Opinion ID: 392946
Heading Depth: 2
Heading Rank: 3

Heading: ERISA and LMRA: Their Intersection and Its Application to This Case

Text: 17 In deciding whether appellants may successfully defend a collection action brought under section 502(a) of ERISA by asserting violations of the structural requirements of section 302(c)(5) of the LMRA, we must first determine whether pre-ERISA decisions interpreting section 302(c)(5) are applicable to an ERISA claim. An examination of ERISA and its legislative history leads us to agree with appellants that this authority is indeed relevant to the disposition of this case. The pertinent section of the statute, section 514(d), explicitly states that 18 (n)othing in this subchapter shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States ... or any rule or regulation issued under any such law. 19 29 U.S.C. § 1144(d) (1976). As this court recently held, this is a strong, comprehensive, express statement that ERISA is not to be read as displacing by implication any pre-existing federal legislation. Air Line Pilots Association, International v. Northwest Airlines, Inc., 627 F.2d 272, 276 (D.C.Cir.1980). The legislative history, moreover, provides additional support for this conclusion. In its discussion of the problems with existing pension legislation, for example, the Senate Committee on Labor and Public Welfare remarked in its Report on the Retirement Income Security for Employees Act of 1973 (the Senate version of the later-enacted ERISA) that 20 (t)he Labor-Management Relations Act, Sec. 302, provides the fundamental guidelines for the establishment and operation of pension funds administered jointly by an employer and a union. The Act is not intended to establish nor does it provide standards for the preservation of vested benefits, funding adequacy, security of investment, or fiduciary conduct. 21 The proposed bill would ( ) establish minimum standards of vesting, funding, and fiduciary conduct and also provide for voluntary portability of earned pension credits and a system of compulsory benefit insurance to protect the security of pension rights. 22 S.Rep.No.93-127, 93d Cong., 1st Sess. 4-5 (1973), U.S.Code Cong. & Admin.News 1974, 4639, 4841, reprinted in I Legislative History of the Employment Retirement Income and Security Act at 590-91 (1976). 23 These sources reveal no congressional intent to undermine the validity of existing legislation, or, inferentially, of its construction by the judiciary. Instead, Congress attempted in ERISA to fill those gaps in the worker protection provided by pension funds created pursuant to such legislation. Because, therefore, judicial interpretations of section 302(c)(5) would be plainly relevant to this case had it been initiated prior to ERISA's enactment, and Congress expressly indicated its intent not to disturb existing law, we proceed to an examination of the section 302(c)(5) authority developed by the federal courts. 24 Under the LMRA, employers are generally forbidden to make any payments to representatives of employees. An exception to this general prohibition is provided in section 302(c)(5), the result of a compromise reached between two competing concerns. One concern was that a flat prohibition against employer payments would destroy existing employee welfare funds; the other was that, absent some statutory control, union officials would remain free to abuse the unfettered discretion they then exercised over such funds. 6 Under the compromise, employers were permitted to contribute to those trusts meeting certain requirements specified within the subsection. By thus structuring the exception Congress could assure the continued flow of benefits to employees under existing plans, while at the same time guarding against those abuses it saw arising from exclusive union control of trust funds. 25 Civil enforcement of the standards established in section 302(c)(5) was provided for in subsection (e). In that subsection Congress granted federal district courts equitable jurisdiction to restrain violations of this section.... 29 U.S.C. § 186(e) (Supp. II 1978). The federal courts have agreed that this jurisdictional provision permits them to grant parties injunctive 7 and, in some instances, declaratory 8 relief in restraining these violations. Moreover, although the scope of section 302(e) jurisdiction has not yet been fully defined, 9 at least this much is certain: 26 a federal district court does have jurisdiction under the section 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. 27 Associated Contractors of Essex County, Inc. v. Laborers International Union, 559 F.2d 222, 225 (3d Cir. 1977). 28 Consistent with this interpretation, courts have entertained challenges to the structural validity of a trust fund. Where, as here, these allegations assert that employers and employees are unequally represented in the joint administration of an employee welfare fund, a court will look beyond the equality signified by equal numbers to determine whether the administrative structure reflects meaningful adherence to the Congressional command. Id. at 227. If it finds that the administration creates the potential for union domination, the court will take the appropriate equitable measures to ensure compliance with the equal representation standard. See, e. g., id.; Quad City Builders Association v. Tri City Bricklayers Union No. 7, 431 F.2d 999 (8th Cir. 1970). 