International Union of Electronic, Elec., Salaried, Mach. & Furniture Workers, AFL-CIO v. Statham, AFL-CIO

• Decision Date: 23 October 1996
• Docket Number: No. 95-8869,AFL-CIO,95-8869
• Citation: 97 F.3d 1416
• Parties: 153 L.R.R.M. (BNA) 2663, 96 FCDR 4108 INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE & FURNITURE WORKERS,, on its own behalf, and on behalf of its former local affiliate, IUE Local Union 353B, also formerly known as Pabst Brewery Workers of Georgia, Local 353, Plaintiff, Counterdefendant-Appellant, v. John E. STATHAM, III, individually and as trustee and former officer of IUE Local Union 353B, formerly known as Pabst Brewery Workers of Georgia, Local 353; Melvin Griffin, individually and as trustee and former officer of IUE Local Union 353B, formerly known as Pabst Brewery Workers of Georgia, Local 353; Henry E. Sumner, individually and as trustee and former officer of IUE Local Union 353B, formerly known as Pabst Brewery Workers of Georgia, Local 353, Defendants, Crossdefendants-Appellees, K. Thomas Hall; Lynward Barrett, individually and d.b.a. Landmark Realty; Defendants-Appellees, Robert L. Mobley, Jr., Defendant, Crossclaimant, Counterclaimant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1416

97 F.3d 1416

153 L.R.R.M. (BNA) 2663, 96 FCDR 4108

INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED,

MACHINE & FURNITURE WORKERS, AFL-CIO, on its own behalf, and

on behalf of its former local affiliate, IUE Local Union

353B, also formerly known as Pabst Brewery Workers of

Georgia, Local 353, Plaintiff, Counterdefendant-Appellant, v. John E. STATHAM, III, individually and as trustee and former

officer of IUE Local Union 353B, formerly known as Pabst

Brewery Workers of Georgia, Local 353; Melvin Griffin,

individually and as trustee and former officer of IUE Local

Union 353B, formerly known as Pabst Brewery Workers of

Georgia, Local 353; Henry E. Sumner, individually and as

trustee and former officer of IUE Local Union 353B, formerly

known as Pabst Brewery Workers of Georgia, Local 353,

Defendants, Crossdefendants-Appellees,

K. Thomas Hall;

Lynward Barrett, individually and d.b.a. Landmark Realty;

Defendants-Appellees,

Robert L. Mobley, Jr., Defendant, Crossclaimant,

Counterclaimant-Appellee.

No. 95-8869.

United States Court of Appeals, Eleventh Circuit.

Oct. 23, 1996.

John C. Edwards, William H. Larsen, Martin, Snow, Grant & Napier, Macon, GA James G. Mauro, Jr., Washington, DC, for Plaintiff-Counterdefendant-Appellant.

Walter J. Lane, Jr, Macon, GA, for Mobley-Appellee.

David Frank Root, Mary Katherine Smith, Atlanta, GA, for Byars.

Stanley M. Lefco, David L. Rusnak, Atlanta, GA, for Barrett.

Appeal from the United States District Court for the Middle District of Georgia.

Before CARNES, Circuit Judge, and FAY and JOHN R. GIBSON ^*, Senior Circuit Judges.

JOHN R. GIBSON, Senior Circuit Judge:

The International Union of Electronic, Electrical, Salaried, Machine & Furniture Workers, AFL-CIO, appeals the district court's dismissal, for lack of jurisdiction, of the union's suit based on the sale of real estate that the union claims belongs to it. The union sued the three former union officials who sold the land, as well as their lawyer, a real estate broker, and the buyer of the land, alleging breach of fiduciary duties by the former officials and numerous other causes of action. The union sought specific performance of provisions in the union constitution, injunctive and declaratory relief, and damages. The district court held that there was no federal jurisdiction under 29 U.S.C. § 501 (1994) or 29 U.S.C. § 185(a) (1994) for this suit by a union against its former officials. The court dismissed the suit. We reverse.

The real estate was originally purchased by a local union of brewery workers at the Pabst brewery in Perry, Georgia. The local was an affiliate of the International Union of United Brewery, Flour, Cereal, Soft Drink and Distillery Workers of America, AFL-CIO, known as the IUB. In 1973 the local broke away from the IUB and established the "Pabst Brewery Workers of Georgia" as a successor to the former local of the IUB. The local retained the same officers as it had before the disaffiliation. As part of the disaffiliation agreement, the members of the local agreed that all the local's property should be transferred to the Pabst Brewery Workers of Georgia. Accordingly, John E. Statham, III, Melvin Griffin, and Henry E. Sumner, the officers of the former IUB local and of the new independent local, executed a quitclaim deed transferring the land with the union hall to "John Statham, Melvin Griffin, and Henry Sumner, trustees of Pabst Brewery Workers of Georgia, a voluntary unincorporated association."

The local became a directly affiliated local union of the AFL-CIO on November 5, 1973. In 1975 the local built a union hall on the real estate. Later, in 1983, the local became an affiliate of the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO, the plaintiff in this case.

