McNamara v. Johnston, 73-1829

• Citation: 522 F.2d 1157
• Decision Date: 16 September 1975
• Docket Number: No. 73-1829,73-1829
• Parties: 90 L.R.R.M. (BNA) 2401, 77 Lab.Cas. P 11,085 Bernard W. McNAMARA et al., Plaintiffs-Appellants, v. Robert JOHNSTON et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1157

522 F.2d 1157

90 L.R.R.M. (BNA) 2401, 77 Lab.Cas. P 11,085

Bernard W. McNAMARA et al., Plaintiffs-Appellants, v. Robert JOHNSTON et al., Defendants-Appellees.

No. 73-1829.

United States Court of Appeals Seventh Circuit.

Argued Sept. 20, 1974.

Decided Sept. 16, 1975.

William J. O'Brien, Chicago, Ill., John L. Kilcullen, Washington, D. C., for plaintiffs-appellants.

Stephen I. Schlossberg, Washington, D. C., M. Jay Whitman, Detroit, Mich., Irving M. Friedman, Chicago, Ill., for defendants-appellees.

Before FAIRCHILD, Chief Judge, CASTLE, Senior Circuit Judge, and SPRECHER, Circuit Judge.

FAIRCHILD, Chief Judge.

The primary question before us is whether rank and file union members can bring an action, pursuant to the Labor Management Reporting and Disclosure Act (popularly referred to as the Landrum-Griffin Act) § 501, 29 U.S.C. § 501 (1975), against union officers for breach of fiduciary duty when the officers, in accordance with general resolutions and the union's constitution, authorize and contribute union funds to political candidates and social causes.

I.

Plaintiffs, rank and file members of Local 558 of the International United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), are employed as production unit workers in the Fisher Body Plant of General Motors Corporation at Willow Springs, Illinois. Defendants are (or were) officials of the UAW or its subordinate bodies: Robert Johnston, Regional Director of UAW Region 4, and Chairman UAW Illinois State Community Action (CAP) Council; James Wright, Chairman of UAW Chicago Area CAP Council; Gerald Peterson, former Secretary-Treasurer of the Illinois CAP Council; Emil Mazey, International UAW Secretary-Treasurer; and Leonard Woodcock, International UAW President.

Plaintiffs, under a union shop agreement, pay monthly membership dues to UAW. The UAW constitution, as augmented by administrative instructions issued by the president of UAW International, requires that all local unions in Illinois, including Local 558, set aside a minimum of three percent of each member's monthly membership dues as a per capita payment to the UAW Illinois State Community Action Program (CAP). These CAP assessments are then spent to further activities and causes considered beneficial to union members and their families. ¹

On May 6, 1969, a majority of the members of Local 558 adopted a resolution objecting to the use of their dues money to support political and certain ideological causes and groups:

Resolution the membership of UAW Local 558, party to a Union Shop, deny use of all or any part of their dues money in support of any political candidate, political organization, state or federal legislation, any organization or group engaged in violence or using the threat of violence, the illegal seizure or destruction of property, engaged in social disorder, promoting racial agitation, and any organization or group that preaches, promotes or identifies with Marxist or communist ideology. Furthermore, this membership does not authorize any person, organization or group to act as spokesman for UAW Local 558 on any political endorsement, legislative endorsement, social problem or movement of any kind unless or until the membership has clearly made such an endorsement by voting 68% In support by secret ballot using the dues check-off lists to verify voter's eligibility.

Formal notice of the resolution was given to the UAW officials.

Despite this resolution, the defendants, it is alleged, contributed CAP funds to social causes and political candidates in state and federal elections. ² After requesting the executive officers of Local 558 to bring legal proceedings and receiving no satisfaction, plaintiffs brought this action asserting federal jurisdiction under § 501(b) of the Labor Management Reporting and Disclosure Act, 29 U.S.C. § 501(b). ³ Their complaint alleges that defendants breached the fiduciary duty imposed by § 501(a) of that Act, 29 U.S.C. § 501(a):

A. By failing to hold such money and property for the benefit of said labor organization and its members as required by Section 501(a) of the Labor Management Reporting and Disclosure Act (29 U.S.C., Section 501(a)).

B. By failing to manage, invest and expend said money and property in accordance with the constitution, bylaws and resolutions of said labor organization.

C. By ignoring said resolutions and dealing with the members of said labor organization as an adverse party, and by expending said moneys and property in a manner that conflicts with the interest of the members of said labor organization.

D. By paying and expending said money and property to and for candidates for Federal office in violation of the Federal Corrupt Practices Act, 18 U.S.C., Section 610.

