# Petition — Miller Electric Co. v. National Constructors Assn.

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0244%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1983
- **Citation:** 462 U.S. 1129

## Text

82-1149 m

Supreme Court, U.S.
FILED

ee
: RUAN 71983
IN THE ALEXANDER L. STEVAS

CLERK

Supreme Court of the Unit

OCTOBER TERM, 1982

MILLER ELEcTRIC COMPANY and
COLGAN ELECTRIC CoMPANY, INC.,

Petitioners,

¥e

NATIONAL CONSTRUCTORS ASSOCIATION, ef al.,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT —

EARL W. KINTNER
(Counsel of Record)

DONALD M. BARNES

DENNIS C. CUNEO

ARENT, Fox, KINTNER, PLOTKIN & KAHN
Washington Square

1050 Connecticut Ave., N.W.
Washington, D.C. 20036-5339

(202) 857-6099

Counsel for Miller Electric Company
and Colgan Electric Company, Inc.

PRESS OF BYRON S. ADAMS PRINTING, INC., WASHINGTON, D.C.

i
QUESTION PRESENTED

This petition presents a question of paramount impor-
tance concerning the fixing of venue in an antitrust case.
Section 12 of the Clayton Act, 15 U.S.C. § 22, provides
that a suit under the antitrust laws may be brought in any
district wherein the defendant corporation “transacts
business.” The iast time this Court interpreted this provi-
sion was some 34 years ago in United States v. Scophony
Corp., 333 U.S. 795 (1948), when it interpreted “trans-
acts business” as meaning “substantial” business activity
within the forum. In contrast, the decision below found
that two small electrical contractors were venued in the
District of Maryland merely because they belonged to a
trade association located there and paid dues to local
independent chapters affiliated with it. Because of this
holding, trade association members, wherever located,
may find themselves subject to suit in distant districts
merely because of trade association membership. The
precise question for review is:

1. Inthe absence of any direct commercial activity
within a district, does membership in a trade
association headquartered in the district con-
stitute “transact[ing] business” there under § 12
of the Clayton Act.

PARTIES
Plaintiffs in the proceedings below included:

National Constructors Association

Commonwealth Electric Company

The Howard P. Foley Company

Donovan Construction Company of Minnesota, Inc.
Arthur McKee & Company, Inc.

reo America, Inc.

Catalytic, Inc.

C. F. Braun Constructors, Inc.

Dravo Corporation

Guy F. 2 nson Company

The H. K. Ferguson Company

Jacobs Constructors, Inc.

Pullman Kellog, Division of Pullman, Inc.
Stearns-Roger, Inc.

Defendants in the proceedings below included:

National Electrical Contractors Association, Inc.
Robert L. Higgins
International Brotherhood of Electrical Workers
Hinman op tng ,
te) ectric Company, Inc.
Miller Electric Company
H. E. Autre
Allen L. Bader
Frank H. Bertke
Donald C. Cates
Robert W. Colgan
Joe R. Devish
Carl T. Hinote
Allan H. Stroupe
L. R. MeCord
Aldo P. Lero
Lowell C. Timm
John Ostrow
C. W. Strou
Warren Los
J. D. Hilburn, Sr.

RELATED COMPANIES

Petitioners Miller Electric Company and Colgan Elec-
tric Company, Inc. have no parent companies, sub-
sidiaries or affiliates.

TABLE OF CONTENTS

Page
ION PUMMIED oc csvcncchiaveachsssewnn i
Cea oe ee tran caeededbavasaaee i
RIND s nacbehaw cabesoeves cuceasdeses ii
EL <5), . dileue, ddengbsebebewesnsbine iii
TABLE OF AUTHORITIES ...... i wine we Sale e ase oak eee iv
nT <. 2... sravebhdeeesenebonhagskwatree l
I Urs 6 weeds Su weseecewededredny ee as 2
IG oe puduw eines <b bac 2
PE oe cn co du ches mabe need sane sede 3
REASONS FOR GRANTING THE WRIT .............-0000- 5

A. By Predicating Venue On Trade Association

embership, The Decision Below Ingores The
Sound Policy Reasons For Requiring Sub-
stantial Business Activity Within The Forum

For Purposes Of § 12 Of The Clayton Act... 7
B. Membership In A Trade Association Located In
The Forum Does Not Constitute “Transact[ing]
Business” There Under § 12 Of The Clayton
BER 3. cod can VECbs dane dasneneenanbedduscex 10
C. In The Absence Of Any Direct Transactions
Within The Forum, It Is Improper.To Predi-
cate Venue On The Mere Fact That A Defend-
ant, Located Outside The Forum, Benefited
From Acts Performed By A Trade Association
PE RED Jaws ccasugcdatvbstiddeess ou2 14
EE Seite cwrevacedcwbes sandeensivanbeves 17
APPENDIX: Fourth Circuit Opinion ................ la
Ben EE III, ok 5's'd 4 din cree ncc cee shane 23a
Injunction Issued By The District Court ........... 98a
Order Denying Petitions For Rehearing And Sugges-
tions For Tebsering UES siccncvesbutdeniedsedas 100a

Disclosure of Respondents’ Corporate Affiliations And
Pe IRIE: <n 65 oS cv t.cussaverecnsensaeevas

102a

iv

TABLE OF AUTHORITIES
CASES: Page

Academy of Ambulatory Foot Surgery v. American
Podiatry Association, 516 F.Supp. 378 (S.D.N.Y.

SE as eekecnnls abide wands sued adudedeieenanks 14
American Society of Mechanical Engineers, Inc. v. Hy-

drolevel Corporation, ___. U.S. —— (1982) ..... 12
Athletes Foot of Delaware, Inc. v. Ralph Libonati Co.,

445 F.Supp. 35 (D. Del. 1977) .......ccccccccecs 10
B. J. Semel Associates, Inc. v. United Fireworks Manu-

facturing Co., 355 F.2d 827 (D.C. Cir. 1966) ..... 16
Bartholomew v. Virginia Chiropractors Association,

Inc., 612 F.2d 812 (4th Cir. 1979) ............... 14

Bogus v. American a and Hearing Association, 389
F.Supp. 327 (E.D. Pa. 1975), rev'd and aff'd on other
grounds, 582 F.2d 277 (3d Cir. 1978) ........... 6, 13

Caribe Trailers Systems, Inc. vy. Puerto Rico Maritime
Shipping Authority, 475 F.Supp. 711(D.D.C. 1979) 6

Courtesy Chevrolet, Inc. v. Tennessee Walking Horse
Breeders’ and Exhibitors’ Association, 344 F.2d 860

Sa DEED Sw icinn b cha dddcdhosnOvabeounvellaa ves 13
Eastman Kodak Co. v. Southern Photo Materials Co.,
PE MA CHEED 5 v0e was cacevéetwedcabis (in 8,9

Fashion Two Twenty, Inc. v. Steinberg, 339 F.Supp. 836
EC UEEE cokkss dccbas bs ponacsodendahes

Friends of Animals, Inc. v. American Veterinary Medi-
cal Association, 310 F.Supp. 620 (S.D.N.Y. 1970) 13

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) .. 12

Golf City, Inc. v. Wilson Sporting Goods Co., Inc., 555
a ee CUES MEUED 5 elvne cdccntcranerdaahes 6, 13

Hanson v. Denckla, 357 U.S. 235 (1958) ............. 15
International Shoe v. Washington, 326 U.S. 310 (1945) 6

J.&B.&S. Restaurant Corp., Inc. v. Henry’s Drive-In,
Inc., 353 F.Supp. 389 (W.D.N.Y. 1973) .........

Midwest Fur Producers Association v. Mutation Mink
Breeders Association, 102 F.Supp. 649 (D. Minn.

Vv

Table of Authorities Continued
Page
0.S.C. Corp. v. Toshiba America, Inc., 491 F.2d 1064
SRA DOUEE tv bnvce dene t vuvesksboceeee eee 6, 10
Philadelphia Housing Authority v. American Radiator
& Standard Sanitary Corporation, 309 F.Supp. 1053
a SO acces ba aes ddcccenenameien ten 10, 11

- Sherman College of Straight Chiropractic v. American
Chiropractic Association, Inc., 534 F.Supp. 438

Ses SE os bet colveenosdi var eens ameeerad 13
State of Illinois v. Harper & Row Publishers, Inc., 308

a Se GUNLEM Bas EOUOED 60c0 vedp eee nccune 6
United States v. National City Lines, 334 U.S. 573

PCR aia'c Wa's 640663 va an-0' ob ha oeenaeaes 6, 9, 16

} Vv. hon tion, 2
ae. ee
STATUTES AND LEGISLATIVE MATERIAL:
DE Dn ick cvcdnsee seshuseéeendadieneeeaean 3
ES EES hide sie vous sesicr ene eehascen bene 2
rr 7

OTHER AUTHORITIES:

Note, Antitrust Venue: Transacting Business Under The
Clayton Act, 55 Geo.L.J. 1066 (1967) ............

National Trade and Professional Associations Of The
United States (C. Colgate, Jr. 17th ann. ed. 1982) 6

IN THE
Supreme Court of the Gnited States

OCTOBER TERM, 1982

ee

MILLER ELECTRIC COMPANY and
CoLGAN ELEcTRIC CoMPANY, INC.,
Petitioners,

Vv.
NATIONAL CONSTRUCTORS ASSOCIATION, et al.,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

Petitioners, Miller Electric Company (“Miller”) and
Colgan Electric Company, Inc. (“Colgan”) respectfully
pray that a writ of certiorari issue to review the judgment
of the United States Court of Appeals for the Fourth
Circuit entered May 17, 1982.

OPINIONS BELOW

The majority and dissenting opinions (App. at 1a) filed
by the Court of Appeals are reported at 678 F.2d 492;
petitions for rehearing and suggestions for rehearing en
banc were denied on September 8, 1982 (App. at 100a).
The decision of the United States District Court for the
District of Maryland (App. at 23a) is reported at 498
F.Supp. 510; its injunction (App. at 98a) was entered on
October 8, 1980.

2

JURISDICTION

The opinion of the Court of Appeals for the Fourth
Circuit was filed on May 17, 1982. Timely petitions for
rehearing and suggesticns for rehearing en banc were
filed on June 1, 1982, and denied on September 8, 1982.
The jurisdiction of this Court is invoked pursuant to 28
U.S.C. § 1254(1).

On November 29, 1982, Chief Justice Burger extended
the time within which to file a petition for a writ of
certiorari to and including January 7, 1983.

STATUTORY PROVISION

The relevant statutory provision is § 12 of the Clayton
Act, 15 U.S.C. § 22, which reads:

Any suit, action, or proceeding under the antitrust
laws — a corporation may be brought not —
the judicial district whereof it is an inhabitant, but
also in any district wherein it may be found or trans-
acts business; and all process in such cases may be
served in the district of which it is an inhabitant, or
wherever it may be found. [Emphasis added].

STATEMENT OF THE CASE

Miller and Colgan are small electrical contractors head-
quartered in Jacksonville, Florida, and Toledo, Ohio,
respectively. They, together with some 5,700 electrical
contractors, are members of the National Electrical Con-
tractors Association (“NECA”), a trade association head-
quartered in the District of Maryland. Respondents, who
collectively constitute the giants of the contracting indus-
try,’ commenced this suit on August 5, 1977, by filing a

‘The corporate affiliations of the respondents that are publicly
held or are subsidiaries of publicly held corporations are listed in
(footnote continues)

3

class action complaint seeking treble damages and injunc-
tive relief for an alleged violation of § 1 of the Sherman
Act, 15 U.S.C. § 1. In essence, the complaint challenged
the legality of the 1976 National Collective Bargaining
Agreement between NECA and the International
Brotherhood of Electrical Workers (“IBEW”). The
named defendants included the IBEW and certain of its
officials, NECA and certain of its officials, and Miller and
Colgan. Miller and Colgan were the only individual
NECA members named as defendants.

On September 9, 1980, the district court, on a motion
for partial summary judgment, found that one provision
of the challenged collective bargaining agreement, the
provision establishing the National Electrical Industry
Fund, violated the Sherman Act. A nationwide class of
electrical contractors was certified, and on October 10,
1980, a permanent injunction was entered against all
defendants, including Miller and Colgan.

In the course of its decision, and as necessary predicate
for including Miller and Colgan within the injunction, the
district court found that venue, under the “transacts
business” provision of § 12 of the Clayton Act, was proper
in the District of Maryland. The court noted that the
question of whether Miller and Colgan were properly
venued in the District of Maryland was “a close one.” 498
F.Supp. at 525; App. at 44a.

(footnote continued)

Appendix (at 102a), which contains the “Disclosure Of Corporate
Affiliations And Financial Interests” filed by respondents with the
Fourth Circuit on December 4, 1980. In contrast, petitioners Miller
and Colgan, which are small, family-owned corporations, had annual
sales of $12 million and $16 million, respectively, when this suit was
filed.

4

The court reached its decision although it was uncon-
tested that neither company: (1) had performed any elec-
trical contracting service in the District of Maryland; (2)
had solicited business or advertised in Maryland; (3) was
qualified to do business in Maryland; (4) owned or leased
property in Maryland; (5) had a post office address, tele-
phone listing or bank account in Maryland; or (6) had any
officers, employees, directors or agents who were resi-
dents of Maryland. 498 F.Supp. at 525; Anp. at 46a.

