Larry V. Muko, Inc. v. Southwestern Pennsylvania Bldg. and Const. Trades Council

• Citation: 670 F.2d 421
• Decision Date: 17 February 1982
• Docket Number: No. 81-1698,Nos. 81-1696,No. 81-1696,No. 81-1697,81-1696,81-1697,81-1698,s. 81-1696
• Parties: 109 L.R.R.M. (BNA) 2469, 93 Lab.Cas. P 13,224, 1982-1 Trade Cases 64,505 LARRY V. MUKO, INC., Appellant in, v. SOUTHWESTERN PENNSYLVANIA BUILDING AND CONSTRUCTION TRADES COUNCIL and Long John Silver's, Inc., Building Council of Pittsburgh, Pa. & Vicinity, Southwest Building Trades Council and Pittsburgh Building Trades Council, Appellants inLong John Silver's, Inc., Appellant into 81-1698.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 421

670 F.2d 421

109 L.R.R.M. (BNA) 2469, 93 Lab.Cas. P 13,224,

1982-1 Trade Cases 64,505

LARRY V. MUKO, INC., Appellant in No. 81-1696, v. SOUTHWESTERN PENNSYLVANIA BUILDING AND CONSTRUCTION TRADES COUNCIL and Long John Silver's, Inc., Building Council of Pittsburgh, Pa. & Vicinity, Southwest Building Trades Council and Pittsburgh Building Trades Council, Appellants in No. 81-1697 Long John Silver's, Inc., Appellant in No. 81-1698.

Nos. 81-1696 to 81-1698.

United States Court of Appeals Third Circuit.

Argued Oct. 26, 1981.

Decided Jan. 25, 1982.

Rehearing and Rehearing In Banc Denied Feb. 17, 1982.

Stanford A. Segal (argued), Gatz, Cohen, Segal & Koerner, Pittsburgh, Pa., for Southwest Bldg. Trades Council and Pittsburgh Bldg. Trades Council.

Daniel I. Booker (argued), Ira S. Lefton, Reed Smith Shaw & McClay, Pittsburgh, Pa., for Long John Silvers, Inc.

R. A. King (argued), Melvin L. Moser, Jr., Buchanan, Ingersoll, Rodewald, Kyle & Buerger, P.C., Pittsburgh, Pa., for Larry V. Muko, Inc.

Before ADAMS, VAN DUSEN and SLOVITER, Circuit Judges.

OPINION OF THE COURT

ADAMS, Circuit Judge.

This is the second time this case has come before us. In Larry V. Muko, Inc. v. Southwestern Pennsylvania Building and Construction Trades Council, 609 F.2d 1368 (3d Cir. 1979) (Muko I), this Court, sitting in banc, reversed a district court order granting defendant's motion for a directed verdict and remanded the case for a new trial. The second trial resulted in a jury verdict for the defendants, and the plaintiff once again has appealed to this Court. We affirm.

I.

Long John Silver's, Inc. ("Silver's"), a Delaware corporation headquartered in Lexington, Kentucky, operates fast food seafood restaurants in several markets across the United States. In 1973, it decided to enter the Pittsburgh, Pennsylvania market, and contracted with Larry V. Muko, Inc. ("Muko"), a non-union general contractor experienced in constructing fast food restaurants, to build its first outlet in Monroeville, a suburb of Pittsburgh. After completion of the Monroeville restaurant, Silver's president Jim Patterson met with Larry Muko and indicated his willingness to give future construction business to Muko if his prices remained competitive and the quality of his construction remained good. Muko was awarded a contract to build a second restaurant in Lower Burrell, Pennsylvania, but Silver's did not commit itself any further.

During construction of the Monroeville restaurant, two labor organizations, the Southwestern Pennsylvania Building and Construction Trades Council and the Building and Construction Trades Council of Pittsburgh (the "Councils"), picketed the site. After completion of construction, handbills were distributed to customers of the Monroeville restaurant urging them not to patronize Silver's because the chain used "contractors who are paying less than the established prevailing wages in the area." Appendix at 115a. The handbill exhorted the customers "to protect the living and working standards established by the Building Trades Council." Id.

Silver's management was alarmed when it was informed that customers were leaving the premises after reading the handbill. In response to the leafletting, Silver's arranged a meeting with the Building Trades Councils. After the meeting, Silver's vice-president sent a letter to the Councils emphasizing the company's "desire to establish good working relationships with the unions in the Greater Pittsburgh Area" and stating Silver's "intent ... to use only union contractors certified by the (Councils)" in the future. The letter concluded: "In any relationship between two parties there must be mutual need and assistance.... It is ... extremely important to both parties that our location at Monroeville, Pennsylvania and the one under construction in Lower Burrell Township, Pennsylvania not be subjected to any kind of informational picketing." Appendix at 116a-117a.

