United States Court of Appeals
For the First Circuit
No. 00-1522
INTERCITY MAINTENANCE COMPANY,
Plaintiff, Appellant,
v.
LOCAL 254, SERVICE EMPLOYEES INTERNATIONAL UNION;
SERVICE EMPLOYEES INTERNATIONAL UNION, AFL-CIO;
VICTOR LIMA AND DONALD COLEMAN,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Stahl, Circuit Judge.
Vincent F. Ragosta Jr., with whom Matthew T. Oliverio and
Christine M. Curley were on brief, for appellant.
John B. Lawlor Jr., with whom Daniel V. McKinnon and Dean
J. Wagner were on brief, for appellees Local 254, Victor Lima
and Donald Coleman.
Steven K. Hoffman, with whom Richard M. Peirce, Adam C.
Robitaille and Christy Hoffman were on brief, for appellee
Service Employees International Union.
March 2, 2001
COFFIN, Senior Circuit Judge. This case stems from a
labor dispute in which local union officials used heavy-handed
tactics in an attempt to unionize a company. Appellant
Intercity Maintenance Company (Intercity), a non-union
janitorial service, sued the Service Employees International
Union (SEIU), its local affiliate (Local 254), and two of the
affiliate's officers, Victor Lima and Donald Coleman, for
unlawful secondary activity in violation of § 303 of the Labor
Management Relations Act (LMRA), 29 U.S.C. § 187, and a variety
of state tort claims, two of them alleging defamation. Summary
judgment was granted to the SEIU and Lima on all counts, and to
Coleman on all but the defamation claims. Local 254 went to
trial on the federal claim and, along with Coleman, on the two
remaining state law counts for defamation. After the close of
the plaintiff's evidence, the court in a bench ruling granted
defendants' Rule 50 motion for judgment as a matter of law on
the three outstanding counts. We affirm the summary judgment in
all respects and the Rule 50 judgment on the defamation claims,
but remand the LMRA claim for retrial.
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We are in full agreement with the district court's
convincing resolution of the summary judgment issues and adopt
its reasoning as articulated in its published opinion. See
Intercity Maint. Co. v. Local 254 Serv. Employees Int'l Union,
62 F. Supp. 2d 483 (D.R.I. 1999). We therefore focus our review
on the Rule 50 judgment granted at trial. Our brief recitation
of the pertinent facts is culled from the district court's
ruling, as well as relevant trial testimony, and presented in
the light most favorable to Intercity. See Russo v. Baxter
Healthcare Corp., 140 F.3d 6, 8 (1st Cir. 1998).
Background
Intercity provided janitorial services to Women and
Infants Hospital (Women & Infants) and Blue Cross/Blue Shield
(Blue Cross) in Providence, Rhode Island, since 1989 and 1990,
respectively. Beginning in late 1994, Local 254, acting through
its director of organizing, Coleman, and his assistant, Lima,
made repeated attempts to persuade Intercity to unionize its
eighty employees and let Local 254 be their collective
bargaining representative. Intercity President Michael
Bouthillette rebuffed these overtures, refusing to sign the
proposed collective bargaining agreement because, he said, it
was up to his workers, not him, to decide whether to unionize.
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In January and February 1995, Lima repeatedly warned
Bouthillette to sign the collective bargaining agreement, or
else Local 254 would drive Intercity out of business by
picketing in front of its two major customers, Women & Infants
and Blue Cross.1 On March 28th, Coleman reiterated this threat
to Blue Cross attorney Gary St. Peter, who testified that
Coleman had told him he would throw up a picket line in front of
Blue Cross "whether . . . it's illegal or not."
On March 20, 1995, Coleman sent two letters to Blue
Cross's director of facilities management, John Leite, who was
in charge of procuring janitorial services. The first letter,
addressed to Bouthillette and copied to Leite, accused Intercity
of violating federal and state laws and regulations in handling
hazardous substances, and demanded information about Blue
Cross's ventilation system. The second letter, sent the same
day directly to Leite, requested the same information from Blue
Cross.
On May 5th, Blue Cross put its cleaning services
contract out to bid, and Intercity lost it to a unionized
bidder. Bouthillette testified that the bid Intercity
1 The threats made against Bouthillette personally were
such that the Rhode Island Superior Court granted him a
temporary restraining order, enjoining Lima from contacting him
or his family.
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submitted, $6,597 per month, was the same price it had charged
since 1990 when it first started the Blue Cross account.
