Petition — COMMERCE TANKERS CORP. v. NATIONAL MARITIME UNION (No. 77-376)
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SEP 9
1977
In The MICHAEL RODAK, JR., CLERK
Supreme Court of the Huited States
October Term, 1977
~—
No.
a
07" 376
COMMERCE TANKERS CORPORATION and VANTAGE
STEAMSHIP CORP.,
Petitioners,
vs.
NATIONAL MARITIME UNION OF AMERICA, AFL-CIO,
Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT
D. DAVID COHEN
185 Community Drive
Great Neck, New York 11022
(516) 487-0140
MARTIN C. SEHAM
SURREY, KARASIK, MORSE & SEHAM
500 Fifth Avenue
New York, New York 10036
(212) 239-7200
Attorneys for Petitioners
088 LUTZ APPELLATE PRINTERS, INC.
Law and Financial Printing
South River, N.J. New York, N.Y. Philadelphia, Pa. Washington, D.C.
(201) 257-6850 (212) 840-9494 (215) 563-5587 (202) 783-7288
TABLE OF CONTENTS
Page
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SE Gr GD GEE cécccncceciccconcccncccoccansecese
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2. The Preliminary Injunction .................6..
ae — § PRS eee Aarne reer
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Reasons for Granting the Writ:
I. The Court of Appeals erred in limiting petitioners’
‘ recovery against the NMU for wrongful injunction to
the amount of the injunction bond. The provisions of
Rule 65(c) requiring the posting of a bond for
security do not explicitly or implicitly establish such
SB, 0 6600000000 4006000006encusepescose
Il. The Court of Appeals erred in failing to consider
whether under the facts of this case, imposition of
the injunction bond limitation deprived petitioners of
their constitutional right to procedural due process. .
Ill. The Court of Appeals erred in instructing the
District Court, on remand, to make detailed findings
on the anti-competitive effects of the restraint-on-
Contents
Page
transfer clause, or in the event that the rule of reason
inquiry should apply, on the anti-competitive
purposes of the clause. ...........eeeeeeeeeeees 14
NS ee cine 5k odes beudadedeeseetcconselets 17
TABLE OF CITATIONS
Cases Cited:
Associated General Contractors v. Illinois Conference of
Teamsters, 486 F.2d 972 (7th Cir. 1973) .............. 8
Bein v. Heath, 53 U.S. (12 Howard) 168 (1851) ............ 8
Benz v. Compania Naviera Hidalgo, S.A., 205 F.2d 944
SE ES EE 6004 6 60NE 6 dn hSSncdecesSésescoesesece 7
Connell Construction Company, Inc. v. Plumbers &
Steamfitters Local No. 100, 421 U.S. 616 (1975) ....... 2, 16
First-Citizens Bank & Trust Company v. Camp, 432 F.2d
f { 5 irate pees ere rr errr rr 14
Fuentes v. Shevin, 407 U.S. 67 (1972) ..........ceeeeeeees il
Goldberg v. Kelly, 397 U.S. 254 (1970) .............000055 1]
International Ladies’ Garment Workers’ Union v. Donnelly
Garment Co., 147 F.2d 246 (8th Cir. 1945), cert. denied,
Be Ce ID ited. itindc.ne 60-00960066606800066 7
Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207
SEED coccnbdsvonebes bobhceniedsuccteGibecdstobides 15
ii
Contents
Local 1976 United Bhd. of Carpenters v. N.L.R.B. (Sand
Le HUE UE Wecctcccccccececccoscceccs
Local Union No. 48 Sheetmetal Workers International
v. Hardy Corp., 332 F.2d 682 (Sth Cir. 1964) .........
Marshall Durbin Farms, Inc. v. National Farmers Organ-
ization, 446 F.2d 353 (Sth Cir. 1971) .................
Meyers v. Block, 120 U.S. 206 (1887) ............eeeeeees
Moore-McCormack Lines, Inc., 139 N.L.R.B. 796 (1962)
National Maritime Union (Overseas Carriers Corp.), 174
FE SOD EETETD ccvccccosesececstvcevcesescoses
National Woodwork Mfrs. Association v. NLRB, 386 U.S.
Pt cceheaddc buy beuuiddennseedsuasesceceseue
NLRB v. National Maritime Union, 486 F.2d 907 (2d
Cir: 1973), cert. denied, 416 U.S. 970 (1974) ..........
Russell v. Farley, 105 U.S. 433 (1881) ................00.-
United Motors Service v. Tropic-Aire, 57 F.2d 479 (8th
RE ee a a ee oe
United States Steel Corp. v. United Mine Workers, 456 F.
2d 483 (3rd Cir. 1927), cert. denied, 408 U.S. 923 (1972)
Urbain v. Knapp Bros. Mfg. Co., 217 F.2d 810 (6th Cir.
1954), cert. denied, 349 U.S. 930 (1955) ..............
Page
13
14
14
16
s
iv
Contents
Statutes Cited:
3 USE: CE ov xeditsidicdieeee
USEC ihisscidvicitsaenen
2 UDG: OE OME: ; sskedsscsccdblinsteen
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United States Constitution Cited:
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Rules Cited:
Federal Rules of Civil Procedure:
Other Authorities Cited:
Page
Metzger and Friedlander, “The Preliminary Injunction:
Injury Without Remedy?”, 29 The Business Lawyer
913 (April 1974) ..........cceccceeeeeees
U
Contents
Page
Note, “Interlocutory Injunctions and the Injunction Bond,”
nw ud. ccececoeeeseses 7
Note, “Recovery of Damages on Injunction Bonds,” 32
i Cn ccccccccccecsecessoe 67
APPENDIX
Judgment of the Court of Appeals ................020005- la
Opinion of the Court of Appeals ................220ee00e 3a
Opinion of the District Court ............... cece ee eees 26a
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In The
Supreme Court of the Hrited States
October Term, 1977
+
No.
COMMERCE TANKERS CORPORATION and VANTAGE
STEAMSHIP CORP.,
Petitioners,
VS.
NATIONAL MARITIME UNION OF AMERICA, AFL-CIO,
Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT
Commerce Tankers Corporation (“Commerce”) and
Vantage Steamship Corp. (“Vantage”) (collectively,
“Petitioners”) pray that a writ of certiorari issue to review the
judgment and decision of the United States Court of Appeals for
the Second Circuit entered in the above entitled case on April
15, 1977.
OPINIONS BELOW
The opinion of the Court of Appeals is reported at 553 F.2d
793 (2d Cir. 1977) and is reproduced in the appendix to this
2
petition at 3a-25a.' The opinion of the District Court is
reported at 411 F. Supp. 1224 (S.D.N.Y. 1976) and is
reproduced at 26a.
JURISDICTION
An order denying a petition for rehearing was entered on
June 15, 1977 (64a-65a). The judgment of the Court of
Appeals was entered on June 29, 1977 (la-2a). The
jurisdiction of this Court rests on 28 U.S.C. §1254(1).
QUESTIONS PRESENTED
1. Did the Court of Appeals err in limiting Commerce’s
recovery against the NMU for the wrongful injunction to the
amount of the injunction bond ($10,000) and by excluding
Vantage from any recovery?
2. Did the Court of Appeals err in failing to find that Rule
65(c), Federal Rules of Civil Procedure, could not
constitutionally be applied, to so limit recovery under the
peculiar circumstances of this case?
3. Did the Court of Appeals fail to adhere to this Court’s
precedent in Connell Construction Company, Inc. v. Plumbers
& Steamfitters Local No. 100, 421 U.S. 616 (1975) in its
instructions to the District Court on remand?
STATEMENT OF THE CASE
1. The Planned Transfer
In the fall of 1970, Commerce’s parent, Vernitron
Corporation, decided for business reasons to go out of the
shipping business. At the time, unlicensed seamen on the two
1. The Appendix to this petition is separately paginated and is referred to
herein as “a”.
3
ocean-going United States flag ships owned by Commerce were
represented by the National Maritime Union (“NMU”). On
December 23, 1970, Commerce sold one vessel to a party with a
pre-existing collective bargaining agreement with the NMU and
contracted to sell its last remaining vessel, the S.S. Barbara, to
Vantage for a price of $2,750,000, with delivery scheduled after
February 28, 1971.2 In January, Vantage chartered the ship to
the Standard Oil Company of California (“SoCal”) for a period
of one year, commencing in March.
2. The Preliminary Injunction
On January 25th, the NMU contacted Vernitron, asserting
that the sale to Vantage violated the restraint-on-transfer clause?
in the NMU collective bargaining agreement and demanding an
immediate arbitration of the dispute. On February 8th, a no-
witness, no-transcript, 20-minute “proceeding” was held, at
which time the contractually designated arbitrator specificallly
enforced the NMU clause, although declining to consider issues
relating to its legality under federal law. Vantage did not receive
formal notice of the arbitration and was not present or
represented in the proceeding. The arbitrator’s award was made
over the objection of Commerce and despite its request for a 72-
hour adjournment to present witnesses and brief the issues in
dispute.
The next day the NMU commenced a civil action seeking
judicial confirmation of the arbitral injunction and obtained, by
application’ before District Court Judge Inzer B. Wyatt, a
2. All dates hereafter are 1971, unless otherwise indicated.
3. The clause has since been so referred to in this litigation and is quoted
in full in the opinion of the Court of Appeals (6a).
4. The application was made without notice to Commerce or its regular
counsel, and without any notice whatsoever to Vantage, which was not named
as a party defendant. Cf, Norris-LaGuardia Act, 29 U.S.C. 101 ef seq. The
NMU gave telephonic notice to Commerce's special counsel who had originally
spoken to the Union to obtain delay of arbitration.
4
temporary restraining order enforcing the arbitral award of
injunctive relief on the posting of a $10,000 injunction bond.
Shortly thereafter, Vantage intervened as a party defendant. On
February 16th and 18th, Commerce and Vantage moved before
Judge Wyatt to vacate the TRO. After extensive written briefs
and oral argument to the Court, Judge Wyatt determined on
February 19th to so vacate the restraining order on the grounds
that serious questions of first impression arising under the
antitrust laws were presented by the NMU’s attempt to enforce
restraint-on-transfer.
On the night of Monday, February 22nd, Judge Wyatt
signed an order in accordance with that determination,
conditioned upon the steamship companies posting a financial
bond and certain written assurances to the National Labor
Relations Board (“NLRB”) concerning the jurisdictional dispute.
Vantage had already filed an unfair labor practice complaint
with the NLRB.‘
On February 23rd, NMU couftse? filed an affidavit seeking
a “preliminary injunction” which came to be heard before
District Judge Marvin Frankel. At oral argument, Judge
Frankel orally “reversed” Judge Wyatt’s written determination
and “revived” the temporary restraining order blocking the sale.
On February 25th and 27th, Judge Frankel issued written
restraining orders. On March 2nd, Judge Frankel rendered a
decision granting the NMU the preliminary injunction which it
sought and further ruling that the $10,000 injunction bond
previously issued — a bond which had been issued before
Vantage intervened and therefore named only Commerce — be
continued in effect. Judge Frankel’s decision is reported at 325
F. Supp. 360 (S.D.N.Y. 1971). The petitioners pressed the
NLRB to enter the proceeding and ultimately obtained initiation
of an NLRB proceeding and reversal and vacation of the
5. The restraint-on-transfer clause was held, in a separate proceeding, to
be violative of Section 8(e) of the National Labor Relations Act. NLRB v.
National Maritime Union, 486 F.2d 907 (2d Cir. 1973), cert. denied, 416 U.S.
970 (1974).
5
preliminary injunction by the Court of Appeals, 457 F.2d 1127
(2d Cir. 1972).
3. Subsequent Events
The sale of the Barbara from Commerce to Vantage was
never consummated. Commerce, having been unable to sell the
vessel for nearly a year, finally sold it elsewhere and received
only $700,000. Commerce also received an additional $700,000
from Vantage as a consequence of the NMU’s frustration at the
sale. Commerce’s losses thus amount to at least $1,350,000 —
the difference between the original sale price and the amount
finally received. Vantage losses, in addition to the $700,000 it
paid Commerce, include claims of more than $2,000,000
consisting of lost profits on the SoCal charter and expenses for
paid improvements to the vessel.
4. The Proceedings Below
In the District Court, petitioners, relying on antitrust,
secondary boycott, and wrongful injunction theories, each
sought damages resulting from the NMU’s enforcement of its
unlawful clause to frustrate their business transaction. After
trial, The Hon. Thomas P. Griesa found that the petitioners’
damages were “caused by the injunction,” dismissed the antitrust
and secondary boycott claims, limited Commerce’s recovery to
$10,000, the amount of the injunction bond, based upon the so-
called “injunction bond rule,” and denied any wrongful
injunction relief to Vantage.
On appeal, the majority held in pertinent part:
“We recognize the authority of the
injunction bond rule, and we have relied on it
ourselves. E.g., In re Spencer Kellogg & Sons, 52
F.2d 129, 134-35 (2d Cir. 1931). But we do not
think it applies to the antitrust claim pressed on
6
the unique facts of this case. The purpose of the
injunction bond rule is to provide protection to a
defendant who is under injunction in an equity
action, but who ultimately prevails on the merits.
The rule, however, does rot apply to this action
at law for damages arising out of a per se
antitrust violation.” (14a).
Accordingly, the Court adopted the District Court’s
limitations on petitioners’ claims for wrongful injunction, but
reversed and remanded to the District Court as to the dismissal
of petitioners’ claims for damages arising out of the antitrust
violation. By this resolution, the courts below have enforced a
century-old doctrine on limitation of damages for wrongful
injunction without any meaningful examination as to the basis
for the rule, its continued applicability in the light of later
legislation, or the constitutionality of such application under the
peculiar circumstances of this case.
Judge Lumbard, concurring in part and dissenting in part,
expressed “considerable doubt [as to] the continued validity of
the limitation of recovery for wrongful injunction to the amount
of the bond.” (20a). Judge Lumbard opined, however, that no
purpose would be served by further examination of the question
as appropriate recovery should be available for the NMU’s
violations of the antitrust laws. On the contrary, the majority
Opinion’s instructions to the District Court on remand render it
uncertain that “appropriate recovery” will be available. Thus,
the time is at hand for final review as to the legal issues arising
from the wrongful injunction. Such issues merit review by this
Court because of a conflict among the Circuit Courts, the ever-
increasing importance of the preliminary injunction to the
overall litigation process, and the federal statutory and
constitutional issues posed by the instant interpretation of Rule
65 of the Federal Rules of Civil Procedure. In addition,
petitioners pray that this Court will grant certiorari to review the
instructions on remand on the grounds that such instructions
clearly diverge from a recent precedent of this Court on the
complex interaction of the labor laws and antitrust laws.
REASONS FOR GRANTING THE WRIT
The Court of Appeals erred in limiting petitioners’ recovery
against the NMU for wrongful injunction to the amount of the
injunction bond. The provisions of Rule 65(c) requiring the
posting of a bond for security do not explicitly or implicitly
establish such a limitation.
In essence, the “injunction bond rule,” relied upon by the
courts below (1) limits recovery for wrongful injunction to the
amount of the bond [see e.g., International Ladies’ Garment
Workers’ Union v. Donnelly Garment Co., 147 F.2d 246 (8th
Cir. 1945), cert. denied, 325 U.S. 852 (1945)}; and (2) limits a
cause of action for wrongful injunction to parties named on the
bond, rather than all parties wrongfully enjoined [see e.g., Benz
v. Compania Naviera Hidalgo, §.A., 205 F.2d 944 (9th Cir.
1953)]}. The philosophic rationalization of the rule has been that
the damages suffered by the wrongfully enjoined party were the
consequence of an error of the Court for which the plaintiff
ought not be held accountable in the absence of malicious
prosecution. United Motors Service v. Tropic-Aire, 57 F.2d 479,
482-83 (8th Cir. 1932). The rule and its purported explanation
have been subject to considerable scholarly criticism. See
generally, Metzger and Friedlander, “The Preliminary
Injunction: Injury Without Remedy?” 29 The Business Lawyer
913 (April 1974); Note, “Interlocutory Injunctions and the
Injunction Bond,” 73 Harv. L. Rev. 333 (1959); Note, “Recovery
of Damages on Injunction Bonds,” 32 Columbia L. Rev. 869
(1932).
