Farrington v. Benjamin, Civ. A. No. 76-40053.

Citation468 F. Supp. 343
Decision Date27 March 1979
Docket NumberCiv. A. No. 76-40053.
PartiesLarry FARRINGTON and John Pruitt, as and for themselves and as members of a class having an interest in the funds of Chevrolet Local 659, Plaintiffs, v. David BENJAMIN, President of Chevrolet Local 659, a Labor Organization, Defendant.
CourtUnited States District Courts. 6th Circuit. United States District Court (Western District Michigan)

COPYRIGHT MATERIAL OMITTED

Gordon Suber, Flint, Mich., for plaintiffs.

Larry G. Sharp, Flint, Mich., for defendant.

MEMORANDUM OPINION AND ORDER

JAMES HARVEY, District Judge.

Plaintiffs commenced this action under 29 U.S.C. § 501(a), (b) alleging that defendant violated the International Constitution of the United Automobile, Aerospace and Agricultural Implement Workers of America (hereinafter, UAW) and the By-laws of Local Union 659 by disbursing union funds without prior authorization and by failing to properly supervise other union activities. Plaintiffs allege that these actions committed by defendant as President of Local 659 constitute a breach of his fiduciary duty to the union and its members. Plaintiffs seek both legal and equitable relief as provided for in 29 U.S.C. § 501(a), (b).

The action initially challenged the propriety of five transactions relating to the appropriation and spending of union funds by defendant. On August 30, 1977, the Court ordered Count IV and Count V dismissed with prejudice pursuant to a stipulation of the parties. The propriety of the following transactions remains at issue:

Count I: The payment of $36,653.00 by Local 659 to Dupuis and Ryden, a Certified Public Accounting (hereinafter CPA) firm for services rendered in conducting the 1975 elections for Local 659.
Count II: The utilization and the payment of $26,367.70 by Local 659 to union members appointed as election assistants for the 1975 elections for Local 659.
Count III: The payment of $822.87 to the law firm of Draper, Daniel, Ruhala and Seymour, P. C. and the payment of $1,000.00 to Attorney James O. Turnage for legal services rendered to Local 659 in 1975.

On December 12, 1977, the parties submitted to the Court proposed findings of fact and proposed conclusions of law. The parties additionally informed the Court which proposed findings of fact were agreed upon and which were disputed or partially disputed between the parties.

On December 13, 1977, the Court received Exhibits # 1 through # 98 into evidence pursuant to the stipulation of counsel. The Court also heard the testimony of two witnesses relating to the payment of union funds to the CPA firm of Dupuis and Ryden.

On December 15, 1977, the Court heard the final arguments of counsel in the matter and took the action under advisement.

Upon a review of the entire record, the Court hereby sets forth its findings of fact and conclusions of law pursuant to F.R. Civ.P. 52(a).

FINDINGS OF FACT
A. JURISDICTION

1. Plaintiffs Larry Farrington and John Pruitt were members in good standing of UAW Local 659 at all relevant times to the instant action. Stipulated Findings of Fact # 6.

2. Defendant David Benjamin was the duly elected President of UAW Local 659 at all times relevant to the instant action. Stipulated Findings of Fact # 9.

3. UAW Local 659 is an amalgamated local labor organization affiliated with the International UAW. In 1975, Local 659 was the local union collective bargaining representative for approximately 15,900 employees of General Motors Corporation employed at seventeen automotive or parts plants in Genesee County, Michigan and was also the representative of approximately 5,000 General Motors Corporation retirees. Stipulated Findings of Fact # 10, # 11.

4. By petition to the Executive Board of Local 659, plaintiff Farrington requested that the Board take whatever steps were necessary to recover the union funds allegedly improperly expended on the 1975 elections.

5. On March 23, 1976, defendant Benjamin, on behalf of the Executive Board, refused to honor plaintiff Farrington's request or to pursue recovery of the funds expended.

6. On May 28, 1976, upon a review of plaintiffs' application to commence the instant action on behalf of Local 659 and upon finding good cause for the same, the Court granted plaintiffs leave to file their verified complaint against defendant Benjamin.

B. OPERATIVE FACTS

7. As President of UAW Local 659, defendant Benjamin was a member of the Executive Board of Local 659. Article VI, Section 1, UAW Local 659 By-laws, Plaintiffs' Exhibit # 2.

8. Members of the Executive Board shall comply with the UAW Local 659 By-laws and with the International UAW Constitution. Article VII, Section 1(A), UAW Local 659 By-laws, Plaintiffs' Exhibit # 2.

9. Executive Board members are authorized to pay all bills and necessary expenses of the Local Union as outlined in Article 46 of the Constitution and are authorized to disburse funds not to exceed $250.00 in any single disbursement and each disbursement must be reported at the next Joint Council meeting for approval. Article VII, Section 1(E), UAW Local 659 By-laws, Plaintiffs' Exhibit # 2.

