Court Opinion

ID: 8908548
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:17:19.187187+00
Date Added: 2024-06-11T17:08:22.262876
License: Public Domain

ADAMS, Circuit Judge,
concurring.
As I see it, this appeal primarily presents the issue whether, when the trustees of union welfare and pension funds sue to compel an employer to make payments to the funds pursuant to the terms of a labor agreement between the employer and the union, the employer may defend on the ground that union misconduct excused its obligation to perform. Specifically, Long’s Hauling Company (Long) raises the defenses of antitrust illegality and labor law violations on the part of the United Mine Workers of America in opposition to a claim by the trustees of that union’s health and retirement funds that Long has undertaken to contribute to the funds by signing the 1974 National Agreement.
Long contends, first, that the Union violated the antitrust laws in coercing it to assume that obligation. It avers that United Mine Workers representatives prevented *462its trucks from hauling coal from a mine that was operated by a party to the 1974 National Agreement and threatened to disrupt Long’s business with the mining company in the future unless Long signed the National Agreement. The UMW was capable of enforcing its threats, Long alleges, since a clause in the National Agreement prohibited signatories from contracting the handling of coal to a trucker that is not a party to the National Agreement. Long insists that the clause in question is an illegal restraint of trade under section 1 of the Sherman Act, and that as a result of such restraint, it was compelled to sign the National Agreement. Second, Long argues that the clause constituted an unfair labor practice and a “hot cargo” clause in violation of sections 8(d) and 8(e), respectively, of the National Labor Relations Act and that consequently the entire National Agreement was void, including the provisions covering employer contributions to the union’s health and retirement funds.
The district court held that it could not consider the merits of Long’s antitrust defense and that it did not have jurisdiction over the labor law defenses, and issued a preliminary injunction ordering Long to contribute to the funds. This Court now affirms the judgment of the trial court. I agree with Chief Judge Seitz that the federal courts do not have jurisdiction to entertain Long’s unfair labor practice and “hot cargo” clause defenses; as to these matters, the National Labor Relations Board has original jurisdiction. However, because I would follow a different route from Chief Judge Seitz in disposing of Long’s antitrust illegality defense, I write this separate opinion.
Evidently, Chief Judge Seitz would permit employers as a general matter to interpose defenses to suits by union pension fund trustees to compel payments to the fund. But he relies on Kelly v. Kosuga, 358 U.S. 516, 79 S.Ct. 429, 3 L.Ed.2d 475 (1959), to conclude that a court may not consider an antitrust violation that was asserted as a defense to such suit. In my view, denial of Long’s defense on the authority of Kosuga would invite further wasteful and fruitless litigation by employers who wish to avoid their contractual obligations to contribute to union welfare and pension funds. Inasmuch as the Supreme Court has, to this date, left open the possibility that under certain circumstances a charge of antitrust illegality may properly be entertained as a defense to a contract claim, see id. at 520, 79 S.Ct. 429, employers in the future may still attempt to bring themselves within that exception.1 And defenses by employers on grounds other than antitrust illegali*463ty would not be precluded at all. Because I believe it desirable to have a clear rule that would foreclose such litigation altogether,21 prefer to rest affirmance of the district court judgment on the ground that where the trustees of a union welfare or pension fund sue to compel an employer to make contributions as stipulated in the labor contract between the employer and the union, the employer may not assert any defenses that he may arguably have to that contract.
My analysis begins with Lewis v. Benedict Coal Corp., 361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960). In Benedict, the trustees of a union pension fund sued a coal operator to collect royalties due the fund under the collective bargaining agreement between the union and the employer. The coal operator contended that under contract rules concerning third-party beneficiaries, it should be permitted to set off against its liability to the fund damages incurred when the union engaged in strikes and work stoppages in contravention of its contractual promises.
This argument was rejected by the Supreme Court, which refused to treat labor agreement provisions stipulating that an employer make payments to a union pension fund as a typical third-party beneficiary contract. It regarded the employer’s contributions to the fund as “really another form of compensation to the employees,” and deduced that, “as such, the obligation to pay royalty might be thought to be incorporated into the individual employment contracts.”3 The Supreme Court also noted that national labor policy, out of “solicitude for the union members, because they might have little opportunity to prevent the union from committing actionable wrongs,” does not permit recourse against anyone but the union to recover damages for injuries inflicted by that entity. In the Court’s view, this policy applies “with even greater force to protecting the interests of beneficiaries of the welfare fund, many of whom may be retired, or may be dependents . . . .”4 These and other related considerations5 influenced the Supreme Court to adopt a rule different from that of general contract law by exercising the federal judiciary’s authority to fashion federal common law for the enforcement of collective bargaining contracts. It held that the parties to such agreements “must express their meaning in unequivocal words before they can be said to have agreed that the union’s breaches of its promises should give rise to a defense against the duty assumed by an employer to contribute to a welfare fund . . . .”6
