Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-02553/USCOURTS-casd-3_14-cv-02553-2/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PRIME HEALTHCARE SERVICES,

INC.,

Plaintiff,

CASE NO. 14cv2553-GPC-RBB

ORDER GRANTING IN PART AND

DENYING IN PART

DEFENDANTS’ MOTION TO

DISMISS PLAINTIFF’S FIRST

AMENDED COMPLAINT

[Dkt. No. 50.]

v.

SERVICES EMPLOYEES

INTERNATIONAL UNION, ET AL.,

Defendants.

INTRODUCTION

Plaintiff Prime Healthcare, Inc. (“Prime Healthcare”) brings this civil action

alleging violations of the Racketeering Influenced and Corrupt Organizations Act

(“RICO”) and the Labor Management and Relations Act (“LMRA”). Before the Court

is a motion to dismiss filed by Defendants Service Employees International Union

(“SEIU”), Service Employees International Union - United Healthcare Workers West

(“UHW”), Change to Win, CTW Investment Group, Mary Kay Henry, Dave Regan,

and TomWoodruff (collectively, “Defendants”). (Dkt. No. 50.) The Parties have fully

briefed the motion. (Dkt. Nos. 57-58.) For the reasons set forth below, the Court

GRANTS IN PART AND DENIES IN PART Defendants’ motion to dismiss. 

///

///

- 1 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 1 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FACTUAL BACKGROUND

Prime Healthcare brings this action against various union-related entities and

individuals for allegedly unlawfully conspiring to unionize hospitals owned by Prime

Healthcare. (Dkt. No. 47, First Amended Complaint (“FAC”) ¶ 5.)

A. The Parties

Plaintiff Prime Healthcare is a hospital management company which, along with

an affiliated foundation, operates twenty-eight acute care hospitals in eight states,

including fifteen hospitals in California. (Id. ¶¶ 1, 22-23.) Prime Healthcare describes

itself as “largely non-union.” (Id. ¶ 3.)

Defendant SEIU is an unincorporated labor association that represents units of

workers and negotiates terms and conditions of employment for the workers it

represents. (Id. ¶ 24.) Defendant UHW is a local union affiliate of SEIU located in

California. (Id. ¶ 25.) UHW represents individuals working in California’s hospitals

and clinics, including nurses, aids, case managers, clerks, maintenance workers, and

housekeeping staff, and negotiates terms and conditions of employment for the

healthcare workers it represents. (Id.)

DefendantChange to Win is a union federation made up ofthree member unions:

SEIU, the International Brotherhood of Teamsters, and the United Farm Workers of

America. (Id. ¶ 30.) Defendant CTW Investment Group is the investment arm of

Change to Win. (Id. ¶ 36.) Prime Healthcare alleges that Change to Win approves of

SEIU’s tactics, and supports them through CTW Investment Group. (Id. ¶¶ 31-35.)

The remaining Defendants are individual executives of the above entities.

Defendant Mary Kay Henry is the President of SEIU and Secretary-Treasurer of

Change to Win. (Id. ¶ 27.) Defendant Dave Regan is President of UHW, Vice

President of SEIU, and Vice President of the SEIU Leadership Council. (Id. ¶ 28.)

Finally, Defendant Tom Woodruff is the Executive Director of Change to Win’s

Strategic Organizing Center, and also previously served as an SEIU International

Executive Vice President for more than a decade. (Id. ¶ 36.) 

- 2 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 2 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

B. Alleged Unlawful Conduct

Prime Healthcare alleges that Defendants have unlawfully conspired to force

PrimeHealthcare to unionize its hospitals through a “corporate campaign” that employs

extortion. (Id. ¶¶ 5, 8, 47.) For example, since around 2010, Defendants have

allegedly:

• attempted to thwart Prime Healthcare’s acquisition of additional hospitals;

• attacked investment partners of Prime Healthcare through false and disparaging

public accusations of wrongdoing;

• produced false and misleading reports and studies for the sole purpose of

damaging Prime Healthcare’s business goodwill;

• worked with complicit media outlets to publicize sham and baseless allegations;

• initiated certain sham and baseless complaints causing regulatory and

administrative investigations, sham and baseless litigation, and inquiries by

accreditation agencies;

• coerced, harassed, and threatened patients who use Prime Healthcare’sservices;

• persuaded writers, government agencies, and politicians to raise specious

allegations about Prime Healthcare’s conduct;

• targeted the California Hospital Association with sham ballot initiatives to

impose a top-down neutrality agreement on its members (including Prime

Healthcare); and

• violated federal labor laws.

(Id. ¶¶ 9, 115.)

Prime Healthcare alleges that through their extortionate activities, Defendants

have acquired and are attempting to acquire substantial money and property, including

tens of millions of dollars, Prime Healthcare’s goodwill, Prime Healthcare’s rights to

grow its business through hospital acquisitions and oppose unionization of its

employees, and Prime Healthcare’s customers and related revenues. (Id. ¶¶ 14, 110.)

///

- 3 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 3 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

C. Prior Prime Healthcare Litigation

On November 15, 2011, Prime Healthcare previously brought an antitrust action

alleging that SEIU, UHW, and several Kaiser-related entities had conspired to

eliminate Prime Healthcare fromthe healthcare servicesmarket and increase healthcare

workers wages. See Prime Healthcare Servs., Inc. v. Serv. Emps. Int’l Union, No. 11-

CV-2652-GPC-RBB (S.D. Cal.) (“Prime Healthcare I”). On September 21, 2012,

Prime Healthcare filed a first amended complaint. (Id. at Dkt. No. 46.) On July 25,

2013, this Court dismissed Prime Healthcare’s first amended complaint under Federal

Rule of Civil Procedure 12(b)(6), but granted leave to amend. See Prime Healthcare

I, 2013 WL 3873074 (S.D. Cal. July 25, 2013). After Prime Healthcare did not file a

second amended complaint, this Court granted the defendants’ motion to dismiss with

prejudice for lack of prosecution under Federal Rule of Civil Procedure 41(b).

See Prime Healthcare I, 2013 WL 6500069 (S.D. Cal. Dec. 11, 2013). Prime

Healthcare’s appeal of this Court’s dismissal orders is still pending. See Prime

Healthcare I, No. 13-57185 (9th Cir.).

PROCEDURAL HISTORY

 On August 25, 2014, Prime Healthcare filed the instant action in the Northern

District of California (“Prime Healthcare II”). (Dkt. No. 1.) On October 24, 2014, the

Northern District of California ordered the case transferred to the Southern District of

California. (Dkt. No. 38.) On November 14, 2014, the case was reassigned to the

undersigned judge. (Dkt. No. 45.)

On November 17, 2014, Prime Healthcare filed the operative First Amended

Complaint (“FAC”), which superseded its original complaint. (Dkt. Nos. 47, 52.)

Prime Healthcare alleges eight RICO claims, 18 U.S.C. §§ 1961 et seq. (counts I-VIII)

and three LMRA claims, 29 U.S.C. §§ 186 et seq. (counts IX-XI). (Dkt. No. 47

¶¶ 270-340.)

- 4 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 4 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

On December 16, 2014, Defendants filed a motion to dismiss the FAC.1 (Dkt.

No. 50.) Prime Healthcare filed its opposition on January 16, 2015. (Dkt. No. 57.)

Defendants filed their reply on January 30, 2015. (Dkt. No. 58.)

On February 20, 2015, the Court held a hearing regarding Defendants’ motion

to dismiss.2(Dkt. No. 67.) Attorneys Ed Scheiderman, Amanda Fitzsimmons, and

David Durham appeared for Prime Healthcare. Attorneys Theodore Franklin, Andrew

Roth, and Glenn Rothner appeared for Defendants. 

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the

sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

Dismissal is warranted under Rule12(b)(6) where the complaint lacks a cognizable

legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.

1984); see also Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule12(b)(6)

authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”).

Alternatively, a complaint may be dismissed where it presents a cognizable legal theory

yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534. While

1Defendants also filed a supporting request for judicial notice. (Dkt. No. 50-3.)

Defendants seek judicial notice of (1) court records in Prime Healthcare I; (2) the

complaint in an ERISA lawsuit mentioned by Prime Healthcare in the instant FAC; and

(3) an announcement on the website of Daughters of Charity Health System (“DCHS”)

that DCHS and UHW had reached a new, three-year collective bargaining agreement

covering DCHS employees represented by UHW. Prime Healthcare only challenges

Defendants’ request for judicial notice of the ERISA lawsuit complaint, and does not

dispute that UHW was the bargaining representative for DCHS. (Dkt. No. 57 at 31,

33.) Under Federal Rule of Evidence 201, a court may take notice of facts not subject

to reasonable dispute that are capable of accurate and ready determination by resort to

sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b). The

Court finds that Defendants’ requests for judicial notice are properly noticeable, and

therefore takes judicial notice of the documents. See United States ex rel. Robinson

Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (“[W]e

‘may take notice of proceedings in other courts, both within and without the federal

judicial system, if those proceedings have a direct relation to matters at issue.’”

(citation omitted)); In re Tourism Assessment Fee Litig., No. 08-CV-1796-MMA, 2009

WL 10185458, at *4-5 (S.D. Cal. Feb. 19, 2009) (taking judicial notice of press release

on website). 

2On March 3, 2015, Prime Healthcare filed an Ex Parte Motion for Leave to File

a Supplemental Memorandum, which the Court GRANTS. (Dkt. No. 68.)

- 5 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 5 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

a plaintiff need not give “detailed factual allegations,” a plaintiff must plead sufficient

facts that, if true, “raise a right to relief above the speculative level.” Bell Atlantic

Corp. v. Twombly, 550 U.S. 544, 545 (2007). “To survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to

relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 547). A claim is facially plausible when the factual

allegations permit “the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id. In other words, “the non-conclusory ‘factual

content,’ and reasonable inferences from that content, must be plausibly suggestive of

a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969

(9th Cir. 2009). “Determining whether a complaint states a plausible claim for relief

will . . . be a context-specific task that requires the reviewing court to draw on its

judicial experience and common sense.” Iqbal, 556 U.S. at 679.

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the

truth of all factual allegations and must construe all inferences from them in the light

most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th

Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal

conclusions, however, need not be taken as true merely because they are cast in the

form of factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003);

W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a

motion to dismiss, the court may consider the facts alleged in the complaint, documents

attached to the complaint, documents relied upon but not attached to the complaint

when authenticity is not contested, and matters of which the court takesjudicial notice.

Lee v. Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).

