Court Opinion

ID: 9464828
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:43:54.793377+00
Date Added: 2024-06-11T17:38:27.357776
License: Public Domain

FRIENDLY, Circuit Judge,
dissenting:
Judge Griesa was abundantly justified in concluding that Capanegro had been a party to a plan for embezzling, abstracting and converting the funds of Local 1101 of the Communication Workers of America. If the Government had procured an indictment charging that Carnivale had violated 29 U.S.C. § 501(c) and that Capanegro had aided and abetted him, I would have no hesitation in affirming a conviction. However, the Government chose instead to charge Capanegro as principal and thereby raise the question whether § 501(c) includes a person whose relationship to the union is solely that of an independent contractor. With respect I cannot agree with the majority’s conclusion that it does if his relationship with the union is close enough.
Although the majority concedes that “Capanegro as retained counsel of the Union was not its ‘employee’ in the common law sense of a servant as distinguished from an independent contractor,” it is worth emphasizing how well-advised the concession is. Neither the retainer agreement quoted ante at pages 976-977, nor Capanegro’s references to himself as the Union’s chief counsel, nor any other aspect of the relationship between Capanegro and the Union removes him from the common law description of an independent contractor as a person “who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right of control with respect to his physical conduct in the performance of the undertaking.” Restatement Second of Agency § 2(2) (1958); see Logue v. United States, 412 U.S. 521, 527, 93 S.Ct. 2215, 37 L.Ed.2d 121 (1973); Radio City Music Hall Corp. v. United States, 135 F.2d 715 (2 Cir. 1943) (L. Hand, J.). In Avis Rent a Car System, Inc. v. United States, 503 F.2d 423, 429 (2 Cir. 1974), we laid out some of the other applicable criteria: whether the person rendering service has a substantial investment in his own tools or equipment; whether he undertakes a substantial cost, as by employing his own laborers; whether he has an opportunity to profit depending on his management skill; whether the relationship between the person rendering the service and the person receiving it is permanent; and whether the person rendering the service works in the ordinary course of the recipient’s business rather than in an ancillary capacity. See also NLRB v. United Insurance Co., 390 U.S. 254, 259, 88 S.Ct. 988, 19 L.Ed.2d 1083 (1968); Restatement Second of Agency § 220. The evidence here was that Capanegro maintained his own office and employed a secretary, and that he possessed a “special skill” upon which his opportunity to profit depended. It is of no moment that services like Capanegro’s could equally well have been rendered by house counsel. That was not the relationship here.
As I understand it, the majority would agree that Capanegro would not fall within § 501(c) if that section had been worded *981“Any officer or employee who embezzles, steals” etc. “assets of a labor organization of which he is an officer or employee. . ” Its conclusion that “the statute we are construing does not limit its coverage to officers or employees of a labor organization,” rests primarily on the basis that the draftsman applied the prohibition to “any person” who embezzles or steals from a labor organization “by which he is employed.” This method of drafting, it is argued, evidences an intention of Congress to avoid use of the term “employee”, with its attendant common law connotations, in favor of a broader usage of the term “employ” which would include all persons hired by a union as independent contractors— lawyers, accountants, physicians, architects, builders of union headquarters, etc. — provided their relationship with the union is sufficiently intimate.
In the absence of any legislative history to support such a conclusion,1 this is attributing altogether too much significance to what on its face appears to be only a draftsman’s choice. When Congress meant to go beyond officers and employees in imposing criminal liability for the misapplication of funds, it has not left the matter to ambiguous inference. See 18 U.S.C. §§ 656 and 657 (“Whoever, being an officer, director, agent or employee of, or connected in any capacity with” . . . ).
