ASSOCIATED GENERAL
CONTRACTORS OF AMERICA
22ND ANNUAL CONSTRUCTION
LABOR LAW SYMPOSIUM
WASHINGTON, D.C.
APRIL 28, 2006
CURRENT DIMENSIONS IN
LABOR AND ANTITRUST LAW
Presented By:
WILLIAM BEVAN III
REED SMITH LLP
P.O. Box 2009
Pittsburgh, Pennsylvania 15230
(412) 288-3184
Fax: (412) 288-3063
Website: www.reedsmith.com
Email: [email protected]
PGHLIB-1794972.2-WBEVAN 7/28/17 6:11 PM
CURRENT DIMENSIONS IN LABOR AND ANTITRUST LAW
William Bevan III*
I. INTRODUCTION
If the task of interpreting our labor laws sometimes involves, as Justice Frankfurter
observed, “the drawing of lines more nice than obvious,”1 then “[t]he interaction of the [antitrust
laws] and federal labor legislation is an area of law marked [even] more by controversy than
clarity”. Wood v. Nat’l Basketball Ass’n, 809 F.2d 954, 959 (2d Cir. 1987). Indeed, federal
labor law and federal antitrust law proceed from wholly different economic premises. The
antitrust laws are about promoting competition and efficiency and decreasing production costs;
labor law is about the distribution of wealth and the enhancement of labor earnings through
collective action, indeed, the exercise of monopoly power over the labor market.2 And,
undoubtedly, labor lawyers and antitrust lawyers without an appreciation of the opposing body of
law are likely to reach different views on a given constellation of facts.3 I leave the issue of
whether economic analysis ought to occur in labor law as it does in the antitrust arena to those
*
1
2
3
Partner, Reed Smith LLP. Any views expressed herein are entirely my own, and do not
reflect the views of either Reed Smith LLP or The Associated General Contractors of
America.
Electrical Workers v. NLRB, 366 U.S. 667, 674 (1961).
See, generally, Thomas J. Campbell, Labor Laws and Economics, 38 Stan.L.Rev. 991,
992-994, 1005-1006 (1986); Daniel J. Chepatis, The National Labor Relations Act, NonParralleled Competition, and Market Power, 85 Cal.L.Rev. 769, 770-782 (1997).
“[W]hile antitrust policy favors unrestricted competition, labor policy in the United States
favors collective determination of wages, working conditions, and other terms and
conditions of employment.” P. Areeda & H. Hovencamp, Antitrust Analysis, 255c, at
167-168 (2000).
Indeed, Judge Posner of the Seventh Circuit observed that: “[B]ecause labor law is . . .
founded on a policy that is the opposite of the policies of competition and economic
efficiency that most economists support, the field is unlikely to attract . . . the lawyer who
is deeply committed to economic analysis; it is likely to repel him. Richard A. Posner,
Some Economics of Labor Law, 51 U. Chi. L. Rev. 998, 990 (1984). Conversely, Posner
observed that “because labor law is doctrinally complex (much more so than antitrust, the
economists’ favorite field of law), economists have not found it accessible in the way
they have found antitrust law . . . accessible.” Id. at 989-990.
PGHLIB-1794972.2-WBEVAN 7/28/17 6:11 PM
far more gifted and attuned to such analyses. My goal here is simply to outline the current state
of labor’s exemption from the antitrust laws, to the extent that clarity can be found, and focus in
particular on some more recent dimensions of the two labor exemptions which I believe will
occupy the courts in the continuing struggle to harmonize these two diametrically opposed
statutory schemes.
II. LABOR’S EXEMPTION FROM ANTITRUST LAW
In determining whether the activities of organized labor are immune from the antitrust
laws, the courts have concerned themselves with two distinct forms of exemption. The first is
the statutory exemption, and the second is the non-statutory exemption.4 In order to determine
the current dimensions of labor’s exemption from the antitrust laws, it is necessary to discuss,
albeit briefly, where we have been in terms of the application of these two exemptions.5
A.
The Statutory Exemption
The statutory exemption stems from the enactment of several federal statutes that were
responses to the application of the Sherman Antitrust Act’s6 prohibitions on combinations in
restraint of trade to the activities of labor organizations. The first of these was the passage in
1914 of the Clayton Act. Section 6 of the Clayton Act provides:
The labor of a human being is not a commodity or article of commerce. Nothing
contained in the antitrust laws shall be construed to forbid the existence and
operation of labor . . . organizations, instituted for the purposes of mutual help,
and not having capital stock or conducted for profit, or to forbid or restrain
individual members of such organizations from lawfully carrying out the
legitimate objects thereof; nor shall such organizations, or the members thereof,
4
5
6
There is another form of immunity for certain union activities known as the NoerrPennington exemption which is discussed in Part III.C, infra.
Perhaps, with the benefit of hindsight, two noted scholars have said that the distinction
between the two exemptions is “more one of historical convenience than substance.”
P. Areeda & H. Hovencamp, Antitrust Analysis, 255c, at 174 (2000). They say that, over
time, “the precise statutory language has had decreasing importance . . . .” Id.
15 U.S.C. § 1 (2005).
-2-
be held or construed to be illegal combinations or conspiracies in restraint of
trade, under the antitrust laws.
15 U.S.C. § 17 (2005) (emphasis added). Section 20 of the Clayton Act further provides:
No restraining order or injunction shall be granted by any court of the United
States, or a judge or the judges thereof, in any case between an employer and
employees, or between employers and employees, or between employees, or
between persons employed and persons seeking employment, involving, or
growing out of, a dispute concerning terms or conditions of employment, unless
unnecessary to prevent irreparable injury to property, or to a property right, of the
party making the application, for which injury there is no adequate remedy at law,
and such property or property might be described with particularity in the
application, which must be in writing and sworn to by the applicant or by his
agent or attorney.
And no such restraining order or injunction shall prohibit any person or persons,
whether singly or in concert, from terminating any relation of employment, or
from ceasing to perform work or labor, or from recommending, advising or
persuading others by peaceful means so to do; or from attending at any place
where any such person or persons may lawfully be, from the purpose of
peacefully obtaining or communicating information, or from peacefully
persuading any person to work or to abstain from working; or from ceasing to
patronize or to employ any party to such dispute, or from recommending,
advising, or persuading others by peaceful and lawful means to do so; or from
paying or giving to, or withholding from, any person engaged in such dispute, any
strike benefits or other moneys or things of value; or from peaceably assembling
in a lawful manner, and for lawful purposes; or from doing any act or thing which
might lawfully be done in the absence of such dispute by any party thereto; nor
shall any of the acts specified in this paragraph be considered or held to be
violations of any law of the United States.
29 U.S.C. § 52 (2005).
Because of the Supreme Court’s decision in Duplex Printing Press Co. v. Deering,
254 U.S. 443 (1921), which substantially limited the application of these exemptions for labor’s
activity, Congress passed the Norris-LaGuardia Act, 29 U.S.C. §§ 101-115. Several sections of
that statute are relevant to the statutory exemption. One is the expanded definition of “labor
dispute” which is defined to include “any controversy concerning terms or conditions of
employment, or concerning the association or representation of persons negotiating, fixing,
maintaining, changing, or seeking to arrange terms or conditions of employment, regardless of
whether or not the disputants stand in the proximate relation of employer and employee.”
29 U.S.C. § 113(c) (2005). As the Supreme Court has observed, under the terms of this section
-3-
of the statute, labor unions are not combinations in restraint of trade, and clearly such activities
as secondary picketing and boycotts generally would be protected from antitrust liability.
Connell Constr. Co. v. Plumbers and Steamfitters Local Union No. 100, 421 U.S. 616, 622
(1975).
The Norris-LaGuardia Act also sets forth a number of acts which could not be the subject
of federal court injunctive relief, and a provision depriving the federal court of jurisdiction over
the activities of labor organizations engaged in labor disputes.7
Given the broad language of these statutes, the Supreme Court held, in United States v.
Hutcheson, 312 U.S. 219, 232 (1941), that “[s]o long as a union acts in its self-interest and does
not combine with non-labor groups,” its activities will normally be exempt. The Court also
stated that “the licit and illicit under § 20 [of the Clayton Act] are not to be distinguished by any
judgment regarding the wisdom or unwisdom, the rightness or wrongness, the selfishness or
unselfishness of the end [to] which the particular union activities are the means.” In Hutcheson,
union carpenters engaged in a strike, peaceful picketing, and a consumer boycott of a large
national brewer over a jurisdictional dispute with another union in order to force the employer to
side with its position. While the Norris-LaGuardia’s bar to federal court injunctive relief is not
expressed as an exemption to the antitrust laws, the court in fact held that the “injunction shield”
prevented application of the antitrust laws to these peaceful and conventional union activities.8
From Hutcheson, we draw the basic test for application of the statutory exemption: that
certain unilateral conduct by a labor organization is shielded from the antitrust laws provided the
7
8
The various acts not subject to injunctive relief are set forth at 29 U.S.C. § 104(a), et seq.,
and the bar to the exercise of jurisdiction by federal courts to issue restraining orders or
temporary permanent injunctions in labor disputes is found in 29 U.S.C. §105 (2005).
The court found it “strange” that Congress would have gone to such lengths in the NorrisLaGuardia Act to protect certain conduct from interference by the federal courts, only to
subject the same activities to criminal liability that was punishable by fines and
imprisonment. Hutcheson, 312 U.S. at 235.
-4-
union is acting in its legitimate self-interest from its employees. See H. A. Artists & Assocs.,
Inc. v. Actors’ Equity Ass’n, 451 U.S. 704, 714 (1981). Obviously, difficult issues of
interpretation and application revolve around the questions of whether a union is acting
unilaterally, when it has combined9 with a non-labor group,10 and when it is acting for a
legitimate purpose. In H. A. Artists, the Court emphasized that the statutory exemption does not
apply when a union combines with a non-labor group. Id. at 715.11
Assuming that a labor organization acts unilaterally, and even arguably for a legitimate
purpose, can the statutory exemption be lost if the union engages in violent activity? There
appears to be a general agreement, at least among the majority courts that have been confronted
9
10
11
For example, if a union successfully pickets a contractor with whom it has a collective
bargaining agreement to enter into a subcontracting agreement, such agreement would
not be outside a union’s legitimate union activity protected by the proviso to Section 8(e).
Such conduct would therefore be within the statutory exemption. Imperial Constr. Mgmt.
v. Laborers Int’l Union, Local 96, 729 F. Supp. 1199 (N.D. Ill. 1990). The Seventh
Circuit has suggested a five-element test for determining whether a collective bargaining
agreement can be used as evidence of a conspiracy to avoid the statutory exemption. The
antitrust plaintiff must allege the following: (1) that the union . . . agreed to impose upon
other employers terms agreed to by it and a ‘non-labor’ entity; (2) that the union activity
. . . [is not] unilateral; (3) that the union activity . . . [is] at the behest of or (4) in
combination with, a non-labor entity which occupies such a position in the competitive
structure that it would directly benefit from the restraint; and (5) that the union and nonlabor groups share an anti-competitive concerted purpose.” Mid-America Regional
Bargaining Ass’n v. Will County Carpenters Dist. Council, 675 F.2d 881, 888-889 (7th
Cir. 1982).
Whether a group is a non-labor group will not always be obvious. In H.A. Artists, the
Supreme Court found that theatrical agents who became franchised agents of the union
were not a “non-labor” group. The agents were admittedly independent contractors who
controlled access to jobs and negotiated terms of employment for union members. The
Court held that the test for whether a group is a non-labor group was whether there was
job or wage competition between the union’s members and the independent contractors
or some other economic interrelationship affecting legitimate union interests between the
union’s members and the independent contractors. 451 U.S. at 718-722.
