International Union of Electronic, Electrical, Salaried, MacHine & Furniture Workers v. Statham

United States Court of Appeals,
Eleventh Circuit.
No. 95-8869.
INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE
& FURNITURE WORKERS, AFL-CIO, on its own behalf, and on behalf of
its former local affiliate, IUE Local Union 353B, also formerly
known as Pabst Brewery Workers of Georgia, Local 353, Plaintiff,
Counterdefendant-Appellant,
v.
John E. STATHAM, III, individually and as trustee and former
officer of IUE Local Union 353B, formerly known as Pabst Brewery
Workers of Georgia, Local 353; Melvin Griffin, individually and as
trustee and former officer of IUE Local Union 353B, formerly known
as Pabst Brewery Workers of Georgia, Local 353; Henry E. Sumner,
individually and as trustee and former officer of IUE Local Union
353B, formerly known as Pabst Brewery Workers of Georgia, Local
353, Defendants, Crossdefendants-Appellees,
K. Thomas Hall;
Lynward Barrett, individually and d.b.a. Landmark Realty;
Defendants-Appellees,
Robert L. Mobley, Jr., Defendant, Crossclaimant, Counterclaimant-
Appellee.
Oct. 23, 1996.
Appeal from the United States District Court for the Middle
District of Georgia. (No. 5:94-CV-97-3), Duross Fitzpatrick, Chief
Judge.
Before CARNES, Circuit Judge, and FAY and JOHN R. GIBSON *, Senior
Circuit Judges.
JOHN R. GIBSON, Senior Circuit Judge.
The International Union of Electronic, Electrical, Salaried,
Machine & Furniture Workers, AFL-CIO, appeals the district court's
dismissal, for lack of jurisdiction, of the union's suit based on
the sale of real estate that the union claims belongs to it. The
*
Honorable John R. Gibson, Senior U.S. Circuit Judge for the
Eighth Circuit Court of Appeals, sitting by designation.
union sued the three former union officials who sold the land, as
well as their lawyer, a real estate broker, and the buyer of the
land, alleging breach of fiduciary duties by the former officials
and numerous other causes of action. The union sought specific
performance of provisions in the union constitution, injunctive and
declaratory relief, and damages. The district court held that
there was no federal jurisdiction under 29 U.S.C. § 501 (1994) or
29 U.S.C. § 185(a) (1994) for this suit by a union against its
former officials. The court dismissed the suit. We reverse.
The real estate was originally purchased by a local union of
brewery workers at the Pabst brewery in Perry, Georgia. The local
was an affiliate of the International Union of United Brewery,
Flour, Cereal, Soft Drink and Distillery Workers of America, AFL-
CIO, known as the IUB. In 1973 the local broke away from the IUB
and established the "Pabst Brewery Workers of Georgia" as a
successor to the former local of the IUB. The local retained the
same officers as it had before the disaffiliation. As part of the
disaffiliation agreement, the members of the local agreed that all
the local's property should be transferred to the Pabst Brewery
Workers of Georgia. Accordingly, John E. Statham, III, Melvin
Griffin, and Henry E. Sumner, the officers of the former IUB local
and of the new independent local, executed a quitclaim deed
transferring the land with the union hall to "John Statham, Melvin
Griffin, and Henry Sumner, trustees of Pabst Brewery Workers of
Georgia, a voluntary unincorporated association."
The local became a directly affiliated local union of the AFL-
CIO on November 5, 1973. In 1975 the local built a union hall on
the real estate. Later, in 1983, the local became an affiliate of
the International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers, AFL-CIO, the plaintiff in this case.
The local dissolved in 1989 because the brewery closed. The
plaintiff international union's constitution provided:
In the even[t] that a local's charter is revoked, or that a
local disbands or dissolves, the local's secretary and
trustees shall send to the Secretary-Treasurer all funds and
property belonging to the local.... If such a charter is not
reissued within the year, the funds and property held by the
Secretary-Treasurer shall be deemed to be the property of the
Union and shall be deposited in the International Defense
Fund."
At the last meeting of the local's executive board, the local
authorized the international union's representative, Gary Tucker,
to wind up the local's affairs.
