Sun-Land Nurseries, Inc. v. Southern California District Council of Laborers

793 F.2d 1110, 122 L.R.R.M. (BNA) 2921

Opinions

BOOCHEVER, Circuit Judge:

In this appeal we are required to construe a provision of the National Labor Relations Act (NLRA) and to reconcile policies expressed in labor and antitrust legislation.

Sun-Land Nurseries, Inc. (Sun-Land) appeals from a summary judgment denying its claims under the NLRA and sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1982). It contends that collective bargaining agreements restricting subcontracting to employers which use employees of specified unions violate section 8(e) of the NLRA, 29 U.S.C. § 158(e) (1982). Section 8(e), in general terms, prohibits “hot cargo” agreements, provisions requiring employers to cease doing business with any other person. Sun-Land further argues that the agreements constitute antitrust violations under the Sherman Act. A panel of this court affirmed the district court’s holding that the agreement comes within the proviso to section 8(e) which exempts the construction industry from that section’s terms. The panel, however, reversed the district court’s award of summary judgment to the union on the Sherman Act claims. Sun-Land Nurseries, Inc. v. Southern California District Council of Laborers, 769 F.2d 1381 (9th Cir.1985), withdrawn, 779 F.2d 1446 (9th Cir.1986) (ordering rehearing en banc).

We took this case en banc to determine whether a provision of a collective bargaining agreement falling within the construction industry proviso is, without more, sufficient evidence of an antitrust violation to withstand a summary judgment motion. While we find that the proviso does not confer automatic exemption from the antitrust laws, we affirm the district court because Sun-Land made no showing of conduct allegedly violative of antitrust laws other than the collective bargaining agreement’s subcontracting provision. We hold that such a provision is not enough to raise a triable issue of antitrust liability.

I. FACTS

Sun-Land is a landscaping company which contracts with general contractors on major construction projects. The present dispute arose after the Teamsters Local 420 (Teamsters) terminated its representation of Sun-Land’s employees either because of an internal power struggle or in the hope of improving its relations with the Southern California District Council of Laborers (Laborers). Sun-Land sued the Teamsters, and this court held that the termination constituted a violation of the collective bargaining agreement between the Teamsters and Sun-Land. Toyota Landscape Co. v. Building Material & Dump Truck Drivers Local No. 420, 726 F.2d 525, 527-29 (9th Cir.), cert. denied, — U.S.-, 105 S.Ct. 104, 83 L.Ed.2d 49 (1984). In the meantime, however, Sun-Land’s employees elected the Independent Union of Craftsmen (Independent Union) as their new bargaining representative.

Many of the general contractors in the area in which Sun-Land does business are parties to various multi-employer agreements that prohibit the subcontracting of work to any employer that does not have a current bargaining agreement with the Laborers or one of the basic craft unions specifically named in the agreements (the Major Unions).¹ Sun-Land claims that, as a result of these subcontracting limitation clauses and its lack of affiliation with either the Laborers or any of the Major Unions, its business suffered drastically and hence the quantity of goods it purchased in interstate commerce declined. It therefore brought suit against the Laborers arguing that the subcontracting clauses constitute both an unfair labor practice under section 8(e) of the NLRA and an unreasonable restraint of trade under sections 1 and 2 of the Sherman Act.

The district court filed an exhaustive and well-reasoned opinion granting summary judgment in favor of the Laborers. The court held that under the construction industry proviso, the challenged clauses are exempt from section 8(e)’s prohibition against hot cargo agreements, and that Sun-Land’s claims did not raise a triable issue under the Sherman Act. The district court reasoned that Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 102 S.Ct. 2071, 72 L.Ed.2d 398 (1982) (Woelke), compelled the section 8(e) holding and relied on Brogan v. Swanson Painting Co., 682 F.2d 807 (9th Cir.1982), for its holding on the antitrust issue. The district court concluded that Brogan amounted to an implicit rejection of the balancing of labor and antitrust policies advanced by one member of the panel in Ackerman-Chillingworth v. Pacific Electrical Contractors Association, 579 F.2d 484, 501-05 (9th Cir.1978) (Hufstedler, J., concurring in part and dissenting in part), cert. denied, 439 U.S. 1089, 99 S.Ct. 872, 59 L.Ed.2d 56 (1979). Finally, the district court concluded that its award of summary judgment dismissing the antitrust claim was not inconsistent with Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975), or United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965).

The panel affirmed the district court’s section 8(e) holding. It also held that restrictive subcontracting agreements are valid under the Sherman Act only to the extent that they are the “least restrictive means” of accomplishing legitimate labor goals, and it remanded for a balancing of labor and antitrust policies. This court withdrew that opinion and ordered rehearing en banc. 779 F.2d 1446 (9th Cir. 1986)(en banc).