451 U.S. 704, 715. Thus, H. A. Artists can be read for the proposition that a union’s
conduct must meet both prongs of the test for the statutory exemption to apply: a union
must act unilaterally and for a legitimate purpose. Lower federal courts have followed
suit. See USS-POSCO Indus. v. Contra Costa Bldg. & Constr. Trades Council, 31 F.3d
800, 807-808 n.6 (9th Cir. 1994) (finding that a union may violate the antitrust laws even
when it does not combine with a non-labor group if it acts outside its own legitimate selfinterest) and Imperial Constr., 729 F. Supp. at 1209. A&D Supermarkets, Inc., No. 2 v.
United Food & Commercial Workers, 880, 732 F. Supp. 770 (N.D. Ohio 1989).
-5-
by the issue, that a union that engages in violence forfeits the statutory exemption. See, e.g.,
Imperial Const. Mgmt. Corp. v. Laborers Int’l Union, Local 96, 729 F. Supp. 1199, 1211-1212
(N.D. Ill. 1990) (violence is a ground for holding that the statutory exemption does not apply);
C&W Constr. Co. v. Bhd. of Carpenters & Joiners, Local 745, 687 F. Supp. 1453, 1464 (D. Haw.
1988) (threats of violence against secondary employer supplying struck employer not exempt);
Altemose Constr. Co. v. Atlantic, Cape May, etc. Bldg. Trades Council, 493 F. Supp. 1181, 1191
(D.N.J. 1980) (Clayton Act does not immunize threats and acts of violence by labor
organizations).12 Caution should be exercised here inasmuch as these decisions are from lower
federal courts and were decided on motions to dismiss or for summary judgment. Moreover, loss
of the statutory exemption does not necessarily translate into antitrust injury and damages.
B.
The Non-Statutory Labor Exemption
The other major exemption for labor’s activities comes from the so-called non-statutory
or implicit exemption. The dimensions of this exemption have largely resulted from the
Supreme Court’s decision in a few seminal cases which are briefly reviewed herein. In cases
involving the non-statutory exemption, there is no dispute that a union has combined with a nonlabor group. The question is whether the agreement that is the product of the combination is
exempt from the reach of the antirust laws.
Perhaps the first case to discuss this exemption was Allen Bradley Co. v. Local Union
No. 3, International Brotherhood of Electrical Workers, 325 U.S. 797 (1945). In Allen Bradley,
a union representing electrical workers only in New York City only negotiated agreements with
various electrical contractors in New York City, as well as local manufacturers to deal only with
the manufacturers and contractors that employed the union’s members. Some of the excluded
12
But see Schnabel v. Bldg. & Constr. Trades Council of Phila., 563 F. Supp. 1030, 1051
(E.D. Pa. 1983), suggesting that violence alone “does not transform an unlawful
secondary boycott into an antitrust conspiracy.”
-6-
manufacturers who manufactured electrical equipment outside of New York City filed a suit
under the antitrust laws claiming that the labor agreements were “but one element in a far larger
program in which contractors and manufacturers united with one another to monopolize all the
business in New York City, to bar all other business men from that area, and to charge the public
prices above a competitive level.” Id. at 809. The union’s members worked both for
manufacturers who produced electrical equipment similar to the plaintiff manufacturers, and also
represented employers whose employees were involved in the installation of electrical
equipment. Id. at 797. The union’s goal for many years was to expand its membership, obtain
shorter working hours, higher wages, and increase employment opportunities for its members.
Id. To obtain these goals, the union sought and obtained closed shop agreements from both
manufacturers and contractors, using conventional strikes and boycotts. These individual
collective bargaining agreements eventually evolved into industry-wide understandings that
controlled not just conditions of employment, but also prices and market. Id. at 799-80. As
such, the three groups – the union, the manufacturers, and the installation contractors - obtained a
complete monopoly which they used to boycott the equipment manufactured by the plaintiffs.
Id. at 800.
The Court initially observed that had the union acted alone, and achieved the results it
sought, it would not have run afoul of the Sherman Act. Id. at 809. The Court found the issue of
“whether unions can [in order to further their own interests as employees and wage earners] aid
and abet business men who are violating the Act.” Id. at 807. It was argued that the immunity
from the antitrust laws could be inferred from the union’s right to make bargaining agreements
with an employer. Id. at 809. Although the union sought the agreements out of “a desire to get
and hold jobs for themselves at good wages and under high working standard,” the Supreme
Court held that where unions “combine with employers and with manufactures of goods to
restrain competition in and to monopolize the marketing of such goods . . . [,]” their agreement is
not exempt from the antitrust laws. Id. at 798, 809. Allen Bradley is the classic case of a union
-7-
directly participating in a conspiracy with business groups to aid and abet the latter to control
prices across not just the labor market, but the product market as well.13
In 1965, the Supreme Court issued two decisions that still strongly influence the law in
this area. In its first decision, United Mine Workers v. Pennington, 381 U.S. 657 (1965), the
Court declined to apply the non-statutory exemption to a multiemployer bargaining agreement
negotiated between the United Mine Workers and various large coal companies. In the second
case, Local Union No. 189, Amalgamated Meat Cutters and Butcher Workmen v. Jewel Tea Co.,
381 U.S. 676 (1965), the Court found that a market hours provision in a collective bargaining
agreement between the union and a retail grocery store chain operating meat markets within its
stores, whereby the employer agreed to limit the hours of operations in its meat departments, was
exempt under the antitrust laws.
In Pennington, the Court was unwilling to adopt the position that a collective bargaining
agreement, covering mandatory subjects, would always be exempt from antitrust scrutiny.
381 U.S. at 664-665. In Pennington, the trustees of a union welfare and retirement fund sued
partners in a coal mining company for royalty payments under a collective bargaining agreement.
Id. at 659. The coal mining operator cross-claimed, asserting that the labor agreement had been
entered into between the union and the large coal companies for the purpose of driving their
competitors, i.e., smaller nonunion coal operators, out of business. Id. at 659-660. The vehicle
for accomplishing this was the union’s agreement with the large coal companies that, to
eliminate over-production, it would insist on the higher wage scale negotiated with them from
the small coal mine operators, regardless of their ability to pay. Id. at 660. The Court held that
“a union may make wage agreements with a multiemployer bargaining unit and may in
pursuance of its own union interests seek to obtain the same terms from other employers . . .
13
Consider whether the monopoly that existed would have occurred if the provisions of
Section 8(e) of the National Labor Relations Act, 29 U.S.C. 158(c) (2005) had been a
part of the Act.
-8-
[b]ut a union forfeits its exemption from the antirust laws when it is clearly shown that it has
agreed with one set of employers to impose a certain wage scale on other bargaining units.” Id.
at 665. The Court stated: “One group of employers was not conspire to eliminate competitors
from the industry and the union is liable with the employers if it becomes a part to the
conspiracy. This is true even though the union’s part in the scheme is an undertaking to secure
the same wages, hours or other conditions of employment from the remaining employers in the
industry.”14 Id. at 665-666. In other words, although a collective bargaining agreement may
address mandatory subjects of bargaining, where it was entered into for predatory purposes, the
collective bargaining agreement will not be exempt from antitrust scrutiny. Id. at 668.15
In the companion case, Jewel Tea, the market hours provision at issue was sought by the
unions as a means of limiting the amount of hours its members could be required to work as well
as protecting any threat to job security that might arise from allowing the supermarket chain to
make night-time sales of prepackaged meat with unskilled labor. Jewel Tea, 381 U.S. at 682.
The challenged market hours provision was agreed to by one of the supermarket chains, Jewel
Tea, who entered into the agreement under protest and then challenged the market hours
provisions as a violation of the antirust laws. Id. at 680-681. As the Court observed, Jewel Tea
did not allege that the union sought the market hours restriction from Jewel Tea as a result of
pressure from other meat sellers or that it eliminated competition among other chain operators in
the bargaining unit. 381 U.S. at 688.16
14
15
16
Pennington can in some ways be viewed as the reverse of Allen Bradley; the union was a
reluctant conspirator in the former and the driving force in the making of the conspiracy
in the latter.
One can make the argument that the Court’s decision on antitrust exemption is in fact
driven by labor law, i.e., that the duty to bargain under the NLRA requires employers and
unions to bargain unit by unit, and prevents an employer or union from insisting that no
agreement will be reached until agreements have been reached in other bargaining units.
See 381 U.S. at 666-668. Yet, arguably, it would not have been unlawful for the parties
in Pennington to have negotiated a most favored nations clause.
In short, the court agreed, as an initial matter, that the case came to it “stripped of any
claim of union-employer conspiracy against Jewel.” 381 U.S. at 688. However, the fact
Continued on following page
-9-
While a majority of the Court found that the market hours restriction was within the nonstatutory exemption, there was no single unifying opinion. Justice White authored a plurality
opinion. Id. at 684-697. In Justice White’s view, the Court should apply a balancing test to
determine the application of the non-statutory exemption. That test would consist of balancing
the “interest of union members” served by the restraint against “its relative impact on the product
market.” Id. at 690 n.5.17 In applying this test, Justice White stated that the issue was whether
the market hours restriction, “like wages, and unlike prices,” was
So intimately related to wages, hours and working conditions that the unions’
successful attempt to obtain that provision through bona fide, arm’s-length
bargaining in pursuit of their own labor union policies, and not at the behest of or
in combination with nonlabor groups, falls within the protection of the national
labor policy and is therefore exempt from the Sherman Act. We think that it is.
Id. at 689-690 (footnote omitted).18
Continued from previous page
that there was no union employer conspiracy or that the challenged agreement was in a
collective bargaining agreement did not put this issue to rest. Id. at 689. The issue was
whether the agreement was immune from attack as a result of the labor exemption from
the antitrust laws. Id.
17
Clearly, the union could not have sought to bargain over the prices to be charged as well
in Jewel’s meat departments. Id. at 689.
18
In a concurring opinion, Justice Goldberg would have applied a more bright-line test. If
the agreement concerned mandatory subjects of bargaining, the agreement should not be
subject to the antitrust laws. Jewel Tea, 381 U.S. at 710. While Justice Goldberg’s test
would certainly be easier to apply, it is inconsistent with the approach in both Pennington
and the plurality opinion in Jewel. Thus, as Justice White observed in Jewel, if Jewel
could have shown that self-service markets in its stores “could actually operate without
butchers, at least for a few hours after 6 p.m., that no encroachment on butchers’ work
would result and that the workload of butchers during normal working hours would not
be substantially increased, Jewel’s position would have considerable merit . . . [because]
then the obvious restraint on the product market – the exclusion of self-service stores
from the evening market for meat – would stand alone, unmitigated and unjustified by the
vital interest of the union butchers which are relied upon in this case. In such event, the
limitation imposed by the unions might well be reduced to nothing but an effort by the
unions to protect one group of employers from competition by another, which is conduct
that is not exempt from the Sherman Act. Whether there would be a violation of [the
Sherman Act] would then depend on whether the elements of a conspiracy in restraint of
trade or an attempt to monopolize had been proved.” Id. at 692-693. What Justice White
says is that merely because the agreement does not have immunity under the antitrust
laws does not mean that the antitrust plaintiff can show antitrust injury and recover
damages.
