International Longshore & Warehouse Union v. ICTSI Oregon, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

INTERNATIONAL LONGSHORE AND No. 14-35504

WAREHOUSE UNION; PACIFIC

MARITIME ASSOCIATION, D.C. No.

Plaintiffs-Counter-Claim- 3:12-cv-01058-SI

Defendants-Appellees,

v. OPINION

ICTSI OREGON, INC., an Oregon

corporation,

Defendant-Counter-Claimant-

Plaintiff-Appellant.

Appeal from the United States District Court

for the District of Oregon

Michael H. Simon, District Judge, Presiding

Argued and Submitted October 7, 2016

Portland, Oregon

Filed July 24, 2017

Before: Diarmuid F. O’Scannlain, Richard R. Clifton,

and Jacqueline H. Nguyen, Circuit Judges.

Opinion by Judge O’Scannlain;

Concurrence by Judge Clifton

2 ILWU V. ICTSI OREGON

SUMMARY*

Antitrust

The panel affirmed the district court’s dismissal of an

antitrust claim alleging anticompetitive activities engaged in

jointly by a labor union and a multi-employer collective

bargaining association.

The panel held that the district court did not err in

entering partial final judgment under Federal Rule of Civil

Procedure 54(b) on an antitrust counterclaim in an action

brought under § 301 of the Labor Management Relations Act.

The panel affirmed the district court’s conclusion that the

antitrust issues were discrete and complex, and that the entry

of partial final judgment would not result in duplicative

proceedings.

The panel held that the counterclaimant had standing to

challenge an alleged antitrust conspiracy redounding to the

benefit of the collective bargaining association even though

it was a member of the association.

The panel held that the Noerr-Pennington doctrine

immunized the counterclaim defendants from antitrust

liability for their conduct in filing lawsuits because they did

not engage in sham litigation.

The panel held that the remainder of the counterclaim

defendants’ alleged joint activity was immunized from

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

ILWU V. ICTSI OREGON 3

antitrust liability under § 1 of the Sherman Act because of the

nonstatutory labor exemption. The panel concluded that

under the Mackey test, the alleged agreement restraining trade

primarily affected the parties to the agreement and no one

else; the agreement concerned wages, hours, or conditions of

employment that were mandatory subjects of collective

bargaining; and the agreement was produced from bona fide,

arm’s length collective bargaining. The panel held that an

agreement that violates labor law does not always fail the

second prong of the Mackey test.

Judge Clifton concurred entirely in the result and

reasoning of the disposition as to the merits of the appeal. He

wrote separately to express concern over the district court’s

decision to enter partial final judgment under Rule 54(b), and

agreed with the opinion’s admonition that a preferable

approach would have been for the district court to certify its

order for interlocutory appeal.

COUNSEL

Thomas M. Triplett (argued), Michael T. Garone, and Kelly

T. Hagan, Schwabe Williamson & Wyatt P.C., Portland,

Oregon, for Defendant-Counter-Claimant-Plaintiff-Appellant.

Ronald F. Wick (argued), Cozen O’Connor, Washington,

D.C.; Eleanor J. Morton (argued) Emily M. Maglio, and

Robert S. Remar, Leonard Carder LLP, San Francisco,

California; for Plaintiffs-Counter-Claim Defendants-

Appellees.

4 ILWU V. ICTSI OREGON

OPINION

O’SCANNLAIN, Circuit Judge:

We must decide whether allegedly anticompetitive

activities engaged in jointly by a labor union and a multi-

employer collective bargaining association violate antitrust

law.

I

A

ICTSI Oregon, Inc. (“ICTSI”), a subsidiary of

International Container Terminal Services, Inc., began

operating a marine shipping facility (“Terminal 6”) in 2011,

leased from the Port of Portland. It employed longshoremen

and mechanics, among others, represented by the

International Longshore and Warehouse Union (“ILWU”), a

labor union that represents many of the shore-based laborers

of the maritime industry.

ICTSI is a member of the Pacific Maritime Association

(“PMA”), a multi-employer collective bargaining association

representing many types of maritime employers who hire

dockworkers and longshoremen. PMA represents ICTSI in

collective bargaining negotiations with ILWU.

ILWU and PMA are parties to a collective bargaining

agreement known as the Pacific Coast Longshore and Clerks

Agreement (the “CBA”) covering the entire West Coast of

the United States which governed the employment terms for

all longshoremen employed by ICTSI during all times

relevant to this appeal. The CBA is administered by the Joint

ILWU V. ICTSI OREGON 5

Coast Labor Relations Committee (“Joint Committee”). The

parties disagree over whether the Joint Committee, which

meets regularly as the master labor-management committee

under the CBA, has the authority to issue contractual

interpretations that are binding on all signatories. ILWU and

PMA agreed that, with some exceptions, all reefer work—the

work of plugging, unplugging, and monitoring refrigerated

shipping containers—would be performed by ILWU for all

PMA members.

ILWU sought to perform the reefer work at Terminal 6,

but such work had historically been within the jurisdiction of

the International Brotherhood of Electrical Workers

(“IBEW”). The Joint Committee met on May 23, 2012, to

resolve the disputed work assignment and determined that the

work belonged to ILWU and then ordered ICTSI to assign the

work accordingly. ICTSI argued, and still argues, that the

reefer work at Terminal 6 was not its to assign under the

terms of its lease with the Port of Portland. On June 4, 2012,

an arbitrator, claiming authority under the CBA’s grievance

provisions, determined that ICTSI was in violation of the

CBA and ordered it to give the reefer work at Terminal 6 to

ILWU. The Joint Committee issued another decision a few

days later, incorporating the arbitrator’s decision and

reiterating its previous command that ICTSI grant the

disputed work to ILWU. ICTSI also alleges that PMA, with

the encouragement of ILWU, threatened numerous daily fines

of $50,000 and even expulsion of ICTSI from the collective

bargaining association to goad it into compliance with the

Joint Committee decisions.

6 ILWU V. ICTSI OREGON

Meanwhile, ICTSI commenced a § 10(k) proceeding

under the National Labor Relations Act (“NLRA”), before the

National Labor Relations Board (“NLRB”), to resolve the

jurisdictional dispute between the rival unions. 29 U.S.C.

