in- junctive relief." Id. at 117a; see also id. at 4a. Follow- ing a nine-day hearing, during which petitioner introduced the testimony of approximately 17 wit- nesses, the state court granted the Unions' motion for a directed finding in their favor and denied peti- tioner's request for a preliminary injunction. Id. at 4a, 80a, 131a. The court explained that the Unions' picket signs did not "by any reasonable interpretation indicate a trade libel against Geske, and I believe that the likelihood of success on the merits as to that count is small." Id. at 138a. The court also found that ---------------------------------------- Page Break ---------------------------------------- 3 petitioner had no likelihood of success on its claims of tortious interference with contractual relationships and prospective advantage, because any interference in petitioner's business was a lawful "part of" the picketing and flowed from "'the very nature of having the picketers." Id. at 140a-141a. Petitioner presented "no evidence" that the Unions "committed any unlaw- ful trespasses" or made "threats of violence." Id. at 141a. 1 The Appellate Court of Illinois affirmed the trial court's denial of injunctive relief. Pet. App. 93a, 121a- 130a. The Illinois Supreme Court denied petitioner leave to file an appeal. Id. at 5a. This Court denied petitioner's petition for a writ of certiorari Id. at 5a & n.4, 96a. 3. While petitioner's case was pending before the Appellate Court of Illinois, the Regional Director of the National Labor Relations Board (Board) issued an administrative complaint against petitioner. Pet. App. 87a-88a. The complaint alleged that petitioner had prosecuted a state-court lawsuit that lacked a reasonable basis and was motivated by an intent to retaliate against the Unions for engaging in pro- tected concerted activity, in violation of Section 8(a)(1) of the National Labor Relations Act (Act), 29 U.S.C. 158(a)(l). Pet. App. 87a. The administrative law judge (ALJ) sustained the Regional Director's complaint. Pet. App. 32a-120a, The ALJ found that Local 150 was engaged in peaceful recognitional picketing protected by the Act. Id. at 102a-107a, l16a. Applying Bill Johnson's Restau- ___________________(footnotes) 1 Petitioner subsequently filed a third and fourth amended complaint, in which it added various new defendants and allegations to the suit. Pet. App. 82a, 96a, 131a, 146a. ---------------------------------------- Page Break ---------------------------------------- 4 rants, Inc. v. NLRB, 461 U.S. 731 (1983), the ALJ concluded that petitioner violated Section 8(a)(1) by filing and prosecuting its state-court suit against the Unions. Pet. App. 116a. First, relying "mostly on the determination of the state judge who conducted the state court trial that [petitioner] had failed to establish likelihood of success on the merits, and on the action of the state appellate and supreme courts in denying [petitioner's] interlocutory appeal," the ALJ concluded that the lawsuit was without basis. Id. at 110a. Although petitioner asserted that it had "lots of other evidence" beyond what it presented to the state courts in support of its preliminary injunction motion, the ALJ observed that petitioner had "fail[ed] to enlighten me as to the nature of this lots of other evidence.'" Id. at 34a n.4. 2 Second, the ALJ found, based on the evidence pre- sented to her, that petitioner had filed and prosecuted the state-court lawsuit "to retaliate against the pro- tected concerted activity of [the Unions]." Pet. App. l15a. Based on the violation of Section 8(a)(l), the ALJ recommended that the Board order petitioner, among other things, to withdraw its state-court lawsuit "to the extent that this' lawsuit includes allegations in the third amended complaint or its predecessors" and to reimburse the Unions for, all legal expenses "in- curred in connection with such allegations." Pet. App. 118a. ___________________(footnotes) 2 The ALJ further found petitioner's argument that the ruling on the preliminary injunction motion did not substan- tially dispose of its ease to be inconsistent with representations petitioner previously made to this Court and to the Illinois Supreme Court. Pet. App. 111a. ---------------------------------------- Page Break ---------------------------------------- 5 With certain modifications not relevant here, the Board affirmed the ALJ's findings and conclusions and adopted the recommended order. Pet. App. 24a- 31a. 3 4. The court of appeals enforced the Board's order. Pet. App. 11a-23a. The court agreed with the Board that, "under the Illinois standard for trade libel, [peti- tioner's] state lawsuit against Local 150 and the other defendants was clearly baseless." Id. at 23a. 4 The court rejected petitioner's contention that inclusion of the phrase "On Strike" rendered the picket signs false, agreeing with the state courts that "there is no reasonable way to interpret the statements as [petitioner] suggests." Id. at 13a. Furthermore, even if the picket signs contained a false statement, the court of appeals agreed with the state courts and the Board that, under Illinois law, petitioner was