United States v. Douglas ( 2005 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 05a0055p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellant, -
UNITED STATES OF AMERICA,
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No. 03-2535
v.
,
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DONNY G. DOUGLAS; JAY CAMPBELL, -
Defendants-Appellees. -
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
Nos. 02-80863-1; 02-80863-3—Nancy G. Edmunds, District Judge.
Argued: December 7, 2004
Decided and Filed: February 8, 2005
Before: MARTIN and MOORE, Circuit Judges; BUNNING, District Judge.*
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COUNSEL
ARGUED: Kathleen Moro Nesi, ASSISTANT UNITED STATES ATTORNEY, Detroit,
Michigan, for Appellant. Harold Z. Gurewitz, GUREWITZ & RABEN, Detroit, Michigan, for
Appellees. ON BRIEF: Kathleen Moro Nesi, ASSISTANT UNITED STATES ATTORNEY,
Detroit, Michigan, for Appellant. Harold Z. Gurewitz, GUREWITZ & RABEN, Detroit, Michigan,
Peter J. Kelley, Ann Arbor, Michigan, for Appellees.
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OPINION
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BOYCE F. MARTIN, JR., Circuit Judge. The United States appeals the district court’s
dismissal of its three-count indictment for insufficiency to plead an offense. The indictment charges
Donny G. Douglas and Jay Campbell with conspiracy to violate federal labor law, conspiracy to
extort, and mail fraud. We find that the indictment sufficiently alleges these offenses. Therefore,
we REVERSE and REMAND.
*
The Honorable David L. Bunning, United States District Judge for the Eastern District of Kentucky, sitting
by designation.
1
No. 03-2535 United States v. Douglas, et al. Page 2
I.
Donny G. Douglas is a former United Auto Workers International servicing representative,
and Jay Campbell is a former United Auto Workers Local 594 Chairman. The Local 594 unit of
United Auto Workers represents over five thousand production and skilled trade employees at
General Motors’s Pontiac Truck facilities. The terms of employment for Pontiac employees are set
forth in the National Agreement between General Motors and International United Auto Workers
and in the Local Agreement between Pontiac and Local 594. Once national union officials and
General Motors management agree to the terms of the National Agreement, local union officials and
Pontiac management negotiate the terms of the Local Agreement. The National Agreement provides
that an employee may be eligible to receive the designation of “skilled tradesman” after completing
various education and training requirements. A skilled tradesman may bid upon various skilled trade
positions, which pay in excess of $100,000 per year. Skilled tradesmen are hired according to a
scale of preference: most preferred are skilled trade employees; next are current company employees
who are qualified under the National Agreement; after that are current company employees. Outside
applicants who do not meet the requirements set forth in the National Agreement are accorded no
preference. The terms of the Local Agreement must not violate the terms of the National
Agreement.
The charges against Douglas and Campbell are based on their conduct during contract
negotiations for the Local Agreement between United Auto Workers Local 594 and General Motors.
In 1995, defendants demanded that Pontiac hire Gordon Campbell, Jay Campbell’s son, and Todd
Fante, the son-in-law of a former Local 594 official—who were not employees of Pontiac or General
Motors and were not qualified under the National Agreement as skilled tradesmen—into skilled
trade positions. General Motors and United Auto Workers officials refused.
In 1996, General Motors and the International United Auto Workers signed a three-year
National Agreement. Local 594 and Pontiac began negotiations for the Local Agreement.
Defendants renewed their demands that Pontiac hire Campbell and Fante as skilled tradesmen.
In April 1997, Local 594 began a strike that lasted eighty-seven days. By July 1997, the
parties had settled all issues involved in the strike except for defendants’ demands that Campbell
and Fante be hired into skilled trade positions. The United States alleges that in order to end the
strike Pontiac Truck agreed to create the two new positions and fill them with Campbell and Fante.
As part of the Local Agreement, the parties signed a “skilled trades proposal,” which the United
States asserts signified Pontiac’s acceptance of defendants’ demand for the two new hires.
