Gilbert v. Hoisting and Portable Engineers, Local Union No. 701

• Decision Date: 31 July 1963
• Citation: 237 Or. 130,384 P.2d 136
• Parties: Charles E. GILBERT et al., for themselves and on behalf of all of the members of Hoisting & Portable Engineers, Local 701, Respondents, v. HOISTING & PORTABLE ENGINEERS, LOCAL UNION NO. 701 of the International Union of Operating Engineers, Appellants.
• Court: Oregon Supreme Court

Page 136

384 P.2d 136

237 Or. 130

Charles E. GILBERT et al., for themselves and on behalf of all of the members of Hoisting & Portable Engineers, Local 701, Respondents, v. HOISTING & PORTABLE ENGINEERS, LOCAL UNION NO. 701 of the International Union of Operating Engineers, Appellants.

Supreme Court of Oregon, In Banc.

Argued and Submitted July 1, 1963.

Decided July 31, 1963.

Clifford D. O'Brien, Portland, argued the cause for appellants. On the briefs were O'Brien & Perkins, Portland.

Gunther Krause, Portland, argued the cause for respondents. On the brief were Krause, Lindsay & Nahstoll, Portland.

Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL, GOODWIN and DENECKE, JJ.

O'CONNELL, Justice.

This is a suit in equity brought against the Hoisting & Portable Engineers Local 701 by plaintiffs as representatives of all the members of the local union. Plaintiffs pray for the appointment of a receiver, for an accounting, and for other incidental relief.

The gravamen of the complaint is that four of the officers of the local union had failed to follow 'democratic processes' in the conduct of the affairs of the union in various particulars. It is charged that these officers were elected as a result of a fraudulent election in which they caused invalid ballots to be cast and that the officers, for the purpose of appropriating union property for unauthorized purposes, have refused to provide for the election of trustees and auditors as required by the bylaws of the union.

The trial court found that plaintiffs had failed to sustain their charge of fraudulent election, or that there had been a misappropriation of funds justifying the appointment of a receiver. However, the court found that defendants, in conducting the affairs of the union, had disregarded the union constitution in certain respects affecting democratic processes. ¹ Although the trial judge found that there was not sufficient evidence to justify removal of the defendant officers, he considered their previous neglect in observing the democratic processes of the union a ground for setting up safeguards in the conduct of the next union election which was soon to be held. To this end the following order was entered:

'5. For the purpose of participating in supervising the election of officers and officials of the defendant Local 701 in June 1962, the certified public accountant firm of Pattullo and Gleason be and it hereby is appointed by the Court with instructions to report the conduct and results of the election to the Court.

'6. For the purpose of advising the Court as to the assets, income and expenses of the defendant Local 701 the certified public accountant firm of Pattullo and Gleason be and it hereby is appointed to check the quarterly audits of the business of said defendant and to report thereon to the Court each quarter from date hereof not to exceed one year.

'7. Jurisdiction over this suit is hereby retained by this Court so that any party may bring before the Court any matters within the issues and particularly any failure to comply with the Constitution of the International and the Bylaws of defendant Local 701 and any failure to accord to the membership their rights under the law and the said constitution and bylaws. Either party may move to terminate said jurisdiction at any time.' ²

Assuming that there was evidence to support the charge of an abuse of democratic processes in conducting the affairs of the union relating to election of officers, the relief granted was within the power of a court of equity. ³ As we read the record, there was evidence to establish that the defendants failed to observe the union bylaws and constitution relating to the election of trustees and auditors. There also was evidence of irregularities in previous election procedures. This evidence was sufficient to support the order designed to protect the plaintiffs' right to have a fair election.

