Southwest Regional Council v. Michael McCarron ( 2018 )

UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT APR 23 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
SOUTHWEST REGIONAL COUNCIL OF No. 15-55879
CARPENTERS,
D.C. No.
Plaintiff-Appellee, 2:14-cv-02762-JVS-JC
Central District of California,
v. Los Angeles
MICHAEL MCCARRON, ORDER
Defendant-Appellant,
and
SOUTHWEST CARPENTERS TRAINING
FUND; DECARLO & SHANLEY, P.C.,
Third-party-defendants.
Before: THOMAS, Chief Judge, and TROTT and SILVERMAN, Circuit Judges.
Appellant’s petition for panel rehearing (Docket Entry No. 27) is granted.
The memorandum disposition filed February 27, 2018, is withdrawn. A
superseding memorandum will be filed concurrently with this order.
No further Petitions for Panel Rehearing or Petitions for Rehearing En Banc
will be entertained.
NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 23 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
SOUTHWEST REGIONAL COUNCIL OF No. 15-55879
CARPENTERS,
D.C. No.
Plaintiff-Appellee, 2:14-cv-02762-JVS-JC
v.
MEMORANDUM*
MICHAEL MCCARRON,
Defendant-Appellant,
and
SOUTHWEST CARPENTERS TRAINING
FUND; DECARLO & SHANLEY, P.C.,
Third-party-defendants.
Appeal from the United States District Court
for the Central District of California
James V. Selna, District Judge, Presiding
Submitted February 23, 2018**
Before: THOMAS, Chief Judge, and TROTT and SILVERMAN, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Michael McCarron appeals pro se from the district court’s interlocutory
order granting summary judgment in favor of Southwest Regional Council of
Carpenters (“SWRCC”), an affiliate of the United Brotherhood of Carpenters and
Joiners of America, on SWRCC’s claim and McCarron’s counterclaims under the
Labor Management Reporting and Disclosure Act (“LMRDA”). We have
jurisdiction under 28 U.S.C. § 1291. We review de novo, Corns v. Laborers Int’l
Union of N. Am., 709 F.3d 901, 907 (9th Cir. 2013), and we affirm in part, reverse
in part, and remand.
I
The district court properly granted summary judgment as to liability on
SWRCC’s claim of breach of fiduciary duty under LMRDA § 501(a) because
McCarron violated SWRCC’s bylaws, and thus breached his fiduciary duties as a
union officer as a matter of law, by making payments to the Southwest Carpenters
Training Fund (“SWTF”) without first referring SWTF’s rental overpayment bills
to SWRCC trustees for review. See Servs. Emps. Int’l Union v. Nat’l Union of
Healthcare Workers, 718 F.3d 1036, 1046 (9th Cir. 2013); Kerr v. Shanks, 466
F.2d 1271, 1276 n.3 (9th Cir. 1972). McCarron did not establish any affirmative
defense based on SWRCC council executive committee’s approval of the
payments he made to SWTF because there is no good faith defense to a claim
under LMRDA § 501(a), see Servs. Emps. Int’l Union, 718 F.3d at 1046-47
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(holding that belief that violations of union constitution were justified did not
absolve union officers of liability), and the defense of authorization does not apply
when an authorization is in conflict with a union’s constitution or bylaws, see id. at
1049.
II
As to the issue of damages caused by McCarron’s breach of his fiduciary
duty to SWRCC, however, the district court clearly erred in effectively construing
McCarron’s answers to SWRCC’s ambiguous requests for admissions as binding
declarations that SWRCC owed no money to the SWTF when he paid SWTF
$5,364,970.10 from SWRCC’s coffers.