29 Appellants in this case could have followed this well-established procedure in determining the structural validity of the SASMI fund. They could have instituted a suit under section 302(e), requesting the district court to enjoin any existing violations of the structural requirements of section 302(c)(5). Appellants chose, however, to disavow their contractual obligation and to assert their claims of structural defects as justification for this disavowal. When the district court subsequently rejected this attempted justification, appellants filed this appeal, claiming that the district court wrongly ignored the federal common law developed under section 302. 30 Pausing briefly to observe that appellants are hardly in a comfortable position to accuse anyone of ignoring the relevance of section 302 law, we proceed to an examination of their proposition that under that law delinquent contributors (can) raise defenses directly related to the structure of the trust fund. Brief for Appellants at 16. To support this proposition, appellants refer us to the cases of Thomas v. Reading Anthracite Co., 264 F.Supp. 339 (M.D.Pa.1966), and Ramsey v. United Mine Workers Welfare & Retirement Fund, 231 F.Supp. 909 (E.D.Tenn.1964); neither case, however, lends credence to appellants' claim. In Ramsey, plaintiffs were coal companies seeking to recover payments made to an employees' welfare trust fund established pursuant to a collective bargaining agreement between the plaintiffs and the United Mine Workers of America. As one basis for their requested recovery, plaintiffs argued that the agreement and its accompanying declaration of trust did not sufficiently specify the basis upon which employer contributions would be paid, and therefore violated one of the requirements of section 302(c)(5). The court rejected this argument. Stating that the requirements of subsection (c)(5) should be interpreted as a part of the entire legislative plan, the court concluded that the establishment of a legally enforcible (sic) method of arriving at a detailed basis for distributing welfare trust funds is sufficient to comply with Section 302(c)(5), id. at 913, and that the challenged agreement provided such a method. Accordingly, the court granted defendants' motion for summary judgment and dismissed the case. We agree with appellants that the Ramsey court actually determined the trust fund to be in compliance with the requirements of section 302(c)(5). As we emphasized earlier, however, it is undisputed that a district court may evaluate challenges to the structural validity of a trust fund when such challenges are presented in the proper posture. In Ramsey, plaintiffs alleged that the trust fund failed to comply with section 302(c)(5)'s requirements; they did not attempt to defend a collection action brought by the fund on that basis. We do not, therefore, find Ramsey particularly helpful to appellants' position. 31 The Thomas case similarly fails to sustain appellants' proposition that section 302(c)(5) violations can be successfully maintained by delinquent contributors defending a collection action. Thomas, however, is not irrelevant to our disposition; in fact, it is the only decisional authority which speaks directly to the issue we presently address. 10 In Thomas, plaintiffs were trustees of the Anthracite Health and Welfare Fund. They brought suit against the defendant company for royalty payments allegedly owed them under certain Anthracite Wage Agreements. Defendants argued that they could not legally make the promised payments because the fund did not comply with the requirements of section 302. One of the violations they alleged was that employers and employees were not equally represented in the fund's administration. In its assessment of this allegation, the district court reviewed Supreme Court precedent which it felt reflected the Court's overriding concern for the innocent beneficiaries of employee welfare plans. In light of this concern and of the remedy readily available under Section 302(e), id. at 348, for situations such as we have here, id. at 347, the district court concluded: the employer's obligation to pay royalties (may not) be diminished by the fact that the plan adopted by the employer and the Union to receive and administer the Fund ( ) does not fully qualify with the Act.... Id. at 348. 32 After careful consideration, we find that the circumstances before us merit an application of the Thomas court's conclusion. Appellants would have us remand this case to the district court for a thorough assessment of their equal representation claim. If we do not remand or, alternatively, ourselves assess that claim, appellants argue that their complaint will go unheard. In support of this argument, appellants state that the NLRB has refused to determine the merits of their allegation on the ground that the statute requires its adjudication by a district court; that our district court has also refused jurisdiction over the matter; 11 and that the Fifth Circuit, the jurisdiction in which these contractors do business, has in other cases refused to provide the type of declaratory relief appellants seek. 