search the entire site.
or go to the recent opinions, or the chronological or subject indices.
AK State Employees Assoc., et al v. AK Public Employees Assoc., et al (11/29/91), 825 P 2d 451
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
ALASKA STATE EMPLOYEES )
ASSOCIATION, and LINDA ) Supreme Court No. S-3755
BRENTON, ALMA FITZGERALD )
SEWARD, and JOSEPH S. ) Trial Court No.
JOHNSON, individually and ) 3AN-88-5808 Civil
on behalf of all others )
similarly situated, )
) O P I N I O N
ALASKA PUBLIC EMPLOYEES )
ASSOCIATION and ALASKA )
PUBLIC EMPLOYEES ASSOCIATION )
LEGAL TRUST FUND, )
Appellees. ) [No. 3779 - November 29, 1991]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Victor D. Carlson,
Appearances: Don Clocksin, Wagstaff,
Pope & Clocksin, Anchorage, for Appellants.
Bradley D. Owens, Jermain, Dunnagan & Owens,
P.C., Anchorage, for Appellees.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
Appellants, the Alaska State Employees Association
("ASEA") and three individual members of the General Government
Unit of State employees ("GGU"), sued the Alaska Public Employees
Association ("APEA") and the Alaska Public Employees Legal Trust
Fund.1 The trial court granted summary judgment for APEA. ASEA
The suit involves three union funds, the Business Leave
Bank, the Strike Fund, and the Legal Trust Fund. The GGU members
contributed the majority of the assets deposited in these funds.
APEA once represented the GGU members, but now ASEA represents
the GGU members. After it was elected to represent the GGU
members, ASEA sued to obtain possession of pro-rated portions of
the funds and for damages for alleged breaches of fiduciary duty
II. FACTS AND PROCEEDINGS
APEA was the certified bargaining representative for
the GGU members between 1974 and 1988. GGU membership in 1988
consisted of approximately 8,300 employees. APEA only
represented approximately 1,600 other employees in 1988.
In May 1988, the GGU members voted to decertify APEA as
their bargaining representative. In that election, ASEA received
1,565 votes, Public Employees Local 71 received 1,554 votes, and
APEA received 1,551 votes. ASEA won a run-off election against
Public Employees Local 71, and on September 28, 1988, the State
Labor Relations Agency certified ASEA as the bargaining
representative for the GGU.
In addition to its general operating accounts, APEA
maintained three funds which are the subject of this lawsuit:
the Association Business Leave Bank, the APEA Strike Fund Trust,
and the APEA Legal Trust Fund.
The Leave Bank was established by Article 30, Section 4
of a 1984-1986 collective bargaining agreement between the State
of Alaska and APEA on behalf of the GGU ("State/GGU Agreement").
The agreement requires new GGU members to contribute their first
earned day of annual leave to the Leave Bank. The State converts
these leave days into cash at the employee's rate of pay and
holds the money in an account. The purpose of the Leave Bank is
to compensate GGU members when they take unpaid leave from their
State duties to conduct union business. GGU members could
request withdrawals from the Leave Bank by submitting leave slips
to APEA. However, the contract provided that only APEA's
executive director or designee could request Leave Bank
disbursements from the State.
APEA has refused to transfer the assets in the Leave
Bank to ASEA. As of June 1989, the Leave Bank contained
ASEA also seeks damages for APEA's alleged breaches of
fiduciary duties relating to the Leave Bank. Between May 1986
and March 1988, APEA withdrew approximately $360,000 from the
Leave Bank. Each of these withdrawals was accompanied by a
"letter of agreement"between APEA and the State. ASEA alleges
that these withdrawals were improper because they were not paid
to GGU members nor accompanied by a leave slip.
The second dispute concerns the APEA Strike Fund Trust.
The Strike Fund is a trust created by APEA. The declaration of
trust designates APEA as the trustee. The declaration of trust
appears to be silent as to the purpose of the trust. An
unlabeled document attached to the declaration of trust in the
record states that the purpose of the Strike Fund is to help win
strike issues, build support in the public, improve the image of
public employees, communicate with the membership, and provide
financial support for striking members.
