Opinion ID: 2575806
Heading Depth: 2
Heading Rank: 1

Heading: causes of action supported by the facts stated in plaintiffs' complaint against union defendants

Text: {8} Plaintiffs argue that the above facts state a cause of action against Union Defendants for breach of the duty of fair representation and urge us to adopt a negligence standard to support such a cause of action. Union Defendants concede that they have a duty to fairly represent their union members. Union Defendants also concede in their reply brief that Plaintiffs have alleged sufficient facts in their complaint to support a cause of action for breach of the duty of fair representation. However, relying on Jones v. Int'l Union of Operating Engineers, 72 N.M. 322, 383 P.2d 571 (1963), Union Defendants contend that the duty of fair representation may only be breached if a union acts arbitrarily, fraudulently, or in bad faith. {9} In Jones, the employer, Continental Oil Company, fired Jones for refusing to sign a statement acknowledging he had a preexisting eye injury that limited his ability to work. Id. at 324, 383 P.2d at 572. Jones sued Continental for wrongful termination. He also sued his union for arbitrarily, fraudulently, and in bad faith breaching its trust obligations as his exclusive bargaining agent by refusing to demand that his termination be submitted to arbitration. Id. The district court dismissed his lawsuit under Rule 12(B)(6) for failure to state a cause of action. Id. On appeal, we reversed the district court and held that Jones stated a cause of action against his union because labor organizations owe their members a duty of fair representation. Id. at 330, 332, 383 P.2d at 576, 578. We explained that the duty of fair representation extends beyond the bargaining table to the day-to-day adjustment of working rules and the protection of employee's rights secured by the contract. Id. at 330, 383 P.2d at 576. Despite explaining that a union's responsibilities extend to the protection of employees' rights, we cautioned against unrestrained interference with a union's decision whether to pursue the arbitration of an employee's grievance: The union has great discretion in handling the claims of its members, and in determining whether there is merit to such claim which warrants the union's pressing the claim through all of the grievance procedures, including arbitration, and the courts will interfere with the union's decision not to present an employee's grievance only in extreme cases. Id. at 331, 383 P.2d at 577. {10} In Jones, we also cited cases and legal scholars for the legal premise that a union is liable to a member for its arbitrary or bad faith action in representing or failing to represent a member against his or her employer. Id. Persuaded by the authority we cited, we held Jones had stated a cause of action when he pled that the union had arbitrarily, in bad faith, and in violation of its trust refused to press Jones's grievance to arbitration. Id. at 331-32, 383 P.2d at 577. In this case, Plaintiffs suggest that our holding in Jones was limited to the pleadings in that case and invite us to recognize that a cause of action for breach of the duty of fair representation may be sustained on facts which demonstrate negligent representation. We decline Plaintiffs' invitation. {11} We continue to believe that a court should only interfere with a union's decision not to present an employee's grievance in extreme cases. Expanding a cause of action for breach of fair representation to include negligent representation would exceed the bounds of caution we expressed in Jones. Moreover, requiring arbitrary, fraudulent or bad faith conduct to prove a breach of the duty of fair representation is consistent with United States Supreme Court precedent. See Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967). {12} In Vaca, the employee was terminated from his employment because of high blood pressure and poor health. Id. at 174-75, 87 S.Ct. 903. He sued his employer for wrongful termination and the union for refusing to submit his grievance to arbitration. Id. at 173, 87 S.Ct. 903. In examining whether the employee had a viable cause of action against the union, the United States Supreme Court recognized that a union's duty of fair representation was a well established duty stemming from federal laws like the Railway Labor Act and the National Labor Relations Act. Id. at 177, 87 S.Ct. 903. The Supreme Court went on to define the duty as a statutory obligation to serve the interests of all members [of a union] without hostility or discrimination toward any, to exercise... discretion with complete good faith and honesty, and to avoid arbitrary conduct. Id. The duty of fair representation was considered by the Supreme Court to be a bulwark to prevent arbitrary union conduct against individuals stripped of traditional forms of redress by the provisions of federal labor law. Id. at 182, 87 S.Ct. 903. {13} Nevertheless, the Supreme Court recognized that the federal collective bargaining system of necessity subordinates the interests of an individual employee to the collective interests of all employees in a bargaining unit. Id. Therefore, [a] breach of the statutory duty of fair representation occurs only when a union's conduct toward a member of the collective bargaining unit is arbitrary, discriminatory, or in bad faith. Id. at 190, 87 S.Ct. 903. With respect to the employee's specific claims that the union was obligated to take his grievance to arbitration, the Supreme Court held that a union member does not have an absolute right to have his [or her] grievance taken to arbitration. Id. at 191, 87 S.Ct. 903. Rather, a union does not breach its duty of fair representation merely by settling an employee's grievance short of arbitration; the union's refusal or failure to take the grievance to arbitration has to be arbitrary, discriminatory or in bad faith. Id. at 190, 192, 87 S.Ct. 903. {14} Since Vaca, the United States Supreme Court has reiterated its holding that a union breaches its duty of fair representation only when its conduct is arbitrary, discriminatory, or in bad faith. United Steelworkers of Am., 495 U.S. 362, 372, 110 S.Ct. 1904, 109 L.Ed.2d 362 (1990); see also Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 571, 96 S.Ct. 1048, 47 L.Ed.2d 231 (1976) (indicating that it would be injustice of the grossest sort to let erroneous arbitration decisions stand even though the union's representation had been dishonest, in bad faith, or discriminatory). {15} Because we hold that the breach of duty of fair representation requires a showing of arbitrary, fraudulent, or bad faith conduct, Plaintiffs' cause of action based on simple negligence is dismissed. The factual allegations in the complaint are sufficient to state a cause of action for arbitrary, fraudulent, or bad faith breach of the duty of fair representation.