DISCUSSION

A. Claim Preclusion

As a preliminary matter, Defendants contend that Prime Healthcare’s RICO

claimsresting on allegations asserted in their prior antitrust action, Prime Healthcare I,

- 6 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 6 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

are barred by claimpreclusion. (Dkt. No. 50-1 at 8-14.)3 Claim preclusion, also known

as res judicata, “prohibits lawsuits on ‘any claims that were raised or could have been

raised’ in a prior action.” Stewart v. U.S. Bankcorp, 297 F.3d 953, 956 (9th Cir. 2002)

(citation omitted). It “is motivated primarily by the interest in avoiding repetitive

litigation, conserving judicial resources, and preventing the moral force of court

judgments from being undermined.” Int’l Union of Operating Eng’rs-Emp’rs Constr.

Indus. Pension, Welfare & Trg. Trust Funds, 994 F.2d 1426, 1430 (9th Cir. 1993)

(citation and internal quotation marks omitted). 

Prime Healthcare primarily responds that claim preclusion does not apply here

because it alleges new wrongdoing that has occurred since its amended complaint in

its prior antitrust action, Prime Healthcare I. (Dkt. No. 57 at 10, 12-16.) Prime

Healthcare is correct that claim preclusion does not bar claims that could not have

previously been asserted because they concern events that took place after the prior

action. See United States v. Liquidators of European Fed. Credit Bank, 630 F.3d 1139,

1151 (9th Cir. 2011) (“If the harm arose from different facts at a different time, . . . then

the plaintiff could not have brought the claim in the first action.”); Frank v. United

Airlines, Inc., 216 F.3d 845, 851 (9th Cir. 2000) (“A claim arising after the date of an

earlier judgment is not barred, even if it arises out of a continuing course of conduct

that provided the basis for the earlier claim.”). However, Prime Healthcare

misconstrues Defendants’ argument. Defendants do not contend that “any RICO

claim” is barred and they are entitled to “perpetual immunity.” (Dkt. No. 57 at 12.)

Rather, Defendants contend only that Prime Healthcare’s RICO claims based on

allegations previously asserted in Prime Healthcare I are barred. (Dkt. No. 50-1 at 8;

see also Dkt. No. 58 at 2.) Defendants admit that in the instant lawsuit Prime

Healthcare also alleges new conduct subsequent to Prime Healthcare I that would not

be barred. (Dkt. No. 50-1 at 8, 24-27; see also Dkt. No. 58 at 2.)

3Page number citations such as this one are to the page numbers reflected on the

Court’s CM/ECF system and not to page numbers assigned by the parties.

- 7 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 7 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Prime Healthcare relies heavily on Harkins Amusement Enter., Inc. v. Harry

Nace Co., 890 F.2d 181, 183 (9th Cir. 1989), which held that a second antitrust action

was not barred by a prior antitrust action because the second action alleged new

antitrust conduct subsequent to the prior action. The Ninth Circuit noted that the

second action alleged facts that “are at least 10 percent different” from the prior action,

and alleged “conduct that occurred in a different time period.” Id. However, Harkins

did not hold that the second antitrust action was not precluded at all. Rather, Harkins

considered whether the second action was “completely prevented” based on the prior

action. Id. at 182. The Ninth Circuit stated that “[t]here can be no doubt” that the

antitrust claims for the time period covered by the prior action were barred by claim

preclusion. Id. Therefore, Harkins does not support Prime Healthcare’s position. 

As such, for the claim preclusion analysis, the Court will only focus on whether

Prime Healthcare’s RICO claims based on allegations asserted in Prime Healthcare I

are barred, and will not consider the new subsequent allegations which Defendants

concede are not barred. See Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322, 328

(1955) (“While the [prior] judgment precludes recovery on claims arising prior to its

entry, it cannot be given the effect of extinguishing claims which did not even then

exist and which could not possibly have been sued upon in the previous case.”); L.A.

Branch NAACP v. L.A. Unified Sch. Dist., 750 F.2d 731, 740-41 (9th Cir. 1984) (en

banc)(holding that claimpreclusion barred segregation claims for acts occurring before

prior lawsuit, but did not bar claims for acts occurring after prior lawsuit); Knox v.

Donahoe, No. 11-CV-2596-EMC, 2012 WL 949030, at *4-5 (N.D. Cal. 2012) (holding

that claim preclusion barred employment discrimination claims to the extent they were

based on events covered by prior lawsuit, but not to the extent the claims were based

on events which took place after prior lawsuit). In other words, for the claim

preclusion analysis, the Court will only focus on alleged conduct that took place before

September 21, 2012, when the operative first amended complaint was filed in Prime

Healthcare I.

- 8 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 8 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Claim preclusion applies where there is “(1) an identity of claims, (2) a final

judgment on the merits, and (3) privity between parties.” Turtle Island Restoration

Network v. U.S. Dep’t of State, 673 F.3d 914, 917 (9th Cir. 2012) (citation and internal

quotation marks omitted). The Court now turns to these three elements.

1. Identity of Claims

Courts considersfourfactorsin determining an “identity of claims”: “(1) whether

rights or interests established in the prior judgment would be destroyed or impaired by

prosecution of the second action; (2) whether substantially the same evidence is

presented in the two actions; (3) whether the two suits involve infringement ofthe same

right; and (4) whether the two suits arise out of the same transactional nucleus offacts.”

Id. at 917-18 (citation omitted). These factors are “tools of analysis, notrequirements.”

Int’l Union of Operating Eng’rs-Emp’rs Const. Ind. Pension, Welfare, & Trg. Trust

Funds v. Karr, 944 F.2d 1426, 1430 (9th Cir. 1993) (citation and internal quotation

marks omitted). However, “[t]he last of these criteria is the most important.” Turtle

Island Restoration Network, 673 F.3d at 918 (citation and internal quotation marks

omitted).

a. Same Transactional Nucleus of Facts

As it is the most important factor, the Court first considers whether

Prime Healthcare I and Prime Healthcare II arise fromthe “same transactional nucleus

of facts.” “Whether two suits arise out of the same transactional nucleus depends upon

whether they are related to the same set of facts and whether they could conveniently

be tried together.” Id. (citation and internal quotation marks omitted). “In most cases,

the inquiry into the ‘same transactional nucleus of facts’ is essentially the same as

whether the claim could have been brought in the first action.” Id. (citation and

internal quotation marks omitted). 

Defendants contend that Prime Healthcare I and Prime Healthcare II relate to

the same set of facts because both actions allege thatsince 2010, Defendants have been

demanding that Prime Healthcare enter into a “neutrality agreement” with UHW, and

- 9 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 9 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

have been backing up that demand with variousforms of economic pressure, including

attempts to thwart Prime Healthcare’s acquisition of hospitals, attacks on Prime

Healthcare’s investment partners, the production and public dissemination of reports

injurious to Prime Healthcare’s business reputation, and the initiation of complaints

resulting in government investigations of Prime Healthcare. (Dkt. No. 50-1 at 10.)

Defendants also include a chart which shows over twenty common sets of allegations

between Prime Healthcare I and Prime Healthcare II. (Dkt. No. 50-2 (Exh. A).) 

Prime Healthcare counters that the two actions do not arise out of the same

transactional nucleus because they involve a “distinctset of facts.” (Dkt. No. 57 at 15.)

However, Prime Healthcare failsto elaborate how, aside fromnew conduct subsequent

to Prime Healthcare I, the two actions involve distinct facts.

The Court concludes that both actions are related to the same set of facts. For

example, both actions allege that Defendants: (1) produced and publicized false and

misleading reports and studies about Prime Healthcare, such as not being in compliance

with earthquake safety laws and high rates of septicemia (compare Prime Healthcare

II FAC ¶¶ 129-43 with Prime Healthcare I FAC ¶¶ 265-66, 270-90); (2) campaigned

to block the bankruptcy sale of Victor ValleyCommunity Hospital to Prime Healthcare

(compare Prime Healthcare II FAC ¶¶ 147-58 with Prime Healthcare I FAC ¶¶ 293-

94, 296); (3) supported California Senate Bill 408 to restrict Prime Healthcare’s ability

to acquire additional hospitals (compare Prime Healthcare II FAC ¶¶ 186-88 with

Prime Healthcare I FAC¶¶ 291-92); (4) advocated for the passage ofCalifornia Senate

Bill 1285 which would require hospitals such as Prime Healthcare to adjust chargesfor

out-of-network emergency care (compare Prime Healthcare II FAC ¶¶ 189-94 with

Prime Healthcare I FAC ¶¶ 312-17); (5) wrote to the Securities and Exchange

Commission stating that Prime Healthcare affiliate Medical Properties Trust had not

made adequate financial disclosures concerning the cost of remedying deficiencies at

Prime Hospitals (compare Prime Healthcare II FAC ¶¶ 128, 130 with Prime

Healthcare I FAC ¶¶ 267-69); and (6) prepared and obtained signatures for two ballot

- 10 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 10 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

initiatives that would financially harm non-union hospitals such as Prime Healthcare,

and then abandoned the initiatives once UHW entered into a 2012 agreement with the

California Hospital Association (compare Prime Healthcare II FAC ¶¶ 204-06 with

Prime Healthcare I FAC ¶¶ 207-09). Because of these related facts, Prime Healthcare

“could have brought” their RICO claims in Prime Healthcare I, and their antitrust and

RICO claims premised on these facts “could conveniently be tried together.” Turtle

Island Restoration Network, 673 F.3d at 918 (citation and internal quotation marks

omitted).

Therefore, the RICO claims in Prime Healthcare II, to the extent they are

premised on conduct covered by Prime Healthcare I, “arise out of the same

transactional nucleus of facts” as the antitrust claims in Prime Healthcare I. This

factor weighs heavily in favor of an identity of claims.

b. Same Evidence

TheCourt next considers whether “substantially the same evidence” is presented

in both Prime Healthcare I and Prime Healthcare II. Defendants contend that both

actions involve substantially the same evidence because, as outlined above, they both

require evidence of Prime Healthcare’s alleged attempts to thwart Prime Healthcare’s

acquisition of hospitals, to attack Prime Healthcare investment partners, to produce and

publicly disseminate reports injurious to Prime Healthcare’s business reputation, and

to initiate complaints resulting in government investigations of Prime Healthcare.

(Dkt. No. 50-1 at 11-12.) Prime Healthcare respondsthat the evidence presented in the

instant RICO action “will reach beyond that presented in the antitrust action,” but fails

to elaborate how, aside from new conduct subsequent to Prime Healthcare I, the two

actions involve different evidence. (Dkt. No. 57 at 15.)

The Court agrees with Defendants that both actions involve “substantially the

same evidence.” Both actions require evidence of Defendants’ alleged conduct

outlined above. As such, this factor also weighs heavily in favor of an identity of

claims. 

