UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
October 21, 1971
In the Matter of the Application of Penny Singleton et al., Petitioners,
Ephraim M. Abramson et al., Respondents
The opinion of the court was delivered by: LASKER
Deadlocked decisions about the administration of a labor union welfare trust fund prompt these cross-petitions seeking the appointment of an impartial umpire by this court. Authority for such action is found in § 302(c)(5) of the Labor Management Relations Act of 1947, 29 U.S.C. § 186(c)(5)(B), and Article III, paragraph 10(a), of the Agreement and Declaration of Trust of the American Guild of Variety Artists for its Welfare Trust Fund ("Trust Agreement").
Petitioners are Trustees of the Welfare Trust Fund ("Fund"), created in 1953 for the benefit of employees in the variety entertainment field and their families. Three of the Trustees represent the American Guild of Variety Artists ("AGVA") and three represent the "Operators" (i.e., employers) who have collective bargaining agreements with AGVA and who make contributions to the Fund.
By the spring of 1970, several issues had become bones of contention between the AGVA Trustees and the Operator Trustees. The AGVA Trustees, determining that the Board was hopelessly deadlocked as to some of the issues, petitioned this court to appoint an umpire to break the even division of trustee votes. Respondents, the Operator Trustees, contest the propriety of submitting any of these issues to an umpire, and in turn file a cross-petition seeking appointment of an umpire to resolve a separate impasse.
Five deadlocked issues are posed for resolution by a court-appointed umpire. The first four are the ones brought here by the AGVA Trustees:
(1) Whether or not to amend the Trust Fund Agreement pursuant to Article III, paragraph 10(s), to provide that Operator Trustee vacancies shall be filled in some method other than by selection by the remaining Operator Trustees in order to assure that actual Operators, or persons closely linked to them, serve as Operator Trustees and not persons with no ties to the Operators, as is allegedly now the case.
(2) Whether or not under Article III, paragraph 10(d), of the Trust Agreement, which requires that the Fund provide fidelity bonds for all persons who collect contributions for the Fund, the Fund is obliged to provide a bond for AGVA employees who collect such contributions.
(3) Whether or not the present manager of the office of the Fund should be replaced pursuant to Article II, paragraph 3, and Article III, paragraph 11.
(4) Whether or not the present Operator Trustees and Alternate should be removed since none are actually Operators or related to Operators, as the petitioners contend is mandated by paragraphs 6 and 16 of Article III.
The final issue is raised by the respondents as cross-petitioners: (5) Whether or not Penny Singleton as Trustee and Sally Rowe and Paul Benson as Alternate Trustees should be permitted to participate on the Board of Trustees since their status as paid employees of AGVA violates Article III, paragraph 11, and Article VII, paragraph 4, of the Trust Agreement.
The relevant portions of 29 U.S.C. § 186 (c)(5)(B) require as to a statutory trust fund such as this that "in the event the employer and employee groups deadlock on the administration of such fund and there are no neutral persons empowered to break such deadlock, such agreement must provide that the two groups shall agree on an impartial umpire to decide such dispute, or in event of their failure to agree within a reasonable length of time, an impartial umpire to decide such dispute shall. . . be appointed by the district court . . ."
Under this statutory mandate, petitioners must satisfy the court that (a) a genuine deadlock exists on an issue of administration, (b) no agreed neutral person is available to break the impasse, (c) the parties fail to agree on an impartial umpire.
The issue must be one which the trustees have the authority under the trust agreement to decide. Mahoney v. Fisher, 277 F.2d 5, 6 (2d Cir. 1960). As was stated in Barrett v. Miller, 276 F.2d 429, 431 (2d Cir. 1960), "while a trustee petitioning for the appointment of an umpire need not demonstrate that his interpretation that the issue was one the trustees could decide is the correct one, he must at least establish that it is a possible one."
Examining each of the five issues in light of the statutory requirements, it appears that the first three are ripe for determination by a court-appointed umpire.
Respondents assert that the Trust Agreement implementing the provisions of 29 U.S.C. § 186(c)(5)(B) is limited by the provision in the Trust Agreement that "Neither the neutral person nor the impartial umpire shall have any power to alter, amend, add to or take away from the terms of this Trust Agreement or any Collective Bargaining Agreement." Respondents concede a deadlock over whether or not to amend, but urge that (a) an umpire cannot alter the Trust Agreement and thus cannot amend, and (b) the issue of amendment is not within the "administration" of the Trust.
Petitioners argue that Article III, paragraph 10(s), of the Trust Agreement provides for amendment of the Agreement on the vote of a majority of the Trustees plus written approval of AGVA. They urge that, since it is within the power of the Trustees to amend, it is a proper function of "administration" and that a decision by an umpire would not constitute an act by the umpire to alter the Agreement.
Article III, paragraph 10(s), of the Trust Agreement specifies that a majority of the Trustees shall exercise the power to amend, and Article III, paragraph 10(a) of the Agreement provides that "in the event of a deadlock . .. an impartial umpire to decide such dispute shall be appointed." Thus the Agreement itself omits the word "administration" and deals only with deadlocks among the Trustees in the exercise of their express powers, such as the power to amend.
In any event, this Circuit has broadly construed the term "administration" as consonant with the policy of the Labor Management Relations Act provisions to resolve disputes. In Barrett v. Miller, supra, at 430, note 1, the Court stated:
"The trust agreement employs the language: 'deadlock upon any question coming before the Trustees for decision.' The statutory language is: 'deadlock on the administration of such fund.' Appellees argue that by this difference of expression the parties intended an area of arbitrability greater than that required by Section 302(c)(5)(B). We, however, believe that the phrases have identical import."