The court predicated its venue finding on the facts that
Miller and Colgan belonged to a Maryland-based trade
association, NECA, and paid dues to NECA chapters
located outside of Maryland. NECA is a federation of 135
independent, autonomous chapters located throughout
the United States. Miller and Colgan belonged to the
chapters located in Florida and Ohio, respectively, and
paid their dues directly to those chapters. A portion of
those dues was ultimately remitted by the chapters to
National NECA in Bethesda, Maryland.’ The court char-
acterized these dues payments to the local chapters as
“purchases of services from the National Electrical Con-
tractors Association. . . in Bethesda, Maryland” because
the defendants received “benefits” from their mem-
bership in NECA, including public relations, labor rela-
tions, congressional lobbying and electrical code making.
498 F.Supp. at 525-26; App. at 46a. The court distin-
guished prior precedent—that trade association mem-
bership and dues payments were insufficient to establish

? The amounts eventually remitted to NECA in Maryland by local
NECA chapters and attributable to Miller and Colgan averaged
$6,576 and $5,921 per year, respectively. 498 F.Supp. at 526; App. at
46a-47a.

5

venue—by characterizing the services provided by
NECA to its members as “extensive” and “valuable.” 498
F.Supp. at 527, n.6; App. at 50a.

On appeal, a divided panel of the Fourth Circuit
affirmed, finding that Miller and Colgan were “transact-
ing business” in Maryland because of their membership
in, and payment of dues to, NECA.’ 678 F.2d at 492; App.
at 8a. Circuit Judge Hall filed a sharp dissent, noting that
“(t]he holding that mere membership and payment of
trade association dues is enough to constitute ‘transact-
[ing] business’ under § 12 of the Clayton Act, 15 U.S.C.
§ 22, flies in the face of the well established rule that a
defendant’s contacts with the forum state must be of a
‘substantial character’ in order for venue to be proper.”
678 F.2d at 504; App. at 21a-22a. [Emphasis in original].
The case was remanded for a determination of liability
and damages, which respondents contend exceed
$100,000,000.*

REASONS FOR GRANTING THE WRIT

In considering the merits of this petition, the Court
should be aware that more is at stake than simply the
rights and interest of these two litigants—much more.
The way in which the question raised in this petition is
answered will profoundly affect the fixing of venue in
antitrust lawsuits involving trade associations and their
members. The core of the finding below is that mem-
bership in a trade association is sufficient to satisfy the

*The appellate court erreoneously characterized the payments
made to local NECA chapters as payments made to National NECA
in Maryland. 678 F.2d at 497; App. at 8a.

‘NECA has filed, this date, a petition for certiorari to review this
liability determination. Miller and Colgan have joined in that peti-
tion.

6

“transacts business” test of § 12 of the Clayton Act. The
implications of this decision on the nation’s 40,000 trade
and professional associations and their millions of
members’ are manifest. The last time that this Court
interpreted the “transacts business” provision of § 12 of
the Clayton Act was some 34 years ago in United States v.
National City Lines, 334 U.S. 573 (1948), and United
States v. Scophony Corporation, 333 U.S. 795 (1948). In
those two cases, this Court construed “transacts busi-
ness” as requiring commercial transactions of “sub-
stantial character” within the forum. In the intervening
years since 1948, the lower courts have reached divergent
conclusions on how “substantial” those contacts must be
to confer venue under § 12.’ The unprecedented decision
here, which adds to the confusion, mandates a reexamina-
tion of the application of this wide-reaching venue provi-
sion.

5 National Trade And Professional Associations Of the United
States, p. 7 (C. Colgate, Jr. 17th ann. ed. 1982).

* A number of courts have refused to find venue where the defend-
ant’s qualitative and quantitative contacts with the forum were not
direct or substantial. See e.g., Golf City Inc. v. Wilson Sporting
Goods Co., Inc., 555 F.2d 426 (5th Cir. 1977); 0.S.C. Corp. v. Toshiba
America, Inc. , 491 F.2d 1064 (9th Cir. 1974); Caribe Trailer Systems,
Inc. v. Puerto Rico Maritime Shipping Authority, 475 F.Supp. 711
(D.D.C. 1979). Conversely, other courts have found venue using an
analysis that is closer to the due-process, minimun contacts test of
International Shoe v. Washington, 326 U.S. 310 (1945) than the
substantial business test of Scophony. See, e.g., Bogus v. American
Speech and Hearing Association, 389 F.Supp. 327 (E.D. Pa. 1975),
rev'd and aff'd on other grounds, 582 F .2d 277 (3d Cir. 1978); Fashion
Two Twenty, Inc. v. Steinberg, 339 F.Supp. 836 (E.D.N.Y. 1971);
State of Illinois v. Harper & Row Publishers, Inc., 308 F.Supp. 1207
(N.D. Ill. 1969).

7

The basic vice of the decision below is that it bases
venue on peripheral, indirect contacts with the forum.
Thus, two small electrical contractors, located in Florida
and Ohio, respectively, who have never solicited nor per-
formed any electrical contracting business in Maryland,
nevertheless find themselves venued there because of
their membership in a trade association. The decision
effectively emasculates the concept of “substantial” com-
mercial transactions within the forum, as required by
Scophony. The decision is wrong as a matter of policy and
fairness, conflicts with the underlying congressional in-
tent of § 12 of the Clayton Act, and will adversely affect
trade associations and their members throughout the
country.

A. By Predicating Venue On Trade Association Activity, The
Decision Below Ignores The Sound Policy Reasons For
Requiring Substantial Business Activity Within The
Forum For Purposes Of § 12 Of The Clayton Act.

The Clayton Act’s venue provision, § 12, was referred
to in the congressional debate as:

[Ojne of the most important [provisions] connected
with the whole subject matter of antitrust legislation
. . . (UJnless the venue be properly p , on the
one hand, you oi subject the defendant to black-
mail. . . On the other hand, if venue be not properly
placed, the plaintiff in humble pen may be de-
prived of the benefits of this bill.

51 Cong. Rec. 9467 (1914) (remarks of Congressman Sum-

ners).

In interpreting § 12 of the Clayton Act, the courts have
generally been able to deal consistently with the terms
“inhabitant” and “found” but have differed over the in-
terpretation of “transacts business”. See Note, Antitrust
Venue: Transacting Business Under the Clayton Act, 55

8

Geo.L.J. 1066, 1068 (1967). This Court first interpreted
the “transacts business” provision in Eastman Kodak
Company v. Southern Photo Materials Co., 273 U.S.
359, 370-71 (1927). It held that “a corporation is engaged
in transacting business in a District . . . in such sense as
to estab'ish the venue of a suit... if in fact, in the
ordinary and usual sense, it ‘transacts business’ therein of
any substantial character.” /d. at 373. This interpretation
of the statute was affirmed 21 years later in United States
v. Scophony Corporation of America, supra, and United
States v. National City Lines, supra.

In Scophony, this Court definitively held that the
“transacts business” provision of § 12 does not permit a
finding of venue based on any contact with the forum.
Rather, a finding of venue requires a “substantial” level
of commercial activity in the forum by the defendant. An
examination of the facts in Scophony places the sub-
stantiality requirement of § 12 in context.

There, defendant, a British corporation, created an
American affiliate to exploit its inventions and patents in
the United States. Through a series of complex con-
tractual arrangements, the British corporation trans-
ferred its patents, inventions and all of its equipment then
in the United States to the American affiliate. It had the
right to elect three of the five directors of the A )»erican
affiliate and constantly supervised the affiliate’s activi-
ties. Moreover, the British corporation was represented
in the United States by two of its directors, one of whom
held a comprehensive power of attorney to protect
Scophony’s interests in the United States. In the words of
Mr. Justice Rutledge, “Scophony then and there was
carrying on largely, if not exclusively, the only business
in which it could engage at the time [in the forum].” 333
U.S. at 810. After analyzing this commercial milieu, the

9

Court readily found that the British corporation satisfied
the “transacts business” standard, which it interpreted to
mean “(tjhe practical, everyday business or commercial
concept of doing or carrying on business ‘of any sub-
stantial character.’. . .” Jd. at 807. (Quoting from East-
man Kodak, supra.).

The facts of Scophony clearly indicate that the “trans-
acts business” provision of § 12 is not satisfied merely by
showing some contact with the forum—contacts rising to
the level of “substantial” business in the forum are re-
quired. The “transacts business” test is assuredly not a
talisman that can be used to transform any sort of forum
contact into a predicate for venue under § 12.

A few months after the Scophony decision, this Court,
in National City Lines, supra, again examined § 12 and
explained why the “transacts business” provision was
only satisfied by the “carrying on” of “substantial” busi-
ness in the forum. Section 12, the Court explained, was
enacted to liberalize the then-existing venue provision
applicable to antitrust suits, but it was not intended to
provide plaintiffs with an unlimited choice of forums. In
examining the legislative history of § 12, the Court con-
cluded:

Congress therefore was not indifferent to possibili-
ties of abuse involved in the various proposals for
change [of the venue provision]. Exactly the opposite
was true. For the broader ng $ were not re-
ported because they gave the plaintiff the choice.
ey were rejected because the choice given was too
wide, giving plaintiffs the power to bring suit and
force trial in districts far removed from the places
where the company was incorporated, had its head-
uarters, or carried on its business. In adopting § 12
ongress was not willing to give plaintiffs free rein to
haul defendants hither and yon at their caprice.

Id, at 587-88.

10

To strike the proper balance between the interests of
antitrust plaintiffs and defendants, in accord with con-
gressional intent, the Court reaffirmed that § 12 required
“substantial” commercial activities within the forum.
That requisite substantiality is missing here.

B. Membership In A Trade Association Located In The
Forum Does Not Constitute “Transact(ing) Business”
There Under § 12 Of The Clayton Act.

The collective theme of Fastman Kodak, Scophony
and National City Lines is that the test of venue under
§ 12is whether a corporation has made its presence felt in
a particular area to advance its essential business pur-
poses. In the typical § 12 venue case, the court analyzes a
corporation's quantitative and qualitative contacts with
the forum, including the dollar value and percentage of its
in-forum sales and purchases, the continuity and regular-
ity of its business activities within the district, and the
existence of sales solicitation and advertising in the
forum. See, e.g., O.S.C. Corp. v. Toshiba America, Inc.,
491 F.2d 1064 (9th Cir. 1974); Athletes Foot of Delaware,
Inc. v. Ralph Libonati Co., 445 F.Supp. 35 (D. Del. 1977);
J. &Bi&S., Restaurant Corp., Inc. v. Henry's Drive-In,
Inc., 353 F.Supp. 389 (W.D.N.Y. 1978); Philadelphia
Housing Authority v. American Radiator & Standard
Sanitary Corp., 309 F.Supp. 1053 (E.D. Pa. 1969).

This is not the typical case.

Here, venue is not predicated on any commercial activ-
ity conducted by these two small electrical contractors in
the District of Maryland. It is undisputed that Miller and
Colgan have never performed nor solicited any electrical
contracting services there. Rather, venue has been predi-
cated on membership in a Maryland-based trade associa-
tion, the payment of dues to independent chapters of that

1]

trade association that are located outside Maryland, and
use of its services outside of Maryland. To counsel's
knowledge, excluding the decision here, the precise ques-
tion of whether trade association membership and dues
payment are sufficient for venue under § 12 of the
Clayton Act has been addressed on only two occasions.
The decision here conflicts with the two other decisions
that have considered the question.

In Philadelphia Housing Authority v. American
Radiator & Standard Sanitary Corp., 309 F.Supp. 1053
(E.D. Pa. 1969), Judge Lord rejected a venue claim based
on facts that a defendant belonged to a trade association
located in the forum, regularly attended meetings there,
and employed the association to perform services in its
behalf. Similarly, in Midwest Fur Producers Ass’n v.
Mutation Mink Breeders Ass’n, 102 F.Supp. 649, 652
(D.Minn, 1951), the court, in dismissing the case for lack
of venue, held that “mere membership in an organization
does not show that defendant is transacting business
here.” These two decisions correctly found that the venue
test under Scophony—substantial commercial activity
‘ within the district—precluded the fixing of venue based
merely on membership in a trade association and partici-
pation in trade association activities.

Here, the district court attempted to distinguish this
precedent by the following characterization: petitioners’
NECA membership and dues payments amounted to
“purchases” of “valuable” and “extensive” services. 498
F.Supp. at 527; App. at 50a. But this distinction begs the
question. The raison d’etre of any trade association is to
provide valuable services to its members. The
characterization of trade association membership as
“valuable” is a meaningless tautology. Venue analysis
should not be reduced to the use of expedient labels, i.e.

12

the subjective determination of the “value” of trade asso-
ciation membership. Rather, that analysis should focus
on the key venue issue—does a defendant, through its
trade association membership or otherwise, have a sub-
stantial commercial presence in the forum?

The unprecedented and far-reaching effects of the deci-
sion below are manifest. If trade association membership
and payment of dues are deemed sufficient to meet the
“transacts business” test of § 12, all members of a trade
association will be venued in the district where the assuci-
ation is headquartered. Indeed, as a direct result of this
holding, some 5,700 members of NECA, from Alaska to
Maine, could now find themselves venued in the District
of Maryland, irrespective of the utter lack of any commer-
cial activity by them within Maryland. Predicating venue
merely on trade association membership ignores the clear
teaching of Scophony—venue can only be found if the
defendant engages in substantial business in the forum.
The plain fact is that the business of these two electrical
contractors in the “ordinary and usual sense” is electrical
contracting, which they have never conducted in Mary-
land. To equate membership in a Maryland trade associa-
tion as substantial business activity in Maryland would
stand the “transacts business” test of § 12 on its head.

