Court Opinion

ID: 159154
Source: CourtListenerOpinion
Date Created: 2010-08-14 06:18:53+00
Date Added: 2024-06-11T12:47:29.831957
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                         FEB 2 2000
                                 TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

 NATIONAL ELECTRIC
 CONTRACTORS ASSOCIATION,
 INC.,

          Plaintiff-Counter-Defendant -
          Appellee,
 v.

 THE KANSAS CHAPTER OF THE
                                                       No. 99-3141
 NATIONAL ELECTRICAL
                                                  (D.C. No. 99-CV-4023)
 CONTRACTORS ASSOCIATION,
                                                    (District of Kansas)
 INC.; JIM MLYNEK, in his capacity
 as agent for defendant Kansas Chapter
 and in his indivual capacity; GARY
 (NMI) ANDERSON, in his capacity as
 agent for defendant Kansas Chapter
 and in his individual capacities,

          Defendants-Counter-Claimants -
          Appellants.

                            ORDER AND JUDGMENT *

Before BALDOCK, BRORBY and LUCERO, Circuit Judges.

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      We are called upon to decide whether a district court abused its discretion

in granting a preliminary injunction in a dispute between a national industry

association and one of its local chapters. The district court issued a preliminary

injunction in favor of plaintiff-appellee National Electrical Contractors

Association, Inc. (“NECA”) against defendants-appellants Kansas Chapter,

National Electrical Contractors Association, Inc. (“Kansas NECA”), its President

Jim Mlynek, and its Secretary-Manager Gary Anderson. Defendants-appellants

challenge the issuance of that preliminary injunction. Exercising jurisdiction

pursuant to 28 U.S.C. § 1292(a), we take the district court’s view of the matter

and affirm.

                                          I

      NECA and Kansas NECA are incorporated trade associations composed of

members engaged in the business of electrical construction. NECA is organized

under a national constitution governing all of its members. The national

organization charters approximately 118 chapters throughout the country, each

one separately incorporated, in charge of its own affairs, and hiring its own

professional and clerical staff. Contractors may belong to multiple chapters if

they have multiple places of business.

      The purpose of NECA is to represent, promote, and advance the interests of

the electrical construction industry. Local chapters of NECA also act as multi-

                                         -2-
employer bargaining agents for the negotiation of collective bargaining

agreements with local unions of the International Brotherhood of Electrical

Workers (“IBEW”). In furtherance of that task, NECA assigns its local chapters,

such as Kansas NECA, to territories corresponding with the jurisdiction of local

chapters of the IBEW. 1

      NECA’s Bylaws provide a means by which it can control directly the affairs

of one of its local chapters: “sponsorship.” 2 Article III, Section 7, of NECA’s

bylaws provides that,

             A “Sponsored Chapter” may be established (subject to the
      requirements hereinafter set forth) when one or more of the following
      situations is found by the Executive Committee to exist:

            (a) When a local group of electrical contractors finds itself unable to
      organize effectively.

            (b) When the charter of a NECA Chapter has been revoked.

             (c) When forty (40%) percent or more of the membership of an
      existing chapter, or Division thereof, certifies in writing to the Executive
      Committee that the Chapter is not functioning adequately by reason of
      internal dissension.

            The requirements to be met prior to the sponsorship of a Chapter are:

      1
         The preceding facts, as determined by the district court for the purposes
of the preliminary injunction motion, are taken from the district court’s
Memorandum and Order. (I Appellants’ App. at 472.)
      2
         Article III, Section 6, of NECA’s Bylaws defines a “Sponsored Chapter”
as “a Chapter which is organized, reorganized or maintained by the direct action,
control or participation of the National Association in matters over which a
chartered Chapter has autonomous control.” (II Appellants’ App. at 595.)

                                         -3-
            (a) Written approval from the chartered Chapter or chapters in whose
      geographical jurisdiction the sponsored Chapter is to be organized. The
      Executive Committee shall not alter the geographical territory of any
      chartered Chapter solely for the purpose of permitting the affiliation of a
      sponsored Chapter with jurisdiction over the same class of business within
      said geographical territory.

