DIAZ, Circuit Judge:
Waugh Chapel South, LLC, WCS LLC, WCS Properties Business Trust (collectively "WCS") sued the United Food and Commercial Workers Union Locals 27 and 400 ("UFCW") and the Mid-Atlantic Retail Food Industry Joint Labor Management Fund (the "Fund") under the Labor Management Relations Act (the "LMRA"), 29 U.S.C. § 187, which provides a cause of action for victims of "unfair labor practices" as defined by the National Labor Relations Act (the "NLRA"), 29 U.S.C. § 158(b)(4). In its complaint,
The defendants moved to dismiss the complaint under the Noerr-Pennington
We agree with the district court that the Fund is not a "labor organization" under the NLRA, but conclude that the Noerr-Pennington doctrine does not (at least at this stage) spare the remaining defendants from the allegations of the complaint. Although the courts are a medium by which citizens may exercise their First Amendment right to petition their government, the act of petitioning those courts may not serve as the means to achieve illegal ends. Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). Under this "sham litigation" exception to the Noerr-Pennington doctrine, we hold that the pleadings and the concomitant record evidence in this case, if credited by a factfinder, are sufficient to show that the
WCS and ELG are commercial real estate developers of two respective shopping centers in Anne Arundel County, Maryland: (1) the Village at Waugh Chapel South ("Waugh Chapel"); and (2) the Woodmore Towne Centre ("Woodmore").
That opposition commenced in December 2006 when union leadership "set[] its sights on Wegmans" to mount an antagonistic campaign. J.A. 14. According to WCS, a union executive threatened WCS that if Wegmans did not unionize, "we will fight every project you develop where Wegmans is a tenant." J.A. 18. The unions thereafter directed and funded a barrage of legal challenges at every stage of the projects' development.
The first of these challenges occurred in August 2008, when UFCW Secretary-Treasurer George Murphy, represented by his attorney G. Macy Nelson, petitioned the Anne Arundel City Council (the "Council") to revoke its decision to rezone the Waugh Chapel site from agricultural and residential to mixed-use commercial. WCS argued that Murphy lacked standing. The day before a scheduled hearing on the merits, Murphy withdrew the petition and effectively ceded that he was not an "aggrieved party." J.A. 441.
After this petition failed, the union employed surrogate plaintiffs to pursue their legal challenges. For the next few years, Nelson would represent plaintiffs in sixteen other proceedings objecting to the development of the shopping centers, with the unions allegedly directing the litigation. Three of those challenges pertained to Woodmore and are not before us on appeal. We summarize the thirteen other challenges to Waugh Chapel below.
On March 31, 2011, WCS and ELG sued the unions under the LMRA, 29 U.S.C. § 187, alleging two counts of secondary boycott activity under § 158(b)(4)(ii)(B). Count 1 of the complaint pertained to the Waugh Chapel shopping center (WCS), while Count 2 pertained to the Woodmore Towne Center (ELG). As to Count 1, the district court categorized the fourteen legal challenges directed against Waugh Chapel as follows: (1) one "successful petition" to appeal the issuance of the TIF bonds, J.A. 55, (2) two environmental suits dismissed for lack of standing, and from which the court would not infer baselessness, (3) ten grading and building "petitions withdrawn to avoid subpoenas" from which the court would not infer baselessness, J.A. 57, (4) one petition appealing the extension of time for WCS to post bonds and pay fees that became moot, and (5) one environmental suit dismissed on the merits "after thoughtful consideration," J.A. 58.
The Fund successfully moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that it was not a "labor organization" subject to the LMRA. And because the district court concluded that none of the prior legal challenges to the development of Waugh Chapel were objectively baseless, it dismissed Count I on Noerr-Pennington grounds. While the court allowed a portion of Count II to survive the unions' motion to dismiss,
Before reaching the merits of this appeal, we first address the procedural posture of this appeal and our jurisdiction to decide it.
Although the parties do not address it, we must determine our appellate jurisdiction to entertain this appeal under 12 U.S.C. § 1291, as "we are bound in all cases to ascertain our own appellate jurisdiction before reviewing a district court judgment." Reid v. Angelone, 369 F.3d 363, 374 n. 7 (4th Cir.2004).
