International Ass'n of Firefighters, Local 1789 v. Spokane Airports

Alexander, C.J. — We must decide if the Court of Appeals erred in concluding that the International Association of Firefighters, Local 1789 (Union), had standing to maintain this lawsuit for monetary relief on behalf of its members and that Union was not required, prior to bringing the suit, to engage in the arbitration process provided for in the collective bargaining agreement between it and Spokane Airports (Airport), a municipal corporation. If we answer these questions in the affirmative we must also decide if the Court of Appeals correctly concluded that the trial court did not err in granting a summary judgment to Union requiring Airport to refund contributions it made to its employees’ social security and Medicare accounts from 1995 through 1998, and to continue contributing to these employees’ accounts for the duration of the collective bargaining agreement. We affirm the Court of Appeals on all issues, concluding that Union had standing to bring this suit on behalf of [211] its members, that it was not required to submit the dispute to arbitration, and that Airport was obliged by the compensatory nature of the social security and Medicare contributions in this employment relationship to refund the employer contributions from 1995 through 1998 and continue to fund the employees’ pension plan for the duration of the collective bargaining agreement. I In 1962, Airport, which operates its own fire department at the Spokane International Airport, contracted with the federal government in order that its fire department employees could obtain social security coverage. Consequently, each of its employees, all of whom were Union members, thereafter paid 6.2 percent of their wages into a social security account and 1.45 percent of their salary into a Medicare account. Airport matched the contributions of its employees. On March 9, 1999, the employees, by means of Union referendum vote, exercised their right to opt-out of the social security plan. Airport then obtained refunds from the federal government for the amount of money each fire department employee paid into a social security and Medicare account during the period 1995 through 1998 and for Airport’s matching contributions.1 Union brought this suit against Airport in Spokane County Superior Court, on behalf of the fire department employees, alleging that Airport “wrongfully . . . convert [ed] . . . those refunds” of the employees’ money. Clerk’s Papers (CP) at 5. It demanded that Airport reimburse the employees for the social security and Medicare taxes that had been withheld from the employees’ paychecks between the years 1995 through 1998. Union [212] also asked that the matching contributions that Airport paid into its employees’ social security accounts be paid over to it for the benefit of the employees. Although Airport eventually returned to the employees the funds that had been withheld from their paychecks for social security and Medicare coverage, it refused to pay over to Union the matching payments it paid into the employees’ accounts from 1995 to 1998. Union moved for a summary judgment requesting reimbursement by Airport of “[a] 11 contributions to Social Security and Medicare for the years 1995 through 1998, [for] . . . the employees for whom they were contributed.” CP at 16. It also sought a judgment requiring Airport to continue to contribute to each individual firefighter’s qualified retirement plan, of plaintiffs’ choosing, in the amount of 6.2% and 1.45% of each employee’s monthly wages for each month the defendant failed to make such payments from and after March 9, 1999, until the expiration of the current bargaining agreement.[2] CP at 85. The trial court granted Union’s motion. Airport appealed to the Court of Appeals, Division Three, which affirmed the trial court. We then granted Airport’s petition for review. II Airport contends that Union lacked standing to maintain this suit for monetary relief on behalf of its members.2 3 In support of this contention it cites Ironworkers [213] District Council v. University of Washington Board of Regents, 93 Wn. App. 735, 970 P.2d 351 (1999). In the Ironworkers case, Division One of the Court of Appeals adopted a position consistent with that taken by many federal courts, to wit: that “an organization does not have standing to invoke the court’s remedial powers on behalf of its members where . . . the organization seeks damages and yet alleges neither monetary injury to itself nor assignment of its members’ damage claims.” Ironworkers, 93 Wn. App. at 741 (citing Worth v. Seldin, 422 U.S. 490, 515, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975)). In concluding that Union had standing here, Division Three indicated that it was “diverging from the federal bright-line rule adopted by Division One in Ironworkers” for the practical reason that “associational representation of the individual fire fighters was the most convenient and efficient method of litigating these issues.” Int’l Ass’n of