Opinion
CIVIL ACTION NO. 04-12536-RGS.
June 17, 2009
MEMORANDUM AND ORDER SETTING DATE FOR TRIAL
BACKGROUND
On December 2, 2004, five non-union New England area steel erection contractors — American Steel Erectors, Inc., Ajax Construction Co., American Aerial Services, Inc., Bedford Ironworks, Inc., and D.F.M. Industries, Inc. (Steel Erector Plaintiffs) — brought suit against Local Union No. 7 of the International Association of Bridge, Structural, Ornamental Reinforcing Iron Workers (Local 7), alleging violations of sections 1 and 2 of the Sherman Antitrust Act, and section 303(a) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 187. The Complaint also asserted state-law claims of tortious interference with contractual and economic relations and violations of the Massachusetts Unfair Business Practices Act, Mass. Gen. Laws ch. 93A.
A sixth plaintiff originally named in the Complaint, Ronald Beauregard d/b/a/ Independent Welding, voluntarily withdrew from the case on February 13, 2006.
Charles Wright, Local 7's former President and its current business agent, and the Steel Erection and Ornamental Iron Industry Advancement Fund (Fund), were also originally named as defendants. The Steel Erector Plaintiffs voluntarily dismissed the Fund on March 29, 2005. Wright's motion to dismiss was granted by the court on June 10, 2005. See Montplaisir v. Leighton, 875 F.2d 1, 4 (1st Cir. 1989).
Section 1 of the Sherman Act declares illegal any contract, combination or conspiracy in restraint of trade or commerce. Section 2 punishes the monopolization of "any part of the trade or commerce among the several states." 15 U.S.C. §§ 1 and 2.
The antitrust claims involve a not uncommon stratagem in the highly competitive and imperfectly organized world of the construction trades — the use by a union of membership dues to subsidize unionized employers who agree to hire union workers at union scale wages. In the early 1990's, Local 7 launched a job targeting program, packaged as a "Market Recovery Program" (MRP), intended to win back business lost by its collective bargaining partners to lower wage non-union contractors. The MRP offered to selected contractors willing to enter a Collective Bargaining Agreement (CBA) with Local 7 a subsidy to offset the higher wages of Local 7 laborers. The subsidy was financed by dues withheld by the cooperating employers from the wages of Local 7 members. The MRP was ratified by a vote of Local 7 members and incorporated into Local 7's by-laws in 1992.
The job targeting program was not unique to Local 7, but had been conceived as part of a national labor union strategy to stanch the flow of jobs to non-union shops.
In November of 1993, Local 7 and the Building Trades Employers' Association of Boston and Eastern Massachusetts (BTEA), a multi-employer bargaining unit, agreed to incorporate the dues levy into the master CBA. Section 9 of the 2000-2006 CBA provided that "the Working Dues Deduction of two percent (2%) of the total package plus .85 for a Market Recovery Program and .03 for the Political Action League will be withheld out of net pay for each and every hour paid." The deductions were paid directly to Local 7, which deposited them into the Fund. The Fund then distributed the subsidies to BTEA employers who submitted successful bids on the targeted projects. The Steel Erector Plaintiffs came up on the losing side of many of the bids.
The Complaint alleges a conspiracy among Local 7 and BTEA members to monopolize the structural steel market in the greater Boston area by means of unlawful anticompetitive practices. The Complaint alleges that Local 7 illegally assesses Fund contributions from workers employed on federally-funded construction projects in violation of the Davis-Bacon Act. Further, the Complaint alleges that Local 7 uses threats, vandalism, the stripping of employees, and illegal picketing, as well as MRP subsidies, to pressure and induce fabricators, developers, owners, and general contractors into breaching contracts with the Steel Erector Plaintiffs and replacing them with BTEA members.
The Davis-Bacon Act requires contractors working on federally-funded projects to pay workers no less than the "prevailing wage" (as determined by the Secretary of Labor). 40 U.S.C. §§ 3141- 3144. The Act also bars the refunding of any portion of a worker's Davis-Bacon wages as a "kickback" to an employer "regardless of any contractual relationship." 40 U.S.C. § 3142(c)(1).
