Petition for Writ of Certiorari — City of Philadelphia v. District Council 33, American Federation of State, County & Municipal Employees
Supreme Court brief1988
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87-1340
No.
IN THE
Supreme Court of the United States
October Term, 1988
CITY OF PHILADELPHIA,
Petitioner
.
DISTRICT COUNCIL 33, AMERICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO, by
EARL STOUT, as Trustee ad Litem; and EARL STOUT:
ALBERT JOHNSON; FRANCES ROONEY, ROBERT LUCAS;
JAMES RAWLS; DONALD GALLIMORE; EDWARD SIMPKINS;
LEONARD TILGHMAN; ANN COHEN: GEORGE WROTEN:
and EARL WILLIAMS, Trustees of DISTRICT GOUNCIL 33
MUNICIPAL WORKERS HEALTH AND WELFARE FUND
PETITION FOR A WRIT OF CERTIORARI
TO THE SUPREME COURT OF THE
COMMONWEALTH OF PENNSYLVANIA
CHARLES W. BOWSER, Esquire
LUTHER E. WEAVER, III], Esquire
JACKIE B. SPARKMAN, Esquire
JAMES P. COUSOUNIS, Esquire
Three Benjamin Franklin Parkway
17th Floor
Philadelphia, PA 19102
(215) 561-7100
SEYMOUR KURLAND, Esquire
City Solicitor
Law Department
Municipal Services Building
15th Floor
Philadelphia, PA 19102-1692
Attorneys for Petitioner
aoe PE tae
QUESTIONS PRESENTED
1. Where a state legislature has enacted a definitive public
policy requiring the protection of the rights of the public when
public employers and public employee unions negotiate labor
agreements, does Section 1 of the Fourteenth Amendment
require state courts to consider that policy sua sponte.
2. Whether the state court rules of law preventing public
employer-signatories to collective bargaining agreements from
contesting the illegality of their agreements, while granting that
right to private parties, violates Section 1 of the Fourteenth
Amendment of the United States Constitution.
3. Whether the refusal of the lower court to hear the appeal
of the City, while agreeing to hear the Union's appeal on the
same issue, violates Section 1 of the Fourteenth Amendment.
TABLE OF CONTENTS
Page
Questions presented .. . ..../.0.414 54500 eee i
Table of authorities ...........55:5 eee iii
Opinions below .. 0.050425 l
Jurisdiction .......i...050<. see 2
Constitutional and statutory provisions involved......... 2
Statement... . 2... 5664s clea a oe ee 4
Reasons for granting the petition...................... 6
Conchusion .... 2. .....4.4.0su se 14
Appendix A... . 2... 0.5.5 isda ee A-l
Appendix B..... 2.6.20: .500 5 A-2
Appendix C...........00055 505 ae A-3
Appendix D .........60<sss00 ane A-5
Appendix E... ... =. 25... +« ssa Re ee A-12
TABLE OF AUTHORITIES
Cases: Page
American Railway Express v. Kentucky, 273 U.S. 269
ee aL urea ba kt ace ho See 10
Association of Pennsylvania State College and University
Faculties v. Commonwealth, 496 Pa. 315, 436 A.2d
I ere ogi cl ww ap eps Cae 56 Own 7, 8
Bell v. Burson, 4023 U.S. 535 (1971) ..................: 13
Economico v. Village of Pelham, 50 N.Y. 2d 120, 480 N.Y.S
2d 213, 405 N.E. 2d 694 (1980)................... 10
Eisenstadt v. Baird, 405 U.S. 938 (1972)............... 13
Fraternal Order of Police v. Hickey, 499 Pa. 194, 452 A.2d
CE ee eS
Grottenthaler v. Pennsylvania State Police, 488 Pa. 19, 410
ree dd he eng ody oben ue. A >, 10, 11
Gryger v. Berke, 334 U.S. 728 (1947) ................. 8,9
Hovey v. Elliot, 167 U.S. 409 (1897) .................. 13
Kaiser Steel Corporation v. Mullins, 455 U.S. 72
eae a ise pieie ov ah hae wie 12, 13
Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982) ... 7, 8
Mullane v. Central Hanover Bank & Trust Co., 339 U.S.
te a: 10, 13
Muse-Art Corp. v. City of Philadelphia, 373 Pa. 329, 95
a ee Ss von ls kad 6 bikie 4.00 #:0.0 6
O’Brien v. O'Brien Steel Contruction Company, 440 Pa.
re 1]
Pennsylvania Labor Relations Board v. State College Area
Sch. Dist., 461 Pa. 494, 337 A.2d 262 (1975) ....... 12
Pittsburgh Joint Collective Bargaining Committee v. Pitts-
burgh, 481 Pa. 66, 391 A.2d 1318 (1978) ...... 5, 10, 11
ili
TABLE OF AUTHORITIES— Continued)
Cases: Page
Ridgefield Park Education Association v. Ridgefield Park
Board of Ed., 78 N.J. 144, 393 A.2d 278 (1978)..... 10
Rothberg v. Rosenbloom, 628 F.2d 746 (E.D. Pa. 1986).. 11
School Committee of Holyoke v. Larry Duprey, 8 Mass.
App. Ct. 58, 391 N.E. 2d 925 (1979) .............. 10
Schuck v. School District of Baldwin Tp., 296 Pa. 408, 146
Re ed vs 5 <6 ewe va Rk eRe ke Ss od owes 12
Societe Internationale v. Rogers, 357 U.S. 197 (1958).... = 8
Thompson tv. Louisville, 362 U.S. 199 (1960) ...........
United Paperworkers International Union v. Misco, Inc.,
NG WEE ect eo rca. ee ae ee Sa 7
W.R. Grace & Co. v. Rubber Workers Local 759, 461 U.S.
NEE haw ak Ne a ce eee ee Ee ales 7,8
Waychoff v. Waychoff, 163 A. 670 (1932) .............. 11
Young v. Ragen, 337 U.S. 235 (1949).................. 12
Constitutions and Statutes:
The Fourteenth Amendment to the United States Consti-
NATE S Sus ok and cesiae dhs wae ap aan a ere KG
Pennsylvania Constitution, Article 3, Section 26 ........ 3
Public Employee Relations Act, §§101, 703, 43 Pa. C.S.A.
ee ek ES PP ERE Pere Ri rameter! 3, 4
Miscellaneous:
Rotunda, Novak and Young, Treatise on Constitutional
Law: Substance and Procedure, Vol. 2 (1986), 1987
oe | RTE pecchivmiet hep Pile Oe mien led dad thar )
No.
IN THE
Supreme Court of the United States
Octeber Term, 1988
CITY OF PHILADELPHIA,
Petitioner
G.
DISTRICT COUNCIL 33, AMERICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO, by
EARL STOUT, as Trustee ad Litem; and EARL STOUT;
ALBERT JOHNSON; FRANCES ROONEY, ROBERT LUCAS;
JAMES RAWLS; DONALD GALLIMORE; EDWARD SIMPKINS;
LEONARD TILGHMAN; ANN COHEN; GEORGE WROTEN;
and EARL WILLIAMS, Trustees of DISTRICT COUNCIL 33
MUNICIPAL WORKERS HEALTH AND WELFARE FUND
PETITION FOR A WRIT OF CERTIORARI
TO THE SUPREME COURT OF THE
COMMONWEALTH OF PENNSYLVANIA
Petitioner, the City of Philadelphia, prays that a writ of
certiorari issue to review a final order of the Supreme Court of
Pennsylvania denying its appeal on a matter involving the duty
of the courts, sua sponte, to enforce established public policy,
thereby protecting the constitutional rights of the public, and
involving the constitutional right to be heard.
OPINIONS BELOW
The basic decisions involved in this petition are the opin-
ions and orders of the chancellor in equity, Court of Common
]
2
Pleas, Philadelphia County, which are reported in 10 Phila. 578
and 12 Phila. 311, and are annexed to this petition in Appendix
E, beginning at page 14a. These opinions and orders interpret-
ing a collective bargaining contract term against petitioner were
affirmed by the state superior court, in an opinion reported at
511 A.2d 818, and annexed hereto as Appendix D, beginning on
page 4a. The order of the Supreme Court of Pennsylvania
denying petitioner's petition for allowance of appeal (App. B,
infra, 2a) is not reported. The order of the Supreme Court of
Pennsylvania granting the Union's appeal (App. C, infra 3a) is
not reported. The order of the Supreme Court of Pennsylvania
denying petitioner's petition for reconsideration raising federal
constitutional challenges to the chancellor's orders (App. A,
infra, la) is not reported.
JURISDICTION
1. The order of the Supreme Court of Pennsylvania was
entered on March 9, 1987 (App. B, infra, 2a). A petition for
reconsideration was denied on November 5, 1987 (App. A,
infra, la). The jurisdiction of this Court is invoked under 28
U.S.C. 1257(3) because a right, privilege or immunity was
claimed under the Constitution of the United States of America
and denied by the state court.
