Cases by Issue - Union Trust Funds

Local 144 Nursing Home Pension Fund v. Demisay - Oral Argument

Fri, 09 Jan 2009 14:49:25 +0000

Case:

Local 144 Nursing Home Pension Fund v. Demisay

Media File:

91-610_19930111-argument.mp3

Related Transcript:

1992_91_610_argument.xml

Transcript:

Argument of Henry Rose

Chief Justice Rehnquist: We'll hear argument first this morning in Number 91-610, Local 144 Nursing Home Pension Fund v. Nicholas Demisay.

Mr. Rose.

Mr. Rose: Mr. Chief Justice, and may it please the Court:

The genesis of this action occurred when the respondent employers withdrew from the petitioner multiemployer pension and welfare benefit plans.

In this action, those withdrawing employers seek to require the petitioner benefit funds to transfer a portion of their plan assets to new benefit plans which are not parties to this action which were established after the withdrawal of those withdrawing employers.

The district court granted petitioners' motion for summary judgment.

However, the Second Circuit reversed and held that a fair portion of the reserves reflecting contributions made to the Greater Funds on behalf of the Southern Employees should be reallocated to the Southern Funds.

What is extraordinary and erroneous is that the court below held that section 302(c)(5) of the Labor Management Relations Act, 1947, was the controlling law and that it required the transfer of assets.

302(c)(5) says nothing about transfers of assets, nor does its legislative history even mention such transfers.

The court below has not only misread section 302(c)(5) but has misread and misapplied... failed to apply... this Court's decision in United Mineworkers v. Robinson.

The focus of 302(c)(5) is specific.

In the words of this Court in Robinson, 302(c)(5) was meant to protect employees from the risk that funds contributed by their employers for the benefit of the employees and their families might be diverted to union purposes, or even to the private benefit of faithless union leaders.

There's no such allegation in this case.

With particular reference to the requirement in 302(c)(5) that a benefit plan be maintained for the sole and exclusive benefit of employees, this Court stated that its plain meaning is simply that employer contributions to employee benefit trust funds must accrue to the benefit of employees and their families and dependents to the exclusion of all others, and especially pertinent for the instant action, this Court specifically concluded in Robinson that nothing in 302(c)(5), quote, places any restriction on the allocation of the funds among the persons protected by 302(c)(5).

Even the narrow holding in Robinson is applicable here.

That is, that the Federal courts have no authority under section 302 to review for reasonableness a collectively bargained term of an employee benefit plan.

That describes the present case.

The collective bargaining agreements to which the respondent employers were parties are clear that the terms of the trust agreements are incorporated by reference, and those trust agreements prohibit the payments that the Second Circuit has ordered.

It is submitted that the trustees in this case certainly breached no fiduciary duties in administering the trust in accordance with their trust agreements.

Unknown Speaker: Mr. Rose, if they had done so, would there have been a remedy against them under 302... under 302(e)?

Mr. Rose: If the trustees had transferred assets?

Unknown Speaker: Yes.

If they had transferred... not just transferred it, but had transferred assets to a union official.

Mr. Rose: To a union official--

Unknown Speaker: Right.

Mr. Rose: --Yes.

Unknown Speaker: So you... it's your--

Mr. Rose: To a union official, that would have--

Unknown Speaker: --You see, I'm not sure what your theory of the operation of 302(c) and 302(e)... what you theory is.

Does it not operate at all, once the trust is established... so long as you establish a trust which on its face meets the requirements, that's the end of the application of 302, or does it continue to have some application, at least if you violate the term of the trust by turning over the money to union officials?

What's your theory?

Mr. Rose: --Justice Scalia, our position is that section 302(c)(5) does not regulate the transfer of plan assets whatsoever.

Unknown Speaker: Whatsoever, so long as the trust is... complies with the statute on its face.

I mean, on its face the trust has to comply with the statute.

Mr. Rose: That is correct.

Unknown Speaker: But so long as it does on its face, if the officer... if the trustee violates the trust, and surreptitiously conveys money to union officials, you think you can only get at that under ERISA.

Mr. Rose: There... it might constitute criminal activity, also.

It might constitute a criminal violation either under State law or under Federal law independently, but you're right, I would relegate that to a regulation under ERISA, clearly.

Unknown Speaker: So the subsection 302 regulates solely the conduct of the employer in making the payment in the first place.

Mr. Rose: That is its focus, absolutely.

As we've noted, the section 302(c)(5) requires employer contributions to be for the sole and exclusive benefit of employees, but those are for the employees of all of the contributing employers, and that is precisely what the petitioner funds have done.

Unknown Speaker: I don't understand why it wouldn't violate subsection... Justice Scalia's hypothetical wouldn't violate 302(c)(5).

Because the funds were not held in trust for the purposes specified in the statute, but were given to the union official as a bribe, they wouldn't comply with the statute.

Mr. Rose: Oh, I think that... I'm sorry, I think that would violate it.

The money would have to be used for the benefits of contributing employers.

Unknown Speaker: The statutory restrictions, and if it goes beyond that and it's a payoff to the union leader, why then, it would violate the statute.

Mr. Rose: Yes, I think that is correct.

That would be a criminal violation under 302, yes.

Unknown Speaker: Mr. Rose, there is a mechanism, is there not, whereby plan assets and corresponding liabilities could be transferred to a new plan, is there not?

Mr. Rose: There is under ERISA, yes, Your Honor.

Yes.

Unknown Speaker: But the procedures for that were not followed here, I take it.

Mr. Rose: They clearly were not followed.

With regard to the pension plan here, the ERISA provisions are very clear.

The ERISA provisions bar a transfer unless certain statutory conditions are met.

One of them is review by the Pension Benefit Guarantee Corporation.

This was not done.

Furthermore, such a transfer is at the discretion of the transferor plan, and clearly the petitioners did not initiate the proposed transfer, and third, the... any such transfer would have to be a transfer not only of benefits or of assets, but of liabilities, and there is and there was proposed no transfer of liabilities.

There is no contention in this case that the contributions were used for purposes other than benefits or employees of contributing employers.

The Second Circuit--

Unknown Speaker: Are you done answering that question?

Mr. Rose: --Yes.

Unknown Speaker: Can I jump in there?

Mr. Rose: Yes.

Unknown Speaker: I'm back to the same problem that you gave one answer to and then took it back.

Are you sure you want to stick with your second answer?

I don't see how the statute requires anything except that the money be placed by the employer in trust for that purpose.

Mr. Rose: Well--

Unknown Speaker: If there's a violation by the trustee later, does that necessarily violate the statute?

Mr. Rose: --Well, Your Honor, I think a strict reading of the statute would come to the conclusion that you are implying.

However, this Court has stated in Arroyo and in Robinson that the specific provisions in section 302(c)(5) are enforceable under 302(e).

Unknown Speaker: Enforceable against the trustee.

Mr. Rose: Yes, and although I think there's some difficulty, logically, coming to it, I don't think that's a difficulty that needs to be reached in this case.

Unknown Speaker: Well, except it makes a nice division between this provision of the Labor Relations Act and ERISA a little less neat.

Mr. Rose: Yes.

Yes, I think that is right.

Unknown Speaker: Are they... criminally, or simply in equity, to enforce the trust?

Mr. Rose: Well, section 302 is a criminal statute.

However, section 302(e) allows injunctive relief to enjoin a violation of section 302.

Unknown Speaker: So it's just equitable enforcement.

Mr. Rose: Yes.

The Second Circuit has interpreted the solely exclusive language so expansively as to judicially legislate that there must be a reallocation of money in the petitioner funds.

Neither the Second Circuit nor the respondents explained how such a mandated reallocation is to be reconciled with this Court's conclusion in Robinson that nothing in section 302(c)(5) places any restriction on the allocation of the funds among the persons protected by section 302(c)(5).

Unknown Speaker: Under ERISA, would the trustees... if they had wanted to, could they have consistently with ERISA transferred some funds and liabilities in this case, this particular case?

Mr. Rose: If they had decided that they want to do it, and there was a transfer of liabilities together with the transfer of assets, yes, it may have been possible.

Unknown Speaker: You say may.

Would it have been consistent with ERISA?

Mr. Rose: It would have been clearly consistent with ERISA had they wanted to do it with regard to the pension plan.

There's some doubt as to whether that is true with regard to the welfare plan.

In the Multiemployer Pension Plan Amendments Act, there is a specific procedure for doing so, and so it clearly could have been done if in their discretion they had wanted to make the transfer of both liabilities and assets.

There... it's not so clear that they can do it in... without violating the prohibited transactions of section 406 of ERISA with regard to the welfare plan.

Unknown Speaker: Thank you.

Mr. Rose: There is a specific exception, you see, to 40... to the prohibited transaction with regard to the pension plan, but there is none with regard to the welfare plan.

It is submitted that attributing to the Congress an intention in 302(c)(5) to regulate the use of benefit plan assets among plan participants is without basis.

The best evidence, of course is the language of the statute.

As we've noted already in answer to Judge Scalia... Justice Scalia's question, 302(c)(5) is an exception to a criminal statute.

It is not a regulatory statute.

It says nothing about the transferring of plan assets, and as we've noted, the legislative history doesn't even mention it.

Strongly mitigating against the Second Circuit's expansive interpretation of 302(c)(5) are the dire consequences that would follow.

The uncontroverted expert testimony in this record is that the construction of the Second Circuit would undermine the viability of multiemployer plans generally.

Contrast such a result with the congressional intention to preserve the financial integrity of multiemployer plans not only by the enactment of 302 but of ERISA and the Multiemployer Pension Plans Amendments Act of 1980.

Congress was well aware of the importance of multiemployer plans as a delivery system of employee benefits to some 9 million workers and their families.

Further indicating that 302 is not a regulatory act is the fact that from the mid-fifties to the early seventies the Congress and the executive branch became increasingly concerned about the lack of regulation of employee benefit plans, and this concern culminated in the enactment of ERISA in 1974.

In the words of this Court in Teamsters v. Daniel, quote, Congress believed that it was filling a regulatory void when it enacted ERISA.

ERISA extensively regulates the use of plan assets, including transfers of assets.

This is to be expected from a statute which this Court has described as comprehensive and reticulated.

ERISA includes at least five provisions that bear on the transfer of assets ordered by the Second Circuit, and each one of them would prohibit the transfer.

Thus, we have the anomaly of the court below ordering the trustees of the petitioner funds to violate ERISA and the Court's order would not be a defense to the violation of the prohibited transaction.

It is submitted that this result cannot be attributed to congressional intent.

The judgment below calls into question basic principles underpinning multiemployer benefit plans.

The essence of multiemployer plans is the pooling of risks among many employers and employees.

In typical multiemployer plans, employer contributions do not reflect the differences in work force demographics of contributing employers.

For example, one employer may have a work force with an average age of 50, and another contributing employer may have a work force with an average age of 30, yet they pay contributions at the same rate.

Contributions may be based on hours of service, or ton of coal produced, or percentage of payroll, as in the case of the petitioner funds.

Therefore, for example, in a multiemployer health benefit plan, it is inevitable that the value of the health benefits needed by the employees of some contributing employers will exceed the contributions made by their employers.

This is made possible because other contributing employers will pay contributions in excess of the value of the benefits received by their employees.

But the court below says that when an employer withdraws from the plan, section 302(c)(5) requires that if the assets of the plan have increased during the period of the withdrawal... withdrawing employer contributing... contributed to the plan, a proportionate share of that increase in assets must be transferred to the plan... by the plan.

According to the court below, the proportion to be paid is the ratio of the contributions of the withdrawing employer to the total contributions.

The Second Circuit's mandate could, if taken literally, require that the petitioner funds pay out substantial moneys even if the benefits received by the employees of the withdrawing employers exceeded their contributions.

As a plan's obligations grow, normally its assets also grow.

Thus, the proportionate share of the plan's assets which the court below would require the plan to pay upon the withdrawal of the withdrawing employer would also grow, and thereby encourage withdrawals and the ultimate demise of the plan.

The court below thereby would impose a new obligation which the actuaries and trustees did not and could not take into account when they were projecting the cost of benefits to be provided and other costs in determining the level of contributions needed to cover those benefits.

If the plan's assets can be invaded in such a major way as the court below has mandated, where will the money come from to pay for the benefits the plan is obligated to pay in the future?

It is to be noted that the Second Circuit's holding is a one-way street.

If the plan's assets rise during the participation of the group of withdrawing employers, the petitioner funds must pay out plan assets, but if the plan's assets diminish, apparently no payment to the petitioner funds would be required.

No insurance arrangement can survive under a system which requires paying out of gains and absorbing all the losses.

It is instructive that the single circumstance where Congress has mandated a transfer of assets from one multiemployer plan to another, that Congress does not define the appropriate amount of assets to be transferred with reference to contributions or reserves.

The only situation where Congress has mandated transfer of assets is where employees move from one multiemployer plan to another multiemployer plan as a result of a certified change of collective bargaining representative.

In that instance, ERISA requires a transfer of an appropriate amount of assets, and that term is statutorily defined in section 4235(g) of ERISA, which appears in the appendix to the petition at page 48(a) to mean the value of the nonforfeitable benefits to be transferred minus any employer withdrawal liability to the transferor plan.

I might add that when it is the transfer of nonforfeitable benefits, which is the same as vested benefits, it is the transfer of the obligation to pay those benefits and therefore it's the same as the transfer of liabilities.

In the present case, no vested benefits have been transferred to the respondent's new benefit plans, therefore, even if there had been a certified change of collective bargaining representative in this case, which there was not, since it's the same union representing both... in both plans, the amount of assets required to be transferred would be zero.

The expansive interpretation of 302(c)(5) and the failure of some lower Federal courts to apply this Court's Robinson decision has resulted in unnecessary litigation and uncertainty among plan sponsors.

Some Federal courts even assert authority to rewrite the terms of benefit plans when they deem them to be unreasonable.

In effect, the Second Circuit has stricken the provisions of the trust agreements barring transfers of assets in this case.

In Mahoney v. Board of Trustees, just less than 6 months ago, the First Circuit held that a decision by a plan sponsor to increase retirement benefits of retired participants in a lesser amount than the increase for active participants was subject to review by the Federal courts as to whether the decision was arbitrary and capricious.

The Robinson decision was not discussed, or even cited.

Unknown Speaker: Would that sort of decision be reviewable somewhere under the law of trusts?

Would it be reviewable in State court?

Mr. Rose: Your Honor, no, I don't believe it would be.

Under ERISA, the State law is preempted, and so it would be under ERISA if there was any remedy whatsoever.

Unknown Speaker: Well then, you're saying that Congress intended that these trusts be not subject to any of the sort of supervision that other trusts are in court... you know, the usual arbitrary and capricious standard for trustees.

Mr. Rose: Well, Your Honor, I think they are subject to the ordinary trust law, and more.

In fact, ERISA is much stricter than traditional trust law.

Even under traditional trust law, the courts did not take it upon them... did not assert the authority to rewrite the basic terms of trust instruments on the basis of a reasonableness test.

Unknown Speaker: What entity is it that applies ERISA in reviewing these decisions?

Mr. Rose: Well, lawsuits are brought by either the Department of Labor for a fiduciary breach or by private parties.

Unknown Speaker: And they're adjudicated in court, but you say pursuant to the provisions of ERISA.

Mr. Rose: Under ERISA, absolutely, yes, in the Federal courts.

Unknown Speaker: In your view, then, ERISA has superseded traditional common law trusts.

Mr. Rose: Yes, Your Honor, it has.

Unknown Speaker: Mr. Rose, if we were to decide that section 302(c)(5) did not mandate the transfer of assets, is there any reason why we have to go ahead and decide the ERISA issues or the breach of fiduciary duty question?

Mr. Rose: Well, I would suggest, Your Honor, that the... it would expedite not only the conclusion of this case, because it is so clear that ERISA--

Unknown Speaker: Oh, but the courts below didn't grapple with that at all.

I mean, it seems to me if you're correct on the interpretation of 302(c)(5), that's enough up here.

Mr. Rose: --I think technically that is correct.

I would hope that the Court would give some guidance beyond that.

In... in Phillips v. Alaska Hotel & Restaurant Employees Pension Fund, the Ninth Circuit recently asserted that even if a pension plan complies with ERISA's minimum vesting standards, the Federal courts have the power to rewrite the terms of the benefit plan to require the plan to adopt a shorter period.

I... Mr. Chief Justice, I would like to reserve the remainder of my time for rebuttal.

Unknown Speaker: Very well, Mr. Rose.

Mr. Richman, we'll hear now from you.

Argument of Ronald E. Richman

Mr. Richman: Mr. Chief Justice, may it please the Court:

Our position is that the plain language of section 302(c)(5) of the LMRA requires that contributions made by an employer benefit that employer's employees either alone or jointly with, in a pool, as most multiemployer plans are set up, with contributions of other contributing employers.

In the language of the syllogism that we used in our brief, A must benefit, or A and B must benefit.

Each of the Greater Funds, both the pension and the welfare fund, will violate 302(c)(5) unless there is a transfer because some of the contributions paid by the Southern Employers helped create a pool surplus in each of the Greater Funds.

A surplus existed in each of the funds at the time all of the employees of the Southern Employers withdrew from each fund.

Unknown Speaker: But all of the Southern Employees didn't in one sense.

Those whose pensions had vested and were receiving payments I take it remained with the plan, did they not?

Mr. Richman: Yes, they did.

They--

Unknown Speaker: So I don't see how, in light of that, your syllogism works.

Mr. Richman: --Those employees have withdrawn from the plans, but they are entitled to benefit payments that have been earned by them prior to the date of their withdrawal.

In other words, they have vested in pension benefits.

They have a nonforfeitable right to receive pensions prior to the time that the withdrawal occurred.

They will not accrue any additional benefits subsequent to the withdrawal.

They will not have the opportunity to receive any benefit from the surplus that has been created by the employer's contributions.

Instead, what will happen is they will have their benefits paid out of the liabilities of the plan, those liabilities being calculated as of the date of the withdrawal.

Unknown Speaker: But the point is, is that under the statute... under the statute as you read it, these are still employees of the withdrawing employer.

Mr. Richman: They are employees of the withdrawing employer, but as we read the statute, all of the contributions that go into these funds must be used for the benefit of the contributing employer either alone or jointly with.

Some of these--

Unknown Speaker: Well, if that's the way you interpret it, then it seems to me that the extension of your argument is that even if some employees of a particular employer leave, the result would still be to transfer the assets.

Mr. Richman: --No, I... we think that's a different case, because if some of the employees remain in the fund, they will be earning on the pension side benefit credit.

On the welfare side, they will have an opportunity to receive medical and other coverage.

The difference is, in our situation, there is no one left who is available to earn a benefit beyond the benefits that are already calculated in the liabilities of the Greater Funds.

When only half of the employees leave, the half of the employees that remain in the fund, for example, are still entitled to medical coverage, and they may have many catastrophic events that occur which create significant liabilities for the plan.

They are still in the pool, and therefore from our syllogism some of the employees of A are benefiting in the pool with the other contributing employers.

We believe that to be distinctly different from our situation, where all the liabilities are fixed, and there is no opportunity at all for the Southern Employees to receive any benefit from the contributions that made up... that went to make up this surplus.

Unknown Speaker: Mr. Richman, doesn't your theory overlook the fact that subsection (5) is couched in terms of money or other thing of value paid to a trust fund established for these purposes?

Isn't the reference to paid, as opposed, for example, to money or things of value held... doesn't that indicate that a violation or not is to be judged with respect to the terms of the fund at the time the money is paid over?

Mr. Richman: If... no, we don't believe so.

If that were the case, the entire protective value of section 302(c)(5) would be essentially eliminated, because once the money went in on Friday, if on Monday a union official ran away with the money, 302(c)(5) would not apply its protective value, which is reflected in the legislative history.

Unknown Speaker: Well, how does 302(c)(5) help you if the union official runs away with the money in any case?

Aren't we talking about contests about the enforcement of certain terms of trusts, or the enforcement of certain benefits as against trustees and employers, and so long as the terms of the trust and the payments to the trust are made in accordance with trust terms that satisfy the requirements of subsection (5), isn't that all subsection (5) is really trying to get at?

Mr. Richman: We don't believe so, and this Court has recognized differently.

As Mr. Rose pointed out in Robinson, this Court said, it is, of course, clear that compliance with specific standards in the administration of these funds are enforceable under--

Unknown Speaker: In other words, it will enforce the terms of the trust--

Mr. Richman: --No, I think the--

Unknown Speaker: --But you want to do something other than enforce the terms of the trust.

Mr. Richman: --That's correct.

We want to enforce compliance with the specific standards in 302(c)(5).

One of those--

Unknown Speaker: But those standards simply refer to money paid in trust, meeting certain requirements set out in subsection (5), and if the money is in fact paid in accordance with those terms, how does subsection (5) provide any other standard by which a court is supposed to do anything?

Mr. Richman: --If that is the interpretation given to subsection (5), then at least a couple of the structural safeguards don't make any sense, because one of the structural safeguards is that the money be held in trust.

It doesn't say it must be received by the trust or paid to a trust, it says that it must be held in trust.

In addition--

Unknown Speaker: Well, I mean, I'm not seeing your point.

Let's assume it's being held in trust and you can enforce as against the trustees their obligation to hold it in accordance with the terms of the trust.

How is my suggestion subversive of that safeguard?

Mr. Richman: --Because, as I understand your suggestion, once the money is paid in, the trustees no longer have an obligation to follow any of the safeguards of 302(c)(5).

Unknown Speaker: Well, the trustees have got an obligation to honor the terms of the trust.

I'm not suggesting otherwise.

Mr. Richman: But they could change the terms of the trust immediately after receipt--

Unknown Speaker: How could they do... I mean, how am I suggesting that the trustees can change the terms of the trust?

Mr. Richman: --Well, the trustees in multiemployer plans generally have the right to, and do, change the terms of the trust all the time.

Unknown Speaker: In calculating benefits and so on.

Mr. Richman: Well, no, that would be the terms of a plan.

They change the terms of the trust in terms of governance of these plans, in some cases in terms of objectives, the use of benefits for certain purposes.

That happens--

Unknown Speaker: Do they have any authority to change the terms with respect to the identification of beneficiaries?

Mr. Richman: --Yes.

Not only--

Unknown Speaker: They could say... are you suggesting that they could say well, the employees of the X Corporation will no longer get benefits, even though we received funds expressly for that purpose?

Mr. Richman: --No.

Unknown Speaker: They couldn't do that.

Mr. Richman: No, they couldn't do that, but they--

Unknown Speaker: That's the kind of change that's at issue here, isn't it?

Mr. Richman: --But they could, for example, add a category of employees to receive benefits as long as that is done within the jointly with language.

Our proposed rule here is really based on the statement in Robinson and statements that appear in Amax and also that appear in the legislative history that the purpose of 302(c)(5), while certainly to fight against the possibility of union corruption, but really the overriding goal is to ensure that the money gets used for the participants and beneficiaries for whom it is contributed.

Unknown Speaker: But Mr. Richman, (a) and (b) establish... of 302 establish the criminal violations.

(a) makes it a violation for the employer to pay over, or to agree to pay over, lend or deliver the money, for the benefit of anyone other than his employees, okay.

That's (a).

(b) does not make it a violation for the recipient to use it for the benefit of anyone except the employees.

It doesn't say that at all.

It says, it shall be unlawful for any person to request, demand, receive, or accept or agree to receive or accept for any other purpose than the employees.

In other words, it is the agreement that it's directed at.

It does not make it criminal to go back on what was originally a valid agreement.

Isn't that at all significant, that it explicitly criminalizes the agreement but says nothing about violation of the agreement?

Mr. Richman: It is significant, except that when we get to subsection (c), and particularly (c)(5), which is an exception to the general rule, the statute does more than just say that the contributions need to be paid in.

Unknown Speaker: But (c) is an exception from what has been criminalized in (a) and (b).

If it hasn't already been criminalized in (a) or (b), you don't have to come within the exception.

So if it's not criminal under (b) to go back on what was originally a valid agreement, and although you told the employer you were going to use it for his employees, in fact you use it for something else, you haven't violated (b).

You don't need the exception of (c).

Mr. Richman: If that were the case, then the protective value of all of the provisions in (c), really, they would be eliminated completely.

Unknown Speaker: No.

Your criticism is not with the protective value of (c).

Your criticism is with (b).

You're just saying (b) wasn't drawn broadly enough, but Congress drew it as broadly as it wanted to.

It made the crime accepting it for a purpose other than the benefit of the employees, or agreeing to accept it for such a purpose.

It did not make it a crime to go back on a trust agreement and use it for your own benefit, or for some benefit other than the employees.

Mr. Richman: No, it... the... 302(e), however--

Unknown Speaker: (e).

Mr. Richman: --Enables the district courts... it provides the district courts with jurisdiction to, in the parlance that's been used by at least five or six of the circuit courts, correct structural defects.

Unknown Speaker: Well, it says to restrain violations, but it's no violation of this section to break a trust agreement.

It's a violation to make a bad trust agreement, but not to break a good one.