II. CONSTRUCTION INDUSTRY PROVISO

Sun-Land argues that the “particular unions” subcontracting clauses violate section 8(e) of the NLRA. There are no material facts in dispute and both parties agree that the clauses fall within the general prohibition of section 8(e).² Both parties also agree that a literal reading of the construction industry proviso would exempt the clauses from section 8(e) liability.³ The parties do dispute the applicability of the proviso in light of legislative history and judicial interpretation. This issue is reviewable de novo. United States v. McConney, 728 F.2d 1195, 1202-04 (9th Cir.) (en banc), cert. denied, — U.S.-, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).

Sun-Land notes that the Supreme Court has held that the construction industry proviso is not to be construed literally but “ ‘must be interpreted in light of the statutory setting and the circumstances surrounding its enactment’ ” in 1959. Woelke, 456 U.S. at 653, 102 S.Ct. at 2077 (quoting Connell, 421 U.S. at 628, 95 S.Ct. at 1838). It points to Connell, where the Court interpreted these circumstances and held that, despite the literal language of the proviso, Congress had not intended to insulate from liability agreements obtained outside the context of collective bargaining. See Con-nell, 421 U.S. at 633, 95 S.Ct. at 1840. The Laborers counter that their agreement arose within a collective bargaining relationship and that Woelke held that a similar subcontracting clause fit within the construction industry proviso. We agree that the Woelke decision applies to the clause at issue here.

In Woelke, the Court was faced with a subcontracting limitation clause very similar to that of the Laborers’ Agreement.⁴ The Court rejected the nonunion employer’s claim that the proviso shelters subcontracting clauses only when they are limited in application to particular jobsites at which both union and nonunion workers are employed. 456 U.S. at 654, 102 S.Ct. at 2077. The Court concluded that the “construction industry proviso to § 8(e) ... ordinarily shelters union signatory subcontracting clauses that are sought or negotiated in the context of a collective-bargaining relationship....” Id. at 666, 102 S.Ct. at 2083.

Sun-Land argues that Woelke is distinguishable for a number of reasons. Most importantly, Sun-Land contends that Woelke only sanctioned subcontracting clauses that operate to exclude non-union contractors; the clause here excludes “other-union” subcontractors. While Woelke does not specifically address the “other-union” situation, its teaching that whether a clause is within the coverage of the proviso is determined “by examining Congress’ perceptions regarding the status quo in the construction industry,” id. at 657, 102 S.Ct. at 2078, directs us to uphold the Laborers’ subcontracting clause. Congress believed broad subcontracting clauses were legal in 1959. Id. Despite its awareness that such clauses could be used to exclude subcontractors represented by other unions, as well as non-union employers, it enacted the proviso. Woelke recites the legislative history of section 8(e), which includes a reference to the other-union situation:

The House Labor Committee heard similar testimony. Representatives of an employer and an independent union complained that employers and unions could lawfully enter into subcontracting clauses, and that, as a result, employers whose employees had selected another union were denied any opportunity to compete for construction jobs. They described agreements very similar to those at issue here.

Woelke, 456 U.S. at 658, 102 S.Ct. at 2079 (citing Labor-Management Reform Legislation: Hearings on H.R. 3540, H.R. 3302, H.R. 4473, and H.R. 4474 before a Joint Subcomm. of the House Comm, on Education and Labor, 86th Cong., 1st Sess. 2363, 2365-66 (1959)(remarks of Howard Lane and Edward M. Carleton)). Congress heard this argument but nevertheless “decided to exclude the construction industry from the scope of § 8(e).” Woelke, 456 U.S. at 658 n. 10, 102 S.Ct. at 2079 n. 10. We must give effect to Congress’ intent and hence affirm the district court’s conclusion that the construction industry proviso covers the agreement before us. Whether the section 8(e) proviso applies to union specific subcontracting clauses has been resolved by Woelke and we do not have the power to reexamine that question as suggested by the dissent.⁵

Sun-Land also argues that Woelke does not control this agreement because Woelke sustained subcontracting restrictions on the basis of two assumptions: that there is generally only one union representing a particular craft, and that subcontractors could enter into single job “pre-hire” agreements with the designated union and thus remain eligible to work. Neither of these assumptions appears valid in Sun-Land’s situation. Several unions represent landscaping employees. Any agreement with the Laborers would violate Sun-Land’s collective bargaining agreement with the Independent Union. While the Court in Woelke mentioned these points as considerations, see Woelke, 456 U.S. at 663 n. 15, 664, 102 S.Ct. at 2082 n. 15, neither was controlling. The Court did recognize that “the use of union signatory subcontracting clauses [may] give a particular union a monopoly position in a labor market,” id. at 663 n. 15, 102 S.Ct. at 2082 n. 15, yet upheld such clauses nevertheless.

