Title: AUDIT SERVICES INC v HARVEY BRO

State: montana

Issuer: Montana Supreme Court

Document:

NO. 82-373 I N THE SUPREME COURT OF THE STATE OF MONTANA 1983 AUDIT SERVICES, INC., a N o n t a n a C o r p o r a t i o n , P l a i n t i f f and A p p e l l a n t , HARVEY BROS. CONSTRUCTION, a M o n t a n a C o r p o r a t i o n , D e f e n d a n t and ~ e s ~ o n d 6 r k . A p p e a l f r o m : D i s t r i c t C o u r t of t h e F i f t h J u d i c i a l D i s t r i c t , I n and for the C o u n t y of B e a v e r h e a d H o n o r a b l e Frank B l a i r , Judge p r e s i d - i n a . C o u n s e l of P.ecord: For A p p e l l a n t : C u r e & B o r e r , G r e a t Falls, M o n t a n a F o r R e s p o n d e n t : C h r i s t i n e C. P a r k e r , D i l l o n , M o n t a n a S u b m i t t e d on briefs- A p r i l 15, 1983 Decided June 3 0 , 1 9 8 3 Filed: JUN 3 0 1983 C l e r k Mr. J u s t i c e L . C. Gulbrandson d e l i v e r e d t h e Opinion of t h e Court. T h i s appeal stems from t h e judgment of t h e D i s t r i c t Court of t h e F i f t h J u d i c i a l D i s t r i c t , Beaverhead County, which d e c l a r e d t h e compliance agreements e n t e r e d i n t o between t h e c a r p e n t e r s and l a b o r e r s unions and Harvey B r o t h e r s C o n s t r u c t i o n (HBC) v o i d , and concluded t h a t they could be r e s c i n d e d . P l a i n t i f f , Audit S e r v i c e s I n c . , commenced t h i s a c t i o n t o c o l l e c t d e l i n q u e n t c o n t r i b u t i o n s , damages, and f e e s a l l e g e d l y owed by d e f e n d a n t t o p l a i n t i f f ' s a s s i g n o r s , t h e Montana C a r p e n t e r s and Laborers T r u s t Funds. A n o n j u r y t r i a l was h e l d on A p r i l 20, 1982, a f t e r which t h e c o u r t h e l d i n f a v o r of d e f e n d a n t , HBC. The d e f e n d a n t is engaged i n t h e c o n s t r u c t i o n b u s i n e s s . I t employs c a r p e n t e r s and l a b o r e r s . Beginning i n 1967, t h e defen- d a n t e n t e r e d i n t o a s e r i e s of compliance agreements w i t h l o c a l c a r p e n t e r and l a b o r e r unions. The compliance agreements incor- p o r a t e d by r e f e r e n c e c o l l e c t i v e b a r g a i n i n g agreements, and pur- s u a n t t o t h e terms of t h e c o l l e c t i v e b a r g a i n i n g agreements, d e f e n d a n t was r e q u i r e d t o make s p e c i f i e d c o n t r i b u t i o n s t o t h e Montana C a r p e n t e r s and Laborers T r u s t Funds. These agreements were renewed through t h e y e a r s . I n 1975, d e f e n d a n t n o t i f i e d t h e l a b o r unions t h a t it intended t o withdraw from t h e l a b o r agreements. Withdrawal was t o be e f f e c t i v e a t t h e e x p i r a t i o n of t h e e x i s t i n g agreements. The e x i s t i n g agreements were t h e 1975-1977 agreement with t h e carpen- t e r s union, and t h e 1974-1976 agreement w i t h t h e l a b o r e r s union. I n 1979, d e f e n d a n t ' s p a y r o l l r e c o r d s were a u d i t e d on behalf of t h e C a r p e n t e r s and t h e Laborers T r u s t Funds. The a u d i t d i s c l o s e d t h a t $9,969 was owed f o r d e l i n q u e n t c o n t r i b u t i o n s . Defendant r e f used t o pay t h e s e d e l i n q u e n c i e s , along w i t h o t h e r p e n a l t i e s , i n t e r e s t and c o s t s due under t h e agreements when b i l l e d . The unions t h e r e a f t e r assigned t h e i r c l a i m s t o p l a i n t i f f who t h e n commenced t h i s a c t i o n . Defendant, by amendment t o t h e answer, a l l e g e d t h a t t h e agreements were void a s having been obtained by d u r e s