Everyone in this controversy knew from the outset that McCarron paid
SWTF’s bill for over market rent charges (with compound interest) because he
concluded that the bill was justified. The purpose of SWTF’s bill to SWRCC was
clear: to recoup for the overpayment of rent. To quote the district court in its
March 4, 2015 Order, “In its Complaint, SWRCC alleges multiple times that
McCarron overcharged the Training Fund for rental of leased properties. The
amount of damages sought [by SWRCC] is ‘the difference between proper market
rents and what McCarron actually charged.’ These allegations do not form the
basis for actual damages to SWRCC because SWRCC cannot be entitled to the
amount it wrongfully overcharged the Training Fund.” S.E.R. Vol. 1, 9.
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Nevertheless, the district court at the urging of the plaintiffs seized upon
McCarron’s answers conclusively to mean something that he vigorously
disclaimed: that he gratuitously delivered SWRCC’s money to the SWTF to cover
a claimed “debt” that SWRCC did not owe.
In his opposition to the motion for summary judgment, McCarron attempted
to clarify his responses. His papers said, “The SWRCC relies on purported
admission to generate its new damage theory. This admission was taken out of
context and mischaracterized. Mike’s theory has always been that the rents were
over market and had to pay back. This admission is the subject of a motion to
withdraw or amend which is/was set for hearing on 02/10/15.” C.R. 166 at 17.1
McCarron supported his opposition with his own declaration to the same
effect:
19. I was sued for various LMRDA violations, such as
my reimbursement of improperly retained funds. The
SWRCC inadvertently overcharged the Southwest
Carpenters’ Training Fund (“SWTF” or the “fund”) on
leases to various buildings it rented from the SWRCC.
20. I have no real estate or lease experience and I did not
set the rates which are the subject of this case. The rents
were set by Randy Sowell, UBC’s Director of Real
Estate, on behalf of the SWRCC. The rents were not set
by me, as I don’t know how to set lease rates. I am not a
lawyer and do not have any real estate or lease
experience.
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McCarron lost his motion. His failure to appeal the results do not preclude
him from challenging the meaning of his responses.
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21. Four different appraisals confirmed that the leases
were improper, including Strategic Partner Advisors,
who sent me a letter dated May 31, 2013 confirming that
the subject leases were charging above-market rates. The
rates came to be above-market at the downturn in the
economy.
22. I paid the SWTF back. The money belonged to the
SWTF. I sought to reverse any unjust enrichment to the
SWRCC by properly reimbursing the SWTF. I risked
breach of my fiduciary duty to the SWRCC if I was to
subject the SWRCC to an avoidable law suit by the
SWTF. I balanced the books of the SWRCC and the
SWTF as I am required to do under the SWRCC bylaws,
Section 8.
. . .
24. In any event, there was no loss or damage to the
SWRCC - it wrongfully obtained $5.3 million from the
SWTF and the SWTF was properly paid back.
S.E.R. Vol. 2, 72-73
Alan Goldberg, McCarron’s attorney filed his own declaration making the
same point in support of McCarron’s opposition to the motion:
2. The admission referred to by the SWRCC in page 10
of its Motion, along with all the admissions attributed to
Mike in the WRCC’s motion, numbers 51-68, do not
accurately reflect Mike’s theory of this case. His theory
is and was, and the theory which I have been developing
throughout this litigation is, that due to the recession the
leases at issue became leases with rates which were
above market value. In assisting Mike with these
responses I did not notice that his denial could be used
against him as an admission that the leases did not charge
over market rents. As soon as I became aware of the
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SWRCC’s plan to use those Responses to Requests for
Admissions, on 12/31/14, I immediately took action to
right this error. This error is the subject of a motion to
withdraw or amend which is set for hearing on February
10, 2015. Mike’s theory is and was that the rents were
over market and he had to pay back. SUF 52, 53.
C.R. 168.
As to the plaintiff’s requests for admissions, we conclude that they are
manifestly ambiguous, in particular the use of the word “require.” Plaintiff’s
requested that McCarron admit “that the lease[s] . . . require the Training Fund to
pay above market rents to the SWRCC.” S.E.R. vol. 2 at 148-55. The leases
themselves do not so require. The terms of the leases may have resulted in above
market rates due to the subsequent downturn in the market after they were
negotiated, however the leases themselves contained no requirement of “above
market rents” language or expectations.