Mr. Richman: Well, in coming back to this Court's statement in Robinson, when the Court said that compliance with the specific standards in administration... and we believe that that statement was about the specific structural standards in 302(c)(5)... is enforceable under 302(e), and in fact the Robinson case itself, a unanimous decision by this Court, in that case, if the interpretation of the statute had been that the limitations apply only upon receipt of contributions, the Court, instead of being concerned about whether 302(c)(5) created a reasonableness standard to judge whether certain benefits violated 302(c)(5) or not, would have easily said, we don't have to do that because 302(c)(5) only replies to the receipt of money.

Unknown Speaker: Once again, (c)(5) is... (c) is entitled, Exceptions.

It is an exception to the criminal provisions of (a) and (b).

Now, if anything here is criminal, it is criminal under (b), and there is no language in (b) which makes it criminal to do anything except to accept the money, or to request the money, or to receive the money, on terms that do not require its use for the employees.

That's all that (b) criminalizes, so you don't even have to look to (c), until you first establish that there's been a violation of (b), and I'm asking how you can establish that.

Mr. Richman: If that were the case, this law was passed more than 25 years prior to ERISA, and we believe that Congress thought that it was creating some safeguards not only with the receipt of money, but that the money would go into these funds, and then it also would be used for the benefit of the employees for whom those contributions were made.

And there are a number of statements, which appear in our brief, in the legislative history from the sponsor of this provision which indicate that Congress really thought that it was creating structural safeguards not only for the receipt of the contributions but for the actual use of the contributions and for the actual administration of the plan, and I understand the concern with the language, but to read the language not to apply beyond--

Unknown Speaker: Criminal statutes... I mean, normally we interpret criminal statutes strictly, don't we?

Mr. Richman: --Yes, you do, but this is not being applied in a criminal context, this is applied in a civil context under 302(e).

Unknown Speaker: Is it one way for civil purposes and another way for criminal purposes?

We don't do that.

Mr. Richman: No, I... we believe that under 302(e), the Second Circuit correctly remedied this structural defect by ordering a transfer of the fair surplus in the Greater Funds.

Unknown Speaker: What, again, is the precise language in (c) that confers the authority on the courts to remedy a structural defect?

Mr. Richman: That appears in 302(e).

Unknown Speaker: Well, all it says is jurisdiction of courts--

Mr. Richman: To restrain--

Unknown Speaker: --To restrain violations--

Mr. Richman: --Violations.

Unknown Speaker: --Of this section.

How does that confer any authority to remedy structural defects?

Mr. Richman: A structural defect that is a violation of one of the specific standards in 302(c)(5), in our case the standard requiring--

Unknown Speaker: But I would think a violation of this section would mean something contrary to (a) or (b).

I mean, something that doesn't conform to an exception would not necessarily be a violation of the exception... be a violation of the statute unless it was... as I think Justice Scalia said, unless it was already illegal under (a) or (b), there would be no violation.

Mr. Richman: --Except that, and again getting back to, really, the same issue that I was talking about a moment ago, if that is the case, then these structural safeguards which we believe that Congress thought it was adopting not only for the receipt of contributions but for the actual administration of the plan and the distribution benefits would be eliminated completely.

Unknown Speaker: Well, but really, it would be... it's quite extraordinary, isn't it, to say that Congress put all of the things that you want to see, or you say should be put to this use, not in a more general statute regulating these sort of agreements, but in an exception to a criminal provision, a rather narrow criminal provision?

Mr. Richman: I don't understand the concern with the language.

Unknown Speaker: That is what we're mostly concerned about here.

[Laughter]

Mr. Richman: This Court, however, did, in the Robinson case, both in... by statement and terms of the analysis done by the Court, indicate that it had really adopted what we had been referring to as the structural defect analysis, again because if the Court was not concerned with the actual enforcement of section 302(c)(5), then the Court in Robinson would have simply said, we don't need to worry about how benefits are distributed and whether coal miners' wives receive some type of benefit or a different type or a lesser benefit.

All we're concerned about is the actual application of this statute to the receipt of the contributions.

Another... if, in fact, the statute is read the way that you're saying it should be read, then a question arises as to the Greater Funds have received contributions subsequent to the withdrawal of the Southern Employees from the Greater Funds.

They have received those contributions from 1985 right up to the future, and continue to receive those contributions.

The receipt of those contributions would be a violation because they are receiving those contributions without actually using contributions, albeit contributions received earlier for the protective purposes of 302(c)(5).

Unknown Speaker: I don't really follow your example, are you saying that after the transfer and after withdrawal that the withdrawing employers continue to contribute to the earlier fund?

Mr. Richman: No.

What we're saying--

Unknown Speaker: Then I don't know what you were saying.

Mr. Richman: --Okay.

The... after the Southern Employers withdrew from the Greater Fund, their contributions stopped to the Greater Funds.

The contributions continued by Greater Employers to the Greater Funds, and those contributions continued from 1985 to the present date.

Those contributions are going into a fund in which contributions which were made previously are not being used for the sole and exclusive benefit of the contributing employees who made those contributions previously... in other words, prior to 1985... and to read the statute strictly, we'd end up in a situation where the funds continued to receive contributions, have done so for a long period of time, when contributions that were received prior were not being used for the sole and exclusive benefit of the employers who contributed those contributions at that time.

Unknown Speaker: I have to confess I have trouble following your example.

You'd helped me if you used A and B--

Mr. Richman: Okay.

Unknown Speaker: --As you did in your original... assume A is the employees of the withdrawing employers and B is everybody else in the original fund.

Mr. Richman: Contributions by A stopped.

Contributions by B continues to the fund.

Unknown Speaker: Right.

Mr. Richman: If the statute is read to say that contributions can't come into these funds unless the contributions are used in accordance with... or the receipt of payment cannot occur unless the--

Unknown Speaker: Are you saying that B's contributions are bad because they are used for... pay some benefits for A's employees even though A is no longer contributing to the same fund, is that what you're saying?

Mr. Richman: --No, almost... no.

Unknown Speaker: Just the opposite.

Mr. Richman: What we're saying is that contributions by B goes in and they benefit B's employees at a time that contributions by A going in, previous contributions by A, were not used for the benefit of the employees of A, and therefore contributions are coming into a fund, but--

Unknown Speaker: Yes, but isn't it true that at the time any one employer made a contribution to either fund, there were employees of that employer who were potential beneficiaries of that fund?

Mr. Richman: --That's correct.

We don't believe that ERISA requires a different result here.

A transfer pursuant to 302(c)(5) can be accomplished without violating a single rule under ERISA.

We can meet the requirements of the transfer rules under 1411(b), for example, and that would be an issue that the district court would be able to deal with.

Our interpretation does not make section 1415, which is the section that requires mandatory transfer, superfluous.

Section 1415 does not say that assets or liabilities, or assets and liabilities will be transferred only if there's a change in collective bargaining representative.

In fact, that would violate the position of the Government that these transfers are, in fact, regulated by fiduciary duty obligations pursuant to ERISA.

In addition, transfers can occur under 1415 that would not occur under the rule that we're requesting that this Court adopt.

They would occur if there is an underfunded plan, for example.

Under the LMRA... under the rule that we're proposing, no transfer would be required if the plan does not have excess or surplus reserves.

Unknown Speaker: Mr. Richman, why don't you argue... you are arguing that this transfer is in breach of the trust... of the valid trust agreement, right?

Mr. Richman: No.

We are arguing that this transfer is in breach of 302(c)(5).

Unknown Speaker: Yes, which means that the trust... the trust agreement was valid under 302(c)(5), and this was in breach of it.

Is that right?

Mr. Richman: That's correct.

Unknown Speaker: Why don't you argue the opposite... that it is not in violation of the trust agreement, but to the contrary, it is fully in accord with the trust agreement?

That means that the trust agreement is invalid under (b), and therefore you would have to apply the (c) exception.

Mr. Richman: I'm not sure I understand the--

Unknown Speaker: In order to get 302 to apply, you have to show that the trust agreement is invalid, so your case ought to be that this payment was perfectly okay under the trust agreement, but that renders the trust agreement invalid under (b), unless the (c) exception applies, which you say it doesn't.

Never mind.

That's all right.

[Laughter]

Well, on the interrelation between (a), (b), and (c), I take it the structure of the statute is that any payment to the trust would be invalid under (a), and that's why (c) is necessary to save it, isn't that correct?

Mr. Richman: --That's correct.

Unknown Speaker: So (c) then does control those payments that are valid, and those which are invalid.

Mr. Richman: That's correct.

Unknown Speaker: Thank you.

Mr. Richman: Thank you.

Unknown Speaker: Thank you, Mr. Richman.

Mr. Rose, you have 4 minutes remaining.

Rebuttal of Henry Rose

Mr. Rose: Mr. Chief Justice, may it please the Court:

My adversary stated to the Court that there was a surplus at the time of the withdrawal of the respondent employers.

There is nothing in the record whatsoever to indicate that.

Unknown Speaker: What if there was?

Mr. Rose: I don't think it would make any difference, Justice White.

The--

Unknown Speaker: He's not your adversary, Mr. Rose He's your friend.

Your clients are adversaries, you and Mr.--

[Laughter]

Mr. Rose: --Not these clients.

The... in answer... in the dialogue just preceding, Justice Scalia suggested that the argument that might be made that the trust might be invalid and thereby bring it within 302.

I would suggest that if, indeed, this trust is invalid, then virtually all multiemployer plan trust agreements are invalid, because the key provisions that we're talking about are virtually universal, and we have in this case filed the trust agreements not only of the petitioner funds, but of the respondent new funds, and you'll find similar provisions in there, and you also have in the amicus briefs the trust agreement for the Central States.

Unknown Speaker: I didn't say there was no answer to the argument, Mr. Rose.

I just said it was an argument that would get you over the (b) problem, anyway... the subsection (b) problem, which really sticks in my craw.

Mr. Rose: It's a difficult hurdle to get over, but that won't do it.

Unknown Speaker: Mr. Rose, in response to questions by Justice O'Connor earlier today, she suggested that maybe all we have to do is decide there's... 302(c)(5) doesn't justify the result below.

You said you wanted us to go on to cite something under ERISA.

Just exactly what are you asking us to decide, perhaps unnecessarily.

[Laughter]

Mr. Rose: Clearly, that ERISA does not require a transfer of assets such as being sought in this case.

That is clear from--

Unknown Speaker: Because it's the same union.

Mr. Rose: --For... there are a number of provisions.

It's a prohibited transaction, to transfer assets to a party in interest.

The respondent employers are parties--

Unknown Speaker: Well, we don't have to say it's a prohibited transaction.

You're just saying it's not a mandated transaction under ERISA.

Mr. Rose: --That is correct.

It certainly is not... there's absolutely clear that it's not a mandated transaction, but it... in fact, I am arguing that it is a prohibited transaction.

Unknown Speaker: We surely don't have to decide that, because if we say 302(c)(5) doesn't justify it, and it's not prohibited by ERISA, why do we have to go on and say what might or might not be mandated?

Mr. Rose: You're quite right, you don't have to.

I would hope you would.

[Laughter]

There was a suggestion by my friend that--

[Laughter]

That the--

Unknown Speaker: Mr. Rose, excellent.

[Laughter]

Mr. Rose: --That the legislative history somehow did talk about the use of the money in the plan, and I would question that that is so.

I looked at it very carefully, and I recall none.

With regard to the prohibited transaction, though, I would add one point, and that is that this Court has stated in Central States v. Central Transport that the use of plan assets by employers, even temporarily, is a prohibited transaction, and that was in the context of the possibility of a plan not seeking collection of contributions with sufficient expedition, that letting it ride might in fact be a prohibited transaction simply because it is an extension of credit.

Chief Justice Rehnquist: Thank you, Mr. Rose.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Jim Mcneff, Inc. v. Todd - Oral Argument

Wed, 18 Feb 2009 07:11:14 +0000

Case:

Jim Mcneff, Inc. v. Todd

Media File:

81-2150_19830117-argument.mp3

Related Transcript:

81-2150_19830117-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF JAMES T. WINKLER, ESQ. ON BEHALF OF PETITIONER, JIM McNEFF, INC.

Chief Justice Burger: We'll hear arguments next in McNeff against Todd.

Mr. Winkler, I think you may proceed whenever you are ready.

Mr. Winkler: Mr. Chief Justice, may it please the Court:

This case is before the Court pursuant to writ of certiorari pursuant to 28 U.S.C. Section 1254.

Respondents, the Operating Engineers Trust Fund, filed a Complaint for fringe benefit collection pursuant to Section 301 of the Labor Management Relations Act.

The District Court on cross motion for summary judgment granted motion for summary judgment for respondents.

The Court of Appeals for the Ninth Circuit affirmed.

The Court of Appeals for the Ninth Circuit in this decision passed on the issue of the enforceability of minority pre-hire agreements and noted in its decision the conflicting decisions of the various circuits and that adopted what it called to be a middle ground between the decisions of the Eighth and Tenth and the... on one hand which state that 301 actions are different than unfair labor practice actions and the conflicting opinion of the Fifth Circuit which adopted the NRLB position that the minority pre-hire agreements are unenforceable unless the union represents the majority of the employees.

The Ninth Circuit adopted what it called a middle ground, that there has to be a notice of repudiation; until then minority agreements are fully enforceable and that the issue of coercion in obtaining the pre-hire agreements is not applicable until that notice of repudiation.

Now, the department interpretation in this case involves an interpretation of Section 8(f) of the Act and this Court's decision in Higdon.

Higdon involved an unfair labor practice matter, and therefore it is important to try and figure out what effect an unfair labor practice context will have in a Section 301 litigation.

And in view of that, it is important to look at this Court's decision in Howard Johnson, which said that the basic policies in an unfair labor practice context cannot be ignored in a Section 301 case.

In Howard Johnson it involved a Burns successorship issue... excuse me, it involved an attempt by a union to apply the contract of a predecessor to a successor, and then Burns was not allowed in the Section 8(a)(5) context.

This was again attempted in the 301 context in Howard Johnson, and this Court would not allow that.

Now, in order to understand the Board's position in Section 8(a)(5), you have to go back to the Board's position in R.J. Smith.

The Board's case... the case of R.J. Smith was commented extensively by... upon extensively by this Court in Higdon.

In R.J. Smith it involved an employer which had not complied with the pre-hire agreement.

According to the administrative law judge before the Board, the administrative law judge said that there's... noncompliance had been concealed from the union.

And that's a very important point.

Despite this active noncompliance by the union, the Board reviewed legislative history and decided that because there was no majority status, that the contract was unenforceable.

And it is important to note that it did review legislative history and in the... in its interpretation of Section 8(f) of the Act.

It noted that there are certain provisions that... there are certain exceptions in Section 8(f) that Congress intended to allow... excuse me... Congress intended to allow for employers to have a steady access of... a steady supply of workmen from the labor organization and to... excuse me... the provisions that Congress wanted to allow in enacting Section 8(f), it wanted to allow employers to have two benefits.

One was to give the employers an opportunity to have workmen provided by the union.

Because employers often go from job site to job site in the construction industry, they don't necessarily have their stable complement of employees.

And secondly, pre-hire agreements would allow employers the opportunity to make bids based on a predetermined cost.

Now, because of these two benefits, Congress allowed pre-hire agreements to be not unlawful under Section 8(a) and 8(b) of the National Labor Relations Act.

But the Board noted that the Section 8(f) language itself showed the limits of its effect, and it noted the proviso to Section 8(f) which stated that an election may be called upon by any... by anybody and it would not despite the existence of the contract.

Now, normally, elections cannot be obtained when there is an existence of a contract in the... in any... excuse me... in any other industry.

Now, it is very important to note that right after noting this intent of the proviso, the Board then stated that, and I quote,

"Thus, the proviso constitutes a statutory safeguard against just the sort of irresponsibly imposed minority union representation which this record reveals. "

That's a very important quote.

I didn't put that in my brief or the reply brief.

The Board then went on and said, because you can file an election petition, it would be inconsistent with this purpose to not allow an examination of majority status in the litigation of refusal to bargain in cases where the employer is refusing to comply with the agreement.

So the old issue in R.J. Smith was the retroactive application... was the retroactive enforcement of a collective bargaining agreement, the pre-hire agreement.

As a matter of fact, the general counsel of the Board argued that you couldn't look back beyond 6 months, the statute 10(b), statute of limitations, because of this Court's decision in Bryant and the usual presumption of majority status that it can only... usual presumption of majority status in collective bargaining agreement can only be attacked within the last 6 months by filing a charge with the Labor Board showing that it was obtained unlawfully because it was a minority union.

But the Board said that doesn't matter here, because it's not unlawful to enter into an 8(f) agreement.

Therefore, we can go back beyond the 6 months and look back, way back to the beginning of the agreement to find out when it was, what kind of an agreement it was, and whether or not there is a majority status to support it.

So the entire purpose of the R.J. Smith decision was to look back and see whether or not it could be retroactively applied.

Now, as I pointed out in my brief, the D.C. Circuit denied enforcement and adopted the theory that respondents argue in their brief that you have to actually file for a petition for an election and until that point in time the contract is enforceable.

The Board did not take the petition for certiorari at that time.

It waited until the Higdon case.

And it's important to note in the Higdon case it sort of reached the issue in the back-door manner.

Higdon was an 8(b)(7)(c) matter involving unlawful picketing for recognition.

And it's important to note that the issue of minority status is not at all involved in the issues, the basic element to an 8(b)(c) violation.

An 8(b)(c) violation is made up of basically picketing for an unreasonable period of time not to exceed 30 days where the object is recognitional and there has been no petition filed for an election with the National Labor Relations Board.

That has nothing to do with the minority status of a union.

The issue only comes into effect in an affirmative defense if the Board has said that the literal terms of 8(b)(7)(c) do not apply in a situation where the union is not seeking initial recognition.

In other words, if it already has a contract or a bargaining history, then it can... then it can picket for recognition beyond 30 days.

However, the Board said that they will not allow that affirmative defense where the recognition is not based on majority status.

Therefore, the issue of majority versus minority status was joined in that case.

And the Board relied on its R.J. Smith decisions and its decisions under section 8(a)(5) of the act.

And the D.C. Circuit again reversed, and that's how it came before this Court.

And as is shown by the petition and briefs to the Court by the Board, this Court passed not only on the 8(b)(7) issue but it, in order to reach that issue, it had to go back and pass on the Board's position in Section 8(a)(5), and it commented on the Board's decision in R.J. Smith.

And it also commented on and passed favorably upon the Board's decision that minority pre-hire agreements are not enforceable unless the union obtains majority support.

Now, the Board rule is basically that, when a union obtains majority, the pre-hire agreement is enforceable.

Until then it is not.

And you have to look both at the R.J. Smith decision and also look to the Board's brief to find out the reasons for its policy.

Basically, it limits the purposes of the statute... excuse me, it limits the adaptation of the statute to its purposes.

In other words, once an employer obtains union members from the union hiring hall, the skilled pool of employees, then the union will normally obtain majority status, and the agreement is therefore enforceable.

In situations where they do not obtain that... do not use that pool and the union does not obtain majority status, then the agreement is not enforceable.

Now, it is very important to look at the basic reasons behind the Board's decision.

This Court and the Board has said that the voluntary compliance of Section 8(f) agreements, of minority Section 8(f) agreements, is not itself unlawful and has said it's all right.

Now, the reasons for that is not that the voluntary compliance of the pre-hire agreement is itself good for employees.

It is important to note that the voluntary compliance of minority pre-hire agreements is in itself inconsistent with employee rights.

It's Just because of this accommodation to the particular needs of the construction industry that it has allowed this exception.

And that is why the Board said in R.J. Smith that the record revealed an irresponsibly imposed minority representation.

Now, you might wonder why did the Board say that when there is no specific findings that any employee was disadvantaged by that.

Unidentified Justice: Mr. Winkler, I think in your briefs you didn't deal with the Section 306(a) of the Multi-Employer Pension Plan Amendments, Plan Amendments Act of 1980.

Are you going to treat it in your oral argument?

Mr. Winkler: Yes, I am, Your Honor.

I also did respond to that in my reply brief.

Unidentified Justice: I guess I didn't notice that.

I am sorry.

Mr. Winkler: Okay.

It's about the last four or five pages of the reply brief.

Unidentified Justice: May I just ask one question here?

Mr. Winkler: Yes, sir.

Unidentified Justice: If I understand you correctly, the enforceabilty of the agreement depends on whether or not there was in fact a majority status.

Mr. Winkler: That is correct.

Unidentified Justice: And when, in your view, is it appropriate for that determination to be made?

Is it your view that the employer can just wait until the union sues to, in this case, to collect the pension obligations, just wait until they sue and then you have a trial of whether there is majority status?

Mr. Winkler: That is correct.

Under the Board's position, yes.

Unidentified Justice: Would you say that if the... if the company had in fact made the payments and then realized that the union never acquired majority status, that it could sue for a refund?

Mr. Winkler: I don't believe so.

Just because the Board and the courts say that voluntary compliance is all right.

In other words, they haven't violated any law and they have complied.

And the Board has also said they can unilaterally make changes.

They can apply some and not to others.

In fact, in R.J. Smith for a certain period of time it did make payments in the trust fund on a few of the union employees, but those employees were still the minority.

There are several things to note about your situation that may seem inequitable at first blush that employers can wait until that point in time.

But often, as the Board noted in Higdon, an employer engages in two job sites at the same time, one using the pre-hire agreement and one not.

And under the Ninth Circuit's notice of repudiation rule, it's really an all-or-nothing situation.

I have many clients that engage in that type of activity.

Unidentified Justice: Would it also be true that the employer could pay below the union scale as long as nobody complained about it and then later on the employees might say, well, you signed the pre-hire agreement which... well, in this case I take it there was an undertaking to pay according to the union scale.

Would that obligation also be unenforceable, in your view?

Mr. Winkler: That is correct.

Unidentified Justice: Yes.

Mr. Winkler: The entire agreement is unenforceable in the Board's position.

Unidentified Justice: It's just a matter of voluntary, unless the employer voluntarily elects to do--

Mr. Winkler: That's right.

Unidentified Justice: --what he said he would.

Mr. Winkler: And it's because that it is inconsistent with employee rights just to in effect recognize a minority union.

And it is only enforceable up to a point in time.

It is important to note that the position taken by respondents and the position taken by the court below would in effect reverse the Board's R.J. Smith decision.

The Board's R.J. Smith decision would not be enforced under either interpretation, because there is no notice of repudiation and there is no election result.

The respondents do cite a couple of cases in support of their position that... they contend that the Board supports their position, and they cite one 8(b)(7) case and they cite also another representation case.

I responded to both of those cases in my reply brief.

But it is important to note that respondents did not go to the very issue, the enforceability of pre-hire agreements, which are contained in Section 8(a)(5) cases.

In my reply brief I cited 13 NLRB Section 8(a)(5) cases in response to the position cited by respondents.

Now, I noted that the position taken by respondents the... would in effect reverse the R.J. Smith decision, would in effect reverse the Ruttmann decision, would reverse certain parts of the Corrugated Structures decision and other decisions by the Board.

There are also some... one point to be considered is that employees do not necessarily have any detriment by the position taken by the petitioner herein or by the Board.

In R.J. Smith, of course, the Board said as a matter of law, employees receive a certain detriment because of court enforcement and Board enforcement of the decision.

Also, in the Ruttmann decision, which was a companion to the R.J. Smith and also noted by this Court, the employees actually receive higher wages and higher fringe benefits rather than under the pre-hire agreement of the other union.

Also, in the--

Chief Justice Burger: We will resume there at 1:00, Counsel.

Mr. Winkler: --Thank you, Your Honor.

Chief Justice Burger: You may resume, Counsel.

Mr. Winkler: Mr. Chief Justice, and may it please the Court:

Just a few more points I would like to make.

I keep on referring to the Board's R.J. Smith decision because it is the basis of the Board's policy and it sets out the Board's policy in total.

It is very important to note that not only did respondent not rely on Section 8(a)(5) cases in its brief, it did not even cite in its entire brief the R.J. Smith decision.

It is completely avoiding the Board's position on these matters.

Now, this Court in Higdon also pointed out the very issue of the enforceability of minority agreements in 301 litigation which was raised in the AFL-CIO brief and by the Board in its reply brief.

And this Court in Higdon stated that 301... in 301 litigation minority status may be litigated just as it is in an--

Unidentified Justice: Mr. Winkler, you know, it's correct about your opponent, but, you know, the government cited the R.J. Smith case.

They found it distinguishable.

Mr. Winkler: --I am sorry?

Unidentified Justice: The Solicitor General cited the R.J. Smith case and seems to think it's distinguishable.

Mr. Winkler: I disagree.

I don't see how it can be, because the... okay... they went in the R.J. Smith decision, they went all the way back and found that there was no enforceable agreement, and also they... it was not... excuse me, there is no notice of repudiation in R.J. Smith.

The government distinction is very simple.

It simply says that that was an unfair labor practice proceeding and this is a 301 litigation.

And that I think was discussed and resolved in the Higdon decision itself.

And also, it goes right back to the Howard Johnson case that says the basic policies in an unfair labor practice case should not be... should also be controlling in a 301 case.

Now, the entire line of cases along there, Howard Johnson, were really ignored by the government in its case.

It just gave a blanket statement.

