Bowers v. Moreno, AFL-CIO

• Decision Date: 11 August 1975
• Docket Number: AFL-CIO,No. 75-1160
• Citation: 520 F.2d 843
• Parties: 90 L.R.R.M. (BNA) 2156, 77 Lab.Cas. P 11,050 John BOWERS, as Trustee of Local 1575, International Longshoremen's Association,, et al., Plaintiffs-Appellants, v. Eusebio G. MORENO et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 843

520 F.2d 843

90 L.R.R.M. (BNA) 2156, 77 Lab.Cas. P 11,050

John BOWERS, as Trustee of Local 1575, International

Longshoremen's Association, AFL-CIO, et al., Plaintiffs-Appellants, v. Eusebio G. MORENO et al., Defendants-Appellees.

No. 75-1160.

United States Court of Appeals, First Circuit.

Submitted June 6, 1975.

Decided Aug. 11, 1975.

Martin Markson, New York City, Juan F. Doval, Rio Piedras, P. R., Seymour M. Waldman, Waldman & Waldman, New York City, and Francis Doval, Colorado & Carlo, Hato Rey, P. R., on brief for appellants.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

COFFIN, Chief Judge.

This is an interlocutory appeal, the matter having been certified to us by the district court under 28 U.S.C. § 1292(b). The issues are still jurisdictional, as they were when we decided Bowers v. Ulpiano Casal, Inc., 393 F.2d 421 (1st Cir. 1968), involving the same litigation.

For a description of the context and major allegations, we cannot improve on the statement of the district court:

"This case arises out of an Agreement and Declaration of Trust made between the International Longshoremen's Association, for and on behalf of Local 1575 and other ILA local unions, and certain shipping and stevedoring employers. Pursuant to the terms of the Trust Agreement, each employer is required to pay certain sums of money to the ILA-PRSSA Welfare Fund. The Welfare Fund is a general fund which consists of five separate funds. The members of Local 1575 are the intended beneficiaries of the Welfare Fund.

"The complaint alleges: that some present and former (union and employer) trustees of the Welfare Fund, former attorneys of the Fund and of Local 1575, unlawfully and in breach of their fiduciary duties, created the ILA-PRSSA Welfare Fund Housing Project; that defendant trustees established the Housing Project as a separate entity and subsidiary of the ILA-PRSSA Welfare Fund so that they could unlawfully and in breach of their duty transfer into the Housing Project monies that were lawfully intended to be deposited in the Welfare Fund; and that the defendant trustees illegally, imprudently, and in violation of their fiduciary duties, together with a speculative housing project builder, La Providencia Development Corporation, and other corporate and individual defendants, performed certain acts which were prejudicial to the rights of the Welfare Fund's beneficiaries."

Specifically, the acts alleged included the improper conveyance of 383.5 cuerdas of land in Puerto Rico purchased with Fund monies to the Housing Project; the transfer by the Project to defendant Moreno, a union trustee of the Fund, without consideration, of 30.2 cuerdas; an imprudent contract with La Providencia to develop the remaining land; the sale of lots by La Providencia, with no accounting for down payments and no posting of required performance bonds; the unjustified waiver of bonding requirements by the Fund and the Project; the unjustified granting of loans to La Providencia to discharge its obligations; the execution by the Project of an unauthorized mortgage to a banking firm; the knowing acquiescence by defendants in a foreclosure action by the mortgagee; and the receipt, with knowledge of illegality and breach of trust, of Fund monies in payment of La Providencia's obligations by several corporations. We affirmed the dismissal of a bank and five other corporate defendants sued under the latter three claims in Bowers v. Ulpiano Casal, Inc., supra.

The question was posed as follows by the district judge, who, we add, was the fourth to endeavor to make progress in this litigation:

"The original complaint in this case was filed on November 8, 1966. After the passage of eight years, the basic jurisdictional question has yet to be decided: Does the federal court have jurisdiction over the parties under 29 U.S.C. § 501 of the Landrum-Griffin Act and/or Sections 301 and 302 of the Labor Management Relations Act of 1947, as amended, 29 U.S.C. §§ 185 and 186?"

