Refusing to dismiss a civil Racketeer Influenced and Corrupt Organizations Act ("RICO") suit against the United Food and Commercial Workers ("UFCW"), a federal judge in Virginia has held that the plaintiff company adequately alleged extortion and a "pattern of racketeering activities" in its complaint against the union and other defendants. Smithfield Foods, Inc. v. United Food & Commercial Workers Int'l Union et al., No. 3:07cv641 (E.D. Va. May 30, 2008).

The Company filed a lawsuit in October 2007 claiming that UFCW and others, including Service Employees International Union President Andy Stern, "conspired to extort Smithfield's ‘voluntary' recognition … by injuring [the company] economically until [it] either agreed to Defendants' demands or was run out of business." The complaint contends that the defendants targeted the Company's Tar Heel, North Carolina, plant for a corporate campaign after over a decade of unsuccessful attempts to unionize workers there.

Judge Robert E. Payne, in refusing to dismiss the RICO suit, noted that a corporate campaign includes a "wide and indefinite range of legal and potentially illegal tactics used by unions to exert pressure on an employer... [including] litigation, political appeals, requests that regulatory agencies investigate and pursue employer violations of state and federal law, and negative publicity campaigns aimed at reducing the employer's goodwill with employees, investors, or the general public."

The plaintiff alleged that UFCW violated the federal RICO statute over the course of its corporate campaign by publishing false information about the Company, unlawfully interfering with the Company's business relations, and seeking frivolous regulatory investigations.

In order to state a viable RICO claim, Judge Payne explained, the plaintiff must allege a "pattern of racketeering activities" and a "predicate act" prohibited by the statute, such as extortion. Relying on U.S. Supreme Court precedent, the judge reasoned that extortion entails "obtaining the property of another by depriving the owner of the property." The judge held that a company's right not to recognize a labor union (unless and until it is certified by the National Labor Relations Board) is a "property right." Indeed, Judge Payne said it "is among the most valuable and important rights possessed by business owners." The complaint, which included allegations that the defendants threatened financial ruin if the Company did not surrender its right not to recognize the union, could survive a motion to dismiss as to the predicate act of extortion, the judge ruled.

Turning next to RICO's "pattern of racketeering activities" component, Judge Payne held that the alleged acts of extortion were "related" and "continuous" as required by the statute.

Judge Payne also refused to dismiss claims against individual defendants, including Stern, and defendants Research Associates of America, Jobs with Justice and Change to Win. These individuals and entities "were significant, active, independent participants in the alleged conspiracy," Judge Payne said. The allegations that the defendants participated in the corporate campaign "by investigating Smithfield's operations and drafting factual reports regarding workplace safety violations, organizing protests at the sites of the company's business partners and shareholder meetings, and proposing resolutions to city councils and other organizations" demonstrate that they acted as more than mere advisors, he concluded.

Though the judge has not made a ruling on the merits, his decision allowing the case to go forward is a significant victory for employers and signals judicial recognition of the perils aggressive corporate campaigns pose to companies.

Although RICO convictions in cases involving insider trading, drug trafficking and organized crime-related activity are well known, civil RICO actions against labor union organizing campaigns have been rare, but are becoming more common. For instance, in November 2007, Wackenhut Corp. filed a lawsuit under the federal RICO statute against the SEIU alleging the union engaged in racketeering activity as part of its campaign to organize that company.