TRUSTEES, ETC. v. Southern Stress Wire Corp.

• Decision Date: 13 March 1981
• Docket Number: Civ. A. No. 77-1149A.
• Parties: TRUSTEES OF the ATLANTA IRON WORKERS LOCAL 387 PENSION FUND et al. v. SOUTHERN STRESS WIRE CORP.
• Court: U.S. District Court — Northern District of Georgia

509 F. Supp. 1097

TRUSTEES OF the ATLANTA IRON WORKERS LOCAL 387 PENSION FUND et al. v. SOUTHERN STRESS WIRE CORP.

Civ. A. No. 77-1149A.

United States District Court, N. D. Georgia, Atlanta Division.

March 13, 1981.

Joseph Jacobs, James T. Langford, Jacobs & Langford, Atlanta, Ga., for plaintiffs.

Floyd E. Siefferman, Jr., Atlanta, Ga., for defendant.

ORDER

RICHARD C. FREEMAN, District Judge.

In this labor relations action, the plaintiff Trustees seek to collect from the defendant contributions allegedly owed the Fringe Benefits Funds. By order dated June 26, 1980, this court held that the "evidence has unmistakenly established as fact that defendant was committed to, and bound by, the collective bargaining agreement of August 29, 1968 between the union and the Association of Steel Erectors & Heavy Equipment Operators, Inc., which specifically bound it to the fringe benefits trust...." Order of June 26, 1980 at 3.¹ We concluded, however, that the Supreme Court's decision in NLRB v. Local 103, International Association of Bridge, Structural and Ornamental Iron Workers, 434 U.S. 335, 98 S.Ct. 651, 54 L.Ed.2d 586 (1978) (Higdon), required the plaintiffs to establish the union's majority status in order to convert the prehire agreement into an enforceable collective bargaining contract. The plaintiffs subsequently conceded, at an informal conference in chambers on November 11, 1980, that they would be unable to establish that the union achieved majority status on the terms set forth by the court.

Before final disposition of the case, however, the court directed the parties to brief two further issues that required consideration: (1) whether Congress, in enacting the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., (ERISA), intended to permit trustees of employee pension and welfare plans to recover delinquent contributions without regard to the technicalities of federal labor law, and (2) whether application of Higdon to cases such as the one before the court would require the court to make a determination as to the appropriate bargaining unit, a task entrusted by Congress exclusively to the National Labor Relations Board (NLRB).² After a thorough reexamination of the legal authorities pertinent to this case, we conclude that we need not reach these issues for, in our view, Higdon does not bar a trustee collection suit brought pursuant to section 301 of the Labor Management Relations Act, 29 U.S.C. § 185(a).

* * * * * *

This case presents an issue which has only recently been raised in the federal courts: whether the trustees of fringe benefit funds may enforce against an employer the provisions of a prehire agreement, authorized by section 8(f) of the National Labor Relations Act (Act), 29 U.S.C. § 158(f), even though the union with which the employer executed the agreement does not represent a majority of the workers in the employer's work force. Although this precise issue has been reached by only a few courts, the two areas of substantive labor law implicated by this question provide settled legal principles to guide the court's consideration of the issue.

The first of these is that body of caselaw construing the rights of non-party trustees to enforce the fringe benefit provisions of collective bargaining agreements. In doing so, the trustees stand, of course, as third-party beneficiaries of the collective bargaining agreement between the union and the employer. Under settled principles of contract law, the third party beneficiary may sue the promisor to enforce vested contractual rights. Although generally the promisor may assert against a third party beneficiary any defense good against the promisee, federal courts, following the lead of the Supreme Court in Lewis v. Benedict Coal Corp., 361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960), have considerably limited the defenses which an employer may assert against trustees of fringe benefit funds in suits to recover delinquent contributions. Indeed, it may safely be said that the trustees enjoy a virtually unqualified right to enforce the employer's contractual obligations to these funds.

In Benedict Coal, the Supreme Court held that the employer could not assert the union's breach of the collective bargaining agreement as a defense in a suit by the trustees. The Court observed that it might be desirable in ordinary third-party beneficiary situations to hold that

a promisor may "set off" the damages caused by the promisee's breach.... In other words, although the promisor's duty to perform has become fixed by the occurrence of applicable conditions precedent, the parties may be taken to have agreed that the extent of the promisor's duty to the third party will be affected by the promisee's breach of contract.

