799 F.2d 1098 (6th Cir. 1986), 84-5518, Central States Southeast and Southwest Areas Pension Fund v. Kraftco, Inc.

Docket Nº:84-5518, 84-5868.
Citation:799 F.2d 1098
Party Name:7 Employee Benefits Ca 2257 CENTRAL STATES SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and Daniel J. Shannon, Plaintiffs-Appellees, v. KRAFTCO, INC., d/b/a Sealtest Foods Division, Defendant-Appellant. KRAFT, INC., Plaintiff-Appellant, v. LOCAL UNION 327, TEAMSTERS, CHAUFFEURS, HELPERS AND TAXICAB DRIVERS, Defendant- Appellee.
Case Date:September 02, 1986
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 1098

799 F.2d 1098 (6th Cir. 1986)

7 Employee Benefits Ca 2257


and Daniel J. Shannon, Plaintiffs-Appellees,


KRAFTCO, INC., d/b/a Sealtest Foods Division, Defendant-Appellant.

KRAFT, INC., Plaintiff-Appellant,



DRIVERS, Defendant- Appellee.

Nos. 84-5518, 84-5868.

United States Court of Appeals, Sixth Circuit

September 2, 1986

Argued June 4, 1986.

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[Copyrighted Material Omitted]

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Terry M. Brooks, Larry W. Bridgesmith (argued), Constangy, Brooks & Smith, Nashville, Tenn., for defendant-appellant.

Cecil Branstetter (argued), R. Jan Jennings, Branstetter, Kilgore, Stranch, Nashville, Tenn., for plaintiffs-appellees.


CONTIE, Circuit Judge.

Appellant Kraftco, Inc., appeals from an order of the district court granting judgment in favor of plaintiffs Central States Southeast and Southwest Areas Pension Fund (hereinafter, Central States), Director Daniel J. Shannon, and Teamsters Local Union 327 (hereinafter Local 327) on plaintiffs' complaint seeking delinquent pension contributions pursuant to 29 U.S.C. Secs. 185, 1132, 1145. Finding the judgment of the district court premised on erroneous factual and legal conclusions, we reverse.


On April 11, 1978, plaintiffs Shannon and Central States filed a complaint against Sealtest Foods (Kraftco) pursuant to 29 U.S.C. Secs. 185, 1132, 1145, and state law. The complaint alleged that Kraftco was obligated to make contributions to Central States pursuant to a collective bargaining agreement between Local 327 and Kraftco, and that defendant "has failed and refused to make certain of the required payments as required on their respective dates." Central States sought $146,000 in delinquent contributions, collection costs, and attorney fees, and an order of specific performance of the collective bargaining agreement.

On February 6, 1979, Kraftco filed a complaint against Local 327 pursuant to 29 U.S.C. Sec. 185, and 28 U.S.C. Secs. 1337, 2201, 2202. The complaint alleged that "plaintiff and defendant have entered into successive formal collective bargaining agreements. In addition to these agreements, certain matters have been resolved through letters of understanding signed by duly authorized representatives of plaintiff and defendant." Pursuant to such a letter, Kraftco alleged that "regular pension payments on employees covered by the collective bargaining agreement ... were to commence only at such time as such employees had been in the employ of plaintiff for a period of thirty-six (36) months." Kraftco alleged that the union's insistence that the letter specifying the 36-month period was of no effect was a threatened breach of the collective bargaining agreement. Kraftco sought a declaratory judgment that Kraftco had no obligation to make the payments demanded by the union, that the letter agreement was a binding agreement, and that the union had violated the agreement. On March 30, 1979, the two cases were consolidated. Trial was held on March 15, 1982, and, on May 9, 1984, the court entered judgment against Kraftco in the amount of $246,395. 589 F.Supp. 1061 (M.D.Tenn.1984). 1 The following evidence was adduced at trial.

Royce McClintock, general manager of Kraftco, testified that he had final authority in collective bargaining matters, and that he was informed of the side agreement in question in 1974 by Don Spencer of Kraftco. McClintock testified that side agreements were a matter of general practice between Kraftco and Local 327. McClintock admitted that the 1969 side agreement was never mentioned in the 1975 negotiations.

