Doyle v. Kamenkowitz

• Decision Date: 02 June 1997
• Docket Number: D,Nos. 721,899,s. 721
• Citation: 114 F.3d 371
• Parties: 155 L.R.R.M. (BNA) 2435, 65 USLW 2810, 133 Lab.Cas. P 11,811 Angela DOYLE; Frederick Gilliam; Betty Hughley; Georgianna Johnson, Plaintiffs, Local 1199, Drug, Hospital and Health Care Employees Union, RWDSU, Plaintiff-Appellant-Cross-Appellee, v. Philip KAMENKOWITZ, Defendant, Doris Turner; Telbert King; Herb Binger; Ramon P. Malave; Claude Ferrara; Jo-Ann Marshall; Barington Moore; Karl Rath; Floris Saunders; Floyd Shephard, Defendants-Appellees- Cross-Appellants. ockets 96-7894(L), 96-7928(XAP).
• Court: U.S. Court of Appeals — Second Circuit

Page 371

114 F.3d 371

155 L.R.R.M. (BNA) 2435, 65 USLW 2810,

133 Lab.Cas. P 11,811

Angela DOYLE; Frederick Gilliam; Betty Hughley Georgianna Johnson, Plaintiffs Local 1199, Drug, Hospital and Health Care Employees Union RWDSU, Plaintiff-Appellant-Cross-Appellee, v. Philip KAMENKOWITZ, Defendant Doris Turner; Telbert King; Herb Binger; Ramon P. Malave; Claude Ferrara; Jo-Ann Marshall; Barington Moore; Karl Rath; Floris Saunders; Floyd Shephard, Defendants-Appellees- Cross-Appellants.

Nos. 721, 899, Dockets 96-7894(L), 96-7928(XAP).

United States Court of Appeals, Second Circuit.

Argued Nov. 1, 1996.

Decided June 2, 1997.

William B. Pollard, III, Kornstein Veisz & Wexler, LLP, New York City (James Reif, Gladstein, Reif & Meginniss, New York City, and Richard A. Levy, Levy, Pollack, Ratner & Behroozi, P.C., New York City, on the brief), for Plaintiff-Appellant-Cross-Appellee.

Gareth W. Stewart, New York City, for Defendants-Appellees-Cross-Appellants.

Before: FEINBERG, WALKER, AND JACOBS, Circuit Judges.

JACOBS, Circuit Judge:

It is settled in this Circuit and others that a labor union may, consistent with § 501(b) of the Labor-Management Reporting Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. § 401 et seq., voluntarily pay the attorney's fees of its officers who prevail in the defense of claims asserted against them on the union's behalf for breach of duty under § 501(a) of that Act. See, e.g., Morrissey v. Segal, 526 F.2d 121, 128-29 (2d Cir.1975). This appeal raises a question of first impression in this Circuit: whether a labor union may be compelled under § 501(b) of the LMRDA to reimburse such fees.

The United States District Court for the Southern District of New York (Haight, J.) concluded that prevailing union officers in such circumstances are entitled to reimbursement for their legal expenses under § 501(b), and ordered the union in this case--Local 1199, Drug, Hospital & Health Care Employees Union, RWDSU--to pay more than $387,000 in attorney's fees to several of its former officers, who won summary judgment dismissing federal and state-law claims filed by the Union and individual Union members.

We conclude that § 501(b) does not compel payment of attorney's fees, and we therefore vacate the district court's award entered on the basis of § 501(b), and remand this case for consideration of alternative grounds (either not raised or not ruled upon in the district court) on which an entitlement to fees may be predicated.

BACKGROUND

The present fee dispute is an episode in a decade-long litigation between rival factions of union officials over control of the union in the early and mid-1980s. ¹ The original complaint was filed in 1986 by four individual union members, pursuant to LMRDA § 501(a) and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.; after the union itself joined the action, the plaintiffs (collectively, the "Union") filed two amended complaints raising additional claims under § 501(a) and RICO, as well as under New York Labor Law § 720 et seq. The thrust of the allegations was that the defendant officers had breached their fiduciary duties to the Union by embezzling and converting Union funds and other assets, and had "stolen" the Union's 1984 elections (and unsuccessfully tried to steal the 1986 elections as well) by stuffing ballot boxes; destroying valid ballots; denying Union members the right to vote; threatening, assaulting, and physically preventing members from exercising their rights under sections 7 and 8 of the National Labor Relations Act, 29 U.S.C. §§ 157, 158; and covering up their illegal acts through mail and wire fraud. See Doyle v. Turner, No. 86-CV-2792 (CSH), 1993 WL 183788, at * 1 (S.D.N.Y. May 27, 1993); Complaint pp 6-18; Amended Complaint pp 7-23; Second Amended Complaint pp 9-63.

