Michigan Building & Construction Trades Council v. Snyder , 729 F.3d 572 ( 2013 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 13a0266p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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MICHIGAN BUILDING AND CONSTRUCTION
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TRADES COUNCIL and GENESEE, LAPEER,
SHIAWASSEE BUILDING AND CONSTRUCTION -
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Nos. 12-1246/2548
TRADES COUNCIL, AFL-CIO,
Plaintiffs-Appellees, ,>
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v.
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RICHARD SNYDER, Governor of the State of
Defendant-Appellant. -
Michigan, in his official capacity,
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
Nos. 2:11-cv-13520; 2:12-cv-13567—Victoria A. Roberts, District Judge.
Argued: June 18, 2013
Decided and Filed: September 6, 2013
Before: SILER, MOORE, and ROGERS, Circuit Judges.
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COUNSEL
ARGUED: Dennis J. Raterink, OFFICE OF THE MICHIGAN ATTORNEY
GENERAL, Lansing, Michigan, for Appellant. John R. Canzano, McKNIGHT,
McCLOW, CANZANO, SMITH & RADTKE, P.C., Southfield, Michigan, for
Appellees. ON BRIEF: Dennis J. Raterink, Susan Przekop-Shaw, Dan V. Artaev,
Christopher W. Braverman, OFFICE OF THE MICHIGAN ATTORNEY GENERAL,
Lansing, Michigan, for Appellant. John R. Canzano, McKNIGHT, McCLOW,
CANZANO, SMITH & RADTKE, P.C., Southfield, Michigan, Terry R. Yellig, Victoria
L. Bor, SHERMAN, DUNN, COHEN, LEIFER & YELLIG, P.C., Washington, D.C.,
for Appellees.
ROGERS, J., delivered the opinion of the court, in which SILER, J., joined.
MOORE, J. (pp. 14–32), delivered a separate dissenting opinion.
1
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 2
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OPINION
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ROGERS, Circuit Judge. Project labor agreements are contracts typically used
in the construction industry to set common terms and conditions of employment for large
projects involving multiple subcontractors and unions. The question on this appeal is
whether the State of Michigan—with respect to the construction of public projects—can
make an across-the-board determination not to require that its contractors enter into such
agreements. Such an across-the-board determination could be made by a private
developer. Michigan can do the same because in this respect the state is acting as a
market participant rather than as a regulator.
Michigan passed the first version of the Fair and Open Competition in
Governmental Construction Act in 2011. Plaintiffs—state and local trades
councils—claimed that the act was preempted by the National Labor Relations Act
(NLRA) and asked for an injunction. The district court granted the injunction in
February 2012. That version of the act has been entirely superseded by an amended
version of the act, passed in 2012, rendering the Governor’s appeal of that injunction
moot. The district court subsequently enjoined the current version of the act, finding it
preempted by the NLRA. However, the act furthers Michigan’s proprietary goal of
improving efficiency in public construction projects, and the act is no broader than is
necessary to meet those goals. Thus, the law is not preempted by the NLRA.
Both versions of the act restrict the use of Project Labor Agreements (PLAs) on
publicly funded construction projects. A PLA sets out the terms and conditions of
employment on a specific construction project. On a public construction project, the
PLA can be entered into by the governmental unit paying for the project or by a general
contractor the governmental unit hires. The other party to the PLA is the relevant labor
organization. Once a PLA is in force, every lower-level contractor must abide by it to
be able to work on the project. Thus, if the governmental unit itself enters into a PLA,
all contractors bidding on the project must agree to abide by the PLA. If a general
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 3
contractor enters into a PLA, all its subcontractors on that project must agree to abide
by the PLA. The PLAs will often incorporate terms from individual local union
collective bargaining agreements, but the PLA will supersede those agreements.
There has been debate over whether PLAs increase the costs of government
projects. Opponents of PLAs argue that PLAs discourage nonunion contractors and
subcontractors from bidding on government contracts and that the rules included in
PLAs increase construction costs. The Governor cites reports that found that PLAs add
12–18% to the costs of public projects.1 PLA proponents, like the trades councils,
counter that PLAs enhance job-site cooperation and reduce labor disputes, thus
preventing delays and cost overruns on public projects. The trades councils cite several
reports supporting their position.2 The federal government has gone back and forth on
whether PLAs should be permissible for federally funded projects. President George H.
W. Bush used an executive order to forbid the use of PLAs on federally funded projects.
See Exec. Order No. 12,818, 57 Fed. Reg. 48713 (Oct. 23, 1992). President Clinton
rescinded that order and encouraged the use of PLAs on construction projects over $5
million. See Exec. Order No. 12,836, 58 Fed. Reg. 7045 (Feb. 1, 1993). President
George W. Bush reinstated the ban on the use of PLAs on federally funded projects, see
Exec. Order No. 13,302, 66 Fed. Reg. 11225 (Feb. 17, 2001), only to see President
1
These reports include Vazques, Glaser & Bruvold, Measuring the Cost of Project Labor
Agreements on School Construction in California, available at
http://www.nusinstitute.org/assets/resources/pageResources/Measuring-the-Cost-of-Project-Labor-Agr
eements-on-School-Construction-in-California.pdf (last visited August 08, 2013) (finding that PLA school
construction projects cost 13% more per square foot than comparable non-PLA projects); Tuerck, Why
Project Labor Agreements Are Not in the Public Interest, 30 CATO J. 45 (Winter 2010), available at
http://www.cato.org/sites/cato.org/files/serials/files/cato-journal/2010/1/cj30n1-3.pdf (last visited August
08, 2013) (“By one estimate, PLAs add 12–18 percent to the cost of public projects”); and Tuerck,
Glassman & Bachman, Project Labor Agreements on Federal Construction Projects: A Costly Solution in
Search of a Problem, available at http://www.beaconhill.org/BHIStudies/PLA2009/PLAFinal090923.pdf
(last visited August 08, 2013) (noting that PLAs increased construction costs on state school construction
projects).
2
The councils cite, among others, Dale Belman and Matthew M. Bodah, Building Better: A Look
at Best Practices for the Design of Project Labor Agreements (Economic Policy Institute Briefing Paper
#274, Aug. 10, 2010), available at http://epi.3cdn net/179fd74170130cd540_ibm6ib3kd.pdf (last visited
August 08, 2013) (discussing benefits of PLAs, including quick resolution of labor disputes and
improved working conditions); Dale Belman et al., Project Labor Agreements’ Effects on
School Construction Costs in Massachusetts, 49 Indus. Rel. 44 (2010), available at
https://www.msu.edu/~drdale/Publications/Construction%20&%20PLAs/Project%20Labor%20Agree
ments'%20Effect%20on%20School%20Construction%20Costs%20IR%20-%20Copy.pdf (last visited
August 08, 2013) (arguing that PLAs do not increase construction costs).
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 4
Obama again lift the ban and allow agencies to use PLAs for construction projects that
cost the government over $25 million, see Exec. Order No. 13,502, 74 Fed. Reg. 6985(Feb. 6, 2009).
The Michigan legislature stepped into this debate in 2011 by passing S.B. 165,
the Fair and Open Competition in Governmental Construction Act, 2011 Mich. Pub.
Acts 98. The introduction to the act stated that its goal was
to provide for fair and open competition in governmental construction
contracts, grants, tax abatements, and tax credits; to prohibit
requirements for certain terms in government contracts and contracts
supported through government grants and tax subsidies and abatements;
to prohibit expenditure of public funds under certain conditions; to
prohibit certain terms in procurement documents for certain expenditures
involving public facilities; and to provide for powers and duties of
certain public officers, employees, and contractors.