Lower federal courts have recognized that the Supreme Court’s discussion in Benedict evinces a considered judgment that the ramifications for national labor policies must be surveyed before labor agreements pertaining to employer contributions to union welfare and pension funds are subjected to contract principles governing third-party *464beneficiary situations.7 Accordingly, attention has been given to the concerns expressed in Benedict in cases raising issues other than the narrow question decided by the Supreme Court of how the intent of the parties to a labor agreement should be construed. Almost invariably, when faced with a suit to compel employer payments to union welfare or pension funds, the courts have disallowed defenses sought to be interposed by employers to enforcement of the contract based on such grounds as failure of consideration, existence of parol evidence to establish a different agreement, fraud, misrepresentation, and duress on the part of the union.8 Indeed, circumstances similar to those presented here formed the backdrop for the Sixth Circuit’s opinion in Pennington v. United Mine Workers of America, 325 F.2d 804 (6th Cir. 1963), rev’d as to other portions, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). In that case, an employer refused to make payments to the union’s pension fund on the ground that it had been coerced into signing the labor agreement under threats of violence, as part of a combination among the union and several large coal companies that violated the Sherman Act. After discussing alternative grounds for affirming the district court’s holding in favor of the trustees, the court of appeals relied on Benedict to conclude that, “with respect to the coal already mined and the rights accrued thereby, we are of the opinion that the Trustees’ right to recover is not barred.” Id. at 819. The approach taken in Benedict and the subsequent decisions appears effectively to dispose of Long’s defense of antitrust illegality.
The wisdom of not permitting employers such as Long to interpose defenses to their undertaking to support union welfare and pension funds seems apparent. With both the number of Americans in retirement and the duration of those non-remunerated years of their lives increasing, and with the cost of health care soaring, it has become ever more important to provide for those situations where the cost of living will no longer be satisfied from anticipated income. Social security benefits are often insufficient by themselves to meet those needs, and must be supplemented from other sources. For millions of unionized employees, the chosen and preferred method for insuring against the privations of sickness, unemployment, and old age has been the union welfare and pension funds. Under such arrangements, the employer contributes periodically to the funds an amount negotiated by contract. Such contributions are, in reality, indirect or deferred compensation, earned by the employee with each hour or each day worked. Ensuring the viability of these funds and protecting the employees’ investment from dissipation as a result of union or employer conduct or misconduct has for many years been a concern *465of the federal government,9 and has recently received renewed attention.10
As Benedict makes clear, vital public interests are served by insulation of the employer’s obligations to union welfare and pension funds form under the labor contract. It prevents penalizing employees for alleged union misdeeds over which they have little, if any, control. And it guarantees hard-working people the unemployment, health and retirement protections that they and their families expect to receive as part of the terms of their employment.11
Moreover, such a rule forces an employer to disclose promptly any problems that may exist in its undertaking to provide for its employees’ health and retirement needs, rather than create false impressions in the minds of its employees regarding the compensation they are entitled to receive. It thus forecloses the possibility that an employer will surprise its employees by revealing at a late date that it was not legally bound to provide for contingencies that may afflict them or their families in the future. The employer may still have its claims adjudicated by bringing, in the proper forum, a timely suit against the union for rescission of the contract, antitrust damages, or a declaration that an unfair labor practice has been committed, as the case may be. It would be discouraged, however, from biding its time in such a way as to jeopardize the future security of its employees.
Finally, it appears preferable as a matter of judicial administration to require that the employer sue the union directly if it believes it has reason to be excused from performing under the labor agreement, instead of permitting it to assert its claim by way of defense against the trustees. The employer dealt with the union and bases its case on those dealings. Clearly, the enforceability of the labor agreement can better be ascertained in the context of a lawsuit to which the principal actors are parties than in one where one party, the trustees, does not have first-hand knowledge of the material facts.12
I recognize that Long is in a more appealing position than the typical employer seeking to avoid its contractual duty to contribute to a pension fund, because Long continues to make payments to a private fund pursuant to a separate agreement with the local union. But that would not appear to justify a departure from a clear and consistent rule barring employer defenses to suits by pension fund trustees. The risks that the important interests of the employees will be eroded by exceptions to the rule and that the rule itself might eventually be undermined outweigh the equities that favor even an employer with the most sympathetic position.13 As against the risks that *466are entailed in complicating a simple, workable rule by engrafting case-by-case exceptions upon it, the employer suffers no real harm: It remains free to initiate suit against the union to excuse its performance under the labor agreement, and is forewarned by the rule’s absolute application that until it prevails in such lawsuit it will be held to its undertaking to contribute to the union’s welfare and pension funds.

