Court Opinion

ID: 8941491
Source: CourtListenerOpinion
Date Created: 2022-11-27 08:02:08.769893+00
Date Added: 2024-06-11T17:09:45.476427
License: Public Domain

WIGGINS, Circuit Judge, with whom KENNEDY, ALARCON and BRUNETTI, Circuit Judges,
join, dissenting:
Because I disagree with the majority’s reasoning on one issue and with its result on a second, I respectfully dissent.
I. The Construction Industry Proviso
The district court’s first ground for granting the defendants’ summary judgment1 was that the subcontracting provision in the defendants’ contracts was, standing alone, within the construction industry proviso of section 8(e) as a matter of law. (ER 77, 4:14-9:3).2 Thus, as the case comes to us, we must determine de novo whether the clause alone suffices to invoke the shelter of the construction industry proviso of section 8(e).
This posture raises an immediate problem: the language of the clause itself is insufficient to answer the question we must determine. Other facts must be known to determine whether the construction industry proviso applies. For example, what was the purpose of this union in exacting the union-specific clause in the master contract? Did it seek to drive nonunion contractors out of the business market? Did it seek a jurisdictional advantage with a competing union? Was the clause consistent with maintaining or bettering the wages, hours, and working conditions of its members, or did the union have another purpose in mind?
Basic national labor policy, reflected in section 8(e), declares hot cargo agreements to be illegal. The construction industry proviso to section 8(e) is an exception to this basic rule. It should thus be interpreted narrowly, so as to reach the Congressional goal in creating it, but to go no further. The legislative history is sparse, making precise determination of Con*1119gress’s purpose difficult. Generally, however, if the purpose of the bargaining parties (usually the union) in insisting on a subcontracting clause is consistent with usual union interests (i.e., the wages, hours, and working conditions of its members), the courts hold that a particular clause falls within the construction industry proviso and thus beyond the general proscription of section 8(e). See Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 628-31, 95 S.Ct. 1830, 1837-39, 44 L.Ed.2d 418 (1975) (union’s hot cargo clause not within section 8(e)’s construction industry proviso because it was not concerned with the legitimate concerns of employees (representation, working alongside nonunion workers) but to pressure nonsignatories into recognition); cf. Local Union No. 189, Amalgamated Meat Cutters & Butcher Workmen v. Jewel Tea Co., 381 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965) (finding a marketing hours limitation contained in a multiemployer contract exempt from antitrust liability because its purpose was to protect the wages, hours, and working conditions of the union’s members); United Mine Workers v. Pennington, 381 U.S. 657, 665-67, 85 S.Ct. 1585, 1590-91, 14 L.Ed.2d 626 (1965) (holding that contract provision not exempt from antitrust scrutiny merely because arrived at in collecting bargaining context and dealing on its face with wages if true purpose was to curtail competition in the marketplace).
A party to a contract should not be able to insulate itself from an examination of the purpose of its contract provisions simply by adopting certain “approved” language. This is especially true where, as here, the provision has an adverse effect on a nonparty. One party to the contract may negotiate for language in a contract that is in lawful form but that is intended to achieve an unlawful object. The other contracting party may accept such language because it does not adversely affect that party. If an aggrieved now party is to have any recourse against the unlawful object, the nonparty must therefore be free to prove the true intent of the parties to the contract, notwithstanding the facial conformity of the contract with the law. Moreover, the same contract language may evidence a legal purpose under one circumstance and an illegal purpose in another. The real purpose can therefore be detected only by examination of the circumstances of the specific case.
