Opinion ID: 347564
Heading Depth: 2
Heading Rank: 3

Heading: The Challenged Amendments

Text: 16 Measured against these standards, the amendments to the Newark welfare and pension funds are plainly illegal. Even if the Union's dominant position is not apparent on the face of the amendments, elementary analysis ineludibly demonstrates the potential of Union domination as the inevitable consequence of the amendments' operation. The starting point for analysis must be the candid recognition that the relationship between employer and employee trustees of an employee benefit trust fund is quasi-adversarial in nature. Naturally, the trustees of such a trust fund function as fiduciaries for the funds' beneficiaries but they also serve as representatives of the parties who appoint them. Insofar as it is consistent with their fiduciary obligations, employer trustees are expected to advance the interests of the employer while employee trustees are expected to further the concerns of the union in the ongoing collective bargaining process between them. See Lamb v. Carey, 162 U.S.App.D.C. 247, 498 F.2d 789, 793 (1974); Toensing v. Brown, 374 F.Supp. 191 (N.D.Cal.1974), aff'd, 528 F.2d 69 (9th Cir. 1975); Goetz, Developing Federal Labor Law of Welfare and Pension Plans, 55 Cornell L.Rev. 901, 921 et seq. (1970). The trustees' efforts to improve the position of the parties they represent are completely legitimate indeed, they are essential to the operation of section 302(c)(5). Congress envisioned the conflict of views of employer and employee as a distilling process which would provide safeguards against trust fund corruption. 17 The arrangement of trustees contemplated by the challenged amendments, however, would impair the delicate balance between employer and employee trustees and thereby destroy the effectiveness of this safeguard. The Congressional objective in maintaining the integrity of the welfare and pension funds by an evenly balanced representation between union trustees and their employer counterparts would be endangered. While the union trustees could be expected to address fund problems with a strong common voice, representatives of two rival employers' associations could be expected, particularly in light of the experience here, to speak in discordant or diluted voices. In a contest of wills, the union trustees might find their employer counterparts divided and readily subjugated. This is not to say that the views of trustees appointed by different employers will always diverge to give the union trustees effective control on every issue. In the instant case, however, the record demonstrates and the district court so found, that Associated and BTEA are avowed rivals. In view of the sequence of events we have chronicled, it is evident that little love is lost between Associated's former and now BTEA trustees Brienza and DiGirolamo, on the one hand, and the two Associated trustees and Associated itself on the other. Thus, even if in other circumstances, a board composed of four union trustees representing a single union and four employer trustees representing two different trade associations might possibly comply with the equal representation clause of subsection (c)(5), we hold that that clause is violated when employer trustees representing a rival association not a party to the original trust agreement are added to the board without the consent of the original employer association. 18 Where employer trustees represent rival associations, especially when the associations are hostile to each other and personal enmity exists between the associations' trustee representatives, the possibility of abuse is high. Assume, for example, that the trustees of the Newark funds are called upon to vote on a proposal which employers would normally oppose and union officials usually favor. Rather than simply voting against the proposal, BTEA's vote would likely be determined by balancing the intensity of its opposition as an employer toward the proposal against the degree of its enmity with Associated. On some issues, BTEA might well regard a vote for a pro-union proposal as a fair price to pay for the adverse effects upon Associated. In this kind of malaise, the well-being of the beneficiaries of the funds is sacrificial bait. And, of course, the reverse is also possible: Associated would find itself subject to the same conflict of motivations. The result would necessarily be to increase the power of union representatives as against the employer representatives at the expense of the balance designed for the protection of employee beneficiaries of the fund. 19 Equal danger would be posed by a proposal toward which the union is neutral but as to which Associated and BTEA have differing views. The Union might be tempted to cast its controlling votes with Associated in exchange for Associated's promise to vote with the Union on a subsequent pro-union motion which Associated would otherwise be expected to oppose. And again, the reverse is equally possible. The situation is fraught with mischief and manipulation. 20 The problem is only exacerbated by the amendment providing for a quorum of six trustees. If that amendment were allowed to stand, business could be conducted even in the absence of any Associated trustees. The danger is not that BTEA might advance its own position vis-a-vis Associated (or vice-versa) for section 302 is not concerned with such rivalries; the danger is that the quorum provision, like the other amendments, places the union in the powerful position of a power broker. 21 In the instant case, some specific dangers to the stability of the Funds and the equal representation of employer and union trustees quickly surface. Under the original agreement and declaration of trust, Associated had the exclusive power to remove any or all employer trustees it found objectionable with or without cause at any time. Under the new amendments, it can only remove two of the four employer designated representatives. Since in most matters action is by simple majority, factionalism among employer trustees readily permits a unified body of union trustees to dominate a controversial issue. Instead of requiring a joint administration by all employer and union trustees, the amendments allow decisions solely by union representatives and representatives of BTEA. Under the original agreement, Associated could appoint half of the total number of trustees; under the amendments, it can only appoint or remove one-fourth. 22 We realize that the record does not establish that an evil alliance has been or will be forged between BTEA and the Union, or between the Union and Associated. The proposed new structure of trustees, however, makes such an alliance possible. That possibility carries with it a very real threat of union domination and union abuse which the equal representation clause was designed to foreclose and which we cannot ignore. Under the controlling legal standards set forth above, that potential for union abuse is sufficient reason to strike down the amendments. 9 We therefore hold that the challenged amendments are invalid under the equal representation clause of section 302(c) (5).