United States District Court, Western District of New York
November 30, 1990
TRUCKMEN'S & WAREHOUSEMEN'S ASSOCIATION OF ROCHESTER; OF ROCHESTER; BOULTER CARTING CO., INC.; GEORGE M. CLANCY CARTING CO., INC.; VOGEL VAN AND STORAGE OF ROCHESTER, INC.; SERVICE STORAGE INCORPORATED; B.G. COSTICH & SONS, INC.; EAST END MOVING AND STORAGE, INC.; GOTTRY CORPORATION; ROCHESTER STORAGE WAREHOUSES, INC.; AND MICHAEL CLANCY, INDIVIDUALLY AND AS A PARTICIPANT IN, AND BENEFICIARY OF, THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, PLAINTIFFS,
THE NEW YORK STATE CONFERENCE AND RETIREMENT FUND; IRVING WISCH, KEPLER VINCENT, T. EDWARD NOLAN, ROCCO F. DE PERNO, VICTOR MOUSSEAU, PAUL E. BUSH, AND JACK CANZONERI, AS TRUSTEES OF THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND; AND AL SGAGLIONE, EXECUTIVE ADMINISTRATOR OF THE NEW YORK STATE CONFERENCE PENSION AND RETIREMENT FUND, DEFENDANTS. JOHN W. MORSE, INDIVIDUALLY AND AS A PARTICIPANT IN, AND A BENEFICIARY OF, THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, PLAINTIFF, V. THE NEW YORK STATE TEAMSTER CONFERENCE PENSION AND RETIREMENT FUND; T. EDWARD NOLAN, ROCCO F. DE PERNO, CURTIS GUNDERSON, PAUL E. BUSH, AND RICHARD MULLER, AS TRUSTEES OF THE NEW YORK TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND; AND AL SGAGLIONE, EXECUTIVE ADMINISTRATOR OF THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, DEFENDANTS.
The opinion of the court was delivered by: Curtin, District Judge.
These cases stem from a dispute over a 1979 stipulation form issued by
the New York State Teamsters Conference Pension and Retirement Fund
("Fund"). The trustees of the Fund ("Trustees") have required employers
to sign this form as a prerequisite to participation in the Fund. As this
court held in Morse v. New York State Teamsters Conference Pension and
Retirement Fund, 580 F. Supp. 180, 185-86 (W.D.N.Y. 1983) (Curtin, J.),
aff'd, 761 F.2d 115 (2d Cir. 1985), this requirement was not an arbitrary
and capricious exercise of the Trustees' authority. The Second Circuit
affirmed, noting that
so long as the trustees act solely in the proper
interests of the Fund and its participant-employees
and do not abuse their powers by arbitrarily
intermeddling in the private management and labor
negotiations of the sponsoring employers, courts
should refrain from faulting their actions.
New York State Teamsters, 761 F.2d at 117. This court's holding in New
York State Teamsters, however, was limited. It
dealt solely with the trustees' insistence upon the
execution of a participation agreement by sponsoring
employers and [this court] was not asked to consider
the capriciousness vel non of any of the agreement's
Id. The cases now before the court specifically allege that provisions in
the 1979 stipulation form are arbitrary and capricious.
The court is presented with opposing motions for summary judgment. Both
sides agree that the issue before the court is whether the actions of the
Trustees in drawing up the 1979 form were arbitrary and capricious. As
this court noted in New York State Teamsters, 580 F. Supp. at 185-86,
aff'd, 761 F.2d 115, "[t]rustees of pension plans may be found to have
acted in an arbitrary and capricious manner when
the trustees of a plan impose a standard not required
by the plan's provisions, or interpret the plan in a
manner inconsistent with its plain words, or by their
interpretation render some provisions of the plan
superfluous. . . .
(quoting Miles v. New York State Teamsters Conference Pension and
Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593
, 599 (2d
Cir.), cert. denied, 464 U.S. 829
, 104 S.Ct. 105
, 78 L.Ed.2d 108
(1983)). Similarly, as noted above, trustees may be found to "abuse their
powers by arbitrarily intermeddling in the private management and labor
negotiations of the sponsoring employers. . . ." New York State
Teamsters, 761 F.2d at 117. The task for this court is to assess each of
the clauses at issue to determine whether the Trustees have overstepped
As an initial matter, defendants raise the question of the parties'
to proceed. In Truckmen's & Warehousemen's Ass'n of Rochester v. New York
State Conference Pension and Retirement Fund, CIV-31-1110C, plaintiffs
include the Truckmen's & Warehousemen's Association of Rochester (an
association of employers), nine corporations, and Michael Clancy, an
alleged participant in, and beneficiary of the Fund.*fn1 In Morse v. New
York State Conference Pension and Retirement Fund, CIV-85-1080C, only
John Morse, an alleged participant in, and beneficiary of the Fund
remains as plaintiff.