In the present case, the subcontracting clause is union specific. Such a clause may evidence that the union was (a) trying to ensure work for its union members, or (b) trying to freeze an employer out of the market by illegal means. If there is only one union, argument (b) is inapplicable, and argument (a) becomes a permissible top-down pressure device to have nonunion workers join the union. See Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 662-65, 102 S.Ct. 2071, 2081-83, 72 L.Ed.2d 398 (1982) (concluding that Congress intended to allow whatever top-down pressures for unionization might arise from subcontracting agreements reached in the context of the collecting bargaining relationship). If there is more than one union, argument (b) may apply and the clause becomes an improper economic weapon against a nonsignatory employer affiliated with another union, effectively allowing the first union to prevent such an employer from doing business. See, e.g., Connell, 421 U.S. at 624-25, 95 S.Ct. at 1836-37 (noting the “significant adverse effects” of allowing unions to exclude certain subcontractors from the market, citing Pennington or to create a closed market). Such a direct restraint on the business market might have “substantial anticompetitive effects, both actual and potential, that would not follow naturally from the elimination of competition over wages and working conditions.” Id. at 625, 95 S.Ct. at 1836. The provision would therefore fall outside the nonstatutory exemption to the antitrust laws. Id.
Consequently, under the circumstances of this case, I would not hold that the contract provision falls within the construction industry proviso of section 8(e) as a matter of law. Where, as here, the provi*1120sion is consistent with the union’s intent to accomplish two different purposes, one legal and one illegal, the court must look beyond the mere recitation of previously approved language and determine the parties’ actual intent as a matter of fact. That intent is a disputed fact here,3 and I would remand to the district court to determine it.
II. The Sherman Act Issue
The district court also granted summary judgment for defendants on the ground that the subcontracting clause in the collective bargaining agreements falls outside the coverage of the Sherman Act as a result of the labor exemptions from antitrust law. The district court did not hold, as the majority states, “that Sun-Land’s claims did not raise a triable issue under the Sherman Act.” It is this misunderstanding of the posture in which this case reaches us that requires me to dissent on this second issue. I agree with the majority’s resolution of the legal issue it defines; I cannot agree with the majority’s ultimate result in the posture of this case.
The majority properly concludes that agreements that are valid under the labor laws are not thereby automatically exempt from the antitrust laws. As the majority correctly notes, such per se exemption is incompatible with the Supreme Court’s decision in Pennington and its fragmented opinions in Jewel Tea and Connell. Even if the clause furthers the normal interests of the contracting labor union (and hence is valid under 8(e)), it may adversely affect competition in a manner different in kind or degree from the adverse impact implicit in every collective bargaining contract containing a subcontracting clause.
I also agree that a contract provision alone is insufficient to support an antitrust claim if that provision is valid under the construction industry proviso to section 8(e). Because of the general use of such hot cargo provisions, a contrary holding could result in widespread antitrust litigation based solely on such provisions, a result clearly not intended by Congress. Although a valid construction industry hot cargo provision may be probative evidence of an antitrust violation, it is not alone sufficient to prove such a violation. Proof of such a violation also requires other evidence of anticompetitive intent or conduct, unprotected by labor law.
The preceding analysis comprehensively addresses the only Sherman Act issue before us on this appeal. We did not take this case en banc, as the majority asserts,
to determine whether a provision of a collective bargaining agreement falling within the construction industry proviso is, without more, sufficient evidence of an antitrust violation to withstand a summary judgment motion.
Majority opinion at 1112.4 Indeed, we could not have taken the case to determine this issue, because the issue is not raised on this appeal.5 Sun-Land does not urge that the contract language is sufficient to create liability; it merely urges that the contract language is not sufficient to insulate the defendants from liability.
To understand the majority’s error, it is important to understand the posture of this case. This appeal is from a district court *1121summary judgment based on a resolution of a single antitrust issue. The defendants carefully framed this issue in their summary judgment motion to present a clear-cut legal question: is a subcontracting clause that is valid under the construction industry proviso of section 8(e) of the LMRA automatically exempt under the Sherman Act? This presented a purely legal question: whether, regardless of what other anticompetitive intent or conduct Sun-Land alleged or proved, the validity of the contract provision under section 8(e) was an absolute bar to antitrust liability. A thorough examination of the pleadings below and the district court’s memorandum, as evidenced by the citations in the margin, confirms that the issue presented and decided was always regarded by all parties and the court as the pure legal question of whether section 8(e) validity creates a per se exemption from the antitrust laws.6
