PEOPLE v. NORTH AVENUE FURNITURE, 645 P.2d 1291 (Colo. 1982)

The People of the State of Colorado, Plaintiff-Appellant, v. North Avenue Furniture and Appliance, Inc.; Harvey Townsley; Leo Lyland; and Harland Jacob, Defendants-Appellees.

No. 80SA505Supreme Court of Colorado.
Decided May 24, 1982.

Appeal from the District Court of the County of Mesa, Honorable James J. Carter, Judge.

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J. D. MacFarlane, Attorney General, Richard F. Hennessey, Deputy Attorney General, Mary J. Mullarkey, SOlicitor General, B. Lawrence Theis, Assistant Attorney General, Jill A. Gross, Assistant Attorney General, for plaintiff-appellant.

Harshman Deister, Thomas M. Deister, for defendants-appellees.

En Banc.

JUSTICE QUINN delivered the opinion of the Court.

[1] The People appeal from an order dismissing an indictment charging the defendants with price-fixing in violation of section 6-4-101, C.R.S. 1973 (1981 Supp.), the Colorado Antitrust Statute. The district court concluded that section 6-4-103(2), C.R.S. 1973, which provides that “[t]he labor of a human being is not a commodity or article of commerce,” exempted the defendants’ activities from antitrust prosecution. Disagreeing with this construction of the so-called “labor exemption” of the antitrust statute, we reverse and remand for reinstatement of the indictment.

I.
[2] The defendants in this proceeding are: North Avenue Furniture and Appliance, Inc. (North Avenue), a Colorado corporation engaged in the floor covering retail business in Grand Junction, Colorado, Harland Jacob, who was North Avenue’s manager; Leo Highland, the manager of Don Felsen, Inc., another floor covering store in Grand Junction; and Harvey Townsley, who operated a carpet installation service in Grand Junction. North Avenue and Don Felsen, Inc., are the two largest retail carpet stores in Grand Junction and do not have installers on their payroll. They contract out installation services to independent carpet installers, such as Harvey Townsley, who then submit a statement to the retail store at the end of each installation job. The statements are based on the amount of carpet installed rather than the number of hours spent on the actual installation. The rates for carpet installation are published on price lists upon which retailers rely in quoting installed prices to their customers.

[3] During January 1980 Harland Jacob discussed with Harvey Townsley and other independent installation contractors the prospect of increasing the price of their services. On February 1 the three defendants, Jacob, Townsley and Leo Highland, reached an agreement which increased the rate for installation by twenty-five cents per yard. Townsley notified other installers of a mid-February meeting to discuss the price increases, and a notice of the meeting was displayed at Glenn’s Flooring, the primary floor covering installation supply store in Grand Junction. On February 18 or 19 Townsley met with approximately twenty-five independent installers at Glenn’s Flooring and discussed the price increases. The installers approved the twenty-five cents per yard increase as well as a minimum charge increase of ten dollars for each installation job. The installers agreed to adhere to these increases and to approach floor covering retailers with the new prices.

[4] After the meeting a new price list was typed by a North Avenue employee and several copies were made at Townsley’s expense and left at Glenn’s Flooring with

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instructions that they be made available to installers when they placed a purchase order for supplies.[1] Although some retailers were reluctant to accept the new rates, they generally agreed to follow them effective March 1, 1980. On February 27, the attorney general received an anonymous complaint regarding the price increase agreement and initiated a grand jury investigation which resulted in the return of an indictment on May 13, 1980.

[5] The defendants filed a motion to dismiss the indictment, contending that the agreement for the increased carpet installation charge “dealt solely with the price of human labor” and, thus, was within the labor exemption of section 6-4-103(2), C.R.S. 1973.[2] In opposing the dismissal the attorney general, relying primarily upon United States Supreme Court decisions addressing the Sherman and Clayton Acts, urged that the labor exemption be restricted to legitimate labor union activities relating to the terms and conditions of employment. The court rejected this narrow construction of the labor exemption and dismissed the indictment. It ruled that carpet installation “is at least as much `labor’ as plumbing, carpeting, welding or any other form of the building trades,” and, in its view, the labor exemption created by section 6-4-103(2) immunized the defendants’ activity from antitrust prosecution.[3] We conclude that the district court misapprehended the nature and scope of the labor exemption in its order of dismissal.

