ASSOCIATED GENERAL CONTRACTORS v. CARPENTERS(1983)

No. 81-334

Argued: October 5, 1982Decided: February 22, 1983

Petitioner multiemployer association and respondents (collectively the Union) are parties to collective-bargaining agreements governing the terms and conditions of employment in construction-related industries in California. The Union filed suit in Federal District Court, alleging that petitioner and its members, in violation of the antitrust laws, coerced certain third parties and some of petitioner’s members to enter into business relationships with nonunion contractors and subcontractors, and thus adversely affected the trade of certain unionized firms, thereby restraining the Union’s business activities. Treble damages were sought under 4 of the Clayton Act, which authorizes recovery of such damages by “[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws.” The District Court dismissed the complaint as insufficient to allege a cause of action for treble damages under 4. The Court of Appeals reversed.

Held:

Based on the allegations of the complaint, the Union was not a person injured by reason of a violation of the antitrust laws within the meaning of 4 of the Clayton Act. Pp. 526-546.

(a) Even though coercion allegedly directed by petitioner at third parties in order to restrain the trade of “certain” contractors and subcontractors may have been unlawful, it does not necessarily follow that the Union is a person injured by reason of a violation of the antitrust laws within the meaning of 4. Pp. 526-529.

(b) The question whether the Union may recover for the alleged injury cannot be answered by literal reference to 4’s broad language. Instead, as was required in common-law damages litigation in 1890 when 4’s predecessor was enacted as 7 of the Sherman Act, the question requires an evaluation of the Union’s harm, the petitioner’s alleged wrongdoing, and the relationship between them. Pp. 529-535.

[459 U.S. 519, 520]

which is neither a consumer nor a competitor in the market in which trade was allegedly restrained, the tenuous and speculative character of the causal relationship between the Union’s alleged injury and the alleged restraint, the potential for duplicative recovery or complex apportionment of damages, and the existence of more direct victims of the alleged conspiracy – weigh heavily against judicial enforcement of the Union’s antitrust claim. Pp. 535-546.

648 F.2d 527, reversed.

STEVENS, J., delivered the opinion of the Court in which BURGER, C. J., and BRENNAN, WHITE, BLACKMUN, POWELL, REHNQUIST, and O’CONNOR, JJ., joined. MARSHALL, J., filed a dissenting opinion, post, p. 546.

James P. Watson argued the cause for petitioner. With him on the briefs was George M. Cox.

Victor J. Van Bourg argued the cause and filed a brief for respondents. *

[ Footnote * ] Briefs of amici curiae urging reversal were filed by Solicitor General Lee, Assistant Attorney General Baxter, Deputy Solicitor General Wallace, Elinor Hadley Stillman, Robert B. Nicholson, and Robert J. Wiggers for the United States; by Peter G. Nash for the Associated General Contractors of America, Inc.; and by Edward B. Miller and Stephen A. Bokat for the Chamber of Commerce of the United States.

J. Albert Woll, Laurence Gold, and George Kaufmann filed briefs for the American Federation of Labor and Congress of Industrial Organization as amicus curiae urging affirmance.

Kenneth E. Ristau, Jr., and David A. Cathcart filed a brief for the Pacific Maritime Association as amicus curiae.

JUSTICE STEVENS delivered the opinion of the Court.

This case arises out of a dispute between parties to a multiemployer collective-bargaining agreement. The plaintiff unions allege that, in violation of the antitrust laws, the multiemployer association and its members coerced certain third parties, as well as some of the association’s members, to enter into business relationships with nonunion firms. This coercion, according to the complaint, adversely affected the trade of certain unionized firms and thereby restrained the [459 U.S. 519, 521] business activities of the unions. The question presented is whether the complaint sufficiently alleges that the unions have been “injured in [their] business or property by reason of anything forbidden in the antitrust laws” and may therefore recover treble damages under 4 of the Clayton Act. 38 Stat. 731, 15 U.S.C. 15. Unlike the majority of the Court of Appeals for the Ninth Circuit, we agree with the District Court’s conclusion that the complaint is insufficient.

