Local 144 Nursing Home Pension Fund v. Demisay

• Decision Date: 14 June 1993
• Docket Number: No. 91-610,91-610
• Citation: 124 L.Ed.2d 522,508 U.S. 581,113 S.Ct. 2252
• Parties: LOCAL 144 NURSING HOME PENSION FUND, et al., Petitioners, v. Nicholas DEMISAY et al
• Court: U.S. Supreme Court

508 U.S. 581

113 S.Ct. 2252

124 L.Ed.2d 522

LOCAL 144 NURSING HOME PENSION FUND, et al., Petitioners,

v Nicholas DEMISAY et al.

No. 91-610.

Argued Jan. 11, 1993.

Decided June 14, 1993.

Syllabus ^*

For several years, respondent employers had made contributions to two trust funds (collectively, Greater Funds) on behalf of their employees. In 1984, however, the employers ended their participation in the Greater Funds and agreed, in collective-bargaining agreements with the relevant union, to establish a new set of trust funds (collectively, Southern Funds). To help finance the change between the funds, the employers and other respondents brought an action to compel petitioners, the Greater Funds and their trustees, to transfer to the Southern Funds that portion of the Greater Funds' reserves attributable to the respondents' past contributions. Respondents asserted a right to relief under, inter alia, § 302 of the Labor Management Relations Act, 1947, which prohibits payments from employers to union representatives, §§ 302(a) and (b), but affords an exception under § 302(c)(5) for payments to an employee trust fund if certain conditions are met, including that the trust fund be "established . . . for the sole and exclusive benefit of the employees," and that the payments be "held in trust for the purpose of paying" employee benefits. Respondents' theory was that, unless the reserves attributable to the employers' past contributions were transferred, the Greater Funds would fail to meet § 302(c)(5)'s conditions and would thus suffer from a "structural defect" which could be remedied by the federal courts pursuant to the power conferred by § 302(e) to "restrain violations of this section." The District Court granted petitioners' motion for summary judgment, finding no such "structural defect" in the Greater Funds, but the Court of Appeals reversed and remanded for the District Court to shape an appropriate remedy.

Held: A federal court does not have authority under § 302(e) to issue injunctions against a trust fund or its trustees requiring the trust funds to be administered in the manner described in § 302(c)(5). Section 302(e) provides district courts with jurisdiction "to restrain violations of this section," and a violation of § 302 occurs when payments prohibited by §§ 302(a) and (b) are made. The exception to violation set forth in § 302(c)(5) describes the character of the trust to which payments are allowed, leaving it originally to state trust law, and now to federal trust law under the Employee Retirement Income Security Act of 1974, to determine when breaches of that trust have occurred and how they may be remedied. Language in Arroyo v. United States, 359 U.S. 419, 426-427, 79 S.Ct. 864, 868-869, 3 L.Ed.2d 915, and NLRB v. Amax Coal Co., 453 U.S. 322, 331, 101 S.Ct. 2789, 2795, 69 L.Ed.2d 672, that is perhaps susceptible of a contrary reading is pure dicta. Pp. ____.

935 F.2d 528, (CA2 1991), reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and O'CONNOR, KENNEDY, SOUTER, and THOMAS, JJ., joined. STEVENS, J., filed an opinion concurring in the judgment, in which WHITE and BLACKMUN, JJ., joined.

Henry Rose, Washington, DC, for petitioners.

Ronald E. Richman, New York City, for respondents.

Justice SCALIA delivered the opinion of the Court.

This case presents the question whether a federal district court may issue an injunction pursuant to § 302 of the Labor Management Relations Act, 1947 (LMRA), 61 Stat. 157, as amended, 29 U.S.C. § 186 (1988 ed. and Supp. III), requiring the trustees of a multiemployer trust fund to transfer assets from that fund to a new multiemployer trust fund established by employers who broke away from the first fund.

I

Respondents include a group of employers that, until 1981, were members of a multiemployer bargaining association, the Greater New York Health Care Facilities Association, Inc. (Greater Employer Association). Two trust funds—the Local 144 Nursing Home Pension Fund and the New York City Nursing Home—Local 144 Welfare Fund (collectively, Greater Funds)—were established pursuant to collective-bargaining agreements between the Greater Employer Association and the relevant union, Local 144 of the Hotel, Hospital, Nursing Home and Allied Services Employees Union, Service Employees International Union, AFL-CIO (Local 144). Prior to 1981, the respondent employers made contributions to the Greater Funds on behalf of their employees in accordance with the terms of collective-bargaining agreements negotiated between the Greater Employer Association and Local 144.