- 11 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 11 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

c. Infringement of Same Right

The Court next considers whether Prime Healthcare I and Prime Healthcare II

involve “infringement of the same right.” Defendants contend that both actions allege

the infringement of the same right, which is Prime Healthcare’s “right to compete in

the healthcare market free from defendants’ allegedly unlawful interference.” (Dkt.

No. 50-1 at 11.) Prime Healthcare responds that the rights asserted in both actions

differ, and the instant action alleges that “Defendants are extorting [it] to surrender its

own property,” not a “right to compete in the healthcare market” or “an antitrust

conspiracy.” (Dkt. No. 57 at 14-15.)

The Court finds instructive the Ninth Circuit’s decision in Feminist Women’s

Health Ctr. v. Codispoti, 63 F.3d 863 (9th Cir. 1995). In that case, the plaintiffs, a

clinic that provided abortions and other health services, brought a state court action for

harassment by protestors, and then later brought a federal RICO action. In holding that

claim preclusion barred the later RICO action, the Ninth Circuit determined that both

actions involved infringement of the same right.

4

Id. at 868. The Ninth Circuit

acknowledged that “[t]he state claim focused on the Center’s constitutional right to

provide abortions, as well asthe patients’ constitutional right to receive abortions” and

“[t]he federal claim concerns infringement of the Center’s right to operate its business

free from a pattern of racketeering.” Id. However, both actions “arose from an alleged

right to be free from appellants’ disruptive activities.” Id.

Similarly, here, Prime Healthcare I focused on Prime Healthcare’s right to be

free froman antitrust conspiracy to eliminate itfromthe healthcare market and increase

healthcare workers wages, while Prime Healthcare II focuses on Prime Healthcare’s

right to be free from extortion designed to force it to unionize its hospitals. However,

both actions arise from Prime Healthcare’s alleged right to operate its business free

from Defendants’ allegedly unlawful disruptive activities. 

4Although Feminist Women’s Health Ctr. applied claim preclusion under

Washington state law, the factors for an identity of claims mirror federal claim

preclusion law. Id. at 867. 

- 12 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 12 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Therefore, the Court concludes that both actions involve “infringement of the

same right.” 

d. Rights or Interests Destroyed by Prosecution of Second Action

Finally, the Court considers whether “rights or interests” established in Prime

Healthcare I would be “destroyed or impaired by prosecution” of Prime Healthcare II.

Prime Healthcare contends that Prime Healthcare I established Defendants’ freedom

from liability concerning their alleged use of economic pressure to induce Prime

Healthcare to enter into a neutrality agreement with Defendant UHW. (Dkt. No. 50-1

at 11.) Defendants note that the Court’s prior dismissal order stated that the Prime

Healthcare I FAC “suggests the union engaged in traditional union activities to

pressure non-labor entitiesto become unionized,” rather than illegal antitrust activities.

Prime Healthcare I, 2013 WL 3873074, at *13. Defendants argue that Prime

Healthcare II alleges that this same economic pressure violates the federal RICO

statute, and would, if upheld by this Court, destroy Defendants’ freedom from liability.

(Dkt. No. 50-1 at 11.)

Prime Healthcare counters that Prime Healthcare II cannot impair the earlier

judgment in Prime Healthcare I because the two actions involve “infringement of

different rights and a distinct set of facts.” (Dkt. No. 57 at 15.) However, the Court

determined above that both actions involve infringement of the same rights and arise

from the same transactional nucleus of facts.

Nonetheless, the Court finds that a judgment in Prime Healthcare II would not

impair the rights and interests established in Prime Healthcare I. Prime Healthcare I

established Defendants’ right to be free from antitrust liability. Prime Healthcare II

concerns whether Defendants should be liable under RICO. A finding that Defendants

are liable under RICO would not impair its right to be free from antitrust liability. 

In sum, the Court concludes that overall there is an identity of claims between

the antitrust claimsin Prime Healthcare I and the RICO claims in Prime Healthcare II

(to the extent they are premised on conduct covered by Prime Healthcare I). Most

- 13 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 13 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

importantly, both claims arise fromthe same transactional nucleus offacts. In addition,

both claims involve substantially the same evidence and infringement ofthe same right.

The Court’s determination that prosecution of Prime Healthcare II would not impair

the judgment in Prime Healthcare I does not undermine this conclusion. See Karr, 944

F.2d at 1430 (common nucleus criterion is often outcome determinative without

reaching other factors). Thus, the first element of claim preclusion is satisfied.

2. Final Judgment on the Merits

The Court next considers whether Prime Healthcare I resulted in a final

judgment on the merits. Defendants contend, and Prime Healthcare does not dispute,

that there was a final judgment on the merits in Prime Healthcare I. (Dkt. No. 50-1 at

12.)

The Court dismissed Prime Healthcare I for failure to prosecute under Federal

Rule of Civil Procedure 41(b). See Prime Healthcare I, 2013 WL 6500069, at *3. A

dismissal under Rule 41(b) is a final judgment on the merits. See Fed. R. Civ. P. 41(b)

(dismissal for failure to prosecute or comply with a court order “operates as an

adjudication on the merits” unless the dismissal order states otherwise); Owens v.

Kaiser Found. Health Plan, 244 F.3d 708, 714 (9th Cir. 2001) (unless otherwise

specified, dismissal with prejudice of an action for failure to prosecute operates as an

adjudication on the merits for claim preclusion purposes). The pending appeal in

Prime Healthcare I does not impact whether there is a final judgment on the merits.

See Eichman v. Fotomat Corp., 759 F.2d 1434, 1439 (9th Cir. 1985) (“The federal rule

on the preclusive effect of a judgment from which an appeal has been taken is that the

pendency of an appeal does not suspend the operation of an otherwise final judgment

for purposes of res judicata.”).

As such, the Court concludes that this element is satisfied for claim preclusion.

3. Privity Between Parties

Lastly, the Court considers whetherthere is privity between the partiesfor Prime

Healthcare I and Prime Healthcare II. Defendants contend, and Prime Healthcare also

- 14 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 14 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

does not dispute, that there is privity between the parties in both actions. (Dkt. No. 50-

1 at 12-14.)

“Even when the parties are not identical, privity may exist if there is‘substantial

identity’ between parties, that is, when there is sufficient commonality of interest.”

Tahoe-Sierra Pres. Council v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1081 (9th

Cir. 2003) (citation and internal quotation marks omitted). Here, Plaintiff Prime

Healthcare and Defendants SEIU and UHW were all parties in Prime Healthcare I, so

they clearlymeet the privity requirement. The other Defendants in Prime Healthcare II

are in privity with Defendants SEIU and UHW so they also meet this requirement.

Defendant Mary Kay Henry is President of SEIU and Defendant Dave Regan is

President of UHW. (FAC ¶¶ 27-28.) SEIU is a member of Defendant Change to Win,

whose investment arm is Defendant CTW Investment Group and whose Executive

Director of its Strategic Organizing Center is Defendant Tom Woodruff, and Prime

Healthcare alleges that these Defendants approve of and support SEIU’s tactics. (Id.

¶¶ 30-36.)

As such, the Court finds that there is privity between the parties in both actions,

and this element of claim preclusion is also satisfied.

Thus, having determined that all three elements are met, the Court concludes that

Prime Healthcare’s RICO claims in Prime Healthcare II, to the extent they are

premised on conduct covered by Prime Healthcare I, are barred by claim preclusion.5

Accordingly, the Court GRANTS Defendants’ motion to dismiss Prime Healthcare’s

RICO claims premised on conduct covered by Prime Healthcare I. The Court now

turns to Prime Healthcare’s additional allegations of more recent conduct that is not

barred by claim preclusion.

B. RICO and LMRA § 302 Claims Based on New Conduct

Prime Healthcare alleges that Defendants are violating both RICO and § 302 of

5As a result, the Court does not reach Defendants’ alternative arguments that

these allegations fail on the merits. (Dkt. No. 50-1 at 14-24.)

- 15 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 15 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the LMRA by demanding that Prime Healthcare sign onto an “unlawful” 2014

agreement between the California Hospital Association (“CHA”), various signatory

CHA-member hospitals, and Defendant UHW (“CHA-UHW Agreement”), and by

putting economic pressure on Prime Healthcare to do so. (FAC ¶¶ 214-65, 270-326.)

To allege a civil RICO claim, a plaintiff must allege: “(1) conduct (2) of an

enterprise (3) through a pattern (4) of racketeering activity (known as ‘predicate acts’)

(5) causing injury to plaintiff's business or property.” United Bhd. Of Carpenters &

Joiners of Am. v. Bldg. & Const. Trades Dep’t, AFL-CIO (“UBC”), 770 F.3d 834, 838

(9th Cir. 2014) (citation and internal quotation marks omitted). “‘[R]acketeering

activity’ includes . . . ‘any act which is indictable’ under the Hobbs Act, 18 U.S.C.

§ 1951, or ‘any act or threat involving . . . extortion, . . . which is chargeable under

State law.’” Id. (quoting 18 U.S.C. § 1961(1)(A), (B)). A person violates the Hobbs

Act where he orshe “obstructs, delays, or affects commerce . . . by robbery or extortion

or attempts or conspires to do so.” 18 U.S.C. § 1951(a). Under the Hobbs Act,

extortion is defined as “the obtaining of property from another, with his consent,

induced by wrongful use of actual or threatened force, violence, or fear, or under the

color of official right.”6Id. § 1951(b)(2). “Racketeering activity” also includes

violations of § 302 of the LMRA. 18 U.S.C. § 1961(1)(C). 

LMRA § 302(a)(2) makes it unlawful for an employer to pay, lend, or deliver,

“any money or other thing of value” to a union, and § 302(b)(1) makes it unlawful for

a union to demand or accept the same. 29 U.S.C. § 186(a)(2), (b)(1). Congress enacted

LMRA § 302 to attack practices that were “inimical to the integrity of the collective

bargaining process,” including bribery by employers during collective bargaining,

6Prime Healthcare alleges that Defendants conduct constitutes a RICO predicate

act because it violates state extortion laws from California, New Jersey, the District of

Columbia and Kansas, as well as the Travel Act, but does not mention the Hobbs Act.

FAC ¶¶ 273, 280, 286, 292. However, as Defendants note, the generic definition of

extortion applies under RICO, not “any conduct criminalized under any state’s

‘extortion’ statute.” UBC, 770 F.3d at 843. (Dkt. No. 50-1 at 15 n.7.) Prime

Healthcare does not argue otherwise in its opposition. As such, the Court applies the

generic definition of extortion found in the Hobbs Act.

