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Colgan v. Premier Electrical Constr. Co.





APPEAL from the Circuit Court of Will County; the Hon. EDWIN G. GRABIEC, Judge, presiding.


This action was commenced in the Circuit Court of Will County to collect monies allegedly owed to plaintiffs as third-party beneficiaries under a collectively bargained labor contract. After a bench trial, judgment was entered for the defendant. The plaintiffs prosecuted this appeal.

The labor contract at issue in this lawsuit involves the electrical contracting industry. Workers in that industry are represented by the International Brotherhood of Electrical Workers (hereinafter IBEW), a large nationwide union organization divided into local chapters that serve specific geographic areas. The employers of workers in the electrical trades hire labor from the local chapter which serves the geographical area of that employer's labor needs, and the terms of the labor contract between the employer and local chapter are specified in an inside agreement. The inside agreement is based upon a nationwide model agreement negotiated by the IBEW and the National Electrical Contractor's Association (hereinafter NECA). NECA is a trade association open to membership on a voluntary basis by employers of workers in the electrical trades.

In 1977, IBEW and NECA negotiated a new model contract to govern the wages, benefits, and other issues that were to prevail in the electrical contracting industry. Sometime early in 1977 the defendant, Premier Electrical Construction Company, an employer of electrical tradesmen in the Joliet, Illinois, area, learned that the new model agreement negotiated between NECA and IBEW would require employers, for the first time, to contribute an amount equivalent to one percent of its gross labor payroll to the National Electrical Industry Fund (hereinafter NEIF). The NEIF is a trust formed to pay contractor's costs for collective bargaining, to enforce and administer collective bargaining agreements, to oversee fringe benefit programs, to promote technological research, to prepare electrical codes, and to promote the electrical industry. The defendant found this NEIF contribution provision objectionable, and before the model contract was incorporated in the regional inside agreement, it sent a letter on May 16, 1977, to Local 176 indicating that Premier would not contribute to the NEIF.

Later in 1977, the NECA/IBEW model contract became the basis for the inside agreement drafted by the Joliet Chapter of NECA and Local 176 of IBEW. Defendant received a preprinted form captioned "Letter of Assent — B" which it was to sign and return to Local 176, thereby indicating its acceptance of the 1977 inside agreement. Premier's agent, Michael S. Hughes, executed the agreement on June 29, 1977, in the following form:

"This is to certify that the undersigned employer has examined a copy of the current approved Inside labor agreement between Joliet Chapter, National Electrical Contractors Association * * * and Local 176, International Brotherhood of Electrical Workers.

The undersigned employer hereby agrees to comply with all of the terms and conditions of employment contained in the above-mentioned agreement and all approved amendments thereto. It is understood that the signing of this letter of assent shall be as binding on the undersigned employer as though he had signed the above referred to agreement including any approved amendments thereto.

This letter of assent shall become effective for the undersigned employer on the 1st day of June, 1977, and shall remain in effect until the 31st day of May, 1978.

If the undersigned employer does NOT intend to renew this assent he shall so notify the local union in writing at least 60 days prior to the termination date."

However, Mr. Hughes did more. To the preprinted letter of assent he attached his May 16 letter and a cover letter stating that Premier agreed to be bound by all the provisions of the labor agreement with the exception of the NEIF provision. Both letters, which were attached to the letter of assent, were subpoenaed for trial from the files of Local 176 and each was produced bearing the "received" date stamp of the Local with the same date as the letter of assent.

No negative response was received by defendant Premier to the counteroffer of its agent, Hughes, and it proceeded to carry out its contractual obligations to its union employees consistent with the terms of the counter-offer. The plaintiffs, trustees of the NEIF, believing that the defendant was bound to make contributions to the NEIF by reason of its 1977 letter of assent, brought this suit as third-party beneficiaries under the inside agreement. The plaintiff-trustees sought the one percent contribution alleged due under the inside labor contract. The court below determined that under these facts, defendant's contract with Local 176 did not require contributions to the NEIF. The plaintiffs believe that decision was in error.

• 1 The first question raised by plaintiffs involves the binding effect of admissions in a verified answer subsequently superceded by an amended answer. At issue is defendant's response to paragraph four of plaintiffs' complaint. That portion of the complaint appears as follows:

"4. That on or about the 29th day of June, 1977, the Defendant, PREMIER ELECTRICAL CONSTRUCTION COMPANY, a Corporation, executed a letter of assent which in part provided that the Defendant authorized the Joliet Chapter of the National Electrical Contractors Association, Inc. to act as its collective bargaining representative for all matters contained in or pertaining to the current approved Inside Labor Agreement between the Joliet Chapter of the National Electrical Contractors Association, Inc., and Local Union 176 — International Brotherhood of Electrical Workers (Exhibit A); that such letter of assent was accepted, signed and approved in Will County, Illinois, has not been amended, modified or ...

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