The Local 594 Constitution requires that new Local Agreements be ratified by the
membership of Local 594. The United States alleges that defendants submitted the “skilled trades
proposal” to Pontiac employees in an altered form that omitted the provisions for the two new
positions. Pontiac employees ratified the proposal and, in August 1997, Fante and Campbell were
hired to fill two new skilled trade positions. The United States alleges that “because their hiring
violated the National Agreement, the [Local 594 Constitution,] and the Local Agreement, other
employees reacted angrily and filed two grievances.” The United States alleges that another Local
594 official, William Coffey—who was originally named as a defendant in this case but has since
passed away—concealed that Campbell and Fante were not qualified by agreeing to withdraw those
grievances and any other grievances related to the two new skilled trade positions.
Defendants were charged in 2002 in a three-count indictment. Count One alleged that
defendants violated 18 U.S.C. § 371 by conspiring to violate the Labor-Management Relations Act.
The indictment identified the objects of the conspiracy as (1) the authority to amend the terms of the
National Agreements and related documents and (2) the employment and skilled trades designation
for Campbell and Fante. Count Two charged defendants with conspiring to obstruct, delay, and
No. 03-2535 United States v. Douglas, et al. Page 3
affect commerce in violation of the Hobbs Act, 18 U.S.C. § 1951. Count Three alleged that
defendants used a scheme and artifice to defraud members of Local 594 of their contractual right
to obtain skilled trade positions and to rely on the honest services of defendants as the union’s
negotiating officials.
Defendants moved to dismiss, arguing that the indictment failed to allege offenses and was
preempted by federal labor law. The district court concluded that the indictment failed to allege
offenses and dismissed the case without considering the preemption question.
II.
An indictment is sufficient if it “set[s] forth the offense in the words of the statute itself, as
long as ‘those words . . . fully, directly, and expressly . . . set forth all the elements necessary to
constitute the offense intended to be punished.’” United States v. DeAndino, 958 F.2d 146, 147 (6th
Cir. 1992) (quoting Hamling v. United States, 418 U.S. 87, 117 (1974)). In dismissing the
indictment in this case, the district court applied the rule of lenity, which limits the expansion of
criminal statutes by means of defining essential terms or elements of wrongful conduct to include
“constructive” offenses or offenses not intended by Congress. According to the rule, a statute must
be strictly construed, United States v. Enmons, 410 U.S. 396, 411 (1973), and constructive offenses
should be avoided, McNally v. United States, 483 U.S. 350, 360 (1987). The district court construed
the statutes at issue to exclude defendants’ conduct, concluding that “the indictment is only
sufficient if the Court were to create numerous constructive offenses.” Accordingly, we must
consider what offenses, and their elements, Congress intended to prohibit when it enacted the
statutes at issue in this case. Because Congress’s intent is essentially a question of statutory
interpretation, we review the district court’s decision de novo. United States v. Spinelle, 41 F.3d
1056, 1057 (6th Cir. 1994); United States v. Brown, 915 F.2d 219, 223 (6th Cir. 1990).
III.
1. Count One
Count One alleges that defendants violated 18 U.S.C. § 371, which criminalizes a conspiracy
to commit a crime against the United States or to defraud the United States by conspiring to violate
the Labor-Management Relations Act, 29 U.S.C. §§ 186(a)(1), 186(b)(1). Section 186(a)(1)
provides:
It shall be unlawful for any employer or association of employers or any person who
acts as a labor relations expert, advisor or consultant to an employer, or who acts in
the interest of an employer, to pay, lend, or deliver, or agree to pay, lend, or deliver
any money, or other thing of value—
(1) to any representative of any of his employees who are employed in an
industry affecting commerce.
Section 186(b) provides:
It shall be unlawful for any person to request, demand, receive or accept or agree to
receive or accept any payment, loan, or delivery of any money or other thing of value
prohibited by subsection (a) of this section.
Violations of sections 186(a) and 186(b) both require a showing of a “thing of value.” The
indictment identifies the objects of the conspiracy as (1) the authority to amend the terms of the
National Agreement and related documents and (2) the employment and skilled trades designation
for Campbell and Fante.
No. 03-2535 United States v. Douglas, et al. Page 4
Defendants argued, and the district court agreed, that neither the authority to amend the
National Agreement nor the procurement of jobs for third parties qualifies as a thing of value under
the statute. The district court reasoned that because defendants did not conspire for “things of
value,” they did not engage in the acts prohibited by either section of the Act. The court concluded
that absent an allegation that defendants violated the substantive statute, they necessarily could not
have violated section 371, and, thus, the indictment did not allege a criminal offense.
