Antitrust Law Daily Wrap Up, ANTITRUST—1st Cir.: Iron worker union avoids antitrust liability in long-running dispute with open shops, (Feb 26, 2016)

By Jeffrey May, J.D.

Nonunionized steel erector companies failed to support their antitrust claims against a teamsters local union for iron workers in eastern Massachusetts, the U.S. Court of Appeals in Boston has ruled. Summary judgment in favor of Labor Union No. 7 of the International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers (Local 7) on claims under Secs. 1 and 2 of the Sherman Act was affirmed. After summary judgment was granted on the antitrust claims, the decade-long case went to trial on the plaintiffs' Labor Management Relations Act (LMRA) claims. A resulting jury verdict in favor of the plaintiffs on those claims and an award of damages for plaintiffs D.F.M. Industries, Inc. and Ajax Construction Company, Inc. were upheld by the appellate court (American Steel Erectors, Inc. v. Local Union No. 7, International Association of Bridge, Structural, Ornamental & Reinforcing Iron Works, February 25, 2016, Howard, J.).

The appellate court explained that, because the plaintiffs' antitrust claim “bobs at the crosscurrents of antitrust liability and labor rights,” the court had to “carefully navigate conflicting statutory directives.” The case involved efforts by Local 7 to preserve jobs for unionized steel erector laborers in structural steel industry. The structural steel industry is comprised of steel fabricators, who manufacture steel products, and steel erectors, who assemble the fabricated steel. General contractors typically solicit bids from fabricators (of which there were around 20 in New England at the time of the dispute). These fabricators then solicit bids for the erection work from approximately 200 steel erectors. At trial on the LMRA claims, the jury found that Local 7 engaged in efforts to shift work from the complaining open shops to unionized erector companies on four particular construction projects. In reviewing the antitrust claims, the court noted these “isolated instances of nonunion erectors being removed from jobs.”

Group boycott. The complaining nonunion steel erectors failed to support their claim of a per se illegal horizontal “group boycott.” The per se rule in the boycott context is limited to horizontal agreements among direct competitors. There was no evidence in the record of a horizontal conspiracy among either the fabricators or the general contractors to shut nonunion erectors out of bidding opportunities, the court concluded. Fabricators' testimony evinced a willingness and desire to work with the nonunion erectors. Also rejected were the plaintiffs' accusations of a horizontal conspiracy among the signatory erectors. The appellate court had already decided in 2008 that wage agreements and a job-targeting program called the Market Recovery Program, which subsidized the bids of unionized contractors applying for certain jobs by paying the difference between union wages and lower wages earned by nonunion workers, were part and parcel of the collective bargaining agreement and were protected from antitrust scrutiny by the nonstatutory exemption. With respect to other challenged conduct, “each company acted as its own profit-maximizing entity pursuant to its own economic interest when seeking to win a fabricator's favor with the lowest erector bid, whether competing against a nonunion firm or another union signatory,” the court decided.

Vertical restraints. Antitrust liability also could not be based on Local 7's alleged vertical arrangements with individual signatory erectors, fabricators, and general contractors. The appellate court would require “a systemic or interlocking set of vertical exclusive dealing agreements with third-party neutrals so as to effectively foreclose the plaintiffs' access to a significant portion of competitive opportunities in the market for structural steel erection” before it would reverse the district court's decision. The plaintiffs could not make a case under the rule of reason where, of the 20 steel fabricators referenced at trial, only four agreed to break subcontracts with DFM and Ajax and retain a union signatory replacement at a higher cost due to the pressure imposed by Local 7. The court pointed out the economic growth of the plaintiffs during the time period as well as other reasons for the concentration of union labor in the market.

Predatory pricing. The court quickly dispensed with the plaintiffs' predatory pricing claim. In light of the plaintiffs’ “skimpy evidence and entangled briefing,” the novel theory that the bids of signatory erectors on particular private projects were below-cost, predatory bids offset by supracompetitive prices enabled by the Davis-Bacon Act's prevailing wage mechanism, and the artificial inflation of the local prevailing wage rate was considered waived. “If the plaintiffs wish to cut a bold new path through antitrust law with a seemingly unique claim, they must show us the way,” the court concluded.

The case is Nos. 13-1531, 13-1665, 13-1705, 13-1714.

Attorneys: Michael E. Avakian (Wimberly Lawson & Avakian), Geoffrey Robbins Bok (Stoneman Chandler & Miller LLP), and Thomas M. Triplett (Schwabe, Williamson & Wyatt) for American Steel Erectors, Inc., Ajax Construction Co., Inc., American Aerial Services, Inc. and Bedford Ironworks, Inc. Jasper Jacob Groner (Segal Roitman LLP) for Local Union, No. 7.

Companies: American Steel Erectors, Inc.; Ajax Construction Co., Inc.; D.F.M. Industries, Inc.; Local Union No. 7, Int'l Ass'n of Bridge, Structural, Ornamental & Reinforcing Iron Workers

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