I

The two named plaintiffs (the Union) – the California State Council of Carpenters and the Carpenters 46 Northern Counties Conference Board – are affiliated with the United Brotherhood of Carpenters and Joiners of America, AFL-CIO. The Union represents more than 50,000 individuals employed by the defendants in the carpentry, drywall, piledriving, and related industries throughout the State of California. The Union’s complaint is filed as a class action on behalf of numerous affiliated local unions and district councils. The defendants are Associated General Contractors of California, Inc. (Associated), a membership corporation composed of various building and construction contractors, approximately 250 members of Associated who are identified by name in an exhibit attached to the complaint, and 1,000 unidentified co-conspirators.

The Union and Associated, and their respective predecessors, have been parties to collective-bargaining agreements governing the terms and conditions of employment in construction-related industries in California for over 25 years. The wages and other benefits paid pursuant to these agreements amount to more than $750 million per year. In addition, approximately 3,000 contractors who are not members of Associated have entered into separate “memorandum agreements” with the Union, which bind them to the terms of the master collective-bargaining agreements between the Union and Associated. The amended complaint does not [459 U.S. 519, 522] state the number of nonsignatory employers or the number of nonunion employees who are active in the relevant market.

In paragraphs 23 and 24 of the amended complaint, the Union alleges the factual basis for five different damages claims. 1 Paragraph 23 alleges generally that the defendants conspired to abrogate and weaken the collective-bargaining relationship between the Union and the signatory employers. In seven subsections, paragraph 24 sets forth activities allegedly committed pursuant to the conspiracy. The most specific allegations relate to the labor relations between the parties. 2 The complaint’s description of actions affecting nonparties is both brief and vague. It is alleged that defendants

“(3) Advocated, encouraged, induced, and aided non-members of defendant Associated General Contractors of California, Inc. to refuse to enter into collective bargaining relationships with plaintiffs and each of them;

[459 U.S. 519, 523]

Paragraph 25 describes the alleged “purpose and effect” of these activities: first, “to weaken, destroy, and restrain the trade of certain contractors,” who were either members of Associated or memorandum contractors who had signed agreements with the Union; and second, to restrain “the free exercise of the business activities of plaintiffs and each of them.” 4 Plaintiffs claim that these alleged antitrust violations [459 U.S. 519, 524] caused them $25 million in damages. 5 The complaint does not identify any specific component of this damages claim.

After hearing “lengthy oral argument” and after receiving two sets of written briefs, one filed before and the second filed after this Court’s decision in Connell Construction Co. v. Plumbers & Steamfitters, 421 U.S. 616 (1975), the District Court dismissed the complaint, including the federal antitrust claim. 404 F. Supp. 1067 (ND Cal. 1975). 6 The court observed that the complaint alleged “a rather vague, general conspiracy,” and that the allegations “appear typical of disputes a union might have with an employer,” which in the normal course are resolved by grievance and arbitration or by the NLRB. Id., at 1069. 7 Without seeking to clarify or further amend the first amended complaint, the Union filed its notice of appeal on October 9, 1975.

Over five years later, on November 20, 1980, the Court of Appeals reversed the District Court’s dismissal of the Union’s federal antitrust claim. 648 F.2d 527. 8 The majority [459 U.S. 519, 525] of the Court of Appeals disagreed with the District Court’s characterization of the antitrust claim; it adopted a construction of the amended complaint which is somewhat broader than the allegations in the pleading itself. 9 The Court of Appeals held (1) that a Sherman Act violation – a group boycott – had been alleged, id., at 531-532; (2) that the defendants’ conduct was not within the antitrust exemption for labor activities, id., at 532-536; and (3) that the plaintiffs had standing to recover damages for the injury to their own business activities occasioned by the defendants’ “industry-wide boycott against all subcontractors with whom the Unions had signed agreements . . . .” Id., at 537. In support of the Union’s standing, the majority reasoned that the Union was within the area of the economy endangered by a breakdown of competitive conditions, not only because injury to the Union was a foreseeable consequence of the antitrust violation, but also because that injury was specifically intended by the defendants. The court noted that its conclusion was consistent with other cases holding that union organizational [459 U.S. 519, 526] and representational activities constitute a form of business protected by the antitrust laws. 10

