Chicago Dist Pension v. Reinke Insulation Co

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-3555
CHICAGO DISTRICT COUNCIL OF
CARPENTERS PENSION FUND, ET AL.,
Plaintiffs,
v.
REINKE INSULATION COMPANY
and K. REINKE, JR. & COMPANY,
Defendants-Appellants,
v.
CHICAGO AND NORTHEAST ILLINOIS
DISTRICT COUNCIL OF CARPENTERS and
UNITED BROTHERHOOD OF CARPENTERS AND
JOINERS OF AMERICA, LOCAL 1307,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 C 8102—Wayne R. Andersen, Judge.
____________
ARGUED FEBRUARY 17, 2006—DECIDED SEPTEMBER 18, 2006
____________
Before FLAUM, Chief Judge, and KANNE, and WOOD,
Circuit Judges.
KANNE, Circuit Judge. Reinke Insulation Co. and K.
Reinke, Jr. & Co. (which we will treat, for purposes of this
2 No. 05-3555
opinion, as one entity called “Reinke”) have been in a
longstanding dispute with a local Union (“Union”) and the
Chicago District Council of Carpenters Pension Fund
(“Fund”). This litigation had its inception when the Fund
sued Reinke alleging a deficiency in pension and welfare
contributions Reinke was required to make according to
a collective bargaining agreement. Reinke responded by
leveling counterclaims against the Union.
The initial suit by the Fund was resolved in favor of
Reinke and affirmed by this court in Chicago Dist. Council
of Carpenters Pension Fund v. Reinke Insulation Co., 347
F.3d 262 (7th Cir. 2003) (“Reinke I”). Judge Andersen
granted the Union summary judgment on all of Reinke’s
counterclaims. This appeal followed, and we now affirm.
I. HISTORY
Reinke is in the business of installing insulation at
construction projects. From about July 1998 to January
2001, it was a member of the Residential Construction
Employers Council (“RCEC”). The RCEC is a multi-em-
ployer bargaining association. The Union prefers to negoti-
ate with an association such as the RCEC, rather than
negotiate with employers individually. The relevant
agreement in effect between Reinke and the Union was a
product of Reinke’s membership in the RCEC.
Reinke decided to withdraw from the RCEC (and then
negotiate with the Union individually) and gave the Union
notice thereof on January 26, 2001. At or after this time,
the Fund decided to audit Reinke’s contributions of pension
and welfare benefits to ensure compliance with the collec-
tive bargaining agreement. The results of the audit were
not positive. A preliminary report opined that Reinke was
delinquent in the amount of $142,441.24, and that Reinke
was in “material noncompliance” with its obligations toward
the Fund. The report also noted that the auditor had been
No. 05-3555 3
unable to retrieve certain essential records because Reinke
had “denied . . . access.” The auditors also stated, “We
believe that our examination provides a reasonable basis for
our opinion.”
The preliminary report also emphasized what its descrip-
tion indicates; namely, that the report was preliminary and
not final. Moreover, it stated that it was intended to be used
by the Fund and not to be a legal determination of Reinke’s
compliance, and that due to the use of alternate procedures
its results should be considered “QUALIFIED.”
Preliminary or not, the Fund began the lawsuit leading to
Reinke I on October 22, 2001, based upon the report. The
day after that suit was filed, the Union started to picket
Reinke at its various job sites with signs accusing Reinke of
failure to make fringe benefits contributions. The Union
had never before picketed on the basis of a preliminary
report alone, and it had not picketed in the past when
preliminary audits of Reinke’s books found delinquencies.
The Union representative responsible for ordering the
picketing against Reinke, Bill Rabinak, had, however,
expressed as far back as 1998 his intent to “infiltrate and
destroy” companies that cheated on their contributions,
companies that Rabinak deemed “bottom feeders.” These
comments from 1998 were not directed toward Reinke. The
picketing was done at Reinke’s job sites and initially led to
some nonunion workers of Reinke’s refusing to work.
Another consequence, of which the Union was aware, was
that Reinke lost business. Various homeowners terminated
their contracts with Reinke because of the picketing.
