Fruit and Vegetable Packers & Ware. Local 760 v. Morley

• Citation: 378 F.2d 738
• Decision Date: 03 May 1967
• Docket Number: No. 21327.,21327.
• Parties: FRUIT AND VEGETABLE PACKERS AND WAREHOUSEMEN LOCAL 760, and James Farrington, Appellants, v. Terry C. MORLEY, Vincent Kuntz and Lumina Brownlee, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

378 F.2d 738 (1967)

FRUIT AND VEGETABLE PACKERS AND WAREHOUSEMEN LOCAL 760, and James Farrington, Appellants, v. Terry C. MORLEY, Vincent Kuntz and Lumina Brownlee, Appellees.

No. 21327.

United States Court of Appeals Ninth Circuit.

May 3, 1967.

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COPYRIGHT MATERIAL OMITTED

Richard P. Donaldson, Bassett, Donaldson & Hafer, Seattle, Wash., for appellants.

Ronald F. Whitaker, Walters & Whitaker, Yakima, Wash., for appellees.

Before MADDEN, Senior Judge, U. S. Court of Claims,^* and BARNES and DUNIWAY, Circuit Judges.

BARNES, Circuit Judge.

Appellees are members of the appellant union, of which appellant Farrington is secretary-treasurer. As required by 29 U.S.C. § 431(b), the union, by its secretary-treasurer Farrington, filed financial statements (called LM-2 reports) with the government for the years 1962, 1963 and 1964, copies of which were obtained by appellees. At an open union meeting in 1965 Farrington was asked what his salary was but refused to disclose it. Thereafter the appellees, on July 16, 1965, sent a letter to the union reading as follows:

"Gentlemen:

"We have obtained copies of the LM-2 reports for the years 1962, 1963 and 1964 filed by Teamsters Local 760.

"We, the undersigned, request the right in person and with an accountant of our own choosing, to examine all supporting documents relating to salaries and expenses paid to officers and employees of Teamsters Local 760 within the years 1962, 1963 and 1964, and all supporting documents relating to loans made by Teamsters Local 760 during the years 1962, 1963 and 1964. In addition, we request the right, in person and with an accountant of our own choosing, to examine all supporting documents relating to receipts and disbursements during the years 1962, 1963 and 1964."

The letter was received but never responded to in any way. The information requested has not been made available to appellees.

Unsuccessful in their request for the information, appellees filed suit in the district court to compel the union and Farrington to permit examination of the records supporting the LM-2 reports. Jurisdiction below was challenged, it being alleged to rest on 29 U.S.C. § 431(c):

"Every labor organization required to submit a report under this subchapter shall make available the information required to be contained in such report to all of its members, and every such labor organization and its officers shall be under a duty enforceable at the suit of any member of such organization in any State court of competent jurisdiction or in the district court of the United States for the district in which such labor organization maintains its principal office, to permit such member for just cause to examine any books, records, and accounts necessary to verify such report. The court in such action may, in its discretion, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney\'s fee to be paid by the defendant, and costs of the action." (Emphasis added.)

The court found that it had jurisdiction, entered an order that the examination be permitted and awarded appellees attorney's fees and costs of the examination. We have jurisdiction of the appeal under 28 U.S.C. § 1291.¹

Appellants raise five specifications of error:

1. The court below erred in failing to hold that appellees' demand to inspect the union's records was insufficient because appellees did not indicate to the union any "just cause" for the inspection;

2. The court below erred in holding that appellees had "just cause" for the inspection;

3. The court below erred in failing to hold that appellees' action was premature and that appellees were required to exhaust their remedies within the union before seeking judicial relief;

4. The court below erred in failing to hold that appellees' action to compel disclosure of the records substantiating the union's 1962 LM-2 report was barred by the Washington two-year statute of limitations; and

5. The court below erred in ordering the appellant union to pay appellees' attorney's fee and the costs of examination of the union's records.

We will treat them in the order presented.

