Mohawk Re-Bar Services Inc. v. Local Union No. 17 International Association of Bridge, Structural, Ornamental, and Reinforcing Iron Workers et al
Filing
46
Memorandum Opinion and Order granting defendants' Motions to dismiss (Related Docs # 33 , 34 and # 35 ). This matter is dismissed in its entirety. Judge Lesley Wells(C,KA)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
-----------------------------------------------------MOHAWK REBAR SERVICE, INC.,
Plaintiff,
-vs-
INTERNATIONAL ASSOCIATION OF
BRIDGE, STRUCTURAL,
ORNAMENTAL, AND REINFORCING
IRON WORKERS LOCAL UNION NO.
17, et al.,
.
: CASE NO. 1:14 CV 00137
:
:
: MEMORANDUM OF OPINION AND
: ORDER
:
:
:
:
:
Defendants.
------------------------------------------------------
UNITED STATES DISTRICT JUDGE LESLEY WELLS
The plaintiff Mohawk Rebar Service, Inc., (“Mohawk”) brings this antitrust and
breach of contract action against defendants International Association of Bridge,
Structural, Ornamental, and Reinforcing Iron Workers Local Union 17 (“Local 17”), the
International Association of Bridge, Structural, Ornamental, and Reinforcing Iron
Workers (“the International Association”), and Harris Davis Rebar, LLC (“Harris Davis”).
Presently before the Court are the defendants’ respective motions to dismiss the
plaintiff’s first amended complaint. (Doc. 33, 34, 35). The plaintiff Mohawk has filed an
omnibus brief in opposition (Doc. 37), and the defendants have filed reply briefs,
respectively. For the reasons that follow, the defendants’ motions to dismiss will be
granted, and this matter will be dismissed in its entirety.
I. Background
The plaintiff Mohawk is an Ohio Corporation engaged in the business of
reinforcing steel (“rebar”) for concrete applications on construction projects throughout
Northeast Ohio. (First Amended Complaint, Doc. 31 (hereinafter “Complaint”) ¶4).
Defendant Harris Davis is also in the rebar business, and it is authorized to do business
in Ohio. (Complaint ¶8). Defendant Local 17 is a labor union which provides iron
workers to Mohawk, Harris Davis, and other employers in the industry for construction
projects in Northeast Ohio. (Complaint ¶5). Defendant the International Association is a
labor organization consisting of various regional and local unions throughout the United
States, one of which is Local 17. (Complaint ¶6).
Since 1981, plaintiff Mohawk and defendant Local 17 have been parties to a
collective bargaining agreement (“the CBA”). (Complaint ¶11). Pursuant to the CBA,
Mohawk is obligated to pay its employees union scale wages and benefits, and it is
obligated to contribute $10 per employee-hour worked to a multiemployer defined
benefit pension plan (“the Pension Fund” or “the Fund”). (Complaint ¶13). Because
operation of the Fund is governed by ERISA, a participating employer who ceases to
have an obligation to contribute to the Fund is generally required to pay a proportionate
share of the Fund’s underfunding. (Complaint ¶13).This is called withdrawal liability.
See 29 U.S.C. § 1301, et seq. Mohawk asserts that the current amount of its withdrawal
liability is approximately $6 million. (Complaint ¶13). As the defendants point out,
however, and the plaintiff concedes, this figure represents not what Mohawk owes
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presently, but what it would allegedly owe if withdrawal liability were triggered.
Withdrawal liability is triggered only when certain conditions are met. For instance, an
employer in the construction industry that continues to perform similar work in the same
local jurisdiction on a non-contributory basis would trigger withdrawal liability. See 29
U.S.C. § 1383(b). It is undisputed that, to date, none of the necessary conditions of
withdrawal liability have been met here, as Mohawk asserts that it has fulfilled all its
obligations to contribute to the Pension Fund. (Com plaint ¶14).