As this court made clear in New York State Teamsters, 580 F. Supp. at
183, aff'd, 761 F.2d at 116, employers lack standing to sue under the
limited jurisdictional scope of the Employee Retirement Income Security
Act ("ERISA"). 29 U.S.C. § 1132. This holding has repeatedly been
reaffirmed by the Second Circuit. See Pressroom Unions Printers League
Income Sec. Fund, 700 F.2d 889, 892-94 (2d Cir.), cert. denied,
464 U.S. 845, 104 S.Ct. 148, 78 L.Ed.2d 138 (1983); Tuvia Convalescent
Center, Inc. v. National Union of Hosp. & Health Care Employees,
717 F.2d 726, 729-30 (2d Cir. 1983). Thus, the nine employers and the
association of employers named as plaintiffs in Truckmen's lack standing
Defendants' argue further, however, that the individual plaintiffs are
also "employers" within ERISA, because they are persons "acting directly
as an employer, or indirectly in the interest of an employer, in relation
to an employee benefit plan." 29 U.S.C. § 1002(5) (defining
"employer" under ERISA). As "employers," defendants argue, these
plaintiffs "cannot defeat the intent of Section 1132 and have the duel
[sic] status of an employer/participant to obtain standing." Item 71, at
The difficulty with defendants' argument is that it is too broad. Cases
cited in support of this defendants' last proposition do hold that a sole
proprietor may not enjoy the dual status of employer and employee to gain
standing under ERISA. See Giardono v. Jones, 867 F.2d 409, 411-13 (7th
Cir. 1989); Peckham v. Board of Trustees of the Int'l Bhd. of Painters
and Allied Trades Union, 653 F.2d 424, 427 (10th Cir. 1981). Moreover, an
"independent contractor's decision to independently subscribe to a policy
shared by the company with which it has a contractual relationship does
not transform the contractor into an employee for purposes of ERISA." HCA
Health Serv. of the Midwest, Inc. v. Brown, 1988 WL 71219 (N.D.Ill. 1988)
These cases do not, however, preclude standing for either individual in
these cases. This court's prior decision in New York State Teamsters,
specifically recognized the standing of Mr. Morse.
[D]efendants readily admit that Mr. Morse is a
participant in the Fund, and it is clear that his
expectation of receiving benefits will be affected by
the resolution of this action. Further, Mr. Morse
states that his status in this action is one of a
participant in the defendant Fund and that he is
seeking a clarification and declaration of his rights
under ERISA. Mr. Morse also states that he has never
been a signatory in his personal capacity to any of
the Fund's Participation Agreements or any other
580 F. Supp. at 184, (citations omitted). Moreover, several other courts
have recognized standing of "employers" to sue as participants. See
Peckham v. Board of Trustees of the Int'l Bhd. of Painters and Allied
Trades Union, 724 F.2d 100
, 100-01 (10th Cir. 1983) ("Peckham II") ("We
need not decide whether an employer, qua employer, may bring an action to
enforce a return of contributions mistakenly paid. . . . Plaintiffs
Peckham and Woolum were named participants in the trust; they brought
suit to recover pension rights in their capacities as participants.");
Chase v. Trustees of the Western Conference of Teamsters Pension Trust
Fund, 753 F.2d 744
, 748 (9th Cir. 1985) (agreeing with the
result in Peckham II, but leaving open the question whether plaintiffs
were "participants"); R.M. Bowler Contract Hauling Co. v. Central
States, Southeast and Southwest Areas Pension Fund, 547 F. Supp. 783
(S.D.Ill. 1982) (noting "it is obvious that R.W. Bowler, as an
individual, has standing as an employee-beneficiary under the Act.").
Thus both Mr. Morse and Mr. Clancy have standing to proceed.
