Raymond v. Hoffmann

• Decision Date: 25 March 1966
• Docket Number: Civ. A. No. 37356.
• Citation: 284 F. Supp. 596
• Parties: A. RAYMOND, Charles Blum, Harold Jacoby, George Bucher, Stephen Mato and John Dulczak, Trustees of Local 837 Pension Fund, a trust fund v. Sal B. HOFFMANN, Chairman, and A. J. Becker, Ralph O. Campbell, H. J. Malerstein, Lee Henson, Grant G. Simmons, Jr., R. Alvin Albarino, Martin L. Garber, and Henry W. Conrad, members, constituting the Board of Governors of the U. I. U. National Pension Trust, a trust fund.
• Court: U.S. District Court — Eastern District of Pennsylvania

284 F. Supp. 596

A. RAYMOND, Charles Blum, Harold Jacoby, George Bucher, Stephen Mato and John Dulczak, Trustees of Local 837 Pension Fund, a trust fund v. Sal B. HOFFMANN, Chairman, and A. J. Becker, Ralph O. Campbell, H. J. Malerstein, Lee Henson, Grant G. Simmons, Jr., R. Alvin Albarino, Martin L. Garber, and Henry W. Conrad, members, constituting the Board of Governors of the U. I. U. National Pension Trust, a trust fund.

Civ. A. No. 37356.

United States District Court E. D. Pennsylvania.

March 25, 1966.

Edward B. Bergman, Philadelphia, Pa., for plaintiffs and intervenor plaintiffs Joseph English and others.

David Berger, Philadelphia, Pa., for intervenor plaintiffs.

Harold Berger, Irving L. Mazer, Philadelphia, Pa., for Howell Mfg. Co., and others, intervenor plaintiffs.

Ehrenreich, Sidkoff, Edelstein & Shusterman, Philadelphia, Pa., for Display Mfrs., Inc. and Metalstand Corp.

Erwin Lodge, Philadelphia, Pa., for Victory Metal Mfg. Corp.

Edward W. Medeira, Jr., Philadelphia, Pa., for Kroehler Mfg. Co.

M. H. Goldstein, Philadelphia, Pa., for defendants.

MEMORANDUM AND ORDER SUR DEFENDANT'S MOTION UNDER RULE 12(b) (DOCUMENT 4)

VAN DUSEN, District Judge.

This case is before the court on the defendants' motion to dismiss the Complaint filed February 1, 1965.

The present suit arises out of an agreement between two labor unions, the Upholsterers International Union (hereafter referred to as the "UIU") and the International Brotherhood of Teamsters (hereafter referred to as the "Teamsters").

Due to a schism in the hierarchy of the UIU, a dissident group of union officials, headed by George Bucher, arranged (after oral agreement with Sal B. Hoffmann, President of the UIU, and John B. Backus, President of the Teamsters Joint Council 53 in Philadelphia) to dissociate themselves and the employees they represented from the UIU and to affiliate with the Teamsters.¹

The salient points of the oral agreement were (1) that a new Teamsters Local (No. 837) would be created to represent a part of the membership of UIU Local No. 37, (2) that a portion of the collective bargaining agreements previously in effect between the UIU through its Local 37 would be assigned to the new Teamster Local 837, (3) that assets of UIU Local 37 would be ratably distributed between the new union and the remainder of the old one, (4) that neither union would engage in the practice known as "raiding," (5) that any change in the status of the employees contemplated by the above arrangement would be voted on by the employees themselves, and (6) that George Bucher and the other dissidents would resign from the UIU and become charter members of the new Teamsters Local 837. These points were orally agreed to in September of 1964 and confirmed in writing in November 1964.

On October 19, 1964, a form letter was sent to all the employees in the group proposed for transfer.² The form letter contained a ballot and directions to vote for either (1) remaining in the UIU or (2) joining the Teamsters. The result of the balloting was that an overwhelming number of employees in each of 36 plants (the operators of which formerly bargained with UIU) voted to leave the UIU and join the Teamsters. This letter contained the following language, inter alia:

"To The U.I.U. Members in

U.I.U. Local No. 37 Employed

By -------------------------

"Greetings:

"* * *

"We have decided to ascertain from you whether or not you would have any objection to being transferred to the Teamsters' Union.

"Accordingly, and by order and authorization of the Upholsterers' International Union General Executive Board, you are herewith requested to indicate on the enclosed ballot whether or not you are willing to be transferred from the Upholsterers' International Union to a Local Union to be chartered by the Teamsters' Union.

"* * *

Fraternally yours /s/ Sal B. Hoffmann Sal B. Hoffmann INTERNATIONAL PRESIDENT"

No information was given by this letter to the employees to whom it was addressed that they would lose any interest they might have in the pension fund to which payments had been made, and were being made, on their behalf. The balloting was completed by 10/26/64.

