Court Opinion

ID: 2971183
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:30:29.029077+00
Date Added: 2024-06-11T11:40:46.864909
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
            Pursuant to Sixth Circuit Rule 206           2    Anderson et al. v. Int’l Union,             No. 01-1253
   ELECTRONIC CITATION: 2004 FED App. 0170P (6th Cir.)        Utd. Plant Guard Workers et al.
               File Name: 04a0170p.06
                                                                             _________________
UNITED STATES COURT OF APPEALS                                                    COUNSEL
              FOR THE SIXTH CIRCUIT                      ARGUED: Barbara M. Harvey, Detroit, Michigan, for
                _________________                        Appellants. E. Michael Morris, MORRIS & DOHERTY,
                                                         Birmingham, Michigan, for Appellees. ON BRIEF: Barbara
GARY ANDERSON, LOUIS              X                      M. Harvey, Detroit, Michigan, for Appellants. E. Michael
SCOHY, and GEORGE SQUIER, -                              Morris, MORRIS & DOHERTY, Birmingham, Michigan,
          Plaintiffs-Appellees, -                        Charles J. Porter, OFFICE OF CHARLES J. PORTER,
                                   -  No. 01-1253        Clarkston, Michigan, for Appellees.
                                   -
           v.                       >                      MOORE, J., delivered the opinion of the court, in which
                                   ,                     GILMAN, J., joined. MERRITT, J. (pp. 24-26), delivered a
                                   -
THE INTERNATIONAL UNION,                                 separate dissenting opinion.
                                   -
UNITED PLANT GUARD                 -                                         _________________
WORKERS OF AMERICA                 -
(UPGWA), INTERNATIONAL             -                                             OPINION
                                   -                                         _________________
EXECUTIVE BOARD OF THE
                                   -
UPGWA, PENSION                     -                        KAREN NELSON MOORE, Circuit Judge. This appeal
COMMITTEE OF THE UPGWA, -                                addresses the question of whether the doctrine of apparent
and RETIREMENT PLAN OF             -                     authority bound a union to its officers’ self-dealing
THE UPGWA,                         -                     transaction entered into in clear violation of the union’s
       Defendants-Appellants. -                          constitution. We hold that it did not.
                                   -
                                  N                         Gary Anderson (“Anderson”), Louis Scohy (“Scohy”), and
      Appeal from the United States District Court       George Squier (“Squier”), Plaintiffs-Appellees, are all former
     for the Eastern District of Michigan at Detroit.    officers of Defendant-Appellant, International Union, United
    No. 96-70710—Gerald E. Rosen, District Judge.        Plant Guard Workers of America (“UPGWA”). The other
                                                         defendants in this action are the International Executive
             Argued: September 11, 2003                  Board of the UPGWA (“IEB”), the Pension Committee of the
                                                         UPGWA (“Pension Committee”), and the retirement plan of
           Decided and Filed: June 7, 2004               the UPGWA (“Retirement Plan”). While Plaintiffs-Appellees
                                                         were officers of UPGWA and members of the IEB, they voted
  Before: MERRITT, MOORE, and GILMAN, Circuit            in favor of resolutions that would eliminate their positions as
                    Judges.                              officers and provide them with early-retirement benefits

                            1
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant      3    4       Anderson et al. v. Int’l Union,                     No. 01-1253
                                 Guard Workers et al.                    Utd. Plant Guard Workers et al.

above those permitted by UPGWA’s constitution. After the                                    I. OVERVIEW
IEB was threatened with litigation, it deferred implementation
of the increased early-retirement benefits until presentation    A. Factual Background
for a vote at the upcoming International Convention.
Subsequently, none of the Plaintiffs-Appellees continued in        Plaintiffs-Appellees are former officers of UPGWA and
their positions as officers, and the International Convention    former members of the IEB. UPGWA is a union that
voted against a resolution providing for the increased early-    represents “Plant Guards, Security Officers, Security Police
retirement benefits.                                             Officers, fire protection and other employees performing
                                                                 protection and security activities for private and governmental
  Plaintiffs-Appellees brought suit in the United States         employers.” Joint Appendix (“J.A.”) at 307 (UPGWA Const.
District Court for the Eastern District of Michigan, asserting   Art. II). UPGWA’s officers are elected “at the union’s
that this denial of the promised early-retirement benefits       convention which is held every five years.” J.A. at 22 (Dist.
violated several provisions of the Employee Retirement           Ct. Op. 1/17/97).1 Anderson and Squier were elected regional
Income Security Act (“ERISA”) of 1974. After the district        directors for UPGWA in 1990, and their terms both expired
court granted summary judgment to Defendants-Appellants          in 1995. Scohy was a vice-president of UPGWA, who was
on all of Plaintiffs-Appellees’ claims, a panel of this court    also elected in 1990, and his term also expired in 1995.
reversed and remanded, requesting the district court to make
further factual findings on the issue of whether the Union          In 1993 and 1994, while Plaintiffs-Appellees were in office,
President and the IEB had apparent authority to bind             “the UPGWA experienced severe financial difficulties and the
UPGWA to the December 7, 1994 resolution. On remand, the         IEB began exploring ways to cut costs and save money. In
district court denied the parties’ cross-motions for summary     November 1994, in order to stem the union’s financial losses,
judgment, conducted a bench trial, and issued an opinion         UPGWA President Eugene McConville [(“McConville”)]
concluding that the Union President and the IEB did have         proposed that the union be restructured so as to eliminate
apparent authority to so bind UPGWA, and accordingly             some regional directorships as well as the position of vice-
awarded Plaintiffs-Appellees the increased early-retirement      president.” J.A. at 23 (Dist. Ct. Op. 1/17/97). As part of this
benefits.                                                        restructuring, McConville proposed offering early retirement
                                                                 to all full-time officers and directors who met certain
  We conclude that Plaintiffs-Appellees could not have           eligibility requirements. McConville further proposed that
reasonably relied on the Union President’s or the IEB’s          the IEB effectuate the restructuring and offer the early-
representations because the increased early-retirement           retirement benefits in February 1995, rather than wait for
benefits clearly violated UPGWA’s constitution. Moreover,        approval “at the international convention in May 1995,
we will not enforce this contract, which Plaintiffs-Appellees    because the union’s accountants had advised that there would
entered into in violation of their fiduciary duties under
§ 501(a) of the Labor-Management Reporting and Disclosure            1
Act (“LMRDA”) of 1959. Therefore, we REVERSE the                       W e are relying upon the district court’s January 17, 1997 summ ary
district court’s judgment awarding Plaintiffs-Appellees the      judgment opinion for uncontested background facts, and upon the district
                                                                 court’s January 4, 2001 bench trial opinion for further factual findings,
increased early-retirement benefits.                             except to the e xtent that we consider tho se factua l findings to be clearly
                                                                 erroneo us.
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant            5   6        Anderson et al. v. Int’l Union,                    No. 01-1253
                                 Guard Workers et al.                          Utd. Plant Guard Workers et al.

