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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 92-2209

SHEET METAL WORKERS LOCAL UNION
No. 54, AFL-CIO,
Plaintiff-Counter
Defendant-Appellee,
versus
E.F. ETIE SHEET METAL CO.,
Defendant-Counter
Plaintiff-Appellant,
versus
SHEET METAL WORKERS LOCAL
UNION 54, AFL-CIO, ET AL.,
Counter-Defendants-
Appellees.

Appeals from the United States District Court
for the Southern District of Texas

( September 3, 1993 )
Before GARWOOD and HIGGINBOTHAM, Circuit Judges, and SCHWARTZ*,
District Judge
HIGGINBOTHAM, Circuit Judge:
A former member of a multi-employer bargaining association
sues the association and the union it dealt with for antitrust
violations, breach of fiduciary duty, and common law fraud, all
part of an asserted effort to drive the member out of business.
*Senior District Judge of the Eastern District of Louisiana,
sitting by designation.

The district court found that any concerted efforts were labor
activity, freed from the antitrust laws and that the company's
problems were of its own making, enforcing an arbitration award
against it and dismissing its counterclaims. We agree with the
district court, affirming its decisions as to the counterclaims and
upholding in substantial part its enforcement of the arbitration
award.
I.
Several different entities play roles in this case. The Sheet
Metal and Air Conditioning Contractors' National Association,
SMACNA, is a national trade association of employers in the sheet
metal contracting industry. The Houston Sheet Metal Contractors'
Association, HSMCA, is a chapter of SMACNA that engages in
collective bargaining with Local 54 of the Sheet Metal Workers'
International Union, SMWIA, to achieve a single contract between
HSMCA members and the union. HSMCA's Labor Committee, made up of
large and small contractors specializing in various types of sheet
metal work to ensure representation for different contractors,
makes bargaining decisions on behalf of HSMCA members.
Negotiations are often guided by the Standard Form of Union
Agreement, SFUA, a form agreement drafted by the National Joint
Adjustment Board, NJAB. The NJAB is an unincorporated panel of
individuals, half of whom are appointed by SMACNA and the other
half of whom are appointed by SMWIA. The SFUA is recommended as a
pattern labor agreement which the local parties may adopt in whole,
or in part.
2

In 1974, E.F. Etie Sheet Metal Co., a Houston sheet metal
contractor, joined HSMCA and SMACNA and signed a written contract
with HSMCA authorizing it to be Etie's exclusive bargaining agent
with Local 54. HSMCA then negotiated a labor agreement with Local
54 for 1982 through 1985.1
1983 brought a recession to south Texas and an accompanying
infusion of nonunion contractors into the sheet metal business.
Needing relief from the current contract, HSMCA negotiated with
Local 54 for an extension of the labor agreement to March 31, 1986,
in exchange for a reduction in wages and changes in the required
composition of the workforce. Due to a continuing decline in the
construction industry, HSMCA sought further wage reductions from
Local 54 in August of 1984 which the union was unwilling to make.
HSMCA and Local 54 then agreed to an "interest arbitration"
provision allowing the NJAB to arbitrate disputed contract
provisions.2 HSMCA and Local 54 bargained over more competitive
provisions but deadlocked on several issues. They submitted these
1This agreement was a prehire contract, or section 8(f)
contract, which is a special exception for the construction
industry to the general rules governing collective bargaining
agreements. See 29 U.S.C. � 158(f). A construction union and
an employer in the construction industry may enter a contract
without the employees having designated the union as their
bargaining representative. These agreements may require, as a
condition of employment, that employees join the union within
eight days of being hired. Id.
2This provision is designated as Article X, Section 8 of the
SFUA. It requires the negotiating parties to first attempt to
agree on the substantive contract terms, but if they become
"deadlocked," either party may submit the disputed term to NJAB
for arbitration. The decision of NJAB is binding only if it is
reached by unanimous vote of NJAB's members.
3

unresolved issues to the NJAB. The NJAB's decision included a
reduction in wages for certain employees and directed the parties
to execute a new agreement effective October 1, 1984 through March
31, 1986 that would include SFUA's interest arbitration clause.3
On April 11, 1985, Etie terminated its membership in HSMCA and
SMACNA, and gave notice that it "wishes to terminate such Union
Agreement, if any, at the earliest possible date." However, Etie
continued to abide by the terms of their contract through the
contract's March 1986 expiration date. The contract provided that
if no new agreement had been reached by the expiration date, the
contract would continue to bind the parties from year to year.
In March and April of 1986, Etie negotiated directly with
Local 54. In May, after three bargaining sessions, and over Etie's
objections, Local 54 submitted the contractual disputes. NJAB met
on June 24, but Etie did not attend, and on June 27 issued a
unanimous decision ordering Etie to execute an agreement on the
same terms as the contract between Local 54 and HSMCA, except
Etie's contract need not contain the interest arbitration
provision. Etie refused to abide by this decision, and on July 2,
began operating a nonunion shop. On July 14, Local 54 filed this
3The interest arbitration clause was modified by HSMCA and
Local 54 in March of 1985. The clause formerly provided that:
"Should the negotiations for a renewal of this Agreement become
deadlocked in the opinion of the Local Union or of the Local
Contractors' Association, or both, notice to that effect shall be
given to the National Joint Adjustment Board." The words "Local
Union or of the Local Contractors' Association" were changed to
"Union representative(s) or of the employer(s) representatives."
Notice of this change was sent to all HSMCA members on March 28,
1985.
4