. Moreover, although I do not dwell on the point because of the approach I take in disposing of this case, I note in passing that the policies articulated in Kosuga do not appear to preclude consideration of Long’s antitrust defense. Kosuga concerned the more common factual context of a party that had already performed under a contract suing for payment due, and a defendant seeking to avoid payment by contending that the contract abridges the antitrust laws. As Chief Judge Seitz observes, Kosuga reflects the policies, first, of not permitting a defendant to be unjustly enriched by receiving benefits under the contract while being exempted from performing in return, and second, of not disproportionately penalizing the plaintiff where the antitrust laws already specify a powerful private remedy. See generally, Comment, The Defense of Antitrust Illegality in Contract Actions, 27 U.Chi.L.Rev. 758 (1960). Neither of these policies, however, appear to be applicable to this case, inasmuch as the UMW apparently extracted Long’s undertaking to make payments to its pension fund without granting it a quid pro quo, and inasmuch as Long continues to make payments for the benefit of its employees to a private pension fund pursuant to the terms of its contract with the local union. It would seem, therefore, that the situation in this case may be analogized to those in which defendants in a contract suit have been permitted to interpose the defense of antitrust illegality, under the exception left open by Kosuga. See, e. g., Farbenfabriken Bayer, A. G. v. Sterling Drug, Inc., 307 F.2d 207 (3d Cir. 1962); cert. denied, 372 U.S. 929, 83 S.Ct. 872, 9 L.Ed.2d 733 (1963); Tampa Electric Co. v. Nashville Coal Co., 276 F.2d 766 (6th Cir. 1960), rev’d on other grounds, 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961). See also Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 646 n. 3, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977) (Stevens, J., dissenting) and cases cited therein. But see Pennington v. United Mine Workers of America, 325 F.2d 804, 818 (6th Cir. 1963), rev’d as to other portions, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965).

. In addition to the policy reasons for such a rule, developed infra, it deserves mentioning that frequent litigation of such disputes would have a deleterious effect upon the pension funds, in that counsel fees for the trustees would have to be paid from their accounts, and may affect the ability of the funds to provide the benefits they were designed to provide.

. 361 U.S. at 469, 80 S.Ct. at 495.

. Id. at 470, 80 S.Ct. at 496..

