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WESTLAB INC. v. FREEDOMLAND

July 5, 1961

WESTLAB INC., Plaintiff,
v.
FREEDOMLAND, INC., Local 3, International Brotherhood of Electrical Workers, and Sound Systems, Inc., Defendants



The opinion of the court was delivered by: LEVET

The defendant Local 3, International Brotherhood of Electrical Workers (hereinafter 'Local 3'), moves, pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A., to dismiss the instant complaint on the grounds that this court lacks jurisdiction of the subject matter of the action and that the complaint fails to state a claim upon which relief can be granted.

Defendant Sound Systems, Inc. also moves to dismiss the complaint on the same grounds asserted by Local 3.

 This is an action to recover treble damages under Section 15 of Title 15 U.S.C.A. In its amended complaint, plaintiff alleges that on or obout December 11, 1959, defendant Freedomland, Inc. entered into a contract with plaintiff whereby plaintiff would design, engineer and supply all sound equipment for a recreation park to be constructed by said defendant; that between December 11, 1959 and January 12, 1960, Local 3 advised Freedomland that its members would not perform any work at Freedomland's recreation park of plaintiff were permitted to supply material for this project, since plaintiff did not employ members of Local 3; that defendants Freedomland, Local 3 and Sound Systems, Inc. unlawfully conspired and agreed in restraint of trade in interstate commerce to preclude plaintiff from supplying material for said recreation park and to cause Freedomland to boycott the plaintiff; that on or about January 12, 1960, pursuant to this conspiracy, Freedomland terminated its contract with plaintiff; that Local 3 and Sound Systems, having knowledge of Freedomland's contract with plaintiff, wrongfully induced Freedomland on January 12, 1960 to break its contract with plaintiff and to substitute therefor a contract with Sound Systems under which Sound Systems agreed to employ members of Local 3; that all these acts had the effect of restraining trade in interstate commerce; that as a direct result of the acts of Local 3 and Sound Systems, Freedomland broke its contract with plaintiff; that before said breach plaintiff duly performed all the conditions of said contract; and that plaintiff was damaged by said breach in the sum of $ 50,000. Plaintiff seeks judgment against the three defendants for treble damages in the amount of $ 150,000.

 Local 3 contends that Westlab's complaint as against Local 3 must be dismissed because; (1) the anti-trust laws cannot properly be invoked in this case against Local 3, a labor union, for its alleged conspiracy with the other defendants; (2) this court lacks jurisdiction over the subject matter because no facts are alleged which, if proved, would establish that the alleged conspiracy had the effect of restraining interstate commerce; (3) the anti-trust laws do not reach any acts by Local 3, a labor union, no facts having been alleged which, if proved, would establish that competition or prices were affected or were intended to be affected by such acts; and (4) the anti-trust laws do not affect any acts by Local 3, a labor union, there being no allegation of facts which, if proved, would establish that public injury resulted from such acts.

 In summary, the amended complaint alleges that Westlab had contracted with Freedomland to design, engineer and supply certain sound equipment for a recreation park being constructed by Freedomland. Freedomland, Local 3 (whose members were employed on other work at Freedomland's property), and Sound Systems, Inc. (a competitor of Westlab) are said to have conspired to preclude Westlab from supplying materials for Freedomland and to cause Freedomland to boycott plaintiff. As a result, Freedomland terminated Westlab's contract and entered instead into a similar contract with Sound Systems. Plaintiff charges that this conspiracy, agreement, boycott, etc., was in restraint of interstate commerce and constituted an attempt to control the market to the detriment of purchasers and consumers in interstate commerce and restricted the free flow of material, etc., in interstate commerce.

 Notwithstanding defendant Local 3's contentions, it appears that the complaint does allege a restraint of trade in interstate commerce; an effect on competition or prices, 'an attempt to control the market to the detriment of consumers * * *;' and resultant public injury 'to deprive purchasers and consumers of the advantage of free competition in interstate commerce.'

 The exemption afforded labor organizations from the federal anti-trust laws is contained in 15 U.S.C.A. 17, which 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, agricultural, or horticultural 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, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.'

 Thus, labor unions and their members are insulated from charged violations of the anti-trust laws predicated on the organization's pursuits of legitimate objects. United States v. Employing Lathers Ass'n, 7 Cir., 1954, 212 F.2d 726, 730. In that case, the Court of Appeals observed:

 '* * * The rule for its application was succinctly stated in Duplex Printing Press Co. v. Deering, 254 U.S. 443, 469, 41 S. Ct. 172, 177, 65 L. Ed. 349, wherein the court said: 'The section assumes the normal objects of a labor organization to be legitimate, and declares that nothing in the anti-trust laws shall be construed to forbid the existence and operation of such organizations or to forbid their members from lawfully carrying out their legitimate objects; and that such an organization shall not be held in itself -- merely because of its existence and operation -- to be an illegal combination or conspiracy in restraint of trade. But there is nothing in the section to exempt such an organization or its members from accountability where it or they depart from its normal and legitimate objects and engage in an actual combination or conspiracy in restraint of trade. And by no fair or permissible construction can it be taken as authorizing any activity otherwise unlawful, or enabling a normally lawful organization to become a cloak for an illegal combination or conspiracy in restraint of trade as defined by the anti-trust laws.' See United States v. Carrozzo, D.C., 37 F.Supp. 191, affirmed United States v. International Hod Carriers, etc., 313 U.S. 539, 61 S. Ct. 839, 85 L. Ed. 1508; Leader v. Apex Hosiery Co., 3 Cir., 108 F.2d 71, affirmed 310 U.S. 469, 60 S. Ct. 982, 84 L. Ed. 1311.'

 Again, in Adams Dairy Company v. St. Louis Dairy Company, 8 Cir., 1958, 260 F.2d 46, 54-55, Circuit Judge Matthes wrote:

 'Unions, however, do not enjoy a blanket immunity to liability under the antitrust laws. As stated, if the evidence discloses that a labor organization has acted in conjunction with other business groups for the purpose of securing ends prohibited by the Sherman Act, and was not primarily motivated by labor goals, the union may be liable to private parties, or injunctions may be issued. The union's liability ultimately depends on the facts * * *.'

 In an analogous setting, United States v. Fish Smokers Trade Council, Inc., D.C.S.D.N.Y.1960, 183 F.Supp. 227, 236, Chief Judge Ryan of this court stated:

 'The Clayton and Norris-LaGuardia Acts, raised as a shield by defendants for their otherwise unlawful activities, cannot avail them here. By their very language, these Acts are limited to the pursuit of legitimate objects of labor and labor disputes affecting the employer-employee relationship for the purpose of mutual help, which language encompasses neither disputes over the sales of commodities nor employer help in controlling market and price. Columbia River Rackers Ass'n v. Hinton, 315 U.S. 143, 62 ...


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