pe/sa 11/1/74
TO:
ROM:
BENCH MEMO
Mr. Justice Powell
Penny Clark
DATE: November 1, 1974
No. 73·12.56 Connell Con1truction co. v.
Plumbers Local 100
Thie is a complex labor•antitrust case with two i11ue1:
(1) whether a hot-cargo contract between Local 100 and Connell
ia entitled to immunity from federal antitrust laws, and (2)
wheth r state antitrust law is preempted.
The events underlying this case occurred in 1970sand
1971 in Dallas. Local 100 had a collective bargaining agree•
ment with a multiemployer unit, the Mechanical Conctractors .
Aa1 1n, setting uniform wages for all members of the aaaoci tion
and binding the union to impose the same wage terms on any
other contractor with which it obtained a contract. There
were a large number of mechanical contractors in the Dallas
area that did not have bargaining agreements with Local 100.
As a part of it1 campaign to organize these subcontractor •
Local 100 approached a number of general contractors and a1ked
them for an agreement that they would subcontract work only
to those mechanical contractors that had collective bargaining
ag~eementa with Local 100. Connell refused to 1ign, and Local
100 sent a lone picket to one of its construction projects.
About 150 work rs walked off the job.
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2.
Connell filed a suit in Texa• court, alleging a violation
of Texas antitrust law and asking for injunctive relief. Local,
100 removed the case to federal court. and COnnell’• motion to
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remand was denied, Connell then sign d the agreement under
prot st. The caee was tried on the merits. though there is
little or no dispute over the facts, and Judge Sara Hughes
gra ted Local 100 a declaratory judgment (on its counterclaim)
that the contract with Connell was legal under § 8(e) of the
NLRA and that it violated neither federal nor state antitru1t
laws. CA5 (Morgan and Ingraham) affirmed over Judge Clark’s
dissent. Connell brought the case here.
I. FEDERAL ANTITRUST LAW
There are three theories on which Local 100 could be held
to forfeit its labor exemption from the antitrust laws:
(1) That a labor union has no antitrust immunity
for activities that are illegal under the laws governing
labor relation • This ts the position Judge Clark took
in his dissent. lt would require the Court to decide
whether the agr ement with Connell violated § 8(e) of
the NLRA.
(2) That the subcontracting agreement ie not entitled
to the labor exemption under Justice White’s analysis in
tJMW v. Pennington, 318 U.S. 657 (1969) (opinion for the
Cour~, and Meat CUtters Local 189 v, Jewel Tea Co •• 381
676 (1965) (opinion for three Justices).
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(3) That Local .100 waa not entitled to antitrust
immunity becau1e forcing Carmell to sign the subcontracting
agre t wa• part of a conspiracy with unionized sub•
contractor• to limiaate competition from nonunion
1ubcontractora.
A. Judge Cl rk’ s Th on
Two reasons are advanced for holding the ubcontraating
agreement invalid under 8(e): (1) Connell has no bargaining
relationship with Local 100, and the 8(e) proviso for the
construction industry was intended only to authorize hot cargo
agreeimt\ts betweetf!’Parties who have an obligation to bargain
with each other; and (2) picketing to obtain hot cargo agree•
ment is illegal under § 8(b)(4)(B). The Board and several
courts of appeals have decided the latter question iii the union’s
favor, holding that picketing to obtain a legal 8(e) agre ent
ia l egal despite the general prohibition of secondary picketing.
2
To my knowledge there is no contrary authority. On the fir•t
point, there is no direct NLRB precedent. The General Coun al
ha1 refused to issue complaints on the queetion, interpreting
the Board’s decisions on other questions to authorize sub•
contracting agreements b tween unions and contracts that do
not stand in a proximate empl oyer-employee relationship.
Becau1e of the General C0U111el’1 default on the issue, the
amici urg this Court to hold 1uch agreement• unlawful und r
8(e) and 8(b)(4)(B). They also aak the Court to diaapp~ove
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the exi•tillg preo dent and hold that a union may not pick t
to obtain a lawful 8(e) agreement. I think it i• unnecessary
to decide the•• question• because Judge Clark’s view of the
antitrust exemption ia untenable in this context.
The legislative hietory of Taft-Hartley strongly indicates
that Conaresa intended to give Ullion1 complete antitruat immunity
for aeoondary activities. The Hartley bill1 which paaeed the
Hou e, included a provision that would have repealed antitrust·
illlmlnity for secondary activities of all types. The Hartley
bill ould alao have codified this Court’s Allen ~radley decision,
which held that union• are subject to antitrust laws when they
join in a classical antitrust conspiracy among employera.