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T.H. Rose, employed by Kraftco prior to 1974 as general manager, had the final authority with respect to collective bargaining agreements, and was the chief company negotiator in 1966. Rose testified that the side agreement in question was executed on June 27, 1969 to "clarify the meaning of the contract," and was signed by himself and Union President Don Vestal. The collective bargaining agreement was signed that same day. The collective bargaining agreement provided that the company would make pension contributions for regular employees who started work, while the side agreement provided that the company would make payments only for employees who had been with the company for 36 months. Rose testified that the company understood a regular employee to be one who had been with the company for 36 months. Further, "[i]t was the understanding that this letter remain in effect until it was changed." Other side agreements were entered into and adhered to through consecutive collective bargaining agreements. Rose also testified that the letter agreement applied to the ice cream plant contract negotiated in August 1969. Rose could recall no mention of the side letter in later negotiations.

Donald Spencer conducted contract negotiations for Kraftco from 1965 to 1980, and indicated that Local 327 represented both milk plant and ice cream plant personnel. Spencer testified regarding past custom in executing letter agreements. Spencer testified that the company and union had entered into several letter agreements which altered the terms of the collective bargaining agreement upon the assent of a representative of the union and company. Spencer indicated that he was never informed that these letter agreements were subject to union ratification. Spencer further testified that the letter agreements were to remain in effect until "negotiated out."

Spencer indicated that he was the chief spokesman for the company during the 1969 negotiations, and that a member from the international union was present at times. Spencer testified that he was never told that any agreement between Local 327 and the company was conditioned on approval by the International, but that the International representative stated that the provision requiring employment for 36 months before contributions were paid would have to be changed. The 36-month requirement had been carried over from other agreements. Spencer testified that the 36-month period was desirable because of the high turnover of employees and enabled the company to avoid making contributions for persons who would never benefit from them. Spencer testified that in 1969 the parties agreed to continue the 36-month requirement through the letter agreement. The letter agreement also included a reference to making employees "whole." "Our intent ... was to make any employee of ours whole if by not paying benefit payments for his first 36 months of employment would cause him to have any loss of pension benefits." Spencer testified that, before the entire bargaining committee, Vestal indicated that he "would give us a letter concerning this 36-months' payment and that it would be no problem to delete the language from the contract."

Spencer testified that, to make employees "whole," Kraftco forwarded checks for the three years of contributions to Central States. Spencer further testified that Vestal told him that the letter agreement would apply to both the milk and ice cream plant contracts. Spencer testified that the union first complained about the contributions in 1977.

James Dreaden was a member of the Kraftco bargaining unit until 1975 when he joined management. Dreaden was a member of the union negotiating committee from 1963 to 1974, and indicated that the side agreement was discussed by the committee in 1969. Dreaden testified that it was his understanding that the letter agreement continued in effect through the subsequent collective bargaining agreements.

Dreaden testified:

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Q. ... I believe your testimony was that the company proposed that the 36 month exclusion would continue in 1969, is that correct?

A. That's true.

Q. Did the union accept that proposal in 1969?

A. When it was taken before the membership, it was ratified and then accepted.

On cross-examination,

Q. Just one question. You didn't have the side letter when it was taken to the union for ratification, did you?

A. No, sir.

Q. All right.

A. But it was explained and they were informed.

Q. They were informed of what? Were they informed of what was in the written contract or what was in the side letter that hadn't been printed at that time?

A. At the time that we had taken it to the membership for ratification, the contract per se was not in a contract form. We had taken the proposals and they accepted the proposals. Then it was compiled together as a contract.

Billy Burrows, business agent for the union in 1971, testified that he participated in negotiations with Kraftco and never heard of the letter agreement until 1977. Burrows testified that there was no copy of the letter in the union records. However, Burrows could find no record whatsoever of the 1969 negotiations.

The following documents were presented to the district court. The Trust Agreement creating Central States, as amended in 1957, provided in Article III Sec. 1 that "[e]ach Employer shall make continuing and prompt payments to the Trust Fund as required by the applicable Collective Bargaining Agreement between the parties. The obligation to make such contributions shall continue during periods when the Collective Bargaining Agreement is being negotiated." Further, "[t]his Agreement shall in all respects be construed according to and be governed by the laws of the State of Illinois." See 1970 Agreement, 1974 Agreement, 1978 Agreement.

The collective bargaining agreement, effective January 1, 1966 to December 31, 1968, provided:

The Employer shall pay to the...

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