Kaiser Steel Corporation v. Mullins

• Citation: 455 U.S. 72,102 S.Ct. 851,70 L.Ed.2d 833
• Decision Date: 13 January 1982
• Docket Number: No. 80-1345,80-1345
• Parties: KAISER STEEL CORPORATION, Petitioner v. Julius MULLINS et al
• Court: United States Supreme Court

455 U.S. 72

102 S.Ct. 851

70 L.Ed.2d 833

KAISER STEEL CORPORATION, Petitioner

v Julius MULLINS et al.

No. 80-1345.

Argued Nov. 10, 1981.

Decided Jan. 13, 1982.

Syllabus

Petitioner coal producer, as a party to a collective-bargaining agreement between the United Mine Workers of America and hundreds of coal producers, agreed to contribute to specified employee health and retirement funds on the basis of each ton of coal it produced and each hour worked by its covered employees. The agreement also required an employer to report its purchases of coal from producers not under contract with the union and to make contributions to the union welfare funds on the basis of such purchases. After petitioner failed to report and make contributions as required by the "purchased-coal" clause, respondents, the trustees of the union trust funds, filed suit in Federal District Court to enforce the collective-bargaining agreement. Petitioner admitted its failure to comply with the purchased coal clause, but contended that the clause was void and unenforceable as violative of §§ 1 and 2 of the Sherman Act and § 8(e) of the National Labor Relations Act (NLRA), which forbids collective-bargaining agreements whereby the employer agrees to cease doing business with, or to cease handling the products of, another employer (hot cargo provision). The District Court entered summary judgment for respondents, and the Court of Appeals affirmed. Both courts rejected petitioner's defense without passing on the legality of the purchased-coal clause under either the Sherman Act or the NLRA.

Held : Petitioner was entitled to plead and have adjudicated its defense based on the alleged illegality of the purchased-coal clause. Pp. 77-78.

(a) Illegal promises will not be enforced in cases controlled by federal law. This rule is not rendered inapplicable here on the asserted grounds that employers' contributions to union funds are not, in themselves and standing alone, illegal acts and that ordering petitioner to pay would therefore not command conduct that is inherently contrary to public policy. Petitioner's obligation to pay money to the union funds arose from and was measured by its purchases from other producers who did not contribute to the union funds, and if this obligation is illegal under the antitrust or labor laws, to order petitioner to pay would command unlawful conduct. Pp. 77-83. (b) Although as a general rule federal courts do not have jurisdiction over activity that is arguably subject to § 8 of the NLRA and must defer to the exclusive competence of the National Labor Relations Board to determine what is and is not an unfair labor practice, a federal court has a duty to determine whether a contract violates federal law before enforcing it. Section 8(e) renders hot-cargo clauses void at their inception and at all times unenforceable by federal courts. Thus, where a § 8(e) defense is raised by a party which § 8(e) was designed to protect, and where the defense is not directed to a collateral matter but to the portion of the contract for which enforcement is sought, a court must entertain the defense. Pp. 83-86.

(c) Assuming, arguendo, that § 306(a) of the Multiemployer Pension Plan Amendments Act of 1980—which requires employers to make contributions to a multiemployer pension plan in accordance with the employer's obligation under the terms of the plan or a collective-bargaining agreement—is applicable to this case, it does not alter the result. Section 306(a) does not abolish all illegality defenses but explicitly requires employers to contribute to pension funds only where doing so would not be "inconsistent with law," and it was intended to simplify collection actions by precluding only defenses that are "unrelated" or "extraneous" to the employer's promise to make contributions. Nor does the statute's language or history indicate that Congress intended to implicitly repeal the antitrust laws, the labor laws, or any other statute which might be raised as a defense to a provision in a collective-bargaining agreement requiring an employer to contribute to a pension fund. Pp. 86-88.

206 U.S.App.D.C. 334, 642 F.2d 1302, reversed and remanded.

A. Douglas Melamed, Washington, D.C., for petitioner.

Stephen J. Pollak, Washington, D.C., for respondents.

Barbara E. Etkind, Philadelphia, Pa., for the U.S. as amicus curiae by special leave of Court.

Justice WHITE delivered the opinion of the Court.

The issue here is whether a coal producer, when it is sued on its promise to contribute to union welfare funds based on its purchases of coal from producers not under contract with the union, is entitled to plead and have adjudicated a defense that the promise is illegal under the antitrust and labor laws.

