Burke v. French Equipment Rental

Decision Date30 September 1980
Docket NumberNo. 76-649-WMB.,76-649-WMB.
Citation498 F. Supp. 94
PartiesC. William BURKE et al., etc., Plaintiffs, v. FRENCH EQUIPMENT RENTAL, INC. et al., Defendants.
CourtU.S. District Court — Central District of California

Christopher Laquer, Wayne Jett, Los Angeles, Cal., for plaintiffs.

Todd Sloan, Hill, Farrer & Burrill, Los Angeles, Cal., for defendants.


WM. MATTHEW BYRNE, Jr., District Judge.

Plaintiffs in this action are trustees of various employee benefit trust funds established pursuant to written collective bargaining agreements between the International Union of Operating Engineers Local No. 12 ("Local 12") and the Southern California General Contractors Association ("Association"). Defendant Sully Miller Contracting Company ("Sully Miller") is a general contractor in the Southern California area and a member of the Association. As such, Sully Miller has been bound at all relevant times by the Master Labor Agreement ("MLA") and the Trust Agreements establishing the trusts. Defendant French Equipment Rental, Inc. ("French Equipment") is a California corporation engaged in business as a subcontractor and contractor. John French is the sole shareholder, president and only employee of French Equipment.

On March 13, 1972, French Equipment executed a short form agreement with Local 12, by which it agreed to be bound by the terms and conditions of the MLA, including those provisions that require contributions to the various trusts based upon the hours worked by employees who perform covered work.

Sully Miller issued a purchase order calling for French Equipment to perform certain excavation work. French made test excavations in March, 1975, and began working on the job site on November 3, 1975. While performing excavations for Sully Miller, French Equipment paid the required contributions to the trust funds on some, but not all, of the hours worked by John French, as the employee of French Equipment. On October 24, 1975, an auditor employed by plaintiffs examined the payroll books and records of French Equipment for the period between January 1, 1972 and September 30, 1975. Ultimately, plaintiffs determined that French owed the various trust funds an additional $4,036.79, plus liquidated damages in the amount of $403.68, for the hours worked by Mr. French for French Equipment, which were previously unreported.

After French Equipment's refusal to pay the assessed amount, it was placed on the delinquency list prepared by plaintiffs under Article I, Section B, Paragraph 15 of the MLA.1 Under Article I, Section B, Paragraph 16, a general contractor, such as Sully Miller, agrees not to subcontract any portion of its construction work to a contractor whose name appears on that list.2 Moreover, any contractor who subcontracts work to a contractor whose name appears on the delinquency list becomes liable to the trustees of the trust funds for all accrued delinquencies of the subcontractor. Sully Miller received actual notice of the alleged delinquency of French Equipment on February 10, 1976; after such notice it terminated its working relationship with French Equipment.

Plaintiffs have brought this suit against French Equipment and Sully Miller for the deficient contributions to the trust funds, liquidated damages, costs, attorney's fees and pre-judgment interest. Plaintiffs seek summary judgment against French Equipment and Sully Miller. Sully Miller has filed a cross-motion for summary judgment. The parties have filed a stipulation of facts and agree that no triable issues of fact remain.


French Equipment has offered no opposition to plaintiffs' motion for summary judgment, which is sufficient grounds to grant the motion. Rule 3(f)(2), Local Rules of the Central District of California. Sully Miller, however, in support of its motion for summary judgment argues that under the Labor Management Relations Act, trust funds cannot require contributions on behalf of an employee (such as John French) who is the sole shareholder, president and only employee of the contractor. As adoption of this theory would relieve French Equipment of liability as well as Sully Miller, the Court will consider it as if French Equipment had raised it in opposition to plaintiffs' summary judgment motion.

Section 302(c)(5) of the National Labor Relations Act ("NLRA") permits the payment of money or other things of value by an employer

to a trust fund established by such representative, for the sole and exclusive benefit of the employees of such employer, and their families and dependents . . .. 29 U.S.C. § 186(c)(5) (1976) (emphasis added). The term "employee" is defined in § 2(3) of the NLRA to exclude independent contractors and supervisors.3 The term "supervisor" is defined in § 2(11) of the NLRA to mean
any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibility to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment. 29 U.S.C. § 152(11) (1976).

Generally, § 302 prohibits employers making payments to, or receiving payments from, employees' representatives, in order "to prevent employers from tampering with the loyalty of union officials and to prevent union officials from extorting tribute from employers." Turner v. Local 302, International Brotherhood of Teamsters, 604 F.2d 1219, 1227 (9th Cir. 1979). Subsection (c)(5) provides an exception to this sweeping prohibition, allowing employers to make contributions to a trust fund established by employee representatives under certain conditions. One of those conditions is that the trust fund must be for the sole and exclusive benefit of the employees of the employer. 29 U.S.C. § 186(c)(5).

