United Brotherhood of Carpenters & Joiners v. Building & Construction Trades Dep't
Docket: No. 12-36049
Court: Court of Appeals for the Ninth Circuit; October 28, 2014; Federal Appellate Court
The legal opinion addresses the issue of whether a labor union’s economic pressure tactics constitute extortion under the Racketeer Influenced and Corrupt Organizations Act (RICO). The Building and Construction Trades Department, AFL-CIO (Building Trades), which represents various unions, is involved in a dispute with the United Brotherhood of Carpenters and Joiners of America (Carpenters), who have severed ties with the Building Trades, claiming its services are unnecessary and its rules outdated. The Building Trades launched the "Push-Back-Carpenters Campaign" to compel the Carpenters to reaffiliate and pay dues, employing tactics such as promoting a competitive chartered union, organizing rallies, criticizing the Carpenters publicly, and filing frivolous claims. The Carpenters allege they faced vandalism, threats, and significant harm to their operations and reputation. They filed suit against the Building Trades and its officers, alleging violations under RICO and the Labor Management Reporting and Disclosure Act (LMRDA), among other claims. The district court dismissed their federal claims due to lack of proximate causation, failure to join a necessary defendant for LMRDA relief, and declined to allow amendments to the complaint. The Carpenters subsequently appealed the decision. RICO allows for civil action by anyone injured due to violations of its provisions, which include various forms of racketeering activities related to an enterprise.
The elements required to establish a civil RICO claim include: (1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity (referred to as 'predicate acts'); and (5) resulting in injury to the plaintiffs' business or property. 'Racketeering activity' encompasses acts indictable under the Hobbs Act or acts involving extortion under state law. The central issue in this case is whether the Carpenters have sufficiently alleged predicate acts under these laws.
Under the Hobbs Act, extortion is defined as obtaining property from another with their consent, induced by wrongful use of force, violence, or fear. The Carpenters assert that the Building Trades exerted significant economic pressure to coerce them into financial compliance. In this context, fear can pertain to economic loss, but the use of economic fear is not inherently wrongful. Courts must distinguish between legitimate economic pressure (hard bargaining) and wrongful extortion.
The distinction can be complex, and courts have referred to the decision in United States v. Enmons, which states that a violation of the Hobbs Act occurs only when the property acquisition is wrongful because the alleged extortionist lacks a lawful claim to it. The 'claim of right' defense allows defendants to contest extortion accusations by asserting a lawful claim to the property. This defense is more restricted when violence or threats are involved, specifically in employer-union disputes. Nonetheless, a claim of right can apply in scenarios where fear of economic loss is used, provided it does not have an inherently wrongful purpose.
Thus, while fear of economic loss is generally permissible in transactions, its wrongful application can lead to extortion, particularly if it is employed to obtain personal payoffs or through coercion for unnecessary services.
The Push-Back-Carpenters Campaign is characterized as extortionate by the Carpenters, who argue that, despite using legitimate means like chartering competing unions, the campaign aimed to coerce them into accepting outdated and unnecessary services. The Carpenters' complaint fails to establish that the Building Trades sought personal payoffs, as supported by precedents such as Greger and Clemente. The Carpenters assert that the Building Trades’ services lack value and are unwanted, but cited cases do not support Hobbs Act convictions based solely on such subjective assessments during economic pressure campaigns. A claim of right defense does not protect individuals who acquire another's property through imposed and unnecessary services, as noted in Enmons. The court referenced the Vigil case, where coercion to hire an unwanted employee constituted extortion, but emphasized that no similar allegations exist against Building Trades officials in this context. Additionally, a claim of right defense cannot be undermined by claims of subjective or idiosyncratic value. The Carpenters also argue that the campaign employed wrongful means, such as filing frivolous claims and misusing confidential information, which they assert should qualify as extortionate conduct since they had a legal right to operate free from such interference. This interpretation raises concerns that any economic pressure campaign involving tortious acts could be deemed a predicate offense for civil RICO, regardless of the absence of direct demands for payment.
Economic pressure is deemed wrongful if the victim had a pre-existing right to what the defendant offers as inducement for a transaction, rendering the transaction illegitimate. In the case of Rennell, the defendant's termination of a joint venture and a take-it-or-leave-it offer did not negate his claim of right, as he had the contractual right to terminate the venture. Breaches of contract or duties of good faith do not automatically invalidate a claim of right defense, which should instead be pursued through state law, not civil RICO.
In another case, Brokerage Concepts, Inc., an HMO's requirement for a pharmacy to use its subsidiary to access its provider network was not wrongful since the HMO was not legally obliged to grant such access. The critical factor in both cases was whether the victim had a pre-existing statutory or contractual right to the consideration offered by the defendant. The Carpenters lack such rights concerning the services offered by the Building Trades.
Additionally, while a lawyer’s threat to manipulate a witness was seen as unlawful, it did not imply that all breaches of duty in a legitimate transaction are wrongful; the remedy lies in state law. The Carpenters’ claims do not establish a violation of the Hobbs Act based solely on alleged tortious acts or contract breaches by the Building Trades.
