Petition — Erickson v. Alvares

IN THE Rae

Supreme Court of the United States

October Term, L975

Haves Enicxsoy, Winiiam L. KLINGAMAN,

Ray S. McKnicut and James O. Paurzke,

Trustees of the Washington State Plumbing and

Pipefitting Industry Health and Weltare Trust,

Defendants-Petitioners,

and

WASHINGTON STATE ASSOCIATION OF THE UNITED ASSOCIATION,

a labor union, and the \Wastincron Strate EspLoyers Councit ror

re PLUMBING AND Piperiritnc [Npustry, an employer association.

Additional Defc ndants-Petitioners,

\.

Winniam J. ALVanes, Witiiam Bapex, BerNarp BROMLEY,

Viceror R. Cuancrart, Acwert D. EroMan, Ernest E. GRAvEs,

J. W. Jensen, Mito FE. Krone, HaAroio L. SuipMan, James M. SMITH,

Austin Sorm, Daxter B. Sweeney, NonMAN W. Swenson and

James R. Yarers, individually and as representatives of a class of

persons hereinatter described.

Plaintiff s-Respondents,

and

THotas Avbro, Wittiam Borrinc, Pave HOLMEs,

Joseru McCarrney, Deut Pererson and DaLe SMITH,

Trustees of the Seattle Area Plumbing and Pipefitting

{Industry Health and Welfare Trust,

Nominal Plaintiffs-Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Cur, Dwyer, Gurerson & GRADER

WittiaM L. Dwyer

Jerry R. McNavcc

Barry E. Wor

Attorneys for Defendants-Petitioners.

Office and Post Office Address:

13th Floor, Hoge Building

Seattle, Washington 95104

Telephone; (206) 624-7141

CRAFTSMAN @ MET POESS QE SEATTLE WASHINGTON

a

i

TABLE OF CONTENTS

Page

BS EEN RN RTO EO MS 2

Jurisdiction .............. suuauiené ONT Me ar A SAN ea ict fe 2

ERIE IMR erin ot Fs RE rere 2

Statutory Provisions Involved ...................scescesceeceeeeeeeeees 3

I a 4

EEE eae ee OTT eR EE ea 4

EE SE ec San ie ae ee ATO Ce 4

ar nd re 6

Reasons For Allowance of the Writ ...........0.....00.ccccceceeeee 9

I. The Court of Appeals Holding That Jurisdiction

Exists Under Section 301 of the Taft-Hartley Act

Presents Significant Issues of First Impression

Regarding the Jurisdiction of the Courts of the

RISA RE SENSI oe ree er 9

II. The Court of Appeals Holding That Jurisdiction

Exists Under Section 302 of the National Labor

Relations (Taft-Hartley) Act Presents Signifi-

cant and Recurring Issues of First Impression

Regarding the Jurisdiction of the Courts of the

United States, and Presents a Conflict or Poten-

tial Conflict Among the Lower Federal Courts .... 12

[1!. The Court of Appeals Treatment of the District

Court's Grant of Summary Judgment as a Dis-

missal for Failure to State a Claim is Erroneous,

Presents a Significant Issue of First Impression,

and Conflicts with a Decision of This Court ........ 16

[V. The Court of Appeals Erred in Interpreting the

SS 5, RRR ee ine Se et Po ea 20

Conclusion ............. Elasiapnecipianiaaielhahaateiuinsadlandanammieassdamasiatis 21

Appendices:

Appendix A .............. ea iaaiisiosbaabiakaeaabasaiieaianenas A-1

SIE UIE. suiid:iikiodi-ccnoncecscioecdennehscamaedariedoceiaaeniaaniale A-18

ii

TABLES OF AUTHORITY

Table of Cases

Page

Bell v. Hood, 327 U.S. 678 (1946) ..............:ceseeeeeee 16, 17

Blassie v. Kroger, 345 F.2d 58 (8th Cir. 1954) .............. 15

Bowers v. Ulpiano Casal, Inc.,

. A EF ORG fe Sl eee 11, 14

Brune v. Morse, 339 F. Supp. 159 (E.D. Mo. 1972),

aff d, 475 F.2d 858 (8th Cir. 1973) ...........c.ccececeeeeeee: 12

Dowd Box Co. v. Courtney, 368 U.S. 502 (1961) ........ 10

RRR TREN Isidore ce aewes re nememeere 14, 19, 20

Franciosa v. Bricklayers Fund Office,

73 CCH Labor Cases §28.857 (S.D. N.Y. 1974) ........ 12

Garvison v. Jensen, 355 F.2d 487 (9th Cir. 1966) ........ 15

Giordani v. Hoffman, 295 F. Supp. 463 ( E.D. Pa. 1969) 14

Hancock v. Central States Pension Fund,

84 L.R.R.M. 2635 (S.D. Ind. 1973) ...............000.00.0000+ 12

Insley v. Joyce, 330 F. Supp. 128 (N.D. Ill. 1971) ........ 15

Leskiw v. Local 1470, Int. 1. Bhd. of Elec. Workers,

AFL-CIO-CLC, 464 F.2d 721 (2d Cir. 1972) ...... 19, 20

Occidental Life Ins. Co. v. Blume,

65 Wn.2d 643, 349 P.2d 76 (1965) 2.00000... eee eee 6, 17

Porter vt. Teamsters Health, Welfare & Life Ins. Funds,

we SO | ee 15

Smith v. Evening News Ass n., 371 U.S. 195 (19€2) 10, 11

Textile Workers Union of America v. Lincoln Mills of

Mememetints, Te OE, GE CG DP vwtnccnsiscccssntrsensissomessones 14

Typo-Publishers Outside Tape Fund,

334 F. Supp. 194 (S.D.N.Y, 1972) .-cccccccccosccssssseeeeee 15

United States v. Ryan, 225 F.2d 417 (2d Cir. 1955),

reed, 350 U.S. 229 (1956) ..0.0000........ iidailalitiadioamaaiaes 13

iii

Statutes

28 U.S.C. § 125A(L) ceeccscsseeseeeeeeee <5, dee 2

29 U.S.C. § 185 (National Labor Relations

Act § 301) 2,3, 6,8, 9, 10, 11, 13, et seq.

29 U.S.C. § 185(a) (§ BOL(a)) c.cceececececescecessesesseesees 3

29 U.S.C. § 186 ( National Labor Relations

Act § 302) ...eecccceeee. 2, 3, 6, 8, 12, 14, 15

29 U.S.C. § 186(e) (§ 302(e)) ............ 3-4, 12, 13, 14, 20

29 U.S.C. § 186(c)(5) (§ 302(c)(5)) eee eeeeees 12,15

Other Authority

i ceaeall 6, 21

IN THE

Supreme Court of the United States

October Term. 1975

es ea

Haven Erickson, WiLtiAM L. KLINGAMAN,

Ray S. McKnicur and James O. Paurzke,

Trustees of the Washington State Plumbing and

Pipefitting Industry Health and Welfare Trust,

Defendants-Petitioners,

and

WASHINGTON STATE ASSOCIATION OF THE UNITED ASSOCIATION,

a labor union, and the WasurncTron State EmMp.Loyers CouNnciL For

THE PLUMBING AND Pipertrrinc [Npustry, an employer association,

Additional Defendants-Petitioners,

v.

WituiaM J. AL\ ares, WILLIAM BabeNn, BERNARD BROMLEY,

Vicror R. Cuarcrart, Acsbert D. EroMan, Ernest E. Graves,

J. W. Jensen, Mico E. Krowr, Harovp L. Simpman, James M. Smitu,

Austin Sorte, Dantec B. SWEENEY, NorMAN W. Swenson and

James R. Yates, individually and as representatives of a class of

persons hereinafter described,

Plaintiffs-Resjpondents,

and

THoMas ALBRO, WILLIAM Bortinc, PauL HoLMeEs,

JoserpH McCarrrey, Dect Pererson and DaLe SMITH,

Trustees of the Seattle Area Plumbing and Pipefitting

Industry Health and Welfare Trust,

Nominal Plaintiffs-Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Petitioners pray that this Court issue a writ of certiorari

to the United States Court of Appeals for the Ninth Circuit,

to review the judgment entered March 10, 1975.

2

OPINIONS BELOW

The following decisions and opinions of the courts below

are included in the appendix hereto:

(1) Opinion of the United States Court of Appeals for

the Ninth Circuit, ...... - P= (March 10, 1975), Ap-

pendix A hereto.

(2) Memorandum Decision of the United States Dis-

trict Court for the Western District of Washington granting

summary judgment of dismissal, unreported (December

21, 1972), Appendix B hereto.

JURISDICTION

The judgment of the United States Court of Appeals

for the Ninth Circuit was made and entered on March

10, 1975. The jurisdiction of this Court is invoked under

28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. Does Section 301 of the National Labor Relations

( Taft-Hartley) Act, 29 U.S.C. §185, require that federal

courts take jurisdiction over disputes concerning nothing

more than the discretionary administration of employee

trust funds?

