Chathas, Charles v. Int'l Brohd Elec 134

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-4314
Charles Chathas, et al.,
Plaintiffs-Appellants,
v.
Local 134 IBEW, Unified Social Club,
and Mike Fitzgerald,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 0400--James B. Zagel, Judge.
Argued May 30, 2000--Decided October 18, 2000
Before Posner, Coffey, and Kanne, Circuit Judges.
Posner, Circuit Judge. This appeal presents a
tangle of jurisdictional, equitable, and labor-
law issues. The plaintiffs are members of a local
of the electricians union who are on the outs
with the local’s current business manager (that
is, president), Mike Fitzgerald. They brought
this suit under section 302 of the Taft-Hartley
Act, 29 U.S.C. sec. 186, which forbids union
officers to solicit employer contributions,
against the local, Fitzgerald, and the "Unified
Social Club," a social organization of members of
the local. The suit charges that Fitzgerald
solicited and received tens of thousands of
dollars in contributions to the Club from
employers with which the local bargains, the
purpose being to solidify Fitzgerald’s hold over
the union by enabling the Club to provide
attractive social outings for union members.
Fitzgerald created the Unified Social Club, and
it is closely identified with him and his faction
of the local. The more lavish its outings, the
more likely he is to be reelected business
manager.
The plaintiffs moved for a preliminary
injunction forbidding the defendants to solicit
or receive contributions to the Unified Social
Club from employers doing business with the
local. In September, the defendants submitted an
offer of judgment under Rule 68 of the Federal
Rules of Civil Procedure. The essence of the
offer was that the preliminary injunction would
be made permanent, but that the offer was not to
be construed as an admission of liability. Rule
68 offers are much more common in money cases
than in equity cases, but nothing in the rule
forbids its use in the latter type of case.
Liberty Mutual Ins. Co. v. EEOC, 691 F.2d 438,
439-40 (9th Cir. 1982) (a case much like this);
People v. Operation Rescue National, 80 F.3d 64,
68 (2d Cir. 1996); Goodheart Clothing Co. v.
Laura Goodman Enterprises, Inc., 962 F.2d 268,
270-71 (2d Cir. 1992); Spencer v. General
Electric Co., 894 F.2d 651, 655 and n. 5 (4th
Cir. 1990), overruled on other grounds, Farrar v.
Hobby, 506 U.S. 103 (1992); RCA/Ariola Int’l,
Inc. v. Thomas & Grayston Co., 845 F.2d 773, 780-
81 (8th Cir. 1988).
The plaintiffs rejected the offer. The
defendants--not the plaintiffs--then moved the
district court to enter a permanent injunction.
The court did so, whereupon the defendants moved
the court to dismiss the suit as moot. The
plaintiffs objected, arguing that they were
entitled to a declaratory judgment or at least to
a finding in or accompanying the permanent
injunction that the defendants had violated the
law. At the same time the plaintiffs asked for
leave to amend their complaint to add a claim
under section 502 of the Labor-Management
Reporting and Disclosure Act, 29 U.S.C. sec. 501,
which (in subsection a) imposes on an officer of
the union, so far as bears on this case, a duty
"to refrain from dealing with [the union] 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
interest which conflicts with the interests of
such organization." The relief sought was
disgorgement of the moneys that the Unified
Social Club had received from employers doing
business with the local.
The district judge granted the motion to dismiss
the suit as moot on the ground that the entry of
the permanent injunction had eliminated the
controversy between the parties, except insofar
as the request to amend the complaint was
concerned. That request the district court denied
on the ground that "the solicitation of money
from employers does not involve union funds or
property, thus does not state a claim under 29
U.S.C. sec. 501."
The plaintiffs appeal, renewing the arguments
that the district court rejected when it
dismissed the suit. The appeal from the denial of
declaratory relief (whether in the form of a
declaratory judgment, or merely a judicial
finding that the defendants did indeed violate
section 302 of the Taft-Hartley Act) is
independent of their appeal from the judge’s
refusal to let them amend the complaint to add a
claim under section 501 of the Labor-Management
Reporting and Disclosure Act, and it will promote
clarity to treat them as if they were two
separate appeals.
A winning party cannot appeal merely because the
court that gave him his victory did not say
things that he would have liked to hear, such as
that his opponent is a lawbreaker. Adverse dicta
are not appealable rulings. California v. Rooney,
483 U.S. 307, 311 (1987) (per curiam); United
States v. Accra Pac, Inc., 173 F.3d 630, 632-33
(7th Cir. 1999); Grinnell Mutual Reinsurance Co.
v. Reinke, 43 F.3d 1152, 1154 (7th Cir. 1995);
Atlantic Mutual Ins. Co. v. Northwest Airlines,
Inc., 24 F.3d 958, 961 (7th Cir. 1994); Abbs v.
