Waugh Chapel South, LLC v. United Food & Commercial Workers Union, Local 27 , 728 F.3d 354 ( 2013 )

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
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.
2
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
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” under the NLRA, but conclude that the
Noerr-Pennington doctrine does not (at least at this stage)
spare the remaining defendants from the allegations of the
complaint. 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. 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:
4
(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 Food Markets, Inc. Because the Wegmans supermarket
chain does not employ organized labor, both projects were
opposed by the defendant unions.
That opposition commenced in December 2006 when union
leadership “set[] its sights on Wegmans” to mount an
antagonistic campaign. J.A. 14. 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 George Murphy, represented by his
attorney G. Macy Nelson, petitioned the Anne Arundel 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. The day
3
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).
5
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. For the next few
years, Nelson would represent plaintiffs in sixteen other
proceedings objecting to the development of the shopping
centers, with the unions allegedly directing the litigation.
Three of those challenges pertained to Woodmore and are not
before us on appeal. 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
6
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). As to Count 1,
the district court categorized the fourteen 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.
7
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 reviewing a district court
4
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.
8
judgment.” 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 remainder of Count II of the complaint “with
prejudice, but without prejudice to refiling in any other
proceeding.” J.A. 68. “This kind of split judgment ordinarily
would not be considered ‘final’ and therefore appealable under
28 U.S.C. § 1291 because it does not wind up the entire
litigation in the district court.” 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 dismissals as a subterfuge to manufacture
jurisdiction for reviewing otherwise non-appealable,
interlocutory orders. 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
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 appellate review of an otherwise
interlocutory order. 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
10
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).
11
affirmative defense . . . . [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 Noerr-Pennington
bars WCS’s claims as a matter of law. In fact, much of the
relevant evidence that the district 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.
12
Fed. R. Civ. P. 12(d). Here, the district court did not
formally convert the unions’ motion to dismiss to one for
summary judgment, believing instead that it could adjudicate the
unions’ motion under Rule 12(b)(6) by considering documents
incorporated into the complaint by reference, 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. Nor should “judicial notice” be used
as an expedient for 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,
13
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 the dismissal of the Fund under Rule 12(b)(6),
therefore, we will “review the district court’s grant of a
motion to dismiss de novo,” McCauley v. Home Loan Inv. Bank,
F.S.B., 710 F.3d 551, 554 (4th 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
14
matter of law. 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 with employers concerning grievances, labor
disputes, wages, rates of pay, hours of employment, or
conditions of work.” 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). But we have also explained that the
“dealing with” phraseology denotes a “bilateral mechanism”
through which an employee entity and management 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
15
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. Id. at
1270 n.6. Yet the Fund satisfies neither of these criteria.
First, WCS’s own complaint alleges that the Fund is prohibited
under its charter from “participating directly or
indirectly . . . in union collective activities.” J.A. 13.
Second, while the “question of whether an organization is a
‘labor organization’ is primarily one of fact,” Peninsula Gen.,
36 F.3d at 1269, the only fact suggesting 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 designated itself as a “labor
organization” for purposes of tax liability, this is not
sufficient to render it a “labor organization” for the purposes
of labor law. The Internal Revenue Code (“I.R.C.”) has a
distinct definition of “labor organization.” See 26 U.S.C.
§ 501(c)(5); 26 C.F.R. § 1.501(c)(5)-1(a). The First Circuit
16
has refused to borrow 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 consider whether the district court correctly
dismissed the claim against the remaining defendants.
Plaintiffs allege that the unions’ various legal challenges to
the Waugh Chapel development violated the secondary boycott
provision of the NLRA, which extends to efforts to “exert
pressure on an unrelated, secondary or neutral employer in order
to coerce the secondary employer to cease dealing with the
primary employer, thereby advancing the union’s goals
indirectly.” R.L. Coolsaet Constr. Co. v. Local 150, Int’l
17
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 of Government.” Cal. Motor, 404 U.S. at 510.