Reinke tried some attempts to make peace with the
Union. It hired its own auditor, who concluded that Reinke
owed nothing, but the Union would not consider that report.
Reinke also tried to make clear that any of its records were
available for review by the Fund’s auditor. Moreover,
Reinke offered to pay all the disputed contributions in
4 No. 05-3555
exchange for the cessation of the picketing. That offer was
conditioned, however, on Reinke retaining the right to
contest the amounts owed in court. The Union rejected that
offer and continued picketing.
Reinke then successfully sought relief from the NLRB,
which petitioned to enjoin the Union’s picketing. A magis-
trate judge agreed, and issued a temporary restraining
order prohibiting the Union from picketing Reinke. The
Union ceased picketing, but began distributing handbills.
The handbills included comments such as, “The HARD
working employees of Reinke have been cheated on their
MEDICAL and RETIREMENT contributions!”
The preliminary report was eventually superseded by a
final report, which contained similar findings. Within a few
months of that report, Judge Andersen informed the parties
of his ruling on the Fund’s claims against Reinke. Judge
Andersen found that Reinke was not delinquent in any of
its contributions (a ruling eventually affirmed in Reinke I).
The Union immediately ceased distributing handbills.
II. ANALYSIS
We review the grant of summary judgment de novo,
viewing all facts in the light most favorable to Reinke, the
nonmoving party. See Moser v. Ind. Dep’t of Corr., 406 F.3d
895, 900 (7th Cir. 2005). Reinke’s claims can be grouped as
follows: Counts 2-4, alleging state law claims of defamation,
false light and trade libel; Counts 5-6, and 8, alleging
tortuous interference and violations of the Illinois Con-
sumer Fraud Act (“ICFA”); Count 7, alleging violations
of § 303 of the Labor Management Relations Act; and,
finally, Count 9, alleging violations of Illinois’s Uniform
No. 05-3555 5
Deceptive Trade Practices Act (“UDTPA”).1
A. Actual Malice: Counts 2-4
Reinke concedes that it cannot prevail on its defamation
claims without first showing that the Union acted with
actual malice. See Linn v. United Plant Guard Workers of
Am., 383 U.S. 53, 61 (1966) (holding as preempted all
defamation actions in labor disputes except those published
with actual malice). Actual malice, or “New York Times
malice,” requires that the party making a defamatory
statement do so “ ‘with knowledge that it was false or with
reckless disregard of whether it was false or not.’ ” Old
Dominion Branch, No. 496 Nat. Assn. of Letter Carriers v.
Austin, 418 U.S. 264, 281 (1974) (quoting New York Times
Co. v. Sullivan, 376 U.S. 254, 280 (1964)). Reinke argues
that the Union acted with reckless disregard for the truth
when it asserted that Reinke cheated its employees out of
benefits. The question for us is not whether a reasonable
person would have found it prudent to accuse Reinke of
cheating, but whether there is “sufficient evidence to permit
the conclusion that the [Union] in fact entertained serious
doubts as to the truth of [its] publication,” St. Amant v.
Thompson, 390 U.S. 727, 731 (1968), or whether there is
sufficient evidence to show that the Union had a “ ‘high
degree of awareness of . . . probable falsity,’ ” Harte-Hanks
Commc’ns, Inc. v. Connaughton, 491 U.S. 657, 667 (1989)
(quoting Garrison v. Louisiana, 379 U.S. 64, 74 (1964)). The
evidence must be sufficient to “support a reasonable jury
finding . . . that the plaintiff has shown actual malice by
clear and convincing evidence.” Saenz v. Playboy Enters.,
Inc., 841 F.2d 1309, 1317 (7th Cir. 1988) (quoting Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255-56 (1986)).
1
Count 1 was voluntarily dismissed prior to summary judgment.
6 No. 05-3555
Reinke relies on a number of pieces of circumstantial
evidence to support its case: the Union’s reliance on a mere
preliminary report that was qualified and based upon
incomplete records; the Union’s deviation from normal
practices (the Union had not previously picketed on the
basis of preliminary reports); the Union’s refusal to stop
picketing after Reinke’s auditor determined the company
had paid all it was obliged to; the Union’s refusal to stop
picketing in the face of Reinke’s offer to pay all disputed
funds; the Union’s use of the term “cheating” instead of
“under contribution”; and, finally, the Union’s ill will
toward Reinke.