The Strike Fund was funded and available to all members
of APEA including non-GGU members. Specifically, the Strike Fund
was funded by a $5 per APEA member per month fee,3 collected by
the State and transmitted to APEA for deposit in the fund. APEA
has refused to transfer the GGU members' share of the Strike Fund
to ASEA. As of May 1989, the Strike Fund held approximately $1.3
million in assets.
In addition, ASEA seeks damages for APEA's alleged
breaches of fiduciary duty relating to the Strike Fund. ASEA
alleges that APEA made improper withdrawals from the Strike Fund
and did not properly invest the assets of the Strike Fund. APEA
withdrew approximately $50,000 in 1987 and authorized the
expenditure of approximately $250,000 in 1988 from the Strike
Fund. ASEA alleges that these transactions were improper because
they were not related to any strike.
As to APEA's investment duty, the declaration of trust
provides that the trustee "shall exercise the judgment and care
under the circumstances then prevailing which an institutional
investor of ordinary prudence, discretion, and intelligence
exercises in the management of investments entrusted to it
. . . ." In November 1988, two months after the GGU members
removed APEA as the GGU members' representative, APEA sold three
APEA owned buildings to the Strike Fund for $215,000. APEA then
leased back the buildings from the Strike Fund for $1 per
building per year. ASEA alleges that these transactions involved
unethical self-dealing by APEA and breached APEA's duty to invest
The third dispute concerns the Legal Trust Fund.
Article 39 of the State/GGU Agreement authorized the Legal Trust
Fund. Each month, the State paid into the trust $25,000 plus
$5.00 per represented employee in pay status. Approximately
eighty-five percent of the total contributions received were made
on behalf of GGU members, some $62,000 per month.
The purpose of the Legal Trust Fund is to "create and
administer a legal services plan for the employees on whose
behalf the contributions are made." The State ceased contri
buting on behalf of GGU members after the GGU members decertified
APEA. The fund then removed the GGU members as beneficiaries,
and increased benefits for the remaining beneficiaries. APEA has
refused to transfer the GGU members' share of the Legal Trust
Fund to ASEA. As of May 1989, the Legal Trust Fund contained
As noted above, ASEA sued APEA, seeking a pro-rated
distribution of funds from the Leave Bank, the Strike Fund, and
the Legal Trust Fund, and damages. APEA moved for summary
judgment, which was orally granted by the trial court over
opposition. Subsequently, a written order dismissing all claims
with prejudice was entered. This appeal followed.
A. Procedural Issues
ASEA argues for dismissal and remand based on Civil
Rule 54(b).4 It contends that the trial court's ruling did not
address all its claims and did not contain the certification
required under Rule 54(b) when fewer than all claims are
addressed. APEA, citing Reed v. Municipality of Anchorage, 741
P.2d 1181, 1194 (Alaska 1987), responds that we should presume
that the trial court resolved all issues before it since there
were "ground[s] asserted [in support of] the decision of the
ASEA notes that the trial court's oral ruling on
summary judgment did not refer to ASEA's breach of fiduciary duty
claims. However, both parties addressed all of ASEA's claims at
oral argument on November 22, 1989, at the close of which the
trial court made its ruling. Thus, we can presume that the trial
court intended to grant summary judgment as to all of ASEA's
Further, any ambiguity in the trial court's oral ruling
is resolved by its written order granting summary judgment. The
order states that
there exists no genuine issue as to any
material facts pertaining to plaintiffs'
claims regarding the business leave bank, the
strike fund and the legal trust fund . . . .
IT IS HEREBY ORDERED that summary
judgment is granted in favor of defendants
concerning plaintiffs' claims involving the
Association Business Leave Bank, the APEA
Strike Fund and the APEA Legal Trust Fund.
IT IS FURTHER ORDERED that all
claims asserted by plaintiffs in this action
are thereby dismissed with prejudice . . . .
(Emphasis added.) This order clearly indicates that the trial
court entered final judgment on all of ASEA's claims.
APEA contends that ASEA should have joined the State as
a necessary party for claims related to the Leave Bank. While
the State was a party to the agreement which created the Leave
Bank, its absence below did not rise to a level such that "relief
[could not] be accorded among those already parties." Civil Rule
19(a). Thus, the State is not a necessary party.
