UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
August 11, 1978
LARRY V. MUKO, INC., APPELLANT
SOUTHWESTERN PENNSYLVANIA BUILDING AND CONSTRUCTION TRADES COUNCIL, LONG JOHN SILVER'S, INC., AND BUILDING AND CONSTRUCTION TRADES COUNCIL OF PITTSBURGH, PENNSYLVANIA, AND VICINITY
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (D.C. Civil Action No. 75-979)
Before: ALDISERT, GIBBONS and HIGGINBOTHAM, Circuit Judges.
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 explored by the Hutcheson Court:
It was widely believed that into the Clayton Act courts read the very beliefs which that Act was designed to remove. Specifically, the courts restricted the scope of § 20 to trade union activities directed against an employer by his own employees. Duplex Co. v. Deering, [254 U.S. 443 (1921)]. Such a view it was urged, both by powerful judicial dissents and informed lay opinion, misconceived the area of economic conflict that had best be left to economic forces and the pressure of public opinion and not subjected to the judgment of courts. Ibid., p. 485-486. Agitation again led to legislation and in 1932 Congress wrote the Norris-LaGuardia Act. Act of March 23, 1932, 47 Stat. 70, 29 U.S.C. §§ 101-115.
The Norris-LaGuardia Act removed the fetters upon trade union activities, which according to judicial construction § 20 of the Clayton Act had left untouched, by still further narrowing the circumstances under which the federal courts could grant injunctions in labor disputes. More especially, the Act explicitly formulated the "public policy of the United States" in regard to the industrial conflict, and by its light established that the allowable area of union activity was not to be restricted, as it had been in the Duplex case, to an immediate employer-employee relation.
312 U.S. at 230-231.
The lesson of this history is that labor's activities are not presumed to come within the embrace of the Sherman Act. Rather, our approach to the present case must accommodate a number of statutes: the Sherman Act, § 20 of the Clayton Act, the Norris-LaGuardia Act, and public policy pronouncements of the National Labor Relations Act.
The basic statutory exemption to our antitrust laws is the product of the interaction of §§ 6 and 20 of the Clayton Act, 15 U.S.C. § 17 and 29 U.S.C. § 52, with the Norris-LaGuardia Act, 29 U.S.C.§§ 101-110, 113-115. Read together, these statutes provide generally that concerted action by labor does not violate the antitrust provisions and, equally significant, express a national labor policy in favor of the freedom of employees to organize. See L. SULLIVAN, ANTITRUST § 237 (1977); United States v. Hutcheson, 312 U.S. 219 (1941). Because the statutory exemption has been held to apply only to unilateral labor activity, and not to concerted activity between labor and nonlabor parties, see Mine Workers v. Pennington, 381 U.S. 657, 662 (1965); Allen Bradley Co. v. Electrical Workers, 325 U.S. 797 (1945), it is not applicable in the present case. The alleged agreement between the unions and a nonlabor party, Long John Silver's, must be evaluated instead in terms of the nonstatutory exemption.
The nonstatutory exemption has been carved out by the courts to give assent to joint activity by labor and nonlabor parties where considerations of the national labor policy outweigh those of the national antitrust policy. It draws its primary nourishment from Justice Stone's teachings in Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940), that the Sherman Act was aimed only at "some form of restraint upon commercial competition in the marketing of goods or services", id. at 495, and that it was not directed at "an elimination of price competition based on differences in labor standards." Id. at 503. Thereafter, in United States v. Hutcheson, supra, and Allen Bradley Co. v. Electrical Workers, supra, the nonstatutory exemption was further refined to provide that labor organizations would lose their immunity if sufficient proof was forthcoming that the union activity was designed to "aid non-labor groups to create business monopolies and to control the marketing of goods and services." 325 U.S. at 808. See also Mineworkers v. Pennington, supra, 381 U.S. at 662 (1965).