2. The federal question was raised as indicated at page 5,
infra.
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
1. The Fourteenth Amendment to the United States Con-
stitution provides in relevant part:
No state shall make or enforce any law which shall
abridge the privileges or immunities of citizens of the
United States; nor shall any state deprive any person of life,
liberty, or property, without due process of law, nor deny
to any person within its jurisdiction the equal protection of
the laws.
a ee
3
2. The Pennsylvania Constitution provides in Article 3,
section 26, in relevant part:
No bill shall be passed giving any extra compensation
to any public employee, agent, or contractor, after services
shall have been rendered or contract made.
3. The Public Employee Relations Act (“PERA”), Section
1101 et. seq. of Title 43, Pennsylvania Consolidated Statutes
Annotated, provides in relevant part:
Public Policy
The General Assembly of the Commonwealth of Penn-
sylvania declares that it is the public policy of this Com-
monwealth and the purpose of this act to promote orderly
and constructive relationships between all public employ-
ers and their employes subject, however, to the paramount
right of the citizens of this Commonwealth to keep inviolate
the guarantees for their health, safety and welfare. Unre-
solved disputes between the public employer and its em-
ployes are injurious to the public and the General Assembly
is therefore aware that adequate means must be established
for minimizing them and providing for their resolution.
Within the limitations imposed upon the governmental
processes by these rights of the public at large and recog-
nizing that harmonious relationships are required between
the public employer and its employes, the General Assem-
bly has determined that the overall policy may best be
accomplished by (1) granting to public employes the right to
organize and choose freely their representatives; (2) requir-
ing public employers to negotiate and bargain with employe
organizations representing public employes and to enter
into written agreements evidencing the result of such
bargaining; and (3) establishing procedures to provide for
the protection of the rights of the public employe, the
public employer and the public at large.
4. Section 703 of the PERA, Title 43, Pa.C.S.A. 1101.703,
provides:
4
The parties to the collective bargaining process shall
not effect or implement a provision in a collective bargain-
ing agreement if the implementation of that provision
would be in violation of, or inconsistent with, or in conflict
with any statute or statutes enacted by the General Assem-
bly of the Commonwealth of Pennsylvania or the provisions
of municipal home rule charters.
STATEMENT
1. In 1982, the City entered into a collective bargaining
contract with District Council 33, AFSCME, (“Union”) for the
period July 1, 1982 to June 30, 1984. The contract included a
clause, paragraph 23B, which read:
Each full-time employee in a class or position repre-
sented by District Council #33 shall have health and
welfare benefits as such benefits are presently defined
(including major medical family coverage, under the Blue
Cross/Blue Shield group health medical plan, with the City
paying the full contribution of such benefits, to District
Council 33 Health and Welfare Fund. (1975-76) (as of 1/1/81
receive $92.00 per month).
The City made payments to the Fund under this clause in the
amount of $92.00 per union member per month during the
contract period. In 1983, the Union filed suit in equity and a
motion for preliminary injunctive relief claiming that the City
had breached its obligation to pay the full amount required by
paragraph 23B into the Fund.
Following trial, the chancellor ordered the City to pay the
Fund $178.00 per member per month, interpreting paragraph
23B to require the City to contribute to the Fund an amount
equivalent to what Blue Cross would charge to provide each
union member and his or her dependents 100% coverage for all
hospital, medical, and doctor bills, with no co-pay provisions,
obligations, deductibles, or caps on the total amount of coverage
for health and medical care (App. E, infra, 16a, 19a). The
chancellor further interpreted paragraph 23B to vest in the -
union president sole discretion in matters of the scope and level
ee
5
of health and welfare benefits to be provided to Union members
and paid for out of public funds, without any right in the City to
prior notice of decisions enlarging the scope of benefits or to
audit fund expenditures (App. E, infra, 17-18a, 26a). Although
concluding that paragraph 23B was an “extraordinarily gener-
ous” health and welfare plan and “certainly exceeds the coverage
offered by other commercial or non-profit health insurance
providers” and was perhaps “actuarially unsound,” the chancel-
lor refused to “substitute [his] judgment for the collective
bargaining process” (App. E, infra, 20a). Rather, the chancellor
ordered the City to make contributions to the Fund in accor-
dance with his interpretation of paragraph 23B without regard to
the amount of money actually expended or expense incurred by
the Fund for health and welfare benefits (App. E, infra, 23-24a).
2. The City appealed to the Superior Court of Pennsylvania
seeking to have the order set aside or, alternatively, modified to
the extent that the order obligated the City to pay over an
amount greater than actual costs paid and incurred during the
relevant time period. The Superior Court affirmed the order of
the lower court, rejecting the City’s view of actual costs as
relevant to the inquiry (App. D, infra, 11-12a).
3. The Supreme Court of Pennsylvania denied the City’s
petition for allowance of appeal without opinion (App. B, infra,
2a) yet granted the Union's appeal (App. C, infra, 3a). The City
then filed a petition for reeonsideration from this denial of its
appeal, challenging the chancellor's order as violating public
policy and the rights of the public and the City to due process
and equal protection of the law (App. A, infra, 1a).
On November 5, 1987, the Supreme Court denied the
City’s petition for reconsideration. The court had previously
held, in Fraternal Order of Police v. Hickey, 452 A.2d 1005
(1982): Grottenthaler v. Pennsylvania State Police, 410 A.2d 806
(1980); and Pittsburgh Joint Collective Bargaining Committee v.
City of Pittsburgh, 391 A.2d 1318 (1978), that public employers
are estopped from challenging the implementation of collective
bargaining contract terms on grounds of illegality after bargain-
ing is completed.
aii ies
6
REASONS FOR GRANTING THE PETITION
This case examines the duty of state courts to act sua sponte
to consider a legislatively mandated public policy to protect the
rights of the public in labor agreements between public employ-
ers and public employee unions. The Supreme Court of Penn-
sylvania and the lower courts of the state failed to act to consider
the public policy, and the state supreme court denied Petitioner
the opportunity to raise the public policy issue, even though the
rule in Pennsylvania permits the assertion of public policy claims
for the first time in the state supreme court. Muse-Art Corp. v.
City of Philadelphia, 95 A.2d 543 (1953).
Since the political considerations inherent in the negotia-
tions between public employers and their employee unions may
result in collusive or soft negotiations to the detriment of the
public, the courts must act, even independently if necessary, at
least to consider if the public policy vesting rights in the public
have been violated by the labor negotiations. This is particularly
true when there is a definitive public policy enunciated by the
legislature.
Notwithstanding the law of Pennsylvania which provides
that public policy questions can be raised on appeal for the first
time, the Pennsylvania Supreme Court denied Petitioner an_
opportunity to be heard. In addition, the state supreme court
enforces a rule of law which allows parties to private agreements
to contest the public policy violations and other illegalities of
their agreements, but the rule denies that opportunity to public
employers.
1. This petition presents a compelling reason for the Court
to review the decision of the Pennsylvania Supreme Court. The
constitutional issue concerns the extent of a state court’s duty,
sua sponte, to examine, at a minimum, public employer-
employee collective bargaining agreements for their adherence
to a pronounced public policy of protecting the rights of the
public at large. This issue transcends the particular facts and
circumstances of this case and implicates state court decisions in
every jurisdiction where state law authorizes public sector
collective bargaining, yet demands that such agreements com-
port with the public weal.
’
In derogation of a legislatively-mandated public policy to
protect the “paramount rights” of the public in connection with
labor contracts agreed to by public employers and employees,
the order of the Pennsylvania Supreme Court denied the City,
and more importantly, the citizens of the Commonwealth, a
forum to review the order of inferior state courts which required
the City, as public employer, to disburse public funds to a public
employee union. The decisions of the state supreme court
effectively denies to the public, the third party to the collective
bargaining contract between the City and the union (see Ass. of
Pennsylvania St. Coll. and Univ. Faculties v. Commonwealth,
436 A.2d 1386 (1981), a vehicle by which to have its legislatively
mandated rights and interests protected. Thus, the order denies
the due process guaranteed by the Fourteenth Amendment to
the United States Constitution (see Logan v. Zimmerman
Brush, 455 U.S. 422, 433-34 (1982)).
The General Assembly of the Commonwealth of Pennsyl-
vania has declared in the PERA as the public policy of the
Commonwealth that the state intends “to promote orderly and
constructive relationships between all public employers and
their employees, subject, however, to the paramount rights of
the citizens of this Commonwealth to keep inviolate the guar-
antees for their health, safety and welfare” (see PERA, 43 Pa.
C.S.A. 1101.101 (emphasis added)).
This declared legislative purpose creates an entitlement in
the citizens of the Commonwealth to have their property
interests protected by the courts of the Commonwealth acting,
sua sponte, to consider and determine whether a labor contract
affords such protection. W. R. Grace & Co. v. Rubber Workers
Local 759, 461 U.S. 757 (1983); United Paperworkers Interna-
tional Union v. Misco, Inc., 484 U.S. __ , 108 S. Ct. 364
(1987); Logan v. Zimmerman Brush, supra, 455 U.S. at 430-32.
