The Supreme Court/The Supreme Court.iso/pc/ascii/1991/91_610/91_610.zo

Text File | 1993-06-13 | 15.9 KB | 311 lines

NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports.  Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D.C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
--------
No. 91-610
--------
LOCAL 144 NURSING HOME PENSION FUND,
et al., PETITIONERS v. NICHOLAS
DEMISAY et al.
on writ of certiorari to the united states court
of appeals for the second circuit
[June 14, 1993]

  Justice Scalia delivered the opinion of the Court.
  This case presents the question whether a federal
district court may issue an injunction pursuant to 302
of the Labor Management Relations Act, 1947 (LMRA), 61
Stat. 157, as amended, 29 U. S. C. 186 (1988 ed. and
Supp. III), requiring the trustees of a multiemployer trust
fund to transfer assets from that fund to a new
multiemployer trust fund established by employers who
broke away from the first fund.

                            I
  Respondents include a group of employers that, until
1981, were members of a multiemployer bargaining
association, the Greater New York Health Care Facilities
Association, Inc. (Greater Employer Association).  Two
trust funds-the Local 144 Nursing Home Pension Fund
and the New York City Nursing Home-Local 144 Welfare
Fund (collectively, Greater Funds)-were established
pursuant to collective-bargaining agreements between the
Greater Employer Association and the relevant union,
Local 144 of the Hotel, Hospital, Nursing Home and Allied
Services Employees Union, Service Employees
International Union, AFL-CIO (Local 144).  Prior to 1981,
the respondent employers made contributions to the
Greater Funds on behalf of their employees in accordance
with the terms of collective-bargaining agreements
negotiated between the Greater Employer Association and
Local 144.
  In 1981, the respondent employers broke away from the
Greater Employer Association and executed independent
collective-bargaining agreements with Local 144.  The
initial agreements required continuing employer
contributions to the Greater Funds, but those concluded
in 1984 provided for establishment of a new set of trust
funds, the Local 144 Southern New York Residential
Health Care Facilities Association Pension Fund and the
Local 144 Southern New York Residential Health Care
Facilities Association Welfare Fund (Southern Funds).  At
approximately the same time, the respondent employers
ended their participation in the Greater Funds.
  In negotiating the transfer from the Greater Funds to
the Southern Funds, the -primary concern- of Local 144
was to make sure that the shift would not cause its
members to lose benefits.  935 F. 2d 528, 530 (CA2 1991).
To address that concern, the respondent employers
guaranteed in their collective-bargaining agreements that
the Southern Funds would recognize all credited service
time earned under the Greater Funds and, more generally,
that employees would not lose any benefits as a result of
the withdrawal from the Greater Funds.  See 710
F. Supp. 58, 60-61 (SDNY 1989).  That guarantee
obviously created some peculiar liabilities for the Southern
Funds.  For example, an employee who had earned nine
years credited service time under the Greater Funds
would, after just one more year of service, acquire vested
rights to pension benefits pursuant to the 10-year vesting
requirement of the Southern Funds-even though the
Southern Funds had received only one year of employer
contributions for that employee.  See id., at 61, n. 4.  The
Southern Funds' assumption of these liabilities, however,
did not alter the obligations of the Greater Funds, which
were not parties to the collective-bargaining agreements:
They remained liable to the departing employees for all
vested benefits.  See id., at 61, and n. 5, 65; 935 F. 2d,
at 530-531.
  To help cover the Southern Funds' liabilities and in
general to help finance the change from the Greater
Funds to the Southern Funds, the respondent
employers-joined by several of their employees and the
trustees of the Southern Funds-brought this action to
compel petitioners, the Greater Funds and the Greater
Funds' trustees, to transfer an appropriate fractional share
of the Greater Funds' assets to the Southern Funds.  They
asserted right to relief under the Employee Retirement
Income Security Act of 1974 (ERISA), 29 U. S. C. 1001
et seq. (1988 ed. and Supp. III), and under 302 of the
LMRA; only the latter claim is at issue here.
  The relevant portions of 302 are set forth in the
margin.  To describe respondents' claim, it is necessary
to sketch the structure of that provision.  Subsection (a)
prohibits an employer (or an association of employers,
such as the Greater Employer Association) from, inter
alia, making payments to any representative of its
employees, including the employees' union and union
officials.  Paragraph (b)(1) is the -reciprocal- of subsection
(a), Arroyo v. United States, 359 U. S. 419, 423 (1959),
making it unlawful for employee representatives to receive
the payments prohibited by subsection (a).  The
prohibitions of subsection (a) and paragraph (b)(1) are
drawn broadly, and would prevent payments to union
employee health and welfare funds such as those at issue
here.  See generally United States v. Ryan, 350 U. S. 299,
304-305 (1956); Goetz, Employee Benefit Trusts under
Section 302 of Labor Management Relations Act, 59 Nw.
U. L. Rev. 719, 723-731 (1965).  Subsection 302(c),
however, provides exceptions to the prohibitions.  Most
significantly for our purposes, paragraph (c)(5) excepts
payments to an employee trust fund so long as certain
conditions are met, including that the trust fund be
-established . . . for the sole and exclusive benefit of the
employees,- and that the payments be -held in trust for
the purpose of paying- employee benefits.
  Respondents' theory is that the Greater Funds cannot
meet those last quoted conditions unless they transfer to
the Southern Funds the portion of their reserves that is
attributable to the respondents' past contributions.  If they
fail to do so, according to respondents, they will suffer
from a -structural defect- which can be remedied by
federal courts pursuant to the power conferred by 302(e)
to -restrain violations of this section.-
  The District Court granted petitioners' motion for
summary judgment.  Though it agreed with respondents
that it had power to -review a challenge that the Greater
Funds are structurally deficient under [302(c)(5)'s] `sole
and exclusive' benefit standard,- 710 F. Supp., at 61, 62,
it found no -structural defect,- since there was no
allegation of corruption in the Greater Funds and since
the transfer of assets would not further any collective-
bargaining policies.  Id., at 64.  The Court of Appeals
reversed, holding that the Greater Funds -would suffer
from a `structural defect'- unless the funds transferred a
portion of their assets to the Southern Funds.  935 F. 2d,
at 534.  It remanded for the District Court -to shape an
appropriate remedy guided by the principle that a fair
portion of the reserves reflecting contributions made to the
Greater Funds on behalf of the [respondents' employees]
should be reallocated to the Southern Funds.-  Ibid.  We
granted certiorari, 505 U. S. ___ (1992).