The conclusion that Congress would have given a much clearer signal if it had intended § 501(c) to include independent contractors is fortified by history with respect to related statutes. When Congress has used the term “employee” or its equivalent, the courts have generally confined it to its common law meaning; in those instances where the courts have gone further, Congress has corrected them. Examples of the attitude first described are Cimorelli v. New York Central R. R., 148 F.2d 575, 577-78 (6 Cir. 1945), (provision of the Federal Employers’ Liability Act, 45 U.S.C. § 51, that “[e]very common carrier by railroad . . . shall be liable in damages to any person suffering injury while he is employed by such carrier,” described “the conventional relationship of employer and employee” and excluded independent contractors); see also Baker v. Texas & Pacific Ry. Co., 359 U.S. 227, 79 S.Ct. 664, 3 L.Ed.2d 756 (1959) (Federal Employers’ Liability Act); Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947) (Fair Labor Standards Act); United States v. New England Coal and Coke Co., 318 F.2d 138, 143-44 (1 Cir. 1963) (phrase “all persons employed by the contractor,” in the WalshHealy Act, 41 U.S.C. § 35(b), was not intended to embrace persons who were independent contractors); Strangi v. United States, 211 F.2d 305 (5 Cir. 1954) (Federal Tort Claims Act). An example of the latter is the 1948 amendments to the Social Security Act and the relevant sections of the Internal Revenue Code which overruled the expansive construction given in United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947) and Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947), and tied the definition of “employee” to common law standards, 62 Stat. 438, now codified at I.R.C. §§ 3121(d)(2), 3306(i); see 42 U.S.C. § 410(j), in what the Senate Report termed a “reassertion of Congressional intent regarding the application of the act.” S.Rep.No.1255, 80th Cong., 2d Sess. 7 (1948). See United States v. W. M. Webb, Inc., 397 U.S. 179, 182-90, 90 S.Ct. 850, 25 L.Ed.2d 207 (1970). An example still more pertinent to this case was the overruling of NLRB v. Hearst Publications, Inc., 322 U.S. 111, 129, 64 S.Ct. 851, 859, 88 L.Ed. 1170 (1944). There the Court, pursuing a line of argument of which the majority’s opinion is quite reminiscent, stated that the barebones definition *982of employee in § 2(3) of the NLRA left “no doubt that its applicability is to be determined broadly, in doubtful situations, by underlying economic facts rather than technically and exclusively by previously established legal classifications,” and upheld the NLRB’s determination that newsboys distributing papers on a commission basis and subject to various supervisory controls were the papers’ employees — a view which surely made sense in the statutory context. Nonetheless, in the Taft-Hartley Act Congress amended § 2(3) expressly to exclude independent contractors. The House report which accompanied the statute used unusually strong terms with respect to the Hearst decision.
An “employee”, according to all standard dictionaries, according to the law as the courts have stated it, and according to the understanding of almost everyone, with the exception of members of the National Labor Relations Board, means someone who works for another for hire. But in the case of National Labor Relations Board v. Hearst Publications, Inc. (322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944)), the Board expanded the definition of the term “employee” beyond anything that it ever had included before, and the Supreme Court, relying upon the theoretic “expertness” of the Board, upheld the Board. In this case the Board held independent merchants who bought newspapers from the publisher and hired people to sell them to be “employees”. The people the merchants hired to sell the papers were “employees” of the merchants, but holding the merchants to be “employees” of the publisher of the papers was most far reaching. It must be presumed that when Congress passed the Labor Act, it intended words it used to have the meanings that they had when Congress passed the act, not new meanings that, 9 years later, the Labor Board might think up. In the law, there always has been a difference, and a big difference, between “employees” and “independent contractors”. “Employees” work for wages or salaries under direct supervision. “Independent contractors” undertake to do a job for a price, decide how the work will be done, usually hire others to do the work, and depend for their income not upon wages, but upon the difference between what they pay for goods, materials, and labor and what they receive for the end result, that is, upon profits. It is inconceivable that Congress, when it passed the act, authorized the Board to give to every word in the act whatever meaning it wished. On the contrary, Congress intended then, and it intends now, that the Board give to words not farfetched meanings but ordinary meanings. To correct what the Board has done, and what the Supreme Court, putting misplaced reliance upon the Board’s expertness, has approved, the bill excludes “independent contractors” from the definition of “employee”.