II. THE 1979 STIPULATION
A. Paragraph 1(b)
Plaintiffs object to two clauses found in ¶ 1(b) of the 1979
stipulation. See Item 77, Ex. 3. The first clause requires employers to
make contributions to the Fund for all employees doing the same work as
bargaining unit employees, whether or not such employees are members of
the union, and whether they work full time, part time, casually or
seasonally. The second clause says that
in the event there is any agreement between employer
and Union that is contrary to or inconsistent with the
terms of this Stipulation or the rules of the Pension
Fund, such inconsistent provisions shall be null and
void and superseded by the terms of this Stipulation
and/or the rules of the Fund.
The controversy over the first of these clauses did not begin with the
present suit. Plaintiffs note that prior to 1977, collective bargaining
agreements between local Teamsters' unions and local employers required
pension contributions only on behalf of union members. See B. G. Costich &
Sons, Inc. v. N.L.R.B., 613 F.2d 450, 451-52 (2d Cir. 1980). In 1977,
although the collective bargaining agreements did not change, the Fund
claimed that, under the stipulation in effect at that time, employers
owed contributions on non-union employees doing bargaining unit work. See
Boulter Carting Co. v. DePerno, No. 925/78, slip op. at 2 (N.Y. Sup.Ct.
May 9, 1980) (Wagner, J.) (Item 1, Ex. K). Various employers brought suit
against the Fund to bar this requirement. Judge Wagner of the New York
Supreme Court granted the employers summary judgment, "declaring that
based upon the General Trucking Agreement and stipulation [in place at
that time] they were obligated to make pension contributions only on
behalf of employees who are members of [the union]." Id. (citing decision
of Aug. 2, 1978). The Appellate Division, Fourth Department, however,
found the language of the stipulation ambiguous and remanded for a
hearing to clarify its meaning. Boulter Carting Co. v. DePerno,
72 A.D.2d 939, 421 N.Y.S.2d 483, 483-84 (1979). On remand, Judge Wagner
again concluded that the stipulation, which required employers "to
contribute for any and all of [their] regular full-time and any and all
other employees covered by this Agreement," Boulter Carting, No. 925/78,
slip op. at 16, "looked to the collective bargaining agreement to
identify those employees for whom the plaintiff-employers had to make
pension contributions in order to participate in the fund." Id. at 17.
In 1979, the Fund amended the stipulation to remove the ambiguity.
Paragraph 1(b) was substituted for the above-quoted language to make
clear the Fund's requirement that employers contribute on behalf of
non-union and casual employees. Shortly thereafter, this suit was
commenced. The question for the court is whether the Trustees' adoption
of this new language was arbitrary and capricious.
This precise issue was litigated with respect to this Fund before Judge
McAvoy in the Northern District of New York in 1987. New York State
Teamsters Conference Pension & Retirement Fund v. S.M. Flickinger Co.,
1987 WL 8442, No. 85-CV-170 (N.D.N.Y. March 16, 1987). As Judge McAvoy
The only issue before this court is whether the Funds'
requirement that Flickinger make contributions on
behalf of seasonal and casual employees despite the
absence of such a mandate in its collective bargaining
agreement is arbitrary and capricious.
Id. at *3.*fn3
To decide this issue, Judge McAvoy asked the following
(1) whether the Fund's interpretation of the
stipulation executed with Flickinger which requires
that it make contributions on behalf of seasonal and
casual employees is rational, (2) whether the Fund's
adoption of the rule requiring such contributions is
authorized by the terms of the trust indenture and
plan, (3) whether the foregoing rule is consistent
with the plan's purpose of providing benefits to all
employees covered therefor by the collective
bargaining agreements, and (4) whether the rule
represents an arbitrary intermeddling in the
collective bargaining process.
Id. at *3-4 He noted that the Second Circuit, reviewing the Fund's
requirement in the context of an unfair labor practice charge, expressly
left open the question whether these trustees have the right to adopt
pension coverage which modifies the terms of a collective bargaining
agreement. Id. at *4 (discussing N.L.R.B. v. Truck Drivers Local Union
No. 449, 728 F.2d 80
, 85 (2d Cir. 1984)).*fn4
Proceeding to discuss each question, Judge McAvoy first concluded that
the Fund had not misinterpreted its rule requiring contributions on
behalf of non-union seasonal and casual employees. S.W Flickinger, 1987
WL 8442, at *5. This point is not contested in the present cases.
