Pennsylvania Nurses Ass'n v. Pennsylvania State Education Ass'n

ROSENN, Circuit Judge,

concurring and dissenting.

Except as to the Pennsylvania Nurses Association’s (PNA’s) allegations charging the defendants with interfering with present and prospective contractual relations with local bargaining units and employers (Counts VIII and IX), the remaining counts of the complaint allege that four PNA employees, while on PNA’s payroll, betrayed their employer, engaged in fraud and deceit, defamation, and other acts of personal misconduct in violation of Pennsylvania’s common law duty of basic loyalty by an employee to an employer. Several of these counts also charge the Pennsylvania State Education Association (PSEA) and some or all of the other defendants with unfair competition, commercial disparagement, conspiracy, and other conduct in violation of state law.

The majority opinion holds that the Labor Management Relations Act (LMRA) does not preempt the specific charges relating to breach of fiduciary duty (Count I) and fraud and deceit (Count II), and affirms the district court’s order remanding Count I to state court. The majority concludes: (1) that these counts are not grounded in either the collective bargaining agreement between PNA and PSO nor in any independent contracts between the employee defendants and PNA; and (2) they do not require an interpretation of the collective bargaining agreement. I concur and also agree that there is no basis to support the PSEA’s cross-appeal.

I concur further with the majority’s conclusion that the NLRA does not preempt PNA’s claim for defamation in Count III. I agree that the Supreme Court’s decision in Linn v. United Plant Guard Workers of America, 383 U.S. 53, 86 S.Ct. 657, 15 L.Ed.2d 582 (1966) controls.

On the other hand, the majority concludes that the remaining allegations are preempted by the National Labor Relations Act (NLRA). Except for Counts VIII and IX which are arguably preempted, I do not believe that the NLRA preempts the other seven counts.1

Although the plan allegedly concocted by the four former employees of PNA eventually enveloped the PSEA, the allegations, except as to Counts VIII and IX, have nothing whatsoever to do with the core activities of the NLRA. These counts do not involve traditional union organization activities, employees’ election of an exclusive bargaining representative, or unfair labor practices. Rather, they basically concern forbidden conduct between employees and their employer, and activities of a competing employer that is prohibited by common law, not by federal law. A state court’s authority to resolve allegations of fraud, commercial disparagement, unfair competition, interference with employment contracts, and conspiracy in no way invades the central scheme of the NLRA. Because presentation of these allegations to a state court does not offend federal labor policy, I would reverse the judgment of the district court insofar as it held the remaining seven counts preempted. I therefore respectfully dissent.

I.

As does the majority, I accept as true the well-pleaded allegations in PNA’s complaint and draw all inferences therefrom in favor of PNA. PNA is a professional association of registered nurses and a nurses labor union. Prior to June 30, 1993, it represented over 9000 nurses for collective bargaining purposes in 60 local bargaining units (locals). These locals were located in private hospitals and public sector institutions in Pennsylvania and Delaware.

PNA employed defendant Debra Ferguson as a labor representative on February 1, *8091983, to serve in its labor union and collective bargaining program. As a labor representative, she had the responsibility for, inter alia, organizing locals, negotiating collective bargaining agreements between PNA and hospitals that employed their member nurses, and administering and enforcing collective bargaining agreements through grievance and arbitration procedures. Her responsibilities also included communications between PNA and its locals, and providing for the cultivation and maintenance of organizational relationships between them. As a paid labor representative of PNA, she also had the duty to keep her employer apprised of local unit activities, to act honestly, in good faith and in the best interests of PNA. This required that she take all necessary and appropriate measures to protect the PNA locals from raids by competing labor unions. PNA also hired the defendants Richard Lewis, Jeffrey Lewis, and Karen Schrader as labor representatives with similar duties.

Apparently, sometime in the first half of 1993, these PNA employees decided that they wanted to become employed as labor representatives by some other labor union and determined that they would be able to achieve such employment more readily if they could bring with them PNA locals that they represented in their capacity as labor representatives of PNA. They therefore undertook a program, although on PNA’s payroll, to undermine their locals’ relationship and loyalty to PNA by convincing them to disaffiliate.