The United States argues that in making a determination regarding “things of value,” the
district court acted beyond its authority.1 Instead, the government contends, the district court should
have considered only the sufficiency of Count One in alleging a violation of section 371, and to that
analysis the “thing of value” inquiry is irrelevant.
We agree that the district court’s scope of analysis was improper. It has been determined,
by this Court and in other circuits, that a conviction under section 371 does not require the
government to prove a violation of a separate substantive statute. See United States v. Khalife, 106
F.3d 1300, 1303 (6th Cir. 1997) (citing United States v. Jackson, 33 F.3d 866, 871-72 (7th Cir.
1994) (holding that the government may allege a violation of a specific statute to demonstrate a
conspiracy to defraud the United States, but such an allegation is only “a way of consummating the
conspiracy . . . which, like the use of a gun to effect a conspiracy to murder, is purely ancillary to
the substantive offense”) (quoting Glasser v. United States, 315 U.S. 60, 67 (1942))). “[I]t is
unnecessary to refer to any substantive offense when charging a section 371 conspiracy to defraud,
and it is also unnecessary to prove the elements of a related substantive offense.” Khalife, 106 F.3d
at 1303. Therefore, the allegations in the indictment that defendants violated section 371 need not
include reference to “things of value” under 29 U.S.C. § 186.
Given this, we must determine whether the indictment satisfies the requirements of Federal
Rule of Criminal Procedure 7(c)(1), which states:
The indictment or information must be a plain, concise, and definite
written statement of the essential facts constituting the offense
charged and must be signed by an attorney for the government. It
need not contain a formal introduction or conclusion. A count may
incorporate by reference an allegation made in another count. A
count may allege that the means by which the defendant committed
the offense are unknown or that the defendant committed it by one or
more specified means. For each count, the indictment or information
must give the official or customary citation of the statute, rule,
regulation, or other provision of law that the defendant is alleged to
have violated.
We have said that to be sufficient an indictment must satisfy two requirements: “first, the indictment
must set out all of the elements of the charge offense and must give notice to the defendant of the
charges he faces; second, the indictment must be sufficiently specific to enable the defendant to
plead double jeopardy in a subsequent proceeding, if charged with the same crime based on the same
facts.” United States v. Martinez, 981 F.2d 867, 872 (6th Cir. 1992) (citing Russell v. United States,
369 U.S. 749, 763-64 (1962)).
The elements of a section 371 conspiracy to defraud are: (1) an agreement to accomplish an
illegal objective against the United States; (2) one or more overt acts in furtherance of the illegal
purpose; and (3) the intent to commit the substantive offense, i.e., to defraud the United States. See
1
The United States has elected not to appeal the district court’s finding that the employment and authority to
amend were not “things of value.”
No. 03-2535 United States v. Douglas, et al. Page 5
Khalife, 106 F.3d at 1303 (quoting Jackson, 33 F.3d at 872). Count One describes the objective of
the conspiracy, the means and methods in furtherance of that objective, and the overt acts taken to
achieve it. As stated above, the United States need not prove the illegal objective, the intent, or the
violation of the substantive offense. Count One sets forth all of the elements of the offense, gives
notice to the defendant of the charges, and is sufficiently specific to enable defendants to plead
double jeopardy in a subsequent proceeding if charged with the same crime based on the same facts.
See id.; Martinez, 981 F.2d at 872. Thus, Count One sufficiently alleges a violation of section 371.
2. Count Two
Count Two charges defendants with conspiring to obstruct, delay, and affect commerce in
violation of the Hobbs Act, 18 U.S.C. § 1951. In essence, this is an extortion claim: the United
States claims that defendants obtained employment for Campbell and Fante by inducing General
Motors through the wrongful use of fear of economic harm, i.e., a prolonged strike. The Act defines
extortion in part as “the obtaining of property from another, with his consent, induced by wrongful
use of actual or threatened force, violence, or fear.” 18 U.S.C. § 1951(b)(2). Count Two alleges that
defendants obtained the consent of Pontiac to hire Campbell and Fante—as evidenced by Pontiac’s
“skilled trade proposal”—by refusing to agree to the terms of the Local Agreement until the two jobs
were secured.
The district court determined that Count Two was insufficient because it failed to allege an
illegal objective, citing to the Supreme Court’s holding in United States v. Enmons, 410 U.S. at 400.