Tucker entered an agreement to sell the land with the union
hall on it to Robert L. Mobley, Sr., but the deal fell through
because the title search showed that the title was vested in
Statham, Griffin, and Sumner. Tucker asked the trustees to
quitclaim the land to the union, but instead Statham then sold the
property to Mobley. Lynward Barrett acted as broker for the sale,
and J. David Byars acted as Statham's lawyer. Byars held the
$62,000 sale proceeds in escrow, so that he could obtain the
signatures of Griffin and Sumner on the deed. Before Byars could
obtain the signatures, he learned that the union was claiming it
owned the property. Byars filed an interpleader action in state
court and tendered the money into court.
The union filed suit in federal court, on its own behalf and
on behalf of the former local, asserting claims for breach of
fiduciary duty, 29 U.S.C. § 501, and breach of contract, 29 U.S.C.
§ 185(a), against Statham, Griffin, and Sumner. The union also
stated numerous state law claims against Statham, Griffin, and
Sumner, as well as Byars, Mobley, and Barrett.1
Byars's interpleader action was removed to federal court and
joined with the union's suit.
The district court dismissed the union's complaint for lack of
jurisdiction upon determining that the union did not state a
federal cause of action under either the Labor-Management
Disclosure and Reporting Act, 29 U.S.C. § 501, or the Labor-
Management Relations Act, 29 U.S.C. § 185(a). Specifically, the
court held that section 501 does not create a federal cause of
action that can be asserted by a union, as opposed to an individual
union member. The court also held that section 185(a) does not
cover a suit by a union against individuals, as opposed to a suit
against another labor union or an employer.
The union appeals, arguing that section 501(a) creates a cause
of action that can be asserted by a union as well as by union
members, and that it can assert a section 185(a) claim against
former officers. These issues are pure questions of law, subject
to de novo review.
I.
The question of whether a union may assert a cause of action
under section 501 of the Labor-Management Reporting and Disclosure
Act has been thoroughly examined by many courts, and they have
1
Both Byars and Mobley have died. Their personal
representatives, K. Thomas Hall and Robert L. Mobley, Jr., have
been substituted for them as parties in this case.
arrived at opposite conclusions.2
Section 501 deals with civil liability in two parts.3
2
The courts that have concluded that section 501 does not
create a cause of action that can be asserted by a union are:
Building Material and Dump Truck Drivers, Local 420 v. Traweek,
867 F.2d 500, 506-07 (9th Cir.1989); Local 443, Int'l Bhd. of
Teamsters v. Pisano, 753 F.Supp. 434, 436 (D.Conn.1991);
International Bhd. of Boilermakers v. Freeman, 683 F.Supp. 1190,
1191-93 (N.D.Ill.1988); Crosley v. Katz, 131 L.R.R.M. 2175,
2176-77, 1988 WL 94283 (E.D.Pa.1988); Local 624, Int'l Union of
Operating Engineers v. Byrd, 659 F.Supp. 274, 276
(S.D.Miss.1986); Truck Drivers v. Baker, 473 F.Supp. 1120, 1122-
24 (M.D.Fla.1979); Teamsters, Local 20 v. Leu, 94 L.R.R.M. 2510,
1976 WL 1685 (N.D.Ohio 1976); and Safe Workers Org. v.
Ballinger, 389 F.Supp. 903, 906-08 (S.D.Ohio 1974). The
following courts have concluded that section 501 does create a
cause of action that a union can assert: International
Longshoremen's Ass'n, Local 1624 v. Virginia Int'l Terminals,
Inc., 914 F.Supp. 1335, 1338-40 (E.D.Va.1996); Morris v.
Scardelletti, 148 L.R.R.M. 2995, 3000-01, 1995 WL 20224(E.D.Pa.1995); Operative Plasterers & Cement Masons v. Benjamin,
776 F.Supp. 1360, 1363-66 (N.D.Ind.1991); Glenn v. Mason, No. 79
Civ. 3918 (S.D.N.Y. Aug. 18, 1980); and BRAC v. Orr, 95 L.R.R.M.
2701, 2702, 1977 WL 1661 (E.D.Tenn.1977). See also Weaver v.
UMW, 492 F.2d 580, 586 (D.C.Cir.1973) (permitting union to
realign as plaintiff in section 501 case).
The Supreme Court noted the conflict of authority
without resolving it in Guidry v. Sheet Metal Workers Nat.
Pension Fund, 493 U.S. 365, 374-75 n. 16, 110 S.Ct. 680, 686
n. 16, 107 L.Ed.2d 782 (1990).
