Sheet Metal Workers' Local 28 of New Jersey Welfare Fund v. Gallagher
| Decision Date | 14 May 1992 |
| Docket Number | No. 91-5056,91-5056 |
| Citation | 960 F.2d 1195 |
| Parties | 140 L.R.R.M. (BNA) 2001, 121 Lab.Cas. P 10,097, 15 Employee Benefits Cas. 1074 SHEET METAL WORKERS' LOCAL 28 OF NEW JERSEY WELFARE FUND; Arthur Moore; William Viotle; Joseph Demark; Frank Cregan; Andy Mihal; Richard Domanico; Sheet Metal Workers' Local 20 of New Jersey Welfare Fund; Ralph A. Quackenbush; Gilbert Nelson; Edward S. Burke; Michael Ryan; Brian Deegan; Richard Bonner; Michael Losito; Arthur Ford; Henry Pfeifer; June R. Pfeifer; Thomas Welch; John Sirochman, Sr.; Milton Kubu; John Rupshis; George Pace, Sr.; Sheet Metal Workers' International Association Local 28; Sheet Metal Workers' International Association Local 27; William G. Sullivan; Ronald Boyle; Carol Ann Boyle v. Edward GALLAGHER, Trustee; Cornelius P. Sharkey, Jr., Trustee; Bernard Yamakaitis, Trustee; Harry Harris, Trustee; Campbell Johnstone, Trustee; Eugene Morrison, Trustee; Sheet Metal Workers' Local Union 22 of New Jersey Welfare Fund. SHEET METAL WORKERS' NATIONAL PENSION FUND; Sheet Metal Workers International Association, Local 28; Sheet Metal Workers International Association, Local 27; Edward J. Carlough, Trustee; Robert T. Stringer, Trustee; C.T. Roff, Trustee; Cavet Snyder, Trustee; Salvatore J. Cardella; Rocco Cassio; Thomas Cofield; Francis Daughenti; Robert Davis; Ernest E. Finizio; Arthur P. Ford; Lawrence A. Fredericks; Ronald J. Gehring; Ronald N. Gedman; Herbert Gunsaules; Matthew M. Hirsh; John Hyland; Milton J. Kubu; George J. Martin; Robert J. Miller; June Nolan; Frederick Rotz; George E. Schwerdt; John P. Sirochman; Robert J. Smith; Henry Zaleski; Paul Vella v. Edward GALLAGHER, Trustee; Cornelius P. Sharkey, Jr., Trustee; Bernard Yamakaitis, Trustee; Harry Harris, Trustee; Campbell Johnstone, Trustee; Eugene Morrison, Trustee; Sheet Metal Workers Local Union 22 of New Jersey Pension Fund. |
| Court | U.S. Court of Appeals — Third Circuit |
Theodore M. Lieverman (argued), James Katz, Mark Belland, Tomar, Simonoff, Adourian & O'Brien, Haddonfield, N.J., Raymond J. Sweeney, Washington, D.C., for appellants.
John A. Craner (argued), Craner, Nelson, Satkin & Scheer, Scotch Plains, N.J., for appellees.
Before: BECKER and ALITO, Circuit Judges, and HUYETT, District Judge. *
This case arises from a dispute between two labor unions over the right to control a welfare fund and a pension fund. One union, an independent local, seceded from the other, an international union, and asserted control over the local's pension and welfare funds, which had previously been controlled by the international. After the secession, a subgroup within the independent returned to membership in locals affiliated with the international. The members of this subgroup believed that the trustees of the pension and welfare funds had breached their fiduciary duties by allowing the independent to assert control over the funds. Further, the members of this subgroup believed that they retained rights to monies in the independent pension and welfare funds that had been contributed on their behalf.
Consequently, the plaintiffs--a number of individuals who left the independent to return to locals affiliated with the international, the pension and welfare funds of the international and their trustees, and the locals affiliated with the international and their trustees--brought suit in the District Court for the District of New Jersey against the pension and welfare funds of the independent local and those funds' trustees. The plaintiffs sought to have control over the independent's pension and welfare funds returned to the international. Further, the plaintiffs sought to have the defendant funds disgorge to the plaintiff funds those assets in the defendant funds attributable to employees who left the independent to rejoin locals affiliated with the international.
The district court entered judgment in favor of the defendants, and plaintiffs appealed. This appeal requires us to decide whether the trustees of the independent local's benefit funds breached any fiduciary duties under the Employee Retirement Income Security Act (ERISA), 29 USC §§ 1001-1461 (1988), by refusing to disgorge monies from the funds and by designating the independent local as the union settlor for the fund. Further, we must determine whether a "structural defect" arises in employee benefit funds under Section 302(c)(5) of the Labor Management Relations Act (LMRA), 29 USC § 186(c)(5) (1988), when a fund retains monies contributed on behalf of employees who have left to join another union.