ASEA asks us to use our equitable power to order a pro-
rated transfer of trust assets. Courts have equitable
jurisdiction over trusts. Clews v. Jamieson, 182 U.S. 461, 479
(1901). This includes the power to create any remedy that
furthers the cause of justice. As Justice Story noted:
In all situations and under all
circumstances, whether new or old, the
principles of equity will point the way to
justice . . . . Where a new condition
exists, and the legal remedies afforded are
inadequate or none are afforded at all, the
never failing capacity of equity to adapt
itself to all situations will be found equal
to the case, extending old principles, if
necessary, . . . for that purpose.
Story, 1 Story's Equity Jurisprudence, 4 (14th ed. 1918).
Specifically, courts have the equitable power to order a pro-
rated transfer of trust assets to prevent unjust enrichment.
E.g., Judge v. Kortenhaus, 192 A.2d 320, 329 (N.J. Super. 1963).
Thus, our courts have the authority to order the affirmative
relief sought by ASEA.
C. Pro-Rated Transfer
The first issue concerns ASEA's request for a pro-rated
transfer of trust assets. The trial court granted summary
judgment to APEA. We reverse.
The trial court relied on Judge v. Kortenhaus, 192 A.2d
320 (N.J. Super. 1963) and Occidental Life Insurance Company of
California v. Blume, 399 P.2d 76 (Wash. 1965), in granting
summary judgment for APEA. Finding this case nearly analogous to
those cases, the court remarked: "This was a voluntary departure
of certain employees from a labor union to another labor union."
As the trial court noted, Kortenhaus and Occidental are
decisions where courts have declined to order a pro-rated
distribution of trust funds to a new employee organization
following the voluntary withdrawal of employee beneficiaries from
an existing employee organization. Both courts stressed the
voluntary nature of the withdrawal. Kortenhaus, 192 A.2d at 326;
Occidental, 399 P.2d at 80-81.
As the trial judge's emphasis on the voluntary nature
of the GGU members' withdrawal from APEA implies, there are cases
where, after an involuntary transfer from one union to another, a
pro-rated remedy in favor of the transferring members has been
ordered. E.g., Whelan v. O'Rourke, 170 N.Y.S.2d 284 (N.Y. App.
Div. 1958); Nicoletti v. Essenfeld, 171 N.Y.S.2d 373 (N.Y. App.
Div. 1958). In Kortenhaus and Occidental, the trustees had
decided not to effect a pro-rated distribution of trust funds to
the new employee organization, and in Whelan and Nicoletti, the
trustees had decided to make such a transfer. Each of these
cases can be read for the proposition that the decision of the
trustees in such matters will be upheld absent an abuse of the
trustees' discretion. Kortenhaus, 192 A.2d at 327 ("the court
will interfere when [the trustee] acts outside the bounds of a
reasonable judgment") (quoting 2 Scott on Trusts, 187 at 1374
(2d ed. 1956)); Occidental, 399 P.2d at 79 ("[t]he question is
whether the . . . [t]rustees' determination . . . constituted an
abuse of discretion."); Whelan, 170 N.Y.S.2d at 287 ("the
[t]rustees possess broad and flexible discretion in the
administration of the [trust]."); Nicoletti, 171 N.Y.S.2d at 377-
378 (the trustee's power to construe and interpret the trust
provisions includes the power to transfer a pro-rated portion of
the trust assets.)
In Occidental, the court made a careful analysis of the
factual situation and decided that not ordering the pro-rated
remedy was not inequitable on the facts of that case.
Occidental, 399 P.2d at 81. Likewise, the New Jersey court in
Kortenhaus recognized that pro-rated relief could be ordered in
an appropriate case to prevent unjust enrichment, but that no
such unjust enrichment occurred in the voluntary withdrawal case
before it. Kortenhaus, 192 A.2d at 329. The court in Nicoletti,
in upholding the trustees' discretion to effect a pro-rated
distribution to the new employee organization, noted that there
would be "gross injustice"if the remaining members of the old
organization "were to be held entitled to retain the entire
reserve for themselves . . . ." They would "in such event, reap
an unintended windfall based on a transfer of membership over
which [the transferred employees] had no control." 171 N.Y.S.2d
A case that depends neither on the voluntary nature of
an employee group's disassociation with the union nor on judicial
deference to the decision of the trustees is Local 50, Bakery and
Confectionery Workers Union, AFL-CIO v. Local 3, Bakery and
Confectionery Workers Union, AFL-CIO, 733 F.2d 229 (2nd Cir.