In addition, the CBA contains a “Favored Nations Clause,” which provides:
If the union shall furnish Iron Workers to any Employer within the area of
jurisdiction of this Agreement upon any more favorable conditions than those
contained therein, the Union agrees that such more favorable wage rates and
conditions other than those contained in a Market Retention Ag reement shall
automatically be extended to the Employer[.] Special Local Area or National
Agreements negotiated to cover specific projects or classes of work shall be
excluded from this provision.
(Complaint ¶19). In broad strokes, the Favored Nations Clause stands for the
proposition that if Local 17 gives a better deal to another employer doing the same sort
of work, in the same area, it must extend the same deal to Mohawk.
Mohawk maintains that defendant Harris Davis was given a better deal when
Harris Davis entered into the National Reinforcing Steel Agreement (“Rebar
Agreement”) with the International Association. The Rebar Agreement is similar to the
CBA in that Harris Davis, like Mohawk, is obligated to contribute $10 per employee-hour
worked into a pension fund; and, also like Mohawk, Harris Davis must pay union scale
wages and benefits to its union employees. (See Doc. 31-3). The only relevant
difference here--and the allegedly more favorable wage rate or condition--is that Harris
Davis, while obligated to contribute to a retirement fund, is not obligated to contribute to
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the Pension Fund. (Complaint, ¶24). Instead, Harris Davis may contribute to a
retirement plan other than the Pension Fund, provided the alternate plan is not subject
to the withdrawal liability provisions of Title IV of ERISA but otherwise complies with
ERISA. (Complaint, ¶24). Mohawk contends that because Harris Davis does not face a
threat of withdrawal liability, it has been given a more favorable wage or condition.
(Complaint, ¶36).
Further, because Harris Davis faces no withdrawal liability under the Rebar
Agreement, it is Mohawk’s position that Harris Davis has been given an unfair
competitive advantage. (Complaint, ¶33, passim). And as a result, Mohawk maintains,
Harris Davis was able to underbid Mohawk in a job for the construction of a parking
structure in Cleveland, Ohio. (Complaint, ¶31). After Harris Davis won the subcontract,
Local 17 provided ironworkers to Harris Davis pursuant to the terms of the Rebar
Agreement. (Complaint, ¶35). Although Local 17 is not a party to the Rebar Agreement,
it was bound to honor it, Mohawk alleges, by virtue of the Constitution of the
International Association of Bridge, Structural, Ornamental and Reinforcing Iron
Workers (“Association Constitution”), which enforces terms and conditions upon
regional and local unions. Thus, by abiding by the terms of the Rebar Agreement,
Mohawk argues, Local 17 extended a more favorable wage rate or condition to Harris
Davis, i.e. that Harris Davis does not face any potential withdrawal liability when it
contributes to the alternate fund. (Complaint, ¶20).
Mohawk points out that in order for Local 17 to technically comply with the
Favored Nations Clause it must extend the same condition to Mohawk that it extended
to Harris Davis. (Complaint, ¶41). One problem with this, as Mohawk explains it, is that
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if Local 17 did so and allowed Mohawk to contribute to the alternate fund, Mohawk
could not cease contributing to the Pension Fund without triggering withdrawal liability
with respect to the Pension Fund. (Complaint, ¶39). If such liability were triggered,
Mohawk asserts, it would be devastating to Mohawk’s business. (Complaint, ¶41).
Mohawk argues, in sum, that these circumstances amount to a violation of the Favored
Nations Clause, for which both Local 17 and the International Association are liable.
(Complaint, ¶45). Mohawk maintains that Local 17 breached the Favored Nations
Clause and that the International Association has unlaw fully interfered with the
protections afforded to Mohawk under it.
Anticipating that Local 17 and the International Association will argue that
Mohawk failed to exhaust contractual grievance procedures, Mohawk has
acknowledged that the CBA contains a grievance procedure for the resolution of
disputes or disagreements arising from the CBA. (Complaint, ¶46). Mohawk further
acknowledges that it and the International Association are parties to the Iron W orkers
International Agreement dated November 19, 2004 (“International Agreement”), which
refers any dispute to the grievance procedure set forth in the CBA. (Complaint, ¶47).
