DUNIWAY, Circuit Judge.
The limited issues on this appeal are whether the federal court has jurisdiction of the case under § 301(a) or § 302(e), or both, of the Taft-Hartley Act, 29 U.S.C. §§ 185(a) and 186(e), respectively. The district court found jurisdiction lacking. We reverse.
In 1946, Local 32 and the other local unions of the United Association of Journeymen' and Apprentices of the Plumbing and Pipefitting Industry of the United
The 1951 statewide collective bargaining agreement and each subsequent renewal of it contained language referring to a certain trust agreement creating the Washington State Plumbing and Pipefitting Industry Health and Welfare Trust ("State Welfare Trust"), a joint labor-management trust fund organized under the provisions of § 302(c) of the Taft-Hartley Act, 29 U.S.C. § 186(c). The statewide agreement obligated employers to make contributions to the State Welfare Trust at a specified rate per employee per hour worked. With the contributed funds, the trustees of the State Welfare Trust ("State Trustees") were to and did provide a program of health and welfare benefits, including medical, time-loss, and death benefits, to all employees in the statewide bargaining unit.
In 1967, Local 32, representing union employees in the Seattle area, withdrew from the statewide bargaining unit and created a new and independent bargaining unit limited to the geographical jurisdiction of Local 32. This the Local 32 members were privileged to do under § 7 of the National Labor Relations Act, 29 U.S.C. § 157. Local 32 and the employers in the Seattle area entered a new collective bargaining agreement, effective January 1, 1968, which provided that thereafter the employers would make contributions to a newly-created Seattle Area Plumbing and Pipefitting Industry Health and Welfare Trust ("Seattle Area Welfare Trust").
Shortly after the establishment of the Seattle Area Welfare Trust, its trustees demanded that the State Trustees relinquish to the Seattle Area Welfare Trust a portion of certain uncommitted reserves accumulated in the State Welfare Trust. The demand was refused, and this action followed.
The reserves in question represented (1) employer contributions exceeding the amount of insurance premiums paid by the trust and trust administrative expenses; (2) forfeitures of the credits of union members, including members of Local 32, under the so-called "hour bank" eligibility program;
Plaintiffs, appellants here, are 14 individual members of Local 32 claiming to represent the class of all 1400 of such members.
In their amended complaint the plaintiffs assert: (1) that they are entitled to an accounting by the State Trustees, (2) that they are entitled to a declaration of their rights in the reserves, (3) that the State Trustees should be required to apply a portion of the reserves for their benefit, (4) alternatively, that the State Trustees should be required to transfer a portion of the reserves to the Seattle Area Welfare Trust, (5) or that the State Welfare Trust be terminated and a portion of its assets be distributed to them or for their benefit, (6) that the State Trustees should be enjoined from using a portion of the reserves for the benefit of anyone but Local 32 members.
As to jurisdiction, the plaintiffs claim that the State Trustees are violating the statewide collective bargaining agreement, a claim over which the federal courts have jurisdiction under § 301(a) of the Taft-Hartley Act, and that they are violating § 302(c)(5) of the same act, a claim over which the federal courts have jurisdiction under § 302(e).
II. The Trial Court's Decision.
The State Trustees moved for summary judgment on the ground that the court did not have jurisdiction under either § 301(a) or § 302(e). The court granted the motion and entered a judgment reading as follows:
(The language in italics was interlineated by the Judge.)
We construe this as a ruling that the court lacked subject matter jurisdiction, not as a decision that the plaintiffs have no claim even if the court has jurisdiction. This is a case in which the jurisdiction of the federal court depends upon the subject matter of the claim, not the status of the parties, as in diversity cases, or the locus in which the claim arose, as in federal enclave cases. Bell v. Hood, 1946, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939, tells us that in subject matter jurisdiction cases, jurisdiction "is not defeated . . . by the possibility that the averments might fail to state a cause of action [claim] on which [plaintiffs] could actually recover. . . . [T]he failure to state a proper cause of action [claim] calls for a judgment on the merits and not for a dismissal for want of jurisdiction" (327 U.S. at 682, 66 S.Ct. at 776). In the case at bar, the court found that it did not have jurisdiction and dismissed on that ground. It did not take the next step and decide that the claim was bad on the merits. As the Court said in Bell v. Hood, that issue "must be decided after and not before the court has assumed jurisdiction over the controversy." Id.
