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Connecticut Ironworkers Employers Association, Inc. v. New England Regional Council of Carpenters

United States Court of Appeals, Second Circuit

August 23, 2017

Connecticut Ironworkers Employers Association, Inc., MRS Enterprises, Inc., Barrett, Inc., Ernest Peterson, Inc., Berlin Steel Construction Co., Iron Workers Local No. 15, International Association of Bridge, Structural, Ornamental & Reinforcing, Iron Workers Local 37, International Association of Bridge, Structural, Ornamental & Reinforcing, Iron Workers Local 424, International Association of Bridge, Structural, Ornamental & Reinforcing, Sheet Metal Workers Local 38 Craft Training Fund, Sheet Metal Workers Local No. 40, International Union of Painters & Allied Trades District Council 11, AFLCIO, CLC, International Union of Painters, Allied Trades Local Unions, Glaziers Local Union Nos. 1333 & 1274, Glaziers Union, No. 1333, Glaziers Union, Local No. 1274, Plaintiffs-Appellants,
v.
New England Regional Council of Carpenters, Defendant-Appellee.[*]

          Argued: December 13, 2016

         On Appeal from the United States District Court for the District of Connecticut

         This case concerns a ʺturf battle" between Ironworkers and Carpenters. The Ironworkers allege that the Carpenters used restrictive subcontracting clauses in their collective bargaining agreements ("CBAs") to secure work in the New England area that historically belonged to the Ironworkers. The Ironworkers contend that the Carpenters' conduct constitutes anticompetitive behavior in violation of Sections 1 and 2 of the Sherman Antitrust Act and unfair labor practices in violation of Sections 8(b)(4) and 8(e) of the National Labor Relations Act ("NLRA").

         The Carpenters counter that their subcontracting practices are consistent with longstanding industry practices, including with practices currently used by the Ironworkers. They assert, as an affirmative defense, that such practices are protected from liability by the "construction industry proviso" under Section 8(e) of the National Labors Relations Act ("NLRA") and the judicially-created "non-statutory exemption." To defeat the antitrust claim, the Carpenters' conduct must come within the protection of both the construction industry proviso and the non-statutory exemption. However, to defeat the unfair trade practices claim, it only needs to satisfy the construction industry proviso.

         On January 20, 2016, the United States District Court for the District of Connecticut (Stefan R. Underhill, Judge) granted summary judgment to the Carpenters based on the affirmative defenses just described. It held that the disputed subcontracting practices were immune from both antitrust and unfair labor practices liability because they qualified for protection under the construction industry proviso and the non-statutory exemption.

         We agree that the Carpenters have met the requirements of the construction industry proviso. But we conclude that, on this record, there are factual disputes that preclude a decision on whether the conduct falls within the non-statutory exemption. To demonstrate that the disputed subcontracting practices are sheltered by the non-statutory exemption (and thus to defeat the Ironworkers' antitrust claim completely), the Carpenters must show that these practices furthered legitimate aims of collective bargaining in a way that is not unduly restrictive of market competition. Absent additional fact-finding by the District Court as to whether the Carpenters' subcontracting practices further legitimate labor goals, it cannot undertake the analysis required by our precedents.

         Accordingly, we VACATE the judgment of the District Court as to the Sherman Act claim, AFFIRM the judgment as to the unfair labor practices claim, and REMAND the cause to the District Court for further proceedings consistent with this opinion, including for such additional discovery as will permit the District Court to be informed of the relevant history and permit the parties to move for summary judgment or, if necessary, to proceed to trial.

          Paul C. Hetterman, Hartnett Gladney Hetterman, LLC, St. Louis, MO (Ronald C. Gladney, Hartnett Gladney Hetterman, LLC, St. Louis, MO; Thomas W. Meiklejohn, Livingston, Adler, Pulda, Meiklejohn & Kelly, Hartford, CT; on the brief), for Plaintiffs-Appellants.

          Keith P. Carroll, Mintz Levin Cohn Ferris Glovsky and Popeo, PC, Boston, MA (Christopher N. Souris, Krakow & Souris LLC, Boston, MA; Kevin McGinty, Mintz Levin Cohn Ferris Glovsky and Popeo, PC, Boston, MA; Bruce D. Sokler, Mintz Levin Cohn Ferris Glovsky and Popeo, PC, Washington, DC; on the brief), for Defendant-Appellee.

