Agola v. Hagner, CV 82-0013.

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Citation556 F. Supp. 296
Docket NumberNo. CV 82-0013.,CV 82-0013.
PartiesJane AGOLA, et al., Plaintiffs, v. William L. HAGNER, etc., et al., Defendants.
Decision Date21 July 1982

Hall, Clifton & Schwartz, New York City, for plaintiffs.

Cohen, Weiss & Simon, New York City, for defendants.

MISHLER, District Judge.

Plaintiffs bring this motion for leave, nunc pro tunc, to include in their complaint a cause of action for breach of fiduciary duty under Section 501(a) of the Labor Management Reporting and Disclosure Act of 1959 ("LMRDA"); 29 U.S.C. § 501(a).1 The court has jurisdiction of this matter pursuant to 28 U.S.C. § 1331 and LMRDA § 102, 29 U.S.C. § 412.

Plaintiffs brought suit against International Brotherhood of Teamsters ("IBT"), Local 803 of IBT ("Local 803") and William Hagner, President of Local 803 ("Hagner"), claiming that defendants deprived them of strike benefits2 and wrongfully abandoned plaintiffs during a strike.3 As an additional cause of action, plaintiffs alleged that such behavior by defendants constituted a breach of fiduciary duty under LMRDA § 501(a); 29 U.S.C. § 501(a). Plaintiffs failed, however, to receive prior leave of the court before bringing action under § 501, as required by that statute.4 Plaintiffs requested such leave, nunc pro tunc and oral argument was heard on plaintiffs' motion.

Defendants raised two arguments in opposition to the motion before us: first, that plaintiffs' allegations of wrongful behavior do not state a claim against defendants under the narrow scope of § 501 and, second, that leave of the court cannot be granted where plaintiffs have not satisfied the mandatory requirements set forth at § 501(b). We do not here decide the merits of plaintiffs' other statutory or pendent claims.5 We conclude that the cause of action for breach of fiduciary duty under § 501 and the remedies afforded thereunder do not apply to the alleged behavior of defendants in this case. In addition, plaintiffs have not satisfied the statutory requirements of § 501(b). Accordingly, plaintiffs' motion for leave, nunc pro tunc, to plead under LMRDA § 501 is denied.

Facts

Plaintiffs were employed as part-time and full-time registered nurses at Brunswick Hospital Center ("Brunswick") in Amityville, New York. Local 803 was certified by the National Labor Relations Board ("NLRB") as the exclusive collective bargaining representative for plaintiffs on April 8, 1980, following a representation election conducted by NLRB in March, 1980. Prior to the certification election, Local 803 distributed leaflets, dated March 7, 1980, which stated, inter alia, that "NO INITIATION FEE" would be charged by Local 803 for any nurse eligible to vote in the election, that "there will be NO DUES to Local 803 for any nurse until a contract is accepted" and "if you decide that a strike is what it takes then we will bring to bear the unbeatable resources of the Teamsters Union which will be behind you until you get what you want."6 Local 803 and Brunswick engaged in negotiations for a collective bargaining agreement but failed to reach agreement by July 11, 1980.

A strike was called by Mr. Hagner against Brunswick on July 11, 1980. The strike continued to November 27, 1981. Each plaintiff received weekly strike benefit payments from IBT through Local 803 for the period from July 11, 1980 to mid-September 1980. No strike benefit payments were made after October 1, 1980 by IBT or Local 803, although plaintiffs claim that they made "demand for such payments"7 and that "nonpayment was the subject of many complaints by Ms. Agola and other plaintiffs to agents of Mr. Hagner and Local 803. "We demanded to know why our strike benefits were not coming through and asked Hagner to look into it."8 Local 803 informed plaintiffs and Brunswick by letter, dated November 14, 1980, that "Local 803 disclaims interest in representing the registered nurses at Brunswick Hospital Center."9 Local 803 unilaterally expelled plaintiffs from the labor organization. The nurses' strike continued to November 27, 1981 without representation by Local 803. Events following this period are not relevant here.

Discussion

An action may be brought under LMRDA § 501(b) "when any officer, agent, shop steward or representative of any labor organization is alleged to have violated the duties declared in subsection (a)."10 Section 501 does not provide a basis for actions against labor organizations. Head v. Brotherhood of Railway, Airline & Steamship Clerks (BRAC), 512 F.2d 398, n. 1 (2d Cir.1975); Pignotti v. Local # 3 Sheet Metal Workers' Int. Ass'n., 477 F.2d 825, 832 (8th Cir.), cert. denied, 414 U.S. 1067, 94 S.Ct. 576, 38 L.Ed.2d 472 (1973); Sabolsky v. Budzanoski, 457 F.2d 1245, 1249 (3d Cir.), cert. denied, 409 U.S. 853, 93 S.Ct. 65, 34 L.Ed.2d 94 (1972). Thus, plaintiffs' suit for breach of fiduciary duty pursuant to LMRDA § 501 can properly be brought against defendant Hagner, President of Local 803, but not against the two defendant labor organizations, Local 803 and IBT.

