Conley v. United Steelworkers of America, Local Union No. 1014, 76-1736

• Decision Date: 25 February 1977
• Docket Number: No. 76-1736,76-1736
• Citation: 549 F.2d 1122
• Parties: 94 L.R.R.M. (BNA) 2938, 81 Lab.Cas. P 13,047 Daniel CONLEY et al., Plaintiffs-Appellees, v. UNITED STEELWORKERS OF AMERICA, LOCAL UNION NO. 1014 et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1122

549 F.2d 1122

94 L.R.R.M. (BNA) 2938, 81 Lab.Cas. P 13,047

Daniel CONLEY et al., Plaintiffs-Appellees, v. UNITED STEELWORKERS OF AMERICA, LOCAL UNION NO. 1014 et al.,

Defendants-Appellants.

No. 76-1736.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 4, 1977.

Decided Feb. 25, 1977.

Bernard M. Mamet, Chicago, Ill., for defendants-appellants.

Harold Abrahamson, Hammond, Ind., for plaintiffs-appellees.

Before FAIRCHILD, Chief Judge, CUMMINGS, Circuit Judge, and EAST, Senior District Judge. ^*

EAST, Senior District Judge.

Appellants-defendants are Local Union No. 1014 of United Steelworkers of America and its officers (Union). Appellees-plaintiffs are members of Local Union No. 1014 (Members). The District Court was involved with the proper construction of § 201(c) of Title II of the Labor-Management Reporting and Disclosure Act of 1959 (Act), 29 U.S.C. § 431(c). ¹

The Union appeals the order of the District Court directing that the Union permit the Members to examine, with the right to copy, certain of the Union's financial records covering the period January 1, 1971 through December 31, 1975 under specified conditions. ²

The Union is required under 29 U.S.C. § 431(b) to submit annual financial statements, called LM-2 reports, to the Secretary of Labor. Section 431(c) permits the members of the reporting unions ". . . for just cause to examine any books, records, and accounts necessary to verify (the LM-2 reports)."

In 1972, the Members, claiming irregularities in the allowance and payment of expenses and reimbursement for "lost time," sought to examine the books and records of the Union to verify its LM-2 reports. In September of 1974, arrangements were made to allow the Members to conduct the examination.

However, the impasse was reached when the Union refused to allow the Members to make copies of the records on the ground that the examination provided for in § 431(c) did not include the right to copy. ³ Thereupon the Members instituted these proceedings to enforce their right to examine the Union's records, arguing that the scope of the examination contemplated by § 431(c) included the right to copy. The District Court agreed but stayed its order that the Members be permitted to make the copies pending the Union's appeal of the issue to this Court.

For the reasons hereinafter stated, we agree with the conclusion of the District Court and affirm.

A primary purpose of the Act was to make full information related to the financial affairs of unions available to members in order that they would be " 'strengthened in their efforts to rid themselves of untrustworthy or corrupt officers.' " Antal v. District 5, United Mine Workers of America,451 F.2d 1187, 1189 (3d Cir. 1971), quoting House Report # 741, 2 U.S.Code Cong. & Admin.News, 1959, at pp. 2430-31. Nevertheless Congress was concerned with the possibility that if access to a union's records was too readily available, harassment could result. In discussing the scope of the showing necessary to satisfy the just cause requirement of § 431(c), the Ninth Circuit Court of Appeals in Fruit and Vegetable Packers & Ware. Local 760 v. Morley,378 F.2d 738, 742-43 (9th Cir. 1967), stated:

"When Senate Bill 1555 (which later became the Labor-Management Reporting and Disclosure Act of 1959, . . .) was on the floor of the Senate, Senator Goldwater offered an amendment which would give members the unqualified right to examine union records. Senator Kennedy, fearing that an unqualified right of inspection would lead to harassment, objected to the amendment. As a compromise Senator Goldwater amended his amendment to provide for inspection for 'proper cause,' and, as amended, the amendment was adopted. Although this language was omitted in favor of the House-version of 'just cause,' it seems clear that Congress designed the just cause requirement to prevent continuous and undue harassment . . . ."

Senator Javits, who was instrumental in reaching this compromise, while discussing the proposal to require "proper cause" stated:

"I think this is an excellent solution of the matter, because it equates the rights of the union members with the rights of corporation stockholders, and it prevents a proliferation of the inspection. I believe the amendment is acceptable because it would prevent vexatious forays into the union's books." Congressional Record 6522-23, Senate, April 23, 1959.

Thus it appears from the limited legislative history regarding the adoption of § 431(c) that protection of unions from harassment was to come from the express predication of the right to examine upon an initial showing of "just cause" rather than an implied denial of the right to copy. Moreover, extending the right to copy to union members is necessary to further the purpose of the Act to make full information concerning a union's financial affairs available to its members. Many unions handle vast sums of money involving a myriad of transactions which are reportable under the Act. Cf. Antal v. District 5, United Mine Workers of America, supra at 1188 n.3. Verification of these reports requires a detailed painstaking analysis which due to space and time constrictions can only be partially completed on the premises of the union. Without the right to copy, the members would necessarily be unable to adequately complete their analysis away from the union's premises and their right to examine the records in order to verify the LM-2 reports would be nullified.

A finding that § 431(c) includes the right to copy is also consistent with the development of the case law construing this section. In Local No. 1419, ILA, General Longshore Wkrs. U. v. Smith, 301 F.2d 791 (5th Cir. 1962), the Court of Appeals held that the right of examination granted by § 431(c) was not restricted to exercise by members alone but that they were entitled to the assistance of experts in making the examination. In reaching this decision, the court noted that allowing such assistance was consistent not only with the underlying purpose of the Act but also with the analogous rule that the shareholders of a corporation have the right to expert assistance in examining the records of the corporation. Id. at 796. More recently, the Court of Appeals in Antal v. District 5, United Mine Workers of America, supra at 1188, held that in conducting an examination pursuant to § 431(c), the member's accountant must be allowed " '. . . unrestricted access to and use of his own work papers.' "

Finally, it is clear that extending the right to copy is consistent with the analogy to the rules governing a shareholder's right to examine corporate records. At common law and pursuant to statute, the...