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II.
[6] Because we have not previously construed the provisions of the Colorado Antitrust Statute, section 6-4-101, et seq., C.R.S. 1973, a brief review of the sources of this statute is in order. The first Colorado Antitrust Statute was enacted in 1913 and was declared unconstitutionally vague by the United States Supreme Court in 1927 Cline v. Frink Dairy Co., 274 U.S. 445, 47 S.Ct. 681, 71 L.Ed. 1146
(1927). The present antitrust statute was enacted in 1957 and was modeled on Wisconsin’s antitrust statute, W.S.A. § 133.01 (1939),[4]
which in turn was based on relevant portions of the Sherman Act of 1890, 15 U.S.C. § 1 (1976),[5] and the Clayton Act of 1914, 15 U.S.C. § 17
(1976).[6]

[7] Section 6-4-101, C.R.S. 1973 (1981 Supp.), which contains the “illegal restraint of trade” proscription, provides as follows:

[8] “Every contract or combination in the nature of a trust or conspiracy in restraint of trade or commerce is declared illegal. Every combination, conspiracy, trust, pool, agreement, or contract intended to restrain or prevent competition in the supply or price of any article or commodity constituting a subject of trade or commerce in this state, or every combination, conspiracy, trust, pool, agreement, or contract which controls in any manner the price of any such article or commodity, fixes the price thereof, or limits or fixes the amount or quantity thereof to be manufactured, produced, or sold in this state, or monopolizes or attempts to monopolize any part of the trade or commerce in this state, is declared an illegal restraint of trade.”

[9] The labor exemption, which substantially duplicates section 6 of the Clayton Act, is contained in section 6-4-103, C.R.S. 1973:

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[10] “(1) Nothing in this article shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations instituted for the purpose of mutual help, or engaged in making collective sales or marketing for its members or shareholders of farm, orchard, or dairy products produced by its members or shareholders, and not having capital stock or conducted for profit or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade under this article.

[11] (2) The labor of a human being is not a commodity or article of commerce.”

[12] The historical backdrop to the Sherman and Clayton Acts and the purpose of their enactment are helpful to an understanding of our resolution of the issue raised here. The Sherman Act, which prohibits contracts or combinations in restraint of trade or commerce, contained no language expressly exempting labor union activities from its sweep. In response to the complaints of labor unions against the application of the act to their activities, Congress in 1914 passed the Clayton Act. However, the Clayton Act precipitated new litigation and renewed controversy regarding the status of trade unions. As the Supreme Court observed i United States v. Hutcheson, 312 U.S. 219, 230, 61 S.Ct. 463, 465 85 L.Ed. 788, 792 (1941):

[13] “It was widely believed that into the Clayton Act courts read the very beliefs which that Act was designed to remove. Specifically, the courts restricted the scope of § 20 to trade union activities directed against an employer by his own employees. Duplex Co. v. Deering [254 U.S. 443, 41 S.Ct. 172, 65 L.Ed. 349 (1921)]. Such a view, it was urged, both by powerful judicial dissents and informed lay opinion, misconceived the area of economic conflict that had best be left to economic conflict that had best be left to economic forces and the pressure of public opinion and not subjected to the judgment of courts . . . Agitation again led to legislation and in 1932 Congress wrote the Norris-LaGuardia Act. Act of March 23, 1932, 47 Stat. at 70, 29 U.S.C. §§ 101-115.”[7]

[14] Federal antitrust legislation is designed to preserve free competition and to protect the public against the evils caused by economic agreements in restraint of trade. Federal labor law, on the other hand, encourages voluntary economic agreements between employers and employees by recognizing and protecting the rights of employees to organize within appropriate units and to bargain collectively regarding wages, hours, and other working conditions. The labor exemption to antitrust prosecution represents an accommodation between these discrete national policies. See Casey Cozzillo, Labor-Antitrust: The Problem of Connell and a Remedy that Follows Naturally, 1980 Duke L.J. 235. State antitrust legislation serves the important function of protecting the public against illegal trade restraints beyond the reach of federal law, without however undercutting the legitimate rights of employees to engage in lawful, concerted activities for the purpose of improving their wages, hours and other conditions of employment. See section 8-3-106, C.R.S. 1973. Given the substantial similarity in text and purpose present in the federal and state antitrust statutes, we believe that federal decisions construing the Sherman and Clayton Acts, although not

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necessarily controlling on our interpretation of the Colorado law, are nevertheless entitled to careful scrutiny in determining the scope of the state antitrust statute.