Debra Ferguson had developed a strong interest in affiliating with PSEA, a labor union engaged in representing school employees. Her husband, Thomas, formerly employed with PNA until 1988, was employed by PSEA as a labor representative. Debra Ferguson sought to gain employment with PSEA by offering to bring with her as many PNA locals as possible. To do this, she developed a scheme, along with her husband and another PSEA representative, Alfred Nelson, to enlist the assistance of Richard Lewis, Jeffrey Lewis, and Karen Schrader to sway the PNA local and then-leadership from PNA to affiliation with PSEA, with each eventually becoming employed with PSEA. Under their plan, they would act as PSEA labor representatives to the former PNA locals. PSEA knowingly assented and collaborated, and Thomas Ferguson and Alfred Nelson actively assisted. PSEA offered employment to and actively assisted and encouraged Debra Ferguson and her three co-employees in their efforts to make the switch in affiliation.

Under federal law, PNA had the exclusive right to negotiate and enter into new collective bargaining agreements during the period of timé from 90 days before the existing contract between PNA and the employers expired. In other words, during this 90-day period, prior to the expiration of a collective bargaining agreement, no competing union is permitted to interfere with PNA’s exclusive right to bargain for a new agreement on behalf of its local. Only in the event that a renewal contract is not reached prior to contract expiration could a competing union such as PSEA seek representation of the local.

Collective bargaining contracts between PNA and various hospitals were scheduled to expire during July and August of 1993, and Debra Ferguson and her three co-labor representatives led PNA to believe that they were faithfully negotiating renewal agreements on behalf of PNA. They led PNA to believe that they were protecting its interests as exclusive bargaining agent for the locals. However, pursuant to the plan of the four former employees and with the knowledge and active assistance of PSEA’s representatives, Debra Ferguson and the other plotters, while still employed by PNA and presumably acting in its best interests, undertook to do the following: (1) They refrained from negotiating renewal agreements for the PNA locals under their responsibility, allowing the agreements to expire. This deprived PNA of its exclusive right to bargain on behalf of its locals prior to contract expiration; it rendered PNA vulnerable to other unions and gave PSEA the opportunity to seek representation of PNA locals; (2) They disparaged PNA’s reputation, and the reputation of its officials, in their efforts to persuade locals to disaffiliate from PNA.

The defendant labor representatives actively solicited PNA locals to sign election cards for PSEA representation and engaged in other disloyal and improper activities, including the distribution of propaganda pro*810moting PSEA at the expense of PNA. They also encouraged and aided PSEA to expand its union parameters to include representation of nurses.

Finally, Debra Ferguson and her three co-employees, with the assistance of PSEA, Thomas Ferguson, and Alfred Nelson, produced and promulgated false, malicious and defamatory propaganda designed to destroy the reputation of PNA, including a false report that PNA officials had been criminally indicted by the federal government. The conspiratorial conduct of PSEA and the individual defendants, the complaint alleges, was designed to cripple and destroy PNA as a nurses union and to facilitate the succession of PSEA as the primary nurses’ union in Pennsylvania.

II.

The majority relies on the preemption doctrine as literally stated by the Supreme Court in San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959). Garmon held that where a labor relations activity is arguably subject to sections 7 or 8 of the NLRA, as the picketing there involved, “the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board if the danger of state interference with national policy is to be averted.” Id. at 245, 79 S.Ct. at 780. The majority concludes that the NLRA arguably prohibits the conduct alleged in PNA’s complaint. Thus, it holds the seven counts identified in note 1 herein preempted.