More specifically, the Steel Erector Plaintiffs allege a violation of "Section 303(a) [of the LMRA which] makes it unlawful for a labor organization to engage in conduct defined as an unfair labor practice under § 8(b)(4) of the NLRA." American Steel Erectors, Inc. v. Local Union No. 7, Int'l. Ass'n of Bridge, Structural, Ornamental Reinforcing Iron Workers, 536 F.3d 68, 82 (1st Cir. 2008) (hereafter American Steel Erectors), quoting Summit Valley Indus., Inc. v. Local 112, United Bhd. of Carpenters Joiners of Am., 456 U.S. 717, 722 (1982).
Local 7 moved initially to dismiss plaintiffs' state-law claims, arguing that they were preempted by section 7 of the National Labor Relations Act (NLRA). The court agreed, and on February 6, 2006, in an unpublished opinion, allowed the motion to dismiss. See American Steel Erectors, Inc. v. Local Union No. 7, 2006 WL 300422 (D. Mass. 2006). After discovery, Local 7 filed a motion seeking summary judgment on plaintiffs' federal claims. On March 30, 2007, the court allowed the motion. In so doing, the court held that Local 7's MRP-related activities fell within the statutory labor exemption to the antitrust laws. The court did not rule on the possible application of the non-statutory exemption. American Steel Erectors, Inc. v. Local Union No. 7, Int'l. Ass'n of Bridge, Structural, Ornamental Reinforcing Iron Workers, 480 F. Supp. 2d 471, 478 n. 15 (D. Mass. 2007) (hereafter American Steel). The court finally held that the Steel Erector Plaintiffs lacked standing to pursue a Davis-Bacon Act violation, and moreover, that no cause of action under the Davis-Bacon Act had been viably plead. Id. at 477.
Two exemptions affecting organized labor, one statutory and the other non-statutory, have been carved out of the antitrust laws to balance the competing federal policies promoting syndicalism on the one hand, and business competition on the other. See H.A. Artists Assocs., Inc. v. Actors' Equity Ass'n, 451 U.S. 704, 713 (1981). In commenting on the statutory exemption, the Supreme Court has observed that union activity is protected from antitrust enforcement "[s]o long as [the] union acts in its self-interest and does not combine with non-labor groups" to directly or indirectly to promote the commercial interests of non-union actors. United States v. Hutcheson, 312 U.S. 219, 232 (1941). The "limited" non-statutory exemption accommodates legitimate collective bargaining activity. See Connell Constr. Co., Inc. v. Plumbers Steamfitters Local Union No. 100, 421 U.S. 616, 622 (1975). The anti-competitive conduct protected by the non-statutory exemption concerns only the parties to a collective bargaining relationship, and relates to wages, hours, conditions of employment, and other mandatory subjects of collective bargaining. Brown v. Pro Football, Inc., 518 U.S. 231, 250 (1996).
The Steel Erector Plaintiffs appealed. The Court of Appeals, in a very focused opinion, affirmed in part and reversed in part. Of immediate import, the Court of Appeals held that Local 7's MRP activity was not protected by the statutory antitrust exemption. American Steel Erectors, 536 F.3d at 79. The Court of Appeals termed it a "thin fiction" that the MRP did not represent a combination between labor and non-labor groups, noting the dues deduction language inserted in the CBA obligating employers to collect monies for the Fund on Local 7's behalf. The Court of Appeals then turned to the non-statutory exemption.
Other circuits have found that job targeting programs, similar in structure and implementation to the program at issue here, do fall within the bailiwick of the nonstatutory exemption. See Phoenix Elec. Co., 81 F.3d at 863 ("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 antitrust laws.);. . . . But Plaintiffs' allegations do not relate only to the MRP; rather, they paint the MRP as only one part-if the central part-of a wider conspiracy between Local 7, its signatory contractors, and the general contractors and steel fabricators from which they solicit steel erection work, to shut open-shop outfits such as Plaintiffs out of the steel erection market in the greater Boston area.Id. at 79-80.
Finding sufficiently disputed issues of material fact over the manner in which Local 7 implemented (and enforced) the MRP, the Court of Appeals remanded the dispute for "further fact-finding" in order to "determine whether Local 7 was protected from antitrust liability by the non-statutory exemption." Id. at 81. On the Davis-Bacon Act issue, the Court of Appeals agreed with the district court that while the MRP may "very well violate" the Act, a violation would not necessarily expose "an otherwise exempt job targeting program to antitrust liability." Id.