I. The Demand

Appellants argue that the demand presented to the union was required to specify the "just cause" of the proposed examination before the union was under a duty to submit to that examination. The district court concluded to the contrary, that the surrounding facts and circumstances are to be considered in determining whether just cause was shown. We agree with the district court. Opinion as to what constitutes "just cause" may differ. It is an amorphous concept. It may mean one thing to a union member, and something entirely different to a union officer. Yet the statutory requirement must be judged by the objective standard of the reasonable man. It is on that basis that we proceed.

The statute itself does not specify who must make a showing of just cause or the lack thereof, when it is to be made, or how it is to be made. Nor does it require any demand, prior to suit, written or otherwise. Nevertheless, we can assume that the party seeking to examine the union records has the burden of showing he has just cause. Just cause is in the nature of a prerequisite to the right to examine, and we can rely upon the general rule that the burden is upon the person seeking to enforce a right to show that all of the prerequisites and conditions precedent have been met.

Ascertaining upon whom the burden falls, however, does not limit the manner in which that burden can be sustained. Congress in its wisdom has not fixed any particular mode of demonstrating just cause, nor any particular time for the doing of it. Congress could have required a written demand setting forth the alleged just cause. It did not, and it is not our function to impose such limitations where Congress has not.

In Zastrow v. Teamsters, 56 L.R.R.M. 2873 (Wis.Cir.Ct.1961), the court sustained the union's demurrer to a petition seeking to enforce certain members' examination rights. The court held that the union members must make a written demand upon his union which sets forth "(1) cause to examine; and (2) a statement linking records to a specific report." 56 L.R.R.M. at 2874. The court's sole authority for this result was the case of Henderson v. Sarle, 45 L.R.R.M. 3037 (N.Y.Sup.Ct.1960). There, without any supporting authority, the court said: "Such a duty to permit examination cannot arise until there has been a demand setting forth the cause and relating the books, records and accounts to a specific report." 45 L.R.R.M. at 3038.

Appellees correctly point out that we are not bound by this authority. We expressly disapprove of any absolute rule established by the Zastrow and Henderson cases. Congress when it established the members' right to examine the union records was fully aware of the circumstances in which this right would be exercised. Individual members, unschooled in the niceties of labor law, will request verification of certain items in the union reports. Often they will not even anticipate what form that verification will take. In our opinion it was never intended that the exercise of the right to inspection be restricted by requiring a demand with all the technical ritual of a formal pleading.

Appellants direct our attention to the history of this legislation. When Senate Bill 1555 (which later became the Labor-Management Reporting and Disclosure Act of 1959, Pub.L. 86-257, 73 Stat. 519 (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, not to pose any barrier to a union member's honest inquiry into the supporting records. The just cause requirement must be read in a narrow sense when invoked to resist an examination which is admittedly not for harassment. Nor can we rule on such a requirement in a vacuum. The facts of each case vary. Here, one would think that ordinary courtesy required the union officers, if they suspected an improper motive or undue harassment through appellees' letter, to at least answer the members' letter, asking the members to state what their just cause was.

There are two further facts disclosed in the record which make this case unusual.

(1) The unanswered question at the union meeting preceding the letter having to do with the secretary-treasurer's salary; and

(2) The appellants' concession that the appellees in this case did have just cause to raise the admitted discrepancy between the statement and its supporting schedule with respect to the amounts paid to officers.

We hold that the just cause requirement of 29 U.S.C. § 431(c) need not be established in a written demand to the union or its officers for permission to examine records. It is sufficient if, at a time reasonably concurrent to the demand, be it written or oral, the union officers in charge of the records sought to be examined know, or should know, that the requesting member has just cause to seek examination.

The demand in this case did not set forth any facts which would constitute just cause. Appellants argue that the union has a right to have the just cause presented to it before the judicial process is invoked. The cases holding that a demand must be made support this position. See International Brotherhood of Teamsters, etc. v. Wirtz, 120 U.S.App.D.C. 346, 346 F.2d 827, 832 (1965) (assuming a demand is required), Coratella v. Roberto, 56 L.R.R.M. 2068, 2071, order withdrawn for...