             (b) Written approval from the District Vice President in whose
      district the Sponsored Chapter is to be organized.

             (c) Approval of the Executive Committee.

(II Appellants’ App. at 595.)

      After a dispute over the amendment of bylaws within Kansas NECA, in

December 1998 eleven members of Kansas NECA signed and sent a request to

John M. Grau, NECA’s Executive Vice President, asking for sponsorship of

Kansas NECA on the ground that the chapter was “unable to function adequately

due to internal dissention [sic],” and needed “the help of the National

Association.” (Id. at 604-10.) The members signing the petition represented over

forty percent of Kansas NECA’s membership in good standing. 3 Kansas NECA’s

eschewed efforts to adopt bylaws that would be approved by NECA came in the

context of a situation in which NECA had informed Kansas NECA—in an August

20, 1998 letter to defendant Anderson—of Kansas NECA’s need for “an approved

      3
        There is dispute over the validity of signatures on the petition by two
members of Kansas NECA. But whether or not those signatures were valid,
appellants do not dispute, and the evidence does not belie, the fact that the
remaining signatures represented over forty percent of Kansas NECA’s
membership.

                                        -4-
set of chapter bylaws,” without which “full recognition of [Kansas NECA]

representatives at the upcoming NECA National Convention and Board of

Governors’ meeting” could not be assured. (Id. at 724.)

      During the second week of January, 1999, NECA’s Executive Committee

authorized Grau and NECA District Vice President Ben Cook to establish

sponsorship of Kansas NECA. On January 19, 1999, Cook approved the

sponsorship, which was followed by the issuance of Articles of Sponsorship,

signed by Grau and finding as follows:

      That the Kansas Chapter, pursuant to the terms of the Kansas Chapter
      Bylaws, is subject to the Constitution, Bylaws, Rules and Regulations of
      the National Association.

      That the Request for Sponsorship submitted by members of the Kansas
      Chapter is properly submitted in accordance with Article III of the National
      Bylaws and is subscribed by and represents more than Forty Percent (40%)
      of the membership of the Kansas Chapter.

      That the Kansas Chapter is not functioning adequately due to internal
      dissension.

      That the conditions for sponsorship as provided for in Article III of the
      National Bylaws have been met in all respects.

      That it is in the best interests of the National Association and the Kansas
      Chapter that the Kansas Chapter become a “Sponsored Chapter” and
      maintained by the direct action, control or participation of the National
      Association in matters over which the Kansas Chapter otherwise would
      have autonomous control.

(Id. at 653.) The Articles of Sponsorship established “[t]he initial term of the

sponsorship . . . for a period of one (1) year commencing January 19, 1999, and

                                         -5-
ending January 18, 2000, subject to termination at an earlier date as determined

by the Executive Committee of the National Association.” (Id. at 653-54.) 4

       By letter dated January 19, 1999, Grau advised the members of Kansas

NECA that NECA had approved the request for sponsorship, notifying them that

an informational membership meeting would be held in Topeka on January 27,

1999, at which Cook, NECA’s Regional Executive Director David Roberts,

Southern Region Field Representative Jim Tatum, and NECA’s Labor Counsel

Gary L. Lieber would explain the details of the sponsorship. The January 27,

1999, meeting was held and was attended by an estimated eight or nine members

of Kansas NECA.

       4
          At oral argument we questioned, sua sponte , whether this appeal had
become moot with the expiration of NECA’s initial sponsorship period. An initial
sponsorship period lasts a maximum of one-year, with a renewal provision for a
maximum of one additional year. Since there is the possibility of renewal, there
is a reasonable expectation that these parties could be subjected to the same
action. Because the one-year initial period will often be concluded before the
appellate process is complete, the issue presented here is “capable of repetition,
yet evading review” and is thus justiciable.       See, e.g. , United States v. Deters , 143
F.3d 577, 578 n.2 (10th Cir. 1998) (“Although the defendant’s initial commitment
period has expired, this case is not moot [because] . . . [s]uch an order will rarely
if ever outlive the appellate process.”);    Grant v. Meyer , 828 F.2d 1446, 1449
(10th Cir. 1987), aff’d sub nom. Meyer v. Grant , 486 U.S. 414 (1988) (“We also
believe that the appeal is not moot even though the November 1984 general
election has passed . . . . It is well settled that an appeal is not moot if the dispute
is ‘capable of repetition, yet evading review.’”) (citations omitted);        Walker v.
McLain , 768 F.2d 1181, 1182-83 (10th Cir. 1985) (holding that case is not moot
where “it is likely” that petitioner may be “unable to meet his [child] support
obligations” and “will once again be held in contempt for nonsupport and again
be subjected to imprisonment”).

