Phillips v. Osborne

Decision Date12 November 1968
Docket NumberNo. 21791.,21791.
Citation403 F.2d 826
PartiesLeo L. PHILLIPS, Appellant, v. Floyd OSBORNE et al., Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Don S. Willner (argued), of Willner, Bennett, Leonard & Burns, Portland, Ore., MacDonald, Hoague & Bayless, Seattle, Wash., for appellant.

James Hubbard (argued), of Bassett, Donaldson & Hafer, Seattle, Wash., for appellees.

Before JERTBERG, BROWNING and ELY, Circuit Judges.

ELY, Circuit Judge:

This case presents a question as to the scope of federal jurisdiction conferred by Section 501 of the Labor Management Reporting and Disclosure Act of 1959, popularly called the Landrum-Griffin Act, 29 U.S.C. § 401 et seq. (hereinafter the "Act").

The appellees were sued in their capacity as officers of Local 580, an affiliate of the International Brotherhood of Pulp, Sulphite & Paper Mill Workers, AFL-CIO (hereinafter "International"). International is a labor organization representing some 170,000 employees engaged in the production of pulp and paper throughout the United States and Canada. Until the fall of 1964, West Coast employees were represented by International as a single collective bargaining unit under a single collective bargaining agreement known as the Uniform Labor Agreement (hereinafter the "ULA").

In May 1964, some of the members and officers of certain local affiliates became dissatisfied with International and formed a new organization known as the Association of Western Pulp and Paper Workers (hereinafter "Western"). Immediately following its initial formation, Western engaged in an active campaign to persuade all the local unions affiliated with International to disaffiliate and join the new organization. These efforts were successful, and a National Labor Relations Board (NLRB) election was conducted in the late summer of 1964. The results of the election, announced on September 23, 1964, led to the NLRB's certification of Western as the bargaining representative in early October 1964.

Local 580 had remained affiliated with International throughout the election campaign. However, on the evening of the day on which the election results were announced, a motion was made during the regular meeting of Local 580 to disaffiliate from International. This motion was ruled out of order and a discussion concerning funds belonging to Local 580 ensued.

On the following day there was a meeting of the appellee officers of Local 580 and representatives of International. Fearing that the membership of Local 580 would eventually disaffiliate from International and take the local's assets to the Western group, the appellees decided to place certain items in escrow on the following day, September 25, 1964. In effect the escrow agreement undertook to place these assets under the control of International and beyond the reach of the Local 580 membership.

On the morning of September 26, 1964, Local 580 held a meeting for the stated purpose of discussing Local 580's funds. Upon learning of the escrow arrangement which had been completed the day before, the membership adopted a motion that "this local does not ratify the action taken by the officers without the knowledge of the local and sic return the money." The president of Local 580 then told the membership that the funds would not be returned. A motion that the funds be disbursed directly to the membership was then passed, whereupon the meeting adjourned.

Immediately following this meeting, a second meeting was convened, and those present voted to disaffiliate from International and join Western. This meeting was then adjourned and a third meeting called to order. At this meeting the appellant Phillips was nominated and elected president of Local 580 affiliated with Western.1

Phillips grounded his suit upon Section 501 of the Landrum-Griffin Act, alleging that the above actions of the appellees constituted a breach of their fiduciary duties within the meaning of the Act. The District Court held that Phillips could not bring this suit under Section 501(b) because he was not a "member" of Local 580 affiliated with International at the time he instituted suit. The court decided that by voting in favor of affiliation with Western and by accepting the presidency of Western Local 580, Phillips had unequivocally withdrawn from International Local 580. We affirm the District Court's construction of Section 501 as well as its factual determination that Phillips was not a "member" of Local 580 for purposes of the section when he brought suit.

The Landrum-Griffin Act confers federal jurisdiction in actions against union officers for breach of fiduciary duties described in Section 501(a) of the Act.