II

As the case comes to us, we must assume that the Union can prove the facts alleged in its amended complaint. It is not, however, proper to assume that the Union can prove facts that it has not alleged or that the defendants have violated the antitrust laws in ways that have not been alleged. 11

We first note that the Union’s most specific claims of injury involve matters that are not subject to review under the antitrust laws. The amended complaint alleges that the defendants have breached their collective-bargaining agreements in various ways, and that they have manipulated their corporate names and corporate status in order to divert business to nonunion divisions or firms that they actually control. Such deceptive diversion of business to the nonunion portion of a so-called “double-breasted” operation might constitute a breach of contract, an unfair labor practice, or perhaps even a [459 U.S. 519, 527] common-law fraud or deceit, but in the context of the bargaining relationship between the parties to this litigation, such activities are plainly not subject to review under the federal antitrust laws. 12 Similarly, the charge that the defendants “advocated, encouraged, induced, and aided nonmembers . . . to refuse to enter into collective bargaining relationships” with the Union (§ 24(3)) does not describe an antitrust violation. 13

The Union’s antitrust claims arise from alleged restraints caused by defendants in the market for construction contracting and subcontracting. 14 The complaint alleges that defendants “coerced” 15 two classes of persons: (1) landowners and [459 U.S. 519, 528] others who let construction contracts, i. e., the defendants’ customers and potential customers; and (2) general contractors, i. e., defendants’ competitors and defendants themselves. Coercion against the members of both classes was designed to induce them to give some of their business – but not necessarily all of it – to nonunion firms. 16 Although the pleading does not allege that the coercive conduct increased the aggregate share of nonunion firms in the market, it does allege that defendants’ activities weakened and restrained the trade “of certain contractors.” See n. 4, supra. Thus, particular victims of coercion may have diverted particular contracts to nonunion firms and thereby caused certain unionized subcontractors to lose some business.

We think the Court of Appeals properly assumed that such coercion might violate the antitrust laws. 17 An agreement to restrain trade may be unlawful even though it does not entirely exclude its victims from the market. See Associated Press v. United States, 326 U.S. 1, 17 (1945). Coercive activity that prevents its victims from making free choices between market alternatives is inherently destructive of competitive conditions and may be condemned even without proof of its actual market effect. Cf. Klors, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 210 -214 (1959). 18 [459 U.S. 519, 529]

Even though coercion directed by defendants at third parties in order to restrain the trade of “certain” contractors and subcontractors may have been unlawful, it does not, of course, necessarily follow that still another party – the Union – is a person injured by reason of a violation of the antitrust laws within the meaning of 4 of the Clayton Act.

III

We first consider the language in the controlling statute. See Consumer Product Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). The class of persons who may maintain a private damages action under the antitrust laws is broadly defined in 4 of the Clayton Act. 15 U.S.C. 15. That section provides:

“Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust 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.”

A literal reading of the statute is broad enough to encompass every harm that can be attributed directly or indirectly to the consequences of an antitrust violation. Some of our prior cases have paraphrased the statute in an equally expansive way. 19 But before we hold that the statute is as broad as its [459 U.S. 519, 530] words suggest, we must consider whether Congress intended such an open-ended meaning.

