Court Opinion

ID: 3019662
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:21:25.533848+00
Date Added: 2024-06-11T18:12:12.924282
License: Public Domain

United States Court of Appeals
                    FOR THE EIGHTH CIRCUIT

                         No. 97-2119

International Association of* Machinists
and Aerospace Workers, AFL-CIO;
                            *
Claudia Davey; John Desmond;* Robert
Dionne; Kit Furness; Tamara *Pierro;
Pamela Pinard; Jill Radel; Nina
                            *
Resenhouse;                 *
                            *
         Appellants;        *
                            * Appeal from the United
States
         v.                 * District Court for the
                            * Eastern     District   of
Missouri.
Barry Schimmel, Flip Becker,* Terry
Fitzgerald, Jerry Giustiniani,
                            *   Sheila
McCann, in their official capacities
                            *          as
officers of the Independent *Federation
of Flight Attendants and in *their
individual capacities;      *
                            *
          Appellees.        *

               Submitted:    September 10, 1997

                                                              Filed:
November 10, 1997

Before BEAM,    FLOYD   R.   GIBSON,      and      HEANEY,   Circuit
Judges.

HEANEY, Circuit Judge.
    International Association of Machinists and Aerospace
Workers (IAM) and eight flight attendants (individual
appellants) for Trans World Airlines (TWA) appeal from
the district court’s denial of their motion for a
preliminary injunction against the Independent Federation
of Flight Attendants (IFFA), an unincorporated labor
organization.    Because IFFA has no representational
responsibilities on behalf of the TWA flight attendants,
we conclude that IFFA is not entitled to retain funds
that reflect union dues paid by the flight attendants
beyond those necessary to conclude representation.
Therefore, individual appellants are entitled to a
preliminary injunction. We reverse.

                           I.

    Prior to March 6, 1997, IFFA was the official
collective bargaining representative of the TWA flight
attendants. These attendants were the only group IFFA
represented and, consequently, IFFA’s sole source of
union dues.      Additionally, IFFA’s only collective
bargaining agreement was with TWA. In the fall of 1996,
IAM submitted a bid to merge with IFFA. Sherry Cooper,
president of IFFA, supported the merger but IFFA’s
executive board rejected the bid.       Subsequently IAM
sought to become the TWA flight attendants’ sole
collective bargaining representative. With the help of
Cooper, IAM acquired IFFA’s membership lists and mailed
materials urging the flight attendants to execute
authorization cards that would allow IAM to seek a
representation election with the National Mediation Board
(NMB). After receiving sufficient authorization cards,

                            2
the NMB scheduled a union representation election to be
held on February 27, 1997.

    On February 4, 1997, Sherry Cooper resigned the IFFA
presidency while charges of dual unionism were pending
against her for her support of IAM. Cooper’s successor as
IFFA president, Rocky Miller, distributed a letter also
advocating   IAM   as  the   new   collective  bargaining
representative, after which he also faced charges of dual

                            3
unionism.    The IFFA executive board opposed IAM’s
succession as the TWA flight attendants’ collective
bargaining representative.

    Shortly before the election on February 21, 1997, the
individual appellants sent a letter to IFFA.1 Pursuant to
the Labor Management Reporting and Disclosure Act (LMRDA),
29 U.S.C. § 501(b),2 they demanded “an immediate
accounting of the current funds and assets of IFFA” and
“that no further funds or assets be expended and that they
be held in trust for the benefit of TWA flight attendants
pending the outcome of the representation election.”3
(Jt. App. at 344.)    Also on February 21st, IAM sent a
letter requesting that IFFA safeguard its assets as well
as “cooperate in an orderly audit and transfer of all
assets and records to [IAM]” after the election. (Jt.
App. at 345.)

    On February 25, 1997, IFFA responded by letter
requesting a clarification of who the individual
appellants believed had violated their fiduciary duties.