be a large savings to the union if it could eliminate the full-                 Union, United Plant Guard Workers of America
time positions prior to the convention.” J.A. at 23 (Dist. Ct.                  (UPGWA), dated May 19, 1990.
Op. 1/17/97).
                                                                      J.A. at 25 (Dist. Ct. Op. 1/17/97).
  The IEB held a special meeting on December 6 through 9,
1994, to consider various cost-cutting measures, including               The district court found that absent the December 7, 1994
McConville’s restructuring and early-retirement proposal. At          resolution, none of the Plaintiffs-Appellees would have been
the special IEB meeting, David Kaufman (“Kaufman”),                   eligible for early retirement under the Retirement Plan, and
UPGWA’s accountant, made a presentation detailing the state           that UPGWA’s constitution prohibited offering early
of UPGWA’s finances and the cost savings projected for                retirement to Plaintiffs-Appellees. Article XI, Section 2 of
McConnville’s restructuring and early-retirement proposal.            UPGWA’s constitution provides:
Kaufman reported to the IEB that eliminating the vice-
president’s position would save UPGWA $535,000 over five                    The International Executive Board is empowered to
years and that eliminating three regional directors would save            formulate, maintain, and amend a Pension Retirement
UPGWA an additional $1.70 million over five years. The                    Plan to include, but not to exceed the following:
resolution proposed by McConville contemplated offering
early retirement to officers and directors who met the                      (A) All full-time elected officers and appointed
following eligibility requirements:                                             International Union representatives who have at
                                                                                least five years of service shall be eligible under
  1.   Must be 50 years of age or over as of December 31,                       such Plan.
       1994.
  2.   Retirement must cause one full-time position to be                   (B) The normal retirement age shall be Sixty (60)
       eliminated.                                                              years. Disability and early retirement benefits
  3.   Retirement must be taken on February 15, 1995.                           shall be in accordance with the normal
  4.   Acceptance of this window must be made by                                retirement age.2
       December 8, 1994.

J.A. at 25 (Dist. Ct. Op. 1/17/97). The resolution further                 2
                                                                            Article III of UPG W A’s constitution specifies that the constitution
specified that the early-retirement package would contain the         “can be amended only by a majority vote of the delegates at succeeding
following benefits:                                                   Conventions; provided , howe ver, that d uring the interim between
                                                                      Conventions, this Constitution and By-Laws can be amended by a
                                                                      majo rity vote o f the total International Membership voting in all Local
  1.   An officer or director will receive ten (10) years             Unions.” J.A. at 307 . This article further provides that the IE B, by a two-
       allocated to age and/or service, at their discretion for       thirds vote, is em pow ered “to make such interim chang es in this
       pension benefit computation.                                   Constitution and By-Laws applicable only until the next regular
  2.   An officer or director shall be entitled to all benefits       Constitutional Convention, as m ay from tim e to time be n ecessary to
       as stated in Article XI, Sections 1 and 2(e) of the            conform this Constitution and By-Laws with any applicable laws.” J.A.
                                                                      at 307-08 (UP GW A Const. Art. III) (emphasis added).
       Constitution and By-Laws of the International                       McCo nnville conceded at trial that the early-retirement benefits
                                                                      embodied in the December 7, 1994 resolution “were not ‘in accordance
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant                     7    8       Anderson et al. v. Int’l Union,                 No. 01-1253
                                 Guard Workers et al.                                   Utd. Plant Guard Workers et al.

J.A. at 310 (UPGWA Const. Art. XI, § 2 (emphases added)).                       and Section 501(a) of the Labor Management Reporting and
Under the Retirement Plan, “a covered employee is entitled                      Disclosure Act.” J.A. at 26 (Dist. Ct. Op. 1/17/97). Although
to full retirement only if he is at least 60 years of age, or a                 it is not reflected in the district court’s January 4, 2001
reduced retirement benefit if he is under age 60 but over age                   opinion, at trial all of the Plaintiffs-Appellees testified that
55 and has completed at least five years of service. No                         Article XI, Section 2 of the UPGWA’s Constitution was
provision is made for retirement under age 55.”3 J.A. at 25-                    discussed at the IEB meeting prior to the vote on the early-
26 (Dist. Ct. Op. 1/17/97). To be eligible for either normal or                 retirement proposal.
early-retirement benefits under the Retirement Plan,
employees must have completed five years of service. As of                        On December 7, 1994, the IEB voted in favor of adopting
February 15, 1994, neither Anderson nor Scohy was fifty-five                    the early-retirement proposal by a margin of eight in favor
years old and neither had completed at least five years of                      and three against; Plaintiffs-Appellees all voted in favor of the
service; Squier was fifty-nine years old, but had not                           proposal.4 On December 8, 1994, Plaintiffs-Appellees all
completed at least five years of service.                                       accepted in writing the increased early-retirement benefits.
                                                                                According to their acceptance letters, Anderson would receive
   On December 7, 1994, before voting on the early-                             a monthly pension of $1,682.95, Scohy would receive a
retirement proposal, Plaintiffs-Appellees asked Gordon                          monthly pension of $3,437.87, and Squier would receive a
Gregory (“Gregory”), UPGWA’s attorney, whether he                               monthly pension of $2,478.82.
foresaw any legal problems with the early-retirement
proposal. According to Anderson and Scohy, Gregory told                           “On December 9, [1994], the IEB passed another
them that he was not aware of any problems. However, two                        resolution, this one consolidating, rearranging, and dissolving
days earlier, on December 5, 1994, Gregory had written to                       certain regions.” J.A. at 30 (Dist. Ct. Op. 1/17/97). The
McConville stating the opinion “that he believed that it was                    regions for which Squier and Anderson had been directors
likely that there would be an administrative and/or judicial                    were “to be dissolved effective February 15, 1995, i.e., the
challenge to the early retirement window based upon a                           date on which Plaintiffs retirements under the December 7
violation of Article XI, Section 2 of the Union Constitution                    resolution were to become effective.” J.A. at 30 (Dist. Ct.
                                                                                Op. 1/17/97). The resolution did not eliminate the vice-
                                                                                president’s position held by Scohy because that required
                                                                                amending UPGWA’s constitution through a vote at the
with normal retirement age’ under Article XI, Section 2(b).” J.A. at 616        International Convention in May 1995.
(Dist. Ct. Op. 1/4/01).