Further development occurred in Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676 (1965), where, although there was no single opinion of the court, at least six justices can be said to have put the test in terms of the union's objective and evidence of that objective. Wages, hours or working conditions were viewed as legitimate subjects of collective bargaining and hence subject to antitrust immunity, but if that which was sought was a forbidden restraint on the product market, there could be no immunity. In a critical passage of Jewel Tea, Justice White, writing for himself, Chief Justice Warren, and Justice Brennan, stated that exemption from the Sherman Act's coverage depends in large measure on the extent to which the activity or agreement complained of is "intimately related to wages, hours and working conditions" and obtained "through bona fide, arm's-length bargaining in pursuit of [the union's] own labor... policies, and not at the behest of or in combination with nonlabor groups..." 381 U.S. at 689-690 (opinion of White, J., announcing the judgment of the Court.) Three justices who did not join in Justice White's plurality opinion, but concurred in the result, would have gone further: Justices Goldberg, Harlan, and Stewart accepted the union argument that agreements dealing with mandatory subjects of bargaining are wholly outside the antitrust laws.
Justice White's Jewel Tea formulation is extremely important because, in 1975, he was to join in the opinion of the Court in Connell Construction Co. v. Plumbers & Steamfitters, 421 U.S. 616 (1975). Summarizing the foregoing precepts and agreeing with their application to the facts in that case, the Connell majority stated:
The nonstatutory exemption has its source in the strong labor policy favoring the association of employees to eliminate competition over wages and working conditions. Union success in organizing workers and standardizing wages ultimately will affect price competition among employers, but the goals of federal labor law never could be achieved if this effect on business competition were held a violation of the antitrust laws. The Court therefore has acknowledged that labor policy requires tolerance for the lessening of business competition based on differences in wages and working conditions. See Mine Workers v. Pennington, supra, at 666; Jewel Tea, supra, at 692-693 (opinion of WHITE, J.). Labor policy clearly does not require, however, that a union have freedom to impose direct restraints on competition among those who employ its members. Thus, while the statutory exemption allows unions to accomplish some restraints by acting unilaterally, e.g., Federation of Musicians v. Carroll, 391 U.S. 99 (1968), the nonstatutory exemption offers no similar protection when a union and a nonlabor party agree to restrain competition in a business market.
421 U.S. at 622-23.
The critical factors which emerge in this analysis of the nonstatutory exemption are the characterization and evidence of the challenged restraint. It becomes apparent that in accommodating the tension between the nation's antitrust and labor policies, both of which are vigorously supported by congressional mandate and federal court decisions, the line must be drawn by identifying labor's specific objective and methods. If the union's effort and methods are directed solely to raising labor standards by increasing wages, regulating hours and improving working conditions, the union's activities, although technically conducive to lessening competition, are nonetheless exempt from the proscriptions of the antitrust acts. When the union's effort and methods go beyond this purpose, the activity has the potential of being beyond the pale of protection afforded by the federal labor policy; a "direct restraint on the business market", one whose "anticompetitive effects, both actual and potential... would not follow naturally from the elimination of competition over wages and working conditions", will not fall within the exemption. Connell, supra, 421 U.S. at 625.
Having determined how the line is to be drawn, however, we are quick to acknowledge that there is no easy test to determine exactly where the axe must fall.*fn7 The approach must be taken on a case-by-case basis with a meticulous examination of the facts.
Connell, supra, a 5-4 decision, is illustrative of a factual complex under which the labor exemption to the antitrust laws did not apply. Since it is the Supreme Court's most recent pronouncement in this area, a comparison of its facts with those of the present case is particularly useful in weighing the competing labor and antitrust considerations presented here. Local 100, a bargaining representative for workers in the plumbing and mechanical trades, approached Connell, a general contracting firm, and demanded that it sign an agreement to award subcontracts only to firms that had "an executed, current collective bargaining agreement with Local 100...." 421 U.S. at 619-620. This was part of a larger union campaign to obtain identical agreements with general contractors throughout Dallas.*fn8 When Connell refused to sign, the union posted a picket at one of its major construction sites, and 150 workers walked off the job, bringing construction to a halt. Connell subsequently signed the agreement under protest and sued, claiming the agreement violated the Sherman Act and was therefore invalid.
The Supreme Court did not go so far as to find the agreement violative of the Sherman Act, but, finding the circumstances to be the kind of "direct restraint on the business market" which could not claim exemption from the antitrust laws, 421 U.S. at 625, it remanded the proceedings for trial. The conclusion was compelled by the presence of three factors. First, the agreement indiscriminately forbade the hiring of nonunion subcontracting firms, even if a firm's competitive advantage derived from efficiency and not from substandard wages or working conditions. Second, only those subcontractors which were parties to current contracts with Local 100 could be hired, an arrangement allowing the union to manipulate the subcontractor market by agreeing or refusing to contract with any firm it might choose. Third, the union was party to a multiemployer bargaining agreement that contained a "most favored nation" clause, a provision in some construction industry contracts which requires the union to give the signatory employer the benefit of the most favorable terms the union subsequently accords any other employer. The practical effect of this clause is to shelter subcontractors in the association from competition with outside subcontractors in that part of the market covered by subcontracting agreements between general contractors and the union.