Close examination of the precedents indicates that the rule
limiting the liability of a party which secured a wrongful
injunction to the amount of the injunction bond was born out of
two early United States Supreme Court decisions, Russell v.
Farley, 105 U.S. 433 (1881), and Meyers v. Block, 120 U.S. 206
(1887). In the view of petitioners, both the Russell v. Farley and
Meyers v. Block decisions emanated from the judicial division of
courts into courts of equity and courts of law. Equity courts
were not capable of granting damages. Bein v. Heath, 53 U.S.
(12 Howard) 168, 178-79 (1851). In that context, this Court
carved an exception to the limits of equity court power, such
that in order to give complete relief, a court of equity could
enter judgment on an injunction bond. Russell v. Farley, supra.
But, in the absence of an injunction bond, a court of equity was
powerless to remedy the wrongful injunction. Meyers v. Block,
supra.
In 1972, the Third Circuit Court of Appeals extensively
reviewed the law and held that in any case involving a labor
dispute,® the liability of the plaintiff, though not of any surety,
for loss, expense, or damage, including attorneys’ fees, under
Section 7 of the Norris-LaGuardia Act, shall be fixed without
regard to the amount of any injunction bond. United States
Steel Corp. v. United Mine Workers, 456 F.2d 483 (3rd Cir.
1972), cert. denied, 408 U.S. 923 (1972). But see Associated
General Contractors v. Illinois Conference of Teamsters, 486
F.2d 972, 974-75 (7th Cir. 1973). The decision below directly
conflicts with the holding of the Third Circuit.’
6. This was clearly a labor dispute within the meaning of the Norris-
LaGuardia Act; but the petitioners place no special weight on the provisions of
such Act notwithstanding the decision by the Third Circuit.
7. The Third Circuit, in ruling that recovery for wrongful injunction
would not be limited to the amount of the bond expressly declined to rule on
the entitlement to recovery for wrongful injunction in the absence of a bond.
See 456 F.2d at 493. However, surely, if the amount of the bond does not limit
recovery for wrongful injunction, the non-existence of a bond should not serve
to deprive an injured party of all recovery for its losses. In any event, this case
presents the almost unique opportunity for reexamination of both aspects of
the rule.
9
This issue is of substantial significance beyond the limits of
this litigation. Despite the apparently mandatory® nature of the
bonding requirement of Federal Rule 65(c), a number of courts
have unequivocally held that the requirement of a bond is
discretionary and that in federal practice the District Judge may
omit the bond entirely. See Urbain v. Knapp Bros. Mfg. Co.,
217 F.2d 810, 815-16 (6th Cir. 1954), cert. denied, 349 U.S. 930
(1955). Considered in light of the trend to no-bond preliminary
injunctions, particularly evident in cases relating to public
interest law, the bond limitation rule poses the important
question of whether federal courts ought properly be injected
into controversies at a “preliminary” state (when all the evidence
is concededly not available to the court) if as a potential
consequence of such interference the enjoined party may be
forever foreclosed from obtaining adequate relief for its damages
from the party which secured the injunction.
In every other legal context, a “security” device “secures”
the protected party against default by the one who posts
security. Of course, as to the surety, its liability is limited to the
amount of the bond. The question here is the obligation of the
principal, not of the surety. Normally, the amount of the bond
will be adequate to compensate the party wrongfully enjoined
for its damages, because the court issuing the injunction will fix
the bond mindful of the possibility of error on its part. When
this matter was before Judge Frankel, Commerce requested that
in the event an injunction was issued, a bond of $2,750,000 be
8. Rule 65(c) of the Federal Rules of Civil Procedure provides: “No
restraining order or preliminary injunction shall issue except upon the giving of
security by the applicant, in such sum as the court deems proper, for the
payment of such costs and damages as may be incurred or suffered by any
party who is found to have been wrongfully enjoined or restrained. No such
security shall be required of the United States or of an officer of agency
thereof.” Are the United States and its officers and ageats “exempt” from
liability for wrongful injunctions or is the provision of 65(c) excusing such
parties from the bond requirement merely an indication that Congress felt it
unnecessary for the Government to demonstrate its financial worthiness?
10
required of the Union. Judge Frankel was not mindful? of the
possibility of error and fixed the bond at a nominal $10,000.
Subsequently, by motion before the Court of Appeals under
Rule 8 of the Federal Rules of Appellate Procedure, Commerce
asked that the injunction be lifted or the bond be increased to a
sum reasonable in relation to the amount of its possible losses.
Commerce sought the additional bond “as security.” No party
cited the injunction bond rule or then claimed that the bond set
by Judge Frankel was a limit against or bar to greater recovery
upon full trial."° The NMU opposed Commerce’s Rule 8
application, and it was denied “without prejudice.” It is
impossible to believe that the NMU’s success in these temporary
maneuvers can in any way insulate it from the damage the NMU
would otherwise owe to the petitioners, yet the decisions below
would appear to have that effect.''
9. The Court of Appeals has characterized Judge Frankel’s decision as
having given “short shrift” to the legal arguments of Commerce and Vantage
(8a). It has also been proven beyond further question that Judge Frankel’s
summary characterizations of the conduct and motives of the steamship
companies were unfounded.
10. Indeed, the NMU_ never pleaded an “injunction bond” defense to either
Commerce’s counterclaims or Vantage’s complaint, but was permitted to raise
it at trial.
11. In the District Court, the NMU conceded that had it stopped the
transfer by acts of self-help, the Union would have been liable to the steamship
companies for the full amount of the monetary damages they suffered. Section
303 of the Labor Management Relations Act, 29 U.S.C. §187. The District
Court held, and the Court of Appeals affirmed, that “resort to court” for
enforcement pendenie lite of a void hot cargo agreement is not actionable
under Section 303. See Local Union No. 48 Sheetmetal Workers International
Ass'n. v. Hardy Corp., 332 F.2d 682 (Sth Cir. 1964). Thus, the anomaly in this
case is that if Commerce had obeyed the NMU clause or caved in to the initial
NMU threat to enforce the clause, the petitioners would have the right to full
recourse from the Union. But because the NMU got its arbitrator to require
literal compliance therewith over Commerce's objection, the Union's pre-
existing obligations for obtaining and enforcing this illegal clause have
“disappeared.”
In short, petitioners were wrongfully stopped from
consummating their private business transaction by a party
which was demanding that its claimed private rights be accorded
preferential treatment. Judge Frankel erroneously granted the
NMU’s motion, and erroneously provided for a bond of $10,000,
or roughly one-quarter of one percent (.0025%) of the actual
damages ultimately sustained. The injunction was reversed. The
insufficiency of the bond is obvious. Equity demands that the
Union be held accountable for its wrongs without regard to the
amount of the bond or the precise parties named beneficiaries
thereof.
The Court of Appeals erred in failing to consider whether
under the facts of this case, imposition of the injunction bond
limitation deprived petitioners of their constitutional right to
procedural due process.
The Fifth Amendment to the Constitution provides:
“No person shall be . . . deprived of life, liberty
Or property without due process of law... .”
This language provides a constitutional guarantee of the
prior application of procedural due process requirements to any
situation involving the taking ~ of a person’s property.
Determinations that dispose of property with finality must be
preceded by adequate notice and opportunity for a fair hearing.
Fuentes v. Shevin, 407 U.S. 67 (1972); Goldberg v. Kelly, 397
U.S. 254 (1970).
Fuentes, supra, is particularly analogous to the case at bar.
In order to replevy goods in a debtor’s possession prior to a
judicial determination of the parties’ legal rights, a Florida
statute required a bond be posted in the amount of double the
12
value of the property to be taken to secure the defendant in the
event that the seizure be found unjustified. Justice Stewart's
opinion emphasized that the bond required of the plaintiffs was
not a substitute for a prior hearing. Petitioners contend that if
recovery for wrongful injunction is limited to the $10,000 bond
fixed by Judge Frankel, that limitation would deprive petitioners
of their constitutional right to procedural due process as they
were never afforded a constitutionally-acceptable hearing, either
before the arbitrator who first issued the injunction, or before
Judge Frankel, who reinstated the injunction and the nominal
bond. The constitutional question posed by this case is: if a
more-than-adequate bond cannot be a substitute for a
temporary taking of property without due process of law, how is
it possible that a less-than-adequate bond can be a permanent
substitute for recompense for the wrongful taking of property
shown to have been without due process?
The Court of Appeals did not expressly consider the due
process issue, apparently on the theory that “appropriate relief”
would be available on the antitrust claim. The petitioners believe
that the constitutional issue is of substantial importance and the
due process violations so serious that they ought not be
submerged beneath some new and uncertain restatement of the
law regarding union liability for participation in group boycotts.
The abuse of procedural due process in this case was, we submit,
caused by the NMU as follows:
(1) In the arbitration, the NMU proceeded without any
written statement of its claim; Vantage was not notified of or
represented at the arbitration; Commerce was denied the
opportunity, urgently requested, to prepare and present
witnesses and prepare briefs which would have brought the
issues into focus; Commerce was not permitted a hearing to
confront or cross-examine the Union’s witnesses since no
witnesses at all were calle’; and the award of preliminary
13
injunction was entered after a 20-minute proceeding at which no
evidence whatever was adduced. !?
(2) In the District Court, the NMU applied for the TRO
without notifying Vantage or naming it as a party defendant,
and without notifying Commerce in a proper procedural manner
(see note 4 supra); and then when the TRO was conditionally
vacated, the NMU applied before a different federal judge for a
“preliminary injunction” again without observing the required
“formalities” of a notice and hearing requirement.'? Indeed, the
preliminary injunction was issued without an evidentiary hearing
on the issues of fact or the amount of the bond. For a similar
instance of unjudicious and informal proceedings resulting in an
erroneous order of preliminary injunction and inequitably low
12. Characteristic of the arbitration “procedure” was the following: At
the meeting, NMU counsel handed the arbitrator a “form” contract which it
claimed Commerce had signed. Only years later at the trial of this case did
NMU counsel admit that the key provision of the form — to wit, the one being
arbitrated — had at the time of the arbitration never been signed by Commerce
or any other employer, and that the restraint-on-transfer agreement had been
made by oral arrangement with an industry association and the form contract
simply mailed to independents, such as Commerce, without requesting or
requiring signature. This Court has held that an employer may simply ignore
an illegal hot cargo clause which it has agreed to contractually. See Local 1976
United Bhd. of Carpenters v. N.L.R.B. (Sand Door), 357 U.S. 93, 105-06
(1958). Enforcement of the “injunction bond limit” thus has the curious result
of “punishing” Commerce (and Vantage) for a contract clause they never
signed and never approved, and which, if Commerce had signed and approved,
was void in any event. E ,
13. Federal Rule 6(d) requiring five days notice of motion applies to a
preliminary injunction. Marshall Durbin Farms, Inc. v. National Farmers
Organization, 446 F.2d 353, 358 (Sth Cir. 1971). Technically, the NMU had a
motion to confirm the arbitration award which was returnable before Judge
Frankel. After issuing the TRO, Judge Frankel wrote that confirmation of the
award was “technically inappropriate” and with the “consent” of the parties he
was treating it as a motion for preliminary injunction. The “consent” referred
to apparently relates to unrecorded oral argument in the heat of motion
practice. In fact, neither petitioner ever consented or waived their objection to
the NMU's multitude of improper procedures.
14
“bond” requirement, see First-Citizens Bank & Trust Company
v. Camp, 432 F.2d 481 (4th Cir. 1970).
In sum, the injunction was granted, and the bond was set in
a manner wholly failing to meet the minimal standards for
procedural due process. At the very least, petitioners are entitled
to a thorough examination of the due process issues which they
have raised. Failing that, this case will stand for the proposition
that procedural due process is not a condition of the injunction
bond limit.
The Court of Appeals erred in instructing the District
Court, on remand, to make detailed findings on the anti-
competitive effects of the restraint-on-transfer clause, or in the
event that the rule of reason inquiry should apply, on the anti-
competitive purposes of the clause.
In the maritime industry a unique rule of labor relations
developed over many years and applicable to most employers,
required each employer to use a crew of seamen represented by a
single union on its entire fleet of vessels, including newly
acquired vessels. Moore-McCormack Lines, Inc., 139 N.L.R.B.
796 (1962); National Maritime Union (Overseas Carriers Corp.),
174 N.L.R.B. 216 (1969).
In 1968-70, a group of AFL-CIO affiliated maritime unions
obtained the agreement'* of the bargaining agent for the
14. The first such agreement was made by cight employers as a midterm
modification to the collective bargaining agreement of the Marine Engineers
Beneficial Association. The extension of the clause to the remainder of the
industry thereafter became “a foregone conclusion” and was, in fact, included
in the printed version of the NMU"s 1969 agreement. Although the proofs at
trial showed that every other clause of the NMU’s 1969 agreements had been
carefully signed by cach employer, the restraint-on-transfer clause was neither
signed by the associations nor submitted to any independent employer for
signature until six months after Judge Frankel’s decision.
15
principal employers’ associations, that those employers would
enforce the restraint-on-transfer agreements, which precluded
sale of their United States flag vessels to competitors in the
coastwise trade except to purchasers who would retain the same
unions. As to the unlicensed seamen alone, the unquestioned
object and effect of this clause was to make employers with
fleetwide agreements with unions other than the NMU
“ineligible” to buy vessels owned by NMU contracted parties. At
the time, approximately half of the U.S. flag operators,
including Vantage, had fleetwide agreements with competing
seamen’s unions.
As a consequence, Commerce, a willing seller, was
prevented from transferring the business of operating the vessel
Barbara in the coastwise trade to Vantage, a willing buyer, solely
because Vantage was a member of a class with which the NMU
and certain affiliated employers had agreed not to do business.
Ordinarily, group boycotts are so pernicious a practice that
upon proof of their existence, no explanation will be heard in
defense of a challenge thereto under the antitrust laws. Klor’s,
Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).
But, because the restraint arises in a labor contest, the
majority would remand for detailed findings from the District
Court on the anti-competitive effects! of the restraint-on-
transfer clause, or in the event that the rule of reason inquiry
should apply, on the anti-competitive purposes of the clause.
Petitioners believe that this direction gravely misapprehends the
state of the developing law concerning group boycotts in a labor
context.
If a “rule of reason” approach is to be employed, the
competitive interests which are to be balanced must be those, on
the one hand, favoring collective bargaining with those, on the
other hand, favoring free competition in the business market.
15. Judge Lumbard correctly concluded that the anticompetitive effects of
the restraint-on-transfer clause were apparent from the record (24a).
16
See Connell Construction Company, Inc. v. Plumbers and
Steamfitters Local No. 100, 421 U.S. 616, 622 (1975). In place of
the Connell test, the Second Circuit substituted a directive that
inquiry be made into the NMU anti-competitive “purposes.”
Such direction is clearly erroneous insofar as it suggests that
‘proper “purposes” may shelter'® a labor party from antitrust
liability for its acts in sponsoring a multi-employer group
boycott. It is not the Union’s goals, but its methods that
determine antitrust liability. Connell, 421 U.S. at 625.
In conclusion, petitioners assert that under the settled law
of Connell, this case should have been remanded to the District
Court solely for an assessment of damages against the NMU.
But, if further factual findings by the District Court are
required, the appropriate instructions on remand should call
solely for the balancing of the interests of collective bargaining
between the NMU and Commerce, on the one hand, and free
competition in the relevant business macket, on the other hand.
