McNamara v. Johnston, 71 C 654.

• Decision Date: 06 June 1973
• Docket Number: No. 71 C 654.,71 C 654.
• Citation: 360 F. Supp. 517
• Parties: Bernard W. McNAMARA et al., Plaintiffs, v. Robert JOHNSTON et al., Defendants, UAW, Intervenor.
• Court: U.S. District Court — Northern District of Illinois

360 F. Supp. 517

Bernard W. McNAMARA et al., Plaintiffs, v. Robert JOHNSTON et al., Defendants, UAW, Intervenor.

No. 71 C 654.

United States District Court, N. D. Illinois.

June 6, 1973.

COPYRIGHT MATERIAL OMITTED

William J. O'Brien, Chicago, Ill., for plaintiffs.

Harold A. Katz and Irving M. Friedman, of Katz & Friedman, Chicago, Ill., for defendants.

Stephen I. Schlossberg, Gen. Counsel UAW, Detroit, Mich., for defendant-intervenor.

MEMORANDUM OPINION AND ORDER

BAUER, District Judge.

This cause comes on the defendants' motion to dismiss the complaint.

This is an action for an alleged breach of the fiduciary duty imposed on defendants under Section 501(a) of the Labor-Management Reporting and Disclosure Act of 1959 (commonly referred to as the Landrum-Griffin Act) 29 U.S.C. § 501(a).

The plaintiffs are employed as production unit workers in the Fisher Body Plant of General Motors Corporation at Willow Springs, Illinois, and are dues paying members of the International United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW"), the designated collective bargaining representative of production unit workers in the plant. The plaintiff, Bernard W. McNamara, in addition to being a dues paying member of UAW, also serves in the capacity of Recording Secretary of UAW, Local 558, a post to which he was duly elected by the membership of the Local. The plaintiffs bring this action as members of UAW for the benefit of the union and its members.

The defendant, Robert Johnston, is Regional Director of UAW, Region 4, a region which includes the State of Illinois. Robert Johnston also serves as Chairman of the UAW Illinois State Community Action Program Council ("CAP").

Defendant James Wright is Chairman of the UAW Chicago Area CAP Council. Defendants Johnston, Wright and Peterson exercise custody and control over Illinois CAP funds, and all decisions respecting the use and expenditure of such funds.

Defendant Emil Mazey is Secretary-Treasurer of UAW International and in such capacity receives and handles union funds as hereinafter described.

Defendant Leonard Woodcock is International President of UAW and in such capacity exercises control and direction over the handling and expenditure of union funds.

The plaintiffs, in the complaint, allege, inter alia, the following facts:

1. Pursuant to the provisions of the UAW Constitution and the administrative instructions issued by the president of UAW International on May 19, 1969, each local union in the State of Illinois, including Local Union 558, is required to set aside a minimum of 3% of each member's monthly membership dues as a per capita payment to the UAW Illinois State CAP, and to remit such money to defendant Robert Johnston. Upon receipt of said money defendant Johnston allocates it proportionately to UAW Illinois State CAP and Chicago Area CAP.

2. The defendants Johnston, Wright and Peterson, unlawfully and wrongfully diverted a large part of said money into the political campaign coffers of candidates for public office and for various political expenditures and purposes totally unrelated to the interests and welfare of the union and its members or to the functions and purposes of the union as collective bargaining representative of plaintiffs and their fellow dues paying members of the union.¹ These actions of the defendants were in violation of 29 U.S.C. § 501(a) which sets forth their statutory duty of fidelity and trust to hold such money solely for the benefit of the union and its members.²

3. Defendants Mazey and Woodcock instructed, controlled and directed defendants Johnston, Wright and Peterson in violation of their aforesaid statutory duty of fidelity and trust to hold such money solely for the benefit of the union and its members. Further, defendants Mazey and Woodcock, in violation of their statutory duty, have unlawfully and wrongfully diverted a substantial part of the membership dues for various political expenditures and purposes totally unrelated to the interests and welfare of the union and its members or to the functions and purposes of the union as a collective bargaining representative of plaintiffs and their fellow dues paying members of the union.³

4. The "unlawful and unauthorized" diversion of union money and assets into political campaigns was not only made by defendants in violation of their statutory duty of fidelity and trust, but was also done contrary to an express and explicit resolution adopted by a referendum vote of the membership of UAW Local 558 on May 6, 1969.⁴ Defendants were given formal notification of such a resolution and of the explicit objections of the members of UAW Local 558 to use of any part of their membership dues money by defendants for partisan political candidates and activites, or for ideological causes or support of organizations or groups espousing ideological causes. The defendants have ignored the objections expressed by the members of UAW Local 558 and the executive officers of UAW have failed and refused to institute a legal action in the name of the union to require defendants to render an accounting.

