American Steel Erectors v. Local Union No. 7, 07-1832.

CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)
Citation536 F.3d 68
Decision Date01 August 2008
Docket NumberNo. 07-1832.,07-1832.
PartiesAMERICAN STEEL ERECTORS, INC., Ajax Construction Co., American Aerial Services, Inc., Bedford Ironworks, Inc., and D.F.M. Industries, Inc., Plaintiffs, Appellants, v. LOCAL UNION NO. 7, INTERNATIONAL ASSOCIATION OF BRIDGE, STRUCTURAL, ORNAMENTAL & REINFORCING IRON WORKERS, Defendant, Appellee.

Michael E. Avakian with whom Smetana & Avakian, Carol Chandler, Geoffrey R. Bok, Stoneman, Chandler & Miller LLP, Thomas M. Triplett, and Schwabe Williamson & Wyatt, P.C. were on brief for appellants.

Paul F. Kelly with whom Indira Talwani, Segal, Rottman & Coleman, and Mickey Long, were on brief for appellees.

John C. Scully and W. James Young on brief for amicus curiae National Right to Work Legal Defense Foundation, Inc.

Maurice Baskin and Venable LLP on brief for amicus curiae Associated Builders and Contractors, Inc.

Before HOWARD, Circuit Judge, STAHL and SILER,* Circuit Judges.

STAHL, Circuit Judge.

Five non-union New England-based steel erectors—Aerial Services, Inc.; D.F.M. Industries, Inc.; American Steel Erectors, Inc.; Bedford Ironworks, Inc.; and Ajax Construction, Inc. ("Plaintiffs" or "non-union contractors")1—brought suit against Local Union No. 7 of the International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers ("Local 7" or "the Union")2, an iron workers union that has a collective bargaining agreement ("CBA") with the Building Trades Employers' Association of Boston and Eastern Massachusetts ("BTEA"). Plaintiffs' complaint alleged that Local 7 conspired with the BTEA and assorted named and unnamed union contractors to shut non-union contractors out of the structural steel industry in the greater Boston area, in violation of federal antitrust and labor laws. Plaintiffs also alleged various state torts and violation of the Massachusetts Fair Business Practices Act, G.L. c. 93A. The district court dismissed the state law claims as pre-empted by federal labor law, and, in a subsequent order, granted Local 7's motion for summary judgment on the federal claims. Plaintiffs now appeal both orders. We affirm the dismissal of the state law claims, but reverse the district court's grant of summary judgment on the federal labor and antitrust claims, and remand for further proceedings consistent with this opinion.

I. Background

We recite the facts in the light most favorable to Plaintiffs, the non-movants. Franceschi v. U.S. Dep't of Veterans Affairs, 514 F.3d 81, 84 (1st Cir.2008).

To understand the context from which Plaintiffs' allegations arise, some explication of the relevant industry is warranted. The structural steel industry is comprised of steel fabricators, who manufacture steel products to meet design specifications, and steel erectors, who assemble the fabricated steel. General contractors requiring structural steel work typically solicit bids for "fab and erect" packages. The packages are submitted by fabricators, who solicit bids for the erection work from steel erectors. In New England there are relatively few fabricators (around twenty) and many erectors (over 200). As a result, the competition for erection subcontracts in the Boston area is fierce, and the general rule is that the lowest bidder will be awarded the erection contract. That fierce competition gave rise to the instant dispute.

Local 7 negotiates collective bargaining agreements with contractors that employ iron workers in eastern Massachusetts, such as steel erection contractors. Among other things, employers who sign a CBA ("signatory contractors" or "union employers") agree to pay Local 7 workers a union scale wage. Plaintiffs have not entered into a CBA with Local 7.

Because of the labor-intensive nature of steel erection work, labor expenditures account for about half of the cost. Signatory contractors are obligated to pay laborers the minimum wage set by the CBA. Non-union contractors, such as Plaintiffs, are not bound to the CBA minimum wage and can negotiate their labor costs. As a result, non-union erectors are often able to submit lower bids for erection contracts.

The gravamen of Plaintiffs' complaint relates to a job targeting program, the Market Recovery Program ("MRP"), which Local 7 created to mitigate the disadvantage imposed on signatory contractors by union wages.3 Under the MRP, Local 7 "targets" certain construction projects and offers a subsidy to signatory contractors bidding on the project. The subsidy is intended to offset the higher cost of union labor, thus enabling union employers to bid competitively against non-union contractors. When a signatory contractor is awarded the target project contract, Local 7 executes an agreement with the contractor detailing the terms and amount of the subsidy. The subsidy is taken from the target fund (the "Fund"), which is financed with sums withheld by union employers from Local 7 member paychecks. The job targeting program was first established by member vote, and it was incorporated into the Union by-laws in 1992.