The two are completely separate.

And I think that if you look at my reply brief, you will see that the entire history from Lincoln Mill and Howard Johnson on up to Higdon itself says you just cannot ignore the basic policies in unfair labor practice context.

Now the litmus test to be applied here is the basic polices.

And if you look at those Board cases I cite in my reply brief, all 13 of them, you will find that in those cases where the statutory policies were intendedly applied, the contract was enforced.

When the employer went to the union hall and got union employees, the contract was enforced.

And when it was... the employer used non-union employees on non-union job sites, the contract was not enforced because that's against public policy.

You should also look, I believe, at the Board's Land Equipment case, which I cited in my reply brief.

Respondents also were involved in that case.

The Trust Funds intervened in the Board proceedings.

Now, in that case the idea of voidability... a repudiation rule was brought up before the Board, and the Board again rejected it specifically.

And the Board did find majority status in that case.

The union did... excuse me, the employer did go to the union hall, got employees, and the employers are bound to honor the agreement.

However, it is only bound to honor the agreement that to a point in time when the union first obtained majority status.

The Board disagreed with the administrative law judge in that case, which gave it retroactive enforcement even before that period of time.

Now, that case was enforced by the Ninth Circuit Court of Appeals, and I didn't cite the Ninth Circuit decision.

It was just a memorandum opinion at 649 F. 2d 867.

So what you have here is the Ninth Circuit in an unfair-practice context enforcing this contract back to the point in time when they had majority but not before.

But in the 301 context the same court would enforce that contract all the way back to the beginning because there was no notice of repudiation.

Now, getting to the issue of the Trust Funds involved in this case, whether or not under Section 306(a) there is some special reason that they shouldn't be bound to the same rules by the NLRB.

Let me just point out one case I cited in my brief, the District Court case of Sorrenton pointed out in the minority agreement, it's really for the employees to decide whether they want the contract and that includes trust fund benefits.

And the court would be second-guessing those wishes of the employees if they in fact gave them trust fund benefits or put the... put the entire contract into effect.

And it pointed out also that trust fund payments to benefit... to employees is not necessarily a benefit to them, it may take away from the ability of the employer to give other--

Unidentified Justice: Mr. Winkler, 306(a), the language there is collectively bargained agreement.

Now, is there a difference between a collectively bargained agreement and a collective bargaining agreement?

Mr. Winkler: --I notice the distinction in the language there.

I don't know exactly what they're talking about there.

I notice in... in Higdon itself, this Court was careful to use the term "pre-hire agreement"--

Unidentified Justice: Well, clearly enough, a pre-hire agreement is not yet a collective bargaining agreement.

But may it not be a collectively bargained agreement?

Mr. Winkler: --Oh, I would say not.

Unidentified Justice: Why not?

Mr. Winkler: The idea of collectively--

Unidentified Justice: Why not?

Mr. Winkler: --collectively bargained assumes that the--

Unidentified Justice: Well, if they sat down and bargained, even though it was a minority pre-hire agreement, isn't that--

Mr. Winkler: --That'd be--

Unidentified Justice: --collectively bargained even if it's not a collective bargaining agreement?

Mr. Winkler: --The idea of collective bargaining assumes the idea that they're acting as the agent of the employees, as the collective bargaining agent for those employees.

Unidentified Justice: Well, do you think Congressmen... Congress chose that language, "collectively bargained agreement", purposely to indicate maybe a distinction?

Mr. Winkler: I do not believe that they did.

I notice in the original Senate version they also had the words "collectively bargained".

I believe they also said... made a reference to a 308(a).

And that's pointed out in my reply brief.

But I would note that the Sorrenson decision has some practical effect in the Board's DeAngelo and Kahn decision, which is also cited in my reply brief.

The only issue in DeAngelo and Kahn are really the trust fund payments.

The employer voluntarily complied with the agreement on one job site, but then on another job site it gave what it would have been the trust fund payments, it gave that extra amount to the employees in additional take-home pay.

It was a federally funded project, and therefore, under the Davis-Bacon Act they had to pay a certain amount, and that amount was the same as the overall union contract.

So the employees actually got a greater take-home pay under that arrangement.

So it's not like the employees necessarily... it's basically for the employees to decide what they want, and if they have not chosen the union, the union contracts do not apply.

Unidentified Justice: What is necessary for the employer to escape the pre-hire agreement under the judgment that you are attacking.

Mr. Winkler: Basically, if the... if the unions... if it is not established that the union represents the majority of the employees, then the contract is not enforceable.

Unidentified Justice: I know that is your... that is your view.

But what, under the decision below, what is necessary for the employer to escape?

Mr. Winkler: They have to, in effect, give a notice of repudiation.

Unidentified Justice: And that notice of repudiation cannot be just a refusal to abide by the contract?

Mr. Winkler: Basically, if they say not.

They say it can be an open and notorious, and that would, in effect, give notice.

But they have said that that did not occur here.

Unidentified Justice: But even if it were... even if a refusal to comply was a notice as to the future, it wouldn't be effective to negate obligations accrued up to that time.

Mr. Winkler: That's true.

Unidentified Justice: And your... your view is that nothing in the contract is binding on the employer until there's a majority representation.

Mr. Winkler: That's true.

That's my view.

That's also the Board's view.

What we have here is basically--

Unidentified Justice: Well, the Board... I don't know how you can say it's the Board's view when the general counsel is on this brief for the government.

Mr. Winkler: --Well, the general counsel and the Board--

Unidentified Justice: Are not one and the same.

Mr. Winkler: --are not one and the same.

I don't mean that lightly.

I mean I do not believe that is an accurate representation of the Board.

Unidentified Justice: Well, we have recognized that for some purposes, have we not?

I mean Congress has recognized that.

Mr. Winkler: That's true.

That's right in the statute.

And I do not think that it's an accurate representation of the Board.

I might add, if you compare the brief of the general counsel... excuse me, of the government in this case with the brief of the Board given in Higdon, they do not match at all.

They are totally inconsistent, and they are totally contrary to each other.

Unidentified Justice: But if the counsel or the Board makes a representation to this Court in a case of this kind, you suggest that that carries no weight?

Mr. Winkler: Oh, it should be given some weight, but then again I think you should take a look at the Board decisions itself.

Unidentified Justice: Is this a case where his independence is directly involved, counsel's independence?

Mr. Winkler: I can't say that.

I don't think that he's speaking for the Board.

Unidentified Justice: Well, this is an amicus case.

I suppose if the Board were a party--

Mr. Winkler: That's right.

Unidentified Justice: --to this case, and then there's a brief filed on its behalf, you should be able to assume that it represents the Board's view, shouldn't you?

Mr. Winkler: Well--

Unidentified Justice: But that isn't the case here.

Mr. Winkler: --In Higdon the brief was on behalf of the National Labor Relations Board.

Unidentified Justice: This is the brief of the United States.

Mr. Winkler: I know.

But in Higdon the brief was--

Unidentified Justice: And not the Board.

Mr. Winkler: --filed on behalf of the National Labor Relations Board.

Unidentified Justice: It was the brief of a party in Higdon, wasn't it?

Mr. Winkler: That's correct.

And you might as well take the Higdon brief and, you know, change the caption and sign my name to it.

I mean I am just adopting exactly what the Board is saying all the way through.

Unidentified Justice: Did the Board prevail in Higdon?

Mr. Winkler: Yes, it did.

Yes, it did.

I might point out that under 306(a), I pointed out a few things in my... in my reply argument.

One thing I would especially like the Court to look at is that in... I believe that the issue raised was also resolved by Kaiser where this Court said that defenses, labor law defenses, are not implicitly repealed.

And I think that settles the matter.

Also, in this matter you might take a look... this is really probably not even a defense.

There's a question whether or not this is even a defense here if the entire agreement is not enforceable.

Also, I think the initial premise, and I request you to take a good look at my reply brief on this, the initial premise was that the legislative history in the Committee Print was to 301(a).

It was to 301(a) and to (b).

And the entire section taken together shows that what they were trying to do was set up a statutory right and to give... so that you can give certain remedies.

And it's set forth in (b) all the remedies that you can give.

You've got attorney's fees, you have liquidated damages, you have extra interest rates.

It's really quite a penalty.

The government... thank you, Your Honor.

Chief Justice Burger: Mr. Jett.

ORAL ARGUMENT OF WAYNE JETT, ESQ., ON BEHALF OF THE RESPONDENT, FRANK L. TODD, ET AL.

Mr. Jett: Mr. Chief Justice, and may it please the Court:

Petitioner McNeff has argued from the viewpoint that because a breach of a Section 8(f) agreement before majority status is achieved is not a violation of Section 8(a)(5) of the National Labor Relations Act, that that breach then cannot be remedied by a suit brought under Section 301.

However, we have shown in our briefs that Section 8(a)(5) cases and all unfair labor practice cases are government litigation pursued by the government at government expense to enforce rights and duties that are created by statute under the Act.

By comparison, private rights and duties that are created by private agreement have been left to enforcement according to the normal processes of the courts under Section 301 litigation.

That is a tandem system of handling labor disputes that has served the country well since 1947 when Section 301 was enacted.

There is no reversal involved of any Section 8(a)(5) case in enforcing the contract rights in a judicial action.

Those Section 8(a)(5) cases would be exactly as valid with the enforcement of contract rights in this Section 301 action as they are presently; namely, the government would not issue a Complaint and would pursue litigation as a matter of public policy to enforce a contract when majority status is not shown.

We have shown in our brief at least two clear similar circumstances in which... one of which this Court has recognized in the Iron Workers case.

For example, Section 8(e) agreements, the hot-cargo clauses, are not enforceable by picketing, just as the minority agreement in Iron Workers was not enforceable by picketing because of the limitations of Section 8(b)(7).

However, those hot-cargo clauses are clearly enforceable by judicial action.

In addition, we have also shown the Pittsburgh Plate Glass decision of this Court, in which it clearly recognizes the established rule of law that nonmandatory subjects of agreement may be included in collective bargaining agreements, and when they are, they are judicially enforceable.

However, they are not enforceable by government litigation under Section 8(a)(5) cases.

And that is what Pittsburgh Plate Glass held.

Unidentified Justice: Well, what happens in a... outside the construction industry when... when an employer purports to recognize a minority union and execute a contract with that union?

Mr. Jett: It is an unfair labor practice, Your Honor.

Unidentified Justice: Well, is it enforceable in a 301 action?

Mr. Jett: Your Honor, it would not be, because--

Unidentified Justice: Why not?

Why not?

Mr. Jett: --Because--

Unidentified Justice: Give me your argument.

Mr. Jett: --According to our argument, we would agree with this Court's decision in Carey versus Westinghouse Electric.

This Court has said that if there is an unfair labor practice involved in the execution of a labor agreement, the superior authority of the Board can be invoked at any time in order to hold the--

Unidentified Justice: Well, that may be the authority of the Board, but what about the... what about a 301 case?

Mr. Jett: --Well, Your Honor, as far as an unfair labor practice involved in a 301 case in the situation you're talking about, if there is an allegation of an unfair labor practice, it must be submitted to the Board in the form of a charge.

Now, such a case has just been litigated in--

Unidentified Justice: Wel, suppose that an employer signs... outside the construction industry, signs a contract with a minority union and perhaps everybody promising to pay a certain wage, and one day he just lowers the wage unilaterally, and then he gets sued in a 301 action for... for the contract wage.

Mr. Jett: --Your Honor, as a matter of fact, that exact circumstance--

Unidentified Justice: What happens?

Mr. Jett: --has just been litigated in the Ninth Circuit.

Unidentified Justice: What happens?

Mr. Jett: It's the Glazers case that was cited in our brief.

And what happened is the Court said... and analyzed Iron Workers in doing so, analyzed the issues largely before this Court.

What happened was they said if there is an unfair labor practice involved, it is to be presented to the Board.

Unidentified Justice: But the employees couldn't sue under those circumstances, a 301 action?

Mr. Jett: They could sue, yes, Your Honor.

And as a matter of fact--

Unidentified Justice: Well, could they collect?

Could they collect the promised price?

Mr. Jett: --The... the Iron Workers... the Glazers case enforces the contract and says it does so because the unfair labor practice must be kept under the primary jurisdiction of the Board and that otherwise that would require litigation of the intent of the unfair labor practice statutes in Section 301 cases, and the Ninth Circuit in the Glazers versus Custom Model case declined to do that.

And I... as a matter of fact, the--

Unidentified Justice: So Glazers... your case is a fortiori from the Glazers case?

Mr. Jett: --It certainly is highly consistent with our case.

It adopts the same arguments that we have made.

It simply is a situation which is outside the construction industry.

And I think it is a more clear representation of the Ninth Circuit's view as to whether employee representational issues... in other words, the litigation of majority status... can be litigated before the courts in Section 301 cases as opposed to before the Board.

And the Ninth Circuit clearly came down in a well-reasoned opinion there that came out after... well, it had not been officially reported as yet at the time of our brief, but we cited it, and it has been, of course, officially reported.

But they followed the same analysis essentially that we did in analyzing the references to litigation of majority status in Iron Workers and said that that was not by any means a holding, it was not a 301 case that was litigated in Iron Workers, it simply was a matter of turning aside an invalid union argument made in the Iron Workers case.

Now--

Unidentified Justice: Well, what's the... under 301 what would be the theory of... that the employer would use if he's sued, just like in this case, and he came back and said, well, I sent you notice last week that I am repudiating the contract?

And what does... what's the 301 theory on that?

Mr. Jett: --Your Honor, we have argued that repudiation is not a proper defense.

We... we have argued that there is no right of repudiation.

Unidentified Justice: You are different from the Board then?

Mr. Jett: We are different from the government's brief in that respect.

Unidentified Justice: You don't think that's a Board brief, either, eh?

Mr. Jett: Your Honor, it is to the extent that it represents the government's views.

However, I must note that, as the Court has already mentioned, that this is not a case that has had the benefit of being litigated through the Board's processes so that the Board itself has had the benefit of a full record and having briefs and arguments made before the Board and developed it on the basis of its expertise.

Unidentified Justice: Well, is it once you've signed the pre-hire agreement, once the employer signs, under your view, he is permanently stuck with it?

Mr. Jett: Not at all, Your Honor.

As a matter of fact--

Unidentified Justice: When is he not subject to suit in the 301 action?

Mr. Jett: --The agreement, according to our argument, is that he would not be bound to the agreement after the Board certifies a union election result that the union has lost.

That is exactly the same treatment--

Unidentified Justice: So the employer, before he can get out of the agreement, he has to... he has to precipitate a representation election?

Mr. Jett: --An election has to be precipitated, we'll put it that way.

Unidentified Justice: And he has to win?

Mr. Jett: The employer may do it.

As the Iron Workers decision says, when this Court referred to the fact that the agreement was voidable, the precise means and the only means that this Court referred to was the filing of a petition under the proviso.

And that filing of a petition, as we have shown in our brief, keeps all employee representation issues... the determination of appropriate bargaining unit, the determination of eligibility of voters... all of those aspects are kept before the Board.

Unidentified Justice: So it changes the burden, the pre-hire changes the burden with respect... it changes the normal rules with respect to how a... how majority status is to be determined?

Mr. Jett: Your Honor, it does not.

As a matter of fact, it... in order to pursue our argument, it keeps it exactly where it has been since 301 was enacted; and that is, all employee representation issues are determined by the Board in exactly the same way that they always have.

And that's an awfully important aspect.

Unidentified Justice: Well, I know, but you... the employer, unless there is some solid evidence of majority representation, an employer isn't normally required to act like the union is the majority representative.

And if he says, look, you've had plenty of time to get... to get... to get yourself organized and you aren't, and I am repudiating the pre-hire agreement right now because you just don't represent the... the employers.

Mr. Jett: Well, Your Honor--

Unidentified Justice: Or the employees.

And you say, well, no, the pre-hire is going to force him to go to the Board.

Mr. Jett: --Your Honor, what--

Unidentified Justice: In order to prove that the union isn't the majority representative.

Mr. Jett: --What it would force him to do, require him to do is to do what he agreed to do; that is, perform according to the agreement until there is an expression of self-determination by the employees in which they vote out the union.

Unidentified Justice: So you... so you do say that pre-hire does change the--

Mr. Jett: Yes, Your Honor, it does.

It does to this extent: As this Court recognized in Iron Workers, 8(f) specifically was intended as an exception to the general requirement of the law that there be majority status before a contract can be signed.

And let me, if I might, look specifically at the objectives of Congress when they enacted Section 8(f).

I believe there are four clear objectives that can be identified.

The first one is that the employers in the construction industry needed the ability to sign binding contracts that would establish firmly their wage rates that could then be used by them in preparing bids that would be entered into competitive bidding for construction projects.

When those bids are accepted, the employer is bound contractually to perform by them, and he needs reliable labor costs.

Otherwise, he is substantially at risk.

Secondly, to the same extent, it is very common in the construction industry that time is of the essence in performing a construction contract once he gets the winning bid.

Therefore, he needs a ready source of labor that he can call on immediately in order to perform the contract.

It's not common at all for the way construction projects develop and bids are won, the employer normally cannot afford to keep a full staff of workmen on his staff and on his payroll.

He must have a source of workmen.

And he needs that on a reliable, a contractually reliable basis.

Now, from the union standpoint, there were also two objectives.

The unions needed to have some approach to stabilize working conditions in their geographic areas over a period of years.

And the legislative history clearly recognizes that they had been doing that by the practices of signing agreements applicable to geographic areas over 1, 2, or 3 years.

I would cite the legislative history, since it has been questioned in the reply brief, pages 423 to 25, pages 451 and 52, page 759 and 777.

Clearly, it was the intent of Congress to validate the practice of signing binding contracts that would stabilize working conditions within an area so that the union and the employer would not have to bid on a project or to bargain on a project-by-project basis after the employees got out on the site where there could be disruption of work at the job site.

And fourth, the fourth objective is also a union objective.

Congress recognized that because of the high mobility and the short... shortness of jobs in the construction industry, that the construction unions did need certain organizing mechanisms that were out of the ordinary for other industries.

One of those, they recognized that the unions needed an exclusive hiring hall to refer their workmen out, and they also recognized a need for the 7-day union security clause.

Both of those objectives, both of those mechanisms are expressed precisely in the wording of Section 8(f).

Now, I refer to those objectives in some detail because they must be examined to recognize that every one of those four objectives of Congress requires a binding contract in order to achieve it.

Congress looked at the existing law at that time and said that, well, they've got to have a binding contract in order to achieve those objectives; right now they have to show majority status before they can sign that.

Now, if they were... if we were to follow that approach, we would have to be ready for the NLRB to conduct elections and every bargaining unit from the construction industry.

And clearly, the legislative history says at several places it's not feasible in the construction industry to contemplate having elections in every unit in order to certify the union as the bargaining agent.

They said, therefore, because of that, the infeasibility of elections in every unit and because we need these four objectives under the circumstances of the construction industry to be met, we are authorizing the pre-hire agreement, we are validating the practices that have been used by the unions, and we are doing it by enacting Section 8(f).

Unidentified Justice: --Well, you would force the... you would force the employer before the Board in any case where he seriously doubted the... the majority status of the union.

Mr. Jett: Your Honor, in order to present a question of employee representation, it is all... has always been the requirement that that question of representation be presented to the Board.

The cases are replete that the Board is the administrative tribunal that has the expertise to make that decision.

And let me say this about the prospect of a transfer wholesale of the employee representation issues in the construction industry from the Board, where it's been for the last 25 years, into the courts.

The courts simply do not have the capacity to continue absorbing the additional doses of litigation that they're getting.

The litigation arena is too crowded already.

And under such a ruling, under 301 cases, both the state and the federal courts would then be involved in litigating majority status issues.

It's doubly troublesome to contemplate moving employee representation issues from the Board to the courts for this reason.

If anything, the litigation burden on the courts would indicate that legislatively those burdens should be moved from the courts to administrative tribunals.

And yet we would have thousands and thousands of employee representation issues.

In effect, every enforcement of a pre-hire agreement would be litigated in the courts rather than the Board.

Unidentified Justice: Well, Mr. Jett, even if we affirm the Ninth Circuit here, it would have the effect of moving a lot to the courts, wouldn't it, unless your view were adopted in the process?

Mr. Jett: Your Honor, that is correct.

To adopt the Ninth Circuit's view, it would result in moving majority status to the courts.

That was stated in dictum views because even under the Ninth Circuit's view holding for us, there was no repudiation here.

But that is why we are pointing out it's so... it's such an important aspect of this case that the proper legal structure for deciding the case is set, because if it is... if courts are led to believe that those issues of majority status of an appropriate bargaining unit, all of those things that go into determining majority status, it's by no means just a situation of checking the payroll and determining who is a union member.

Unidentified Justice: How do you respond to Mr. Winkler's position, though, that the Board itself has viewed these agreements as unenforceable?

Mr. Jett: Your Honor, they... the Board has not reviewed... viewed them as unenforceable under 301.

The Board has never decided that issue.

It wouldn't be called upon.

That's what's before this Court.

It is unenforceable from the standpoint that the government will not pursue litigation at government expense under Section 8(a)(5) to enforce that agreement.

So that... that would stand completely.

And as a matter of fact, I would like to point out in regard to the ERISA Amendment that basically the same government attitude toward the enforcement of these private rights is maintained in ERISA, because while the ERISA Amendment creates the statutory right or obligation to perform the contract, there is also a part of that amendment that says the Secretary of Labor will not initiate litigation to enforce that contract.

And so basically, it is simply a situation that the Board has said and ERISA has said that the government is not going to expend its agency resources to enforce this as a matter of public policy.

However, under the ERISA Amendment, they did add the provision that entitles the private trustees to recover their costs of pursuing that litigation.

So in that respect of what the ERISA Amendment did is simply add the statutory obligation that 8(a)(5) doesn't provide for performance here, it adds the statutory obligation but again it leaves the litigation in private hands just as it was under 301.

Unidentified Justice: Incidentally, what do you suggest is the reason that that ERISA Amendment speaks for the collectively bargained agreement rather than a collective bargaining agreement?

Mr. Jett: Your Honor, I believe that it is common usage in ERISA to speak in that terminology as opposed to collective bargaining agreement.

It--

Unidentified Justice: In other words, this is a different thing than a collective bargaining agreement?

Mr. Jett: --I believe that ERISA, while it intended collectively bargained agreement to apply broadly to these kinds of agreements, I believe they were not concerning themselves with the intricacies of unfair labor practice law in terms of recognizing the policies of the Board in any detail.

But I believe that at the very minimum what has to be said about the legislative history of the ERISA Amendment is that with the citation of the Overhead Door case that expressed disapproval of Overhead Door and McDowell, both of them being clearly 8(f) cases in which majority status was raised, the minimum that can be said is that Congress intended that that statutory obligation in Section 515 applies to 8(f) agreements.

They viewed those agreements--

Unidentified Justice: That they may be collectively bargained even if not collective bargaining agreements?

Mr. Jett: --Correct, Your Honor, although I would say this.

I don't believe the history of Section 8(f) indicates that a pre-hire agreement is not a collective bargaining agreement.

I believe that the decision of this Court in Iron Workers was... was specific and express in saying that... that the collective bargaining agreement does not move to the status of a Section 9 representative which would entitle it to enforcement under Section 8(a)(5).

But it didn't say that... that this is not a collective bargaining agreement.

In my estimation, clearly it's a collective bargaining agreement.

It sets wages and working conditions for employees on whose behalf the union bargained.

Unidentified Justice: Isn't one of the requirements for a collective bargaining agreement that the union has to represent the employees?

Mr. Jett: Your Honor, it is, except in 8(f) cases.

And what Congress intended to do in 8(f) was enable both employers and unions to step into the vacuum that exists before a project is actually manned.

Unidentified Justice: Well, does 8(f) shed light on whether the... one of the requirements of a collective bargaining agreement is that the union represent the employees?

Mr. Jett: Your Honor, I believe that Section 8(f) specifically contemplates agreements and binding agreements in which it expressly is with a minority union.

That's specifically and expressly what 8(f) intends, that you be able to enter into binding agreements when it is conceded that the union is a minority union.

That's what it says on its face.

And the only... the only point that Congress saw fit to protect was that enabling employers and unions to step into this vacuum and deal with binding contracts on the basis that met the needs of both parties was the proviso... they didn't want the employers and the unions to stick the employees with something that the employees didn't want.

And as a matter of fact, in looking at the legislative history on the purpose of the proviso, the clearest explanation I find of exactly what Congress had in mind and what was bothering it on the proviso appears in the... in the Committee Print of the Senate Subcommittee on Labor that was published right at the time the Joint Conference adopted the Senate version of Section 8(f).

And that proviso, or that explanation on a section-by-section basis explains the proviso with a more limited purpose even than what we have discussed so far.

It says this: Agreements permitted by this section may not operate as a bar to a petition for an election sought by a union not party to such agreements.

You look at the legislative history in light of that explanation, and what Congress was really worrying about when it added the proviso is they... and the legislative history shows clearly they were concerned about sweetheart contracts between corrupt employers and paper unions.

I cite the the Committee statement of the legislative history at page 967.

And the paper union/sweetheart contract motive is shown in the legislative history at page 425 and at pages 992 and 994.