s , menace, and f r a u d . Furthermore, d e f e n d a n t claimed t h a t t h e a u d i t con- cerned r e c o r d s of ACE C o n s t r u c t i o n , a p a r t n e r s h i p owned and o p e r a t e d by t h e owners of defendant; and s i n c e ACE was not a p a r t y t o t h e agreements, it could not be l i a b l e f o r t h e payments. The p l a i n t i f f contends t h a t t h e r e c o r d s a u d i t e d were t h e p r o p e r r e c o r d s based on t h e testimony of Mr. Howard Sands, t h e a c c o u n t a n t who conducted t h e a u d i t . H e s t a t e d t h a t a l l t h e per- s o n s , wages and hours appearing on t h e a u d i t a l s o appeared on t h e q u a r t e r l y r e p o r t d e a l i n g w i t h unemployment c o n t r i b u t i o n s , f i l e d w i t h t h e Employment S e c u r i t i e s D i v i s i o n of t h e S t a t e of Montana under t h e name of Harvey B r o t h e r s C o n s t r u c t i o n . H e f u r t h e r s t a t e d t h a t some of h i s i n f o r m a t i o n was taken from t h e i n d i v i d u a l p a y r o l l r e c o r d s which r e c a p a man's wages by week, month, and y e a r . Three i s s u e s a r e p r e s e n t e d f o r our review. They a r e a s f o l l o w s : 1. Is t h e r e any c r e d i b l e evidence t o s u p p o r t t h e f i n d i n g s of f a c t and c o n c l u s i o n s of law upon which t h e D i s t r i c t Court based i t s judgment? 2. R e g a r d l e s s of t h e e v i d e n t i a r y f o u n d a t i o n f o r t h e judgment, is it c o n s i s t e n t w i t h t h e governing p r i n c i p l e s of f e d e r a l l a b o r law by which t h i s c a s e was supposed t o be decided? 3. Did t h e D i s t r i c t Court abuse its d i s c r e t i o n by allowing t h e d e f e n d a n t l e a v e t o amend its answer s h o r t l y b e f o r e t r i a l ? W e b e l i e v e t h a t t h e second i s s u e is d i s p o s i t i v e . I n a c a s e brought t o e n f o r c e a c o n t r a c t between an employer and a l a b o r o r g a n i z a t i o n , which f a l l s under s e c t i o n 3 0 1 ( a ) of t h e Labor Management R e l a t i o n s A c t (29 USC 1 8 5 ( a ) ) , it should be noted t h a t t h e s t a t e c o u r t s have c o n c u r r e n t j u r i s d i c t i o n w i t h t h e f e d e r a l c o u r t s . Audit S e r v i c e s I n c . , v. Clark B r o t h e r s C o n t r a c t o r s ( 1 9 8 2 ) , - Mont* ---- , 645 P.2d 953, 955, 39 St.Rep. 928, (and c a s e s c i t e d t h e r e i n ) ; Audit S e r v i c e s v. S t e w a r t and J a n e s ( 1 9 8 1 ) , Mont. , 622 P.2d 217, 219, 38 St.Rep. 41, (and c a s e s c i t e d t h e r e i n ) ; Lowe v. O'Conner ( 1 9 7 3 ) , 163 Mont. 100, 515 P.2d 677, 678. However, i n e x e r c i s i n g t h a t j u r i s d i c t i o n , t h e s t a t e c o u r t s must a p p l y f e d e r a l s u b s t a n t i v e law. Audit S e r v i c e s v. Clark B r o t h e r s C o n t r a c t o r s , s u p r a ; Audit S e r v i c e s v. S t e w a r t and J a n e s , s u p r a ; Lowe v. O'Conner, s u p r a . The a p p l i c a t i o n of t h e f e d e r a l law t o t h i s c a s e w a r r a n t s r e v e r s a l of t h e D i s t r i c t C o u r t ' s judgment. The f e d e r a l law on t h i s p o i n t is most c o g e n t l y set o u t by t h e n i n t h c i r c u i t c o u r t of a p p e a l s i n Todd v. McNef f ( 9 t h C i r . 