§ 160(k). The NLRB issued a decision on August 13, 2012,

finding that ILWU workers were not entitled to the reefer

work at Terminal 6, but rather that IBEW workers were. Int’l

Bhd. of Elec. Workers, 358 N.L.R.B. 903, 907 (2012).1

B

1

While the NLRB proceeding was pending, ILWU and

PMA jointly filed this suit against ICTSI in federal district

court under § 301 of the Labor Management Relations Act

(“LMRA”), 29 U.S.C. § 185, asking it to order ICTSI to

comply with the recently issued Joint Committee decisions.

ICTSI counterclaimed and alleged, among other things,

that ILWU and PMA violated Sections 1 and 2 of the

Sherman Act through their agreement to assign the disputed

work to ILWU and their actions taken to enforce such

agreement. 15 U.S.C. §§ 1–2. Specifically, ICTSI alleged that

1

PMA responded by filing a suit in federal district court seeking to

vacate the NLRB’s decision. The district court granted summary judgment

to PMA, but we reversed, concluding that the district court lacked

jurisdiction to review the NLRB’s decision. Pac. Mar. Ass’n v. NLRB,

827 F.3d 1203, 1213 (9th Cir. 2016).

ILWU V. ICTSI OREGON 7

ILWU and PMA used the collective bargaining process to

create a monopoly over longshoreman work on the West

Coast: ILWU benefits because only its workers are able to

perform longshoreman work for PMA-member employers,

and PMA benefits because it collects fees for each hour

worked by ILWU longshoremen.

ICTSI further alleged in its counterclaim that in service of

their agreement to monopolize West Coast port services,

ILWU and PMA worked together to commit various illegal

anticompetitive acts which reduced competition in the

relevant market2—raising prices and injuring consumers.

ICTSI claimed at least $4,000,000 in damages to itself as

well.

2

ICTSI, in its counterclaim, specifically alleged that (1) PMA, with

the encouragement of ILWU, threatened ICTSI with daily fines of $50,000

for refusing to give the disputed reefer work to ILWU workers; (2) PMA

threatened ICTSI with fines for initiating proceedings with the NLRB;

(3) ILWU and PMA improperly used the Joint Committee to issue

determinations before using the federal courts to enforce the collusive,

illegal decisions issued by the Joint Committee; (4) ILWU and PMA

discriminated against non-PMA members, as well as ICTSI, by the terms

of the CBA granting some PMA members an exemption from provisions

granting certain work to ILWU; (5) a PMA board member boycotted the

Port of Portland over ICTSI’s refusal to give the disputed reefer work to

ILWU; (6) ILWU members engaged in slowdown activity at Terminal 6

even after the NLRB determined that ITCSI did not control the disputed

reefer work; (7) ILWU and PMA filed sham lawsuits against ICTSI;

(8) ILWU and PMA interfered in ICTSI’s contractual relationship with the

Port of Portland; (9) ILWU caused other unions to lose similar work in

ports in Washington and San Francisco; (10) ILWU threatened third

parties in other Oregon ports in order to gain access to longshoreman

work; (11) ILWU violated the labor laws; and (12) ILWU and PMA used

a jointly-run hiring hall to send inefficient and unqualified workers to

ICTSI.

8 ILWU V. ICTSI OREGON

2

The district court stayed most of the parties’ claims

pending resolution of various disputes filed before the NLRB.

However, the district court allowed ILWU and PMA to file a

joint motion to dismiss ICTSI’s antitrust counterclaim and

then granted it under Federal Rule of Civil Procedure

12(b)(6), concluding that a shared monopoly claim was not

viable under Section 2 of the Sherman Act and that the

alleged anticompetitive conduct was immunized from

antitrust scrutiny because of a combination of the Noerr-

Pennington doctrine, the statutory labor exemption, and the

nonstatutory labor exemption.

ICTSI moved for entry of a partial final judgment

pursuant to Federal Rule of Civil Procedure 54(b), which the

district court granted, dismissing ICTSI’s antitrust

counterclaim with prejudice. All other issues remain stayed

in the district court pending the resolution of related NLRB

proceedings.3 This timely appeal followed.

3

The related NLRB proceedings cited by the district court are Case

Nos. 19-CC-87504, 19-CD-87505, 19-CC-82533, and 19-CC-82744. The

cases were consolidated for review by an administrative law judge. Int’l

Longshore & Warehouse Union, AFL–CIO, 363 N.L.R.B. No. 12,

2015 WL 5638153, at *2 (Sept. 24, 2015). On September 24, 2015, a

three-member panel of the NLRB affirmed the judge’s decision that

ILWU violated labor law by engaging in improper job actions against

ICTSI and that ILWU must cease engaging in such activity. Id. A three-

member panel of the NLRB affirmed another administrative law judge’s

decision in Case No. 19-CC-100903, concluding that ILWU had engaged

in improper work slowdown activities at Terminal 6 against ICTSI. Int’l

Longshore & Warehouse Union, AFL–CIO, 363 N.L.R.B. No. 47,

2015 WL 7750748 (Nov. 30, 2015).

ILWU V. ICTSI OREGON 9

II

A

ILWU and PMA contend that the district court erred in

entering a Rule 54(b) partial final judgment on the antitrust

counterclaim. They assert that the facts and legal arguments

of the antitrust counterclaim substantially overlap with other

claims and counterclaims before the district court, and that

the district court’s grant of a partial final judgment will

generate piecemeal appeals and waste judicial resources. See

Romoland Sch. Dist. v. Inland Empire Energy Ctr., LLC,

548 F.3d 738, 747 (9th Cir. 2008). Accordingly, they argue

that we should vacate the judgment. See Morrison-Knudsen

Co. v. Archer, 655 F.2d 962, 966 (9th Cir. 1981) (concluding

that if “[t]he claims disposed of by the Rule 54(b) judgment

[are] inseverable, both legally and factually, from claims that

remained unadjudicated in the district court, and there [are]

no unusual and compelling circumstances that otherwise

dictated entry of an early, separate judgment on that part of

the case,” the partial final judgment should be vacated).

