Premier Elec. Const. Co. v. National Elec. Contractors Ass'n, Inc.

• Decision Date: 23 April 1987
• Docket Number: Nos. 86-1935,86-2035 and 86-2036,s. 86-1935
• Parties: 124 L.R.R.M. (BNA) 2974, 55 USLW 2499, 106 Lab.Cas. P 12,292, 1987-1 Trade Cases 67,462, 7 Fed.R.Serv.3d 142 PREMIER ELECTRICAL CONSTRUCTION CO., Plaintiff-Appellant--Cross-Appellee, v. NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, INC., et al., Defendants- Appellees--Cross-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 358

814 F.2d 358

124 L.R.R.M. (BNA) 2974, 55 USLW 2499,

106 Lab.Cas. P 12,292,

1987-1 Trade Cases 67,462, 7 Fed.R.Serv.3d 142

PREMIER ELECTRICAL CONSTRUCTION CO. Plaintiff-Appellant--Cross-Appellee, v. NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, INC., et al Defendants- Appellees--Cross-Appellants.

Nos. 86-1935, 86-2035 and 86-2036.

United States Court of Appeals Seventh Circuit.

Argued Dec. 11, 1986.

Decided March 2, 1987.

As Amended March 17, 1987.

Rehearing and Rehearing En Banc Denied April 23, 1987.

Jonathan G. Bunge, Keck, Mahin & Cate, Chicago, Ill., for plaintiff-appellant--cross-appellee.

Anthony W. Kraus, Semmes, Bowen & Semmes, Baltimore, Md., for defendants-appellees--cross-appellants.

Before BAUER, Chief Judge, and COFFEY and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

This antitrust case presents questions concerning issue preclusion, horizontal price fixing with a union's assistance, and the Noerr-Pennington doctrine. The questions arise from an agreement in 1976 between the National Electrical Contractors Association, Inc. (the Association), which comprises firms doing 50-60% of the nation's electrical contracting work, and the International Brotherhood of Electrical Workers, AFL-CIO (the Union), which represents employees of these and many other contractors. The agreement established the National Electrical Industry Fund (the Fund), and members of the Association pay 1% of their gross payroll to the Fund to finance its activities. The Fund helps to defray the costs of the Association's bargaining with the Union on behalf of its members and administering their collective bargaining agreements. The Fund also pays for some research and educational programs. The 1976 agreement calls for the Union to obtain, as part of any collective bargaining agreement with a firm that is not a member of the Association, a requirement that the firm contribute 1% of its gross payroll to the Fund.

I

Firms that were outside the Association objected to the Union's effort to divert 1% of each employer's payroll to the Fund. Characterizing the contribution requirement as a cartel, they filed an antitrust suit in the federal court in Maryland in 1977. Two of the plaintiffs in the Maryland case asked that it be certified as a class action on behalf of all electrical contractors that did not belong to the Association. Despite the requirement of Fed.R.Civ.P. 23(c)(1) that the court determine "[a]s soon as practicable" whether a suit may be maintained as a class action, the district court allowed that issue to slide for three years. It then simultaneously decided the merits and the application for certification of the class. National Constructors Ass'n v. National Electrical Contractors Ass'n, Inc., 498 F.Supp. 510 (D.Md.1980). The court held the contribution requirement unlawful per se under Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1, see 498 F.Supp. at 529-43. It also certified a class of electrical contractors that do not belong to the Association and have signed agreements with the Union requiring them to make the 1% contribution to the Fund. Id. at 544-51. The court denominated this as a class under Rule 23(b)(3), id. at 548, which required that each member be given notice and offered an opportunity to opt out. Certification under Rule 23(b)(3) was appropriate, the judge concluded, because all members of the class had identical claims for damages, which could be computed in a mechanical fashion. Id. at 549-50. The district court then deferred the required notice while the Association, Union, and Fund took an appeal under 28 U.S.C. Sec. 1292(a)(1) from the injunction against their demand that firms pay the 1% fee.

On September 16, 1980, seven days after the Maryland court filed its opinion, Premier Electrical Construction Co.--a member of the class that had been certified in Maryland--filed this suit in Chicago. Premier's complaint tracked that of the plaintiffs in Maryland, with one exception. The plaintiffs in the Maryland case wanted an injunction and damages of treble the amounts they had paid into the Fund. Although Premier had signed contracts containing the 1% requirement, it had refused to pay and therefore could not obtain the kind of damages the class representatives had requested. Because Premier had refused to pay, the Fund had filed three suits (one for each year of the contract) in state courts of Illinois. Premier defended these suits, arguing among other things that the contribution requirement violated the Sherman Act. These state suits proceeded for a while as the Maryland litigation was ongoing. They were stayed after a time, and the Fund dismissed them voluntarily when it lost the Maryland case. Premier's complaint in federal court asked for treble damages based on the expense, including attorneys' fees, of defending the contract actions in Illinois.

