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

decided: July 20, 1979.



Before Aldisert, Gibbons and Higginbotham, Circuit Judges. Argued May 24, 1978 Reargued en banc May 17, 1979 Before Seitz, Chief Judge, and Aldisert, Adams, Gibbons, Rosenn, Hunter, Weis, Garth and Higginbotham, Circuit Judges.

Author: Gibbons


Larry V. Muko, Inc. (Muko), a Pennsylvania corporation engaged in the general contracting business, appeals from an order granting defendants' Fed.R.Civ.P. 50(a) motion for a directed verdict in an antitrust action seeking damages and injunctive relief under §§ 4, 16 of the Clayton Act, 15 U.S.C. §§ 15, 26. The defendants are Long John Silver's Inc. (Silver's), a fast-food seafood restaurant chain, 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). We reverse and remand for a new trial.


Muko is a nonunion general contractor. Its complaint charges that Silver's entered into an agreement with the defendant labor organizations that it would not award building and construction contracts to any contractor that was not a party to a current collective bargaining agreement with member unions of either the Southwestern Council or the Pittsburgh Council. The defendants' motions for a directed verdict were granted at the end of the plaintiff's case. The grant of those motions was proper only if, without weighing the credibility of witnesses, as a matter of law, there could be only one reasonable conclusion as to a verdict. Thus we must determine what, from Muko's evidence, a jury might have found.

The jury could have found as follows: Silver's is a national chain of fast-food seafood restaurants with its headquarters in Kentucky. In 1973, when it first decided to enter the fast-food seafood business in Western Pennsylvania, Silver's contracted with Muko, after competitive bidding, for the construction of a restaurant in Monroeville, a Pittsburgh suburb. Muko was an experienced builder of fast-food restaurants. In 1973 it was Silver's policy to solicit bids on a competitive basis without regard to whether the contractor used union labor. 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. Muko was also awarded a contract for the construction of a Silver's restaurant in Lower Burrell, and commenced construction there about the time the Monroeville restaurant opened.

Faced with handbilling at the completed Monroeville restaurant, and fearful of new picketing at the Lower Burrell construction site, Silver's approached the Councils and arranged for a meeting. On November 1, 1973, a meeting took place between Silver's vice president for real estate, its local real estate agent, and three council representatives. Silver's vice president said that he wanted the leafleting to end as quickly as possible. One of the Council representatives stated that he wanted future restaurants built by union labor. Another union representative gave Silver's vice president a form of contract used between the Councils' local unions and union contractors in the area, and supplied Silver's with a list of contractors with whom the local unions had collective bargaining agreements. A Council representative stated there would be no picketing or leafleting at Lower Burrell, the 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 vice president for development sent the Councils a letter. The letter began by emphasizing Silver's desire "to establish good working relationships" with unions in the Pittsburgh area. It noted that the form contract was specifically designed for use by area contractors and local trade unions. But, the writer continued:

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 the investors (property owners) developing for us use union contractors. By operating in this manner, we will accomplish a good working relationship with you. 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.

In any relationship between two parties there must be mutual need and assistance. . . . It is . . . 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.

Silver's had been satisfied with Muko's work at Monroeville, and had therefore contracted with Muko for erection of the second restaurant at Lower Burrell. 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. After the meeting of November 1, 1973, Silver's asked Muko if it would build as a union contractor. It refused to do so, and subsequently was not asked to bid on any further jobs for Silver's. By the trial date twelve other restaurants had been built, all by union contractors whose prices for those twelve restaurants aggregated over $250,000 more than Muko would have charged. Muko's bids and cost estimates for these twelve restaurants projected a profit even at its lower bid prices.

Muko's operation involved only a handful of construction employees, who functioned primarily as supervisors. The bulk of the work on its jobs was performed by subcontractors. Neither the Pittsburgh Council nor the Southwestern Council had any interest in or made any attempt to organize Muko's employees. Neither council ever represented those employees. Muko made a tender of proof that it was paying prevailing wage rates to its supervisory employees. The district court rejected the tender on the ground that it was irrelevant in the plaintiff's case, but suggested that it might be offered later, depending on the defendants' evidence. On this record we must therefore assume that Muko was paying those employees prevailing rates. There is no evidence in the record regarding the wage rates paid by Muko's subcontractors.

The defendants stipulated that Muko could prove the requisite jurisdictional relationship to interstate commerce and that direct out-of-state purchases would, had Muko obtained the additional contracts, have exceeded $50,000.

In face of the foregoing evidence the district court granted defendants' Rule 50(a) motions. No opinion was written, but the transcript of proceedings discloses that the directed verdict was granted solely because the court believed the evidence could sustain no finding other than a unilateral decision on the part of Silver's to accept bids only from union contractors.


