California ex rel. Lockyer v. Safeway, Inc.

• Decision Date: 25 May 2005
• Docket Number: No. CV 04-0687 GHK SSX.,CV 04-0687 GHK SSX.
• Citation: 371 F.Supp.2d 1179
• Parties: State of CALIFORNIA, ex rel. Bill LOCKYER, Plaintiff, v. SAFEWAY, INC., dba Vons, a Safeway Company, Albertson's, Inc., Ralphs Grocery Company, a division of the Kroger Company, Food 4 Less Food Company, a division of the Kroger Company, and Does 1 through 100, inclusive, Defendants.
• Court: U.S. District Court — Central District of California

371 F.Supp.2d 1179

State of CALIFORNIA, ex rel. Bill LOCKYER, Plaintiff, v. SAFEWAY, INC., dba Vons, a Safeway Company, Albertson's, Inc., Ralphs Grocery Company, a division of the Kroger Company, Food 4 Less Food Company, a division of the Kroger Company, and Does 1 through 100, inclusive, Defendants.

No. CV 04-0687 GHK SSX.

United States District Court, C.D. California.

May 25, 2005.

COPYRIGHT MATERIAL OMITTED

Bill Lockyer, Richard M. Frank, Thomas Greene, Kathleen Foote, Barbara M. Motz, Olivia W. Karlin, Office of the Attorney General, Los Angeles, CA, for Plaintiff, the State of California.

Phillip A. Proger, Jones Day, Washington, D.C., Jeffrey A. LeVee and Amy A. Stathos, Jones Day, Los Angeles, CA, for Defendant, Albertson's Inc.

J. Thomas Rosch and Peter Huston, Latham & Watkins LLP, San Francisco, CA, for Defendant, The Vons Companies, Inc.

Robert B. Pringle and Paul Griffin, Thelen Reid & Preist LLP, San Francisco, CA, for Defendant, Ralphs Grocery Company.

MEMORANDUM AND ORDER RE: DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

KING, District Judge.

I

INTRODUCTION

On February 2, 2004, California Attorney General Bill Lockyer, on behalf of the State of California ("the State"), filed a complaint alleging that defendants Safeway, Inc., d.b.a. Vons, Albertson's, Inc., Ralphs Grocery Company, ("the Supermarkets") and Food 4 Less Food Company ("Food 4 Less") (collectively "Defendants") engaged in an unlawful combination and conspiracy in restraint of interstate trade and commerce in violation of section 1 of the Sherman Act. 15 U.S.C. § 1. The State alleged that Defendants violated antitrust laws by entering into a Mutual Strike Assistance Agreement ("MSAA") whereby they agreed, among other things, to share revenue in the event of a strike. Defendants now move for summary judgment, arguing that their MSAA is immunized from antitrust challenge because it is related to the Supermarkets' participation in multiemployer collective bargaining and thus falls within the nonstatutory labor exemption to the antitrust laws. Having carefully considered all of the parties' briefs, evidence and oral arguments, we rule as follows:

II

Summary Judgment Standard

We may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Celotex Corp v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Defendants, having raised the nonstatutory labor exemption as an affirmative defense, bear the burden of proof on this defense at trial. To be entitled to summary judgment, a moving party with the burden of proof at trial "must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial." C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir.2000) (quoting Houghton v. South, 965 F.2d 1532, 1536 (9th Cir.1992)). Summary judgment is appropriate when the issue turns only on questions of law, "the resolution of which does not involve disputed material facts." Applied Med. Res. Corp. v. U.S. Surgical Corp., 352 F.Supp.2d 1119, 1123 (C.D.Cal.2005).

III

Facts

Virtually all relevant facts are undisputed. Ralphs, Albertson's and Vons, three of the largest supermarket chains in Southern California, joined together in a multiemployer collective bargaining unit to negotiate with certain United Food and Commercial Workers ("UFCW") labor organizations. Their collective bargaining agreement ("CBA") with UFCW was set to expire on October 5, 2003. (Defs.' Ex. H). In anticipation of a labor dispute, the Supermarkets executed a pair of MSAAs on September 5, 2003.¹ (Cox Decl. ¶ 6). Pursuant to the MSAA, the Supermarkets agreed to lock out all union employees within 48 hours in the event any of their stores were to experience a strike. They also agreed to share revenue according to a fixed formula,² beginning at "12:01 a.m. on the Monday at the start of the week in which the strike or lockout ... commences and continuing for two ... full weeks following the week in which each strike or lockout ends." (MSAA at ¶ 4(C)). Moreover, the revenue sharing was not limited to the employers participating in the multiemployer bargaining unit. It included Food 4 Less, a chain that was not a signatory to the Ralphs/Vons/Albertson's CBA.

