Opinion ID: 769857
Heading Depth: 2
Heading Rank: 1

Heading: Examination of Union Financial Records

Text: 6 The Union presents a series of arguments asserting that the district court erred in finding that the Union violated Section 431 of the LMRDA by refusing Kinslow access to the Union's financial records. To understand the Union's arguments, a little background concerning the LMRDA is necessary. 7 After determining that some union leaders were running their organizations primarily for their own benefit, Congress enacted the Labor Management Reporting and Disclosure Act of 1959, in part to curb embezzlement and other unlawful activities. Finnegan v. Leu, 456 U.S. 431, 434 (1982); Mallick v. International Bhd. of Elec. Workers, 749 F.2d 771, 776 (D.C. Cir. 1984). Among other things, the LMRDA requires unions to file annual financial reports with the Secretary of Labor--known as LM-2 reports--detailing the union's assets, liabilities, and disbursements. 29 U.S.C. sec. 431(b). Because union members are often in the best position to discover union corruption and have a vested interest in honest union leaders, the Act also requires unions to make available to their members those records which purportedly corroborate the LM-2 reports. 29 U.S.C. sec. 431(c); Conley v. United Steelworkers of Am., Local Union No. 1014, 549 F.2d 1122, 1123 (7th Cir. 1977). The provision is designed to make full information related to the financial affairs of unions available to members in order that they would be 'strengthened in their efforts to rid themselves of untrustworthy or corrupt officers.' Conley, 549 F.2d at 1124 (quoting Antal v. District 5, United Mine Workers of Am., 451 F.2d 1187, 1189 (3d Cir. 1971)). But access to these reports is not unfettered. Believing that some union members might harass union officials with repeated requests for documents, the LMRDA only requires the production of financial records when the request is based on good cause. Specifically, the LMRDA states 8 Every labor organization required to submit a report under this subchapter shall make available the information required to be contained in such report to all of its members, and every such labor organization and its officers shall be under a duty . . . to permit such member for just cause to examine any books, records, and accounts necessary to verify such report. 9 29 U.S.C. sec. 431(c) (emphasis added). Thus, in pursuing judicial enforcement of this right, the plaintiff has the burden of showing that he has just cause for seeking the information and that his request is not simply based on idle curiosity. Mallick, 749 F.2d at 784. 10 In attacking the district court's findings on this claim, the Union first argues that Kinslow had no just cause to see the Union's financial records. Many courts have noted that the standard for determining whether there was just cause is necessarily minimal. Just cause need not be shown beyond a reasonable doubt, nor by a preponderance of the evidence. It need not be enough to convince a reasonable man that some wrong has been done . . . . Fruit and Vegetable Packers and Warehousemen Local 760 v. Morley, 378 F.2d 738, 744 (9th Cir. 1967); see Landry v. Sabine Indep. Seamen's Ass'n, 623 F.2d 347, 349 (5th Cir. 1980). Indeed, a union member need not even suspect an impropriety, although a reasonably-based suspicion would certainly constitute just cause. The just cause requirement simply entails a showing that the union member had some reasonable basis to question the accuracy of the LM-2 or the documents on which it was based, or that information in the LM-2 has inspired reasonable questions about the way union funds were handled. Mallick, 749 F.2d at 781 (Typically, union members will be interested in looking at underlying records precisely because they believe the LM-2 reports are accurate, and raise questions about the handling of union funds.). 2 11 In this case, at the time Kinslow initially requested the records, Briscoe and Bell had already been indicted for embezzlement and for issuing improper loans with union funds. The existence of the indictment indicates that an impartial grand jury believed that crimes relating to union disbursement of funds probably occurred. Clearly the indictment gave Kinslow a rational basis for his suspicions and a good reason to inspect the Union's financial records. Because just cause under the LMRDA requires less than a reasonable suspicion of wrongdoing, and an indictment's indication of probable cause easily surpasses the requisite showing, an indictment for financial improprieties within the Union certainly satisfies the just cause requirement. Only a criminal conviction for embezzlement, which requires proof beyond a reasonable doubt, could provide a stronger basis for good cause. Incidentally, even after Briscoe was convicted and Bell pleaded guilty, the Union continued to refuse to provide Kinslow with the requested documents. Because either the indictment or the convictions would instill in any reasonable person a level of skepticism surpassing reasonable suspicion, the Union's argument that Kinslow lacked just cause is patently frivolous. 12 Its next argument isn't much better. The Union contends that it had no duty to turn over the financial records to Kinslow because at the time he requested the documents he didn't state his reason for seeking them. Notably, the text of Section 431 seems to require the plaintiff to show at trial that he had good cause to examine the books. It doesn't explicitly require that the union member inform the union of the reasonable basis for his inquiry. The notice of reasons requirement to which the Union points is a judicial addition which apparently is based on a hope that once the union learns of the member's good cause, it will comply with its duty to turn over documents without requiring the member to resort to litigation. Morley, 378 F.2d at 743. This reasoning may have some logic to it, but it also has obvious limitations. It seems likely that corrupt union officials would be more reluctant to produce incriminating documents once they know that suspicion is converging on them. At that point, they have little to gain by handing over incriminating documents, and much to lose, specifically because they know that there is good cause for suspicion. Thus, contrary to the rationale underlying this rule, notice of good cause might make unions less inclined to cooperate. 