MEDIA

August 13, 2010

Bargaining And Legal Fees In Union Cases, Succeeding ACORN

Published in: New York Law Journal | volume 244

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York.  Judge Frederic Block granted interim relief, pursuant to 29 USC §160(j), pending the adjudication of an unfair labor practices complaint.  Judge Arthur D. Spatt permitted another organization to succeed ACORN in a Nassau County fair housing suit.  Judge Brian M. Cogan held, with respect to defendants’ agreement to pay plaintiffs’ legal fees, that plaintiffs’ union could not ethically receive more than its own fees and costs for work done by its staff counsel on plaintiffs’ behalf, unless payments went to a separate legal fund.  And Judge Block rejected the government’s jurisdictional defenses under the Federal Tort Claims Act.

Unfair Labor Practice

In Blyer v. One Stop Kosher Supermarket Inc., 10 CV 1956 (EDNY, June 29, 2010), Judge Block, granting a petition for temporary relief filed by the Regional Director of the National Labor Relations Board (NLRB), ordered the respondent company to bargain with, and provide relevant information to, Local 338, Retail, Wholesale and Department Store Union, United Food and Commercial Workers. The interim relief was granted pursuant to 29 USC §160(j), pending the NLRB’s adjudication of an unfair labor practices complaint against the company.

In May 2009, the union and the company’s labor consultant executed an agreement whereby the company would recognize the union as its employees’ designated collective-bargaining representative. Throughout the summer, the union informally requested bargaining. In September, it formalized its request in writing and asked the company to turn over pertinent information. In October, having received no response, the union filed a charge with the NLRB.

In January 2010, the NLRB issued a complaint and referred the matter to an administrative law judge, who held a hearing in March. The company argued that the recognition agreement was not binding for various reasons.

On April 30, 2010, during the pendency of those proceedings, the Regional Director filed the present petition for temporary relief.

A week later, the ALJ found the recognition agreement to be binding, and recommended that the company bargain with the union and give it the requested information. To date, the NLRB has taken no action on that recommendation.

In granting temporary relief under §160(j), Judge Block determined as follows:

  1. The Regional Director’s position-that, even without an election, an employer may be bound by a voluntary recognition agreement-is ‘hardly novel.’ And the ALJ’s decision, though still subject to NLRB review, shows ‘reasonable cause’ to believe that the company will be required to bargain.
  2. Temporary relief is ‘just and proper’ because of the risk of irreparable harm. The possible loss of union bargaining strength was a harm ‘too speculative to warrant relief’ because the company was not engaged in an anti-union campaign. But the loss of the right to collective bargaining is a real-and irreparable-harm:
  1. If the NLRB adopts the ALJ’s recommendation and upholds the union’s complaint, it will, in essence, be saying that [the company] has been required to bargain with the union since September 2009, at the very least. It can partially remedy such a violation by ordering bargaining going forward. However, such a remedy will be incomplete because it will not provide whatever benefits [the company’s] employees would have gained from collective bargaining between September 2009 and the time the NLRB’s decision becomes final and enforceable. Slip op. 8.
  2. Moreover, though the union may later try to negotiate a retroactive application of an eventual agreement, the company has not promised to accede to such a demand and the NLRB cannot impose it unilaterally.
  3. While bargaining has to start now, no agreement should be implemented until the NLRB renders its decision. This resolution leaves final adjudication of employee rights to the NLRB, ‘yet encourages it to act as promptly as possible.’ Slip op. 10.

Fair Housing Act

In ACORN v. County of Nassau, 05 CV 2301 (EDNY, June 15, 2010), Judge Spatt allowed the New York Communities for Change Inc. (NYCC) to intervene for purposes of succeeding the New York Association of Community Organizations for Reform Now (NY ACORN) as plaintiff in a fair housing suit.

NY ACORN had commenced the action in 2005, alleging that, as part of a ‘long-standing racially discriminatory policy’ and in violation of the Fair Housing Act, 42 U.S.C. §3601 et seq., defendants had ‘discriminatorily re-zoned two parcels of Nassau Countyowned land that was located in Garden City’ to prevent an affiliate of NY ACORN ‘from building lowand middle-income housing on that site.’ Slip op. 3.