However, it is contended that even assuming such evidence was produced, plaintiffs have failed to comply with Section 501(b) of the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 501(b), requiring a union member who seeks relief against his union to first request the governing board or officers to sue or secure the appropriate relief and to obtain leave of court before bringing such proceeding. ⁴

The trial court concluded that the procedure specified in Section 501(b) was not intended to be binding upon union members bringing actions in courts of a state where there already existed procedures by which a union member could enforce the fiduciary duties of union officers. We agree with this interpretation of the act. Section 501(b) could be interpreted to mean that the procedure there specified must be followed in state court proceedings. But Section 603(a) of the Labor-Management Reporting and Disclosure Act of 1959 indicates the congressional intent to recognize the remedies available in state courts unaffected by the remedies under the federal act unless 'explicitly provided to the contrary.' ⁵

It is not necessary under Oregon law to obtain leave to sue under the circumstances recited in Section 501(b). Although it is necessary for a complaining union member to exhaust his remedies within the union itself as a condition precedent to judicial relief, ⁶ the facts in the present case indicate such procedure would have been fruitless. ⁷ Plaintiffs could not expect relief through a request made to the officer of the local union whose conduct was being challenged. And, although plaintiffs brought the alleged unlawful activities of the defendant officers to the attention of the International Union of Operating Engineers, the International took no action.

We are of the opinion that the controversy was ripe for consideration by the trial court.

Defendants' attack upon the court's jurisdiction is made, not because they object to the judicial supervision of the election but because the court allowed plaintiffs' attorneys fees ($8,500) and reimbursed plaintiffs' counsel for the cost of duplicating and distributing to the union membership copies of the court's memorandum opinion ($222).

Defendants object to the allowance of attorneys' fees, first upon the ground that there is no authorization in the Oregon statutes for the allowance of attorneys' fees under the circumstances of this case, and secondly because Section 501(b) limits the allowance of attorneys' fees to cases where there is the 'recovery' of money. ⁸ Having interpreted Section 501(b) as merely supplemental to state remedies, it follows that we would not be bound by any limitation which that section imposes upon the allowance of attorneys' fees.

Although defendants' first ground of objection presents a more serious question, we are of the opinion that the allowance of attorneys' fees was proper in this case. The authority of a court of equity to award attorneys' fees is not derived solely from the statutes. Equity may under some circumstances as a part of its inherent equitable powers award attorneys' fees. This power is frequently exercised where the plaintiff brings a representative suit on behalf of other members of an organization, as for example where a stockholder brings a derivative suit against a corporation.

Defendants contend, however, that attorneys' fees are allowed in such cases only if the prosecution of the suit results in a pecuniary benefit. Although there is authority supporting defendants' contention, more recent cases have permitted recovery where there was a non-pecuniary benefit to the corporation. ⁹ We believe that these recent cases announce the sounder rule. ¹⁰ The broader rule is particularly apposite in suits brought by members of a union to correct evils in union management. The preservation of the democratic process in the functioning of unions is a matter of primary concern, not only to union members but to the public as well. Litigation which results in correcting abuses of this process frequently may not give rise to an ascertainable pecuniary benefit. But the fact that no money or property is involved does not detract from the importance of the litigation. Those members of the union who in good faith seek to preserve the internal democracy of their union should not have to bear the expense of a successful suit. We hold that plaintiffs were entitled to attorneys' fees. The fee allowed by the trial court was reasonable.

The trial court allowed plaintiffs $222 which was the cost of reproducing and distributing to the union membership 4800 copies of the court's order. This is not an item of disbursement within ORS 20.020. However, under proper circumstances a court of equity would have the power to order the defendants to duplicate and distribute copies of the court's opinion or to pay the cost of doing so. But we are unable to find anything in the record other than the statement of plaintiffs' counsel explaining why this cost was imposed upon defendants. Therefore it is disallowed.

The decree of the lower court, as modified by the disallowance of the sum of $222, is affirmed.

1 The trial judge's memorandum opinion contains the following statement:

'3. As to Abolition of Democratic Processes. This challenge to defendants' conduct of Local 701, its members' meetings, controls, failure to follow constitutional directives, as evidenced by absence of auditors, trustee appointments, inability of members to secure requested information regarding funds, elections, etc., constitute...