We conclude that the court did have jurisdiction under both § 301 and § 302(e). Our reluctance to hand down a decision that appears to enlarge the jurisdiction of the federal courts—to "fire [a] jurisdictional cannon which will be heard on future battle grounds" (Goldberg, J., in Mumford v. Glover, 5 Cir., 1974, 503 F.2d 878, 880)—is somewhat diminished by the action of the Congress in adopting the Employee Retirement Income Security Act of 1974 (Pub.L. 93-406, 88 Stat. 829). That Act imposes very broad jurisdiction upon the federal
III. Section 301(a) Jurisdiction.
Here there is no dispute that the statewide plumbing and pipefitting industry does affect commerce within the statutory meaning. See, e. g., Local 44 and Washington State Association, 195 N.L. R.B. 225 (1972). Our inquiry then is whether the following three jurisdictional requisites are satisfied: (1) a contract; (2) a claim of violation; and (3) a "between" employer and labor organization or "between" labor organizations element.
To find the first element, we examine the relationship between the statewide collective bargaining agreement and the State Welfare Trust agreement. Each of the successive statewide bargaining agreements, including the 1965 agreement relevant here, provided in relevant part:
Article IV of the trust agreement thus referred to as a supplement to the labor-management collective bargaining agreement provides in relevant part:
Separate documents are frequently used to define the rights and obligations contemplated in a single conceptual contract. That the parties here intended the trust agreement to form "part and parcel" of the collective bargaining contract is evident. We therefore conclude that the word "contract" as it appears in § 301(a) encompasses the provisions of a welfare trust, such as this, established as a supplement to and referred to in a collective bargaining agreement. The two together are the "contract." AFL v. Western Union Telegraph Co., 6 Cir., 1950, 179 F.2d 535, 538; Smith v. DCA Food Industries, Inc., D.Md., 1967, 269 F.Supp. 863, 868. Cf. Retail Clerks International Association v. Lion Dry Goods, Inc., 1962, 369 U.S. 17, 82 S.Ct. 541, 7 L.Ed.2d 503 (the word "contracts" in § 301 is not limited to collective bargaining agreements but includes strike settlement agreements, for example, as well).
To establish § 301(a) jurisdiction, plaintiffs must further allege a breach of the contract. Beriault v. Local 40, Super Cargoes & Checkers, ILWU, 9 Cir., 1974, 501 F.2d 258, 261. This the plaintiffs have done by pointing to two provisions of the trust agreement. Article VIII, Section 2, of that agreement specifies:
Section 3 of the same article further specifies that the trustees shall establish eligibility rules taking into account "all factors necessary for the proper administration and the financial security" of the health and welfare plan. Plaintiffs assert that the trustees' refusal to allocate to or for the benefit of the withdrawing but otherwise "qualified" Local 32 members a prorated share of the reserves was not "necessary for the proper administration and financial security of the trust fund," and that this conduct therefore violated Section 2 of Article VIII of the trust agreement and an implied duty of the trustees not to adopt arbitrary and capricious eligibility rules. Cf. Giler v. Board of Trustees of Sheet Metal Workers Pension Plan, 9 Cir., 1974, 509 F.2d 848 (No. 73-1149) (applying the arbitrary and capricious standard to eligibility rules framed by pension plan trustees in a case involving an alleged violation of § 302(c)(5), but finding no arbitrariness or caprice).
Whether these allegations are substantial enough to carry the day for plaintiffs on the merits does not concern us. We think the plaintiffs have sufficiently alleged a breach of the collective bargaining contract to satisfy that element in the jurisdictional formula. Compare Fiorelli v. Kelewer, E.D.Pa., 1972, 339 F.Supp. 796, aff'd without published opinion, 3 Cir., 1973, 474 F.2d 1340, on which the defendant State Trustees rely, where the court technically found jurisdiction but held there was no cognizable § 301(a) claim because the plaintiffs had alleged neither the existence nor the breach of any labor-management contract. Here plaintiffs have alleged a breach.