On November 12, 1964, Sal B. Hoffmann, in his capacity as President of the UIU, wrote similar letters to each of the 36 employers whose employees had voted to switch over to the Teamsters. These letters informed those employers that the Teamsters were stepping into the shoes of the UIU for all practical purposes with regard to their employees. The letters also informed the employers that they would "no longer be required to make payments or contributions to the U.I.U. HEALTH and WELFARE FUND and to the U.I.U. National Pension Program which would otherwise become due * * *."³

On November 13, 1964, the major points of the oral agreement reached by Messrs. Hoffmann, Bucher and Backus were set down in two separate documents.⁴

On December 1, 1964, the division of the UIU Local 37 took place.

On December 22, 1964, the new Teamsters Local 837 set up a Pension Fund under a Trust Indenture (hereafter referred to as the "Teamsters Local 837 Pension Fund").⁵

It is unclear at what point the members of the new Teamsters Local 837 turned their attention to a pension plan. The record shows that after the new Local set up a pension plan on December 22, 1964, but before February 1, 1965, which was the date of the filing of the present suit, the Trustees of the new pension fund (Local 837 Pension Fund, Document 1, Exhibit A) made a formal demand on the Trustees of the old pension fund (UIU National Pension Program, Document 1, Exhibit B—hereafter called "The UIU Pension Fund") for an allocated portion of the old fund. This demand was refused and has now been renewed in the form of the present suit.

The present controversy is in essence a disagreement on whether or not that portion (called hereafter the "aliquot portion") of the UIU Pension Fund, which was the allocated reserve from contributions for employee pensions by the employers whose employees were transferred to the Teamsters, should be turned over to the Teamsters Local 837 Pension Fund.

19 of the 36 employers whose employees were transferred from the UIU to the Teamsters had contributed for several years to the UIU Pension Fund. Those 19 employers had approximately 1500 employees working for them at the time of the transfer. The UIU Pension Fund exists for the benefit of approximately 38,000 employees. The transferred employees thus represent about 4% of the total employees covered by the UIU Pension Fund. The reserves of the UIU Pension Fund on the date of transfer amounted to approximately $25,000,000. and the Teamsters Local 837 Pension Fund is claiming approximately $1,000,000. (or about 4%) as the amount properly allocable to it.

Section 301 of the Taft-Hartley Act (29 U.S.C.A. § 185) provides in paragraph (a):

"(a) Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties."

The defendants contend that this language is insufficient to give this court jurisdiction. The court cannot agree with defendant's contention for the following reasons. First, the oral agreement of September 1964, which was later reduced to writing, was a contract between two labor unions. Such a contract falls squarely within the language of § 301. Second, there may be sufficient evidence produced at the trial to support a finding that this contract was violated because the contract required the aliquot portion to be set aside in a pension fund for the members of Teamster Local 837.⁶ There is nothing in § 301 to preclude a suit on a contract between two labor organizations by third-party beneficiaries of such contract.^6a Although the defendants apparently contend that they would not be bound by such a contract made by the UIU, it is noted that 50% of the governors (four of the nine defendants) are "elected International Officers of the Union selected by the Union and representing employees" (par. A-1 of Article IV of the UIU Pension Trust Indenture, Exhibit B to the Complaint), and that a fifth defendant, Mr. Hoffmann, as Chairman of the Board, may "by consent of all governors present, in person or by proxy * * * cast his vote" in the event of a tie vote (see Article VI, par. a, 5 and s). Further, there seems little doubt that the evidence which might be produced at the trial would justify the use of the court's equitable power to require the defendants to take such action as the court might decree.⁷

It is also possible that the letter of October 19, 1964 (Exhibit C to Document 15), together with the oral agreement which it implemented, constituted an enforceable contractual promise to the employees by UIU binding on its pension committee under principles of promissory estoppel (see § 90 of Restatement of Contracts).

Also, although this court may have jurisdiction in this case under § 301, another basis for jurisdiction is available here. Section 302 of the Act (29 U.S.C. § 186) makes all payments by employers to employees or their representatives illegal⁸ except those payments specifically exempted in the Act. Thus, at the outset it is clear that unless the UIU Pension Fund can qualify under one of the exceptions listed in § 302, its operation is illegal. The language in § 302 which governs pension funds is 302(c) (5) and the UIU Pension Fund must operate in conformity with that subsection. Section 302(c) (5) provides:

"(c) The provisions of this section shall not be applicable * * * (5) with respect to money or other thing of value paid to a trust fund established by such representative, for the sole and exclusive benefit of the employees of

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