Opinion ID: 439051
Heading Depth: 2
Heading Rank: 3

Heading: The Availability of Punitive Damages

Text: 39 The judge permitted the jury to award Quinn not only compensatory damages but punitive damages as well under both the LMRDA and the duty of fair representation. The defendants argue that the punitive damage awards are not authorized under either statutory cause of action. 40
41 In International Brotherhood of Electrical Workers v. Foust, 442 U.S. 42, 99 S.Ct. 2121, 60 L.Ed.2d 698 (1979), the Supreme Court held that damages may not be assessed against a union that breaches its duty of fair representation by failing properly to pursue a grievance. Id. at 52, 99 S.Ct. at 2128. The plaintiff would have us limit the holding of Foust to grievance handling and permit the award of punitive damages in this case, where the union breached its duty of fair representation by procuring Quinn's discharge because of his political activity within the union. The defendants argue that Foust announced a per se rule applicable to all fair representation suits and thus barred the jury's award of $7500 in punitive damages. We agree with the defendants. 42 Although the precise holding quoted above was made in the specific context of grievance handling, we do not believe this can be read as a limitation. First, Justice Blackmun, speaking for four members, concurred in the result only precisely because, in his view, [t]he Court now adopts a per se rule that a union's breach of its duty of fair representation can never render it liable for punitive damages, no matter how egregious its breach may be. Id. at 52-53, 99 S.Ct. at 2128 (Blackmun, J., concurring). The majority made no objection to this broad characterization of its decision. On the other hand, the Court specifically responded to the suggestion of the concurrence, id. at 59, 99 S.Ct. at 2131, that its holding might extend to suits under the LMRDA Bill of Rights, reserving that question for another day. See id. at 47 n. 9, 99 S.Ct. at 2125 n. 9. We believe that the majority's response to the concurring justices strengthens our view that the Court meant to formulate a blanket rule for DFR suits. This also appears to be the view of the Fifth Circuit, see Wells v. Southern Airways, Inc., 616 F.2d 107, 109 n. 1 (5th Cir.), cert. denied, 449 U.S. 862, 101 S.Ct. 166, 66 L.Ed.2d 78 (1980), and the Eighth Circuit, see Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1216 (8th Cir.), cert. denied, 454 U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981). 43 The reasoning of the Foust decision also supports a broad reading of its holding. The judicially-implied fair representation doctrine imposes on unions the duty to represent fairly the interests of all bargaining-unit members during the negotiation, administration, and enforcement of collective bargaining agreements. See Foust, 442 U.S. at 47, 99 S.Ct. at 2125. This duty was implied from the NLRA by the Supreme Court as a necessary corollary and counterbalance to the union's power under the NLRA of exclusive representation of all members of the bargaining unit. See Steele v. Louisville & Nashville Railroad Co., 323 U.S. 192, 65 S.Ct. 226, 89 L.Ed. 173 (1944). The Court determined in Foust that permitting punitive damage awards threatened to impair the financial stability of unions and unsettle the careful balance of individual and collective interests which [the Supreme] Court has previously articulated in the unfair representation area. 442 U.S. at 48, 99 S.Ct. at 2126. 44 It is true that Foust, like the bulk of DFR suits, concerned the union's handling of a grievance. Thus, the Court stated, [a]dditionally, the prospect of punitive damages in cases such as this could curtail the broad discretion ... afforded unions in handling grievances. Nevertheless, most of the Court's analysis applies to the union's task of balancing individual and collective interests at every stage of the collective bargaining process, which is the context in which the duty of fair representation operates. 45 The plaintiff argues that in this case, in which the union procured his discharge on the basis of his electoral opposition to the incumbent officers, there were no countervailing collective interests to balance against Quinn's individual interest. Of course, in any particular case of an egregious breach of the duty it will appear that no collective interest could possibly justify the union's action. But Foust clearly rejected the notion that punitive damages could be awarded because the union's conduct was especially culpable. Thus, if the union here were charged with maliciously refusing to process Quinn's meritorious grievances because of his intra-union political activities, Foust would clearly bar any award. The union's arguably greater culpability in this case does not take it out from under the broad reach of Foust. 46 Neither is the particular manner in which the union breached its duty to Quinn--procuring his discharge--a rational basis for carving an exception to the broad reach of Foust. It is only because the union's action against Quinn can be understood as an aspect of the union's representation of him in collective bargaining that the duty of fair representation comes into play. If the union's action here were so remote from the daily administration of the collective bargaining relationship involved in Foust that the reasoning of that case had no application, we doubt that it would be a fair representation suit at all. We think the analysis of Foust extends logically to all aspects of the union's representation of employees in the collective bargaining process, and thus bars punitive damages in all suits for breach of the union's duty to represent fairly all its members in collective bargaining. We therefore vacate the jury's award of $7500 in punitive damages against Local 31. 47
