Associated Builders and Contractors, Inc. v. City of Seward

• Decision Date: 05 June 1992
• Docket Number: No. 91-35511,91-35511
• Citation: 966 F.2d 492
• Parties: 140 L.R.R.M. (BNA) 2539, 60 USLW 2772, 122 Lab.Cas. P 10,210, 1992-1 Trade Cases P 69,887 ASSOCIATED BUILDERS AND CONTRACTORS, INC., et al., Plaintiffs-Appellants, v. CITY OF SEWARD, an Alaska own rule municipality; International Brotherhood of Electrical Workers, Local Union 1547 (IBEW), a labor union, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 492

966 F.2d 492

140 L.R.R.M. (BNA) 2539, 60 USLW 2772,

122 Lab.Cas. P 10,210,

1992-1 Trade Cases P 69,887

ASSOCIATED BUILDERS AND CONTRACTORS, INC., et al Plaintiffs-Appellants, v. CITY OF SEWARD, an Alaska own rule municipality International Brotherhood of Electrical Workers Local Union 1547 (IBEW), a labor union Defendants-Appellees.

No. 91-35511.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 7, 1992.

Decided June 5, 1992.

Maurice Baskin, Venable, Baetjer, Howard & Civiletti, Washington, D.C., Stephen M. Ellis, Delaney, Wiles, Hayes, Reitman & Brubaker, Inc., Anchorage, Alaska, for plaintiffs-appellants.

Helene M. Antel, IBEW Local Union 1547, Anchorage, Alaska, for defendants-appellees.

Appeal from the United States District Court for the District of Alaska.

Before WRIGHT, NORRIS, and HALL, Circuit Judges.

WILLIAM A. NORRIS, Circuit Judge:

The City of Seward ("Seward") owns and operates its own electric utility. Seward has a Collective Bargaining Agreement ("CBA") with the International Brotherhood of Electrical Workers ("IBEW"). In 1990, Seward received a grant from the Alaska legislature to replace an old high voltage electric transmission line. Although Seward has traditionally relied on its own employees to do the work on improvements in its electrical system, in this case it decided to contract out the transmission line renovation project to a private contractor. The primary reason for doing so was that Seward lacked the heavy construction equipment needed to do the job.

To protect the interests of the Seward employees represented by the IBEW, the union negotiated with Seward to add a work preservation clause to the CBA. The clause limits bidding on the renovation project to contractors who agree to enter into a labor agreement with the IBEW for purposes of this project. ¹ Trade associations representing construction industry contractors ("Contractors") filed this action seeking to enjoin the enforcement of the work preservation clause. The Contractors maintained the clause is preempted by the National Labor Relations Act (NLRA), that it violates the antitrust laws, and that it operates to deny the Contractors equal protection and due process of law.

Ruling on stipulated facts, the district court granted summary judgment to Seward and the IBEW. The Contractors appeal. We review a summary judgment de novo. See Harkins Amusement Enterprises, Inc. v. General Cinema Corp., 850 F.2d 477, 482 (9th Cir.1988), cert. denied, 488 U.S. 1019, 109 S.Ct. 817, 102 L.Ed.2d 806 (1989).

I

We first address the Contractors' preemption argument that the NLRA prohibits Seward from enforcing the work preservation clause in its CBA with the IBEW.

In Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 106 S.Ct. 1395, 89 L.Ed.2d 616 (1986), the Supreme Court summarized its NLRA preemption case law. The Court said:

Last Term, in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 [105 S.Ct. 2380, 85 L.Ed.2d 728] (1985), we again noted: "The Court has articulated two distinct NLRA preemption principles." The first, the so-called [San Diego Building Trades Council v.] Garmon [359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959) ] preemption prohibits States from regulating "activity that the NLRA protects, prohibits, or arguably protects or prohibits." The Garmon rule is intended to preclude state interference with the National Labor Relation Board's interpretation and active enforcement of the "integrated scheme of regulation" established by the NLRA.

[T]he second, ... the so-called Machinists [ v. Wisconsin Employment Relations Comm'n, 427 U.S. 132, 96 S.Ct. 2548, 49 L.Ed.2d 396 (1976) ] preemption ... precludes state and municipal regulation "concerning conduct that Congress intended to be unregulated." Although the labor-management relationship is structured by the NLRA, certain areas intentionally have been left " 'to be controlled by the free play of economic forces.' " The Court recognized in Machinists that ... Congress' decision to prohibit certain forms of economic pressure while leaving others unregulated represents an intentional balance " 'between the uncontrolled power of management and labor to further their respective interests.' "

Id. at 613-14, 106 S.Ct. at 1398-99 (citations omitted).

