Earl Warren: Number 13, William H. Black and Ruth H. Black, Petitioners, versus A. M. Amen, et al. Mr. Smith, you may proceed.
Douglas F. Smith: May it please the Court. To recapitulate for just a moment, I should like to emphasize that in our view, the question here is essentially one of fact not of law. We say that on the facts here, the question posed by the Court on certiorari is not presented, it's not presented by the facts. Petitioner cites a number of decisions by distinguished courts and judges which hold as -- he stated in one quite graphically that the Court does not have jurisdiction to deal with non-diverse interveners in a case in which the claims are simply a conjury of separate claims involving only common questions. We don't find it necessary to deal with those cases. They do not relate to the facts of the case before the Court. They're germane to the argument that Brother Acheson has with Professor Moore which is an interesting question but it's an academic one in this case. On the other hand, we rely on many cases in which this Court and other federal courts have held that if the claims are interdependent claims to funds of which the federal court has taken control, that then jurisdiction exists to make a full disposition of that property subject to the control of the Court. Petitioner purports not to question these decisions naturally. He says yes but in those cases, there were -- there were really funds there. Well, let's see about that. In the leading case of Stewart versus Dunham, decision of this Court, there was an equitable trust imposed upon money in the hands of the fraudulent transferee. It wasn't locked in the Court's safe or in the physical possession of the Court. It was -- it was just money in the hands of the fraudulent transferee. Let's look at Hanley versus (Inaudible). There, there wasn't any money in possession of the Court in the literal sense. It was money in the hands of stockholders who hadn't paid for their stock subscriptions and the creditor is one to get to him. And the Court impressed a constructive trust on it and then heard the property, was property in the assets of an insurance company. And in Dickinson versus Burnham, there is a case that's particularly an uncomfortable one from my friend. It was decided by the Second Circuit Court of Appeals fairly recently. There, there had been money collected for a corporate purpose. But as the District Court said in that case, the case was not one to collect from a trustee of that money that had been collected, the trustee wasn't in court. It was not a case to reinstate a trust. If you please, it was precisely the situation we have here, the Court impressed a constructive trust upon unjust enrichment that came into the hands of a fraud feasor, exactly the situation we have here and the Court said that there were independent claims in an order fully to distribute the fund. It should be done by one court. And he took -- he took jurisdiction of non-diverse interveners and this Court denied certiorari.
Felix Frankfurter: Mr. Smith, you can sustain your judgment of course on any ground on which you can sustain it.
Douglas F. Smith: That's right.
Felix Frankfurter: What was the ground of the Court of Appeals in sustaining jurisdiction?
Douglas F. Smith: I was going to put that last but --
Felix Frankfurter: Well, that's -- they only added --
Douglas F. Smith: If you don't mind, I -- I will. I'm going to -- I'm going to get to it.
Felix Frankfurter: Please do.
Douglas F. Smith: So, they can't do much with this fund distinction. And so finally and belatedly and in the fourth brief, they filed in this Court, they come to the reality of dealing with the facts. And I've put together some of these sentences and that's where I left off when the Court rose yesterday. In which they say, the total number of validly issued shares at liquidation is a fact to be determined. In determining the fact from the proof, a court must decide the number of validly issued shares at the time of liquidation. Mark this please, “Facts that go beyond an individual plaintiff's interests must be considered in working out the amount of recovery. Here, the amount per share to which he is entitled.” Now, I earnestly ask the Court to compare that admission, that in order to decide this case, the Court's got to know how much everybody else is entitled to with this statement upon which they -- by which they induced this Court to grant certiorari. Just please compare what I've read in the reply brief with his statement. “The Court of Appeals formula," and I'm quoting, "produces the same fixed absolute amount to each claimant regardless of the number of claimants.” That's the -- that's the representation upon which you granted certiorari. Now, for the first time in their reply brief, they come to face with the reality, namely the intensely practical fact that the amount that every person gets out of this fund on which the courts impressed the constructive trust. The -- everybody's claim is for more or fewer dollars depending upon the merits of the claim of every other individual who stopped was arbitrarily retired. For the first time, they have conceded in their reply brief that the actual, factual interdependence here makes it necessary to determine on the evidence as to each of these claims whether the individual parted with his stock through fraud and the amount of his claim. They concede in the part I've read to the Court that they -- you have to do that in order to determine how much the plaintiffs are entitled to. Now, let's see what this means further. It means that after the Court has determined the precise amount of the unjust enrichment and determined exactly the amount that all the victims of this fraud are entitled to. That then, the Court can't distribute that unjust enrichment of which he's taking control, but he's got to the people that have been shown by this evidence that they say is necessary to be entitled to it. He can't distribute this fund of which he's taking control. But he's got to turn back to the trustee ex maleficio. He's got to turn back to Black. That part of this fund which has been shown to be due to the non-diverse interveners. Well now, in this case for example, what that means is that you've got to determine from the evidence of Mr. and Mrs. Constant whether they parted with their shares through fraud and how much they are entitled to. You've got to do that, they say, in order to determine what the plaintiff is entitled to, but after you have determined what the Constants are entitled to, then they say, "The Court must turn them out of court because they're non-diverse and it can't give them their established part of this fund. Professor (Inaudible), one time, characterized the type of cases in which federal courts exercise ancillary jurisdiction over non-diverse people. I say in that non-diverse people are permitted to come in order to dispose of the property of which the Court has taken jurisdiction. And that he says it's like dividing up a pie. He says you've got to count the people around the table. You've got to know who's there before you cut the pie, before you know how many pieces there are. Well, my friend on the other side goes partway. They -- they have to count the Constants. They have to count the people. They have to find out about it. But after the pie has been cut, then the Constants are turned away from the table, they are not permitted to get their pieces of the pie. But those pieces of the pie are turned back to the fraud feasor out of this property of which the Court has taken jurisdiction. Now, we submit that what this contention adds up to is a brand new contention in this lawsuit that federal courts just don't have after all -- federal courts don't have the jurisdiction they have exercised from the beginning of the Court to deal with non-diverse interveners in order to adjudicate interdependent rights to property on which the Court has impressed a constructive trust. The petition here was aimed primarily and naturally so at the substantive judgment alone, the judgment holding Black guilty of fraud and require him account for his unjust enrichment. But the Court denied certiorari on the merits of that substantive judgment and left Black only with this narrow jurisdictional point. The jurisdictional point is so self-limiting that Black has found that an extremely poor substitute for the review on the merits which he sought. The jurisdictional point involving the Constants is a self-limiting point because the very heart of the contention on which it rest is that the claims of the Constants are wholly separate and distinct from those of every other party. So, if we accept completely here and I think my friend on the other side conceded this in a question from Justice Black or Justice Douglas, its -- if we accept fully the proposition that the Court's question was correctly posed on the facts which we say it was. And if we concede arguendo that non-diverse parties should not be permitted in this case, concede everything that petitioner is entitled to argue under the limited grant of certiorari that we have here. What we come to is the proposition, that two parties, the Constants were non-diverse, were permitted to intervene here and ought to be dismissed out of this case without questions. Well now, that would be most unfortunate for the Constants. We've devoted our entire defense here substantially to showing that it would be an unjust and improper result. But at the same time, its very poor comfort for Mr. Black, and so he asks an opportunity to perform a very delicate operation which he didn't really elaborate here in argument as he did in his brief. The judgment against the Constants would -- the dropping out of the Constants would reduce the judgment only insignificant. And so Black has deemed it to be utterly essential to find some basis on which he could defeat the participation of the other plaintiffs as well as the Constants. And since the majority of the other parties are residents of Illinois, the expedient which he has adopted is an effort to destroy the diversity of the Illinois people. And here's where the delicate operation comes in. He sees as his vehicle on Black Marshall Oil Corporation. He wants the Black Marshall Oil Company to be held to be a necessary party in order to destroy the diversity that exist between the bulk of the plaintiffs and Black Marshall.
William O. Douglas: But that question isn't here.
Douglas F. Smith: It is not here -- It is not here. Somehow however, he must contend that Black Marshall is a necessary party and must be aligned as a defendant, not withstanding the fact that it was dissolve and fully liquidated before this suit was brought, not withstanding the fact that in their petition, own petition for removal, they said it wasn't a necessary party. It seems I have five minutes.
Earl Warren: Five minutes, yes.