1984). In that case the employees voted to change bargaining
representatives from Local 50 to Local 3. Local 3 claimed
reserves in the Local 50 health benefits fund attributable to
past payments made by the employer on the behalf of its
employees. The trustees of the Local 50 fund refused to transfer
these reserves. The trial court held that a pro-rated
distribution should be made and this was upheld by the Second
Circuit on appeal. The Second Circuit expressed concerns
relating both to unjust enrichment, and to the chilling effect
which not transferring the trust funds to a successor employee
organization would have on representation elections. The court
Before beginning an analysis of the
law, it is helpful to recognize some of the
equities at issue. On its face, this case
deals with the rights of employees to reap
the benefits of employer contributions made
in lieu of wages. Viewed in this light, the
problem here might be considered one of
entitlement on the part of Entenmann's
employees or, alternatively, unjust
enrichment of those workers who retain Local
50 as their collective bargaining
Yet a more fundamental problem
exists -- one that strikes at the very core
of collective representation. Specifically,
were we to hold that Local 50 may retain the
contributions made by Entenmann's on behalf
of its employees, we would be imposing a
great disincentive for employees ever to
change bargaining representatives. Faced
with the devil's alternative of either
forfeiting their right to a substantial sum
of employer contributions or retaining a
collective bargaining representative with
which they are less than satisfied, employees
may well choose the latter. Such a result
would not only impinge on free choice in
representation, but would also permit unions
without penalty to them to become less
attentive to their constituencies' demands.
See Summers, Union Schism in Perspective, 45
Va. L. Rev. 261, 279, n. 84 (1959). We see
no necessity to make employees choose between
two such bad bargains.
Local 50, 733 F.2d at 233.5
The legal context in which Local 50 was decided differs
from that present in this case. Section 302(c)(5) of the Federal
Labor-Management Relations Act permits payments by an employer to
the representative of its employees only "with respect to money
or other thing of value paid to a trust fund established by such
representative, for the sole and exclusive benefit of the
employees of such employer, and their families and dependents
. . . ." 29 U.S.C. 186(c)(5). Federal courts have
jurisdiction to remedy "structural defects" in trust funds
established pursuant to 302(c)(5). The structural defect in
the Local 50 case was the fact that there was no provision in the
trust providing for a transfer of funds in case of a change to a
different bargaining representative, in violation of the "sole
and exclusive benefit"provision of the LMRA.
This difference does not substantially detract from the
precedential value of the Local 50 case. The statutory command
that employer contributions be for the sole and exclusive benefit
of employees and their dependents is merely a specific example of
the equitable principle against unjust enrichment which is
expressed in more general terms by the state authorities which we
have discussed. The equitable basis for the Local 50 decision
becomes clearer when one compares the later Second Circuit case
of O'Hare v. General Marine Transport Corp., 740 F.2d 160 (2nd
Cir. 1984). There, some employees of the employer joined a
different union while others did not. The Second Circuit held
that a pro-rated transfer of union trust funds was not required,
distinguishing Local 50 as a case where "all of an employer's
employees have left a fund en mass, creating a great distortion
in the organization and financing of the Funds." 740 F.2d at
To claim that monies retained by the
Funds contributed by an employer on behalf of
all of its employees is not contributed "for
the sole and exclusive benefit of the
employees of such employer"whenever some of
the employees choose to leave the union and
fund would be an unfair and unrealistic
construction of section 302(c)(5). This is
especially true when considering pension
funds, where financing is based on long-range
actuarial projections and vesting require
ments which assume that some employees for
whom contributions are made will never be
eligible for benefits . . . . Simply put,
section 302(c)(5) does not require that when
a small number of employees leave a large
multi-employer unit, pension funds, by virtue
of that circumstance alone, must return money
contributed on their behalf to the employees
or their new funds.
