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Associated Gen. Contractors v. Carpenters (full text) :: 459 U.S. 519 (1983) :: Justia U.S. Supreme Court Center Log In
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Associated Gen. Contractors v. Carpenters 459 U.S. 519 (1983)
U.S. Supreme CourtAssociated Gen. Contractors v. Carpenters, 459 U.S. 519 (1983)Associated General Contractors v.California State Council of CarpentersNo. 81-334Argued October 5, 1982Decided February 22, 1983459 U.S. 519CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
(c) The Union's allegations of consequential harm resulting from a violation of the antitrust laws, although buttressed by an allegation of intent to harm the Union, are insufficient as a matter of law. Other relevant factors -- the nature of the alleged injury to the Union, which is Page 459 U. S. 520 neither a consumer nor a competitor in the market in which trade was allegedly restrained, the tenuous and speculative character of the causal relationship between the Union's alleged injury and the alleged restraint, the potential for duplicative recovery or complex apportionment of damages, and the existence of more direct victims of the alleged conspiracy -- weigh heavily against judicial enforcement of the Union's antitrust claim. Pp. 459 U. S. 535-546.
This case arises out of a dispute between parties to a multiemployer collective bargaining agreement. The plaintiff unions allege that, in violation of the antitrust laws, the multiemployer association and its members coerced certain third parties, as well as some of the association's members, to enter into business relationships with nonunion firms. This coercion, according to the complaint, adversely affected the trade of certain unionized firms, and thereby restrained the Page 459 U. S. 521 business activities of the unions. The question presented is whether the complaint sufficiently alleges that the unions have been "injured in [their] business or property by reason of anything forbidden in the antitrust laws," and may therefore recover treble damages under § 4 of the Clayton Act. 38 Stat. 731, 15 U.S.C. § 15. Unlike the majority of the Court of Appeals for the Ninth Circuit, we agree with the District Court's conclusion that the complaint is insufficient.
The Union and Associated, and their respective predecessors, have been parties to collective bargaining agreements governing the terms and conditions of employment in construction-related industries in California for over 25 years. The wages and other benefits paid pursuant to these agreements amount to more than $750 million per year. In addition, approximately 3,000 contractors who are not members of Associated have entered into separate "memorandum agreements" with the Union, which bind them to the terms of the master collective bargaining agreements between the Union and Associated. The amended complaint does not Page 459 U. S. 522 state the number of nonsignatory employers or the number of nonunion employees who are active in the relevant market.
"(4) Advocated, encouraged, induced, coerced, aided and encouraged owners of land and other letters of construction contracts to hire contractors and subcontractors who are not signatories to collective bargaining agreements with plaintiffs and each of them; "Page 459 U. S. 523
Paragraph 25 describes the alleged "purpose and effect" of these activities: first, "to weaken, destroy, and restrain the trade of certain contractors," who were either members of Associated or memorandum contractors who had signed agreements with the Union; and second, to restrain "the free exercise of the business activities of plaintiffs and each of them." [Footnote 4] Plaintiffs claim that these alleged antitrust violations Page 459 U. S. 524 caused them $25 million in damages. [Footnote 5] The complaint does not identify any specific component of this damages claim.