Id. The act barred governmental units from entering or expending funds on a project if
the contract or any subcontract contained a PLA. Id. § 5. It also forbade the
governmental units from awarding grants, tax abatements, or tax credits while under a
PLA, id. § 7, and forbade governmental units and their agents from placing any PLA
terms in bid specifications, project agreements, or other controlling documents, id. § 9.
The Michigan Building and Construction Trades Council, AFL-CIO, and
Genesee, Lapeer, Shiawassee Building and Construction Trades Council, AFL-CIO, both
associations of labor organizations, filed suit. The trades councils argued, among other
things, that the new law was preempted by the NLRA, which permitted the use of PLAs.
The district court agreed and issued a preliminary injunction. The court rejected the
Governor’s argument that the state was acting in its proprietary capacity when it passed
the law. The court determined that the law was regulatory and that it was preempted by
Sections 7 and 8 of the NLRA. Mich. Bldg. and Const. Trades Council, AFL-CIO v.
Snyder, 846 F. Supp. 2d 766, 783 (E.D. Mich. 2012).
The Governor appealed. While that appeal was pending in this court, the
Michigan legislature amended the act. The legislature clarified that it intended the act
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 5
“to provide for more economical, nondiscriminatory, neutral, and efficient procurement
of construction-related goods and services by this state and political subdivisions of this
state as market participants,” and that “providing for fair and open competition best
effectuates this intent.” 2012 Mich. Pub. Acts 238 § 2 (codified at Mich. Comp. Laws
§ 408.872). The amended act replaced Section 5, which had previously barred
government spending on any project that included a contract or a subcontract that
contained a PLA. The new Section 5 only barred governmental units from entering into
PLAs themselves. Id. § 5 (codified at Mich. Comp. Laws § 408.875). It also forbade
governmental units from discriminating against bidders on public projects based on
whether the bidder had entered into a PLA. Id. The legislature also added a new section
to the act stating that the act “does not prohibit a governmental unit from awarding a
contract, grant, tax abatement, or tax credit to a private owner, bidder, contractor, or
subcontractor who enters into or who is party” to a PLA so long as entering into that
PLA “is not a condition for award of the contract, grant, tax abatement, or tax credit.
. . .” Id. § 8 (codified at Mich. Comp. Laws § 408.878).
These changes satisfied neither the trades councils nor the district court. On the
trades councils’ request, the district court enjoined the new version of the act as well.
Once again, the district court found the act preempted by Sections 7 and 8 of the NLRA
because the act still prohibited governmental units from requiring their contractors to
adhere to PLAs as a condition of a contract award. The court also found, contrary to the
legislature’s statement that the state was acting as a market participant, that the act is
tantamount to regulation because it is broad in scope and “does not reflect the State’s
interest in efficient procurement of goods or services.” The court noted that if the state
were acting as a private proprietor would, it would consider PLAs on a case-by-case
basis and would not issue a blanket prohibition. Mich. Bldg. & Constr. Trades Council
v. Snyder, No. 12-13567, 2012 WL 6155964, at *7 (E.D. Mich. Nov. 15, 2012).
The Governor also appealed the second injunction. Upon the Governor’s
unopposed request, this court consolidated the two appeals.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 6
The Governor’s appeal of the injunction of the original version of the act is now
moot. That version has been replaced entirely by the current version, enacted in 2012,
and removing the injunction would have no effect. A case becomes moot “when it is
impossible for a court to grant any effectual relief whatever to the prevailing party.”
Knox v. Serv. Emps. Int’l Union, Local 1000, 132 S. Ct. 2277, 2287 (2012) (internal
quotation marks omitted). “[I]f an event occurs while a case is pending on appeal that
makes it impossible for the court to grant ‘any effectual relief whatever’ to a prevailing
party, the appeal must be dismissed.” Church of Scientology of Cal. v. United States,
506 U.S. 9, 12 (1992). The enactment of the current version of the act is such an event.
Therefore, the Governor’s appeal of the first injunction must be dismissed.
Both parties argue that the appeal of the original injunction is not moot, but their
arguments are unavailing. The Governor argues that the appeal is not moot because the
councils make the same preemption arguments with regard to the current version of the
act as they did against the first version. However, those arguments are appropriately
considered in light of the language of the law as it stands now, not as it was before the
amendments. The councils note that a reversal of the first injunction will jeopardize
PLAs signed in the period while the original act was enjoined but before the amended
act went into effect. However, the Governor has given no indication that the state
intends to challenge contracts entered into by governmental units before the enactment
of the current version of the act, and no such challenges have been identified. While the
original act barred governmental units from entering into or expending funds under
contracts that contained PLAs, see 2011 Mich. Pub. Acts 98 § 5, the current version only
bars governmental units from entering into new PLAs on or after the effective date of
the amendatory act, see 2012 Mich. Pub. Acts 238 § 5 (codified at Mich. Comp. Laws
§ 408.875). The Governor has repeatedly contended before this court that, contrary to
its apparent language, the original act's exceptions meant that it did not bar governmental
units from entering into contracts with contractors or subcontractors that had PLAs. See
Reply Br. in No. 12-1246 at 5–6. Thus, we take these contentions as a representation
that the state will not seek to invalidate contracts that would be legal under the current
version of the act on the basis of illegality under the original version.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 7
The parties agree that if the state’s statutes are proprietary rather than regulatory,
the councils’ arguments based on the NLRA fail. See Bldg. & Constr. Trades Council
v. Associated Builders & Contractors, 507 U.S. 218, 227 (1993). The current version
of the act is proprietary. The state is seeking to preserve taxpayer resources by
encouraging open competition among potential contractors and subcontractors. It is not
banning PLAs, and contractors who enter into PLAs can compete on equal footing with
non-PLA contractors for public contracts. Private entities, including contractors working
on government projects, remain free to enter into PLAs. 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. Such a limited
action is similar to those found to be proprietary by the Supreme Court, this court, and
other circuits.
The statements of intent within the legislation and its legislative history provide
evidence that the legislation was passed in an effort to improve efficiency in government
projects, not to regulate. The act specifically states that it is intended “to provide for
more economical, nondiscriminatory, neutral and efficient procurement of construction-
related goods and services by this state and political subdivisions.” 2012 Mich. Pub.
Acts 238 § 2 (codified at Mich. Comp. Laws § 408.872). The legislative history further
demonstrates this intent. Senator Moolenaar explained that the act is intended to
“guarantee[] the equal opportunity and fiscal accountability that taxpayers expect from
government.” S. Journal 48, 96th Leg., at 867 (Mich. 2012). Even the act’s opponents
believed that the act was intended to save resources, with Senator Gleason arguing that
the act constitutes a terrible decision to “go cheap on labor” because it would lead to the
use of lesser-skilled workers and shabbily built projects. He noted that it would be better
to have “high standards and high qualifications, not low cost.” Id. at 866–67.
The limits of the act demonstrate its proprietary nature. The act affects only the
actions of the state and political subdivisions of the state. It has no effect on private
projects. Furthermore, even its effect on public projects is limited. The act forbids
governmental units and their agents from entering into PLAs. It does not forbid the use
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 8
of PLAs on public projects. If a governmental unit uses a general contractor on a
project, and that general contractor is responsible for all subcontracting, the general
contractor could enter into a PLA that would cover the entire project. Under the act,
bidding on public construction projects must be open to contractors whether or not they
are parties to PLAs, and a governmental unit cannot discriminate in favor of or against
a contractor because it is party to a PLA. 2012 Mich. Pub. Acts 238 § 5(b) (codified as
Mich. Comp. Laws § 408.875(b)).3 The councils argue that the act severely restricts the
use of PLAs because PLAs are ineffective if they do not apply to every contractor on the
project, and some contracts involve more than one general contractor. However, all that
a governmental unit needs to do to encourage bids that include effective PLAs is choose
to give all subcontracting power to one general contractor. Furthermore, for those
projects where a PLA is the most efficient way to proceed, the general contractors are
free to come together to enter a PLA.
