Court Opinion

ID: 71292
Source: CourtListenerOpinion
Date Created: 2010-04-26 07:16:05+00
Date Added: 2024-06-11T09:39:35.739874
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United States Court of Appeals,

                        Eleventh Circuit.

                          No. 95-8869.

 INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE
& FURNITURE WORKERS, AFL-CIO, on its own behalf, and on behalf of
its former local affiliate, IUE Local Union 353B, also formerly
known as Pabst Brewery Workers of Georgia, Local 353, Plaintiff,
Counterdefendant-Appellant,

                               v.

   John E. STATHAM, III, individually and as trustee and former
officer of IUE Local Union 353B, formerly known as Pabst Brewery
Workers of Georgia, Local 353; Melvin Griffin, individually and as
trustee and former officer of IUE Local Union 353B, formerly known
as Pabst Brewery Workers of Georgia, Local 353; Henry E. Sumner,
individually and as trustee and former officer of IUE Local Union
353B, formerly known as Pabst Brewery Workers of Georgia, Local
353, Defendants, Crossdefendants-Appellees,

                         K. Thomas Hall;

   Lynward Barrett, individually and d.b.a. Landmark Realty;
Defendants-Appellees,

Robert L. Mobley, Jr., Defendant, Crossclaimant, Counterclaimant-
Appellee.

                         Oct. 23, 1996.

Appeal from the United States District Court for the Middle
District of Georgia. (No. 5:94-CV-97-3), Duross Fitzpatrick, Chief
Judge.

Before CARNES, Circuit Judge, and FAY and JOHN R. GIBSON *, Senior
Circuit Judges.

     JOHN R. GIBSON, Senior Circuit Judge.

     The International Union of Electronic, Electrical, Salaried,

Machine & Furniture Workers, AFL-CIO, appeals the district court's

dismissal, for lack of jurisdiction, of the union's suit based on

the sale of real estate that the union claims belongs to it.   The

     *
      Honorable John R. Gibson, Senior U.S. Circuit Judge for the
Eighth Circuit Court of Appeals, sitting by designation.
union sued the three former union officials who sold the land, as

well as their lawyer, a real estate broker, and the buyer of the

land, alleging breach of fiduciary duties by the former officials

and numerous other causes of action.             The union sought specific

performance of provisions in the union constitution, injunctive and

declaratory relief, and damages.            The district court held that

there was no federal jurisdiction under 29 U.S.C. § 501 (1994) or

29 U.S.C. § 185(a) (1994) for this suit by a union against its

former officials.       The court dismissed the suit.           We reverse.

      The real estate was originally purchased by a local union of

brewery workers at the Pabst brewery in Perry, Georgia.               The local

was an affiliate of the International Union of United Brewery,

Flour, Cereal, Soft Drink and Distillery Workers of America, AFL-

CIO, known as the IUB.        In 1973 the local broke away from the IUB

and   established      the   "Pabst   Brewery   Workers    of   Georgia"    as   a

successor to the former local of the IUB.           The local retained the

same officers as it had before the disaffiliation.               As part of the

disaffiliation agreement, the members of the local agreed that all

the local's property should be transferred to the Pabst Brewery

Workers of Georgia.          Accordingly, John E. Statham, III, Melvin

Griffin, and Henry E. Sumner, the officers of the former IUB local

and   of   the   new   independent    local,    executed   a    quitclaim     deed

transferring the land with the union hall to "John Statham, Melvin

Griffin, and Henry Sumner, trustees of Pabst Brewery Workers of

Georgia, a voluntary unincorporated association."

      The local became a directly affiliated local union of the AFL-

CIO on November 5, 1973.        In 1975 the local built a union hall on
the real estate.   Later, in 1983, the local became an affiliate of

the   International   Union   of   Electronic,    Electrical,    Salaried,

Machine and Furniture Workers, AFL-CIO, the plaintiff in this case.

      The local dissolved in 1989 because the brewery closed.             The

plaintiff international union's constitution provided:

      In the even[t] that a local's charter is revoked, or that a
      local disbands or dissolves, the local's secretary and
      trustees shall send to the Secretary-Treasurer all funds and
      property belonging to the local.... If such a charter is not
      reissued within the year, the funds and property held by the
      Secretary-Treasurer shall be deemed to be the property of the
      Union and shall be deposited in the International Defense
      Fund."

At the last meeting of the local's executive board, the local

authorized the international union's representative, Gary Tucker,

to wind up the local's affairs.

