Application of RICO to Labor Management Disputes

7 St. Thomas L. Rev. 309, *

Spring, 1995

7 St. Thomas L. Rev. 309

LENGTH: 10101 words

ARTICLE: THE APPLICATION OF RICO TO LABOR-MANAGEMENT AND EMPLOYMENT DISPUTES

Raymond P. Green *

* B.A., Boston University, 1961; J.D., New York University School of Law, 1964. Administrative Law Judge for the National Labor Relations Board; member of the Labor and Employment Subcommittee of the New York City Bar Association.

SUMMARY:
... In 1970, Congress passed the Racketeer Influenced Corrupt Organization Act (the Act or RICO). ... [In Enmons] the Court focused on the special characteristics of the crime of extortion which embraces any act or threat of violence, however, minor, used to obtain the property of another. ... Further, finding a violation of the mail fraud statute, because the mails were used in connection with a scheme to commit an unfair labor practice, would subvert the NLRA by converting an otherwise civil violation into a criminal offense. ... Due to the Boffa holding, there may be disagreement about the legitimacy of a mail fraud conviction and its use as a RICO predicate act, because the fraud is based solely on acts which arguably constitute unfair labor practices. ... After discussing the history of preemption as it relates to labor relations, the court concluded that section 302 of the LMRA, a labor statute, was on the list of criminal statutes constituting predicate racketeering acts and Congress intended that a RICO claim based on this provision was not to be preempted by the NLRA, even if the acts alleged could also constitute an unfair labor practice. ...

TEXT:
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I. INTRODUCTION

In 1970, Congress passed the Racketeer Influenced Corrupt Organization Act (the Act or RICO). ¹ The stated purpose of the Act was to attack organized crime by providing both criminal and civil remedies in order to detach crime organizations, such as the Mafia, from various legitimate and illegitimate enterprises, such as labor unions. ² While RICO has been an effective weapon for the Justice Department in fighting organized crime, it has disrupted the labor-management relationship. While once disputes were resolved by a swift punch in the nose, the provisions mandating treble damages and attorney's fees now allow the parties to bring loaded guns into a school yard fight. The issue is not whether RICO is abused. The issue is whether it places into the hands of both management and labor a weapon which each can use against the other to upset the tenuous balance of power that is the hallmark of labor-management relations.

This article does not challenge the propriety of government initiated lawsuits under the Act. However, this article does seek to question whether private parties should intitiate RICO suits in the context of labor relations disputes. The ability of private parties to initiate these suits with regard to labor relations disputes, may insert a wild card into the balance of power between unions and managements. This is true even in lawsuits that will ultimately be unsuccessful.

Part II of this article provides a brief overview of the RICO Act and part III analyzes certain aspects of the RICO Act in relation to labor-management relations. Finally, the conclusion asserts that Congress should remove the ability of private parties to bring RICO suits in labor-management disputes.
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II. RACKETEER INFLUENCE CORRUPT ORGANIZATION ACT

A. The Act

At the risk of oversimplification, but for the purposes of understanding, the following sentence summarizes the RICO statute. The Act provides for criminal and/or civil remedies when a person or enterprise ³ engages in a pattern ⁴ of racketeering activity ⁵ for the purpose of: using the income from racketeering activity to acquire an interest in an enterprise; ⁶ obtaining an interest in an enterprise by means of racketeering activity; ⁷ participating in the operation of an enterprise through a pattern of racketeering activity; ⁸ or conspiring to commit any of the above. ⁹

The Act has three procedures for accomplishing its purpose. First, the United States government may initiate criminal prosecutions. ¹⁰ In addition to fines and imprisonment, RICO also mandates that the government require defendants to forfeit any interest acquired in violation of RICO. ¹¹ The forfeiture remedy may include attorney's fees, which have attached prior to trial in some cases. ¹²
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Second, the government may bring a civil RICO action against a defendant. ¹³ Under a civil RICO claim there are a variety of remedies available, including injunctive relief. The scope of this remedy is illustrated in United States v. Local 560, International Brotherhood of Teamsters. ¹⁴ The union's executive board was replaced by a court appointed trustee. The trustee also conducted a hearing in which he investigated two of the union's principle officers. A settlement between the parties incorporated the trustee's conclusion that the executive board members should be forever barred from union office. ¹⁵ The Second Circuit approved the settlement. ¹⁶

The third procedure allows a private party to bring a civil RICO action against a defendant who allegedly engages in a pattern of racketeering activity. ¹⁷ In this context, monetary relief may only be granted to the extent that the plaintiff suffered an injury to his business or property. ¹⁸ Actual economic loss, to the extent that it was proximately caused by the defendant's racketeering acts, needs to be proven. ¹⁹ Thus, damages for personal injury are excluded under RICO. ²⁰ Likewise, an injury to reputation may not be sufficient to sustain a civil RICO claim. ²¹ In addition, because of the strong likelihood that a union official or company officer may become a defendant in a RICO case, that person may be held personally liable. ²²
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It should be noted preliminarily, that racketeering conduct is a "predicate act." ²³ More importantly, although all of the predicate acts are criminal violations, it is unecessary for the plaintiff to show that the defendant "person" has been convicted of any of the acts alleged. The plaintiff need only prove by a preponderance of the evidence that the acts have been committed. ²⁴

B. "Pattern" of Racketeering Activity

A large area of ambiguity exists when applying RICO to labor disputes, both in terms of what should or should not be preempted and what types of activities constitute patterns of racketeering acts. ²⁵