- 16 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 16 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

extortion by employee representatives, and abuse of power by union officers who have

sole control over welfare funds. Arroyo v. United States, 359 U.S. 419, 425-26 (1959);

see also Turner v. Local Union No. 302, Int’l Bhd. of Teamsters, 604 F.2d 1219, 1227

(9th Cir. 1979) (“The dominant purpose of § 302 is to prevent employers from

tampering with the loyalty of union officials and to prevent union officials from

extorting tribute from employers.”). 

The Court first addresses the alleged violations of LMRA § 302, and then

addresses whether Prime Healthcare has sufficiently stated a RICO claim predicated

on extortion rather than an alleged violation of LMRA § 302.

1. LMRA § 302

Prime Healthcare alleges that the CHA-UHW Agreement violates LMRA § 302

for two reasons. First, Prime Healthcare particularly challenges the portion of the

CHA-UHW Agreement creating a “Joint Advocacy Fund.” Second, Prime Healthcare

challenges other “neutrality agreement” provisions setting ground rules for union

organizing.

a. Joint Advocacy Fund

Prime Healthcare alleges that the CHA-UHW Agreement violates LMRA § 302

because it creates a “Joint Advocacy Fund” administered by a “Labor Management

Cooperation Committee” (“Committee”) and funded in part by $80 million from CHA

and its signatory member hospitals, which constitutes an illegal direct payment to

UHW. (FAC ¶¶ 228-40, 251-56.) 

Defendants argue that this payment is not illegal because § 302 explicitly excepts

payments by employers through an industrywide labor management committee

established under the Labor Management Cooperation Act of 1978 (“LMCA”).

7

(Dkt.

7Defendants note that in Prime Healthcare I, this Court held that allegations that

a $50 million payment from Kaiser Permanente to a Labor Partnership Trust created

under an agreement between Kaiser and SEIU did not plausibly allege a violation of

§ 302 because of the LMCA exception. (Dkt. No. 50-1 at 25-26). See Prime

Healthcare I, 2013 WL 3873074, at * 8. Prime Healthcare counters that this Court’s

ruling in Prime Healthcare I is irrelevant because here Prime Healthcare has alleged

- 17 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 17 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

No. 50-1 at 25-27.) See 29 U.S.C. § 186(c)(9).8 Prime Healthcare responds that the

LMCA exception does not apply because it has alleged that UHW will unlawfully use

the money in the Joint Advocacy Fund “as its own slush fund” to “advance whatever

agenda it chooses, without regard to the limited purposes for those funds permitted

under the LMCA.” (FAC ¶¶ 230, 235-36, 238; Dkt. No. 57 at 27-28.) However, as

Defendants point out, Prime Healthcare’s own allegations show that the CHA-UHW

Agreement limits the money to purposes allowed under the LMCA. (Dkt. No. 50-1 at

26-27; Dkt. No. 58 at 8 n.5.) Prime Healthcare alleges that the Committee’s scope is

limited to five specific purposes which mirror the LMCA, as well as a catch-all for

“other mutually agreed upon issues as permitted by the LMCA.” (FAC ¶¶ 251-52.)

Prime Healthcare also acknowledgesthat the moneymay not be spent without the equal

approval of both the employer and UHW representative. (Id. ¶ 216 (“decision making

is a 50/50 split”), ¶ 229 (“cannot spend any money, without approval of both” of the

leaders of CHA and UHW, ¶ 230 (President of UHW stated that “‘we each have to

agree how to spend it equally’”).) Prime Healthcare’s speculation that despite these

limitations UHW will improperly use the money for its own ends does not pass the

plausibility standard. 

In addition, Prime Healthcare contendsthat the LMCA exception does not apply

because the Committee is not a legitimate industrywide labor management committee

under the LMCA. (Dkt. No. 57 at 27.) Specifically, Prime Healthcare alleges that the

Committee does not qualify because UHW “is not the bargaining representative of

CHA’s employees and is not seeking to represent those employees” but instead is

seeking to represent “employees at CHA’s member hospitals, such as Prime

that the Committee falls outside the LMCA, and that UHW plans to use the money in

the Joint Advocacy Fund, not a trust, to serve its own ends and not for the limited

purposes enumerated in the LMCA. (Dkt. No. 57 at 28 n.21.)

8LMCA § 5(b) authorizes the establishment of industrywide labor committees

which “are established for the purpose of improving labor management relationships,

job security, organizational effectiveness, enhancing economic development or

involvingworkersin decisions affecting their jobs including improving communication

with respect to subjects of mutual interest and concern.” 29 U.S.C. § 175a(a)(1)(B).

- 18 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 18 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

[Healthcare].” (FAC ¶ 239.) However, Prime Healthcare provides no legal authority

for a requirement that the labor organization must be the representative of the

employees of every employer participating on the labor management committee. The

LMCA states only that the labor organization “represent[s] employees in that plant,

area, or industry,” and there is no dispute that UHW represents employees in the

healthcare industry. 28 U.S.C. § 175a(a)(1)(A). 

Prime Healthcare also alleges that theCommittee does not qualify as a legitimate

industrywide labor management committee under the LMCA because one of the

purposes of the CHA-UHWAgreement isto “discourage the exercise of an employee’s

rights under the [National Labor Relations Act (“NLRA”)] Section 7, 29 U.S.C. § 157”

by “restrict[ing] employees’ freedom of association and right to choose not to form,

join, or assist a labor organization or to not have a union bargain collectively on their

behalf by . . . granting UHWaccessto signatory hospitalfacilities, giving UHWcontrol

over the communications and other rights of signatory hospitals, and by surrendering

to UHW full control over any signatory hospital’s labor relations.” (FAC ¶ 240.) The

LMCA provides that a labor management committee “may not have as one of its

purposes the discouragement of the exercise of rights contained in section 157 of this

title, or the interference with collective bargaining in any plant, or industry.” 29 U.S.C.

§ 175a(b)(3). In turn, § 157 provides that “[e]mployees shall have the right to

self-organization, to form, join, or assist labor organizations, to bargain collectively

through representatives of their own choosing, and to engage in other concerted

activitiesfor the purpose of collective bargaining or other mutual aid or protection, and

shall also have the right to refrain from any or all of such activities except to the extent

that such right may be affected by an agreement requiring membership in a labor

organization as a condition of employment as authorized in section 158(a)(3) of this

title.” 29 U.S.C. § 157. 

The Court finds that Prime Healthcare has not plausibly alleged that one of the

purposes of the Committee is to discourage employee rights under NLRA § 157. As

- 19 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 19 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

support that the Committee has this ulterior purpose, Prime Healthcare allegesthat the

CHA-UHW Agreement discourages employee rights because it: (1) grants UHW

“access rights” to at least 30,000 non-union hospital employees (FAC ¶ 241);

(2) requires that the signatory hospitals give UHW “control over that signatory’s

communications” because theAgreement requiresthat the parties not make disparaging

communications about each other or engage in “Anti-Union Activities” (id. ¶¶ 243-45);

and (3) requires that the signatory hospitals give UHW “control of its labor relations”

because it allows the Committee to address “other mutually agreed upon issues as

permitted by the LMCA” (id. ¶¶ 250-52). None of these allegations sufficiently show

that a purpose of the Committee is to discourage employee rights under § 157. For

example, merely granting UHW “access” to these employees and prohibiting

disparaging communications does not suggest that a purpose of the Committee is to

discourage employee rights. Likewise, it is illogical that allowing the Committee to

address “other mutually agreed upon issues as permitted by the LMCA” would lead to

the inference that a purpose of the Committee is to discourage employee rights in

violation of the LMCA. 

As such, the Court concludes that Prime Healthcare fails to sufficiently allege

that the Joint Advocacy Fund is not covered by the LMCA exception and violates

LMRA § 302.

b. Neutrality Agreement Provisions

PrimeHealthcare also allegesthat the CHA-UHWAgreement, while “containing

some of the hallmarks of a neutrality agreement – the CHA signatories agreed to not

disparage UHWor engage in ‘Anti-Union activities’ and UHWagreed to not disparage

those signatories or engage in ‘Anti-Employer Activities’” – is unlawful because its

“reach is much more pervasive.” (FAC ¶ 217.) Specifically, Prime Healthcare alleges

that the Agreement goes beyond a standard neutrality agreement, and isillegal, because

it: (1) grants UHW “accessrights” to at least 30,000 non-union hospital employees (id.

¶¶ 218, 241-42); (2) requiresthat CHA and other signatories be “positive” about UHW

- 20 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 20 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

in communications (id. ¶¶ 243-49); (3) prohibits CHA and other signatories from

advocating against UHW through litigation (except to enforce the terms of an existing

collective bargaining agreement) or adverse action by any branch of government (id.

¶ 244); (4) requires that the signatory hospitals give UHW “control of its labor

relations” because it allows the Committee to address “other mutually agreed upon

issues as permitted by the LMCA” (id. ¶¶ 250-52); and (5) requires that CHA and its

signatory member hospitals make $80 million in paymentsto the Joint Advocacy Fund

(id. ¶¶ 215-16, 228-29). (Dkt. No. 57 at 26.) Prime Healthcare alleges that in

exchange, UHW will: (1) stop disparaging signatory hospitals (FAC ¶¶ 219-20);

(2) stop pursuing, sponsoring, or supporting any anti-hospital industry legislation,

initiatives, or other efforts (id. ¶¶ 219, 221-22); and (3) provide at least $20 million of

its own money to the Joint Advocacy Fund (id. ¶¶ 214-16, 219, 228-31). (Dkt. No. 57

at 26-27.) 

Defendants contend that the Ninth Circuit and other circuits have held that

neutrality agreements are lawful underfederal labor laws. (Dkt. No. 50-1 at 22-23, 25.)

Defendants rely on the Ninth Circuit’s decision in Hotel Emps., Rest. Emps. Union,

Local 2 v. Marriott Corp., 961 F.2d 1464 (9th Cir. 1992). (Dkt. No. 50-1 at 22; Dkt.

No. 58 at 5.) There the Ninth Circuit held that the a district court had jurisdiction to

enforce a neutrality agreement that the employer was “not to express any opinion on

whether its employees should choose Local 2 as their exclusive bargaining

representative,” and that such an agreement was enforceable because “[n]othing in the

relevantstatutes or NLRB decisions suggests employers may not agree to remain silent

during a union’s organizational campaign – something an employer is certainly free to

do in the absence of such an agreement.” Marriott Corp., 961 F.2d at 1469-70.

However, as Prime Healthcare correctly notes, Marriott Corp. did not expressly

consider whether the neutrality agreement violated LMRA § 302. (Dkt. No. 57 at 29

& n.22.) Therefore, it appears that the Ninth Circuit has not yet addressed whether a

- 21 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 21 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

neutrality agreement can violate § 302.