      Tucker entered an agreement to sell the land with the union

hall on it to Robert L. Mobley, Sr., but the deal fell through

because the title search showed that the title was vested in

Statham,   Griffin,   and   Sumner.    Tucker    asked   the   trustees    to

quitclaim the land to the union, but instead Statham then sold the

property to Mobley.    Lynward Barrett acted as broker for the sale,

and J. David Byars acted as Statham's lawyer.             Byars held the

$62,000 sale proceeds in escrow, so that he could obtain the

signatures of Griffin and Sumner on the deed.        Before Byars could

obtain the signatures, he learned that the union was claiming it

owned the property.     Byars filed an interpleader action in state

court and tendered the money into court.

      The union filed suit in federal court, on its own behalf and

on behalf of the former local, asserting claims for breach of

fiduciary duty, 29 U.S.C. § 501, and breach of contract, 29 U.S.C.
§ 185(a), against Statham, Griffin, and Sumner.            The union also

stated numerous state law claims against Statham, Griffin, and

Sumner, as well as Byars, Mobley, and Barrett.1

     Byars's interpleader action was removed to federal court and

joined with the union's suit.

     The district court dismissed the union's complaint for lack of

jurisdiction upon determining that the union did not state a

federal     cause   of   action   under   either   the    Labor-Management

Disclosure and Reporting Act, 29 U.S.C. § 501, or the Labor-

Management Relations Act, 29 U.S.C. § 185(a).            Specifically, the

court held that section 501 does not create a federal cause of

action that can be asserted by a union, as opposed to an individual

union member.       The court also held that section 185(a) does not

cover a suit by a union against individuals, as opposed to a suit

against another labor union or an employer.

     The union appeals, arguing that section 501(a) creates a cause

of action that can be asserted by a union as well as by union

members, and that it can assert a section 185(a) claim against

former officers.      These issues are pure questions of law, subject

to de novo review.

                                    I.

         The question of whether a union may assert a cause of action

under section 501 of the Labor-Management Reporting and Disclosure

Act has been thoroughly examined by many courts, and they have

     1
      Both Byars and Mobley have died. Their personal
representatives, K. Thomas Hall and Robert L. Mobley, Jr., have
been substituted for them as parties in this case.
arrived at opposite conclusions.2
     Section   501   deals   with   civil   liability   in   two   parts.3

     2
      The courts that have concluded that section 501 does not
create a cause of action that can be asserted by a union are:
Building Material and Dump Truck Drivers, Local 420 v. Traweek,
867 F.2d 500, 506-07 (9th Cir.1989); Local 443, Int'l Bhd. of
Teamsters v. Pisano, 753 F.Supp. 434, 436 (D.Conn.1991);
International Bhd. of Boilermakers v. Freeman, 683 F.Supp. 1190,
1191-93 (N.D.Ill.1988); Crosley v. Katz, 131 L.R.R.M. 2175,
2176-77, 1988 WL 94283 (E.D.Pa.1988); Local 624, Int'l Union of
Operating Engineers v. Byrd, 659 F.Supp. 274, 276
(S.D.Miss.1986); Truck Drivers v. Baker, 473 F.Supp. 1120, 1122-
24 (M.D.Fla.1979); Teamsters, Local 20 v. Leu, 94 L.R.R.M. 2510,
1976 WL 1685 (N.D.Ohio 1976); and Safe Workers Org. v.
Ballinger, 389 F.Supp. 903, 906-08 (S.D.Ohio 1974). The
following courts have concluded that section 501 does create a
cause of action that a union can assert: International
Longshoremen's Ass'n, Local 1624 v. Virginia Int'l Terminals,
Inc., 914 F.Supp. 1335, 1338-40 (E.D.Va.1996); Morris v.
Scardelletti, 148 L.R.R.M. 2995, 3000-01, 1995 WL 20224
(E.D.Pa.1995); Operative Plasterers & Cement Masons v. Benjamin,
776 F.Supp. 1360, 1363-66 (N.D.Ind.1991); Glenn v. Mason, No. 79
Civ. 3918 (S.D.N.Y. Aug. 18, 1980); and BRAC v. Orr, 95 L.R.R.M.
2701, 2702, 1977 WL 1661 (E.D.Tenn.1977). See also Weaver v.
UMW, 492 F.2d 580, 586 (D.C.Cir.1973) (permitting union to
realign as plaintiff in section 501 case).

