U.S. Dist. Judge Helen W. Gillmor (D. Haw., Clinton) ordered the Int’l Bhd. of Teamsters Local 996 in Hawaii to pay nearly $1 million to a dry cleaning firm and its owner for union bosses’ “reckless disregard” as to the truth of statements they made regarding the firm’s financial state during contract bargaining and in advance of a strike vote. Local 996’s bosses “acted with malice in making statement…[at a membership meeting] while being aware of the probable falsity of the statements” about the company’s resources, said Gillmor. The firm’s owner claimed he was defamed by the union’s false and malicious statements that the firm was making money and that he had hidden the money in a separate entity while demanding that employees accept a concessionary contract.
The case arose out of a collective bargaining dispute in 1998 between Young Laundry & Dry Cleaning and Local 996 that resulted in a 7 month strike, the permanent replacement of striking workers, and ultimately to the decertification of IBT in May 1999. In the course of the bargaining, the firm’s owner, Michael Drace, repeatedly tried to provide IBT negotiators with information concerning the firm’s deteriorated financial state. Drace offered the firm’s financial records in explanation for a wage rollback he proposed in his contract offer.
Evidence and testimony showed that local president Mel Kahele took the financial records but never reviewed them. He also rejected Drace’s offer to allow a union accountant to review the books. Kahele said he made a deliberate decision not to have an accountant review the financial records because employees were adamant that they receive a wage increases. At a Sept. 11 membership meeting, Kahele told employees the firm was seeking concessions even though it was profitable. He claimed Drace was “hiding money” in Steam Press Holdings, Inc., a holding company created in 1997 when Drace took over the laundry operation.
“A state law defamation claim may proceed in federal court to the extent that the aggrieved party can demonstrate that the defamatory statements are made with actual malice. Actual malice is shown with knowledge that the statements made are false or made with reckless disregard to their truth or falsity,” wrote Gillmor.”The documentary and testimonial evidence shows that the union acted with a high degree of awareness of the probable falsity of the truth of the statements that Drace was making money and that he was hiding money in Steam Press….The union acted with malice in making statements to [company] employees on Sept. 11 while being aware of the falsity of the statements.”
At a subsequent strike authorization meeting, Kahele again told employees that the company was making money and hiding it. In making such statements, the judge said, the union “acted in reckless disregard for the truth.”
Gillmor ruled, “The effect of these statements being put forth by the employees’ lawful collective bargaining representative moments before the strike vote was clearly to motivate the employees to vote to strike. … The subsequent strike that flowed from the vote was directly caused by the misinformation put forward by Kahele and the union.”
Gillmor ordered the local to pay compensatory damages totaling $885,323 to Young Laundry & Dry Cleaning and an additional $100,000 to Drace for damage to his reputation and emotional distress. Gillmor also held the union liable for the cost of additional unemployment insurance taxes and interest payments which, according to the firm’s attorney, could amount to an additional $600,000. Gillmor, however, denied Drace’s request for punitive damages, saying that “compensatory damages adequately reflect the unlawful nature of the conduct and that punitive damages are not necessary to deter [the union] from similar conduct in the future.
Attorney Jeffrey Cutler, of Wohlner Kaplon Phillips, Young, & Barsh in Encino, Cal., represented Local 996 and said the local intends to appeal the ruling. Young Laundry & Dry Cleaning was represented by Honolulu attorneys Jared H. Jossem and Lynne T. Toyofuku of the firm of Dwyer Schraff Meyer Jossem & Bushnell. [BNA 10/11/01]