Over five years later, on November 20, 1980, the Court of Appeals reversed the District Court's dismissal of the Union's federal antitrust claim. 648 F.2d 527. [Footnote 8] The majority Page 459 U. S. 525 of the Court of Appeals disagreed with the District Court's characterization of the antitrust claim; it adopted a construction of the amended complaint which is somewhat broader than the allegations in the pleading itself. [Footnote 9] The Court of Appeals held (1) that a Sherman Act violation -- a group boycott -- had been alleged, id. at 531-532; (2) that the defendants' conduct was not within the antitrust exemption for labor activities, id. at 532-536; and (3) that the plaintiffs had standing to recover damages for the injury to their own business activities occasioned by the defendants' "industry-wide boycott against all subcontractors with whom the Unions had signed agreements. . . ." Id. at 537. In support of the Union's standing, the majority reasoned that the Union was within the area of the economy endangered by a breakdown of competitive conditions, not only because injury to the Union was a foreseeable consequence of the antitrust violation, but also because that injury was specifically intended by the defendants. The court noted that its conclusion was consistent with other cases holding that union organizational Page 459 U. S. 526 and representational activities constitute a form of business protected by the antitrust laws. [Footnote 10]
We first note that the Union's most specific claims of injury involve matters that are not subject to review under the antitrust laws. The amended complaint alleges that the defendants have breached their collective bargaining agreements in various ways, and that they have manipulated their corporate names and corporate status in order to divert business to nonunion divisions or firms that they actually control. Such deceptive diversion of business to the nonunion portion of a so-called "double-breasted" operation might constitute a breach of contract, an unfair labor practice, or perhaps even a Page 459 U. S. 527 common law fraud or deceit, but in the context of the bargaining relationship between the parties to this litigation, such activities are plainly not subject to review under the federal antitrust laws. [Footnote 12] Similarly, the charge that the defendants "advocated, encouraged, induced, and aided nonmembers . . . to refuse to enter into collective bargaining relationships" with the Union (¦ 24(3)) does not describe an antitrust violation. [Footnote 13]
The Union's antitrust claims arise from alleged restraints caused by defendants in the market for construction contracting and subcontracting. [Footnote 14] The complaint alleges that defendants "coerced" [Footnote 15] two classes of persons: (1) landowners and Page 459 U. S. 528 others who let construction contracts, i.e., the defendants' customers and potential customers; and (2) general contractors, i.e., defendants' competitors and defendants themselves. Coercion against the members of both classes was designed to induce them to give some of their business -- but not necessarily all of it -- to nonunion firms. [Footnote 16] Although the pleading does not allege that the coercive conduct increased the aggregate share of nonunion firms in the market, it does allege that defendants' activities weakened and restrained the trade "of certain contractors." See n 4, supra. Thus, particular victims of coercion may have diverted particular contracts to nonunion firms, and thereby caused certain unionized subcontractors to lose some business.
We think the Court of Appeals properly assumed that such coercion might violate the antitrust laws. [Footnote 17] An agreement to restrain trade may be unlawful even though it does not entirely exclude its victims from the market. See Associated Press v. United States, 326 U. S. 1, 326 U. S. 17 (1945). Coercive activity that prevents its victims from making free choices between market alternatives is inherently destructive of competitive conditions, and may be condemned even without proof of its actual market effect. Cf. Klors, Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207, 359 U. S. 210-214 (1959). [Footnote 18] Page 459 U. S. 529
A literal reading of the statute is broad enough to encompass every harm that can be attributed directly or indirectly to the consequences of an antitrust violation. Some of our prior cases have paraphrased the statute in an equally expansive way. [Footnote 19] But before we hold that the statute is as broad as its Page 459 U. S. 530 words suggest, we must consider whether Congress intended such an open-ended meaning.
The critical statutory language was originally enacted in 1890 as § 7 of the Sherman Act. 26 Stat. 210. The legislative history of the section shows that Congress was primarily interested in creating an effective remedy for consumers who were forced to pay excessive prices by the giant trusts and combinations that dominated certain interstate markets. [Footnote 20] That history supports a broad construction of this remedial provision. A proper interpretation of the section cannot, however, ignore the larger context in which the entire statute was debated. Page 459 U. S. 531
National Society of Page 459 U. S. 532 Professional Engineers v. United States, 435 U. S. 679, 435 U. S. 687-688 (1978) (footnotes omitted). Just as the substantive content of the Sherman Act draws meaning from its common law antecedents, so must we consider the contemporary legal context in which Congress acted when we try to ascertain the intended scope of the private remedy created by § 7.