16. The majority opinion also indicates that the NMU conduct may be
“sheltered” because the restraint-on-transfer clause was included in an
otherwise lawful collective bargaining agreement and that this issue is not
necessarily determined by the prior holding that the clause was an unlawful
secondary boycott within the meaning of §8(e) of the NLRA (17a). Even if
arguendo not every union agreement which fails to meet the “work-
preservation” standards of National Woodwork Mfrs. Association v. NLRB,
386 U.S. 612 (1967) will necessarily result in union liability under the antitrust
laws, here again the majority of the Court of Appeals misconstrues this Court's
holding in Connell. To the same extent, it was true that Local 100 had no
interest in representing Connell’s employees, the NMU had no interest in
representing Vantage’s employees.
17
CONCLUSION
For all of the foregoing reasons, the petition for a writ of
certiorari should be granted.
Respectfully submitted,
s/ D. DAVID COHEN
s/ MARTIN C. SEHAM
SURREY, KARASIK, MORSE
& SEHAM
Attorneys for Petitioners
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APPENDIX
JUDGMENT OF THE COURT OF APPEALS
UNITED STATES COURT OF APPEALS
“FOR THE
SECOND CIRCUIT
Filed Apr. 15, 1977
Daniel Fusaro, Clerk
At a stated Term of the United States Court of Appeals for
the Second Circuit, held at the United States Courthouse in the
City of New York, on the fifteenth day of April one thousand
nine hundred and seventy-seven.
Present:
HON. J. EDWARD LUMBARD
HON. WILFRED FEINBERG
Circuit Judges
HON. ALBERT W. COFFRIN
District Judge
National Maritime Union of America, AFL-CIO,
Plaintiff-Appellee
v.
Commerce Tankers Corporation,
Defendant-Counterclaimant-Appellant
and
2a
Judgment of the Court of Appeals
Vantage Steamship Corp.,
Intervening Defendant-Appellant.
Vantage Steamship Corp.,
Plaintiff-Appellant
v.
National Maritime Union of America, AFL-CIO
76-7217
76-7223
Appeal from the United States District Court for the
Southern District of New York.
This cause came on to be heard on the transcript of record
from the United States District Court for the Southern District
of New York, and was argued by counsel.
ON CONSIDERATION WHEREOF, it is now hereby
ordered, adjudged, and decreed that the judgment of said
District Court be and it hereby is affirmed in part, reversed in
part and the action be and it hereby is remanded to said District
Court for further proceedings in accordance with the opinion of
this court.
A. DANIEL FUSARO
Clerk
by
Arthur Heller
Deputy Clerk
3a
OPINION OF THE COURT OF APPEALS
UNITED STATES COURT OF APPEALS
For tHe Seconp Crircuitr
—-o>—
No. 179-80—September Term, 1976.
(Argued January 19, 1977 Decided April 15, 1977.)
Docket Nos. 76-7217, 7223
or
Commerce TaNKERS CORPORATION,
Defendant-Counterclaimant-Appellant,
—and—
Vantace STeEaMsHiIP CoRPORATION,
Intervening Defendant-Appellant,
—against—
Natiowat Maritiwz Union or Amenica, AFL-CIO,
Plaintiff- Appellee.
atin
Vantack STeaMsHIP CoRPoRaTION,
Plaintiff-Appellant,
—against—
NationaL Maritime Union or America, AFL-CIO,
Defendant-A ppellee.
——oo
4a
Opinion of the Court of Appeals
Before:
LumBarpD, Feinpers, Circuit Judges, and
Corrrinx, District Judge.*
-—-er
Appeal from judgment of the United States District
Court for the Southern District of New York, Thomas P.
Griesa, J., dismissing complaint alleging violations of fed-
eral antitrust and labor laws, and limiting recovery for
wrongful injunction to amount posted for injunction bond
Affirmed in part and reversed in part.
oe
1). Davi Conen, Great Neck, N.Y., for Defen-
dant-Counterclaimant-Appellant.
Martin C. Seuam, New York, N.Y. (Surrey,
Karasik, Morse and Seham; Fred C. Klein,
David F. Devine, on the brief), for Inter-
vening Defendant-Appellant Vantage
Steamship Corporation.
Cartes Sovet, New York, N.Y. (Phillips &
Cappiello), for Plaintiff-Appellee.
Feinperc, Circuit Judge:
Over six vears ago, :ppellant Commerce Tankers Cor-
poration for pressing economic reasons attempted to sell
its last remaining vessel to Vantage Steamship Corp., also
appellant here. Appellee National Maritime Union (NMU),
which represented the seamen on the vessel, objected to
the sale because Commerce had not obtained a commitment
from Vantage to continue the NMU as bargaining repre-
sy Of the United States District Court for the District of Vermont, sitting
by designation.
Sa
Opinion of the Court of Appeals
sentative, in accordance with a provision of NMU’s collec-
tive bargaining agreement with Commerce. This began a
flurry of litigation over a period of several years among
Commerce, Vantage, NMU and the National Labor Rela-
tions Board (NLRB), in combinations and permutations
set forth below.
At first NMU blocked the sale, obtaining an arbitration
award and an injunction in the United States District
Court for the Southern District of New York. National
Maritime Union v. Commerce Tankers Corp., 325 F. Supp.
360 (S.D.N.Y. 1971). That injunction, however, was re-
versed after the Regionai Director of the NLRB, on an
application under § 10/1) of the National Labor Relations
Act, alleged that there was “reasonable cause to believe”
that the clause invoked by the NMU violated section 8(e)
of the National Labor Relations Act, see McLeod v.
National Maritime Union, 457 F.2d 1127 (2d Cir. 1972), a
preliminary determination later confirmed by the Board
and by this court in NLRB v. National Maritime Union,
486 F.2d 907 (2d Cir. 1973), cert. denied, 416 U.S. 970
(1974). Commerce and Vantage claimed that they suffered
damages of $1,550,000 and $2,230,000, respectively, due to
NMU’s conduct, which they alleged violated not only the
National Labor Relations Act, but also the Sherman Act.'
After a non-jury trial in the United States District Court
for the Southern District of New York, Judge Thomas P.
Griesa found that the proximate cause of any damage was
the district court injunction against the sale. The judge
therefore limited Commerce’s recovery to the $10,000 in-
junction bond posted by NMU in the litigation below and
denied Vantage any relief whatever, since it was not cov-
ered by the bond. 411 F. Supp. at 1225. This appeal fol-
1 Appellants also alleged, inter alia, violation of the New York antitrust
law, wrongful injunction, and tortious interference with contract. Only
the second of these claims is pressed here.
6a
Opinion of the Court of Appeals
lowed. For reasons set forth below, we reverse and remand
for further consideration of appellants’ claim under the
Sherman Act.
I
The background of this litigation is set forth in our two
prior opinions cited above, and we will try not to repeat
here anything but the essential facts. The contract clause
in question, which is reproduced in the margin,’ was con-
tained in a multiemployer NMU collective bargaining
agreement, to which Commerce was a party. The clause
provided in substance that if Commerce sells a ship to an
American flag shipper not already under contract with
the NMU, the ship will be sold with a crew provided by
the NMU, and Commerce will obtain from the purchaser
“a written undertaking” to abide by the NMU contract.
In the fall of 1970, Commerce’s parent, Vernitron Cor-
2 Article I, section 2, which is entitled “Sale and Transfer of Vessels,”
provides:
(a) The Company agrees with respect to any vessel which is pres-
ently under or may hereafter come under this Agreement, that if
during the term of this Agreement said vessel is sold or transferred
im any manner to any other business entity not covered by this
Agreement for operation under United States flag (but not inelud-
ing a vessel which the Company bareboat charters and the charter
is terminated), said vessel shall be sold or transferred with the
complement of employees who either are or shall be provided by
the Union in accordance with the terms of this Agreement, or such
number as may be agreed upon between the Union and the trans-
feree. The term “transfer” shall be construed to include any char-
tering of a vessel by the Company.
(b) The Company obligates itself to obtain for the benefit of the
Union a written undertaking with the Union to be executed by the
business entity to which the vessel has been sold or transferred that
for the full term of the Agreement all of its terms and provisions
shall apply to said vessel except as herein-above provided and that
said business entity will fully comply with all of the terms and pro-
visions of this Agreement and any amendments thereto to preserve
the jobs and job rights of the Unlicensed Personnel covered by this
Agreement and to protect and maintain the wages, pension rights
and other economic benefits and working conditions provided such
personnel under this Agreement.
Ta
Opinion of the Court of Appeals
poration, decided for business reasons to go out of the
shipping business. On December 23, 1970, Commerce con-
tracted to sell the S.S. Barbara, an ocean-going tanker,
to Vantage for a price of $2,750,000, with delivery sched-
uled for February 28, 1971. The contract did not contain
any provision regarding “the complement of employees”
to be furnished by the NMU; nor did Commerce obtain
from Vantage the undertaking with the NMU called for by
paragraph (b) of the restraint-on-transfer clause. See note
2, supra. At the time, Vantage could not properly have
given such an undertaking, since it was party to a con-
flicting agreement with the Seafarers International Union
of North America (SIU), a rival maritime union. In Janu-
ary 1971, Vantage chartered the ship it had contracted to
purchase to the Standard Oil Company of California
(SoCal) for a period of one year, commencing on March
5, 1971. |
At this point, furious activ..y ensued. The NMU de-
manded of Commerce and Vantage that Vantage accept
the NMU as the bargaining agent of the unlicensed seamen
employed aboard the ship. The SIU threatened to strike
all Vantage vessels if it ceased using the SIU hiring hall
to obtain its unlicensed seamen. Vantage threatened to sue
Commerce if it did not deliver the S.S. Barbara in accor-
dance with its contract. The NMU commenced and won a
labor arbitration, at which the arbitrator did not consider
the legality of the restraint-on-transfer clause; the award
enjoined the sale of the vessel without compliance with
the clause. The next day, NMU began an action against
Commerce in the United States District Court for the
Southern District of New York for confirmation of the
award. A week later, Vantage intervened as a party de-
fendant and also filed unfair labor practice charges with
the NLRB against the NMU and Commerce. After some
other skirmishing, Judge Frankel in early March 1971
8a
Opinion of the Court of Appeals
granted a preliminary injunction against the sale unless
the contested clause were observed. The arguments of
Commerce and Vantage tliat the clause was illegal were
given short shrift, National Maritime Unton v. Commerce
Tankers Corporation, supra, 325 F. Supp. at 364-65, and
the court required NMU to post only a $10,000 bond. Both
Commerce and Vantage appealed.
At about this time, Vantage’s charter with SoCal was
eancelled due to “anion problems.” Shortly thereafter,
Commerce advised the NMU that all efforts to obtain a
United States flag purchaser had been unsuccessful and
Commerce asked the NMU to drop its objection to the
transfer, offering to drop its legal attack on the clause.
The NMU refused, saying that it “would not gamble that
the ship might go SIU.”
In late May 1971, the Regional Director of the NLRB
issued a complaint against the NMU and sought a § 10(1)
injunction against enforcement of the restraint-on-transfer
clause. The NLRB’s motion was heard along with a mo-
tion by Commerce to vacate the earlier preliminary in-
junction against it, in view of the intervening NLRB com-
plaint. In July 1971, Judge Croake denied both motions,
but it appears that were it not for the jurisdictional prob-
lem posed by the earlier appea! of Commerce and Vantage,
the judge would have vacated the injunction obtained by
the NMU.? The NLRB appealed from the order refusing
a §10(1) injunction.
By notice of motion dated July 21, 1971, Commerce
moved in this court to vacate the NMU injunction against
the sale of the vessel, or, in the alternative, to increase
32 McLeod v. National Maritime Union, 329 F. Supp. 151, 160 (8.D.N.Y.
1971). Judge Croake’s original opinion vacated the preliminary injunc-
tion. The judge thereafter decided, however, that since the issue was the
subject of a pending appeal, he should not, as a matter of discretion,
express any opinion on the subject. The opinion was revised accordingly.
9a
Opinion of the Court of Appeals
the bond to be posted by the NMU to $2,750,000. Com-
merce advised the panel then sitting of the NLRB com-
plaint and of various additional financial exigencies‘ and
argued strenuously that at least the NMU “should be
obliged to post a bond to cover the full purchase price
of the vessel so that Commerce .. . . will not be left in
a situation in which recovery against any of the other
parties cannot be readily accomplished.” The NMU’s posi-
tion was that a large bond was “singularly inappropriate
. . in view of the absence of any meaningful defense to
the merits of the action [by the NMU against Commerce].”
The panel denied Commerce’s motion, but expedited the
appeal. Thereafter, another panel reversed the rulings of
the district court, vacating the NMU injunction and grant-
ing the NLRB a § 10(1) injunction. 457 F.2d 1127. Eventu-
ally, the NLRB completed the unfair labor practice pro-
ceeding and found that the NMU had violated §8(e) of
the Labor Act. The NLRB sought enforcement of its
order, which we granted. 486 F.2d 907.
I
This background brings us to the litigation now before
us. From the start, Commerce—later joined by Vantage—
has claimed that the NMU’s restraint-on-transfer clause
was illegal and should not be enforced, and that the NMU
was liable to it for damages. Commeréce’s damage claims
were pressed in the form of counterclaims in the suit by
NMU against it. Vantage brought its own action in Octo-
ber 1972 against the NMU and Commerce. In June 1973,
4 Thus, the affidavits in support of the motion pointed out that Com-
merce had been directed by an arbitration award that it had obtained
against Vantage, see 486 F.2d at 910 and 13, to sell the S.S. Barbara
in order to minimize damages, that the only oustanding offer at the time
was $1,300,000 from a foreign flag operator, and that Vantage said it
was still willing to buy the ship for $2,750,000 if it had the “express
right to operate SIU.”
10a
Opinion of the Court of Appeals
pursuant to a settlement agreement between Vantage,
Commerce and Vernitron, the action was discontinued
against Commerce and Vernitron. After our reversal of
the injunction obtained by the NMU in its action, Com-
merce’s counterclaims against the NMU in that suit and
Vantage’s action against the NMU were consolidated and
tried without a jury before Judge Thomas P. Griesa. The
trial lasted over two weeks ; 15 witnesses testified and there
were over 1500 pages of transcript.
Commerce and Vantage argued that the NMU was liable
for damages on a number of theories. First, the NMU vio-
lated Section 1 of the Sherman Act, 15 U.S.C. §1, in two
ways described by the district judge as follows: “(1) That
the restraint on transfer clause involved a group boycott
against certain potential purchasers of vessels and there-
fore constituted a per se violation; and (2) that the sale
and transfer clause was the result of a combination or
conspiracy between NMU and large shipping companies
to enhance their competitive and financial position at the
expense of smaller companies such as Commerce.” 411
F. Supp. at 1229. Second, the NMU was liable under sec-
tion 303 of the Labor Management Relations Act, 29 U.S.C.
§ 187, which by its terms incorporates section 8(b)(4) of
the National Labor Relations Act, 29 U.S.C. § 158(b) (4),
both of which are reproduced in the margin.' Third, Com-
5 Section 187 reads:
(a) It shall be unlawful, for the purpose of this section only, in
an industry or activity affecting commerce, for any labor organiza-
tion to engage im any activity or conduct defined as an unfair labor
practice in section 158(b)(4) of this title.
(b) Whoever shall be injured in his business or property by rea-
son of any violation of subsection (a) of this section may sue
therefor in any district court of the United States subject to the
limitations and provisions of section 185 of this title without respect
te the amount in controversy, or in any other court having juris-
diction of the parties, and shal] recover the damages by him sus-
tained and the cost of the suit.
Opinion of the Court of Appeals
merce and Vantage relied on varir ; other alleged bases
of liability: The contract clause .olated New York Gen-
eral Business Law, § 340, know1 as the Donnelly Anti-trust
Act; the NMU wrongfully induced breach of the contract
between Commerce and Vantage for the sale of the S.S.
Barbara; and the NMU obtained a “wrongful injunction.”
Judge Griesa decided all of these claims on_the merits
except the very first of the two federal antitrust claims.