In Enmons, the Supreme Court limited the Hobbs Act
to those instances where the obtaining of the property would itself be “wrongful”
because the alleged extortionist has no lawful claim to that property. Construed in
this fashion, the Hobbs Act has properly been held to reach instances where union
officials threatened force or violence against an employer in order to obtain personal
payoff, and where unions used the proscribed means to exact “wage” payments from
employers in return for “imposed, unwanted, superfluous, and fictitious services” of
workers.
Id. The Court held that when force is used to obtain legitimate union demands, such as higher
wages, the Hobbs Act does not apply. Id. at 410.
Based on that holding, the district court found that negotiating for additional jobs is a
legitimate objective, and that, because defendants’ actions were merely negotiating tactics for
additional jobs, their objective was legitimate. The court explained that it is only an unfair labor
practice to cause an employer to pay a thing of value “for services which are not performed or not
to be performed.” It distinguished that situation from cases, such as this one, where an employer
is forced to pay for services which were actually performed or intended to be performed. Thus, it
concluded, the Count alleges no criminal act.
The United States argues that the court erred in finding that defendants’ objective was
legitimate because the demand for the two jobs was contrary to an existing collective bargaining
agreement and to the Local 594 Constitution. Based on this Court’s holding in United States v.
Cusmano, 729 F.2d 380, 381-83 (6th Cir. 1984), the United States argues that an objective that
violates an existing collective bargaining agreement cannot be regarded as legitimate under Enmons,
even where the jobs obtained are duly performed. The government contends that because the
indictment alleges that defendants’ objective violated the United Auto Workers Constitution and the
National Agreement, it necessarily alleges an illegal objective.
As the United States indicates, this Court distinguished the holding of Enmons in Cusmano,
where we explained that the Hobbs Act presents no bar to prosecution where an accused is alleged
No. 03-2535 United States v. Douglas, et al. Page 6
to have extorted property to which he has no lawful claim. 729 F.2d at 381-83 (citing United States
v. Iozza, 420 F.2d 512, 515 (4th Cir. 1970)). The Cusmano court held that Cusmano’s activities in
extracting money, to which he had no lawful claim, through an agreement that he forced on his
employees was not protected under the rule of Enmons. Id. at 382. The agreement between
Cusmano’s company and its employees provided that it would be “unlawful and illegal” for the
company to deduct the welfare and pension payments from the employees’ gross earnings. Id. at
382-83. The agreement was not the result of any collective bargaining between the company and
the employee’s union, “but instead was secured through the coercive tactics of Cusmano and his
codefendants [who were prosecuted in the companion case of United States v. Russo, 708 F.2d 209
(6th Cir. 1983)].” Id. at 383. This Court concluded:
We believe Cusmano’s attempt to characterize his behavior as protected labor
activity stretches Enmons too far. He claims he had a legal right to bargain with his
employees in an attempt to reduce [the company’s] labor costs. Although he might
have this right, the facts proven at trial do not establish any legitimate bargaining by
Cusmano in an attempt to reduce [the company’s] labor costs. Instead, the evidence
discloses that he and his codefendants coerced the [employees] into an illegal
agreement which required the [employees] to pay for pension contributions which
Cusmano should have paid. The facts demonstrate Cusmano attempted to obtain by
wrongful means and under the guise of a “service charge” an objective which the
parties’ own contract specifically declared “unlawful and illegal.” This conduct went
beyond legitimate labor tactics and violated the Hobbs Act.
Id. (citations omitted). We also concluded that, had we applied Cusmano’s view that his activities
were legitimate and protected under Enmons, the Hobbs Act would then “pose no bar against the
utilization of sham agreements even though such agreements were obtained outside the traditional
labor/management bargaining context.” Id. We declined to adopt such a restricted view. Id.
Here, the district court discussed the application of Cusmano and its companion case, United
States v. Russo. The court found that those cases are distinguishable
because [in Cusmano and Russo] the employer made its demands on individual
employees to pay extra fees to the employer, to which the employer was not entitled
under the existing contract and which the membership collectively rejected. Here,
Defendants’ alleged demands were made in the course of negotiating the new local
collective bargaining agreement which, if the parties reached an agreement, could
have provided for the two positions, and thus the positions would not have been in
violation of at least one of the governing contracts. Whether or not the inclusion of
that provision in the new agreement between Pontiac Truck and Local 594 would
have violated other contractual provisions between the [United Auto Workers] and
General Motors should not be the basis of a criminal charge of extortion—that is an
issue to be resolved between the [union], Local 594, General Motors and Pontiac
Truck through the established labor relations’ dispute framework.
