Skyline Roofing & Sheet Metal Co. v. Ziolkowski Construction, Inc.

Citations: 957 N.E.2d 176; 192 L.R.R.M. (BNA) 2441; 2011 Ind. App. LEXIS 1848; 2011 WL 5057204Docket: No. 71A03-1105-PL-202

Court: Indiana Court of Appeals; October 25, 2011; Indiana; State Appellate Court

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Skyline Roofing, Sheet Metal Company, Inc. (Skyline) is appealing the trial court’s dismissal of its amended complaint against Ziolkowski Construction, Inc. (Ziolkowski) and the United Union of Roofers, Waterproofers, and Allied Workers Local 26 (Local 26). The case revolves around the construction of a new middle school by the Kankakee Valley School Corporation (Kankakee Valley) in Wheatfield, Indiana, which involved union support to pass a referendum for project funding. Ziolkowski, the general contractor, invited Skyline, a non-union subcontractor, to bid for the roofing work, alongside union subcontractor Midland Engineering, which submitted a higher bid.

On September 30, 2009, after bids were submitted, Local 26 requested Ziolkowski’s bid documents and learned of Skyline's bid. Pressure from unions led to threats against the project if a union subcontractor was not used. Ultimately, Ziolkowski awarded the roofing contract to Midland, despite Skyline’s lower bid. Skyline then filed a complaint alleging collusion between Ziolkowski and Kankakee Valley to exclude it from the project, claiming violations of the Indiana Antitrust Act. Ziolkowski moved to dismiss on grounds of failure to state a claim and for not including necessary parties, also arguing that federal labor laws preempted the antitrust claims. The appellate court reversed the dismissal and remanded the case for further proceedings.

Skyline's initial complaint was dismissed without prejudice for failure to state a claim, prompting Skyline to file an amended complaint in February 2011 against Ziolkowski and Local 26. This amended complaint alleged that Ziolkowski and Local 26 colluded with Kankakee Valley to unfairly exclude Skyline as the roofing subcontractor in favor of Midland, violating the Indiana Antitrust Act. Specifically, it claimed that Kankakee, in a quid pro quo arrangement, canceled its prior agreement with Skyline due to debts owed to unions and awarded the contract to Midland in exchange for Local 26’s financial support. Skyline asserted damages from this alleged antitrust violation, including lost time and profits.

Ziolkowski and Local 26 moved to dismiss the amended complaint, arguing it failed to state a claim under Indiana Trial Rule 12(B)(6), that Skyline did not join necessary parties Midland and Kankakee Valley under Trial Rule 12(B)(7), and that federal labor law preempted Skyline’s allegations. The trial court dismissed the complaint with prejudice without a hearing, leading to Skyline’s appeal.

On appeal, Skyline contends that the trial court erred in its dismissal, arguing that the amended complaint adequately stated a claim under the Indiana Antitrust Act, that necessary parties were not omitted, and that its allegations are not preempted by federal labor laws. The appeal first addresses the issue of preemption, with Local 26 and Ziolkowski asserting that the alleged actions are potentially prohibited under the National Labor Relations Act, which prohibits labor organizations from coercing any business relationships.

Ziolkowski contends that Skyline's claims against him should be preempted by federal labor laws, specifically referencing the Supreme Court case San Diego Building Trades Council v. Garmon. In Garmon, the Court ruled that when an activity is arguably regulated by Sections 7 or 8 of the National Labor Relations Act, state claims must defer to the National Labor Relations Board (NLRB) to avoid conflicts between state and federal regulations. The Court emphasized that even if state laws are broadly applicable, allowing states to regulate conduct already under federal jurisdiction risks undermining national labor policy. Moreover, preemption under Garmon does not apply if the regulated activity is only marginally related to federal labor laws or involves local interests deeply rooted in community responsibility.

In addressing Skyline's amended complaint regarding Local 26, key facts include: Skyline submitted a lower bid than Midland for roofing work; after Kankakee Valley awarded the project to Ziolkowski, Ziolkowski informed Skyline that its bid was used in preparing a bid; Local 26 requested Ziolkowski's bid documents; Ziolkowski and Kankakee Valley received threats from unions to disrupt the project unless a union subcontractor was hired; Local 26 contributed funds to Midland to bridge the bid gap; and ultimately, Ziolkowski chose Midland over Skyline for the subcontract.

Local 26 allegedly threatened and coerced Ziolkowski to hire union subcontractor Midland over non-union subcontractor Skyline, despite Skyline's lower bid, suggesting potential violation of Section 8(b)(4)(ii)(B). Skyline contends that the conduct is deeply rooted in local interests, arguing for a local-interest exception to preemption. To assess this, the court must evaluate if there's a significant state interest in protecting citizens from such conduct and whether state jurisdiction poses little risk of interfering with the National Labor Relations Board (NLRB) authority. Skyline asserts Indiana's interest in allowing fair competition among contractors but the court finds this interest not unique to Indiana and insufficient to prevent preemption. The Supreme Court has typically recognized the local-interest exception in cases involving local regulation of public order or personal torts. Skyline's state claim mirrors what would have been brought to the NLRB, raising concerns about interference with federal jurisdiction. The key issue remains whether Local 26's actions coerced Ziolkowski. The court also rejects Skyline's argument regarding the peripheral-concern exception under Garmon.

Resolution of the state antitrust claim requires determining if Local 26 coerced Ziolkowski into hiring Midland instead of Skyline, which would violate Section 8(b) of the National Labor Relations Act. The case law cited establishes that when a plaintiff's complaint challenges union activities, such as picketing, which are prohibited under Section 8, state claims may be preempted. Specifically, Skyline’s amended complaint is deemed preempted as the alleged conduct falls under Section 8(b)(4)(ii)(B), with no applicable Garmon exceptions. 