Allen Bradley Co. v. IBEW Local 3, 325 u.s. 797 (1945). The
Senate bill contained no antitrust provision, but Senator Ball
introduced an amendment similar to the House bill’s antitrust
section. After extensive debate the Ball amendment wa1 def ated.
t..tHi6~S
Senator Taft then offered a compromise amendment to makeAliable
for actual damages wheneve~ they engage in illegal secondary
activities. Taft’s amendment was approved by a handy ipa.jority.
In conference the House agreed to drop its antitruat rem dy,
with its treble damages, injunctions. and criminal penalties,
and to accept the Senate’s actual•damagee remedy in1tead.
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Section 303 of the Taft-Hartley Act was the compromise.
There is some ambiguity in the legialative hietory. The
focus of the deb te on antitE’Uat liability was the spect r
of a retum to “govemment by injunction,” the judicial abuses
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that had prompted the Norri1•LaGuardia Act. The Ball amen t
would hav limit•d th Norri •L Guardia Act’ role in prohibiting
injunction• against labor activities under the antitrust 1 w •
The House bill would have 1u1pended Norris•LaGuardia al togebhe~
in antitrust actions. Still, the rejection of the antitrust
proposals i1 strong evidence that Congress compromieed on an
actual-damages remedy, rejecting the possibility of treble
damages and criminal penalties, as well as injunctions, for
a11 violations of the secondary-boycott provisions.
If the subcontracting agreement with Connell is illegal
for either of the reasons suggested, the evidence will establish
a violation of 8 (b) (4). If the agreement does not come within
the construction industry prtviso because Connell and Local
100 have no bargaining relationship, Local 100 ~as violated
8(b)(4)(A) by picketing to obtain an agreement that is prohibited
by 8(e), or alternatively, has violated 8(b)(4)(B) by forcing
Connell to “cease doing business” with nonunion subcontractor •
If picketing to obtain a lawful 8(e) agreement is illegal, itl
illegality stems from 8(b)(4)(B). In either case, Local 100
would be liable to Connell for actual damages under § 303.
~o’f’irie&~
But sine Connell neither pleaded a violation ofC :I 303 -M!i~~~
c. a’5e. OV\ 4″.<Jt~”‘~’ -tk ,·ssu.a,. of § 303 \ ia’1ilH~
A :l not b fore the Co t.
There is a strong practical reaaon to read the legislative
history as I auggest. Secondary boycotts were restraints of
trade at common law. They were among the first practices to
be outlawed under the Sherman Act. !•&•, Lo w v. La lor,
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208 u.s. 274 (1908) (the Danbuiry Hatters caae). Congress
act d a clear ex mption for them in the Norris•LaGuardia
Act, and although the Supreme Court’s acqui aaence wa1 both
reluctant and late, it was complete. _s..;..;…….-…;;,;;;;;;,,,;;o–……-…-…-..–..-.
Hutch eon, 312 u.s. 219 (1941). When Congress set out to
r gulate secondary boycotts, it did not return to the readily
Ac.t
av ilable Sh rmanAr dy but enacted S 8(b)(4) of the NLRA,
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defining illegal activities with more care than it had ev r
done under the antitrust laws, and entrusting their enforc t
to the NLRB. ‘l11e law governing secondary boycotts is highly
technical. It would be undesirable to enforce it through the
)’luni:tiv.e remedies of the Sherman and Clayton Acts, when
Congress has provided a specific remedy in I 303.
B. Justice Whit ‘s Theo!Y
In Pennington and Jewel Tea Justice White outlined a
fairly complex theory of labor immunity, Writing for the Court
in Pepnington, he said that the complete inmmity conferred
by the Clayton and Norria-LaGuardia Acts applies only when
unions act alone. It does not apply to “arrangamettts or agreements
between unions and employers.” 381 u.s. t 661•62.
#JZ. ~road. i~ l•’c-.;..s of
As to the holding in Penningtan, Athi stat t dictum.