For the reasons that follow, we will affirm the district court's judgment with respect to the fiduciary duty issues but will reverse and remand for further proceedings to determine whether structural defects exist in the funds.
On October 16, 1981, plaintiff Edward J. Carlough, General President of the Sheet Metal Workers' International Association ("the International" or "SMWIA"), issued an order consolidating several of the International's locals in New Jersey into three larger locals. Carlough's order specifically directed that Local 22 of the SMWIA be disbanded and that its members be absorbed into SMWIA Locals 28, 27, and 19. Approximately 500 active journeymen and apprentices belonged to Local 22 at the time that the International ordered the merger. Under the Carlough plan, members of SMWIA Local 22 working in Union County and Morris County would become members of SMWIA Local 28, an existing local. After the merger, SMWIA Local 28 was to have within its territory both New York City and Northern New Jersey. Members of SMWIA Local 22 working in Somerset County were to become part of a new local, SMWIA Local 27, as would members of three other dismantled SMWIA locals. 1
Under the terms of the merger order, Local 22 members were to receive credit in their new locals for time served in their old locals, which would be used in calculating their benefits and pensions. The International ordered Local 22's property and assets distributed proportionately to SMWIA Locals 27 and 28. The merger, in essence, contemplated that Local 22 would be dissolved and that its members would be treated as if they had always been members of their new locals.
At the time of the prescribed merger, Local 22 was party to a collective bargaining agreement with the Sheet Metal Contractors Association of Union, Morris, Somerset, and Sussex Counties ("the Contractors Association"), a group of thirteen employers in Northern New Jersey. It was also party to collective bargaining agreements with twenty-three contractors in Northern New Jersey who were not affiliated with the Contractors Association. The International proposed to treat Locals 27 and 28 as the "successors" to Local 22 under these collective bargaining agreements, that is, Locals 27 and 28 would assume all of the rights and responsibilities that Local 22 had previously held under the collective bargaining agreements with these employers.
As is often the case with the best-laid plans, the Carlough plan encountered difficulties. Some members of Local 22, including many of its officers, opposed the plan to dissolve their local. These members opposed the merger, at least in part, because they believed that the plan would deprive them of political power within their own union. While the merger plan preserved the benefits packages that members would receive, it would have concentrated power in the other members of Locals 27 and 28 and would have decreased the ability of the members of the former Local 22 to govern their own union. The Local 22 dissidents attempted to block the merger by appealing Carlough's order to the International's Executive Council. Their appeal was rejected.
The officers of Local 22 also went outside the union to undermine the planned merger, filing a complaint in New Jersey state court seeking to enjoin it. The International removed the case to federal district court and promptly counterclaimed against the Local 22 leadership, seeking to enjoin the leadership from interfering with the merger order. In December 1981, the district court dismissed the action against the International and granted the injunction against the officers of Local 22. See Sheet Metal Workers Int'l Ass'n Local Union No. 22 v Sheet Metal Workers International Association, Civ Nos 81-3414, 81-3415 (DNJ December 9, 1981). The court further ordered Local 22's officers to turn over all funds, books, records, and other property to the International.
About two weeks before the entry of the court's order directing the union to stop interfering with the merger and to turn over records, Local 22 held a meeting to discuss the future of its membership. At that meeting, a vote was taken among the approximately 300 members present to decide whether the membership wanted to disaffiliate from the International. The membership voted in favor of disaffiliation and created a new, independent local, the Sheet Metal Workers Local 22 of New Jersey ("the Independent" or "Independent Local 22"). The new local elected officers and drafted a charter and constitution.
After the federal district court in New Jersey entered the order barring Local 22's officers from interfering with the merger, the International moved to consolidate its position. It sought to merge the other locals and to have the Contractors Association recognize Locals 27 and 28 as the successors to Local 22. 2 This would have eliminated Independent Local 22 as a bargaining agent for employees of companies in the Contractors Association.
Independent Local 22 countered by filing a petition for representation with the National Labor Relations Board (NLRB) on January 6, 1982. The Local's petition claimed that Independent Local 22 was the collective bargaining agent for those employed within the Contractors Association, and it sought to have...
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Sheet Metal Workers' Local 28 of New Jersey Welfare Fund v. Gallagher
...Jersey Pension Fund NO. 91-5690 United States Court of Appeals, Third Circuit. Oct 09, 1992 Appeal From: D.N.J.; Appealing after remand 960 F.2d 1195 ...