Clearly the directed verdict cannot be affirmed on the ground upon which the district court acted. Looking at the evidence, and particularly the letter of November 7, 1973, in the light most favorable to Muko, reasonable jurors could find that Silver's and the Councils agreed that, in consideration of the Councils refraining from informational picketing and leafleting directed at the Monroeville and Lower Burrell restaurants, Silver's would use, for the restaurants yet to be constructed, contractors with whom Council local unions had collective bargaining agreements. Since the jury could have found such an agreement, we cannot sustain the grant of a directed verdict on the theory that the only activity which Muko proved was a unilateral appeal to an employer for the exercise of managerial discretion. See NLRB v. Servette, Inc., 377 U.S. 46, 54, 84 S. Ct. 1098, 12 L. Ed. 2d 121 (1964). Moreover, although the Councils argue on appeal that Muko failed to prove an injury to its business or property within the meaning of § 4 of the Clayton Act, that argument cannot prevail on the record before us. The jury could have found that but for the agreement to exclude nonunion contractors Muko would have been the low bidder on twelve restaurant jobs and would have made a profit on each. Finally, because of the parties' stipulation, we must assume that the twelve construction projects involved a substantial amount of interstate commerce. Since Muko established injury to its business or property and the contract which the jury could have found affected a significant amount of interstate commerce, the directed verdict can only be sustained if as a matter of law the agreement reached (1) was exempt from antitrust scrutiny, or (2) was lawful under the antitrust laws. We emphasize that in the procedural posture of this case we deal only with the narrow question whether any agreement which the jury might have found must be found to be exempt or legal for antitrust purposes.


Because the jury could have found concert of action between Silver's and the Councils, neither the Clayton Act, §§ 6 and 20, 15 U.S.C. § 17, 29 U.S.C. § 52, nor the Norris-LaGuardia Act, §§ 4, 5, and 13, 29 U.S.C. §§ 104, 105, 113, provide any statutory exemption from antitrust liability. See United Mine Workers v. Pennington, 381 U.S. 657, 662, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965); Allen Bradley Co. v. Local 3, IBEW, 325 U.S. 797, 65 S. Ct. 1533, 89 L. Ed. 1939 (1945). Thus any immunity from antitrust coverage must be found in the nonstatutory exemption. Moreover, the agreement which could have been found was outside the context of a collective bargaining relationship. Thus the significant labor law factors arising from that relationship to which we gave special deference in Consolidated Express, Inc. v. New York Shipping Association, Inc., 602 F.2d 494 (3d Cir. 1979), are not present here. Accord, Connell Construction Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 625-26, 95 S. Ct. 1830, 44 L. Ed. 2d 418 (1975). We must turn for guidance, therefore, to Connell, the one case in which the Supreme Court has dealt with an agreement, not in the collective bargaining context, between a labor union and a business organization. Connell recognized the possibility that agreements between labor unions and business organizations outside the collective bargaining context might be exempt, but held that the exemption was unavailable on the facts of that case. Unlike this case, Connell was before the Supreme Court after a full trial. Thus the Court was in a position to hold that nonstatutory labor exemption was unavailable as a matter of law. In the posture of this case, we need not reach so broadly. But if the jury could from the plaintiff's evidence have found facts falling within the principles established in Connell, we must remand for a new trial.

In Connell a labor union for one of the construction industry sub-trades had successfully used informational picketing to force a number of general contractors, with which it had no collective bargaining relationship, to agree to subcontract in that sub-trade only to subcontractors with whom the union had a current collective bargaining agreement. Connell, a general contractor who had been soliciting subcontract 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 the agreement violated section 1 of the Sherman Act. The union argued that the agreement was exempt for two reasons: (1) it was directly related to the valid union goal of organizing as many subcontractors as possible; and (2) it was expressly authorized by the construction industry proviso to § 8(e) of the National Labor Relations Act, 29 U.S.C. § 158(e) (1976). The Court rejected both arguments.

Local 100 first contended that the agreement was protected by the nonstatutory exemption from the antitrust laws because, although entered into outside the collective bargaining context, it advanced the union's valid organizational objective. Rejecting that contention Justice Powell wrote:

This record contains no evidence that the union's goal was anything other than organizing as many subcontractors as possible. This goal was legal, even though a successful organizing campaign ultimately would reduce the competition that unionized 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 laws.

421 U.S. at 625, 95 S. Ct. at 1836 (footnote omitted).

We understand Connell to hold, then, that an agreement between a union and a business organization, outside a collective bargaining relationship, which imposes a direct restraint upon a business market, and which is not justified by congressional labor policy because it has actual or potential anticompetitive effects that would not flow naturally from the elimination of competition over wages and working conditions, is not exempt from antitrust scrutiny.

