Highway Truck Drivers and Helpers Local 107 v. Cohen

• Decision Date: 24 March 1960
• Docket Number: Civ. A. No. 27053.
• Citation: 182 F. Supp. 608
• Parties: HIGHWAY TRUCK DRIVERS AND HELPERS LOCAL 107, of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, an unincorporated association, by Thomas Graham, Carmen Grasso, Anthony Hnizdo, Jr., Karl M. Jensen, John C. Jones, Edward P. McCormick, John Regan, William D. Stasen and Robert D. Thomas, Trustees ad litem v. Raymond COHEN, Joseph E. Grace, Edward Battisfore, Edward Walker and Benjamin Lapensohn.
• Court: U.S. District Court — Eastern District of Pennsylvania

182 F. Supp. 608

HIGHWAY TRUCK DRIVERS AND HELPERS LOCAL 107, of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, an unincorporated association, by Thomas Graham, Carmen Grasso, Anthony Hnizdo, Jr., Karl M. Jensen, John C. Jones, Edward P. McCormick, John Regan, William D. Stasen and Robert D. Thomas, Trustees ad litem v. Raymond COHEN, Joseph E. Grace, Edward Battisfore, Edward Walker and Benjamin Lapensohn.

Civ. A. No. 27053.

United States District Court E. D. Pennsylvania.

March 24, 1960.

COPYRIGHT MATERIAL OMITTED

Edward B. Bergman, Philadelphia, Pa., for plaintiffs.

Samuel Dash, Philadelphia, Pa., for defendants, Raymond Cohen, Joseph E. Grace, Edward Battisfore and Edward Walker.

Morton Witkin, Philadelphia, Pa., for defendant, Benjamin Lapensohn.

Richard H. Markowitz, Philadelphia, Pa., for Union.

CLARY, District Judge.

This is a private suit brought under the recently enacted Labor Management Reporting and Disclosure Act of 1959, Public Law 86-257 (hereinafter referred to as the "Act"), 29 U.S.C.A. § 401 et seq. That Act establishes a fiduciary responsibility on the part of officers of a labor organization § 501(a), and further provided for a suit in a Federal district court to enforce these responsibilities § 501(b). The present suit has been brought under § 501(b) to enforce certain of these duties.

The moving parties are nine rank-and-file members of Highway Truck Drivers and Helpers, Local 107, of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (hereinafter referred to as "Local 107"), who were given leave by this Court on November 12, 1959 to file a complaint against the defendants, the governing officers of Local 107.¹ The complaint charged the defendants with a continuing mass conspiracy to cheat and defraud the union of large sums of money— the conspiracy alleged to have begun in 1954 and continued to the present time.

The defendants have yet to answer these very serious charges. Having been unsuccessful in first opposing the plaintiffs' petition for leave of this Court to sue,² defendants now move to have the complaint dismissed. They are supported in this motion by counsel for Local 107, which has been allowed to intervene as a party defendant. This motion to dismiss is presently before the Court along with the plaintiffs' prayer for a preliminary injunction to prohibit the defendants from using union funds to defray the legal costs and other expenses being incurred by the defendants (and several other members of Local 107) in the defense of civil and criminal actions brought against them in the Courts of Pennsylvania and also the present suit in our own Court. The charges in these cases, in essence, grow out of the alleged activities of the defendants complained of here. The question of the preliminary injunction will be taken up after we resolve the motion to dismiss the complaint.

Motion To Dismiss

Section 501(a) of the new Act establishes a federal duty on the part of labor union officials to abide by the ordinary rules of fiduciary responsibility. Section 501(a) states:

"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 interest which conflicts with the interests of such organization, and to account to the organization for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the organization. A general exculpatory provision in the constitution and bylaws of such a labor organization or a general exculpatory resolution of a governing body purporting to relieve any such person of liability for breach of the duties declared by this section shall be void as against public policy."

Its complement, § 501(b) authorizes suit in a federal court to enforce the duties imposed by subsection (a). Section 501(b) states:

"When any officer, agent, shop steward, or representative of any labor organization 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 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."

On September 30, 1959 the plaintiffs filed an application for leave to sue under § 501(b) and annexed the complaint which has since been filed by Order of this Court. Aside from the alleged continued expenditure of union funds to defend the criminal and civil suits brought against the defendants and others mentioned above, the only specific acts of misconduct alleged in this complaint relate to events occurring between June 1, 1954 (the date the defendants took office) and September 1957. The remainder of the complaint contains several general claims of fraud and breach of duty and alleges that such acts are continuing to the present time, and that these can only be discovered by an accounting. In light of this fact, the defendants vigorously assert that we must dismiss the complaint, since § 501(a) and (b) apply prospectively only and can not be applied to acts occurring prior to September 14, 1959, the effective date of § 501.

The defendants' contention that those alleged wrongs which occurred prior to the enactment of § 501 can not alone constitute a basis for recovery under that section, must be accepted. Aside from the fact that the plaintiffs have not attempted to meet this contention, the principle that a statute which creates a new substantive right or duty will not, in the absence of clear legislative intent to the contrary, be construed to apply retrospectively, is too well established to admit of argument. Brewster v. Gage, 1930, 280 U.S. 327, 50 S.Ct. 115, 74 L.Ed. 457; Miller v. United States, 1935, 294 U.S. 435, 55 S.Ct. 440, 79 L.Ed. 977; Home Indemnity Co. v. State of Missouri, 8 Cir., 1935, 78 F.2d 391; Peony Park, Inc. v. O'Malley, 8 Cir., 1955, 223 F.2d 668.

Moreover the question of retrospective application of the Act has only recently been passed on by Judge Mathes in the Southern District of California, Flaherty v. McDonald, 1960, 183 F.Supp. 300. Although that case dealt with Title III of the Act, rather than Title V, we believe that that court's reasoning is applicable here. Like the trusteeship provisions of Title III, Title V creates new substantive rights and duties not formerly cognizable under federal law. They will not be applied retrospectively.

Perhaps, the assertion that the basic and fundamental requirements of justice and fair play called for by § 501(a) of the Act—requirements which are indeed developed but one step beyond the Seventh Commandment itself—are "newly created duties", seems startling even in our present day and age. In defense of this admitted paradox we may only point out that although the duties alleged to have been breached here have long been encompassed within the moral law, and presumably within the common law of the various states (although we would be hard pressed to substantiate this with case law in the labor field), these duties are new to federal law, on which the jurisdiction (and thus the sole power) of this Court to act is based. Therefore, we feel bound by the principle of statutory interpretation previously enunciated.

To avoid the effect of this conclusion plaintiffs' attorney has astutely advanced the somewhat novel contention that §§ 157 and 158(a) (3) of Title 29 U.S.C.A. (popularly referred to as the Taft-Hartley Act) create an independent basis for recovery in this action. Since the Taft-Hartley Act became law on June 23, 1947 it would, of course, if applicable here, dispel any problem of retrospective application. However, we are convinced that it is not applicable and that the plaintiffs' argument must fail.

Generally speaking the sections of the Taft-Hartley Act relied upon by the plaintiffs recognize under federal law the right of employees to organize unions and further makes it an unfair labor practice for an employer to discriminate in regard to the hiring or tenure of employment except that they may discriminate against an employee for nonpayment of union dues, (i. e., § 158(a) (3) recognizes the right of a union and an employer to enter a union shop agreement whereby a new employee must within 30 days join the union or lose his job.)

From this, plaintiffs argue that the employee under a collective bargaining agreement containing this union shop clause (which clause is contained in a great...