In November 1993, Local 7 and the BTEA agreed to codify the method of Fund contributions in their CBA. Section 9 of the 2000-2006 CBA provides that "the Working Dues Deduction of two percent (2%) of the total package plus .85 for a Market Recovery Program and .03 for the Political Action League will be withheld out of net pay for each and every hour paid." The MRP monies are paid directly to Local 7, which deposits them into the Fund. The Fund then distributes wage subsidies on a case-by-case basis to BTEA employers who successfully bid on targeted projects.

The plaintiff steel erection contractors bid on many of the projects that Local 7 targeted. Plaintiffs allege a conspiracy between the Union and union employers to monopolize the structural steel industry in the Boston area and push non-union employers like Plaintiffs out of the market. To this end, Plaintiffs claim that Local 7 used Fund subsidies and other tactics to ensure that contracts were awarded to signatory contractors, rather than Plaintiffs. Specifically, Plaintiffs assert that Local 7 used Fund subsidies to assist signatory employers in underbidding Plaintiffs on erection jobs. Plaintiffs also claim that Local 7 used subsidies, threats, and picketing to pressure fabricators, developers, owners, and general contractors (none of which directly employ Local 7 workers) into breaching contracts with Plaintiffs and replacing them with signatory contractors.

As a result of Local 7's efforts, Plaintiffs argue that they were excluded from a large portion of the structural steel market in the greater Boston area. For example, on one project, Plaintiff D.F.M. submitted the lowest bid for the erection work to a fabricator and was awarded the subcontract. Subsequently, the fabricator breached its agreement with D.F.M. and gave the project to a signatory contractor, who was the beneficiary of a subsidy from Local 7. In another instance, D.F.M. was awarded a steel erection contract for a new Fox25 TV station, but Local 7 picketed the job site until the fabricator breached its agreement with D.F.M. and hired a union contractor. Plaintiffs allege that, at that job site, equipment belonging to D.F.M. was vandalized and stolen after Local 7 began its picket. On yet another occasion, according to Plaintiffs, the erection work on a Stop & Shop was taken from Plaintiff Ajax due to a Fund subsidy. In addition, John J. Paulding, the president of fabricator C & I Steel, Inc., ("C & I") submitted an affidavit averring that Local 7 agents had offered him Fund money if he agreed to "work" with them and that, on a number of projects, Local 7 threatened "problems" on the job if he did not hire a signatory contractor. Paulding contended that "problems" is well-known industry short-hand for project delays, increased financial costs, and property destruction.

On December 2, 2004, Plaintiffs filed a complaint against Local 7, its agent, Charles Wright, and the Steel Erection and Ornamental Iron Industry Advancement Fund, alleging violations of the Sherman Act and the Labor Management Relations Act ("LMRA"), as well as the commission of various state torts. In particular, Plaintiffs alleged a conspiracy between Local 7 and its signatory contractors to pressure fabricators to hire only union employers, through a combination of threats, disruptive behavior, and MRP subsidies, in violation of § 1 and § 2 of the Sherman Act.4 Additionally, Plaintiffs argued that the MRP constituted an unlawful restraint on trade because the Fund was the recipient of deductions from paychecks of Local 7 members working on public projects, and subsidies were paid to signatory contractors working on public projects, in violation of the Davis-Bacon Act and the Massachusetts prevailing wage law.5 Plaintiffs also alleged that Local 7's conduct violated a provision of LMRA, 29 U.S.C. § 187(a) and (b), which prohibits unions from engaging in any unfair labor practices as defined by § 8(b)(4) of the National Labor Relations Act ("NLRA"). The state law claims included two counts of tortious interference with advantageous contractual and economic relations and one count of violation of the Massachusetts Fair Business Practices Act, G.L. c. 93A.

Defendants Local 7 and Charles Wright moved to dismiss the pendent state torts on February 1, 2005, arguing that the state claims were pre-empted by federal labor law. Plaintiffs countered that the claims were exempt from federal pre-emption. The district court found that Plaintiffs' allegations clearly fell within activity protected or prohibited by the NLRA because Plaintiffs had alleged that the same conduct violated both the NLRA and state tort laws. The court held that Plaintiffs' allegations could not benefit from the relevant exceptions to pre-emption, as the factual allegations of the complaint did not implicate conduct so related to local...

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