Court Opinion

ID: 8914662
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:30:34.833511+00
Date Added: 2024-06-11T17:08:52.020375
License: Public Domain

SLOVITER, Circuit Judge,
dissenting.
My difference with the majority is narrow but fundamental. I agree with the majority that the precedent of Connell Construction Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975), Consolidated Express, Inc. v. New York Shipping Association, Inc., 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), and Muko I compels the conclusion that “once it is ascertained that union activity falls outside the protection of the labor exemption, a court must apply traditional antitrust principles in determining whether the activity in question violates the antitrust laws.” Typescript op. at 11. I disagree with the majority that the application of traditional antitrust principles to the agreement found by the jury in this case supports the trial court’s instruction to the jury that the rule of reason rather than the per se standard must be applied.
Although the parties disagree on the inferences to be drawn from the evidence, the jury could have found that at the meeting on November 1, 1973, representatives of Silver’s and the Trades Councils reached an agreement, the substance of which was reflected in the letter sent by Silver’s Vice-President within a week thereafter, that Silver’s would use only union contractors certified by the Trades Councils in the con*435struction of the Silver’s restaurants. Interrogatory 1 to the jury asked “Did Long John Silver’s and the Trades Councils enter into an agreement or combination to refuse to grant construction contracts to non-union builders, including Muko?” (emphasis added). It replied in the affirmative. Thereafter, by its reply to Interrogatory 2, the jury found that the effect of the agreement between Silver’s and the Trades Councils was to impose a restraint on free competition “beyond that which would follow from the elimination of competition based on wage rates and working conditions.” In other words, the defendants entered into an agreement, and that agreement fell outside the nonstatutory labor exemption.
The majority gives four reasons for its unwillingness to apply the per se standard usually applicable to concerted refusals to deal: (1) “neither Silver’s nor the Trades Councils was in competition with each other or with Muko,” and no evidence suggests that either defendant wished, through their concerted action, to gain an advantage over Muko in an economic or competitive sense; (2) “the ‘refusal to deal’ in this ease involved only one relatively small buyer: Silver’s”, rather than the imposition of a “widespread restraint of trade”; (3) “the agreement did not have the necessary effect of destroying Muko’s business,” since his profits increased during the time in question and Silver’s might have permitted Muko to construct future restaurants if Muko employed union labor; and (4) “pro-competitive effects were demonstrated” because Silver’s gained a position in the otherwise crowded Pittsburgh-area fast food market. At 432. I believe the grounds on which the majority bases its decision are either factually erroneous or legally irrelevant. Those grounds will be considered seriatim.
(1) The principal reason relied upon by the majority, both in its legal analysis and in its application of the legal principles to the case at hand, is its view that “this is not a case in which one competitor, through concerted action with a supplier or customer, attempts to cut another, horizontal competitor out of the marketplace.” In the same paragraph, the majority enunciates its conclusion that there was no anticompeti-tive intent underlying the agreement. Thus, the majority states, Silver’s “goal” was not to affect Muko’s business but “to retain the goodwill of its customers in a new market”; the Councils’ “goal was to ensure payment of the prevailing union wage”. Neither defendant was, according to the majority, “in competition ... with Muko” and neither sought “to gain an advantage over Muko in an economic or competitive sense.” At 432 (emphasis in original).
The legal and factual flaws underlying the majority’s analysis are numerous. It is of no small significance that in dealing with the definition of a “boycott”, as that term is used in the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. (1976), the Supreme Court rejected the contention that “boycott” embraces “only those combinations which target competitors of the boycotters as the ultimate objects of a concerted refusal to deal.” St. Paul Fire & Marine Insurance Co. v. Barry, 438 U.S. 531, 542, 98 S.Ct. 2923, 2930, 57 L.Ed.2d 932 (1978) (emphasis in original). The Court noted instead:
As the labor-boycott cases illustrate, the boycotters and the ultimate target need not be in a competitive relationship with each other. This Court also has held unlawful, concerted refusals to deal in cases where the target is a customer of some or all of the conspirators who is being denied access to desired goods or services because of a refusal to accede to particular terms set by some or all of the sellers. See, e.g., Paramount Famous Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 75 L.Ed. 145 (1930); United States v. First Nat. Pictures, Inc., 282 U.S. 44, 51 S.Ct. 45, 75 L.Ed. 151 (1930); Binderup v. Pathe Exchange, 263 U.S. 291, 44 S.Ct. 96, 68 L.Ed. 308 (1923). See also Anderson v. Shipowners Assn., 272 U.S. 359, 47 S.Ct. 125, 71 L.Ed. 298 (1926). As the Court put it in Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 214, 71 S.Ct. 259, 261, 95 L.Ed. 219 (1951), “the Sherman Act makes it an offense for *436[businessmen] to agree among themselves to stop selling to particular customers.”