A comparison of the present appeal shows that the material facts differ from those in Connell. Arguably, the first element is present - an "agreement" that commits Long John Silver's to hiring union craftsmen, and not hiring even an efficient, nonunion contractor. Yet we are not persuaded that appellant proved the second element. Long John Silver's letter to the unions indicates an intent to use only contractors "certified" by the unions; Muko introduced no evidence to explain the significance of certification, or to show that the unions exercised the same extent of market control that Local 100 sought in Connell. The agreements in Connell "did not simply prohibit subcontracting to any nonunion firm; they prohibited subcontracting to any firm that did not have a contract with Local 100." 421 U.S. at 624. No such comprehensive restraint of an entire industry was present here. In the context of reviewing a directed verdict, we cannot go beyond the record, and assume or presume unproved, widespread restraint. And as for the third element, there is neither allegation nor evidence of a multiemployer agreement with a "most favored nation" clause.
Beyond point-by-point distinctions, however, we see a fundamental difference between the facts here and those in Connell regarding the methods that the respective unions employed to press the cause of labor. In Connell, Local 100 had launched an all-out campaign to obtain identical agreements with general contractors throughout Dallas. Contractors like Connell who refused to sign would be, and were, picketed until they did. The picketing at Connell's site closed it down.*fn9 In contrast, the record here discloses no such widespread, dominating union action. Picketing occurred at one site, and handbilling took place at one completed location for one week only. The meeting between the unions and Long John Silver's occurred two months later. For all that appeared in the plaintiff's case, the unions were concerned solely with persuading one firm in the entire Pittsburgh area to hire union craftsmen in building its restaurants. There is no evidence that the unions distributed handbills at other establishments constructed by Muko, or at the premises of other businesses.*fn10 Nor is there evidence that Muko was picketed while it worked jobs for other employers. Thus the case presents a picture entirely different from that in Connell: it is an instance of union activity which is low-key and narrow in scope; an activity "intimately related to wages, hours and working conditions," normal aspirations of a union with a one employer target; an activity not accompanied by efforts to subject an entire industry to its demands, with the resultant substantial restraint in the products market.
Finally, we consider it particularly significant that the alleged agreement in the present case - Long John Silver's letter to the unions - was a direct result of handbilling on the part of the unions. The peaceful distribution of handbills, within the permissible limits of § 7 of the National Labor Relations Act, 29 U.S.C. § 157, carries the protection of the First Amendment.*fn11 Subject to certain reasonable restrictions that may be imposed as to time, place, and manner of distribution - not involved in these proceedings, see, e.g., Hudgens v. N.L.R.B., 424 U.S. 507 (1976) - and subject also to unfair labor practice considerations set forth in 29 U.S.C. § 158(b)(1), union handbilling is a protected activity. See, e.g., Republic Aviation Corp. v. N.L.R.B., 324 U.S. 793 (1945); Texaco, Inc. v. N.L.R.B., 462 F.2d 812 (3d Cir. 1972), cert. denied, 409 U.S. 1008. Moreover, appropriate handbilling is also protected by the statutory publicity proviso of § 8(b)(4) of the National Labor Relations Act, 29 U.S.C. § 158(b)(4). See, e.g., Local No. 54, Sheet Metal Workers Int'l Assoc., AFL-CIO, 179 N.L.R.B. 362 (1969); Plumbers and Pipefitters Local No. 142, AFL-CIO, 133 N.L.R.B. 307 (1961). Paragraph (4) of § 8(b) prohibits certain forms of secondary boycotts, but the publicity proviso reads as follows:
Provided further, That for the purposes of this paragraph (4) only, nothing contained in such paragraph shall be construed to prohibit publicity, other than picketing, for the purpose of truthfully advising the public, including consumers and members of a labor organization, that a product or products are produced by an employer with whom the labor organization has a primary dispute and are distributed by another employer, as long as such publicity does not have an effect of inducing any individual employed by any person other than the primary employer in the course of his employment to refuse to pick up, deliver, or transport any goods, or not to perform any services, at the establishment of the employer engaged in such distribution....
