International Brotherhood Of Teamsters, Chauffeurs, Warehousemen & Helpers Of America v. Daniel

439 U.S. 551 (1979)

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Nature of the Case

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Facts

A multiemployer collective bargaining between D and employers produced a pension plan for employees represented by D. The plan was compulsory and noncontributory. Employees had no choice as to participation in the plan and did not have the option of demanding that the employer's contribution be paid directly to them as a substitute for pension eligibility. The employees paid nothing to the plan themselves. The Board of Trustees of the Fund, a body composed of an equal number of employer and union representatives, was given sole authority to set the level of benefits but had no control over the amount of required employer contributions. At the time respondent brought suit, employers contributed $ 21.50 per employee man-week, and pension payments ranged from $425 to $525 a month depending on age at retirement. To receive a pension, an employee was required to have 20 years of continuous service, including time, worked before the start of the plan. D began working as a truck driver in the Chicago area in 1950 and joined D the following year. When the plan first went into effect, D automatically received 5 years' credit toward the 20-year service requirement because of his earlier work experience. He retired in 1973 and applied to the plan's administrator for a pension. The administrator determined that D was ineligible because of a break in service between December 1960 and July 1961. The trustees affirmed. D then asked the trustees to waive the continuous-service rule as it applied to him. They refused, and D brought suit in federal court against D. P alleged that D misrepresented and omitted to state material facts with respect to the value of a covered employee's interest in the pension plan. P claimed a fraud in connection with the sale of a security in violation of §10 (b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U. S. C. § 78j (b), and the Securities and Exchange Commission's Rule 10b-5, 17 CFR § 240.10b-5 (1978). P also alleged a violation of §17 (a) of the Securities Act of 1933, 48 Stat. 84, as amended, 15 U. S. C. § 77q. D moved to dismiss. The District Court denied the motion. It held that P's interest in the Pension Fund constituted a security within the meaning of §2 (1) of the Securities Act. It held that the plan created an 'investment contract' as that term had been interpreted in Howey. It also determined that there had been a 'sale' of this interest to respondent within the meaning of §2 (3) of the Securities Act and § 3 (a)(14) of the Securities Exchange Act. D appealed. The Court of appeals affirmed. The court ruled that P's interest in the Pension Fund was a 'security.' According to the court, a 'sale' took place either when P ratified a collective-bargaining agreement embodying the Fund or when he accepted or retained covered employment instead of seeking other work. The Supreme Court granted certiorari.