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Waugh Chapel South, LLC v. United Food and Commercial Workers Union Local 27, No. 12-1429

Decided:  August 26, 2013

The Fourth Circuit held that the Mid-Atlantic Retail Food Industry Joint Labor Management Fund (the “Fund”) was not a “labor organization” subject to the Labor Management Relations Act (“LMRA”), and that a genuine issue of material fact existed as to whether the United Food and Commercial Works Union Local 27 and 400 (“UFCW”) violated the secondary boycott provision of the National Labor Relations Act (“NLRA”).  The Fourth Circuit therefore affirmed the decision of the United States District Court for the District of Maryland in part, vacated the decision in part, and remanded the case to the district court.

Waugh Chapel South, LLC and Waugh Chapel South Properties Business Trust (collectively “WCS”) were the commercial real estate developers of the Village at Waugh Chapel South, a shopping center in Anne Arundel County, Maryland.  WCS planned to lease a storefront unit to Wegmans Food Markets, Inc. (“Wegmans”).  The UFCW and the Fund opposed the project, as Wegmans does not employ organized labor.  A union executive allegedly threated to “fight every project you [WCS] develop where Wegmans is a tenant” if Wegmans did not unionize.  The unions subsequently brought fourteen legal challenges to the development project, thirteen of which involved surrogate plaintiffs.  Ten of the petitions were subsequently withdrawn, two were dismissed, and two were mooted by subsequent developments.

WCS sued the unions under the LMRA, 29 U.S.C. § 187, alleging secondary boycott activity under § 158(b)(4)(ii)(B).  The district court granted the Fund’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), concluding that the Fund was not a “labor organization” subject to the LMRA.  The district court also did not find any of the unions’ legal challenges to be objectively baseless.  The district court therefore dismissed WCS’s secondary boycott allegation under the Noerr-Pennington doctrine.  WCS appealed.

The Fourth Circuit noted that, to fall under the NLRA’s definition of a “labor organization,” 29 U.S.C. § 152(5), an employee entity must meet the “dealing with” employers requirement.  The Fourth Circuit found that neither the purpose nor the activity of the Fund involved “dealing with” employers:  The Fund’s charter prohibits it from participation in union activities, and the Fund’s only interaction with an employer concerned the actual secondary boycott allegations.  Furthermore, though the Fund defined itself as a labor organization for purposes of tax liability, the Fourth Circuit concluded that Internal Revenue Code definitions could not be imported to the NLRA. Addressing the unions’ motion to dismiss the secondary boycott allegation as a motion for summary judgment, the Fourth Circuit first reconciled the different standards for the sham litigation exception to the Noerr-Pennington doctrine found in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, and Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc. (“PREI”), 508 U.S. 49.  The Fourth Circuit concluded that the strict two-step test from PREI applies to a single instance of alleged sham litigation, whereas the California Motor test applies to a series of legal proceedings.  Applying the California Motor test, the Fourth Circuit noted, “the vast majority of the [unions’] legal challenges failed demonstrably.”  The Fourth Circuit also noted other indications of bad-faith litigation, including the withdrawal of ten of the suits under suspicious circumstances.

Full Opinion

– Stephen Sutherland