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The Building Industry Electrical Contractors Association, On Behalf of Itself and Its Members v. the City of New York

May 4, 2012

THE BUILDING INDUSTRY ELECTRICAL CONTRACTORS ASSOCIATION, ON BEHALF OF ITSELF AND ITS MEMBERS, UNITED ELECTRICAL CONTRACTORS ASSOCIATION, ON BEHALF OF ITSELF AND ITS MEMBERS, PLAINTIFFS-APPELLANTS,
v.
THE CITY OF NEW YORK, ON BEHALF OF ITSELF AND ITS VARIOUS AGENCIES, THE BUILDING AND CONSTRUCTION TRADES COUNCIL OF GREATER NEW YORK AND VICINITY, ON BEHALF OF ITSELF AND ITS SIGNATORY AFFILIATED LOCAL UNIONS, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Gerard E. Lynch, Circuit Judge:

11-3590-cv

The Building Industry Electrical Contractors Association et al. v. City of New York et al.

Argued: February 29, 2012

Before: KEARSE, WALKER, and LYNCH, Circuit Judges.

Plaintiffs-Appellants, two contractors' associations, appeal the dismissal of their complaint by the United States District Court for the Southern District of New York (Patterson, J.). The complaint alleges that a number of long-term construction labor agreements entered into by the City of New York are labor regulations that are preempted by the National Labor Relations Act. We find the challenged agreements indistinguishable from those upheld by the Supreme Court in Building and Construction Trades Council of Metropolitan District v. Associated Builders and Contractors of Massachusetts/Rhode Island, 507 U.S. 218 (1993), and therefore affirm. AFFIRMED.

Plaintiffs-Appellants the Building Industry Electrical Contractors Association ("BIECA") and United Electrical Contractors Association ("UECA") appeal the dismissal of their complaint challenging a number of agreements entered into by the City of New York with respect to labor conditions on certain City construction projects. Appellants argue that the agreements regulate the labor market and are therefore preempted by the National Labor Relations Act. We find the project labor agreements in this case materially indistinguishable from agreements the Supreme Court found permissible under the market participant exception to preemption in Building and Construction Trades Council of Metropolitan District v. Associated Builders and Contractors of Massachusetts/Rhode Island Inc., 507 U.S. 218 (1993) ("Boston Harbor"). Because the City acted as a market participant and not a regulator in entering the agreements, its actions fall outside the scope of NLRA preemption. We therefore affirm the judgment of the district court.

BACKGROUND

The contracts at issue in this case are project labor agreements ("PLAs"), large- scale contracts common in the construction industry. PLAs typically select a union to represent workers on a project and are often signed before construction begins. Although pre-hire agreements normally violate the National Labor Relations Act's requirement that a collective bargaining representative be selected by a majority vote of workers, see 29 U.S.C. § 159(a), Congress created an exception for the construction industry because of the unique conditions of that industry. Construction is characterized by "seasonal work, jobs of brief duration, and employees who typically work for many employers and for none of them continuously." Building and Construction Trades Department, AFL-CIO Br. at 6 (internal quotation marks and citation omitted). These conditions convinced Congress, as part of the 1959 Landrum-Griffin Act, Pub. L. No. 86-257, to enact special provisions governing the construction industry, which codified and expressly legalized contemporary practice in that industry. See Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 652-60 (1982); see also Boston Harbor, 507 U.S. at 230. Although public employers such as the City are excluded from the NLRA's coverage, see 29 U.S.C. § 152(2), two key provisions of the Landrum-Griffin Act provide important background on the use of prehire agreements in the construction industry. First, the Act added to the NLRA Section 8(f), codified at 29 U.S.C. § 158(f), which permits unions and employers in the construction industry to enter into collective bargaining agreements before the union establishes majority status by vote. Second, the Act amended NLRA Section 8(e), codified at 29 U.S.C. § 158(e), to except the construction industry from the usual prohibition on agreements between an employer and union to refrain from doing business with a third party. The amended Section 8(e) allows unions and employers to agree that only contractors who sign particular contracts, such as a project's PLA, will be permitted to work on a site. Together, Sections 8(e) and 8(f) allow the manager of a construction project to enter into a comprehensive agreement that sets common employment terms to govern the many different trades involved in a construction project. The two provisions help solve the problems otherwise created by the specific conditions in the construction industry, including "the short-term nature of employment which makes posthire collective bargaining difficult, the contractor's need for predictable costs and a steady supply of skilled labor, and a longstanding custom of prehire bargaining in the industry." Boston Harbor, 507 U.S. at 231.