"With few narrow exceptions," including certain interlocutory and collateral orders, "our jurisdiction extends only to appeals from all final decisions of the district courts of the United States." United States v. Myers, 593 F.3d 338, 344 (4th
Several of our sister circuits have held that litigants may not use voluntary dismissals as a subterfuge to manufacture jurisdiction for reviewing otherwise non-appealable, interlocutory orders. See Gannon Int'l, Ltd. v. Blocker, 684 F.3d 785, 791-92 (8th Cir.2012); Rabbi Jacob Joseph School v. Province of Mendoza, 425 F.3d 207, 210 (2d Cir.2005); LNC Investments LLC v. Republic of Nicaragua, 396 F.3d 342, 346 (3d Cir.2005); Marshall v. Kansas City S. Ry. Co., 378 F.3d 495, 499-500 (5th Cir.2004); James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1070 (9th Cir. 2002); CSX Transp., Inc. v. City of Garden City, 235 F.3d 1325, 1327 (11th Cir. 2000); ITOFCA, Inc. v. MegaTrans Logistics, Inc., 235 F.3d 360, 365 (7th Cir.2000); Cook v. Rocky Mountain Bank Note Co., 974 F.2d 147, 148 (10th Cir.1992). "Tolerance of that practice would violate the long-recognized policy against piecemeal appeals," Rabbi Jacob Joseph School, 425 F.3d at 210, and would allow "an end-run around the final judgment rule." Palmieri v. Defaria, 88 F.3d 136, 140 (2d Cir.1996).
ELG confesses that its Rule 41(a)(2) voluntary dismissal was intended to allow appellate review of an otherwise interlocutory order. See Appellants' Br. at 3 n. 1 ("The claims relating to one of those actions was dismissed by the March 29, 2012 Consent Order to allow for a final judgment.").
Madsen v. Audrain Health Care, Inc., 297 F.3d 694, 698 (8th Cir.2002) (internal quotations omitted). As did the Eighth Circuit, we choose the latter remedy here, as it polices the boundaries 10 of our appellate jurisdiction without punishing the litigants in this appeal. Accordingly, we deem ELG's voluntary dismissal of Count II to be with prejudice and proceed to consider WSC's appeal of its remaining claims.
We next address a procedural wrinkle regarding the district court's Rule 12(b)(6) dismissal. While we have since questioned our decision to do so, see IGEN Int'l, Inc. v. Roche Diagnostics GmbH, 335 F.3d 303, 311 (4th Cir.2003), we have held that the Noerr-Pennington doctrine is an affirmative defense,
While WCS's complaint alleges that the unions directed a series of adverse lawsuits in order to wage a secondary boycott, the mere reference to the purportedly sham proceedings does not show — on the face of the complaint — whether Noerr-Pennington bars WCS's claims as a matter of law. In fact, much of the relevant evidence that the district court considered on the point consisted of materials
We also note that when "matters outside the pleadings are presented to and not excluded by the court, the [Rule 12(b)(6)] motion must be treated as one for summary judgment under Rule 56," and "[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed.R.Civ.P. 12(d). Here, the district court did not formally convert the unions' motion to dismiss to one for summary judgment, believing instead that it could adjudicate the unions' motion under Rule 12(b)(6) by considering documents incorporated into the complaint by reference, and taking judicial notice of the purported sham proceedings.
It is not obvious to us that incorporation by reference is appropriate in this context given our holding in Goodman that a district court may consider only "the face of the complaint." Goodman, 494 F.3d at 464. Nor should "judicial notice" be used as an expedient for courts to consider "matters beyond the pleadings" and thereby upset the procedural rights of litigants to present evidence on disputed matters. Greater Balt. Ctr. for Pregnancy Concerns, Inc. v. Mayor & City Council of Baltimore, 721 F.3d 264, 271 (4th Cir.2013) (en banc) (internal quotations omitted); see Haavistola v. Cmty. Fire Co. of Rising Sun, Inc. 6 F.3d 211, 218 (4th Cir.1993).
But the bottom line is that the district court did allow the parties to supplement the record before ruling on the motion to dismiss. Moreover, the parties did not request discovery or otherwise object to the court's procedural management of the unions' motion to dismiss. As we have stated before,
Dean v. Pilgrim's Pride Corp., 395 F.3d 471, 474 (4th Cir.2005) (internal quotations omitted). We conclude that the principle announced in Dean applies directly here, and so we too will consider the unions' motion to dismiss based on the Noerr-Pennington doctrine as one for summary judgment.
