United States v. Embassy Restaurant, Inc.

PETITIONER: United States
RESPONDENT: Embassy Restaurant, Inc.
LOCATION: Union Station

DOCKET NO.: 174
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 359 US 29 (1959)
ARGUED: Jan 22, 1959
DECIDED: Mar 09, 1959

Facts of the case

Question

Media for United States v. Embassy Restaurant, Inc.

Audio Transcription for Oral Argument - January 22, 1959 in United States v. Embassy Restaurant, Inc.

Earl Warren:

Number 174, United States of America, Petitioner, versus Embassy Restaurant, et al.

Mr. Davis.

John F . Davis:

Mr. Chief Justice, if the Court please.

The issue here is whether a sum of money owed by a bankrupt restaurant to the trustees of a union welfare fund, whether these sums of money are wages due to workmen within the terms of the Bankruptcy Act so that they will be entitled to a priority of payment.

If these sums due to the welfare fund are to be considered as wages due to workmen, then they are entitled to a priority to be paid immediately after the expenses of administering the estate.

If on the other hand they are not wages, then they will share with the other secured creditors.

Now, the Embassy Restaurant in Philadelphia had contracted to pay to the trustees of the welfare plans for the local unions, which represented their chefs, theirs cooks and the local union representing the waiters and waitresses, the sum of $8 a month for each union employee.

This obligation arose from a collective bargaining agreement which had been entered into between the Greater Philadelphia Restaurant Operators, Inc., representing the restaurants generally, and the Local Joint Executive Board of Philadelphia which was made up of the unions of the workers who worked in the restaurants and the hotels.

And the purpose of these -- the purpose of these payments and it's set forth, page 30 of the record, and this is quoted from the collective bargaining agreement under (b) and this is all what is stated about the purpose.

“These funds shall be maintained and utilized to promote life insurance, weekly sick benefits, hospital and surgical benefits and other benefits for the employees who are members of locals,” and it names them, “in the employee of the employer as in that practice.”

Now, the funds were to be operated -- were to be used in accordance with a trust agreement which is also set forth in the record at pages 9 to -- 9 to 24.

The restaurants are not a direct party to these trust agreements.

The trust agreement entered into by the local union, in this case, the chefs and cooks union, and the Board of Trustees for the welfare fund.

And this is the document under which the recipients of these payments from the -- from the restaurant were to be governed in -- in the administration of their trust.

This, too, is stated in the most general terms.

I call the attention of the Court to the provision on page 11, which names the purpose of the trust and to Article II, Section 2.

It says, “The purposes of the chefs, cooks, pastry cooks and assistants' local union -- Local 111 welfare plan shall be provide welfare benefits for employee who use -- who meet the eligibility requirements for coverage as such eligible -- eligibility requirements presently exist or are amended.

Almost a cut blank but they don't define welfare benefits other than just welfare benefits as such.And then, in the duties of the trustees, the trustees are given authority to determine how these funds shall be used.”

And Article IV on page 13 states -- gives these trustees the -- the authority to make the determination as to what welfare purposes they shall be used for.

It's one of the item in the -- in the trust agreement and that is with respect to the rights, the beneficial rights of the union members.

On page 22, this was specifically stated, “The money is to be paid in the said Local 111 welfare plan shall not constitute or be deemed moneys due to the individual employees.

Hugo L. Black:

Where is that?

John F . Davis:

Page 22 of the record, Mr. Justice Black.

Now these, I think, are -- are all the facts which we have before us in -- in this case.

And the question which we have to answer is whether this $8 per employee, which was not paid, is to be considered wages within the provisions of 64 (a) of the Bankruptcy Act.

The language of that section is not helpful.

It merely says that there shall be a priority for wages due to workmen.

Legislative history of that section is also, as far as any reference to congressional debates or reports, is also not helpful.

The words have been in the statute in these words since about 1841, although there have been some changes in the details.

But as far as interpretation goes, it's always just referred to wages to employees.