Firefighters, Local 1789 v. Spokane Airports, 103 Wn. App. 764, 771, 14 P.3d 193 (2000) , review granted, 143 Wn.2d 1019, 25 P.3d 1019 (2001) . We are called upon to determine whether we should approve the rule set forth in Ironworkers or instead recognize, as Division Three did here, that an employee’s organization is not precluded from bringing a suit for monetary damages on behalf of its members simply because it fails to assert that the association suffered monetary injury or that it had an assignment of its members’ claim. If we adopt the latter position, we must also decide if the Court of Appeals was correct in concluding that the Union should be granted standing under the circumstances of this case. An association has standing to bring suit on behalf of its members when the following criteria are satisfied: (1) the members of the organization would otherwise have standing to sue in their own right; (2) the interests that the [214] organization seeks to protect are germane to its purpose; and (3) neither claim asserted nor relief requested requires the participation of the organization’s individual members. Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343, 97 S. Ct. 2434, 53 L. Ed. 2d 383 (1977), cited with approval in Save a Valuable Env’t v. City of Bothell, 89 Wn.2d 862, 576 P.2d 401 (1978). The first two criteria are easily established. We say that because the individual Union members clearly had standing to sue in their own right since the contributions Union seeks to have returned were made by Airport for the accounts of Airport’s employees and as a part of the employees’ total compensation package. Furthermore, as the collective bargaining agreement between Airport and Union makes clear, the purpose of Union, as the exclusive bargaining agent of its members, is to “maintain harmonious relations” with Airport and to “establish proper and equitable standards of wages, hours and other conditions of employment.” CP at 25. Protection of its members’ retirement accounts is germane to those purposes. The question of whether the third criteria has been shown is more troublesome. In addressing that question we take note of the fact that Union is seeking monetary damages and not injunctive relief. Monetary damages are distinguishable from injunctive relief, in that injunctive relief generally benefits every member of an employee association equally whereas the amount of monetary damages an employee suffers may vary from employee to employee. See Warth, 422 U.S. at 515. It is primarily for this reason that federal courts have not accorded standing to an association to seek monetary damages on behalf of its members if it has not alleged an injury to itself or received an assignment of its members’ damage claim. See, e.g., Lake Lucerne Civic Ass’n v. Dolphin Stadium Corp., 801 F. Supp. 684 (S.D. Fla. 1992); United Union of Roofers, Waterproofers, & Allied Trades No. 40 v. Ins. Corp. of Am., 919 F.2d 1398 (9th Cir. 1990); Telecomms. Research & Action Ctr. v. Allnet Communication Servs., Inc., 806 F.2d 1093 [215] (D.C. Cir. 1986).4 Central to the holdings in the aforementioned cases is the concern that the third criteria is not established because “claims for monetary relief necessarily involve individualized proof and thus the individual participation of association members.” Ins. Corp. of Am.., 919 F.2d at 1400. Airport’s challenge to Union’s claim of standing focuses on this prong of the Hunt test. Unlike the third prong of the test, the first two prongs are constitutional in that they ensure that article III, section 2’s “case or controversy” requirements are satisfied. United Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544, 116 S. Ct. 1529, 134 L. Ed. 2d 758 (1996). The third prong is not, however, constitutionally based and is judicially self-imposed for “administrative convenience and efficiency, not on elements of a case or controversy within the meaning of the Constitution.” United Food & Commercial Workers Union Local 751, 517 U.S. at 557. Division Three observed this distinction in holding that the ultimate question is “whether the circumstances of the case and the relief requested make individual participation of the association’s members indispensable.” Spokane Airports, 103 Wn. App. at 770 (citing Warth, 422 U.S. at 511). Because the rule enunciated by Division One in Iron-workers and many federal courts is judicial and not based on constitutional requirements, we are not required to give it substantial deference. Instead, we find ourselves attracted to the approach taken by Division Three to the effect that there are instances where the lack of individual participation by an association’s members is not fatal to the association’s standing because the amount of monetary damages sought on behalf of those members is certain, easily ascertainable, and within the knowledge of the [216] defendant. In our judgment, this pragmatic view is preferable to a rule that serves to automatically deny standing to an association that seeks monetary damages on behalf of its members