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NLRB litigated in bad faith, against Circuit precedent, is hit with attorneys’ fees

By Ronald Miller, J.D.

In the face of the NLRB’s persistent defiance of settled circuit precedent, a divided D.C. Circuit, in a 2-1 decision, granted an employer’s motion for attorney fees based on the Board’s bad-faith litigation. The Board’s suit was predicated upon its view that the employer unlawfully refused to bargain on a matter allegedly within the scope of a collective bargaining agreement without a “clear and unmistakable” waiver. However, Circuit precedent has consistently rejected that view, regarding the contents of a CBA to be a question of “contract coverage.” Judge Millett filed a dissenting opinion (Heartland Plymouth Court MI, LLC dba Heartland Health Care Center–Plymouth Court v. NLRB, September 30, 2016, Brown, J.).

The employer first appealed the Board’s adverse order to the D.C. Circuit in 2013. That decision was held in abeyance pending the Supreme Court’s ruling in NLRB v Noel Canning. When the Supreme Court found the recess appointments of two Board members unconstitutional, the Board set aside its order against the employer. A new Board panel readopted its prior order. Again, the employer appealed the order. Given the Circuit’s well-established “contract coverage” precedent, the employer’s second appeal was pre-ordained, observed the appeals court. Accordingly, it granted the employer’s petition for review and denied the Board’s cross-petition for enforcement.

Stalemate. The appeals court assumed that the Board would recognize a stalemate with circuit case law and seek certiorari to the Supreme Court to resolve it. However, the Board neither confessed the error of its underlying order against the employer under D.C. Circuit law, nor sought to preserve its argument against that precedent for certiorari (or even en banc reconsideration). Nor did the Board seek a transfer to the Sixth Circuit, which embraces the Board’s “clear and unmistakable” waiver policy—and which covers Michigan, where the employer’s operations exist, and where the conduct underlying the dispute occurred.

However, in lieu of these legitimate options, the Board chose obstinacy. The Board cross-petitioned the D.C. Circuit to enforce its order. In its responsive brief, the Board asked the court to uphold its “clear and unmistakable” waiver policy, while essentially ignoring the appeal court’s adverse precedent. The Board’s tactics forced the employer to waste resources in replying, and the employer sought attorney fees under both the “not-substantially-justified” and “bad faith” provisions of the Equal Access to Justice Act.

“Nonacquiescence.” Replying to the employer’s motion, the Board referenced its general policy of flouting any circuit’s NLRA interpretation with which it disagrees—a policy described colloquially as “nonacquiescence.” The Board’s rationale for nonacquiescence is two-fold: (1) the NLRA’s multi-venue provision renders the Board clueless as to what circuit will govern the enforcement of its orders on appeal; and (2) the Board’s “uniform and nationwide” jurisdiction over labor policy gives it the right to disagree with any circuit, whenever it wants. The Board thinks its right to disagree extends beyond preferring one circuit’s position to another in a split, but also includes “stak[ing] out its own position contrary” to any circuit, observed the court, and identifies no limit to its nonacquiescence.

Over 60 years ago, the Board stated that the goal of nonacquiescence, was to “achieve[]” “a uniform and orderly administration of a national act, such as the [NLRA].” By determining “whether to acquiesce in the contrary views of a circuit court of appeals or whether, with due deference to the court’s opinion, to adhere to its previous holding until the Supreme Court . . . has ruled otherwise,” the Board claims to ensure a nationally uniform labor policy.

Percolation. The D.C. Circuit’s approval of nonacquiescence presumed its stated virtue: opposing adverse circuit decisions permits the Board to bring national labor law questions to Supreme Court resolution. To that end, nonacquiescence allows for an issue’s “percolation” among the circuits; generating a circuit split that can improve the likelihood of certiorari being granted. But nonacquiescence is justifiable only as a means to judicial finality, not agency aggrandizement. Proper nonacquiescence should be characterized by the agency clearly asserting its nonacquiescence, and specifying its arguments against adverse precedent to preserve them for Supreme Court review.

However, the D.C. Circuit observed, the NLRB’s history with nonacquiescence reveals “its primary goal is . . . to see its interpretation of the federal labor laws prevail in as many cases as possible, rather than to change contrary law in particular circuits or . . . serve as a percolator for the Supreme Court.” Thus, the appeals court found it difficult to see the Board’s steadfast refusal to seek certiorari on the “contract coverage” question as something other than an evasion of finality in the name of hegemony.

Bad faith. Here, the appeals court determined that the Board’s nonacquiescence amounted to bad faith. The legal dispute in this case demonstrated persistent nonacquiescence without either candor or the pursuit of judicial finality. The appeals court pointed out that its “contract coverage” case law has diverged from the Board’s “clear and unmistakable” waiver policy for almost a quarter century. Now, seven of the 12 circuits take a side in that debate. With a split engulfing most circuits, there is no serious argument for nonacquiescence in the name of percolation. Yet the Board gave no indication that it intends to seek certiorari of any adverse ruling, or en banc reconsideration of circuit precedent.

Moreover, the court found that venue uncertainty was not the real reason behind the Board’s behavior. The Board’s response to the employer’s attorney fee motion offered an extreme and unbounded view of nonacquiescence, the appeals court found. Thus, the Board’s conduct before the court was a clear case of bad-faith litigation. The standard for an award of attorney fees for bad faith is met “where the party receiving the award has been the victim of unwarranted, oppressive, or vexatious conduct on the part of his opponent and has been forced to sue to enforce a plain legal right.” Here, the Board’s conduct before the appeals court manifested a stubborn refusal to recognize any law. Accordingly, the employer’s motion for attorney fees was granted.

Dissent. Judge Millett strongly disagreed that a bad-faith award of attorney fees was warranted in this appeal. She noted that the majority fairly called the NLRB out for its failure to candidly acknowledge binding circuit precedent in its answering brief and for pressing only gossamer-thin distinguishing arguments. However, she observed, awarding fees for bad faith is an exceptional sanction that should only be employed “when extraordinary circumstances or dominating reasons of fairness so demand.” That standard was not met in this case, she argued.