Read on for a letter from FCA CEO Anthony Darkangelo discussing the International Painters and Allied Trades Pension Fund and the events that have given rise to a lawsuit.
Dear Signatory Contractor,
I write today on behalf of the FCA International (FCA) Board of Directors and the FCA appointed Employer Trustees of the International Painters and Allied Trades Pension Fund to update you on events relating to the Fund that have given rise to a lawsuit.
By way of background, the Fund is comprised of an equal number of Employer and Union Trustees. Under the Agreement and Declaration of Trust, FCA has the right to appoint all of the Employer Trustees, and the International Union of Painters and Allied Trades (IUPAT) has the right to appoint all of the Union Trustees. All of the Trustees have a legal obligation to act in the best interests of the Fund's partcipants and beneficiaries.
As you may be aware, there has been a steady decline of the Fund's funded percentage in recent years. As of Jan. 1, 2018, that percentage was 62.2 percent. Considering this decline, it is more imperative than ever that the Trustees work collaboratively to improve the Fund's health. The Fund Trustees are essentially tasked with ensuring fund participants can retire with dignity and have the financial security they earned for their years in the trade. However, they must also balance this with the raelity that continued contribution rate increases will only further reduce signatory contractors' ability to compete with non-signatory contractors, resulting in fewer work opportunities and less man-hours contributed to the fund.
This backdrop is important in order to put the recent serieis of events into context.
In mid-September, the IUPAT proposed an AMendment to the Trust that allows "...other Employers, Associations of Employer or Employer organizations with whom the Union may agree..." to appoint half of the Employer Trustees to the Fund. FCA and Employer Trustees had three simple questions - How is this in the best interests of the Fund's participants and beneficiaries? What will these trustees do that we aren't? How will they help the health of the fund? These questions remain unanswered.
The Employer Trustees were advised that the legality of granting Union involvement in appointing Employer Trustees was doubtful. FCA and the Employer Trustees believe this Amendment would provide the IUPAT and Union Trustees control of the fund, which would not be in the best interests of the participants and beneficiaries.
The Amendment was voted on during the Oct. 9, 2018 IPAT Pension Fund Trustees meeting. All of the Employer Trustees voted against, and all of the Union Trustees voted in favor. Accordingly, the Amendment should have deadlocked and failed. However, the Union Appointed Trustees and Fund Counsel then engaged in a series of violations of the Agreement and Declaration of Trust, and, as a result, wrongly determined that the motion on the Proposed Amendment carried.
Our understanding is that the IUPAT intends to appoint Employer Trustees according to the right granted to them under the terms of their Amendment. In order to address this, the Employer Trustees recommended FCA file a lawsuit against the Union and Union Trustees. The FCA Board of Directors filed a lawsuit on behalf of the Employer Trustees on Oct. 25, 2018. The lawsuit asks the Federal District Court for the District of Columbia to rule that the Amendment did not pass, is invalid and to restrain the IUPAT from exercising any rights whatsoever with respect to the Amendment.
The Fund is jointly-trusted, and the Labor-Management Relations Act requires there be an equal representation of labor and management. The Amendment proposed by the Union Trustees to allow "other Employers, Associations of Employers or Employer Organizations with whom the Union may agree" denies equal representation under the Act.
In a United States Court of Appeal for the Third Circuit decision in Associated Contractors of Essex County, Inc. v. Laborers International Union the court found that equal representation was needed by any arrangement that created the possibility of union domination, and the essence of equal representation was that each side had veto power on any proposed action.
The court concluded that "both interests of employer and labor union had to be equally represented on the board of trustees for a labor union trust fund to prevent abuse or domination. "The creation of new board positions had resulted in possible domination of the trust fund by the labor union and was void as to appelant employer trustees."
Further details on this issue can be found in the Complaint, Memorandum of Law and Declration of Employer Trustee documents, which can be obtained by contacting your local association or FCA. As you read through the documents, it is important to understand the Employer Trustees' position is not to exclude any contributing employers from serving as Employer Trustees, but rather to be sure the Fund is operated lawfully, and that there is equal representation of both labor and management. Anything that deviates from this is not in the best interests of the Fund's participants and beneficiaries, which is of paramount importance.
Below is a recap and timeline of the essential points surrounding this issue.