without alleging that it has been injured or that it has an assignment of the members’ claim. The rule enunciated by Division Three in this case is, in our view, entirely reasonable and ensures fairness in cases where an individual association member’s participation is not necessary to prove the damages that are asserted on behalf of the members by the association. In sum, Division Three’s analysis affords a practical and sensible remedy to individual members who belong to an employee association and, perhaps, lack the means to bring a lawsuit on his or her own behalf. See Save a Valuable Env’t, 89 Wn.2d at 867 (In determining associational standing courts consider the “individual who is one of many harmed . . . [and who] may be unable to afford the costs of challenging the action himself.”). If we reached the result advanced by Airport we would likely burden individual members of the employee association economically and would almost certainly burden our courts with an increased number of lawsuits arising out of identical facts. In short, we see little sense in an ironclad rule that has the effect of denying relief to members of an association based upon an overly technical application of the standing rules. Having concluded that Union is not precluded from bringing this lawsuit on behalf of its members solely because Union sought monetary relief, we must next determine whether, under the facts of this case, the participation of Union’s individual members was required. Here the record shows that the amount of monetary relief requested on behalf of each employee is certain, easily ascertainable, and within the knowledge of Airport. In that regard we note that Airport has already obtained and refunded to the employees the amounts that represent their individual contributions. Because Airport matched these amounts dollar for dollar, the exact amount of relief due each individual employee is known. Thus, we are satisfied that [217] neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Accordingly, we agree with the Court of Appeals’ conclusion that Union had standing to bring this lawsuit on behalf of its members. Ill Airport also asserts that the collective bargaining agreement required Union to arbitrate the dispute between it and Airport and that because it did not, Union is precluded from bringing this action. In support of this assertion Airport notes that the collective bargaining agreement provides that “[g]rievances or disputes .. . involving interpretation or application of [the agreement] shall be settled” through the grievance and arbitration procedures set forth in the agreement. CP at 36. Airport contends that the word “shall” indicates the mandatory nature of this portion of the agreement. While it is true that “shall” generally denotes that an obligation is mandatory, the duty to arbitrate a dispute must be found in the contract itself. See W.A. Botting Plumbing & Heating Co. v. Constructors-Pamco, 47 Wn. App. 681, 683, 736 P.2d 1100 (1987) (citing AT&T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986)). Thus, to reach the result that Airport advocates, we must conclude that its obligation to the fire fighters arises from the collective bargaining agreement. As we observe below, however, the Airport’s obligation to provide the fire fighters with a corresponding benefit after they opted-out of the social security and Medicare system is not an obligation that arises from the collective bargaining agreement. The obligation, rather, flows from the compensatory nature of the social security benefits in this employment relationship. Consequently, we conclude that Union was not required to submit this dispute to arbitration. [218] IV Having concluded that Union has standing to bring this action on behalf of its members and that it was not required to exhaust the arbitration process, we must next determine if the trial court correctly granted summary judgment in Union’s favor. In making that judgment, we must determine whether Airport is obliged to (1) refund the matching contributions it made from 1995 through 1998 and (2) fund the employees’ pension plan for the duration of the collective bargaining agreement, which expired on December 31, 2000. Airport asserts that it is not obligated to do either. Its primary argument in support of that position is that the trial court erred in relying upon International Association of Firefighters, Local No. 2088 v. City of Tukwila, 22 Wn. App. 683, 591 P.2d 475, review denied, 92 Wn.2d 1021 (1979). As a secondary argument, Airport contends that the question of whether the social security and Medicare payments were included in the collective bargaining agreement is, at a minimum, a factual question and, thus, not resolvable on summary judgment. The landmark case regarding characterization of pension and retirement payments for the benefit of municipal employees is Bakenhus v. City of Seattle, 48 Wn.2d 695, 296 P.2d 536 (1956). In that case we said that “a pension granted to a public employee is . . . deferred compensation for services