Reinke is entitled to prove state of mind with circumstan-
tial evidence like that listed above, but “courts must be
careful not to place too much reliance on such factors.” Id.
at 668. Our review of the record as a whole leads us to the
conclusion that there is insufficient evidence to allow a
finder of fact to conclude the Union acted with actual
malice.2
The Union’s reliance on the preliminary report does not
evidence actual malice. While preliminary in nature, and
stamped “QUALIFIED,” there is nothing in the record to
suggest any facially obvious errors in its accuracy. To the
contrary, the auditors stated their belief that their exami-
nation provided a “reasonable basis” for the conclusion.
Moreover, the Union knew the Fund thought it was a
reliable enough source for initiating a lawsuit. Reliance on a
report expressly noting it is incomplete because of
the absence of certain records might, in other circum-
stances, help support a finding of actual malice. But in this
case the absence of the records was attributed by the
2
Accordingly, we need not consider the other dispute between the
parties as to this issue; namely, whether the Union’s allegation of
cheating is an actionable defamatory statement.
No. 05-3555 7
preliminary report to Reinke’s lack of cooperation. Thus, the
missing records reinforce the inference of impropriety on
Reinke’s part rather than detract from it. We cannot
describe reliance on that report as evidence of a reckless
disregard of the truth.
The Union’s disinterest in Reinke’s audit and other efforts
to prove that Reinke did not cheat also do not bring us
closer to sufficient evidence of actual malice. Yes, the Union
refused to consider the opinion arrived at by Reinke’s
auditor, but that does not evidence a “purposeful avoidance
of the truth.” Harte-Hanks, 491 U.S. at 692. Auditing
reports are prepared by licensed professionals for a reason:
they involve complex calculations and procedures the
untrained person cannot perform. The only information in
these reports that matters to most people is the bottom
line—whether or not Reinke is short on its payments. The
Fund’s auditor said Reinke owed money and Reinke’s
auditor said the opposite. A battle of experts like this tends
to show a good faith dispute, not actual malice.
Nor do we find significant the Union’s refusal to stop
picketing in the face of Reinke’s offer to pay the disputed
funds. Even putting aside the fact that this offer was
qualified by Reinke’s reservation to contest the matter in
court, offering to pay the funds cures alleged cheating in the
same way that a bank robber’s offer to give the money back
dispels the need for a criminal prosecution. By the time an
offer of restitution is made the alleged cheating (or bank
robbery) has occurred and paying the money back will not
make it go away. To put it another way, the Union could
have construed the offer of payment as evidence of a guilty
conscience just as easily as it could consider it to be evi-
dence of Reinke’s innocence.
Finally, the Union’s deviation from its previous practice
and its ill will toward Reinke are just more pieces of
circumstantial evidence, insufficient without something
8 No. 05-3555
more concrete, to show actual malice. See Harte-Hanks, 491
U.S. at 665 (explaining that a “plaintiff must prove more
than an extreme departure from professional standards and
that a [defendant’s] motive . . . [cannot] provide a sufficient
basis for finding actual malice”). And the Union’s use of the
term “cheating” instead of a more innocuous term like
“failure to contribute,” or “undercontribution,” is also not
sufficient alone, or in combination with Reinke’s other
evidence, to show actual malice. Many innocent explana-
tions may exist when a company lapses in its obligation to
pay welfare benefits, but it does not show actual malice for
a union not to give the company the benefit of the doubt.
After all, the relationship between organized labor and
employers is marked by “intemperate” and “abusive”
language, where “epithets such as ‘scab,’ ‘unfair,’ and ‘liar’
are commonplace.” Linn, 383 U.S. at 60. Our review of the
record, taking the facts in the light most favorable to
Reinke, and viewing them through the prism of the higher
clear and convincing evidence standard, leads us to con-
clude that there exists no genuine issue of material fact as
to actual malice on the part of the Union.
