SODEXO INC.’S ANTI-UNION RICO CASE MAY SIGNAL A TREND

There is yet another pathbreaking civil RICO complaint making news in the legal world.  On March 17th Sodexo, Inc., the U.S. affiliate of French multinational Sodexo S.A., a janitorial, laundry and food service provider, sued the Service Employees International Union (S.E.I.U.), several of its locals and its former President, Andy Stern, for attempting to coerce the company to agree to allow it to organize the 80,000 of its employees who are not already represented by another union.  Sodexo, Inc. v. S.E.I.U. et al., Case No. 1:20 11-cv-00276 (E.D. Va.).  According to Sodexo’s lengthy Complaint, S.E.I.U. has waged a relentless campaign to damage Sodexo’s reputation, interfere with its contracts, make false allegations of serving contaminated food to its customers, and otherwise bring the company to its knees.  Sodexo claims this campaign has cost it millions of dollars in lost business and the Complaint specifies several contracts it contends were lost as a direct result of the union’s tactics. 

For RICO purposes, a campaign to extort property can be the basis of a Complaint if the extortion violates either the Hobbs Act, a federal statute, or a state law  which makes the extortion a crime ”punishable”" by more than a year in jail.  Additionally, the Hobbs Act makes attempts to extort property actionable.  So Sodexo’s allegations that S.E.I.U. has attempted to extort Sodexo’s alleged right to recognize, or not to recognize, that union as its employees’ bargaining agent and that this attempt has taken the form of a long-running campaign which has cost it money (lost profits), could state a RICO claim.  I say could because the racketeering activity must be long-term (typically at least two years running) or  the regular way the defendant conducts its operations, i.e., like an organized crime ring whose activities will project into the future and harm others.  Sodexo alleges both types of conduct: a long-term record of harming it and other companies who would not capitulate to its demands in the past several years, and that the union has adopted this as its modus operandi.  According to Sodexo, the S.E.I.U. is not interested in the traditional manner of labor organizing, a plant-by-plant  campaign to persuade a majority of workers to vote for it in a secret ballot overseen by the National Labor Relations Board, but rather prefers to wage an all-out fight to get the target company to agree to its representation of all of its workers without elections.  This manner of unionizing is allowed by federal law but is rarely used. 

Sodexo’s damages from S.E.I.U.’s vicious campaign would, of course, be much greater if it had succumbed and agreed to allow the union to organize the 80,000 employees.  Then it would be paying, under duress, very high wages and generous benefits which would cost it enormous sums of money and might put the company on the path toward bankruptcy.  But it did not succumb (at least not yet) and thus its damages from S.E.I.U.’s campaign would seem to be limited to profits it lost due to the union’s aggressive campaign waged on college campuses and hospitals which have food-service contracts with Sodexo, to smear the company’s reputation.  (In some cases S.E.I.U.  organizers enlisted celebrities, including actor Danny Glover, to draw media attention its anti-Sodexo protests.)  But these are big contracts, and Sodexo does not need to prove many were lost to crush the defendants.  For example, the Complaint alleges the S.E.I.U. campaign cost it a long-term food service contract with the Department of Defense to serve 20 marine corps bases -worth $765 million. If Sodexo can establish that number at trial, and a jury believes the defendants’ actions were the proximate cause of the loss of that contract, then the damages, which are tripled under RICO, plus attorney’s fees, which will be sky-high in this case, could be arge enough to shut down the S.E.I.U. for good.

But civil RICO cases have many parts, and Sodexo’s lawyers will have to conduct extensive discovery and prove the requisite pattern of racketeering activity, and the use of the various enterprises it alleges in the different counts of its complex  Complaint.  Sodexo will also have to contend with the the decison in a similar RICO case brought by Smithfield Foods, Inc. against the United Fooods and Commercial Workers International Union which held that all of the union’s acts were protected by the First Amendment as forms of speech.  Thus, in order to recover damages on its RICO claim Smithfield must prove the union’s statements were made with”actual malice,” the standard established by the Supreme Court for defaming public figures.  Smithfield Foods, Inc. v. United Foods and Commercial Workers Intern. Union,585 F. Supp. 2d 815 (E.D. Va. 2008).  This is a tough standard to meet, essentially requiring the plaintiff to prove the defendant knew its statements were false or in “reckless diregard for the truth.”  This is why there are so few successful libel lawsuits brought by American celebrities against tabloids.  (European libel law is much more friendly to the victim.)  If the Sodexo court adopts the Smithfiled First Amendment analysis, then Sodexo’s burden in obtaining damages will be quite difficult.  I do not know enough about the case to offer an opinion as to whether this burden can be met, i.e., how outrageous were the statements of food contamination and ill treatment of workers by the union and its agents.  I will be following the cases closely because if either Smithfiled or Sodexo can win, then we may see a dramatic change in the all-out warfare type of union organizing S.E.I.U. is known for.  These are truly cutting- edge RICO cases.

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