2. Does Section 301 of the National Labor Relations

( Taft-Hartley) Act, 29 U.S.C. §185, subject to federal

jurisdiction a controversy between employees formerly

covered by a trust fund, and the trustees of the fund, where

neither an employer nor a labor organization is a party

to the controversy and no labor dispute is involved?

3. Does Section 302 of the National Labor Relations

( Taft-Hartley ) Act, 29 U.S.C. §186, prohibiting payments

3

by employers to labor representatives, except in certain

specified circumstances, subject to federal jurisdiction a

controversy over nothing more than discretionary admini-

stration of an employee trust fund, where it is undisputed

that employer payments were lawfully made to a properly

constituted employee trust, and the dispute concerns only

the propriety of the trustees having declined to allocate

reserves of the fund to individual employees who volun-

tarily withdrew from the trust?

4. Does either Section 301 or Section 302 of the Na-

tional Labor Relations Act, 29 U.S.C. §§185 and 186,

require federal courts to become involved in the detailed

supervision of employee trust funds in terms of accounting

matters, discretionary acts of trustees, or coverage and

allocation claims made by departing employees?

STATUTORY PROVISIONS INVOLVED

Taft-Hartley Act §301(a), 29 U.S.C. §185(a) (1970),

Volume 4, Page 8014:

Suits by and against labor organizations.

Suits for violation of contracts between an em-

ployer and a labor organization representing em-

ployees in an industry alfecting commerce as defined

in this chapter, or between any such labor organiza-

tions, may be brought in any district court of the

United States having jurisdiction of the parties, with-

out respect to the amount in controversy or without

regard to the citizenship of the parties.

Taft-Hartley Act §302(e), 29 U.S.C. §186(e) (1970),

Volume 4, Page 8016:

Restrictions on payments and loans to employee

representatives, labor organizations, officers and eim-

plovees of labor organizations, and to employees or

groups or committees of employees.

4

The district courts of the United States and the

United States courts of the Territories and possessions

shall have jurisdiction, for cause shown, and subject

to the provisions uf section 381 of Title 28 (relating

to notice to opposite party) to restrain violations of

this section, without regard to the provisions of sec-

tion 17 of Title 15 and section 52 of this title, and the

provisions of sections 101-115 of this title.

STATEMENT OF THE CASE

Introduction

The district court ordered dismissal of the present ac-

tion, following development of a full evidentiary record

on the jurisdictional issues, for the reason that no federal

claim was presented. See Memorandum Decision, Appendix

B hereto.

The Court of Appeals has now reversed, stating that its

decision is one of first impression, the effect of which is

to enlarge federal jurisdiction. See Opinion, Appendix A

hereto.

Petitioners believe that the decision of the Court of

Appeals, if followed, would erroneously extend federal

jurisdiction far beyond the subject matter authorized and

intended by Congress, and would needlessly enmesh the

federal courts in hundreds of routine suits involving day-

to-day administration and accounting of employee trust

funds. Such matters have heretofore been, and should

continue to be, litigated in the courts of the several states

under applicable state law.

Nature of the Case

Plaintiffs are fourteen individual plumbers and _pipe-

fitters. They allege that they are members of Local 32 of

5

the United Association of Journeymen and Apprentices of

the Plumbing and Pipefitting Industry (“Local 32”). Be-

ginning in 1946, Local 32 and other United Association

locals in the State of Washington began joint bargaining,

on a statewide basis, with employers in the plumbing and

pipefitting industry. The locals were represented by the

Washington State Association of the United Association,

the statewide bargaining unit.

In 1951, an agreement was reached creating the Washing-

ton State Plumbing and Pipefitting Industry Health and

Welfare Trust (“the Trust”). The Trust Agreement was a

separate agreement, expressed in a separate document,

supplemental to the labor-management agreement. Con-

tributions were made by employers in amounts specified in

successive statewide collective bargaining agreements.

The Trust has continued, as above, for many years. On

May 28, 1967, Local 32 voluntarily withdrew from the

state-wide bargaining unit. On January 2, 1968, its mem-

bers withdrew from the Trust. They did not have to do so.

Their withdrawal from the Trust was voluntary, and they

could have continued to participate in the Trust and receive

benefits thereunder even though their local was no jonger

affiliated with the statewide bargaining organization.

Following the withdrawal, the trustees (defendants-

petitioners herein ) provided to the Local 32 members the

benefits which, under the terms of the Trust Agreement,

were to be afforded to withdrawing members. Each mem-

ber of Local 32 was permitted to run out his accumulated

hour banks for several months after the withdrawal, and

after contributions had ceased being made in his behalf.

6

The Trust still pays insurance premiums for members of

Local 32 who were on “superannuated” status as of the

date of withdrawal, such members representing a future

liability to the Trust in excess of $50,000.

When it chose to withdraw from the Trust, Local 32

was fully aware that (1) under applicable state law, with-

drawing employees were not entitled to Trust: reserves,

Occidental Life Ins. Co. v. Blume, 65 Wn.2d 643, 349 P.2d

76 (1965), (2) that employees who had previously with-

drawn either individually or en masse had never before

received any share of the reserve funds, and (3) that the

Agreement creating and governing the Trust vested in the

trustees total discretion regarding reserve funds. Neverthe-

less, the Local 32 members withdrew from the Trust. Cer-

tain Local 32 members then demanded that the trustees

allot them a portion of the reserves allegedly existing on

the date of withdrawal. After due consideration Local 32’s

claim was rejected. This suit followed.

Course of the Proceedings

Plaintiffs commenced this action by filing a complaint

on January 30, 1970. Federal jurisdiction was alleged under

Sections 301 and 302 of the National Labor Relations Act,

29 U.S.C. §§185 and 186. Plaintiffs purported to bring this

suit as a class action on behalf of all Local 32 members.

However, plaintiffs have never attempted to comply with

the requirements of Rule 23 of the United States District

Court for the Western District of Washington pertaining

to class actions. Thus, this suit concerns only the rights

of the fourteen individual plaintiffs herein. The trustees of

the Trust were the only named defendants.

7

On March 27, 1970, defendant trustees moved to dismiss

the complaint on the ground that the court lacked jurisdic-

tion over the subject matter.

On August 10, 1970, the District Court ordered dis-

covery on the questions relevant to its jurisdiction and re-

served ruling on the motion to dismiss pending discovery.

Plaintiffs then filed a motion for leave to file an amended

complaint, in which they sought to add the State Associa-

tion and the Washington State Employers’ Council for

the Plumbing and Pipefiitting Industry, an employer asso-

ciation, as defendants. The purpose of the amendment was

to counter defendants’ position, expressed in support of

their motion to dismiss, that jurisdiction under Section 301

of the National Labor Relations Act does not exist where

neither a labor organization nor an employer is a party.

An order granting leave to file the amended complaint was

entered and filed on May 25, 1971.

There followed an extended period of discovery by way

of depositions and production of documents, in which the

parties completed all discovery considered necessary for

determination of the jurisdictional issue. Nothing developed

in discovery showed any basis for a claim either for or

against the labor organization (“the Association”) or the

employers (“the Employers’ Council”). On October 20,

1972, defendants moved as follows:

1. For summary judgment of dismissal in favor of the

defendant Washington State Association;

2. For summary judgment of dismissal in favor of the

detendant Washington State Employers’ Council;

8

3. For summary judgment in favor of the defendant

trustees, dismissing plaintiffs’ purported claims for relief

based upon Sections 301 and 302 of the National Labor

Relations Act; and

4. For summary judgment in favor of the defendant

trustees dismissing the common law claims for relief for

for lack of federal subject matter jurisdiction.

Plaintiffs conceded that the motions of defendants Asso-

ciation and Employers’ Council for summary judgment of

dismissal should be granted. As to those parties the sum-

mary judgment of dismissal was thereafter granted without

opposition. Upon dismissal of the Association and the Em-

ployers’ Council, the suit reverted to its original nature,

i.e., an action by individual union members against indi-

vidual trustees of a health and welfare trust fund.

Both sides prepared and submitted extensive memoranda

and affidavits concerning this motion. Oral argument was

held following submission of the affidavits and briefs.

On December 21, 1972 the District Court issued its

memorandum decision granting defendants motions for

summary judgment and for dismissal.

An order of dismissal was accordingly entered on Febru-

ary 23, 1973.

Plaintiffs filed a timely notice of appeal. On March 10,

1975, the United States Court of Appeals for the Ninth

Circuit reversed the decision of the district court. For

the reasons stated below, a petition for writ of certiorari

to review and reverse this decision must issue.

9

REASONS FOR ALLOWANCE OF THE WRIT

I. The Court of Appeals Holding That Jurisdiction

Exists Under Section 301 of the Taft-Hartley Act

Presents Significant Issues of First Impression Re-

garding the Jurisdiction of the Courts of the United

States

This case presents a basic and highly significant issue:

the extent of the role of federal courts in labor-management

relations. The Court of Appeals expressly recognized this,

noting its

reluctance to hand down a decision that appears to

enlarge the jurisdiction of the federal courts—to “fire

a jurisdictional cannon which will be heard on future

battle grounds’. . . . Opinion, page 5.

