The opinion of the court was delivered by: GRIESA
This is the final stage of litigation in these two consolidated cases involving National Maritime Union of America ("NMU"), Commerce Tankers Corporation, and Vantage Steamship Corp. The remaining matters to be covered relate to the counterclaims of Commerce against NMU in 71 Civ. 582 and the claims of Vantage against NMU in 72 Civ. 4619. These matters have been tried by the court without a jury. This decision constitutes findings of fact and conclusions of law.
This litigation grows out of an attempt by Commerce to sell its ship, the S.S. Barbara, to Vantage pursuant to a contract of sale dated December 23, 1970. The contract price was $2,750,000. At the time of this contract of sale, Commerce had a collective bargaining agreement with NMU covering the unlicensed personnel on Commerce's vessels. Article I, Section 2 of this collective bargaining agreement provided that if the employer sold any of its ships to a buyer who would operate under the United States flag, the ship should be sold with the complement of NMU employees, and that the employer would obtain from the buyer an undertaking that the NMU collective bargaining agreement would apply to the vessel.
Article I, Section 2 will sometimes be referred to as the "restraint on transfer clause."
The problem created by the proposed sale of the S.S. Barbara to Vantage was that Vantage's collective bargaining agreement for unlicensed seaman was with NMU's rival organization -- Seafarer's International Union ("SIU"). Vantage did not intend to man the S.S. Barbara with NMU members, nor did Vantage give Commerce any undertaking that it would do so.
After learning of the proposed sale, NMU demanded enforcement of the restraint on transfer clause by way of arbitration, which was held before Arbitrator Theodore Kheel in New York City on February 8, 1971. The arbitrator found in favor of NMU and ordered that Commerce not transfer the S.S. Barbara to Vantage or any other purchaser without complying with the clause.
On February 9, 1971 the first of the actions in this court, 71 Civ. 582, was commenced by NMU against Commerce to obtain enforcement of Arbitrator Kheel's decision.
Vantage was thereafter permitted to intervene in this action. On March 2, 1971 Judge Frankel handed down a decision holding that a preliminary injunction should issue restraining the transfer of the S.S. Barbara in violation of the restraint on transfer clause. National Maritime Union v. Commerce Tankers Corp., 325 F. Supp. 360 (S.D.N.Y. 1971). The preliminary injunction was signed March 4, 1971. NMU was required to post a bond of $10,000. Commerce and Vantage appealed.
On May 24, 1971 the New York Regional Director of the National Labor Relations Board issued a complaint against NMU charging that the restraint on transfer clause in the Commerce-NMU collective bargaining agreement violated Section 8(e) of the National Labor Relations Act, 29 U.S.C. § 158(e). On the same day the NLRB filed a petition in this court (71 Civ. 2300) asking for a preliminary injunction under Section 10(l) of the National Labor Relations Act, 29 U.S.C. § 160(l). The NLRB filed an amended petition on June 1 adding Commerce as a respondent.
On May 27, Commerce filed a motion in the District Court to vacate Judge Frankel's preliminary injunction in view of the NLRB charges.
Both the NLRB's § 10(l) motion in 71 Civ. 2300 and Commerce's motion to vacate in 71 Civ. 582 were heard by Judge Croake on June 4, 1971. On July 15 Judge Croake issued a decision denying both motions. McLeod v. National Maritime Union, 329 F. Supp. 151 (S.D.N.Y. 1971). Appeals were taken.
On March 22, 1972 the Second Circuit Court of Appeals reversed the rulings of Judges Frankel and Croake, holding that there was reasonable cause to believe that Article I, Section 2 of the NMU-Commerce collective bargaining agreement involved an unfair labor practice and that therefore a Section 10(l) injunction should issue. The Court of Appeals also held that, because of the filing of the NLRB complaint subsequent to Judge Frankel's preliminary injunction, that injunction should be vacated. National Maritime Union v. Commerce Tankers Corp., 457 F.2d 1127 (2d Cir. 1972).
Unfortunately, by this time the proposal to transfer the S.S. Barbara to Vantage was dead, for reasons to be described hereafter. On May 1, 1972 Commerce sold the Barbara to Plaza Shipping, Inc. (an NMU contract company) for a greatly reduced price -- $700,000.
