The opinion of the court was delivered by: HUYETT, III
DANIEL H. HUYETT, III, UNITED STATES DISTRICT JUDGE
Plaintiffs' 53 page, 14 count complaint requires a careful balance of the policies of two fundamental and often competing areas of law governing the conduct of business and employee relations. The case involves charges of union domination of the management of employee benefit trust funds, and, at the same time, manipulation and control of the union by a large nationwide multi-employer bargaining association. Plaintiffs claim that the alleged union domination of the benefit funds is the result of a structural defect caused by the employer trustee appointment process and violates section 302(c)(5) of the Labor Management Relations Act [hereinafter, LMRA], 29 U.S.C. § 186(c)(5)(B) (1982 & West Supp. 1988), and various provisions of the Employee Retirement Security Act of 1974 [hereinafter, ERISA], 29 U.S.C. §§ 1001-461 (1982 & West Supp. 1988). The alleged manipulation and control of the union by the multi-employer bargaining association, according to plaintiffs, violates sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2.
In four separate motions, defendants seek summary judgment in their favor on essentially two areas of the plaintiffs' second amended complaint, the antitrust counts and the union domination counts. After extensive discovery, briefing, and oral argument, I conclude that plaintiffs' theory of antitrust violations must fail on a number of different grounds. I will, therefore, grant defendants' motions for summary judgment on counts XI and XII. As to plaintiffs' theories of structural defects and union domination in the trust agreements governing the Central Pennsylvania Teamsters Pension Fund and the Central Pennsylvania Teamsters Health and Welfare Fund, I conclude that the remedy of a reformation of the trust agreements as plaintiffs seek is not available on the facts of this case. Therefore, I will grant defendants' motions for summary judgment as to counts II, III, IV, V, VI, VII and X of the second amended complaint.
As with many antitrust cases, "stating the facts of this case is a daunting task." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corporation, 475 U.S. 574, 576, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). This suit is complex because plaintiffs raise issues under ERISA and LMRA in respect to their claims against defendants.
Plaintiffs consist of three groups: employer representation associations, individual employers, and individual employees. Defendants are two employer representation associations, two Taft-Hartley employee benefit trust funds and the trustees of the funds. The common link among all the parties is their involvement with the International Brotherhood of Teamsters ("IBT"), a nationwide union, and various locals of the IBT representing members in the Central Pennsylvania region. Neither the IBT nor any of its locals are parties to this action.
The employer representation associations are Motor Carriers Labor Advisory Council ("MCLAC") and Eastern Labor Advisory Association ("ELAA", collectively, "Association plaintiffs"). These entities are associations of small to medium sized trucking firms which provide their members with collective bargaining and grievance services.
The Employer plaintiffs are Chemical Leaman Tank Lines, Inc. ("Chemical"), Materials Transport Service, Inc. ("MTS"), Acme Markets, Inc. ("Acme"), and Schwerman Trucking Company ("Schwerman"). Chemical and MTS employ members of the IBT under collective bargaining agreements with IBT Local 773. Acme employs IBT members under a collective bargaining agreement with IBT Local 401. The record is unclear as to which local represents Schwerman employees. Under collective bargaining agreements, each of these employers contributes to the defendant employee benefit funds. With the exception of Acme, the employer plaintiffs are all members of ELAA, and utilize its services for collective bargaining with the IBT. Acme has a separate bargaining agreement with the IBT.
The individual employee plaintiffs are Gustav Braun, Leonard Parsons, and Fred Ahlberg (collectively, "employee plaintiffs"). Braun is a managerial employee of Chemical who has vested and accrued rights to benefits under the defendant employee benefit funds. Parsons and Ahlberg are employees of Chemical who also have vested rights to benefits under the defendant benefit funds.
The employer representation association defendants are Trucking Management, Inc. ("TMI"), and the Central Pennsylvania Motor Carriers Conference, Inc. ("Conference").
Since the early 1960s, TMI, a multi-employer bargaining association, negotiated with the IBT on a national level for the majority of employers in the dry freight industry who employ IBT members. Among the trucking companies TMI represents are three so-called nationwide network carriers, Yellow Freight Systems, Inc., Roadway Express, Inc., and Consolidated Freightways, Inc. (collectively, "Nationwide Network Carriers"). Again, as with the IBT and Local 429, plaintiffs chose not to pursue this litigation against these companies directly.