740 F.2d at 173-74.
We are in general agreement with the approach taken by
the Second Circuit in Local 50 and, in our view, it should be
applied to this case. The loss of the GGU decimated APEA's
membership rolls. In 1988, APEA represented about 8,300 GGU
employees and about 1,600 other employees. Not to require a pro-
rated transfer of the trust funds would work an obvious unjust
enrichment in favor of the remaining employees represented by
APEA to the detriment of the GGU members. Such a result would
plainly be inequitable.
Further, to withhold the transfer remedy in this case
could, in future cases, give an undue advantage to an incumbent
union in a representation election. This would interfere to some
extent with employees' right to freely choose their bargaining
representative which is implicit in the Public Employment
Relations Act, AS 23.40. Kenai Peninsula Borough School Dist. v.
Kenai Peninsula School Dist. Classified Ass'n, 590 P.2d 437, 439
Moreover, to stress the voluntary nature of the
decertification in this case ignores the fact that the
decertification of APEA as the GGU representative was
accomplished by a closely divided vote. One thousand five
hundred and fifty-one GGU members voted to retain APEA
representation, yet when APEA was decertified, they did not
retain the option to continue to be represented collectively by
APEA.6 It is unrealistic to say that those members voluntarily
chose to leave APEA. For the above reasons, we conclude that the
trial court erred in refusing to grant a pro-rated transfer.
APEA concedes that the Strike Fund and the Legal Trust
Fund are trusts. Therefore, we require a pro-rated transfer of
those funds to ASEA. APEA contends that the Leave Bank is not a
trust. However, as we discuss below, we conclude that the Leave
Bank is a trust. Thus, we also require a pro-rated transfer of
the Leave Bank to ASEA.
APEA also contends that because the Strike Fund was
funded through "dues," we should treat the Strike Fund
differently than the Leave Bank and the Legal Trust Fund. The
Strike Fund was funded by a $5 per member contribution that the
State collected and turned over to APEA. APEA placed the money
into the Strike Fund pursuant to the Strike Fund Declaration of
Trust. The Strike Fund Declaration of Trust labeled these
contributions as "dues"and as "funds."7 APEA contends that
since part of the Strike Fund Declaration of Trust labels these
contributions as "dues,"they were dues and are the property of
APEA. We disagree.
The source of the assets in the Strike Fund is not of
controlling importance. Assuming, without deciding, that the
contributions were dues and hence originally the property of
APEA, APEA transferred its equitable interest in the
contributions to its members when it placed the contributions in
the Strike Fund. See Island Homes, Inc. v. City of Fairbanks,
421 P.2d 759, 764 (Alaska 1966). As trustee, APEA retained legal
title in the Strike Fund assets solely to administer the assets
faithfully for the benefit of its members. See Restatement
(Second) of Trusts 74 comment a, 170. As settlor, APEA lost
all ownership rights.8 Thus, APEA's ownership interest in the
assets of the Strike Fund is no different than its ownership
interest in any assets which it owns solely as trustee.
In arguing that the source of the Strike Fund is deter
minative, APEA incorrectly relies on In Re PATCO, 724 F.2d 205
(D.C. Cir. 1984). PATCO involved a dissolution of a trust that
failed its essential purpose. Id. at 210. In PATCO, unsecured
creditors of a bankrupt union sought a declaration that the union
owned the assets in a strike benefits trust fund. The D.C.
Circuit held that the trust was funded through union member dues.
Id. at 210. Since union dues are the union's property, the court
held that the union, not the union members, was the trust
settlor. Id. at 209-210. The court applied the general rule
that when a trust fails its essential purpose the assets in the
trust revert back to the settlor. Id. (citing Restatement
(Second) of Trusts 411 (1959)) (other citations omitted).
Therefore, the court declared that the union owned the assets of
the strike benefits trust fund. Id. Unlike PATCO, the Strike
Fund Trust will not be dissolved in this case. Thus the
dissolution remedy ordered in PATCO is not appropriate here.