The handbilling in this case was a form of publicity, carried on to inform the public of the labor dispute between the unions and Muko.*fn12 Neither Muko nor Long John Silver's contends that the handbills were untruthful, or that they had the effect of inducing Long John Silver's employees not to perform their jobs. We think it would seriously undercut the protection offered by the publicity proviso to hold that, without more, concessions gained through legitimate handbilling under our labor laws could be subject to the antitrust laws.
It is obvious that what separates our view from that of the dissent is our reading of Connell . We make use of the case in conjunction with previous applicable cases, while the dissent gives it a far broader and, in our view, extravagant interpretation which fails to accommodate other equally important Supreme Court pronouncements on this subject.
Our reading of Connell is tempered by the truism that the Supreme Court, and indeed any federal court, may only decide the case or controversy before it. Individual decisions, or opinions, give way merely to "rules " which, in Roscoe Pound's formulation, are "precepts attaching a definite detailed legal consequence to a definite, detailed set of facts." Pound, Hierarchy of Sources and Forms in Different Systems of Law, 7 Tulane L. Rev. 475, 482 (1933). The very essence of law as an ongoing process dictates that we not look merely to one "rule" and "colormatch" that individual rule with the case at hand. Rather, we must discern patterns of cases in such a way that the combination of all relevant "rules" gives a wholistic guidance to the present approach. Thus, we explore Connell along with other cases such as Jewel Tea, supra, noting such aspects as Justice White's participation in both. So doing, we simply cannot agree with the dissent's characterization of Connell as a piece of judicial legislation which virtually destroys labor's nonstatutory exemption from the antitrust laws.
This case is before us on appeal from a directed verdict, and our focus, of course, is limited to whether or not "there are... controverted issues of fact upon which reasonable men could differ." 5A MOORE'S FEDERAL PRACTICE Par. 50.02 at 50-20 (footnote omitted). See, e.g., Fireman's Fund Insurance Co. v. Videfreeze Corp., 540 F.2d 1171, 1177 (3d Cir. 1976), cert. denied, 429 U.S. 1053 (1977). Giving full consideration to the issue of the antitrust laws and the labor exemption, we have decided, as a matter of law, that plaintiff did not make out a prima facie case that would take the proceedings outside the nonstatutory exemption. Specifically, the evidence showed that union activity and methods were limited "to the elimination of competition over wages and working conditions", and there was insufficient evidence to constitute a jury question of "anticompetitive effects, both actual and potential, that would not follow naturally from the elimination of competition over wages and working conditions." Connell, supra, 421 U.S. at 625. Resolution of this threshold question of law thus precludes the necessity of fact finding on Muko's antitrust claim.
The judgment of the district court will be affirmed.
GIBBONS, Circuit Judge, dissenting
Larry V. Muko, Inc. (Muko), is a nonunion building contractor engaged in interstate commerce. Muko appeals from a directed verdict in a suit for money damages under Section 4 of the Clayton Act, 15 U.S.C. § 15, entered at the close of plaintiff's evidence. The defendants in that action were Long John Silver's, Inc. (Silver's), a fast-food seafood restaurant chain engaged in interstate commerce, and two labor organizations, the Southwestern Pennsylvania Building and Construction Trades Council (Southwestern Council) and the Building and Construction Trades Council of Pittsburgh, Pennsylvania and Vicinity (Pittsburgh Council). The Southwestern Council represents construction trades unions in a five-county area surrounding Allegheny County, and the Pittsburgh Council represents construction trades unions within that county.
