EMPLOYING PLASTERERS'ASS'N v. JOURNEYMEN, ETC.

• Decision Date: 22 June 1960
• Docket Number: No. 12813.,12813.
• Citation: 279 F.2d 92
• Parties: EMPLOYING PLASTERERS' ASSOCIATION OF CHICAGO, Plaintiff-Appellant, v. JOURNEYMEN PLASTERERS' PROTECTIVE AND BENEVOLENT SOCIETY OF CHICAGO, LOCAL NO. 5; Chicago Plastering Institute, Inc.; Bryon W. Dalton, Individually, as President of Chicago Plastering Institute, Inc., and as a Representative of Employees; Albert J. Forst, Individually, and as President of Local No. 5; Owen Hughes, Individually, as Secretary-Treasurer of Local No. 5, and as Treasurer of Chicago Plastering Institute, Inc.; Joseph McGuire, Individually, and as Vice President of Local No. 5; Jerry Fogarty, Individually, and as a Representative of Local No. 5; Daniel Heffernan, Individually, and as a Representative of Local No. 5; Frank Downey, Individually, and as a Representative of Local No. 5; Joseph T. Power, Individually, as Director of Chicago Plastering Institute, Inc., and as a Representative of Employees; and William Fischer, Individually, as Director of Chicago Plastering Institute, Inc., and as a Representative of Employees, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

279 F.2d 92 (1960)

EMPLOYING PLASTERERS' ASSOCIATION OF CHICAGO, Plaintiff-Appellant, v. JOURNEYMEN PLASTERERS' PROTECTIVE AND BENEVOLENT SOCIETY OF CHICAGO, LOCAL NO. 5; Chicago Plastering Institute, Inc.; Bryon W. Dalton, Individually, as President of Chicago Plastering Institute, Inc., and as a Representative of Employees; Albert J. Forst, Individually, and as President of Local No. 5; Owen Hughes, Individually, as Secretary-Treasurer of Local No. 5, and as Treasurer of Chicago Plastering Institute, Inc.; Joseph McGuire, Individually, and as Vice President of Local No. 5; Jerry Fogarty, Individually, and as a Representative of Local No. 5; Daniel Heffernan, Individually, and as a Representative of Local No. 5; Frank Downey, Individually, and as a Representative of Local No. 5; Joseph T. Power, Individually, as Director of Chicago Plastering Institute, Inc., and as a Representative of Employees; and William Fischer, Individually, as Director of Chicago Plastering Institute, Inc., and as a Representative of Employees, Defendants-Appellees.

No. 12813.

United States Court of Appeals Seventh Circuit.

May 6, 1960.

Rehearing Denied June 22, 1960.

Matthew E. Murray, Seyfarth, Shaw, Fairweather & Geraldson, Henry E. Seyfarth, Joseph E. Wyse, Wilfred F. Rice, Jr., Chicago, Ill., for plaintiff-appellant, Employing Plasterers' Ass'n. of Chicago.

Thomas M. Thomas, Thomas B. Martineau, Kirkland, Ellis, Hodson, Chaffetz

& Masters, Chicago, Ill., for defendants-appellees, Chicago Plastering Institute, Byron W. Dalton, Joseph T. Power and William Fischer.

William T. Kirby, John J. Enright, Hugh J. McCarthy, Chicago, Ill., for defendants-appellees, Journeymen Plasterers' Protective & Benevolent Society of Chicago, Local No. 5; Albert J. Forst, Owen Hughes, Joseph McGuire, Jerry Fogarty, Daniel Heffernan, Frank Downey.

Before SCHNACKENBERG and KNOCH, Circuit Judges, and GRUBB, District Judge.

GRUBB, District Judge.

This is an appeal from an order for judgment for the defendants dismissing an action for injunction and ancillary relief under Section 302(e) of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 186(e).

Plaintiff-appellant, Employing Plasterers' Association of Chicago (hereinafter referred to as the "Association"), is a nonprofit trade corporation. At the commencement of this action, its members were about 45 out of an approximate total of 200 Chicago plastering contractors. A function of the Association is the negotiation and execution on behalf of its members of collective bargaining agreements covering wages, hours, and conditions of employment for plastering work performed in and about Chicago.

Defendant-appellee, Journeymen Plasterers' Protective and Benevolent Society of Chicago, Local No. 5 (hereinafter called "Local No. 5"), is an unincorporated trade union composed of journeymen and apprentice plasterers who are employed by Chicago plastering contractors, including contractor members of the Association. It is a chartered local of the Operative Plasterers and Cement Masons International Association. Local No. 5 has negotiated and executed the pertinent collective bargaining agreements of June 1, 1945 and June 1, 1955, with the Association.