In 1890, notwithstanding general language in many state constitutions providing in substance that "every wrong shall have a remedy," [Footnote 23] a number of judge-made rules circumscribed the availability of damages recoveries in both tort and contract litigation -- doctrines such as foreseeability and proximate cause, [Footnote 24] directness of injury, [Footnote 25] certainty of damages, [Footnote 26] Page 459 U. S. 533 and privity of contract. [Footnote 27] Although particular common law limitations were not debated in Congress, the frequent references to common law principles imply that Congress simply assumed that antitrust damages litigation would be subject to constraints comparable to well-accepted common law rules applied in comparable litigation. [Footnote 28]
The federal judges who first confronted the task of giving meaning to § 7 so understood the congressional intent. Thus, in 1910, the Court of Appeals for the Third Circuit held as a matter of law that neither a creditor nor a stockholder of a corporation that was injured by a violation of the antitrust laws could recover treble damages under § 7. Loeb v. Eastman Page 459 U. S. 534 Kodak Co., 183 F. 704. The court explained that the plaintiff's injury as a stockholder was "indirect, remote, and consequential." Id. at 709. [Footnote 29] This holding was consistent with Justice Holmes' explanation of a similar construction of the remedial provision of the Interstate Commerce Act a few years later: "The general tendency of the law, in regard to damages at least, is not to go beyond the first step." Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U. S. 531, 245 U. S. 533 (1918). [Footnote 30] When Congress enacted § 4 of the Clayton Act in 1914, and when it reenacted that section in 1955, 69 Stat. 282, it adopted the language of § 7 and presumably also the judicial gloss that avoided a simple literal interpretation.
"An antitrust violation may be expected to cause ripples of harm to flow through the Nation's economy; but, 'despite the broad wording of § 4, there is a point beyond which the wrongdoer should not be held liable.' [Illinois Page 459 U. S. 535 Brick Co. v. Illinois, 431 U.S.] at 431 U. S. 760 (BRENNAN, J., dissenting). It is reasonable to assume that Congress did not intend to allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property."
There is a similarity between the struggle of common law judges to articulate a precise definition of the concept of "proximate cause" [Footnote 32] and the struggle of federal judges to Page 459 U. S. 536 articulate a precise test to determine whether a party injured by an antitrust violation may recover treble damages. [Footnote 33] It is common ground that the judicial remedy cannot encompass every conceivable harm that can be traced to alleged wrongdoing. In both situations, the infinite variety of claims that may arise make it virtually impossible to announce a blackletter rule that will dictate the result in every case. [Footnote 34] Instead, Page 459 U. S. 537 previously decided cases identify factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances.
The factors that favor judicial recognition of the Union's antitrust claim are easily stated. The complaint does allege a causal connection between an antitrust violation and harm to the Union and further alleges that the defendants intended to cause that harm. As we have indicated, however, the mere fact that the claim is literally encompassed by the Clayton Act does not end the inquiry. We are also satisfied that an allegation of improper motive, although it may support a plaintiff's damages claim under § 4, [Footnote 35] is not a panacea that will enable any complaint to withstand a motion to dismiss. [Footnote 36] Indeed, in McCready, we specifically held: "The availability of the § 4 remedy to some person who claims its benefit is not a question of the specific intent of the conspirators." 457 U.S. at 457 U. S. 479. [Footnote 37] Page 459 U. S. 538