                                            -6-
      On that same day, defendants Anderson and Mlynek and other Kansas

NECA members attended a meeting in Wichita at which it was resolved that “the

[Kansas] Chapter engage legal counsel and take all legal measures to fight

National NECA’s attempted sponsorship of the Chapter.” (Id. at 708.)

      After the NECA meeting in Topeka, Fowler, Roberts, Tatum, Lieber, and

Kansas NECA Treasurer Douglas Hague went to Kansas NECA’s Topeka office,

where they met with defendants Mlynek and Anderson. Defendant Anderson was

informed of the sponsorship, asked for the office keys, and told to “remove

himself from office.” (I Appellants’ App. at 352.) He refused.

      There was also evidence that defendants Mlynek and Anderson, after

NECA’s sponsorship of Kansas NECA took place, attempted to change the

signature requirements for writing checks on behalf of Kansas NECA. The

change would have allowed Mlynek and Anderson to write checks without the

countersignature of the Treasurer, contrary to Kansas NECA’s practice.

      On February 8, 1999, NECA filed suit in United States District Court for

the District of Kansas seeking both a declaratory judgment pursuant to 28 U.S.C.

§§ 2201-2202 that it had lawfully sponsored Kansas NECA and preliminary and

permanent injunctions against defendants prohibiting them from interfering with

the sponsorship or taking any action inconsistent with the sponsorship. Following

a hearing, the district court issued a show cause and temporary restraining order

                                        -7-
against defendants. The district court thereupon conducted full evidentiary

hearings on plaintiff’s preliminary injunction motion, afterwards issuing a

Memorandum and Order granting a preliminary injunction that prohibited

defendants from engaging in the following actions:

      (1) interfering in any way with the operation of the Kansas Chapter by
      [NECA]; (2) interfering with NECA’s access to the Kansas Chapter’s
      offices, books, records, bank accounts and any other property; (3)
      scheduling and/or conducting any Board of Directors meetings or
      membership meetings without the express written approval of David
      Roberts, NECA Executive Director of Southern Region; and (4) transacting
      or attempting to transact any financial business concerning the Kansas
      Chapter, including with respect to any of its committees.

(I Appellants’ App. at 495-96.) This interlocutory appeal followed.

                                         II

      “We review the grant of a preliminary injunction for an abuse of

discretion.” ACLU v. Johnson, 194 F.3d 1149, 1155 (10th Cir. 1999) (citing

Kansas Health Care Ass’n, Inc. v. Kansas Dep’t of Soc. & Rehab. Servs., 31 F.3d

1536, 1543 (10th Cir.1994)). “We reverse that grant ‘only if the district court

abuses its discretion, commits an error of law, or is clearly erroneous in its

preliminary factual findings.’” Id. (quoting Kansas Health Care Ass’n, Inc., 31

F.3d at 1543 (internal quotation and citation omitted)).

      A party seeking a preliminary injunction

      must show that four conditions are met: (1) the movant will suffer
      irreparable harm unless the injunction issues; (2) there is a substantial
      likelihood the movant ultimately will prevail on the merits; (3) the

                                         -8-
      threatened injury to the movant outweighs any harm the proposed
      injunction may cause the opposing party; and (4) the injunction would not
      be contrary to the public interest.