W.R. Grace & Co. v. Rubber Workers Local 759, supra,
buttresses this view: “the question of public policy is ultimately
one for resolution by the courts”, and if a labor contract as
interpreted “violates some expicit public policy, we are obliged
to refrain from enforcing it.” In sum, the state courts must
exercise their judicial decision-making authority to achieve the
. 8
public policy explicitly declared in PERA that the authority to
bargain collectively in the public sector is subject to “the
paramount right” of the citizens “to keep inviolate the guaran-
tees for their health, safety and welfare”. 461 U.S. at 766.
The Court may take judicial notice that public officials, as
political beings, do not always decide policy issues with the
public interest in mind. Indeed, the Pennsylvania Supreme
Court has recognized this political fact:
The public employer, whose continued existence does
not depend on cost-efficient management decisions, may
yield to compensation demands in excess of those to which
a private employer would accede. Indeed, the former's
awareness that public sector budget increases can be re-
quested to cover negotiated salary raises may, in itself,
diminish the adversarial nature of the bargaining process.
Association of Pennsylvania State Coll. and Univ. Faculties v.
Commonwealth, supra, 436 A.2d at 1380.
The Court has construed the due process guarantee, con-
sistently and on many occasions, to require that state judicial
decison-making not be arbitrary or capricious, i.e. that the
record provide some set of facts that could conceivably support
the decision. Thompson v. Louisville, 362 U.S. 199 (1960). More
importantly, due process requires that a court exercise and not
abandon a judicial decision-making responsibility when the
judiciary is required to exercise judicial power to protect and
enforce rights. Logan v. Zimmerman Brush, supra; Societe
Internationale v. Rogers, 357 U.S. 197 (1958). In Logan and in
Societe Internationale, this Court read the “property” compo-
nent of the Due Process Clauses of the Fifth and Fourteenth
Amendment's to impose constitutional limitations upon the
powers of courts, even in aid of their own valid processes, to
dismiss an action without affording a party the opportunity for a
hearing on the merits of his cause. Logan, supra, 455 U.S. at
429.
Justice Rutledge, in a dissenting opinion in Gryger v.
Berke, 334 U.S. 728 (1947), articulates this view of the due
9
process guaranteed by the Fourteenth Amendment best. There,
Justice Rutledge declared as follows:
The denial of the very essence of the judicial process,
which is the exercise of discretion where discretion is
required, is in itself a denial of due process, not merely an
error of state law of no concern to this court... .
Gryger, supra, 334 U.S. at 734. ~
Professors Rotunda, Nowak and Young, in their leading
treatise on constitutional law, similarly suggest that the substan-
tive due process guarantee, when applied to the decision of a
govermental agent or agency to whom the legislature has
delegated the power to make individualized determinations
regarding the rights and obligations of a person, requires that
the court find some facts that could conceivably show the
exercise of decision-making authority, i.e., that the decision is
not totally arbitrary or capricious. Rotunda, Nowak and Young,
Treatise on Constitutional Law: Substance and Procedure, Vol.
2 (1986), 1987 Pocket Part., p.3-4. The authors emphasize that
“due process” in this context mandates that the forum respon-
sible for the protection of rights exercise, and not evade, the
responsibility to act to consider and make a determination as to
whether the decision it reaches affords the necessary protection
to such rights. Rotunda, Nowak and Young, supra at 4.
Initially, a review of the record below demonstrates no
action on the part of the Pennsylvania courts to consider and
safeguard the rights of the public, and, on the contrary, indicates
that the state courts abdicated their responsibility to do so.
Neither the trial court’s findings and conclusions nor the deci-
sion of the Pennsylvania Superior Court evince that those courts
acted to address, hear and determine whether the trial court's
orders protect the rights of the public.
In that the record neither contains any facts nor discloses
any conceivable set of facts that demonstrate that the courts of
this state considered or exercised their judicial responsibility to
determine whether the order depriving the City, and in actual-
ity the public, of public funds comported with the public policy
10
declared by the statute prior to requiring such disbursement
(see Mullane v. Central Hanover Bank & Trust Co., 339 U.S.
306 (1950)). Absent any such facts showing judicial consideration
of the rights of the public in connection with its order, the action
of the Pennsylvania Supreme Court must be deemed arbitrary
and capricious so as to violate the due process guaranteed by the
Fourteenth Amendment. American Ry. Express v. Kentucky,
273 U.S. 269 (1931).
The Court can find that the Pennsylvania Supreme Court's
denial of the City’s application for reconsideration, without
opinion, signals the state court's adherence to a state rule of law
of abstaining from entertaining and considering — let alone
making a judicial determination of the merits of — a claim of
nonconfirmity with public policy raised by signatories to public
sector collective bargaining agreements. See Fraternal Order of
Police v. Hickey, supra; Grottenthaler v. Pennsylvania State
Police, supra; and Pittsburgh Joint Collective Bargaining Com-
mittee v. City of Pittsburgh, supra. In those cases, the Penn-
sylvania Supreme Court consistently held that public employers
may not challenge the implementation of collective bargaining
contract terms on public policy grounds after the parties have
completed their collective bargaining. !
In sum, no indication of record, nor any conceivable set of
facts deducible from the record, demonstrates that the Pennsyl-
vania state courts considered or determined whether the collec-
tive bargaining agreement protected the rights of the public, in
addition to those of the public employees and public employer.
This Court should grant a writ of certiorari to review whether
the Pennsylvania Supreme Court order, in these circumstances,
violates the due process required by the Fourteenth Amend-
ment of the United States Constitution, in the sense of an
1. The rule of law adopted by the Supreme Court of Pennsylvania's
conflicts with that followed by the highest courts of New York, New Jersey,
and Massachusetts. See, e.g., Economico v. Village of Pelham, 50 N.Y. 2d 120,
480 N.Y. S.2d 213, 405 N.E. 2d 694 (1980); School Committee of Holyoke v.
Larry Duprey, 8 Mass. App. Ct. 58, 391 N.E. 2d 925 (1979); and Ridgefield
Park Education Association v. Ridgefield Park Bd. of Ed., 78 N.J. 144, 393
A.2d 278 (1978).
11
arbitrary and capricious abdication of the duty which the state
legislature demanded that the courts undertake for the protec-
tion of the rights of the public at large.
2. The state supreme court has held that public employers
are estopped from challenging in the courts the illegality of
collective bargaining contract terms mutually agreed upon dur-
ing the bargaining process, but that these issues may only be
raised by non-signatory intervenors. See Fraternal Order of
Police v. Hickey, supra; Grottenthaler v. Pennsylvania State
Police, supra; and Pittsburgh Joint Collective Bargaining Com-
mittee v. City of Pittsburgh, supra. Private parties, however,
have the right at any time, including in the state supreme court,
to raise the defense of illegality in suits seeking enforcement of
contracts. Waychoff v. Waychoff, 163 A. 670 (1932); O’Brien v.
O’Brien Steel Construction Company, 271 A.2d 254 (1970);
Rothberg v. Rosenbloom; 628 F. Supp. 746 (E.D. Pa. 1986).
In that PERA makes protection of the interest of the public
_at large in public sector contracts the central theme of the grant
of authority to bargain collectively in the public sector, no
rational basis justifies allocating the right to defend against the
implementation of contract interpretations on the basis of the
public/private status of signatories to the contract. The state
court bases that distinction on the asserted need to preserve the
integrity of the bargaining process and the harmonious relation-
ship it was designed to foster (see Fraternal Order of Police v.
Hickey, supra). However, this interest is not compromised in
the circumstance where the public employer does not attempt to
avoid duties imposed on it by the contract, but only tries to
define them. The integrity of the collective bargaining process is
not undermined by permitting a public party to seek a deter-
mination as to whether a contract provision or its interpretation
violates public policy or law. The City secures no advantage by
an interpretation of paragraph 23B which adopts actual cost to
the Fund of the benefits provided as the proper measure of the
City’s contribution, nor does the Union suffer any detriment.
Under Article 3, section 6 of the state constitution, which
prohibits paying “extra compensation” to public employees, the
Union’s claim can only properly be for a contribution sufficient
Ng i
12
in amount to pay for the health services and benefits it provided
to its members during the 1982-1984 contract period. The
legislature's explicit policy pronouncement favoring protection
of the public interest is eviscerated by the court's linking of the
power of judicial review to the happenstance that some citizen
will discover infringements of public rights occurring during the
bargaining process and have the gumption, fortitude and re-
sources to file suit.
Policy considerations dictate that the court afford public
employers the right to assert illegality defenses. Pennsylvania
recognizes that a public employer's relationship to the public
funds which it collects and disburses is a fiduciary one. See
Pennsylvania Labor Relations Bd. v. State College Area Sch.