An interesting aspect of RICO arises when one attempts to ascertain what constitutes a "pattern." In trying to ascertain the judicial definition of the word "pattern", it appears as though this is an area of metaphysical wonderland. Because RICO speaks of a pattern as requiring at least two acts of racketeering activity, ²⁶ the implication here is that although Congress probably intended to expect an excess of two acts, it also implied that only two acts may suffice. The Supreme Court commented on this in Sedima:

The implication is that while two acts are necesary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a 'pattern'. The legislative history supports the view that two isolated acts of racketeering activity do not constitute a pattern. As the Senate Report explained: 'The target of RICO is thus not sporadic activity. The infiltration of legitimate business normally requires more than one racketeering activity and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern' . . . . Significantly in defining 'pattern' in a later provi- [*313] sion of the same bill, Congress was more enlightening: 'Criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.' ²⁷

The Supreme Court has struggled with its own interpretation of the term "pattern." Consider the opinion in H.J. Inc. v. Northwestern Bell Telephone Co., ²⁸ where the Court stated:

What a plaintiff or prosecutor must prove is continuity of racketeering activity, or its threat, simpliciter . . . . 'Continuity' is both a closed and open-ended concept, referring either to a closed period of repeated concept, or to past conduct that by its nature projects into the future with a threat of repetition . . . . it is, in either case, centrally a temporal concept and particularly so in the RICO context, where what must be continuous, RICO's predicate acts or offenses, and the relationship these predicates must bear to one another, are distinct requirements. ²⁹

It is the statute, not the Court, that has created a discontinuity of meaning that cannot be reconciled by the plain meaning of the English language.

One of the problems with interpreting RICO is the difficulty in calling a series of transactions a pattern while at the same time saying that a pattern can exist with as few as two events. It is impossible, for example, to make a pattern out of any two numbers. If we take the numbers 1 and 2, we cannot conclude that the next number will be 3. The pattern could be 1, 2, 3, etc., or it could be 1, 2, 4, 8, etc., or it could be 1, 2, 1, 2, etc. Indeed, any two numbers can yield an infinite number of patterns, and therefore cannot themselves be a pattern.

When speaking of a pattern in ordinary affairs, it normally means that, by looking at a series of the past acts by a person or group, it can be predicted with a high degree of probability, what will be done in the next similar circumstance. When unions or corporations, by a large number of officers, directors, representatives, business agents, members, employees, etc., perform a myriad of acts over a period of time, it is virtually impossible to claim that a pattern can be established
[*314] by a limited number of events, much less a number as small as two. For example, could it be said that a union engaged in a pattern of violence, if during a given year it conducted twenty peaceful strikes involving 1000 employees and in one, a business agent (one of ten) condoned or even encouraged a series of threats, assaults and vandalism by a small group of young male employees while they were engaged in a primary economic strike against a single plant of a single employer?

The court in MHC, Inc. v. International Union Mine Workers of America ³⁰ noted that, "courts have struggled to implement Sedima's directive to develop a meaningful concept of continuity plus relationship." ³¹ The court also noted that "three distinct standards have developed for determining whether or not the continuity aspect of a pattern has been established." ³² A majority of the courts require that the predicate acts occur in different criminal episodes, apparently meaning that the "mere fact that a transaction is complex and requires numerous predicate activities is not sufficient to establish a pattern where, although these predicate acts are ongoing over a period of time and seem to constitute separate transactions, they, in fact, involve a single 'scheme'." ³³ Other courts have taken a broader view and have required only "two acts that have a common purpose of furthering a criminal enterprise with which that person is associated." ³⁴ These courts have rejected the idea that a pattern requires more than one scheme. ³⁵ Both these views have been criticized, the first as being too narrow an interpretation of the Sedima requirement and the second as being too broad. ³⁶

A final group identifies a pattern as requiring more than one scheme, or an open-ended continuous scheme, which contains a "multiplicity of predicate acts." ³⁷ The MHC court opted for a variation of
[*315] this final view. It concluded that a pattern requires "multiple episodes evincing a regular and ongoing course of conduct." ³⁸ The court stated:

Such a standard is broad enough to draw into the scope of RICO those parties who, as a common practice, resort to criminal activities to achieve their goals--whether their actions constitute multiple schemes or a single open-ended scheme involving numerous activities over an extended period of time--yet it is narrow enough to exclude the first time offender who takes several actions to achieve a single goal within a limited span of time. It is important to remember that such a decision does not relieve the first time offender of all criminal liability, it only relieves him of the onerous additional penalties under RICO. Additionally, should the first time offender succumb to illegal activity for a second time at a later date, he could be prosecuted under RICO at that time. ³⁹

III. LABOR-RELATIONS

A. Preemption

A fairly high percentage of private RICO claims have been dismissed by application of a preemption concept. ⁴⁰ Where labor disputes were involved, courts have concluded that the predicate acts alleged were not the acts specifically establishing, under RICO, that a person engaged in a pattern of racketeering. ⁴¹