Bouthillette also testified that Leite had told him "we're going
to go with the union contractor, and if you can resolve things
with [Local 254], there's a good chance you'll get [the
contract] back, but if not . . . . if you don't, there's not
much of a chance." At one point, Lima told Bouthillette that
Local 254 no longer wanted to organize his workers; it just
wanted to drive Intercity out of business. By August 1995,
Intercity was no longer servicing Blue Cross.
Local 254 did not limit its interference with
Intercity's customers to Blue Cross. On March 31, 1995, Local
254 began a week-long picket line outside of Women & Infants,
distributing printed handbills that contained grave accusations,
including false references to Intercity not providing health
insurance or holiday pay to its employees and paying less than
the prevailing wage. In fact, Intercity did provide those
benefits and paid its employees more than the union wage
contemplated in the proposed collective bargaining agreement.
Bouthillette testified that his contact at Women & Infants, Mark
Neal, told him on the day picketing started, "We can't have this
here . . . . We'll do what we have to do, but this doesn't look
very good for you in the future." Nearly two years later, in
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1997, Intercity lost the contract for three buildings at Women
& Infants, but continued to perform services at seven others.
The original complaint, filed in 1995, alleged the LMRA
claim along with state tort causes of action and was amended in
1997 to add separate counts for defamation involving Blue Cross
(Count IV) and Women & Infants (Count V). As we have noted,
only the LMRA claim against Local 254, and the defamation claims
against Local 254 and Coleman, went to trial.
At trial, Bouthillette testified that Intercity
suffered pecuniary damage not only from losing the accounts, but
also from defendants besmirching its reputation, which diverted
Bouthillette from developing new business due to the inordinate
amount of time he spent reassuring customers that they would not
be targeted for picketing. Plaintiff also introduced into
evidence an accounting report, which quantified Intercity's loss
from the Blue Cross account at roughly $30,000 per year.
In a bench ruling issued at the close of the
plaintiff's evidence, the court granted defendants' Rule 50
motion on all three claims. It held the evidence in support of
Intercity's LMRA claim insufficient as a matter of law because,
even if Local 254's actions were proscribed illegal secondary
activity (which was assumed for purposes of the decision),
Intercity failed to show how that activity caused it to lose the
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Blue Cross and Women & Infants accounts. As for the two
defamation counts, the court held that, although the evidence of
knowing or reckless false statements was "overwhelming,"
Intercity presented "no evidence that the plaintiff lost
business at Blue Cross or at Women & Infants as a result of the
defamation."
Appellant argues that it presented sufficient evidence
on both fronts to reach the jury. On the LMRA claim, appellant
asserts that the jury should have been afforded an opportunity
to find that Intercity lost both the Blue Cross and Women &
Infants accounts due to Local 254's illegal interference. On
the defamation claims, appellant argues that it did not need to
present evidence to prove damages and, even if it did, its proof
on damages was sufficient. It also assigns error to the court's
refusal to admit evidence of Local 254's assets in support of a
claim for punitive damages.
We review Rule 50 challenges to the sufficiency of
evidence presented at trial de novo, affirming entry of judgment
as a matter of law "only if there 'is no legally sufficient
evidentiary basis for a reasonable jury to find for [the non-
moving party].'" Tang v. Rhode Island Dep't of Elderly Affairs,
163 F.3d 7, 11 (1st Cir. 1998) (quoting Fed. R. Civ. P.
50(a)(1)). When judgment is entered before the jury is called
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upon to render its verdict, we examine the legal sufficiency of
the evidence in the light most favorable to the non-moving
party, and require more than a mere scintilla of evidence or
speculation to justify the submission of an issue to the jury.
Id. And, of course, we must ensure that the trial court has
refrained from making credibility determinations or weighing the
evidence.
Discussion
Appellant challenges the court's Rule 50 judgment,
arguing that its claims of unlawful secondary activity and
defamation should have gone to the jury. We agree, in part. As
for the LMRA claim, we conclude that the evidence linking
Intercity's loss of the Blue Cross account to Local 254's
interference was sufficient to merit consideration by a fact
finder, but the evidence of losses attendant to the union's
activities at Women & Infants was inadequate as a matter of law,
particularly because that account was not terminated until
almost two years later. As for the defamation claims, Intercity
failed to introduce more than a scintilla of evidence of
reputational harm or other specific damages. Accordingly, we
remand the LMRA claim for trial, limited to liability for, and
damages stemming from, Intercity's loss of the Blue Cross
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account, and affirm the district court's judgment on the
defamation claims.
