383 F.2d 735 (5th Cir. 1967), 23643, Local No. 92, Intern. Ass'n of Bridge, Structural and Ornamental Iron Workers, AFL-CIO v. Norris

Docket Nº:23643.
Citation:383 F.2d 735
Party Name:LOCAL NO. 92, INTERNATIONAL ASSOCIATION OF BRIDGE, STRUCTURAL AND ORNAMENTAL IRON WORKERS, AFL-CIO, Appellant, v. M. E. NORRIS et al., Appellees. H. L. THACKER, Appellant, v. M. E. NORRIS et al., Appellees.
Case Date:October 02, 1967
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 735

383 F.2d 735 (5th Cir. 1967)

LOCAL NO. 92, INTERNATIONAL ASSOCIATION OF BRIDGE, STRUCTURAL AND ORNAMENTAL IRON WORKERS, AFL-CIO, Appellant,

v.

M. E. NORRIS et al., Appellees.

H. L. THACKER, Appellant,

v.

M. E. NORRIS et al., Appellees.

No. 23643.

United States Court of Appeals, Fifth Circuit.

October 2, 1967

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Corretti, Newsom & Rogers, Birmingham, Ala., for appellant H. L. Thacker.

Ernest W. Weir, James L. Shores, Jr., Douglas P. Corretti, James W. May, Birmingham, Ala., Johnston & Shores, Weir & Shannon, Birmingham, Ala., of counsel, for appellant Local No. 92.

C. V. Stelzenmuller, Birmingham, Ala., Thomas, Taliaferro, Forman, Burr & Murray, Birmingham, Ala., of counsel, for appellees.

Before BROWN, Chief Judge, and MOORE, [*] and BELL, Circuit Judges.

JOHN R. BROWN, Chief Judge:

These appeals involve a derivative suit brought under § 501(b) of the LMRDA,

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29 U.S.C.A. § 501(b) 1 by four individual members 2 of the Local 3 charging certain named Local officials with breach of their fiduciary obligations as set out in § 501(a), 29 U.S.C.A.§ 501(a). 4 We affirm.

Although brought in its behalf the Local was not formally made a party to the action. Besides the general prayer for relief, the complaint specifically sought an accounting and judgment 5 against the named defendants, the appointment of a special master, an injunction prohibiting defendants from further wrongful acts, and an award of attorney's fees out of any recovery.

The matter was referred initially by the District Court to a Special Master on June 27, 1962, who, after examining the books and records of the Local and receiving considerable oral testimony, found that Local officials Thacker and Green had received salaries and expense allowances which had 'not been duly authorized and properly paid of the funds of said Local Union by action of the membership thereof.' Following the presentation of additional testimony in hearings before the District Court, 6 the Court entered judgment on October 26, 1965, accepting the basic findings of the Special Master regarding the unauthorized salary and expense allowances and ordering that the Local recover from Thacker and Green the sum of $22,896.01. 7 It was provided that if the judgment against Thacker and Green was not satisfied within 60 days the Local would be liable not only for the fees of the Special Master but also for the fees of

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counsel (and accountants) retained by the plaintiff members of the Local to prosecute the § 501(b) action. 8 These fees totaled $19,946.60, 9 leaving a net award to the Local of $2,949.41. The Local was also enjoined from paying any salary to Thacker 10 if the judgment against him remained unsatisfied at the end of the sixty-day period. 11

From this final judgment, separate appeals asserting different grounds are taken by Thacker, individually, and by the Local. Thacker urges first that the questioned items were properly ratified by the Local, thus precluding violation of his fiduciary duties as set out in § 501(a) and second, that the District Court erred in denying his timely motion for a jury trial on the issue of damages. The Local contends that, based on the wording of § 501(b), it should not be liable for the fees of counsel retained by the members of the Local to prosecute the suit unless it collects the judgment. Attacking the jurisdiction of the District Court, it urges that, on analogy to a stockholder derivative suit, the Local was an indispensable party to the action yet not joined and therefore the judgment is void. Related to this is the contention that since the Local was not formally a party to the action, the District Court could not properly enter an order rendering it liable for counsel fees and expenses incurred by the members who brought the action. Finally the Local apparently questions that part of the order enjoining further payments to Thacker until the judgment is satisfied. We find all these contentions without merit, and affirm the judgment of the District Court.