The Court of Appeals also noted that the argument of the

defendant trustees, that either an employee or a union must

be a party to the action if Section 301 is invoked, “does not

seem to have been expressly considered by any other

federal court.” Opinion, page 8, Appendix A hereto.

The Court of Appeals’ holding, if allowed to stand, would

extend federal jurisdiction into areas of labor-management

relations in which the participation of the federal courts

is unnecessary, the parties having an adequate forum in

the state courts. Moreover, as will be shown below, such

an extension is in fact contrary to the intent of Congress,

as expressed in the Taft-Hartley Act, and is also contrary

to the Constitutional principle that the federal courts are

courts of limited jurisdiction. The Court of Appeals decision

here is therefore significant, and commands the attention

of this Court, because it involves a potential overreaching

by the federal courts into areas which neither Congress

nor the Constitution permits them to enter.

10

_ The role of the federal courts in labor cases is simply

that of peacemaker. This function is clearly expressed in

Dowd Box v. Courtney, 368 U.S. 502 (1961). In Dowd,

the Court stated that the purpose of Section 301 is “to pro-

mote the achievement of industrial peace through en-

couragement and refinement of the collective bargaining

process.” Id. at 509. Further,

A principal motive behind the creation of federal

jurisdiction in this field was the belief that the courts

of many states could provide only imperfect relief

because of rules of local law which made suits against

labor organizations difficult or impossible, by reason

of their status as unincorporated associations.

Id. at 510.

Nowhere is there expressed a purpose of involving the

federal courts in matters of employee trust fund adminis-

tration, of concern here, absent a dispute involving an em-

ployer or a labor union. And here the plaintiffs are not

even “employees, but rather are former beneficiaries of a

trust from which they voluntarily withdrew and with which

they are no longer connected.

The Court of Appeals relied on Smith v. Evening News

Ass'n, 371 U.S. 195 (1962), in ruling that neither an em-

ployer nor a labor union need be a party to invoke Section

301 jurisdiction. In Smith, an employee sued his employer

to enforce the provisions of the collective bargaining agree-

ment. The Court found jurisdiction under Section 301 of

the National Labor Relations Act, concluding that the word

“between” in Section 301 refers to “contracts , not “suits”.

The effect of the Court's decision in Smith is the removal of

the requirement that suits under Section 301 invariably

involve a union suing an emplover. or vice versa. The

ll

Court did not consider, and therefore did not remove, the

requirement that either an employer or a union must be a

party.

In reaching the decision above, the Court in Smith relied

on the purpose of Section 301. The importance of the reas-

oning in Smith to the result in that case is noted in Bowers

v. Ulpiano Casal, Inc., 393 F.2d 421, 423 (1st Cir. 1968).

The Court in Smith held, in effect, that employee-employer

disputes with regard to terms of collective bargaining

agreements posed as great a threat to the peaceful enforce-

ment of those agreements as employer-union and union-

union disputes. In the present case no such chance for

disruption has been shown or even suggested. The merely

“attenuated” danger, relied upon by the Court of Appeals,

is insufficient at best and, at least, dubious. The deprivation

of benefits here, if any, was purely voluntary—the plain-

tiffs did not have to withdraw from the trust.

The controversy here is solely between ex-beneficiaries

and trustees of the health and welfare fund. A disagreement

between the two will not lead to a strike. Nor, since there

is no violation of any term of the Trust Agreement, will

the state-federal law problem of concern to the Court in

Smith be present. Thus the basis for the ruling in Smith,

that an employee may sue to enforce the provisions of a

collective bargaining agreement, is totally absent in the

present case. To accept jurisdiction here would in no way

serve the purpose of Section 301.

The Court of Appeals appears not to have considered

this compelling ground limiting federal jurisdiction and

directly applicable here. Without authority, the court

would engage the federal courts in disputes adequately

12

resolved in state courts. The cases cited below are actually

inapposite. Brune v. Morse, 339 F.Supp. 159 (E.D. Mo.

1972), affd., 475 F.2d 858 (8th Cir. 1973), did not even

consider the limits of federal jurisdiction. The same is true

of Hancock v. Central States Pension Fund, 84 L.R.R.M.

2635 (S$.D. Ind. 1973). No reason was given by the court

in Franciosa v. Bricklayers Fund Office, 73 CCH Labor

Cases %28,857 (S.D.N.Y. 1974), for its holding.

Il. The Court of Appeals Holding That Jurisdiction

Exists Under Section 302 of the National Labor Re-

lations (Taft-Hartley) Act Presents Significant and

Recurring Issues of First Impression Regarding the

Jurisdiction of the Courts of the United States. and

Presents a Conflict or Potential Conflict Among the

Lower Federal Courts

The court below similarly extended federal jurisdiction

under Section 302(e) of the Taft-Hartley Act, thereby

entering another area of labor-management relations not

intended by Congress. Plaintiff's sole claim in this case is

that if trust reserve funds are not allocated to them, contri-

butions to the trust on their behalf might not be paid in

direct benefits to them. This is alleged to be a violation of

Section 302(c)(5), which requires that Trust funds be

established for the “sole and exclusive benefit” of, em-

ployees. The plaintiffs do not assert that any employer

payment to the fund was unlawful, or that the fund was not

established for the employees’ benefit. Nor do they assert

that trust funds have been applied to any persons other

than qualified employees. Rather. they argue only about

the discretionary administration of a trust fund, itself law-

fully established.

13

Plaintiffs’ sole theory of Section 302(e ) jurisdiction, and

the sole basis relied upon by the Court of Appeals, is the

idea that each trust fund dollar contributed by an employer

must be expended in benefits for employees of the con-

tributor. and no others. Opinion, page 11, Appendix A

hereto. This is a question of trust fund accounting and the

discretion of trustees with respect to the necessary level

of reserves, and is therefore beyond the scope of subjects

in which Congress intends the federal courts to partici-

pate.

The purpose of Section 302(e) is

to prevent employers from tampering with the loyalty

of union officials, and disloyal union officials from

levying tribute upon employers.

United States v. Ryan, 225 F.2d 417, 426 (2d Cir. 1955)

(Learned Hand, dissenting), rev'd. 350 U.S. 299 (1956):

Opinion, page 11, Appendix A hereto.

The Court of Appeals found the legislative history re-

garding the purpose of Section 302(e) to be ambiguous.

Opinion, page 12, Appendix A hereto. Nevertheless, it is

clear that that purpose was to regulate the structure of

employee trust funds and that nowhere is there expressed a

purpose of involving the federal courts in accounting and

administration of a lawfully established fund. Indeed, to

hold otherwise would effectively transfer trusteeship of

such funds to federal courts, further overburdening their

already crowded dockets despite an adequate remedy in

state courts.

The existence of an adequate state remedy completely

removes the basis for federal jurisdiction over administra-

tive matters. If jurisdiction under Section 301 is necessary

solely to allow creation of a uniform federal labor law,

—

14

Textile Workers Union of America v. Lincoln Mills of

America, 353 U.S. 448 (1957), federal jurisdiction under

Section 302(e€) should similarly be limited solely to matters

clearly covered by legislation. The accounting and admini-

stration of lawfully established employee trust funds is not

such a subject. Other federal courts have expressly recog-

nized this limitation. Fiorelli v. Kelewer, 339 F.Supp. 796

(E.D. Pa. 1972), aff'd. without opinion, 474 F.2d 1340 (3d

Cir. 1973) (“although it has been questioned, it is now

firmly settled that by enacting Section 302 Congress did

not intend federal courts to fashion federal law concerning

the administration of trust funds established pursuant to

it.” 339 F.Supp. at 799); Giordani v. Hoffman, 295 F.Supp.

463 (D.C. Pa. 1969) (matters of daily internal administra-

tion “do not constitute a satisfactory federal jurisdictional

basis and properly should be adjudicated in the state

courts,” 295 F.Supp. at 471); and Bowers v. Ulpiano

Casal, Inc., 393 F.2d 421, 426 (1st Cir. 1968) ( “violations”

in Section 302(e) means “violations of basic structure as

determined by Coagress, not violations of fiduciary obliga-

tions or standards of prudence in the adminisntration of

trust funds’ ).

The holding in Fiorelli, adopted without opinion by the

Third Circuit in affirming, and the opinion in Bowers, at

least indicate a potential conflict among the circuits re-

quiring the attention of this Court. The decision in this

case is directly contrary to that of Fiorelli, for example,

for here the Court of Appeals has thrust the federal courts

into the verv center of trust administration.

A similar conflict is presented in the Court of Appeals

at least implicit adoption of the theory that employer con-

tributions must be matched on a dollar-for-doliar basis in

15

benefits to the specific employees on whose behalf such

contributions were made. See, Insley v. Joyce, 330 F.Supp.

128 (N.D. Ill. 1971), Blassie v. Kroger Co., 345 F.2d 58

(8th Cir. 1965) (the “sole and exclusive” benefit require-

ment of Section 302(c)(5) is “met when benefits are

restricted to persons who are or have been covered em-

ployees. 345 F.2d at 70 (emphasis added). There is no

requirement that contributions be matched to benefits for

empolyees on whose account such contributions were

made). Indeed, the Court of Appeals’ own holding in

Garvison v. Jensen, 355 F.2d 487 (9th Cir. 1966) defeats

this “matching” theory, the court there deciding that

“employee” in Section 302(c)(5) includes both current

and past employees.

The kinds of trust activities which are contrary to the

purpose of Section 302 and which, therefore, violate the

sole and exclusive benefit requirement, are completely

different. For example, a trust fund established so as to

allow a diversion of trust funds to the personal use of the

trustees, Porter v. Teamsters Health, Welfare & Life Ins.

Funds, 321 F.Supp. 101 (E.D. Pa. 1970), or the provision

of benefits for emplovees of non-contributing emplovers,

Typo-Publishers Outside Tape Fund, 344 F.Supp. 194

(S.D.N.Y. 1972), would violate the requirement. Plaintiffs

here, however, have not even alleged violations such as

those in Porter and Typo Publishers. In the face of a motion

for summary judgment their sole factual contention—that

in the Trust administration emplover contributions will not

be matched, dollar for dollar, in payments to plaintiffs—

utterly fails to raise a justiciable issue under Section 302.

These kinds of cases, relied upon by the Court of Appeals,

ure clearly distinguishable from the present case, where no

diversion of trust assets is alleged.

16

Ill. The Court of Appeals Treatment of the District

Court's Grant of Summary Judgment as a Dismissal

for Failure to State a Claim Is Erroneous, Presents

a Significant Issue of First Impression, and Con-

flicts With a Decision of This Court

The Court of Appeals interpreted the district court's

grant of summary judgment as a decision that federal

jurisdiction was lacking because averments failed to state

a claim on which relief could be granted. But the district

court's ruling has a much more substantial effect. It fol-

lowed substantial discovery, and is more accurately inter-

preted as meaning that plaintiffs failed to raise any genuine

issue as to any material jurisdictional fact.

Viewed in this light, as a summary judgment motion, it

is clear that the district court ruling is correct and that the

Court of Appeals’ decision must be reversed. Plaintiffs

decision to rest on were unsupported jurisdictional allega-

tions in the face of a motion for summary judgment is their

undoing. At the very least, this case presents an issue of

first impression: the manner in which the courts are to

treat a summary judgment motion, following discovery

and establishment of a record, regarding jurisdiction.

The Court of Appeals incorrectly determined that this

case comes within the rule of Bell v. Hood, 327 U.S. 678

(1946). The summary judgment motion distinguishes the

two, as explained below.

There are substantial reasons why the district courts

ruling is correct. The motion here was made following

extensive discovery in which defendants-trustees made

every attempt to evoke the basis for federal jurisdiction.

None appeared. Jurisdiction is of course sacred to each

federal case, as reflected in the principle that jurisdiction

17

may be challenged at any stage of the proceedings. More-

over, the court is to challenge jurisdiction on its own mo-

tion, if grounds exist.

The novel question, in effect, is whether a party who de-

sires to challenge subject matter jurisdiction must wait

until all pre-trial matters have been concluded. Bell ».

Hood does not hold that a party must wait. That case

merely specifies the burden in the face of a motion to dis-

miss for failure to state a claim, and that burden is to raise

averments which, if true, under any imaginable state of

facts, would establish a federal! claim. But a summary judg-

ment motion forces the party opposing the motion to deal

with the real facts of the case, and to put forth those in sup-

port of jurisdiction.

Moreover, in Bell the Court noted specific exceptions to

the rule that mere allegations of federal jurisdiction were

sufficient as against a motion to dismiss for failure to state a

claim. One of these exceptions is “where the alleged claim

under the Constitution or federal statutes clearly appears

to be immaterial or made solely for the purpose of obtain-

ing jurisdiction. . . .. 327 U.S. at 682 (emphasis added).

Forum shopping is very much in evidence here. As noted

earlier, the applicable law of the State of Washington would

bar plaintiffs’ claim. Occidental Life Ins. Co. v. Blume, 65

Wn.2d 643, 349 P.2d 76 (1965). When forum shopping is

shown, more than mere averments should be necessary,

and a summary judgment motion on the jurisdictional

issues, made after full discovery thereon, should under

Bell v. Hood be of more substantial effect than a motion to

dismiss for failure to state a claim. The summary judgment

procedure, which forces the opponent to “put his cards on

18

the table,” should not be restricted in this area. There is

no reason for so restricting the use of this procedure and.

indeed, judicial economy and efficiency dictate a contrary

result.

Thus, the decision of the Court of Appeals is significant,

and commands the attention of this Court. Moreover,

defendants are entitled to judgment as a matter of law.

Regarding jurisdiction under Section 301, plaintiffs have

never gone beyond the mere allegation that defendants’

failure to allocate reserves to them is a breach of the Trust

Agreement. They argue under the following three sections

of Article VIII of the Trust Agreement:

1. The Trustees shall employ the Health and Wel-

fare Account to provide medical care, hospitalization,

disability, life insurance and other welfare benefits to

the Employees who become qualified and eligible

therefore under the terms of this Agreement.

2. The benefits provided by the Health and Welfare

Account will be paid only to the Emplovees who“have

been, or who shall hereafter be, employed or available

for employment under the jurisdiction and terms of the

Labor-Management Agreement subject to Article VI,

Paragraph 8, above. Such Employees shall be deemed

‘qualified’ for the aforesaid benefits from the Health

and Welfare Account, subject to the terms of eligibility

established by the Board of Trustees in accordance

with this Agreement.

3. The Board shall have the power to establish and

determine the conditions, rules and regulations under

which a qualified Employee shall become eligible for

medical, hospitalization, disability, life insurance and

other welfare benefits provided by the Health and

Welfare Plan. The conditions of eligibility, rules and

regulations shall include all factors necessary for the

proper administration and the financial security of the

Health and Welfare Plan...

19

The Court of Appeals relied on alleged violations of

Paragraphs 2 and 3 in finding Section 301 jurisdiction.

However, it is obvious that paragraph 3 does not apply to

claims for disbursement of accumulated reserves. Rather,

the section concerns eligibility for medical, insurance and

other welfare-type benefits. Plaintiffs have never claimed

that they were denied any welfare type benefits to which

they are entitled. The essence of plaintiffs’ contention is

simply that the trustees, vested with wide discretion under

the terms of the Trust Agreement, erred in the exercise of

that discretion concerning the disposition of reserve funds.

Absent any showing of a genuine issue of fact as to

alleged violations of the Trust Agreement, no claim arises

under Section 301. Fiorelli v. Kelewer, 339 F.Supp. 796,

798 (E.D. Pa. 1972), affd without opinion, 474 F.2d 1340

(3d Cir. 1973). See also, Leskiw v. Local 1470, Int'l Bhd.

of Elec. Workers, AFL-CIO-CLC, 464 F.2d 721 (2d Cir.

1972).

Fiorelli is similar to the instant case in that it involved

the withdrawal of employees from one union to form

another union. The trustees of the new union sued the trus-

tees of the old union to recover contributions made by em-

ployers to the old union on behalf of the employees. The

district court found that no claim was presented under

Section 301 because plaintiffs had alleged neither the ex-

istence nor breach of any contract between an employer

and a labor organization.

The Court of Appeals distinguished Fiorelli here by argu-

ing that a breach of an employer-labor organization con-

tract was not alleged in Fiorelli, but is alleged here. But

as the District Court pointed out, “this same charge, ex-

20

press or implied, would underlie virtually every claim for

trust benefits.” Moreover, as noted above, the present case

was dismissed on a motion for summary judgment follow-

ing full discovery, and, therefore, mere allegations claiming

a violation of the Trust Agreement are insufficient. Just as

the failure to allege a violation of a collective bargaining

agreement meant the absence of a claim under Section 301

in Fiorelli and Leskiw, the plaintiffs’ failure to put in issue

facts material to the question of whether defendants vio-

lated the Trust Agreement signifies the lack of a claim aris-

ing under Section 301 in the present case. The distinction

between this case and Fiorelli is, therefore, one of pro-

cedure and not of result.

Nor is there any basis, even an alleged basis, for a claim

under paragraph 2, plaintiffs: having conceded that benefits

were paid only to qualified “employees.”

None of the other claims asserted by plaintiffs relate to

a purported violation of an employer-labor organization

contract, and the Court of Appeals did not rely on any of

them in finding a basis for federal jurisdiction.

IV. The Court of Appeals Erred in Interpreting the

Scope of This Suit

The Court of Appeals relied in part for its decision that

jurisdiction exists under Section 302(e) on the idea that

plaintiffs here are not seeking individual specific benefits

that have been denied them. Opinion, page 14, Exhibit A

hereto. Rather, the Court stated:

They seek a determination that, as a group, Local 32

members have interests in the trust as a whole which

have been denied them.

———

21

Id. This was identified as a claim relating to the basic

“structure” of the Trust.

This conclusion is incorrect. Plaintiffs have never com-

plied with Local Rule 23 of the United States District Court

for the Western District of Washington, relating to repre-

sentative suits, and therefore they seek benefits solely for

themselves and no one else.

CONCLUSION

This action belongs in state court. As a purported federal

claim it is devoid of jurisdictional basis. The District Court's

order and judgment of dismissal is correct in all respects,

and the Court of Appeals erred in reversing. For this reason,

and for the reasons stated above, a writ of certiorari to

review and reverse the decision of the Court of Appeals

should issue.

Respectfully submitted,

Cup, Dwyer, GuTERSON & GRADER

WILLIAM L. Dwyer

Jerry R. McNavut

Barry E. WoLF

Attorneys for Defendants-Petitioners.

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

WituiaM J. ALvares, et al., individually

and as representatives of a class of |

persons hereinafter described, |

Plaintiffs-Appellants, |

and |

Tuomas ALBRO, et al., Trustee of the |

Seattle Area Plumbing and Pipefitting |

Industry Health and Welfare Trust, | NO. 73-1765

Nominal Plaintiffs-Appellants,

v.

Haven Erickson, et al., Trustees of the OPINION

Washington State Plumbingand

Pipefitting Industry Health and |

Welfare Trust, |

Trustee Defendants-Appellees. |

[March 10, 1975]

On Appeal from the United States District Court

for the Western District of Washington

Before: DUNIWAY and KILKENNY, Circuit Judges, and

SWEIGERT,” District Judge.

DUNIWAY, Circuit Judge.

The limited issues on this appeal are whether the fed-

eral court has jurisdiction of the case under § 301(a) o%

§ 302(e), or both, of the Taft-Hartley Act, 29 U.S.C.

§§ 185(a) and 186(e), respectively. The district court

found jurisdiction lacking. We reverse.

*The Honorable William T. Sweigert, United States District Judge

for the Northern District of California, sitting by designation.

A-2

William J. Alvares, et al. v.

I. Facts.

In 1946, Local 32 and the other local unions of the

United Association of Journeymen and Apprentices of the

Plumbing and Pipefitting Industry of the United States

and Canada, AFL-CIO (“United Association” ) in the state

of Washington began joint bargaining, on a statewide

basis, with employers in the plumbing and pipefitting in-

dustry. The local unions bargained through the Washing-

ton State Association of the United Association (“State

Association”), a statewide labor union. The employers

bargained through the Washington State Employers Coun-

cil for the Plumbing and Pipefitting Industry (“State Em-

ployers Council”), a statewide employers’ association.

The 1951 statewide collective bargaining agreement and

each subsequent renewal of it contained language referring

to a certain trust agreement creating the Washington State

Plumbing and Pipefitting Industry Health an Welfare

Trust (“State Welfare Trust”), a joint labor-management

trust fund organized under the provisions of § 302(c) of

the Taft-Hartley Act, 29 U.S.C. § 186(c). The statewide

agreement obligated employers to make contributions to

the State Welfare Trust at a specified rate per employee

per hour worked. With the contributed funds, the trustees

of the State Welfare Trust (“State Trustees’) were to and

did provide a program of health and welfare benefits, in-

cluding medical, time-loss, and death benefits, to all em-

ployees in the statewide bargaining unit.

In 1967, Local 32, representing union employees in the

Seattle area, withdrew from the statewide bargaining unit

and created a new and independent bargaining unit limited

to the geographical jurisdiction of Local 32. This the Local

32, members were privileged to do under § 7 of the National

Labor Relations Act, 29 U.S.C. § 157. Local 32 and the

employers in the Seattle area entered a new collective

bargaining agreement, effective January 1, 1968, which

provided that thereafter the employers would make con-

tributions to a newly-created Seattle Area Plumbing and

Pipefitting Industry Health and Welfare Trust (“Seattle

Area Welfare Trust’ ).

_ Shortly after the establishment of the Seattle Area Wel-

fare Trust, its trustees demanded that the State Trustees

A-3

relinquish to the Seattle Area Welfare Trust a portion of

certain uncommitted reserves accumulated in the State

\Welfare Trust. The demand was refused, and this action

followed.

The reserves in question represented (1) employer con-

tributions exceeding the amount of insurance premiums

paid by the trust and trust administrative expenses; (2)

forfeitures of the credits of union members, including

members of Local 32, under the so-called “hour bank”

eligibility program; (3) refunds received from the insur-

ance carrier because of favorable claims experience, and

(4) interest on investments. According to the plaintiffs in

this action, the uncommitted reserves totalled approxi-

mately $953,000 at the time when the Local 32 members

withdrew from the State Trust. Had the State Trust been

dissolved at that point and all liabilities been paid, this

sum, less costs of dissolution, would have remained. The

plaintiffs maintain that an accounting will show that ap-

proximately 40 percent of the reserves, or $371,200, are

attributable to contributions made by Seattle area em-

ployers on behalf of Local 32 members.

Plaintiffs, appellants here, are 14 individual members of

Local 32 claiming to represent the class of all 1400 of such

members. The trustees of the Seattle Area Welfare Trust

are also nominal plaintiffs, but Local 32 as an entity was

not made a party because trust benefits accrue to its mem-

bers individually and not to the union itself. At the present

stage of the litigation the only defendants are the State

Trustees. In an amended complaint, the plaintiffs also

named as defendants the original parties to the statewide

collective bargaining agreement, namely, the State Asso-

ciation and the State Employers Council. However, upon

those parties’ disclaimer of any interest in the outcome of

1. Under the hour bank program, all contributions paid by an em-

ployer for an employee, up to a maximum of 840, are credited to that

employee's hour bank. For each 140 hours of contributions in his bank,

the employee receives one month of future paid-up eligibility. After an

employee has accrued 540 unused hours in his bank, any additional

contributions which the employer may pay for him are forfeited to the

general reserves of the trust.

2 Whether this action is properly a class action is a question not now

betore us.

A-4

the lawsuit and upon the plaintiffs’ concession that no

claim could be established against those parties, the dis-

trict court dismissed the State Association and the State

Employers Council from the case before considering the

subject matter jurisdictional issues.

In their amended complaint the plaintiffs assert: (1)

that they are entitled to an accounting by the State Trus-

tees, (2) that they are entitled to a declaration of their

rights in the reserves, (3) that the State Trustees should

be required to apply a portion of the reserves for their

benefit, (4) alternatively, that the State Trustees should

be required to transfer a portion of the reserves to the

Seattle Area Welfare Trust, (5) or that the State Welfare

Trust be terminated and a portion of its assets be distrib-

uted to them or for their benefit, (6) that the State Trus-

tees should be enjoined from using a portion of the re-

serves for the benefit of anyone but Local 32 members.

As to jurisdiction, the plaintiffs claim that the State

Trustees are violating the statewide collective bargaining

agreement, a claim over which the federal courts have

jurisdiction under § 301(a) of the Taft-Hartley Act, and

that they are violating § 302(c) (5) of the same act, a claim

over which the federal courts have jurisdiction under

§ 302(e).

Il. The Trial Court's Decision.

The State Trustees moved for summary judgment on the

round that the court did not have jurisdiction under either

301(a) or § 302(e). The court granted the motion and

entered a judgment reading as follows:

IT IS HEREBY ORDERED, ADJUDGED AND

DECREED that the motions of defendants and each

of them to dismiss and for summary judgment of dis-

missal be, and the same hereby are, granted; that this

action be, and hereby is, dismissed for lack of federal

jurisdiction in failing to establish a federal cause of

action and that defendants have judgment for their

costs and disbursements herein to be taxed.

(The language in italics was interlineated hy the Judge. )

We construe this as a ruling that the court lacked sub-

ject matter jurisdiction, not as a decision that the plain-

A-5

tiffs have no claim even if the court has jurisdiction. This

‘s a case in which the jurisdiction of the federal court de-

pends upon the subject matter of the claim, not the status

of the parties, as in diversity cases, or the locus in which

the claim arose, as in federal enclave cases. Bell v. Hood,

1946. 327 U.S. 678, tells us that in subject matter jurisdic-

tion cases, jurisdiction “is not defeated _. . by the possi-

bilitv that the avertments might fail to state a cause of

action [claim] on which [plaintiffs] could actually re-

cover... . [T lhe failure to state a proper cause of action

[claim] calls for a judgment on the merits and not for a

dismissal for want of jurisdiction” (327 U.S. at 682). In

the case at bar, the court found that it did not have juris-

diction and dismissed on that ground. It did not take the

next step and decide that the claim was bad on the merits.

As the Court said in Bell v. Hood, that issue “must be de-

cided after and not before the Court has assumed jurisdic-

tion over the controversy.” Id.

We conclude that the court did have jurisdiction under

both § 301 and § 302(e). Our reluctance to hand down a

decision that appears to enlarge the jurisdiction of the fed-

eral courts—to “fire a jurisdictional cannon which will be

heard on future battle grounds” (Goldherg, J., in Mumford

v. Glover, 5 Cir., 1974, 503 F.2d 878, 880 )—is somewhat

diminished by the action of the Congress in adopting the

Employee Retirement Income Security Act of 1974 ( Pub.

L.. 93-406. 88 Stat. 829). That Act imposes very broad

jurisdiction upon the federal courts in cases involving wel-

fare trusts such as those involved here, § 502, and broadly

supers des, effective January 1, 1975, otherwise applicable

state laws, § 514. If we are firing a cannon, the Congress

has blown up a dam.

Ill. Section 301(a) Jurisdiction.

Section 301(a) of the Taft-Hartley Act provides:

Suits for violation of contracts between an employer

and a labor organization representing employees in

an industry affecting commerce as defined in this

chapter, or between any such labor organizations.

may be brought in any district court of the United

States having jurisdiction of the parties, without re-

spect to the amount in controversy or without regard

to the citizenship of the parties 29 U.S.C. § 185(a).

A-6

Here there is no dispute that the statewide plumbing and

pipefitting industry does affect commerce within the

statutory meaning. See, e.g., Local 44 and Washington

State Association, 195 N.L.R.B. 225 (1972). Our inquiry

then is whether the following three jurisdictional requisites

are satisfied: (1) a contract; (2) a claim of violation; and

(3) a “between” employer and labor organization or

“between” labor organizations element.

To find the first element, we examine the relationship

between the statewide collective bargaining agreement

and the State Welfare Trust agreement. Each of the suc-

cessive statewide bargaining agreements, including the

1965 agreement relevant here, provided in relevant part:

Subject to the trust agreement supplement hereto.

Management agrees to contribute certain hourly

amounts [for health and welfare, vacation. pension,

training and other industry benefit funds] as shall

from time to time be determined by the Washington

State Board of Negotiators.

Article IV of the trust agreement thus referred to as a

supplement to the labor-management collective bargain-

ing agreement provides in relevant part:

This Agreement is and shall be deemed a supple-

ment to the Labor-Management Agreement of the

Plumbing and Pipefitting Industry of the State of

Washington and every Employer who is a party to

the Agreement shall become a party to this Agree-

ment. Any violation of this Agreement, or failure to

become a party thereto, shall be deemed a violation

of the Labor-Management Agreement and shall be

grounds for the cancellation or forfeiture thereof.

(emphasis added )

Separate documents are frequently used to define the

rights and obligations contemplated in a single conceptual

contract. That the parties here intended the trust agree-

ment to form “part and parcel” of the collective bargain-

ing contract is evident. We therefore conclude that the

world “coutract” as it appears in § 301(a) encompasses

the provisions of a welfare trust. such as this, established

as a supplement to and referred to in a collective bargain-

A-7

ing agreement. The two together are the “contract.” AFL

». Western Union Telegraph Co., 6 Cir., 1950, 179 F.2d

535, 538; Smith v. DCA Food Industries, Inc., D. Md..

1967, 269 F. Supp. 863, 868. Cf. Retail Clerks Inter-

national Association v. Lion Dry Goods, Inc., 1962, 369

U.S. 17 (the word “contracts” in § 301 is not limited to

collective bargaining agreements but includes strike settle-

ment agreements, for example, as well ).

To establish § 301(a) jurisdiction. plaintiffs must fur-

ther allege a breach of the contract. Beriault v. Local 40,

Super Cargoes & Checkers, ILWU, 9 Cir., 1974, 501 F.2d

258, 261. This the plaintiffs have done by pointing to two

provisions of the trust agreement. Article VIII, Section

2. of that agreement specifies:

The benefits provided by the Health and Welfare

Account will be paid only to Employees who have

been, or who shall hereafter be, employed or avail-

able for employment under the jurisdiction and terms

of the Labor-Management Agreement. . . . Such Em-

ployees shall be deemed * ualified” for the atore-

said benefits from the Health and Welfare Account,

subject to the terms of eligibility established by the

Board of Trustees in accordance with this Agreement.

Section 3 of the same article further specifies that the

trustees shall establish eligibility rules taking into ac-

count “all factors necessary for the proper administration

and the financial security” of the health and welfare plan.

Plaintiffs assert that the trustees’ refusal to allocate to or

for the benefit of the withdrawing but otherwise “quali-

fed” Local 32 members a prorated share of the reserves

was not “necessary for the proper administration and

financial security of the trust fund,” and that this conduct

therefore violated Section 2 of Article VIII of the trust

agreement and an implied duty of the trustees not to

adopt arbitrary and capricious eligibility rules. Cf. Giler

v. Board of Trustees of Sheet Meta Workers Pension Plan,

9 Cir., Sept. 3, 1974, ....... F.2d ........ (No. 73-1149) (an-

plying the arbitrary and capricious standard to eligibility

rules framed by pension plan trustees in a case involving

an alleged violation of § 302(c)(5), but finding no arbi-

trariness or caprice ).

A-8

Whether these allegations are substantial enough to

carry the day for plaintiffs on the merits does not concern

us. We think the plaintiffs have sufficiently alleged a

breach of the collective bargaining contract to satisfy that

element in the jurisdictional formula. Compare Fiorelli v.

Kelewer, E.D. Pa., 1972, 339 F. Supp. 796, aff d without

published opinion, 3 Cir., 1973, 474 F.2d 1340, on which

the defendant State Trustees rely, where the court tech-

nically found jurisdiction but held there was no cogniz-

able § 301(a) claim because the plaintiffs had alleged

neither the existence nor the breach of any labor-manage-

ment contract. Here plaintiffs have alleged a breach.

The State Trustees argue, however, that plaintiffs fail

the “betweenness” requirement of § 301 jurisdiction be-

cause neither a labor union nor an employer is a party to

this lawsuit. The dispute here, as the dismissal of the

State Association and the State Employers Council from

the case underscores, is between the members of Loca!

32 on one hand and the State Trustees on the other. But

that does not foreclose federal jurisdiction. As the Su-

preme Court held in Smith v. Evening News Association.

1962, 371 U.S. 195, § 301 refers to “contracts” between an

employer and a labor organization—not to “suits” between

them. In Smith the Court held that, without joining the

union as a party plaintiff, individual employees can sue

under § 301 to enforce rights arising from a labor contract.

We do not accept the State Trustees’ argument that

Smith nonetheless implies that either a union or an em-

ployer must be a party to the action if § 301 is to be in-

voked. We think that such a requirement would be in-

consistent with the Court’s instruction in Smith that § 301

(a) is not to be given a narrow reading. 371 U.S. at 199.

See Textile Workers v. Lincoln Mills, 1957, 353 U.S. 448,

456-57. Although this precise point does not seem to have

been expressly conisdered by any other federal court, we

note that at least one district court has accepted juris-

diction under § 301(a) in a suit by an individual employee

against the trustees of a labor-management pension trust

where neither the union nor the employer was a party.

Brune t. Morse, E.D. Mo., 1972, 339 F. Supp. 159, aff'd,

A-9

8 Cir., 1973, 475 F.2d 858 (action challenging pension

eligibility rules ).”

————

3. See also Franciosa v. Bricklayers Fund Office, $.D.N.Y., 1974, 72

L.C. 28, 857 (action by union member against trust fund successfully

invoked jurisdiction under §§ 301 and 302); Hancock v. Central States

Pension Fund, §.D. Ind., 1973, 84 L.R.R.M. 2635 (action by union

member against pension fund and trustees for additional benefits from

fund founded on § 301 jurisdiction). No union or employer was involved

in either case.

Many federal courts have accepted § 301(a) jurisdiction in disputes

involving welfare and pension plans where the union, the employer, or

both. were involved in the lawsuit. E.g.. Tolbert v. Union Carbide Corp.,

4 Cir., 1974, 495 F.2d 719 (§ 301 jurisdiction existed, and therefore

federal substantive law applied, for employee's claim against employer

for benefits under disability and pension plans for injury sustained while

laid off); AFL v. Western Union Tclegraph Co., 6 Cir., 1950, 179 F.2d

535 (action by employee against employer for pension benefits); Roth-

lein v. Armour and Co., W.D. Pa., 1974, 377 F. Supp. 506 (action by

employees to determine rights on transfer from one pension plan to

another); International Union of Brewery Workers v. Duke & Co., Inc.,

W_D. Pa.. 1974, 373 F. Supp. 778 (suit by union to determine rights of

participant union members upon termination of business and pension

plan); Sheet Metal and Roofing Contractors’ Association tv. Liskany,

S.D. Ohio, 1974, 369 F. Supp. 662 (action by employers against trust

employees for diversion of trust funds; jurisdiction invoked under both

§§ 301 and 302); International Association of Machinists, Lodge 1194 v.

Gar Wood Industries, Inc., N.D. Ohio, 1973, 368 F. Supp. 357 (action

by former employees asserting rights to pension payments from employer

on the closing of a plant and termination of pension plan); Local 626,

United Bhd. of Carpenters tv. Delaware Contractors Association, D. Del.,

1972, 344 F. Supp. 1281, affd per curiam, 3 Cir., 1973, 477 F.2d 564

(action to determine lawfulness of administration of certain vacation

fund); International Union, UAW v. Anaconda American Brass Co., E.D.

Mich., 1972, 340 F. Supp. 651, modified, 6 Cir., 1973, 475 F.2d 682

(action by union involving rights of laid-off workers to early retirement

benefits under pension agreement) ; Knoll v. Phoenix Steel Corp., E.D.

Pa., 1971, 325 F. Supp. 666, affd, 3 Cir., 1972, 465 F.2d 1128, cert.

denied, 1973, 409 U.S. 1126 (action by former employees to discon-

tinue pension fund and distribute assets to beneficiaries upon closing of

plant); United Brick and Clay Workers v. Internationel Union of District

50, UMW, E.D. Mo., 1970, 315 F. Supp. 224, affd, 8 Cir. 1971, 439

F.2d 311 (action by employees who selected a new union against old

union and employer to continue pension plan in effect by substituting

new union for old); Hauser v. Farwell, Ozmun, Kirk & Co., D. Minn...

1969. 299 F. Supp. 387 (action by former employees to recover money

in pension fund upon plant closing); Raymond v. Hoffman, E.D. Pa.,

1966. 284 F. Supp. 596 (action by trustees of new local union pension

plan formed after union schism against trustees of old union's pension

plan for aliquot share of trust reserves under a contract made between

A-10

We are mindful that the court in Bowers vt. Ulpiano

Casal, Inc., 1 Cir., 1968, 393 F.2d 421, 423, found central

in Smith, supra, the underlying rationale that § 301(a)

jurisdiction obtains in employee-employer_ disputes be-

cause of the grave questions concerning the interpreta-

tion and enforceability of collective bargaining agree-

ments that such disputes pose. Here, the State Trustees

argue, there is no need for § 301 jurisdiction because there

is no possibility of labor-management strife. Of that, how-

ever, we cannot be certain. The danger may be atten-

uated, but it is conceivable that the State Trusteees con-

duct in withholding the reserves could disrupt the collec-

tive bargaining process. “To deprive [a union member of

his potential benefits from a pension or welfare fund]

because he shifts his allegiance to another union would

seriously inhibit his freedom of choice, which is central

to collective bargaining.” Summers, Union Schism in Per-

spective, 45 Va. L. Rev. 261, 279 n. 84 (1959), also quoted

in Raymond v. Hoffman, E.D. Pa., 1966, 284 F. Supp.

596, 602 n. 14, holding that. where certain union members

left the union to form a new local and the unions then

agreed to divide the old union’s assets ratably, § 301(a)

jurisdiction existed over an action by the trustees of the

new local’s pension plan against the trustees of the old

union’s pension plan for an aliquot share of its reserves.

We hold that § 301(a) jurisdiction exists over the claim

of the plaintiffs in this case.

the unions); Smith v. DCA. Food Industries, Inc., D. Md., 1967, 269 F.

Supp. 863 (action by certain employees against employer and union for

pension benefits which were denied upon plant closing); Bey v. M uldoon,

ED. Pa., 1963, 217 F. Supp. 404 (action involving interests of long-

shoremen in technological improvement fund set up under collective

bargaining contract); Local 90, Stove Mounters’ International Union v.

Welbilt Corp., E.D. Mich , 1959, 178 F. Supp. 408, affd without opinion,

6 Cir.. 1960, 283 F.2d 868 (action to compel employer's payments to

pension fund); United Construction Workers v. Electro Chemical En-

graving Co., S.D.N.Y., 1959, 175 F. Supp. 54 (action to compel em-

ployer’s payments to welfare and pension funds). Sce also Hammil v.

Stubnitz Spring Division, E.D. Pa., 1973. 85 L.R.R.M. 2231, Internation-

al Union of Brewary Workers t. Stegmaier Brewing Co.. M.D. Pa., 1972,

“9 L.R.R.M. 2765; Retail Clerks Union, Local 1460 v. Newberry,

Wubash. Inc.. N.D. Ind., 1971, 79 L.R.RM. 2847: Abruscato v. Local

199. Industrial Workers, $.D.N.Y., 1968, 69 L.R.R.M. 2537.

A-ll

IV. Section 302(e ) Jurisdiction.

Section 302(e) of the Taft-Hartley Act. which the

Local 32 members contend provides a second, independ-

ent jurisdictional base for their action, states in relevant

part:

The district courts of the United States . . . shall have

jurisdiction, for cause shown, . . . to restrain violations

of this section. . . . 29 U.S.C. § 186(e).

Section 302 in general forbids an employer to make any

payment of money to any representatives of its employees

and forbids such representatives to accept such payments.

Section 302(c)(5) creates an exception for payments to

an employee welfare or pension fund by stating that the

general prohibitions of } 302 do not apply:

with respect to money or other thing of value paid to

a trust fund established by such representative, for

the sole and exclusive benefit of the employees of

such employer, and their families and dependents

(or of such employees, families, and dependents

jointly with the employees of other employers making

simlar payments, and their families and dependents ).

_. 29 U.S.C. § 186(c)(5) (emphasis added ).

Plaintiffs rely on the “sole and exclusive benefit” lan-

guage and argue that payments which were made by Local

32 employers to the State Welfare Trust for the benefit

of their employees and to which a share of the reserves

that the State Trustees refuse to relinquish is attributable

will be used by the State Trustees for the benefit of per-

sons other than Local 32 employees, that is, for the bene-

ft of the remaining beneficiaries of the State Trust.

The dominant legislative purpose of the § 302 restric-

tion on payments to employee representatives was to pre-

vent employers from tampering with the loyalty of union

officials. and to prevent union officials from extorting

tribute from employers. United States v. Ryan, 1956, 350

U.S. 299, 304-06; Bowers v. Ulpiano Casal, Inc., 1 Cir.,

1968, 393 F.2d 421, 425. Whether § 302(e) was meant to

extend heyond cases involving the possibilities of such

corruption is unclear. Although there are indications in

congressional debates that § 302(e) was intended to have

A-12

a broad sweep, the legislative history is inconclusive.

Lugo wv. Employees Retirement Fund, E.D.N.Y., 1975, 366

F. Supp. 99, 101 n. 2. Compare Copra v. Suro, 1 Cir,.

1956, 236 F.2d 107, 115 (tentatively reading § 302(e) to

create a broad federal equity jurisdiction over the admin-

istration of welfare te “whose life in effect depends

on the permissive exception of § 302(c)(5)") with Bow-

ers U. Ulpiano Casal, Inc., supra, 393 F.2d at 425 (acknowl-

edging suggestions in the debates that employees could

invoke § 302(e) to challenge the administration of such

funds but repudiating the broad interpretation proposed

in Copra). See generally Legislative History of the Labor

Management Relations Act, 1947 (U.S. Govt. Printing

Office 1948).

Notwithstanding ambiguous legislative history, § 302

(e) jurisdiction has been successfully invoked in a num-

ber of cases where it was alleged, as here, that a trust fund

was not being administered for the “sole and exclusive

henefit” of the employees of the contributing employers.

E.g., Blassie v. Kroger Co., 8 Cir., 1965, 345 F.2d 58

(action by contributing employers successfully challenz-

ing, among other administrative matters, the use of trust

property for a pharmacy offering discounts to persons

other than trust beneficiaries); Lugo v. Employees Re-

tirement Fund, E.D.N.Y., 1973, 366 F. Supp. 99 (action

by employee challenging eligibility requirements for dis-

ability and retirement benefits under the provisions of a

certain pension fund); Insley v. Joyce, N.D. Ill., 1971.

330 F. Supp. 1228 (action by employee challenging

“break-in-service’ provision in pension plan excluding for

eligibility purposes any service predating an interrup-

tion in employment of more than three years); Porter v.

Teamsters Funds, E.D. Pa., 1970, 321 F. Supp. 101 (class

action by union members against trustees » rs diver-

sion of trust funds and receipt of unlawful compensation ) ;

Giordani v. Hoffman, E.D.Pa., 1969, 295 F. Supp. 463

(action by employees against health and welfare fund

trustees alleging broadly that funds were not established

for the “sole and exclusive benefit” of the employees of the

contributing employers ); Bath v. Pixler. D. Colo.. 1968,

283 F. Supp. 632 (action to determine proper disposition

of health and welfare funds on termination of old trust

A-13

and establishment of new trust); Raymond v. Hoffman,

E.D.Pa.. 1966, 284 F. Supp. 596 (action by trustees of

pension plan of new local against trustees of pension plan

for old union demanding aliquot portion of reserves ).

Raymond v. Hoffman, a case much like the one at bar,

found § 302(c) jurisdiction without distinguishing the

types of cases that might be cognizable under that section.

However, based on language in Bowers, supra,’ the more

recent of these cases, Lugo, Insley, Porter, and Giordani,

have recognized a distinction between actions involving

“structural” deficiencies in the relevant trust which cause

it to violate the “sole and exclusive benefit” provision of

§ 302(c)(5) and actions involving only questions of day-

to-day fiduciary administration of welfare and pension

funds. Section 302(e), these cases say, provides jurisdic-

tion over the former but not the latter.

Accepting this distinction for the moment, we conclude

that the claim of the plaintiffs in this case involves a

“structural” rather than an “administrative” matter. Here,

a substantial number of the employer parties to the State

Welfare Trust have withdrawn and are no longer making

contribtuions to it. Those employers and their employees

have agreed to set up and have set up a new Seattle Area

Welfare Trust. It is unclear whether those employees of

Local 32 who were beneficiaries before the withdrawal

remained beneficiaries of the State Welfare Trust or, if

4. That language in Bowers is:

We are, however, persuaded that the weight of reason and authority

compels a narrow reading of section 302(e). In the first place, its

language limits federal courts “to restrain violations of this section.”

These violations. if we read correctly, are violations of basic struc-

ture, as determined by Congress, not violations of fiduciary obliga-

tions or standards of prudence in the administration of the trust

fund. 393 F.2d at 424.

However, the Bowers court interpreted § 302(e) much more narrowly

than the case before it required. Stripped of surplusage, the holding of

Bowers is really that § 302(e) does not confer federal jurisdiction over

claims of wrongful diversion of trust funds brought against third parties

who are neither unions, employers. nor trustees, who allegedly received

monies from the fund “with knowledge that such transactions were illegal,

imprudent, or in breach of fiduciary obligations.” 393 F.2d at 422, 426.

Identical claims against the principal parties apparently were not dis-

missed for want of jurisdiction and were not before the Bowers court.

A-14

so, how and to what extent. The action of the State

Trustees in forfeiting the hourbank credits of the Local

32 members indicates that the trustees no longer consider

them to be beneficiaries. Before the withdrawal, the re-

serves were held for the benefit of all emplovees, state-

wide. After the withdrawal, and if the Local 32 members

ceased to be beneficiaries, the number of beneficiaries

was markedly reduced. Yet the State Trustees still have

the same reserves, and appear to take the position that

they are now held only for the benefit of beneficiaries

other than the Local 32 members. Surely these changes do

not involve mere administration of the trust. They involve

a rather drastic change in its structure. The plaintifis

here are not seeking individual specific benefits that have

heen denied them. They seek a determination that, as a

group, Local 32 members have interests in the trust as a

whole which have been denied to them.

The structural deficiency test does not depend solely

on the structure of the trust fund at its inception. As the

court in Porter, supra, reasoned:

[T]he claims relating to structural violations need

not be directed to the point in time when the trust

funds were created and the first contributions made.

To so hold would create grave practical problems.

Let us suppose, for example, that a trust fund is

created and initially administered in accordance with

the structural requirements of Section 302(c)(5).

If at some future point during the trust fund's exis-

tence it were either amended or administered in such

a way as not to comply with those provisions, such

would be a structural violation over which this Court

would have jurisdiction under Section 302. Such a

conclusion is necessary to protect the beneficiaries

and the funds previously paid into the trust. 321 F.

Supp. at 103-04.

In Insley, supra, which involved a “break-in-service” dis-

qualifying rule adopted by trustees of a pension fund, the

court refuted the trustees’ claim that no “structural” de-

ficiency was alleged, using the following reasoning:

A careful reading of the complaint, however, indi-

cates that the plaintiff specifically alleges that the

A-15

break-in-service provision of the Pension Plan, which

in effect divested him of the contributions made by

employers on his behalf, renders the Plan violative

of Section 302(c)(5) because the Plans thus struc-

tured is not one for the sole and exclusive benefit of

employees of the employers who have made sub-

stantial contributions to the Pension Fund. While the

plaintiff does not allege the most obvious types of

poetential structural violations such as siphoning of

trust funds for union purposes or lack of an annual

audit, he does allege, in effect, that the divesting pro-

cedures adopted by the Fund's trustees operate so as

to render it not for the exclusive benefit of the em-

ployees. 330 F. Supp. at 1232.

Furthermore, in Lugo, supra, the court offered an even

broader interpretation of the structural deficiency require-

ment:

We do believe, however, that a trust fund which

authorizes the trustees to act arbitrarily and capri-

ciously to exclude from eligibility certain potential

employee-beneficiaries, has a structural defect in that

it fails to satisfy the requirement that the fund shall

be for the sole and exclusive benefit of all the em-

ployees. A Section 302 trust fund does not fit the

categories of an ordinary trust and to that extent is

sui generis and thus requires compliance with the

objectives of Section 302. Roark v. Lewis, {D.C.Cir..

1968, 401 F.2d 425, 427]. In assuming jurisdiction

for the enforcement of such a trust in accordance

with Section 302, we do not do so under any broad

chancery powers of the Court (cf., e.g., Copra v.

Suro, 236 F.2d 107 (1st Cir., 1956) ), or under the

theory that Section 302(e) is “the foundation stone

for federal court management of trust funds.” See

Bowers v. Ulpiano Casal, Inc., 393 F.2d at 426.

Rather, we believe that jurisdiction in a case of this

kind can be found within the “penumbra of express

statutory mandate” of Section 302. See T extile Work-

ers Union of America vt. Lincoln Mills, 353 U.S. 445

_.. (1957). 366 F. Supp. at 103.

A-16

We agree with this interpretation.”

We think that this result is consonant with our previous

cases where we have considered on the merits actions

based on § 302(c)(5) challenging eligibility rules estab-

lished by trustees of labor-management pension funds.

In Lee t. Nesbitt, 9 Cir., 1972, 453 F.2d 1309, 1311, in-

volving a “break-in-service” rule, we stated:

Section 302 requires that a pension trust be “for

the sole and exclusive benefit of employees.” The

trustees of such a trust, while possessing a large

measure of* discretion in precsribing conditions ot

eligibility for benefits, owe a fiduciary duty to the

employees and may neither impose unreasonable

conditions of eligibility nor act arbitrarily in deter-

mining who is eligible.

There, however, we did not reach the jurisdictional ques-

tion because federal jurisdiction rested on diversity of

citizenship. In Giler v. Board of Trustees of Sheet Metal

Workers Pension Plan, 9 Cir., Sept. 3, ae F.2d

wRcts (No. 73-1149, amended January 7, 1975), also in-

volving a “break-in-service” rule, we adhered to the Lee

standards, stating:

The trustees of a pension plan established under

29 U.S.C. § 186(c)(5) [§ 302(c)(5) of Taft-Hart-

ley] have broad discretion in setting eligibility rules.

A court should interfere only when the rule is un-

reasonable or its enforcement arbitrary. Slip op. at 2.

We there affirmed the lower court's dismissal of the action

because the plaintiff failed to show that the rule was un-

reasonable or that the trustees arbitrarily or capriciously

enforce the rule with respect to him. We did not discuss

jurisdiction.

5. Under the circumstances, we need not consider whether the struc-

tural deficiency versus administration dichotomy is a sound basis for

limiting our jurisdiction. One court has concluded that whether thet test

ought to be the legal standard, and what constitutes a structural defect,

raise such “difficult and complicated issues” that, when recently faced

with the problem, it purported to avoid deciding those jurisdictional

issues by proclaiming the § 302(c) (5) claim before it inadequate on the

merits. de Loraine v. MEBA Pension Trust, 2 Cir., 1974, 499 F.2d 49,

51 n9.

A-17

We express no opinion as to the merits of plaintiffs’

claim(s). We only hold that the district court had juris-

diction under both § 301(a) and § 302(e) of the Taft-

Hartley Act.

Reversed and remanded for further proceedings.

A-18

APPENDIX B >

Memorandum Decision of District Court

“UNITED STATES DISTRICT COURT

December 21, 1972

[ Names and addresses of counsel deleted

Re: William J. Alvares, et al. v. Haven Erickson, et

al. No. 8755, U.S.D.C., W.D. Wash.

Gentlemen:

Please consider this letter as the Court’s memoranduin

decision on defendants’ motion to dismiss and for sum-

mary judgment. By agreement, the union and the em-

ployer have been dismissed by minute order previous!)

entered. Defendants may prepare and present appropriate

order and judgment for entry.

Plaintiffs’ action is based on sections 301 and 302 of

the National Labor Relations Act. In the Court's opinion.

section 301 of the Act has no application in the matter o!

trust administration, particularly where neither the union

nor the employer are parties, unless a violation of the

terms of the collective bargaining agreement is presented.

Here. the only violation alleged is a general claim that de-

fendant trustees, by refusing to allocate a portion of the

fund reserves to withdrawing plaintiffs, breached their

duty to provide specified benefits to qualified employees.

But this same charge, express or implied, would underlie

virtually every claim for trust benefits. Were the courts to

accept jurisdiction in this type of case, it would be tanta-

mount to a determination that the administration of em-

ployer-employee trust funds is a matter of federal court

jurisdiction. Where neither emplover nor union are par-

ties, and where violation of specific terms of a collective

bargaining agreement are not involved, the majority rule

(and in this Court’s opinion the better rule) is that sec-

tion 301 is not applicable.

Plaintiffs also charge that the trustees’ refusal to allo-

cate a portion of the reserves to withdrawing members is

a violation of section 302. However, section 302 is con-

A-19

cerned with the structure of the fund—not with the ad-

ministration of a properly structured fund. There is no

claim here that trust funds will be devoted to non-em-

ployees of contributing employers. The validity of the

trust purposes is not an issue, only its administration.

Finally, plaintiffs argue that the Court should retain

jurisdiction because of pendent claims. The rule, however,

‘s that when federal claims are dismissed before trial,

state claims will also be dismissed.

Very truly yours,

/s/ Morrell E. Sharp

United States District Judge”