NO. 83-534 INTHE SUPREME COURT OF THE STATE OF MONTANA 1984

AUDIT SERVICES, INC., a Montana corp.

### , Plaintiffand Appellant,

WAYNE ANDERSOiJ d/b/a WAYNE

### 'S ELECTRIC, Defendantand Respondent.

APPEAL FROM: DistrictCourtof theEighthJudicial District, Inand for the Countyof Cascade, TheHonorableJohn P.1. McCarvel, Judge presiding.

COUNSEL OF RECORD: ForAppellant: Cure, Borer & Davis; Maxon R. Davis, GreatFalls, 

### Montana ForRespondent: Howard F. Strause, GreatFalls, Montana

- - Submittedon Briefs: March 23, 1984 Decided: July 23, 1984

itf

## l. f 5UQ4 Filed:"1.

### Justice 

### L. C. Gulbrandson delivered the Opinion of the Court.
This case comes on appeal froin a September 22, 1983, order of the District Court, Eighth Judicial District, Cascade County, granting the respondent, Wayne Anderson, summary judgment against the appellant,Audit Services, Inc. We reverse and remand. On September 1, 1977, Wayne Anderson, 

### a Great Falls electrical contractor doing business as Wayne's Electric, signed two agreements with Local 122 of the International Brotherhood of Electrical Workers 

### (IBEW). The first agreement, a "letter of assent," bound Anderson to the terms of current and successive collective bargaining agreements negotiated between Local 122 and the Montana Chapter National Electric Contractors Association, Great Falls Division 

### (NECA). NECA was designated as Anderson's collective bargaining representative. The second document signed by Anderson was 

### a participating agreement for the IBEW-NECA Health and Accident Trust. The trust agreement

was also signed by the 

### IBEW and NECA. According to the trust agreement, Anderson was to make health and welfare contributions to the trust at a rate set forth in the collective bargaining agreements. Six trustees were to he appointed to administer the fundspaid into the trust. The trustees, who are the assignors of Audit Services, Inc. in this action, did not sign and were not aparty to either the collective bargaining agreements or the trust agreement. In July, 1981,a representative of the trust examined Anderson's payroll records and determined that Anderson had not made full and proper contributions to the trust. WhenAnderson refused to pay the amounts allegedly due, the trust's claim was assigned toAudit Services, Inc. for the purpose of collection. Audit Services, Inc. filed this action on June 22, 1982. A follow-up audit was conducted and additional sums were found to be owed the trust. An amended complaint combining the two audits was filed by Audit Services, Inc. Meanwhile, on December 11, 1981, IBEW Local 122 filed

a lawsuit against Anderson in Federal District Court. The lawsuit was based upon Section 301 of the Labor-Management Relations Act (LMRA), 29 U.S.C. Sec. 185, and alleged violations of the same collective bargaining agreements between Local 122 and NECA to which Anderson was bound by viruteof hisexecution of the "letter of assent." Count I of the union's complaint alleged a brea.ch of hiring hall provisions of the collective bargaining agreements. In effect, the union claimed that Anderson had failed to hire persons referred from the union hall. Count I stated that the collective bargaining agreements required Anderson to contribute to the trust as well as make payments of other fringebenefits. Thus, asset forth inCount I,persons

### who had been denied employment by Anderson because of his alleged hiring hall violations had lost compensation, including trustcontributions, towhich theywould have been entitledpursuant to thecollectivebargaining agreements. Count I1 of the union's complaint alleged that Anderson violated the collective bargaining agreements becausehe failedtorequirepersonswho hedidhiretojoin theunion. The relief which the union sought was that Andersonpay thewages of personswho were not, hut should have been, hired through the union referralmechanism. Paragraph 2of the prayer also asked that Anderson be required to pay the necessary fringe benefits including health and welfare contributionstothetrust. On January 24, 1983, theunion and Anderson stipulated to a dismissal with prejudice of theFederal DistrictCourt complaint. An order to that effect was entered the following day. In themeantime, Audit Services, Inc., as assignee of the trust's claim against Anderson, proceeded with its collection action in state court. After the parties had made cross-motions for summary judgment, the District Court qranted Anderson summary judgment on September 22, 1983. The District Court accepted Anderson's argument that the dismissal with prejudice of the union's Federal District Court lawsuit stood as 

### res judicata, barring the trust claimsthatwere being litigated inStatecourt. From the order of theDistrictCourt, Audit Services, Inc. appeals raising one issue: did the dismissal with prejudice of the union's lawsuit against Anderson for violation of their collectivebargaining agreements serveas
res judicata for the claims of the trustees of the trust fund to collect contributions based upon hours worked by Anderson's employees? We note first that state courts have concurrent jurisdiction with federal courts in trust fund collection

casesand federal substantive lawprovides thebasis forour decisions. Audit Services, Inc. v. Harvey Bros. Construction Co. (Mont. 1983), 665 P.2d 792, 40 St.Rep.& 1019; Lowe et a1. v. O'Conner (1973), 163 Xont. 100, 515 P.2d 677. Where compatible with federal labor law, state law may be resorted to in order to find a rule that will best effectuate federal policy. Textile Workers Union v. Lincoln Mills(1957), 353 U.S. 448, 77 S.Ct. 912, 1L.Ed.2d 972. The doctrineof res judicata provides thattheparties to an action in which a judgment on the merits has been rendered, or theirprivies, 

### arebarred from relitigating the

same cause of action in a second proceeding. Expert Electric Inc. v. Levine (2dCir. 1977), 554 F.2d 1227. This Court in Smith v. County of Musselshell (1970), 155 pllont. 376, 472 P.2d 878, stated that four criteria must be met before a plea of 

### res judicata can be sustained: (1)the parties or their priviesmust be the same; (2) the subject matter of the actionmust be the same; (3) the issuesmust be the same and relate to the same subject

### matter; and (4) the capacities of thepersons must be the same inreference tothe subject

### matter and tothe issuesbetween them. In granting Anderson's motion for summary judgment on the basis of res judicata, the District Court stated that Audit ServicesInc.'s situationwas analagous tothatof the union in St. Louis Typographical Union No. 