We are satisfied that the district court did not err in

concluding that ICTSI’s antitrust counterclaim involved

discrete legal issues separate from those involved in the § 301

ILWU filed petitions for review of both of these NLRB decisions with

the United States Court of Appeals for the District of Columbia Circuit.

Petitioners’ Opening Brief at 3, Int’l Longshore & Warehouse Union v.

NLRB, Nos. 15-1443, 16-1036 (D.C. Cir. Jan. 25, 2017) (discussing both

petitions for review—the case challenging the Sept. 24, 2015 NLRB

decision is referenced as Nos. 15-1344 and 15-1428 (D.C. Cir.)). The

cases were consolidated for oral argument and are currently pending

before the D.C. Circuit. Id. Proceedings in the instant case still before the

district court remain stayed.

10 ILWU V. ICTSI OREGON

litigation or the adjudications still proceeding before the

NLRB. It is true that the factual issues involved in such claim

are closely tied to the factual issues in the labor-law claims

still pending before the district court, but the antitrust

counterclaim involves distinct points of law. Also, the legal

issues before us are complicated and not routine. See Wood

v. GCC Bend, LLC, 422 F.3d 873, 882 (9th Cir. 2005)

(observing that in cases where common factual issues

abound, the entry of a Rule 54(b) partial final judgment

should be reserved for complex and distinct legal issues).

Finally, we agree with the district court’s determination that

entry of a partial final judgment would result in no

duplicative proceedings, even if we reversed the dismissal of

the antitrust counterclaim. Id. at 879.

Whether the district court’s decision to grant ICTSI’s

Rule 54(b) motion was correct is a close call. In

circumstances such as these, we strongly prefer that the

district court “certify its order for interlocutory appeal,”

which allows “the Court of Appeals to protect its docket by

determining for itself whether to accept the issue for review.”

Morrison-Knudsen Co., 655 F.2d at 966. However, because

the issues before us are discrete and complex and we must

give substantial deference to certain elements of the district

court’s analysis, we conclude that the district court did not err

in entering a partial final judgment under Rule 54(b).

B

ILWU and PMA also contend that ICTSI lacks standing

to challenge an alleged conspiracy redounding to the benefit

of PMA because ICTSI itself was a member of PMA when

PMA allegedly benefitted from said conspiracy. To have

standing as an antitrust plaintiff, a party must demonstrate

ILWU V. ICTSI OREGON 11

antitrust injury, meaning it must show “injury of the type the

antitrust laws were intended to prevent and that flows from

that which makes defendants’ acts unlawful.” Atl. Richfield

Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quoting

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,

489 (1977)). An injury caused by an antitrust violation will

not count as an antitrust injury “unless it is attributable to an

anti-competitive aspect of the practice under scrutiny.” Id.

We confronted an analogous situation in Big Bear

Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096 (9th Cir.

1999). The plaintiffs in Big Bear alleged that a group of their

competitors had engaged in a price-fixing scheme. Id. at

1102. Logically, then, the plaintiffs alleged a course of

conduct from which they also stood to benefit. Id. We

observed, however, that in such situations competitors “may

have standing to challenge practices used to enforce a price-

fixing conspiracy” if they allege injury from “practices used

to enforce” the illegal conspiracy. Id.

Here, ICTSI has alleged that ILWU and PMA’s illegal

restraint of trade harmed competition by raising prices to

supra-competitive levels. Importantly, ICTSI also alleged that

it was harmed directly by the efforts of ILWU and PMA to

enforce their illegal agreement. For example, ICTSI alleged

that ILWU and PMA filed sham lawsuits against ICTSI in an

attempt to force its hand.4 This meets the Big Bear

requirement that a party allege “injury resulting from

practices used to enforce the alleged [illegal anticompetitive]

conspiracy.” Id. ICTSI thus has standing to bring its antitrust

counterclaim.

4

See supra note 2 (describing the harmful and illegal actions ILWU

and PMA allegedly took against ICTSI to enforce their illegal agreement).

12 ILWU V. ICTSI OREGON

III

On the merits of the appeal, ICTSI contends that the

district court made several errors in dismissing its

counterclaim.5

A

ICTSI first contends that the district court erred in its

interpretation of the Noerr-Pennington doctrine, which

provides immunity and “broad antitrust protection for those

who ‘petition the government for a redress of grievances.’”

USS-POSCO Indus. v. Contra Costa Cnty. Bldg. & Constr.

Trades Council, AFL-CIO, 31 F.3d 800, 810 (9th Cir. 1994)

(quoting City of Columbia v. Omni Outdoor Advert., Inc.,

499 U.S. 365, 378 (1991)). ICTSI alleges that ILWU and

PMA filed sham lawsuits in furtherance of their conspiracy

to restrain trade and to monopolize longshore services.

Although Noerr-Pennington immunity extends to judicial

proceedings,6 it does not protect persons engaging in sham

5

“We review dismissal of a complaint without leave to amend de

novo.” Big Bear, 182 F.3d at 1101. “All allegations of material fact are

taken as true and construed in the light most favorable to the nonmoving

party.” Id. (quoting Cahill v. Liberty Mut. Ins., 80 F.3d 336, 337–38 (9th

Cir. 1996)). However, the party must allege “enough facts to state a claim

to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007). “A complaint may be dismissed without leave to amend

only ‘when it is clear that the complaint cannot be saved by further

amendment.’” Big Bear, 182 F.3d at 1101 (quoting Dumas v. Kipp,

90 F.3d 386, 389 (9th Cir. 1996)).

6

ICTSI argues that ILWU and PMA waived the affirmative defense

of Noerr-Pennington immunity. But this appeal followed ILWU and

PMA’s successful motion to dismiss ICTSI’s antitrust counterclaim. Even

ILWU V. ICTSI OREGON 13

litigation. USS-POSCO Indus., 31 F.3d at 810. Litigation will

be labeled a sham if it is “objectively baseless,” and

“conceal[s] ‘an attempt to interfere directly with the business

relationships of a competitor.’” Id. (quoting Prof’l Real

Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S.

49, 60–61 (1993)). In the context of a series of alleged sham

proceedings, however, “the question is not whether any one

[suit] has merit . . . but whether they are brought pursuant to

a policy of starting legal proceedings without regard to the

merits and for the purpose of injuring a market rival.” Id. at

811. In such a context, the legal success of an occasional

sham suit is irrelevant. Id. (“[E]ven a broken clock is right

twice a day.”).