D. Breach of Fiduciary Duty
Although the foregoing is sufficient to decide the pro-
rated transfer issue raised by ASEA, we also must address ASEA's
claims concerning breach of fiduciary duty. ASEA claims that
APEA breached its fiduciary duty with respect to two of the three
trusts, the Strike Fund and the Leave Bank. APEA suggests that
these claims should be disposed of on appeal favorably to it on
grounds different from the rationale used by the trial court
which we have rejected in the preceding section. This is proce
durally proper as a judgment may be defended on grounds not
utilized by the trial court. Ransom v. Haner, 362 P.2d 282, 285
(Alaska 1961). With respect to the Strike Fund, however, the
record is insufficiently developed and the parties' arguments are
too general for us to make a determinative ruling. With respect
to the Leave Bank, we are able to rule. We agree with APEA that
no claim for damages is appropriate.
ASEA claims that the Leave Bank is a trust and that
"[a]s a holder of the power of control, APEA is subject to a
fiduciary duty, since the power it holds is for the benefit of
GGU members." ASEA claims that APEA breached its fiduciary
duties by participating in various withdrawals from the Leave
Bank, namely: withdrawal of $100,000 to be transferred to the
Legal Trust Fund; withdrawal of $60,000 paid to the State of
Alaska; withdrawal of $150,000 to offset unexpected and
unbudgeted negotiation costs of APEA; withdrawal of $14,116.75 to
pay salary and benefits of a non-State employee; and withdrawal
of $40,352.76 to pay salary and benefits of a non-GGU member.
In response, APEA argues that the Leave Bank is not a
trust. Alternatively, APEA argues that if the Leave Bank is a
trust, APEA is the beneficiary of the trust and has no fiduciary
duty as such. Further, APEA argues that the withdrawals from the
Leave Bank were proper because all withdrawals were authorized
under letters of understanding which in effect amended the
agreement creating the trust.
A trust is defined in the Restatement as "a fiduciary
relationship with respect to property, subjecting the person by
whom the title to the property is held to equitable duties to
deal with the property for the benefit of another person, which
arises as a result of a manifestation of an intention to create
it." Restatement (Second) of Trusts 2 (1959). Comment h of
section 2 describes the elements of a trust. They are:
(1) a trustee, who holds the trust
property and is subject to equitable duties
to deal with it for the benefit of another;
(2) a beneficiary, to whom the trustee owes
equitable duties to deal with the trust
property for his benefit; (3) trust property,
which is held by the trustee for the
As noted, APEA argues that the Leave Bank is not a
trust. Rather, it creates either a third-party beneficiary
contract between the State and APEA, or a debtor-creditor
relationship between those parties. According to section 14 of
the Restatement, comment a, one of the major differences between
a contract for the benefit of a third party and a trust is that
"[t]he beneficiary of a trust has the beneficial interest in the
trust property; the beneficiary of a contract has merely a
personal claim against the promisor . . . ." The Leave Bank does
not appear to be a third-party beneficiary contract because the
State has not agreed to assume personal liability to APEA or its
members. The State has merely agreed to administer the fund
created by the transfer of annual leave. When the fund is
insufficient to meet the purposes of the Leave Bank, the State is
not personally liable. Instead, it is then to grant annual leave
if the employee in question has annual leave coming, or approve
leave without pay at the option of the employee. State/GGU
Agreement at Art. 30 4.3(b).
Likewise, the Leave Bank provision did not create a
debtor-creditor relationship between APEA and the State.
According to section 12 of the Restatement (Second) of Trusts,
comment a, the distinction between a trust and a debt is that the
beneficiary of a trust has the beneficial interest in the trust
property, whereas a creditor has merely a personal claim against
the debtor. Here, article 30 creates no grounds for a personal
claim against the State, whereas a segregated fund in which APEA
or its members have a beneficial interest is created. For these
reasons, we conclude that the Leave Bank is a trust.
