Trustees of Asbestos Workers Local Union No. 25 Ins. Trust Fund v. Metro Insulators, Inc.
| Decision Date | 22 May 1990 |
| Docket Number | No. 89-1656,89-1656 |
| Citation | 1990 WL 67403,902 F.2d 1569 |
| Parties | Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. TRUSTEES OF ASBESTOS WORKERS LOCAL UNION NO. 25 INSURANCE TRUST FUND, Pension Fund, Supplemental Unemployment Benefit Trust Fund, Industry Advancement Fund and Apprenticeship Fund, Plaintiffs-Appellants, v. METRO INSULATORS, INC. and Lee D. Johnson, jointly and severally, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Before KEITH and MILBURN, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.
Plaintiffs, Trustees of the Asbestos Workers Local Union No. 25 Trust Funds (collectively "plaintiffs"), sued defendants, Metro Insulators, Inc. ("Metro") and Lee D. Johnson ("Johnson") (collectively "defendants"), for unpaid fringe benefit contributions allegedly owed to the trust funds from June 1, 1982 through June 1, 1988. In its April 24, 1989 opinion and order, the district court held that after 1983, no collective bargaining agreement existed between the Asbestos Workers Local Union No. 25 (the "Union") and defendants; thus, defendants were not liable for any unpaid contributions. For the reasons set forth below, we REVERSE.
On December 21, 1987, plaintiffs initiated this action, requesting permission to audit the books and records of Metro, who had initially committed to contribute to the trust funds through a collective bargaining agreement with the Union. Plaintiffs allege that Metro and its sole shareholder, officer and director, Johnson, subsequently failed to make the requisite contributions to the trust funds. On February 1, 1988, defendants answered plaintiffs' complaint. Defendant's asserted that after June 1983, no collective bargaining agreement existed between Metro and the Union because Johnson orally notified the Union that Metro was ceasing its operations. Defendants contended that no contributions were due on behalf of Johnson, since he was not a Union member.
Johnson, acting in his individual capacity, filed a motion for summary judgment on July 29, 1988. The district court denied his motion on August 12, 1988. Plaintiffs filed, on August 12, 1988, a motion for summary judgment, seeking to audit Metro's books and to obtain a judgment against defendants for all unpaid contributions uncovered by the audit. On August 31, 1988, Johnson moved for rehearing on his summary judgment motion.
The district court held a final pre-trial conference on October 27, 1988. Without ruling upon the parties' summary judgment motions, the court set a trial date to determine: first, whether the collective bargaining agreement between defendants and the Union was in force during the time period that plaintiffs sought to audit Metro's books; and second, whether contributions to the trust funds are due on Johnson's behalf. On November 21 and 22, 1988, a two-day bench trial was held. On April 24, 1989, the district court issued an opinion and order finding that no collective bargaining agreement existed between the Union and the defendants during the contested time period; thus, defendants would not be required to pay additional fringe benefit contributions on behalf of Johnson. Judgment was entered for defendants.
Plaintiffs filed a timely notice of appeal with this court on May 24, 1989.
On July 19, 1982, Johnson, acting in his capacity as the sole officer, director and shareholder of Metro, executed an independent contractor's collective bargaining agreement (the "independent agreement") with the Union. The independent agreement bound Metro to the terms and conditions set forth in the Union's collective bargaining agreement with the Master Insulators Association of Detroit (the "association agreement"). The independent agreement contains a June 1, 1983 expiration date, with an automatic renewal provision that becomes effective immediately unless either party notifies the other in writing, at least 30 days prior to the anniversary of the contract's expiration date.
Defendants concede that, with the exception of one contribution report for February 1984, they have not made fringe benefit contributions to the trust funds since June 1983. Defendants further admit that Johnson has engaged in, and caused Metro to engage in, employment covered by the association agreement. Defendants also concede that they provided no written notice of their intent to terminate the independent agreement prior to April 20, 1988. Thus, defendants' written termination notice became effective on May 31, 1988.