48 Neither the Supreme Court nor this circuit has addressed the propriety of punitive damage awards under the LMRDA, which involves different considerations than the propriety of such awards in DFR suits at issue in Foust. 442 U.S. at 47 n. 9, 99 S.Ct. at 2125 n. 9. Those circuits that have considered the question are unanimous in concluding that punitive damages may be awarded where the union or its officials have acted with malicious intent or at least reckless and wanton indifference to the plaintiff's rights. See, e.g., Vandeventer v. Local 513, International Union of Operating Engineers, 579 F.2d 1373, 1379-80 (8th Cir.), cert. denied, 439 U.S. 984, 99 S.Ct. 576, 58 L.Ed.2d 656 (1978) (at least where conduct malicious, i.e., prompted by ill will against plaintiff); Morrissey v. National Maritime Union, 544 F.2d 19, 25 (2d Cir.1976); Cooke v. Orange Belt District Council of Painters, 529 F.2d 815, 820 (9th Cir.1976); International Brotherhood of Boilermakers v. Braswell, 388 F.2d 193, 200 (5th Cir.), cert. denied, 391 U.S. 935, 88 S.Ct. 1848, 20 L.Ed.2d 854 (1968). But cf. McGraw v. United Association of Journeymen, 341 F.2d 705, 710 (6th Cir.1965) (affirming without discussion district court decision that only compensatory damages available under Sec. 102). With some qualifications, we agree. 49 Section 102 of the LMRDA, 29 U.S.C. Sec. 412, authorizes the award of such relief (including injunctions) as may be appropriate. 17 Nothing in the legislative history either expressly precludes or expressly authorizes the award of punitive damages. 18 In Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973), the Supreme Court considered the scope of relief authorized by section 102 in deciding whether the award of attorneys' fees was proper under that section. The Court read section 102, in light of its legislative history, as affording wide latitude to grant relief according to the necessities of the case. 412 U.S. at 13, 19 93 S.Ct. at 1950. Because it found that an attorneys' fee award in the case before it was within the traditional equitable powers of the court under the common benefit theory, and that the availability of counsel fees was necessary to the civil enforcement of the Bill of Rights by individual union members, the Court concluded that such fees were available under the LMRDA, in appropriate cases. The Supreme Court in Hall v. Cole thus gave a broad reading to section 102. In the absence of explicit congressional intent either to preclude or to permit the award of counsel fees, the Court looked to the traditional powers of equity and the policies underlying the statute, and found both to favor the award of counsel fees in appropriate cases. One court has found the court's decision in Hall v. Cole to be, at the least, not hostile to the award of punitive damages under section 102. See Morrissey v. National Maritime Union, 544 F.2d at 25. 50 Whether section 102 can be read as permitting the award of punitive damages involves somewhat different considerations, however, than were involved in Hall v. Cole. While the award of counsel fees falls squarely in the hands of the judge and is limited by objective measures, there is a danger that exhorbitant punitive damage awards by juries against unions and their officers would impair the ability of these institutions, which are often in chronically precarious financial health, to carry out their statutory duty to the workers they represent, most of whom are ordinarily innocent of any wrongdoing. Indeed, in the Supreme Court's later decision in IBEW v. Foust, 442 U.S. 42, 99 S.Ct. 2121, 60 L.Ed.2d 698 (1979), the danger of permitting punitive damage awards against unions was an important consideration underlying the creation of a per se rule precluding punitive damages in DFR suits. Id. at 50-51, 99 S.Ct. at 2126-2127. The Court seemed particularly concerned about permitting such potentially burdensome awards in cases arising under a judicially-implied cause of action enforcing a judicially-implied duty. The Court thus expressly reserved the very different question of [w]hether the explicit statutory language of 29 U.S.C. Secs. 411 and 412 and the accompanying legislative history authorize punitive damage awards. Id. at 47 n. 9, 99 S.Ct. at 2125 n. 9. We are thus reminded that, in determining what forms of relief are available in a suit expressly authorized by Congress, we are of course attempting to ascertain congressional intent and should look first to the language and legislative history of the provision. 20 ] 51 As we have noted, the open-ended language used in section 102 is not greatly elucidated by the very limited congressional debate over the provision. However, the intent of Congress can also be discerned through an examination of the broader policies underlying the Bill of Rights provisions. The Supreme Court gave a broad reading to the language of section 102 in Hall v. Cole; in the absence of specific evidence of congressional intent with respect to the availability of counsel fees, the court gave content to the provision by examining policy considerations which it found to favor the award of such fees in some cases. We turn therefore to a consideration of the impact of punitive damage awards on unions and on the policies underlying the Bill of Rights provisions of the LMRDA. We are guided in our analysis by the Supreme Court's discussions of policy considerations in both Hall v. Cole, concerning counsel fees in suits under the same section, and Foust, concerning punitive damages in duty of fair representation suits. 