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LEWART v. WOODHULL CARE CTR. ASSOCS. & ALBERT SCHW

October 27, 1982

MORTIMER A. LEWART, as Executive Director of the NATIONAL BENEFIT AND PENSION FUNDS FOR HOSPITAL AND HEALTH CARE EMPLOYEES and NATHANIEL HACKNEY, as Director of the HOSPITAL LEAGUE/DISTRICT 1199 TRAINING AND UPGRADING FUNDS, Plaintiffs, against WOODHULL CARE CENTER ASSOCIATES and ALBERT SCHWARTZBERG, SIDNEY ESIKOFF and EUGENE KATZ, individually and d/b/a WOOHULL CARE CENTER ASSOCIATES, Defendants and Third-Party Plaintiffs, against DAVID AXELROD, M.D., as Commissioner of the New York State Department of Health, MARK LAWTON, as Budget Director of the State of New York, and DISTRICT 1199, NATIONAL UNION OF HOSPITAL AND HEALTH CARE EMPLOYEES, RWDSU, AFL-CIO, Third-Party Defendants.


The opinion of the court was delivered by: CONNER

OPINION AND ORDER

CONNER, D.J.:

On February 18, 1982, plaintiffs Mortimer A. Lewart, as executive director of the National Benefit and Pension Funds for Hospital and Health Care Employees, and Nathaniel Hackney, as director of the Hospital League/District 1199 Training and Upgrading Funds (the "Funds") instituted this action against defendants Woodhull Care Center Associates and Albert Schwartzberg, Sidney Esikoff and Eugene Katz, individually, and doing business as Woodhull Care Center Associates (the "Employer") to recover certain payments alleged to be owed to the Funds under the terms of two successive collective bargaining agreements entered into between defendant Employer and third-party defendant District 1199, National Union of Hospital and Health Care Employees, RWDSU, AFL-CIO (the "Union"). The Funds were not parties to either of the collective bargaining agreements, but claim their rights as third-party beneficiaries of those agreements. On April 6, 1982, the Employer filed a third-party complaint against the Union, the Commissioner of the New York Department of Health, and the Budget Director of the State of New York seeking an order declaring the current collective bargaining agreement null and void and indemnification for any liability that the Employer may have to the plaintiff Funds. Subsequently, the claims against the state officials were voluntarily dismissed.

 This matter is currently before the Court on plaintiffs' and defendants' cross-motions for summary judgment pursuant to Rule 56, F.R.Civ.P. Third-party defendant Union has also moved for summary judgment or, alternatively, to have the claims against it dismissed pursuant to Rule 12(b), F.R.Civ.P.

 BACKGROUND

 On July 14, 1981, defendant Employer and the Union signed a collective bargaining agreement (the "Agreement") ending a long, bitter, and sometimes violent, labor dispute that had commenced in January of that year. The dispute arose after the parties were unable to reach a new accord following the expiration on December 31, 1980 of a previous collective bargaining agreement (the "Prior Agreement").

 The Agreement is a comprehensive, eighty-seven-page document covering all aspects of the employer/employee relationship. During the negotiations leading up to the Agreement on July 14, the level of worker's compensation was concededly a major area of disagreement. In the Agreement the Union and the Employer ultimately provided for two separate wage increases as well as for increased Employer contributions to the three Funds. Paragraphs XXI through XXIV of the Agreement set forth the Employer's obligations to the funds. The clear and unconditional language of these paragraphs requires the Employer to pay every month to each of the three Funds a stated percentage of the previous month's payroll.

 Defendant Employer, however, asserts that its obligation to contribute to the Funds never matured because the Agreement is void and unenforceable.In support of this assertion, the Employer raises two claims. *fn1" Defendants' first argument is that the Agreement never became effective because it was subject to an unsatisfied condition precedent. Defendants allege that the Union orally agreed that the Agreement would not take effect unless the Employer received sufficient reimbursement from the Medicaid program to cover the increased labor costs. Both the Union and the Funds deny that the Agreement is predicated upon such performance by the state.