suit to enforce NJAB's decision. Etie went out of business in
October.
On March 27, 1987, Etie filed its Second Amended Counter-Claim
claiming that all appellees had violated the Sherman Antitrust Act
by conspiring to fix prices and drive Etie out of business and had
engaged in a continuing fraud; that Local 54 and SMWIA had engaged
in multiple unfair labor practices in violation of the National
Labor Relations Act; and that HSMCA and SMACNA had breached Etie's
1974 written exclusive bargaining agency contract and breached
their fiduciary duty to Etie.
In December, the district court dismissed Etie's antitrust
counterclaim, ruling that it fell within an antitrust exemption.
It also (i) dismissed Etie's breach of fiduciary duty and fraud
claims as preempted by the National Labor Relations Act and barred
by the Texas two year statute of limitations; (ii) granted summary
judgment to HSMCA on Etie's breach of contract claims, finding that
Etie implicitly authorized HSMCA to agree to interest arbitration
before the NJAB; and (iii) denied Etie's summary judgment motion
and granted Local 54's and SMWIA's motion to dismiss on Etie's
unfair labor practices claim, because Etie was arguably bound under
the 1984 contract to the interest arbitration provision.
After disposing of all of Etie's claims, Local 54's original
claim seeking enforcement of NJAB's decision was tried to the
bench. On February 28, 1992, the district court issued its final
judgment and findings of fact and conclusions of law, finding for
5

Local 54 by determining that Etie was bound to the 1984 contract,
and that NJAB had the power to decide the dispute.
II.
We first address Etie's state law claims for fraud, breach of
fiduciary duty, and breach of contract. The district court erred
in dismissing the fraud and breach of fiduciary duty claims as
barred by limitations and preempted by the National Labor Relations
Act. The district court correctly found that HSMCA acted within
authority of its contract with Etie, and we affirm its grant of
summary judgment on the breach of contract claim. The finding that
HSMCA acted within its authority leaves no fact issue on the other
state law claims.
The district court dismissed the claims as barred by a two
year statute of limitations under Coastal Distributing Co. v. NGK
Spark Plug Co., 779 F.2d 1033 (5th Cir. 1986). The Texas Supreme
Court, interpreting the limitations statute at issue in Coastal
Distributing, held that 1979 amendments to the Texas limitation
statutes "make[] all fraud actions consistent, in that they have a
four-year limitation period, regardless of the remedy sought."
Williams v. Khalaf, 802 S.W.2d 651, 658 (Tex. 1990) (construing
Tex. Civ. Prac. & Rem. Code � 16.051 (Vernon 1986)). That four
year limitations period applies to breach of fiduciary duty claims
as well. Spangler v. Jones, 797 S.W.2d 125, 132 (Tex. App.--Austin
1990, writ denied). The four year statute is not a bar since the
earliest act Etie complains of occurred in October 1983 and the
6

second amended counterclaim alleging fraud and breach of fiduciary
duty was filed in March 1987.
The district court also concluded that Etie's claims for fraud
and breach of fiduciary duty involved areas arguably regulated by
section 8 of the National Labor Relations Act as unfair labor
practices and were preempted under San Diego Building Trades
Council v. Garmon, 359 U.S. 236, 245 (1959). The critical inquiry
in examining that conclusion is whether the controversy presented
to the state court is identical to or different from that which
could have been, but was not, presented to the National Labor
Relations Board, NLRB. Sears, Roebuck & Co. v. San Diego County
District Council of Carpenters, 436 U.S. 180, 197-98 (1978). That
inquiry requires not only looking to the factual bases of each
controversy, but also examining the interests protected by each
claim and the relief requested. See Belknap, Inc. v. Hale, 463
U.S. 491, 510-11 (1983); Sears, 436 U.S. at 188-89, 198.
The district court reasoned, and the appellees contend before
us, that the substance of Etie's fraud and breach of fiduciary duty
claims is that HSMCA and Local 54 unlawfully collaborated to drive
Etie out of business. The appellees cite two provisions of the
NLRA as arguably implicated by Etie's allegations.4 The first is
section 8(a)(2) of the NLRA, making it an unfair labor practice for
4Appellees also contend that the entire area of
multiemployer bargaining requires NLRB oversight because of its
complexity and widespread effects. While those interests may
weigh in favor of preemption in some cases, we decline to place
every dispute about the conduct of employers' associations beyond
the reach of state law.
7

an employer to contribute financial or other support to any labor
organization. 29 U.S.C. � 158(a)(2). Appellees contend that
HSMCA's agreement with Local 54 to include the arbitration clause
arguably constituted unfair support. The second provision cited is
section 8(a)(1), which prohibits employers from interfering with,
restraining or coercing employees in the exercise of their right to
refrain from collective bargaining through representatives of their
own choosing. 29 U.S.C. � 158(a)(1). HSMCA, a coalition of
employers, arguably reached an agreement with Local 54 to keep
Etie's employees in the union.
The focus of both allegations differs from the state law
claims. The state law claims focus on the grant of authority Etie
gave to HSMCA in 1974, and ask whether that grant included the
power to agree to interest arbitration. The question under section
8 assumes away that issue. It takes place later in time, once the
HSMCA and Local 54 entered into a binding interest arbitration
agreement, and asks if that agreement violates federal standards.
Both labor law questions presuppose the question of power to enter
the agreement at issue in the state claims.5 An answer to those
questions does not answer the state law questions.
The Supreme Court's decision in Belknap v. Hale lends support
to our position. The Court concluded that hiring replacements for
5Appellees cite Manges v. Guerra, 673 S.W.2d 180, 185 (Tex.
1984), for the proposition that fiduciary duties arise from a
relationship between two parties rather than the contract between
them. This distinction does not matter for purposes of our
preemption inquiry, as the focal point of all state law claims in
this case differs from that of the labor laws with which they
arguably overlap.
8