B. Preemption: Counts 5,6, and 8
The district court held that these state law counts were
preempted, but in doing so the court merged distinct
preemption doctrines as one. While § 301 of the Labor
Management Relations Act (“LMRA”), 29 U.S.C. § 185(a),
preempts claims that require interpretation of a collective
bargaining agreement, “it is important to remember that
other federal labor-law principles may pre-empt state law.”
Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399,
409 n.8 (1988) (emphasis added); see also Allis-Chalmers
Corp. v. Lueck, 471 U.S. 202, 220 (1985) (holding § 301
preempts state law claims that are substantially dependent
upon analysis of the terms of an agreement made between
No. 05-3555 9
the parties in a labor contract). One of these other types of
preemption is so-called Garmon preemption, which forbids
state regulation of conduct that is arguably protected or
prohibited by federal law. See, e.g., San Diego Bldg. Trades
Council v. Garmon, 359 U.S. 236, 245 (1959).
On appeal, the Union has made clear that its preemption
argument relies on Garmon and its progeny.3 See Ehredt
Underground, Inc. v. Commonwealth Edison Co., 90 F.3d
238, 241 (7th Cir. 1996) (holding that a tortious interference
with contract claim was preempted by Garmon). Reinke
does not dispute Garmon’s preemptive force, but instead
argues that its claims fall within an exception to Garmon
preemption because of the Union’s actual malice. See Keehr
v. Consolidated Freightways of Delaware, Inc., 825 F.2d 133,
136-37 (7th Cir. 1987) (explaining that a claim for inten-
tional infliction of emotional distress is not preempted by
Garmon when, among other things, it is “based on ‘outra-
geous’ conduct and not simply ‘on the type of robust lan-
guage . . . that may be commonplace in various labor
contexts’ ”) (quoting Farmer v. United Bhd. of Carpenters
and Joiners, 430 U.S. 290, 306 (1977)). We must necessarily
reject this argument, as we have already found that the
record in this case cannot support such a finding.
C. Section 303 of the LMRA: Count 7
For this count, the district judge granted summary
judgment on the basis that Reinke could not show the
Union had engaged in improper activities directed at any
secondary employers. See Mautz & Oren Inc. v. Teamsters,
Local No. 279, 882 F.2d 1117, 1120-21 (7th Cir. 1989).
Applying the standards set forth in Sailors’ Union of Pacific
(Moore Dry Dock), 92 N.L.R.B. 547, 549 (1950), the court
3
We may affirm on any basis present in the record. Cygan v.
Wisconsin Dep’t Corr., 388 F.3d 1092, 1098 (7th Cir. 2004).
10 No. 05-3555
found that the Union’s conduct in picketing at the job site
constituted lawful primary picketing. In its brief before us,
the Union echos the district court’s ruling and ignores
Reinke’s argument that the distinction between “primary”
and “secondary” picketing analyzed in Moore Dry Dock is
irrelevant to its claim. According to Reinke, the prohibited
object of the Union’s picketing was to force Reinke back into
the RCEC.
Reinke’s claim is brought under § 158(b)(4)(A), which in
relevant part states:
It shall be an unfair labor practice for a labor organi-
zation or its agents—
(4) (I) to engage in, or to induce or encourage any
individual employed by any person engaged in com-
merce or in an industry affecting commerce to engage
in, a strike or a refusal in the course of his employment
to use, manufacture, process, transport, or otherwise
handle or work on any goods, articles, materials, or
commodities or to perform any services; or (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—
(A) forcing or requiring any employer . . . to join any
labor or employer organization . . . .
29 U.S.C. §§ 158(b)(4)(i)(A), (ii)(A). Reinke’s argument is
that § 158(b)(4)(A) prohibits picketing directed against a
primary employer where an object is to force that employer
to join a multi-employer bargaining association, regardless
of whether the union also targets secondary employers.
Reinke relies primarily on Frito-Lay, Inc. v. Local Union
No. 137, Int’l Bhd. of Teamsters, 623 F.2d 1354, (9th Cir.
