350 F.3d 73 (2nd Cir. 2003), 02-7939, Local Union No. 38, Sheet Metal Workers' Intern. Ass'n, AFL-CIO v. Pelella

Docket Nº:02-7939
Citation:350 F.3d 73
Party Name:Local Union No. 38, Sheet Metal Workers' Intern. Ass'n, AFL-CIO v. Pelella
Case Date:November 17, 2003
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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350 F.3d 73 (2nd Cir. 2003)

LOCAL UNION NO. 38, SHEET METAL WORKERS' INTERNATIONAL ASSOCIATION, AFL-CIO, Plaintiff-Counter-Defendant-Appellant,

v.

Anthony PELELLA, Defendant-Counter-Plaintiff-Appellee.

No. 02-7939.

United States Court of Appeals, Second Circuit

November 17, 2003

Argued Aug. 27, 2003.

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Jeffrey S. Dubin, Huntington, NY, for Appellant.

Christopher Watkins, Chester, NY (Stephen Bergstein, Thornton, Bergstein & Ullrich, Chester, NY, of counsel), for Appellee.

Before: MESKILL, MINER and STRAUB, Circuit Judges.

MESKILL, Circuit Judge.

This appeal asks us to decide if section 101(a)(4) of the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 411(a)(4), bars a union member's counterclaim that is financed by an interested employer as well as whether punitive damages are available where only nominal damages are awarded and whether attorney's fees were justified.

Plaintiff-appellant Local Union No. 38, Sheet Metal Workers' International Association, AFL-CIO (Local 38) appeals from a judgment of the United States District Court for the Southern District of New York, Yanthis, M.J., entered after a jury trial. When Local 38 commenced an action against defendant-appellee Anthony Pelella (Pelella) to collect a fine levied during the course of an earlier union proceeding, Pelella asserted a counterclaim that accused Local 38 of breach of contract and violations of his due process rights. 1 A jury found in favor of Pelella on his counterclaim and awarded him $1 in nominal damages and $25,000 in punitive damages. Thereafter, the district court awarded Pelella $30,213 in attorney's fees and $205.50 in costs.

On appeal, Local 38 contends that section 101(a)(4) of the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 411(a)(4), bars a union member's counterclaim where that claim for relief is financed by an interested employer. Local 38 also argues that attorney's fees were not warranted, punitive damages were not available in the absence of an award of actual damages, and, in any event, the punitive damages awarded by the jury were grossly excessive.

For the reasons that follow, we conclude that section 101(a)(4) does not bar a counterclaim financed by an interested employer. We also hold that the district court did not abuse its discretion by awarding attorney's fees and that Local 38 has waived the remaining arguments. We therefore affirm.

BACKGROUND

I. Union Proceedings

This appeal is the byproduct of an internal union dispute. Several years ago, Pelella joined Local 38 as an apprentice member. In October 1998, Nicholas Colombo (Colombo), Local 38's Business Representative,

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filed charges of misconduct against Pelella. In those charges, Colombo accused his fraternal union brother of several violations of the Constitution and Ritual of the Sheet Metal Workers' International Association and Affiliated Local Unions, State, District and Provincial Councils (the Constitution). According to Colombo, Pelella (a) had accepted substandard wages and benefits for work he performed for P & P Sheet Metal, Inc. (P & P), in excess of 40 hours with the full knowledge that benefits were not being paid to Local 38, (b) had failed to obtain an overtime permit for such work, and (c) had improperly received certain benefits.

Local 38 ordered Pelella to answer the charges before its Trial Committee. On November 4, 1998, Local 38's Executive Board, sitting as a Trial Committee (Committee), held Pelella's trial. The board members found Pelella guilty on all three charges and removed him from his employment with P & P. The Committee also imposed a $4,418 fine. However, the Committee mitigated the effect of that sanction by holding the fine in abeyance; the fine would only be reinstated if, in the future, a union Executive Board found Pelella guilty of an infraction of the Constitution.