The question of predicating venue on trade or profes-
sional association activity is of great importance. Two
recent cases decided by this Court, Goldfarb v. Virginia
State Bar, 421 U.S. 773 (1975), and American Society of
Mechanical Engineers, Inc. v. Hydrolevel Corporation,
—__— U.S. —— (1982), have effectively made trade and
professional associations more amenable to antitrust law-
suits. Since most associations have nationwide mem-
bership, the venue issue, as it relates to trade association
activity, has become increasingly important.

13

The lower courts have not developed consistent stand-
ards for applying the “transacts business” provision of
§ 12 to trade association activity. Thus, on a similar set of
operative facts, the Tennessee Walking Horse Associa-
tion was found properly venued in California, while the
Professional Golfers’ Association was found improperly
venued in Louisiana. Compare: Courtesy Chevrolet, Inc.
v. Tennessee Walking Horse Breeders’ and Exhibitors’
Ass’n, 344 F.2d 860 (9th Cir. 1965) with Golf City, Inc. v.
Wilson Sporting Goods Co., 555 F.2d 426 (5th Cir. 1977).
Similarly, the American Speech and Hearing Association
found itself venued in Pennsylvania because it held three
conferences and had 393 members there, while the Amer-
ican Veterinary Medical Association’s sponsorship of two
conferences and 183 members in New York were deemed
insufficient to constitute “transact[ing] business” there.
Compare: Bogus v. American Speech and Hearing
Ass’n, 389 F.Supp. 327 (E.D. Pa. 1975), rev’d and aff'd on
other grounds, 582 F.2d 277 (3d Cir. 1978) with Friends of
Animals, Inc. v. American Veterinary Medical Ass’n,
310 F.Supp. 620 (S.D.N.Y. 1970).

Because venue governs access to federal courts, the
status of trade association activity and membership
under § 12 of the Clayton Act is too important to be left in
flux.” This Court should grant the writ to give needed
guidance.

’ For other examples of the divergent treatment of this question by
the lower courts, see: Sherman College of Straight Chiropractic v.
American Chiropractic Ass’n, Inc. 534 F.Supp. 438, 444-45 (N.D. Ga.
1982) (sponsorship of 3 or 4 seminars over a five-year period, public
service announcements, and mailing of promotional material to a
local chiropractic school constitute “carrying on business of any sub-

(footnote continues)

14

C. In The Absence Of Any Direct Transactions Within The
Forum, It Is Improper To Predicate Venue On The Mere
Fact That A Defendant, Located Outside The Forum,
Benefited From Acts Performed By A Trade Association
In The Forum

As the district court recognized, neither Miller nor
Colgan paid any dues directly to National NECA in Mary-
land. Rather, all dues were paid to local chapters which,
as respondents recognized below, are “independently in-
corporated local trade associations” that are “separate”
from National NECA.* Thus, venue was predicated on
indirect transactions with the forum by these two com-
panies. To bridge the venue gap, the district court
effectively considered the local independent chapters as

(footnote continued)

stantial character” for purposes of § 12); Academy of Ambulatory
Foot Surgery v. American Podiatry Ass’n, 516 F.Supp. 378
(S.D.N.Y. 1981) (presence of 313 members in the district, affiliation
with a state association in the district, and receipt of $18,824 in
advertising revenues not sufficient to constitute “transacting busi-
ness”), and Midwest Fur Producers Ass’n v. Mutation Mink Breed-
ers, supra, (presence of 166 members in Minnesota, and provision of
advertising and marketing services which benefited those members
in Minnesota not sufficient to confer venue under § 12). Indeed, in
reaching its decision below, the Fourth Circuit failed to distinguish,
reconcile or even cite its previous decision which is inconsistent with
the decision reached in this case. See Bartholomew v. Virginia Chi-
roprators Ass'n, Inc., 612 F.2d 812 (4th Cir. 1979) (maintenance of a
training program for peer review conducted in the district, dis-
semination of peer review guidelines and a relative value fee schedule
in the district, and 53 members located in district insufficient to
establish venue.)

*This admission is contained in pages 4 and 52 of respondents’
Appellate Brief in the Fourth Circuit.

15

the alter egos of National NECA and further equated
defendants’ use of NECA services in areas outside of
Maryland as transacting business in Maryland.

It is doubtful that such tenuous contacts even meet the
minimum contact requirements of the due process clause.
Hanson v. Denckla, 357 U.S. 235, 252-53 (1958) (“(Tyhis
suit cannot be said to be one to enforce an obligation that
arose from a privilege the defendant exercised in [the
forum]. . . [I]t is essential in each case that there be some
act by which the defendant purposefully avails itself of
the privilege of conducting activities within the forum
State, thus invoking the benefits and protections of its
laws.”) It is difficult to fathom how the paying of dues toa
“local trade association” located outside of Maryland, for
services received and used outside of Maryland, invokes
the benefits and protections of Maryland’s laws.

These peripheral contacts, which are questionable
under the due process clause, are clearly inadequate to
meet the substantial business test of § 12 of the Clayton
Act. The focus of venue here is the payment of dues for
trade association services. But those dues were not paid
directly into Maryland, and more importantly, those
services were not used by Miller and Colgan in Maryland.
Instead, those “services” were used by petitioners in
their activities that took place far away from the District
of Maryland.

The decision below amounts to a new rule of vicarious
venue. There has heen no showing that Miller and Colgan
had any commercial presence in Maryland. Rather, the
presence and activities of National NECA in Maryland
have been imputed to them. This, we respectfully submit,
is an unprecedented expansion of the “transacts busi-
ness” provision of § 12 of the Clayton Act. Membership in
a Maryland trade association and the use of its services

16

outside of Maryland do not constitute a commercial pre-
sence in Maryland. As noted by Judge, now Chief Justice
Burger in his dissent in B. J. Semel Associates, Inc. v.
United Fireworks Manufacturing Company, 355 F.2d
827, 834 (D.C. Cir. 1966), Section 12 “contemplates venue
when business is transacted in this jurisdiction, not. . .
with persons in [this jurisdiction].”* [Emphasis in origin-
al]. The facts here are even one step removed from those
in Semel. Petitioners’ transactions were with local in-
dependent chapters located outside of the District of
Maryland. To equate these indirect contacts with carry-
ing on “substantial” business in Maryland violates the
letter and the spirit of this Court’s decisions in Scophony
and National City Lines, supra. If the decision below is
allowed to stand, antitrust plaintiffs suing trade associa-
tions or their members will be able to “haul defendants
hither and yon at their caprice,” National City Lines,
supra, 334 U.S. at 588, the very license Congress
cautiously withheld when it enacted § 12.

* Compare the district court’s statement below: “(T]he court finds
that both Miller and Colgan were in effect “transacting business”
with national NECA in Bethesda, Maryland. . .” 498 F.Supp. at 527;
App. at 50a. [Emphasis added].

~

17

CONCLUSION

The decision below departs from the congressional poli-
cy underlying § 12 of the Clayton Act, conflicts with
controlling precedent of this Court, and dangerously ex-
pands the amenability of trade associations and their
members to antitrust suits in distant districts. The lower
courts, which have failed to develop consistent standards
for applying § 12 to trade association activity, are.in need
of this Court’s guidance. Petitioners pray that certiorari
be granted.

Respectfully submitted,

EARL W. KINTNER
(Counsel of Record)

DONALD M. BARNES

DENNIS C. CUNEO

ARENT, Fox, KINTNER, PLOTKIN & KAHN
Washington Square

1050 Connecticut Ave., N.W.
Washington, D.C. 20036-5339

(202) 857-6099
»Counsel for Miller Electric Company
and Colgan Electric Company, Inc.

la

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

Nos. 80-1808
80-1809

NATIONAL ELECTRICAL CONTRACTORS
ASSOCIATION, INC., et al.
Defendants-Appellants
Ve
NATIONAL CONSTRUCTORS ASSOCIATION, et al.
Plaintiffs-Appellees

Appeal from the United States District Court for the District
of Maryland. Herbert F. Murray, District Judge.

Argued March 3, 1981 Decided May 17, 1982

Before WIDENER and HALL, Circuit Judges, MICHAEL,
District Judge*

* United States District Court for the Western District of
Virginia, sitting by designation.

Stanley D. Robinson (Kaye, Scholer, Fierman, Hays & Hand-
ler; James P. Garland, Anthony W. Kraus, Nora Winay, Sem-
mes, Bowen & Semmes; Laurence J. Cohen, Richard M. Res-
nick, Sherman, Dunn, Cohen, Leifer & Counts; Milton Hand-
ler, Michael Malina; Peter H. Gunst, Mary K. Farmer, Frank,
Bernstein, Conaway & Goldman; Guy Farmer (Farmer, Wells,
McGuinn, Flood & Sibal, on brief) and Donald M. Barnes (Ear!
W. Kintner, Dennis C. Cuneo, Arent, Fox, Kintner, Plotkin &
Kahn, on brief) for Appellants; Wilbur D. Preston, Jr. (Robert

2a

M. Wright, Gerson B. Mehlman, James R. Chason, Whiteford,
Taylor, Preston, Trimble and Johnston, on brief); Alan D.
Cirker (Anthony J. Obadal, Zimmerman and Obadal; Ira
Greenberg, Stokes & Shapiro, on brief) for Appellees; (K. L.
Estabrook, Donald F. Nicolai, Lindabury, McCormick and
Estabrook, on brief) for Amicus Curiae Mechanical Con-
tractors Association of America, Inc.; (John P. Frank, Lewis
and Roca, on brief) for Stephen J. Burton, Felhaber, Larson,
Fenlon and Vogt, on brief) for Amicus Curiae NECA, Pipe,
and Masonry; (Robert J. Fenlon, StephenJ. Burton, Felhaber,
Larson, Fenlon and Vogt, on brief) for Amicus Curiae The
Sheet Metal and Air Conditioning Contractors National Asso-
ciation, Inc.; (J. Albert Woll and Lawrence Gold on brief) for
Amicus Curiae The American Federation of Labor and Con-
gress of Industrial Organizations; (Jerry J. Williams, Keith B.
Bardellini, Freshman, Mulvaney, Marantz, Comsky, Forst,
Kahan & Deutsch, on brief) for Amicus Curiae Construction
Industry Advancement Fund of Southern California, Fund for
Construction Industry Advancement, San Diego Construction
Industry Advancement Fund, and Associated General Con-
tractors, San Diego County, Inc.

WIDENER, Circuit Judge:

The National Electrical Contractors Association, the Inter-
national Brotherhood of Electrical Workers, and other defend-
ants appeal the award of a permanent injunction to plaintiffs
who include the National Constructors Association and numer-
ous construction companies, after a finding that the actions of
the defendants amounted to price fixing illegal under § 1 of the
Sherman Act, 15 U.S.C. § 1. National Constructors Associa-
tion, et al. v. National Electrical Contractors Association,
Inc., et al., 498 F. Supp. 510(D. Md. 1980). This appeal is taken
under 28 U.S.C. § 1292(a)(1) permitting appeals from the
award of injunctive relief. A FRCP 54(b) certificate was en-
tered by the district court relating to the counterclaims. We
affirm, and modify the injunctive order only slightly.

3a

This case involves a private antitrust action for injunctive
relief under § 16 of the Clayton Act, 15 U.S.C. § 26, and
damages under § 4 of that Act, 15 U.S.C. § 15, fora violation of
§ 1 of the Sherman Act, 15 U.S.C. § 1.' The plaintiffs below,
appellees here, are the National Constructors Association
(NCA), an unincorporated trade association made up of com-
panies who perform electrical construction work and transact
business in the electrical construction industry, and other
corporations performing electrical contracting work which em-
ploy IBEW electrical workers.* The defendants below, appel-
lants here, are the National Electrical Contractors Association
(NECA), an incorporated trade association, whose members
perform electrical construction work; the International
Brotherhood of Electrical Workers (IBEW), an unincorpo-
rated labor union representing electrical workers throughout
the country, Charles H. Pillard, President of IBEW In-
ternational; Robert L. Higgins, Executive Vice President of
NECA; Miller Electric Co. and Colgan Electric Co., corpora-
tions engaged in electrical contracting work and members of
NECA; and the trustees of the National Electrical Industry
Fund.’

'§ 1 of the Sherman Act provides in part:

Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the
several States, or with foreign nations, is declared to be illegal

* The district court has certified a class of plaintiffs as those elec-
trical contractors who, since July 1, 1977 have not been members of
NECA and who perform electrical construction work using workers
obtained or employed under the terms of collective bargaining agree-
ments with locals of the IBEW, which agreements contain or in-
corporate by reference the terms of Article 6 of the NECA-IBEW
national agreement.

The plaintiffs/appellees may be referred to as NCA or as appellees.

