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Tri-Gen Inc. v. International Union of Operating Engineers

January 18, 2006

TRI-GEN INCORPORATED, DOING BUSINESS AS GENERAL DRILLING, INCORPORATED, PLAINTIFF-APPELLANT,
v.
INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 150, AFL-CIO, WILLIAM E. DUGAN, AND KEVIN TROGLIO, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 03 C 9-Allen Sharp, Judge.

The opinion of the court was delivered by: Bauer, Circuit Judge.

ARGUED SEPTEMBER 27, 2005

Before FLAUM, Chief Judge, and BAUER and SYKES, Circuit Judges.

Tri-Gen Incorporated ("General Drilling") sued International Union of Operating Engineers, Local 150, AFL-CIO ("Local 150") in district court for federal labor and antitrust violations. Local 150 moved for dismissal and summary judgment on all counts. The district court ruled in favor of Local 150 and entered judgment as a matter of law. We affirm.

I. Background

General Drilling is a non-union company that owns large drill rigs and drills blast holes for limestone quarries in Indiana, Kentucky, Tennessee, and Illinois. Drilling blast holes is the first step in the process of mining limestone from a quarry. The following people hold high-ranking positions at General Drilling: William Boatman is president, David Keil is a director, and Catherine Diehr is secretary, controller, and treasurer. Chicago companies, such as Raimonde Drilling (Raimonde), Ludwig Explosives (Ludwig), Callahan & Schoe, and Lambert Drilling also subcontract to drill blast holes. These four are known collectively as "the Chicago union drillers." A Wisconsin driller, Finn Drill, also competes with General Drilling and the Chicago union drillers for drilling work.

Local 150 is a labor organization that represents employees in the material production industry in northwest Indiana, northern Illinois, and northeast Iowa. The Northern Illinois Material Producers Agreement ("NIMPA") is a multi-employer association collective bargaining agreement between material producers and Local 150. All of the Chicago union drillers and Finn Drill are signatories to the NIMPA. Unlike its competitors, General Drilling has not signed the NIMPA. Kevin Troglio serves as the agent for Local 150 members employed by Raimonde, Ludwig, Callihan & Schoe, and Finn Drill. He is authorized to represent any Local 150 member employed by a signatory contractor if that contractor performs work in his jurisdiction.

Quarry owners in northwest Indiana include Vulcan Materials (Vulcan), Prairie Materials (Prairie), Northern Indiana Materials Company (Northern Indiana), and Material Service. Material Service has operated quarries in northwest Indiana since approximately 2000, when it purchased three quarries. The following people serve in high-ranking positions for Material Service: David Olson is senior vice president of operations, Michael Bernardi is vice president for human resources and administration, Scott Jorns is manager of drilling and blasting, and Rick McElfresh is a superintendent.

Material Service does its own drilling at its quarries in northeast Illinois, but not at its northwest Indiana quarries. When Material Service originally purchased the Indiana quarries, General Drilling was doing the drill work. After the purchase, Material Service decided to continue using General Drilling as the contract driller for the quarries because, under Boatman's leadership, General Drilling had performed satisfactory work. Material Service is a signatory to the NIMPA. Material Service also had a separate collective bargaining agreement with Local 681, International Union of Laborers (Laborers) for its employees who do drilling work.

In 1996, Troglio met with General Drilling officials Boatman, Diehr, and Keil to discuss the company's drill work at quarries near Manteno, Illinois, owned by Vulcan and Prairie. Troglio stated that he wanted General Drilling to "be Union or be out" of Illinois. He also stated that General Drilling was not paying the prevailing area wage. Boatman disagreed. Troglio also stated that he was "under pressure" from the Chicago union drillers. Shortly thereafter, General Drilling decided to relinquish its drilling work in Illinois. After General Drilling left, Ludwig took over the work at the Manteno quarries.