          The Supreme Court noted the conflict of authority
     without resolving it in Guidry v. Sheet Metal Workers Nat.
     Pension Fund, 493 U.S. 365, 374-75 n. 16, 110 S.Ct. 680, 686
     n. 16, 107 L.Ed.2d 782 (1990).
     3
      29 U.S.C. §§ 501(a) and (b) provide:
          (a) Duties of officers;      exculpatory provisions and
               resolutions void

               The officers, agents, shop stewards, 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, taking into account the special
          problems and functions of a labor organization, to hold
          its money and property solely for the benefit of the
          organization and its members and to manage, invest, and
          expend the same in accordance with its constitution and
          bylaws, and any resolutions of the governing bodies
          adopted thereunder, to refrain from dealing with such
          organization as an adverse party or in behalf of an
          adverse party in any matter connected with his duties
          and from holding or acquiring any pecuniary or personal
Subsection   (a)   imposes    fiduciary   duties   on   union   officials.

Subsection (b) confers jurisdiction on the federal courts for suits

brought by individual union members on the union's behalf to

enforce the duties created by subsection (a).       Subsection (b) also

places procedural limits on an individual's right to enforce the

subsection (a) duties, analogous to the demand prerequisites for

bringing shareholder derivative suits.      Under subsection 501(b) an

individual who wishes to sue for breach of an official's subsection

501(a) fiduciary duty must first request the union to proceed
against the official.        Only if the union fails to act within a

reasonable time after the request may the individual proceed to

          interest which conflicts with the interests of such
          organization....
          (b) Violation of duties; action by member after
               refusal or failure by labor organization to
               commence proceedings; jurisdiction; leave of
               court; counsel fees and expenses

               When any officer, agent, shop steward, or
          representative of any labor organization is alleged to
          have violated the duties declared in subsection (a) of
          this section 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 of the labor
          organization, such member may sue such officer, agent,
          shop steward, or representative in any district court
          of the United States or in any State court of competent
          jurisdiction 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 trial judge may
          allot a reasonable part of the recovery in any action
          under this subsection to pay the fees of counsel
          prosecuting the suit at the instance of the member of
          the labor organization and to compensate such member
          for any expenses necessarily paid or incurred by him in
          connection with the litigation.
federal court.

     Subsection 501(b) does not itself confer jurisdiction over

suits by the union, but it assumes that a union can sue its

officials;      otherwise, it would be futile for individuals to

request the union to sue and senseless to make the individuals

engage in a futile act.    By giving the union the right of first

refusal to the cause of action, section 501(b) shows Congress

preferred that the union, rather than individual members, sue on

its own behalf.    Weaver v. UMW, 492 F.2d 580, 586 (D.C.Cir.1973).

One of the early cases on this issue reasoned that if Congress

assumed unions could sue, and even preferred direct action by the

union to a derivative-type suit by individuals, Congress must have

intended that the unions have access to federal courts.    See BRAC

v. Orr, 95 L.R.R.M. 2701, 2702 (E.D.Tenn.1977).

     Other courts have answered that Congress did not necessarily

intend to give the unions a federal cause of action.       Congress

could conceivably have intended to relegate the unions to state law

remedies.    These courts say that, in the absence of any explicit

authorization from Congress, the courts may not enlarge their

jurisdiction by permitting the unions to sue in federal court. See

Teamsters, Local 20 v. Leu, 94 L.R.R.M. 2510 (N.D.Ohio 1976) ("The

statutory language confers upon the union as a unit no right to sue

its officers.    Unions are left to the state law jurisdiction they

have always had.");   Local 624, Int'l Union of Operating Eng'rs v.

Byrd, 659 F.Supp. 274, 276 (S.D.Miss.1986);   International Bhd. of

Boilermakers v. Freeman, 683 F.Supp. 1190, 1192 n. 4 (N.D.Ill.1988)

("In our view, [BRAC] represents an unjustified assumption of
judicial power.");      Truck Drivers v. Baker, 473 F.Supp. 1120, 1124

(M.D.Fla.1979).