* The defendants/appellants may be referred to as NECA or as the
appellants.

da

NECA is the largest trade association in the electrical con-
tracting industry, consisting of at least 133 local trade associa-
tions or chapters whose members are both union and non-union
electrical contractors. The IBEW is the largest union
representing electrical workers, representing the vast major-
ity of all of the organized electrica) workers in the nation. At
the time of the district court's order the members of NECA
performed slightly more than 50% of the electrical contracting
work in the nation. Since 1960 NECA members have per-
formed between 50 and 60% of such work. Because of their
respective positions, much of the collective bargaining in the
electrical contracting industry is done by IBEW and NECA.
Local chapters of NECA are assigned territories throughout
the country which coincide with the jurisdiction of one or more
of the more than 400 IBEW locals. The local chapters of NECA
act as multi-employer bargaining representatives and negoti-
ate local collective bargaining agreements with the local IBEW
unions. Individual electrical contractors who are not members
of NECA usually enter into a labor agreement with the IBEW
in one of several ways: (1) Letter of Assent—A—An “A”
Letter of Assent authorizes the local NECA chapter to act as
the collective bargaining representative for the employer in
negotiations with the local union. As such, the employer is, of
course, considered a member of the NECA chapter bargaining
unit, (2) Letter of Assent—B—A “B” Letter of Assent binds
the employer to the terms of the local IBEW-NECA collective
bargaining agreement and all approved amendments, but does
not make the employer part of the bargaining unit. (3) Interna-
tional agreements—Designed for employers operating on a
national basis, such an agreement binds the employer to the
terms of local union contracts in the areas in which the employ-
er performs work. (4) Project agreements-—These agreements
apply to a single construction site and contain any provisions
that may be agreed upon. A local contractor may also negotiate
separately with the IBEW although this is not commonly done.

Both NECA and IBEW International reserve the right to
approve or veto all collective bargaining agreements entered
into by the local organizations.

5a

NECA and IBEW International also enter into national
agreements, whose terms are incorporated into local agree-
ments between NECA and IBEW. It is a provision of the 1976
National Agreement between NECA and IBEW‘ that appel-
lees challenged below as being in violation of the Sherman Act.
The first five articles of the 1976 agreement provide for the
National Electrical Benefit Fund (a pension fund), shift work,
management rights, and apprentice ratios. Article 6, the one
challenged below, provides for the establishment of an indus-
try fund. Article 6 states:

The parties agree to the establishment of a le con-
stituted trust to be called the National Electrical ~ ustry
un

All construction agreements in the electrical industry
shall contain the following language:

“Each individual employer shall contribute one per-
cent (1%)* of the gross labor payroll to be forwarded
monthly to the National Electrical Industry Fund in a
form and manner —— by the trustees no later than
fifteen (15) calendar days following the last day of the
month in which the labor was performed. Failure to do so
will be considered a breach of this agreement on the part of
the individual em ~ er.” *(an amount not to exceed 1%
nor less than 0.2 of 1% as determined by ech local chapter
and approved by the trustees)

a National Electrical Contractors Association will be
nsible to see that the objects of the fund, as outlined
in t e trust, are adhered to strictly.

No of the funds collected under this trust shall be
used for purely social activities.

No of the funds collected under this trust shall be
used for any purpose which is held to be in conflict with the

‘This agreement was announced in the spring of 1976 and ratified
at the October 1976 meeting of the NECA Board of Governors. The
agreement went into effect on July 1, 1977.

6a

interests of the International Brotherhood of Electrical
Workers and its local unions.

Both parties will be provided w th a copy of the Trust
and any further amendments.’

On December 8, 1976, President Pillard of IBEW and Vice
President Higgins of NECA signed the agreement containing
the provision for the industry fund. Contemporaneously they
signed a paper called “Basic Understandings and Interpreta-
tions of the IBEW-NECA Agreement” which provided in part:

Article Six—Industry Fund

(1) Itis understood that because of the cost of adminis-
tration of labor agreements, industry advancement and
services rendered to the electrical contracting industry by
the National Association and the NECA chapters that the
intent of this Article is to insert the industry fund con-
tribution mnguege in all IBEW construction agreements
containing the NEBF language except those covering em-
ployees of utility companies and municipalities and em-
ployees working under contractor equipment mainte-
nance agreements and employees working for motor
shops. In return, NECA will provide basic service to
electrical contracting employers employing workmen
obtained from the IBEW without re to the affiliation
of the individual employer with NECA.

Appellees challenged the industry fund provision under the
Sherman Act, alleging that the fund added a 1% charge to the
cost of all their electrical construction contracts with IBEW
whether the contractor belonged to NECA or not. Appellees
noted that prior to the 1976 agreement members of NECA paid
dues and a service charge for their membership in and services

‘The National Agreement provides that less than 1% of the labor
payroll may be collected by the local NECA chapter, but the local
must collect at least .2 of 1%, the amount which must be remitted to
the national organization. Both parties, as well as the district court,
have treated the required contribution to be 1%. The record supports
a conclusion that 1% is the usual amount collected.

7a

received from NECA.” The 1976 agreement thus increased
their cost of doing business. Thus, non-NECA members, who
paid no dues or service charges, had a competitive advantage
over NECA members when bidding on contracts. In order to
end this situation, argued appellees, appellants initiated the
1% contribution to be applied uniformly to all IBEW construc-
tion contracts whether the contractor was a member of NECA
or not, thereby stabilizing the price of electrical construction
contracts, As a result, non-NECA contractors no longer had a
competitive edge over their NECA competitors. Appellees
claimed that appellants’ actions constituted price fixing, a per
se violation of the Sherman Act. The district court agreed and
in a thorough and detailed opinion granted summary judgment
for the appellees, finding the anticompetitive purpose neces-
sary for a finding of price fixing a per se violation of the
Sherman Act.’

The district court also summarily dismissed as without merit
the NECA defendants’ counterclaims that appellees were en-
gaged in a boycott, illegal under § 1 of the Sherman Act, by
their concerted refusal to pay what they owed into the industry
fund, 498 F. Supp. at 551. The NECA defendants appeal this
grant of summary judgment for the appellees on the counterc-
laims.

Before dealing with appellants’ substantive arguments, we
note that appellants Colgan Electric and Miller Electric argue
as a separate issue that the district court erred in not granting
their motion to dismiss the complaint because venue was im-
proper as to them since they were not transacting business in

*The dues were $50.00 per year with a service charge of .2% of
their labor payroll after the first year of membership.

' The district court discussed at length the evidence before it which
had been produced by both sides regarding the agreement. We need
not diseuss such evidence in any detail except as it applies to the
issues to be dealt with later in this opinion.

8a

Maryland as required by § 12 of the Clayton Act, 15 U.S.C.
§ 22.* The district court found that they were in fact transact-
ing business in Maryland because of their dealings with NECA
to which they both belonged and paid substantial amounts in
the form of dues and industry fund contributions. We cannot
say that such a conclusion is clearly erroneous, and accordingly
affirm the district court’s denial of the motion to dismiss.
United States v. Scophony Corp., 333 U.S. 795 (1947). See
especially Scophony at p. 807, and the concurring opinion of
Justice Frankfurter at p. 818.

Appellants’ primary contention on appeal is that summary
judgment for the appellees in their price fixing case was inap-
propriate. Preliminarily we note that the Supreme Court has
cautioned against the granting of summary judgment in anti-
trust cases, stating in Poller v. Columbia Broadcasting Sys-
tems, 368 U.S. 464, 473 (1962), that “summary procedures
should be used sparingly in complex antitrust litigation where
motive and intent play leading roles .. .,” and we have had
occasion to follow this case in Morrison v. Nissan Co., Ltd.,
601 F.2d 139 (4th Cir. 1979). This is not to say that summary
judgment is never appropriate in antitrust cases, see White
Motors Co. v. United States, 372 U.S. 253 (1963), and in fact
grants of summary judgment in such cases have been explicitly
affirmed. Citizens Publishing Co. v. United States, 394 U.S.
131 (1969); First National Bank v. Cities Service, 391 U.S. 253
(1968).

With these rules in mind, we analyze appellants’ arguments.
They initially contend that summary judgment was inappro-

*§ 12 of the Clayton Act reads in part:

Any suit, action, or under the antitrust eae agent

a corporation ma brought not only in the judicial
whereof it is an tant, ~--+ yap deeaaaabeaaaaanseteed
be found or transacts business .

The agree that Miller and Co are neither inhabitants
of land nor are they found oe

9a

priate because a genuine issue of fact exists regarding the
meaning of Article 6 of the NECA-IBEW National Agree-
ment. First, they argue that the language of Article 6, when
considered in connection with the remainder of the National
Agreement, is ambiguous on its face. The district court dis-
agreed, holding instead that the language in the agreement
clearly required the inclusion of the fund in all IBEW electrical
construction contracts at issue here. We agree that there is
nothing ambiguous at all about the agreement’s language. On
its face the agreement requires inclusion of the industry fund
clause in all such contracts.

Even if the language itself is clear, argue the appellants, a
consideration of the evidence submitted in the form of docu-
ments and pre-trial depositions create an issue of fact as to the
meaning of Article 6. To support his argument, appellants
principally rely upon several pieces of evidence which we shall
consider separately. We find no error in the district court’s
rejection of the pre-trial depositions submitted by the appel-
lants as sufficient to create an issue of fact. This testimony
amounted to no more than a denial of the meaning of the clear
words of the contract. In no way does it seek to clarify the
terms of the contract, but instead seeks to change the terms o.
an already clear agreement.’

Appellants also contend that other documents submitted to
the district court create a question of fact as to the meaning of
Article 6. The minutes of the October 1976 Board of Governors
meeting of NECA reflect that Robert Higgins, Executive Vice
President of NECA, read to the group a letter from its counsel,

* This also applies to IBEW President Pillard’s letter to NCA in
June 1977 in which Pillard denied the interpretation of the agreement
that NCA placed upon it, but immediately followed the denial with
the statement that: “It is true that, by July 1, 1977, we expect that all
local IBEW-NECA agreements will have been amended to include a
number of new provisions, including contributions to the [Industry]
Fund.”

10a

Henry H. Glassie, with reference to whether or not the NECA
bylaws would have to be amended to reflect the industry fund
as a change in NECA dues. Concluding that they would not,
Glassie in part stated, as transcribed, as follows: “If the indus-
try fund provided for in the Article 6 of the agreement referred
to in proposal number 3 applies to the NECA members, as
such, a change in the by-laws would be involved. However, we
are informed that the contribution to this fund as provided in
Article 6 will be required of all union electrical contractors
whether they are members of NECA or not. Indeed, would be
applicable to a company after resignation from NECA. And
moreover that the contribution will not be required of non-
NECA members and nonunion members of NECA.”

We first note that the minutes of the meeting are self con-
tradictory. At one place they state that the industry fund
contributions are “required of all union electrical contractors
whether they are members of NECA or not.” In the second
sentence following, the minutes then contradict themselves as
they state that “the contribution will not be required of non-
NECA members and non-union members of NECA.” The very
best that can be said of the minutes is that they both corrobo-
rate and flatly contradict NECA’s position in the case. There
was a mistake made in reading the letter from Glassie, how-
ever, or in the transcription of the minutes of the meeting. The
letter itself did not contain the critical words “non-NECA
members and,” but read (in the form of a clause in the letter)
“The contribution will not be required of non-union members of
NECA.” Even if we accept the minutes of the meeting instead
of the content of the letter (and no reason is offered as to why
the letter is not the proper document to use), they do not clarify
any claimed ambiguity existing in the agreement but amount
at the best to no more than an ambiguous interpretation there-
of. The letter from Glassie obviously supports the already clear
contract terms, and, indeed, its observation that contribution
would not be required of non-union members of NECA only
states the obvious. In all events, the status of non-union mem-
bers of NECA is not a matter of dispute in this case and is of no

consequence.

lla

Appellants next rely upon a December 1976 letter from
Charles Pillard, President of IBEW International, to its locals
which notes that local unions are to seek to reopen agreements
with non-NECA employees by mutual consent to include the
industry fund in “all non-NECA inside and outside construc-
tion agreements.” We see no way that this letter supports
appellants’ position, rather, it supports appellees’ contention
that the provision for the industry fund goes in all applicable
contracts. We reject appellants’ argument that this evidence
shows that they merely intended to request the inclusion of the
fund in labor contracts, for the letter obviously applied to
existing contracts which would require agreement to change.

Appellants next rely upon three letters from Pillard to three
different local unions, their text being very similar, advising
the locals that they must bargain in good faith with contractors
who terminated their letters of assent. Again, we do not see
how these letters support appellants’ contentions. At best they
show that the local unions were advised as to their obligations
under the National Labor Relations Act to bargain in good
faith as toa whole contract and not take a take or leave it stance
in negotiations.

Finally, appellants rely upon a June 1978 letter from Pillard
to the union locals which stated that local unions should
specifically remove from the bargaining table the industry
fund if a contractor objected to its inclusion. Not only was this
letter sent almost a year after this lawsuit was filed, it only
reflects how the union at that later time wished to handle the
industry fund. It does not clarify the agreement itself.

All of this evidence taken together shows no more than
appellants’ attempt to change the meaning of the National
Agreement to reflect how they now wish the contract to be
read. None seeks to clarify any particular language or term in
the National Agreement. As such, they have no effect upon an
obviously clear agreement.

The National Agreement and the Basic Understanding must
be considered together as documents which are a part of the

12a

same transaction. Gordon v. Vincent Youmans, Inc., 358 F.2d
261 (5th Cir. 1966); 4 Williston, Contracts (3d Ed.) § 628. The
agreement states very clearly that the industry fund goes “in
all construction agreements in the electrical industry.” As
such, we need go no further to find appellants’ intent. Loca-
france U.S. Corp. v. Intermodal Systems Leasing, 558 F.2d
1113 (2d Cir. 1977); E. P. Hinkel Co. v. Manhattan Co., 506
F.2d 201 (D.C. Cir. 1974). But, even if we go further, the Basic
Understanding says the same thing, to wit: “in all IBEW
construction agreements containing the NEBF language.”
The evidence shows, without dispute, in the NECA-IBEW
Employees Benefit Agreement, that all contracts with IBEW
unions contain NEBF provisions whether the contractor be-
longs to NECA or not. These two documents, then (the Na-
tional Agreement and the Basic Understanding), read sepa-
rately or together leave no doubt as to the applicability of the
industry fund to all IBEW construction contracts. Appellants’
evidence shows no more than that NECA and the IBEW
sought to read the contract differently at a later date.