Dist., 337 A.2d 262, 264 (1975); Schuck v. School District of
Baldwin Tp., 146 A. 24 (1929). Therefore, the City’s position as
custodian of the public trust confers standing upon the City to
protect the taxpayer's interest in disbursements of public funds
apart from its status as the public employer party to the
collective bargaining contract. By denying the City’s appeal, the
court has made no state remedy available, in the circumstances
of this case, for vindication of the entitlement that PERA confers
on the public at large, since under its prior rulings it will not
itself review the contract interpretation involved for violation of
law or policy, and there are no non-signatory intervenors. The
procedure which the state court has chosen for promoting its
view of the need to encourage good faith bargaining is imper-
missably severe. See Young v. Ragen, 337 U.S. 235 (1949);
Kaiser Steel Corporation v. Mullins, 455 U.S. 72 (1982). The
legislative mandate that the interests of the public at large in
public sector contracts be considered is not effectuated by
excluding parties wishing to assert public policy objections to
contract interpretations from the courtroom. Equal protection
demands that the City, at least in its fiduciary capacity, have the
same right to assert public policy and statutory defenses to
enforcement of interpretations of contract terms as private
parties. No national basis exist for the distinction being made
between public and private contracts.
13
3. In issuing an order which deprives the City of the
opportunity to assert illegality and public policy defenses to the
enforcement of a collective bargaining agreement, the Supreme
Court of Pennsylvania has adopted a position which seriously
conflicts with decisions of this Court that litigants be afforded
due process and equal protection of the law. Hovey v. Elliott,
167 U.S. 409 (1897); Mullane v. Central Hanover Bank ¢& Trust
Co., supra; Bell v. Burson, 402 U.S. 535 (1971).
Considerations of fundamental fairness compel the conclu-
sion that contesting litigants, as persons similarly situated, must
have parity in terms of access to the courts to be heard on their
differing positions on the same issue. In this case the issues of
liability and damages under paragraph 23B merged. The City
never disputed liability, i.e., that monies were required to be
paid by the City to the Union. The sole issue has always been,
based upon the proper interpretation of the contract, how much
was the City required to pay. Yet, the court granted the Union’s
petition for allowance of appeal and denied the City’s. In so
doing, the court granted the Union access to the court to argue
its interpretation of the contract, while denying the City that
same access. Such disparity of treatment is not justified by
considerations of judicial economy or efficiency or on any other
rational basis. Nothing is more repugnant to our laws than to
permit one litigant to be heard, while forcing silence upon
another. See Eisenstadt v. Baird, 405 U.S. 438, 447 (1972):
Kaiser Steel Corporation v. Mullins, supra.
aaa
14
CONCLUSION
It is the duty of the state courts to consider, sua sponte,
legislatively enacted public policy to protect the rights of
the public in labor agreements between the public employer
and the public employee. The failure of the state courts to do
so, and their failure to permit the City and the public at large to
be heard, violates the due process and equal protection guar-
antees of the Fourteenth Amendment to the United States
Constitution.
Respectfully submitted:
ers od). (aa
CHARLES W. BOWSER, ESQUIRE
LUTHER E. WEAVER, III, ESQUIRE
JACKIE B. SPARKMAN, ESQUIRE
JAMES P. COUSOUNIS, ESQUIRE
SEYMOUR KURLAND, ESQUIRE
Attorneys for Petitioner,
City of Philadelphia
APPENDIX
——
Appendix A
SUPREME COURT OF PENNSYLVANIA
EASTERN DISTRICT
November 19, 1987
John M. Myers, Esquire
Chief Deputy City Solicitor
15th Floor
Municipal Services Building
Philadelphia, Pa. 19102
RE: City of Philadelphia v. District Council 33, et al. No.
730 E.D. ALLOCATUR DOCKET 1986
Dear Mr. Myers:
This is to advise you that the following Order has been
endorsed on your Petition for Reconsideration, filed in the
above captioned matter:
“November 5, 1987.
Petition Denied.
Per Curiam’.
Very truly yours,
PATRICK TASSOS
Deputy Prothonotary
/ma
ce: Robert C. Daniels, Esquire
A-2
Appendix B
SUPREME COURT OF PENNSYLVANIA
EASTERN DISTRICT
March 9, 1987
John M. Myers, Esquire
Chief Deputy City Solicitor
M S B Building, 15th Floor
Philadelphia, Pa. 19102
RE: City of Philadelphia PETITIONER v. District Council
33, American Federation of State, County, and Mu-
nicipal Employees, etc., Respondents No. 730 E. D.
ALLOCATUR DOCKET 1986
Dear Mr. Myers:
This is to advise you that on March 3, 1987 the Supreme
Court entered its Order denying the Petition for Allowance of
Appeal in the above-captioned matter.
Very truly yours,
Marlene F. Lachman, Esq.
Prothonotary
PATRICK TASSOS,
Deputy Prothonotary
PT: jpa
ce: Robert C. Daniels, Esquire
A-3
Appendix C
SUPREME COURT OF PENNSYLVANIA
EASTERN DISTRICT
March 9, 1987
Robert C. Daniels, Esquire
DANIELS, SALTZ & ASSOCIATES, Ltd.
211 South Broad Street
Philadelphia, Pa. 19102
RE: District Council 33, et al., Appellants v. City of
Philadelphia No. 32 E.D. Appeal Docket 1987 (For-
merly No. 647 E.D. Allocatur Docket 1986)
Dear Mr. Daniels:
This is to advise you that the following Order has been
endorsed on your Petition for Allowance of Appeal, filed in the
above captioned matter.
“March 3, 1987
Petition Granted.
Per Curiam.”
Accordingly, your appeal has been docketed as of March 9,
1987 at No. 32 E.D. APPEAL DOCKET 1987. You are further
advised that Appellants’ briefs and record are due for filing on
April 20, 1987 and Appellee’s briefs must be filed within thirty
(30) days after service of the briefs for Appellant.
THE COURT WILL NOT ENTERTAIN PETITIONS
FOR EXTENSIONS OF TIME EXCEPT FOR THE MOST
COMPELLING REASONS. Such petitions will not be accepted
for filing unless received by the Prothonotary at least two 2
weeks prior to the date on which briefs are due.
A-4
Your attention is directed to Pa. R.A.P. 2111(b) which
provides that copies of the lower court opinions must be
appended to the Appellant's briefs. This rule will be strictly
enforced and no briefs will be accepted for filing which do not
comply with this requirement.
Very truly yours,
PATRICK TASSOS
Deputy Prothonotary
/pj
cc: John M. Myers, Esquire
A-5
APPENDIX D
J. 04009/1986
DISTRICT COUNCIL 33, AMER-
ICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL EM-
PLOYEES, AFL—CIO, By
EARL STOUT, AS TRUSTEE AD
LITEM, AND EARL STOUT; AL-
BERT JOHNSON; HARRY DAR-
GAN; GEORGE WINNS; JOHN
EVERETT; LEONARD TILGH-
MAN; GEORGE WROTEN;
EARL WILLIAMS; EDWARD
SIMPKINS; EDWARD WIL-
LIAMS; AND FRANCIS ROONEY,
TRUSTEES OF DISTRICT COUN-
CIL 33 MUNICIPAL WORKERS
HEALTH AND WELFARE
FUND,
Appellants at No. 1463 & 2016
PHL $5
v.
CITY OF PHILADELPHIA
Appellant at No. 1511 &
1943 PHL 85
IN THE
SUPERIOR COURT
OF PENNSYLVANIA
No. 1463
Philadelphia 1985
No. 1511
Philadelphia 1985
No. 1943
Philadelphia 1985
No. 2016
Philadelphia 1985
Appeal from the Orders of the Court of Common
Pleas, Civil Division, of Philadelphia County at No.
3504 January Term 1983.
Before: WICKERSHAM, McEWEN and JOHNSON, JJ.
OPINION BY WICKERSHAM: J.:
FILED APRIL 25, 1986
A-6
These four consolidated appeals are taken from the orders
of April 26, 1985 and July 10, 1985 of the Court of Common
Pleas of Philadelphia County. They arise out of a dispute
between the City of Philadelphia (“the City”) and District
Council 33, American Federation of State, County and Munic-
ipal Employees (“District Council 33”) concerning the meaning
of the 1982-84 Collective Bargaining Agreement between the
parties.
Trustees for the District Council 33 Municipal Workers
Health and Welfare Fund (“the Fund”) filed a complaint in
equity and a motion for preliminary injunctive relief on January
18, 1983 against defendant-below, the City, based on allegations
that the City had breached its obligation to pay certain sums of
money to the Fund. A period of litigation followed which
resulted in the disqualification of original counsel for District
Council 33. City of Philadelphia v. District Council 33, 503 Pa.
498, 469 A.2d 1051 (1983). Subsequently, the chancellor issued
a preliminary injunction in April, 1984 and made certain find-
ings of fact after the initial hearing on this matter. After further
trial proceedings in 1984 and 1985, the chancellor issued
additional findings of fact after the final hearing in April, 1985.