9

 

Defendants also rely on the Fourth Circuit’s decision in Adcock v. Freightliner

LLC, 550 F.3d 369 (4th Cir. 2008) and the Third Circuit’s decision in Hotel Emps.,

Rest. Emps. Union Local 57 v. Sage Hospitality Res., LLC, 390 F.3d 206 (3d Cir.

2004), which both held that neutrality agreements did not violate LMRA § 302. (Dkt.

No. 50-1 at 22-23.) In Adcock, the Fourth Circuit held that a neutrality agreement

which required the employer to, among other things, provide the union access to

employees and refrain from making negative comments about the union did not violate

§ 302 because the employer did not deliver a “thing of value” to the union. Adcock,

550 F.3d at 374-75. The Fourth Circuit noted that its interpretation of “thing of value”

was consistent with the purposes of § 302 because “the concessions made by [the

employer] do not involve bribery or other corrupt practices. By no stretch of the

imagination are the concessions a means of bribing representatives of the Union . . . .

Rather, the concessions serve the interests of both [the employer] and the Union, as

they eliminate the potential for hostile organizing campaigns in the workplace.” Id. at

375. 

Similarly, in Sage Hospitality, the Third Circuit held that a neutrality agreement

under which union representation would be determined by a card-check procedure did

not violate § 302 because the employer did not deliver a “thing of value” to the union.

Sage Hospitality Res., 390 F.3d at 210, 219. The Third Circuit reasoned that: “Not

surprisingly, [the employer] is unable to provide any legal support for the remarkable

assertion that entering into a valid labor agreement governing recognition of a labor

union amounts to illegal labor bribery. . . . The fact that a Neutrality Agreement – like

any other labor arbitration agreement – benefits both parties with efficiency and cost

9Defendants also rely on the Ninth Circuit’s purported decision in Hotel &Rest.

Emps. Union Local 217 v. J.P. Morgan Hotel, 996 F.2d 561, 566-67 (2d Cir. 1993).

(Dkt. No. 50-1 at 22.) However, as Prime Healthcare correctly notes, this decision is

actually by the Second Circuit, and is not relevant because it concerns whether a

district court had jurisdiction over an arbitration clause in an agreement between an

employer and union. (Dkt. No. 57 at 29 n.22.)

- 22 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 22 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

saving does not transform it into a payment or delivery of some benefit.” Id. at 219.

Prime Healthcare contendsthat Adcock and Sage Hospitality are distinguishable

because the CHA-UHW Agreement here makes more extensive demands than those

standard neutrality agreements. (Dkt. No. 57 at 29-30 & n.23.) Prime Healthcare

instead relies on the Eleventh Circuit’s decision in Mulhall v. Unite Here Local 355,

667 F.3d 1211 (11th Cir. 2012). (Dkt. No. 57 at 29.) In Mulhall, the Eleventh Circuit

disagreed with the Third and Fourth Circuits, and held that a neutrality agreement

which required that the employer provide the union access to employees and remain

neutral to unionizing efforts could constitute a “thing of value,” if demanded or given

as payment, and therefore could violate LMRA § 302. Mulhall, 667 F.3d at 1213,

1215. The Eleventh Circuit stated that:

[A] violation of § 302 cannot be ruled out merely because

intangible assistance cannot be loaned or delivered. Section 302 also

prohibits payment of a thing of value, and intangible services, privileges,

or concessions can be paid or operate as payment. Whether something

qualifies as a payment depends not on whether it is tangible or has

monetary value, but on whether its performance fulfills an obligation. If

employers offer organizing assistance with the intention of improperly

influencing a union, then the policy concerns in § 302 – curbing bribery

and extortion – are implicated.

It istoo broad to hold that all neutrality and cooperation agreements

are exempt from the prohibitionsin § 302. Employers and unions may set

ground rules for an organizing campaign, even if the employer and union

benefit from the agreement. But innocuous ground rules can become

illegal payments if used as valuable consideration in a scheme to corrupt

a union or to extort a benefit from an employer.

Id. at 1215. The Eleventh Circuit held that the plaintiff stated a claim under § 302

because he alleged that the employer’s organizational assistance had monetary value

as evidenced by the union spending $100,000 on a ballot initiative favored by the

employer as consideration. Id. at 1215-16.

Defendants argue that Mulhall does not support Prime Healthcare’s LMRA § 302

claim because the Eleventh Circuit still held that neutrality agreements are generally

lawful unless they implicate the type of corruption aimed at by § 302. (Dkt. No. 50-1

at 23 n.8; Dkt. No. 58 at 7.) Defendants also argue that Mulhall is distinguishable

because the aspect of the neutrality agreement the Eleventh Circuit found potentially

- 23 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 23 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

troublesome – that the union allegedly agreed to spend money on a ballot initiative in

return for the employer’s entry into the neutrality agreement – is not alleged by Prime

Healthcare here. (Dkt. No. 50-1 at 23 n.8.) 

The Court need not determine whether a neutrality agreement may ever violate

LMRA § 302 because the Court concludes that Prime Healthcare has failed to

sufficiently allege that the neutrality provisions in the instant CHA-UHW Agreement

are unlawful. As stated above, Prime Healthcare alleges that Defendants are

demanding that it sign the CHA-UHW Agreement, and therefore is demanding Prime

Healthcare provide the following “thing[s] of value”: (1) grant UHW “access rights”

to non-union hospital employees (FAC ¶¶ 218, 241-42); (2) be “positive” about UHW

in communications (id. ¶¶ 243-49); (3) refrain from advocating against UHW through

litigation (except to enforce the terms of an existing collective bargaining agreement)

or adverse action by any branch of government (id. ¶ 244); (4) give UHW “control of

its labor relations” by allowing the Committee to address “other mutually agreed upon

issues as permitted by the LMCA” (id. ¶¶ 250-52); and (5) make substantial payments

to the Joint Advocacy Fund (id. ¶¶ 215-16, 228-29). (Dkt. No. 57 at 26.) In return,

UHW will: (1) stop disparaging Prime Healthcare (FAC ¶¶ 219-20); (2)stop pursuing,

sponsoring, or supporting any anti-hospital industry legislation, initiatives, or other

efforts (id. ¶¶ 219, 221-22); and (3) provide its own substantial payments to the Joint

Advocacy Fund (id. ¶¶ 214-16, 219, 228-31). (Dkt. No. 57 at 26-27.) 

As discussed above, the Court has already concluded that the Joint Advocacy

Fund does not violate LMRA § 302. The other concessions made by CHA and the

signatory hospitals, and allegedly demanded by UHW from Prime Healthcare, also do

not violate § 302 because they do not plausibly involve bribery or other corrupt

practices, which is what Congress sought to prevent by enacting § 302. See Arroyo,

359 U.S. at 425-26. Rather, the concessions serve the interests of both the

CHA/hospitals and UHW “as they eliminate the potential for hostile organizing

campaigns in the workplace” which is “certainly . . . not inimical to the collective

- 24 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 24 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

bargaining process.” Adcock, 550 F.3d at 375. The fact that the CHA-UHW

Agreement, like any other labor agreement, “benefits both parties with efficiency and

cost saving does not transform it into a payment or delivery of some benefit.” Sage

Hospitality Res., 390 F.3d at 219. 

As such, the Court concludes that Prime Healthcare fails to sufficiently allege

that the neutrality agreement provisions violate LMRA § 302.

2. Extortion

The Court next turnsto whether Prime Healthcare has sufficiently stated a RICO

claim premised on the predicate act of extortion, rather than on an alleged violation of

LMRA § 302.10 Under RICO, “extortion” requires: (1) “the obtaining of property from

another”; and (2) “wrongful use of actual orthreatened force, violence, orfear, or under

the color of official right.” 18 U.S.C. § 1951(b)(2). 

a. Obtaining Property From Another

To meet the first “obtaining of property fromanother” element, the plaintiff must

allege facts showing that the defendant has acquired or is seeking to acquire property

from the plaintiff that the defendant (or an allied third party) can “exercise, transfer, or

sell.” Scheidler v. Nat’l Org. for Women, Inc., 537 U.S. 393, 404-05 (2003). Mere

coercion, interference, or deprivation without acquisition is not sufficient to constitute

extortion for a RICO claim. Id. at 404-08. In other words, this element “requires that

the victim ‘part with’ his property, and that the extortionist ‘gain possession’ of it.”

Sekhar v. United States, 133 S. Ct. 2720, 2725 (2013) (citations omitted). 

In Scheidler, the Supreme Court held that the actions of anti-abortion protestors

preventing access to clinics, causing property damage, and committing criminal

trespass did not constitute “extortion” under RICO because the petitioners did not

“obtain” the respondents’ property. Scheidler, 537 U.S. at 404, 409. The Supreme

10Defendants appear to assume that any RICO claim predicated on extortion is

barred by claim preclusion. (Dkt. No. 50-1 at 24-27.) However, the Court concludes

that Prime Healthcare is also alleging extortion under RICO based on Defendants’

more recent conduct.

- 25 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 25 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Court reasoned that “[p]etitioners may have deprived orsought to deprive respondents

of their alleged property right of exclusive control of their business assets, but they did

not acquire any such property.” Id. at 405. 

More recently, in Sekhar, the Supreme Court held that the petitioner’s e-mails

threatening to expose an affair of the New York Comptroller’s general counsel if he did

not recommend investing government money in a fund the petitioner’s firm managed

did not constitute “extortion” under the Hobbs Act because the petitioner did not

“obtain” the general counsel’s right to make an investment recommendation. Sekhar,

133 S. Ct. at 2723, 2726-27. The Supreme Court reasoned that the petitioner’s goal

was not to “acquire” the general counsel’s right to make a recommendation, but rather

to “force” or “coerce” the general counsel to offer advice that accorded with the

petitioner’s wishes. Id. at 2727.

Here, in addition to the provisions in the CHA-UHW Agreement, Prime

Healthcare alleges that Defendants seek to obtain a litany of its property, such as:

(1) Prime Healthcare’s business reputation and goodwill (FAC ¶¶ 5, 7, 9, 13-14, 109,

198, 267, 282, 288, 300, 318); (2) Prime Healthcare’s current and potential customers

and related revenues (id.); (3) Prime Healthcare’s money in the formof union dues paid

to Defendants by Prime Healthcare on behalf of its employees (id. ¶¶ 14, 68, 105, 110,

273), as well as contributions by Prime Healthcare to other funds benefitting

Defendants, including but not limited to, certain of Defendants’ pension funds (id.