We also agree with the district court that the evidence
presented was so removed in time and self serving as to not
create a genuine issue of fact as to the meaning of the contract.
The district court did not err in relying upon the clear language
of the agreement in deciding the issue in the appellees favor.”

‘0 Appellants further claim that in actuality IBEW did not insist
upon inclusion of the fund in every contract signed, and that some
labor contracts entered into during this time did not include the
industry fund. The fact that the IBEW was somewhat less diligent
than it might have been in enforcing the provisions of the National
Agreement is not a defense, especially since the language of the
agreement itself leaves no room for debate that the fund was to be
included in all construction contracts. An activity does not have to be
a complete success to violate the antitrust laws. United States v.
Trenton Potteries Co., 273 U.S. 392, 402 (1927); United States v.
Bensinger Co., 430 F.2d 584 (8th Cir. 1970); Plymouth Dealers
Assoc. v. United States, 279 F.2d 128 (9th Cir. 1960).

13a

Va. Impression Products Co. v. SCM Corp., 448 F.2d 262 (4th
Cir. 1971).

Appellants next claim that the district court erred in con-
cluding that the agreement in question constituted price fixing
illegal per se under the Sherman Act. Instead, they contend
that no restraint of trade existed. Alternately, if a restraint of
trade is found, appellants contend that it must be judged under
the rule of reason.

Although a literal reading of the Sherman Act would make
illegal all contracts if they restrain trade in any particular, the
Supreme Court has construed the statute to outlaw only un-
reasonable or undue restraints. Standard Oil of N.J. v. United
States, 211 U.S. 1 (1911). In Standard Oil the Court estab-
lished the rule of reason as a method of examining the actions of
parties to determine if § 1 has been violated by looking at the
purpose, character, and effect of the actions in question.
Unreasonableness is based upon either the nature of the con-
tract or upon the surrounding circumstances that give rise to
an inference that the parties intended to restrain trade or
enhance prices. National Society of Professional Engineers v.
United States, 435 U.S. 679 (1978). By this standard, the
courts decide whether conduct is unreasonably anticompeti-
tive in character or in effect.

Certain practices whose nature and effect are so clearly
anticompetitive have been held to be illegal per se. Those
specifically include price fixing."' E.g. United States v.

'! As the Supreme Court noted in Northern Pacific RW v. United
States, 356 U.S. 1, 5 (1958): “because of their pernicious effect on
competition and lack of any redeeming virtue [such activities] are
conclusively presumed to be unreasonable and therefore illegal with-
out elaborate inquiry as to the precise harm they have caused or the
business excuse for their use.” The Court mentioned price fixing,
division of markets, group boycotts, and tying arrangements.

l4a

Socony-Vacuum Oil Co., 310 U.S. 150 (1940); Pa. W. & P. Co.
v. Consolidated G.E. L. & P. Co., 184 F.2d 552 (4th Cir. 1950).
The critical analysis in determining whether a particular activ-
ity constitutes a per se violation is whether the activity on its
face seems to be such that it would always or almost always
restrict competition and decrease output instead of being de-
signed to increase economic efficiency and make the market
more rather than less competitive. Broadcast Music, Inc. v.
CBS, 441 U.S. 1 (1979).

As just noted, price fixing is one of those practices that the
Court has held to be illegal per se under the Sherman Act.
United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).
The Court stated at 223 “a combination formed for the purpose
and with the effect of raising, depressing, fixing, pegging or
stabilizing the price of a commodity in interstate or foreign
commerce is illegal per se.” To be guilty of price fixing, the
conspirators do not have to adopt a rigid price, substantially
less has been found to be price fixing.* An activity can violate
the per se rule even if its effect upon prices is indirect. United
States v. General Motors, 384 U.S. 127, 147 (1966). In essence,
an interference with the market forces treely setting the prices
of goods is sufficient. Jn Re Yarn Processing Patent Validity
Litigation, 541 F.2d 1127, 1137 (5th Cir.) cert. den. 433 U.S.
910 (1977).

“Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980),
elimination of interest free short term credit; United States v. Con-
tainer Corp. of America, 393 U.S. 333 (1969), exchange of price
information as stabilizing although lowering prices; United States v.
Parke, Davis & Co., 362 U.S. 29 (1960), setting minimum prices;
Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211 (1951), setting
maximum prices; United States v. Socony-Vacuum Oil, 310 U.S. 150
(1940), buying surplus gasoline to stabilize prices; P! ymouth Dealers
Assoc. of Northern Cal. v. United States, 279 F.2d 128 (9th Cir.
1960), establishing price list from which negotiations began.

l5a

There can be no doubt that the agreement in question here,
which adds a 1% charge to all IBEW construction contracts
falls within the definition of price fixing. By taking the addi-
tional 1% of labor costs from non-NECA contractors it robs
them of a competitive advantage beneficial to the public. It
clearly interferes with the market forces that set the price of
such contracts. The industry fund would tend to stabilize the
price of electrical construction contracts, a practice illegal per
se under the Sherman Act.

Appellants further contend that even if the per se doctrine is
applicable the district court erred because a genuine issue of
fact existed as to the purpose of the fund. Additionally, they
argue that the district court erred as a matter of law because it
concluded that an anticompetitive effect need not be shown in
order to prove price fixing. Appellants would argue instead
that both anticompetitive purpose and effect must be proven.
Such an argument is without merit. We know of no better
statement of the rule than that of this court in United States v.
Society of Ind. Gasoline Marketers, 624 F.2d 461, 465 (4th Cir.
1979), cert. den. 101 S.Ct. 859, where we stated: “Since in a
price-fixing conspiracy the conduct is illegal per se, further
inquiry on the issues of intent or the anti-competitive effect is
not required. The mere existence of a price-fixing agreement
establishes the defendants’ illegal purpose since ‘[t]he aim and
result of every price-fixing agreement, if effective, is the
elimination of one form of competition.’ United States v. Tren-
ton Potteries, 273 U.S. 392, 397...” See also 2 Areeda &
Turner, Antitrust Law § 314." As this decision makes clear, a

specific finding of anticompetitive purpose and effect is not

“In United States v. McKesson & Robbins, 351 U.S. 305 (1956),
the Court stated: “It has been held too often to require elaboration
now that price fixing is contrary to the policy of competition underly-
ing the Sherman Act & that its illegality does not depend on a
showing of its unreasonableness, since it is conclusively presumed to
be unreasonable. It makes no difference whether the motives of the

l6a

needed. But, even if it were, there is no doubt, as the district
court found, that, on its face, this agreement has an
anticompetitive purpose, which is to add the 1% of labor cost to
all IBEW construction contracts which could only stabilize
prices of NECA and non-NECA contractors.

This brings us to appellants’ objections to the injunctive
order entered by the district court which was in two parts.

The first part of the injunction enjoins NECA and IBEW
and others named from “seeking to continue, continuing,
enforcing, maintaining, or renewing Article 6 of the National
Acreement. . . as to any person, corporation, or other entity
which is not a member of the National Electrical Contractors
Association or from entering into, maintaining or participating
in any act, contract, agreement, understanding, plan, pro-
gram, or other arrangement with any person, corporation, or
other entity which is not a member of the National Electrical
Contractors Association that includes any provision for imple-
mentation of Article 6 of the aforesaid agreement.” The second
part of the injunction enjoins the same defendant from “de-
manding, soliciting, collecting or receiving from any person,
corporation or entity which is not a member of the National
Electrical Contractors Association contributions to the Na-
tional Electrical Industry Fund, or any alternate or substitute
therefor, the effect of which would be to add a surcharge,
determined by a uniform formula, to the cost of procuring all
contracts with the IBEW in the electrical construction indus-

try.”
Appellants object to the first part of the injunction as being
overbroad in that a non-NECA employer who voluntarily as-

participants are good or evil, whether the price fixing is ace~mplished
by express contract or by some more subtle means; whether the
participants possess market control; whether the amount of in-
terstate commerce affected is large or small; or whether the effect of
the agreement is to raise or to decrease prices.”

17a

sents to pay into the industry fund should not have been
included. That objection is without merit. In Perma Mufflers
v. International Parts Corp., 392 U.S. 134 (1968), the Court
held that the fact the plaintiff may have been in pari delicto
does not prevent a suit under § 1 of the Sherman Act. The
Court said the courts do not “have power to undermine the
antitrust acts by denying recovery to injured parties merely
because they have participated to the extent of utilizing illegal
arrangements formulated and carried out by others.” p. 139.
Thus, under Perma Mufflers there is no reason to deny non-
NECA employers relief although they may have previously
voluntarily assented to a NECA-IBEW agreement.

Appellants next object to the second part of the injunction
which they say could be construed to prohibit any demand that
an IBEW local might unilaterally make in collective bargaining
to be characterized as a uniform surcharge on labor contracts.
They say that it prevents the union, even acting unilaterally,
from doing the very thing that §7 of the National Labor
Relations Board Act, 29 U.S.C. § 157, permits unions to do,
that is, to bargain collectively on any permissive or mandatory
subject of bargaining. That objection is well taken only to a
very small extent. The question of whether or not the industry
fund is either a permissive or mandatory subject of collective
bargaining is not before us, but, for present purposes, we will
assume that it is a permissive subject of collective bargaining.

Merely, however, because establishment and maintenance
of the industry fund may be a permissive subject of collective
bargaining does not automatically exempt the IBEW from the
provisions of the antitrust laws. This was specifically held in
Allen Bradley v. Local Union No. 3, IBEW, 325 U.S. 797
(1945). In Allen Bradley the Court upheld a finding of the
district court which had found Local 3 of IBEW guilty of a
violation of the Sherman Act for acting in concert with business
organizations and with manufacturers of goods to restrain
competition in and monopolize the marketing of such goods in
New York City. The Court found that “. . . the same labor
union activities may or may not be in violation of the Sherman

18a

Act, dependent upon whether the union acts alone or in
combination with business groups.” 325 U.S. at 810. The gist of
the Court’s reasoning, which is applicable here, is found on the
same page of the opinion where it said: “For if business groups,
by combining with labor unions, can fix prices and divide up
markets, it was little more than a futile gesture for Congress to
prohibit price fixing by business groups themselves.” The Su-
preme Court in Allen Bradley did require a modification of the
decree “so as to enjoin only those prohibited activities in which
the union engaged in combination ‘with any person, firm or
corporation which is a non labor group.’ p. 812. The second
part of the order complained of does no more than this. It
enjoins the “above mentioned defendants” (which include
NECA and IBEW) from demanding, etc., from non-NECA
members contributions to the National Electrical Industry
Fund. The order must be read in the context of the case instead
of divorced from it. As such, it undoubtedly means the defend-
ants acting together and not the defendants acting severally. It
leaves IBEW entirely free to pursue any legitimate object of
collective bargaining acting unilaterally, but, this, of course,
does not include IBEW acting “with any person, firm or
corporation which is a non-labor group,” Allen Bradley, p. 812,
to violate the Sherman Act, and this expressly includes the
maintenance of the industry fund as expressed in the contract
between NECA and IBEW.

The standard by which we review such injunctive orders is
“whether the relief represents a reasonable method of
eliminating the consequences of the illegal conduct.” National
Society of Professional Engineers v. United States, 435 U.S.
679, 698 (1978). We think the order of the district court meets
that standard; it does no more than enjoin the enforcement of,
and collection of money under, a contract held to violate the
antitrust laws.

Despite what we have just said with respect to the second
part of the order complained of, out of perhaps an over abund-
ance of caution, and in order to prevent any reading out of
context of that part of the district court’s order, we direct that

19a

the district court modify the second part of its order so that it
applies to IBEW only when IBEW is engaged in the prohibited
activities “in combination with any person, firm or corporation
which is a non-labor group.” Allen Bradley at 812.

We have discussed in some detail the principal contentions of
appellants and note that we have considered all of their other
assignments of error and find them without merit, including
those relating to the granting of summary judgment in favor of
appellees on the NECA defendants’ counterclaims. Except as
may be otherwise indicated in this opinion, we rely upon the
district court’s complete and thorough discussion of the issues
in this case, and its judgment is accordingly

AFFIRMED AS MODIFIED."

HALL, Circuit Judge, dissenting:

Through its blind application of the per se rule against price
fixing, the majority ignores the realities of this case and, as a
consequence, reaches a manifestly inequitable result. As I
believe that the facts before us do not justify an extension of
the per se price fixing rule, I must respectfully dissent.

We are aware that, on its particular facts, this is a case of first
impression and as such we should be careful in applying the per se
rule. Broadcast Music, Inc. v. CBS, 441 U.S. 1, 9 (1979). Cases are
legion, however, declaring the illegality of price fixing in various
forms, and the agreement here, we think, is as clear as the one struck
down in Citizens Publishing Co. v. U.S. 394 U.S. 131 (1969). The
conclusion reached by the Court in that case that “(t]he joint operat-
ing agreement exposed the restraints so clearly and unambiguously
as to justify the rather rare use of a summary judgment in the
antitrust field,” p. 136, is applicable here. The Supreme Court,
indeed, in United States v. Container Corp., 393 U.S. 333 (1969), a
price fixing case “unlie any other” decided by that Court, found a
per se antitrust violation in reviewing a dismissed complaint, certain-
ly without the benefit of any more documents than we have available
here.