52 In Foust, the Court laid heavy emphasis on the tension inherent in the duty of fair representation between the interests of the individual bargaining unit member and the interests of the unit as a whole in collective bargaining. The Court recognized that the availability of punitive damages for a breach of the duty of fair representation could tip the balance too far in the direction of the interests of the individual and thus hamper the union's ability to represent effectively the collective interests of the employees. 442 U.S. at 51-52, 99 S.Ct. at 2127-2128. Cases arising under the LMRDA, however, more typically involve a conflict between the individual union member and the incumbent union leadership, whose interests are not necessarily consonant with the interests of the membership as a whole. Thus, while conflicts may certainly arise between the individual rights of union members under the LMRDA and the interests of the membership as a whole, the potential for this kind of conflict does not appear to us to be inherent in the very nature of the Bill of Rights provisions. Indeed, the basic harmony between these individual rights and the collective interests of the union membership underlies the Supreme Court's conclusion in Hall v. Cole that the award of counsel fees in the Bill of Rights case before it could be justified under the common benefit theory: 53 When a union member is disciplined for the exercise of any of the rights protected by Title I [of the LMRDA], the rights of all members of the union are threatened. And, by vindicating his own right, the successful litigant dispels the chill cast upon the rights of others. Indeed, to the extent that such lawsuits contribute to the preservation of union democracy, they frequently prove beneficial not only in the immediate impact of the results achieved but in their implications for the future conduct of the union's affairs. 54 412 U.S. at 8, 93 S.Ct. at 1948 (citation omitted). In view of the essentially convergent rather than competing nature of the individual rights protected by the LMRDA and the collective interests of the membership, there is less cause for the concern expressed in Foust that the availability of punitive damages in egregious cases would force unions to be overly solicitous of individual interests to the detriment of the membership as a whole. 55 However, the collective interests of the union membership, most of which is ordinarily innocent of wrongdoing, could be directly and severely harmed by the financial impact of a punitive damages award. The Supreme Court in Foust was thus also concerned that a punitive award that seriously unsettled a union's financial integrity, or even bankrupted the union, would severely prejudice the interests of the entire membership for the sake of a windfall recovery to the individual victim. 442 U.S. at 50-51, 99 S.Ct. at 2126-2127. Thus, while we perhaps need not worry that the future prospect of a punitive damage award will skew the union's efforts to strike a balance between competing individual and collective interests, we are concerned that the actual effect of a punitive damages award may be to cripple or destroy the union's ability to represent any of its members. Such a result would do little to further the congressional goal of fostering the development of vigorous and democratic labor organizations that are responsive to the needs of their members. 56 The Supreme Court in Hall v. Cole, 421 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702, considered a similar objection to the award of counsel fees in LMRDA suits: 57 Petitioners contend that the payment of counsel fees out of the union treasury might deplete union funds to such an extent as to impair the union's ability to operate as an effective collective bargaining agent and to endanger union stability. Although this consideration is undoubtedly an important one, it is relevant, not to the power of federal courts to award counsel fees generally, but rather, to the exercise of the District Court's discretion on a case-by-case basis. 58 Id. at 9 n. 13, 93 S.Ct. at 1948. Based on the same reasoning, we think that the potential impact of a punitive damage award on the union's viability and effectiveness is a very important consideration, but one which does not justify a per se rule prohibiting punitive awards in all section 102 suits. 59 Because the award of punitive damages, unlike the award of counsel fees, will often rest with a jury, careful jury instructions may be necessary to ensure that adequate consideration will be given on a case-by-case basis to the financial impact of a punitive award on the union. Such punishment should be imposed only in the most egregious cases, in which the conduct of the union or its officers was malicious--motivated by ill will or a purpose to harm the plaintiff's interests. 21 Furthermore, the amount of any such award must not be so great as to cripple the union financially and detract significantly from its ability to represent its members. 22 The trial judge should be prepared to reduce any award that fails to reflect sufficient consideration of these factors. 60 In the case before us, the jury was properly instructed that it could award punitive damages only if it found that the defendants had acted with malicious intent. 23 Although the jury was not explicitly instructed to consider the impact of any punitive award against Local 31 on the union's ability to represent its members, the defendants did present to the jury evidence of the apparently abysmal financial condition of Local 31. 24 Indeed, this evidence may account for the rather modest amount of the award, an amount that is not challenged in this court as excessive. 25 Under these circumstances, we uphold the award of $3000 in punitive damages against Local 31 for LMRDA violations. 61