ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 82-2717).
Before ADAMS, Acting Chief Judge, and GIBBONS and STAPLETON, Circuit Judges.
Jack Moldovan and Jack Draper, the trustees of a multi-employer welfare benefit fund (trustees), appeal from a final judgment in favor of the Great Atlantic & Pacific Tea Company, Inc. (A&P). The trustees sought payment to the fund allegedly due under a collective bargaining agreement. Alternatively they sought recovery under Pennsylvania law or under section 8(a)(5) of the National Labor Relations Act, 29 U.S.C. § 158(a)(5) (1982). The district court held that the trustees claim under the collective bargaining agreement was barred by collateral estoppel, that Pennsylvania law was preempted by federal law, and that only the National Labor Relations Board could enforce section 8(a)(5). We hold that the court erred in holding that the trustees are collaterally estopped from enforcing their claim under the collective bargaining agreement. Thus we reverse.
Jack Moldovan and Jack Draper, are, respectively, the employer and employee trustees of a multi-employer welfare benefit fund created, as authorized by section 302(c) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186(c) (1982), by two labor organizations and five employees. The labor organizations are Locals 590 and 424 of the United Food and Commercial Workers Union, AFL-CIO. The employers are the defendant, A&P, and four other chain store operators. The fund's purpose is to provide group benefits for covered employees in the form of life, accident, and health benefits. The level of benefit is within the discretion of the trustees, with the intention that they "shall provide the maximum amount of benefits which the Fund can, from time to time, furnish consistent with good business practice, after taking into consideration the reasonable reserves to be established and the payment of administration expenses." Joint Appendix at 725 (Trust Fund Agreement and Declaration of Trust, Art I, § 1.2, P2). Eligible fund beneficiaries include current employees of the five employers as well as retirees. While the trustees determine benefits, contributions are determined by collective bargaining. Only one of the labor organizations participating in the fund, Local 590, has a collective bargaining relationship with A&P.
Local 590 and A&P grieved and arbitrated the question of whether a valid collective bargaining agreement existed after the nominal expiration date of their 1977-1980 collective bargaining agreement. The arbitrator ruled that no collective bargaining agreement existed. Local 590 then filed suit in the United States District Court for the Western District of Pennsylvania seeking to modify the arbitrator's decision. The district court entered summary judgment against Local 590 and this court affirmed. See United Food & Commercial Workers International Union, Local 590 v. The Great Atlantic & Pacific Tea Co., 734 F.2d 455 (3d Cir. 1984).
In the meantime, the trustees had filed suit in district court against A&P for A&P's failure to make contributions to the fund in accordance with the alleged collective bargaining agreement between Local 590 and A&P. The trustees' action was stayed pending disposition of the earlier arbitration. Once the arbitration was resolved, however, the district court held that the trustees were collaterally estopped from litigating the question whether A&P owed contributions to the fund because they were bound by the arbitrator's decision that no collective bargaining agreement existed. The trustees contend that the district court's holding is a misapplication of the law respecting the preclusive effect of arbitration awards against third parties.
At the outset we must distinguish some issues that are not presented. If A&P lost an arbitration on an issue and a court confirmed the award, A&P would not be free to relitigate the issue when sued by a third party who did not participate in the arbitration. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 333-37, 58 L. Ed. 2d 552, 99 S. Ct. 645 (1979); Wilkes-Barre Publishing Co. v. Newspaper Guild, Local 120, 647 F.2d 372, 383 (3d Cir. 1981), cert. denied, 454 U.S. 1143, 71 L. Ed. 2d 295, 102 S. Ct. 1003 (1982). conversely, Local 590, which lost the arbitration and the case in which it sought modification, would not be free, in litigation with a third party, to relitigate the issue on which it lost. Local 590 is not, however, a party to this lawsuit.
Moreover, this case is not a suit by employees in the A&P bargaining unit for wages or benefits due under a collective bargaining agreement. When an employee's claim "is based upon breach of the collective bargaining agreement, [the employee] is bound by terms of that agreement which govern the manner in which contractual rights may be enforced." Vaca v. Sipes, 386 U.S. 171, 184, 17 L. Ed. 2d 842, 87 S. Ct. 903 (1967). That result follows, not because of principles of the law of judgment preclusion, but because in the field of labor relations the courts ordinarily defer to collectively-bargained-for, dispute-resolution procedures. Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 736, 67 L. Ed. 2d 641, 101 S. Ct. 1437 (1981).
Even in cases where employees in a bargaining unit sue to enforce claims arguably based upon a collective bargaining agreement, however, the federal labor law policy favoring bargained-for, dispute-resolution mechanisms yields to competing policies in two situations: First, a member of the bargaining unit may bring a separate suit against the employer and the union if he charges a breach of the duty of fair representation in processing a grievance or arbitration, see DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 164, 76 L. Ed. 2d 476, 103 S. Ct. 2281 (1983); Vaca v. Sipes, 386 U.S. at 176-86; Cady v. Twin Rivers Towing Co., 486 F.2d 1335, 1337 (3d Cir. 1973); and, second, a member of the bargaining unit may bring a separate suit if his claim, although perhaps comprehended by the collective bargaining agreement, is also based upon federal statutory rights separate from that agreement, see Barrentine, 450 U.S. at 737; Alexander v. Gardner-Denver Co., 415 U.S. 36, 59-60, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974).