Id. at 543-44, 98 S.Ct. at 2930-31 (footnote omitted). Although the majority states that in the St. Paul case, “the Court did intimate that it was willing to distinguish between those boycotts that were unreasonable per se and those that were not”, at 430, I would not be comfortable with that reading of the case in light of the Supreme Court’s express disclaimer of any such intimation. After referring to the attempt by commentators to define those boycotts to which the per se approach should be limited, the Court stated, “We express no opinion, however, as to the merit of any of these definitions.” Id. at 542 n.14, 98 S.Ct. at 2930 n.14. Its express rejection of a limitation of the boycott definition to those agreements that target competitors undercuts the legal foundation upon which the majority opinion is constructed.
Even if use of a per se analysis is justified, as the majority suggests, only when there is some competitive impact, the majority’s failure to recognize such an impact stems from a somewhat naive perception of the marketplace in which this agreement was wrought. The Trades Councils are representatives of union labor; Muko, a nonunion contractor, must be viewed as the representative of non-union labor. Thus the parties represent two strong competitive forces in the Pittsburgh area construction industry. If the Trades Councils succeed in their effort to limit the construction work available to firms using non-union labor, the union workers will have gained a competitive advantage over the non-union workers. This is an economic conflict in the most basic sense.
Because the true antagonists are workers, not businesses, “strong labor policy favor[s] the association of employees to eliminate competition over wages and working conditions.” Connell Construction Co. v. Plumbers & Steamfitters Local 100, 421 U.S. at 622, 95 S.Ct. at 1835. Notwithstanding the actual or potential anticompetitive effects that flow from such agreements, the non-statutory labor exemption from the antitrust laws which is applied even to union-employer agreements is founded on the recognition that “labor policy requires tolerance for the lessening of business competition based on differences in wages and working conditions.” Id. But once the agreement has effects which extend beyond the lessening of business competition based on differences in wages and working conditions, we are compelled to apply traditional antitrust analysis.
Significantly, the unions in this case did not use the customary method by which organized labor attempts to effectuate its goals regarding wage rates and working conditions, which would have been to seek to organize Muko’s employees. Instead, for reasons which do not appear on the record, the unions circumvented that route and confined themselves to pressuring Silver’s not to do business with Muko merely because Muko employed their competitors, the non-union workers. It is because this effort had an effect, as the jury found, beyond that on wages and working conditions, that the Trades Council — Silver’s agreement goes beyond the recognized labor protection. As such, it is indistinguishable from similar agreements which have been placed in the per se category.
As we pointed out in Consolidated Express, defendants cannot avoid per se illegality merely because they had no anticom-petitive intent. We stated there, in rejecting the relevance of the factor of “goal” on which the majority here relies, “A showing of a specific intent to harm one’s competitors or restrain competition need not be shown.” 602 F.2d at 523. In effect, the majority’s use of the “goal” of the Trades Councils “to ensure payment of the prevailing union wage” as a reason for the application of the rule of reason standard is simply another way of saying that special consideration should be given to this agreement because it involved union activity. This is inconsistent with the majority’s own recognition that traditional antitrust principles must apply once the nonstatutory labor exemption is found to be inapplicable, and is inconsistent with this court’s holding in *437Consolidated Express, Inc. v. New York Shipping Association, Inc., 602 F.2d 494, and the Supreme Court’s holding in Connell Construction Co. v. Plumbers & Steamfitters Local 100, supra.
Further, the majority misperceives the thrust of the recent efforts to define more precisely the type of concerted refusals to deal with warrant per se treatment. It is true, as the majority suggests, that there is some resistance to application of a per se standard to all refusals to deal. But the leading academic commentators agree that a classic boycott, one which entails exclusionary conduct for economic benefit, merits per se treatment. See, e.g., L. Sullivan, Handbook of the Law of Antitrust 256 (1977); 3 P. Areeda & D. Turner, Antitrust Law H 836, at 351-52 (1978). What could be more exclusionary or fit more into the mold of a classic boycott than an agreement to exclude another firm (Muko and other nonunion contractors) from a market (construction of Silver’s restaurants) because it does not use union labor?
