Petition for Writ of Certiorari — Local Freight Drivers, Local 208, International Brotherhood of Teamsters v. Rozay's Transfer

United States

OCTOBER TERM 1988

LOCAL FREIGHT DRIVERS, LOCAL 208, INTERNATIONAL

BROTHERHOOD OF TEAMSTERS, CHAUFFEURS,

WAREHOUSEMEN AND HELPERS OF AMERICA,

Petitioner,

vs.

ROZAY’S TRANSFER,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ROBERT D. VOGEL, Esq.

A Member of

WOHLNER, KAPLON, PHILLIPS,

VOGEL, SHELLEY & YOUNG

A Professional Corporation

15760 Ventura Boulevard

Suite 1510

Encino, California 91436

Telephone: (213) 484-2005

Attorneys for Petitioner

Local Freight Drivers,

Local 208, International

Brotherhood of Teamsters

Chauffeurs, Warehousemen and

Helpers of America

Bowne of Los Angeles, Inc., Law Printers (213) 742-6600.

i

QUESTIONS PRESENTED

1. Do federal courts possess jurisdiction under Sec-

tion 301 of the Labor-Management Relations Act to adju-

dicate actions challenging the validity of collective

bargaining agreements?

2. Does the National Labor Relations Board possess

exclusive primary jurisdiction to adjudicate the extent

and effect of bargaining obligations imposed upon con-

tracting parties by the National Labor Relations Act?

3. Is a union legally obligated to disclose to an em-

ployer material information concerning the employer’s

obligation to make contributions to an ERISA trust fund

and, if so, may the employer reasonably rely on the

union’s representations regarding discretionary internal

trust policy as a matter of law?

ü

LIST OF PARTIES AND RULE 28.1 LIST

The parties to the proceeding below were petitioner

Local Freight Drivers Local 208, International Brother-

hood of Teamsters, Chauffeurs, Warehousemen and Help-

ers of America (“Local 208”), respondent Rozay’s

Transfer (“Rozay’s”) and amicus curiae Southern Cali-

fornia District Council of Laborers, International Union

of Operating Engineers, Local Union No. 12, Merchants

and Manufacturers Association and the California Truck-

ing Association.

iii

TABLE OF CONTENTS

JURISDICTION........

STATUTES INVOLVED

iv

INDEX TO APPENDICES

Page

APPENDIX A. Lower Court’s Findings of Fact and

Conclusions of Laguuu A-1

APPENDIX B. Opinion of the United States Court

of Appeals, Ninth Circuit. B-1

Je eg a7 Pe Ed f

r ee ES ee ae ee OR eS eee

Vv

TABLE OF AUTHORITIES CITED

Cases

A.T. Massey Coal Co., inc. v. Intern. Union, 799 F.2d

142 (4th Cir. 1986), cert. den., — U.S.

— /// vccracccccvcsecs

Adams v. Budd Co., 349 F. 2d 368 (3d. Cir. 1965)

Alvares v. Erickson, 514 F.2d 156 (9th Cir.) cert.

den., 423 U.S. 874 (1975õo )

Amalgamated Association of Street, Electrical Rail-

way & Motor Coach Employees v. Lockridge, 403

JJ. c bhi adon oes ss

Anderson v. Ford Motor Co., 803 F.2d 953 (8th Cir.

1986), cert. den., U.S., 107 S.Ct. 3242

os REL —— ROLE OEE: a oan Eee

Associated Gen. Con. of A., Inc., Okl., etc. v. Laborers

%% ᷣ ͤ ia eis ic ee cccccieeas

Black Clawson Co. v. International Ass’n. of Mach.,

313 F.2d 179 (2d Cir. 1962) .................

Board of Trustees v. Universal Enterprises, Inc., 751

F. ad 1177 (Iich Cir. 1986) ..................

Chambless v. Masters, Mates of Pilots Pension, 571

F.Supp. 1430 (S.D. N.Y. 1983)...............

Connell Construction Co. v. Plumbers & Steamfitters,

. c

Galvez v. Local 804 Welfare Trust Fund, 543

F.Supp. 316 (E.D. N.Y. 1982)))0

Hernandez v. National Packing Co., 455 F.2d 1252

CR ee I œN]f ⁵ . 8

Intern. Broth. of Elec. Wkrs., 532 v. Brink Const.,

825 F.2d 207 (9th Cir. 1987) ................

Page

12

15

10

‘ |

TABLE OF AUTHORITIES CITED

CASES

Page

JS. Griffith Const. v. United Bro. of Carpenters, 785

F. ad 706 (9th Cir. 198:ꝛ: 10

Kaiser Steel Corp. v. Mullins, 455 U.S. 72 (1982) 12,15

Knoll v. Phoeniz Steel Corporation, 405 F.2d 1128

(3d Cir. 1972), cert. den., 409 U.S. 1126 (1973) 17

Laborer’s Health & Welfare Tr. v. Adv. Light Con.,

—. U.S. —_, 108 S. Ct. 830 (1988) ......... 13

Leskiw v. Local 1470, International Brotherhood of

Electrical Workers, 464 F.2d 721 (3d Cir. 1972) 8

Lexington Cartage v. Intern. Broth. of Teamsters, 713

F. ad 194 (6th Cir. 198 8)))))))))) :; 14

Local 20, Teamsters, Chauffeurs and Helpers Union

v. Morton, 377 U.S. 252 (1964) ...... 1 8

Local 435, etc. v. General Motors Corp., 552 F.Supp.

395 (D. Del. 1982) modified on other grounds, 720

Le 8

Local 481 v. Sign-Craft, Inc., — F.2d , 128

LRRM 3070 (7th Cir. 19889))) 9

Lumber Prod. Indus. v. W. Coast Indus. Rel., 775

F.2d 1042 (9th Cir. 19880)))))): : 9, 12

Martin v. Hamil, 608 F.2d 725 (7th Cir. 1979) ... 17

McNally Pittsburgh, Inc. v. Intern. Iron Workers, 812

ELI 10

Mengel Co. v. Nashville Paper Products and Spe-

cialty Workers Union, 221 F.2d 644 (6th Cir.

+) RPO Gr oO 9

vii

TABLE OF AUTHORITIES CITED

CASES

Page

Milk Drivers & Dairy Employees Union v. Vevoda,

772 F.2d 530 (9th Cir. 1985), cert. den., 475 U.S.

J ee er er ee 9

Mo-Kan Teamsters Pension Fund v. Creason, 716

F.2d 772 (10th Cir. 1983), cert. den., 464 U.S.

D ̃ͤ CFO Gh ck b's oh.ce shee d 6a bees 14

NDK Corporation v. Local 1550 of the United Food &

Commercial Workers International Union, 709

, SS 1 P 9

Oates v. Teamsters Affiliates Pension, 482 F.Supp.

r Ä . . 17

Ridens v. Voluntary Separation Program, 610

F.Supp. 770 (D. Minn. 1985) ................ 18

Rozay’s Transfer v. Local Freight Drivers, L. 208,

850 F.2d 1321 (9th Cir. 1988) ............ 2. 7, 11,14

San Diego Building Trades Council v. Garmon

(“Garmon”), 359 U.S. 236 (1959) ............ 12

Smith v. Evening News Association, 371 U.S. 195

77 ⁵ ˙——a— 55 13

Southwest Administrators, Inc. v. Rozay’s Transfer,

Inc., 791 F.2d 769 (9th Cir. 1986), cert. den.,

— gl UR, Ee 5, 6

Teamsters L. 348 H. & W. Fund v. Kohn Bev. Co,.

749 F. 2d 315 (6th Cir. 1984), cert. den., 471 U.S.

c 0 17

eee

TABLE OF AUTHORITIES CITED

CASES

Page

United Steelworkers v. Rome Industries, Inc. 437

F. ad 881 (Sth Cir. 1970) ¶ r P77 10

West Coast Tel. Co. v. Local U. No. 77 Int. Bro. of

Elec. Wkrs., 431 F.2d 1219 (9th Cir. 1970) .... 9

Administrative Decisions

Eastern Market Beef Processing Corp., 269 NLRB

Wid. Wy Ces 4a 06 46 bh aaweasseneneececens- 12

Penntech Papers, 263 NLRB No. 33 (1982) ...... 11

Statutes

Employee Retirement Income Security Act of 1974

t AA 5

ik se puke thee dea „ 5

Labor-Management Relations Act aes

a 1, 2, 5, 6, 7, 8, 9, 10, 11, 13, 14

r A a ⁵ ä 88 8

National Labor Relations aeetettttltWͥt 3, 12

United States Code, Title 28,

ee a 6s Slate . 2

United States Code, Title 29, 1

, ¼ . 12

% „ „„ 2 3, 12

In the Supreme Court

OF THE

United States

‘OCTOBER TERM 1988

LOCAL FREIGHT DRIVERS, LOCAL 208, INTERNATIONAL

BROTHERHOOD OF TEAMSTERS, CHAUFFEURS,

WAREHOUSEMEN AND HELPERS OF AMERICA,

Petitioner,

vs.

ROZAY’S TRANSFER,

- Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Petitioner Local 208 respectfully prays that a Writ of

Certiorari issue to review the opinion of the Court of

Appeals for the Ninth Circuit rendered in this case on

June 24, 1988.

OPINIONS BELOW

Respondent Rozay’s commenced litigation against Lo-

cal 208 seeking rescission of a collective bargaining agree-

ment (“contract”) or, in the alternative, indemnification

damages pursuant to Section 301 of the Labor-Manage-

ment Relations Act (“LMRA”), 29 U.S.C. § 185 (a), alleg-

ing Local 208 fraudulently induced it to execute the

contract.

2

Following a bench trial, the district court entered

judgment in favor of Rozay’s; rescinded the contract; and

awarded Rozay’s indemnification damages equivalent to

the pension contributions and related monies it contractu-

ally owed the trust fund in accordance with the rescinded

contract and the attorney’s fees and costs it incurred in

unsuccessfully defending the trust fund collection action

both at trial and on appeal because of Local 208’s fraudu-

lent misconduct.

The lower court entered findings of fact and conclu-

sions of law consistent with its judgment. (App. A, pp.

A-1-A-11.)'

Thereafter, Local 208 timely appealed the judgment to

the Ninth Cireuit Court of Appeals (“Ninth Circuit’).

On June 24, 1988, the Ninth Circuit affirmed the lower

court’s judgment in its entirety. (App. B, pp. B-1-B-34.)

The Ninth Cireuit's opinion is reported as Rozay’s Trans-

fer v. Local Freight Drivers, L. 208, 850 F.2d 1321 (9th

Cir. 1988).

JURISDICTION

The decision of the Ninth Cireuit was filed on June 24,

1988. The jurisdiction of this court is invoked pursuant to

28 U.S.C. § 1254(1) for review by a Writ of Certiorari.

STATUTES INVOLVED

This ease directly involves Section 301(a) of the LMRA

which provides:

References in this Petition to “App.” refer to the Appendices

attached hereto.

3

“Suits for violations of contracts between an em-

ployer and a labor organization representing employ-

ees in an industry affecting commerce as defined in

this Act,...may be brought in any district court of

the United States having jurisdiction of the parties

.. . . 29 U.S.C. § 185 (a).

STATEMENT OF THE CASE

Prior to September 30, 1981, Rozay's and Local 208

were signatory to a contract which required monthly

pension contributions being made on behalf of Rozay’s

employees to the Western Conference of Teamsters Pen-

sion Trust Fund (“Trust Fund“).

After the 1978-1981 agreement expired and during

continuing negotiations over the terms of a successor

contract, Rozay’s continued to make contributions to the

Trust Fund pursuant to the terms of the 1978-1981

contract.

In July of 1982, after refusing to execute a negotiated

agreed-upon successor contract, Rozay’s informed Local

208 it would no longer make contributions to the Trust

Fund. In September of 1982, Local 208 filed an unfair

labor practice charge with the National Labor Relations

Board (“NLRB”) against Rozay’s contending it had

violated Section 8(a) (5) of the National Labor Relations

Act (“NLRA”), 29 U.S.C. 5 158 (a) (5), by refusing to

execute the new three-year contract. Local 208 later

amended its NLRB charge to include the contention

Rozay’s had unilaterally and improperly changed the

terms and conditions of employment, in pertinent part, by

its cessation of payments to the Trust Fund. Local 208

also filed a grievance alleging the cessation of contribu-

tions to the Trust Fund violated the 1978-1981 contract.

4

After the NLRB issued an administrative complaint

against Rozay’s and while the NLRB and grievance pro-

ceedings were pending, representatives of Rozay's and

Local 208 met in January of 1983 in an effort to resolve

the dispute which culminated in an alleged settlement

resulting in Rozay’s resuming making pension contribu-

tions to the Trust Fund.

During the January meeting, Rozay’s expressed con-

cern over being required to make retroactive pension

contributions for the time period May 1982 through Feb-

ruary 1983. As a result, representatives of Local 208 and

other union officials present agreed to contact the Trust

Fund on Rozay’s behalf and request a waiver of Rozay’s

statutory and contractual obligation to pay the contribu-

tions for this time period and allegedly assured Rozay’s it

would not have to do so.

Following the alleged settlement, Local 208 wrote to

the Trust Fund on Rozay’s behalf requesting relief from

paying the pension contributions for this period. On

February 16, 1983, the Trust Fund voted to deny Rozay’s

request for relief from paying the contributions and

informally apprised Local 208 of its decision in early

March.

On March 8, 1983, when the new 1981-1984 contract

was executed by Rozay’s and Local 208, Local 208 did not

advise Rozay’s the Trust Fund had already voted to deny

its request that the payment of the delinquent contribu-

tions be waived. Rozay’s, allegedly assuming the unpaid

contributions would be forgiven by the Trust Fund,

signed the contract. Rozay’s and Local 208 also executed

a settlement agreement at the same time resolving the

pending NLRB unfair labor practice and breach of con-

tract grievance proceedings. Thereafter, consistent with

5

\

the settlement agreement, Local 208 withdrew its unfair

labor practice charge and grievance.

Approximately three (3) weeks later, on or about

March 24, 1983, the Trust Fund informed Rozay’s it had

denied its request it not have to pay the pension contribu-

tions. After learning of the Trust Fund’s decision,

Rozay's did not contact Local 208 for the purpose of

reopening contractual negotiations; to rescind or reform

the 1981-1984 contract executed on March 8, 1983; and/or

to seek other additional economic relief to compensate for

the Trust Fund’s decision.