ICTSI has not alleged enough sham suits to establish a

pattern of baseless or repetitive claims. ICTSI points to only

two allegedly meritless suits, one by PMA and one by ILWU

and PMA. Two sham suits cannot amount to “a whole series

of legal proceedings” or a “pattern of baseless, repetitive

claims.” Amarel v. Connell, 102 F.3d 1494, 1519 (9th Cir.

1996) (quoting USS-POSCO Indus., 31 F.3d at 811; Prof’l

Real Estate Investors, 508 U.S. at 58).

Because there is no pattern of baseless claims, we engage

in a two-step inquiry, evaluating each suit individually. Step

one asks whether the alleged sham suit was meritless. Prof’l

assuming that Noerr-Pennington immunity is an affirmative defense—an

assumption that may not be warranted—it would not be waived unless

ILWU and PMA omitted it from their answer to ICTSI’s counterclaim.

See Fed. R. Civ. P. 8(c)(1); see also Bayou Fleet, Inc. v. Alexander,

234 F.3d 852, 861 (5th Cir. 2000) (rejecting waiver argument where

plaintiff “knew Noerr-Pennington was a potential issue throughout most

of the discovery process”). ILWU and PMA have not yet answered the

antitrust counterclaim.

14 ILWU V. ICTSI OREGON

Real Estate Investors, 508 U.S. at 60. The burden is on “the

plaintiff to disprove the challenged lawsuit’s legal viability.”

Id. at 61 (emphasis omitted). “Only if challenged litigation is

objectively meritless may a court” proceed to step two to

analyze whether the baseless suit was an attempt to directly

interfere with the business of a competitor. Id. at 60–61.

This means that ICTSI must “disprove the challenged

lawsuit’s legal viability.” Id. at 61. A suit has merit “[i]f an

objective litigant could conclude that the suit is reasonably

calculated to elicit a favorable outcome.” Id. at 60. For

example, a suit is not objectively meritless if it is “arguably

warranted by existing law or at the very least [is] based on an

objectively good faith argument for the extension,

modification, or reversal of existing law.” Id. at 65.

1

PMA’s suit collaterally attacking the NLRB’s § 10(k)

jurisdictional award was not objectively baseless. The district

court, in fact, granted summary judgment in that case to

PMA. Pac. Mar. Ass’n, 827 F.3d at 1204 (reviewing the

district court’s decision). While we reversed that decision,

holding that the district court lacked jurisdiction, we noted

that the NLRB’s § 10(k) determination likely violated the

NLRA. Id. at 1210. Even if the NLRB’s jurisdictional award

survives all further challenges, PMA’s suit challenging the

agency’s determination is at least “arguably warranted by

existing law” given that two federal courts have concluded it

had substantial merit. Prof’l Real Estate Investors, 508 U.S.

at 65.

ILWU V. ICTSI OREGON 15

2

The joint suit by ILWU and PMA against ICTSI under

§ 301 of the LMRA—from which the antitrust counterclaim

of this appeal grew—is a more difficult case. The district

court stayed claims related to reefer work at the Port of

Portland pending resolution of the inter-union jurisdictional

disputes before the NLRB and our court. But ILWU and

PMA maintained the joint suit even after success became

very unlikely. Once a § 10(k) order becomes final, it takes

precedence over any inconsistent arbitration award. See

Carey v. Westinghouse Elec. Corp., 375 U.S. 261, 272

(1964); Int’l Longshoremen’s & Warehousemen’s Union,

Local 32 v. Pac. Mar. Ass’n, 773 F.2d 1012, 1021 (9th Cir.

1985).

The NLRB has also repeatedly held that a § 301 suit

brought to achieve results contrary to a § 10(k) award is

illegal and constitutes an unfair labor practice. See, e.g., Sheet

Metal Workers Int’l Ass’n, 357 N.L.R.B. 1577, 1578 (2011)

(affirming an ALJ’s determination that “following the

Board’s 10(k) award, [a union]’s maintenance of its [§] 301

lawsuit was incompatible with the Board’s award and,

therefore, had an objective that was illegal under Federal

law”); Local 30, United Slate, Tile, & Composition Roofers,

Damp & Waterproof Workers Ass’n, 307 N.L.R.B. 1429,

1430 (1992).

However, the facts of ILWU and PMA’s § 301 lawsuit

suggest that it may be legally viable. ILWU and PMA

brought their § 301 claim on June 13, 2012. The NLRB

issued its § 10(k) determination on August 13, 2012. In

response to such determination, the district court stayed the

16 ILWU V. ICTSI OREGON

§ 301 claim pending final resolution and then the exhaustion

of appeals related to the NLRB’s jurisdictional determination.

ILWU and PMA did not bring a frivolous § 301 suit when

they initiated this lawsuit against ICTSI: an arbitrator had

interpreted a CBA binding on PMA, ILWU, and ICTSI, and

§ 301 authorizes suits in federal court to enforce such

decisions. Therefore, ILWU and PMA’s suit to enforce the

arbitrator’s decision was not objectively baseless or frivolous

at the time it was filed.

Though the suit was maintained after the NLRB’s

unfavorable ruling, ILWU and PMA were also collaterally

challenging the § 10(k) award that would trump their § 301

suit. As recounted above, the collateral attack on the NLRB’s

§ 10(k) decision proved unsuccessful, but only after two

federal courts observed that the NRLB’s decision was likely

incorrect. ILWU continues to fight the NLRB’s § 10(k)

decision as well. See supra note 3. It would make little sense

to hold that a suit lacked merit because it was maintained

while the plaintiffs were actively challenging the

impediments to such suit. The § 301 suit has not been

frivolously maintained; rather, it has been “arguably

warranted by existing law or at the very least [is] based on an

objectively good faith argument for the extension,

modification, or reversal of existing law.” Prof’l Real Estate

Investors, 508 U.S. at 65. That ends the inquiry: the § 301 suit

is covered by Noerr-Pennington immunity.