- 10 -
The next case to be discussed is one that, as construction labor lawyers, we have all read
and reread. In Connell Construction Co. v. Plumbers and Steamfitters Local Union No. 100,
421 U.S. 616 (1975), the Supreme Court declined to apply the non-statutory labor exemption to a
union’s activity in attempting to secure, through picketing, an agreement with a general
contractor that required it to deal only with mechanical subcontractors that were currently
signatory to agreements covering the union’s members.19 The subcontracting agreement, and
the union’s efforts to obtain it, was part of an effort by the union to engage in top down
organizing through pressure placed on Connell and other general contractors in the area to enter
into the disputed subcontracting agreement. 421 U.S. at 620-621. The union did not represent
any of the contractor’s employees, nor was it seeking a collective bargaining relationship with
the contractor. Id. When picketing and a sympathetic strike occurred at one of Connell’s major
projects, Connell signed the agreement. It also filed suit in state court under the Texas antitrust
statute seeking to enjoin the union’s picketing. Id. The union removed the case to federal court
where it argued that the agreement was protected by the construction industry proviso to
Section 8(e) as literally an agreement falling within the terms of that section of the statute and
was exempt. The lower federal courts agreed. Id.
The Supreme Court began its analysis of non-statutory exemption by pointing out that its
source lay in the strong national labor policy favoring the association of employees to eliminate
competitive over wages and working conditions. 421 U.S. at 622. Admittedly, the Court
observed, a union’s success in organizing employees and standardizing wages would affect price
competition between employers but “the goals of federal labor law never could be achieve if this
effect on business competition were held [to be] a violation of the antitrust laws.” Id. Citing
Allen-Bradley, the Court held that the non-statutory labor exemption could offer no protection
19
The agreement in question specifically recited that Connell Construction Co. (“Connell”)
was a general contractor that always subcontracted its mechanical work on its projects,
and the subcontracting restriction sought was limited to onsite mechanical work.
421 U.S. at 619-620.
- 11 -
when a union and a non-labor group agreed to restrain competition in a business market. Id. at
622-623. It then characterized the union’s conduct as involving direct restraints on the business
market in support of its organizing campaign; the Court viewed such an agreement with Connell
and other general contractors as indiscriminately excluding non-union contractors from a portion
of the market, even if their competitive advantages were not derived from substandard wages or
working conditions, but more efficient operations. Id.
The Court also focused on two facts which appear important to its analysis. First it noted
that the union was party to a multiemployer bargaining agreement with a most favored nations
clause. By giving members of the multiemployer group a contractual right to insist on terms as
favorable as any the union might give a competitor, “it guaranteed that the union would make no
agreement that would give an unaffiliated contractor a competitive advantage over members of
the [multiemployer group].” Id. at 623. Second, success by the union in extracting agreements
from Connell and other general contractors would then give the union power to control access to
the market from mechanical subcontracting work because the agreements prohibited
subcontracting to any firm that did not have a contract with the union. Id. at 624. The Supreme
Court refused to apply the non-statutory exemption to what it described as this “kind of direct
restraint on the business market [which] has substantial anticompetitive effects, both actual and
potential, that would not follow naturally from the elimination of competition over wages and
working conditions. Id. at 625. The Court stated, however, that [t]here can be no argument . . .
that a restraint of this magnitude might be entitled to an antitrust exemption if it were included in
a lawful collective-bargaining agreement. 421 U.S. at 625-626 (emphasis added). However,
because the union was not seeking a collective bargaining relationship, federal labor policy
would not protect the union’s conduct against Connell “or its campaign to exclude non-unions
from the subcontracting market.” Id. at 626.
As previously indicated, the union contended that its agreement with Connell was
protected by the first proviso to Section 8(e) of the NLRA based on the literal language of the
- 12 -
statute. The Court rejected the union’s argument. It held that Congress intended to allow only
subcontracting agreements that arose within the collective bargaining relationship and that, in its
view, Congress did not intend to allow a union to approach a “strange” contractor and obtain an
agreement not to deal with non-union contractors. Id. at 627-628. Although the legislative
history of the construction industry indicated that the proviso’s purpose was the prevention of job
site friction that arose when union employees work along side non-union employees at a
construction site, the union did not claim to be seeking the clause to prevent job site friction. Id.
at 630-631. Nor did it seek even to organize a specific non-union contractor on the building
project that it picketed; its sole purpose for seeking the agreement was to pressure mechanical
subcontractors to recognize it. Id. at 631. The Court found that sanctioning this agreement
under the construction industry proviso would give construction unions an almost unlimited
organizational weapon. This, the Court was unwilling to do. Id. at 631-632.20
In sum, the Court held that the union’s agreement, which was outside the context of a
collective bargaining relationship and not restricted to a particular jobsite, but which obligated
the general contractor to subcontract work only to firms having a contract with the union, could
be the basis of a federal antitrust claim because of its potential for restraining competition in the
business market. Id. at 635.21
20
21
The distinguishing feature of Connell was its restraint on the product market. The
product market was affected because the restraint was sought against Connell and other
general contractors who employed no plumbers and did not themselves perform the work
in question. Suppose, that Local 100 had sought an agreement from Connell not to
subcontract work to a specific firm with whom the Local 100 had an ongoing dispute.
Would such an agreement run afoul of Connell? See Richards v. Neilsen Freight Lines,
810 F.2d 898, 906 (9th Cir. 1987) (Court distinguished Connell on the ground that the
agreement in Connell involved “an arbitrary and ongoing exclusion of nonunion firms;”
whereas, union in instant case was seeking an agreement to exclude a specific firm that
had been the target of a union organizational attempt; court did not see the agreement as
imposing direct restraints on the business market other than those related to wages and
conditions of employment).
The Court declined to accept the union’s argument that labor law provided the exclusive
remedy for the union’s conduct. 421 U.S. at 633-634. The Court also found that
Connell’s state law antitrust claims were preempted. Id. at 635-637.
- 13 -
Connell left unanswered a number of possible questions. At least one would eventually
be resolved by the Supreme Court in the context of labor law. Thus, the Court in Connell had
characterized the agreement being sought by the union as not constituting a collective bargaining
agreement (even though it was an agreement falling literally within the language of the proviso
to Section 8(e)) because the union in Connell had not sought a collective bargaining relationship.
Post-Connell, what then would constitute an agreement which satisfies both Section 8(e) and the
antitrust concerns in Connell? 22 That question was partially answered in Woelke & Romero
Framing, Inc. v. NLRB, 456 U.S. 645 (1982). In Woelke, the Court held that subcontracting
clauses that were sought or negotiated in the context of a collective bargaining relationship were
lawful. Id. at 652-654.23 Moreover, the Court further held that such clauses were lawful even
when not limited to a particular job site where both union and nonunion employees work sideby-side. Id. at 661-665. In other words, as long as the union seeking a broad subcontracting
agreement was seeking such an agreement in the context of a collective bargaining relationship,
the agreement was lawful under Section 8(e) despite its “top-down” organizing effect.24
22
23
24
The Court declined to pass on the issue of whether picketing to obtain such agreement
violated Section 8(b)(4)(A), 29 U.S.C. 158(b)(4)(A)(2005). The Board had found that
such conduct did not violate Section 8(b)(4)(A), but the Court declined to review this
issue because it had not been properly raised before the Board by either the General
Counsel or Woelke. Id. at 665-666.
In a companion case to Woelke, the Board held that Connell drew no distinctions
between collective bargaining relationships premised on Section 8(f) of the NLRA, and
Section 9(a) of the NLRA. Los Angeles Building & Construction Trades Council
(Donald Scrivner, Inc. et al., 239 NLRB 264, 269 (1978)).
In Connell, the court had suggested that the construction industry proviso to Section 8(e)
“possibly” authorizes agreements outside a collective bargaining relationship if designed
to foreclose jobsite frictions and common situs problems on a particular site. 421 U.S. at
631. Woelke seems to indicate that the proviso only exempts subcontracting agreements
in the context of a collective bargaining relationship. 456 U.S. at 653. Consider the
antitrust implications if the Board finds that an employer who enters into a large project
agreement qualifies as an “employer” within the meaning of the proviso, but not one for
Section 8(f) purposes. See Glens Falls Building & Construction Trades Council (Indeck
Energy) 325 NLRB 1084 (1998). Such an agreement would arguably qualify for
exemption under Connell. Moreover, the challenged restraint would be limited to a
particular job site.
- 14 -
Other questions not resolved in Connell, and for that matter, not in lower federal courts,
might be viewed as two sides of the same coin. If an agreement is found to be lawful under labor
law, is it automatically exempt from antitrust scrutiny? Conversely, if an agreement violates
labor law, does that automatically translate into antitrust liability? In other words, does loss of
the labor exemption necessarily mean the same thing as antitrust liability? 25
As to the former question, the Ninth Circuit in Sun-Land Nurseries, Inc. v. Southern
California District Council of Laborers, 793 F.2d 1110 (9th Cir. 1986) considered the issue of
whether a subcontracting provision in a collective bargaining agreement falling within the
construction industry proviso to Section 8(e) is, without more, sufficient evidence of an antitrust
violation to withstand a summary judgment motion. The court noted that the clause at issue was
lawful under the Supreme Court’s decision in Woelke, and, as such, the court had no power to
reexamine whether such a clause was permissible under labor law. The court rejected the
union’s contention, however, that once an agreement is found to be within the construction
industry proviso, it is automatically exempt from antitrust scrutiny. Id. at 1115. Relying on
Pennington, it held that “a union that is otherwise guilty of a conspiracy in violation of the
antitrust laws cannot escape liability merely because some of the means of accomplishing the
goals of that conspiracy were embodied in a collective bargaining agreement.” Id. at 1115-1116.
Nevertheless, the court held that under Pennington, in the absence of evidence of conspiracy, a
union is free to pursue its own collective bargaining objectives. The court held further that:
We think it apparent from the Supreme Court’s decisions in Pennington
and Jewel Tea, and implicit in decisions in this and other circuits, that
subcontracting clauses within the construction industry proviso to section 8(e)
must be given breathing room to operate in their intended fashion without
interference from the antitrust laws. While we refuse to rule that such clauses are
wholly exempt from scrutiny if they are shown to be instruments on an antitrust
conspiracy otherwise existing, we hold that a valid subcontracting clause
contained in a collective bargaining agreement cannot serve as the basis of an
antitrust claim.
25
For an excellent analysis of this entire problem, see P. Areeda and H. Hovencamp, supra,
at 256 e., at 213-224.
- 15 -
Id. at 1117.26
A somewhat contrary view from the Ninth Circuit’s decision in Sun-Land is reflected in
the Eleventh Circuit’s decision in A.L. Adams Constr. Co. v. Georgia Power Co., 733 F.2d 853,
858 (11th Cir. 1984). The court affirmed the district court’s opinion that a project labor
agreement, that satisfied the requirements for an 8(f) pre-hire agreement provided the necessary
collective bargaining relationship necessary for the exemption from the antitrust laws under the
construction industry proviso to Section 8(e). Thus, the implementation of the agreement by the
owner and a related company to carry out the terms of the project agreement did not constitute a
conspiracy under the antitrust laws.