¶¶ 14, 108, 110); (4) Prime Healthcare’s right to exclude representatives of Defendants

from Prime Healthcare’s property (id. ¶¶ 14, 110); (5) Prime Healthcare’s autonomy

and control over its business operations (id. ¶¶ 71, 110, 112); (6) Prime Healthcare’s

right guaranteed under Section 8(c) of the NLRA to voice its opinion about, and/or

opposition to, attempts to unionize its employees, by forcing Prime to waive such right

and remain neutral (id. ¶ 122); (7) Prime Healthcare’s right to refuse to recognize UHW

as bargaining agent of Prime Healthcare’s employees on the basis of signed union

- 26 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 26 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

authorization cards, by forcing Prime Healthcare to waive such right and to recognize

UHW as such bargaining agent on the basis of such cards (id. ¶ 70); (8) Prime

Healthcare’s recognition of Defendants as bargaining agents of Prime Healthcare’s

non-union employees, at current and future Prime facilities that have not, to date, been

organized by any union (id. ¶ 110); (9) Prime Healthcare’s right to insist on secret

ballot elections conducted by the NLRB (id.); (10) monies invested in Victor Valley

Community Hospital in anticipation of Prime Healthcare’s acquisition of that hospital

(id.); and (11) unwanted, unnecessary, and superfluous labor services (id. ¶ 14). (Dkt.

No. 57 at 17 n.9.) 

To analyze Prime Healthcare’s allegations, the Court finds the Florida district

court’s decision in Wackenhut instructive. See Wackenhut Corp. v. SEIU, 593 F. Supp.

2d 1289 (S.D. Fla. 2009). In Wackenhut, the court dismissed a RICO claim in which

the employer alleged that the union was attempting to obtain from it various intangible

property rights, including the “right to control the form and nature of the union

recognition process,” the “right to decline collective bargaining with [the union],” the

“right to preserve its employees’ statutory right to ‘free choice,’” and the “right to

conduct business with its customers free from interference, harassment and threats of

economic doom.” Id. at 1296. The court held that these allegations “fall short of

satisfying the ‘obtaining’ prong of the extortion statute” because the employer did not

allege that the union “obtained any of [its] rights or property; at most it claims that [the

union] improperly coerced or attempted to coerce it to do something to which it was

not otherwise inclined or required to do.” Id. The court reasoned that:

Even assuming the truth of [the employer’s] allegations – that the [union]

sought to exert economic pressure on [the employer] to force it to accede

to its demand for recognition and in doing so interfered with its right to

conduct its business, even to the point of causing it to lose customers –

such allegations merely establish that the [union] sought to deprive [the

employer] of these property rights, not that it sought to acquire them for

itself. 

Id. 

Here, as in Wackenhut, Prime Healthcare fails to allege how Defendants would

- 27 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 27 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

obtain most of its listed property. Prime Healthcare’s allegations only establish that

Defendants seek to deprive Prime Healthcare of these rights or to coerce Prime

Healthcare not to exercise these rights, rather than establishing that Defendants seek

to acquire these rights. For example, Prime Healthcare has not established that

Defendantsseek to acquire Prime Healthcare’s recognition of Defendants as bargaining

agents ofPrime Healthcare’s non-union employees. Instead, Defendants seek to coerce

Prime Healthcare to recognize Defendants as the bargaining agents. 

Prime Healthcare argues that Wackenhut is distinguishable because that case

only addressed intangible property and here Prime Healthcare also alleges tangible

property.

11

(Dkt. No. 57 at 20 n.13.) However, Prime Healthcare’s allegations

regarding tangible property are insufficient to show extortion. For example, Prime

Healthcare alleges that Defendants are attempting to obtain Prime Healthcare’s money

in the form of union dues paid to Defendants by Prime Healthcare on behalf of its

employees (FAC ¶¶ 14, 68, 105, 110, 273), as well as contributions by Prime

Healthcare to other funds benefitting Defendants, including but not limited to, certain

of Defendants’ pension funds (id. ¶¶ 14, 108, 110). But, there is no allegation that

Defendants are presently demanding these items. (Dkt. No. 59 at 4-5 n.3.) 

More importantly, as discussed below, even if Prime Healthcare has sufficiently

alleged that Defendants are seeking to “obtain” some of their listed property, Prime

Healthcare fails to meet the second element required for generic extortion.

b. Wrongful Use of Economic Pressure

The second element of generic extortion requiresthe wrongful use of force, fear,

11Prime Healthcare also relies on the district court’s decision in Smithfield Foods,

Inc. v. United Food &Commercial Workers Int’l, 633 F. Supp. 2d 214 (E.D. Va. 2008).

(Dkt. No. 57 at 19.) In Smithfield, the court held that the employer’s right to refrain

from recognizing unions and right to operate its business free from interference by the

defendants were obtainable property rights for extortion under RICO. Smithfield, 633

F. Supp. 2d at 225. However, this Court does not find the reasoning in Smithfield

persuasive in light of the Supreme Court’s decisions in Scheidler and Sekhar, and

chooses not to follow it here.

- 28 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 28 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

or threats. See 18 U.S.C. § 1951(b)(2); UBC, 770 F.3d at 843. Prime Healthcare

alleges that Defendants have used economic pressure to demand that it sign onto the

CHA-UHW Agreement. Defendants argue that Prime Healthcare has failed to allege

that their use of economic pressure was “wrongful.” (Dkt. No. 50-1 at 20-21.) 

“[T]he fear of economic loss is a driving force of our economy that plays an

important role in many legitimate business transactions.” Brokerage Concepts, Inc. v.

U.S. Healthcare, Inc., 140 F.3d 494, 523 (3d Cir. 1998). However, there is a difference

“between legitimate use of economic fear – hard bargaining – and wrongful use ofsuch

fear – extortion.” UBC, 770 F.3d at 838 (fear, in the context of the Hobbs Act, can

include fear of economic loss). In United States v. Enmons, 410 U.S. 396, 400 (1973),

the Supreme Court held that a defendant violates the Hobbs Act only “where the

obtaining of the property would itself be ‘wrongful’ because the alleged extortionist

has no lawful claim to that property.” “[F]ollowing Enmons, using fear of economic

loss to obtain personal payoffs or payments for ‘imposed, unwanted, superfluous and

fictitiousservices,’may well be extortionate.” UBC, 770 F.3d at 838 (quoting Enmons,

410 U.S. at 400). 

In UBC, the Ninth Circuit held that a labor organization’s alleged use of

economic pressure was not “wrongful” and therefore the complaint failed to state a

claim for extortion under RICO. Id. at 841. A labor union (“Carpenters”) had alleged

that an umbrella labor organization (“Building Trades”) committed extortion under

RICO by using a campaign of intense economic pressure to try to force the Carpenters

to reaffiliate with the Building Trades and pay monthly dues in exchange for the

Building Trades’ services that were “unrequested, unwanted, and unnecessary.” Id. at

836. Allegations of “economic pressure” included, among other things, organizing a

rally,repeated public criticism of the Carpenters on websites and in other publications,

and filing frivolous regulatory claims against the Carpenters. Id. 

In holding that the Carpenters failed to state a RICO claim, the Ninth Circuit

- 29 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 29 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

rejected the Carpenters’ argument that the Building Trades’ economic pressure was

extortionate because it was directed towards a wrongful end – coercing the Carpenters

to accept “unrequested, unwanted, and unnecessary” services. Id. at 839. The Ninth

Circuit reasoned that the Building Trades’ economic pressure was not wrongful simply

because it offered “unwanted or subjectively valueless services” in consideration. Id.

“Otherwise any plaintiff could bring a civil RICO claim based on a bare allegation that

whatever service or good he received in return for his property was of no subjective

value.” Id. 

The Ninth Circuit also rejected the Carpenters’ argument that the Building

Trades’ economic pressure was extortionate because it used wrongful means, such as

filing frivolous regulatory claims. Id. Otherwise, “any economic pressure campaign

that includes tortious conduct . . . would be a predicate offense to civil RICO,

regardless of whether the alleged tortfeasor demanded payment to refrain fromharming

the victim” Id. at 840. Rather, the key question is “whether the victim had a preexisting statutory or contractual right to the consideration offered by the defendant in

return for the victim’s property.” Id. “If so, the resulting transaction would have been

an illegitimate sham, and potentially a ‘wrongful’ goal to pursue.” Id. Because the

Carpenters did not have a statutory or contractual right to the services the Building

Trades offered, it failed to show that the alleged economic pressure was extortion. Id.

Moreover, the complaint did not allege extortion merely because the Building Trades

might have committed some tort or breached some contract through its economic

pressure. Id. at 841. If the Building Trades committed such a breach, the proper

remedy was a claim under state law, not RICO. Id. 

Here, Prime Healthcare alleges that Defendants are committing extortion by

using economic pressure to try to coerce Prime Healthcare to sign onto the “unlawful”

CHA-UHW Agreement. Regarding this economic pressure, Prime Healthcare alleges

that Defendants threatened to continue, and then accelerated, their campaign attacks. 

- 30 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 30 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(FAC ¶¶ 261-62.) Specifically, Prime Healthcare alleges that Defendants told

California elected officialsthat they should refuse to accept political contributions from

Prime Healthcare. (Id. ¶¶ 263-65.)

Prime Healthcare argues that Defendants’ economic pressure is wrongful

because it is directed towards a wrongful end – coercing Prime Healthcare to sign an

agreement that is “illegitimate under labor law.” (Dkt. No. 57 at 21.) However, as

discussed above, the Court has already determined that Prime Healthcare failed to

sufficiently allege that the CHA-UHW Agreement was unlawful under the LMRA.

Prime Healthcare’s arguments that the CHA-UHW Agreement “falls outside th[e]

statutory framework” in the NLRA because Defendants are “forc[ing] themselves upon

employees who never consented to Defendants’ representation” is misplaced because

the Agreement only establishes ground rules for a union organizing campaign. (Dkt.

No. 57 at 21-22; Dkt. No. 59 at 5-6.) Prime Healthcare also argues that Defendants’

economic pressure is extortionate because it is being used to impose “unwanted,

unnecessary, and superfluouslaborservices”which are of no “subjective” value. (FAC

¶ 14; Dkt. No. 57 at 23). But, the Ninth Circuit rejected this precise argument in UBC.

See 770 F.3d at 839. To the extent Prime Healthcare is arguing that Defendants’

economic pressure used wrongful means, this argument is unavailing because Prime

Healthcare has failed to allege that it has a statutory or contractual right to the

consideration Defendants have offered. See id. at 840. 

As such, the Court concludes that Prime Healthcare fails to sufficiently allege

a claim for extortion under RICO.

Accordingly, the Court GRANTS Defendants’ motion to dismiss Prime

Healthcare’s RICO and LMRA § 302 claims based on more recent conduct.

