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U.S. Information Systems, Inc. v. International Brotherhood of Electrical Workers Local Union Number 3

September 2, 2008

U.S. INFORMATION SYSTEMS, INC., PLAINTIFF,
v.
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS LOCAL UNION NUMBER 3, AFL-CIO, ADCO ELECTRICAL CORPORATION, FIVE STAR ELECTRIC CORPORATION, FOREST ELECTRIC CORPORATION, HUGH O'KANE ELECTRIC COMPANY LLC, NEAD INFORMATION SYSTEMS, INC., NEAD ELECTRIC, INC. AND THE NEAD ORGANIZATION, INC., DEFENDANTS.



The opinion of the court was delivered by: Cedarbaum, J.

OPINION

U.S. Information Systems, Inc. ("USIS") sues the International Brotherhood of Electrical Workers Local Union Number 3, AFL-CIO ("Local 3"), Nead Information Systems, Nead Electric, Inc., and the Nead Organization, Inc. ("Nead"), ADCO Electrical Corp., Five Star Electric Corp., and Hugh O'Kane Electric Co. LLC (collectively "Defendants"),*fn1 for violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. All of the defendants are subcontractors, with the exception of Local 3, a union. USIS sues all defendants except Local 3 for tortious interference with contract. Defendants move to dismiss all claims pursuant to Fed. R. Civ. P. 12(b)(6), principally on the ground that USIS has not pleaded facts sufficient to allege an antitrust conspiracy.

For the following reasons, Defendants' motion is denied.

I. BACKGROUND

A. The Facts Alleged

In its Amended Complaint, USIS alleges the following facts, which are taken as true for the purposes of this motion.

1. General Background

USIS is a subcontractor that installs telecommunications wiring in commercial buildings in the New York City metropolitan area. The employees of USIS belong to a union, the Communications Workers of America ("CWA"). USIS and its employees perform low-cost, low-voltage wiring installations used for the transmission of voice, data, and video over cable, radio, or optical systems. Their work is not regulated or licensed by any government entities.

The defendant subcontractors are in the business of installing electrical wiring in commercial buildings in New York. All of the defendant subcontractors use Local 3 labor. Their employees perform high-cost, high-voltage wiring installations used for the transmission of electrical current. By law, installers of electrical wiring must possess a valid license, follow the National Electrical Code, and comply with state and local building codes.

Contracts for telecommunications work are bid on and awarded separately from contracts for electrical work. A general contractor could employ low-cost subcontractors such as USIS for telecommunications wiring and use high-cost subcontractors such as the Defendants only for electrical wiring. USIS alleges, however, that several general contractors in New York have used Defendants not only for electrical wiring, but also for telecommunications wiring. By using Defendants to install telecommunications wiring, these general contractors have, according to USIS, overpaid: the general contractors could have saved one-third to one-half of the installation cost had they accepted the lower-priced bids made by USIS.

USIS alleges that Local 3, in conspiracy with the defendant subcontractors, coerces general contractors to use Local 3 subcontractors rather than CWA subcontractors. A general contractor who uses a CWA contractor for telecommunications work "run[s] the risk of incurring work stoppages and slowdowns, missing cutover dates, threatening move-in schedules and finding the work done by the CWA vandalized or sabotaged." (Amended Complaint ¶ 50.)

2. The Slleged Conspiracy

USIS alleges that in or about September of 1998, Robert Eccles, the executive vice president of Nead Information Systems, complained to Howard Cohen, business manager for Local 3, that Nead was losing a large number of bids to CWA subcontractors. On September 1, 1998, Eccles wrote a letter to Mark Hansen, a business agent for Local 3 (the "Eccles Letter"), stating that "'[w]e are losing as much work to CWA as we are winning now and getting worse,'" and soliciting a meeting with Local 3 "'to discuss this problem and review any recommendations you may have to competing in this market place.'" (Amended Complaint ¶ 34 (quoting the Eccles Letter)).

In response to this communication, a meeting was held (the "Local 3 Meeting") between unnamed "electrical [sub]contractors" and "representatives of IBEW Local No. 3's hierarchy." (Amended Complaint ¶ 36.) USIS also alleges that Nead wrote a memo regarding that meeting (the "Nead Memo"), which indicated that one issue for discussion was the "CWA Problem with Respect to Comp[et]ition S[c]enario, Procedure When Threatened by CWA and Future of Telecommunications with Local Three?" (Amended Complaint ¶ 36.) After the meeting, Local 3 decided to "continue[] its efforts to enforce the principles of the 'total job policy' with respect to firms hiring or considering CWA contractors." (Id. ¶ 36.) "Total job policy" means that Local 3 would seek to perform all of the wiring jobs, electrical and telecommunications, at a building site, and would put pressure on general contractors not to hire CWA subcontractors for the telecommunications jobs.

A section of the Amended Complaint titled "Specific Examples of Defendants' Illegal Acts" alleges fifteen instances, ten within the four-year statute of limitations period, in which USIS lost a bid to Local 3 and one of the defendant subcontractors. USIS notes that its list of lost bids is not exhaustive. The instances alleged display a common pattern in which USIS, using CWA labor, made a much lower bid than its competitors using Local 3 labor, but the job was ultimately awarded to a Local 3 subcontractor. In each case, the lower bid by USIS was passed over because of the general contractor's fear that Local 3 electricians on site would cause slowdowns and vandalize the property. The following three examples illustrate the pattern.

In October of 2007, at a project for Merrill Lynch, USIS was awarded the bid to perform a closed circuit television installation. In response, Local 3 electricians at the site caused a one-week work delay. The job was removed from USIS and given to defendant subcontractor Forest Electric, which used Local 3 labor.

In April of 2005, USIS bid on the PA and Access Control systems at a project for ZS Associates. During a construction job meeting, the general contractor stated that, to avoid problems, the installation should be performed by Local 3. A representative of ZS Associates called USIS and asked whether USIS could do the job using Local 3 labor, because "a substantial portion of the building was under construction," which meant that "there were electricians on site" who could "jeopardize tenant schedules" through threats and vandalism. (Amended Complaint ¶ 52(g).) USIS responded that it could not use Local 3 labor because its collective bargaining agreement required the use of CWA labor. As a result, "one of the defendant conspirator electrical contractors was awarded the project." (Id.)

In September of 2003, at a project for Clifford Chance Rogers & Wells, USIS was asked to prepare a bid for telecommunications work at a project on West 52nd Street. USIS alleges that Stan Williams of Clifford Chance was informed by the building owner's representative that "Nead Electric was taking the position that it would not put in conduit unless there were IBEW Local No. 3 wires going through them." (Id. ΒΆ 52(e).) Nead Electric reportedly "was displeased because they were not getting work from Clifford Chance and had complained to the union." (Id.) Mr. Williams "was visited by an IBEW Local No. 3 shop steward who reiterated the position that the Nead electricians ...


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