Opinion ID: 2981468
Heading Depth: 2
Heading Rank: 3

Heading: SEIU Adjudication

Text: Plaintiffs appealed SEIU HCMI’s decisions to the SEIU International president. Plaintiffs were jointly represented by counsel, and they submitted two briefs and twelve exhibits in support of their appeal. Plaintiffs argued that they were terminated without cause, in violation of the Reorganization Agreement. According to Plaintiffs, SEIU HCMI failed to provide them fair notice that their purported misconduct would be grounds for termination. They argued that Pearson and Childs were simply carrying out Local 79’s ordinary course of business when they voted in favor of and acting pursuant to the Hampton Agreement. They also argued that Murdaugh was an employee protected by the Reorganization Agreement. For its part, SEIU HCMI argued that Pearson and Childs violated the Labor-Management and Reporting Disclosure Act (“LMRDA”), 29 U.S.C. §§ 401–531. Section 501(a) of the LMRDA requires an officer of a labor organization “to refrain from dealing with such organization as an adverse party or holding or acquiring any pecuniary or personal interest which conflicts with the interest of such organization.” 29 U.S.C. § 501(a). SEIU HCMI argued that Pearson violated § 501(a) by self-dealing—because the Hampton Agreement gave him protection greater than provided under the Reorganization Agreement—and violated § 501(a) by granting retirement benefits to Hampton upon the signing of the Hampton Agreement. SEIU HCMI argued that Childs violated the LMRDA because her act of signing the donation checks caused union funds to be spent in a manner that did not benefit union members. With respect to Murdaugh, SEIU HCMI argued that he was an independent contractor unprotected by the Reorganization Agreement’s “for cause” provision. 5 No. 10-1543
On April 30, 2009, the SEIU International president’s designee issued a lengthy written opinion ruling in favor of SEIU HCMI. The president, through his designee, first concluded that Pearson breached his fiduciary duty. The president agreed with the union that Pearson engaged in self-dealing by securing employment benefits for himself and other Local 79 employees and also by granting Hampton unauthorized retirement benefits. The president reasoned that Pearson had a fiduciary duty to protect union members’ funds and “had a heightened responsibility [because] he acted as Local 79’s representative in the negotiations over the former president’s retirement benefits.” The president faulted Pearson for not obtaining counsel for the union in negotiating with Hampton, who himself was represented by counsel in the negotiations. The president accepted Pearson’s contention that he played no role in negotiating Hampton’s benefits package, and he found that the Hampton Agreement’s terms were drafted by Hampton through his counsel. Nonetheless, the president concluded that Pearson’s apparent lack of involvement did not absolve him from fault in executing an agreement from which Local 79 did not benefit. Rather, according to the president, Pearson’s lack of involvement represented an abdication of his fiduciary responsibility. The president concluded that Pearson further abdicated his responsibility by failing to assure that all executive board members received notice of the June 27, 2007 meeting before the Hampton Agreement was adopted. 6 No. 10-1543
The president found that Childs was employed by Local 79, served as recording secretary for six years prior to her termination, and co-signed the union’s donation checks. The president recounted the recording secretary’s powers under the Local 79 constitution and noted that the constitution gave the financial secretary-treasurer, but not the recording secretary, the power to disburse union funds. According to the president, Childs did not dispute that the manner in which the donation checks were handled created a conflict of interest for Hampton. Rather, like Pearson, Childs argued that she acted as Hampton’s “rubber stamp,” merely did as she was told, and therefore did not knowingly breach her fiduciary duty. Alternatively, Childs argued that Hampton assigned her the duty of co-signing the checks, since the financial secretary-treasurer refused to sign the checks. Childs also contended that she was faultless because the union’s bank and accountant approved the donations, but the president disagreed. The president found these defenses unpersuasive. He noted that the Local 79 constitution gave the recording secretary no check-writing authority and that it contained no provision permitting her to carry out other duties assigned by the local president. The president concluded that Childs violated the LMRDA by acting outside the scope of her fiduciary duty. According to the president, Childs’ argument that she acted as Hampton’s “rubber stamp” simply magnified her error, because acting in such a manner demonstrated that she ignored her fiduciary responsibility to assure that the funds were properly expended. With respect to Childs’ argument that the bank and accountant ratified the donation checks, the president reasoned that ratification by any other party could not expand Childs’ authority. Finally, the president said that he did not need to decide whether the 7 No. 10-1543 financial secretary-treasurer was unavailable to co-sign the checks, because Childs had no authority to sign the checks even if the financial secretary-treasurer refused to do so.
Finally, the president noted that Murdaugh was employed at Local 79 through 1999, worked for the union as a consultant after that date, and was told his services were no longer needed on August 30, 2007. The president ruled that Murdaugh was an independent contractor and not a member of the Local 79 staff who was protected by the Reorganization Agreement. In support of this conclusion, the president reasoned that Murdaugh was paid a flat retainer fee from which no taxes were withheld, that an SEIU policy permitted union retirees to consult without losing their pensions, and that the National Labor Relations Board and the Michigan Unemployment Insurance Agency both determined that Murdaugh was a consultant. V. Plaintiffs’ Lawsuit Challenging the SEIU Adjudication Plaintiffs challenged the president’s decision by filing a breach of contract claim, which the parties agree is governed by § 301 of the LMRA.1 Plaintiffs alleged that SEIU HCMI had no cause to terminate them and, therefore, the terminations breached the Reorganization Agreement in violation of the LMRA. SEIU HCMI moved for summary judgment, arguing that SEIU International’s adjudication of Plaintiffs’ appeals was entitled to judicial deference and was fair and reasonable. The district court granted SEIU HCMI summary judgment in a brief opinion. The court 1 “Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . ., or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.” 29 U.S.C. § 185. 8 No. 10-1543 relied on cases from this circuit requiring a federal court to defer to a union’s interpretation of its governing document unless that interpretation is unfair or unreasonable. See Taylor v. Great Lakes Seamen’s Union, Local 5000, 701 F.2d 590 (6th Cir. 1983); Vestal v. Hoffa, 451 F.2d 706, 709 (6th Cir. 1971). The court reviewed the president’s opinion and concluded that the SEIU International adjudication was neither unreasonable nor unfair. Plaintiffs timely appealed.