Beutler Sheetmetal Works v. McMorgan & Co.
| Decision Date | 14 August 1985 |
| Docket Number | No. C-82-6269 EFL.,C-82-6269 EFL. |
| Court | U.S. District Court — Northern District of California |
| Parties | BEUTLER SHEETMETAL WORKS, a California corporation; and River City Mechanical, a sole proprietorship, Plaintiffs, v. McMORGAN & COMPANY, a California corporation; and Carpenters Pension Trust Fund For Northern California, Defendants. |
Thierman, Simpson & Cook, Dennis B. Cook, Sacramento, Cal., for plaintiffs Beutler Sheetmetal Works and River City Mechanical.
Victor J. Van Bourg, Michael B. Roger, Robert M. Hirsch, Van Bourg, Weinberg, Roger & Rosenfeld, A Professional Corp., Stanton & Kay, San Francisco, Cal., for defendant Carpenters Pension Trust Fund for Northern Cal.
Charles T.C. Compton, Peter J. Courture, Richard J. Gray, Wilson, Sonsini, Goodrich & Rosati, A Professional Corp., Palo Alto, Cal., for defendant McMorgan & Company.
SUMMARY JUDGMENT
This matter is before the Court on defendants' Carpenters Pension Trust Fund for Northern California ("Trust Fund") and McMorgan & Company ("McMorgan") motion for summary judgment. The Trust Fund is an employee benefit trust established pursuant to a collective bargaining agreement between Carpenters 46 Northern California Conference Board and various employers and employer associations. McMorgan is an investment management service that administers the Trust Fund's investments. At issue is whether the Trust Fund's policy of conditioning its mortgage financing of residential housing on the construction of the units by union craftspersons violated section 1 of the Sherman Act.
The plaintiffs, Beutler Sheetmetal Works ("Beutler") and River City Mechanical ("River City") are heating, ventilating and air conditioning contractors. During 1982 and 1983, both Beutler and River City subcontracted with Citation Builders ("Citation") on several projects in the Sacramento area. During this same period, Beutler also performed heating and air conditioning work for Morrison Homes ("Morrison"). Neither of the plaintiffs are presently covered by a collective bargaining agreement.
Morrison and Citation used Trust Fund monies for mortgage financing of their residential developments. As contained in the Trust Fund's commitment letter initiating the investment, all "carpenters, laborers, operating engineers, cement masons and construction teamsters" employed at a work site financed by the trust fund had to be covered by a collective bargaining agreement with either AFL-CIO or Teamster affiliated unions. As construed by the Trust Fund's administrator, McMorgan, this restriction included heating, ventilation and air conditioning contractors.
As a result of this limitation in the Trust Fund's commitment letter, both Morrison and Citation terminated their contracts with the plaintiffs. After being notified by McMorgan that a continuation of its subcontract with Beutler would result in a withdraw of all funding, Morrison cancelled its subcontract with Beutler in November 1982. Citation cancelled its contracts with both Beutler and River City after being warned by McMorgan that failure to do so would result in the builder losing millions of dollars in residential mortage financing.
As it now stands,1 the complaint alleges a conspiracy between McMorgan and the Trust Fund to coerce several developers of residential housing in the Sacramento area (including Morrison and Citation) to boycott the plaintiffs. Such a conspiracy, the plaintiffs allege, constitutes a per se violation of the Sherman Act. In addition, the plaintiffs claim that this boycott intentionally interfered with existing contracts and obstructed future business relations.
The defendants move for summary judgment on the section 1 antitrust claim based on two separate arguments.2 First, the defendants argue that the plaintiff has failed to provide any probative evidence of concerted action necessary for a violation of section 1. Second, the defendants contend that even if a conspiracy can be established, the conduct complained of does not constitute a per se violation of the Sherman Act. The defendants assert that a vertical boycott by non-competitors must be evaluated under the rule of reason. As required by the rule of reason, the plaintiffs must show some harm to the relevant market as a result of anticompetitive conduct. Fine v. Barry and Enright Productions, 731 F.2d 1394, 1399 (9th Cir.), cert. denied, ___ U.S. ___, 105 S.Ct. 248, 83 L.Ed.2d 186 (1984); Cascade Cabinet Co. v. Western Cabinet & Millwork, Inc., 710 F.2d 1366, 1373 (9th Cir.1983). The defendants contend that the plaintiffs' failure to define a relevant market or to prove actual harm to competition in that market entitles them to summary judgment on the section 1 claims.
