STANWOOD R. DUVAL, Jr., District Judge.
Before the Court are the Plaintiff's Motion for Summary Judgment, R. Doc. 39, and Defendant's and Intervenors' Joint Motion for Summary Judgment, R. Doc. 40. The parties' cross-motions for summary judgment present a challenge to a Louisiana statute as being constitutionally preempted by the National Labor Relations Act ("NLRA"), 49 Stat. 449, as amended, 29 U.S.C. § 151 et seq., and the Supremacy Clause, U.S. Const. art. VI, cl. 2. Having considered the motions, memoranda, exhibits, and relevant law, the Court GRANTS the Defendant and Intervenors' Motion for Summary Judgment and DENIES the Plaintiff's Motion for Summary Judgment for reasons stated herein.
Plaintiff, Southeast Louisiana Building and Construction Trades Council, AFL-CIO ("Plaintiff" or "The Council"), is an unincorporated association comprised of member labor organizations or building and construction trade unions throughout Southeast Louisiana. (Pl.'s Mot. Summ. J. 12, R. Doc. 39). The Council exists to represents its members' interests, providing bargaining power and advancing the union sector of the construction market. Id. at 5. The Council's activities include negotiation of project labor agreements ("PLA" or "PLAs"), a type of collective bargaining agreement, on behalf of its members. Id. In 2011, the Louisiana legislature passed Act No. 134 ("Act 134") of the 2011 Regular Session, codified at La. R.S. 38:2225.5 (2014). On March 19, 2013, the Plaintiff was informed by the City of New Orleans that it could not enter into a potential PLA with the Council for the construction of the New Orleans East Hospital District A by virtue of the prohibition of such agreements as circumscribed by Act 134. (See Def.'s & Inter. Mot. Summ. J. Ex. 3 at 5, R. Doc. 40). In turn, Plaintiff filed a Complaint on February 27, 2013, alleging that Act 134 is unconstitutional and unenforceable naming Bobby Jindal, Governor of Louisiana, and James D. Caldwell, Attorney General for the state of Louisiana, as Defendants. On May 2, 2013, the Louisiana Chapter, the New Orleans-Bayou Chapter, and the Pelican Chapter of Associated Builders and Contractors, Inc., (collectively "ABC" or "Intervenors") intervened. On December 18, 2013, the Court granted Defendants' motion and dismissed Governor Jindal from the action. Order, Dec. 18, 2013, R. Doc. 23.
In its instant Motion for Summary Judgment, Plaintiff seeks a preliminary injunction prohibiting the enforcement of Act 134 and a declaration that Act 134 is preempted by federal law. See Pl. Mot. 1.
A party is entitled to summary judgment only if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The determination of whether a genuine issue of material fact exists is a question of law that must be decided by the court when raised by motions for summary judgment, despite the fact that the parties agree no factual issues exist.
No party contends that genuine issues of material fact exist and each party seeks summary judgment in its favor as a matter of law. Upon review of the competent summary judgment evidence, including the record and any admissible exhibits attached to the parties' motions,
In 1935, Congress enacted the NLRA, Pub. L. No. 74-189, 49 Stat. 449, codified as amended, 29 U.S.C. § 151 et seq., in which it articulated a national labor policy and created the National Labor Relations Board ("NLRB") to implement it. See N.L.R.B. v. Jones & Laughlin Steel Corp., 301 U.S. 1, 22-24, 57 S.Ct. 615, 81 L.Ed. 893 (1937). The NLRA declared that it was the public policy of the United States that employees shall be free from interference, restraint, or coercion of employers of labor in self-organization for the purposes of collective bargaining or other mutual aid.
Section 7 of the NLRA guarantees employees the right to organize and join unions, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. 29 U.S.C. § 157. Section 8, on the other hand, concerns unfair labor practices. See 29 U.S.C. § 158. In 1947, the Taft-Hartley Act amended the NLRA and outlawed the closed shop, curtailed the strike and boycott, and declared that employees had the right to refrain from union activity, Labor Management Relations Act (Taft-Hartley Act), Pub. L. No. 80-101, 61 Stat. 136 (1947), codified as amended 29 U.S.C. § 141, et seq. See N.L.R.B. v. Gen. Motors Corp., 373 U.S. 734, 740, 83 S.Ct. 1453, 1458, 10 L. Ed. 2d 670 (1963). In 1959, the Landrum-Griffin Act further restricted labor's picketing and boycott activities, and regulated internal union affairs. See Pub.L. No. 86-257, 73 Stat. 519 (1959); Nat'l Woodwork Mfrs. Ass'n v. N.L.R.B., 386 U.S. 612, 633, 87 S.Ct. 1250, 1262, 18 L. Ed. 2d 357 (1967); Marriott In-Flite Servs. v. Local 504, Air Transp. Div., Transp. Workers of Am., AFL-CIO, 557 F.2d 295, 298 (2d Cir. 1977)(citation omitted). One of the major aims of the 1959 Act was to limit "top down" organizing campaigns, in which unions used economic weapons to force recognition from an employer regardless of the wishes of its employees. Connell Const. Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 632, 95 S.Ct. 1830, 1840, 44 L. Ed. 2d 418 (1975).