Though large in scope and dollar amount, the PLAs in this case ("City PLAs") contain terms typical of PLAs. Initially announced in November 2009, they have been estimated to cover about half of the City's construction projects over the five years between 2009 and 2014, and provide that the covered projects will be serviced by contractors recognizing the Building and Construction Trades Council of Greater New York and Vicinity ("BCTC") and its affiliates as the sole bargaining representatives for all construction workers on PLA-covered projects. The BCTC is affiliated with Local Union No. 3, International Brotherhood of Electrical Workers, AFL-CIO ("Local 3"), and the PLAs incorporate favorable terms for members of Local 3, which will provide the lion's share of the electrical labor on projects covered by the City PLAs. In addition to the requirement that contractors on PLA-covered projects recognize BCTC affiliates as the collective bargaining representatives for project employees, relevant common terms of the City PLAs include: union security clauses, which require employees on the PLAs to pay dues, or their equivalent, whether or not they join the relevant BCTC-affiliated union; a requirement for any signatory contractor to secure at least 88% of its labor through BCTC affiliates' hiring halls; prohibitions on unions' discriminating in referrals based on union affiliation; requirements that contractors contribute to affiliated union fringe benefit funds; standard work rules and hours; and no-strike clauses and dispute resolution systems. It is undisputed that these terms are not materially different from those in other private and public PLAs. A contractor wishing to obtain work under one of the City PLAs must sign a letter of assent which binds the contractor to the PLA's terms and specifies that where the PLA conflicts with the contractor's collective bargaining agreement ("CBA"), the PLA will govern.

BIECA has a collective bargaining agreement with a different, non-BCTC- affiliated union - Local 363, United Service Workers Union - under which Local 363 has the right to provide labor on BIECA's contracts. This and other terms in BIECA's collective bargaining agreement will make it difficult for BIECA to seek work under the City PLAs. As discussed more fully below, BIECA argues that the PLAs effectively punish BIECA for its bargaining agreement with Local 363. Similarly, UECA has been engaged in an ongoing labor dispute with Local 3, but the PLAs will set the terms under which UECA members can employ Local 3 members on PLA projects. This, UECA argues, improperly interferes with UECA's right to freely negotiate its collective bargaining agreements.*fn1

Plaintiffs BIECA and UECA brought suit in the United States District Court for the Southern District of New York (Robert P. Patterson, J.). They argued principally that the PLAs are preempted by the NLRA, and also asserted related causes of action under federal and state law. Defendants moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and (1). After holding that the PLAs are not preempted, the district court found that the remaining federal claims lacked merit and dismissed them; it then declined to exercise supplemental jurisdiction over the state claims. Building Industry Elec. Contractors Ass'n v. City of New York, No. 10 Civ. 8002, 2011 WL 3427138 (S.D.N.Y. Aug. 5, 2011). This appeal followed.

DISCUSSION

We review de novo the district court's dismissal of an action for failure to state a claim under Rule 12(b)(6), e.g., In re Citigroup ERISA Litig., 662 F.3d 128, 135 (2d Cir. 2011), or for lack of jurisdiction under Rule 12(b)(1), see Moore v. PaineWebber, Inc., 189 F.3d 165, 169 n.3 (2d Cir. 1999). Dismissal is appropriate if the complaint fails to state a claim "plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In assessing the legal sufficiency of the claim, we must accept factual allegations in the complaint as true and draw all reasonable inferences in favor of the nonmoving party. DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010); see also Citigroup, 662 F.3d at 135. We will consider only the complaint and any documents attached thereto or incorporated by reference and "documents upon which the complaint 'relies heavily.'" Citigroup, 662 F.3d at 135, quoting DiFolco, 622 F.3d at 111. Although the complaint asserted five causes of action and the district court dismissed them all, BIECA concedes that the threshold and potentially dispositive question before this court is whether the district court correctly held that the PLAs are not preempted, since all of the district court's rulings rest on that conclusion. BIECA argues that the PLAs are invalid because they are preempted by the elaborate regulatory scheme set out in the National Labor Relations Act. "States may not regulate activity that the NLRA protects, prohibits, or arguably protects or prohibits," Healthcare Ass'n of N.Y. State, Inc. v. Pataki, 471 F.3d 87, 95 (2d Cir. 2006) (internal quotation marks omitted), nor may they "interfere with the open space created by the NLRA for the free play of economic forces," id. at 107 (internal quotation marks omitted).

But "pre-emption doctrines apply only to state regulation." Boston Harbor, 507 U.S. at 227. Congress did not intend states' decisions about how to spend their own money as participants in the labor market to be subject to the same scrutiny as state regulation of the private labor market. "When a State owns and manages property," i.e., when it is a proprietor, "it must interact with private participants in the marketplace." Id. Such marketplace interactions are not regulation and so are not normally subject to preemption analysis at all. See Healthcare Ass'n, 471 F.3d at 108 ("A major limitation on the labor law preemption doctrines is the principle that state conduct will not be preempted if the state's actions are proprietary, rather than regulatory."). The clearest illustration of the market participant exception is a case with facts nearly identical to this one: the Supreme Court's Boston Harbor decision. In Boston Harbor, contractors who did not use union labor challenged a project labor agreement covering public works and environmental projects to clean up Boston Harbor worth $6.1 billion over ten years. 507 U.S. at 221-23. The PLA designated the Building and Construction ...


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