We turn then to ASEA's second point. ASEA argues that
the State is the trustee under the Leave Bank and APEA has the
status of a person holding power of control and as such is
subject to a fiduciary obligation to the GGU members. ASEA
relies on the black letter rule expressed in section 185 of the
Restatement (Second) of Trusts:
If under the terms of the trust a person
has power to control the action of the
trustee in certain respects, the trustee is
under a duty to act in accordance with the
exercise of such power, unless the attempted
exercise of the power violates the terms of
the trust or is a violation of a fiduciary
duty to which such person is subject in the
exercise of the power.
This section itself does not impose a fiduciary duty on
a person holding power of control. However, comment e provides
that "[i]f the power is for the benefit of someone other than the
holder of the power, the holder of the power is subject to a
fiduciary duty in the exercise of the power." ASEA argues that
the power of APEA to make requests for withdrawals from the bank
-- an exclusive power under article 30, section 4 subsection 3(a)
of the State/GGU Agreement -- is for the benefit of GGU members.
APEA counters that this power is for the benefit of APEA, and
thus no fiduciary obligation arises.
We interpret the Leave Bank provisions as designed for
the benefit of the APEA and of the employee members of GGU who
take business leave for union purposes. Thus, we agree with
ASEA that APEA was subject to a fiduciary duty in the exercise of
its power to make requests for withdrawals.
We turn then to the question as to whether APEA was
entitled to summary judgment on the grounds that it did not
breach its fiduciary duty with respect to the Leave Bank. APEA's
first argument on this point is that the Leave Bank's purpose was
basically open ended. The final clause of the first sentence of
subsection 3(a) provides that withdrawal requests from the bank
will be for purposes "as may be determined by the Executive
Director." APEA argues that clause means that Leave Bank funds
may be withdrawn for any legitimate purpose at the sole
discretion of the executive director. We reject this
interpretation. The sentence in full reads as follows:
Withdrawal requests from the Bank will
be for purposes of contract negotiations and
formulation, executive meetings, general
assembly, and State Administrative Council
meetings, training sponsored by the
Association, attendance at arbitration
hearings as witnesses for the Association and
other purposes as may be determined by the
In our view, the specific purposes listed prior to the
"other purposes"clause, all of which involve employee attendance
at union-related functions, give meaning to the more general
clause. The principle applicable here is ejusdem generis (the
general is controlled by the particular). See State v. First
National Bank of Anchorage, 660 P.2d 406, 413 (Alaska 1982).
Thus, the "other purposes"authorized under subsection 3(a) must
bear a relationship to participation by an employee in some
aspect of APEA's business.
APEA's second argument is that all withdrawals were
proper because they were made pursuant to a letter of
understanding with the State. APEA is arguing that each letter
of understanding is, in effect, a modification of the trust,
authorizing withdrawal of funds for the purposes mentioned in the
letter of understanding.
This argument has merit. Article 33 of the State/GGU
Agreement provides that the agreement can be changed using the
device of a letter of understanding. Article 33 provides in
Prior to enacting any change in the
terms and conditions of employment, as
established by a specific provision of this
Agreement, the Commissioner of Administration
[of the State] shall obtain the approval of
APEA in the form of a Letter of
Trusts may be modified to the extent that the "settlor"
of the trust has reserved the power of modification. Restatement
(Second) of Trusts 331 (1959). Here it appears that the joint
settlors of the trust, APEA and the State, reserved the power of
modification, and that in accordance with the terms of the power
of modification, modified the trust with respect to each of the
withdrawals about which ASEA complains. Thus we agree with APEA
that it is entitled to summary judgment on the question of
whether the withdrawals from the Leave Bank amounted to a breach
of APEA's trust duties with respect to the Leave Bank.
As to the Strike Fund, ASEA claims that the sale by
APEA of its three office buildings to the Strike Trust Fund was a
breach of duty, especially since APEA was allowed to lease back
the buildings from the Strike Fund for rental of $1 per year for
each building. Further, ASEA contends that the expenditure of
$50,000 from the Strike Fund was for the purpose of general APEA
operations, not a purpose of the Strike Fund Trust. Finally,
ASEA contends that the appropriation of some $250,000 was for the
purpose of conducting a public relations campaign in the
decertification election, also not an allowable purpose under the
Strike Fund trust.