    3                                                                             On December 22, 1994, Jack Webb (“Webb”), a regional
       Article XI of UP GW A’s Retirement Plan specifies that the IEB has       director, wrote a letter to McConville asserting that by voting
“the right at any time and from time to time to terminate, modify or
amend in whole or in p art any o r all of the p rovisio ns of the Plan.” J.A.   in favor of the increased early-retirement benefits, members
at 292 . The IEB is designated a s the “Plan Administrator” for purposes        of the IEB violated Article XI, Section 2 of UPGWA’s
of the Employee Retirement Income Security Act (“ERISA”) of 1974, but
a Pension Comm ittee, composed of three members designated by the IEB,
is responsible for daily administration and interpretation of the Retirement        4
Plan. W hen the events giving rise to this litigation occurred, Scohy was           Jack W ebb, Ronald W arfield, and Denise Sylvestre voted against the
the Chairman of the Pension Committee.                                          Decemb er 7, 1994 resolution.
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant        9    10   Anderson et al. v. Int’l Union,              No. 01-1253
                                 Guard Workers et al.                   Utd. Plant Guard Workers et al.

constitution and their fiduciary duties, and threatening to sue    person that another is his agent, regardless of whether an
if the IEB did not withdraw the December 7, 1994 resolution.       actual agency relationship has been formed and (2) exists only
In an opinion letter written on January 4, 1995, Gregory           to the extent that it is reasonable for the third person dealing
confirmed the possibility of a viable legal challenge to the       with the agent to believe that the agent is authorized.” Id. at
early-retirement benefits embodied in the December 7, 1994         593. Because the record on the issue of apparent authority
resolution. On January 5, 1995, in response to Webb’s              was limited, the panel remanded this case instructing the
threatened lawsuit, McConville circulated a referendum ballot      district court “to make further factual findings on whether
to members of the IEB asking whether they wanted to delay          principles of apparent authority can bind the union to the
implementation of the early-retirement benefits and                December 7, 1994 resolution.” Id. (emphasis added). More
restructuring until authorized through a vote at the               specifically, the panel instructed the district court to:
International Convention.        The IEB voted to defer
implementation of the resolutions until the International            determine if union president McConville, as president of
Convention, and the Plaintiffs-Appellees continued in their          the union and a member of the [IEB], and the [IEB],
offices until that time. At the International Convention,            were acting within their apparent or actual authority as
Squier “ran for re-election as regional director, but lost.          representatives of the union’s retirement plan and
Anderson did not seek re-election,” and the membership               whether plaintiffs reasonably relied upon this authority
voted to eliminate the vice-president’s position held by             to enter into the agreement for early retirement benefits.
Scohy. J.A. at 33 (Dist. Ct. Op. 1/17/97). Additionally, the         Whether plaintiffs’ reliance was reasonable may turn, in
membership voted against adopting the increased early-               part, on whether they were aware of the possible legal
retirement benefits.                                                 challenges to the December 7, 1994, resolution before
                                                                     they accepted the early retirement offer.
B. Procedural Background
                                                                   Id. (citations omitted). The panel further instructed that,
   Plaintiffs-Appellees filed various lawsuits against UPGWA       “Apparent authority . . . may attach even when the agent’s
and other defendants, including two state-court actions and        acts are unauthorized [and] that even in the presence of a
this federal action asserting ERISA violations.              On    ratification requirement, a third party may rely upon the
January 17, 1997, the district court issued an opinion rejecting   apparent authority of the union representatives to enter into an
all of Plaintiffs-Appellees’ ERISA claims and granting             agreement where there is a reasonable basis for such
summary judgment to Defendants-Appellants. Then, on July           reliance.” Id.
31, 1998, a panel of this court reversed and remanded,
indicating that the relevant issue was whether McConville and        On August 31, 1999, the district court issued an opinion
the IBE had apparent authority to bind UPGWA to the                denying the parties’ post-remand motions for summary
December 7, 1994 resolution. Anderson v. Int’l Union,              judgment. The court concluded that Article XI, Section 1 of
United Plant Guard Workers, 150 F.3d 590, 592 (6th Cir.            the UPGWA Retirement Plan, Article XII, Section 5 of the
1998).                                                             UPGWA constitution, and McConville’s statements
                                                                   manifested apparent authority in McConville and the IEB to
  In this court’s 1998 opinion, the panel explained that           offer the early-retirement benefits encompassed in the
“apparent authority (1) results from a manifestation by a          December 7, 1994 resolution. The district court found it
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant        11    12    Anderson et al. v. Int’l Union,              No. 01-1253
                                 Guard Workers et al.                     Utd. Plant Guard Workers et al.

