Steam Press Holdings v. Hawaii Teamsters, 01-17222.

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: Goodwin
• Citation: 302 F.3d 998
• Parties: STEAM PRESS HOLDINGS, INC., dba Young Laundry and Dry Cleaning; Michael Drace, Plaintiffs-Appellees, v. HAWAII TEAMSTERS AND ALLIED WORKERS UNION, LOCAL 996; Mel Kahele, as an individual, Defendants-Appellants. Steam Press Holdings, Inc., dba Young Laundry and Dry Cleaning; Michael Drace, Plaintiffs-Appellants, v. Hawaii Teamsters and Allied Workers Union, Local 996, Defendant-Appellee. and Mel Kahele, as an individual; Hawaii Teamsters Health & Welfare Trust Fund; Doe Defendants 1-150, Defendants.
• Docket Number: No. 01-17222.,No. 02-15097.,01-17222.,02-15097.
• Decision Date: 26 August 2002

302 F.3d 998 STEAM PRESS HOLDINGS, INC., dba Young Laundry and Dry Cleaning; Michael Drace, Plaintiffs-Appellees,
v.
HAWAII TEAMSTERS AND ALLIED WORKERS UNION, LOCAL 996; Mel Kahele, as an individual, Defendants-Appellants.
Steam Press Holdings, Inc., dba Young Laundry and Dry Cleaning; Michael Drace, Plaintiffs-Appellants,
v.
Hawaii Teamsters and Allied Workers Union, Local 996, Defendant-Appellee. and
Mel Kahele, as an individual; Hawaii Teamsters Health & Welfare Trust Fund; Doe Defendants 1-150, Defendants. No. 01-17222. No. 02-15097. United States Court of Appeals, Ninth Circuit. Argued and Submitted June 10, 2002. Filed August 26, 2002.

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Deborah Drooz, Strook & Stroock & Lavan, Los Angeles, CA, and Jeffrey L. Cutler, Elizabeth Rosenfeld, Wohlner Kaplon Phillips Young & Cutler, Encino, CA, for the defendants-appellants-appellees.

Jared H. Jossem, Dwyer Schraff Meyer Jossem & Bushnell, Honolulu, HI, for the plaintiffs-appellees-appellants.

Fred H. Altshuler, Linda Lye, Altshuler, Berzon, Nussbaum, Rubin & Demain, San Francisco, CA, for the amici curiae.

Appeal from the United States District Court for the District of Hawaii; Helen Gillmor, District Judge, Presiding. D.C. Nos. CV-99-00187-HG(KSC), CV-99-00187-HG.

Before: GOODWIN, HAWKINS and FISHER, Circuit Judges.

GOODWIN, Circuit Judge.

Michael Drace and Steam Press Holdings, Inc., dba Young Laundry and Dry Cleaning, sued Mel Kahele and Hawaii Teamsters and Allied Workers, Local 996, in federal district court alleging that (1) defendants made defamatory statements of and concerning plaintiffs during the course of a labor dispute; (2) defendants breached a no-strike clause in a collective bargaining agreement ("CBA"); and (3) defendants engaged in racketeering. The district court found in favor of plaintiffs on the defamation claim, awarding damages for economic and reputational harm caused by the defamatory statements, and found in favor of defendants on the remaining claims. Both parties appeal.

We have jurisdiction pursuant to 28 U.S.C. § 1291. For the reasons that follow, we (1) reverse the district court's holding on the defamation issue; (2) affirm the district court's disposition of the RICO and breach of collective bargaining agreement issues; and (3) affirm the district court's denial of plaintiffs' request for attorneys' fees.

BACKGROUND

This appeal arises out of a labor dispute involving the employees of Young Laundry and Dry Cleaning, Inc. ("YLDC"), a retail laundry and dry cleaning business operating in Hawaii. In September 1994, Michael Drace purchased YLDC from its prior owner, David Applebaum. Drace has been the president and owner of YLDC since the time of the purchase.¹

Hawaii Teamsters and Allied Workers, Local 996, (the "Union") is a labor organization, as defined in 29 U.S.C. § 152(5). Mel Kahele was president of the Union at all times relevant to these proceedings. As of July 1998, the Union had approximately 5400 members and was a party to collective bargaining agreements with approximately 68 employers, one of whom was YLDC.

At the time of Drace's purchase of YLDC, the Union and YLDC were parties to a collective bargaining agreement (known as the Master Laundry Agreement ("MLA")) which governed the YLDC employees' wages, benefits, and working conditions. As a condition of Drace's purchase of YLDC, the Union was asked to make certain concessions on employee wages and benefits. The Union agreed to these concessions, and the concessions became part of the Memorandum of Agreement ("MOA"), which modified the terms of the MLA. YLDC's employees understood the concessions as a loan that would be repaid to them by Drace upon the expiration of the MOA. By its express terms, the MOA remained in effect until September 30, 1998.