Subsequently, Southwest Administrators, Inc., an as-

signee of the Trust Fund, commenced litigation against

Rozay’s in federal court pursuant to Sections 301 of the

LMRA and 502(a) and 515 of the Employee Retirement

Income Security Act of 1974, as amended (“ERISA’’), 29

U.S.C. §$§ 1132 (a) and 1145, to collect the delinquent

pension contributions for the time period May 1982

through February 1983. See Southwest Administrators,

Inc. v. Rozay’s Transfer, Inc. (“Southwest Administra-

tors”), 791 F.2d 769, 771-72 (9th Cir. 1986), cert. den.,

—_. U.S. — 107 S.Ct. 951 (1987).

Following a bench trial in Southwest Administrators, the

district court eoneluded Local 208 fraudulently induced

Rozay’s to sign the 1981-1984 contract by failing to

disclose the Trust Fund’s adverse decision at the time the

contract was executed and held there was no meeting of

the minds between the contracting parties at that time on

the question of whether the unpaid retroactive pension

constributions were to be made.

Nevertheless, the district court concluded Local 208’s

fraudulent misrepresentation was not a defense to the

Trust Fund’s right to recover the unpaid contributions

6

required by the express terms of the contract and, as a

result, entered judgment for Southwest Administrators

against Rozay’s for the amount of the retroactive pension

contributions, liquidated damages, interest and the attor-

ney’s fees incurred by Southwest Administrators in pros-

ecuting the case. Id. at 772.

Later, after learning of Local 208’s alleged misconduct

and appealing the adverse judgment in Southwest Admin-

istrators to the-Ninth Circuit, Rozay’s filed a separate

action against Local 208 relying upon Section 301 seeking

rescission of the 1981-1984 contract and indemnification

damages

After a bench trial before the same judge who deeided

Southwest Administrators, the district court concluded

Local 208 was guilty of fraudulent misrepresentation in

failing to inform Rozay’s of the adverse trust decision on

March 8, 1983 when the 1981-1984 contract was executed;

rescinded the contract; and awarded Rozay’s the indemni-

fication damages it requested.

Later, the Ninth Circuit affirmed the lower court’s

decision in Southwest Administrators, concluding Local

208’s misrepresentation constituted only fraud in the

inducement rendering the 1981-1984 contract ‘“voidable”

rather than “void” as against the Trust Fund and, as a

‘result, Rozay’s was contractually obligated to pay the

pension contributions required by the express terms of

the 1981-1984 contract. Id. at 775.

Subsequently, the Ninth Circuit affirmed the lower

court’s decision in this case concluding the district court

possessed jurisdiction under Section 301 to rescind the

1981-1984 contract and fashion a “make whole“ remedy

compensating Rozay’s for the damages it suffered attribu-

table to the fraudulent misrepresentation and bad faith

nm eS ee a Tey

7

bargaining misconduct engaged in by Local 208 when the

1981-1984 contract was executed on March 8, 1983; evalu-

ated the bargaining history and concluded Local 208 had

fraudulently induced Rozay’s to sign the contract; de-

clared Local 208 had the legal duty to disclose the Trust

Fund’s adverse decision to Rozay’s at the time the con-

tract was signed and could he held liable for intentionally

failing to disclose such; and determined Rozay’s and

Local 208 orally reached agreement on January 17, 1987

extinguishing Rozay’s obligation to make the retroactive

contributions consistent with the 1978-1981 contract. See

850 F.2d at 1326-37.

REASONS FOR GRANTING THE WRIT

I.

THE NINTH CIRCUIT’S DECISION CONFLICTS

WITH DECISIONS RENDERED BY OTHER CIR-

_ CUITS WHICH HAVE HELD FEDERAL COURTS

DO NOT POSSESS JURISDICTION UNDER SEC-

TION 301 TO ADJUDICATE ACTIONS CHAL-

LENGING THE VALIDITY OF COLLECTIVE

BARGAINING AGREEMENTS.

In concluding the lower court possessed jurisdiction to

entertain Rozay’s complaint seeking rescission of the

contract and other equitable relief, the Ninth Circuit

deciared Section 301 “applies not only to suits for breach

of a collective bargaining agreement once it is duly

formed, but also to suits impugning the existence and

validity of a labor agreement.” [Case citations omitted. ]

850 F.2d at 1326. As a result, the Ninth Cireuit deter-

mined “the district court had jurisdiction under LMRA

§ 301 to entertain this action alleging fraudulent induce-

ment in the formation of the agreement.” Id.

8

Cireuit courts are sharply split on the question of

whether federal courts may address challenges to the

validity of collective bargaining agreements under Sec-

tion 301. Although the Second, Fifth, Tenth and Eleventh

Cireuits have rendered decisions seemingly consistent

with the Ninth Cireuit in this case, the First, Third,

Fourth, Sixth and Seventh Circuits have issued opinions

which directly and irreconcilably conflict with the Ninth

Cireuit's holding a federal court possesses jurisdiction

under Section 301 to determine the validity/seek the

rescission of a contract and/or award other appropriate

equitable relief.”

Decision rendered in other circuits which directly con-

flict with the Ninth Cireuit's opinion in this regard in-

elude Hernandez v. National Packing Co., 455 F.2d 1252,

1253 (1st Cir. 1972) (no jurisdiction under Section 301 to

challenge the validity of a contract); Adams v. Budd Co.,

349 F.2d 368 (3d Cir. 1965); Leskiw v. Local 1470,

International Brotherhood of Electrical Workers, 464 F. 2d

721 (3d Cir. 1972); and Local 435, etc. v. General Motors

Corp., 552 F.Supp. 395, 397-98 (D. Del. 1982), modified

on other grounds, 720 F.2d 664 (3d Cir. 1983) (Section

301 only applies to cases which involve an alleged breach

of contract); A.T. Massey Coal Co., Inc. v. Intern. Union,

799 F.2d 142, 146 (4th Cir. 1986), cert. den., US.

— 107 S.Ct. 1964 (1987) (jurisdiction does not exist

under Section 301 to allege the parties are not bound to a

eontract — a breach of an existing contract must be

alleged); Mengel Co. v. Nashville Paper Products and

Although this court has not directly addressed this question, it

has concluded Section 301’s companion statute, Section 303 of the

LMRA, 29 U.S.C. § 187, is limited to the recovery of actual, compen-

satory damages suffered. See Local 20, Teamsters, Chauffeurs and

Helpers Union v. Morton, 377 U.S. 252, 260 (1964).

9

Specialty Workers Union, 221 F.2d 644, 647 (6th Cir.

1955); and NDK Corporation v. Local 1550 of the United

Food & Commercial Workers International Union, 709 F.2d

491, 493 (7th Cir. 1983) (court does not posssess jurisdic-

tion under Section 301 to rescind a contract where the

validity of the contract was the ultimate issue and it was

alleged the execution of the contract was procured by the

union’s fraudulent misrepresentation) and Local 481 v.

Sign-Craft, Inc., — F. 2d , 128 LRRM 3070 (7th

Cir. 1988) (no Section 301 jurisdiction over complaint

alleging company repudiated the contract where the ulti-

mate question was the contract’s validity).

The First, Third, Fourth, Sixth and Seventh Circuits in

the above cases essentially adhered to the plain language

of Section 301 in determining that although Section 301

provides jurisdiction in suits alleging a violation of a

valid contract, it does not afford jurisdiction in actions

challenging the validity of a contract where the contract’s

validity is the ultimate issue in the litigation.

The Second, Fifth, Tenth and Eleventh Circuits, consis-

tent with the Ninth Cireuit's holding in this case, have

Within the Ninth Cireuit itself, this issue has been decided

inconsistently. Compare Alvares v. Erickson, 514 F.2d 156, 161 (9th

Cir.), cert. den., 423 U.S. 874 (1975) (allegation of breach of contract

is essential element in stating cause of action under Section 301);

Milk Drivers & Dairy Employees Union v. Vevoda, 772 F.2d 530, 532-

33 (9th Cir. 1985), cert. den., 475 U.S. 1036 (1986) (claim’ of

fraudulent inducement raised in defense of union collection case

brought under Section 301 is preempted); and Lumber Prod. Indus. v.

W. Coast Indus. Rel., 775 F.2d 1042, 1045 (9th Cir. 1985) (no

jurisdiction under Section 301 to remedy tort action alleging breach

of prospective contractual relations if a crucial element of... [the]

action is identical to an element of an unfair labor practice that is

arguably covered by the NLRA....”) with West Coast Tel. Co. v.

Local U. No. 77 Int. Bro. of Elec. Wkrs., 431 F.2d 1219, 1222 (9th Cir.

1970) (court has jurisdiction under Section 301 to reform contract

10

declared it is not necessary to allege a violation of an

existing contract in order to invoke the court’s jurisdic-

tion under Section 301 and federal courts can properly

rely upon it in entertaining actions seeking rescission of

the contract, declaratory and other appropriate equitable

relief. See Black-Clawson Co. v. International Ass’n. of

Mach., 313 F.2d 179, 182 (2d Cir. 1962) (“We find

nothing in the [legislative] history of Section 301(a)

which indicates an intention to restrict that section to

suits for damages or specific enforcement”); United Steel-

workers v. Rome Industries, Inc., 437 F.2d 881, 882 (5th

Cir. 1970) (court possesses jurisdiction to determine the

validity of a contract and a party need not allege a

violation of it in order to_obtain a declaration of its

contractual rights); McNally Pittsburgh, Inc. v. Intern.

Iron Workers, 812 F.2d 615, 617-19 (10th Cir. 1987)

(court has jurisdiction under Section 301 to render de-

elaratory judgment); and Board of Trustees v. Universal

Enterprises, Inc., 751 F.2d 1177, 1184 (11th Cir. 1985)

(court has jurisdiction under Section 301 to determine if

a valid collective bargaining agreement exists.). See also,

Associated Gen. Con. of A., Inc., Okl., etc. v. Laborers Int.

U., 476 F.2d 1388, 1402 n. 25 (Temporary Emergency

even if it involves conduct which arguably constitutes unfair labor

practice); J. S. Griffith Const. v. United Bro. of Carpenters, 785 F.2d

706, 712-13 and n. 6 (9th Cir. 1986) (court distinguishes earlier

First, Seventh and Ninth Circuit decisions holding jurisdiction does

not exist under Section 301 in suits not alleging a breach of contract

but litigating the validity of the contract itself because, in those

eases, the facts were such the NLRB could have decided the issues

presented); and Intern. Broth. of Elec. Wkrs., 532 v. Brink Const., 825

F.2d 207, 212 (9th Cir. 1987) (court, citing Griffith Const., supra, as

support, declares it possesses jurisdiction under Section 301 to

resolve a contract’s existence and validity as well as whether it has

been breached unless it requires resolution of an issue within the

exclusive jurisdiction of the NLRB.).

cc

11

Court of Appeals 1973) (“The question of whether a

collective bargaining agreement has been validly entered

into in the first instance have been held to be so related to

the subject of ‘suits for violation of’ labor contracts as to

permit their resolution by district courts by virtue of

§185 . . . . ).

Because of the significant split in the circuit courts as

to whether Section 301 is limited to actions complaining a

valid collective bargaining agreement has been breached,

Local 208 requests this court grant this petition and bring

about uniformity of decision on this jurisdictional issue.

II.

THE NINTH CIRCUIT’S DECISION CONFLICTS

WITH DECISIONS RENDERED BY OTHER CIR-

CUITS WHICH HAVE HELD THE NLRB POS-

SESSES EXCLUSIVE PRIMARY JURISDICTION TO

ADJUDICATE THE EXTENT AND EFFECT OF

BARGAINING OBLIGATIONS IMPOSED UPON

CONTRACTING PARTIES BY THE NATIONAL LA-

BOR RELATIONS ACT

Relying upon Section 301, the Ninth Circuit concluded

federal courts possess jurisdiction to rescind collective

bargaining agreements and award indemnification dam-

ages and other equitable relief if it is factually demon-

strated one contracting party fraudulently induced. the

other contracting party to execute the contract, conduct

which the Ninth Circuit conceded constituted bad faith

bargaining and an unfair labor practice. See 850 F.2d at

1326.

See e. g., Penntech Papers, 263 NLRB No. 33 (1982) (company

committed unfair labor practice by making false and misleading

statements concerning the future of its plant if it closed) and Eastern

12

This court long ago declared federal courts do not have

jurisdiction to pass upon the propriety of conduct that is

arguably subject to Sections 7 or 8 of the National Labor

Relations Act (“NLRA”), 28 U.S.C. 55 157 and 158, and

must defer to the competence and expertise of the NLRB

to address and remedy such complaints. See San Diego

Building Trades Council v. Garmon (“Garmon’’), 359 U.S.

236, 245 (1959) and Kaiser Steel Corp. v. Mullins, 455 U.S.

72, 83 (1982).

The NLRB possesses exclusive jurisdiction over activi-

ties that threaten to interfere with national labor policy

and was entrusted by Congress the task of administering

labor policy in order “to avoid conflicting regulation of

conduct by various official bodies” and to promote a

consistent unified development of national labor policy.

Garmon, supra, 359 U.S. at 242-45 and Amalgamated

Association of Street, Electrical Railway & Motor Coach

Employees v. Lockridge, 403 U.S. 274, 285-86 (1981).

Although “Congress recognized the need for an admin-

istrative agency having the necessary specialized knowl-

edge and cumulative experience to resolve conflicts

associated with this nation’s industrial relations,” Lumber

Prod. Indus., supra, 775 F.2d at 1045, citing Garmon,

supra, 359 U.S. at 242, two (2) exceptions to the genera!

rule of exclusive NLRB jurisdiction have been judicia ly

carved out.

If the activity constitutes an unfair labor practice and

also allegedly violates a valid collective bargaining agree-

ment, federal courts and the NLRB exercise concurrent

Market Beef Processing Corp., 269 NLRB No. 19 (1981) (employer

engaged in unfair labor practice by disguising and misinforming the

union concerning its relocation plans).

13

jurisdiction. Smith v. Evening News Association, 371 U.S.

195, 197 (1962).

Secondly, “federal courts may decide labor law ques-

tions that emerge as collateral issues in suits brought

under independent federal remedies....” Laborers

Health & Welfare Tr. v. Adv. Light Con. U.S. ___.,

108 S.Ct. 830, 832-33 n. 4 (1988), quoting with approval,

Connell Construction Co. v. Plumbers & Steamfitters, 421

U.S. 616, 626 (1975).°

In Adv. Light Con., supra, this court remarked that “whether an

employer's unilateral decision to discontinue contributions to a pen-

sion plan constitutes a violation of the statutory duty to bargain in

good faith is the kind of question that is routinely resolved by the

administrative agency with expertise in labor law’, the NLRB. 108

S. Ct. at 837.

Acknowledging that “situations in which district judges must

occasionally resolve labor issues... represent the exception rather

that the rule,” this court stated cases concerning whether and when

an impasse had been reached in collective bargaining negotiations

and whether an employer's decision to discontinue contributions to a

pension plan constitutes an unfair labor practice are the type of

issues “federal courts typically defer to the judgment of the NLRB.”