On March 29, 2002, Local 150 sent a letter to General Drilling claiming that General Drilling was engaged in the construction industry and was paying wages below those established in the area by Local 150. Local 150 also threatened pickets to advertise to the public the inadequate wages. After receiving the letter, General Drilling officials met with Troglio on two occasions in the spring of 2002 to discuss the company's operations in northwest Indiana. General Drilling secretly recorded the two meetings. At the time, General Drilling was drilling blast holes on a subcon-tract basis at quarries throughout Indiana at quarries owned by Vulcan, Northern Indiana, and Material Service. Again, Troglio voiced his concern that General Drilling was not paying the area wage according to the NIMPA and was not "on the same playing field as those people within our jurisdiction." General Drilling was reluctant to sign the NIMPA because it would have, as Diehr testified, "hugely" increased General Drilling's labor costs. Boatman for his part argued that General Drilling paid its employees more in wages and benefits than quarry employees who do drill work. Again, there was talk of pressure from the Chicago union drillers.

Troglio faxed a copy of the March 29th letter to Material Service, with the added note: "Please review and any support would be appreciated. Any questions please call." After receiving the letter, Olson and Bernardi decided to develop a plan in case it became necessary to terminate General Drilling. Olson instructed Jorns "to put a Plan B together" to solicit bids from alternate drillers. All involved Material Service officials testified that they developed the Plan B because they wanted to avoid interference with Material Service's production and sales. Initially, Jorns selected two drillers, Ludwig and Raimonde, as possible replacements and received bids from them. Jorns approved Ludwig, the lower bidder, as the replacement on June 27, 2002. Material Service officials testified that Troglio was not involved in the development of Plan B or in the selection of the alternate driller.

Troglio met with Material Service employees twice, once in May or June and again in June or July of 2002. At those meetings, he explained his intention to start organizing against General Drilling and informed them of the pos- sible picket. He also educated them of their rights to cross the picket line. On July 16, 2002, Troglio received final authorization for the picket.

In August, McElfresh suggested to Boatman that he lease his equipment to a new driller so that the work could continue uninterrupted. After Boatman told him that he would be contacted, Finn Drill's president, Pat Garvin, called McElfresh to schedule an appointment to view the facility. Boatman had worked out a deal with Finn Drill whereby the same equipment and personnel could operate at the quarry under the Finn Drill name. Garvin toured the quarry on August 14, 2002, and later that week came in with the lowest bid. Finn Drill bid at $1.75 per foot, the same rate that Material Service had paid to General Drilling.

On August 15, 2002, Troglio sent a second letter to Material Service describing its labor dispute with General Drilling and notifying it of a possible common situs picket. Attached to this letter was a list of some Chicago union drillers. Both Ludwig, Jorns' original alternate driller, and Finn Drill, the ultimate replacement, were on the list. Troglio testified that he sent the list to quarry owners that requested information about possible union drillers.

On August 23, 2002, Local 150 picketed the Babcock quarry in Rennselaer while General Drilling was working there. Local 150 displayed a notice mentioning General Drilling's substandard wages and benefits. That same day Material Service terminated General Drilling and replaced it with Finn Drill. Material Service officials testified that, had it not been for these pickets, General Drilling would still be drilling for the company. Material Service twice invited General Drilling back to drill at its quarries, in the spring and fall of 2003. General Drilling continues to work in northwest Indiana, at the Vulcan and Northern Indiana quarries, and to solicit business in northwest Indiana.

General Drilling sued Local 150, alleging that: (1) Local 150 conspired to restrain trade in violation of the Sherman Act; and (2) Local 150 engaged in unlawful picketing against General Drilling and Material Service in violation of Section 303 of the Labor Management Relations Act (LMRA). Defendants moved to dismiss and for summary judgment on all counts. The district court ruled in favor of defendants on January 18, 2005, and plaintiff appealed.

II. Discussion

The district court considered defendants' motions to dismiss and for summary judgment together, and did not clarify which motion it granted in defendants' favor. Where, however, matters outside the pleadings were presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all materials made pertinent to such a motion by Rule 56.