20a

Under a provision in the collective bargaining agreement
between the National Electrical Contractors Association
(NECA) and the International Brotherhood of Electrical
Workers (IBEW), the IBEW could not sign any employment
contract unless the employer agreed to pay one percent of its
gross monthly labor payroll into the National Electrical Indus-
try Fund. Finding that this requirement acts to increase the
labor costs to non-NECA contractors and “would tend to sta-
bilize the price of electrical construction contracts,” the major-
ity concludes that the agreement is per se illegal under the
Sherman Act, 15 U.S.C. § 1.

This case, however, is inherently different from those relied
on by the majority in that all of the parties involved here
receive an extremely important benefit from the NECA/
IBEW negotiations, that being the establishment of a fixed
wage level. “Assenting” non-NECA contractors (i.e., those
who agree to follow the terms of the NECA/IBEW agreement
through either “A” or “B” Letters of Assent or International
Agreements) receive the benefit directly by accepting all of the
gains and concessions secured by NECA during the course of
the negotiations.

Non-assenting contractors who bargain directly with the
Union enjoy the benefit in a similar, albeit indirect, manner.
They have the terms of the NECA/IBEW agreement, espe-
cially the wage level, on which they can rely during the course
of their independent negotiations. The salary level agreed to
by NECA may be employed as a ceiling on the Union’s de-
mands. Indeed, the Union has an incentive to obtain a high
wage rate from NECA which it will then attempt to carry over
into its non-NECA contracts. See generally P. Samuelson,
ECONOMICS 586-87 (10th ed. 1976). Thus, any wage con-
cessions NECA is able to draw out of IBEW spill over to the
benefits of all non-assenting non-NECA contractors.

Since all electrical contractors benefit from NECA's collec-
tive bargaining, it is only fair that they share in the costs of
such bargaining. In this regard, it is clear that one of the main

2la

purposes of the industry fund is to help defray the costs of the
negotiation process. Under the majority’s ruling, however,
although both assenting and non-assenting non-NECA con-
tractors would continue to enjoy the benefits of NECA’s
bargaining, neither can be required to contribute to the fund.
Moreover, they will receive a windfall in the form of treble
damages.

'n Smitty Baker Coal Co. v. United Mine Workers of Amer-
ica, 620 F.2d 416 (4th Cir.), cert. denied, 449 U.S. 870 (1980),
we ruled that a protective wage clause, requiring a union to
demand the wage sca/e from all employers who were not mem-
bers of the multi-employer bargaining unit, did not constitute a
per se violation of the Sherman Act. Rather,

([tlo amount to an antitrust violation the agreement must
be rooted in an anti-competitive purpose, and must effect
an anti-competitive result, as evidenced by action “ruin-
ing” a competitor’s business or driving him “out of busi-
ness.” Unless there is such an agreement between the
labor organization and the non-labor group and such an
anti-competitive result, there is no conspiracy actionable
under the antitrust laws.

Id. at 431-32 (emphasis supplied).

Since the one percent industry fund charge at issue here has no
greater effect on electrical contractor prices than would a
protective wage clause, I would follow the Smitty Baker stand-
ard and avoid the majority’s untenable extension of the per se
rule.

As a final matter, I also disagree with the majority’s con-
clusion that the trial judge did not err in finding defendants
Colgan Electric Co. (Colgan) and Miller Electric Co. (Miller)
within the venue of the court. The record indicates that their
most significant contact with the judicial district of Maryland
was the payment of dues to NECA which has its national office
located in that state. The holding that mere membership and
payment of trade association dues is enough to constitute
“transact(ing] business” under § 12 of the Clayton Act, 15

22a

U.S.C. § 22, flies in the face of the well established rule that a
defendant’s contacts with the forum state must be of a “sub-
stantial character” in order for venue to be proper. See
Bartholomew v. Virginia Chiropractors Association, 612 F.2d
812, 815 (4th Cir. 1979), cert. denied, 446 U.S. 938 (1980).
Consequently, the district court clearly erred in failing to
dismiss the complaint against defendants Colgan and Miller.

For the foregoing reasons, I respectfully dissent.

23a

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

Civil No. HM77-1302

NATIONAL CONSTRUCTORS ASSOCIATION and COMMONWEALTH
ELECTRIC CoMPANY, by and on behalf of itself and
all others similarly situated and
THE Howarp P. FoLtey Company, by and on behalf of itself
and all others similarly situated and
DONOVAN CONSTRUCTION COMPANY OF MINNESOTA, INC.,
ARTHUR MCKEE & Company, INc., BADGER AMERICA, INC.,
CaTALYTIC, INc., C. F. BRAUN Constructors, INc., DRAVO
CorRPORATION, Guy F. ATKINSON CoMPANY, THE H. K.
FERGUSON COMPANY, JACOBS CoNsTRUCTORS, INC., PULLMAN
KELLOGG, DIVISION OF PULLMAN, INC.,
STEARNS-ROGER, INC.,

Vv.

NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, INC.,
Rosert L. Hiccins, THE INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WorKERS, AFL-CIO, CHARLES H. PILLARD,
CoLGAN ELectric, INc., MILLER ELEcTRIC Co., and
H. E. Autrey, ALLEN L. BADER, FRANK H. BERTKE,
DoNnALD C. CaTEes, Ropert W. CoLcaNn, Joe R. DEVISH, and
Car_ T. Hinorte, in their individual capacities and as
Trustees of the National Electrical Industry Fund, and
ALLAN H. Stroupe, L. R. McCorp, ALpDo P. LERo and
LoweLL C. Tim, in their official capacities as Trustees of
the National Electrical Industry Fund, and
JoHN Ostrow C. W. StroupeE, WARREN Losi and J. D.
HILBuRN, Sr., in their individual capacities.

Filed: September 9, 1980

Wilbur D. Preston, Jr., Robert M. Wright, Nevett Steele, Jr.,
and Ward B. Coe, III, of Whiteford, Taylor, Preston, Trimble
& Johnston, Baltimore, Maryland; Anthony J. Obadal, Steven
R. Semler, Howard J. Kaufman, Alan D. Cirker; Stephen C.
Yohay, of Zimmerman and Obadal, Washington, D.C.; Ira

24a

Genberg, Peter R. Spanos, of Stokes & Shapiro, Atlanta,
Georgia, Attorneys for Plaintiffs.

Guy Farmer, of Farmer, Shilbey, McGuinn & Flood, Washing-
ton, D.C.; Alan I. Baron, Peter H. Gunst, of Frank, Bernstein,
Conaway & Goldman, Baltimore, Maryland; Attorneys for
Defendant National Electrical Contractors Association, Inc.
and all other defendants EXCEPT Defendants International
Brotherhood of Electrical Workers, AFL-CIO and Charles H.
Pillard.

Thomas X. Dunn, Richard M. Resnick, of Sherman, Dunn,
Cohen and Liefer, Washington, D.C.; James P. Garland,
Anthony W. Kraus, Steven D. Frenkil, Nora Winay, of Sem-
mes, Bowen & Semmes, Baltimore, Maryland, Attorneys for
Defendants International Brotherhood of Electrical Workers
and Charles H. Pillard, International President of IBEW.

Herbert F. Murray, United States District Judge

25a

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

Civil No. HM77-1302

NATIONAL CONSTRUCTORS ASSOCIATION, ETC. et al.
We

NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, INC., et
al.

MEMORANDUM OPINION
I. Factual Background

This is a private antitrust action for treble damages and
declaratory and injunctive relief, brought under § 1 of the
Sherman Antitrust Act, 15 U.S.C. § 1. Currently pending
before the court are eight motions, on which the court has
heard extensive oral argument. An explanation of the factual
background of the dispute is essential to an understanding of
the pending motions.

_ Plaintiff National Constructors Association (NCA) is an un-

incorporated trade association whose members are “corpora-
tions who perform electrical construction work and who other-
wise transact business in the electrical construction industry.”
Amended Complaint at 4. Of the remaining plaintiffs, Com-
monwealth, Foley, Donovan, Catalytic, Braun, Atkinson, Fer-
guson and Pullman-Kellog are corporations which perform
electrical construction work and employ electrical construction
workers who are members of the defendant IBEW and its local
unions. McKee, Badger, Dravo, Jacobs and Stearns-Roger are
also corporations which perform electrical construction work,
but rather than employ IBEW workers directly, they hire
electrical construction contractors who in turn employ IBEW
labor. None of those corporate plaintiffs except Donovan is a
member of defendant National Electrical Contractors Associa-
tion, Inc. (NECA).

26a

Defendant NECA is an incorporated trade association
whose members, like those of NCA, perform electrical con-
struction work. Although NECA’s principal place of business
is in Bethesda, Maryland, the association has approximately
133' local chapters nationwide. NECA and its local chapters
provide various services to member companies, including
representing members in collective bargaining with the IBEW
and its local unions. Amended Complaint © 4(a)(iii).

Defendant IBEW is an unincorporated labor organization
whose local unions throughout the United States represent at
least some of the electrical workers whom the corporate plain-
tiffs employ. Defendant Charles H. Pillard is now and at all
pertinent times was International President of the IBEW;
defendant Robert L. Higgins is and at all pertinent times was
Executive Vice President of NECA.

Defendants Colgan Electric Co. and Miller Electric Co. are
corporations engaged in the electrical contracting business and
are members of defendant NECA. The remaining defendants
are the trustees of the National Electrical Industry Fund
(NEIF), which is more fully described below.

At the heart of the plaintiffs’ suit is the collective bargaining
structure in the electrical construction industry. Local chap-
ters of NECA, which is the largest trade association in the
industry, are assigned regional territories throughout the
country which coincide with the jurisdictions of one or more
IBEW local unions. Acting as a multi-employer bargaining
unit representing its chapter members, each NECA chapter
periodically negotiates a collective bargaining agreement with
the IBEW union or unions in its territory. Each “Local Agree-
ment” provides for wages, hours, terms and conditions of
employment, and any other subjects of bargaining permitted

‘Some of the pleadings set the figure at 330. Suffice it to say that
the local chapters are numerous.

27a

by the National Labor relations Act. A Local Agreement is
either “inside,” covering labor on the interior or buildings, or
“outside,” covering labor on outdoor power lines. Although the
IBEW locals also negotiate with other local contractors’ associ-
ations, the majority of the Local Agreements are the result of
collective bargaining between the unions and NECA chapters.

Individual electrical contractors who are not members of
NECA usually enter into a labor agreement with the IBEW in
one of three ways. The most prevalent practice is for the
contractor to sign a short-form agreement known as a Letter of
Assent, which binds the signatory to the terms of the existing
NECA-IBEW Local Agreement for the area in which the
contractor works. There are two types of Letters of Assent:
Type “A” authorizes the local NECA chapter to act as the
signatory’s collective bargaining agent for all matters con-
tained in the existing NECA-IBEW Local Agreement, and
remains in effect until the contractor gives timely notice of
termination. Type “B” does not authorize NECA to act as the
contractor’s collective bargaining agent, but merely binds the
signatory for a stated period (usually the life of the current
Local Agreement) to all the terms of the existing Local Agree-
ment and any amendments that might be made to it.

The second method by which an unassociated contractor
enters into a labor agreement with the IBEW is by signing an
“International Agreement.” Large general contractors which
perform construction work at several sites across the country
usually adopt this second method. The International Agree-
ment is in effect a nationwide Letter of Assent, which binds the
signatory to the terms and conditions of the NECA-IBEW
Local Agreements for any and all geographic areas in which
the general contractor seeks to procure IBEW labor. Made
available by the IBEW’s international office, an International
Agreement is terminable at will upon sixty days’ notice.

The third means of negotiating with the IBEW is by signing
a “Project Agreement.” As the name implies, such an agree-
ment is usually designed to cover a single construction project

28a

which the contractor has in the area, and may contain any
terms on which the parties agree. Although a Project Agree-
ment is negotiated independently of the NECA agreements,
the IBEW usually seeks to procure the terms of the Local
Agreements in an unassociated contractor’s Project Agree-
ment.

Both NECA and the IBEW International reserve the power
to approve all collective bargaining agreements entered into
by local chapters or local unions. Either national body may veto
an agreement if its terms do not conform to the association's or
the union’s policies.

As of December 1976, the vast majority of contractors in the
electrical construction industry procured IBEW labor under
the terms and conditions of NECA-IBEW Local Agreements,
either as members of local NECA chapters, or as signatories to
Letters of Assent or International Agreements.

In the summer and fall of 1975, national officials of NECA
and the IBEW began negotiation of the agreement which the
plaintiffs contend violates § 1 of the Sherman Act. The parties
undertook the negotiations at least in part to provide for in-
creased employer contributions to the National Electrical
Benefit Fund (NEBF), which is a pension fund for IBEW
workers, jointly administered by NECA and the IBEW and
funded by payments provided for in electrical construction
industry collective bargaining agreements. At the meetings
that began in 1975, International President Charles H. Pillard
and his Administrative Assistant Marcus Loftis represented
the IBEW; Executive Vice President Robert L. Higgins and
Director of Labor Relations Mark Hughes represented
NECA.

In the spring of 1976, the parties tentatively agreed to what
will hereinafter be referred to as the National Agreement, a
copy of which is appended hereto as Exhibit A. The first five
articles of the agreement contained provisions for the NEBF,
shift work, management rights and apprentice ratios. Article
Six, which is the crux of this litigation, provided as follows:

29a

ARTICLE SIX—INDUSTRY FUND

The parties agree to the establishment of a —_ con-
se trust to be called the National Electrical Industry
und.