On the other hand, what if the agreement and issue is found to violate Section 8(e)? On
this issue, there has been disagreement among lower federal courts. In Commerce Tankers Corp.
v. National Maritime Union of America, 553 F.2d 793 (2d Cir. 1977), although the Second
Circuit found a restraint on transfer clause in a collective bargaining agreement violated Section
8(e), the court stated this did not necessarily determine the outcome of the antitrust issue. Thus,
“even if the ‘non-statutory’ exemption does not apply, there is at least a substantial question
whether a per se approach under the antitrust laws is applicable in the case of a non-exempt labor
activity.” 553 F.2d at 802. The Third Circuit, however, in Consolidated Express, Inc. v. New
York Shipping Association., 602 F.2d 494 (3rd Cir. 1979) (“Conex”), held that a labor law
violation, in its view, would automatically foreclose the issue of antitrust immunity. In the Third
Circuit’s view, a finding of an unfair labor practice would equate with an antitrust violation and
warrant injunctive relief. At that point, the problem for the defendant becomes whether the
plaintiffs can prove antitrust damages. In that regard, the defendant could show (a) that at the
26
But see Associated Builders v. City of Seward, 966 F.2d 492, 299 (9th Cir. 1992) (“It
would be inconsistent to approve such an agreement under labor law, but strike it down
under antitrust law. Accordingly, we hold that the Seward work preservation clause is
immune from antitrust liability.”)
- 16 -
time the agreement was entered into it was not reasonably foreseeable that the provision at issue
was unlawful under labor law; (b) that the disputed provision was “intimately related” to the
objects of collective bargaining; and (c) that the restraints imposed were no broader than
necessary to accomplish the union’s collective bargaining goals. Id. at 520-521.
Subsequently, the Third Circuit appeared to soften its earlier position in Conex in Larry
V. Muko v. Southwestern Pennsylvania Building & Construction Trades Council (Muko II),
670 F.2d 421 (3rd Cir. 1982), cert. denied 459 U.S. 916 (1982).27 The Muko litigation involved
an agreement entered into by a restaurant chain and a local building and construction trades
council under which terms the restaurant chain would not award any building and construction
contracts to any contractor who was not a party to a current collective bargaining agreement with
member unions of the trades council. The agreement came about as the result of prior picketing
by the council during construction by Muko of one of the chain’s restaurants, handbilling of that
location following the restaurant’s completion, and the fear of new picketing at a future site that
Muko was constructing. The chain contacted the trades council and agreed that all future
restaurant locations in Western Pennsylvania would be constructed with union labor, and council
agreed not to picket at a second location then being constructed by Muko. By the time of the
first trial, there were twelve additional restaurants constructed, all using union contractors. In
Muko I, the district court had granted a directed verdict because the court believed that the
decision to use union contractors in the future was a unilateral decision on the part of the
restaurant chain. The district court’s order granting a directed verdict was reversed, largely on
the basis of Connell.
27
In Larry V. Muko, Inc. v. Southwestern Pennsylvania Building & Construction Trades
Council (Muko I) 609 F.2d 1368 (3rd Cir. 1979) (Muko I), the Third Circuit had
previously reversed a district court order granting a defendant’s motion for a directed
verdict and remanded the case for a new trial.
- 17 -
In Muko II, while the court stated that it was reaffirming its holding in Conex, it
nevertheless held that it would not agree that in every labor antitrust case in which the labor
exemption is found to be inapplicable, that a per se antitrust standard should apply. Thus,
although a violation of Section 8(e) would render the nonstatutory exemption inapplicable, the
court said, in speaking about its decision in Conex, “There is no indication that the Court was
prepared to find that the defendants’ conduct was per se illegal merely because it was not exempt
from the antitrust laws.” 670 F.2d at 427. In short, according to the court, “a fair reading of both
Conex and Muko I impels the conclusion that, once it is ascertained that union activity falls
outside the protection of the labor exemption, a court must apply traditional antitrust principles
in determining whether the activity in question violates the antitrust laws. In most cases the rule
of reason will supply the measure of illegality; the per se rule may, however, be invoked where
appropriate.”28 Id. at 427-428 (footnote omitted).
The court’s approach in Muko II seems to represent current judicial thinking.29. Use of
the rule of reason as opposed to a per se approach seems to this author more sensible in most
cases. As one set of commentators have observed “[O]ne must question the wisdom of
extracting treble damages from an employer - including the direct employer or general contract
or property owner engaging contractors - who was forced by a union to accede to a contract term
violating labor law … especially when consistency with labor law was [and is] unclear ….”
These same commentators have questioned post-Connell decisions “moving too quickly from the
premise of a labor law violation to the conclusion of an antitrust violation.”30
28
29
30
In a footnote, the court said that even assuming that the agreement was illegal under
Section 8(e), there was no reason to presume that Congress intended that the same
conduct be automatically violative of the antitrust laws, which were enacted at a different
time and for a different purpose, and which also provide different remedial relief. Id. at
427.
See discussion in P. Areeda and H. Hovencamp, supra, 256(e), at 221, n.133.
P. Areeda and H. Hovencamp, at 223-224.
- 18 -
The Supreme Court’s latest pronouncement on the non-statutory exemption is Brown v.
Pro Football Inc., 518 U.S. 231 (1996). Brown is important because of its broad statements
about the non-statutory exemption and because it dealt with the issue of what antitrust lawyers
refer to as employer restraints on the market initiated in the context of collective bargaining.
Brown stemmed from a disagreement between the National Football League, a group of football
clubs, and the NFL Players Association, the union representing the players, over the terms of a
new collective bargaining agreement. During negotiations, the clubs had sought a plan that
would permit each club to establish a development squad of substitute players.31 518 U.S. at
234. Under the terms of the league’s proposal, club owners would pay all squad members the
same weekly salary. Id. The union refused to agree and insisted that any of the individual squad
members should be free to negotiate their own salaries, and that they should receive benefits and
protections similar to regular employees. Id. at 234.
After the negotiations had reached an impasse, the NFL unilaterally implemented its
proposal. Id. at 235. Some of the players who were on developmental squads sued over the
implemented agreement to pay them the proposed $1,000 weekly salary claim that it violated the
Sherman Act. Id.32. The players were successful in the district court, obtaining a $30 million
plus award from the treble damage provision of the Sherman Act. Id. The Court of Appeals
found that the agreement was immune from antitrust scrutiny under federal labor law because the
restraints imposed through collective bargaining “operate[d] primarily in a labor market
31
32
These squads would consist of up to six rookies or first-year employees who, as free
agents, had failed to obtain a position on a team roster as a regular player. Id. Squad
members could play in practice games and regular games as substitutes for injured
players. Id.
An obvious question here is why didn’t the Players Association sue the clubs? Generally
speaking, since unions are neither consumers nor competitors in the market where the
restraint was employed, they would not suffer an antitrust injury. As such, they lacked
standing to sue. See Associated General Contractors v. Calif. State Council of
Carpenters, 459 U.S. 519, 526-529 (1983); see also Plumbers & Steamfitters Local 598 v.
Morris, 511 F. Supp. 1298 (E.D. Wash. 1981) (union could not be victim of
anticompetitive objective or antitrust injury as a result of employer lockout used as a
means to implement agreement between employers and collective bargaining agent).
- 19 -
characterized by collective bargaining.” Id. at 235. The Supreme Court also agreed. Thus, the
issue before the Court was whether the league’s post impasse imposition of a term and condition
of employment that involved a mandatory subject of bargaining, and did not violate labor law
could, nevertheless, be subject to antitrust liability.
The Court began its opinion by a discussion of the non-statutory exemption, and its
characterization of this exemption based on its prior decisions is worth repeating here:
The Court has implied this exemption from federal labor statutes, which set forth
a national labor policy favoring free and private collective bargaining, which
require good-faith bargaining over wages, hours, and working conditions and
which delegate related rulemaking and interpretative authority to the National
Labor Relations Board.
This implicit exemption reflects both history and logic. As a matter of
history, Congress intended the labor statutes (from which the Court has applied
the exemption) in part to adopt the views of dissenting justices in Duplex Printing
Press Co. v. Deering, 254 U.S. 443 (1921), which Justices had urged the Court to
interpret broadly a different explicit “statutory” labor exemption that Congress
earlier (in 1914) had written directly into the antitrust laws. . . . The implicit
(“nonstatutory”) exemption interprets the labor statutes in accordance with this
intent, namely, as limiting an antitrust court’s authority to determine, in the area
of industrial conflict, what is or is not a “reasonable” practice. It thereby
substitutes legislative and administrative labor-related determinations for judicial
antitrust-related determinations as to the appropriate legal limits of industrial
conflict.
. . . Thus, the implicit exemption recognizes that, to give effect to federal labor
laws and policies and to allow meaningful collective bargaining to take place,
some restraints on competition imposed through the bargaining process must be
shielded from antitrust sanctions.
518 U.S. at 236-237 (citations omitted).
The Court emphasized that the type of conduct at issue was directly regulated by labor
law, noting that both the NLRB and courts had held that, after impasse, labor law permits
employers to unilaterally implement changes in preexisting conditions, but only insofar as the
new terms meet carefully circumscribed conditions. Id. at 238. The Court pointed out that no
party had argued that labor law should somehow treat multiemployer bargaining differently in
terms of this aspect, i.e., the range of and resort to economic weapons, which includes the
- 20 -
imposition of terms as a bargaining tactic. Id. In this regard, the Court observed that labor law
in fact drew no distinction as noted in the decisions of the NLRB, courts of appeals, and
Supreme Court’s own decisions. Id. at 239-240. Given that, in the Court’s words,
“[m]ultiemployer bargaining itself is a well-established, important, pervasive method of
collective bargaining, offering advantages to both management and labor,” it held that “[i]n these
circumstances, to subject the practice [of post impasse unilateral implementation] to antitrust law
is to require antitrust courts to answer a host of important practical questions about how
collective bargaining over wages, hours, and working conditions is to proceed – the very result
that the implicit labor exemption seeks to avoid[,] [a]nd it is to place in jeopardy some of the
potentially beneficial labor-related effects that multiemployer bargaining can achieve.” Id. at
240-241. This is so, according to the Court, “because unlike labor law, which sometimes
welcomes anticompetitive agreements conducive to industrial harmony, antitrust law forbids all
agreements among competitors (such as competing employers) that unreasonably lessen
competition among or between them in virtually any respect whatsoever. Id. at 241.
Important here is the Court’s explicit rejection of the players’ claim that the implicit
exemption would apply only to actual labor management agreements, i.e., that the exemption
applies only to an understanding embodied in the collective bargaining agreement as opposed to
matters arising out of the collective bargaining process. Thus, the Court held
For these reasons, we hold that the implicit (“nonstatutory”) antitrust
exception applies to the employee conduct at issue here. The conduct took place
during and immediately after a collective-bargaining negotiation. It grew out of,
and was directly related to, the lawful operation of the bargaining process. It
involved a matter that the parties were required to negotiate collectively. And it
concerned only the parties to the collective bargaining relationship.
Our holding is not intended to insulate from antitrust review every joint
imposition of terms by employers, for an agreement among employers could be
sufficiently distant in time and in circumstances from the collective-bargaining
process that a rule permitting antitrust intervention would not significantly
interfere with that process. We need not decide in this case whether, or where,
within these extreme outer boundaries to draw that line. Nor would it be
appropriate for us to do so without the detailed views of the Board, to whose
“specialized judgment” Congress “intended to leave” many of the “inevitable
questions concerning multiemployer bargaining bound to arise in the future.”
- 21 -
518 U.S. at 250 (citations omitted).33
Whether you are a labor lawyer or an antitrust lawyer, it is hard to argue with the logic of
Brown. Indeed, Justice Breyer’s opinion garnered all members of the Court but one. Here, the
restraints imposed were exclusively on the labor market relating to the terms and conditions
under which substitute players would be employed. That the union did not agree did not change
the fact that the restraint sought by the employers affected the price of labor that the club owners
were willing to pay to this particular group of players who were part of the bargaining unit, and
were no wider than the scope of the multiemployer unit. Suppose, however, that following a
long strike, the union had been decertified. Would an agreement between the leagues’ clubs to
determine the wage scale for each classification of employee be subject to antitrust attack? See
In re Detroit Auto Dealers Ass’n, Inc., 955 F.2d 457 (6th Cir. 1992) (finding that non-statutory
labor exemption from the antitrust laws did not apply to an agreement among automobile
dealers, most of whose employees were nonunion, to restrict their hours of operation).