The Court of Appeals similarly held that plaintiffs had failed to plead a Davis-Bacon cause of action and, in any event, had no standing to do so. The Court of Appeals also agreed with the district court with respect to the state-law claims noting that
[p]laintiffs have not pled allegations that sufficiently implicate interests "so deeply rooted in local feeling and responsibility" or of "peripheral or collateral concern" to federal labor laws so as to except them from federal pre-emption. [footnote omitted]. Local 7's conduct may be prohibited rather than protected by the NLRA, but either way it is well within the regulatory purview of federal labor law rather than that of state police power.American Steel Erectors, 536 F.3d at 85.
With respect to the LMRA unfair labor practices claims, the district court had held that Local 7's job targeting subsidy did not amount to a "coercive restraint or tactic" in violation of federal law. American Steel, 480 F. Supp. 2d at 478. Criticizing the district court for giving short (or no) shrift to the Steel Erector Plaintiffs' claims of concerted action extending beyond the expenditure of job targeting funds, the Court of Appeals made note of the broader net cast by section 303 of the LMRA. Section 303 proscribes conduct undertaken by labor organizations in violation of section 8(b)(4) of the NLRA. As the Court of Appeals pointed out,
under section 8(b)(4)(ii), it is an unfair labor practice for a union to threaten, coerce, or restrain an employer with an object of forcing the employer (A) to join any labor or employer organization or enter into an agreement prohibited by § 8(e) of the NLRA, or (B) to cease doing business with another party.American Steel Erectors, 536 F.3d at 82 (footnote omitted). It then explained the difference between a section 8(b)(4)(ii)(A) and a section 8(b)(4)(ii)(B) claim: "[A] successful § 8(b)(4)(ii)(A) claim requires proof that a union is acting to coerce employers into an unlawful agreement to cease doing business with another party, while a successful § 8(b)(4)(ii)(B) claim requires proof that the union's coercive tactics are intended to force an employer to cease doing business with another party, regardless of any agreement." Id. (footnote omitted). Although the district court had not read the Complaint to allege a section 8(b)(4)(ii)(B) violation, the Court of Appeals disagreed. Id. Nonetheless, the Court found that plaintiffs had waived the section 8(b)(4)(ii)(B) claim by focusing solely on the (A) provision in its arguments before the district court and on appeal. Id. at 83. The Court, however, reversed the district court's implied grant of summary judgment on the section 8(b)(4)(ii)(A) claims. Id. at 84.
On January 27, 2009, after the mandate issued, Local 7 renewed its motion for summary judgment on the antitrust claims. In doing so, Local 7 waived any reliance on the non-statutory antitrust exemption, instead arguing that its conduct had no anti-competitive effects because: (1) members of the BTEA compete with one another as well as with non-union contractors; (2) the bids of BTEA members had not been shown to be below cost to satisfy the requirements of predatory pricing; and (3) Local 7 could not achieve true monopoly power in the steel erection industry as it is not a steel erection contractor but a mere supplier of labor to the steel erection industry. The Steel Erector Plaintiffs, for their part, repeated the same conspiracy and coercion arguments that they had advanced in opposing Local 7's original motion for summary judgment as well as recapitulating the Davis-Bacon Act argument (despite its having been rejected by the Court of Appeals).
A plaintiff "seeking to establish competitive injury resulting from a rival's low prices must prove [as a prerequisite] that the prices complained of are below an appropriate measure of its rival's costs." Brooke Group Ltd. v. Brown Williamson Tobacco Corp., 509 U.S. 209, 222 (1993). See Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 117 (1986); Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 n. 8 (1986). A plaintiff seeking to establish predatory pricing must also demonstrate that its "competitor had . . . a dangerous probability[] of recouping its investment in below-cost prices" for, without recoupment, "predatory pricing produces lower aggregate prices in the market, and consumer welfare is enhance."Brooke Group Ltd., 509 U.S. at 224. See also Matsushita, 475 U.S. at 588-589. Local 7 argues that while the award of target funds may have reduced costs for members of the BTEA, bids made by BTEA members are not below their costs. Morever, Local 7 contends that even if "below-cost" bidding could be shown by Steel Erector Plaintiffs, the highly competitive nature of the industry and the low barriers of entry make recoupment of such costs unlikely.
Local 7 points out that as a supplier it only has a vertical agreement with the steel erection contractors.
