International Longshoremen's Association v. Wilderman, CIVIL ACTION NO. 97-2438 (E.D. Pa. 2/__/1998)
| Decision Date | 01 February 1998 |
| Docket Number | CIVIL ACTION NO. 97-2438. |
| Parties | INTERNATIONAL LONGSHOREMEN'S ASSOCIATION, AFL-CIO v. SPEAR, WILDERMAN, BORISH, ENDY, SPEAR & RUNCKEL, Charles T. Joyce, and Thomas W. Blackwell. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Stanley B. Gruber, Philadelphia, PA, Ernest L. Mathews, Jr., New York City, for Plaintiff,
Richard L. Bazelon, Philadelphia, PA, for Defendants.
Plaintiff International Longshoremen's Association, AFL-CIO ("ILA"), a labor organization, brought this action against the law firm of Spear, Wilderman, Borish, Endy, Spear & Runckel ("Spear Wilderman"), Charles Joyce ("Joyce"), who is a member of Spear Wilderman, and Thomas Blackwell, who is a former officer of ILA Local 1332, alleging violations of the Labor Management Reporting And Disclosure Act ("LMRDA") 29 U.S.C. § 501, the Labor Management Relations Act, 29 U.S.C. § 185, as well as state law claims of fraud, breach of contract, unjust enrichment and breach of fiduciary duties. Spear Wilderman and Joyce have moved to dismiss the complaint in its entirety, on the grounds that 1) § 501 does not confer federal subject matter jurisdiction over suits by labor organizations against individuals for breach of fiduciary duty; 2) private attorneys may not be held liable for breach of fiduciary duty under § 501; 3) liability of moving defendants under § 501 cannot be based on allegations of conspiracy with defendant Blackwell; 4) the remaining federal claim, against defendant Blackwell under 29 U.S.C. § 185, fails to state a claim, and; 5) after dismissing all the federal claims, this court should decline to exercise supplemental jurisdiction over the remaining state claims.1
This lawsuit is the second action arising out of ILA's revocation of the charter of one of its Philadelphia — area affiliates, Local 1332. In September, 1995, after ILA notified Local 1332 that its charter was revoked for non-payment of dues, Local 1332 brought an action seeking to set aside the revocation.2 Defendants Joyce and Spear Wilderman represented Local 1332 in that action, which was settled in February 1996. The settlement agreement provided, inter alia, that Local 1332's charter had been revoked effective September 25, 1995, and that Local 1332 would take necessary steps to transfer title of the local's property to ILA or designated trustees.
In the current action, ILA alleges that during the pendency of the first action, on or about December 12, 1995, Joyce and Spear Wilderman "induced [Local 1332 president Blackwell and Local 1332 financial secretary Warren Robinson] to execute and deliver to Spear Wilderman a note in the amount of $53,578.40 purportedly in payment of attorneys fees for services rendered to the local in litigation including the case brought by Local 1332 against the ILA." (Amended Complaint ¶ 22) ILA further alleges that the note "authorizes the confession and entry of judgment against the local for the sum of the note and agrees to the sale of the local's real estate on writ of execution." Id.
The core of ILA's complaint is that these actions violated Joyce's, Spear Wilderman's and Blackwell's fiduciary duties to Local 1332 as spelled out in 29 U.S.C. § 501(a). The core of Joyce and Spear Wilderman's motion to dismiss is that this case presents both the wrong plaintiff and the wrong defendants, i.e., that § 501 does not permit an action brought by a labor organization (which is what ILA is), nor does it permit an action brought against private attorneys providing representation to a labor organization. After reviewing the arguments made by the parties in their briefs and at oral argument, as well as the relevant case law, I am persuaded that defendants are correct as to their first argument: that § 501 does not confer subject matter jurisdiction over plaintiffs claims brought against defendants for breaches of fiduciary duty.3 I will therefore grant the motion to dismiss.
