Court Opinion

ID: 4695244
Source: CourtListenerOpinion
Date Created: 2021-06-14 16:00:30.841717+00
Date Added: 2024-06-11T08:05:34.338507
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 19-3087
                                No. 19-3197
                                No. 19-3200
                        ___________________________

Jonathan Gould, on behalf of St. Louis - Kansas City Carpenters Regional Council

               lllllllllllllllllllllPlaintiff - Appellant/Cross Appellee

                                          v.

                                    Albert Bond

              lllllllllllllllllllllDefendant - Appellee/Cross Appellant

              St. Louis - Kansas City Carpenters Regional Council

        lllllllllllllllllllllIntervenor Defendant - Appellee/Cross Appellant
                              ___________________________

                   Appeals from United States District Court
                 for the Eastern District of Missouri - St. Louis
                                 ____________

                          Submitted: December 16, 2020
                              Filed: June 14, 2021
                                 ____________

Before SMITH, Chief Judge, LOKEN and MELLOY, Circuit Judges.
                              ____________

LOKEN, Circuit Judge.
       Jonathan Gould, a dues paying member of the St. Louis-Kansas City
Carpenters Regional Council (Council), filed this application for leave of court to file
an action on behalf of the Council under 29 U.S.C. § 501(a) against Albert Bond, the
Council’s current Executive Secretary Treasurer (EST), alleging various breaches of
Bond’s fiduciary duties as a union official. The Council intervened as a defendant.
After a contested hearing, the district court1 denied leave to file suit for failure to
show the good cause the statute requires. Gould appeals. Bond and the Council cross
appeal the district court’s order granting Gould leave to file his appeal one day out
of time. See Fed. R. App. Proc. 4(a)(5). We affirm.

                                   I. Background.

       Gould was appointed a Council business agent by EST Terrence Nelson. Bond
was Nelson’s Assistant Secretary Treasurer and became the EST in 2015. Gould has
complained of financial and administrative waste by Council executives since 2008 --
approving reimbursements for non-Council-related activities and unsupported claims;
granting executives compensation rather than providing vehicle benefits, which
increased the Council’s tax burden and inflated executive pensions; and failing to
take remedial action to correct past failures. Gould was nominated to run against
Nelson in the 2014 EST election. Gould had emailed Council business agents and
executive board members an accounting of perceived breaches of fiduciary duties and
delivered a speech to the same effect. Nelson removed Gould from his slate of
proposed business agents. The delegates re-elected Nelson in 2014 and 2015.

       In 2016, Gould sued the Council and several officials in the Circuit Court for
the City of St. Louis, asserting claims for wrongful termination, defamation, injurious

      1
        The Honorable David D. Noce, United States Magistrate Judge for the Eastern
District of Missouri, to whom the case was referred for final disposition by consent
of the parties pursuant to 28 U.S.C. § 636(c).

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falsehood, and intentional infliction of emotional distress. Gould v. St. Louis-Kansas
City Carpenter’s Regional Council, 1622-CC09954-01 (Mo. Cir. Ct. 2016), aff’d per
curiam, No. ED 108318 (Mo. App. July 28, 2020), vacated pursuant to transfer, SC
98740 (Dec. 22, 2020). In late 2017, Gould received voluminous Council documents
in discovery. In a January 12, 2018 letter to Bond, Gould outlined improper
reimbursements and the vehicle policy as breaches of fiduciary duties, identified six
executives responsible for waste of union funds, and demanded that Bond “recover
damages, secure an accounting and/or seek other appropriate relief on behalf of the
Council and its members.”

      In response, the Council hired a Washington, D.C., accounting firm, Calibre
CPA Group, to perform an audit and invited Gould to provide information and
documentation that could assist in the investigation. Gould questioned Calibre’s
independence because it had been retained on other matters by the United
Brotherhood of Carpenters and Joiners of America, the Council’s parent organization.
He argued the audit was insufficient but agreed to deliver documents to Calibre.