These statutory rights cases define the outer reach of the federal labor law policy of binding members of a bargaining unit to bargained-for, dispute-resolution mechanisms. This court has been careful to preserve the line between instances when members of a bargaining unit are bound by the bargained-for resolution of a dispute and when they are not. In Burke v. Latrobe Steel Co., 775 F.2d 88 (3d Cir. 1985), we held that even members of a bargaining unit could sue their employer for violations of the anti-discrimination clause, 29 U.S.C. § 1140 (1982), and the fiduciary duty clause, 29 U.S.C. § 1104 (1982) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001-1461 (1982). See also Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 939 (3d Cir. 1985); Viggiano v. Shenango China Division of Anchor Hocking Corp., 750 F.2d 276, 280-81 (3d Cir. 1984).
If the plaintiffs were members of the A&P bargaining unit and the dispute involved the interpretation of a collective bargaining agreement containing an arbitration clause, we would agree that such plaintiffs would be bound by the arbitration award. That would follow not as a matter of collateral estoppel, but as a matter of the substantive federal law of labor relations. Where, as here, the dispute is not over the terms of a collective bargaining agreement, however, but is over its existence, even members of the bargaining unit are entitled to a judicial resolution of the question whether such a contract was still in effect. See, e.g., Gariup v. Birchler Ceiling and Interior Co., 777 F.2d 370, 373 n.8 (7th Cir. 1985); International Brotherhood of Electrical Workers, Local 1228 v. Freedom WLNE-TV, Inc., 760 F.2d 8, 10 (1st Cir. 1985); Rochdale Village, Inc. v. Public Service Employees Union, 605 F.2d 1290, 1294 (2d Cir. 1979); International Union v. International Telephone and Telegraph Corp., 508 F.2d 1309, 1313 (8th Cir. 1975); International Ladies' Garment Workers' Union v. Ashland Industries, 488 F.2d 641, 644 (5th Cir.), cert. denied, 419 U.S. 840, 42 L. Ed. 2d 68, 95 S. Ct. 71 (1974).
In this case the matter of dispute between Local 590 and A&P was the existence of a collective bargaining agreement. While Local 590 filed a grievance claiming the contract continued, A&P contended otherwise. The parties agreed to submit to arbitration the question whether the agreement was still in effect; an issue that would ordinarily be resolved by a court. It is far from clear that the federal law of labor relations even requires the conclusion that Local 590's decision to submit that question to arbitration binds the members of the bargaining unit that it represents. The arguments favoring binding members of the bargaining unit in that respect are considerably narrower than those favoring binding them to arbitral contract interpretations. In a broad sense, a decision by a union to submit to arbitration the question of the continued existence of a contract is an exercise of its collective bargaining authority. In a narrower sense, arbitration is not bargaining. Nevertheless we assume, arguendo, that an arbitrator's decision on an issue ordinarily subject to judicial resolution does, as a matter of substantive federal labor law, bind members of the bargaining unit.
Moldovan and Draper, however, are not members of the A&P bargaining unit. They are trustees of a fund that has as its beneficiaries employees in five bargaining units, not all of whom are even represented by Local 590, and retirees who are not members of any bargaining unit. Benefits paid from the fund are determined by the trustees independent of the collective bargaining process. The fund trustees, who by virtue of section 302(c) of the LMRA must equally represent employers and employees, have fiduciary obligations on behalf of all the beneficiaries. The level of contribution for each participating employer, however, is determined by collective bargaining between the employer and the representative of the bargaining unit. Therefore, the level of contribution may differ for each of the five employer members. In addition, bargaining between the employer and the union representative over the level of contributions or the obligation of the employer even to make contributions may affect the wages and employment opportunities of the members of that unit. This in turn may affect not only the funds available to the trustees to pay benefits, but the bargaining posture of the collective bargaining representatives in the other four units, where job preservation may be less of an issue than preservation of the solvency of the fund. There is, in short, an inherent conflict between the interests of members of Local 590's A&P bargaining unit and the interests of other fund beneficiaries. See U.M.W. Health & Retirement Funds v. Robinson, 455 U.S. 562, 71 L. Ed. 2d 419, 102 S. Ct. 1226 (1982); NLRB v. Amax Coal Co., 453 U.S. 322, 336-38, 69 L. Ed. 2d 672, 101 S. Ct. 2789 (1981).
None of the policies that have been identified as favoring arbitral resolutions in the collective bargaining context apply to this case. The underlying dispute is not one as to which labor arbitrators are deemed expert; indeed the existence of the contract is ordinarily a matter for the courts. The trustees are not, and lawfully cannot be, participants in the collective bargaining process. The potential for conflict of interest that is the basis for the duty of fair representation exception is, in the case of the fund and the bargaining unit, patent. ERISA confers on fund beneficiaries statutory rights entirely apart from those that are collectively-bargained-for.
The Supreme Court and this court have consistently held that bargaining representatives do not represent trustees of benefit plans. For example, in Central States v. Central Transport, Inc., 472 U.S. 559, 105 S. Ct. 2833, 2843, 86 L. Ed. 2d 447 (1985), the Court held that a trustee need not rely on the union to monitor an employer's compliance with the plan. Similarly, in Schneider Moving & storage co. v. Robbins, 466 U.S. 364, 370-76, 80 L. Ed. 2d 366, 104 S. Ct. 1844 (1984), the Supreme Court held that trustees of a multi-employer fund may seek judicial enforcement of an employer's obligation, contained in a collective bargaining agreement, to contribute to a fund without resorting to arbitration of the underlying dispute over the meaning of that agreement. In Robbins, Justice Powell explained.
These are multiemployer trust funds. Each of the participating unions and employers has an interest in the prompt collection of the proper contributions from each employer. Any dimunition of the fund caused by the arbitration requirements of a particular employer's collective-bargaining agreement would have an adverse effect on the other participants. The enforcement mechanisms established in the trust agreements protect the collective interests of the parties from the ...