Moreover, Section 303 of the Labor Management Relations Act provides a federal remedy for damages arising from violations of Section 8(b)(4). This section makes it unlawful for labor organizations to engage in conduct defined as an unfair labor practice affecting commerce, allowing injured parties to sue in federal or other appropriate courts. The precedent from Smart v. Local 702 International Brotherhood of Electrical Workers illustrates that state antitrust claims can be preempted by federal law when the conduct is arguably prohibited under Section 8(b)(4). The Seventh Circuit affirmed that the exclusive jurisdiction of the National Labor Relations Board precludes both state and federal courts from hearing related claims, establishing that Section 303(b) serves as the exclusive federal cause of action for such alleged violations.

The court remanded the state antitrust claim to the district court, instructing it to allow the non-union company the opportunity to amend its complaint under Section 303. It affirmed that a state court is an appropriate venue for Section 303 claims, referencing Gentry v. United Slate, which involved a subcontractor whose work was canceled due to a union's threat to picket. The subcontractor alleged that this constituted an unfair labor practice under Section 8(b)(4) and sought damages under Section 303. The trial court's dismissal was appealed, and the court clarified that the Garmon preemption doctrine does not prevent claims for damages under Section 303 even if the National Labor Relations Board (NLRB) finds no violation of Section 8(b)(4). The court recognized that both public and private wrongs exist in such cases, allowing for concurrent actions under the same statute. The court then reversed the trial court's dismissal regarding Local 26, permitting Skyline to amend its complaint under Section 303. In addressing Ziolkowski's argument about federal preemption, the court found no unfair labor practices were alleged against Ziolkowski, meaning state law responsibilities remain. Lastly, Skyline argued that its amended complaint sufficiently stated a claim under the Indiana Antitrust Act, with the court emphasizing that the dismissal motion tests legal sufficiency rather than factual support, leading to a de novo review of the trial court's decision.

In reviewing a motion to dismiss, courts interpret pleadings in favor of the non-moving party, accepting all allegations as true and only dismissing if it is clear the party is not entitled to relief. Dismissal under Trial Rule 12(B)(6) is generally disfavored to uphold the merits of claims. Skyline's complaint involves the Indiana Antitrust Act, which prohibits schemes to restrict competition in contract bidding and provides a private right of action for those injured by violations. A plaintiff under this Act must demonstrate a statutory violation, resulting injury, and actual damages.

The key issue in Skyline's case is whether its amended complaint sufficiently alleges a violation of the Act. Ziolkowski contends that simply receiving a threat does not constitute collusion necessary for an antitrust violation, asserting that collusion requires a combination of distinct entities. However, the cases cited by Ziolkowski reference situations involving multiple schemers within a single entity. The document notes that the Town of Vevay and the City of Fort Wayne cannot conspire with themselves as they are single entities. In contrast, Skyline's claim involves alleged collusion among three distinct entities—Kankakee Valley, Ziolkowski, and Local 26. Skyline concedes that merely receiving threats is not collusive activity, aligning with Ziolkowski’s argument.

Skyline's amended complaint contends that Ziolkowski's actions go beyond merely receiving a threat, as several critical facts support this claim: 1) Skyline's bid was $585,216 lower than Midland’s; 2) Ziolkowski indicated to Skyline that it had the lowest bid; 3) unions threatened Kankakee Valley and Ziolkowski with disruptions unless a union subcontractor was hired; and 4) Ziolkowski chose Midland, after Kankakee Valley awarded the contract, following a post-bid financial contribution from Local 26 to Midland to equal Skyline's bid. These facts suggest Ziolkowski not only received threats but also engaged in actions that excluded Skyline despite its lower bid, indicating a potential violation of Section 3 regarding competition. 

Ziolkowski’s defense that it hired an "equal-priced" subcontractor is flawed because Midland was not equal-priced at the time of bid submission; it only matched Skyline's bid after the fact due to the funds from Local 26. This indicates a possible scheme to exclude Skyline, warranting a reversal of the dismissal of Skyline’s complaint. The court finds that Skyline's allegations are sufficient to survive a motion to dismiss, as they imply collusion between Ziolkowski, Kankakee Valley, and Local 26.

Regarding necessary parties, Ziolkowski initially argued that Kankakee Valley and Midland were necessary but later abandoned the argument about Kankakee Valley, acknowledging its immunity from liability under the Indiana Antitrust Act. Ziolkowski contends it should not be held liable if Kankakee Valley is exempt, but the complaint does not clarify roles in the alleged collusion, making it premature to assume Ziolkowski's liability is lesser. The statute holds all colluding parties accountable without exception for the degree of involvement.

Ziolkowski asserts that Midland is a necessary party in the case, with the trial court having discretion to determine a party's indispensability. The precedent indicates that a case does not need to be dismissed simply because an indispensable party is not included. If an indispensable party is not named, the trial court can either order that the party be added or allow the case to proceed without them. Assuming the trial court correctly identified Midland as a necessary party and that joining Midland was feasible, the appropriate action would have been to either include Midland in the case or continue without them. The dismissal of Skyline’s amended complaint due to the failure to join Midland was therefore an error. The court concludes that the trial court’s dismissal is reversed, and the case is remanded for further proceedings. Additionally, Ziolkowski's argument that Skyline's state antitrust claim is invalid due to the alleged existence of a job targeting program is rejected, as the court finds no support for the assertion that such a claim must fail under these circumstances.