NOTICE: This opinion is subject to formal revision before publication in the bound volumes of NLRB decisions. Readers are requested to notify the Executive Secretary, National Labor Relations Board, Washington, D.C. 20570, of any typographical or other formal errors so that corrections can be included in the bound volumes.

Ray Angelini, Inc. and International Brotherhood of Electrical Workers, Local Union No. 98. Case 4–CA–24904

September 28, 2007

SUPPLEMENTAL DECISION AND ORDER

By Chairman Battista and Members Schaumber, and Kirsanow

On July 5, 2001, the Board issued its decision in this case, finding that the Respondent violated Section 8(a)(1) of the Act by filing and maintaining an unsuccessful lawsuit against International Brotherhood of Electrical Workers, Local Union No. 98 (Local 98 or the Union), in retaliation for the exercise of rights protected by Section 7 of the Act.[1] On February 1, 2002, the Board filed an application for enforcement with the United States Court of Appeals for the Third Circuit. On June 24, 2002, the Supreme Court issued its decision in BE&K Construction Company v. NLRB, 536 U.S. 516 (2002). On October 11, 2002, the Third Circuit granted the Board’s request to remand this case to the Board for further consideration in light of the Supreme Court’s decision in BE&K and the parties’ joint stipulation to dismiss without prejudice the Board’s application for enforcement. Thereafter, the General Counsel, the Respondent, and the Charging Party Union filed statements of position with the Board, setting forth their arguments concerning the impact of the Supreme Court’s BE&K decision on this case.

The National Labor Relations Board has delegated its authority in this proceeding to a three-member panel.

The Board has considered its prior decision in this case in light of the Supreme Court’s BE&K decision, our recent decision in BE&K on remand from the Court,[2] the record, and the statements of position. We find, for the reasons set forth below, that the Respondent’s lawsuit was reasonably based, and therefore, under the test set forth in our decision in BE&K, supra, the filing and maintenance of the lawsuit did not violate the Act. We will therefore dismiss the complaint.

i. background

The Respondent’s underlying lawsuit that was alleged to have violated Section 8(a)(1) and the circumstances leading to it are described at length in our prior decision. See 334 NLRB at 428-436. We summarize here. In late 1995, the City of Philadelphia (City) solicited bids for electrical work at the Philadelphia International Airport (Airport). The Respondent (RAI), which usually operates on an open-shop basis, had been considered a prequalified bidder on City contracts on dozens of occasions. RAI submitted the lowest bid for the Airport job by a margin of roughly $600,000. The next-lowest bidder was a union contractor, Lombardo & Lipe. The City notified RAI that it was the low bidder.

In early 1996, Local 98 business agent John Dougherty advised Gerald Murphy, the City’s deputy mayor for labor, that RAI had violated prevailing-wage regulations on jobs it performed for the State of New Jersey. Murphy inquired, and was informed by the New Jersey Department of Labor that RAI had violated such regulations three times over a 5-year period. The City then notified RAI that it was disqualified from receiving the contract.

RAI requested a disqualification hearing. The three-member panel presiding at this hearing included City Director of Procurement Louis Applebaum. At the hearing, RAI’s three New Jersey prevailing-wage violations were particularized. Two were the result of clerical error; the third was caused by an employee’s failure to advise RAI that he was no longer enrolled in an apprentice program. The panel upheld the disqualification, and the contract was awarded to Lombardo & Lipe. RAI then filed suit in state court against the City and Lombardo & Lipe.

After learning that its disqualification had been upheld, RAI hired an investigator to determine whether other Airport contracts had been awarded to contractors with prevailing-wage violations. Based on the investigator’s report, RAI informed the City that contracts had been awarded to bidders that had committed much more serious violations than had RAI. There is no evidence that the City took action against these bidders, who were, according to RAI, union contractors.

In March 1996, RAI’s then-attorney, Roy S. Cohen, happened to encounter Applebaum. According to Cohen, Applebaum told him that the City’s mayor and the mayor’s chief of staff had been involved in awarding the contract to Lombardo & Lipe, and that the decision had been made as a result of their political obligations to Local 98 business agent Dougherty. Cohen averred that Applebaum stated that Dougherty had a 5000-man convention coming to the City, and that it would not look good if a nonunion contractor was working on the Airport project.