[Case citation omitted.] Id.

Similarly, the questions and issues raised in this case (whether

Local 208 fraudulently induced Rozay’s to sign the contract; whether

Rozay’s detrimentally relied upon the fraudulent misrepresentation;

whether Rozay’s detrimental reliance was reasonable; and whether

Rozay’s would have been statutorily and contractually obligated to

pay the delinquent pension contributions but for the fraudulent

misrepresentation necessitated scrutinizing the collective bargaining

history and represent the kinds of questions and issues routinely

brought to and resolved by the NLRB, the administrative agency who

possesses the expertise in resolving bad faith bargaining disputes

such as the instant one.

This is why the Ninth Cireuit was unable to find any judicial

precedent for the proposition an union has a legal duty to disclose to

14

In this case, the Ninth Circuit determined jurisdiction

existed under Section 301 to address an issue which was

not predicated upon alleged violation of a valid contract

or collateral or secondary to other primary issues raised

(Local 208 fraudulently inducing Rozay’s to sign the

contract) and, as a result, rescission of the contract and

indemnification damages were warranted.

The Ninth Cireuit's conclusion the NLRB did not

possess exclusive jurisdiction to address and remedy

Rozay’s fraudulent inducement claim Local 208 engaged

in bad faith collective bargaining directly conflicts with

decisions rendered by other circuits on the subject. See

Lexington Cartage v. Intern. Broth. of Teamsters, 713 F. 2d

194, 195 (6th Cir. 1983) (court does not possess jurisdic-

tion under Section 301 to adjudicate the extent and effect

of bargaining obligations imposed upon employers and

unions by the NLRA) and Mo-Kan Teamsters Pension

Fund v. Creason, 716 F.2d 772, 775 (10th Cir. 1983), cert.

den., 464 U.S. 1045 (1984) (union’s lack of majority

status can only be challenged in an unfair labor practice

proceeding over which the NLRB has exclusive jurisdic-

tion and is not a valid defense in a Section 301 action for

enforcement of the contract).

The misconduct allegedly engaged in by Local 208 in

this case — fraudulent misrepresentation in procuring

the assent of Rozay’s to the contract — is a claim that

arose in common law and measured by standards of

conduct and responsibility completely separate from and

independent of a collective bargaining agreement. See

an employer during collective bargaining material information con-

cerning the employer’s obligations to a trust fund and can be held

liable under Section 301 for intentionally misrepresenting material

facts relevant to the employer's pension contribution obligations. See

850 F.2d at 1328-1331.

15

Anderson v. Ford Motor Co., 803 F. 2d 953, 958-59 (8th Cir.

1986), cert. den., U.S. —__, 107 S.Ct. 3242 (1987).

This court has counseled only the NLRB may provide

affirmative remedies for unfair labor practices to ensure

that in situations like the present one, courts do not

engage in conduct inconsistent with the remedial scheme

of the NLRA. Kaiser Steel Corp., supra, 455 U.S. at 86.

Since the Ninth Circuit’s fashioning a remedy for bad

faith collective bargaining under Section 301 directly

conflicts with decisions rendered by other circuits which

have correctly held the NLRB possesses the necessary

knowledge and expertise to exclusively adjudicate and

resolve such disputes, this court should grant Local 208’s

Petition for Writ of Certiorari.

III.

THE NINTH CIRCUIT’S DECISION CONFLICTS

WITH RELATED DECISICNS RENDERED IN

OTHER CIRCUTTS AND RAISES IMPORTANT

QUESTIONS OF FEDERAL LABOR LAW WHICH

SHOULD BE RESOLVED BY THIS COURT: IS A

UNION LEGALLY OBLIGATED TO DISCLOSE

TO AN EMPLOYER MATERIAL INFORMATION

CONCERNING THE EMPLOYER’S OBLIGATION

TO MAKE TRUST FUND CONTRIBUTIONS TO AN

ERISA TRUST AND, IF SO, MAY THE EMPLOYER

REASONABLY RELY ON THE UNION’S REPRE-

SENTATIONS REGARDING DISCRETIONARY IN-

TERNAL TRUST POLICY AS A MATTER OF LAW?

The Ninth Cireuit's opinion is the first to expressly

hold a union is legally obligated to disclose material

information to an employer concerning its obligations to

make contributions to an ERISA trust fund and if it fails

16

to do so/ecommunicates erroneous information, the em-

ployer’s reliance upon such conduct can be reasonable as

a matter of law and the union held liable to it for damages

on a theory of negligent or intentional misrepresentation.

See 850 F. 2d at 1328-32.°

Prior decisions have consistently held an employer may

not detrimentally rely as a matter of law on a union's

misrepresentation regarding the employer’s trust fund

obligations if the misrepresentation concerns a subject

»Confusingly, after stating Local 208 was not contesting its inten-

tional failure to disclose the trust fund’s adverse decision [to

Rozay's] could constitute a fraudulent misrepresentation” and,

therefore, was not reach ing] the question of whether a party has a

duty to disclose material facts to another party during collective

bargaining negotiations or whether a breach of such a duty will

necessarily constitute actionable fraud,” Id. at 1328, the Ninth

Cireuit remarked: ö

The substance of the union's argument is that it is unreasonable

as a matter of law for an employer to rely on a union’s represen-

tations regarding its ability to influence the trust fund, because

the union cannot bind a trust fund, nor does it have a legal duty

to disclose to an employer any information concerning the

employer's obligations to a trust fund.” Id. at 1329.

\

Clearly, Local 208 stressed to the Ninth Cireuit its failure to

disclose the Trust Fund’s adverse decision to Rozay's on March 8,

1983 when the 1981-1984 contract was signed did not constitute fraud

because it was not legally obligated to disclose the information and

Rozay’s alleged detrimental reliance upon its prior representation it

would attempt to secure a waiver from the Trust Fund of Rozay's

statutory and contractual obligation to pay the delinquent contribu-

tions was unreasonable as a matter of law because an employer

cannot reasonably rely on a union’s misrepresentation concerning the

nature and scope of its obligations to the Trust Fund / diseretionary

internal trust policy because the Trust Fund is a separate and

distinct legal entity over which Local 208 has no express, apparent or

implied control.

17

over which the trust fund is exclusively vested with the

power and discretion to administer and regulate, such as

Rozay’s request the Trust Fund waive its obligation to

pay the delinquent contributions. See Knoll v. Phoenix

Steel Corporation, 465 F.2d 1128, 1132 (3d Cir. 1972),

cert. den., 409 U.S. 1126 (1973) (court declared employ-

ees’ reliance on union’s promise they would receive lump

sum pension payments was unreasonable because the

authority to determine and make that decision rested

solely with the pension fund); Martin v. Hamil, 608 F.2d

725, 729 and 730 n. 8 (7th Cir. 1979) (employer could not

reasonably rely on the statements of a union business

agent concerning pension eligibility when the union repre-

sentative stated “he really did not know for sure... but

to go ahead and pay until you hear from us”); Teamsters

L. 348 H. & W. Fund v. Kohn Bev. Co., 749 F.2d 315, 319-

20 (6th Cir. 1984), cert. den., 471 U.S. 1017 (1985)

(employer’s reliance on union representative’s statement

certain employees would not be eligible for benefits was

unreasonable and could not support an estoppel defense

because the employer knew or had a means of determining

the truth of the union agent’s statements and the union

agent had no authority to bind or act on behalf of the

trust fund and thus acted outside his authority in making

the misrepresentation); Oates v. Teamsters Affiliates Pen-

sion, 482 F.Supp. 481, 488 (D. D.C. 1979) (justifiable

reliance does not exist where the promissor is not a

trustee or representative of the trust fund but merely an

agent of the union without either actual or apparent

authority to make the relied upon promise); Galvez v.

Local 804 Welfare Trust Fund, 543 F.Supp. 316, 317 (E.D.

N.Y. 1982) (employee could not reasonably rely upon

union representative’s statement he would be eligible for

\ 8 pension since the union agent did not possess express,

er" or apparent authority to act or speak for the trust

55

N

18

fund); Chambless v. Masters, Mates & Pilots Pension, 571

F.Supp. 1430, 1451 (S.D. N.Y. 1983) (where trust docu-

ments made clear that only trustees could obligate plan,

an employee’s reliance upon statement uttered by his

union representative his acceptance of employment would

not adversely impact on his ability to collect pension

benefits was unreasonable); and Ridens v. Voluntary Sepa-

ration Program, 610 F.Supp. 770, 777 (D. Minn. 1985)

(employee could not reasonably rely upon his supervisor's

comments concerning voluntary separation benefits be-

cause the supervisor had no authority to make the state-

ments and only the program’s administrator could decide

if he would be granted an exception under the program).

Because this case represents a sharp departure from

and is inconsistent with decisions rendered in other

circuits which have uniformly held an employer may not,

as a matter of law, reasonably rely upon a union’s repre-

sentations concerning its trust fund obligations and dis-

eretionary internal trust policy, this petition should be

granted and this court should decide this important

question of federal labor law and harmonize the conflict-

ing opinions on the subject.

19

CONCLUSION

For all the foregoing reasons, Local 208 respectfully

submits this case presents substantial federal questions

for this court’s review and the decision below conflicts

with other cireuit authority and, as a result, this Petition

for Writ of Certiorari should be granted.

DATED: September 22, 1988

Respectfully submitted,

WOHLNER, KAPLON, PHILLIPS,

VOGEL, SHELLEY & YOUNG

By ROBERT D. VOGEL

Attorneys for Petitioner

Local Freight Drivers, Local 208,

International Brotherhood of

Teamsters, Chauffeurs, Ware-

housemen and Helpers of

America

la

APPENDIX A

Case No. 84 8313 MRP (Bx)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

ROZAY’S TRANSFER

Plaintiff,

vs.

LOCAL FREIGHT DRIVERS, LOCAL 208,

INTERNATIONAL BROTHERHOOD OF TEAMSTERS,

CHAUFFEURS, WAREHOUSEMEN AND

HELPERS OF AMERICA,

Defendants.

FINDINGS OF FACT

AND CONCLUSIONS OF LAW

The above-entitled cause came on regularly for trial on

January 14, 1986 before the Honorable Mariana R.

Pfaelzer, United States District Judge, sitting without a

jury. Stephen P. Pepe and Cliff Fonstein, of the law firm

of O’Melveny & Myers, appeared as counsel for plaintiff,

and Robert D. Vogel of the law firm of Wohlner, Kaplon,

Phillips, Vogel, Shelley & Young appeared as counsel for

defendant. The trial was conducted pursuant to the Pre-

trial Conference Order, the narrative statements of wit-

nesses, the testimony and documentary evidence

introduced at trial, and the oral arguments of counsel.

The cause having been submitted to the Court for deci-

sion, the Court now makes the following Findings of Fact

and Conclusions of Law.

2a

FINDINGS OF FACT

1. Plaintiff Rozay’s Transfer (“Rozay’s’’) is a Califor-

nia corporation engaged in the trucking industry in

Southern California. (See Stipulated Fact “a” in Pretrial

Conference Order (“Stipulated Fact a.“))

2. The truck drivers and dock workers employed by

Rozay’s are now and for several years have been repre-

sented for purposes of collective bargaining by defendant

Local Freight Drivers, Local 208, International Brother-

hood of Teamsters, Chauffeurs, Warehousemen and Help-

ers of America (Local 208”) (See Stipulated Fact b.)

3. Rozay’s and Local 208 were parties to a collective

bargaining agreement (“Agreement”) and an Employer-

Union Pension Certification (“Certification”) which ex-

pired on September 30, 1981. (See Stipulated Fact c.)

4. The Argument and Certification which expired on

September 30, 1981 required Rozay’s to make contribu-

tions to the Western Conference of Teamsters Pension

Trust Fund (“Trust Fund”) on behalf of employees

represented by Local 208. The Trust Fund is an employee

pension benefit plan within the meaning of the Employee

Retirement Income Security Act. (See Stipulated Fact

d.)

5. Rozay’s made regular contributions to the Trust

Fund during the life of the Agreement and Certification

and continued to make contributions after the expiration

and through April, 1982, while Local 208 and Rozay’s

attempted to negotiate a renewal Agreement and Certifi-

cation. (See Stipulated Fact e.)

6. On or about April 18, 1982, Local 208 presented a

rough draft of a new collective bargaining agreement to

Rozay's. After reviewing the draft, on May 6, 1982,

3a

Rozay’s returned it unsigned to Local 208 with several

corrections. (See Stipulated Fact f.)

7. Also on May 6, 1982, Rozay’s Vice President, Rich-

ard Fletcher (“Fletcher’’), raised with Local 208 Busi-

ness Agent, Eddie McKiernan (““McKiernan’”’), Rozay’s

severe economic problems and explained that in order to

stay in business, Rozay’s would need a reduction in labor

costs. Rozay’s specifically proposed cessation of pension

contributions, and reduced holiday, vacation, and sick

leave benefits. (See Stipulated Fact g.)

8. Qn April 26, 1982, the Trust Fund wrote and in-

formed Rozay’s that it could not accept pension contribu-

tions unless there was a signed collective bargaining

agreement in force between Rozay’s and Local 208. (Trial

Exhibit No. 11.) On June 30, 1982, the Trust Fund wrote

a substantially similar letter to Rozay’s. (Trial Exhibit

No. 12.)

9. On June 8, 1982 Fletcher again raised the needed

concessions with MeKiernan and with Local 208’s Secre-

tary-Treasurer, Alex Maheras (““Maheras”). Maheras re-

quested that Rozay’s make the proposal in the form of a

letter. (See Stipulated Fact i.)

10. On June 11, 1982, Fletcher on behalf of Rozay’s

wrote to Maheras to propose labor concessions. Specifi-

cally, Fletcher proposed the following: cessation of pen-

sion contributions; elimination of one week’s vacation;

elimination of two personal holidays; and elimination of

five days’ sick leave. This letter was sent via certified

mail. (Trial Exhibit No. 16.)

11. Loeal 208 received the letter of June 11, 1982, but

made no reply. (See Stipulated Fact k.)