As the court observed at oral argument on the renewed summary judgment motion, there are two routes this case can now take. The first involves a return to discovery "for further fact-finding with regard to the extent of the collaboration between Local 7, signatory contractors, and the construction companies that hire them, to determine whether Local 7 is protected from antitrust liability by the nonstatutory exemption," as the First Circuit indicated was necessary. American Steel Erectors, 536 F.3d at 81. Following this path will result in protracted delay in resolving this five-year-old case as the parties wade through the additional discovery, a third round of summary judgment, and a likely further appeal. In the alternative, the case can proceed to trial on the labor law issue identified by the Court of Appeals as ripe for jury resolution (the section 8(b)(4)(ii)(A) claim). Expeditious resolution of this claim would, in the judgment of the court, serve as a springboard for a global resolution of the case.
Plaintiffs express concern that proceeding separately on the LMRA and antitrust claims will mean that two different juries will have to hear the same evidence and the same expert testimony. The concern is misplaced. Plaintiffs themselves note that their antitrust and labor law claims "match up."
Given evidence of Local 7's collaboration with signatory employers in identifying projects (e.g., "blast faxes"), subsidizing their bids (job target contracts), threats to fabricators to breach contracts (e.g., Fox 25 (Brickworks), meetings with fabricators, and threats to fabricators outside a formal collective bargaining relationship, that result in bars to business with plaintiffs under § 8(b)(4)(ii)(A) (e.g., Fox 25, Brickworks; see Connell), then these collaborative activities are predicate facts for finding Sherman Act violations. A second trial would by necessity force a repeat of the same testimonial evidence for finding a violation of Section 8(b)(4)(ii)(A), thereby lifting the nonstatutory antitrust exemption, and thus showing a prima facie Section 1 violation.
Reading the cases cited by plaintiffs as compelling the joint trial of the claims, I find no "directive" suggesting that the claims "should always be heard together," as plaintiffs contend.See, e.g., Altemose Constr. Co. v. Bldg. and Constr. Trades Council of Philadelphia Vicinity, 751 F.2d 653 (3d Cir. 1985). The other opinion cited from a Circuit Court for the proposition,Consol. Express, Inc. v. New York Shipping Ass'n, Inc., 602 F.2d 494 (3d Cir. 1979), has been vacated by the Supreme Court. See Int'l Longshoremen's Ass'n, AFL-CIO v. Consol. Express, Inc., 448 U.S. 902 (1980).
Plaintiffs' May 14, 2009 Response, at 4, citing Connell, 421 U.S. at 634. (The Court of Appeals saw the case no differently, noting that the factual disputes underlying both the labor law and the antitrust claims were "the same." American Steel Erectors, 536 F.3d at 83.) While plaintiffs' concerns are seriously taken, given the conceded identicality of the issues, they can be readily addressed by carefully-crafted special verdict questions conclusively determining the factual issues underpinning both claims. Finally, the non-statutory antitrust exemption that plaintiffs fear will result in duplicative proceedings has been waived by Local 7, and under the law of the case doctrine, is no longer before the court.
Plaintiffs make a valid point with regard to damages. While the measure of actual damages is the same under both the labor law and antitrust claims, the antitrust laws permit a trebling of damages, which the LMRA does not. There is also the ubiquitous issue of attorneys' fees, which are available under the antitrust laws but not the LMRA. See Local 20, Teamsters, Chauffeurs and Helpers Union v. Morton, 377 U.S. 252, 261 n. 16 (1964). If plaintiffs prevail on the labor law claims, it may be necessary to try damages aspects of the antitrust claim separately if the case cannot otherwise be settled. This task, however, will be greatly simplified by the issue preclusion effects of the jury's answers to the special verdict questions in the trial of the labor law claim.
In any event, it is somewhat difficult to see how the range of alleged concerted activity involving Local 7 and the union employers could be described as a "mandatory subject" of collective bargaining, Brown, 518 U.S. at 250, or as having only tangential business market effects, Clarett v. Nat'l Football League, 369 F.3d 124, 134 n. 14 (2nd Cir. 2004), as the non-statutory exemption requires.
ORDER
For the foregoing reasons, the court will set the case for trial before a jury on the section 8(b)(4)(ii)(A) claims to begin at 9:00 a.m., Monday, August 24, 2009. An order for a pretrial conference will be issued by the Clerk in due course.SO ORDERED.