Douglas F. Smith: Well, now the sufficient reason why that didn't work has been observed by Justice Douglas. The Court did not take jurisdiction of that question, did not grant certiorari as to that question. The Court of Appeals held that there was no equity in the corporate claim because the money would go to N.C.R.A., the purchaser which had gotten full value for what it paid. But the Court held that Black equity would not permit Black to participate in the proceeds of this sale in respect to this 32,000 shares. That contention was vigorously attacked in this Court on the petition for certiorari by the petitioner asserting that the wrong resulted not to the stockholders but to the corporation. The Court denied certiorari on that issue, not withstanding that denial and limitation on certiorari in a desperate effort to defeat the participation of this Illinois people. They simply reargue all over again that question and what they asked is a remand to the District Court that will broad enough to enable them to argue that question to the District Court, and thus, achieve the same result as if they have gotten a certiorari on the merits which was denied, and then gotten the substantive judgment set aside. Now, I -- I come to this action of the Court of Appeals, Mr. Justice Frankfurter. I want to say first and correct a misstatement of my brother Acheson on the opening, in which he said twice that it was a divided court that reversed, it was not. It was a unanimous court with reference to the basic fraud that Black had committed wholly and that he must account for his unjust enrichment. One judge dissented on some technical grounds with reference to the corporation and the 32,000 shares. Now, to avoid coming to grips with the facts, as the interdependence here, they relied throughout three of their briefs on what the Circuit Court of Appeals had done here. They rely upon the circumstance that in a different context and in reply to a different argument, the Court of Appeals had said that these questions involved this claim, this suit involves common questions of law and fact. As of course most obviously it does, and that it does met the requirements of spurious class action. Now, let's see, if you please, what contention the Court was responding to and what significance that has if any in relation to the question under discussion here. Petitioner's position in the Court of Appeals was exactly the opposite of their position here.They said there that these claims didn't present common questions of law and fact. They didn't present common questions of law and fact because they said that the fraud had been separately committed. They said it wasn't a spurious class action and for that reason -- for that reason because it wasn't a spurious class action, the Court couldn't hear non-diverse interveners. Well, they -- they made their assertion that these claims didn't present common questions of law and fact, Mr. Justice, on the theory that they had been separately committed not by one prospectus or at one meeting. The Court of Appeals responding to that held that the fraudulent representations were made in pursuance of a definite plan to eliminate a large family of stockholders, I'm quoting, “and that the testimony indisputably shows the general pattern of action.” And so, he said that the claims do present common questions of law and fact. Now, that was the only question before the Court on this point. It had no occasion whatever to find out or to say whether in addition to presenting common questions of law and fact which of course they do, they were also interdependent. With the Court's formula, you will find when you study it, does recognize the interdependence of the claims and makes provision for it.
Felix Frankfurter: Well, they said in terms -- I repeat you've -- you've been sustained in those judgments on anything that sustained. And while their claims and demands were separate, they allege substantially. Now, what does that mean?
Douglas F. Smith: The Court was responding -- you've got to take that in context, Mr. Justice.
Felix Frankfurter: Your argument --
Douglas F. Smith: All right, that --
Felix Frankfurter: Your argument requires us hereafter, to look at all the briefs that --
Douglas F. Smith: Well --
Felix Frankfurter: -- the counsel below to find out what they were addressing themselves to.
Douglas F. Smith: Well, I -- I think maybe that --
Felix Frankfurter: But you do that sometimes.
Douglas F. Smith: -- that becomes necessary when -- when a petitioner relies not on the facts of his case but upon what somebody has said about it. But bear mind, if you please --
Felix Frankfurter: I don't care what the petitioner says, is what I read in the opinion.
Douglas F. Smith: Well, I -- I think it's just a matter of fairness to the Court of Appeals to point out that they weren't dealing at all with the question that's presented here. They heard no argument on it. They were dealing simply with a question as to whether these frauds had been separately committed and that's all they were dealing with. But they did make provision for the interdependence of these claims in the formula and why did they do so? Simply because, Mr. Justice, they couldn't spell out the mechanics by which the District Court should deal with these claims below without confronting the facts of interdependence and that's the thing that has forced these people when they come to deal with the facts to admit the interdependence. Thank you very much.
Hugo L. Black: May I ask you one question, Mr. Smith? That the plaintiff seems to allege what you have been insisting on that impressing of the trust by reason of fraud and as their prayer calls for relief on that basis, what position did the defendant has taken to answer to that charge as to the Court was arising on the count of fraud?
Douglas F. Smith: Well, Your Honor, my recollection of that answer and I think it's accurate, is that they went down through the complaint mostly with denials. They just denied, for example, existence of a federal question, they just denied this and denied that and then --
Hugo L. Black: They claim --
Douglas F. Smith: Prayed that --
Hugo L. Black: Did they claim that that phase of the bill failed to state any cause of action on which relief would be granted, anything of that kind?
Douglas F. Smith: Well, no. They -- they didn't. They just -- they just answered and asked judgment for the defendants which we normally do.
Hugo L. Black: You mean, they just deny the fraud?
Douglas F. Smith: I beg your pardon?
Hugo L. Black: You mean they just denied the fraud?
Douglas F. Smith: Oh, yes. They just denied the fraud and asked that no relief be granted.
Hugo L. Black: There was no -- there seems to have been no sharply, contest at issue between the parties that I've seen yet in here as to that charge.
Douglas F. Smith: No, not at all.
Hugo L. Black: The allegations brought to the assumption that if you could prove your fraud, it wouldn't bring about the -- show (Inaudible) --
Douglas F. Smith: Your Honor there was -- there was --
Hugo L. Black: -- an ex maleficio.
Douglas F. Smith: It was not assemblance of -- of an attack made on that theory, not at all.
Earl Warren: Mr. Acheson, proceed.
Dean G. Acheson: If the Court please. Two points that I would like to stress. My learned -- learned friend's argument, I think, brings out forcefully the tyranny of words. I'm not clear whether his -- the victim or whether he's using words as an ally to impose their tyranny on us. Here, the tyrannical word is “fund". He accuses me of believing, which would certainly be a naïve thing for a lawyer to believe, that there is no fund unless there is some money locked up in the safe in the clerk's office, of course, I have no such fantastic idea as that. The term “common fund” and he always keeps dropping off the important word “common". The term “common fund” as it's used in the law means a definite sum of money in which people have rights, usually the rights exceeding the amount of money. The amount of money is before the Court either because the person who owns it as before the Court or because it is paid in. Let's figure all about it's being paid in. In the Dickinson case which is his favorite case and it is my favorite case also because it brings out very clearly what this case is not. In the Dickinson case, the fund was a 106 -- $176,000. It was not in Court, of course, it wasn't in court. It was owned by two men who had stolen it and the subscribers to the original fund of $600,000 said, "We have a pro rata interest in that fund." And the Court said, “You have. We now decide that this fund was improperly taken by these two men. All of you who put up the original $600,000 have got a pro rata interest and you may all come in and get your interest." But the way my learned friend uses the term “fund”, it means the sum of all the separate demands of all the separate plaintiffs in this case. He uses -- it would be a fund in his sense of the word if I ran down an automobile -- with my automobile, it went down a loading platform on which 50 people were standing and heard all of them. If they all sued me that some total of their claims would be, in his view, a fund, because they all have claims against me. It all has -- came out of a common transaction, their common questions of law involved. Therefore, it's a fund. Any one person on the loading platform had diversity of citizenship with me, then according to his argument, they could all come into a federal court. But then he keeps talking about a trust fund, the Court impressed a trust on a fund, or what did the Court impress anything on. It isn't a fund. If there's any fund at all and this -- these words of trust are merely used to describe the nature of the recovery, not a sum of money. He can't tell you what sum of money is in this fund, he doesn't know. Nobody will know until the individual recoveries are added up. There isn't a trust imposed on something. In the language of the Court, there are all kinds of trust that as -- as many trusts as there are defendants, but they are separate. The point is not to be confused with the word “fund". There's nothing common about this. Each plaintiff has his own separate recovery. That -- and that again is brought out very clearly in cases like Ayer versus Kemper and Miller versus the National -- the National City which I talked about yesterday. Then that brings me to the second part of -- of -- second point I want to make. Counsel was asked, what is the basis of the Court of Appeals decision? It's an unjust enrichment. That is the basis of their decision and why was it the basis? Because there is a finding of fact which is concurred in by all four judges who heard this case and by counsel, he can't say one single word against him. And that is that Black paid these people, the full value of their stock when they bought it. Absolutely down to the last cent of the full value. Therefore, they have no cause of action for in fraud or in tort. So, what did they do? They say, "Well, there's a trust on this." There was misrepresentation here and therefore, you hold each one of these blocks of stock, entrust for its owner until the corporation is dissolved, and then you pay him out. Now, two things come out of this. One of them is, if there is not a common trust but even on the language of -- of the Court, there is a specific trust imposed on each block of stock for each owner. And the second thing that comes out of it that I want to stress is over and over and over again where we have been arguing here, my friend has been arguing here as though you hadn't granted certiorari on the first point, as though we were attacking or -- or defending the Court of Appeals in overruling the decision of the District Court. The District Court found there was no fraud at all, not a different fraud. When we come to the Court of Appeals, my friend says there was not a dividend court on this question. There was divided court on this question, a proof of this comes from reading the opinion. What the Judge Phillips decide on this question? He decided that the man who made the misrepresentations, made it within the scope of -- of an agency which Black had given him. He did not find. In fact, he specifically found the other way that Black was not responsible for what this man said. Therefore, we have two judges, the judge who heard the case, the Chief Judge of the Court of Appeals who said this man is not guilty of any fraud. But Judge Phillips joins with the others and say, "We must hold him liable for somebody else's fraud because he comes within -- it came within the scope of an agency given to him." The other two judges of course go further and -- and say the opposite. But in impressing all of this evidence when they talk about fraud on this Court, please remember that out of the four judges who heard it, the judge who heard the testimony did not believe it and either did the Chief Judge in the Court of Appeals. One last word. We're talking -- keep talking, my brother does about the federal question which is involved. I went over it yesterday to show you that this federal question had never been mentioned in any proceeding, in any argument, in any evidence, in any brief filed throughout the entire length of this case. And my brother said that the Court of Appeals opinion if fairly read would read on this federal question. The Court of Appeals didn't have the remotest idea that anyone dreamed that there was a federal question. It wasn't mentioned to it. It wasn't in the record when -- which went up to it. It wasn't any brief which was before it. This federal question has not been followed until the brief filed on October 11th, 1957. Thank you, Your Honor.