Sully Miller contends that under § 302(c)(5), the trust fund agreements should be interpreted to exclude contributions on behalf of "owner-employees" such as John French, because such individuals are either supervisors or employers and a trust fund that provides benefits for persons other than employees is illegal. See Burroughs v. Board of Trustees, 542 F.2d 1128 (9th Cir. 1976), cert. denied, 429 U.S. 1096, 97 S.Ct. 1113, 51 L.Ed.2d 543 (1977); Alvares v. Erickson, 514 F.2d 156 (9th Cir.) cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975). Sully Miller relies upon decisions of the National Labor Relations Board ("NLRB") holding that persons with substantial ownership in a business are employers, not employees, for the purposes of unfair labor practice proceedings or bargaining unit determinations. Cerni Motor Sales, Inc., 201 N.L.R.B. 918, 918 (1973); Associated Musicians of Greater New York, Local 802 (Random Travel, Inc.), 171 N.L. R.B. 1106, 1112 (1968), Foam Rubber City # 2 of Florida, Inc., 167 N.L.R.B. 623, 624 (1967).

The issue presented is whether an individual who is the sole shareholder, president and only employee of a corporation can be considered an employee under § 302(c)(5). Neither the Supreme Court nor the Ninth Circuit has ruled on this question.4

The issue of whether sole proprietors and "owner-employees" can be considered employees under § 302(c)(5) has been examined by several courts in recent years.5 At least one circuit court has held that an individual in a situation analogous to that of Mr. French can participate in an employee trust fund, notwithstanding the restriction in § 302(c)(5). Reiherzer v. Shannon, 581 F.2d 1266 (7th Cir. 1978). The plaintiff in that case was employed as a teamster truck driver from 1949 to 1951. In 1951 he purchased the controlling share of stock of the trucking company for which he worked and became the president and chief executive officer of the company. By 1955 he owned 90 percent of the company's stock, although he continued to function as a day-to-day truck driver. He was paid a salary while the company paid the other truck drivers on an hourly basis. Pursuant to a collective bargaining agreement, Reiherzer made payments to an employee trust fund beginning in 1955 and continuing until 1968, when he retired. After finding that the terms of the trust fund plan did not exclude Reiherzer's participation, the Court concluded that the argument that Reiherzer was a "supervisor" and thus not an "employee" as that term is used in § 302(c)(5) was "without merit." 581 F.2d at 1275. The Court reasoned that when Congress explicitly excluded supervisors from the definition of employees in § 2(3) of the NLRA, it was concerned with whether supervisors should be able to band together in a union to bargain collectively with the employer, see NLRB v. Bell Aerospace Co., 416 U.S. 267, 279-84, 94 S.Ct. 1757, 1764-1766, 40 L.Ed.2d 134 (1974), and not with the question of the legitimate coverage of employee benefit trust funds. Therefore, the Court reasoned that the term "employees" has a broader scope under § 302(c)(5) than under other provisions of the NLRA and that the result would be absurd if an otherwise eligible worker who had made regular contributions to a trust fund would be unable to receive benefits because he was promoted to a supervisor. 581 F.2d at 1276.

Were this Court considering whether John French could be included in a bargaining unit of employees of French Equipment6 it is likely that he would be excluded, either because he is an employer or a supervisor, as contended by Sully Miller,7 or because he represents management. See generally NLRB v. Yeshiva University, 444 U.S. 672, 100 S.Ct. 856, 63 L.Ed.2d 115 (1980); Beasley v. Food Fair of North Carolina, Inc., 416 U.S. 653, 94 S.Ct. 2023, 40 L.Ed.2d 443 (1974). The term "employees," however, can have a meaning in § 302(c)(5) different from its meaning in those sections of the NLRA that define employees...

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  • HAWAII CARPENTERS'TRUST v. Waiola Carpenter Shop, Civ. No. 83-0253.
    • United States
    • U.S. District Court — District of Hawaii
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    ...the continuity in the employing industry and the continuity in the appropriateness of the bargaining unit. In Burke v. French Equipment Rental, 498 F.Supp. 94, 98 (C.D.Cal.1980), rev'd in part, aff'd in part, 687 F.2d 307 (9th Cir. 1982), the court examined whether an individual who is the ......
  • Burke v. French Equipment Rental, Inc.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
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    ...on February 10, 1976; after such notice it terminated its working relationship with French Equipment.Burke v. French Equipment Rental, 498 F.Supp. 94, 95-96 (C.D.Cal.1980) (footnotes omitted).2 The Supreme Court remanded for the purpose of "further consideration in light of Kaiser Steel Cor......
    • United States
    • U.S. District Court — Central District of California
    • December 21, 1982
    ...at issue herein are not prohibited by Section 302(c)(5) of the National Labor Relations Act, 29 U.S.C. § 186. Burke v. French Equipment Rental, 498 F.Supp. 94 (C.D.Ca. 1980); rev'd on other grounds, Burke v. French Equipment Rental, 687 F.2d 307 (9th Counterclaimants are therefore entitled ......
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    ...than Sapper. See Operating Eng'rs Pension Trust v. Silvergate Corp., CV83-1411R (D.C.C.D.Cal) (1983); Burke v. French Equipment Rental Inc., 498 F.Supp. 94 (C.D.Cal.1976), rev'd, 687 F.2d 307 (9th Cir.1982); Burke v. Ernest v. Hahn, Inc., CV75-2724 LTL (D.C.C.D.Cal.) (1975). Once we have de......

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