not defamed: "There is nothing about a company's employees being on strike that suggests that the ___________________(footnotes) 3 Despite the ALJ's decision, petitioner continued to prose- cute its state-court suit. The Board's Regional Director filed a petition in federal district court, seeking an injunction barring petitioner from prosecuting its lawsuit until the Board issued a final decision in the unfair labor practice proceeding. Pet. App. 157a; see 29 U.S.C. 160(j). Petitioner filed a number of counterclaims. Pet. App. 157a-158a. When the Board issued its decision affirming the ALJ, the Regional Director voluntarily dismissed his petition. The district court then dismissed peti- tioner's counterclaims for lack of jurisdiction. Id. at 158a, 163a- 165a. The court of appeals affirmed. Zipp v. Geske & Sons, Inc., 103 F.3d 1379 (7th Cir. 1997) (Pet. App. 154a-162a). Peti- tioner has not sought further review of that decision. 4 The court noted that only the viability of the state libel claim was at issue in the case, because petitioner had not included its tortious interference claims in its statement of issues presented for appellate review. Pet. App. 11a. ---------------------------------------- Page Break ---------------------------------------- 6 company has engaged in fraud or mismanagement or that necessarily assails the company's financial position or business methods." Id. at 14a (citing Vee See Constr. Co. v. Jensen & Halstead, Ltd., 399 N.E.2d 278 (Ill. App. Ct. 1979)). The court also ruled that substantial evidence supported the Board's finding that petitioner filed the lawsuit for retaliatory reasons. Pet. App. 15a, 23a. Petitioner's claim to the contrary was deemed "completely devoid of merit." Id. at 15a. Lastly, the court of appeals held that the Board acted within its broad remedial authority in ordering petitioner to reimburse the Unions for the attorneys' fees they incurred in defending against petitioner's lawsuit. Pet. App 20a-23a. The court noted that "the Board may award attorneys ' fees to unions when they are subjected to patently frivolous litigation before the Board in the course of an unfair labor practice proceeding," and that "[t]hat situation is highly analogous to the situation before us today." Id. at 22a. The award of fees, moreover, "effectuates the policies underlying the [Act]: because " [t]he injured party, the [u]nion that plays a necessary part in the organ- izational activities of the employees, is compensated for expenses that it would not have incurred in the absence of the baseless state law suit." Ibid. ARGUMENT 1. Petitioner contends (Pet. 11-19) that the court of appeals erred in applying the standard established in Bill Johnson's Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983), for determining when an employer's state court action violates Section 8(a)(1) of the National Labor Relations Act (Act), 29 U.S.C. 158(a)(l). In Bill Johnson's, this Court held that "it ---------------------------------------- Page Break ---------------------------------------- 7 is an enjoinable unfair labor practice to prosecute a baseless lawsuit with the intent of retaliating against" an exercise of rights protected by the Act. 461 U.S. at 744. A lawsuit is baseless if the employer cannot "present the Board with evidence that shows his lawsuit raises genuine issues of material fact" or "genuine state-law legal questions." ld. at 745-746. If a lawsuit is determined to be baseless, the Board may then decide whether the suit was filed with the subjective intention of retaliating against the exer- cise of protected rights. Id. at 747. a. Petitioner does not challenge the Board's find- ing that the Unions in this case were engaged in peaceful recognitional picketing protected by the Act. Nor does petitioner seek review of the Board's factual finding that petitioner filed and prosecuted its state- court lawsuit in order to retaliate against the Unions for engaging in such protected activity. Rather, peti- tioner contends (Pet. 11) that the court of appeals erred in holding that its lawsuit was baseless because the suit was not "based on intentional falsehoods or on knowingly false claims." This claim does not merit further review. This Court recognized in Bill Johnson's that, in addition to suits based on "intentional falsehoods" and "knowingly frivolous claims: (461 U.S. at 743) law- suits that "lack[] a reasonable basis in fact or law" can provide the predicate for a Section 8(a)(1) viola- tion. Id. at 748. The court of appeals correctly found that petitioner's trade libel claim lacked such a reasonable basis. Both the state trial and appellate courts held that petitioner was unlikely to succeed on its trade libel claim. Pet. App. 125a-127a, 138a. Nor did petitioner's trade libel claim present a genuine issue of material fact, because the content of the ---------------------------------------- Page Break ---------------------------------------- 8 picket signs was not in dispute. Furthermore, each state court that reviewed the claim concluded that there was no reasonable way to construe the signs as constituting a trade libel. Id. at 127a, 138a. Accord- ingly, the court of appeals correctly concluded that petitioner's trade libel claim was baseless under the standard set forth in Bill Johnson's. b. Contrary to petitioner's assertion (Pet. 12), the court of appeals' decision is consistent with Profes- sional Real Estate Investors, Inc. v. Columbia Pic- tures Indus., Inc., 508 U.S. 49 (1993). Columbia held that, under the antitrust laws, litigation is a "sham" if the lawsuit is "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." 