Among the amendments made were the addition of Section 8(f) and modification of Section 8(e) of the NLRA, both of which made specific exceptions for the construction industry. 29 U.S.C. §§ 158(e) and (f); see Building & Constr. Trades Council v. Associated Builders & Contractors of Mass./R. I., Inc., 507 U.S. 218, 230, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993) ("Boston Harbor"). Section 8(f) specifically allows "prehire agreements," or agreements made between and employer and a labor organization covering employees not yet hired—only for those employees in the construction industry. 29 U.S.C. § 158; see John Deklewa & Sons, 282 N.L.R.B. 1375, 1380-81 (1987). "These agreements may be signed before the union represents a majority of the employer's employees, and may continue in duration through more than one of the employer's jobs, even if the employer goes through a high employee turnover." Todd v. Jim McNeff, Inc., 667 F.2d 800, 801-02 (9th Cir.) aff'd, 459 U.S. 1013, 103 S.Ct. 370, 74 L. Ed. 2d 505 (1982) and aff'd, 461 U.S. 260, 103 S.Ct. 1753, 75 L. Ed. 2d 830 (1983). Without this exception, forming a prehire agreement might have constituted an unfair labor practice, "for such an agreement (naming the unions to which all employees of all contractors and subcontractors must belong) might be seen as interfering with employees' rights to bargain through representatives of their own choosing, in violation of §§ 8(a)(1) and 7, see id. §§ 158(a)(1) & 157, or unreasonably discriminating against those who are not union members, in violation of § 8(a)(3)[, s]ee id. § 158(a)(3)."
In enacting this exception, Congress recognized that the use of prehire agreements in the construction industry antedated the federal labor legislation proscribing them. See S.Rep. 86-187 at 28, 55-56 (1959), reprinted in 1959 U.S.C.C.A.N. 2318, 2344; H.R. Rep. No. 86-741 at 19-20 (1959), reprinted in 1959 U.S.C.C.A.N. 2318, 2441-2442; Associated Builders & Contractors, 935 F.2d at 364 (Breyer, J., dissenting). As a practical matter, prehire agreements addressed unique circumstances in the construction industry, including short-term employment, the employer's need to know labor costs in advance of a project before making an accurate bid, and the employer's need for a steady supply of labor for referral. See H.R. Rep. No. 86-741 at 19 (1959), 1 Leg. Hist. 777; reprinted in 1959 U.S.C.C.A.N., 2424, 2442. Despite the concern over employees' right to select their bargaining representatives,
In addition, in 1959 Congress added the "construction industry proviso" to Section 8(e). 28 U.S.C. § 158(e); see 1 Bureau of National Affairs, The Labor Reform Law Labor-Management Reporting and Disclosure Act of 1959 93 (1959). Section 8(e) generally prohibits "hot cargo" agreements or agreements between a union and secondary employer whereby the secondary employer agrees to help the union (engaged in a dispute with a primary employer) by refusing to do business with that primary employer. See Woelke & Romero Framing, Inc. v. N.L.R.B., 456 U.S. 645, 654-55, 102 S.Ct. 2071, 72 L. Ed. 2d 398 (1982). The construction industry proviso specifically exempted employers in the construction industry so that its prohibition of hot-cargo clauses would not prevent parties in the construction industry from entering into prehire agreements, which traditionally included a subcontracting restriction "requiring the general contractor to award bids only to subcontractors who would sign the prehire agreement." Associated Builders and Contractors, 935 F.2d 345, 363-64 (1st Cir. 1991) (citing 105 Cong. Rec. S16, 414 (daily ed. September 3, 1959) (statements of Sen. Kennedy); 105 Cong.Rec. S16,414 (daily ed. September 3, 1959)(statements of Rep. Thompson)). The provision specifically addressed the problem of picketing a single non-union subcontractor on a multi-employer building project, and the close relationship between contractors and subcontractors at the jobsite. Connell Const. Co., 421 U.S. at 629-30. Thus Section 8(e) permits a general contractor's prehire agreement to require a contractor not to hire other contractors performing work on that particular project site unless they agree to become bound by the terms of that agreement.
The Plaintiff contends that the NLRA preempts Act 134 because the Act prohibits the use of a project labor agreement, a Section 8(f) prehire agreement, on public construction projects. The Supreme Court has determined that a project labor agreement or PLA is a "valid labor contract" under Sections 8(e) and 8(f) of the NLRA. Boston Harbor, 507 U.S. at 230, 113 S. Ct. at 1197. A PLA is a type of prehire agreement that applies to a specific construction project and lasts for the duration of the project. Cong. Res. Service, Project Labor Agreements, 1. "Subcontracting restrictions and prehire agreements are typically combined with hiring hall and grievance arbitration arrangements in a project labor agreement."
