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

United States District Court, D. Connecticut

May 23, 2018

CONNECTICUT IRONWORKERS EMPLOYERS' ASSOCIATION, et al., Plaintiffs,
v.
NEW ENGLAND REGIONAL COUNCIL OF CARPENTERS, Defendant.

          RULING AND ORDER

          Stefan R. Underhill United States District Judge

         This case involves a “turf battle” between two sets of construction organizations. The defendant, New England Regional Council of Carpenters (the “Carpenters”), has entered into collective bargaining agreements (“CBAs”) with non-party construction companies and construction managers (collectively, the “employers”). The agreements contain restrictive subcontracting clauses (sometimes known as “hot cargo” clauses, but which I call the “CBA clauses”) that prohibit signatories from subcontracting work to any employer that has not acceded to a Carpenters' CBA. The plaintiffs-construction trade unions, [1] contractors, [2] and trade associations[3] (collectively, the “Ironworkers”)[4]-allege that the Carpenters have used the CBA clauses to expand the scope of their work by preventing the Ironworkers from bidding on and performing work that traditionally was assigned to the Ironworkers. According to the complaint, that conduct constitutes anticompetitive behavior, in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2, and unfair labor practices, in violation of 29 U.S.C. § 1987.

         I previously granted summary judgment for the Carpenters, see Conn. Ironworkers Emp'rs Ass'n v. New Eng. Reg'l Council of Carpenters, 157 F.Supp.3d 173, 175 (D. Conn. 2016) (“Ironworkers I”), after I concluded that the Carpenters' conduct was shielded from antitrust scrutiny by both the non-statutory exemption to the antitrust laws and the construction industry proviso contained in Section 8(e) of the National Labor Relations Act (“NLRA”), 29 U.S.C. § 158(e). On appeal by the Ironworkers, the Second Circuit agreed that the Carpenters' actions fell within the construction industry proviso, and affirmed with respect to the unfair labor practices claim. See Conn. Ironworkers Emp'rs Ass'n v. New Eng. Reg'l Council of Carpenters, 869 F.3d 92, 96-97 (2d Cir. 2017) (“Ironworkers II”). The Court concluded, however, that “there are factual disputes that preclude a decision on whether the conduct falls within the non-statutory exemption, ” and reversed with respect to the Ironworkers' Sherman Act claim. Id. The Court remanded “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.” Id. at 97.

         Following the remand, and before allowing additional discovery, I scheduled a new argument on the undecided issue raised by the Carpenters' previously-briefed motion for summary judgment. After examining the parties' submissions, I conclude that the Ironworkers have failed to provide evidentiary support for the actual adverse effect on competition required to state a prima facie case for violation of the Sherman Act under the rule of reason. Therefore, I again grant the Carpenters' motion for summary judgment.

         I. Standard of Review

         Summary judgment is appropriate when the record demonstrates that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When ruling on a summary judgment motion, the court must “view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor.” Sologub v. City of New York, 202 F.3d 175, 178 (2d Cir. 2000); Aldrich v. Randolph Ctrl. Sch. Dist., 963 F.2d 520, 523 (2d Cir. 1992) (court is required to “resolve all ambiguities and draw all inferences in favor of the nonmoving party”). “The burden of showing that no genuine factual dispute exists rests upon the moving party.” Carlton v. Mystic Transp., 202 F.3d 129, 133 (2d Cir. 2000). When a motion for summary judgment is properly supported by documentary and testimonial evidence, however, the nonmoving party may not rest upon the mere allegations or denials of the pleadings, but must present sufficient evidence supporting its position “to require a jury or judge to resolve the parties' differing versions of the truth at trial.” Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986); Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir. 1995).