On October 11, 2003, the unions struck local Vons stores. (Cox Decl. ¶ 7). In response, Ralphs and Albertson's locked out their union employees the next day. (Schroeder Decl. ¶ 12; Bohn Decl. ¶ 9). The unions initially picketed all three supermarket chains, but stopped picketing Ralphs stores on October 31, 2003. (Schroeder Decl. ¶ 13). Selective picketing of Vons and Albertson's stores continued until the end of the strike in late February 2004.³ Ultimately, Ralphs and Food 4 Less paid Vons and Albertson's approximately $142 million in revenue sharing for the strike period, and another $4.2 million for the two-week period following the strike. (Schroeder Decl. ¶ 13).

IV

Discussion

The State does not challenge the entirety of the MSAA. Instead, it claims only that the revenue-sharing provision, the inclusion of Food 4 Less, and the so-called two week "tail" provision (the "challenged provisions" or "challenged conduct") violate antitrust laws. Defendants assert, and the State disputes, that all of the challenged provisions are immune from antitrust scrutiny under the nonstatutory labor exemption. Our task on this motion is limited to deciding whether the nonstatutory labor exemption applies to these challenged provisions. If so, the State's antitrust claim necessarily fails. If not, further proceedings will be necessary to determine whether these provisions in fact violate the antitrust laws.

A The Nonstatutory Labor Exemption

Federal labor statutes set forth a national labor policy favoring collective bargaining, and require good-faith bargaining over wages, hours and working conditions. Brown v. Pro Football, Inc., 518 U.S. 231, 236, 116 S.Ct. 2116, 135 L.Ed.2d 521 (1996).⁴ Moreover, "[m]ultiemployer bargaining itself is a well-established, important, pervasive method of collective bargaining, offering advantages to both management and labor." Id. at 240, 116 S.Ct. 2116. This process, however, necessarily entails some amount of restraint on competition. In an attempt to harmonize the Sherman Act with the national labor policy "of promoting `the peaceful settlement of industrial disputes by subjecting labor-management controversies to the mediatory influence of negotiation,'" the Supreme Court recognized a nonstatutory labor exemption to antitrust liability. United Mine Workers of Am. v. Pennington, 381 U.S. 657, 665, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965) (quoting Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 211, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964)). "[T]he implicit exemption recognizes that, to give effect to federal labor laws and policies and to allow meaningful collective bargaining to take place, some restraints on competition imposed through the bargaining process must be shielded from antitrust sanctions." Brown, 518 U.S. at 237, 116 S.Ct. 2116.

For example, in Local Union No. 189, Amalgamated Meat Cutters, and Butcher Workmen v. Jewel Tea Co., 381 U.S. 676, 679-80, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965) (plurality opinion) (White, J.), a meat cutters union successfully negotiated a concession from a multiemployer bargaining unit by which the markets agreed that meat would not be sold before 9 a.m. or after 6 p.m. Jewel Tea Company and National Tea Company, two of the employers in the bargaining unit, signed the agreement under duress of a strike vote. Contending that the agreement was illegal, they brought suit under the Sherman Act. Id. at 680-81, 85 S.Ct. 1596. Justice White, writing for a plurality, concluded that the agreement was immune from antitrust attack under the nonstatutory labor exemption because national labor policy places beyond reach of the Sherman Act agreements between unions and employers as to "when, as well as how long, employees must work." Id. at 691, 85 S.Ct. 1596. Were it otherwise, collective bargaining would be frustrated. See id. at 689, 85 S.Ct. 1596; Connell Constr. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 622, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975) (stating that "the goals of federal labor law never could be achieved" were it otherwise).

Also, in Brown, 518 U.S. at 234, 116 S.Ct. 2116, the Supreme Court considered the exemption in the context of an agreement solely among employers. When NFL employers reached an impasse with players in negotiations over salaries for a developmental squad, the employers unilaterally implemented the developmental squad program at the salary they had last proposed. Id. at 235, 116 S.Ct. 2116. The players alleged the employers' agreement among themselves to implement the wage provisions violated the Sherman Act. Id. The Court disagreed, concluding that the exemption applied to the employers' practice of jointly imposing the "last best good-faith wage offer" at an impasse. Id. at 250, 116 S.Ct. 2116. It also observed that "[a]s a matter of logic, it would be difficult, if not impossible, to require groups of employers and employees to bargain together, but at the same time to forbid them to make among themselves or with each other any of the competition-restricting agreements potentially necessary to make the process work or its results mutually acceptable." Id. at 237, 116 S.Ct. 2116 (emphasis in original).

However, the exemption has never been regarded as an open-ended invitation to those involved in a labor dispute to restrain competition in the product market. It is a "limited nonstatutory exemption from antitrust sanctions." Connell, 421 U.S. at 622, 95 S.Ct. 1830 (emphasis added...