Steam Press Holdings, Inc. v. Hawaii Teamsters and Allie Union, Local 996 - 2002 Daily Journal D.A.R. 9785

In September 1994, Michael Drace purchased Young Laundry and Dry Cleaning ("YLDC") and has been the president and owner since. Hawaii Teamsters and Allied Workers ("HTAW") is a labor union as defined in 29 U.S.C. § 152(5) with Mel Kahele as its president during all times relevant to these proceedings. HTAW was a party to a collective bargaining agreement ("CBA") with 68 employers, including YLDC. These CBAs each contained provisions against strikes and for arbitration where either a covered employee or the union believes an employer has violated the agreement.

HTAW agreed to a memorandum of agreement authorizing a reduction in benefits and wages from the time of Drace's purchase until 30 September 1998. After this agreement expired, the union proposed restoration of the benefits and wages. In response, Drace claimed YLDC was in financial trouble and proposed further reductions.

Drace extended and HTAW accepted an invitation to have an accountant review YLDC's books. HTAW also conducted its own independent review, including a Dun & Bradstreet Report on YLDC, from July until September 1998. All reports indicated that YLDC was in financial trouble.

Shortly thereafter, union representatives discovered the existence of Steam Press Inc. ("SPI"), a holding company for YLDC that Drace formed in 1995, and questioned Drace about it during a bargaining session on 10 September. Drace responded that SPI was established to invest YLDC profits. Kahele called Drace, "a liar," and the union rejected his proposal.

The next day, forty to eighty union members met at a dumpster outside of YLDC. There, Kahele stated, "Mike is making money," and, "Mike is making money from the Steam Press."

The Union went on strike from 8 October 1998 until May 1999.

Drace and Steam Press Holdings, dba YLDC sued Kahele and HTAW alleging: (1) defamation; (2) breach of the CBA; and (3) racketeering.

The district court found in favor of plaintiffs on the defamation claim, and found in favor of defendants on the remaining issues. Both parties appealed. The four issues of the case included the following:

  1. Is a statement made by a union president during a lengthy labor dispute that an employer is "making money" where the company is not profitable defamatory?

  2. May a party seek arbitration of an issue under an agreement that does not call for arbitration of that type of issue and the party seeking arbitration has repudiated the agreement?

  3. Can activities engaged in during a single strike constitute "continuous" activities under a RICO claim? and,

  4. May a party recover attorneys' fees for an unsuccessful motion?

The Ninth Circuit reversed the district court's holding on the defamation claim and affirmed the denial of plaintiffs' request for attorneys' fees as well as the disposition of the breach of CBA and RICO claims.

Under Linn v. United Plant Guard Workers, defamation based on a statement made during a labor dispute must prove: (1) that the defamatory statement asserts a fact or implies an assertion of objective fact; (2) that the factual assertion is false; and (3) that the speaker published the statement with actual malice. 383 U.S. 53 (1996).

To be defamatory, the statement, "Mike is making money," a reasonable factfinder must be capable of concluding that it implies an assertion of objective fact based on a totality of the circumstances test:

First, we look at the statement in its broad context, which includes the general tenor of the entire work, the subject of the statements, the setting, and the format of the work. Next we turn to the specific context and content of the statements, analyzing the extent of figurative or hyperbolic language used and the reasonable expectations of the audience in that particular situation. Finally, we inquire whether the statement itself is sufficiently factual to be susceptible of being proven true or false. Underwager v. Channel 9 Australia, 69 F.3d 361, 366 (9th Cir. 1995).

The broad context of Kahele's statement was an intense labor dispute that began when HTAW did not get back the benefits it gave up in 1984 and lasted for several months of fruitless negotiations. In such a volatile setting, even seemingly factual statements resemble opinion more than objective fact. See Underwager, 69 F.3d at 367. Further, because the statements were made at internal union meetings, the format, subject matter, and tenor suggest that Kahele's statements were rhetorical devices to further the union's bargaining strategy rather than statements of objective fact even though the language employed was plain and unadorned.

Also, the statements are incapable of verification. The phrase "making money" is susceptible to different interpretations, such as quarterly earnings, annual profit, or other figures. Phrased in such abstract language, Kaheles' statements do not rest on a "core of objective evidence" and are not susceptible of being proven true or false. Underwager, 69 F.3d at 367. With regard to the CBA does not require the employer to bring its claims in arbitration. Therefore, Drace and YLDC are not entitled to having the Court of Appeals vacate the district court's ruling in order to compel arbitration.

Moreover, the district court concluded that during negotiations, Drace and YLDC repudiated the CBA with HTAW. Once a party repudiates a contract, the party is estopped from relying on the contract's terms.

A RICO violation requires: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Howard v. America Online Inc., 208 F.3d 741, 746 (9th Cir. 2000). In order to show a pattern, the acts must be related and continuous. To be continuous, there must be "a series of related predicates extending over a substantial period of time" or "past conduct that by its nature projects into the future with a threat of repetition." Id. at 750. Here, the acts occurred within the context of a single labor strike and, therefore, could not constitute a pattern or a future threat, especially given that the union has since been decertified.

Drace and YLDC filed a motion in district court for partial summary judgment due to sham answer and obstruction of justice with an accompanying request for fees. This motion and the request for fees was denied. Drace and YLDC do not appeal the denial of their motion. Therefore, they are not entitled to an award for attorneys' fees in connection with a motion that was denied by the district court.

Lewis Brisbois Bisgaard & Smith LLP has prepared this article for informational purposes only and it is not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking professional counsel. If you want legal advice, you must consult a lawyer.

© Lewis Brisbois Bisgaard & Smith LLP 2002