I do not believe that the foregoing conduct is prohibited or arguably prohibited by either Sections 8 or 9 of the NLRA. As the majority explains, NLRA Section 8 prohibits conduct that restrains or coerces employees in their right to organize or bargain collectively through representation of their own choosing. 29 U.S.C. §§ 157, 158. The conduct referred to in the seven counts was not directed at the employees of the employer hospitals represented by PNA, but was directed at PNA as a legal entity. It neither restrained nor coerced employees of the hospitals or government facilities in their right to organize or bargain collectively through representatives of their own choosing. No campaigning, organizing or election processes were involved because the defendants’ activities preceded such possibility.

Similarly, the conduct of which PNA complains in no way restrains or coerces employees in their right to organize. It is aimed at PNA. When PNA’s four former employees commenced their scheme to switch the PNA locals to a union with whom they would seek employment, there was no organizational campaign on the part of PSEA or any other union to represent these locals. The existing contracts were not yet open to competing unions. No NLRA election procedures were involved; no validation or invalidation of an election conducted by the NLRB was sought. There was no recognitional dispute at that time between PNA and PSEA.

The majority points to the recent ease of Polyclinic Medical Center, 315 N.L.R.B. 1257 (1995), enforced sub nom. Pennsylvania State Educ. Ass’n-NEA v. NLRB, 79 F.3d 139 (D.C.Cir.1996) to “illustrate the proposition that action targeted at a rival union may restrain employees in the exercise of their Section 7 rights.” (Maj.Op. p. 802) Polyclinic, however, is an example of a case properly before the Board, and wholly distinguishable from the case before this court. It in no way involves the issue before us in this case. PNA was the charging party in that case where it appropriately complained that the hospital-employer engaged in an unfair labor practice by unlawfully withdrawing recognition of PNA and entering into a bargaining agreement with PSEA, absent evidence that PSEA enjoyed the support of the majority of employees.2 The Board ordered Polyclinic to, inter alia, cease and desist from recognizing and bargaining with PSEA unless PSEA demonstrates its majority status. The District of Columbia Court of Appeals *811enforced the order, finding that Polyclinic and PSEA engaged in a collective bargaining agreement in violation of the NLRA. Pennsylvania State Educ. Ass’n-NEA, 79 F.3d at 154. In contrast, the case before us presents no issue of representation or election procedure.

The majority believes that Section 9 of the NLRA also arguably prohibits the conduct alleged in this case because the Section gives the NLRB the authority “to resolve disputes among competing unions, and take action needed to insure the workers’ freedom of choice, including, if necessary, invalidation of an election.” (Maj.Op. p. 802) Although this case has a union background, that alone does not grant the Board exclusive jurisdiction over every controversy arising between an employer and its employees or over every dispute between two unions. Surely, no one would suggest that the NLRB has jurisdiction over a land dispute merely because the parties are two distinct unions. No one would suggest that the Board has jurisdiction over a contractual dispute with respect to the right to operate a recreation camp for children because the dispute is between competing unions. Here, as discussed, the alleged conduct involves PNA as an employer and four individual defendants in their capacity as employees, over their contractual rights and duties unrelated to any collective bargaining agreement; it also involves conspiratorial conduct between those employees and another union wholly unrelated to authorities under the jurisdiction of the NLRB. Section 9 grants the Board authority to resolve representation disputes among competing unions. The parties in this case do not request the Board’s intervention in an election or representation proceeding.

III.

It must be noted that, in Garmon, the Court also carved out exceptions to the general rule of preemption that recognized traditional factors that preserve state jurisdiction. It concluded that where the activity was merely of “peripheral concern” to the Labor Management Relations Act, the states retain the power to regulate. 359 U.S. at 243, 79 S.Ct. at 778-79. States also retain jurisdiction over matters of compelling local interest. Id. at 247, 79 S.Ct. at 780-81. Thus, states should be free to award damages under state tort law for violent conduct, or for a basic breach of or interference with a contract between an employer and employee unrelated to any collective bargaining agreement.