The local dissolved in 1989 because the brewery closed. The plaintiff international union's constitution provided:

In the even[t] that a local's charter is revoked, or that a local disbands or dissolves, the local's secretary and trustees shall send to the Secretary-Treasurer all funds and property belonging to the local.... If such a charter is not reissued within the year, the funds and property held by the Secretary-Treasurer shall be deemed to be the property of the Union and shall be deposited in the International Defense Fund."

At the last meeting of the local's executive board, the local authorized the international union's representative, Gary Tucker, to wind up the local's affairs.

Tucker entered an agreement to sell the land with the union hall on it to Robert L. Mobley, Sr., but the deal fell through because the title search showed that the title was vested in Statham, Griffin, and Sumner. Tucker asked the trustees to quitclaim the land to the union, but instead Statham then sold the property to Mobley. Lynward Barrett acted as broker for the sale, and J. David Byars acted as Statham's lawyer. Byars held the $62,000 sale proceeds in escrow, so that he could obtain the signatures of Griffin and Sumner on the deed. Before Byars could obtain the signatures, he learned that the union was claiming it owned the property. Byars filed an interpleader action in state court and tendered the money into court.

The union filed suit in federal court, on its own behalf and on behalf of the former local, asserting claims for breach of fiduciary duty, 29 U.S.C. § 501, and breach of contract, 29 U.S.C. § 185(a), against Statham, Griffin, and Sumner. The union also stated numerous state law claims against Statham, Griffin, and Sumner, as well as Byars, Mobley, and Barrett. ¹

Byars's interpleader action was removed to federal court and joined with the union's suit.

The district court dismissed the union's complaint for lack of jurisdiction upon determining that the union did not state a federal cause of action under either the Labor-Management Disclosure and Reporting Act, 29 U.S.C. § 501, or the Labor-Management Relations Act, 29 U.S.C. § 185(a). Specifically, the court held that section 501 does not create a federal cause of action that can be asserted by a union, as opposed to an individual union member. The court also held that section 185(a) does not cover a suit by a union against individuals, as opposed to a suit against another labor union or an employer.

The union appeals, arguing that section 501(a) creates a cause of action that can be asserted by a union as well as by union members, and that it can assert a section 185(a) claim against former officers. These issues are pure questions of law, subject to de novo review.

I.

The question of whether a union may assert a cause of action under section 501 of the Labor-Management Reporting and Disclosure Act has been thoroughly examined by many courts, and they have arrived at opposite conclusions. ²

Section 501 deals with civil liability in two parts. ³ Subsection (a) imposes fiduciary duties on union officials. Subsection (b) confers jurisdiction on the federal courts for suits brought by individual union members on the union's behalf to enforce the duties created by subsection (a). Subsection (b) also places procedural limits on an individual's right to enforce the subsection (a) duties, analogous to the demand prerequisites for bringing shareholder derivative suits. Under subsection 501(b) an individual who wishes to sue for breach of an official's subsection 501(a) fiduciary duty must first request the union to proceed against the official. Only if the union fails to act within a reasonable time after the request may the individual proceed to federal court.

Subsection 501(b) does not itself confer jurisdiction over suits by the union, but it assumes that a union can sue its officials; otherwise, it would be futile for individuals to request the union to sue and senseless to make the individuals engage in a futile act. By giving the union the right of first refusal to the cause of action, section 501(b) shows Congress preferred that the union, rather than individual members, sue on its own behalf. Weaver v. UMW, 492 F.2d 580, 586 (D.C.Cir.1973). One of the early cases on this issue reasoned that if Congress assumed unions could sue, and even preferred direct action by the union to a derivative-type suit by individuals, Congress must have intended that the unions have access to federal courts. See BRAC v. Orr, 95 L.R.R.M. 2701, 2702 (E.D.Tenn.1977).

Other courts have answered that Congress did not necessarily intend to give the unions a federal cause of action. Congress could conceivably have intended to relegate the unions to state law remedies. These courts say that, in the absence of any explicit authorization from Congress, the courts may not enlarge their jurisdiction by permitting the unions to sue in federal court. See Teamsters, Local 20 v. Leu, 94 L.R.R.M. 2510 (N.D.Ohio 1976) ("The statutory language confers upon the union as a unit no right to sue its officers. Unions are left to the state law jurisdiction they have always had."); Local 624, Int'l Union of Operating Eng'rs v. Byrd, 659 F.Supp. 274, 276 (S.D.Miss.1986); International Bhd. of Boilermakers v. Freeman, 683 F.Supp. 1190, 1192 n. 4 (N.D.Ill.1988) ("In our view, [BRAC] represents an unjustified assumption of judicial power."); Truck Drivers v. Baker, 473 F.Supp. 1120, 1124 (M.D.Fla.1979).

We conclude that it would in fact frustrate congressional intent to relegate the union to state remedies. The legislative history of the LMRDA shows that Congress enacted the fiduciary provisions of section 501 because existing state law remedies for union officials' misconduct were inadequate. The Senate report contains a minority statement complaining about the lack of fiduciary provisions in the Senate bill: "Only one state has enacted a statute imposing fiduciary obligations on union officials and giving union members a right to sue in the event of any breach thereof." S.Rep. No. 187, 86th Cong., 1st Sess. reprinted in 1959 U.S.C.C.A.N....