Unlawful Secondary Activity
Section 8(b) of the LMRA makes it an unfair labor
practice for unions to threaten, coerce, or restrain a company
by forcing it to cease doing business with another company. See
29 U.S.C. § 158(b)(4)(ii)(B).2 Direct efforts to pressure an
employer with whom a union has a dispute are acceptable, but
indirect efforts to pressure a secondary employer are unfair
labor practices. Abreen Corp. v. Laborers' Int'l Union, 709
F.2d 748, 754-55 (1st Cir. 1983). Here there was no dispute
that Blue Cross was a secondary employer. Coleman, acting on
behalf of Local 254, threatened to picket Blue Cross unless it
ceased doing business with Intercity, a threat made not only to
Bouthillette, but repeated to his attorney and the attorney for
2 "(b) It shall be an unfair labor practice for a labor
organization or its agents--
(4) (ii) to threaten, coerce, or restrain any person engaged
in commerce or in an industry affecting commerce, where in
either case an object thereof is--
(B) forcing or requiring any person to cease . . . doing
business with any other person, or forcing or requiring any
other employer to recognize or bargain with a labor organization
as the representative of his employees unless such labor
organization has been certified as the representative of such
employees under the provisions of section 159 of this title:
Provided, That nothing contained in this clause (B) shall be
construed to make unlawful, where not otherwise unlawful, any
primary strike or primary picketing . . . ." 29 U.S.C. § 158.
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Blue Cross. The district court recognized this as
"epitomiz[ing] the classic description of coercion within the
labor law context." Intercity, 62 F. Supp. 2d at 496 ("The
evidence presented by plaintiff is not subtle; it reveals a
transparent intention by Local 254 to pressure Blue Cross
improperly.").
Despite this strong evidence of Local 254's improper
secondary activity, the court did not let the claim go to the
jury. It entered judgment for Local 254 on the ground that
Intercity had failed to offer sufficient evidence that it lost
the Blue Cross account because of Local 254's unlawful conduct.
In analyzing Intercity's loss of the Blue Cross account, the
court reasoned:
There is not one shred of evidence produced at this
trial to indicate why Blue Cross elected to put its
janitorial contract out to bid. No one from Blue
Cross testified. The Court and the jury can draw the
inference that the failure of the plaintiff to produce
Leite, who was the key man in this area, and probably
made the decision, was because his testimony would
have been of no value to the plaintiff. The point is
that Blue Cross did put all of its janitorial work out
to bid. The Plaintiff did bid, and didn't receive the
bid and didn't receive the contract. The inference is
that the plaintiff was not the low bidder. In any
event, there's no evidence from Blue Cross as to why
the plaintiff was not chosen. The jury should not be
allowed to speculate because it is the plaintiff that
has the burden of proof, and it is the plaintiff's
obligation to produce witnesses who will support its
cause of action. In this case the plaintiff has
failed to do so.
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This reasoning was in error because the court
impermissibly drew negative inferences against Intercity. It
inferred that the failure to call Leite "was because his
testimony would have been of no value" and that Intercity lost
the Blue Cross contract because "plaintiff was not the low
bidder." The jury could have reasonably concluded otherwise.
As to the sufficiency of the evidence, the court simply
noted that there was no basis for a finding of proximate cause.
Neither it nor the parties attempted to give this term further
definition. In our own jurisprudence dealing with unlawful
activity, we have had three occasions to consider when, in
accordance with the statutory wording, damages may be said to
have been sustained "by reason of" the illegal activity. 29
U.S.C. § 187(b).3 But in this case any difference between these
3 In Abreen, our first such case construing the "by
reason of" element, we held that where predominantly secondary
activity is at issue, losses traceable to that unlawful union
conduct may be recovered. 709 F.2d at 759. Our two subsequent
cases, however, invoked a more exacting standard adopted from
the Ninth Circuit's decision in Mead v. Retail Clerks Int'l
Ass'n, 523 F.2d 1371 (9th Cir. 1975), which held that injury
occurs "by reason of" particular unlawful conduct only if that
conduct "materially contributes" to the injury or is a
"substantial factor" in bringing it about. Id. at 1376; see
John B. Cruz Constr. Co., Inc. v. United Bhd. of Carpenters and
Joiners, 907 F.2d 1228, 1232 (1st Cir. 1990); Tresca Bros. Sand
& Gravel, Inc. v. Truck Drivers' Union, 19 F.3d 63, 65 (1st Cir.