B. Listed Predicate Acts

In United States v. Thordarson, ⁴² company employees elected Local 186 to be their bargaining agent. When the company refused to
[*316] recognize the union, the union and a sister local engaged in a primary strike. The company claimed that during the strike, company trucks were damaged or destroyed by arson. ⁴³ An indictment was filed against various officers and employees of the unions, alleging that they conspired to destroy trucks in order to force the company to recognize and bargain with Local 186. ⁴⁴ The indictment charged the defendants with: using explosives in violation of the Arson Act; ⁴⁵ traveling in interstate commerce to commit arson in violation of the Travel Act; ⁴⁶ converting union funds in violation of the Landrum-Griffith Act; ⁴⁷ and, of course, conspiring to conduct the affairs of an enterprise through a pattern of racketeering acts, in violation of RICO. ⁴⁸

The district court dismissed the Arson and Travel Act charges, as well as the RICO violations based thereon. The court held that the alleged violence, as it was in furtherence of a primary labor dispute, was precluded under the authority of United States v. Enmons. ⁴⁹ The district courts dismissal of the Landrum-Griffith Act allegations was reversed on appeal. ⁵⁰ Because RICO specifically lists the LandrumGriffith Act among the racketeering acts, ⁵¹ it cannot be argued that a RICO suit based on a pattern of converting funds should be preempted under a labor relations exemption.
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In the circuit court's view, there was no showing that Congress, in passing RICO or the Arson or Travel Acts, intended to exclude labor unions or labor disputes from their coverage. The court stated:

[In Enmons] the Court focused on the special characteristics of the crime of extortion which embraces any act or threat of violence, however, minor, used to obtain the property of another. The underlying concern was that to apply a federal extortion statute in the context of the collective bargaining process would transform minor acts of labor violence punishable by state law into federal felonies, thus placing the federal government in the business of policing the routine conduct of strike activity.

There is little, if any, risk that the crimes charged in this indictment, if applied to labor violence, would involve the federal government in policing routine strike activity. The destruction of vehicles . . . by means of explosives . . . are hardly the sorts of minor picket line violence that the Enmons Court feared would be transformed into federal crimes under the Hobbs Act. ⁵²

Judge Pregerson, while agreeing with the validity of the indictment based on the Landrum-Griffith statute, added:

The Court [in Enmons] voiced its reluctance, absent unmistakably compelling statutory language, to conclude 'that Congress intended to put the Federal Government in the business of policing the orderly conduct of strikes.' This policy is as appropriate here as in Enmons and counsels against extending RICO, the Travel Act, or section 844(i) to 'the use of force to achieve legitimate collectivebargaining demands.' ⁵³

C. Labor Management Relations, National Labor Relations Act and Mail Fraud

United States v. Boffa ⁵⁴ involved the criminal convictions of the owners of several related corporations. Universal Coordinators, Inc. (UCI), a New Jersey Corporation controlled by Eugene Boffa, Sr., leased truck drivers to Inland's Newark facility. These drivers were represented by the Teamsters Local 326, headed by co-defendant Francis Sheeran. Concerned about recurring labor disputes at the Inland plant, appellant Eugene Boffa, Sr. and Sheeran agreed that after the election of officers of Local 326, Boffa would terminate the leasing
[*318] contract between UCI and Inland and substitute for UCI, a second leasing company controlled by the enterprise. The purpose of the switch was to "cause the employees of UCI . . . to be fired and not rehired by the second leasing company." ⁵⁵ To ensure the success of the scheme, the owners bribed the union's president by giving him use of a Lincoln Continental for four months. ⁵⁶

The indictments alleged: (1) mail fraud, under 18 U.S.C. section 1341; (2) unlawful payments to a union officer, under 29 U.S.C. section 186 (i.e., section 302 of the Labor Management Relations Act (LMRA)); ⁵⁷ (3) obstruction of justice under 18 U.S.C. section 1503, and (4) RICO violations, where the predicate acts were based on the preceding three violations. ⁵⁸

The mail fraud indictment asserted that the defendants engaged in a scheme to both defraud the unionized employees of their rights to join, assist or bargain through a labor organization, ⁵⁹ and also, to defraud those employees by depriving them of the wages and benefits they had derived under the collective bargaining agreement UCI entered with the union. Because the employees were notified of their discharges by letter, this satisfied the "mail" portion of the mail fraud statute. ⁶⁰

The court dismissed the mail fraud allegation insofar as it was based on a "scheme" to deprive employees of their rights under section 7 of the National Labor Relations Act (NLRA), noting that unfair labor practices provisions are remedial, not penal, in nature. ⁶¹ Further, find- [*319] ing a violation of the mail fraud statute, because the mails were used in connection with a scheme to commit an unfair labor practice, would subvert the NLRA by converting an otherwise civil violation into a criminal offense. ⁶²

The Boffa court nevertheless sustained a mail fraud conviction insofar as it was based on the theory that the defendants schemed to defraud the employees of the labor contract benefits as distinguished from their rights under section 7 of the NLRA. ⁶³ The Boffa court recognized that a "scheme to deprive persons of intangible rights . . . may be within the ambit of 18 U.S.C. section 1341." ⁶⁴ This was held even though such acts would have constituted unfair labor practices under sections 8(a)(3) and 8(a)(5) of the NLRA. ⁶⁵ The alleged "bribe" to the union's president, gave rise to a "failure to represent claim" under section 8(b)(1)(A) of the NLRA ⁶⁶ and this permitted the employees to file a civil law suit against both the union and the company, pursuant to section 301 of the LMRA. ⁶⁷

Based on the mail fraud and the section 302 violations, the Boffa court concluded that these were predicate acts which gave rise to a RICO violation. ⁶⁸ Due to the Boffa holding, there may be disagreement about the legitimacy of a mail fraud conviction and its use as a RICO predicate act, because the fraud is based solely on acts which arguably constitute unfair labor practices. However, there can be no preemption argument regarding the section 302 claim, as this provision is specifically included as a RICO predicate act. ⁶⁹ Therefore, Congress did not intend to preclude it. On the other hand, if the RICO convic- [*320] tion in Boffa had been based solely on the car loans, it is unlikely that that activity would have amounted to a pattern of racketeering.