By orders dated May 27, 1993 and July 5, 1994, the district court granted motions for summary judgment filed by eight of the eleven original defendant officers, ² dismissing the Union's Second Amended Complaint with prejudice as to them (except for one claim against one defendant). See Doyle, 1993 WL 183788, at * 11-* 14; Doyle v. Turner, No. 86-CV-2792 (CSH), 1994 WL 323889, at * 2 (S.D.N.Y. July 5, 1994). The Union continued to press its claims against the remaining defendant officers, and all of the defendant officers continued to pursue counterclaims alleging that the Union was unlawfully withholding severance pay and vacation benefits to which they were entitled under "an unwritten policy of the Union." See Doyle v. Turner, No. 86-CV-2792 (CSH), 1994 WL 48854, at * 1 (S.D.N.Y. Feb.16, 1994).

Meanwhile, the eight defendant officers who had won summary judgment moved for an award of costs and attorney's fees--the issue now here on appeal. They specified three sources of authority for an award of fees: (1) § 501(b); (2) the "bad faith" exception to the "American Rule" governing liability for attorney's fees; and (3) various provisions of New York State law regarding "reimbursement of corporate officers and directors who have been vindicated in litigation against them." See Doyle v. Turner, 886 F.Supp. 399, 400 (S.D.N.Y.1995). The district court addressed only the first ground; as explained in more detail below, the court held--pursuant to § 501(b)--that the defendant officers were entitled to recover, and the Union was required to pay, the legal expenses incurred by the defendant officers in successfully defending against the Union's lawsuit. Id. at 402.

The district court's order awarding fees was entered on July 17, 1995. The Union originally filed an appeal of that order to this Court on July 26, 1995. Ten months later (after briefing but prior to argument), this Court granted a motion by the defendant officers to dismiss the appeal for lack of a final judgment because other claims and counterclaims remained pending in the district court. Upon dismissal of the appeal, the fee judgment became final for purposes of enforcement, and the defendant officers Eventually, the Union and the defendant officers settled their remaining claims and counterclaims, with prejudice, by way of a Stipulated Order of Dismissal (dated July 10, 1996). Among the other principal terms of the Stipulated Order: (1) the Union agreed to pay the defendant officers $750,000 in nine equal monthly installments; ⁴ (2) all parties expressly preserved their rights to appeal from the district court's July 17, 1995 fee judgment; and (3) all parties "agreed that by entering into th[e] settlement[,] no party ha[d] prevailed on any claim or counterclaim for the purpose of awarding attorneys' fees." The Union filed a timely appeal of the fee judgment, and the defendant officers filed a timely cross-appeal contesting the district court's reduction of the award by one-third to account for the fees attributable to the defendant officers who had not won summary judgment.

collected the amount of the judgment ($387,235.45) plus accrued interest. ³

On appeal, both sides raise arguments that (variously) were not asserted in the district court, were not addressed there, or were not properly preserved for appeal to this Court. Thus the Union, despite failing to appeal from the district court's orders granting the defendant officers summary judgment, now argues that those orders were erroneous and should be subject to this Court's de novo review of summary judgment. The defendant officers, for their part, advance at least three new grounds for affirming the fee award: (1) reimbursement is justified by a "common benefit" analysis, because § 501(b) is a "trust statute"; (2) reimbursement is justified by "promissory-equitable estoppel," because the Union promised in writing (when the litigation started) to pay the costs of a successful legal defense; and (3) as a policy matter, vacating the award would "emasculate union democracy" by permitting unions to reimburse exonerated officers (or not) at whim. ⁵

DISCUSSION

Whether the Union was compelled, under § 501(b), to reimburse the defendant officers' attorney's fees is a question of law that we review de novo. See, e.g., Mautner v. Hirsch, 32 F.3d 37, 39 (2d Cir.1994) (de novo review is appropriate where appellant claims that fee award lacks a basis in law or fact).

As noted, the Union now urges that we address a preliminary issue: the correctness of the district court's summary judgment orders. According to the Union, those orders are "appropriately before this Court" because they constituted "[t]he predicate to the fee judgment," by making the defendant officers "prevailing defendants" for purposes of recovering fees, Union Brief at 29, and because an appeal from final judgment permits attack upon "all prior non-final orders and rulings which produce the judgment," Union Reply Brief at 19 (citation omitted). At the same time, the Union concedes that our reversal of summary judgment would "not reinstate the litigation," Union Brief at 29, and that "the summary judgment issues cannot be further pursued on the merits in the event of a reversal because the action has been dismissed with prejudice," Union Reply Brief at 20 n. 12. We conclude that all disputes bearing on the merits of the underlying Because we reach the issue of attorney's fees under § 501(b), answer that question in the Union's favor, and vacate the district court's order awarding fees, we do not consider arguments challenging the particulars of the fee judgment, such as the amount of the award or the sufficiency of the evidence supporting it. In short, our discussion is limited to analyzing whether § 501(b) requires reimbursement of vindicated officers' attorney's fees.

action were mooted by the Stipulated Order of Dismissal. The summary judgment orders made the defendant officers "prevailing" parties; the Union concedes that the merits cannot be reopened; and the Stipulated Order of Dismissal--which expressly provided that its entry would not have the effect...