Muko's evidence tended to show that Silver's, when it first decided to enter the fast-food seafood business in Western Pennsylvania, contracted with Muko after competitive bidding for the construction of a restaurant buildin in Monroeville, a Pittsburgh suburb. The Monroeville site was picketed during construction, by Council pickets. After the restaurant opened, Council representatives leafleted its patrons, asking them to refrain from patronizing Silver's because it used contractors who were paying less than the established prevailing construction wages in the area. In fact, according to a tender of proof which the district court rejected, Muko was paying the prevailing wage rates, and the defendants do not now contend otherwise. The evidence also tended to show that a representative of Silver's approached the Councils and arranged a meeting. On November 1, 1973, the meeting took place, attended by Silver's vice president for real estate, its local real estate agent, and three Council representatives. Silver's vice president said he wanted the leafleting to end as quickly as possible. One of the Council representatives said he wanted future restaurants built by union labor. Another union representative gave Silver's vice president a form contract used between the Councils and union contractors in the area. He also supplied Silver's with a list of contractors with which the Councils had collective bargaining agreements. A Council representative said that there would be no picketing or leafleting at Lower Burrell, a second Silver's location, pending a decision on the use of union contractors at future construction sites. Silver's representatives left the meeting with the form contract and the list of union contractors.Within a week Silver's sent the Councils a letter, Exhibit P. 2, noting that the form contract was designed for use by area contractors and local trade unions, but stating:
I believe that we can serve the same purpose with this letter to show intent that Long John Silver's, Inc., plans to use only union contractors certified by the affiliated Building and Construction Trades Councils of Pittsburgh and Allegheny - Kiski Valley and vicinity. We will also request that all investors (property owners) developing for us use union contractors.... We have visited several of the contractors, the names of which we mentioned to you. As soon as we have firm bids on several construction sites, we will contact you to insure that these contractors are in good standing with the union.... It is also extremely important to both parties that our location at Monroeville, Pennsylvania and the one under construction in Lower Burrell Township, Pennsylvania not be subjected to any kind of informational picketing.
Muko's evidence also tended to show that Silver's had been satisfied with Muko's work at Monroeville, that it had contracted with Muko for erection of the second restaurant at Lower Burrell, Pennsylvania, and that the president of Silver's had told Muko it could construct all the chain's restaurants in Western Pennsylvania if it continued to offer high-quality work at competitive prices. By the trial date twelve other restaurants had been built, all by union contractors whose prices were substantially higher than Muko would have charged.
With the foregoing evidence in the record the trial court granted a directed verdict against Muko on the ground that no reasonable factfinder could find anything but unilateral action by Silver's. Thus, the court concluded, there was no contract, combination, or conspiracy within the meaning of Section 1 of the Sherman Act, 15 U.S.C. § 1. The majority proposes to affirm, but not on that ground. It assumes, quite correctly, that looking at the evidence in the light most favorable to Muko a reasonable juror could find that Silver's and the Councils agreed that, in consideration of the Councils refraining from informational picketing directed at discouraging patronage at the Monroeville and Lower Burrell restaurants, it would use only union contractors for the restaurants yet to be built. The majority affirms, not because there was no such agreement, but because even if there was, it was lawful.
Since both Muko and Silver's were indubitably in interstate commerce, and since the twelve construction projects apparently involved a substantial amount of such commerce, prima facie the agreement was one meeting Section 1 Sherman Act muster. Moreover, although the Councils argue on appeal that Muko failed to prove such injury to his business or property as suffices to take a case to the jury under Section 4 of the Clayton Act, that argument is impermissible on the present record. Thus, for an affirmance, the agreement must be lawful either because, regardless of who made it, it does not violate the Sherman Act, or because the status of one of the parties to it makes it exempt. These are discrete inquiries. Part III of the majority opinion, unfortunately, blends them by analyzing the so-called labor exemption in terms of market effects rather than in terms of labor policy. Analysis of the issues presented by this appeal would, I think, be advanced by asking, first, whether absent an exemption there would have been an antitrust violation, and second, whether a violation, if any, would be cured by the labor exemption.
The agreement which could have been found excluded all nonunion contractors from a significant interstate market, consisting of at least twelve construction projects. Silver's agreed, in other words, that it would refuse to deal with - i.e., boycott - a class of contractors of which Muko was a member. It is too late in the antitrust game to argue that such a contract, unless exempt, is never a violation of Section 1.*fn1 Indeed the premise of both the majority and the minority opinions in Connell Construction Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616 (1975), is that absent an exemption such an agreement may be the basis of a federal antitrust suit. In that case, since the district court and the court of appeals had held the agreement exempt from the antitrust laws, neither court had reached the question of an antitrust violation. Since the issue was neither briefed nor argued fully, the Supreme Court remanded for further consideration. Although the opinion of the court is not completely clear, the questions left open probably were: (1) whether the contract requiring use of union subcontractors should be considered subject to a rule of per se illegality, or should be tested by the less rigorous rule of reason standard, and (2) whether under Section 16 of the Clayton Act, 15 U.S.C. § 26, injunctive relief was appropriate.*fn2
In this case no question of injunctive relief is presented, while in Connell no damages were sought. But the asserted ground of liability is the same. Whether the evidence here is viewed as establishing a group boycott to which a per se rule would apply, or some lesser restraint to which a rule of reason analysis might apply, it was sufficient to take the case to the jury on Muko's Section 4 damage claim, unless the labor exemption was available. It is well established that even boycott arrangements which have the effect of lowering prices are illegal.*fn3 Muko, however, presented evidence that its competition, which was excluded, would have resulted not only in profits to it, but also in lower bids to Silver's on twelve construction projects. It the majority intends to suggest that there would have been no antitrust violation in Connell except for the "most favored nations" clause in the unions' collective bargaining agreements, I disagree. At most, for antitrust purposes that was one factor, and a small one, in proving a group boycott by showing that the total arrangement could raise prices in the relevant market. Thus I conclude that absent an exemption Muko established a prima facie case under Section 4 of the Clayton Act and that the directed verdict was error.
