Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Local 50 v. Local 3

April 19, 1984

LOCAL 50, BAKERY AND CONFECTIONERY WORKERS UNION, AFL-CIO, HEALTH BENEFITS FUND AND TRUSTEES OF THE LOCAL 50 BAKERY AND CONFECTIONERY WORKERS UNION, AFL-CIO, HEALTH BENEFITS FUND, PLAINTIFFS-APPELLANTS,
v.
LOCAL 3, BAKERY AND CONFECTIONERY WORKERS UNION, AFL-CIO, WELFARE FUND AND TRUSTEES OF THE LOCAL 3, BAKERY AND CONFECTIONERY WORKERS UNION, AFL-CIO, WELFARE FUND, DEFENDANTS-APPELLEES, ENTENMANN'S INC., INTERVENOR-APPELLEE.



Appeal from an order of the United States District Court for the Eastern District of New York, Thomas C. Platt, Judge, granting summary judgment in favor of a successor union's health benefits fund and against a predecessor union's similar fund. The principal issue involves the funds' relative liability for insurance premiums and entitlement to past employer contributions when the employees' changed membership from one union to the other. Affirmed in part, and reversed in part.

Author: Cardamone

Before: MESKILL, KEARSE and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judges:

The principal issue presented on this appeal is to what extent a union's health benefits fund must account to a successor union's fund, and vice versa, for employer contributions and insurance payments previously made on behalf of employees who have since shifted their union allegiance from one local to another. Nearly a million dollars is at stake in the immediate dispute. Equally important are the far reaching consequences of our decision, for today's determination necessarily touches on important questions of federal jurisdiction as well as the policies underlying an employee's freedom to choose his collective bargaining representative.

Plaintiffs, a union local and its affiliated health benefits fund, appeal from an order of the United States District Court for the Eastern District of New York (Platt, J.) entered March 28, 1983, denying their motions for summary judgment on their claims and granting defendants' and intervenor's motion for summary judgment on their counterclaims. On June 24, 1983 the district court entered a final judgment in favor of defendants on the counterclaim in the amount of $459,251 plus prejudgment interest of $246,532.27 and dismissed plaintiffs' claims.

I BACKGROUND

Entenmann's, Inc., famous for its chocolate chip cookies and other baked goods, owns and operates a bakery in Bayshore, Long Island, where it employs about 2,000 workers.Local 50, Bakery and Confectionery Workers Union, AFL-CIO and Local 3, Bakery and Confectionery Workers Union, AFL-CIO are affiliates of the International Union of Bakery, Confectionery and Tobacco Workers Union and, for collective bargaining purposes, represent baking industry employees in the New York area. Pursuant to collective bargaining and trust agreements, each Local established a pooled, multiemployer welfare fund. Both bunds are trust funds within the meaning of section 302(c)(5) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186(c)(5) (1982), and benefit plans for purposes of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1002 (1982). Accordingly, contributions are made to them from employers, like Entenmann's, on behalf of their employees, and fund proceeds are used to purchase insurance, which provides group health and welfare benefits for those employees and their dependents.

For many years prior to September 1, 1979 Entenmann's employees were represented by Local 50. All employer contributions were paid into the Local 50, Bakery and Confectionery Workers Union, AFL-CIO, Health Benefits Fund (Local 50 Fund or Local 50), and the trustees of that Fund were responsible both for purchasing insurance and distributing employee benefits. In early August, 1979 Entenmann's workers voted to make Local 3 their new bargaining representative, effective September 1. The Local 3, Bakery and Confectionery Workers Union, AFL-CIO, Welfare Fund (Local 3 Fund or Local 3) was to become the depository of Entenmann's contributions, and its trustees were to assume the duties then held by the Local 50 Fund's trustees.

To facilitate an orderly transfer of responsibilities, the parties agreed (without prejudice to their claims now before us) that Local 50 would pay the insurance premiums, due September 1, covering Entenmann's employees for the month of September and Entenmann's would make its monthly contribution, due September 15, directly to Local 3. Thus, Local 50 paid the September 1 premium of $101,228.58, and Entenmann's paid to Local 3 the September 15 welfare contribution of $151,837.58. Apart from these two sums there existed in the Local 50 Fund a reserve of approximately $3,450,416 as of October 1, 1979. A portion of this reserve represented past contributions made by Entenmann's on behalf of its employees (Entenmann's employees allegedly constituted more than 25 percent of the Fund's participants). Since Local 50 did not transfer any part of this reserve to Local 3, it would subsequently have inured solely to the benefit of the remaining participants in the Local 50 Fund, and Entenmann's workers would have derived no benefit from that portion of their past contributions.