Mohawk indicates that it has not utilized the contractual grievance procedure, but it
asserts that should be excused from using it, because its use would be ineffective and
otherwise futile. (Complaint, ¶48).
Mohawk further maintains that the provisions of the Rebar Agreement that allow
Harris Davis to avoid any potential withdrawal liability amount to violations of the
antitrust laws. Mohawk argues that by participating in the Rebar Agreement, Harris
Davis engaged in anticompetitive and predatory conduct. Mohawk asserts that because
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Harris Davis is not obligated to contribute to the Pension Fund, it has a n unfair
competitive advantage and it will be able to obtain a disproportionate amount of the
rebar work in Local 17’s jurisdiction. Mohawk maintains that as a result, the defendants
will be able to reduce and eventually eliminate competition in Local 17’s jurisdiction.
On January 21, 2014, Mohawk filed the instant action. After the defendants filed
respective motions to dismiss the complaint, Mohawk filed an amended complaint, in
which Mohawk asserts the following claims:
(1) Violation of the Favored Nations Clause (against Local 17 and the
International Association);
(2) Monopolization in violation of 15 U.S.C. § 2 (against Harris Davis);
(3) Attempted monopolization in violation of 15 U.S.C. § 2 (against Harris Davis);
(4) Conspiracy to monopolize in violation of 15 U.S.C. § 2 (against Harris Davis,
Local 17, and the International Association);
(5) Violation of the Valentine Act, Ohio Revised Code § 1331.02 (against Harris
Davis);
(6) Conspiracy to violate the Valentine Act, Ohio Revised Code § 1331.04
(against Harris Davis, Local 17, and the International Association)
In its prayer for relief, Mohawk seeks declarations that Local 17 has violated the
Favored Nations Clause and that the International Association com pelled Local 17 to
do so. (Complaint, p. 21). Mohawk maintains that Local 17 and the International
Association should be enjoined from engaging in this allegedly unlawful activity.
(Complaint, p. 22). Mohawk further seeks damages, fees and costs from all three
defendants. (Complaint, p. 22). The defendants now respectively move to dismiss the
first amended complaint.
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II. Standard
The plaintiff’s complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 12(b)(6) motion
tests the sufficiency of the complaint. To survive a motion to dismiss, “a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face “when the
plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556).
III. Law and Argument
A. Violation of the Favored Nations Clause
Mohawk claims that Local 17 violated the Favored Nations Clause contained in
the CBA when it honored the Rebar Agreement, which relieved Harris Davis of the
obligation of contributing to the Local 17 Pension Fund and allows it to avoid any
potential withdrawal liability. Mohawk further asserts that by force of the Association
Constitution, the International Association compelled Local 17 to breach the Favored
Nations Clause.
Exhaustion
Local 17 argues that Mohawk’s breach of the Favored Nations Clause claim, as
to Local 17, should be dismissed because Mohawk has failed to exhaust the
contractual grievance procedures contained in the parties’ agreement. Section 301 of
the Labor Management Relations Act (“LMRA”) grants federal courts jurisdiction over
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suits for violation of contracts between an employer and a labor organization. 29 U.S.C.
§ 185(a). A prerequisite for suit under Section 301 is that parties exhaust grievance and
arbitration procedures established by the applicable collective bargaining agreement.
See Apponi v. Sunshine Biscuits, Inc., 809 F.2d 1210, 1216 (6th Cir. 1987). “W hether a
dispute must be arbitrated before judicial relief may be sought is determined by
analyzing the collective bargaining agreement to see if it permits or requires arbitration.”
Id.
Under Section 301, courts will generally enforce provisions of a labor agreement
that provide procedures for the settlement of disputes through mutual discussion and
arbitration. Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 562 (1976).“[F]inal
adjustment by a method agreed upon by the parties is declared to be the desirable
method for settlement of grievance disputes . . . .” Id. (quoting 29 U.S.C. §173(d)).