PLAs generally apply to all work performed under a specific contract or project or at a specific geographic location. Under the typical terms of a PLA, the PLA will (1) require an employer recognize the signatory union or group of unions as the exclusive collective bargaining agent for all covered employees; (2) supersede all other collective bargaining agreements; (3) prohibit strikes and lockouts; (4) require hiring through union referral systems or union hiring halls; (5) require all contractors and subcontractors to become signatory to the agreement, which in turn, may require contractors to use the unions' apprenticeship programs and to contribute to union health, pension, and vacation funds; (6) establish uniform work rules covering overtime, working hours, and dispute resolution; and (7) prescribe craft wages. See U.S. Congressional Research Service, Project Labor Agreements, 7-5700, Gerald Mayer, July 1, 2010, at 4; see Johnson v. Rancho Santiago Cnty. Coll. Dist., 623 F.3d 1011, 1017 (9th Cir. 2010). Often, the requirement that a winning bidder on a project agree to a PLA is incorporated directly into the bid specifications. See Associated Gen. Contractors v. Metro. Water Dist. of S. Cal., 159 F.3d 1178, 1180 (9th Cir. 1988); Michigan Bldg. & Constr. Trades Council, AFL-CIO v. Snyder, No. 12-13567, 2012 WL 6155964, at *1 (E.D. Mich. Nov. 15, 2012) rev'd sub nom. Michigan Bldg. & Constr. Trades Council v. Snyder, 729 F.3d 572 (6th Cir. 2013). Taken together, as one court has opined, PLAs "effectively unionize[] an entire construction project because all union and non-union contractors must comply with certain union protocol and procedure." Michigan Bldg. & Constr. Trades Council, AFL-CIO v. Snyder, 846 F.Supp.2d 766, 772 (E.D. Mich. 2012)(citing Cent. Iowa Bldg. and Constr. Trades Council, AFL-CIO v. Branstad, No. 11-00202, 2011 WL 4004652 at *1 (S.D.Iowa, Sept. 7, 2011)); see John T. Callahan & Sons, Inc. v. City of Malden, 713 N.E.2d 955, 960-61 n.9 (Mass. 1999).
In contracting for construction projects, a PLA may come into effect in a number of different scenarios. See Snyder, 846 F. Supp. 2d at 772. A union building trades council may negotiate and enter into a PLA with a construction manager acting as an agent for the owner-developer or directly with the owner-developer; the owner-developer then incorporates a requirement into bid specifications that successful bidders agree to enter or adhere to a PLA; the trades council could also enter into a PLA with a series of projects over a fixed period of time; or a general contractor could independently negotiate a PLA with trades councils either before or after being awarded the work. Id.
In 2011, the Louisiana legislature enacted Act No. 134 of the 2011 Regular Session ("Act 134" or "the Act"), adding a new provision to Louisiana's pre-existing Public Bid Law,
Id. at (A). The prohibited conditions in Section (A) along with Section (B) effectively prohibit those conditions typically included in PLAs, as discussed above,
Plaintiff argues that the NLRA preempts Act 134 because the Act either directly or indirectly regulates NLRA-protected collective bargaining rights of employers and public and private project owners in all publicly financed construction or other operations. Plaintiff argues that the Act is regulatory as it applies to all construction projects funded in whole or part by the state and all public entities. Plaintiff asserts that the organization, on behalf of its employees, has a right under Section 7 of the NLRA to collectively bargain for project labor agreements, which are specifically authorized under Section 8 of the NLRA, with the State. Plaintiff argues that the Act regulates this protected activity by prohibiting public entities from entering (or deciding whether to enter) into PLAs either through incorporation in bid specifications or controlling documents on all public works projects (or related project) paid for in whole or in part by public funds or on any project on which the public entity provides financial assistance, issues grants, or enters into cooperative agreements. Plaintiff also contends that the Act, in section (A)(3)(c), prohibits provisions requiring the use of union hiring halls, as employees must register with a union hiring hall or "affiliate" with the sponsoring union "and, if required by the controlling bargaining agreement, pay referral fees to the union." (Pl.'s Mem. Supp. Mot. Summ. J., 9). Further, Plaintiff argues that Section (A)(2)(b) prohibits bidders, offerors, contractors, and subcontractors from entering into neutrality agreements obligating a public entity remain neutral to a labor union facilitating voluntary recognition of a collective bargaining agent, and voluntary recognition is undisputedly lawful. Finally, Plaintiff argues that the enforcement provision in Section (D) further evidences its regulatory nature. Thus, Plaintiff avers that the Act interferes with federal labor policy and upsets a balance of power established by the NLRA by adopting a statute prohibiting PLAs and other collective bargaining relationships.