SWTF and SWRCC are not normal arm’s-length parties to economic
transactions. Because SWTF falls within the ambit of ERISA, it is subject by
statute to the watchful eye and umbrella of the United States Department of Labor
(“DOL”). 29 U.S.C. §§ 1132(a), 1134(a), 1136(b). After the district court’s order,
the DOL issued letters to SWTF regarding its investigation of the disputed leases
in this case. McCarron asks us to take judicial notice of these documents. We
grant his request.
The DOL’s letter of March 12, 2015, reads in pertinent part as follows:
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Dear Mr. DeCarlo:
The Department of Labor (the Department) has
responsibility for administration and enforcement of Title
I of the Employee Retirement Income Security Act of
1974 (ERISA). Title I of ERISA establishes standards
governing the operation of employee benefit plans such
as the Southwest Carpenters Training Fund (Training
Fund).
. . .
This office has concluded its investigation of the
Training Fund and of the activities of the fiduciaries.
Based on the facts gathered in this investigation, and
subject to the possibility that additional information may
lead us to revise our views, it appears that, as fiduciaries,
the Board, the Trustees individually, and Ripley, may
have violated several provisions of ERISA. The purpose
of this letter is to advise you of our findings and to give
you an opportunity to comment before the Department
determines what, if any, action to take.
. . .
From 2008 through 2013, it was revealed that the
Training Fund had paid rent to the SWRCC that was
grossly in excess of comparable market rental values
relating to the lease agreements entered into prior to May
2009. Specifically, based on an assessment of
comparable fair market rental values, it was concluded
that the Training Fund had paid rent to the SWRCC that
was $5,843,434.25 in excess of fair market rental values
from 2008 through June of 2013.
. . .
Because the terms of the lease agreements and the
amounts paid by the Training Fund were in excess of
comparable market rates, this office has determined that
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the lease agreements did not constitute a reasonable
arrangement, and the amount paid by the Training Fund
to the SWRCC was more than reasonable compensation.
Additionally, this office has determined that the amount
paid by the Training Fund to the SWRCC was in excess
of adequate consideration. Consequently, the conditions
of ERISA Sections 408(b)(2) and (17) were not met.
. . .
Correction
On May 31, 2013 and June 21, 2013, McCarron, on
behalf of the SWRCC reimbursed the Training Fund
$4,736,970.52 and $627,999.58, respectively,
representing excessive rent for periods from 2008
through June 2013, plus lost opportunity cost.
On August 4, 2015, the DOL sent another letter to the SWTF:
Dear Mr. DeCarlo:
I have received your letter, dated March 16, 2015,
concerning the Southwest Carpenters Training Fund
(Training Fund), which was in response to my letter,
dated March 12, 2015.
. . .
It is my understanding that you have taken corrective
action with respect to the specific violations detailed in
my letter of March 12, 2015. Specifically, the Southwest
Regional Council of Carpenters (Union) reimbursed the
Training Fund a total of $6,203,145.18 in connection
with the above-market rent paid to the Union for the
lease of various training facilities.
The district court’s award of damages to SWRCC constituted an
inappropriate windfall and a miscarriage of justice. Using the amount McCarron
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returned to SWRCC as a measure of damages was not proper. However, we are
unable to determine on the record whether SWRCC might have suffered other
compensable damages caused by McCarron’s related inappropriate activities.
III
The district court properly granted summary judgment on McCarron’s
counterclaims for retaliation and violation of his free speech rights under LMRDA
§ 101(a)(2) because he made no showing that SWRCC took action against him
after he expressed his opposition to union policies. See United Steel Workers
Local 12-369 v. United Steel Workers Int’l, 728 F.3d 1107, 1118 (9th Cir. 2013)
(setting forth elements of claim).
CONCLUSION
AFFIRMED in part, REVERSED in part, and REMANDED for further
proceedings in accord with this disposition.
Each party shall bear its own costs on appeal.
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