Source: https://supreme.justia.com/cases/federal/us/508/581/
Timestamp: 2019-04-21 08:37:22+00:00

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A federal court does not have authority under § 302(e) of Labor Management Relations Act to issue injunctions against a trust fund or its trustees requiring that fund be administered in accordance with §302(c)(5).
For several years, respondent employers had made contributions to two trust funds (collectively, Greater Funds) on behalf of their employees. In 1984, however, the employers ended their participation in the Greater Funds and agreed, in collective-bargaining agreements with the relevant union, to establish a new set of trust funds (collectively, Southern Funds). To help finance the change between the funds, the employers and other respondents brought an action to compel petitioners, the Greater Funds and their trustees, to transfer to the Southern Funds that portion of the Greater Funds' reserves attributable to respondents' past contributions. Respondents asserted a right to relief under, inter alia, §302 of the Labor Management Relations Act, 1947, which prohibits payments from employers to union representatives, §§ 302(a) and (b), but affords an exception under § 302(c)(5) for payments to an employee trust fund if certain conditions are met, including that the trust fund be "established ... for the sole and exclusive benefit of the employees," and that the payments be "held in trust for the purpose of paying" employee benefits. Respondents' theory was that, unless the reserves attributable to the employers' past contributions were transferred, the Greater Funds would fail to meet § 302(c)(5)'s conditions and would thus suffer from a "structural defect" which could be remedied by the federal courts pursuant to the power conferred by § 302(e) to "restrain violations of this section." The District Court granted petitioners' motion for summary judgment, finding no such "structural defect" in the Greater Funds, but the Court of Appeals reversed and remanded for the District Court to shape an appropriate remedy.
determine when breaches of that trust have occurred and how they may be remedied. Language in Arroyo v. United States, 359 U. S. 419, 426427, and NLRB v. Amax Coal Co., 453 U. S. 322, 331, that is perhaps susceptible of a contrary reading is pure dicta. Pp. 587-593.
935 F.2d 528, reversed and remanded.
SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and O'CONNOR, KENNEDY, SOUTER, and THOMAS, JJ., joined. STEVENS, J., filed an opinion concurring in the judgment, in which WHITE and BLACKMUN, JJ., joined, post, p. 593.
Ronald E. Richman argued the cause for respondents.
This case presents the question whether a federal district court may issue an injunction pursuant to § 302 of the Labor Management Relations Act, 1947 (LMRA), 61 Stat. 157, as amended, 29 U. S. C. § 186 (1988 ed. and Supp. III), requiring the trustees of a multiemployer trust fund to transfer assets from that fund to a new multiemployer trust fund established by employers who broke away from the first fund.
*Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Starr, Christopher J. Wright, Ronald J. Mann, Allen H. Feldman, Mark S. Flynn, Carol Connor Flowe, and Jeffrey B. Cohen; for the Central States, Southeast and Southwest Areas Health and Welfare and Pension Funds by Thomas C. Nyhan and Terence G. Craig; for the National Coordinating Committee for Multiemployer Plans by Gerald M. Feder and David R. Levin; and for the Western Conference of Teamsters Pension Trust Fund by Robert M. Westberg and Kirke M. Hasson.
Local 144 Nursing Home Pension Fund and the New York City Nursing Home-Local 144 Welfare Fund (collectively, Greater Funds)-were established pursuant to collectivebargaining agreements between the Greater Employer Association and the relevant union, Local 144 of the Hotel, Hospital, Nursing Home and Allied Services Employees Union, Service Employees International Union, AFL-CIO (Local 144). Prior to 1981, the respondent employers made contributions to the Greater Funds on behalf of their employees in accordance with the terms of collective-bargaining agreements negotiated between the Greater Employer Association and Local 144.
In 1981, the respondent employers broke away from the Greater Employer Association and executed independent collective-bargaining agreements with Local 144. The initial agreements required continuing employer contributions to the Greater Funds, but those concluded in 1984 provided for establishment of a new set of trust funds, the Local 144 Southern New York Residential Health Care Facilities Association Pension Fund and the Local 144 Southern New York Residential Health Care Facilities Association Welfare Fund (Southern Funds). At approximately the same time, the respondent employers ended their participation in the Greater Funds.
