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January 26, 1979

In the Matter of the Application of BULLARD CONTRACTING CORPORATION, Petitioner-Respondent, For a Judgment Permanently Staying the Arbitration Commenced by Laborers' International Union of North America, Local Union No. 91, Respondent-Petitioner

The opinion of the court was delivered by: CURTIN

Bullard Contracting Corporation ("Bullard"), upon being advised of the pending arbitration of two grievances filed by Laborers' International Union of North America, Local Union No. 91 ("Local 91"), instituted a proceeding in New York State Supreme Court, Erie County, for a stay of that arbitration. Bullard's petition alleged that the subcontracting clause which Local 91 sought to enforce in the arbitration proceeding was illegal and, thus, unenforceable because it violated the Sherman Antitrust Act. The action was removed to this court by Local 91 and Local 91 subsequently has made a motion for an order denying Bullard's application for a stay of arbitration.

The facts in this case are straightforward. Bullard is a general contractor that specializes in the construction of sanitary sewers and water lines. In the operation of its business, Bullard annually purchases and receives goods valued in excess of $ 50,000 from suppliers located in states other than New York. Prior to June 1, 1978, it had been a signatory to a collective bargaining agreement between Local 91 and the Building Industry Employers' Association of Niagara County, although not a member of that association. When that agreement expired, Bullard entered into an interim agreement with Local 91 on June 1, 1978 in which Bullard agreed to become a signatory to the collective bargaining agreement ("Agreement") entered into between Local 91 and the Council of Utility Contractors, Inc.

This Agreement contains comprehensive provisions governing wages, hours, terms and conditions of employment, fringe benefits, and procedures for adjusting grievances. Article VI of the Agreement, Conditions of Employment, contains a subcontracting provision requiring all signatories of the Agreement to obtain compliance with all the terms of the Agreement from any subcontractors to whom it subcontracts. *fn1" One such term is the union security clause of Article VI which requires contractors to recognize the union as sole bargaining agent and requires membership in the union by employees after seven days as a condition of employment. *fn2" On August 14, 1978, Local 91 served Bullard with two notices claiming that Bullard had violated the subcontracting clause of the Agreement on two separate occasions.

 The first of these incidents concerned a contract Bullard made with Milhurst Construction, Inc. on or about July 6, 1978, for construction work on a sanitary sewer project on Rapids Road, Lockport, for the Town of Lockport Sewer District No. 3. Milhurst is a non-union contractor. The second alleged violation of the Agreement occurred when Bullard contracted with Ronald Coulsen to perform certain sewer excavation work on Ernest Road in the City of Lockport. Ronald Coulsen is non-union and employs only himself and his son. At no time were employees of Milhurst or Coulsen members of Local 91. Local 91 filed grievances with respect to both of these subcontracts. *fn3"

 Bullard argues that enforcement of the Agreement through arbitration should be enjoined because it violates the antitrust laws. *fn4" In its argument that the subcontracting clause violates the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, Bullard relies heavily on Connell Construction Co., Inc. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 95 S. Ct. 1830, 44 L. Ed. 2d 418 (1975). Local 91 contends that Connell is distinguishable and does not preclude enforcement of the subcontracting clause in question here.

 The facts of Connell are simple. The union in that case picketed a number of general contractors in the Dallas area with the sole purpose of obtaining from such contractors an agreement that, in making subcontracts for the performance of mechanical work, each contractor would deal only with firms that were parties to Local 100's current collective bargaining agreement with mechanical subcontractors. Local 100 had no contract with Connell, one of the general contractors which it picketed, nor did it wish to represent Connell's employees. The purpose was to assist Local 100 in its efforts to organize the mechanical subcontractors in the Dallas area. Connell eventually gave in to the picketing and signed a subcontracting agreement with Local 100. Connell then sought a judicial declaration that that agreement was an illegal restraint on competition in violation of the Sherman Act. Local 100 contended that the agreement it obtained from Connell was exempt from antitrust sanctions and also allowed by the construction-industry proviso to § 8(e) of the National Labor Relations Act, 29 U.S.C. § 158(e).

 The Supreme Court held that the agreement

which is outside the context of a collective-bargaining relationship and not restricted to a particular jobsite, but which nonetheless obligates Connell to subcontract work only to firms that have a contract with Local 100, may be the basis of a federal antitrust suit because it has a potential for restraining competition in the business market in ways that would not follow naturally from elimination of competition over wages and working conditions.

 Connell, supra, 421 U.S. at 635, 95 S. Ct. at 1841. The construction-industry proviso of § 8(e), in the absence of a collective-bargaining relationship, did not immunize the subcontracting agreement from the reach of the Sherman Act.

 Local 91 argues that the presence of a collective-bargaining relationship between it and Bullard distinguishes this case from Connell. This court agrees.

 Bullard's petition points out with some precision the tension between the federal antitrust policy of promoting competition and the federal labor policy of encouraging collective bargaining between employees and employer. The combined effect of the subcontracting clause and the union security clause in the Agreement does require Bullard to subcontract only with subcontractors who agree to recognize Local 91 and whose employees join the union within seven days. The federal labor policy expressed in the construction-industry proviso of § 8(e) saves this provision from the general prohibition against secondary union activity. *fn5" In enacting this proviso Congress recognized the legitimate interest of a union in negotiating a subcontracting provision which would permit an employer to subcontract work to be performed at a construction site only to subcontractors who are signatory to contracts either with a particular union or with an appropriate union. Such a provision was recognized as a means of avoiding conflicts between union and non-union workers at a construction site and as a means of preserving work for union members. See Connell, supra, 421 U.S. at 629-30, 95 S. Ct. 1830; Orange Belt District Council of Painters No. 48 v. Maloney Specialties, Inc., et al., No. CV 77-3033-WP6 (C.D.Cal. June 1, 1978) (unreported decision); Carpenters Local No. 944 v. Woelke & Romero Framing, Inc., 239 NLRB No. 40 (November 13, 1978). See also Note, The Supreme Court, 1974 Term, 89 Harv.L.Rev. 47, 234, 243-45 (1975).

 The holding in Connell that the union's activity in that case could constitute an antitrust violation does not preclude the applicability of the § 8(e) proviso to the facts of this case. In examining the scope of the § 8(e) proviso as it relates to the federal antitrust policy, the Supreme Court held in Connell that its authorization

extends only to agreements in the context of collective-bargaining relationships and, in light of congressional references to the Denver Building Trades, (341 U.S. 675, 71 S. Ct. 943, 95 L. Ed. 1284) problem, possibly to common-situs relationships on particular jobsites as well.

 421 U.S., at 633, 95 S. Ct. at 1840. In this case, Bullard was a signatory to the Agreement between Local 91 and the Council of Utility Contractors. The presence of this collective-bargaining relationship between the parties is the controlling distinction between this case and Connell. Since the subcontracting and union security clauses were negotiated in the context of that relationship they do not fall under the ...

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