The City filed a timely motion for post-trial relief. On April 26,
1985. The City filed a timely motion for post-trial relief. On
April 26, 1985, the court issued an order requiring the City to
pay an additional $15,879,215.36 to the Fund. Both the City and
District Council 33 filed timely exceptions and motions for
post-trial relief. On May 24, 1985, District Council 33 filed an
appeal from the order of April 26, 1985 at No. 1463 Philadelphia,
1985. The City filed a cross-appeal at No. 1511 Philadelphia,
1985. On July 10, 1985, the chancellor denied both parties
motions in an opinionless order. The City subsequently filed an
appeal from that order to our court at No. 1943 Philadelphia,
1985 and District Council 33 filed a cross-appeal at No. 2016
Philadelphia, 1985.
At the outset, we must determine which of the above
appeals are properly before us. We conclude that the appeal and
cross-appeal at Nos. 1463 and 1511 Philadelphia, 1985 were
taken prematurely in that they were taken after the filing but
OAR Be /
A-7
before the disposition of motions for post-trial relief. We there-
fore quash those appeals. The appeal and cross-appeal at Nos.
1943 and 2016 however, we find properly before this court. See
Pa.R.A.P. 301. Accordingly, we now turn to the issues raised
therein. ! —
Initially, we examine the claims of appellant, the City. After
a thorough examination of the briefs of the parties, the relevant
caselaw and the extensive record in this case, we affirm the
order of the chancellor in the court below.
We begin by noting that our scope of review in such matters
is closely confined. Appellate review of equity matters is limited
to the determination of whether chancellor committed an error
of law or abuse of discretion; a final decree in equity will not be
disturbed unless it is unsupported by evidence or demonstrably
capricious. Sack v. Feinman, 489 Pa. 152, 413 A.2d 1059 (1980),
decided after remand, 495 Pa. 100, 432 A.2d 971 (1981); Rosen
v. Rittenhouse Towers, 334 Pa. Super. 124, 482 A.2d 1113
(1984).
Applying this standard, we now address appellant's first
issue regarding the chancellor's interpretation of the City’s
obligations to the Fund under the collective bargaining agree-
ment in effect between the parties from July 1, 1982 to June 30,
1984. Appellant argues that the chancellor erred in referring to
extrinsic evidence to determine the intent of the parties regard-
ing that obligation. We disagree.
In construing a contract, the intention of the parties is
paramount and the court will adopt an interpretation which
under all circumstances ascribes the most reasonable, prob-
able, and natural conduct of the parties, bearing in mind
the objects manifestly to be accomplished. Unit Vending
Corp. v. Lacas, 410 Pa. 614, 190 A.2d 298 (1963). Where
the words of the contract are clear and unambiguous, the
intent of the parties must be determined exclusively from
the agreement itself. Kennedy v. Erkman, 389 Pa. 651, 133
A.2d 550 (1957). Where the language of the written contract
is ambiguous, extrinsic or parol evidence may be consid-
ered to determine the intent of the parties. In re Herr's
Estate, 400 Pa. 90, 161 A.2d 32 (1960). While courts are
A-8
responsible for deciding whether, as a matter of law,
written contract terms are either clear or ambiguous; it is
for the fact finder to resolve ambiguities and find the
parties intent. Easton v. Washington County Insurance
Co., 391 Pa. 28, 137 A.2d 332 (1957); Castelucci v. Colum-
bia Gas of Pennsylvania, Inc., 226 Pa. Super. 288, 310 A.2d
331 (1973).
A contract will be found to be ambiguous:
[I]f, and only if, it is reasonably or fairly succeptible of
different constructions and is capable of being under-
stood in more senses than one and is obscure in
meaning through indefiniteness of expression or has a
double meaning. . . .
Ambiguities may be either patent or latent. A patent
ambiguity appears on the face of the instrument and arises
from the defective, obscure, or insensible language used.
Steuart v. McChesney, 498 Pa. 45, 444 A.2d 659 (1982).
Latent ambiguities rise from extraneous or collateral facts
which render the meaning of a written contract uncertain
although the language, on its face, appears clear and
unambiguous. Id.
Metzger v. Clifford Realty Corp., 327 Pa. Super. 377, 385-86,
476 A.2d 1, 5 (1984) (footnote omitted). In light of the facts of
this case, such a latent ambiguity existed in the clause address-
ing health and welfare benefits under the agreement which
provided:
23. HEALTH AND WELFARE PROGRAM
* * * * * *
B. Each full-time employee in a class or position repre-
sented by District Council #33 shall have health and
welfare benefits as such benefits are presently defined
including major medical family coverage, under the
Blue Cross/Blue Shield group health medical plan, with
the City paying the full contribution of such benefits, to
A-9
District Council 33 Health and Welfare Fund. (1975-76)
(as of 1/1/81 receive $92.00 per month).
Agreement between the City of Philadelphia and District Coun-
cil 33, AFSCME, AFL-CIO, July 1, 1982-June 30, 1984 at 23.B.
[emphasis added].
The chancellor properly resolved any ambiguity as to the
term “as such benefits are presently defined” by considering
evidence regarding its meaning as understood by the principals
to the agreement, former Mayor Frank Rizzo and Earl Stout,
President of District Council 33. The chancellor concluded that
based on this testimony, the ambiguous phrase should be read to
have the same meaning which was attached to it by both parties.
See Demharter v. First Federal Savings and Loan Association of
Pittsburgh, 412 Pa. 142, 194 A.2d 214 (1963). See also Restate-
ment of Contracts 2d, § 201(1). (“Where the parties have
attached the same meaning to a promise or agreement or a term
thereof, it is interpreted in accordance with that meaning’).
Accordingly, the chancellor found that:
10. The City agreed to “provide 100 percent medical
coverage to city employees’ consistent with the 100 percent
medical coverage provided by District Council 33 to its
union members prior to and at the time of the contract
negotiations.
* * * * *
18. The Agreement requires that defendant pay over to the
Health and Welfare Fund such amount of money per union
member per month as it would cost to purchase a plan that
would provide the same full level of health care benefits as
provided by District Council 33 to its members immedi-
ately preceding the effective date of the current Agree-
ment.
Findings of Fact, May 4, 1984 at 5 and 7.
Where a chancellor's findings are fully supported by com-
petent evidence of record, they are binding upon a reviewing
court, Abraham v. Mihaiich, 330 Pa. Super. 378, 479 A.2d 601
A-10
(1984). We can find neither an abuse of discretion nor error of
law, which would otherwise warrant our disturbing the chancel-
lors findings on ths issue.”
The City next challenges the chancellor's award of damages
as not calculated on a “cost” basis. Once again applying our
narrow scope of review, see Sack v. Feinman, supra, Rosen v.
Rittenhouse Towers, supra, we must conclude that the chancel-
lor acted within his discretion in this finding and committed no
error of law. At trial, expert witnesses for the City and District
Council 33 presented opposing views of the proper measure of
damages. After consideration of the testimony and the reports of
the respective experts, the chancellor was persuaded by the
opinion of the Price, Waterhouse, expert for District Council 33.
The chancellor was the trier of the facts and it was his duty to
resolve the conflict in the testimony. Pirilla v. Bonucci, 320 Pa.
Super. 496, 467 A.2d 821 (1983). Because his findings are fully
supported by competent evidence they are binding upon this
court. Abraham v. Mihalich, supra.
Finally, the City contends that the chancellor erred in
certain discovery rulings and in improperly shifting the burden
of proof at the preliminary hearing. Regarding these matters, we
once more find the chancellor committed no error of law and
acted properly within his discretion. Since a trial court must
oversee the ongoing discovery between the parties during the
course of the litigation, it is within the court’s discretion to
determine the appropriate measures necessary to insure ade-
quate and prompt discovery of mattes permitted under the
Rules of Civil Procedure. Stern v. Vic Snyder, Inc., 325 Pa.
Super. 423, 473 A.2d 139 (1984).
In this case, the deposition testimony regarding the 1975
negotiations sought by the City was not relevant to the pending
action and thus was undiscoverable under the rules. See
Pa.R.C.P. No. 4003.1.° Besides, one of the proposed deponents
had previously testified and been cross-examined by the City
while the other testified that he had no specific recollection
concerning the 1975 negotiations. Similarly, the requested
records concerning operating costs of the Fund were irrelevant
since the City’s obligation was not governed by those costs. In
A-11
any event, sufficient evidence was provided to the City in this
regard, including trustees minutes, financial audits and other
records. We do not believe that the City was entitled to further
discovery of these matters. We note also that the City has failed
to identify any information produced at trial which was denied to
it during pre-trial discovery.
Lastly, the City argues that the court improperly shifted the
burden of proof from District Council 33 to the City at the
commencement of the final hearing, when the court stated that
its preliminary findings of fact would be taken into account. We
find the City’s burden of proof claim previously rebutted by our
supreme court in Lackey v. Sacoolas, 411 Pa. 235, 191 A.2d 395
(1963), where at the final hearing of an injunction, the court
properly incorporated into the record as part of the evidence to
be considered, the testimony which had been presented at the
preliminary hearing. Accordingly, we hold that the chancellor
acted within his discretion in all respects discussed above and
affirm the order of the Honorable Lawrence Prattis, dated July
10, 1985.