rendered.” Bakenhus, 48 Wn.2d at 698. Consequently, we held that governmental pension programs extend to employees a vested contractual right in the pension plan upon commencement of public service. The contract theory announced in Bakenhus regarding public employee pensions, we determined, is constitutionally grounded in that Washington Constitution article VIII, section 7 prohibits municipal corporations from making gratuitous transfers of money. This theory has received overwhelming acceptance in Washington courts. See, e.g., Horowitz v. Dep’t of Ret. Sys., 96 Wn.2d 468, 472, 635 P.2d 1078 (1981); Wilder v. Wilder, 85 Wn.2d 364, 367, 534 P.2d 1355 (1975); [219] Eisenbacher v. City of Tacoma, 53 Wn.2d 280, 333 P.2d 642 (1958).5 Thus, we have consistently held that any alterations in pensions that reduce benefits prior to the natural expiration date of an employment relationship must be supplemented by a corresponding benefit for the duration of the agreement. Bradford v. Data Processing Joint Bd., 106 Wn.2d 368, 372, 722 P.2d 95 (1986); Bakenhus, 48 Wn.2d 695. Citing to our decision in Caughey v. Employment Security Department, 81 Wn.2d 597, 503 P.2d 460 (1972), in which we adopted the general rule enunciated by the United States Supreme Court in Flemming v. Nestor, 363 U.S. 603, 80 S. Ct. 1367, 4 L. Ed. 2d 1435 (1960), the dissent asserts that “social security benefits do not fall within the Bakenhus rule that ‘payments under government pension plans are a form of deferred compensation for past services rendered to the employer.’ ” Dissent at 230 (emphasis omitted). We do not believe that Caughey applies to the case before us. Indeed, in Bradford, we indicated that social security benefits fall outside of Caughey where the employer and the employee group properly consider those benefits compensatory. More specifically, we stated that “in this case, unlike Caughey, social security benefits are contractual in nature, even though statutorily created.” Bradford, 106 Wn.2d at 375 (emphasis added). We reached this conclusion because we “agree [d] with the analysis adopted in Tukwila and find its application of Bakenhus persuasive in the present case.” Id. at 373. Accordingly, we find it appropriate to first analyze Tukwila prior to an extended discussion of Bradford. In Tukwila, as in the instant case, a union6 brought suit on behalf of its members against an employer, the City of Tukwila, following a vote by the union members to opt-out [220] of a social security plan which was partially funded by the City. The union requested that the City be required to continue contributing into a substitute pension plan for the duration of the existing collective bargaining agreement. In affirming the trial court’s grant of summary judgment in favor of the union, the Court of Appeals relied upon our decision in Bakenhus and emphasized that “ ‘[a]n employee has a vested right in a pension or retirement system upon becoming a qualified employee, and that system cannot be altered to his detriment without corresponding benefit to him.’ ” Tukwila, 22 Wn. App. at 687 (quoting Frank v. Day’s, Inc., 13 Wn. App. 401, 405, 535 P.2d 479 (1975)). The court went on to hold that because the City made past payments to the social security plan “[t]he contractual obligation of the City to contribute to a union retirement plan [was] inferred.” Id. at 688 (emphasis added). The court reached that conclusion because the City of Tukwila made “past payments to social security for the benefit of the firefighters [and those] payments were properly considered compensatory during arbitration proceedings between the City and the Union.” Id. at 688. Of central importance to the holding was the fact that the collective bargaining agreement contained no provision relating to social security payments.7 It is apparent that the decision in Tukwila turned upon the compensatory nature of the social security contributions and not on the existence of an express contractual term providing for the payments. As noted above, this court specifically adopted the Tukwila approach in Bradford. Nevertheless, the dissent asserts that under Bradford social security payments do not fall under the Bakenhus rule unless they are included as an express term in the collective bargaining agreement. We did not, as the dissent suggests, conclude in Bradford that a mutually agreed upon contract is the only source of [221] an obligation to fund a pension. Rather, we said “that pension benefits, including social security, when agreed upon through the collective bargaining process, are contractual in nature, and thereby obligate the employer to make contributions in accordance with the terms and duration of the collective bargaining agreement.” Bradford, 106 Wn.2d at 373 (emphasis added). Had we believed that the court in Tukwila meant to require an express contractual term in order for the social security payments to fall under the Bakenhus rule, we would have specified “collective bargaining agreement,” not “collective bargaining process” in Bradford. We did not