Construing the Trust Agreement in the light of the Barrett rationale,
we hold that the issue of amendment is within the powers of the Trustees and is a deadlock as to Fund administration. A contrary determination would hamstring the continued operation of the Fund and defeat the intention of Congress in providing for court-appointed umpires. Accordingly, the issue should go to an umpire.
(2) Fidelity Bonds
Respondents contend that this issue is really a legal one not resolvable by arbitration. We disagree.
Article III, paragraph 10(d), of the Trust Agreement requires the Trustees to provide fidelity bonds for all persons authorized to deal with Fund monies. The Fund's Rules and Regulations, promulgated by the Trustees pursuant to Article III, paragraph 10(s) of the Trust Agreement, provide in Article VI that the Trustees "shall likewise secure bonds for all administrative personnel of the Fund . . . authorized to handle . . . monies relating to the Fund."
The Trustees have secured a bond for the Fund's own employees. AGVA employees who collect contributions to the Fund on its behalf are not covered by the Fund's bond but appear to be covered by an independent bond held by AGVA for its own staff. The Operator Trustees assert that AGVA's bond is sufficient for insurance purposes under state and federal law; the AGVA Trustees argue that the Trust Agreement states bonds "shall" be obtained for all persons authorized to handle Fund monies and that AGVA employees qualify as such persons and that the Trust Agreement and certain federal laws
are violated unless the Fund obtains such bonding.
There is no need here to explore the merits of these contentions or the applicability of state or federal laws relating to insurance bonds for welfare funds. The present issue is narrow: must the Trustees under Article III, paragraph 10(d), provide bonds for AGVA employees authorized to collect Fund contributions? There is deadlock on this issue within the powers of the Trustees, and therefore it is ready for submission to an umpire.
(3) Replacement of Fund Manager
Article II, paragraph 3(a), of the Trust Agreement states that the Fund shall be used "by the Trustees" to provide administrative staff (among other things) for the Fund. The Rules and Regulations of the Fund state in Article V, section 3, that the Chairman of the Fund shall "with the approval of a majority of the Board of Trustees, appoint and remove, employ and discharge, and fix compensation of all servants, agents, employees, etc." Article VII of the Rules states in paragraph 3 that "the Trustees may, by a majority vote, appoint such administrative, functionaries and establish their tenure, if any, their salaries and their duties."
The AGVA Trustees seek to replace the Manager of the Fund. Without exploring the merits of the deadlocked Board motion to discharge the present Manager, it is clear that it is a question of Fund administration. The respondents urge that the Board delegated the duty of initiating hiring and firing to the Board Chairman, and that the Trustees cannot raise the issue independently of the Chairman. However, the Trustees' fiduciary duties under Article II of the Trust Agreement to supervise management of the Fund must take precedence over the designation of responsibility in the Chairman. The same Rules and Regulations that delegate to the Chairman also re-assert the authority for the Trustees as a whole to appoint and establish tenure for staff. The competing constructions of the Rules and the decision whether or not to replace the Manager are within the powers of the Board and suitable, in the case of a deadlock, for determination by an umpire.
(4) and (5) Removal of Trustees
Removal of Trustees is governed by Article III, paragraph 6, of the Trust Agreement, which provides for removal "at will as provided herein or in the Rules and Regulations." Article III, paragraph 16, states that "an Operator shall cease to be an Operator within the meaning of this Agreement and Declaration of Trust when he no longer engages members of AGVA . . ." Article VII of the Fund's Rules and Regulations provides that Operator Trustees may be removed, "either with or without cause, at any time, by a majority of the Trustees appointed by the Operator(s)."
At the June 2, 1970 meeting of the Trustees, the AGVA Trustees declared that they would not recognize the Operator Trustees as properly appointed, since none had any ties to actual Operators as that status is defined in the Trust Agreement. AGVA Trustee Singleton moved that the existing Operator Trustees "remove themselves as Trustees and any one else not in a contractual arrangement." This motion was countered by Operator Trustee Hamid's motion that "Miss Singleton not be permitted to act on behalf of the AGVA Trustees since she is a paid employee. Also that only the legally appointed AGVA trustees speak for themselves." Votes on both motions were deadlocked.
As to issue 4, the Operator Trustees decline to exercise their authority to replace themselves, and the wish of the AGVA Trustees that they do so does not create a deadlock in the exercise of powers held by the whole Board of Trustees under the Trust Agreement. While a deadlock might exist, given the posture of both groups of Trustees, if the AGVA Trustees sought to amend the Rules to change the system of replacement of Operator Trustees, no such motion has been made. There is, therefore, no issue which an umpire would be empowered to decide.
On issue 5, the AGVA Trustees assert that the statutory requirements of 29 U.S.C. § 186(c)(5)(B) have not been met, since the Operator Trustees have not submitted a list of neutral persons to serve as an umpire on that issue.
This deficiency is, under the statute, fatal to a petition for an appointed umpire. Accordingly, the court is without power to act on the merits at the present time.
An umpire will be appointed pursuant to 29 U.S.C. § 186 to decide the issues determined above to be arbitrable. Each of the parties shall separately within 20 days of the filing of this memorandum submit to the court in writing the names of five persons proposed as umpire, indicating by number respective priorities of choice. Unless none of the names so suggested appears on both lists, the court will appoint an umpire from such lists. In the event that no name appears on both lists, the court will make an independent appointment.
In accordance with Article III, paragraph 10(a), of the Trust Agreement, the Fund shall bear the costs of the umpire.
The petition for the appointment of an umpire as to issues 4 and 5 is denied, without prejudice to renewal upon completion of the proper procedural requirements.
It is so ordered.