Building v. Snyder

• Decision Date: 27 November 2013
• Docket Number: 12–2548.,Nos. 12–1246,s. 12–1246
• Citation: 729 F.3d 572
• Parties: MICHIGAN BUILDING AND CONSTRUCTION TRADES COUNCIL and Genesee, Lapeer, Shiawassee Building and Construction Trades Council, AFL–CIO, Plaintiffs–Appellees, v. Richard SNYDER, Governor of the State of Michigan, in his official capacity, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

729 F.3d 572

MICHIGAN BUILDING AND CONSTRUCTION TRADES COUNCIL and Genesee, Lapeer, Shiawassee Building and Construction Trades Council, AFL–CIO, Plaintiffs–Appellees,

v.Richard SNYDER, Governor of the State of Michigan, in his official capacity, Defendant–Appellant.

Nos. 12–1246, 12–2548.

United States Court of Appeals,Sixth Circuit.

Argued: June 18, 2013.

Decided and Filed: Sept. 6, 2013.

Rehearing and Rehearing En Banc Denied Nov. 27, 2013.^*

ARGUED:Dennis J. Raterink, Office of the Michigan Attorney General, Lansing, Michigan, for Appellant. John R. Canzano, McKnight, McClow, Canzano, Smith & Radtke, P.C., Southfield, Michigan, for Appellees. ON BRIEF:Dennis J. Raterink, Susan Przekop–Shaw, Dan V. Artaev, Christopher W. Braverman, Office of the Michigan Attorney General, Lansing, Michigan, for Appellant. John R. Canzano, McKnight, McClow, Canzano, Smith & Radtke, P.C., Southfield, Michigan, Terry R. Yellig, Victoria L. Bor, Sherman, Dunn, Cohen, Leifer & Yellig, P.C., Washington, D.C., for Appellees.

Before SILER, MOORE, and ROGERS, Circuit Judges.

ROGERS, J., delivered the opinion of the court, in which SILER, J., joined. MOORE, J., (pp. 582–93), delivered a separate dissenting opinion.

OPINION

ROGERS, Circuit Judge.

Project labor agreements are contracts typically used in the construction industry to set common terms and conditions of employment for large projects involving multiple subcontractors and unions. The question on this appeal is whether the State of Michigan—with respect to the construction of public projects—can make an across-the-board determination not to require that its contractors enter into such agreements. Such an across-the-board determination could be made by a private developer. Michigan can do the same because in this respect the state is acting as a market participant rather than as a regulator.

Michigan passed the first version of the Fair and Open Competition in Governmental Construction Act in 2011. Plaintiffs—state and local trades councils—claimed that the act was preempted by the National Labor Relations Act (NLRA) and asked for an injunction. The district court granted the injunction in February 2012. That version of the act has been entirely superseded by an amended version of the act, passed in 2012, rendering the Governor's appeal of that injunction moot. The district court subsequently enjoined the current version of the act, finding it preempted by the NLRA. However, the act furthers Michigan's proprietary goal of improving efficiency in public construction projects, and the act is no broader than is necessary to meet those goals. Thus, the law is not preempted by the NLRA.

Both versions of the act restrict the use of Project Labor Agreements (PLAs) on publicly funded construction projects. A PLA sets out the terms and conditions of employment on a specific construction project. On a public construction project, the PLA can be entered into by the governmental unit paying for the project or by a general contractor the governmental unit hires. The other party to the PLA is the relevant labor organization. Once a PLA is in force, every lower-level contractor must abide by it to be able to work on the project. Thus, if the governmental unit itself enters into a PLA, all contractors bidding on the project must agree to abide by the PLA. If a general contractor enters into a PLA, all its subcontractors on that project must agree to abide by the PLA. The PLAs will often incorporate terms from individual local union collective bargaining agreements, but the PLA will supersede those agreements.

There has been debate over whether PLAs increase the costs of government projects. Opponents of PLAs argue that PLAs discourage nonunion contractors and subcontractors from bidding on government contracts and that the rules included in PLAs increase construction costs. The Governor cites reports that found that PLAs add 12–18% to the costs of public projects.¹ PLA proponents, like the trades councils, counter that PLAs enhance job-site cooperation and reduce labor disputes, thus preventing delays and cost overruns on public projects. The trades councils cite several reports supporting their position.² The federal government has gone back and forth on whether PLAs should be permissible for federally funded projects. President George H.W. Bush used an executive order to forbid the use of PLAs on federally funded projects. SeeExec. Order No. 12,818, 57 Fed.Reg. 48713 (Oct. 23, 1992). President Clinton rescinded that order and encouraged the use of PLAs on construction projects over $5 million. SeeExec. Order No. 12,836, 58 Fed.Reg. 7045 (Feb. 1, 1993). President George W. Bush reinstated the ban on the use of PLAs on federally funded projects, seeExec. Order No. 13,302, 66 Fed.Reg. 11225 (Feb. 17, 2001), only to see President Obama again lift the ban and allow agencies to use PLAs for construction projects that cost the government over $25 million, seeExec. Order No. 13,502, 74 Fed.Reg. 6985 (Feb. 6, 2009).