On the second antitrust claim, the judge held in a lengthy
opinion that the evidence did not support the view that
the restraint-on-transfer clause was the result of a “con-
Section 185(b)(4) reads:
(b) It shall be an unfair labor practice for a labor organization
oF its agents—
(4) (i) to engage in, or to induce or encourage any individual
employed by any person engaged in commerce or in an industry
affecting commerce to engage in, a strike or a refusal in the
course of his employment to use, manufacture, process, transport,
or otherwise handle or work on any goods, articles, materials, or
commodities or to perform any services; or (ii) to threaten, coerce,
or restrain any person engaged in commerce or in an industry
affecting commerce, where in either case an object thereof is—
(A) foreing or requiring any employer or self-employed per-
son to join any labor or employer organization or to enter into
any agreement which is prohibited by subsection (e) of this
section ;
(B) foreing or requiring any person to cease using, selling,
handling, transporting, or otherwise dealing in the products of
any other producer, processor, or manufacturer, or to cease
doing business with any other person, or forcing or requiring
any other employer to recognire or bargain with a labor organi-
ration as the representative of his employees unless such labor
organization has been certified as the representative of such em-
ployees under the provisions of section 159 of this title: Pro-
vided, That nothing contained in this clause (B) shall be con-
strued to make unlawful, where not otherwise unlawful, any
primary strike or primary picketing . . .
The “subsection (e)” referred to above is the same section 8(e) which
the NLRB and then this court found that the NMU had violated by the
restraint-on-transfer clause. 486 F.2d 907.
12a
Opinion of the Court of Appeals
spiracy between the NMU and large shipping companies
to enhance their competitive . . . position at the expense of
smaller companies ....” The judge also ruled that even
though the clause violated section 8(e) of the Labor Act,
the NMU was not liable under 29 U.S.C. §§ 158(b) (4) and
187. The former section provides that it shall be an unfair
labor practice for a labor union “to threaten, coerce, or
restrain any person” with “an object” of “forcing or re-
quiring any employer” to enter into a prohibited agree-
ment or “forcing or requiring any person . . . to cease
doing business . . .” with anyone else. The judge held that
the NMU did not coerce Commerce into signing the agree-
ment containing the restraint-on-transfer clause. Nor did
the NMU coerce Commerce into maintaining the clause,
since the NMU did not “strike or threaten to strike” to
enforce the provision, but instead “went to arbitration and
then to court, . .. [and] resort to a court for a judicial
remedy is not coercion.” 411 F. Supp. at 1238. Accordingly,
the judge found that the NMU did not violate section
8(b)(4) of the Labor Act and therefore appellants could
not recover under 29 U.S.C. § 187. With regard to the
other asserted theories of liability, the judge held that the
New York State antitrust law was inapplicable, on the
authority of Connell Construction Co. v. Plumbers and
Steamfitters Union No. 100, 421 U.S. 616, 635-37 (1975),
that the NMJ) was not liable for wrongful inducement of
breach of contract because “the proximate cause of the
asserted injuries was the preliminary injunction, and the
remedy of Commerce and Vantage is limited to the injunc-
tion bond,” 411 F. Supp. at 1240, and that the NMU’s lia-
hility for the “wrongful injunction” was limited to the
$10,000 bond posted for the benefit of Commerce only.‘
6 Perhaps througt oversight, the bond did not cover Vantage.
13a
Opinion of the Court of Appeals
The only claim that the judge did not decide on the
merits was that “the restraint-on-transfer clause was a
group boycott against certain potential purchasers of ves-
sels and therefore constituted a per se violation” of the
Sherman Act. 411 F. Supp. at 1229. Judge Griesa recog-
nized that this claim raised the preliminary issue whether
the clause could be considered exempt from the antitrust
laws after the Supreme Court decision: in Connell, supra.
But he decided that it was not necessary to reach that
issue, because even if the clause were subject to the anti-
trust laws and did violate them, the violation would not be
“the proximate cause” of the injuries to Commerce and
Vantage. The judge found instead that:
The proximate cause of the delay and final frustra-
tion of the 8.8. Barbara transactions was the pre-
liminary injunction issued hy Judge Frankel in a case
admittedly involving close and difficult questions of
law. The problem created by the injunction was com-
pounded by the long delay of Commerce and Vantage
in seeking an appellate remedy.
411 F. Supp. at 1239. Accordingly, the judge denied re-
covery “on anv theory of antitrust violation.” Id.
Ill
Judge Griesa cited no authority for the view that one
who commits a per se violation of the Sherman Act can
be insulated from liability by the injunction bond rule.
That rule has its origin in early equity practice. The chan-
cellor had limited authority to award damages directly,
but had broad discretion to frame orders granting injunc-
tions. See generally 1 J. Pomeroy’s Equity Jurisprudence
§§ 1-39, 237(e) (5th ed. 1941). The practice grew up of
conditioning the grant of a preliminary injunction on a
l4a
Opinion of the Court of Appeals
plaintiff's agreement to post .a bond to cover any damages
that might result if it were later determined that plaintiff
was not entitled to an injunction. See Russell v. Farley,
105 U.S. 433 (1881). The plaintiff, in effect, consented to
liability up to the amount of the bond, as the price for it.
Otherwise, plaintiff could be found liable for damages
only on the theory of malicious prosecution, an action at
law. See Benz v. Compania Naviera Hildago, 205 F.2d 945,
948 (9th Cir. 1953); 7 Moore’s Federal Practice § 65.10[1]
at 65.98-99.
We recognize the authority of the injunction bond rule,
and we have relied on it ourselves. E.g., 1n re Spencer Kel-
logg & Sons, 52 F.2d 129, 134-35 (2d Cir. 1931). But we do
not think it applies to the antitrust claim pressed on the
unique facts of this case. The purpose of the injunction
bond rule is to provide protection to a defendant who is
under injunction in an equity action, but who ultimately
prevails on the merits. The rule, however, does not apply
to this action at law for damages arising out of a per se
antitrust violation. Had Commerce and Vantage brought
their actions before the NMU’s suit to enforce the restraint-
on-transfer clause, their recovery would not have been
barred by the intervening wrongful injunction, nor would
their damages have been limited to the amount of the bond.
We do not believe that their rights are altered because
Commerce asserted its antitrust claims as counterclaims in
the suit against it, or because Vantage intervened as a
defendant in that action and brought its own action for
damages after the NMU obtained its wrongful injunction.
The NMU argues that it cannot be held liable even if its
restraint-on-transfer clause violated the antitrust laws be-
cause the district court injunction was a “superseding
cause” and because good faith resort to the courts cannot
be a basis for liability, citing, e.g, Eastern Railroad Presi-
dents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127
1Sa
Opinion of the Court of Appeals
(1961); United Mine Workers of America v. Pennington,
381 U.S. 657, 669-70 (1965); and California Motor Trans-
port Co. v. Trucking Unlimited, 404 U.S. 508, 510-11 (1972).
But those cases do not stand for the proposition that a
group boycott that is illegal under the antitrust laws can
be immunized from liability by a later law suit to enforce
it. Indeed, the language in them indicates to the contrary.’
It appears that the district judge was led astray by
applying the wrong standard for proof of damages in anti-
trust cases. Proximate cause for an antitrust violation is
based on the statutory requirement that the injuries occur
“by reason of” the antitrust violation. 15 U.S.C. §15. We
have described the test as
a causal connection between an antitrust violation and
an injury sufficient for the trier of fact to establish
that the violation was a “material cause” of or a “sub-
stantial factor” in the occurrence of the damage.
Billy Baxter, Inc. v. Coca-Cola Company, 431 F.2d 183, 187
(2d Cir. 1970), cert. denied, 401 U.S. 923 (1971) (citations
omitted). By this standard, the execution of the disputed
clause and the NMU’s determined efforts to enforce it were
the proximate cause of injury to appellants, and the notion
of superseding cause urged on us by the NMU on appeal is
simply inapplicable. Similarly, we have emphasized that
the right to recovery under the antitrust laws is given to
those in the “target area” of the violation. SCM Corp. v. -
Radto Corporation of America, 407 F.2d 166, 171 (2d Cir.),
7 Petitioners, of course, have the right of access to the agencies and
courts to be heard .... That right, as indicated, is part of the right
of petition protected by the First Amendment. Yet that does not
necessarily give them immunity from the antitrust laws.
It is well settled that First Amendment rights are not immunized
from regulation when they are used as an integral part of conduct
whieh violates a valid statute... .
44 UB. at 518-14. (Footnote omitted). See also 365 U.S. at 136-37.
16a
Opinion of the Court of Appeals
cert. denied, 395 U.S. 943 (1969); Calderone Enterprises
Corp. v. United Artists Theater Circuit, Inc., 454 F.2d 1292
(2d Cir. 1971), cert. denied, 406 U.S. 930 (1972). Vantage,
and other potential buyers of vessels, were the targets of
the restraint-on-transfer clause.
Finally, we regard the district judge’s emphasis on “the
long delay of Commerce and Vantage in seeking an appel-
late remedy” as misplaced. Even if there had been an in-
excusable delay, that would be irrelevant to NMU’s anti-
trust liability under the tests referred to above. But even
more important, there was no undue delay in seeking
appellate relief in this unusual case. After the district
court enjoined the sale in March 1971 and an appeal was
taken to this court in early April, Commerce and Vantage
frantically sought an immediate remedy at the NLRB by
pressing the § 8(e) unfair labor practice charge. This was
the most effective way of demonstrating that the district
court injunction had been improper, and this course proved
to be successful. Moreover, as soon as the NLRB issued
its complaint on May 24, 1971, Commerce sought to vacate
the injunction first in the district court and then in this
court, and argued, in the alternative, for an increase in
the NMU’s bond. Under the circumstances, appellants fol-
lowed a sensible course, and the NMU’s efforts, successful
at the time, to keep the injunction in force and the bond at
an inadequate figure, strengthen rather than weaken, appel-
lants’ equitable position now.
We thus conclude that the district judge committed
error in holding that no damages (above the $10,000 bond)
could be proved on the claim of a group boycott antitrust
violation and in failing to rule on the substance of that —
claim. The obvious remedy for that error is to remand
the case to the district court for it to consider appellant’s
first antitrust claim on the merits. Appellants, however,
ask us to bypass that procedure and to hold that the re-
17a |
Opinion of the Court of Appeals
straint-on-transfer clause would not be exempt from the
antitrust laws under the standards established by Connell,
supra, and that the agreement constitutes a group boycott
and is illegal per se under section 1 of the Sherman Act.
See Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S.
207 (1959). Both these assertions raise extremely complex
and significant questions on the interaction between the
federal labor and antitrust laws. The accommodation of
the conflicting policies reflected in these laws has aptly
been called “a troublesome and unruly issue.” See Meltzer,
Labor Unions, Collective Bargaining, and the Antitrust
Laws, 32 U. Chi. L. Rev. 659 (1965). Connell indicates
that a “nonstatutory” exemption from the antitrust laws
in this case, see 421 U.S. at 622, turns upon whether the
restraint-on-transfer clause was a “direct restraint on the
business market . . . that would not follow naturally upon
the elimination of competition over wages and working
condition,” id. at 625, and whether the inclusion of the
clause in “a lawful collective-bargaining agreement” shel-
ters the NMU because of the “federal policy favoring col-
lective bargaining.” Id. at 626. See generally St. Antoine,
Connell: Antitrust Law at the Expense of Labor Law, 62
Va. L. Rev. 603 (1976) ; Note, Supreme Court Term—1974,
89 Harv. L. Rev. 234 (1975). And we do not believe that
our prior holding that the clause violated § 8(e) necessar-
ily determines that antitrust issue; although it lends sup-
port to appellants’ position. And even if the “nonstatutory”
exemption does not apply, there is at least a substantial
question whether a per se approach under the antitrust
laws is applicable in the case of a non-exempt labor activ-
ity." See Mackey v. National Football League, 543 F.2d
8 This brings us to the question of antitrust liability when union |
activity is held to be non-exempt. The principal danger of these
recent rulings is that a finding of antitrost liability will automat-
ically be made whenever the challenged conduct is held to be noa-
18a
Opinion of the Court of Appeals
606 (8th Cir. 1976), cert. filed, 45 U.S.L.W. 3511 (Jan. 25,
1977); see zenerally McCormick, Group Boycotts—Per Se
or Not Per Se, That Is the Question, 7 Seton Hall L. Rev.
703 (1976) (on the complexity of the per se approach to
group boycotts in general). It would, however, be in-
appropriate for us to decide these issues now without
further findings from the district court and briefs on the
questions from both partics.? See Connell, supra, 421 U.S.
at 637. At this point, we are without detailed findings
from the district court on the anti-competitive effects of
the restraint-on-transfer clause, or in the event that the
rule of reason inquiry should apply, on the anti-competitive
purposes of the clause.'"* We therefore remand to the dis-
exempt. This would be a per se approach with a vengeance. Ar-
rangements may fall outside the scope of mandatory bargaining and
yet have no adverse effect on competition. We still must find whether
the agreement restrains trade and whether the restraint is unreason-
able. A fair reading of Jewel Tea |Meat Cutters v. Jewel Tea Co.,
Inc., 381 U.S. 676 (1965).] satisfies me that the Court intended that
there be a full-seale rule of reason inquiry in every instance in which
a non-er® pt activity is claimed to be in violation of antitrust.
Handler .oor and Antitrust: A Bit of History, 40 Antitrust L.J. 233,
239-40 1971). Cf. Jacobi v. Bathe $ Co., Inc., 520 F.2d 1231, 1238-39
(2d Cir. 1975), cert. denied, 423 U.S. 1053 (1976).
9 On appeal, the NMU’s brief did not discuss the antitrust claim at issue
here, presumably beeause the distriet court did not reach it. Also, in
their complaint and their briefs in this court, Commerce and Vantage
have argued that the alleged group boycott was illegal per se. If, on
remand, the district court determines that the rule of reason theory
should apply, appellants should be allowed to press their claim of a group
boycott antitrust violation under that theory.
10 We realize that the district court has already determined that the
restraint-on-transfer elause was not the result of a conspiracy between
the NMU and the large shipping companies to enhance their competitive
position. Our remand on the issue of an illegal group boycott does not
disturb that finding, but by the same token, the finding does not fore-
close full examination of appellants’ group boyeott claim. We note that
in Connell, “{t]}here was no evidence that Local 100’s organizing cam-
paign was connected with any agreement with members of the multi-
employer bargaining unit ...." 421 U.S. at 625 n.2. The Court none-
19a
Opinion of the Court of Appeals
trict court for consideration of the merits of the first anti-
trust claim.
IV
We turn now to the district court’s dismissal of appel-
lants’ claim under § 303 of the Labor Management Rela-
tions Act, 29 U.S.C. § 187, see note 5, supra, and its lim-
itation of NMU’s liability for wrongful.injunction to the
amount of the injunction bond. With respect to the claim
under § 303, we agree with the judge’s determination that
“resort to the courts” is not a threat, coercion or restraint
under § 8(b) (4) (ii), 29 U.S.C. § 158(b) (4) (ii). See Retail
Clerks Local 770 (Hughes Market, Inc.), 218 N.L.R.B. No.
84 (1975) ; cf. Local Union No. 48 v. Hardy Corp., 332 F.2d
682 (5th Cir. 1964). Similarly, the judge correctly limited
Commerce’s recovery for wrongful injunction to the $10,000
injunction bond posted by NMU. See Associated General
Contractors v. Illinois Conference of Teamsters, 486 F.2d
972, 974-75 (7th Cir. 1973); International Ladies Garment
Workers Union v. Donnelly Garment Co., 147 F.2d 246 (8th
Cir.), cert. denied, 325 U.S. 852 (1945); but see United
States Steel Corp. v. United Mine Workers, 456 F.2d 483
(3d Cir.), cert. denied, 408 U.S. 923 (1972).
Accordingly, we affirm the court’s dismissal of appel-
lants’ claims under § 303 of the Labor Management Rela-
tions Act and its limitation on the recovery for wrongful
injunction, but reverse its dismissal of appellants’ claim
of a group boycott in violation of section 1 of the Sherman
Act and remand for further consideration.
theless considered the multiemployer bargaining agreement as “relevant
in determining the effect that the agreement between Local 100 and
Connell would have on the business market.” Id. at 623. The same
considerations apply in this case. Although the district court found no
conspiracy between the NMU and the large shipping companies to injure
the smaller companies, it must still evaluate the agreement between the
NMU and the shipping companies for its effect on the market.
