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United Rentals Highway Technologies, Inc. v. Indiana Constructors

March 5, 2008


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:05-CV-00571-SEB-VSS-Sarah Evans Barker, Judge.

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


Before BAUER, POSNER, and SYKES, Circuit Judges.

Adam Smith believed that the key to economic progress is specialization. The production process is subdivided into narrow tasks, and workers gain speed and accuracy from performing just one of them. As markets expand, the opportunities for specialization expand too, because having a substantial market for its output the specialized producer (and its specialized subdivisions) can grow large enough to reap economies of scale and thus minimize its costs. We can see the pro-cess at work in the highway construction industry. The creation of the interstate highway system in the 1950s and 1960s, followed later by an enormous expansion in its use that caused tremendous wear and tear and hence a constant need for repair and rebuilding, enabled unprecedented specialization in the highway construction industry. Anyone who travels on the interstate system in northern states understands the force of the dictum that on the interstate highways in those states there are only two seasons: winter and construction.

United Rentals is one of the specialized producers enabled by the expansion of the highway construction industry. It is a member of the "traffic control" submarket. The firms in that market help to protect highway construction workers from being hit by the vehicles using the stretch of the highway that the workers are building, repairing, or rebuilding. The firms try to do this in a way that will minimize traffic delay, and traffic accidents not limited to hitting workers. When construction activity is about to begin, employees of the traffic control firm place cones, barrels, concrete blocks, or other barricades in position to block or alter traffic lanes. The workers also paint stripes on the road to indicate the new lanes; install warning signs to guide drivers using the highway; and place guard rails to keep vehicles from veering off into what may, as a result of the construction activity, be a nonexistent shoulder. The barricades, signs, guard rails, and other safety devices are owned and stored by the traffic control firm and brought to the construction site as needed. The firm installs its devices before the construction begins and removes them when it is finished. If flagmen are required, they may be supplied either by the traffic control firm or by the general contractor.

The traffic control firm is a subcontractor of the general contractor. Before the emergence of traffic control as a separate business, traffic control was done by the general contractor or by a construction subcontractor not specialized to traffic control.

Road work in Indiana is done almost entirely by contractors who belong to a trade association called Indiana Constructors, which has for many years negotiated collective bargaining agreements for its members with the Laborers International Union (actually with its locals, but we can ignore that detail). In 2004, the collective bargaining agreement then in force was modified to forbid the association's members to subcontract work at a construction site to a firm that had not signed a collective bargaining agreement with the Laborers Union. The union had pushed for the modification because it wanted as much work at construction sites as possible to be done by its members. This was a blow to United Rentals because it had a collective bargaining agreement with another union (also it didn't want to bargain with the Laborers Union when that agreement expired); and so it filed a charge with the National Labor Relations Board that Indiana Constructors and the Laborers Union were violating the National Labor Relations Act's "hot cargo" provision. NLRA § 8(e), 29 U.S.C. § 158(e). The provision forbids a union and employer to agree that the employer will refuse to deal with another employer (in this case a subcontractor), as Indiana Constructors has agreed with the Laborers Union to do with respect to United Rentals and any other subcontractor that does not have a collective bargaining agreement with that union.

But there is an exception to the hot cargo provision for "an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work," id., including highways. Spectacor Management Group v. NLRB, 320 F.3d 385, 395 (3d Cir. 2003); International Union of Operating Engineers, Local Union No. 12, AFL-CIO, 131 N.L.R.B. 520, 526-27 (1961). On the basis of the exception, the Board's General Counsel declined to file a complaint against Indiana Constructors or the Laborers Union.

The company then filed this suit, which charges the contractors' association and the union with conspiring to exclude United Rentals from the traffic control market in Indiana, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. There are other charges as well, but the only one of the others that is pursued in this appeal is a charge (against the union alone) of violation of section 303 of the Taft-Hartley Act, 29 U.S.C. § 187(a). That section, by incorporating by reference 29 U.S.C. § 158(b)(4)(ii)(A), forbids a union to "forc[e] or requir[e]" an employer to "enter into any agreement which is prohibited by" the hot cargo provision. Unlike the incorporated provision of the National Labor Relations Act, which is enforceable only by the Labor Board, section 303 is enforceable by suit in federal court.

The district court granted summary judgment in favor of the defendants on all counts, and United Rentals appeals. So we have an antitrust claim and a hot cargo claim to consider. We'll start with the latter because the former is partly derivative from it.

Before Congress enacted the hot cargo provision, along with its exception for the construction industry, in 1959, hot cargo clauses had been pervasive in the industry, had been upheld repeatedly as lawful, and had not caused the problems associated with closed shops-though one reason, inapplicable to this case, was that most construction workers are hired from hiring halls; the halls are operated by unions but the unions are required to refer all comers, and not just workers represented by a union, to contractors and subcontractors. Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 664-65 (1982); Lucas v. NLRB, 333 F.3d 927, 932 (9th Cir. 2003).

So one reason for the construction-industry exception was just a desire to ratify an acceptable status quo. Milwaukee & Southeast Wisconsin District Council of Carpenters v. Rowley-Schlimgen, Inc., 2 F.3d 765, 767 (7th Cir. 1993). But another was to prevent friction at construction job sites. Id.; Local 210, Laborers' International Union of North America v. Labor Relations Division Associated General Contractors of America, N.Y.S. Chapter, Inc., 844 F.2d 69, 76 (2d Cir. 1988). More than just work stoppages were at stake. Much construction work is dangerous, including road construction in the presence of highway traffic; and there was concern that the frictions engendered by union workers' working side by side at a construction job site with nonunion workers or workers belonging to another union would reduce safety as well as efficiency. Woelke & Romero Framing, Inc. v. NLRB, supra, 456 U.S. at 662.

Before there was a separate market in traffic control, there was no impediment to the general contractor's requiring whatever subcontractor performed traffic control for the contractor to bargain collectively with the general contractor's union. For a time after traffic control broke off and became a separate business, general contractors and construction workers' unions did not insist that the employees of traffic control subcontractors be represented by the general contractor's union, though even in that transitional period the collective bargaining agreement between the Indiana Constructors and the Laborers Union said that the union "encourages its members to utilize sub-contractors who are signatory to collective bargaining agreements with the Laborers Union. Such sub-contractors help to promote peace and harmony of the job-site and to avoid labor dispute interruption of work." The modification in the collective bargaining agreement of which United Rentals complains restores fully the practice that prevailed before traffic control became a separate market.

United Rentals' employees work at construction sites. But the company argues that since they arrive at and depart from the site before the construction workers appear, and, later, arrive and leave (to pick up their barricades and signs) after those workers have completed their work and left the site, there is no danger of job-site friction. That is wrong as a matter of fact, as is the suggestion that the existence of such friction is a criterion for ...

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