From the foregoing Supreme Court cases, one might well ask if there is some analytical
test which can be used to determine whether a particular agreement between a union and an
employer or group of employers meets the non-statutory exemption. Prior to Brown, several
circuits had adopted a three-factor test. Thus, the alleged agreement or restraint, to fall within
the non-statutory exemption, must: (1) primarily affect only the parties to the collective
bargaining relationship;34 (2) involve a mandatory subject of bargaining;35 and (3) be the
33
34
The Court’s unwillingness to say that the employers’ right to implement terms and
conditions of employment was absolute envisioned a situation “sufficiently distant in
time and in circumstances from the collective bargaining process” where either the
collective bargaining relationship has collapsed or the union has been decertified. Id. at
250. In these circumstances, “a rule permitting antitrust intervention would not
significantly interfere with [the collective bargaining] process. Id.
Obviously, agreements between an employer and union concerning wages will have an
effect on other parties, but what the courts mean is does the immediate impact of the
agreement primarily affect wages, hours, and working conditions between the contracting
parties. See P. Areeda and H. Hovencamp, 256d, at 209-210. See, e.g., A&D
Supermarkets, Inc., No. 2 v. United Food & Commercial Workers, 732 F. Supp. 770
Continued on following page
- 22 -
product of bona fide arms-length bargaining.36 This test was originally formulated by the Eighth
Circuit in Mackey v. National Football League, 543 F.2d 606, 614 (8th Cir. 1976) and has been
adopted by other circuit courts of appeal. See Detroit Auto Dealers Ass’n., 995 F.2d at 463;
Phoenix Elec. v. Nat’l Elec. Contractors Ass’n, 81 F.3d 858, 861-862 (9th Cir. 1996). However,
in Clarett v. National Football League, 369 F.3d 124 (2d Cir. 2004), the Second Circuit was
specifically critical of this test after Brown and declined to follow its definition of the
appropriate limits of the non-statutory exemption. The Second Circuit would follow a balancing
test similar to that set forth in Justice White’s opinion in Jewel. 369 F.3d at 133.
III. SOME RECENT APPLICATIONS OF LABOR AND ANTITRUST ANALYSIS
This section of the paper deals with four recent or relatively recent examples of the
application of the statutory and non-statutory exemptions for various union activities. It is hoped
that these examples will provide some current dimension to the state of the law in this area.
These areas are mutual strike assistance agreements, antitrust standing and conspiracy, the
Noerr-Pennington exemption and anticompetitive litigation by unions, and job targeting
programs.
A.
Mutual Strike Assistance Agreements
In a very recent case out of California, California ex rel. Lockyer v. Safeway, Inc.,
371 F. Supp. 2d 1179 (C.D. Cal. 2005), a federal district court held that certain aspects of a
Continued from previous page
(N.D. Ohio 1989) (picketing by union to impose terms of its agreement with one
employer, on non-union employees, where not done unilaterally, primarily affects
product market).
35
But see Sheet Metal Workers Local Union No. 54 v. E.F. Etie Sheet Metal Co., 1 F.3d
1464 (5th Cir. 1993) (although dispute involved interest arbitration, a non-mandatory
subject, it affected only the labor market).
36
Consider whether an antitrust court should make judgments about whether the parties
have bargained in good faith.
- 23 -
mutual strike assistance agreement (“MSAA”) were outside the non-statutory labor exemption
and subject to potential antitrust liability. The case was brought by the California Attorney
General alleging that the MSAA’s revenue-sharing provisions violated Section 1 of the Sherman
Act. The defendant employers all claimed that their actions were immune from antitrust scrutiny
based on the non-statutory labor exemption and sought summary judgment in the district court.
The district court denied their motion.
The MSAA was between three supermarket chains in Southern California bargaining
together in a multiemployer unit with various locals of the United Food and Commercial
Workers. 371 F. Supp. 2d at 1182. Shortly before their collective bargaining agreements with
the union were to expire, the employers entered into a pair of mutual strike assistance
agreements. Id. Under the terms of the MSAA, the chains agreed to lock out all union
employees within 48 hours if any of their stores were the subject of a strike. They also agreed to
share revenue according to a fixed formula that stated that revenue sharing would begin at
“12:01 a.m. on the Monday at the start of the week in which the strike or lockout . . . commences
and continuing for two . . . full weeks following the week in which each strike or lockout ends.”
Id. Moreover, the revenue-sharing provision was not limited to the chains in the multiemployer
unit, but also included another chain that was not a signatory to the three-chain multiemployer
unit agreement and was not bargaining as part of the multiemployer unit. Id. When the unions
struck one of the chain stores in the multiemployer unit, the other two chains locked out their
employees the following day. Initially, the unions picketed all three supermarket chains in the
multiemployer unit, but then began a campaign of selective picketing of stores of two of the
three chains in the multiemployer unit. Id. Ultimately, one of the members of the multiemployer
unit and the employer outside the unit paid approximately $142 million in revenue-sharing for
the strike period, and another $4.2 million for the two-week period following the strike (the socalled “tail” period) to the two chains who were the subject of the unions’ continued picketing.
Id.
- 24 -
After discussing the development by the Supreme Court of the non-statutory exemption,
the court held that the Supreme Court’s decision in Brown v. Pro Football Inc., supra, provided
the controlling analysis of the issues presented in this case. In particular, it noted the four factors
that the Court in Brown thought were important: (1) did the conduct at issue take place during or
immediately after collective bargaining; (2) did it grow out of, or was it directly related to, the
lawful operation of the bargaining process; (3) did it involve a matter that the parties were
required to negotiate collectively; and (4) did it only concern the parties to the collective
bargaining relationship. Id. at 1185. While the court did not view Brown as “declaring rigid
factors that must be found in every case for the exemption to apply,” the district court did believe
that the Supreme Court “signaled the importance of these considerations in determining whether
there [was] an actual or potential conflict between labor and antitrust law that require[d]
accommodation through the application of the exemption.” Id. According to the court,
Each of the considerations described in Brown relates in some way to the
scope of the exemption. While none is controlling, together they provide a
valuable analytical tool for us to use in deciding whether the challenged conduct
merits application of the exemption in this case.
Id. Applying the previously described factors in Brown to the facts relating to the MSAA, the
court found that the MSAA was not protected by the non-statutory labor exemption to the
antitrust laws. First, as to the timing of the MSAA, the court found that while the MSAA was
entered into before the contract expired and was triggered by a strike or lockout, the
complicating factor for it was the fact that the “tail” provision survived the end of the labor
dispute and the employer’s entry into a new collective bargaining agreement. The court
concluded that the revenue-sharing tail provision was not “sufficiently temporally connected to
the collective bargaining process to favor application of the exemption because the conduct at
issue transpired not merely at an impasse in negotiations, but after the bargaining process itself
- 25 -
had concluded successfully. The timing of this conduct weighs against application of the
exemption to the tail period.” Id. at 1187.37
With respect to the second Brown factor – the connection of the challenged provision to
the lawful operation of the collective bargaining process – the court held that the MSAA’s
reallocation of the revenues during the strike was a core concern of the Sherman Act. Id. at
1187-1188. The court felt that the implications of the revenue-sharing provisions of the MSAA
for labor policy would at best be only indirectly supported by encouraging unity during
bargaining. Id. at 1188. In the court’s view, there was a direct effect on market competition by
freezing the employers’ (who were each other’s competitors) relevant market shares at pre-strike
levels and redistributing revenues from one competitor to another. Id. In the court’s view, the
anticompetitive effects of the challenged provision did not come from the elimination of wage
competition in the labor market, but as a result of direct restraints on the business market. Id.
The court also rejected the defendants’ arguments that there was no difference between
revenue-sharing and locking out the employees, that both were undertaken to prevent
whipsawing by the unions. Id. at 1188-1189. To be sure, both were undertaken to strengthen the
employers’ hands in the labor dispute with the unions, but in the court’s view there were
significant differences. Id. at 1185-1190. Although the court believed that lockouts were the
“flip-side” of a strike under the National Labor Relations Act (a proposition with which labor
lawyers might well disagree), the court held that revenue-sharing had no analog in labor law. Id.
at 1190-1191. While the lockout restrained competition in the labor market by the employers’
37
Brown had indicated that the exemption might not apply to those agreements sufficiently
distant from the collective bargaining process. The district court also indicated that it
was not suggesting that national labor policy would support the use of a revenue-sharing
agreement during the strike. 371 F. Supp. 2d at 1187 n.6. The court simply wished to
make clear that “once the strike is over and a new CBA is agreed upon, there is not even
an arguable case for reliance on the collective bargaining process to justify an exemption
from the antitrust laws.” Id. The court did not indicate what the result might be if the
strike was over, but the parties had not reached agreement on a new contract.
- 26 -
halting the purchase of labor services, the imposition of the revenue-sharing provisions primarily
affected competition between employers who were otherwise competitors. Id. at 1191-1192.
With regard to the Brown factor that relates to whether or not the MSAA was a
mandatory subject of bargaining, the court found that MSAAs did not constitute mandatory
subjects of bargaining. Id. at 1192. Turning to the final factor in the Brown analysis – whether
the employers’ agreement concerned only the parties to the collective bargaining relationship the court again found that the MSAA did not meet the non-statutory exemption because it
involved an employer outside the collective bargaining relationship. While it conceded that the
three chains in the multi-employer unit were “indisputably parties to the collective bargaining
process,” the fourth participant in the MSAA was not part of the multi-employer bargaining unit.
Id. In other words, the cross-sharing of revenue beyond bargaining unit lines with a non-unit
employer was fatal to application of the exemption because its status as a “party outside the . . .
collective bargaining unit [could not] be disconnected from its status as a competitor of the stores
within [the multiemployer] bargaining unit . . . .” Id. at 1193.
Finally, the court rejected the employers’ parity argument: that as long as the revenuesharing agreement was designed to counter a union tactic protected by the statutory exemption, it
should receive immunity from the antitrust laws under the non-statutory exemption. In other
words, because the MSAA’s revenue-sharing provision was adopted to combat whipsawing by
the unions, the non-statutory immunity was applicable to it. The court believed the employers’
position amounted to reading a per se rule of parity that represented a fundamental
misunderstanding of the “interplay between the statutory and nonstatutory exemptions.” Id. at
1195. In the court’s view, while Brown extended the non-statutory exemption to encompass
certain employer-only agreements made in the context of collective bargaining, it did not
fundamentally alter the dynamics of the relationship between the statutory and non-statutory
exemptions.” Id. In the court’s view, any application of the non-statutory exemption, “must be
limited to those instances where the exemption is necessary to carry out Congress’s intent as
- 27 -
expressed in national labor policy.” Id. The court was not prepared, in essence, to legislate on
this issue of whether MSAAs were fundamental to national labor policy.38
B.
Antitrust Standing and Conspiracy Issues
Tri-Gen Incorporated (“General Drilling”) sued International Union of Operating
Engineers, Local 150, AFL-CIO (the “Union”) in district court for federal labor and antitrust
violations. Local 150 moved for dismissal and summary judgment on all counts. The Seventh
Circuit affirmed the district court’s order granting the Union’s motion for summary judgment.
