Courthouse Steps Oral Argument: Starbucks Corp. v. McKinney

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Chayila Kleist:   Hello, and welcome to this FedSoc Forum webinar call. Today, April 29, 2024, we’re delighted to host a “Courthouse Steps Oral Argument” on Starbucks Corporation v. McKinney, which was argued last week before the Court. My name is Chayila Kleist, and I’m an Associate Director of Practice Groups here at The Federalist Society. As always, please note that all expressions of opinion are those of the expert on today’s program, as The Federalist Society takes no position on particular legal or public policy issues. Now, in the interest of time, I’ll keep my introduction of our guest today brief. But if you’d like to know more about our speaker, you can access his impressive full bio at fedsoc.org.

 

      Today, we are fortunate to have with us, Sheng Li, who is litigation counsel for the New Civil Liberties Alliance. Prior to joining NCLA, Mr. Li served as Counselor to the Administrator of Wage and Hour at the U.S. Department of Labor, and he has also worked in the private sector as a Litigation Associate at Patterson Belknap Webb and Tyler, as well as at Kirkland and Ellis.

 

      Mr. Li is a graduate of Johns Hopkins University and Yale Law School, where he was the managing editor of the Yale Journal on International Law. And after graduating law school, he served as a law clerk to the Hon. Danny Boggs in the U.S. Court of Appeals for the Sixth Circuit, and I will leave it there. A last note, and then we’ll turn it over for a time of opening remarks: if you have questions throughout the program, please submit them via the question-and-answer feature, as we’ll have an extended portion of today’s webinar where we’ll be able to address those. With that, however, Mr. Li, the floor is yours.

 

Sheng Li:  Thanks for having me on to discuss this case. Quite an interesting case: Starbucks v. McKinney—McKinney being the regional director of the National Labor Relations Board in the Tennessee area and surrounding areas. Even though this was an NLRB case, it’s not really a labor case, per se, but rather an administrative law case concerning the Board’s power to obtain an injunction under Section 10(j) of the National Labor Relations Act.

 

      That section allows the Board to get an injunction against the target of one of its enforcement actions, be that an employer or a union, although it’s -- in recent years, it’s been used exclusively against employers, and it could get an injunction when doing so is just and proper. And the question presented is what does that really mean? What are the standards for that injunction that the court had decided?

 

      So maybe a little table setting on the legal backdrop and the factual backdrop, and then we can jump into what happened at oral argument last Tuesday. So the question, again, was, “What must the NLRB show to get an injunction that is just and proper?” And there’s a circuit split on this question. Four courts of appeal—and those are the Fourth, Seventh, Eighth, and Ninth Circuits—apply the traditional four-factor injunction test that comes out of the Winter case out of 2008. And those four factors are, first, the entity seeking the injunction must show a likelihood of success on the merits. Second, it must show that, with absent an injunction, it is likely to suffer irreparable harm. Third, the balance of equities must favor an injunction. And fourth, the injunction should favor the public interest. And I think most of our listeners are familiar with that tried-and-true injunction standard.

 

      However, five courts of appeal apply a different test when the NLRB is the agency seeking it, and this is actually a less rigorous four-factor -- I’m sorry, two-factor test. The first is, is there reasonable cause for NLRB to seek an injunction, meaning does the NLRB allege factual evidence and make legal arguments that are not frivolous and not insubstantial? So this is a lot less—just looking at it—than the likelihood of success standard that we just talked about. So that’s one difference. And second, is they have to show -- the NLRB has to show that the injunction would serve the NLRB’s remedial powers, which is quite different from those other bounds of equities and irreparable harm factors that normally apply.

 

      And just a word on this “not frivolous standard.” This is the first -- on the part of the reasonable cause test, it’s quite deferential to the NLRB, obviously. The NLRB -- the courts have bent over backwards in the past in those other circuits—in Third, Fifth, Sixth, Tenth, and Eleventh Circuits—to grant injunctions based on legal and factual arguments that may differ from how the courts themselves would have thought about it, but they instead just defer to the NLRB’s position.

 

      So with those -- those are the two standards for NLRB injunctions that courts have used. I will mention as an aside, the First and the Second Circuit uses sort of a hybrid standard, but those are the two main branches, and that’s the circuit split on which the Court granted review.