The first ground asserted in defendants' motion to dismiss is jurisdictional. Thus, I should examine the allegations "and satisfy [myself] as to the existence of [my] power to hear the case." Boyle v. Governor's Veterans Outreach and Assistance Center, 925 F.2d 71,74 (3d Cir. 1991), quoting Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884, 891 (3d Cir. 1977). The plaintiff, as the party asserting jurisdiction, has the burden of proving that jurisdiction is proper. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1936).
Plaintiff is a labor organization, as that term is defined in the LMRDA, 29 U.S.C. § 402(i). (Amended Complaint at I ¶¶ 3-5,16-36) What I am asked to determine at this stage of the proceedings is the legal significance of that identity in the context of a § 501 suit. If plaintiff is correct that § 501 implies a right of action for labor organizations to sue in federal court for breach of fiduciary duty, and more specifically, that § 501 confers a right for an international union to sue in federal court for breach of fiduciary duty by a local union officer, then plaintiff has adequately established that I have jurisdiction. If, on the other hand, moving defendants are correct as to either of their arguments, then I have no power to hear the claims against them, and this action must be dismissed against them.
The relevant portions of section 501 of the LMRDA provide:4
(a) Duties of officers; exculpatory provisions and resolutions void
The officers, agents, shop stewards, and other representatives of a labor organization occupy positions of trust in relation to such organization and its members as a group. It is, therefore, the duty of each such person, taking into account the special problems and functions of a labor organization, to hold its money and property solely for the benefit of the organization and its members and to manage, invest, and expend the same in accordance with its constitution and bylaws, and any resolutions of the governing bodies adopted thereunder, to refrain from dealing with such organization as an adverse party or in behalf of an adverse party in any matter connected with his duties and from holding or acquiring any pecuniary or personal interest which conflicts with the interests of such organization. . . .
(b) Violation of duties; action by member after refusal or failure by labor organization to commence proceedings; jurisdiction; leave of court; counsel fees and expenses
When any officer, agent, shop steward, or representative of any labor organization is alleged to have violated the duties declared in subsection (a) of this section and the labor organization or its governing board or officers refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization, such member may sue such officer, agent, shop steward, or representative in any district court of the United States or in any State court of competent jurisdiction to recover damages or secure an accounting or other appropriate relief for the benefit of the labor organization. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown, which application may be made ex parte. The trial judge may allot 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.
29 U.S.C. § 501(a) and (b).
Subsection (a) establishes the fiduciary duties of officers, agents, shop stewards and representatives of labor organizations. Subsection (b) both creates and limits a cause of action for a member to recover damages caused by an officer, agent, shop steward or representative's breach of the duties established in subsection (a). A union member seeking to sue under § 501(b) must meet two statutory prerequisites: he or she must first request that the union or its governing officers bring an action, and allege that the union refused or failed to do so, and then must request leave of court to bring the action.5 Thus, a § 501(b) action is analogous to a shareholder's derivative suit; a union member brings the action in the name of the organization, to recover damages belonging to the membership as a whole. See Building Material and Dump Truck Drivers, Local 420 v. Traweek, 867 F.2d 500 (9th Cir. 1989).
The plain language of the statute reveals that § 501(b), "by its terms, does not establish a private right of action for a union itself." Guidry v. Sheet Metal Workers National Pension Fund, 493 U.S. 365, 375, n. 16, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990).6 Nor is there any dispute that the language of § 501(b) "contemplates that a union may bring suit against its officers in some forum, but it does not expressly provide an independent basis for federal jurisdiction." Id. The lower courts considering the issue presented here, i.e., whether a federal cause of action brought by a union itself may be implied from the text and/or purpose of § 501, have reached differing conclusions,7 and the Third Circuit has not ruled on the issue.8
Defendants rely principally on the Ninth Circuit's ruling in Building Material and Dump Truck Drivers, Local 420 v. Traweek, 867 F.2d 500 (9th Cir. 1989), as well as several district court cases, which held that § 501 did not create a federal cause of action for a labor organization to sue for breach of fiduciary duty by a union officer. Plaintiff responds by pointing out that courts addressing this issue recently, including the Eleventh Circuit in International Union of Electronic, Electrical, Salaried,...
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