Union Will Base Defamation Appeal On Free Speech Argument

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A Service Employees International Union local in Texas has filed for bankruptcy because it can’t pay a jury award and needs time for an appeal, but does it really have a leg to stand on?

Unions and companies fight, but in Texas where everything is big, one such battle rages on.

Professional Janitorial Service of Houston (PJS) and Service Employees International Union Local 5 (SEIU Local 5) have waged a war since 2007 that now may have implications when it comes to the First Amendment rights of labor organizations and the financial accountability that national ones have when it comes to their chapters.

SEIU Local 5 is currently in Chapter 11, having filed a petition with the U.S. Bankruptcy Court for the Southern District of Texas in Houston on Dec. 3 because it can’t pay the nearly $8 million in damages and interest a Harris County jury and judge awarded PJS for being defamed by the union.

The protection from creditors afforded by the bankruptcy filing gives SEIU Local 5 time to better craft its appeal. The chapter wouldn’t respond to requests for comment, but it did say in a statement to the Washington Free Beacon on Nov. 15 that it “will argue that the judgment against Local 5 must be overturned because, among other things, it violates the free speech rights of workers and their advocates throughout Texas.”

PJS, meanwhile, isn’t happy with SEIU Local 5’s attempt to skirt payment of the defamation award.

The union argued that the Local 5 branch is too broke to make the bond dictated by the judgment, and filed a motion asking the District Court of Harris County, Texas, for a bond of $100,000.

“In response to that, we said, ‘No, the local union is really the alter ego of the national union, and the national union should be on the hook for this,’” says PJS’ lawyer, John Zavitsanos of Houston law firm AZA.

The national SEIU for two decades has been waging its Justice for Janitors campaign for janitor rights, but in Spring 2007, PJS felt Local 5 had gone too far. It wasn’t just that the chapter had filed 19 unfair labor practice (ULP) claims against PJS with the National Labor Relations Board. PJS asserted that the union distributed false statements about the commercial cleaning company, as well as forged documents.

On May 3, 2007, PJS filed a defamation case against Local 5 in the state district court for Harris County. After years of litigation, a jury on Sept. 6, 2016, sided with PJS and awarded the company $5.3 million in damages. On Sept. 26, Judge Erin Elizabeth Lunceford tacked on an additional $2.5 million as interest for the nearly 10 years of legal proceedings, bringing the grand total of damages to nearly $8 million. All 19 ULP claims were tossed out.

In December, Local 5 made a Chapter 11 bankruptcy filing just before the Harris County court was going to hold a hearing on how to set the bond.

“This filing ensures that our union will remain open for business, representing members at the bargaining table and maintaining the vital role the union plays in helping working Houstonians have a voice at work, protecting them from unfair employers, and building a better future for their families,” according to a statement SEIU Texas President Elsa Cabellero provided to the Washington Free Beacon. “Bankruptcy is a common process provided under the law to protect organizations—such as corporations, non-profits, unions etc.—and allows us to seek temporary relief from our debt while we continue to pursue our appeal of an unfair judgment.”

But Zavitsanos remains confident that the ruling will hold.

“During the course of this trial, there were instances where union representatives lied during the trial, where they fabricated and just made things up,” he says. “It was pretty insulting. So my belief —before having seen whatever it is that they’re going to say— is that they’re going to get crushed in the appeal, just like they got crushed in the trial.”

But before that appeal can move forward, there’s the bankruptcy to deal with. A hearing is set for the end of January on a PJS motion seeking for the bankruptcy filing to be dismissed.

“The basis for asking for the dismissal is that the bankruptcy filing is essentially a sham and that they did it as a maneuver to get around this bond issue on the state court side,” Zavitsanos says.

If the bankruptcy is dismissed, the district court in Harris County court can then hold its hearing on setting the bond.

Then what? Will the national SEIU come to Local 5’s rescue?

Probably not. The local has given no indication it will seek help from the national SEIU.

If the bankruptcy isn’t dismissed, PJS will try to get it converted to a Chapter 7 winddown so that the union could pay the damages from funds derived from liquidating assets, Zavitsanos explains. If the court sides with SEIU and decides on Chapter 11, Zavitsanos says that the bankruptcy court will likely hold some sway in how the appeal of the state court case proceeds.

One thing seems sure. The fight between Local 5 and PJS has lasted nearly a decade, and it will likely last several months longer at the very least.

“Our primary objective is to get the bankruptcy dismissed,” Zavitsanos notes. “We need to prevail on that in order to get back in state court, put the train back on the tracks, and let it move forward so that we can have the hearing on the bond and their appeal can go forward.”

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