The Conference is the bargaining agent for TMI members in the Central Pennsylvania region. The two funds, the Central Pennsylvania Teamsters Pension Fund, and the Central Pennsylvania Teamsters Health and Welfare Funds (collectively, "Funds"), are employee benefit trust funds under LMRA, section 302(c)(5)(B), 29 U.S.C. § 186(c)(5)(B). Under the relevant trust agreements, each Fund is governed by four trustees. In each case, two of the trustees are appointed by employers, and two by the union. The individuals who serve as employer trustees are defendants William Baum and Vincent R. Dagen. James L. Burns and John P. Kleinfelter are the two union trustees. These individuals are the trustees for both Funds.
To understand the facts of this case, a background in the structure and procedure of the collective bargaining methods employed by the IBT is necessary. Because the IBT is a nationwide union with thousands of members who are employed by thousands of employers in different industries, the IBT negotiates a master agreement with the employers in each industry group. The national agreement for the dry freight industry is called the National Master Freight Agreement ("NMFA"). The NMFA consists of a master contract, negotiated by TMI, plus twenty-eight area supplements. The area supplements are negotiated on a regional level with the multi-employer bargaining associations, employers and locals within each geographic region. The first NMFA was negotiated in 1964. The current NMFA covers in excess of 200,000 employees who work for over 1,200 employers throughout the United States.
Prior to 1985, TMI and MCLAC jointly negotiated the NMFA on a national level. The terms and provisions of the NMFA were administered by both employer associations under a single network of grievance committees controlled by TMI. When the most recent NMFA was being negotiated in 1985, MCLAC decided to engage in separate NMFA negotiations from TMI. Thus, currently there exist at least two separate trucking industry NMFAs; one governing the relationship of employers and employees of TMI associated employers ("TMI NMFA"), and another governing the relationship of MCLAC employers and employees ("MCLAC NMFA"). Independent employers may become signatories to the NMFAs without affiliating with either employer association. They must, however, choose a grievance committee operated by one or the other. The NMFAs currently in force were negotiated in 1985 and expired in 1988.
Contributions to employee benefit funds are negotiated on both the national and regional levels. At the national level, the NMFA sets the combined contribution levels to both the health and welfare and the pension funds. The area supplements allocate the total contributions, as defined by the NMFA, between the two Funds. Further, other separate supplemental agreements cover a wide variety of topics within the employer-employee relationship between multi-employer bargaining associations or individual employers and IBT locals.
The individual employers, except plaintiff Acme, employ members of IBT Local 773. The collective bargaining agreements governing their relationship is negotiated by ELAA. The agreements are called the Eastern Area Cement Haul Agreement ("EACHA") and the Eastern Area Tank Haul Agreement ("EATHA"). Acme has a separate collective bargaining agreement with IBT Local 701. Importantly, plaintiffs are neither governed by the TMI NMFA, nor are they represented in any way by TMI or the Conference. MCLAC represents other employers who are not represented by TMI or the Conference.
The original complaint was filed on July 31, 1986. That complaint was accompanied by a motion for a temporary restraining order seeking, inter alia, preliminary injunctive relief requiring that certain plaintiffs not be compelled to execute certain documents related to the Funds. After the parties reached agreement on the execution of the documents, the motion was withdrawn on August 12, 1986.
On August 13, 1986, plaintiffs filed an amended complaint containing fourteen counts. Plaintiffs sought various forms of declaratory, equitable, and monetary relief. On May 28, 1987, after limited discovery, I partially granted motions for judgment on the pleadings brought by the defendants. In the order granting partial judgment on the pleadings, I granted plaintiffs leave to amend their complaint to state claims for the individual employee plaintiffs for breach of fiduciary duty under ERISA and the federal common law of ERISA. Plaintiffs did so, and filed a second amended complaint on June 12, 1987. Thereafter, the parties commenced full discovery proceedings.
During discovery, it became evident that plaintiffs' counsel was attempting to broaden the claims in counts XI and XII of the second amended complaint. Count XI purportedly states a claim for relief under section 1 of the Sherman Act, for conspiracy "to fix, control, raise, and stabilize the fringe benefit costs of [trucking] carriers doing business in . . . the trucking industry[.]" Second Amended Complaint at 46. Count XII states a claim for relief under section 2 of the Sherman Act for monopoly or attempted monopoly in "the trucking marketplace in the Pennsylvania region[.]" Second Amended Complaint at 47. Following a pretrial conference in September, 1987, an issue arose concerning the geographic scope of plaintiffs' antitrust allegations.
Subsequently, on January 7, 1987, defendants filed a motion for an order limiting discovery on the antitrust claims to the Pennsylvania region. After considering defendants' motion, plaintiffs' response that the complaint alleged a nationwide antitrust conspiracy, and the allegations of the second amended complaint, on January 27, 1988, I limited discovery to the Pennsylvania region. Plaintiffs then filed a motion to file a third amended complaint which alleged a nationwide predatory pricing conspiracy by the defendants and the Nationwide Network Carriers. The proposed third amended complaint named the Nationwide Network Carriers as defendants. By Order dated November 1, 1988, I denied plaintiffs leave to file a third amended complaint.
