decided: May 26, 1981.
H. A. ARTISTS & ASSOCIATES, INC., ET AL
ACTORS' EQUITY ASSN. ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.
Stewart, J., delivered the opinion of the Court, in which White, Blackmun, Powell, Rehnquist, and Stevens, JJ., joined, and in all but Part II-D of which Burger, C. J., and Brennan and Marshall, JJ., joined. Brennan, J., filed an opinion concurring in part and dissenting in part, in which Burger, C. J., and Marshall, J., joined, post, p. 723.
[ 451 U.S. Page 706]
JUSTICE STEWART delivered the opinion of the Court.
The respondent Actors' Equity Association (Equity) is a union representing the vast majority of stage actors and actresses in the United States. It enters into collective-bargaining agreements with theatrical producers that specify minimum wages and other terms and conditions of employment for those whom it represents. The petitioners are independent theatrical agents who place actors and actresses in jobs with producers. The Court of Appeals for the Second Circuit held that the respondents'*fn1 system of regulation of theatrical agents is immune from antitrust liability by reason of the statutory labor exemption from the antitrust laws, 622 F.2d 647.*fn2 We granted certiorari to consider the availability of that exemption in the circumstances presented by this case. 449 U.S. 991.
Equity is a national union that has represented stage actors and actresses since early in this century. Currently representing approximately 23,000 actors and actresses, it has collective-bargaining agreements with virtually all major theatrical producers in New York City, on and off Broadway,
[ 451 U.S. Page 707]
and with most other theatrical producers throughout the United States. The terms negotiated with producers are the minimum conditions of employment (called "scale"); an actor or actress is free to negotiate wages or terms more favorable than the collectively bargained minima.
Theatrical agents are independent contractors who negotiate contracts and solicit employment for their clients. The agents do not participate in the negotiation of collective-bargaining agreements between Equity and the theatrical producers. If an agent succeeds in obtaining employment for a client, he receives a commission based on a percentage of the client's earnings. Agents who operate in New York City must be licensed as employment agencies and are regulated by the New York City Department of Consumer Affairs pursuant to New York law, which provides that the maximum commission a theatrical agent may charge his client is 10% of the client's compensation.
In 1928, concerned with the high unemployment rates in the legitimate theater and the vulnerability of actors and actresses to abuses by theatrical agents,*fn3 including the extraction of high commissions that tended to undermine collectively bargained rates of compensation, Equity unilaterally established a licensing system for the regulation of agents. The regulations permitted Equity members to deal only with those agents who obtained Equity licenses and thereby agreed to meet the conditions of representation prescribed by Equity. Those members who dealt with non-licensed agents were subject to union discipline.
The system established by the Equity regulations was immediately challenged.*fn4 In Edelstein v. Gillmore, 35 F.2d 723,
[ 451 U.S. Page 708]
the Court of Appeals for the Second Circuit concluded that the regulations were a lawful effort to improve the employment conditions of Equity members. In an opinion written by Judge Swan and joined by Judge Augustus N. Hand,*fn5 the court said:
"The evils of unregulated employment agencies (using this term broadly to include also the personal representative) are set forth in the defendants' affidavits and are corroborated by common knowledge. . . . Hence the requirement that, as a condition to writing new business with Equity's members, old contracts with its members must be made to conform to the new standards, does not seem to us to justify an inference that the primary purpose of the requirement is infliction of injury upon plaintiff, and other personal representatives in a similar situation, rather than the protection of the supposed interests of Equity's members. The terms they insist upon are calculated to secure from personal representatives better and more impartial service, at uniform and cheaper rates, and to improve conditions of employment of actors by theater managers. Undoubtedly the defendants intend to compel the plaintiff to give up rights under existing contracts which do not conform to the new standards set up by Equity, but, as already indicated, their motive in so doing is to benefit themselves and their fellow actors in the economic struggle. The financial loss to plaintiff is incidental to this purpose." Id., at 726 (emphasis added).*fn6
[ 451 U.S. Page 709]
The essential elements of Equity's regulation of theatrical agents have remained unchanged since 1928.*fn7 A member of Equity is prohibited, on pain of union discipline, from using an agent who has not, through the mechanism of obtaining an Equity license (called a "franchise"), agreed to comply with the regulations. The most important of the regulations requires that a licensed agent must renounce any right to take a commission on an employment contract under which an actor or actress receives scale wages.*fn8 To the extent a contract includes provisions under which an actor or actress will sometimes receive scale pay -- for rehearsals or "chorus"
[ 451 U.S. Page 710]
employment, for example -- and sometimes more, the regulations deny the agent any commission on the scale portions of the contract. Licensed agents are also precluded from taking commissions on out-of-town expense money paid to their clients. Moreover, commissions are limited on wages within 10% of scale pay,*fn9 and an agent must allow his client to terminate a representation contract if the agent is not successful in procuring employment within a specified period.*fn10 Finally, agents are required to pay franchise fees to Equity. The fee is $200 for the initial franchise, $60 a year thereafter for each agent, and $40 for any subagent working in the office of another. These fees are deposited by Equity in its general treasury and are not segregated from other union funds.