Hugo L. Black: Would that affect the jurisdiction of the Court?
Dean G. Acheson: Well, Mr. Justice Black --
Hugo L. Black: (Voice Overlap) -- for?
Dean G. Acheson: What -- what the -- what my friend on the other side is now arguing. The truth is that you don't need to worry about this question of federal jurisdiction on diversity. But as he says a federal statute is involved.
Hugo L. Black: Well, is he -- is he right in relying on that if he is -- if his petition is valid?
Dean G. Acheson: No, sir. He is not.
Hugo L. Black: Would -- would in fact (Voice Overlap) --
Dean G. Acheson: No, that every single decision which is -- is cited in my friend's brief, Your Honors, every decision of this Court that he cites and I would be glad to apologize if there's a single one of which this isn't true. Every one of those single decisions says that, if you have not litigated the case or put it the other way, that in all those cases, the federal statute was the center of the litigation. A testimony was taken on it, briefs were written about it, arguments were made upon it. Any of the cases, the lower court dismissed the federal question and said, "No, we don't think it is involved on the Court." And when they went up to the Court of Appeals, they said, "Certainly, we think it's involved, it was the center of this case." Therefore, it is a federal law case. But there, he cannot find one single solitary case to say that when -- not a word has been said about it, not as single solitary word after the filing of the complaint, then when we go through the District court, the Court of Appeals and come to this Court. He can certainly discover that all the time that was lurking in the background here, have question under a federal law. And if we now read all the proceedings as though they had been taken under that statute, then he can sustain his jurisdiction. Now, there's no support for that theory in anything Your Honors to decide it.
Earl Warren: Mr. Acheson, assume that we're to agree with you that this case should go back the -- for the purpose of determining who have diversity citizenship and who did not. How do you get into the case? Your suggestion that we also send it back to see or to see if you can get the corporation into the case?
Dean G. Acheson: Your Honor, in -- in the first place -- let me be clear that we have not asked in our brief and I do not ask in argument that this Court consider that question. I do not ask this Court to consider whether or not the oil company is a necessary party defendant. You have not granted certiorari on that question and I quite understand that your jurisdiction here under your granting of the writ is limited to the federal jurisdiction question. Now, if Your Honors decide that question in a way in which we urge you to decide it, then when we go back to the District Court, we will say, "Let's realign these parties in accordance with the Supreme Court's decision." You had in this case not brought in by us but by the other side as their principal defendant, the first one named in the list of defendants, the first one described in the complaint, the Black Marshall Oil Company, a corporation of Illinois. We say that corporation -- we will say to the District Court, this corporation is a necessary party. Why is it? Because if you read that prayer in the complaints, you will see that each one of these interveners and stockholders asks to be restored to his right as a stockholder of a corporation to be given back his stock, to be allowed to participate in the liquidating dividend of the corporation. And we say the corporation of course is a necessary party. They thought it was when they brought the suit. And how did it disappear? Because they appointed receivers for it. The receivers came in as party's plaintiff. They asked for the dismissal of the corporation and the corporation was dismissed. Now, we say that the Court of Appeals dismissed the receivers out of the case, said they have no standing to sue. It was -- it'd be inequitable to allow them to recover. Therefore, they are gone and back must come, the corporation. The corporation must be a party defendant. It cannot be a party plaintiff. And if it is, then we all go back to the District Court. We're not saying that anyone is going to be denied any of their rights to make any proof. They all go back to the state court and in the state court, they will discover the questions of state law which were erroneously decided by the Court of Appeals if you decide it correctly. And this of course is -- is an aftermath to my -- my brother.
Earl Warren: Was the corporation in existence when the complaint was filed?
Dean G. Acheson: The Corporation hadn't been dissolved but was within two years of being resolved. And under the law of Illinois, on application, it could be revived for litigating purposes and that action was done, Your Honor.
Hugo L. Black: In order -- just one more question but I'm not sure about one point. The complaint alleges facts which are supposed was their nature for arguments that there was a trust fund created and that there -- this trust fund is shown in the bill. Assuming that all the parties were, this is if they were (Inaudible) it seems to me that your argument rest on the basis that the complaint just does not state a cause of action in that respect.
Dean G. Acheson: No.
Hugo L. Black: (Voice Overlap) --And I assume if it did -- If it did show upon as they alleged and as they prayed for that they wouldn't have to be diversity, would be among others?
Dean G. Acheson: No, Your Honor. I think I've not made myself clear. We -- we do not question the fact that this complaint states a cause of action.
Hugo L. Black: On that phase of the complaint I'm talking about, whether they (Voice Overlap) --
Dean G. Acheson: That -- that phase --
Hugo L. Black: -- and the trust -- and the trust fund.
Dean G. Acheson: That phase, Your Honor, is -- is only a way of praying for relief.
Hugo L. Black: But its -- it's a way of charging the facts too. They charge that it was there. Now, I can understand that if it does not state a cause of action on that basis, that you could raise your question of diversity. But if it does state a cause of action, why would that not be enough. If it states a cause of action as to their being a trustee, I don't think it's maleficio, then -- assuming that's the fact, would there have to be diversity among other interveners?
Dean G. Acheson: Yes, -- yes, Mr. Justice Black.
Hugo L. Black: You think there would be?
Dean G. Acheson: This -- this has been the whole -- this is what I've been trying to -- to urge and that is that there is not a trust fund.
Hugo L. Black: I understand that.
Dean G. Acheson: This is a separate --
Hugo L. Black: But assuming that there is, assuming they are right in charging that there is. What would happen to your argument?
Dean G. Acheson: Your Honor, they do not charge that there is.
Hugo L. Black: Well, I suppose (Voice Overlap) --
Dean G. Acheson: The Black -- Mr. Black brought -- Mr. --
Hugo L. Black: I so read the complaint both as to the allegations in the trial, maybe I'm wrong with that. That's the only -- their problem.
Dean G. Acheson: I -- I think you are wrong, Mr. Justice Black.
Hugo L. Black: Well, we --
Dean G. Acheson: If --
Hugo L. Black: Let's us assume that's correct. What would you say then because I -- I look at it further, I just want -- assuming they are, do you still say that your position would be well taken?
Dean G. Acheson: Yes, I would say that our position would be well taken because I would say that it'd be perfectly obvious on the phase of the complaint that what they mean by a trust fund is a series of trust funds.
Hugo L. Black: And you would -- you'd -- you'd say, then it doesn't state a cause of action on that phase of the case.
Dean G. Acheson: No, it does -- does state a cause of action because each fellow --
Hugo L. Black: On that phase of the case --
Dean G. Acheson: -- states his own cause of action.
Hugo L. Black: On that phase of the case there, were they charged that there's a -- there been this fraud -- perpetrated that that made them, created to impress the trust on the fund that he had gotten and on the stock that he had gotten and that -- then they ask for a prayer on that basis.
Dean G. Acheson: Your Honor --
Hugo L. Black: Assuming if that is well-charged, then states a cause of action. What I'm trying to find out is, because I'm not (Inaudible) would you still say that your position is well taken?