20a
Opinion of the Court of Appeals
LumBArp, Circuit Judge (concurring in part and dissenting
in part):
I agree with my brothers that any limitation of recovery
under the injunction bond rule does not bar full recovery
for violation of the antitrust laws.’ But I disagree with
my brothers’ failure to find that there has been a violation
of the antitrust laws since the record made in the court
below furnishes ample basis for such a determination. In
my view, it remains only for the district court to assess
the damages and enter judgment.
Connell Construction Co. v. Plumbers & Steamfitters
Local Union No. 100, 421 U.S. 616, 634 (1975) squarely
rejected the argument that § 303 of the LMRA provided
the exclusive employer remedy for violations of the “hot
cargo” prohibition of §8(e) of the National Labor Rela-
tions Act (“NLRA”), 28 U.S.C. §158(e). In determining
whether to apply labor’s nonstatutory exemption, the
Court observed that “labor policy requires tolerance for
lessening of business competition based on differences in
wages and working conditions[,]” 421 U.S. at 622, but an
agreement between a union and a nonlabor party which
restrains competition in any other manner is not immune,
421 U.S. at 622-23; see Mine Workers v. Pennington, 381
U.S. 657, 662 (1965); Alen Bradley Co. v. Electrical
Workers, 325 U.S. 797, 806-11 (1945). In applying these
standards to the facts before it, the Connell Court analyzed
1 It seems to me there is considerable doubt of the continued validity
of the limitation of recovery for wrongful injunction to the amount of
the bond. See Metzger & Friedlander, The Preliminary Injunction: In-
jury Without Remedy? 29 Bus. Law. 913 (1974); Note, Interlocutory
Injunctions and the Injunction Bond, 73 Harv. L. Rev. 333 (1959); and
Note, Recovery of Damages on Injunction Bonds, 32 Colum. L. Rev. 869
(1932). However, as appropriate recovery should be available for vio-
lations of the antitrust laws, no purpose would be served by further
examination of that question.
2la
Opinion of the Court of Appeals
the agreement in issue in terms of §8(e) of the NLRA.
Although the union argued that the agreement was saved
by reason of the construction industry proviso to 4 8(e),
the Court disagreed and found it to be an illegal secondary
boycott.
Once the Court reached the § 8(e) issue it deemed it
unnecessary to engage in further scrutiny but concluded
that the union was not immunized from antitrust liability.
421 U.S. at 634-35. I believe that inasmuch as the National
Labor Relations Board (“NLRB”), 196 NLRB No. 165
» (1972), and this court, 486 F.2d 907 (2d Cir. 1973), cert.
denied, 416 U.S. 970 (1974), have adjudicated the NMU
restraint-on-transfer clause and efforts at its enforcement
to be a violation of § 8(e), there is no need for us or for
the district court to re-examine this record. See Connell
Construction Co. v. Plumbers ¢ Steamfitters Local Union
No. 100, 483 F.2d 1154, 1179 (5th Cir. 1973), rev’d, 421
U.S. 616 (dissenting opinion of Circuit Judge Clark).
Implicit in our prior decision enforcing the Board’s
order was an acceptance of its finding that the restraint-
on-transfer clause prevented Commerce from selling the
S.S. Barabara to Vantage, 486 F.2d at 911.2 We also ruled
that the National Woodwork standards were met since
the clause was not “addressed to the labor relations of the
contracting employer vis-a-vis his own employees,” 486
F.2d 912, quoting National Woodwork Mfgrs Ass’n v.
NLRB, 386 U.S. 612, 645 (1967). These two conclusions
are sufficient to meet the Connell standard that the clause
have “a potential for restraining competition in the busi-
ness market in ways that would not follow naturally from
2 The district court's opinion arrives at the same basic finding but for
its legal conclusion which we today reject that the NMU's resort to arbi-
tration and the ensuing injunction were nonactionable superseding causes.
411 F. Supp. at 1239.
22a
Opinion of the Court of Appeals
climination of competition over wages and working condi-
tions.” 416 U.S. at 635.’
The majority suggests that inclusion of the clause in “a
lawful collective-bargaining agreement” might save it from
antitrust serutiny, F.2d at ——, slip op. at ——,
quoting Connell, supra at 626. But that argument has no
application to the facts before us since we have already
ruled that portion of the collective-bargaining agreement
to be unlawful as violative of § 8(e).
The record before us requires a finding of liability on
either a per se or rule-of-reason analysis of the NMU’s
actions.‘ Under the per se approach a well-meaning purpose
will not insulate a group boycott from liability, see Fashion
Originators Guild of America, Inc. v. FTC, 312 U.S. 457
(1941); Radiant Burners, Inc. v. Peoples Gas Light & Coke
Co., 364 U.S. 656 (1961), and its anticompetitive effect will
be presumed, see Northern Pacific Railway v. United States,
3 This view is fully consistent with the thoughts of Professor Handler
whose comments are favorably cited by the majority:
To me the test should be this: Whatever is required or expressly
authorized under existing labor legislation should be exempt from
the antitrust laws. And whatever is mandatory should be deter-
mined in the light of our national labor policy, which should over-
ride any countervailing antitrust considerations.
Handler, Labor and Antitrust: A Bit of History, 40 Antitrust L.J. 233,
238 (1971).
Perhaps a finding of no exemption entails a preliminary appraisal
of the nature 42d merits of the underlying antitrust claim, but it does
not necessarily follow that the labor organization will be found liable
on that claim. “Exemption and liability are not co-extensive concepts.”
Id. at 237. The removal of the shroud of immunity simply means that
the union must answer to the charge of violating the antitrust laws.
4 In a post-Connell decision, the Eighth Cireuit has found the per se
approach to be inapplicable to a group boycott arising out of a labor
agreement. See Mackey v. National Football League, 543 F.2d 606 (8th
Cir. 1976), cert. filed, 45 U.S.L.W. 3511 (Jan. 25, 1977). A rule of
reason inquiry in the context of a labor boycott might well be an appro-
priate means to balance the goals of the antitrust laws with the positive
values of collective-bargaining.
23a
Opinion of the Court of Appeals
356 U.S. 1, 5 (1958).5 Under the balancing approach of the
rule of reason, examination of the facts of this case indi-
cates that the anticompetitive effects of this particular
agreement outweigh any legitimate collective bargaining
concerns.
Judge Griesa’s 58 page opinion carefully traced the bar-
gaining practices in the shipping industry and found that
the restraint-on-transfer clause had its genesis in com-
plaints made by Joseph Curran, president of the NMU, in
a January 22, 1968 letter to Edward Silver concerning the
loss of NMU-represented vessels through sale and transfer.
Silver, who testified at trial, was the lawyer and chief nego-
tiator for the two major shipping owners associations, the
Tankers Service Committee (“TSC”) and the Maritime Ser-
vice Committee (“MSC”). The restraint-on-transfer clause
was first successfully negotiated into a collective-bargaining
agreement by the Maritime Engineers Beneficial Associa-
tion (“MEBA”), a non-competing union, in a May, 1968
amendment to its contract with MSC. Judge Griesa found
this version of the restraint-on-transfer clause to be the
model for the NMU clause. The district judge found the
purpose of the clause to have been memorialized in the fol-
lowing portion of a June 25, 1969 letter from J. M. Calhoon,
president of MEBA to Silver:
The original and continuing_purpose of said Memo-
randum is: To preserve the jobs and job rights of the
Company’s engineers covered by our collective bargain-
ing agreement and to protect and maintain the wages,
pension rights and other economic benetits and working
conditions provided such engineers under said Agree-
ment.
5 For a recent and thorough review of this subject see McCormick, Group
Boyeotts—Per Se or Not Per Se, That is the Question, 7 Seton Hall L.
Rev. 703 (1976).
24a
Opinion of the Court of Appeals
411 F. Supp. 1224, 1233 (S.D.N.Y. 1976). The clause was
subsequently adopted without significant discussion in the
NMU’s 1969 collective-bargaining agreement.
Allen Bradley Co., supra at 798, forecloses any argument
that a labor agreement is not unreasonable simply because
its general purpose is “to get and hold jobs for [the union
members] at good wages and under high working stan-
dards.” As we noted in our prior decision, the NMU’s
interest in job preservation was not directed at the crew
members of the S.S. Barbara since it is the union’s practice
to strip a ship of its crew when it is sold and to have it
remanned from the hiring halls. 486 F.2d at 914.
The anticompetitive effect of the restraint-on-transfer
clause is also apparent from the record before us. Its most
immediate impact was to thwart the sale of the S.S. Bar-
bara to Vantage, cause the cancellation of the lucrative
SoCal charter, and virtually force the sale of the vessel for
scrap. Beyond that, the clause prohibits shipowners from
selling their vessels to United States Flag operators unless
the prospective buyer agrees to enter into an NMU collec-
tive-bargaining agreement. Owners are effectively pre-
vented from selling to a potential buyer whose employees
are presently represented by the NMU’s rival, the Seafar-
er’s International Union (“SIU”). Sales are, therefore,
limited to foreign flag operators, non-SIU operators, or
those who would buy for scrap value. Mergers between
small NMU represented owners and small SIU represented
owners are foreclosed. By encouraging sales to foreign flag
owners, the clause lessens competition among the American
owners.
In summary, whether the appropriate inquiry is under a
rule of reason or the per se measure, the record requires a
finding that the Union must be held responsible for viola-
tion of the antitrust law.
25a
Opinion of the Court of Appeals
I would hold that the NMU has violated § 1 of the Sher-
man Act, 15 U.S.C. §1, and remand to the district court
solely for determination of damages.
26a
OPINION OF THE DISTRICT COURT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
71 Civ. 582
NATIONAL MARITIME UNION OF AMERICA, AFL-CIO,
Plaintiff,
v.
COMMERCE TANKERS CORPORATION,
Defendant-Counterclaimant,
and
VANTAGE STEAMSHIP CORP.,
Intervening Defendant.
72 Civ. 4619
VANTAGE STEAMSHIP CORP.,
Plaintiff,
v.
NATIONAL MARITIME UNION OF AMERICA, AFL-CIO,
Defendant.
GRIESA, J.
27a
Opinion of the District Court
APPEARANCES:
ABRAHAM E,. FREEDMAN
346 West 17th Street
New York, New York 10011
By: Charles Sovel, Esq.
Ned R. Phillips, Esq.
Attorneys for National Maritime Union
of America, AFL-CIO
D. DAVID COHEN, ESQ.
175 Community Drive
Great Neck, New York 11021
MARSHALL, BRATTER, GREENE,
ALLISON & TUCKER
430 Park Avenue
New York, New York 10022
By: James M. Bergen, Esq.
Stephen B. Camhi, Esq.
Attorneys for Commerce Tankers
Corporation
SURREY, KARASIK, MORSE &
SEHAM
500 Fifth Avenue
New York, Néw York 10036
By: Fred C. Klein, Esq.
Donald F. Devine, Esq.
Attorneys for Vantage Steamship
Corporation
This is the final stage of litigation in these two consolidated
cases involving National Maritime Union of America (“NMU”),
28a
Opinion of the District Court
Commerce Tankers Corporation, and Vantage Steamship Corp.
The remaining matters to be covered relate to the counterclaims
of Commerce against NMU in 7! Civ. 582 and the claims of
Vantage against NMU in 72 Civ. 4619. These matters have been
tried by the court without a jury. This decision constitutes
findings of fact and conclusions of law.
Prior Proceedings
This litigation grows out of an attempt by Commerce to sell
its ship, the S.S. Barbara, to Vantage pursuant to a contract of
sale dated December 23, 1970. The contract price was
$2,750,000. At the time of this contract of sale, Commerce had a
collective bargaining agreement with NMU covering the
unlicensed personnel on Commerce’s vessels. Article I, Section 2
of this collective bargaining agreement provided that if the
employer sold any of its ships to a buyer who would operate
under the United States flag, the ship should be sold with the
complement of NMU employees, and that the employer would
obtain from the buyer an undertaking that the NMU collective
bargaining agreement would apply to the vessel.' Article I,
Section 2 will sometimes be referred to as the “restraint on
transfer clause.”
The problem created by the proposed sale of the S.S.
Barbara to Vantage was that Vantage’s collective bargaining
agreement for unlicensed seamen was with NMU’s rival
organization — Seafarer’s International Union (“SIU”). Vantage
did na@& intend to man the S.S. Barbara with NMU members,
nor did Vantage give Commerce any undertaking that it would
do so. ,
After learning of the proposed sale, NMU demanded
enforcement of the restraint on transfer clause by way of
arbitration, which was held before Arbitrator Theodore Kheel in
29a
Opinion of the District Court
New York City on February 8, 1971. The arbitrator found in
favor of NMU and ordered that Commerce not transfer the S.S.
Barbara to Vantage or any other purchaser without complying
with the clause.
On February 9, 1971 the first of the actions in this court, 71
Civ. 582, was commenced by NMU against.Commerce to obtain
enforcement of Arbitrator Kheel’s decision.
Vantage was thereafter permitted to intervene in this action.
On March 2, 1971 Judge Frankel handed down a decision
holding that a preliminary injunction should issue restraining the
transfer of the S.S. Barbara in violation of the restraint on
transfer clause. National Maritime Union v. Commerce Tankers
Corp., 325 F. Supp. 360 (S.D.N.Y. 1971). The preliminary
injunction was signed March 4, 1971. NMU was required to post
a bond of $10,000. Commerce and Vantage appealed.
On May 24, 1971 the New York Regional Director of the
National Labor Relations Board issued a complaint against
NMU charging that the restraint on transfer clause in the
Commerce-NMU collective bargaining agreement violated
Section 8(e) of the National Labor Relations Act, 29 U.S.C.
$158(e). On the same day the NLRB filed a petition in this
court (71 Civ. 2300) asking for a preliminary injunction under
Section 10(1) of the National Labor Relations Act, 29 U.S.C.
§160(1). The NLRB filed an amended petition on June | adding
Commerce as a respondent.
On May 27, Commerce filed a motion in the District Court
to vacate Judge Frankel’s preliminary injunction in view of the
NLRB charges.
Both the NLRB’s §10(1) motion in 71 Civ. 2300 and
Commerce’s motion to vacate in 71 Civ. 582 were heard by
Wa
Opinion of the District Court
Judge Croake on June 4, 1971. On July 15 Judge Croake issued
a decision denying both motions. McLeod v. National Maritime
Union, 329 F. Supp. 151 (S.D.N.Y. 1971). Appeals were taken.
On March 22, 1972 the Second Circuit Court of Appeals
reversed the rulings of Judges Frankel and Croake, holding that
there was reasonable cause to believe that Article 1, Section 2 of
the NMU-Commerce collective bargaining agreement involved
an unfair labor practice and that therefore a Section 10(1)
injunction should issue. The Court of Appeals also held that,
because of the filing of the NLBR complaint subsequent to
Judge Frankel’s preliminary injunction, that injunction should
be vacated. National Maritime Union v. Commerce Tankers
Corp., 457 F. 2d 1127 (2d Cir. 1972).
Unfortunately, by this time the proposal to transfer the S.S.
Barbara to Vantage was dead, for reasons to be described
hereafter. On May 1, 1972 Commerce sold the Barbara to Plaza
Shipping, Inc. (an NMU contract company) for a greatly
reduced price — $700,000.
Meanwhile, the unfair labor practice matter had been
proceeding in the NLRB. On September 2, 1971 NLRB Trial
Examiner Thomas F. Ricci filed a decision recommending
dismissal of the compiaint. On May 16, 1972 the Board issued its
decision, reversing the trial examiner, and holding that Article I,
Section 2 of the NMU-Commerce agreement was invalid
because it violated Section 8(e) of the National Labor Relations
Act. Upon the NLRB’s petition for enforcement, in which
Vantage intervened in support of the NLRB, the Court of
Appeals (opinion of Judge Feinberg joined by Judges Lumbard
and Friendly) upheld the NLRB’s ruling. NLRB v. National
Maritime Union, 486 F.2d 907 (2d Cir. 1973), cert. denied, 416
U.S. 970 (1974).