C. LMRA § 303 Claims

In Count XI, Prime Healthcare alleges that Defendants SEIU and UHW violated

§ 303 of the LMRA based on their conduct related to Daughters of Charity Health

- 31 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 31 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

System (“DCHS”). Specifically, Prime Healthcare alleges that Defendants violated

§ 303 by protesting at a DCHS hospital, backing an ERISA lawsuit against DCHS, and

requesting that the Securities and Exchange Commission (“SEC”) investigate DCHS.

(FAC ¶¶ 173-76, 178, 339-40.) 

LMRA § 303 makesit unlawful for a labor organization to engage in any activity

or conduct defined as an unfair labor practice in § 8(b)(4) of the NLRA. 29 U.S.C.

§ 187(a). In turn, NLRA § 8(b)(4)(ii)(B) prohibits a labor organization from engaging

in secondary boycotts. 29 U.S.C. § 158(b)(4)(ii)(B). “A § 8(b)(4)(ii)(B) violation has

two elements.” Overstreet v. United Bhd. ofCarpenters &Joiners of Am., Local Union

No. 1506, 409 F.3d 1199, 1212 (9th Cir. 2005). “First, a labor organization must

‘threaten, coerce, or restrain’ a person engaged in commerce (such as a customer

walking into one ofthe secondary businesses).” Id.(quoting 29 U.S.C. § 158(b)(4)(ii)).

“Second, the labor organization must do so with ‘an object’ of ‘forcing or requiring any

person to cease using, selling, handling, transporting, or otherwise dealing in the

produces of any other producer, processor, or manufacturer, or to cease doing business

with any other person.’” Id. (quoting 29 U.S.C. § 158(b)(4)(ii)(B)). 

Defendants argue that Prime Healthcare fails to allege a violation of LMRA

§ 303 for three reasons: (1) Prime Healthcare has not been injured; (2) DCHS was not

a “secondary” or neutral employer; and (3) the alleged conduct was not “coercive.”

(Dkt. No. 50-1 at 27-32.) 

1. Injury

LMRA § 303 confers standing to “[w]hoever shall be injured in his business or

property by reason o[f]” an unfair labor practice under NLRA § 8(b)(4). 29 U.S.C.

§ 187(b). “[A] court must determine whether Section 303 standing exists by looking

to: (1) the nexus between the injury and the statutory violation; and (2) the relationship

between the injury alleged and the forms of injury that Congress sought to prevent or

remedy by enacting the statute.” Am. President Lines, Ltd. v. Int’l Longshore &

- 32 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 32 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Warehouse Union, 721 F.3d 1147, 1153 (9th Cir. 2013).

Defendants contend that Prime Healthcare has failed to allege any injuries as a

result of SEIU and UHW’s allegedly unlawful § 8(b)(4) conduct related to DCHS, and

that Prime Healthcare cannot do so because it acknowledges that DCHS approved the

sale of six hospitals to Prime Healthcare on October 10, 2014. (Dkt. No. 50-1 at 28

(citing FAC ¶ 171).) Prime Healthcare counters that it sufficiently alleged injury

because it alleged that it incurred costs in responding to Defendants’ conduct. (Dkt.

No. 57 at 31 (citing FAC ¶¶ 19, 21, 266-69).) In addition, the sale of the hospitals is

not final yet because DCHS’s approval was just one step in the process and most of

Defendants’ conduct occurred after DCHS announced its decision in an effort to force

DCHS to abandon the sale while it remains subject to agency approval. (Dkt. No. 57

at 31 (citing FAC ¶¶ 171-78).) Defendants reply that Prime Healthcare’s cited

allegations are too vague or irrelevant. (Dkt. No. 58 at 8-9.)

None of the allegations relied on by Prime Healthcare are sufficient to show an

injury under LMRA § 303. (Dkt. No. 57 at 31 (citing FAC ¶¶ 19, 21, 266-69).) Prime

Healthcare points to paragraph 19, but that paragraph only vaguely alleges that “Prime

has incurred significant costs, including substantial legal fees, in defending against

UHW’s unlawful conduct in violation of LMRA Section 303.” (FAC ¶ 19.) Prime

Healthcare also points to paragraph 21, but that paragraph only conclusorily alleges

that it seeks to recover “consequential damages that were directly and proximately

caused by UHW’s unlawful activities under Section 303(a) of the LMRA.” (Id. ¶ 21.)

Paragraphs 266 and 267 address injuries allegedly flowing from“extortionate” conduct

under RICO, not flowing from secondary conduct under § 303. (Id. ¶¶ 266-67.)

Paragraph 268 concerns an employee’s False Claims Act suit against Prime Healthcare

and is irrelevant. (Id. ¶ 268.) Paragraph 269 is also irrelevant because it concerns the

boycott of a DCHS hospital, but does not allege any damages or other injury. (Id.

¶ 269.) 

- 33 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 33 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Therefore, the Court concludes that Prime Healthcare fails to sufficiently allege

any injuriesstemming from the allegedly unlawful § 8(b)(4) conduct related to DCHS.

As Prime Healthcare will have an opportunity to amend its FAC, the Court briefly

addresses Defendants’ other arguments regarding Prime Healthcare’s LMRA § 303

claims.

2. Secondary Conduct

NLRA § 8(b)(4) is notmeant to prohibit “primary activity” but rather “secondary

boycotts whose ‘core concept’ is ‘union pressure directed at a neutral employer the

object of which [is] to induce or coerce him to cease doing business with an employer

with whom the union [is] engaged in a labor dispute.’” Griffith Co. v. NLRB, 545 F.2d

1194 (9th Cir. 1976) (quoting Nat’l Woodwork Mfrs. Ass’n v. NLRB, 386 U.S. 612, 622

(1967)). 

Defendants contends that DCHS is not a “secondary” or neutral employer, but

rather a “primary” employer, because UHW was the bargaining representative of

employees at DCHS. (Dkt. No. 50-1 at 29.) Further, the fact that Prime Healthcare

may have also been affected by this conduct does not mean that Defendants violated

NLRA § 8(b)(4). (Id. at 29-30.) (citing NLRB v. Local 825, Int’l Union of Operating

Eng’rs, AFL-CIO, 400 U.S. 297, 303 (1971) (“Section 8(b)(4)(B) . . . reflects a concern

with protecting labor organizations’ right to exert legitimate pressure aimed at the

employer with whomthere is a primary dispute. This primary activity is protected even

though it may seriously affect neutral third parties.”)). Prime Healthcare responds that

it isirrelevant that UHWwasthe bargaining representative of employees at DCHS, and

the key issue is whether Defendants’ conduct directed at DCHS was motivated by its

labor dispute with Prime Healthcare. (Dkt. No. 57 at 31-32.) 

The Court agrees with Prime Healthcare that UHW’s status as the bargaining

representative of employees at DCHS does not preclude its conduct toward DCHS as

constituting secondary activity. As Prime Healthcare notes, in Local 825, cited by

- 34 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 34 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendants, the union’s activities were “aimed directly” at employers with which it had

a bargaining relationship, but the Supreme Court still held that the union’s actions were

“unmistakably and flagrantly secondary” because these neutral employers were not

involved in the dispute and the union’s goal wasto get these neutral employersto apply

pressure on another employer, the union’s primary target. See Local 825, Int’l Union

of Operating Eng’rs, AFL-CIO, 400 U.S. at 300, 304. The Fifth Circuit case cited by

Defendants also actually supports Prime Healthcare’s argument that a union may have

more than one motive, and the key issue is whether it has a prohibited secondary

boycott motive. (Dkt. No. 50-1 at 29 n.10; Dkt. No. 57 at 32.) See Tex. Distributors,

Inc. v. Local Union No. 100, United Ass’n of Journeyman, 598 F.2d 393, 399-400 (5th

Cir. 1979) (“The prohibited secondary object need not be the sole object of the union’s

activity. . . . A determination that the union has [a primary] objective does not . . .

foreclose inquiry into whether a prohibited secondary objective or intent exists, as

well.”), abrogated on other grounds by Summit Valley Indus., Inc. v. Local 112, United

Bhd. of Carpenters, 456 U.S. 717 (1982)).

Prime Healthcare alleges that Defendants’ conduct regarding DCHS was

intended to induce DCHS to cease its sale of hospitals to Prime Healthcare because of

Defendants’ labor dispute with Prime Healthcare. (FAC ¶¶ 173-76, 339-40.) As such,

Prime Healthcare has sufficiently alleged secondary conduct.

3. Coercive Conduct 

NLRA § 8(b)(4)(ii)(B) requiresthat the union “threaten, coerce, or restrain” any

person to cease doing business with another. 29 U.S.C. § 158(b)(4)(ii). Prime

Healthcare challenges three alleged actions by Defendants regarding DCHS:

(a) protesting at a DCHS hospital; (b) backing an ERISA lawsuit against DCHS; and

(c) requesting that the SEC investigate DCHS. (FAC ¶¶ 173-76, 178, 339-40.)

Defendants contend that Prime Healthcare has failed to allege that these alleged actions

amount to unlawful coercion under NLRA § 8(b)(4)(ii)(B). (Dkt. No. 50-1 at 30-32.)

- 35 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 35 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

a. Protest at DCHS Hospital

The Supreme Court has emphasized that, in light of a union’s First Amendment

rights, the phrase “threaten, coerce, orrestrain” “should be interpreted with caution and

not given a broad sweep.” Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. &

Constr. Trades Council, 485 U.S. 568, 578 (1988). For example, a union protest at a

neutral employer’s premises that creates a physical or symbolic barrier to the neutral

employer, promotes physical confrontations with individuals seeking to enter the

neutral employer’s business, implicitly instructs union members employed by the

neutral employer to stop work, or explicitly pickets the neutral employer is unlawful.

See Overstreet, 409 F.3d at 1213-16. However, a union protest at a neutral employer’s

premisesthatsimply informsthe public of a labor dispute in a non-threatening and noncoercive manner is lawful. See id.

Defendants argue that Prime Healthcare failed to allege any details regarding

Defendants’ protest at a DCHS hospital. (Dkt. No. 50-1 at 31.) Prime Healthcare

responds that Defendants’ protests “contain an element of conduct which differ from

pure speech” and that its allegations are not conclusory. (Dkt. No. 57 at 33 & n.27.)

Regarding the protest, Prime Healthcare only vaguely alleges that “on August

15, 2014, dozens of SEIU members, at the direction of Defendants, joined [healthcare

‘watchdog’ coalition] Our SALUD members outside St. Vincent’s MedicalCenter, one

of the hospitals owned by DCHS, for the purpose of interfering with Prime’s attempted

acquisition of this hospital system by coercing neutral DCHS not to sell to Prime.”