       Attorney Matthew Clash-Drexler, hired by the Council to interface with Gould,
rejected personal delivery of documents, requested the documents be sent to him, and
promised to forward the documents to Calibre upon receipt. Gould responded by
petitioning to amend his state court wrongful termination suit to add several counts
under 29 U.S.C. § 501(b). With that motion pending in April, Clash-Drexler
informed Gould that the audit was underway and expected to conclude later that
month. In response, Gould sent Clash-Drexler 18,000 Council documents totaling
nearly 120,000 pages which Gould had received in the state court suit. Clash-Drexler
objected to the voluminous, unsorted document dump and asked Gould to sort the
documents within a week, identifying each document’s relevance to the allegations
against each individual named in Gould’s demand letter. Gould sent the documents
back to Clash-Drexler with a letter describing three broad categories and arguing that
every document was relevant to Nelson’s breaches of fiduciary duty because the EST

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is responsible for approving all expenditures. The Council declared that Nelson’s
approval of expenditures was outside the scope of Gould’s demand letter and
therefore “Calibre was not asked to investigate same.” After the state court denied
Gould leave to add claims under 29 U.S.C. § 501(b) because his motion “does not
show the good cause requisite,” Gould narrowed his submission to 800 documents.
Clash-Drexler never forwarded the documents to Calibre.

      Calibre completed the audit in August. The audit included “the Council’s
internal and accounting controls and procedures surrounding cash disbursements,
expense reimbursements, and credit card disbursements” from July 1, 2013 to August
9, 2018, and the vehicle policy. The report concluded that the Council’s expense
reimbursement policy was sound under Department of Labor regulations. Some
individuals had failed to adequately substantiate reimbursement requests totaling
$1,351, but they either provided adequate documentation or reimbursed the Council.
Calibre found no impropriety in the increased compensation for vehicles.

       Gould refused to accept Calibre’s findings. On April 16, 2019, he commenced
this action by filing a motion for leave to file a verified complaint under 29 U.S.C.
§ 501(b) against Bond. Gould delivered a copy of the pleadings to Bond’s counsel.
Bond appeared, the Council intervened, the parties briefed the issue, and after a
hearing the district court denied Gould leave to file for failure to show good cause.
Adopting the good cause standard in Dinko v. Wall, 531 F.2d 68, 75 (2d Cir. 1976),
the court concluded that “a union member who files a Section 501(b) lawsuit after a
union has taken action in response to the member’s request should show an
objectively reasonable ground for belief that the union’s accounting or other action
was not legitimate. Plaintiff has not made such a showing.”

                                  II. Discussion.

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       A. The Grant of Leave to Appeal Out of Time. We review the grant of a
motion for leave to appeal out of time for abuse of discretion. The time for filing a
notice of appeal is thirty days, but the district court may extend the time to file a
notice of appeal if the party seeking the extension shows “excusable neglect or good
cause.” Fed. R. App. P. 4(a)(1), 4(a)(5)(A)(ii). As timely filing is a statutory
requirement in civil cases, compliance is mandatory and jurisdictional. Hamer v.
Neighborhood Hous. Servs. of Chi., 138 S. Ct. 13, 21 (2017). We consider four
circumstances relevant in determining whether neglect is excusable: “the danger of
prejudice to the non-moving party, the length of the delay and its potential impact on
judicial proceedings, the reason for the delay, including whether it was within the
reasonable control of the movant, and whether the movant acted in good faith.”
Lowry v. McDonnell Douglas Corp., 211 F.3d 457, 462 (8th Cir.), cert. denied, 531
U.S. 929 (2000), quoting Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship,
507 U.S. 380 (1993). The movant’s reason for missing the deadline is “key to the
analysis.” Id. at 463. Excusable neglect may include “late filings caused by
inadvertence, mistake, or carelessness.” Treasurer, Trs. of Drury Indus., Inc. Health
Care Plan & Tr. v. Goding, 692 F.3d 888, 893 (8th Cir. 2012) (quotation omitted).
But “inadvertence, ignorance of the rules, or mistakes construing the rules do not
usually constitute ‘excusable neglect.’” Pioneer, 507 U.S. at 392. Thus, in Lowry,
we reversed the district court’s grant of a time extension because it was based on
excusable neglect that was nothing more than “garden-variety attorney inattention.”
211 F.3d at 464.

