Adams-Lundy v. Association of Professional Flight Attendants
| Decision Date | 10 May 1988 |
| Docket Number | No. 86-1911,ADAMS-LUNDY,86-1911 |
| Parties | 128 L.R.R.M. (BNA) 2380, 108 Lab.Cas. P 10,484, RICO Bus.Disp.Guide 6941 Stu, et al., Plaintiffs-Appellants, v. The ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
JoAnn Peters, Dallas, Tex., for plaintiffs-appellants.
Eric D. Ryan, Alan L. Busch, Dallas, Tex., for Paluk, et al.
Edward B. Cloutman, III, Mullinax, Wells, Baab & Cloutman, Dallas, Tex., for Donovan.
Phyllis Conrad, pro se.
Kathy Knoop, pro se.
Appeal from the United States District Court for the Northern District of Texas.
Before WILLIAMS and HIGGINBOTHAM, Circuit Judges, and BUCHMEYER, * District Judge.
The appellants, members of the Association of Professional Flight Attendants, appeal the district court's dismissal of their claims against fellow APFA members under the Labor Management Reporting Disclosure Act and Racketeer Influenced and Corrupt Organizations Act. The district court dismissed the LMRDA claim because appellants had not requested the union to act, a condition precedent to filing suit; the court dismissed the RICO claim for lack of standing. We affirm in part and reverse in part.
These parties have been before us twice, 1 so we only briefly recount the factual and procedural history of this struggle between two factions for control of the Association of Professional Flight Attendants, a labor union representing American Airlines flight attendants. After several years, the struggle intensified at an APFA governing board meeting on March 3, 1984, when a minority faction that controlled nine seats on the board, including the presidency, filed charges accusing the eleven-member majority of disloyalty. The minority faction introduced a resolution to remove the charged officers from the positions they held. Because union rules did not permit charged persons to vote on the resolution "nine members of the board thereby suspended eleven of their brethren." 2
Stu Adams-Lundy and sixteen other APFA members, a group that included the suspended members, filed suit under the Labor Management Reporting and Disclosure Act 3 against APFA and union members, including those who had voted them out of office. This court vacated the district court's grant of a preliminary injunction because the plaintiffs had not established a likelihood of success on the merits. 4 We remanded to the district court and reminded the parties that the APFA constitution provided a procedure for dealing with officers accused of impropriety. This procedure included an ultimate appeal to a neutral arbitrator.
The parties heeded our suggestion and brought the matter to a neutral arbitrator, who issued a decision in February, 1985, in favor of the Adams-Lundy plaintiffs. The parties immediately headed back to the district court, which ordered enforcement of the arbitration award in its entirety. A panel of our court again vacated the district court's orders, concluding that the district court lacked jurisdiction to enforce an arbitration award based solely on an internal union constitution. 5
Plaintiffs meanwhile had filed their Second Amended Complaint, alleging claims under various sections of the LMRDA, including Sec. 501, which addresses the fiduciary duties of union officers, RICO, the Railway Labor Act, and pendent state claims. After Adams-Lundy II, plaintiffs voluntarily dismissed all claims except those under Sec. 501 and RICO and all claims against APFA. The union later moved to realign itself as a party plaintiff but the district court denied this motion because APFA was not then a party.
On November 18, 1986, the district court dismissed with prejudice all remaining claims, concluding that plaintiffs had failed to meet the conditions of Sec. 501. The court also dismissed the RICO claims because plaintiffs were seeking to redress injuries to the union, not themselves; RICO would not support derivative actions and thus plaintiffs lacked standing to bring a RICO action.
Adams-Lundy appeals the dismissal of the Sec. 501 and RICO claims and the denial of APFA's motion to realign. Appellees argue that this appeal is frivolous and request sanctions. We affirm the district court's decision in part and reverse it in part, and decline to impose sanctions.
We first turn to appellees' contention that the law of the case precludes us from entertaining Adams-Lundy's Sec. 501 claims. Specifically, appellees argue that the panel in Adams-Lundy II already has decided that Adams-Lundy has no cognizable Sec. 501 claim.
