Artists Associates, Inc v. Actors Equity Association

• Decision Date: 26 May 1981
• Docket Number: No. 80-348,80-348
• Parties: H. A. ARTISTS & ASSOCIATES, INC., et al., Petitioners, v. ACTORS' EQUITY ASSOCIATION et al
• Court: U.S. Supreme Court

451 U.S. 704

101 S.Ct. 2102

68 L.Ed.2d 558

H. A. ARTISTS & ASSOCIATES, INC., et al., Petitioners,

v ACTORS' EQUITY ASSOCIATION et al.

No. 80-348.

Argued March 23, 1981.

Decided May 26, 1981.

Syllabus

Respondent union, which represents most of the stage actors and actresses in the United States, has entered into collective-bargaining agreements with virtually all major theatrical producers throughout the country, fixing minimum (scale) wages and other conditions of employment for those represented by the union. Because of abuses by theatrical agents who, as independent contractors, negotiated employment contracts for actors and actresses with producers, particularly abuses as to the extraction of high commissions tending to undermine collectively bargained rates of compensation, the union in 1928 unilaterally established a licensing system for the regulation of agents, prohibiting union members from using an agent who has not obtained a license from the union. The essential elements of the licensing system have remained unchanged. To obtain a license, an agent must agree to comply with union regulations which, inter alia, prohibit agent commissions on scale portions of wages received by an actor or an actress from a producer, limit commissions on wages in excess of scale pay, and require payment to the union of franchise fees. Petitioners, agents who refused to obtain union licenses, instituted this action, contending that the union's regulations violated §§ 1 and 2 of the Sherman Act. After trial, the District Court dismissed the complaint, finding that the union's agency franchise system was protected from liability by the antitrust exemptions of unions and their members arising under the Clayton Act and the Norris-LaGuardia Act. The Court of Appeals affirmed, determining that the central feature of the union's franchising system—the exaction of an agreement by agents as to their commissions—was immune from antitrust challenge. The court suggested that if the exactions of franchise fees exceeded the union's costs in administering its license system, they could not legally be collected; but despite the lack of any cost evidence at trial, the court concluded that the fees were sufficiently low that a remand on the point would not serve any useful purpose.

Held :

1. Labor unions acting in their self-interest and not in combination with nonlabor groups enjoy statutory exemption from Sherman Act liability, but the exemption does not apply when a union combines with a "nonlabor group," or persons who are not "parties to a labor dispute" within the meaning of the Norris-LaGuardia Act. United States v. Hutcheson, 312 U.S. 219, 61 S.Ct. 463, 85 L.Ed. 788. Here, the union's franchising of agents did not involve any combination between the union and any "nonlabor groups." The record amply supports the conclusion that there was no combination between the union and the theatrical producers, and the determination of whether the combination between the union and those agents who agreed to become franchised was a combination with a "nonlabor group" depends on whether there was "job or wage competition or some other economic interrelationship affecting legitimate union interests between the union members and the independent contractors." Musicians v. Carroll, 391 U.S. 99, 106, 88 S.Ct. 1562, 1567, 20 L.Ed.2d 460. Because of the peculiar structure of the legitimate theater industry, where it is customary if not essential for union members to secure employment through agents whose fees are calculated as a percentage of the member's wage—thus making it impossible for the union to defend even the integrity of the minimum wages it has negotiated with producers without regulation of agency fees—the union's regulations are within the labor exemption. Agents must, therefore, be considered a "labor group" and their controversy with the union is plainly a "labor dispute" as defined in the Norris-LaGuardia Act. The union's regulations are also clearly designed to promote its legitimate self-interest. Pp. 713-722.

2. However, the union's justification for the franchise fees based only on the suggestion in the most general terms that they are related to the basic purposes of its regulations—is inadequate to warrant the conclusion that the fees are a permissible component of the exempt regulatory system. Pp. 722.

622 F.2d 647, affirmed in part, reversed in part, and remanded.

Howard Breindel, New York City, for petitioners.

Jerome B. Lurie, New York City, for respondents.

Laurence Gold, Washington, D. C., for AFL-CIO as amicus curiae, by special leave of Court.