 

      And as for a little factual background here, the case -- and the Sixth Circuit is one of the cases that uses the easier standard. And what happened was back in 2022, there was a unionization effort among Starbucks stores—and I think that unionization effort is still ongoing—and particularly in the Memphis store, a number of Starbucks employees opened the store after hours and let in a film crew to make a pro-union film without the authorization of the store manager and against corporate policy. So because this violated Starbucks’ policy, Starbucks says that it terminated seven of these employees. I think there were eight involved, but one of them was not terminated. Later, in 2022, the Memphis store did vote to unionize, and that union filed an NLRB complaint, which, among other things, stopped the reinstatement of the seven employees who were terminated.

 

      NLRB then issued a -- started an administrative enforcement action against Starbucks, alleging that the terminations violated labor law because it was retaliation of -- and it discourages protected unionization activity. That administrative proceeding is still pending before the NLRB as of today, and it’s internal to the agency. But while that was pending, the NLRB then also sought, under Section 10(j) of the Act, in Tennessee district court, an injunction requiring Starbucks to rehire those employees while the Board was deciding and considering the administrative proceeding.

 

      The district court in Memphis granted that injunction, so it required Starbucks to rehire those employees, and it—consistent with that circuit split I talked about earlier—applied the more relaxed standard for an injunction. So it deferred to NLRB’s factual allegations that the terminations were in retaliation of unionization activities, as opposed to being consistent with Starbucks’s general policy of not letting employees in after hours to do unauthorized activities.

 

      And, in fact, the district court “disregarded” in its opinion the Starbucks -- the facts that Starbucks offered, refuting NLRB’s account of why these terminations fired and how they were fired. Instead it said, “Because of this deferential, more relaxed, two-part test, conflicts in evidence and issues of witness credibility are really left to the NLRB, under the Sixth Circuit’s rule on this matter.” And as to that second part of the two-factor test, the district court said an injunction was necessary to return the parties to their status quo ante, and therefore granted the injunction, which, again, is different and more relaxed than the typical irreparable harm standard that litigators typically have to meet to find -- to get an injunction.

 

      On appeal, the Sixth Circuit affirmed the injunction based on this relaxed two-factor test. And it was a unanimous decision on that matter, but Judge Readler did reluctantly concur. He said, “Hey, based on our Sixth Circuit precedent, yes, we do apply this relaxed standard, where all Starbucks -- I’m sorry -- all NLRB has to prove is make a non-frivolous argument at this stage, and we have to grant an injunction. But he said this relaxed standard seems to be inconsistent with what the Supreme Court has said applies, typically, in injunctions—which that is that four-factor test from Winters—and that while Congress may be able to depart from that four-factor test, the phrase, “just and proper” was not clear enough of a statement to do so.

 

      And so, Judge Readler’s concurrence there was almost a semi-dissent, and really teed up the circuit split and teed up the cert petition that Starbucks filed. And Starbucks did file that, and the Court agreed to a review, and then we had oral arguments last week. So with that backdrop in mind, we can come to last week’s oral argument.  Lisa Blatt, a veteran litigator—I think she holds the record for the most number of Supreme Court cases by a woman—argued for Starbucks, and Austin Raynor argued for the Board.

 

      Now, normally, I think it’s risky to predict outcomes based on what was said during oral argument, but as we’ll discuss in a little more detail, based on the stridency of some of the justice’s questioning and some of the concessions that NLRB’s attorney, Mr. Raynor made, I think it’s pretty safe to say -- while the exact opinion you can’t predict, it’s pretty safe to say Starbucks is very likely to come out on top here. And why is that?

 

      Well, to start, NLRB’s briefing in this case, surprisingly took a step back from the position it took in the lower courts. Again, in the lower courts, Starbucks argued, “Hey. You should apply -- courts, you should apply the traditional four-factor tests.” NLRB in the district court and the Sixth Circuit argued instead for the more relaxed two-factor test, under Section 10(j). But instead of standing really behind the two-factor test, NLRB’s position had a transform at the cert stage. It said, “Hey. We understand this four-factor test exists. This two-factor test is merely -- it’s not really that different; [inaudible 12:00] it’s merely a reflection of the four-factors. It incorporates them, and it’s just applying that -- it’s not in NLRA statutory context and therefore no reason to grant cert on this, your honors. Nothing to see here.” The court completely didn’t agree and did, in fact, grant cert. And at the merit stage, NLRB’s argument was much the same, making the argument that the two-factor test was not so different from the four-factor test. So that’s already—coming into the oral argument—I think, a substantial concession there.

