United Marine Division, I. L. A., Local 333, A. F. of L., an Unincorporated Association, James P. Mcallister, Edward Morris, Lloyd Dalzell, William v. Bradley, Louis Ziegler and Joseph O'hare, Appellants, v. Essex Transportation Co., a Corporation of the State of New Jersey, Charles E. Mccarren, Rita Keyasko and John J. Mccloskey, 216 F.2d 410 (3d Cir. 1954)

This is an appeal from a judgment for the defendant in a suit brought to compel the payment by the employer of money to a pension trust for employees.¹ 

The plaintiff alleges that the defendant company orally agreed to make payments to six trustees of a welfare fund. The defendants say that this oral promise, if it was made, is insufficient to hold them liable for the payments because of a provision in the Labor Management Relations Act of 1947. 29 U.S.C.A. § 141 et seq. The district court was persuaded that this position was correct and ordered judgment for the defendants without submitting to the trier of the fact the question whether the promise to pay was made as alleged. We are, therefore, confronted at this point with a question of law solely and this question involves the interpretation of Section 186(c) (5) (B) of the statute referred to.

The two provisions to which we must give attention are as follows:

"(a) It shall be unlawful for any employer to pay or deliver, or to agree to pay or deliver, any money or other thing of value to any representative of any of his employees who are employed in an industry affecting commerce.

"(b) It shall be unlawful for any representative of any employees who are employed in an industry affecting commerce to receive or accept, or to agree to receive or accept, from the employer of such employees any money or other thing of value." 29 U.S.C.A. § 186(a) and (b).² 

It is undisputed that at the time of the alleged oral agreement there was a welfare fund set up which was operated by six trustees, three of whom were chosen by the plaintiff union and three by the Marine Towing and Transportation Employers' Association. This fund was set up by an agreement in writing and the trustees had also established, through an agreement in writing, relations with a bank of deposit for custody of the funds and payment as specified in their agreement. But Essex Transportation Co. was not a member of this association and, therefore, not a party to any contract which the association made with the union.

We are faced with the question, therefore, whether an agreement such as the one alleged comes within the prohibition of the language quoted from Section 186. There is no doubt that the employees of Essex were employed in an industry affecting commerce. Our question becomes whether an agreement to pay money to these six trustees is a promise to pay to "any representative of any of his employees."

We approach the question with the thought in mind that these welfare funds represent a social device to be encouraged. See Upholsterers' International Union of North America v. Leathercraft Furniture Company, D.C. E.D. Pa. 1949, 82 F. Supp. 570. We are also conscious of the fact that abuses in the use of these funds had been the subject of public discussion. It was thought that in some instances employers had been induced to agree to pay into welfare funds over which they had no control and, indeed, over which members of the union itself had no knowledge or control. This appears quite clearly in the discussion of this portion of the Taft-Hartley Act when the matter was before the Congress.

Thus, Senator Taft stated: "* * * the purpose of the provision is that the welfare fund shall be a perfectly definite fund, that its purposes shall be stated so that each employee can know what he is entitled to, can go to court and enforce his rights in the fund, and that it shall not be, therefore, in the sole discretion of the union or the union leaders and usable for any purpose which they may think is to the advantage of the union or the employee * * * The tendency is to demand a welfare fund as much in the power of the union as possible. Certainly unless we impose some restrictions we shall find that the welfare fund will become merely a war chest for the particular union * * *" 93 Cong. Rec. 4746-7 (1947).

Senator Byrd stated: "* * * I happen to have been a patron of a similar amendment to the Case bill last year which was adopted by a substantial majority. The reason that amendment was offered * * * was because Mr. John Lewis, the president of the United Mine Workers, was attempting to obtain a royalty of 10 cents a ton on all coal mined, the money thus obtained to be placed in a fund to be controlled exclusively by the labor union." 93 Cong. Rec. 4678 (1947).

Senator Ball stated: "* * * the sole purpose of the amendment is not to prohibit welfare funds, but to make sure that they are legitimate trust funds, used actually for the specified benefits to the employees of the employers who contribute to them, and that they shall not degenerate into bribes." 93 Cong.Rec. 4678 (1947). See also 93 Cong.Rec. 3562-66, 3634 (1947).

With this background it is not hard to see what the lawmakers were after. They were forbidding money to be paid to representatives of unions unless through a trust fund, the requirements for which were set up in some detail.³ 

We think that in this instance the promise of the employer (if indeed the promise was made)⁴  was not a promise "to any representatives of any of his employees." The promise alleged was to pay these trustees. These trustees were not, in our judgment, representatives of the employees. They were trustees of a welfare fund. It is true that they were chosen half and half by the employers' association and this union. But we think that when set up as a board, as they were in this case, these individuals are not acting as representatives of either union or employers. They are trustees of a fund and have fiduciary duties in connection therewith as do any other trustees. The terms under which they act were carefully spelled out.

We think that the promise in this case is outside the evil which the Congress was endeavoring to erase in the sections of the statute which we have quoted. Since the fact situation is outside that evil, we do not think we should enlarge an application of the statute to void the type of arrangement which has met with legislative sanction, judicial approval and is a growing trend in employer-employee relations.

The judgment of the district court will be reversed and the case remanded for further proceedings not inconsistent with this opinion.