The critical statutory language was originally enacted in 1890 as 7 of the Sherman Act. 26 Stat. 210. The legislative history of the section shows that Congress was primarily interested in creating an effective remedy for consumers who were forced to pay excessive prices by the giant trusts and combinations that dominated certain interstate markets. 20 That history supports a broad construction of this remedial provision. A proper interpretation of the section cannot, however, ignore the larger context in which the entire statute was debated. [459 U.S. 519, 531]

The repeated references to the common law in the debates that preceded the enactment of the Sherman Act make it clear that Congress intended the Act to be construed in the light of its common-law background. 21 Senator Sherman stated that the bill “does not announce a new principle of law, but applies old and well recognized principles of the common law to the complicated jurisdiction of our State and Federal Government.” 22 Thus our comments on the need for judicial interpretation of 1 are equally applicable to 7:

“One problem presented by the language of 1 of the Sherman Act is that it cannot mean what it says. The statute says that `every’ contract that restrains trade is unlawful. But, as Mr. Justice Brandeis perceptively noted, restraint is the very essence of every contract; read literally, 1 would outlaw the entire body of private contract law. . . .

[459 U.S. 519, 532]

Professional Engineers v. United States, 435 U.S. 679, 687 -688 (1978) (footnotes omitted).

Just as the substantive content of the Sherman Act draws meaning from its common-law antecedents, so must we consider the contemporary legal context in which Congress acted when we try to ascertain the intended scope of the private remedy created by 7.

In 1890, notwithstanding general language in many state constitutions providing in substance that “every wrong shall have a remedy,” 23 a number of judge-made rules circumscribed the availability of damages recoveries in both tort and contract litigation – doctrines such as foreseeability and proximate cause, 24 directness of injury, 25 certainty of [459 U.S. 519, 533] damages, 26 and privity of contract. 27 Although particular common-law limitations were not debated in Congress, the frequent references to common-law principles imply that Congress simply assumed that antitrust damages litigation would be subject to constraints comparable to well-accepted common-law rules applied in comparable litigation. 28

The federal judges who first confronted the task of giving meaning to 7 so understood the congressional intent. Thus in 1910 the Court of Appeals for the Third Circuit held as a matter of law that neither a creditor nor a stockholder of a corporation that was injured by a violation of the antitrust laws could recover treble damages under 7. Loeb v. Eastman [459 U.S. 519, 534] Kodak Co., 183 F. 704. The court explained that the plaintiff’s injury as a stockholder was “indirect, remote, and consequential.” Id., at 709. 29 This holding was consistent with Justice Holmes’ explanation of a similar construction of the remedial provision of the Interstate Commerce Act a few years later: “The general tendency of the law, in regard to damages at least, is not to go beyond the first step.” Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U.S. 531, 533 (1918). 30 When Congress enacted 4 of the Clayton Act in 1914, and when it reenacted that section in 1955, 69 Stat. 282, it adopted the language of 7 and presumably also the judicial gloss that avoided a simple literal interpretation.

As this Court has observed, the lower federal courts have been “virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation.” Hawaii v. Standard Oil Co., 405 U.S. 251, 263 , n. 14 (1972). Just last Term we stated:

[459 U.S. 519, 535]

Brick Co. v. Illinois, 431 U.S.], at 760 (BRENNAN, J., dissenting). It is reasonable to assume that Congress did not intend to allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property.” Blue Shield of Virginia v. McCready, 457 U.S. 465, 476 -477 (1982).

It is plain, therefore, that the question whether the Union may recover for the injury it allegedly suffered by reason of the defendants’ coercion against certain third parties cannot be answered simply by reference to the broad language of 4. Instead, as was required in common-law damages litigation in 1890, the question requires us to evaluate the plaintiff’s harm, the alleged wrongdoing by the defendants, and the relationship between them. 31

IV

There is a similarity between the struggle of common-law judges to articulate a precise definition of the concept of “proximate cause,” 32 and the struggle of federal judges to [459 U.S. 519, 536] articulate a precise test to determine whether a party injured by an antitrust violation may recover treble damages. 33 It is common ground that the judicial remedy cannot encompass every conceivable harm that can be traced to alleged wrong-doing. In both situations the infinite variety of claims that may arise make it virtually impossible to announce a black-letter rule that will dictate the result in every case. 34 Instead, [459 U.S. 519, 537] previously decided cases identify factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances.

