# Petition — COMMERCE TANKERS CORP. v. NATIONAL MARITIME UNION (No. 77-376) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2508%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 ## Text 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 GID BD oo ccccccccccccnbdbddebisesec dtesstsccees DEE. . vegucecesncccetoesrenhe 6690060eeseseekeues ey ND ng. nn cconcceensdeaseseesaeencsucnce SE Gr GD GEE cécccncceciccconcccncccoccansecese ee 8 rr eee 2. The Preliminary Injunction .................6.. ae — § PRS eee Aarne reer ee PR ee 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 OD voiniicscstasocdaaee United States Constitution Cited: ee BS onc ccccsccevsoosneceseenees 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 I vcvicdcccecesédecccceccecesces 64a se oe ee , eo \ 7 i< - i Ae Lea Pe ee > eee oP eng : +45 er es yr ™ 2 < | | si is wehaieatel suet : teem Ay '? vax Jet e asp che ee tee, ‘ -9 SLIT) Oy. eg | esIOS": bt wed ake iy echt 7 2 . . sos aH. greet e vite) 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 Mespry 7 cael, ee is ey “nn 9 a ~ | P : : Ly a8 mat ae ¢ = ; a Sra : 4 27, ir * ~~ Ud y g - ‘_ DUES Siw TE ts PAR Ot rir ee Bo) aa Raf 7 ‘ As — 7 9 one BE cine pia ne i la Lhe ptt ” ew a ity oa To aren 2 ays ve | Sane aire Ai: Cpoygeaes Ma eee nae 7 : - a a ek Tihs aan fare. ig- se ah Be a Ni 7 - _ ‘ - x 2 . oa AE Me 4 Coby * shu ; Le - at be z a (Aa GS “Air ragN 2 a - =~ pra S Rae ee Sots ‘ ss ; . a iy of etna tie Ay vi ee a — | a Ns S ‘ a | ke 45a s) Te ua ye x ; Rte Aes os “ ") er , a on “. - Se pay an = ! a) 0 ‘ p43 err ee as ¥ ® r - 5 : (eae os ao | ; bf - . p a a — a . . 1 < Y v 7 é “= a > € Mo b pe 7 a aan “J A Le ae i o> vA ar ¥ ® = ear = i * (o> t io as * ¥ Sra sche | a Y 7 2 ‘ - rr) 6 ? r ") a ; La - ‘ ‘ iy y ; 5 = 2 la 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 32a 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. 33a 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 — 34a 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 38a 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 44a 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 46a 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. 47a 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. 48a 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. 49a 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 50a 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 Van [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2508%3A1. Public record. Not legal advice.