Dean G. Acheson: Yes, I would Mr. Justice Black.
Hugo L. Black: Why?
Dean G. Acheson: Because it is inherit in the situation that there is not one fraud, the 20 frauds.
Hugo L. Black: Well I understand --
Dean G. Acheson: There are 20 people, he had separate people and each one of them says, I have been defrauded.
Hugo L. Black: That's right. You're still -- you are saying again that there could have been no trust fund, there aren't ex maleficio created.
Dean G. Acheson: No, no, I'm not saying that, Mr. Justice Black.
Hugo L. Black: None.
Dean G. Acheson: I'm saying that each one of these can claim that there is a trust fund created for him out of the proceeds of his stock.
Hugo L. Black: Well, that's -- that's your line.
Dean G. Acheson: But he has no interest in -- in the proceeds of the next man in stock. Each fellow is interested only in his own stock and if there's any trust fund created, it's a trust fund for each man out of the proceeds of the securities of each man.
Hugo L. Black: Well, assuming that they obtained in the end enough money or -- or -- show the money they've received from him through the cause will be an evidence that they own them, would that create -- make a difference?
Dean G. Acheson: Not in the slightest bit. Each one would be dealt with by himself. Here is a man who has 10 shares. That's all he has. He can't have any right in anything more than the proceeds of his 10 shares. Now, either Mr. Black can pay him that or he can't pay him that. He doesn't grow on somebody else's shares. If he draws on that -- the proceeds of those shares.
Hugo L. Black: Well, I understand that you have not raised the question as to the jurisdiction of the Court to try this case if it were real, genuine trust fund which was to be administered by the Court and divided up among them.
Dean G. Acheson: I'm not even challenging the jurisdiction of the Court to try it at all, Your Honor but --
Hugo L. Black: Well, I mean if I'm (Voice Overlap) --
Dean G. Acheson: But because there are some people --
Hugo L. Black: I don't think not well used, I'm talking about the, how to try it by reason of diversity?
Dean G. Acheson: If -- if there were -- there was no diversity in here at all, the Court would not have power to decide the case, no. Clearly, it would not. Now, I think that Your Honor perhaps asking me is this. Are you asking me -- suppose one person had diversity and everyone else did not, would the case then be properly in the federal court in regard to those who have no diversity? It clearly would not because there is no common fund, Your Honor.
Hugo L. Black: That's not what I meant to ask (Voice Overlap) --
Dean G. Acheson: Oh, wasn't that? I'm sorry.
Hugo L. Black: -- that way.
Speaker: Isn't -- isn't your point, if I understand it correctly, that the jurisdictional purposes is a distinction between a complaint or the recovery is sought in a common fund and a complaint that alleges a cause of action, the damage is based on the theory of impressive -- constructed trust.
Dean G. Acheson: A series of constructive trust.
Speaker: And that would have been?
Dean G. Acheson: Yes, Mr. Justice Harlan.


Warren E. Burger: -- arguments in number 76, Amalgamated Association against Lockridge. Mr. Groner, you may proceed whenever you’re ready.
Isaac N. Groner: Mr. Chief Justice and may it please the Court. In this case which is here on writ of certiorari to the Supreme Court of the State of Idaho, preemption is the issue. Whether the state court had jurisdiction over the action which respondent Wilson P. Lockridge filed against petitioner unions, or whether the state courts had no jurisdiction because Congress has regulated the union conduct involved in this case under the Labor Management Relations Act. For some years prior to 1959, respondent Lockridge was an interstate bus driver employed by the Greyhound Bus Company. Pursuant to the Check-off Clause in the collective bargaining contracts between Greyhound and the petitioner local division, Lockridge had been maintaining his union dues payments, and also, his employment with the Greyhound in as much as the collective-bargaining agreements provided that all employees shall remain members as a condition precedent to continued employment. The union constitution provided that where agreements with employing companies provide that members must be in continuous good financial standing, the member in arrears one month maybe suspended from membership and removed from employment in compliance with the terms of the agreement. In August 1959, Lockridge and some others voluntarily revoked their check-off arrangements. They voluntarily assumed the responsibility of maintaining their union dues payments timely to maintain their membership in the union and also to maintain their employment. In August 1959 and also in October 1959, the union in writing advised the -- Lockridge of the provisions to which I have adverted and pointed out that he had the responsibility to maintain these payments. Nevertheless, he permitted his payments to become delinquent and the union so advised Greyhound, and in November 1959, being delinquent in his dues for the month of October, the union advised Greyhound of the delinquency and Greyhound discharged Lockridge.
Warren E. Burger: How long after his delinquency arose for the October dues did the union terminate him?
Isaac N. Groner: The union, Your Honor, did not terminate him. The union advised the company -- the union advised the company on November 2nd, his delinquency having arisen on November 1st.
Warren E. Burger: When did they notify him that he was out of the union?
Isaac N. Groner: They --
Warren E. Burger: For non-payment of dues?
Isaac N. Groner: They had advised him, Your Honor, in advanced that he would be out of the union if he permitted his delinquency to be in arrears more than one month.
Warren E. Burger: Oh, what I’m trying to do that is how many hours or days was he delinquent when the acts fell?
Isaac N. Groner: He was delinquent --
Warren E. Burger: 24 hours, does it?
Isaac N. Groner: About 48 hours.
Warren E. Burger: 48 hours?
Isaac N. Groner: Yes, that is correct Your Honor. After having --
Warren E. Burger: Does the union uniformally act in that way on every dues -- non-payment of dues every case, or does this record show anything on that score?
Isaac N. Groner: The record indicates two things with respect to that Mr. Chief Justice. First of all that it acted uniformally with respect to everyone who had been given these notifications and were in this precise delinquency. There was only one other such member, an employee named Elmer J. Day. It also shows as a finding of fact that the union had suffered delinquencies -- had permitted other people who were in arrears a comparable length of time to remain in membership and to remain in employment. But there is nothing indicated that they had received the kind of notices which Messrs Lockridge and Day had received here. In any event, Lockridge did not file a charge with the National Labor Relations Board alleging either that he had not been treated like others in the same situation or making any other allegation of unfair labor practice under the federal Act. In September 1960, as a resident of Idaho, he instituted an action in the District Court for Boise, Idaho District Court for Boise against petitioner unions and originally also against Greyhound, naming Greyhound as a party defendant and including also a count specifically directed to the just cause provision of the collective-bargaining agreement and alleging that Greyhound had violated that. Prior to any judicial action on the original complaint, however, Lockridge filed an amended complaint which removed Greyhound as a party defendant and also removed the particular count which had been addressed to Greyhound in its action under the collective-bargaining contract. Basically in that amended complaint there were in essence three counts; One, tortuous interference with employment; two, violation of the contract between the union and the member and three, conspiracy all purporting to be stated under state law. The union’s filed a motion to dismiss, including among other things; the particular ground that the subject matter of Lockridge’s action was preempted by virtue of its regulation under the Labor Management Relations Act. The district judge granted that motion, relying in principle part upon this Court’s decision in the Garmon case, Lockridge appealed. In 1962, the Idaho Supreme Court reversed holding that it was confused by the preemption decisions of this Court and in particular purporting to see confusion between the decision of this Court in the Gonzales case and the decision of this Court in the Garmon case. The case was remanded for trial. Prior to trial, there was another amendment of the complaint. In all of these complaints and of course, in particular in the second amended complaint which was the basis for the trial, all that Lockridge sought was money damages. At no time did he request the relief of restoration to union membership. He had originally sought both compensatory damages and punitive damages, but in his second amended complaint, he excised the count which was addressed to punitive damages and he also cut out the prayer of a request for punitive damages. In a preliminary ruling prior to trial, the Idaho District Court ruled that there was no ambiguity in the documents involved. In essence, holding that the contract required that the employee remain a member, whereas the constitution required that members must be in good or the constitution referred to contracts which required that members must be in continuous good financial standing that court purporting to find that difference unambiguous and declining to permit the unions to file affidavits both from their officers and from Greyhound representatives which stated that no difference was intended that between the language and no difference was intended in the interpretation and application of the collective-bargaining agreement applicable here and other collective-bargaining agreements applicable to other drivers in the same bargaining unit which did have the continuously good financial standing language. The trial was devoted primarily to damages. The district judge in Idaho held again that he believed that the matter was preempted and that the union’ position in this respect had been strengthen by the decisions of this Court in Borden and in Perko. The 1962 decision of the Idaho Supreme Court was rendered prior to the decision of this Court -- decisions of this Court in Borden and in Perko. And indeed, the Idaho Supreme Court in 1962 relied upon the state Supreme Court decisions in Borden and in Perko which were of course reversed on preemption grounds by the decisions of the this Court. The Idaho district judge felt, however, that he was mandated to proceed by the Idaho Supreme Court decision, and he awarded damages in which with interest approximate $50,000.00. An appeal was taken by the unions on the ground of preemption. The decision below affirmed by a vote of 4 to 1 both the majority and the dissenting opinions confining themselves to the issue of preemption, and indeed almost entirely to a discussion of the decisions of this Court featuring Borden and Perko.