As to the dismissal of the Fund under Rule 12(b)(6), therefore, we will "review the district court's grant of a motion to dismiss de novo," McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551, 554 (4th Cir.2013), accepting the allegations of WCS's complaint as true, Trail v. Local 2850 UAW United Def. Workers of Am., 710 F.3d 541, 543 (4th Cir.2013). But because we have refashioned the district court's dismissal of the claim against the remaining defendants as a grant of summary judgment, we review de novo whether there are any genuine issues of material fact for the trier of fact to resolve and, if not, whether the unions were entitled to dismissal as a matter of law. Reynolds v. Am. Nat'l Red Cross, 701 F.3d 143, 149 (4th Cir.2012).
We first consider the district court's decision to dismiss the claim against the Fund on the basis that it is not a "labor organization" under the NLRA subject to the secondary boycott prohibitions of the LMRA. The NLRA defines a "labor organization" as "any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work." 29 U.S.C. § 152(5).
We have "given a broad interpretation to the `dealing with' requirement." NLRB v. Peninsula Gen. Hosp. Med. Ctr., 36 F.3d 1262, 1270 (4th Cir.1994). But we have also explained that the "dealing with" phraseology denotes a "bilateral mechanism" through which an employee entity and management reciprocally interact:
Id. at 1271-72.
An employee entity may be a "labor organization" if its purpose or activity involves "dealing with" employers. Id. at 1270 n. 6. Yet the Fund satisfies neither of these criteria. First, WCS's own complaint alleges that the Fund is prohibited under its charter from "participating directly or indirectly ... in union collective activities." J.A. 13. Second, while the "question of whether an organization is a `labor organization' is primarily one of fact," Peninsula Gen., 36 F.3d at 1269, the
Although the Fund has designated itself as a "labor organization" for purposes of tax liability, this is not sufficient to render it a "labor organization" for the purposes of labor law. The Internal Revenue Code ("I.R.C.") has a distinct definition of "labor organization." See 26 U.S.C. § 501(c)(5); 26 C.F.R. § 1.501(c)(5)-1(a). The First Circuit has refused to borrow the NLRA definition of "labor organization" to determine the meaning of that term under the I.R.C. Tupper v. United States, 134 F.3d 444, 446 n. 1 (1st Cir. 1998). We agree with our sister circuit that the "I.R.C. and the NLRA have very different objectives," and we similarly decline "to import definitions from statutes with unrelated or cross-purposes." Id.
Because Plaintiffs fail to allege that the Fund has engaged in a pattern or practice of "dealing with" employers, it is not a "labor organization" under the NLRA and is not subject to the conditions of the LMRA. We therefore affirm the district court's decision to dismiss the complaint against the Fund.
We next consider whether the district court correctly dismissed the claim against the remaining defendants. Plaintiffs allege that the unions' various legal challenges to the Waugh Chapel development violated the secondary boycott provision of the NLRA, which extends to efforts to "exert pressure on an unrelated, secondary or neutral employer in order to coerce the secondary employer to cease dealing with the primary employer, thereby advancing the union's goals indirectly." R.L. Coolsaet Constr. Co. v. Local 150, Int'l Union of Operating Eng'rs, AFL-CIO, 177 F.3d 648, 655 (7th Cir.1999) (internal quotations omitted).
The unions counter that their litigation activity is protected by the Noerr-Pennington doctrine, which safeguards the First Amendment right to "petition the government for a redress of grievances," U.S. Const. amend. I, by immunizing citizens from the liability that may attend the exercise of that right. See Noerr, 365 U.S. at 136-39, 81 S.Ct. 523; Pennington, 381 U.S. at 669, 85 S.Ct. 1585.
The principle originated from Noerr, where the Supreme Court extended First Amendment protection to lobbying efforts for anti-competitive legislation, explaining that "mere attempts to influence the passage or enforcement of laws" cannot comprise a violation of antitrust law. Noerr, 365 U.S. at 135, 81 S.Ct. 523.
The Court has since expanded Noerr-Pennington immunity to alleged labor law violations, BE & K Constr. Co. v. NLRB, 536 U.S. 516, 526, 122 S.Ct. 2390, 153 L.Ed.2d 499 (2002), and to "the approach of citizens or groups of them to administrative agencies ... and to courts, the third branch of Government." Cal. Motor, 404 U.S. at 510, 92 S.Ct. 609. However, the First Amendment offers no protection when "petitioning activity ostensibly directed toward influencing governmental action, is a mere sham to cover ... an attempt" to violate federal law. Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus. ("PREI"), 508 U.S. 49, 56, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) (internal quotations omitted).