Critical Points and Timeline
- FCA has the exclusive right to appoint all Employer Trustees to the International Painters and Allied Trades Pension Fund, and to remove any Employer Trustees for any (or no) reason at any time.
- The FCA appointed Employer Trustees on the Fund are focused on improving the Fund's health and acting in the best interests of its participants and beneficiaries.
- In mid-September, the IUPAT and IUPAT appointed Union Trustees proposed an amendment to amend the Trust in order to remove FCA as the sole appointing entity of Employer Trustees, and to share that right with "...other Employers, Associations of Employers or Employer organizations with whom the Union may agree..."
- The FCA Board of Directors determined the Proposed Amendment was not in the best interests of the participants and beneficiaries, and FCA Legal Counsel advised they were doubtful of the Amendment's legality.
- Based upon that, the FCA Board of Directors directed that any Employer Trustee intending upon suppporting the Amendment be given the opportunity to resign or be removed.
- At the same time, the FCA appointed Employer Trustees requested that the IUPAT appointed Union Trustees withdraw the Proposed Amendment and asked that the two sides discuss the issues at the upcoming meeting. The IUPAT appointed Union Trustees refused.
- Four FCA appointed Employer Trustees advised that they would vote against the proposed Amendment, one said he was unsure, and one said he would vote in favor. These two Employer Trustees were advised that the FCA Board of Directors had directed they be removed as Employer Trustees. In case necessary, letters were prepared on FCA's letterhead to the Fund Administrator and the two Employer Trustees stating their immediate termination.
- On Oct. 9, at approximately 9 AM CT, the Fund's Board of Trustees meeting began.
- The Union Trustees convened an Executive Session immediately upon calling the meeting to order, and a motion was made by a Union Trustee to amend the Agreement and Declaration of Trust in the manner set forth by the Proposed Amendment.
- An FCA appointed Employer Trustee immediately placed the ltters removing the two Employer Trustees at the chair occupied by the Fund Administrator, and handed letters to the two Trustees.
- This completed the removal of the Employer Trustees based on the requirements of the Trust Agreement. This action left the remaining four (4) Employer Trustees to take on all trustee actions going forward.
- However, the Union Trustees, based upon the advice and direction of Fund Counsel, moved that the very clear language of Article III, Section 7 of the Trust Agreement, which states that an Employer Trustee can be removed "at any time," be interpreted to only allow for removal of a trustee before or after a meeting.
- A motion was made by a Union Trustee to adopt the interpretation of Article III, Section 7 of the Agreement and Declaration of Trust put forth that no Trustee could be removed once a meeting had begun, and that such an amendment would have retroactive application to before the current meeting began ("Retroactive Trust Interpretation Motion").
- On the Retroactive Trust Interpretation Motion, the remaining four (4) of the FCA appointed Employer Trustees voted against, and all of the Union Trustees voted in favor. Based on Article VIII, Section 4 of the Trust provides that when the number of appointed Employer and Union Trustees is unequal, the remaining Union or Employer Trustees shall nontheless have equal voting rights, the Retroactive Trust Interpretation should have deadlocked and failed. The Union Trustees proceeded to count the votes of the removed Employer Trustees. The Union Trustees and Fund Counsel then wrongly determined that the motion of the Proposed Amendment carried.
- On the motion pertaining to the Proposed Amendment, the remaining four (4) FCA appointed Employer Trustees voted against, and the Union Trustees voted in favor. The motion should have also deadlocked and failed. However, the Union Trustees continued to count the votes of the removed Employer Trustees . The Union Trustees Fund Counsel then wrongly determined that the motion on the Proposed Amendment carried.
- On Oct. 26, 2018, FCA International and the FCA appointed Employer Trustees filed a lawsuit in the Federal District Court for the District of Columbia against the IUPAT, IUPAT appointed Union Trustees and Fund Administrator., alleging that the Defendants had violated the terms of the Trust Agreement and breached their fiduciary duties.
- The Plaintiffs also asked the Court to enter a preliminary injunction, restraining the IUPAT from exercising any of the rights under their Amendment.
- Oct Oct. 31, 2018, the IUPAT agreed it would refrain from exercising any rights under the Amendment while the Plaintiffs' lawsuit proceeds, and accordingly, the Plaintiffs withdrew their pending motion for a preliminary injunction.
Please do not hestiate to call if you have any questions or would like further clarification.
Anthony D. Darkangelo
Chief Executive Officer