12. On June 28, 1982, on behalf of Rozay’s, Fletcher

sent a second letter to Local 208. Fletcher stated that

da

having received no response to its June 11, 1982 letter,

Rozay’s assumed that the union had no objection to its

proposed changes, and the changes would be implemented

on July 6, 1982. This second letter was also sent by

certified mail. (Trial Exhibit No. 17.)

13. Local 208 received Rozay’s letter of June 28, 1982,

but made no reply. (See Stipulated Fact m.)

14. Rozay’s implemented the proposals outlined in its

June 11, 1982 letter to Local 208 effective July 6, 1982.

(See Stipulated Fact n.)

15. Several months after Rozay’s ceased making pen-

sion contributions to the Trust Fund, Local 208 filed an

unfair labor practice charge with the National Labor

Relations Board (the “NLRB” or Board“). The charge

was filed on September 20, 1982 and amended on Novem-

ber 1, 1982, under Board Case No. 21-CA-21591. (Trial

Exhibits Nos. 18, 19.) Local 208 also filed a grievance

pursuant to the grievance and arbitration provisions of

the expired Agreement. (Trial Exhibit No. 20.) The

Board charge alleged that the cessation of the payment of

pension contributions constituted an unfair labor prac-

tice, and the grievance alleged that it was a breach of the

collective bargaining agreement.

16. On January 17, 1983, William S. Rozay (“Mr.

Rozay'), President of Rozay’s, met with Maurice E.

Anderson ( Anderson“), International Vice President of

the International Brotherhood of Teamsters, and Archie

Murrietta (“Murrietta”), President of Local 208. The

purpose of this meeting was to resolve the NLRB case

then pending between Rozay’s and Local 208. This meet-

ing took place in Anderson’s office. (See Stipulated Fact

q.) At all times during his dealings with Rozay’s, Mur-

rietta was acting as agent of and on behalf of Local 208.

5a

17. At the January 17, 1983 meeting, Rozay’s and

Local 208 reached a settlement of the NLRB case. Among

the terms agreed to were a reduction of hourly wages by

$1.00 per hour and resumption of the payment of pension

contributions prospectively. The pension contributions

were 98¢ per hour for each employee.

18. At this January 17, 1983 meeting, Anderson

agreed to ask the Trust Fund to waive retroactive pension

contributions for the period of May 1982 to February

1983. He represented to Mr. Rozay that the Trust Fund

had forgiven the unpaid pension contributions of other

employers under similar circumstances. (See Stipulated

Fact r.)

19. On January 21, 1983, Mr. Rozay sent Murrietta a

letter confirming the terms of the January 17, 1983

agreement. (Trial Exhibit No. 13.) Mr. Rozay stated in

his letter that under the agreement, retroactive contribu-

tions would not be required. On January 26, 1983 Mur-

rietta replied to Mr. Rozay’s letter, and did not disagree

with or question the statement that there would be no

retroactive pension contributions. (Trial Exhibit No. 14.)

20. On January 26, 1983, Murrietta wrote a letter to

the Trust Fund, requesting that Rozay’s be relieved from

paying pension contributions for the months of July 1982

through January 1983. He sent a copy of this letter to Mr.

Rozay. (Trial Exhibit No. 1.) ,

21. On February 16, 1983 the Trustees of the Trust

Fund met to consider, among other agenda items,

whether to forgive Rozay’s unpaid pension contributions

for the months of May, 1982 through February, 1983. The

Trustees voted not to forgive the payment of these contri-

butions. (Trial Exhibit No. 6.)

6a

22. On or about March 4, 1983, Michael Uranga, an

employee of Southwest Administrators, the entity who

administers the Trust Fund in Southern California, told

Murrietta at a social gathering, a Teamsters’ joint Coun-

cil meeting, that the Trustees had voted not to forgive the

payment of the unpaid contributions. (See Stipulated

Fact y.)

23. On March 8, 1983, Local 208 and Rozay’s executed

a collective bargaining agreement (Trial Exhibit No. 4),

an Employer-Union Pension Certification (Trial Exhibit

No. 5), and a settlement agreement (the “Side Agree-

ment”) (Trial Exhibit No. 15) which resolved all pending

disputes between Rozay’s and Local 208 involving the

Board charge and the grievance.

24. At the time that Murrietta and Mr. Rozay signed

the March 8, 1983 collective bargaining agreement, Mur-

rietta knew that the Trustees had voted not to forgive

Rozay’s unpaid contributions, but he did not disclose this

fact to Mr. Rozay. The existence of an obligation to pay

the $76,133.29 in unpaid contributions was a material

fact. Murrietta did not disclose this fact to Mr. Rozay

because he knew that if Mr. Rozay was told that the past

contributions would not be forgiven, Mr. Rozay would not

execute the collective bargaining agreement. Murrietta

fraudulently induced Mr. Rozay’s execution of the collec-

tive bargaining agreement. When he committed these

fraudulent acts, Murrietta was acting as an agent of and

on behalf of Local 208.

25. At the time that Murrietta and Mr. Rozay signed

the March 8, 1983 collective bargaining agreement, the

Employer-Union Pension Certification and the Side

Agreement, there was no meeting of the minds between

Rozay’s and Local 208 on the issue of retroactive pension

contributions. The Trustees’ decision on February 16,

Ta

1983 not to grant Rozay’s relief from paying the retroac-

tive pension contributions changed the essential character

and nature of the agreement which Rozay’s and Local 208

reached on January 17, 1983 and which agreement Mr.

Rozay believed he was executing on March 8, 1983.

26. Murrietta by not disclosing the material fact that

the past due pension contributions would not be forgiven

deprived Rozay’s of the opportunity to renegotiate its

agreement for economic relief with Local 208 or to refuse

to sign the collective bargaining agreement and the Em-

ployer-Union Pension Certification and thus avoid the

$76,133.29 pension liability.

27. By letter dated March 24, 1983, the Trust Fund

notified Murrietta and Mr. Rozay of its decision not to

forgive the payment of the unpaid contributions. (Trial

Exhibit No. 2.) Rozay’s first learned of the Trustees’

decision through this letter.

28. On or about June 20, 1983, the Trust Fund filed an

action in this Court captioned, Southwest Administrators,

Inc. v. Rozay’s Transfer, Case No. 83-4194-MRP (“South-

west Administrators”) seeking recovery of the unpaid

pension contributions, along with interest, liquidated

damages, and attorney's fees. In that action, plaintiff

Southwest Administrators, Inc., was the assignee and

representative of the Trust Fund. (See Stipulated Fact

ff.)

29. Rozay’s did not learn of Local 208’s fraudulent

conduct until April 11, 1984 when in the course of litigat-

ing the Southwest Administrators case, Rozay’s deposed

Michael Uranga, a Trust official. During his deposition,

Uranga admitted telling Murrietta and Anderson before

the January 17, 1983 meeting that the Trust would not

forgive the unpaid contributions. Uranga also disclosed

8a

that the Trustees’ decision not to forgive Rozay’s unpaid

contributions was made on February 16, 1983. The deposi-

tion transcript was served on the parties on April 30,

1984. After waiting thirty days for Uranga to sign the

deposition, Rozay’s filed, on July 6, 1984, a motion for

leave to file a third party complaint against Local 208 for

fraud.

30. At the trial of the Southwest Administrators case,

on March 12, 1985, Murrietta for the first time admitted

knowing of the Trustees’ decision before March 8, 1983.

Until March 12, 1985, Murrietta denied knowing of the

Trustees’ decision prior to March 8, 1983.

31. In Southwest Administrators, this Court held that

Rozay’s was liable to the Trust Fund for the unpaid

pension contributions and entered judgment in favor of

Southwest Administrators in the amount of $122,789.03.

Added to the amount of back pension contributions

($76,133.29) was $15,226.65 in liquidated damages,

$25,039.09 in interest, and $6,390.00 in attorney’s fees.

The interest Rozay’s owes is continuing to accrue pending

appeal of Southwest Administrators. (See Stipulated Fact

ii.)

32. Rozay’s spent approximately $22,010.37 in attor-

ney's fees and costs defending the Southwest Admimistra-

tors ease in the district court. Rozay’s has currently spent

approximately $17,663.21 in attorney’s fees and costs in

appealing the Southwest Administrators case. Rozay’s has

currently spent approximately $9,304.89 in prosecuting

the present case.

CONCLUSIONS OF LAW

1. Loeal 208, through its agent Murrietta, intenti-

nonally concealed the Trustees’ decision from Mr. Rozay,

9a

knowing that this decision was a material fact which

changed the essential nature of the collective bargaining

agreement. Murrietta did not disclose this fact to Mr.

Rozay because he knew that if Mr. Rozay was told that

the past contributions would not be forgiven, Mr. Rozay

would not execute the collective bargaining agreement.

Mr. Rozay justifiably relied upon the intentional misrep-

resentation of Murrietta when signing the agreement.

Such conduct on the part of Local 208 constitutes fraud.

See, e. g., Pence v. United States, 316 (U.S. 332, 338, 62 8.

Ct. 1080, 1083, 86 L.Ed. 1510, 1515 (1942) (describing

elements of fraud); Hart v. McLucas, 535 F.2d 516 (9th

Cir. 1976) (accord); Greene v. Gibraltar Morts. Inv. Corp.,

488 F. Supp. 177, 179 (D.C.D.C. 1980) (omission or

concealment of material facts can constitute a misrepre-

sentation, just as a positive, direct assertion can).

2. Local 208, through its agent Murrietta, by intention-

ally concealing the Trustees’ decision from Mr. Rozay,

deprived Rozay’s of the opportunity to refuse to sign the

collective bargaining agreement and avoid retroactive

pension contributions of $76,133.92 or of renegotiating its

collective bargaining agreement with Local 208.

2. Because Mr. Rozay justifiably relied on the inten-

tional misrepresentation of Murrietta, acting as agent of

Local 208, when he signed the March 8, 1983 Agreement

which gave rise to Rozay’s liability to the Trust, Local 208

is required to indemnify Rozay’s the full amount. of

Rozay's damages arising from such fraud. Great American

Ins. Co. v. Evans, 269 F. Supp. 151, 157 (N. D. Cal. 1967)

(the principle behind indemnification is that everyone

should be responsible for the consequences of his or her

own wrong, and if others by reason of a lesser kind of

liability have been compelled to pay damages, then they

may recover from the real wrongdoer); Graphic Arts

a

10a

International Union, Local No. 280 v. NLRB, 596 F.2d 909,

910 (9th Cir. 1979) (union required to make employer

whole for any financial expenditures made pursuant to a

labor contract coerced in violation of the National Labor

Relations Act); Moe v. Transamerica Title Ins. Co., 21 Cal.

App. 3d 289, 303, 98 Cal. Rptr. 547 (1971) (a person who

is required through the tort of another to act in protection

of his interest by defending an action against a third

party is entitled to recover as damages, compensation for

the reasonably necessary attorneys’ fees incurred). Such

indemnification includes:

a. The amount of Rozay’s liability to the Trust

Fund in the Southwest Administrators case, including

interest subsequently accrued;

b. Rozay’s legal fees in defending the Southwest

Administrators case in the district court;

e. Rozay’s legal fees in appealing the Southwest

Administrators case; and

- 4, The 1981-1984 collective bargaining agreement be-

tween Rozay’s and Local 203 is null, void, rescinded and

is without effect because, as a result of Local 208’s fraud,

there never was a meeting of the minds on the essential,

material and critical issue of retroactive pension contribu-

tions. Boeing Airplane Co. v. Aeronautical Industrial Dist.

Lodge, 188 F.2d 356, 357 (9th Cir.) cert. denied, 342 U.S.

821, 72 S. Ct. 39, 96 L.Ed. 621 (1951) (strike by union is

material breach of collective bargaining agreement justi-

fying employer’s rescission of the agreement).

5. The Court denies Rozay’s request for attorneys’

fees in the present action.

lla

6. The Court denies Rozay’s request for punitive dam-

ages in the present action.

DATED: June 23, 1986

Mariana R. Pfaeizer

United States District Judge

Ib

APPENDIX B

No. 86-6544

D.C. No. CV-84-8313-MRP

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Rozay’s TRANSFER,

Plaintiff-Appellee,

v.

LOCAL FREIGHT DRIVERS, LOCAL 208,

INTERNATIONAL BROTHERHOOD OF TEAMSTERS,

CHAUFFEURS, WAREHOUSEMEN AND HELPERS

OF AMERICA,

Defendant-Appellant.

OPINION

Appeal from the United States District Court

for the Central District of California

Mariana R. Pfaelzer, District Judge, Presiding

Argued and Submitted

January 5, 1988 — Pasadena, California

Filed June 24, 1988

Before: J. Clifford Wallace, Thomas Tang and

William A. Norris, Circuit Judges.

Opinion by Judge Wallace

2b

SUMMARY

LABOR

Appeal from judgment. The court affirmed holding that

an employer would not have been liable for retroactive

pension fund contributions “but for” a union’s fraud.

In Southwest Administrators, the district court found

that appellee Rozay’s Transfer had been fraudulently

induced by appellant union president Murrietta into sign-

ing a collective bargaining agreement. The court also

found that there had been no meeting of the minds on a

retroactive pension fund contributions issue. Nonetheless,

the district court concluded that the union’s oral misrep-

resentation was not a defense to the trust fund’s right to

collect the contributions required by the express terms of

the agreement. Consequently, the district court entered

judgment for Southwest Administrators. This court af-

firmed and concluded that Rozay’s was still obligated to

make the contributions to the pension trust fund required

by the express terms of the agreement. At the same time,

Rozay’s initiated a separate action against the union

under section 301 of the Labor Management Relations

Act for fraudulent inducement. The district court con-

cluded that the union was guilty of fraudulent misrepre-

sentation in procuring the apparent assent of Rozay’s to

the March 8 agreement and entered judgment in favor of

Rozay’s. In fashioning a make whole remedy, the district

court rescinded the March 8 agreement, awarded Rozay’s

indemnification, and awarded Rozay’s indemnification

from the union for attorneys’ fees and costs.

[1] Evidence supports the district court’s factual find-

ings of fraud. [2] Given the evidence, it was not clear

error for the district court to infer that Rozay’s would not

have signed the existing agreement knowing that it would

3b

be bound to make over $76,000 in retroactive pension fund

contributions and that Murrietta concealed the trust

fund’s decision not to forgive the delinquent contribu-

tions because he realized that Rozay’s would not sign the

contract if he knew of the decision. [3] When Rozay’s

finally learned of Murrietta’s fraud, it promptly inter-

posed a contractual defense of fraudulent misrepresenta-

tion. The facts belie the union’s contention that Rozay’s

was satisfied with the agreement even though it obligated

Rozay’s to make retroactive pension fund contributions.

