Sodexo Inc., the giant food services company, is in the middle of an unappetizing battle with one of the nation’s largest unions.
And to gain the upper hand, it’s trying a legal tactic that’s had a mixed record in the courts: using federal racketeering laws to quash the union’s negative publicity campaign.
On March 17, Sodexo — a domestic subsidiary of French multinational corporation Sodexo S.A. — filed suit against the Service Employees International Union (SEIU) in the U.S. District Court for the Eastern District of Virginia.
In the 125-page complaint, the company accuses the SEIU of several violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). The company claims that the union launched a “Clean Up Sodexo” public campaign to strong-arm the company into handing over exclusive access to Sodexo’s nonunion employees. The union’s goal, Sodexo said, is to increase revenue from union dues by unlawfully organizing the employees.
The SEIU has called the case “bogus litigation,” accusing Sodexo of filing the suit as a ruse to shift attention from what the SEIU characterizes as Sodexo’s anti-union behavior.
Similar cases have played out in Florida, New York and Virginia federal courts. One high-profile action, filed by Smithfield Food Inc. against the United Food and Commercial Workers International Union (UFCW) in 2007, survived a motion to dismiss and settled just before trial. RICO claims in two other cases were dismissed.
That Sodexo decided to sue under the RICO Act — despite the mixed judicial track record — is a sign that attorneys still see gray areas in the courts’ definition of extortionate behavior under RICO, said James Brudney of Ohio State University Michael E. Moritz College of Law.
“Whether employers will pursue these RICO suits will depend on whether it gets to the courts of appeals,” said Brudney, who does not think case law supports defining the union campaigns as extortion. “I don’t think employers will stop bringing these cases until the law is clearer.”
Congress passed the RICO Act in 1970 to combat organized crime, but during the late 1990s and early 2000s, businesses increasingly turned to RICO’s civil provisions to litigate suits previously handled under state commercial law, said Abbe Lowell, head of the white-collar criminal defense group in McDermott Will & Emery Washington office.
RICO was attractive, he said, because the potential damages awards, as well as attorney fees, are higher in federal court; RICO violations can carry treble damages awards. RICO was “used and overused,” Lowell said, eventually causing courts to crack down on its use. “Where it has not gotten as pulled back is in the area of labor relations,” he said.
Meanwhile, Brudney said, unions were seeking alternative organizing strategies, believing that traditional methods gave employers too much room to interfere with employee choice. Unions began pushing for neutrality agreements, under which both sides agree to organizing terms at the onset, with oversight by an arbitrator.
“There are two reasons why employers might agree to a neutrality agreement. One is carrots, and one is sticks,” Brudney said. A union offering to throw its weight behind an issue important to an employer would be a carrot, he said. A comprehensive campaign, he added, is a stick.
Three cases filed since 2007 have set the stage for the Sodexo suit.
Smithfield sued the UFCW over a campaign launched in 2006. In the complaint, filed in October 2007 in U.S. District Court for the Eastern District of Virginia, Smithfield claimed that the union was using extortionate tactics to unlawfully gain access to represent nonunion employees.
Senior Judge Robert Payne, in denying the union’s motion to dismiss, ruled that a company’s right to recognize a union is a property right. Because Smithfield was accusing the union of threatening to take away that right in pursuit of unlawful organizing, he ruled, it had ground to move forward. Smithfield and the UFCW settled in October 2008; the agreement is sealed, but according to a joint statement released at the time, both sides agreed to an election so employees could vote whether to be represented by the UFCW, and the UFCW agreed to end its campaign. They also agreed to embark on a joint anti-hunger campaign.
Judges in two other suits disagreed. One was filed by Wackenhut Corp. (now known as G4S Secure Solutions (USA) Inc.) against the SEIU in November 2007 in Florida federal court, and the other was filed in New York federal court in March 2008 by Cintas Corp. against Unite Here, Change to Win and the International Brotherhood of Teamsters.
The Wackenhut case was settled, but not before U.S. District Judge Daniel Hurley dismissed the RICO claims; the terms were kept confidential. Hurley agreed that the right to recognize a union was a property right, but said that union campaigns are not necessarily aimed at taking away that right. Instead, he found that union pressure on a company in pursuit of a lawful organizing campaign amounts to legal coercion, not extortion.
In the Cintas case, U.S. District Court Judge William Pauley III also found the company was not accusing the unions of unlawfully seeking to organize — only of disrupting business activities to pressure the company to accept a lawful organizing campaign. In dismissing the suit, Pauley noted that the First Amendment protects unions that use coercion or harassment to these ends.
Robert Stern, general counsel for Sodexo, said RICO was “a perfect fit” for the company’s claims. The law is “well-suited to a long-term, comprehensive set of attacks like this,” he said. “The more recent cases show under the right circumstances, RICO is perfectly suited to a corporate campaign.”
Sodexo’s lead counsel in the SEIU suit is Gregory Robertson of Hunton & Williams in Richmond, Va., who also represented Smithfield. Robertson, through a Hunton spokeswoman, declined to comment. But a May 2009 article he co-authored in The Corporate Counselor with Hunton colleague Kurt Larkin discussed the case for using RICO in opposing union campaigns.
“The conventional wisdom is that big cases can be time consuming, distracting to top executives and counsel, and very costly. In addition, they can be difficult to prove,” they wrote, referring to the Cintas and Wackenhut dismissals. But, they added, “the alternative of doing nothing, or simply responding with a traditional public relations strategy, can often be worse.”
Attorneys from Washington’s Bredhoff & Kaiser represent the SEIU, according to a union spokeswoman, but declined to comment while the litigation is pending. Bredhoff attorneys worked on defense teams in the Smithfield, Wackenhut and Cintas cases.
Brudney, who published an analysis of previous applications of RICO to union campaigns in the May 2010 Southern California Law Review, said the Smithfield case proved that simply by surviving a motion to dismiss, a RICO action can be enough to break up a union campaign.
“Your ultimate goal [as a union] is not to win a lawsuit, it’s to organize,” he wrote. “If judge says…that union is a racketeer, it makes it much harder to organize.”
Zoe Tillman can be contacted at email@example.com.