As this statement indicates, the district court found that demands by force for an objective that
violates a contract between the union and the employers do not constitute extortion when resolution
of such violation is better achieved in the traditional labor-management dispute resolution process.
We disagree. The defendants’ demands, as alleged by the United States, are illegitimate, as
they were in Cusmano and Russo, and constitute extortion because they were in contradiction of the
collective bargaining agreement and the union’s Constitution. Like the unlawful agreement at issue
in Cusmano, the “skilled trades proposal” allegedly was obtained outside the traditional
labor/management bargaining context. Also, the proposal, as alleged, contradicted a contractual
No. 03-2535 United States v. Douglas, et al. Page 7
provision between the union and the employers that gave preference to qualified, eligible employees
of Pontiac in the distribution of skilled trade jobs and required at a minimum that those who are
hired meet specific standards. We conclude that this is one of those instances, referenced by the
Supreme Court in Enmons, to which the Hobbs Act would apply. Furthermore, the indictment
sufficiently alleges that defendants forcefully coerced Pontiac negotiators to exact wage payments
in return for the imposed and unwanted services of unqualified, ineligible non-employees.
Therefore, we reverse the ruling of the district court as to Count Two.
3. Count Three
Count Three charges defendants with mail fraud in violation of 18 U.S.C. §§ 1341, 1346.
The indictment alleges a scheme to deprive Local 594 members of the following rights conferred
by the National Agreement and the United Auto Workers Constitution: (1) the contractual right to
obtain a skilled trades designation, (2) the skilled trades designation and associated wages and
benefits for two undetermined qualified employees, and (3) the honest services that defendants owed
to Local 594 members to faithfully and fairly represent them. The district court, relying heavily on
the Third Circuit’s decision in United States v. Boffa, 688 F.2d 919 (3d Cir. 1982), held that neither
the first two rights—the so-called property allegations—nor the honest services allegation is
sufficient to support an indictment for mail fraud. Thus, we consider the scope of the mail fraud
statute and the application of the Third Circuit’s ruling to this case.
The mail fraud statute provides criminal penalties for devising “any scheme or artifice to
defraud, or for obtaining money or property by means of false or fraudulent pretenses,
representations, or promises.” 18 U.S.C. § 1341. The Supreme Court long ago recognized that a
“scheme or artifice to defraud” is not limited to the common law of fraud and false pretenses,
Durland v. United States, 161 U.S. 306, 313-14 (1896), and since then courts have struggled to
define the contours of the mail fraud statute. Generally, courts have construed it expansively to
prohibit all schemes to defraud by any means of misrepresentation that in some way involve the use
of the postal system. United States v. Pearlstein, 576 F.2d 531, 534 (3d Cir. 1978). Most courts
have rejected the argument that the statute was intended to prohibit only schemes to defraud
individuals of money or property, see, e.g., United States v. States, 488 F.2d 761, 763-64 (8th Cir.
1973), and instead have held that the statute prohibits schemes to defraud individuals of “intangible”
interests or rights as well. See United States v. Bronston, 658 F.2d 920, 927 (2d Cir. 1981) (client’s
right to “undivided loyalty” of attorney).
In United States v. Boffa, the Third Circuit agreed that the statute’s scope is expansive, but
found that, as a matter of statutory construction, it was unwilling to sanction mail fraud prosecutions
for schemes to deprive individuals of a particular intangible right when such a prosecution would
contravene the intent of the Congress that created that right. 688 F.2d at 930 (citing Great Am. S
& L Assn. v. Novotny, 442 U.S. 366, 372-76 (1979) (finding civil rights action under 42 U.S.C.
§ 1985(3) based on deprivations of rights guaranteed by the Civil Rights Act of 1964 impermissible
where such action would undermine policies of Title VII of that Act)). In Boffa, the National Labor
Relations Act provided the rights of which the employees were allegedly deprived, and it provided
the remedy, which held no criminal consequences, for such deprivation. Id. The Third Circuit
stated that it therefore perceived a strong indication that Congress did not intend for unfair labor
practices related to the National Labor Relations Act to have any criminal consequences. Id.