          Before: Jacobs, Cabranes, and Parker, Circuit Judges.

          JOSÉ A. CABRANES, Circuit Judge.

         Much of the practice of American antitrust law consists of deciding whether particular conduct is, or is not, "exempt" from the application of the antitrust statutes by virtue of immunities conferred by later legislation or judicial interpretation. The celebrated fourteen-volume treatise of Professor Philip E. Areeda devotes fully two volumes to these numerous immunities.[1] The history of these immunities is "rich and fascinating . . . com[ing] in waves. Each particular wave has involved a distinct approach and rested on its own economic justification."[2]

         We consider here the latest chapter in the unfolding story of one of those immunities-those that exempt certain labor union activities. Professor Ralph K. Winter (as he then was) characterized this topic as "one of the most disputed legal issues of this century."[3] We address only a piece of this storied immunity: the exemption for certain union activities within the construction industry.

         This case arises out of a dispute over subcontracting clauses in collective bargaining agreements ("CBAs") between the defendant New England Regional Council of Carpenters (the "Carpenters Union" or "Carpenters") and various construction companies and construction managers. These clauses effectively bar subcontracting of construction work with non-Carpenter affiliates. The plaintiffs, consisting of several other unions, employers, trade associations, and union pensions funds (jointly, the "Ironworkers"), allege that the Carpenters have used these subcontracting clauses to expand the scope of work assigned to the Carpenters Union to include work traditionally assigned to the Ironworkers. The Ironworkers bring two claims against the Carpenters: first, that the Carpenters' conduct constitute anticompetitive behavior in violation of Sections 1 and 2 of the Sherman Antitrust Act[4] and second, that the Carpenters' conduct constitutes unfair labor practices in violation of Sections 8(b)(4) and 8(e) of the National Labor Relations Act ("NLRA").[5] The Carpenters counter that their subcontracting practices are shielded from both antitrust liability and claims of unfair labor practices.

         To determine if the disputed subcontracting practices[6] are protected from antitrust liability, we must assess whether both the "construction industry proviso" of Section 8(e) of the NLRA[7] and the judicially-created "non-statutory exemption"[8] to antitrust liability apply.[9] To defeat the unfair labor practices claim, the Carpenters need only show that their conduct fall within the statutory construction industry proviso.

         In the United States District Court for the District of Connecticut (Stefan R. Underhill, Judge), the Carpenters moved for summary judgment based on the affirmative defenses just described and the Court granted their motion. Specifically, the District Court held that the disputed subcontracting practices were immune from both antitrust and unfair labor practices liability because they qualified for protection under the construction industry proviso and the non-statutory exemption.

         We agree that the Carpenters have met the requirements of the construction industry proviso, but we conclude that, on this record, there are factual disputes that preclude a decision on whether the conduct falls within the non-statutory exemption. To demonstrate that the disputed subcontracting practices are sheltered by the non-statutory exemption (and thus to defeat the Ironworkers' antitrust claim completely), the Carpenters must show that these practices furthered legitimate aims of collective bargaining, in a way that is not unduly restrictive of market competition. Absent additional fact-finding by the District Court as to whether the Carpenters' subcontracting practices further legitimate labor goals, it cannot undertake the analysis required by our precedents.[10]Establishing that these subcontracting agreements arose from a lawful CBA is not, in and of itself, sufficient to gain the protection of the non-statutory exemption.

         Accordingly, we VACATE the judgment of the District Court as to the Sherman Act claim, AFFIRM the judgment as to the unfair labor practices claim, and REMAND the cause to the District Court for further proceedings consistent with this opinion, including for such additional discovery as will permit the District Court to be informed of the relevant history and permit the parties to move for summary judgment or, if necessary, to proceed to trial.

         BACKGROUND

         This case concerns what some might call a "turf battle" between the Ironworkers and the Carpenters Union. The plaintiff Ironworkers are a group of construction organizations including: a district council, seven locals affiliated with construction trade unions, four construction contractors, and two trade groups.[11] The defendant Carpenters Union is a labor organization that operates throughout New England.