3
29 U.S.C. §§ 501(a) and (b) provide:
(a) Duties of officers; exculpatory provisions and
resolutions void
The officers, agents, shop stewards, and other
representatives of a labor organization occupy
positions of trust in relation to such organization and
its members as a group. It is, therefore, the duty of
each such person, taking into account the special
problems and functions of a labor organization, to hold
its money and property solely for the benefit of the
organization and its members and to manage, invest, and
expend the same in accordance with its constitution and
bylaws, and any resolutions of the governing bodies
adopted thereunder, to refrain from dealing with such
organization as an adverse party or in behalf of an
adverse party in any matter connected with his duties
and from holding or acquiring any pecuniary or personal
Subsection (a) imposes fiduciary duties on union officials.
Subsection (b) confers jurisdiction on the federal courts for suits
brought by individual union members on the union's behalf to
enforce the duties created by subsection (a). Subsection (b) also
places procedural limits on an individual's right to enforce the
subsection (a) duties, analogous to the demand prerequisites for
bringing shareholder derivative suits. Under subsection 501(b) an
individual who wishes to sue for breach of an official's subsection
501(a) fiduciary duty must first request the union to proceed
against the official. Only if the union fails to act within a
reasonable time after the request may the individual proceed to
interest which conflicts with the interests of such
organization....
(b) Violation of duties; action by member after
refusal or failure by labor organization to
commence proceedings; jurisdiction; leave of
court; counsel fees and expenses
When any officer, agent, shop steward, or
representative of any labor organization is alleged to
have violated the duties declared in subsection (a) of
this section and the labor organization or its
governing board or officers refuse or fail to sue or
recover damages or secure an accounting or other
appropriate relief within a reasonable time after being
requested to do so by any member of the labor
organization, such member may sue such officer, agent,
shop steward, or representative in any district court
of the United States or in any State court of competent
jurisdiction to recover damages or secure an accounting
or other appropriate relief for the benefit of the
labor organization. No such proceeding shall be
brought except upon leave of the court obtained upon
verified application and for good cause shown, which
application may be made ex parte. The trial judge may
allot a reasonable part of the recovery in any action
under this subsection to pay the fees of counsel
prosecuting the suit at the instance of the member of
the labor organization and to compensate such member
for any expenses necessarily paid or incurred by him in
connection with the litigation.
federal court.
Subsection 501(b) does not itself confer jurisdiction over
suits by the union, but it assumes that a union can sue its
officials; otherwise, it would be futile for individuals to
request the union to sue and senseless to make the individuals
engage in a futile act. By giving the union the right of first
refusal to the cause of action, section 501(b) shows Congress
preferred that the union, rather than individual members, sue on
its own behalf. Weaver v. UMW, 492 F.2d 580, 586 (D.C.Cir.1973).
One of the early cases on this issue reasoned that if Congress
assumed unions could sue, and even preferred direct action by the
union to a derivative-type suit by individuals, Congress must have
intended that the unions have access to federal courts. See BRAC
v. Orr, 95 L.R.R.M. 2701, 2702 (E.D.Tenn.1977).
Other courts have answered that Congress did not necessarily
intend to give the unions a federal cause of action. Congress
could conceivably have intended to relegate the unions to state law
remedies. These courts say that, in the absence of any explicit
authorization from Congress, the courts may not enlarge their
jurisdiction by permitting the unions to sue in federal court. See
Teamsters, Local 20 v. Leu, 94 L.R.R.M. 2510 (N.D.Ohio 1976) ("The
statutory language confers upon the union as a unit no right to sue
its officers. Unions are left to the state law jurisdiction they
have always had."); Local 624, Int'l Union of Operating Eng'rs v.
Byrd, 659 F.Supp. 274, 276 (S.D.Miss.1986); International Bhd. of
Boilermakers v. Freeman, 683 F.Supp. 1190, 1192 n. 4 (N.D.Ill.1988)
("In our view, [BRAC] represents an unjustified assumption of
judicial power."); Truck Drivers v. Baker, 473 F.Supp. 1120, 1124
(M.D.Fla.1979).