[4] Rozay’s bases its claim for relief against the union on

the union’s intentional failure to apprise it of the exis-

tence of a material fact: the trust fund’s adverse decision.

[5] Rozay’s amicus persuasively argues that because

pension plans are a mandatory subject of bargaining and

the employer must negotiate in good faith only through

the union’s chosen representative, it is untenable to hold

that the union cannot be held liable for intentional mis-

representations regarding material facts relating to the

employer’s pension obligations. [6] The union has cited

no authority or sound legal principle explaining why rules

pertaining to fraudulent inducement should not apply to

the formation of labor contracts. [7] In view of the

union’s inaction, the failure of the parties formally to

execute the tentative November 1981 agreement, and the

clearly expressed intent of Rozay’s to modify this agree-

ment in light of changed circumstances, this court fails to

see how a binding agreement came into effect as of

November 1981. [8] This court rejects Rozay’s argument

that just because an employer may continue contributing

to a pension trust fund following the expiration of a

collective bargaining agreement it does not mean that a

trust fund has the right to sue to collect such contribu-

tions during this period. [9] Upon expiration of a collec-

tive bargaining agreement, an employer has a duty to

4b

continue the status quo until the parties bargain to

impasse or reach a new agreement. By unilaterally chang-

ing the status quo before that time, the employer commits

an unfair labor practice. This obligation to maintain the

status quo under the expired labor agreement applies

with equal force to the obligation to continue contributing

to a pension trust fund. [10] That section 8(a) (5) creates

an enforceable obligation on the part of an employer to

continue pension fund contributions pending renegoti-

ation of an expired collective bargaining agreement belies

the Rozay’s claim that an employer is permitted, but

cannot be required by the trust fund, to make such

contributions during this hiatus. [11] Nonetheless, this

court remains unpersuaded by the union’s argument that

notwithstanding Murrietta's alleged misrepresentation,

Rozay’s would still have been legally obligated to make

the pension fund contributions for the period in question.

The employer’s obligation to maintain the status quo is

merely presumptive in the sense that it ean be discharged

through the bargaining process. The parties could always

have extinguished this obligation. This court sees no

reason why this could not be done retroactively. [12]

Union officials clearly evinced by their words and actions

their intent to free Rozay’s from the burden of making

retroactive pension fund contributions for the period in

question. Murrietta’s fraud deprived Rozay’s of the op-

portunity to negotiate away any continuing legal obliga-

tion to make the retroactive payments. [13] Section 301

allows courts to fashion remedies and in doing so, the

range of judicial inventiveness under section 301 will be

determined by the nature of the problem. [14] Hence,

there is no sound reason why section 301 should bar the

district court from simultaneously awarding a remedy of

rescission and indemnification for the union’s fraudulent

inducement in order to make the employer whole. [15]

5b

The union’s suggestion that Rozay’s was tardy in waiting

over a year before formally notifying the union of the

collection action initiated by the trust fund is contrary to

the record. [16] There is no evidence in the record that

Rozay’s was remiss or dilatory in conducting discovery

that would otherwise have led Rozay’s to uncover Mur-

rietta’s fraudulent conduct. [17] The award of attorneys’

fees and costs in this case merely compensates Rozay’s

for one aspect of its out-of-pocket expenses attributable to

the union’s fraud. Case law supports awarding attorneys’

fees and costs where such expenses were incurred as a

result of the defendant’s own misconduct. [18] Thus, the

district court did not abuse its discretion by awarding

Rozay’s the attorneys’ fees and costs that it incurred in

defending the Southwest Administrators lawsuit.

COUNSEL

Robert D. Vogel, Wohlner, Kaplon, Phillips, Vogel, Shel-

ley & Young, Los Angeles, California, for the defendant-

appellant.

Stephen P. Pepe, O’Melveny & Myers, Los Angeles, Cali-

fornia, for the plaintiff-appellee.

OPINION

WALLACE, Circuit Judge:

Rozay’s Transfer, an employer, brought this action

against Teamsters Local 208 (union) for fraudulently

inducing Rozay’s Transfer to execute a collective bargain-

ing agreement. Following a bench trial, the district court

found for Rozay’s Transfer-and granted its prayer for

rescission of the collective bargaining agreement (agree-

ment) and for indemnification for retroactive pension

6b

fund contributions under the agreement for which

Rozay’s Transfer was adjudged liable in a previous collec-

tion action brought by the pension trust fund. On appeal,

the union contests not only the merits of the district

court’s finding of fraud, but also the district court’s

jurisdiction over this action and its authority simultane-

ously to award rescission and indemnification as a rem-

edy. We have jurisdiction pursuant to 28 U.S.C. § 1291,

and we affirm.

I

The circumstances giving rise to this lawsuit were

previously detailed in our decision in Southwest Adminis-

trators, Inc. v. Rozay’s Transfer, Inc., 791 F.2d 769 (9th

Cir. 1986) (Southwest Administrators), cert. denied, 107 S.

Ct. 951 (1987), an action brought by the trust fund to

collect retroactive pension fund contributions that

Rozay’s Transfer was obligated to make under its collec-

tive bargaining agreement with the union.

Prior to September 30, 1981, Rozay’s Transfer, an

employer in the trucking industry, and Teamsters

Local 208 were parties to a collective bargaining

agreement. Pursuant to the agreement, Rozay’s

Transfer made monthly contributions on behalf of its

employees to the Western Conference of Teamsters

Pension Fund. This trust fund is a multiemployer

pension plan as defined by subsections 3(2) and

(37) (A) of the Employee Retirement Income Secur-

ity Act of 1974, 29 U.S.C. § 1002 (2), (37) (A).

After the agreement had expired, and while negoti-

ations were continuing over the terms of a successor

agreement, Rozay’s Transfer continued to make con-

tributions to the trust fund pursuant to the terms of

the 1978-81 bargaining agreement. In July, 1982,

Tb

when no successor agreement had yet been adopted,

Rozay’s Transfer informed the union that it had

ceased making contributions to the pension fund.

In September, 1982, Local 208 filed an unfair labor

practice claim with the National Labor Relations

Board (NLRB) charging Rozay’s Transfer under 29

U.S.C. § 158 (a) (5) with refusal to execute a collec-

tive bargaining agreement that had allegedly been

negotiated. The NLRB charge was subsequently

amended to include the charge that Rozay’s Transfer

had unilaterally altered benefits and conditions of

employment, including cessation of payments to the

pension fund. Local 208 also filed a grievance alleg-

ing the cessation of contributions to the trust fund

violated the collective bargaining agreement.

While the NLRB charge and the grievance were

pending, William S. Rozay, the owner of Rozay’s

Transfer, and Archie Murrietta, president of Local

208, eventually reached a settlement. Under this

settlement, employee wages would be reduced by

$1.00 and Rozay’s Transfer would resume payments

to the trust fund on behalf of each employee at the

approximate rate of $.99 per hour.

In light of the company’s precarious financial posi-

tion, Rozay expressed serious concerns about being

required to make retroactive pension fund contribu-

tions for the period between May, 1982 and Febru-

ary, 1983. Murrietta, and Maurice E. Anderson, the

director of the Western Conference of Teamsters,

agreed to contact the trust fund and request a waiver

of the obligation to make contributions for this pe-

riod. Murrietta and Anderson assured Rozay that the

delinquent payments would be forgiven, noting that

the trust fund had waived the unpaid pension contri-

8b

butions of other employees under similar

circumstances.

Murrietta wrote to the trust fund on behalf of

Rozay’s Transfer requesting relief from payment of

contributions for this interim period. However, on

February 16, 1983, the trustees of the Western Con-

ference of Teamsters Pension Fund, voted to deny

the request to forgive the unpaid contributions.

When the new collective bargaining agreement was

executed on March 8, 1983, Murrietta had been in-

formed of the trust fund’s decision to deny a waiver

of the delinquent contributions. He did not advise

Rozay of this action. Rozay, assuming that unpaid

contributions would be forgiven, signed the agree-

ment, which covered the period from September 1.

1981 to September 30, 1984. The parties also exe-

cuted a settlement agreement resolving the NLRB

unfair practice complaint and the breach of agree-

ment grievance. Local 208 thereafter withdrew the

NLRB unfair labor practice charge and the

grievance.

Subsequently, Southwest Administrators, Inc., the

assignee of the Western Conference of Teamsters

Pension Fund, filed this action against Rozay's

Transfer under sections 502(a) and 515 of the Em-

ployee Retirement Income Security Act (ERISA), 29

U.S.C. $§ 1132 (a), 1145, to collect delinquent contri-

butions for the period between May, 1982 and Febru-

ary, 1983.

Rozay’s Transfer contended that its obligation to

make pension fund contributions dated only from

May 8, 1983, when the collective bargaining agree-

ment was signed. Rozay’s Transfer also filed a coun-

9b

terclaim seeking the return of $57,235.28 in

contributions made to the trust between October,

1981 and April, 1982, the period between expiration

of the old bargaining agreement and the date Rozay’s

Transfer ceased making payments.

791 F. ad at 771-72 (footnote omitted)

Following a bench trial, the district court in Southwest

Administrators found that Rozay’s Transfer had been

“fraudulently induced” by Murrietta into signing the

agreement and that there had been no “meeting of the

minds” on the retroactive pension fund contributions. Id.

at 772. Nonetheless, the district court concluded that the

union’s oral misrepresentation was not a defense to the

trust fund’s right to collect the contributions required by

the express terms of the agreement. Jd. Consequently, the

district court entered judgment for Southwest Adminis-

trators for $76,133.29 in retroactive pension fund contri-

butions, $15,226.25 in liquidated damages, $25,039.09 in

interest, and $6,390.00 in attorneys’ fees. Id.

On appeal, we affirmed. Relying on Southern California

Retail Clerks Union and Food Employers Joint Pension

Trust Fund v. Bjorklund, 278 F.2d 1262 (9th Cir. 1984),

we held that while a union’s misrepresentation that

amounted to fraud in the execution could constitute a

defense to a trust fund’s subsequent collection action, a

misrepresentation that amounted only to fraud in the

inducement could not. Id. at 774. Concluding that the

misrepresentation by the union went only to induce

Rozay's Transfer to enter into the agreement, we held

that the agreement was not void“, but merely voidable“

as against the trust fund. Id. at 775. Hence, we concluded

that, regardless of the union’s fraudulent inducement,

Rozay’s Transfer was still obligated to make the contribu-

10b

tions to the pension trust fund required by the express

terms of the agreement. Id.

Subsequent to the entry of judgment by the district

court in the collection action brought by the trust fund,

but prior to our decision in Southwest Administrators,

Rozay’s Transfer initiated a separate action against the

union under section 301 of the Labor Management Rela-

tions Act (LMRA), 29 U.S.C. 5 185 (a), for fraudulent

inducement. After a bench trial, the district court con-

cluded that the union-was guilty of fraudulent misrepre-

sentation in procuring the apparent assent of Rozay’s

Transfer to the March 8, 1983, agreement, and entered

judgment in favor of Rozay’s Transfer. In fashioning a

make whole” remedy, the district court (1) rescinded

the March 8, 1983, agreement, (2) awarded Rozay’s

Transfer indemnification from the union for contributions

owed to the trust fund as a result of the union’s fraudu-

lent misrepresentation, and (3) awarded Rozay’s Trans-

fer indemnification from the union for attorneys’ fees and

costs incurred by Rozay’s Transfer in defending the

Southwest Administrators litigation both at trial and on

appeal. The union timely appealed.

On appeal, the union challenges virtually all the factual

findings and legal conclusions underlying the district

court's determination that the union is liable for fraudu-

lent misrepresentation. Regarding the remedy awarded,

the union challenges the district court’s award of rescis-

sion and indemnification for contributions owed to the

trust fund on both statutory and equitable grounds, and

contests the propriety of awarding indemnification for the

attorneys’ fees and costs that Rozay’s Transfer incurred

in defending the Southwest Administrators lawsuit. We

granted leave to the Southern California District Council

of Laborers and International Union of Operating Engi-

neers, Local Union No. 12, AFL-CIO (union’s amicus) to

11b

file an amicus brief on behalf of the union and to the

Merchants and Manufacturers Association and the Cali-

fornia Trucking Association (Rozay's Transfer's amieus)

to file an amicus brief on behalf of Rozay’s Transfer. In

its amicus brief, the union’s amicus objects to the district

court’s jurisdiction to hear this case.

II

Rozay's Transfer brought its action pursuant to section

301 of the LMRA which provides for district court juris-

diction over suits involving collective bargaining agree-

ments. The union’s amicus, however, contends that

because the union’s conduct in this case was arguably an

unfair labor practice, the NLRB had exclusive primary

jurisdiction over the claims of Rozay’s Transfer.

The union’s amicus correctly interprets San Diego

Building Trades Council v. Garmon, 359 U.S. 236 245

(1959), as conferring exclusive primary jurisdiction on

the NLRB over cases involving conduct that is arguably

an unfair labor practice under section 8 of the National

Labor Relations Act (NLRA), 29 U.S.C. § 158. Because

the union’s nondisclosure is arguably an unfair labor

practice, insofar as it constituted a failure to bargain in

good faith, the amicus reasons that the district court was

deprived of jurisdiction by the Garmon preemption

doctrine.

Although no one disputes that the union’s conduct was

arguably an unfair labor practice, the argument of amicus

is incorrect as a matter of law. LMRA § 301 carves out a

broad exception to the NLRB’s primary jurisdiction for

claims arising out of collective bargaining agreements,

whether or not such claims would also be an unfair labor

practice under section 8 of the NLRA. In cases involving

conduct that is both an unfair labor practice and a

12b

violation of a collective bargaining agreement, the NLRB

and the district courts have concurrent jurisdiction. See

William E. Arnold Co. v. Carpenters District Council of

Jacksonville, 417 U.S. 12, 15-16 (1974). Section 301,

moreover applies not only to suits for breach of a collec-

tive bargaining agreement once it is duly formed, but also

to suits impugning the existence and validity of a labor

agreement, International Brotherhood of Electrical Work-

ers, Local 532 v. Brink Construction Co., 825 F.2d 207, 212

(9th Cir. 1987); John S. Griffith Construction Co. v. United

Brotherhood of Carpenters and Joiners, 785 F.2d 706, 712

(9th Cir. 1986) (in suit under LMRA § 301, district court

has jurisdiction to determine the existence of a labor

contract), including those alleging improper conduct or

mistake during the formation of the agreement. See, e. g.,

Operating Engineers Pension Trust v. Gilliam, 737 F.2d

1501, 1503-05 (9th Cir. 1984) (fraud); H. Prang Trucking

Co. v. Local Union No. 469, 613 F.2d 1235, 1238-39 (3d Cir.