Defendants move for partial summary judgment on plaintiffs' claims of antitrust violations under sections 1 and 2 of the Sherman Antitrust Act, counts XI and XII, and the claims of violations of section 302(c)(5) of LMRA contained in counts II through VII. The Funds and their Trustees also seek summary judgment on count VIII which alleges a breach of fiduciary duty under ERISA and the federal common law of ERISA, and count X which requests equitable modification of the terms of the Funds' trust agreements.
Further, plaintiffs argue defendants conspired to impose certain rules on employers who contribute to the Funds. The rules are allegedly designed to keep the employers contributing to the Funds. The contribution rates are allegedly "artificially inflated" as a result of the conspiracy among the TMI employers.
A. Exemptions from Antitrust Liability
The parties raise various contentions about the scope of the nonstatutory exemption from the antitrust laws for the activities of organized labor and its applicability to this case. Plaintiffs argue that the nonstatutory exemption is inapplicable under United Mine Workers v. Pennington, 381 U.S. 657, 14 L. Ed. 2d 626, 85 S. Ct. 1585 (1965), and Allen Bradley Co. v. International Brotherhood of Electrical Workers, 325 U.S. 797, 89 L. Ed. 1939, 65 S. Ct. 1533 (1945). Defendants argue that plaintiffs have failed to meet their burden in producing sufficient evidence that the alleged combination of the IBT and defendants reached beyond the scope of the collective bargaining agreement between TMI and the IBT.
The nonstatutory labor exemption is based on an accommodation of the often competing policies in favor of collective bargaining and in favor of free competition in the economic marketplace. Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 44 L. Ed. 2d 418, 95 S. Ct. 1830 (1975). The Supreme Court described the sources of organized labor's nonstatutory exemption from the antitrust laws as
the strong policy favoring association of employees to eliminate competition over wages and working conditions. Union success in organizing workers and standardizing wages will ultimately affect price competition among employers, but the goals of federal labor law never could be achieved if this effect on business competition were held a violation of antitrust laws.
The nonstatutory labor exemption is not applicable to combinations of a union and employers who combine to impose anticompetitive restraints on parties who are not party to their collective bargaining agreement. Pennington, 381 U.S. at 662. The Third Circuit has interpreted Connell to hold
that an agreement between a union and a business organization, outside a collective bargaining relationship, which imposes a direct restraint upon a business market, and which is not justified by congressional labor policy because it has actual or potential anticompetitive effects that flow naturally from the elimination of competition over wages and working conditions, is not exempt from antitrust scrutiny.
However, plaintiffs' contention is quite the opposite - plaintiffs claim defendants conspired among themselves to manipulate the IBT into demanding higher rates from other employers who were not parties to the TMI NMFA. While evidence of this alleged conspiracy contained in the record is, as discussed below, admittedly lacking, if plaintiffs could prove the existence of the conspiracy and that its objective was to inflict higher fringe benefit costs on other employers, the nonstatutory exemption would be inapplicable. Altemose Construction Co. v. Building & Construction Trades Council, 751 F.2d 653, 659-60 (3rd Cir. 1985) (nonstatutory labor exemption is inapplicable when the identified objective of the alleged conspiracy is unlawful), cert. denied, 475 U.S. 1107, 89 L. Ed. 2d 912, 106 S. Ct. 1513 (1986); Carpenters Local Union No. 1846 v. Pratt-Farnsworth, Inc., 690 F.2d 489, 530-531 (5th Cir. 1982)(alleged conspiracy among employers and multi-employer bargaining association without agreement of union is not covered by nonstatutory labor exemption), cert. denied, 464 U.S. 932, 78 L. Ed. 2d 305, 104 S. Ct. 335 (1983); Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 514 (3rd Cir. 1979) ("restraints . . . which are aimed at controlling a secondary product market or service are suspect, and are presumptively covered by the Sherman Act."), vacated and remanded on other grounds, 448 U.S. 902, 65 L. Ed. 2d 1131, 100 S. Ct. 3040 (1980).
Further, the union has not been named as a party to this suit. None of the plaintiffs or defendants in this action have pursued the union or any local for any possible wrongdoing. I am unable to locate any authority for the proposition that the nonstatutory labor exemption should be applied to a conspiracy of employers, and their actual or alleged agents. I, therefore, conclude that the nonstatutory labor exemption is inapplicable to plaintiffs' antitrust claims against TMI and Conference.