508 U.S. at 60. In the present case, every court that has considered the question- both state and federal-has concluded (as did the NLRB) that petitioner's trade libel claim had no realistic chance of success on the merits. Those con- sistent determinations are the equivalent of a finding that the case is "objectively baseless." This is espe- cially true in light of petitioner's inability or unwill- ingness to identify any new or additional evidence to buttress its claim, beyond what it presented to the state courts at the preliminary injunction stage five years ago. Likewise, petitioner's contention (Pet. 12-13) that the court of appeals' decision conflicts with decisions of the Third, Fifth, and Ninth Circuits is without merit. Petitioner notes that those courts applied a "no realistic chance of success on the merits" stan- dard. Ibid. That is merely another way of articulat- ing the standard applied by the Board and the court of appeals here. See Pet. App. 12a-14a, 109a-l 13a (apply- ing Bill Johnson's Standard and relying, inter alia, ---------------------------------------- Page Break ---------------------------------------- 9 upon state courts' finding that petitioner is unlikely to succeed on the merits). c. Petitioner also argues (Pet. 14) that the Board contravened Bill Johnson's by "review[ing] all the evidence" and "ma[king] numerous credibility and demeanor based decisions in favor of one party over another." The Board's determination that peti- tioner's suit was baseless, however, rested upon the legal conclusions of the state courts and petitioner's own statements in its filings with the Illinois Su- preme Court and this Court. Pet. App. 110a-113a. The credibility determinations that were made (as relevant here) pertained to the Board's factual finding that petitioner acted with a retaliatory motive, which is fully within the Board's province to adjudicate. See, e.g., id. at 44a, 52a n.18, 61a n.21, 62a n.23, 66a n.28. 5 Nor is there merit to petitioner's related conten- tion (Pet. 13) that the court of appeals erred in fault- ing petitioner for its refusal to proffer the addi- tional evidence it claimed to possess. Bill Johnson's squarely places on the state-court plaintiff the burden "to come forward with any evidence * * * or at least with an acceptable explanation why he cannot present such evidence" demonstrating that its state-law claim has a reasonable basis or that genuine issues of material fact remain. 461 U.S. at 746 n.1 see also id. at 745-746. 6 ___________________(footnotes) 5 Petitioner has not sought review of the aspect of the court of appeals' decision pertaining to the retaliatory motive prong of the Bill Johnson's test. 6 Petitioner criticizes (Pet. 17) the court of appeals for not considering the libel per quod claim asserted in its fourth amended complaint. Petitioner, however, did not argue that theory below, and neither the Board nor the court of appeals ---------------------------------------- Page Break ---------------------------------------- 10 In any event, petitioner's narrow challenge to how the Board and court of appeals applied the correct legal standard in this particular case presents no issue of broad or recurring importance meriting this Court's review. 2. Petitioner contends (Pet. 19-25) that the Board's order requiring petitioner to reimburse the Unions for the legal expenses they incurred in defense of the state-court litigation conflicts with decisions of this Court and of the Sixth Circuit. No conflict exists meriting this Court's review. The award of fees is fully consistent with this Court's precedents. Bill Johnson's provided that, when an employer violates Section 8(a)(1) of the Act by filing a baseless lawsuit for a retaliatory motive, "the Board may order the employer to reimburse the employees whom he had wrongfully sued for their attorney's fees and other expenses." 461 U.S. at 747. Petitioner contends (Pet. 19-22) that Bill Johnson's allows reimbursement only of "employees," and not the non employee union organizers named as defen- dants in petitioner's state suit. The reference to employee awards in Bill Johnson's, however, simply reflected the facts of the case before the Court. Petitioner cites nothing in the opinion's language or reasoning that mandates "a categorical inference by negative implication" (Pet. App. 21a) that the Board is precluded from awarding costs to a union under any ___________________(footnotes) has addressed the claim. Pet. App. 13a n.12; see also id. at 116a, 118a (remedial action required by Board's order confined to allegations "in the third amended complaint or its predeces- sors"). "It is this Court's practice