Eads v. Sayen, 12916.

• Decision Date: 12 August 1960
• Docket Number: No. 12916.,12916.
• Parties: James R. EADS, Lawrence S. Shapiro et al., on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. Clarence N. SAYEN and Don J. Smith, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

281 F.2d 791 (1960)

James R. EADS, Lawrence S. Shapiro et al., on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. Clarence N. SAYEN and Don J. Smith, Defendants-Appellees.

No. 12916.

United States Court of Appeals Seventh Circuit.

August 12, 1960.

Robert Ackerberg, Jr., James B. O'Shaughnessy, Chicago, Ill., Dallstream, Schiff, Hardin, Waite & Dorschel, Chicago, Ill., of counsel, for appellants.

Newton N. Minow, F. Harold Bennett, W. Willard Wirtz, for appellee.

John W. Hunt, Chicago, Ill., Stevenson, Rifkind & Wirtz, Chicago Ill., of counsel, for defendants-appellees.

Before SCHNACKENBERG, MAJOR and KNOCH, Circuit Judges.

KNOCH, Circuit Judge.

The original plaintiffs here were James R. Eads and Lawrence S. Shapiro, members of the Air Line Pilots Association, International. By supplemental complaint, seventeen other members of the Association joined them. The defendants are Clarence N. Sayen and Don J. Smith, respectively President and Treasurer of the Association. The Association, which is not a party, is a voluntary, unincorporated association of pilots employed by air common carriers in the United States, and is the duly designated collective bargaining representative of pilot members for some fifty carriers, but there is no closed or union shop, and pilots need not belong to the Association to maintain their jobs.

Plaintiffs brought this action in the District Court to obtain equitable relief from allegedly invalid levies of two assessments to pay benefits to Capital and Eastern Airlines pilot members, who were out of work because of strikes by other unions, though not themselves on strike. Plaintiffs also sought protection from disciplinary action against them by the Association. The matter was referred to a special master who found and concluded that the suit was between citizens of different states; that more than $10,000, exclusive of interest and costs, was involved, in that assessments of more than $1,000,000 would have to be refunded or cancelled if plaintiffs were successful; and that this was a class action — all pilots who paid the assessments would in equity be entitled to refund, and those who had not paid would be entitled to cancellation, if plaintiffs, who fairly insured adequate representation of all members of the class, were successful.

Defendants argue that the special master erred in concluding that plaintiffs adequately represented the class, but defendants took no appeal.

The special master also found and concluded that the assessments were valid, the voting procedures in accordance with the Association's Constitution and Bylaws, Robert's Rules of Order, and the interpretation placed on the Constitution and By-laws by the Association's board of directors, who, under the Constitution and By-laws, are given the power to interpret the same in the event of any dispute arising out of their meaning or intent.

Thus, the special master concluded that in authorizing the two assessments of which plaintiffs complain, the board of directors interpreted the Constitution and By-laws to mean that payment of benefits to pilots out of work on account of strike but not themselves on strike, was an emergency expense for an object within the scope of article I, section 6 of the Constitution and By-laws.^*

The special master also found that adequate and reasonable remedies were provided by the Constitution and By-laws within the procedures of the Association, and that plaintiffs had not availed themselves of those remedies, or of their adequate remedy at law, and that, further, the Association itself was an indispensable party-defendant.

The District Judge adopted the special master's findings and conclusions, after considering the objections thereto. The complaint was dismissed.

Plaintiffs appealed from the final judgment except for that part of it which adopted the findings and recommendations of the special master concerning jurisdiction of the subject matter and parties, jurisdictional amount, class action and adequate representation of all class members by plaintiffs. Plaintiffs contend that they are forbidden, by the Association's Constitution, to challenge any assessments approved by the board of directors and that the entire subject of internal remedies within the Association is foreclosed; that the numerous remedies found available by the special master and the District Court are impracticable or illusory.

Plaintiffs also argue that the Association as an unincorporated association lacks the capacity to be sued under Illinois law and cannot, therefore, be joined as a party.

It is plaintiffs' position that the defendant officers are acting without valid authority because assessments must be approved, in mail balloting, by an absolute majority of all 290 directors and not merely by a majority of those voting; and that, in meetings, assessments must be approved by roll call and not a mere voice vote. With respect to the assessment for Eastern pilot members, plaintiffs allege that the directors were prevented from any valid exercise of their authority by combination of four questions in a single voting proposition, and by failure to disclose to the directors the existence of a partial agreement made between the Association and Eastern Airlines. Plaintiffs further contend that the assessments were not levied for purposes authorized by the Association's Constitution, and that the purposes stated therein may not be enlarged other than by deliberate amendment.

Plaintiffs' prayer for relief calls for the accounts of members who paid the assessment to be credited with such sums against future dues and assessments. Plaintiffs argue that this method of redress would preserve the operating integrity of the Association. Thus over a period of time (plaintiffs suggest five years) these members would be reimbursed at the gradual expense of Capital and Eastern members, who, in the eyes of plaintiffs, having been unjustly enriched, would make restitution indirectly. The Capital and Eastern members would also receive credits for the payments each made for the other. Plaintiffs feel that the differential, between dues and assessment payments made by a member of their class and such payments made by any other member, would prove to be less than $20 per year per such member.

However, the District Court in adopting the special master's findings held that neither defendant is a policy-making official, and that in carrying out their duties as President and Treasurer, they are subject to the control and direction of the board of directors and the executive committee of the Association; that the Constitution and By-laws give them no authority to waive payment of assessments, to make payments out of the Association treasury, adjust the books and records or credit members' accounts for moneys not actually paid in, except on authorization of the board of directors; and that a decree directing them to do any of these things would be invalid because the Association, an indispensable party, had not been joined as a party defendant.

In their answer filed May 11, 1959, defendants asserted, as their Fourth Defense, the fact that the Association was not a party. The District Court allowed the motions of plaintiffs dated May 19, 1959, and June 2, 1959, to file amendments to their complaint, but no apparent attempt was made to add the Association as a party.

Plaintiffs' position is that Rule 17(b), Federal Rules of Civil Procedure, 28 U.S.C.A. requires application of local state law to determine capacity to be sued, and that, in Illinois, a union cannot be sued as an entity. The defendants agree with this general statement of the law, but argue that this does not mean that the Association can never be sued, because under Federal Rule 23, the members of an unincorporated association may be sued as a class.

Plaintiffs rely on Talton v. Behncke, 7 Cir., 1952, 199 F.2d 471, for their assertion that:

"The conclusion that ALPA the Association had to be a party had no merit in 1952, and it has none now." (Plaintiff\'s brief, p. 39)

In Talton a class suit was brought by members of this same Association individually and as members of the Executive Board and of the Board of Directors of the Association to restrain a recalled President from acting. In his Consolidated Motions to Dismiss the Complaint; Answer and Counterclaim, the recalled President-defendant asserted, in Paragraph 2(a) thereof, that the relief sought affected the Association, which being an indispensable party to the action, nevertheless had not been made a party. The District Court subsequently granted motion of the plaintiffs in that case to amend their complaint by adding to the title the words:

"and for and on behalf of the members"

and by making similar insertions to the body of the complaint. The defendant then answered denying (inter alia) that plaintiffs represented the members of the Association.

The special master to whom the Talton case was referred concluded that the members of an unincorporated association may sue or be sued under Rule 23 in a class action, where the necessary conditions to a class exist; that, in fact, the right to bring a class action to enforce the liability of an unincorporated association existed long prior to the adoption of Rule 23; that an unincorporated association might sue and be sued in equity in a class...