We now turn to District Council 33’s cross-appeal which
disputes the amount of the chancellor's award, despite his
decision in its favor. Applying our narrow scope of review, we
are obliged to conclude that the chancellor committed no abuse
of discretion nor error of law by “misapplying” the testimony of
Distrit Council 33’s expert, a representative of Price, Water-
house. In being persuaded by that expert’s evidence, the
chancellor was not required to adopt the expert's opinion
verbatim in his finding of damages. The chancellor's finding
regarding the amount of damages was based on all the evidence,
including that adduced from the expert's testimony and is not so
inconsistent with his other findings so that it should be dis-
turbed. See In re Estate of Billinger, 451 Pa. 77, 301 A.2d 795
(1973). :
We therefore affirm the order of the Honorable Lawrence
Prattis, dated July 10, 1985 with respect to the cross-appeal as
well.
Appeals at Nos. 1463 and 1511 Philadelphia, 1985 are
quashed. We affirm the order of the court below with respect to
appeals Nos. 1943 and 2016 Philadelphia, 1985.
A-12
Appendix E
District Council 33, AFSCME v. City of Philadelphia
Labor Law — Gollective Bargaining Agreement — Munic-
ipal Employer — Health and Welfare Fund.
Equity — Constructive Trust — Preliminary Injunction —
Final Adjudication.
(1) Where language in a collective bargaining agreement
between a municipal employer and its employees’ union created
mutual obligations respecting an employee's health and welfare
fund and the municipal employer failed to provide complete
funding as promised, a constructive trust was imposed in favor of
the union.
(2) A preliminary injunction was granted to a union entitled
to a constructive trust imposed against municipal funds,
whereby the amount of the municipal employers payments to
the union employees’ health and welfare fund was increased as
required by a collective bargaining agreement: the union having
demonstrated substantial probability of success on the merits,
irreparable injury if relief were not granted and that relief would
preserve the status quo.
(3) A court will not substitute its judgment for the collec-
tive bargaining process.
(4) Neither court nor municipal employer may control
funds disbursed to union member employees unless provided in
the collective bargaining agreement.
(5) The court's power to impose a constructive trust as a
preliminary injunction feature expired upon final adjudication.
(6) The court made the preliminary injunction final with a
modification increasing the rate of payment per member per
month from the municipal employer to the union member
employees health and welfare fund based upon revised cost
projections.
C.P., Phila. Co., January Term. 1983. No. 3504.
Robert C. Daniels, Esquire, for Plaintiff.
John M. Myers, Assistant City Solicitor, for Defendant.
PRATTIS, J., April 4, 1985
A-13
FINDINGS OF FACT AFTER FINAL HEARING
The Court confirms the Findings of Fact adopted April 27,
1984, and incorporates them herein as Final Findings of Fact.
The Court further finds:
i. The purpose of including paragraph 23(B) in the Collec-
tive Bargaining Agreement entered into between the City of
Philadelphia and District Council 33 for the period extending
from July 1, 1982 through June 30, 1984 was to continue to
provide not less than the same level of health and medical
benefits as were provided by District Council 33 to its members
prior to and contemporaneous with the execution of the Collec-
tive Bargaining Agreement effective July 1982:
Each full-time employee in a class of position repre-
sented by District Council #33 shall have health and
welfare benefits as such benefits are presently defined
including major medical family coverage, under the Blue
Cross/Blue Shield group health medical plan, with the City
paying the full contribution of such benefits, to District
Council 33 Health and Welfare Fund (1975-76) (as of 1/1/81
receive $92.00 per month). (Emphasis added.)
2. District Council 33’s claims experience with Blue Cross/
Blue Shield for the fourteen and a half (14%) month period
(September 1, 1981 through November 17, 1982) is the most
reliable available data base upon which to base a quotation from
Blue Cross for costing out the monthly monetary amount
necessary to “provide 100 percent medical coverage to City
employees” under a Blue Cross family rate, consistent with the
100 percent medical coverage provided by District Council 33 to
its union members prior to and at the time of the inception of the
1982-84 Collective Bargaining Agreement.
3. During the period January 1, 1983 through July 30,
1984, District Council 33 undertook to provide this full coverage
by payments to third party health care providers for services
rendered for District Council 33 members; by the provision of
health care services at the John F. Kennedy Hospital owned and
operated by trustees of District Council 33, Health and Welfare
A-14
Fund. The John F. Kennedy Hospital further provided health
care services to members of District Council 33 by the operation
of a clinic which rendered out-patient services to District
Council 33 members, beyond the coverage provided by com-
mercial and non-profit health insurers.
4. District Council 33 undertook to pay the full balance for
the cost of those medical services provided to its members and
not covered by or included under the Blue Cross/Blue Shield
contract between District Council 33 and Blue Cross/Blue
Shield while said contract was in effect with Blue Cross/Blue
Shield from September 1, 1981 through November 17, 1982,
inclusive.
5. The City of Philadelphia has never requested Blue Cross
to price out or prepare a cost rating for a level of health care
benefits for members of District Council 33, at full 100 percent
coverage for all of medical expenses including, but not limited
to, 365 day in-patient hospitalization, with no co-pay provisions
or obligations, no deductibles, no cap on the total amount of
coverage for health and medical care for each union member and
his or her dependent family members, including full and
complete payment of all hospital, medical and doctor bills, as the
City was obligated to provide and pay under paragraph 23(B) of
the Collective Bargaining Agreement in force between the City
of Philadelphia and District Council 33 for the period extending
from July 1, 1982 through and including June 30, 1984.
6. District Council 33 members who were covered by the
terms of the Collective Bargaining Agreement with the City of
Philadelphia have incurred known claims of more than Twenty-
Four Million, Three Hundred and Forty-Seven Thousand, Five
Hundred and Thirty-Five ($24,347,535) Dollars for medical
services for the period extending from January 1, 1983 through
June 30, 1984. However, this figure does not represent all of the
costs or claims for medical services provided to District Council
33 members from January 1, 1983, through June 30, 1984
because the District Council 33 computer system did not go into
effect until August, 1983 and not all of the known bills for
medical services incurred prior to that time have been entered
into the computer.
—
A-15
7. Due to the Fund's inability to pay the health care
providers who were and had been providing District Council 33
members with health services, hospitals in the greater Philadel-
phia area have refused to admit and are continuing to refuse to
admit and provide hospital care and medical treatment to
numerous members of District Council 33.
8. Earl Stout, as President of District Council 33, intermit-
tently exercised his authority to make modifications enlarging
the scope of benefits provided to District Council 33 union
members.
9. The union's benefit booklets were not republished each
time a modification was made increasing those health benefits
provided to District Council 33 members.
10. The union's benefits booklet provided only the mini-
mum of benefits actually provided to its union members and
their dependents during the contract period extending from July
1, 1982 through June 30, 1984.
11. District Council 33 provided its members with “full
coverage,” notwithstanding certain limitations set forth in the
Benefits Booklet (i.e., alcohol, drvg treatment, cosmetic sur-
gery), which were apparently not considered illnesses.
12. The administrative expenses of the Fund from January
1, 1983 through June 30, 1984 were less than four (4%) percent
of the total benefits paid for by the Fund. According to the cities’
expert, that figure (less than four (4%) percent) “is on a very
good side of the range . . . [and the Fund]. . . is being well
run at that percentage point. . . [and constitutes] good perfor-
mance” by the Fund.
13. The City of Philadelphia has never obtained the right,
through the collective bargaining process or otherwise, and,
consequently, does not have the authority to administer, or
audit the financial expenditures or affairs of District Council 33
or its Health and Welfare Fund.
14. In September, 1983, the City’s contribution to the
Police and Firefighters Health and Welfare Fund was $186.00
A-16
per member per month for a package of health benefits cover-
age, which provided a lesser level of health care benefits
coverage, than that level of benefits provided by District
Council 33 to its members.
15. The record before this court does not establish the
extent to which the operations of the clinic and John F. Kennedy
Hospital were allocated to those District Council 33 members
for whom the City of Philadelphia was obligated. Accordingly,
the court cannot compute the clinic cost or the hospital costs
except to the extent that they are reflected in the Blue Cross-
Blue Shield data base developed during the period September
1, 1981, through November 17, 1982.
16. After a review of the testimony and opinion of wit-
nesses, and a study of the reports of the respective experts, the
court is persuaded by the opinion of the plaintiffs’ expert, Price,
Waterhouse. The Court's preliminary order was based on a
projection of cost of the Blue Cross plan which most closely
approximated the coverage extended by plaintiffs. This projec-
tion resulted in the temporary order of April 27, 1984, directing
the defendants to pay $122.00 per member per month during
the period in question. A more detailed projection of the data
relating to the same plan based upon the Price, Waterhouse
report persuades the court that a more accurate estimation of the
requirements of the defendant's obligation under the Collective
Bargaining Agreement would be $157.00 per member per
month during the period January, 1983 to June, 1983 and
$188.00 per member per month during the period July, 1983 to
June, 1984 or an average monthly payment during the period in
controversy of $178.00 per month.
