California State Council of Carpenters v. Associated General Contractors of California, Inc.

• Decision Date: 22 May 1981
• Docket Number: No. 77-2323,AFL-CIO,77-2323
• Citation: 105 LRRM 3311,648 F.2d 527
• Parties: 105 L.R.R.M. (BNA) 3311, 107 L.R.R.M. (BNA) 2724, 90 Lab.Cas. P 12,410, 91 Lab.Cas. P 12,826, 1980-81 Trade Cases 63,663, 1981-1 Trade Cases 64,109 CALIFORNIA STATE COUNCIL OF CARPENTERS, United Brotherhood of Carpenters and Joiners of America,, et al., Plaintiffs-Appellants, v. ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., et al., Defendants- Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 527

648 F.2d 527

105 L.R.R.M. (BNA) 3311, 107 L.R.R.M. (BNA) 2724,

90 Lab.Cas. P 12,410, 91 Lab.Cas. P 12,826,

1980-81 Trade Cases 63,663,

1981-1 Trade Cases 64,109

CALIFORNIA STATE COUNCIL OF CARPENTERS, United Brotherhood of Carpenters and Joiners of America, AFL-CIO, et al., Plaintiffs-Appellants, v. ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., et al Defendants- Appellees.

No. 77-2323.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 15, 1980.

Decided Nov. 20, 1980.

Rehearing and Rehearing En Banc Denied May 22, 1981.

Victor J. Van Bourg, Van Bourg, Allen, Weinberg & Roger, San Francisco, Cal., for plaintiffs-appellants.

Kurt W. Melchior, Severson, Werson, Berke & Melchior, San Francisco, Cal., for Harold E. Shugart, Co.

James P. Watson, Cox, Castle & Nicholson, Los Angeles, Cal., for defendant-appellee, Associated Gen. Contractors.

Appeal from the United States District Court for the Northern District of California.

Before SNEED, PREGERSON and ALARCON, Circuit Judges.

PREGERSON, Circuit Judge:

This is an appeal from an order of the district court granting defendants' motions to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted.

Two carpenters' unions filed an antitrust action against a contractors' association for conspiracy to boycott union-signatory subcontractors. The complaint also charged breach of contract, various business torts, and violations of state antitrust laws. The district court granted the motion to dismiss on the ground that unions are barred from bringing antitrust actions "against an employer in the normal type of labor dispute." California State Council of Carpenters v. Associated General Contractors of California, Inc., 404 F.Supp. 1067, 1070 (N.D.Cal.1975). We find that the district court erred in dismissing appellants' claim for relief under the Sherman Act. As to appellants' remaining claims, however, we affirm the district court's order of dismissal.

BACKGROUND

The California State Council of Carpenters is the collective bargaining agent for carpenters and their affiliated local unions with respect to master collective bargaining agreements governing the California carpentry industry. The Carpenters 46 County Conference Board is the collective bargaining agent for carpenters employed in the drywall industry. Together, these two unincorporated labor organizations ("Unions") filed a complaint in district court, on their own behalf and on behalf of their affiliated local unions and district councils. ¹

The complaint names as defendants the Associated General Contractors of California ("AGCC"), each of its individual members, and one-thousand "Doe's," who are identified only as co-conspirators of the named defendants. The AGCC and the Unions have, for many years, entered into collective bargaining agreements. The complaint alleges, in essence, that, despite the existence of those agreements, members of the AGCC, an important construction industry employers' organization, conspired among themselves and with other industry employers to: (1) boycott union-signatory subcontractors, i.e., subcontractors who signed collective bargaining agreements with the Unions; (2) maintain non-union shops and divisions; and (3) breach their collective bargaining agreements with the Unions. The Unions claim this alleged conspiracy violated section 1 of the Sherman Act. The Unions further claim that, through this conspiracy, the AGCC breached its collective bargaining agreements with the Unions, violated California's antitrust statute, ² and committed the torts of intentional interference with contractual relations and intentional interference with business relationships. The Unions allege antitrust damages of $25 million, to be trebled to $75 million.

In an order based largely on the Supreme Court's decision in Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975), the district court dismissed the Unions' entire complaint. The court characterized the Unions' antitrust claim as charging that "defendants declined to enter into agreements with plaintiffs to deal only with subcontractors which were signatories to contracts with plaintiffs " 404 F.Supp. at 1070. The district court then dismissed the antitrust claim on the basis of "Connell and the considerable body of case law declining to recognize an antitrust cause of action alleged by a union against an employer in the normal type of labor dispute." Id. As to the Unions' claims for breach of collective bargaining agreements, the court reasoned that such claims were subject to the agreements' mandatory arbitration provisions and that the Unions were therefore required to pursue those dispute resolution procedures first before challenging alleged violations in federal court. Finally, dismissal of the Unions' state law claims was premised on the doctrine of federal preemption.

