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August 5, 1982


The opinion of the court was delivered by: Shadur, District Judge.


Chicago District Council of Carpenters Pension Fund, Chicago District Council of Carpenters Health and Welfare Fund and Chicago District Council of Carpenters Apprentice and Training Fund (collectively "Trust Funds") bring this action against Joseph L. Dombrowski ("Dombrowski") for unpaid contributions to Trust Funds. Trust Funds have moved in limine for the exclusion of any evidence as to fraud or duress on the part of Chicago District Council of Carpenters ("Union") in procuring Dombrowski's signature on the collective bargaining agreement.*fn1 For the reasons stated in this memorandum opinion and order that motion is granted.

Dombrowski contends his promise to make fund contributions is unenforceable because the collective bargaining agreement itself is unenforceable. Trust Funds essentially argue the two sets of promises are independent of each other.

Under traditional contract law third party beneficiaries are subject to any contract defenses generally available against the contracting parties themselves. In an obvious sense trustees of employee benefit funds are third party beneficiaries of the collective bargaining agreements that require contributions to those funds: Trustees are not signatories to the contracts, but contract provisions are deliberately inserted for their benefit as such trustees.

Nonetheless many courts have held, following the lead of Lewis v. Benedict Coal Corp., 361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960), that the full range of third party beneficiary doctrine does not apply to the collective bargaining agreement. In Benedict Coal the employer, sued by trustees for delinquent contributions, charged the union had violated the no-strike clause contained in the contract and sought to set off any damages caused by the strike against any delinquent contributions. That argument was rejected by a 7-1 Supreme Court decision.

But an employer is not barred from raising all defenses based on the contract. Just last Term, in Kaiser Steel Corp. v. Mullins, ___ U.S. ___, 102 S.Ct. 851, 70 L.Ed.2d 833 (1982), the Supreme Court dealt with employer contributions to a trust fund partly linked to whether or not it purchased coal for producers under contract with the union. When the trustees sued for delinquent contributions the employer successfully defended by arguing such contributions were void and unenforceable as violative of Sections 1 and 2 of the Sherman Act and Section 8(e) of the National Labor Relations Act. In the Court's view contributions would not be ordered because the very act of making a contribution was unlawful.

Fraud and duress defenses do not fit squarely within either Benedict Coal or Kaiser Steel. In Benedict Coal the conduct the employer sought to raise as a defense was unrelated to the alleged delinquencies. In contrast, Dombrowski asserts fraud and duress in the formation of the very contract that established the right to the contributions. But Kaiser Steel does not provide direct precedent either. There the very act of making the required contributions was illegal. Here the contributions themselves would be wholly lawful, but Dombrowski argues he should not have to make them because his consent to the underlying contract (including the promise to contribute) was not validly obtained.

Nor does Kaiser Steel provide a clear guide to resolution of the question. It contains two conflicting hints as to the continued scope and vitality of Benedict Coal:

At one point in the opinion the Court states, 102 S.Ct. at 859 n. 8:

  As the Court of Appeals recognized, "[T]hird party
  beneficiaries, like the Trustees here, are subject to
  the contract defenses of non performing promissors."
  206 U.S.App.D.C. 334, 344, 642 F.2d 1302, 1312. In
  this respect, pension fund trustees have no special
  status which exempts them from the general rule that
  courts do not enforce illegal contracts. Only
  Congress could create such an exemption and, as
  discussed in Part IV, it has not done so.*fn2

Footnote 8 might indicate Benedict Coal is to be read in a very limited fashion.

But a somewhat later section of Kaiser Steel points in a different direction. When Congress passed the Multi-employer Pension Plan Amendments Act of 1980 (the "Act") several congressmen made statements concerning the case law that had developed in the pension contribution area. Two senators in particular, in explaining the purpose of one of the sections of the amended legislation, specifically endorsed the approach taken in Benedict Coal as well as several other cases — one of them Lewis v. Mill Ridge Coals, Inc., 298 F.2d 552 (6th Cir. 1962), barring an employer's defense to an action for delinquent contributions on grounds the underlying contract was void for lack of consideration. In Kaiser Steel the Supreme Court said Mill Ridge did not conflict with the Court's current decision because Mill Ridge did not (102 S.Ct. at 861):

  [involve] a defense based on the illegality of the
  very promise sought to be enforced.

That section of Kaiser Steel might perhaps be read as an implicit acceptance of Mill Ridge, and lack of consideration does have some similarities to the ...

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