607 F.2d 1229 (9th Cir. 1979), 77-2931, Waggoner v. R. McGray, Inc.

Docket Nº:77-2931, 77-3774 and 78-2067.
Citation:607 F.2d 1229
Party Name:William C. WAGGONER et al., etc., Appellants, v. R. McGRAY, INC., O'Shaughnessy Construction Company, Tri-Central Construction Company, and Vernon Houghton, Appellees. C. William BURKE, et al., etc., Plaintiffs-Appellants, v. ERNEST W. HAHN, INC., etc., Defendant, Third-Party Plaintiff-Appellee, v. PETERSON BROTHERS EQUIPMENT CO., etc., Third-Party
Case Date:August 24, 1979
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1229

607 F.2d 1229 (9th Cir. 1979)

William C. WAGGONER et al., etc., Appellants,

v.

R. McGRAY, INC., O'Shaughnessy Construction Company,

Tri-Central Construction Company, and Vernon

Houghton, Appellees.

C. William BURKE, et al., etc., Plaintiffs-Appellants,

v.

ERNEST W. HAHN, INC., etc., Defendant, Third-Party Plaintiff-Appellee,

v.

PETERSON BROTHERS EQUIPMENT CO., etc., Third-Party Defendant-Appellee.

Nos. 77-2931, 77-3774 and 78-2067.

United States Court of Appeals, Ninth Circuit

August 24, 1979

        Rehearing Denied Nov. 30, 1979.

Page 1230

        Albert Rush, Wayne Jett (argued), Los Angeles, Cal., Lewis Scott, Portland, Or., for appellants.

        John H. Stephens, William R. Harmsen, Los Angeles, Cal. (argued), Stafford, Buxbaum & Chakmak, Newport Beach, Cal., for appellees.

        Appeal from the United States District Court for the Central District of California.

        Before HUFSTEDLER and SNEED, Circuit Judges, and SPENCER WILLIAMS, [*] District Judge.

        HUFSTEDLER, Circuit Judge:

        These consolidated appeals require us to decide whether a federal court may entertain an unfair labor practice defense to enforcement of a collective bargaining agreement in an action pursuant to section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, before the National Labor Relations Board ("NLRB") has exercised primary jurisdiction over the unfair

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labor practice charge. We hold that the NLRB's primary jurisdiction precludes federal courts from acting as the initial arbiters of unfair labor practice charges in section 301 actions.

        I

        Appellants are trustees of various employee benefit trusts established pursuant to the Master Labor Agreement between the International Union of Operating Engineers, Local Union No. 12 ("Local 12") and the Southern California General Contractors Associations, a group of multi-employer associations in the building and construction industry of Southern California. Appellees are construction industry employers who are signatories to the Master Labor Agreement with Local 12. The Master Labor Agreement requires signatory employers to make fringe benefit contributions to the trusts for each hour worked by (or paid) covered employees. Employers who fail to make the required contributions are placed on a "delinquency list," which the trustees distribute to the union and to each contractor association. The Master Labor Agreement prohibits signatory employers from subcontracting work to contractors on the delinquency list. 1 Employers who violate this provision are made liable for all accrued delinquencies of the subcontractor. 2

        R. McGray, Inc. ("McGray") and Peterson Brothers Equipment Company ("Peterson") were placed on the trusts' delinquency list on November 1, 1974, and January 10, 1975, respectively. O'Shaughnessy Construction Company ("O'Shaughnessy"), Tri-Central Construction Company ("Tri-Central"), and Vernon Houghton thereafter subcontracted covered work to McGray and Ernest W. Hahn, Inc. ("Hahn") subcontracted covered work to Peterson. On February 3, 1976, the trustees filed suit against Hahn, pursuant to section 301 of the Labor Management Relations Act, to enforce the terms of the Master Labor Agreement. Hahn later filed a third-party complaint seeking indemnification from Peterson. On October 18, 1976, the trustees filed a similar action against McGray, O'Shaughnessy, Tri-Central, and Houghton. In both actions the trustees sought recovery of fringe benefit contributions owed by the delinquent subcontractors pursuant to the terms of the Master Labor Agreement that made contractors liable for the accrued delinquencies of their subs.

        In Waggoner v. R. McGray, Inc. (C.D.Cal.1977) 432 F.Supp. 580, the district court dismissed the trustees' complaint for failure to state a claim upon which relief can be granted. The court held that the provisions of the Master Labor Agreement that the trustees sought to enforce were "unenforceable and void" because they involved an unfair labor practice in violation of section 8(e) of the National Labor Relations Act, 29 U.S.C. § 158(e). 3 The court based its decision

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on the fact that the disputed provisions of the Master Labor Agreement were identical to those involved in Griffith Co. v. N. L. R. B. (9th Cir. 1976) 545 F.2d 1194.

        In Griffith we reviewed the NLRB's dismissal of a contractor's complaint that the Master Labor Agreement involved an unfair labor practice by requiring contractors to cease doing business with delinquent subcontractors. We reversed the NLRB's determination that the disputed portions of the agreement involved lawful "primary" activity, but we remanded the case for the NLRB to consider whether the disputed provisions were valid nonetheless under the construction industry exception to section 8(e).

        The district court in McGray concluded that "(a)lthough Griffith arose in the context of an unfair labor practice, the Ninth Circuit's conclusion therein brings into play the sanction found in Section 8(e) of the Act, namely, that such forbidden agreements are 'unenforceable and void.' " (Waggoner v. R. McGray, Inc., supra, 432 F.Supp. at 582.) The court rejected the trustees' claim that the agreement was protected by the construction industry exception to section 8(e). The court then concluded that the trustees could not state a claim because the contract provisions they sought to enforce were "against national labor policy as expressed in Section 8(e)" and thus "unenforceable and void." (Waggoner v. R. McGray, Inc., supra, 432 F.Supp. at 583.)

        Following the rationale of McGray, the district court in Burke v. Ernest W. Hahn, Inc. granted summary judgment to defendants on January 23, 1978.

        II

        In both of these cases the district courts refused to enforce the Master Labor Agreement on the theory that it embodied an unfair labor practice forbidden by section 8(e) of the National Labor Relations Act. Neither the NLRB nor this court, however, has declared the disputed provisions of the agreement an unfair labor practice. None of the defendants filed unfair labor practice charges with the NLRB based on the alleged illegality of the agreement. Although in Griffith we reversed the NLRB's decision that identical contract terms involved lawful primary activity, we reserved for the NLRB's determination the question whether the agreement was protected by the construction industry exception to section 8(e). In holding the agreement unenforceable, the district courts reached their own conclusions about the applicability of the construction industry exception to section 8(e). By deciding the merits of the unfair labor practice claims, the district courts deviated from the traditional practice of respecting the NLRB's primary jurisdiction over unfair labor practice charges.

        The rationale of the primary jurisdiction principle was outlined by a unanimous Supreme Court in Garner v. Teamsters Union (1953) 346 U.S. 485, 74 S.Ct. 161, 98 L.Ed. 228. In discussing the congressionally-established scheme for regulation of labor practices, the Court said:

"Congress did not merely lay down a substantive rule of law to be enforced by any tribunal competent to apply law generally to the parties. It went on to confide primary interpretation and application of its rules to a specific and specially constituted tribunal and prescribed a particular procedure for investigation, complaint and notice, and hearing and decision, including judicial relief pending a final administrative order. Congress evidently considered that centralized administration of specially designed procedures...

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