The fiduciary duty imposed under LMRDA § 501(a) relates to the money and property of the labor organization. Section 501(a) of LMRDA provides that it is the duty of the officers and agents of a labor organization:

to hold its money and property solely for the benefit of the organization and its members and to manage, invest, and expend the same in accordance with its constitution and bylaws and any resolutions of the governing bodies adopted thereunder...."
29 U.S.C. § 501(a).

In Gurton v. Arons, 339 F.2d 371 (2d Cir.1964), the United States Court of Appeals for the Second Circuit first held that § 501:

applies to fiduciary responsibility with respect to the money and property of the union and that it is not a catch-all provision under which union officials can be sued on any ground of misconduct with which the plaintiffs choose to charge them.
339 F.2d at 375.

This conclusion has been consistently restated by the Second Circuit in subsequent decisions concerning LMRDA § 501. See United States v. Robinson, 512 F.2d 491, 495, n. 7 (2d Cir.1975); Head v. Brac, supra, 512 F.2d at 400; Coleman v. Brotherhood of Railway & Steamship Clerks, etc., 340 F.2d 206, 209 (2d Cir.1965). That court noted that the actual misuse of union funds for personal or political reasons was found to be an essential element of cases decided in other circuits. Head v. Brac, supra, 512 F.2d at 401. See Pignotti, supra; Sabolsky v. Budzanoski, supra. The Second Circuit bases its literal interpretation of § 501 on that statute's legislative history. See Gurton, supra (which in turn relies upon the District Court decision in Guarnaccia v. Kenin, 234 F.Supp. 429, 442 (S.D.N.Y.1964)). Gurton and Guarnaccia rely upon a debate between Senators McClellan and Ervin concerning S. 1555, the Kennedy-Ervin Bill. Circuits giving a broader interpretation of the fiduciary duty under § 501 rely upon the legislative history of this statute as it evolved in the House Committee on Education and Labor as the Elliot Bill and later as the Landrum-Griffin Bill which became law. The apparent inconsistency between the circuits is more fully explained in Pignotti, supra, 477 F.2d at 832-35 where Judge Gibson concluded that the broader view (extension of the fiduciary principal to all the activities of union officials and other union agents or representatives) is correct, as based upon Congressional intent. While we agree with the conclusion in Pignotti, we are, nonetheless, bound by the decisions of the Second Circuit. Accordingly, we conclude that Hagner's alleged abandonment of the striking nurses does not constitute conduct that is within the intended scope of § 501. Further, we conclude that plaintiffs' vague allegations concerning Hagner's possible personal use of the strike funds11 are inadequate grounds for suit under § 501.

In contrast, Hagner's alleged activities with respect to the non-payment of strike benefits represents a breach of his duty under § 501 "to expend the labor organization's money and property in accordance with its constitution and bylaws and any resolutions adopted thereunder."12 Strike payments are authorized under Article XII, Section 4 of the IBT Constitution.13 Plaintiffs' allegation that Mr. Hagner directed IBT to cease making such authorized strike payments14 constitutes a prima facie breach of fiduciary duty under § 501. Nonetheless, we conclude that the remedies afforded under Section 501 are not applicable here because plaintiffs fail to satisfy certain statutory requirements.

Section 501(b) clearly imposes certain conditions precedent to suit. The statute provides that:

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. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown, which application may be made ex parte. The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit at the instance of the member of the labor organization and to compensate such member for any expenses necessarily paid or incurred by him in connection with the litigation.

Plaintiffs' suit is defective at the outset because it is not brought for "the benefit of the labor organization." Phillips v. Osborne, 403 F.2d 826, 832 ...

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    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 15 Julio 2016
    ...501(a).3 See 29 U.S.C. § 501(b) (recovery is solely for the benefit of the organization as a whole); see also, e.g. , Agola v. Hagner , 556 F.Supp. 296, 301 (E.D.N.Y. 1982) (complaint under Section 501 failed to state a claim because the suit was “for the benefit of individual plaintiffs an......
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    • United States District Courts. United States District Court (Columbia)
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    ...that plaintiff's various courses of conduct do not amount to an "actual" demand "to initiate legal action." See also Agola v. Hagner, 556 F.Supp. 296, 301 (E.D.N.Y.1982) (holding that repeated requests for strike payments, followed by letter to international outlining failure to make strike......
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    ...reversing, 494 F.Supp. 732 (N.D.Ala.1980), cert denied, 459 U.S. 989, 103 S.Ct. 343, 74 L.Ed.2d 384 (1982); Agola v. Hagner, 556 F.Supp. 296, 299-300 (E.D.N.Y.1982) (citing United States v. Robinson, 512 F.2d 491, 495 n. 7 (2d Cir. 1975), cert. denied, 423 U.S. 853, 96 S.Ct. 100, 46 L.Ed.2d......
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