The factors that favor judicial recognition of the Union’s antitrust claim are easily stated. The complaint does allege a causal connection between an antitrust violation and harm to the Union and further alleges that the defendants intended to cause that harm. As we have indicated, however, the mere fact that the claim is literally encompassed by the Clayton Act does not end the inquiry. We are also satisfied that an allegation of improper motive, although it may support a plaintiff’s damages claim under 4, 35 is not a panacea that will enable any complaint to withstand a motion to dismiss. 36 Indeed, in McCready, we specifically held: “The availability of the 4 remedy to some person who claims its benefit is not a question of the specific intent of the conspirators.” 457 U.S., at 479 . 37 [459 U.S. 519, 538]

A number of other factors may be controlling. In this case it is appropriate to focus on the nature of the plaintiff’s alleged injury. As the legislative history shows, the Sherman Act was enacted to assure customers the benefits of price competition, and our prior cases have emphasized the central interest in protecting the economic freedom of participants in the relevant market. 38 Last Term in Blue Shield of Virginia v. McCready, supra, we identified the relevance of this central policy to a determination of the plaintiff’s right to maintain an action under 4. McCready alleged that she was a consumer of psychotherapeutic services and that she had been injured by the defendants’ conspiracy to restrain competition in the market for such services. 39 The Court stressed the fact that “McCready’s injury was of a type that Congress sought to redress in providing a private remedy for violations of the antitrust laws.” 457 U.S., at 483 , citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 487 -489 (1977). After noting that her injury “was inextricably intertwined with the injury the conspirators sought to inflict on psychologists and the psychotherapy market,” 457 U.S., at 484 , the Court concluded that such an injury “falls squarely within the area of congressional concern.” Ibid. [459 U.S. 519, 539]

In this case, however, the Union was neither a consumer nor a competitor in the market in which trade was restrained. 40 It is not clear whether the Union’s interests would be served or disserved by enhanced competition in the market. As a general matter, a union’s primary goal is to enhance the earnings and improve the working conditions of its membership; that goal is not necessarily served, and indeed may actually be harmed, by uninhibited competition among employers striving to reduce costs in order to obtain a competitive advantage over their rivals. 41 At common law – as well as in the early days of administration of the federal antitrust laws – the collective activities of labor unions were regarded as a form of conspiracy in restraint of trade. 42 Federal policy has since developed not only a broad labor exemption from the antitrust laws, 43 but also a separate body of [459 U.S. 519, 540] labor law specifically designed to protect and encourage the organizational and representational activities of labor unions. Set against this background, a union, in its capacity as bargaining representative, will frequently not be part of the class the Sherman Act was designed to protect, especially in disputes with employers with whom it bargains. In each case its alleged injury must be analyzed to determine whether it is of the type that the antitrust statute was intended to forestall. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., supra, at 487-488. In this case, particularly in light of the longstanding collective-bargaining relationship between the parties, the Union’s labor-market interests seem to predominate, and the Brunswick test is not satisfied.

An additional factor is the directness or indirectness of the asserted injury. In this case, the chain of causation between the Union’s injury and the alleged restraint in the market for construction subcontracts contains several somewhat vaguely defined links. According to the complaint, defendants applied coercion against certain landowners and other contracting parties in order to cause them to divert business from certain union contractors to nonunion contractors. 44 As a result, [459 U.S. 519, 541] the Union’s complaint alleges, the Union suffered unspecified injuries in its “business activities.” 45 It is obvious that any such injuries were only an indirect result of whatever harm may have been suffered by “certain” construction contractors and subcontractors. 46

If either these firms, or the immediate victims of coercion by defendants, have been injured by an antitrust violation, their injuries would be direct and, as we held in McCready, they would have a right to maintain their own treble-damages actions against the defendants. An action on their behalf would encounter none of the conceptual difficulties that [459 U.S. 519, 542] encumber the Union’s claim. 47 The existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general. 48 Denying the Union a remedy on the basis of its allegations in this case is not likely to leave a significant antitrust violation undetected or unremedied.