The State Trustees argue, however, that plaintiffs fail the "betweenness" requirement of § 301 jurisdiction because neither a labor union nor an employer is a party to this lawsuit. The dispute here, as the dismissal of the State Association and the State Employers Council from the case underscores, is between the members of Local 32 on one hand and the State Trustees on the other. But that does not foreclose federal jurisdiction. As the Supreme Court held in Smith v. Evening News Association, 1962, 371 U.S. 195, 83 S.Ct. 267, 9 L.Ed.2d 246, § 301 refers to "contracts" between an employer and a labor organization—not to "suits" between them. In Smith the Court held that, without joining the union as a party plaintiff, individual employees can sue under § 301 to enforce rights arising from a labor contract.
We do not accept the State Trustees' argument that Smith nonetheless implies that either a union or an employer must be a party to the action if § 301 is to be invoked. We think that such a requirement would be inconsistent with the Court's instruction in Smith that § 301(a) is not to be given a narrow reading. 371 U.S. at 199, 83 S.Ct. 267. See Textile Workers v. Lincoln Mills, 1957, 353 U.S. 448, 456-57, 77 S.Ct. 912, 1 L.Ed.2d 972. Although this precise point does not seem to have been expressly considered by any other federal court, we note that at least one district court has accepted jurisdiction under § 301(a) in a suit by an individual employee against the trustees of a labor-management pension trust where neither the union nor the employer was a party. Brune v. Morse, E.D.Mo., 1972, 339 F.Supp. 159, aff'd, 8 Cir., 1973, 475 F.2d 858 (action challenging pension eligibility rules).
We hold that § 301(a) jurisdiction exists over the claim of the plaintiffs in this case.
IV. Section 302(e) Jurisdiction.
Section 302(e) of the Taft-Hartley Act, which the Local 32 members contend provides a second, independent jurisdictional base for their action, states in relevant part:
Section 302 in general forbids an employer to make any payment of money to any representatives of its employees and forbids such representatives to accept such payments. Section 302(c)(5) creates an exception for payments to an employee welfare or pension fund by stating that the general prohibitions of § 302 do not apply:
Plaintiffs rely on the "sole and exclusive benefit" language and argue that payments which were made by Local 32 employers to the State Welfare Trust for the benefit of their employees and to which a share of the reserves that the State Trustees refuse to relinquish is attributable will be used by the State Trustees for the benefit of persons other than Local 32 employees, that is, for the benefit of the remaining beneficiaries of the State Trust.
The dominant legislative purpose of the § 302 restriction on payments to employee representatives was to prevent employers from tampering with the loyalty of union officials, and to prevent union officials from extorting tribute from employers. United States v. Ryan, 1956, 350 U.S. 299, 304-06, 76 S.Ct. 400, 100 L.Ed. 335; Bowers v. Ulpiano Casal, Inc., 1 Cir., 1968, 393 F.2d 421, 425. Whether § 302(e) was meant to extend beyond cases involving the possibilities of such corruption is unclear. Although there are indications in congressional debates that § 302(e) was intended to have a broad sweep, the legislative history is inconclusive. Lugo v. Employees Retirement Fund, E.D.N.Y., 1973, 366 F.Supp. 99, 101 n. 2. Compare Copra v. Suro, 1 Cir., 1956, 236 F.2d 107, 115 (tentatively reading § 302(e) to create a broad federal equity jurisdiction over the administration of welfare funds "whose life in effect depends on the permissive exception of § 302(c)(5)") with Bowers v. Ulpiano Casal, Inc., supra, 393 F.2d at 425 (acknowledging suggestions in the debates that employees could invoke § 302(e) to challenge the administration of such funds but repudiating the broad interpretation proposed in Copra). See generally Legislative History of the Labor Management Relations Act, 1947 (U.S. Govt. Printing Office 1948).