So under that circumstance, what they were really protecting against is... is the employees getting stuck with a sweet deal that benefited the employer and the union but not the employees.

Now, the argument has been made that the employees are disadvantaged--

Unidentified Justice: Well, isn't it true, Mr. Jett, that the... according to your position, it really doesn't make any difference for the purposes of this case where this majority status issue is to be litigated or even whether it is to be.

Until it is, you say the contract's enforceable?

Mr. Jett: --Yes, Your Honor.

Unidentified Justice: So you don't... it's... it's... all you have to say is that the majority status has never been determined and you're suing for back pay, so to speak.

Mr. Jett: In terms of this contract... or this case, it is clear that there was neither repudiation under the Ninth Circuit view or a determination of majority status until after the period that was enforced in the contract.

And clearly, we would prevail on that basis.

But once again, it is most important--

Unidentified Justice: But you would like to go on prevailing on the same contract?

Mr. Jett: --It is most important that the right reasons be given for that prevailing; otherwise, the wrong reasons will undoubtedly lead to erroneous decisions in future cases.

And certainly, the decision we believe of the Ninth Circuit, at least the dictum on handling majority status in the courts, would certainly lead to very erroneous decisions... that is, the litigation of majority status in the courts.

Now--

Unidentified Justice: Well, I don't... I don't know.

I don't know whether the court would be necessarily obligated to hear the issue rather than defer to the Board and tell the parties to take it to the Board as a matter of primary jurisdiction.

Mr. Jett: --Your Honor, as a matter of fact, that is an extremely important point here and one actually that the petitioner has taken both sides of.

If you look at the opening brief of the petitioner here, they've argued that it was improper... or that the District Court should have deferred to the Board, and argues quite extensively that that should be done.

They are now arguing essentially that, yes, it ought to be litigated in the... in the courts.

Now, we believe that if the Court were to take the view that, yes, the agreements are void ab initio, if you... if you don't prove majority status and they're a nullity from the beginning, it would certainly be better to defer to the Board for a determination of majority status than to litigate in the courts.

Unidentified Justice: Mr. Jett, you don't... I don't think you're going to... you're going to say that every time you sued on a pre-hire agreement and the employer said... said, sorry, but I am repudiating right now, you're not going to wage a losing battle, you're not going to litigate forever when you know you don't have majority status.

And I am... I wouldn't think the employer, if there is any doubt about it, or if there is substantial doubt about it, is going to litigate forever either.

Mr. Jett: Well, Your Honor, of course, our... our trustees, the parties respondent here--

Unidentified Justice: Yes.

Mr. Jett: --are in the position of attempting to enforce the fringe benefit rights, and are in the position that in order to... if... if the Ninth Circuit were to be taken at face value on the dictum, would be in the position of having to come up with union majority status proved to see whether it could be proved to the court's satisfaction that that was established before repudiation.

We would not be in the position, of course, of going beyond what evidence is available.

But at the same time, we would have the prospect of needing to enforce contract rights that have accrued to the employees involved.

Now, I would like to--

Unidentified Justice: Well, you certainly would agree, I suppose, that if the employer took it to the Board, the question of majority status to the Board, and he won, that you haven't got any contract rights?

Mr. Jett: --Your Honor, if we--

Unidentified Justice: From... from at least the prospective.

Mr. Jett: --From that date forward, yes, Your Honor.

And we have shown that.

As a matter of fact, in my letter citing the two additional cases that was presented to the Court today, I would like to refer to the Board's policy in that matter in non-construction industry cases.

In a non-construction industry circumstance, when a petition is filed and goes to election and the contract basically is still in effect, the Board's clear policy is that the contract remains in effect to the date of Board certification of election results.

Unidentified Justice: And if there is unilateral change, it's an unfair labor practice, is that it?

Mr. Jett: That is correct, Your Honor.

That is correct.

But as far as... and I might refer to that.

That's the Trico Products case that I cited today.

It goes in some detail into the Board policy, that to create a hiatus or instability simply on the filing of the petition would be adverse to the policies of the act because the employees would be unsure of what their rights are until the time of actual certification.

Unidentified Justice: But that's in a case where the union had been at one time certified as the majority representative?

Mr. Jett: Not necessarily so, Your Honor.

It would be in a situation in which at least there had been recognition of majority status, because, as I said, that's a non-construction industry case.

And that would not necessarily be a Board certification.

In other words, a petition can be filed at a certain window of time during which the contract does not present a bar, and when the Board then proceeds to an election the Board says that its clear policy is to maintain the status quo of the agreement until the time that the election results are actually certified.

Now, I would like to deal with two concepts that I think have... have come round to the argument that is made by petitioner in this case.

I think it's most important to deal with the concepts of repudiation and voluntariness, in order to clarify the way in which they have been intermixed.

Repudiation is the concept that the Board has developed under 8(a)(5) cases in which the employer can breach the contract--

Chief Justice Burger: Your time has expired.

We will take that on the briefs, Counsel.

Mr. Jett: --Thank you.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

UMWA Health & Retirement Funds v. Robinson - Oral Argument

Fri, 09 Jan 2009 14:47:36 +0000

Case:

UMWA Health & Retirement Funds v. Robinson

Media File:

81-61_19820113-argument.mp3

Related Transcript:

transcript.xml

Transcript:

ORAL ARGUMENT OF E. CALVIN GOLUMBIC, ESQ., ON BEHALF OF THE PETITIONERS

Chief Justice Burger: We will hear arguments next in United Mine Workers against Robinson.

Mr. Golumbic, I think you may proceed when you are ready.

Justice White will join us very shortly.

Mr. Golumbic: Mr. Chief Justice, may it please the Court, the court of appeals in this case decided that the substantive terms of the collective bargaining agreement embodied in an employee benefit trust was subject to review by federal courts for reasonableness, under the sole and exclusive benefit provision of Section 302(c)(5)of the Taft-Hartley Act.

This decision, we submit, is inconsistent with the intent of Congress, as revealed by the national labor laws.

The national labor laws were based on private bargaining with governmental supervision alone.

Congress was not concerned with the substantive terms upon which parties agreed.

Accordingly, this Court has on numerous occasions rejected attempts by federal courts to substitute their own judgment for that of the collective bargaining parties.

Of course, collective bargaining agreements and collective bargaining parties are not subject to unqualified 3 authority.

A collective bargaining agreement may be reviewed and revised if it violates the Constitution or federal law, but absent such a violation, the collective bargaining procedure should not be interrupted, so long as that process was conducted in good faith.

The record before the court of appeals in this case clearly reflected that the agreement to exclude the widows and respondent's class was the subject of prolonged, intense, and informed bargaining.

In fact, the court below acknowledged that the--

Unidentified Justice: But it was bargaining, wasn't it?

Mr. Golumbic: --Excuse me?

Unidentified Justice: It was bargaining?

Mr. Golumbic: The issue was bargained from the day the bargaining commenced until, indeed, the parties decided to agree in order to agree to a final bargaining agreement in order to avoid a strike.

Given the fact, given the fact that the agreement in this case was the result of good faith collective bargaining, the court should have restrained, or refrained from reviewing it.

Instead, the court decided to become a party to the negotiations and impose its own view of a desirable settlement.

The court justifies its intervention in this case by asserting that the eligibility rules of an employee benefit trust established through collective bargaining are subject to review for reasonableness pursuant to the sole and exclusive benefit provision in Section 302(c)(5) of the Taft-Hartley Act.

The court, in support of that proposition, the court relies on a series of cases decided by the D. C. Circuit which involve acts undertaken by collective bargaining parties... excuse me, which involve acts undertaken not by collective bargaining parties, but by trustees of employee benefit trusts.

These cases do not support the proposition that authority to review eligibility rules for reasonableness emanates from Section 302(c)(5).

Unidentified Justice: Do you think those cases are correctly decided?

Mr. Golumbic: I think those cases are correctly decided, Justice Rehnquist, insofar... insofar as they rest on the jurisdictional basis of a court of equity to review the discretionary acts of trustees, and insofar as they decided that in those particular instances, in those cases the trustees had abused their discretion.

Unidentified Justice: Properly decided under 302(c)(5)?

Mr. Golumbic: The cases were decided on the authority of a court of equity to review the discretionary acts of trustees, and in no instance did the cases rest on a jurisdictional basis under the Taft-Hartley Act, such as Section 302(c) or 302(e).

These cases demonstrate that the authority to review in each of the cases rested on the broad authority of a court of equity to review the discretionary acts of Taft-Hartley trustees.

Other courts also decided that they have authority to review the discretionary acts of Taft-Hartley trustees, and these courts based their authority on Section 302(e), which in their view authorized the review of employee benefit trusts for a structural violation of Section 302(c)(5).

The scope for review under the structural violation doctrine remains unsettled.

The Third Circuit has adopted a rather broad scope of review under the doctrine.

The First Circuit has limited review under the doctrine to ascertaining whether employee benefit trusts conform to the express requirements of Section 302(c)(5).

The reason for this diversity of views on the scope of review under the structural violation doctrine is apparent when the structural violation doctrine is traced to its origin.

Virtually every court which has adopted a broad construction of review under the doctrine begins with analysis of Section 302(c), with the cases decided by the D. C. Circuit upon which the court below relied.

But as we have shown, these cases do not rest on an analysis of Section 302(c)(5), but rather on the broad authority of a court of equity to review the discretionary acts of trustees.

In this case, in this case the court of appeals lost sight of the equitable origin of its authority and decided that it may review a collective bargaining provision for reasonableness under the sole and exclusive benefit provision of Section 302(c)(5), but to say that Section 302(c)(5) imposes a standard of reasonableness under which the courts may review and revise the fruits of collective bargaining is to ignore the legislative purpose of Congress in adopting the Taft-Hartley Act.

Congress adopted the Taft-Hartley Act, among other things, to prevent labor unions from using welfare funds for their own purposes, and to make sure that those funds were used for the benefit of employees of contributing employers.

It is apparent therefore that the requirement in Section 302(c)(5) that welfare funds must be used for the sole and exclusive benefit of employees was intended only to prevent and prohibit the use of those funds for union officials and other non-employees.

It is equally apparent that Section 302(c)(5) imposes no limitation upon the eligibility standards adopted through collective bargaining for the payment of benefits to employees.

So long as those collectively bargained eligibility standards do not permit the payment of benefits to persons other than employees, those standards, we submit, are not subject to review under Section 302(c)(5) of the Taft-Hartley Act.

Of course, of course those standards and collectively bargained employee benefit plans are subject to review for compliance with ERISA.

In ERISA, Congress adopted standards for employee benefit trusts, including standards of vesting participation in funding, standards for reporting and disclosure, and standards of fiduciary conduct, and significantly, Congress provided that any violation of these standards was subject to judicial challenge in federal courts.

Certainly in enacting this comprehensive legislation governing employee benefit trusts, including a provision for the judicial review of a violation thereof, Congress believes that it was filling a regulatory void.

And in light of that fact, this... the existence of this comprehensive legislation undercuts all arguments for permitting the judicial review of collectively bargained employee benefit trusts pursuant to Section 302(c)(5) of the Taft-Hartley Act.

I thank you.

Chief Justice Burger: Mr. Sword?

ORAL ARGUMENT OF LARRY FRANKLIN SWORD, ESQ., ON BEHALF OF THE RESPONDENTS

Mr. Sword: Mr. Chief Justice, may it please the Court, it is important at the outset to note the limits of this case.

The trustees concede three important points.

First, the trustees concede if they, the trustees, had formulated this provision, that it would be reviewable.

Indeed, there is no disagreement among the lower courts over the courts' power to review eligibility provisions which have been formulated by trustees, and that Section 302 prohibits the trustees from formulating eligibility provisions which would deny coverage to persons with substantial contributory work histories while granting benefits to persons with lesser contributory work histories, unless there is a rational nexus between the provision and a valid purpose of a 302 trust.

Unidentified Justice: Mr. Sword, even though your opponent concedes that point, and he did in response to Justice Rehnquist's question, this Court has never so held, has it?

Assume that discretion was expressly given to the trustees in a collective bargaining agreement to administer the pension.

Has this Court ever held that the exercise of discretion by the trustees be subject to review?

Mr. Sword: That issue has never been before this Court.

However, in the case of NLRB versus Amax, this Court noted that there are fiduciary duties which are placed on--

Unidentified Justice: It didn't say anything about their duties being reviewable by a court, the performance of their duties being reviewable by a court?

Mr. Sword: --I don't believe that any court has ever said that their duties are not reviewable.

Unidentified Justice: Well, has it ever said that they are reviewable, is my question.

Has this Court ever said they are reviewable?

How about AMAX?

Mr. Sword: I believe that the AMAX case talks about the differences between bargaining representatives and the trustees.

Unidentified Justice: But didn't say that there are fiduciary duties on trustees?

Mr. Sword: Yes, it did.

Unidentified Justice: Subject to the supervision of a court of equity?

Mr. Sword: Indeed.

Unidentified Justice: So they are reviewable, their decisions, in terms of 302 standards?

Mr. Sword: We take the position that trustees are... their duties are reviewable.

Unidentified Justice: Well, AMAX hardly dealt with the question of reviewing discretion.

That dealt with the manner in which they are appointed.

Mr. Sword: That's correct.

I don't think there is any doubt in any of the cases that the trustee's actions are reviewable, and I think that the lower federal courts which have dealt with the issue of whether trustee formulated eligibility provisions can be arbitrary or not have consistently held that the provisions cannot exclude persons who have contributory work histories that are substantial unless there is a rational nexus for the provision.

Unidentified Justice: But there are certainly no cases around that say that the courts may modify the eligibility requirements.

I mean, that the trustees may modify the eligibility requirements.

Except this one, maybe.

Mr. Sword: Except this one, maybe, and the Congress has shown in enacting ERISA, it has provided that trustees are to follow the trust documents only insofar as the trust documents do not cause a breach of any fiduciary duty.

And the trustees concede a second point, which is that if the respondents' husbands had quit work and filed applications for retirements instead of continuing to work in contributory work, that then these widows would be granted this benefit.

The third point which the trustees--

Unidentified Justice: Of course, on that point, they also would have gotten $5,000 instead of $2,000 in severance pay, wouldn't they?

Mr. Sword: --Not all persons in the respondents' class.

Unidentified Justice: Some of them would, wouldn't they?

Mr. Sword: Some of them would, but--

Unidentified Justice: Are you contending that that also violated the agreement, the disparate treatment, $5,000 for some and $2,000 for others?

Mr. Sword: --No.

The... what they are referring to there is a death benefit which is provided to the family of an active worker.

An active worker, regardless of how long he had worked in the mines, whether it was 20 years or one day, if he passed away while actively employed, there was that payment.

Unidentified Justice: Even if he was eligible for benefits?

Mr. Sword: If he was eligible or not.

The trustees in effect concede that this provision is arbitrary.

They have tendered no justification for the provision other than it was collectively bargained.

In fact, there is no question that this provision is arbitrary.

The arbitrariness can be shown by looking at the hypothetical of twin brothers.

You could have one brother who could go to work in a non-contributory mine, work 19 years in that non-contributory mine, then work one year in contributory employment, and then have retired and drawn benefits for a number of years, and died.

That brother's widow would receive this permanent health care coverage.

If his twin brother could have worked for 19 years in a contributory mine, or even more, but worked his last year in a non-contributory mine, or you know, died without retiring, that brother who had worked 19 years in contributory employment, his family would receive absolutely nothing, no death benefits, his widow would receive no health benefits whatsoever.

Unidentified Justice: Well, if that distinction is arbitrary, the distinction between the $5,000 and $2,000 death benefits is equally arbitrary, isn't it?

Mr. Golumbic: Not necessarily, because the death benefit, this $5,000, $2,000 difference is talking about a death benefit, which is a benefit that is provided to the widow of an active miner, and there could be some considerations for the payment of a larger benefit to the widow of someone who is actively working at death.

That is in no way related to the--

Unidentified Justice: Well, I thought it was the other way around, that the one who was the widow of a retired miner got the $5,000, and the widow of a pension-eligible worker who still worked... Do I have it backwards?

Mr. Sword: Yes.

The contract provides that the widow of a pensioner, upon the pensioner's death, received $2,000.

The widow of an active miner who at the time of his death happened to be working in a union mine, regardless of whether or not he was pension-eligible--

Unidentified Justice: I see.

Mr. Sword: --would receive $5,000.

It is more of a funeral payment.

In fact, the facts of our case show the arbitrariness of this situation.

Juanita Hager's husband had worked from the time he was a teenager in the mines.

He had worked 39 years in the coal mines.

The last 24 years that he worked was for a contributory employer.

And yet Juanita Hager is denied this benefit because Mr. Hager was still working in contributory employment at the time he died, and he had not filed an application.

Likewie, Gracie Robinson's husband had worked more than 30 years in the coal mines.

The last 21 years of his life he spent working in a contributory coal mine, paying into the funds.

And yet these widows are both denied this benefit that is being provided to some widows whose husbands had as little as one year of contributory service.

Throughout this litigation, the trustees have not shown any justification for the provision, any rational nexus between the purpose of a fund and this exclusion.

Instead they say that because it was collectively bargained, it is immune from judicial review, and that issue, whether the mere collective bargaining of a provision can immunize it from judicial review is the only issue in this case.

This case presents a very narrow set of circumstances, and--

Unidentified Justice: Well, isn't the question rather whether it can immunize it from judicial review or whether judicial review is permissible, or authorized?

Mr. Sword: --Well, be contented that judicial review is clearly authorized, that without judicial review these beneficiaries of these funds would in no way have protection.

Unidentified Justice: Well, that doesn't answer the question, to say that someone is without protection, I mean, if there is no judicial review.

You have to point to some affirmative authority by which the courts review the thing.

Mr. Sword: We contend that that authority is within Section 302 of Taft-Hartley, and within the cases that have interpreted that provision.

When Congress enacted Section 302, it was concerned that the earned contributions of workers could be arbitrarily disposed of by the unions unless there was some protection and some control over these funds.

Congress in 1947 saw a potential for abuse whenever unions had any control over these trust funds, and provided that there would be review, and that... so that these funds would not become a union war chest.

Without 302's protections, eligibility decisions could be made solely on terms to further the union's benefit, not in a manner to further the beneficiaries' benefit.

So, Congress intended 302 to be remedial; it provided a private cause of action, so that be enforced, and so that the rights could workers could protect their rights.

Subsequent to Section 302's enactment, numerous federal court cases have ruled that eligibility provisions under a Section 302 trust cannot be arbitrary, that you cannot exclude persons with substantial contributory work histories at the same time you are granting benefits to similarly situated persons with lesser contributory work histories unless the trustees can show a rational nexus between that provision and a valid purpose of the fund, which is to reward workers for their contributory work.

It is important to note that Congress has added a number of amendments to Section 302(c)(5) through the years, and that has been, even though there have been two decades of court decisions which have imposed on these trusts this arbitrary prohibition, this prohibition that you cannot have these arbitrary provisions in the trust--

Unidentified Justice: Mr. Sword, there really isn't anything, is there, in the legislative history that shows a Congressional intent to set a substantive standard for eligibility retirements, is there?

Mr. Sword: --There is nothing in the legislative history to show, you know, the substantive requirements as far as how many years of work or anything along those lines, but the legislative intent does show that Congress couched Section 302 in trust terms so that the workers would be protected.

Unidentified Justice: Well, isn't every indication that the sole and exclusive benefit to prevent provision in the legislation was to prevent the union officials from using the trust funds for their own benefit?

Isn't that really the thrust of the legislative history?

Mr. Sword: The sole and exclusive benefit language shows that Congress wanted these funds to be used for the benefit of the workers, and not for the benefit of the union.

Unidentified Justice: Right.

Mr. Sword: We contend that the evidence in this case shows one example of, if there is no judicial review, of what the trust... how the trust could be used to further union benefits, because it is clear in the negotiations in this case that the collective bargainers were not concerned with the merits of any of the classes.

They were not concerned with... As a matter of fact, they did not even consider our class, but instead the union was insisting upon one group's inclusion, because they were concerned that there was a vocal group which wanted benefits for a certain group, and they considered that group a no compromise item because of that vocal group.

For instance, there was one memorandum which was drawn up during the negotiations in which... concerning... I think this is just an example... benefits for widows of active miners regardless of years of service, and they say,

"UMWA sees no compromise possible here, views this as potentially dangerous post-ratification issue, especially in southern West Virginia."

And the importance of that is that there were certain groups, the union was concerned that there could be wildcat strikes or other things which would embarrass the union, and so the--

Unidentified Justice: Well, there is another reason for that, too, isn't there?

The people involved here were people whose husbands had died before the negotiation took place, so that I think it would be normal for the union to show a greater interest in the current work force.

There would be no obligation at all to provide retroactive benefits for people who previously died, would there?

The arbitrariness comes in that they provided benefits for some but not all.

Mr. Sword: --Yes.

We are not challenging the fact that there were benefits provided to the widows of miners who would be working in the future.

Unidentified Justice: But would you not agree that they could have... if they had denied benefits for all widows of previously deceased miners, you would have no case.

Mr. Sword: We would have a case if they were granting, as they did in this provision, benefits to the widows of men who had quit work in the past.

The benefits are provided under the 1950 benefit plan to the widows of pensioners--

Unidentified Justice: Well, say they denied benefits to all widows of deceased miners and all families of retired miners.

Mr. Sword: --And if they were only providing benefits to--

Unidentified Justice: Current workers.

Mr. Sword: --Then we would not have the situation that we have in this case.

Unidentified Justice: You wouldn't have any case at all, would you?

Mr. Sword: Then we would not have a case.

But the facts of this case are different.

They did grant this coverage to similarly situated widows, some of whose husbands had this insignificant years of contributory work history.

They granted it to widows of retirees who had passed away prior to the negotiations.

Unidentified Justice: What if they found a situation in which they didn't think they had enough money to provide all the benefits that they wanted, and they just arbitrarily said, we will provide benefits for the people in Pennsylvania, but not in Ohio, and if we tried to do it equally the benefits would be so small they are not worth anything, so we would rather have substantial benefits for one group and for the others.

I take it that would be illegal under your theory.

Mr. Sword: The trustees contend that that would not even be reviewable.

We contend that that would not be lawful, that the distinctions between persons who receive benefits and the persons who are denied benefits must be drawn on a rational basis.

If benefits are going to be denied persons with massive contributory work histories, with many years of working in contributing work employment, while at the same time they are granting it to persons with lesser work histories, there must be a rational nexus shown.

There must be a purpose of the trust fund that would be furthered by such a provision.

Unidentified Justice: Well, the purpose always will be, I suppose, whenever you deny a class benefit, you save a little money.

Mr. Sword: Well, the cases have shown that the mere saving of money is not a justification.

If so, any restriction, regardless of how arbitrary, would be justified.

It is also interesting to note that after the various court cases which have held that there is judicial review of eligibility provisions, Congress did enact ERISA, and ERISA was enacted at a time when it was well established that there was judicial review of eligibility provisions which were formulated by trustees, and yet ERISA left Section 302(c)(5) in effect and ERISA in effect codified and strengthened sole and exclusive benefit standard which the courts have interpreted under 302(c)(5) to prohibit this type of arbitrary and capricious provisions.

The Congress was concerned in enacting 302(c)(5) with the fact that workers' contributions could be subject 8 to union manipulations, and the evidence in this case show 9 that that indeed is a possibility whenever the negotiators 10 are involved in this area, and the protection is the judicial review.

The trustees' position that these rules are unreviewable and do not have to bear a rational nexus to 13 a valid purpose of a 302 fund, their position would open the 14 door to unions manipulations of these funds, would allow the 15 unions to accomplish at the bargaining table what would be 16 unlawful for them to accomplish as trustees, and it would leave retirees and widows totally unprotected for under the trustees' argument these eligibility provisions could be drawn not for the benefit of the workers, but to further the 20 benefit of the union.

The collective bargaining of a provision does not afford any of the protections to an active worker which is required under Section 302(c)(5).

The trustees' argument concerning Allied Chemical Workers is not correct, because this case does not involve a situation where the parties were being forced to bargain to impasse.

The collective bargainers in this case freely undertook to create a Section 302 trust.

We contend that when they created that 302 trust, they created a creature of federal law, that trust must comply with federal law.

Unidentified Justice: Why do you sue the trustees, though?

Mr. Sword: Under ERISA, suit can be brought against the trustees, and also under the very trust--

Unidentified Justice: Well, I know that solves your case for you very easily, but the people who are at fault are the settlors.

The union and the management.

Now, you may have a right under 302 to have the fairness of the collective bargaining agreement adjudicated, but I don't know why you 14 sue the trustees.

What authority do they have to say they 15 won't enforce the... or maybe the trustees could even have 16 sued the settlors.

Mr. Sword: --That's correct, Justice White.

We feel that the trustees in this situation could have sued to ask for a declaratory judgment.

Unidentified Justice: Why didn't you sue the union and the management to have their agreement declared illegal under federal law?

Mr. Sword: The very wage agreement in this case and the trust documents themselves, Justice White, both provide that the trustees are to reform these trusts to comply with federal law, that the trustees are to reform this trust to comply with any court decisions.