Tri-Gen Inc. v. Int’l Union of Operating Engineers, Local 150, 433 F.3d 1024 (7th Cir. 2006).
Unlike its competitors in the limestone quarry drilling industry, General Drilling was a
non-union company and not a signatory to the Northern Illinois Material Producers Agreement
(“NIMPA”). Tri-Gen Inc., 433 F.3d at 1027-1028. Northern Illinois Material Producers is a
multiemployer association collective bargaining agreement between various material producers
and the Union. Id. General Drilling was a subcontractor and performed drilling work for
Material Service, a company that owned and operated limestone quarries in Northern Indiana and
also a signatory of NIMPA. Id.39
The Union made several attempts to induce General Drilling to sign the NIMPA when it
found the company working for Material Service in Indiana. The Union advised General
Drilling that it was paying wages below those established in the area by the Union and threatened
to picket at sites where General Drilling performed work to advertise to the public the company’s
38
39
The court also rejected the argument that this presented a situation where an antitrust
court should not police the tactics used by parties in collective bargaining and should
defer to the expertise of the NLRB as to whether the challenged revenue sharing
provision was a lawful tactic by the employers involved under labor law. Id. at 1196.
Previously, in 1996, the Union had made repeated attempts to persuade General Drilling
to sign NIMPA for work it was performing in Illinois. A business representative of the
Union had informed General Drilling that he wanted it to “be Union or be out of” Illinois,
and that he was “under pressure” from union firms in Chicago. 433 F.3d at 1028.
- 28 -
inadequate wages. Id. at 1028. The Union’s business representative also made several
statements to General Drilling reflecting that it was “under pressure” from union drilling
companies in Chicago that were signatories to NIMPA Id.40 General Drilling refused to sign
NIMPA because it would have “hugely” increased its labor costs. Id. at 1028.
The Union kept Material Service informed of its communications with General Drilling,
including copying it on a letter sent to General Drilling about area standards that had a note
stating, “[p]lease review and any support would be appreciated.” Id. Upon receiving the letter,
Material Service formulated a plan to solicit bids from alternate drillers to avoid interference
with its production and sales in the event of picketing. Id. Several months later, Local 150
picketed one of Material Service’s quarries where General Drilling was performing work. Id. at
1029. Material Service immediately terminated General Drilling and replaced it with another
drilling company which charged the same rates as General Drilling. Id.
General Drilling then brought suit against Local 150, alleging that the Union: (1) had
conspired to restrain trade in violation of the Sherman Act; and (2) had violated Section 303 of
the Labor Management Relations Act. The unlawful restraint of trade claim under the Sherman
Act was based on the allegation that Material Service was forced into a conspiracy to terminate
General Drilling so that one or more of the unionized drillers would get its business. In turn, this
suppressed price competition in violation of the Sherman Act.
The Seventh Circuit affirmed the lower court’s finding that: (1) General Drilling did not
have antitrust standing; (2) General Drilling fell short of demonstrating a per se unreasonable
40
In a taped recording in one of the meetings between the Union and General Drilling, a
business representative said: “I have to get this repaired. It is an issue. An issue to other
guys and I gotta get this done,” and that the other parties were General Drilling’s “signed
competition.” Id. at 1033. He also told General Drilling, “I have to do something about
you . . . politically, you know, I’ve got to do it. Id. The business representative also said
“Your competition . . . pays a rate. That’s all I care about. That you’re on the same
playing field . . . .” Id. (emphasis added).
- 29 -
restraint of trade under the Sherman Act; (3) the Union was entitled to the statutory exemption to
the antitrust laws; and (4) General Drilling did not establish a conspiracy to achieve an unlawful
purpose.
The court held that General Drilling did not have antitrust standing because it did not
demonstrate consumer injury. 433 F.3d at 1031-1032. The court noted that under Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) “the antitrust laws . . . were enacted for
the protection of competition, not the competitors.” 433 F.3d at 1031. The court noted that
Material Service was the consumer of the drilling services provided by General Drilling, and it
was General Drilling, not Material Services, which brought the lawsuit. Id. While General
Drilling suffered a loss from Material Service’s transfer of business to another company, it did
not have standing as its loss did not come from acts that reduced output or raised prices to
consumers. Id. General Drilling was unable to offer evidence indicating a negative effect on
competition in the drilling services market. Id.
Next, the court held that Local 150’s actions were not a per se unreasonable restraint of
trade under the Sherman Act. Id. at 1032-1034. To support a price-fixing conspiracy, the court
required a showing by the plaintiff that a combination was formed for the purpose of fixing
prices and as a result caused them to be fixed or contributed to that result. TriGen Inc., 433 F.3d
at 1033. The entire evidentiary basis for the “price-fixing claim” was Local 150’s statements to
General Drilling officials regarding pressure from other union drillers. Id. The court, however,
failed to find that these statements amounted to a conspiracy formed “for the purpose and with
the effect of price-fixing.” Id. The focus of the conspiracy was not on the price paid by Material
Service for General Drilling Services, but on the latter’s wages and benefits. Id. There also was
no evidence that the Union ever discussed prices with either General Drilling or its union
competitors. Id. Ultimately, the driller that replaced General Drilling even charged the same
rate. Id. General Drilling also failed to show antitrust injury when it was unable to demonstrate
that it was excluded from the market. It continued to work at other quarries that had not been
- 30 -
picketed by the union, and, the next year, Material Service twice invited it back to drill at its
quarries. Id. at 1034.
Tri-Gen is a current example of the court’s continuing to follow the well-established
trend that began with Brunswick in consistently interpreting “antitrust injury” to mean injury to
competition.41 This particular court will clearly grant summary judgment where it has not been
shown that a plaintiff has suffered an injury of the type the antitrust laws were intended to
prevent. Injury to competitors without any accompanying injury to competition will not suffice.
Thus, unless a plaintiff’s allegations, if assumed to be true, and its evidence, taken in the light
most favorable to it, raise a triable issue of fact that a union’s conduct has caused injury to the
market by increasing prices or reducing output, a plaintiff’s Sherman Act claim will not survive
summary judgment. The decision also demonstrates the difficulty in establishing conspiracy.
C.
Anti-Competitive Litigation and the Noerr-Pennington Exemption
In USS-POSCO Industries, the Ninth Circuit addressed the nature of two doctrines that
allow unions to evade applicability of the federal antitrust laws: (i) the statutory labor exemption
and (ii) the Noerr-Pennington doctrine. USS-POSCO Indus. v. Contra Costa County Bldg. &
Constr. Trades Council, 31 F.3d 800, 803-804 (9th Cir. 1994). It is the leading case on the issue
of anticompetitive litigation by unions against employers with whom they have a dispute over
their labor relations policies. BE&K, a merit-shop contractor, sued several unions that engaged
in a series of activities allegedly designed to eliminate non-union construction in Northern
California, asserting that these activities violated the Sherman and Clayton Antitrust Acts. USSPOSCO, 31 F.3d at 804. The district court dismissed BE&K’s antitrust claims, and the Ninth
Circuit affirmed the dismissal. Id. at 812.
41
In this regard, see the court’s prior opinion in Ehredt Underground, Inc. v.
Commonwealth Edison Company, et al., 90 F.3d 238, 240 (7th Cir. 1996).
- 31 -
The dispute in USS-POSCO stemmed from USS-POSCO Industries’ decision to award a
construction contract to modernize PITCAL, an old steel facility in Pittsburg, California, to a
merit-shop contractor (BE&K), rather than to a union contractor. Id. at 804. Several interested
unions then mounted a campaign allegedly to voice their discontent with this decision. Id.
BE&K alleged that the unions’ activities violated the antitrust laws because they were designed
to “cause such delay and expense that future project owners would only hire unionized
contractors and subcontractors.” Id. The allegedly illegal activities included: (i) filing
automatic protests to BE&K’s permits; (ii) lobbying for a local toxic waste disposal ordinance;
(iii) bringing legal action to enforce the toxic waste ordinance at the PITCAL site;
(iv) encouraging subcontractors to protest nonexistent safety violations; (v) bringing an action
for violation of environmental laws; and (vi) bringing grievances, arbitrations and enforcement
proceedings against the contractor’s partner. Id.
The unions sought summary judgment as to BE&K’s antitrust claims, arguing that those
claims failed because their activities were protected under (i) the statutory labor exemption and
(ii) the Noerr-Pennington doctrine. Id.42 The district court granted partial summary judgment to
the unions on both grounds. Id.
As to the applicability of the statutory labor exemption, the district court concluded that
BE&K failed to overcome the exemption because it failed to show that the unions’ activities
constituted a combination with non-labor groups. Central to the court’s conclusion was its
determination that BE&K had to establish “both a combination with non-labor groups and an
illegitimate purpose in such combination” to overcome the statutory exemption. Id. at 804
42
Before amending its complaint to allege violations of the antitrust laws, BE&K initially
alleged that the unions’ activities constituted unfair labor practices in violation of the
LMRA. Id. at 804. The unions asserted immunity from LMRA liability under the NoerrPennington doctrine, and the district court granted partial summary judgment to the
unions on BE&K’s claims related to the unions’ lobbying and grievance activities. Id.
This aspect of the district court’s decision was not the subject of BE&K’s appeal.
- 32 -
(emphasis in original). Because it determined that BE&K could not establish the former, the
court concluded that it could not overcome the unions’ assertion of the exemption and, therefore,
did not consider (and, in fact, did not allow discovery on) the latter “prong,” e.g., whether the
unions had an illegitimate purpose. Id. On appeal, BE&K argued that the district court erred
because it failed to consider this latter “prong.” Id.
The Ninth Circuit first addressed the statutory labor exemption. Preliminarily, the court
noted that the burden was not on the union to establish the exemption as an affirmative defense,
but instead, the onus was on the plaintiff to establish its inapplicability. Id. at 805 n.3. Like the
district court, the Ninth Circuit acknowledged two aspects of the exemption: (i) whether the
union combined with a non-labor group and (ii) whether the union acted in its legitimate selfinterest. Id. at 805. Unlike the lower court, however, the Ninth Circuit opined that these two
inquiries or prongs should be read conjunctively, not disjunctively. Id.
A critical component of the first “prong” is the definition of “non-labor group.” Noting
that the definition should not “stray too far from the paradigm of the union combining with the
employer’s competitors,” the court defined the term as follows:
To constitute a non-labor group for purposes of the statutory labor exemption, . . .
the entity in question must operate in the same market as the plaintiff to a
sufficient degree that it would be capable of committing an antitrust violation
against the plaintiff, quite independent of the union’s involvement.
Id. at 806. Thus, competitors, suppliers, or purchasers of a plaintiff’s goods or services are
within the definition of “non-labor groups.” Id. at 806-807. The court further explained that
when the union combines with an entity that may be “deemed to be operating in the same
market,” then this too would be considered a “non-labor group,” thus precluding a union’s ability
to invoke the exemption. Id. at 807. Based on these pronouncements, the court affirmed the
district court’s finding that BE&K failed to demonstrate that the unions combined with a “nonlabor group.” Id. However, because the court also determined that the exemption’s two prongs
ought to be read conjunctively, the court concluded that the district court erred in failing to
- 33 -
consider or to permit the parties to conduct discovery as to the second prong, i.e., whether the
union acted in its legitimate self-interest. Id. at 807.