Because Congress had already provided specific remedial provisions for the violation of rights under
that Act, the Third Circuit held that a scheme to deprive employees of their rights under that Act
does not constitute a crime under the mail fraud statute. Id. It left open the possibility of applying
the mail fraud statute to the deprivation of economic benefits unrelated to the National Labor
Relations Act.
No. 03-2535 United States v. Douglas, et al. Page 8
Indeed, the Third Circuit further held in Boffa that such acts do have criminal consequences
under the mail fraud statute. Id. The indictment in that case alleged that defendants deprived
employees of the “economic benefits they enjoyed through rights they had under the collective
bargaining agreement.” Id. The Third Circuit held that this scheme, which deprived employees of
economic benefits such as wages and seniority rights, “lies squarely within the ambit of the mail
fraud statute,” because the source of such benefits was the contract between [defendants] and the
employees.” Thus, while deprivation of rights guaranteed by the National Labor Relations Act may,
according to the Third Circuit, be vindicated solely through that Act’s procedures for unfair labor
practice disputes, schemes to deprive an individual of economic benefits that are contained in a
collective bargaining agreement are subject to the criminal sanctions set forth in the mail fraud
statute. Id. (citing United States v. McNeive,536 F.2d 1245, 1248-49 (8th Cir. 1976) (“There can
be little doubt that . . . schemes are within the scope of section 1341 [when] they involve calculated
efforts to use misrepresentation or other deceptive practices to induce the innocent or unwary to give
up some tangible property interest.”)). We agree with that decision, and now look to determine
whether the rights at issue in this case were guaranteed by the collective bargaining agreement.
a. Property Allegations
The government argues that the right to compete is an economic benefit guaranteed by the
collective bargaining agreement, and, according to the Third Circuit’s decision in Boffa, is a
property interest whose deprivation is subject to criminal consequences under the mail fraud statute.
In response, the district court held that
the bargaining agreements, at most, guaranteed the membership the right to compete
for skilled trade positions before any outside hires were considered for the positions,
and that scheming to deny membership the right to compete for a job does not reach
the level of scheming to deny membership wages which were promised in the
agreements.
Basically, the court held that the right to compete for jobs may be valuable, but it is not valuable
enough to constitute a property interest subject to the protections of the mail fraud statute. We must
determine whether the right to compete constitutes a sufficient property interest.
The government explains that the collective bargaining agreement requires that skilled trade
positions be filled by only qualified applicants and gives hiring preference to skilled trade
employees. The government argues that this agreement guarantees wages and other financial
benefits to qualified employees, and that such benefits constitute property. It cites to decisions of
other circuits, including the Third Circuit’s decision in Boffa, holding that wages and other financial
benefits guaranteed by collective bargaining agreements are sufficient to constitute property for
purposes of mail fraud convictions. See United States v. Palumbo Bros., Inc., 145 F.3d 850, 873 n.3
(7th Cir. 1998); Boffa, 688 F.2d at 930. The district court distinguished those cases because they
involved wages for active positions—i.e., positions currently filled by employees—that were subject
to renegotiation, whereas this case involved only a right, held by qualified employees yet
determined, to earn those wages.
The government disputes the court’s distinction. At issue in Boffa were seniority rights that
were used to determine which employee-drivers could bid on particular driving assignments. The
government argues that the seniority rights at issue in that case are akin to the right to compete in
this case: both rights are “job-bidding” rights and both fundamentally provide the right to compete
for economic benefits and wages. However, in Boffa, the employees lost their wages as a result of
unfair labor practices; here, the employees lost their right to compete for wages sometime in the
future as a result of unfair labor practices. To the district court, the difference between workers
currently employed and workers who may be employed sometime in the future was significant. The
No. 03-2535 United States v. Douglas, et al. Page 9
court, noting the Supreme Court’s decision in Cleveland v. United States, 531 U.S. 12 (2000), which
held that unissued government licenses are not property, determined that the right to compete for
a job is more akin to an unissued government license; neither rises to the level of wages and
therefore does not constitute property for purposes of a mail fraud conviction. The district court
found that the government, in aligning the right to compete with the right at issue in Boffa, was
“stretching too far—scheming to deny membership the right to compete for a job does not reach the
level of scheming to deny membership wages which were promised in the agreements.”