The conclusion that the nonstatutory labor exemption is inapplicable to these claims does not, however, mandate the conclusion that no exemption exists for all defendants to this action. Plaintiffs are seeking both monetary and injunctive relief from defendant Funds for the alleged antitrust violations. Plaintiffs cite no precedent for the proposition that a qualified employee benefit trust fund may be held liable for antitrust damages or that a court may impose some type of injunctive relief on a qualified employee benefit fund under the antitrust laws.
In fact, plaintiffs admit "it would seem to require more that [sic] just a lack of grace to advocate a position that fiduciary entrusted funds, earmarked for the benefit of participants and their families, should pay for '[Association and Trustee Defendants'] antitrust violations.'" Plaintiffs' Memorandum in Reply to TMI and Conference Motion for Partial Summary Judgment on Antitrust Claims, at 13.
Defendant Funds and Trustees assert that plaintiffs' claims against the Funds should be barred by analogy to LMRA section 301(b).
In Lewis v. Benedict Coal Corp., 361 U.S. 459, 4 L. Ed. 2d 442, 80 S. Ct. 489 (1960), the Supreme Court discussed the implications of section 301(b).
[Section 301(b)] evidences a congressional intention that the union as an entity, like a corporation, should in the absence of agreement be the sole source of recovery for injury inflicted by it. Although this policy was prompted by solicitude for the union members, because they might have little opportunity to prevent the union from committing actionable wrongs, it seems to us to apply with even greater force to protecting the interests of beneficiaries of the welfare fund, many of whom may be retired, or may be dependents, and therefore without any direct voice in the conduct of union affairs. Thus, the national labor policy becomes an important consideration in determining whether the same inferences which might be drawn as to other third-party agreements should be drawn here.
Id. at 470 (footnotes omitted).
Defendants argue that the caselaw following Benedict Coal holds section 301(b) to preclude suits by employers against benefit funds. Plaintiffs respond that section 301(b) is not read by courts to preclude suits by employers to obtain contributions wrongfully made to a fund. See, e.g., Whitworth Brothers Storage Co. v. Central States, 794 F.2d 221, 236 (6th Cir.), cert. denied, 479 U.S. 1007, 93 L. Ed. 2d 701, 107 S. Ct. 645 (1986). Thus, plaintiffs contend "much of the Funds' assets are derived from the conspiratorial acts of Defendants and Plaintiffs are therefore entitled to such monies." Plaintiffs' Consolidated Reply, at 172.
Plaintiffs' argument is unpersuasive. There is no evidence in the record as to how much of the Funds' assets were derived from the alleged conspiracy. The Funds have existed since the mid-1950s and cover many employees who have nothing to do with either plaintiffs or defendants in this case. Plaintiffs' antitrust theories allege a conspiracy beginning sometime in the early 1980s. To allow plaintiffs to recover from the Funds would require recomputing the benefits for all the members covered by the Funds. Not only would determining this create an administrative nightmare, but it may jeopardize the benefits of workers who retired long before the alleged conspiracy was initiated. These are precisely the same concerns which the Supreme Court voiced in Benedict Coal. There simply is no legal basis for allowing plaintiffs to claim that qualified benefit trust funds can be held liable for antitrust violations of contributing employers and employer trustees. Accordingly, I hold the Funds are exempt from antitrust liability by analogy to section 301(b) and will enter judgment in favor of the Funds on counts XI and XII.
TMI and the Conference assert that the Association and Employer plaintiffs lack standing to assert antitrust claims against them. Because of the variety of plaintiffs, I shall review the arguments as to each group separately.
1. Association Plaintiffs
We have recognized that an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
In this case, both Association plaintiffs are organizations who represent their members for purposes of collective bargaining and grievance procedures. They allege that the defendants illegally combined to inflate fringe benefit costs of their members. It is beyond dispute that fringe benefit costs are germane to both Associations' purpose, that of negotiating collective bargaining agreements. Thus, I conclude that the interest MCLAC and ELAA seek to protect, their ability to negotiate fringe benefit contribution rates without the allegedly illegal conspiracy of the defendants, is germane to their purpose as organizations.
Regarding MCLAC's standing as an association, at oral argument on these motions, I asked counsel for plaintiffs about the relief MCLAC was seeking.
[by the Court] Q: What specific relief are you seeking on behalf of MCLAC in the antitrust part of this lawsuit?
[by Mr. Bray] A: We're asking for injunctive relief as part of the request to remove the current trustees, the employer-designated trustees, on the Central Pennsylvania Funds and monetary damages against the trustees and Fund [sic] for damages suffered on behalf of all plaintiffs, including MCLAC.
Q: Do not the individual employers that you represent have to be party to this suit in order to ...