MECHANICAL CONT. ASS'N OF PHILADEPHIA v. Local Union 420, 12748.

• Decision Date: 13 April 1959
• Docket Number: No. 12748.,12748.
• Parties: MECHANICAL CONTRACTORS ASSOCIATION OF PHILADELPHIA, INC., v. LOCAL UNION 420, Appellant, Local Union 428, and Local Union 690 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO.
• Court: U.S. Court of Appeals — Third Circuit

265 F.2d 607 (1959)

MECHANICAL CONTRACTORS ASSOCIATION OF PHILADELPHIA, INC., v. LOCAL UNION 420, Appellant Local Union 428, and Local Union 690 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO.

No. 12748.

United States Court of Appeals Third Circuit.

Argued February 3, 1959.

Decided April 13, 1959.

M. H. Goldstein, Bernard L. Barkan, Goldstein & Barkan, Philadelphia, Pa., for defendant-appellant.

Henry W. Maxmin, Jacoby & Maxmin, Philadelphia, Pa., for plaintiff-appellee.

Before GOODRICH and STALEY, Circuit Judges, and STEEL, District Judge.

STALEY, Circuit Judge.

At issue in this appeal is the legality of a jointly administered labor-management industrial fund in light of Section 302 of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 186.

Plaintiff, Mechanical Contractors Association of Philadelphia, Inc. (hereinafter referred to as the Association), is a non-profit corporation composed of fifty of the mechanical contractors in the Philadelphia area. For approximately twenty years it has negotiated, on behalf of management, collective bargaining agreements with the unions which represent the employees of its members. These employee representatives, Local Unions 690, 428, and 420 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, were the defendants in the action below. The collective bargaining agreements negotiated by plaintiff have been adopted by all mechanical contractors engaged in the industry in the area, that is, the Pennsylvania counties of Philadelphia, Montgomery, Bucks, Chester, and Delaware, as setting the pattern governing wages, hours, and working conditions. In addition, the plaintiff association bears the cost and provides the services for management's participation in this industry's health and welfare funds, apprentice training programs, joint arbitration procedures, and joint conference committees.

In late August and early September of 1956, collective bargaining agreements were executed by the Association and Local Unions 690, 420, and 428, covering a period of three years, beginning May 1, 1956. Pursuant to the provisions of Article IX of the agreements all employers are required to contribute 19 cents for each hour worked by each of its employees. The fund created thereby is deposited in the First Pennsylvania Banking and Trust Company and was to be administered by a joint board of trustees, consisting of three members to be appointed by the Association and three by the union, operating under an agreement and declaration of trust to be executed by the parties. The declaration of trust has never been executed because of the dispute concerning the legality of the joint board provisions. However, contemporaneous with the execution of the collective bargaining agreement the parties entered into a supplemental agreement for the purpose of clarifying Article IX of the master contract. It provides that pending appointment of the joint board of trustees, the designated depository is directed to turn over 16½ cents out of the 19 cent hourly contribution to the trustees of existing funds to be administered pursuant to pre-existing trust instruments.

The remaining 2½ cents, known as the Industry Fund, was to be held in escrow by the depository pending a determination by the Department of Justice or United States District Court for the Eastern District of Pennsylvania of the legality of its joint administration.¹ The supplemental agreement provided that if joint administration was held to be lawful the depository was to pay over the fund to the joint board of trustees and it in turn was to turn over $50,000 annually to the Association for its use in any manner whatsoever, provided that no part of it should be used for advertising, propaganda, or other purposes inimical to the interests of the union. The remaining portion of the fund was to be turned over to the Association only after approval by an affirmative vote of at least two management and two labor trustees of projects proposed by the Association. After the funds were turned over to the Association in either way, it was to be solely responsible without any interference by the joint board of trustees or the union.

In the event that it was decided that the fund was lawful but joint administration unlawful, the depository was to turn over the contribution directly to the Association. Lastly, if it was decided that the establishment of the fund per se was unlawful, the money was to be returned to the contributors. However, pending resolution of the question of legality, the depository was authorized to turn over to the Association 1½ cents of the contribution of 2½ cents.

The supplemental agreement set out the purposes for which the Industry Fund was created as follows: paying the operating costs of the Association, including but not limited to, the expenses of conducting public relations, public education in regard to the heating, piping, and air conditioning industry, promotion of stability in labor-management relations; paying the employer's costs of collective bargaining on an industry-wide basis; maintaining facilities for arbitration and adjustment of grievances; creating and administering jointly with labor the health and welfare fund, joint apprenticeship training program and comparable programs; and guaranteeing, by means of surety bond coverage, the payment by each employer of his contributions into the various industry programs.

Pursuant to the terms of the supplemental agreement, the Association requested an opinion from the Department of Justice in the form set forth therein. In submitting the question, the Association took the position that joint administration of the Industry Fund was unlawful.² Local 420 contended, on the contrary, that such administration was lawful. The Department of Justice indicated that it could give no formal opinion inasmuch as the application of the statute involved criminal sanctions; however, it did state "we can advise you that if the fund were under the exclusive management and control of the employers who maintained it by their contributions no question would arise of the validity of the trust under the (A) proviso of Section 302(c) (5). The reason for this is, of course, that the payments to the trustees would not be payments to `representatives' of the employees within the meaning of Section 302(a) and (b), and hence not within the prohibitions of those subsections." Local 420 contended that this answer was not dispositive of the controversy and, as a result, the Association brought an action in the District Court for the Eastern District of Pennsylvania seeking a decree that the Industry Fund is lawful and contributions to it enforceable; that joint administration of labor and management is unlawful; and that the Fund may only be administered by the employer contributors. The district court rendered an opinion and entered a decree on September 11, 1958, in substantially the form requested by the Association.

The Association contends that the reply of the Department of Justice to its inquiry is a definitive opinion such as was contemplated by the supplemental agreement but does not press that point here. It does contend vigorously that the decision rendered by the district court is clearly a determination such as was contemplated by the supplemental agreement and dispositive of the issues and under the agreement there was no right of appeal. However that may be, we need not determine these issues for the view which we take of the substantive question disposes of the case.

Section 302(a)³ of the Labor Management Relations Act of 1947 proscribes the giving by an employer to any representative of his employees, who are employed in an industry affecting commerce, of any money or other thing of value. Subsection (b)⁴ thereof makes it equally unlawful for any representative of employees to receive or accept any money or...