 

      So coming in, the question presented and the question that everyone was trying to answer at the oral argument was really, “Well, is it true? Does the NLRB prefer two-factor test? Does that depart from the traditional four-factor tests, and if so, is that departure justified by the statute?” And right off the bat, I think, it seemed pretty clear that the justices were, at least -- many of the justices were not satisfied with the NLRB’s two-factor standard. The questions all presumed that the four-factor standard applies, and the real question at issue was whether the two-factor standard was somehow an adequate reflection or adequate substitute for the four-factor test. And the questioning really focused on that first factor in the standard four-factor test: the likelihood of success on the merits.

 

      Under the traditional test, you have to show that “Hey. There’s a little merits peaking Before we grant you preliminary relief, the court’s going to make sure that, based on the preliminary legal arguments and factual evidence presented, that you have -- you’re more likely than not to prevail.” But under NLRB’s preferred standard, that’s not quite true. All it has to do is show a not frivolous set of facts and not frivolous legal argument. And not frivolous was the “language” that the courts below have adopted when applying that test. So it’s quite a big difference, when you look at it.

 

      And so, the Court, I think, focused on that difference because it’s quite egregious and quite large between likelihood of success and not frivolous. Not frivolous -- I don’t know where the analog is, but it's got to come pretty close to a Rule 11 sanctionable argument. And I just think it just can’t be that an agency can get an injunction as long as its arguments are somehow past the sanctioning Rule 11 test.

 

      I think the arguments -- many of the questions focused on whether this ultimately comes down to a super level of deference, and this case is argued, in a way, under the shadow of the Chevron cases, Relentless and Loper Bright, which are reconsidering the Chevron deference. And in many ways, the deferential standard review for this injunction test is, in many ways, a stronger version of Chevron because, at least under Chevron, judicial deference to an agency’s interpretation of the law is based on the agency’s final action—after the agency does notice and comment and considers all the facts and does a full fact finding and legal analysis.

 

      But here, it’s at the preliminary stage. It’s just the agency’s initial litigation position. So in many ways, the NLRB is just asking for judicial deference to its legal arguments and factual findings, both for the purpose of litigation, and that’s, I think, a whole level of deference that’s far stronger than Chevron. And if the Court’s reconsidering Chevron, it’s not likely to grant deference that’s much stronger than that.

 

      So early in the argument, even, we can see the justices being very skeptical to the NLRB's test. Even as she pushed back on Starbucks’ positions with respect to some of the -- this is when Justice Sotomayor was pushing back on the Starbucks’ position on irreparable harm, balance of the equities, public interest. But even as she did that, I think she—clearly, on the likelihood of success on the merits—didn’t think the NLRB's not frivolous standard satisfied that, saying -- so I’m just going to find this. Yeah. She commented, “I do understand why that”—that’s the likelihood of success on the merits issue—“needs to be corrected because”—to Lisa Blatt—“Lisa Blatt, you’re right, it’s the Court that has to decide the likelihood of success on the merits,” not the agency. The Court has to exercise some kind of independent judgment on this point. And on this point, the -- most of the other justices agreed with Justice Sotomayor’s position there, which they made clear in their intense questioning of the NLRB’s attorney later on.

 

      And these questions led to some concessions, and we can just start -- Mr. Raynor conceded at the beginning of his argument that all four of the traditional factors are relevant here, which was, again, not what NLRB has argued below, nor what the lower courts did. So that, to start, I think concedes that the lower court may have gotten it wrong and provides a basis for reversing and remanding and get the justices focusing on the likelihood of success factor—kept on pressing on the amount of delta, the amount of difference between the traditional test on likelihood of success and the likelihood of success standard on the NLRB's standard.

 

      Justice Gorsuch—looking at just the fact-finding aspect of that likelihood of success—said, “So the Sixth Circuit rule”—talking to the Sixth Circuit rule— “that you can’t engage in fact finding, that has to be wrong. Right?”—he asked the NLRB attorney. And after some hemming and hawing and back and forth, he pressed it and said—Justice Gorsuch—“That statement is wrong.”  Mr. Raynor—“That statement on its own is.” So again, the concession by NLRB that the lower court’s refusal to do any fact finding, refusal to consider countervailing factual evidence that Starbucks presented below was an error. And that concession itself, I think, already creates a basis for reversal.  