The district court granted summary judgment, holding that a contract provision’s validity under the construction industry proviso absolutely barred antitrust liability. This summary judgment was in effect a dismissal on the pleadings, as no facts were involved and the decision turned solely on the legal effect of the contract provision. The majority of this court today correctly rejects the district court’s analysis, holding instead that a contract provision valid under section 8(e) does not insulate contracting parties from antitrust liability if there is additional anticompetitive intent or conduct. Ordinarily, such a holding by this court would result in reversal and remand to the district court for the determination of this question of fact.
In the present case, however, the majority invokes the well-recognized doctrine that a court of appeals may affirm on any ground finding support in the record, even though the lower court did not rely on that ground. In a single paragraph, the majority decides that Sun-Land’s complaint and summary judgment allegations do not allege any anticompetitive intent or conduct beyond the contract language itself and concludes that Sun-Land relies exclusively on the subcontracting clause for its claim of antitrust liability. The majority therefore holds that summary judgment is proper as a matter of law.
Leaving aside the fairness of granting a dismissal on the pleadings without leave to amend based on a new legal standard that the drafter of the complaint had no way of anticipating, the majority’s analysis of the case is simply wrong. The complaint below in fact alleged the additional anticompeti-tive intent and conduct required by the majority’s analysis, and Sun-Land continues to press those claims to this day. These allegations are not prominent in the summary judgment materials simply because there was no need for them to be there.
First, the complaint itself is replete with allegations of anticompetitive conduct oth*1122er than the disputed contract. It alleges anticompetitive agreements other than the disputed contract (ER 1, 5:20-24). It alleges threats and coercion against present and prospective customers of Sun-Land intended to induce them not to do business with Sun-Land, within the terms of the disputed contract or otherwise, as a means of putting Sun-Land out of business (ER 1, 16:15-22). It also alleges threats and coercion against present and prospective customers of Sun-Land intended to induce Sun-Land to recognize the Laborers as its bargaining representative, in violation of the NLRB certification of the present, independent union as bargaining agent (ER 12:7-13:6; 17:3-8). Finally, the complaint alleges an intent to destroy competition or control prices in the commercial landscape industry (ER 1, 17:35). Some of these allegations are admittedly general, but that is hardly surprising in a complaint drafted before discovery.
Neither side offered affidavits supporting or opposing the motions grounded in antitrust.7 This is logical: because the parties framed defendants’ summary judgment motion as a purely legal question dependent solely on the contract language, any additional facts would have been irrelevant. There was no need for allegations of fact by affidavit at the time the district court granted the summary judgment motion we review here. This court therefore should not rely on the absence of such facts to affirm the summary judgment.
In addition, the summary judgment motion was heard on facts stipulated only for the purpose of the cross motions for summary judgments. This is apparent from the very caption of the stipulation: “Joint Statement of Uncontroverted Facts and Issues of Law Re Cross Motions for Summary Judgment” (ER 55 (emphasis added)). The statement contained only the facts necessary to resolve the purely legal issues presented. Even in this stipulation, however, Sun-Land included facts that suggest additional anticompetitive conduct and intent on the part of the defendants. The statement notes the Teamsters’ earlier association with Sun-Land and its employees, the Teamsters’ abrupt disclaimer of that association, and the ensuing court action that resulted in the finding of unfair labor practice on the Teamsters’ part. ER 55, 4:22-6:6; see also Toyota Landscape Co. v. Building Material & Dump Truck Drivers Local No. 420, 726 F.2d 525 (resolving the court action), cert. denied, — U.S. -, 105 S.Ct. 104, 83 L.Ed.2d 49 (1984). The defendants objected to the inclusion of these facts as irrelevant (ER 55, 6:7-8), as indeed they were to the ground on which the district court granted defendants’ motion, the automatic antitrust exemption. The facts are certainly relevant, however, to the campaign of anticompetitive conduct on the part of local contractors and labor unions that Sun-Land alleges in its complaint. On their face, these facts suggest earlier, illegal anticompetitive actions against Sun-Land. In any event, they are certainly inconsistent with the majority’s conclusion that Sun-Land relies solely on the hot cargo language for antitrust liability.