1 9 8 2 ) , 667 F.2d 800. I n t h a t c a s e t h e c i r c u i t c o u r t of a p p e a l s was d e a l i n g w i t h a s e c t i o n 8 ( f ) , NLRA, (29 USC 1 5 8 ( f ) 1, p r e - h i r e agreement, which i n e s s e n c e is what we have h e r e a s t h e r e was never any showing t h a t t h e unions i n q u e s t i o n r e p r e s e n t e d a m a j o r i t y of t h e HBC employees. The Todd c o u r t c l e a r l y set o u t t h e r a t i o n a l e f o r allowing t h e s e t y p e s of agreements i n t h e c o n s t r u c t i o n i n d u s t r y where it s t a t e d : "The l a b o r c o n t r a c t i n t h i s case is one under S e c t i o n 8 ( f ) of t h e N a t i o n a l Labor R e l a t i o n s A c t (29 U.S.C. S 1 5 8 [ £ ] ) . T h i s s e c t i o n is an e x c e p t i o n t o t h e g e n e r a l l a b o r p o l i c y t h a t an employer can o n l y e n t e r i n t o a c o l l e c t i v e b a r g a i n i n g r e l a t i o n s h i p w i t h a union t h a t r e p r e s e n t s a m a j o r i t y of t h e employer's employees. A s jobs begin and end, c o n s t r u c - t i o n workers f r e q u e n t l y change employers. Due t o t h i s , Congress h a s s e e n f i t t o a l l o w so- c a l l e d ' p r e - h i r e ' agreements i n t h a t i n d u s t r y . These agreements may be signed b e f o r e t h e union r e p r e s e n t s a m a j o r i t y of t h e employer's employees, and may c o n t i n u e i n d u r a t i o n through more than one of t h e employer's j o b s , even i f t h e employer goes through a h i g h employee t u r n o v e r . These agreements a l l o w t h e employees some of t h e wage and b e n e f i t advan- t a g e s of union r e p r e s e n t a t i o n , a s well a s r e l a t i v e wage s t a b i l i t y . The employer is a s s u r e d a q u a l i f i e d pool of workers t o choose from when it needs them, p r o t e c t i o n a g a i n s t l a b o r u n r e s t d u r i n g t h e p e r i o d of t h e c o n t r a c t , and p r e d i c t a b l e l a b o r c o s t s , an i n v a l u a b l e t o o l i n t h e bidding p r o c e s s . " 667 F.2d a t 801, 802. The Todd c o u r t went on t o s t a t e t h a t a s a m a t t e r of p o l i c y and based on t h e United S t a t e s Supreme C o u r t ' s mandate i n NLRB v. Local No. 103, I r o n Workers (Higdon C o n s t r u c t i o n Co.) (19781, 434 U.S. 335, 98 S.Ct. 651, 54 L.Ed.2d 586, t h a t s e c t i o n 8 ( f ) (29 USC 1 5 8 ( f ) ) c o n t r a c t s " a r e v o i d a b l e by t h e employer u n t i l t h e union a t t a i n s m a j o r i t y s u p p o r t . " However, t h e y a l s o made it c l e a r t h a t such c o n t r a c t s a r e e n f o r c e a b l e under s e c t i o n 301, L M R A (29 USC 1 8 5 ( a ) ) u n t i l t h e employer r e p u d i a t e s them. Todd v. McNef f , 667 F.2d a t 803, 804. T h i s remedy of r e p u d i a t i o n a p p l i e s even i f t h e c o n t r a c t s were c o e r c e d , a s was a l l e g e d i n t h e c a s e p r e s e n t l y b e f o r e u s , ( e . , t h r e a t s t o p i c k e t and of v i o l e n c e ) . Todd v. McNeff, 667 F.2d a t 804. Here we s e e no evidence of r e p u d i a t i o n . A s a m a t t e r of f a c t i f HBC d i d a n y t h i n g , it r a t i f i e d t h e s e agreements w i t h t h e car- p e n t e r s and l a b o r e r s . W e have p r e v i o u s l y d e f i n e d r a t i f i c a t i o n i n A u d i t S e r v i c e s , I n c . v . F r a n c i s T i n d a l l C o n s t r u c t i o n ( 1 9 7 9 ) , 183 Mont. 474, 600 P.2d 811, where we s t a t e d : " ' " R a t i f i c a t i o n " is defined t o be t h e c o n f i r - mation of a p r e v i o u s a c t done e i t h e r by t h e p a r t y himself o r by a n o t h e r . ( C i t i n g a u t h o r i t y . ) And a c o n f i r m a t i o n n e c e s s a r i l y supposes knowledge of t h e t h i n g r a t i f i e d ( C i t i n g a u t h o r i t y . ) It f o l l o w s t h a t t o c o n s t i t u t e a r a t i f i c a t i o n t h e r e must be an a c c e p t a n c e of t h e r e s u l t s of t h e a c t w i t h an i n t e n t t o r a t i f y and w i t h f u l l knowledge of a l l t h e m a t e r i a l c i r c u m s t a n c e s . ' Koerner v. Northern Pac. Ry. Co. ( 1 9 1 9 ) , 56 Mont. 511, 520, 186 P. 337, 340." 