III.
[15] We now turn to the specific issues of this case. The People contend that the labor exemption of section 6-4-103 should be narrowly restricted to bona fide labor union activities, such as collective bargaining to improve wages and other conditions of employment, and should not be construed to encompass, as here, an agreement by independent contractors to fix the price at which their carpet installation service may be purchased. The defendants on the other hand argue that all agreements relating to the labor of human beings, including those arising from economic interests shared by independent businessmen, are immune from antitrust sanctions by virtue of the labor exemption in section 6-4-103(2). Implicit in this issue relating to the scope of the labor exemption is the underlying assumption that the installation of carpet, although a service, is nonetheless a “trade” within the meaning of the antitrust statute. We first consider this threshold matter before addressing the scope of the labor exemption created by section 6-4-103.

A.
[16] In Atlantic Cleaners Dyers v. United States, 286 U.S. 427, 52 S.Ct. 607, 76 L.Ed. 1204 (1931), the Supreme Court considered whether the Sherman Act could be applied against persons who, in the course of engaging in the business of cleaning, dying and renovating wearing apparel, had agreed to perform such services at minimum and uniform prices. The Court rejected a narrow interpretation of the word “trade” and, instead, construed the term in a broader sense as “equivalent to occupation, employment, or business, whether manual or mercantile.”286 U.S. at 436, 52 S.Ct. at 610, 76 L.Ed. at 1209. More recently, i Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572
(1975), the Court held that the practice of law was “trade or commerce” within section 1 of the Sherman Act and, therefore, a minimum fee schedule for a title examination of real estate, which was enforced by the Virginia Bar Association, constituted a form of illegal price fixing proscribed by the Act:

[17] “The nature of an occupation, standing alone, does not provide sanctuary from the Sherman Act, Associated Press v. United States, 326 U.S. 1, 7 (1945), nor is the public-service aspect of professional practice controlling in determining whether § 1 includes professions United States v. National Assn. of Real Estate Boards, 339 U.S. at 489. Congress intended to strike as broadly as it could in § 1 of the Sherman Act, and to read into it so wide an exception as that urged on us would be at odds with that purpose . . . . Indeed, our cases have specifically included the sale of services within § 1. E.g., American Medical Assn. v. United States, 317 U.S. 519 (1943); Radovich v. National Football League, 352 U.S. 445 (1957). Whatever else it may be, the examination of a land title is a service; the exchange of such a service for money is `commerce’ in the most common usage of that term.” Goldfarb v. Virginia State Bar, supra, 421 U.S. at 787-88, 95 S.Ct. at 2013, 44 L.Ed.2d at 585.

[18] Clearly, the installation of carpeting for money is “trade or commerce” within the meaning of section 6-4-101. That the installation involves the exchange of a service for money, rather than the exchange of an article or commodity, is a distinction without antitrust significance See, e.g., National Society of Professional Engineers v. United States, 435 U.S. 679, 98 S.Ct. 1335 55 L.Ed.2d 637 (1978); American Medical

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Assn. v. United States, 317 U.S. 519, 63 S.Ct. 326, 87 L.Ed. 434 (1943).[8]

B.
[19] The pivotal question in this case is whether, notwithstanding the “trade” aspect of carpet installation service, the defendants are exempted from prosecution by reason of the labor exception of section 6-4-103(2). In contrast to the “trade or commerce” clause of section 1 of the Sherman Act, the labor exemption has been construed narrowly in light of its purpose, which is to permit employees to engage in organization activity related to the improvement of wages, hours, and other conditions of employment. Columbia River Packers Association, Inc. v. Hinton, 315 U.S. 143, 62 S.Ct. 520, 86 L.Ed. 750 (1942), illustrates the narrow compass of the statutory exemption. There an association of fishermen operating as independent businessmen joined together in a union to regulate the terms under which they would sell fish to a fish processor. In holding that the fishermen were not protected against injunctive relief for a Sherman Act violation, the Supreme Court stated:

[20] “That a dispute among businessmen over the terms of a contract for the sale of fish is something different from a `controversy concerning terms or conditions of employment, or concerning the association . . . of person . . . seeking to arrange terms or conditions of employment’ calls for no extended discussion. This definition and the state public policy of the [Norris-LaGuardia] Act — aid to `the individual unorganized worker . . . commonly helpless . . . to obtain acceptable terms and conditions of employment’ and protection of the worker `from the interference, restraint, or coercion of employers of labor’ — make it clear that the attention of Congress was focussed upon disputes affecting the employer-employee relationship, and that the Act was not intended to have application to disputes over the sale of commodities.

[21] . . .

[22] “The controversy here is altogether between fish sellers and fish buyers. The sellers are not employees of the petitioners or of any other employer, nor do they seek to be. On the contrary, their desire is to continue to operate as independent businessmen, free from such controls as an employer might exercise. That some of the fishermen have a small number of employees of their own, who are also members of the Union, does not alter the situation. For, the dispute here, relating solely to the sale of fish, does not place in controversy the wages or hours, or other terms and conditions of employment, of these employees.” 315 U.S. at 145-47, 62 S.Ct. at 521-22, 86 L.Ed. at 753-54.

[23] Likewise, in Los Angeles Local 626 v. United States, 371 U.S. 94, 83 S.Ct. 162, 9 L.Ed.2d 150 (1962), where self-employed, independent grease peddlers joined a union for the purpose of increasing the margin between the price at which they purchased and sold their grease, the Court held that the peddlers were sellers of a commodity, and since their activity did not grow out of a labor dispute, they were not insulated from antitrust sanctions under the labor exemption.

[24] The defendants do not dispute the effect of federal precedent on their exemption claim. Rather, they urge us to depart from that precedent and to construe the Colorado labor exemption to include all forms of service-oriented labor, whether performed by union, nonunion employees or independent businessmen such as themselves. The defendants center their argument on the

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difference in textual sequence and arrangement between section 6 of the Clayton Act and section 6-1-103. Section 6 of the Clayton Act provides:

[25] “The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purpose of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.” 15 U.S.C. § 17 (1970).

[26] In contrast, section 6-4-103(1) does not contain the first sentence of the Clayton Act. Rather, this sentence is separately set out in subsection 6-4-103(2). Thus, the defendants conclude that the separation of the labor exemption into two subsections of section 6-4-103 manifests a legislative intent to exempt not only bona fide union activity but also all forms of human labor. We reject the defendants’ proposed construction of the labor exemption.

[27] Section 6-4-103(2) was originally enacted as part of a single section entitled “Organizations exempt.” Colo. Sess. Laws 1957, ch. 142 at 369-70. The division of this original enactment into subsections first appeared in the compilation of 1973 Colorado Revised Statutes. Section 2-5-101, C.R.S. 1973 (1980 Repl. Vol. 1B), requires the revisor of statutes to compile, edit, arrange and prepare for publication “all the laws of the state of Colorado of a general and permanent nature.” The revisor’s duties, however, are limited to editorial changes which do not alter the substantive meaning of the law. Section 2-3-703, C.R.S. 1973 (1980 Repl. Vol. 1B). In the case of the compilation and publication of the 1973 Colorado Revised Statutes, section 2-5-103(2), C.R.S. 1973 (1980 Repl. Vol. 1B), leaves no doubt about the limitations upon the revisor’s authority:

[28] “The revisor shall make no change in the substance of any statute but may make such changes in arrangement and terminology as will, in the judgment of the committee [of legal services], improve the style and clarity of the laws, yet preserve the intent, effect, and meaning of each statutory provision.”

