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JAFFEE v. SHANIN CO.

February 13, 1991

LEE JAFFEE, JOHN J. BAILEY, JR., WILLIAMS B. RIGGS, WILLIAM MATTES, RICHARD CATALANO, CARMEN GAMBINO, ALAN MITCHELL, STANLEY MUCHA, CHARLES TIMMEL, AND LAWRENCE JANKOWSKI, as Trustee of the Chicago Graphic Arts Health and Welfare Fund, Chicago, and LOCAL 458-3M, GRAPHIC COMMUNICATIONS INTERNATIONAL UNION, AFL-CIO, Plaintiffs,
v.
SHANIN COMPANY, Defendant


Marvin E. Aspen, United States District Judge.


The opinion of the court was delivered by: ASPEN

MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 The plaintiffs, Trustees of the Chicago Graphic Arts Health and Welfare Fund ("Fund") and Local 458-3M of the Graphic Communications International Union, AFL-CIO ("Union"), brought this action seeking to collect $ 2,451.66 allegedly owed to the Fund by the defendant, The Shanin Company ("Shanin") as a result of failing to make payments on behalf of a person employed by Shanin. Shanin has moved to compel arbitration and dismiss the two-count complaint against it on the ground that this action is governed by a provision in a labor agreement which requires arbitration of disputes concerning obligations undertaken in the agreement. For the following reasons we grant Shanin's motion.

 Shanin's obligation to make payments to the Fund arise from Article 15 of the collective-bargaining agreement entered into between the Union and employers. Article 15 also appears to create the Fund. There is no evidence of any separate trust agreement. Shanin readily admits that it has not made the payments at issue, but argues that it is under no obligation to do so in this instance. Shanin contends that the employee in question is a "part-time" employee. Accordingly, Shanin maintains that the collective bargaining agreement does not require payments to the fund for such employees. Therefore, whether the agreement requires payment for such employees is central issue in this case.

 Shanin argues that both the Fund and the Union are bound by Article 26, Procedure for Disputes, to submit the resolution of such a question to arbitration. Section 26.1 states that "in the event of any disagreement or dispute in any Company, arising out of the application or interpretation of this contract" the parties will resolve the dispute by arbitration. In response, the Fund and the Union contend that the provision upon which Shanin relies is not applicable to this dispute. They maintain that the contractual provision relied on by Shanin only requires arbitration of grievances brought by the employees or the Union, not by the Fund. They then point to Section 15.3 of the agreement which they contend specifically reserves the trustees' rights to collect delinquent accounts, granting them the "right to take whatever action they deem necessary to collect payment. . . ." *fn1" As framed by the parties, the question we must therefore consider on the motion to dismiss is simply one of contract interpretation as to whether the parties intended the Fund to be bound by the arbitration provision in cases such as this one. The controlling law in this area is found in Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364, 104 S. Ct. 1844, 80 L. Ed. 2d 366 (1984), and Local Union 597 v. Mosbeck Indus. Equip., Inc., 856 F.2d 837 (7th Cir. 1988).

 Before turning to a discussion of those cases, however, we observe that the plaintiffs' opposition to the motion to dismiss is predicated on the argument that the Fund is not contractually bound by the arbitration clause, by virtue of Section 15.3. But the Fund is not the only plaintiff in this case, the Union is a plaintiff as well, and the plaintiffs expressly acknowledge that the Section 26.1 requires the Union to submit to arbitration of its grievances. Even assuming the Fund is not bound by the agreement to submit to arbitration, the plaintiffs have cited to no legal or contractual authority that would excuse the Union's contractual obligation to arbitrate the dispute. *fn2" Thus, at the very least, a dismissal of this action would be warranted pending arbitration of the Union's claim against Shanin, since such arbitration would lead to resolution of the issues presented here. We need not rely on this as our sole basis for dismissing the case, however, because we find that the agreement binds the Fund to the requirement that contract interpretation disputes be submitted to arbitration.