10. The President of Local 659 shall countersign all drafts, checks, notes, orders, or other undertaking for the payment of money on the Local Union Treasury. Article IX, Section 1(H), UAW Local 659 By-laws, Plaintiffs' Exhibit # 2.

11. Local 659 has a standing Election Committee elected by and from the members of the Joint Council. It is the duty of the Election Committee to supervise all primary and final union elections of local union officers. Article XVI, Section 1 and 2, UAW Local 659 By-laws, Plaintiffs' Exhibit # 2.

12. In 1975, Willie Jamerson was the Chairman of the Election Committee.

13. On May 6 and 7, 1975, Local 659 conducted its Primary Election for local union officers. Stipulated Findings of Fact # 16.

14. On May 20 and 21, 1975, Local 659 conducted its Run-Off Election for local union officers. Stipulated Findings of Fact # 17.

15. The 1975 Union Elections were the first "in-plant" elections conducted in the history of Local 659. Stipulated Findings of Fact # 18.

16. Defendant Benjamin was re-elected President of Local 659 in 1975. Stipulated Findings of Fact # 15.

C. COUNT I: RETENTION OF DUPUIS & RYDEN

17. Article XX, Section 7 of the By-laws of Local 659 provide:

A firm of Certified Public Accountants within the State of Michigan shall be employed to conduct the General Local Union Election of Officers, Unit Officers, Shop Committee-at-Large, Skilled Trades Shop Committee-at-Large and International UAW Convention delegates. Any agreement hiring Certified Public Accountants shall be negotiated by the Election Committee, and shall be placed into a written contract regarding rates, maintenance of Local Union records, etc., between the Local Union and Certified Public Accounts. The Agreements shall be subject to the approval of, and be signed by, the Local Union President and Financial Secretary.
Plaintiffs' Exhibit # 2.

18. Local 659 had employed the CPA firm of Dupuis & Ryden to conduct the prior fifteen union elections, including the 1975 union elections. Stipulated Findings of Fact # 23.

19. Prior to 1975, written agreements between Local 659 and the CPA firm of Dupuis & Ryden set forth the balloting procedure, election hours and places of balloting. The agreements did not specify the rates of compensation for the CPA services and were signed by the Election Committee Chairman only. Defendant's Exhibit # 57A-N.

20. Prior to 1975, the CPA firm of Dupuis & Ryden charged Local 659 a fee based on the standard per diem hourly rate of the CPA firm personnel.

21. Chairman Jamerson of the Election Committee negotiated the agreement with the CPA firm of Dupuis & Ryden regarding the 1975 union elections.

22. The CPA firm of Dupuis & Ryden represented to Local 659 that $33,000.00 would be an estimate for its services for conducting the Primary and Run-Off Elections in 1975, but that the same was only an estimate due to inevitable and unpredictable difficulties which occur in any election. Testimony of Joseph H. Anthony, CPA, Dupuis & Ryden.

23. The written agreement between Local 659 and the CPA firm of Dupuis & Ryden was similar to written agreements from past years setting forth the balloting places, election hours and the counting and certification of the election results. The written agreement did not specify the rate of compensation. Defendant's Exhibits # 55, 56.

24. Defendant Benjamin did not sign the 1975 agreement between Local 659 and the CPA firm of Dupuis & Ryden.

25. On June 18, 1975 following the elections, the CPA firm of Dupuis & Ryden submitted a bill to Local 659 in the amount of $37,653.00 for professional services rendered for conducting the 1975 union elections. Defendant's Exhibit # 58S.

26. Local 659 paid the CPA firm of Dupuis & Ryden in regular installments from July 14, 1975 until December 15, 1975. Defendant's Exhibits # 58B, # 61.

27. Defendant Benjamin countersigned five of the six installment payments from Local 659 to the CPA firm of Dupuis & Ryden. Defendant's Exhibit # 61.

28. Expenditures to the CPA firm of Dupuis & Ryden were ratified by the Executive Board of Local 659 and by the Joint Council of Local 659 subsequent to payment; but, at no time were the expenditures approved prior to payment. Defendant's Exhibit # 97.

D. COUNT II: UTILIZATION OF ELECTION ASSISTANTS

29. Local 659 customarily employed union members as "election assistants" to facilitate the conducting of union elections. "Election assistants" were paid on a "lost time" basis; that is, election assistants would be paid from union funds for the time spent away from their regular scheduled shift to perform union-related duties. Stipulated Findings of Fact # 31, # 39.

30. In the 1975 elections, approximately 165 election assistants were selected by the Election Committee and performed various functions, including but not limited to: setting up voting booths, delivering ballots, moving trailers, maintaining...

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