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NLRB finds real estate investment trust lawsuit aimed at union’s consumer boycott unlawful

By Ronald Miller, J.D.

A real estate investment trust (REIT) that owned a hotel acted unlawfully by filing and maintaining a lawsuit against a union in response to the union’s encouragement of a consumer boycott of the hotel, ruled a three-member panel of the NLRB. The Board first found that the REIT could be liable under the NLRA even though a management company employed the hotel’s employees. Further, the Board found that the lawsuit’s tortious interference claims were preempted by the Act, and both tortious interference and defamation claims were independently unlawful because they were baseless and motivated by a desire to retaliate against the union (Ashford TRS Nickel, LLC, February 1, 2018).

Hotel acquisition. In December 2006, Ashford TRS Nickel (Ashford), a subsidiary of Ashford Hospitality Trust (AHT), purchased the Sheraton Anchorage Hotel. As a REIT, the AHT was prevented from directly operating the hotel. Accordingly, it contracted with Remington Lodging to operate the hotel and employ its workforce. Remington is primarily owned by two individuals, who also owned an interest in AHT and served on its board of directors. Ashford and AHT were a single integrated enterprise. AHT and Remington shared the same CEO.

Under a management agreement between Ashford and Remington, Ashford paid Remington three percent of the hotel’s gross revenue, plus an incentive fee of one percent of the gross operating profit. All other profits went to Ashford. The management agreement also required Remington to consult with Ashford on matters of policy concerning management, sales, room rates, wage scales, personnel, operating procedures, economics, and other matters affecting the operation of the hotel.

The employees of the hotel were represented by the union. The hotel and union were parties to a collective bargaining agreement effective through February 28, 2009. Following Ashford’s acquisition of the hotel, and enlistment of Remington to operate it, Remington and the union began negotiating a new CBA. However, Remington quickly demonstrated its hostility toward the bargaining process and the union’s representation of the hotel’s employees, including failure to bargain in good faith with the union, and unilateral changes in terms and conditions of employment.

Consumer boycott. In November 2009, bargaining unit employees signed a petition authorizing a consumer boycott of the hotel. In response to the consumer boycott, Ashford (not Remington) filed a lawsuit in federal court against the union alleging tortious interference with contractual and prospective relations and defamation. The asserted factual basis of the lawsuit was that the union allegedly told prospective customers that the hotel was firing workers illegally and was trying to strip employees of core benefits, and that they would have to cross a “vigorous” picket line if they booked a conference at the hotel.

Ultimately, the district court granted the union’s motion to dismiss the lawsuit. The union thereafter filed unfair labor practice charges with the Board alleging that the lawsuit violated NLRA Section 8(a)(1). An administrative law judge found that Ashford’s lawsuit was unlawful. As a threshold matter, the ALJ found that Ashford could be held liable under the NLRA for the lawsuit, even though Remington employed the bargaining unit employees, because it exercised “sufficient control” over the employees’ terms and conditions of employment. Turning to the merits, the ALJ found that Ashford’s tortious interference claims were unlawful because they targeted protected activity and were preempted under the Act. Further, the tortious interference and defamation claims were independently unlawful because they were baseless and motivated by a desire to retaliate against the union.

Third-party employer. The Board agreed with the ALJ that Ashford could be found to have violated the NLRA even though it had no employment relationship with the hotel’s employees. The Board has consistently held that third-party employers may be liable for interfering with the protected rights of the employees of another employer. Moreover, the Board has specifically held the lack of an employer-employee relationship does not absolve a statutory employer of liability for filing a retaliatory lawsuit. Further, the Board rejected the employer’s argument that it should not be held liable for filing the lawsuit because it was merely trying to protect its investment in the hotel, and had no control over Remington’s collective bargaining relationship with the union. Rather, the lawsuit targeted employee activity that was plainly protected by the NLRA.

Preemption. Next, the Board found no merit to Ashford’s argument that, even if its lawsuit was preempted, preempted lawsuits are no longer necessarily unlawful under Supreme Court precedent. Since the Supreme Court’s 1983 ruling in Bill Johnson’s Restaurants v. NLRB, the Board and reviewing courts have consistently held that preempted lawsuits enjoy no special immunity from condemnation under the Act. Here, the Board rejected Ashford’s argument that the Supreme Court eliminated that “large exemption” for preempted lawsuits in BE & K Construction Co. v. NLRB. The Court did not retreat from its position on lawsuits that are preempted by federal law. Thus, the Board declined to analyze preempted lawsuits under the standard adopted by the Supreme Court in BE & K.

Consequently, the Board concluded that Ashford’s tortious interference claims were wholly preempted by the Act because they were based on, and targeted, the union’s consumer boycott of the hotel. Here, the consumer boycott was clearly protected by Section 7. The boycott consisted of the union and its members notifying potential hotel customers of the union’s labor dispute with the hotel and of the prospect of picketing at the hotel. Those communications constituted protected activity. Moreover, the Board agreed with the ALJ that Ashford failed to articulate any basis for concluding that the union may have forfeited that protection by acting with malice or threatening violence. Accordingly, the lawsuit was preempted insofar as it asserted claims of tortious interference.

Baseless claims. Additionally, the Board agreed with the ALJ that the tortious interference claims, as well as Ashford’s defamation claim, were unlawful on the independent ground that they were baseless and retaliatory. Applying the baseless standard here, the Board found that no reasonable litigant could realistically have expected success on the merits of Ashford’s lawsuit. Because the lawsuit was based on union activity protected by the Act, Ashford was required to establish that the union acted with actual malice. However, it failed to adequately plead actual malice, and did not assert any facts that, if proven, would have established actual malice.