(D.C. Civil Action No. 70-1475) APPEAL FROM THE ORDER OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA
Before: SEITZ, Chief Judge; and FORMAN and HUNTER, Circuit Judges.
International Association of Heat and Frost Insulators and Asbestos Workers; Local Asbestos Workers No. 2, AFL-CIO by Fred Rust, Jr., an officer of said union on its behalf and its members filed a complaint in the United States District Court for the Western District of Pennsylvania. Twenty-seven other unions joined in it, each represented by an officer and the members of the respective unions. (They are referred to herein as the "Unions"). They are all locals of AFL-CIO in various trades, such as plumbers, masons, et cetera. They named as defendants the United Contractors Association, Inc. of Pittsburgh, Pennsylvania (hereinafter called the "Association"), and Associated Trades and Crafts Union (hereinafter called "Trades and Crafts Union").
The complaint asserts that the Association is a Pennsylvania corporation with an office in Pittsburgh, purporting to represent, for trade association and collective bargaining purposes, members engaged in interstate commerce in the construction industry which they conduct in various counties of the Western District of Pennsylvania; that the Trades and Crafts Union is an unincorporated association purporting to represent, for collective bargaining purposes, employees in the construction industry in the same area, which also maintains an office in Pittsburgh.
The complaint alleges that the Association and the Trades and Crafts Union have entered into a conspiracy and have created combinations for the purposes of restraining trade in interstate commerce and in eliminating competition in the construction industry in the Western District of Pennsylvania; that an object of the illegal combination and conspiracy is to prevent the Unions from representing for collective bargaining purposes employees of the members of the Association and thus to obtain a competitive advantage over employer parties to collective bargaining agreements with the Unions; that in furtherance of the conspiracy to restrain trade and eliminate competition, a scheme was developed whereby the Association was organized with the color of authority to act as bargaining representative for its employer members; that the conspiracy was carried out by the Association in organizing and supporting the Trades and Crafts Union, and that funds to carry out the activities of the Trades and Crafts Union are supplied by the Association through its members by the payment of dues, fines and other items for employees compelled by the Association to be members in the Trades and Crafts Union; that the Association and the Trades and Crafts Union have executed sham collective bargaining agreements, the purpose of which is to permit the employer members of the Association to conduct their business activities free from interference by the 28 unions, to use the agreements to bar organizational efforts undertaken by the Unions and to prevent their employees from becoming members of the Unions.
It is further alleged in the complaint that membership in the Association automatically entitles an employer to membership in the Trades and Crafts Union; that through this dual membership the Association is able to control the activities of both organizations and to destroy competition and restrain trade in the construction industry; that through the conspiracy as above alleged, the Association and the Trades and Crafts Union have prevented the Unions from organizing and representing employees of the members of the Association and have prevented the Unions from performing their rights and duties as duly recognized bargaining representatives of employees engaged in interstate commerce in the building and construction industry.
Finally, it is alleged that through the unlawful conspiracy members of the Unions have been unlawfully denied the right to work and earn wages in the building and construction industry jobs obtained by the members of the Association by reason of the unlawful competitive advantage over employers operating under bona fide collective bargaining agreements with the Unions; that the Association and the Trades and Crafts Union have continued from the inception of their organizations to date in the form of unlawful financial assistance, sham collective bargaining agreements, mutual officers, directors and members and mutual control of the activities of both the Association and the Trades and Crafts Union, and that they will continue their conspiracy and conduct to the irreparable injury of the Unions.
The Unions pray for money damages in a sum unliquidated in nature at the institution of the action, trebled in amount pursuant to Rule 30 of the District Court of the Western District of Pennsylvania, together with reasonable attorneys' fees and costs and an injunction restraining the Association and the Trades and Crafts Union from various activities alleged to comprise the conspiracy designed to eliminate, avoid or destroy competition in interstate commerce.