Other courts, however, have failed to consider the preemption argument. In Yellow Bus Lines, Inc. v. Drivers, Chauffeurs & Helpers, Local Union 639, ⁷⁰ the company sued the union and a business agent alleging that they made threats and engaged in numerous acts of violence. Although the jury awarded damages for tortuous conduct, the trial judge dismissed the RICO contentions because the complaint alleged that the union was both the RICO "person" and the RICO "enterprise" which, under 18 U.S.C. section 1962(c), must be distinct entities. ⁷¹ The court refused to allow the union to amend the complaint to allege that Yellow Bus was the "enterprise" in which the "persons" participated, as required by RICO. The alleged "pattern of racketeering acts" consisted of four threats against the company's property and employees which occurred during the course of recognitional picketing.

On appeal, the circuit court held that it was an abuse of discretion for the district court to refuse the amended complaint. ⁷² In addition, although the alleged acts were part of a single recognitional strike, the four alleged acts were sufficient to constitute a "pattern." ⁷³ The court found that the alleged acts constituted predicate acts under 18 U.S.C. sections 1961(1) and (5), which specifically include acts or threats, involving murder, arson and extortion, punishable under state law. ⁷⁴ Moreover, the court concluded that the complaint could be amended to allege that the union and its business agent were "persons" who, through a "pattern" of racketeering predicate acts, "participated" in an "enterprise," namely the plaintiff, Yellow Cab. ⁷⁵

It does not appear that the union made or the court considered any preemption contentions. Because the alleged threats probably would have been encompassed by RICO's section 1961, it is doubtful that such a contention could have prevailed even though the union's conduct arguably would also have been unfair labor practices under sections 8(b)(1)(A) and 8(b)(7)(C) of the NLRA.
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Compare the preceding case's definition of "pattern," with Local 400 v. Marval Poultry Co. ⁷⁶ In the latter, the union alleged that the company, by payments of money, solicited employees to circulate and file a decertification petition seeking to oust the incumbent union. ⁷⁷ The union contended that the employer: tortuously interfered with contractual relations; violated section 302 of the LMRA; and, engaged in a pattern of racketeering acts under RICO. ⁷⁸ Simultaneously, the union alleged unfair labor practices under section 8(a)(1) and section (5) of the NLRA, and the National Labor Relations Board's regional office issued a complaint. ⁷⁹

Section 302 of the LMRA prohibits various payments by employers to union officers or employees with certain specified exceptions. ⁸⁰ Section 302(a)(3) of the LMRA precludes payments to employees "in excess of their normal compensation for the purpose of causing such employees . . . to influence any other employees in the exercise of the right to organize and bargain collectively through representation of their own choosing." ⁸¹ A violation of section 302 of the LMRA is a misdemeanor and is one of the specified criminal statutes whose violation constitutes a predicate act under RICO. ⁸² Hence, a violation of section 302 of the LMRA cannot be preempted by the NLRA, even though the acts may also constitute an unfair labor practice. The RICO claims were based on the section 302 violation and also on the mail fraud statute as it was alleged that the mails were used during the course of this conduct. ⁸³

The court concluded that the RICO claim was not preempted under the Garmon preemption doctrine ⁸⁴ which is the correct result in that particular case. However, the court did dismiss the RICO claim by concluding that the conduct did not constitute a "pattern." ⁸⁵ Thus, although numerous acts were alleged to have occurred over a four month period, the court stated:
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While the court recognizes the gravity of Marval's alleged illegal objective, it finds that this particular scheme, limited in scope to the accomplishment of a single, discrete objective, namely, forcing out one specific collective bargaining representative, does not pose a sufficient threat of continuing criminal activity to justify the imposition of RICO's extraordinary penalties. The plaintiff does not suggest that Marval's alleged activity would have continued for a moment longer than was necessary to terminate this particular bargaining representative. If true, the defendant's activity certainly represents blatant unfair labor practices, precisely of the kind which the NLRA was intended to remedy and which the plaintiff sought to have remedied by the NLRB. Of course, some unfair labor practices will also satisfy RICO's pattern requirement, for example, those which "contemplate the repeated infliction of independent economic injuries . . . ." ⁸⁶

Other courts have, however, disagreed with this reasononing. In Local 355, Hotel, Motel, Restaurant & Hi-Rise Employees & Bartenders Union v. Pier 66 Co., ⁸⁷ the union claimed that the employer had violated section 302 of the LMRA, and therefore RICO, by making payments to employees to decertify the union. ⁸⁸ Contrary to the reasoning in the Marval Poultry case, the court dismissed the complaint on the grounds that, the alleged acts were arguably unfair labor practices and therefore should be preempted. Further, the injuries suffered, attorney's fees and costs incurred by the decertification effort, did not constitute an economic injury which is a precondition for a private RICO suit. ⁸⁹ As to the preemption argument, the court stated:

The claims presented by the Union fall squarely within those activities that are arguably subject to section 7 or section 8 of the NLRA. Further continued litigation of this matter would be tantamount to providing the Union with a means of circumventing unfavorable decisions by the NLRB regarding its unfair labor practice claims. This court, therefore, will defer to the expertise of the NLRB. ⁹⁰

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The continued inconsistency is further illustrated by Butchers' Union, Local 498 v. SDC Investment, Inc., ⁹¹ in which the Local 498 asserted that the company recognized and entered into a contract with the National Maritime Union (NMU) in order to prevent the plaintiff from organizing the employees. ⁹² The complaint alleged that this scheme was carried out in part through payments by the company to NMU representatives in violation of section 302 of the LMRA. ⁹³ The complaint also alleged a violation of the mail and wire fraud statute, presumably because letters were posted in connection with the alleged scheme. ⁹⁴ The company, its officers, its lawyers, and the NMU were named as defendants. ⁹⁵ Using as its basis, the LMRA section 302 and mail fraud allegations, the union asserted that these persons had engaged in a pattern of racketeering acts in violation of RICO. ⁹⁶

The court rejected the defendants' motion to dismiss as to the RICO allegations insofar as they were based on the section 302 contention. After discussing the history of preemption as it relates to labor relations, the court concluded that section 302 of the LMRA, a labor statute, was on the list of criminal statutes constituting predicate racketeering acts and Congress intended that a RICO claim based on this provision was not to be preempted by the NLRA, even if the acts alleged could also constitute an unfair labor practice. ⁹⁷ The court disagreed with the opinion in Local 355 and stated:

The legislative history, however, buttresses the conclusion that plaintiff's section 186 claims are not preempted by the NLRA. Sponsors of the bill that became RICO emphasized the need to end illegitimate unions and the resultant "sweetheart contracts," believing that violations of section 186 corrupts legitimate labor management relations and leads to "labor peace being sold to businesses." ⁹⁸

The court did, however, dismiss the mail and wire fraud allegations on the grounds that the fraud alleged was fraud only because of the provisions of the NLRA. ⁹⁹
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It appears in the instant case that but for the proscriptions of the labor law, defendants' conduct simply would not be either mail or wire fraud. The mail and wire fraud statutes denounce the use of the mails or wire to perpetrate a fraud, but leave to other laws the definition of what is a fraud . . . . In essence then, defendants' use of the mails or wire is an indictable offense only where its purpose is the execution of a fraud . . . . Under the instant complaint, this configuration is crucial since, under plaintiffs' allegations, the only reason defendants' conduct can be alleged to be unlawful, is that it is denounced by the labor law. ¹⁰⁰

Finally, the court in MHC v. International Union, United Mine Workers of America ¹⁰¹ phrased the issue as "whether a RICO action is preempted by the NLRA when the predicate acts alleged may also be classified as unfair labor practices." ¹⁰² In MHC, a company sued a union alleging a RICO violation. ¹⁰³ This violation was based on certain acts and threats of violence which took place during the union's recognitional picketing which another proceeding held that this activity violated section 8(b)(7)(C) of the NLRA. ¹⁰⁴ The union counterclaimed, alleging that the company had violated RICO by using the mails to engage in a scheme seeking to avoid the terms of a collective bargaining agreement by shutting down and firing its unionized work force, and reopening as a new corporation using non-union employees. ¹⁰⁵
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The court refused to dismiss the RICO claim against the union holding it was not preempted. The test applied by the court in determining whether a set of actions was preempted was stated as follows:

If the activities alleged in a RICO claim involving a labor entity are such that they would obviously be illegal under any and all circumstances and involving any and all perpetrators, the matter is not so tied to labor law as to make preemption necessary. The Court can render a decision on the matter without any examination of labor law. For example, murder and destruction of property would be illegal whether or not there was a labor motive or relationship. No interpretation of labor law is necessary to make a determination of liability. A series of these sorts of illegal activities could establish a "pattern of racketeering activity" for RICO purposes . . . . In these instances, there would be little possibility that the Courts and the NLRB would deliver contradictory decisions having an adverse effect upon labor policy. The "chilling effect" upon the exercise of labor rights would be limited since the activities being discouraged are criminal in nature and not within the scope of activities contemplated by the NLRA. Those who commit such activities are in no doubt as to the illegality of their actions and should know that they can be held responsible . . . . Such an analysis does not apply when the RICO predicate acts alleged are not illegal per se. In many instances, an unfair labor practice involves activities that but for labor law would be legal. In such actions, an examination of labor law would be necessary to determine if a violation of law actually occurred. If an action undertaken in a labor dispute is not illegal per se, the "perpetrator" could not know of the wrongfulness of his actions until a complaint was filed and a decision rendered. In such cases, there is a real possibility that different jurisdictions could render conflicting decisions . . . . Thus, if there is any question at all about the legality of an action alleged as a predicate act, the action is so tied to labor law as to require preemption to the NLRB. ¹⁰⁶

Conversely, the court dismissed the union's RICO claims on the theory that they were preempted by the NLRA. The Court stated:

The actions alleged, e.g. asset switches and lease arrangements, are often accomplished within the sphere of legitimate corporate activity and would not be unlawful but for labor law if it is shown that such actions were taken to avoid the obligation enforceable under the NLRA. The Court would be forced to examine the actions and their relationship within labor law to determine if, in
[*326] fact, unlawful activity occurred. ¹⁰⁷

IV. CONCLUSION

A large area of ambiguity exists when applying RICO to labor disputes, both in terms of what should or should not be preempted and what types of activities constitute patterns of racketeering acts. Indeed, there are sufficient ambiguities to make lawyers happy with the possibility that they may become engaged in numerous, complex and intellectually stimulating lawsuits, which are paid for by their clients. Whether that would be good for labor and management, as an institution, is quite another matter. The legitimate question remains as to whether private civil RICO lawsuits should continue to be available to plaintiffs in cases involving either strike violence or situations involving non-payments to benefit funds. The argument suggests that the present remedies are insufficient. That is, the RICO option, or its threatened use thereof, involving triple damages, attorney's fees, and the potential for individual liability, is one that that would not be easily given up if one is hired as a plaintiff's counsel. Nevertheless, it should be kept in mind that such cases are still amenable to existing remedies under a variety of state and federal procedures.