{16} The Court of Appeals held that unions such as Defendants owe a fiduciary duty to their union members such as Plaintiffs to represent those members fairly. Plaintiffs have adequately stated a cause of action and should be able to proceed with it. Callahan, 2005-NMCA-011, ¶ 23. The Court of Appeals also wrote in its conclusion that Plaintiffs adequately stated a cause of action in that unions owe a fiduciary duty to their members to represent them fairly. Id. ¶ 30. Plaintiffs have interpreted this language as permitting a cause of action for breach of fiduciary duty. Union Defendants argue that the factual allegations in the complaint cannot support a cause of action for breach of fiduciary duty since Plaintiffs do not allege a breach of fiduciary duty as defined in 29 U.S.C. § 501 (2000). {17} We do not interpret the Court of Appeals opinion to create a cause of action for breach of fiduciary duty. Rather, we interpret the opinion as relying on our language in Jones to explain why Plaintiffs state a cause of action for breach of the duty of fair representation. In Jones, we stated that collective bargaining agreements generally provide that grievance procedures are union controlled and that the individual employee is to be represented by the union under its fiduciary capacity as the bargaining agent. Jones, 72 N.M. at 329, 383 P.2d at 576 (emphasis added). We also quoted the following passage from a law review article: Unless a contrary intention is manifest, the employer's obligations under a collective bargaining agreement which contains a grievance procedure controlled by the union shall be deemed to run solely to the union as the bargaining representative, to be administered by the union in accordance with its fiduciary duties to employees in the bargaining unit. The representative can enforce the claim. It can make reasonable, binding compromises. It is liable for breaches of trust in a suit by the employee beneficiaries. Id. at 329, 383 P.2d at 576 (emphasis added) ( quoting Archibald Cox, Rights Under a Labor Agreement, 69 Harv. L.Rev. 601, 619 (1956)). Although we employed the phrases fiduciary capacity and fiduciary duties in the above quotations, we were referring to a union's duty to represent union members under a collective bargaining agreement. The intent in using such language was and remains an explanation as to why we recognize a cause of action by a union member against the union for breach of the duty of fair representation. We have explained the proof necessary to establish a breach of the duty but do not label the cause of action as one for breach of fiduciary duty. When the complaint arises from the union's representation of the employee in a grievance proceeding, the cause of action is for breach of the duty of fair representation. [3] {18} Plaintiffs rely on an American Law Reports annotation and two Pennsylvania cases in support of their argument that Union Defendants owed them a fiduciary duty relating to their employment grievance. However, our review of these authorities reveals that the authorities deal only with a union's duty of fair representation. See Jerald J. Director, Annotation, Union's Liability in Damages for Refusal or Failure to Process Employee Grievance, 34 A.L.R.3d 884, 896 (1970) (stating that a number of courts have recognized or applied a duty often arising out of the fact that the union is the employee's statutory agent, or out of a general fiduciary obligation, to fairly represent its members and other employees in the bargaining unit (Emphasis added and footnotes omitted)); Falsetti v. Local Union No.2026, 400 Pa. 145, 161 A.2d 882, 895 (1960) (In entering into this [collective bargaining] Agreement, the Union has assumed the role of trustee for the rights of its members and other employees in the bargaining unit. The employees, on the other hand, have become beneficiaries of fiduciary obligations owed by the Union. As a result, the Union bears a heavy duty of fair representation to all those within the shelter of its protection. (Emphasis added.)); Rutledge v. Se. Pa. Transp. Auth., 52 Pa.Cmwlth. 308, 415 A.2d 982, 984 (1980) (describing a union's failure to pursue the final stages of grievance procedures under a collective bargaining agreement as a breach of the fiduciary duty of fair representation), overruled on other grounds by Fouts v. Allegheny County, 64 Pa.Cmwlth. 441, 440 A.2d 698 (1982). Since Plaintiffs do not allege any financial impropriety on the part of Union Defendants, and since Plaintiffs' claims are encompassed by their claim for breach of the duty of fair representation, we hold that Plaintiffs did not state a claim for breach of a fiduciary duty in this case.