       1
     One of the eight individual appellants, Kit Furness, was not a signatory to the
February 21, 1997 letter but made identical demands on IFFA in a letter dated March 1,
1997.
   2
    Prior to bringing suit under § 501 of the LMRDA, there must first be an allegation
that a union official has breached a fiduciary duty owed to the labor organization or its
members. Second, a member of the labor organization must request that the labor
organization or its governing board remedy the breach by taking such action as
“secur[ing] an accounting or other appropriate relief.” 29 U.S.C. § 501(b).
       3
     The letter went on to state that “[e]ach officer shall be individually liable for
damages, attorney’s fees and other appropriate relief should you violate your fiduciary
duty in failing to give us an accounting or by wasting our funds.” (Jt. App. at 344.)
                                           4
IFFA also stated that without information about a
specific violation, IFFA would not have sufficient
information to process individual appellants’ request for
an accounting. On the same day, IFFA’s executive board
awarded themselves unused vacation time and

                            5
expressed their intention to fund a campaign to organize
flight attendants at Continental Airlines.

    On February 27, 1997, the flight attendants elected
IAM as their collective bargaining representative.4 The
day after the election, IFFA’s secretary-treasurer, Barry
Schimmel, transferred at least $700,000 of IFFA funds
into new accounts; and IFFA filed a lawsuit to prevent
appellants from obtaining an accounting of IFFA’s funds
and to enjoin them from filing suit in this case.

    On March 3, 1997, appellants filed their own action
for declaratory judgment and injunctive relief against
IFFA.    Appellants argued that, because IFFA had no
collective bargaining agreement, no members, and no
duties of representation, and because the IFFA executive
board continued to hold and expend IFFA funds solely to
advance its “political power and self[-]interest,” the
executive board was in breach of its fiduciary duties.5
(Jt. App. at 41.) Appellants sought to enjoin the IFFA
executive board from expending additional IFFA funds and
to require either the transfer of IFFA’s funds to IAM to

   4
    According to NMB mediator Maurice Parker, there were 5,139 employees eligible
to vote in the election: 2,886 voted for IAM representation; 1,078 employees voted for
IFFA representation; 657 voted for other representation; and 7 votes were void. (See
Jt. App. at 126.)
   5
    In discussing the fiduciary duties owed by union officials, § 501(a) of the LMRDA
reads in relevant part: “The officers . . . and other representatives of a labor
organization occupy positions of trust in relation to such organization and its members
as a group. It is, therefore, the duty of each such person . . . to hold its money and
property solely for the benefit of the organization and its members . . . .” 29 U.S.C. §
501(a).
                                           6
be held in trust for the TWA flight attendants or the
return of those assets to the flight attendants
themselves.

                          7
    On March 6, 1997, the NMB certified IAM as the TWA
flight   attendants’   official   collective   bargaining
representative.   On April 9, 1997, the district court
denied appellants’ motion for a preliminary injunction.
In denying the motion, the district court noted that the
LMRDA only provides a cause of action for union members
and determined that, as a rival union, IAM lacked
standing to sue IFFA. The court also held that, although
the individual appellants had standing, they were not
entitled to an injunction under the factors enumerated in
Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109,
112 (8th Cir. 1981) (en banc).

    On appeal, appellants argue that the district court
erred in determining that IAM lacked standing and that
the individual appellants were not entitled to a
preliminary injunction. We conclude that the individual
appellants are entitled to a preliminary injunction under
Dataphase and, therefore, we need not address the issue
of whether IAM had standing to sue IFFA on behalf of its
members.

                          II.

    In reviewing the denial of a preliminary injunction,
we ask whether the trial court abused its discretion.
Baker Elec. Coop., Inc. v. Chaske, 28 F.3d 1466, 1472
(8th Cir. 1994). An appellant bears a “heavy burden” in
seeking to overturn a district court’s denial of a
preliminary injunction.    Rittmiller v. Blex Oil, Inc.,
624 F.2d 857, 859 (8th Cir. 1980) (citation omitted). To
evaluate a request for a preliminary injunction, the
court considers (1) the probability of success on the

                            8
merits, (2) the threat of irreparable harm to the moving
party, (3) the balance between the potential harm and any
injury that an injunction would cause to other interested
parties, and (4) whether the public interest supports the
issuance of an injunction. Sanborn Mfg. Co. v. Campbell
Hausfeld/Scott Fetzer Co., 997 F.2d 484, 485-86 (8th Cir.
1993) (citing Dataphase, 640 F.2d at 114). In evaluating
a request for preliminary injunction, no single factor is
dispositive and all must be balanced to determine whether
to grant the injunction. Id. (citation omitted).