Warren E. Burger: Mr. Groner, my I ask you a question here, a general question? Do you accept the idea that’s been expressed by several Courts of Appeals, I’m not sure it’s ever been articulated here, that a union in relation to its members is a trusty, a fiduciary, has all the duties of a fiduciary towards its members?
Isaac N. Groner: Well, there’s no question that unions in general have a duty of fairly representing all those in the bargaining unit. If -- to that extent, I would answer your question in the affirmative Mr. Chief Justice.
Warren E. Burger: Well, I put it little further. You embrace within that fiduciary duty to the extent you accept the fiduciary idea of the concept that they have a duty of fair dealing to the point of protecting him and aiding him in every way?
Isaac N. Groner: No sir. No Your Honor.
Warren E. Burger: You mean he is an adversary?
Isaac N. Groner: In this case, he comported himself as one --
Warren E. Burger: 48 hours -- 48 hour -- on a 48-hour delinquency in his dues, he becomes an adversary instead of a beneficiary?
Isaac N. Groner: Well, there are other alternatives Your Honor between being an outright adversary and responding to your question that the union must defend him in every way. I certainly would not accept the proposition that the duty of fair representation is so broad. At least, where -- there isn’t presented all the factual reference which would indicate how broad you would like to extend it. With respect to this particular case Mr. Chief Justice, if your question is directed to it, the duty about which you inquire was never invoked by Lockridge. He had account which sought punitive damages and he excised that and even in that count, he did not purport to rely upon any duty of fair representation and the reason for that Mr. Chief Justice in our view is quite obvious. He wanted no part of any federal law. He wanted no part of any action that could possibly be thought to be based on Section 301, so as to give rise to a right of removal in the unions; a right of removal to the federal District Court which would be acquainted with the act to a Court of Appeals which has had cases under Section 8 (b) (2) of the National Labor Relations Act which are directly in point. The fiduciary duty of which Your Honor maybe thinking, if I may try to make it somewhat more precise, the duty of a union to advise the member when he is delinquent in his dues, and the extent to which he is delinquent in his dues is a duty which has been spelled out by the National Labor Relations Board in its decisions under Section 8 (b) (2), and it is precisely -- that is precisely the basis or one of the basis of our fundamental position that the judgment below must be reversed on preemption grounds for two different reasons. One is that Congress has occupied the field of this union activity.
Byron R. White: Let’s assume that all he asked for in his suit was restoration of his membership of the union, that’s his claim?
Isaac N. Groner: If that was all he asked for in the suit and if all the other circumstances indicated that the crux of the action was the membership relationship rather than the employment relationship, then the state courts would have had jurisdiction to adjudicate it.
Byron R. White: Sue just on the contract basis or to entertain whatever his action was?
Isaac N. Groner: No Your Honor, no.
Byron R. White: Given your some position would be that the state court could have entertained him?
Isaac N. Groner: Oh yes and could have granted the relief of restoration to union membership.
Byron R. White: But if he said I also want by the way not only restoration, but I would like some damages for my lost wages which I lost because I didn’t have my membership, now It’s wrongfully the fact -- that act let's that prayer in his complaint, is he awkward right there?
Isaac N. Groner: I do not think that there is a -- that I can answer your question directly Mr. Justice White because it would depend upon many other factors. It depends as this Court’s talked in Borden and Perko, upon decision as to what the crux of the action is, and that would depend upon what he sought in his action, what he said in his complaint as well perhaps upon other things.
Byron R. White: If he says I was wrongfully terminated from membership of the union and I want my membership back and I want damages for the lost wages?
Isaac N. Groner: The damages for lost wages, where the wages of course would relate to employment, a state court would have no jurisdiction to grant.
Byron R. White: In any circumstances?
Isaac N. Groner: Under any circumstances, yes Your Honor. The only issue would be whether the state court would have any jurisdiction in the premises if in the initial analysis to conclusion were reached, as it must be in this case in our view, that the nub of the action is the employment relationship, then, the state court would have no jurisdiction. But in any event, its jurisdiction would be limited to granting relief under the -- under that part of the action which did not impinge upon federal law, that part of the relief which the National Labor Relations Board could not get.
Byron R. White: And you give the same answer if he had already gone to the General Counsel and filed a complaint and the General Counsel rejected it, and then he said well I must get a hearing some place, I’m going to go to court. You would say you couldn’t go to court then either?
Isaac N. Groner: Yes Your Honor. I will say that he could not and that is this Court has made clear in its decisions that the action or inaction of the board is -- does not provide an exception to preemption principles. In this case of course, as Your Honor is aware, he did not go to the National Labor Relations Board. Also Your Honor, there must be an assumption of regularity with respect to the General Counsel. The General Counsel purportedly would issue -- presumably would issue a complaint if the facts which he submitted would indicate that there have been a violation of the Act. And under the facts as he states, there would have been a violation of Section 8 (b) (2) and Section 8 (b) (1) (A).
Byron R. White: Now (b) had alleged discriminatory conduct amounting to what he alleged was a breach the duty of fair representation, he could have stayed in the court?
Isaac N. Groner: If he had done so?
Byron R. White: Yes.
Isaac N. Groner: If he had done so, yes. He could have stayed in court, but he couldn’t not have stayed in the state court because that would have given rise to our right to remove and our right to appeal to the Ninth Circuit. And in our view that would have led to a far different consideration of the case, and it would have led to a far different result. It is precisely because of this -- these state courts are not acquainted with labor cases, have had not no experience with the Labor Relations Act that we find ourselves as petitioners here in our view. But in any event, he did not do that, and this was a deliberate election.
Byron R. White: Yes.
Thurgood Marshall: Oh Mr. Groner, what difference of punitive damages make, if any?
Isaac N. Groner: I’m sorry, I didn’t --
Thurgood Marshall: What difference does it make that he also asked for punitive damages, is that necessary at all in your case, is it?
Isaac N. Groner: No. He originally asked for it, but then withdrew it, and I cite that partly by way of the history of the case, but also by way of lending some color to what we say is a deliberate election, not to allege any breach of fiduciary duty, and there is no such issue in the case. He did not allege it. Indeed, he did not ask for punitive damages. The District Court found that petitioners acted out of an honest interpretation of what their legal rights were and the court below also found that this was an honest misunderstanding with respect to the legal documents involved and had been no discrimination Mr. Justice White in the invidious sense of deliberately in individual matter. Under the findings here, the Union’s acted in good faith, but the issue of good faith was never fairly litigated because he never alleged it and it was never tried.
Thurgood Marshall: Well, what was the basis for the amount of damages? He would not have worked that long, it's just back pay?
Isaac N. Groner: No, he would was. The Lockridge was discharged in November 2, 1959, so that by the time -- and then the case --
Thurgood Marshall: What I’m trying to get at that that’s the same thing he would have done if the NLRB had agreed to him and given him back wages?
Isaac N. Groner: Well, --
Thurgood Marshall: -- true are not.
Isaac N. Groner: It is the back pay, yes. But the back pay would not have been in such a large amount because he would have to file his charge within six months and presumably the board however slowly, it may grant in some cases would have dispose of this case prior to the 11 years which was elapse on its way to this Court?
Warren E. Burger: Mr. Groner, assume that it had moved over into the federal court pursuant to your efforts. Would the federal court have been obliged not withstanding the preemption doctrine or consistent with the preemption doctrine to apply basic rules of equity that were prevailing in the state where the problem originated?
Isaac N. Groner: Well, I don’t see how that could have been done. We could have removed Mr. Chief Justice only if the plaintiff had stated a complaint under federal law. The plaintiff is in-charge of the claim he states. If he had stated a claim -- only if he had stated a claim under federal law, could we have removed. If he had stated a claim under federal law, it would have been decided under federal law. It presumably would have been a Section 301 claim, and the federal law with respect to that is under many decisions of this Court, law that the judges pronounce as a matter of federal law which is made pursuant to Section 301. It is not based in any part upon the law of equity of a particular state.
Warren E. Burger: Do you thing the equitable rules would -- doctrines would have no application to the relations between the Union and its members? Is it controlled --
Isaac N. Groner: In some other -- I’m sorry?
Warren E. Burger: Is it controlled exclusively by the statute?