“Courts are not to usurp those functions which collective-bargaining contracts have
properly ‘entrusted to the arbitration tribunal.’” Id. (quoting Steelworkers v. American
Mfg. Co., 363 U.S. 564, 566 (1960). Permitting parties “to sidestep available grievance
procedures would cause arbitration to lose most of its effectiveness, . . . as well as
eviscerate a central tenet of federal labor-contract law under § 301 that it is the
arbitrator, not the court, who has the responsibility to interpret the labor contract in the
first instance.” Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 220 (1985) (citing Republic
Steel Corp. v. Maddox, 379 U.S. 650, 653 (1965).
In the present case, Mohawk’s first amended complaint acknowledges that the
CBA contains a grievance procedure for resolving all disputes arising under the
agreement. Mohawk further acknowledges that it has not utilized the agreed upon
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procedure, but it claims that it would be futile or ineffective for it to do so. Mohawk
accordingly claims it should be excused from exhausting these procedures.
In particular, Mohawk argues that the instant dispute involves parties,
agreements, and issues that are not governed by the CBA. Mohawk asserts that its
claim of breach of the Favored Nations Clause against Local 17 inextricably involves
the actions of the International Association, in that the International Association
allegedly compelled Local 17 to breach the Favored Nations Clause. Because the
International Association is not subject to the grievance procedures set forth in the
CBA, Mohawk contends, the arbitrator would be without authority to provide any relief
with respect to its actions. In sum, Mohawk asserts that the International Association is
a necessary and critical party to the dispute involving the Favored Nations Clause.
Thus, Mohawk argues, reliance on the contractual grievance procedure would be futile
because an arbitrator would be unable to provide complete relief to Mohawk.
In the Court’s view, Mohawk has not met its burden to show that use of the
contractual grievance procedure would be futile. In order to excuse a failure to exhaust,
the plaintiff must make a “clear and positive showing of futility.” Allied Mech. Servs., Inc.
v. Local 337 of United Ass'n of Journeymen & Apprentices of Plumbing & Pipefitting
Indus., 221 F.3d 1333 (6th Cir. 2000). A bare allegation of futility is not sufficient. Yenyo
v. Fairmount Foods Co., 1981 U.S. App. LEXIS 11863 (6th Cir. 1981). Nor is a plaintiff’s
subjective belief of futility enough. Terwilliger v. Greyhound Lines, Inc., 882 F.2d 1033,
1039 (6th Cir. 1989). The test “is not whether [the plaintiff’s] grievances would succeed,
but whether [the plaintiff] could have availed itself of the grievance procedure.” Allied
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Mech., 221 F.3d 1333 (citing Mason v. Continental Group, Inc., 763 F .2d 1219, 1224
(11th Cir.1985)).
In Glover v. St. Louis-San Francisco R. Co., 393 U.S. 324, 329-30 (1969),
African-American employees alleged that the union conspired with the employer to bar
their promotion because of their race. Id. at 325. The futility exception applied in that
case because the plaintiffs had repeatedly complained about the discrimination, and
the Court indicated that the plaintiffs should not be required to “submit their controversy
to a ‘group which is in large part chosen by the (defendants) against whom their real
complaint is made.’” Id. (citing Steele v. Louisville & N.R. Co., 323 U.S. 192, 206
(1944).
The gist of Mohawk’s first claim is that Local 17 violated the Favored Nations
Clause contained in the CBA when it provided iron workers to Harris Davis pursuant to
the terms of the Rebar Agreement. There is little question this is a dispute that arises
out of the CBA. Therefore, because Mohawk previously agreed that it would resolve all
disputes arising out of the CBA pursuant to the grievance procedures contained therein,
Mohawk’s claim as to Local 17 should be heard pursuant to those procedures. T he fact
that an arbitrator may not have the authority to hear Mohawk’s claims against the
International Association does not make its claims against Local 17 futile, and Mohawk
cites no authority to support the idea that the International Association’s inv olvement in
this dispute excuses Mohawk from participating in contractual grievance procedures on
the ground of futility. In addition, because, as explained below, all of Mohawk’s antitrust
claims are subject to dismissal, there is even less force to Mohawk’s contention that this
case involves parties and issues over which the arbitrator would not have authority.