31a
Opinion of the District Court
It is appropriate here to discuss this decision in some detail.
Section 8(c) provides:
“(e) It shall be an unfair labor practice for
any labor organization and any employer to enter
into any contract or agreement, express or
implied, whereby such employer ceases or
refrains or agrees to cease or refrain from
handling, using, selling, transporting or otherwise
dealing in any of the products of any other
employer, or to cease doing business with any
other person, and any contract or agreement
entered into heretofore or hereafter containing
such an agreement shall be to such extent
unenforcible and void: .. .”
The Court noted that Section 8(e) does not “shimmer with
clarity” and that the question presented was “difficult to decide.”
Id. at 910, 911. The Court further noted that the primary
purpose of Section 8(e) was to curb certain “secondary” labor
activities. NMU argued that Article I, Section 2 was proper
because it had the “primary” labor objective of preserving work
for its: members vis-a-vis Commerce and other NMU employers.
However, the Court of Appeals held that the contractual clause
went beyond “work preservation,” and had an illegal secondary
purpose of expanding NMU jurisdiction to non-NMU
employers such as Vantage.
Concurrently with these proceedings in the federal courts
and the NLRB, there was an arbitration and a state court
proceeding involving Commerce and Vantage.
On February 10, 1971 Commerce demanded arbitration
against Vantage on the December 23, 1970 contract of sale,
claiming damages for breach of contract. On March 29, 1971, in
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Opinion of the District Court
an action in Supreme Court, New York County, Justice Streit
ordered arbitration. The arbitration commenced May 12. On
July 9, the arbitrators awarded Commerce damages measured by
the amount of the contract price for the S.S. Barbara —
$2,750,000, plus other damages in the amount of $133,264, less
the net proceeds to be realized upon the resale of the S.S.
Barbara.
As already described, Commerce sold the Barbara to Plaza
Shipping, Inc. on May 1, 1972 for $700,000.
On November 20, 1972 Justice Abraham J. Gellinoff issued
a decision confirming the arbitration award. This was affirmed
by the Appellate Division, First Department, on April 5, 1973.
Vantage Steamship Corp. v. Commerce Tankers Corporation,
41 A.D.2d 813, 342 N.Y.S.2d 281 (ist Dept. 1973).
On October 30, 1972 Vantage commenced an action in
this court (72 Civ. 4619) against NMU and Commerce. Among
other things, Vantage alleged that NMU and Commerce had
been guilty of an unfair labor practice and had violated Section
| of the Sherman Aci. This is one of the cases being dealt with in
the present opinion.
On May 31, 1973 Vantage and Commerce concluded a
settlement of all disputes between these parties. Vantage agreed
to pay Commerce $700,000 in installments over a period of time.
Commerce and Vantage exchanged releases in which there were
express reservations of rights against NMU.
The net result of all these proceedings is that there remain
for determination Commerce’s claim against NMU for damages
in 71 Civ. 582 and Vantage’s claim against NMU for damages in
72 Civ. 4619.
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Opinion of the District Court
Contentions of Commerce and Vantage
Commerce and Vantage claim that NMU is liable for
damages under Section 303 of the Labor Management Relations
Act, 29 U.S.C. §187, which provides:
“$187. Unlawful activities or conduct; right to
sue; jurisdiction; limitations; damages
“(a) It shall be unlawful, for the purpose of
this section only in an industry or activity
affecting commerce, for any labor organization
to engage in any activity or conduct defined as an
unfair labor practice in section 158(b)(4) of this
title.
“(b) Whoever shall be injured in his
business or property by reason of any violation
of subsection (a) of this section may sue therefor
in any district court of the United States subject
to the limitations and provisions of section 185 of
this title without respect to the amount in
controversy, or in any other court having
jurisdiction of the parties, and shall recover the
damages by him sustained and the cost of the
suit.”?
Section 303 authorizes a suit for damages where there has been a
violation of Section 8(b)(4) of the National Labor Relations Act,
29 U.S.C. §158(b)(4). The relevant passages in Section 8(b)(4)
are as follows:
“(b) It shall be an unfair labor practice for a
labor organization or its agent —
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Opinion of the District Court
“(4) .. . (ii) to threaten, coerce, or restrain
any person engaged in commerce or in an
industry affecting commerce, where in either case
an object thereof is —
“(A) forcing or requiring any
employer or self-employed person to join
any labor or employer organization or to
enter into any agreement which is
prohibited by subsection (e) of this
section;
“(B) forcing or requiring any person
to cease using, selling, handling,
transporting, or otherwise dealing in the
products of any other producer,
processor, or manufacturer, or to cease
doing business with any other
person, ...
The references to “subsection (e) of this section” is the
Section 8(e) which was found to have been violated by the Court
of Appeals in its opinion in the NLRB proceeding. 486 F.2d 907.
As already described, that court held that Article I, Section 2 of
the NMU-Commerce agreement was a violation of Section 8(e).
However, the mere making of a contract which violates Section
8(e) does not in and of itself give rise to a cause of action for
damages.
It is only where the added elements of Section 8(b)(4) are
found to exist that a cause of action for damages accrues. For
instance, the latter section would be violated where a labor
union threatens, coerces or restrains an employer with the object
35a
Opinion of the District Court
of forcing or requiring the employer to enter into the Section
8(e) agreement. Similarly, Section 8(b)(4) would be violated if a
labor union threatens, coerces or restrains an employer in order
to force or require him to cease doing business with another
party.
Commerce and Vantage claim that NMU violated Section
8(b)(4) in that (1) NMU coerced Commerce into entering into
the collective bargaining agreement containing the Article I,
Section 2 provision which violated Section 8(e); (2) that NMU
coerced Commerce, and forced Commerce to cease doing
business with Vantage, and forced a prospective charterer to cease
doing business with Vantage — such coercion and force being
the strike threat contained in Article I, Section 2; (3) NMU
restrained Commerce, and forced Commerce to cease doing
business with Vantage, by obtaining the preliminary injunction
from Judge Frankel.
Commerce and Vantage further contend that NMU is liable
under Section | of the Sherman Act. In the first place,
Commerce and Vantage urge that there is no labor law
exemption from antitrust liability here citing Connell
Construction Co. v. Plumbers and Steamfitters Local Union No.
100, 421 U.S. 616 (1975). Vantage and Commerce then contend
that NMU has Sherman Act Section |! liability on the following
related but somewhat different theories: (1) That the restraint on
transfer clause involved a group boycott against certain potential
purchasers of vessels and therefore constituted a per se violation;
and (2) that the sale and transfer clause was the result of a
combination or conspiracy between NMU and large shipping
companies to enhance their competitive and financial position at
the expense of smaller companies such as Commerce.
Commerce and Vantage also rely upon certain common law
theories. They contend that NMU wrongfully induced the
36a
Opinion of the District Court
breach of the contract between Commerce and Vantage for the
sale of the S.S. Barbara. Commerce and Vantage also contend
that NMU is liable for obtaining a “wrongful injunction” — i.e.,
the preliminary injunction issued by Judge Frankel.
Vantage claims that Article I, Section 2 violated New York
General Business Law §340, known as the Donnelly Anti-Trust
Act.
The amounts of damages (before any trebling based upon
the Sherman Act theory) are claimed to be as follows.
Commerce claims that it is entitled to a total of $1,550,000,
calculated by taking the contract price for the S.S. Barbara
($2,750,000) and subtracting the amount realized upon the resale
to another purchaser ($700,000) and further subtracting the
amount received from Vantage in the settlement ($700,000),
giving a net total of $1,350,000, to which is added to costs of
holding the S.S. Barbara after it was supposed to have been
delivered to Vantage ($200,000). Vantage claims a total of
$2,230,000, consisting of loss of profits on a charter it had for
the S.S. Barbara with Standard Oil of California — the alleged
profits being $1,500,000; amounts invested by Vantage in repair
of the S.S. Barbara ($30,000); and the amourt paid to
Commerce in the settlement ($700,000).
Contentions of NMU
NMU denies the validity of each of the above theories. In
addition NMU asserts certain affirmative contentions. NMU
urges that the only action it took to enforce Article I, Section 2
was to obtain an arbitration award, and then sue in this court to
enforce that award. NMU contends that it was the preliminary
injunction of Judge Frankel in this lawsuit which prevented the
consummation of the sale of the S.S. Barbara to Vantage and
the fulfillment of the charter which Vantage had obtained for the
37a
Opinion of the District Court
vessel. NMU argues that Commerce and Vantage did not pursue
available remedies in the Court of Appeals in a timely or
appropriate manner. NMU contends that its liability, if any, is
limited to the amount of the $10,000 bond posted for the
preliminary injunction.
NMU also urges that the settlement of the mutual claims of
Commerce and Vantage operates as a bar to any recovery by
either of these parties against NMU.
Further Facts
Background of Article I,. Section 2
A substantial part of the evidence in this case relates to the
contention of Commerce and Vantage that the restraint on
transfer clause (Article 1, Section 2) of the NMU-Commerce
collective bargaining agreement was the result of a joint effort by
larger shipping companies to somehow prejudice the smaller
companies and reduce competition.
Commerce and Vantage contend that the large companies
were attempting to inhibit free transfer of vessels so as to keep
the contributor to the union pension funds “bound into the
contributing group” (Commerce Post-Trial Brief p. 28).
Moreover, Commerce and Vantage contend that the large
companies were attempting to reduce competition in certain
trade carried on by United States flag vessels.» Commerce and
Vantage allege that, since Article I, Section 2 imposed its
restrictions only upon sales to a United States flag operator, the
result would be to encourage sales to foreign flag operators thus
reducing the number of United States flag vessels.
There is no direct evidence that these alleged purposes were
discussed or agreed upon by the larger companies. Commerce
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Opinion of the District Court
and Vantage assert that their claims of combination or
conspiracy on the part of the larger shipping companies are
proved by circumstantial evidence about the background of the
collective bargaining agreement in question, and about the
methods used in negotiating this agreement.
In the United States maritime industry there are separate
unions representing the unlicensed seamen, the engineers, the
deck officers and the radiomen.
There are competing unions for the different categories of
personnel — an example being the NMU and SIU rivalry
respecting unlicensed seamen. In one segment of the United
States shipping industry the companies have contracts with a
particular line-up of unions, as follows:
Category Union
Unlicensed NMU
seaman
Engineers Marine Engineers Beneficial Association
(“MEBA”)
Deck officers Masters, Mates and Pilots (“MMP”)
Radiomen American Radio Association (““ARA”)
Among the shipping companies having contracts with this
group of unions — NMU, MEBA, MMP and ARA — are
companies who have formed certain committees to act together
in bargaining with the unions. One such committee is the Tanker
Service Committee (“TSC”), which represents certain large
tanker operators. The other committee is the Maritime Service
Committee (“MSC”), which represents certain non-tanker
operators. For many years a lawyer by the name of Edward
39a
Opinion of the District Court
Silver has represented both the TSC and the MSC in
negotiations with these unions.
Many companies other than members of the TSC and the
MSC have collective bargaining agreements with this set of
unions. These other companies have been referred to in this
action as the “independents.” Commerce was such an
“independent” tanker company, operating two tankers.
Although the independe its are not represented by the TSC and
MSC in any legal scnse, the independents have in practice
generally acquiesced in the agreements worked out by the
committees.
In 1961 or thereabouts NMU, MEBA, MMP and ARA
entered into labor contracts which were due to expire in June
1965. In 1963 NMU agreed with its contract employers that its
agreement would be extended until June 1969, subject to
possible “wage reopeners” in 1967 or 1968. NMU hoped that the
other unions would follow, thus creating some degree of stability
in maritime labor relations. However, this did not occur. When
the non-NMU contracts expired in 1965, there was a strike by
MEBA which shut down a large segment of the shipping
industry. One of the problems was the contention that MEBA
was not receiving benefits granted to MMP.
When the 1965 agreements with MEBA, MMP and ARA
were arrived at, one of the features of these agreements was what
are known as “most favored nation” clauses. These clauses
provided basically that each union would receive the equivalent
of the most favorable treatment given to another union. The
1965 agreements were to last until June 1969.
The NMU contract, having been entered into prior to 1965,
did not have a most favored nation clause.
40a
Opinion of the District Court
The most favored nation clauses proved to be highly
unsatisfactory. An arbitration award in favor of one union
would lead to an arbitration proceeding by another union
claiming to be entitled to the benefits conferred upon the union
in the first proceeding.
Moreover, during the 1965-1969 period serious questions
arose regarding the funding of union pension plans. One
problem related to what is called the “past service liability.”
When the union pension funds were established (the NMU
fund was established in 1951), the companies became liable for
contributions, not only for benefits based upon current services
of the employees, but also for benefits based upon past services
— ie., services performed by employees prior to the adoption of
the pension plan. By the late 1960’s the companies as a whole
were delinquent on their past service liabilities to the extent of
many millions of dollars.
Subsequent to the conclusion of the 1965 labor contracts,
the ARA obtained an arbitration award directing that the past
service liability of the companies to the ARA pension plan
should be made up in a short period of time — about five to
seven years. This was a cause of severe consternation to the
shipping companies. If the formula decided upon by the
arbitrator with respect to the ARA were to be applied with
respect to other union pension funds, the me on the
companies would be acute.
Lee Pressman, attorney for the MEBA, proposed a
compromise. Under his proposal the funding of past service
liabilities would be stretched out to either 15 or 25 years
depending on the relative age of the vessels owned by a
particular company. A company having vessels with an average
age of more than 20 years would fund its past service liability
4la
Opinion of the District Court
over a period of 15 years. A company having vessels with an
average age of less than 20 years would fund the past service
liability over a period of 25 years. It appears that in 1967 this
proposal was agreed upon by the TSC and MSC and also by the
group of unions — NMU, MEBA, MMP and ARA. The
evidence is not precise as to whether the independent shipping
companies agreed. The implication is that they acquiesced in
their normal manner.
Obviously the companies able to stretch their past service
funding over 25 years would have a somewhat lighter financial
load than the companies required to do the funding in 15 years.
Commerce and Vantage contend that this was one of
the instances in which the larger shipping companies
combined to place the smaller companies at an economic
disadvantage. The idea is that the larger companies had the
newer fleets and dealt themselves the more favorable funding
treatment.
The weight of the evidence does not support this
contention. For instance, United Fruit had a large fleet, but the
age of the fleet was such as to put United Fruit in the shorter —
15 year — funding category. Commerce itself appears to have
been eligible to receive the benefit of the 25-year funding.
During this period, NMU and MEBA manifested concern
about loss of jobs for their members due to discontinued
operation of vessels or sale of vessels to companies not having
contracts with these particular unions.
On January 22, 1968 Joseph Curran, president of NMU,
wrote Silver complaining:
“The shipowners have been engaged in the sale
and transfer of vessels and the merger of
42a
Opinion of the District Court
companies at such a rapid rate that new transfer
agreements go into effect before the ink on the
old ones is dry.”
The letter stated that this situation prevented “stability” in the
industry and further stated that the union would take
“|. . appropriate action to protect its contracts,
the security of its pension programs, and the
rights of our members and their families to
receive the pension benefits which they have
earned.”
NMU took no immediate action. However, MEBA entered
into discussions on the subject with Silver. The result was that in
May 1968 MSC and MEBA agreed upon an amendment to their
collective bargaining agreements in the form of a restraint on
transfer clause of the kind which later became the Article I,
Section 2 involved in this action. In other words the genesis of
NMU’s restraint on transfer clause was the MEBA-MSC
contract amendment of May 1968.
In late 1968 and early 1969 the unions and the TSC and
MSC were preparing for the collective bargaining negotiations
which would take place in connection with the expiration of the
NMU, MEBA, MMP and ARA contracts in June 1969.