### S v. The Herald Co. (E.D. Mo. 1967), 277 F.Supp. 276. In the St. Louis 

### Typographical case, certainunion members sued the employer individually for benefits allegedly due under a collective bargaining agreement. After the individual union members lost that suit, the union sued the employer for the same benefits. In deciding that the union's case was barred by

res judicata, the

## - St. LouisTypographical court said:

# ".

. . the union has no beneficial interest in any possible recovery. Although its right to sue is granted by the federal law, it prosecutes the present suit solely as the agent or representativeof thosewho would receive the proceeds of any recovey." St. Louis Typograhical, supra, p. 282. The St. LouisTypographical court went on to say that res judicata applied because theplaintiff's in the two actions

were in "privity." The St. Louis Typographical court said "privity"designatesaperson so identified in interestwith

a party to former litigation that 

# ".

. . he represents precisely the same legal right in respect to the subject matter involved." St. Louis Typographical, supra, 277 F.Supp at 284. Thus, the District Court in the present action concluded that res judicata barred Audit Services Inc.'s action because Audit Services Inc. was bringing the suitsolelyasthe representativeof theunionmembers. However, inthe instantcase, Audit Services, Inc. was not representing precisely the same legal right in respect to the subject matter involved as in the union's Federal District Court suit against Anderson. The union's Federal DistrictCourt action concernedAnderson's allegedbreach of the "hiring hall" and "union security" clauses of his collectivebargaining agreements. Whilementionwasmade of health and welfare trust contributions, it was within the context of the compensation that was lost to those union members not hired due to Anderson's breach of the "hiring hall" clauseof thecollectivebargaining agreements. By contrast, the claims of the trustees assigned to Audit Services, Inc. were for contributions based upon actual hours worked by Anderson's employees. The fact that both Audit Services, Inc. and the union sought enforcementof certain provisions of the same collective bargaining agreement does not satisfy the "identity of issues" requirement necessary for the doctrineof 

### res judicata. As statedby thecourt inAmerican BroadcastingCompanies, Inc.

v. Muhammad Ali (S.D.N.Y. 1977), 434 F. Supp. 1108: "The limitation of the doctrine to the 'same cause of action' is highly significant. Where two distinct causes of action exist, they may be sued on separately notwithstanding the fact that they arise from the same general course of events, Kernel Kutter, Inc. v. Fawcett Publications, Inc., 284 F.2d 675, 676 (7th Cir. 1960); Bankers Trust Co. v. PacificEmployers InsuranceGo., 282 F.2d 106, 111 (9th Cir. 1960), cert. denied, 368 U.S. 822, 82 S.Ct, 41, 7 L.Ed.2d 27 (1961), that an element of damages is common to both suits, Herendeen v. Champion International Corp., 525 F.2d 130, 134 (2d Cir. 1975)., or both might have been asserted at the same time, Herendeen, supra, at 135; Secor v. Sturgis, 16 N.Y. 548, 554 (1858)('It makes no difference that the causes of actionmightbe united ina singlesuit.' Id.)" Moreover, we reject the District Court's conclusion that res judicata applies to the present case because the trustees and the union are "privies." As the trustees1 functions have developed under federal labor law, a significant distance has been recognized between the trustees of a jointly administered benefit trustfund and a union which isa co-sponsor of thetrust. By Section403 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Section 1103, the trustees, rather than the union, the participating employers or any thirdparties, aregiven the exclusive authoritytomanage and control the assets of the plan. The court in Waggoner v. Dallaire (9th Cir. 1981), 649 F.2d 1362, said: "The district court's conclusion hingesupon the legal finding that Local 12 and Fortsen acted as the Trustees' agents. This may have been a proper conclusion under California agency law: it is incorrect under federal law. Asamatter of federal law, a union and its representatives arenot agents of a trust fund created by a collective bargaining 2greement. Trust authoritites set up pursuant to section 302 of the LMRA have long been held to constitute a distinct and independent entity separate from the union that negotiates the collective bargaining agreement establishing a trust. See Lewis v. Benedict Coal Corp., 361 U.S. 459, 465-71, 80 S.Ct. 489, 493-496, 4 L.Ed.2d 442 (1960). These trust authorities by law have no authority todirect union activities and unions are involved with the trust authoritites only to the extent of selecting half of the trustees. Section 302(c)(5)of the LMRA, 29 U.S.C. Section 186(c)(5). Moreover, all funds in trust must be used 'for the sole and exclusive benefit of employees.' Id. 'Thus, the fund is no way an asset or property of the union.' Lewis v. Benedict Coal Corp., 361U.S. at465, 80 S.Ct. at493." The trusteeshave legalduties independent of both the union and the employer in administering the trust fund. N.L.R.B. 

### v. Amax Coal Co. (1981),453 U.S. 322, 333-334, 101 S.Ct. 2789, 69 L.Ed.2d 672. A union cannot relieve the trustees of those duties either by action or non-action. This is the federal labor policy within which this Court is toapply thedoctrineof resjudicata. We reverse the decision of the District Court and remand the cause for further proceedings in accordance with thisopinion.

Justice .' 

### /We concur:


### @dd, Chief 

### Justice