 Defendants also claim that the Agreement is null and void because they were fraudulently induced to sign it. Contemporaneously with their execution of the Agreement on July 14, the Union and the Employer signed two other stipulations relating to the resolution of the labor dispute. One provision of these stipulations provides that ". . . there will be no reprisals of any kind whatsoever against either party or against any employee because of his or her position in supporting or failing to support the strike or any position of either of the parties. . . ." (the "No-Reprisals Clause"). Defendants allege that the Union has not adhered to this provision and never intended to do so, and that they would not have entered into the Agreement had they known that the Union's promise not to engage in reprisals was false and fraudulent.These same two arguments serve as the basis for defendants' third-party claims against the Union, which claims the Union has moved to dismiss.

 LEGAL STANDARD

 In the determination of motions for summary judgment, the applicable legal standard is quite clear. The Court must be satisfied that the moving party has met its burden of establishing that there is no genuine issue with respect to any material fact and that it is entitled to judgment as a matter of law. Rule 56, F.R.Civ.P.; Friedman v. Meyers, 482 F.2d 435, 438-39 (2d Cir. 1973). In making this determination, the Court cannot try issues of fact, but can only determine whether there are issues of fact to be tried. SEC v. Research Automation Corporation, 585 F.2d 31, 33 (2d Cir. 1978). The Court will consider affidavits, depositions, answers to interrogatories, and admissions, but will not give any effect to mere conclusory allegations or denials or to unsubstantiated assertions submitted by a party. Id. Finally, if there is a geunine dispute as to damages, but the Court is convinced that liability is established as a matter of law, it may grant summary judgment on the issue of liability alone. Rule 56, F.R.Civ.P.

 THE CURRENT COLLECTIVE BARGAINING AGREEMENT

 As previously noted, plaintiffs and defendants have cross-moved for summary judgment on the issue of the Employer's liability for contributions to the Funds for the period of time covered by the Agreement, commencing July 14, 1981 and that the plain and unambiguous language of Paragraphs XXI-XXIV of the Agreement requires the payments demanded in this action. Thus, if these Paragraphs are effective, this action becomes a simple suit for collection which may properly be maintained by the Funds as third-party beneficiaries, irrespective of any participation by the Union itself. See Trustees of National Benefit Fund for Hospital and Health Care Employees v. Constant Care Community Health Center, Inc., 669 F.2d 213, 215 (4th Cir. 1982).

 As a legal matter, defendants are not precluded from raising as a defense to the Funds' suit for collection a claim that they are not contractually obligated to the Funds. Although the Supreme Court in Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 102 S. Ct. 851, 70 L. Ed. 2d 833 (1982), recognized that federal labor policy limits the scope of defenses an employer may raise against a pension fund's collection efforts, this limitation presumes the existence of a contractual obligation to the fund. See Lewis v. Benedict Coal Corp., 361 U.S. 459, 4 L. Ed. 2d 442, 80 S. Ct. 489 (1960); see also Huge v. Long's Hauling Co., Inc., 590 F.2d 457 (3d Cir. 1978).This case does not present a situation such as that in Lewis v. Benedict Coal Corp., supra, where the employer claimed an offsetting defense to its concededly operative contractual obligation to contribute to the funds. The issue here is the most basic question of whether the provision creating the duty to pay into the Funds is itself effective. Where, as here, the defenses seek to establish the non-existence of any contractual duties to the Funds, federal labor policy does not preclude them.

 A. The Oral Condition

 Defendants' first argument is that the entire Agreement is null and void because the parties orally agreed that it was not to become effective until the State had provided the Employer with increased Medicaid reimbursement. Defendants characterize this oral agreement as a condition precedent to the existence of the entire Agreement. This Court is not, of course, bound by defendants' legal categorization of their own actions. The classification ...


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