striking workers raised a question for the NLRB as an arguable NLRA
violation. But the terms of the employment contracts for the
striking workers, and the liability of the company for
misrepresenting those terms, raised distinct state law questions.
463 U.S. at 510. As in this case the labor question assumed the
existence of an obligation under state law. Because the state had
a strong interest in defining the scope of such obligations, the
court found no preemption. See also Windfield v. Groen Div., Dover
Corp., 890 F.2d 764, 770 (5th Cir. 1989) (recognizing that a
"personal guarantee" of employment created obligations for the
employer independent of its obligations under federal labor law).
Local 926, International Union of Operating Engineers v.
Jones, 460 U.S. 669 (1983), illustrates preempted state law claims.
In Jones the Court found that � 8(b)(1) of the NLRA, preempted a
wrongful discharge claim, reasoning that the NLRA and state law
claims shared a "fundamental" element. Both allegations required
a finding that Jones' discharge was "the result of Union
influence." Jones, 460 U.S. at 682. Both federal and state law
presupposed the existence of a valid employment contract and both
focused on the issue of breach. The Court saw that common ground
as raising a sufficiently large risk of inconsistent decisions by
the NLRB and the courts to justify preemption.
Etie survives preemption to fail on the merits, however.
Under Texas agency law a grant of authority to an agent includes
the implied authority to do all things proper, usual, and necessary
to exercise that authority. E.g., Polland & Cook v. Lehmann, 832
9

S.W.2d 729, 738 (Tex. App.--Houston [1st Dist.] 1992, writ denied).
The district court correctly held that Etie implicitly authorized
HSMCA to agree to Article X, section 8.6
Several facts about the relationship support this conclusion.
The NJAB was no stranger to their original bargaining agreement.
Article X, Section 4 of the agreement provides for an appeal to the
NJAB after repeated failures to resolve grievances "arising out of
interpretation or enforcement" of their agreement. Section 5
provides that the NJAB is "empowered to render such decisions and
grant such relief to either party" as it deems "necessary and
proper." Section 6 gives the NJAB the power to cancel the
agreement if one party refuses to comply with an arbitration
agreement, and section 7 provides that "[e]xcept in case of
deadlock, the decision of the National Joint Adjustment Board shall
be final and binding." These provisions belie Etie's claim that
6Etie characterizes the dispute as one about whether HSMCA
could "delegate" its negotiating responsibilities to the NJAB.
This mischaracterizes the relationship between HSMCA, Local 54,
and the NJAB. The Board was a tool used by HSMCA and Local 54 to
resolve their negotiating disputes rather than an independent
party to the negotiations. See Mobile Mechanical Contractors
Ass'n v. Carlough, 664 F.2d 481, 486 (5th Cir. Unit A Dec. 1981),
cert. denied, 456 U.S. 975 (1982) (noting that the NJAB was
formed to resolve disputes between employers and union locals).
Further, the law of implied authority remains the same no matter
the label. Texas agency law allows powers entrusted to an agent
to be delegated if the authority to delegate may be implied from
the nature and circumstances of the transaction. Powell v.
State, 82 Tex. Crim. 163, 198 S.W. 317, 319 (1917).
Etie also distinguishes the act of delegation from the act
of impermissible extending the agency relationship by invoking
the arbitration clause. For purposes of these state law claims
that distinction does not matter, as an agent's power to use an
arbitration clause includes the power to enter and to invoke it.
10

HSMCA's status as its "exclusive" bargaining agent foreclosed any
reliance on the NJAB.
Nor is there anything surprising about the use of an interest
arbitration clause. This court has recognized it as one of the
"general[] types or categories of labor arbitration." N.L.R.B. v.
Columbus Printing Pressmen & Assistants' Union No. 22, 543 F.2d
1161,1163 n.4 (5th Cir. 1976). See also Winston-Salem Printing
Press & Assistants' Union v. Piedmont Publishing Co., 393 F.2d 221,
227 n.10 (4th Cir. 1968) (noting that the practice of arbitrating
the terms of new contracts predates grievance arbitration and has
a long record of success). Uncontroverted testimony in the record
from Arthur Gowan of the HSMCA indicates that the identical
interest arbitration clause is in about half of the sheet metal
workers' contracts nationwide.
Etie contends that HSMCA added the clause in violation of its
bylaws, which provide in part that "[m]ember firms may vote on all
matters coming before the association." But Etie offers no
evidence as to the meaning of "coming before." Arthur Gowan's
uncontroverted testimony shows that the membership had voted to
give the Association's Labor Committee the authority to negotiate
such clauses, showing that Etie was not entitled to a vote as to
this specific clause.