B

ICTSI next contends that the district court erred when it

concluded that the remainder of ILWU and PMA’s alleged

ILWU V. ICTSI OREGON 17

“Joint Activity”7 is immunized from antitrust liability under

Section 1 of the Sherman Act because of the nonstatutory

labor exemption, even though such activity allegedly includes

actions by ILWU and PMA that violate labor law.8

1

The nonstatutory, or implied labor, exemption

“recognizes that, to give effect to federal labor laws and

policies and to allow meaningful collective bargaining to take

place, some restraints on competition imposed through the

bargaining process must be shielded from antitrust

sanctions.” Brown v. Pro Football, Inc., 518 U.S. 231, 237

(1996); see also United Mine Workers of Am. v. Pennington,

381 U.S. 676, 711 (1965) (Goldberg, J., concurring in part

and dissenting in part) (discussing how the nonstatutory

exemptions protects the scheme of collective bargaining

sanctioned and mandated by the NLRA from being

“destroyed by the imposition of Sherman Act” penalties).

This exemption includes “some union-employer agreements.”

7

The Joint Activity includes all of the allegations discussed above,

such as ILWU and PMA agreeing to discriminate against ICTSI and other

non-PMA employers by treating PMA members preferentially. Supra note

2; see also supra note 3 (discussing NLRB decisions concluding that

ILWU violated labor law).

8

For example, it includes allegations that ILWU and PMA entered

into an illegal agreement to engage in secondary boycotts against ICTSI

with the purpose of seizing work for ILWU. The NLRA, in § 8(e),

prohibits “hot cargo” agreements, as well as secondary boycotts or

agreements to not do business with third parties, between employers and

unions. 29 U.S.C. § 158(e).

18 ILWU V. ICTSI OREGON

Connell Const. Co. v. Plumbers & Steamfitters Local Union

No. 100, 421 U.S. 616, 622 (1975).9

The nonstatutory exemption shields collective bargaining

agreements and actions related to collective bargaining from

antitrust liability. Phoenix Elec. Co. v. Nat’l Elec.

Contractors Ass’n, 81 F.3d 858, 860 (9th Cir. 1996). The

exemption prevents courts, sitting in antitrust, from asserting

authority over the collective bargaining process and

determining “through application of the antitrust laws, what

is socially or economically desirable collective-bargaining

policy.” Brown, 518 U.S. at 242. It reflects antitrust law’s

complex relationship with labor law—a relationship

complicated by Congress’s struggle to determine where

socially desirable anticompetitive action in support of labor

ends and socially undesirable anticompetitive action, whether

in support of labor or not, begins. See, e.g., Richard A.

Epstein, Labor Unions: Saviors or Scourges?, 41 Cap. U. L.

Rev. 1, 18–23 (2013) (discussing the historical development

of antitrust laws and its interaction with labor law).

Whether the nonstatutory exemption applies depends on

the so-called Mackey test. Phoenix Elec., 81 F.3d at 861

(citing Mackey v. Nat’l Football League, 543 F.2d 606, 614

(8th Cir. 1976)). An alleged agreement restraining trade is

shielded from antitrust liability only if the following three

parts of the test are satisfied: “(1) the restraint primarily

affects the parties to the agreement and no one else, (2) the

agreement concerns wages, hours, or conditions of

9

The statutory labor exemption applies only where unions act

unilaterally; therefore, it does not shield collective bargaining agreements

from antitrust scrutiny. See United States v. Hutcheson, 312 U.S. 219,

231–32 (1941).

ILWU V. ICTSI OREGON 19

employment that are mandatory subjects of collective

bargaining, and (3) the agreement is produced from bona fide,

arm’s-length collective bargaining.” Id. Though developed in

the Eighth Circuit, the Mackey test was formally adopted by

this court in Continental Maritime of San Francisco, Inc. v.

Pacific Coast Metal Trades District Council, 817 F.2d 1391

(9th Cir. 1987). Id.

2

ICTSI contends that the district court misapplied the

Mackey test and thus erred in concluding that the Joint

Activity was covered by the nonstatutory exemption. ICTSI

also argues that conduct violating labor laws, particularly

violations of Section 8(e) of the NLRA prohibiting secondary

boycotts and related actions, cannot qualify for the

nonstatutory exemption because post-Mackey cases have

modified the test to exclude unfair labor practices and other

illegal conduct. Both arguments rely on ICTSI’s allegations

that some of the Joint Activity violated labor laws.10

ICTSI’s arguments focus on whether the second prong of

the Mackey test—does the alleged agreement concern a

mandatory subject of collective bargaining—precludes illegal

agreements or related conduct from being covered by the

nonstatutory exemption. ICTSI asserts that an illegal

agreement never qualifies as a “mandatory subject[] of

collective bargaining,” and thus any illegal conspiracy fails

prong two. See Phoenix Elec., 81 F.3d at 861. Alternatively,

ICTSI contends that the Supreme Court and our circuit have

modified the Mackey test by adding the requirement that the

alleged agreement conforms to the requirements of labor law.

10

See supra note 8.

20 ILWU V. ICTSI OREGON

3

A cursory glance at Supreme Court precedent would seem

to suggest ICTSI’s contention that an illegal agreement

always fails the Mackey test is correct. For instance, in 1975

the Supreme Court denied the nonstatutory exemption,

observing that “[t]here is no legislative history in the 1959

Congress suggesting that labor-law remedies for § 8(e)

violations were intended to be exclusive.” Connell, 421 U.S.

at 634. And the Supreme Court later read Connell as holding

that agreements running afoul of Section 8(e) of the NLRA

were “subject to the antitrust laws.” Kaiser Steel Corp. v.

Mullins, 455 U.S. 72, 85 (1982). The Court explained that

Connell decided whether the agreement in question violated

§ 8(e) because “[i]t was necessary to do so to determine

whether the agreement was immune from the antitrust laws.”

Id.

However, we extensively analyzed Connell post-Kaiser

and rejected the notion that every § 8(e) violation loses the

benefit of the nonstatutory exemption. Richards v. Neilsen

Freight Lines, 810 F.2d 898, 905–06 (9th Cir. 1987). In

Richards, a trucking company alleged that the Teamsters

union conspired with several rival trucking companies to

engage in boycott agreements in violation of § 8(e). Id.