We contend 3 that--

Unidentified Justice: Against whom?

Mr. Sword: --Against--

Unidentified Justice: Against court decisions... maybe court decisions against the union and the management.

Mr. Sword: --Even the District Judge Gesell--

Unidentified Justice: You mean, the trustees... you suggest that the trustees may look at the trust agreement and say, gee, we think this violates federal law, this collective bargaining agreement and the terms of the trust, so we just 13 aren't going to pay out the benefits.

We are just going to 14 pay them out as we see fit.

Is that what you think they can 15 do?

Mr. Sword: --We contend that when it was apparent to the trustees that this provision was arbitrary and unlawful, 18 they could have gone back to the settlors and said, this is arbitrary, or they could have asked for a declaratory judgment.

Unidentified Justice: I know, but you wouldn't say they could act on their own, would you?

Mr. Sword: Under the trust documents, because the provision was unlawful--

Unidentified Justice: You mean, you suggest--

Mr. Sword: --they had the ability to change the trust.

Unidentified Justice: --Well, how do they know it was unlawful?

Mr. Sword: When it was brought to their attention, they could see it, or--

Unidentified Justice: Well, by whom?

Mr. Sword: --When it was brought to their attention by--

Unidentified Justice: By whom?

Mr. Sword: --Gracie Robinson and Juanita Hager--

Unidentified Justice: Well, I know, but why do they have to take their word for the fact that it is illegal?

Mr. Sword: --They don't have to take their word.

They can go--

Unidentified Justice: Well, whose word do they take?

Mr. Sword: --They could go to court, ask for a court's determination--

Unidentified Justice: Well, wouldn't they at least have to go to court?

Mr. Sword: --They could go to court, and they could go back to collective bargaining.

Unidentified Justice: Well, wouldn't they have to before they could vary... disregard the trust instrument?

Mr. Sword: They would not have to.

The trust documents themselves empower the trustees to reform these trusts.

Unidentified Justice: If it is illegal.

Mr. Sword: If it is--

Unidentified Justice: If it is illegal.

Mr. Sword: --If it is unlawful.

Unidentified Justice: Well, how do you know it is unlawful until somebody decides it?

Mr. Sword: If... they could go to court and have the court determine that.

Unidentified Justice: They would have to, wouldn't they?

Mr. Sword: They could, or they could have gone back to the collective bargainers and asked for--

Unidentified Justice: I know.

The collective bargainers would say, sorry, but that is what we agreed to, and we think it is perfectly fair, and then the trustees would, if they wanted to vary from the trust document, would have to sue.

Mr. Sword: --Then the trustees should have asked for a judgment.

Unidentified Justice: Well, I suggest you sued the wrong people.

Mr. Sword: We did not, because the trust documents themselves provide, and also under ERISA there is a provision that the plan itself can be sued.

Unidentified Justice: I don't think the trustees can give you relief by themselves.

Mr. Sword: The district court found that the provision in the contract and a provision in the trust document both provided that the trustees were empowered to change this trust document if it was shown that the 5 exclusion of this class was arbitrary and capricious.

Unidentified Justice: Shown where?

Mr. Sword: If a court determined that the exclusion was arbitrary and capricious, the trustees were to change the documents.

Unidentified Justice: But the district judge thought otherwise, didn't he?

Mr. Sword: The district judge concluded that based on the fact that it was collectively bargained, that therefore we were not entitled to relief.

Unidentified Justice: He said, bad bargain or not, it is a bargain, didn't he?

Mr. Sword: He said that this provision was the result of collective bargaining, and so therefore it was--

Unidentified Justice: Yes, and good or bad, it was a contract.

Mr. Sword: --That is what the district court found, and that is the incorrect standard to apply to a Section 302 trust.

The judicial review which is normally applied to collectively bargained contracts is a limited judicial review.

The review is normally applicable to cases in which you are dealing with issues which are relevant to active employees.

Now, the active employee has many remedies and many protections.

The active employee has NLRB protections, is afforded a duty to fair representation, has a voice in the union, has a vote in the contract, and yet the retiree 5 or their survivor has none of these protections.

For the respondents' class, the only protection is the requirement in Section 302, and the requirement in the case law that these eligibility provisions not be drawn in 9 an arbitrary and capricious manner.

The testimony shows 10 that the collective bargainers did not even consider the fact that there were men who were age eligible and years of service eligible to retire, but who had not retired and filed applications for pensions because they had continued 14 working past retirement age in contributory employment, and 15 had died while still actively employed.

There was no good 16 faith, active, intense bargaining as to our group.

There 17 was no consideration of the cost of our group or of their 18 merits.

The union negotiator, one of the union negotiators, Mr. Pearce, noted that there was no trade-off and that the respondents' class was omitted not on the merits.

As we mentioned, the reason that our class was omitted was because they were not considered.

The union only considered the vocal class that the union thought would embarrass the union after ratification of the contract, and when the bargaining stopped, our class was left out for no reason whatsoever.

The trustees' position, if adopted, would mean that any provision, regardless of how arbitrary, could be readopted by the collective bargainers, and then there would be judicial immunity.

For instance, the signatory last employment requirement, which the defendant funds had, and which was invalidated in Roark v. Boyle and Roark v. Lewis, if the trustees in those cases had simply gone to the collective bargainers and said, the court says this provision is arbitrary, under their theory, the collective bargainers could say, we, the collective bargainers, think this is a good provision, and therefore the courts would have no review whatsoever.

We contend that that position is not supported in the case law, that that total abdication of their fiduciary duties was not envisioned by Congress when it enacted 302(c)(5), was not envisioned by Congress when it enacted ERISA, and that there is absolutely no support for that position.

The trustees' argument that the cases holding that 302 places restrictions on trust funds have mistakenly relied on general equity law is not supported from a reading of the numerous cases from all of the circuits.

It is clear that the courts have held that Section 302, because of the fact that Congress was concerned that those persons who have worked in contributory employment receive benefits, the courts have held that 302 does supply substantive restrictions on the plans themselves.

The trustees, of course, do not argue that collective bargaining imposed any protections on this class, and they have not shown any way in which judicial review would harm collective bargaining.

Chief Justice Burger: Your time has expired, Mr. Sword.

Do you have anything further, counsel?

Unidentified Justice: Could I ask you a question?

ORAL ARGUMENT OF E. CALVIN GOLUMBIC, ESQ., ON BEHALF OF THE PETITIONERS -- REBUTTAL

Mr. Golumbic: Yes, sir.

Unidentified Justice: Suppose the union and management in the collective bargaining agreement had some racial discrimination, limited the benefits to all blacks or all whites.

Would that be reviewable anywhere in the federal law?

Mr. Golumbic: It would, Justice White, pursuant to this Court's decision in Steel and in Howard, as a violation of possibly statutory basis upon which the collective bargaining was undertaken, such as the Railway Labor Act, or it might be in violation or Title VII, or it may very well be a constitutional violation.

Unidentified Justice: You mean as a violation of their fair representation?

Mr. Golumbic: The right to fair representation under Title VII and--

Unidentified Justice: But you say 302 would have no relevance to it?

Mr. Golumbic: --Section 302 of the Taft-Hartley Act would merely require that benefits be paid to contributing employees, or to employees of contributing employers.

Unidentified Justice: All of them?

Mr. Golumbic: Not at all.

Not at all.

In fact, let me address my response--

Unidentified Justice: So your answer is, there is no 302 remedy for a situation like that?

That is your submission?

Mr. Golumbic: --That's correct.

In fact, if the Court will permit me in a few words to expand upon my response to your question, in this instance the exclusion of the widows from lifetime health care was undertaken in good faith collective bargaining, and the economic wisdom and judgment of the collective bargaining parties in making that exclusion is not normally subject to review.

Absent a violation of federal law, as you pointed out, Justice White, in this instance, there was no such violation of federal law, although the court, the trial court decided it was a violation of Section 302(c)(5) of the Taft-Hartley Act, and Section 302(c)(5) of the Taft-Hartley Act merely requires that benefits not be paid to individuals who are not employees of contributing employers.

It does not impose a duty upon the collective bargaining parties to pay a benefit to any particular group of employees of 6 contributing employers.

Interestingly enough, the respondents argue that notwithstanding the fact that the agreement was established in good faith collective bargaining, the trustees have a duty to modify that agreement to make it more equitable.

And may I point out to this Court that the trustees have no authority under Section 8 of the National Labor Relations Act to negotiate, and indeed, under Section 406 of ERISA, they are prohibited from acting on behalf of the collective bargaining parties, and to that extent the trustees may not negotiate benefit modifications that were raised in collective bargaining, and they may not negotiate those benefit modifications to the collective bargaining agreement, and try to give effect to benefit proposals that were advanced and rejected during the collective bargaining procedures.

To the contrary, to the contrary, the trustees under Section 404(a)(1) of D of ERISA must comply and administer the wage agreement consistent with its terms, and 25 solely for the benefit of the beneficiaries designated thereunder.

Thank you.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

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United Mine Workers of America v. National Labor Relations Board

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ORAL ARGUMENT OF HARLON L. DALTON, ESQ., ON BEHALF OF THE PETITIONER NATIONAL LABOR RELATIONS BOARD

Chief Justice Burger: We will turn to our first case and we'll hear arguments in United Mine Workers v. the Labor Board and the consolidated case.

Mr. Dalton, you may proceed whenever you're ready.

Mr. Dalton: Thank you, Mr. Chief Justice, and may it please the Court:

This case comes to the Court on a writ of certiorari to the United States Court of Appeals for the 3rd Circuit.

Two petitions were filed, one by the United Mine Workers and a second on behalf of the National Labor Relations Board.

I should add that the Department of Labor, which administers ERISA, is not a party in this proceeding but concurs in the views presented by the Labor Board.

The question presented in both cases is whether a management-appointed trustee of a jointly administered Taft-Hartley trust fund is a collective bargaining agent within the meaning of Section 8(b)(1)(B) of the National Labor Relations Act, which forbids unions from coercing employers in the selection of their collective bargaining representatives.

In practical terms, at issue in this case is whether a union may strike as part of its effort to induce an employer to contribute to a multiemployer, as distinct from a single employer, pension, or welfare fund.

Now, although the dealings between Amax Coal Company and the union in this case were rather complex, the facts that relate to the sole issue that's before this Court are rather straightforward.

Amax Coal Company mines coal.

It does so primarily in the midwest and in deep shaft bituminous mines.

It bargains with the UMW through the Bituminous Coal Operators Association with respect to its midwest operations.

Now, in 1972, Amax Coal Company opened its first surface strip mine in Gillette, Wyoming, called the Belle Ayr mine, and that's the subject of this litigation.

Amax did not negotiate through the BCOA in connection with the Belle Ayr mine but instead entered into a separate agreement with the mine workers that was patterned on the BCOA contract.

And pursuant to that independently negotiated contract Amax contributed to the union's national multiemployer pension and welfare funds.

In January of 1975, at the expiration of that Belle Ayr contract and the expiration of several other western surface mine contracts, the union struck the Belle Ayr mine and the mines of other western coal operators.

The following month, in February, the union and Amax began negotiations over the Belle Ayr mine but they reached an impasse in March and in mid-March... I think, March 17... Amax resumed operations at the mine under its last contract proposal.

Over the course of the next year the parties engaged in sporadic negotiations but no agreement was ever reached between them.

Justice Rehnquist: Mr. Dalton, does the Government concede that if the person in question here was a collective bargaining agent rather than a trustee, there was coercion on the part of the union?

Mr. Dalton: Yes.

Now, among the sticking points which led to the impasse was... and there were several, but there's only one that's before this Court today... was Amax's refusal to continue to contribute to the multiemployer pension and trust funds.

Those funds were set up pursuant to Section 302(c)(5) of the Labor Management Relations Act, the Taft-Hartley Act, and provide for comprehensive health and retirement benefits.

Those funds are administered pursuant to that section by three trustees, one appointed by the union, one appointed by management, and the third trustee to be appointed by the other two.

At the time the negotiations between Amax and the union began over the Belle Ayr mine, the trustees were already appointed, the trust funds were set up, and the trustees were engaged in the active administration of them.

Now, while acknowledging that the union's trust fund proposals were mandatory subjects of collective bargaining, Amax took the position that the management-appointed trustees were collective bargaining representatives and that therefore the union's insistence to impasse, the union's striking in an effort to induce the company to contribute to those trust funds constituted a violation of Section 8(b)(1)(B).

And that's because the trustees were already selected at the time negotiations took place.

Amax filed an unfair labor charge with reference to this issue.

They filed other charges but they are not before the Court.

Unidentified Justice: Mr. Dalton, may I ask one thing?

Mr. Dalton: Yes.

Unidentified Justice: I gather the Belle Ayr mine was not part of the collective bargaining unit in connection with which the original trust fund was set up.

Is that right?

Mr. Dalton: That is correct.

Well, the Belle Ayr mine was not; that's correct.

Unidentified Justice: The Belle Ayr mine was not?

Mr. Dalton: Right.

Unidentified Justice: And the demand of the union was that, nevertheless, the contributions to the pension fund be made to the trustees set up under a different unit than this.

Is that it?

Mr. Dalton: The trustees of one of the national pension and welfare funds; yes.

Unidentified Justice: And there's no question of the legitimacy of that demand and that it is the subject of mandatory bargaining?

Mr. Dalton: Yes.

No one has... in fact, that issue was fairly foreclosed by the opinion of this Court, I think written by you, in Allied Chemical & Alkali Workers.

Unidentified Justice: Yes.

Mr. Dalton: And the Board rejected Amax's contention and concluded that trustees are not collective bargaining representatives.

The Board stated that trustees are

"solely fiduciaries owing undivided loyalty to the beneficiaries. "

of the trust.

A two-judge panel of the court of appeals reached the opposite conclusion and pro tanto refused to enforce the Board's order.

In a nutshell, we submit that Congress did not intend for Taft-Hartley trustees to function as agents for either unions or employees while engaged in the administration of a trust; that trustees cannot do so without violating duties imposed upon them both by the common law and by ERISA: and that Taft-Hartley trustees do not in practice engage in collective bargaining.

Now, these arguments are laid out in our briefs, and I don't intend to elaborate on them here unless, of course, the Court wishes otherwise.

Instead I propose to address my remaining time to three considerations.

One, the meaning of the term 302(c)(5).

Second, the equal representation provision of that section, what it means, what it's designed to accomplish, and how.

And third, some of the legal and institutional consequences of the decision below.

If all goes according to plan, my colleague of this side of the podium will address the impact of the decision below on multiemployer funds, and particularly on the funds at issue in this case.

I note at the outset that the term "representative" is not a term of art.

It has no fixed meaning within the National Labor Relations Act or the Labor Management Relations Act and as this Court unanimously observed in United States v. Ryan, one Justice not participating, the terms "representative" and "collective bargaining representative" are not synonymous.

Amax argues that representative refers to persons who advance the interests of the parties that appoint them.

That construction however, as we demonstrate in our brief, is flatly inconsistent with Section 302's requirement that contributions be held in trust and that they be held in trust for the sole and exclusive benefit of trust beneficiaries.

Chief Justice Burger: Let's assume that, of course, a trustee represents no one except the interests of the trust.

I take it you agree that that's so?

Mr. Dalton: Absolutely; yes.

Chief Justice Burger: But in a sense, does not... is not each of the trustees, one appointed by the union and one by the employer, a representative in a limited sense?

Mr. Dalton: Yes, Mr. Chief Justice, but it's our position that they represent those parties, that the limitations of that representation are such that in any instance in which the interests of the parties to the collective bargaining agreement might possibly conflict with the interests of the beneficiaries, then the former must recede, and therefore it's inappropriate to consider them as collective bargaining representatives because the latter owe an undivided duty of loyalty to the parties that they represent.

It's our position, it's the common law, that trustees must eschew the interests of third parties, that they owe a sole primary exclusive obligation to trust beneficiaries.

That's also... ERISA has codified the common law and has essentially made those principles matters of federal statute, and therefore the most that can be said of the term representative as used in this Section 302(c)(5) is that it means, in effect, designee; refers to the fact that trustees are appointed by unions and employers.

So the next question is, to what end?

What is the purpose of the appointment of trustees by employers?

And in particular, what is the purpose of the equal participation rule, that for every trustee appointed by a union there must be a trustee appointed by an employer?

Now, it is common ground that this equal participation rule was one of a set of strictures.

The requirement that contributions be made into a formal trust is another, set up by Taft-Hartley to deter unions and union officials from misusing and misappropriating pension and welfare funds.

However, there's a serious division among the parties with respect to how that's to be achieved.

It's our position that by their mere presence employer-appointed trustees serve to check potential pension abuses.

Furthermore, by participating in the actual workings, administration of the trust, trustees are in a position to discover and ferret out abuses and to take whatever steps are appropriate, including the commencing of lawsuits for breach of fiduciary responsibilities.

Thirdly, because they are equal in number to the union-appointed trustees, the management trustees are in the position to block any efforts by their colleagues to advance the union's interest.

None of these steps requires the slightest deviation from the exclusive obligation, exclusive duty of loyalty that trustees, management-appointed and union-appointed alike, owe to the beneficiaries of the trust.

In marked contrast, the 3rd Circuit conception of how this watchdog provision is to operate is premised on the trustees' exhibiting at best divided loyalties.

The court of appeals stated that the trustees of a Taft-Hartley trust are "expected to advance the interests" of the appointed parties.

The court took the position that this advancing of private party interest or third-party interest was

"essential to the operation of Section 302(c)(5). "

and that the clash of party interests creates

"a distilling process which would provide safeguards against trust fund corruption. "

Now, whether or not this approach would root out corruption, we submit that it would have the inevitable collateral consequence of undermining orderly administration of trust and of fostering pursuits and interests that are alien to, or in any event, not congruent with the interest of trust beneficiaries.

This ongoing collective bargaining within the administration of the trust, as the court of appeals termed it, would lead to frequent stalemates, broken either by resort to arbitrators, compulsory arbitration, which I might notice are contrary to the way we normally think of collective bargaining, or impasses broken by horse trading in which concessions on trust issues might well be exchanged for concessions on non-trust issues.

Now, that compromise or subordination of the interest of trust beneficiaries is but one of the consequences of the decision below.

In addition, the introduction of collective bargaining considerations into the day-to-day administration of trust would have the effect of injecting the National Labor Relations Board into the routine matters of trust administration.

Whenever a disappointed party, be it a beneficiary of the trust or a trustee, concluded that one of the trustees had failed to engage in good faith collective bargaining, then that person would be entitled to file with the National Labor Relations Board an unfair labor practices charge.

And so, contrary to the scheme that was set up by Congress in which Section 302 of Taft-Hartley is reserved to the courts, the National Labor Relations Board would assume jurisdiction over the administration of trust funds.

Justice Stevens: Mr. Dalton, may I ask you a question?

Mr. Dalton: Yes.

Justice Stevens: I remember reading somewhere in the briefs that the trustees of this fund had the power to set the royalty rates on salvage coal--

Mr. Dalton: Yes.

Justice Stevens: --Which I gather is a method of determining how much is contributed to the trust funds by the employers?

Mr. Dalton: With respect solely to refuse or salvage coal.

Justice Stevens: To the extent that they have the power to determine the level of contributions by the employers, are they not determining a matter which would normally be subject to collective bargaining?

Mr. Dalton: Yes, but they would do that by virtue of the agreement of the parties during collective bargaining.

In other words, that provision which--

Justice Stevens: Well, supposing the collective bargaining agreement had an open-ended provision saying the trustees shall determine from month to month how much the employer shall contribute to the fund.

Would they then be representatives within the meaning of the Act?

Mr. Dalton: --I would submit not.

That's obviously a more difficult case than that presented here in which every one of the rates of contribution in the collective bargaining agreement would be set in the contract, except for refuse or--

Justice Stevens: Royalties on the salvage coal.

But why... you say it's not significant that that's limited to salvage coal?

You're saying, even if they had an open-ended power to fix the contribution rate, they'd still not be representatives?

Mr. Dalton: --They still would not be collective bargaining representatives, so they would indeed obviously be engaged in the setting of those rates.

Justice Stevens: Well, what if they were to determine the hours of work on which royalties would be paid or the--

Mr. Dalton: Well, then we begin--

Justice Stevens: --At what point do they become representatives?

Mr. Dalton: --That's... at that point I begin to worry because at that point, and maybe even at some point prior to that, they're engaged in brokering the relationship between employers and employees, which is one of the hallmarks of collective--

Justice Stevens: It seems to me they're doing that as even with the smaller item of royalty rates on salvage coal.

Mr. Dalton: --Except that one of the other hallmarks of collective bargaining representatives is that, is that what they are negotiating around is the contract.

I take it that in your hypothetical the trustees would be making those judgments in connection with administering the trust instrument, or at least the trust funds.

Justice Stevens: Well, if the trust instrument gave them the power to adjust... to make a term of the collective bargaining agreement, which in effect it does when it says, how much money shall be contributed to the fund?

That's normally in the agreement rather than in the trust instrument.

They are getting... it seems to me they're getting bargaining power.

Mr. Dalton: Well, a third distinction between bargaining parties and trustees is that when the former reach impasse, they're entitled to... at least, if we're talking about issues that are mandatory bargaining issues, they're entitled to resort to their economic weapons, strike, lockout, et cetera, whereas under Section 302(c)(5), when trustees reach an impasse, either that impasse is broken by neutral trustees, if such exist, or the trustees are entitled to themselves appoint a compulsory arbitrator or to ask the district court to do so.

And I take it, under your hypothetical, that if the trustees were... to accept the trustees are empowered to set royalty rates for salvage coal, any disputes would be resolved by compulsory arbitration, and that's a different mechanism, at least, than this typical collective bargaining.

Justice Stevens: But the employer here doesn't want his royalty rate set by either the trustees selected by the employees or or by the compulsory arbitrator selected by them.

In either event, is not that person doing something that the employer would like to have his own representative have a voice in?

Isn't that the problem?

Mr. Dalton: Well, I just have a couple of responses.

At the point that the trustees would be reappointed, Amax at least theoretically could have a voice in selecting the employer trustees.

Justice Stevens: Well, Mr. Dalton, didn't Amax, as to its membership on the multibargaining unit, did have a voice in the selection of this trustee?

Mr. Dalton: In fact, Amax... yes... that's precisely... Amax... Number one, Amax did select these trustees in connection with this deep shaft bituminous mine--

Justice Stevens: Then your argument is, not that this is not a representative, but he's not being compelled to take a representative he didn't have a voice in selecting.

That's a different argument.

Justice Rehnquist: I thought you had conceded that there was coercion?

Mr. Dalton: --I did concede that there was coercion, but not for all time.

The point that I began to make in response to Justice Stevens' question was that the 51 percent, employers representing 51 percent of the contributions are entitled to select the employer-appointed trustees, so there might come a time in which Amax could ally with other employers and select a trustee.

Second--

Unidentified Justice: Well, Mr. Dalton, am I wrong?

I thought that Amax did have a voice in the selection of this particular trustee through BCOA, did it not?

Mr. Dalton: --That is absolutely correct.

That is absolutely correct.

Unidentified Justice: If that's your argument--

--Well, of course, it would turn out to be exactly the same, whether or not that was correct, wouldn't it?

That's right.

Mr. Dalton: Yes, it would.

Moreover, we note that--

Unidentified Justice: The trustee is not a collective bargaining representative.

Mr. Dalton: --Yes.

Moreover, we note that Amax did not have to agree to this particular provision or any other provision of the union's proposal in the course of this collective bargaining, as we stress in our reply brief.

The duty to bargain is not an obligation to agree.

I will reserve the balance of my time for rebuttal.

Chief Justice Burger: Very well.

Mr. Combs.

ORAL ARGUMENT OF HARRISON COMBS, ESQ. , ON BEHALF OF PETITIONERS UNITED MINE WORKERS ET AL.

Mr. Combs: Mr. Chief Justice; may it please the Court.

It is our position that the 3rd Circuit's decision holding that a management-appointed trustee is a collective bargaining representative jeopardizes collective bargaining relationship between the employer and employee in the coal industry.

And further, that if this is upheld, that it could lead to the extinction of multitrust funds in the coal industry.

I think it's just a bit ironic that this situation grew out of a strike in the coal industry in 1947 in which John L. Lewis was demanding, among other things, that the operators contribute to the union certain amounts based upon the royalty of coal produced for the purpose of health and retirement funds to the union.

The Congress, the sponsors of 302(c), stated that there was a danger that if these contributions were paid to the union, to John Lewis, at that time, as they were saying, that they could be diverted, and that they could lead to war chests on the part of the union for purposes other than payment to beneficiaries and participants in these funds.

Therefore, the Congress in enacting 302(c) insulated these contributions from the control of the union by the method of providing that, in the first place, under the contract, that the funds would have to be the subject of a written agreement in the contract on which they were going to pay, and for what purposes they were going to be used.

The Congress further specified in 302(c) the benefits that could be paid from these funds.

It provided an equal balance of the trustees to be administered by the employer, the operator, and the union, by having a representative on the board of trustees.

This has been in effect for the past 31 years.

To my knowledge it has not been challenged on this basis that the 3rd Circuit has adopted in this case by any court in this country.