Because the contract authorized HSMCA to agree to the
inclusion of the interest arbitration agreement, the district court
properly denied Etie relief on its claims for breach of contract.
Furthermore, since no evidence in the record shows that HSMCA
11

abused its authorized power, this finding also disposes of the
breach of fiduciary duty and fraud claims.7 We affirm the
district court's dismissal of the fraud and breach of fiduciary
duty claims and its grant of summary judgment on the breach of
contract claims.
III.
The district court correctly granted summary judgment on the
unfair labor practices counterclaim. Etie's second amended
counterclaim alleges that appellees "forced and restrained . . .
Etie to join and maintain membership in HSMCA" in violation of
Section 303(b) of the Labor Management Relations Act, 29 U.S.C. �
158(b)(4)(A). Etie argues that by bringing the disputed provisions
to arbitration, Local 54 "coerced" Etie into a de facto membership
in HSMCA because the arbitration provision "compels it to act as if
it were a member and submit collective bargaining disputes it has
with union locals to the adjustment board." Mobile Mechanical
Contractors Ass'n v. Carlough, 664 F.2d 481, 486 (5th Cir. Unit A
Dec. 1981), cert. denied, 456 U.S. 975 (1982). We find the analogy
to Mobile Mechanical Contractors unpersuasive and affirm the
district court's grant of summary judgment.
Etie contends that it was not bound by the interest
arbitration agreement negotiated by HSMCA because, on April 11,
1985, it repudiated its prehire contract with Local 54, denying the
union the right to invoke the interest arbitration clause or any
7Counsel for Etie conceded at oral argument that if the
contract authorized the insertion of the interest arbitration
clause then its other state law claims would fail.
12

other contractual provision against it.8 The Supreme Court, has
expressly left open the issue of how to repudiate a prehire
agreement, stating that "it is not necessary to decide in this case
what specific acts would effect the repudiation of a prehire
agreement--sending notice to the union, engaging in activity overtly
and completely inconsistent with contractual obligations, or, as
respondents suggest, precipitating a representation election
pursuant to the final proviso in � 8(f) that shows the union does
not enjoy majority support." Jim McNeff, Inc. v. Todd, 461 U.S.
260, 271 n.11 (1983). We conclude that under the cases since Jim
McNeff Etie failed to repudiate the agreement.
Etie's sole action that it claims constitutes a repudiation
was a letter sent from Etie to HSMCA on April 11, 1985, retracting
its assignment of bargaining authority to the association and
expressing a desire to terminate its contract with Local 54 "at the
earliest possible time." Etie continued to pay until 1986 both the
wages and industry funds required by its contract with Local 54.
There is no evidence of acts inconsistent with the contract until
after the interest arbitration clause had been invoked and the
dispute sent to the NJAB in May of 1986, when a majority of Etie
8Under John Deklewa & Sons, 282 N.L.R.B. 1375 (1987), an
employer cannot repudiate a prehire contract. However, this
court has held, without adopting the decision, that Deklewa is
not retroactive. United Brotherhood of Carpenters & Joiners v.
Mar-Len of Louisiana, Inc., 906 F.2d 200, 203-04 (5th Cir. 1990).
Prior to Deklewa an employer could repudiate a prehire contract
under certain circumstances. Etie's alleged repudiation occurred
before Deklewa.
13

workers indicated to Etie that they no longer wished to be bound by
Local 54.
The Seventh Circuit identified the incentives controlled by
the rules in Gould v. Lambert Excavating, Inc., 870 F.2d 1214
(1989). In declining to find repudiation based on an employer
giving notice and declining to follow certain contractual
provisions, the court noted that when an employer "maintains that
it repudiated the contract while at the same time admitting that it
continues to comply with certain provisions and to enjoy certain of
the benefits of the contract" an "ambiguous" situation results.
Id. at 1219. The employer can selectively repudiate
disadvantageous provisions, or can later renege on a statement that
it completely repudiated the contract. Because this danger appears
in a case such as this one where an employer's statements do not
entirely match its actions, we hold that notice of a desire to
terminate unaccompanied by any other actions inconsistent with the
contract is not sufficient to repudiate the prehire contract.

We announce no recipe for repudiating a prehire agreement.
The conduct we described in United Brotherhood of Carpenters and
Joiners Local Union 953 v. Mar-Len of Louisiana, Inc., 906 F.2d
200, 201 (5th Cir. 1990), where the employer refused to use the
union's hiring hall, stopped contributing to the union's fringe
benefit funds, refused to rehire laid-off workers, and sent notice
to the union of its repudiation constitutes an effective
repudiation. Less equivocal conduct requires a case-by-case
inquiry given the differences between various prehire agreements
14

and the different types of organizations that can bargain for a �
8(f) agreement. See Operating Engineers Pension Trust v. Beck
Engineering & Surveying Co., 746 F.2d 557, 565 (9th Cir. 1984).9
Etie contends that even if it did not repudiate its prehire
agreement with Local 54, the interest arbitration agreement did not
bind its individual negotiations with Local 54 after it withdrew
from the contractors' association. It is not so simple. An
employer continues to be subject to an interest arbitration clause
in its individual negotiations after withdrawing from an employer's
association if it is "arguably" bound by the clause. Sheet Metal
Workers Int'l Ass'n, Local Union No. 9, 136 L.R.R.M. (301 N.L.R.B.
No. 32) 1338 (January 15, 1991) [Graco]. The Board found in Graco
that a withdrawing employer was arguably bound by an interest
arbitration clause that referred to "the Local Contractors'
Association" rather than to individual employers. The agreement
in this case contains even more specific language, referring to
"employer(s) representatives."
Because the agreement bound Etie, the analogy to Mobile
Mechanical fails. Mobile Mechanical involved a strike called to
force an employer to accept an interest arbitration clause, which
9We treat as dicta the Tenth Circuit's statement that notice
alone can constitute repudiation of a prehire contract in
Trustees of Iron Workers Fund v. A & P Steel, 812 F.2d 1518, 1524
(10th Cir. 1987). That case involved a full collective
bargaining agreement rather than a prehire agreement, and no
contested legal issue in the case turned on deciding what acts
constituted repudiation of a prehire agreement. The facts of
Plumbers & Pipefitters Local Union No. 72 v. John Payne Co., 850
F.2d 1535 (11th Cir. 1988), where the court found repudiation on
the basis of a much more strongly-worded statement than Etie
used, are not before us.
15

