Associated Contractors of Essex County, Inc. v. Laborers Intern. Union of North America

• Decision Date: 23 June 1977
• Docket Number: No. 76-2011,Nos. 342,699 and 112,N,s. 342,76-2011
• Citation: 559 F.2d 222,95 L.R.R.M. 2908
• Parties: 95 L.R.R.M. (BNA) 2908, 81 Lab.Cas. P 13,306, 1 Employee Benefits Ca 1286 ASSOCIATED CONTRACTORS OF ESSEX COUNTY, INC., Sigfried Higgins, Jr., John Wall, and Archie Ingrassia, Individually and as Employer Trustees of the Newark Laborers Welfare Fund and the Newark Laborers Pension Fund, Appellants, v. LABORERS INTERNATIONAL UNION OF NORTH AMERICA, the Local Unionewark Laborers Welfare Fund, and Frank DiGirolamo and Paul Brienza, Individually and as alleged Employer Trustees thereof, and Michael Mandaglio, James Brown and James McDonald, Individually and as Union Trustees thereof, and Michael Giacolone, Individually and as alleged Union Trustees thereof, and Frank Boscia as Administrator thereof, Newark Laborers Pension Fund, and Frank DiGirolamo and Paul Brienza, Individually and as alleged Employer Trustees thereof.
• Court: U.S. Court of Appeals — Third Circuit

Page 222

559 F.2d 222

95 L.R.R.M. (BNA) 2908, 81 Lab.Cas. P 13,306,

1 Employee Benefits Ca 1286

ASSOCIATED CONTRACTORS OF ESSEX COUNTY, INC., Sigfried Higgins, Jr., John Wall, and Archie Ingrassia, Individually and as Employer Trustees of the Newark Laborers Welfare Fund and the Newark Laborers Pension Fund, Appellants, v. LABORERS INTERNATIONAL UNION OF NORTH AMERICA, the Local Union Nos. 342, 699 and 112, Newark Laborers Welfare Fund and Frank DiGirolamo and Paul Brienza, Individually and as alleged Employer Trustees thereof, and Michael Mandaglio James Brown and James McDonald, Individually and as Union Trustees thereof, and Michael Giacolone, Individually and as alleged Union Trustees thereof, and Frank Boscia as Administrator thereof, Newark Laborers Pension Fund, and Frank DiGirolamo and Paul Brienza, Individually and as alleged Employer Trustees thereof.

No. 76-2011.

United States Court of Appeals Third Circuit.

Argued Feb. 25, 1977.

Decided June 23, 1977.

Vincent J. Apruzzese, Francis A. Mastro, Apruzzese & McDermott, Springfield, N.J., for appellants.

Oransky, Donovan, Scaraggi & Borg, East Orange, N.J., for Newark Laborers Pension, Welfare Funds.

Before GIBBONS, FORMAN and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

Congress determined thirty years ago when it enacted the Taft-Hartley Act to interdict conduct that would deprive employees engaged in interstate commerce from fair representation in collective bargaining. Motivated by the same social objectives, it also provided for safeguards to maintain the integrity of employee welfare and pension funds. This appeal raises an important question whether the Act's objective of equal representation by employer and employee trustees on the board of welfare and pension funds is thwarted when the employer trustees represent two rival associations.

I.

After many years of collective bargaining between them, the Associated Contractors of Essex County (Associated) and several Locals of the Laborers International Union (hereinafter referred to collectively as the "Union") pursuant to a collective bargaining agreement, entered into two agreements and declarations of trust in 1964 creating the Newark Laborers Welfare Fund and the Newark Laborers Pension Fund. ¹ Under the terms of the trust agreements Associated and the Union were each to designate three trustees and each party retained the right to recall and replace one or more of its designated trustees at any time.

Prior to February 1973, the Executive Secretary of Associated was Paul Brienza. Brienza also served as one of the designated Associated trustees on the Welfare and Pension Funds. Associated removed him from both positions whereupon Brienza became instrumental in organizing a rival trade association known as the Building Trades Employers Association (BTEA). On March 7, 1975, BTEA executed its first collective bargaining agreement with the Union and agreed to make contributions to the aforesaid Welfare and Pension Funds. Three days later, March 10, 1975, Brienza, now managing director of BTEA, made a demand of Mandaglio, a union trustee and chairman of the Funds, that BTEA be given representation equal to Associated in view of BTEA's promised contribution to the Funds.

A meeting of the Trustees of the Funds was called for March 17 but Associated alleges that no notice of BTEA's demand was furnished to it or to Higgins and Ingrassia, two of Associated's three trustees. Associated alleges that its third trustee, Frank DiGirolamo, whose company, DiGirolamo Construction Company, had joined BTEA, knew of the BTEA demand but elected not to share his knowledge with his fellow trustees. At the March 17 meeting, motions were made to amend the trust agreements to make BTEA a "party" and to expand the board of trustees to eight members, two appointed by Associated, two by BTEA, and four by the Union. Each motion carried by a vote of 4 to 2, DiGirolamo voting in each case with the union trustees.