 

      Justice Kavanaugh, at this point, jumps in and says, “Well, do we apply the test the same way we usually apply it as a general matter?” In other words he’s looking for the delta—the difference between the normal test and the NLRB's preferred test. And Mr. Raynor’s answer to that question was also a decisive concession here. He responded, “I think there has to be some translation on the context. And on -- just focusing on likelihood of success for a moment, we think that there has to be a substantial legal theory, and there has to be sufficient facts a reasonable fact finder could find for the Board.” And at that point, both Justice Kavanaugh and Justice Gorsuch jumped in and said, “That doesn’t sound like likelihood of success on the merits at all.” So, again, this is very different. You have to find, under the traditional test, more likely than not that you’re going to succeed on the merits, whereas under the NLRB’s test, it just has to be a substantial legal theory. I’m not sure what really that means. Maybe a reasonable fact-finder could find it, and after some back and forth, everyone kind of agreed what the NLRB was doing was getting injunctions based on less than a 50 percent showing, which is -- again, that’s, I think, a major difference here.

 

      NLRB made some arguments to support its claim for a more deferential test based on -- there was a statistical argument that was presented. The argument was, “Well, we have 20,000 complaints filed every year, and we only seek a few dozen 10(j) injunctions; therefore, we must -- these 10(j) injunctions must be really important and must be really meritorious because we’re being so selective,” was the NLRB's position. And the justices didn’t seem to buy that. Justice Roberts says, “Well, your selectivity here, could that just -- could the inference be opposite,” was what he asked, “because this shows you’re putting your resources on these cases because you think they’re harder cases to win so you’re -- that’s why you’re being selective?”

 

      Justice Alito presented a hypothetical of, well -- to NLRB's attorney who was from the solicitor general’s office. And he asked, “Well, the solicitor general gets a lot of requests for cert petitions for making oral arguments, and obviously, it’s selective in deciding which cases it seeks cert on, which cases it seeks emergency relief on. Should the solicitor general’s selectivity be a factor for the courts on the decision on the merits?” Can the solicitor general say, “Hey. We only bring up a few cases each year to the Court, and therefore, these cases are meritorious.” And the NLRB attorney said, “Maybe that could be a consideration,” and Alito responded, “Seriously,” in an incredulous way, suggesting quite -- the selectivity of an agency or of a government actor in bringing cases should not be a consideration for courts when deciding whether those cases present meritorious arguments.

 

      And ultimately, the NLRB's argument for a relaxed review comes back to what they say is the statutory context, which relies a lot on legislative history, of what Congress intended, even though the phrase “just and proper” may not give much evidence to that intent. Again, Justices Thomas and Gorsuch both came back at this and said, “Well, if we’re going to give this much deferential review to an agency’s litigation position based on just and proper, shouldn’t every -- all these other agencies, these alphabet soup of agencies—the SEC, FTC, CFTC, etc.—they all have authority to seek injunctions in district court, pending an administrative adjudication? Wouldn’t the NLRB's position be also that these hodgepodge of agencies get deferential treatment?” And whether that’s an appropriate outcome, I think they’re very hesitant to accept any argument that would broaden this sort of deferential treatment to all kinds of agencies.

 

      Among the justices, I think, Justice Jackson was the only one who said a word of support for the NLRB standard on the likelihood of success prong. Justice Sotomayor had some support on irreparable harm and others. But on likelihood of success, I think Justice Jackson was really the only one. She asked, “Is this -- this is a different context from other PIs and to the extent” -- she says, “to the extent we’re applying the four-factor test, it’s the likelihood that the Board is going to decide that there’s an unfair labor practice in this situation in reverse. The stakes on the ground, or whatever, isn’t that right?” So again, she thinks, based on this extra context, her interpretation seems to be that what the district court should be doing is not necessarily deciding the issues on its own, but rather what the district court should be doing is trying to predict what the NLRB is likely to do in the end because the NLRB was given the task of deciding these issues.

 

      However, I think Justice Kagan came in right after that and shut that argument down, saying, “I don’t see how that could possibly be, and you know a court is supposed to say, ‘I have one view of the law, and I’m just going to assume that the Board has the’” -- I’m sorry -- “the Board is not supposed to say that I have one view of the law, and I’m just supposed to assume the Board has a different view of the law.” And at the end, she put it -- Justice Kagan put it rhetorically—I think sums up the argument—“It’s got to be the Court’s view of the law. Right?” And if it is to be the Court’s view of the law, it can’t be a non-frivolous standard and so, at least, on that likelihood of success prong, Starbucks is very likely to win this case.