The plaintiffs seek an order of this Court requiring defendants to furnish an accounting and repay in damages to the Union all monies unlawfully diverted by them.⁵

The defendants, in support of their motion to dismiss the complaint, contend:

1. The complaint does not state a cause of action upon which relief can be granted because the alleged unlawful expenditures are expenses entirely proper under Section 501, and the UAW Constitution.

2. Plaintiffs have failed to exhaust their Union remedies prior to bringing this action.

3. Plaintiffs have failed to allege the performance of the procedural requirements contained in Section 501(b) of the Act.

4. There was no showing of good cause made prior to the filing of the instant suit.

The plaintiffs, in opposition to the instant motion, contend that the complaint states a proper cause of action according to 29 U.S.C. § 501(a) and has met the procedural requirements of 29 U.S.C. § 501(b).

It is the opinion of this Court that the plaintiffs' claims do not constitute a proper cause of action under 29 U.S.C. § 501.

THE PLAINTIFFS' COMPLAINT FAILS TO SUFFICIENTLY STATE A CAUSE OF ACTION UNDER 29 U.S.C. § 501.

The jurisdiction of this Court is invoked under the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 501. This legislation confers fiduciary status upon union officers who deal with the property and funds of a union. As a fiduciary under the Act, a union officer must account to his union for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the union.⁶ The statute further provides that any breach of fiduciary duty shall not be relieved by a subsequent exculpatory resolution passed either by the union itself or by its governing board. Should a union or its governing board fail or refuse to sue, recover damages or secure an accounting within reasonable time any member of the union may sue in a federal court in a derivative capacity for the benefit of the union.⁷

The clear intent of Congress in enacting this legislation was to weed out instances of corruption and breach of trust; to preserve the rights of individual union members; and to insure high standards of responsibility on the part of, at that time, powerful and sometimes detached and autocratic union officers. Richardson v. Tyler, 309 F.Supp. 1020 (N.D.Ill.1970); Purcell v. Keane, 277 F.Supp. 252 (E.D.Pa.1967). Thus the precise issue of the instant action is whether the defendants breached their fiduciary duty in violation of 29 U.S.C. § 501.

Section 501(a) of the Act literally requires, and was intended to so require, union officers to expend union funds in accordance with the union's constitution and bylaws and any resolution of the governing bodies adopted thereunder.⁸

Congress did not in Section 501, or elsewhere in the Act, attempt to regulate or limit the purposes for which a union may spend its money, and the use of the phrase "taking into account the special problems and that the labor organization" indicates an awareness of the fact that the labor union of today does not typically confine its activities to "business unionism."⁹ What the Act does require is that expenditures of a union's funds as well as use of its other assets, be exclusively for purposes which are authorized by its constitution, bylaws, and any pertinent resolutions of its governing body.¹⁰ Congress did not intend § 501 to be a bar to union expenditures for political activity. Nowhere in the Act is there an attempt to limit or regulate the purposes for which a union uses its funds. The very words which are embodied in § 501 of the Statute — ". . . taking into account the special problems and functions of a labor organization . . ." indicates a recognition of the political realities of modern unionism. Senator McClellan, the principal Congressional proponent of fiduciary responsibility for union officials, stated:

"However, I am not offering my amendment on the direct question of political contributions. Everyone knows my views on the subject, I assume. This is not a drive at that situation. It is a drive at skullduggery of some leaders when they meet in executive sessions and pay off this one and pay off that one. . . . I may say that there never was any idea of my trying to curb the authority of the members of a union to do whatever the members want to do; rather it is my intention to protect the members from having the members of a board or a committee vote to do just about anything they want to do, as has been the case in many instances." 105 Cong.Rec. 6526 (Daily Ed., April 23, 1959); II Legislative History of the Labor Management Act of 1959, at 1131 (1959).¹¹

It is clear that political expenditures of union funds which are authorized by its constitution, bylaws, and any pertinent...