Notwithstanding ambiguous legislative history, § 302(e) jurisdiction has been successfully invoked in a number of cases where it was alleged, as here, that a trust fund was not being administered for the "sole and exclusive benefit" of the employees of the contributing employers. E. g., Blassie v. Kroger Co., 8 Cir., 1965, 345 F.2d 58 (action by contributing employers successfully challenging, among other administrative matters, the use of trust property for a pharmacy offering discounts to persons other than trust beneficiaries); Lugo v. Employees Retirement Fund, E.D.N.Y., 1973, 366 F.Supp. 99 (action by employee challenging eligibility requirements for disability and retirement benefits under the provisions of a certain pension fund); Insley v. Joyce, N.D.Ill., 1971, 330 F.Supp. 1228 (action by employee challenging "break-in-service" provision in pension plan excluding for eligibility purposes any service
Raymond v. Hoffmann, a case much like the one at bar, found § 302(e) jurisdiction without distinguishing the types of cases that might be cognizable under that section. However, based on language in Bowers, supra,
Accepting this distinction for the moment, we conclude that the claim of the plaintiffs in this case involves a "structural" rather than an "administrative" matter. Here, a substantial number of the employer parties to the State Welfare Trust have withdrawn and are no longer making contributions to it. Those employers and their employees have agreed to set up and have set up a new Seattle Area Welfare Trust. It is unclear whether those employees of Local 32 who were beneficiaries before the withdrawal remained beneficiaries of the State Welfare Trust or, if so how and to what extent. The action of the State Trustees in forfeiting the hour-bank credits of the Local 32 members indicates that the trustees no longer consider them to be beneficiaries. Before the withdrawal, the reserves were held for the benefit of all employees, statewide. After the withdrawal, and if the Local 32 members ceased to be beneficiaries, the number of beneficiaries was markedly reduced. Yet the State Trustees still have the same reserves, and appear to take the position that they are now held only for the benefit of beneficiaries other than the Local 32 members. Surely these changes do not involve mere administration of the trust. They involve a rather drastic change in its structure. The plaintiffs here are not seeking individual specific benefits that have been denied them. They seek a determination that, as a group, Local 32 members have interests in the trust as a whole which have been denied to them.
The structural deficiency test does not depend solely on the structure of the trust fund at its inception. As the court in Porter, supra, reasoned:
In Insley, supra, which involved a "break-in-service" disqualifying rule adopted by trustees of a pension fund, the court refuted the trustees' claim that no "structural" deficiency was alleged, using the following reasoning:
Furthermore, in Lugo, supra, the court offered an even broader interpretation of the structural deficiency requirement:
We agree with this interpretation.
We think that this result is consonant with our previous cases where we have considered on the merits actions based on § 302(c)(5), challenging eligibility rules established by trustees of labor-management pension funds. In Lee v. Nesbitt, 9 Cir., 1972, 453 F.2d 1309, 1311, involving a "break-in-service" rule, we stated:
There, however, we did not reach the jurisdictional question because federal jurisdiction rested on diversity of citizenship. In Giler v. Board of Trustees of Sheet Metal Workers Pension Plan, 9 Cir., 1974, 509 F.2d 848 also involving a "break-in-service" rule, we adhered to the Lee standards, stating:
We there affirmed the lower court's dismissal of the action because the plaintiff failed to show that the rule was unreasonable or that the trustees arbitrarily or capriciously enforce the rule with respect to him. We did not discuss jurisdiction.
We express no opinion as to the merits of plaintiffs' claim(s). We only hold that the district court had jurisdiction under both § 301(a) and § 302(e) of the Taft-Hartley Act.
Reversed and remanded for further proceedings.