1994). Although we did not explicitly note the distinction,
Cruz and Tresca are distinguishable from Abreen because they
involved both lawful and unlawful union activity. The Mead
rule, and our cases applying it, do not apply where only
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standards is irrelevant, for under either formulation Intercity
presented enough evidence at trial to warrant submission to the
jury. Bouthillette testified that Intercity lost its account
with Blue Cross, not because it overbid,4 but because of Local
254's threatened picket. Blue Cross attorney St. Peter
corroborated Bouthillette's testimony about the union's unlawful
threat. Bouthillette further testified that Blue Cross's own
procurement officer, Leite, told him that Intercity would likely
lose the account if it did not resolve the dispute with the
union.5 Although plaintiff did not call Leite to testify, the
jury was entitled to consider Bouthillette's uncorroborated
testimony. Indeed, assuming favorable and permissible
inferences and that Bouthillette was to be believed, there was
no other competing cause for Intercity's loss of business.
prohibited secondary activity is at issue.
4 At trial, defense counsel suggested in his opening
statement that Intercity's bid was nearly double the amount to
which Bouthillette later testified, and more than that of the
unionized bidder who won the contract. Of course, since the
judgment entered before defendants put on their case, they had
no opportunity to substantiate this claim. Because counsel's
statement was not evidence, we, like a jury, may not consider
it, see, e.g., United States v. Brassard, 212 F.3d 54, 57 (1st
Cir. 2000), and therefore must credit Bouthillette's testimony.
5 The court admitted this hearsay testimony over an
objection and without a limiting instruction. Neither party
takes exception to this ruling on appeal.
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Moreover, the timing of events permitted the jury to
infer that Intercity's loss was caused by Local 254's conduct.
The last readily identifiable unlawful act was Coleman's threat
made to attorney St. Peter on March 28th; Blue Cross put its
contract out to bid on May 5th. The court foreclosed jury
consideration of a permissible inference, i.e., that these two
events - which occurred just five weeks apart - were causally
related. This it may not do. Because the timing and
Bouthillette's testimony, if believed, would have sufficed as a
matter of law to prove that Intercity's loss of the Blue Cross
account occurred by reason of Local 254's unlawful activity, the
LMRA claim should have been decided by the jury.
Intercity's loss of the Women & Infants account, by
contrast, is unsupported by such an inference. The nearly two-
year gap between Local 254's picketing and leafleting there and
Women & Infants's curtailment of its business with Intercity was
too attenuated on its own to permit an inference of some causal
connection between these events. Bouthillette's testimony that
his contact at Women & Infants, Neal, had made a reference to
the union activity not boding well for Intercity's future, was
too opaque to rise above the scintilla level, especially in
light of the timing of adverse action. The district court
correctly found the evidence insufficient as a matter of law to
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prove Intercity lost any part of the Women & Infants account by
reason of Local 254's activity.
Defamation
Intercity pleaded its defamation claim in two counts,
one involving Blue Cross (Count IV) and the other involving
Women & Infants (Count V). In support of Count IV, Intercity
relied on Coleman's March 20, 1995, letter to Blue Cross's
Leite, which announced that "InterCity [wa]s in violation of
both Federal and State laws and regulations." Count V alleged
defamation from handbills distributed at Women & Infants, which
claimed that "INTERCITY expose[d] its cleaners to chemical and
biological hazards including HIV and Hepatitis B virus," and
that Intercity did not provide certain benefits or pay a living
wage. Local 254 made scant effort to investigate the veracity
of these charges.
In its summary judgment ruling, the district court
correctly found these assertions to be statements of fact, not
opinion, requiring a jury to determine whether they were false
and made with malice. See Intercity, 62 F. Supp. 2d at 504-05.6
6 The court also rightly noted that certain other
statements - characterizing Intercity as a "sweatshop," a
"plague," and an "infestation," and Bouthillette as a
"bloodsucking, plantation-minded boss" - were non-actionable
opinion, "rhetorical hyperbole" typical of labor disputes and
protected under the LMRA. Id. at 503.
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As the court stated in its Rule 50 decision, the evidence
presented at trial was "overwhelming that those statements were
either knowingly false or made with reckless disregard for truth
or falsity." The judge remarked, "plaintiff has succeeded in
proving that the defendants . . . are lawless, marauding,
disingenuous, character assassins who deserve their
comeuppance." Despite the strong evidence of malice, however,
the court ruled there was "no basis for submitting this cause of
action to the jury" because plaintiff failed to "allege and
prove specific or special damages."
Relying on Linn v. United Plant Guard Workers, Local
114, 383 U.S. 53 (1966), the court held that Intercity could not
rest on the common law presumption of damages, in which the
existence of injury is presumed from the fact of publication
without evidence of actual loss. See generally Gertz v. Robert
Welch, Inc., 418 U.S. 323, 349 (1974); Carey v. Piphus, 435 U.S.
247, 262 & n.18 (1978). Appellant argues that the court misread
Linn, and contends in the alternative that it did present
sufficient evidence of damages even without the presumption. We
agree with the court's reading of the law and view of the
evidence.