To be sure, it has not always been easy for the courts to apply the per se rule when the conduct itself could be considered to have a redeeming value. Thus, one might justify concerted refusals to deal when the effort is to eliminate design piracy, to prevent production of inferior work and insure ethical behavior, or to insure that potentially dangerous products are safe, useful and durable. But when met with each such rationale, the Supreme Court held that such potential justification does not warrant consideration of the combination by any standard less than the per se one applicable to concerted refusals to deal. See Fashion Originators’ Guild of America, Inc. v. FTC, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941); National Society of Professional Engineers v. United States, 435 U.S. 679, 38 S.Ct. 242, 244 L.Ed. 683 (1978);1 Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961) (per curiam).
There has been a recent group of cases, primarily those in connection with professional sports, where the courts have recognized that the necessity of combined action makes the field inappropriate for per se treatment. Obviously, if two clubs do’not agree to be at the same field at the same time, to the exclusion of their competitors, there would hardly be a game in town. Other forms of combination within sports leagues are equally difficult, to fit into the traditional antitrust analysis. See, e.g., Mo-linas v. National Basketball Association, 190 F.Supp. 241, 243-44 (S.D.N.Y.1961). Antitrust professors delight in pushing their students to the outer limit of analysis by posing hypothetical (and some not-so-hypothetical) situations in which consumer boycotts are organized against grape growers, non-ERA states, or racial discriminators to test if the students are willing to apply a laxer antitrust standard in these situations than when businesses combine to refuse to deal with other businesses. Whatever the merits of making a distinction along these lines, it has no application in the present situation. Indeed, in the case of the type of agreement at issue here, akin to a hot cargo agreement, Congress has already determined its lack of redeeming value since, in the labor context, such an agreement is ordinarily banned. See NLRA § 8(e); Consolidated Express, Inc. v. New York Shipping Association, Inc., 602 F.2d at 524. Thus I disagree with both the majority’s restrictive interpretation of the scope of the per se standard in antitrust cases and its failure to apply what have heretofore been traditional antitrust principles to combinations of labor and business which go far beyond labor’s recognized exemption.
(2) The majority’s second reason for applying the rule of reason here focuses on “the limited nature of the restraint” which “involved only one relatively small buyer: Silver’s.” The facts in this case simply do not fit into the majority’s view of a single *438seller, a single buyer, and a single transaction. Arrayed on one side of the agreement were the Trades Councils representing all of the construction unions in six Pennsylvania counties, Allegheny County and the five surrounding counties. On the other side of the agreement was Silver’s, which as of the trial date had constructed nineteen additional restaurants in the Western Pennsylvania area. At stake in the agreement was the considerable business represented by this construction, hardly similar to the single transaction to which we referred in Sitkin Smelting & Refining Co. v. FMC Corp., 575 F.2d 440 (3d Cir.), cert. denied, 439 U.S. 866, 99 S.Ct. 191, 58 L.Ed.2d 176 (1978), cited by the majority. In Sitkin, which did not involve a classic agreement not to deal, the agreement found by the jury was one involving a sham bidding scheme for one transaction, the sale of scrap of a building damaged by a hurricane. That agreement did not fall within one of the categories which the Supreme Court has held must be construed under the per se standard and was therefore one to be evaluated under the rule of reason standard.
In this case, on the contrary, the restraint of trade was not “limited”, as the majority suggests, but was found by the jury to be directed to “non-union builders, including Muko” who were the object of the agreement not to deal. Thus, this case must be viewed in a light far different from that seen by the majority, even were we free to gloss over the precedent of Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959), where the Court stated of a concerted refusal to deal,
[I]t is not to be tolerated merely because the victim is just one merchant whose business is so small that his destruction makes little difference to the economy. Monopoly can as surely thrive by the elimination of such small businessmen, one at a time, as it can by driving them out in large groups.
Id. at 213, 79 S.Ct. at 710 (footnote omitted).
Further, the majority’s apparent view that per se analysis is inappropriate because only one “relatively small buyer” was involved is inconsistent with this court’s opinion in Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164 (3d Cir. 1979), also authored by Judge Adams, where we held that a manufacturer’s withdrawal of its line of kitchen cabinets from the plaintiff dealer at the instigation of a competitor stated a per se violation of the antitrust laws. In Cernuto there was no “widespread restraint of trade;” indeed we recognized that the impact may solely have been in the market for that manufacturer’s cabinets, rather than in the general market for kitchen cabinets. Id. at 166. Nonetheless, we rejected the contention that the rule of reason should be applied.
The jury’s affirmative response to Interrogatory 1 reflects its finding that there was an agreement between Silver’s and the Trades Councils. In Muko I we suggested how such an agreement should be viewed when we stated, in rejecting the defendants’ contention that the evidence failed to support an antitrust claim,
A factfinder could have found an agreement to exclude nonunion contractors from the Silver’s construction market, a significant interstate market consisting of twelve construction projects. The premise of both the majority and minority opinions in Connell is that absent an exemption such an agreement may be the basis of a federal antitrust claim. 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.