would have forced the employer to act as if it was a member of a
national employers association by forcing it to submit disputes to
a group of arbitrators selected by the national association. The
strike violated � 8(b)(4)(A) as the equivalent of an attempt to
force an employer to join an employer organization. Mobile
Mechanical, 664 F.2d at 484 (citing Frito-Lay, Inc. v. Teamsters,
401 F.Supp. 370 (N.D. Cal. 1975)). While Etie was a member of an
employer organization it became subject to an interest arbitration
clause that bound it in later negotiations. Requiring an employer
to honor obligations it incurred while an organization member
forces no membership.
Etie also contends that even if Local 54 had a right to submit
their dispute to interest arbitration, that right could only be
invoked under conditions not present. Etie claims that Local 54
bargained to impasse over several nonmandatory subjects10 so that
it could wrongfully invoke the arbitration clause, leading to Etie
being "forced and restrained" to remain a de facto contractors'
association member in violation of � 8(b)(4)(A).
It is true, as Etie argues, that an interest arbitration
clause cannot be invoked solely because of an impasse over a
nonmandatory subject of bargaining. See, e.g., NLRB v. Sheet Metal
10Wages, hours, and other terms and conditions of employment
are considered mandatory subjects of collective bargaining, and
either party may insist upon inclusion of a clause relating to
those subjects. 29 U.S.C. � 158(d); Fibreboard Paper Products
Corp. v. NLRB, 379 U.S. 203 (1964). However, it is unlawful to
insist upon inclusion of clause relating to matters as to which
collective bargaining is not mandatory. NLRB v. Wooster Div. of
Borg-Warner Corp., 356 U.S. 342 (1958).
16

Workers Int'l Ass'n Local 38, 575 F.2d 394, 399 (2d Cir. 1978).
The gap between Etie and Local 54 in 1986, however, went beyond
nonmandatory issues. Etie's counsel wrote to Local 54 after three
negotiation sessions to declare that "the existence of the impasse
has been and is now clear and unmistakable" because "all important
issues" including wages, benefits, and overtime remained
unresolved. The NJAB's 1986 award incorporated all terms of the
agreement in effect at the time between HSMCA and Local 54. Given
this broad gap between the parties on mandatory terms we find that
Local 54 had the right to invoke interest arbitration even if their
negotiations left some nonmandatory issues unresolved.11
Coercion did not bring Etie before the NJAB. The employer
association it belonged to negotiated for the interest arbitration
clause under a lawful grant of authority from Etie. Etie remained
bound by that clause when it maintained its contract with the local
union. Local 54 subjected Etie to the NJAB because Etie agreed to
be subjected to the NJAB. We affirm the grant of summary judgment
on the unfair labor practices counterclaim.
IV.
Etie's antitrust counterclaim charges that a combination of
the local and national manufacturers' associations, the local and
national unions, and the NJAB conspired to insert the interest
11Our conclusion can also be phrased in terms of
"conditionality." Insistence on a nonmandatory issue becomes
unlawful when the issue becomes a condition for an agreement.
NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 349
(1957). When the parties cannot reach an agreement for other
reasons the dispute on the nonmandatory issue is not a condition
of agreement.
17

arbitration provision in the 1984 contract and to produce a NJAB
award favorable to Local 54 in 1986. The combination sought to
reduce competition for association members by keeping union
employers from becoming nonunion contractor competitors. The
district court found that the activity of the counterdefendants was
protected from antitrust liability under a nonstatutory exception
to the antitrust laws and granted summary judgment. We agree and
affirm.
This well established nonstatutory exemption is a judicial
implementation of the statutory policy favoring the association of
employees to eliminate competition over wages and working
conditions. Connell Co. v. Plumbers & Steamfitters Local 100, 421
U.S. 616, 622 (1975). Strict enforcement of the antitrust laws and
collective union activity are at odds. Compatibility of labor and
antitrust rules require that employee organizations receive some
exemption from the antitrust laws. Id. at 622; United Mine Workers
v. Pennington, 381 U.S. 657, 666 (1965) (White, J.); Local 189,
Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676 (1965)
(White, J.).
The required accommodation of conflicting policies dictates
the
scope
of
the
exemption. Two themes recur.
The first theme is that unions should focus on the labor
market. "Direct" restraints on employers' product markets are not
within the exception. Connell, 421 U.S. at 622. Connell involved
a union that represented workers in the plumbing and mechanical
trades. In negotiating with a general building contractor, it
18