State tort claims are generally preempted by the LMRA.
See San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 243-
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44 (1959). In Linn, the Court carved out an exception to the
Garmon preemption rule for defamatory statements made with
actual malice, adopting the standard applicable to public
officials from New York Times Co. v. Sullivan, 376 U.S. 254, 280
(1964) (defining malicious libel as a statement published "with
knowledge that it was false or with reckless disregard of
whether it was false or not"). See Linn, 383 U.S. at 65; see
also Old Dominion Branch No. 496, Nat'l Ass'n of Letter Carriers
v. Austin, 418 U.S. 264, 273 (1974); Barss v. Tosches, 785 F.2d
20, 21 (1st Cir. 1986).
In addition to malice, Linn requires "proof of [] harm,
which may include general injury to reputation, consequent
mental suffering, alienation of associates, specific items of
pecuniary loss, or whatever form of harm would be recognized by
state tort law." 383 U.S. at 65; accord Belknap, Inc. v. Hale,
463 U.S. 491, 509 (1983); Farmer v. United Bhd. of Carpenters &
Joiners, Local 25, 430 U.S. 290, 299 (1977). In explicitly
requiring proof of harm, Linn preempts not only non-malicious
libels, but also reliance on the common law presumption of
damages in those jurisdictions where libel is actionable per se.
383 U.S. at 58 & n.2, 65.7 Therefore, plaintiffs who endure even
7 In Rhode Island, a common law action for defamation
requires proof of "damages, unless the statement is actionable
irrespective of special harm." Swerdlick v. Koch, 721 A.2d 849,
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malicious libels during a labor dispute must present evidence of
harm from defamation in order to recover, notwithstanding the
law of states such as Rhode Island in which damages would
otherwise be presumed. Cf. Dunn v. Air Line Pilots Ass'n, 193
F.3d 1185, 1210-11 (11th Cir. 1999) (Tjoflat, J., dissenting)
("Under federal law, [] a libel action arising out of a labor
dispute requires proof of injury, regardless of state libel
law." (citing Linn, 383 U.S. at 64-65)).
Under Linn, Intercity could not rest on an
unsubstantiated allegation of injury to its reputation. Having
correctly concluded that Linn preempted Intercity from relying
on the common law presumption of damages, the district court
held that the evidence of actual loss due to reputational harm
and consequent lost profits was insufficient as a matter of law.
We agree that Intercity offered no more than a scintilla of
evidence to prove losses stemming from diminished reputation.
859-60 (R.I. 1998). Under the common law rule damages are
presumed, and the need to offer evidence obviated, if the
defamatory statement is libelous per se. See id. at 861 ("[F]or
statements to qualify as libel per se, the publication must
impute insolvency, financial embarrassment, unworthiness of
credit, or failure in business to a plaintiff, but to make them
so it is essential that such imputation relate to or affect the
plaintiff in his business.") (internal quotation marks and
alterations omitted). Since Intercity presented evidence of
harm to its business based on statements that are defamatory on
their face, it would have been able to take advantage of the
common law presumption of damages if the statements had not been
made in the context of a labor dispute.
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However, in its amended complaint Intercity also sought to
substantiate its claim for defamation with evidence of specific
damages apart from reputation: the loss of the Blue Cross and
Women & Infants accounts.
Had appellant shown that it lost the contracts as a
result of Coleman's libelous letters or the defamatory
handbills, then such proof of a "specific item of pecuniary
loss" would have satisfied the damages element required by Linn.
383 U.S. at 65. But Intercity presented no evidence - not even
hearsay testimony from Bouthillette - to show the loss of the
contracts resulted from Local 254's malicious accusations. The
only such testimony related to threats of union retaliation.
The evidence in support of specific damages pleaded in Counts IV
and V was therefore inadequate to merit jury consideration.
Intercity also argues that it should have been
permitted to recover punitive damages and introduce evidence of
Local 254's assets in support of that claim. Absent evidence of
actual damages, however, no punitive damages may be awarded.
See Linn, 383 U.S. at 66 ("[A] defamed party must establish that
he had suffered some sort of compensable harm as a prerequisite
to the recovery of additional punitive damages."). Because
plaintiff failed to present evidence from which the jury could
have found that Intercity suffered actual harm due to
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defamation, the district court properly refused to admit
evidence of punitive damages.
Conclusion
We remand for retrial Count II of the Amended
Complaint, the LMRA claim; in all other respects, the judgment
is affirmed.
Affirmed in part, vacated in part and remanded. No
costs.
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