On the record before us a jury could have found such an agreement. Like Connell Construction, Silver's purchases the services of building contractors. Like Connell, it has no collective bargaining relationship, actual or potential, with the Councils or their member locals. As in Connell, the jury could have found that the defendants entered into an agreement not to deal with nonunion contractors, which operated as a direct restraint on the business market by making those contractors "ineligible to compete for a portion of the available work." 421 U.S. at 625, 95 S. Ct. at 1836. The plaintiff introduced evidence that this agreement had "substantial (actual) anticompetitive effects" an increase of more than $250,000 in the total price paid for the twelve restaurants built by union contractors. Finally, the jury could have found that the agreement between Silver's and the Councils had "a potential for restraining competition in the business market in ways that would not follow naturally from elimination of competition over wages and working conditions." 421 U.S. at 635, 95 S. Ct. at 1841. For, on plaintiff's evidence, that agreement "indiscriminately excluded nonunion (contractors) from a portion of the market, even if their competitive advantages were not derived from substandard wages and working conditions but rather from more efficient operating methods." 421 U.S. at 623, 95 S. Ct. at 1835. We therefore conclude that the grant of a directed verdict cannot be affirmed on the theory that any agreement which might be found is as a matter of law within the nonstatutory labor exemption.

The Connell defendants also argued that the agreement challenged there was expressly authorized by the construction industry proviso to § 8(e) of the Labor Act, and therefore exempt from antitrust scrutiny. In answer to this argument the Court held that the construction industry proviso was not intended to authorize subcontracting agreements that are neither within the context of a collective bargaining relationship nor limited to a particular job site. To appreciate that holding 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 added). 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. The construction industry proviso reads:

(N)othing in this subsection shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work.

29 U.S.C. § 158(e). In rejecting the proviso's application to the Local 100-Connell agreement Justice Powell wrote:

(The) careful limits (in § 8(b)(4) and § 8(e)) on the economic pressure unions may use in aid of their organizational campaigns would be undermined seriously if the proviso to § 8(e) were construed to allow unions to seek subcontracting agreements, at large, from any general contractor vulnerable to picketing. Absent a clear indication that Congress intended to leave such a glaring loophole in its restrictions on "top-down" organizing, we are unwilling to read the construction-industry proviso as broadly as Local 100 suggests. Instead, we think its authorization extends only to agreements in the context of collective-bargaining relationships and, in light of congressional references to the Denver Building Trades problem, possibly to common-situs relationships on particular jobsites as well.

421 U.S. at 633, 95 S. Ct. at 1840 (footnotes omitted).

Absent the construction industry proviso, the "express or implied" agreement which the jury could have found between Silver's and the Councils would clearly fall within the prohibitions of § 8(e), since it required Silver's "to cease doing business" with Muko and all other nonunion contractors. And Connell is controlling on the question whether that agreement was protected by the construction industry proviso, for here there is neither a collective bargaining relationship with Silver's nor any evidence of a common-situs problem. Thus the grant of a directed verdict cannot be affirmed on the theory that any agreement which might be found is protected by the construction industry proviso to § 8(e).*fn1 This conclusion renders legally irrelevant the fact, relied upon by the dissent, that the agreement here was entered into as a result of handbilling protected by the first amendment and the publicity proviso to § 8(b)(4) of the Labor Act. The protections of the publicity proviso evidently extend only to handbilling conducted in conformity therewith. Nothing in § 8(b)(4) can reasonably be construed to authorize an agreement between a union and an employer that falls within the wholly independent prohibition of § 8(e) of the Act. Nor has the first amendment been viewed as compelling protection for an agreement illegal under § 8(e) or the Sherman Act solely because that agreement was entered into as a result of protected speech.

While Connell was decided on the basis of a full trial record, we have not yet heard the defendants' evidence in this case. Our holding that the grant of a directed verdict cannot be sustained on the basis of the nonstatutory exemption therefore should not be misconstrued as a holding that the defendants cannot establish in the court below that they are entitled to that defense. We hold only that Muko has introduced evidence sufficient to entitle it to have a jury determine that issue. Nor do we decide the question whether a finding that an agreement made outside the collective bargaining context violates § 8(e) by itself removes labor's nonstatutory antitrust exemption. Cf. Consolidated Express v. New York Shipping Ass'n, Inc., supra. The fact that in Connell Justice Powell considered the actual and potential anticompetitive effects of the agreement independently of the § 8(e) issue suggests that the presence of a § 8(e) violation may not itself decide the exemption issue. In this case, however, as in Connell, there is evidence ...

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