Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 86 C 1011--William E. Steckler, Judge.
Coffey, Flaum, and Manion, Circuit Judges.
Harold L. Stinson ("Stinson") and the Bridge, Structural and Ornamental Iron Workers Local Union No. 22, AFL-CIO ("Local 22") (plaintiffs-appellants are collectively referred to as "Local 22") brought suit against defendant Iron Workers District Council of Southern Ohio and Vicinity Benefit Trust ("Ohio Trust" or "Trust"). Count I of the two-count complaint sought injunctive relief against Ohio Trust's denial of benefits to members of Local 22 following their withdrawal from the Trust. Count II alleged that an amendment to the Trust Agreement violated § 302(c)(5) of the Labor Management Relations Act, 29 U.S.C. § 186(c)(5), in that it prohibited unions withdrawing from the Trust from obtaining a proportional allocation of the Trust reserves owing to their employers' contributions. The district court denied Local 22's request for injunctive relief. Ohio Trust moved for summary judgment on Count I while both parties filed cross-motions for summary judgment on Count II. The district court granted summary judgment in favor of Ohio Trust on both counts. Local 22 appeals only as to Count II. We affirm.
The facts in this case are undisputed and relatively straightforward. Stinson was a participant in Ohio Trust until September 1, 1986. He was formerly a member of the Board of Trustees of Ohio Trust at various intervals between July 1984 until the time of his resignation in May 1986. Local 22 is a labor organization representing employees in the ironworkers trade in Indianapolis, Indiana, and surrounding counties. Ohio Trust is an employee benefit plan within the meaning of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.
Insurance benefits provided by Ohio Trust are funded through contributions submitted by employers having collective bargaining agreements with participating unions. Employer contributions are based on the number of hours worked by each employee. Benefits are available in accordance with a benefit plan which the trustees have adopted. At all times relevant to this lawsuit, all of the local unions participating in the Trust as well as each employer association within the jurisdiction of a participating local union, have had a representative on Ohio Trust's Board of Trustees.
Ohio Trust operates with pooled resources. Employer contributions are pooled without segregation as to each company or local union. A pooled trust accommodates the realities of the ironworkers trade, where employment is dictated by the level of construction in particular locations at particular times. By pooling resources into a common fund, participating unions and employers can better withstand the peaks and valleys which are characteristic of employment in the construction industry. Pooling contributions is especially suitable in the construction trade, where employees are likely to work for several different employers in several different locations during a short time.
In the early 1980's, Ohio Trust suffered from the combined effects of recessionary unemployment and increased health care costs. During 1982 and 1983, employer contributions--income to the Trust--sharply declined while benefit claims simultaneously rose. As a result, Ohio Trust was forced to dip into its reserves at an alarming rate; at one point the reserves dropped from a level of $7.5 million in early 1982 to a low of approximately $300,000 in early 1984.
The trustees considered a variety of measures in response to the financial crisis facing Ohio Trust. Among these were benefit reductions and increases in employer contribution rates. Ultimately, the trustees settled on tightening employee eligibility rules and increasing the level of employer contributions. In the meantime, Ohio Trust learned that Iron Workers Local 70, a participating local union based in Louisville, Kentucky, planned to withdraw from the Trust. In response to the news of Local 70's anticipated withdrawal, Ohio Trust's actuarial consultant suggested to the trustees that the Trust Agreement be amended. At the time the amendment was proposed, Ohio Trust's consultant believed Ohio Trust's financial situation was so grave that the cost of providing continued eligibility to members of departing Local 70 threatened to bankrupt the Trust. The proposed amendment ("withdrawal amendment"), which was adopted unanimously by the trustees, provided that any participating union could withdraw from the Trust simply by providing three months' advance notice. However, effective upon the date of the union's withdrawal, all persons represented by the withdrawing local union would cease to be eligible for further benefits and no payments would be made from the Trust for the benefit of those persons or to any other trust fund established to provide benefits to the employees represented by the withdrawing union.
A participating union's withdrawal from a trust fund has several detrimental effects. First, since the withdrawing local is typically experiencing a higher level of employment than those remaining in the fund (as was apparently the case with Local 70), there is a decline in income. At the same time, and as a result of the higher level of employment, there is a disproportionately greater number of persons participating through a withdrawing local union who have qualified for continued eligibility. Thus, a departing union, such as Local 22, leaves behind a disproportionate number of people eligible for trust benefits, such as retirees and disabled employees, who will no longer have an employer making contributions on their behalf. Second, the per-person administrative costs of the trust fund increase when a local withdraws. Third, the withdrawal lowers the ratio of active employees to retirees and disabled employees (who retain eligibility). When a local union withdraws, it leaves the fund with fewer remaining active employees to bear the burden of expensive retiree and disabled employee health claims. In the case of Local 22, the ratio of active employees to retirees dropped from 3:1 to 2.5:1. Fourth, there is a tendency among individuals about to lose health insurance coverage to make greater use of their insurance before going to another plan. Here, Local 22 all but guaranteed this result by advising its membership to submit claims to Ohio Trust before its withdrawal.
Ohio Trust's Executive Committee first considered the withdrawal amendment in February 1984. The Executive Committee is a body of three union trustees and three employer trustees which meets monthly and makes recommendations to the full Board of Trustees or takes action on business occurring between the quarterly meetings of the full Board, subject to the full Board's ratification. At this time, the Executive Committee included Local 22 representative Vestal Stinson (a retired member of Local 22 and plaintiff-appellant Harold Stinson's father). The Executive Committee considered the amendment three times before finally recommending that it be adopted. Vestal Stinson voted for the amendment. The Board unanimously voted to adopt the amendment at its regular meeting in April 1984.
The withdrawal amendment reads in relevant part:
Section 5. Any Union participating herein may withdraw from this Trust Agreement and the Trust herein created, provided that such Union serves written notice of a change in its Collective Bargaining Agreement eliminating the requirement for contributions upon each of the trustees of said Trust at least three months prior to the effective date of the withdrawal. . . . Notwithstanding such withdrawal, no payments whatsoever shall be made from or out of the Trust Fund to or for the benefit of the employees represented by such withdrawing Union or to any other trust fund or other entity created for the purpose of providing health and welfare benefits to the employees represented by such withdrawing Union and, by such withdrawal, the withdrawing Union and the Employees and ...