We disagree. Although proof at trial may undermine the government’s case, for purposes
of the indictment the government has pleaded sufficiently. We are persuaded by the government’s
argument that, were the right to compete to have such little value—indeed, value equivalent to an
unissued government license—then the union would not bother to bargain collectively for this hiring
system. We find this right to be similar enough to the right at issue in Boffa to follow the Third
Circuit’s decision. The right to compete guaranteed by the collective bargaining agreement in this
case is sufficient to constitute property for purposes of the mail fraud statute.
b. Honest Services
Count Three also alleges a mail fraud scheme in violation of 18 U.S.C. § 1346, which
explicitly prohibits a “scheme or artifice to deprive another of the intangible right of honest
services.” The indictment states that defendants intended to defraud the members of Local 594 of
“[t]he honest services of defendants owed to Local 594 members pursuant to Article 19, of the
[United Auto Workers] Constitution, Section 501(a) of the Labor Management Reporting and
Disclosure Act, and the defendants’ duty to faithfully and fairly represent the members of Local 594
as labor representatives.” As the district court noted, Congress passed section 1346 in response to
the Supreme Court’s decision in McNally v. United States, 483 U.S. 350, 360 (1987), where the
Court held that the mail fraud statute did not include schemes to defraud others of honest services.
See United States v. Frost, 125 F.3d 346, 364 (6th Cir. 1997).
Subsequently, in Frost, 125 F.3d at 364, this Court discussed the limits of an honest services
claim. We said:
Unlike a defendant accused of scheming to defraud another of money or property,
a defendant accused of scheming to deprive another of honest services does not have
to intend to inflict an economic harm upon the victim. Rather, the prosecution must
prove only that the defendant intended to breach his fiduciary duty, and reasonably
should have foreseen that the breach would create an identifiable economic risk to
the victim.
The district court found that this statement in Frost identifies the elements of the honest services
claim, and that the government could satisfy all of these elements except for the breach that would
create an economic risk. The court found that the alleged breach—that defendants submitted a
misleading contract for the membership’s ratification and withdrew all grievances filed by local
members regarding the hiring of Campbell and Fante—was insufficient because it constituted merely
an unfair labor practice that is not properly the subject of criminal liability. The court cited to Boffa,
where the Third Circuit said that to “permit mail fraud prosecutions grounded on unfair labor
practices would be to impose criminal penalties for conduct that, until now, has been remediable
solely under the [National Labor Relations Act].”
The government contends that the “breach” element identified by the district court is not
actually an element of the honest services claim. The government argues that this Court has only
identified the “breach” issue as an evidentiary burden, and therefore it is not properly the subject of
a sufficiency-of-the-indictment inquiry. Frost, 135 F.3d at 367-69. The government, citing to Frost
No. 03-2535 United States v. Douglas, et al. Page 10
and the case quoted therein, United States v. Oldfield, 859 F.2d 392, 400 (6th Cir. 1988), identifies
the true elements of the claim as these: (1) devising or intending to devise a scheme to defraud (or
to perform fraudulent acts); (2) involving a use of the mails; and (3) for the purpose of executing the
scheme or attempting to do so. It explained that the Frost court’s discussion of the “breach” issue
in the paragraph quoted above occurred in an analysis and review of jury instructions concerning
what the government was required to prove to establish that private individuals deprived their
employer of the right to their honest services, Frost, 125 F.3d at 367-69; it did not occur in the
discussion of the elements of the offense that must be stated in the indictment. Moreover, the
government argues, the Frost court explicitly characterized the “breach” issue as an evidentiary
burden. Id. at 369 (“Unlike a defendant accused of scheming to defraud another of money or
property . . . a defendant accused of scheming to deprive another of honest services does not have
to intend to inflict an economic harm upon the victim. Rather, the prosecution must prove only that
the defendant intended to breach his fiduciary duty, and reasonably should have foreseen that the
breach would create an identifiable economic risk to the victim. We do not believe that this standard
imposes an especially rigorous evidentiary burden upon the prosecution.”). “Nothing in Frost,” the
government argues, “suggests that [the] elements of proof (as opposed to the elements of the
offense) must be alleged in the indictment.”