The Supreme Court's first engagement with this exception occurred in California
The Supreme Court revisited the sham litigation standard in PREI, which involved a defendant's counterclaim that the copyright action it was defending was a sham suit designed to violate antitrust law. In examining the applicability of Noerr-Pennington, the Court set forth a "two-part definition of `sham litigation.' First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." PREI, 508 U.S. at 60, 113 S.Ct. 1920. The second inquiry focuses on the "litigant's subjective motivation ... [and] whether the baseless lawsuit conceals an attempt to" violate federal law "through the use of the governmental process." Id. at 60-61, 113 S.Ct. 1920. Because "the sham exception contains an indispensable objective component," id. at 58, 113 S.Ct. 1920, "even an improperly motivated lawsuit may not be enjoined ... as an unfair labor practice unless such litigation is baseless," id. at 59, 113 S.Ct. 1920.
It is unclear whether PREI distinguished or displaced the sham litigation test first propounded in California Motor. Two of our sister circuits, however, "reconcile" the two cases "by reading them as applying to different situations. Professional Real Estate Investors provides a strict two-step analysis to assess whether a single action constitutes sham petitioning.... California Motor Transport, deals with the case where the defendant is accused of bringing a whole series of legal proceedings." USS-POSCO Indus. v. Contra Costa Cnty. Bldg. & Const. Trades Council, AFL-CIO ("POSCO"), 31 F.3d 800, 810-11 (9th Cir.1994); accord Primetime 24 Joint Vent. v. Nat'l Broad. Co., 219 F.3d 92, 101 (2d Cir.2000).
We have not had occasion to confront this issue, as our precedent has applied PREI only where a party has alleged a single sham proceeding. See IGEN Int'l, 335 F.3d at 307-08; Baltimore Scrap Corp. v. David J. Joseph Co., 237 F.3d 394, 397-98 (4th Cir.2001). Nevertheless, we agree with the distinction adopted by our sister circuits. In the absence of any express statement that the sham litigation standard in PREI supplanted California Motor, we are obligated to "follow the case which directly controls, leaving to th[e] [Supreme Court] the prerogative of overruling its own decisions." Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989).
Accordingly, when purported sham litigation encompasses a series of legal proceedings rather than a singular legal action, we conclude the sham litigation standard of California Motor should govern. In this context, the focus is not on any single case. Rather a district court should conduct a holistic evaluation of whether "the administrative and judicial processes have been abused." Cal. Motor, 404 U.S. at 513, 92 S.Ct. 609. The pattern of the legal proceedings, not their individual merits, centers this analysis:
Id. Of course, the subjective motive of the litigant and the objective merits of the suits are relevant, but other signs of bad-faith litigation — including those present in this case — may also be probative of an abuse of the adjudicatory process.
We now review the unions' motion to dismiss under this test.
In our view, the vast majority of the legal challenges failed demonstrably. In fact, it appears that only the March 2010 suit to enjoin the approval of TIF bonds could be called successful.
The plaintiffs objectively lacked standing in the proceedings to rescind the rezoning decision by the Council, as Maryland
Two additional suits regarding the MDE issuance of surface mining permits were dismissed as "based in critical part only on conjecture," J.A. 196, as the petitioners supplied only their own conclusory affidavits of environmental harm with no scientific data or expert testimony. Finally, collateral estoppel would have barred the nine appeals of the building and grading permits, as the petitioners simply repeated the substance of their nuisance claim — dismissed weeks earlier — that the developments caused environmental harm to their property.
While there is no particular win-loss percentage that a litigant must achieve to secure the protection of the First Amendment, a one-out-of-fourteen batting average at least suggests "a policy of starting legal proceedings without regard to the merits and for the purpose of [violating the law]." POSCO, 31 F.3d at 811; cf. Kaiser Found. Health Plan, Inc. v. Abbott Lab. Inc., 552 F.3d 1033, 1046-47 (9th Cir.2009) (no sham litigation where plaintiffs "won seven of the seventeen suits" and eight of the ten defeats concerned novel or close questions of law); POSCO, 31 F.3d at 811 (no sham litigation where fifteen out of twenty-nine suits succeeded); Twin City Bakery Workers & Welfare Fund v. Astra Aktiebolag, 207 F.Supp.2d 221, 224 (S.D.N.Y.2002) (no sham litigation where the court allowed "four of the six asserted patents to proceed beyond summary judgment.").
Of course, some of the legal challenges directed by the unions may have been justifiable in one sense or another. For example, the petition appealing the issuance of TIF bonds could be characterized as successful. Nevertheless, the fact that there may be moments of merit within a series of lawsuits is not inconsistent with a campaign of sham litigation, for "even a broken clock is right twice a day." POSCO, 31 F.3d at 811.