H.R.Rep.No.245, 80th Cong., 1st Sess. 18 (1947). While Congress did not repeat the express exclusion of independent contractors in the definition of “employee” in § 402(f) the LMRDA,2 this was doubtless because it saw no need to reiterate what it had so plainly said. Indeed, the majority does not contend that Capanegro was an “employee” as defined in § 402(f).
What is ultimately dispositive is that § 501(c) is a criminal provision and thus implicates Justice Jackson’s warning in Morissette v. United States, 342 U.S. 246, 263, 92 S.Ct. 240, 249, 96 L.Ed. 288 (1952) (footnote omitted):
The spirit of the doctrine which denies to the federal judiciary power to create crimes forthrightly admonishes that we should not enlarge the reach of enacted crimes by constituting them from anything less than the incriminating compo*983nents contemplated by the words used in the statute. And where Congress borrows terms of art in which are accumulated the legal tradition and meaning of centuries of practice, it presumably knows and adopts the cluster of ideas that were attached to each borrowed word in the body of learning from which it was taken and the meaning its use will convey to the judicial mind unless otherwise instructed. In such case, absence of contrary direction may be taken as satisfaction with widely accepted definitions, not as a departure from them.
Cf. United States v. Ferrara, 451 F.2d 91, 95 (2 Cir. 1971), cert. denied, 405 U.S. 1032, 92 S.Ct. 1291, 31 L.Ed.2d 489 (1972); and United States v. Ottley, 509 F.2d 667, 672 & n. 7 (2 Cir. 1975) (applying Morissette in interpreting criminal provisions of LMRDA). The wisdom of this statement is illustrated by the consequences of ignoring it. Instead of being able to refer to a well-developed body of law which provides a basis on which criminal liability can be determined, trial judges and juries must now minutely scrutinize the relationships of independent contractors to unions to determine if they are close enough for the statute to apply. The majority supplies no real clue as to when “employee” in § 501(c) is to be taken in its common law context and when it is not. I am baffled how the majority can conclude that a criminal statute requiring such an inquiry to determine whether a person is subject to it could pass muster under such cases as Lanzetta v. New Jersey, 306 U.S. 451, 453, 59 S.Ct. 618, 83 L.Ed. 888 (1939) and United States v. Harriss, 347 U.S. 612, 617, 74 S.Ct. 808, 98 L.Ed. 989 (1954). At the very least such an interpretation of § 501(c) raises constitutional doubts which a court should avoid. Furthermore, the majority seems to have involved itself in the anomaly of giving the criminal provision, § 501(c), a broader sweep than the civil ones, §§ 501(a) and (b), since Capanegro could be brought under these only by characterizing him as a “representative” of a labor organization — a tour de force in which the majority is as yet unwilling to engage. See footnote 5 to majority opinion. The understandable desire that Capanegro should not escape criminal punishment should not lead us to extend the statute beyond what Congress directed.
I would reverse the conviction with instructions to dismiss the indictment on the ground that Capanegro was not a person employed by a union as required by § 501(c).

. Such legislative history as exists is to the contrary. Congress did not enact proposed versions of the LMRDA that would have exposed to criminal liability anyone “engaged directly or indirectly in or connected in any capacity with (i) the administration, management, or control of money or other property of a labor organization . . . ,” S. 748, 86th Cong., 1st Sess. § 412(a) (1959); H.R. 4473, 86th Cong., 1st Sess. § 215 (1959), or, broader yet, “any person” whether or not employed by a labor organization, S. 1137, 86th Cong., 1st Sess. § 407 (1959); H.R. 7265, 86th Cong., 1st Sess. § 306 (1959).

. This reads:
(f) “Employee” means any individual employed by an employer, and includes any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice or because of exclusion or expulsion from a labor organization in any manner or for any reason inconsistent with the requirements of this chapter.