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While Mohawk complains that an arbitrator would not be able to grant the relief it
seeks, the question is not whether Mohawk would succeed, but rather whether
contractual procedures would be available to it. Unlike the plaintiffs in Glover, there is
no allegation that Mohawk was somehow frustrated in its attempts to present its
grievance against Local 17. Nor is there any allegation that the contractual grievance
procedure would somehow be unfair, as was the case in Glover. As noted in Glover, “it
is settled that the employee must at least attempt to exhaust exclusive grievance and
arbitration procedures established by the bargaining agreement.” Id. (quoting Republic
Steel Corp. v. Maddox, 379 U.S. 650 (1965). While Mohawk claims this is outdated
language, this principle has been reiterated in subsequent cases. In Terwilliger, the
Sixth Circuit held that “[b]efore a section 301 action can be initiated, an em ployee must
attempt to use the procedures available under the collective bargaining agreement.”
Terwilliger, 882 F.2d at 1040. There is no allegation that Mohawk ever attempted to
resolve this dispute through contractual grievance procedures, and Mohawk has not
made a clear and positive showing of futility.
Failure to state a claim as to Mohawk and the International Association
In any event, assuming for the sake of argument that this Court has jurisdiction
to hear this matter, Mohawk’s claim that the Favored Nations Clause has been
breached is not a claim upon which relief can be granted. Under the Favored Nations
Clause, if Local 17 provides iron workers to another employer upon “more favorable
wage rates and conditions,” then that same more favorable wage rates and conditions
are to be automatically extended to Mohawk. Assuming for the sake of argument that
Harris Davis has been given “more favorable wage rates and conditions,” Mohawk does
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not complain that Local 17 failed to live up to its obligation and automatically extend
those same rates and conditions to Mohawk. Instead, Mohawk contends that even if
those more favorable wage rates and conditions were extended to it, Mohawk would not
accept them because, when applied to Mohawk, the wage rates and conditions are not
more favorable as to it. Mohawk in fact alleges that extending the same wage rates and
conditions, in compliance with the contract, would be damaging to it because it would
trigger withdrawal liability. Given this particular set of allegations, the Court agrees with
Local 17 that Mohawk has not stated a plausible breach of contract claim. And, for this
reason, Mohawk’s claim that the International Association compelled Local 17 to breach
the contract is also implausible.
B. Antitrust standing and injury
As for Mohawk’s antitrust claims, the defendants maintain that Mohawk fails to
allege sufficient facts to establish antitrust standing. The Court agrees. “[S]tanding in an
antitrust case is more onerous than the conventional Article III inquiry.” Static Control
Components, Inc. v. Lexmark Int'l, Inc., 697 F.3d 387, 402 (6th Cir. 2012). “[A]ntitrust
standing is a threshold, pleading-stage inquiry and when a complaint by its terms fails
to establish this requirement [it] must [be] dismiss[ed] ... as a matter of law—lest the
antitrust laws become a treble-damages sword rather than the shield against
competition-destroying conduct that Congress meant them to be.” NicSand, Inc. v. 3M
Co., 507 F.3d 442, 450 (6th Cir. 2007) (en banc). As a result of this high pleading
hurdle, “the federal courts have been ‘reasonably aggressive’ in weeding out meritless
antitrust claims at the pleading stage[.]” Id. (quoting Valley Prods. Co. v. Landmark, 128
F.3d 398, 403 (6th Cir. 1997)).
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A district court decides whether a plaintiff has adequately pleaded antitrust
standing by balancing five factors:
(1) the causal connection between the antitrust violation and harm to the plaintiff
and whether that harm was intended to be caused; (2) the nature of the plaintiff's
alleged injury including the status of the plaintiff as consumer or competitor in the
relevant market; (3) the directness or indirectness of the injury, and the related
inquiry of whether the damages are speculative; (4) the potential for duplicative
recovery or complex apportionment of damages; and (5) the existence of more
direct victims of the alleged antitrust violation.
