Doyle v. Turner
| Decision Date | 25 May 1995 |
| Docket Number | No. 86 Civ. 2792 (CSH).,86 Civ. 2792 (CSH). |
| Citation | 886 F. Supp. 399 |
| Parties | Angela DOYLE, Frederick Gilliam, Sylvia Grant-Gutierrez, Betty Hughley, Georgianna Johnson, Edward Kay, Steven Kramer, Luis Matos, James Murphy, Mark Shanker, Unity and Progress-Save Our Union Committee, and Local 1199, Drug, Hospital and Health Care Employees Union, RWDSU, AFL-CIO, Plaintiffs, v. Doris TURNER, Telbert King, Claude Ferrara, Philip Kamenkowitz, Ramon P. Malve, Jo-Ann Marshall, Herb Binger, Barrington Moore, Karl Rath, Floris Saunders and Floyd Shephard, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Gladstein, Reif & Meginniss and Levy, Pollack, Ratner & Behroozi, P.C., New York City, for plaintiffs (James Reif and Fanette Pollack, of counsel).
Gareth W. Stewart, New York City, for defendants.
The defendants in this much-litigated case are former officers of plaintiff Local 1199, Drug, Hospital and Health Care Employees Union, RWDSU AFL-CIO (the "Union"). Eight of the eleven individual defendants, having been granted summary judgment dismissing all of plaintiffs' claims against them, now move for reimbursement of their attorneys' fees, costs and disbursements.
Plaintiffs commenced this action in April of 1986 against defendants who were then officers of the Union. Plaintiffs filed an amended complaint in late 1986 and a second amended complaint in 1990. The second amended complaint alleged claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.; and Section 501(a) of the Labor Management Reporting and Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. § 401 et seq.
The case has been the subject of a number of prior opinions by this Court. Familiarity with all of them is presumed. For present purposes it is sufficient to say that at the time the individual plaintiffs filed a suit, the individual defendants were officers of the Union. However, the Union election in 1984, which installed the individual defendants as officers, was set aside, and in a June, 1986 election the individual plaintiffs prevailed. While the original complaint was filed while defendants were still in office, the action was pressed since their departure by the plaintiffs, now including the Union itself.
Since the inception of the litigation, all the defendants except for Philip Kamenkowitz have been represented by Gareth W. Stewart, Esq. and attorneys with whom he is associated. In opinions dated May 26, 1993 and July 5, 1994, addressing plaintiffs' second amended complaint, the Court directed that summary judgment enter dismissing all claims against defendants Claude Ferrara, Ramon P. Malave, Jo-Ann Marshall, Herb Binger, Barrington Moore, Karl Rath, Floris Saunders, and Floyd Shephard. These defendants now move for an order directing payment of their attorneys fees and costs. While the motion papers do not specify the expected source of those monies, presumably defendants' principal target is the Union itself.
The moving defendants rely upon three sources of authority. First, they claim that the requested relief may be had under Section 501 of the LMRDA, 29 U.S.C. § 501, as interpreted by case law. Secondly, defendants rely upon the "bad faith" exception to the usual American Rule in respect of attorney's fees, contending that plaintiffs acted in bad faith in initiating and continuing this action against them. Third, defendants rely upon provisions of New York law applicable to the reimbursement of corporate officers and directors who have been vindicated in litigation against them. See N.Y. Not-For-Profit Corporation Law, §§ 722-725; N.Y. Business Corporation Law, §§ 724(c), 725(c), 726(a) (McKinney's Supp.1995).
Plaintiffs contend that there is no authority entitling defendants to Court-directed payment of attorney's fees and costs.
Section 501(a) of the LMRDA provides that officers of a Labor Union "occupy positions of trust in relation to such organization and its members as a group." Section, 501(b) authorizes suits by members of labor of organizations against officers who have breached their fiduciary duty. That subsection provides in part:
No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown which application shall be made ex parte. The trial judge may alot 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.