We conclude that it would in fact frustrate congressional
intent to relegate the union to state remedies. The legislative
history of the LMRDA shows that Congress enacted the fiduciary
provisions of section 501 because existing state law remedies for
union officials' misconduct were inadequate. The Senate report
contains a minority statement complaining about the lack of
fiduciary provisions in the Senate bill: "Only one state has
enacted a statute imposing fiduciary obligations on union officials
and giving union members a right to sue in the event of any breach
thereof." S.Rep. No. 187, 86th Cong., 1st Sess. reprinted in 1959
U.S.C.C.A.N. 2318, 2376. The LMRDA as passed contains broader
fiduciary obligations than the Senate bill. The House Report
contains a statement of supplementary views stating:
We affirm that the committee bill is broader and stronger than
the provisions of S. 1555 which relate to fiduciary
responsibilities. S. 1555 applied the fiduciary principle to
union officials only in their handling of "money or other
property" (see S. 1555, sec. 610), apparently leaving other
questions to the common law of the several States. Although
the common law covers the matter, we considered it important
to write the fiduciary principle explicitly into Federal labor
legislation. Accordingly the committee bill extends the
fiduciary principle to all the activities of union officials
and other union agents or representatives.
H.R.Rep. No. 741, 86th Cong., 1st Sess. reprinted in 1959
U.S.C.C.A.N. 2424, 2479-80. We conclude from this background that
Congress intended to supplement the remedies available to unions by
creating new federal protections. Accord Glenn v. Mason, No. 79
Civ. 3918 (S.D.N.Y. Aug. 18, 1980). But see Crosley v. Katz, 131
L.R.R.M. 2175, 2176-2177, 1988 WL 94283 (E.D.Pa.1988) (noting that
one Senate bill expressly provided for suits by unions and that
bill's provisions were not adopted). It would make no sense to
impose federal duties and simultaneously deny the unions the right
to enforce those duties.
If Congress had only enacted section 501(a) without section
501(b), no one would suggest that Congress meant to deny the union
the right to enforce 501(a). However, because section 501(b)
mentions federal jurisdiction over suits by individuals but does
not explicitly refer to federal suits by unions, some courts have
inferred that Congress must have meant to exclude the possibility
of federal jurisdiction over unions' claims. See, e.g., Leu, 94
L.R.R.M. at 2510 ("This remedy is new, specific, and limited.").
Expressio unius est exclusio alterius.
The Seventh Circuit rejected this type of argument when
considering an analogous question in Hood v. Journeymen Barbers,
454 F.2d 1347, 1350-1354 (7th Cir.1972). There, individuals sued
their union, its board and the members of its Pension Plan
Committee. The Pension Plan Committee members argued that section
501(a) did not apply to them because, although they might be said
to fall within section 501(a)'s terms, section 501(a) did not refer
to pension trustees specifically, as section 502(a) did. The
Seventh Circuit refused to conclude that Congress's silence implied
an intent to exclude the pensions. Instead, the Seventh Circuit
looked to the purpose of section 501(a): "The Section, as we see
it, was a direct and far-reaching response to the mischief exposed
and dramatized by the McClellan Committee. That mischief was the
misuse of union funds and property by union officials in its every
manifestation." Id. at 1354. The court concluded that section 501
did in fact extend to the pension committee members.
Here, section 501(b) clearly shows that it has not one, but
two purposes: first, to enable individuals to sue on the union's
behalf, and second, to make sure that individuals do not preempt a
union's right to prosecute its own claims. Section 501(b) itself
makes the first purpose subservient to the second. We should not
infer from the mention of individual suits that Congress did not
intend to give unions a cause of action. It is far more in keeping
with the statute as a whole to conclude that, having given the
unions certain rights, Congress thought it implicit that the unions
could enforce those rights in court. Allowing the individuals to
assert the unions' claims was more extraordinary and therefore had
to be spelled out.
Moreover, reading section 501(a) as providing a cause of
action for individual union members, but not for the union itself,
would encourage the unions to refuse their members' requests to sue
offending officials. Only by refusing the members' requests could
the union fulfill the prerequisite under section 501(b) for
creating federal jurisdiction—though an individual, rather than the
union, would have to serve as plaintiff. Thus, interpreting
section 501 to create a federal cause of action for individuals to
vindicate the unions' rights, but not for the unions themselves to
do so, would require the union to forego its right to sue in order
to obtain federal jurisdiction for the derivative claim. See
Operative Plasterers v. Benjamin, 776 F.Supp 1360, 1366
(N.D.Ind.1991). This interpretation would make the individual's
demand under section 501(b) into a meaningless formality.