Southaven Land Co., Inc. v. Malone & Hyde, Inc., 715 F.2d 1079, 1085 (6th Cir. 1983)
(citation omitted). The Court addresses the applicable factors below.
In this instance, the connection between the alleged antitrust violation and
Mohawk’s injury is tenuous, and the Court is unable to reasonably infer that harm was
intended to be caused. Mohawk alleges, and it is undisputed, that under the Rebar
Agreement, Harris Davis is not obligated to contribute to the Pension Fund. Instead, the
agreement allows Harris Davis to contribute to a retirement fund that is not subject to
the withdrawal liability provisions of ERISA. Thus, Harris Davis will incur no withdrawal
liability as a result of this agreement. Mohawk’s position is that because Harris Davis
carries no potential withdrawal liability, Harris Davis is at an unfair competitive
advantage. Mohawk alleges that as a result of this advantage, Harris Davis was able,
and will continue to be able, to underbid Mohawk for construction jobs in the area. In
addition to claiming the Rebar Agreement provides Harris Davis with an unfair
competitive advantage, Mohawk contends that this advantage will allow Harris Davis to
eventually obtain monopoly power.
One critical problem with Mohawk’s claim is that it pleads no facts to support the
idea that because Mohawk pays into the Pension Fund and Harris Davis does not,
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Mohawk has been caused to face a greater financial hardship at the present time. It is
undisputed that Harris Davis does not carry the threat of withdrawal liability, but
Mohawk fails to explain what it is about the absence of withdrawal liability that allows
Harris Davis to bid lower than it would be able to if it did carry withdrawal liability.
Mohawk concedes that withdrawal liability is not “booked” until an actual withdrawal
happens, and, in this instance, Mohawk’s liability has not been booked, since it has not
withdrawn from the Fund. Further, Mohawk alleges that, to date, it has complied with its
obligations to contribute to the Pension Fund, and it alleg es no intention to withdraw
from the Fund. Mohawk claims, in a conclusory way, that the Rebar Agreement affords
Harris Davis a financial advantage in the present, but the plaintiff does not say exactly
what that advantage is.
Mohawk claims that Harris Davis has been able to reduce its costs as a result of
the Rebar Agreement, but when challenged as to what those costs are, it is unable to
describe them with any degree of specificity. Further, Mohawk is unable to describe
how its own costs are greater. Based on the Court’s review, it is evident that Harris
Davis’s present burden is precisely the same as that of Mohawk. Like Mohawk, Harris
Davis pays $10.00 per employee-hour worked into a retirement fund, and like Mohawk,
Harris Davis must pay local union scale for wages and benefits. Thus, even with the
factual allegations viewed in favor of the plaintiff, the Court is unable to infer a causal
connection between the alleged antitrust violation and Mohawk’s alleged injury.
While it is undisputed that Mohawk is a competitor of Harris Davis, Mohawk’s
alleged injury, as already suggested, is of a contingent, speculative, and unrealized
nature. First, there is no dispute that because Mohawk operates in the construction
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industry, a complete withdrawal will only occur if Mohawk ceases to have an obligation
to contribute to the fund but continues to perform work or, within five years, resumes
performing work in the jurisdiction of the CBA of the type for which contributions were
previously required. See 29 U.S.C. 1383(b)(2). Thus, a mere cessation of the obligation
to contribute, such as when a company is sold or goes out of business, is not sufficient
to trigger liability. Based on the allegations in the complaint, whether and at what time
Mohawk will be subject to withdrawal liability is highly speculative. Furthermore, even if
Mohawk ultimately becomes liable, the amount of that liability is far from certain. As
noted by Harris Davis, and undisputed by the plaintiff, “an employer’s share of
unfunded vested liability is generally derived from a formula which takes into account
the contribution history of an employer and comparatively apportions that history to the
contribution histories of other contributing employers.” (Doc. 35-1 at 14 (citing 29 U.S.C.