         “The trial court's function at this stage is to identify issues to be tried, not decide them, ” Graham v. Long Island R.R. Co., 230 F.3d 34, 38 (2d Cir. 2000), and so “[o]nly when no reasonable trier of fact could find in favor of the non-moving party should summary judgment be granted.” White v. ABCO Eng'g Corp., 221 F.3d 293, 300 (2d Cir. 2000). Summary judgment therefore is improper “[w]hen reasonable persons, applying the proper legal standards, could differ . . . on the basis of the evidence presented.” Sologub, 202 F.3d at 178. Nevertheless,

the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. . . . Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.

Anderson, 477 U.S. at 247-48.

         “[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial, ” and in such circumstances, there is “no genuine issue as to any material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); accord Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (movant's burden satisfied if it can point to an absence of evidence to support an essential element of nonmoving party's claim). To present a “genuine” issue of material fact and avoid summary judgment, the record must contain contradictory evidence “such that a reasonable jury could return a verdict for the non-moving party.” Anderson, 477 U.S. at 248.

         “In the context of antitrust cases, ” the Second Circuit has noted that “summary judgment is particularly favored because of the concern that protracted litigation will chill pro-competitive market forces.” PepsiCo v. Coca-Cola Co., 315 F.3d 101, 104 (2d Cir. 2002) (per curiam). Thus, “[a]lthough all reasonable inferences will be drawn in favor of the non-movant, those inferences ‘must be reasonable in light of competing inferences of acceptable conduct.'” Id. at 105 (quoting Top Mkts. v. Quality Mkts., 142 F.3d 90, 95 (2d Cir. 1998)).

         II. Background

         The Ironworkers and the Carpenters are both construction organizations that operate throughout New England. The Carpenters have entered into CBAs with many construction companies and construction managers in the region that contain restrictive subcontracting clauses.[5] Those clauses-“colloquially called ‘hot cargo' clauses”-“bar signatories from subcontracting work to any employer that is not also a signatory to a Carpenters' CBA.” See Ironworkers II, 869 F.3d at 97. The Ironworkers allege that the Carpenters have used the CBA clauses anticompetitively “to prevent the Ironworkers from performing the relevant work, ” thereby “secur[ing] work in the New England area that allegedly belonged to the Ironworkers.” See Id. at 97-98. They assert that the Carpenters' conduct constitutes anticompetitive behavior in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2.

         The Carpenters moved for summary judgment in May 2014, Doc. No. 85, arguing that their actions were “shield[ed] . . . from antitrust scrutiny” by “the non-statutory labor exemption and the ‘construction industry proviso' provided in Section 8(e)” of the NLRA. See Ironworkers I, 157 F.Supp.3d at 175. I granted the Carpenters' motion. In a ruling issued on January 20, 2016, I held that the Carpenters had “established the requisite elements to be afforded the protection of the construction industry proviso” and had also shown that “the subcontracting provisions at issue, ” as “lawful provisions of a valid CBA, . . . [were] protected by the non-statutory labor exemption.” Id. at 187. Therefore, I concluded, “the Carpenters [were] not subject to antitrust scrutiny for their attempts to enforce the subcontracting agreements.” Id. at 188.

         The Ironworkers appealed and the Second Circuit reversed in part. Although the Court agreed that “the construction industry proviso applies to the disputed subcontracting practices, ” it decided that “disputes of material fact prevent [it] from deciding . . . whether the non-statutory exemption applie[d].” Ironworkers II, 869 F.3d at 104. The Court referred to the standard for applying the non-statutory exemption set forth in Local 210, Laborers' International Union of North America v. Labor Relations Division, Associated General Contractors of America, New York State Chapter, 844 F.2d 69 (2d Cir. 1988) (“Local 210”):

First, the agreement at issue must further goals that are protected by national labor law and that are within the scope of traditionally mandatory subjects of collective bargaining. Second, the agreement must not impose a direct restraint on the business market [that] has substantial anticompetitive effects, both actual and potential, that would not follow naturally from the elimination of competition over wages and working conditions that results from collective bargaining agreements.

