U.S. District Judge Esther Salas U.S. District Judge Esther Salas/photo by Carmen Natale

A federal judge in Newark has denied a motion to sanction Chiesa Shahinian & Giantomasi for accepting funding from a nonparty employer to sued a labor union.

The dispute stems from Fonti v. Health Professionals & Allied Employees AFT/AFL-CIO, a suit against a union by current and former union members. The suit claims the union engaged in unfair labor practices when it held a vote on a retirement benefits plan after making misstatements about the plan. The suit was filed in state court in 2012 and removed to federal court in 2013.

Chiesa Shahinian’s A. Ross Pearlson took over from the original counsel for plaintiffs in January 2014. At the same time, Meadowlands Hospital wrote a check for $25,000 to Chiesa Shahinian as payment of the plaintiffs’ retainer fee. Meadowlands Hospital was not a party to the litigation but was a signatory to collective bargaining agreements with the Health Professionals & Allied Employees union. The hospital, in Secaucus, was sold to a new operator in 2017.

Pearlson filed an amended complaint, accusing union President Hannah Twomey of breaching her fiduciary duty by giving nearly all of the union’s legal work to the law firm of her live-in boyfriend, attorney Richard Loccke. His firm, Loccke, Correia & Bukosky of Hackensack, took in more than $1.4 million in fees from the union between 2006 and 2014, as shown in reports to the state Department of Labor, the plaintiffs claimed.

U.S. District Judge Esther Salas dismissed the claims over Twomey’s hiring of Loccke’s firm in March 2017, finding Twomey was not a fiduciary under the Employee Retirement Income Security Act, which governed the case.

In May 2017, the union and Twomey moved for sanctions against Chiesa Shahinian and Meadowlands Hospital based on the hospital’s financing of the lawsuit. The motion sought an order directing the hospital and Chiesa Shahinian to pay attorney fees and costs incurred by the union as punishment for their violation of the “interested employer” provision of the Labor-Management Reporting and Disclosure Act.

The lawsuit was terminated in July 2017 when the parties agreed the remaining federal counts were moot.

In September 2017, U.S. Magistrate Judge Joseph Dickson denied the defendants’ motion for sanctions. Although the lawsuit was dismissed, its allegations were plausible and the court made no finding of bad faith on the part of the plaintiff, Dickson said. The union appealed the decision to Salas, claiming no finding of bad faith was needed for the court to impose sanctions. The union also said Dickson “disregard[ed] the severity of Chiesa Shahinian’s misconduct.”

Salas replied that a finding of bad faith was necessary when the sanctions being sought are the imposition of attorney fees and costs. She added that the defendants’ argument ignores that the U.S. Supreme Court and U.S. Courts of Appeals for the Third Circuit have consistently warned that courts should exercise their inherent power to issue sanctions “with great caution.” Sanctions of the kind sought by the defendants “are only imposed in the most egregious of circumstances, when there is an adequate factual predicate for flexing [the Court's] substantial muscle under its inherent powers,” Salas said. “The record before us falls far short of that standard.”

There is no evidence Chiesa Shahinian violated any court orders or otherwise abused the judicial process with the suit, Salas said. Rather, it “raised colorable arguments that, though they ultimately fell short, were persuasive nonetheless,” Salas said. “As such, this Court declines to wade into the morass of ill will between these litigants in order to punish the Counsel for plaintiff.”

Pearlson did not respond to a request for comment, and his co-counsel, Brigitte Gladis, said she is not authorized to comment.

Chiesa Shahinian, based in West Orange, lists 138 lawyers on its website.

Emma Rebhorn, an in-house lawyer with the union, represented Health Professionals & Allied Employees and Twomey. Asked to comment on the sanctions ruling, the union said in a statement, “The Fonti lawsuit was one of the many attacks that the former owners of Meadowlands Hospital mounted against their hard-working employees. In 2016, the court dismissed this baseless lawsuit, which was brought in the name of a former local union officer, but funded exclusively by the hospital.”

The union statement went on to say that, “Following the case’s dismissal, the employees’ union sought to recoup costs it incurred defending the litigation, both before the National Labor Relations Board in an unfair labor practice proceeding against the hospital owners, and at the district court against the attorneys the hospital owners employed to further their scheme. The NLRB proceeding ended in a satisfactory confidential settlement. As part of that settlement, Meadowlands Hospital notified its employees that it would ‘not pay legal expenses for litigants against Health Professionals & Allied Employees, AFT/AFL-CIO where we are not a party to the proceedings.’”

The union also said in its statement that “the court decided the substantive issues in the Fonti litigation correctly when it dismissed the case. HPAE accepts the court’s recent finding that plaintiffs’ attorneys did not act in bad faith. HPAE will, however, continue its practice of pursuing all available remedies to protect its members from unscrupulous employers.”