1980) (mutual mistake of fact). Thus, we hold that the

district court had jurisdiction under LMRA §301 to

entertain this action alleging fraudulent inducement in

the formation of the agreement.

III

Unlike its amicus, the union does not dispute the

district court’s jurisdiction under section 301. Rather, the

union contests the district court’s legal determination

that Rozay’s Transfer was fraudulently induced by Mur-

rietta’s oral misrepresentation into signing the agree-

ment. In addition, the union maintains that even if the

district court’s finding of fraud were correct, the relief

that it awarded was improper. We now address the

liability issues, dealing first with the challenge to factual

findings and then to the conclusions of law.

13b

A.

To establish a claim of fraudulent misrepresentation,

Rozay’s Transfer must prove that the union knowingly

made a false representation concerning a material fact

with the specific intent to deceive Rozay’s Transfer and

that Rozay’s Transfer detrimentally relied upon the false

representation, See Pence v. United States, 316 U.S. 332,

338 (1942); Hart v. McLucas, 535 F.2d 516, 519 (9th Cir.

1976). On the merits, the union challenges the district

court's findings on each of these elements of fraudulent

concealment, contending that the district court (1) erred

in finding that the union committed a fraudulent misrep-

resentation with the specific intent to deceive Rozay’s

Transfer into signing the agreement, (2) erred in con-

cluding that the alleged misrepresentation concerned a

material fact, (3) erred in finding that Rozay’s Transfer

had detrimentally relied upon the fraudulent misrepre-

sentation, (4) erred as a matter of law in concluding that

Rozay's Transfer’s reliance on Murrietta’s representa-

tions was reasonable, and (5) erred as a matter of law in

concluding that Rozay’s Transfer would not have been

contractually obligated to pay the delinquent pension

contributions even had it not signed the agreement.

We review the district court’s findings of fact, whether

based on oral or documentary evidence, under the clearly

erroneous standard, Fed. R. Civ. P. 52(a); Cooling Sys-

tems and Flexibles, Inc. v. Stuart Radiator, Inc., 777 F.2d

485, 487 (9th Cir. 1985), while we review its conclusions

of law de novo. United States v. McConney, 728 F.2d 1195,

1201 (9th Cir.) (en bane) (McConney), cert. denied, 469

U.S. 824 (1984). Moreover, we will not disturb the district

court’s interpretation of a contract that looks to extrinsic

evidence of what the parties said and did unless it is

14b

clearly erroneous. Miller v. Safeco Title Insurance Co., 758

F.2d 364, 367 (9th Cir. 1985).

The district court’s findings that Murrietta had the

specific intent to induce Rozay’s Transfer into signing the

agreement and that Rozay’s Transfer detrimentally relied

on his misrepresentation are findings of historical fact

that are reviewed for clear error. See Fed. R. Civ. P.

52(a); MeConney, 728 F.2d at 1200. Particular deference

is paid to the district court’s credibility findings. Ander-

son v. City of Bessemer City, 470 U.S. 564, 579-80 (1985).

B.

[1] Notwithstanding the union’s protestations to the

contrary, there was ample evidence to support the district

court’s factual findings essential to its determination of

fraud. The district court obviously found the testimony

presented by Rozay’s Transfer more credible than Mur-

rietta’s, and with good reason. There was ample testimony

by the executives of Rozay’s Transfer, and corroborating

letters from Rozay’s Transfer to the union, to show that

the whole point of the settlement agreement was to afford

Rozay’s Transfer economic relief and that absent a waiver

of the $76,133.29 in unpaid retroactive pension fund

contributions, there would be no significant economic

relief. Correspondence between Rozay’s Transfer and the

union reveals that the Rozay’s Transfer trucking business

had fallen on hard times, that it was operating in the red,

and that to bring down costs to the point where it could

begin operating profitably again, it had to decrease its

employees’ total compensation package. During its rene-

gotiation of the agreement that expired on September 10,

1981, Rozay’s Transfer consistently maintained that it

could no longer afford to provide its employees with the

same package of wages and benefits. Indeed, while the

disputed agreement of March 8, 1983, provided that

15b

Rozay's Transfer would resume pension fund contribu-

tions in the future at the approximate rate of $0.99 per

hour, the side agreement offset the cost of such contribu-

tions by across the board wage reductions of $1.00 per

hour and a waiver of five days’ sick leave and two paid

holidays.

More importantly, however, the trial evidence is en-

tirely consistent with the district court’s finding that

Rozay’s Transfer would not have signed the agreement if

Rozay's Transfer had been aware that the agreement

required it to pay retroactive pension fund contributions

for the period between May 1982 and February 1983. The

parties stipulated that on January 17, 1983, William

Rozay (Rozay), President of Rozay’s Transfer, met with

Anderson and Murrietta to resolve a pending labor dis-

pute between Rozay’s Transfer and the union relating to

the unilateral cessation of pension fund contributions by

Rozay's Transfer for the period from May 1982 through

February 1983. At this meeting, Anderson represented to

Rozay that the trust fund had in the past forgiven other

employers’ unpaid pension fund contributions. Anderson

told Rozay that he would see to it that the trust fund

similarly forgive delinquent contributions of Rozay’s

Transfer for the period in question. During this same

meeting, Murrietta told Rozay that he would write a

letter to the trust fund on behalf of Rozay’s Transfer

requesting that the trust fund forgive the delinquent

payments. |

Sometime after this meeting, Rozay called Anderson

and was assured that Anderson was doing “all that was

necessary” to relieve Rozay’s Transfer of any pension

fund obligations for the period in question. On Janu-

ary 21, 1983, Rozay wrote a letter to Murrietta in which

Rozay confirmed his understanding that In]o pension

contributions will be required for the period April 1, 1982

16b

through January, 1983.” On January 26, 1983, Murrietta

replied to Rozay’s letter and also wrote to the trust fund

requesting that it forgive the unpaid pension fund contri-

butions of Rozay’s Transfer.

[2] Subsequently, around March 4, 1983, Michael

Uranga, an employee of the trust fund’s administrators,

informed Murrietta at a social function that the trust

fund trustees had voted against forgiving the unpaid

contributions of Rozay’s Transfer. When Murrietta met

again with Rozay on March 8, 1983, for the purpose of

executing a new agreement between Rozay’s Transfer and

the union, Murrietta did not tell Rozay that the trust fund

had already rendered an adverse decision on his request

to forgive the unpaid contributions. Given this evidence,

it was not clear error for the district court to infer that

Rozay would not have signed the existing agreement

knowing that it would be bound to make over $76,000 in

retroactive pension fund contributions and that Murrietta

concealed the trust fund’s decision not to forgive the

delinquent contributions because he realized that Rozay

would not sign the contract if he knew of the decision.

Hence, the district court’s findings on specific intent and

materiality are not clearly erroneous.

The union contends that the failure of Rozay’s Transfer

to seek to reopen negotiations with Murrietta or to re-

seind, reform, or amend the agreement after receiving the

trust fund’s letter dated March 24, 1983, denying his

request to forgive delinquent contributions, proves that

Rozay did not in fact detrimentally rely on Murrietta's

misreprescntation, but, rather, indicates that Rozay's

Transfer was satisfied with the bargain. It was not until

the deposition of Uranga on April 30, 1984, however, when

the contract had nearly expired, that Rozay’s Transfer

17b

first learned of Murrietta’s fraud, and it was not until

March 12, 1985, during the Southwest Administrators trial

and after the contract had expired, that Murrietta finally

confessed to his concealment. 5

[3] Moreover, the union's argument ignores the fact

that during the dispute between Rozay’s Transfer and the

trust fund, Rozay's Transfer had initially maintained that

Rozay and Murrietta had orally modified the provisions of

the March 8, 1983, agreement relating to the retroactive

contributions for the period in question. When Rozay’s

Transfer finally learned of Murrietta’s fraud, it promptly

interposed a contractual defense of fraudulent misrepre-

sentation. These facts belie the union’s contention that

Rozay's Transfer was satisfied with the agreement even

though it obligated Rozay’s Transfer to make retroactive

pension fund contributions. Rozay’s Transfer never acqui-

esced to an agreement that required such payments. In

view of this evidence, the district court could have prop-

erly concluded that Rozay’s Transfer had in fact believed

that Rozay and Murrietta had orally modified the express

terms of the March 8, 1983, agreement, that the union

would be able to use its influence to procure forgiveness

of delinquent contributions, and that there was no basis

for attacking its failure to do so until Rozay’s Transfer

learned of the fraud years later. It was therefore not

clearly erroneous for the district court to find that Rozay

had in fact relied detrimentally on Murrietta’s misrepre-

sentation despite the apparent inaction of Rozay’s

Transfer.

C.

In addition to attacking the district court’s factual

findings, the union also challenges its legal conclusions

relating to the ingredients of fraudulent misrepresenta-

18b

tion. In this appeal, the union does not contest that

Murrietta’s intentional failure to disclose the trust fund’s

adverse decision could constitute a fraudulent misrepre-

sentation, and, therefore, we do not reach the question of

whether a party has a duty to disclose material facts to

another party during collective bargaining negotiations or

whether a breach of such a duty will necessarily consti-

tute actionable fraud.

*

The union first contends that Rozay’s reliance on Mur-

rietta’s misrepresentation was unreasonable as a matter

of law. Obviously, as a question of law, we review this

issue de novo. See McConney, 728 F.2d at 1201. Because

the trust fund was not forbidden by law from forgiving

delinquent contributions, we do not believe that an em-

ployer can never reasonably rely on a union’s representa-

tions that it can influence favorable discretionary acts by

the pension administrators. Because there was a common-

ality of interest between the union and the trust fund to

further the welfare of the employees, it was not unreason-

able as a matter of law for Rozay’s Transfer to believe

that the union could favorably influence the trust fund.

[4]The substance of the union’s argument is that it is

unreasonable as a matter of law for an employer to rely on

a union’s representations regarding its ability to influence

a trust fund, because a union cannot bind a trust fund,

nor does it have a legal duty to disclose to an employer

any information concerning the employer’s obligations to

a trust fund. The cases that it cites for this broad

proposition, however, do not address the question

presented here — whether an employer may sue a union

for its intentional misrepresentation of an existing mate-

rial fact. Chamberlin v. Bakery & Confectionery Union &

19b

Industry International Pension Fund, 99 L.R.R.M. 3176,

3177-80 (N.D. Cal. 1977), for example, involved a suit by

a retired employee seeking to estop a trust fund from

denying him benefits based upon a union representative’s

erroneous representation that he was eligible for such

benefits. Because the trust had not made any misrepre-

sentations, the union representative lacked apparent au-

thority to bind the fund, and the terms of the collective

bargaining agreement rendered the employee ineligible

for benefits, the district court determined that the em-

ployee had not reasonably relied on a representation of

the defendant, and denied relief. In the present case, in

contrast, Rozay’s Transfer bases its claim for relief

against the union on the union’s intentional failure to

apprise it of the existence of a material fact: the trust

fund’s adverse decision. Chamberlin, which involves a suit

against a trust fund based upon misrepresentations of a

union representative, is thus inapplicable to the question

of Rozay’s reasonable reliance in this case. See also

Pension Trust v. Moine Brothers Excavators, 124 L.R.R.M.

2031 (C.D, Cal. 1986) (trust fund not bound by union

representative’s misrepresentations).

In Lucky Construction Co. v. Operating Engineers Local

12, 4 E. B. C. 2521 (S.D. Cal. 1983), the district court held

that an employer could not recover benefits paid to a trust

fund from a union based upon a union agent’s alleged

verbal representation regarding the employer's obliga-

tions to the trust fund. The court determined that Lucky’s

reliance on the union’s representation was unreasonable

as a matter of law because it was charged with knowledge

of its legal and contractual obligations set forth in the

Master Labor Agreement and the trust agreements to

which it was bound. Because the union had no power to

modify these agreements, and because the union owed no

duty to explain to Lucky its legal obligations under the

20b

agreements, the union could not be liable for its negligent

misrepresentations concerning Lucky’s legal obligations

under the agreements. Id. at 2523.

Lucky stands for the familiar proposition that an em-

ployer cannot reasonably rely on a union’s erroneous

representation regarding the scope of the legal obliga-

tions to a distinct entity of which the employer is presum-

ably aware. This rule is inapplicable here. In the present

case, Rozay’s Transfer alleges that the union intention-

ally misrepresented a material fact by failing to disclose

that its obligation to the trust fund would not be forgiven.

Rozay’s Transfer did not miscomprehend its legal obliga-

tions to the fund, rather, it misunderstood the state of

facts, known to the union, existing at the time it entered

into a separate agreement with the union. Lucky does not

control this issue before us.

Similarly, in Operating Engineers Pension Trust v. Cecil

Backhoe Service, Inc., 795 F.2d 1501, 1507-08 (9th Cir.

1986), we held that a union owed an employer no duty to

disclose that he was legally bound by a short form

collective bargaining agreement that incorporated the

terms of a master labor agreement requiring the employer

to make contributions to an employee pension fund. Cecil

Backhoe, like Lucky, however, is clearly distinguishable

from the instant case. The union in that case had not led

the employer to believe that its legal obligations would be

anything other than those set forth in the written agree-

ment, nor had the union intentionally concealed a mate-

rial fact. Id. at 1508. Here, by contrast, Rozay’s Transfer

was affirmatively led to believe that the union would be

able to exert its influence to see to it that its delinquent

contributions were forgiven. In the present case, moreo-

ver, the information that the union failed to disclose did

not pertain to legal consequences, which the employer is

21b

presumed to understand. See id. at 1508 (the union

committed no “wrong” by failing to disclose that the

agreements applied to Cecil Backhoe’s employees).

Rather, the information pertained to a material fact,

namely, that the trust fund had already refused to exer-

cise its discretion to forgive the delinquent payments.