Isaac N. Groner: It is con -- in any lawsuit Your Honor, no. In some lawsuits for some purposes, the considerations which you advert to would be most relevant and indeed, decisive. In this lawsuit, under the allegations made in the complaint, under the meets and bounds of the cases drawn in the complaint in the trial and in the consideration by all parties and both courts, there is no room for such considerations. In any event Mr. Chief Justice, we have been discussing matters which are related more to the merits and to the issue of jurisdiction. In our view, all that we have here is an issue of a jurisdiction as to whether the state courts could exercise any jurisdiction under the decisions of this Court and in particular Borden and Perko, and under the prescriptions of the Congress which in Section 8 (b) (2) and (7) and some of the others have covered all cases involving Union conduct of requesting or obtaining an employee’s discharge by advising the employer that he has been delinquent in his dues. Congress has made all such activity, either protected or concerted. And therefore, Congress is occupied the field and therefore, Congress -- and therefore, what the Union conduct involved here is arguably either an unfair labor practice or protected activity, and --
Byron R. White: Mr. Groner, what the -- I suppose, it’s difficult to talk abstractly, but let’s assume that this matter had gone to the board and the board had decided that there was no unfairly for practice here? Now, is your position that therefore, the employee would have no remedy against the Union under his contract with the Union just because the board found that it didn’t amount -- whatever the Union didn't amount to an unfair labor practice?
Isaac N. Groner: Well, I don’t’ know as it would -- as it would be therefore. But with respect to the Union conduct directed to his employment relationship, yes, there would be no remedy. Congress has carved this out and put it beyond the state -- the state domain. Now, had he brought a suit solely to restore his union membership; that would have been a different matter if the crux of that action had been the membership relationship rather than the employment relationship.
Warren E. Burger: You mean that would be within the jurisdiction of the state court and not subject to preemption?
Isaac N. Groner: Under Borden and Perko Your Honor as we understand it, the text -- the test is what the crux of the action is, and if the crux of the action is the employment relationship, yes, the state court has jurisdiction.
Warren E. Burger: But if it’s membership in the Union, is that exclusively federal in your view?
Isaac N. Groner: No, Your Honor. If it solely and exclusively membership of the Union, that would be a matter over which the state court could exercise jurisdiction, if it involved the membership relationship.
Warren E. Burger: And why doesn’t the -- to pursue Justice White’s point, why doesn’t the suit for damages for wrongful termination of the membership, and therefore the employment fall in the same slot?
Isaac N. Groner: It does not Your Honor because with respect to the employment aspects of it, Congress has litigated and in the congressional litigation, Congress covered all such cases, and in covering all such cases, Congress provided that the National Labor Relations Act shall be the determining law and provided that the National Labor Relations Board shall be the tribunal. These cases are routinely handled by the National Labor Relations Board. There are many cases of alleged violation of Sections 8 (b) (2) and 8 (b) (1) (A). This is the way cases like this are handled. The only one other than this of which we are aware is the Day case where the Oregon Supreme Court held that it had no jurisdiction on the basis of preemption, and this Court denied the petition for certiorari. If there are no other questions, I would like to reserve whatever balance I have and perhaps even to request a minute or two more for rebuttal.
Warren E. Burger: Very well. Mr. Kilcullen?
John L. Kilcullen: Mr. Chief Justice and members of the Court. There’s no question that respondent Lockridge here sustained a substantial injury. He has had his case in court now for more than 10 years. He was out of work entirely for almost four years of those 10 years. In order to find another job, he had to move to a different part of the state and take a job at a much lower rate of pay than he had been earning with Greyhound. Not only has his earning level been reduced, he has also lost all of the benefits, retirement, medical coverage, burial benefits and other rights, he would have enjoyed if he had not been unlawfully suspended from union membership. This was all because he was two days late in paying $6.50 in Union dues.
Harry A. Blackmun: Mr. Kilcullen, let me ask you there because you are repeating what Mr. Groner said. Under the Union constitution, wasn’t he delinquent on the 15th of October, so that it was a half month plus two days?
John L. Kilcullen: That’s correct, Your Honor. Under the -- but the union’s right to suspend him from membership was exe -- or the union suspension of him from membership was taken on the basis that he was two days past the 30 days allowed under their contention. Actually, the union constitution said that a man may not be suspended from membership unless he is delinquent from dues, unless --
Harry A. Blackmun: In this case --
John L. Kilcullen: His dues are --
Harry A. Blackmun: -- is in the end of November?
John L. Kilcullen: His dues are in arrears, and where a member allows his arrears and dues finds some assessments to run into the second month before paying the same shall be barred from benefit.
Harry A. Blackmun: But then, he suspended at the end of the second month which would be November 30th?
John L. Kilcullen: That would be November 30th, yes sir. If Lockridge is denied a remedy for these -- for the wrongs he has sustained, there will be a grave in justice. He is a man of limited education. Without qualifications to do much else and drive a bus and he is a physical disability which limits his employment opportunities. Now, the union argues that the remedy given him by the state court cannot stand because he filed the wrong form of pleading. They say that if he filed a complaint asking only for restoration of his union membership, the case would have been within the jurisdiction of the state court as an internal union matter. His mistake they say was that he asked for damages for loss of his employment, and that this changed the whole focus of this case to one for interference with his employment relationship. The union does seeks to make the question of jurisdiction turn on the form of the pleadings rather than on the substance. This of course would take us back to the old common law -- rules of common law pleading with all the hair splitting distinctions between different forms of action, whereas under current practice, it’s the substance accounts rather than the form. The critical act which gave rise to this case was the suspension of respondent’s membership in the union. The loss of his job and loss of his income was a result of that act. The suit which he brought in the Idaho court was predicated on that act. The money damages he claimed were simply the measure of the injury he sustained because of that act. For purposes of comparison, let us take a situation in which an individual is unlawfully arrested and detained in jail and as a consequence, he looses his job. He brings suit against the person responsible for the unlawful arrest and he claims money damages for the loss of his employment. The wrongful act on which such a suit is based is the false arrest and not the resulting interference with his employment. If the false arrest had not taken place, there would not have been any interference with his employment or consequent damages to him for loss of earnings. So in the present case, the wrongful conduct upon which his suit is based is the unlawful suspension from union membership. Without this, there would be no cause of action. The issue to which the Idaho court addressed itself was the propriety of the union’s action in suspending respondent from membership, and it carefully reviewed and followed the decision of this Court in Gonzales in fashioning a remedy. It pointed out that under Idaho law, the union constitution constitutes a contract between the union and its members, and that the wrongful cancellation of respondent’s union membership was a breach of contract for which the union is answerable in the state courts. The trial judge stated in his memorandum opinion and this is found on appendix a -- appendix 55, “I do not have jurisdiction over his employer-employee relation in this relationship in this action. It is my opinion that at most, I can restore him to his union membership as of the date of his wrongful termination. In this, I am attempting to follow Gonzales as I see it.” The Idaho Supreme Court similarly concluded that the trial court had authority to correct the breach of contract by ordering respondent restored to membership, and that in line with Gonzales, it had authority to fill out the remedy by awarding damages for his loss of earnings. Petitioner's attempt to distinguish this case from Gonzales is really an exercise in semantics. The situation here is in all respects parallel to Gonzales. In that case, the employee brought suit in the California court claiming to have been wrongfully expelled from the union in violation of his rights under the union constitution, and he asked for damages for the resulting loss of his employment. The California court entered judgment ordering his reinstatement and awarded damages for the lost earnings. When the case was reviewed by this Court, the union presented the same preemption argument that the petitioner is now advancing. They asserted that the resulting termination of respondent’s employment involved discrimination in violation of Section 8 (b) (2) of the Taft-Hartley Act, and was therefore a matter within the exclusive jurisdiction of the labor board. This Court held that the National Labor Relations Act does not undertake to protect union members as their rights in their rights as members from arbitrary conduct by unions and union officers and therefore, the state court had the power to grant the remedy of reinstatement.
Warren E. Burger: Now, what were you citing there?