We conclude that the clause under consideration does not violate section 8(e).

III. ANTITRUST EXEMPTION

Sun-Land argues that, irrespective of the validity of the agreements under section 8(e), those agreements violate sections 1 and 2 of the Sherman Act because they constitute an illegal group boycott and evidence a concerted refusal to deal.⁶ The Laborers contend that once a clause is found to be valid under section 8(e), it is automatically exempt from antitrust liability-

Organized labor enjoys two types of exemptions from federal antitrust laws: statutory and nonstatutory. Granddad Bread, Inc. v. Continental Baking Co., 612 F.2d 1105, 1109 (9th Cir.1979), cert. denied, 449 U.S. 1076, 101 S.Ct. 854, 66 L.Ed.2d 798 (1981). The sources of the statutory exemption include the Clayton Act, 15 U.S.C. § 17 (1982) and 29 U.S.C. § 52 (1982), and the Norris-LaGuardia Act, 29 U.S.C. §§ 104, 105, 113 (1982), which except some union activities from antitrust scrutiny. Connell, 421 U.S. at 621-22, 95 5. Ct. at 1834-35. “They do not exempt concerted action or agreements between unions and nonlabor parties.” Id. at 622, 95 S.Ct. at 1835. Hence, the statutory exemption does not apply here because the Laborers combined with nonlabor groups through the collective bargaining agreements.

The Supreme Court has recognized a limited nonstatutory exemption, which “has its source in the strong labor policy favoring the association of employees to eliminate competition over wages and working conditions.” Id. Thus some union-employer agreements are exempt from antitrust sanctions as part of the “proper accommodation between the congressional policy favoring collective bargaining under the NLRA and the congressional policy favoring free competition in business markets.” Id. The nonstatutory exemption, then, may be invoked in cases involving valid collective bargaining agreements between unions and employers on wages or working conditions.

We cannot accept the Laborers’ contention that, once an agreement is found to be within the construction industry proviso to section 8(e), it is entirely and invariably beyond the reach of the antitrust laws. We find a suggestion to the contrary in United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), one of the earliest cases defining the nonstatutory exemption. There the Supreme Court dealt with an alleged conspiracy among major coal companies and a union to drive smaller, competing coal companies out of business. The union was said to have agreed with the major companies to impose a uniform high wage upon the smaller companies “regardless of their ability to pay and regardless of whether or not the union represented employees of these companies, all for the purpose of eliminating them from the industry.” Id. at 664, 85 S.Ct. at 1590. The union contended that, because such an agreement concerned wage standards, it was exempt from the antitrust laws. The Supreme Court rejected that defense. The Court recognized that simple wage agreements between unions and multi-employer bargaining units do not violate the antitrust laws, but added that “[t]his is not to say that an agreement resulting from union-employer negotiations is automatically exempt from Sherman Act scrutiny simply because the negotiations involve a compulsory subject of bargain-ing____” Id. The Court concluded that a union “forfeits its exemption from the antitrust laws” when it becomes a party to a conspiracy with one set of employers to eliminate competitors to those employers. Id. at 665-66, 85 S.Ct. at 1590-91.

Pennington makes it clear, therefore, that a union that is otherwise guilty of a conspiracy in violation of the antitrust laws cannot escape liability merely because some of the means of accomplishing the goals of that conspiracy were embodied in a collective bargaining agreement. In so holding, the Court emphasized that nothing in national labor policy favored such activity. Id. at 666, 85 S.Ct. at 1591. The Court’s decision, however, falls far short of establishing Sun-Land’s case. For Pennington makes it equally clear that in the absence of such a conspiracy, a union is free to pursue its own bargaining objectives in the traditional way without interference from the antitrust laws. The union in Pennington was entitled, for example, to adopt its own uniform wage policy and to seek to implement it even though it suspected that the result would be to deprive some of the weaker employers in the industry of the ability to compete. Id. at 665 n. 2, 85 S.Ct. at 1591 n. 2.

