Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Non-statutory labor exemption bars claims against trade association, (Jul 30, 2024)

By Martin A. Steinberg, J.D.

Electrical line repair company accused apprenticeship committee of violating the Sherman Act by suspending it from the program.

The federal district court in Flint, Michigan denied a motion for preliminary injunction in an antitrust case filed by an electrical line repair service alleging several unions and trade consortiums enacted anticompetitive standards and unreasonably restrained interstate commerce. State Line Construction and Maintenance, LLC alleged that American Line Builders Chapter NECA, Local Union No. 17 IBEW, American Line Builders Joint Apprenticeship and Training Committee (ALBAT), and several individuals associated with ALBAT conspired to use ALBAT’s exclusive power over apprentices to eliminate State Line as a competitor via ALBAT’s suspension of State Line. The court denied the injunction because State Line was unlikely to prevail on the merits because the non-statutory labor exemption barred the Sherman Act claims (State Line Construction and Maintenance, LLC v. American Line Builders Chapter NECA, No. 4:24-cv-11047-FKB-DRG (E.D. Mich. July 29, 2024)).

State Line, a certified minority business, contracts to provide overhead electrical line repair services to non-party DTE Energy, Inc. State Line has been in operation for 15 years and had, until recently, built a thriving business despite intense competition with other established line contractors. American Line Builders Chapter, NECA (Association), is a trade consortium of about 50 overhead line contractors, including many of State Line’s direct competitors. Because State Line is not a member of Association it does not pay Association fees, which are substantial. In addition to annual dues, Association imposes fees based on a percentage of each member’s payroll.

Local 17, IBEW is a local union that represents overhead line workers in southeast Michigan and is part of non-party International Brotherhood of Electricians (IBEW). State Line is a union employer, but State Line did not negotiate the collective bargaining agreement (the CBA) with Local 17. Instead, the CBA was negotiated between Local 17 and Association. To obtain union line workers, State Line signed a Letter of Assent binding it to the terms of the CBA.

Apprentice program. The CBA refers to a separate Training Agreement that governs the employment of apprentices. The Training Agreement is between the national IBEW and the Association and is also signed by the local unions, including IBEW Local 17. This agreement established the Area Joint Apprenticeship and Training Committee (AJATC) to be responsible for “all matters of apprenticeship and training.” The AJATC exists as ALBAT and is responsible to establish an apprenticeship training program and “supervise all matters involving apprenticeship and training.” Its Board of Trustees consists of four members representing employers and four members representing the 4th and 6th IBEW Districts. ALBAT is also an employee welfare benefit fund under ERISA.

Employers who sign the CBA have the option of employing ALBAT apprentices. However, these employers, such as State Line, can only hire apprentices through ALBAT. The Standards require employers to provide safe conditions of employment for apprentices. These requirements of employing apprentices who need supervision and training are offset by apprentices’ lower hourly wages.

According to ALBAT, State Line chose to employ apprentices but failed to meet the necessary standards for their employment. ALBAT points to an arc flash incident in March 2024 at State Line’s jobsite where a wire dropped and emitted an electrical discharge, which could have been fatal. This resulted in ALBAT temporarily withdrawing its apprentices from State Line on March 20, 2024. ALBAT stated that it would reconsider the suspension of apprentice placements on or about July 1 depending on State Line making any progress addressing apprenticeship safety.

Claims. State Line brought two claims under the Sherman Antitrust Act. Count I asserted a violation of § 1 of the Sherman Act resulting from ALBAT controlling the supply of apprentice line works in Michigan, that their standards are anticompetitive and unreasonably restrain interstate commerce because union contractors, like State Line, cannot obtain apprentice line works from any other source. According to the complaint, ALBAT and the other Defendants conspired to use ALBAT’s exclusive power over apprentices to eliminate State Line as a competitor via ALBAT’s suspension of State Line. Count II asserted a claim for violation of § 2 of the Sherman Act, alleging that ALBAT has an illegal monopoly on the supply of apprentice line worker labor. The complaint further raised a civil conspiracy claim and a tortious interference claim.

Likelihood of success on the merits. Because the non-statutory labor exemption bars Plaintiffs’ antitrust claims State Line is unlikely to succeed on the merits of this claim. The statutory labor dispute exemption applies to conduct arising (1) out of the actions of a labor organization undertaken (2) during a labor dispute, (3) unilaterally, and (4) out of the self-interest of the labor organization. Confederacion Hipica de Puerto Rico v. Confederacion de Jinetes Puertorriquenos, 30 F.4th 306, 313 (1st Cir. 2022).

The court did not need to determine whether ALBAT qualified as a “labor organization” for purposes of the statutory exemption because, regardless of whether the statutory exemption applies, the non-statutory exemption was applicable and barred Plaintiffs’ antitrust claims. The non-statutory exemption for labor-employer agreements is an accommodation of the Sherman Act to the policy of national labor laws and any anti-competitive effect of a properly bargained CBA is excluded from antitrust scrutiny.

The Training Agreement was created through the bargaining process along with the CBA, which the Training Agreement referenced and required the application of the Standards. Thus the court found that the effects of the Training Agreement satisfied the Mackey test: the restraint on trade caused by the Training Agreement primarily affected the parties to the CBA; the Training Agreement concerned mandatory subjects of collective bargaining; and the Training Agreement was the product of bona fide arm’s length bargaining. See Mackey v. National Football League, 543 F.2d 606 (8th Cir. 1976). Moreover, given this conclusion, the court did not need to address the other merits-based arguments raised by the parties.

Irreparable Harm. State Line contended that it has been put out of business by ALBAT’s actions. When DTE suspended State Line’s contract, State Line was forced to shut down its overhead line business and lay off workers because DTE accounted for 98% of State Line’s revenues. Absent an injunction, State Line asserted that it will be irreparably harmed. Because the court had found no likelihood of success on the merits, an injunction is unwarranted, regardless of the showing made on the other factors.

It is also within the court’s discretion to determine whether a delay in seeking injunctive relief was unreasonable, and thus weighs against a finding of irreparable harm. Though not all delays in seeking injunctive relief are unreasonable. Plaintiffs claimed that DTE almost immediately suspended their contract on learning of ALBAT’s actions, which occurred on March 20, 2024. Plaintiffs filed suit a full month later and did not file their motion for preliminary injunction until three weeks after suit was filed. Further, Plaintiffs did not seek an ex parte temporary restraining order or designated their motion as an emergency. Given the short time frame in which ALBAT indicated it would review this matter on July 1, 2024, Plaintiffs’ failure to take any action for seven weeks undermined its claim of irreparable harm.

Harm to others and the public interest. For the sake of completeness, even though the court had concluded that State Line was not likely to success on the merits of their antitrust claims, the court noted that the harm to ALBAT and the public interest favored denying the motion for preliminary injunction because promoting worker safety is in ALBAT’s interest and in the public interest.

The Case is No. 4:24-cv-11047-FKB-DRG.

Judge: Behm, F.

Attorneys: Anthony Adams (Marine Adams Law PC) for State Line Construction and Maintenance LLC and Ernest Coger. Christopher M. Wolcott (Taft Stettinius & Hollister LLP) for American Line Builders Chapter NECA. George H. Kruszewski (Watkins, Pawlick, Calati and Prifti, PC) for Local Union No. 17 IBEW.

Companies: State Line Construction and Maintenance LLC; American Line Builders Chapter NECA; Local Union No. 17 IBEW

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