The subject of funding the union pension plan was under
further consideration. Funding of union pension plans was
based upon contributions from the companies. An individual
company would contribute on the basis of the number of man-
days of employment with that company. If a company scrapped
or sold vessels, or if it acquired more modern vessels requiring
less crew, this company’s man-days of employment would be
reduced. The practice in the industry was to have periodic
43a
Opinion of the District Court
calculations by actuaries as to the amounts of money required to
fund the union pension plans and the number of man-days being
worked, and an assessment of the amount of money per man-
day required to be contributed.
The unions were concerned about the solvency of their
pension plans because of loss of employment — reduction in
man-days — in the United States maritime industry. The
problem related to the entire subject of funding, both past
service and present service liabilities. The concern existed despite
the fact that in theory, even if man-days were reduced, solvency
of the funds could be insured by actuarial adjustments increasing
the contribution per man-day.
During 1968 and early 1969 NMU, MEBA, MMP and
ARA reached an agreement among themselves that they would
present, as far as possible, common demands to the shipping
companies in the forthcoming 1969 collective bargain
negotiations. This was designed to avoid disputes which had
been created by different unions obtaining different benefits. The
common bargaining approach was also designed to do away
with the most favored nation clauses, which were now
condemned by both the companies and the unions.
One of the demands which the unions agreed to make upon
the companies was for guaranteed minimum contributions to the
union pension funds. It was also agreed that each of the unions
would request the restraint on transfer clause which had been
obtained by the MEBA from the MSC in May 1968.
The collective bargaining negotiations opened on April 2,
1969. It had been arranged that these negotiations would be held
on a coordinated basis involving all of the unions — NMU,
MEBA, MMP and ARA. At the opening session on April 2
representatives of all the unions met together with company
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Opinion of the District Court
representatives. Thereafter, at least for a time, company
representatives met with a different union each day on a rotating
basis.
Invitations to the negotiations commencing April 2 were
given not only to the TSC and MSC companies but also to the
independents, including Commerce. However, there was little or
no participation by the independents. Commerce attended none
of the sessions. The effect was that the negotiations on behalf of
all the companies were carried on by the representatives of the
TSC and MSC.
The first phase of the negotiations concerned what are
called “economic terms” — referring in general to wages,
overtime rates, pension fund contributions and similar items.
The second phase of the negotitions related to work rules and
other items not covered by the economic terms.
By July 1969 the economic terms had been worked out.
These terms were incorporated in memoranda of understanding
relating to the different unions. Such a memorandum, relating to
NMU and the tanker companies, was signed by NMU and the
TSC on July 16, 1969. This memorandum was sent to
Commerce for signature. Commerce signed and returned it to
NMU on July 13, 1969.
Among other things, the NMU-tanker company economic
terms provided that the tanker companies would guarantee
pension fund payments to NMU under a formula which would
provide a minimum of $44 million per year. It appears that this
formula was intended to include both past service and present
service obligations.‘
_ With regard to the restraint on transfer clause, it was
apparently assumed by all parties to the negotiations that the
4Sa
Opinion of the District Court
clause, which had been adopted by MEBA and the TSC in May
1968, would be incorporated in all the collective bargaining
agreements being negotiated in 1969. There is no evidence of any
debate or dispute on the subject. J. M. Calhoon, president of
MEBA, wrote a letter to Silver dated June 25, 1969
“confirming” the purpose of the May 1968 memorandum of
understanding as to the restraint on transfer clause as follows:
“The original and continuing purpose of said
Memorandum is: To preserve the jobs and job
rights of the Company’s engineers covered by our
collective bargaining agreement and to protect
and maintain the wages, pension rights and other
economic benefits and working conditions
provided such engineers under said Agreement.”
The restraint on transfer clause was not included in the July
16, 1969 memorandum of understanding regarding the NMU-
tanker company economic terms. It appears that this clause was
formally agreed upon at some point during the balance of the
contract negotiations, which lasted until sometime in December
1969.
Subsequent to July 1969, Commerce was sent three other
memoranda of understanding relating to various provisions —
on August 5, August 18 and September 30. None of these dealt
with the restraint on transfer clause.
However, the restraint on transfer clause (Article |, Section
2) was included in the final agreement — the so-called
“Bluebook,” entitled “June 16, 1969-June 15, 1972 Agreement
Between Various Tanker Companies and The National Maritime
Union of America, AFL-CIO.” Due to an oversight by NMU
personnel, the companies were not actually requested to sign the
final agreement or any memorandum indicating their assent to
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Opinion of the District Court
it. However, the agreement was put into effect. Commerce made
no objection to the restraint on transfer clause or to any other
provision. Commerce does not deny that it was in fact a party to
the final agreement, although Commerce never signed it.
It appears that the restraint on transfer clause was included
in the other union contracts — i.e., MEBA, MMP and ARA —
negotiated in 1969 with both the tanker and non-tanker
companies.
I reject the contention of Commerce and Vantage that the
TSC and MSC, as far as any issue in this case is concerned,
negotiated improperly for the benefit of the larger companies
vis-a-vis the smaller companies such as Commerce. The restraint
and transfer clause was a demand by the unions on all the
companies, large and small. There is no evidence whatever to
suggest that the larger companies promoted the restraint on
transfer clause in any way, or regarded it as a device to benefit
them at the expense of the smaller companies. As to the matter
of maintaining the pool of contributors to the union pension
funds, it is clear that this was one of the reasons why the unions
demanded the restraint on transfer clause from aii the
companies. However, there is no evidence that the larger
companies sought the restraint on transfer clause in order to
lock smaller companies into the group of pension fund
contributors. There is also no support in the evidence for the
contention that the restraint clause was intended to encourage
sales to foreign companies, thus reducing competition in United
States flag trade.
Sale of the S.S. Barbara
As of late 1970 Commerce was owned by Vernitron
Corporation of Great Neck, New York. The president of
Commerce was Milton Pilalas. Herman S. Nathanson became
president of Vernitron in November 1970.
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Opinion of the District Court
Vernitron decided to discontinue its shipping business and
to sell Commerce’s two vessels — S.S. Thalia and S.S. Barbara.
Nathanson took charge of the arrangements for the sale of the
vessels. Because of disagreements between Pilalas and Vernitron,
Pilalas had little participation in the dealings relating to the sales
of the Thalia and the Barbara.
Nathanson was assisted by David Cohen, house counsel and
assistant secretary of Vernitron. Vernitron also retained
admiralty counsel — Kenneth Simon.
Final negotiations for the sale of the vessels took place in
late December 1970. The prospective purchaser of the Thalia at
this time was Tanker “Four Lakes,” Inc. For the Barbara, it was
Vantage Steamship Corp. The president of Vantage was Philip
Corletta.
Simon was familiar with the restraint on transfer clause in
the union agreements. The contract for the sale of the Thalia to
Tanker “Four Lakes” contained a paragraph complying with
that clause — i.e., requiring the continuation of the same unions.
This clause apparently presented no problem to Tanker “Four
Lakes.”
Simon prepared a draft contract for the sale of the Barbara
to Vantage. This draft contained a paragraph about
continuation of unions.
On December 22, 1970 the representatives of Vernitron —
Nathanson, Cohen and Simon — met with Corletta of Vantage.
In the midst of discussing various matters, there was a brief
mention of the union continuation clause. Corletta said that the
clause must be eliminated because Vantage was an SIU
company. Nathanson or Simon asked about a possible union
problem for Commerce. Corletta replied that after the vessel was
delivered this would be Corletta’s problem.
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Opinion of the District Court
The contract for the sale of the S.S. Barbara by Commerce
to Vantage was signed December 23, 1970. It did not contain a
union continuation clause. The vessel was to be delivered on or
before February 28, 1971, although the time could be extended
for certain specified reasons, or for any reason beyond
Commerce’s control, to April 4, 1971. The contract would be
extended even after that date if Vantage did not give notice of
cancellation.
Events Subsequent to Sale
A public announcement of the sales of the Thalia and the
Barbara by Commerce was made on December 28, 1970. Word
of the sales was picked up by NMU shortly thereafter. There
apparently was no problem from NMU’s standpoint regarding
the Thalia. However, NMU was concerned about the Barbara
being transferred to an operator under contract with SIU. On
January 7, 1971 Mel Barisic of NMU called Pilalas of
Commerce to inquire about the sale. On January 11 Barisic sent
a letter to Commerce asking what steps would be taken to
comply with Article I, Section 2 of the Commerce-NMU
contract. On January 13, Pilalas responded by letter stating that
he had no reason to believe that the same unions would not be
continued on the Barbara following the sale.
At about this time, an NMU lawyer spoke to Corletta of
Vantage on the telephone, requesting an undertaking from
Vantage that Article 1, Section 2 would be complied with.
Corletta refused to give such assurance.
On January 25, 1971 NMU made a demand for arbitration
of its rights under Article I, Section 2 respecting the sale of the
Barbara. This resulted in the arbitration held February 8 before
Arbitrator Kheel and his decision in favor of NMU, all as
described earlier in this opinion.
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Opinion of the District Court
In the earlier portion of this opinion entitled “Prior
Proceedings” I have described the main features of the complex
litigation which occurred during 1971-1973. Certain other details
must be added. These relate particularly to questions about (1)
the frustration of the sale of the Barbara to Vantage and of a
charter which Vantage had obtained for the Barbara; (2) the
fixing of the injunction bond by Judge Frankel; and (3) the
timeliness of the appellate remedies sought by Commerce and
Vantage.
On the same day the arbitration occurred — February 8,
1971 — Vantage entered into an agreement with Standard Oil of
California (“SoCal”) to charter the Barbara to SoCal for one
year commencing some time between February 15 and March 5,
1971.
As stated earlier, NMU sued in this court on February 9,
1971 to obtain enforcement of Arbitrator Kheel’s award of
February 8.
At the time the complaint was filed, NMU presented an
order to show cause for a hearing on a preliminary injunction
motion to restrain the sale of the Barbara in violation of Article
I, Section 2. Judge Wyatt signed the order to show cause setting
the hearing on the preliminary injunction motion for February
16. The order to show cause also contained a temporary
restraining order. Judge Wyatt fixed the amount of the bond for
the TRO as $10,000.
On February 10 NMU and Commerce agreed to adjourn
the hearing to February 23 and agreed that the TRO would
remain in effect.
On February 11 NMU posted the required $10,000 bond.
Under the terms of the bond the surety undertook
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Opinion of the District Court
... that the Plaintiff [NMU] will pay to the
Defendant [Commerce Tankers Corporation] so
enjoined, such damages no exceeding the sum of
Ten Thousand and No/100 ($10,000) as it may
sustain by reason of the injunction, if the Court
shall finally decide that the Plaintiff was not
entitled thereto; such damages to be ascertained
by a reference, or otherwise as the Court shall
direct.”
On February 18 Commerce filed papers supporting
Vantage’s motion to intervene which had been filed February 16.
Commerce also opposed NMU’s motion for a preliminary
injunction and requested that the TRO be vacated, or in the
alternative asked that NMU be required to post a bond in the
amount of $2,750,000 to cover Commerce’s potential loss of the
ship sale and an additional bond to cover Vantage’s potential
loss of the SoCal charter.
Following a hearing on February 18, Judge Wyatt handed
down a memorandum on February 19 granting Vantage’s
motion to intervene and holding that the temporary restraining
order should be dissolved on condition that a bond be posted to
cover contributions to the NMU pensionfund. On February 22
Judge Wyatt signed an order based on that memorandum and
fixing the amount of the bond as $278,361.
Commerce and Vantage agreed that each would provide
half of this bond. Commerce arranged for its half. Vantage
failed to provide its half.
The preliminary injunction motion was heard on February
23 by Judge Frankel. On that day he orally restored the TRO.
On February 24 Judge Frankel signed an order continuing the
TRO on the basis of a $10,000 bond posted by NMU. On
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Opinion of the District Court
February 25 Judge Frankel signed a revised TRO, again fixing
the bond at $10,000.
Judge Frankel’s decision of March 2, holding that a
preliminary injunction should issue prohibiting the sale of the
Barbara in violation of Article I, Section 2, further held that the
$10,000 amount of the TRO bond would be sufficient for the
preliminary injunction. Judge Frankel stated that in his view the
protestations of Commerce and Vantage regarding threatened
financial loss were not impressive. Judge Frankel noted that
Commerce and Vantage had simply ignored the Article I,
Section 2 provision, and had made their contract without
seeking a timely test before a court or arbitrator.
udge Frankel’s preliminary injunction of March 4
contained the provision:
“ORDERED, that Plaintiff shall post a
bond in the amount of Ten Thousand
($10,000.00) Dollars for the payment of such
costs and damages as defendant may be found to
have incurred should it hereafter be determined
that this injunction was wrongfully issued.”
Apparently none of the parties, in submitting proposed orders to
Judge Frankel, considered the possible need to delineate the
rights of Commerce and Vantage with respect to the bond or
bonds. In any event, the caption of the order refers to
Commerce as “Defendant” and Vantage as “Intervening
Defendant.” The paragraph in the order dealing with the bond
refers only to a singular “defendant,” which, literally read, would
mean Commerce. In any event, no other bond was ever filed
than the $10,000 bond filed in the TRO. The sole beneficiary of
this bond is Commerce.
S2a
Opinion of the District Court
March 5, 1971 was the original deadline for delivery of the
Barbara by Vantage to SoCal on the charter. This deadline was
orally extended. During the subsequent period of time there
were intensive discussions regarding possible mechanisms for
carrying out the SoCal charter for the Barbara. Vantage finally
agreed that Commerce could charter the Barbara to SoCal, with
Vantage reserving its right to sue Commerce for non-delivery of
the vessel, and for profits derived from the charter. However,
SoCal refused to accept this proposal and on March 11 notified
Vantage that it considered the charter canceled. SoCal’s
cancellation was the result of complications regarding the
injunction and union problems. The evidence shows that at icast
through the end of March SoCal would have chartered the
Barbara if these problems had been resolved.
On March 12, 1971 Commerce requested Vantage to free
Commerce to sell the Barbara to another buyer. This request
was without prejudice to any alleged damage claims of Vantage.
It is clear that, following the cancellation of the SoCal charter,
Vantage did not in fact wish to proceed with the purchase of the
Barbara, at least at the contract price of $2,750,000. However,
until May 26, 1971, Vantage continued to formally insist upon
the delivery of the Barbara in order to preserve Vantage’s legal
rights.
On March 18 Commerce obtained an order to show cause,
returnable March 23, for a resettlement of Judge Frankel’s order
of March 4. The proposed revision was a paragraph stating that
Commerce was free to sell the Barbara to a purchaser other than
Vantage, who could comply with Article I, Section 2. On March
24 Judge Frankel denied this application.
As described earlier, Commerce at this time was involved in
arbitration proceedings against Vantage under the aegis of the
Saas
53a
Opinion of the District Court
state court. Also, commencing in late May there was an NLRB
proceeding, resulting in an action in the federal court to obtain a
preliminary injunction against NMU under 29 U.S.C. §160(1),
which was denied by Judge Croake on June 4, 1971.
However, Commerce and Vantage had a right of immediate
appeal from Judge Frankel’s injunction of March 4. The
chronology which is now set forth shows that Commerce and
Vantage chose not to prosecute this appeal on any urgent basis.
No notices of appeal were filed until Vantage did so on
April | and Commerce on April 2. Commerce filed the record
on appeal with the Second Circuit on May 12 and obtained an
extension for filing its brief until June 20. On June 17
Commerce obtained another extension to July 20. On July 19
Commerce obtained a third estension (sic) to August 20, 1971.
On July 20 Commerce filed a motion in the Court of
Appeals requesting that the preliminary injunction of Judge
Frankel be suspended, modified or dissolved, or, in the
alternative, that the bond required to be posted by NMU be
increased to $2,750,000. On August 17 Commerce applied for an
extension of another 60 days to file its brief. This proposed
extension would have lasted until October 19, 1971.