Association and Trades and Crafts Union attack the complaint by way of motions to dismiss. Association grounded its motion on the failure of the complaint to state a claim against it upon which relief could be granted and that the allegations of conspiracy and acts in furtherance thereof are all based on alleged violations of the National Labor Relations Act as amended which are within the exclusive jurisdiction of the National Labor Relations Board.
Trades and Crafts Union based its motion (1) on lack of jurisdiction in the court over the subject matter since all allegations of the complaint charge violation of the Labor Management Relations Act, subject matter exclusively cognizable by the National Labor Relations Board; (2) that the Clayton Anti-Trust Act supplementing the Sherman Act specifically provides that labor organizations or members thereof shall not be held to be illegal combinations or conspiracies in restraint of trade under the antitrust laws; and (3) that the complaint fails to state a claim upon which relief can be granted.
Upon the filing of briefs by the parties and a hearing, the District Court filed an opinion dismissing the complaint.
The District Court carefully reviewed many of the cases which consider the knotty question of when its jurisdiction is preempted by the doctrine of primary jurisdiction in the National Labor Relations Board.*fn1 Among other things it held:
"In providing immunity for activities which are encouraged or protected by the labor laws from the application of the antitrust laws, the Congress has expressly furnished the judiciary with guidelines for the preservation of the policies of the labor laws. Afforded these guidelines, then, there is no need to apply the preemption principles of Garmon and Lockridge. Rather, the accommodation process should be controlled, as suggested in Allen Bradley Co. v. Local Union No. 3, 325 U.S. 797, 89 L. Ed. 1939, 65 S. Ct. 1533 (1945), by the determination of, '... how far Congress intended activities under one of these policies to neutralize the results envisioned by the other.'
"Conclusively, this seems to be the clear and controlling import of Local Union No. 189, Amalgamated Meat Cutters of North America v. Jewel Tea Co., 381 U.S. 676, 14 L. Ed. 2d 640, 85 S. Ct. 1596 (1965). In that case the Supreme Court squarely resolved in the negative, the question of,
"'[Whether] a claimed violation of the Sherman Antitrust Act which falls within the regulatory scope of the National Labor Relations Act is within the exclusive primary jurisdiction of the National Labor Relations Board.'
"Thus, the jurisdiction of this Court to entertain the instant action is not preempted by the doctrine of primary jurisdiction and we turn to determine whether or not the alleged activities are substantively immune from an antitrust attack." International Ass'n of H. & F.I. & A.W. v. United Con. Ass'n, 331 F. Supp. 1298, 1300 (1971).
Having ruled that it had jurisdiction, the District Court turned to the determination whether the alleged activities are substantively immune from an antitrust attack. Again the District Court made an exhaustive canvass of the provisions of the antitrust laws*fn2 and cases*fn3 bearing on this issue and concluded:
"Notwithstanding the bald conclusion that competition in the construction industry of Western Pennsylvania is adversely affected by the instant collective bargaining agreement (competition in which the plaintiffs, in any event, have no justiciable interest), the plaintiffs in this case allege no facts which would even remotely taint the immunity provided the defendant Associated Trades from the antitrust laws. By § 6 of the Clayton Act, the existence of Associated Trades is expressly insulated from the antitrust laws. As to the collective bargaining agreement, the competition which it is alleged to foreclose is not that in a market in which the non-labor group competes, but rather that of the competition between labor organizations for the right to represent certain employees. This competition is clearly not the concern of the antitrust laws. [Footnote omitted.] Further, the aid of which the plaintiffs complain in the instant action flows from the non-labor group to the labor organization which is the reverse of that condemned in Allen Bradley [325 U.S. 797, 65 S. Ct. 1533, 89 L. Ed. 1939 (1965)] and Pennington [381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965)]. We conclude, therefore, that the alleged activities are immune from the antitrust laws and this action must be dismissed. An appropriate Order will be entered."
It appears at the foot of the opinion as follows:
"AND Now, to wit, this 6th day of August, 1971, IT IS ORDERED, in consideration of the foregoing Opinion, that the defendants' Motions to Dismiss be and the same hereby are granted."