Sullivan, 963 F.2d 918, 924 (7th Cir. 1992). They
can cause harm, but not the sort of harm that the
courts, in an effort to limit litigation, deem to
create a genuine controversy within the meaning
of Article III of the Constitution. Judgments are
appealable; opinions are not.
Nor can a party force his opponent to confess to
having violated the law, as it is always open to
a defendant to default and suffer judgment to be
entered against him without his admitting
anything--if he wants, without even appearing in
the case. Reynolds v. Roberts, 202 F.3d 1303,
1315 (11th Cir. 2000). And if the defendant has
thus thrown in the towel there is nothing left
for the district court to do except enter
judgment. The absence of a controversy (in the
constitutional sense) precludes the court from
issuing an opinion on whether the defendant
actually violated the law. Such an opinion would
be merely an advisory opinion, having no
tangible, demonstrable consequence, and is
prohibited. Alliance To End Repression v. City of
Chicago, 820 F.2d 873, 875-76 (7th Cir. 1987).
The plaintiffs acknowledge that their principal
dissatisfaction with the permanent injunction
that the district court entered is the absence of
a finding of illegality, which they wish to
brandish in their continuing struggle with
Fitzgerald and his clique for control of Local
134. Had the injunction that the judge entered
been narrower than the plaintiffs wanted, they
could have appealed just like any other plaintiff
who obtains only partial relief in the trial
court and is dissatisfied. See, e.g., Deposit
Guaranty National Bank v. Roper, 445 U.S. 326,
332-33 (1980); EEOC v. Chicago Club, 86 F.3d
1423, 1431 (7th Cir. 1996); see also Electrical
Fittings Corp. v. Thomas & Betts Co., 307 U.S.
241 (1939) (appeal by prevailing defendant);
LaBuhn v. Bulkmatic Transport Co., 865 F.2d 119,
121-22 (7th Cir. 1988) (ditto). The plaintiffs
drafted the preliminary injunction that the judge
entered, however, and so far as the terms of the
permanent injunction are concerned all the
plaintiffs wanted was for him to make the
preliminary injunction permanent, and he did so.
The permanent injunction forbids exactly what the
plaintiffs want it to forbid. But they argue that
it is invalid because of its lack of a finding
that the defendants violated the law, and if this
is right it means that the relief they obtained
was illusory--a proper basis for a "winning"
plaintiff to appeal.
The requirements for a valid injunction are
found in Rule 65(d) of the Federal Rules of Civil
Procedure, which provides, so far as pertinent
here, that "every order granting an injunction .
. . shall set forth the reasons for its issuance;
shall be specific in terms; shall describe in
reasonable detail, and not by reference to the
complaint or other document, the act or acts
sought to be restrained." The order granting the
injunction in this case does not contain the
material required by the rule; all it says is
that the court grants the defendants’ motion to
enter a permanent injunction. The order contains
no reasons and no terms, and in conspicuous
contradiction of the rule incorporates by
reference another document, namely the
preliminary injunction. The order, in short, is a
clear violation of Rule 65(d), International
Longshoremen’s Ass’n v. Philadelphia Marine Trade
Ass’n, 389 U.S. 64, 74-76 (1967); Schmidt v.
Lessard, 414 U.S. 473 (1974) (per curiam); PMC,
Inc. v. Sherwin-Williams Co., 151 F.3d 610, 619-
20 (7th Cir. 1998), but also a harmless one, and
it does not render the injunction unenforceable
and so the plaintiffs have no legal basis for
complaining. When the terms of an injunction,
although not set forth in a separate document as
the rule requires, can be inferred from the
documentary record with sufficient clarity to
enable a violation of those terms to be punished
as a contempt, the injunction is enforceable.
Metzl v. Leininger, 57 F.3d 618, 619 (7th Cir.
1995); Chicago & North Western Transportation Co.
v. Railway Labor Executives’ Ass’n, 908 F.2d 144,
149-50 (7th Cir. 1990). That is the case here.
The preliminary injunction that the judge had
entered in February of last year complied with
Rule 65(d); the defendants’ motion which the
judge granted asked him to make the preliminary
injunction permanent; and so the granting of the
motion was the equivalent of reissuing the
preliminary injunction but striking through the
word "preliminary," just as in Chicago & North
Western Transportation Co. v. Railway Labor
Executives’ Ass’n, supra, 908 F.2d at 150; see
also Advent Electronics, Inc. v. Buckman, 112
F.3d 267, 273 (7th Cir. 1997).
Well, almost the equivalent; so far as the legal
basis for the permanent injunction is concerned,
the plaintiffs point out that the order entering
the preliminary injunction recited only that "the
Plaintiffs have made a reasonable showing of
likely success on the merits," whereas the
predicate for a permanent injunction would have
to be that they had prevailed on the merits. A
preliminary injunction is intended to protect the
status quo while the case proceeds, not to
adjudicate the merits. A plaintiff cannot obtain
a permanent injunction merely on a showing that
he is likely to win when and if the merits are
adjudicated. University of Texas v. Camenisch,
451 U.S. 390, 394-95 (1981); Plummer v. American
Institute of Certified Public Accountants, 97
F.3d 220, 229 (7th Cir. 1996); K-Mart Corp. v.
