Lumber Products Ass'n v. United States, 10011.

• Decision Date: 14 October 1944
• Docket Number: No. 10011.,10011.
• Citation: 144 F.2d 546
• Parties: LUMBER PRODUCTS ASS'N, Inc., et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

144 F.2d 546 (1944)

LUMBER PRODUCTS ASS'N, Inc., et al. v. UNITED STATES.

No. 10011.

Circuit Court of Appeals, Ninth Circuit.

August 23, 1944.

Rehearing Denied October 14, 1944.

Maurice E. Harrison, Moses Lasky, Brobeck, Phleger & Harrison and James M. Thomas, all of San Francisco, Cal., for Lumber Products Ass'n group of appellants.

Joseph O. Carson, II, of Indianapolis, Ind., Harry N. Routzohn, of Dayton, Ohio, and Hugh K. McKevitt and Jack M. Howard, both of San Francisco, Cal., for certain Labor Union appellants.

Joseph O. Carson, of Indianapolis, Ind., Charles H. Tuttle and Thomas E. Kerwin, both of New York City, and Hugh K. McKevitt, of San Francisco, Cal., for appellant United Brotherhood of Carpenters and Joiners of America.

Clarence E. Todd, of San Francisco, Cal., for appellant Alameda County Building & Construction Trades Council.

Morgan J. Doyle, of San Francisco, Cal., for appellants Boorman Lumber Co. et al.

Charles S. Burdell, Sp. Asst. to Atty. Gen., of Seattle, Wash., and Joseph L. Alioto and George W. Hippeli, both of San Francisco, Cal., John S. Harlow, of Seattle, Wash., and James McI. Henderson, of San Francisco, Cal. (Tom C. Clark, Asst. Atty. Gen., and Frank J. Hennessy, U. S. Atty., of San Francisco, Cal., of counsel), for appellee.

Before GARRECHT, DENMAN, and HEALY, Circuit Judges.

DENMAN, Circuit Judge.

This is an appeal from a judgment of the district court sentencing appellants for violation of Section 1 of the Sherman Anti-Trust Act,¹ on finding the several appellants guilty or acting on pleas of nolo contendere. They were among a large group indicted on two counts for combining and conspiring to violate that Act. The second count was dismissed upon motion of the government.

For convenience in describing the parties to the alleged conspiracy, one group of the present appellants will be designated as the "Union Group" and the remaining appellants as the "Manufacturer Group." The former group is composed of the United Brotherhood of Carpenters and Joiners of America, an international union affiliated with the A. F. of L., two area Trade Councils, two local unions, affiliated with the above international, and several officers and members of these associations. The latter group is composed of Trade associations, corporations and individuals.

All of the appellants were engaged in or otherwise associated with the manufacture, distribution, sale or installation of mill work and patterned lumber in the San Francisco Bay Area.

The facts alleged to constitute the charge of the indictment show that prior to 1936 at least 80% of the mill work and patterned lumber used in the San Francisco area was produced in states other than California. The principal area of production was in Washington and Oregon. The processing of lumber products in the latter two states was with the most developed equipment and on a large scale mass basis in which, in some instances, raw timber was converted into finished lumber in a single continuous operation. This method of production was in marked contrast to the apparently more costly, small plant operations of the Bay area manufacturers, in which the skilled labor of craftsmen was used. The labor used in the Washington and Oregon production, though organized, was on a lower wage scale than that of the Bay area mill workers at the time the alleged conspiracy was formed, though it does not appear that the annual wage of the out-of-state labor was lower or their cost of living as high.

The Manufacturer Group involved here produced substantially all the mill work and patterned lumber made in the area. All of the craftsmen skilled in the production or installation of these products had to be members of a local of the Union Group before they could work for the Manufacturers. It was alleged that under these circumstances the combined power of these two groups was great. It is apparent that such monopoly power well could impose a greatly increased cost to the smaller home builder and others in the great building activity of such a state as California, with its extraordinary immigration of the past two decades.

