Local 538 United Broth. of Carpenters and Joiners of America v. U.S. Fidelity and Guar. Co.

• Decision Date: 28 November 1995
• Docket Number: D,Nos. 368,850,s. 368
• Citation: 70 F.3d 741
• Parties: 131 Lab.Cas. P 11,458, 33 Fed.R.Serv.3d 909, Pens. Plan Guide P 23915Q LOCAL 538 UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA, Northern New England District Council of Carpenters, Local 522 Laborers' International Union of North America, and Maine, New Hampshire and Vermont Laborers' District Council, Plaintiffs-Appellants, Cross-Appellees, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Appellee, Cross-Appellant. ockets 94-7351, 94-7353.
• Court: U.S. Court of Appeals — Second Circuit

Page 741

70 F.3d 741

131 Lab.Cas. P 11,458, 33 Fed.R.Serv.3d 909,

Pens. Plan Guide P 23915Q

LOCAL 538 UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA, Northern New England District Council of Carpenters, Local 522 Laborers' International Union of North America, and Maine, New Hampshire and Vermont Laborers' District Council, Plaintiffs-Appellants, Cross-Appellees, v. UNITED STATES FIDELITY AND GUARANTY COMPANY Defendant-Appellee, Cross-Appellant.

Nos. 368, 850, Dockets 94-7351, 94-7353.

United States Court of Appeals, Second Circuit.

Argued Jan. 24, 1994.

Decided Nov. 28, 1995.

Anne R. Sills, Segal, Roitman & Coleman, Boston, MA, for Laborer Plaintiffs-Appellants, Cross-Appellees.

Jeffrey Neil Young, McTeague, Higbee, Libner, MacAdam, Case & Watson, Topsham, ME, for Carpenter Plaintiffs-Appellants, Cross-Appellees.

Bradford R. Carver, Boston, MA (Edward F. Vena, Michael S. Levitz, Vena, Truelove & Riley, of counsel), for Defendant-Appellee, Cross-Appellant.

Before VAN GRAAFEILAND and WINTER, Circuit Judges, and KAPLAN, ^* District Judge.

WINTER, Circuit Judge:

This is a diversity action brought by local unions against an employer's surety to collect union dues withheld by the employer and unpaid employer contributions to certain employee health and welfare funds. Chief Judge Parker granted summary judgment for the unions but declined to award attorney's fees, liquidated damages, or interest. The unions appeal from the latter denial. The surety cross-appeals on a host of grounds. We hold that the unions have standing to bring such an action but that the trustees of the funds are necessary parties to such an action. We do not reach the merits.

BACKGROUND

In 1991, Granger Northern, Inc., a general contractor, entered into a contract with the University of Vermont to construct the school's Emerging Technologies Complex in Burlington, Vermont. Granger Northern contracted with defendant United States Fidelity and Guaranty Company ("USF & G") for a Labor and Material Payment Bond. Granger Northern subsequently subcontracted certain work to Amcan, Inc., which signed agreements with Local 538, United Brotherhood of Carpenters and Joiners of America ("the Carpenters"), and with Local 522, Laborers' International Union of North America and the Maine, New Hampshire, and Vermont Laborers' District Council (collectively "the Laborers").

Amcan's agreement with the Carpenters obliged it to pay certain amounts per employee, per hour to designated health and welfare funds ("the Carpenters' Funds"). Amcan also agreed to withhold $.25 per Local 538 employee, per hour as union dues. Local 538's members in turn assigned the dues to Local 538.

Amcan's agreements with the Laborers similarly required per employee, per hour payments to designated health and welfare funds ("the Laborers' Funds"). The agreement between Amcan and the Laborers also provided that $.34 per hour, per Local 522 employee, would be deducted from employee pay for union dues, pursuant to the members' assignment to the Local.

Amcan failed to make $32,160.38 in contributions due to the Carpenters' Funds for the periods March through May, 1991 and July, 1991 through March, 1992, and failed to pay Local 538 dues withheld in the amount of $2,234.63. Amcan similarly failed to make $46,332.30 in contributions due to the Laborers' Funds from July, 1991 to March, 1992 Local 538 and Local 522 brought this action to recover the unpaid amounts from USF & G, as surety for Granger Northern, under the terms of the Labor and Material Bond. The district court granted summary judgment for the plaintiffs with regard to the unpaid dues and benefit payments but declined to award attorney's fees, liquidated damages or interest. The local unions appealed from the latter denial, and USF & G cross-appealed from the money judgment against it.

and failed to pay Local 522 $3,750.51 in dues withheld.

