O'Hara v. District No. 1-PCD

• Decision Date: 23 June 1995
• Docket Number: No. 93-7121,AFL-CIO,93-7121
• Citation: 56 F.3d 1514
• Parties: 149 L.R.R.M. (BNA) 2666, 312 U.S.App.D.C. 444, 64 USLW 2048, 130 Lab.Cas. P 11,357 Charles O'HARA and Jerry Howard, Appellees, v. DISTRICT NO. 1-PCD, MEBA,, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1514

56 F.3d 1514

149 L.R.R.M. (BNA) 2666, 312 U.S.App.D.C.

444, 64 USLW 2048,

130 Lab.Cas. P 11,357

Charles O'HARA and Jerry Howard, Appellees, v. DISTRICT NO. 1-PCD, MEBA, AFL-CIO, et al., Appellants.

No. 93-7121.

United States Court of Appeals District of Columbia Circuit.

Argued March 31, 1995.

Decided June 23, 1995.

Appeal from the United States District Court for the District of Columbia (No. 93cv01137).

Diane Krejsa argued the cause, Baltimore, MD, for appellants. With her on the briefs was Susan Souder. Michael D. Derby, Hopkinton, MA, entered an appearance.

William A. Isaacson argued the cause, Washington, DC, for appellees. With him on the brief was Jonathan D. Schiller.

Before: BUCKLEY, WILLIAMS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

Appellants, four labor unions, bring this interlocutory appeal under 28 U.S.C. Sec. 1292(a)(1) (1988), seeking reversal of the district court's preliminary injunction precluding them from disposing of approximately $12.5 million received by their common predecessor pursuant to an arbitration award. Asserting their right to these funds, appellees, two members of one of the unions, obtained the injunction in a suit under section 301 of the Labor Management Relations Act. We reject the appellant unions' argument that the district court lacks section 301 jurisdiction over this suit, but finding an insufficient likelihood that appellees will succeed on the merits of their claim to the funds, we vacate the preliminary injunction.

I.

The arbitration award at issue in this case resulted from the breach of a series of collective bargaining agreements between the Pacific Coast District, Marine Engineers Beneficial Association ("PCD/MEBA"), on the one hand, and the Delta Steamship Company and Crowley Maritime Corporation, on the other. In 1981, PCD/MEBA entered into a three-year collective bargaining agreement with Delta, under which Delta agreed to use only PCD/MEBA engineers to crew its ships. The following year, Crowley purchased Delta. In 1983, Crowley agreed with PCD/MEBA that for the next ten years Crowley would continue to ply Delta's service areas only with Delta vessels and that it would not subcontract any Delta services. As a Crowley subsidiary, Delta then renewed its collective bargaining agreement with PCD/MEBA through 1987, and also made the agreement's terms applicable to three new ships--the "Sea Wolf vessels"--that Delta anticipated leasing.

Delta subsequently sold its assets and subleased the three Sea Wolf vessels to U.S. Lines, which had its own collective bargaining agreement with PCD/MEBA. U.S. Lines employed a number of both "permanent" and "temporary" (or relief) engineers on each of the three Sea Wolf vessels. In August 1986, facing financial difficulties and with PCD/MEBA's agreement, U.S. Lines reduced each vessel's permanent crew to five engineers. Shortly thereafter, U.S. Lines went bankrupt and returned the three ships to Delta, which by then existed only as a Crowley shell corporation.

Crowley in turn subleased the Sea Wolf vessels to another of its subsidiaries, American Transportation Lines ("ATL"). ATL did not have a collective bargaining agreement with PCD/MEBA, but instead employed engineers from another union. PCD/MEBA commenced arbitration against Crowley and Delta, alleging that they had breached their agreements to crew the Sea Wolf vessels exclusively with PCD/MEBA engineers for the ten years that had begun in 1983. Arbitrator William J. Usery found in favor of PCD/MEBA, leaving the parties to negotiate damages. The New York Supreme Court for New York County twice confirmed the arbitration decision, and the Appellate Division affirmed.

When the parties could not agree on damages, arbitrator Usery conducted supplemental arbitration proceedings, awarding PCD/MEBA damages of approximately $6 million, measured by the "per day, per vessel" wages and benefits lost to date "by the whole bargaining unit" as a result of ATL's failure to crew the Sea Wolf vessels with PCD/MEBA members. Mr. Usery also awarded the union prospective relief of over $6,500 per day throughout the remainder of the ten-year period. Although Mr. Usery stated that Crowley could terminate this ongoing liability at any time by causing ATL to employ PCD/MEBA members on the Sea Wolf vessels, he did not require, as a condition of such termination, that ATL reinstate any specific employees, such as those who had previously worked on these vessels. Similarly, in calculating past damages, Mr. Usery explicitly rejected Crowley's claim that PCD/MEBA had to identify specific aggrieved individuals and then mitigate damages by any income those individuals had received during the period of the award. Mr. Usery concluded instead that "the violation ... goes to the Union's jurisdictional rights and that the harm in effect was suffered by the whole bargaining unit." He thus made the award "to the Union, for the benefit of unit members."