The councils argue that the act is too broad to be proprietary because it does not
consider projects on a case-by-case basis. But private proprietors can and do act on an
across-the-board basis without somehow becoming regulators. The 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.
The trades councils also argue that the statute is too broad because it extends
coverage to governmental projects funded by private or federal funds. However, this
argument presumes that the state does not have a proprietary interest in the efficiency
of construction projects financed by private or federal money. Using such funds
efficiently allows for more to be done with limited funding and increases the likelihood
that more projects will be funded. This is a proprietary interest that the legislation
directly furthers. Moreover, even private developers could reasonably impose such
restrictions notwithstanding the presence of outside funding. In contrast, by focusing on
3
During oral argument, counsel for the Governor stated that a governmental unit could not choose
a contractor who had a PLA if it had put in the lowest bid for a project. The Governor later clarified that
that reading of the law is incorrect. The opposite is true—if a contractor with a PLA submits the lowest
bid, it would be a violation of the act for the governmental entity not to choose that contractor because of
the existence of the PLA.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 9
state action instead of state funding, the act allows private projects receiving state grant
funds to use PLAs if those private entities so desire. See 2012 Mich. Pub Acts 238 § 8
(codified at Mich. Comp. Laws § 408.878). This is a limit President George W. Bush’s
executive order did not contain, see Exec. Order No. 13,302, 66 Fed. Reg. 11225 (Feb.
17, 2001), and it further demonstrates that the statute’s goal is efficiency in government
construction and not the wholesale elimination of PLAs.
The proprietary nature of the act is directly supported by the Supreme Court’s
holding in Building & Construction Trades Council v. Associated Builders
& Contractors, 507 U.S. 218 (1993) (Boston Harbor). In Boston Harbor, the Court held
that the government-mandated requirement of a PLA for the Boston Harbor construction
project was proprietary. In Boston Harbor, the Massachusetts Water Resources
Authority enforced a PLA negotiated by its agent and a local trades council in an effort
to avoid delays from labor disputes. A contractors’ association complained, arguing that
the agreement violated the NLRA. The Supreme Court held that preemption did not
apply because the Authority’s action was proprietary. “When a State owns and manages
property,” the Court explained, “it must interact with private participants in the
marketplace. In so doing, the State is not subject to pre-emption by the NLRA, because
pre-emption doctrines apply only to state regulation.” Id. at 227 (emphasis in original).
The Court noted that “[t]o the extent that a private purchaser may choose a contractor
based upon that contractor’s willingness to enter into a prehire agreement, a public entity
as purchaser should be permitted to do the same.” Id. at 231 (emphasis in original).
That lesson must be applied to this case. Just as a private purchaser can choose
not to enter into PLAs, believing them to be inefficient, a state legislature, sharing that
same belief, can decide that public money should not to be used for PLA projects. In
Boston Harbor, the Authority “was attempting to ensure an efficient project that would
be completed as quickly and effectively as possible at the lowest cost.” Id. at 232. The
Michigan legislature has stated a similar goal. Although the legislature acted on all
projects at once, unlike the Authority in Boston Harbor, that is not alone sufficient to
make an action regulatory. While some, such as Senator Gleason, may argue that
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 10
banning the use of PLAs actually sacrifices speed and efficiency in favor of cost savings,
it is not the job of this court to question whether the legislature made the correct
decision. It is a permissible decision.
This type of action is materially different from the challenged action in
Wisconsin Department of Industry v. Gould, 475 U.S. 282 (1986). In that case,
Wisconsin maintained a list of repeat NLRA-violators and forbade state procurement
agents from doing business with any person or firm on that list. Id. at 283–84. The
Court held that the statute requiring this practice was regulatory and preempted by the
NLRA, explaining that “on its face the debarment statute serves plainly as a means of
enforcing the NLRA. . . . [T]he point of the statute is to deter labor law violations and
to reward ‘fidelity to the law.’” Id. at 287. Unlike in Boston Harbor, “[n]o other
purpose could credibly be ascribed” to the statute. Id. As the Court explained in Boston
Harbor, the problem with Wisconsin’s action in Gould was that it constituted “a state
agency’s attempt to compel conformity with the NLRA.” 507 U.S. at 228. The statute
“addressed employer conduct unrelated to the employer’s performance of contractual
obligations to the State, and . . . the State’s reason for such conduct was to deter NLRA
violations.” Id. at 228–29. Here, the act purportedly conserves state resources. The
state did not restrict its choices to promote the enforcement of a different labor policy.
This act is closer to the action the Court found proprietary in Boston Harbor than to the
statute found to be regulatory in Gould.4
4
Chamber of Commerce v. Brown, 554 U.S. 60 (2008), is like Gould. The Supreme Court held
to be pre-empted a California statute (“AB 1889”) prohibiting employers that receive state grants or
program funds from using the funds “to assist, promote, or deter union organizing,” and establishing a
“formidable” scheme to enforce the statute. Id. at 63. The Supreme Court reasoned that California had
acted in its regulatory capacity not only because the statute was not “specifically tailored to one particular
job” but also because the statute was not a “legitimate response to state procurement constraints or to local
economic needs,” id. at 70. citing Gould. In particular,
the legislative purpose is not the efficient procurement of goods and services, but the
furtherance of a labor policy. Although a State has a legitimate proprietary interest in
ensuring that state funds are spent in accordance with the purposes for which they are
appropriated, this is not the objective of AB 1889. In contrast to a neutral affirmative
requirement that funds be spent solely for the purposes of the relevant grant or program,
AB 1889 imposes a targeted negative restriction on employer speech about unionization.
Furthermore, the statute does not even apply this constraint uniformly. Instead of
forbidding the use of state funds for all employer advocacy regarding unionization,
AB 1889 permits use of state funds for select employer advocacy activities that promote
unions.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 11
This court’s precedent demonstrates this dividing line. In Petrey v. City of
Toledo, we held that provisions of a city towing ordinance that chose certain tow
companies for police towing were proprietary because they “do not constitute attempts
on the part of the City to regulate the towing industry as a whole, or to advance some
general societal goal.” 246 F.3d 548, 558–59 (6th Cir. 2001), abrogated on other
grounds by City of Columbus v. Ours Garage and Wrecker Serv., Inc., 536 U.S. 424(2002). Instead, the provisions were meant to ensure administrative efficiency and city
monitoring. Id. at 558. Similarly, the Michigan act does not regulate the construction
industry as a whole and does not aim to eliminate PLAs altogether. Instead, it is meant
to ensure efficiency and save taxpayer money.
Other circuits’ decisions support this analysis. Building and Construction Trades
Department v. Allbaugh, 295 F.3d 28 (D.C. Cir. 2002), is directly on point. Allbaugh
was a challenge to President George W. Bush’s ban on federal agencies’ requiring PLAs
for federally funded projects. See Exec. Order No. 13,302, 66 Fed. Reg. 11225 (Feb. 17,
2001). The D.C. Circuit considered both Boston Harbor and Gould and found that the
challenged executive order constituted proprietary action. The D.C. Circuit held the
relevant distinction to be whether the government “‘acts just as a private contractor
would act’ . . . or instead seeks to affect conduct ‘unrelated to the employer’s
performance of contractual obligations.’” 295 F.3d at 34–35 (quoting Boston Harbor,
507 U.S. at 233, 229). The court noted that “the Government unquestionably is the
proprietor of its own funds, and when it acts to ensure the most effective use of those
funds, it is acting in a proprietary capacity.” Id. at 35. The D.C. Circuit also addressed
the same case-by-case vs. blanket-rule argument that the councils make here, and
concluded that “there simply is no logical justification for holding that if an executive
order establishes a consistent practice regarding the use of PLAs, it is regulatory even
though the only decisions governed by the executive order are those that the federal
government makes as a market participant.” Id. (internal quotation marks omitted).