The court next evaluated whether the Fund's rule was authorized under
the Fund's trust indenture. The preamble to the trust provides:
Whereas, Local Unions . . . of the International
Brotherhood of Teamsters . . . has [sic] heretofore
executed and will from time to time execute collective
bargaining agreements with Employers . . . engaged in
the trucking industry and in allied industries which,
among other things, provide and will continue to
provide for the payment by such Employers to the . . .
Fund, . . . periodically, a sum of money more nearly
described in such collective bargaining agreements
between said Contributing Employers and the Union;
Whereas, the sums payable to the Fund as aforesaid
. . . are for the purposes of providing pensions or
retirement benefits to the employees covered therefor
under collective bargaining agreements or supplements
thereto, between the Union and contributing
Now, therefore, in consideration of the premises,
the Trustees declare that they will receive and hold
the Employer contributions and other money or property
which may come into their hands as Trustees hereunder
. . . with the following powers and duties and for the
following uses, purposes and trusts, and none other. . . .
Item 77, Ex. 16, at 1 (emphasis added). Other provisions of the trust
permit the trustees to apply the trust proceeds
To pay or provide for the payment of pensions . . . to
members of the Union covered for pension or retirement
benefits under collective bargaining agreements . . .
or to other persons who may properly come under the
Pension Plan, in such amounts and upon such conditions
as the Trustees shall from time to time determine."
Id. at ¶ 4(b). Further, the trustees have the power to "demand,
collect, receive and hold Employer contributions and take such steps . . .
as may be necessary or desirable to effectuate the collection of such
Employer contributions." Id. at ¶ 2. Judge McAvoy, interpreting these
provisions, reasoned that:
Indisputably, the amount of an employer's contribution
[per hour, per employee] is set by the terms of the
collective bargaining agreement. It does not
necessarily follow, however, that the plan likewise
incorporates the collective bargaining agreement's
definition of the identity of those for whom
must be made. Indeed, the plan itself is silent in
Id. at *5 (emphasis added). Given this gap in the trust indenture, Judge
McAvoy concluded that the Fund's rule was permissible in light of its
authority to administer the Fund. Id. This court agrees with this
Judge McAvoy then considered whether the Fund's rule implemented the
Fund's objective to provide pension benefits for employees covered under
collective bargaining agreements. See supra (second paragraph of trust
preamble; ¶ 4(b)). The court found the rule "reasonable and necessary
to ensure the availability of funds for the payment of benefits to
covered employees. . . ." Id. at *5. Again, this court agrees.
Under the common law, trustees "bear an unwavering duty of complete
loyalty to the beneficiary of the trust, to the exclusion of the
interests of all other parties." N.L.R.B. v. Amax Coal Co., 453 U.S. 322,
329, 101 S.Ct. 2789, 2794, 69 L.Ed.2d 672 (1981). See also RESTATEMENT
(SECOND) OF TRUSTS § 170(1) (1959); IIA A. Scott & W. Fratcher, THE
LAW OF TRUSTS § 170 (1987). ERISA has essentially codified this duty
of loyalty for pension fund trustees. Amax Coal, 453 U.S. at 332, 101
S.Ct. at 2795-96 (citing 29 U.S.C. § 1104(a)(1)).
The Fund's rule benefits covered employees in two important ways.
First, the rule enables employees, who might otherwise not accumulate
enough service credit to become "vested" under the plan, to pick up
valuable service time from their first hours on the job. The Fund counts
all hours for which contributions are made toward an employee's vesting
period. See Item 72, ¶ 4, 5. Under the Fund's rule, casual employees
who move from employer to employer will be fully credited for their time
worked. Second, the rule increases the pension benefits for covered
employees. Once an employee becomes vested, the Fund determines that
person's pension benefits based on a percentage of all contributions made
on their behalf. See Item 72, ¶ 5. By requiring payment from an
employee's first hour of work, the Fund's rule necessarily increases that
employee's ultimate pension benefits. Defendants have listed, by
example, several employees who have been helped by this rule. See Item
72, ¶ 3 & Ex. A.
This rule helps the Fund too, because it requires employers to
contribute on behalf of many employees who may never become vested. If an
employee is not vested, the Fund is not obligated to pay out pension
benefits. This additional money stays with the Fund to increase benefits
for remaining beneficiaries.