                            9
    With respect to the first factor, the district court
held that because appellants did not allege a specific
breach of a fiduciary duty in their February 21, 1997
letter or file suit on behalf of IFFA, they failed to
establish a probability of success on the merits.
International Ass’n of Machinists & Aerospace Workers,
AFL-CIO v. Schimmel, No. 4:97CV357 JCH, mem. & order at
10-12 (E.D.Mo. Apr. 9, 1997)       (hereinafter “Mem. &
Order”). We disagree.

    In determining whether appellants alleged a specific
breach of fiduciary duty, we note that § 501(a) of the
LMRDA provides that union officials have a duty to hold
union funds “solely for the benefit of the organization
and its members.” 29 U.S.C. § 501(a). Moreover,

    [s]ection 501 should be interpreted broadly in
    order to insure that elected union officials
    fulfill their responsibilities as fiduciaries to
    their members, guard union funds from predators,
    and keep intact all such union funds except
    those expended in the legitimate operation of
    the union’s business.      The funds should be
    treated as trust funds belonging to the union’s
    members.

United States v. Goad, 490 F.2d 1158, 1162 (8th Cir.
1974).

    At oral argument, IFFA stated that the union funds at
issue were approximately $1.6 million dollars. Generally,
unions provide for the disposition of union funds upon
decertification or dissolution in their constitution or
by-laws. In such situations, the contract between the
union and its members provides the mechanism to dispose

                           10
of union funds. Here, however, IFFA made no provision
for the disposal of union funds in the event its only
members elected a new bargaining representative. In the
absence of such a provision, principles of equity dictate
that a union should not retain funds that reflect the
dues of its only members and use them in a way that does
not advance those members’ interests.       We therefore
conclude that IFFA has a fiduciary duty to preserve union
funds that reflect the dues paid by the TWA flight
attendants and to use them

                           11
only to advance the interests of the flight attendants.
Because we read the individual appellants’ February 21,
1997 letter as charging IFFA with a breach of this duty
owed to all TWA flight attendants, we conclude that they
alleged a specific breach of a fiduciary duty for the
purposes of § 501.

    Next, we do not agree that the individual appellants
may not prevail because they based their claim on a
breach of a duty owed to them rather than to the union.
In determining whether appellants filed suit to secure
“relief for the benefit of the labor organization,” 29
U.S.C. § 501(b), we note that “‘[t]he members of a labor
organization are the real owners of the money and
property of such organizations and are entitled to a full
accounting of all transactions involving such money and
property.’” Goad, 490 F.2d at 1162 (quoting H.R. Rep.
No. 741 at 2430 (1959), reprinted in 1959 U.S.C.C.A.N.
2318, 2324); see also Pignotti v. Local #3 Sheet Metal
Workers’ Int’l Ass’n, 477 F.2d 825, 832-35 (8th Cir.
1973). IFFA’s members constituted a single group of like
employees. Therefore, bringing suit for the benefit of
the labor organization was indistinguishable from
bringing suit for the benefit of the real owners of the
union funds--the TWA flight attendants. Since the relief
sought in this case is the transfer of IFFA funds to IAM
to be held in trust for or distributed to TWA flight
attendants,6 appellants have brought suit for the benefit

   6
     We note that at oral argument IAM stated that it would be willing to conduct a
referendum among its members who were also members of IFFA before March 6,
1997. Such a referendum would allow the union members to decide whether IAM
would hold IFFA funds in trust for the TWA flight attendants or whether those flight
                                        12
of the labor organization. Because appellants alleged a
specific breach of fiduciary duty and filed suit on
behalf of IFFA, the district court abused its discretion
in determining that appellants did not establish a
probability of success on the merits.

    The second factor requires the moving party to show
“the threat of irreparable harm.” Dataphase, 640 F.2d at
114. Following its reasoning under the first factor, the

attendants would receive their pro rata share of those funds.
                                          13
district court characterized § 501 as requiring
irreparable harm to the union as a whole. The court then
determined that, because appellants could only establish
harm to themselves individually, they could not make the
requisite showing. (Mem. & Order at 9.) Even if the
district court properly characterized the irreparable
harm inquiry, we do not agree that where a union only
represents a single class of employees, harm to the union
is sufficiently distinguishable from harm to the flight
attendants.