“Because the Executive Order does not address the use of PLAs on projects unrelated
Id. at 70–71 (citations omitted). The Michigan statute at issue in this case has nothing like these facially
regulatory aspects of AB 1889.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 12
to those in which the Government has a proprietary interest, the Executive Order
establishes no condition that can be characterized as ‘regulatory.’” Id. at 36. The
executive order at issue in Allbaugh is almost identical to the Michigan act in its effect
on PLAs.
Allbaugh is the closest parallel to this case. The councils argue that Allbaugh is
no longer good law; however, the cases they point to have not criticized Allbaugh and
each is distinguishable. UAW-Labor Employment and Training Corp. v. Chao, 325 F.3d
360 (D.C. Cir. 2003), was a challenge to an executive order requiring contractors who
obtain large government contracts to post notices at all facilities informing employees
of their rights not to join a union or pay certain union dues. The D.C. Circuit held the
order to be regulatory instead of proprietary. The challenged order, like the statute in
Gould and unlike the authority’s action in Boston Harbor and the order in Allbaugh, had
no effect on government resources. Its sole purpose was to use government contracts as
a tool to promote a certain labor policy. The government did not even explicitly argue
that its actions were proprietary. 325 F.3d at 363. UAW-Labor was a straightforward
application of Gould and does not say anything about the continued validity of Allbaugh.
Precedent from other circuits follows this same pattern. The Fifth Circuit,
considering Gould and Boston Harbor, held that a city’s grant of an exclusive towing
contract to a company was proprietary. Cardinal Towing & Auto Repair, Inc. v. City of
Bedford, 180 F.3d 686, 693 (5th Cir. 1999). The city’s action ensured efficient towing,
clarified responsibility, minimized administrative confusion, and allowed for easy
supervision. Furthermore, there was no indication that the city’s goal was to encourage
private towing companies to conduct their business in a specified manner. Id. Likewise,
the Third Circuit has noted that the “pivotal difference” between Gould and Boston
Harbor “is that in the former case the state deployed its spending authority to achieve
a goal far broader than merely protecting or fostering its own investment or proprietary
interest, while in the latter instance the public agency limited its spending conditions to
the protection of its investment or proprietary interest.” Hotel Emps. & Rest. Emps.
Union, Local 57 v. Sage Hospitality Res., 390 F.3d 206, 214 (3d Cir. 2004). The Third
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 13
Circuit held that an ordinance conditioning tax-incentive funding on an employer’s
acceptance of a labor neutrality agreement was intended to promote and protect the
city’s interest in tax revenues from the project and was therefore proprietary. Id. at 217.
Notably, in reaching that decision, the court considered Allbaugh in its survey of other
circuits, and did not criticize it. Id. at 215. Finally, the Seventh Circuit held a
Milwaukee ordinance requiring city contractors to reach “labor peace agreements” with
unions to be regulatory because the ordinance would have significant spillover effects
on private contracts and because the city passed up easy alternatives to achieve the same
desired effect without the spillover effects. Metro. Milwaukee Ass’n of Commerce v.
Milwaukee Cnty., 431 F.3d 277, 280 (7th Cir. 2005). These cases all draw a similar line:
to be proprietary, the government action must be aimed to achieve a proprietary goal and
must be limited to the furtherance of that goal. The Michigan statute falls on the
proprietary side of that line.
Michigan’s statute advances the proprietary interest of efficient use of resources
and is limited enough to advance only that interest. Accordingly, it is proprietary, and
not regulatory, and therefore is not preempted by the NLRA.
In case No. 12-1246, the appeal is dismissed as moot. In case No. 12-2548, the
district court’s judgment is reversed and the injunction is vacated.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 14
__________________
DISSENT
__________________
KAREN NELSON MOORE, Circuit Judge, dissenting. The Supreme Court has
held that a state cannot regulate activity protected by the National Labor Relations Act
(“NLRA”). In 2012, however, the Michigan legislature enacted the amended Fair and
Open Competition in Governmental Construction Act (“amended Act”), a statute
forbidding all governmental units in Michigan from entering into project labor
agreements (“PLAs”), a kind of collective bargaining agreement typically associated
with construction projects and expressly protected by the NLRA. This sweeping
measure affects every governmental unit in the state, including local government entities,
on every contract these units award, even those that are privately funded. By necessary
implication, the amended Act also affects all labor organizations or trade councils
seeking to enter into a PLA with a government entity. In short, Michigan implemented
a statute that regulates collective bargaining.
The majority attempts to escape this conclusion by pointing out that there is a
type of action that the amended Act does not regulate—PLAs entered into by private
parties. But this is unpersuasive for two key reasons. First, the issue in front of this
court is whether the amended Act interferes with an organization’s right to convince a
governmental unit to enter into a PLA, not whether the amended Act interferes with a
private party’s right to enter into PLAs independently. Second, the fact that the amended
Act does not regulate every PLA does not mean that it is not regulating some PLAs. We
have never held that a statute must regulate everything in order to regulate something.
Because I believe that we must follow the clear dictates of the Supreme Court that a state
does not have the authority to enact broad statutes implementing labor policy in an area
protected by the NLRA, I cannot agree with the majority’s conclusion. I respectfully
dissent.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 15
I. STANDARD OF REVIEW
As an initial matter, it is important to note that Snyder appeals from the district
court’s grant of a preliminary injunction on enforcement of the amended Act, the review
of which is governed by specific principles. The majority not only fails to recognize the
posture of this appeal, but also declines to specify the standard under which it conducts
its review. As a result, it is unclear on what basis the majority reverses the order of the
district court. Because we review a district court’s grant of a preliminary injunction with
great deference, the majority’s silence on this matter is troubling.
The applicable standard is summarized as follows. We must “review[] the grant
of a preliminary injunction for an abuse of discretion.” United States v. Edward Rose
& Sons, 384 F.3d 258, 261 (6th Cir. 2004). Under this standard, “[a] district court’s
findings of fact underlying its decision to grant a preliminary injunction are reviewed for
clear error and the legal conclusions underpinning its decision are reviewed de novo.”
Id. (internal quotation marks omitted). “Because a trial court’s decision to grant a
preliminary injunction is accorded great deference, this court should disturb such a
decision only if the district court relied upon clearly erroneous findings of fact,
improperly applied the governing law, or used an erroneous legal standard.” Id. (internal
quotation marks omitted).
There are four preliminary injunction factors that a court must consider:
(1) the likelihood that the party seeking the preliminary injunction will
succeed on the merits of the claim; (2) whether the party seeking the
injunction will suffer irreparable harm without the grant of the
extraordinary relief; (3) the probability that granting the injunction will
cause substantial harm to others; and (4) whether the public interest is
advanced by the issuance of the injunction.
Id. “The district court’s weighing and balancing of the equities is overruled only in the
rarest of cases.” Id. (internal quotation marks and alteration omitted). Certain of these
factors, however, employ a separate standard of review. For example, “[t]he district
court’s determination of whether the movant is likely to succeed on the merits is a
question of law and is accordingly reviewed de novo.” Certified Restoration Dry
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 16
Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 541 (6th Cir. 2007). I will
focus my analysis on this factor.
II. PREEMPTION ANALYSIS
The NLRA preemption analysis involves two inquiries. First, a court must
consider whether the action at issue is “subject to pre-emption by the NLRA.” Bldg. &
Constr. Trades Council v. Associated Builders & Contractors of Mass./R.I., Inc.
(“Boston Harbor”), 507 U.S. 218, 227 (1993). “It is by now a commonplace that in
passing the NLRA Congress largely displaced state regulation of industrial relations.”
