# Petition — Lipsitz v. Costello > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1951%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 - **Citation:** 434 U.S. 829 ## Text Anited States No. £6-1716 BARRY LIPSITZ, ROBERT SEIPLE, C. M. SCHNEIDER, as Trustees of the GOLD COAST ELECTRICAL JOINT APPRENTICESHIP and TRAINING TRUST FUND, Petitioners, v8. MICHAEL COSTELLO, CHARLES PEREZ and ROBERT HORAN, as Trustees of the GOLD COAST ELECTRICAL JOINT APPRENTICESHIP AND TRAINING TRUST FUND, Respondents. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT STEADMAN S. STAHL, JR. 2432 Hollywood Boulevard Hollywood, Florida 33020 Counsel for Petitioners —————————————— cen EEEEREeieeremeres eine A A pees on contribution shall revert to two percent (2%) until such time the Fund is increased to $250,000.00, at which time the contribution shall revert back to one percent (1%). '7Most important are the executive director and assistant director of the Trust Fund. Also included are clerical employees of the Fund. *Before trial other issues were disputed, but on the day of the trial all the following, formerly disputed issues were settled by stipu- lation. It was a that other matters in the administration of the Trust Fund must be joint (R.13), Union Trustees may have access to and copy all Fund records (R. 13, 23, 24), and that the records App. 13 In resolving this dispute, this Court addresses whether a written Trust Fund Agreement exists," whether the 27 August 1962 Trust Agreement has been ratified, whether a trust fund agreement in this Union Trustee-Employer Trustee dispute must conform to the dictates of § 302(c)(5)(B) and (c) (6) of the LMRA, and whether § 10 of the Trust Agreement violates these LMRA provisions. Misuse, Influence Peddling, Bribery Based on these actions, on the wording of these particular writings, and the historical development of the trust fund references which exist in the collective bargain- ing agreements, the drama between the two groups has un- folded. In simplest terms, this case is another of the peren- nial replays of labor-management disputes. Although the geographical setting of this disagreement is different from other, similar ones, it is staged with the back drop of con- cerns which gave rise to § 302. Because of the abuses that have occurred in the cauldron of labor-management interplay which include misuse of labor organization funds, extortion by labor personnel, and attempts by business personnel to influ- ence or exert pressure on union “personnel”—particularly will be available during trustee meetings. Also, with the exception of employment and salaries of the Trust Fund staff, it was agreed that a vote of all the Trustees had to be taken before payments of Func monies occurred. (R. 17-22). 19More particularly, whether the Trust Fund Agreement referred to in the 1962 1974 collective bargaining agreements may be the 27 August 1962 Trust Agreement. App. 14 in a financial form, restrictions on conduct beween these two bodies and certain of their representatives have been imposed by Congress.”” One is the § 302(c) prohibition of payments by an employer to labor organizations or to their representatives." However, in certain explicitly, statu- torily defined instances exceptions to this general prohibi- tion exist. One permits payments to a trust fund for train- ing and apprenticeship programs.” For such a trust fund 20[1959] U.S.Code Cong. & Ad.News, pp. 2318, 2321-33. See Arroyo v. United States, 1959, 359 U.S. 419, 425-26, 79 S.Ct. 864, 868-69, 3 L.Ed.2d 915; see also United States v Ryan, 1956, 350 U.S. 299, 304, 76 S.Ct. 400, 100 L.Ed. 335. 1Other examples of payments by employers to employee represen- tatives which are precluded by § 302 are illustrated in United States v. Pecora, 3 Cir., 1973, 484 F.2d 1289 (testimonial dinner and gifts within § 302); United States v. Overton, 2 Cir., 1972, 470 F.2d 761 (payments made by non-employer corporate entity prohibited by § 302); United States v. Lanni, 3 Cir., 1972, 466 F.2d 1102 (employer payments to union officer’s girl friend violate § 302). For an example of a restrictive interpretation of “representative” of an employer's employees made prior to the 1959 amendment of § 302 by the Labor-Management Reporting and Disclosure Act of 1959, one should read Ventimiglia v. United States, 4 Cir., 1957, 242 F.2d 620. The holding in that case is no longer good law. See [1959] U.S.Code Cong. & Ad.News, pp. 2318, 2330. 22L_abor Management Relations Act, 1947, § 302(c) (6), 29 U.S.C. § 186(c)(6). Aside from the requirements of § 302, the existence of a trust fund satisfying state law requirements is a prerequisite to lawful employer payments to a trust fund under §§ 302(c)(5)(B), (c)(6). Bricklayers, Masons and Plasterers International Union of America, Local Union No. 15, et al. v. Stuart Plastering Company, Inc., 5 Cir., 1975, 512 F.2d 1017, 1026. See text infra following note 28. App. 15 to come within this exception, the statutory criteria set forth in § 302(c) (5) and (c) (6) must be met.?! [1] As any “curative” form of legislation designed to eliminate past abuses and prevent future ones, § 302’s prohibition combines an elimination of the then existing abuses with its future-looking “prophylactic” purpose. See Local No. 2 of Operative Plasterers and Cement Masons International Association v. Paramount Plastering, Inc., 9 Cir., 1962, 310 F.2d 179, 186; Employing Plasterers’ Association of Chicago v. Journeyman Plasterers’ Protec- tive & Benevolent Society of Chicago, 7 Cir., 1960, 279 F.2d 92, 97. To retain this preventive effect against the onslaught of creative devices to avoid § 302’s application, this Court has recognized that strict compliance with the rigid structure of § 302 is necessary in determining whether a trust fund satisfied the § 302(c)(5)(B) re- quirements, we have stated Judicial adherence to the intention of Congress in enacting Section 302 requires strict enforce- ment of the purposefully rigid structure provided in this section. Stuart Plastering, supra at 1026. Likewise, if the Trust Fund under examination in this case comes within § 302’s scope, such a strict enforce- ment of § 302(c) (5) (B)’s requirements must be followed. 23Qne is “. .. a trust fund established by such [employee] representative . . . .” Additionally, Employer Trustees do not directly challenge that the Trust Fund was created by such a representative. Of the requirements set forth in § 302(c)(5)(B) (a detailed written agreement, equal representation for employers and employees in the administration of the fund, a dispute-deadlock resolving mechanism, an annual audit, and an availability of a statement of results), the only portion Union Trustees contend is violated by § 10 is the equal representation requirement. App. 16 Anticipation Of Ratification Recognizing that, with the exception of § 302(c) (5) (B)’s equality of administration provision, the other re- quisites are present in the existing documents, Employer Trustees direct their sole attack on appeal at whether the 27 August 1962 Trust Agreement is the agreement con- templated on or after September 1, 1962. In other words, they contend that although the 27 August Trust Agree- ment may meet § 302’s requirements, it is not the Trust Fund Agreement called for by the September 1, 1962 col- lective bargaining agreement. An attempt to bolster this argument is made by in- voking our prior decision in Bricklayers, Masons and Plasterers International Union of America, Local Union No. 15, et al. v. Stuart Plastering, 5 Cir., 1975, 512 F.2d 1017, on which Employer Trustees rely as supporting **The Employer Trustees contend that Article V, § 7 of the 1962 collective bargaining agreement, and as it has been utilized in sub- sequent collective bargaining agreements, anticipates the creation of a trust fund. This “anticipates” argument is partly founded on the literal language of § 7 stating “The parties to this Agreement shall have a joint apprenticeship and training Trust Fund A re a The remaining portion of their argument’s foundation is the September 1, 1962 execution of the initial collective bargaining agreement com- pared to the August 27, 1962 signing of the Trust Agreement. Con- struing these items together, Employer Trustees contend that the Sep- tember 1 collective bargaining agreement has required and envisioned execution of a post-September 1, 1962 Trust Fund Agreement. Ac- cording to Employer Trustees, it is not the absence of a writing complying with § 302 which creates the lack of a writing in this instance. Rather, it is the absence of the writing contemplated to have been executed after the September 1, 1962 collective bargaining agree- ment. However, the 1962 Trust Agreement indicates the contrary. See note 28, infra. App. 17 their argument that the collective bargaining agreements contemplated or anticipated “. . . a trust agreement in future.” Even assuming this foundation to be based on bedrock — not shifting sand — we need not and do not address this issue. For ratification purposes, whether the Trust Agreement was executed before or after the 1962 collective bargaining agreement is irrelevant.2> A written Trust Agreement exists which virtually tracks § 302’s standards. Both Union and Employer representatives who are not challenged on this record as lacking authority ex- ecuted the 27 August Trust Agreement which has been operated under and remains in effect without change. Thus, a writing within § 302’s meaning exists if the 27 August Trust Agreement has been ratified. Additionally and despite Employer Trustee’s asser- tion, whether a written, executed trust agreement may be ratified by subsequent actions was not before the Stuart Plastering Court. In briefest form, Stuart Plastering en- tailed consideration of whether a collective bargaining agreement containing a schedule of payments, by itself,” 25Section 18 of the Trust Agreement states that “[t]his Trust er t shall continue in effect for the period provided for in the current and any subsequent Collective Bargaining Agreement, and for the period of any renewal or extension . . . .” In light of this provision, we need not consider whether the Trust Fund may exist ind t of the collective bargaining agreements. See also Hinson v. N.L.R.B., 8 Cir., 1970, 428 F.2d 133, 138-39. 26In Stuart Plastering, the collective bargaining agreement pro- vided “the following amounts [specified . . . under the ‘health and welfare’ benefits schedule and the ‘pension’ benefits schedule] shall be paid into health and welfare fund”. 512 F.2d at 1020. App. 18 satisfies § 302(c) (5). No trust agreement had been ex- ecuted by the defendant employers” in Stuart Plastering. 512 F.2d at 1018-20. Another singularly distinguishing factor is apparent from a close reading of Stuart Plastering. Whether a trust fund agreement could be ratified or similarly assented to was explicitly stated not to be before the Court. “Moreover, the appellants do not now contend, nor did they offer to prove in the district court, that the defend- ants ratified or assented to this particular agreement by making any payments that were consistent with its terms after the apparent date on its face.” Id. at 1029. For these reasons, Stuart Plastering cannot be considered as expressing this Court’s view on the ability of a union to ratify or adopt the terms of a written, executed trust agreement. Ratification, Adoption, Or The Childless Parent [2] Under the pervasive evidence in the record re- garding their beliefs** and the consistent conduct of the 7Significant are the disparities between that case and this one. In Stuart Plastering only a collective bargaining agreement had been executed. Of the two trust instruments, the one for a health and wel- fare fund had not been executed by any of the defendant employers. The other for a pension fund had been drafted but not signed by any employer who was a pasty to the collective bargaining agreement. Unlike this Gold Coast Trust case, Stuart Plastering represents an instance when no written trust agreement had been consummated by the employer parties. *8The District Court trial transcript indicates the consensus. Union Trustees presented two witnesses during trial: Charles Perez and Michael Costello. On cross-examination by Employer Trustees’ attor- ney, Costello responded in the affirmative to counsel’s inquiry regard- App. 19 parties, Union and Employer Trustees have continually indicated that the 27 August writing is the Trust Fund Agreement required by the collective bargaining agree- ments. Consequently, the dispositive question is whether Florida law would recognize the Trust Agreement drafted, executed, and operated under by the parties as the agree- ment contemplated by Union and Employer Trustees. In other words, under Florida law does the conduct of the ing whether the provision of § 7 refers to the 27 August 1962 Trust Agreement. (R. 175-76). During direct questioning by the Court, Perez was asked: “Well, let me ask the question and see if I can get an answer to it. In Section 7 it says the parties to the working agreement shall have a joint apprenticeship and training trust fund ‘agree- ment. Now, is there one? Perez: Why yes, there is. The Court: And is that the one of August 27, 1962? Perez: Why yes, it is.” (R. 121). Also, Union Trustees’ indicated in a colloquy with the Court that there is no contention Union Trustees that the 27 August Trust Agreement is not the one that they have been operating under. (R. 78). Additionally, the testimony of Marshall Williams who was the only witness for Employer Trustees indicates that the 27 August 1962 Trust Agreement is the one called for and operated under the suc- cessive collective bargaining agreements. (R. 130-33). The testimony of Union Trustees’ counsel, of two Union Trustee witnesses, and of Employer Trustees’ witness, Marshall Williams who was the Union’s business manager during the negotiations for the Trust er r and the 1962 collective bargaining agreement, in- dicates all parties recognize that and have acted as if the 27 Au Trust Agreement was and is the one required by Article V, § 7 of sy respective collective bargaining agreements. Further support for this proposition is found in § 2 of the 27 August 1962 Trust Agreement which states “. . . It shall be the duty of the individual employers and the Union to remit to the Trustees sums in accordance with the Collective Bargaining Agreement, begin- ning with the first payroll period following September 1, 1962.” App. 20 parties constitute a ratification or adoption of the 27 August 1962 Trust Agreement?” In considering whether ratification is a viable theory under Florida law, an important factor is that Marshall Williams signed the 27 August Trust Agreement on behalf of Union and Karl Behkne signed it on behalf of Em- ployers’ Association. (R. 37-38). No challenge has been made of the authority of these individuals to execute the 27 August Trust Agreement for their principals. Also, this Trust Agreement was drafted by representatives for Union and Employers Association and, thus, with the knowledge and consent of both sides to the agreement. These parties have consistently recognized and acted in a manner which demonstrates ratification. They have con- tinually operated the Trust Fund from its inception to the present day in conformity with the 27 August Trust Agreement as authorized by Article V, § 7 of each col- lective bargaining agreement subsequent to 1962. In G & M Restaurants Corporation v. Tropical Music Service, Inc., 2d Dist.Fla.App., 1964, 161 So.2d 556, 557- *This Circuit has recognised that there is an exception to the preemption doctrine for “matters of peripheral concern to federal labor law.” One of the areas not removed from governing state law is the creation of trust funds for the benefit of union members. Such funds are established under the laws of the relevant state. See Craig v. Bemis Company, Inc., 5 Cir., 1975, 517 F.2d 677, 678; Connell v. United States Steel Corporation, 5 Cir., 1975, 516 F.2d 401, 405; Bricklayers, Masons and Plasterers International Union v. Stuart Plas- tering Company, Inc., 5 Cir., 1975, 512 F.2d 1017, 1025; Snider v. All State Administrators, Inc., 5 Cir., 1973, 481 F.2d 387, 390. For this reason, this Court defers to Florida law to determine whether the conduct of the parties constitutes a ratification of the 27 August Agree- ment or another form of acceptance of that agreement. App. 21 58, the Florida District Court quotes from generally rec- ognized agency authorities that “* |. . Ratification as it relates to the law of agency is the express or implied adoption and confirmation by one person of an act or contract performed or entered into in his behalf by an- other without authority . . . However, .. . it is ordinarily required that for a ratification of an unauthorized act or transaction of an agent to be valid and binding, the principal shall have full knowledge, at the time of the ratification, of all material facts and circumstances relating to the unauthorized act or transaction, ....’ In speaking of ratification, it is universally held that ‘[i]t is always necessary, in order to have an effective ratification, that there shall be an intention on the part of the purported principal to ratify the act in question.’ Moreover, the required intention must be manifested in some way.” (Citations omitted). (3] For Union, no question exists about its full knowledge and intent to ratify. Union manifested this rati- fication and has accepted the benefits of the Trust Fund. Apprentices have entered this program, been trained, and become full-fledged, card carrying dues paying members of Loca] 728. For each of these Local 728 members, con- tributions have been made into the Trust Fund benefiting Union Trustees and those they represent. In such circum- stances, a Florida Court would hold that Union has rati- fied the written, executed Trust Agreement. See Branford State Bank v. Howell Company, 1924, 88 Fla. 493, 102 So. 649, 650; Oxford Lake Line v. First National Bank of App. 22 Pensacola, 1898, 40 Fla. 349, 24 So. 480, 482-84; see also, Smith v. Loftis Plumbing and Heating Co., 1933, 112 Fla. 382, 150 So. 645; Bellaire Securities Corp. v. Brown, 1936, 124 Fla. 47, 168 So. 625; Proodian v. Plymouth Citrus Growers Association, 1943, 152 Fla. 684, 13 So.2d 15. The only possible valid defense Employer Trustees offer against ratification is that the union members must vote their approval of the Trust Agreement. Nothing in the record indicates that the Trust Agreement had to ever be directly voted on by the union membership. Absent an explicit requirement for this “voting requirement”, we find this assertion to be without merit. Probably the ultimate manifestation of ratification, and accordingly most telling blow to Employer Trustees’ no ratification argument, is Union Trustees continued at- tempts to have the disputed provision of the Trust Agree- ment altered or deleted. How can one contend that a pro- vision of an agreement is illegal or must be changed if one has not ratified, adopted or otherwise accepted that agreement? From their converse position, how can Em- ployer Trustees contend that § 10 is proper if the 27 August Trust Agreement has not been ratified? [4] Following this Florida authority, the actions and conduct discussed above indicate that all parties in- tended, still intend, believed and still believe, the written executed 27 August 1962 Trust Agreement to be the agree- ment required by each of the collective bargaining agree- ments. By ratification, the 27 August Trust Agreement is the Trust Fund Agreement contemplated by Article V, § 7. We do not accept Employer Trustees’ contention that under the respective collective bargaining agreements — App. 23 the Trust Fund’s parent documents — ratification is pre- cluded. Consequently, the Trust Fund does not have a gap in its lineage for want of the necessary Trust Fund Agree- ment. The District Court’s erroneous finding was caused by misplaced reliance on Moglia v. Geoghegan, 2 Cir., 1968, 403 F.2d 110, cert. denied, 394 U.S. 919, 89 S.Ct. 1193, 22 L.Ed.2d 453; and Local Union No. 529, United Brother- hood of Carpenters and Joiners of America v. Bracy De- velopment Co., Inc., W.D.Ark., 1971, 321 F.Supp. 869.” Scrutiny of these cases reveals their inapplicability to this Union Trustee-Employer Trustee dispute. Moglia addresses whether payments could legally be made into a trust fund by an employer who was not a party to the signed trust agreement and had repeatedly refused to be a signatory of the collective bargaining agree- ments which required a trust agreement. Why the Moglia Court found lack of mutuality of agreement and mutuality of obligation necessary for rati- fication is evident. The employer in Moglia had declined™ to become a party to both the collective bargaining agree- ment and the trust agreement. In a similar fashion, Bracy Development Co., Inc., supra, is not applicable. In this Western District of Ar- 3°Jt also cited Hinson v. NLRB, 8 Cir., 1970, 428 F.2d 133. How- ever, Hinson considers a different issue. It is, under the NLRB Act, the extent to which an employer is bound by commitments made in a collective bargaining contract and incidental trust agreement after termination of the collective bargaining agreement. 31The non-execution was stipulated in Moglia, supra at 110, n. 5. App. 24 kansas case, Bracy was not a member of the Contractors Association which had negotiated the collective bargaining and trust agreements. Bracy never executed these agree- ments, nor did Local 529 present evidence showing that an agent of Bracy’s with sufficient express, implied, or inherent authority executed these documents for Bracy. Unlike Moglia and Bracy, this case is an instance where Employer and Union representatives negotiated, drafted, and executed both a Trust Agreement and col- lective bargaining agreements, and subsequently conducted their affairs in accordance with the terms of each for over twelve years. Because of these differences, Moglia and Bracy do not sustain their usage by the District Court for the proposition that Union and Employer Association have never executed a written Trust Fund Agreement for the years in question. One was executed on 27 August 1962 and subsequently ratified. As a second basis for its conclusion that Union Trustees are not entitled to a voice in the selection and direction of the employees of the Trust Fund, the District Court also predicated its opinion on the following, rather unilluminating recitation. “In addition, the Apprenticeship Trust Fund which has been in operation is wholly funded by the employer. In such event it is not controlled by Section 302 of the Taft-Hartley Act so that the employer must give the union an equal voice in the operation of the Fund. Independent Associa- tion of Mutual Employees of New York State v. New York [Racing Ass’n], 398 F.2d 587 (2d Cir., 1968) .” App. 25 In Independent Association of Mutual Employees, pay- ments were made by an employer to a trust fund benefit- ing his employees, an employee representative. See Local No. 2 of Operative Plasterers and Cement Masons Inter- national Association v. Paramount Plastering, Inc., 9 Cir., 1962, 310 F.2d 179, 182-83, 185-86, cert. denied, 372 U.S. 944, 83 S.Ct. 935, 9 L.Ed.2d 969; Mechanical Contractors Association of Philadelphia, Inc. v. Local Union 420, 3 Cir., 1959, 265 F.2d 607, 610-11; Sheet Metal Workers Associa- tion of San Francisco v. Sheet Metal Workers Interna- tional Association, 9 Cir., 1957, 248 F.2d 307, 315. Any such payments are illegal unless all the prerequisites of § 302 are met. The one absent in Independent Association of Mutual Employees and this case is equality of adminis- tration under § 302(c) (5)(B). We find it impossible to approve Independent Association of Mutual Employees the affect of which would be to encourage open, flagrant violation of the Act by the simple expediency of having all of the contributions from the employer.** Thus, it does not sustain the District Court’s determination that this Trust Fund is not governed by § 302 of the LMRA. [5] On the basis of our determination from the overwhelming evidence that a written Trust Agreement was executed and ratified and an improper legal standard 32Without intimating that any evil motive exists in this instance— for none does—an additional consideration regarding human pre- dispositions supports our disapproval of Independent Association of Mutual Employees. It is a matter of human experience that successful organizational activity generally hinges on the quality of its executive direction. In a situation such as the one here, the motives of a trust’s executive director whose pay is controlled by Employer Trustees and who is also an employee of Employers—Chapter Manager of NECA— acting in significant labor matters on Employers’ be may easily be in significant Trust Fund decisions and operations rm Mong but not limited to, the selection and employment of the Trust’s personnel. App. 26 was utilized, the trial court’s conclusion that as a matter of law a written trust agreement “... has not been exe- cuted by union and management” and its finding that no written trust agreement exists may not stand.” Equality Versus Inequality The plain terms of § 302(a) indicate in subdivision (1) that before a § 302 trust exists requiring compliance with the provisions of § 302(c) (5) (B), a payment must be made from an employer to “... any representative of any of his employees who are employed in an industry affecting commerce’’, The payments by the contractor members of Em- ployer Association represent payments by an employer to an employee “representative” within the meaning of and the prohibitions of § 302(a) (1).** See Operative Plasterers and Cement Masons, supra at 182-86; Mechanical Contrac- tors Association of Philadelphia, supra at 610-11; Sheet Metal Workers Association of San Francisco, supra at 315. Thus, this Trust Fund must comply with § 302. *’Because an improper legal standard was used, the District Court’s findings do not come to this Court with the usual “Buckler and Shield” of F.R.Civ.P. 52(a). In other terms, a standard of deference to trial court findings below the clearly erroneous one applies to this instance. Battelstein Investment Co. v. United States, 5 Cir., 1971, 442 F.2d 87, 92; McGowan v. United States, 5 Cir., 1961, 296 F.2d 252, 254. See Perkins v. Mississippi, 5 Cir., 1972, 455 F.2d 7, 44 (Brown, C. J., dissenting) . Aside from the fact that the payments in this case are pro- hibited under § 302 unless its requirements are met, it Pee” be remembered that Article V, § 7 of the collective bargaining agreements calls for a written trust fund agreement meeting the § 302 standards. App. 27 [6] One of the mandates of § 302(c) (5) (B) is that there be equal representation by employers and employees in the administration of the trust fund. 29 U.S.C. § 186(c) (5) (B). Knowing that §302 requires equal rep- resentation, remembering that the purpose of § 302 is, at the least partially, to prevent abuses— not requiring that one actually occur,’* and being aware of the infinite cre- ativity of mankind to circumvent such statutory schemes, we conclude that § 10 of the 27 August Trust Agreement violates the provisions of § 302(c) (6) and (c) (5)(B) re- quiring equal representation. Although we wish to empha- size that none of the flagrant, impermissible abuses which gave birth to § 302 have occurred in this case,** our deci- sion is based upon the recognition that § 302 would be eviscerated should the phrase “employees and employers are equally represented in the administration of such fund” connotate only the requirement that employees and employers have equal numbers of trustees, three each in this case, or representatives. If one wishes to circumvent the purposes for which § 302 was adopted, it requires little ingenuity to foresee that control over the hiring, firing, and salary determina- tions of Trust Fund employees solely by Employer Trustees would enable the unscrupulous union representa- tive to seek indirect payments of the form § 302 was de- signed to prevent by demanding employment of friends or relatives. At the opposite extreme, an employer bent on the disaffection of an employee representative may offer employment to such a person’s spouse, relative, or friend. 3$See Paramount Plastering, supra at 186; Journeyman Plasterers’ Protective & Benevolent Society of Chicago, supra at 97. *6Indeed, the record shows that all parties have acted with the utmost propriety. App. 28 Of more immediate bearing to this case is the exist- ence of a trust fund created for the benefit of employees which has an administration exclusively chosen and con- trolled by Employer Trustees. In 1967, the Director of the Trust Fund shifted from Union’s to Employers’ employ- ment and signed a contract which provides for a salary of approximately $50,000 per year by 1972 plus reimburse- ment for business expenses including twenty cents per mile for automobile expenses. As an additional complica- tion, the Executive Director also acts as NECA Chapter Manager, the Employer Association’s. It does not strain one’s imagination to think that any trust fund adminis- trator — especially one for the benefit of employees — will listen closely to the words of his major master, Em- ployer Trustees.*’ These are the subtle forces that have often tempted the most honorable among us. It is the preventive aspect of § 302 which recognizes the frailty inherent in mankind and seeks to avert these temptations by specifying a rigid structure before the Gold Coast Electrical Joint Appren- ticeship and Training Trust Fund, or any trust fund, is exempted from its prohibitions. For these reasons, strict application of the mandates of § 302 is required by this Court to this Trust Agreement. (7] In summary, we find that (i) a written Trust Fund Agreement containing within its four corners all of the requirements of § 302 of the LMRA has existed, been 7Because of our disposition of this case, we do not consider whether any conflicts with § 302’s requirements or with the fiduciary aspects present in all trust situations arise from holding the dual posi- —. > Executive Director of the Trust Fund and Chapter Manager of App. 29 ratified, and continues to be operated under, (ii) the Gold Coast Electrical Joint Apprenticeship and Training Trust Fund must comply with the provisions of § 302 of the Labor Management Relations Act of 1947, and (iii) § 10 of the Trust Agreement violates § 302(c)(5)(B) requiring equal representation.** For these reasons, the ruling of the District Court is reversed. REVERSED. © 38Jn making this decision, one additional factor must be addressed. Simply because we find that § 10 of the Trust Agreement violates § 302(c)(5)(B), this does not and is not to be construed as a deter- mination that the entire Trust Agreement and Trust Fund structure violate § 302. Section 17 of the Trust Agreement contains a severabil- ity provision. “. . . In the event that any of the ae of this Trust Fund Agreement is held to be illegal or invalid . . . such illegality or invalidity shall not affect the remaining provisions of the agreement unless such po or invalidity prevents the accomplishment of the urposes and objectives of this Trust Fund Agreement.” This severa- lity clause § 10’s limited impact—its correction cures the de- fect—allows the Trust Agreement and Trust Fund to remain. App. 30 APPENDIX “B” § 186. Restrictions on payments and loans to em- ployee representatives, labor organizations, officers and employees of labor organizations, and to employees or groups or committees of employees; exceptions; penalties; jurisdiction ; effective date ; exception of certain trust funds (c) The provisions of this section shall not be ap- plicable (1) in respect to any money or other thing of value payable by an employer to any of his employees whose established duties include acting openly for such employer in matters of labor relations or personnel admin- istration or to any representative of his employees, or to any officer or employee of a labor organization, who is also an employee or former employee of such employer, as compensation for, or by reason of, his service as an em- ployee of such employer; (2) with respect to the payment or delivery of any money or other thing of value in satis- faction of a judgment of any court or a decision or award of an arbitrator or impartial chairman or in compromise, adjustment, settlement, or release of any claim, complaint, grievance, or dispute in the absence of fraud or duress; (3) with respect to the sale or purchase of an article or commodity at the prevailing market price in the regular course of business; (4) with respect to money deducted from the wages of employees in payment of membership dues in a labor organization: Provided, That the employer has received from each employee, on whose account such deductions are made, a written assignment which shall not be irrevocable for a period of more than one year, or be- yond the termination date of the applicable collective agree- ment, whichever occurs sooner; (5) with respect to money or other thing of value paid to a trust fund established by App. 31 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 simi- lar payments, and their families and dependents): Pro- vided, That (A) such payments are held in trust for the purpose of paying, either from principal or income or both, for the benefit of employees, their families and de- pendents, for medical or hospital care, pensions on retire- ment or death of employees, compensation for injuries or illness resulting from occupational activity or insurance to provide any of the foregoing, or unemployment benefits or life insurance, disability and sickness insurance, or acci- dent insurance; (B) the detailed basis on which such pay- ments are to be made is specified in a written agreement with the employer, and employees and employers are equally represented in the administration of such fund, together with such neutral persons as the representatives of the employers and the representatives of employees may agree upon and in the event the employer and employee groups deadlock on the administration of such fund and there are no neutral persons empowered to break such deadlock, such agreement provides that the two groups shall agree on an impartial umpire to decide such dispute, or in event of their failure to agree within a reasonable length of time, an impartial umpire to decide such dispute shall, on petition of either group, be appointed by the dis- trict court of the United States for the district where the trust fund has its principal office, and shall also contain provisions for an annual audit of the trust fund, a state- ment of the results of which shall be available for inspec- tion by interested persons at the principal office of the trust fund and at such other places as may be designated in such written agreement; and (C) such payments as are App. 32 intended to be used for the purpose of providing pensions or annuities for employees are made to a separate trust which provides that the funds held therein cannot be used separate trust which provides that the funds held therein cannot be used for any purpose other than paying such pensions or annuities; (6) with respect to money or other thing of value paid by any employer to a trust fund estab- lished by such representative for the purpose of pooled vacation, holiday, severance or similar benefits, or defray- ing costs of apprenticeship or other training programs: Provided, That the requirements of clause (B) of the prv- viso to clause (5) of this subsection shall apply to such trust funds; (7) with respect to money or other thing of value paid by any employer to a pooled or individual trust fund established by such representative for the purpose of (A) scholarships for the benefit of employees, their fami- lies, and dependents for study at educational institutions, or (B) child care centers for preschool and school age de- pendents of employees: Provided, That no labor organiza- tion or employer shall be required to bargain on the estab- lishment of any such trust fund, and refusal to do so shall not constitute an unfair labor practice: Provided further, That the requirements of clause a (B) of the proviso to clause (5) of this subsection shall apply to such trust funds; or (8) with respect to money or any other thing of value paid by any employer to a trust fund established by such representative for the purpose of defraying the costs of legal services for employees, their families, and depend- ents for counsel or plan of their choice: Provided, That the requirements of clause (B) of the proviso to clause (5) of this subsection shall apply to such trust funds: Provided further, That no legal service shall be furnished: (A) to initiate any proceeding directed (i) against any such em- ployer or its officers or agents except in workman’s com- App. 33 pensation cases, or (ii) against such labor organization, or its parent or subordinate bodies, or their officers or agents, or (iii) against any other employer or labor or- ganization, or their officers or agents, in any matter aris- ing under subchapter II of this chapter or this chapter; and (B) in any proceeding where a labor organization would be prohibited from defraying the costs of legal serv- ices by the provisions of the Labor-Management Reporting and Disclosure Act of 1959. App. 34 APPENDIX “C” UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA No. FL 74-172-Civ-NCR MICHAEL COSTELLO, CHARLES PEREZ and ROBERT HORAN, et al Plaintiffs vs. BARRY LIPSITZ, ROBERT SEIPLE, D. M. SCHNEIDER, et al Defendants FINDINGS OF FACT and CONCLUSIONS OF LAW (Filed March 31, 1975) After trial of this case, without a jury, the court makes the following findings of fact and conclusions of law. FINDINGS OF FACT 1. This is an action brought by Employee Trustees of the Gold Coast Electrical Joint Apprenticeship and Training Trust Fund against the Employer Trustees of said Trust, alleging that the Trust Agreement under which the parties function in the administration of an apprentice and journeyman training program violates the provisions App. 35 of Sections 302 (c) (5) (B) and (C) (6) of the Labor- Management Relations Act of 1947, as amended, (the Taft- Hartley Act); and, in the implementation of the Trust Agreement, defendants have denied plaintiffs their exer- cise of certain richts contained in said statutory law. 2. On August 27, 1962, the Trust Agreement which is the subject of this suit was signed by Marshall Williams, as Business Manager of International Brotherhood of Electrical Workers, Local Union 728, and the Chapter Man- ager of the Gold Coast Chapter National Electrical Con- tractors Association, Inc., the labor and management groups, respectively, which had been and remain the col- lective bargaining agents for union electricians and con- tractors in Broward County, Florida. On September 1, 1962, a two year collective bargaining agreement became effective, which contained a new section dealing with the establishment of a Trust Agreement which was to “con-. form to Section 302 of the Labor Management Relations Act of 1947 as amended.” 3. The witnesses called by the plaintiffs testified that they were familiar with the provisions of Article V, Section 7. The court finds that the written Trust Agree- ment dated August 27, 1962 was not accepted by the trustees for union members, but it has been followed by both the union and management. 4. There is no written Trust Agreement in existence for the years 1964, 1966, 1967, 1972, 1973 and 1974. The working agreements for these years were introduced into evidence, and in Article V, Section 7, is set forth the fol- lowing: App. 36 “The parties to this Agreement shall have a joint apprenticeship and training Trust Fund Agreement, which Agreement shall conform to Section 302 of the Labor-Management Relations Act of 1947, as amended.” 5. Prior to August 1962 there was no written Trust Fund Agreement, and the program at that time was funded by both parties — union and management. Man- agement offered to refund the entire apprenticeship pro- gram in turn for the union agreeing to delegating the re- sponsibility of employment to the employer representa- tives. This offer has not been accepted by the union in those years subsequent to the August 27, 1962 agreement. 6. The Joint Apprenticeship and Training Commit- tee (JATC) was established and continued to operate un- der the terms of the 1962 agreement although the union attempted from 1967 on to delete Section 10 from the Agreement. Section 10 reads, as follows: “10. Matters pertaining to any employees of this F'und shall be the responsibility of the Em- ployers Trustees only.” 7. The plaintiffs, Employee Trustees, have had an equal voice along with the Employer Trustees in the se- lection and the employment conditions, including salaries and expenses, of some seventeen instructors employed by the Trust to give the training and instruction to apprentices and journeymen which is the sine qua non of the program. They have, in addition, had an equal voice in the selection of apprentices, the investment of the Trust’s assets, the purchase of instructional materials and supplies, the send- App. 37 ing of persons to instructional meetings and conferences, the payment of rent, and the discharge of a former Assist- ant Director of the Trust. However, the Employer Trust- ees have effectively blocked them in exercising any control over the selection of a Director, an Assistant Director and several office clerical employees, as well as the amount of salaries paid to said persons. 8. Marshall Williams, the former Business Manager of Local 728, current Director of the Trust, also serves in the dual capacity as Chapter Manager of the Contractors’ Association. His office and the offices of the Trust are located in a building owned by the Contractors’ Associa- tion, which also has its office in the same building. By the terms of his employment contract 2xecuted jointly be- tween the Employer Trustees of the Trust and the Con- tractors’ Association, he is to serve in both capacities for one weekly salary, with dual responsibilities. His Assist- ant Director, Arnold Bleeker, serves the Trust exclusively, but his salary is set solely by the Employer Trustees of the Trust. The office clerical employees, at least some of whom perform duties for both the Trust and the Contractors’ Association, are directed solely by Mr. Williams and the Employer Trustees. 9. The Training Fund is an employer-established Fund and wholly funded by them. Prior to August 1962, the empleyers and employees funded the program equally. CONCLUSIONS OF LAW 1. Section 302 of the National Labor Relations Act provides that the agreements for apprenticeship training App. 38 programs and other type welfare programs be a “written agreement.” However, the working agreements are not complete written agreements for the establishment of an Apprenticeship Training Fund. Section 7 of the working agreements requires that there be a written Trust Fund Agreement but one has not been executed by union and management. See Moglia v. Geoghehan, 403 F.2d 110 (2d Cir. 1968) ; cert. denied, 89 S.Ct. 1193 (1969); Hinson v. National Labor Relations Board, 428 F.2d 133 (8th Cir. 1970); Local Union No. 529, United Brotherhood of Car- penters and Joiners of America v. Bracy Development Co., Inc., 321 F.Supp. 869 (W.D. Ark. 1971). In addition, the Apprenticeship Trust Fund which has been in operation is wholly funded by the employer. In such event it is not controlled by Section 302 of the Taft- Hartley Act so that the employer must give the union an equal voice in the operation of the Fund. Independent Association of Mutuel Employees of New York State v. New York, 398 F.2d 587 (2d Cir. 1968). The defendants have stipulated to certain requests of plaintiffs in this suit, including willingness to provide the Employee-Trustees full and complete access during regular business hours and during meetings of the JATC to all records, including financial records. Defendants fur- ther stipulated that all expenses of the Fund, except the salaries of the Director, Assistant Director and the office clerical employees would be submitted to a voite of the Trustees — both Employee Trustees and Employer Trust- ees — before disbursement. The court further finds that certain services have been performed by plaintiffs’ attorney which the Appren- App. 39 ticeship Training Fund should bear, and the court will consider this matter further at a hearing, or upon affi- davits if counsel so stipulate. DONE AND ORDERED this 31 day of March, 1975. /s/ Norman C. Roettger, Jr. United States District Judge ec— Kaplan Dorsey Sicking & Hessen ec— Varon, Stahl & Kay, P.A. App. 40 APPENDIX “D” MR. KAPLAN: I object, Your Honor. It calls for a legal conclusion. THE COURT: Sustained. MR. KAPLAN: May I also submit to Your Honor the question has gone much further inan direct ever contemplated and he is going over ground we have all talked about this morning. I think it is improper at this point. THE COURT: I sustained your objection. BY MR. STAHL: Q. Mr. Costello, this agreement of August 27, 1962 with Section 10 in it, has it ever been approved by the union representatives? A. Not to my knowledge, sir. MR. STAHL: Thank you. MR. KAPLAN: I have no further questions. THE COURT: You may step down, Mr. Cos- tello. App. 41 APPENDIX “E” Q. And also under Section 16, if it is to be amended it is to be taken to the employees and employers? A. Also Section 17, if any part of that trust agree- ment is found to be illegal by a court of law it shall be removed. Q. Mr. Costello, then you are telling me that there was no official union-designated members to negotiate the August 27, 1962 agreement? A. Yes, sir. I will state that again. Q. And has the union ever, or any union repre- sentatives, ever becn been appointed— You are a member of that committee, aren’t you, sir? A. lIamnow, sir. Q. By virtue of what document? A. I was appointed by the unit chairman in 1969. Q. By reason of the working agreement or by rea- son of the trust fund agreement? A. The working agreement, collective bargaining agreement. App. 42 APPENDIX “F” Q. You say formally it is not before them right now. Every time since September the Ist, 1962 there’s been a collective bargaining agreement, the trust fund agreement of August 27, 1962 has been ratified and adopted as the trust fund agreement in existence? MR. KAPLAN: Object. That is a conclusion on the part of counsel. THE COURT: It’s cross examination. I will permit a yes or no answer. THE WITNESS: No. The working agreements have been ratified, yes. The trust agreement has not been ratified. BY MR. STAHL: Q. The trust agreement has not been ratified by whom? A. The union side. It was never brought before them. App. 48 APPENDIX “G” THE COURT: Who’s “they”? THE WITNESS: The local union, membership, told the negotiating committee, their negotiating commit- tee, to proceed with what really took affect. That hap- pened. BY MR. KAPLAN: Q. So if the trust agreement wasn’t in existence, you read only the collective bargaining agreement, is that right? A. That’s correct. Didn’t even read the collective bargaining agreement at the time. Q. I see. A. We discussed it and we discussed the problems of the apprenticeship and how to fund it, just like I men- tioned a moment ago. Q. If you never read the documents, then, it is your testimony, is it not, that the finished product which is the trust agreement, was something that was constructed be- tween you and Kar! Behnke; is that true? A. No, sir. Absolutely not. Karl Behnke and I didn’t personally have anything to do with constructing this agreement. It was constructed by the two respective committees of the organizations. We only signed it. We only signed it on behalf of them. App. 44 Q. The collective bargaining agreement makes ref- erence, as we have pointed out on several occasions, to the creation of a “Joint Apprenticeship and Trust Fund Agreement which agreement shall conform to Section 302 of the Labor-Management Relations Act of 1947 as amended.” Did you agree to put that language in there? A. The committee did. Q. Well, did you have any part in the drafting of that clause? A. Mr. Kaplan, the business manager or the chapter mar ger never votes on any action that is taken from the respective bodies. They only carry out the orders that are given them, and this is precisely what happened. The two committees constructed this thing, I didn’t. I signed on behalf of the local union because I am under the opin- ion now, as I was then, that is what they agreed to. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1951%3A1. Public record. Not legal advice.