Defendant and Intervenors argue, however, that Act 134 is not preempted by the NLRA as it is a narrow, proprietary law with the purpose of efficiently procuring construction services. Defendant and Intervenors argue the law is not regulating any protected activity under the NLRA or interfering with the balance of power established by the NLRA. They state that the legislation was passed to foster open competition in the competitive bidding process for state-funded construction projects as part of the Public Bid law, narrowly applies only to those projects funded by the state, and is written to protect employee rights under the NLRA. Plaintiff overstates the reach of the legislation, they argue, as Act 134 does not prohibit the use of PLAs between private contractors and subcontractors on public projects but only prohibits public entities from entering into PLAs on construction projects. They assert that Act 134 similarly does not prohibit private parties from entering into any other bargaining agreement or the use of hiring halls, as the Act makes no mention of union hiring halls but simply reinforces existing Louisiana's Right to Work Law, Louisiana Revised Statutes section 23:981, et seq., and leaves the labor organizations are free to negotiate neutrality agreements with the State. Thus, Defendant and Intervenors argue the Act is not preempted because law has no effect outside of contracts with the State. Further, the Act is not preempted, they argue, because it does not regulate activities that are protected by the NLRA; they assert that labor organizations, as opposed to employees, have no right to negotiate PLAs under Section 7 of the NLRA with the State.
It is a fundamental principle of the Constitution that the Supremacy Clause gives Congress the power to preempt state law. Crosby v. National Foreign Trade Council, 530 U.S. 363, 372, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000); see U.S. Const. art. VI, cl. 2. "In deciding whether a federal law pre-empts a state statute, our task is to ascertain Congress' intent in enacting the federal statute at issue," Metro. Life, 471 U.S. at 738, as Congress' intent is "the ultimate touchstone in every pre-emption case," Wyeth, 555 U.S. at 565 (citation and internal quotation marks omitted). In addition, in all preemption cases "and particularly in those in which Congress has legislated," the court must "start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Wyeth, 555 U.S. at 565 (citations and internal quotation marks omitted).
The topic of preemption in federal labor law "presents one of the densest thickets in all of labor and employment law," as one commentator has opined and has further declared that "the Supreme Court has decided more cases touching on federal preemption than on any other legal issue in the field of collective bargaining."
The first preemption principle, Garmon preemption, precludes state interference with the NLRB's primary jurisdiction to determine in the first instance what kind of conduct is either prohibited or protected by the NLRA. San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L. Ed. 2d 775. Under Garmon, the NLRA preempts state action where the regulated activity is protected, prohibited, or arguably protected under Sections 7 and 8 and thus would be within the primary jurisdiction of the NLRB. Id. at 244. When it is not clearly protected but it is "arguably" protected, an inflexible application of preemption is avoided. Id. at 245. Courts consider whether there is a significant state interest in protecting its citizens from the conduct or whether state jurisdiction would entail little risk of interfering with the uniform labor policy. See Gould, 475 U.S. at 291 (preemption should not be inferred where policies address conduct of peripheral concern to the NLRA or deeply rooted local interests); Sears, Roebuck & Co. v. San Diego Cnty. Dist. Council of Carpenters, 436 U.S. 180, 180, 98 S.Ct. 1745, 1749, 56 L. Ed. 2d 209 (1978)(finding deeply local interests to be at stake such that Garmon preemption was inappropriate). A state law conflicts with the NLRA's provisions or underlying goals and policies if it stands as an obstacle to the accomplishment of its purposes. Hotel Employees, 468 U.S. at 501 (internal quotation marks and citation omitted).
The second preemption principle, Machinists preemption, forbids the states from regulating conduct that Congress intended to be unregulated. Machinists v. Wis. Emp't Relations Comm'n, 27 U.S. 132, 140 (1976); Metro Life., 471 U.S. at 749. Even if the conduct is not protected or prohibited by the NLRA, the act may be preempted if it is within a zone that Congress intended to leave unregulated or left to the "free play of economic forces." Machinists; 27 U.S. at 140. "Machinists pre-emption is based on the premise that `Congress struck a balance of protection, prohibition, and laissez-faire in respect to union organization, collective bargaining, and labor disputes.'" Chamber of Commerce of U.S. v. Brown, 554 U.S. 60, 65, 128 S.Ct. 2408, 2412, 171 L. Ed. 2d 264 (2008)(quoting Machinists, 427 U.S. at 140, n. 4)(internal quotation marks omitted).
