Court Dismisses Civil RICO Suit Brought by an Employer Alleging Extortionate Acts by a Local Union When There Was No Violence or Threats of Violence.

CareOne Management LLC v. UnitedHealthcare Workers East, SEIU 1199, 2019 WL 554140 (D. N.J. Oct. 28, 2019)

Court Dismisses Civil RICO Suit Brought by an Employer Alleging Extortionate Acts by a Local Union When There Was No Violence or Threats of Violence.

The court denied Plaintiffs’ motion for summary judgment and granted Defendants’ motion for summary judgment in this lawsuit brought by CareOne Management LLC against the labor union SEIU 1199, finding insufficient evidence of extortion and mail/wire fraud resulting from the defendants’ organizing and negotiation tactics.

Plaintiffs alleged Defendants engaged in extortion and fraud in violation of federal and state law, and alleged civil RICO violations and other violations. The SAC alleged that Defendants used force and violence in concert with unlawful economic pressure to force Plaintiffs to accede to Defendants’ bargaining and unionization demands, including “(1) engag[ed] in vandalism and other criminal acts to endanger patients and … bring about negative outcomes before the Connecticut regulatory authorities; (2) disseminat[ed] false, misleading, and defamatory information about Plaintiffs …; (3) publicly smear[ed] [Straus] and his other businesses …; and (4) abus[ed] the legal process ….”.)


The court first clarified that “violations of state extortion statutes may qualify as RICO predicate acts, if such violations are also ‘capable of being generically classified as extortionate.’


Plaintiffs alleged that Defendants used demonstrations/protests and regulatory and legal processes to wrongfully pressure Plaintiffs into complying with illegitimate bargaining and unionization demands. Defendants concede that they used those tactics to put economic pressure on Plaintiffs, but dispute that neither the ends they sought or the means by which they pursued them were wrongful. The court stated that “unlike the use or threatened use of force or violence, the use of economic fear in business negotiations between private parties is not ‘inherently’ wrongful” and “the fear of economic loss is a driving force of our economy that plays an important role in many legitimate business transactions.” *4, citing case.. The threat of economic loss may constitute “fear” for purposes of an extortion analysis, but it does not include “the fear of economic loss in the context of hard business bargaining ….” The court found that the evidence would not permit a reasonable jury to conclude that defendants pursued illegitimate ends in the collective bargaining or unionization process. Because it is not unlawful to pursue “a union contract calling for higher wages and other monetary benefits.” cting to the seminal case United States v. Enmons, 410 U.S. 396, 409 (1973).


The court then found the tactics employed by Defendants in pursuit of their collective bargaining and unionization goals, their participation in regulatory processes was not improper. Further, the protests and demonstrations Defendants engaged in were peaceful, did not involve violence or threats of violence, and did not result in arrests or criminal charges being brought against any person or entity. (emphasis added).   Therefore, the court found that there is no genuine issue of material fact as to whether Defendants’ actions were wrongful yet recognizing “intense and coercive measures” adopted by the parties.


Mail & Wire Fraud

Plaintiffs next claim that a “central feature” of the Campaign included using the COW, flyers, and media advertisements to “disseminat[e] … false, misleading, and/or incendiary allegations regarding” Plaintiffs’ business and labor practices and Straus’s personal and professional life with the goal of depriving Plaintiffs “of their property by deceiving third-parties into believing that Plaintiffs are bad health care providers …”

In so doing, Plaintiffs allege that Defendants committed mail and/or wire fraud.
The elements of wire/mail fraud are: (1) a scheme or artifice to defraud, (2) culpable participation by the defendant (i.e., specific intent to defraud), and (3) use of the mails or wire transmissions to effectuate the scheme. Additionally, the object of the alleged scheme or artifice to defraud must be a traditionally recognized property right.”

The court stated that Plaintiff did not produce admissible evidence from which a reasonable jury could conclude that Defendants had the specific intent to deceive finding that the record is clear that the individuals who researched, drafted and/or approved the challenged publications believed their contents to be truthful. While the Campaign may have used forceful, critical, hyperbolic, and sometimes satirical statements regarding Plaintiffs’ practices and Straus’s actions, that is not the same as publishing false or misleading statements with the intent to deceive the public. As such, there was no genuine issue of material fact as to Defendants’ culpability for mail and/or wire fraud.

Ed. Note: The court is focusing on the Enmons standard which allows a union to conduct campaigns without violating Hobbs Act extortion provided there is no violence or threats of violence.

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