12 Appellants further assert that Congress intended section 302(c) trusts to comply strictly with the requirements specified in subsection (c)(5). They note the criminal penalties to which employers contributing to nonconforming trusts are subject, 13 and point to the acknowledged right of employers to enforce statutory compliance. See, e. g., Denver Metropolitan Association of Plumbing, Heating, Cooling Contractors v. Journeymen Plumbers & Gas Fitters Local 3 & Pipefitters Local 208, 586 F.2d 1367, 1372 (10th Cir. 1978); Blassie v. Kroger Co., 345 F.2d 58 (8th Cir. 1965); Employing Plasterers' Association v. Journeymen Plasterers' Protective & Benevolent Society, Local 5, 279 F.2d 92, 97-98 (7th Cir. 1960). On the basis of these factors, appellants contend that our failure to ensure proper consideration of their claim would be contrary to the congressional intent underlying the creation of section 302(c)(5) standards. 33 We disagree. Although strict compliance with the qualifications of section 302(c)(5) is generally required, 14 it is not an end in itself but a means of ensuring that payments made by employers (are) used to provide employees with the benefits to which they are entitled under a collective bargaining agreement. Bricklayers, Masons and Plasterers International Union, Local 15 v. Stuart Plastering Co., 512 F.2d 1017, 1025 (5th Cir. 1975). To ensure this proper flow of benefits, Congress endowed the federal district courts with the equitable power to restrain violations of section 302(c)(5) requirements. These courts have recognized that their exercise of this power must be consistent with the underlying congressional purpose of protecting trust beneficiaries. Thus, where possible, courts have acted to restrain section 302(c)(5) violations without disturbing the employer's payment obligations. 15 34 Equal representation violations seem particularly susceptible of this type of accommodation. Unlike other defects such as the absence of a written agreement, or the absence of a detailed basis for employer payments, an equal representation defect does not practically preclude continued employer contributions. 16 In Quad City Builders Association v. Tri City Bricklayers Union No. 7, 431 F.2d 999 (8th Cir. 1970), for example, the court determined that a trust fund in which the employer trustees were appointed by ten mason contractors, eight of whom were active union members who worked occasionally as employees, did not comply with the equal representation requirement. On that basis, the court enjoined the violation and instructed the parties to agree upon a lawful plan for trustee selection. It also held, however, that in the interim preceding election of appropriate trustees, the present trustees could continue to receive contributions to the fund subject to court supervision of disbursements. Id. at 1004. 35 We agree that an equal representation violation need not preclude an employer's fulfillment of his contractual obligation. Moreover, we believe that the primacy of protection for trust beneficiaries in the congressional scheme compels the conclusion that appellants may not successfully assert an equal representation defect as a defense to appellees' collection action. In addition to the fact that this conclusion best promotes Congress's interest in a continued flow of benefits, two related factors make this disposition particularly appropriate here: appellants' failure to invoke the well-established forum for the resolution of structural allegations, and the delay in asserting such allegations. As we have been at some pains to point out in this opinion, appellants had, and indeed still have, recourse to the civil preventive remedy provided in section 302(e). The importance of this remedy to employers has been clearly expressed: 36 Unilateral termination by the employer-contributors of allegedly illegal contractual obligations may subject them to an action for breach of the collective bargaining agreement. The benefit conferred ... by a test of the legality of the welfare funds and a restraint of violations of Section 302 is the bestowing of legal posture on payments and on the administration of welfare funds and the removal of the onus of participation in a continuing violation which may subject the Association to possible criminal sanctions. 37 Employing Plasterers' Association v. Journeymen Plasterers' Protective & Benevolent Society, Local 5, 279 F.2d 92, 99 (7th Cir. 1960). 38 Despite the acknowledged importance of this remedy, however, appellants chose not to avail themselves of its benefits either during the two-year interval between the conclusion of the bargaining agreement and the commencement of the agreed-upon payments, or when the payment obligation matured. They simply breached that obligation. Indeed, only after the trustees of the SASMI fund brought a collection action for the overdue payments did appellants raise their equal representation objection in the district court, and even then the challenge was made in the context of a cross-motion for summary judgment rather than in a separate suit or counterclaim brought pursuant to subsection (e). By thus electing to forego the proper opportunities to resolve their equal representation claim, appellants have created their present distress. 17