Id. at 79-80 (citations, internal quotation marks, and alterations omitted).

         With respect of the first prong of the Local 210 test, I had relied on Local 210 and a Supreme Court decision on which it relied, Fibreboard Paper Prod. Corp. v. NLRB, 379 U.S. 203 (1964) (“Fibreboard”), for the proposition that most “subcontracting clauses are within the scope of the mandatory subjects of collective bargaining.” See Ironworkers II, 869 F.3d at 107. Quoting Justice Stewart's concurrence in Fibreboard, I concluded that “the ‘substitution of one group of workers for another to perform the same task in the same location under the ultimate control of the same employer' is a mandatory subject of collective bargaining.” Ironworkers I, 157 F.Supp.3d at 184 (quoting Fibreboard, 379 U.S. at 224 (Stewart, J., concurring)) (internal brackets omitted). Because “each subcontracting agreement . . . was a part of an existing CBA, ” and the Ironworkers failed to show that “the type of subcontracting agreement at issue [was] anything other than a lawful subject of a CBA, ” I held that the CBA clauses were protected by the non-statutory exemption. Id. at 92 (emphasis removed).

         The Second Circuit deemed my reliance on Local 210 and Fibreboard “misplaced.” Ironworkers II, 869 F.3d at 107. Both decisions, the Court determined, were “premised on the fact that the particular subcontracting clauses . . . were designed to ‘preserve work traditionally performed by a union for a particular employer.'” Id. (quoting Local 210, 844 F.2d at 73) (emphasis in Ironworkers II); see also Id. (“[T]he ‘contracting out' of the work previously performed by members of an existing bargaining unit is a subject about which the National Labor Relations Act requires employers and the representative of their employees to bargain collectively.”) (quoting Fibreboard, 379 U.S. at 209 (emphasis in Ironworkers II). Those precedents stood only “for the proposition that work preservation-not restrictive subcontracting generally-is a legitimate labor purpose and a mandatory subject of collective bargaining.” Id. With respect to the present case, the Second Circuit concluded that “the record [was] insufficient to determine whether or not the[] subcontracting clauses were in fact being used to preserve work . . . or whether [they] were used for work expansion.” Id. at 108. Because the latter “purpose . . . would not fall within the scope of traditionally mandatory subjects of collective bargaining, ” the Court held that I “erred in finding, as a matter of law, that the disputed subcontracting practices were entitled to the protection of the ‘non-statutory exemption.'” Id.

         The Second Circuit remanded “for further proceedings consistent with [its] 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.” Id. at 109. On remand, prior to reopening discovery, I elected to address the undecided alternative ground raised by the Carpenters' previously-briefed motion for summary judgment. This ruling addresses the unresolved issues raised by that motion.

         III. Discussion

         Following the Second Circuit's determination that the CBA clauses are not entitled to the non-statutory exemption, the Carpenters' motion for summary judgment presents two further matters for decision. First, what is the proper standard for analysis of the Ironworkers' claims? The Ironworkers insist that the CBA clauses constitute “group boycott[s]” that should be deemed “per se violations of the antitrust laws.” Mem. Opp'n Mot. Summ. J., Doc. No. 100, at 40. The Carpenters, conversely, argue that the CBA clauses are “exclusive dealing requirements” that should be “analyzed under the rule of reason.” Mem. Supp. Mot. Summ. J., Doc. No. 86, at 32- 33. I agree that the CBA clauses-which at worst substitute one group of unionized workers for another-are not “manifestly anticompetitive.” See Bus. Elecs. Corp. v. Sharp. Elecs. Corp., 485 U.S. 717, 723 (1988). Accordingly, per se condemnation is inappropriate, and I analyze the clauses under the rule of reason.