to decline to review those issues neither pressed nor passed upon below." FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 224 (1990) (plurality opinion); see also Taylor v. Freeland & Kronz, 503 U.S. 638, 646 (1992). ---------------------------------------- Page Break ---------------------------------------- 11 circumstances. Indeed, because the employees' "right of self-organization depends in some measure on [their] ability * * * to learn the advantages of self- organization from others," Lechmere, Inc. v. NLRB, 502 U.S. 527, 532 (1992) (quoting NLRB v. Babcock & Wilcox Co., 351 U.S. 105, 113 (1956)), unions possess derivative rights to engage in organizational activi- ties to protect the employees' underlying tight to organize, Sears, Roebuck & Co. v. San Diego County Dist. Council of Carpenters, 436 U.S. 180, 206 n.42 (1978). While the union's derivative rights are not as broad as the employees' rights, they support a limited award of fees that simply reimburses the union for the costs it incurred in defending against a baseless lawsuit that was intended to interfere with the employees' right to organize. Cf. Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 216 (1964) (Board enjoys "a broad discretionary" power to devise reme- dies "subject to limited judicial review," so that a remedial order of the Board will be reversed only if it "is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the Act") (citations and internal punctuation omit- ted). See also ABF Freight Sys., Inc. v. NLRB 510 U.S. 317, 324-325 (1994), and cases there cited. Contrary to petitioner's assertion (Pet. 20), the court of appeals' decision accords with those of other circuits. See "Gibson Greetings, Inc. v. NLRB, 53 F.3d 385, 394 (D.C. Cir. 1995) ("The NLRB can award a Union the costs and fees it incurs in defending against an employer's baseless, retaliatory lawsuit only if it determines that the filing or maintenance of the lawsuit was an unfair labor practice."); Diamond Walnut Growers, Inc., 312 N.L.R.B. 61, 71 (1993), enforced, 53 F.3d 1085 (9th Cir. 1995). Petitioner is ---------------------------------------- Page Break ---------------------------------------- 12 correct that the Sixth Circuit declined to enforce a particular attorneys' fee award to a union in Johnson & Hardin Co. v. NLRB, 49 F.3d 237,244 0995). But in that case, the Sixth Circuit had reversed the Board's determination that the employer's state- court lawsuit against the union was baseless and retaliatory. Id. at 243-244. The predicate for an award of fees-compensation for the costs incurred by the union in an unlawful lawsuit-was thus absent in Johnson, and the Board failed to offer any alternative support for its award.7 Accordingly, there is no direct conflict between the decision reached in Johnson and that in the present case, and any alleged inconsistency in the reasoning of the two opinions does not merit this Court's review. 8 ___________________(footnotes) 7 The court's statement that the Board erred in finding "no basis for distinguishing between employees and nonem- ployee union representatives as recipients of reimbursement" was thus dictum. Johnson, 49 F.3d at 244. 8 Petitioner errs in asserting (Pet. 20, 23) that the award of fees is inconsistent with the Board's policy of awarding COWS and fees in cases where a party asserts "patently frivolous" defenses in a Board proceeding. See Tiidee Prods., Inc., 194 N.L.R.B. 1234 (1972), enforced as modified, 502 F.2d 349 (D.C. Cir.), cert. denied, 417 U.S. 921 (1974); Heck's, Inc., 215 N.L.R.B. 765 (1974) (supplemental decision on remand). Attorneys' fees and costs are awarded in the latter situation to ensure "speedy access to uncrowded Board and court dockets" by "discourag[ing] future frivolous Litigation." Tiidee, 194 N.L.R.B. at 1236. The fees in this case were awarded to com- pensate a party that had been forced to defend against a base- less and retaliatory court suit. Because the remedies serve dis- tinct purposes, the Board could reasonably set different stan- dards for the award of attorneys' fees and costs in each situa- tion. Petitioner's reliance (Pet. 24) on Montgomery Ward & Co., 288 N.L.R.B. 126 (1988), remanded, 904 F.2d 1156 (7th Cir. 1990), modified, 307 N.L.R.B. 764 (1992), is also misplaced. ---------------------------------------- Page Break ---------------------------------------- 13 CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. FREDERICK L. FEINSTEIN General Counsel LINDA SHER Associate General Counsel NORTON J. COME Deputy Associate General Counsel JOHN EMAD ARBAB Attorney National Labor Relations Board WALTER DELLINGER Acting Solicitor General JULY 1997 There, the Board upheld an ALJ recommendation not to award a nonemployee union organizer legal expenses where the em- ployer's actions enjoyed "some debatable support." Id. at 194- 195. Further, the cases relied upon by the ALJ in that case for the proposition that the Board can award legal expenses only to employees were subsequently overruled by the Board. See Johnson & Hardin Co., 305 N.L.R.B. 690, 693 (1991), enforced in part & order vacated in part, 49 F.3d 237 (6th Cir. 1995).