All construction agreements in the electrical industry
shall contain the following language:

“Each individual employer shall contribute one percent
(1%)* of the gross labor payroll to be forwarded monthly
to the National Electrical Industry Fund in a form and
manner prescribed by the trustees no later than fifteen
(15) calendar days following the last day of the month in
which the labor was performed. Failure to do so will be
considered a breach of this agreement on the part of the
individual employer.”

*(an amount not to exceed 1% nor less than 0.2 of 1%, as
determined by each local chapter and approved by the
trustees)

The National Electrical Contractors Association will be
shay agen to see that the objects of the fund, as outlined
in the trust, are adhered to strictly.

No of the funds collected under this trust shall be
used for purely social activities. No of the funds
collected under this trust shall be used for any p
which is held to be in conflict with the interests of the
International Brotherhood of Electrical Workers and its
local unions.

Both parties will be provided with a copy of the Trust
and any future amendments. .

The industry fund thus created was to be used primarily to
cover NECA’s “costs of administration of labor agreements,
industry advancement and services rendered to the electrical
contracting industry.” See Exhibit 10 to plaintiffs’ motion for

summary judgment.

As required by the association's bylaws, the NECA Board of
Governors ratified the National Agreement at a meeting in
Dallas in October 1976. The IBEW rules did not require a
similar ratification vote. On December 8, 1976, both Charles
Pillard and Robert Higgins signed the agreement, which was
to become effective on July 1, 1977.

30a

Between December 1976 and July 1977, NECA and the
IBEW took steps to implement the National Agreement, in-
cluding the new NEIF. Local IBEW unions and NECA chap-
ters were instructed to insert the industry fund provision in
existing NECA-IBEW Local Agreements. Although the de-
fendants contend that the language of Article 6 was to be
inserted only in contracts between the IBEW and NECA
members, the plaintiffs argue that the defendants sought to
have the language included in all construction agreements in
the electrical industry.

The plaintiffs allege that prior to July 1, 1977, NECA mem-
bers paid dues to their association in order to pay for the
services NECA offered such as advertising, negotiating, train-
ing employees and disseminating information. Because those
dues added to NECA members’ cost of doing business, non-
NECA members allegedly had a competitive edge in bidding
on electrical construction projects. The plaintiffs claim that by
providing for a uniform 1% contribution to a fund that would
support NECA services, and by ensuring that the 1% require-
ment was in all construction contracts in the industry, regard-
less of a contractor’s affiliation with NECA, the defendants
agreed to fix, maintain and stabilize the price of contracts with
the IBEW—and consequently all prices in the electrical con-
struction industry—for the purpose of eliminating non-NECA
members’ competitive advantage. The plaintiffs contend that
under the line of cases beginning with United States v. Socony-
Vacuum Oil Co., 310 U.S. 150 (1940), the National Agreement
constitutes a price fixing agreement which is on its face a per se
violation of § 1 of the Sherman Act. They seek a declaratory
judgment that the NEIF is il'egal, an injunction preventing
the defendants from enforcing the NEIF provisions, and
monetary relief of three times the amount each plaintiff has
already paid into the fund.

NECA and the trustees of the NEIF have filed counter-
claims alleging that the plaintiffs have engaged and are engag-
ing in an illegal conspiracy and boycott in violation of § 1 of the
Sherman Act. The activity alleged to be illegal is the plaintiffs’

3la

concerted undertaking to refuse to pay into the NEIF, with
the alleged purpose of injuring NECA and compelling it to
acquiesce in the plaintiffs’ plans for “a single multitrade
bargaining agreement [in] all unionized sectors of the in-
dustrial construction industry.” Memorandum in Support of
Motion of NECA and the Trustees of the NEIF for Summary
Judgment, at 1.’

Of the eight motions now before the court, three are motions
to dismiss. The first is the defendants’ motion to dismiss NCA
as a plaintiff on the grounds it lacks standing. The second is the
defendants’ motion to dismiss those plaintiffs who do not hire
IBEW labor directly, but instead employ electrical contractors
who in turn hire IBEW workers. Those parties will be referred
to hereinafter as the “indirect-hire plaintiffs.” The third mo-
tion is that of defendants Miller and Colgan to dismiss the
complaint as to them, on the grounds that they as corporations
were not involved in any alleged conspiracy.

The fourth and fifth motions to be decided are cross-motions
for summary judgment on the plaintiffs’ claim that the Nation-
al Agreement is on its face a price-fixing agreement illegal per
se. The sixth motion is the plaintiffs’ motion for class certifica-
tion, and the remaining two are cross-motions for summary
judgment on the boycott counterclaims. The court will discuss
the motions in the order in which they have been described.

II. The Motion To Dismiss Plaintiff NCA

The primary issue is whether NCA has standing to sue for
injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26.
The defendants argue that a private plaintiff does not have

*The NEIF trustees have filed a number of related actions
throughout the country, secking to recover on a Lreach of contract
theory the amounts which several electrical contractors have refused
to pay into the NEIF. For purposes of this opinion, the related
actions will be referred to as the “collection cases.”

32a

standing at all under the antitrust laws, unless it can show
some injury or threatened injury personal to itself; and that
NCA has made no such showing. NCA claims that strict stand-
ard applies only under § 4 of the Clayton Act (15 U.S.C. § 15),
where a plaintiff seeks monetary damages; and that § 16 embo-
dies more flexible general rules of standing, including the tests
set out in Warth v. Seldin, 422 U.S. 490 (1975), and Hunt v.
Washington Apple Advertising Commission, 432 U.S. 333
(1977), for determining when an association may sue in a purely
representational capacity on behalf of its members.

If NCA could meet the stricter standard of showing direct
injury to itself, there would be no need to explore the relative
leniency of § 16 requirements. However, the court is not per-
suaded that the association is threatened with any personal
harm. NCA alleges that the NEIF scheme compels NCA mem-
bers to support a rival trade association, NECA, and “neces-
sarily places a financial stricture on the operation of their own
association, therefore tending to have a stifling effect upon the
achieving of their association's purposes either now or in the
future.” Plaintiffs’ Memorandum in Opposition to Defendants’
Motion to Dismiss NCA, at 2. NCA further contends that the
NEIF scheme frustrates NCA’s associational goal of reducing
operating costs. In the court’s view, the awkwardness and
abstractness of the plaintiffs’ description of the supposed inju-
ry reveals that NCA'’s contentions are without merit. Con-
sequently, the court must determine whether the standing
requirements of § 16 are nonetheless broad enough to emcom-
pass NCA.

There is long-standing authority in support of the defend-
ants’ proposition that personal injury is a prerequisite to in-
stituting any private antitrust action. In United States v.
Borden, 347 U.S. 514, 518 (1954), the Supreme Court said,

Under § 16 of the Act, . . . a private plaintiff may obtain
injunctive relief against [anti-trust] violations only on a
sho of “threatened loss or Pa this must be
of a sort personal to the plaintiff... . . (The private plain-
tiff, though his remedy is made available pursuant to

33a

public policy as determined by Congress, may be expected
to oo it only when his personal interest will be
served.

However, since Borden was decided, two important trends
have developed: first, the courts have increasingly acknowl-
edged that standing requirements under § 16 are broader and
more flexible than those under § 4; and second, the courts have
recognized that under certain circumstances, an association
may have standing solely as the representative of its members.

Section 4 of the Clayton Act provides as follows:

Any person who shall be injured in his business or
property by reason of anything forbidden in the anti-
trust laws may sue therefor in any district court of the
United States in the district in which the defendant
resides or is found or has an agent, without respect to
the amount in controversy, and shall recover threefold
the damages by him sustained, and the cost of suit,
including a reasonable attorney’s fee.

Section 16, however, states in pertinent part:

Any person, firm, corporation, or association shall be
entitled to sue for and have injunctive relief, in any
court of the United States having jurisdiction over the
parties, against threatened loss or damage 7 a viola-
tion of the antitrust laws, including sections 13, 14, 18,
and 19 of this title, when and under the same conditions
and principles as injunctive relief against threatened
conduct that will cause loss or damage is granted b
courts of equity, under the rules governing suc
proceedings, and upon the execution of proper bond
against damages for an ye improvidently
— and a showing that the danger of irreparable
oss or damage is immediate, a preliminary injunction

may issue.
In Hawaii v. Standard Oil Co. of Calif., 405 U.S. 251 (1972),
the Supreme Court analyzed the “business or property”
requirement in § 16. The Court speculated that the language
difference was probably attributable to the different impacts of
the remedies offered by the two sections: while 100 simul-
taneous injunctions could be no more effective than one, 100

34a

treble-damage awards could be far more devastating to a de-
fendant than a single monetary judgment. 405 U.S. at 261-62.
Without commenting further on the § 16 standards, the Court
concluded that a party could not sue under § 4 without showing
injury to its commercial interests. /d. at 264.

Most lower federal court cases interpreting Hawaii v.
Standard Oil have concluded that the standing requirements
under § 16 are more lenient and more flexible than those under
§ 4. In Re Multidistrict Vehicle Air Pollution MDL #31, 481
F.2d 122 (9th Cir.), cert. denied, 414 U.S. 1045 (1973); Tug-
boat, Inc. v. Mobil Towing Co., 534 F.2d 1172 (5th Cir. 1976);
Mid-West Paper Products Co. v. Continental Group, Inc., 596
F.2d 578 (3d Cir. 1979). Contra, NAACP v. New York Clear-
ing House Assn., 431 F. Supp. 405(S.D.N.Y. 1977), relying on
Nassau County Ass'n of Inc. Agents, Inc. v. Aetna Life & Cas.
Co., 497 F.2d 1151 (2d Cir.), cert. denied, 419 U.S. 968 (1974).
The cases recognizing a distinction between § 4 and § 16 re-
quirements imply that a party may sue for injunctive relief
under the antitrust laws whenever the party can show the
threat of an injury cognizable in equity and proximately caused
by the defendant’s antitrust violation. Mid-West v. Con-
tinental, supra; Tugboat v. Mobil Towing, supra. See also
Buckley Towers Condominium, Inc. v. Buchwald, 595 F.2d
253 (5th Cir. 1979).

At about the same time that the courts began to hold the
requirements of § 16 were more lenient, the Supreme Court
was developing the doctrine that in certain well-defined cir-
cumstances, an association may have standing to represent its
members even when the association as such had suffered no
injury. In Warth v. Seldin, supra, 422 U.S. 490 (1975), the
court considered whether various individuals and associations
had standing to challenge an allegedly exclusionary zoning
ordinance. Writing for the Court, Justice Powell first set out
the general standing requirements in any litigation: each plain-
tiff must show first that there is a justiciable case or con-
troversy, and second that the plaintiff has “such a personal
stake in the outcome of the controversy as to warrant his

35a

invocation of federal court jurisdiction and to justify exercise of
the court’s remedial powers on his behalf.” 422 U.S. at 498-99,
citing Baker v. Carr, 369 U.S. 186 (1962). In elaborating on
those prerequisites with respect to associations the Court said,

Even in the absence of mild to itself, an association
may have standing solely as the representative of its mem-
bers. . . . The association must allege that its members,
or any one of them, are suffering immediate or threatened
injury as a result of the challenged action of the sort that
would make out a justiciable case had the members them-
selves wigs og suit. So long as this can be established, and
so long as the nature of the claim and of the relief sought
does not make the individual participation of each injured
party indispensable to proper resolution of the cause, the
association may be an appropriate representative of its
members, entitled to invoke the court’s jurisdiction [cita-
tions omitted]. 422 U.S. at 511.

In Hunt v. Washington Apple Advertising Commission,
supra, 432 U.S. 333 (1977), the Court reiterated the language
just quoted from Warth, and rephrased it into a three-part
test:

Thus we have i ep that an association has standing
to bring suit on behalf of its members when: (a) its mem-
bers would otherwise have standing to sue in their own
right; (b) the interests it seeks to protect are germane to
the organization’s purpose; and (c) neither the claim
asserted nor the relief requested requires the participa-
tion of individual members in the lawsuit. 432 U.S. at 343.

In establishing that test, the Court expressly rejected the
defendant’s claim that the Advertising Commission could not
sue because it had no “personal stake” in the outcome of the
case, and had alleged no “distinct and palpable injury” to itself.
At 341-42.

In light of the developments in Warth, Hunt and the Hawaii
v. Standard Oil line of cases, this court is persuaded that a
plaintiff need not meet the strict personal injury standards of
§ 4 in order to sue for injunctive relief under § 16, and that an
association may have standing under § 16 if it meets the three-
part test of Hunt. Associated General Contractors v. Otter

36a

Tail Power Co., 611 F.2d 684 (8th Cir. 1979); National Office
Machine Dealers Ass’n v. Monroe, 484 F. Supp. 1306 (N.D. IIl.
1980). The court has discovered no persuasive authority that
would indicate associational standing is precluded in the anti-
trust context, and can think of no compelling reason why that
should be the rule. the question remains whether NCA has
satisfied all three prerequisites under Hunt; the court finds
that it has.

The first requirement, that NCA’s members or any one of
them would have standing to sue in their own right, is clearly
met. As corporations doing business in the electrical construc-
tion industry, and as signatories to labor agreements with the
IBEW, at least some of NCA’s members undoubtedly have
standing to allege that the NEIF provision was to be inserted
into all construction contracts in the electrical contracting
industry, that the scheme as so defined violated the antitrust
laws, and that the violation either caused or threatened to
cause them direct, personal damage in the amount of the NEIF
assessments. The court does not read Hunt to require that
each of an association’s members have independent standing.
In this case, it is sufficient that a significant proportion of the
association’s members are obligated to contribute to the
allegedly-illegal NEIF.