With discovery in the matter closed, NYCC sought to intervene as the ‘practical-though not the legal-successor to NY ACORN,’ which had ceased to exist as a result of an unrelated, well-publicized scandal. Slip op. 4. Defendants opposed intervention on the grounds that: (i) NYCC’s claims were barred by the statute of limitations, and (ii) intervention would require the re-opening of discovery, ‘causing unfair expense and delay.’ Id.

Judge Spatt found that intervention as of right was ‘doubtful’ under Fed. R. Civ. P. 24(a), but employed his ‘broad discretion’ to grant permissive intervention under Rule 24(b). Citing the ‘community of interest’ between the claims of NYCC and NY ACORN, he found NYCC’s claims ‘related back’ to NY ACORN’s complaint, and concluded that ‘any supplementary discovery necessitated by the intervention of NYCC would be minimal,’ and would ‘not cause unfair prejudice to the defendants.’ Slip op. 6-8.

Legal Fees Sought by Union

In Rodriguez v. City of New York, 06 CV 3049 (EDNY, July 6, 2010), Judge Cogan held that (a) legal fees sought by the prevailing plaintiffs under the Family Medical Leave Act (FMLA) for work done by their union’s in-house counsel could not be paid to a general union fund, but rather had to be placed in a separate legal fund; and (b) unless the money was put into a separate legal fund, the union was entitled only to fees and costs it actually incurred in providing legal services to plaintiffs.

Plaintiffs commenced a class action in June 2006 alleging violations of FMLA. In January 2008, the court certified a class of ‘current or former civilian employees of the NYPD, who worked or are working in [certain] civil service titles . . . as of June 20, 2003, who are or were, within three years preceding the filing of the original complaint, eligible and certified for FMLA leave.’ The action was settled by Stipulation of Settlement and Discontinuance approved by the court in December 2009.

The stipulation provided for payment of counsel fees to both plaintiffs’ private counsel, Lewis Brisbois Bisgaard & Smith, and District Counsel 27, AFSCME, AFL-CIO (‘DC-37’), as ‘Attorneys for Plaintiffs.’ Judge Cogan questioned ‘(1) how DC-37, a union and not a law firm, could be awarded attorney’s fees under the stipulation, and (2) the basis for DC-37 being awarded more in attorney’s fees than plaintiffs’ outside counsel.’

The General Counsel’s Office of DC-37 and Lewis Brisbois had entered into a joint retainer agreement with each of the named plaintiffs, which provided that DC-37 would pay Lewis Brisbois’ fees and costs and that at the end of the case, both counsel would make a separate fee application. The subsequent stipulation provided that defendant will pay Lewis Brisbois $370,460 and DC-37, $594,539. DC-37 explained that of the amount it sought, $440,000 was to reimburse it for the fees it had already paid to Lewis Brisbois and $154,539 was to compensate it for the hours in-house counsel had spent. Any legal fees recovered by DC-37 would go into the general union fund.

It was clear to Judge Cogan that plaintiffs were entitled to counsel fees, but the court sought to ensure that any award complied with ethical rules. The court found no ethical issue with the union in-house counsel, as a salaried union attorney, representing plaintiffs. However, a salaried staff attorney in a non-legal organization is not permitted to split fees with a non-lawyer. Indeed, the New York State Bar Association has condemned a situation where a lay employer charged a third party for services rendered by the staff attorney to the extent the charge exceeds the employer’s own cost for such services.

In addition, ethical issues arise when a corporation or a union profits from the legal services of its salaried attorneys. This ethical concern is alleviated ‘where the legal fees awarded are to be deposited into a separate fund controlled exclusively by lawyers and used solely for legal work.’ Slip op. 11. If a union creates a separate legal fund, payment to the fund is equivalent to paying a non-profit legal services organization.

