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Philadelphia Record Co. v. Manufacturing Photo-Engravers Association of Philadelphia

May 17, 1946


Author: Mclaughlin

Before BIGGS, GOODRICH, and MCLAUGHLIN, Circuit Judges.

By MCLAUGHLIN, Circuit Judge: Plaintiff, a Pennsylvania corporation, is engaged in publishing a morning newspaper in Philadelphia. It brought suit in the District Court under the Declaratory Judgments Act*fn1 asking that the alleged activities of the defendants by declared to be in violation of the Sherman Anti-Trust Law*fn2 and for a preliminary and final injunction. Defendants are the Manufacturing Photo-Engravers Association of Philadelphia, a corporation, the eighteen companies of which are members thereof, Philadelphia Photo-Engravers' Union No. 7, I.P.E.U. of N.A. and the president and general manager of the latter.

From the facts found by the Trial Court it appears that since 1929 plaintiff has been engaged in the commercial photo-engraving business. At the time of the hearing before the District Court plaintiff's gross from this source amounted to about $100,000 a year with approximately 25% of the business in interstate commerce. Plaintiff employs twenty-seven photo-engravers, all members of the defendant union.Twenty-two of these work at night and the remaining four in the daytime. It is necessary to have twenty-two men on the night shift to properly take care of the newspaper's emergency requirements. During slack periods the men do commercial photo-engraving which is chiefly produced at night. Because of the local labor situation in the particular trade there are no extra photo-engravers available for plaintiff during the day. The defendant association is comprised entirely of competitors of the plaintiff in commercial photo-engraving. These were designated by the president of the union testifying in the plaintiff's case as "... the manufacturing commercial employers of Philadelphia ..."

The plaintiff and the union have a contract covering plaintiff's daytime commercial photo-engraving. They have no contract as to the night commercial work. The association and the union for many years had a contract covering their general relationship which included a supplemental agreement providing that "future night forces shall be prohibited unless by consent of both parties to this agreement." The latest supplemental agreement expired February 28, 1945. The parties, however, continued to act in accordance with it and the failure to renew it did not alter their relationship in connection therewith. One of the members of the association, Peerless Engraving Co., is a partnership with one of that firm also the current president of the association. That company is permitted to do night commercial photo-engraving with the approval of the union and the association. The same company does the photo-engraving for another Philadelphia newspaper.

In 1944 plaintiff asked the association and the union to negotiate a night commercial contract with it. On September 6, 1944 there was a meeting in the office of the plaintiff. Those present were the business manager of the union, the then president of the association, its secretary and attorney and representatives of the plaintiff. The purpose of the meeting was to find a solution which would permit the union to negotiate the desired contract. The association's representatives objected to the proposed negotiations on the ground that plaintiff was charging lower prices which the association's representatives declared was unfair competition and on the ground that there was insufficient work for members of the association. On September 14, 1944 the association adopted the following resolution, a copy of which was sent to the union:

"Resolved: That the Association insist upon compliance of the Supplemental Agreement dated February 2, 1937 made and executed by the Photo-Engravers' Union No. 7 of Philadelphia and Manufacturing Photo-Engravers' Association of Philadelphia, and continued by supplemental agreement each year, which agreement is now in full force and effect."

On July 30, 1945 a strike vote was taken among plaintiff's photo-engravers under the provisions of the Smith-Connolly Act*fn3 to determine whether they should stop doing commercial work at night. The employees rejected the strike proposal. On September 24, 1945 in compliance with the order of the union, plaintiff's photo-engraving employees stopped night commercial work for the plaintiff. This was not due to any grievance or dispute between the union and the plaintiff as to labor or working conditions.

The District Court held "... the evidence sustains a finding that the union combined with, or aided and abetted the defendant association, at least to prevent the Record from producing the commercial photo-engraving products at night." It further held that under the facts this practically prevented plaintiff from engaging in the commercial photo-engraving business.*fn4 The conclusion of law of the Trial Judge on this is:

"3. A combination and agreement exists between defendant union, defendant association, and defendant competitors (1) to enforce the supplementary agreement between defendant union and defendant association, which restricts future night commercial photo-engraving in Philadelphia without the consent of both parties, against the plaintiff; and (2) to compel the plaintiff to cease production of commercial photo-engraving products at night."

The Court held:

"The evidence sustains plaintiff's contention that the effect of the work stoppage, coupled with the status of the local labor supply, reduced the volume of commercial engravings produced and lowered the volume of interstate shipments. These acts of the defendants affected interstate commerce."

The Court then found that the evidence did not show an interference with interstate commerce in violation of the Sherman Act and denied the motion for a temporary infunction saying:

"The evidence adduced as to the present application of the supplemental agreement does not show such restraint upon competition which has 'or is intended to have an effect upon prices in the market or otherwise to deprive purchasers or consumers of the advantages which they derive from free competition ...' 310 U.S. 469, 501. There is no evidence that the association, in concert with the union, is attempting to fix or raise prices. Nor is there any evidence that cessation of night production of photo-engravings by the plaintiff 'had any substantial commercial effect upon either the prices at which the goods ... sold or the supply upon the market.' United States v. Gold, 115 F.2d 236, 237. There is a total lack of evidence showing that the joint action of the union and the association prejudiced the consumers in any way."

The evidence clearly supports the finding of the Trial Court that there was a combination between the union and the association to prevent the plaintiff from producing photo-engraving products at night. This because of local labor conditions known to all the parties shows not only the intent of the defendants to prohibit the plaintiff from engaging in the commercial photo-engraving business but achieves that practical result. The finding that the enforcement of the supplemental agreement between the union and the association was forced by the latter is fully sustained. Mr. Kraft, the president of the union, testified that the association by its resolution "called attention to the union to enforce the contract that we have with them." Again he said: "But it just meant for us that they were calling our attention that we have a commercial agreement with the manufacturing commercial employers in Philadelphia, and it had stipulated paragraphs in there that we were to live up to during an agreement that we had with them." And further: "Because of the resolution, we immediately - I am pretty sure we got in touch with the Philadelphia Record company in trying to negotiate with them to eliminate all commercial work at night." He stated that the resolution of the association was the only reason for the union getting in touch with the plaintiff. At the time there was no labor dispute between the union and the plaintiff. While commercial work was frowned on by the parent body of the union, there was actually a current commercial day contract between the plaintiff and the Philadelphia union. There was also a night commercial contract in existence between the union and Peerless with the latter company admittedly handling newspaper photo-engraving production. The transcript amply justifies the District Judge's finding that the reasons the association pressed the union to prohibit plaintiff's night photo-engraving were that plaintiff was charging lower prices and because there was insufficient work for members of the association. It is obvious from the record, as the District Court ...

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