 

      The justices backed both sides -- asked both sides whether there could be a short opinion, and I think it could be based on the concessions that NLRB made. So the decision would likely focus on that likelihood of success because that’s what occupied most of the argument. Maybe there will be some -- there was some discussion on irreparable harm, as well, maybe -- what the Board has to show when it seeks an injunction for irreparable harm, everyone agreed that chilling union activity could be irreparable harm. But Starbucks and Lisa Blatt argue that such chilling has to be tied to some sort of discernible, irreversible, discreet activity, such as a vote for a union -- for unionization, and that wasn’t the case in this case because, well, the unionization vote had already occurred.

 

      And with that, I guess, looking at predictions -- I normally hesitate to make any predictions about outcomes of cases, but here, I think Starbucks is highly likely to win. The Court is highly likely to say that the four-factor test applies and that, at least, with respect to the likelihood of success prong that the test that’s used in the Sixth Circuit and a few other circuits around the country doesn’t pass muster. And with that, I think we can open it up to some questions.

 

Chayila Kleist:  Sounds great. Thank you so much for that summary of the case and the facts associated with it, as well as oral argument. We do, actually, already have a question from our audience, and so I’ll issue the brief reminder here to the rest of our audience, if you want to submit a question, the Q&A feature at the bottom of your Zoom screen is the way to do that.

 

      John Sheller, from the audience, asks, “The NLRB, like any litigant, could presumably seek relief under Rule 65 without invoking 10(j). Why would the NLRB be restricted solely to Rule 65 when it has this extra authority under 10(j)?”

 

Sheng Li:  Well, I don’t know if it does have Rule 65 authority. That’s actually not -- the use of 10(j) didn’t exist; it wouldn’t normally be able to get into federal court. And, in fact, the -- this was part of the legislative history here. It’s in the 1930s, the National Labor Relations Act was passed to -- in part, to get courts out of the labor -- getting labor disputes and setting -- giving the power to NLRB to decide them. And at that time, the rationale was folks thought the courts were getting too -- putting a lot more injunctions against labor unions. The courts were too employer-friendly, and they wanted -- Congress wanted the NLRB to make -- to be the final decision. It was only in 1947 that the statute was amended to provide for 10(j) injunctions, allowing the Board to seek an injunction while its investigation and enforcement action was pending. So I don’t know if -- so based on that, I don’t think prior to 10(j) being added in ’47, NLRB was actually not able to get district court injunctions.

 

Chayila Kleist:  Got it. Thank you. That’s a helpful answer. You mentioned a little bit in your discussion the nature of the NLRB and the way that its structure is and the fact that this is before there’s been a final decision by the Board. Part of the conversation during oral argument was on whether or not the specific nature of 10(j) and the way that the NLRB has a prosecutorial arm versus a deciding arm, how that affects whether or not there should be deference here. Can you give a little more background to that conversation and whether or not the decision here could affect other agencies and whether or not they apply for these sorts of injunctions?

 

Sheng Li:  Yeah. So on the first part, NLRB's general counsel is the one that brings cases, and before seeking a 10(j) injunction, NLRB's general counsel typically -- I think, actually, through NLRB regulation, has to present the case to the Board—the five-member Board—and the Board has to sign off on that 10(j) injunction. One of the NLRB's arguments is, “We’re very selective in doing that. The Board doesn’t sign off on just any of these injunctions.” So once the Board signs off on that injunction, then the general counsel and the regional administrator in charge of the enforcement action could then seek it in district courts. So that’s how it happens internally through NLRB.

     

      And I’m sorry, could you say the second part of that question again, on whether it affects other agencies?

 

Chayila Kleist:  Oh. It was how it would affect other agencies. It was back and forth as to what the impact of this could be.

 

Sheng Li:  Right. So the differential test that the NLRB sought -- NLRB's argument was, one, we’re very selective and, two, this furthers our remedial purpose of remedying labor violations. But a couple of the justices—Thomas and Gorsuch in particular—were skeptical of that, in part, because the same argument would apply to virtually any agency tasked with regulating companies and enforcing and adjudicating cases against regulated entities—so the SEC, FTC, and so forth.  Those agencies do have the power to seek injunction in district court, but they have all been required to do so based on the traditional, more strict four-factor test. And the justices were concerned, “Well, if we rule for NLRB here, does that open the door for SEC, FTC, and so forth, to get injunctions against targets of enforcement adjudications in district court under a far more relaxed standard?”