required that the contractor only subcontract mechanical work to
firms that had a current contract with the union. The Court found
that this requirement violated the antitrust laws as a "direct
restraint on the business market" with "substantial anticompetitive
effects" that "would not follow naturally from the elimination of
competition over wages and working conditions." Id. at 625. See
also Allen Bradley Co. v. Local 3, Int'l Brotherhood of Elec.
Workers, 325 U.S. 797 (1945) (finding an antitrust violation when
a union required that electrical contractors buy equipment only
from local manufacturers with closed shop agreements with the
union).
This arbitration clause only affected employers' product
markets to the extent it subjected employers to a union contract.
The only alleged harm of that contract was that it represented
successful union wage negotiation, proper union activity. See
Local 189, Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676,
689-90 & n.5. (1965) (White, J.).
The clause was introduced as part of a wage reduction
strategy. Both employers and the union recognized that the need to
cut wages to compete with growing nonunion employers, but the union
had concerns about most-favored-nation agreements it had with other
major area employers. Interest arbitration allowed wage reductions
that did not trigger most-favored-nation clauses, as the wage
reductions resulted from arbitration rather than agreement.
The clause itself is not a mandatory subject of bargaining.
Past decisions have expressed concern about extending the exemption
19

to nonmandatory subjects. Jewel Tea, 381 U.S. at 689 (White, J.)
(noting that the union and employer could not agree to a product
price scale and stay within the exemption); Id. at 710 & n.18
(Goldberg,J.) (noting that the NLRB's decisions about what subjects
are mandatory topics are "very significant" in determining the
scope of the exemption); Consolidated Express, Inc. v. New York
Shipping Assoc., 602 F.2d 494, 517 (3d Cir. 1979), vacated on other
grounds, 448 U.S. 902 (1980). But these statements are just
illustrations of the broader principle that unions should focus on
the labor market rather than employers' product markets. See
Connell, 421 U.S. at 622-23. A nonmandatory procedural device can
be used to facilitate substantive agreement about wages or working
conditions without offending that principle.
The second theme in the nonstatutory exemption cases is that
the agreement between the union and an employer have some effect on
third parties who had no chance to affect the negotiation or
implementation of the agreement. For example, in United Mine
Workers v. Pennington a small coal operator alleged that large coal
operators and the United Mine Workers had conspired to drive it out
of business. The union and the large operators had agreed to a
wage and hour schedule and also agreed that the union would force
the same terms on small operators as well. Justice White, writing
for a plurality of the Court, held that the exception did not apply
as "[o]ne group of employers may not conspire to eliminate
competitors from the industry and the union is liable with the
employers if it becomes a party to the conspiracy." 381 U.S. at
20

665-66. See also Connell, 421 U.S. at 619-20 (union representing
an employers' association's workers illegally tried to impose
conditions on an independent employer); Embry-Riddle Aeronautical
Univ. v. Ross Aviation, Inc., 504 F.2d 896, 904-05 (5th Cir. 1974)
(union conspired with an employer to impose forbidden conditions on
another employer).
This case is distinguishable from Pennington because Etie
cannot claim to be the victim of a labor contract it could not
affect. This interest arbitration clause was negotiated while Etie
was a member of the HSMCA. The association members got the
tangible benefit of a no-strike clause in exchange for the interest
arbitration provision, suggesting that the parties weighed the
risks and benefits of their actions in the negotiations. Further,
under the law at the time, Etie had the right to unequivocally
repudiate its relationship with the union and be free of the clause
completely. Given Etie's status as a member of the association
that negotiated the clause, coupled with its power to avoid the
effect of the clause completely, the risks of allowing labor
contracts to bind sectors of the economy that never had a chance to
influence the contract are not present.
Viewed against the background of the negotiations between
HSMCA and Local 54, the negotiation of the arbitration clause falls
within the exemption. It was part of wage negotiations, Etie
belonged to the association that negotiated it, and Etie had the
chance to pull out of the agreement entirely.
21

No evidence suggests that a conspiracy infected any other
stage of Etie's dealings with Local 54. Local 54's unilateral
invocation of a legal remedy was within its rights. See Apex
Hosiery, 310 U.S. at 503-04. And nothing suggests that a
conspiracy orchestrated the NJAB's award. Etie can only point to
statements by national union officials that show their awareness of
the need to cut wages. Those statements at best show that the
clause was negotiated as part of an agreement about wages. Cf.
Embry-Riddle, 504 F.2d at 903-04.
V.
The final issue is the enforceability of the NJAB award. In
reviewing arbitration awards in labor disputes this Circuit uses a
three-part test. It requires: (1) an agreement to arbitrate and
the parties must be covered by that agreement; (2) an award which
draws its "essence" from the agreement and does not exceed the
scope of the issues presented to the arbitrator; and (3) an award
which is not "repugnant" to the NLRA. General Warehousemen &
Helpers Local 767 v. Standard Brands, 579 F.2d 1282, 1292 (5th Cir.
1978) (en banc), cert. dismissed, 441 U.S. 957 (1979). The
district court erred by only analyzing the agreement under the
first two parts of the test.12 We affirm the enforcement of the
12Ordinarily allegations of unfair labor practices, such as
bargaining to impasse over nonmandatory subjects, fall within the
exclusive jurisdiction of the NLRB. Sheet Metal Workers' Int'l
Ass'n v. Standard Sheet Metal, Inc., 699 F.2d 481 (9th Cir.
1983). But it is well-established that in actions to enforce
arbitration awards brought under � 301 of the NLRA, federal
courts have "jurisdiction . . . over enforcement suits even
thought the conduct involved was arguably or would amount to an
unfair labor practice within the jurisdiction of the National
22

