Northern Illinois Chapter of Builders v. Lavin, 05-2174.

• Decision Date: 09 December 2005
• Docket Number: No. 05-2174.,05-2174.
• Citation: 431 F.3d 1004
• Parties: NORTHERN ILLINOIS CHAPTER OF ASSOCIATED BUILDERS AND CONTRACTORS, INC., and Loberg Excavating, Inc., Plaintiffs-Appellants, v. Jack LAVIN, Director of the Illinois Department of Commerce and Economic Opportunity, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

431 F.3d 1004

NORTHERN ILLINOIS CHAPTER OF ASSOCIATED BUILDERS AND CONTRACTORS, INC., and Loberg Excavating, Inc., Plaintiffs-Appellants, v. Jack LAVIN, Director of the Illinois Department of Commerce and Economic Opportunity, Defendant-Appellee.

No. 05-2174.

United States Court of Appeals, Seventh Circuit.

Argued October 28, 2005.

Decided December 9, 2005.

Rachel B. Cowen (argued), Connelly, Sheehan & Harris, Chicago, IL, for Plaintiffs-Appellants.

Mary E. Welsh (argued), Office of the Attorney General, Civil Appeals Division, Chicago, IL, for Defendant-Appellee.

Eric M. Madiar, Freeborn & Peters LLP, Springfield, IL, Ryan A. Hagerty, Asher, Gittler, Greenfield & D'Alba, Chicago, IL, for Amici Curiae.

Before EASTERBROOK, MANION, and ROVNER, Circuit Judges.

EASTERBROOK, Circuit Judge.

Illinois subsidizes the construction or renovation of renewable-fuel plants—principally facilities that make ethanol. One condition of a grant is that the recipient "enter into a project labor agreement". 20 ILCS 689/15(a)(3). The agreement must establish wages and benefits and must include a no-strike clause. 20 ILCS 689/25(a). As a practical matter such agreements can be achieved only by employers that recognize and bargain with labor unions. An association of non-union contractors (and one of its members) filed this suit under 42 U.S.C. § 1983, seeking a declaratory judgment that the requirement of a project labor agreement is preempted by federal law. See Golden State Transit Corp. v. Los Angeles, 493 U.S. 103, 110 S.Ct. 444, 107 L.Ed.2d 420 (1989). Relying on Building & Construction Trades Council v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993) (Boston Harbor), the district court entered judgment for Illinois.

Boston required its contractors to negotiate project labor agreements under which all workers would be referred by union hiring halls and would be obliged to pay dues under union-security clauses; in exchange the unions would agree to forego strikes. Federal law permits such prehire agreements in the construction industry. See 29 U.S.C. § 158(e), (f). See also Jim McNeff, Inc. v. Todd, 461 U.S. 260, 103 S.Ct. 1753, 75 L.Ed.2d 830 (1983); Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 102 S.Ct. 2071, 72 L.Ed.2d 398 (1982). Boston Harbor holds that a public owner has the same entitlement as a private owner to decide how it will manage a construction project. Federal law preempts all state regulation of those aspects of labor relations that are arguably protected, arguably prohibited, or left to the domain of market forces. See San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959); Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132, 96 S.Ct. 2548, 49 L.Ed.2d 396 (1976). A city or state acting as proprietor, however, is a market participant rather than a market regulator. Boston Harbor, 507 U.S. at 230-31, 113 S.Ct. 1190.

The district court concluded that Illinois is acting as a proprietor in its renewable-fuels program. The problem with this view is that the state is not the proprietor of anything. It does not own any renewable-fuels project, either before or after granting a subsidy. The project's owner, not the state, is its proprietor. Boston hired the general contractors for the project; Illinois does not hire contractors. Nor does it invest in the projects through bonds. Contrast Hotel Employees v. Sage Hospitality Resources, LLC, 390 F.3d 206 (3d Cir.2004). All it has done is set a condition on grants to private proprietors.

To say that Illinois is not acting as a proprietor is not, however, to resolve the main question. Boston Harbor holds that if a state acts as a proprietor, then it may insist on the sort of prehire agreements that federal labor law permits private owners to adopt. It does not hold that only if a state acts in this capacity is its decision compatible with federal law. The Court stated the rule this way: "[T]he NLRA prevents a State from regulating within a protected zone, whether it be a zone protected and preserved for market freedom, see Machinists, or for NLRB jurisdiction, see Garmon. A State does not regulate, however, simply by acting within one of those protected areas.... We have held consistently that the NLRA was intended to supplant state labor regulation, not all legitimate state activity that affects labor." Boston Harbor, 507 U.S. at 226-27, 113 S.Ct. 1190 (emphasis in original). The need to distinguish regulation from other governmental activity is the Court's theme in Boston Harbor.

So is the conditional offer of a subsidy for renewable-fuels plants a form of regulation? It is hard to see how it could be: Illinois does not seek to affect labor relations generally. Both labor and management are free to make independent decisions with respect to all activities other than those for which the state pays.

The question "is a condition on the receipt of a grant a form of regulation?" comes up frequently, and the answer almost always is negative. Consider, for example, the many conditions on grants to states. The national government lacks the authority to regulate how states behave; it cannot direct them to pass or enforce laws. See Printz v. United States, 521 U.S. 898, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997). But it can set conditions on grants, and a state's decision to take the money obliges it to respect the conditions. Thus South Dakota v. Dole, 483 U.S. 203, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987), held that states that accept federal highway-construction money must set and enforce speed limits specified by Congress. That condition on the subsidy was not, the Court held, a form of forbidden regulation.

Similarly Congress lacks the authority to regulate what physicians say about abortion but may set conditions on federal grants and require those who accept the money to follow federal rules for family-planning advice. Rust v. Sullivan, 500 U.S. 173, 111 S.Ct. 1759, 114 L.Ed.2d 233 (1991). The condition differs from regulation because any physician or clinic may decline the offer. The list of similar decisions is lengthy. See, e.g., National Endowment for the Arts v. Finley, 524 U.S. 569, 118 S.Ct. 2168, 141 L.Ed.2d 500 (1998); Buckley v. Valeo, 424 U.S. 1, 57 & n. 65, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976).

Conditions on spending may become regulation if they affect conduct other than the financed project. Wisconsin Department of Industry v. Gould Inc., 475 U.S. 282, 106 S.Ct. 1057, 89 L.Ed.2d 223 (1986), illustrates this limit. Wisconsin refused to purchase goods or services from firms that had violated the National Labor Relations Act three or more times during the preceding five years. The Supreme Court understood this as an effort to control how employers behave when not...