Two weeks after filing the suit in Chicago, Premier informed the Maryland court that it would move to consolidate the cases. It did not file the necessary motion, however, until February 1982, when the court in Chicago demanded that Premier show cause for its inaction. Premier quickly filed with the Judicial Panel on Multidistrict Litigation a motion to transfer the case under 28 U.S.C. Sec. 1407(c)(ii). This was a peculiar motion, because Sec. 1407 allows transfer and consolidation only for pretrial proceedings, and the Maryland case was already on appeal from a dispositive judgment. The Panel denied the motion in light of "the more advanced stage of the Maryland action" and the "minimal number of actions involved in this litigation". Premier did nothing further concerning the Maryland litigation until March 1983.

Meanwhile the Fourth Circuit affirmed the Maryland court's decision. National Electrical Contractors Ass'n, Inc. v. National Constructors Ass'n, 678 F.2d 492 (4th Cir.1982). The court of appeals agreed with the district court that the 1% requirement was unlawful per se as price fixing. Premier did not participate in the appeal, and apparently no one asked the Fourth Circuit to address the propriety of the class certification. The Association, Union, and Fund asked the Supreme Court to review the case. While the petition was pending, the case was settled. The defendants consented to the entry of an injunction against collecting the 1% contribution from firms that did not belong to the Association. They also offered to create a fund of $6 million, on which class members could draw in proportion to their contributions to the Fund since 1977.

On learning of the terms of the proposed settlement, Premier objected that only payments into the Fund could be a basis of access to the $6 million. In April 1983 it asked the Maryland court to defer still further the giving of notice under Rule 23 and to allow it to add and litigate claims on behalf of a new subclass that had incurred expenses of litigation. The subclass Premier proposed would include contractors sued, threatened with suit, or subject to any other efforts to collect the fee. Premier apparently wanted payments to this subclass to come on top of the $6 million. The Maryland court concluded that Premier had tarried far too long in proposing a new subclass and rebuffed its requests. It stated that the case had "progressed to the point that ... it would be totally unfair to interrupt it by permitting intervention along the lines requested and staying the distribution of the class notice and redefining the class. It seems to me that Premier, being a member of the class in this suit, should, if it so desires, object to the settlement, either that or seek to opt out of the settlement and pursue any further claims it may have elsewhere." The notices to the class were issued in April 1983 and told class members that they could accept the benefits of the settlement, object to the settlement (see Rule 23(e)), or opt out of the class. Premier opted out. The district court approved the settlement, and in August 1983 the defendants dismissed their petition for certiorari. 463 U.S. 1234, 104 S.Ct. 26, 77 L.E.2d 1449 (1983).

The Maryland case was over, but the Chicago case had just begun. There had been only limited discovery, and Premier wanted to keep things that way. It asked the Chicago court to hold that the defendants are bound by the Fourth Circuit's decision that they violated the Sherman Act. The defendants opposed this request and added the contention that the sort of damages Premier requested are unavailable under the Sherman Act unless the state litigation was a "sham". Both sides moved for summary judgment.

The district court held that the defendants are bound by the Maryland decision under principles of issue preclusion (collateral estoppel, here the offensive, non-mutual variety). Premier Electrical Construction Co. v. IBEW, 627 F.Supp. 957, 960-63 (N.D.Ill.1985). The court concluded that class members should be entitled to the benefit of preclusion even when they opt out, because preclusion will reduce claims on judicial resources. ¹ This did not carry the day for Premier, however, because the court also held that the Noerr-Pennington doctrine precludes the recovery as damages of the costs of defending the Fund's suits. Id. at 964-66. Premier had not alleged that the suits were shams in the sense that the Fund did not care whether it won, or that the Fund brought them for the sake of the costs they would impose rather than because of the prospect of winning.

The court did not grant the defendants' motions for summary judgment, however, because of the possibility that Premier could show some other kind of compensable injury. Premier asked the district court to certify its order for an interlocutory appeal under 28 U.S.C. Sec. 1292(b), arguing that the court's interpretation of the Noerr-Pennington doctrine warranted immediate review. In the course of requesting the certification, Premier conceded that it did not expect to be able to show any other...