However, the First Amendment offers no protection when
“petitioning activity ostensibly directed toward influencing
governmental action, is a mere sham to cover . . . an attempt”
to violate federal law. Prof’l Real Estate Investors, Inc. v.
Columbia Pictures Indus. (“PREI”), 508 U.S. 49, 56 (1993)
(internal quotations omitted).
18
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 register those rights.” 404 U.S. at 509.
Respondents, a group of rival highway carriers, filed an
antitrust suit claiming this litigation activity constituted
anti-competitive conduct. The Court concluded that the facts
alleged came within the “sham” exception to the Noerr-Pennington
doctrine, explaining that sham litigation occurs where “a
pattern of baseless, repetitive claims . . . emerge[s] 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.” PREI, 508 U.S. at 60. The second
inquiry focuses on the “litigant’s subjective
motivation . . . [and] whether the baseless lawsuit conceals an
attempt to” violate federal law “through the use of the
19
governmental process.” Id. at 60-61. Because “the sham
exception contains an indispensable objective component,” id. at
58, “even an improperly motivated lawsuit may not be
enjoined . . . as an unfair labor practice unless such
litigation is baseless,” 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 a single action constitutes sham
petitioning. . . . 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, 397-
98 (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
20
California Motor, we are obligated to “follow the case which
directly controls, leaving to th[e] [Supreme Court] the
prerogative of overruling its own decisions.” 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. See PREI,
508 U.S. at 59-61. But it is an entirely different undertaking
to collaterally review--as here--fourteen state and
administrative lawsuits for baselessness. It is 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
(1) it had no inkling that 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. Rather a 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
B.
We now review the unions’ motion to dismiss under this
test. 8 Accordingly, we ask whether the record evidence presents
a genuine issue of material fact as to whether the unions
indiscriminately filed (or directed) a series of legal
proceedings without regard for the merits and for the purpose of
violating federal law. We conclude that it does.
In our view, the vast majority of the legal challenges
failed demonstrably. 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
conjecture,” J.A. 196, as the petitioners supplied only their
own conclusory affidavits of environmental harm with no
scientific data or expert testimony. Finally, 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 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].”
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. For
24
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. First,
there was a perverse nature to the environmental litigation
directed by the unions to enjoin the commercial development.
Because WCS and MDE entered into a consent decree to remediate
preexisting environmental contamination, an injunction would
have terminated the consent decree and 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. And in the nine
appeals of the building and grading permits, plaintiffs
voluntarily dismissed their suits--according to WCS--to avoid
complying with subpoenas of financial records that would have
revealed that the unions were directing and paying for the
litigation. 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
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 or an abuse of process tort under Maryland law,
imposing federal liability for sham litigation “[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 of whether we should afford it constitutional
protection. It would make little sense to cede that federal
question to state law proceedings that involve issues that are
26
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 also emphasize that sham litigation must
“effectively bar[] [WCS] from access to the agencies and
courts.” Cal. Motor, 404 U.S. at 513. But this “access-
barring” language cannot mean that litigation must reach such a
crescendo as to literally incapacitate the legal system and
27
prevent another litigant from receiving their day in court. 9
Instead, legal challenges need only “harass and deter
[litigants] in their use of administrative and 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 development with substantially
increased risk and costs. 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 law because it did not block development of the
shopping centers. If anything, 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
sham litigation. Because successfully halting the project would
defeat any sham litigation 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. POSCO, 31 F.3d at 811. In light of the poor
litigation record and the signs of bad-faith petitioning, a
factfinder could reasonably conclude that the unions have abused
their right to petition the courts and, as a result, have
forfeited the protection of the First Amendment. Therefore, the
district court erred in dismissing WCS’s claims against the
unions.
V.
For the foregoing reasons, we affirm the district court’s
dismissal of WCS’s complaint as to the Fund, vacate the
29
dismissal of WCS’s complaint as to the remaining union
defendants, and remand for further proceedings.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
30