                           II
  Both the District Court and the Court of Appeals relied
on the Second Circuit's earlier decision in Local 50,
Bakery and Confectionery Workers Union, AFL-CIO v.
Local 3, Bakery and Confectionery Workers Union,
AFL-CIO, 733 F. 2d 229 (1984), which held that federal
courts have -`jurisdiction under [section 302(e)] to enforce
a trust fund's compliance with the statutory standards set
forth in subsection (c)(5) by eliminating those offensive
features in the structure or operation of the trust that
would cause it to fail to qualify for a (c)(5) exception.'-
Id., at 234 (quoting Associated Contractors of Essex Cty.,
Inc. v. Laborers Int'l Union of North America, 559 F. 2d
222, 225 (CA3 1977)).  Local 50 and the decision below
are among a large body of conflicting cases bearing upon
federal courts' powers under 302(e) to supervise the
administration of 302(c)(5) trust funds.  A number of
courts have held that 302(e) confers broad supervisory
powers.  See, e.g., Ponce v. Construction Laborers Pension
Trust for Southern California, 628 F. 2d 537, 541-542
(CA9 1980); Lewis v. Mill Ridge Coals, Inc., 298 F. 2d
552, 558 (CA6 1962).  Others have held that it confers no
supervisory powers at all.  See, e.g., Ader v. Hughes, 570
F. 2d 303, 306 (CA10 1978); Bowers v. Ulpiano Casal,
Inc., 393 F. 2d 421 (CA1 1968); Moses v. Ammond, 162
F. Supp. 866, 871-872 (SDNY 1958).  Still others have
acknowledged supervisory powers limited in various
respects.  See Riley v. MEBA Pension Trust, 570 F. 2d
406, 412-413 (CA2 1977); Knauss v. Gorman, 583 F. 2d
82, 86-87 (CA3 1978).  Our most recent case in this area
expressly reserved the question.  See Mine Workers Health
and Retirement Funds v. Robinson, 455 U. S. 562, 573,
n. 12 (1982).
  We hold today that 302(e) does not provide authority
for a federal court to issue injunctions against a trust
fund or its trustees requiring the trust funds to be
administered in the manner described in 302(c)(5).  By
its unmistakable language, 302(e) provides district courts
with jurisdiction -to restrain violations of this section.-
A -violation- of 302 occurs when the substantive
restrictions in 302(a) and (b) are disobeyed, which
happens, not when funds are administered by the trust
fund, but when they are -pa[id], len[t], or deliver[ed]- to
the trust fund, 302(a), or when they are -receive[d], or
accept[ed]- by the trust fund, or -request[ed], [or]
demand[ed]- for the trust fund, 302(b)(1).  And the
exception to violation set forth in paragraph (c)(5) relates,
not to the purpose for which the trust fund is in fact used
(an unrestricted fund that happens to be used -for the
sole and exclusive benefit of the employees- does not
qualify); but rather to the purpose for which the trust
fund is -established,- 302(c)(5), and for which the
payments are -held in trust,- 302(c)(5)(A).  The
trustees' failure to comply with these latter purposes may
be a breach of their contractual or fiduciary obligations
and may subject them to suit for such breach; but it is no
violation of 302.
  A few courts and some academic commentators have
drawn an analogy between 301 and 302 of the LMRA
and have suggested that, as 301 has been held to create
a federal common law governing labor contracts, see
Textile Workers v. Lincoln Mills of Alabama, 353 U. S.
448 (1957), so too should 302 be viewed as authorizing
the development of -a specialized body of federal common
law of trust administration.-  Goetz, Developing Federal
Labor Law of Welfare and Pension Plans, 55 Cornell L.
Rev. 911, 930 (1970).  One court has said, quoting Lincoln
Mills, 353 U. S., at 457, that -jurisdiction in a case of this
kind can be found within the `penumbra of express
statutory mandate' of Section 302.-  Lugo v. Employees
Retirement Fund of Illumination Products Industry, 366
F. Supp. 99, 103 (EDNY 1973), quoted approvingly in
Alvares v. Erickson, 514 F. 2d 156, 166 (CA9 1975), cert.
denied, 423 U. S. 874 (1975).  See also Nedd v. United
Mine Workers of America, 556 F. 2d 190, 203 (CA3 1977),
cert. denied, 434 U. S. 1013 (1978).  A comparison of
302(e) with 301(a) shows that the analogy to Lincoln
Mills is inapt.  The latter provides a federal cause of
action for any -violation of contracts between an employer
and a labor organization.-  Subsection 302(e), by
contrast, provides no cause of action for a -violation of the