     We conclude that it would in fact frustrate congressional

intent to relegate the union to state remedies.           The legislative

history of the LMRDA shows that Congress enacted the fiduciary

provisions of section 501 because existing state law remedies for

union officials' misconduct were inadequate.            The Senate report

contains    a    minority   statement   complaining   about   the   lack   of

fiduciary provisions in the Senate bill:              "Only one state has

enacted a statute imposing fiduciary obligations on union officials

and giving union members a right to sue in the event of any breach

thereof."       S.Rep. No. 187, 86th Cong., 1st Sess. reprinted in 1959

U.S.C.C.A.N. 2318, 2376.         The LMRDA as passed contains broader

fiduciary obligations than the Senate bill.              The House Report

contains a statement of supplementary views stating:

     We affirm that the committee bill is broader and stronger than
     the provisions of S. 1555 which relate to fiduciary
     responsibilities. S. 1555 applied the fiduciary principle to
     union officials only in their handling of "money or other
     property" (see S. 1555, sec. 610), apparently leaving other
     questions to the common law of the several States. Although
     the common law covers the matter, we considered it important
     to write the fiduciary principle explicitly into Federal labor
     legislation.    Accordingly the committee bill extends the
     fiduciary principle to all the activities of union officials
     and other union agents or representatives.

H.R.Rep.    No. 741, 86th Cong., 1st Sess.             reprinted    in   1959

U.S.C.C.A.N. 2424, 2479-80.       We conclude from this background that

Congress intended to supplement the remedies available to unions by

creating new federal protections.         Accord Glenn v. Mason, No. 79

Civ. 3918 (S.D.N.Y. Aug. 18, 1980).         But see Crosley v. Katz, 131

L.R.R.M. 2175, 2176-2177, 1988 WL 94283 (E.D.Pa.1988) (noting that
one Senate bill expressly provided for suits by unions and that

bill's provisions were not adopted).          It would make no sense to

impose federal duties and simultaneously deny the unions the right

to enforce those duties.

     If Congress had only enacted section 501(a) without section

501(b), no one would suggest that Congress meant to deny the union

the right to enforce 501(a).           However, because section 501(b)

mentions federal jurisdiction over suits by individuals but does

not explicitly refer to federal suits by unions, some courts have

inferred that Congress must have meant to exclude the possibility

of federal jurisdiction over unions' claims.              See, e.g., Leu, 94

L.R.R.M. at 2510 ("This remedy is new, specific, and limited.").

Expressio unius est exclusio alterius.

     The Seventh Circuit rejected this type of argument when

considering an analogous question in Hood v. Journeymen Barbers,

454 F.2d 1347, 1350-1354 (7th Cir.1972).         There, individuals sued

their   union,   its   board   and   the   members   of   its   Pension   Plan

Committee.   The Pension Plan Committee members argued that section

501(a) did not apply to them because, although they might be said

to fall within section 501(a)'s terms, section 501(a) did not refer

to pension trustees specifically, as section 502(a) did.                  The

Seventh Circuit refused to conclude that Congress's silence implied

an intent to exclude the pensions.          Instead, the Seventh Circuit

looked to the purpose of section 501(a):         "The Section, as we see

it, was a direct and far-reaching response to the mischief exposed

and dramatized by the McClellan Committee.           That mischief was the

misuse of union funds and property by union officials in its every
manifestation." Id. at 1354. The court concluded that section 501

did in fact extend to the pension committee members.

      Here, section 501(b) clearly shows that it has not one, but

two purposes:    first, to enable individuals to sue on the union's

behalf, and second, to make sure that individuals do not preempt a

union's right to prosecute its own claims.           Section 501(b) itself

makes the first purpose subservient to the second.             We should not

infer from the mention of individual suits that Congress did not

intend to give unions a cause of action.       It is far more in keeping

with the statute as a whole to conclude that, having given the

unions certain rights, Congress thought it implicit that the unions

could enforce those rights in court.         Allowing the individuals to

assert the unions' claims was more extraordinary and therefore had

to be spelled out.

      Moreover, reading section 501(a) as providing a cause of

action for individual union members, but not for the union itself,

would encourage the unions to refuse their members' requests to sue

offending officials.     Only by refusing the members' requests could

the   union   fulfill   the   prerequisite   under    section    501(b)   for

creating federal jurisdiction—though an individual, rather than the

union, would have to serve as plaintiff.               Thus, interpreting

section 501 to create a federal cause of action for individuals to

vindicate the unions' rights, but not for the unions themselves to

do so, would require the union to forego its right to sue in order

to obtain federal jurisdiction for the derivative claim.                   See

Operative     Plasterers v. Benjamin,         776     F.Supp    1360,     1366

(N.D.Ind.1991).    This interpretation would make the individual's
demand under section 501(b) into a meaningless formality.