Thus, the Fund's rule clearly furthers "the purpose of providing
pension or retirement benefits to the employees covered therefor under
collective bargaining agreements." Item 77, Ex. 16, at 1. It neither
enlarges the class of people who are specified to receive pension
benefits under the collective bargaining agreements, nor does it increase
the per-hour amount that must be contributed for these individuals. As
such it is not arbitrary and capricious.
Finally, Judge McAvoy considered whether the Fund abused its authority
by "arbitrarily intermeddling in labor-management negotiations." S.W.
Flickinger, 1987 WL 8442, *6 (quoting New York State Teamsters, 761 F.2d
at 117). He concluded that it did not. Id. at *6-8. Given the trustees'
authority under the trust instrument, the benefits of the Fund's rule to
employees who receive pension coverage, and the financial stability this
rule provides to the Fund, this court agrees "that the trustees' decision
requiring payments on behalf of all of defendant's employees is not
arbitrary and capricious or an abuse of their discretion." Id. at *8. To
hold otherwise would unnecessarily disrupt the Fund, and would
impermissibly jeopardize the Fund's "soundness by violating a policy
essential to that soundness to accommodate the desires of a single
employer." Talarico v. United Furniture Workers Pension Fund A,
479 F. Supp. 1072, 1082 (D.Neb. 1979).
Nor is the second clause of ¶ 1(b), quoted above, arbitrary or
capricious. A Fund may adopt rules that conflict with
collective bargaining agreements, as long as these rules are not
arbitrary and capricious. Cf. New York State Teamsters, 761 F.2d at 117.
Trustees must follow the terms of the trust, not collective bargaining
agreements. Sinai Hosp. of Baltimore v. National Benefit Fund for Hosp. &
Health Care Employees, 697 F.2d 562, 566 (4th Cir. 1982). The Fund is not
a party to any collective bargaining agreement. See Talarico, 479 F.
Supp. at 1079. It is a wholly independent body. Id. "As a separate
entity, the Fund is not bound by agreements entered into by local
affiliates of the [union]." Id. See also Toensing v. Brown, 528 F.2d 69,
72 (9th Cir. 1975). Therefore, the trust provisions are to govern when in
conflict with contrary provisions in a collective bargaining agreement.
Sinai Hospital, 697 F.2d at 566-67; Gainey v. Vemo, 627 F. Supp. 408,
411-12 (W.D.Wash. 1986).
B. Paragraph 1(a)
Plaintiffs also object to the requirement that the employer is "bound
by all the rules and regulations of the Fund now and/or hereinafter
adopted by the Board of Trustees of the Pension Fund." Item 77, Ex. 16,
¶ 1(a) (emphasis added).
Plaintiffs' argument is twofold. First, federal courts have recognized
the right of trustees to implement administrative rules governing the
Fund as long as they are not arbitrary and capricious. See, e.g., New
York State Teamsters, 580 F. Supp. at 185-86, aff'd, 761 F.2d 115.
Plaintiffs argue that this grants Trustees all the authority they need to
adopt new rules, thus making the provision in the stipulation
unnecessary, arbitrary and capricious. Second, plaintiffs point out there
has been no practical need for this provision. It has only been used
once, they claim, and this rule was subsequently revoked.
Plaintiffs' arguments are without merit. The Trustees by their own
admission are unable lawfully to make any rule that is arbitrary and
capricious. This court is confident that this restriction will keep the
Fund's rules within appropriate bounds.
C. Paragraph 2
Plaintiffs object to several aspects of paragraph 2. The paragraph
Failure on the part of the employer to contribute on
any of his employees as specified herein, shall make
the employer liable for all employee benefit claims
which are incurred during the period of delinquency,
damages, reimbursement to the Fund for the Fund's
attorneys' fees, auditors' fees, court costs,
disbursements and expenses incurred by the Fund in
recovering the above. In addition the employer must
pay all arrears due the Fund together with liquidated
damages in the sum of ten percent (10%) of the amount
owed to compensate for additional administrative
expenses caused by the delinquency. . . . The late
payment of arrears by the employer shall not in any
way relieve him from the obligations set forth above.