However, preemption only occurs when a state regulates in a protected zone under Garmon or Machinists. See Boston Harbor, 507 U.S. at 226-27; Alameda Newspapers, Inc. v. City of Oakland, 95 F.3d 1406, 1413 (9th Cir. 1996) ("A prerequisite to pre-emption [under the NLRA] is a finding that the state or local action in question constitutes regulation of labor relations between employers and employees."). "In general, Congress intends to preempt only state regulation, and not actions a state takes as a market participant." Johnson, 623 F.3d at 1022 (citation omitted); see Cardinal Towing & Auto Repair, Inc., v. City of Bedford, Tex., 180 F.3d 686, 691 (5th Cir. 1999).
Three Supreme Court cases primarily define the scope of the "market participant" exception to preemption. In Gould, the Court addressed a Wisconsin "debarment" statute that forbade state procurement agents from using state funds to purchase products manufactured or sold by "labor law violators," or those employers who had violated the NLRA three times within a five-year period. 475 U.S. 282. Wisconsin conceded that it did not have the power to bar its residents from doing business with repeated violators of the NLRA but argued that the statute was not unlawful because the statute merely regulated the spending power of its procurement officers. Id. at 287. The Court held this to be a "distinction without a difference" because the statute plainly served as a means of enforcing the NLRA. Id. By "flatly prohibiting state purchases from repeat labor law violators" the state was not functioning as a private purchaser of services and for "all practical purposes, Wisconsin's debarment scheme [was] tantamount to regulation." Id. at 289.
The Gould court discussed the qualitative difference with state action as compared to private purchasers, noting that a private purchaser could boycott labor law violators without offending the NLRA. "The Act treats state action differently from private action not merely because they frequently take different forms," the Court noted, but also because "States simply are different from private parties and have a different role to play." Id. at 290. Yet the Court emphasized that the purpose and effect of the law in that case did not fall within any exception to the rule and found the Wisconsin statute preempted under Garmon. Id. at 291.
The Court answered the open question of whether a State may act without offending the preemption principles of the NLRA when it acts as a proprietor rather than a regulator in Boston Harbor, 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993). In Boston Harbor, the Court addressed the validity of a project labor agreement adopted by the Massachusetts Water Resources Authority (MWRA) and entered into by its project manager, Kaiser Engineers, Inc., and Building and Construction Trades Council and affiliated organizations (BCTC). Id. at 221. The Association of Builders and Contractors challenged the action arguing that it was preempted by the NLRA. Id. The PLA in Boston Harbor pertained to a $6.1 billion project to clean up the Boston Harbor by building treatment facilities over which MWRA had the primary responsibility to fund, decide contract awards, supervise, and eventually own. Id. at 221.
The Court found that the PLA was a valid labor contract under Sections 8(f) and 8(e) of the NLRA, and that those provisions also applied to the State and its political subdivision, the MWRA. Id. at 231. Though the NLRA excludes the State from the definition of an "employer," the Court found that Congress did not intend to distinguish between a private purchaser or a public entity acting in the construction industry in allowing the collective bargaining agreements under Sections 8(f) and 8(e); absent express intent to disallow states from managing its own property and pursuing proprietary interests, and where analogous private conduct would be permitted, the Court refrained from inferring a restriction on the states' ability to enter into prehire agreements. Id. at 231-232.
In making a distinction between state as regulator or state as proprietor, the Court revisited the analogy to a private actor in Gould. The Boston Harbor Court agreed with the Gould court that states play a qualitatively different role than private persons—when the state acts as a regulator. Id. at 229. The distinction between a state and a private actor is "far less significant when the State acts as a market participant with no interest in setting policy." Id. at 229. Thus, the Court in Boston Harbor emphasized that the statute was regulatory in Gould because the statute at issue "addressed employer conduct unrelated to the employer's performance of contractual obligations to the State, and because the State's reason for such conduct was to deter NLRA violations." Id. at 228-29.
As applied in that case, the Court found the MWRA was acting as a proprietor in entering into a PLA "to ensure that the project would be completed quickly and effectively at lowest cost." Id. at 232. Moreover, the challenged action was "tailored to one particular job," so there was no reason to distinguish the incentives there from those elsewhere in construction industry which are legitimate. Id. at 232 (citing Woelke, 546 U.S. at 662, and n.14).
In the most recent Supreme Court announcement on NLRA preemption and the market participant exception, the Supreme Court found that a California state statute was not subject to the market participant exception and was subject to NLRA preemption under Machinists. Brown, 554 U.S. 60, 120 S.Ct. 2408, 171 L.Ed.2d 264 (2008). The statute at issue in Brown prohibited certain employers that receive state funds—whether by reimbursement, grant, contract, use of property, or pursuant to a state program—from using such funds to assist, promote, or deter union organizing. Id. at 63. The preamble of the statute candidly acknowledged that it was the state of California's policy not to interfere with an employee's choice about whether to join a union and thus it would not subsidize efforts by employers to either promote or deter unionizing. Id. The Court found it "beyond dispute" that the state was regulating as it was neither specifically tailored to one particular job nor a legitimate response to state procurement restraints or to local economic needs. Id. at 70. The legislative purpose was not "the efficient procurement of goods and services" but rather, as acknowledged in the preamble, "furtherance of a labor policy." Id. The purpose was further illustrated by the fact that the statute was a negative restriction on employer speech about unionization as opposed to an affirmative requirement about the use of state funds for the relevant grant program and the fact that it was not applied uniformly, exempting certain employer advocacy activities that promoted unions. Id. at 70-71. The Court held that the NLRA preempted the statute under Machinists as it interfered and regulated the employer's non-coercive speech about unionization, an area Congress left unregulated. Id. at 66.