A number of other factors may be controlling. In this case, it is appropriate to focus on the nature of the plaintiff's alleged injury. As the legislative history shows, the Sherman Act was enacted to assure customers the benefits of price competition, and our prior cases have emphasized the central interest in protecting the economic freedom of participants in the relevant market. [Footnote 38] Last Term in Blue Shield of Virginia v. McCready, supra, we identified the relevance of this central policy to a determination of the plaintiff's right to maintain an action under § 4. McCready alleged that she was a consumer of psychotherapeutic services and that she had been injured by the defendants' conspiracy to restrain competition in the market for such services. [Footnote 39] The Court stressed the fact that "McCready's injury was of a type that Congress sought to redress in providing a private remedy for violations of the antitrust laws." 457 U.S. at 457 U. S. 483, citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477, 429 U. S. 487-489 (1977). After noting that her injury "was inextricably intertwined with the injury the conspirators sought to inflict on psychologists and the psychotherapy market," 457 U.S. at 457 U. S. 484, the Court concluded that such an injury "falls squarely within the area of congressional concern." Ibid. Page 459 U. S. 539
In this case, however, the Union was neither a consumer nor a competitor in the market in which trade was restrained. [Footnote 40] It is not clear whether the Union's interests would be served or disserved by enhanced competition in the market. As a general matter, a union's primary goal is to enhance the earnings and improve the working conditions of its membership; that goal is not necessarily served, and indeed may actually be harmed, by uninhibited competition among employers striving to reduce costs in order to obtain a competitive advantage over their rivals. [Footnote 41] At common law -- as well as in the early days of administration of the federal antitrust laws -- the collective activities of labor unions were regarded as a form of conspiracy in restraint of trade. [Footnote 42] Federal policy has since developed not only a broad labor exemption from the antitrust laws, [Footnote 43] but also a separate body of Page 459 U. S. 540 labor law specifically designed to protect and encourage the organizational and representational activities of labor unions. Set against this background, a union, in its capacity as bargaining representative, will frequently not be part of the class the Sherman Act was designed to protect, especially in disputes with employers with whom it bargains. In each case, its alleged injury must be analyzed to determine whether it is of the type that the antitrust statute was intended to forestall. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., supra, at 429 U. S. 487-488. In this case, particularly in light of the longstanding collective bargaining relationship between the parties, the Union's labor-market interests seem to predominate, and the Brunswick test is not satisfied.
An additional factor is the directness or indirectness of the asserted injury. In this case, the chain of causation between the Union's injury and the alleged restraint in the market for construction subcontracts contains several somewhat vaguely defined links. According to the complaint, defendants applied coercion against certain landowners and other contracting parties in order to cause them to divert business from certain union contractors to nonunion contractors. [Footnote 44] As a result, Page 459 U. S. 541 the Union's complaint alleges, the Union suffered unspecified injuries in its "business activities." [Footnote 45] It is obvious that any such injuries were only an indirect result of whatever harm may have been suffered by "certain" construction contractors and subcontractors. [Footnote 46]
If either these firms or the immediate victims of coercion by defendants have been injured by an antitrust violation, their injuries would be direct and, as we held in McCready, they would have a right to maintain their own treble damages actions against the defendants. An action on their behalf would encounter none of the conceptual difficulties that Page 459 U. S. 542 encumber the Union's claim. [Footnote 47] The existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general. [Footnote 48] Denying the Union a remedy on the basis of its allegations in this case is not likely to leave a significant antitrust violation undetected or unremedied.