 

      And one difference here I didn’t mention, and the oral argument didn’t dwell on this -- but one issue here is that in a typical injunction, the court is in charge of really how long that lasts because you’re litigating a case before the district court, and so the district court can make sure it doesn’t last longer than it needs to be. Here, the injunction lasts until the NLRB finishes its adjudication. So actually, it’s the party that’s seeking the injunction has full control over the length of the injunction, which, I think, may play a little bit in deciding how fair it is to offer a deferential standard.

 

Chayila Kleist:  Got it. Thank you. That’s helpful. Next audience question gets to what was at issue here. Was this on the actions of the former Starbucks employees? Was that being litigated, or was it focusing solely on the standard of review for this kind of injunction?

 

Sheng Li:  Yeah. It was solely on the standard of review. So there’s no decision on whether the Starbucks employees actually violated Starbucks’ policy, whether they were -- I mean, they were definitely terminated, but then the question is whether they were terminated for a violation of Starbucks’ policy or if they were terminated for unionizing. So if they were terminated for unionizing, that could be a violation of labor law. So that’s the issue that’s before the NLRB right now, and NLRB has sought an injunction, saying, “Well, before we actually make a final decision on whether Starbucks’ termination was lawful or unlawful, we want to force Starbucks to rehire these seven terminated employees and keep them on the payroll for this period of time.” And I would say Starbucks has been targeted with about a dozen of these 10(j) injunctions over the last couple of years, so I think this might be them saying, “We’re sick of it, and we’re going to take it all the way to the Supreme Court.”

 

      To answer the question, the underlying legality of Starbucks’ action has not been decided, and we’re just dealing with what the legal standard is for reviewing when NLRB seeks injunction. So if, as I predict it would, Starbucks were to win, this case would probably get sent back and ask, “Did it apply the correct standard -- just does NLRB make the case under the correct standard?”

 

Chayila Kleist:  Got it. Thank you. Next audience question, I will try to read verbatim, and hopefully it will make sense that way. Doug Seden (sp) asks, “The NLRB’s GC seems to threaten to seek a 10(j) injunction in discussions when the employer is the charged party, and it does so, seemingly to press for a concessionary settlement. This almost seems to be a policy. Comments on that.”

 

Sheng Li:  Yeah. So that’s a great question and a great point. So when the NLRB goes after an employer, again, if these injunctions are granted at a lower standard, the NLRB is able to -- what the NLRB seeks in ultimate relief when it goes after an employer in an enforcement action is also often very similar to what they seek in a 10(j) injunction. For example, here, the NLRB, when they -- in the underlying dispute, NLRB is trying to seek various relief against Starbucks, including the reinstatement of the employees, which they have to normally prove it—prove in a normal case—which is reviewable by courts of appeal. But if, instead, they can get one of these injunctions under a deferential standard, why bother proving it in a normal case if they can just by making non-frivolous allegations get an injunction and get the exact relief that they want?

 

      And then the employer is hit with this exact relief and then put into a pretty bad negotiating position. Why? Because then Starbucks can drag out the -- I’m sorry, not Starbucks -- NLRB can then drag out the proceeding, and Starbucks has to hire these employees and maintain them on payroll until the very end. Now, hiring seven employees is not a big deal for Starbucks, but some of the relief that NLRB has been able to obtain has been quite onerous, including forcing -- in a Third Circuit case, forcing the employer to not sell a million-dollar factory that was operating at a loss.

 

      So if you’re the employer in that case, and you get one of these injunctions hit onto you --  “Well, that’s going to cost me a ton of money. So I better settle this thing quickly with NLRB because once the injunction -- once they get the injunction, they have all the power. They can just sit on this case for years and years and years and I’m losing money hand over fist every month. So I’m going to settle this case on unfavorable terms.”

 

      And if you step back from that, NLRB doesn’t even have to get the injunction because if the standard for getting an injunction is very low, as it is in the Sixth Circuit and a few other circuits, NLRB can just threaten to seek an injunction. And that very threat, if you’re the employer and you read the precedent and say, “Oh. Well, they can get one if they want. It’s a very low standard, and once they get it, it costs me a ton of money, maybe more money than it’s worth to defend this enforcement action. So my best bet is just to settle the case --” and that tactic -- my understanding is even though NLRB formally seeks relatively few of these injunctions, they threaten to seek many more, and that tactic pressures employers to settle on unfavorable terms. One, maybe, beneficial outcome to this case would be to take away that coercive negotiating tactic from the NLRB's toolbox and force them to actually prove labor violations.