In the field of labor relations, both management and union attorneys are called upon to represent their respective clients, both as plaintiffs and defendants. Therefore, the RICO weapon that an attorney might employ in one case will have to be defended against in the next. A balance must also be struck by weighing the use of a legal procedure to benefit clients, against the affect that a civil RICO suit may have on an existing bargaining relationship. Finally, there is the larger issue as to whether the use of civil RICO suits, in the aggregate, may alter the "balance of power" between labor and management in an institutional sense.

The most obvious way to modify the statute would simply be to repeal section 1964 and thereby eliminate private RICO suits completely. Such a solution would leave criminal and civil RICO cases in the hands of the Justice Department. This, however, may not be feasible or even be in the public interest. There may be an appropriate place for private civil suits under this statute outside the ambit of labor relations, or even in certain contexts where it is clear that either a union or a
[*327] company is an enterprise whose purpose, in substantial part, is to engage in criminal activities. For example, a company or union taken over by criminals, or perhaps a political terrorist organization, who then systematically diverts pension fund assets for personal benefit. As such, this article therefore proposes alternatively that section 1964(e) be amended as follows:

Any person injured in his business or property by reason of a violation of section 1962 [prohibited activity] may sue . . . provided that such lawsuits shall be preempted and dismissed if the activities alleged:

(1) are related to a labor dispute as defined in the Norris-LaGuardia Act;

(2) constitute activities arguably protected or prohibited by the National Labor Relations Act; or

(3) relate to an employee benefit plan as those terms are used in section 514 of ERISA or section 302 of the Labor Management Relations Act.

FOOTNOTES:

n1 Racketeer Influenced Corrupt Organization Act of 1970, Pub. L. No. 91-452, 84 Stat. 941 (codified as amended at 18 U.S.C. sections 1961-1968 (1988)).

n2 Id. section 1.

n3 18 U.S.C. section 1961(3)-(4) (1988). An "enterprise includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." Id.

n4 18 U.S.C. section 1962(5) (1988). A pattern "requires at least two acts of racketeering activity." Id.

n5 18 U.S.C. section 1962(1) (1988). Rackeetering activity includes "any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed . . . which is chargeable under State law and punishable by imprisonment for more than one year; . . . any act which is indictable under any of the following provisions of title 18, United States Code . . . ." Id.

n6 18 U.S.C. section 1962(a) (1988). That is, using the proceeds from criminal activity to obtain an interest in a legitimate business or other enterprises.

n7 18 U.S.C. section 1962(b) (1988). An example would be the use of threats or extortion to obtain an interest in a legitimate business or labor organization.

n8 18 U.S.C. section 1962(c) (1988). Operating a grocery store as a front for selling narcotics or for laundering money from the sale of illegal drugs is an example of operating an enterprise through a pattern of racketeering activity.

n9 18 U.S.C. section 1962(d) (1988).

n10 18 U.S.C. section 1963(a) (1988).

n11 Id. For examples of cases involving forfeiture, see United States v. Horak, 833 F.2d 1235 (7th Cir. 1987); United States v. McKeither, 822 F.2d 310 (2d Cir. 1987); United States v. Busher, 817 F.2d 1409 (9th Cir. 1987).

n12 See Caplin & Drysdale v. United States, 491 U.S. 617 (1989); United States v. Monsanto, 491 U.S. 600 (1989).

n13 18 U.S.C. section 1964(b) (1988).

n14 780 F.2d 267 (3d Cir. 1985), cert. denied, 476 U.S. 1140 (1986).

n15 Id. at 270.

n16 United States v. International Brotherhood of Teamsters, 941 F.2d 1292 (2d Cir. 1991). For other cases involving the imposition of trusteeships or receiverships see United States v. Local 30, United Slate, Tile and Composition Roofers, 871 F.2d 401 (3d Cir. 1989); United States v. Ianello, 824 F.2d 203 (2d Cir. 1987) (appointing receiver prior to litigation of case in chief in the absence of a hearing). But cf. United States v. Local 6A, Cement & Concrete Workers, 633 F. Supp. 192 (S.D.N.Y. 1986) (denying the government's request for a preliminary order appointing a trustee).

n17 18 U.S.C. section 1964(c) (1988). "Any person injured in his business or property by reason of . . . section 1962 . . . may sue . . . and shall recover threefold the damages he sustains and . . . reasonable attorney's fees." Id.

n18 Id.

n19 Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985).

n20 Grogan v. Platt, 835 F.2d 844 (11th Cir.), cert. denied, 488 U.S. 981 (1988). "The ordinary meaning of the phrase injured in his business or property excludes personal injuries, including the pecuniary losses therefrom." Id. at 847. See also Callen v. State Chem. Mfg. Co., 584 F. Supp. 619, 623 (E.D. Pa. 1984).