relevant that the Retirement Plan document provides: “The           2001. In its opinion, the district court adhered to its previous
Union, acting through its International Executive Board,            conclusion that UPGWA manifested authority in the IEB and
reserves and shall have the right at any time and from time         McConville to offer the early-retirement benefits. Based
to time to terminate, modify or amend in whole or in part           upon testimony heard at trial, the district court then concluded
any and all provisions in the Plan.” J.A. at 74 (Dist. Ct.          that Plaintiffs-Appellees’ reliance on the IEB’s and
Op. 8/31/99) (emphases in original). The district court also        McConville’s manifestations of authority was reasonable.
found it relevant that the UPGWA constitution “provides that        Specifically, Ronald Warfield (“Warfield”), an IEB member
the IEB ‘shall decide all questions involving interpretation of     and also a Pension Committee member, testified that the
this Constitution and By-Laws, between Conventions.” J.A.           Retirement Plan could be amended via an IEB resolution.
at 75. Additionally, the district court found that prior to their   Additionally, all three Plaintiffs-Appellees testified that they
accepting the early-retirement benefits, McConville assured         relied upon Gregory’s assurances “that there were no legal
Plaintiffs-Appellees that the early-retirement proposal had         problems with the early retirement proposals.” J.A. at 643
been checked by the attorneys and accountants and was legal,        (Dist. Ct. Op. 1/4/01). Although Gregory testified that he told
and that Gregory had assured Plaintiffs-Appellees that the          Plaintiffs-Appellees that he had written on December 5, 1994,
early-retirement proposal was legal.                                an opinion letter for McConville explaining the possibility of
                                                                    a § 501 challenge, the district court credited Plaintiffs-
  In its August 31, 1999 opinion, the district court also           Appellees’ testimony that Gregory had not told them about
concluded, however, that there was a genuine issue of               the letter. Moreover, all of the witnesses at trial, including
material fact regarding whether Plaintiffs-Appellees’ reliance      Gregory and Webb, testified that in response to an inquiry by
on these manifestations of apparent authority was reasonable.       Webb, Gregory had stated that he was not aware of any legal
J.A. at 77 (Dist. Ct. Op. 8/31/99). The district court noted        problems with the early-retirement proposal under either
that “whether Plaintiffs’ reliance was reasonable turns on          Article XI, Section 2 of UPGWA’s constitution or under
whether they were aware of the [UPGWA] constitution’s               § 501 of the LMRDA. Because Gregory had been UPGWA’s
requirement of a vote of the full membership on the early           legal counsel for more than thirty-five years, the district court
retirement proposal and whether they were aware of the              found “that it was reasonable for Plaintiffs to rely upon Mr.
possible legal challenges to the December 7, 1994 resolution        Gregory’s assurances that there were no legal problems with
before the[y] accepted the early retirement offer.” J.A. at 77      the early retirement plan.” J.A. at 643-44 (Dist. Ct. Op.
(Dist. Ct. Op. 8/31/99) (citing Anderson, 150 F.3d 590)). The       1/4/01). Moreover, the district court found that even if
district court found that the parties had presented conflicting     Plaintiffs-Appellees may have heard that Webb might
testimony regarding whether the Plaintiffs-Appellees were           challenge the early retirement proposals, it was reasonable for
told prior to accepting the early-retirement proposal that there    Plaintiffs-Appellees to rely upon Gregory’s and McConville’s
was the possibility of a legal challenge to the December 7,         assurances that there were no legal problems with the plan.
1994 resolution, thereby creating a genuine issue of material       Therefore, the court concluded that Plaintiffs-Appellees
fact and precluding summary judgment.                               “reasonably relied upon the apparent authority of the IEB to
                                                                    adopt the Resolution on December 7, 1994 providing for an
  The district court conducted a six-day bench trial in             early retirement plan in accepting early retirement pursuant to
December 1999. After hearing testimony and considering              that Resolution on December 8, 1994” and that UPGWA “is
exhibits, the district court issued an opinion on January 4,        bound by the terms of the resolution passed December 7,
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant         13    14   Anderson et al. v. Int’l Union,                No. 01-1253
                                 Guard Workers et al.                     Utd. Plant Guard Workers et al.

1994 modifying the UPGWA Retirement Plan to grant early              those manifestations was reasonable; therefore, the district
retirement benefits to Plaintiffs.” J.A. at 645 (Dist. Ct. Op.       court concluded that McConville and the IEB had apparent
1/4/01).                                                             authority to bind UPGWA to December 7, 1994 resolution.
                                                                     Although we commend the district court for its thorough and
  All defendants timely appealed the district court’s                thoughtful opinion, we conclude that the district court
January 4, 2001 order.                                               committed clear error by finding that the Plaintiffs-Appellees’
                                                                     reliance on McConville’s and the IEB’s ostensible authority
                       II. ANALYSIS                                  to bind UPGWA in this manner was reasonable.
A. Standard of Review                                                   An agent acting with apparent authority may bind his or her
                                                                     principal to a contract with a third party. Id. As we explained
   “In considering a district court’s decision following a bench     in Anderson, apparent authority arises in situations when the
trial,” we review for clear error the district court’s findings of   principal manifests to a third party that an agent is authorized
fact, and we review de novo the district court’s conclusions of      to act upon the principal’s behalf and the third party
law. Overton Distribs., Inc. v. Heritage Bank, 340 F.3d 361,         reasonably relies upon that authority. A third party may not,
366 (6th Cir. 2003) (internal quotation marks omitted). When         however, reasonably rely upon an agent’s ostensible authority
deciding cases that turn upon the interpretation of a union’s        if the third party knows that the agent is not authorized to act
constitution, “Courts are reluctant to substitute their judgment     in a particular manner. See Dayton Bread Co. v. Montana
for that of union officials in the interpretation of the union’s     Flour Mills Co., 126 F.2d 257, 261 (6th Cir. 1942). In
constitution, and will interfere only where the official’s           Dayton Bread Co., we held that the third party did not
interpretation is not fair or reasonable.” United Food &             reasonably rely upon the agent’s authority to bind the
Commercial Workers Int’l Union Local 911 v. United Food              principal because it is well established that a salesman “has
& Commercial Workers Int’l Union, 301 F.3d 468, 478 (6th             no implied authority to bind his principal by an absolute sale
Cir. 2002) (quoting United Bhd. of Carpenters, Dresden               or contract,” and because the contracts at issue were
Local No. 267 v. United Bhd. of Carpenters, S. Cent. Ohio            prohibited under applicable law. Id. In Dayton Bread Co.,
Dist. Council, 992 F.2d 1418, 1423 (6th Cir. 1993)).                 we explained
B. Apparent Authority                                                  The principal is often bound by the acts of his agent in
                                                                       excess of or in abuse of his actual authority, but this is
  When we remanded this case, we instructed the district               only true between the principal and third persons who,
court to make further findings on the issue of whether                 believing and having a right to believe that the agent was
McConville or the IEB had apparent authority to bind                   acting within and not exceeding his authority, would
UPGWA to the early-retirement benefits embodied in the                 sustain a loss if the act was not considered that of the
December 7, 1994 resolution. Anderson, 150 F.3d at 592-93.             principal. . . . If . . . a third person dealing with an agent
After conducting a bench trial, the district court found that          knows he is acting under a circumscribed and limited
UPGWA manifested to Plaintiffs-Appellees that McConville               authority and that his act is in excess of or an abuse of
and the IEB were its agents for the purposes of amending the           the authority actually conferred, then clearly the
Retirement Plan, and that Plaintiffs-Appellees’ reliance upon          principal is not bound.
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant                 15     16       Anderson et al. v. Int’l Union,                    No. 01-1253
                                 Guard Workers et al.                                  Utd. Plant Guard Workers et al.