Subsequently, Silver's employed only unionized general contractors to build its Pittsburgh-area restaurants, although the general contractors were free to use non-union subcontractors. Silver's discussed with Muko the question whether Muko would be willing to bid on the construction of its restaurants as a union firm. Muko declined to build under such circumstances however, and it was not awarded any of Silver's contracts after the construction of the Lower Burrell restaurant.

On August 12, 1975, Muko filed the present lawsuit against Silver's and the two Councils, alleging that the defendants had entered into an agreement to award contracts for the construction of Silver's restaurants in the Pittsburgh area only to union contractors. This, claimed Muko, was an unreasonable restraint of trade in violation of section 1 of the Sherman Act and sections 4 and 16 of the Clayton Act. After Muko presented its case at a jury trial held on July 19-20, 1977, the district court granted the defendants' motion for a directed verdict. The directed verdict apparently was granted "because the court believed the evidence could sustain no finding other than a unilateral decision on the part of Silver's to accept bids only from union contractors." 609 F.2d at 1372. On appeal, this Court, sitting in banc, reversed and remanded the case for a new trial. 609 F.2d 1368. We held that the jury could have found an agreement between Silver's and the Councils that was not exempt from antitrust scrutiny because, under the standards set forth in Connell Construction Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975), such an agreement might have "actual or potential anticompetitive effects that would not flow naturally from the elimination of competition over wages and working conditions." 609 F.2d at 1373.

Upon remand, a bifurcated jury trial on issues of liability and damages took place. At the close of the evidence on liability, the district court submitted four special interrogatories to the jury:

1. Did Long John Silver's and the Trade Councils enter into an agreement or combination to refuse to grant construction contracts to non-union builders, including Muko?

If your answer to question 1. is NO, go no further. If your answer to question 1. is YES, go on to question 2.

2. Was the effect of the agreement between Long John Silver's and the Trade Councils to impose a restraint on free competition beyond that which would follow from the elimination of competition based on wage rates and working conditions?

If your answer to question 2. is NO, go no further. If your answer to question 2. is YES, go on to question 3.

3. Was the agreement between Long John Silver's and the Trade Councils an unreasonable restraint of trade under the standards given you by the court in its instructions?

If your answer to question 3. is NO, go no further. If your answer to question 3. is YES, go on to question 4.

4. Did the agreement between Long John Silver's and the Trade Councils cause injury to the plaintiff in his business or property?

On February 17, 1981, the jury returned its verdict, answering "Yes" to Interrogatories 1 and 2 and "No" to Interrogatory 3. The jury thus found that the defendants had reached an agreement, outside the labor exemption, to exclude Muko as a competitor for Silver's construction work. Because the jury concluded that the agreement was not an unreasonable restraint of trade, however, the district court entered judgment for the defendants. The district court subsequently denied Muko's motion for a new trial and denied defendants' conditional motions for judgment n. o. v. This appeal followed.

II.

Muko challenges two aspects of the district court proceeding. First, it claims that the trial judge erred as a matter of law when he instructed the jury to apply the rule of reason, rather than the per se standard, to the agreement at issue. Second, it argues that, even if the district judge was correct in applying the rule of reason, he erred in his instructions on the relevant product market. We disagree with both contentions. ¹

III.

A.

In the earlier in banc opinion in this case, we declined to decide the proper standard by which to measure any potential antitrust violation. We intimated, however, that traditional antitrust principles would govern such a determination by the district court:

The jury might have found a concerted refusal to deal with a class of contractors of which Muko is a member. But whether the evidence here is viewed as capable of sustaining a finding of a group boycott, to which a per se rule would apply, or some lesser restraint to which a rule of reason analysis might apply, it was sufficient to take Muko's case to the jury. We have no occasion on this record to rule on whether, after hearing the defendants' evidence as well, the court should instruct the jury that it should measure the agreement by rule of reason or per se standards.

609 F.2d at 1376 (footnote omitted).

In counseling that the level of antitrust inquiry depends upon the nature of the conduct alleged, even in the labor-antitrust context, Muko I reflected the approach taken by a panel of this Court in Consolidated Express, Inc. v. New York Shipping Association, 602 F.2d 494 (3d Cir. 1979), vacated and remanded on other grounds, 448 U.S. 902, 100 S.Ct. 3040, 65 L.Ed.2d 1131 (1980) ("Conex "), a case decided several months prior to Muko I. There, the plaintiff was a freight consolidator whose business was threatened after defendants New York Shipping Association (an association of employers) and the longshoremen's union negotiated "Rules on Containers" and the so-called "Dublin Supplement" in response to the perceived threat to waterfront labor posed by technological change in the shipping industry. Conex claimed, inter alia, that the defendants' enforcement of the rules constituted a group boycott of the plaintiffs that was illegal per se under the Sherman Act. ² We held, as an initial matter, "that the...