Wis. Dep’t of Indus., Labor, & Human Relations v. Gould, Inc. (“Gould”), 475 U.S. 282,
286 (1986). As a general matter, “States may not regulate activity that the NLRA
protects, prohibits, or arguably protects or prohibits.” Id. As explained in Boston
Harbor, however, not all actions taken by a state are subject to preemption by the
NLRA; in fact, only regulatory actions come under such scrutiny. 507 U.S. at 227.
When a state acts in a proprietary manner, for example, the state is not regulating. Id.If a court determines that the legislation is regulatory, it must then address
whether either of the two preemption principles established by the Supreme Court apply:
(1) Garmon preemption, established in San Diego Building Trades Council v. Garmon,
359 U.S. 236 (1959), or (2) Machinists preemption, established in Lodge 76,
International Association of Machinists & Aerospace Workers, AFL-CIO v. Wisconsin
Employment Relations Commission, 427 U.S. 132 (1976). Boston Harbor, 507 U.S. at224–26. If the legislation is preempted under either principle, it cannot stand. Because
my disagreement with the majority’s analysis is based largely on that which the majority
omitted, I will set forth in detail the applicable legal framework before applying it to this
appeal.
A. The Amended Act is Regulatory
The first inquiry a court must make is whether the state action is subject to
preemption by the NLRA—i.e., whether the action is proprietary or regulatory in nature.
The Supreme Court has explained that while “the NLRA prevents a State from
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 17
regulating within a protected zone, . . . [a] State does not regulate, however, simply by
acting within one of these protected areas.” Boston Harbor, 507 U.S. at 226–27. “When
a State owns and manages property, for example, it must interact with private
participants in the marketplace. In so doing, the State is not subject to pre-emption by
the NLRA, because pre-emption doctrines apply only to state regulation.” Id. at 227.
The Court further explained, though, that the government is held to a different standard
than that of private parties when it comes to distinguishing between regulatory and
proprietary conduct, for “[w]hen the State acts as regulator, it performs a role that is
characteristically a governmental rather than a private role.” Id. at 229. “[A]s regulator
of private conduct, the State is more powerful than private parties.” Id.; see also Gould,
475 U.S. at 290 (“But government occupies a unique position of power in our society,
and its conduct, regardless of form, is rightly subject to special restraints.”).
Because of the unique dynamic created when a state acts in the area of labor
relations, the Supreme Court has given substantial guidance on the distinction between
actions that are proprietary and actions that are regulatory. Specifically, the Supreme
Court has identified two factors that should inform a court’s analysis on this point—the
breadth of the action taken and whether the action reflects a legitimate interest in the
efficient procurement of goods and services. The Court has also made clear that it is
improper to rely on the way in which the state classifies the action. Instead, a court must
focus on what the state action actually does and how it affects the rights protected by the
NLRA.
Instead of following this binding Supreme Court precedent—as well as the
decisions of the Second, Third, Fifth, Seventh, and Ninth Circuits; two panels of the
D.C. Circuit; and a decision of this Court in Petrey v. City of Toledo, 246 F.3d 548 (6th
Cir. 2001), abrogated on other grounds by City of Columbus v. Ours Garage & Wrecker
Serv., Inc., 536 U.S. 424 (2002)—the majority has chosen to adopt a standard set forth
by a single panel of the D.C. Circuit that directly contradicts Supreme Court precedent.
I cannot agree that this is the correct course.
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 18
The Supreme Court first acknowledged these guiding principles in Gould, where
it was faced with determining whether the NLRA preempted a Wisconsin statute that
“debarr[ed] certain repeat violators of the [NLRA] from doing business with the State.”
475 U.S. at 283. In Gould, Wisconsin encouraged the Court to consider the statute as
an exercise of its spending power rather than as a regulation of labor relations, and
therefore not subject to preemption by the NLRA. Id. at 287. The Court declined this
invitation, asserting that how a state categorized an action made no difference, as “[i]t
is the conduct being regulated, not the formal description of governing legal standards,
that is the proper focus of concern.” Id. at 289 (internal quotation marks omitted). The
Court also rejected Wisconsin’s argument that it was acting in a proprietary capacity:
“by flatly prohibiting state purchases from repeat labor law violators Wisconsin simply
is not functioning as a private purchaser of services; for all practical purposes,
Wisconsin’s debarment scheme is tantamount to regulation.” Id. (internal quotation
marks and citation omitted).
Seven years later, the Supreme Court considered the issue again in Boston
Harbor, a case in which organizations challenged a single labor agreement entered into
by the Massachusetts Water Resources Authority (“MWRA”). There, the Supreme
Court determined that MWRA was not acting in a regulatory manner when it decided
against employing a PLA in a ten-year, $6.1 billion cleanup project. Boston Harbor, 507
U.S. at 221, 232. The Court’s analysis centered on the fact that “the challenged action
in this litigation was specifically tailored to one particular job.” Id. at 232. As such, the
Court reasoned that “[t]here is no question but that MWRA was attempting to ensure an
efficient project that would be completed as quickly and effectively as possible at the
lowest cost.” Id. When the state acts “in the role of purchaser of construction services,”
the Court explained, there is “no basis on which to distinguish the incentives at work
here from those that operate elsewhere in the construction industry.” Id. at 232–33
(internal quotation marks omitted). The Court reiterated its emphasis on the narrow
reach of the state’s conduct and the efficient procurement of services for that single
project, leading it to conclude that the state was acting as a market participant rather than
as a regulator.
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Finally, the Court recently reiterated these principles in a case where several
organizations argued that provisions of a California statute impermissibly regulated
employer speech relating to unions. Chamber of Commerce v. Brown, 554 U.S. 60(2008). The Court agreed, stating that “[i]t is beyond dispute that California enacted
AB 1889 in its capacity as a regulator rather than a market participant.” Id. at 70.
Importantly, the Court described the Boston Harbor standard as follows: “In finding that
the state agency had acted as a market participant, we stressed that the challenged action
was specifically tailored to one particular job, and aimed to ensure an efficient project
that would be completed as quickly and effectively as possible at the lowest cost.” Id.(internal quotation marks omitted). Additionally, it emphasized that the stated purpose
of a statute does not govern the analysis. To that end, the Court rejected “the neutral
statement of policy” set forth in the preamble and instead relied on the substance of the
statute and its effects. Id. at 63. The Court stated that “[i]n NLRA pre-emption cases,
judicial concern has necessarily focused on the nature of the activities which the States
have sought to regulate, rather than on the method of regulation adopted.” Id. at 69(internal quotation marks omitted).
Additionally, the vast majority of our sister circuits to have addressed NLRA
preemption have chosen to follow this framework. One of the first circuits to examine
this issue in light of the Supreme Court’s ruling in Boston Harbor was the D.C. Circuit.
In Chamber of Commerce v. Reich, 74 F.3d 1322 (D.C. Cir. 1996), the D.C. Circuit
struck down an executive order “barring the federal government from contracting with
employers who hire permanent replacements during a lawful strike.” Id. at 1324. The
D.C. Circuit distinguished this case from Boston Harbor on several grounds. First, the
D.C. Circuit explained that “[i]t does not seem to us possible to deny that the President’s
Executive Order seeks to set a broad policy governing the behavior of thousands of
American companies and affecting millions of American workers.” Id. at 1337. In fact,
the court hypothesized that in Boston Harbor, “[s]urely, the result would have been
entirely different, given the Court’s reasoning, if Massachusetts had passed a general law
or the Governor had issued an Executive Order requiring all construction contractors
doing business with the state to enter into collective bargaining agreements . . .
