NO. 83-534 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1984 

AUDIT SERVICES, INC., a Montana 

corp. , 

Plaintiff and Appellant, 

WAYNE ANDERSOiJ d/b/a WAYNE ' S 

ELECTRIC, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable John P.1. McCarvel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Cure, Borer & Davis; Maxon R. Davis, Great Falls, 

Montana 

For Respondent: 

Howard F. Strause, Great Falls, Montana 

- - 

Submitted on 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 funds paid into the trust. The 

trustees, who are the assignors of Audit Services, Inc. in 

this action, did not sign and were not a party 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. When 
Anderson refused to pay the amounts allegedly due, the 

trust's claim was assigned to Audit 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 

virute of his execution 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 

fringe benefits. Thus, as set forth in Count I, persons who 

had been denied employment by Anderson because of his 

alleged hiring hall violations had lost compensation, 

including trust contributions, to which they would have been 

entitled pursuant to the collective bargaining agreements. 

Count I1 of the union's complaint alleged that 

Anderson violated the collective bargaining agreements 

because he failed to require persons who he did hire to join 

the union. 

The relief which the union sought was that Anderson 
pay the wages of persons who were not, hut should have been, 

hired through the union referral mechanism. Paragraph 2 of 

the prayer also asked that Anderson be required to pay the 

necessary fringe benefits including health and welfare 

contributions to the trust. 

On January 24, 1983, the union and Anderson stipulated 

to a dismissal with prejudice of the Federal District Court 

complaint. An order to that effect was entered the 

following day. 

In the meantime, 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 

claims that were being litigated in State court. 

From the order of the District Court, Audit Services, 

Inc. appeals raising one issue: did the dismissal with 

prejudice of the union's lawsuit against Anderson for 

violation of their collective bargaining agreements serve as 

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 

cases and federal substantive law provides the basis for our 

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, 1 L.Ed.2d 

972. 

The doctrine of res judicata provides that the parties 

to an action in which a judgment on the merits has been 

rendered, or their privies, are barred from relitigating the 

same cause of action in a second proceeding. Expert 

Electric Inc. v. Levine (2d Cir. 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 privies must be the same; (2) the subject 

matter of the action must be the same; (3) the issues must 

be the same and relate to the same subject matter; and (4) 

the capacities of the persons must be the same in reference 

to the subject matter and to the issues between them. 

In granting Anderson's motion for summary judgment on 

the basis of res judicata, the District Court stated that 

Audit Services Inc.'s situation was analagous to that of 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, certain union 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. Louis Typographical 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 

representative of those who would receive 

the proceeds of any recovey." St. Louis 

Typograhical, supra, p. 282. 

The St. Louis Typographical court went on to say that res 

judicata applied because the plaintiff's in the two actions 

were in "privity." The St. Louis Typographical court said 

"privity" designates a person so identified in interest with 

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 

suit solely as the representative of the union members. 

However, in the instant case, 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 

District Court action concerned Anderson's alleged breach of 

the "hiring hall" and "union security" clauses of his 

collective bargaining agreements. While mention was made 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" clause of the collective bargaining 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 enforcement 
of certain provisions of the same collective bargaining 

agreement does not satisfy the "identity of issues" 

requirement necessary for the doctrine of res judicata. As 

stated by the court in American Broadcasting Companies, 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. 

Pacific Employers Insurance Go., 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 

action might be united in a single suit.' 

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 trust fund and a 

union which is a co-sponsor of the trust. By Section 403 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 third parties, are given 

the exclusive authority to manage 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 hinges 
upon 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. As a matter 

of federal law, a union and its 

representatives are not 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 to direct 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., 361 U.S. at 465, 80 S.Ct. at 493." 

The trustees have legal duties 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 

to apply the doctrine of res judicata. 

We reverse the decision of the District Court and 

remand the cause for further proceedings in accordance with 

this opinion. 

Justice .' / 
We concur: 

@dd, 

Chief Justice