Fed. R. Civ. P. 12(b). Adequate notice is provided when the moving party frames its motion in the alternative as one for summary judgment. See, e.g., Groden v. Random House, Inc., 61 F.3d 1045, 1053 (2d Cir. 1995); Madewell v. Downs, 68 F.3d 1030, 1048 (8th Cir. 1995); Ninth Ave. Remedial Group v. Allis-Chalmers Corp., 195 B.R. 716, 722 (N.D. Ind. 1996). Here, Local 150 filed both a motion to dismiss and a motion for summary judgment. Accordingly, both parties argued on appeal under the summary standard.

We review the district court's grant of summary judgment de novo. R.J. Corman Derailment Servs., LLC v. Int'l Union of Operating Engineers, Local 150, 422 F.3d 522, 525 (7th Cir. 2005). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The court must view the evidence, and draw all reasonable inferences therefrom, in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970); Landgrebe Motor Transp., Inc. v. District 72, Int'l Assoc. of Machinists, 763 F.2d 241, 244 (7th Cir. 1985). The party that bears the burden of proof on a particular issue cannot rest its case on the pleadings, but must demonstrate by specific factual allegations that there is a genuine issue of material fact that requires a trial. Celotex, 477 U.S. at 324. The plaintiff gets the benefit of the doubt "only if the record contains competent evidence on both sides of a factual question." Patel v. Allstate Ins. Co., 105 F.3d 365, 367 (7th Cir. 1997). If the plaintiff's evidence is "merely colorable" or "not significantly probative," then there is no genuine issue for trial and summary judgment is appropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986).

A. Antitrust Claim

In its complaint, General Drilling asserted that Local 150 violated section 1 of the Sherman Act, 15 U.S.C. § 1, because it entered into schemes, understandings or conspiracies with one or more of General Drilling's union competitors to suppress price competition by forcing General Drilling's customers to terminate, and cease hiring, General Drilling so that one or more of the union drillers might get the business. Material Service was coerced into effectuating the conspiracy.

Section 1 prohibits concerted anticompetitive activities, including conspiracies, designed to restrain trade unreasonably. Vakharia v. Swedish Covenant Hosp., 190 F.3d 799, 810 (7th Cir. 1999). The Sherman Act "was enacted to assure customers the benefits of price competition, and . . . protect[ ] the economic freedom of participants in the relevant market." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 538 (1983). Section 4 of the Clayton Act defines the class of persons who may bring a private suit to enforce the Sherman Act, providing a treble damages remedy to "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws. . . ."

15 U.S.C. § 15.

The district court's grant of summary judgment in favor of Local 150 on the Sherman Act claims was based on the following findings: (1) General Drilling could not establish antitrust standing; (2) General Drilling fell short of demonstrating a per se unreasonable restraint of trade; (3) Local 150 was entitled to the protection of the statutory exemption to the antitrust laws; and (4) General Drilling did not sufficiently establish that Local 150 entered into a conspiracy to achieve an unlawful purpose. We review the summary judgment ruling de novo to determine whether a genuine issue of material fact existed. To survive a defendant's motion for summary judgment, a plaintiff must present sufficient evidence to show the existence of each element of its case on which it will bear the burden at trial. Serfecz v. Jewel Food Stores, 67 F.3d 591, 596 (7th Cir. 1995).

1. Antitrust Standing

In order to bring an antitrust claim, a plaintiff must establish that it has antitrust standing; that is, that its claimed injuries are "of the type the antitrust laws were intended to prevent" and "reflect the anticompetitive effect of either the violation or of anticompetitive acts made possible by the violation." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). General Drilling's complaint alleged that Local 150 "repeatedly sought to suppress price competition by coercing General Drilling not to do business in a given area." In moving for summary judgment Local 150 argued that General Drilling did not have antitrust standing. In its brief opposing summary judgment, instead of affirmatively asserting its standing, General Drilling dismissed the standing argument with a footnote stating that the cases cited by Local 150 do not have "any applicability to the case at bar."