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 20
containing [PLAs].” Id. Given the breadth of the policy set forth in this case, the court
reasoned, the executive order “cannot be equated to the ad hoc contracting decision
made by MWRA in seeking to clean up Boston Harbor.” Id.Second, the court described the unique role the NLRA plays in situations where
a government entity attempts to regulate labor relations: “labor relations policy is
different because of the NLRA and its broad field of pre-emption. No state or federal
official or government entity can alter the delicate balance of bargaining and economic
power that the NLRA establishes, whatever his or its purpose may be.” Id. Applying
that standard to the case at hand, the D.C. Circuit noted that because “the premise of the
Executive Order is the proposition that the permanent replacement of strikers unduly
prolongs and widens strikes and disrupts the proper ‘balance’ between employers and
employees[,] . . . [w]hatever one’s views on the issue, it surely goes to the heart of
United States labor relations policy.” Id.In 2002, however, the D.C. Circuit employed a different analysis in Building &
Construction Trades Department, AFL-CIO v. Allbaugh, 295 F.3d 28 (D.C. Cir. 2002),
a case examining an executive order “provid[ing] that, to the extent permitted by law,
no federal agency, and no entity that receives federal assistance for a construction
project, may either require bidders or contractors to enter, or prohibit them from
entering, into a [PLA].” Id. at 29. Because the language in the executive order mirrors
the language of the amended Act, the majority adopts Allbaugh’s logic wholesale. Upon
review of the Supreme Court precedent in this area, however, I must agree with the
district court’s assessment that Allbaugh misconstrues critical aspects of Gould, Boston
Harbor, and Brown and runs contrary to the great weight of authority on NLRA
preemption.
The Allbaugh court concluded that the executive order at issue was proprietary
in nature, explaining that “[b]ecause the Executive Order does not address the use of
PLAs on projects unrelated to those in which the Government has a proprietary interest,
the Executive Order establishes no condition that can be characterized as ‘regulatory.’”
Id. at 36. As pointed out by the district court, however, Allbaugh relies heavily on a
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 21
proposition from Boston Harbor that was taken wholly out of context. Specifically,
Allbaugh states that “[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 (quoting Boston
Harbor, 507 U.S. 228–29) (alterations in original). In fact, Boston Harbor states as
follows:
Respondents quote the following passage from Gould, arguing
that it stands for the proposition that the State as proprietor is subject to
the same pre-emption limitations as the State as regulator[.]
...
The above passage does not bear the weight that respondents
would have it support. The conduct at issue in Gould was a state
agency’s attempt to compel conformity with the NLRA. Because the
statute at issue in Gould 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, we concluded: Wisconsin simply is not functioning as a
private purchaser of services, and therefore, for all practical purposes,
Wisconsin’s debarment scheme is tantamount to regulation. We
emphasized that we were not saying that state purchasing decisions may
never be influenced by labor considerations.
Boston Harbor, 507 U.S. at 228–29 (internal quotation marks, citations, and alterations
omitted).
The discrepancy between these two passages makes clear that it was inaccurate
to characterize Boston Harbor as holding that the only relevant consideration is whether
the conduct at issue is unrelated to the performance of contractual obligations. As an
initial matter, this passage is not the holding of Boston Harbor, rather, it merely acts to
rebut the respondent’s argument that a state is subject to preemption limitations even
when it is acting in a proprietary capacity. Moreover, as shown above, the Boston
Harbor Court relied on at least two other factors in reaching its decision—the scope of
the action and whether it reflected the state’s interest in efficiently procuring goods and
services. That these factors are the critical import of Boston Harbor is further supported
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by the fact that the Brown Court’s description of the Boston Harbor standard includes
these two factors rather than the factor relied on by the Allbaugh court. Whether the
conduct at issue is unrelated to the performance of contractual obligations is simply not
the only relevant factor at issue. In fact, it is not even a central one.
Another concern that I have with the majority opinion is the fact that it adopted
the Allbaugh court’s statement “that there simply is no logical justification for holding
that if an executive order establishes a consistent practice regarding the use of PLAs, it
is regulatory even though the only decisions governed by the executive order are those
that the federal government makes as a market participant.” 295 F.3d at 35 (internal
quotation marks and alteration omitted). As an initial matter, this statement ignores the
detailed descriptions given by the Supreme Court distinguishing regulatory and
proprietary conduct. For example, it completely ignores the fact that breadth is one of
the two most important considerations to take into account when making this
determination.
More importantly, I cannot agree with this assertion because it directly
contradicts a principle well established by the Supreme Court: states must abide by
different standards than private actors in areas governed by the NLRA. In Gould, the
Court reminded us that “[w]hat the Commerce Clause would permit States to do in the
absence of the NLRA is thus an entirely different question from what States may do with
the Act in place.” 475 U.S. at 290. The NLRA “treats state action differently from
private action not merely because they frequently take different forms, but also because
in our system States simply are different from private parties and have a different role
to play.” Id. For example, while private actors may “regulate” by adopting a broad
policy based wholly on principle, “States have a qualitatively different role to play from
private parties.” Boston Harbor, 507 U.S. at 229. When a state acts based on principle,
“it performs a role that is characteristically a governmental rather than a private role.”
Id. I thus cannot agree with the majority that there is no distinction between actions
taken by a government entity and a private proprietor in this area. Maj. Op. at 8 (“But
private proprietors can and do act on an across-the-board basis without somehow
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becoming regulators.”). That a private proprietor can act in a way tantamount to
regulation where a government entity cannot is a fundamental principle upon which the
Supreme Court relies time and again. I would reject the Allbaugh court’s analysis and
instead rely on the NLRA preemption principles asserted by the Supreme Court.
Moreover, other courts have examined language virtually identical to that at issue
in Allbaugh and have reached the opposite result. For example, the Ohio Supreme Court
considered a statute with provisions similar to those at issue in Allbaugh and concluded
that it was regulatory in nature. Ohio State Bldg. & Constr. Trades Council v. Cuyahoga
Cnty. Bd. of Comm’rs, 781 N.E.2d 951, 953, 970 (Ohio 2002). In its opinion, the court
explained that the legislation at issue “is a blanket, across-the-board prohibition that
precludes any sort of ad hoc determination as to the benefits or advantages of utilizing
a PLA on a particular project. It is therefore ‘“tantamount to regulation” or
policymaking.’” Id. at 969–70 (quoting Boston Harbor, 507 U.S. at 229).
In reaching this conclusion, the Ohio Supreme Court interpreted Boston Harbor
to “suggest[] that a state would be acting as a regulator or policymaker, rather than as
a purchaser, proprietor, or market participant, were it to impose an across-the-board rule
that either requires or prohibits the use of PLAs on all public construction projects.” Id.
at 966. Furthermore, the court expressly rejected the logic of Allbaugh, explaining that
its “reasoning, we believe, places the proverbial cart before the horse. These courts
assume that a state acts as a market participant by doing what a private actor may do
under the NLRA.” Id. at 968–69. “But the gist of Boston Harbor is that a state may act
as a private contractor would act when it acts as a market participant. Otherwise, the
state would be permitted to regulate within a protected zone because a private actor may
do so.” Id. at 968–69. I cannot agree with the majority’s decision here to ignore these
weaknesses of the Allbaugh analysis, especially in light of the clear Supreme Court
precedent pointing out the problems with undertaking such an analysis.
Finally, it is important to recognize that we have adopted previously a test set
forth by the Fifth Circuit in Cardinal Towing & Auto Repair, Inc. v. City of Bedford,
180 F.3d 686 (5th Cir. 1999). Petrey v. City of Toledo, 246 F.3d 548 (6th Cir. 2001),
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 24
abrogated on other grounds by City of Columbus v. Ours Garage & Wrecker Serv., Inc.,
536 U.S. 424 (2002). In addition to my belief that we should employ this standard
because it is correct, I must also note that we must adhere to this standard because it was
adopted in a published decision of this court. The majority’s refusal to recognize this
fact does not make it any less relevant.