600 P.2d a t 813. W e went on i n T i n d a l l t o s t a t e t h a t " [ i l t is t h e m a n i f e s t a t i o n of t h e r a t i f y i n g p a r t y which c o n t r o l s . The r e s p o n d e n t ' s outward e x p r e s s i o n s and a c t i o n s judge of h i s i n t e n t i o n . . . " 600 P.2d a t 813. H B C ' s outward e x p r e s s i o n s and a c t i o n s c l e a r l y show t h e i r i n t e n t i o n h e r e . E a r n e s t Harvey a d m i t s t h a t they signed t h e agreements w i t h t h e two unions. The testimony of a c c o u n t a n t Howard Sands, who conducted t h i s a u d i t of HBC a s w e l l a s a pre- v i o u s one which covered from 1973 t o J u l y 1, 1975, shows t h a t HBC v o l u n t a r i l y c o n t r i b u t e d thousands of d o l l a r s t o t h e r e s p e c t i v e t r u s t s between 1973 and 1975. These c o n t r i b u t i o n s were made i n s p i t e of t h e Harvey's c l a i m s t h a t they were coerced i n t o e n t e r i n g t h e agreements by t h r e a t s of v i o l e n c e and t h e t h r e a t of being p i c k e t e d . Such v o l u n t a r y payments over a p e r i o d of t i m e w i t h no e f f o r t s t o r e s c i n d have been h e l d t o r e s u l t i n r a t i f i c a t i o n of c o l l e c t i v e b a r g a i n i n g agreements. A u d i t S e r v i c e s v. F r a n c i s T i n d a l l C o n s t r u c t i o n , s u p r a . ( S e e a l s o P i o v. ~ e 1 l . y ( 1 9 7 6 ) , 275 O r . 585, 552 P.2d 1301, where it was s t a t e d : ". . . t h a t an employer who h a s made c o n t r i b u - t i o n s t o a t r u s t fund e s t a b l i s h e d under t h e terms of a c o l l e c t i v e b a r g a i n i n g agreement over a s u b s t a n t i a l p e r i o d of time may n o t , when l a t e r sued by t h e union t o e n f o r c e such a n agreement, contend a t t h a t time t h a t t h e agreement is unenforceable by r e a s o n of d u r e s s . " 552 P.2d a t 1306, 1307. ( S e e a l s o , C a r r v. S e t t l e C o n s t r u c t i o n , I n c . ( 1 9 7 4 ) , 1 1 Wash.App. 336, 522 P.2d 849, where employer h e l d t o be estopped from denying c o l l e c t i v e b a r g a i n i n g agreement where he had o p e r a t e d under its terms f o r 1 5 y e a r s . ) F i n a l l y , t h e l e t t e r s s e n t by HBC t o t h e l a b o r e r s and carpen- ters unions withdrawing from t h e agreements a r e f u r t h e r and more c o n c l u s i v e e v i d e n c e t h a t HBC intended t o be bound, under t h e t e r m s of t h o s e agreements, u n t i l t h e agreements e x p i r e d . Those l e t t e r s i n p e r t i n e n t p a r t read a s f o l l o w s : "Gentlemen: " T h i s is t o a d v i s e you t h a t t h i s firm h a s e l e c t e d t o withdraw from any Compliance Agreements t o which it is s i g n a t o r w i t h your o r g a n i z a t i o n . " T h i s e l e c t i o n is e f f e c t i v e upon t h e expira- t i o n of t h e e x i s t i n g agreement o r agreements, and t h i s n o t i c e is given p u r s u a n t t o t h e withdrawal r i g h t s granted t h e r e u n d e r ." A l l t h e above s e t o u t a c t i o n s tend t o show t h a t HBC had knowledge of a l l t h e m a t e r i a l f a c t s and t h a t it confirmed t h e agreements, t h u s , meeting t h e d e f i n i t i o n of r a t i f i c a t i o n from t h e T i n d a l l c a s e s e t o u t above. The f a c t t h a t HBC d i d not r e p o r t any hours worked t o t h e car- p e n t e r s from J u l y 1, 1975, t o A p r i l 30, 1977, o r t o t h e l a b o r e r s from J u l y 1, 1975 t o A p r i l 30, 1976, makes no d i f f e r e n c e . T h i s was made c l e a r by t h e n i n t h c i r c u i t i n t h e Todd c a s e where they s t a t e d noncompliance under some c i r c u m s t a n c e s may be s u f f i c i e n t t o r e p u d i a t e but is n o t s u f f i c i e n t under a l l c i r c u m s t a n c e s . 