Here, we are bound by the district court’s factual

finding that at the time the parties signed the March 8,

1983, agreement, “there was no meeting of the minds

between Rozay’s and Local 208 on the issue of retroactive

pension contributions.” Further, we are bound by the

district court’s determination that “[t]he Trustees’ deci-

sion on February 16, 1983, not to grant Rozay’s relief

from paying the retroactive pension contributions

changed the essential character and nature of the agree-

ment which Rozay’s and Local 208 reached on January 17,

1983, and which agreement Mr. Rozay believed he was

executing on March 8, 1983.” Reviewed in the light of all

the evidence that Rozay signed the agreement only be-

cause he believed that he was securing economic relief for

his company, mainly through avoidance of the retroactive

pension fund contributions for the period in question, we

cannot say that these findings by the district court were

clearly erroneous. Consequently, there having been no

“meeting of the minds” between the parties on the issue

of retroactive pension fund contributions, regardless of

the apparent plain language of the agreement, it was not

unreasonable as a matter of law for Rozay to rely on

Murrietta’s fraudulent misrepresentation prior to signing

the March 8, 1983, agreement.

[5] While the union has cited no authority for the

proposition that a union cannot be held liable to an

employer for intentionally misrepresenting facts relevant

to the employer’s pension fund obligations during the

22b

collective bargaining process, neither Rozay's Transfer

nor its amicus have alerted us to any direct authority

recognizing such liability on the part of the union.

Rozay's Transfer’s amicus, however, argues that because

pension plans are a mandatory subject to bargaining and

the employer must negotiate in good faith only through

the union’s chosen representative, it is untenable to hold

that the union cannot be held liable for intentional mis-

representations regarding material facts relating to the

employer’s pension obligations. We find this argument

persuasive. :

First, as Rozay's Transfer’s amicus correctly observes,

the trustees are not collective bargaining agents and

hence cannot negotiate pension fund provisions. See

NLRB v. Amar Coal Co., 453 U.S. 322, 334 (1981).

Second, as the Seventh Cireuit pointed out in Battle v.

Clark Equipment Co., 579 F.2d 1338, 1349 (7th Cir. 1978),

overruled on other grounds, Rupe v. Spector Freight Sys-

tems, Inc., 679 F.2d 685, 690 n.3 (7th Cir. 1982), an

“employer cannot be held liable for... retroactive mone-

tary relief when it relies in good faith on union actions or

representations that are not obviously outside the scope

of its authority.” In that case, the employer had relied on

the union’s representations that its members had ratified

certain amendments pursuant to properly conducted in-

ternal union procedures. Jd. Although the present case

involves the union’s representations concerning its au-

thority to induce the trust fund to forgive delinquent

pension contributions, rather than internal union proce-

dures, we do not believe that the union’s ability to influ-

ence a discretionary act of the trust fund was “obviously

outside the scope of its authority.”

[6] Finally, the union has cited no authority or sound

legal principle, nor can we discern any, explaining why

23b

rules pertaining to fraudulent inducement should not

apply to the formation of labor contracts. Hence, we do

not find it unreasonable as a matter of law for Rozay’s

Transfer to have relied on the union’s assurances that it

could convince the trust fund to act favorably on the

petition of Rozay’s Transfer.

2.

Next, the union argues that because Rozay’s Transfer

would have been obligated to make the pension eontribu-

tions even had it not signed the agreement, Murrietta's

misrepresentation could not have been “material” to

Rozay’s decision to sign the agreement. We interpret this

materiality contention as a “causation” argument. The

union is really arguing that if Rozay’s Transfer were

legally obligated to make the retroactive contributions

whether or not Rozay signed the March 8, 1983, agree-

ment, then Murrietta’s misrepresentation could not have

been the cause-in-fact of the injury to Rozay’s Transfer.

Causation is ordinarily a question of fact that is reviewed

for elear error. See Armstrong v. United States, 756 F.2d

1407, 1409 (9th Cir. 1985.) But whether or not there was

a prior legal obligation to make such payments absent a

valid, signed collective bargaining agreement is a mixed

question of fact and law that requires us to assess

whether legal duties arise under a given set of facts.

Accordingly, we review this issue de novo, See McConney,

728 F.2d at 1201-02.

[7] The union marshals two main arguments in sup-

port of its contention that Rozay’s Transfer would have

been obligated to make the payments even had it refused

to sign the March 8, 1983, agreement. Initially, the union

argues that as of November 1981, “[t]he undisputed

material facts in this case disclose” that the parties had

es Wu

24b

reached a mutual agreement on a new contract and that

the refusal by Rozay’s Transfer to sign it did not prevent

the agreement from going into effect. We find no merit in

this claim. The record discloses neither a stipulation by

Rozay’s Transfer, nor a finding by the district court that a

binding agreement was reached in November of 1981. On

the contrary, the record reveals that while the parties had

reached a tentative agreement on the terms of a successor

agreement, which the union was to incorporate into a

written draft, Rozay’s Transfer did not receive a draft

until April 18, 1982. On May 6, 1982, Rozay’s Transfer

returned to the union the draft unsigned to make certain

corrections, but the union never responded. Because

Rozay’s Transfer had experienced severe financial

problems during the interim, on this same day it informed

the union that a reduction in labor costs, including termi-

nation of pension benefits, was required if Rozay’s Trans-

fer were to remain in business. Indeed, on both June 11,

1982, and June 28, 1982, Rozay’s Transfer sent certified

letters to the union proposing, among other things, cessa-

tion of pension contributions. On neither occasion did the

union respond. In view of the union’s inaction, the failure

of the parties formally to execute the tentative November

1981 agreement, and the clearly expressed intent of

Rozay's Transfer to modify this agreement in light of

changed circumstances, we fail to see how a binding

agreement came into effect as of November. 1981.

In presenting its first causation argument, the union

reads our prior decision in Southwest Administrators as

holding that Rozay’s Transfer was still contractually

obligated to pay the delinquent contributions even if the

March 8, 1983, labor contract were rescinded for fraud.

However, while we recognized in Southwest Administra-

tors that Murrietta’s fraud did not render the agreement

void as to the obligations of Rozay’s Transfer to the trust

25b

fund, 791 F.2d at 774-75, this holding has no bearing on

the question of causation in this action. Just because

Rozay’s Transfer is contractually obligated to the trust

fund does not answer the question whether the union

caused Rozay’s Transfer to assume this obligation. We

did not suggest in Southwest Administrators that Rozay’s

Transfer could not seek redress against the union in a

separate action. Indeed, we suggested that the proper

remedy for Rozay’s Transfer might lie in an action for

indemnification against the union. See id. at 777 n.4.

[8] In the second branch of its “causation” agreement,

the union maintains that even if the parties had not

negotiated any new labor agreement after the old one had

expired in September 1981, Rozay’s Transfer would none-

theless have remained statutorily obligated under the

NLRA to continue paying into the pension fund through-

out the period in question. The union relies on NLRB v.

Carilli, 648 F.2d 1206, 1213-14 (9th Cir. 1981), which

held that until the parties negotiate a new agreement or

bargain in good faith to impasse, the employer is required

to maintain the status quo under the expired collective

bargaining and trust agreements, including payments to

pension trusts. Accord Southwest Administrators, 791 F.2d

at 776. Rozay’s Transfer, however, does not interpret our

decision in Carilli as imposing a general obligation on the

employer to maintain the terms of an expired collective

bargaining agreement pending renegotiation. Instead, it

reads Carilli as holding only that an employer may

continue to contribute to a pension trust fund following

expiration of a collective bargaining agreement without

violating section 302 (e) (5) of the LMRA, which forbids

such payments in the absence of an express, written

agreement. Just because an employer may continue con-

tributing to a pension trust fund following the expiration

of a collective bargaining agreement, Rozay’s Transfer

26b

argues, does not mean that a trust fund has the right to

sue to collect such contributions during this period.

[9] After giving this argument careful consideration,

we reject such a narrow interpretation of our holdings in

Carilli and Southwest Administrators. Our cases have long

established that upon expiration of a collective bargaining

agreement, an employer has a duty to continue the status

quo until the parties bargain to impasse or reach a new

agreement, Southwest Administrators, 791 F. 2d at 776-77.

By unilaterally changing the status quo before that time,

the employer commits an unfair labor practice in violation

of NLRA § 8(a)(5) (failure to bargain in good faith).

See, e.g., Laborers Health & Welfare Trust v. Advanced

Lightweight Concrete. 779 F.2d 497, 500 (9th Cir. 1985)

(Advanced Lightweight), aff d, 108 S.Ct. 830 (1988). This

obligation to maintain the status quo under the expired

labor agreement applies with equal force to the obligation

to continue contributing to a pension trust fund. South-

west Administrators, 791 F.2d at 776-77; Peerless Roofing

Co. Ltd. v. NLRB, 641 F.2d 734, 736 (9th Cir. 1981).

Further, this obligation to continue making pension

fund contributions is legally enforceable. While the Su-

preme Court just recently held that the district courts do

not have jurisdiction under ERISA over a suit brought by

a pension trust fund to recover delinquent contributions

due after expiration of a collective bargaining agreement,

it also recognized that a pension trust fund could seek to

enforce this obligation by filing an unfair labor practice

charge before the NLRB. See Advanced Lightweight, 108

S.Ct. at 837-38; see also Advanced Lightweight, 779 F. ad at

500-02.

[10] That section 8 (a) (5) creates an enforceable obli-

gation on the part of an employer to continue pension

fund contributions pending renegotiation of an expired

27b

collective bargaining agreement belies the claim of

Rozay's Transfer that an employer is permitted, but

cannot be required by the trust fund, to make such

contributions during this hiatus. Rozay’s Transfer did not

allege, nor did the district court find, that the parties had

bargained to impasse. Given this interpretation, we turn

to the question of whether Rozay’s Transfer would have

been obligated to make the contributions “but for“ Mur-

rietta’s misrepresentations.

[11] One might read our prior decision in Southwest

Administrators as suggesting that Rozay’s Transfer had

an independent legal obligation to make the payments.

See 791 F.2d at 776-77. Nonetheless, we remain unper-

suaded by the union’s argument that notwithstanding

Murrietta’s alleged misrepresentation, Rozay’s Transfer

would still have been legally obligated to make the pen-

sion fund contributions for the period in question. During

oral argument, Rozay’s Transfer suggested the basis of

our reasoning. The gravamen of its contention is that,

even assuming that it would otherwise have been obli-

gated to make the retroactive contributions while await-

ing negotiation of a new labor agreement, the parties in

fact reached a new agreement on January 17, 1983,

extinguishing any incipient obligation to make retroactive

contributions. We find this argument convincing. For

even if we were to find that Rozay’s Transfer were legally

obligated under the NLRA to continue the pension contri-

butions all along, the union was free to bargain away such

a right through the collective bargaining process. See

American Distributing Co. v. NLRB, 715 F.2d at 446, 449-

50 (9th Cir. 1983) (American), citing NLRB v. C&C

Plywood Corp., 385 U.S. 421, 430-31 (1967). The em-

ployer’s obligation to maintain the status quo is therefore

merely presumptive in the sense that it ean be discharged

through the bargaining process. Waivers of union’s right

28b

under the NLRA ean occur “by express contractual provi-

sions, by bargaining history, or by a combination of the

two.” American, 715 F.2d at 450. Thus, it is not true as a

matter of law that absent Murrietta’s fraud, Rozay’s

Transfer would still have remained liable for pension fund

obligations under the expired labor contract. The parties

by express provision in a new agreement could always

have extinguished this obligation. We see no reason why

this could not be done retroactively. See Advanced Light-

weight, 108 S. Ct. at 838 (“the employer and the union

may enter into a settlement that either reduces, or even

might waive, the employer’s postcontract obligations to

contribute to the pension fund“).

[12] Moreover, that the parties would have agreed to

such terms is not sheer conjecture at this stage. We

observe that the contract as executed did not contain such

a term, apparently because “the parties believed it was

not possible simply to draft a collective bargaining agree-

ment providing for prospective-only payment of contribu-

tions to the pension fund.” Southwest Administrators, 791

F.2d at 771 n.1. The union may have been constrained in

its bargaining because “[i]t was the established policy of

the Western Conference of Teamsters Pension Trust

Fund not to accept contributions made under any colle~-

tive bargaining agreement which provided for a ‘gap’ in

contributions. Thus, when a collective bargaining agree-

ment expired, in order for the employer to be reinstated

in the trust fund, the new agreement had to provide for

the payment of contributions for the interim between the

two agreements.” Jd. at 771-72 n.1. Even so, union offi-

cials clearly evinced by their words and actions their

intent to free Rozay’s Transfer from the burden of mak-

ing retroactive pension fund contributions for the period

in question. Indeed, the district court found that on

January 17, 1983, Rozay’s Transfer and the union agreed

29b

to “the resumption of the payment of pension contribu-

tions prospectively.” (Emphasis added.) Although at this

time, the district court did not find that the parties

agreed specifically to a waiver of retroactive pension fund

obligations, it found that Anderson represented to Rozay

that the trust fund had forgiven unpaid pension contribu-

tions of other employers in the past and that he would ask

the trust fund likewise to waive the unpaid contributions

for the period from May 1982 to February 1983. Further,

the district court found that four days later, on January

21, 1983, Rozay sent Murrietta a letter confirming the

terms of the January 17, 1983, agreement, in which Rozay

articulated his understanding that, under the new agree-

ment, retroactive contributions would not be required. In

his reply to this letter, Murrietta did not express any

disagreement or objection to Rozay’s understanding that

there would be no retroactive pension contributions.

Hence, we agree with the district court that Murrietta’s

fraud deprived Rozay’s Transfer of the opportunity to

negotiate away any continuing legal obligation to make

the retroactive payments — a result that was clearly in-

tended by the parties’ words and course of conduct

during the negotiations that culminated in the January

17, 1983, settlement agreement.

We recognize that despite the union’s desire to relieve

the obligation of Rozay’s Transfer to make the retroactive

payments, the union may have believed that it could, not

include such a term in the new agreement, because of the

trust fund’s policy against allowing gaps in coverage. Had

the parties reached impasse, or had the union agreed

retroactively to abolish the delinquent contributions to

the trust fund, the trust fund’s exclusive remedy, if any,

would have been to file an unfair labor practice charge

under the NLRA to compel payment of the delinquent

contributions. The district court found that the direct

30b

consequence of Murrietta’s fraud was to induce Rozay’s

Transfer to sign an agreement that provided for the

payment of these delinquent contributions to the trust

fand. Without this agreement, the trust fund would not

have been able to pursue its prior action under section 515

of ERISA, 29 U.S.C. 5 1145, to collect these contribu-

tions, for an action under section 515 is available only to

collect “promised contributions.” Advanced Lighweight,

108 S. Ct. at 832. As the Supreme Court observed, an

ERISA collection action generally provides a more effec-

tive remedy for the trust fund than an unfair labor

practice proceeding under the NLRA, See id. at 838. This

is true, in part, because in an action under the NLRA, the

union and the employer can always enter into a settle-

ment waiving the employer’s post-contract obligations to

contribute to a pension fund. Id. It is thus clear that

Murrietta’s fraud is the cause-in-fact of the liability of

Rozay’s Transfer to the trust fund in the Southwest

Administrators case.