To determine whether the union acted in its legitimate self-interest, both the union’s ends
and the means employed to meet those ends should be considered. Id. at 808. Thus, the
legitimacy of the union’s activities - and whether the exemption is properly claimed - focuses on
whether those activities are those “normally associated with labor disputes,” or among the
traditional objectives of labor unions. Id. If the means, however, are not traditional, then it may
impact on the legitimacy of those activities. Id.
Applying these principles to BE&K’s claims, the court noted that many of the unions’
activities indeed were legitimate, including (i) picketing and handbilling BE&K’s premises and
(ii) efforts to encourage work stoppages by unionized employees because of safety concerns. Id.
at 809. The court specifically noted as insignificant the fact that the unions were not attempting
to unionize BE&K, but, instead, were attempting to eliminate non-union shops. The court
reasoned that “[e]ncouraging the use of unionized labor is an objective well within the legitimate
interests of labor unions and, so long as this end is pursued by activities normally associated with
labor disputes, there’s a strong presumption that the unions are protected from antitrust liability
by the statutory labor exemption.” Id.
Although the court found that a number of the unions’ activities were legitimate, it
reached a different conclusion as to other activities, such as “pressing frivolous lawsuits,
automatically protesting against permits sought by BE&K, pressing for the passage of a
regulatory measure and then agitating for its enforcement against BE&K.” Id. at 809. The court
noted that these were non-traditional means to achieve a legitimate end, i.e., discourage use of
merit-shop contractors. Id. Because the means were non-traditional, the court found that the
burden rested on the unions to demonstrate that the means were “not only lawful, but necessary
because the goals could not be achieved through traditional tactics.” Id. The court found that the
- 34 -
unions failed to sustain their burden and that the district court erred in failing to consider this. Id.
at 809-810. Nevertheless, the court concluded that the error was harmless because the activities
were protected from antitrust liability under the Noerr-Pennington doctrine. Id. at 810, 812.
Although the Noerr-Pennington doctrine protects those who petition the government for a
redress of grievances, it does not protect “sham” petitions. Id. at 810.43 BE&K argued that the
unions’ efforts to petition the government were a sham because they lacked probable cause,
relying on the Supreme Court’s 1972 decision in California Motor Transport Co. v. Trucking
Unlimited. Id. The unions argued that the California Motor Transport decision was inapplicable
in light of the court’s 1993 decision in Professional Real Estate Investors, Inc. v. Columbia
Pictures Industries, 508 U.S. 49 (1993) (“PRE”).44 Id. Based on that decision, the unions
argued that BE&K had to establish that the lawsuits were “objectively baseless,”45 which it
could not do because it admitted in its appeal papers that the unions’ lawsuits were not
objectively baseless. Id.
43
44
45
This doctrine extends from the decisions decided by the Supreme Court in Eastern
Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and
United Mine Workers v. Pennington, 381 U.S. 657 (1965). The doctrine as originally
articulated protects some petitioning activity from antitrust liability where such activity is
directed towards various governmental branches, such as a legislature, as well as the
executive branch. However, in California Motor Transport Co. v. Trucking Unlimited,
404 U.S. 508 (1972), the doctrine was extended to administrative agencies and courts.
Noerr-Pennington can be an antitrust plaintiff’s Achilles’ heel since it provides an
opportunity for a defendant to secure summary judgment early in the litigation.
From the inception of the doctrine, the Supreme Court had provided that an antitrust
plaintiff could get around Noerr-Pennington immunity if it could show that the
petitioning activity was “a mere sham to cover . . . an attempt to interfere directly with
the business relationships of a competitor.” Noerr, 365 U.S. at 144. In PRE, the Court
established a two-factor test for determining whether the defendant’s litigation activities
are a “sham,” and therefore beyond immunity from the antitrust laws. Under PRE, the
lawsuit must be objectively baseless and, if so, “whether the baseless lawsuit conceal[ed]
an attempt to interfere directly with the business relationships of a competitor.” 508 U.S.
at 60-61.
Under PRE, the court described “objectively baseless” as baseless in the sense that no
reasonable litigant realistically expects success on the merits . . . Id.
- 35 -
The Ninth Circuit initially observed what was an apparent conflict in the two Supreme
Court decisions governing when litigation is considered a sham. The court distinguished the two
cases based on whether a “series of legal proceedings,” as in California Motor Transport, or a
single action, as in PRE, was alleged to be a sham. Id. at 810-811. The court concluded that
because BK&E alleged a “series of legal proceedings” to be a sham, the court applied the
subjective standard of “whether [the lawsuits] are brought pursuant to a policy of starting legal
proceedings without regard to the merits and for the purpose of injuring a market rival.” 31 F.3d
at 811. In the court’s view, PRE’s two-step analysis was limited to a single action. Id. at 810811. The court, however, rejected BK&E’s argument that the Noerr-Pennington doctrine was
inapplicable. Id. at 811. The court observed that 15 of the 20 lawsuits alleged to be a sham had
been successful, thus detracting from the notion that the unions’ activities were a “sham.” Id.
As the court reasoned:
The fact that more than half of all the actions as to which we know the results turn
out to have merit cannot be reconciled with the charge that the unions were filing
lawsuits and other actions willy-nilly without regard to success. Given that the
plaintiff has the burden in litigation, a batting average exceeding .500 cannot
support BE&K’s theory [that the unions’ conduct falls within the sham exception
to the Noerr-Pennington doctrine].
Id. Ultimately, then, the Ninth Circuit affirmed dismissal of BE&K’s antitrust claim based on
the Noerr-Pennington doctrine, despite finding that the district court had erred in failing to
consider fully the applicability of the statutory labor exemption.46
46
Not surprisingly, following BE&K’s defeat in the Ninth Circuit, General Counsel for the
National Labor Relations Board issued an administrative complaint against BE&K,
asserting that it had violated the National Labor Relations Act by maintaining the lawsuit
against the unions. The Board found that the complaint was valid because the lawsuit
was unmeritorious and that it had been filed in retaliation for the unions’ engaging in
protected conduct. The United States Supreme Court granted certiorari to consider the
propriety of the Board’s actions. It held, in part, that the Board’s standard for imposing
liability under the NLRA was improper because it allowed the Board to penalize all
unsuccessful lawsuits that were filed with a retaliatory purpose, regardless of whether
those suits, in the first instance, were reasonably based. See BE&K Constr. Co. v.
NLRB, 536 U.S. 516 (2002).
- 36 -
What are the questions left open by USS-POSCO, and what are the implications for
future antitrust plaintiffs who are subjected to anticompetitive litigation by various unions?47
One commentator, Wofford, has said that there are three questions to be resolved after the USSPOSCO pattern of litigation exception.48 These are (1) whether USS-POSCO adequately
reconciles California-Motor Transport and PRE; (2) are the differences between the two cases
such that they can’t be reconciled; and (3) did the Ninth circuit’s decision avoid a holding that its
own reasoning would have demanded. 49 Wayne L. Rev. at 105-115.
According to this commentator, arguably USS-POSCO did not properly reconcile the two
Supreme Court decisions. To reiterate, the Ninth Circuit reconciled the two decisions based on
its conclusion that they involved two different situations. But, in his view, this basis for
reconciling the two is arguably flawed because, contrary to the Ninth Circuit’s conclusion, in
both decisions, the Supreme Court considered the antitrust defendant’s subjective intent.
49 Wayne L. Rev. at 107. More importantly, however, he maintains that the Ninth Circuit failed
to analyze whether PRE, in fact, undercuts or overrules California Motor Transport. Id.
Turning to the second question left open by USS-POSCO - whether California Motor
Transport and PRE can be reconciled - Wofford suggests that the Ninth Circuit failed to consider
a critical difference in the views advanced by the Court in those two decisions and, therefore,
failed to consider that the two decisions could be reconciled. Specifically, the Ninth Circuit
disregarded the Courts’ divergent views on the interplay between the Sherman Act and the First
Amendment. Id. at 109-111. In California Motor Transport, the Supreme Court viewed the
Sherman Act as limiting the First Amendment, noting that “First Amendment rights are not
immunized from regulation when they are used as an integral part of conduct which violates a
47
48
At least one other circuit court has adopted the Ninth Circuit’s approach in USS-POSCO.
See Primetime 24 Joint Venture v. Nat’l Broadcasting Co., 219 F.3d 92 (2nd Cir. 2000).
R. Wofford, Considering the “Pattern Litigation” Exception to the Noerr-Pennington
Antitrust Defense, 49 Wayne L. Rev. 95, 105-116 (2003).
- 37 -
valid statute.” Id. at 111. The PRE Court, on the other hand, seemed to view the Sherman Act
as being limited by the First Amendment, stating that “an objectively reasonable effort to litigate
cannot be sham regardless of subjective intent.” Id.
Again, Wofford argues that the Ninth Circuit ignores this distinction to conclude that the
sham exception under the Noerr-Pennington doctrine does not require an objective component,
thereby raising the possibility - contrary to PRE - that even First Amendment-protected litigation
can constitute an antitrust violation if the requisite intent, e.g., an intent to injure, is established.
Id. at 112. He suggests, however, that the Ninth Circuit’s failure to acknowledge the Courts’ two
very divergent views, namely the interplay between the First Amendment and the Sherman Act,
precluded it from properly distinguishing between the two decisions. Id. at 113.
In Wofford’s view, the final question left open by USS-POSCO is whether its holding is
inconsistent with its own reasoning. Id. at 113. Specifically, the court held that the sham
exception did not apply, reasoning that over half of the lawsuits brought by the unions were
meritorious and, therefore, the unions could not have had an intent to injure BE&K. Id. Its
conclusion was based on two, arguably flawed, assumptions: (i) that 15 of the 29 lawsuits were
legitimate because the unions had prevailed in those cases and (ii) that the remaining fourteen
suits were baseless because the parties disputed their legitimacy. Id. The court made these
assumptions because of the procedural posture of the case, i.e., a review of a motion for
summary judgment. As the commentator observed, the decision is correct “only if no reasonable
trier of fact could have concluded that a combination of fourteen baseless and fifteen legitimate
lawsuits demonstrated that the unions were just as likely to file baseless lawsuits as legitimate
ones.” Id. at 114 (emphasis in original). But, he maintains, the Ninth Circuit did not explain
why no one could reach this conclusion, e.g., why no one could have concluded that 14 baseless
lawsuits demonstrate that the unions had an intent to injure BE&K. Id. And, in fact, the
Supreme Court in California Motor Transport reinstated the antitrust claim because “a bare
- 38 -
majority of legitimate lawsuits in an allegedly sham series could not preclude a finding of sham
litigation as a matter of law.” Id. at 115 (emphasis in original).
D.
Job Targeting Programs
A job targeting program (“JTP”), sometimes also referred to as a market recovery
program, authorizes funds to be deducted from the pay of union members, which are remitted
directly to the union by contractors signatory to agreements with the union. The funds are placed
in a special account administered solely by the union and used to support unionized contractors
who are submitting bids against non-union contactors for construction contracts. If a contractor
signatory to a labor agreement with a JTP is the successful bidder on the project, it still pays the
union employees the wages specified in the applicable collective bargaining agreement, and the
union apportions funds from the JTP account to reimburse the contractor for the difference
between the wages under the collective bargaining agreement and those that were submitted in
order to enable the contractor to obtain the bid.