NCA has also satisfactorily shown that the interest it seeks
to protect are germane to the organization’s purpose. Among
the association’s objectives are “[t]o unite members of the
Association in a concerted effort to influence and improve
craftsmen efficiency and job performance as well as all other
activities affecting operating costs and client relationships”
and “(tJo inspire in labor and management a constant adher-
ence to the highest ethical concept of individual and collective
social responsibility.” NCA Constitution Article II a. and e.
Challenging an industry fund which allegedly raises operating
costs and allegedly results from an illegal conspiracy between
labor and management is certainly pertinent or relevant to
NCA’s stated purposes. The court does not believe the second
prong of the Hunt test imposes a stricter standard than that.

37a

The defendants argue that NCA cannot prove germaneness
because it cannot show that the NEIF has any direct adverse
impact on the association’s professed goals. However, if that
were the test under Hunt, the requirement of a showing of
direct, personal injury to the association would in effect be
reinstated.

In Hunt itself, the association whose standing was in dispute
was the Washington Apple Advertising Commission, a state
agency whose purpose was “protecting and enhancing the mar-
ket for Washington apples.” The Commission had no members
in the traditional sense. The Supreme Court first noted that
“{iJf the Commission were a voluntary membership
organization—a typical trade association—its standing to
bring this action as the representative of its constituents would
be clear under prior decisions of this Court [citing Warth v.
Seldin, supra).” 432 U.S. at 343. In a single sentence, the
Court concluded that the Commission’s efforts to remedy the
injuries allegedly suffered by Washington apple growers was
“central” to the Commission’s stated purpose. /d. at 344. As far
as establishing germaneness is concerned, NCA’s objections
are no more abstract and amorphous than those the Court so
readily accepted in Hunt, especially in light of the fact that
NCA is a “typical trade association” in the very industry
affected by the NEIF.

Although the question is a much closer one, the court is also
persuaded that “neither the claim asserted nor the relief re-
quested requires the participation of individual members in the
lawsuit.” The third prong of the Hunt test involves two con-
siderations: (1) whether the nature of the claims involves in-
dividualized proof, Hunt, supra, 432 U.S. at 344; and (2)
whether the association is competent to speak for its members,
Associated General Contractors v. Otter Tail, supra, 611 F.2d
at 691. For the reasons set forth infra in connection with the
motion for class certification, the court does not believe the
primary issues in the case require individualized proof. The
defendants’ contention that NCA’s members’ interests are too

38a

diverse to be represented by the association dese: ves closer
analysis.

In Associated Genera! Contractors v. Otter Tail, supra, the
Eighth Circuit found too many actual and potential conflicts
among the members of a trade association to permit the associ-
ation to speak for all of them. The association sought to enjoin
the enforcement of an agreement that the court felt could
benefit some members, hurt others, and affect still others not
at all. 611 F.2d at 691. The defendants in the case at bar argue
that NCA’s members have similarly conflicting interests, and
point to the fact that many member corporations have not
joined in the suit or have voiced their opinion that the NEIF
provisions do not injure them. In the court’s view, such a
“division within NCA” (see Exhibit E to the Reply Memoran-
dum in Support of Defendants’ Motion to Dismiss NCA) is not
the kind of conflict that requires individual participation in the
lawsuit. There is no evidence that any NCA member feels it
stands to benefit from the NEIF, and that NCA’s presence in
the litigation therefore works against that member’s interest.

The defendants have argued that some NCA members may
oppose the suit to the extent it jeopardizes their delicate
negotiating relationships with the IBEW. However, the court
does not find that argument sufficient to establish the necessi-
ty of the allegedly dissenting members’ individual participa-
tion. To hold otherwise would be to incorporate into the Hunt
test a sort of adequacy-of-representation standard even more
stringent than the one applied under Rule 23(a)(4) on a motion
for class certification. See Part VI, injva at pp. 52-57. the plain
language of Hunt’s third prong does not warrant such a hold-
ing. To the extent Associated General Contractors implies a
different result, this court is not inclined to follow the Eighth
Circuit’s lead, at least under the circumstances presented by
this case.

Because NCA meets all the prerequisites for an association
bringing suit on behalf of its members, and because the court
knows of no reason why those prerequisites should not apply in
an antitrust case, the defendants’ motion to dismiss NCA must
be denied.

39a

III. The Defendants’ Motion For Dismissal On The Plead-
ings

The defendants have moved to dismiss the claims for dam-
ages and injunctive relief brought by those plaintiffs who do
not hire IBEW labor directly, but instead employ electrical
construction contractors who in turn employ IBEW workers.
These “indirect-hire” plaintiffs are McKee, Badger, Dravo,
Jacobs and Stearns-Roger. The defendants contend that those
plaintiffs lack standing under §§ 4 and 16 of the Clayton Act
because they cannot show any direct injury to themselves
proximately caused by the allegedly-illegal NEIF. Although
the court agrees that the indirect-hire plaintiffs have no stand-
ing to sue for treble damages, the court finds that those plain-
tiffs are not precluded from seeking injunctive relief. Accord-
ingly, the defendants’ motion must be granted in part and
denied in part. .

The indirect-hire plaintiffs have conceded that their claim
for treble damages under § 4 of the Clayton Act is barred by
the holding in Jllinois Brick Co. v. Illinois, 431 U.S. 720
(1977). That case established that a plaintiff has no standing to
recover monetary damages if he alleges only that the “over-
charge” resulting from an illegal price-fixing scheme was
passed on to him as an indirect purchaser, through the chain of
distribution, in the form of higher costs. The Court reasoned
first that such “offensive” use of the passing-on theory should
not be permitted when “defensive” use of the same theory had
been prohibited in Hanover Shoe, Inc. v. United Shoe
Machinery Corp. 392 U.S. 481 (1968); and second that the
overcharged direct purchaser in a price-fixing scheme was the
only party “injured in his business or property” within the
meaning of § 4 of the Clayton Act. Jilinois Brick v. Illinois,
431 U.S. at 728-29. The Court also noted its concern with
preventing multiple, overlapping recoveries and with ensuring
that damage recoveries would not be so divided as to dis-
courage private enforcement of the antitrust laws. Jd. at 738,
746-47.

40a

The defendants in the instant case argue that //linois Brick
did not consider the implications of the passing-on theory in a
suit for injunctive relief under § 16, and that the standing
requirements under that section were therefore unaffected by
the Supreme Court decision. The defendants contend further
that the test under § 16 both before and since //linois Brick has
been the “target area” test, which is defined as follows in
NAACP v. New York Clearing House Ass'n, 431 F. Supp. 405,
409-10 (S.D.N.Y. 1977):

In order to have standing to sue under the Clayton Act a
plaintiff must show more than that he was injured as a
result of an alleged antitrust violation, or even that his
injury was foreseeable or intended. He must show that he
is “within that area of the economy which is endangered by
a breakdown in competitive conditions in a particular in-
dustry.” In other words, the plaintiff must suffer direct
injury as a result of the anti-competitive consequences of
the defendants’ acts. If not, then he cannot sue even if he
has suffered 1 oy as a result of his economic relationship
to a target of the conspiracy or to one of the conspirators.
[Footnotes onmulteed.

According to the defendants, the indirect-hire plaintiffs do not
pass that test.

The court does not agree that the “target area” test is the
correct one to apply when an indirect purchaser seeks only
injunctive relief. Even before //linois Brick was decided, the
courts were beginning to recognize a distinction between §§ 4
and 16 of the Clayton Act. Hawaii v. Standard Oil, 405 U.S.
251 (1972); In re Multidistrict Vehicle Air Pollution MDL #31,
481 F.2d 122 (9th Cir. 1973). See the discussion supra in con-
nection with the motion to dismiss NCA. Since 1977, thai
distinction has been held to permit an indirect purchaser to
obtain an injunction as long as he can show the traditional
“equitable entitlement” to such relief.

One of the leading cases on point is Mid-West Paper Prod-
ucts Co. v. Continental Group, supra, 596 F.2d 573 (3d Cir.
1979). At issue was an alleged conspiracy among manufactur-
ers to fix the price of paper bags used in packaging cookies,

4la

coffee, pet foods and the like. The indirect purchasers were
supermarkets who bought the prepackaged groceries for re-
sale to their customers. After dismissing the supermarkets’ § 4
claims on the authority of Jllinois Brick, the Third Circuit
considered the supermarket plaintiffs’ standing under § 16,
noting first that the rationales of J/linois Brick had no applica-
tion outside § 4 claims. The court then described the special
position of the indirect purchaser:

For unlike other Fg rage plaintiffs, who may be only
remotely affected by the ripples caused by the con-
spirators’ tampering with the supply and demand curve,
indirect purchasers can state unequivocally that under all
circumstances prevalent in the real economic world,
money is passing from their hands into the pockets of the
price fixers as a result of the conspiracy, and that no
rational pricing decisions by an intermediary will erase
this fact. [Footnotes omitted.] 596 F.2d at 593.

The court concluded that indirect purchasers were not pre-

cluded from obtaining injunctive relief as long as they could
establish that “equity principles” entitled them to it. Jd. at 594.

The Fifth Circuit reached a similar conclusion in Jn re Beef
Industry Antitrust Litigation, MDL #248, 600 F.2d 1148 (5th
Cir. 1979). The plaintiff cattlemen, ranchers and feeders
alleged that the defendant supermarkets fixed the price at
which beef was purchased from slaughterhouses and packers,
and ultimately from the producers. The Fifth Circuit held that
the district court had erroneously dismissed the plaintiffs
claims for an injunction. Finding that “the policy considera-
tions underlying the pass-on rule are not implicated in claims
for injunctive relief,” Judge Wisdom then wrote:

To secure injunctive relief under section 16 of the Clayton
Act, the plaintiffs need show only “threatened loss or

by a violation of the antitrust laws.” 15 U.S.C.
§ 26. to show a threat of such injury, plaintiffs in a case
such as this would not have to show the extent of their
harm. It would suffice to show by a preponderance of the
evidence that the alleged price-fixing had or will have
some adverse impact on the prices they receive for their

42a

cattle, or that the conspiracy reduced the packers’ demand
for fat cattle. 600 F.2d at 1167.

The Eighth Circuit adopted a similar rule in Paschall v.
Kansas City Star Co., 605 F.2d 403, 408 (8th Cir. 1979):

To proceed under section 26, the injunctive relief provi-
sion, the plaintiff need only show that there is a threat that
he will suffer fact of injury and that such threatened fact of
injury is causally related to the defendant’s pending anti-
trust violation. [Footnotes omitted. }’

Judge Watkins of this court, in Dart Drug Corp. v. Corning
Glass Works, Civil No. 72-664-W (D. Md. Oct. 29, 1979), relied
on the Third and Fifth Circuit decisions to hold that //linois
Brick did not preclude injunctive relief for indirect purchasers,
but that the plaintiff “must still establish, as § 16 requires, that
principles of equity entitle it to such injunctive relief.” Unpub-
lished Memorandum Opinion at 24.

The defendants in the present action cite several cases for
the proposition that an antitrust plaintiff may never have
standing, under § 4 or § 16, unless the plaintiff can show direct
injury. In NAACP v. New York Clearing House, supra, 431 F.
Supp. 405 (S.D.N.Y. 1977), the court held that the standing
requirements developed in treble damage suits applied to ac-
tions for injunctions as well. Although Judge Weinfeld ac-
knowledged that the Supreme Court had recognized a distinc-
tion between the requirements of §§ 4 and 16, he was bound by
the Second Circuit’s consistent application of the “target area”
test to claims for injunctive as well as monetary relief. See,
e.g., Nassau County Ass'n of Insurance Agents, Inc. v. Aetna
Life & Casualty Co., 497 F.2d 1151 (2d Cir.), cert. denied, 419
U.S. 968 (1974); Long Island Lighting Co. v. Standard Oil Co.
of Calif., 521 F.2d 1269 (2d Cir. 1975), cert. denied, 423 U.S.

§ Paschall involved alleged violations of § 2 of the Sherman Act
rather than price-fixing, and did not discuss purchasers. However,
nothing in the court’s interpretation of § 16 tended to limit that
interpretation to the given facts.

43a

1073 (1976). The defendants also cite Parkview Markets, Inc.
v. Kroger Co., 1978-2 Trade Cases © 62,373 (S.D. Ohio 1978), in
which the court found that the reasoning of //linois Brick did
preclude the plaintiffs’ requested injunction.

This court is not persuaded that the cases the deiendants
have cited state the controlling rule of law. To begin with, the
majority of those cases are from the Second Circuit, whose
acknowledged rule rejecting the distinction between §§ 4 and
16 has not been adopted in the Fourth Circuit. Moreover,
because Parkview Markets does not focus on an indirect pur-
chaser claiming threatened injury from a price-fixing scheme,
the case sheds little light on the question of when such a
plaintiffs alleged injury should be considered too remote.
Many of the other cases the defendants cite were decided prior
to cases such as Mid-West Paper and Paschall, supra, and in
the court’s view do not reflect the most recent developments in
this area of the law.

In sum, the weight of authority compels the conclusion that
in order to have standing to sue for injunctive relief under § 16,
an indirect purchaser must show only an “equitable entitle-
ment” to such relief. The court interprets that requirement to
mean that the plaintiffs must (1) “demonstrate a significant
threat of injury from an impending violation of the antitrust
la

[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_IA40385010_0244%3A1. Public record. Not legal advice.