Partly because it is indirect, and partly because the alleged effects on the Union may have been produced by independent factors, the Union's damages claim is also highly speculative. There is, for example, no allegation that any collective bargaining agreement was terminated as a result of the coercion, no allegation that the aggregate share of the contracting market controlled by union firms has diminished, no allegation that the number of employed union members has declined, and no allegation that the Union's revenues in the form of dues or initiation fees have decreased. Moreover, although coercion against certain firms is alleged, there is no assertion that any such firm was prevented from doing business with any union firms, or that any firm or group of firms was subjected to a complete boycott. See nn. 9 15 and 16 supra. Page 459 U. S. 543 Other than the alleged injuries flowing from breaches of the collective bargaining agreements -- injuries that would be remediable under other laws -- nothing but speculation informs the Union's claim of injury by reason of the alleged unlawful coercion. Yet, as we have recently reiterated, it is appropriate for § 4 purposes "to consider whether a claim rests at bottom on some abstract conception or speculative measure of harm." Blue Shield of Virginia v. McCready, 457 U.S. at 457 U. S. 475, n. 11, citing Hawaii v. Standard Oil Co., 405 U.S. at 405 U. S. 262-263, n. 14. [Footnote 49]
The indirectness of the alleged injury also implicates the strong interest, identified in our prior cases, in keeping the scope of complex antitrust trials within judicially manageable limits. [Footnote 50] These cases have stressed the importance of avoiding Page 459 U. S. 544 either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other. Thus, in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481 (1968), we refused to allow the defendants to discount the plaintiffs' damages claim to the extent that overcharges had been passed on to the plaintiffs' customers. We noted that any attempt to ascertain damages with such precision "would often require additional long and complicated proceedings involving massive evidence and complicated theories." Id. at 392 U. S. 493. In Illinois Brick Co. v. Illinois, 431 U. S. 720 (1977), we held that treble damages could not be recovered by indirect purchasers of concrete blocks who had paid an enhanced price because their suppliers had been victimized by a price-fixing conspiracy. We observed that potential plaintiffs at each level in the distribution chain would be in a position to assert conflicting claims to a common fund, the amount of the alleged overcharge, thereby creating the danger of multiple liability for the fund and prejudice to absent plaintiffs.
The same concerns should guide us in determining whether the Union is a proper plaintiff under § 4 of the Clayton Act. [Footnote 51] Page 459 U. S. 545 As the Court wrote in Illinois Brick, massive and complex damages litigation not only burdens the courts, but also undermines the effectiveness of treble damages suits. Id. at 431 U. S. 745. In this case, if the Union's complaint asserts a claim for damages under § 4, the District Court would face problems of identifying damages and apportioning them among directly victimized contractors and subcontractors and indirectly affected employees and union entities. It would be necessary to determine to what extent the coerced firms diverted business away from union subcontractors, and then to what extent those subcontractors absorbed the damage to their businesses or passed it on to employees by reducing the workforce or cutting hours or wages. In turn, it would be necessary to ascertain the extent to which the affected employees absorbed their losses and continued to pay union dues. [Footnote 52]
We conclude, therefore, that the Union's allegations of consequential harm resulting from a violation of the antitrust laws, although buttressed by an allegation of intent to harm the Union, are insufficient as a matter of law. Other relevant factors -- the nature of the Union's injury, the tenuous and speculative character of the relationship between the alleged antitrust violation and the Union's alleged injury, the potential for duplicative recovery or complex apportionment of damages, and the existence of more direct victims of the alleged conspiracy -- weigh heavily against judicial enforcement of the Union's antitrust claim. Accordingly, we hold that, based on the allegations of this complaint, the District Page 459 U. S. 546 Court was correct in concluding that the Union is not a person injured by reason of a violation of the antitrust laws within the meaning of § 4 of the Clayton Act. The judgment of the Court of Appeals is reversed.
In keeping with the inclusive language and remedial purposes of § 4, this Court has "refused to engraft artificial limitations Page 459 U. S. 547 on the § 4 remedy." Blue Shield of Virginia v. McCready, supra, at 457 U. S. 472 (footnote omitted). [Footnote 2/1] Thus, for example, in Pfizer Inc. v. India, the Court held that the statutory phrase "any person" is broad enough to encompass a foreign sovereign. In Reiter v. Sonotone Corp., 442 U. S. 330 (1979), the Court likewise adopted an expansive reading of the statutory term "property," ruling that a consumer who pays a higher price as a result of a price-fixing conspiracy has sustained an injury to his "property" and therefore has standing to sue under § 4.
