Callahan v. N.M. Federation of Teachers-Tvi

• Citation: 2006 NMSC 010,131 P.3d 51
• Decision Date: 22 February 2006
• Docket Number: No. 28,983.,28,983.
• Parties: Connie CALLAHAN, Sally Fish, and Anne Waters, Plaintiffs-Respondents, v. NEW MEXICO FEDERATION OF TEACHERS-TVI, Albuquerque TVI Faculty Federation Local No. 4974 AFT, NMFT, and American Federation of Teachers, Defendants-Petitioners.
• Court: Supreme Court of New Mexico

131 P.3d 51

2006 NMSC 010

Connie CALLAHAN, Sally Fish, and Anne Waters, Plaintiffs-Respondents, v. NEW MEXICO FEDERATION OF TEACHERS-TVI, Albuquerque TVI Faculty Federation Local No. 4974 AFT, NMFT, and American Federation of Teachers, Defendants-Petitioners.

No. 28,983.

Supreme Court of New Mexico.

February 22, 2006.

Corrected March 27, 2006.

COPYRIGHT MATERIAL OMITTED

Law Offices of Justin Lesky, Justin Lesky, Albuquerque, NM, for Petitioners.

Steven K. Sanders & Associates, L.L.C., Steven K. Sanders, Albuquerque, NM, for Respondents.

OPINION

CHÁVEZ, Justice.

{1} This case examines the scope of a public employee union's liability to its members for alleged inadequate representation during a grievance proceeding. Plaintiffs, who were members of the New Mexico Federation of Teachers-TVI, Albuquerque TVI Faculty Federation Local No. 4974 AFT, NMFT, and the American Federation of Teachers ("Union Defendants"), were fired from their jobs as full-time teachers at Albuquerque Technical Vocational Institute ("TVI"). Plaintiffs requested Union Defendants to represent them in a grievance against TVI seeking reinstatement and back pay through the procedures established in the Collective Bargaining Agreement between Union Defendants and TVI. However, after obtaining a favorable arbitration decision concluding that Plaintiffs could file a grievance challenging their terminations, Union Defendants allegedly negotiated a settlement with TVI without consulting Plaintiffs, effectively waiving Plaintiffs' grievance. Plaintiffs then filed a lawsuit in the district court against Union Defendants, asserting: 1) breach of the duty of fair representation, based on a negligence standard; 2) breach of the collective bargaining agreement of which Plaintiffs were third-party beneficiaries; 3) breach of the covenant of good faith and fair dealing implied in the collective bargaining agreement; and 4) breach of a fiduciary duty. The district court dismissed Plaintiffs' complaint under Rule 1-012(B)(6) NMRA 2006, concluding that Plaintiffs did not state a cause of action against Union Defendants.

{2} On appeal the Court of Appeals reversed the district court, reinstating Plaintiffs' complaint in its entirety. Callahan v. Albuquerque TVI Faculty Fed'n Local No. 4974, 2005-NMCA-011, 136 N.M. 731, 104 P.3d 1122. The Court of Appeals held that Plaintiffs could sue Union Defendants for breach of the duty of fair representation, breach of the collective bargaining agreement because Plaintiffs were third-party beneficiaries, breach of the covenant of good faith, and breach of a fiduciary duty. Id. ¶ 30. The Court of Appeals opinion also suggests that mere negligence would suffice to prove a breach of the duty of fair representation. Id. ¶ 28. In addition, the Court of Appeals decided two issues not specifically addressed by the district court. The Court of Appeals held that Plaintiffs were not required to file their complaint against Union Defendants with the TVI Labor Relations Board as a means of exhausting administrative remedies under the Public Employees Bargaining Act, see NMSA 1978, §§ 10-7D-1 to 10-7D-26 (1992, amended 1997 and 1998, repealed 1999) ("PEBA I")¹, and that the international union, American Federation of Teachers ("AFT"), was a proper party defendant under the facts as pled. Id. ¶ 30.

{3} We granted certiorari to consider three issues. One, what is the scope of a public employee union's liability to a member for alleged failure or refusal to adequately represent the employee in a grievance proceeding? Two, whether public employees who seek compensatory damages from their union for inadequate representation during a grievance proceeding must file their complaint against the union with a Labor Relations Board as a prohibited practice in order to exhaust administrative remedies. Three, whether under the facts as pled the international union may be joined as a party defendant. We hold that under the facts pled by Plaintiffs, the only cause of action that may survive a 12(B)(6) motion is the cause of action for breach of the duty of fair representation based only on a showing that the union acted arbitrarily, fraudulently or in bad faith. Plaintiffs were not required to file their complaint with the TVI Labor Relations Board in order to exhaust administrative remedies since their cause of action against Union Defendants is not a prohibited practice under PEBA I. Finally, because Plaintiffs pled that AFT does business in New Mexico as an exclusive bargaining agent for Plaintiffs under the Collective Bargaining Agreement, Plaintiffs' complaint survives a 12(B)(6) motion. Accordingly, the Court of Appeals is reversed in part, affirmed in part, and this matter is remanded to the district court for proceedings consistent with this opinion.

