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4th Circuit revives $25M action alleging bid to block Wegmans

A Gambrills shopping center developer can pursue its $25 million lawsuit against a labor union for using allegedly “sham litigation” to wage an unsuccessful war to keep out Wegmans, a federal appeals court has ruled.

Waugh Chapel South LLC alleges the union violated a federal prohibition on unfair labor practices by filing 14 separate lawsuits and petitions for review between August 2008 and July 2011.

A federal judge in Baltimore dismissed Waugh Chapel South’s suit against the United Food and Commercial Workers Union locals 27 and 400 last year, saying the unions’ many legal filings were constitutionally protected and did not constitute an unfair practice under the federal Labor Management Relations Act.

But the 4th U.S. Circuit Court of Appeals reinstated the action on Monday, saying the First Amendment does not protect what might prove to be unlawful activity.

“Although the courts are a medium by which citizens may 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,” Judge Albert Diaz wrote for the unanimous three-judge panel.

In sending the case back for trial, the 4th Circuit said the judge could take note that only one of the union’s 14 challenges proved to be successful.

“While there is no particular win-loss percentage that a litigant must achieve to secure the protection of the First Amendment, a one-out-of-fourteen batting average at least suggests a policy of starting legal proceedings without regard to the merits and for the purpose of violating the law,” Diaz wrote.

Michael T. Anderson, the union’s attorney, said he and his client are “still reviewing the decision” and have not determined whether to file a further appeal.

If the case does go to trial, “we are confident that under any standard the [union’s] litigation in this case would be found legitimate on a full record,” said Anderson, of Murphy Anderson PLLC in Washington.

But Ira L. Oring, the shopping center developer’s attorney, said the 4th Circuit’s decision sent a “clear” message.

“There is a basis to believe it was sham litigation, which is unprotected by the First Amendment,” added Oring, of Fedder & Garten P.A. in Baltimore. “This series of sham lawsuits was done with the intention of forcing the developer to cease a business relationship with Wegmans.”

The trouble began shortly after the developer reached an agreement in 2006 to lease space in the new Village of Waugh Center to Wegmans, according to the lawsuit the developer filed in U.S. District Court in Baltimore in March 2011. Wegmans is a nonunion operation.

A union executive told the LLC in December 2006 that “we will fight every project you develop where Wegmans is a tenant,” according to the complaint.

The union’s first filing came in August 2008, when it pressed the Anne Arundel County Council to revoke its decision to rezone the development site to mixed-use commercial. The petition was withdrawn after the developer argued the union lacked standing, according to the LLC’s lawsuit.

The union acknowledged it was not an aggrieved party, but then used surrogate plaintiffs in 13 other proceedings in an effort to quash the deal with Wegmans, the developer alleged.

The actions included a soon-dismissed lawsuit against the Maryland Department of the Environment, alleging the development constituted a nuisance. The union also appealed the granting of nine separate building and grading permits issued by the county but withdrew the appeals when Waugh Chapel South subpoenaed the union’s financial records, according to the developer’s complaint.

Judge William Quarles Jr. dismissed the developer’s suit against the unions in February 2012, finding it was barred under the Noerr-Pennington doctrine.

The doctrine — named for two Supreme Court decisions from the 1960s — generally bars entities from being sued in retaliation for exercising their right to petition the government for a redress of grievances.

But the 4th Circuit on Monday said the doctrine does not apply to petitions and lawsuits filed in a bad-faith effort to cause delay or compel the termination of a lease.

“Under this ‘sham litigation’ exception to the Noerr-Pennington doctrine, we hold that the pleadings and 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,” Diaz wrote.

The 4th Circuit also rejected the union’s argument that the ruling should be upheld because Waugh Chapel has suffered no injury as a result of the alleged bad-faith filings: Wegmans is a tenant of its center, the Village of Waugh Chapel.

“Because successfully halting the project would defeat any sham litigation argument in the first place, this ‘heads I win, tails you lose’ theory … would nullify the sham litigation exception altogether,” Diaz wrote.

On remand, the trial court must “conduct a holistic evaluation of whether the administrative and judicial processes have been abused” by the union’s filings, the 4th Circuit wrote.

The union’s only success was its challenge to the County Council’s approval of tax increment financing bonds to fund the shopping center.

The union successfully argued that the TIFs were invalid because no hearing had been held. But that victory was short lived as the council held a hearing and the TIFs were again approved, the 4th Circuit said.

WHAT THE COURT HELD

Case:

Waugh Chapel South LLC et al. v. United Food and Commercial Workers Union Local 27 et al., US4th No.12-1429. Published. Opinion by Diaz, J. Argued May 16, 2013. Filed Aug. 26, 2013.

Issues:

Did the trial judge err in dismissing a developer’s claim that a union’s legal challenges to a development were filed in bad faith and violated the Labor Management Relations Act?

Holding:

Yes; the First Amendment does not protect ‘sham litigation’ and a trial should be held to determine if the union’s challenges were filed in bad faith.

Counsel:

Ira L. Oring for Plaintiffs-Appellants; Michael T. Anderson for defendants-appellees.

RecordFax # 13-0826-60 (30 pages).