      On the other hand, if we conclude that the union has a federal

cause of action, the demand requirement functions properly, to give

the union a chance to sue first, if it will.

      Therefore, we cannot interpret section 501 in such a way as to

frustrate Congress's apparent purpose in enacting it.                 We conclude

that section 501(a) was intended to create a federal cause of

action that can be asserted by the union on its own behalf.

          Once we have determined that a federal cause of action

exists, the statute granting jurisdiction over cases arising under

federal law provides jurisdiction for this suit.             28 U.S.C. § 1331

(1994).4

                                       II.

          The union also relies on section 301 of the LMRA, 29 U.S.C.

§   185(a),    to   provide    jurisdiction.       Section   185(a)     provides

jurisdiction        over    contract    suits    "between    any      ...    labor

organizations [representing employees in an industry affecting

commerce]."         The    union   asserts   a   claim   based   on    its   union

constitution, which is a "contract" claim under section 301.

Plumbers v. Local 334, 452 U.S. 615, 627, 101 S.Ct. 2546, 2553, 69

L.Ed.2d 280 (1981).

      4
      The trustees make some argument that section 501(a) does
not apply to them because any possible breach of trust occurred
when they had the property transferred to themselves as trustees,
and this antedated any relationship with the plaintiff
international union. To the contrary, the trustees are being
sued by the international union on behalf of its former local for
selling land they allegedly held in trust for the former local.
The fact that the trustees are no longer officers of the union is
immaterial, since they are being sued for abuse of the trust
which they enjoyed by virtue of their union offices. See
Benjamin, 776 F.Supp. at 1367.
       The defendants argue that section 185(a) does not extend to

claims against individual officers, citing Complete Auto Transit,

Inc. v. Reis,      451 U.S. 401, 417, 101 S.Ct. 1836, 1845-46, 68

L.Ed.2d 248 (1981), and Traweek, 867 F.2d at 508.              To the contrary,

we have affirmed a case in which the district court asserted

section      185(a)    jurisdiction        over    individual        defendants.

International Bhd. of Boilermakers v. Local Lodge D111, 681 F.Supp.

1570 (S.D.Ga.1987),       aff'd,    858    F.2d    1559,      1560   n.    1    (11th

Cir.1988), cert. denied, 490 U.S. 1047, 109 S.Ct. 1955, 104 L.Ed.2d

424 (1989).     See also Tile, Marble, Terrazzo Shopworkers v. Local

32, 896 F.2d 1404, 1416 (3d Cir.1990);                  International Bhd. of

Boilermakers v. Olympic Plating, 870 F.2d 1085 (6th Cir.1989);

International Bhd. of Boilermakers Local Lodge 714, 845 F.2d 687

(7th Cir.1988); International Bhd. of Boilermakers v. Freeman, 683

F.Supp. 1190, 1191 (N.D.Ill.1988).

       The district court in Local Lodge D111 observed there can be

no action for damages against individuals under section 185(a).

Lodge D111, 681 F.Supp. at 1572 n. 1 (citing Reis, 451 U.S. at 427,

101 S.Ct. at 1850-51).         However, the union has expressly limited

its section 185(a) claim to seek only equitable relief.                   This fact

distinguishes our case from Traweek, 867 F.2d at 508, which was a

suit   for    money   damages.     See    Benjamin,     776    F.Supp.     at    1367

(distinguishing Traweek ).        Cf. Local 443, Int'l Bhd. of Teamsters

v. Pisano, 753 F.Supp. 434 (D.Conn.1991) (section 185(a) does not

authorize suit against individuals for money damages).                    This case

is   also    distinguishable     from    Traweek   in   that    it   involves      an

international union's dispute with local officials, rather than a
strictly internal dispute within the local.         See id.

     The defendants distinguish Local Lodge D111, because both the

union   and   its   representatives   were   sued   in   that   case.   The

defendants argue that without the union defendant in Local Lodge

D111, there would not have been section 185(a) jurisdiction.            The

Second Circuit considered this question in Shea v. McCarthy, 953

F.2d 29, 32 (2d Cir.1992).      There, the Second Circuit explicitly

held that an individual defendant may be sued alone (without also

joining a union as defendant) under section 185(a) for violating

the union constitution, as long as the relief sought is equitable,

not legal.    We therefore conclude that there is jurisdiction over

the union's section 185(a) claim as stated.

     Accordingly, we must REVERSE the district court's dismissal of

this case, and REMAND for further proceedings.