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LMRA Section 303 Does Not Completely Preempt State Property-based Tort Claims: Ninth Circuit
Practical Law Legal Update 6-583-7416 (Approx. 10 pages)
LMRA Section 303 Does Not Completely Preempt State Property-based Tort Claims: Ninth Circuit
by Practical Law Labor & Employment
| Published on 13 Oct 2014 • USA (National/Federal) |
In Retail Property Trust v. United Brotherhood of Carpenters & Joiners of America, the US Court of Appeals for the Ninth Circuit held that Section 303 of the Labor Management Relations Act (LMRA), which prohibits unions from engaging in secondary picketing or boycott activities, does not completely preempt all state law property-based tort claims such as trespass and public nuisance related to union conduct that also might be that kind of secondary activity. The decision creates a split between the Ninth Circuit and the US Court of Appeals for the Seventh Circuit, which held that Section 303 has a sufficient preemptive power to convert ordinary state law complaints into federal claims and supplant the state law causes of action.
On September 23, 2014, in Retail Property Trust v. United Brotherhood of Carpenters & Joiners of America, the US Court of Appeals for the Ninth Circuit held that Section 303 of the Labor Management Relations Act (LMRA), which prohibits unions from engaging in secondary picketing or boycott activities, does not completely preempt all state law property-based tort claims related to union conduct that also might be unlawful secondary activity. The Ninth Circuit:
- Reversed the district court's order dismissing a mall owner's trespass and public nuisance claims against a union that protested on its property without complying with notice and time, place and manner rules and granting judgment for the union on the pleadings.
- Affirmed the district court's dismissal of:
- a Section 303 claim against an individual union representative;
- a Section 303 claim against the union that the mall voluntarily withdrew; and
- a California Labor Code cause of action for injunctive relief that the Ninth Circuit deemed waived when the mall owner declined to appeal its dismissal.
- Held that the Real Property Trust waived potential objections to the district court's decisions to receive the case after the union removed it from state court and not to remand the case to state court when, following the removal, Real Property Trust amended its complaint to add federal (Section 303) claims.
- Remanded the case to the district court to consider the Real Property Trust's revived state claims.
- Deferred to the district court's discretion whether it should exercise supplemental jurisdiction over the revived state law claims.
The decision creates a split between the Ninth Circuit and the US Court of Appeals for the Seventh Circuit, which held that Section 303 has a sufficient preemptive power to convert ordinary state common law complaints into federal claims and supplant the state law causes of action.
Background
Retail Property Trust (Mall), owns Brea Mall in California. According to its complaint allegations, Mall policy accommodates speech-related activities on its property provided that those interested fill out an application in advance, agree to remain in two designated common areas and refrain from interfering with the public's enjoyment of the property, for example by creating high volume noise or obstructing pedestrian traffic, or damaging Mall or tenant property. Mall policy specifically recognizes "Qualified Labor Activity," for example "picketing and/or informational leafletting," as a special class of protected activity. Mall policy provides that unions and their representatives may choose between conducting their activities in a designated area or in an alternative area designated by the Mall. The Mall reserves the right to prohibit labor activity from areas that would threaten the personal safety of patrons.
In 2010, one of the Mall's tenants contracted with non-union subcontractors to renovate its storefront in advance of its opening. The Carpenters union sent a letter to the Mall advising it of the union's plans to pursue a labor dispute under federal labor law, the First Amendment, the California Constitution and California Labor Law.
Beginning on October 1, 2010, union members allegedly violated Mall rules by engaging in disruptive protests outside of designated areas and without permission. The Mall filed a complaint in California Superior Court:
- Alleging state-law claims for trespass and nuisance.
- Seeking declaratory and injunctive relief under California Labor Code § 1138.1.
The union:
- Removed the case to federal court, asserting that the Mall had alleged the equivalent of unlawful secondary boycott activity in violation of Section 303 of the LMRA (29 U.S.C. § 187).
- Argued that the state claims must be dismissed as preempted by Section 303.
The district court:
- Denied the Mall's request to remand the case to state court.
- Acknowledged that a defendant ordinarily cannot remove a case based on the assertion of a federal defense, but found there is a "complete preemption" exception where "any claim purportedly based on that preempted state law is considered, from its inception, a federal claim, and therefore arises under federal law." (Balcorta v. Twentieth Century Fox Film Corp., 208 F.3d 1102, 1107 (9th Cir. 2000); Smart v. Local 702 Int'l Bhd. of Elec. Workers, 562 F.3d 798, 808 (7th Cir. 2009)).
- Exercised supplemental jurisdiction over the Mall's trespass and nuisance claims.