       Here, Gould’s Rule 4(a)(5) motion explained that he approved an appeal on
September 18 -- the last day to appeal the district court’s decision under Rule 4(a)(1).
Counsel believed that he forwarded a notice of appeal to his legal assistant for filing.
He had not. When counsel noticed the error one day later, Gould filed a motion for
leave to file notice of appeal out of time. The district court granted the motion over
defendants’ objections, concluding in a one-page Order that “the failure to file the

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notice on time was caused by excusable neglect. See Pioneer . . . (ruling that
‘excusable neglect’ includes ‘inadvertence, mistake, or carelessness’).”

        We disagree. The sole reason alleged for the untimely filing was the last-
minute failure of Gould’s counsel to provide his legal assistant with a notice of appeal
for filing. In our view, untimeliness was the result of “garden variety” delay by
Gould and negligence by his two attorneys, not their excusable neglect of a
mandatory and jurisdictional filing requirement. See Goding, 692 F.3d at 893
(distinguishing inexcusable delay from an error in attempting to comply). However,
whether this was an abuse of discretion by the district court is a closer question. See
generally Kern v. TXO Prod. Corp., 738 F.2d 968, 970 (8th Cir. 1984). So we will
turn to the merits of Gould’s fully briefed appeal.2

       B. Application for Leave to File Suit Under § 501(b). Section 501, entitled
“Fiduciary responsibility of officers of labor organizations,” was part of the Labor-
Management Reporting and Disclosure Act of 1959. Pub. L. 86-257, 73 Stat. 519,
535. Section 501(a) broadly defines the duty of “officers, agents, shop stewards, and
other representatives of a labor organization . . . in relation to such organization and
its members as a group.” Section 501(b) provides in relevant part:

            When any officer . . . is alleged to have violated the duties
      declared in subsection (a) and the labor organization or its governing
      board or officers refuse or fail to sue or recover damages or secure an
      accounting or other appropriate relief within a reasonable time after
      being requested to do so by any member . . . such member may sue such

      2
       Like the statutory requirement of a timely notice of appeal, the conditions
precedent to filing a § 501(b) action are statutory limits on federal jurisdiction. See
Phillips v. Osborne, 403 F.2d 826, 830 (9th Cir. 1968). “A court faced with more
than one [statutory] jurisdictional issue may decide these jurisdictional questions in
any order.” In re AFY, 734 F.3d 810, 816 (8th Cir. 2013), cert. denied sub nom.
Sears v. Badami, 572 U.S. 1117 (2014).

                                          -6-
      officer [in federal or state court] to recover damages or secure an
      accounting or other appropriate relief for the benefit of the labor
      organization. No such proceeding shall be brought except upon leave
      of the court obtained upon verified application and for good cause
      shown, which application may be made ex parte.

       The requirement that a union member request that the organization sue or
recover damages or secure an accounting “is a condition precedent to a suit under
section 501(b).” Horner v. Ferron, 362 F.2d 224, 231 (9th Cir.), cert. denied, 385
U.S. 958 (1966). “Together with the further requirement of a showing of good cause
and of securing court permission to proceed, the provision requiring a request is
clearly designed to protect union officials from unjust harassment.” Coleman v.
Brotherhood of Ry. & S.S. Clerks, 340 F.2d 206, 208 (2d Cir. 1965); accord Hoffman
v. Kramer, 362 F.3d 308, 314 (5th Cir. 2004). “However, the fiduciary responsibility
created by the Act is designed to protect union members . . . . The interpretation of
section 501(b) as a whole must reflect a balancing of important policies.” Dinko, 531
F.2d at 73. Reflecting these tensions, our sister circuits to some extent disagree over
the proper standard to apply in determining whether a union member has shown the
good cause required to be granted leave to file a § 501(b) suit. Compare, e.g., Horner,
362 F.2d at 228-29, with Dinko, 531 F.2d at 74-75, and with Hoffman, 362 F.3d at
316-17. The district court applied the Dinko standard. Our circuit has not taken sides
in this debate, and this case does not require us to do so.