I

The National Bituminous Coal Wage Agreement of 1974 is a collective-bargaining agreement between the United Mine Workers of America (UMW) and hundreds of coal producers, including steel companies such as petitioner Kaiser Steel Corp. The agreement required signatory employers to contribute to specified employee health and retirement funds. Section (d)(1) of Article XX required employers to pay specified amounts for each ton of coal produced and for each hour worked by covered employees. In addition, the section included a purchased-coal clause requiring employers to contribute to the trust specified amounts on "each ton of two thousand (2,000) pounds of bituminous coal after production by another operator, procured or acquired by [the employer] for use or for sale on which contributions to the appropriate Trusts as provided for in this Article have not been made. . . ." ¹ Section (d) also provided that employers would furnish the trustees with monthly statements showing the full amounts due the trust funds as well as the tons of coal produced, procured, or acquired for use or for sale. The parties agreed that if the clause requiring contributions based on purchased coal was held illegal by any court or agency, the union could demand negotiations with respect to a replacement for the invalidated provision.²

Kaiser operates a steel mill in California and coal mines in Utah and New Mexico. Its mines produce only high-volatile coal, so it must purchase mid-volatile coal used in steel manufacturing from another producer. Since 1959, Kaiser has purchased virtually all of its mid-volatile coal requirements from Mid-Continent Coal and Coke Co. Mid-Continent's employees are represented by the Redstone Workers' Association, and their wages and benefits during the period covered by the 1974 Agreement were equal or superior to those required by the UMW contract. Nevertheless, the UMW has repeatedly attempted to become the collective-bargaining representative for Mid-Continent's employees. According to affidavits submitted by Kaiser, the purchased-coal clause was not taken into account in calculating the needs and revenues of the various UMW trust funds during the negotiation of the 1974 Agreement.³

Kaiser complied with its obligation under the 1974 contract to make contributions based on the coal it produced and the hours worked by its miners. It did not, however, report the coal that it acquired from others or make contributions based on such purchased coal. After the expiration of the 1974 contract, the trustees of the UMW Health and Retirement Funds, respondents here, sued Kaiser seeking to enforce the latter's obligation to report and contribute with respect to coal not produced by Kaiser but acquired from others. Jurisdiction was asserted under § 301 of the Labor Management Relations Act, 1947 (LMRA), 61 Stat. 156, 29 U.S.C. § 185, and § 502 of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 891, 29 U.S.C. § 1132. Kaiser admitted its failure to report and contribute but defended on the ground, among others, that the agreement in these respects was void and unenforceable as violative of §§ 1 and 2 of the Sherman Act, 26 Stat. 209, 15 U.S.C. §§ 1 and 2, and § 8(e) of the NLRA, 73 Stat. 543, 29 U.S.C. § 158(e). The District Court did not pass on the legality of the purchased coal agreement under either the Sherman Act or the NLRA. It nevertheless rejected Kaiser's defense of illegality and granted the trustees' motion for summary judgment. 466 F.Supp. 911 (1979). The Court of Appeals affirmed, 206 U.S.App.D.C. 334, 642 F.2d 1302 (1980), also rejecting Kaiser's defense without adjudicating the legality of the purchased-coal clause.

We granted Kaiser's petition for certiorari raising the question, among others, whether the Court of Appeals had properly foreclosed its defense based on the illegality of its promise to report and contribute in connection with coal purchased from other producers. 451 U.S. 969, 101 S.Ct. 2044, 68 L.Ed.2d 347 (1981). We now reverse.

II

There is no statutory code of federal contract law, but our cases leave no doubt that illegal promises will not be enforced in cases controlled by the federal law. In McMullen v. Hoffman, 174 U.S. 639, 19 S.Ct. 839, 43 L.Ed. 1117 (1899), two bidders for public work submitted separate bids without revealing that they had agreed to share the work equally if one of them were awarded the contract. One of the parties secured the work and the other sued to enforce the agreement to share. The Court found the undertaking illegal and refused to enforce it, saying:

"The authorities from the earliest time to the present unanimously hold that no court will lend its assistance in any way towards carrying out the terms of an illegal contract. In case any action is brought in which it is necessary to prove the illegal contract in order to maintain the action, courts will not enforce it. . . ." Id., at 654, 19 S.Ct., at 845.

"[T]o permit a recovery in this case is in substance to enforce an illegal contract, and one which is illegal because it is against public policy to permit it to stand. The court refuses to enforce such a contract and it permits defendant to set up...