In addition when the employer is notified in writing
by the Fund office that he is delinquent and is told
to pay whatever is involved, he must do so immediately
and after payment he may appeal to the Board of
Trustees for reimbursement, whose decision shall be
final and binding. In the event of failure of the
employer to comply with this final decision, then the
employer and all his employees shall cease to
participate in this Fund, and the employer shall be
responsible for all the benefits and all other charges
Item 77, Ex. 3, ¶ 2. Plaintiffs list three objections to this
(1) it purports to render employers liable for pension
benefits during periods of delinquency, (2) it sets
forth requirements governing review of claimed
delinquencies, and (3) it provides that the failure of
an employer to abide by the trustees' determination
renders the employer liable for its retired employees'
benefits and terminates the employer's further
participation in the Fund.
Item 68, at 24.
Paragraph 2, plaintiffs argue, contrasts with the Internal Revenue
Service's ("IRS") position that the Fund must grant an employee both
eligibility credits and
benefits if the employer is obligated to contribute for that employee's
time worked, whether or not an employer actually makes a contribution to
the Fund for that period. Defendants do not quarrel with the IRS'
position. See Item 77, Ex. 7, ¶ 4(f); Item 74, at 83-84; Item 71, at
9. See also S.W. Flickinger, 1987 WL 8442 (noting "ERISA requires funds
to credit an employee with service toward the vesting of his benefits
even where the employer never remitted corresponding contributions.")
(citing 29 U.S.C. § 1052(a)(3)(A), (C), 1053(b)(2)).
Plaintiffs further allege that defendants have stipulated the Fund will
not turn away contributions from employers and employers will not have
responsibility for payment of pension benefits to vested beneficiaries.
See Item 68, at 25-26. Defendants have not conceded these points. See
Item 71, at 7, 9.
Plaintiffs objections and allegations with respect to paragraph 2 are
without merit. As this court held in New York State Teamsters, 580 F.
Supp. at 185-87, aff'd 761 F.2d 115, it is not arbitrary or capricious
for the Fund to require an employer to sign a stipulation form as a
prerequisite to participation in the Fund. Moreover, under the trust
indenture, the Trustees have the power to
demand, collect, receive and hold Employer
contributions and take such steps, including the
institution and prosecution of or in the intervention
in any proceeding at law, in equity or in bankruptcy,
or in an assignment for the benefit of creditors, as
may be necessary to effectuate the collection of such
Item 77, Ex. 16, ¶ 2 (emphasis added). The court concludes that
paragraph 2 of the 1979 stipulation is an entirely permissible set of
rules designed to force delinquent employers to make the contributions
required of them under the applicable collective bargaining agreement.
Plaintiffs object that paragraph 2 renders employers liable for pension
benefits during periods of delinquency. Under the trust indenture,
"receipt given by the Trustees for any monies or other properties
received by them shall effectively discharge the person or persons paying
or transferring the same. . . ." Item 42, Ex. 16, ¶ 12(b). This
paragraph relieves employers of liability for pension benefits to the
extent they have properly paid therefor under the collective bargaining
agreement. Moreover, the Fund has admitted it is liable to pay employees
pension benefits for which an employer was obligated to pay under the
collective bargaining agreement, even if that employer did not pay the
Fund. See supra. But neither of these rules relieve employers of
liability for these same pension benefits if they have failed to make
their required payments to the Fund. A rule holding the employer liable
to the Fund for such benefit claims is certainly not arbitrary and
Nor is it arbitrary and capricious for the Fund to terminate employers
who fail to make their required contributions. Indeed, it is hard to
imagine how a Fund could operate any other way given its liability to
employees upon their retirement. Compliance with Fund rules simply must
be allowed to control participation in the Fund. See New York State
Teamsters, 580 F. Supp. at 186-87, aff'd 761 F.2d 115; N.L.R.B. v. Amax
Coal Co., 453 U.S. at 333, 101 S.Ct. at 2796; Sinai Hospital, 697 F.2d at
567; Gainey v. Vemo, 627 F. Supp. at 411-12; Talarico, 479 F. Supp. at
1080; 29 U.S.C. § 1103(a).
Finally, it is not arbitrary and capricious for the Board of Trustees
decisions on appeal to be "final and binding." Item 42, Ex. 16, ¶ 2.
By law, such decisions may not be themselves arbitrary and capricious.
New York State Teamsters, 580 F. Supp. at 186-87, aff'd 761 F.2d 115.
D. Strike Clause, Paragraphs 2 and 3
Plaintiffs oppose clauses found in paragraphs 2 and 3 which permit the
union to strike in the event an employer is delinquent in his
contributions. If the union does strike, under these clauses: (1) the
union shall not be bound by an arbitration or no strike clause in its
agreement, and (2) the employer shall be liable to the employees for all
time lost during such stoppage, and to the Fund for all contributions
due. Item 42, Ex. 16, ¶¶ 2, 3.
