Opinion ID: 1263597
Heading Depth: 2
Heading Rank: 1

Heading: The Labor-Management and Reporting Disclosure Act of 1959

Text: In 1959, Congress passed the LMRDA, also known as the Landrum-Griffin Act, Pub.L. No. 86-257, 73 Stat. 519 (codified as amended at 29 U.S.C. § 401 et seq. ), in response to growing concerns over corruption, violence, and racketeering within the leadership of labor organizations across the country, see Hood v. Journeymen Barbers, Hairdressers, Cosmetologists & Proprietors Int'l Union, 454 F.2d 1347, 1354 (7th Cir.1972); Phillips v. Osborne, 403 F.2d 826, 828 (9th Cir.1968). A year earlier, a congressional committee known as the Select Committee on Improper Activities in the Labor Management Field released a report, popularly referred to as the McClellan Committee Report, detailing these problems. See S.Rep. No. 85-1417 (1958); see also Phillips, 403 F.2d at 828. This report served as the catalyst that prompted Congress to promulgate the LMRDA. See Hood, 454 F.2d at 1354 ([Section 501] was a direct and far-reaching response to the mischief exposed and dramatized by the McClellan Committee. That mischief was the misuse of union funds and property by union officials in its every manifestation.). This case focuses on the first two subsections of § 501 of the Act. Subsection (a) imposes many fiduciary duties on a labor organization's officers, agents, shop stewards, and other representatives. [1] 29 U.S.C. § 501(a). [2] Specifically, the Act requires those individuals, all of whom occupy positions of trust in relation to such organization and its members as a group, to hold and manage the union's money for the sole benefit of the organization, to refrain from self-dealing, and to remain loyal to the organization. Id. The statute makes it clear that these duties inure to the benefit of the labor organization and the people it represents as a body, not to the members as individuals. Id. The duty of loyalty is at the forefront of this case. The Act states that a covered individual shall refrain from dealing with [the] organization as an adverse party or in behalf of an adverse party in any matter connected with his duties and from holding or acquiring any pecuniary or personal interest which conflicts with the interests of such organization. Id. If a union officer engages in such conduct, the Act requires him to account to the organization for any resulting profits he received. Id. If an officer commits violations of the fiduciary duties set forth in subsection (a), subsection (b) creates a federal cause of action for individual union members to sue and recover damages ... for the benefit of the labor organization.  Id. § 501(b) (emphasis added). [3] Because these member suits serve to benefit the union, they are derivative, much like shareholder derivative suits brought on behalf of corporations. See Hoffman v. Kramer, 362 F.3d 308, 317 n. 4 (5th Cir. 2004); Chathas v. Local 134 IBEW, 233 F.3d 508, 514 (7th Cir.2000); O'HarFed. Appx.a v. Teamsters Union Local No. 856, 151 F.3d 1152, 1161 (9th Cir.1998). As with shareholder derivative suits, the Act permits a union member to file such a suit only if he first takes prescribed steps. See Int'l Union of Elec., Elec., Salaried, Mach. & Furniture Workers v. Statham, 97 F.3d 1416, 1419 (11th Cir.1996) (comparing the prerequisites for claims brought under § 501(b) to those required for shareholder derivative suits). First, the union member must request, and the union must refuse, that the union take appropriate action to censure its own officer. Hoffman, 362 F.3d at 313-14; see also 29 U.S.C. § 501(b). Second, if the union refuses to take action, the union member must then show good cause for the suit and receive the court's permission to bring the action. Hoffman, 362 F.3d at 314; see also 29 U.S.C. § 501(b). This allows the court to assess the member's claim and ensure that the member seeks the type of remedy that would ultimately benefit the union. See Hoffman, 362 F.3d at 319. The statute, therefore, openly declares that union members may sue in federal court for violations of the duties that it establishes. The Act is silent, however, on whether it creates a similar federal cause of action for unions. As we discuss below, in this context such a cause of action is a prerequisite for a union to proceed in federal court.