Funds would, after just one more year of service, acquire vested rights to pension benefits pursuant to the 10-year vesting requirement of the Southern Funds-even though the Southern Funds had received only one year of employer contributions for that employee. See id., at 61, n. 4. The Southern Funds' assumption of these liabilities, however, did not alter the obligations of the Greater Funds, which were not parties to the collective-bargaining agreements: They remained liable to the departing employees for all vested benefits. See id., at 61, and n. 5, 65; 935 F. 2d, at 530-531.
To help cover the Southern Funds' liabilities and in general to help finance the change from the Greater Funds to the Southern Funds, the respondent employers-joined by several of their employees and the trustees of the Southern Funds-brought this action to compel petitioners, the Greater Funds and the Greater Funds' trustees, to transfer an appropriate fractional share of the Greater Funds' assets to the Southern Funds. They asserted right to relief under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U. S. C. § 1001 et seq. (1988 ed. and Supp. III), and under § 302 of the LMRA; only the latter claim is at issue here.
delivery of any money or other thing of value prohibited by subsection (a) of this section.
of Labor Management Relations Act, 59 Nw. U. L. Rev. 719, 723-731 (1965). Subsection 302(c), however, provides exceptions to the prohibitions. Most significantly for our purposes, paragraph (c)(5) excepts payments to an employee trust fund so long as certain conditions are met, including that the trust fund be "established ... for the sole and exclusive benefit of the employees," and that the payments be "held in trust for the purpose of paying" employee benefits.
Respondents' theory is that the Greater Funds cannot meet those last quoted conditions unless they transfer to the Southern Funds the portion of their reserves that is attributable to the respondents' past contributions. If they fail to do so, according to respondents, they will suffer from a "structural defect" which can be remedied by federal courts pursuant to the power conferred by § 302(e) to "restrain violations of this section."
The District Court granted petitioners' motion for summary judgment. Though it agreed with respondents that it had power to "review a challenge that the Greater Funds are structurally deficient under [§ 302(c)(5)'s] 'sole and exclusive' benefit standard," 710 F. Supp., at 61, 62, it found no "structural defect," since there was no allegation of corruption in the Greater Funds and since the transfer of assets would not further any collective-bargaining policies. Id., at 64. The Court of Appeals reversed, holding that the Greater Funds "would suffer from a 'structural defect'" unless the funds transferred a portion of their assets to the Southern Funds. 935 F. 2d, at 534. It remanded for the District Court "to shape an appropriate remedy guided by the principle that a fair portion of the reserves reflecting contributions made to the Greater Funds on behalf of the [respondents' employees] should be reallocated to the Southern Funds." Ibid. We granted certiorari, 505 U. S. 1203 (1992).
Both the District Court and the Court of Appeals relied on the Second Circuit's earlier decision in Local 50, Bakery and Confectionery Workers Union, AFL-CIO v. Local 3, Bakery and Confectionery Workers Union, AFL-CIO, 733 F. 2d 229 (1984), which held that federal courts have" 'jurisdiction under [§ 302(e)] to enforce a trust fund's compliance with the statutory standards set forth in subsection (c)(5) by eliminating those offensive features in the structure or operation of the trust that would cause it to fail to qualify for a (c)(5) exception.'" Id., at 234 (quoting Associated Contractors of Essex Cty., Inc. v. Laborers Int'l Union of North America, 559 F.2d 222, 225 (CA3 1977)). Local 50 and the decision below are among a large body of conflicting cases bearing upon federal courts' powers under § 302(e) to supervise the administration of § 302(c)(5) trust funds. A number of courts have held that § 302(e) confers broad supervisory powers. See, e. g., Ponce v. Construction Laborers Pension Trust for Southern California, 628 F.2d 537, 541-542 (CA9 1980); Lewis v. Mill Ridge Coals, Inc., 298 F.2d 552, 558 (CA6 1962). Others have held that it confers no supervisory powers at all. See, e. g., Ader v. Hughes, 570 F.2d 303, 306 (CAlO 1978); Bowers v. Ulpiano Casal, Inc., 393 F.2d 421 (CA1 1968); Moses v. Ammond, 162 F. Supp. 866, 871-872 (SDNY 1958). Still others have acknowledged supervisory powers limited in various respects. See Riley v. MEBA Pension Trust, 570 F.2d 406, 412-413 (CA2 1977); Knauss v. Gorman, 583 F.2d 82, 86-87 (CA3 1978). Our most recent case in this area expressly reserved the question. See Mine Workers Health and Retirement Funds v. Robinson, 455 U. S. 562, 573, n. 12 (1982).
different section of petitioners' brief and claims that it is "disingenuous" to characterize that argument as a broad attack on a federal court's power. Post, at 598, n. 4. We do not do so.