In response to ASEA's contentions concerning investment
in the three buildings, APEA contends first, that the investment
was reasonable and prudent and thus not a fiduciary violation.
Second, APEA argues that the question of investment of the funds
in the buildings was presented to the APEA membership and
approved, noting that where there is consent of all beneficiaries
there can be no breach of fiduciary duty. Third, APEA argues
that the failure of the investment to earn income does not
constitute a violation of duty because of the potential for
capital appreciation of the buildings.
In our view there are questions of fact concerning
whether APEA, as trustee of the Strike Fund, breached its
fiduciary duty. First, the purposes of the Strike Fund are not
expressed in the declaration of trust which created it. Nor are
the beneficiaries of the Strike Fund defined. Second, the
declaration of trust creating the Strike Fund permits investment
"in property of any kind . . . irrespective of any statute, case,
rule, or custom limiting the investment of trust funds." Whether
this clause is effective to override the general rule that a
trustee may not sell property which he owns individually to
himself as trustee has not been briefed or argued. See
Restatement (Second) Trusts 206, comment c (1959). Further,
apart from the conflict of interest question, there are questions
of fact as to the value of the buildings and the prudence of the
investment which need to be developed. We thus conclude that
summary judgment in favor of APEA as to whether it was in breach
of its fiduciary obligations to the Strike Fund was
In conclusion, we direct the trial court to order a pro-
rated transfer of each trust's assets. We affirm the trial
court's grant of summary judgment to APEA with respect ASEA's
breach of fiduciary duty claim concerning the Leave Bank. We
reverse the trial court's grant of summary judgment to APEA with
respect ASEA's breach of fiduciary duty claim concerning the
Strike Fund and remand that claim for further proceedings.
The decision of the trial court is AFFIRMED in part,
REVERSED in part, and REMANDED for further proceedings.
1 Although appellants consist of ASEA and three individuals,
for ease of discussion we will refer only to ASEA as the appel
lant. Likewise, although appellees consist of APEA and the
Alaska Public Employees Legal Trust Fund, we will refer only to
2 This case does not fall under the Employee Retirement
Income Security Act ("ERISA") because the collective bargaining
agreements at issue qualify as "governmental plans" within the
meaning of Section 3(32) of ERISA, 29 U.S.C. 1002(32). The
Labor-Management Relations Act ("LMRA") excludes states from its
definition of employers. 29 U.S.C. 152(2). Thus this case is
decided under state law.
3 The legal characterization of this $5/month fee as "dues"
or "temporary special assessment"is hotly contested by the
parties. The declaration of trust refers to the contributions as
"dues,"but ASEA argues that the fees have little in common with
4 Civil Rule 54(b) provides:
When more than one claim for relief is
presented . . . the court may direct the
entry of a final judgment as to one or more
but fewer then all of the claims or parties
only upon an express determination that there
is no just reason for delay and upon an
express direction for the entry of judgment.
In the absence of such determination and
direction, any order . . . shall not
terminate the action as to any of the claims
or parties, and the order . . . is subject to
revision at any time before the entry of
judgment adjudicating all the claims and the
rights and liabilities of all the parties.
5 The court also noted with approval "the district court's
requirement that the post-transfer position of the successor
fund's members may not be better than their pre-transfer
position. This stipulation should assure that bargaining
representatives will not use today's holding as a tool with which
to lure groups of employees from their current representatives."
733 F.2d at 238.
6 Once ASEA was certified by the State Labor Relations
Agency as the new bargaining representative for the GGU, no
employee within the GGU was eligible to be a member of APEA.
7 Paragraph one of the trust declaration provides:
1. Declaration of Trust
APEA hereby declares that it has
set aside and now holds in trust those dues
monies received as "strike fund"
contributions . . . . APEA further declares
that it will contribute to the Trust, when
received, all future funds which it receives
which are designated as "strike fund"
contributions. (Emphasis added.)
8 After a settlor has created a trust, the settlor has no
rights or powers with regard to the trust unless the trust
instrument provides otherwise. Bogert, The Law of Trusts &
Trustees 42, at 431 (rev. 2d ed. 1984). In the present case,
APEA reserved no rights in the Strike Fund other than the right
to be the trustee.