On the other hand, if we conclude that the union has a federal
cause of action, the demand requirement functions properly, to give
the union a chance to sue first, if it will.
Therefore, we cannot interpret section 501 in such a way as to
frustrate Congress's apparent purpose in enacting it. We conclude
that section 501(a) was intended to create a federal cause of
action that can be asserted by the union on its own behalf.
Once we have determined that a federal cause of action
exists, the statute granting jurisdiction over cases arising under
federal law provides jurisdiction for this suit. 28 U.S.C. § 1331(1994).4
II.
The union also relies on section 301 of the LMRA, 29 U.S.C.
§ 185(a), to provide jurisdiction. Section 185(a) provides
jurisdiction over contract suits "between any ... labor
organizations [representing employees in an industry affecting
commerce]." The union asserts a claim based on its union
constitution, which is a "contract" claim under section 301.
Plumbers v. Local 334, 452 U.S. 615, 627, 101 S.Ct. 2546, 2553, 69
L.Ed.2d 280 (1981).
4
The trustees make some argument that section 501(a) does
not apply to them because any possible breach of trust occurred
when they had the property transferred to themselves as trustees,
and this antedated any relationship with the plaintiff
international union. To the contrary, the trustees are being
sued by the international union on behalf of its former local for
selling land they allegedly held in trust for the former local.
The fact that the trustees are no longer officers of the union is
immaterial, since they are being sued for abuse of the trust
which they enjoyed by virtue of their union offices. See
Benjamin, 776 F.Supp. at 1367.
The defendants argue that section 185(a) does not extend to
claims against individual officers, citing Complete Auto Transit,
Inc. v. Reis, 451 U.S. 401, 417, 101 S.Ct. 1836, 1845-46, 68
L.Ed.2d 248 (1981), and Traweek, 867 F.2d at 508. To the contrary,
we have affirmed a case in which the district court asserted
section 185(a) jurisdiction over individual defendants.
International Bhd. of Boilermakers v. Local Lodge D111, 681 F.Supp.
1570 (S.D.Ga.1987), aff'd, 858 F.2d 1559, 1560 n. 1 (11th
Cir.1988), cert. denied, 490 U.S. 1047, 109 S.Ct. 1955, 104 L.Ed.2d
424 (1989). See also Tile, Marble, Terrazzo Shopworkers v. Local
32, 896 F.2d 1404, 1416 (3d Cir.1990); International Bhd. of
Boilermakers v. Olympic Plating, 870 F.2d 1085 (6th Cir.1989);
International Bhd. of Boilermakers Local Lodge 714, 845 F.2d 687(7th Cir.1988); International Bhd. of Boilermakers v. Freeman, 683
F.Supp. 1190, 1191 (N.D.Ill.1988).
The district court in Local Lodge D111 observed there can be
no action for damages against individuals under section 185(a).
Lodge D111, 681 F.Supp. at 1572 n. 1 (citing Reis, 451 U.S. at 427,
101 S.Ct. at 1850-51). However, the union has expressly limited
its section 185(a) claim to seek only equitable relief. This fact
distinguishes our case from Traweek, 867 F.2d at 508, which was a
suit for money damages. See Benjamin, 776 F.Supp. at 1367(distinguishing Traweek ). Cf. Local 443, Int'l Bhd. of Teamsters
v. Pisano, 753 F.Supp. 434 (D.Conn.1991) (section 185(a) does not
authorize suit against individuals for money damages). This case
is also distinguishable from Traweek in that it involves an
international union's dispute with local officials, rather than a
strictly internal dispute within the local. See id.The defendants distinguish Local Lodge D111, because both the
union and its representatives were sued in that case. The
defendants argue that without the union defendant in Local Lodge
D111, there would not have been section 185(a) jurisdiction. The
Second Circuit considered this question in Shea v. McCarthy, 953
F.2d 29, 32 (2d Cir.1992). There, the Second Circuit explicitly
held that an individual defendant may be sued alone (without also
joining a union as defendant) under section 185(a) for violating
the union constitution, as long as the relief sought is equitable,
not legal. We therefore conclude that there is jurisdiction over
the union's section 185(a) claim as stated.
Accordingly, we must REVERSE the district court's dismissal of
this case, and REMAND for further proceedings.