Labor & Employment Law Daily Healthcare unions’ tactics, including workers tampering with patient info, did not violate RICO
Thursday, October 31, 2019

Healthcare unions’ tactics, including workers tampering with patient info, did not violate RICO

By Lisa Milam, J.D.

The nursing home operator alleged that the union defendants “ceased with traditional organizing and negotiation tactics in favor of extortion and fraud.” But the court found no unlawful predicate acts to support a RICO claim.

SEIU and related healthcare locals did not conspire to engage in unlawful extortion, violence, or other unlawful acts in a bid to force a nursing home operator into acquiescing to the unions’ impermissible bargaining and unionizing objectives. “Overall, the record shows only that Defendants engaged in lawful, albeit aggressive, bargaining and unionization efforts which involved a public campaign critical of Plaintiffs in order to advocate for its members,” a federal district court in New Jersey held. “Plaintiffs’ obvious frustration with these efforts, however, is insufficient to render Defendants’ actions “wrongful.” While it might be preferable if these types of disputes did not necessitate the intense and coercive measures adopted by the parties, this Court finds that Defendants’ actions do not constitute extortion.” Therefore, the court awarded summary judgment in the unions’ favor on the employer’s RICO claims (Care One Management, LLC v. United Healthcare Workers East, SEIU 1199, October 28, 2019, Wigenton, S.).

The employer entities operate nursing homes and assisted living facilities in New Jersey, Connecticut, and Massachusetts. The defendants are New England Health Care Employees Union, District 1199 (NEHCEU), 1199SEIU United Healthcare Workers East (UHWE), and Service Employees International Union (SEIU). One of the defendants represents employees at several of the plaintiffs’ facilities; all are looking to organize other facilities. The parties have had a contentious relationship, as evidenced in part by an extensive trail of NLRB litigation as well as the fact that, even after 38 bargaining sessions, the NEHCEU was unable to reach an agreement with the employer on a successor contract for its Connecticut facilities. The incidents at issue here began in 2010.

“Public speech and advocacy campaign.” In 2011, NEHCEU and UHWE, with assistance from SEIU, launched a “public speech and advocacy campaign” critical of the employer’s business and labor practices. The union launched “Care One Watch” and “HealthBridge Watch” websites; purchased radio and print ads and billboards; and disseminated flyers. All these materials called into question the propriety of the employer’s billing practices and standards of patient care, challenged the employer’s opposition to unionization, and publicized NLRB complaints filed against the facilities.

The corporate campaign also included peaceful protests and demonstrations. In one action, protesters delivered petitions to the CEO’s offices. In another, they hand-billed outside an event at New York University Law School, questioning the CEO’s values and decrying the “hypocrisy” of his endowing the law school’s Institute for the Advanced Study of Law & Justice while “breaking labor law.”

Vandalism, sabotage. With no contract deal, NEHCEU called a strike at the Connecticut facilities. The night before the strike was to begin, the employer’s facilities were vandalized and sabotaged. The damage included tampering with patient identifying information (including patient wrist bands, door name plates, and dietary requirements), altering medical records, damaging and/or hiding medical equipment, and vandalizing laundry equipment. A number of police and incident reports were filed, but the persons responsible were never identified, and union officials strongly repudiated the actions.

Political action. The employer had filed several applications with the Massachusetts Department of Health to obtain approval for capital improvement projects at several nursing facilities in that state. UHWE filed petitions for public hearings on three of those applications. They also asked U.S. Senator Richard Blumenthal (D-Ct.) to look into the employer’s questionable Medicare billing practices, prompting the elected official to ask HHS to conduct an audit and “take any necessary enforcement actions.”

RICO and related claims. The employer sued the SEIU entities alleging RICO violations as well as defamation, breach of contract, and trade libel. According to the employer, the union had abandoned hard bargaining and aggressive but lawful organizing tactics and resorted to “force and violence,” criminal activity, a smear campaign, abuse of the legal process, and unlawful economic pressure to strong-arm the employer into accepting the union’s bargaining and organizing demands.

The sole prong at issue here was whether the unions’ activity constituted “predicate acts” under RICO. According to the employer, the unions committed predicate acts of extortion in violation of Connecticut, New Jersey, and Massachusetts state law. The court had to examine whether the union defendants used “wrongful” force, fear, or threats against the employer, and concluded they had not.

Union not liable for sabotage. The employer charged that union members committed criminal acts “designed to harm the elderly and frail patients under their care in an effort to force Plaintiffs to accede to [NEHCEU’s] extortionate demands” and that those acts were committed “at the direction of lead organizers employed by the NEHCEU.” In the employer’s view, this “wrongful use of violence and force” is a predicate act of extortion sufficient to prove racketeering activity.