13 We also note that in Morley, the case from which this requirement originated, the Ninth Circuit acknowledged that there is no specific statutory requirement of prior notice, and whatever right there was to notice was waived in that case. Furthermore, the D.C. Circuit case cited by Morley in support of the existence of this notice requirement in fact never adopted such a rule. See International Bhd. of Teamsters, Chauffeurs, Warehousemen and Helpers of Am. v. Wirtz, 346 F.2d 827, 832 (D.C. Cir. 1965) (assuming without deciding that the member must give notice to the Union of his just cause at the time the document request is made). Although we too previously derived from legislative history the assumption that this requirement is legitimate, see Conley, 549 F.2d at 1124, it seems that even if the rationale underlying the policy were sound, the desire to encourage the settlement of the claim without litigation is hardly a sufficient basis for whittling away a union member's statutory rights. This is especially so when we consider that the notice prerequisite cuts against the statute's goal of permitting timely access to union financial records in order to prevent corruption. But we need not further address this issue today because even those courts that have added this condition recognize three separate exceptions, any one of which is applicable here. Specifically, a union member seeking union financial records need not inform the union of his basis for suspecting financial improprieties when the basis for his suspicions should be known to the union, when the union waives this notice requirement by failing to ask for his reasons, or when a reasonable union member would believe that providing such notice would be futile. Morley, 378 F.2d at 743; cf., Bagsby v. Lewis Bros. Inc. of Tenn., 820 F.2d 799, 805 (6th Cir. 1987) (Ryan, J., concurring); Retana v. Apartment, Motel, Hotel and Elevator Operators Union, Local No. 14, AFL-CIO, 453 F.2d 1018, 1027 (9th Cir. 1972). 14 Here, Briscoe and Bell's indictment for embezzlement was well known among the union leadership, and so Kinslow's reason for seeking the records should have been obvious to the Union as well. Because the Union had notice of Kinslow's just cause for desiring to examine the documents, Kinslow was not obliged to inform the Union of his obvious reasons. Furthermore, even if there had been no indictment, Kinslow would still be exempted from any duty of prior notice because Briscoe's criminal exploits were so well known within the union that any reasonable members should have suspected that criminal conduct was afoot. See Briscoe, 65 F.3d at 580 (describing Briscoe's exploits, including testimony that he openly destroyed union records and instructed the Union's administrative staff to collect loan application fees only in cash). As a second independent ground for excusing actual notice, the Union waived any right to notice by failing to ask Kinslow about his reasons for requesting the documents. Instead of attempting to find out what prompted Kinslow's demand, the Union simply ignored his requests. In a nearly identical case, the Ninth Circuit held that this constitutes waiver. It stated: 15 Here the members presented a written demand to inspect the records. The union's answer was to ignore the demand. Had it wished to exercise its right to have a showing of just cause, the union should have asked the demanding members to allege such cause. To completely ignore the members' demand is inconsistent with the purpose of the union's rights to first consider the just cause allegation. To ignore the members' demand is a reflection of the union officers' attitude that they are unconcerned with the demand, whether or not it is supported by just cause. 16 Morley, 378 F.2d at 743. The Postal Workers Union displayed the same attitude in refusing to respond to Kinslow's demands, so any right it had to notice was waived. This attitude lends support to a third independent reason to excuse notice futility. The Union's repeated acts of disdain for Kinslow's rights would lead a reasonable person to believe that even if Kinslow set forth a detailed list of his reasons for suspecting illegal conduct, the Union would still have refused to produce the documents. Section 431 doesn't require a union member to perform futile acts in order to vindicate his rights. Accordingly, Kinslow was under no obligation to provide the Union with a detailed list of his concerns when this would most likely prove fruitless. 17 The Union next argues that Kinslow didn't specifically identify the documents he wanted. We have already discussed the hollowness of this argument in the context of the Jencks Act; it is impossible for a person requesting documents he has never seen to describe them with great detail. United States v. Johnson, 200 F.3d 529, 534 (7th Cir. 2000); United States v. Allen, 798 F.2d 985, 997 (7th Cir. 1986). In recognition of this fact, the LMRDA, like the Jencks Act, does not require great precision in crafting requests. Rather, we perceive the statute to require only minimal specificity. Here, Kinslow requested full financial disclosure of our Local's Financial business including copies of the General Account, Payroll Account and also the full minutes of both the Executive Board and General meeting minutes. For months beginning May 1990 to September 1991. This request was sufficiently specific to apprise the Union of what Kinslow desired. Moreover, to the extent it was imprecise or overly broad, the Union waived any objection by failing to ask Kinslow for more precision, as we discussed above with respect to notice of just cause. Accordingly, we reject the Union's lack of specificity argument. 18 The Union's last argument concerning Kinslow's access claim is that it was impossible to comply with his request because either the Departments of Labor or Justice had the relevant documents. This argument seems specious in light of its late introduction into the case and the Union's contention that it couldn't even tell what documents Kinslow wanted. If it didn't know what documents Kinslow was requesting, it is unlikely that it could know that it didn't have them. This apparent inconsistency might be reconcilable if the government had seized all of the Union's financial documents and the Union kept no copies, but the record indicates otherwise. Regardless, there is sufficient evidence in the record to support the district court's implicit finding that the Union had the documents, so we cannot say that the district court erred in granting relief on this claim.