In April 1996, RAI dropped its state court action against the City and Lombardo & Lipe and filed an action in Federal district court—the lawsuit at issue in this case—against the City and certain of its officials, Lombardo & Lipe, and Local 98. RAI alleged that the defendants, in violation of 42 U.S.C. § 1983,[3] had acted in concert, under color of state law, to deprive the Respondent of its 14^th Amendment right to substantive due process. RAI alleged that the defendants conspired to have the Respondent, a nonunion contractor, disqualified from the Airport job and divested of its bid in favor of a union contractor. In essence, the theory of RAI’s lawsuit was that Local 98 and the City and its officials had entered into an agreement whereby the City assured Local 98 that it would attempt to preclude nonunion electrical contractors from working at the Airport, and as a quid pro quo Local 98 would bring a national IBEW convention to the City in the summer of 1996. In so alleging, RAI relied primarily on Cohen’s account of his conversation with Applebaum.[4] As circumstantial evidence that such an agreement existed, RAI also relied on the City’s disparate treatment of union contractors that had committed more serious prevailing-wage violations than RAI but still received Airport contracts.

In May 1996, the Union filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief may be granted. The district court denied, without opinion, the Union’s motion to dismiss, and also denied a 12(b)(6) motion filed by other defendants. In November 1996, the Union filed a motion for summary judgment. In March 1997, the district court denied the Union’s motion, again without opinion.

The following month, the district court conducted a 5-day bench trial. On November 24, 1997, the court dismissed RAI’s complaint in its entirety, with prejudice. Ray Angelini, Inc. v. City of Philadelphia, 984 F. Supp. 873 (E.D. Pa. 1997). The court concluded, in relevant part, that RAI “had failed to prove that the City’s Procurement Department had a pro-union or anti-open-shop contractor policy,” or that the “Procurement Department’s decision to disqualify [RAI] . . . was the result of improper political influence or agreement between the City and Local 98.” 984 F. Supp. at 882. Rather, the court concluded, “Local 98 submitted information to various City officials about [RAI, and] [t]he City conducted its own investigation into Local 98’s allegations . . . . Local 98 did not act with any State appeals [sic] to deprive [RAI] of a constitutionally protected right.” Id. at 883. In sum, RAI failed to prove the existence of a conspiracy between Local 98 and the City. The court ordered RAI to pay the costs of the proceeding, but it denied the Union’s request for attorneys’ fees. Id. at 885. RAI did not appeal the district court’s decision.

Meanwhile, in May 1996, the Union filed a charge alleging that the Respondent’s lawsuit was filed in retaliation against the Union’s exercise of Section 7 rights and thus violated Section 8(a)(1). The Regional Director held the Union’s charge in abeyance pending the disposition of the Respondent’s lawsuit. After the district court dismissed the Respondent’s lawsuit, the Regional Director issued the complaint herein.

Thereafter, Administrative Law Judge Nancy M. Sherman found that the Respondent violated Section 8(a)(1) as alleged. Applying Bill Johnson’s Restaurants v. NLRB, 461 U.S. 731 (1983), she reasoned that because the Respondent’s lawsuit was “unsuccessful,” it was unlawful if filed in retaliation against the exercise of Section 7 rights. The Respondent conceded, and the judge found, that Local 98’s conduct in reporting the Respondent’s prevailing-wage violations to City officials was protected by Section 7. The judge also found protected Local 98’s efforts to lobby officials to award public works projects to union-shop contractors. The judge then turned to the issue of whether the Respondent’s lawsuit had been filed and maintained with a retaliatory motive. She found that it had been, citing the Respondent’s opposition to the Union’s having reported its prevailing-wage violations to City officials, to the Union’s lobbying those officials in an effort to obtain City contracts for union contractors, and to Local 98 business agent Dougherty’s efforts to thereby ingratiate himself with potential voters (Dougherty was seeking reelection as business agent). The judge also cited the Respondent’s request for punitive damages in its unsuccessful lawsuit. The Board affirmed the judge’s findings and conclusions.[5]