3JUSTICE STEVENS concludes that "it is perfectly clear that funds are no longer 'held in trust for the purpose' of benefiting employees if, immediately after deposit into a legitimate trust fund, they are diverted for some improper purpose." Post, at 597-598, n. 3. It is true that funds are "no longer" held in trust if they are misappropriated (just as it is true that funds are "no longer" held in trust when they are paid out in the form of pensions), but it is also irrelevant. If the payments, when received by the relevant employee representative, "are held in trust" and that trust satisfies the other requirements of § 302(c)(5) (including that it have been "established" for the proper purposes), the exception in § 302(c)(5) applies and the payments do not violate § 302. This was our precise holding in Arroyo v. United States, 359 U. S. 419 (1959). The union official in that case, immediately upon receiving the employer's contributions to the trust fund, had begun diverting the funds to improper purposes. See id., at 422. Indeed, "the evidence could properly support an inference that the [union official's] purpose from the outset was to appropriate the [contributions to the fund] for his own use." Id., at 423 (emphasis added). Nevertheless, we held that the employer's payments were "within the precise language of § 302(c)." Ibid. We deemed the payments to have been "held in trust for the purpose" of benefiting employees since they were made to a trust fund established for that purpose. See id., at 421, 423. JUSTICE STEVENS criticizes us for relying on this "half" of Arroyo while disregarding the other "half," see, post, at 595, n. 1, but the "half" to which we adhere is holding, and the "half" we disregard, dictum.
has said, quoting Lincoln Mills, supra, at 457, that "jurisdiction in a case of this kind can be found within the 'penumbra of express statutory mandate' of Section 302." Lugo v. Employees Retirement Fund of Illumination Products Industry, 366 F. Supp. 99, 103 (EDNY 1973), quoted approvingly in Alvares v. Erickson, 514 F.2d 156, 166 (CA9), cert. denied, 423 U. S. 874 (1975). See also Nedd v. United Mine Workers of America, 556 F.2d 190, 203 (CA3 1977), cert. denied, 434 U. S. 1013 (1978). A comparison of § 302(e) with § 301(a) shows that the analogy to Lincoln Mills is inapt. The latter provides a federal cause of action for any "violation of contracts between an employer and a labor organization." Subsection § 302(e), by contrast, provides no cause of action for a "violation of the fiduciary duties imposed pursuant to an employee benefit trust fund"; rather, it allows federal courts to "restrain violations" of § 302, which, as we have explained, occur when payments to a nonqualifying trust are made or received.
upon the federal courts authority to govern and enforce the trusts, and there is no more reason to reach such a conclusion here.
4 While JUSTICE STEVENS does not dispute that this statement was dictum, he argues that "the reasoning that led us to [that] conclusion ... is not so easily dismissed." Post, at 596 (emphasis added). We disagree. As one will see by reading the relevant passage from Arroyo (set forth in the concurrence, post, at 596-597), the "reasoning" consisted of leaping from the correct premise, that Congress limited the purposes for which exempt trust funds could be used, to the entirely unsupported conclusion, that §302(e) rather than state trust law was to be the means by which that limitation was enforced. It is an ipse dixit, rather than a reasoned conclusion-and, to boot, an ipse dixit contradicted by the very holding of the case in which it was pronounced. Arroyo held that malfeasance in the administration of trust funds did not create federal criminal liability under § 302, and there is no basis in either text or reason why it should nonetheless create federal civil liability.
Consistently with the text of § 302(c)(5), and the structure of § 302 in general, we view the "sole and exclusive benefit" and "held in trust" provisions of that paragraph as neither creating nor imposing a federal trust law standard, but rather as simply requiring a trust obligation for the specified purposes, defined and enforced originally under state law, see Restatement (Second) of Trusts § 170(1) (1959), and now under ERISA.6 Cf. Amax Coal, supra, at 329-330. Respondents do not deny that the Greater Funds are held subject to such a trust obligation. The fiduciaries of the Greater Funds are subject to the fiduciary obligations of ERISA, including the so-called exclusive benefit requirement of 29 U. S. C. § 1l04(a)(1)(i), and are liable under 29 U. S. C. § 1l09(a) to legal and equitable remedies for failure in those obligations. Since the Greater Funds are entities that qualify under § 302(c)(5), equitable relief under § 302(e) restraining future payments to them would not be appropriate.