Turning to the labor exemption, I agree with the majority that because the jury could have found concert of action between Silver's and the Councils, neither the Clayton Act, Sections 6 and 20, 15 U.S.C. § 17; 29 U.S.C. § 52, nor the Norris-LaGuardia Act, Sections 4, 5, and 13, 29 U.S.C. §§ 104, 105, 113, provides any exemption from antitrust liability.*fn4 Were the question open, I would hold that the nonstatutory exemption from such liability applied, regardless of the fact that a contract was with a nonlabor party, so long as it was exacted as a result of a legitimate union goal such as, in this case, the goal of forcing the organization of all nonunion building contractors. But Congress and the Supreme Court have between them foreclosed that decision, and an intermediate appellate court is not free to substitute its own judgment on when the exemption should apply.
Until the decision in Connell there might have been room for recognizing a nonstatutory exemption in the circumstances of this case, but no longer. In that case a union for one of the construction industry sub-trades had successfully used informational picketing to force a number of general contractors, with whom it had no collective bargaining relationship, to agree to subcontract in that subtrade only to subcontractors with whom the union had a current collective bargaining agreement. Connell, a general contractor who had been soliciting subcontracting bids on a competitive basis without regard to union status, signed the tendered agreement under duress and then sued for declaratory and injunctive relief claiming that it violated Section 1 of the Sherman Act. Justice Powell, writing for the majority, held, as we do, that the statutory exemptions were inapplicable. He also held that the non-statutory exemption was unavailable for two reasons: first, the union did not represent the employees of the party with whom it contracted; second, the construction industry proviso to Section 8(e) of the National Labor Relations Act, 29 U.S.C. § 158(e), was not intended to authorize subcontracting agreements that ahe neither within the context of a collective bargaining relationship nor limited to a particular jobsite.
To appreciate what Justice Powell meant by his second reason one must start with the 1959 amendment to the Labor-Management Relations Act, which provides:
(e) It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, transporting or otherwise dealing in any of the products of any other employer, or to cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent unenforcible and void....
29 U.S.C. § 158(e) (emphasis supplied). Prior to that enactment it was an unfair labor practice under § 8(b)(4) of the Act, 29 U.S.C. § 158(b)(4), to urge employees of an employer to refuse to perform work for the purpose of compelling their employer to cease doing business with some other person. That prohibition did not apply to agreements between a union and an employer, and thus unions were free to coerce an employer to make such an agreement, by informational picketing or otherwise. If a union could exact such an agreement from customers of a supplier whose employees it was attempting to organize, it would gain considerable organizational leverage. Congress concluded that this was more leverage than the national labor policy should permit. In 1959 it amended Section 8(b)(4), so that its prohibition against coercion applied not only to employees, but to any person engaged in commerce. It also added the prohibition in Section 8(e) against contracts obligating employers to aid union organizational efforts by refraining from doing business with third parties. At the same time, recognizing the special historical situation in the construction and apparel industries, Congress added provisos to the general prohibition in Section 8(e) creating limited exceptions for those two industries.*fn5
In Connell the defendant unions contended that the agreement was legal because of the construction industry proviso, and that as a contract permitted by the national labor policy it was exempt from the antitrust laws. The Court unanimously rejected the contention that the construction industry proviso authorized a boycott clause in anything other than a collective bargaining agreement at a specific jobsite.*fn6 Prior to Connell it was arguable that even though an agreement might fall within Section 8(e), and outside the construction industry proviso, it was nevertheless exempt from the antitrust laws if it had, as in this case, a lawful organizational object. That argument was firmly rejected when Justice Powell wrote:
This record contains no evidence that the union's goal was anything other than organizing as many subcontractors as possible.*fn2a This goal was legal, even though a successful organizing campaign ultimately would reduce the competition that unionzed employers face from nonunion firms. But the methods the union chose are not immune from antitrust sanctions simply because the goal is legal. Here Local 100, by agreement with several contractors, made nonunion subcontractors ineligible to compete for a portion of the available work.This kind of direct restraint on the business market has substantial anticompetitive effects, both actual and potential, that would not follow naturally from the elimination of competition over wages and working conditions. It contravenes antitrust policies to a degree not justified by congressional labor policy, and therefore cannot claim a nonstatutory exemption from the antitrust law.