ii. the parties’ positions

The General Counsel’s statement of position asserts that, in light of the Supreme Court’s decision in BE&K, the complaint should be dismissed. The General Counsel reasons as follows. In BE&K, the Court rejected the Bill Johnson’s standard for assessing the legality of concluded lawsuits. Under that standard, an unsuccessful lawsuit could be found to violate Section 8(a)(1) if filed and maintained with a motive to retaliate against Section 7 activity.[6] The Court in BE&K pointed out that an unsuccessful lawsuit nonetheless may be reasonably based, and it held that Section 8(a)(1) may not be read “to reach all reasonably based but unsuccessful suits filed with a retaliatory purpose.”[7] Thus, in determining whether a lawsuit is reasonably based, the Board may no longer rely solely on its ultimate lack of success. A lawsuit is baseless, according to the General Counsel, only if it “presents unsupportable facts or unsupportable inferences from facts, or if it depends upon [a] ‘plainly foreclosed’ or ‘frivolous’” legal theory (citing Bill Johnson’s, 461 U.S. at 744-747). Further, in assessing baselessness, the Board is not to make credibility determinations or draw inferences from disputed facts. The General Counsel also states that the Court in BE&K rejected the Board’s standard for finding retaliatory motive. Under that standard, such a motive consists merely of a motive to interfere with Section 7 activity. The Court observed that such a standard would condemn genuine petitioning where a lawsuit was directed at conduct that a plaintiff reasonably believed was unlawful.[8]

Applying BE&K, the General Counsel urges the Board to find that Respondent’s lawsuit was reasonably based. The General Counsel notes that the district court determined that there were triable issues of fact. The Respondent’s lawsuit, says the General Counsel, “survived the Union’s motion to dismiss and raised sufficient factual questions that, after discovery, the court denied the motion for summary judgment” and proceeded to a trial. After trial, “the court made detailed, extensive fact findings, and drew inferences from those findings.” The General Counsel urges the Board to defer to the court’s judgment that the lawsuit presented “valid constitutional questions” involving “triable issues of fact.” The General Counsel also states that the Board’s previous finding of retaliatory motive cannot stand, as it rests on grounds the Court has now rejected.

The Respondent argues that, pursuant to the Supreme Court’s BE&K decision, the Respondent’s lawsuit had a reasonable basis and did not violate the Act. The Respondent notes that its lawsuit “was sufficiently genuine to survive three dispositive motions and to proceed through a lengthy 5 day trial,” and that defendants’ request for attorneys’ fees was denied. The Respondent also states that BE&K renders invalid the Board’s approach to determining whether a lawsuit is retaliatory, and asserts that its lawsuit was not retaliatory. The Respondent urges the Board to dismiss the complaint.

The Charging Party Union argues that the Respondent’s lawsuit was not objectively reasonable under the BE&K standard. The Union notes that because the lawsuit was brought under a federal civil rights theory, the Respondent had to show that the defendants acted “under color of state law.” Further, because the Union is not a state actor, the Respondent could make that showing only by proving a conspiracy between the Union and the state-actor defendants; and both the district court and the administrative law judge rejected the Respondent’s “conspiracy theory.” The Union urges the Board to examine Cohen’s account of his conversation with Applebaum because “if Cohen’s testimony regarding [that] conversation . . . would not implicate Local 98 in any conspiracy to deprive the [Respondent] of constitutional rights, the Board should conclude here that the [Respondent’s] lawsuit was not objectively reasonable.” The Union’s statement of position does not address the status of the Board’s retaliatory motive finding in light of the Court’s BE&K decision. The Union urges the Board to find that the Respondent violated Section 8(a)(1) of the Act.

iii. discussion

In our recent decision in BE&K, 351 NLRB No. 29, slip op. at 1, we held that “the filing and maintenance of a reasonably based lawsuit does not violate the Act, regardless of whether the lawsuit is ongoing or is completed, and regardless of the motive for initiating the lawsuit.” We also held that “a lawsuit lacks a reasonable basis, or is ‘objectively baseless,’ if ‘no reasonable litigant could realistically expect success on the merits.’” Id. (quoting Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, 508 U.S. 49, 60 (1993)). In applying that standard here, we are mindful of the constitutional underpinning of the Supreme Court’s decision in BE&K and of the neccessity of avoiding a result that improperly burdens the First Amendment right to petition the government for redress of grievances.[9] We are also guided by the Court’s discussion, in Bill Johnson’s, of the reasonable-basis inquiry in the context of ongoing suits. There, the Court stated that “if there is a genuine issue of material fact that turns on the credibility of witnesses or on the proper inferences to be drawn from undisputed facts, it cannot, in our view, be concluded that the suit should be enjoined.” 461 U.S. at 745. The Court also held that the Board should “stay its hand” unless “the plaintiff’s position is plainly foreclosed as a matter of law or is otherwise frivolous[.]” Id. at 747.

