The opinion of the court was delivered by: PLATT
This is a dispute between one union local's (Local 50's) health benefits fund and a second union local's (Local 3's) welfare fund, and their respective trustees, over entitlement to monies now held in part by each fund. Both locals are unincorporated labor organizations, although each is a constituent of the Bakery and Confectionery Workers Union, AFL-CIO.
The instant lawsuit was precipitated by an August 8, 1979 representation election in which Bakery and Confectionery Workers Local 3 ousted Bakery and Confectionery Workers Local 50 as the collective bargaining agent for approximately 1300 employees of the Entenmann's, Inc. bakery in Bay Shore, Long Island. On September 1, 1979, as a result of that election, Local 3 assumed all duties and obligations of Local 50 under a collective bargaining agreement then in effect between the latter and Entenmann's. The agreement covered the period from May 1, 1977 to April 30, 1980. This, and all prior agreements, provided that Entenmann's would make contributions to the bargaining agent's welfare fund,
and that the bargaining agent would purchase an insurance policy providing a variety of group health and welfare benefits to bargaining unit members and their dependents. With this as background, we shall now outline each party's claim.
Plaintiffs, the Local 50, Bakery and Confectionery Workers Union, AFL-CIO, Health Benefits Fund, and its Trustees (hereinafter, the Local 50 Fund), paid to its insurance carrier $101,228.58, the premium due on September 1, 1979, to cover bargaining unit employees. However, the welfare fund contribution due on September 15, 1979 -- in the amount of $151,837.58
-- was paid by Entenmann's to the defendant, the Local 3, Bakery and Confectionery Workers Union, AFL-CIO, Welfare Fund, and its Trustees (hereinafter, the Local 3 Fund), and not to the Local 50 Fund.
The Local 50 Fund seeks declaratory and injunctive relief ordering the Local 3 Fund to (1) reimburse it for the $101,228.58 September 1, 1979 insurance payment; and (2) pay over to it the $151,837.58 contribution due September 15, 1979, which Entenmann's paid to the Local 3 Fund.
B. LOCAL 3 FUND'S AND INTERVENOR'S CLAIMS
By order dated July 14, 1982, this Court permitted Entenmann's to file an intervenor complaint in this action. Both Entenmann's and, by way of a counterclaim asserted in its answer, the Local 3 Fund
seek a declaratory judgment, an accounting, and injunctive relief with regard to certain reserves remaining in the Local 50 Fund. As of October 1, 1979, these reserves amounted to approximately $3,450,416. That sum consists of contributions made by Entenmann's and by other employers whose employees are or were represented by Local 50. According to calculations developed by the Local 3 Fund, the portion of these reserves attributable to contributions by Entenmann's is at least $651,239. The Local 3 Fund seeks an order transferring this amount to it.
Both the Local 50 Fund and the Local 3 Fund (but not Entenmann's) now move for summary judgment on the claim of the Local 50 Fund. Both sides agree that no factual issue remains in dispute as to this claim. In addition, Entenmann's moves for summary judgment on its complaint, as does the Local 3 Fund on its counterclaim. The Local 50 Fund likewise moves for summary judgment as to the claims of the defendant and the intervenor.
A. THE LOCAL 50 FUND'S CLAIM
1. Jurisdiction. In a Memorandum & Order dated June 9, 1981, this Court held that the Local 50 Fund had properly pleaded jurisdiction under § 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185 (1978), in view of its allegations as to the existence of three contracts (the first two of which involve the collective bargaining agreement): (1) between Entenmann's and Local 50; (2) between Entenmann's and Local 3; and (3) between Local 50 and Local 3 (the September, 1979 interfunds agreement). We see no reason to alter or supplement our discussion on that point. The Local 50 Fund also attempted to found jurisdiction upon LMRA § 302(c)(5)(B), 29 U.S.C. § 186(c)(5)(B) (1982), an issue that this Court did not need to decide in its June 9, 1981 Order. Plaintiffs have now abandoned this allegation, and we will not address it here.
2. The Merits. The facts are not in dispute. The Local 50 Fund's position rests entirely on the argument, not illogical on its face, that employer contributions to the fund are "retrospective," while insurance payments by the union are "prospective." To be specific, the Local 50 Fund contends that, because each contribution by Entenmann's on the fifteenth of a given month was calculated on the basis of hours worked by bargaining unit employees during the immediately preceding month,
the employer contribution "covered" the immediately preceding month. Conversely, insurance payments made on the first of a given month "covered" that month. Thus, according to this argument, the September 15, 1979 contribution by Entenmann's should have been paid to the Local 50 Fund and not the Local 3 Fund because it in effect was reimbursement for the Local 50 Fund's payment on August 1, 1979 of its group insurance premiums.