In light of our later discussion of pendent jurisdiction, we think it useful to describe in some detail the parties and the relief sought. The parties are the following. Plaintiff Bowers is a trustee of Local 1575, whose members are the beneficiaries of the Fund and the supposed principal beneficiaries of the housing development. ¹ He also represents intervening persons who have made down payments on houses which were to have been built on the land in question. The Fund is also a plaintiff. The defendants (some of whom fit into more than one of the following categories) are four employer trustees of the Fund, five union trustees of the Fund, the Project, two attorneys for the Fund and Project (one also being attorney for the local union), La Providencia and its officers, stockholders, and directors (including one of the attorneys), and another corporation and its controlling stockholder.

The district court has well summarized the relief sought:

"Cutting through the maze of legal maneuverings that this case has produced, the area of key concern is the ownership and legal control of the land purchased by the Housing Project. The land is approximately worth $2,000,000. Plaintiffs seek this court to require defending Housing Project and its purported members or directors (and defendant union trustee Moreno) to convey to them good and marketable title to the property in question. Plaintiffs also seek to enjoin the defendants from engaging in the following activities: selling or offering for sale the property in question; taking deposits or downpayments for houses to be built on the property in question; or engaging in any activity which will encumber all or part of the property in question. In addition to the injunctive relief sought, plaintiffs ask that the trustees be required to render a full, just and complete accounting of any and all transactions and dealings and all monies received and disbursed by them in their capacities as trustees of the ILA-PRSSA Fund. Finally, plaintiffs ask that the defendant corporations be required to render a full and just accounting of all monies received as a result of their transactions with the Welfare and Housing Project Funds, and that they be required to pay over all monies and properties found upon such accounting to belong to said Welfare Fund."

To this we add the requests that certain agreements between the Project and La Providencia, debts from the Fund and Project to certain corporations, and the Project's mortgage notes be cancelled and that certain corporations refund monies to the Fund. The assessment of damages, other relief and attorneys' fees are also prayed for.

The district court held that plaintiff Bowers was a proper party; that under 29 U.S.C. § 501 the court had jurisdiction over the union trustees of the Fund but not the employer trustees; ² that the court had no jurisdiction over employer trustees under section 301 of the Labor Management Relations Act of 1947 (LMRA), 29 U.S.C. § 185, since they were not, in this context representatives of the employers and there was no allegation of a breach of the Fund agreement; that, while employer trustees were suable as representatives of the employees under section 302 of LMRA, 29 U.S.C. § 186(e), the alleged misdeeds were not such "structural violations" going to the integrity of the Fund and its conformity to statutory requirements as to give jurisdiction under this section; and, finally, that the court did have jurisdiction over the remaining defendants who were not union trustees, under the doctrine of pendent jurisdiction.

The district court twice certified the question of jurisdiction for appeal under 28 U.S.C. § 1292(b), See In re La Providencia Development Corporation, 515 F.2d 94 (1st Cir. 1975). Although the defendants failed on both occasions to make proper application to this court for permission to take an interlocutory appeal, plaintiffs sought and were granted leave to appeal the denial of section 302 jurisdiction. Since jurisdiction is always a matter of concern, whether raised by the parties or not, and since in any appeal of the final judgment ultimately entered by the district court we will have to confront questions of jurisdiction which we leave unresolved in our decision of the present appeal, we also scrutinize the district court's assertion of jurisdiction under the theory of pendent jurisdiction.

We first consider plaintiffs' appeal from a denial of jurisdiction under section 302. This section states that "It shall be unlawful for any employer . . . to pay, lend, or deliver, any money or other thing of value (1) to any representative of any of his employees . . . with intent to influence him . . . as a representative of employees." Certain exceptions, here irrelevant, are provided for. The critical section, § 302(e), provides that district courts "have jurisdiction . . . to restrain violations of this section."

Plaintiffs confront our statement in Bowers v. Ulpiano Casal, Inc., supra, 393 F.2d at 424, which described the violations of § 302 subject to restraint by a district court as those constituting "violations of basic structure, as determined by the Congress, not violations of fiduciary obligations or standards of prudence in the administration of the trust fund." This is admittedly a severe standard, but one which we concluded was compelled by legislative history and followed by the majority of cases.

We think that the standard adopted in Ulpiano Casal remains the generally accepted standard today, although courts have been understandably tempted to denominate some egregious conduct a "structural violation". In Giordani v. Hoffmann, 295 F.Supp. 463 (E.D.Pa.1969), and in Porter v. Teamsters Health, Welfare and Life Insurance Fund, 321 F.Supp. 101 (E.D.Pa.1970), direct diversions of funds from employers to employee representatives were held to constitute such violations, the court observing in each case that the misuse of funds...