The district court permitted the Mall to amend its complaint to clarify that it was not challenging the lawfulness of the union's protests except to the extent that the union violated the Mall's time, place and manner restrictions. The Mall amended its complaint and renewed its motion to remand the case to state court.
The district court held that, because the Mall requests damages for injury to its business interests and its tenants use of private property and the Mall's "time, place and manner restrictions prohibit the same conduct that is prohibited under 29 U.S.C. § 158(b)(4) ..., [the Mall]'s claims to enforce its time, place and manner rules are still completely pre-empted by the federal statute."
The Mall filed a second amended complaint that again included claims for trespass, private nuisance and injunctive relief for unlawful acts by a union under California Labor Code § 1138.1 and added that the Mall was asserting that:
- The same facts supported a Section 303 claim for which it sought damages for the unions alleged illegal secondary boycott and costs.
- The court had subject matter jurisdiction over the case based on the Section 303 claim.
The district court:
- Granted the union's motion to dismiss with respect to the Mall's claims for state-law trespass, private nuisance and injunctive relief under California Labor Code § 1138.1.
- Denied the motion to dismiss with respect to the Section 303 cause of action.
- Concluded, quoting Smart, that § 303 of the LMRA " 'completely preempts state-law claims related to secondary boycott activities described in § 158(b)(4)' and 'provides an exclusive federal cause of action for the redress of such illegal activity." (562 F.3d at 808 (7th Cir. 2009)).
The district court granted a later motion by the Mall to voluntarily dismiss the Section 303 claim.
The Mall appealed all of the district court's orders to the Ninth Circuit. It subsequently clarified that:
- The sole issue on appeal was whether the district court erred in holding that a state-law action for trespass and private nuisance is preempted by Section 303 of LMRA simply because the invasion of property happened to involve a secondary boycott by a union.
- It was asking the Ninth Circuit to:
- vacate the judgment of the district court in its entirety; and
- instruct the district court to remand the case to state court.
Outcome
The Ninth Circuit noted that:
- Complete preemption is a jurisdictional, rather than preemption, doctrine that:
- provides exclusive federal jurisdiction in instances where Congress intended federal law to be so broad that it entirely replaces state law claims; and
- applies in limited circumstances only where a federal statutory scheme is so comprehensive that it entirely supplants state law causes of action.
- The Supreme Court has recognized only three instances of complete preemption:
- Section 301 of the LMRA (29 U.S.C. § 185, Avco Corp. v Aero Lodge No. 735, Int'l Ass'n of Machinists, 390 U.S. 557 (1968));
- Section 502(a) of ERISA (29 U.S.C. § 1132(a), Metro. Life Ins. v. Taylor, 481 U.S. 58 (1987)); and
- Sections 85 and 86 of the National Bank Act (12 U.S.C. §§ 85 and 86; Beneficial Nat'l Bank v. Anderson, 539 U.S. 1 (2003)).
- There are three kinds of preemption:
- express preemption where Congress drafted a federal statute to explicitly preempt state law;
- conflict preemption where courts infer that Congress intended to displace state law that conflicts with or would frustrate the federal scheme; and
- field preemption where courts infer from the totality of circumstances that Congress sought to occupy the field to the exclusion of the States.
- Courts have not consistently analyzed preemption using these three terms and have often erroneously interchanged the terms complete preemption and field preemption.
- The Supreme Court has recognized that the LMRA and the NLRA (as amended by the LMRA):
- do not expressly preempt state law (Bldg. & Constr. Trades Council, 507 U.S. 218);
- impliedly preempt state laws that would interfere with the NLRB's primary jurisdiction in interpreting and enforcing the NLRA, such as determining whether an employer or union action constitutes an unfair labor practice (ULP) (San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959)); and
- impliedly preempt state law (and the NLRB) from regulating conduct that Congress intended to be unregulated and left to be controlled by the free play of economic forces (Lodge 76, Int'l Ass'n of Machinists and Aerospace Workers, AFL–CIO v. Wis. Empl. Relations Comm'n, 427 U.S. 132 (1976)).
- Neither Garmon nor Machinists preemption wrests:
- the authority of states to regulate interests rooted in local feeling, such a maintaining public order; or
- the jurisdiction of state courts to decide cases involving conduct traditionally subject to state regulation.
- A state court's exercise of jurisdiction may risk interfering with the NLRB's ULP jurisdiction only if a legal controversy is identical to a claim that could have been presented to the NLRB (Sears, 436 U.S. at 189).
- Even when ULP charges could have been filed with the NLRB regarding union conduct that is both a ULP and a tort, the state has an interest in exercising jurisdiction over the tort claim if the court does not interfere with the NLRA issue (Sears, 436 U.S. at 196).