5 JUSTICE STEVENS' concluding words are that our action today is "a radical departure from the doctrine of judicial restraint." Post, at 601. We have already refuted his claim that our ruling is reached uninvited and without benefit of argument. See supra, at 588-589, n. 2. His lack-ofrestraint criticism seems principally directed, however, at our "departure from [the] understanding" of § 302(c)(5), post, at 601, reflected in the dicta of earlier cases-such as the excerpt that he quotes from Mine Workers Health and Retirement Funds v. Robinson, 455 U. S. 562, 573, n. 12 (1982) (STEVENS,J.), see post, at 600. This seems to us a topsy-turvy version of judicial restraint. It was, if anything, those dicta themselves-uninvited, unargued, and unnecessary to the Court's holdings-which insulted that virtue; and we would add injury to insult by according them precedential effect.
6 Title 29 U. S. C. § 1l04(a)(1) (1988 ed. and Supp. III) provides: "[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and-(A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan."
In addition to the § 302 claim, respondents' complaint asserted two ERISA claims, one based on ERISA's asset transfer rules, 29 U. S. C. § 1414, and the other on ERISA's above-mentioned fiduciary duty provision, § 1104. The District Court ruled against respondents on both claims but, because of its ruling on § 302, the Court of Appeals did not reach them. Neither do we and, on remand, the Court of Appeals will be free to consider them.
The judgment of the Court of Appeals should be reversed because petitioners' failure to transfer assets to respondents' Southern Funds did not violate § 302(c)(5) of the Labor Management Relations Act, 1947 (LMRA), 29 U. S. C. § 186(c)(5) (1988 ed., Supp. III). Because the Court unnecessarily decides that § 302(e) of the LMRA would not authorize injunctive relief even had petitioners violated the specific standards of § 302(c)(5), I do not join its opinion.
§ 302(c)(5). Id., at 533-534; see ante, at 586. We granted certiorari to review that holding. See Pet. for Cert. i.
I would decide this case on the narrow ground presented: that the refusal to make the transfer at issue did not violate § 302(c)(5), 29 U. S. C. § 186(c)(5) (1988 ed., Supp. III). That provision allows payments into trusts not only "for the sole and exclusive benefit of the employees of [the contributing] employer," but also for the benefit of "such employees, families, and dependents jointly with the employees of other employers making similar payments, and their families and dependents." To the extent respondents' previous contributions to the Greater Funds have not been used already to benefit respondents' own employees, they now will be used for the benefit of "employees of other employers making similar payments, and their families and dependents." Ibid. Hence, the Greater Funds continue to operate within the constraints of § 302(c)(5), and no transfer is required.
That some portion of respondents' contributions will go to benefit the employees of other contributors is, of course, in the nature of a multiemployer plan. Such plans operate precisely as suggested by the language of § 302(c)(5), by pooling employer contributions for the joint benefit of all participating employees. Segregation of funds by an employer is neither feasible nor contemplated. "An employer's contributions are not solely for the benefit of its employees or employees who have worked for it alone." Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal., post, at 638. See also Stinson v. Ironworkers Dist. Council of Southern Ohio and Vicinity Benefit Trust, 869 F.2d 1014, 1021-1022 (CA7 1989) (use of employer's contributions for benefit of other than own employees does not violate "sole and exclusive benefit" requirement); British Motor Car Distributors, Ltd. v. San Francisco Automotive Industries Welfare Fund, 882 F.2d 371, 377-378 (CA9 1989) (same).
In short, I agree with the United States, appearing as amicus curiae, that petitioners did not violate § 302(c)(5) when they refused to transfer some proportional share of assets to the Southern Funds. The Court eschews this straightforward rule of decision, however, in favor of a far broader approach, quite unanticipated by the submissions of the parties. Without the benefit of argument on the point by either litigant, the Court reaches out to overrule decades of case law by deciding that § 302(e) does not authorize a civil remedy for violations of § 302(c)(5). In my view, this reinvention of § 302 of the LMRA is as unwise as it is uninvited.
The majority repudiates this understanding of § 302(c)(5)'s operation, reflected also in NLRB v. Amax Coal Co., 453 U. S. 322, 331 (1981), and Mine Workers Health and Retirement Funds v. Robinson, 455 U. S. 562, 570-572 (1982), as "pure dictum." Ante, at 591. But the reasoning that led us to our conclusion in Arroyo is not so easily dismissed. As we explained in that case, § 302(c)(5) was enacted not merely to exempt specified conduct from the prohibitions of §§ 302(a) and (b), but also to ensure that union trust funds, once established, would continue to benefit the designated employees. 359 U. S., at 424-427.
and receipt of trust funds do not violate §§ 302(a) and (b) if the funds are later diverted, not that the later diversion does not violate § 302(c)(5).