On August 18 the Court of Appeals (Judges Feinberg,
Mulligan and Timbers) denied the motion to vacate or amend
the injunction and denied the request to increase the bond to
$2,750,000. The court ordered that the appeal be expedited and
that all briefs should be filed on or before September 29, 1971
with a hearing the week of October 4, 1971. This schedule was
complied with.
As already described, the Court of Appeals considered
together Judge Frankel’s granting of the preliminary injunction
54a
Opinion of the District Court
in favor of NMU and Judge Croake’s denial of a preliminary
injunction against NMU in the NLRB action. The Court of
Appeals reversed both rulings on March 22, 1972, by which time
the proposed sale of the Barbara to Vantage and the charter of
the Barbara to SoCal were no longer feasible.
Neither Commerce nor Vantage made any attempt to obtain
immediate or accelerated action by the Court of Appeals —
either by motion for a stay, motion for an increased bond or
swift prosecution of their appeal. Commerce’s motion to suspend
Judge Frankel’s injunction or to increase the amount of the
bond was not filed until 4-1/2 months after the entry of the
injunction. Due to Commerce’s repeated requests for extensions
of time for filing its brief, the appeal was not heard until seven
months after the date of the injunction, and the hearing would
have been delayed further had it not been for the deadline
imposed by the Court of Appeals.
There is every reason to believe that, had Commerce and
Vantage proceeded immediately in the Court of Appeals, they
could have obtained expedited review. The viability of the
transactions involving the sale and charter of the Barbara was
clearly threatened by any appreciable delay. It is difficult to
believe that the Court of Appeals would have ignored this.
Exactly what response the court would have made to a request
for immediate appellate action cannot, of course, be known. But
Commerce and Vantage never attempted to obtain such relief.
It should be noted that in August 1971 Commerce had
discussions through a broker regarding a possible sale of the
Barbara to a company called Northeast Petroleum Company,
for foreign flag operation. Northeast at first offered $1.3 million
and then reduced its offer to $1 million. Northeast asked
Commerce to obtain a letter from NMU stating that NMU
would not strike Northeast’s United States facilities if Northeast
55a
Opinion of the District Court
bought the ship for foreign flag operation. Counsel for NMU
supplied a letter which made no express concessions, but stated
“the collective bargaining agreement is self-explanatory.” The
sale to Northeast Petroleum did not go through. To the extend
that Commerce claims that NMU is responsible, I reject this
argument. Certainly there is nothing in Article I, Section 2 which
in any way prevented the sale of the Barbara to Northeast
Petroleum.
Conclusions of Law
The Labor Statutes
At an earlier point in this opinion I summarized the
arguments of Commerce and Vantage iu support of their claims
for damages under Section 303 of the Labor Management
Relations Act, 29 U.S.C. §187, and Section 8(b)(4) of the
National Labor Relations Act, 29 U.S.C. §158(b)(4). I reject
each of these arguments and hold that neither Commerce nor
Vantage has a valid claim under these provisions.
The argument that NMU coerced Commerce into entering
into the collective bargaining agreement containing the restraint
on transfer clause is contrary to the facts. Commerce was
content to have the TSC representatives, who had the maximum
bargaining power, negotiate on its behalf. Commerce declined
the invitation to participate in the negotiations, and took no
exception to the terms agreed to by its de facto representatives.
The practical necessities of this type of bargaining do not
constitute the type of coercion requisite for a violation of
Section 8(b)(4).
I also reject the argument that the strike threat contained in
Article 1, Section 2 exerted coercion and force on Commerce
and Vantage, causing the frustration of the sale of the Barbara
56a
Opinion of the District Court
to Vantage and the charter of the Barbara to SoCal. These
arguments have no factual support. The strike provision in
Article I, Section 2 did not prevent Commerce from making the
agreement for the sale of the Barbara to Vantage. When it came
to enforcing Article I, Section 2, NMU did not strike or threaten
to strike. NMU went to arbitration and then to court. As to the
SoCal charter, this was frustrated as a result of the preliminary
injunction and the impatience of SoCal with the legal
complications with NMU. SoCal did not cancel because of any
coercion from a strike threat.
The final argument under Section 8(b)(4) advanced by
Commerce and Vantage is that NMU restrained Commerce and
forced Commerce to cease doing business with Vantage, by
obtaining the preliminary injunction from Judge Frankel.
The Fifth Circuit Court of Appeals have analyzed the
statute and legislative history, and has held that resort to a court
for a judicial remedy is not coercion within the meaning of
Section 8(b)(4). Local Union No. 48 v. Hardy Corp., 332 F.2d
682 (Sth Cir. 1964). The court stated (p. 686):
“We believe that the Congress used ‘coerce’
in the section under consideration as a word of
art, and that it means no more than non-judicial
acts of a compelling or restraining nature,
applied by way of concerted self help consisting
of a_ strike, picketing or other economic
retaliation or pressure in a background of a
labor dispute. Our view is supported by the
legislative history.”
On the basis of this well-reasoned authority, I reject the
contention that NMU violated Section 8(b)(4) by seeking and
obtaining a preliminary injunction.
57a
Opinion of the District Court
Sherman Act
I have already found against the factual contentions of
Commerce and Vantage regarding an alleged combination or
conspiracy by the larger shipping companies to enhance their
financial and competitive position. However, this leaves open
the question as to whether the restraint on transfer clause in the
collective bargaining agreement amounted to a per se violation
of Sherman Act §1. This, in turn, raises another question as to
whether the restraint on transfer clause is exempt from the
federal antitrust laws.
Both of these issues involve difficult and complex questions
of law. The exemption problem depends upon the application of
the recent Supreme Court decision in Connell Construction Co.
v. Plumbers and Steamfitters Union No. 100, 421 U.S. 616
(1975), and earlier decisions, particularly United Mine Workers
v. Pennington, 381 U.S. 657 (1965), and Meat Cutters Local 189
v. Jewel Tea Co., 381 U.S. 676 (1965). The per se violation
question also presents numerous problems.
It is inappropriate and unnecessary for me to decide these
questions. Even if Article I, Section 2 were held to violate
Sherman Act §1, under the facts of this case I would necessarily
hold that such violation was not the proximate cause of the
injuries sustained by Commerce and Vantage.
NMU took no action to implement or enforce Article I,
Section 2 other than to seek a determination of its legal rights by
arbitration and by resort to this court. Prior to NMU’s
commencement of litigation, Article I, Section 2 had not
deterred Commerce or Vantage in any way. The provision had
simply been ignored.
The proximate cause of the delay and final frustration of
S&a
Opinion of the District Court
the S.S. Barbara transactions was the preliminary injunction
issued by Judge Frankel in a case admittedly involving close and
difficult questions of law. The problem created by the injunction
was compounded by the long delay of Commerce and Vantage
in seeking an ~ppellate remedy.
There can be no recovery in this case on any theory of
antitrust violation. Commerce and Vantage can recover only to
the extent permitted by the specific rules relating to injuries
suffered as a result of the granting of an injunction.
Remedy Regarding Injunction
Rule 65(c) of the Federal Rules of Civil Procedure provides:
“(c) Security. No restraining order or
preliminary injunction shall issue except upon the
giving of security by the applicant, in such sum as
the court deems proper, for the payment of such
costs and damages as may be incurred or suffered
by any party who is found to have been
wrongfully enjoined or restrained. No such
security shall be required of the United States or
of an officer or agency thereof.”
There has been some divergence of view as to the rights, if
any, of a party to recover damages for injury resulting from a
preliminary injunction later determined to have been
erroneously issued. The resolution of the problem by the
majority of the courts, both before and after the adoption of
Rule 65(c) is as follows. In the absence of malicious prosecution,
the seeking of injunctive relief is not a tort. However, a party
obtaining a preliminary injunction may be required, as a
condition of obtaining the injunction, to provide a bond or other
undertaking to indemnify the defendant for injuries resulting
59a
Opinion of the District Court
from the injunction, if the injunction is later overturned. In such
a case recovery by the injured party is limited to the amount of
the bond or undertaking. Associated General Contractors v.
Illinois Conference of Teamsters, 486 F.2d 972, 975 n.6 (7th Cir.
1973); United Motors Service, Inc. v. Tropic-Aire, Inc., 57 F.2d
479, 483 (8th Cir. 1932); 7 J. Moore, Federal Practice
165.10[1]}, at 65-98 (2d ed. 1975); Note, Recovery of Damages
on Injunction Bonds, 32 Colum. L. Rev. 869, 871 (1932). The
Court of Appeals for the Second Circuit summarized the rule as
follows (Judge Learned Hand, joined by Judges Augustus Hand
and Chase):
“Any one who acts honestly and does not subject
himself to a charge of malicious prosecution is as
free from liability in invoking the action of a
court as the court itself, and what he does under
its order is not a wrong. The party aggrieved has
no remedy except in so far as the court may have
protected him by bond or otherwise, as a
condition upon the order, and as security against
its own errors.” In Re Spencer Kellogg & Sons,
52 F.2d 129, 135 (2d Cir. 1931).
Under this rule, the maximum liability of NMU with
respect to the preliminary injunction is the amount of the
$10,000 bond. As already described, this bond runs solely in
favor of Commerce.
I have not made detailed findings with respect to the
damages of Commerce resulting from the injunction. However,
it is clear that such damages are in excess of $10,000. I hold that
Commerce is entitled to judgment against NMU for $10,000 in
71 Civ. 582.
Since there is no bond in favor of Vantage, I hold that the
60a
Opinion of the District Court
complaint of Vantage in 72 Civ. 4619 must be dismissed. Benz v.
Compania Naviera Hidalgo, S.A., 205 F.2d 944, 948 (9th Cir.),
cert. denied, 346 U.S. 885 (1953).
Commerce and Vantage assert that the preliminary
injunction was entered under Section 7 of the Norris-LaGuardia
Act, 29 U.S.C. §107, and that damages in excess of the bond are
recoverable under this statute, citing the Third Circuit decision
in United States Steel Corp. v. United Mine Workers, 456 F.2d
483 (3d Cir.), cert. denied, 408 U.S. 923 (1972). No extensive
discussion of this point is necessary. In the proceedings before
Judge Frankel, there appears to have been no reference to
Section 7 of the Norris-LaGuardia Act. Both Commerce and
Vantage, in their papers filed at the time, treated the application
for preliminary injunction as being under Fed. R. Civ. P. 65. In
any event, the weight of authority is contrary to the Third
Circuit view, and holds that Norris-LaGuardia Act §7 does not
depart from the common law rule limiting recovery to the
amount of the injunction bond. Associated General Contractors
v. Illinois Conference of Teamsters, 486 F.2d 972, 975 (7th Cir.
1973); Int'l Ladies Garment Workers Union v. Donnelly
Garment Co., 147 F.2d 246, 252-53 (8th Cir.), cert. denied, 325
U.S. 852 (1945). See also Hoh v. Pepsico, Inc., 491 F.2d 556, 560
(2d Cir. 1974); Detroit News Pub. Ass'n v. Detroit
Typographicu*é/nion No. 18, 471 F.2d 872, 876 (6th Cir. 1972),
cert. denied, 411 U.S. 967 (1973).
Miscellaneous Claims
The foregoing discussion is sufficient to dispose of the claim
of Commerce and Vantage that NMU induced the breach of the
contract for the sale of the Barbara. In other words, the answer
to this claim is that the proximate cause of the asserted injuries
was the preliminary injunction, and the remedy of Commerce
and Vantage is limited to the injunction bond.
A rr ERB De a STR Om
6la
Opinion of the District Court
Vantage’s contention that it is entitled to damages because
NMU violated New York’s Donnelly Anti-Trust Act can be
disposed of on the basis of the clear holding in Connell
Construction Co. v. Plumbers and Steamfitters Union No. 100,
421 U.S. 616, 635-37 (1975), that, even if there is no exemption
from federal antitrust laws, there could be no application of
state antitrust laws in a setting such as the present case.
With respect to NMU’s contention that all claims of
Commerce and Vantage are barred by the 1973 settlement
between these parties, I reject this defense. The releases
exchanged between the parties expressly reserved the rights of
Commerce and Vantage against NMU.
Conclusion
The counterclaims of Commerce against NMU in 71 Civ.
582 are dismissed, except that Commerce is entitled to judgment
against NMU on the second counterclaim in the amount of
$10,000.
The complaint of Vantage in 72 Civ. 4619 is dismissed.
No costs are awarded as against any party.
NMU is directed to submit appropriate judgments.
So ordered.
Dated: New York, New York
March 31, 1976
s/ Thomas P. Griesa
THOMAS P. GRIESA
U.S.D.J.
*
62a
Opinion of the District Court
FOOTNOTES
1. Article 1, Section 2 reads as follows:
“Section 2. Sale and Transfer of Vessels. (a)
The Company agrees with respect to any vessel
which is presently under or may hereafter come
under this Agreement, that if during the term of
this Agreement said vessel is sold or transferred
in any manner to any other business entity not
covered by this Agreement for operation under
United States flag (but not including a vessel
which the Company bareboat charters and the
charter is terminated), said vessel shall be sold or
transferred with the complement of employees
who either are or shall be provided by the Union
in accordance with the terms of this Agreement,
or such number as may be agreed upon between
the Union and the transferee. The term ‘transfer’
shall be construed to include any chartering of a
vessel by the Company.
“(b) The Company obligates itself to obtain for
the benefit of the Union a written undertaking
with the Union to be executed by the business
entity to which the vessel has been sold or
transferred that for the full term of the
Agreement all of its terms and provisions shall
apply to said vessel except as hereinabove
provided and that said business entity will fully
comply with all of the terms and provisions of
this Agreement and any amendments thereto to
preserve the jobs and job rights of the Unlicensed
Personnel covered by this Agreement and to
protect and maintain the wages, pension rights
—————
A tated eh VE ne ay 4
63a
Opinion of the District Court
and other economic benefits and working
conditions provided such personnel under this
Agreement.
“(c) The Company agrees that if it desires to sell,
bareboai charter or in any manner whatsoever
transfer a vessel to another business entity,
whether for United States flag or Foreign-flag
registry, timely written notice to the Union must
first be given prior to any such sale or transfer.
“(d) This Section shall be deemed of the essence
of the Collective Bargaining Agreement and in
the event of any violation, the no-strike provision
of this Agreement shall not be applicable.”
2. Originally Commerce and Vantage contended that they
would be entitled to damages under Section 301 of the Labor
Management Relations Act, 29 U.S.C. §185. However, this
section relates to suits “for violation of contracts between an
employer and a labor organization.” Neither Commerce nor
Vantage is suing NMU on such a cause of action.
3. United States intercoastal trade and certain other trade
has been limited by law to United States flag vessels.
4. The guarantees turned out to be somewhat illusory. By
1972 the companies were behind in their contributions by several
million dollars. NMU forgave the deficiency.
64a
ORDER DENYING REHEARING
UNITED STATES COURT OF APPEALS
SECOND CIRCUIT
At a Stated Term of the United States Court of Appeals, in
and for the Second Circuit, held at the United States Court
House, in the City of New York, on the fifteenth day of June,
one thousand nine hundred and seventy-seven.
Present:
HON. J. EDWARD LUMBARD,
1iON. WILFRED FEINBERG,
Circuit Judges.
HON. ALBERT W. COFFRIN,
District Judge.
Filed June 15, 1977
Daniel Fusaro, Clerk
National Maritime Union of America, AFL-CIO,
Plaintiff-Appellee,
v.
Commerce Tankers Corporation,
Defendant-Counterclaimnt-Appellant,
and
65a
Order Denying Rehearing
Vantage Steamship Corp.,
Intervening Defendant-Appellant.
Vantage Steamship Corp.,
Plaintiff-A opellant,
v.
National Maritime Union of America, AFL-CIO,
Defendant-Appellee.
76-7217
A petition for a rehearing having been filed herein by
counsel for the appellant Commerce Tankers Corporation,
Upon consideration thereof, it is
Ordered that said petition be and it hereby is DENIED.
s/ A. Daniel Fusaro
A. DANIEL FUSARO
Clerk
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