Colfax Corp. v. Illinois State Toll Highway Authority

• Decision Date: 22 March 1996
• Docket Number: No. 95-2118,95-2118
• Parties: 151 L.R.R.M. (BNA) 2938 COLFAX CORPORATION, Plaintiff-Appellant, v. The ILLINOIS STATE TOLL HIGHWAY AUTHORITY and its chief counsel, Frank M. Howard, in his official and individual capacity; and the International Association of Heat and Frost Insulators Union Local 17 and its business manager, Michael O'Neill, in his official and individual capacity, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 631

79 F.3d 631

151 L.R.R.M. (BNA) 2938

COLFAX CORPORATION, Plaintiff-Appellant, v. The ILLINOIS STATE TOLL HIGHWAY AUTHORITY and its chief

counsel, Frank M. Howard, in his official and individual

capacity; and the International Association of Heat and

Frost Insulators Union Local 17 and its business manager,

Michael O'Neill, in his official and individual capacity,

Defendants-Appellees.

No. 95-2118.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 18, 1996.

Decided March 22, 1996.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 93 C 7463; William T. Hart, Judge.

Lawrence M. Cohen, Douglas M. Werman, S. Richard Pincus (argued), Fox & Grove, Chicago, IL, for Colfax Corporation.

John P. Morrison (argued), Michael J. Abernathy, David M. Novak, Bell, Boyd & Lloyd, Chicago, IL, for Illinois State Toll Highway Authority, Frank M. Howard.

Marvin Gittler (argued), Stephen J. Feinberg, Asher, Gittler, Greenfield, Cohen & D'Alba, Chicago, IL, John J. Toomey, Hugh B. Arnold, Arnold & Kadjank, Chicago, IL, for International Association of Heat and Frost Insulators, Union Local 17, Michael O'Neill.

Before COFFEY, DIANE P. WOOD, and EVANS, Circuit Judges.

TERENCE T. EVANS, Circuit Judge.

The Colfax Corporation submitted bids for asbestos removal from Illinois Tollway oases and maintenance buildings and as the lowest bidder was optimistic about receiving the work. When that did not happen, Colfax sued the Illinois State Toll Highway Authority and two labor unions--the International Association of Heat and Frost Insulators Union Local 17 and the Laborers International Union, Local 225--plus various officials of the three entities. Colfax appeals the dismissal of two counts of its amended complaint: those based on the National Labor Relations Act, 29 U.S.C. § 151 et seq., and the Civil Rights Act, 42 U.S.C. § 1983.

We review the dismissal of the complaint de novo, accepting as true its well-pleaded factual allegations and drawing all reasonable inferences for the benefit of Colfax. Midwest Grinding Co. v. Spitz, 976 F.2d 1016 (7th Cir.1992). The dismissal of a complaint can be affirmed only if "it appears beyond doubt that [Colfax] can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957).

In the amended complaint, Colfax alleges that the Authority instituted a project for asbestos abatement and repair of some of its buildings. It advertised for bids on May 24, 1993. In the advertisement, the Authority stated that it might not award any contract and reserved the right to reject any and all bids. But on June 24, 1993, the Authority decided to award the work, subject to the proper execution of certain documents, to the lowest responsible bidder, which turned out to be Colfax. Also, as it turns out, the documents were never signed.

The Authority and the unions entered into a project labor agreement related to its tri-state widening project. The agreement barred contractors from locking out employees and prevented workers from striking, picketing, and engaging in conduct which would delay construction. Under the project labor agreement, the Authority agreed to contract only with employers who are bound by or are willing to observe the terms of the project agreement with the unions having jurisdiction over the type of work being performed.

The Authority informed Colfax on June 27, 1993, that the asbestos removal work would be subject to the project labor agreement. Colfax consented to sign the agreement. On July 15, 1993, a meeting was held with representatives of the company, the Authority, and Local 17 and Local 225, the relevant unions. Neither union had a labor agreement with Colfax and in fact had ongoing labor disputes with the company.

Both unions stated that they would not enter into project-specific agreements with Colfax but would allow Colfax to become a party to their existing areawide collective bargaining agreements. Colfax refused, and on July 29, 1993, the Authority rejected all bids, including that of Colfax.

Three weeks later, on August 19, 1993, the Authority again advertised for bids for asbestos abatement and repair work on its buildings. Once more, the advertisement stressed that the Authority might not award any contract and that it reserved the right to reject all proposals. A multi-project labor agreement was attached to the advertisement. That agreement is similar to the project labor agreement; however, under the multi-project labor agreement, the Authority agreed to contract work only to employers who are or will become parties to areawide collective bargaining agreements with the unions having jurisdiction over the relevant work.

Colfax submitted a bid and once again was the low bidder. It informed the Authority that it would sign a project agreement but that any attempt to require it to sign an areawide collective bargaining agreement with Local 17 or Local 225 would be beyond the Authority's lawful powers and would be prohibited by federal law. On September 30, 1993, the Authority rejected all bids.

This lawsuit followed. Colfax filed claims alleging preemption under the NLRA and the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., and claims regarding violations of 42 U.S.C. § 1983 and the federal anti-trust laws. In addition, there were pendent state law claims. As we said, Colfax appeals the dismissal of the claims based on the NLRA and § 1983. ¹

The district court dismissed the disputed claims on the basis that the Authority's actions were not an impermissible attempt by a state to regulate labor relations, in contravention of the NLRA. Rather, the actions were taken by the Authority in its proprietary role as the owner of the project. Several issues swirl around in this appeal, only one of which requires an extended discussion.

That question is, at heart, whether the actions were in fact proprietary, or were some nefarious attempt by a state authority to regulate labor relations. In light of Building & Construction Trades Council v. Associated Builders, 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993)--the now famous "Boston Harbor" case--the question need not detain us long.

A state's potential attempt to regulate labor is subject to the preemption doctrine. Because the NLRA contains no express preemption provision, courts are reluctant to infer preemption. It is not found unless an action conflicts with federal law or would frustrate the federal scheme, or unless it is clear from the totality of the circumstances that Congress intended to occupy the field. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). There are two distinct preemption principles. One is that state and local regulation is forbidden regarding activities which are "protected by § 7 of the [NLRA] or constitute an unfair labor practice under § 8." San Diego Building Trades Council v. Garmon, 359 U.S. 236, 244, 79 S.Ct. 773, 779, 3 L.Ed.2d 775 (1959). The other prohibits regulation of those activities which have been left "to be controlled by the free play of economic forces." Lodge 76, Intern. Ass'n of Machinists and Aerospace Workers, AFL-CIO v. Wisconsin Employment Relations Comm'n, 427 U.S. 132, 147, 96 S.Ct. 2548, 2556-57, 49 L.Ed.2d 396 (1976).

In "Boston Harbor," the Court made clear that while the doctrine of preemption prevents a state from regulating in preempted areas, a state does not engage in regulation "simply by acting within one of these protected areas." 507 U.S. at 227, 113 S.Ct. at 1196. A state may act within those areas if it is acting in a proprietary way:

When a State owns and manages property, for example, it must interact with private participants in the marketplace. In so doing, the State is not subject to pre-emption by the NLRA, because pre-emption doctrines apply only to state regulation.

At 227, 113 S.Ct. at 1196.

As one might guess, the "Boston Harbor" case involved the cleanup of the Boston harbor. The Massachusetts Water Resources Authority (MWRA) is an independent government agency charged with providing water-supply services, sewage collection,...