Because DC-37 had informed the court that any attorney’s fees awarded to DC-37 would be deposited into its general union coffers, ethical considerations prohibited the union from recovering more than its actual costs. An award of fees as provided in the stipulation would constitute improper fee-splitting between a lawyer and a non-lawyer, and DC-37 would be profiting from the services performed by its in-house attorney, with discretion to use the money for any activity it wished. Thus, Judge Cogan concluded, ‘absent a separate legal fund for depositing attorneys’ fees, the prohibition on fee-splitting bars DC 37 from recovering fees at market rate for the services provided by its inhouse counsel.’ Slip op. 15.

Federal Tort Claims Act

In Carter v. United States, 04 CV 4880 (EDNY, July 20, 2010), Judge Block denied the government’s motion to dismiss the complaint and found subject matter jurisdiction under the Federal Tort Claims Act (FTCA). The court awarded plaintiff $300,000 damages for post-traumatic stress disorder.

In February 2004, based on incorrect information from the Postal Inspection Service, arrest warrants for one Kinte Carter (no relation to plaintiff) and 27 others, who were suspected members of rival gangs, were executed by hundreds of agents from multiple law enforcement agencies. The executing officers, who had not participated in the investigation, knocked loudly on plaintiff’s front door as her family members slept, entered the house and searched each room with their guns drawn. They did not find Kinte Carter, who was unknown to plaintiff and her family. As a result of the incident, plaintiff suffered from chronic PTSD.

The Bivens claim (Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971)), against the individual law enforcement officers who invaded plaintiffs’ home was tried to a jury, which found them not liable. The incorrect information was provided by a Postal Inspection Service Operation Technician responsible for verifying the possible addresses for Kinte Carter. In transcribing her notes, she incorrectly assumed that the ‘Carter Family,’ who lived at plaintiff’s address, included Kinte Carter, although his first name did not appear in her notes. She also reported to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) that plaintiff’s home was a ‘good’ address for Kinte Carter.

Judge Block first addressed jurisdiction under the FTCA. The government argued that plaintiff could not meet the ‘private analog requirement’ of the FTCA and that her claim fell within the ‘discretionary function exception.’

The ‘private analog requirement’ raises the question of whether a private person would be liable for similar negligence under the laws of the state where the acts occurred. Judge Block found a private analog in Restatement (Second) of Torts § 311, cited with approval by the New York Court of Appeals, providing that: ‘One who negligently gives false information to another is subject to liability for physical harm caused by action taken by the other in reasonable reliance upon such information, where such harm results’ to a third person ‘as the actor should expect to be put in peril by the action taken. ‘ Slip op. 12.

Judge Block also found that plaintiff’s claims were not barred by the Discretionary Function Exception (DFE). The DFE bars suit if (1) the acts alleged to be negligent are discretionary and (2) the judgment or choice is grounded in public policy. Here, the postal technician’s mistake in transcribing her notes did not, in the court’s view, ‘involve the type or degree of discretion contemplated by the DFE.’ Slip op. 14. Moreover, any choices she did make were not policy-based. In short, her error was due to carelessness.

Judge Block also addressed, sua sponte, the ‘misrepresentation’ exception, which includes claims arising out of negligent and willful misrepresentation, but does not bar actions based on a breach of duty other than the duty to use due care in communicating information. An essential element of the ‘misrepresentation’ exception is detrimental reliance by the plaintiff on the alleged misrepresentation. Plaintiff here did not rely on the postal technician’s incorrect statement to the ATF, even though there was a breached duty of care in the communication of information. Slip op. 14-21.

Judge Block then addressed the merits and concluded that the plaintiff satisfied the conventional elements of negligence. First, it was foreseeable that incorrect address information might lead to the search of an innocent person’s home and that the person might suffer injuries as a result. Second, the postal technician’s negligence was the proximate cause of the mistaken search of plaintiff’s home. Third, damages in the amount of $300,000 were reasonable compensation for plaintiff’s pain and suffering resulting from her emotional distress.

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.

[This article is reprinted with permission from the August 13, 2010, issue of the New York Law Journal. Copyright © 2010 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]