         The Ironworkers challenge the enforcement of restrictive subcontracting clauses in the Carpenters' CBAs. These clauses, colloquially called "hot cargo" clauses, bar signatories from subcontracting work to any employer that is not also a signatory to a Carpenters' CBA.[12] The Ironworkers argue that the Carpenters use these subcontracting clauses to act in concert with various non-party general contractors and construction managers to prevent the Ironworkers from performing the relevant work.[13] In other words, they allege that the Carpenters designed and enforced the disputed clauses not to further legitimate goals of collective bargaining, such as protecting wages, but rather, to secure work in the New England area that allegedly belonged to the Ironworkers. Accordingly, they claim that these subcontracting practices violate the antitrust laws and constitute unfair labor practices.

         The Carpenters counter that these subcontracting practices are commonplace in the construction industry, and point to similar provisions in CBAs to which the Ironworkers are signatories. They assert, as affirmative defenses, that these practices are immune from antitrust liability and unfair labor practices claims because they fall within the construction industry proviso of Section 8(e) of the NLRA and the judicially-devised non-statutory exemption to antitrust liability.

         The Ironworkers do not dispute that these subcontracting clauses have long existed, but they argue nonetheless that enforcement of the subcontracting provisions-namely, acting in concert with various non-party general managers-only started between 2005 and 2006.[14] They assert that such enforcement impinges on work traditionally performed by Ironworkers and conflicts with historical industry practice. The primary purpose of these subcontracting practices, they argue, is to force parties to enter into CBAs with the Carpenters as opposed to other labor organizations.

         Specifically, the Ironworkers identify seven examples of general contractors or construction managers who executed an agreement with the Carpenters to assign relevant work to Carpenters' signatories, in accordance with the Carpenters' CBAs: (1) Suffolk Construction Company, 360 State Street Project, New Haven, Connecticut; (2) Dimeo Construction, New Rowe Residences, New Haven, Connecticut; (3) Turner Construction, St. Francis Hospital, Hartford, Connecticut; (4) Bond Brothers, Bryant University Project, Smithfield, Rhode Island; (5) E. Turgeon, Immaculate Conception Catholic Regional School, Cranston, Rhode Island; (6) Berry & Sons, Bay State Medical Center Hospital Project, Springfield, Massachusetts; and (7) Fusco, Inc., Schools Project, New London, Connecticut.[15]

         The Carpenters moved for summary judgment on both of the plaintiffs' claims, which the District Court granted on January 20, 2016.[16] The Ironworkers filed a timely appeal.

         DISCUSSION

         We review de novo orders granting summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.[17]Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[18] The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination, the court must view all facts in the light most favorable to the non-moving party.[19]

         We apply the same standard "whether summary judgment is granted on the merits or on an affirmative defense. . . ."[20]Accordingly, if a movant meets his or her burden by introducing evidence sufficient to establish an affirmative defense, the nonmovant must introduce evidence to establish that a genuine dispute of material fact exists.[21]

         As noted above, this dispute turns on two legal questions. The first is whether the construction industry proviso applies to the Carpenters' subcontracting practices, which requires us to determine, among other things, whether these practices arose in the context of a collective bargaining relationship. The second is whether the judicially-devised "non-statutory exemption" applies to those same practices, which requires us to weigh the impact on the relevant market and the competing interests of our national labor and antitrust policies. The Carpenters' subcontracting practices must come within the protection of both the construction industry proviso and the non-statutory exemption to defeat the antitrust claim, but need only satisfy the proviso to defeat the unfair labor practices claim.

         I. Historical Context

         We first turn to the historical context in which the construction industry proviso and "non-statutory exemption" came into existence. This historical inquiry is not merely an exercise in curiosity. We are required by the Supreme Court to read the construction industry proviso in Section 8(e) "in light of the statutory setting and the circumstances surrounding its enactment."[22] Similarly, in applying the "non-statutory exemption, " we have been instructed to "balance[] the conflicting policies embodied in the labor and antitrust laws"-policies that can only be viewed in light of Congress's intent at the time of their enactment.[23]Both tasks thus require us to delve into the historical context.