Meanwhile, the unfair labor practice matter had been proceeding in the NLRB. On September 2, 1971 NLRB Trial Examiner Thomas F. Ricci filed a decision recommending dismissal of the complaint. On May 16, 1972 the Board issued its decision, reversing the trial examiner, and holding that Article I, Section 2 of the NMU-Commerce agreement was invalid because it violated Section 8(e) of the National Labor Relations Act. Upon the NLRB's petition for enforcement, in which Vantage intervened in support of the NLRB, the Court of Appeals (opinion of Judge Feinberg joined by Judges Lumbard and Friendly) upheld the NLRB's ruling. NLRB v. National Maritime Union, 486 F.2d 907 (2d Cir. 1973), cert. denied, 416 U.S. 970, 94 S. Ct. 1993, 40 L. Ed. 2d 559 (1974).
It is appropriate here to discuss this decision in some detail. Section 8(e) provides:
"(e) It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, transporting or otherwise dealing in any of the products of any other employer, or to cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent unenforceable and void: . ."
The Court noted that Section 8(e) does not "shimmer with clarity" and that the question presented was "difficult to decide." Id. at 910, 911. The Court further noted that the primary purpose of Section 8(e) was to curb certain "secondary" labor activities. NMU argued that Article I, Section 2 was proper because it had the "primary" labor objective of preserving work for its members vis-a-vis Commerce and other NMU employers. However, the Court of Appeals held that the contractual clause went beyond "work preservation," and had an illegal secondary purpose of expanding NMU jurisdiction to non-NMU employers such as Vantage.
Concurrently with these proceedings in the federal courts and the NLRB, there was an arbitration and a state court proceeding involving Commerce and Vantage.
On February 10, 1971 Commerce demanded arbitration against Vantage on the December 23, 1970 contract of sale, claiming damages for breach of contract. On March 29, 1971, in an action in Supreme Court, New York County, Justice Streit ordered arbitration. The arbitration commenced May 12. On July 9, the arbitrators awarded Commerce damages measured by the amount of the contract price for the S.S. Barbara -- $2,750,000, plus other damages in the amount of $133,264, less the net proceeds to be realized upon the resale of the S.S. Barbara.
As already described, Commerce sold the Barbara to Plaza Shipping, Inc. on May 1, 1972 for $700,000.
On November 20, 1972 Justice Abraham J. Gellinoff issued a decision confirming the arbitration award. This was affirmed by the Appellate Division, First Department, on April 5, 1973. Vantage Steamship Corp. v. Commerce Tankers Corporation, 41 A.D.2d 813, 342 N.Y.S.2d 281 (1st Dept. 1973).
On October 30, 1972 Vantage commenced an action in this court (72 Civ. 4619) against NMU and Commerce. Among other things, Vantage alleged that NMU and Commerce had been guilty of an unfair labor practice and had violated Section 1 of the Sherman Act. This is one of the cases being dealt with in the present opinion.
On May 31, 1973 Vantage and Commerce concluded a settlement of all disputes between these parties. Vantage agreed to pay Commerce $700,000 in installments over a period of time. Commerce and Vantage exchanged releases in which there were express reservations of rights against NMU.
The net result of all these proceedings is that there remain for determination Commerce's claim against NMU for damages in 71 Civ. 582 and Vantage's claim against NMU for damages in 72 Civ. 4619.
Contentions of Commerce and Vantage
Commerce and Vantage claim that NMU is liable for damages under Section 303 of the Labor Management Relations Act, 29 U.S.C. § 187, which provides:
"§ 187. Unlawful activities or conduct; right to sue; jurisdiction; limitations; damages
"(a) It shall be unlawful, for the purpose of this section only, in an industry or activity affecting commerce, for any labor organization to engage in any activity or conduct defined as an unfair labor practice in section 158(b)(4) of this title.
"(b) Whoever shall be injured in his business or property by reason or any violation of subsection (a) of this section may sue therefor in any district court of the United States subject to the limitations and provisions of section 185 of this title without respect to the amount in controversy, or in any other court having jurisdiction of the parties, and shall recover the damages by him sustained and the cost of the suit."
Section 303 authorizes a suit for damages where there has been a violation of Section 8(b)(4) of the National Labor Relations Act, 29 U.S.C. § 158(b)(4). The relevant passages in Section 8(b)(4) are as follows:
"(b) It shall be an unfair labor practice for a labor organization or its agents --
"(4) . . . (ii) to threaten, coerce, or restrain any person engaged in commerce or in an industry affecting commerce, where in either case an object thereof is --
"(A) forcing or requiring any employer or self-employed person to join any labor or employer organization or to enter into any agreement which is prohibited by subsection (e) of this section;
"(B) forcing or requiring any person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor, or manufacturer, or to cease doing business with any other person, . . ."