The Labor Board's opinion and the opinion of the Secretary of Labor and the opinion of the Solicitor on behalf of the National Labor Relations Board in my opinion is very correct.

To my mind, if the trustee is a bargaining representative of the appointing employer or union, that would lead to the administration of these funds by the National Labor Relations Board to unfair labor practices, which I think has been in one court, at least, in the District of Columbia, that a claimant for benefits under the fund took the position that the union had not fairly represented him as a trustee of the fund and therefore that he was wrongfully denied a pension that he should have been delivered.

That case is cited in our brief in Miniard v. Lewis.

The court rejected that argument and he said, no.

The court said, no, that these trustees had the fiduciary obligation to represent the beneficiaries and the participants.

And that was a sole obligation on their part.

And I might point out to this Court that the argument between the beneficiary or the claimant, was between the trustees and not between an employer, as would be the case of adjusting a grievance.

Justice Rehnquist: Do you disagree, Mr. Combs, with the proposition that on occasion under certain contracts the management trustee could be pulled in one direction and the union trustee in another over a question as to the administration of the trust?

Mr. Combs: Yes.

I'll agree that that could occur, Mr. Justice Rehnquist, but it would be in the context these trustees would be bound by the trust agreement that's required under 302(c), and they would have to adjust as a fiduciary, they would have to adjust the disputes between them based upon their obligation that's specified in the trust agreement.

Justice Rehnquist: And if that would go to court or to arbitration or?

Mr. Combs: Well, under the way that these trust agreements, it does not go to arbitration, it's a final judgment of the trustees on the eligibility that's specified in the trust agreements of that kind.

Justice Rehnquist: But supposing that we're talking about the price of salvage coal or the amount, as Justice Stevens asked Mr. Dalton, and the two trustees disagree on that, how is that answered?

Mr. Combs: That would be answered by the third trustee as provided for in Section 302(c).

The two trustees, appointed by the employer and the union, have the right to select the third trustee, and the third trustee, that's a balancing under the Act itself.

So that is my point, that under ERISA, which is encouraging multibargaining... there's a preamble in that... and the common law of trust administration, that these trustees, even in the salvage coal that Mr. Justice Stevens asked about, that that is an administrative problem.

It's refuse, it's a slate dump, and the trustees are authorized because it's just a question of determining how much coal, related to regular coal mining, may be in that slate dump.

Now, if there's a disagreement between the two trustees or the three trustees... and I might say this, that the neutral trustee, supposedly neutral, whatever he is, he gets ahold of these things too.

It's an administrative act.

It certainly isn't bargaining.

Justice Stevens: Would you say the same thing if the entire trust were financed by royalties; I don't know whether it is or not?

Mr. Combs: It's partly, both.

Justice Stevens: If we assume it all was and the trustees had the power to decide what the royalty rate on coal would be, would it be $5 or $10 a ton, they would determine the entire economic burden on the employers of the fund?

Mr. Combs: I think that assumption would have to take into consideration that many of these operators don't agree to any such thing as that.

The bargaining--

Justice Stevens: --If you're right, then that's a matter of collective bargaining.

Mr. Combs: Well, it is a matter of collective bargaining but--

Justice Stevens: And I take it the point on the royalty coal is that that's a relatively small item in the total picture?

Mr. Combs: --Yes.

Justice Stevens: If it were a big item, it would clearly be a subject that would be bargained out, wouldn't it?

Mr. Combs: Yes.

But I might point out, Mr. Justice Stevens, what happened in this particular case.

This trust fund was set up in 1974.

It was in operation.

It was in compliance with 302(c).

Now, Amax said, look, we've got a better deal for our people than you've got in that fund.

We'll give them more benefits.

That's their strenuous argument.

It's a strange argument that the employer's be arguing that what I'm offering is better than what the union is asking for, but that was it.

Both of them were placed on the table, they bargained that out, Amax would not agree to it.

They never did agree to it.

They broke the strike, and they still haven't agreed to it.

That's collective bargaining.

Now--

Justice Stevens: Does the record... oh, excuse me, go ahead.

Mr. Combs: --Sure.

To follow your point hypothetically to its total conclusion, I think that if they agreed to that and set it up in conformance to the Act, that the trustees would have fiduciary obligation to bargain that they have to carry out, and I don't think that any of the courts have said that if it's set up in conformity with 302(c), that because it's been set up prior to new operators coming in, that that is in violation of the Act.

Now, I might point out this, that this multiemployer fund, the BCOA had about 160 companies at this time, we have over 2,000 independent companies that bargain to go into that, and we are constantly having them coming in and going out in this industry.

And to set up a forum that would be total at the beginning of the contract, it just wouldn't be practical.

Because we've got new companies coming in and we don't get these kind of arguments, and what we're saying, that these funds are balanced, that they were paid under 302(c), and that these trustees... sorry, but my time is up.

Justice Stevens: Let me ask you one question before you sit down, if I may.

Does the record tell us whether there have ever been any disagreements on the royalty rate on the salvage coal which have had to be referred either to the arbitrator or perhaps back to the parties for clarification?

Mr. Combs: I might say this for the information, Mr. Justice Stevens, of you and the Court: I am a trustee.

To my knowledge there's been no dispute.

There's a formula that was adopted years ago with the trustees and they still follow that.

It has to do with BTUs and stuff of that character, and it's related to whether, to how many BTUs in there.

They take that average of BTUs in the industry, and it's just a salvage proposition.

Justice Stevens: And I take it it's a formula that's well known to the parties and their agreement may in effect be interpreted as having accepted that as a proper approach?

Mr. Combs: That is correct.

To my knowledge, it's been in there for many years.

Unidentified Justice: I see.

Thank you.

Mr. Combs: Thank you.

Chief Justice Burger: Mr. Gruender.

ORAL ARGUMENT OF DANIEL F. GRUENDER, ESQ., ON BEHALF OF THE RESPONDENTS AMAX COAL COMPANY, ET AL.

Mr. Gruender: Mr. Chief Justice, and may it please the Court:

This case and the section of the statute, Section 8(b)(1)(B) has been before this court before.

This particular case involves several key concepts in the whole system of our free collective bargaining system.

But one of the first ones is... which is contained in Section 9(a) of the Act... and it's emphasized, of course, in the Pittsburgh Plate Glass decision, that the purpose of the Act is to assure to employees the fullest freedom of the exercise of their rights to collective bargaining, unit by unit.

Belle Ayr mine is a separate unit, always has been a separate unit, never been part of the Bituminous Coal Operators Association.

Another key concept in our free collective bargaining system is that the parties' representatives will be free, that they'll be dependent, that one party cannot be compelled to have accepted or forced on him a representative whose interests he feels are adverse or for whom they cannot act in even a fair way.

There are interplay of many other concepts in the labor-management area that enter into this case, the duty of fair representation, we're talking about fiduciary duties.

There are many statutes involved and I know that you've got a lot of them laid out before you and you can come to judgment yourself on them.

I would like to--

Unidentified Justice: Mr. Gruender, may I ask a moment, am I right that you do have representative in multibargaining set-up through BCOA of which, as I understand it, your client's a member?

Mr. Gruender: --A separate bargaining unit as to Amax Coal--

Unidentified Justice: I know, but--

Mr. Gruender: --is a member of the Bituminous Coal Operators Association.

Unidentified Justice: --But the fact is, the fact is that you did have a voice in the selection of the trustee through BCOA, did you not?

Mr. Gruender: I did not.

My client may have.

Unidentified Justice: Your client did.

Well, it did, not "may have".

Well, somebody did.

Mr. Gruender: Well, the way it... somebody was a representative of the Bituminous Coal Operator's Association.

Whether they were represented--

Unidentified Justice: Of which your client was a member.

Mr. Gruender: --Whether they were at the time that they joined the BCOA or not, I don't know that.

I really don't.

The BCOA trustees were preselected and designated.

I don't know if they were preselected and designated at the time Amax became a member of the BCOA.

That's not a matter of the record in this case, sir.

Unidentified Justice: No, but the fact is that your client is a member of BCOA?

Mr. Gruender: My client, Amax Coal Company, is.

The Belle Ayr unit--

Unidentified Justice: And that there is a trust fund of which one of the trustees was selected by BCOA?

Mr. Gruender: --Well, I'm sure that the trustee was selected by BCOA.

I don't know whether our client was a member at that time or not, and the record doesn't disclose that.

Unidentified Justice: Well, now, assume with me for a moment that it was, and it had a voice in the selection.

Mr. Gruender: Yes, sir?

Unidentified Justice: Even if you're right--

Mr. Gruender: Even if I'm right?

Unidentified Justice: --Even if you're right that the trustee selected by BCOA also is a collective bargaining agent, then you do have a collective bargaining agent administering the fund, don't you?

Mr. Gruender: Well, no, because the Act dictates and guarantees to the parties unit-by-unit bargaining.

There is no... and it contravenes the requirements of the Act and the whole policies of collective bargaining for one unit to be able to force on another unit a representative or participation in a multiemployer trust that is basically the product of multiemployer bargaining.

In the particular case involved with Belle Ayr, Belle Ayr was contesting, that unit was resisting an effort to be forced into another bargaining unit for whatever, for lack of a better description was entitled, the Peabody Group, which was another separate multiemployer bargaining unit.

That strike commenced at Belle Ayr.

The Board found... this is undisputed in the record.

It's not an issue before you, but it is a fact.

Since the other parties have gone into some of the preliminary facts, I suppose there's no harm in shedding light on this part of it.

The major issue in that strike that commenced was the strike by the union, the United Mine Workers, to compel Amax to participate in the Peabody Group.

Now the reason that Amax did not participate in the Peabody Group, multiemployer bargaining, was because the Peabody Group would not listen, was not willing to entertain an alternative pension proposal, which Amax knew would be cheaper for itself, half the cost, essentially, of what the Mine Workers' plan was, better benefits, and with the same or better affordability; on that basis.

And that was one of them.

There were other areas where the bargaining group was adverse, or at loggerheads, or adverse to the interests of Amax.

And incidentally, that's a key point in bargaining, too.

I think that what the Government and what the union have totally ignored here, and it's not brought on the record, is that bargaining is a matter of compromise, that the process of collective bargaining as we see it is not black and white.

When the parties... negotiation is defined, collective bargaining is defined in Section 8(d) of the Act; it involves a negotiated agreement or any question arising thereunder.

That's where you get the grievance and arbitration, adjustment of grievances provision of our national labor laws.

For example--

Justice Rehnquist: When the unions struck to demand that Amax join the multiemployer group, didn't the NLRB file an unfair labor practices charge against them?

Mr. Gruender: --Well, the employer filed an unfair labor practice charge and the National Labor Relations Board issued a complaint.

Eventually that complaint was found to be meritorious by the Board and the court of appeals that the union struck to force Amax into that "Peabody Group" or other multiemployer unit.

Now, let me give you a hypothesis that you might want to compare, because it's keyed to the understanding of what collective bargaining is, and you must make a determination on that issue, and if you are to determine if an 8(b)(1)(B) representative and a trust representative or an employer's representative on the trust, is engaged in collective bargaining.

We must understand the process.

The process of collective bargaining can be roughly divided into two basic categories.

One, where you're negotiating to obtain an agreement or to fashion an agreement.

Once that agreement is fashioned, collective bargaining does not end.

As a matter of fact, you then get into the grievance and arbitration process which has been sometimes called the administration of the collective bargaining agreement.

The collective bargaining representatives continue and in a multiemployer type of bargaining situation the employer, quite often there'll be what we call joint grievance procedures.

That is to say, the employer representative, the union representative, will sit on a grievance panel, and one of the employers who is a member of that bargaining unit, multiemployer bargaining unit, will come in, he's been violating the agreement.

The management representative and the union representative may be sitting in judgment on a management representative, and sometimes the management representative votes against the other management representative.

And vice versa, for the union.

The process of collective bargaining, that's the adjustment of grievances, has been undisputedly and uniformly, where a multiemployer bargaining situation arises and the employer objects to joint resolution of grievances by a multiemployer group and says, look, they aren't collective bargaining representatives, they're adjusting grievances concerning the interpretation, application, and meaning of this agreement.

We don't want them to do that, and says, we're not going to do that.

The Board will automatically find them to be 8(b)(1)(B) representatives and not force the employer to accept joint resolution of grievance committees.

On the other hand, the process of administering a trust, once it's negotiated... and that's done at the table, negotiating the trust, in this case some of it's done by the trustees, as Justice Stevens has pointed out, or pointed out other sections of the trust, where they actually engage in negotiations or creation of provisions of the so-called contract or agreement.

But once that trust... or, it's just like a collective bargaining agreement, and as a matter of fact, this trust is incorporated word for word into the agreement.

The trustees are authorized, specifically, under the agreement, to interpret, apply, and adjust, and settle its terms.

Literally do what the collective bargaining representatives do with grievances.

Well, anyway, once that occurs, the normal collective bargaining process of settling disputes that arise concerning the meaning and application or the interpretation of a question arising under an agreement is what?

It's normally through the grievance and arbitration procedure culminating in the compulsory arbitration.

That's so commonplace in our lexicon of labor law that everybody just accepts it.

The very same process occurs on a trust fund.

When the... and remember the statutory choice is deliberate here.

Congress was aware of compromise being an essential ingredient of collective bargaining.

Congress had many options available to set up trust funds.

They chose the compromise between labor and management and they also chose the same collective bargaining methods of adjustment that they foster in that Act.

For example, they said, instead of just establishing a separate organization we're going to... in order to make sure the union does what's right, we're going to subject them to the conflict that occurs sometimes between labor and management.

That's the best way to insure to employees the best deal.

I'll get into that in just a minute because it's very crucial, it seems to me, to understand the advantage to the employees.

In other words, I believe one of the myths here is that people are thinking that the sole benefit of the employees will never be taken care of by the employer or the union, and that for some reason the employer is always trying to undermine the union or the employees and vice versa.

That's not true.

The key factor with most employers is, once the agreement is made, is to make sure it's enforced, and that the beneficiaries of the agreement get the best of it.

And there are quite often reasonable men disagreeing over what is the best way to do it, are both looking out for the best interests of the beneficiaries.

Insisting that employees get paid the highest wages in our country is not always good for the employees, as they sometimes find themselves priced out of the market and gone.

So an employer who resists what appears to be a liberal wage demand may in fact be benefiting the rest of the beneficiaries, the employees, in helping save the business.

The same thing is true for an unwarranted claim on a trust.

If an employer representative resisted, or a union, he may be in fact preventing a wage, the assets or corpus of the trust, for other beneficiaries.

The interests of all, sometimes, are not necessarily served by making a liberal interpretation of the fund so that it pays out things without regard to what were the basic assumptions when it was started.

Chief Justice Burger: Now, Mr. Dalton, earlier, in response to questions, conceded that the conduct here constituted coercion.

Is what you're telling us that coercion may never appropriately be applied to a trustee, that the very concept of a trust and a trusteeship is incompatible with being subject to coercion from anyone on any subject?

Mr. Gruender: No, sir.

I believe that just as in the instance where... and I think the law is, that just as in the instance where a union cannot strike to compel an employer to agree to joint grievance arbitration procedures or joint, in a multiemployer bargaining context, that same reason exists to justify that he cannot be struck or coerced to select as a trustee someone who he would not have an opportunity to have confidence and trust in.

Now, once the distinction... there's a distinction you've got to make, because they're polevaulting over, the Government, the union... once an employer agrees to engage in multiemployer bargaining, he doesn't have a right to say, then, if we'd have joined the BCOA... I don't have a right to then say the president of BCOA will be myself, or my law associate here or somebody else.

I don't have a right to select who that representative is.

But once I commit to the joint bargaining, once an employer commits to a multiemployer trust, and the cases are legion on that, he doesn't have a right to stand above all others and select who the trustees are going to be.

But, just like in the situations of the joint grievance procedure... the Teamsters are the most familiar kind of thing, tripartite kind of a joint grievance procedure... once an employer says, I'm not going to agree to joint bargaining, then it completely defies the whole federal policy and it subverts it, of unit by unit bargaining, to say to him that he has to then put up with multiemployer trusts.

Remember, multiemployer trusts do not exist outside of multiemployer bargaining.

They are a creature of it.

The issue, the cardinal issue in this case before the parties was, will I be compelled to be bound by a bargaining group, which does not represent their interests?

In this case it wasn't even for the benefit of the employees, if that's the touchstone of collective bargaining.

What are the things they say about, what are some of the myths about multiemployer trusts?

They say they're cheaper for the employers.

They say they're better benefits.

They also say that they're more portable.

There's less liability for the employers.

None of those are true today.

Amax--

Justice Stevens: Mr. Gruender, may I interrupt just a second?

Mr. Gruender: --Yes, sir.

Justice Stevens: It doesn't seem to me that the issue is whether it's appropriate to bargain over whether you can join a multiemployer trust.

You would object to the trust even if you had, even if you could appoint the employer trustee, it seems to me.

Mr. Gruender: You mean on the basis that it wasn't as good?

That was the thing that moved them to that point, but also the interests of BCOA trustees as opposed to the interests of the employees at Belle Ayr were adverse.

There was no way that the Belle Ayr, that the BCOA trustees could act in the best interests of the Belle Ayr employees.

Justice Stevens: But that's a reason why you don't want to participate in the multiemployer trust.

Mr. Gruender: Yes, sir.

Justice Stevens: And that's totally independent of who the trustee is.

Mr. Gruender: Yes, sir.

Justice Stevens: And... but it is true, is it not, that there are many multiemployer trusts in which one employer is not necessarily a member of the employer association that is primarily responsible for the particular trust?

Mr. Gruender: Where he agrees to participate... and the cases on that are clear... once you agree to participate in multiemployer bargaining, you have a right to come in and designate who the representative--

Justice White: Some of your argument sounds as though you're arguing that, well, that you shouldn't be forced to participate in this multiemployer trust.

Well, no one suggests you have to.

Mr. Gruender: --Well, on the contrary--

Justice White: You just want to avoid the strike to make you.

Mr. Gruender: --No, no.

There are permissive subjects--

Justice White: You could just bargain to impasse and then see who can win.

Mr. Gruender: --The issue before this Court is, are these people collective bargaining representatives or not?

Justice White: I know, I know.

Mr. Gruender: And if, in fact... and they say that... 30 percent of our compensation package in this country today is fringe benefits... and if they say, and we all agree, that fringes, fringe benefit funds are mandatory subjects of bargaining, and so are wages, hours, and other terms and conditions of employment, which are handled by joint grievance representatives at a joint grievance procedure under a multiemployer trust.

But it is very clear that the law does not permit the union to strike to force the employer to select as his representative to be bound by the representatives in a joint grievance procedure.

But, on the other hand, the issue here is--

Unidentified Justice: I understand what the issue is... I know what the issue is--

Mr. Gruender: --What's the difference?

Unidentified Justice: --But nobody claims that you have to do it.

I mean, all you--

Mr. Gruender: Yes.

They claim that the union is entitled to strike the employer to force him to be bound by the representative of a multiemployer trust--

Unidentified Justice: --You don't have to accede, though.

Nothing in the law says that even if... nothing says you have to agree, just because somebody strikes.

Mr. Gruender: --No, but there is a provision in the law that it is not right for a union to strike to compel someone to select as their representative--

Unidentified Justice: I understand.

Mr. Gruender: --someone who cannot--

Unidentified Justice: I understand.

If you win, you don't have to bargain to impasse.

That's what you're saying.

Mr. Gruender: --No, that is... the point is not, whether you win.

If it's a matter of winning or losing, as you so aptly have pointed out, our client has stood their ground.

The question is whether or not it encourages bargaining.

There are other employers who are not as, perhaps as resolute as our client, and were able to persevere in the pressure that they were subjected to.

The question is if what the trustees do is essentially the same thing in administering the terms, adjusting the grievances under the trust agreement, or as Justice Stevens has pointed out, in fact setting a contribution level, what collective bargaining representatives do, why is it fair to say that they cannot strike to force you to accept the BCOA representatives as your grievance representatives, but it is okay to be bound by another bargaining unit's representatives who also do the same thing for something that accounts for only 30 percent of the wage package?

So, what we're saying is that... what we're really saying in our argument is that the duties of collective bargaining representative and the duties of trust fund representative... remember to look at the language in the statute.

This is not just by chance they're called employer representatives, employee representatives; and as a matter of fact, instead of it's calling a third person as an arbitrator, he's called the neutral.

The parties recognize the conflict inherent.

Incidentally, in a multiemployer bargaining--

Unidentified Justice: You haven't mentioned ERISA at all.

Mr. Gruender: --Well, in ERISA it merely reemphasizes what in fact the common law was with respect to 302(c) trusts before and codifies them.

And it also recognizes the fact of life that practically all of the trustees, most of them, in a multiemployer situation are in fact the collective bargaining representatives, so that's fine, there's no problem with that.

And that there is nothing inconsistent with a person being a fiduciary and a bargaining representative.

As a matter of fact, under other statutes they have to to be, the union has to be.

What's the duty of fair representation?

Unidentified Justice: You can wear two hats, but as mentioned in the brief, you can't wear them both at once.

Mr. Gruender: The day has gone when we can look at a union representative as some big monster who's only interested in union goals.

Unidentified Justice: The trustee has duties both under the common law or equity--

Mr. Gruender: So do collective bargaining representatives.

Unidentified Justice: --And under the statute now enacted by Congress called ERISA.

And under ERISA there are fiduciary duties.

Mr. Gruender: Well, he had them before, sir.

Unidentified Justice: And they're not collective bargaining duties--

Mr. Gruender: Well, they are collective bargaining duties, in our opinion.

Unidentified Justice: --Imposed by ERISA?

Mr. Gruender: Well, ERISA doesn't impose collective bargaining duties.

Unidentified Justice: No.

Mr. Gruender: The National Labor Relations Act defines collective bargaining duties and the provision of the National Labor Relations Act is 302(c)(5).

Now, Nedd v. Mine Workers clearly stated that ERISA did nothing more than codify what 302(c)(5) and the common law of trusts provided prior to that--

Unidentified Justice: Or equity.

Mr. Gruender: --So, our point is that the conflict that they say exists between employer and union representatives.

I think one of the points the briefs makes, I think, that the employer might have to make a judgment about another employer and there'd be a conflict of interest.

That happens all the time in collective bargaining, that an employer passes judgment on another employer, particularly, only, in multiemployer bargaining.

There's nothing inconsistent with that at all.

Chief Justice Burger: I'm a little puzzled by your seeming to merge, maybe you didn't intend to merge the functions of the collective bargaining representative and the functions of the trustee.

Now, it's true that a collective bargaining representative has a fiduciary obligation, but he owes that obligation just to one side, would you not agree?

Mr. Gruender: No, I do not agree at all.

For example--

Chief Justice Burger: Wait a minute, wait a minute.

Don't you think a collective bargaining representative of the union owes his obligation to the union and not to the employer?

Mr. Gruender: --At what point?

After an agreement is reached or thereafter?

Once it's reached he holds an obligation to make sure the terms and provisions of that agreement are carried out.

Chief Justice Burger: I'm talking about reaching the agreement.

In coming to the agreement all of his obligations and duties are to the people he represents just as an advocate in this Court owes the obligations to to his client and to the Court.

Now, on the other hand, a trustee of the fund owes his obligation to the totality, does he not?

Not just to the person who designated him but to the fund itself and the purposes of the fund?

Mr. Gruender: A BCOA collective bargaining representative has the same obligation to all of the members of the association... the union, to all the members of the union... as he would if he were a trustee.

Now, as far as the exclusivity, is the collective bargaining representative like a lawyer?

I don't think so.

The law is much more complex on that.

Unidentified Justice: Well, certainly, the Chief Justice is correct that in the collective bargaining process itself, before the agreement is reached, or alternatively in the processing of a grievance under the agreement, a collective bargaining representative owes his exclusive and undivided loyalty to either the union or the employer?

The person he represents.

Mr. Gruender: Before an agreement is reached?

Unidentified Justice: The association or person whose agent he is.

Mr. Gruender: Subject to the law--

Unidentified Justice: Like any agent?

Mr. Gruender: --Subject to all the requirements of the National Labor Relations Act, some of which impose obligations on the employer's representative to watch out for the interests of the employers.

That's... black and white.

Justice Rehnquist: Can a collective bargaining representative as defined in the National Labor Relations Act sit on a grievance panel, administering a collective bargaining agreement?

Mr. Gruender: Can a collective bargaining representative?

Justice Rehnquist: Yes.

Mr. Gruender: Yes.

Justice Rehnquist: Well, then, in that case I take it he might well have occasion, as you have pointed out, to vote against... if he's the management representative, he might nonetheless vote against one of his fellow managers.

Mr. Gruender: In the multiemployer situation they do it every day.

Unidentified Justice: But he is not then acting as collective bargaining agent.

Mr. Gruender: I beg your pardon, sir, he is.

Unidentified Justice: He can wear two hats but he can't wear them both at once, as we said earlier.

Mr. Gruender: Well, I don't agree with that, sir.