We note some other indicia of bad-faith litigation. First, there was a perverse nature to the environmental litigation directed by the unions to enjoin the commercial development. Because WCS and MDE entered into a consent decree to remediate preexisting environmental contamination, an injunction would have terminated the consent decree and prevented any environmental remediation from actually occurring.
Second, plaintiffs withdrew ten of the fourteen suits under suspicious circumstances. UFCW Secretary-Treasurer Murphy's eleventh-hour withdrawal of the August 2008 petition occurred a day before a hearing on the merits and after WCS had expended significant resources opposing the petition. And in the nine appeals of the building and grading permits, plaintiffs voluntarily dismissed their suits — according to WCS — to avoid complying with subpoenas of financial records that would have revealed that the unions were directing and paying for the litigation. While third-party financing of legal proceedings does not itself demonstrate an illegal purpose or render those suits sham, see Balt. Scrap, 237 F.3d at 400-01, a reasonable factfinder could credit this evidence in deciding whether "the administrative and judicial processes have been abused." Cal. Motor, 404 U.S. at 513, 92 S.Ct. 609.
The unions' post hoc justifications for these suits, as well as their alternative theories for why the sham litigation exception should not apply, fail to persuade us that dismissal of WCS's complaint is appropriate. We first reject the notion that because no attorney or union member
Just as we do not trespass on the prerogative of Maryland to police access to its courts, a state court's decision of whether or not to penalize sham litigation cannot control our determination of whether we should afford it constitutional protection. It would make little sense to cede that federal question to state law proceedings that involve issues that are distinct from our inquiry under California Motor. See Keller v. State Bar of Cal., 496 U.S. 1, 11, 110 S.Ct. 2228, 110 L.Ed.2d 1 (1990) ("Of course the Supreme Court of California is the final authority on the `governmental' status of the State Bar of California for purposes of state law. But its determination... is not binding on us when such a determination is essential to the decision of a federal question.").
In any event, while a state court's appraisal of the merits of litigation aids the sham exception inquiry, see Balt. Scrap, 237 F.3d at 399-400, the plaintiffs in the majority of the cases withdrew their suits before an adjudication. Moreover, WCS could not pursue sanctions against the unions, as they were not parties to the litigation. And even in the cases that reached an adjudication, we accord slight significance to the absence of a formal declaration of baselessness by the presiding tribunal where — as here — the defendants and the court did not have reason to suspect an improper motive behind the suits. Cf. PREI, 508 U.S. at 51-55, 113 S.Ct. 1920.
The unions also emphasize that sham litigation must "effectively bar[] [WCS] from access to the agencies and courts." Cal. Motor, 404 U.S. at 513, 92 S.Ct. 609. But this "access-barring" language cannot mean that litigation must reach such a crescendo as to literally incapacitate the legal system and prevent another litigant from receiving their day in court.
For this reason, we reject the unions' final argument that their series of legal challenges was not access-barring as a matter of law because it did not block development of the shopping centers. If anything, the ineffectiveness of the lawsuits in this case tends to prove, not dispel, the charge of sham litigation. Because successfully halting the project would defeat any sham litigation argument in the first place, see Balt. Scrap, 237 F.3d at 399 ("By definition, a winning lawsuit is a reasonable effort at petitioning for redress and therefore not a sham." (internal quotations omitted)), this "heads I win, tails you lose" theory of access-barring would nullify the sham litigation exception altogether.
We conclude that there remains a genuine issue of material fact as to whether the pattern of litigation alleged in WCS's complaint derived from "a policy of starting legal proceedings without regard to the merits and for the purpose of" waging a secondary boycott. POSCO, 31 F.3d at 811. In light of the poor litigation record and the signs of bad-faith petitioning, a factfinder could reasonably conclude that the unions have abused their right to petition the courts and, as a result, have forfeited the protection of the First Amendment. Therefore, the district court erred in dismissing WCS's claims against the unions.
For the foregoing reasons, we affirm the district court's dismissal of WCS's complaint as to the Fund, vacate the dismissal of WCS's complaint as to the remaining union defendants, and remand for further proceedings.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
We, however, remain bound by our earlier precedent that the Noerr-Pennington doctrine is an affirmative defense. See McMellon v. United States, 387 F.3d 329, 333 (4th Cir. 2004).
At oral argument, the unions sensed our inclination to sua sponte address this question, and requested that we allow supplemental briefing on this point. We deny this request, as we have reviewed the parties' briefing at the district court on this issue and find it more than sufficient.