         This "irreconcilable" conflict between our labor and antitrust policies has not only been the topic of many academic works, [24] but has also been at the center of an emotionally charged national debate for most of the twentieth century.[25] In some sense, this conflict was inevitable: the central aim of our antitrust laws is to promote competition, while the central aim of collective bargaining is to reduce or eliminate competition for labor in order to strengthen the bargaining power of workers.[26] For over a hundred years, the difficult and delicate task of mediating this conflict has largely fallen to the federal courts.

         With the passage of the Sherman Antitrust Act in 1890, Congress declared illegal "[e]very contract, combination . . . or conspiracy, in restraint of trade."[27] The Sherman Act was largely directed at business monopolies and trade restraints, but it was almost immediately invoked against unions.[28] Indeed, in the early 1900s, the federal courts held unions liable for antitrust violations to nearly the same extent as manufacturers.[29]

         In response, Congress adopted the Clayton Antitrust Act of 1914[30] aimed, in part, to protect peaceful labor activities from the reach of antitrust laws and limit the issuance of judicial injunctions in labor disputes. Section 6 declared that labor was "not a commodity or article of commerce, " and that the Sherman Act should not be "construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help . . . ."[31] Section 20, in turn, limited the power of courts to issue injunctions "in any case between an employer and employees, or between employers and employees, or between employees, or between persons employed and persons seeking employment, involving, or growing out of, a dispute concerning terms or conditions of employment."[32] Section 20 also prohibited injunctions against identified types of union activity, including strikes, boycotting, picketing, persuading others by peaceful means not to work, and peacefully assembling in a lawful manner and for lawful purposes.[33] The Clayton Act thus created the first so-called "labor exemption" to antitrust scrutiny.

         The Supreme Court, however, narrowly interpreted the anti- injunction provisions in Section 20 of the Clayton Act in 1921, in Duplex Printing Press Co. v. Deering.[34] Specifically, the Court held that "[i]t would do violence to the guarded language employed"[35] to interpret Section 20 to protect workers other than those "in a proximate relation" to the dispute.[36]

         Once again, Congress responded with the enactment of new legislation-the Norris-LaGuardia Act in 1932[37], and the NLRA in 1935.[38] Together, these statutes greatly strengthened the position of labor unions and marked the inception of our modern system of national labor relations. Most relevant here, the Norris-LaGuardia Act forbade courts from issuing injunctions in "a case involving or growing out of a labor dispute."[39] The NLRA codified a broad framework for the conduct and management of labor relations and delegated to the newly-created National Labor Relations Board (the "Board") responsibility for enforcing the provisions of the NLRA.[40]These laws substantially expanded labor's statutory exemption from antitrust scrutiny by closing the judicially-recognized gaps in the Clayton Act.

         The federal courts once again assumed the task of mediating the friction between national antitrust and labor policies. In a duo of famous wartime cases-Apex Hosiery Co. v. Leader ("Apex")[41] and United States v. Hutcheson[42]-the Supreme Court substantially expanded the labor exemption to the antitrust laws. In Apex, the Supreme Court found that labor unions were still subject to the Sherman Act "to some extent not defined, "[43] but noted that the Sherman Act "was enacted in the era . . . of capital organized and directed to control of the market by suppression of competition, " and that its purpose was to protect consumers from monopoly prices, not to regulate and police all kinds of interruptions to the flow of trade.[44] In Hutcheson, the Supreme Court declared that the Sherman, Clayton, and Norris-LaGuardia Acts must be jointly considered in arriving at a conclusion that labor union activities run afoul of antitrust laws, and that the narrow interpretation of the Clayton Act established in Duplex Printing Press Co. was inconsistent with congressional policy set out by these three "interlacing statutes."[45]

         The Supreme Court, however, specified a qualification to the labor exemption in Allen Bradley Co. v. Local Union No. 3, International Brotherhood. of Elec. Workers ("Allen Bradley").[46] In Allen Bradley, the Court held that the union defendant forfeited its right to the labor exemption when it acted "in combination with business groups" in a conspiracy to monopolize a product market.[47] The Allen Bradley Court noted "[i]t would be a surprising thing if Congress, in order to prevent a misapplication of [antitrust] legislation to labor unions, had bestowed upon such unions complete and unreviewable authority to aid business groups to frustrate its primary objective."[48]