The majority here dismisses the “peripheral concern” exception without discussion, concluding that the conduct at issue involves “core activities with which the Act is concerned: union organizing and the employees’ election of an exclusive bargaining representative.” (Maj.Op. p. 803) I do not believe the majority categorizes PNA’s claims correctly. This case does not implicate the core concerns of the Act. Rather, it primarily requires. a forum that can determine PNA’s rights as an employer vis a vis its own employees, not the employees it represents for purposes of collective bargaining, and whether PNA’s employees violated those rights. Further, PNA seeks damages for the conduct of all the defendants which had not yet reached a point over which the NLRB had jurisdiction.

Thus, PNA brought this suit for damages only in the state court for breach of fiduciary duty by its four former employees and business agents, for their fraud, deceit, and defamatory actions; it charged PSEA and its' agents for ■ unfair competition and interference in the employment contracts between PNA and its former labor representatives; and it sued all of the defendants for commercial disparagement and conspiracy. These are matters that traditionally have occupied the attention and jurisdiction of state courts and at best are only of peripheral concern to the National Labor Relations Board.

Moreover, the state of Pennsylvania has a substantial interest in protecting the rights of its citizens against the fraudulent and other misconduct alleged in this case. Under Pennsylvania law, an agent, or employee, owes a duty of loyalty to his employer, and must act with utmost good faith and loyalty in furtherance of the employer’s interests. Kademenos v. Equitable Life Assurance Soc. of U.S., 513 F.2d 1073, 1076 (3rd Cir.1975); Garbish v. Malvern Fed. Sav. & Loan Ass’n, *812358 Pa.Super. 282, 517 A.2d 547, 553-54 (1986).

Although the Court has sustained the right of Congress to legislate in the areas of labor relations, Congress has not completely occupied the field. “[T]he areas that have been preempted by federal authority and thereby withdrawn from state power are not susceptible of delineation by fixed metes and bounds.” Weber v. Anheuser-Busch, Inc., 348 U.S. 468, 480, 75 S.Ct. 480, 488, 99 L.Ed. 546 (1955). As the Court observed in Garner v. Teamsters, Chauffeurs and Helpers Local Union No. 776, 346 U.S. 485, 74 S.Ct. 161, 98 L.Ed. 228 (1953), the Labor Management Relations Act “leaves much to the states, though Congress has refrained from telling us how much.” Id. at 488, 74 S.Ct. at 164.

For almost a quarter of a century following the enactment of the NLRA in 1935, the Court has endeavored to justify its preemption decisions in terms of congressional intent to preempt, “although the Act offers no specific guidance for applying this principle,” 2 Patrick Hardin, The Developing Labor Law 1657 (3rd ed.1992). Many of the Court’s decisions “appear to have been based on pragmatic analysis of relevant fact and circumstances, but the results often were ascribed to the will of Congress.” Id. at 1658.

In the 25 years that has elapsed since Garmon, the Court has refined, and perhaps even extended its exceptions to preemption. The Court has warned that:

While the Garmon formulation accurately reflects the basic federal concern with potential state interference with national labor policy, the history of the labor preemption doctrine in this Court does not support an approach which sweeps away state court jurisdiction over conduct traditionally subject to state regulation without careful consideration of the relative impact of such a jurisdictional bar on the various interests affected.

Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180, 188, 98 S.Ct. 1745, 1752-53, 56 L.Ed.2d 209 (1978); see also Farmer v. Carpenters, 430 U.S. 290, 302, 97 S.Ct. 1056, 1064-65, 51 L.Ed.2d 338 (1977). (“[Ijnflexible application of the [Garmon ] doctrine is to be avoided, especially where the state has a substantial interest in regulation of the conduct at issue and the state’s interest is one that does not threaten undue interference with the federal regulatory scheme.”).

Post-Garmon case law reveals that the Court has made a detailed factual analysis in each case before it in an effort to ascertain whether the claims in the state court would offend federal policies established by the Board. Under the current status of the law, the Court is concerned with not only preserving federal jurisdiction in labor cases, but has exhibited, since Garmon, a sensitive and pragmatic concern for the preservation of claims in state court that do not encroach upon the Board’s jurisdiction.