{19} The Court of Appeals held that Plaintiffs stated a claim for breach of a collective bargaining agreement as third-party beneficiaries. Callahan, 2005-NMCA-011, ¶ 25. As the Court of Appeals stated, [a] collective bargaining agreement is a contract between a labor organization and the employer. Id. In this case, TVI and Union Defendants entered into a collective bargaining agreement. Plaintiffs were not signatories to that contract. However, Plaintiffs allege that they may state a cause of action against Union Defendants for breach of the collective bargaining agreement as third-party beneficiaries. {20} A third-party may have an enforceable right against an actual party to a contract if the third-party is a beneficiary of the contract. Fleet Mortgage Corp. v. Schuster, 112 N.M. 48, 49, 811 P.2d 81, 82 (1991). A third-party is a beneficiary if the actual parties to the contract intended to benefit the third-party. Id. at 49-50, 811 P.2d at 82-83; Leyba v. Whitley, 120 N.M. 768, 773, 907 P.2d 172, 177 (1995). The intent to benefit the third-party `must appear either from the contract itself or from some evidence that the person claiming to be a third party beneficiary is an intended beneficiary.' Fleet Mortgage, 112 N.M. at 50, 811 P.2d at 83 ( quoting Valdez v. Cillessen & Son, Inc., 105 N.M. 575, 581, 734 P.2d 1258, 1264 (1987)). As TVI and Union Defendants entered into a collective bargaining agreement in accordance with PEBA I, TVI and Union Defendants clearly intended to benefit Plaintiffs, as public employees. {21} However, for Plaintiffs to have an enforceable right as third-party beneficiaries against the Union, at the very least the employer must have an enforceable right as promisee. Rawson, 495 U.S. at 375, 110 S.Ct. 1904. Plaintiffs argue that they should be allowed to seek damages for breach of the collective bargaining agreement because TVI promised that it would not terminate their employment unfairly or unjustly and Unions indirectly through the CBA ... promised that they would safeguard Members' rights by challenging their unfair or unjust terminations through arbitration. In order to state a claim, instead of relying on the general notion that TVI and Union Defendants entered into a collective bargaining agreement that pertains to Plaintiffs' employment, Plaintiffs would need to assert a promise that Union Defendants made to TVI and subsequently broke. Plaintiffs have not directed this Court to any such promise or to duties that Union Defendants owed to TVI, and thus also owed to Plaintiffs as third-party beneficiaries of the Collective Bargaining Agreement. Therefore, we find that Plaintiffs did not state a claim for breach of the Collective Bargaining Agreement as third-party beneficiaries.
{22} While we do not recognize breach of an implied covenant of good faith and fair dealing as a cause of action in New Mexico in at-will employment relationships, Melnick v. State Farm Mut. Auto. Ins. Co., 106 N.M. 726, 730, 749 P.2d 1105, 1109 (1988), we have recognized breach of an implied covenant of good faith and fair dealing in employment arrangements that are not at-will. Bourgeous v. Horizon Healthcare Corp., 117 N.M. 434, 439, 872 P.2d 852, 857 (1994). Bourgeous dealt with a lawsuit brought by the non-union director of nursing at a nursing home against her employer for breach of contract and breach of implied covenant of good faith and fair dealing stemming from wrongful termination. Id. at 435, 872 P.2d at 853. In this case, we are faced with a situation where Plaintiffs are attempting to sue Union Defendants for breach of the implied covenant of good faith and fair dealing as third-party beneficiaries to a collective bargaining agreement. We conclude Plaintiffs' claims for breach of implied covenant are subsumed within their claims for breach of the duty of fair representation.