In 1977, after a dispute between Equity and Theatrical Artists Representatives Associates (TARA) -- a trade association representing theatrical agents, see n. 7, supra -- a group of agents, including the petitioners, resigned from TARA because of TARA's decision to abide by Equity's regulations. These agents also informed Equity that they would not accept Equity's regulations, or apply for franchises. The petitioners instituted this lawsuit in May 1978, contending that Equity's regulations of theatrical agents violated §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. §§ 1 and 2.
[ 451 U.S. Page 711]
The District Court found, after a bench trial, that Equity's creation and maintenance of the agency franchise system were fully protected by the statutory labor exemptions from the antitrust laws, and accordingly dismissed the petitioners' complaint. 478 F.Supp. 496 (SDNY). Among its factual conclusions, the trial court found that in the theatrical industry, agents play a critical role in securing employment for actors and actresses:
"As a matter of general industry practice, producers seek actors and actresses for their productions through agents. Testimony in this case convincingly established that an actor without an agent does not have the same access to producers or the same opportunity to be seriously considered for a part as does an actor who has an agent. Even principal interviews, in which producers are required to interview all actors who want to be considered for principal roles, do not eliminate the need for an agent, who may have a greater chance of gaining an audition for his client.
"Testimony confirmed that agents play an integral role in the industry; without an agent, an actor would have significantly lesser chances of gaining employment." Id., at 497, 502.
The court also found "no evidence to suggest the existence of any conspiracy or illegal combination between Actors' Equity and TARA or between Actors' Equity and producers," and concluded that "[the] Actors Equity franchising system was employed by Actors' Equity for the purpose of protecting the wages and working conditions of its members." Id., at 499.
The Court of Appeals unanimously affirmed the judgment of the District Court. It determined that the threshold issue was, under United States v. Hutcheson, 312 U.S. 219, 232, whether Equity's franchising system involved any combination
[ 451 U.S. Page 712]
between Equity and any "non-labor groups" or persons who are not "parties to a labor dispute." 622 F.2d, at 648-649. If it did, the court reasoned, the protection of the statutory labor exemption would not apply.
First, the Court of Appeals held that the District Court had not been clearly erroneous in finding no agreement, explicit or tacit, between Equity and the producers to establish or police the franchising system. Ibid. Next, the court turned to the relationship between the union and those agents who had agreed to become franchised, in order to determine whether those agreements would divest Equity's system of agency regulation of the statutory exemption. Relying on Musicians v. Carroll, 391 U.S. 99, the court concluded that the agents were themselves a "labor group," because of their substantial "economic inter-relationship" with Equity, under which "the union [could] not eliminate wage competition among its members without regulation of the fees of the agents." 622 F.2d, at 650, 651. Accordingly, since the elimination of wage competition is plainly within the area of a union's legitimate self-interest, the court concluded that the exemption was applicable.*fn11
After deciding that the central feature of Equity's franchising system -- the union's exaction of an agreement by agents not to charge commissions on certain types of work -- was immune from antitrust challenge, the Court of Appeals turned to the petitioners' challenge of the franchise fees exacted from agents. Equity had argued that the fees were necessary to meet its expenses in administering the franchise system, but no evidence was presented at trial to show that the costs justified the fees actually levied. The Court of Appeals suggested that if the exactions exceeded the true
[ 451 U.S. Page 713]
costs, they could not legally be collected, as such exactions would be unconnected with any of the goals of national labor policy that justify the labor antitrust exemption. Despite the lack of any cost evidence at trial, however, the appellate court reasoned that the fees were sufficiently low that a remand to the District Court on this point "would not serve any useful purpose." Id., at 651.