Plaintiffs note that this clause has never been used. According to
testimony by Al Sgaglione, Executive Administrator of the Fund, since he
began working for the Fund in 1980, there has never been a discussion
among the Trustees concerning a need to use this clause: Item 74, at 76.
The only time it was mentioned was in 1989, when the Fund's attorney
apparently recommended removing the provision from the Fund's stipulation
form. Id. Plaintiffs claim this clause is unnecessary as federal law
grants the trustees ample enforcement authority without it.
Defendants counter that this clause gives the fund considerable
leverage in collecting contributions from employers. This threat alone,
even if never used, may induce some employers to come forward with
delinquent employee contributions, defendants argue.
The court finds this clause to be outside the scope of the Trustees
authority under the trust indenture, and thus arbitrary and capricious.
See New York State Teamsters, 580 F. Supp. at 186-87, aff'd 761 F.2d 115.
Under previously quoted language, the Trustees "shall have the power to
demand, collect, receive and hold Employer contributions and take such
steps . . . as may be necessary or desirable to effectuate the collection
of such Employer contributions." Item 77, Ex. 16, ¶ 2. This language
grants the Trustees the power to themselves take whatever steps may be
necessary to collect from delinquent employers. It does not, however,
grant the Trustees the power to authorize others to take coercive actions
against such employers in violation of their collective bargaining
agreements with these same employers.*fn5 As Mr. Sgaglione himself
I have to be honest with you. In the ten years [I have
worked for the Fund], I don't know what [the strike
clause] means. It doesn't really have anything to do
with the Fund, or the Fund doesn't do anything to
influence or encourage or get involved in a labor
Item 74, at 77.
E. Paragraph 4
Plaintiffs object to the breadth of paragraph 4, which allegedly
permits the Fund to "at any time check any and all records of the signing
employer." Item 68, at 30.
Paragraph 4 cannot be read so broadly. Paragraph 4 provides, in part,
that the Fund "may at any time check the payroll records of any and all
employees of the employer covered by this Stipulation. . . ." Item 77,
Ex. 3, ¶ 4 (emphasis added). This language is clearly within the
permissible limits set by the Supreme Court. See Central States, Southeast
and Southwest Areas Pension Fund v. Chicago-St. Louis Transp. Co.,
472 U.S. 559, 565-74, 105 S.Ct. 2833, 2837-42, 86 L.Ed.2d 447 (1985). In
Central States, the Supreme Court upheld the right of fund trustees to
conduct field audits to check the payroll records of
not-concededly-covered employees. Such authority was not in conflict with
ERISA's goal to provide trustees with mechanisms to identify all the
beneficiaries of a fund so they may be aware of their status and rights
under the trust's terms. Id. 472 U.S. at 569-74, 105 S.Ct. at 2839-42.
Paragraph 4's scope does not exceed the clause reviewed in Central
States, and is therefore not arbitrary and capricious.
F. Paragraphs 5 and 8
Plaintiffs object to paragraphs 5 and 8 of the 1979 stipulation, which
together suggest that an employer who fails to make contributions on all
its employees shall become liable to those employees for their pensions,
while the Fund shall not be liable.
As an initial matter, the court finds paragraph 5 to be permissible.*fn6
It essentially inserts into the stipulation the rule found in the trust
indenture, Item 77, Ex. 16, ¶ 12(b), that relieves employers of their
pension responsibilities once they have made their required contributions
to the Fund.
Paragraph 8, on the other hand, is impermissible. It provides:
The employer agrees that should he not make
contributions on 100% of all his Bargaining Unit
employees as required herein, the Pension and
Retirement Fund will not pay nor be liable or
obligated to pay any Pension and Retirement or other
benefits to all his employees involved, whether or not
contributions were made on such individuals, in which
event the employer shall pay to any or all such
employees any and all Pension and Retirement or other
benefits. . . .
Item 77, Ex. 3 (emphasis added). As discussed above, defendants have
conceded their liability to employees for whom an employer is obligated
to contribute, even if the employer fails to make these contributions.