Defendant-appellee, Chicago Plastering Institute, Inc. (hereinafter called the "Institute"), is a nonprofit Illinois corporation. It was incorporated in December of 1944 on application of Byron W. Dalton and Herman J. Mutter, members of Local No. 5, and Stephen Luczak, a plastering contractor and member of the Association. The purposes for which the Institute was originally organized were as follows:

"The advancement of plaster construction over inferior substitutes, by (1) education of the public, and (2) by sponsoring legislation calculated to preserve the health and safety of the public by the use of plaster construction, and (3) discourage attempts to pass legislation derogatory to plaster construction, and (4) to do those things which are necessary and proper to promote and enhance the plastering industry."

An amendment on December 7, 1945, added the following:

"5. Benevolent and charitable, and in furtherance of same but in limitation thereof, and obtaining, through others, of hospital, death and other benefits for members of the corporation employed by contractors engaged in the business of plastering construction.

"The above shall not include the payment of any direct sick or death benefits by the corporation, nor shall it be deemed to authorize the corporation to perform any of the functions of an insurance company."

The collective bargaining agreement between Local No. 5 and the Association provides for financial contributions to the Institute as follows: The Association agrees to assess and collect from its members and to contribute a certain number of cents per hour per man employed. Local No. 5 agrees to contribute a sum not to exceed a fraction of a cent per hour for each hour each of its members is employed by contractor members of the Association.¹

The organic structure of the Institute provides for two classes of membership: (1) Institute members consisting of Local No. 5 and contributing contractors, and (2) beneficial members composed of members in good standing of Local No. 5 employed by an Institute member. In addition, proprietors, executives, and employees of all Institute members are eligible for the benefits provided under the By-Laws on payment of certain dues.

Pursuant to the By-Laws which serve as its constitution, the management of the Institute affairs is vested in an eight member Board of Directors which also elects its officers. Four of the directors represent employer groups including the Association; the remaining four represent Local No. 5. In voting at Institute meetings, the number of Local No. 5 votes shall equal the number of votes of employers present. The President of the Institute, an ex-officio member of the Board of Directors, may cast the deciding vote in case of deadlock.

The Institute administers three funds: (1) a General Fund, (2) a Benevolent Fund, and (3) a Pension Trust. The directors in their discretion may variably distribute Institute income between the General Fund and the Benevolent Fund, subject to the limitation that 40 per cent of the gross proceeds must go to the General Fund.

Regular members of the Association are contributing members of the Institute and have supplied approximately 40 per cent of the Institute income. Members of the Association have also served on the Board of Directors or as officers of the Institute since its inception.

The individual defendants-appellees are members of Local No. 5, officers of said Local, or employee designees on the Board of Directors of the Institute.

The complaint herein alleges that defendants are "representatives" of employees; that they are receiving contributions from employers for the purpose of providing employee welfare benefits; that the contributed funds are not administered in accordance with Section 302; and that said contributions are, therefore, in violation of Section 302 (a-g).² In addition, there is alleged the unauthorized disbursement of said funds.

The Association demands that violations of Section 302 be enjoined by restraining defendants from demanding, coercing, and accepting employer contributions, and from making further disbursements of funds now in the possession of the Institute. The Association also asks for the appointment of a receiver in respect to said funds and for an accounting of receipts and disbursements of employer contributions from date of the inception of the Institute.

The record in this case, consisting of stipulations and plaintiff's case on trial, contains evidence bearing on the allegedly unauthorized disbursements of Institute funds. Specific instances of asserted maladministration include the receipt of insurance commissions by Byron W. Dalton, the Institute President; loans without notes or interest; misuse of a home constructed as a "humane service for a good cause"; irregularities in the issuance of a $300,000 mortgage; the appointment and remuneration of building inspectors of the City of Chicago; expenditures for experimental work performed by contractors at the home of a certain alderman; the bestowing of honorary lifetime memberships in the Institute on Chicago political figures and others who thereby received gratis benefits; and expenditures for attorneys' fees and political contributions.

The conclusions of the trial judge as set forth in the decision on defendants' motion to dismiss³ may be summarized as follows: The legislative purpose in the enactment of Section 302 is the prevention of union-management corruption and union war chests and the guarantee of proper administration of employee welfare funds. These congressional objectives require that a cause of action under Section 302(e) must be directly related to the prevention of these evils. Section 302(e) was enacted primarily for the purpose of giving employees the right to challenge the administration of their funds in the federal courts and does not vest jurisdiction in the district court to entertain this cause of action at the instance of the employer.

An additional ground for dismissal was based on the knowledge of the allegedly illegal acts chargeable to the Association.

The decision further reveals the court's conditional holdings had the action been brought by a proper party. The court would find that employer payments to the Institute were payments to a "representative" of the employees. The court would also find that acceptance of employer contributions would constitute a violation of Section 302 because of the discretion vested in the directors of the Institute to distribute variable amounts between the General and the Benevolent Funds, the latter of which does not comply with the requirements of Section 302 (c) (5). Furthermore, defendants' recent attempts at compliance with the provisions of that section...