Though the trucking companies were all formally rivals, the

defendant companies were also customers of the plaintiff

trucking company because the defendants would use the

plaintiff company for the final stages of certain local

deliveries. Id. at 900. The plaintiff alleged that the boycott

agreements were for the purpose of pressuring the plaintiff to

accept the Teamsters union. Id. at 905–06.

ILWU V. ICTSI OREGON 21

We concluded that “[e]ven if such conduct were a

violation of the labor law, it would bear such a close and

substantial economic relation to a union’s legitimate [ends]

that it falls well within the purpose and the coverage of the

exemption from antitrust liability.” Id. at 904. The Richards

court read Connell to hold that agreements violating § 8(e)

would fall outside the nonstatutory exemption only when the

alleged agreements “pose actual or potential anticompetitive

risks other than those related to a reduction in competitive

advantages based on differential wages or working

conditions.” Id. at 906.

The alleged agreements in Richards “may have had an

effect on [the plaintiff],” but such effect “apart from

competition related to wages and working conditions, was not

pervasive as with the agreement at issue in Connell.” Id.

Then-Judge Kennedy, writing for the court, concluded by

observing that “[i]t is not paradoxical that a labor law

violation may still be within the antitrust exemption, for the

violation will carry its own remedies under the labor laws.”

Id.

While acknowledging that agreements violating § 8(e)

could expose parties to antitrust liability, we concluded that

Connell stood for the proposition that antitrust liability would

attend such agreements only where there was some showing

of substantial anticompetitive effects outside of those

anticipated and protected by the nonstatutory exemption. Id.

at 905 (citing Connell, 421 U.S. at 625 (discussing how the

union’s goal in this case would have substantial

anticompetitive effects “that would not follow naturally from

the elimination of competition over wages and working

22 ILWU V. ICTSI OREGON

conditions”)).11 We conclude this logic also extends to actions

taken in support of such an agreement. See id. at 905–06

(discussing actions taken by the union to support the

agreement).

Here, the Joint Activity alleged to violate § 8(e) has the

purpose of gaining the reefer work at Terminal 6 for ILWU

by suppressing competition. ICTSI contends that the

conspiracy’s ultimate purpose is “to expand the ILWU/PMA

bargaining unit at the expense of third-party bargaining units”

so that ILWU gains a monopoly, supported by PMA, over

various types of West Coast port work.

Taking ICTSI’s allegations as true, it still alleges no

anticompetitive harm unrelated to wages and working

conditions. Even if the ends of the allegedly illegal Joint

Activity were achieved, the result would be that ICTSI

replaced IBEW reefer workers with ILWU reefer workers at

Terminal 6. The relevant market in which competition would

be reduced is the labor market—specifically, the ability of

other labor unions to compete against ILWU for this kind of

work. However, in the course of advocating for benefits for

11

Whether one views suppressing competition in the labor market to

benefit labor as a desirable policy depends on one's political preferences,

but is not at issue in the instant case. See generally Alex Bryson, Union

Wage Effects, IZA World of Labor 2014:35 (July 2014),

https://wol.iza.org/uploads/articles/35/pdfs/union-wage-effects.pdf

(discussing the benefits and costs of labor unions with respect to their

impact on the labor market); Ralph K. Winter, Jr., Collective Bargaining

and Competition: The Application of Antitrust Standards to Union

Activities, 73 Yale L.J. 14, 19 (1963). Congress has presumably exempted

certain anticompetitive actions from antitrust scrutiny because it has

determined that the social benefits of suppressing competition in the labor

market sometimes outweigh the costs, and we must respect its decision.

See, e.g., Brown, 518 U.S. at 242.

ILWU V. ICTSI OREGON 23

their members, labor unions may have to suppress

competition relating to wages and working conditions. See

Richards, 810 F.2d at 806 (discussing the impact union

activity had on competition in the labor market). Any harms

flowing from suppressing competition among labor unions in

the instant case would be “related to a reduction in

competitive advantages based on differential wages or

working conditions.” Id.

In fact, the situation in this case is very analogous to

Richards: ICTSI alleges that formal rivals, who are also

customers, have entered into illegal agreements with a union

which would allow the union to seize work at the facility

operated by ICTSI. Richards could be distinguished from this

case insofar as the work sought by ILWU is currently being

performed by another union, IBEW, instead of non-unionized

workers. But, the only anticompetitive harm that ICTSI

alleges is that ILWU would be able to capture anticompetitive

wages by suppressing competition, leading to higher prices

for consumers. The suppressed competition just happens to be

another labor union instead of individual workers. In both

cases competition amongst labor is being suppressed to

benefit a specific union. ICTSI alleges agreements that, even

if illegal and “carry[ing] [their] own remedies under the labor

laws,” id., are still “within the purpose and the coverage of

the exemption from antitrust liability.” Id. at 904.

“[I]n some cases a violation of the labor laws may involve

conduct whose consequences are so far-reaching that it falls

outside the exemption,” but that is not the case here. Id. at

906. For example, in Connell, a building trades union (“Local

100”) “supported its efforts to organize mechanical

subcontractors by picketing certain general contractors.”

421 U.S. at 618. If Local 100 succeeded, “the restriction on

24 ILWU V. ICTSI OREGON

subcontracting would eliminate competition . . . on subjects

unrelated to wages, hours, and working conditions [and]

could result in significant adverse effects on the market and

on consumers . . . unrelated to the union’s legitimate goals of

organizing workers and standardizing working conditions.”

Id. at 624. Here, ICTSI has failed sufficiently to allege that

the Joint Activity will lead to anticompetitive harms “that

would not follow naturally from the elimination of

competition over wages and working conditions.” Id. at 625.

ICTSI counters Richards by pointing out that illegal

conduct is not a mandatory subject of collective bargaining.

But, we have never explicitly or implicitly overruled

Richards, which held that agreements violating § 8(e) did not

automatically lose the benefit of the nonstatutory exemption.

