Goddess & Baker Wacker L.L.C. v. Sterling Bay Cos.
| Decision Date | 22 March 2022 |
| Docket Number | 21 C 1597 |
| Citation | 592 F.Supp.3d 746 |
| Parties | GODDESS AND BAKER WACKER L.L.C., on behalf of itself and all others similarly situated, Plaintiff, v. STERLING BAY COMPANIES, L.L.C., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
James B. Zouras, Anna Ceragioli, Ryan F. Stephan, Stephan Zouras, LLP, Chicago, IL, Howard William Foster, Matthew A. Galin, Foster, P.C., Chicago, IL, for Plaintiff.
John J. Hamill, Jr., Jacob Riley Clubb, Joseph Anton Roselius, DLA Piper LLP, Chicago, IL, for Defendant.
John Z. Lee, United States District Judge Plaintiff Goddess and Baker Wacker, L.L.C. ("Goddess") is a tenant in a building in downtown Chicago managed by Defendant Sterling Bay Companies, L.L.C. ("Sterling Bay"). Goddess alleges that Sterling Bay conspired with three unions—International Union of Operating Engineers Local 399 ("Local 399"); AFL-CIO, Service Employees International Union, Local 1 ("Local 1"); and Teamsters Local 705 ("Local 705") (collectively "the Unions")—to force Goddess and other Sterling Bay tenants to use only unionized labor to maintain and make improvements to their properties. And so, Goddess brings this putative class action alleging that Sterling Bay violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. , by colluding with the Unions to extort Goddess in violation of the Hobbs Act, 18 U.S.C. § 1951 et seq.
Sterling Bay moves to dismiss Goddess's complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim and, in the alternative, to refer the case to the National Labor Relations Board ("NLRB"). For the following reasons, Sterling Bay's motion to dismiss is denied, and Sterling Bay's motion to refer this case to the NLRB under the doctrine of primary jurisdiction is granted.
Goddess is a coffee shop and bakery that has rented commercial space in 121 W. Wacker Drive ("121 Wacker") since 2016. Class Action Compl. ("Compl.") ¶ 19, ECF No. 1. Sterling Bay manages 121 Wacker and is responsible for supervising contractors’ access to the building. Id. ¶ 8.
Since its lease began, Goddess has made extensive improvements to the premises, including "electrical installation, carpentry, drywalling, tile installation, plumbing, painting, and ceiling installation." Id. ¶ 20. According to Goddess, Sterling Bay has forced it to use unionized labor for all of this work. Id. ¶ 21. This is in keeping with Sterling Bay's practice of forcing all tenants at several other Sterling Bay-managed properties to do the same. See id. ¶ 24.
As Goddess sees it, the management company's union-only policy stems from a conspiratorial agreement between Sterling Bay and the Unions to require tenants to use unionized labor. Id. ¶ 12. The arrangement purportedly works as follows. At each Sterling Bay building, the chief engineers, who are members of Local 399, report the presence of any nonunionized contractors to their union. Id. ¶ 14. Local 399 notifies Sterling Bay of the nonunionized workers and threatens to picket the Sterling Bay building and display the notorious "Scabby the Rat"2 in front of the building, if Sterling Bay does not remove the nonunionized workers. Id. The other two unions, who benefit from the arrangement, agree to join the picket. See id.
In an effort to avert picketing in front of its building, Sterling Bay then contacts the tenant that employed the nonunion labor and orders it to stop using nonunion labor. Id. Over time, this arrangement hardened into Sterling Bay's policy to require all tenants to submit proof of a contractor's union membership before the contractor is allowed access to the building. Id. ¶¶ 15, 41. This policy is enforced through Sterling Bay's tenant handbook and its directions to its building managers to deny contractors access to the building if the contractors cannot prove that they are union members. Id. ¶ 15. Sterling Bay communicates this policy to all tenants before they begin a move or contract work. Id. ¶ 41.