Pennington could have been decided under the precedent of
All n Br dley, for there was evidence that the UMW had conspired
with the coal operators aaeociation to eliminate marg4lnal
operators from the industry, limit production, and preempt the
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market for the conapir&tora. Justice White’• opinion for himself
and two other Justices (including Justice Brennan) in
J wel Tea 1ugge1t1 that he con.aiders any contract between a
union and a nonlabor party • including an ordinary single•
employer collective bargaining agreement – out ide the scope
of Clayton and Norris•LaGuardia immunity. To such agreement•
he applies a “balancing” analy is, comparing the anticompetitive
effect on the product market with the legitimate interests of
union members under the labor laws. The agreements may y t be
exempt from antitrust laws if the labor interests prevail, but
thi1 im:nunity derives from judicial doctrine instead of atatute1.
It is possible that Justice White would apply this balancing
analysis to Local lOO’s subcontracting agreement, even if ha
accepted my analysis of the Taft-Hartley legislative history,
by confining the implied exemption for secondary activitiea
to union actions t en without employer participation or agreement.
If so, the factors that would ateer his analysis are
as follows: (1) how strongly the agreement implicates national
labor policy, including whether it involves a compulaory subject
of bargaining, whether the agreement is consistent with the
union’• obligation to its memh•r•. and whether the labor 1 wa
protect or encourage the agreement; (2) how strongly tha
agreement violate antitrust policy, including whether the
employ r ie primarily interested in hi• competitive poaition
rather than his labor relations, whether th• agr emant ha
1t’l’ong • ticompetitive potential, and whether the union h
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aut’r”endered its freedom of action with respect to its bargaining
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policy.
In the context of this case, it would be highly relevant
that th agreement between Local 100 ad COnnell, even if not
prohibited by I 8( ), i1 not within a traditional bargaining
relationship, and that Local 100 made no pretense of
repreeenting Connell’• employee•. Still, the agreement i1
related to the union’s traditional concern of preserving work
for it1 members. If Local lOOoperates a hiring hall, and 1
presume that it does although the record is not clear, ita
member would be vitally interested in getting more jobs for
unionized subcontractors. The agreement With Connell would
also aid Local 100 in its efforts to organize other subcontractors.
Again, if there is a hiring hall, the union
members would benefit directly from an increase in the number
of unionized contractors. If there is no hiring ball, the
union members would still benefit from unionization of other
subcontractors, because their. employers would face less
competition from subcontractors who pay low wages. Their
employers would have a better position in competitive bidding,
and the employees would benefit from the lax-ger number of jobs,
The1e are the con iderations that the CA5 majority found to
be “legitimate \.D\ion intere•ta.”
The subjectivity of thi• analysis illustrate• the dang r
of Justice Whit•’• approach. In almost every case, the union’s
antitrust immunity will depend on the predilections of the
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judges that decide the case. As one notawriter put it,
Thia balancing act would seem to return the 1tatua
of 1 bor ‘ s exemption to the days of the Dupl x case
[Du2lex Printin~ Pres Co . v. De ring, 254 u.s. 443
(19 1)], durlngld\lch Judici 1 notions of th paop r
balance in the industrial struggle wer determinative
of 1 bor1e antitrust liability. This practic w
condemn d in Hutch son, wher in the Court found that
Congress had aeffned labor interest and th r by
xclud d any ubstitution of judicial policy
jud t cone ming union purpo e •
9.
It would be difficult for a union to determine in advance whether
a contemplated agreement could lead to treble damages under
the antitrust laws.
If the balancing approach must be faced, 1 would recommend
some hard thinking to come up with a more concrete approach to
the labor exemption. After only preliminary thinking, I am
inclined to favor a return to the Allen Bradley approach: a
union is statutorily exempt unless it has entered a traditional
antitrust conspiracy among employers, that is, a conspiracy
with an object of fixing prices, dividing markets, excluding
competitors, or the like/ Since the allegations in Pennipgton
fit thi1 mold, it would be possible to establish such a rule
without overruling any cases.
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c. e Conspiracy
I
The -‘1t«A oK of All me to the narrowest
ground for deciding thi• case: Local lOO’a participation in a
claaeical ntit~at conspiracy among the members of the multiemploy
r bargaining unit.
Connell tried this ca e below on the theory that the
t~me1t favoX”ed nations” clause in the multiemployer agreement
established a ~,ima facie case of conspiracy. Local 100 had
agreed, contrary to the usual behavior of unions, that it
would not sign up any new subcon•ractors at a wage structure
different from that in the multiemployer contract. The only
conceivable purpose of the agreement would be the elimination
of competition among union con• tractors, including those outside
the multiemployer unit, Reduction of competition based on wage
level ‘# among parties to a multiemployer agreement is tolerated,
but no labor policy allows o~ encourages the multiemployer unit
to prescribe wages for other bargaining units. Local lOO’s
attempts to from general
alleged conspiracy.