 Robbins and Local Union 597 set forth the framework for deciding under what circumstances an employee benefit trust fund will be subject to an arbitration clause in a collective bargaining agreement. *fn3" In Schneider, the Supreme Court determined that there is no presumption in favor of arbitration in disputes between employers and employee-benefit trust funds. The court reasoned that the policy goal of peaceful labor relations which created the presumption would not be served by applying it to trust funds since they did not have the damaging "economic weapons" of strikes or lockouts. Schneider, 466 U.S. at 372, 104 S. Ct. at 1849. The court also addressed the trust's status as a third-party beneficiary under the collective-bargaining agreement and the rule of construction that "the promisor may assert against the beneficiary any defense that he could assert against the promisee if the promisee were suing on the contract." Id. at 370, 104 S. Ct. at 1848. The court concluded that such a "mechanical" approach was inappropriate since collective bargaining agreements are not "typical third-party beneficiary contract[s]." Id. at 371 n. 11, 104 S. Ct. at 1848 n. 11. Instead, the court framed the relevant inquiry as being "whether the parties . . . intended to condition the trustees' contractual right to seek judicial enforcement of the trust agreement on exhaustion of the arbitration procedures set forth in the collective-bargaining agreements." Id. at 371, 104 S. Ct. at 1849. The Seventh Circuit emphasized these principles in Local 597: "Schneider stands for the proposition that courts must carefully examine the pertinent trust and collective bargaining agreements to determine whether parties intended to arbitrate disputes between trust funds and employers." 856 F.2d at 840.

 Since the trust agreement clearly gave the trustees the right to sue, the court looked to the collective bargaining agreement for language that might establish an intent that the trustees were to be bound by its arbitration clause. However, such language was not to be found. Instead, the arbitration clause was narrowly written so as to apply only to "differences that arise between the Company and the Union or any employee of the Company as to the meaning or application of the provisions of this agreement." Id. at 374, 104 S. Ct. at 1850 (emphasis supplied by the court). This wording supported the argument that the trustees were not to be included in the arbitration clause requirement. Moreover, the petitioners in Schneider conceded that the trustees did not have access to the arbitration process directly, but rather would have to rely on the Union to arbitrate their disputes with the employer. Id. at 375, 104 S. Ct. at 1850. The court found this position unreasonable. Id., 104 S. Ct. at 1850. In addition, the court believed that since the trust fund was one of the nation's largest and received contributions from employers pursuant to a variety of different collective bargaining agreements it would have been "unreasonable to infer that these parties would agree to subordinate [the interest of all parties represented by the fund] to whatever arbitration procedures might be required by a particular employer's collective bargaining agreement." Id. at 373-74, 104 S. Ct. at 1850. Accordingly, the Court ruled that the parties had not intended the trustees to be bound by the arbitration clause and were thus free to bring suit in federal court. Id. at 376, 104 S. Ct. at 1851.

 In Local 597, the Seventh Circuit also reviewed a case involving both a collective bargaining agreement and a trust agreement that was incorporated by reference through the collective bargaining agreement. The trust agreement gave the trustees the power to "take such steps, including the institution and prosecution of, or the intervention in, any proceeding . . . as may be necessary or desirable to effectuate the collection of such employer contributions." 856 F.2d at 840. The court found that this language "unambiguously" granted the trustees the right to bring a civil action for contribution and in no way evidenced an intent to require such disputes to be submitted to arbitration. Id. at 840.

 The court then looked to the collective bargaining agreement for language that might establish an intent that the trustees be bound by the arbitration clause of the agreement. No such language was found. Instead, the collective bargaining agreement stated that "the Agreements and Declarations of Trust between the parties . . . are hereby continued in full force and effect for the term of this agreement." Id. at 841 (emphasis supplied by the court). The court found this to be "significant evidence of an intention that the Trust Funds not be bound by arbitration." Id.

 In Local 597, there was a section of the collective bargaining agreement that arguably supported the contention that the parties intended for the trust fund to be bound by the arbitration agreement. That section stated:

 Id. at 841-42 (emphasis supplied by the court). However, the court found that this provision was "expressly addressed to the parties to the collective-bargaining agreement, and not to the Trust Funds or its trustees." Id. at 841. The court stated that this was not the type of plain language needed "to override the provisions of the trust agreements that allow the Trust Funds to bring civil actions to enforce contributions." Id. at 842. The court additionally concluded from this language that the Trust Fund did not have access to the arbitration process, further supporting the inference that they were never intended to be bound by it. Id. at 843. Accordingly, ...


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