By the time Mr. Usery finalized this award (the "Crowley award"), PCD/MEBA had merged with the National Maritime Union ("NMU") to form MEBA/NMU. The Crowley award therefore went to this merged entity. Because Crowley chose not to terminate its ongoing liability, it ultimately paid MEBA/NMU approximately $12.5 million through 1993. MEBA/NMU placed $6 million into pension and benefits funds for MEBA members. From the balance of the award, the union proposed to distribute up to $1.4 million to certain "disadvantaged" union members, although it asserted that neither the Delta collective bargaining agreements nor the arbitration award obligated it to do so. The "disadvantaged" members consisted of 51 former PCD/MEBA members who had worked on the Sea Wolf vessels for U.S. Lines, including the fifteen permanent engineers at the time of the U.S. Lines bankruptcy. MEBA/NMU intended to use the remainder of the Crowley award in its discretion "for the benefit of all of the membership." Appellants' Brief at 13.

MEBA/NMU notified its members of its proposed distribution plan and established an internal grievance process through which members could contest the plan. Seven of the 5,000 former PCD/MEBA members, each a permanent engineer on the Sea Wolf vessels at the time of U.S. Lines' bankruptcy, challenged the plan before another arbitrator, Joseph Kiss. Alleging that MEBA/NMU was improperly using the Crowley award for its own operating expenses and as a cushion for its depleted treasury, they argued that it should instead pass the entire award on to them and the other PCD/MEBA members who had been permanent or temporary engineers on the Sea Wolf vessels at the time of U.S. Lines' bankruptcy.

Meanwhile, MEBA/NMU was facing increasing financial difficulties, as well as a number of internal conflicts stemming from its 1988 merger. See, e.g., Licensed Div. Dist. No. 1 MEBA/NMU v. DeFries, 943 F.2d 474 (4th Cir.1991), cert. denied, 502 U.S. 1074, 112 S.Ct. 972, 117 L.Ed.2d 137 (1992); see also United States v. Defries, 43 F.3d 707 (D.C.Cir.1995) (criminal proceeding alleging fraud and corruption by certain union leaders). One such conflict related to the union's use of the undistributed remainder of the Crowley award. MEBA/NMU's Licensed Division, comprised of the approximately 5,000 former PCD/MEBA members, argued that MEBA/NMU could not use the undistributed funds for the benefit of the entire 28,000 MEBA/NMU members, but instead must dedicate its use to activities benefitting only members of the Licensed Division. The Licensed Division eventually filed suit in U.S. District Court for the District of Maryland, seeking dissolution of the 1988 merger and challenging MEBA/NMU's disposition of the Crowley award. The district court ordered MEBA/NMU to keep a portion of the Crowley award in escrow pending the outcome of the suit.

In settlement of the Licensed Division's suit and other court challenges, MEBA/NMU dissolved the merger in June 1993. The merger termination agreement, which Mr. Usery helped negotiate, provided that the unions could satisfy remaining MEBA/NMU liabilities with "the escrowed Crowley money, except that portion payable to injured engineers and/or the MEBA Funds." The termination agreement also provided that on June 4, 1993, four successor unions--now the four appellants here--would replace MEBA/NMU and equitably share its remaining liabilities.

Three days after the termination, the same seven employees who had challenged the union's distribution plan before arbitrator Kiss commenced this litigation in U.S. District Court for the District of Columbia under section 301 of the Labor Management Relations Act, asserting their right to the Crowley award. They charged MEBA/NMU, but not its four successor unions, with violating the Delta collective bargaining agreements, the Crowley award, and the union's duty of fair representation. The seven plaintiffs requested class certification on behalf of the 51 former PCD/MEBA engineers employed by U.S. Lines on the Sea Wolf vessels, and they sought a preliminary injunction against MEBA/NMU's transfer of any of the $12.5 million Crowley award to PCD/MEBA and against any other use of the escrowed funds or other portions of the Crowley award. The district court granted the preliminary injunction. Wilkinson v. District No. 1-MEBA/NMU, No. 93-1137 (D.D.C. June 24, 1993) (order granting preliminary injunction).

Although not named parties to the suit, Dist. No. 1-PCD/MEBA and the other three successors to MEBA/NMU answered the underlying complaint and appealed the preliminary injunction to this court. Because it was no longer functioning, the named defendant, MEBA/NMU, did neither. In their appeal, the four successor unions moved for summary reversal of the preliminary injunction because the district court had not supported it with any findings of fact or conclusions of law. The seven plaintiff employees sought dismissal of the appeal,...