Oriental Plaza, Inc., 875 F.2d 907, 915 (1st Cir.
1989).
True; and this is another example of the sloppy
way in which the case was handled in the district
court. But it is not true that a permanent
injunction is invalid unless it recites that the
defendants violated the law. The obvious
counterexample is a permanent injunction entered
pursuant to a consent agreement in which the
defendants deny liability. See, e.g., United
States v. Accra Pac, Inc., supra, 73 F.3d at 631.
In such a case there is no adjudication of the
merits, yet the injunction is valid. The
plaintiffs in this case did not consent to the
entry of the permanent injunction, because it was
unaccompanied by a finding of liability. But that
does not mean that the injunction was invalid, as
would be obvious if the injunction had been
entered after the defendants defaulted, as in SEC
v. Worthen, 98 F.3d 480, 481 (9th Cir. 1996).
Although Rule 65(d) does require that the order
granting the injunction "set forth the reasons
for its issuance," they need not take the form of
findings that the defendant violated the law. The
reason for the injunction might simply be that
the defendant had consented to its entry--that in
fact was the reason the judge gave when he
dismissed the suit. He gave a reason, too, why
the plaintiffs’ objection should not be
controlling. He said that the plaintiffs had got
all they were entitled to, and he was right,
given that the injunction is valid and prohibits
exactly the same conduct that the plaintiffs
wanted it to prohibit. All that is missing is a
finding of violation, and we have seen that this
is not a prerequisite to the issuance of a valid
injunction.
Let us move now to what we’re calling the second
appeal. In defending the judge’s refusal to allow
the plaintiffs to amend their complaint to add a
claim under section 501 of the LMRDA Act, the
defendants emphasize that the motion was made
long after the case was filed. The complaint was
filed in January of 1999; the amendment was not
sought until November. But the delay cannot be
dispositive, and for two reasons. First, the
reason the plaintiffs delayed was to give the
local a chance to sue the Club and its officers.
A suit under section 501 by union members is a
derivative suit. See, e.g., O’Hara v. Teamsters,
151 F.3d 1152, 1161 (9th Cir. 1998); Weaver v.
United Mine Workers, 492 F.2d 580, 582 (D.C. Cir.
1973) (per curiam). The officers have defrauded
the union, and only if the union (for example
because controlled by the dishonest officers)
refuses to bring suit are the members permitted
to do so. So the plaintiffs had to give the union
a chance to decide whether to sue (of course it
decided not to). Second, the question whether to
bar an amendment to the complaint because of
undue delay is committed to the discretion of the
district court, Foman v. Davis, 371 U.S. 178, 182
(1962); Chaveriat v. Williams Pipe Line Co., 11
F.3d 1420, 1430 (7th Cir. 1993); Clemmons v.
Delo, 177 F.3d 680, 686 (8th Cir. 1999), and the
court here did not exercise any discretion. It
forbade the amendment on the sole ground that the
claim sought to be added did not state a claim.
If the judge was wrong in this legal ruling, the
case must be returned to him for an exercise of
his discretion.
We think he was wrong. Although section 501 is
primarily aimed at preventing officers from
misusing union funds, Tile, Etc., Int’l Union v.
Local 25, 972 F.2d 738, 744 (7th Cir. 1992);
Talbot v. Robert Matthews Distributing Co., 961
F.2d 654, 666 (7th Cir. 1992); Hood v. Journeymen
Barbers, Etc., 454 F.2d 1347, 1354 (7th Cir.
1972); United States v. Hartsel, 199 F.3d 812,
819 (6th Cir. 1999); Morrissey v. Curran, 650
F.2d 1267, 1274 (2d Cir. 1981), it is not limited
to that conduct. The language we quoted earlier
forbids the officers to deal with the union as an
adverse party, which the defendants are accused
of having done here by taking money from
employers in order to solidify their control of
the union. The statute also forbids union
officers to obtain a personal interest adverse to
the union, which the defendants did here by
operating the Unified Social Club with funds from
employers, thus creating a conflict between their
interest in reelection and their duty to deal
with employers at arm’s length. Such conduct
violates section 501 too. United States v.
Pecora, 798 F.2d 614, 623 (3d Cir. 1986); United
States v. Cody, 722 F.2d 1052, 1057 (2d Cir.
1983); Johnson v. Nelson, 325 F.2d 646, 650-53
(8th Cir. 1963). It was therefore error for the
district judge to disallow the amendment on the
ground he did, and the case must be remanded to
enable him to make the required discretionary
judgment.
Affirmed in Part, Reversed
in Part, and Remanded.