State v. Safeway Inc.

Decision Date12 July 2011
Docket Number08–55708.,Nos. 08–55671,s. 08–55671
Citation191 L.R.R.M. (BNA) 2038,161 Lab.Cas. P 10396,651 F.3d 1118,11 Cal. Daily Op. Serv. 8655,2011 Daily Journal D.A.R. 10469,2011 Trade Cases P 77522
PartiesState of CALIFORNIA, ex rel. Kamala D. HARRIS,* Plaintiff–Appellant,v.SAFEWAY, INC., a Safeway Company doing business as Vons; Albertsons, Inc.; Ralphs Grocery Company, a division of the Kroger Company; Food 4 Less Food Company, a division of the Kroger Company; Vons Companies Inc., an indirect, wholly owned subsidiary of Safeway, Inc., Defendants–Appellees.State of California, ex rel. Kamala D. Harris, Plaintiff–Appellee,v.Safeway Inc. a Safeway Company doing business as Vons; Albertsons, Inc.; Ralphs Grocery Company, a division of the Kroger Company; Food 4 Less Food Company, a division of the Kroger Company; Vons Companies Inc. an indirect, wholly owned subsidiary of Safeway, Inc. Defendants–Appellants.
CourtU.S. Court of Appeals — Ninth Circuit

651 F.3d 1118
191 L.R.R.M. (BNA) 2038
161 Lab.Cas.
P 10,396
2011-1 Trade Cases P 77,522
11 Cal.
Daily Op. Serv. 8655
2011 Daily Journal D.A.R. 10,469

State of CALIFORNIA, ex rel. Kamala D. HARRIS,* Plaintiff–Appellant,
v.
SAFEWAY, INC., a Safeway Company doing business as Vons; Albertsons, Inc.; Ralphs Grocery Company, a division of the Kroger Company; Food 4 Less Food Company, a division of the Kroger Company; Vons Companies Inc., an indirect, wholly owned subsidiary of Safeway, Inc., Defendants–Appellees.State of California, ex rel.
Kamala D. Harris, Plaintiff–Appellee,
v.
Safeway Inc. a Safeway Company doing business as Vons; Albertsons, Inc.; Ralphs Grocery Company, a division of the Kroger Company; Food 4 Less Food Company, a division of the Kroger Company; Vons Companies Inc. an indirect, wholly owned subsidiary of Safeway, Inc.
Defendants–Appellants.

Nos. 08–55671

08–55708.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 22, 2011.Filed July 12, 2011.


[651 F.3d 1121]

Kamala D. Harris, Attorney General for the State of California; Kathleen E. Foote, Senior Assistant Attorney General; Barbara M. Motz, Supervising Deputy Attorney General; Patricia L. Nagler, Deputy Attorney General; Cheryl L. Johnson, Deputy Attorney General; and Jonathan M. Eisenberg (argued), Deputy Attorney General, Los Angeles, CA, for the plaintiff-appellant/cross-appellee.Alan B. Clark, Peter K. Huston, Latham & Watkins LLP, Los Angeles, CA, and Jeremy P. Sherman, Seyfarth Shaw LLP, Chicago, IL, for respondents-appellees

[651 F.3d 1122]

/cross-appellants Safeway, Inc. and The Vons Companies, Inc.Jeffrey A. LeVee, Craig E. Stewart (argued), and Kate P. Wallace, Jones Day, Los Angeles, CA, for respondent-appellee/cross-appellant Albertson's, Inc.Robert B. Pringle, Winston & Strawn, San Francisco, CA, for respondents-appellees/cross-appellants Ralphs Grocery Company and Food 4 Less Company.Robin S. Conrad, Shane B. Kawka, Washington, DC, for amicus curiae Chamber of Commerce of the United States.Charles I. Cohen, Jonathan C. Fritts and David R. Broderdorf, Washington, DC, for amici curiae Chamber of Commerce of the United States and Council on Labor Law Equality.Jeffrey A. Berman, Los Angeles, CA, for amicus curiae Employers Group.Robert M. McKenna, Attorney General of Washington and Mark O. Brevard, Assistant Attorney General, Seattle, WA; and Nancy H. Rogers, Attorney General of Ohio and Jennifer L. Pratt, Chief, Antitrust Section, Columbus, OH, for amici curiae Arizona, Connecticut, Delaware, Maryland, Massachusetts, Mississippi, Missouri, Montana, Nevada, Ohio, Oklahoma, Oregon, Tennessee, Washington, and West Virginia.Nicholas W. Clark, Washington, DC, for amicus curiae United Food and Commercial Workers International Union.Michael D. Four, Los Angeles, CA, for amici curiae UFCW Local Unions 135, 324, 770, 1036, 1167, 1428, and 1442.Andrew D. Roth, Washington, DC, for amici curiae United Food and Commercial Workers International Union, UFCW Local Unions 135, 324, 770, 1036, 1167, 1428, and 1442, Change to Win, and AFL–CIO.Richard M. Brunell, Washington, DC, for amicus curiae American Antitrust Institute.Appeal from the United States District Court for the Central District of California, Andrew J. Guilford, District Judge, Presiding. D.C. No. 2:04–cv–00687–AG–SS.Before: ALEX KOZINSKI, Chief Judge, MARY M. SCHROEDER, STEPHEN REINHARDT, SUSAN P. GRABER, M. MARGARET McKEOWN, RAYMOND C. FISHER, RONALD M. GOULD, RICHARD C. TALLMAN, JOHNNIE B. RAWLINSON, RICHARD R. CLIFTON, and N. RANDY SMITH, Circuit Judges.Opinion by Judge GOULD; Concurrence by Judge FISHER; Partial Dissent by Chief Judge KOZINSKI; Partial Concurrence and Partial Dissent by Judge REINHARDT.
OPINION
GOULD, Circuit Judge:

We must decide whether an agreement among competitors to share revenues during the term of a labor dispute is exempt from the antitrust laws under the non-statutory labor exemption, and if not, whether the agreement should be condemned as a per se violation of the antitrust laws or on a truncated “quick look,” or whether more detailed scrutiny is required. We conclude that the agreement is not immune from the antitrust laws, but that summary condemnation, whether as a per se violation or on a “quick look,” is improper. We affirm the district court.