Labor unions are lawful combinations that serve the collective interests of workers, but they also possess the power to control the character of competition in an industry. Accordingly, there is an inherent tension between national antitrust policy, which seeks to maximize competition, and national labor policy, which encourages cooperation among workers to improve the conditions of employment.*fn12 In the years immediately following passage of the Sherman Act, courts enjoined strikes as unlawful restraints of trade when a union's conduct or objectives were deemed "socially or economically harmful." Duplex Printing Press Co. v. Deering, 254 U.S. 443, 485 (Brandeis, J., dissenting).*fn13 In response to these practices, Congress acted, first in the Clayton Act, 38 Stat. 731, and later in the Norris-LaGuardia Act, 47 Stat. 70, to immunize labor unions and labor disputes from challenge under the Sherman Act.
Section 6 of the Clayton Act, 15 U. S. C. § 17, declares that human labor "is not a commodity or article of commerce," and immunizes from antitrust liability labor organizations
[ 451 U.S. Page 714]
and their members "lawfully carrying out" their "legitimate [objectives]." Section 20 of the Act prohibits injunctions against specified employee activities, such as strikes and boycotts, that are undertaken in the employees' self-interest and that occur in the course of disputes "concerning terms or conditions of employment," and states that none of the specified acts can be "held to be [a] [violation] of any law of the United States." 29 U. S. C. § 52. This protection is re-emphasized and expanded in the Norris-LaGuardia Act, which prohibits federal-court injunctions against single or organized employees engaged in enumerated activities,*fn14 and specifically forbids such injunctions notwithstanding the claim of an unlawful combination or conspiracy. While the Norris-LaGuardia Act's bar of federal-court labor injunctions is not explicitly phrased as an exemption from the antitrust laws, it has been interpreted broadly as a statement of congressional policy that the courts must not use the antitrust laws as a vehicle to interfere in labor disputes.*fn15
In United States v. Hutcheson, 312 U.S. 219, the Court held that labor unions acting in their self-interest and not in combination with nonlabor groups enjoy a statutory exemption from Sherman Act liability. After describing the
[ 451 U.S. Page 715]
congressional responses to judicial interference in union activity, id., at 229-230, the Court declared that
"[so] long as a union acts in its self-interest and does not combine with non-labor groups, the licit and the illicit under § 20 [of the Clayton Act] are not to be distinguished by any judgment regarding the wisdom or unwisdom, the rightness or wrongness, the selfishness or unselfishness of the end of which the particular union activities are the means." Id., at 232 (footnote omitted).
The Court explained that this exemption derives not only from the Clayton Act, but also from the Norris-LaGuardia Act, particularly its definition of a "labor dispute," see n. 14, supra, in which Congress "reasserted the original purpose of the Clayton Act by infusing into it the immunized trade union activities as redefined by the later Act." 312 U.S., at 236. Thus under Hutcheson, no federal injunction may issue over a "labor dispute," and "§ 20 [of the Clayton Act] removes all such allowable conduct from the taint of being a 'violation of any law of the United States,' including the Sherman [Act]." Ibid.*fn16
The statutory exemption does not apply when a union combines with a "non-labor group." Hutcheson, supra, at 232. Accordingly, antitrust immunity is forfeited when a union combines with one or more employers in an effort to restrain trade. In Allen Bradley Co. v. Electrical Workers, 325 U.S. 797, for example, the Court held that a union had violated the Sherman Act when it combined with manufacturers and contractors to erect a sheltered local business market in
[ 451 U.S. Page 716]
order "to bar all other business men from [the market], and to charge the public prices above a competitive level." Id., at 809.*fn17 The Court indicated that the union efforts would, standing alone, be exempt from antitrust liability, ibid., but because the union had not acted unilaterally, the exemption was denied.*fn18 Congress "intended to outlaw business monopolies. A business monopoly is no less such because a union participates, and such participation is a violation of the Act." Id., at 811.*fn19
[ 451 U.S. Page 717]
The Court of Appeals properly recognized that the threshold issue was to determine whether or not Equity's franchising of agents involved any combination between Equity and any "non-labor groups," or persons who are not "parties to a labor dispute." 622 F.2d, at 649 (quoting Hutcheson, 312 U.S., at 232).*fn20 And the court's conclusion that the trial court had not been clearly erroneous in its finding that there was no combination between Equity and the theatrical producers*fn21 to create or maintain the franchise system is amply supported by the record.