609 F.2d at 1376 (emphasis added). Once the jury found “a concerted refusal to deal with a class of contractors of which Muko is a member”, it follows, as we previously recognized, that the agreement must be characterized as a group boycott and is one to which the per se rule applies.
*439(3) The third ground relied upon by the majority, that “the agreement did not have the necessary effect of destroying Muko’s business”, is legally irrelevant. The entire purpose of utilization of a per se rule is to avoid the necessity by plaintiffs to show the anticompetitive effects of the conspiracy. See Cernuto, Inc. v. United Cabinet Corp., 595 F.2d at 166. The thrust of the inquiry must be directed to whether the agreement is one which falls within the category of agreements classified as per se, not whether anticompetitive effects have been shown in the specific case. As we stated in Consolidated Express, Inc. v. New York Shipping Association, Inc., 602 F.2d at 523,
If a per se violation has been established, the court will already have found that “the nature and necessary effect” of the challenged conduct is “plainly anticom-petitive.” National Society of Professional Eng’rs v. United States, 435 U.S. at 690, 98 S.Ct. at 1364 (emphasis added). Once that fact has been established, all that need be shown is that the charged anticompetitive acts were in fact performed by the defendant.
If application of the per se standard were to be limited to those cases in which plaintiffs have shown the anticompetitive effects of the conspiracy, there would be no need to establish any per se rule. The extent of injury, if any, suffered by Muko is evidence directed to the amount of damages to which he would be entitled rather than to the standard by which the conduct should be judged. The “necessary effect” of the agreement found by the jury, which was to exclude Muko and other non-union contractors from the construction of Silver’s restaurants, is inevitably exclusionary. It thus falls within the category of “agreements whose nature and necessary effect are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality — they are ‘illegal per se.’ ” National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978).
(4) The final ground relied upon by the majority, that “procompetitive effects were demonstrated” because Silver’s gained a position in the otherwise crowded Pittsburgh-area fast food market, also cannot withstand analysis. The self-interest of Silver’s, in avoiding union pickets and displeasure, is hardly synonymous with a “procompetitive effect”. Even if there were evidence of such an effect, antitrust cases have always rejected the premise that a procompetitive effect in one market will excuse an anti-competitive effect in another. See, e.g., United States v. Topco Associates, Inc., 405 U.S. 596, 609-11, 92 S.Ct. 1126, 1134-35, 31 L.Ed.2d 515 (1972); United States v. Philadelphia National Bank, 374 U.S. 321, 370, 83 S.Ct. 1715, 1745, 10 L.Ed.2d 915 (1963). During the almost 100 years of antitrust enforcement in this country, antitrust defendants have often sought to rationalize their conduct either on the ground that some benign and beneficent purpose is served or on the ground that competition, rather than being hurt, is enhanced. In the rare instances where the latter ground has been accepted as the basis for placing a class of agreements into the rule of reason category, the courts have not looked to whether the individual self-interest of one of the parties to the agreement would be served, as the majority does in this case, but to whether the competition that may flow from such agreements in general warrants a judgment that they could have economic utility. See Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 54-59, 97 S.Ct. 2549, 2559-2562, 53 L.Ed.2d 568 (1977). In contrast, the majority has proffered no legally cognizable basis for application of the rule of reason to an agreement not to use non-union contractors.
Since I believe none of the reasons given by the majority to support the use of a rule of reason standard when unions conspire with business to exclude a non-union firm from the market withstands analysis, I conclude that the underlying rationale for the majority’s approach must stem from its discomfort with the application of traditional antitrust rules in the labor context. Judge Adams candidly set forth his concern in his concurring opinion in Muko I, 609 F.2d at 1376-77. While there may be some merit in *440that position, it is, as Judge Adams recognized, one which we, as an inferior court, are not free to take in light of the Supreme Court’s decision in Connell. Further, were we free to examine the issue anew, I have grave question whether the extension of labor’s exemption from the antitrust laws should be accomplished by the courts or whether it should not be left to Congress.
For the aforesaid reasons, I would reverse the judgment of the district court, and remand for retrial so that the jury may apply a per se standard to the concerted refusal to deal which it already found existed and which it found extended beyond labor’s nonstatutory exemption from the antitrust laws.

. Although the majority characterizes the Professional Engineers case as one decided under the rule of reason, the Supreme Court itself in Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647, 100 S.Ct. 1925, 1927, 64 L.Ed.2d 580 (1980) (per curiam), included that case among those applying a per se rule.