I. Factual and Procedural History

In the fall of 2003, the collective-bargaining agreement between several local chapters of the United Food and Commercial

[651 F.3d 1123]

Workers (“UFCW”) and three large supermarket chains operating in Southern California (Albertson's, Ralphs, and Vons, a subsidiary of Safeway, Inc.) was set to expire. Another grocery chain, Food 4 Less,1 had a separate contract with UFCW that was set to expire several months later, in February 2004. Before the contracts expired and with the consent of the union, Albertson's, Ralphs, and Vons formed a multi-employer bargaining unit in the summer of 2003 for negotiation of a successor labor contract.

Albertson's, Ralphs, Vons, and Food 4 Less (“Defendants” or “grocers”) entered into a Mutual Strike Assistance Agreement 2 (“MSAA”) in September 2003, in anticipation of the potential use of “whipsaw” tactics, where unions exert pressure on one employer within a multi-employer bargaining unit through, for example, selective strikes or picketing. Among other things, the MSAA provided that if one party to the agreement was struck by the union, the other grocers (with the exception of Food 4 Less) would lock out all their union employees within 48 hours.

Pertinent to the antitrust claims that we assess, the MSAA also included a revenue-sharing provision (“RSP”), providing that in the event of a strike/lockout, any grocer that earned revenues above its historical share relative to the other chains during the strike period would pay 15% of those excess revenues as reimbursement to the other grocers to restore their pre-strike shares.3 The MSAA specified that the strike/lockout period would begin at the start of the week in which the strike/lockout commenced and continue for two weeks following the end of the strike/lockout.4 According to a responsible grocer executive, the 15% figure was designed to estimate the incremental profit the grocers earned on each additional dollar of revenue.

On October 11, 2003, after union contract negotiations broke down, the unions began a strike against Vons stores in the region. Albertson's and Ralphs locked out their union employees the next day pursuant to the terms of the MSAA. The unions at first picketed Albertson's, Ralphs, and Vons stores, but soon elected to pull their pickets from Ralphs stores and focus their picketing efforts on Albertson's and Vons only. About four-and-a-half months after the strike began, at the end of February 2004, the grocers and the unions reached an agreement and the strike/lockout ended. In accord with the revenue-sharing provision of the MSAA, Ralphs paid about $83.5 million to Vons, and it paid about $62.5 million to Albertson's.

[651 F.3d 1124]

While the strike was in progress, the State of California brought an action against the grocers alleging that the RSP violated Section 1 of the Sherman Act, which prohibits any contract, combination, or conspiracy in restraint of trade or commerce.5 15 U.S.C. § 1. After limited discovery, the grocers moved for summary judgment on the ground that the RSP was immune from antitrust scrutiny under the non-statutory labor exemption. The district court denied the motion, holding that the exemption was inapplicable. California then moved for summary judgment, contending that the RSP was a per se violation of § 1, or in the alternative that it was unlawful under an abbreviated rule of reason or “quick look” antitrust analysis. The district court denied that motion as well. The grocers renewed their motion for summary judgment on the non-statutory labor exemption, and the district court again denied their motion.

While preserving their right to appeal the district court's rulings, the parties stipulated to the entry of final judgment for the grocers after California agreed not to pursue the theory that the RSP violated § 1 of the Sherman Act under a full rule of reason analysis, and the grocers agreed not to pursue the various affirmative defenses they had pleaded, with the exception of the non-statutory labor exemption. The district court entered judgment in accordance with the parties' stipulations.

California timely appealed the final judgment, arguing that the RSP should be condemned as a per se violation or on a “quick look,” and the grocers timely cross-appealed, arguing that the non-statutory labor exemption should apply. We issued an opinion affirming in part, reversing in part, and remanding. California ex rel. Brown v. Safeway, Inc., 615 F.3d 1171 (9th Cir.2010). A majority of non-recused active judges voted to rehear this case en banc pursuant to Circuit Rule 35–3. California ex rel. Brown v. Safeway, Inc., 633 F.3d 1210 (9th Cir.2011).

II. Jurisdiction and Standard of Review

We have jurisdiction under 28 U.S.C. § 1291. We review de novo a district court's denial of summary judgment on the basis of the non-statutory labor exemption. Clarett v. Nat'l Football League, 369 F.3d 124, 130 (2d Cir.2004). The selection of the proper mode of antitrust analysis is a question of law, which we review de novo. United States v. Brown, 936 F.2d 1042, 1045 (9th Cir.1991); see also Craftsmen Limousine, Inc. v. Ford Motor Co., 363 F.3d 761, 772 (8th Cir.2004); XI Phillip Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1909b, at 279 (2d ed.2005) (hereinafter Areeda & Hovenkamp).

III. Non–Statutory Labor Exemption

On cross-appeal, the grocers contend that the district court erred in holding that the RSP is not immune from the Sherman Act under the non-statutory labor exemption, and they urge that summary judgment should have been entered in their favor on the basis of the exemption.

A. Background

Courts have recognized both “statutory”...

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