Justice STEWART delivered the opinion of the Court.

The respondent Actors' Equity Association (Equity) is a union representing the vast majority of stage actors and actresses in the United States. It enters into collective-bargaining agreements with theatrical producers that specify minimum wages and other terms and conditions of employment for those whom it represents. The petitioners are independent theatrical agents who place actors and actresses in jobs with producers. The Court of Appeals for the Second Circuit held that the respondents' ¹ system of regulation of theatrical agents is immune from antitrust liability by reason of the statutory labor exemption from the antitrust laws, 622 F.2d 647.² We granted certiorari to consider the availability of that exemption in the circumstances presented by this case. 449 U.S. 991, 101 S.Ct. 526, 66 L.Ed.2d 288.

I

A.

Equity is a national union that has represented stage actors and actresses since early in this century. Currently representing approximately 23,000 actors and actresses, it has collective-bargaining agreements with virtually all major theatrical producers in New York City, on and off Broadway and with most other theatrical producers throughout the United States. The terms negotiated with producers are the minimum conditions of employment (called "scale"); an actor or actress is free to negotiate wages or terms more favorable than the collectively bargained minima.

Theatrical agents are independent contractors who negotiate contracts and solicit employment for their clients. The agents do not participate in the negotiation of collective-bargaining agreements between Equity and the theatrical producers. If an agent succeeds in obtaining employment for a client, he receives a commission based on a percentage of the client's earnings. Agents who operate in New York City must be licensed as employment agencies and are regulated by the New York City Department of Consumer Affairs pursuant to New York law, which provides that the maximum commission a theatrical agent may charge his client is 10% of the client's compensation.

In 1928, concerned with the high unemployment rates in the legitimate theater and the vulnerability of actors and actresses to abuses by theatrical agents,³ including the extraction of high commissions that tended to undermine collectively bargained rates of compensation, Equity unilaterally established a licensing system for the regulation of agents. The regulations permitted Equity members to deal only with those agents who obtained Equity licenses and thereby agreed to meet the conditions of representation prescribed by Equity. Those members who dealt with nonlicensed agents were subject to union discipline.

The system established by the Equity regulations was immediately challenged.⁴ In Edelstein v. Gillmore, 35 F.2d 723, the Court of Appeals for the Second Circuit concluded that the regulations were a lawful effort to improve the employment conditions of Equity members. In an opinion written by Judge Swan and joined by Judge Augustus N. Hand,⁵ the court said:

"The evils of unregulated employment agencies (using this term broadly to include also the personal representative) are set forth in the defendants' affidavits and are corroborated by common knowledge. . . . Hence the requirement that, as a condition to writing new business with Equity's members, old contracts with its members must be made to conform to the new standards, does not seem to us to justify an inference that the primary purpose of the requirement is infliction of injury upon plaintiff, and other personal representatives in a similar situation, rather than the protection of the supposed interests of Equity's members. The terms they insist upon are calculated to secure from personal representatives better and more impartial service, at uniform and cheaper rates, and to improve conditions of employment of actors by theater managers. Undoubtedly the defendants intend to compel the plaintiff to give up rights under existing contracts which do not conform to the new standards set up by Equity, but, as already indicated, their motive in so doing is to benefit themselves and their fellow actors in the economic struggle. The financial loss to plaintiff is incidental to this purpose." Id., at 726 (emphasis added).⁶

The essential elements of Equity's regulation of theatrical agents have remained unchanged since 1928.⁷ A member of Equity is prohibited, on pain of union discipline, from using an agent who has not, through the mechanism of obtaining an Equity license (called a "franchise"), agreed to comply with the regulations. The most important of the regulations requires that a licensed agent must renounce any right to take a commission on an employment contract under which an actor or actress receives scale wages.⁸ To the extent a contract includes provisions under which an actor or actress will sometimes receive scale pay—for rehearsals or "chorus" employment, for example—and sometimes more, the regulations deny the agent any commission on the scale portions of the contract. Licensed agents are also precluded from taking commissions on out-of-town expense money paid to their clients. Moreover, commissions are limited on wages within 10% of scale pay,⁹ and an agent must allow his client to terminate a representation...