It was further alleged that in 1936 the Union Group demanded an increase in wages. This demand was acceded to by the Manufacturer Group in exchange for an agreement by the unions to prevent the sale and shipment to the Bay area of products manufactured outside of California. This agreement was reduced to a written contract between the parties in which they agreed that "* * * no material will be purchased from, and no work will be done on any material or article that has had any operation performed on same by Saw Mills, Mills or Cabinet Shops, or other distributors that do not conform to the rates of wage and working conditions of this agreement." This exclusionary clause was alleged to be subject to certain named exceptions.

The Manufacturer Group circulated among the trade price lists and market reports which effected artificial and non-competitive prices for mill work and patterned lumber. These were enforced by the Union Group by picketing, work stoppages and other means, preventing the use of materials purchased in violation of the terms of the contract.

On the basis of the alleged facts and conduct it was finally charged that the object and effect of the combination was to stop the sale of mill work and patterned lumber by manufacturers in other states in the San Francisco area and to prevent lumber yards and jobbers in that area from purchasing such out-of-state products and thereby permit the raising and fixing of prices in such products. It was further charged that the conspiracy had succeeded in its object and that prices of mill work and patterned lumber had been arbitrarily and unreasonably increased.

All of the defendants demurred to the indictment. This was overruled by the trial court. Thereafter all the parties here making up the Manufacturers Group withdrew their pleas of not guilty and entered pleas of nolo contendere.² The parties falling in the Union Group maintained their plea of not guilty, were tried and found guilty by verdict of a jury.

The first issue common to all of the appellants is the sufficiency of the indictment. It is contended that the trial court erred in refusing to sustain the demurrers which were based on the ground that the allegations of the indictment failed to state a crime under the Sherman Act in that the agreement between the parties merely embodied legitimate objectives of labor, successfully obtained through the process of collective bargaining in termination of a labor dispute. Appellants urge here that the doctrines of the Supreme Court decisions in Apex Hosiery Co. v. Leader, 310 U.S. 469, 60 S.Ct. 982, 84 L.Ed. 1311, 128 A.L.R. 1044, and United States v. Hutcheson, 312 U.S. 219, 61 S.Ct. 463, 85 L.Ed. 788, are controlling.

Appellants argue that nothing unlawful is charged, for it is well established that labor may lawfully refuse to work on any product it sees fit and from this freedom it follows that labor may make the intention of such a refusal the terms of a contract.

The government argues that the allegations of the indictment cannot be so narrowly construed. They must be viewed in the light of all the facts charged, and, though such a provision in a contract may not be invalid on its face, the factual context in which it will work, its alleged purpose and ultimate effect cannot be ignored in determining its actual validity. Considering all these factors the government contends that the agreement was for the express purpose of committing the offense of violating the Sherman Act; that the gains in wages to the labor conspirators and in the profits to the co-conspiring manufacturers from their monopoly grip on the home builder and other consumers of such lumber products in the San Francisco area were not mere fortuitous and incidental results of the agreement; and that Congress in enacting the Norris-LaGuardia Act did not intend that labor should be free so purposefully to conspire with its employers to exact a tribute from the consumers of their products.

We agree with the government that the charges of the indictment and the factual allegations made in their support are not of a restraint upon commerce merely incident to the ordinary disruption of the production of an employer, arising out of a protracted labor dispute and necessary to the achieving of a legitimate objective of organized labor. Rather there is here alleged a combination for a direct restraint upon commerce with an objective of destroying the competition of that commerce and permitting the fixing and maintenance of the local area prices at an arbitrary, artificial and non-competitive level. It is such intended restraints for such an objective at which the sanctions of the Sherman Act are directed.³

Nor are the appellants aided by the statement in the Apex case that the restrictive effect upon the power of an employer to compete in commerce by the elimination of price competition based on differences in labor standards, resulting from the successful consummation of a wage agreement by a union, is not within the Sherman Act. Not only was the price competition of mill work and patterned lumber products of Washington and Oregon attributed in part to more efficient, technically improved, large scale methods, but here the elimination of competition was not a result merely incidentally flowing from the achieved objective of increased wages but the means of obtaining it. Also there is not here the protection or preservation of a previously existing interest lending reasonableness to a restraint, but rather the bold pursuit of restraint for the direct mutual advantage of the parties, to be gained by the monopoly price tribute from the consumer.

Because organized labor may lawfully strike, picket or boycott in support of its demands for higher wages which an employer may or may not be able to pay, it does not follow that...