Prior to the next meeting of the Trustees on March 24, DiGirolamo was replaced as an Associated trustee by Wall. At the meeting, however, DiGirolamo showed up together with Brienza and both were seated as employer trustees representing BTEA. The two amendments to the trust agreements as formally drafted by counsel were put to a vote at a subsequent meeting on April 3 and adopted by a vote of 6 to 2; Brienza and DiGirolamo voted in favor of the amendments together with the union trustees. At the April 3 meeting, the trust agreements were further amended by the same 6 to 2 vote to provide that six trustees would constitute a quorum with the further proviso that at least two of the six were employer trustees and two union trustees.

Shortly thereafter, Associated together with Higgins, Wall, and Ingrassia sought declaratory and injunctive relief in the United States District Court for the District of New Jersey, naming as defendants the Union, Brienza and DiGirolamo, the two trust funds, the three union trustees, the additional alleged union trustee, and the administrator of the funds. Jurisdiction was alleged under sections 301 and 302 of the Labor Management Relations Act of 1947, as amended, 29 U.S.C. §§ 185, 186 (1970) and 28 U.S.C. §§ 2201-02 (1970).

The plaintiffs prayed that the court declare ² the amendments to the trust agreements and the actions taken pursuant thereto illegal and void under the terms of the trust agreements themselves as well as under the equal representation requirement of section 302(c)(5)(B) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186(c)(5)(B). ³

Following cross-motions for partial summary judgment, the district court held in a letter-opinion that the challenged amendments did not violate the terms of the trust agreement and that they were validly enacted. Finding also that the plaintiffs "ha(d) failed to raise any genuine issue of material fact" necessitating trial of their claim that the challenged amendments violated the equal representation clause, the court entered partial summary judgment for the defendants. This appeal followed.

II.

A. Jurisdiction

We are obliged to meet an important threshold question of subject matter jurisdiction, although neither the parties nor the district court raised the issue, Cutler v. Rae, 48 U.S. (7 How.) 729, 12 L.Ed. 890 (1849), particularly since the scope of section 302 jurisdiction still remains controversial. ⁴

Section 302 takes the form of a broad prohibition of payments of money or other thing of value by employers to representatives of employees. An exception is made, however, in subsection (c)(5) for employee benefit trust funds that meet certain rigid standards, among which is a unique feature requiring equal representation for employers and employees in the administration of the funds. Subsection (e) of section 302 grants district courts jurisdiction "to restrain violations of this section, . . . ." Although the extent of the jurisdiction under section 302(e) is not yet settled, ⁵ this much is certain: a federal district court does have jurisdiction under the section to enforce a trust fund's compliance with the statutory standards set forth in subsection (c)(5) by eliminating those offensive features in the structure or operation of the trust that would cause it to fail to qualify for a (c)(5) exception. Arroyo v. United States, 359 U.S. 419, 426-27, 79 S.Ct. 864, 3 L.Ed.2d 915 (1959); Nedd v. UMW, 556 F.2d 190 at 201 n.18 (3d Cir. 1977); Blassie v. Kroger Co., 345 F.2d 58 (8th Cir. 1965). Since plaintiffs in the instant case alleged inter alia a structural violation of the equal representation clause of subsection (c)(5)(B), the district court was justified in the exercise of its jurisdiction.

In addition to alleging a subsection (c)(5) violation, however, plaintiffs also claim that the amendments to the trust agreements are invalid on two other grounds: (1) that they were not properly adopted, and (2) that even if properly adopted, they are void under Article X of the agreements and declarations of trust which prohibits amendments that exceed the "original purposes" of the trust agreement. ⁶ These two claims, grave as they appear to be, do not purport to rest on any federal statute. Thus, jurisdiction over them is problematic.

Some authorities suggest that section 302(e) vests the federal courts with broad, equity jurisdiction over the operation and administration of 302(c)(5) trusts. ⁷ The majority position, however, to which this circuit subscribes, does not find in section 302 a grant of jurisdiction board enough to reach plaintiffs' non-statutory claims in the instant case. ⁸ On the other hand, since plaintiffs have stated one claim over which federal jurisdiction is clear, the district court in its discretion might have exercised pendent jurisdiction over the non-statutory, state law claims. See Snider v. All State Administrators, Inc., 481 F.2d 387 (5th Cir.) rehearing denied, 481 F.2d 1403 (1973), cert. denied, 415 U.S. 957, 94 S.Ct. 1484, 39 L.Ed.2d 571 (1974). We therefore acknowledge the possibility of district court jurisdiction over the plaintiffs' state law claims, but we do not find it necessary to reach them on appeal for reasons which will subsequently become clear.

B. The law of equal representation

Section 302 was enacted to prevent "the possible abuse by union officials of the power which they might achieve if welfare funds were left to their sole control." Arroyo v. United States, 359 U.S. 419, 425-26, 79 S.Ct. 864, 868, 3 L.Ed.2d 915 (1959); accord, United Marine Div. v. Essex Transp. Co., 216 F.2d 410, 412 (3d Cir. 1954); Moyer v. Kirkpatrick, 265 F.Supp. 348 (E.D.Pa.1967), aff'd 387 F.2d 955 (3d Cir. 1968) (per curiam). Since the governing trust agreement usually delegates broad powers and discretion to the trustees, it is conceivable that the exercise of such powers "may involve important questions of policy or judgment on which union and employer ...