John L. Kilcullen: This is in Gonzales Mr. Chief Justice. The court held that the labor Act does not undertake to protect union members in their rights as members from arbitrary conduct by the union officers, and the state court therefore had jurisdiction. They went on -- the court went on to say that the state court had the power to fill out this remedy by an award of damages for lost of wages and suffering resulting from this breach of contract and pointed out “no radiation of the Taft-Hartley Act requires us to mutilate the comprehensive relief of equity in such a situation.” The facts in this case are so closely akin to those presented in Gonzales, it is most difficult to see how this case could be decided in any other manner. The Borden and Perko cases involved substantially different factual situations than the present case. One involved the hiring hall referral system under which the union refused to refer man to a job, and the other involved discharge of a foreman for assigning work to another trade. Neither of those cases involved wrongful suspension of union membership and neither affected the vitality of the Gonzales decision. It was not necessary in any event for the Idaho Supreme Court to rely exclusively on Gonzales in deciding the question of State versus NLRB jurisdiction. On the basis of the pleadings, the court could have found that respondent had stated a proper cause of action under Section 301 of the Taft-Hartley Act, which authorizes suits for violation of collective bargaining contracts between employers and unions. It was clear from the facts alleged in the complaint and found by the court that respondent’s discharge from his employment, at the time when he was still legally and rightfully a member of the union was a breach of the existing collective contract between the union and Greyhound. This Court has held in a series of cases, including Smith versus Evening News, 371 U.S., Humphrey versus Moore in 375 U.S., and Vaca versus Sipes in 386 U.S. that an employee discharged without cause may sue the employer or the union under Section 301 in either federal or state courts, not withstanding that the discharge also involves an unfair labor practice under the Taft-Hartley Act. In the Evening News case, an employee of a newspaper brought suit in a Michigan court asserting discriminatory action by his employer in violation of a collective bargaining agreement. The discrimination focused on employment during a strike, allowing non-union employees to report for work and paying them even though there was no work available, but denying a similar privilege to the plaintiff. The state courts refused to entertain the suit, holding that the discrimination was an unfair labor practice under -- within the exclusive jurisdiction of the NLRB under the Garmon rule. This Court reversed, holding that the action arose under Section 301 and was not preempted. The court said and I quote “in Lucas Flour as well as in Atkinson, the court expressly refused to apply the preemption doctrine of the Garmon case, and we likewise reject that doctrine here where the alleged conduct of the employer, not only arguably, but concededly is an unfair labor practice within the jurisdiction of the labor board. The authority of the board to deal with an unfair labor practice which also violates a collective-bargaining agreement is not displaced by Section 301, but it is not exclusive and does not destroy the jurisdiction of the courts in suits under 301.” In Vaca against Sipes, again, this Court noted that under the section, that is 301, “the courts have jurisdiction over suits to enforce collective-bargaining agreements, even though the conduct of the employer which is challenged as a breach of contract is also arguably an unfair labor practice within the jurisdiction of the labor board.
Potter Stewart: Now, it’s your -- it’s the theory of your brother on the other side, Mr. Groner as I understood him that had that kind of a lawsuit been brought in the state court, the defendant could have removed it to the federal court. Do you agree with that?
John L. Kilcullen: He could have Mr. Justice Stewart, but he could also have removed it as it was here. There was sufficient grounds for removal in the case as filed in the Idaho court under the pleadings as filed. There was a diversity of citizenship.
Potter Stewart: You say there was diversity?
John L. Kilcullen: Yes. There was diversity.
Potter Stewart: Well, I didn’t understand Mr. Groner to be relying on diversity, but rather on federal question.
John L. Kilcullen: I say --
Potter Stewart: Or well he didn’t. He was --
John L. Kilcullen: I say could have removed on whatever grounds was available and diversity was available to him to remove.
Potter Stewart: But do you think in the absence of diversity of citizenship, either a failure to fairly represent complaint on the one hand or this sort of a complaint on the other would stay the case, it was removable to the federal court by the defendant in the absence of diversity?
John L. Kilcullen: I think it would be removable, yes.
Potter Stewart: Both of them?
John L. Kilcullen: But I think the failure to remove is not -- did not prejudice the petitioner here, for the reason that petitioner had the opportunity to remove the case as it was.
Potter Stewart: Yes. Well, if it was removable?
John L. Kilcullen: Right. Now, the union argues --
Thurgood Marshall: The petitioner also complains that he didn’t have chance at the NLRB?
John L. Kilcullen: I’m sorry.
Thurgood Marshall: The petitioner also complains that that he didn’t have a chance to argue the case before the NLRB?
John L. Kilcullen: Well --
Thurgood Marshall: Not just the federal court.
John L. Kilcullen: They -- the respondent here did not file a charge with the labor board because his co-worker, Day, filed the charge with the labor board, and the labor board refused to entertain it. So it obviously would have been futile for him to file with the labor board. Now, we don’t know on what grounds the labor board refused to take the case or file -- to assume jurisdiction. It might very well be that the labor board viewed this as an internal, strictly and internal of the union matter, which was within the state court jurisdiction, and they just said we won’t handle it. That left him with no place to go. Now, the petitioners really can’t complain that they didn’t have any opportunity to appear before the labor board in this respect. The -- they had all of the opportunities here to present whatever defenses were available to establish that their conduct was not unlawful or improper or prejudicial or discriminatory.
Thurgood Marshall: But do you agree that this is strictly a matter between Lockridge and the Union?
John L. Kilcullen: This is the -- the source of this action, the thing that caused the injury was his suspension from the union, that was the first cause.
Thurgood Marshall: Or in the language of the Perko that was principally if not entirely on the union’s action with respect to the member’s efforts to obtain employment. That’s the language of Perko, is it not?
John L. Kilcullen: That’s correct. Now, Perko did not involve suspension from the union now.
Thurgood Marshall: Now I know, but --
John L. Kilcullen: But Perko was never suspended from the union. He simply couldn’t get a job because the union put him on some kind of a blacklist.
Thurgood Marshall: Well, isn’t that one of the basis for the holding of this Court that where it is entirely or at least principally a matter between the man -- the union, you first talk to NLRB?
John L. Kilcullen: No. I beg your pardon. It’s just I would say the reverse that where the principal point is between the man and a union, the labor board has no jurisdiction. This -- in Gonzales, this Court held very clearly that the Congress did not attempt to regulate the relationship between a member and his union in the Taft-Hartley Act. They left that for the states to regulate and this is exactly the posture --
Thurgood Marshall: Well, the language, you dispute is language that's quoted here in the Government’s brief on page 11 at the top of the page?
John L. Kilcullen: No, I don’t dispute that. This was --
Thurgood Marshall: This was just quoted to you?
John L. Kilcullen: This was a distinction that I believe this Court was making in Perko and Borden between Perko and Borden on the one hand and Gonzales on the other. That Perko and Borden dealt primarily with the employees, the member’s efforts to obtain employment, whereas Gonzales involved his unlawful suspension from the union that is the internal union relationship, and the consequences of that act. The consequences being his loss of employment, but the -- in other words, it’s a two step proposition. The first thing the union does is suspend him from membership and then subsequently or as a consequence, he looses his job.
Thurgood Marshall: But if the union gave him back his membership wouldn’t he have his job?
John L. Kilcullen: Yes, he would have.
Thurgood Marshall: So, union is in it at the beginning and that end of it?
John L. Kilcullen: That’s correct.
Thurgood Marshall: And the company is not in it at all?
John L. Kilcullen: Well, he could have sued the company under 301. The company did breach --
Thurgood Marshall: But he did sue the company and then dropped the charge?
John L. Kilcullen: Yes, because -- well Your Honor, that was before Smith versus Evening News, that was back in 1960, and this the court -- this Court had not at that point developed quite clearly the 301 concept. But -- and that was a reason why he dropped the suit against the company. But today, there’s no question that he could sustain the suit against a company under 301. Because this Court has said in Smith versus Evening News and Humphrey versus Moore and Vaca versus Sipes and the whole series of other cases that a man who is improperly discharged may sue the company or the union or both alleging breach of the collective-bargaining agreement, and he can maintain that suit in the state courts or the federal courts, not withstanding that the conduct complained of is also an unfair labor practice under the Taft-Hartley Act.
Thurgood Marshall: Regardless to that, when the case gets to us, it’s obvious in action of a complaint of an employee against his own labor union.
John L. Kilcullen: Yes sir.
Thurgood Marshall: Period, nothing more in it?