The Michigan legislature stepped into this debate in 2011 by passing S.B. 165, the Fair and Open Competition in Governmental Construction Act, 2011 Mich. Pub. Acts 98. The introduction to the act stated that its goal was

to provide for fair and open competition in governmental construction contracts, grants, tax abatements, and tax credits; to prohibit requirements for certain terms in government contracts and contracts supported through government grants and tax subsidies and abatements; to prohibit expenditure of public funds under certain conditions; to prohibit certain terms in procurement documents for certain expenditures involving public facilities; and to provide for powers and duties of certain public officers, employees, and contractors.

Id. The act barred governmental units from entering or expending funds on a project if the contract or any subcontract contained a PLA. Id. § 5. It also forbade the governmental units from awarding grants, tax abatements, or tax credits while under a PLA, id. § 7, and forbade governmental units and their agents from placing any PLA terms in bid specifications, project agreements, or other controlling documents, id. § 9.

The Michigan Building and Construction Trades Council, AFL–CIO, and Genesee, Lapeer, Shiawassee Building and Construction Trades Council, AFL–CIO, both associations of labor organizations, filed suit. The trades councils argued, among other things, that the new law was preempted by the NLRA, which permitted the use of PLAs. The district court agreed and issued a preliminary injunction. The court rejected the Governor's argument that the state was acting in its proprietary capacity when it passed the law. The court determined that the law was regulatory and that it was preempted by Sections 7 and 8 of the NLRA. Mich. Bldg. and Const. Trades Council, AFL–CIO v. Snyder, 846 F.Supp.2d 766, 783 (E.D.Mich.2012).

The Governor appealed. While that appeal was pending in this court, the Michigan legislature amended the act. The legislature clarified that it intended the act “to provide for more economical, nondiscriminatory, neutral, and efficient procurement of construction-related goods and services by this state and political subdivisions of this state as market participants,” and that “providing for fair and open competition best effectuates this intent.” 2012 Mich. Pub. Acts 238 § 2 (codified at Mich. Comp. Laws § 408.872). The amended act replaced Section 5, which had previously barred government spending on any project that included a contract or a subcontract that contained a PLA. The new Section 5 only barred governmental units from entering into PLAs themselves. Id. § 5 (codified at Mich. Comp. Laws § 408.875). It also forbade governmental units from discriminating against bidders on public projects based on whether the bidder had entered into a PLA. Id. The legislature also added a new section to the act stating that the act “does not prohibit a governmental unit from awarding a contract, grant, tax abatement, or tax credit to a private owner, bidder, contractor, or subcontractor who enters into or who is party” to a PLA so long as entering into that PLA “is not a condition for award of the contract, grant, tax abatement, or tax credit....” Id. § 8 (codified at Mich. Comp. Laws § 408.878).

These changes satisfied neither the trades councils nor the district court. On the trades councils' request, the district court enjoined the new version of the act as well. Once again, the district court found the act preempted by Sections 7 and 8 of the NLRA because the act still prohibited governmental units from requiring their contractors to adhere to PLAs as a condition of a contract award. The court also found, contrary to the legislature's statement that the state was acting as a market participant, that the act is tantamount to regulation because it is broad in scope and “does not reflect the State's interest in efficient procurement of goods or services.” The court noted that if the state were acting as a private proprietor would, it would consider PLAs on a case-by-case basis and would not issue a blanket prohibition. Mich. Bldg. & Constr. Trades Council v. Snyder, No. 12–13567, 2012 WL 6155964, at *7 (E.D.Mich. Nov. 15, 2012).

The Governor also appealed the second injunction. Upon the Governor's unopposed request, this court consolidated the two appeals.

The Governor's appeal of the injunction of the original version of the act is now moot. That version has been replaced entirely by the current version, enacted in 2012, and removing the injunction would have no effect. A case becomes moot “when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Knox v. Serv. Emps. Int'l Union, Local 1000, ––– U.S. ––––, 132 S.Ct. 2277, 2287, 183 L.Ed.2d 281 (2012) (internal quotation marks omitted). “[I]f an event occurs while a case is pending on appeal that makes it impossible for the...