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Schmidt v. McKay

May 12, 1977


Appeal from an order of the Eastern District, Bruch-hausen, Judge, dismissing appellant's complaint on the grounds that his claims of breach of contract, promissory estoppel and fraud are time-barred under the applicable New York statute of limitations, CPLR § 213. The court holds that appellant's claims of breach of contract and promissory estoppel were not time-barred and that the district court erred in granting summary judgment dismissing appellant's fraud claim. Reversed and remanded.

Lumbard and Oakes, Circuit Judges, and Bryan, District Judge.*fn*

Author: Lumbard

LUMBARD, Circuit Judge:

In this diversity action, Reginald V. Schmidt, a citizen of Florida, appeals from an order of the Eastern District, Bruchhausen, Judge, entered on August 9, 1976, dismissing his second amended complaint on the ground that the claims alleged therein are time-barred under the applicable New York statute of limitations, CPLR § 213. Defendants-appellees Raymond T. McKay and John F. Brady, the president and secretary-treasurer respectively of District 2, Marine Engineers Beneficial Association - AFL-CIO (hereinafter "MEBA"), are sued in their representative capacities on behalf of a class consisting of all persons who were members of MEBA in September 1971, pursuant to Fed. R. Civ. Pro. 23.1.*fn1 MEBA is an unincorporated association with headquarters in Brooklyn. Schmidt alleges (1) that appellees breached a contractual obligation to negotiate an agreement with the trustees of the MEBA pension plan under which he would be provided with credits for past service, or, in the alternative, to make appropriate contributions in his behalf so that he would receive pension credits for past service; (2) that appellees' promises should be enforced under the doctrine of promissory estoppel; and, (3) that McKay and Brady, acting in their representative capacity, committed fraud in making the foregoing promises with no intent to attempt their fulfillment and with the intent to cause him to rely on these misrepresentations to his detriment. On appellees' motion for summary judgment, the district court held that appellant had filed his action eleven days beyond the applicable six-year statute of limitations. We hold that the statute of limitations had not run on Schmidt's contract and promissory estoppel claims and that the court erred in granting summary judgment dismissing appellant's fraud claim; accordingly, the order of the district court is reversed.

Schmidt alleges that from about May 15, 1948 until 1972, he was a member in good standing of the MEBA, and was employed as an engineer by Cities Service Tanker Corporation from 1946 until 1966, during which time Cities Service did not have a collective bargaining agreement with MEBA.

Schmidt claims that in May, 1966 MEBA was engaged in an intensive effort to organize the engineers employed by Cities Service and that prior to May 12, 1966 two representative elections had been held, both resulting in tie votes. According to Schmidt, around May 12, 1966 McKay and Brady sought his help and McKay orally promised him that, regardless of whether the campaign against Cities Service was successful, in return for his support in the campaign they would ensure that he was included in the MEBA pension plan with full benefits upon his retirement.

According to the affidavit of Thomas J. Mackell, Jr., the administrator of the MEBA pension plan, the plan is a jointly administered Taft-Hartley trust. Pension credits are earned by MEBA members through service as licensed marine engineer officers on oceangoing vessels under contract with MEBA. In order to qualify for a normal pension, 20 years credited service is required; benefits of greater value may be acquired through continued work in the industry beyond 20 years.

Schmidt alleges that on May 12, 1966 McKay sent a letter to him aboard the SS Council Grove; apparently, similar letters were sent to the other engineers aboard the Council Grove. The letter advised that Cities Service was about to violate an election agreement with MEBA by negotiating with a competing union. It explained that under the terms of the MEBA plan, the past service credits of engineers employed by "newly participating companies" could be picked up after the company had paid one year's contribution into the plan and that this would be done for engineers in the Cities Service fleet if Cities Service became a party to the plan. The letter then stated that action had been taken against Cities Service's breach of the election agreement and that MEBA made the "following additional commitment to all the Engineers employed by the Cities Service Tanker Corp.:

A) District 2 MEBA will satisfactorily conclude with the Trustees of the District 2 MEBA Pension Plan an agreement permitting the Plan to pick up all the past service credits of any Engineer who supports District 2 MEBA in its current action against the violation of the election agreements - regardless of how this action comes out.

B) District 2 MEBA further guarantees that in the unlikely event that A) above is not accomplished by the Trustees' action, District 2 MEBA will make the appropriate contributions in behalf of said Engineers supporting District 2 MEBA in this action, with the result that the past service credits of the Engineers supporting District 2 MEBA will be totally accredited to their accounts for pensions from the District 2 MEBA Pension Plan."

The letter on MEBA stationery was signed, "Raymond T. McKay, President."

On May 26, 1966 a second letter, also on MEBA stationery and signed by McKay and Brady, was sent to all Cities Service engineers. This letter enclosed the May 12 letter and stated that Cities Service had "reconsidered" its position and had agreed to another representation election. The letter warned, however, that action against the company might still be necessary and stated that "should the Company refuse to agree to fair election conditions and permit the elections to progress without prejudicial interference, we will then institute our original plan." The letter advised that should such action become necessary, "then the terms, commitments and conditions for the COUNCIL GROVE Engineers will apply to all Cities Service Engineers." (emphasis in original).

Apparently, MEBA later concluded that action against the company was necessary and Schmidt took over direction of a picket line around the SS Bradford Island, a Cities Service vessel docked at Mobile, Alabama. Schmidt took part in the strike action from October 26, 1966 to November 16, 1966, when it appears the picket line was terminated because the engineers and mates aboard the Bradford Island were successfully organized. Schmidt claims that his support of MEBA on this occasion was taken in reliance upon McKay's oral promise and the letters of May 12 and 26. Although the Bradford Island battle was won, the union lost the war and MEBA never became the collective bargaining representative for the Cities Service engineers.*fn2

Schmidt alleges that because of his union activity he was demoted by Cities Service and resigned. He then found employment for the next four years (from 1967 to 1971) with companies under contract with MEBA. On September 22, 1967 he wrote to Brady stating that he had heard rumors that the union had refused to pick up his time with Cities Service and he "told them this was all a big lie." He then stated, "I wonder if it would do any good to . . . have the union certify my time for retirement . . ." The Mackell affidavit explains that under the MEBA pension plan, employees "are entitled to periodically request from the Plan certification . . . of their earned pension credits." Certification enables the individual to establish the amount of pension credits earned under the plan and thereby determine whether he has qualified for a pension or for increased benefits. In his deposition, Schmidt testified that prior to May, 1966 he was aware that in order to earn pension credits it was necessary to be employed by a company under contract with MEBA. Schmidt never received an answer to his letter of September 22 and did not request certification of his credits prior to his application for a pension. In his deposition Schmidt also stated that he believed a binding contract had been established when he engaged in the strike action at ...

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