Far from supporting the Court's conclusion, ante at 459 U. S. 531-533, the common law background of the antitrust laws highlights the anomaly of denying a remedy to the intended victim of unlawful conduct. Since antitrust violations are essentially "tortious acts," Bigelow v. RKO Radio Pictures, Inc., 327 U. S. 251, 327 U. S. 264 (1946), [Footnote 2/2] the most apt analogy is to the common law of torts. Although many legal battles have been fought over the extent of tort liability for remote consequences Page 459 U. S. 548 of negligent conduct, it has always been assumed that the victim of an intentional tort can recover from the tortfeasor if he proves that the tortious conduct was a cause-in-fact of his injuries. An inquiry into proximate cause has traditionally been deemed unnecessary in suits against intentional tortfeasors. [Footnote 2/3] For example, if one party makes false representations to another, intending them to be communicated to a third party and acted upon to his detriment, the third party can bring an action for misrepresentation against the originator of the false information if he suffers injury as a result. [Footnote 2/4] Indeed, in many situations the common law holds Page 459 U. S. 549 an intentional tortfeasor liable even for the unforeseeable consequences of his conduct. [Footnote 2/5] I am not aware of any cases exonerating an intentional tortfeasor from responsibility for the intended consequences of his actions merely because he inflicted harm upon his victim indirectly, rather than directly.
Nor does the present case implicate the consideration of statutory policy underlying this Court's decisions in Illinois Brick Co. v. Illinois, 431 U. S. 720 (1977), and Hawaii v. Standard Oil Co., 405 U. S. 251 (1972). Critical to the denial of standing in those cases was the risk of duplicative recovery that would have been created by affording the plaintiffs Page 459 U. S. 550 standing. [Footnote 2/6] In Illinois Brick, the Court held that an indirect purchaser has no standing to sue a seller on the theory that overcharges paid to the seller by a direct purchaser were passed on to the indirect purchaser. 431 U.S. at 431 U. S. 730-731. If the Court had held in Illinois Brick that the indirect purchaser has standing, sellers would have faced the prospect of two treble damages actions based on the same overcharges. Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481 (1968), had established that a direct purchaser can sue a seller for the entire amount of the seller's overcharges, and that the seller cannot assert as a defense that the direct purchaser passed the overcharges through to its customers (the indirect purchasers). Similarly, in Hawaii v. Standard Oil Co., where the State of Hawaii sought to recover for financial harm allegedly suffered by the general economy of the State, the Court denied standing because
There is no risk of double recovery here. The plaintiff unions seek recovery for injuries distinct from those that other parties may have suffered. One such distinct injury Page 459 U. S. 551 plaintiffs may have suffered is a decrease in union dues resulting from a reduction in work available to union members. In addition to regular dues, it is not uncommon for employees to pay periodic dues representing a percentage of their wages. See R. Gorman, Basic Text on Labor Law 650 (1976). [Footnote 2/8] If union members lost work as a result of the alleged restraint of trade, their wages and thus the dues collected by the plaintiff unions may have been reduced.
Any recovery of lost dues by the plaintiff unions would not duplicate recoveries that might be obtained by either unionized carpentry firms or employees of those firms. A recovery of lost dues by a union would not duplicate a recovery for lost profits that might be obtained by a firm for which union members worked, for union dues are not an element of a firm's profits. Nor would a recovery of lost dues by a union duplicate recoveries of lost wages that employees might obtain. Although periodic union dues are based on a percentage of wages, there would be no double recovery, because union dues would be subtracted from lost wages in calculating the employees' damages. The Hanover Shoe rule barring the assertion of a "pass-through" defense would not prevent subtraction of union dues from wages in determining the employees' damages. The Hanover Shoe rule was designed to avoid the "additional long and complicated proceedings involving massive evidence and complicated theories" that would be required to determine the extent to which price overcharges were passed through to an indirect purchaser. 392 U.S. at 392 U. S. 493. In sharp contrast, where union dues are a percentage of wages, there is no difficulty in determining the amount of dues that a union lost as a result of a reduction in the wages earned by union members. Page 459 U. S. 552