BACKGROUND

{4} In its order dismissing Plaintiffs' complaint, the district court was clear that it was deciding this case under Rule 12(B)(6) and was not considering matters outside the pleadings. Dismissal on 12(B)(6) grounds is appropriate only if Plaintiffs are not entitled to recover under any theory of the facts alleged in their complaint. Kirkpatrick v. Introspect Healthcare Corp., 114 N.M. 706, 709, 845 P.2d 800, 803 (1992). Therefore, we assume the veracity of all of the well-pled facts in Plaintiffs' complaint to determine whether Plaintiffs may prevail under any state of the facts alleged. Swinney v. Deming Bd. of Educ., 117 N.M. 492, 493, 873 P.2d 238, 239 (1994). The material facts pled by Plaintiffs, which we accept as true, are provided as background for our analysis.

{5} Plaintiffs were fired from their jobs as full-time teachers at TVI without notice or explanation. As employees of a public institution, Plaintiffs were covered by PEBA I. PEBA I gives public employees the right to join a labor organization for the purpose of collective bargaining. Union Defendants are the exclusive representatives of TVI employees under a Collective Bargaining Agreement between Union Defendants and TVI. Part of the responsibilities of Union Defendants under the Collective Bargaining Agreement are to represent public employees during a grievance proceeding.

{6} Plaintiffs sought representation from Union Defendants to challenge their terminations and obtain reinstatement and back pay. Union Defendants undertook representation of Plaintiffs and filed grievances on Plaintiffs' behalf. As a preliminary matter, Union Defendants represented Plaintiffs in an arbitration to determine whether Plaintiffs had a right to challenge their terminations. On this issue, Union Defendants prevailed — it was determined that Plaintiffs were entitled to challenge their terminations under the Collective Bargaining Agreement. Although Union Defendants continued to represent Plaintiffs, rather than seek reinstatement and back pay for them, Union Defendants settled the matter without notifying or consulting with Plaintiffs. The settlement required Plaintiffs to dismiss a pending federal lawsuit against TVI and to waive any right to future employment with TVI.² In the event Plaintiffs refused to abide by the settlement, Union Defendants had an agreement with TVI to testify against Plaintiffs in an attempt to have Plaintiffs' federal lawsuit against TVI dismissed.

{7} Dissatisfied with the settlement, Plaintiffs sued Union Defendants in the district court. In their complaint, Plaintiffs allege that Union Defendants ignored Plaintiffs' legitimate defense to their terminations, failed to investigate Plaintiffs' claims, processed their grievances in a perfunctory manner, and settled Plaintiffs' claims with TVI without notifying or consulting Plaintiffs. The first issue we decide is what cause or causes of action these facts will support against Union Defendants.

I. CAUSES OF ACTION SUPPORTED BY THE FACTS STATED IN PLAINTIFFS' COMPLAINT AGAINST UNION DEFENDANTS

A. LABOR ORGANIZATIONS OWE PUBLIC EMPLOYEES A DUTY OF FAIR REPRESENTATION BUT CANNOT BE SUED FOR NEGLIGENT REPRESENTATION

{8} Plaintiffs argue that the above facts state a cause of action against Union Defendants for breach of the duty of fair representation and urge us to adopt a negligence standard to support such a cause of action. Union Defendants concede that they have a duty to fairly represent their union members. Union Defendants also concede in their reply brief that Plaintiffs have alleged sufficient facts in their complaint to support a cause of action for breach of the duty of fair representation. However, relying on Jones v. Int'l Union of Operating Engineers, 72 N.M. 322, 383 P.2d 571 (1963), Union Defendants contend that the duty of fair representation may only be breached if a union acts arbitrarily, fraudulently, or in bad faith.

{9} In Jones, the employer, Continental Oil Company, fired Jones for refusing to sign a statement acknowledging he had a preexisting eye injury that limited his ability to work. Id. at 324, 383 P.2d at 572. Jones sued Continental for wrongful termination. He also sued his union for arbitrarily, fraudulently, and in bad faith breaching its trust obligations as his exclusive bargaining agent by refusing to demand that his termination be submitted to arbitration. Id. The district court dismissed his lawsuit under Rule 12(B)(6) for failure to state a cause of action. Id. On appeal, we reversed the district court and held that Jones stated a cause of action against his union because labor organizations owe their members a duty of fair representation. Id. at 330, 332, 383 P.2d at 576, 578. We explained that the duty of fair representation extends beyond the bargaining table to the "day-to-day adjustment of working rules and the protection of employee's rights secured by the contract." Id. at 330, 383 P.2d at 576. Despite explaining that a union's responsibilities extend to the protection of employees' rights, we cautioned against unrestrained interference with a union's decision whether to pursue the arbitration of...