Id. (emphases added).5                                                        C. Section 501 of the LMRDA
  In this case, Plaintiffs-Appellees had actual knowledge of                    As an alternative basis for our holding, we conclude that
the limitations on pension benefits imposed by Article XI,                    Plaintiffs-Appellees may not enforce the increased early-
Section 2 of UPGWA’s constitution and should have known                       retirement benefits because Plaintiffs-Appellees violated
the appropriate procedures for amending UPGWA’s                               § 501(a) of the LMRDA. Section 501 of the LMRDA
constitution.6 Although Plaintiffs-Appellees may have                         imposes fiduciary duties upon the officers and agents of labor
believed that McConville and the IEB had the authority to                     unions and provides union members with a cause of action
bind UPGWA to the December 7, 1994 resolution, we                             against union officers and agents who violate those duties.
conclude that Plaintiffs-Appellees’ actual knowledge and                      Section 501(a)8 defines the scope of union officers’ and
imputed knowledge made this reliance unreasonable.                            agents’ fiduciary duties, and § 501(b) specifies prerequisites
Therefore, we conclude that McConville and the IEB did not                    to bringing suit to redress violations of § 501(a). We
have apparent authority to offer the increased early-retirement               recognize that when defining the scope of fiduciary duties
benefits, and thus UPGWA is not bound by the December 7,                      imposed by § 501(a), courts must be cognizant of “the special
1994 resolution.7                                                             problems and functions of a labor organization.” 29 U.S.C.
                                                                              § 501(a). We also recognize, however, that Congress passed
                                                                              § 501(a) to curb abusive practices by union officials.
    5
      Although Dayton Bread Co. v. Montana Flour Mills Co., 126 F.2d
257 (6th C ir. 194 2), is a diversity case applying O hio law, we find its
discussion of general agency principles instructive and consistent with       estop pel, we are reluctant “to allow estopp el to override the clear terms”
other authorities. See Brandin g Iron M otel, Inc. v. Sandlian Equity, Inc.   of an ERISA plan. Marks v. Newcourt Credit Group, Inc., 342 F.3d 444,
(In re Bra ndin g Iron M otel, Inc.), 798 F.2d 396, 401 (10th Cir. 1986);     456 (6th Cir. 2003).
Pasco County Peach Ass’n v. J.F. Solley & Co., 146 F.2d 880, 883 (4th
Cir. 1945); Harold Gill Reuschlein & W illiam A. G regory, The Law of              8
Agency and Partne rship 63-64 (2d ed . 1990).                                      Subsection (a) provides, in pertinent part:
                                                                                  The officers, agents, shop stewards, and other representatives of
    6                                                                             a labor organization occupy positions of trust in relation to such
      Plaintiffs-Appellees’ actual and im puted know ledge sufficiently           organization and its members as a group. It is, therefore, the
distinguishes the present case from Cen tral Sta tes Southeast & Southwest        duty of each such person, taking into account the special
Areas Pension Fund v. Kraftco, Inc., 799 F.2d 1098 (6th Cir. 1986) (en            problems and functions of a labor organization, to hold its
banc), cert. denied, 479 U.S. 1086 (1987), in which we held that a union’s        money and property solely for the benefit of the organization
agent could bind the union based upon the doctrine of appa rent authority         and its members and to manage, invest, and expe nd th e sam e in
even in the presence of a m emb ership-ratification requirement.                  accordance with its constitution and bylaws and any resolutions
    7
                                                                                  of the governing bodies adopted thereunder, to refrain from
       Although throughout much of this litigation the parties have focused       dealing with such organization as an adverse party or in behalf
on ERISA, we note that our outcome today does not disrupt the terms of            of an adverse party in any matter connected with his duties and
an ERISA plan. P laintiffs-App ellees may not claim benefits under the            from holding or acquiring any p ecuniary or personal interest
terms of the Retirement Plan because the plan was never validly amended.          which conflicts with the interests of such organization, and to
Sprague v. Gen. Motors Corp., 133 F.3d 388, 403 (6th Cir.) (en banc),             account to the organization for any profit received b y him in
cert. denied, 524 U.S. 923 (1998). As will be discussed below, P laintiffs-       whatever capacity in connection with transactions conducted by
Appellees have not established all of the elements of estoppel. Moreover,         him or under his direction on behalf of the organization.
even if Plaintiffs-Appellees had established all of the elements of           29 U.S.C. § 50 1(a).
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant                     17     18     Anderson et al. v. Int’l Union,                      No. 01-1253
                                 Guard Workers et al.                                    Utd. Plant Guard Workers et al.