The more difficult problem is whether the combination between Equity and the agents who agreed to become franchised was a combination with a "nonlabor group." The answer to this question is best understood in light of Musicians v. Carroll, 391 U.S. 99. There, four orchestra leaders, members of the American Federation of Musicians, brought an action based on the Sherman Act challenging the union's unilateral system of regulating "club dates," or one-time musical engagements. These regulations, inter alia, enforced a
[ 451 U.S. Page 718]
closed shop; required orchestra leaders to engage a minimum number of "sidemen," or instrumentalists; prescribed minimum prices for local engagements;*fn22 prescribed higher minimum prices for traveling orchestras; and permitted leaders to deal only with booking agents licensed by the union.
Without disturbing the finding of the Court of Appeals that the orchestra leaders were employers and independent contractors, the Court concluded that they were nonetheless a "labor group" and parties to a "labor dispute" within the meaning of the Norris-LaGuardia Act, and thus that their involvement in the union regulatory scheme was not an unlawful combination between "labor" and "nonlabor" groups. The Court agreed with the trial court that the applicable test was whether there was "job or wage competition or some other economic interrelationship affecting legitimate union interests between the union members and the independent contractors." Id., at 106.
The Court also upheld the restrictions on booking agents, who were not involved in job or wage competition with union members. Accordingly, these restrictions had to meet the "other economic interrelationship" branch of the disjunctive test quoted above. And the test was met because those restrictions were "'at least as intimately bound up with the subject of wages' . . . as the price floors." Id., at 113 (quoting Teamsters v. Oliver, 362 U.S. 605, 606). The Court noted that the booking agent restrictions had been adopted, in part, because agents had "charged exorbitant fees, and booked engagements for musicians at wages . . . below union scale."*fn23
[ 451 U.S. Page 719]
The restrictions challenged by the petitioners in this case are very similar to the agent restrictions upheld in the Carroll case.*fn24 The essential features of the regulatory scheme are identical: members are permitted to deal only with agents who have agreed (1) to honor their fiduciary obligations by avoiding conflicts of interest, (2) not to charge excessive commissions, and (3) not to book members for jobs paying less than the union minimum.*fn25 And as in Carroll, Equity's
[ 451 U.S. Page 720]
regulation of agents developed in response to abuses by employment agents who occupy a critical role in the relevant labor market.*fn26 The agent stands directly between union members and jobs, and is in a powerful position to evade the union's negotiated wage structure.
The peculiar structure of the legitimate theater industry, where work is intermittent, where it is customary if not essential for union members to secure employment through agents, and where agents' fees are calculated as a percentage of a member's wage, makes it impossible for the union to defend even the integrity of the minimum wages it has negotiated without regulation of agency fees.*fn27 The regulations are "brought within the labor exemption [because they are] necessary to assure that scale wages will be paid . . . ." Carroll, 391 U.S., at 112. They "embody . . . a direct frontal attack upon a problem thought to threaten the maintenance of the basic wage structure." Teamsters v. Oliver, 358 U.S. 283, 294.
[ 451 U.S. Page 721]
Agents must, therefore, be considered a "labor group," and their controversy with Equity is plainly a "labor dispute" as defined in the Norris-LaGuardia Act: "representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment, regardless of whether or not the disputants stand in the proximate relation of employer and employee." 29 U. S. C. § 113 (c).