Conversely, the use of actual or threatened force to obtain property is inherently wrongful and does not permit a claim of right defense. The Carpenters allege threats of violence from the Building Trades, including claims of public dissemination of violent attack footage. However, it was noted that the Building Trades did not actually disseminate the video. The central inquiry remains whether the Carpenters adequately alleged that the Building Trades or its associates used violence or force against them.
The Building Trades issued a news release referencing a YouTube video without embedding it or providing a link, and it described a brawl involving the Carpenters that did not indicate a violent attack. The release contained phrases suggesting active resistance from craft unions but lacked warnings of violence. The Carpenters’ brief claimed the website included materials promoting violence, but this was overstated, as it referenced one concerning statement from Defendant Ayers, who described the Carpenters as a 'cancer' that needed confronting. The brief also cited speeches that included threats against the Carpenters, with statements from Hill about protecting members and Ayers emphasizing a united front. However, these statements were not direct calls for violence; the complaint attempted to link them to prior violence but only cited one act of vandalism and two vague death threats without establishing a connection to the Building Trades. The Carpenters’ claims of conspiracy relied on conclusory statements rather than specific facts, failing to answer essential questions about the parties involved and their actions. The complaint did not plausibly allege that any defendant threatened violence to obtain property, nor did it convincingly establish an agency relationship with unnamed perpetrators labeled as 'Defendants’ agents.'
Subordinate union members acted on the Defendants' guidance, engaging in threats and violence; however, these 'directions' did not constitute explicit instructions for violent acts, which either occurred before or well after the Defendants' statements. The Building Trades' distribution of a YouTube video was claimed to promote violence, but the accompanying news release did not support such a notion. The Carpenters failed to provide plausible claims of conspiracy or agency concerning the Building Trades attempting to acquire property through threats or violence. Although the Carpenters alleged RICO predicate offenses under various state extortion statutes, they incorrectly argued that any state-defined extortion should qualify as a RICO predicate. This position mirrors a previously rejected argument in United States v. Nardello, which distinguished between state definitions of extortion and the generic notion of extortion. The court affirmed that extortion must be generically classified, meaning wrongful use of fear must be present. The Carpenters incorrectly characterized a claim of right as an affirmative defense irrelevant to the analysis of extortion under the Hobbs Act, when in reality, it is key to understanding what constitutes 'wrongful use of fear.' As a result, even if a state law penalizes the use of economic fear to achieve legitimate ends, it does not equate to generic extortion. The only potential basis for generic extortion under state law would relate to threats of personal reputational harm, as noted in Nardello.
The Carpenters’ brief lacks specific record citations regarding claims of reputational harm inflicted by the Building Trades, and the complaint does not contain plausible allegations of such harm. Members of the Carpenters allege that officers Ault, Williams, and Molnaa violated the Labor-Management Reporting and Disclosure Act (LMRDA) by unlawfully suspending or expelling them without written charges or a hearing, arguing that these automatic expulsions are unlawful. LMRDA § 101(a)(5) stipulates that members can only be disciplined through specified processes, including written charges and a hearing. The Carpenters’ members were not expelled as a disciplinary action, as defined by relevant dictionaries, indicating that 'discipline' involves punishment for misconduct. The statute's language and context suggest that automatic expulsions without due process only violate the statute when they are disciplinary in nature. Moreover, the cited cases pertain to disciplinary actions and do not support the Carpenters' argument. The court noted that if the Carpenters’ interpretation were correct, it would hinder the termination of affiliation agreements, which the statute does not intend.
Additionally, the Carpenters argued on appeal that the district court abused its discretion by not allowing them to amend their complaint. The decision to grant leave to amend is within the district court's discretion, and the court correctly applied the legal standards for such decisions, considering whether the initial complaint could be cured through additional facts. It identified the appropriate legal rule and assessed factors such as bad faith, undue delay, and potential prejudice to the opposing party in its decision-making process.
The court denied the Carpenters leave to amend their complaint, deeming it futile due to its extensive length and the absence of new facts that could remedy its deficiencies. The district court found that the Carpenters' 246-page complaint likely included all pertinent facts to support their claims against the Building Trades. The Carpenters argued that they could address the failure to establish an agency relationship regarding violent actions, but did not provide specific facts to support this claim. Consequently, the court affirmed the dismissal of the RICO and LMRDA claims against the Building Trades, stating the district court did not abuse its discretion.
The decision underscores the acceptance of well-pleaded factual allegations in the complaint under Federal Rule of Civil Procedure 12(b)(6). Additionally, the dismissal involved two other defendants who were voluntarily removed from the case. The court refrained from interpreting federal statutes in a way that would convert numerous local crimes into federal offenses, echoing recent Supreme Court guidance regarding federal-state relationships. Concerns about First Amendment rights were raised regarding statements made by individuals associated with the Building Trades, emphasizing that holding such comments actionable could infringe upon protected speech. Specific instances of alleged threats were insufficiently linked to the defendants, failing to meet the necessary legal standards. Ultimately, the ruling highlights the stringent requirements for establishing claims under civil RICO and the complexities of intertwining state and federal law.