See supra part II(C) (citing Item 77, Ex. 7, ¶ 4(f); Item 74, at
83-84; Item 71, at 9). See also Item 74, at 10. Moreover, the Trustees
have no authority under the trust indenture to hold employers liable to
employees for unpaid pension contributions. The Trustees may only hold
employers liable to the Fund for these contributions. See supra part
II(C) (discussing Trustees' authority under trust instrument).
G. Paragraph 10
Paragraph 10 provides that "[p]ayments to the Fund must be paid by the
employer for the employees' paid vacations and holiday periods." Item
77, Ex. 3. The Fund has stipulated that, unless collective bargaining
agreements provide otherwise, double contributions will not be required
for employees working during their paid holiday periods. Item 74, at
7-8. This stipulation appears to have resolved the dispute over this
H. Paragraph 11
Paragraph 11 requires:
If an employee is granted a leave of absence, the
employer shall collect from said employee, prior to
the leave of absence being effective, sufficient
monies to pay the required contributions into the
Pension and Retirement Fund during the period of
absence. In the event the employer grants a leave and
does not comply with this, the employer must pay the
contributions subject to all other requirements of
paragraph 2 herein.
Item 77, Ex. 3 (emphasis added). Plaintiffs object that this rule amounts
to blatant intermeddling in employer-employee relations. Moreover,
plaintiffs note, the Fund has since modified this provision to make the
rule dependant on union-employer negotiations. See Item 74, at 5 (citing
Trustees meeting of June 12, 1989).
The court agrees that to require employers to collect from their
employees monies to cover the employers' required contributions to the
Fund is arbitrary and capricious. The Fund may properly adopt rules which
facilitate contributions, but a requirement that employers collect such
contributions from employees does nothing to enrich the Fund unless the
employer takes the next step and turns over these monies. This holding
does not, however, relieve employers of the obligation to make pension
contributions during periods of employee absence. Cf. 29 C.F.R. §
2530.200b-2(a), 2530.200b-3(a) (1990) (counting leaves absence towards
hours of service which must, as a minimum, be credited for employees).
I. Paragraph 14
Finally, plaintiffs object to paragraph 14, which covers contributions
during periods of illness or injury to an
employee. It requires that whenever a labor agreement supplies benefits
for illness or off-the-job injury, the employer must contribute to the
Fund: (a) for four weeks, if a regular employee is absent because of
illness or off-the-job injury and notifies the employer of such absence,
or (b) until such employee returns to work, but not for more than twelve
months, if a regular employee is injured on the job. These periods may be
changed by collective bargaining if the union and employer both initial
Plaintiffs objection to this paragraph is inappropriate. By its plain
terms it may be modified by collective bargaining. As such, its inclusion
in the stipulation is not arbitrary and capricious.
To review the conclusions of each section:
Plaintiffs Morse and Clancy have standing to proceed.
II. THE 1979 STIPULATION
A. Paragraph 1(b)
The Fund's rule requiring contributions to be made on non-union and
casual employees is not arbitrary and capricious.
Further, as a general matter the Trustees may prescribe rules in
conflict with such agreements and not exceed their authority.
B. Paragraph 1(a)
The Trustees may make any rule that is not arbitrary and capricious.
The stipulation's requirement binding employers to compliance with such
rules is not itself arbitrary and capricious.
C. Paragraph 2
The provisions of paragraph 2 are not arbitrary and capricious. They
clearly delineate a delinquent employer's obligations to the Fund.
D. Strike Clause, Paragraphs 2 and 3
The Strike Clauses of paragraphs 2 and 3 are impermissibly arbitrary
E. Paragraph 4
Paragraph 4, which permits the Fund to audit an employer's payroll
records, is not arbitrary and capricious.
F. Paragraphs 5 and 8
Paragraph 5's provisions are not arbitrary and capricious. Defendant
admits that paragraph 8, on the other hand, exceeds its authority.
G. Paragraph 10
No controversy appears to remain over paragraph 10.
H. Paragraph 11
Paragraph 11, to the extent it requires employers to collect from
employees contributions due for periods of absence, is arbitrary and
I. Paragraph 14
Paragraph 14, because it may be modified by collective bargaining
agreement, is not arbitrary and capricious.
With this order the preliminary injunction issued in the Truckmen's
case on April 9, 1982, Item 16, and amended on June 23, 1982, Item 19, is
hereby lifted. Also lifted is the temporary restraining order issued in
the Morse case on August 30, 1985, Item 4 (Morse), and extended on
September 30, 1985, Item 6 (Morse).