Apex Hosiery Co. v. Leader

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Apex Hosiery Co. v. Leader

United States 1940

Synopsis

In Apex Hosiery Co. v. Leader, the U.S. Supreme Court ruled that a labor strike carried out to further the interests of the union conducting it, even if the effect of the strike is to reduce the amount of goods in interstate commerce, is not a violation of the Sherman Antitrust Act. The Apex decision was significant because it nullified earlier decisions that had preserved the Sherman Act as a tool against organized labor and because it in effect ratified the Norris-La Guardia Federal Anti-Injunction Act of 1932.

Timeline

1919: With the Third International (Comintern), the Bolshevik government of Russia establishes its control over communist movements worldwide.
1924: In the United States, secretary of the interior Albert B. Fall, along with oil company executives Harry Sinclair and Edward L. Doheny, is charged with conspiracy and bribery in making fraudulent leases of U.S. Navy oil reserves at Teapot Dome, Wyoming. The resulting Teapot Dome scandal clouds the administration of President Warren G. Harding.
1929: The Lateran Treaty between the Catholic Church and Mussolini's regime establishes the Vatican City as an independent political entity.
1935: Germany annexes the Saar region after a plebiscite. In defiance of Versailles, the Nazis reintroduce compulsory military service. The Allies do nothing, and many Western intellectuals maintain that it is only proper for Germany to retake its own territory and begin building up its army again.
1940: Hitler's troops sweep through Western Europe, annexing Norway and Denmark in April, and in May the Low Countries and France. At the same time, Stalin—who in this year arranges the murder of Trotsky in Mexico—takes advantage of the situation to add the Baltic republics (Latvia, Lithuania, and Estonia) to the Soviet empire, where they will remain for more than half a century.
1940: Winston Churchill succeeds Neville Chamberlain as British prime minister in May. A month later, he tells Parliament, "We shall not flag or fail. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills. We shall never surrender." In November, German bombers begin air strikes against Britain.
1940: NBC makes the first official network television broadcast.
1945: At the Yalta Conference in February, Roosevelt, Churchill, and Stalin make plans for Germany after its by now inevitable surrender.
1950: North Korean troops pour into South Korea, starting the Korean War. Initially the communists make impressive gains, but in September, the U.S. Marines land at Inchon and liberate Seoul. China responds by sending in its troops.
1955: African and Asian nations meet at the Bandung Conference in Indonesia, inaugurating the "non-aligned" movement of Third World countries.

Event and Its Context

The Sherman Antitrust Act and Organized Labor

The roots of Apex Hosiery Co. v. Leader extended back exactly half a century, to the passage of the Sherman Antitrust Act of 1890. The chief purpose of the Sherman Act was to curb the monopolistic practices of big business, but an unintended side effect of the act was that it became a tool that employers could wield against organized labor. Employers repeatedly argued in court that certain union activities, in particular the secondary boycott, violated the Sherman Act because they restrained interstate commerce. The courts agreed. In a series of landmark cases, including Danbury Hatters (1908), Gompers v. Bucks Stove & Range Co. (1911), Duplex Printing Press Company v. Deering (1921), the Coronado Coal Company cases (1922 and 1925), and Bedford Cut Stone Company v. Journeymen Stone Cutters Association (1927), the Supreme Court applied the Sherman Act and, later, the Clayton Antitrust Act of 1914 against unions—although it did not always do a very effective job of applying them against monopolistic business practices.

One of these cases, United Mine Workers v. Coronado Coal Company (1922), would later be of particular relevance to the Apex decision. The owners of the Coronado coal mine, facing stiff competition from nonunion mining companies, attempted to close down the mine and reopen it on a nonunion basis despite the fact that the United Mine Workers had a contract with the company. Operation of the mine came to a halt when the workers struck, occupied the mine, and did considerable damage to it; several nonunion workers were murdered. The company brought suit, charging that the union had violated the Sherman Act. The U.S. Supreme Court initially ruled against the company, reasoning that coal mining in and of itself was not interstate commerce and that therefore the Sherman Act did not apply. In reaching its decision, however, the Court provided Coronado management with a claim in a subsequent suit by stating that the union's actions would have fallen under the Sherman Act if the company had shown that the union intended to monopolize or restrain interstate commerce by eliminating the marketing of nonunion coal.

Accordingly, the company refiled its suit, and when the case reappeared before the Supreme Court in 1925 (as Coronado Coal Company v. United Mine Workers), the company argued that the purpose of the strike was to prevent "scab-dug coal"—that is, nonunion coal—from reaching the market. On this basis the Court ruled in favor of the company, agreeing that the union's activities restrained trade under the Sherman Act. The effect of the second Coronado case was to dampen the efforts of the United Mine Workers to organize nonunion mines and, more significantly, to call into question the legality of any strike.

The Norris-La Guardia Act of 1932

One widely used tactic management employed against labor unions during these years was the injunction. Section 20 of the Clayton Act had attempted to prevent the federal courts from enjoining labor union activities, but the courts interpreted the act so narrowly as to render it impotent. Indeed, the courts continued to enjoin union activities so frequently that some states, including Arizona, passed anti-injunction statutes designed to keep the courts out of labor disputes. In Truax v. Corrigan (1921), however, the U.S. Supreme Court held that the Arizona statute unconstitutionally deprived employers of property rights in their business without equal protection and due process. Congress, though, was recognizing increasingly the value of effective collective bargaining in modern society. After nearly five years of discussion and debate, Congress passed the Norris-La Guardia Federal Anti-Injunction Act in 1932 to reduce the influence of the courts in labor disputes. The act denied the courts the right to enjoin peaceful picketing, regardless of the purpose of the strike, and it carefully drew up procedures regulating when and under what conditions a court could issue an injunction against a union in a labor dispute.