The references to "subsection (e) of this section" is the Section 8(e) which was found to have been violated by the Court of Appeals in its opinion in the NLRB proceeding. 486 F.2d 907. As already described, that court held that Article I, Section 2 of the NMU-Commerce agreement was a violation of Section 8(e). However, the mere making of a contract which violates Section 8(e) does not in and of itself give rise to a cause of action for damages.
It is only where the added elements of Section 8(b)(4) are found to exist that a cause of action for damages accrues. For instance, the latter section would be violated where a labor union threatens, coerces or restrains an employer with the object of forcing or requiring the employer to enter into the Section 8(e) agreement. Similarly, Section 8(b)(4) would be violated if a labor union threatens, coerces or restrains an employer in order to force or require him to cease doing business with another party.
Commerce and Vantage claim that NMU violated Section 8(b)(4) in that (1) NMU coerced Commerce into entering into the collective bargaining agreement containing the Article I, Section 2 provision which violated Section 8(e); (2) that NMU coerced Commerce, and forced Commerce to cease doing business with Vantage, and forced a prospective charterer to cease doing business with Vantage -- such coercion and force being the strike threat contained in Article I, Section 2; (3) NMU restrained Commerce, and forced Commerce to cease doing business with Vantage, by obtaining the preliminary injunction from Judge Frankel.
Commerce and Vantage further contend that NMU is liable under Section 1 of the Sherman Act. In the first place, Commerce and Vantage urge that there is no labor law exemption from antitrust liability here, citing Connell Construction Co. v. Plumbers and Steamfitters Local Union No. 100, 421 U.S. 616, 95 S. Ct. 1830, 44 L. Ed. 2d 418 (1975). Vantage and Commerce then contend that NMU has Sherman Act Section 1 liability on the following related but somewhat different theories: (1) That the restraint on transfer clause involved a group boycott against certain potential purchasers of vessels and therefore constituted a per se violation; and (2) that the sale and transfer clause was the result of a combination or conspiracy between NMU and large shipping companies to enhance their competitive and financial position at the expense of smaller companies such as Commerce.
Commerce and Vantage also rely upon certain common law theories. They contend that NMU wrongfully induced the breach of the contract between Commerce and Vantage for the sale of the S.S. Barbara. Commerce and Vantage also contend that NMU is liable for obtaining a "wrongful injunction" -- i. e., the preliminary injunction issued by Judge Frankel.
Vantage claims that Article I, Section 2 violated New York General Business Law § 340, known as the Donnelly Anti-Trust Act.
The amounts of damages (before any trebling based upon the Sherman Act theory) are claimed to be as follows. Commerce claims that it is entitled to a total of $1,550,000, calculated by taking the contract price for the S.S. Barbara ($2,750,000) and subtracting the amount realized upon the resale to another purchaser ($700,000) and further subtracting the amount received from Vantage in the settlement ($700,000), giving a net total of $1,350,000, to which is added the costs of holding the S.S. Barbara after it was supposed to have been delivered to Vantage ($200,000). Vantage claims a total of $2,230,000, consisting of loss of profits on a charter it had for the S.S. Barbara with Standard Oil of California -- the alleged profits being $1,500,000; amounts invested by Vantage in repair of the S.S. Barbara ($30,000); and the amount paid to Commerce in the settlement ($700,000).
NMU denies the validity of each of the above theories. In addition NMU asserts certain affirmative contentions. NMU urges that the only action it took to enforce Article I, Section 2 was to obtain an arbitration award, and then sue in this court to enforce that award. NMU contends that it was the preliminary injunction of Judge Frankel in this lawsuit which prevented the consummation of the sale of the S.S. Barbara to Vantage and the fulfillment of the charter which Vantage had obtained for the vessel. NMU argues that Commerce and Vantage did not pursue available remedies in the Court of Appeals in a timely or appropriate manner. NMU contends that its liability, if any, is limited to the amount of the $10,000 bond posted for the preliminary injunction.
NMU also urges that the settlement of the mutual claims of Commerce and Vantage operates as a bar to any recovery by either of these parties against NMU.
Background of Article I, Section 2
A substantial part of the evidence in this case relates to the contention of Commerce and Vantage that the restraint on transfer clause (Article I, Section 2) of the NMU-Commerce collective bargaining agreement was the result of a joint effort by larger shipping ...