In most instances, a plaintiff must demonstrate consumer injury to have standing to assert antitrust violations. Wigod v. Chi. Mercantile Exch., 981 F.2d 1510, 1515 (7th Cir. 1992). In this case, the quarry owner Material Service was the consumer of the drilling services provided by General Drilling and the Chicago union drillers. Material Service, however, is not bringing this suit; General Drilling is. General Drilling claims that it suffered an antitrust injury as a competitor in the drilling services industry when Local 150 and the Chicago union drillers conspired to force Material Service to terminate General Drilling. Because the parties do not dispute that Material Service terminated General Drilling, General Drilling plainly suffered a loss. Transfer of business from one company to another, however, without an accompanying effect on competition, cannot be an antitrust violation, because "the antitrust laws . . . were enacted for 'the protection of competition, not competitors.'" Midwest Gas Servs., Inc. v. Ind. Gas Co., 317 F.3d 703, 711 (7th Cir. 2003) (quoting Brunswick, 429 U.S. at 488). To have standing as a competitor, General Drilling needed to show that "its loss comes from acts that reduce output or raise prices to consumers." Stamatakis Industries, Inc. v. King, 965 F.2d 469, 471 (7th Cir. 1992).

General Drilling failed to present evidence indicating a negative effect on competition in the drilling services market. The consumer, Material Service, purchased the drilling services first from General Drilling and then from Finn Drill. The undisputed record evidence reveals that the price Material Service paid for those services did not change under Finn Drill-the price remained $1.75 per foot, the same as it was under General Drilling. Local 150 established as much through Olson's deposition testimony:

Q: Did you review the bids of Raimonde or Ludwig?

A: They were higher than what we were paying with General Drilling. And Finn Drill was the exact same amount. And I believe it was $1.75 per foot.

Because General Drilling did not present evidence to contest this fact, no reasonable jury could find that the claimed conspiracy resulted in raised prices to the consumer, Material Service. Moreover, no record evidence suggests that the claimed conspiracy reduced output in the market.

In Stamatakis, 965 F.2d 469, Chicago firms provided color separation services to advertising agencies. One of these firms, the plaintiff, alleged that its competitor conspired with others to deprive it of business in the market. This Court upheld the district court's grant of summary judgment, holding that Premier did not suffer an antitrust injury. Finding that the victims of the scheme were the advertising agencies, the Court stated that because an advertising agency "had no reason to bring higher prices upon itself, it . . . [made] sense to infer that there was never a threat to consumers." Id. at 472. As for Premier's decline in sales, the Court held that "a producer's loss is no concern of the antitrust laws, which protect consumers from suppliers rather than suppliers from each other." Id. at 471.

The same reasoning applies with equal force here. As in Stamatakis, the plaintiff supplier (of drilling services) alleges that its competitors (the Chicago union drillers) conspired with others to deprive it of business in the market. The victims of this alleged antitrust scheme would be quarry owners like Material Service, who would logically not desire to bring higher prices upon themselves. Moreover, because the evidence reveals that prices did not rise when Finn Drill took over, there in fact "was never a threat to consumers." Id. at 472. In fact, the evidence presented by Local 150 reflects that Finn Drill was able to compete more efficiently in the market than General Drilling. In her deposition, Diehr testified that signing the NIMPA would have "hugely" increased General Drilling's labor costs. Finn Drill, on the other hand, was able to drill at the same quarry with the same rig and employee at the same price, $1.75 per foot, and still pay higher wages under the NIMPA. Again General Drilling offered no evidence to dispute these facts. As this Court has held, the transfer of a plaintiff's business to a competitor who can compete more efficiently in the marketplace is not an antitrust violation. Midwest Gas, 317 F.3d at 712.

Finally, this Court has recognized that competitors can bring an antitrust claim when they are excluded from the market and injured by defendants' actions. Serfecz, 67 F.3d at 598. General Drilling was not excluded from the market. General Drilling's president, Boatman, testified in his deposition that the company continues to work at the Vulcan and Northern Indiana quarries, and continues to solicit business in northwest Indiana. Moreover, Boatman testified that Material Service twice invited General Drilling back to drill at its quarries, in the spring and fall of 2003. Because General Drilling presented no record evidence to dispute these facts, no reasonable jury could find that General Drilling was excluded from the market. Summary judgment on this issue was proper.