The union subcontractors would benefit from the partial
elimination of competition. Any succea that Local 100 ha•
in getting “exclusive dealing” agreements froni general
contractors would increase the number of jobs available to
unionized subcontractors. And aucceaa in organizing eubeontracto1
would reduce competition baaed on low ‘?tfage scales.
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The DC did not rule on the conapiracy issue. Judge
Hughe• did not reach the issue because she held the 1ubcontractin1
‘ agreement legal under 8(e), and therefore automatically exempt
from the antitrust laws. The CAS majority held that no such
conspiracy was established, taking an unjustifiably narrow
view of the kind of conspiracy that would invoke the Allen
Bradley rule.
The CAS majority ignored the multiemployer agreement
altogether. It emphasized that the complaint alleged no
conspiracy betweeen Local 100 and the unionized subeontractors.
Then it said that the proof at trial alluded to no such
conspiracy, auotiff~ from the· testimony of Connell’s president.
H was asked if he had any evidence that Local 100 had
conspired “to try to drive Texas Distributor• [a nonunion
subcontractor], or anyone else, out- of business,” or any
evidence that it had conspired “to create a monopoly in the
Dallas area for certain contractors.” To both ctUestions, he
answered that he had no su~h information. CAS regarded these
answers as conclusive, apparently because it read Pllen ra<lley ,
Pennington, and anotbeir CAS case to withdraw ioununity only
from union conspiracies that “create a monopoly among fellowconspiratory
busine11 interest .” This formulation is too
narrow when it ignores the existence of a conspiracy to reduce
price competition from contractors outside the multiemployer
unit and to secure “exclusive dealing agreements” from general
contractors to foreclose nonunion contractors from competing
for ~b1.
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Thus, as of the time of trial, there was evidence
suggesting that Local +oo w~s participating in a conapiracy
among unionized contractors, with the purpose of insulating
themae ~ve s from .outside competition. As an integral part of
that ~onspirscy , the agreement with Connell should have been
held outside the scope of Local lOO’s antitrust immunity.
Whe~her it was also an antitrust violation has not been decided
be ~ow. Unless the Court wanta to treat it as a per se violation
($nd I do not · think it fits the classic psttern. of a group
boycott or concerted refusal to deal, e.2. , Klor’s. Inc . v.
Broadwav-Hale Stores Inc., 359 U.S. 207 (1959)), it would
seem preferable to remand for decision whether the agreement
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was illegal.
‘nl.ere is one final problem. Local 100 1s counsel informs
us that the “most favored nstions1• clause in the multiemployer
agreement was eliminated in 1973. Connell has not asked for
damages (surprise!) but only for declaratory and injunctive
relief. In a footnote. Local lOO’s counsel says that insofar
as Connell’s claim depends on the “most favored nations”
clause, it is now moot. Connell’s brief does not respond to
the point.
Whatever this problem is, it is not mootness. There is
a continuing live controversy between Connell and Local 100
over the legality of the “exclusive dealing” agreement. The
only question is what evidence ia to be used in ruling on its
legality: whether it ia to be determined as of now or as of
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tri 1. Local 100’• analogy to repeal of challenged statutes
i• not very helpful, because the agreement between Local 100
and the multiemployer group could continue quietly without an
express contractual provision. Moreover, if the “exclusive
dealing” agreement was illegal at it• inception. it would be
highly artificial to disregard thati!-llegality in determining
whether Connell is entitled ,to declaratory or injt.mctive relief
now. Accordingly, I would decide the case on the record created
at trial.
STATE ANTITRUST, LAW
The current rule for preemption of state law ia expressed
in Amalgamated St”r'”e et Employees v. Lockridge, 403 U.S. 274, 284
(1971): “the National Labor Relations ..t:1ct pre-empts the juria•
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diction of state and federal courts to regulate conduct ‘arguably I
~
subject to § 7 or § 8 of the Act.'” -aef-ore this principle i
was announced as a rule of general application in San Diego
Building Trades Council v. Garmon, 359 U.S. 236 (19S9), it had
been applied to preemption· of state antitrust law. Weber v.
Anheuser-Bu eh, Inc., 348 U.S. 468 (19S5). Nor does, state
antitru1t law fit any of the eubsequent exceptions to the
Garmon rule. See Lockridge, 403 U.S. at 297-298; Cox, Labor
Law ~eemption Revisit d, 85 Harv. L. Rev. 1337, 1357 (197 ,.