In the wake of Boston Harbor, the lower courts applying the market participant exception have examined critical factors that evidence proprietary conduct rather than regulatory conduct. With facts closely resembling that of Boston Harbor, courts have commonly shielded contract specifications or contracts over projects with defined temporal or project limits from preemption or those contracts based on "ad hoc" decisions.
The Fifth Circuit in Cardinal Towing succinctly distilled these factors, based on the reasoning of Boston Harbor, in a two-part test since cited with approval by other Circuit courts.
As acknowledged by the Fifth Circuit in Cardinal Towing, the point at which the action evidences a primary goal of encouraging labor policy
In Allbaugh, the D.C. Circuit held that President George W. Bush had the authority to issue an executive order that provided that no federal agency receiving federal assistance for a construction project may require bidders or contractors to enter (or prohibit them from entering into) a project labor agreement. 295 F.3d at 29. The effect was to "leave to the contractors working on the project the choice whether to enter into, and to require their subcontractors to enter into, a PLA, presumably depending upon whether it is likely to increase or to decrease their costs." Id. at 30. That the restriction was regulatory because it applied to projects merely funded by the Government was, in the court's opinion, an argument "that proceeds from too crabbed an understanding of proprietorship." Id. at 35. "[T]he Government unquestionably is the proprietor of its own funds, and when it acts to ensure the most efficient use of those funds, it is acting in a proprietary capacity." Id. If the Government acts as a benefactor or lender just as a private benefactor would, the Court reasoned, the Government similarly would be concerned about the efficient use of its funds; the distinction was not relevant in that case. Id. The blanket rule— applicable to all government contractors, "but not to the non-government contracts of those who do business with the Government"—was not inconsistent with the actions of a proprietor. Id. The Court explained: "A condition that the Government imposes in awarding a contract or in funding a project is regulatory only when, as the Supreme Court explained in Boston Harbor, it `addresse[s] employer conduct unrelated to the employer's performance of contractual obligations to the [Government].'" Id. at 36 (citing Boston Harbor, 507 U.S. at 228-29). The impact of the prohibition only extended to projects funded by the Government and not on projects unrelated to those in which the Government had a proprietary interest. Id. Thus, the court concluded that the executive order "establishe[d] no condition that can be characterized as regulatory." Id.
In Snyder, a Michigan legislative act, the Fair and Open Competition in Governmental Construction Act, was challenged as being preempted by the NLRA. 729 F.3d at 575. The Act initially stated that its purpose was to "provide for fair and open competition in governmental construction contracts, grants, tax abatements, and tax credits" and barred governmental units from entering or expending funds on a project if the contract or any subcontract contained a PLA. Id. It also forbade any governmental units from placing any PLA terms in bid specifications, project agreements, or other controlling documents. Id. The Act was amended and clarified, stating that the purpose was "to provide for more economical, nondiscriminatory, neutral, and efficient procurement of construction-related goods and services by this state..." as well as "providing for fair and open competition," which would best effectuate that intent. Id. at 576. The Act also only forbade governmental units from entering into PLAs themselves or discriminating in favor of or against bidders on public projects based on whether the bidder had entered into a PLA. Id. The amended version was found to be proprietary as the state was "seeking to preserve taxpayer resources by encouraging open competition among potential contractors and subcontractors." Id. at 577. It did not ban PLAs or the use of PLAs on public projects, and private entities, including those working on government projects, remain free to enter into PLAs. Id. at 577-78. "The law's effect is limited to forbidding governmental units from entering into PLAs and then forcing the terms and conditions found within on bidders, contractors, and subcontractors." Id. at 577.