"(b) When any officer, agent, shop steward or representative of any labor organization is alleged to have violated the duties declared in subsection (a) of this section 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. * * *"

29 U.S.C. § 501(b) (1959). In determining the scope of jurisdiction conferred by this section, we must remain mindful of the fact that the jurisdiction of federal courts is defined, and limited, by the Constitution and congressional action. Hence, statutes extending federal jurisdiction, such as Section 501(b), are narrowly construed so as not to reach beyond the limits intended by Congress. Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 78 L.Ed. 1248 (1933); Kline v. Burke Constr. Co., 260 U.S. 226, 233-234, 43 S.Ct. 79, 67 L.Ed. 226 (1922). Such a construction is especially appropriate when, as here, the statute generally concerns rights subject to full and satisfactory vindication in state courts.2

When Congress enacted the Landrum-Griffin Act, it was manifestly concerned with regulating the internal affairs of labor unions. The Act was a response to the report of the Select Committee on Improper Activities in the Labor Management Field, more popularly known as the McClellan Committee Report. This Committee uncovered widespread practices of misappropriation of union funds and illicit profits by union officers, as well as repeated instances of violence and racketeering. See Interim Report of the Select Committee on Improper Activities in the Labor Management Field, S.Rep. No. 1417, 85th Cong., 2d Sess. (1958). The entire thrust of the Committee's report was that if unions became internally democratic, many of the abuses would be eliminated. In its recommendations, the Committee stated:

"Much that is elicited in the Committee\'s findings of misconduct by union officials can be substantially improved, in the committee\'s view, by a revitalization of the democratic processes of labor unions."3

The congressional history of the Landrum-Griffin Act makes it abundantly clear that Congress sought to implement the recommendations of the Committee and intended to deal solely with the activities of union leaders as they affected their members. The original bill, the Kennedy-Ervin bill, did not contain a so-called bill-of-rights for union members. S. 1555, 86th Cong., 1st Sess. (1959). This lack of protection for union membership prompted Senator McClellan to call for amendment of the bill.

"It does not afford adequate sanctuary to the exploited and the oppressed. I propose, therefore, Mr. President, to offer some strong amendmentsamendments that will be in the interests primarily of workers — of union members and for their protection; amendments designed to insure greater integrity in the administration and management of union affairs. * * *"4

It was in the House of Representatives that the Landrum-Griffin substitute for the original Senate bill was introduced. H.R. 8400, 86th Cong., 1st Sess. (1959). The changes which were made did not affect the central purpose of the legislation. Senator Griffin, during House debate on his bill, remarked that "The labor reform legislation before the House at this time is directed at the regulation of the internal affairs of unions." 105 Cong.Rec. 15722 (1959).

Although the Act sought to eliminate abuses of unscrupulous leaders, it was recognized that the activities of a comparatively few should not inspire broad legislation which would unnecessarily restrict the power of labor organizations and their members. The Senate Committee Report on the Landrum-Griffin Bill alluded to the need for restraint.

"In acting on this bill the committee followed three principles:

"1. The committee recognized the desirability of minimum interference by Government in the internal affairs of any private organization. Trade unions have made a commendable effort to correct internal abuses; hence the committee believes that only essential standards should be imposed by legislation. Moreover, in establishing and enforcing statutory standards great care should be taken not to undermine union self-government or weaken unions in their role as collective-bargaining agents. * * *"

2 United States Code Cong. & Admin. News 2323 (1959).

It has been recognized that the broad language of Section 501(a), imposing fiduciary duties upon union officers, potentially invites undue government interference. Hence, when dealing with this section, the courts have been especially careful to confine their role to areas which are clearly within the intended reach of the Act. For example, in Gurton v. Arons, 339 F.2d 371 (2d Cir. 1964), the court refused to extend federal jurisdiction under Section 501 to breaches of fiduciary duties involving activities unrelated to the money or property of the union. It was declared...

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