2. Per Se Unreasonable Restraint of Trade

Because General Drilling could not establish an antitrust injury outright, it relied at argument before the district court on the presumption of injury that arises from a per se unreasonable restraint of trade. This Court has held that antitrust remedies may be available without a showing of market injury if an individual competitor can show that the defendant's anticompetitive actions were per se illegal under Section 1. Wigod, 981 F.2d at 1515. Per se violations are actions where the nature and necessary effects that result are so plainly anticompetitive that an in-depth analysis of their illegality is unnecessary. Id. General Drilling claims that "conspiracies to eliminate a low price competitor to suppress price competition are per se unreasonable restraints of trade." A Sherman Act combination "formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price" in the marketplace is illegal per se. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940). To establish a per se price-fixing conspiracy, a plaintiff must produce evidence "that a combination was formed for the purpose of fixing prices and that it caused them to be fixed or contributed to that result. . . ." Id. at 224.

General Drilling predicates its price-fixing conspiracy claim on Troglio's statements to General Drilling officials at the 1996 and 2002 meetings. For instance, Keil testified that Troglio spoke at the 1996 meeting of "complaints . . . from the Union drillers." According to Diehr, "there were contract drillers up there that were not happy with General Drilling being in their area." Finally, Boatman testified that Ludwig in particular "was the one that put pressure at various times and tried to come down and get that business." Boatman could not testify to any specific conversations between Troglio and union drillers about General Drilling.

The 2002 taped conversations also provide some indication of pressure from the Chicago union drillers. On those tapes, Troglio is heard saying, "I have to get this repaired. It is an issue. An issue to the other guys and I gotta get this done." When asked who it was an issue to, Troglio replied, "Well, I'm not going to mention names but you have got a lot of competition. . . ." Although he would not specify, he intimated that the other parties were General Drilling's "signed competition." When asked in the deposition what names he had refused to mention, Troglio replied, "None." At other times on the tapes, Troglio says, "Bill, I, we were to the point that I have to do something about you" and "politically, you know, I've got to do it." General Drilling, then, presented some evidence of a conspiracy. The evidence fails, however, to show that the conspiracy was "formed for the purpose and with the effect of" price-fixing, which is necessary to establish a per se claim of price-fixing conspiracy. On tape, Troglio voices the concerns that he shared with the Chicago union drillers:

KT: What I am talking about, Bill, is your competition. Be it Ludwig. Be it Raimonde. Be it Lamberts. Uh. Be it Calahan and Shue [sic]. Your competition within our jurisdiction pays a rate. That's all I care about. That you're on the same playing field as those people within our jurisdiction. . . .

Troglio and the Chicago union drillers, then, focused not on the price paid by Material Service for the services General Drilling provided, but on the amount of wages and benefits General Drilling paid to their employees. There is no evidence that Troglio ever discussed pricing with any of the Chicago union drillers or with General Drilling. As discussed below in reference to the section 303 claims, Troglio played no role in formulating Material Service's decision to terminate General Drilling or its choice of a driller to replace General Drilling. Undisputed record evidence reveals that Material Service paid the same price to Finn Drill as it did to General Drilling for the drilling services-the price remained at $1.75 per foot. Any evidence of price-fixing was insufficient to survive summary judgment.

General Drilling's reliance on Denny's Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217 (7th Cir. 1993),to support its price-fixing claim is misplaced. In Denny's Marina, this Court held that the defendants' actions constituted a per se violation of the Sherman Act because the conspiracy was both horizontal and formed for the purpose of fixing prices. The Court found that a group of boat dealers in the central Indiana market took concerted action to protect themselves from price competition by the discounter, Denny's. When participating in industry boat shows, Denny's had a policy to "meet or beat" its competitors' prices. As a result, its competitors complained and succeeded in preventing Denny's from participating in the boat show.

In contrast, General Drilling presented no evidence to indicate that it was prevented from participating in the northwest Indiana market. Instead, General Drilling continues to solicit business and to work for Vulcan and Northern Indiana in the market. General Drilling was not even prevented from working for Material Service, who asked General Drilling to work at its quarries again twice in 2003. Because General Drilling neither presented evidence from which a reasonable jury could find that it had antitrust standing nor demonstrated a per se violation of the ...


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