I.
Summary judgment is proper only where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the burden of demonstrating the absence of a genuine issue as to any material fact and summary judgment must be denied if the facts supporting the motion do not establish the nonexistence of such an issue. Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665 (9th Cir.1980). If, however, the moving party meets its burden, then the opposing party must come forward with significant probative evidence supporting its complaint. R.C. Dick Geothermal Corp. v. Themogenics, Inc., 566 F.Supp. 1104, 1107 (N.D.Cal.1983).
A. Conspiracy Element
Section 1 of the Sherman Act, 15 U.S.C. § 1, makes unlawful those contracts, combinations or conspiracies that unreasonably restrain trade. Board of Trade v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 244, 62 L.Ed. 683 (1918). Thus, under Section 1 there must be concerted action. Independent action is not proscribed. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984).
The plaintiffs allege a conspiracy between the Trust Fund, its administrator McMorgan and several developers and mortgage lenders. According to the complaint, the Trust Fund, through McMorgan, coerced builders and their lenders to terminate subcontracts obtained by the plaintiffs and others not covered by a collective bargaining agreement. Thus, there are two conspiracies alleged: the one between McMorgan and the Trust Fund and the one between the Trust Fund (including McMorgan) and the developers-lenders.
As to the developer-lender conspiracy, the defendants contend that there is no evidence that these individuals influenced or were at all involved in the establishment of the union-only investment policy of the Trust Fund. They were merely the recipients of restrictive commitment letters. In no way did these alleged co-conspirators knowingly participate in the investment decisions of the Trust Fund.
Such knowing participation, however, is a prerequisite to liability under Section 1. As held by the Supreme Court in Spray-Rite, the law requires direct or circumstantial evidence that reasonably tends to prove that the defendants had a conscious commitment to a common scheme designed to achieve an unlawful objective. Spray-Rite, 104 S.Ct. at 1471.
After nearly three years of discovery, the plaintiffs have provided no evidence that any of the builders or lenders shared with the defendants any unlawful or anticompetitive purposes. The record is clear that loan originators simply agreed to sell a relative small number of mortgages to the Trust Fund meeting the union-only restriction. The contractors merely enforced their existing policy of hiring only those subcontractors who had signed collective bargaining agreements.3 Such acquiescence to the Trust Fund's demand in order to avoid termination is not actionable as an antitrust conpiracy. See Spray-Rite, 104 S.Ct. at 1469.
The facts presented in this case are clearly distinguishable from those in the case cited by the plaintiffs, Larry V. Muko, Inc. v. Southwestern Pennsylvania Building and Construction Trades Council, 609 F.2d 1368 (3rd Cir.1979), cert. denied, 459 U.S. 916, 103 S.Ct. 229, 74 L.Ed.2d 182 (1982). In the Muko case, the court held that a defendant corporation's active participation in formulating union-only contracting restrictions exposed it to antitrust liability under section 1. By contrast, in the present case there is no evidence presented that the contractors or lenders participated in any way in the formulation or implementation of the Trust Fund restrictions. The record before that Court shows that the union-only restriction in the commitment letters was simply a unilateral investment decision by the Trust Fund, in association with McMorgan.
As the plaintiffs provide no evidence that the defendants conspired with contractors or lenders in arriving at the challenged restriction in the commitment letter, summary judgment is appropriate as to this conspiracy allegation. See First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968) ()
The second conspiracy alleged by the plaintiffs, and upon which they principally rely in opposing the motion for summary judgment, is between the Trust Fund and its administrator, McMorgan. The defendants contend that as a matter of law McMorgan was not sufficiently independent of the Trust Fund to be able to conspire to violate the antitrust laws.
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