         Against this backdrop, and in the aftermath of World War II, the pendulum once again swung away from protecting labor towards promoting market competition. The Taft-Hartley Act of 1947, among other things, outlawed secondary boycotts and jurisdictional strikes.[49] Twelve years later, the Landrum-Griffin Act of 1959[50] further reined-in what it perceived as labor misconduct. The Landrum-Griffin Act, which amended Section 8 of the NLRA, outlawed "hot cargo" agreements, which prohibit an employer from doing business with any firm not affiliated with the contracting union.[51] As noted above, though Congress prohibited "hot cargo" agreements, it exempted any such agreements made in the construction industry by means of the construction industry proviso.[52]

         The Supreme Court first interpreted the construction industry proviso in Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100 ("Connell").[53] The Court held that Congress intended the construction industry proviso to apply only to agreements "in the context of collective-bargaining relationships and . . . possibly to common-situs relationships on particular jobsites as well."[54] Connell also required federal courts to read the construction industry proviso "in light of the statutory setting and the circumstances surrounding its enactment."[55] In other words, the construction industry proviso was intended to preserve the balance of power between construction employees and employers as it stood in 1959- not to be a means by which labor unions expanded their influence into other work areas.[56]

         In addition to defining the contours of the new statutory exemption created by the proviso, the Connell decision expressly defined the so-called non-statutory exemption to antitrust laws. While the Clayton Act and the Norris-LaGuardia Act expressly state that labor unions themselves and certain union activities are exempt from antitrust laws, "concerted action or agreements between unions and nonlabor parties" are not protected by statute from antitrust scrutiny.[57] Accordingly, the Court recognized "that a proper accommodation between the congressional policy favoring collective bargaining under the NLRA and the congressional policy favoring free competition in business markets requires that some union-employer agreements be accorded a limited nonstatutory exemption from antitrust sanctions."[58] In Connell, the Court held that this limited non-statutory exemption did not apply to a union's agreement with a contractor where that agreement imposed "substantial anticompetitive effects, both actual and potential, that would not follow naturally from the elimination of competition over wages and working conditions."[59]

         It bears noting that nowhere in the long history of antitrust exemptions for unions is there mention of jurisdictional disputes between unions, such as those presented by this appeal. Instead, the NLRA and its amendments were "concerned entirely with regulating what it conceived to be a struggle for power between unions and employers."[60]

         With this history in mind, we turn back to the parties' arguments and undertake to the ongoing task of balancing the competing interests between antitrust and labor considerations in the context of the restrictive CBA clauses at issue here.

         II. Sherman Act Claim

         The Ironworkers allege that the disputed subcontracting practices constituted unreasonable restraints of trade, in violation of Section 1 of the Sherman Act, [61] and enforcement of those clauses was an attempt by the Carpenters to expand work in the relevant market area in violation of Section 2 of the Sherman Act.[62] The Carpenters, on the other hand, assert that the clauses and their enforcement are immunized from antitrust scrutiny because, in their view, they come within the protection of both the construction industry proviso and the non-statutory exemption.[63]

         The District Court agreed with the Carpenters, and held that both apply here. We disagree. While the construction industry proviso applies to the disputed subcontracting practices, disputes of material fact prevent us from deciding, at this stage, whether the non-statutory exemption applies.

         A. The Construction Industry Proviso

         To determine whether the Carpenters' affirmative defense to the Ironworkers' Sherman Act claim applies, the first question we must address is whether the disputed subcontracting practices fall within the protection of the construction industry proviso . As mentioned above, Section 8(e) of the NLRA contains a general prohibition on "hot cargo" agreements, stating

[i]t 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 . . . .[64]

         Section 8(e), however, also contains the construction industry proviso, which provides

[t]hat nothing in this subsection shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work . . . .[65]

         The construction industry proviso thus plainly applies to agreements (1) between a labor organization and an employer; (2) relating to the contracting or subcontracting of work; (3) to be done at the site of construction.[66] In conducting this analysis, we bear in mind that Congress intended the construction industry proviso to apply only to agreements "in the context of a collective-bargaining relationship and . . . possibly to common-situs relationships on particular jobsites as well."[67] In addition, for the proviso to apply, the ...


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