In Farmer, the Court concluded that Hill, a member of the Carpenter’s Union who complained of union discrimination in its hiring hall and other tortious conduct, could pursue a tort action brought in a state court against the union and its officials to recover damages for intentional affliction of emotional distress. 430 U.S. at 292-93, 97 S.Ct. at 1059-60. The Court reasoned that, in light of the discrete concerns of the federal scheme and state tort law, the potential for interference with the Board’s proceedings if a complaint were filed with the court “is insufficient to counterbalance the legitimate and substantial interest of the State in protecting its citizens.” Id. at 304, 97 S.Ct. at 1065. In Sears, the Court noted that when a claim involves conduct arguably prohibited by the Act, the “critical inquiry” is “whether the controversy presented to the state court is identical to ... or different from ... that which could have been, but was not, presented to the labor board.” 436 U.S. at 197, 98 S.Ct. at 1757.

The majority dismisses PNA’s “identical controversy” argument asserting that PNA is attempting to construct a new exception to Garmon, or replace Garmon’s analytical framework with a new test. I do not suggest that this court abandon the Garmon analysis. However, I believe the “identical controversy” test can aid courts in determining if conduct “arguably prohibited” by the NLRA may be litigated in a state court. Supreme Court case law focusses on whether the conduct is central to the Act, whether the state interest in regulation is compelling, and whether the state’s exercise of jurisdiction *813risks interference with the federal regulatory scheme. See e.g. Belknap, 463 U.S. 491, 103 S.Ct. 3172, 77 L.Ed.2d 798, Farmer, 430 U.S. 290, 97 S.Ct. 1056, 51 L.Ed.2d 338, Linn, 383 U.S. 53, 86 S.Ct. 657, 15 L.Ed.2d 582.

I disagree with the majority here that the Supreme Court’s decision in Belknap, 463 U.S. 491, 103 S.Ct. 3172, 77 L.Ed.2d 798, is distinguishable. In fact, Belknap strongly supports PNA’s position that its seven counts are not preempted. In that case, negotiations for a new contract between the union and employer reached an impasse, some employees struck, and the employer unilaterally granted a wage increase to employers who stayed on the job. The wage increase became the basis for an unfair labor practice charge filed by the union with the Board and the employer countered with charges of its own. The employer hired replacement workers, promising permanent employment, but dismissed them to make room for the returning strikers. The replacement workers sued under state law theories of misrepresentation and breach of employment contract. Despite the unfair labor practice proceedings before the Board growing out of the strike, the Court held that the Act did not preempt the replacement workers state law suit. It stated:

[T]he suit for damages for breach of contract could still be maintained without in any way prejudicing the jurisdiction of the Board or the interest of the federal law in insuring the replacement of the strikers. The interests of the Board and the NLRA, on the one hand, and the interests of the State in providing a remedy to its citizens for breach of contract, on the other, are “discrete” concerns. We see no basis for holding that permitting the contract cause of action will conflict with the rights of either the strikers or the employer or would frustrate any policy of the federal labor laws.

Id. at 512, 103 S.Ct. at 3184 (citations omitted). In so holding, the court found that the returning workers’ claims were not “identical” to the controversy before the Board. The Board’s focus was on the rights of the striking workers, while the state court would focus on the rights of the replacement workers. Id. at 510, 103 S.Ct. at 3183.

In the instant case, even if a proceeding were initiated before the Board, the interests, as in Belknap, are different. The Board would be concerned with the defendants’ coercive conduct towards the union nurses affecting their freedom of choice; the state court would be concerned with the breach of the defendants’ obligations to PNA. As in Belknap, the state court in this case “in no way offers [the plaintiff] an alternative forum for obtaining relief that the Board can provide.” Id. at 510, 103 S.Ct. at 3183. Although not dispositive, an important factor in preemption analysis is that the NLRB is unable to award relief to PNA for the alleged damage caused by PSEA and the individual defendants. See, e.g. Farmer, 430 U.S. at 304, 97 S.Ct. at 1065-66 (noting that the Board could not award damages for plaintiffs alleged pain, suffering, and medical expenses), Linn v. United Plant Guard Workers, 383 U.S. 53, 64, 86 S.Ct. 657, 663-64, 15 L.Ed.2d 582 (1966) (noting the Board’s inability to provide redress for personal injury caused by malicious libel).