award in substantial part but strike two provisions as contrary to
national labor policy.
Etie contends that the award is void as an imposition against
its will of a prehire agreement. See generally Limbach Co. v.
Sheet Metal Workers Int'l Ass'n, 949 F.2d 1241, 1248 (3d Cir. 1991)
(noting that an 8(f) agreement must be voluntary). Etie's
contention might have force if the award were not based on any
prior relationship between the parties. Etie was, however, already
in a voluntary 8(f) relationship at the time of the NJAB award.
Its failure to repudiate the contract, coupled with the wording of
the interest arbitration clause, subjected it to the NJAB. See
Sheet Metal Workers Int'l Ass'n Local 110 Pension Trust Fund v.
Dane Sheet Metal, 932 F.2d 578, 581-82 (6th Cir. 1991). The
parties could not agree on mandatory issues. Local 54 had a right
to invoke the NJAB and enforce its award in court. Sheet Metal
Workers Int'l Ass'n, Local Union No. 9, 136 L.R.R.M. (301 N.L.R.B.
No. 32) 1338 (Jan. 15, 1991).
Etie then challenges specific provisions of the award as
forcing it to agree to issues that it is not required to bargain
over. In addressing Etie's counterclaim for damages we explained
that the arbitration proceeding was properly invoked to settle
disputes over mandatory bargaining issues. The question now is
whether nonmandatory provisions can be imposed after a party
Labor Relations Board." General Warehousemen & Helpers Local 77
v. Standard Brands, 579 F.2d 1282, 1288-89 (5th Cir. 1978) (en
banc), cert. dismissed, 441 U.S. 957 (1979) (citing Hines v.
Anchor Motor Freight, 424 U.S. 554, 562 (1976)).
23

invokes interest arbitration. The Second Circuit addressed this
issue in NLRB v. Sheet Metal Workers Int'l Ass'n Local Union No.
38, 575 F.2d 394 (1978). The court held an interest arbitration
provision void as contrary to public policy insofar as it applied
to nonmandatory subjects. It reasoned that preserving parties'
freedom to exclude nonmandatory subjects from labor agreements was
an important goal of national labor policy. Id. at 399 (quoting
and citing Chemical Workers Local 1 v. Pittsburgh Plate Glass Co.,
404 U.S. 157, 187 (1971)). Insofar as an interest arbitration
proceeding forced a party to put nonmandatory issues on the table,
it was unenforceable as contrary to that policy.
Other courts have followed this rule. American Metal Prods.,
Inc. v. Sheet Metal Workers Int'l Ass'n, Local No. 104, 794 F.2d
1452, 1457 (9th Cir. 1986);13 Sheet Metal Workers' Int'l Ass'n,
Local 14 v. Aldrich Air Conditioning, Inc., 717 F.2d 456, 459 (8th
Cir. 1983). Our own more limited precedent on the issue echoes the
Second Circuit's reasoning and states that using an interest
arbitration clause to perpetuate itself is against national labor
policy. NLRB v. Columbus Printing Pressmen & Assistants' Union No.
252, 543 F.2d 1161 (5th Cir. 1976). The NLRB recently held that
Article X, Section 8 of the SFUA was valid and enforceable only as
to mandatory subjects of bargaining. Sheet Metal Workers Int'l
13Sheet Metal Workers Int'l Ass'n, Local No. 252 v. Standard
Sheet Metal, Inc., 699 F.2d 481 (9th Cir. 1983), is not to the
contrary. That case hinged on limitations issues that are not
present here. American Metal Products shows that the Ninth
Circuit does examine interest arbitration awards to determine
their consistency with national labor policy.
24

Ass'n, Local Union No. 9, 136 L.R.R.M. (301 N.L.R.B. No. 32) 1338
(Jan. 15, 1991). We follow these decisions and hold that
nonmandatory provisions in this NJAB award are not enforceable
because Local 54 did not have the power to bring them before the
Board by use of the interest arbitration clause.
Etie complains of four14 allegedly nonmandatory provisions that
appear in the agreement ordered by the NJAB. It is proper to
analyze them one-by-one. No provision presents the "extraordinary
circumstances that would render severance inappropriate" and
require invalidating the entire award. See Sheet Metal Workers'
Int'l Ass'n, Local 206 v. R.K. Burner Sheet Metal, Inc., 859 F.2d
758, 761 (9th Cir. 1988); Sheet Metal Workers Int'l Ass'n, Local
Union No. 9, 136 L.R.R.M. (301 N.L.R.B. No. 32) 1338 (Jan. 15,
1991) (both engaging in similar analyses).
The parties all agree, correctly, that the "Industry Fund"
provision, requiring a contribution to the Sheet Metal Industry
Fund of Houston based on hours worked by union members, is
14Etie also complains of an "Integrity Clause" that would
penalize it for doing business with nonunion contractors. This
clause did not appear in the 1986-1989 HSMCA-Local 54 agreement
so it was not in the NJAB award.
25