n21 Morrison v. Syntax Labs., 101 F.R.D. 743 (D.D.C. 1984). "Had Congress intended to create a . . . remedy for cases involving . . . mental or emotional anguish, . . . it could have enacted a statute . . . without any restrictive language." Id. at 744.

n22 See 18 U.S.C. section 1962(a) (1988).

n23 18 U.S.C. section 1961(5) (1988).

n24 The standard of proof for the commission of the acts is that of a preponderance of the evidence. Sedima, 473 U.S. at 491-93.

n25 This article does not address other issues, such as what should be the statute of limitations in a private RICO suit. It is also noted, without discussion, that there have been a number of RICO cases filed by employees against either their unions or their employers or both. See, e.g., Brown v. Keystone Consol. Indust., 680 F. Supp. 1212 (N.D. Ill. 1988) (former employees brought age discrimination and RICO claims against a company which purchased their employer); Landry v. Air Line Pilots Ass'n, 901 F.2d 404 (5th Cir. 1990) (employees brought RICO claims against their union and their employer based in part on theories that the union and company conspired to defraud employees by allowing the airline to move operations from Texas to El Salvador, and by conspiring to breach pension plan obligations pursuant to contract and ERISA).

n26 18 U.S.C. section 1961(5) (1988).

n27 Sedima, 473 U.S. at 497 n.14 (citations omitted).

n28 492 U.S. 229 (1989).

n29 Id. at 240.

n30 685 F. Supp. 1370 (E.D. Ky. 1988).

n31 Id. at 1382.

n32 Id. at 1383.

n33 Id. See, e.g., Superior Oil v. Fulmer, 785 F.2d 252 (8th Cir. 1986); Medallion TV Enter., Inc. v. SelecTV, 627 F. Supp 290 (C.D. Ca. 1986), aff'd, 833 F.2d 1360 (9th Cir. 1987).

n34 MHC, 685 F. Supp. at 1384.

n35 See, e.g., United States v. Ianello, 808 F.2d 184, 192 (2d Cir. 1986); R.A.G.S. Couture, Inc. v. Hyatt, 744 F.2d 1350 (5th Cir. 1985).

n36 See Louisiana Power & Light Co. v. United Gas Pipe Line Co., 642 F. Supp. 781, 808-09 (E.D. La. 1986).

n37 MHC, 685 F. Supp. at 1384. See also Temporaries, Inc. v. Maryland Nat'l. Bank, 638 F. Supp. 118 (D. Md. 1986); Graham v. Slaughter, 624 F. Supp. 222, 225 (N.D. Ill. 1985).

n38 MHC, 685 F. Supp. at 1385.

n39 Id.

n40 The Supreme Court first articulated a preemption standard in the context of labor relations in San Diego Bldg. Trades Council v. Garmon, 59 U.S. 236 (1959).

n41 A number of courts require plaintiffs to file a "RICO case statement" setting forth the basis of the complaint's RICO claims. See Landry v. Air Line Pilots Ass'n, 901 F.2d 404, 434 (5th Cir. 1990) (approving the use of a RICO case statement and the trial court's stay of discovery pending resolution of the motion for summary judgment); Schreiber Distrib. Co. v. Serv-Well Steel Co. v. Shearson Lehman Bros., 3 RICO L. Rep. 804, 807 (N.D. Ohio 1986); Mulligan v. Prudential-Bache Secs., Inc., No. 86-70856, 1986 WL 15625 (E.D. Mich. 1986); Robinson v. Mount Vernon Realty, Inc., No. 86-0931, 1986 WL 22212 (D.D.C. Dec. 17, 1986).

n42 487 F. Supp. 991 (C.D. Cal. 1980), rev'd, 646 F.2d 1323 (9th Cir. 1981).

n43 Id. at 991-92.

n44 Id.

n45 The Arson Act provides that: "Whoever maliciously damages or destroys or attempts to damage or destroy, by means of an explosive, . . . real or personal property used in interstate or foreign commerce . . . shall be imprisoned . . . or fined . . . or both." 18 U.S.C. section 844(i) (1988).

n46 The Travel Act provides that:

(a) whoever travels in interstate or foreign commerce, or uses any facility in interstate or foreign commerce, including the mail with the intent to . . . (2) commit any crime of violence to further any unlawful activity, or (3) otherwise promote, manage, establish, carry on . . . any unlawful activity . . . shall be fined . . . or imprisoned . . . or both.

18 U.S.C. section 1952 (1988).

n47 The Landrum-Griffith Act provides in pertinent part that: "Any person who embezzles or converts to his own use, or the use of another part of the moneys, funds, securities, property, or other assets of a labor organization of which he is an officer, or by which he is employed directly or indirectly, shall be fined." 29 U.S.C. section 501(c) (1988).

n48 The RICO predicate acts were based on the alleged violations of the other criminal statutes.

n49 487 F. Supp. at 992-93. In United States v. Enmons, 410 U.S. 396, 400 (1973), the Supreme Court held that the Hobbs Act, which prohibits unions from using force or violence to extort property, could not be used to regulate or criminalize the conduct of strikes which had an otherwise legitimate purpose.

n50 United States v. Thordarson, 646 F.2d 1323, 1331 (9th Cir. 1981), rev'g 487 F. Supp. 991 (C.D. Cal. 1980).