It was undisputed the sabotage occurred, and that these acts were criminal, but there was no evidence that individual union members committed the acts or that the union itself directed or ratified them. While the pleadings “are rife with conjecture and supposition,” the court observed, there was no record evidence that any union member committed the acts of sabotage. But even if individual union members had been identified and/or charged with the actions, they are not named defendants in this suit, and their union membership alone does not make the union responsible for their actions, the court found. The union can only be liable for its members’ actions if it authorized or ratified them. Here, there was no evidence the union knew of or encouraged the vandalism; union officials expressly denied prior knowledge or directing members to commit the acts. Moreover, internal union communications denouncing the actions after the fact clearly reflected the union’s disapproval, stressing that “anyone with a peasized brain would realize this isn’t a tactic we would undertake,” and admonishing that any of its members would think “it was a good idea to ‘mess up the scabs” with no regard to the likelihood of harm to the facility’s residents, adding “this is totally contrary to everything we stand for and believe in.” No reasonable jury could find the union liable for the acts of sabotage.

Union’s goals were legitimate. The employer also contended the unions engaged in improper economic pressure in the form of demonstrations and regulatory action to wrongfully impose economic pressure on the employer to submit to “illegitimate bargaining and unionization demands.” The defendants readily admitted putting economic pressure on the employer but insisted both its ends and means were lawful. The court agreed a reasonable jury could not find the union’s ends were illegitimate. It is lawful to pursue a CBA with higher wages and other benefits—as well as to pursue more favorable staffing ratios, a permissible subject of bargaining. While the employer insisted the union was trying to create “do nothing” or “no show” positions at the facilities, the court found the union clearly believed that maintaining existing staffing ratios was necessary for the provision of patient care.

Nor was it unlawful for one of the UHWE to attempt to unionize another facility, as both the NLRB and Third Circuit concluded in ratifying the union’s election win. The employer also argued that the unions’ effort to unionize other facilities were unlawful because the unions were demanding a neutrality agreement for ending its corporate campaign against the employer. Even if the record supported this claim (it did not), “a neutrality agreement is merely a contract in which an employer agrees to remain neutral during a union’s attempt to organize a workforce,” the court said, and there was nothing improper about requesting such an agreement.

The employer further argued the unions’ very attempt to unionize was wrongful because it was “driven almost entirely by the need to increase membership in order to fund ‘significant underfunded pension liabilities and other considerable debt.’” But again, whether to shore up finances or to strengthen union bargaining power, “the goal of increasing union membership is not illegitimate,” said the court. “The possibility that they were financially motivated to do so is irrelevant.”

Union’s tactics were permissible. Nor were the tactics used in pursuing these objectives wrongful. As to the unions’ filing of regulatory petitions, there was no admissible evidence supporting the employer’s claim that the unions offered to withdraw them if the employer would sign on to a neutrality agreement, or submit to specific bargaining demands. Likewise, the protests and demonstrations were peaceful. There were no threats of violence or arrests for trespassing. And while the CEO may not have been happy about the unions publicly challenging his business and philanthropic endeavors, they were within their rights to do so. These methods “may be harassing, upsetting or coercive,” said the court, but they remain protected.

No mail or wire fraud. The employer alleged that the unions committed mail and/or wire fraud by disseminating “false, misleading, and/or incendiary allegations regarding” the employer’s business and labor practices and the CEO’s personal and professional life, with the intent to deprive the employer and CEO “of their property by deceiving third-parties into believing that Plaintiffs are bad health care providers.” But the plaintiffs offered no admissible evidence from which a jury could find the unions had a specific intent to deceive.

In fact, the record showed the unions have a fact-checking and vetting operation in place, which they adhered to before publishing any of the union communications in question—a procedure that included “gathering factual information, drafting a communication based on that information, providing the material to counsel for fact-checking and legal vetting, and then requesting approval for authorization to publish the communication.” There is nothing to suggest the unions deviated from this routine here. Moreover, the record was clear that the union officials who researched and drafted the communiques believed the content was truthful. The union might have adopted “forceful, critical, hyperbolic, and sometimes satirical statements” about the employer and CEO, but “that is not the same as publishing false or misleading statements with the intent to deceive the public.”

The court stops here. Because the court granted summary judgment in the unions’ favor as to the extortion claims, it did not have to address the employer’s federal Travel Act claim before disposing of it. And, because the substantive RICO claims were deemed deficient, there was no need for the court to consider whether the union defendants unlawfully conspired to engage in the complained-of acts before granting summary judgment in their favor on the employer’s RICO claim. Finally, the court refused to exercise supplemental jurisdiction over the employer’s remaining state-law claims for defamation and trade libel.

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