IV

The union and the union’s amicus also raise three

objections to the remedy that the district court granted:

(1) the simultaneous award of rescission and indemnifica-

tion exceeded the district court’s authority under section

301, (2) indemnification for the amount of the judgment

entered against Rozay’s Transfer in Southwest Adminis-

trators was improper because Rozay’s Transfer could have

“reasonably and prudently” avoided incurring the judg-

ment in that case, and (3) indemnification for the attor-

neys’ fees incurred by Rozay’s Transfer in Southwest

Administrators was improper because the defense of

Rozay’s Transfer in that case was legally meritless as

against the trust fund in both the district court and on

_ 81b

appeal and because Rozay’s Transfer did not first provide

the union with the opportunity to defend Rozay’s Trans-

fer against the trust fund in the prior case.

A.

The union’s amicus argues that by awarding indemnifi-

cation and damages as the remedy, the district court

exceeded its authority under section 301, the sole juris-

dictional basis invoked. According to amicus, section 301

permits only an action for rescission for fraudulent in-

ducement, leaving an award of indemnification or dam-

ages for common law fraud beyond the district court’s

remedial power. Implicit in this argument is the assump-

tion that section 301 permits only contractual-type reme-

dies and that while granting both rescission and

restitution is a proper contractual remedy, granting both

rescission and indemnification is not. Because the inabil-

ity of the district court as a matter of law to rescind the

obligation running from Rozay’s Transfer to the trust

fund makes it impossible literally to restore the parties to

their status quo ante, the union correctly asserts that the

district court’s “make-whole” remedy following its order

of rescission is more properly characterized as indemnifi-

cation than as restitution.

[13] Nonetheless, how this court chooses to character-

ize the remedy granted in this case and whether simulta-

neously granting rescission and indemnification is a

proper “contractual” remedy are irrelevant to the district

court’s remedial authority under section 301. The union’s

amicus points to no authority holding that a claim for

equitable indemnity or other noncontractual relief is not

cognizable under section 301. Contrary to its suggestion

that section 301 strictly limits the remedial power of the

federal courts, the Supreme Court has construed section

32b

301 as a congressional mandate to the federal courts to

fashion a body of federai common law to be used to

address disputes arising out of labor contracts,” Allis-

Chalmers Corp. v. Lueck, 471 U.S. 202, 209 (1985) (foot-

note omitted); see Textile Workers v. Lincoln Mills, 353

U.S. 448, 456-57 (1957). In Lincoln Mills, the Court held

that section 301 allows courts to fashion remedies even

though lacking in express statutory sanction and that

“(t]he range of judicial inventiveness [under section

301] will be determined by the nature of the problem.”

353 U.S. at 457; see also Bowen v. United States Postal

Service, 459 U.S. 212, 222 (1983) (Bowen) (“of para-

mount importance is the right of the [injured party]...

to be made whole“); Black-Clawson Co., Inc. v. Interna-

tional Association of Machinists, 313 F.2d 179, 182 (2d Cir.

1962) (Black-Clawson) (legislative history of section

301’s predecessor contemplates “not only the ordinary

lawsuits for damages but also such other remedial pro-

ceedings, both legal and equitable, as might be appropri-

ate in the circumstances’). Recognizing that [t] he label

attached to the remedy as tort or contract is not disposi-

tive of the scope of federal common law which under

section 301 (a) it is our responsibility to create,” the

Third Cireuit in Wilkes-Barre, Publishing Co. v. Newspaper

Guild of Wilkes-Barre, Local 120, 647 F.2d 372, 381 (3d

Cir. 1981), cert denied, 454 U.S. 1143 (1982), held that a

claim for tortious interference with a labor contract was

proper under section 301.

[14] Other courts have similarly allowed tort-like,

‘“‘make-whole” remedies similar to the one fashioned by

the district court for breach of contract and breach of

duty of fair representation claims under section 301.

These remedies have included awards for back pay and

future losses, Thompson v. Brotherhood of Sleeping Car

Porters, 367 F. 2d 489, 492-93 (4th Cir. 1966), cert. denied,

33b

386 U.S. 960 (1967), compensatory damages, see Bowen,

459 U.S. at 222, and attorneys’ fees, Dutrisac v. Caterpil-

lar Tractor Co., 749 F.2d 1270, 1275-76 (9th Cir. 1983)

(Dutrisac). In analogous cases of union misconduct, this

court has affirmed an award imposed by the NLRB

requiring a union to make an employer whole for financial

expenditures coerced from the employer in violation of

the NLRA. See Graphic Arts International Union, Local

No. 280 v. NLRB, 596 F.2d 904, 910 (9th Cir. 1979)

(Graphic Arts International); NLRB v. Warehousemen’s

Union Local 17, 451 F.2d 1240, 1243 (9th Cir. 1971)

(upholding Board remedial order requiring union to make

employer whole for financial expenditures made by em-

ployer as result collective

bargaining agreement). The NLRB’s “broad discretion in

fashioning remedies to effectuate the policies of the

NLRA in light of the cireumstances of each case,”

Graphic Arts International, 596 F.2d at 910, justified its

award of make-whole“ remedies in these cases of union

unfair labor practices. No reason has been provided to

suggest why, by analogy, the federal district courts’ broad

remedial powers under section 301 should not similarly

invest them with the power to devise “make-whole” reme-

dies, “both legal and equitable, as might be appropriate in

the circumstances.” Black-Clawson, 313 F.2d at 182.

Hence, there is no sound reason why section 301 should

bar the district court from simultaneously awarding a

remedy of rescission and indemnification for the union’s

fraudulent inducemént in order to make the employer

whole.“

B.

Taking a different tack, the union next maintains that

Rozay's Transfer could have “reasonably and prudently”

34b

avoided the judgment entered against it in Southwest

Administrators if it had done either of two things. First, it

argues that Rozay’s Transfer could have contacted the

union after learning of the trust fund’s unfavorable deci-

sion by mail on March 24, 1983, for the purposes of

reopening negotiations or amending the agreement. We

construe this as a claim that Rozay’s Transfer failed to

take steps to mitigate its damages. At that time, however,

Rozay’s Transfer was unaware of any grounds that would

have entitled it to reopen negotiations or modify the

March 8, 1983, agreement. Murrietta’s fraud was not

revealed until much later. Further, the union’s position in

the instant case is completely inconsistent with a desire

on its part to renegotiate or amend the March 8, 1983,

labor contract to reflect Rozay’s Transfer’s mistaken

understanding of that agreement.

[15] Second, the union suggests that Rozay’s Transfer

was tardy in waiting over a year before formally notifying

the union of the collection action initiated by the trust

fund on June 20, 1983. This claim is contrary to the

record. While Rozay’s Transfer did not file its complaint

against the union in this case until after September 26,

1984, the union had actual notice of the Southwest Admin-

istrators trial from its outset. Moreover, the union does

not explain how notice of the trust fund’s action against

Rozay’s Transfer would have resulted in mitigation of

damages. Union officials, after all, testified against

Rozay’s Transfer in the Southwest Administrators

litigation.

[16] Third, the union alleges that had Rozay’s Trans-

fer promptly conducted discovery in that case, it would

have uncovered Murrietta's fraudulent conduct, and

could then have moved at an earlier date to serve a third

party complaint against the union seeking rescission.

35b

There is, however, no evidence in the record that Rozay’s

Transfer was remiss or dilatory in conducting discovery.

In addition, we held in Southwest Administrators that

because ERISA was intended to provide a streamlined

and simplified procedure for employee benefit trust funds

to collect delinquent contributions,” the district court

reasonably denied Rozay’s application to implead the

union. 791 F.2d at 777. The strong policy in favor of

avoiding complicated, lengthy trials in ERISA collection

actions suggests to us that impleader might well have

been denied at any stage of the Southwest Administrators

proceedings. Moreover, even if the union had been joined

as a third party defendant, Rozay’s Transfer still would

have been adjudged liable to the trust fund, although it

then could have simultaneously sought indemnification

from the union. In either event, Rozay’s Transfer would

not have avoided its primary liability to the trust fund.

C.

The union also attacks that part of the district court’s

judgment indemnifying Rozay’s Transfer for the attor-

neys' fees and costs that it incurred in litigating the

Southwest Administrators case at both the district court

and circuit court level. An award of attorneys’ fees on the

grounds of bad faith is a matter committed to the district

court's discretion and will not be reversed absent an

abuse of discretion. Beaudry Motor Co. v. ABKO Proper-

ties, Inc., 780 F.2d 751, 756 (9th Cir. 1986) (Beaudry

Motor).

According to the union, the theory of defense at trial of

Rozay’s Transfer and on appeal in Southwest Administra-

tors was frivolous and, moreover, Rozay’s Transfer failed

to provide the union the first opportunity to defend

Rozay's Transfer. Therefore, the union reasons, the dis-

36b

trict court should not have ordered it to indemnify

Rozay’s Transfer for the attorneys’ fees and costs in-

curred in defending Southwest Administrators. We find

these arguments to be patently without merit. Merely

because a party ultimately loses does not mean that its

defense was not in good faith. Indeed, our lengthy discus-

sion of the defense of Rozay’s Transfer in Southwest

Administrators recognized the force of its position, al-

though we were compelled ultimately to reject it as a

matter of law. Moreover, the union’s apparent fraud was

not the only good faith defense that Rozay’s Transfer

raised in the prior case. See 791 F.2d at 775. Last, we

know of no authority that requires the victim of inten-

tional fraud to request its defrauder to defend it in a suit

brought by a third party. Particularly in this case, the

conflicting interests between Rozay’s Transfer and the

union would have counseled against allowing the union to

defend Rozay’s Transfer in the prior lawsuit. The union

would hardly have been willing to admit to the fraud of its

own agent, thereby subjecting itself to potential liability.

Nor could one expect it vigorously to take a position in

conflict with the best interests of its members by arguing

that Rozay’s Transfer was not obligated to make the

retroactive pension fund contributions. Indeed, as we

have previously observed, the union actively sided with

the trust fund in the Southwest Administrators litigation.

[17] The award of attorneys’ fees and costs in this

case merely compensates Rozay’s Transfer for one aspect

of its out-of-pocket expenses attributable to the union's

fraud. Case law supports awarding attorneys’ fees and

costs where such expenses were incurred as a result of the

defendant’s own misconduct. See e.g., Dutrisac, 749 F.2d

at 1275-76 (holding that award of attorneys’ fees in a

section 301 suit is proper where fees reimburse an em-

ployee for union’s failure to represent him at a hearing);

37b

Moe v. Transamerica Title Insurance Co., 21 Cal.App. 3d

289, 303 (1971) (one who is required by another's tort to

defend an action brought by a third party is entitled to

recover attorneys’ fees on that action, even if unsuccess-

ful). Such an award by the district court is also consistent

with the rule that allows a court to award attorneys’ fees

against a party whose conduct resulting in a lawsuit

constituted fraud or who otherwise acted in bad faith. See

F. D. Rich Co. v. United States ex rel. Industrial Lumber

Co., 417 U.S. 116, 129 (1974); Beaudry Motor, 780 F.2d at

756; Dogherra v. Safeway Stores, Inc., 679 F.2d 1293, 1298

(9th Cir. 1982), cert. denied, 459 U.S. 990 (1982). The

union’s claim that under Weston v. Globe Slicing Machine

Co., 621 F.2d 344, 349 (9th Cir. 1980), an indemnitee

cannot recover its attorney’s fees from an indemnitor

absent an express contractual provision ignores the fact

that Weston was a diversity action applying Idaho law,

and, moreover, that it did not involve, as in this ease, the

commission of an intentional tort by the indemnitor.

[18] Thus, the district court did not abuse its disere-

tion by awarding Rozay’s Transfer the attorneys’ fees and

costs that it incurred in defending the Southwest Adminis-

trators lawsuit.

V

Under seetion 301 of LMRA, the distriet eourt had

jurisdiction to entertain this action against the union for

fraudulently inducing Rozay’s Transfer into signing the

March 8, 1983, agreement. On the merits, we hold that in

finding the union liable for fraudulent misrepresentation,

the district court’s findings of fact were not clearly

erroneous and its conclusions of law are correct in light of

our precedents. Regarding the “causation” issue, we find

that under the facts of this case, the fraud interfered with

38b

the ability of Rozay’s Transfer to bargain for an agree-

ment extinguishing its obligation to make the retroactive

pension fund contributions in question even had it not

signed the March 8, 1983, agreement. Were it not for

Murrietta’s oral misrepresentations, Rozay would not

have signed the agreement, and without his signature,

Rozay’s Transfer could have avoided any liability to the

trust fund for retroactive pension fund contributions.

Thus, we affirm the district court’s finding that “but for”

the union’s fraud, Rozay’s Transfer would not have been

liable for these contributions. We also find that the

district court’s simultaneous rescission of the March 8,

1983, agreement and indemnification award for the judg-

ment rendered against Rozay’s Transfer in the Southwest

Administrators case is authorized under section 301 and

that the district court did not abuse its discretion by

including the attorneys’ fees and costs ineurred by

Rozay’s Transfer in defending that previous action.

AFFIRMED.

PROOF OF SERVICE BY MAIL

I am a citizen of the United States and a resident of the

City and County of Los Angeles; I am over the age of

eighteen years and not a party to the within action; my

business address is: 1706 Maple Avenue, Los Angeles,

California.

On September 22, 1988, I served the within Petition for

Writ of Certiorari in re: “Local Freight Drivers vs.

Rozay’s Transfer” in the United States Supreme Court

October Term 1988 No.

On the Parties in said action, by placing Three copies

thereof enclosed in a sealed envelope with postage fully

prepaid, in the United States post office mail box at Los

Angeles, California, addressed as follows:

Stephen Pepe, Esq.

O'Melveny & Myers

400 S. Hope St.

Suite 1050

Los Angeles, California 90071

John Welch, Esq.

Latham & Watkins

555 S. Flower St.

Suite 4600

Los Angeles, California 90071

Anthony Segall, Esq.

Reich, Adell & Crost

501 Shatto Place, Suite 100

Los Angeles, California 90020

All Parties required to be served have been served.

I certify under penalty of perjury, that the foregoing is

true and correct.

Executed on September 22, 1988, at Los Angeles,

California. 7

4 A 1

CE CE MEDINA