By this same line of reasoning, the Local 3 Fund should have paid the September 1, 1979 insurance premium because it would be (and was) reimbursed for it through the October 15, 1979 contribution from Entenmann's.
But here the Local 50 Fund's seemingly logical analysis breaks down. First of all, it should be obvious that mere calculation of employer welfare fund contributions on the basis of the number of hours worked in a given month does not necessarily mean those payments cover that month in the sense that they constitute reimbursement for insurance premiums. In a similar vein, insurance premium payments are not necessarily prospective vis-a-vis welfare fund contributions merely because the policy itself requires that the fund pay the premium before benefits are provided. Second, as a matter of common sense, we expect that a welfare fund would have to build up reserves before it could begin to pay insurance premiums. Thus, employer contributions should be prospective and premium payments retrospective, not the other way around.
Turning to the facts of the case as presented by the Local 3 Fund (and not disputed by the plaintiffs), it is clear that these observations are borne out. The collective bargaining agreement (para. 19(b)) states in the following language that the employer's obligation to make welfare fund contributions accrues as soon as each employee starts work:
The term "employee" for the purpose only of determining the employees for whom contributions shall be made and the amounts thereof, shall mean all of the Employer's employees for whom the Union is the Collective Bargaining Representative, commencing from the first date of employment.
Thus, although actual payment of the contribution for each employee may have occurred between 15 and 45 days after that employee joined Entenmann's, the payment "covered" the period beginning on that day and terminating at the end of the month. Conversely, the group insurance plan provided by the Local 50 Fund to members of the Entenmann's bargaining unit provides as follows:
You will become insured for yourself and your dependents on the first day of the month following a period of three consecutive months during which you work at least 15 days a month.
Taken together, these two provisions clearly demonstrate that Entenmann's made at least two months of contributions to the Local 50 Fund, and at least one more month's obligation accrued, before the Local 50 Fund paid insurance premiums on behalf of any employee. Proceeding forward from the beginning, it is equally clear that the Local 50 Fund was obliged to pay the September 1, 1979 premium because it had already been reimbursed for it by Entenmann's.
The Local 50 Fund's argument also is undercut by the terms of the collective bargaining agreement in effect between Local 3 and Entenmann's at the time of the September 15, 1979 welfare fund contribution. The agreement (para. 19(f)) states that
All moneys paid [by Entenmann's] . . . will be used . . . for the purpose of the purchase of group insurance benefits for the employees [of Entenmann's] and their dependents . . . .
Thus, if the Local 3 Fund had paid over the September 15, 1979 welfare fund contribution to the Local 50 Fund, it would have done so in direct breach of its collective bargaining agreement -- an agreement originally negotiated by Local 50.
We need not belabor this point, for it has been amply demonstrated that the Local 50 Fund's claim must fail. Therefore, as to it, the plaintiffs' motion for summary judgment is denied and the defendants' motion is granted.
B. THE LOCAL 3 FUND'S AND INTERVENOR'S CLAIMS
1. Jurisdiction. In broadest outline, the Local 3 Fund alleges that jurisdiction exists over its counterclaim because the counterclaim either is compulsory under Fed.R.Civ.P. 13(a) or is properly ancillary, there being an independent basis for federal jurisdiction in LMRA § 302(c)(5). If jurisdiction exists over the Local 3 Fund's counterclaim, it will also exist over Entenmann's intervention.
The Local 3 Fund contends that its counterclaim is compulsory because, in the language of Fed.R.Civ.P. 13 (a), it "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim . . . ." That transaction or occurrence is said to be "the change from Local 50 to Local 3 as the collective bargaining representative for Entenmann's employees, and the consequences of that event on the two Funds." Defendants' Brief, at 46.
In response, the Local 50 Fund argues that the claim and counterclaim involve entirely different transactions. Specifically, it points out that its claim focuses on the payment of a single welfare fund contribution (on September 15, 1979) and a single insurance premium payment (on September 1, 1979), while the Local 3 Fund's counterclaim places in issue the right to approximately 10 years of reserves accumulated by the Local 50 Fund. Plaintiffs' Reply Brief, at 2-4.
The determination of whether a party has set forth a compulsory counterclaim is complicated by "the absence of any accepted test" to guide the courts. Federman v. Empire Fire and Marine Insurance Co., 597 F.2d 798, 811 (2d Cir. 1979). It appears that in analyzing this issue the Second Circuit ...