In 1981, the respondent employers broke away from the Greater Employer Association and executed independent collective-bargaining agreements with Local 144. The initial agreements required continuing employer contributions to the Greater Funds, but those concluded in 1984 provided for establishment of a new set of trust funds, the Local 144 Southern New York Residential Health Care Facilities Association Pension Fund and the Local 144 Southern New York Residential Health Care Facilities Association Welfare Fund (Southern Funds). At approximately the same time, the respondent employers ended their participation in the Greater Funds.

In negotiating the transfer from the Greater Funds to the Southern Funds, the "primary concern" of Local 144 was to make sure that the shift would not cause its members to lose benefits. 935 F.2d 528, 530 (CA2 1991). To address that concern, the respondent employers guaranteed in their collective-bargaining agreements that the Southern Funds would recognize all credited service time earned under the Greater Funds and, more generally, that employees would not lose any benefits as a result of the withdrawal from the Greater Funds. See 710 F.Supp. 58, 60-61 (SDNY 1989). That guarantee obviously created some peculiar liabilities for the Southern Funds. For example, an employee who had earned nine years credited service time under the Greater Funds would, after just one more year of service, acquire vested rights to pension benefits pursuant to the 10-year vesting requirement of the Southern Funds—even though the Southern Funds had received only one year of employer contributions for that employee. See id., at 61, n. 4. The Southern Funds' assumption of these liabilities, however, did not alter the obligations of the Greater Funds, which were not parties to the collective-bargaining agreements: They remained liable to the departing employees for all vested benefits. See id., at 61, and n. 5, 65; 935 F.2d, at 530-531.

To help cover the Southern Funds' liabilities and in general to help finance the change from the Greater Funds to the Southern Funds, the respondent employers—joined by several of their employees and the trustees of the Southern Funds—brought this action to compel petitioners, the Greater Funds and the Greater Funds' trustees, to transfer an appropriate fractional share of the Greater Funds' assets to the Southern Funds. They asserted right to relief under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. (1988 ed. and Supp. III), and under § 302 of the LMRA; only the latter claim is at issue here.

The relevant portions of § 302 are set forth in the margin.¹ To describe respondents' claim, it is necessary to sketch the structure of that provision. Subsection (a) prohibits an employer (or an association of employers, such as the Greater Employer Association) from, inter alia, making payments to any representative of its employees, including the employees' union and union officials. Paragraph (b)(1) is the "reciprocal" of subsection (a), Arroyo v. United States, 359 U.S. 419, 423, 79 S.Ct. 864, 867, 3 L.Ed.2d 915 (1959), making it unlawful for employee representatives to receive the payments prohibited by subsection (a). The prohibitions of subsection (a) and paragraph (b)(1) are drawn broadly, and would prevent payments to union employee health and welfare funds such as those at issue here. See generally United States v. Ryan, 350 U.S. 299, 304-305, 76 S.Ct. 400, 404-405, 100 L.Ed. 335 (1956); Goetz, Employee Benefit Trusts under Section 302 of Labor Management Relations Act, 59 Nw.U.L.Rev. 719, 723-731 (1965). Subsection 302(c), however, provides exceptions to the prohibitions. Most significantly for our purposes, paragraph (c)(5) excepts payments to an employee trust fund so long as certain conditions are met, including that the trust fund be "established . . . for the sole and exclusive benefit of the employees," and that the payments be "held in trust for the purpose of paying" employee benefits.

Respondents' theory is that the Greater Funds cannot meet those last quoted conditions unless they transfer to the Southern Funds the portion of their reserves that is attributable to the respondents' past contributions. If they fail to do so, according to respondents, they will suffer from a "structural defect" which can be remedied by federal courts pursuant to the power conferred by § 302(e) to "restrain violations of this section."

The District Court granted petitioners' motion for summary judgment. Though it agreed with respondents that it had power to "review a challenge that the Greater Funds are structurally deficient under [§ 302(c)(5)'s] 'sole and exclusive' benefit standard," 710 F.Supp., at 61, 62, it found no "structural defect," since there was no allegation of corruption in the Greater Funds and since the transfer of assets would not further any collective-bargaining policies. Id., at 64. The Court of Appeals reversed, holding that the Greater Funds "would suffer from a 'structural defect' " unless the funds transferred a portion of their assets to the Southern Funds. 935 F.2d, at 534. It remanded for the District Court "to shape an appropriate remedy guided by the principle that a fair portion of the reserves reflecting contributions made to the Greater Funds on behalf...