For example, Phoenix Electric and Richards can be

reconciled by reading Richards as holding that illegal

agreements still satisfy prong two of the Mackey test if such

agreements concern mandatory subjects of collective

bargaining. Compare Phoenix Elec., 81 F.3d at 861, with

Richards, 810 F.2d at 905–06. As discussed above, Richards

also covers conduct in support of an illegal agreement. See

Richards, 810 F.2d at 905–06. This interpretation is

supported by our court’s emphasis in later cases on whether

or not the alleged conduct is “regulated by labor law” and

“anchored in the collective-bargaining process.” See, e.g.,

California ex rel. Harris v. Safeway, Inc., 651 F.3d 1118,

1131 (9th Cir. 2011) (en banc). And work assignments are a

mandatory subject of collective bargaining. Antelope Valley

Press, 311 N.L.R.B. 459, 460 (1993). Labor law, not antitrust

law, should generally govern work assignment disputes.

Illegal conduct relating to “mandatory subjects of

collective bargaining,” such as wages or conditions of

ILWU V. ICTSI OREGON 25

employment, does not remove the alleged agreements or

related conduct from the scope of the nonstatutory exemption

under the Mackey test. This includes violations of § 8(e).

4

ICTSI further contends that Richards is no longer good

law. ICTSI points to two cases in particular, Brown, 518 U.S.

231, and Safeway, 651 F.3d 1118, that purportedly overrule

Richards.

In Brown, the Supreme Court held that the nonstatutory

exemption covered an employer-only agreement among a

multi-employer bargaining unit. 518 U.S. at 238. Brown arose

out of failed collective bargaining negotiations between the

National Football League, a group of employers, and the NFL

Players Association, a labor union. Id. at 234–35. When the

parties bargained to impasse over the pay and working

conditions of young, rookie players on the various teams’

development squads, the League unilaterally imposed the

terms of its last, best offer on the players. Id. Hundreds of

players on the development squads brought a suit under

Section 1 of the Sherman Act. Id. at 235. At trial, the district

court held that the League could not avail itself of the

nonstatutory exemption. Id. The Court of Appeals for the

District of Columbia Circuit reversed in an opinion eventually

affirmed by the Supreme Court. Id. The Supreme Court

concluded that the nonstatutory exemption applied because

the alleged conduct grew out of a lawful collective bargaining

process, involved matters of mandatory bargaining, and

concerned only the parties to the collective bargaining

relationship. Id. at 250.

26 ILWU V. ICTSI OREGON

Brown contains numerous references tying the Supreme

Court’s holding to approval of the alleged conduct in labor

law cases.12 The Court began its analysis by “assum[ing] that

such conduct, as practiced in this case, is unobjectionable as

a matter of labor law and policy.” Id. at 238. More

importantly, the court specifically tied its conclusion to such

legality. Id. (“On that assumption [of legality], we conclude

that the exemption applies.”).

But Brown did not review the applicability of the

nonstatutory exemption generally. Rather, Brown dealt with

whether the exemption, traditionally applied to collective

bargaining agreements between employers and employees,

should extend to the context of employer-only agreements. Id.

at 238. In this respect, tying the holding of Brown to labor

law’s approval seems to make sense: employer-only collusion

logically presents a greater risk of cartel-generating activity

that harms the interests of labor than an agreement formed

with the input of both management and labor. And the Court

also recognized that the scope of the collective bargaining

exemption from antitrust scrutiny cannot be limited strictly to

terms to which both labor and management give consent: the

nonstatutory exemption must apply, for instance, to a multi-

employer bargaining group’s discussions about positions

taken both before and after impasse. Id. at 243–44.

12

When collective bargaining is undertaken in good faith, but labor

and management reach an impasse as to terms covering wages, working

conditions, and other mandatory terms of bargaining, the employer is

allowed to impose its last, best offer without committing an unfair labor

practice or violating the law. Brown, 518 U.S. at 238 (“Both the Board and

the courts have held that, after impasse, labor law permits employers

unilaterally to implement changes in pre-existing conditions, but only

insofar as the new terms meet carefully circumscribed conditions.”).

ILWU V. ICTSI OREGON 27

Though Brown’s holding does rely, in part, on the labor-

law legality of the conduct in question, the opinion also notes

that such conduct’s close relation to the collective bargaining

process distinguishes it from the class of behavior governed

by antitrust law. The Supreme Court noted that “labor laws

give the Board, not antitrust courts, primary responsibility for

policing the collective-bargaining process.” Brown, 518 U.S.

at 242. In expanding the nonstatutory exemption to some

employer-only agreements, the Supreme Court did not require

that only conduct blessed by the labor laws could receive the

exemption going forward. Nor did the court overrule

Richards, Phoenix Electric, Mackey, or related cases. But see

Eller v. National Football League Players Ass’n, 731 F.3d

752, 754–55 (8th Cir. 2013) (“[A] nearly unanimous Supreme

Court . . . overrul[ed] Mackey . . . .”).

Similarly, in Safeway our court applied Brown to

determine whether the nonstatutory exemption applied in the

context of a multi-employer bargaining association’s

unilateral action. 651 F.3d at 1128–32. In Safeway, a group of

employers decided to share and to redistribute certain

revenues in the event that a party to their agreement

experienced a strike or lockout. Id. at 1123. The en banc court

denied the nonstatutory exemption, noting that the employers’

agreement was not “approved or regulated by labor law.” Id.

at 1131 (emphasis added). The conduct in the instant

case—work assignments—is regulated by labor law. The

revenue sharing agreement in Safeway was not the type of

issue historically regulated by labor law. Id. at 1130. Finally,

we never held that conduct violating labor laws automatically

fell outside of the nonstatutory exemption.

28 ILWU V. ICTSI OREGON

5

But does the Mackey test justify application of the

nonstatutory exemption to the alleged Joint Activity?

First, the alleged conduct primarily affects the parties to

the agreement. ICTSI is a member of PMA and a party to the

CBA, and there are no allegations in ICTSI’s counterclaim

that the CBA purports to govern the conduct of nonparties.

See Phoenix Elec., 81 F.3d at 862 (finding it relevant to the

first prong of Mackey that an agreement “does not attempt to

impose its terms on any nonsignatory party”).