do that. Similarly, we would have said “express contractual term,” instead of “contractual in nature.” Clearly, this court’s choice of language in Bradford reflected our understanding of Tukwila to wit: that a contractual obligation to contribute is inferred where the social security payments are properly considered compensatory. To the extent that Bradford may be read differently, it is worth noting that Bradford involved a collective bargaining agreement that included an express term regarding the funding of social security. In that regard, we agree with the Court of Appeals here that Bradford’s characterization of the Tukwila opinion in the terms of a collective bargaining agreement was “more a comment on the facts in Bradford than a summary of the holding in Tukwila.” Spokane Airports, 103 Wn. App. at 774. We find ourselves in agreement with the Court of Appeals’ analysis of our opinion in Bradford and the Court of Appeals’ opinion in Tukwila. Specifically, we note that the duty to fund social security accounts flows from the compensatory nature of the social security contributions in the employment relationship, and does not necessarily flow from the collective bargaining agreement. Indeed, the real issue in Bradford was whether the employer was under a duty to provide future social security payments to the employee following the expiration of the agreement, or whether the employer was merely required to bargain in good faith. There, the duty to provide social security pay [222] ments terminated when the collective bargaining agreement expired because that was when the employment relationship terminated. Washington law is clear that the contractual obligation to fund a retirement system arises from the employment relationship when the employee’s right to the retirement benefit exists at the outset of the employment relationship. Bakenhus, 48 Wn.2d at 699. Bradford and Tukwila make it clear that this jurisprudence also applies to social security and Medicare contributions that are properly considered compensatory. Here, as was the case in Bradford and Tukwila, the social security and Medicare payments were properly considered compensatory in the employment relationship between Airport and its fire fighter employees. In that regard, the record contains facts that demonstrate that Airport considered the social security and Medicare contributions to be part of the fire fighters’ total compensation package. For example, during collective bargaining negotiations Spokane Airport’s attorney, Mr. Hollingsworth, “[brought] up the issue of social security payments as one of the compensations [Union] would have to consider and include as part of [its] total compensation package. . . . [and], the local, agreed that social security . . . should be considered a part of [the] total compensation package.” CP at 80. The record also reveals that Airport based fire fighter salaries, in part, upon the corresponding percentages that it contributed into its fire fighter employees’ social security and Medicare accounts. When discussing salary increases, Airport indicated that the fire fighters “needed to keep in mind the total benefit package . . . [including] Social Security (FICA) [Federal Insurance Contributions Act], LEOFF2 [Law Enforcement Officers’ and Fire Fighters’ Retirement System] Pension, Unemployment Insurance, Holiday Pay, Medicare and Industrial Disability.” CP at 82 (emphasis added). The compensatory nature of the social security and Medicare contributions is further evidenced by minutes of the contract negotiations which indicate that Airport attributed 7.65 percent of Firefighters compensation to FICA payments (6.2 percent social security and 1.45 percent Medicare). CP at 71-74. This resembles the situation in Tukwila [223] where social security payments were discussed during negotiations but were not incorporated into the collective bargaining agreement as an express term. In sum, we are persuaded that the social security and Medicare contributions were properly considered compensatory in the employment relationship between Airport and its fire fighter employees. That being the case the fire fighter employees have an inferred contractual right in such payments. Accordingly, the trial court correctly concluded that Airport’s payments to the social security accounts created an inferred contractual obligation on the part of employer and that that obligation may not be altered to the employees’ detriment without providing for a corresponding benefit to the employees. V Airport next contends that even if Tukwila is applicable, “there is a material issue of fact regarding whether there is any contractual agreement regarding social security benefits.” Br. of Appellant at 9. In this regard, Airport asserts that at the very least a jury should decide whether Airport and Union expressly agreed that the social security and Medicare payments constituted deferred compensation. Summary judgment is appropriate only if “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” CR 56(c); Scott v. Pac. W. Mt. Resort, 