CONCLUSION
The employees of the City of Philadelphia, who are repre-
sented by the plaintiffs have designated the plaintiffs as their
collective bargaining agent to work out the wages, hours, and
working conditions of their contract of employment. As Mayor
Goode testified, the City, as employer, made available to the
employees, an aggregate sum to be divided as the employees,
> ee ee ee
A-17
through their agent, perceived their needs and priorities. Thus,
the employees might emphasize job security over take-home pay
and might, for obvious tax reasons, divide compensation into
taxable earnings as reflected in the paycheck and non-taxable
earnings designated for health and welfare purposes and di-
verted to a special trust set up and operated by the agents of the
employers. In either event, the payments by the city are
beneficially the money of the employees as soon as paid.
Appropriately, therefore, the employees and their agents
have resisted attempts by the defendant to both pay the money
and control it. Mayor Rizzo testified that it was never contem-
plated that the City would have any such control. While a
legitimate subject for negotiation between the employees’ col-
lective bargaining agent and the City of Philadelphia; in no
contract entered into from 1975 to date have the parties
negotiated any provision giving the defendant City of Philadel-
phia audit authority, representation on the trustee board,
administrative responsibilities or any control of the expenditures
of the employees’ money. Consequently, the court will not
substitute its judgment for the collective bargaining process.
The employees who are members of District Council 33
have, through their agents, provided an extraordinarily gener-
ous health and welfare plan. It certainly exceeds the coverage
customarily offered by other commercial or non-profit health
insurance providers. It may be actuarially unsound. Certainly, it
— includes the potential that a few members with catastrophic
illness may preempt the resources available in a given period of
time for the general membership.
However, just as the defendant may not, unless provided in
the collective bargaining agreement tell the members and their
agent how to spend their money; neither may the court.
The constructive trust imposed by the court in the Order of
April 27, 1984, was of necessity, a temporary device designed to
assure the court that the status quo would be maintained until
final adjudication. The court’s power to impose such a trust
expires with the final adjudication.
The court concludes, as_a matter of law, that the prelimi-
nary injunction entered April 27, 1984, shall be made final: but
A-18
shall be modified to provide that the defendant City of Phila-
delphia pay to the plaintiff District Council 33 Health and
Welfare Trust the sum of $178.00 per member per month for the
period January 1, 1983 to June 30, 1984.
APPENDIX E
District Council 33, American Federation of State, County and
Municipal Employees, AFL-CIO, by Earl Stout, as Trustee ad
Litem, et al. v. City of Philadelphia
Labor Law — Municipal Collective Bargaining Agreement
— Health and Welfare Benefits.
Civil Procedure — Preliminary Injunction — Constructive
Trust.
(1) The City of Philadelphia’s breach of its contractual
obligation under the collective bargaining agreement with Dis-
trict Council 33, AFSCME, has caused union members and
their families to suffer irreparable harm by being denied neces-
sary health care services due to the union’s inability to pay for
required medical services for its members and their depen-
dents.
(2) Plaintiff Union’s request for a preliminary injunction
increasing the city’s contribution to union’s health and welfare
fund is granted where the union has demonstrated a substantial
probability that it will succeed on the final merits of their
litigation; irreparable injury will occur if preliminary injunctive
relief is not granted; union is seeking preservation of the status
quo; and the collective bargaining agreement creates mutual
obligations under which this court should impose a constructive
trust.
C.P., Phila. Co., January Term, 1983, No. 3504.
Robert C. Daniels, Esquire, for Plaintiff.
John M. Myers, Deputy City Solicitor, for Defendant.
PRATTIS J., April 27, 1984
FINDINGS OF FACT
1. Since July 1, 1975, the City of Philadelphia (“City”) and
District Council 33, AFSCME (“Union”), have been bound by
an agreement, embodied in a “Memorandum of Agreement”
eee
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(P-1), and subsequently in a Collective Bargaining Agreement
(P-2), which provides in relevant part:
Each full-time employee in a class of position repre-
sented by District Council #33 shall have health and
welfare benefits as such benefits are presently defined
including major medical family coverage, under the Blue
Cross/Blue Shield group health medical plan, with the City
paying the full contribution of such benefits, to District
Council 33 Health and Welfare Fund. (1975-76) (as of 1/1/81
receive $92.00 per month). (Emphasis added.)
The phrase “benefits as presently defined”, as negotiated with
and.agreed to by representatives of the City and Union during
negotiations preceding the signing of the 1975 Agreement, was
intended to provide for health and welfare benefits as then
defined and provided by the Union at the time of the negotia-
tions in February, March and April of 1975 and at the time of the
inception of the Agreement on July 1, 1975 (i.e. 365 unlimited
in-patient hospital days per year, no co-payments by union
members, no deductible for the payment of any expenses and no
cap on the amount of payments for any one particular illness for
a union member or his dependents).
2. From July 1, 1975, through December 31, 1981, the
City paid to the Fund for each employee and retiree covered by
the Collective Bargaining Agreement, pursuant to Paragraphs 5
and 23(B), an amount equal to that charged by Blue Cross/Blue
Shield to the City under an “A700” contract for health and
welfare benefits of City employees (D-13). The A700 contract
defined the health and welfare benefits for a group of City
employees which, in 1975, included among others, a significant
number of members of the Union. However, the City never
indicated or suggested to Earl Stout or any members of Union
that the 1975 Agreement provision regarding health and welfare
benefits would be tied to any particular Blue Cross or Blue
Shield Group or Plan. Rather, the City agreed and contractually
undertook to use Blue Cross/Blue Shield as a guide with respect
to pricing the cost of purchasing a health care plan which would
provide the “health and welfare benefits as such benefits are
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presently defined” and were being provided by District Council
33 to its union members at the time of the negotiation of that
Agreement in March, April and May 1975 and at the time of its
inception on July 1, 1975.
3. The Union was not required under the Collective Bar-
gaining Agreement to purchase a Blue Cross/Blue Shield con-
tract. The 1975 Agreement between the City of Philadelphia and
Union intended that the level of benefits provided for the union
members would be determined by District Council 33. The
level of benefits as “such benefits are presently defined” in the
1975 Agreement referred to that level of benefits that were
being provided to the union members during the negotiations
between District Council 33 and the City.
4. The City’s payments under Paragraphs 5 and 23(B) were
consistent with its interpretation of the Agreement, as set forth
in published Civil Service Regulations, amended in 1975, 1979,
1980, 1981 and 1982 (D-11), but the Civil Service Regulations
unilaterally varied the obligations undertaken by the City in the
Collective Bargaining Agreement.
5. Section 27.0111 of the Civil Service Regulations have
described the City’s obligation for health and welfare payments
to be:
For each full-time employee in a class of position
represented by District Council #33, one hundred percent
(100%) of the cost of family coverage including Major
Medical, under the City’s Blue Cross/Blue Shield group
health medical plan as presently defined (7/1/75) . . .
6. By 1983, the figures provided by Blue Cross/Blue Shield
were a grossly inappropriate guide under Paragraphs 5 and 23(B)
because the number of city employees covered under the A700
plan was either extremely small or nonexistent. As of this date,
the City’s Blue Cross/Blue Shield A700 contract has been
cancelled.
7. Paragraph 5 of said Memorandum of Agreement pro-
vides as follows:
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Each full-time employee in a class or position repre-
sented by District Council 33 shall have health and welfare
benefits as such benefits are presently defined including
major medical family coverage, under the Blue Cross/Blue
Shield group health medical plan, with the City paying the
full contribution of such benefits, to District Council 33
Health and Welfare Fund. (P-1, emphasis added).
5. Prior to and since July of 1975 and up until and including
the present time, Union provided its members with full 100
percent coverage for all of their medical expenses, including,
but not limited to, 365 day in-patient hospitalization, with no
co-pay provisions or obligations, no deductibles, no cap on the
total amount of coverage for health and medical care for each
union member and his or her dependent family members,
including full and complete payment of all hospital, medical and
doctor bills.
9. However, the City never indicated or suggested to Earl
Stout or any members of Union that the 1975 Agreement
provision regarding health and welfare benefits would be tied to
any particular Blue Cross or Blue Shield Group or Plan.
10. The City agreed to “provide 100 percent medical
coverage to city employees’ consistent with the 100 percent
medical coverage provided by District Council 33 to its union
members prior to and at the time of the contract negotiations.
11. Both the City and Union agreed that the Union had the
exclusive right to determine the full and proper level of benefits
which were to be provided to its members and the City would
pay to the District Council 33 Health and Welfare Fund (Fund)
a monthly sum of money based upon a rate quotation provided
by Blue Cross to the City, in costing out the monthly monetary
amount necessary to provide said levels of benefits.