Shortly before the expiration of the MOA, the Union and the Employers entered

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into negotiations on a new contract. In a letter dated July 13, 1998, the Union proposed restoration of the benefits that had been reduced or eliminated when Drace purchased YLDC in 1994. In response, Drace claimed that YLDC was in financial trouble and proposed further reductions in employee benefits and wages. Drace also invited the Union to arrange for an accountant to review YLDC's books.

On July 28, 1998, the Union informed Drace that it was conducting its own research into YLDC's finances and that it would organize a negotiating committee. The Union asked the International Brotherhood of Teamsters to provide it with financial information regarding YLDC.

On September 2, Union representatives met with Drace and others to discuss YLDC's proposals. Drace, employing various charts and graphs, explained to the Union representatives that YLDC was in financial distress. One Union member reacted by telling Drace that charts can be "made to show anything that [one] wants them to show." After Drace's presentation, the Union again proposed the restoration of the benefits that had been conceded in 1994, along with wage increases for each of the following three years. The meeting ended without an agreement.

On or around September 8, the Teamsters responded to the Union's request for financial information about YLDC by sending the Union a Dun & Bradstreet Report ("D & B Report") on YLDC. The district court found that the D & B Report and supporting documents "contain[ed] numerous indications of YLDC's poor financial health."

The parties held their second bargaining session on September 10. Drace presented his third proposal (which was substantially similar to his earlier proposals). During this meeting, Union representatives inquired about a company called "Steam Press, Inc." Although Drace had formed Steam Press in 1995 as a holding company for YLDC, Union members had only recently discovered the company's existence. Kahele asked Drace what Steam Press was, and Drace replied that it was a company set up to invest the profits of YLDC. The Union's questions concerning Steam Press prompted Mr. Jossem, YLDC's attorney, to ask if the Union was calling Drace a liar. Union member Jesse Apodaca Torres responded "we can," to which Kahele added "we will." The Union ultimately rejected Drace's proposal.

On the following day, near a dumpster outside the YLDC plant, the Union held a meeting to discuss the status of contract negotiations with YLDC employees. The number of employees present changed over the course of the meeting, ranging from a low of forty to a high of eighty.

Hannah Kilakalua, a YLDC employee, attended this meeting and later testified that Kahele stated at the meeting "Mike is making money" and "Mike Drace is making money from the Steam Press." Kilakalua further testified that "everybody was mad" after Kahele made the statement "Mike is making money."

Drace, although not present at the meeting, testified that after the meeting he spoke with Bernard Roque, a member of the Union negotiating team. Roque told Drace that he was at the meeting and that he resigned from the negotiating team after hearing that YLDC was hiding seven to ten million dollars. The district court found "that Kahele stated at the September 11 meeting that Mike Drace was making money and that he was hiding the money in Steam Press."

On September 17, a third negotiation session took place, resulting in the parties agreeing that they were at an impasse. On September 25, the Union agreed to have its accountant examine YLDC's books. Kahele accompanied Union accountant

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Terry Takaki to YLDC's offices where they reviewed the consolidated books and records of YLDC and Steam Press. After examining these materials, Takaki informed Kahele that YLDC did not have any money. Shortly thereafter, Kahele and Takaki put the review of YLDC's financial records on hold.

The Union held a strike authorization vote on September 29. YLDC employees voted 80-8 in favor of a strike. Relying on the testimony of Kilakalua, the district court found that "At the strike vote, Kahele, as well as others, made statements that Drace was making money from Steam Press and that the Union was going to check on that." On October 8, the Union went on strike. The strike lasted until May 1999, when YLDC's employees decertified the Union.

Shortly before the strike ended, Drace and YLDC sued the Union and Kahele in federal district court, alleging, inter alia, that (1) the strike violated a no-strike clause in the collective bargaining agreement; (2) the Union was guilty of defamation; and (3) Kahele and others had engaged in racketeering in violation of 18 U.S.C. § 1961.

The district court disposed of the Employers' racketeering claim at the summary judgment stage, granting the Union's motion for summary judgment. The court found that the Employers had failed to demonstrate either "closed-ended" or "open-ended" continuity, and therefore held that the Union had not engaged in a "pattern" of racketeering activity, as required by 18 U.S.C. § 1961.

The court disposed of the Employers' remaining claims following a bench trial. Pursuant to section 301 of the Labor Management Relations Act, the Employers alleged that the Union breached the no-strike clause of the MLA. Specifically, the Employers alleged that the October 8 strike was a breach of Section 29 of the MLA, which prohibited strikes while the agreement was in force.²

The district court found that the MLA, by its express terms, still governed the parties at the time of the strike. The court also found, however, that the Employers were "estopped from arguing that the MLA continued to be in force because they had repudiated it prior to the beginning of the strike on October 8, 1998." Accordingly, the court entered judgment in favor of the Union.

Lastly, with respect to the state law defamation claim, the court found in favor of the Employers. The court found that Kahele's statements that "Drace was making money" and "hiding it in...