fiduciary duties imposed pursuant to an employee benefit
trust fund-; rather, it allows federal courts to -restrain
violations- of 302, which, as we have explained, occur
when payments to a nonqualifying trust are made or
received.
  The text of 302 requires that, if payments are to be
exempt from its prohibition, they must be -held in trust
for the purpose of paying- employee benefits and the trust
must be -established- for the sole and exclusive benefit of
the employees.  There is nothing to suggest that this had
the ambitious purpose of establishing an entire body of
federal trust law, rather than merely describing the
character of the trust to which payments are allowed,
leaving it to state law to determine when breaches of that
trust have occurred and how they may be remedied.  As
observed by the court in Moses v. Ammond, supra, at 872,
n. 14, 302(c)(5) is akin to a provision such as 401(a) of
the Internal Revenue Code, 26 U. S. C. 401(a) (1988 ed.
and Supp. III), which (in connection with 26 U. S. C.
501 (1988 ed. and Supp. III)) provides a tax exemption
for employer-created pension trust funds so long as, inter
alia, they are -created . . . for the exclusive benefit of [the
employer's] employees or their beneficiaries.-  No one
would contend that that provision confers upon the federal
courts authority to govern and enforce the trusts, and
there is no more reason to reach such a conclusion here.
  Respondents point to our statement in Arroyo v. United
States, 359 U. S., at 426-427, that -[c]ontinuing
compliance with [the standards of 302(c)(5)] in the
administration of welfare funds was made explicitly
enforceable in federal district courts by civil proceedings
under 302(e).-  See also Robinson, supra, at 573, n. 12
(referring to this passage).  The statement is perhaps
susceptible of the reading that -compliance- was -made
. . . enforceable- by authorizing district courts to prohibit
further payments to an entity that was not established,
or does not hold its funds in trust, for the requisite
purposes.  But in any case, Arroyo was a criminal
prosecution brought under 302(d), and the statement was
therefore pure dictum.  Also dictum was our statement
in NLRB v. Amax Coal Co., 453 U. S. 322, 331 (1981),
later quoted in Robinson, 455 U. S., at 570, that -the `sole
purpose' of 302(c)(5) is to ensure that employee benefit
trust funds `are legitimate trust funds, used actually for
the specified benefits to the employees of the employers who
contribute to them . . . .'-  (Emphasis added.)  This obiter
quotation of a line from the floor debate on the LMRA
cannot convert (1) a statutory statement of trust
obligations that must exist to obtain an exemption into (2)
a statutory authorization to enforce trust obligations.
  Consistently with the text of 302(c)(5), and the
structure of 302 in general, we view the -sole and
exclusive benefit- and -held in trust- provisions of that
paragraph as neither creating nor imposing a federal trust
law standard, but rather as simply requiring a trust
obligation for the specified purposes, defined and enforced
originally under state law, see Restatement (Second) of
Trusts 170(1) (1959), and now under ERISA.  Cf. Amax
Coal, supra, at 329-330.  Respondents do not deny that
the Greater Funds are held subject to such a trust
obligation.  The fiduciaries of the Greater Funds are
subject to the fiduciary obligations of ERISA, including the
so-called exclusive benefit requirement of 29 U. S. C.
1104(a)(1)(i), and are liable under 29 U. S. C. 1109(a)
to legal and equitable remedies for failure in those
obligations.  Since the Greater Funds are entities that
qualify under 302(c)(5), equitable relief under 302(e)
restraining future payments to them would not be
appropriate.
  In addition to the 302 claim, respondents' complaint
asserted two ERISA claims, one based on ERISA's asset
transfer rules, 29 U. S. C. 1414, and the other on
ERISA's above-mentioned fiduciary duty provision, 29
U. S. C. 1104.  The District Court ruled against
respondents on both claims but, because of its ruling on
302, the Court of Appeals did not reach them.  Neither
do we and, on remand, the Court of Appeals will be free
to consider them.

                         *  *  *
  The judgment of the Court of Appeals is reversed, and
the case is remanded for proceedings consistent with this
opinion.
                                      It is so ordered.