1391(a)). Thus, the existence and extent of Mohawk’s withdrawal liability obligation is
necessarily governed by future events.
Mohawk’s allegation that it suffers injury because the funding status of the
Pension Fund worsens as a consequence of the Rebar Agreement is untenable, and
the first amended complaint contains no factual allegations that would support this idea.
As Harris Davis points out, it is undisputed that Harris Davis is not a contributing
employer to the Pension Fund and that its employees do not accrue benefits in the
Fund. Because Harris Davis does not participate in the Fund, the amount of benefits
that will ultimately vest will not increase. Mohawk cannot credibly claim that Mohawk’s
liability in the Fund somehow increases as a result of Harris Davis’s non-participation in
it.
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In its brief in opposition, Mohawk asserts a number of other potential injuries,
including the threats of an excise tax, additional assessments, and “partial withdrawal”
or “mass withdrawal.” The primary trouble with these claims is that Mohawk makes no
such allegations in the first amended complaint, and it is black letter law that a plaintiff
may not cure a pleading deficiency through assertions in a brief in opposition to a
motion to dismiss.
Furthermore, Mohawk fails to allege actual anticompetitive behavior or an
antitrust injury. Mohawk focuses on possible harm to itself (citing, as noted above, the
possible imposition of withdrawal liability, excise taxes, and assessments), but it does
not allege how the defendants’ actions “harmed competition in the relevant market, as
the Sherman Act requires.” Elias v. Fed. Home Loan Mortg. Corp., 581 Fed.Appx. 461,
468, 2014 WL 3702597, at *7 (6th Cir.2014) (emphasis in original) (dismissal based on
lack of antitrust standing). “To prove antitrust injury, the key inquiry is whether
competition—not necessarily a competitor—suffered as a result of the challenged
business practice.” CBC Companies, Inc. v. Equifax, Inc., 561 F.3d 569, 571–72 (6th
Cir.2009) (citing NicSand, 507 F.3d at 450 (“[O]ne competitor may not use the antitrust
laws to sue a rival merely for vigorous or intensified competition.”). The fact that
Mohawk was underbid for a single job does not demonstrate that competition was
harmed in the relevant market.
In the Court’s view, the first amended complaint fails to establish that Mohawk
has antitrust standing. The connection between the alleged wrongdoing and the alleged
injury is tenuous; Mohawk’s alleged injury is indirect and not the type the antitrust laws
were intended to prevent; and damages are speculative.
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C. Non-statutory exemption
The defendants further maintain that Mohawk’s claims are barred by the
non-statutory labor exemption. The Court agrees. The non-statutory labor exemption
applies if the agreement at issue: (1) “primarily affects only the parties to the collective
bargaining relationship”; (2) “concerns a mandatory subject of bargaining”; and (3) “is a
product of bona fide arm’s-length bargaining.” Mackey v. NFL, 543 F.2d 606, 614-15
(8th Cir. 1976).
In this instance, there is no dispute that retirement pay is a mandatory subject of
bargaining, and Mohawk does not allege that the Rebar Agreement was not a product
of a bona fide arm’s-length negotiation. The only question under Mackey therefore is
whether the Rebar Agreement “primarily affects only the parties to the collective
bargaining relationship.” An agreement primarily affects only the parties thereto if the
primary impact is on the agreeing employer and its employees. See Zimmerman v. Nat’l
Football League, 632 F.Supp 398, 405 (D.D.C. 1986). In Zim merman, the court
observed that the purpose of the first element of the Mackey test is to “withhold the
exemption from agreements that primarily affect competitors of the employer, or . . .
economic actors completely removed from the bargaining relationship.” Id.