As made clear by the ensuing claims and counterclaims, neither Local was content with these arrangements. Local 50, plaintiff-appellant in this action, asserted in its amended complaint that because Local 3 represented Entenmann's employees as of September 1, 1979 the insurance premiums due that day should have been paid by the Local 3 Fund. Additionally, it alleged that because Entenmann's September 15 contribution was based on the number of hours worked by its employees during August 1979 (when they were represented by Local 50), that contribution should have been made to the Local 50 Fund. As a result, Local 50 and its trustees sought to be repaid both the September 1 premium payment of $101,228.58 and the September 15 welfare contribution of $151,837.58. In its answer Local 3 denied that it owed Local 50 these two amounts and asserted as a counterclaim that the reserves in the Local 50 Fund attributable to past payments made by Entenmann's on behalf of its employees should be paid over to it. Entenmann's successfully intervened in this action. It sided with Local 3 and argued that the court's disposition of the counterclaim would have a serious impact on the amount of future contributions it might be compelled to make.

Following discovery, both Funds moved for summary judgment on all claims and counterclaims. In a published opinion dated March 28, 1983 the district court dismissed the claims of Local 50 and rendered judgment for Local 3 on its counterclaim. Local 50, Bakery and Confectionery Workers Union, AFL-CIO, Health Benefits Fund v. Local 3, Bakery and Confectionery Workers Union, AFL-CIO, Welfare Fund, 561 F. Supp. 205 (E.D.N.Y. 1983).

With respect to Local 50's claims, Judge Platt reasoned that in as much as insurance premiums must be paid before benefits will be provided and because a welfare fund ;must build reserves before it is in a position to pay insurance premiums, employer contributions must be made before the welfare fund can make premium payments, not the other way around as Local 50 argues.In other words, first, the employer makes its contributions to the fund, then, when a reserve is builty, the fund pays insurance premiums and, finally, the employees receive their insurance benefits. Local 50 received contributions from Entenmann's prior to September 1 and built a reserve for the sole purpose of paying future premiums. Therefore, it was obliged to pay the September 1 premium from those reserves. Judge Platt reasoned similarly with regard to Entenmann's September 15 contribution. He believed that the number of hours its employees worked in August, 1979 was not the relevant factor, but rather that the contribution was earmarked for the payment of insurance premiums in October and thereafter.

Judge Platt's separate analysis of the counterclaim turns primarily on issues of federal jurisdiction. Without resolving whether Local 3's counterclaim was compulsory, he found an independent jurisdictional basis in section 302(e) of the LMRA. He concluded that this provision empowers federal courts to remedy structural defects in employee welfare funds, and that a plan whose provision violated section 302(c)(5) -- providing that welfare fund contributions must be "for the sole and exclusive benefit of the employees of such employer, and their families and dependents" -- constituted a structural defect.Accordingly, Judge Platt ordered Local 50 to pay to Local 3 that portion of its reserves attributable to Entenmann's so that Entenmann's contributions would inure to the "sole and exclusive benefit of [its] employees."

We find the district court's analysis quite compelling, at least with respect to Local 3's counterclaim and that portion of Local 50's claim arising from the September 1, 1979 insurance premium payment. Entenmann's September 15 contribution, however, is another matter. Because that contribution was based on the number of hours worked by Entenmann's employees in August, it makes sense to infer that the contribution accrued during the month of August -- a month in which Entenmann's employees were represented by Local 50. Accordingly, we believe Entenmann's should have paid its September 15 contribution to the Local 50 Fund. This, in turn, would increase the amount of Local 50 Fund reserves attributable to Entenmann's and thus the amount of reserves the Local 50 Fund must transfer to the Local 3 Fund on its counterclaim.

In light of these modifications, the details of which are set forth below, the judgment of the district court is affirmed in part and reversed in part.

II EQUITIES

Before beginning an analysis of the law, it is helpful to recognize some of the equities at issue. On its face, this case deals with the rights of employees to reap the benefits of employer contributions made in lieu of wages. Viewed in this light, the problem here might be considered one of entitlement on the part of Entenmann's employees or, alternatively, unjust enrichment of those workers who retain Local 50 as their collective bargaining representative.

Yet a more fundamental problem exists -- one that strikes at the very core of collective representation. Specifically, were we to hold that Local 50 may retain the contributions made by Entenmann's on behalf of its employees, we would be imposing a great disincentive for employees ever to change bargaining representatives. Faced with the devil's alternative of either forfeiting their right to a substantial sum of employer contributions or retaining a collective bargaining representative with which they are less than satisfied, employees may well choose the latter. Such a result would not only impinge on free choice in representation, but would also permit unions without penalty to them to become less attentive to their constituencies' demands. See Summers, Union Schism in Perspective, 45 Va. L. Rev. 261, 279 n.84 (1959). We see no necessity to make employees choose between two such bad bargains.

III LOCAL 3's COUNTERCLAIM

From a monetary standpoint Local 3's counterclaim is the major component of this litigation. Moreover, its disposition from a practical standpoint bears directly on Local 50's claims. For ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.