Moreover, Sun-Land’s memoranda in the district court make clear that Sun-Land recognized the possibility of disputed facts should the court deny the motions for summary judgment. Indeed, Sun-Land’s own cross-motion for summary judgment is grounded on the defendants’ failure to present any evidence that the subcontracting provision was the “ ‘least restrictive means to obtain legitimate union goals.’ ” (ER 64, 16:12-22:23 (quoting Pennington)). Sun-Land argued that in light of this failure and the unique circumstances of the case, the subcontracting agreement was as a matter of law not the least restrictive means, entitling Sun-Land to summary judgment. Although Sun-Land’s cross-motion was denied and not appealed, its arguments in support of that cross-motion clearly indicate that Sun-Land had additional *1123evidence to prove antieompetitiveness8 and did not offer it merely because both summary judgment motions presented pure questions of law and the evidence was therefore irrelevant to them. Even the district court’s memorandum implicitly recognized this aspect of Sun-Land’s position. See ER 77, 9:5-16:26 (“Sun-Land claims that regardless of validity of the clause under the NLRA, the Court must engage in an independent analysis of the antitrust consequences.”).
I do not normally take exception to the practice of affirming district court judgments on grounds different from those relied on by the district court. This practice serves both judicial economy and the parties’ interests. Such an affirmance is justified, however, only “if the issue was litigated in the trial court, and if the record presented is such as to permit decision.” M.O.S. Corp. v. John I. Haas Co., 375 F.2d 614, 617 (9th Cir.1967). In the present case, neither the parties, the district court, nor the three-judge panel of this court considered the sufficiency of the complaint under the antitrust standard the majority sets forth today, nor did any of them consider the presence or absence of disputed facts material to the application of that standard. The first time such concerns were raised was at oral argument before the en banc panel of this court. The raising of the issue prompted the following comments in a letter to the court from Sun-Land’s counsel:
With respect to the comments and inquiries ... as to the sufficiency of certain allegations in the Complaint and whether the Complaint had withstood the summary judgment motion, I would respectfully request that the parties be given an opportunity to submit supplemental briefs on this issue. The sufficiency of Plaintiff’s Complaint was never challenged by the Defendants before the District Court or the 3-Judge Panel of this Court, nor was it raised by either of these tribunals. The comments of the En Banc Panel represent the first occasion that the sufficiency of the allegations of Plaintiff’s Complaint were challenged or placed in issue. Since this question has never been briefed by the parties and came as a complete surprise to me, I would urge the Court to allow the parties to submit supplemental briefs addressed to the issue of whether the allegations of the Complaint are sufficient to plead a prima facie violation of the Sherman Act and withstand a motion for summary judgment on the affirmative defense, that regardless of what is alleged, the challenged conduct is automatically and absolutely exempt from antitrust scrutiny solely because the restraint is contained within a collective bargaining agreement arguably privileged by the construction industry proviso to Section 8(e). Because this issue has not been heretofore raised or addressed, additional briefing may be necessary. (Emphasis in original).
We denied this request by Sun-Land, which merely asks that it be allowed to address at least once the issue that forms the basis for the majority’s decision against it.
In light of the fact that the issues of sufficiency of the complaint and the existence of material issues of disputed fact were not addressed by the court below, have never been argued by the parties, and are unreachable in the present posture of this case, I believe the majority errs in deciding the case on those grounds.
Accordingly, I dissent.