Plaintiffs allege that defendants owe unpaid fringe benefit contributions to the trust funds for June 1, 1982 through June 1, 1988. During that time period, defendants were signatories--through the automatically renewed independent agreement--to the Union's 1982-1984, 1984-86, and 1986-89 association agreements. Each association agreement required signatory employers to make fringe benefit contributions to five trust funds, which provided the following programs or services: insurance, pensions, supplemental unemployment benefits, industry advancement and apprenticeship. Each association agreement also contained an audit provision which required signatory employers to submit their books and records for an audit by the plaintiffs to determine the accuracy of their fringe benefit contribution reports.
Although plaintiffs asked to audit Metro's books from June 1, 1982 through June 1, 1988, defendants refused their requests. Defendants argue that plaintiffs have no rights to audit Metro's books because Johnson orally terminated the independent agreement with the Union in June 1983. Defendants also contend that Johnson was not a Union member; thus, no contributions are due upon his behalf. To enforce their right to the audit, plaintiffs brought this action pursuant to Section 301 of the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. Sec. 185(a), and Section 502 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1132.
In Policy v. Powell Pressed Steel Co., 770 F.2d 609 (6th Cir.1985), cert. denied, 475 U.S. 1017 (1986), this court explained:
Contract interpretation is a question of law, not subject to the clearly erroneous standard. Chevron, U.S.A v. Belco Petroleum Corp., 755 F.2d 1151, 1153-54 (5th Cir.1985). Thus, when reviewing the trial courts interpretation of a contract, an appellate court is not limited to the clearly erroneous rule, since a district judge's conclusions of law are freely reviewable by the court of appeals. Washington Metropolitan Area Transit Authority v. Mergentime Corp., 626 F.2d 959, 961 (D.C.Cir.1980).
On appeal, defendants argue that because Johnson orally terminated the independent agreement that he signed on July 19, 1982, Metro owes no unpaid fringe benefit contributions to the trust funds. Plaintiffs contend that after the Union reached majority status in its bargaining unit, but before Johnson's alleged June 1983 oral termination, Metro's independent agreement matured into a fully binding collective bargaining agreement. Plaintiffs argue that as a matter of law, the independent agreement could not have been terminated by oral notice or subsequent conduct. We agree.
It is undisputed that defendants' written termination of the independent agreement was not issued until April 20, 1988. Thus, by its own terms, the contract was automatically renewed from its initial execution on July 19, 1982, until defendants' written notice of termination became effective on May 31, 1988. The independent agreement signed by Metro provides:
[T]he Employer further acknowledges that this [A]greement shall continue in effect until the first day of June, 1983 and that, either party hereto shall notify the other party, in writing, at least 30 days prior to June 1, 1983 or any succeeding anniversary date, any modification in its terms agreed to by the Asbestos Workers Local No. 25 and the Master Insulators Association of Detroit shall also apply to it, and the [A]greement, as modified, shall automatically renew itself until such time as the notice provided for herein is delivered by either party.
Joint Appendix at 126 (citing Plaintiffs' Trial Exhibit No. 3, Abestos Workers Local Union No. 25 Trust Funds v. Metro Insulators, Inc., No. 87-CV-74548-DT (E.D.Mich. Apr. 24, 1989)).
The district court recognized that the independent agreement provided for automatic rollover and written notice of termination. The district court held, however, that the independent agreement was a contract of indeterminate duration, and that after a reasonable lapse of time, it was justifiably terminated by defendants' unilateral action. See Joint Appendix at 20 () (hereinafter "Opinion"). The district court concluded:
[B]ased upon the conduct of the parties, this court finds that the oral notice of termination was accepted and acted upon by the Union, and plaintiff Funds cannot now at this date claim that these defendants did not conform literally to the written termination requirements and therefore are still bound to the terms of the contract. In Boeing Airplane Co. v. NLRB, 174 F.2d 988 (D.C.Cir.1949), the court stated: "We agree with the principal of law that a contract of indeterminate duration may become terminable by the unilateral action on the part of either party after a reasonable lapse of time." Id. at 991.
It is our view that the district court erroneously relied upon Boeing to conclude that the defendants' unilateral oral termination of the independent agreement was proper. In International Union of...
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