Application of the Garmon principle would allow the use
of state antitrust laws in Allen Bradley conspiracies. EYen
if particular aspects of the union’s conduct are arguably
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protected or prohibited by the NLRA, the over-all conspiracy
would not be, and there would be no danger of a claah between
state antitrust policy and federal labor policy. To that
extent labor’s exemption from federal antitrust law would
coincide with the preemption of state antitrurat law. But
Justice White’s approach to the federal law, allowing antitrust
law to apply to some collective bargaining agreements on
mandatory subjects of bargaining. could not carry over into
state•law preemption. doctrine without undermining the Garmon
principle. To me, this furnishes another reason for rejecting
Justice White’s approach. Lockridge recognizes the need for
simplicity in state-law preemption doctrine, 403 U.S. at 289-290.
For the same reasons, congruence between the use of federal
antitrust and state antitrust would be desirable. Although
the federal antitrust exemption is found in the Clayton Act
and the preemption of state antitrust law has a judicial aource,
the two doctrines have a common purpose: to avoid the application
of conflicting legal principles in an area that Congress
has selected for detailed regulation. The only possible
justification for giving federal antitrust law a wider sweep
than state antitrust law is a willingness to trust federal
courts more than state courts. But federal judges, despite
their greater familiarity with federal labor policy, have a
poor track record. For all these reasons, I recommend a rule
that allows federal and state antitrust law to apply only when
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there is proof of union participation in a classical antitrust
conspiracy.
P.C.
88
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FOOTNOTES
1. I think the USDC was wrong in denying the remand
because there was no federal ouestion in Connell’• complaint.
But after the motion was denied. Connell amended its complaint
to state a cause of action under the federal antitrust laws.
and there is now no dispute about fedaral jurisdiction.
l. From all indications. the leading figures in the
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passage of the Landrum•Griffin Act in 1969 believed that the
lag lity of picketing tw obtain a hot cargo agreement was an
unlettled que1tion. Conmittee reports and sp che on the
Ul\’\ai” ~l.~us dite-tAJ:s ‘illlt iJ~) WA~ MOt
floor of the House and the SenateAintended to chang existing
law on the point, as it pertained to the construction industry
agreements authorized by the proviso to 8(e). H. Rep. No.
1147, 86th Cong., lat Saas., st 943-944 (conference report);
II Legislative History of the Labor-Management Reporting and
Diaclosure Act of 1959, at 1433 (19S9» (statement of Sen.
Kennedy). A memorandum inserted in the Congressional Record
by Sen. Goldwater. a member of the labor com:nittee respon1ible
for the bill1 indicates that the committee recognized that
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the ouestion had not been decided and intended to leaveAin
“in the same unresolved status ••• and [intended] that the
Board and the ciurt1 decide the issue for the building
construction industry as if these new amendments contained in
I 8(e) had not been enacted and in accordance with the
previou1ly applicable law.” Il Legislative History of the
~A. at 18S8.
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3. Section 303, codified as 29 u.s.c. I 187. provides:
(a) It shall be unlawful, for th purpose of
this section only, in an indu try or activity
affecting commerce, for any labor org nizstion to
engage in any activity or conduct defined as an
unfair labor practice in I 158(b)(4) of this title.
(b) Whoever ehall be injured in hi business
or property by reason of any violation of subsection
(a) of this section may sue therefor in any district
court of the United States • • • without respect to
the amount in controversy, or in any other court
having jurisdiction of the parties, and shall recover
the damages by him sustained snd the cost of the suit.
i
As originally enacted, S 303 listed the practices that supplied
a cau1e of action, but in 19S9 the detailed listing was dropped
because it merely tracked the proviaiona of 8(b)(4).
4. I disagree with Justice White’s emphasis on this final
point. His Pennington opinion says that the union’• surrender
of its bargaining freedom “run[s] counter to antitrust policy,”
381 U.S. at 668, citing cases involving buainesse1. Treating
unions as “economic units” and lumping them together with
b uaineases ignores the history of labor policy. The Clayton
Act flatly declares that antitrust policy shall not prohibit
concerted action by workers, and the Wagner Act converted
the exemption into affirmative protection. This Court should
not undermine that strong policy by careless declarations that
a union’• participation in concerted action is contrary to
antittust policy. The illegality in Pennington was not that
the union tied its own hands, but that it aided a conspiracy
to eliminate competition among the mine operators.
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