2 When the Court characterizes this passage as "leaping" to an "entirely unsupported conclusion," see ante, at 591, n. 4, it ignores the abundant support for that conclusion in the legislative history cited in Justice Stewart's opinion.
diately after deposit into a legitimate trust fund, they are diverted for some improper purpose.
More important, however, is the fact that other provisions of § 302(c)(5) clearly set forth standards for the continuing administration of trust funds. By their very terms, these standards demand compliance on an ongoing basis. See § 302(c)(5)(B) (employees and employers must be equally represented in fund administration); § 302(c)(5)(C) (payments to be used for pensions or annuities must be made to a separate trust). The obvious purpose of §302(e)-a subsection largely overlooked by the majority-is to provide a vehicle for enforcing § 302(c)(5)'s ongoing obligations, among them the requirement that funds be held in trust for the benefit of employees.
4 As the majority notes, petitioners argue that § 302(c)(5) does not authorize such broad jurisdiction to "restructure and regulate employee benefit plans." See ante, at 588, n. 2. More precisely, the position with which respondents take issue in the cited pages of their brief, see ibid., is that "a collectively bargained term of an employee benefit plan is not subject to federal court review for reasonableness under Section 302 of LMRA." Brief for Petitioners 19; see Brief for Respondents 18. It is disingenuous, to say the least, to characterize petitioners' argument as one "attacking the basic authority of federal courts to regulate § 302(c)(5) trust funds." Ante, at 588, n. 2. See n. 6, infra.
6 The Court seems to assume that the question reserved in Robinson was the very different one it answers today. See ante, at 587.
The Court now seems to assume that it is confronted with a choice between "establishing an entire body of federal trust law," ante, at 590, on the one hand, and limiting the scope of § 302(e) to injunctions against the making or acceptance of prohibited payments, on the other. As Robinson makes clear, however, there is no need to go so far in either direction; our understanding that § 302(e) provides a remedy for violations of § 302(c)(5)'s specific standards is independent of any view as to whether § 302(e) makes general fiduciary duties enforceable in federal court.
ers, supra, that the only violations "within the federal courts' authority involved the failure to meet the specific requirements of Section 302(c)(5)." Brief for Petitioners 12 (emphasis in original). Nor do petitioners ever argue that § 302(c)(5)'s "exclusive benefit" obligation is satisfied finally at the time of trust establishment; rather, petitioners understand § 302(c)(5) to require that a trust "(1) use employer contributions only for specified types of benefits; (2) use those assets only for benefits for employees and families of the contributing employer and the employees and families of other contributing employers .... " Id., at 8 (emphasis added).
7 Had this basic proposition been challenged in Robinson-and had the Court as then constituted found any merit in the challenge-then it would have been unnecessary to go on to decide whether the discrimination in that case violated § 302(c)(5) as "unreasonable." In other words, this proposition provided the framework for all of the reasoning in Robinson, just as it provided the framework for all of our post-Arroyo cases under this statute. Whether or not the label "dicta," see ante, at 592, n. 5, is appropriately applied to such a proposition, our statement in Robinson represented an interpretation of an important federal statute that had been accepted uniformly by the bar, the judiciary, and the Congress for over three decades, since Arroyo was decided in 1959. The Court today simply ignores the interest in adhering to settled rules of law that undergirds the doctrines of stare decisis and judicial restraint.
In my view, if a trust fund is not complying with the standards of § 302(c)(5)-if, for instance, it is making annual contributions to the Red Cross-then a federal court is authorized by § 302(e) to enjoin the improper diversion of funds. There is no sensible reason why the court should instead be restricted to enjoining future payments to the fund, or receipt of those payments, as violations of §§ 302(a) and (b). Congress intended § 302(c)(5) to operate as a guarantee against diversion of trust funds, and this purpose is effectuated by the reading we have always before given § 302. Today's departure from this understanding seriously undermines the functioning of the statute. The Court's action is not only uninvited and unnecessary; it is a radical departure from the doctrine of judicial restraint.
Local 144 Nursing Home Pension Fund et al.

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