The statute does not deal expressly with the payment or reimbursement of attorney's fees incurred by union officers who are charged with violating their fiduciary duties. However, the cases make it clear that union funds cannot be expended for the personal defense of officers "prior to a full determination on the merits." Morrissey v. Segal, 526 F.2d 121, 127 (2d Cir.1975) (citing cases); Milone v. English, 306 F.2d 814, 817 (D.C.Cir.1962) (); United States v. Local 1804-1, International Longshoremen's Association, AFL-CIO, 732 F.Supp. 434, 437 (S.D.N.Y.1990).
The question then arises, what of the union officer who successfully defends against the charges against him, and incurs legal expenses in doing so? In Morrissey v. Segal, the Second Circuit held that union pension fund trustees charged with breaches of fiduciary duty in permitting unauthorized pension payments, and whose actions were vindicated in part, "are entitled to be reimbursed for those fees incurred in defending their behavior" to the extent that the defense succeeded. 526 F.2d at 128. Defendants at bar contend that the rationale of Morrissey v. Segal entitles them to payment of their attorney's fees and costs.
As plaintiffs at bar point out, in Morrissey v. Segal the pension fund advanced attorney's fees to the defendant trustees. After litigation on the merits, the plaintiffs sought to recover those payments, "arguing that any indemnification was improper for what they allege is the personal defense of the defendant-trustees." 526 F.2d at 126. The Second Circuit rejected that argument, to the extent that the attorney's fees were properly allocable to claims upon which the trustees had been exonerated.
Thus the Morrissey court concluded that the trustees "may properly be indemnified for those attorneys' fees allocable to the defense of all pension payments other than to Perry." Id. at 129. In the later case of Morrissey v. Curran, 650 F.2d 1267, 1277 (2d Cir.1981), the Second Circuit characterized its decision in Morrissey v. Segal as upholding "an allocation of the costs of legal services that could be reimbursed by a union in a § 501 action, where the defendant officer was held liable on some charges while other charges were dismissed."
Plaintiffs at bar contend that these cases and others cited by defendants do no more than declare a union's authority to voluntarily reimburse the attorneys' fees of vindicated officers without offending the LMRDA. The Union, which never had any intention of paying defendants' legal expenses and has not done so, argues that in the absence of a provision in the constitution or by-laws or a voluntary payment by the Union, there is no authority entitling defendants to a Court-directed payment of legal expenses incurred by vindicated officers.
The question appears to be one of first impression. Nonetheless, I conclude that the rationale of Morrissey v. Segal entitles defendants at bar to the relief they seek.
As I understand the Second Circuit's analysis in that case, the voluntary advancing of legal costs to the accused trustees was not a dispositive or even pertinent factor. Judge Lumbard wrote at 526 F.2d at 128:
The defendant trustees, however, are entitled to be reimbursed for those fees incurred in defending their behavior in the non-Perry payments. The beneficent aims of § 501 should not be frustrated by construing its terms with such uncompromising rigor that competent individuals are discouraged from assuming a fiduciary role in union affairs. A pension trustee who has acted blamelessly in a good faith effort to promote what he reasonably believed to be the purpose of the trustee should not be required to shoulder the burden of his defense when subsequent events prove his decision to have been an improvident one. See 3 Scott, The Law of Trusts, § 1884, at 1535 (3d ed. 1967).
The court of appeals enlarged upon that analysis by saying:
Concern that the union subsidization of attorneys' fees will represent new bounty to alleged malefactors or enable officer-defendants financially to overwhelm the § 501 plaintiff is inapposite where, as here, the lawsuit has already terminated and the trustees have been substantially absolved. See generally, Counsel Fees for Union Officers Under the Fiduciary Provisions of the Landrum-Griffin, 73 Yale L.J. 443 (1964).
The Yale Law...
To continue reading
Request your trial
-
Doyle v. Turner
...the union and its successor officers. The union refuses to pay its former officers' attorney's fees. This Court held, in Doyle v. Turner, 886 F.Supp. 399 (S.D.N.Y.1995), that § 501(b) of the Labor-Management Reporting Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. § 401 et seq., could be invok......
-
Doyle v. Kamenkowitz
...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 § 5......