Applying these principles to the facts of this case, we find that the Respondent’s lawsuit was reasonably based. Although the district court did not explain its rationale in denying Local 98’s motions to dismiss and for summary judgment, we must infer that the district court concluded, first, that the Respondent’s complaint stated a claim upon which relief could be granted, and second, that disputed issues of material fact existed precluding judgment as a matter of law in Local 98’s favor. Ultimately, after a 5-day trial, the court found that Local 98 had not entered into any sort of agreement with the City or its officials to deprive the Respondent of City contracts. The court therefore dismissed the Respondent’s lawsuit, inasmuch as such an agreement was an essential element of the Respondent’s theory under § 1983.[10] But the court’s denial of Local 98’s motion for summary judgment necessarily shows that, in the court’s opinion, a dispute existed as to that material fact. Had the court resolved that dispute the other way, the outcome of the lawsuit may well have been different. Thus, we cannot say that the Respondent could not reasonably have expected to succeed on the merits. Certainly, the Respondent’s claims in its lawsuit were not “plainly foreclosed as a matter of law or . . . otherwise frivolous.” Bill Johnson’s, supra at 747.

In its statement of position, the Union urges us, in effect, to readjudicate its motion for summary judgment. As stated above, the Union asks us to examine Cohen’s account of his conversation with Applebaum because “if Cohen’s testimony regarding [that] conversation . . . would not implicate Local 98 in any conspiracy to deprive the [Respondent] of constitutional rights, the Board should conclude here that the [Respondent’s] lawsuit was not objectively reasonable.” In other words, the Union asks us to find no factual dispute as to the existence of a conspiracy. The district court, however, necessarily found to the contrary. As indicated above, the existence of a conspiracy involving the Union was an essential element of the Respondent’s § 1983 lawsuit against the Union. Had the district court found no dispute as to that material fact, it would have granted the Union’s motion for summary judgment. It denied the motion, and we decline the Union’s invitation to second-guess the district court in this regard.

In sum, we find that the Respondent’s lawsuit was reasonably based. Therefore, under our supplemental decision in BE&K, the lawsuit cannot be found to be an unfair labor practice.[11]

ORDER

The complaint is dismissed.

Dated, Washington, D.C. September 28, 2007

Robert J. Battista,	Chairman
Peter C. Schaumber,	Member
Peter N. Kirsanow,	Member

(Seal) National Labor Relations Board

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[1] Ray Angelini, Inc., 334 NLRB 425.

[2] BE&K Construction Co., 351 NLRB No. 29 (2007).

[3] As relevant here, 42 U.S.C. § 1983 states:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress[.]

[4] RAI hired a new attorney so that Cohen could appear as a witness on RAI’s behalf.

[5] The judge cited the Respondent’s language in its filings with the district court as yet another indication of its retaliatory motive. The Board did not adopt this aspect of the judge’s decision. See 334 NLRB at 425 fn. 2.

[6] “If judgment goes against the employer . . . or if his suit is withdrawn or is otherwise shown to be without merit, the employer has had its day in court . . . and the Board may then proceed to adjudicate the . . . unfair labor practice case. The employer’s suit having proved unmeritorious, the Board would be warranted in taking that fact into account in determining whether the suit had been filed in retaliation for the exercise of the employees’ § 7 rights.” Bill Johnson’s, 461 U.S. at 747.

[7] BE&K, 536 U.S. at 536.

[8] Id. at 533.

[9] Indeed, the Court in BE&K left open the possibility that even some objectively baseless litigation might be exempt from injunction or penalty so as to give the First Amendment right to petition “breathing space.” 536 U.S. at 531.

[10] “‘Private persons, jointly engaged with state officials in the prohibited action, are acting ‘under color’ of law for purposes of [§ 1983]. To act ‘under color’ of law does not require that the accused be an officer of the State. It is enough that he is a willful participant in joint activity with the State or its agents[.]’” Adickes v. Kress & Co., 398 U.S. 144, 152 (1970) (quoting United States v. Price, 383 U.S. 787, 794 (1966)).

[11] In light of our finding that the Respondent’s lawsuit had a reasonable basis, we find it unnecessary to determine the Respondent’s motive in instituting the suit.