nonmandatory.15 Sheet Metal Workers Local 38, 575 F.2d at 397-98.
It is a void provision of the award.
The second provision requires contributions to the
Stabilization Agreement of the Sheet Metal and Air Conditioning
Industry, SASMI, an unemployment insurance fund maintained by the
national union.16 Participation in such a fund is a mandatory
15This provision appears in Article VIII, Section 12 of the
SFUA and provides:
The Employer agrees to promote programs of
industry education, training, administration of
collective bargaining agreements, research and
promotion, such programs serving to expand the market
for the services of the Sheet Metal Industry, improve
the technical and business skills of Employers,
stabilize and improve Employer-Union relations, and
promote, support and improve the training and
employment opportunities for employees. No part of
these payments shall be used for political or anti-
union activities.
Effective April 1, 1986, the Employer shall pay to
the Sheet Metal Industry Fund of Houston $0.13 per hour
for each hour worked by all foremen, journeymen and
apprentices covered by this Agreement.
Payment shall be made monthly in accordance with
the terms of the Trust agreement as amended, in
contribution agreement in Addendum 2, and shall be
remitted to the Sheet Metal Workers Local 54 Trust Fund
administration, for transmittal to the Sheet Metal
Industry Fund of Houston.
16This provision appears in Section 6 of Addendum #2 to
Article VIII and provides:
Effective on April 1, 1986, and until the termination
of this Agreement, it is agreed that each Employer
shall contribute and pay into the Stabilization
Agreement of Sheet Metal Industry Fund an amount equal
to 3% of the gross earnings of each foreman, journeyman
and apprentice subject to this Agreement. The gross
earnings include all reportable wages paid to the
employee for Federal Income Tax purposes plus the
contributions, excluding Apprentice and Building Fund,
National Training Fund and Industry Fund. The payments
are to be made in accordance with the terms of the
Agreement and Declaration of Trust, establishing such
Fund, as amended.
26

bargaining issue. Sheet Metal Workers' Int'l Ass'n Local 493, 234
N.L.R.B. 1238 (1978). Etie's concern that it will not be able to
appoint a trustee of the fund do not affect that conclusion. See
id.; Denver Metropolitan Ass'n of Plumbing, Heating, & Cooling
Contractors v. Journeyman Plumbers & Gas Fitters Local No. 3, 586
F.2d 1367, 1374-75 (10th Cir. 1978).
Third is the exclusive union hiring hall.17 Its status as a
bargaining provision depends on whether it presents a subject
matter over which bargaining is mandatory. The test is whether the
subject matter would settle any term or condition of employment, or
would regulate the relations between the employer and employees.
If so, in either event, bargaining is mandatory. NLRB v.
Associated General Contractors, Inc., 349 F.2d 449, 452 (5th Cir.
1965), cert. denied, 382 U.S. 1026 (1966) (citing NLRB v. Wooster
Div. of Borg-Warner Corp., 356 U.S. 342, 350 (1958)). This
provision serves purposes similar to the one in Associated General
Contractors, as it promotes job priority standards in an industry
with many employers where employees move from job to job and
employer to employer. We find that as applied to this industry the
provision is mandatory.
17Article IV, Section 2 of the SFUA requires in relevant
part "the following system of referral of applicants for
employment: (a) The Union shall be the sole and exclusive source
of referral of applicants for employment. (b) The Employer shall
have the right to refuse any applicant for employment. (c) The
Union shall select and refer applicants for employment without
discrimination . . . (d) The Union shall maintain a register of
applicants for employment . . . ."
27

The fourth contested provision is a subcontracting clause
limiting Etie's ability to subcontract to nonunion employees.18 The
Supreme Court, in upholding the legality of such a "union
signatory" subcontracting clause, withheld judgment on whether it
was a mandatory bargaining subject. Woelke & Romero Framing, Inc.
v. NLRB, 10 S.Ct. 2071, 2082-83 & 2082 n.17.(1982). The Ninth
Circuit has examined a similar provision and held that while it was
lawful under section 8(e) of the National Labor Relations Act, 29
U.S.C. � 158(e), it did not necessarily follow that the agreement
was a mandatory subject of bargaining. NLRB v. Bricklayers &
Masons Int'l Union, Local 3, 405 F.2d 469, 470 (9th Cir. 1968). It
reasoned that the provision directly benefitted the union "and only
in a most attenuated sense, if at all" benefitted employees. We
agree with the Ninth Circuit that the effect of the clause on wages
and hours is too attenuated to constitute a mandatory subject under
18Sections 1 and 2 of Article II of the SFUA provide:
No employer shall subcontract or assign any of the work
described herein which is to be performed at a job site
to any contractor, subcontractor or other person or
party who fails to agree in writing to comply with the
conditions of employment contained herein including,
without limitations, those relating to union security,
rates of pay and working conditions, hiring and other
matters covered hereby for the duration of the project.
Subject to other applicable provisions of this
Agreement, the Employer agrees that when subcontracting
for prefabrication of materials covered herein, such
prefabrication shall be subcontracted to fabricators
who pay their employees engaged in such fabrication not
less than the prevailing wage for comparable sheet
metal fabrication, as established under provisions of
this Agreement.
28

section 8(d), 29 U.S.C. � 158(d). Since the clause is nonmandatory
the part of the award imposing it is unforceable.
Local 54 properly invoked interest arbitration to settle the
far-reaching disagreements between the parties. But it overstepped
its authority by urging the award of nonmandatory provisions, and
such provisions that found a place in the final award are void. We
affirm the district court's enforcement of the award in its
substantial part except for the provisions regarding the industry
fund and the subcontracting clause. Those two awards are
unenforceable.
AFFIRMED IN PART AND REVERSED IN PART.
29