Morrissey v. Curran, 650 F.2d 1267, 1272-73 (2d Cir. 1981).                       UPGWA’s constitution specifies, however, that only full-time
Although the precise contours of the fiduciary duties imposed                     officers and union representatives who have attained at least
by § 501(a) are not fully delineated in the statutory text, it is                 five years of service are eligible for pension benefits.
clear that Congress intended unions’ constitutions and by-                        Moreover, UPGWA’s constitution specifies that qualifying
laws to play a major role in shaping these duties. See                            individuals may receive normal retirement benefits at age
Guzman v. Bevona, 90 F.3d 641, 648 (2d Cir. 1996). Section                        sixty and that “early retirement benefits shall be in
501(a) directs union officers and agents to expend the union’s                    accordance with the normal retirement age.” J.A. at 310
money and property, “in accordance with its constitution and                      (emphasis added). It is clear that UPGWA’s constitution
bylaws and any resolutions of the governing bodies adopted                        allows for early-retirement benefits to be offered only on a
thereunder.” 29 U.S.C. § 501(a) (emphasis added). We have                         reduced basis, and also requires pension recipients to have
previously held that union officers and agents violate § 501(a)                   worked for UPGWA for at least five years; a contrary
by engaging in transactions that provide a direct personal                        interpretation would be unreasonable and not entitled to
benefit to themselves and that contravene their union’s                           deference. It is undisputed that as of December 7, 1994,
constitution. McCabe v. Int’l Bhd. of Elec. Workers Local                         Plaintiffs-Appellees were not entitled to any retirement
Union No. 1377, 415 F.2d 92, 97-98 (6th Cir. 1969) (holding                       benefits under the Retirement Plan and that the early-
that union officers violated § 501(a) by accepting                                retirement benefits encompassed in the December 7, 1994
reimbursement for out-of-pocket expenses incurred while                           resolution exceeded the limits imposed by UPGWA’s
conducting union business in addition to per diem payments                        constitution. Plaintiffs-Appellees were to receive a direct
that were not authorized by their union’s constitution).9                         personal benefit from the December 7, 1994 resolution,
Although § 501(a) imposes fiduciary duties beyond those                           because at that time none of them were eligible for any
outlined in a union’s constitution and by-laws, it is not                         retirement benefits. Additionally, the retirement benefits
necessary for us to expound upon the boundaries of § 501(a)                       embodied in the December 7, 1994 resolution exceeded the
because in this case the early-retirement benefits Plaintiffs-                    limits imposed by UPGWA’s constitution, and the IEB did
Appellees seek to enforce violate UPGWA’s constitution.                           not amend the constitution.10 Therefore, we conclude that
                                                                                  Plaintiffs-Appellees violated their fiduciary duties under
  UPGWA’s constitution empowers the IEB to create a                               § 501(a).11 This conclusion does not end our analysis,
pension plan for all full-time officers and appointed
representatives. J.A. at 310 (UPGWA Const. Art. XI, § 2).
                                                                                       10
                                                                                         Mo reover, the IEB could not have am ended U PG W A’s
                                                                                  constitution in this manner, as the IEB is only authorized to amend
    9                                                                             temporarily the constitution to conform the constitution to changes in the
      Our positio n is consistent with other circuits that have add ressed this
issue. See, e.g., Guzman v. Bevona, 90 F.3d 641, 647-48 (2d Cir. 1996)            law. J.A. at 307-08 (U PGW A Const. Art. III).
(holding that union officers violate d § 501(a) by expending union funds               11
on surveillance of union member, who criticized the union’s leadership,                   Because the December 7, 1994 resolution was not validly
in violation of the union’s constitutio n); Brink v. DaLe sio, 667 F.2d 420       authorized by the International Convention, see supra Part II.B., the more
(4th Cir. 19 81); Stelling v. Int’l Bhd. of Elec. Workers Local Union No.         deferential “manifestly unreasonable” standard that the Sec ond Circuit
1547, 587 F.2d 1379 (9th C ir. 197 8), cert. denied, 442 U .S. 944 (1979 );       first enunciated in Morrissey v. Curran, 650 F.2d 12 67, 1274 (2d Cir.
Sabolsky v. Budzanoski, 457 F.2d 124 5 (3d Cir.), cert. denied, 409 U.S. 1981), is inapplicable. In Morrissey, the Second Circuit held that
853 (19 72).                                                                      authorization is not a complete defense to self-dealing transactions entered
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant                     19     20     Anderson et al. v. Int’l Union,                      No. 01-1253
                                 Guard Workers et al.                                    Utd. Plant Guard Workers et al.