667 F.2d a t 804. J u s t a s t h e noncompliance t h e r e f e l l s h o r t of repu- d i a t i o n , it a l s o does s o h e r e , i n l i g h t of a l l t h e above- d i s c u s s e d c i r c u m s t a n c e s showing r a t i f i c a t i o n , e s p e c i a l l y t h e l e t t e r s of withdrawal. Those l e t t e r s made it clear t h a t HBC i n t e n d e d t o a b i d e by t h e terms of t h e agreements e n t e r e d i n t o w i t h t h e two unions u n t i l t h e y e x p i r e d . For t h e foregoing r e a s o n , we b e l i e v e t h a t t h e D i s t r i c t Court e r r e d and t h e c a s e w i l l have t o be r e t r i e d . A s t h i s c a s e r e q u i r e s r e v e r s a l and remand f o r r e t r i a l , we would l i k e t o c l a r i f y two p o i n t s . F i r s t , we would l i k e t o b r i e f l y d i s c u s s t h e argument p u t f o r t h by t h e Harvey's t h a t t h e p a y r o l l r e c o r d s a u d i t e d were those of ACE C o n s t r u c t i o n and not HBC. T h i s may be of l i t t l e s i g n i f i c a n c e i f t h e two e n t i t i e s on r e t r i a l a r e found t o be a l t e r egos. T h i s concept is c l e a r l y defined i n J M Tanaka C o n s t r u c t i o n v. NLRB ( 9 t h C i r . 1 9 8 2 ) , 675 F.2d 1029. The Tanaka c o u r t set o u t t h e f o u r f a c t o r s t o be used i n determining i f e n t i t i e s a r e a l t e r egos where t h e y s t a t e d : " I n determining whether two b u s i n e s s e s a r e a l t e r e g o s , a c o u r t must c o n s i d e r t h e f o l l o w i n g f a c t o r s : (1) c e n t r a l i z e d c o n t r o l of l a b o r r e l a t i o n s , ( 2 ) common management, ( 3 ) i n t e r r e l a t i o n of o p e r a t i o n s , and ( 4 ) common ownership and f i n a n c i a l c o n t r o l . Radio Union v . Broadcast S e r v i c e , 380 U.S. 255, 256, 85 S.Ct. 876, 877, 1 3 L.Ed.2d 789, ( 1 9 6 5 ) ; NLRB v . Lantz, 607 F.2d a t 295; NLRB v. Don Burgess C o n s t r u c t i o n Corp., 596 F.2d 378, 384 ( 9 t h C i r . 1 9 7 9 ) . " 675 F.2d a t 1033. A l l of t h e s e f a c t o r s need not be p r e s e n t . J M Tanaka C o n s t r u c t i o n v . NLRB, s u p r a . The o t h e r p o i n t is t h e argument t h a t t h e agreements were o r a l l y l i m i t e d i n scope t o two c o n s t r u c t i o n p r o j e c t s . T h i s argu- ment cannot s t a n d a s 29 USC S e c t i o n 1 8 6 ( c ) ( 5 ) ( B ) r e q u i r e s t h e d e t a i l e d b a s i s on which payments are t o be made t o t h e t r u s t t o be s p e c i f i e d i n a w r i t t e n agreement between t h e employer and employees. Thus, t h e b u s i n e s s a g e n t and employer cannot set down a n agreement i n t h e c o n t r a c t and t h e n d e p a r t from its e s s e n c e and make t h e f i n a l agreement o r a l l y . To a l l o w such o r a l modifica- t i o n s t o s t a n d would d e f e a t t h e p r o t e c t i o n s provided t h e t r u s t b e n e f i c i a r i e s by 29 USC 1 8 6 ( c ) ( 5 ) . Waggoner v. D a l l a i r e ( 9 t h C i r . 1 9 8 1 ) , 649 F.2d 1362. For t h e foregoing r e a s o n s , t h i s c a s e is reversed and remanded f o r f u r t h e r proceedings t o be nion. W e concur: