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MASON CONTRS. ASSN. OF AMERICA v. INTERNATIONAL CO

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


May 26, 1994

MASON CONTRACTORS ASSOCIATION OF AMERICA, et al., Plaintiffs,
v.
INTERNATIONAL COUNCIL OF EMPLOYERS OF BRICKLAYERS & ALLIED CRAFTSMEN, et al., Defendants.

The opinion of the court was delivered by: JOYCE HENS GREEN

MEMORANDUM OPINION AND ORDER

 This case involves a dispute over who is properly a trustee of the Bricklayers and Trowel Trades International Pension Fund ("the Pension Fund"). The Pension Fund is a multiemployer pension fund, jointly administered by trustees, an equal number of whom are appointed by labor and an equal number of whom are appointed by management as is required by the Labor Management Relations Act of 1947 ("the LMRA"), codified at 29 U.S.C. §§ 141 et seq. Plaintiffs allege that actions taken by some of the defendants to replace the Mason Contractors Association of America ("MCAA") with the International Council of Employers of Bricklayers and Allied Craftsmen ("ICEBAC") as the body responsible for nominating U.S. Employer Trustees to the Pension Fund constitutes a "structural defect" in violation of the LMRA. In addition, plaintiffs contend that these actions, allegedly violative of the LMRA's requirement of "equal representation," constitute breaches of fiduciary duties owed under both the Employment Retirement Income Security Act of 1974 ("ERISA"), codified at 29 U.S.C. §§ 1001 et seq., and under the common-law.

 MCAA, an international trade association, Joseph F. Szabo ("Szabo"), Robert C. Tubesing ("Tubesing"), and George Miller ("Miller"), three trustees of the Pension Fund, initiated this case. *fn1" The defendants are: ICEBAC, the International Union of Bricklayers and Allied Craftsmen ("the Union"), the Pension Fund, John T. Joyce ("Joyce"), L. Gerard Carlisle ("Carlisle"), Brian Strickland ("Strickland"), Thomas Uzzalino ("Uzzalino"), and Louis Weir ("Weir"), all trustees of the Pension Fund, and Eugene George ("George"), Walter Kardy ("Kardy"), and John Flynn ("Flynn"), three disputed trustees of the Pension Fund. Presently pending are the Parties' dispositive cross-briefs. *fn2"

 BACKGROUND *fn3"

 A. The Pension Fund

 The Pension Fund is an employee benefit plan, commonly referred to as a jointly administered multiemployer pension fund. The Pension Fund is administered pursuant to an Agreement and Declaration of Trust ("the Trust Agreement"). The Trust Agreement, inter alia, controls the number of trustees that can be appointed, *fn4" describes the composition of the Board of Trustees, specifies how trustees are appointed *fn5" and removed, *fn6" and describes the procedure that can be used to amend the Trust Agreement.

 At the present time, the Pension Fund is administered by a Board of Trustees, comprised of six U.S. Employee Trustees, appointed by the Union; six U.S. Employer Trustees, four of whom used to be appointed by MCAA, *fn7" and one appointed by TCAA; three Canadian Employee Trustees appointed by the Union; and three Canadian Employer Trustees appointed by the U.S. Employer Trustees. From the 1970's until the present dispute, with the exception of the one TCAA-appointed U.S. Management Trustee, MCAA *fn8" has appointed all of the U.S. Employer Trustees to the Board of Trustees. At this time, ICEBAC has the authority (with the exception of the one TCAA-appointed U.S. Employer Trustee) to appoint U.S. Employer Trustees.

 Plaintiffs Szabo, Tubesing and Miller are all U.S. Employer Trustees of the Pension Fund, appointed to their positions by MCAA. Szabo is Chairman of the Board of Trustees of the Pension Fund.

 B. MCAA

 Plaintiff MCAA is an international trade association that, inter alia, acts as a negotiating representative and collective bargaining agent for its members with the defendant Union and other labor organizations. In 1986, MCAA amended its Constitution and By-laws to allow non-union contractors to become members. In 1987, a second amendment created two classes of membership. The first are called "regular members" -- corporations or individuals engaged in business as mason contractors who are signatories to collective bargaining agreements. The second, "independent members," are corporations or individuals not signatories to any collective bargaining agreements. *fn9" The non-union, independent members, are entitled to full participation in the election of MCAA executive board members and officers.

 It is undisputed that MCAA's decision to give non-union contractors membership in the MCAA created considerable concern on the part of the Union. *fn10" The Union was troubled about the potential impact of MCAA's non-union membership on its appointment of trustees to the Pension Fund and the financial stability of the Pension Fund. According to the Union, the change in the MCAA Constitution and By-Laws focused that concern because the Union believes that: (1) non-union contractors exploit their workers and destroy wage and working standards; (2) non-union contractors are strengthened by being permitted membership in groups like the MCAA; (3) the increase in the market share of non-union contractors poses a threat to the Pension Fund and its beneficiaries; and, (4) decisions made by U.S. Employer Trustees may be influenced by their commitment to the Union because Trustees decide, inter alia, withdrawal liability formulas which make it either more difficult or easier for a contractor to become non-union and withdraw as a contributing employer. *fn11"

 In early 1993, plaintiff Miller, then the Executive Director of MCAA, resigned from that position. MCAA then named Michael Adelizzi ("Adelizzi"), the former director of a organization consisting mostly of non-union contractors, as Miller's successor. Because U.S. Employer Trustees are appointed by MCAA officials, not by the membership at large, this move generated further uneasiness to both the Union and the Pension Fund's U.S. Employee Trustees. *fn12"

 C. The Union

 The Union is a labor union representing bricklayers, masons, plasterers, and other workers in the trowel trades. It negotiates labor agreements with employers, requiring the employer to make regular contributions to the Pension Fund for each employee. Joyce is the President of the Union, Carlisle its Secretary-Treasurer, and Strickland, Uzzalino, and Weir are officers of the Union. Each of these individuals is a U.S. Employee Trustee of the Pension Fund, appointed by the Union.

 D. IMI13

 The International Masonry Institute ("IMI") is an organization established in 1970 by MCAA and the Union for the purpose of promoting the masonry industry. In 1981, IMI became a jointly administered labor/management trust with an equal number of management and labor trustees. Until early 1987, all of the management trustees of IMI were appointed by MCAA, except for one appointed by TCAA. Following the change at MCAA allowing non-union membership, the IMI trustees amended the IMI trust agreement to eliminate MCAA as a trustee-appointing body. *fn14" After ICEBAC was formed, the trust agreement was amended a second time to name ICEBAC as the employer trustee nominating body (in addition to TCAA, who continues to name one trustee). After these changes, all but two of the MCAA-appointed management trustees resigned from IMI.

 IMI's current management trustees include all of the officers of ICEBAC: George, Charles Velardo, DeLazzero and Paul Songer. The labor trustees include Joyce, Carlisle, Strickland, Uzzalino, Weir, and Flynn, all of whom are also U.S. Employee Trustees of the Pension Fund.

 E. ICEBAC

 In early 1987, after MCAA was removed as the appointing body for management trustees of IMI, ICEBAC was formed. ICEBAC, a trade association for Union contractors in the masonry industry, was organized to provide management trustees for jointly administered trust funds in the masonry industry, including IMI. *fn15" The Union readily concedes that ICEBAC was established as a response to MCAA's decision to allow non-union contractors membership in MCAA since ICEBAC's founders anticipated that MCAA could not represent and advance the interests of union and non-union contractors at the same time.

 Membership in ICEBAC is restricted to masonry contractors who have entered into collective bargaining agreements requiring the contractor to contribute to IMI a specified amount of money for each hour worked by any of the contractor's employees covered by the collective bargaining agreement. *fn16" Membership is automatic for eligible employers and there is no application process. To date, ICEBAC has never held a membership meeting. Board of Director meetings are held, but the director participants are not elected by the membership. They are elected by other directors. *fn17" George has no recollection of how ICEBAC's first directors *fn18" were chosen. The By-Laws of ICEBAC specifically preclude members from voting on the election of officers and directors. In turn, the Directors of ICEBAC appoint management trustees to IMI. When ICEBAC'S directors meet, they meet at the same locations at which the IMI Board meetings are held. Joyce and Carlisle, both union officials and IMI Union-appointed trustees, have attended ICEBAC's board meetings "for the limited purpose required to enable them to give the union's perspective on specific subjects of mutual interest." Joyce and Carlisle maintain that they attend only for the period of time necessary to make their presentations.

 In addition, ICEBAC members pay no dues to support ICEBAC. All of ICEBAC's funding and the legal fees necessary to form ICEBAC originated with IMI. *fn19" The initial decision to finance the legal fees necessary to establish ICEBAC was made by IMI at the time in 1987 when all but two MCAA-appointed trustees (defendant George and plaintiff Miller) had resigned. *fn20" Since the formation of ICEBAC, ICEBAC's expenses are included as an item in IMI's yearly budget. *fn21"

 In June 1987, George became the first President of ICEBAC. George had previously been a "regular member" of MCAA. At the time George became President of ICEBAC, he was a U.S. Employer Trustee of the Pension Fund, appointed by MCAA. George also became a management trustee of IMI and co-chairman with Joyce of IMI's joint board of trustees. He continues to hold these IMI positions to date.

 F. The Dispute

 On March 29, 1993, written notice was sent to the Board of Trustees of the Pension Fund scheduling a meeting in Washington, D.C. on May 26, 1993. A meeting of the Administrative Committee *fn22" of the Pension Fund took place on May 24th and May 25th. According to plaintiffs, it was the practice of the Board of Trustees not to consider at a Board of Trustees meeting, any major business items that had not previously been discussed by the Administrative Committee and placed on the agenda for that meeting. Nonetheless, there is no requirement in the Trust Agreement that all proposals be discussed by the Administrative Committee prior to a board meeting.

 On May 25th, prior to the Board of Trustees Meeting, Joyce and Miller met in the lobby of a Washington, D.C. hotel. In that meeting, according to Miller, Joyce advised that because the Trust Agreement allowed up to eight U.S. Employee Trustees and eight U.S. Employer Trustees, the Union would propose that Flynn be added as an additional U.S. Employee Trustee and requested that Miller have MCAA consider appointing Kardy as an additional U.S. Employer Trustee. Miller advised that he could not speak for the other U.S. Employer Trustees with respect to naming Kardy. Joyce contends that he asked Miller if ICEBAC could appoint the additional U.S. Management Trustee and Miller stated that he did not believe that MCAA would agree to that. *fn23" While Miller insists Joyce did not mention ICEBAC to him, nonetheless, he states that had Joyce proposed that ICEBAC be permitted to nominate the sixth management trustee, he would not have agreed.

 The Board of Trustees meeting began the morning of May 26th. After all the items listed on the agenda had been discussed, Joyce made an oral motion to delete any reference to MCAA in the Trust Agreement and to name ICEBAC in MCAA's place. *fn24" There had been no discussion of this proposal at the Administrative Committee meeting the day before and the U.S. Employer Trustees had not been advised of the proposal. *fn25" It was Joyce's opinion that prior notice of the amendments was unnecessary. The motion to amend the Trust Agreement to insert ICEBAC as the U.S. Management Trustee-appointing body instead of MCAA was not revealed at the beginning of the meeting when "New Business" was announced.

 The motion to remove MCAA passed by a vote of six to three with the TCAA-appointed U.S. Employer Trustee abstaining. Plaintiffs Szabo, Tubesing and Miller, all MCAA-appointed U.S. Employer Trustees, voted against the change. Defendants Joyce, Carlisle, Strickland, Uzzalino, and Weir, all U.S. Employee Trustees appointed by the Union, voted in favor of the measure. Defendant George, a MCAA-appointed U.S. Employer Trustee, then the President of ICEBAC, voted for the motion.

 In addition, the Trustees voted to expand the number of U.S. Employer Trustees and U.S. Employee Trustees from five each to six each. After the vote, Joyce proposed that the Union appoint Flynn as the sixth U.S. Employee Trustee and that motion was approved. The meeting was adjourned without any discussion regarding the addition of a sixth U.S. Employer Trustee. However, in the 1992 Annual Report of the Pension Fund issued on July 31, 1993, Kardy was identified as the sixth U.S. Employer Trustee.

 When asked why he proposed substituting ICEBAC for MCAA, Joyce replied that he no longer had confidence in MCAA because it had begun to admit members who were not parties to collective bargaining agreements with the Union. However, because seven years had elapsed since MCAA first starting allowing non-union contractors to become members, plaintiffs contend that Joyce decided to replace MCAA with ICEBAC due to two 1993 incidents. In the first, Joyce formed the false belief that the son of MCAA's then-president, Richard C. Matthews, was a non-union contractor; Joyce alluded to this belief at the May 26th board meeting. It is a fact that Matthews' son does belong to a union and works for his father, a union contractor. The second reason cited by plaintiffs is the fact that Adelizzi, formerly president of an association of primarily non-union contractors, was appointed MCAA's Executive Director.

 On September 20, 1993, by a vote of its Executive Board, MCAA attempted to remove George as a U.S. Employer Trustee, appointing Richard Felice ("Felice"), as a successor Trustee. *fn26" Because of the disputed amendment installing ICEBAC in MCAA's stead, George contends that the removal by MCAA is ineffective because only ICEBAC has the authority to appoint or remove U.S. Employer Trustees. On October 19, the Executive Board of the MCAA appointed Matthews as the sixth U.S. Employer Trustee.

 Written notice had earlier been sent to the Pension Fund's Board of Trustees scheduling a Board of Trustees meeting in Puerto Rico for November 1. That meeting was later rescheduled. On October 21, Joyce, as Secretary of the Pension Fund Board of Trustees, advised Matthews and Felice by letter that they would not be seated at the upcoming Board Meeting because they had been appointed by MCAA, a body without the authority to appoint them to their positions.

 DISCUSSION

 As a general matter, under the LMRA, employers are prohibited from making any payments to employee representatives. See 29 U.S.C. § 186(a). Section 302 of the LMRA was enacted to prevent "the possible abuse by union officials of the power which they might achieve if welfare funds were left to their sole control." Arroyo v. United States, 359 U.S. 419, 425-26, 3 L. Ed. 2d 915, 79 S. Ct. 864 (1959). However, § 302 provides an exception for employer contributions made to trusts meeting certain specified requirements. 29 U.S.C. § 186(c)(5). Among the requirements of § 302(c)(5), is the condition that the "employees and employers are equally represented in the administration of such fund. . . ." Id. It is this equal representation requirement that is at issue here.

 Before addressing whether § 302(c)(5) has been violated, it is first necessary to ascertain whether, pursuant to § 302(e), this Court has jurisdiction to review the alleged violation. In light of the Supreme Court's most recent discussion of the scope of § 302(e), it is clear this Court does not have jurisdiction.

 In Local 144 Nursing home Pension Fund v. Demisay, 124 L. Ed. 2d 522, 113 S. Ct. 2252 (1992), the Supreme Court sharply curtailed an expanded interpretation of § 302's jurisdictional provision. Section 302(e) provides that the district courts have jurisdiction to "restrain violations of this section. . . ." 29 U.S.C. § 186(e). Addressing the use of § 302(e) to enforce the strictures of § 302(c)(5), the Supreme Court held

 

that § 302(e) does not provide authority for a federal court to issue injunctions against a trust fund or its trustees requiring the trust funds to be administered in the manner described in § 302(c)(5).

  Demisay, 113 S. Ct. at 2257. Specifically discussing alleged § 302(c)(5) violations, the Court stated:

 

By its unmistakable language, § 302(e) provides district courts with jurisdiction "to restrain violations of this section." A "violation" of § 302 occurs when the substantive restrictions in §§ 302(a) and (b) are disobeyed, which happens, not when funds are administered by the trust fund, but when they are paid, lent, or deliver[ed]" to the trust fund, § 302(a), or when they are "receive[d], or accept[ed]" by the trust fund, or "request[ed], [or] demand[ed]" for the trust fund, § 302(b)(1). And the exception to violation set forth in paragraph (c)(5) relates, not to the purpose for which the trust fund is in fact used . . . but rather to the purpose for which the trust fund is "established," § 302(c)(5), and for which the payments are "held in trust," § 302(c)(5)(A). The trustees' failure to comply with these latter purposes may be a breach of their contractual or fiduciary obligations and may subject them to suit for such breach; but it is no violation of § 302.

 Id. at 2257 (footnotes omitted).

 To evade the reach of Demisay, plaintiffs contend that § 302(e) is properly invoked because the trust fund at issue is a nonqualifying trust fund due to the structural defect of unequal representation. In other words, payments made by employers and received by the Pension Fund violate §§ 302(a) and (b) because the fund no longer satisfies § 302(c). That argument fails. Rephrasing the issue in this regard in order to come within Demisay is merely an exercise in semantics. Although the same argument could have been made in Demisay, the Supreme Court rejected jurisdiction over the matter. For example, in Demisay, plaintiffs argued that their fund suffered from a structural defect because two of § 302(c)(5)'s provisions had allegedly not been satisfied, thereby creating a structural defect. Thus, any future payments to that fund would be considered payments made to a nonqualifying fund. Section 302(e) did not extend to the plaintiffs in Demisay and it cannot be used here to provide the jurisdiction plaintiffs invoke. An alleged violation of the provision at issue here, that employers and employees be equally represented in the "administration " of the fund, occurs "when funds are administered by the trust fund," an occurrence not redressable under § 302(e). See id. at 2257. *fn27" In conclusion,

 

the text of § 302 requires that, if payments are to be exempt from its prohibition, they must be [made to a plan administered by an equal number of employer and employee representatives]. There is nothing to suggest that this had the ambitious purpose of establishing an entire body of federal trust law, rather than merely describing the character of the trust to which payments are allowed, leaving it to state law to determine when breaches of that trust have occurred and how they may be remedied.

 See id. at 2258. The facts and argument made in this case are indistinguishable from Demisay and therefore fail.

 Even if jurisdiction existed, the relief requested by plaintiffs would not be granted for the reasons recited by plaintiffs. Relying almost entirely on a 1977 Third Circuit case, plaintiffs contend that the 1993 amendment to the Pension Fund's Trust Agreement that replaced MCAA with ICEBAC constitutes a "structural defect" in violation of the LMRA's "equal representation" requirement. The Third Circuit case, Associated Contractors of Essex County, Inc. v. Laborers Int'l Union of North Am., 559 F.2d 222 (3d Cir. 1977), involved a factual scenario somewhat similar to the instant case. In Associated Contractors, the trust agreement of a § 302 pension fund was amended to grant appointing authority for half of the management-appointed trustees to a rival trade association of the body originally vested with that appointment authority. Id. at 224. Holding that this amendment constituted a violation of the LMRA's "equal representation" requirement, the Third Circuit noted that:

 

The trustees of [a jointly administered trust fund] function as fiduciaries for the funds' beneficiaries but they also serve as representatives of the parties who appoint them. Insofar as it is consistent with their fiduciary obligations, employer trustees are expected to advance the employer while employee trustees are expected to further the concerns of the union in the ongoing collective bargaining process between them.

 Id. at 228. That court then held that the amendment to the trust agreement to permit two different management organizations to have appointing authority

 

would impair the delicate balance between employer and employee trustees and thereby destroy the effectiveness of this safeguard. . . . While the union trustees could be expected to address fund problems with a strong common voice, representatives of two rival employers' associations could be expected to speak in discordant or diluted voices.

 Id. As a consequence, the Third Circuit announced a per se rule, concluding that § 302(c)(5) is violated whenever employer trustees representing a rival association not a party to the original trust agreement are added to the board of trustees without the consent of the original employer association. Id.

 Assuming arguendo that Associated Contractors remains valid today, Associated Contractors would not be applied to this case. First, the two cases are factually distinct. Associated Contractors was concerned with the lack of a common voice on the part of management. Here, ICEBAC (assuming it is a valid management organization) is the sole appointing authority (except for TCAA, an entity uninvolved in this suit) and can speak with one voice in response to union-appointed trustees. Second and more important, as a legal matter, although § 302(c)(5) requires a court to look beyond pure numerical equality of representatives to see if there is "meaning full adherence" to the congressional command of equality, see National Stabilization Agreement of the Sheet Metal Indus. Trust Fund v. Commercial Roofing and Sheet Metal, 210 U.S. App. D.C. 401, 655 F.2d 1218, 1224 (D.C. Cir. 1981), cert. denied, 455 U.S. 909 (1982), this Court does not agree with the per se rule announced in Associated Contractors.