. The district court first held that it had jurisdiction over Sun-Land’s claims. The defendants do not appeal that ruling.

. The "Joint Statement of Uncontroverted Facts and Issues of Law Re Cross-Motions for Summary Judgment" misstates this issue as "Whether or not the subcontracting clauses ... are violative of Section 1 and 2 of the Sherman Act.” (ER 55, 6:14-16) Thus stated, the issue would be a sloppy repetition of the Sherman Act issue stated immediately thereafter (ER 55, 6:17-20). The moving papers and the court’s memorandum make clear that this issue involved whether section 8(e) of the NLRA was violated.

. I am aware that the majority believes there are no disputed facts in this case. For reasons discussed under section II, I disagree.

. I also note that such a generalization is impossible. Different members of the court majority who voted for en banc consideration may have had different reasons for voting to rehear the case. We have no formal mechanism for granting rehearing on specific issues. At most, we may request parties to brief specific issues, and we made no such request in this case. On the contrary, we have denied the appellant leave to brief this very issue, on which the majority bases its decision. See infra.

. The issue was raised below in Sun-Land’s cross-motion for summary judgment. Sun-Land in effect argued that the contract language created a rebuttable presumption of antitrust liability as a matter of law, regardless of whether the language was valid under the construction proviso. Because the defendants had failed to present any evidence that the disputed clause was the least restrictive means of accomplishing the defendants’ legitimate objectives, Sun-Land argued, Sun-Land was entitled to summary judgment. The district court denied Sun-Land's motion, and that denial is not appealed from.

. ER 58, 32:7-38:16 (Plaintiffs Memorandum of Points and Authorities In Support of Cross-Motion for Summary Judgment) ("Defendants have adamantly maintained throughout the entire course of this litigation that ... such restrictions are ipse dixit exempt from antitrust scrutiny under the Sherman Act.”); ER 58, 38:17-44:2 ("Defendants also theorize that ... the instant subcontracting restrictions are automatically exempt from antitrust scrutiny under the Sherman Act.”); ER 59, 9:19-10:14 (Defendants’ Notice of Motion and Motion for Summary Judgment; and Points and Authorities) (”[T]he question this court is asked, is whether the construction industry proviso constitutes an implied exemption to the antitrust laws.”); ER 64, 8:21-16:11 (Plaintiffs Reply Memorandum of Points and Authorities in Support of Cross-Motions for Summary Judgment) (“[I]t is clear that the validity of a particular provision of the Labor Act does not ipse dixit result in its automatic exemption from antitrust scrutiny under the Sherman Act.”); ER 66, 17:1-18:18 (Defendants’ Points and Authorities in Opposition to Plaintiffs Motion for Summary Judgment) ("The Jewel Tea Court could not make more clear that once a restriction falls within the protection of labor law, no more balancing need be done, but that restriction is ‘therefore exempt from the Sherman Act.”’); ER 71A, 6:3-9, 6:22-7:13 (Reporter’s Transcript) (“[E]ven assuming arguendo these provisions were valid under 8(e), ... that doesn’t determine anything."); ER 77, 9:5-16:26 (Second Amended Memorandum of Decision and Order) ("Defendants claim that the Sherman antitrust laws cannot be violated when the provision is valid under the NLRA”).

. The only declaration filed in relation to the motions at all was on the issue of jurisdiction, which is not on appeal here.

. For example, Sun-Land points out that its wages, hours, and working conditions were the same for the new union as they had been when its employees were represented by the Teamsters, suggesting that the subcontracting clause was not related to the legitimate union goals of improving employees' wages, hours, and working conditions. See, e.g., Donald Schriver, Inc. v. NLRB, 635 F.2d 859, 880 (D.C.Cir.1980) ("The only way that workers in the employment pool may be certain to receive the protection and benefits provided by the master contract is if subcontracting is limited to subcontractors who are signatory to that agreement or who provide identical terms.” (emphasis added)), cert. denied, 451 U.S. 976, 101 S.Ct. 2058, 68 L.Ed.2d 357 (1981).