1980), where the court held that § 158(b)(4)(A) prohibited a
strike by a union against Frito-Lay, Inc. where the intent of
the union was to force Frito-Lay, Inc. (as well as two other
companies) to form a multi-employer bargaining unit. See
No. 05-3555 11
Mobile Mech. Contractors Ass’n v. Carlough, 664 F.2d 481,
484-85 (5th Cir. 1981) (finding § 158(b)(4)(A) violated where
a union attempted to force a multi-employer bargaining
unit to cede some of its authority to a larger, nationwide
multi-employer bargaining unit); Union De Tronquistas De
Puerto Rico, Local 901 v. Arlook, 586 F.2d 872 (1st Cir.
1978) (affirming an injunction where a union threatened
and coerced an employer to become part of a multi-employer
association); see also Musicians Union, AFM Local 6 (Hyatt
Regency/Oakland), 298 N.L.R.B. 740, 741 (1990) (“Section
8(b)(4)(ii)(A) draws no distinction between primary and
secondary picketing.”); Chicago Typographical Union No. 16
(Alden Press, Inc.), 151 N.L.R.B. 1666, 1677 n.16 (1965)
(same) (citing agency decisions).
Even assuming Reinke’s interpretation of § 158(b)(4)(A)
is correct, it still cannot prevail. The record in this case does
not present a genuine issue of fact as to whether the Union
struck with the object of having Reinke return to the
RCEC.4 All this record shows is that after Reinke gave
notice of its withdrawal from the RCEC the Fund initi-
ated an audit which led to a lawsuit and the challenged
picketing. Reinke asks us to infer from this chain of
events—and the fact that the Union had not picketed based
upon under contribution deficiencies evidenced only by a
preliminary report—that the object of the Union’s picketing
was to force Reinke to rejoin the RCEC. But we do not think
that inference is reasonable based upon all of the evidence.
The picketing began the day after the lawsuit was filed,
4
As the party opposing summary judgment on this claim, Reinke
was required to “ ‘set forth specific facts showing that there is a
genuine issue for trial.’ ” Scaife v. Cook County, 446 F.3d 735, 740-
41 (7th Cir. 2006); see also Roger Whitmore Auto. Services, Inc. v.
Lake County, 424 F.3d 659, 669 (7th Cir. 2005) (explaining that
“speculation or a scintilla of evidence” will not suffice to defeat
summary judgment) (citations omitted).
12 No. 05-3555
which was nine months after Reinke pulled out of the
RCEC. The picketing, and later handbilling, was directed
solely at Reinke’s alleged failure to make required pay-
ments. Reinke points to no evidence whatsoever indicating
that the Union would have stopped picketing if Reinke
rejoined the RCEC. This set of facts is far removed from
Frito Lay, where the court found “substantial, although not
overwhelming, direct evidence” of the union’s motive. 623
F.2d at 1360-61 (explaining that after the break up of the
multi-employer association the union continued to try to
negotiate “a single contract for all companies,” “suggested
that the employers ‘get together’ to come up with common
contracts, and went so far as to arrange joint bargaining
meetings to be attended by all three employers,” while also
noting that the Union negotiators admitted the “strategy
was to persuade the companies to reinstitute the old
employer organization”). The timing and circumstances of
the audit and picketing in relation to Reinke’s withdrawal
from the RCEC are insufficient to support the inference
that the Union picketed for the object of having Reinke
rejoin the RCEC.
D. The UDTPA: Count 9
The district court dismissed this count as moot, given that
the UDTPA allows only for injunctive relief and by the time
summary judgment occurred all picketing and handbilling
had stopped. Reinke finds error in this ruling, arguing that
the UDTPA also allows for attorney’s fees, which would be
a valuable remedy. Reinke does not explain how it can be
awarded attorney’s fees when no substantive relief is
available under the statute. Reinke, in effect, tells us we
can read the fee-shifting provision of this statute as a stand
alone remedy, an argument we have great difficulty under-
standing, let alone accepting. In any event, Reinke’s claim
under this statute is premised on its ability to show the
No. 05-3555 13
Union disparaged it on the basis of “false or misleading
representation[s] of fact.” 815 ILCS 510/2(a)(8). Success on
this claim would require actual malice, Linn, 383 U.S. at
61, a showing Reinke cannot make.
III. CONCLUSION
For the foregoing reasons, the grant of summary judg-
ment is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-18-06