In simply asserting that the Unions have alleged no fact which would taint the immunity of the labor group, the District Court did not deal with the allegation that the members of the Association were also members and officers of the Trades and Crafts Union, which could result in contravening the provisions of the antitrust law. Since the appeal arises from the granting of motions to dismiss, all well-pleaded facts must be taken as true.*fn4
The question of whether or not a person is functioning in a given occupation as an employee or as an independent contractor has been treated in numerous cases. In United States v. Los Angeles Meat & Provision Drivers Union, 196 F. Supp. 12 (S.D. California, 1961; affirmed 371 U.S. 94, 9 L. Ed. 2d 150, 83 S. Ct. 162 (1962), a test was evolved based on pronouncements by the Supreme Court in Bakery and Pastry Drivers and Helpers Local, etc. v. Wohl, 315 U.S. 769, 86 L. Ed. 1178, 62 S. Ct. 816 (1941), and in Milk Wagon Drivers' Union etc. v. Lake Valley Farm Products, 311 U.S. 91, 85 L. Ed. 63, 61 S. Ct. 122 (1940), in which the Court sanctioned the joinder of independent contractors' groups with unions:
"(1) if these groups compete with union members by doing the same or similar work; and (2) if the object of having these groups join the union is to eliminate their unfair competition with union members, and the consequent lowering of the wages and working conditions of union members."196 F. Supp. at 15.
The same court, commenting on a similar problem in United States v. Fish Smokers Trade Council, 183 F. Supp. 227 (S.D.N.Y. 1960) found that:
"However, the true significance of the Fish Smokers case is not that it merely states the circumstances under which independent contractors may not properly be forced into a union. Rather, the real importance of this decision lies in the fact that it indicates the result of such a misalliance, which is that the union and the independent contractors have put together a combination in restraint of trade, in violation of the Sherman Act." 196 F. Supp. at 16-17.
If those belonging to the union are independent contractors rather than a group of workers, then what seemed to be a closed shop labor agreement becomes a conspiracy to restrain competition. It falls back into being the type of conspiracy which it would be without its labor agreement mantle. In U.S. v. Los Angeles Meat & Provision Drivers Union, supra, thirty-five to forty-five out of some forty or fifty grease peddlers in Los Angeles had become a local affiliated with the International Brotherhood of Teamsters. Their work consisted of buying waste grease from restaurants and selling it to processors. The union agreement increased the margin of profit on the prices they would be paid for grease, allocated territories among them, and required processors to deal only with members of the union. In affirming, the Supreme Court held that a court of equity has power to order the dissolution of an association of business men who have become members of a union for the purpose of increasing the margin of profit on grease prices. In a case with similar facts, Columbia River Co. v. Hinton, 315 U.S. 143, 86 L. Ed. 750, 62 S. Ct. 520 (1942), involving fishermen who owned their own boats and sold fish to processors, the Court held that the Norris-LaGuardia Act "was not intended to have application to disputes over the sale of commodities." (315 U.S. at 145).
Even though a small business man may be compensated for his labors in the form of a profit on the sale of commodities, the crucial distinction which can nevertheless make him an employee rather than a business man for purposes of the National Labor Relations Act is whether his job competes with others doing the same work, thus driving down their wages. Hence in Milk Wagon Drivers' Union, supra, the Court held that independent vendors of milk who bought milk from dairies and sold on consignment were in direct competition with employee-drivers and thus could properly belong to a union.
Another test which has been applied to distinguish independent contractors has been the degree of control exercised over them by their employers. In N.L.R.B. v. Hearst Publications, Inc., 322 U.S. 111, 88 L. Ed. 1170, 64 S. Ct. 851, the Court found inter alia that "the designated newsboys... have their total wages influenced in large measure by the publishers, who dictate their buying and selling prices, fix their markets and control their supply of papers. Their hours of work and their efforts on the job are supervised and to some extent prescribed by the publishers or their agents." (At p. 131.)