As we noted in Adams-Lundy II, the law of the case doctrine dictates that the holdings of a previous panel in the case "must be followed in all subsequent proceedings in the same case, both in the trial court and/or on a later appeal in the appellate court." 6 The doctrine, however, does not "bar us from considering any issue that was not resolved in the earlier appellate proceeding." 7
No panel has decided the Sec. 501 issue. In Adams-Lundy I the court decided that plaintiffs did not state claims under section 102 of the LMRDA. 8 The Adams-Lundy II court held that it did not have jurisdiction to enforce an arbitration award solely based on an internal union constitution. 9 It is true that the Adams-Lundy II panel recognized that the suit was brought under LMRDA sections that included Sec. 501 and stated "that this case has been in litigation for a considerable period of time, and from each appearance in our court, appears to have little reason to be in the federal courts." 10 This statement, however, was not a decision on the merits of the Sec. 501 claim and the law of the case does not prevent us from deciding the issue, to which we now turn.
Section 501(a) of the LMRDA requires union officers "to hold [the union's] money and property solely for the benefit of the [union]." 11 In his Second Amended Complaint Adams-Lundy alleges that appellees violated their Sec. 501 duties by financing their defense with union funds, by failing to expend money in accordance with the union constitution, and by spending union money without the authorization of the governing board.
A union member may sue for violations of Sec. 501(a) only after meeting the requirements established in Sec. 501(b). First, the union member must request the union, its governing board, or its officers "to sue or recover damages or secure an accounting or other appropriate relief." 12 Second, the board must refuse to take action within a reasonable time after being requested to do so. 13 The district court found that Adams-Lundy plead neither that he actually had requested that APFA act against the alleged breach of fiduciary duty nor that the union failed to or refused to act after such a request. We disagree and conclude that Adams-Lundy has fulfilled sufficiently the requirements of Sec. 501(b).
Although the circuits disagree about what constitutes a sufficient Sec. 501(b) request, we decide that Sec. 501(b) requires a plaintiff to request the union to institute legal proceedings. 14 First, the statute on its face contemplates some form of legal action. Although Sec. 501(b) reads "to sue or recover damages or secure an accounting or other appropriate relief," courts have construed the "or" to mean "to," based on the statute's legislative history. 15 The House and Senate reports both refer to the language in Sec. 501(b) as "to recover." 16 "It would seem that the confusing word 'or' must be a misprint in the statute which has heretofore escaped detection." 17 Read as "to," the statute requires a plaintiff to request that the union begin legal proceedings. Second, Sec. 501(b) must be strictly construed because it extends the jurisdiction of federal courts. 18 Third, one purpose of Sec. 501(b) is "to protect union officials from unjust harassment" 19 and declining to soften its requirements accomplishes that purpose.
The Second Amended Complaint does not explicitly allege that appellants requested the union to take legal action to correct breaches of fiduciary duties, but paragraph 80 20 and paragraph 83, 21 both imply some form of request was made, as does paragraph 84. 22 As other courts have found, these requests sufficiently meet Sec. 501(b)'s requirement of a request for legal action. 23 We agree with the Second Circuit that in determining whether a request for legal action was made, we must keep in mind that "the Act is designed to protect union members" and that an interpretation of Sec. 501(b) requires a balancing of policies. 24 These paragraphs also sufficiently demonstrate that the appellants requested action to cure alleged fiduciary duty violations. 25 Finally, the complaints allege that the APFA refused to correct the violations. Thus, we are persuaded that appellants met the conditions precedent of Sec. 501(b). 26 Accordingly, we reverse this portion of the district court's decision.
Adams-Lundy also alleged violations of the Racketeer Influenced and Corrupt Organizations Act. 27 We assume without deciding that the district court was correct in analogizing Adams-Lundy's claim to shareholder derivative suits.
Of course, stockholders cannot sue in their own name for diminution in the value of their stock; a decrease in stock value does not provide sufficient direct injury for the stockholder to sue in his own right. 28 This circuit, as well as other circuits, have declined to allow stockholders to bring individual claims under RICO for diminution in the value of the corporation. 29 A RICO action to recover for injury to the corporation "is a corporate asset, and shareholders cannot bring it in their own names without impairing the rights of prior claimants to such assets." 30 In a RICO case "an indirectly injured party should look to the recovery of the directly injured party, not to the wrongdoer, for relief." 31
In their discussion of the RICO claims, appellants have attempted to locate a direct...
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