[29] See also section 2-3-703 (the revisor’s duties “shall be performed in such form and manner as to preserve the intent, effect, and meaning of any and every such statute revised”). With these limitations in mind, we cannot attach any substantive significance to the revisor’s bifurcation of the labor exception into two separate subsections of section 6-4-103. The substantive content of section 6-4-103 remains identical to the original enactment in 1957 and, in accordance with the express legislative intent in reenacting prior law into the 1973 Colorado Revised Statutes, section 6-4-103 must be given effect as though a continuation of the original 1957 statute. Section 2-5-113(3), C.R.S. 1973 (1980 Repl. Vol. 1B).

[30] That subsection 6-4-103(2) does not broaden the scope of the labor exemption becomes apparent upon considering the identical language of section 6 of the Clayton Act. The statement “The labor of a human being is not a commodity or article of commerce” was first proposed as an amendment to the Clayton Act during the senate debate on the act. 3 The Legislative History of the Federal Antitrust Law and Related Statutes
2378-79 (E. Kintner ed. 1978). The text of this sentence was composed by Samuel Gompers, President of the American Federation of Labor. Annot., 9 L.Ed.2d 998, 1001 n. 9 (1964). The sentence mirrors to great extent Mr. Gompers’ view, as stated to the House Committee on the Judiciary during the Clayton Act hearings, that it was “an outrage upon our language” to construe the Sherman Act as applicable to “men and women who own nothing but

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themselves and undertake to control nothing but themselves and their power to work.” 2 The Legislative History of the Federal Antitrust Law and Related Statutes, supra, at 1096. Viewed in this historical context, the first sentence of section 6 of the Clayton Act reflects a principle of national policy that employees should not be required to compete in the sale of their labor as if it were a commodity or article of commerce. By itself, however, the sentence neither adds to nor detracts from the scope of the exemption as set forth in the remaining sentence of section 6 of the Clayton Act and, in this sense, it has no independent legal significance.

[31] In view of the similarity in text and purpose between the federal and Colorado antitrust statutes, we decline to depart from the basic analytical framework developed by federal courts with respect to the labor exemption in antitrust prosecutions. Considering the expressed public policy of this state that “[n]egotiations of terms and conditions of work should result from voluntary agreement between employer and employee,” section 8-3-102(1)(c), C.R.S. 1973 (1981 Supp.), as well as the statutory right of employees to form labor organizations and “to engage in lawful, concerted activities for the purpose of collective bargaining or other mutual aid or protection,” section 8-3-106, C.R.S. 1973, we construe the Colorado labor exemption in section 6-4-103 to apply to those concerted employee activities arising out of an employment relationship and directed to the improvement of wages, hours of work and other conditions of employment. In our view the dispositive consideration is whether the defendants’ agreement arises from lawful associational activity of employees concerning the terms or conditions of their employment. See Los Angeles Local 626 v. United States, supra; Gulf Coast Shrimpers and Oystermans Assn. v. United States, 236 F.2d 658 (5th Cir. 1956), cert denied, 339 U.S. 947, 70 S.Ct. 801, 94 L.Ed. 1361 (1950).

[32] In this case the evidence shows that the carpet installers operate their respective businesses as self-employed entrepreneurs. Admittedly, the physical effort required for carpet installation is the same whether performed by an independent contractor or an employee. However, an employee works under the direction or control of his employer for a wage or salary usually paid on a unit-of-time basis. The independent businessman, in contrast, works for himself and look to prospective profits for his remuneration. Clearly, the object of the price-fixing agreement in this case was not to establish an employment relationship on behalf of the carpet installers or to settle the terms and conditions of such a relationship. The carpet installers stood in no employment relationship with each other, with the carpet retailer, or with the ultimate consumers of their services. So far as the record shows, the primary purpose of the agreement was to control the price at which carpet installation services would be sold, thereby imposing on the Grand Junction market a direct and immediate price restraint which carpet retailers and consumers could not realistically escape. To construe the labor exemption as suggested by the defendants would result in its extension to practically any form of human labor involving work for pay, independently of any employer-employee relationship. Such a construction inevitably would lead to the abrogation of the antitrust proscription itself. This we decline to do.[9]

[33] The judgment is reversed and the cause is remanded to the district court with

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directions to reinstate the indictment and to proceed as provided by law.