Although Norris-La Guardia was a victory for organized labor, many observers remained skeptical, fearing that the act would meet with the same fate in the courts as had the Clayton Act. Their fears proved unfounded. In Milk Wagon DriversUnion v. Lake Valley Farm Products (1940) and United States v. Hutcheson (1941), the Supreme Court affirmed the right of labor to engage in activities intended to affect the outcome of the collective bargaining process, including strikes, picketing, and secondary boycotts. It was in this context that the Apex case appeared on the Court's docket in 1940.

The Nullification of Coronado

The last obstacle for labor was the precedent set in the Coronado case of 1922 and 1925, particularly as the facts of the Apex case were remarkably similar to those of the earlier case. The Apex Hosiery Company was a nonunion shop that produced about $5 million worth of hosiery each year with 80 percent of it shipped in interstate commerce. Of the company's 2,500 workers, only eight were members of the hosiery workers' union. In early 1937 the union pressed the company to recognize it as the bargaining agent for the company's workers and to employ only union members. The company refused, so in May of that year union members, along with members of the hosiery union who worked at other plants in the Philadelphia area, gathered at the Apex plant to renew their demands. When the company again refused, union officials ordered a sit-down strike. The workers seized the plant, wrecked machinery, and prevented the shipment of 130,000 dozen pairs of hosiery valued at about $800,000, despite three requests from the company that it be allowed to retrieve the goods and ship them to fill orders. The strikers held the plant until an injunction issued by the Third Circuit Court of Appeals forced them out on 23 July.

The company filed suit in district court, and under the provisions of the Sherman Act, the court awarded it treble damages in the amount of $711,932.55. In the days and weeks that followed, other companies, smelling blood, filed similar suits. Three northeastern trucking companies filed suit against the Teamsters union, asking for damages as a result of a strike; the Republic Steel Corporation sued the CIO, asking for $7.5 million in damages as a result of a 1937 strike. The outcome of these and other cases would depend principally on the outcome of the Apex case, which was argued on 1-2 April 1940 and decided on 27 May. The question on the minds of both the legal and the labor communities was whether the Court would reaffirm its decision in the Coronado cases and hold that the strike, because it restrained interstate commerce, violated the Sherman Antitrust Act.

It is important to note that the validity of the union's demands was not at issue, nor was the lawfulness of the strike. Indeed, the Court deplored the defendants' "lawless invasion of petitioner's plant and destruction of its property by force and violence of the most brutal and wanton character." If the company had wanted simply to seek indemnification for damage to the plant, which was unable to resume even partial operation until 19 August 1937, it could have done so in state court, for the union and its members clearly had violated state civil and criminal laws. The Supreme Court, however, had no authority to enforce state laws. The sole issue the Court was called upon to decide was whether the union had violated antitrust law.

In his majority opinion, Justice Harlan Fiske Stone dismissed the company's suit and held that the union's actions were not a restraint of trade within the meaning of the Sherman Act. Stone reasoned that the very purpose of a labor union was to eliminate nonunion competition: "an elimination of price competition based on differences in labor standards is the objective of any national labor organization. But this effect on competition has not been considered to be the kind of curtailment of price competition prohibited by the Sherman Act." Further, one purpose of any strike is to reduce the amount of goods in circulation; striking and stopping production are the same thing. A union strikes not to conspire to restrain interstate commerce but to win a labor dispute with an employer. If a strike were declared unlawful simply because it diminished the amount of goods in interstate commerce, the Sherman Act would undermine the legality of "practically every strike in modern industry," according to Stone and the Court.

The Court's decision was not unanimous. Chief Justice Charles Hughes wrote a lengthy dissent, with Justices James McReynolds and Owen Roberts joining him. Hughes's dissent turned on the union's refusal to grant the company permission to enter the plant to retrieve already finished goods to fulfill existing orders. This was not merely a stoppage of production; it was, in Hughes's words, a "direct and intentional prevention of interstate commerce in the furtherance of an illegal conspiracy."

The Court in Apex did not specifically overrule its decision in the second Coronado case. Further, it reaffirmed that labor unions were still governed by antitrust law, although later Courts held this to be true only in cases in which labor unions joined with employers to promote a monopoly. Thus, for example, it remains illegal for a contractor to conspire with a labor union to boycott nonunion subcontractors that the union wishes to organize. Nonetheless, in its 1940-1941 term, the Supreme Court finally joined with Congress in getting the judiciary's hands off of labor disputes. From that point on, secondary boycotts became an effective tool in the hands of labor, and the courts no longer used antitrust law to halt union organizing efforts or to threaten the legality of strikes.

Key Players

Hughes, Charles Evans (1862-1948): Born in Glens Falls, New York, Hughes served as governor of New York from 1907 to 1910, when he was nominated to the Supreme Court by President William Taft. He left the Court in 1916 to run for president, narrowly losing against Woodrow Wilson. From 1921 to 1925 he was secretary of state under presidents Warren Harding and Calvin Coolidge. From 1928 to 1930 he served as a World Court judge, until Coolidge appointed him chief justice of the Supreme Court (1930-1941).

Stone, Harlan Fiske (1872-1946): Stone was born in Chesterfield, New Hampshire. After a long career at the Columbia University law school (1898-1924; dean after 1910), he served briefly as U.S. attorney general before President Calvin Coolidge appointed him to the Supreme Court in 1924. In 1941 President Franklin Roosevelt appointed Stone chief justice, and he served in this capacity until his death.