I

A. Ratification

Thacker, who occupied a position which imposed upon him the fiduciary responsibilities of § 501(a), 12 had the duty to

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expend union funds 'in accordance with its constitution and bylaws and any resolutions of the governing bodies adopted thereunder * * *.' He urges that the salary and expense allowance items here questioned were properly authorized under the existing constitution and bylaws of the Local and that therefore he may not be charged with breach of his fiduciary responsibilities. The congressional intent, as evidenced by the debates 13 in Congress regarding the proposed legislation, appears to support the proposition that there is no violation of § 501(a) where union funds are expended in accordance with the Union's constitution and bylaws. But such is not the case here.

We think the record amply reflects, as found by the Special Master 14 and the District Court, that the salary and expense allowances here involved were not properly authorized or ratified by the Local membership under its constitution. Only a brief sketch is needed to point out that the action of these insiders compelled the Court's findings. The International Union had taken over control of the Local's affairs on March 18, 1955, and its appointees, including Thacker, remained in control until January 21, 1957. During this period, meetings of the membership of the Local Union were suspended. The appointed officers adopted a bylaw on June 13, 1955 which excepted current bills and salaries of employees from the requirement of authorization by the membership. This was in direct conflict with, and contravention of, provisions of the constitution 15 of the International Union which remained applicable to the Local. Thereafter, on December 10, 1956, the officers adopted a resolution purporting to increase the expense account of Green and Thacker by $35 a week. This increase was not then nor thereafter approved

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by the membership of the Local. After control had been restored to the Local, a resolution was passed by the Executive Committee which had the effect of combining the previously authorized expense allowance with their salary, their take-home pay remaining unchanged. 16 Again, this resolution was not adopted by the membership nor was it read at three successive meetings as required by the Constitution (see note 15 supra).

The upshot is that Thacker's argument of ratification or authorization must fail. There was, in short, a flagrant abuse of power by statutory fiduciaries in breach of trust.

B. Jury Trial

Thacker next contends that the District Court erred in denying his motion, timely filed, for a trial by a jury of the damage issue. He urges that since damages are sought as an element of relief, the right to a jury trial is of primary importance.

In support of his argument, Thacker relies exclusively on the case of Simmons v. Avisco, Local 713, Textile Workers Union of America, 4 Cir., 1965, 350 F.2d 1012. We do not think that case is controlling. Simmons involved a suit brought under § 102 LMRDA, 29 U.S.C.A. § 412, by an official of the local union who allegedly had been wrongfully suspended. He sought injunctive relief and 'damages, both actual and punitive, for loss of income, mental anguish, and injury to reputation caused by the illegal suspension.' 350 F.2d at 1015. Disagreeing with a then recent decision of the Sixth Circuit, 17 the Court was of the opinion that the suspended official was entitled to a jury trial of the damage issue. 'The plaintiff here is suing both at law and in equity. He seeks an injunction to effect his restoration to membership. He also seeks money damages for injury to reputation, and resulting mental anguish-- a cause of action of which the developing common law of torts certainly takes cognizance. We see no reason for not allowing a jury to determine whether the union's wrongful conduct was the proximate cause of the plaintiff's injuries and how much the plaintiff is entitled to recover therefor. A jury determination of damages in no way affects the equity jurisdiction of the judge over the injunction issue.' 350 F.2d at 1018.

We need not choose between either the Fourth or the Sixth Circuits, or perhaps both. It is sufficient for our purposes that we think the opinion of the Fourth Circuit in Simmons is distinguishable. The nature of the relief sought in Simmons was clearly within the realm of a common law tort cause of action. The controlling issues-- whether the union was guilty of wrongful conduct, whether such conduct was the proximate cause of the injuries, and the amount of the injury-- are issues which traditionally are within the province of the jury to determine. In our case, however, the relief sought is, not only in name but in substance, traditionally equitable. The members of the Local seek to compel an accounting, the end result of which would be to restore to the Local's treasury any funds found to have been misappropriated by the officials of the Local in violation of the fiduciary responsibilities imposed upon

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them by the Act, and perhaps more important, to rid the Local of such pernicious infections for the future. These issues are traditionally for the decision of the Chancellor, and no mandatory right to a jury exists.

The Fourth Circuit apparently thought that the right to a jury was compelled by virtue of the more recent decisions of the Supreme Court, 18 with which the Fifth Circuit is now firmly aligned. 19 All of these cases, including the present one, involve the difficult problem of distinguishing, on the basis of the type of relief sought and not just from the terminology of the...

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