       “[T]he first step a court should undertake in reviewing a claim [under 29 U.S.C.
§ 501(b)] is to ascertain that the allegations meet the minimal requirements of the
statute.” Hoffman, 362 F.3d at 316. One condition precedent is that the plaintiff
made a request “to sue or recover damages or secure an accounting or other
appropriate relief,” and the union or its governing officers failed or refused to act on
the request within a reasonable time. Like the demand prerequisite to a derivative
shareholder action, see Fed. R. Civ. P. 23.1(b)(3)(A), “[t]he purpose of the [§ 501(b)]
demand requirement is to afford [union leaders] an opportunity to exercise their

                                          -7-
reasonable business judgment.” Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 96
(1991) (quotation omitted).

       In this case, Gould’s January 12, 2018 letter to Bond demanded that he and the
Council’s governing officers “take one or more of the following actions against [the
six named executives]: (1) sue to recover damages; (2) secure an accounting; and/or
(3) seek other appropriate relief.” In response, Bond immediately advised Gould that
“the Council will launch a thorough and comprehensive investigation of your
allegations by securing an accounting conducted in accordance with accepted
accounting best practices and standards.”

       Some courts have construed § 501(b) as requiring a request that the union “take
legal action.” Adams-Lundy v. Ass’n of Prof. Flight Attendants, 844 F.2d 245, 249
(5th Cir. 1988). But the inclusion of requests to “secure an accounting” broadens the
scope of what will satisfy this condition precedent.3 Gould’s initial request satisfied
the statute’s condition precedent. Accord Dinko, 531 F.2d at 73. However, the fact
that Gould’s initial letter satisfied this statutory condition is not controlling when the
Council met his demand and secured an accounting that concluded no legal action
was appropriate. Section § 501(b) addresses the situation where a union does not
respond, leaving the complaining member “no alternative but to invoke the power of
the state or federal court to stop the abuses and recover damages.” Filippini v.
Austin, 106 F.R.D. 425, 430 (C.D. Cal. 1985). Here, the Council secured an
accounting by an outside auditor that investigated every complaint in Gould’s initial
request and concluded that there had been no wrong-doing by the union and that
relatively minor unsubstantiated reimbursement requests had been remedied by

      3
        But see Penuelas v. Moreno, 198 F. Supp. 441, 443 (S.D. Cal. 1961) (secure
an accounting “refers to court relief granting an accounting”). We disagree with that
illogical statutory interpretation. No party has raised the issue.

                                           -8-
individual Council executives.4 Based on the Calibre audit report, the Council had
no basis to sue the six individuals for damages or take other “legal action” for the
breaches of duty Gould had alleged.

       Gould disagreed with the audit report, alleging it was a sham, and filed this
action. In these circumstances, we conclude an additional request to Bond or the
Council was first required, stating precisely what legal action the Council was now
required to take against what executives for what alleged breaches of fiduciary duty
that the accounting had not remedied. After securing an accounting, Gould’s broad
allegations in his Verified Application based on vague references to 800 documents
produced in state court discovery did not suffice “to protect union officials from
unjust harassment.” Those allegations had been thoroughly investigated and found
to be unsupported. If Gould believed that only legal action would remedy specific
alleged breaches of duty the audit report failed to acknowledge and remedy, § 501(b)
required that he give Bond and the Council a second request to sue or recover
damages based on what he considered to be the audit report’s specific deficiencies.
We agree with the district court that Gould failed to “show an objectively reasonable
ground for belief that the union’s accounting or other action was not legitimate.” But
the defect in his application for leave to file a § 501(b) complaint was not simply a
failure to show good cause. It was a more fundamental failure to meet the condition
precedent of a timely and appropriate request “to sue or recover damages or secure
an accounting or other appropriate relief within a reasonable time.” Gould’s assertion
that any further demand would have been futile is contrary to the union’s efforts to
investigate his initial claims and to recover money owed the union and its members
for inadequately substantiated reimbursement requests.

      4
       A minor, inappropriate expenditure may be “a de minimis expenditure that
does not justify a federal lawsuit” even if it “state[s] a literal, cognizable claim of
breach of fiduciary duty.” Hoffman, 362 F.3d at 322 n.14.

                                         -9-
                                  III. Conclusion.

        For the foregoing reasons, the judgment of the district court denying leave to
file plaintiff’s Verified Complaint under 29 U.S.C. § 501(b) is affirmed. We dismiss
as moot defendants’ cross appeals in Appeal Nos. 19-3197 and 19-3200 from the
order granting plaintiff leave to appeal.
                         ______________________________

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