Milwaukee Area Joint Apprenticeship Training Committee for Elec. Industry v. Howell
| Decision Date | 16 October 1995 |
| Docket Number | No. 95-1489,95-1489 |
| Citation | 67 F.3d 1333 |
| Parties | , 19 Employee Benefits Cas. 2041, Pens. Plan Guide P 23914B MILWAUKEE AREA JOINT APPRENTICESHIP TRAINING COMMITTEE FOR the ELECTRICAL INDUSTRY, Milwaukee Electrical Joint Apprenticeship and Training Trust Fund, Joe Ramsack, Lee Hollenbeck, Dick Neiman, and Carol Megna, Present Trustees of the Milwaukee Electrical Joint Apprenticeship and Training Trust Fund, Plaintiffs-Appellants, v. Andrew A. HOWELL, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Frederick Perillo (argued), John J. Brennan, Previant, Goldberg, Uelmen, Gratz, Miller & Bruegeman, Milwaukee, WI, for Plaintiffs-Appellants.
David P. Lowe (argued), Jacquart & Lowe, Milwaukee, WI, for Defendant-Appellee.
Before CUMMINGS, FLAUM and ROVNER, Circuit Judges.
In 1986, defendant Andrew A. Howell, entered an electrical training program that was provided by the plaintiffs, the trustees of the Milwaukee Electrical Joint Apprenticeship and Training Trust Fund ("Trust Fund"). Upon entering the program, Howell signed a loan agreement that obligated him to repay the cost of his training in cash should he choose to work for an employer within the industry that does not contribute to this or a like apprenticeship training trust fund.
The district court held that Howell had breached the loan agreement by accepting employment as an electrician with the City of Milwaukee, which does not contribute to an apprenticeship trust fund. However, the district court granted Howell's motion for summary judgment on the grounds that the repayment plan established by the plaintiffs violated ERISA, 29 U.S.C. Sec. 1104(a)(1), because it was not enacted solely for the benefit of its participants. Because the plaintiffs owed no fiduciary duty to plan participants in the adoption of the loan agreement, the judgment below is reversed.
The following facts are undisputed. The Trust Fund is a joint union-employer training apprenticeship trust fund organized pursuant to section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. Sec. 186(c)(5). The Trust Fund trains apprentices to become journeyman electricians. The committee that administers the Trust Fund is composed of an equal number of union and employer representatives.
Pursuant to collective bargaining agreements, certain employers make contributions to the Trust Fund to provide for the training of the apprentices. The contributions are made pursuant to a formula and represent 1% of each employer's gross monthly labor payroll for each hour worked by journeymen and apprentices.
While the training program has been in existence for many years, in 1986 the trustees adopted the Scholarship Loan Plan ("SLP"). The SLP was adopted in response to what the trustees viewed as a marked increase in the number of journeymen who, after completing the training program at the expense of contributing employers, went to work for employers that do not contribute to the Trust Fund.
According to the SLP, each apprentice signs a scholarship loan agreement and a promissory note. The terms of the agreement provide that the apprentice is at all times free to leave the electrical industry with no resulting repayment obligation. However, if the apprentice chooses to accept employment within the electrical industry, he has two options: (1) repay the cost of his training in kind by working for an employer who contributes either to the Trust Fund or to a like trust fund, or (2) default under the terms of the agreement by working for an employer who does not contribute to either the Trust Fund or a like trust fund, and repay the cost of his training in cash. 1
Howell entered the training program in 1986, signing a promissory note and scholarship loan agreement ("Agreement") which included the above repayment obligations. The gross amount of his loan was $10,206.92. Howell finished the training program and achieved journeyman status in 1990. Throughout his entire apprenticeship, and until December 1991, Howell worked for employers that contributed to the Trust Fund. In December 1991, however, Howell accepted employment as an electrician with the City of Milwaukee Bureau of Public Works. The City of Milwaukee does not contribute to any apprenticeship training trust fund. The Trust Fund subsequently sued Howell claiming that his employment with the City of Milwaukee constituted a breach of the Agreement.
