Court Opinion

ID: 8940265
Source: CourtListenerOpinion
Date Created: 2022-11-27 07:52:53.053358+00
Date Added: 2024-06-11T17:09:43.105690
License: Public Domain

KOZINSKI, Circuit Judge,
concurring.
I reluctantly join the court's opinion because I believe it faithfully applies the law of this circuit. The result we reach is difficult to reconcile, however, with good sense, good conscience or good law. In an effort to carry out the congressional mandate embodied in section 302(c)(5) of the Labor Management Relations Act (LMRA), the court has given the union carte blanche to commit fraud upon small employers like appellee, abrogating principles of contract dating to the earliest days of the common law. I do not think that is what Congress intended, and nothing in the language or legislative history of section 302(c)(5) justifies this result.
Since this case was decided after trial, and the district court made findings of fact, we can be certain as to what happened. Appellee operates a mom and pop subcontractor business. Mr. Giorgi runs the business; Mrs. Giorgi keeps the books; Aaron F. Flores was their employee. In 1979, the union discovered Flores on a worksite operating a skiploader, a task within the juris*624diction of the Operating Engineers. Given the choice of signing a short form agreement or being thrown off the worksite, Giorgi signed. Before doing so, however, he asked the union’s business agent whether he would be required to contribute to the trust fund for hours Flores worked as a laborer. The business agent assured him that he would not.
For almost two years théreafter, Giorgi paid some $9,500 to the Laborers’ Trust in reliance upon the representation of the Operating Engineers’ business agent. The Master Labor Agreement and the resolution of the Adjustment Board, documents that would have advised Giorgi that he was required to pay the Operating Engineers even for the time Flores worked as a laborer, were never presented to him. The union allowed Giorgi to rely on the representations of its agent, to his great financial detriment. To add injury to injury, we now award attorney’s fees to the pension fund because it has prevailed in the litigation.
The basis for this result is a terse phrase in section 302(c) of the LMRA providing that the trust agreement be in writing, which this court has interpreted as prohibiting oral modifications of the agreement. E.g., Maxwell v. Lucky Construction Co., 710 F.2d 1395, 1398 (9th Cir.1983); Kem-mis v. McGoldrick, 706 F.2d 993, 996 (9th Cir.1983); San Pedro Fishermen’s Welfare Trust Fund v. Di Bernardo, 664 F.2d 1344, 1345 (9th Cir.1982); Waggoner v. Dallaire, 649 F.2d 1362, 1366 (9th Cir. 1981). This is in the nature of a statute of frauds and appears to" have been intended to avoid corrupt practices in the administration of employee welfare funds. Dallaire, 649 F.2d at 1366. It is quite a leap, however, from a provision requiring that agreements be in writing, to one that abrogates basic principles of contract law: mutual assent, estoppel and fraud in the inducement. See Connick v. Teachers Insurance & Annuity Assoc., 784 F.2d 1018, 1022 (1986) (a contract can be reformed when one party is mistaken and the other party knows or suspects the first party is mistaken); Michael Distributing Co. v. Tobin, 225 Cal.App.2d 655, 37 Cal.Rptr. 518 (1964) (“purpose of statute of frauds is to prevent, not effectuate, wrong”); Restatement (Second) of Contracts § 163 (1979) (“[i]f a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent”).
While protecting trust funds from fraud is important, I cannot believe that the congressional purpose is served by holding a tiny subcontractor to a massive contract, the contents of which he has never seen and as to which the union’s representative has lied. At the very least, it would seem that there was not a meeting of the minds, and therefore no contract. See Joseph, v. Donover Co., 261 F.2d 812, 820 n. 11 (9th Cir.1958) (“to create a contract ... the minds of the parties must meet as to every essential term of the proposed contract”); Restatement § 163.
I find this case particularly troubling because it does not appear to represent an isolated incident. There have now been a number of occasions where misstatements by representatives of this very union regarding the pension plan have been alleged and proved. See Operating Engineers Pension Trust v. Gilliam, 737 F.2d 1501 (9th Cir.1984); McGoldrick, 706 F.2d at 995; Dallaire, 649 F.2d at 1365; cf. Maxwell v. Lucky Construction Co., 710 F.2d at 1397 (employer relied on union representative’s oral representation regarding contributions). Once put on notice that its agents were misleading some employers, and that many more employers were signing the short form agreement without fully appreciating its terms, what did the union do? Did it clarify the short form agreement? Did it provide copies of the Master Labor Agreement and the relevant orders of the Adjustment Board to signatory employers? Did it prepare a simple, concise summary of the key terms of the full contract and attach it to the short form agreement? Did it modify the short form agree*625ment to disclaim any oral representations made by the union’s business agent? As far as this record reflects, the union has done none of these things. And why should it? After all, it can be confident that employers caught in the web of misstatement or misunderstanding spun by its agents will be without legal recourse, and that any employers foolish enough to resort to the courts will have to bear the trust fund’s attorney’s fees for defending the suit.1
To reach this result requires, in my view, a very broad reading of a statutory provision that calls for nothing more than a written trust agreement, a provision intended to avoid fraud on the trust fund. I think the drafters of the legislation would be surprised to learn that it has been interpreted to sanction fraud by the trust fund.
I concur, but not without grave misgivings.

. This case does not raise the issue of whether the employer may recover from the union the damagés suffered as a result of the fraud.