In general, the NLRB has found that JPTs are lawful attempts by employees to enhance
their employment opportunity through their union representatives and, as such, these programs
have been viewed as falling within the “concerted activities for the purpose of mutual aid or
protection” language of Section 7 of the NLRA, 29 U.S.C. 157 (2005). Indeed, attempts by
nonunion employers to sue either employers or unions who were the beneficiaries of these
programs have, in the past, been deemed conduct violative of the NLRA. See Associated
Builders & Contractors, Inc., 331 NLRB 132 (2000); Manno Electric, Inc., 321 NLRB 278
(1996), aff’d, 127 F.3d 34 (5th Cir. 1997). However, in certain narrow circumstances, these
programs have been declared unlawful where such dues or assessments were extracted from
employees working on Davis-Bacon projects. Electrical Workers Local 48 (Kingston
- 39 -
Constructors), 332 NLRB 1492 (2000); Building & Constr. Trades Dep’t, AFL-CIO v. Reich,
40 F.3d 1275 (D.C. Cir. 1994).49
Until now, JTPs have also been thought to be exempt under the antitrust laws. Thus, in
Phoenix Electric Co. v. National Electric Contractors Association, 81 F.3d 858 (9th Cir. 1996),
the Ninth Circuit held that a JTP which was adopted in a collective bargaining agreement
between a union and an electrical contractors association fell within the non-statutory labor
exemption to the antitrust laws. Because the job targeting program was part of a collective
bargaining agreement, the court found that the statutory exemption would not apply. 81 F.3d at
860. In determining whether the non-statutory exemption applied, the court was bound by the
so-called Mackey test that the court had recently adopted.50 The court first reasoned that the job
targeting program was exempt from antitrust scrutiny because the agreement affected only its
parties and did not bar any union or non-union subcontractors from competing with signatory
contractors for construction jobs. It was intended only to make participating employers more
competitive with non-union subcontractors. Id. at 862. Second, the subject of the job targeting
program related to wages, a mandatory subject of bargaining. Id. The court found that there was
no evidence that the subsidy was used for anything other than off-setting the competitive
difference in wages or that the wages ever dropped below the legal minimum. Id. Finally, the
court found that the agreement was the product of collective bargaining and was developed in
lieu of an across-the-board wage cut by the union’s members; the collective bargaining
49
50
In December of 2003, the NLRB issued a public announcement inviting interested parties
to submit amicus briefs in two cases relating to the issue of the legality of union job
targeting programs, J.A. Croson Company, 9-CA-33163-1, and Can-Am Plumbing, Inc.,
335 NLRB 1217 (2001), on remand from 321 F.3d 145 (D.C. Cir. 2003).
According to the court:
Under that test, the parties to an agreement restraining trade are exempt from
antitrust liability only if (1) the restraint primarily affects the parties to the
agreement and no one else, (2) the agreement concerns wages, hours, or
conditions of employment that are mandatory subjects of collective
bargaining, and (3) the agreement is produced from bona fide, arms-length
collective bargaining. Id. at 861.
- 40 -
agreement provided that the employers would deduct the dues directly from covered employees’
paychecks. Id. The court found that “the parties to this agreement undoubtedly wanted the
union subcontractors to increase their work at the expense of nonunion subcontractors. That of
course is a legitimate goal of the union and its [members].” Id. at 863. The court held that the
agreement was not intended to bar competition as was the case in Connell. Id. In short, “[a]
subsidy program that targets some jobs for more competitive wage components of signatory
union subcontractor bids and does not bar nonunion bidders from bidding on the same jobs, is in
harmony with the policies of both the labor and antirust laws.” Id.
In Local Union 257 v. Sebastian Electric, 121 F.3d 1180 (8th Cir. 1997), a similar JTP
was also exempt from antitrust liability under the non-statutory exemption following the same
rationale as that reached by the Ninth Circuit in Phoenix Electric. Thus, it appeared that JTPs
would remain exempt from attack under the antitrust laws.51
There is now, however, pending, in the federal district court of Massachusetts, a suit
brought by a number of steel erection contractors that may change the labor/antitrust landscape.
American Steel Erectors Inc., et al. v. Local Union No. 7, International Association of Bridge,
Structural, and Ornamental and Reinforcing Iron Workers, Case No. 04-cv-12536-RGS (“Boston
Iron Workers Litigation”).52 In their complaint, six steel erection companies seek “redress for
an illegal, on-going conspiracy among the Defendants and their co-conspirators in violation of
the federal Sherman Antitrust Act . . . and other federal and state laws. The object of the
conspiracy is the abuse and acquisition of monopoly market power in the structural steel erection
51
52
The Fourth Circuit, in an unpublished opinion, affirmed a lower court’s decision
upholding a job targeting program. Grinnell Corp. v. Road Sprinkler Fitters Local Union
No. 669, No. H-94-3309, 1997 WL 311498 (D. Md. Jun. 3, 1997), aff’d mem., 133 F.3d
914 (4th Cir.1998).
My synopsis of this case comes from a review of the complaint and various pleadings
filed thus far in the case. Although certain state law claims have already been dismissed
by the court, the case is currently in discovery with regard to the antitrust counts. See
also BNA Daily Labor Report (December 7, 2004).
- 41 -
industry by using illegal predatory pricing tactics and money, obtaining agreements with
contractors to exclude Plaintiffs from the relevant market and to monopolize the relevant
market . . . [with] the intent and effect of reducing and eliminating competition between the
Defendants and their signatory contractors with the Plaintiffs.” Complaint at ¶ 1. The current
defendants are Iron Workers Local No. 7(“Local 7”) and the Steel Erection and Ornamental Iron
Industry Advancement Fund (“The Job Targeting Fund”). Complaint at ¶ 8-9.
The complaint names a number of employers who are signatory to contracts with Local 7
as co-conspirators, and other locals of the Iron Workers are also named as co-conspirators.
Complaint ¶ 16-27. The relevant market for antitrust purposes is defined in the complaint as the
erecting of structural metal and steel on building structures, erecting prestressed and precast
concrete to produce structural elements, and other tasks commonly associated with steel erection
work on construction projects in eastern and central Massachusetts, Rhode Island, New
Hampshire, and southern and central Maine – an area proximate to the city of Boston.
Complaint at ¶ 29. The plaintiffs allege that over 70 percent of the structural steel erection
performed in the relevant market is performed by union contractors and that the relevant market
is dominated by union signatory contractors who only employ employees belonging to the Iron
Workers. Complaint at ¶¶ 37 and 44.
The thrust of the antitrust allegations which make this case different from previous cases
is the claim that Local 7 has used money from the job target fund to engage in a pattern and
practice of unreasonable restraint of trade, by conspiring with union signatory contractors to
systematically exclude plaintiffs and other non-union contractors from projects in the relevant
market and has continued to collect and spend money to do so. Complaint at ¶¶ 45 and 46.
Local 7’s use of the job targeting fund is alleged to allow union signatory contractors to factor in
below labor and equipment prices to reduce their bids below those submitted by the plaintiffs to
various contractors, developers, and fabricators with the intent of driving plaintiffs out of their
own market. Complaint at ¶ 47. Plaintiffs claim that they have been excluded from certain large
- 42 -
jobs, and they have been left with more numerous jobs of shorter duration, and more widely
distributed and less visible jobs in the relevant market over which the defendants have not been
able to achieve monopoly power. Complaint at ¶¶ 48-50.
Finally, in order to obtain the alleged monopoly and exclusion of the plaintiffs from the
relevant market, the complaint alleges that Local 7 and other unions have entered into various
agreements that violate both the antitrust laws as well as Sections 8(b)(4)(A), 8(b)(4)(B), and
8(e) of the NLRA through threats of localized and widespread picketing, surveillance, work
stoppages, and actual picketing or stopping of work at various job sites where plaintiffs or other
non-union contractors were working - to compel developers, building owners, building
management, general contractors and others not to do business with them. Complaint at ¶ 58a.
Plaintiffs also allege, inter alia, that Local 7 granted subsidy monies to fabricating contractors
with whom it had no collective bargaining agreement to induce them not to use plaintiffs’
services and to instead use signatory contractors; that Local 7 had conspired with signatory
contractors to pull job target funds collected from its members working on Davis-Bacon projects;
and that Local 7 engaged in “stripping,” a practice of inducing employees of the plaintiffs and
other non-union contractors to leave their employment and work for Local 7 signatory
contractors. Complaint at ¶ 58b-g.
It is obvious that this complaint is factually complicated and that this case represents
arguably a “horse of a different color” than what has been previously seen in this area. Clearly,
the allegations are that the defendant union and its sister locals are using a large job targeting
fund to obtain more work for its members than they currently have access to. Although the
complaint alleges that 70 percent of the relevant market now belongs to union contractors who
are signatory to agreements with the union, may the union use the job targeting fund as a means
of systematically excluding the plaintiffs and other similarly situated contractors entirely from
the market? Obviously, under the statutory exemption, a union may seek an absolute monopoly
of jobs for its members. However, it is doubtful that the statutory exemption applies here
- 43 -
because the job targeting fund, although unilaterally established by the union, is funded through
deductions from employee wages by contractors with whom the union has labor agreements.
Does this make the contractors witting or unwitting co-conspirators?
These are questions of antitrust standing because the plaintiffs are competitors and the
antitrust laws do not protect competitors so much as competition. Obviously, there are
substantial claims sounding like Pennington in this case, i.e., that Local 7 and its signatories have
conspired to use the job targeting funds to drive the plaintiffs out of business. Arguably,
however, the facts are different from Pennington. In this case, the union has not agreed with
union contractors that it will force the plaintiffs out of business through negotiating labor
agreements with signatory contractors that the plaintiffs cannot economically live with. In fact,
the defendant unions do not have agreements with the plaintiffs, and it is not clear that they have
any current organizational designs on the plaintiff employers. Thus, the court must still answer
whether what is permissible on a project-by-project basis is impermissible if it is shown that it is
part of a larger program to secure all the work in the relevant market for the union and its
co-conspirators.
Moreover, it is clear that Local 7 and its contractors could agree in a collective bargaining
agreement that in order to capture more work for employees covered by the agreement that
Local 7 would lower its labor costs on certain types of work and in certain areas. One has to ask
the legitimate question as to whether such an agreement would be deemed to be predatory under
Pennington or merely an attempt by the union to obtain work for which its members are not
currently competitive.
In short, it can be argued that the only reason the job targeting funds are not available to
the plaintiffs is because they are not signatory to agreements with the union. Obviously, the
lowering of wage rates in order to increase work opportunities for union members, even at the
expense of non-union employees and the resulting affect on their employers, is outside
- 44 -
Pennington. But may a union systematically use its members’ monies to subsidize employers
who would not ordinarily be able to obtain work from another group of employers absent the
subsidy? That is the question, and it is obviously too early to make any forecast here. The
propriety of job targeting programs and antitrust concerns about their use may well be revived by
the time this litigation works its way through the federal court system.
Lastly, there is the Davis-Bacon issue in this case that is the same as that currently before
the Board. Complaint at ¶ 58c. Whether the Board’s decision on this issue will have an impact
on this case and others like it is anybody’s guess, but I believe it will be a peripheral concern. It
should be recalled that simply because there is a violation of labor law does not mean that either
the appropriate exemption is lost or that loss of the exemption automatically translates into
antitrust liability.
IV. CONCLUSION
If you were hoping to obtain complete clarity on this issue, as the Second Circuit
observed in Clarrett, supra, that is not likely to happen. Application of the statutory and nonstatutory labor exemptions continues to challenge both labor and antitrust lawyers. Hopefully,
the foregoing has given you some contours of the current dimensions in labor and antitrust law.
As the landscape of our economy continues to change, there will be new and different
arrangements between employers and unions, and new and different tactics by unions acting
alone, which will call for an analysis of where the permissible boundaries of labor law end and
antitrust scrutiny and potential liability begin.
- 45 -