12. It was never contemplated by the City or Union that
Blue Cross would actually provide the benefits to the members
of Union.
13. The City agreed that the money paid to Union pursuant
to the terms of the Agreement, became the property and
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responsibility of Union and that the City had no right to
administer or control the Fund’s money.
14. The City agreed that the Collective bargaining Agree-
ment gave the City of Philadelphia no right to control the
expenditures of the Union Health and Welfare Fund and that
said right was exclusively vested with the trustees of the Fund.
15. From July 1, 1975 up to and including the present
time, defendant, City of Philadelphia, and Union have entered
into a series of collective bargaining agreements and/or signed
and executed memorandums of agreement in ratification
thereof.
16. Paragraph 5 of that original 1975-76 Agreement has
remained unchanged and has been carried forward in its exact
language since 1975 up through the present Agreement of
1982-1984, as paragraph 23(B) of the Collective Bargaining
Agreement between Union and the City of Philadelphia.
17. From July 1, 1975 to the present, and including the
period covered by the 1982-1984 Collective Bargaining Agree-
ment involved herein, defendant's contractual obligation to pay
monies over to the Health and Welfare Fund has been defined
in two paragraphs of both the current agreement, and in all
preceding agreements, which paragraphs read, in relevant part,
as follows:
[T]here shall be made available to each employee and
to [categories of] former employee[s] . . . and paid over to
the established organization or agency designated by such
employee or former employee against the cost to him of an
established health-medical plan: . . . Payment shall be
made to the Secretary-Treasurer of District Council 33 of
the American Federation of State, County and Municipal
Employees, AFL-CIO (1968). (23(A))
Each full-time employee in a class or position repre-
sented by District Council 33 shall have health and welfare
benefits as such benefits are presently defined including
major medical family coverage, under the Blue Cross/Blue
Shield Group health medical plan, with the City paying the
5 adtin alate Ah. atl ail és
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full contribution of such benefits, to District Council 33
Health and Welfare Fund. (23(B))
18. The Agreement requires that defendant pay over to the
Health and Welfare Fund such amount of money per union
member per month as it would cost to purchase a plan that
would provide the same full level of health care benefits as
provided by District Council 33 to its members immediately
preceding the effective date of the current Agreement.
19. As of September 1, 1981, Union applied to Blue
Cross/Blue Shield for medical benefits providing union mem-
bers with 365 days of in-patient hospital care, with no co-
payment obligations by union members, full coverage of ancil-
lary, semi-private room benefits, a private room, if medically
necessary, certain out-patient benefits and full coverage for
diagnostic and emergency treatment for medical and accidents.
20. By letter dated October 18, 1982 (P-5) Blue Cross,
acting on its behalf and for Blue Shield, informed Union that for
a package of health-medical benefits providing a lesser level of
medical benefits from Blue Cross/Blue Shield of Greater Phila-
delphia (Plan 100) than the Union had contracted for on behalf of
its members with defendant, City of Philadelphia, the monthly
cost to the Health and Welfare Fund for each union member
would be $122.13.
21. In said letter of October 18, 1982 (P-5), Blue Cross
quoted the Union a major medical plan which was a standard
One Million ($1,000,000.00) Dollar medical program which has
an annual $100.00 deductible per member each year, with Blue
Cross reimbursing 80 percent of the charges and the individual
union member being responsible for the remaining 20 percent of
the medical expense incurred; this plan also contained a
$10,000.00 maximum benefit for mental health benefits.
22. The Blue Shield Plan 100 is the top program offered
through Blue Shield.
23. The City never requested a rate quotation from Blue
Cross/Blue Shield with respect to the amount of money it would
cost to purchase a health care plan which would provide benefits
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“as such benefits are presently defined” and as were being
provided by District Council 33 to its union members.
24. The City has been paying $92.00 per union member
per month for Health and Welfare benefits since July 1, 1981
and up until the present time, despite acknowledgements by
members of the City administration and its counsel that more
money is owed to the Fund under the terms of the 1982-1984
Collective Bargaining Agreement.
25. Even during the period that District Council 33 con-
tracted with Blue Cross and Blue Shield, the union continued to
provide its members with 100 percent medical coverage by
underwriting those medical and hospital costs and expenses not
covered by the Blue Cross/Blue Shield medical insurance plan
in effect between DC 33 and Blue Cross/Blue Shield.
26. District Council 33 relied on the assumption that the
City would fairly and honestly procure an accurate rate quota-
tion from Blue Cross with respect to determining the amount of
contribution it was obliged to make per union member per
month to the Fund, pursuant to its contractual obligation so to
do under the Agreement (P-1).
27. Members of Union have been denied health care and
medical services and beneits because of the Union’s inability to
pay the bills of medical health care providers due to the City's
breach of its Collective Bargaining Agreement (P-2) with Union.
28. There have been numerous lawsuits and other out-
standing claims against individual members of DC 33 due to
unpaid medical and hospital bills for DC 33 members (P-10).
29. Defendant’s breach of its contractual obligation under
the Agreement (P-2) has caused union members and their
families to suffer irreparable harm by being denied necessary
health care services due to the Union’s inability to pay for
required medical services for its members and their depen-
dents.
30. The Court cannot determine, on the basis of the
present limited record, what the proper payment under Para-
graphs 5 and 23(B) should have been either in 1983 or 1954, but
it is clearly not less than the $122.13 quoted to the Union in
oe ve ate
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October, 1982 as the cost for less than 100% of the then existing
benefit package.
31. The Union and Fund have an obligation under Para-
graphs 5 and 23(B) to use the funds received thereunder
exclusively for the health and welfare benefits of persons
covered by the Collective Bargaining Agreement and their
dependents (221).
32. At the preliminary stage, the Court cannot determine
the amount of money the Fund has expended for health and
welfare benefits and other expenses on behalf of City employees
for health and welfare benefits under Paragraphs 5 and 23(B) of
the Collective Bargaining Agreement.
33. Although the Union produced evidence that the total
claims against it, exclusive of JFK Hospital and Blue Cross/Blue
Shield is approximately $11 million, it has not yet produced
evidence as to the amount of valid claims asserted by health and
welfare benefit providers who have rendered covered health and
welfare services to persons as to whom the City of Philadelphia
has an obligation under the Collective Bargaining Agreement.
34. There is, however, substantial evidence that District
Council 33 will be able to establish a clear right to the relief it
seeks.
CONCLUSIONS OF LAW
35. The Union has demonstrated a substantial probability
that it will succeed on the final merits of this litigation.
36. The Union hs demonstrated that irreparable injury to
it, the Fund, and City employees has occurred and will occur if
preliminary injunctive relief is not granted.
37. The Union has established that it is seeking preserva-
tion of the status quo; to wit, provision of 100% of the cost of
health and welfare benefits.
38. Paragraphs 5 and 23(B) create an obligation of the City
to pay money to the Fund, subject to a condition that the fund
use the money so paid exclusively for health and welfare benefis
for persons on whose behalf the payment has been made.
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39. The Union and Fund have yet to establish that they
have fulfilled his condition.
40. The language of Paragraphs 5 and 23(B) creates mutual
obligations under which this Court should impose a constructive
trust. Buchanan v. Brentwood Federal S & L Assn., 457 Pa. 13,
320 A.2d 117 (1974).
41. On the basis of the record before the Court, the
Union’s request for a preliminary injunction increasing the
amount of the City’s payment to the Fund should be granted.
ORDER
And Now, this 3rd day of May, 1984, upon due and proper
notice to the defendant, and in consideration of plaintiffs’
verified complaint, the motion for preliminary injunction, sup-
porting memorandum of law, the evidence presented at the
preliminary hearings in support thereof — April 6, 13 and 16,
1984, and the Findings of Fact and Conclusions of Law entered
by the Court on April 27, 1984, it is hereby
ORDERED and DECREED the Defendant City of Phila-
delphia pay to the Plaintiff District Council 33, AFSCME
Health and Welfare Fund, the sum of $122.13 per member per
month as such payments are provided for in the existing
Collective Bargaining Agreement; said payment to become
effective the month of May, 1984 and to continue until said
existing Collective Bargaining Agreement expires.
For the period of January, 1983, until and including April,
1984, the Defendant City of Philadelpia shall pay to the Plaintiff
District Council 33 the difference between the sum of $92.00
per member per month, and $122.13 per member per month, as
such payments are provided for in the existing Collective
Bargaining Agreement, provided that such payment shall be
made:
Subject to a constructive trust for the benefit of
members of District Council 33, which trust shall be
discharged by payments of the claims of the third party
health providers who have rendered service to said District
fey age
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Council 33 members but whose agreed upon charges
therefore are due and unpaid.
Defendant City of Philadelphia shall make such pay-
ments to District Council Health and Welfare Fund for
payment of said providers, upon presentation to defendant
of statements by the plaintiff certified to by an accountant
agreed upon by the parties.
The accumulated arrearages from January, 1983 to April,
1984 shall be paid by the defendant by June 30, 1984.
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