In Cardinal Towing, the Fifth Circuit summarized the controlling precedent as
follows, which I believe to be accurate: “The Supreme Court has found that when a state
or municipality acts as a participant in the market and does so in a narrow and focused
manner consistent with the behavior of other market participants, such action does not
constitute regulation subject to preemption.” 180 F.3d at 691. “When, however, a state
attempts to use its spending power in a manner tantamount to regulation, such behavior
is still subject to preemption.” Id. (internal quotation marks omitted). The Fifth Circuit
thus developed the following test for discerning whether a state’s conduct is proprietary:
First, does the challenged action essentially reflect the entity’s own
interest in its efficient procurement of needed goods and services, as
measured by comparison with the typical behavior of private parties in
similar circumstances? Second, does the narrow scope of the challenged
action defeat an inference that its primary goal was to encourage a
general policy rather than address a specific proprietary problem?
Id. at 693. Unlike the standard employed in Allbaugh, this test incorporates all of the
relevant considerations noted in Boston Harbor and Brown. Recognizing this fact, the
Second and Ninth Circuits have also adopted the Fifth Circuit test. See Johnson v.
Rancho Santiago Cmty. College Dist., 623 F.3d 1011, 1023 (9th Cir. 2010); Healthcare
Ass’n of New York State, Inc. v. Pataki, 471 F.3d 87, 109 (2d Cir. 2006).
The Third Circuit has similarly created a two-part test that focuses on these
principles: “First, does the challenged funding condition serve to advance or preserve
the state’s proprietary interest in a project or transaction, as an investor, owner, or
financier? Second, is the scope of the funding condition ‘specifically tailored’ to the
proprietary interest?” Hotel Emps. & Rest. Emps. Union, Local 57 v. Sage Hospitality
Res., LLC, 390 F.3d 206, 216 (3d Cir. 2004). The Third Circuit reached this standard
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 25
after engaging in a detailed analysis of the difference between regulatory and proprietary
conduct, explaining that “[t]he pivotal difference [between Gould and Boston Harbor]
is that in the former case the state deployed its spending authority to achieve a goal far
broader than merely protecting or fostering its own investment or proprietary interest,
while in the latter instance the public agency limited its spending conditions to the
protection of its investment or proprietary interest.” Id. at 214. Notably, the Third
Circuit’s standard references only a “proprietary interest in a project or transaction.” Id.
at 216 (emphasis added). By its own terms, then, it would not define as proprietary an
action affecting all projects controlled by any governmental unit.
Additionally, although it did not adopt a two-part test, the Seventh Circuit has
articulated a standard similar to that of the Second, Third, Fifth, and Ninth Circuits—one
that focuses on the scope of the action. N. Ill. Chapter of Associated Builders &
Contractors, Inc. v. Lavin, 431 F.3d 1004 (7th Cir. 2005). In Lavin, the Seventh Circuit
held that “[b]ecause Illinois has limited its condition to the project financed by the
subsidy, it has not engaged in ‘regulation’ under the approach of Boston Harbor or
Gould, and its conditions are not preempted by federal labor law.” Id. at 1007; see also
Colfax Corp. v. Ill. State Toll Highway Auth., 79 F.3d 631, 634 (7th Cir. 1996)
(concluding that the state action at issue was proprietary because the state had not
enacted a statute or passed a general rule).
Also significant is UAW-Labor Employment & Training Corp. v. Chao, 325 F.3d
360 (D.C. Cir. 2003). When given the opportunity to address this issue for a third time,
the D.C. Circuit opted to revert to the principles it asserted in Reich. Reviewing an
executive order that applied “to all government contracts involving more than
$100,000,” the court stated that “[a] clause is likely to be found regulatory where it
apparently seeks to set a broad policy.” Id. at 362–63 (internal quotation marks
omitted). Citing Reich, the court concluded that the action was regulatory: “But as the
order operates on government procurement across the board, rather than being tailored
to any particular setting, the order is regulatory under prevailing principles.” Id.Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 26
With the exception of Allbaugh, then, courts that have addressed this issue post-
Gould and Boston Harbor, including the Supreme Court, focus on whether the
challenged action reflects an interest in efficiently procuring these goods and services
and on the scope of that action. Against this backdrop, I believe that we should continue
to employ the Fifth Circuit test—considering whether “the challenged action essentially
reflect[s] the entity’s own interest in its efficient procurement of needed goods and
services, as measured by comparison with the typical behavior of private parties in
similar circumstances” and whether “the narrow scope of the challenged action defeat[s]
an inference that its primary goal was to encourage a general policy rather than address
a specific proprietary problem.” Cardinal Towing, 180 F.3d at 693. I also believe that
this standard requires us to construe the amended Act as regulatory.
First, the breadth of the amended Act is undoubtedly expansive. By its own
terms, it applies to all governmental units, which Michigan has defined as “this state, a
county, city, township, village, school district, intermediate school district, community
college, or public university that receives appropriations from this state, or any agency,
board, commission, authority, or instrumentality of the foregoing.” MICH. COMP. LAWS
§ 408.873. Additionally, the amended Act applies without regard to the source of the
project’s funding. In other words, even a school district that is overseeing a privately
funded project is forbidden from entering into a PLA on that project. Moreover, because
PLAs necessarily include every contractor and subcontractor working on the project, all
organizations that would ordinarily seek to enter into a PLA with any of these
governmental units are affected, as the amended Act makes it impossible for them to
enter into a PLA with these governmental units.
The only way in which the majority even attempts to reconcile the breadth of
these provisions with its conclusion that the amended Act is sufficiently narrow to be
considered proprietary is by pointing out actions that the amended Act does not
regulate—in particular, PLAs entered into between private parties. But this approach
evades the critical issue we must resolve in two key respects. First, it misstates the right
at issue in this appeal. Contrary to the majority’s assertions otherwise, the right at issue
Nos. 12-1246/2548 Mich. Bldg. & Constr. Trades Council, et al. v. Snyder Page 27
is not an organization’s ability to enter into a PLA generally. Rather, it is the right to
attempt to convince a governmental entity to enter into a PLA, an action that is wholly
precluded by the plain terms of the amended Act. The significance of the majority’s
misguided analysis on this point cannot be overstated. Imperative to assessing whether
a statute regulates a right is recognizing correctly the right at issue. Relatedly, when the
right at issue is wholly precluded by the action at issue, it is hard to understand how the
action can be construed as narrow with respect to its effect on the right.
Second, in assessing the breadth of an act, it is critical to consider what that act
actually does. Instead of taking this approach, however, the majority chooses to
articulate only that which the amended Act does not do. This cannot be a persuasive
approach. If it were, then every state action could be construed as narrow, as no statute
exists that covers all actions taken by every actor. An analysis of that which the
amended Act does not cover should not supplant an analysis of that which the amended
Act does cover.
It is also important to note that with the exception of Allbaugh, the amended Act
is dissimilar from those actions that have been upheld in previous cases, as it constitutes
an across-the-board policy with no temporal or project-based limits. For example, in
Boston Harbor, the Supreme Court upheld the state action because it “was specifically
tailored to one particular job,” a point that it later reiterated in Brown. Boston Harbor,
507 U.S. at 232. Likewise, in Lavin, the Seventh Circuit found a state action proprietary
where it “limited its condition to the project financed by the subsidy.” 431 F.3d at 1007;
see also Sage Hospitality Res., 390 F.3d at 217–18 (upholding a requirement where it
was “limited to hotels and hospitality projects receiving TIF funds”). Here, the amended
Act affects all projects developed by every governmental unit in the state. It has no
provision limiting its applicability to a geographic region or type of project, let alone one
that would restrict it to a single project. In Rancho Santiago, the Ninth Circuit similarly
focused on the scope of the action when it upheld a PLA on the basis that it was limited
to a three-to-five-year period for all projects carried out in a college district. 623 F.3d
at 1028–29. Here, there is no such temporal limitation.