Second, the alleged anticompetitive agreement between

ILWU and PMA giving rise to the Joint Activity concerns a

mandatory subject of collective bargaining under Section 8(d)

of the NLRA. 29 U.S.C. § 158(d). Work assignments are a

mandatory subject of collective bargaining, though the scope

of the bargaining unit is not. Antelope Valley Press,

311 N.L.R.B. at 460. ICTSI admits in its pleadings that

ILWU and PMA have negotiated collective bargaining

agreements for many years “covering virtually all longshore

work in all West Coast ports.” Specifically, ICTSI alleges

that the CBA assigned reefer work within the bargaining unit

to ILWU, and that ILWU had performed this work at some

West Coast ports before that time. ICTSI alleges, therefore,

that the alleged agreements between ILWU and PMA

concerned work assignments within the bargaining unit of the

West Coast. See Maui Trucking, Inc. v. Operating Eng’rs

Local Union No. 3, 37 F.3d 436, 439 (9th Cir. 1994)

(suggesting that the “relevant work universe [is] coextensive

with the bargaining unit”).

ILWU V. ICTSI OREGON 29

Finally, the alleged Joint Activity was the result of a bona

fide, arm’s-length agreement. ICTSI alleges that there is at

least a factual question as to the third Mackey

requirement—the good faith requirement—because ILWU

and PMA would both benefit in the event that ILWU gains

jurisdiction over additional work. ICTSI argues that the

nonstatutory exemption presupposes an adversarial

relationship.

Phoenix Electric gives little direction on what the good

faith requirement entails, but the Eighth Circuit offers more

guidance in Mackey, 543 F.2d at 615–16. In first applying

what would become the Mackey test, the Eighth Circuit held

that the evidence of one-sided bargaining in which one party

dominated the other to impose unilaterally its own terms

could not qualify as bona fide bargaining. Id. at 615 (“[T]he

parties’ collective bargaining history reflected nothing which

could be legitimately characterized as bargaining.”). The

court noted an absence of any quid pro quo in the bargaining

process in Mackey, and the relative bargaining strengths of

the parties was also significant. Id. at 616. Presumably, this

is part of the analysis that we adopted in Phoenix Electric

when we endorsed the Mackey test. Phoenix Elec., 81 F.3d at

861.13

13

The Eighth Circuit concluded that the Supreme Court overruled

Mackey in Brown. Eller, 731 F.3d at 754–55. However, this decision does

not help ICTSI on the arm’s-length question. Instead, Brown makes it

easier for parties to argue their agreement is arm’s-length—before Brown

only union-employer agreements seemed to qualify for the nonstatutory

exemption in NFL litigation, but now employer-only agreements qualify

too (meaning employer-only agreements now qualify as arm’s-length or

such requirement no longer exists at all). Id.

30 ILWU V. ICTSI OREGON

Such conditions are absent from the allegations put

forward by ICTSI. Some degree of quid pro quo between

ILWU and PMA forms part of ICTSI’s allegations: ICTSI

notes ways in which the alleged agreements would benefit

both ILWU and PMA. And the lack of an overly adversarial

collective bargaining process should not, in itself, imperil the

nonstatutory exemption. The purpose of labor law in the

United States, after all, is to promote “sound and stable

industrial peace.” 29 U.S.C. § 171(a).

6

For all of the above reasons, the nonstatutory exemption

shields the alleged Joint Activity of ILWU and PMA from

antitrust scrutiny and ICTSI’s counterclaim was properly

dismissed.14

14

Because the nonstatutory exemption covers all the Joint Activity in

furtherance of the alleged conspiracy—including allegations that ILWU

“engaged in slowdowns, work stoppages, safety gimmicks” and similar

activities “to force ICTSI to assign the disputed work to the ILWU”—we

need not reach, and choose not to reach, the question of whether the

district court erred in applying the statutory exemption to shield certain

activity by ILWU from antitrust scrutiny. The wrongs dismissed under the

statutory exemption by the district court are shielded from antitrust

liability by the nonstatutory exemption.

We also need not, and do not, reach the question of whether the

district court erred by concluding that shared monopoly claims are not

actionable under § 2. The dismissed § 2 claim is also barred by the

nonstatutory exemption. See Brown, 518 U.S. at 235 (discussing “the

‘nonstatutory’ labor exemption from the antitrust laws” (emphasis

added)).

ILWU V. ICTSI OREGON 31

IV

The judgment of the district court is AFFIRMED.15

CLIFTON, Circuit Judge, concurring:

I concur entirely in the result and reasoning of the

disposition as to the merits of ICTSI’s appeal. I write

separately to express concern over the district court’s

decision to enter partial final judgment under Rule 54(b) on

ICTSI’s federal antitrust counterclaim. I agree with the

opinion’s admonition that, in circumstances like these, a

preferable approach would be for the district court to certify

its order for interlocutory appeal. Alternatively, the district

court in this case should have refused appellate review

altogether.

Most importantly, for purposes of Rule 54(b)

certification, it is not obvious why there was “no just reason

for delay” in entering partial final judgment on ICTSI’s

antitrust counterclaim. Fed. R. Civ. P. 54(b). Entering partial

final judgment instead promoted a disfavored piecemeal

appeal. See Curtiss-Wright Corp. v. General Electric Co.,

446 U.S. 1, 10 (1980). I accept the district court’s

determination, affirmed by our court’s opinion, that the

antitrust counterclaim raised discrete and independent issues

of law. Even so, the counterclaim was ultimately secondary

to the primary dispute at issue in this case: a jurisdictional

dispute between rival unions over reefer work assignments.

15

ICTSI’s motion for judicial notice is GRANTED. See Small v.

Avanti Health Systems, LLC, 661 F.3d 1180, 1186 (9th Cir. 2011).

32 ILWU V. ICTSI OREGON

Allowing the main action to proceed at the district court, even

if stayed pending the resolution of related NLRB

proceedings, may have resulted in resolution of the parties’

primary dispute, thereby obviating the need for an appeal

addressing ICTSI’s follow-on antitrust counterclaim. Under

these circumstances, I cannot say that the interests of “sound

judicial administration” were served by this appeal. Wood v.

GCC Bend, LLC, 422 F.3d 873, 882 (9th Cir. 2005).

We have treated the judgment as final, and that makes

sense at this point for reasons of efficiency and simplicity, but

I hope this is not a course that is repeated in the future.