Two weeks later, the Committee submitted its decision to the membership of Local 38. They voted unanimously to accept that decision. Thereafter, Pelella appealed to both the General President and the General Executive Council (Council) of the Sheet Metal Workers' International Association. The General President affirmed the Committee's verdict. In turn, the Council upheld the determinations of the General President and the Committee. The Council did, however, modify the Committee's decision in one pertinent respect: Pelella was informed that the fine, once held in abeyance, would now be collectible in full. 2

II. Legal Proceedings

After Pelella failed to pay the fine, Local 38 commenced an action, pursuant to section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, in the United States District Court for the Southern District of New York to collect the unpaid penalty. Pelella responded by asserting a counterclaim that alleged due process violations and breach of contract. According to Pelella, Local 38 breached the union's Constitution and violated his rights to due process of law when the union disciplined him without following certain procedures. In a similar vein, Pelella asserted, through various affirmative defenses, that he should not be liable for a fine that was the product of procedures that failed to comport with due process and the union's Constitution.

Local 38 moved for partial summary judgment. The union argued that section 101(a)(4) of the Labor-Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. § 411(a)(4), barred Pelella's counterclaim because the counterclaim had

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been financed by an interested employer. Pelella opposed Local 38's motion on several grounds. At the outset, Pelella argued that section 101(a)(4) did not prohibit counterclaims financed by interested employers. In addition, Pelella explained that his counterclaim had not asserted the violation of any rights in contravention of the LMRDA; rather, the counterclaim was premised on violations of the Due Process Clause and breach of contract. Pelella therefore took the position that section 101(a)(4) of the LMRDA did not apply to his counterclaim. Finally, Pelella contended that the counterclaim had not been "financed" by an "interested employer" within the meaning of section 101(a)(4).

The district court did not address whether Pelella's counterclaim had been financed by an interested employer. Nor did the court examine the precise nature of Pelella's counterclaim or the bearing thereof on the application of section 101(a)(4). Instead, the court held that section 101(a)(4) did not prohibit an interested employer from financing a member's counterclaim against his union. Accordingly, the court denied Local 38's motion for partial summary judgment.

As the trial drew near, Pelella began to describe his counterclaim in a somewhat different fashion. Immediately prior to trial, he submitted proposed jury instructions that characterized his counterclaim as one brought for breach of contract and violations of his due process rights under the LMRDA.

What transpired during the two day trial that followed is far from clear. The parties have failed on appeal to introduce an adequate record of the jury instructions, evidence, and legal arguments (including objections), if any, presented during the trial. At some stage, Local 38 apparently moved, pursuant to Rule 50(a) of the Federal Rules of Civil Procedure, for a directed verdict. The record does not reflect the exact grounds for that motion. Moreover, the jury apparently proceeded to consider both Local 38's LMRA claim as well as Pelella's breach of contract and LMRDA allegations. In other words, the jury evaluated, inter alia, whether Local 38 had violated Pelella's due process rights under section 101(a)(5) of the LMRDA, 29 U.S.C.§ 411(a)(5). 3

On November 27, 2001, the jury returned a verdict in favor of Pelella with respect to Local 38's LMRA claim and on his counterclaim after they found that Local 38 had breached a contract and violated Pelella's due process rights under the LMRDA. It awarded Pelella $1 in nominal damages and $25,000 in punitive damages. The punitive damages award was predicated entirely on Local 38's violation of Pelella's LMRDA rights.

After the jury returned a verdict in Pelella's favor, Local 38 renewed its motion for judgment as a matter of law in accordance with Rule 50 and also moved, in the alternative, for a new trial pursuant to Rule 59. The union argued that Pelella could not recover punitive damages in the absence of an award of actual damages and that the evidence presented at trial was insufficient to warrant punitive damages.

The district court denied both motions. The court held that a party could recover punitive damages even in the absence of

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actual damages. The court also found that there was sufficient evidence from which a reasonable jury could conclude that punitive damages were warranted and that the jury's verdict had been neither seriously erroneous nor a miscarriage of justice.

At the same time, the district court granted Pelella's motion for attorney's fees and costs. The court concluded that attorney's fees were justified because Pelella's victory conferred several common benefits on Local 38's members. Hence, the court awarded Pelella $30,213 in attorney's fees and $205.50 in costs.

The court issued an Amended Judgment on July 1, 2002. 4 This timely appeal followed.

DISCUSSION

I. Standard of Review

Local 38 appeals from the district court's denial of its motion for partial summary judgment as well as its motions for judgment as a matter of law and for a new trial. Local 38 also appeals the district court's decision...

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