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Furthermore, the actions that have been struck down by courts are strikingly
similar to the amended Act. For example, in Reich the D.C. Circuit struck down an
executive order on the basis that it was not limited to an “ad hoc contracting decision”
as was the case in Boston Harbor. 74 F.3d at 1337. Rather, the court explained, it was
clear that the executive order “seeks to set a broad policy governing the behavior of
thousands of American companies and affecting millions of American workers.” Id.The Ohio Supreme Court also struck down a statute based on its breadth, as the statute
was “a blanket, across-the-board prohibition that precludes any sort of ad hoc
determination as to the benefits or advantages of utilizing a PLA on a particular project.”
Ohio State Bldg. & Constr. Trades Council, 781 N.E.2d at 969–70. Here, the amended
Act similarly precludes all governmental units from making any ad hoc determinations
relating to the benefits of using a PLA on a particular project. In sum, the amended Act
is most similar to those governmental actions that have been struck down by courts and
is dissimilar from those that courts have upheld.
With respect to the efficient-procurement factor, I am most concerned by the
majority’s assertion that because “the government unquestionably is the proprietor of its
own funds, . . . when it acts to ensure the most effective use of those funds, it is acting
in a proprietary capacity.” Maj. Op. at 11–12 (internal quotation marks omitted). This
cannot be true. If it were, then two critical principles articulated by the Supreme Court
would effectively be rendered null: (1) the express instruction to consider the breadth
of the action as a factor in this analysis and (2) the tenet that broad actions taken by a
state actor are tantamount to regulation even where a private actor would be allowed to
act. As articulated in greater detail above, in areas governed by the NLRA the Supreme
Court has made clear that while private actors may “regulate” by adopting a policy based
wholly on principle, “States have a qualitatively different role to play from private
parties.” Boston Harbor, 507 U.S. at 229. The majority, however, does not even
mention this limitation.
Furthermore, I cannot agree with the majority’s conclusion that the statute
reflects a mere interest in efficient procurement of goods and services rather than an
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attempt to affect labor policy. Notably, the only sources the majority cites in support of
this contention are those that the Supreme Court has expressly discouraged, including
the amended Act’s statement of intent, its legislative history, and whether it is ultimately
effective. As explained above, however, the Supreme Court has instructed us to focus
on what the state action does as opposed to how it is described. And here, the state
action at issue forecloses all governmental units from entering into a specific kind of
collective bargaining agreement. This is not a neutral action based in efficiency. It is
an attempt to affect labor policy.
Likewise, the majority is incorrect to cite the effectiveness of the amended Act
as a reason supporting its determination that it is proprietary. See, e.g., Rancho
Santiago, 623 F.3d at 1025 (“[W]hether the [action’s] benefits outweighed its costs . . .
bears only on whether the [entity] made a good business decision.”). The majority offers
no authority to the contrary explaining why these sources should be considered. To the
extent the majority relies on these sources, its analysis should be discounted. I would
therefore agree with the district court that the amended act does not reflect an interest
in the efficient procurement of goods and services.
B. Garmon and Machinists Preemption
Because I would hold that amended Act was regulatory rather than proprietary,
I will briefly address whether it is preempted by the NLRA. “Although the NLRA itself
contains no express pre-emption provision, [the Supreme Court has] held that Congress
implicitly mandated two types of pre-emption as necessary to implement federal labor
policy.” Brown, 554 U.S. at 65. “The first, known as Garmon pre-emption, is intended
to preclude state interference with the National Labor Relations Board’s interpretation
and active enforcement of the integrated scheme of regulation established by the
NLRA.” Id. (internal quotation marks and citation omitted). “To this end, Garmon
pre-emption forbids States to regulate activity that the NLRA protects, prohibits, or
arguably protects or prohibits.” Id. (internal quotation marks omitted). “The second,
known as Machinists pre-emption, forbids . . . States to regulate conduct that Congress
intended be unregulated.” Id. (internal quotation marks omitted). “Machinists
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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.” Id. (internal quotation marks omitted).
The first step in these preemption analyses is to determine whether the district
court was correct in concluding that the NLRA protects a trade association’s right to
attempt to convince a public entity to enter into a PLA and that the amended Act
interferes with this right. Snyder argues that the district court’s conclusion that this right
is protected was unsupported by any legal authority. The district court’s conclusion that
the right to convince the state to enter into a PLA is a concerted activity protected under
Section 7 of the NLRA, however, is supported by the text of Sections 7 and 8 of the
NLRA, as well as Supreme Court precedent.
Section 7 of the NLRA provides that “[e]mployees shall have the right to
self-organization, to form, join, or assist labor organizations, 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. The Supreme Court has recognized that this is a broad provision,
explaining that “labor’s cause often is advanced on fronts other than collective
bargaining and grievance settlement within the immediate employment context.”
Eastex, Inc. v. NLRB, 437 U.S. 556, 565 (1978). With respect to Section 8, the Supreme
Court has established two significant principles. First, it asserted that “Section 8(f)
explicitly permits employers in the construction industry—but no other employers—to
enter into prehire agreements [(PLAs)].” Boston Harbor, 507 U.S. at 230. Second, the
Court explained that “[p]rehire agreements are collective-bargaining agreements
providing for union recognition, compulsory union dues or equivalents, and mandatory
use of union hiring halls, prior to the hiring of any employees.” Id.In light of this authority, Snyder’s argument that an employee’s right to convince
the state to enter into a PLA, a type of agreement authorized by Section 8(f) and deemed
a collective bargaining agreement by the Supreme Court, is not protected under the
Section 7 right “to bargain collectively through representatives of their own choosing,
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and to engage in other concerted activities for the purpose of collective bargaining or
other mutual aid or protection” is unpersuasive. 29 U.S.C. § 157. Moreover, it seems
evident that a statute forbidding a governmental unit from entering into a PLA interferes
with the right to convince the state to enter into a PLA. The majority’s attempt to dodge
this issue by focusing on the fact that contractors can enter into a PLA with one another
is unpersuasive, as it says nothing about the right to convince the state to enter into a
PLA. I would thus hold that the district court was correct to recognize this as a right
protected by the NLRA and as one with which the amended Act interferes.
Upon determining that the right is protected and that the state action interferes
with the right, the next step is to apply the Garmon and Machinists doctrines. The
district court concluded that both Garmon and Machinists preemption apply to the Acts.
Because the right to attempt to convince governmental units to enter into a PLA is
protected under Section 7 of the NLRA, there seems to be no doubt that Garmon
preemption would apply, as Garmon preemption prohibits state or local regulation of
activities protected under Section 7 of the NLRA. Garmon, 359 U.S. at 244.
Likewise, Machinists preemption, which prohibits state and local regulation of
areas meant to be left unregulated, applies to the amended Act. Under this doctrine,
however, the focus is whether the state regulation upsets the balance of power between
management and employees that Congress established in the NLRA. Boston Harbor,
507 U.S. at 226. At issue here, then, is Section 8 of the NLRA—specifically, whether
the amended Act upsets the balance Congress created by expressly allowing for PLAs
in the construction industry. It seems obvious that a regulation prohibiting a type of
collective bargaining agreement that the NLRA allows would upset the balance of power
established by Congress in the NLRA. I would agree with the district court’s conclusion
that the trade councils are likely to succeed on the merits of their claims under both
Garmon and Machinists preemption.
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III. CONCLUSION
For the reasons stated, I would affirm the district court’s preliminary injunction
against the enforcement of the amended Act. I respectfully dissent.