The prayer for relief requests defendants to account for all monies received and expended in their capacity as union officials over the last five years; an injunction restraining defendants from contributing union monies to political and social causes; damages for all monies unlawfully diverted; and attorneys' fees and all other relief the court deems proper.

The UAW International moved to intervene, to provide counsel for defendants, and to dismiss the complaint. The district court granted the motion to intervene, 55 F.R.D. 441 (N.D.Ill.1972), and dismissed the complaint for failure to state a claim, 360 F.Supp. 517 (N.D.Ill.1973). This appeal followed. We affirm.

II.

After we heard oral argument, Congress passed and the President signed into law the Federal Election Campaign Act Amendments of 1974, Pub.L. No. 93-443, 88 Stat. 1263 (Oct. 15, 1974), and the Supreme Court decided Cort v. Ash, --- U.S. ---, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). The parties have submitted supplemental briefs assessing the impact of this new law on this appeal, and we have concluded that the Campaign Act Amendments require the dismissal of plaintiff's complaint for lack of federal jurisdiction insofar as it requests that defendants be enjoined from contributing CAP funds to political campaigns for federal office under circumstances that allegedly violate the Federal Corrupt Practices Act, 18 U.S.C. § 610. ⁴

The 1974 Campaign Act Amendments created a Federal Election Commission, § 310(a), 88 Stat. 1280, and established an administrative procedure to process complaints alleging violations of 18 U.S.C. § 610 after January 1, 1975. §§ 314, 410, 88 Stat. 1284, 1304. The Amendments expressly vest the Commission with "primary jurisdiction with respect to the civil enforcement of" 18 U.S.C. § 610. § 310(b), 88 Stat. 1281. The legislative history of the measure confirms that henceforth the Commission is charged with the civil enforcement of § 610. ⁵

In Cort v. Ash, supra, a shareholder brought a derivative suit seeking to imply a private cause of action for injunctive relief and damages to remedy alleged violations of 18 U.S.C. § 610 by corporate management in connection with the 1972 Presidential election. The action was filed prior to the 1974 Campaign Act Amendments, but the Court, invoking well established principles, nevertheless held that the Campaign Act Amendments "constitute an intervening law that relegates to the (Federal Election) Commission's recognizance respondent's complaint as a citizen or stockholder for injunctive relief against any alleged violation of § 610 in future elections." 95 S.Ct. at 2087. The Court then examined those factors that are considered when determining whether a private remedy is implicit in a statute not expressly providing one and held that there was no federal cause of action for damages on behalf of a corporation for the alleged violation of 18 U.S.C. § 610.

The first branch of Cort is dispositive of plaintiffs' claim for injunctive relief. We are aware that the instant case differs from Cort in that we are dealing with a labor organization, not a corporation, and that we are asked to construe a statute, 29 U.S.C. § 501, not to imply a cause of action, but we nevertheless reach the same result. Both the language and the legislative history of the Campaign Act Amendments indicate that Congress intended the statutory remedy before the Commission to govern all allegations of misconduct of this type in future federal elections. Accordingly, plaintiffs' complaint must be dismissed to the extent it requests injunctive relief for future violations of § 610.

III.

Whether plaintiffs' complaint insofar as it seeks an accounting and damages for past CAP expenditures for partisan political activities and social causes and an injunction barring the expenditure of funds in the future for social causes and political activities not in violation of 18 U.S.C. § 610 states a cause of action under 29 U.S.C. § 501 is another matter.

UAW argues at the outset that plaintiffs have failed to comply with § 501(b)'s requirement that an unsuccessful demand must be made upon the union or its officers to seek relief against the defendants before suit may be commenced. ⁶ Plaintiffs made a demand upon the officers of Local 558 but not upon the officers of the UAW International. While we tend to agree with UAW that a demand should have been made on the International, on the facts of this case we do not believe this omission defeats our jurisdiction. We have recognized the similarity between a § 501 action and a shareholder's derivative suit and have noted that, as in the case of a derivative suit, a demand is not always necessary. Hood v. Journeymen Barbers, Hairdressers, Etc., 454 F.2d 1347, 1354, n. 23 (7th Cir. 1972). Here, the UAW has consistently and vigorously argued that defendants were acting at all times in compliance with the union's constitution and duly adopted resolutions, and it is apparent that a demand upon the International for relief would have been futile. Under these circumstances, plaintiffs' failure to make such a request is excused. Cf. Nussbacher v. Continental Illinois National Bank, 518 F.2d 873 (...