. Two additional factors were mentioned by the Supreme Court. Though more closely connected to the discrete issue raised in Benedict —whether a contract rule of construction for interpreting the intent of the parties should be applied to a labor agreement — than are the two general considerations highlighted in the text, they, too, are noteworthy. The Court observed that, “[i]n a very real sense Benedict’s interests in the soundness of the fund and its management is in no way less than that of the promisee union” since “[i]t is a commonplace of modem industrial relations for employers to provide security for employees and their families to enable them to meet problems arising from unemployment, illness, old age or death.” 361 U.S. at 468-69, 80 S.Ct. at 495. The Court also deemed relevant the fact that the agreement was industry-wide, and that it was doubtful that the other coal operators had intended to assume the risk of being pressured to increase their contributions in the event that one or more of their co-signatories were absolved because of union strikes and work stoppages.

. 361 U.S. at 471, 80 S.Ct. at 496.

. See, e. g., Lewis v. Mill Ridge Coals, Inc., 298 F.2d 552, 557 (6th Cir. 1962) (“The Supreme Court has now placed collective bargaining contracts in a special class, exempt from some of the rules of construction traditionally applicable to contracts.”)

. See, e. g., Lewis v. Mill Ridge Coals, Inc., 298 F.2d 552 (6th Cir. 1962); Boyle v. North Atlantic Coal Corp., 331 F.Supp. 1107 (W.D.Pa.1971); Lewis v. Seanor Coal Co., 256 F.Supp. 456 (W.D.Pa.1966), affd, 382 F.2d 437 (3d Cir.), cert. denied, 390 U.S. 947, 88 S.Ct. 1035, 19 L.Ed.2d 1137 (1967); Lewis v. Harcliff Coal Co., 237 F.Supp. 6 (W.D.Pa.1965).
The one situation where courts have been reluctant to apply the rationale of Benedict as fully as they might have is in permitting an employer to show by parol evidence that no agreement at all was intended by the parties. See, Lewis v. Mears, 297 F.2d 101 (3d Cir.), cert. denied, 369 U.S. 873, 82 S.Ct. 1142, 8 L.Ed.2d 276 (1962) (but petition for rehearing denied by equally divided court, with published dissent); Lewis v. Lowry, 295 F.2d 197 (4th Cir. 1961), cert. denied 368 U.S. 977, 82 S.Ct. 478, 7 L.Ed.2d 438 (1962) (with Sobeloff, Chief Judge, dissenting). To the extent these decisions are consistent with the prevailing trend of judicial opinion, they might be explained as recognizing that whereas it is reasonable to demand in other circumstances that the employer initiate suit if it wishes to be absolved from liability, it is unreasonable to expect that it do where it believes that both it and the union had no intent to create a binding agreement. In the latter situation, the employer should not be expected to know that a potential adversary exists or that it is jeopardizing the expectations of its employees.

. See, e. g., Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq., repealing Welfare and Pension Plans Disclosure Act of 1959, as amended in 1962, 29 U.S.C. §§ 301 et seq.

. On July 12, 1978, Executive Order No. 12071 was promulgated, establishing an eleven-member Commission on Pension Policy to examine public and private pension systems and to suggest reforms, as part of an effort to develop national policies for disability, survivor, and retirement programs. 47 U.S.L.W. 2052 (July 25, 1978).

. Also, there is always the danger that while the defense to the trustees’ suit is being litigated, the employer may become financially pressed and unable to make payments, and the employees would then be without any recourse.

. Chief Judge Seitz agrees that the rule laid down by Benedict and subsequent cases requires that Long pay the amounts already owed to the health and retirement funds, but believes that the trustees’ request that Long be compelled to make future payments as they become due may be subject to different treatment. In view of the far-reaching policy considerations — elaborated upon in the text — that underlie the Benedict rule, no practical purpose would be served in creating a dichotomy between retrospective and prospective relief. Moreover, such a distinction would appear to be unrealistic because unless the trustees refrain for some reason from enforcing the employer’s promise to contribute to the funds until after the labor agreement has expired, the trustees will invariably combine claims for retrospective and prospective relief.

. Such risk to the employees’ interests may exist, for instance, in the present case. There is no indication in the record that Long’s employees are more secure or receive greater ben*466efits under the private pension plan than they would under the UMW program. Indeed, the private arrangements may be wholly inadequate.