Citing Golden State, the Contractors argue that the work preservation clause in Seward's CBA triggers the so-called Machinists preemption principle which the Court found applicable in Golden State. In Golden State, the employees of a privately-owned taxi cab company were on strike when their employer's cab franchise came up for renewal by the City of Los Angeles. The city council refused to renew the franchise unless the cab company settled the strike by a certain date. The strike was not settled and the franchise expired. The cab company sued the city on the ground that the city's conditioning the renewal of the franchise on the settlement of the strike constituted an impermissible attempt to regulate conduct that Congress intended to be unregulated.

Invoking the Machinists preemption doctrine, the Supreme Court agreed. The Court said that the NLRA "leaves the bargaining process largely to the parties," id. at 616, 106 S.Ct. at 1400, and that "[t]he parties' resort to economic pressure [in this case] was a legitimate part of their collective-bargaining process." Id. at 615, 106 S.Ct. at 1399. The Court went on to observe that "the bargaining process was thwarted when the city in effect imposed a positive durational limit on the exercise of economic self-help." Id. Because "[p]rotecting the free use of economic weapons during the course of negotiations was the rationale for [the] finding[ ] of preemption in Machinists," the Court held the city's action was preempted by the NLRA. Id. at 617, 106 S.Ct. at 1400.

Here, the Contractors argue that, just like the City of Los Angeles in Golden State, the City of Seward impermissibly regulated private sector collective bargaining when it enforced the terms of the work preservation clause against private contractors. In response, Seward and the IBEW argue that the Contractors overlook the critical fact that this case, unlike Golden State, involves action taken by a city in its capacity as a public employer to enforce the terms of a valid work preservation clause in a collective bargaining agreement that covers its own electrical employees. Relying in part on Congress' exemption of public sector collective bargaining from the coverage of the NLRA, see 29 U.S.C. § 152(2), Seward and the IBEW contend that the NLRA does not preempt the action Seward took in its capacity as a public employer.

A

Golden State is clear authority for the proposition that a city may not regulate the collective bargaining activities of private employers merely because they do business in the city. In Golden State, the Supreme Court held that the NLRA barred the City of Los Angeles from using its power to franchise taxi cab companies to influence the bargaining process between a cab company and its employees. In that sense, the Contractors are correct that the City of Seward cannot use its regulatory power to influence private sector collective bargaining. In this case, however, Seward was not exercising its regulatory power, but rather was exercising its power as a market participant. Seward did not require all contractors doing business in the city to have a collective bargaining agreement with the IBEW; rather it only required the successful bidder on the city's power line renovation project to have such a contract. This is an important distinction for the purpose of applying the NLRA preemption doctrine. As the Supreme Court has explained in the Commerce Clause context, "[w]hen the State acts solely as a market participant, no conflict between state regulation and federal regulatory authority can arise." United Building and Construction Trades Council of Camden County v. City of Camden, 465 U.S. 208, 220, 104 S.Ct. 1020, 1028, 79 L.Ed.2d 249 (1984) (emphasis in original).

The fact that Seward was acting as a market participant, however, does not end the preemption inquiry. In Wisconsin Department of Industry, Labor and Human Relations v. Gould, Inc., 475 U.S. 282, 106 S.Ct. 1057, 89 L.Ed.2d 223 (1986), the Court recognized that in some circumstances state action as a market participant could run afoul of the NLRA.

In Gould, the Court considered whether the NLRA preempted a Wisconsin statute prohibiting state procurement agents from purchasing any products manufactured or sold by a company that repeatedly violated the NLRA. Id. at 283-84, 106 S.Ct. at 1059-60. In the course of its analysis, the Court rejected Wisconsin's argument that its procurement statute was not subject to preemption analysis because it constituted "an exercise of the State's spending power rather than its regulatory power." Id. at 287, 106 S.Ct. at 1061. The Court reasoned, "That seems to us a distinction without a difference, at least in this case, because on its face the debarment statute serves plainly as a means of enforcing the NLRA." Id.

Gould thus stands as authority for the idea that action taken by a state as a market participant is not automatically immune from NLRA preemption. In deciding that the Wisconsin procurement policy constituted an impermissible effort to use the state's purchasing power to regulate private sector labor relations, the Court in Gould looked to the state's purpose in adopting the policy. The Court specifically relied both on the state's concession "that the point of the statute is to deter labor law violations and to reward 'fidelity to the law,' " id., and on its own observation that "[n]o other purpose could credibly be ascribed [to the statute.]" Id. Because the Wisconsin policy served the sole purpose of enforcing the NLRA, the Court determined that "for all practical purposes, Wisconsin's debarment scheme is tantamount to...