Many federal courts have accepted § 301(a) jurisdiction in disputes involving welfare and pension plans where the union, the employer, or both, were involved in the lawsuit. E. g., Tolbert v. Union Carbide Corp., 4 Cir., 1974, 495 F.2d 719 (§ 301 jurisdiction existed, and therefore federal substantive law applied, for employee's claim against employer for benefits under disability and pension plans for injury sustained while laid off); AFL v. Western Union Telegraph Co., 6 Cir., 1950, 179 F.2d 535 (action by employee against employer for pension benefits); Rothlein v. Armour and Co., W.D.Pa., 1974, 377 F.Supp. 506 (action by employees to determine rights on transfer from one pension plan to another); International Union of Brewery Workers v. Duke & Co., Inc., W.D.Pa., 1974, 373 F.Supp. 778 (suit by union to determine rights of participant union members upon termination of business and pension plan); Sheet Metal and Roofing Contractors' Association v. Liskany, S.D.Ohio, 1974, 369 F.Supp. 662 (action by employers against trust employees for diversion of trust funds; jurisdiction invoked under both §§ 301 and 302); International Association of Machinists, Lodge 1194 v. Garwood Industries, Inc., N.D.Ohio, 1973, 368 F.Supp. 357 (action by former employees asserting rights to pension payments from employer on the closing of a plant and termination of pension plan); Local 626, United Bhd. of Carpenters v. Delaware Contractors Association, D.Del., 1972, 344 F.Supp. 1281, aff'd per curiam, 3 Cir., 1973, 477 F.2d 564 (action to determine lawfulness of administration of certain vacation fund); International Union UAW v. Anaconda American Brass Co., E.D.Mich., 1972, 340 F.Supp. 651, modified, 6 Cir., 1973, 475 F.2d 682 (action by union involving rights of laid-off workers to early retirement benefits under pension agreement); Knoll v. Phoenix Steel Corp., E.D. Pa., 1971, 325 F.Supp. 666, aff'd, 3 Cir., 1972, 465 F.2d 1128, cert. denied, 1973, 409 U.S. 1126, 93 S.Ct. 941, 35 L.Ed.2d 257 (action by former employees to discontinue pension fund and distribute assets to beneficiaries upon closing of plant); United Brick and Clay Workers v. International Union of District 50, UMW, E.D.Mo., 1970, 315 F.Supp. 224, aff'd, 8 Cir., 1971, 439 F.2d 311 (action by employees who selected a new union against old union and employer to continue pension plan in effect by substituting new union for old); Hauser v. Farwell, Ozmun, Kirk & Co., D.Minn., 1969, 299 F.Supp. 387 (action by former employees to recover money in pension fund upon plant closing); Raymond v. Hoffmann, E.D.Pa., 1966, 284 F.Supp. 596 (action by trustees of new local union pension plan formed after union schism against trustees of old union's pension plan for aliquot share of trust reserves under a contract made between the unions); Smith v. DCA Food Industries, Inc., D.Md., 1967, 269 F.Supp. 863 (action by certain employees against employer and union for pension benefits which were denied upon plant closing); Bey v. Muldoon, E.D.Pa., 1963, 217 F.Supp. 404 (action involving interests of longshoremen in technological improvement fund set up under collective bargaining contract); Local 90, Stove Mounters' International Union v. Welbilt Corp., E.D.Mich., 1959, 178 F.Supp. 408, aff'd without opinion, 6 Cir., 1960, 283 F.2d 868 (action to compel employer's payments to pension fund); United Construction Workers v. Electro Chemical Engraving Co., S.D.N.Y., 1959, 175 F.Supp. 54 (action to compel employer's payments to welfare and pension funds). See also Hammil v. Stubnitz Spring Division, E.D.Pa., 1973, 85 L.R.R.M. 2231; International Union of Brewery Workers v. Stegmaier Brewing Co., M.D.Pa., 1972, 79 L.R.R.M. 2765; Retail Clerks Union, Local 1460 v. Newberry, Wabash, Inc., N.D.Ind., 1971, 79 L.R.R.M. 2847; Abruscato v. Local 199, Industrial Workers, S.D.N.Y., 1968, 69 L.R.R.M. 2537.
However, the Bowers court interpreted § 302(e) much more narrowly than the case before it required. Stripped of surplusage, the holding of Bowers is really that § 302(e) does not confer federal jurisdiction over claims of wrongful diversion of trust funds brought against third parties who are neither unions, employers, nor trustees, who allegedly received monies from the fund "with knowledge that such transactions were illegal, imprudent, or in breach of fiduciary obligations." 393 F.2d at 422, 426. Identical claims against the principal parties apparently were not dismissed for want of jurisdiction and were not before the Bowers court.