(FAC ¶ 269.) There is no indication what type of conduct Defendants were engaged

in outside the hospital. 

As such, the Court agrees with Defendants that Prime Healthcare has failed to

allege sufficient details regarding this protest to show that Defendants’ conduct rises

to the level of a threat, coercion or restraint under NLRA § 8(b)(4)(ii)(B). 

///

- 36 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 36 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

b. ERISA Lawsuit

Defendants contend that UHW’s alleged support of an ERISA lawsuit against

DCHS is protected by the First Amendment right to access the courts and does not

amount to coercive conduct under § 8(b)(4)(ii)(B) because Prime Healthcare fails to

allege that the lawsuit was filed for an improper purpose and is objectively baseless,

and because it is implausible that such a lawsuit would coerce DCHS to back out of its

hospital sales to Prime Healthcare. (Dkt. No. 50-1 at 31; Dkt. No. 58 at 9-10.)

Defendants also argue that the ERISA lawsuit is well-founded, ask this Court to take

judicial notice of the ERISA complaint, and cite to a separate district court ERISA case

concerning different parties. (Dkt. No. 50-1 at 31.) Prime Healthcare counters that a

lawsuit with a secondary objective constitutes coercion under the statute, and it is

inappropriate at this stage for the Court to evaluate the merits of the ERISA lawsuit.

(Dkt. No. 57 at 33.)

The First Amendment provides that “Congress shall make no law . . . abridging

. . . the right of the people . . . to petition the Government for a redress of grievances.”

U.S. Const. amend. I. The right to petition the government extends to the courts and,

thus, includes the right to file certain lawsuits. BE & K Constr. Co. v. NLRB, 536 U.S.

516, 525 (2002). In the NLRA context, the Supreme Court held in Bill Johnson’s

Restaurants, Inc. v. NLRB, 461 U.S. 731, 744 (1983) that an employer’s prosecution

of a retaliatory suit against picketing employees constitutes an unfair labor practice

under § 8(a)(1) if the suit: (1) is filed with an improper motive; and (2) lacks a

reasonable basis in law. The Ninth Circuit has applied this “improper

motivation/reasonable basis” test to determine whether a union committed an unfair

labor practice under § 8(b)(4). Int’l Longshoremen’s&Warehousemen’s Union, Local

32 v. Pac. Maritime Ass’n, 773 F.2d 1012, 1015 (9th Cir. 1985). 

Regarding the ERISA lawsuit, Prime Healthcare alleges:

On October 21, 2014, a few weeks after DCHS announced its intent

to sell to Prime, UHW filed a class action lawsuit against DCHS and other

- 37 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 37 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

related defendants. The lawsuit alleges that DCHS improperly evaded

federal pension law requirements under ERISA, allowing DCHS to

underfund its pension plan by an estimated $229 million.

The suit wasfiled to threaten, coerce, and restrain DCHS, and those

in control of DCHS, from moving forward with the sale of the DCHS

hospitals to Prime. UHW’s declared impetus for the suit: the acquisition

by Prime increased the risks to the pension plan.

Also, the ERISA lawsuit targets not only DCHS – requesting that

DCHS bring the retirement plan into compliance with ERISA and funding

the plan – it also targets those in charge of the decision to do business

with Prime (i.e., sell the hospitals to Prime): DCHS executives and

corporate entities that DCHS is subordinate to or affiliated with.

Specifically, the lawsuit requests that the DCHS executives who are plan

fiduciaries make the plan whole for any losses, disgorge any profits

accumulated as a result of their breaches of fiduciary duty, and pay all

applicable civil monetary penalties. With regard to the other corporate

entities, the lawsuit alleges that they are jointly and severally liable for the

failure to meet ERISA’s minimum funding standards and must therefore

fully fund the retirement plan.

Although UHW is not a named plaintiff, it has publicly

acknowledged that it is backing the lawsuit. DCHS has characterized

UHW’s suit as “nothing more than an unfortunate scare tactic by a union

waging a corporate campaign against Prime Healthcare.”

(FAC ¶¶ 173-76.)

The Court finds that Prime Healthcare has alleged that the ERISA lawsuit was

filed for an improper motive because Prime Healthcare alleged that the lawsuit “was

filed to threaten, coerce, and restrain DCHS, and those in control of DCHS, from

moving forward with the sale of the DCHS hospitals to Prime” and was filed “in the

context of UHW’s dispute with Prime.” (FAC ¶¶ 174, 339.) However, the Court finds

that Prime Healthcare has failed to allege that the ERISA lawsuit lacks a reasonable

basis in law. There are no allegations regarding the merit of the ERISA lawsuit.

As such, the Court concludes that Prime Healthcare has failed to sufficiently

allege that the ERISA lawsuit amounts to a threat, coercion or restraint under NLRA

§ 8(b)(4)(ii)(B).

c. SEC Investigation

Defendants contend that government lobbying, such as requesting that the SEC

investigate DCHS, does not amount to coercion under NLRA § 8(b)(4)(ii)(B). (Dkt.

No. 50-1 at 32.) (citing Brown & Root, Inc. v. La. State AFL-CIO, 10 F.3d 316, 326-27

- 38 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 38 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(5th Cir. 1994) (“[T]o hold that lobbying activities constitute coercion within the

meaning of section 8(b)(4)(ii)(B) would pose potentially serious First Amendment

problems . . . We cannot discern in the language of section 8(b)(4)(ii)(B) any clear

indication that governmental lobbying alone ‘coerces’ secondary employers. Neither

do we find any clear indication in the legislative history that Congress intended to

proscribe such lobbying.”).

Prime Healthcare counters that UHW’s request that the SEC investigate DCHS

is not protected lobbying activity because it is not a genuine effort to influence

governmental action butrather an unlawful attempt to interfere with Prime Healthcare’s

relationship with DCHS. (Dkt. No. 57 at 24-25, 33.) (citing Clipper Exxpress v. Rocky

Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1251, 1253 (9th Cir. 1982) (“If

the purported effort to influence or obtain government action is in reality only an

attempt to interfere with the business relationships of” another the activity does not

enjoy immunity under the Noerr-Pennington doctrine, and “[w]hether something is a

genuine effort to influence governmental action, or a mere sham, is a question of

fact.”). See also Kearney v. Foley & Lardner, LLP, 590 F.3d 638, 643-44 (9th Cir.

2009) (discussing Noerr-Pennington doctrine).

Prime Healthcare alleges that:

UHW sent a letter to the SEC demanding an investigation of and agency

action against the neutral DCHS. Specifically, UHW alleged that DCHS

had violated the Securities Exchange Act because its CEO had misled

investors. In reality, the DCHS CEO was asked about a dispute between

the California Nurses Association and UHW and what percentage of the

staff was represented by UHW. He responded that he did not know the

specific number, that it was a significant percentage, and that “we have

had a great labor-management partnership for years, working together. So

it is a significant number but I can’t tell you percentage.” The basis for

the SEC investigation demand: UHW disagreed with the description of

the labor-management partnership as “great.”

(FAC ¶ 178.) Prime Healthcare further alleges that this request was “in the context of

UHW’s dispute with Prime” and that by “requesting that the SEC initiate an

investigation of DCHS . . . UHW sought to pressure DCHS to not sell its hospitals to

- 39 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 39 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Prime.” (Id. ¶ 339.) 

At this early stage of the proceedings, assuming that truth of all factual

allegations and construing all inferencesfromthemin the light most favorable to Prime

Healthcare, the Court concludes that Prime Healthcare has sufficiently alleged that

UHW’s request that the SEC investigate DCHS amounts to coercion under NLRA

§ 8(b)(4)(ii)(B). Prime Healthcare alleged that UHW’s request to the SEC was not

well-founded (FAC ¶ 178) and was “sought to pressure DCHS to not sell its hospitals

to Prime” “in the context of UHW’s dispute with Prime” (id. ¶ 339). Therefore, it is

plausible that UHW’s request to the SEC was not genuine government lobbying, but

rather a sham to coerce DCHS because of UHW’s labor dispute with Prime Healthcare.

In sum, the Court has concluded for its LMRA § 303 claims related to DCHS,

Prime Healthcare has failed to sufficiently allege that it was injured, and has failed to

sufficiently allege that the protest at a DCHS hospital and the ERISA lawsuit amount

to unlawful conduct under NLRA § 8(b)(4)(ii)(B). Accordingly, the Court GRANTS

Defendants’ motion to dismiss Prime Healthcare’s LMRA § 303 claim in Count XI.12

CONCLUSION AND ORDER

For the foregoing reasons, the Court hereby ORDERS:

1. Defendants’ Motion to Dismiss the FAC is GRANTED IN PART AND

12Prime Healthcare correctly points out that Defendants failed to address

Count X, which alleges that SEIU and UHW violated LMRA § 303 by attempting to

force Prime Healthcare to join a de facto multi-employer bargaining group. (Dkt. No.

57 at 12; FAC ¶¶ 252-53, 331-32.) Defendants acknowledge that they overlooked

Count X, but ask this Court to use its discretion to consider thisissue raised for the first

time in their reply brief, and argue that the claim is specious because it is predicated

on the legal assertion that by giving the Committee the authority to make expenditures

as permitted by the LMCA, the CHA-UHW Agreement thereby gives the Committee

the right to control all labor relations issues at the signatory hospitals. (Dkt. No. 58 at

10-11.) The Court declines to address this issue because it is raised for the first time

in Defendants’ reply brief, and Prime Healthcare has not had the opportunity to

respond. See Hupp v. San Diego County, 2014 WL 347472, at *4 (S.D. Cal. Jan. 30,

2014) (district courts have broad discretion to consider arguments raised in a reply

brief, but generally should do so only for good cause, if the issue is raised in the

opponent’s brief, or if failure to raise the issue properly did not prejudice the opposing

party). 

- 40 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 40 of 41
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

DENIED IN PART (Dkt. No. 50);

2. the Court DISMISSES WITHOUT PREJUDICE Prime Healthcare’s

entire FAC, except for Count X. If Prime Healthcare wishes, it SHALL

FILE a second amended complaint to correct the deficiencies identified

herein within thirty (30) days of the date this Order is electronically

docketed;

3. Plaintiff’s Ex Parte Motion for Leave to File Supplemental Memorandum

is GRANTED (Dkt. No. 68).

IT IS SO ORDERED. 

DATED: April 1, 2015

HON. GONZALO P. CURIEL

United States District Judge

- 41 - 14cv2553-GPC-RBB

Case 3:14-cv-02553-GPC-RBB Document 70 Filed 04/01/15 Page 41 of 41