The Supreme Court directly protected parties to a multi-employer collective bargaining agreement from the antitrust laws in Local Union No. 189, Amalgamated Meat Cutters & Butcher Workmen v. Jewel Tea Co., 381 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965), decided the same day as Pennington. In Jewel Tea, a fractured Court found that a marketing-hours restriction in a collective bargaining agreement obtained by the unions through “bona fide, arm’s-length bargaining in pursuit of their own labor union policies, and not at the behest of or in combination with nonlabor groups, [fell] within the protection of the national labor policy and [was] therefore exempt from the Sherman Act.” Id. at 690, 85 S.Ct. at 1602 (White, J.) (plurality opinion). Justice White’s opinion, joined by two other justices, noted that the “crucial determinant is not the form of the agreement ... but its relative impact on the product market and the interests of union members.” Id. at 690 n. 5, 85 S.Ct. at 1602 n. 5. Because the interest of union members in the hours of operation was immediate and direct, the agreement was beyond the reach of the Sherman Act even though “the effect on competition [was] apparent and real.” Id. at 691, 85 S.Ct. at 1603. Jewel Tea did not, however, muster a majority for the view that collective bargaining activity concerning mandatory subjects of bargaining could never be subjected to antitrust scrutiny. Justice Goldberg, concurring, embraced that position, but he was joined by only two other justices. The three dissenting justices would have held the agreement a violation of the antitrust laws.

The Supreme Court’s most recent case dealing with the nonstatutory exemption is Connell. There the Court held that the construction industry proviso to section 8(e) does not apply to agreements obtained outside the context of collective bargaining, 421 U.S. at 633, 95 S.Ct. at 1840, and that such agreements cannot claim the nonstat-utory exemption. Id. at 625, 95 S.Ct. at 1836. The Court merely noted that “[t]here can be no argument in this case, whatever its force in other contexts, that a restraint of this magnitude might be entitled to an antitrust exemption if it were included in a lawful collective-bargaining agreement.” Id. at 625-26, 95 S.Ct. at 1836-37 (citing Pennington and Jewel Tea).

Two Ninth Circuit cases, although not dealing with subcontracting clauses, generally support our holding. In California Dump Truck Owners Association, Inc. v. Associated General Contractors, 562 F.2d 607 (9th Cir.1977), we found that a valid collective bargaining agreement, “by itself, does not violate the federal antitrust laws.” Id. at 614. In Granddad Bread we held that a work preservation clause, valid under the nonstatutory exemption, was not sufficient evidence of antitrust violation by itself to justify submission to the jury. 612 F.2d at 1111. In both cases, then, we concluded that evidence in addition to a valid provision of a collective bargaining agreement is required in order to establish an antitrust violation. In neither did we state that such a provision could never be considered as evidence of an antitrust violation, if other evidence was also introduced.

In Brogan v. Swanson Painting Co., 682 F.2d 807 (9th Cir.1982), this court considered a situation similar to the one at issue here. In determining whether a subcontracting clause was “in violation of § 8(e) and the antitrust laws,” id. at 810, we concluded that, under Woelke, “the construction industry proviso to § 8(e) shelters union signatory subcontracting clauses that are sought or negotiated in the context of a collective bargaining relationship.” Id. We therefore reversed the district court’s judgment holding the clause unenforceable. We did not further elaborate on the scope or nature of the nonstatutory exemption.

Other circuits seem to agree with our holdings. An early Seventh Circuit case, Suburban Tile Center, Inc. v. Rockford Building & Construction Trades Council, 354 F.2d 1 (7th Cir.1965), cert. denied, 384 U.S. 960, 86 S.Ct. 1585, 16 L.Ed.2d 673 (1966), holds that an agreement coming within the construction industry proviso does not constitute a violation of the antitrust laws. And the Eleventh Circuit, while noting that it “express[ed] no opinion regarding the application of the nonstatutory exemption to these facts,” upheld a grant of summary judgment for the defendant on a subcontracting clause found valid under the proviso to section 8(e) since no other evidence of antitrust violations was presented. A.L. Adams Construction Co. v. Georgia Power Co., 733 F.2d 853, 855 n. 5 (11th Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 2155, 85 L.Ed.2d 511 (1985). Neither case discusses anticompetitive purposes other than those necessary to attain collective bargaining goals which do not violate labor law.

We think it apparent from the Supreme Court’s decisions in Pennington and Jewel Tea, and implicit in decisions of this and other circuits, that subcontracting clauses within the construction industry proviso to section 8(e) must be given breathing room to operate in their intended fashion without interference from the antitrust laws. While we refuse to rule that such clauses are wholly exempt from scrutiny if they are shown to be instruments of an antitrust conspiracy otherwise existing, we hold that a valid subcontracting clause contained in a collective bargaining agreement cannot serve as the basis of an antitrust claim. Yet Sun-Land has attempted to make the clauses the foundation of its antitrust claim here. As the Supreme Court stated in an analogous context, “[n]o case under the antitrust laws could be made out on evidence limited to such union behavior.” Pennington, 381 U.S. at 665, 85 S.Ct. at 1591.

