The U.S. Court of Appeals yesterday expanded the locations where union members can picket during labor disputes to include so-called "neutral" businesses that sell large quantities of products marketed by the firm that is the actual target of the strikes.

The approval of what amounts to a form of secondary boycott came in a 5-to-4 opinion by the appellate court, which handles direct appeals from the National Labor Relations Board.

The NLRB had ruled against the union, claiming the picketing at issue was illegal under existing labor laws that prohibit most secondary boycotts.

The ruling came in a case involving a 1974 labor dispute in the state of Washington. The Retail Store Employees Union of the Retail Clerks International Association went on strike against the Safeco Title Insurance Co. after it had been unable to achieve a contract there.

In addition to picketing Safeco's Seattle office, the labor union began picketing five land title companies that had close business ties with Safeco. The larger firm underwrote all of the policies handled by the land title companies, for example.

The picketing was peaceful, according to the opinion by U.S. Circuit Judge Spottswood Robinson III, but included the distribution of handbills to passersby urging them to cancel their insurance. There was no actual work stoppage at the title companies, nor did the picketing interfere with deliveries there.

One of the land title companies then filed a complaint with the NLRB that the action by the union was a secondary boycott and therefore illegal. The board agreed, and ordered the union to stop the picketing.

The appeals court ruled yesterday, however, that the action was merely limited to "consumer picketing which is employed only to persuade customers not to buy the struck product," and therefore legal.

The appellate court said the economic impact of the picketing - possibly resulting in the loss of most of the business by the title companies - was unimportant in the legal approach in the case.

"Neither the potential nor the predictable economic consequences for the secondary entrepreneur is the key, nor even a factor in the equation," Robinson wrote for the majority.

The four other appellate judges who agreed with Robinson were David L. Bazelon, Chief Judge J. Skelly Wright, Carl A. McGowan and Harold Leventhal.

Robinson said there was no indication that the secondary picketing "threatened, coerced or restrained" the title companies, as would be required to make it an illegal secondary boycott.

"(There) is no suggestion that the picketing was structured to effect anything but the struck insurance," Robinson added.

The four judges who disagreed said in an opinion written by Circuit Judge Roger Robb that the ruling exposes "neutral employers to the disruption if not the ruin caused by a complete boycott."

"I cannot believe that the National Labor Relations Act permits such a sacrifice of helpless victims."

Agreeing with Robb were Circuit Judges Edward A. Tamm, George MacKinnon and Malcolm R. Wilkey.