John L. Kilcullen: That’s the way this case is here, right. Now, he can sue the union under 301. He doesn’t have to join the employer and the complaint makes out a case for jurisdiction under 301. It alleges facts sufficient to support a breach of contract between the union and the company in Greyhound. Now in Humphrey versus Moore, the same question was presented. The plaintiff in that case had not alleged 301 as the jurisdictional basis for his suit and the union there argued as the union argues here that he didn’t because he didn’t specifically allege 301, he couldn’t raise its subsequently. But this Court held that it was not necessary that the two allege -- specifically alleged 301 that if the complaint stated a cause of action under 301, whether or not it involved an unfair labor practice under the National Labor Relations Act and said even if it is or arguable it maybe an unfair labor practice, the complaint here alleged that Moore’s discharge would violate the contract, and was therefore within the cognizance of state and federal courts; citing Smith versus Evening News. Now, the trial court here in this case found that there was a -- that the discharge of respondent was contrary to the terms of the contract between Greyhound and the Union; that’s on page A60 of the appendix. So, there was in effect that finding that there was a violation of the contract. The union had every opportunity to defend itself on that point, on that question and they cannot now complain that they didn’t have the chance to remove because they did have a chance to remove. In addition to the section -- to a Section 301 violation, the complaint in the present case also showed on it face a violation of the union’s duty of fair representation. The complaint alleged and the trial court found on page 60 -- appendix 61 that not withstanding the provisions of the union constitution, relative to timely payment of dues, it had been the custom and practice of the union over a period of many years to permit members to be in arrears of their dues without being suspended, even though the arrears exceeded 60 days. That respondent and his fellow worker Day were the only members ever suspended for this reason, and that the union’s purpose was to punish them for their refusal to continue their check-off authorization.
Hugo L. Black: For their refusal to what?
John L. Kilcullen: For their refusal to continue the check-off. They had revoked their check-offs and the union didn’t like it and they said we’re going to punish you and this is what the court found that this was a means by which they punished them. Now, this we say is an invidious violation of the rights of the employees. It’s discriminatory, it’s arbitrary obviously a breach of the duty of fair representation. The doctrine --
Warren E. Burger: You haven’t spoken at all Mr. Kilcullen, nor have you cited the cases as far as I can see. Three or four of them that have referred to the fiduciary duty of the union toward every one of its members, some authorities equating it to the duty of a conventional trustee toward the beneficiary of a trust?
John L. Kilcullen: This doctrine originated Mr. Chief Justice I believe with the Steel and Tunstall cases, and it has evolved through the years and has been most recently reaffirmed by this Court in a series of cases. Vaca versus Sipes being one, and the most recent being Sozack versus Omara, 397 U.S., a decision handed down this year by this Court. This -- I’m not sure that I understand the difference between the fiduciary concept and the duty of fair representation concept. I would say they are essentially the same.
Warren E. Burger: Well, I’d almost thought and the authorities who write about them seem to think that the fiduciary is much broader, much more pervasive than the duty of fair representation?
John L. Kilcullen: It could be. It maybe, but I believe that the duty of fair representation is a strong enough concept to cover this situation. It’s obvious, it’s quite clear from the facts as pleaded and as found that the union singled this man out, singled him and Day out. They let everybody else get in arrears of union dues and they didn’t do anything about it. In fact, there was testimony that the financial secretary of the union made it a practice to pay up the union dues of those who where in arrears. In this case, they fired the man or had him fired, even before he was notified. On the 2nd of November, they sent notice to him. He didn’t receive it until some time later, and they also the same day, obtained his discharge. Now, he immediately upon receipt of the notice, he tried to pay up his dues and he repeatedly proffered his dues several times and the union just refused to take it. He appealed to the union president and asked them to take the money and the union president wouldn’t take his money and because of that, because of $6.50, he has been deprived of a job for 10 years, which we think is an outrageous consequence of such a minor infraction of a union rule.
Speaker: What’s the reason for the long delay in the case getting up here?
John L. Kilcullen: Well -- it was Your Honor, the -- at the -- the first -- at the trial court, it was first dismissed on the preemption doctrine. The plaintiff had to appeal to the Supreme Court of Idaho. Supreme Court reinstated the case. It went back for trial, and after trial, it went back up to the Supreme Court of Idaho which sustained the trial court finding of damages, various delays in between, none of which to my knowledge were the fault of the respondent here.
Harry A. Blackmun: Mr. Kilcullen, does the record bear out what you just said that the union paid up the delinquency of other members?
John L. Kilcullen: There is testimony in the record to that effect Your Honor and I think there is some -- the court adverted to it.
Harry A. Blackmun: Why was this necessary if they were on the check-off system?
John L. Kilcullen: This was I guess before the check-off was instituted.
Harry A. Blackmun: Was that some time ago then?
John L. Kilcullen: That was -- well, prior to the time, this suit arose, yes Your Honor.
Harry A. Blackmun: Were this the only two who abandoned the check-off?
John L. Kilcullen: There were others, there were others. There was a movement apparently at that time to cancel the check-off. There was a petition being circulated and these two men signed it and they were the two that got caught because they neglected to pay the dues within the -- a time that the union felt that they were required to pay them, but again at the constitution of the union, in fact, gave them 60 days to pay. They couldn’t be suspended unless they were in arrears for 60 days. I have one final point I believe to make here. The -- well in summary, there are a number of exceptions to the -- I’m sorry, there is one further point. Section 83 of the union constitution, that appears on page 87 of the appendix, clearly points out that no member shall be allowed to injure the interest of a fellow member by undermining him in place, wages or in any other willful act by which the reputation or employment of any member maybe injured. Now, notwithstanding that provision of the constitution, the union clearly did interfere with his employment by unlawfully suspending him and violated the duty of fair representation. In summary, there are number of exceptions to the Garmon rule which would sustain jurisdiction of the state court in this case. The first is the exception stated in Garmon and Gonzales, “where the activity regulated is of merely peripheral concern to the Labor Management Act, namely, internal union matters, the second is jurisdiction under Section 301 to entertain a suit for breach of the collective-bargaining contract, and the third is a breach of the duty -- the union’s duty of fair representation.” The fact that the -- oh, my time is up.
Warren E. Burger: Mr. Kilcullen, thank you. Mr. Groner?
William J. Brennan, Jr.: Mr. Groner, may I ask you. The judgment of page 66 has both an awarded damages, $32,000.00 and an order for full restoration of union membership, and you ask I gather that the judgment be set aside in toto. I notice apparently while the plaintiff didn’t seek those remedies, that’s the way the paragraph starts. Yet, I gather Idaho law is that he is entitled to all relief forwarded by the evidence. Now, would preemption reach the direction for full restoration of union membership?
Isaac N. Groner: Yes, it would for a reason that I’ll come to, but we have alternative positions. We say yes, it covers the whole judgment, but if it does not cover the whole judgment, it leaves only that and strikes the --
William J. Brennan, Jr.: Because I thought you conceded in your argument in chief that an action for full restoration of union membership is a state law action between the member and the union which would be maintainable in the state court, wouldn’t it?
Isaac N. Groner: If that was all there was to it, yes Mr. Justice Brennan.
William J. Brennan, Jr.: But when you ask for that in the state court and also damages, then, the state court has the jurisdiction as to both remedies?
Isaac N. Groner: When you have a claim which involves the employment relationship and presumably, when you mentioned the word damages, you are I assume referring to damages measured by wages. If they’re measured by something else --
William J. Brennan, Jr.: So, this is damages for loss of earnings?
Isaac N. Groner: This is damages measured in this case, measured directly by wages without any question. Yes, then the court would have no jurisdiction to award that and we say Your Honor that the state court would have no jurisdiction in this case because under this Court’s decisions in Borden and Perko and under the ruling of Garmon that the fundamental thrust, the question at the outset is whether the crux of the case involves the employment relationship or the membership --
William J. Brennan, Jr.: Well I know, but I know your time is limited, but why is it this to say, the law of Idaho is that we disregard the pleadings. We look just at the evidence, and the evidence indicates that this is an action among other things for restoration of union membership, and therefore we going to enter an order of restoration of union membership. How can this Court do anything about that question of state law?
Isaac N. Groner: Because it is not a question of state law Mr. Justice Brennan, it is a question --
William J. Brennan, Jr.: You mean that no matter how you look at it, this is only a remedy for an action with -- the thrust of which was directed at the employment relationship and not at the membership --
Isaac N. Groner: Beyond any question. Mr. Kilcullen cannot have it both ways. He cannot advise the court that he deliberately took out the breach of contract point because he knew that was the law was at that time and then come here today and say oh, there was breach of contract in it. He took it out and took it out deliberately. He wanted to focus on state law. He wanted to focus on state law because he knew and has known all the time that he can come away with a judgment in this case of any kind only if this Court turns its back on Borden and Perko, only if this Court disregards the regulation of this very union conduct, every type of union conduct which involves requesting a discharge under a union security clause. He’s known that all the time and we submit to Your Honors that because Congress has occupied the field and because this certainly and not arguably is either an unfair labor practice or protected activity. The judgment in its entirety should be reversed, but if it is not to be reversed for whatever reason in its entirety, only the portion Mr. Justice Brennan that you refer to and maybe left standing and the aspect of damages which in this case beyond any doubt is based upon employment must be stricken. Are there any other questions?
Warren E. Burger: Thank you Mr. Groner. Thank you Mr. Kilcullen. The case is submitted.