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Agathos v. Starlite Motel

argued: August 19, 1992.

JOHN AGATHOS AND LEONARD DEMARSICO, AS TRUSTEES OF THE LOCAL 4-69 WELFARE FUND AND THE LOCAL 4-69 PENSION FUND, AND LOCAL 69, HOTEL EMPLOYEES AND RESTAURANT EMPLOYEES INTERNATIONAL UNION, BY ITS PRESIDENT, JOHN AGATHOS, APPELLANTS
v.
STARLITE MOTEL



ON APPEAL from the UNITED STATES DISTRICT COURT for the DISTRICT of NEW JERSEY. (Civ. No. 89-02429)

Before: Hutchinson, Cowen and Weis, Circuit Judges

Author: Cowen

Opinion OF THE COURT

COWEN, Circuit Judge.

Plaintiff trustees of the jointly-administered Local 4-69 Welfare Fund and the Local 4-69 Pension Fund ("Funds") brought this action pursuant to section 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1145 (1988), claiming entitlement to welfare and pension fund contributions for unreported employees of defendant Starlite Motel ("Starlite"). The Funds also sought reimbursement for medical claims paid to a former Starlite employee who was ineligible to receive payments. Plaintiff Local 69, Hotel Employees International Union ("Union") brought this action under section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185 (1988), seeking membership dues for Starlite's unreported employees, all of whom were non-union. The district court decided to leave the parties as it found them, and entered judgment in favor of Starlite.

We will vacate the district court's judgment and remand for further proceedings consistent with this opinion.

On the eve of trial before the district court, the parties stipulated to what they perceived as the relevant facts and agreed that only legal Conclusions remained. The stipulated facts are as follows:

From and after May, 1979, and through the present time, defendant Starlite Motel ("Starlite") has been owned and operated as a motel in Jersey City, New Jersey, by Henry and Irene Dabrowski. Dabrowski's testimony is that shortly after the Dabrowski's [sic] assumed ownership of Starlite, two men identifying themselves as representatives of the Hotel & Restaurant Employees and Bartenders Union Local 4 sought to have him recognize the Union and sign a collective bargaining agreement with the local Union. Dabrowski initially refused. Several meetings occurred thereafter. The Local 4 representatives never proved to Dabrowski that they represented a majority of the employees at Starlite. They did tell Dabrowski that picketing would occur unless he signed an agreement. Dabrowski thereupon agreed to recognize the Union. He states that he then agreed with the Union representatives to report that he employed only two employees. He states that the Union representatives agreed to this limitation. After the subsequent merger of Local 4 into Local 69, no former Local 4 personnel are available. Thus Local 69 has no testimonial evidence on this point to confirm or refute Dabrowski's testimony.

Shortly thereafter under date of May 31, 1979 Dabrowski, for Starlite, entered into a collective bargaining agreement with Local 4. The agreement recognized the Union and covered 'all workers employed by the Employer in crafts covered by this agreement' (i.e. maids and housekeepers) (emphasis supplied).

The agreement contained a self-renewal provision in Article XXI which provided that the agreement shall 'be automatically renewed for a period of one year from such date and from year to year thereafter, unless either party notifies the other by registered mail at least thirty (30) days before termination of this agreement or renewal hereof that changes are to be negotiated.' No notice of change was ever given by either party. No new contract was ever negotiated either by Local 4 or by Local 69 after the merger. The Union contends that the agreement self-renewed during all pertinent periods and is currently in effect. The Employer contests this.

The agreement also provided that defendant Starlite contribute to plaintiff Health and Pension Funds ("Funds") on behalf of each 'steady' bargaining unit employees [sic], employed by Starlite Motel, and remit initiation fees and monthly dues, withheld from Union members' pays [sic], to plaintiff Union. The agreement also provided that defendant would employ only maids and housekeepers who were members in good standing of the Union.

Defendant employed up to ten employees at any one time from 1979 to 1989. Nevertheless, defendant made contributions to the Funds on behalf of only two individuals, Zuzanna Podkowa and Elizabeth Matuszcak. Starlite also submitted dues payments supposedly deducted from these two employees' wages. This procedure was continued even after both women left the employ of Starlite. Defendant's reports to the Union and Funds simply showed Podkowa and Matuszcak as continuing in employment and did not show any deletions or additions. Other non-union members were employed throughout this period without notice or payment to the Union or Funds.

On January 30, 1983 Local 4 merged with plaintiff Local 69. The benefit funds were merged at the same time and became the Local 4-69 Welfare and Pension Funds.

Defendant initially made its fund contribution for the two employees based upon the contract rate of $23.00 per month. Thereafter from time to time defendant increased the contribution rates to the same rate as the Local had negotiated with the local Motel Association. Defendant was not a member of the local Motel Association. Defendant's owner maintained that these increases were paid after Discussion with Union representatives who visited the motel from time to time. Monthly billing sheets reflecting these increased rates were sent by the Funds to Starlite.

Zuzanna Podkowa left defendant's employ on June 30, 1986. After leaving defendant's employ, Mrs. Podkowa filed medical claims with the Fund. Fund records, based on the employer contributions, showed Mrs. Podkowa was still employed by defendant. Since contributions were current, she was considered eligible and the claims in the amount of $11,203.67 were paid. Zuzanna Podkowa would not have been eligible for coverage if her true employment status were known.

Because of information disclosed in Mrs. Podkowa's subsequent claims, Local 69 and the Funds sought audit of defendant's books. This was refused. Defendant thereupon stopped payment of dues and Fund contributions. Suit was instituted. Subsequent audit for the period from January, 1984 through December 31, 1990 conducted during discovery showed that:

Welfare contributions due

were: $52,665.00

Pension ...


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