 

Chayila Kleist:  Got it. I’d love to follow up on this. And this touches a little bit on something you mentioned during your overview. There was some back and forth during the oral argument on the statistics surrounding both the rate at which the NLRB applies for these and the rate at which they win, either in front of themselves or upon appeal. How relevant were those factual disagreements to the legal arguments being made, and what effect could that have on the eventual decision?

 

Sheng Li:  Yeah. I don’t think they were particularly relevant to the discussions here. Obviously, NLRB -- on the first part—on how often they seek these injunctions—obviously NLRB wants to make the point that because they seek relatively few injunctions—I think a couple dozen a year; don’t quote me on the stats—out of the thousands and thousands of complaints they get that they’re making -- well, these must be selective and meritorious. But, again, that’s not necessarily true because as the questioner -- as the previous question suggested, they could just threaten to seek these and get a lot of mileage out of the lower standard.

 

      On how often NLRB succeeds, ultimately, on the merits, again, I don’t think that really is that revealing of anything because so many of these cases will just settle. And so, yes, it’s true that NLRB doesn’t succeed on all of its -- when it gets challenged, it doesn't succeed all the time before the Board, but the cases that actually make it to a final Board decision—let alone the cases that make it to, I guess, the eventual petition for review in federal appellate court— represents a very small fraction of NLRB enforcement actions.

 

      And again, because most employers will fold and settle for economic and business reasons, it typically is only the cases that do get decided—ultimately do see the light of day in a federal court—are going to be the closer cases where the employer either thinks it really should win, it’s been treated really unfairly, or a case potentially like this in Starbucks where Starbucks has been hit with one of these injunctions after another over the past few years. And even though each single injunction might not be enough for Starbucks to say, “Let’s take this all the way up,” the fact that they don’t want -- they’re repeat players in this game, so they have an interest in changing the rules, so it’s more equally applied. So to answer that question, at least, more directly, it’s very hard to base it on the statistics. And I think the justices -- to the extent that any of them commented on NLRB statistical argument, they both -- they tended to be skeptical that the statistics prove anything. 

 

Chayila Kleist:  Got it. Thank you. Next audience question asks, “Why now?” This split’s existed for a while.”

 

Sheng Li:  Yeah. I was quite surprised when NLC had learned about this case -- we found an amicus brief in support of Starbucks, of course, but when we learned about it, it was quite shocking at how much and how egregious the deference was, and I asked myself, “Wow. How could this persist for so long?” And I think there’s a couple potential explanations. One is the composition of the Court—the Roberts’ Courts—has been, at least, in recent years or especially in recent years, skeptical of agency action. We see that this term with the reevaluation of the Chevron doctrine, certainly. So this case falls within that pattern of skepticism towards agency power.

 

      The second is, actually, this two-factor test—this deferential test—was developed decades and decades ago when the preliminary injunction standard was not so—what do you call it—strict or uniformly strict. It was the Winter case in 2008 that really set it, and while courts used the four-factor test prior to that, they did it in a more loosey-goosey way. They [balance it and say, “Well, you don’t need to show us much likelihood of success on the merits if there’s a lot of balance of the equities or -- those factors weren’t hard and fast, weren’t very strict before Winter. And so, under that more malleable four-factor test, maybe the NLRB’s preferred test may not depart from that so much. But I think once Winter came out, the difference between the four-factor test and the two-factor test became indefensible.

 

Chayila Kleist:  Got it. Thanks. Were there any arguments you were surprised to see come up at oral argument, and conversely, was there anything you were surprised not to see raised?

 

Sheng Li:  We were surprised -- I guess, we were surprised when the government’s brief came in and they implicitly conceded some points of -- of conceding, basically, that the four-factor test is -- the four-factors are relevant and hinting that it’s the correct test. I don’t know why they did that because that’s not what they argued below but maybe just because they see the composition of the Court and think that if they were to argue that -- a full-throated defense of the explicitly deferential two-factor test would not get them very far. But as we saw in oral argument, the justices teased that out, and the questions made clear that the NLRB doesn’t really believe the two-factor test is somehow just a mirror image of reformulation of the traditional four-factor test.

 

      As for surprising arguments, I think there was -- I think Justice Sotomayor it was that mentioned at the end there might be a mootness issue here because it’s possible that the NLRB actually renders its final decision before the Court -- renders its final decision against Starbucks—yea or nay—before the Court has a chance to put out its opinion here. That’s theoretically interesting. I don’t think it’s going to happen because we’re in April, and the Court’s going to make its decision in the next couple months.