This case is distinguishable from Operating Engineers v. Jones, 460 U.S. 669, 103 S.Ct. 1453, 75 L.Ed.2d 368 (1983). In Jones, a newly appointed supervisor filed a charge before the NLRB, alleging that the union instigated the supervisor’s discharge because he was not a member in good standing with the union. The Board declined to issue a complaint. The supervisor then filed suit in state court, alleging that the union interfered with his employment contract by coercing the company to breach the contract. The Supreme Court found the supervisor’s state law claim preempted by the NLRA.

The Court found that the alleged conduct was arguably prohibited by the Act, and that the controversy before the state court was identical to that brought before the Board. In Jones, the resolution of both the state law and the Board action involved an analysis of whether the union coerced the employer into terminating the supervisor. In the instant case, however, there could only be the remote possibility that the Board might be called upon to determine if the defendants coerced the nurses in the collective bargaining units in the exercise of their Section 7 rights. In contrast, the state court would *814focus on whether the defendants’ conduct injured PNA.

Unlike Jones, the exercise of state jurisdiction over the common law tort claims in the instant case would not have any effect on federal labor policy. The court would focus on the conduct as it specifically affected the employer-employee relationship between PNA and the individual defendants, not employees in the collective bargaining units, and on PSEA’s entrepreneurial behavior in violation of state law. Thus, state jurisdiction here creates no significant risk of impact on federal labor law.

IV.

In contrast to the seven counts discussed above, I acknowledge that PNA’s Counts VIII and IX involve matters appropriate for the Board. In Count VIII, PNA alleges that the defendants interfered with its relationship with its local bargaining units. PNA asserts that the defendants were aware of its right to bargain with its locals prior to the expiration of their bargaining agreements. The defendants allegedly interfered with PNA’s prospective contractual relations with the local units with the intent to displace PNA as the exclusive bargaining agent. Similarly, in Count IX, PNA alleges that the defendants interfered with the collective bargaining agreements between PNA and various health care employers.

These two counts focus on the bargaining agreements and the relationship between PNA, their locals, and their employers. The alleged behavior is arguably prohibited by both Sections 8 and 9 of the NLRA. In contrast to the seven counts discussed above, Counts VIII and IX involve core concerns of the Act. Thus, I agree with the majority that the NLRA preempts Counts VIII and IX.

V.

To recapitulate, I respectfully dissent from the opinion of the majority in affirming the order of the district court dismissing Counts II, IV, V, VI, VII, X and XI as preempted by the NLRA. However, I concur with the majority that the NLRA preempts Counts VIII and IX of PNA’s complaint.

I further concur with the majority in affirming the order of the district court in holding that Counts I and III are not preempted and directing each side in this appeal to bear its own costs.

Present: SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS, McKEE, and ROSENN,* Circuit Judges.

. The seven counts are: II (fraud and deceit); IV (commercial disparagement); V (unfair competition); VI (vicarious liability); VII (interference with present contractual relations between PNA and its former labor representatives); X (aiding and abetting); and XI (conspiracy).

. Polyclinic illustrates that PNA, as an experienced labor union, knew when it should invoke the jurisdiction of the Board. As the defendants noted in their brief to the district court, "PNA was aware of and knew how to invoke the jurisdiction of the NLRB.” Defendants' brief in district court in support of motion for judgment on pleadings, A 191, N.8. The filing of charges with the Board in no way dissipates PNA’s common law claims with respect to these defendants for their activities at Polyclinic and the other hospitals and facilities referred to in PNA’s complaint in these proceedings.