 Accordingly, even though Associated Contractor's rule would not be applied, there would still be inquiry into whether equal representation exists. NLRB v. Amax Coal Co., 453 U.S. 322, 69 L. Ed. 2d 672, 101 S. Ct. 2789 (1981), does not require otherwise. Again assuming arguendo that violations of § 302(c)(5), can be enforced by this Court, defendants' argument regarding Amax Coal, taken to its logical conclusion would effectively eviscerate § 302(c)(5) and render the "equal representation" requirement contained therein unenforceable. Undoubtedly, trustees of a § 302(c)(5) pension fund owe their entire allegiance to the beneficiaries of that trust. According to trust law, trustees cannot serve two masters equally well. See id. at 330. Amax Coal found that, in addition to the fact that Congress intended basic principles of trust law to apply to the LMRA, the passage of ERISA reaffirmed Congress' intentions regarding a trustee of a pension fund by essentially codifying the strict fiduciary duties that a trustee must meet. See id. at 332.

 But trustees' obligations of sole loyalty to the beneficiaries does not mean that the equal representation requirement of the LMRA is unenforceable. The LMRA still requires equal representation and Amax Coal did not vitiate that requirement. Indeed, the passage of ERISA reinforces this finding. Section 414(d) of ERISA expressly states that:

 

Nothing in this subchapter shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States . . . or any rule or regulation issued under such law.

  29 U.S.C. § 1144(d). "This is a strong comprehensive express statement that ERISA is not to be read as displacing by implication any pre-existing federal legislation." National Stabilization, 655 F.2d at 1223 (quoting Air Line Pilots Assoc., Int'l v. Northwest Airlines, Inc., 200 U.S. App. D.C. 219, 627 F.2d 272, 276 (D.C. Cir. 1980)). Congress did not intend ERISA to supplant the LMRA; ERISA was enacted to fill gaps in worker protection. Id. Thus, although Amax Coal defines the fiduciary duties owed by a trustee of a § 302(c)(5) pension fund to the beneficiaries and overrules that portion of Associated Contractors holding that trustees owe dual loyalties, it does not eviscerate from § 302(c)(5) Congress' requirement that there be equal representation between employer and employee trustees.

 In sum, while § 302(c)(5)'s "equal representation" requirement has not been rendered meaningless, it is unclear whether plaintiffs could demonstrate a violation of § 302(c)(5) on the facts presented in this case. There is no evidence to support a finding that the union exercises actual dominion and control over any U.S. Management Trustee of the Pension Fund. As plaintiffs readily conceded at oral argument, there has been no actual harm to the beneficiaries of the Pension Fund. Nevertheless, plaintiffs' concern is understandable. Because of the interrelationships detailed supra in the "Background" section, there does exist the potential that Union control over management trustees could be exercised at some point in the future. In light of the holding that § 302(e) of the LMRA does not confer jurisdiction to resolve this matter, whether solely the potential for Union dominion and control that exists in this case is sufficient to constitute a violation of equal representation need not be reached at this time. *fn28"

 The rest of plaintiffs' claims, alleged breaches of fiduciary duties under ERISA *fn29" and the common-law, *fn30" are all premised on the conclusion that the LMRA has been violated. *fn31" Without that foundation to support those claims, they must be dismissed. Plaintiffs cite no authority or facts to support a contrary conclusion.

 CONCLUSION

 For the reasons stated above, it is hereby

 ORDERED that plaintiffs' motion to strike is denied; it is

  FURTHER ORDERED that judgment is entered in favor of the defendants and against plaintiffs. This case stands dismissed.

 IT IS SO ORDERED.

 May 26, 1994.

 JOYCE HENS GREEN

 United States District Judge

 JUDGMENT

 In accordance with the Memorandum Opinion and Order issued this date, judgment is entered in favor of the defendants and against the plaintiffs.

 IT IS SO ORDERED.

 May 26, 1994.

 JOYCE HENS GREEN

 United States District Judge


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