 

      So I think it’s unlikely that NLRB is going to somehow preempt the Supreme Court by getting a decision out tomorrow or something like that when this case has been before them for several years. And even if that happens—this obviously wasn’t briefed and I haven’t really taken a look at it -- but I’m skeptical of a mootness argument even if that were to happen because, as I mentioned, Starbucks has been hit with multiple of these 10(j) injunctions over the last couple years, so this seems to me like a repetitious yet evading review situation.

 

Chayila Kleist:  Got it. Thanks. Well, I know we’re winding down, so the last couple questions on potential ramifications of this case. It seems that there may be a way that the Court is leaning, so I’ll start with that hypothetical first. What is the implication of this case if the Court rules against the NLRB?

 

Sheng Li:  I think it -- Yeah. I think the NLRB will just be -- one reason why we think the Court is likely to do that is because it’s actually, I think, a narrow decision. It doesn't change the facts on the ground very much. NLRB, in those circuits that apply the deferential test, will just have to do what it’s already been doing for decades in the circuits that apply this traditional four-factor test. So that creates consistency across the board among courts of appeal, and I think that’s ultimately a good result. Plus, from just a fundamental fairness, due process perspective, it puts the NLRB on an even playing field with employers that it goes after. So it doesn’t have the ability to use the threat of an easy-to-obtain 10(j) injunction to force employers to cave and settle on unfavorable terms.

 

      I think, ultimately, it’s good for due process. These 10(j) injunctions deprive -- they deprive employers of property rights. If you’re forced to retain employees that otherwise weren’t wanted, if you’re forced to not sell a property that you own, etc. -- and you can’t deprive anyone of property rights without due process of law. And, certainly, meeting a non-frivolous standard doesn’t supply due process of law.

 

Chayila Kleist:  Got it. I’ll ask the reverse question. What are the implications of this case if the Court rules in favor of the NLRB?

 

Sheng Li:  Yeah. And that would be -- I think it’s highly unlikely because of how momentous that would mean. And Justice Thomas and Gorsuch both considered this, and said, “If we rule for you, NLRB, doesn’t this mean all these other agencies—this alphabet soup of agencies with enforcement and adjudicatory power -- can’t they come back to us and start seeking injunctions on a deferential standard where agencies win at a much easier rate than -- can obtain injunctions much more easily than litigants can?” And that would vastly expand federal administrative power during a time where the Supreme Court is more skeptical of federal administrative power. So it would have quite wide-ranging and shocking effects if that were to occur, which is partly why I think it would not occur.

 

Chayila Kleist:  Got it. Last question, barring any others from our audience. You’ve mentioned -- okay, NLRB seems like it’s going to fail on this one. Do you have a read—even a general or unsolidified one—of how the justices will break out on the issue and what the determinative points will be?

 

Sheng Li:  Yeah. It’s harder to pick that way, but I think Justice Jackson was, again, the only one -- and I may have missed something, but I think she was the only one that really said anything in favor of the NLRB's position, this idea that maybe what the district court judge is supposed to be doing is trying to predict what the Board is ultimately going to do at the end. None of the other justices seem to support that. And the fact that she said that doesn’t mean she’s going to rule for the NLRB either. It just could be she’s just teasing out a position that she finds interesting or wants an answer on. So it very well could be a 9-0.

 

      Even Justice Sotomayor pushed back on Starbucks’ points on how irreparable harm should be assessed because it’s not -- it’s irreparable harm on an agency’s enforcement power. So that might be -- what does that mean? How do you irreparable harm an agency’s enforcement power? So it’s possible she might write separately to discuss that particular issue. But even she said it’s supposed to be the judge that makes the call and not the agency. And so, I think she was -- if I had to bet, I would be inclined to think she wouldn’t favor the agency on -- allow the agency to dictate what the judge is supposed to rule. And all the other justices never really spoke about this. Their questioning indicated deep skepticism at a deferential standard.

 

Chayila Kleist:  Got it. Thank you. That was all incredibly helpful and useful in thinking through the case. We can wrap a tad early and give people a section of their afternoons back. I really appreciate you joining us today, Mr. Li.

 

Sheng Li:  Thank you.

 

Chayila Kleist:  Thanks for this section of your day and sharing your expertise with us. Thank you also to our audience for joining and participating. We welcome listener feedback by email at [email protected]. And as always, keep an eye on our website and your emails for announcements about other upcoming virtual events. With that, thank you all for joining us today. We are adjourned.