however, because Defendants-Appellants did not bring a                            retirement proposal; however, we do not think that this
§ 501 suit against Plaintiffs-Appellees.                                          distinction warrants a different result in this case. See id;
                                                                                  Cement Masons, 794 F.2d at 1220. A union or its members
   The procedural posture of this case is unique, in that neither                 can ordinarily obtain an injunction prohibiting payments that
UPGWA nor its members brought a § 501 action against                              were authorized by union officers in breach of their fiduciary
Plaintiffs-Appellees; rather Defendants-Appellants assert that                    duties or obtain reimbursement for such payments. 29 U.S.C.
§ 501(a) provides a defense to Plaintiffs-Appellees’ breach of                    § 501(a); see also Guzman, 90 F.3d at 648; Council 49, Am.
contract action. No circuit has yet issued a published opinion                    Fed’n of State, County & Mun. Employees Union v. Reach,
expressly deciding whether § 501(a) can be asserted as a                          843 F.2d 1343, 1347-49 (11th Cir. 1988); Kerr v. Shanks, 466
defense to a breach of contract action. But see Trs. of the                       F.2d 1271, 1276 (9th Cir. 1972); McCabe, 415 F.2d at 98;
Operative Plasterers’ & Cement Masons’ Local Union                                Local No. 92, Int’l Ass’n of Bridge, Structural & Ornamental
Officers & Employees Pension Fund v. Journeymen                                   Iron Workers v. Norris, 383 F.2d 735, 737-40 (5th Cir. 1967).
Plasterers’ Protective & Benevolent Soc’y, Local Union No.
5, 794 F.2d 1217, 1220 (7th Cir. 1986) [hereinafter Cement                           In the case at bar, because the IEB deferred implementation
Masons] (questioning whether § 501(a) can be raised as a                          of the increased early-retirement benefits and the International
defense to a breach of contract action because a violation of                     Convention ultimately voted against their implementation, an
§ 501(a) does not render a contract intrinsically illegal). A                     injunction against implementation of the benefits was not a
basic principle of contract law supports our conclusion that                      possibility. Denying UPGWA and its members use of
§ 501(a) can be asserted as a defense to this breach of contract                  § 501(a) as a defense in this situation, where they were unable
action.                                                                           to use it offensively, makes little sense and would thwart the
                                                                                  purposes of that provision.12 Moreover, “Refusing to enforce
   Federal courts may not enforce a contract if the result                        a promise that is illegal under the antitrust or labor laws is not
would be to compel a violation of the law. Kaiser Steel Corp.                     providing an additional remedy contrary to the will of
v. Mullins, 455 U.S. 72, 77 (1982). As explained above, the                       Congress. . . .[A]ny one sued upon a contract may set up as a
early-retirement benefits resolution violated § 501(a) of the                     defen[s]e that it is a violation of the act of Congress, and if
LMRDA. In Kaiser Steel, the Supreme Court refused to                              found to be so, that fact will constitute a good defen[s]e to the
enforce a collective bargaining agreement provision that was                      action.” Kaiser Steel, 455 U.S. at 82 n.7 (quotation omitted).
illegal under federal labor and antitrust laws. Kaiser Steel,
455 U.S. at 85-87. It is true that the federal labor and antitrust                   Plaintiffs-Appellees argue that UPGWA may not rely upon
laws at issue in Kaiser Steel made intrinsically illegal the                      illegality as a defense to enforcement of the early-retirement
collective bargaining provision under consideration, whereas                      benefits because either the IEB or the convention delegates
§ 501(a) does not make intrinsically illegal the early-

                                                                                       12
                                                                                          Because § 50 1(a) is being raised as a de fense, neither M ichigan’s
into by union officers and agents, b ut that if such tra nsactio ns are validly   statute of limitations for breach of fiduciary duty claims nor the doctrine
authorized, then courts should no t interfere unless the transaction “is so       of laches prevents Defendants-App ellants from relying upon this
manifestly unreasonable as to evidence a breach of fiduciary obligation           provision. Likewise, the procedural requirements contained in § 501(b)
imposed by § 501(a).” Id.                                                         are not applicable.
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant      21    22   Anderson et al. v. Int’l Union,              No. 01-1253
                                 Guard Workers et al.                  Utd. Plant Guard Workers et al.

could have eliminated the § 501 problem by amending               Brown-Graves Co. v. Central States, Southeast & Southwest
UPGWA’s constitution. We reject this argument. First, the         Areas Pension Fund, 206 F.3d 680, 684 (6th Cir. 2000).
IEB did not have the authority to amend UPGWA’s                   Here, Plaintiffs-Appellees did not detrimentally or justifiably
constitution in this manner. Second, if UPGWA was required        rely upon the December 7, 1994 resolution. In January 1995,
to amend its constitution when its officers exceeded their        the IEB voted to rescind the resolutions authorizing the
powers thereunder, the constitution would not serve its           increased early-retirement benefits, and Plaintiffs-Appellees
purpose of limiting the officers’ powers. Third, we question      all continued in their respective offices until the end of their
whether a vote to amend UPGWA’s constitution could cure           terms in May 1995. Therefore, Plaintiffs-Appellees did not
after-the-fact this self-dealing violation of § 501(a). See       rely to their detriment on the increased early-retirement
Janice R. Bellace & Alan D. Berkowitz, THE LANDRUM-               benefits. As discussed above, the IEB exceeded its authority
GRIFFIN ACT: Twenty Years of Federal Protection of Union          under UPGWA’s constitution in offering the early-retirement
Members’ Rights 299 (1979).                                       benefits, and Plaintiffs-Appellees had actual knowledge of the
                                                                  limitations imposed by Article XI, Section 2 of UPGWA’s
  Therefore, we hold that § 501(a) can properly be raised by      constitution. Therefore, Plaintiffs-Appellees’ expectation that
a union or its members as a defense to a transaction entered      they would receive the increased early-retirement benefits
into by union officials, which grants those officials a direct    was not justifiable. Moreover, Plaintiffs-Appellees cannot
personal benefit in violation of the union’s constitution. This   assert estoppel when the passage of the December 7, 1994
holding is necessary to ensure that union officers or agents do   resolution constituted a breach of fiduciary duty under
not thwart the purposes of § 501(a) by binding unions to          § 501(a) of the LMRDA. See Meyers v. Moody, 693 F.2d
contracts with union officials that violate this provision.       1196, 1208 (5th Cir. 1982), cert. denied, 464 U.S. 920 (1983)
                                                                  (“The doctrine of estoppel is for the protection of innocent
D. Estoppel and Ratification                                      persons, and only innocent persons may invoke it.”).
  Our holding that the December 7, 1994 resolution                   Nor may Plaintiffs-Appellees obtain the early-retirement
constitutes an unenforceable contract should not be               benefits embodied in the December 7, 1994 resolution on the
interpreted as foreclosing the possibility of estoppel in an      theory of ratification. On appeal, Plaintiffs-Appellees
appropriate case. This, however, is not an appropriate case.      strenuously assert that UPGWA ratified the early-retirement
                                                                  benefits by eliminating their positions and thereby retaining
  The elements of estoppel are: (1) conduct or language           the cost savings associated with the early-retirement proposal.
  amounting to a representation of fact; (2) the party to be      It is true, “Ratification occurs where the principal receives
  estopped must be aware of the true facts; (3) the party to      and retains the benefits of a transaction with full knowledge
  be estopped must intend that the representation be acted        of all of material facts.” Davis v. Mut. Life Ins. Co. of New
  on such that the party asserting the estoppel has the right     York, 6 F.3d 367, 374 (6th Cir. 1993), cert. denied, 510 U.S.
  to believe it was so intended; (4) the party asserting the      1193 (1994). In this case, however, elimination of Plaintiffs-
  estoppel must be unaware of the true facts; and (5) the         Appellees’ positions was not dependent upon providing the
  party asserting the estoppel must detrimentally and             increased early-retirement benefits. Although Plaintiffs-
  justifiably rely on the representation.                         Appellees, as members of the IEB, may not have voted to
                                                                  eliminate their positions absent the generous early-retirement
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant     23    24   Anderson et al. v. Int’l Union,             No. 01-1253
                                 Guard Workers et al.                 Utd. Plant Guard Workers et al.