When a management representative sits on a joint grievance panel and an employer comes before him, another employer, a competitor, as a matter of fact, comes before him and he has to now decide, did this man fire this man unlawfully or did he not, many times employer representatives have voted, based on the facts, they become like... unions and management in those situations become like umpires and they vote, well, yeah, we believe he violated the contract, he fired him without just cause, or he didn't pay him the right wages on the thing, and he'll vote against the management person.

That happens every day in collective bargaining.

They are collective bargaining representatives and nobody questions it.

And they are doing what they believe to be their duty, to carry out the terms of the agreement.

As a matter of fact, once the parties reach agreement, to say that the union doesn't have any conflict among its members is to ignore reality.

Sometimes the employees are fighting and the poor union would like to have the employer decide the question instead of being involved with a conflict between their members: who gets which job?

Let's say these trustees are sitting there and there's $10 to spend for new benefits.

Half of the membership want a dental plan; another one wants vision; another one wants major medical; and another one wants additional maternity.

And the union business agent would rather have a management man make that decision.

He doesn't want to go back to the union hall and listen to the union people complain about how he didn't do a thing.

In other words, they have conflicts.

Justice Marshall: I've been listening very carefully to what you say and I read your brief, but you know my problem?

The Government in its brief very carefully points out legislative history which says you are wrong.

And neither in your brief nor today have you pointed to one piece of legislative history that helps you.

Am I right?

Mr. Gruender: Well, the legislative history, in my opinion, we didn't address that because I don't think the legislative history is dispositive, or I don't believe it's that conclusive.

I think it--

Justice Marshall: Isn't it helpful?

Mr. Gruender: --I think it suggests certain things but you've seen legislatures come and go, Your Honor.

Justice Marshall: It's really not helpful to you.

Mr. Gruender: That's not it; really.

I don't believe it's helpful to them.

I don't think it says what they think it means.

I don't think that something dropped out of a passage in Congress is that significant, particularly in the context of this particular legislation and the specific statutory language that was used.

The section of the Act, 501(3) that says, the term 2; the clear delineation of the employer and employee representatives have a specific meaning, at least to employer and employee representatives; and the use of the term "neutral".

Now, that means that somebody has a flavor to them, or a bias, if you will.

Now, what I mean to say, and one of the myths here, is that... and I've pointed it out, it's not in the suit... they say that the destruction of multiemployer trusts will come about as a result of this.

All we can say is that that's just simply not true.

For example, if this particular union wished to maintain the same program, it could have gone to the bargaining table and insisted that the employer put up a duplicate fund, not with the same, with the representatives, but with the employers' representatives, and could have offered reciprocity to give them the portability, it could have offered the same benefits and could have struck for that and there would have been no violation of the law in our opinion.

If, on the other hand, they insisted on forcing him into another bargaining unit, a bargaining unit which in fact has a long history... I need not cite authority for it... of disruptions, labor disputes, which have caused problems with those funds... that not only does an injustice to the Belle Ayr employees, who had nothing to do with those disputes and disruptions and could do nothing to prevent them through the grievance or arbitration procedure or any other way, it just does violence to the whole procedure of bargaining unit by unit.

No destruction of collective bargaining is going to come about as a result of this position.

As a matter of fact, multiemployer trusts will stand or fall on their ability to provide to the employees whom they cover, and to the employers that they serve, what they hold themselves out to do, which is better benefits at less cost, with the same amount of portability.

That, frankly, they have had a lot of favored treatment in law.

Forty-year amortization schedules as opposed to 30, no... very seldom are they covered with termination insurance.

So they've had a little different set of rules to play with and, frankly, many of the employers have been able to develop better programs for their employees at less cost.

Now, there is no reason in God's world that I can see or in the National Labor Relations Act or reason or logic to require employers to be subjected to demands that they have representatives determining those fringe benefits, or be compelled to accept the strike, or take a strike, on an issue like that when those people stand almost on the same footing, in terms of function, from the standpoint of the labor laws, as an 8(b)(1)(B) representative who is adjusting the grievances concerning the provisions of the collective bargaining agreement.

Justice Stevens: Mr. Gruender, you haven't really argued this, but I've just been reflecting on your argument a little bit.

Supposing you represented BCOA instead of just one operator and the union said to BCOA, we want you to designate John L. Lewis, Jr., as the employer trustee on the fund.

Under your view, that's essentially... and then they struck on that.

Mr. Gruender: They struck the BCOA?

Justice Stevens: Yes.

Mr. Gruender: And I represent the BCOA?

Justice Stevens: You say that BCOA, just say, I want to pick my own representative, and they say, no, no, we want John L. Lewis, Jr., or somebody like that.

Mr. Gruender: The union did that?

Justice Stevens: The union did it.

If the union did that, under their view of the law, he would not be a representative and that would be a perfectly proper strike, wouldn't it?

Mr. Gruender: That's their view of the law.

I think they're dead wrong.

I think the law doesn't support that kind of a demand.

I think that when you understand what the trustees do, that there is nothing inconsistent between having fiduciary obligations and being a collective bargaining representative, and ERISA said so.

And incidentally, in Vaca v. Sipes, the Miranda case, demonstrate that collective bargaining representatives literally are living by fiduciary standards.

They have to.

And the employer likewise.

Times are changing.

There is nothing inconsistent with them having both types of functions and acting in the best interests of the beneficiaries in the process, and the best interests of the beneficiaries of the process might be fighting the union on a particular claim which may not have merit, and that may be the best interests of the beneficiaries because it would avoid a wasting of the assets, a destruction of the actual assumptions, for example, on which the trust was based, so that the rest of the beneficiaries would have a benefit.

But the Board's error, in our opinion, is best evidenced, and the union's error is the same, is they confuse the thing.

Look at Footnote 12 on page 20 of their brief, where they state that... they mix up the fact that fringes are a mandatory subject and they said, well, since the trustee representative is involved in that, that's a mandatory subject too.

That's just like saying, wages, hours, and working conditions are a mandatory subject and the collective bargaining representative who determines the wages and hours and working conditions is the same.

I draw your attention to a case which I did not--

Chief Justice Burger: Your time has expired now.

If you'll just mention the case, briefly.

Mr. Gruender: --The case is Sinai Hospital.

Incidentally, I heard a comment here about a reply brief.

I never received a reply brief from the Government.

Chief Justice Burger: Would you see the Clerk about that?

I think there is one.

Mr. Gruender: I have not received it, so I am unable to answer you.

I have seen a reply brief from the union and I've hit most of their arguments.

Unidentified Justice: There are two.

There are two of them.

Mr. Gruender: I have not seen the Government's brief.

If there is a reply brief from them, that's news to me.

ORAL ARGUMENT OF HARLON L. DALTON, ESQ., ON BEHALF OF THE PETITIONER NATIONAL LABOR RELATIONS BOARD -- REBUTTAL

Mr. Dalton: I just have three quick points, actually four.

With respect to the reply brief, I take it it was served in the ordinary course and I can't really say more than that.

Justice Rehnquist: It's dated April 21, filed in the Clerk's Office.

Is that in time?

Mr. Dalton: Yes.

It was one week before today.

Mr. Chief Justice, I just want to clarify my concession with respect to coercion.

That concession is limited to the acknowledgement that striking to induce an employer to contribute to a pension fund where the trustees have already been selected, that that strike is in a sense coercion, but certainly I'm not conceding that's a violation of Section 8(b)(1)(B) or that in this case the union was attempting to coerce Amax to participate in multiemployer bargaining.

That confusion of multiemployer bargaining and participation in a multiemployer trust fund, I think, is something that--

Justice Stevens: Mr. Dalton, would you respond to the question I put to your opponent--

Mr. Dalton: --Yes.

Justice Stevens: --A moment or two ago?

Could the union strike against an association and say, we want you to designate Mr. X as the employer trustee on the pension fund?

Mr. Dalton: No, I think not.

Unidentified Justice: Why not?

Mr. Dalton: For two reasons.

First, in my mind, that trustee, that suggested trustee by the union could well be characterized as a union trustee and would thus violate the balancing of employer-appointed and union-designated trustees required by Section 302(c)(5).

Justice Stevens: No, if they... what they'd do is say we want the employer to select a trustee from the following list, but the employer can make the selection and he will be the employer trustee.

Unidentified Justice: That wouldn't be a mandatory subject of bargaining.

Mr. Dalton: That's my second point.

Yes, that would be a permissive subject and therefore the employer would not be obligated.

Justice Stevens: Would it violate the provision that prohibits the union from trying to designate the employer's collective bargaining representative?

Mr. Dalton: I'm sorry?

Justice Stevens: This case arises as a violation of whatever statute it is that says the union cannot try to coerce the employer into selecting a representative.

Mr. Dalton: Yes.

Justice Stevens: Now, would he be a representative for purposes of that section?

Mr. Dalton: No, he wouldn't but nevertheless the union's demand would not be a mandatory subject for collective--

Justice Stevens: Well, it wouldn't be mandatory, it would be permissive.

It isn't even permissive if the man is a representative.

Mr. Dalton: --Well, my point clearly is the man is not a representative for purposes of Section 8(b)(1)(B) so then the question is, as it is here, assuming that the trustees are not collective bargaining representatives, then the question is, whether or not the union demand is a mandatory or permissive subject of collective bargaining.

If mandatory, then the employer must take its part.

If not, then the employer need not.

Justice Stevens: The union could say, to avoid your suggestion that he would become a union representative, say the union just said, we will not, we insist that you do not appoint Mr. X, the man you had before.

He's been a pest in all our negotiations; we don't want him on the trust fund.

They could do that, though?

Mr. Dalton: My position is that the union could make that request or demand, but the employer--

Justice Stevens: Without violating this statute?

Mr. Dalton: --Without violating Section 8(b)(1)(B); that the employer need not accept it and that the union would not be entitled under the Act to bargain to impasse or strike over that issue.

That's the distinction.

I have one other response, which is to your earlier question about salvage rates, though I wonder why I want to climb back in that pit.

But, to the extent that trustees are authorized to determine royalty rates, they must do so in the interest of the beneficiaries of the trust and not in order to advance the interests of either the employer or the union.

Justice Stevens: You mean they always take the highest possible rate?

Mr. Dalton: If that's in the interest of the beneficiaries of the trust.

Justice Stevens: Well, it surely would be.

I think you shouldn't have climbed back into that pit.

Mr. Dalton: I've got the red light.

I'm going to sit down.

Thank you.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Featured:

Walsh v. Schlecht - Oral Argument

Sun, 08 Aug 2010 17:08:17 +0000

Case:

Walsh v. Schlecht

Media File:

75-906_19761101-argument.mp3

Related Transcript:

75-906_19761101-argument.xml

Transcript:

Argument of Carl R. Neil

Chief Justice Warren E. Burger: We’ll hear at arguments first this morning in 75-906, Walsh v. Schlecht.

Mr. Neil, you may proceed whenever you are ready.

Mr. Carl R. Neil: Mr. Chief Justice and may it please the Court.

This case involves interpretation and application of Section 302 of the Labor Management Relations Act, 1947 as amended, popularly known as Taft-Hartley Act, in the context of payments to trust required by the terms of a subcontractor’s clause in a Collective Bargaining Agreement.

This Court has asked to review a decision of the Supreme Court of Oregon rejecting petitioner’s defense that the subcontractor’s clause conflicts with the requirements of Section 302 (c) (5).

The question on which petitioners sought certiorari, which was briefed, and decided among other questions by the Supreme Court of Oregon, is what are the subcontractor’s clause and requiring a signatory employer to make trust contributions on behalf of or for the benefit of employees of a non-signatory subcontractor violates the 302 (c) (5) requirements.

The trust agreements must benefit only employees of contributing employers.

It is apparently conceded by Respondents in this Court -- I read their brief so to concede him pleasantly, that the subcontractor’s clause less construed that is to require contributions for the benefit over on behalf of subcontractor’s employees would violate Section 302 (c) (5).

Instead, Respondent’s brief as I read it, raised three arguments, which were not made below and which now apparently are the questions to be decided by this Court.

I except this, these are valid -- I don’t read a valid arguments but I think they are validly raised by the Respondents.

His questions are (1) they now seek to have an interpretation of Article IV of the Collective Bargaining Agreement, the subcontractor’s clause different than that made by the Court below as I read the opinion of the Court below.

They say that the clause should be read to merely measure contributions to the trust by the hours of work of the non-signatory subcontractor’s employees and not to require contributions for their benefit or on their behalf.

That is the first argument they make.

The second is that two of trusts, the apprenticeship trust and the vacation trust are 302 (c) (6) trust in purpose and therefore not subsidiary requirements of 302 (c) (5) concerning beneficiaries.

Third, they say that one of the trusts CIAF or Construction Industry Advancement Fund trust is not 302 Trust at all.

Petitioner, we submit, is entitled to prevail on all of these issues as well as on the original issue.

The facts giving rise this is controversy, are these?

Chief Justice Warren E. Burger: Mr. Neil, before you go in, if they are right on the first argument, that’s the end of the whole case.

Mr. Carl R. Neil: I believe that’s right, Your Honor.

Unknown Speaker: Is that a federal question and all the construction of Article IV or is that a matter for the Supreme Court of Oregon.

Mr. Carl R. Neil: No, as I will, if you might advantage argument, it’s a matter of Supreme Court of Oregon but I don’t think it is, I think it is a federal question, I think since Lincoln Mills of Alabama that the construction of Collective Bargaining Agreements in interstate Congress has been a matter of Federal Law.

This Court might well respect the interpretation of the Supreme Court of Oregon, but I do not think it binding on this Court.

The petitioner, Mr. Walsh, is a builder of multiple family housing in Portland.

He formed a limited partnership of which he became the general partner to build and operate a 56 unit apartment project in Salem, Oregon known as Oak Hill.

This project was HUD supported, federally financed and therefore by agreements required by HUD the contractor and his subcontractor’s was required to adhere to the provision of the Davis-Bacon Act, principally requirement of paying prevailing wages including fringe benefits either to workmen on a job or in to trust.

The limited partnership subcontracted, the carpentry framing work to a non-union subcontractor, Lloyd Jackson.

Walsh, of course and it was bound by the terms of a Collective Bargaining Agreement with a carpenters union that had the subcontractor’s clause in it.

In addition to requiring Walsh to pay if he hired his own carpenters, a total of 96 cents per hour into these five trust.

The subcontractor’s clause is quoted at pages 5-6 in our brief and elsewhere in the briefs and it says in general that Walsh has a signatory agreement, shall either hire and retain only union subcontractors or if he fails to do so -- and these are the crucial words, he shall “be liable for payment of these employees, wages, travel and then it goes on the list, contributions to these five trusts”.

During the construction, the carpenters union find out a course that there was a non-union sub on the job and protested that Mr. Walsh who said that he was bound by the terms of the subcontract that he could not discharge the non-union subcontractor.

Mr. Walsh, the record shows, did cooperate in arranging for the non-union sub to meet with the union people and to negotiate as to whether they could be organized.

That was unsuccessful but it is agreed in the record that Mr. Walsh was cooperative in that respect.

Unknown Speaker: How does that effect to the central (Inaudible).

Mr. Carl R. Neil: Well, I am trying to make the point, Your Honor, I guess that my client is not hostile to unions.

He insists on his rights under this clause but I think that his evidence says that he is not unfriendly toward unions.

It is stipulated that the subcontractor paid his man directly, Jackson, a non-union subcontractor, paid his man directly, the 96 cents per hour, amounting fringe benefits, that is an amount equal to the trust contributions which would have been required if a union subcontractor had been employed.

The Oak Hill project was…

Unknown Speaker: Was that part of their original employment?

Was that under their original employment or did that come about after the union raised?

Mr. Carl R. Neil: No, I see your question as a good question.

No, this was paid from the outside; the subcontractor was made aware at the beginning that this was a Davis-Bacon Act job.

There are forms in evidence for his payroll and right on the form it says, are you paying the fringes directly your man, are you paying them to a trust?

He checked directly to his men and it stipulated that he did so.

The Oak Hill project was completed in November of 1971 and year later these suits were brought to seeking payment to the trust by Walsh, of the same amounts that the subcontractor had previously paid into the trust, So, we say in effect a double payment or a second payment of the same benefits or he paid to already Jackson’s men is being required from, I think principal contractor, Walsh.

Unknown Speaker: Mr. Neil, I may have misunderstood what you said, you said double payment to the trust.

Mr. Carl R. Neil: No, we say a double payment has been required in effect by the contractors.

Unknown Speaker: I see! The first payment is to the employee.

Mr. Carl R. Neil: Yeah, the contractor had to pay a fixed price to the sub, Jackson before to work, obviously, from which Jackson paid his men the 96 cents among other things.

So, when Walsh is required to pay this in order to trust that he has already paid the fixed price including the fringes once, now you have to pay them a second.

Unknown Speaker: Can you say that’s a violation of the statute?

Mr. Carl R. Neil: No, I do not think that’s the violation of the statute.

Unknown Speaker: What is the question?

Mr. Carl R. Neil: The violation question is if we construe an Article IV of the subcontractor’s clause correctly to require contributions by Walsh for the benefit of or on behalf of the subcontractor’s employees.

We say this violates Section 302 (c) (5), the requirement that benefits paid out of those trusts under 302, only for the benefit of employees, of the contributing employer or of other contributing employers.

Jackson is not one.

Unknown Speaker: Well, but there are no benefits being paid down to the subs employee.

Mr. Carl R. Neil: That’s true, but three of two deals not only…

Unknown Speaker: Well, they aren’t beneficiaries of the trust.

Mr. Carl R. Neil: So, they how say.

Unknown Speaker: Well, are they legal or not.

Mr. Carl R. Neil: No, I do not think they are not legal beneficiaries.

Unknown Speaker: Well, how has the statute violated?

Mr. Carl R. Neil: The statute is violated because three or two prohibits either paying on agreement to pay.

Unknown Speaker: Well, is there agreement to pay.

Mr. Carl R. Neil: Article IV, we say, is an agreement requiring Walsh to make contributions to the trust for the benefit of and we say we’d follow –- it is an agreement that these men should be pay these benefits.

Strongest case Your Honor, is the vacation trust in that respect.

The testimony in the record is that the vacation trust operates as in and out payment, the employer pays into the trust the money for the vacation pay and that sum is paid to the workmen for whose benefit it is paid plus any earnings, their pro rata share of any earnings on the sum paid into the trust.

Unknown Speaker: Well, but did the employees at the sub get paid out of the vacation trust?

Mr. Carl R. Neil: There is no evidence if they did, Your Honor.

Unknown Speaker: But you contend under the agreement that they will be?

Mr. Carl R. Neil: I contend it under Article IV that that is the intention -- I would conceive that the trust agreements themselves, which you will see on much more carefully drawn documents than the collective bargaining agreement.

Our intended probably to restrict in the beneficiaries to contributing employers with one exception.

It says in Article VIII of the principal agreements that, although the rights of the beneficiaries and everyone else of these trusts are defined or as defined in the trust agreements, their terms are subject to the Collective Bargaining Agreement.

So, it leaves open it seems to me individual Collective Bargaining Agreements to vary the terms of the trust and we contend that’s exactly what happened by Article IV of the subcontractor’s clause.

We think in effect that the union got carried away probably in Article IV and penalizing and I agree that the penalizing employer, in and of itself, is not unlawful, but we think the union probably got carried away in drafting Article IV and in a penally way that they would not cognizant of the requirements of Section 302 (c) (5).

We say that our interpretation of Article IV that is…

Unknown Speaker: Let’s assume an Article IV was perfectly clear that the employer would be required to pay under the trust an amount of money measured by not only his all employees but the subs employees even if the sub was not organized, the union are not 11.12 and let's assume that they expressly say that this is an order to encourage contractors to employee union subcontractors and so it’s perfectly clear the intention was to making pay twice if they use a non-union, is that probably the statute?

Mr. Carl R. Neil: No, but not Your Honor, though your positing agreement of the type of Kreindler, of Budget Dress, of Greenstein all of which was cited by the other side and involved contracts in the garment industry would said exactly that.

Unknown Speaker: The question is of course I suppose whether that kind of a payment is an authorized payment by an employer on behalf of the union.

Mr. Carl R. Neil: Yes, I think it is.

Unknown Speaker: Do you think that employer would authorize that kind of the double payment.

Mr. Carl R. Neil: Well, I know it authorize it but I don’t think it prohibits it.

Unknown Speaker: It is a forbidden one, it is a provision statement on the behalf of the union.

Mr. Carl R. Neil: So, these three cases held and I haven’t challenged those, because the requirement that we are proceeding on, says you may not require payments to a trust for the benefit of people other than employees of contributing employers.

Unknown Speaker: And it is clear from what you have said before that you think the employees, these employees, can never get any benefit.

Mr. Carl R. Neil: It is not true, they can never get any benefit.

If they in the future would become -- well, I won’t say in the future, if they, in the past, had worked for a contributing employer, a signatory employer, they could have qualified as the employee of a contributing employer by past employment for a signatory employer, therefore, contributions made by Walsh here for those employees, even though their present employment is by a non-signatory employer might not be unlawful under 302 (c) (5) and that point is 13.17 on in the brief of Respondents.

However, there is no evidence in this record that these employees ever did work for any signatory employer prior to this.

Respondent say well people in the construction industry move around from employer to employer, from job to job, that’s quite true but it is rare, I submit that people in the construction industry move from union employers to non-union employers and vice versa.

There are either one or the other here in this industry, you're workman in union membership or you're workman for a non-union employer.

I submit it to be very unlikely, you will know the record does not speak to this that these workmen objects and whatever have been employees of the union employer prior this time, it’s conceivable but unlike this.

Unknown Speaker: On the theory of the Section 4 of the contract that this was for the benefit of the employees, do you think the employees could maintain action and equity to impress that money with the constructive trust?

Mr. Carl R. Neil: Possibly, it’s clear that they could not maintain an action against the trust or trust benefits, that’s what Moglia out of the Second Circuit holds that and in the old legal payment to the trust does not create a right of the beneficiary or intended beneficiary to sue the trust for benefits.

So, probably the answer to your question, Mr. Chief Justice, no because these employees in this case already received payment of these benefits.

So, if they were to do that, they would in effect missing a double payment.

The correct procedure I would think is that we’re following which is to setup a defense to the contributions when sued for or possibly, we can sue against the back if we had pay them.

Unknown Speaker: Well, that sued would be under Oregon Law presumably the hypothetical case I suggested, but if the Supreme Court of Oregon had no difficulty assessing in effect determining the double payments where appropriate, is there anything in the law of the equity doctrine of Oregon that would preclude having the employees get double benefit.

Mr. Carl R. Neil: Fairly not because Oregon ruled on a matter of equitable law in this case and rejected our arguments along those lines.

The rationale of the Oregon of Supreme Court’s opinion is that it does not accept the Moglia case, at least as I read it.

It is saying that even though you accept our construction of Article IV, that is that the contributions are required for the benefit of Jackson’s employees, that does not violate 302 (c) (5).

Unknown Speaker: Moglia is very distinguished belong this facts.

Mr. Carl R. Neil: Moglia is not factually in point.

Unknown Speaker: Then the employer didn’t sign the agreement.

Mr. Carl R. Neil: It is the rationale of Moglia, I think that we feel it’s applicable to this case, Your Honor.

Well, in any event, the Oregon Supreme Court seemed to think that the language of Moglia on which we rely, it was not to be followed.

Unknown Speaker: This is multi-employer bargaining unit?

Mr. Carl R. Neil: The bargaining unit is the petitioner is not a member of that multi-employer association.

He has signed a memorandum agreement, which binds him to observe the multi-employer agreement.

Unknown Speaker: Is he the multi-employer agreement otherwise fairly general in the market.

Mr. Carl R. Neil: I don’t understand your question.

Unknown Speaker: Well, is that cover most of the contractors.

Mr. Carl R. Neil: Oh, I see.

Yes, it covers, I would say all of the union contractors in the area, how many non-union contractors?

Unknown Speaker: Because in effect it’s an agreement -- whoever signed the multi-employer agreement and whoever agreed on the side to observe it, the general agreement in effect it will employ only unionized subcontractors?

Mr. Carl R. Neil: Yes.

Unknown Speaker: Or at least, these are going to cost you.

Mr. Carl R. Neil: That’s the way it works.

Unknown Speaker: I must confess, I don’t understand the relevance of Moglia at all because that case, as I remember, just dealt with whether or not the employees can receive benefits in having to do with contribution, did it.

Mr. Carl R. Neil: Well, the rationale of the Court in Moglia says that the laid down principle which we quote in our briefs that one of the reasons they say why the person seeking pension and as I recall it, cannot obtain one is because his or her employer never paid into the trust at all -- or excuse me, did pay into the trust but under without a written agreement.

Therefore, the contributions into the trust were illegal and therefore had to be put to one side and the Court goes on to make statements to the effect that only employees of employers who were lawfully contributing to the trust may obtain benefits.

So, it seems to me the rationale relied on by Moglia is applicable.

Unknown Speaker: Well, that means that the employees of the subcontract in this case could not legally obtain benefits from this trust, that’s what that said.

Mr. Carl R. Neil: I agree, that’s true and I think…

Unknown Speaker: If that’s true, then as a matter of law that seemed to follow that the contributions could not have been for their benefit, it seems to me defeats your position.