On this appeal, the Unions dispute the position of the AGCC that its conduct is exempt from the antitrust laws by virtue of the labor exemption discussed in Connell. The Unions correctly state that Connell did not purport to exempt anti-union activities on the part of employers from the antitrust laws. On the contrary, Connell held that a union could be liable under the antitrust laws for coercing a "stranger" employer, i.e., one with whom the union had no collective bargaining relationship, to agree not to use non-union subcontractors. The Unions argue that the AGCC's alleged conduct in this case constitutes the "flip side" of Connell, viz., employers conspiring to coerce stranger employers, i.e., those with whom the Unions had no collective bargaining relationship, to agree not to use union-signatory subcontractors. The Unions therefore maintain that their complaint does, consistent with Connell, state a cause of action under the antitrust laws.

The AGCC argues that, while conspiracies involving both a union and an employer may give rise to antitrust violations, employer conspiracies directed against unions are not actionable under the Sherman Act. The AGCC also suggests that the Unions do not have standing to bring this action, even if the AGCC did violate the Sherman Act. ³ As to the Unions' breach of contract claims, the AGCC argues that the Unions should have first used contractual grievance procedures, and that their failure to do so rendered those claims vulnerable to dismissal.

As to dismissal of their contract claims, the Unions suggest that proceedings on the contract issues should have been stayed, pending arbitration, rather than dismissed. The Unions also argue that their state law claims should not have been dismissed on the basis of federal preemption because those claims were based on conduct undertaken outside of the collective bargaining relationship, and therefore not exclusively governed by federal labor laws.

I. SHERMAN ACT CLAIM

Section 1 of the Sherman Act declares unlawful "every conspiracy, in restraint of trade or commerce." 15 U.S.C. § 1. The Supreme Court has rejected the proposition that every arguable "restraint" falls within the scope of the Act and indicated that a showing of some form of restraint upon commercial competition in the "marketing of goods or services" is a prerequisite to the application of the Sherman Act. Apex Hosiery Co. v. Leader, 310 U.S. 469, 495, 60 S.Ct. 982, 993, 84 L.Ed. 1311 (1940). See also Kennedy v. Long Island Railroad, 319 F.2d 366, 372-73 (2d Cir.), cert. denied, 375 U.S. 830, 84 S.Ct. 75, 11 L.Ed.2d 61 (1963); Prepmore Apparel, Inc. v. Amalgamated Clothing Workers, 431 F.2d 1004, 1007 (5th Cir. 1970), cert. dismissed, 404 U.S. 801, 92 S.Ct. 21, 30 L.Ed.2d 34 (1971).

In its published order, the district court mischaracterized the Unions' antitrust claim as charging that "defendants declined to enter into agreements with plaintiffs to deal only with subcontractors which were signatories to contracts with plaintiffs." 404 F.Supp. at 1070. Our reading of the first amended complaint does not reveal the basis for this characterization, nor can support for the district court's characterization otherwise be gleaned from the record. To accept the district court's characterization would thus require overstepping the boundaries of the complaint, which federal courts are precluded from doing when ruling on motions to dismiss. Fed.R.Civ.P. 12(b). See Walling v. Beverly Enterprises, 476 F.2d 393, 395 (9th Cir. 1973).

What the Unions' first amended complaint does allege is that the AGCC conspired to coerce "owners of land and other letters of construction contracts to hire contractors and subcontractors who are not signatories to collective bargaining agreements with plaintiffs." ⁴ The Unions also allege that members of the AGCC coerced and aided each other to subcontract only with subcontractors who had not signed with the Unions. The situation described by these allegations is very similar to a concerted refusal to deal, or a group boycott, which have both been held to constitute Sherman Act violations. ⁵

In Connell, the defendant union picketed the plaintiff general contractor to compel it to do business exclusively with plumbing and mechanical work subcontractors who had signed contracts with the defendant union. No collective bargaining relationship existed or was contemplated between the defendant union and the plaintiff general contractor. Indeed, the union had no interest in organizing the general contractor's own employees. To halt the picketing, the general contractor, under protest, finally signed the agreement demanded by the union to employ union signatory subcontractors exclusively. The general then brought suit alleging that the union's conduct violated sections 1 and 2 of the Sherman Act. The Supreme Court reversed the district court's finding, affirmed by the Fifth Circuit, that the union's conduct fell within labor's exemption from the...