n51 18 U.S.C. section 1961(1) (1988).

n52 Thordarson, 646 F.2d at 1329.

n53 Id. at 1338 (Pregerson, J., concurring in part and dissenting in part).

n54 688 F.2d 919 (3d Cir. 1982).

n55 Id. at 923. This is in many ways similar to a "double breasting" scheme where the owners of a unionized company establish a new corporation to engage in the same or similar business using employees, often many of the same employees, without affording them the benefits contained in the union contract. Depending upon the facts in any given situation, such a transaction may or may not be an unfair labor practice under the National Labor Relations Act section 8(a)(5), 29 U.S.C. sections 151-169 (1988). Alternatively, the union might seek to enforce its contract against the new company through the Labor Management Relations Act section 301, 29 U.S.C. section 185 (1988).

n56 Boffa, 688 F.2d at 924.

n57 "It shall be unlawful for any employer . . . to pay . . . any money . . . to any representative of any of his employees." 29 U.S.C. section 186 (1988).

n58 Boffa, 688 F.2d at 919.

n59 Employees are given the right to "self-organization to form, join or assist labor organizations, and to bargain collectively through representatives." National Labor Relations Act section 7, 29 U.S.C. section 157 (1988).

n60 Boffa, 688 F.2d at 925 (citing United States v. Pearlstein, 576 F.2d 531, 534 (3d Cir. 1978)). "Generally, [mail fraud] has been expansively construed to prohibit all schemes to defraud by any means of misrepresentation that in some way involves the use of the postal system." Id.

n61 Id. at 930.

n62 Id.

n63 Id. "The broad language of the mail fraud statute proscribes schemes to deprive an individual of economic benefits that are contained in a collective bargaining agreement." Id. The appellate court also upheld the conviction based on the four month loan of the car to the union's president under section 302 of the LMRA. Id. at 934.

n64 Id. at 926.

n65 Id. at 931. "We decline to accept the proposition that the NLRA precludes the enforcement of a federal statute that independently proscribes that conduct as well." Id. Section 8(a)(3) of the NLRA states that it is an unfair labor practice by an employer to "discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization." 29 U.S.C. section 158(a)(3) (1988). It is also an unfair labor practice for an employer "to refuse to bargain collectively with the representative of his employees." 29 U.S.C. section 158(a)(5) (1988).

n66 It is an unfair labor practice for a labor organtization "to restrain or coerce employees in the exercise of the rights guaranteed in [the NLRA]." 29 U.S.C. section 158(b)(1)(A) (1988).

n67 Boffa, 688 F.2d at 934. See also Vaca v. Sipes, 386 U.S. 171 (1967).

n68 Boffa, 688 F.2d at 934.

n69 18 U.S.C. section 1962 (1988).

n70 883 F.2d 132 (D.C. Cir. 1989).

n71 Id. at 139.

n72 Id. at 145.

n73 Id.

n74 Id. at 138.

n75 Id. at 139.

n76 708 F. Supp. 761 (W.D. Va. 1989).

n77 Id. at 762.

n78 Id. at 761.

n79 Id.

n80 29 U.S.C. section 186(a) (1988). For example, payment may not be made to pension and welfare funds which are jointly administered by union and management representatives.

n81 29 U.S.C. section 186(a)(3) (1988).

n82 29 U.S.C. section 186(d)(1) (1988).

n83 Marval Poultry, 708 F. Supp. at 767.

n84 See San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959).

n85 Marval Poultry, 708 F. Supp. at 763-66.

n86 Id. at 767.

n87 599 F. Supp. 761 (S.D. Fla. 1984).

n88 Id. at 761-62.

n89 Id. at 765.

n90 Id. at 764.

n91 631 F. Supp. 1001 (E.D. Cal. 1986).

n92 Id. at 1003.

n93 Id.

n94 Id. at 1004.

n95 Id. at 1003.

n96 Id.

n97 Id. at 1011.

n98 Id. at 1008.

n99 Id. at 1011-12. They are essentially violations of section 8(a)(1), (2) and (3) and sections 8(b)(1)(A) and (2) of the NLRA.

n100 Id. at 1011. The court compared the situation here with Laborers Health & Welfare Trust Fund for N. Cal. v. Advanced Lightweight Concrete Co., 779 F.2d 497, 504 (9th Cir. 1985). In that case, a union's trustee sued an employer for failing to make contractually required payments. The suit was brought under sections 502 and 515 of the Employee Retirement Income Security Act (ERISA) and also alleged a RICO violation based thereon. The court in Advanced concluded that the suit was preempted because the obligations to make payments arose solely under labor law (presumably Section 8(a)(5)), which mandates a duty to continue making fund contributions during the collective bargaining process. It therefore concluded that the NLRB should be the body to determine the existence or nonexistence of any liability.

n101 685 F. Supp. 1371 (E.D. Ky. 1988).

n102 Id. at 1374.

n103 The complaint alleged that the union's members:

"1. Carried, brandished, and discharged firearms and sling shots;

2. Threw rocks, bottles and other objects.

3. Made threats and engaged in similar verbal behavior intended to intimidate employees.

4. Threw nails and spiked boards in front of coal trucks.

5. Threw 'molotov cocktails' which destroyed company property."

Id. at 1373.

n104 Id. at 1375.

n105 Id. at 1372.

n106 Id. at 1378 (citations omitted).

n107 Id. at 1380.