The Court agrees with the defendants that the Rebar Agreement primarily affects
the parties to that agreement. The restraint at issue here--that Harris Davis is not
obligated to contribute into the Pension Fund--af fects primarily Harris Davis and its
employees by altering the form of retirement benefits. There is no direct effect on
Mohawk, and the fact that the agreement may have had a secondary effect on
Mohawk, in that Harris Davis has reduced its costs (though Mohawk provides no factual
17
allegations to support this claim) such that it can underbid Mohawk, is not sufficient.
Instructive on this point is a case cited by the defendants, Local Union 257, Int'l Bhd. of
Elec. Workers, AFL-CIO v. Sebastian Elec., 121 F.3d 1180, 1182 (8th Cir. 1997). In
Sebastian Electric, defendant electric companies alleged a counterclaim that the local
union for electrical workers had violated the antitrust provisions of the Sherman Act
when the union participated in a so-called “Target Fund.” The fund, which was financed
by the local union, provided partial payment of wages paid to members of Local 257
when the employer was party to a collective bargaining agreement with Local 257.
Participating employers were able to submit lower bids than they could have otherwise
without the fund’s assistance. The defendant electrical companies argued that
operation of the Target Fund resulted in a form of price-fixing designed to force out
competition.
On a motion for summary judgment, a panel of the Eighth Circuit concluded that
the nonstatutory exemption barred the defendants’ counterclaim. Even though
participation in the Target Fund indirectly affected non-participating employers, in that
participants were able to submit bids lower than non-participating competitors, the court
concluded that the reimbursement arrangement primarily affected only the parties to the
agreement. Thus, a collective bargaining agreement that merely reduces the costs of
an employer and causes other companies to lose bids does not create liability under
the antitrust laws. Mohawk fails to provide any counterpoint to this idea. In any event,
as already discussed, Mohawk does not describe a situation where Harris Davis’s costs
have been reduced such that Mohawk has been placed at a competitive disadvantage.
Mohawk’s present financial obligations under the CBA are the same as those of Harris
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Davis, and Mohawk fails to provide any facts to support the idea that by avoiding any
future withdrawal liability, Harris Davis has a distinct advantage in the present.
The case law cited by Mohawk is unpersuasive in this instance. For example,
Mohawk cites Allen Bradley Co. v. Local Union No.3, IBEW, 325 U.S. 797 (1945) for
the proposition that it was not the “purpose of Congress to immunize labor unions who
aid and abet [employers] in violating the Sherman Act.” In Allen Bradley, as part of an
effort to expand its membership, the defendant union sought to obtain “closed shop”
agreements with all local electrical equipment contractors. Under the agreements, the
contractors and manufacturers were obligated to purchase and sell equipment from
only other signatories to the closed shop agreements. This arrangement led to a
complete monopoly, where the products of non-participating firms were pushed out of
the market. The question for the Supreme Court was whether these activities, which
“quite obviously” violated the Sherman Act, were immunized by the union’s
participation. The Court held that a labor union is not immune where it aids and abets
employers in violating the Sherman Act.
Allen Bradley is inapposite. In that case, there was no question that business
entities involved had violated the Sherman Act. The question presented, whether the
violations were immunized by the union’s involvement, is not at issue in this instance. In
sum, the Court concludes that the non-statutory exemption bars the plaintiff’s antitrust
claims.
E. Valentine Act claims
The defendants contend that Mohawk’s claims under Ohio’s Valentine Act
should be dismissed because those claims mirror the plaintiff’s meritless federal
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antitrust claims. The Court agrees. The Ohio Supreme Court has held that the
Valentine Act must be construed in harmony with federal antitrust law. See Johnson v.
Microsoft Corp., 834 N.E.2d 791, 800-02 (Ohio 2005). T herefore, for all the reasons
stated above, the plaintiff’s causes of action under the Valentine Act, R.C. 1331.02 &
1331.04, will be dismissed.
IV. Conclusion
For the reasons stated above, the defendants’ respective motions to dismiss are
granted. This matter is dismissed in its entirety.
IT IS SO ORDERED.
/s/ Lesley Wells
UNITED STATES DISTRICT JUDGE
Date: 24 September 2015
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