DISCUSSION

A. The Judgment for Unpaid Dues

USF & G does not dispute that the local unions are proper parties to bring an action for union dues withheld by an employer but never paid to the union. Local 538 concedes that the district court erroneously calculated dues at 35 cents an hour instead of 25 cents. That can be corrected on remand. Agreement ceases there.

USF & G argues that, based on the language of the Bond, dues are owed only for those employees who worked within ninety days of the notices of claims. A similar argument is made with regard to the unpaid contributions to the health and welfare funds, and, in light of our disposition of this matter, we believe it inappropriate to address this issue until the funds' trustees have been joined as parties and can speak to it. See Part C., infra.

USF & G also argues that the judgment regarding Local 522 dues should be reversed because the notice of claim failed to assert that the union was seeking dues. This argument was not raised in the district court, and we deem it waived.

B. The Unions' Standing to Bring a Collection Action for Unpaid Contributions to Health and Welfare Funds

We next consider whether the unions have standing to bring a collection action for contributions due to health and benefit funds. USF & G argues that the trustees of the funds are the only proper parties to seek recovery of contributions due the funds. See Carpenters & Millwrights Health Benefit Trust Fund v. Domestic Insulation Co., 387 F.Supp. 144, 147 (D.Colo.1975).

Ordinarily, "a party ... in whose name a contract has been made for the benefit of another ... may sue in that person's own name without joining the party for whose benefit the action is brought." Fed.R.Civ.P. 17(a). In Warshaw v. Local No. 415, Int'l Ladies' Garment Workers Union, AFL-CIO, 325 F.2d 143 (5th Cir.1963), however, the Fifth Circuit rejected the argument that a union may sue for unpaid contributions to a health and welfare fund required by a collective agreement trust without joining the fund as a party. Warshaw stated that "cases [citing Rule 17(a) ] failed to take into consideration the fact that a collective bargaining agreement relating to health and welfare funds is not a typical third-party beneficiary contract and is not necessarily governed by the procedural rules normally applied to them." Id. at 145. In the context of a collective bargaining agreement, "a consideration which is not present in the case of other third-party beneficiary contracts is the impact of the national labor policy," which "becomes an important consideration in determining whether the same inferences which might be drawn as to other third-party agreements should be drawn here." Lewis v. Benedict Coal Corp., 361 U.S. 459, 470, 80 S.Ct. 489, 495, 4 L.Ed.2d 442 (1960).

However, there is no policy of labor law that militates against unions bringing actions for delinquent contributions to health and welfare funds so long as the funds are joined as parties. See Part C., infra. Locals 538 and 522 negotiated with Amcan for contributions to the funds as part of their overall wage agreements. Unions may have a strong interest in seeing that collective agreements are uniformly enforced so that one employer does not have a competitive advantage over others based on its failure to abide by the terms of a collective agreement. Once one employer is allowed to benefit from delinquencies under a collective agreement, others may seek--may be compelled to seek--to follow. We believe that this interest is sufficient to permit unions to be parties to actions seeking the payment of delinquent contributions to health and welfare funds as required by a collective agreement. USF & G suggests that this holding will somehow make unions the "general litigating agencies" of their "members." See Rock Drilling, Blasting, etc. Local Union No. 17 v. Mason & Hanger Co., 217 F.2d 687 (2d Cir.1954), cert. denied, 349 U.S. 915, 75 S.Ct. 604, 99 L.Ed. 1249 (1955). We disagree. It simply allows Local 538 and Local 522 to enforce the benefit of their bargains, and no more.

C. The Funds' Trustees as Necessary Parties

Although we see no infirmity in the unions' initiation of this action, we nevertheless believe that the funds' trustees should be joined as parties. ¹ Subject to certain exceptions, Rule 19 of the Federal Rules of Civil Procedure requires that

[a] person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if ... the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may ... as a practical matter impair or impede the person's ability to protect that interest.

The judgment in this action could well be res judicata in any future action by the funds to compel payment of the contributions at issue. Unless the trustees are joined, the unions in effect may have sole discretion to settle or otherwise compromise the claims for the delinquent contributions owed to the funds, perhaps thereby foreclosing a subsequent action by the funds' trustees to recover delinquent benefits. In such circumstances, permitting the unions to proceed without the trustees may impair or impede the funds' ability to protect their interests in the claim. Compare Health-Chem Corp. v. Baker, 915 F.2d 805, 810 (2d Cir.1990) (where judgment not binding on non-party and possibility of litigation with that non-party was only speculative, there existed no basis for compulsory joinder).

As noted in Part B., supra, unions generally will seek uniform enforcement among employers of their collective agreements. However, unions must also attend to current negotiations and the present economic conditions of particular employers. The interests of unions and those of health and benefit funds may thus at times diverge, because a union's power to offer an employer a settlement of an action for delinquent contributions as a bargaining...