The court looked to the legislative intent as expressed in the statute as evidence of intent as well as the legislative history and comments from certain senators. Id. at 577-78. The court found that the limits or scope of the act demonstrated proprietary nature in that it only affected actions of the state and had no effect on private parties. Id. In response to the argument that PLAs would be ineffective if not applied to every contractor on the project, the court noted that the governmental unit could give subcontracting power to one general contractor who could enter into a PLA. Id. at 578. The council argued that the statute was too broad because it did not consider projects on case-by-case basis, to which the court responded that private proprietors do act in across-the-board basis without becoming regulators. Id. The court opined that "[t]he legislature permissibly decided that public resources would best be preserved by taking the PLA decision out of the hands of governmental units and leaving it to private contractors." Id. at 578. As compared to Boston Harbor, the court found the Michigan legislature stated a similar goal of efficient procurement, and unlike Gould or Brown, the statute did not evidence facially regulatory intent. Id. at 579 and n.4. "Although the legislature acted on all projects at once," the court stated, "unlike the Authority in Boston Harbor, that is not alone sufficient to make an action regulatory." Id. at 579.
Though Act 134 differs from the statute in Snyder and executive order in Allbaugh in some respects, the differences are not as determinative as Plaintiff suggests. Despite the existing Supreme Court and Fifth Circuit precedent on the market participant exception and the compelling reasoning of the two Circuit courts that have addressed factually similar issues, the Plaintiff urges the Court to reject the reasoning of Allbaugh and Snyder and adopt the reasoning of the Ohio State Supreme Court in Ohio State Build. & Constr. Trades Council v. Cuyahoga Cnty. Bd. of Commissioners, 98 Ohio St.3d 214 (Ohio 2002), which found a similar state statute preempted by the NLRA. With this in mind, the Court now turns to the application of the market participant doctrine in the instant matter.
When examining whether the challenged action, the state legislation, reflects the efficient procurement of goods and services, the court must turn to the manifest purpose and effect of the legislation. See Gould, 475 U.S. at 1064. In assessing whether legislation has a regulatory purpose, the court should "look[] primarily to the objective purpose clear on the face of the enactment" and "not search for an impermissible motive where a permissible purpose is apparent." Bldg. Indus. Elec. Contractors Ass'n, 678 F.3d at 191. "Federal preemption doctrine evaluates what legislation does, not why legislators voted for it or what political coalition led to its enactment." Id. (quoting Lavin, 431 F.3d at 1007 (internal quotation marks omitted)).
Though courts have looked to explicit legislative statements of purpose in preambles to statutes for evidence of intent,
From the face of the statute, it is clear that the purpose pertains to the purchase of construction services through a particular contract form (a PLA), on a "public works" project with the use of state funds. Act 134 applies to public entities "when engaged in procuring products or services or letting contracts" for construction of public works "paid for in whole or in part by state or local funds" or when overseeing the procuring of products or services for the same. La. R.S. 38:2225.5(A). It is clear that the State is concerned with the "procurement of goods or services" through contracting for construction services in relation to construction contracts for "public works," which by definition the public entity owns, uses, or leases.
The proprietary interest derives not only from the ownership of the project constructed but from the use of its funds. As the Supreme Court in Brown recognized, the state has a legitimate proprietary interest in ensuring state funds are spent in accordance with the purposes for which they are appropriated. Brown, 554 U.S. at 70. Thus, whether as owner or benefactor of a project, the state is "unquestionably the proprietor of its own funds, and when it is acts to ensure the most effective use of those funds, it is acting in a proprietary capacity." Allbaugh, 295 F.3d at 35. By making a procurement policy on construction contracts, Act 134 evidences the State's entry into the market, whether legislatively or through individual public entities' contracting decisions. Indeed, in Cardinal Towing, the city contracted for towing services, thus participating in the market as a consumer (on behalf of the absent owner of the vehicle) without utilizing its spending power or being the owner of the property towed. Cardinal Towing, 180 F.3d at 697.
Notwithstanding the text of Act 134, the placement of Act 134 within the context of the public bid law reinforces the purpose of the law.
Moreover, the state has acted similar to a private purchaser in determining whether it will or will not permit its agents to choose to enter into PLAs. Just as the state spending power cannot automatically be assumed to be proprietary, "the presence of the state in the market cannot automatically be assumed to be motivated by a regulatory impulse." Cardinal Towing, 180 F.3d at 692. Here, a private actor may freely refuse to enter into PLAs with a union as a market participant.
The second part of the Cardinal Towing test examines the scope of the action and questions whether the narrow scope of the challenged action defeats an inference that its primary goal was to encourage a general policy rather than address a specific proprietary problem. The Fifth Circuit recognized that not all state spending decisions are presumptively proprietary:
Cardinal Towing, 180 F.3d at 691. Plaintiff argues that Act 134 is not proprietary because the prohibition is not tailed to one specific job but all PLAs entered into by the state, and that the regulatory purpose is clear: it regulates not only those contractors bidding for projects with the state but effectively forbids contractors to enter into PLAs with subcontractors. While "ad hoc" decisions, such as the MWRA's decision in Boston Harbor, undoubtedly demonstrate proprietary conduct, a decision made through a blanket prohibition, on the other hand, may appear regulatory upon first glance. The inquiry into the scope of the act under the Cardinal Towing test becomes even more germane in this instance. Though ad hoc decisions eschew regulatory purpose, it does not necessarily follow that "blanket" prohibitions cannot evidence proprietary purpose. Both Allbaugh and Snyder relied on the purpose and effect of the executive order and state legislation at issue, respectively, in determining that the scope did not defeat the proprietary nature. See Allbaugh, 295 F.3d at 35-36; Snyder, 729 F.3d at 580. By contrast, the Ohio Supreme Court focused on the form of the act (a flat-out prohibition) and relied heavily on the comparison between state and private action, rather than examining the scope—the effect— of the statute. See Cuyahoga Cnty., 781 N.E.2d 951, 969-970. This Court finds the Ohio Supreme Court's reasoning unpersuasive and will examine the effect of the statute in ascertaining whether its scope defeats an inference of a regulatory rather than proprietary goal.
