Why the Ironworkers conviction is monumental: An attorney's view

The guilty verdict in the trial of former Ironworkers Local 401 President Joseph Dougherty is a monumental decision that will have a profound impact on labor relations in the construction industry both locally and nationally. On a local level, the conviction should be another step towards ending Philadelphia's hard-earned reputation as a place that developers should avoid because of "the unions." Both locally and nationally, the decision could be the first in similar criminal cases federal prosecutors bring against labor unions and begin a wave of civil litigation against them as well.

Thanks to a 1973 U.S. Supreme Court case, U.S. v. Enmons, for over 40 years, labor union leaders enjoyed de facto immunity from federal criminal charges for actions that would otherwise be criminal — so long as they were in furtherance of a "legitimate union objectives." That case involved the prosecution of members of the International Brotherhood of Electrical Workers for conspiracy to commit extortion for activities that occurred during a strike against Gulf States Utilities Company. In the Enmons case, the Supreme Court said the "legitimate union objective" was higher wages for its members.

Until recently, courts had done little to reel in the breadth of Enmons and its holding remained unchecked. (In fact, Tuesday's guilty verdict is the first of its kind in at least 40 years — if not ever.) That changed in 2011 in a decision from the federal court in New York in the case very similar to the Ironworkers case, U.S. v. Larson. In that case, the Court held that Enmons did not apply to situations where unions use otherwise illegal means to coerce non-union contractors to sign a collective bargaining agreement or to pressure owners to higher only union contractors. That decision paved the way for a series of guilty pleas from members of Operating Engineer union.

In the Ironworkers' case, Judge Michael Baylson reached a similar conclusion and ruled that the Enmons case did not provide members of the Ironworkers Union immunity from federal prosecution. That ruling led to guilty pleas from all of the defendants except Mr. Dougherty and ultimately paved the way for his conviction. Following the New York case and the Ironworkers case, there is now no question that acts of violence and extortion are no longer protected under U.S. v. Enmons and unions leaders will no longer avoid indictment for otherwise criminal activity.

Last year, the Philadelphia Business Journal reported that U.S. Attorney Zane Memeger, was making cases, like the Ironworkers case, a priority. Moreover, at the news conference initially announcing the Ironworkers indictment Mr. Memeger said similar cases could be brought against other labor unions. We will have to see if that means the Ironworkers case was a test case for the Philadelphia U.S. Attorney's Office. We also will have to see if similar indictment happen outside of Philadelphia. U.S. Attorneys in other jurisdictions tend to bring similar type cases following a significant guilty verdict.

Labor unions may not just feel the heat from federal prosecutors. Soon, they could be facing a wave of civil litigation from non-union construction companies and real estate developers. In what is perhaps the bigger ramification of the Ironworkers' conviction it clears the way for civil RICO claims to be brought against trade unions. The Ironworkers were prosecuted under the Racketeer Influenced and Corrupt Organizations Act, otherwise known as RICO. RICO is a Nixon era body of laws that was originally passed with the intention of fighting the mafia and other organized crime syndicates. However, the RICO act has both a criminal and civil component. The civil component allows a private party to bring a civil lawsuit for damages against a defendant that violates the RICO laws. The civil component requires a plaintiff to prove most of the same elements of a criminal RICO claim. The civil component also carries with it significant damage penalties and a successful plaintiff can recover trebel (triple) damages and attorneys fees.

The reason why contractors did not likely have a viable RICO claim before the Ironworkers conviction involves a bit of background on what is required to prove a RICO claim. (RICO is a very complex area of the law. The complexity of RICO is probably one of the reasons it took the jury in the Ironworkers case a few days to come back with a verdict.) A fundamental element of a RICO claim is that the defendants must have committed a RICO "predicate act," which are set forth in the RICO act. Simply put, if you have no predict act you have no RICO claim. Predict acts include murder, gambling, extortion, mail fraud, wire fraud and money laundering. The RICO predicate act that is the easiest to allege against a labor union in a dispute with a contractor is the Hobbs Act, which makes it a federal crime to conspire to commit extortion. The problem before the Ironworkers' conviction was that the Enmons case foreclosed a civil RICO claim against a trade organization because Enmons held that the Hobbs Act was not violated so long as a union was furthering legitimate objectives. Now that courts have held that a violation of the Hobbs Act does occur when unions commit extortion against non-union contractors and the owners that hire them, suddenly, a civil RICO claim against a labor union becomes easier to bring. So, on the civil end we need to see if civil RICO claims do not become a weapon that non-union contractors and developers use against labor unions.

Finally, there is also the chance that the Ironworkers case marks the end of an era. Perhaps instead of criminal cases and civil claims we a see a new era of labor harmony in Philadelphia.

Wally Zimolong is the founder of Zimolong LLC, a lawfirm representing individuals and companies in the construction industry.

Source: Philadelphia Business Journal