The district court found as an undisputed fact that Howell's employment with the City of Milwaukee constituted a breach of the Agreement. However, the lower court denied the Trust Fund's motion for summary judgment and granted Howell's motion for summary judgment, concluding that Howell need not repay his loan because the trustees' enactment of the SLP violated their fiduciary duty as imposed by ERISA, 29 U.S.C. Sec. 1104(a)(1). The Trust Fund appeals the lower court's decision. This Court has jurisdiction of the appeal pursuant to 28 U.S.C. Sec. 1291.
This Court reviews the grant or denial of summary judgment de novo. East Food & Liquor, Inc. v. United States, 50 F.3d 1405, 1410 (7th Cir.1995). In so doing, we review the facts alleged in the complaint and the legitimate inferences to be drawn therefrom in the light most favorable to the plaintiffs. Id.
The district court concluded that the undisputed facts showed that Howell breached the Agreement by accepting employment with the City of Milwaukee. Howell argues that the district court erred in this determination. We disagree.
The Agreement contained the following provision:
5. It will constitute an immediate breach of this Agreement if the apprentice accepts employment in the electrical industry from an employer who does not have a collective bargaining agreement which provides for the payment of contributions to the Trust Fund or a like Joint Apprenticeship and Training Trust Fund.
[Pl.App. 28] (emphasis added).
Howell points out that the City of Milwaukee is a signatory to a collective bargaining agreement that requires the training of apprentice electricians. He additionally notes that the City of Milwaukee pays for such training. However, the district court found that Howell produced no evidence that the City of Milwaukee contributes either to the Trust Fund or to any other trust fund. The district court concluded that "[c]ontribution to a training program, but not a trust fund, does not satisfy the terms of the scholarship loan agreement." [Pl.App. 5]. We agree with the district court's conclusion.
In its brief to this Court, the Trust Fund initially argues that Howell lacks standing to assert an ERISA violation as a defense to his obligation to repay his loan. However, the Trust Fund failed to argue this issue before the court below. 2 Therefore, we need not consider the question of Howell's standing to raise an ERISA violation as a defense to his repayment obligation, as the issue has been waived. United States v. Rode Corp., 996 F.2d 174, 179 (7th Cir.1993).
The district court held that Howell was not required to repay his loan because the trustees' adoption of the SLP violated ERISA, 29 U.S.C. Sec. 1104(a)(1). The Trust Fund argues that the district court erred in this determination. For the reasons discussed below, we agree.
Joint apprenticeship and training funds are "welfare benefit plans" under ERISA, 29 U.S.C. Sec. 1002(1)(A). As such, the trustees of the plan are bound by the fiduciary duties imposed by ERISA, 29 U.S.C. Sec. 1104(a)(1), which provides in part,
[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and:
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries.
The district court concluded that the purpose of enacting the SLP "appears to be to ensure contributing employers a pool of trained workers that is unavailable to the competition." [Pl.App. 9-10]. The district court therefore decided that the SLP was "not enacted solely in the interest of the Trust Fund's participants," and thus violated ERISA. [Pl.App. 10].
In analyzing the fiduciary duty issue, the district court relied upon Joint Apprenticeship & Training Comm. of the Sheet Metal Workers' Int'l Ass'n, Local No. 9 v. Chapman, 744 F.Supp. 1008 (D.Colo.1990). In Chapman, the court held that a similar apprentice repayment arrangement was unenforceable because the trustees' adoption of the plan was arbitrary and capricious, and a violation of the fiduciary duties imposed by both ERISA and the trust documents. Id. at 1020. Specifically, the court found a fiduciary duty violation because the trustees did not provide sufficient evidence of a financial justification for the repayment requirement, or that they had considered less restrictive means for accomplishing their stated purpose. Id.
The Chapman court based its holding on Deak v. Masters, Mates and Pilots Pension Plan, 821 F.2d 572 (11th Cir.1987), certiorari denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). Deak involved a trustee breach of fiduciary duty by suspending benefits for retired employees working at non-union employers while allowing those working for union employers to draw full benefits. However, Deak is distinguishable from the Trust Fund's situation, as well as from that in Chapman, because it involved action regarding vested pension benefits. Welfare benefit plans, on the other hand, are exempt from the participation-and-vesting requirements imposed by ERISA, 29 U.S.C. Sec. 1081(a)(1). Because the Trust Fund is a welfare benefit plan, and therefore does not involve vested benefits, the analysis in Deak is inapplicable here.
However, we conclude that the district court's analysis and reliance on Chapman This Circuit has consistently held that the...
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