421 U.S. at 625.
Connell is controlling on the availability of the non-statutory labor exemption here. Like Connell, Silver's is a purchaser of building contracting services. Like Connell, Silver's has no collective bargaining relationship, actual or potential, with the organization with which, the evidence suggests, it entered into an agreement not to deal with nonunion contractors. As in Connell, the agreement covered all construction sites, not a particular jobsite. The majority's effort to distinguish Connell is, in my view, unconvincing.
In an effort to find a distinction the majority urges that Muko failed to introduce evidence sufficient to support a jury finding that Silver's agreed to use only those subcontractors who had current contracts with the locals represented by the Councils. Considering what transpired at the November 1, 1973 meeting, the text of the subsequent letter from Silver's to the Councils, and what occurred thereafter in the award of contracts, I find disingenuous the suggestion that no factfinder could reasonably conclude that an agreement to use only union contractors had been made. Indeed, that suggestion is inconsistent with the very predicate for any argument for a nonstatutory exemption from the antitrust laws. That predicate is that the Councils had a valid organizational objective; namely, the organization of all building contractors in the area. If that was not the object, then the contract had no discernible lawful purpose. Certainly the Councils were not coercing Silver's for the organizational benefit of some hypothetical competing labor organization.
The majority also attempts to distinguish the Connell case on the ground that Local 100 exercised substantially greater market control than did the Councils in this case. But Connell makes it clear that the availability of the non-statutory labor exemption does not turn on the presence or absence of market control, whether that control is evidenced by the scope of the union's organizational activities or otherwise. Rather that case holds that the protection of the exemption is not available for any agreement which, like the one in this case, is exacted in violation of Section 8(e) by a labor organization from a party which whom it has no collective bargaining agreement. The contrary result, which would require a preliminary showing of substantial anticompetitive effect before the exemption could be lifted, would foreclose any possibility of per se antitrust remedies for boycott violations, and might limit the role of the jury in "rule of reason" cases. Such a conclusion would be sharply at variance with the substantive law of antitrust boycotts,*fn7 and, despite the majority's assertion, finds no support in the Connell opinion, which twice condemned the agreement between Connell and Local 100 on the basis of its "actual and potential" anticompetitive effects.*fn8
The majority's reliance on the publicity proviso in Section 8(b)(4) of the Act, 29 U.S.C. § 158(b)(4), is misplaced. That proviso is a qualification to the general prohibition in Section 8(b)(4) against coercing an employer or employee to stop doing business with an organization which is the target of union organizational efforts. It, in turn, is qualified by language making it clear that the proviso does not apply if it has the effect of producing the very refusal to handle the products of such target which Section 8(b)(4) prohibits. Nothing in Section 8(b)(4) can reasonably be construed to authorize an actual agreement falling within the prohibitions of Section 8(e).
Finally, the majority's argument based on the first amendment is untenable. The record contains evidence from which a jury could find an agreement. If that agreement violates the Sherman Act or is an unfair labor practice under the National Labor Relations Act, the parties to it cannot justify it on the ground that it was entered into as a result of protected speech. It might be perfectly lawful for manufacturers to urge that society would benefit if they were permitted to form cartels. If they acted upon that program, however, the fifth amendment would not help them.
Summarizing, I agree with the majority that there was sufficient evidence to go the jury on the question of the existence of a contract; I agree, as well, that no statutory exemption takes the agreement outside the coverage of the antitrust laws. I do not agree, however, that the nonstatutory exemption, as limited by Connell Construction Co. v. Plumbers & Steamfitters Local 100, supra, applies to the agreement which the jury could have found. I would remand the case for trial.