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Union pact case goes bust at the Supreme Court

WASHINGTON — It was the major U.S. Supreme Court labor law decision that wasn’t.worker's union

The case of Unite Here Local 355 v. Mulhall ended not with a decision impacting the way unions and employers — particularly those in the hospitality industry — deal with one another, but rather with a dismissal that leaves in place a circuit split.

The justices were poised to decide whether neutrality agreements between unions and employers, which are commonly used in certain sectors in advance of union organizing campaigns, can violate §302 of the Labor Management Relations Act. That law imposes criminal penalties on employers who “pay, lend, or deliver, any money or other thing of value … to any labor organization, or any officer or employee thereof, which represents, seeks to represent, or would admit to membership, any of the employees of such employer.” The court heard oral argument in the case in November.

But in a strange twist earlier this month, the court dismissed the case as improvidently granted, leaving labor lawyers and their clients who use neutrality agreements scratching their heads.

“We’re really in sort of the twilight zone,” said Howard K. Kurman, principal in the Baltimore office of Offit Kurman Attorneys At Law, where he represents employers.

“The Supreme Court’s quick dismissal of this case raises a lot more questions than [it] provides answers,” said Michael J. Lebowich, a partner in the New York office of Proskauer Rose and co-head of the labor-management relations group.

The case stemmed from an 11th U.S. Circuit Court of Appeals ruling involving a neutrality agreement between a casino and a labor union seeking to unionize its employees.

In that agreement, the casino promised to give union representatives access to the casino’s premises and a list of the names and contact information of its employees. The casino also agreed to remain neutral as to the unionization of its employees. In return, the union agreed not to strike or undertake any other economic activity against the casino and to publicly support a gaming ballot initiative that the casino favored.

But an employee who was opposed to unionization challenged the agreement, arguing it violated the LMRA provision, which is designed to impose criminal penalties for bribery and corruption in union organizing. Although no cash changed hands between the union and management, the promises made by the casino, the employee argued, constituted a “thing of value” under the statute.

A federal district court disagreed and dismissed the claim, but the 11th Circuit reversed, holding that a jury could find that the casino’s promised assistance was a thing of value. That ruling was at odds with decisions from the 3rd and 4th Circuits.

Unusual ending

The Supreme Court agreed to decide the issue, but just short of a month after oral arguments the case was dismissed.

Dismissals are typically issued without explanation, but a dissent filed by Justice Stephen G. Breyer provided some insight into what happened.

“[I]n considering the briefs and argument, we became aware of two logically antecedent questions that could prevent us from reaching the question of the correct interpretation of §302,” Breyer wrote. “First, it is possible that the case is moot because the contract between the employer and union that contained the allegedly criminal promises appears to have expired by the end of 2011, before the Eleventh Circuit rendered its decision on the scope of §302. Second, it is arguable that respondent Mulhall, the sole plaintiff in this case, lacks Article III standing.”

In his dissent, which was joined by Justices Sonia Sotomayor and Elena Kagan, Breyer said that rather than dismissing the case he would have asked for additional briefing on those antecedent issues as well as another: whether §302 provides plaintiffs with a private right of action.

But Breyer’s view did not carry the day, and labor attorneys were left with different rules in different jurisdictions.

“We don’t have any finality.” said Jean Marc Favreau, a partner at Peer, Gan & Gisler in Washington, where he represents public and private sector unions. “I think employers and unions were waiting for a decision that could provide some certainty on this issue.”

Chilling effect?

While neutrality agreements are frequently used by unions and employers at hotels, casinos and other hospitality venues, the open legal question as to whether entering such a pact qualifies as a crime could chill that practice, at least until the justices agree to take up it again.

Although unions are typically thought of as the proponents of such agreements, “a lot of employers like neutrality agreements because they can make union organizing a little less contentious,” Favreau said.

Kurman said that the ruling could be a blessing in disguise for the labor union that appealed the 11th Circuit ruling to the Supreme Court. During oral argument, several justices expressed doubt that the contract fell outside the boundaries of §302.

“You had a real split between the conservative and the liberal justices,” Kurman said. “Maybe [Justice Anthony M.] Kennedy may have been the swing vote.”

Now attorneys and their clients, particularly those in the 11th Circuit, must tread carefully if they plan to use pre-organizing agreements.

“On a practical level, companies need to give close consideration to the purpose and intent of a neutrality agreement as it is being proposed.” Lebowich said. “Is the proposal on the table part of a larger collective bargaining agreement? Is it a proactive tactic to avoid union unrest in an area where an employer is considering development? Is it to garner political support for a corporate development? The Supreme Court’s dismissal leads us right back to where we were,” with a circuit split.

Some companies may opt to forgo such pacts altogether, Favreau said.

“They are going to think twice about entering into a neutrality agreement if they think they might be subject to criminal liability,” he said.