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Larry V. Muko Inc. v. Southwestern Pennsylvania Building and Construction Trades Council

August 11, 1978



Author: Aldisert


ALDISERT, Circuit Judge.

Larry V. Muko, Inc., a general contractor, appeals from an adverse verdict directed by the district court after a trial based on Muko's claim that an agreement violative of § 1 of the Sherman Act, 15 U.S.C. § 1, exists between appellees Long John Silver's, Inc., on the one hand, and the Southwestern Pennsylvania Building and Construction Trades Council, and the Building and Construction Trades Council of Pittsburgh, Pennsylvania & Vicinity (the "unions"), on the other. Muko claims that the alleged agreement operates to exclude it from obtaining construction contracts with Long John Silver's, solely because Muko is a nonunion firm.

The central issue in this appeal is whether, on the basis of record evidence, labor's nonstatutory exemption from federal antitrust laws applied as a matter of law to preclude jury consideration of the antitrust claim. Put another way, we must determine whether Muko presented sufficient evidence which, if believed by a jury, would bring this matter within the proscription of the antitrust laws and not within the labor union exemption. This appeal thus requires us to draw a line between union activity that is subject to antitrust sanctions and union activity that is not, an endeavor which has been described as "one of the most delicate, demanding tasks confronting the judiciary."*fn1 We hold that the nonstatutory exemption applies, and accordingly, affirm.


Because this case turns on the material evidence adduced at trial, it is necessary to emphasize the facts generously from the standpoint of appellant Muko. Appellee Long John Silver's, Inc., is a national chain of fast-food restaurants with headquarters in Kentucky. In 1973, it introduced its restaurants into the Pittsburgh area, hiring Muko to build the first restaurant in suburban Monroeville. Muko finished the job in August 1973 and was subsequently awarded a contract to build a second Long John Silver's in Lower Burrell. It completed that job in late 1973 or early 1974.

During construction of the Monroeville restaurant, the unions had picketed the site, claiming that Muko paid its workers substandard wages. In addition, when that restaurant opened, the unions distributed handbills which urged customers to "protect living standards" by not patronizing Long John Silver's, and which claimed that "LONG JOHN SILVER is using contractors who are paying less than the established prevailing wages in this area." Plaintiff's Exhibit 1. The handbill distribution lasted approximately one week.

Some two months later, concerned with the image of its first restaurants in the Pittsburgh area, the Long John Silver's management set up a meeting with the unions to learn how it could prevent future handbillings of its restaurants. At the meeting,*fn2 the unions indicated that the answer to the problem was to have Long John Silver's restaurants built by union workers.No agreement was reached at the meeting, but the unions did give Long John Silver's representatives an illustrative contract, the kind by which a contractor agrees to hire union members, and a representative list of contractors who use union labor in the Pittsburgh area.*fn3

Six days after the meeting, Long John Silver's sent a letter to the unions in which it noted its consideration of, but not a precise acceptance of, the sample contract, and its conclusion that it could "serve the same purpose with this letter to show intent that Long John Silver's Inc., plans to use only union contractors certified by [appellee unions]." Plaintiff's Exhibit 2.Although Long John Silver's practice had been to award construction contracts to the lowest bidder without regard to whether the contractor was union or nonunion, all twelve restaurants constructed after this letter was sent were built by exclusively union contractors. Long John Silver's did invite Muko to employ union craftsmen in order to be able to construct the restaurants on a union basis, but Muko refused and was not permitted to bid on the later jobs.

Muko brought suit in the district court, claiming that the alleged agreement between the unions and Long John Silver's had excluded it from obtaining construction contracts in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Its amended complaint included three counts - the first for treble damages and costs of the suit under 15 U.S.C. § 15, the second for injunctive relief under 15 U.S.C. § 26, and the third for damages as a result of intentional interference with prospective contractual relations.

After hearing evidence on the issue of liability, the trial judge granted defendant-appellees' motions for a directed verdict. The judge rendered an oral decision. Although he gave no specific reasons for his determination, it appears from one of his statements that his decision was based primarily upon his view that the requisite Sherman Act § 1 agreement did not exist.*fn4


Our analysis must begin with the recognition that labor enjoys a rather broad exemption from federal antitrust laws. This is not to imply that union activity does not inhibit competiton for, according to Dean Theodore J. St. Antoine, "[the] antitrust laws are designed to promote competition, and unions avowedly and unabashedly, are designed to limit it."*fn5 In this regard, Professor Archibald Cox has observed:

The purpose and effect of every labor organization is to eliminate competition in the labor market. Chief Justice Taft's classic statement observed:

"[Labor unions] were organized out of the necessity of the situation. A single employee was helpless in dealing with an employer. He was dependent ordinarily on his daily wage for the maintenance of himself and family. If the employer refused to pay him the wages that he thought fair, he was nevertheless unable to leave the employ and to resist arbitrary and unfair treatment. Union was essential to give laborers an opportunity to deal in equality with their employer."

Each bricklayer's local seeks to control the supply of bricklayers' services available to contractors within its geographical jurisdiction. United Steelworkers of America controls the supply of labor available to United States Steel Corporation. In this sense every union is an avowed monopolist.

COX, Labor and the Antitrust Laws - A Preliminary Analysis, 104 U. PA. L. REV. 252, 254 (1955) (footnote omitted).Because the very essence of the labor movement, as protected by the national labor policy, hinges on labor's ability to seek monopoly in appropriate spheres, two forms of antitrust exemption - one statutory, the other nonstatutory - have emerged to protect that ability.


In accommodating the tension between the nation's antitrust and labor policies, the courts must not overlook the lessons of history; indeed, we must be guided by them. And it is a fact of history that Congress has twice resorted to specific legislation to counteract federal court decisions that sought to bring labor activity within the prohibitions of the antitrust laws. First, the Clayton Act of 1914 was passed as a result of criticism of the Sherman Act's application to trade union activities.*fn6 As explained by the Supreme Court in United States v. Hutcheson, 312 U.S. 219, 229-30 (1941), section 20 of the Clayton Act withdrew from the general interdict of the Sherman Law specifically enumerated practices of labor unions by prohibiting injunctions against them - since the use of the injunction had been the major source of dissatisfaction - and also relieved such practices of all illegal taint by the catch-all provision, "nor shall any of the acts specified in this paragraph be considered or held to be violations of any law of the United States."

The Clayton Act itself, however, engendered further controversy which, along with the resultant legislation, was ...

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