         Second, do the CBA clauses function as “unreasonable” restraints under the rule of reason? The multi-part, burden-shifting rule of reason requires that the “plaintiff bear[] the initial burden of showing that the challenged action has had an actual adverse effect on competition as a whole in the relevant market.” Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., 996 F.2d 537, 543 (2d Cir. 1993) (“Capital Imaging”). Here, I conclude that the Ironworkers have failed to present evidence sufficient to show that the CBA clauses are anticompetitive under the rule of reason. As a result, the Ironworkers cannot state a prima facie case for violation of the Sherman Act, and I grant the Carpenters' motion for summary judgment.

         A. Should the CBA clauses be analyzed under the per se rule or the rule of reason?

         Most arrangements alleged to violate the antitrust laws are analyzed under the so-called rule of reason, a multi-part test through which the factfinder “weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.” See Bus. Elecs. Corp., 485 U.S. at 723. A few arrangements, however, such as “group boycotts, ” are considered “unlawful per se.” FTC v. Ind. Fed'n of Dentists, 476 U.S. 447, 458 (1986). In order to avoid application of the rule of reason- which entails a “burdensome” and “demanding calculus, ” Am. Steel Erectors v. Local Union No. 7, Int'l Ass'n of Bridge, Structural, Ornamental & Reinforcing Iron Workers, 815 F.3d 43, 61, 67 (1st Cir. 2016) (“ASE II”)-the Ironworkers attempt to obtain the benefit of the per se rule by “forcing the [CBA clauses] into the ‘boycott' pigeonhole.” See Ind. Fed'n of Dentists, 476 U.S. at 458. The Carpenters respond that the CBA clauses are not a “group boycott, ” but rather akin to “exclusive dealing requirements” that should be “analyzed under the rule of reason.” Mem. Supp. Mot. Summ. J., Doc. No. 86, at 32-33. I agree with the Carpenters.

         1. Are the CBA clauses a proscribed “group boycott”?

         Although courts often list so-called “‘[g]roup boycotts' . . . among the classes of economic activity that merit per se invalidation” under the antitrust laws, it is “far from certain” what conduct “fall[s] within the forbidden category.” Nw. Wholesale Stationers v. Pac. Stationery & Printing Co., 472 U.S. 284, 294 (1985); see also Spectators' Commc'n Network v. Colonial Country Club, 253 F.3d 215, 223 (5th Cir. 2001) (observing that “the distinction between boycotts that are per se illegal and those judged by the rule of reason is often a vexing one”). Broad dicta in older cases notwithstanding, “per se condemnation is not visited on every arrangement that might, as a matter of language, be called a group boycott or concerted refusal to deal.” U.S. Healthcare v. Healthsource, Inc., 986 F.2d 589, 593 (1st Cir. 1993). Instead, the Supreme Court has “limit[ed] the per se rule in the boycott context to cases involving horizontal agreements among direct competitors.”[6] NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998); cf. Bogan v. Hodgkins, 166 F.3d 509, 515 (2d Cir. 1999) (stating that the “classic model of a group boycott” is “a concerted attempt by a group of competitors at one level to protect themselves from competition from non-group members who seek to compete at that level”) (quoting Smith v. Pro Football, 593 F.2d 1173, 1178 (D.C. Cir. 1978)) (internal quotation marks omitted). Thus, for the Ironworkers to prevail on their boycott claim under the per se rule, “a horizontal agreement is a prerequisite.” PepsiCo, 315 F.3d at 110.

         The Carpenters argue that this case “obviously [does] not present” a group boycott under recent precedent, see Ind. Fed'n of Dentists, 476 U.S. at 458, because the challenged agreements were made “between parties at different levels of the market structure.” Mem. Supp. Mot. Summ. J., Doc. No. 86, at 32. The Carpenters and the employers “did not compete” with one another; rather, the Carpenters “w[ere] an upstream supplier” of labor for the employers. See MacDermid Printing Sols. v. Cortron Corp., 833 F.3d 172, 185 (2d Cir. 2016). Thus, the Carpenters argue, the ...


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