Because unionized labor is more expensive than nonunionized labor, id. ¶¶ 16–18, Goddess has spent at least twenty percent more on improvements than it would have if Sterling Bay had permitted it to use nonunionized labor. Id. ¶ 23. Goddess brings this putative class action under RICO §§ 1962(c)–(d) to recover these damages for itself and all other Sterling Bay tenants forced to pay a "premium" for unionized labor. Goddess pleads racketeering activity under § 1962(c) and predicate offenses of extortion under the Hobbs Act, 18 U.S.C. § 1951, based on Sterling Bay's alleged "wrongful threat," id. § 1951(b), of a "hot cargo agreement"3 in violation of § 8(e) of the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151 et seq. See id. § 158(e). Goddess also pleads conspiracy to engage in racketeering activity under § 1962(d).
Sterling Bay moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. See Def. Sterling Bay Cos.’ Mot. Dismiss, ECF No. 23; Mem. Supp. Mot. Dismiss ("Def.’s Mem."), ECF No. 24. In the alternative, Sterling Bay ask the Court to refer the case to the NLRB under the primary jurisdiction doctrine. See Def. Sterling Bay Co.’s Mot. Primary Jurisdictional Referral NLRB, ECF No. 25; Mem. Supp. Mot. Primary Jurisdictional Referral NLRB, ECF No. 26. Because Sterling Bay raises primary jurisdiction as both a ground for dismissal and an alternative basis for NLRB referral, the Court addresses both motions here.
To survive a motion to dismiss under Rule 12(b)(6), a complaint must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). This standard "is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (cleaned up). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (cleaned up).
When considering a motion to dismiss, courts accept "all well-pleaded factual allegations as true and view them in the light most favorable to the plaintiff." Lavalais v. Vill. of Melrose Park , 734 F.3d 629, 632 (7th Cir. 2013). At the same time, courts are "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).
Accordingly, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to state a claim. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.
RICO provides a civil cause of action for plaintiffs damaged by long-term criminal schemes, including organized crime. See 18 U.S.C. § 1964(c). To state a RICO claim, a plaintiff must plead "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Menzies v. Seyfarth Shaw LLP , 943 F.3d 328, 336 (7th Cir. 2019). This introduces several terms requiring definition.
A RICO "enterprise" can be either a legal entity (such as a corporation, partnership, or association), or a "group of individuals associated in fact." 18 U.S.C. § 1961(4) ; see Boyle v. United States , 556 U.S. 938, 943–44, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009).
"Racketeering activity" is any predicate offense listed in 18 U.S.C. § 1961(1), including crimes such as bribery, extortion, fraud, money laundering, or drug trafficking. Id.
To plead a "pattern" of racketeering activity, the plaintiff must show "at least two acts of racketeering activity," id. § 1961(4), and "a relationship between the predicate acts as well as a threat of continuing activity—a standard known as the ‘continuity plus relationship’ test." Menzies , 943 F.3d at 337 (quoting DeGuelle v. Camilli , 664 F.3d 192, 199 (7th Cir. 2011) ). The pattern of racketeering activity must also "affect interstate or foreign commerce." § 1962(c).
Finally, the plaintiff must prove that the defendant is a RICO "person," meaning an individual or entity "distinct from the RICO enterprise," who is responsible for the challenged conduct (i.e. , the racketeering activity). Sabrina Roppo v. Travelers Com. Ins. Co. , 869 F.3d 568, 588 (7th Cir. 2017) ).
According to Goddess, Sterling Bay (the RICO "person") colluded with the Unions (together comprising an "associated-in-fact enterprise") to engage in numerous acts of extortion (the "conduct" and "racketeering activity") against Goddess and other Sterling Bay tenants to force them to use only unionized labor for moving and contract work. Goddess brings two counts under this theory: conduct or participation in a RICO enterprise under § 1962(c), and RICO conspiracy under § 1962(d).
Sterling Bay first argues that Goddess's RICO claims should be dismissed because they are "inextricably tied to labor issues" governed by the NLRA.4 Def.’s Mem. at 1. Sterling Bay points out that Goddess's extortion claim (the "racketeering activity") is based on an underlying allegation of a "hot cargo agreement" in violation of § 8(e) of the NLRA. Thus, in Sterling Bay's view, Goddess's RICO claim falls within the primary jurisdiction doctrine, because the alleged extortion on which it is predicated is "wrongful only by virtue of the labor laws." Talbot v. Robert Matthews Distrib. Co. , 961 F.2d 654, 662 (7th Cir. 1992).
As an initial matter, it bears mentioning that "[f]ederal statutes do not preempt...
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