Through Act 134, the Louisiana legislature has circumscribed public officials' ability to determine whether to enter into a PLA and incorporate a PLA into a bid or controlling document on a public works construction project. The effect of this corporate or "executive" decision is no different than the effect of a public officer deciding "each and every time . . . not to enter into PLAs for any specific project." Branstad, 2011 WL 4004652 at *10.
Notwithstanding the permissible proprietary goal of the "blanket prohibition," the legislation may be regulatory and preempted if it interferes with the comprehensive scheme established by the NLRA. See Brown, 554 U.S. at 73-74. The Boston Harbor Court noted that it was the state's regulating conduct "unrelated to the employer's performance of contractual obligations" in Gould that was determinative in that case. 507 U.S. at 228-29. Indeed, the "line between state regulation that is subject to preemption and market participation that escapes preemption must be drawn more finely than by simply distinguishing between regulation through mandatory laws and regulation achieved through the spending or procurement power." Sage Hospitality, 390 F.3d at 214. Thus, as in Gould and Brown where each state deployed its spending power to achieve a goal far broader than merely protecting its own proprietary interests, "[c]onditions on spending may become regulation if they affect conduct other than the financed project." Lavin, 431 F.3d at 1006-07.
Despite Plaintiff's broad interpretation of Act 134, the Act does not affect conduct unrelated to the State's contracts. Act 134 applies only to public works projects and does not forbid any collective bargaining agreement between private parties. It does not even ban the use of PLAs on all State or government projects. The Act prohibits public entities from making the decision to enter into a PLA; as in Snyder, that decision is left to individual contractors. See Snyder, 729 F.3d at 578. In light of its narrow application to State contracts, the Act specifically states that nothing shall in the Act prohibit subcontractors and contractors from entering into PLAs or other collective bargaining agreements. See La. R.S. 38:2225.5(C). Act 134 goes so far as to exempt public-private projects over which a private entity would have the right to control the labor relations on the project. See id. at (E)(4). Although Plaintiff argues that section (B) of the Act would prohibit a private entity receiving government funds, such as tax increment financing, from entering into a PLA on a private project, this argument misconstrues the statute in applying it to private projects
Finally, the court is reluctant, as other courts have been, to examine the statute for any further ulterior motive, particularly where a permissible motive is apparent.
In light of the above discussion, the proprietary nature and the narrow scope of the legislation are evident. The State was acting not as a regulator but as a market participant in enacting Act 134, and the Court finds that the NLRA should not preempt Act 134. Though Plaintiff argues that the Act prevents labor organizations from exercising their "right" to convince governmental entities to enter into a PLA with the labor organization and interferes with an area left unregulated by Congress, these arguments that pertain to Garmon and Machinists preemption are of no avail when the state acts as a market participant.
In finding that the market participant applies to Act 134, the Court is mindful of "the volume of, and obvious need for, interaction between the government and the private sector, [and avoiding] the application of preemption in a manner that hobbles state and local governments' purchasing efforts [and] threatens severe disruption." Cardinal Towing, 180 F.3d at 692. The Court is reluctant to infer preemption in light of existing precedent and the absence of Congressional intent to the contrary. See Boston Harbor, 507 U.S. at 231-232; Garmon, 359 U.S. at 244; Sears, 436 U.S. at 188-89, and n.13. Congress balanced the employee's right to select a bargaining representative and an employer's right to choose to associate with a union with accommodating the construction industry's established practices, opting to promote the latter in enacting Sections 8(f) and 8(e) and allowing construction industry employers the opportunity to continue industry practices. In this case, to deny the state the an option available to a private purchaser in the construction market where Congress has acted to allow market participants the choice to engage in industry contracting practices would arguably "place a restriction on Congress' intended free play of economic forces identified in Machinists." See Boston Harbor, 507 U.S. at 232.
In sum, the Court finds that the NLRA does not preempt Act 134 of the Louisiana legislature. Therefore, as no genuine issue of material fact exists, the Defendant is entitled to judgment as a matter of law on this matter.
Accordingly,
