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My Most Rewarding Legal Experience

 

By James Sherman

Several years ago I represented a small, family owned tile company that was being sued by a union fringe benefit fund for failing to make contributions pursuant to a collective bargaining agreement (CBA). The client maintained that it never agreed to a CBA but was tricked into signing a single "acknowledgement" page for what the union business agent had represented was solely to allow the union to speak to employees. Once signed the vague "acknowledgement" was appended to the back of a lengthy CBA and submitted to the fringe benefit administrator for compliance with its terms. This small employer assumed there was a mistake when it began receiving demands from the union fund for payment of contractual contributions; however, it quickly realized the seriousness of the matter when it was sued in federal court for hundreds of thousands of dollars in unpaid contributions, interest and penalties as provided for under ERISA, along with attorney fees.

At the time the prospect for raising the defense of fraud by a union representative, against a third-party beneficiary fund, was far from encouraging. Courts had routinely held that union "fraud in the inducement" was no defense in a collection suit brought by an employee benefit fund. The notion that an employer might be able to successfully raise a defense of "fraud in the execution," had been mentioned only in passing dicta in one or two federal decisions. Consequently, the case went to trial in federal court with the client fully aware that our defense was at best iffy.

Following a bench trial in federal court in St. Paul, Judge Magnuson commented that union benefit funds normally win collection cases, but this was a rare case not seen in his many years on the bench. Judge Magnuson stated that a written decision would follow but that he had concluded the evidence demonstrated fraud in the execution and he was ruling that this defense barred enforcement of the CBA as it was "void ab initio." My client was seated at my side at the defense table as the judge issued his findings in the usual legalese known to lawyers but not to lay persons. I looked over at my client and he was physically shaking, not understanding the ruling and assuming he was about to be put out of business. When I leaned over and whispered to him "we won," he flopped down on the table and began sobbing uncontrollably with relief and joy.

The case received national attention in BNA as a first of its kind; however, what that decision meant to my client was by far the most rewarding aspect of my representation.