Agents perform a function -- the representation of union members in the sale of their labor -- that in most nonentertainment industries is performed exclusively by unions. In effect, Equity's franchise system operates as a substitute for maintaining a hiring hall as the representative of its members seeking employment.*fn28
Finally, Equity's regulations are clearly designed to promote the union's legitimate self-interest. Hutcheson, 312 U.S., at 232. In a case such as this, where there is no direct wage or job competition between the union and the group it regulates, the Carroll formulation to determine the
[ 451 U.S. Page 722]
presence of a nonlabor group -- whether there is "'some . . . economic interrelationship affecting legitimate union interests . . . ,'" 391 U.S., at 106 (quoting District Court opinion) -- necessarily resolves this issue.
The question remains whether the fees that Equity levies upon the agents who apply for franchises are a permissible component of the exempt regulatory system. We have concluded that Equity's justification for these fees is inadequate. Conceding that Carroll did not sanction union extraction of franchise fees from agents,*fn29 Equity suggests, only in the most general terms, that the fees are somehow related to the basic purposes of its regulations: elimination of wage competition, upholding of the union wage scale, and promotion of fair access to jobs. But even assuming that the fees no more than cover the costs of administering the regulatory system, this is simply another way of saying that without the fees, the union's regulatory efforts would not be subsidized -- and that the dues of Equity's members would perhaps have to be increased to offset the loss of a general revenue source.*fn30 If Equity did not impose these franchise fees upon the agents, there is no reason to believe that any of its legitimate interests would be affected.*fn31
[ 451 U.S. Page 723]
For the reasons stated, the judgment of the Court of Appeals is affirmed in part and reversed in part, and the case is remanded for proceedings consistent with this opinion.
It is so ordered.
622 F.2d 647, affirmed in part, reversed in part, and remanded.
JUSTICE BRENNAN, with whom THE CHIEF JUSTICE and JUSTICE MARSHALL join, concurring in part and dissenting in part.
I join all but Part II-D of the Court's opinion. That part holds that respondents' exaction of a franchise fee is not a "permissible component of the exempt regulatory system." Ante, at 722. Rather, I agree with the Court of Appeals that the approximately $12,000 collected annually in fees is not "incommensurate with Equity's expenses in maintaining a full-time employee to administer the system," 622 F.2d 647, 651 (CA2 1980), and thus is not "unconnected with any of the goals of national labor policy which justify the antitrust exemption for labor," ibid.
The Court justifies its conclusion by suggesting that, since the union could increase its dues to offset the revenue lost from invalidation of the fee system, "there is no reason to believe that any of [the union's] legitimate interests would be affected," if the fee system were found to violate the antitrust laws. Ante, at 722. The union could of course raise its dues, but the issue here is whether the conceded antitrust immunity of the franchising system includes the franchise fee.
I find somewhat incongruous the Court's conclusion that an incident of the overall system constitutes impermissible regulation, but that agents in general may be significantly
[ 451 U.S. Page 724]
regulated because they are not a "nonlabor group." This incongruity is highlighted by the similarity between union hiring halls and the franchising system, a similarity which the Court itself acknowledges: "Equity's franchise system operates as a substitute for maintaining a hiring hall as the representative of its members seeking employment." Ante, at 721. The Court disregards this similarity in concluding that the franchising system does not "directly benefit" the agents who are required to pay the fees. Ante, at 722, n. 31. It reaches this conclusion by incorrectly assuming that the only parties who directly benefit from the hiring hall and the franchising system are employers and employees and producers and actors, as the case may be. But surely the agents also benefit from the franchising system, which provides an orderly and protective mechanism for pairing actors who seek jobs with producers who seek actors. The system is thus the means by which the agents ultimately receive their commissions; it is as much the source of their livelihood as it is that of the actors.
Because the fee is an incident of a legitimate scheme of regulation and because it is commensurate in amount with the purpose for which it is sought, I would also affirm this holding of the Court of Appeals.
* David Alter, Joseph Ferraro, Mortimer Becker, Henry Kaiser, Ronald Rosenberg, and Paul P. Selvin filed a brief for the American Federation of Television and Radio Artists et al. as amici curiae urging affirmance.