Mr. Carl R. Neil: Well, it does not seem to me that way, Your Honor, because 3 or 2 (c) prohibits agreements to make illegal contributions as well as illegal contributions.

It does not just prohibit trusts that violate the statute, it also prohibits any kind of agreement to make an illegal payment or to make requiring an illegal contribution.

Unknown Speaker: But the legality of the payment turns on for whose benefit it is and by the matter of law under Moglia, it cannot be for the benefit of the employees of the sub as I think.

Mr. Carl R. Neil: But the testimony indicates, Your Honor, I submit that that isn’t what the parties thought, but that the people who enforced this agreement on a day-to-day basis thought that these subcontracts employees could benefit and they thought that they were announcing a principle that non-union people aren’t disqualified by that matter of fact from being beneficiaries and that is true.

But I don’t think that that conclusion falls at all because it seems to me that there was every attempt in the Lower Court and the evidence to make these people beneficiaries.

Unknown Speaker: Does the record tell us whether the general ever had any employees for whom if may contribute?

Mr. Carl R. Neil: It does not but I would concede that he has had, at times, employees for which he must make contributions.

He didn’t happen to have it at the time of his job, the subcontractor’s -- and other times he has that.

I would like to reserve rest of my time, Mr. Chief Justice for rebuttal.

Chief Justice Warren E. Burger: Mr. Bailey.

Argument of Paul T. Bailey

Mr. Paul T. Bailey: Mr. Chief Justice and may it please the Court.

We are here representing these trust funds and here as contrasted to reference to unions from time to time because these are jointly administered trusts funds, four of them are and in that respect, they refer to the Health and Welfare and pension, apprenticeship and vacation.

The fifth fund, this Construction Industry Advancement Fund is an employer administered fund, part of the employer trustdeed and, therefore, it should not be used in connection with three or two at all, it is not a Taft-Hartley Fund.

So, referenced to that should not be a referenced to the other funds, which are jointly administered.

These trustees are authorized and directed both by the trust agreement now by Federal Law to enforce the trust agreements before its collections and contributions that are provided for in those trust agreements and that’s what this action was initiated for.

There are really not a great deal of difference contravention of what counsel for petitioner has stated here, particularly, in the view of the law because we do agree that if these trust agreements do permit contributions to be received for the benefit of a non-signatory employers/employees but that would violate the 302 provisions of (c) (5).

Unknown Speaker: Were these payments for the exclusive benefit of employees of such employer?

Mr. Paul T. Bailey: Yes, I say that…

Unknown Speaker: Can you spell that out for me, will you?

Mr. Paul T. Bailey: The contract that is spelled out in the Labor Agreement establishes the trust agreements in each of these instances and that set up in the working agreement.

In the trust agreement themselves, they were very careful in the drafting of it to provide that they do particularly, do precisely what the act and the laws says, they should do.

Article II of, first speaking of the Health and Welfare, which is in plaintiff’s Exhibit IV and recited in our brief, that section provides that the purpose of the Health and Welfare contributions in the funds established there, shall be for the benefit of employees, of the individual employers, and it goes on to say sort of things.

Definition of employee is spelled out in Article I of the agreement.

Article I of each of these agreements provide that the employee, whether union or non-union, is defined of any employee, whether union or non-union, of an individual employer and then he goes forward to say what’s an individual employer by definition.

That set out in Article I, Section 5 of the trust agreement.

There, it provides that the employer – it defines an individual employer, as employer who is required by the Collective Bargaining Agreement to make contributions to the fund.

Now, in the face of that, that’s precisely what we say that the act also requires that the contributions coming in must be used for the benefit of employees of the contributing employer.

If there is testimony in this record, contrary to that or if somebody attempts to do contrary to that.

They also both violate the law; they also violate the trust find.

Unknown Speaker: What do you find the obligation to -- what promise are you enforcing here?

Mr. Paul T. Bailey: Promise?

If I understand your question, Mr. Justice White.

Unknown Speaker: Why you are suing for contributions?

Mr. Paul T. Bailey: Yes, we are suing for contributions.

Unknown Speaker: where do you find the promise to pay?

Mr. Paul T. Bailey: The promise to pay is set forth initially in the working agreement and it is spelled out in the working agreement particularly and that is also contained in plaintiff’s Exhibit IV in this record.

Unknown Speaker: But it is not in the trust agreement.

Mr. Paul T. Bailey: No, it is a separate document.

Unknown Speaker: Does agreement just tells you what to do with the funds 23.18.

Mr. Paul T. Bailey: Right, correct.

Unknown Speaker: And it also requires you to sue for whatever payments that are due to the fund.

Now, so where is the promise?

Mr. Paul T. Bailey: The promise comes from the working agreement and the working agreement...

Unknown Speaker: Collective Bargaining Agreement?

Mr. Paul T. Bailey: Collective Bargaining Agreement, right.

The Collective Bargaining Agreement spells out frankly in the Articles 17, 18, 19, 20 and 21 as for each of the five trusts, precisely that the trusts will be established.

It also spell out that the contributing employer shall pay certain specific sums of money to each of these trusts.

Now, in order to…

Unknown Speaker: Then it require the employer that you are suing here to say (Inaudible) to measured by the number of employees that he has any subcontractors.

Mr. Paul T. Bailey: Well, the employees precisely, it’s on the hours that each of these employees work and if he happens to subcontract the way that those hours to some employer, who is not also a signatory, then the employer, in this case Walsh, the petitioner, is also agreed there that he will contribute in order to maintain the integrity of that fund and he will contribute a sum that would equal, the amount that he would have paid had they been his employees.

Unknown Speaker: And even though, the sum he is paying that his contribution make it by will never benefit.

Mr. Paul T. Bailey: That’s what the law says.

We did not say that, Congress established that so...

Unknown Speaker: Well, I know but that the fact is that you are requiring those payments even though they would not be necessary to maintain the integrity of the fund because the people, those particular employees will never benefit.

Mr. Paul T. Bailey: Well, I would not say that he can never benefit, he could not benefit, we state that they could not benefit from the particular contribution made at that time, as counsel stated, Your Honor, in earlier question from the Court that if these employees are eligible, employers are contributing, employers either before or after this period that would not by working for a non-contributing employer here does not qualify.

Unknown Speaker: But the fact is, you are suing for some fund to go into the trust that can never be -- right now anyway, cannot benefits the employees by whose hours they are measured.

Mr. Paul T. Bailey: Yes, I think that’s correct.

I think we are also in certain instances these trust funds sue employers for moneys that are in excess of as an example, the benefit schedule has established.

Unknown Speaker: So, they are really not for the benefits.

They are really not necessary thing to maintain the integrity of the fund.

Mr. Paul T. Bailey: The actuarial determination of the trust, Mr. Justice Brennan.

Unknown Speaker: Because those are the some people but whose hours measure these contribution just can never benefit.

Mr. Paul T. Bailey: Well, we have pointed out.

Unknown Speaker: Wasn’t that true or not?

Mr. Paul T. Bailey: Well, I don’t say that this is true on the basis that the…

Unknown Speaker: Do you deny it’s true?

Mr. Paul T. Bailey: Well I say, Mr. Justice, that the basis of the actuarial determinations of these funds is premised upon the dollars paid then that goes specifically to benefits.

They also are actuarial determinations on the amount of overfull.

That’s the money that comes in over the amounts necessary to pay for contribution, and some of these people never been had at all.

Unknown Speaker: What you are saying then is this you have to sue to collect on behalf of monies or wages paid to some employees, who can, themselves, never benefit in order to make the fund actuarially assigned sound for those employees who can benefit.

Mr. Paul T. Bailey: That’s correct.

Unknown Speaker: Just a small point, Mr. Bailey with strictly speaking, the trustees brought suit as third party beneficiaries of the labor contract, is that correct?

Mr. Paul T. Bailey: That’s correct and that’s their obligation on both the trust funds he said and also recent.

We are submitting that and argue that the defense raised by petitioner herein unless the defense that he raised initially below, but also he is arguing that the language of Article IV of the trust agreement has to be determined to be on behalf of or for the benefits of these people.

We think that strains it, we think that certainly attempts to modify the trust agreement which in itself provides that the money is coming into the trust shall be used only for the benefit of individual employees who are signed up.

We ask and he has used the phraseology in his briefing, petitioner has, we ask that if a person was going to look for benefits, one of these funds, he must really look to the trust agreements and not to the working agreement, because the working agreement only spells out what monies will go into the trust.

We submit that the trust agreement in and of itself is an agreement that is legal, complies with the statute that there is no record, no evidence and no proof shown by petitioner whose obligation it is to make that showing here that any employee has received benefits in violation of the law or the trust agreement.

Unknown Speaker: Mr. Bailey, do you think that the construction of the trust agreement is a matter of State Law or Federal Law.

Mr. Paul T. Bailey: Well, I would assume that because it is a document drafted in state law, it would be matter of construction of state law unless there is a federal question that could properly operate on it.

Here we think the construction of -- now, that’s where we think we are down to, we are not disagreeing with petitioner on the law of the case and that’s the 302 law, but we do say the construction of that particular paragraph or that particular contract is a matter of state law.

Unknown Speaker: And the Oregon Supreme Court has construed it?

Mr. Paul T. Bailey: Yes, that’s what they say.

A comment that I would make; additional comment if I may--

Unknown Speaker: There would be questions in that if the contract violated Section 302 then it would involve, would you?

Mr. Paul T. Bailey: I would have to agree with that that is that’s the connotation given to it.

We submit that it’s a strained effort that the petitioner is making here to say that Article IV does provide for benefits.

We think…

Unknown Speaker: Are there decisions in this court that say that the construction of collective bargaining agreement in this kind of a lawsuit is a matter of a federal law; Lucas Flower and Dowd Box and some of those?

Mr. Paul T. Bailey: Well, it could well be that there is some aspect of it.

Here we are talking about the construction of this statute.

Unknown Speaker: I would know -- yes, we were talking about the construction of collective bargaining agreement.

It was a question as I understood.

Mr. Paul T. Bailey: Well, more specifically, we are talking about the construction of the trust agreement.

Unknown Speaker: Mr. Bailey, you are doing on a promise within a collective bargaining agreement not a trust fund.

Mr. Paul T. Bailey: That’s correct but the defense that has been raised through our suit on a promise is the defense that these are contributions that would benefit people who are…

Unknown Speaker: The question is whether the CA2, the comment in the collective bargaining agreement is not possible.

Unknown Speaker: Which in-turn turns on whether they are beneficiaries within the meaning of the trust agreement.

Mr. Paul T. Bailey: That’s correct.

Unknown Speaker: So, all of them lead to the construction question is one of the trust instrument rather than a collective bargaining agreement.

Mr. Paul T. Bailey: That’s what we have maintained all the way, that you have to go to the trust agreement to find what benefits--

Unknown Speaker: Here the petitioner’s claim is that they attempted, they agreed to make contribution on behalf of employees of an employer who would not making a contribution.

Mr. Paul T. Bailey: Alright, may I address myself?

Unknown Speaker: That’s his claim.

Mr. Paul T. Bailey: Yes, that’s his claim and that’s what…

Unknown Speaker: That’s what the question about the construing that collective bargaining agreement.

Mr. Paul T. Bailey: I understand that, yes.

But to reach that and to make that convention, petitioner has to – and we think the wrongfully has to act or use the language of 302(c)(6) as encompassing 302(c)(5) of the act.

The act itself spells out that under 302(c)(5) it must for the exclusive benefit of contributing employer’s employees.

When the Congress enacted amendment by 302(c)(6) and added such things as vacation, apprenticeship, things of that nature which are involved here and did spell out in 302(c)(6) that the provisions of 302(5)(b) would likewise be the ones that would apply and that’s the provisions that sets up the trust agreement program.

It did not specifically sort out the requirement that it be for the exclusive benefit of the employees.

Additionally, when counsel in his or when petitioner has referred to that all five funds should be treated the same and using the language of Article IV to say so, he is saying there that the construction industry advancement fund is also one that goes to the benefit of employees.

What we say that that’s a strained interpretation of Article IV to get to that point.

Basically there are no specific benefits to employees at all in the apprenticeship and training; nor are there any benefits that go to anybody in the construction industry advancement fund.

Both of those could not be for the benefit of any of these employees.

Thus, he has to strain the language in order to reach the result that he is urging that the language in Article IV does say what he says, isn’t that this is for the benefit of employees.

Unknown Speaker: If there were no Article IV in that collective bargaining contract, there would not be any case here, was there?

Mr. Paul T. Bailey: That’s great.

Unknown Speaker: Well, then the genesis of everything in this case springs from a collective bargaining agreement.

Mr. Paul T. Bailey: That’s right, we are suing on that and we are saying that in the fact that his defense has to rest on the fact that the benefit payments for employees would benefit employees of a non-contributor and we both agree that that is unlawful at least as far is the 302(c)(5) says.

Unknown Speaker: Neither the general contractor or the subcontractor were in privity with the trust agreement in anyway, were they?

Mr. Paul T. Bailey: They over this way because in the agreement that the general contractor, Walsh, who are the petitioner executed he agreed to adopt the terms of the trust agreement as a part of his agreement.

So, he did adopt that.

Now, the subcontractor was no signatory at all, so he did not.

We state that basically this whole case has drop down to one or what are the words for these employee’s contributions mean.

That’s the language of the Article IV and we think that it does not, we submit that it does not mean what they petitioner has indicated here or urged on this court or in the court below, because we do spell out here that it could not mean that particularly when you get down to apprenticeship and the CIAF funds.

Justice Potter Stewart: Well, do you agree, Mr. Bailey that the Oregon Supreme Court construed and interpreted the meaning in the way suggested by Mr. Neil and nonetheless decided in your favor.

As I understand it now, you are submitting us that if that construction is correct than it’s near legal payment.

Mr. Paul T. Bailey: If that does say that but we say that it does but let go back to answer your question, Mr. Justice Stewart that the Oregon Supreme Court in its opinion spelled out that first of the urging before that Oregon Supreme Court was mostly Moglia and the teachings of Moglia and that of the urging there was that Moglia says that you have to have an agreement in writing before you could have benefits.

The Oregon Supreme Court except for Moglia does not apply here, because Walsh does have an agreement therefore it could not operate.

Then they came on this petition here saying that, well look because these people cannot benefit and there is an indication that they might benefit then it’s in violation Article IV and violation of 302.

We say that the trust agreement, which is the way that you determine how you are going to have benefit, that trust agreement precludes that interpretation.

Justice Potter Stewart: But the Oregon Supreme Court seems to interpret the documents here as well the employees of the sub were beneficiaries of the trust agreement.

Mr. Paul T. Bailey: Well, if you use the words -- well I am not totally in agreement with it because the Oregon...

Justice Potter Stewart: Well, it’s all not that clear and I just wanted...

Mr. Paul T. Bailey: Right, correct.

It’s not that clear because the Oregon Court said that they did not really have to reach that because in the teachings of the Kreindler v. Clarise case and the Budget Dress that an agreement that provided that the contractor signed an agreement to pay for his own employees plus contract employees under certain circumstances was alright because --

Justice Potter Stewart: As you will agree now, as I understand you, can you tell me about, misunderstand you that you would agree that the Oregon Supreme Court did have to reach that and that indeed is the dispositive issue in this case, isn’t it?

Whether or not the employees of the sub were beneficiaries of the trust agreement?

Unknown Speaker: I don’t think the Oregon Supreme Court they actually reach that.

Justice Potter Stewart: But isn’t that the dispositive issue?

Mr. Paul T. Bailey: That is the dispositive issue.

Justice Potter Stewart: You and your brother agree on that as I understand and you agree as to what the law is as I understand.

You differ only as to what the precise situation is in this case, isn’t it that?

Mr. Paul T. Bailey: Right and that there is no showing that there has been anybody that has not been entitled to receive benefits whosoever received it.

Unknown Speaker: My brother Stewart asked you, if the proclaim on the face of this (Inaudible) that the employer and the union actually agreed and intended to have these payment made for the benefit of a nonunion subcontractor, as I have understanding to your answer that that would be a new legal contract.

Mr. Paul T. Bailey: That portion would be -- I would agree with that.

Unknown Speaker: You would assert you will also agree, I take it, but basically you are dealing with a prohibition that is across the border and then there are exceptions to it and I would presume the burden is on he wants to bring himself within an exception.

Mr. Paul T. Bailey: That’s what we say that he has to show that we actually did payout; the trust actually payout some money to somebody to --

Unknown Speaker: No, no, no I think it’s the other one.

Unknown Speaker: The agreement.

What's the construction of the collective bargaining agreement?

If the parties have said it in so many words we -- I have a contractor terms to pay on behalf of and for the benefit of the employees of nonunion subcontractor certain amounts of money.

I think if you agree that would be a new legal term?

Mr. Paul T. Bailey: Yes, you said that right.

Unknown Speaker: Do you conceive that the basic language of 302 is not here.

That it was a payment to a representative of any of his employees.

Mr. Paul T. Bailey: Well, we can see certainly that the trusts are such representatives because they are established as a Taft-Hartley trust, except that, except that —

Unknown Speaker: Then you have to bring in yourself within one of your exception, don’t you?

Mr. Paul T. Bailey: Well, I am saying I wanted to qualify my answer to qualification is that of course the CIAF is not such a Taft-Hartley trust.

Unknown Speaker: It is one out of the five, the industry advancement trust.

Mr. Paul T. Bailey: Now, to bring ourselves within in the exceptions, the exceptions, of course, rather that the trust fund and we are talking about the exceptions of (c)(5) that the trust funds must be such that they do not make contributions or benefits to persons other than the employees of the contributing player.

Unknown Speaker: And traditional statutory constructions as of the burden would be on you to bring yourself within the exemption, is it not?

Mr. Paul T. Bailey: Well, council has never challenged the validity of the trust fund and no time has he done that.

There has never been any challenge to whether these trust funds are unlawful.

Unknown Speaker: Mr. Bailey, may I ask you a question?

Mr. Paul T. Bailey: Yes sir.

Unknown Speaker: First of all, is the entire trust agreement in the record?

Mr. Paul T. Bailey: Each of the trust agreements are in the record, yes.

Unknown Speaker: And is it correct that an employee in order to be entitled to benefits must work a certain number of years or something like that is their periods that must elapsed before his rights vest.

Mr. Paul T. Bailey: That’s on the pension.

Unknown Speaker: On the pension?

Mr. Paul T. Bailey: Right, on the pension he must have 12 credits and that means 12 years of employment to have certain hours per year.

Unknown Speaker: So, with respect to such an employee there might be contributions made for him for five years and then he might decide to get out of carpentry and go into some other industry, he would never be a beneficiary of that trust then.

Mr. Paul T. Bailey: That’s correct.

Unknown Speaker: Is that also true of say the other trust?

Mr. Paul T. Bailey: The health and welfare runs on a shorter period of time and that runs on a quarter saying that you receive the credit of 250 hours in a period of three months.

Unknown Speaker: And such a man could perhaps work 200 hours and contributions be made on account of those 200 hours, but he never get any benefit from that?

Mr. Paul T. Bailey: That’s correct.

Unknown Speaker: Now, is that same principle applicable to all of the trust?

Mr. Paul T. Bailey: The balance of the trust is on the vacation for those who are eligible of it.

The dollars that come in on the vacation are allocable to an individual and they are also added to by earnings of trust and the disposition is made on pro rata base based upon the amount of money that comes in.

Unknown Speaker: But is there immediate investing in the vacation cost as soon as the man works for few hours?

Mr. Paul T. Bailey: If he is an employee.

Unknown Speaker: If he is a covered employee.

Mr. Paul T. Bailey: Right.

It need to be vest.

Now, as you wanted the other two trust you asked about.

On the apprenticeship and training, of course, there is no benefit that applies to an employee because the employee himself is working.

See, he is a contract I mean he is a journeyman and he is on the job, so he is not taking --

Unknown Speaker: So, the beneficiary is somebody entirely different.

Mr. Paul T. Bailey: He is not around and on the construction industry advancement there are no beneficiaries of that except the general public or what you will because it promotes the industry.

Unknown Speaker: Let me ask one other question, I am sure you would not mind.

Assume that there were an employee of the general contractor in the past.

He had been in the union perhaps took a withdrawal card and was not working for the general during the period involved in this lawsuit and but he worked for the sub; the nonunion sub and later he got back into the union.

I take that he would not get credit or vesting for the period he worked for the nonunion employer.

Mr. Paul T. Bailey: Alright, he would not get credit for that period because those funds do not attach themselves to other than employee of a private employer.

Unknown Speaker: I once attended the Oregon, is it Oregon.

Mr. Paul T. Bailey: Yes, I am sorry.

Unknown Speaker: The Oregon Supreme Court describes that contract that in this case the requirement of the written contract was satisfied and that the defendant admit he had a written contract with the union, which requires that he make contributions to his trust funds for his own employee and also specifically provided if he had engaged with some subcontractor, if he do any work covered by the agreement, he would be liable for payments into the various trust funds for the employees subcontractor?

Mr. Paul T. Bailey: Yes, that’s what it says.

Unknown Speaker: Now, is that an interpretation of the contract that they were agreeing to make payments on behalf of and for the benefit of the employees of any subcontracts?

Mr. Paul T. Bailey: I of course, cannot say precisely what the Supreme Court of Oregon had in its mind.

Unknown Speaker: Considered any other way, it sound like that way if there is any other way?

Mr. Paul T. Bailey: Yes, it uses the word for but if it was applicable to the facts.

Unknown Speaker: What is for me?

Mr. Paul T. Bailey: Well, it could be for the hours that these employees work and that’s generally what the reference means because the word for these employees under Article IV could not apply to benefits for those people who we just demonstrated for the apprenticeship and the vacation over the CIAF.

Unknown Speaker: Do you really think that these people knew what they were doing; they were not taking any legal contract?

Mr. Paul T. Bailey: That’s what I was saying is that the intent of the labor agreement was to produce money, produce money to support the trust funds.

The intent and purpose of the trust funds is to say what to do with that money, and that’s what we are saying is that you have to look.

If you are going to get benefits, you have to look to the trust fund for that purpose.

That the only real purpose of the contract, the labor agreement was to supply the money and that was the method in which it was supplied.

I am closing by state that we emphasize that there was despite any testimony otherwise and that any testimony on this record has the contravention of the requirements of the both the law and the trust agreements.

There are no circumstances.

It must comply with the law, and that there is no proof in this record that any individual has received any benefits who was not entitled to them under the law and we think that that was the matter of proof that the petitioner had to make and we say that the decision of the Oregon Supreme Court should differ.

Chief Justice Warren E. Burger: Thank you Mr. Bailey.

Mr. Neil, do you have anything further?

Rebuttal of Carl R. Neil

Mr. Carl R. Neil: I have two or three points, Mr. Chief Justice.

Mr. Justice White extracted the concession from counsel that the payments required under counsel’s theory to case for a nonunion signatory employees are not necessary to the integrity of the trust fund.

That’s an important point I think because our argument is made otherwise in the brief of respondents.

There is no evidence in this record of any actuarial assumptions of any of the trust funds.

Furthermore the tax on pensions and pension planning cited by respondents do not disclose that any such actuarial assumptions are made.

There are a lot of actuarial assumptions made but they are all made on how many covered employees are there, how many hours they are going to work, and this kind of thing.

They do not make the kind of actuarial assumptions that says there is going to be so much penalty contributions or so many contributions they aren’t related to particular employees.

Unknown Speaker: Oh, really that’s not a business of the statute or this court.

Mr. Carl R. Neil: I don’t think so, but the argument….

Unknown Speaker: The actuarial soundness of the trustees.

Mr. Carl R. Neil: I agree, but counsel my points is -- counsel suggest that the actuaries might have assumed that there is going to be a certain level of penalty contributions made into the trust and that may be necessary for the soundness of the trust and I am saying that’s not the case.

Mr. Justice Rehnquist raised the question I think first of whether state law might control trust construction.

The Oregon Supreme Court’s opinion does not directly construe the trust agreement except by implication in its comments on Article IV and if it can be said that will construe the trust agreement, by its comments in Article IV, it construe them in our favor.

In addition to the point made by Mr. Justice White, the Oregon Supreme Court’s opinion, I draw your attention to page 34, the appendix to our brief another portion of the Oregon Supreme Court’s opinion.

In the first full paragraph where they are stating the questions as presented to the Oregon Supreme Court on this issue and they say, defendant’s first contention on cross appeal is that the subcontractor’s clause over the labor agreements violats 29 U.S.C. Section 186, that’s 302 to the extent that it maybe applied to require defendant to make contributions to union trust funds “for the benefit of employees other than his own as pleaded in defendant’s fifth affirmative defense.”

I suggest that’s further evidence that they thought they were deciding the case below on the basis of a construction that Article IV did require that contributions for Jacksons employees.

Unknown Speaker: Did the trial court construe (Inaudible)?

Mr. Carl R. Neil: It is hard to tell Your Honor, this case and this issue in the trial court, we decide on demurrer and the trial Judge rendered no opinion in his decision on the demurrer.

Thank you very much.

Chief Justice Warren E. Burger: Thank you gentleman.

The case is submitted.

Attribution:

The OYEZ Project

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