Johnson, 194 F.3d at 1155 (citing Kiowa Indian Tribe of Okla. v. Hoover, 150

F.3d 1163, 1171 (10th Cir. 1998)). Where a party seeks a mandatory injunction

that would alter the status quo, the moving party must “satisfy an even heavier

burden of showing that the four factors listed above weigh heavily and

compellingly in [its] favor.” SCFC ILC, Inc. v. Visa USA, Inc., 936 F.2d 1096,

1098-99 (10th Cir. 1991). “The burden on the party seeking a preliminary

injunction is especially heavy when the relief sought would in effect grant

plaintiff a substantial part of the relief it would obtain after a trial on the merits.”

GTE Corp. v. Williams, 731 F.2d 676, 679 (10th Cir. 1984) (citations omitted).

                                            A

      With respect to NECA’s likelihood of prevailing on the merits, it is clear,

despite appellants’ claims to the contrary, that Kansas NECA was bound by the

sponsorship provisions of NECA’s Bylaws. Whether or not, as appellants and

appellees dispute, Kansas NECA possessed a valid charter, its articles of

incorporation provide that it shall “cooperate in general with [NECA], conducting

all activities in accord with [NECA’s] Constitution,” (II Appellants’ App. at

611), and its bylaws provide that “[e]ach member [of Kansas NECA] upon

becoming a member, agrees to be bound by each and every provision of the

                                           -9-
Constitution of NECA.” (Id. at 574.) NECA’s Constitution, in turn, incorporates

NECA’s Bylaws by reference, stating in Article I that NECA “shall be governed

under this Constitution . . . and by subsidiary bylaws designated the ‘Bylaws’

adopted simultaneously herewith . . . which Bylaws shall not be in conflict with

the provisions of the Constitution.” (Id. at 586.) Article III, Section 2, further

provides that “Sponsored Chapters shall be affiliated by articles of sponsorship

agreed to on an individual basis consistent with the provisions of the Bylaws.”

(Id. at 587.) Thus, by agreeing to be bound by NECA’s Constitution, Kansas

NECA is likewise bound by NECA’s Bylaws and sponsorship provision.

      The evidence is compelling that NECA complied with its Bylaws’

conditions for sponsorship of Kansas NECA. As noted, over forty percent of

Kansas NECA’s members petitioned NECA for sponsorship on grounds of

internal dissension pursuant to Article III, Section 7(c), of NECA’s Bylaws. 5

There was approval of sponsorship by the District Vice President and the

Executive Committee. Thus, when it found the sponsorship proper, the district

court neither “abuse[d] its discretion,” nor “commit[ted] an error of law,” nor was

      5
         Despite appellants’ contention that there was no internal dissension
within Kansas NECA, the district court found that there was, and our reading of
the record indicates that finding was not clearly erroneous. See Johnson, 194
F.3d at 1155.

                                         -10-
“clearly erroneous in its preliminary factual findings” regarding this point.

Johnson, 194 F.3d at 1155 (internal quotations and citations omitted). 6

      Similarly, defendants’ argument based on Kansas corporation law is not

sufficient to meet the threshold for reversal under the abuse of discretion

standard. 7 Defendants cite Kan. Stat. Ann. § 17-6505(c) for the proposition that a

meeting was legally required before Kansas NECA could approve sponsorship by

the national organization. 8 But it is an unreasonable interpretation of the

      6
        Under the abuse of discretion and “clear error of law” standard, we must
likewise uphold the district court’s legal conclusion that the “written approval”
requirement could not logically apply to the “internal dissension” ground for
NECA sponsorship, but instead applies exclusively to the other grounds for
sponsorship, because “written approval” would not be forthcoming from a chapter
riven by internal dissension. (II Appellants’ App. at 492-93.)
      7
         We find that defendants did not raise their present Kansas corporation
law arguments before the district court. It is a general rule that this court will not
consider an issue on appeal that was not raised below. See Walker v. Mather, 959
F.2d 894, 896 (10th Cir. 1992). But even assuming arguendo that the issue is not
barred, it is meritless, and we affirm on that basis.
      8
          Kan. Stat. Ann. § 17-6505(c) provides as follows:

              Unless otherwise provided in this act, the articles of incorporation or
              bylaws of a nonstock corporation may specify the number of
              members having voting power who shall be present or represented by
              proxy at any meeting in order to constitute a quorum for, and the
              votes that shall be necessary for, the transaction of any business. In
              the absence of such specification in the articles of incorporation or
              bylaws of a nonstock corporation, 1/3 of the members of such
              corporation shall constitute a quorum at a meeting of such members,
              and the affirmative vote of a majority of such members present in
              person or represented by proxy at the meeting and entitled to vote on
              the subject matter shall be the act of the members, unless the vote of

                                         -11-
language “any business” to construe Kansas corporation law as mandating a

meeting of voting members in the case of sponsorship. We can find no case law

interpreting the provision on which defendants rely. We find, however, a general

provision granting corporations broad authority to regulate their affairs as they

see fit:

       [E]very corporation, its officers, directors, and stockholders shall possess
       and may exercise all the powers and privileges granted by this act or by any
       other law or by its articles of incorporation, together with any powers
       incidental thereto, so far as such powers and privileges are necessary or
       convenient to the conduct, promotion or attainment of the business or
       purposes set forth in its articles of incorporation.

Kan. Stat. Ann. § 17-6101(a). As noted, Kansas NECA is bound to follow

NECA’s Constitution and Bylaws, and the sponsorship procedure set forth therein

is arguably “necessary or convenient to the conduct, promotion or attainment of

the business or purposes set forth in [Kansas NECA’s] articles of incorporation,”

especially in light of the obvious conflict existing within Kansas NECA that

threatened to disrupt its functioning. Id. It is unreasonable to construe Kansas

corporation law as micro-managing the conduct, and nullifying the articles of

incorporation, of nonstock corporations in the manner appellants urge. It was

therefore not an abuse of discretion under Kansas law for the district court to

grant the preliminary injunction against the defendants.

             a greater number is required by this chapter, the articles of
             incorporation or bylaws.

                                         -12-
      Finally, we agree with the district court that appellants are “equitably

estopped from claiming that [Kansas NECA] is not a Chapter of NECA.” (I

Appellants’ App. at 490.) The district court correctly found that “[t]he Kansas

Chapter has held itself out as a chapter of NECA for 55 years. During this period,

it has used the name NECA in its name, sent a representative to the NECA Board

of Governors, submitted proposals on behalf of the Chapter, and collected NECA

dues and submitted them.” (Id.) That evidence is undisputed, and the district

court’s consequent holding of equitable estoppel, irreproachable.

                                           B

      With respect to the “irreparable harm” factor, the district court likewise

found for NECA. It cited several reasons to support its conclusion. First, it

found that “[i]n recent months, the Chapter has been forced to deal with

seemingly endless disputes, some petty and some of importance . . . that have

made functioning extremely difficult.” (Id. at 493.) It concluded that NECA had

interests “in bringing order to one of its chapters[,] . . . in ensuring that the

wishes of the majority of the membership are realized[,] . . . [and] in seeing that

its chapters follow the requirements of its Constitution and Bylaws.” (Id.) In

addition, the district court cited evidence that defendants were “attempting to

manipulate the bank account of the Chapter,” and that the issuance of the

preliminary injunction “will serve to protect the Chapter’s assets.” (Id. at 494.)

                                          -13-
Based on our review of the record on appeal, we do not adjudge those preliminary

factual findings to be “clearly erroneous.” Johnson, 194 F.3d at 1155 (internal

quotations and citations omitted).

                                           C

      Finally, we agree fully with the findings of the district court that the injury

to NECA outweighs any injury to defendants and the grant of the preliminary

injunction is not adverse to the public interest. We therefore adopt the district

court’s analysis of those issues in its entirety.

                                          IV

      After reviewing the foregoing conditions for granting the preliminary

injunction, we hold that NECA has met its heightened burden of showing that on

balance the factors “weigh heavily and compellingly” in its favor. SCFC ILC,

Inc., 936 F.2d at 1098-99. The judgment of the district court is AFFIRMED.

                                         ENTERED FOR THE COURT

                                         Carlos F. Lucero
                                         Circuit Judge

                                          -14-