The government accurately states the elements of the honest services charge. The indictment
has only to allege that defendants devised a scheme to defraud, involving use of the mails for the
purpose of executing the scheme. The indictment sufficiently makes these allegations.
4. Preemption
Because the district court dismissed the indictment as insufficient, it did not discuss
defendants’ argument that the charges are preempted by the National Labor Relations Act.
However, an appellate court may affirm a decision of the district court if that decision is correct for
any reason, including a reason not considered by the district court. Loftis v. United Parcel Serv.,
342 F.3d 509, 514 (6th Cir. 2003). In the interest of judicial economy, we now consider the issue
of preemption. See Holloway Constr. Co. v. United States Dep’t of Labor, 891 F.2d 1211, 1212 (6th
Cir. 1989).
Defendants argue that the alleged violations of 29 U.S.C. § 186, 18 U.S.C. § 1951, and 18
U.S.C. §§ 1341, 1346 are all “inextricably intertwined” with sections 7 and 8 of the National Labor
Relations Act, because they all depend on a violation of the collective bargaining agreement.
Therefore, the alleged violations are preempted under the Garmon doctrine. See Garmon, 359 U.S.
at 245. At the outset, we note that there are no issues concerning 29 U.S.C. § 186, because, as we
said above, it is not necessary to show any violation of that statute for purposes of this appeal. Thus,
defendants’ arguments relating to 29 U.S.C. § 186 are moot. We consider only the questions raised
by defendants’ preemption argument relating to 18 U.S.C. §§ 1951, 1341, 1346, and hold, for the
reasons below, that preemption is unwarranted.
“As a general rule,” Garmon establishes that “federal courts do not have jurisdiction over
activity which is ‘arguably subject to § 7 or § 8 of the [National Labor Relations Act],’ and they
‘must defer to the exclusive competence of the National Labor Relations Board.’” Kaiser Steel Corp.
v. Mullins, 45 U.S. 72, 83 (1982) (quoting Garmon, 359 U.S. at 245). Under the doctrine, a federal
district court may not have jurisdiction to determine whether an employer violates the National
Labor Relations Act by allegedly engaging in unfair labor practices. Laborers Health & Welfare
Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 543 n.4 (1988); Breininger v.
Sheet Metal Workers Int’l Ass’n Local Union No. 6, 493 U.S. 67, 74 (1989); Communications
Workers of Am. v. Beck, 487 U.S. 67, 74 (1989); Storey v. Local 327, Int’l Bhd. of Teamsters, 759
F.2d 517, 520 (6th Cir. 1985) (noting that when Garmon applies, “neither state nor federal courts
have subject matter jurisdiction”).
No. 03-2535 United States v. Douglas, et al. Page 11
Like many general rules, however, this one contains exceptions. First, “federal courts may
decide labor law questions that emerge as collateral issues in suits brought under independent federal
remedies.” Connell Constr. Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 626
(1975); accord Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 610-11 (6th Cir. 2004). And second,
federal courts may decide criminal charges that allegedly involve federal labor law. Palumbro,145
F.3d 850, 863 (holding as a matter of first impression that charges in a criminal indictment are not
preempted by federal labor law, even assuming that the alleged acts underlying the indictments fall
within the scope of federal labor law); Boffa, 688 F.2d at 931-33 (holding that Garmon did not
preempt the court’s consideration of a federal criminal statute prohibiting mail fraud). Because we
believe, as our sister circuits have held, that Garmon was not intended to affect a district court’s
jurisdiction to hear criminal charges, we need not consider the issue of whether the federal labor law
issues in this case are merely collateral.
It would be entirely inappropriate to strip federal courts of criminal jurisdiction merely
because the criminal charges relate to federal labor law. We agree with the Third Circuit’s decision
in Boffa, which reasoned that when this kind of alleged conflict occurs, preemption would only be
appropriate if, by enacting the National Labor Relations Act, Congress had intended to repeal the
existing criminal statute. Boffa, 688 F.2d at 932-33. The Boffa court found no indication that
Congress had such intention, and therefore held that Garmon preemption was inappropriate. Id. We
also find no such indication. Therefore, we hold that Garmon preemption does not apply.
IV.
For the foregoing reasons, we REVERSE the district court’s dismissal and REMAND for
further consideration.