- Trespass is a threat to public order for which the NLRA does not entirely preempt related state claims (Garmon, 359 U.S. at 247).
- Section 303 of the LMRA does not preempt all actions arising out of secondary union activity (Local 20, Teamsters, Chauffeurs & Helpers Union v. Morton, 377 U.S. 252, 257 (1964)).
- Attempts to enjoin or seek legal damages from harms from peaceful secondary union activity under state antitrust law have been preempted by Section 303. However, some state laws have been permitted to prevail, especially in cases involving violent union protests (Morton, 377 U.S. 252, 257).
The Ninth Circuit found that:
- Section 303 did not completely preempt the Mall's state claims.
- Garmon preemption does not apply in this case.
- Machinists preemption also did not apply. t
- Section 303 does not preempt all trespass and nuisance claims under field preemption because:
- Section 303 of the LMRA does not occupy the field of secondary boycotts or picketing so fully that any claims related to these things must be brought under Section 303 or not at all;
- trespass and nuisance fall within the long-standing exception for conduct that touches interests so deeply rooted in local feeling and responsibility that preemption could not be inferred in the absence of clear evidence of congressional intent;
- the conduct at issue is, at most, "a merely peripheral concern" of federal labor law (Machinists, 427 U.S. at 137);
- the Mall alleged property-based torts rather than economic causes of actions (such as antitrust or tortious interference with business interests); and
- the lawsuit was not fundamentally a labor case cast as a trespass case; it was a trespass case incidentally complaining about a union's conduct.
- The Mall's claims did not conflict with Section 303 and are not subject to conflict preemption because:
- trespass and nuisance are labor-neutral torts distinct from state laws, such as state antitrust laws that had traditionally been used to thwart economic self-help activity protected under the NLRA;
- the facts of the case suggested that these claims will not interfere with the purposes of federal labor law because the Mall was not seeking to quell all union protest activity. Rather, the claims concerned only the application of time, place and manner restrictions to raucous and threatening picket activity (yelling, chanting loudly in unison, blowing whistles, hitting and kicking construction barricades and hitting pickets against Mall railings). Congress did not impliedly intend that these types of actions be immune from state regulation.
- The district court's decision, based on Smart, that Section 303 "completely preempts" claims related to secondary boycotts, was:
- contrary to Morton and Sears; and
- simply wrong.
- In light of Morton, Section 303 does not fully preempt any suit based on conduct arguably prohibited by the secondary boycott provisions of Section 8 of the NLRA and made actionable by Section 303 of the LMRA.
The Ninth Circuit declined to adopt the Seventh Circuit's analysis in Smart that Section 303 mirrors Section 301 and therefore should similarly completely preempt state law actions concerning unions' secondary activity. This creates a circuit split between the only two circuits to consider this issue. The Ninth Circuit found that the Seventh Circuit's decision in Smart was unpersuasive because it appeared to:
- Ignore Morton.
- Project Section 301's preemptive effect on Section 303, despite Supreme Court and circuit precedent observing that Section 303 may not preempt all state actions concerning secondary activity.
Based on its analysis of precedent, pleadings, briefs and arguments, the Ninth Circuit:
- Reversed the district court's order dismissing the Mall's trespass and public nuisance claims against the union that protested on its property without complying with notice and time, place and manner rules and granting judgment for the union on the pleadings.
- Affirmed the district court's dismissal of the Mall's:
- Section 303 claim against an individual union representative;
- Section 303 claim against the union that the Mall voluntarily withdrew; and
- California Labor Code cause of action for injunctive relief that the Ninth Circuit deemed waived when the Mall declined to appeal its dismissal.
- Held that the Mall waived potential objections to the district court's decisions to receive the case after the union removed it from state court and not to remand the case to state court when, following the removal, the Mall amended its complaint to add federal (Section 303) claims.
- Remanded the case to the district court to consider the Mall's revived state claims.
- Deferred to the district court's discretion whether it should exercise supplemental jurisdiction over the revived state law claims.
Practical Implications
Employers and property owners should be aware that nuisance and trespass actions under state law may survive under state law where:
- The state claims touch interests deeply rooted in local feeling and responsibility, such as in maintaining public safety.
- The employer or property owner only seek to enforce time, place and manner restrictions against union protesters.
The two circuits that have evaluated whether Section 303 completely preempts state law claims have reached opposing conclusions, but interestingly, the Ninth Circuit would have likely reached the conclusion that Smart plaintiff's antitrust claims against a union were preempted on narrower conflict or field preemption grounds.