Partly because it is indirect, and partly because the alleged effects on the Union may have been produced by independent factors, the Union’s damages claim is also highly speculative. There is, for example, no allegation that any collective-bargaining agreement was terminated as a result of the coercion, no allegation that the aggregate share of the contracting market controlled by union firms has diminished, no allegation that the number of employed union members has declined, and no allegation that the Union’s revenues in the form of dues or initiation fees have decreased. Moreover, although coercion against certain firms is alleged, there is no assertion that any such firm was prevented from doing business with any union firms or that any firm or group of firms was subjected to a complete boycott. See nn. 9, 15, and 16, supra. [459 U.S. 519, 543] Other than the alleged injuries flowing from breaches of the collective-bargaining agreements – injuries that would be remediable under other laws – nothing but speculation informs the Union’s claim of injury by reason of the alleged unlawful coercion. Yet, as we have recently reiterated, it is appropriate for 4 purposes “to consider whether a claim rests at bottom on some abstract conception or speculative measure of harm.” Blue Shield of Virginia v. McCready, 457 U.S., at 475 , n. 11, citing Hawaii v. Standard Oil Co., 405 U.S., at 262 -263, n. 14. 49

The indirectness of the alleged injury also implicates the strong interest, identified in our prior cases, in keeping the scope of complex antitrust trials within judicially manageable limits. 50 These cases have stressed the importance of avoiding [459 U.S. 519, 544] either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other. Thus, in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968), we refused to allow the defendants to discount the plaintiffs’ damages claim to the extent that overcharges had been passed on to the plaintiffs’ customers. We noted that any attempt to ascertain damages with such precision “would often require additional long and complicated proceedings involving massive evidence and complicated theories.” Id., at 493. In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), we held that treble damages could not be recovered by indirect purchasers of concrete blocks who had paid an enhanced price because their suppliers had been victimized by a price-fixing conspiracy. We observed that potential plaintiffs at each level in the distribution chain would be in a position to assert conflicting claims to a common fund, the amount of the alleged overcharge, thereby creating the danger of multiple liability for the fund and prejudice to absent plaintiffs.

“Permitting the use of pass-on theories under 4 essentially would transform treble-damages actions into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed part of the overcharge – from direct purchasers to middlemen to ultimate consumers. However appealing this attempt to allocate the overcharge might seem in theory, it would add whole new dimensions of complexity to treble-damages suits and seriously undermine their effectiveness.” Id., at 737-738.

The same concerns should guide us in determining whether the Union is a proper plaintiff under 4 of the Clayton Act. 51 [459 U.S. 519, 545] As the Court wrote in Illinois Brick, massive and complex damages litigation not only burdens the courts, but also undermines the effectiveness of treble-damages suits. Id., at 745. In this case, if the Union’s complaint asserts a claim for damages under 4, the District Court would face problems of identifying damages and apportioning them among directly victimized contractors and subcontractors and indirectly affected employees and union entities. It would be necessary to determine to what extent the coerced firms diverted business away from union subcontractors, and then to what extent those subcontractors absorbed the damage to their businesses or passed it on to employees by reducing the work force or cutting hours or wages. In turn it would be necessary to ascertain the extent to which the affected employees absorbed their losses and continued to pay union dues. 52

We conclude, therefore, that the Union’s allegations of consequential harm resulting from a violation of the antitrust laws, although buttressed by an allegation of intent to harm the Union, are insufficient as a matter of law. Other relevant factors – the nature of the Union’s injury, the tenuous and speculative character of the relationship between the alleged antitrust violation and the Union’s alleged injury, the potential for duplicative recovery or complex apportionment of damages, and the existence of more direct victims of the alleged conspiracy – weigh heavily against judicial enforcement of the Union’s antitrust claim. Accordingly, we hold that, based on the allegations of this complaint, the District [459 U.S. 519, 546] Court was correct in concluding that the Union is not a person injured by reason of a violation of the antitrust laws within the meaning of 4 of the Clayton Act. The judgment of the Court of Appeals is reversed.

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