Although all these cases involve the selling of commodities, it is obvious that margin of profit on sales shades into wages readily, and that the sale of commodities shades into the sale of personal services. Therefore the courts have sought to fashion the labor exemption in the Sherman Act according to the foregoing analyses of the function of the work in its relevant economic relationships, rather than by applying a test of whether commodities or services are being sold. Thus in Taylor v. Local No. 7, International Union of Journeymen Horseshoers, 353 F.2d 593 (4th Cir. 1965), the court held that the defendant farriers were independent contractors, with the result that their agreement to charge $16 for shoeing a race horse constituted price fixing, which they enforced with boycotting. The foregoing case of Taylor v. Local No. 7, International Union of Journeymen Horseshoers, based its holding, among others, on American Medical Association v. U.S., 317 U.S. 519, 87 L. Ed. 434, 63 S. Ct. 326 (1943), wherein the American Medical Association and the Medical Society of the District of Columbia were convicted of conspiring to violate the Sherman Act. The court held:
"A nonprofit corporation, Group Health, had been organized by government employees to provide medical and hospital care on a prepayment plan and employed full-time physicians on a salary basis. The accused, certain individuals some of whom were their own officers or employees, and some of their members who were practicing physicians, sought, among other things, to coerce other of accused's physician members from accepting employment under Group Health, to prevent accused's members from consulting with Group Health's doctors who might desire consultation, and to prevent hospitals in and about Washington from affording facilities for the care of patients of Group Health's physicians. The Court assumed that doctors who had contracts with Group Health were employees of that corporation. It was argued that there was a dispute concerning terms and conditions of the employment of doctors in which the accused were interested; that when a committee of the D.C. Medical Society first conferred with representatives of Group Health, a controversy arose, the matrix of which was the terms and conditions of employment by Group Health of members of the District Society to perform Group Health's medical work; that Group Health rejected an offered basis of employment of members of the District Society and insisted upon dictating the terms and conditions of such employment and method of payment of compensation. The Court held that the accused did not represent employees, either present or prospective; that their purpose was to prevent anyone from taking employment under Group Health; the accused 'were not an association of employees in any proper sense of the term. They were an association of individual practitioners each exercising his calling as an independent unit. [Emphasis supplied.] These independent physicians, and the two * * * associations which represent them, were interested solely in preventing the operation of a business conducted in corporate form by Group Health. In this aspect the case is very like Columbia River Packers Assns. v. Hinton, 315 U.S. 143, 86 L. Ed. 750, 62 S. Ct. 520 .' (317 U.S. at 536.) The Court concluded that no labor dispute was involved and the activities of the accused were not protected by the Clayton and Norris-LaGuardia Acts." (353 F.2d at 605.)
Also in a recent case, Goldfarb v. Virginia State Bar, 355 F. Supp. 491, 41 U.S.L.W. 2369 (D.C. E. Virginia 1973), it was held that a minimum fee schedule is a form of price-fixing. This holding cited as authority U.S. v. Real Estate Boards, 339 U.S. 485, 70 S. Ct. 711, 94 L. Ed. 1007 (1950).
In the instant case, nothing which appears in the record controverts the independent-contractor status of the members of the Association who, it is alleged, also belong to the Trades and Crafts Union. The District Court did not determine that as a result this is not a controversy which arises from a labor dispute and apparently, in its view of the law, the status of the Association was not relevant. It considered merely whether anything which had been shown could taint the immunity of the Trades and Crafts Union.
"8. In furtherance of this scheme and conspiracy, the defendants have executed sham collective bargaining agreements between them. The purpose of these sham collective bargaining agreements is to permit the member employers of the defendant Association to conduct their business activities free from any interference by the Plaintiff Unions, to use the agreements as a bar to any and all organizational efforts undertaken by the Plaintiff Unions, and to prevent their employees from becoming members of Plaintiff Unions, and to eliminate competition of business operating under the terms of bonafide collective bargaining agreements." (App. 10a).
In dealing with an appeal from a motion to dismiss under F.R.C.P. 12(b)(6), the court in Prepmore Apparel, Inc. v. Amalgamated ...