offer, the elimination of their offices could and did occur                            ______________
without their consent. UPGWA’s constitution gave the IEB
the authority to consolidate regions and eliminate directors’                             DISSENT
positions, which the IEB did through the January 24, 1995                              ______________
resolution, and UPGWA’s constitution gave the convention
delegates the authority to eliminate the vice-president’s          MERRITT, Circuit Judge, dissenting. The plaintiffs
position, which the delegates did at the International           entered into an agreement with the union to give up their jobs,
Convention in May 1995.                                          salaries and expectations of future retirement benefits in
                                                                 return for yearly early retirement benefits of approximately
                   III. CONCLUSION                               $20,000 for Anderson, $30,000 for Squier and $40,000 for
                                                                 Scohy — less than half their salaries. There is no showing of
  For the foregoing reasons, we REVERSE the district             bad faith. They responded to the union’s offer made by its
court’s judgment awarding Plaintiffs-Appellees the requested     President, originating with its accountants and blessed as to
increased early-retirement benefits. Additionally, Plaintiffs-   legality by its counsel. The district court was correct to
Appellees’ motions to dismiss and motion for costs are           conclude that the Union, through its retirement plan, as well
DENIED.                                                          as the actions of its president and the advice of its counsel,
                                                                 manifested authority in the Board to offer the early retirement
                                                                 contracts to the plaintiffs. The Retirement Plan specifically
                                                                 provides that the Union “acting through its...Board” shall
                                                                 have the right to modify the plan. Moreover, the Union’s
                                                                 constitution provides that the Board “shall decide all
                                                                 questions involving interpretation of the Constitution and By-
                                                                 Laws, between Conventions.” Both the Union President and
                                                                 the Union’s attorney, Gordon Gregory, assured the plaintiffs
                                                                 that there were no legal problems with the retirement plan.
                                                                   The district court was also correct that the plaintiffs were
                                                                 reasonable in relying on such manifestations. Their beliefs
                                                                 that Board approval would bind the Union were reinforced by
                                                                 Board member Ronald Warfield, who at the time was a
                                                                 member of the pension committee; by Union President
                                                                 McConville, who presented the plan to them to begin with as
                                                                 a way to save the Union money and who assured them that
                                                                 the Board could bind the Union to such a plan; and by Gordon
                                                                 Gregory, who had been an attorney for the Union for 35
                                                                 years, and whose opinion they sought and who repeatedly
                                                                 assured them that the Board action would be sufficient to
                                                                 make the plan binding. President McConville and Attorney
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant     25    26    Anderson et al. v. Int’l Union,              No. 01-1253
                                 Guard Workers et al.                  Utd. Plant Guard Workers et al.

Gregory even testified that they thought the plaintiffs were     not void the contract as illegal. Neither the language of the
reasonable in believing that Board approval could make the       statute nor the case-law contemplates rendering the union
plan binding. It is true that the plaintiffs were made aware     contract void. The majority seems to admit this point, but
that there might be some legal challenge to the retirement       downplays its significance. A contract should not be rendered
plan, but that alone is not sufficient to make their reliance    void at the behest of the party that induced its formation at the
unreasonable in light of all the assurances they received,       expense of actors who lack culpability or any wrongful intent.
especially when the plan was not even their idea, but rather     If the Union members claim a breach of duty by the plaintiffs,
was presented to them as a way for the Union to save money.      that claim should be pursued in an action for damages in tort
Indeed, the plaintiffs were praised for sacrificing their own    or restitution under the statute. Voiding the contract and
jobs in order to save the Union money.                           leaving the plaintiffs out in the cold is too drastic a remedy
                                                                 and has no relation to any damages Union members may have
  The Union argues that the plaintiffs cannot claim              suffered.
reasonable reliance on Attorney Gregory’s advice when
Gregory advised them otherwise on January 4th,                      Furthermore, as I explained above, I do not believe the
recommending that the Board rescind the vote. But                plaintiffs breached a duty to the Union members in the first
Gregory’s advice on January 4th is irrelevant to the question    place. Again, there was no showing of bad faith on their part,
of whether a contract had been created on December 7th. By       and the retirement plan was not their idea, but rather was the
that point the plaintiffs had already relied on the apparent     idea of the Union accountant, and was presented to them by
authority of the President and the Board and the advice of       the Union president as a way of saving the Union money. We
counsel. Had the plaintiffs been the ones who sought to get      should not now allow the Union to avoid the contract it
out of the December 7th agreement while the Union sought to      drafted and asked them to sign, especially by means of a
enforce it, the plaintiffs would likely have been bound.         statutory provision that only provides a cause of action for
                                                                 third-party Union members. Doing so turns Section 501 into
   The Union believes that the early retirement agreement        a one-sided escape route for Unions that Congress never
violates Section 501 of the Labor Management Reporting and       intended.
Disclosure Act (LMRDA), which makes it a breach of duty
for a Union official to expend Union money in violation of         For the aforementioned reasons, I respectfully DISSENT.
the Union constitution, and which provides a cause of action
for individual Union members when the Union’s constitution
is so violated. 29 U.S.C.A. § 501 (2003). But Section 501
does not provide that a Union may itself persuade otherwise
innocent Union officers to sign a contract and then use that
provision as a defense to the contract that the Union has
entered into. As the majority notes, there is no precedent for
allowing a Union to use Section 501 in this manner.
  Moreover, even if a Union’s officers had breached a
Section 501 duty by entering into such a contract, that does