We recognize that an agreement restricting subcontracting has anticompetitive effects. It adds nothing to Sun-Land’s claim, however, to argue that the intent or the effect of the clauses was to preclude Sun-Land from obtaining contracts because its employees were not represented by Laborers. That anticompetitive effect is part of the natúral operation of a subcontracting clause; the goals of federal labor law could never be achieved if every anticompetitive effect on business caused by collective bargaining were held to be a violation of the antitrust laws. See Connell, 421 U.S. at 622, 85 S.Ct. at 1835.

Congress would not have exempted the construction industry from the prohibition against “hot cargo” clauses only to have such provisions create liability under the antitrust laws. Moreover, the policy behind the provision would be ill-served if parties to such agreements were required to undergo trials on charges of antitrust violations solely because of the hot cargo provision or its intended anticompetitive effects.

There is no question on this record concerning the nature of Sun-Land’s antitrust claims. Sun-Land’s sole summary judgment submission on those claims states:

[T]he parties are in complete agreement that the following issues of law and no others are involved in this action[:]

2. Whether or not the subcontracting clauses in the collective bargaining agreements ... are violative of Sections 1 and 2 of the Sherman Act;

3. Whether or not the subcontracting clauses in the collective bargaining agreements ... fall outside the coverage of the Sherman Act as a result of the labor exemptions from antitrust law.

Sun-Land’s evidence of antitrust liability is clearly limited to the subcontracting clauses. The dissent disputes this conclusion and contends that we are “simply wrong” in our summary judgment analysis. It would have us remand to allow Sun-Land to produce additional facts demonstrating anticompetitive intent and conduct. The cross motions for summary judgment were heard in the district court pursuant to the stipulation setting forth the sole issues involved in the action. Having stipulated that no issues of law were involved in the action other than those concerning the subcontracting clause, Sun-Land cannot now seek to raise additional claims.

The nonstatutory exemption from the antitrust laws applies. Thus summary judgment against Sun-Land was proper, and although the district court may not have expressly relied on this rationale, we may affirm on any ground finding support in the record. Islamic Republic of Iran v. Boeing Co., 771 F.2d 1279, 1288 (9th Cir. 1985).

The judgment of the district court is

AFFIRMED.

1 . The 1980-83 Master Labor Agreement provides:

[NJeither the Contractor nor any Subcontractor on the jobsite will subcontract any work to be done at the site of construction, alteration, painting or repair of a building, structure or other work, except to a person, firm or corporation, party to a current labor agreement

with the Union, or the basic crafts, namely, the Carpenters, Cement Masons, Operating Engineers and Teamsters who are also party to an agreement covering the particular work generally recognized as the jurisdiction as defined by the Building and Construction Trades Department.

2 . Section 8(e) of the NLRA provides in part:

(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 unenforcible and void____

29 U.S.C. § 158(e).

3 . The construction industry proviso to section 8(e) states:

Provided, That 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.

4 . The clause in Woelke provided:

The Contractor agrees that neither he nor any of his subcontractors on the jobsite will subcontract any work to be done at the site of construction, alteration, painting or repair of a building, structure or other work (including quarries, rock, san[d] and gravel plants, asphalt plants, ready-mix concrete plants, established on or adjacent to the jobsite to process or supply materials for the convenience of the Contractor for jobsite use) except to a person, firm or corporation, party to an appropriate, current labor agreement with the appropriate Union, or subordinate body signatory to this Agreement.

456 U.S. at 649 n. 1, 102 S.Ct. at 2074 n. 1.

5 . In addition, the dissent would require a trial over the purpose of a subcontracting clause even though the issue is not specifically raised by the defendant, or if raised, no proof of impermissible purpose is submitted in response to a motion for summary judgment. Such a requirement would needlessly encourage litigation, and would tend to thwart the apparent intent of Congress in enacting the section 8(e) proviso.

6 . The dissent contends that the argument presented by Sun-Land is not that "the contract language is sufficient to create liability; it merely urges that the contract language is not sufficient to insulate the defendants from liability." Infra at 1120-1121. We disagree. The issue on appeal was clearly stated by Sun-Land itself in its opening brief: "Whether the challenged ‘particular union’ subcontracting restrictions violate Sections 1 and 2 of the Sherman Act irrespective of whether or not they are valid under section 8(e) of the Labor Act.”