119 Wn.2d 484, 502, 834 P.2d 6 (1992). “A material fact is one upon which the outcome of the litigation depends.” Vacova Co. v. Farrell, 62 Wn. App. 386, 395, 814 P.2d 255 (1991). Facts and all reasonable inferences therefrom must be considered in the light most favorable to the nonmoving party, and summary judgment should be granted only if a reasonable person would reach but one conclusion. Scott, 119 Wn.2d at 502. The problem with Airport’s contention is that the question of whether the parties expressly agreed on terms obliging Airport to contribute to the employees’ social [224] security and Medicare plans is immaterial. As we have previously held, the contractual obligation to fund the accounts flows from the compensatory nature of the social security benefits in the employment relationship. Tukwila, 22 Wn. App. at 688. Thus, under Tukwila, the only material fact necessary to demonstrate Airport’s obligation to make the social security and Medicare payments is whether Airport and Union considered those payments compensatory. That fact is not at issue, the record established that the social security and Medicare payments were being made at all relevant times prior to the employees’ decision to opt-out of the social security and Medicare plan and that they were considered part of the fire fighters’ compensation. Accordingly, the trial court’s order granting summary judgment should be affirmed. VI In sum, we are satisfied that an association, such as Union, is not precluded from bringing a lawsuit simply because it seeks monetary relief on behalf of its members without alleging injury to itself or acquiring an assignment of the employees’ claim. Under the circumstances of this case the criteria set forth in Hunt have been satisfied and, consequently, Union has standing. We are further satisfied that the collective bargaining agreement did not require Union to exhaust the arbitration process prior to bringing this action since the obligation is only contractual in nature and arises from the compensatory nature of the social security and Medicare contributions in this employment relationship. Finally, we hold that Airport is obligated to refund the matched contributions from the years 1995 to 1998 and to fund the employees’ pension plan for the duration of the collective bargaining agreement. Affirmed. Smith, Ireland, Bridge, Chambers, and Owens, JJ., concur. Footnotes [1] Municipal employees defined as a “coverage group” may obtain, or discontinue, social security coverage pursuant to 42 U.S.C. § 418 and chapter 41.48 RCW. RCW 41.48.050(1)(h) defines groups covered by the Washington Law Enforcement Officers’ and Fire Fighters’ Retirement System Act, such as Union, as a “coverage group.” [2] Although the members of Union have participated in the social security and Medicare plan since 1962, Union sought relief on the employees’ behalf only for the years 1995 through 1998. This is because the applicable statute of limitations barred any recovery for payments made prior to 1995. Union also sought relief from the date that its members voted to opt-out of the social security plan, March 9, 1999, to the date that the collective bargaining agreement terminated. Union has not sought any recovery relating to the period from January 1, 1999, to the March 9, 1999, opt-out date. [3] Although Airport raised the standing issue as an affirmative defense in its answer to Union’s complaint, it failed to assert it on summary judgment. The Court of Appeals, however, correctly observed that standing is a jurisdictional [213] issue that can be raised for the first time on appeal. See Int’l Ass’n of Firefighters, Local 1789 v. Spokane Airports, 103 Wn. App. 764, 768, 14 P.3d 193 (2000) (citing RAP 2.5(a); Mitchell v. John Doe, 41 Wn. App 846, 847-48, 706 P.2d 1100 (1985)), review granted, 143 Wn.2d 1019, 25 P.3d 1019 (2001). [4] Although the Court of Appeals refers to a federal bright-line rule against standing for an association seeking monetary damages on behalf of its members if it has not alleged an injury to itself or received an assignment of its members’ damage claim, and a rule to that effect was adopted in Ironworkers, “[n]o court... has pronounced a per se rule against... damage claims on behalf of its members.” Dolphin Stadium, 801 F. Supp. at 691 n.5. [5] This principle, however, is not limited to public employment. Whether the pension is public, established by a collective bargaining agreement, or voluntarily funded by an employer, a pension is contractual in nature. See Tukwila, 22 Wn. App. at 687 (quoting Frank v. Day’s, Inc., 13 Wn. App. 401, 404, 535 P.2d 479 (1975)). [6] Another local of the plaintiffs/respondents. [7] The dissent asserts that “[i]t is unclear from [the Tukwila opinion] whether social security was part of the parties’ collective bargaining agreement.” Dissent at 231 n.11. In Tukwila, however, both parties admitted “that their collective bargaining agreement does not speak to either social security or private pension plan payments.” Tukwila, 22 Wn. App. at 688 n.2.