    Harm to the union as a whole may be the appropriate
inquiry where a union represents members who perform
different jobs or work for different employers.      The
interests of a union as a whole in those instances can
vary significantly from the interests of a particular
segment of the union’s membership. Here, however, the
union represented employees, all of whom performed the
same job for the same employer.        Because the TWA
collective bargaining agreement constituted IFFA’s sole
representational obligation, IFFA’s interests were the
functional   equivalent   of   the  flight   attendants’
interests. Appellants contend, and we agree, that the
TWA flight attendants will be irreparably harmed without
an injunction because union funds reflecting their union
dues would finance continued IFFA activities that do not
advance the flight attendants’ interests.        Because
appellants have demonstrated that the flight attendants
would suffer irreparable harm without an injunction and
because harm to the flight attendants is tantamount to
harm to IFFA under § 501, we conclude that appellants
made the requisite showing under the irreparable harm
inquiry.

                           14
    The third factor compares the potential harm to the
moving party with the injury that granting the injunction
would likely inflict on other interested parties.
Dataphase, 640 F.2d at 114.     The district court found
that any harm to the appellants arising from continued
IFFA activities did not outweigh the injury that granting
the injunction would inflict. (Mem. & Order at 9-10.)
We disagree.

    Having determined that using the proceeds of the TWA
flight attendants’ union dues for any reason other than
solely for the benefit of the flight attendants would
cause

                            15
irreparable harm to the flight attendants, we move
directly to the likely harm that an injunction might cause
other interested parties. IFFA argues that it needs the
flight attendants’ funds to organize, to defend the
present action, and to aid in the transition to IAM
representation. This argument somewhat overstates IFFA’s
entitlement to those funds and the hardship that would be
imposed by the preliminary injunction. We agree that IFFA
is entitled to the funds necessary to effectuate the
transfer of representation and to the attorneys’ fees and
costs that it has incurred to date in this litigation. No
other purpose proposed by IFFA meets its duty to act
solely for the benefit of the TWA flight attendants.
Because IFFA is not entitled to the remainder of the
funds,7 IFFA suffers no injury from an injunction
preventing it from expending those funds. As such, the
harm to the flight attendants arising from allowing IFFA
to continue its operations outweighs any injury that
granting the injunction might inflict on any other party.

    The final factor requires the district court to
determine whether an injunction is in the public interest.
Dataphase, 640 F.2d at 114.      Stating that appellants
failed to show that any IFFA board members converted funds
for personal use, the district court found that the public
interest would not be served by granting the preliminary
injunction.    (Mem. & Order at 12-13.)      However, the
overall purpose of the LMRDA as it relates to this case
“is to protect union property and funds, to provide full
disclosure of financial affairs of the union, [and] to

    7
     IFFA is entitled to funds that reflect sources independent of union dues. Such
sources include sales, raffles, and non-germane accounts.
                                        16
establish self-help remedies for union members.” Goad,
490 F.2d at 1165. For the above reasons, requiring union
members to fund activities that do not advance their own
interests does not serve the public interest. In this
case, the public interest is better served by issuing the
injunction.

                           17
    Contrary to the findings of the district court,
appellants have met their burden under Dataphase. Because
the individual appellants have demonstrated that they are
entitled to an injunction, we need not consider the issue
of whether IAM has standing to seek the same remedy in
this case.

                          III.

    For the foregoing reasons, we reverse and remand to
the district court for a determination of the specific
amount of IFFA funds necessary to conclude the union’s
representation of the TWA flight attendants as well as
funds derived from sources other than union dues to which
IFFA is otherwise entitled.       We further direct the
district court to order IFFA to transfer the remaining
funds to IAM as trustee with the duty to return the funds
transferred to the flight attendants who were former
members of IFFA pursuant to a formula to be devised by IAM
as trustee and approved by the district court.

    A true copy.

        Attest.

             CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                            18