Id. at 467, 80 S.Ct. at 494. The Court noted, however, that a collective bargaining agreement is not a typical third-party beneficiary contract:

The promisor's interest in the third party here goes far beyond the mere performance of its promise to that third party, i. e., beyond the payment of royalty. It is a commonplace of modern industrial relations for employers to provide security for employees and their families to enable them to meet problems arising from unemployment, illness, old age or death. While employers in many other industries assume this burden directly, this welfare fund was jointly created by the coal industry and the union for that purpose....

Moreover, unlike the usual third-party beneficiary contract, this is an industry-wide agreement involving many promisors. If Benedict and other coal operators having damage claims against the union for its breaches may curtail royalty payments, the burden will fall in the first instance upon the employees and their families across the country. Ultimately this might result in pressures upon the other coal operators to increase their royalty payments to maintain the planned schedule of benefits.

Id. at 468-69, 80 S.Ct. at 494-95.

As one district court said in applying Benedict Coal a few years thereafter:

Whatever one may think of the equities of the situation confronting a small coal company during hard times, if faced with a situation such as defendants allege was the case here, it seems clear that the law does not permit the written welfare agreement to be ignored by reason of any matters affecting the relationship of the coal company and the union inter sese. The Supreme Court has made it plain, in Lewis v. Benedict Coal Co., that considerations of social welfare with regard to the benefits payable to miners from the fund make it inappropriate to admit defenses based upon the alleged misdeeds of the union.

Lewis v. Harcliff Coal Co., 237 F.Supp. 6, 7 (W.D.Pa.1965) (citations omitted). This policy of disallowing employer defenses in trustee collection cases has continued unchanged to the present. As Judge Adams of the Third Circuit recently observed, concurring in that court's rejection of an employer's antitrust defense:

Lower federal courts have recognized that the Supreme Court's discussion in Benedict evinces a considered judgment that the ramifications for national labor policies must be surveyed before labor agreements pertaining to employer contributions to union welfare and pension funds are subjected to contract principles governing third-party beneficiary situations.... Almost invariably, when faced with a suit to compel employer payments to union welfare or pension funds, the courts have disallowed defenses sought to be interposed by employers to enforcement of the contract based on such grounds as failure of consideration, existence of parol evidence to establish a different agreement, fraud, misrepresentation, and duress on the part of the union.

Huge v. Long's Hauling Co., Inc., 590 F.2d 457, 463-64 (3d Cir. 1978) (Adams, J., concurring) (footnotes omitted), cert. denied, 442 U.S. 918, 99 S.Ct. 2840, 61 L.Ed.2d 285 (1979). Thus, it is clear that if this case involved the usual collective bargaining agreement negotiated between a majority union and employer, the trustees would be entitled to recover.

Defendant contends, however, that because the benefit provisions sued on here had their genesis in a prehire agreement with a minority union, the agreement is unenforceable and the trustees may not recover. In order to evaluate this contention, the court must turn to the second area of substantive labor law pertinent here: that dealing with the enforceability of prehire agreements. It is a fundamental principle of our statutory labor law scheme that the labor organization which represents the employees in a unit must be "designated or selected for the purposes of collective bargaining by the majority of the employees...." Section 9(a) of the Act, 29 U.S.C. § 159(a). To safeguard that selection process, it is an unfair labor practice for an employer under sections 8(a)(1) and (2), 29 U.S.C. §§ 158(a)(1) and (2),³ and for a union under section 8(b)(1)(A), 29 U.S.C. § 158(b)(1)(A),⁴ to interfere with, restrain, or coerce employees in the selection of their bargaining representative. Thus, it is unlawful for an employer to bargain or enter into a collective bargaining agreement with a minority union, even if the parties have a good faith belief that the union represents a majority of the workers in the unit. International Ladies' Garment Workers' Union v. NLRB, 366 U.S. 731, 738-39, 81 S.Ct. 1603, 1607-08, 6 L.Ed.2d 762 (1961).

However, section 8(f) of the Act, 29 U.S.C. § 158(f),⁵ provides an exception to the general prohibition and permits employers in the construction industry to negotiate a collective bargaining agreement with a labor organization prior to the establishment of its majority status pursuant to the provisions of section 9 of the Act, 29 U.S.C. § 159.⁶ In enacting section 8(f), Congress acknowledged the unique nature of the industry: "representation elections in a large segment of the industry are not feasible to...