Pearson v. Seiu Healthcare Mich.
| Decision Date | 28 September 2012 |
| Docket Number | No. 10-1543,10-1543 |
| Parties | JERRY PEARSON, ESTA FAYE CHILDS, and RAY MURDAUGH, Plaintiffs-Appellants, v. SEIU HEALTHCARE MICHIGAN, fka SEIU Local 79, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a1040n.06
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF MICHIGAN
BEFORE: CLAY, ROGERS, and DONALD, Circuit Judges.
CLAY, Circuit Judge. Plaintiffs Jerry Pearson, Esta Faye Childs, and Ray Murdaugh appeal an order granting summary judgment in favor of Defendant Service Employees International Union Healthcare Michigan ("SEIU HCMI") on Plaintiffs' claims under the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185. The district court granted deference to an internal adjudication of Plaintiffs' claims that Defendant improperly terminated them without cause and, finding that the adjudication was not unfair or unreasonable, dismissed Plaintiffs' LMRA claims. Because we are persuaded that the union's adjudication is entitled to deference and was not unreasonable, we AFFIRM.
On June 11, 2007, SEIU HCMI and SEIU Local 79 initiated a merger, under which Local 79 would be consolidated into SEIU HCMI. A "Reorganization Agreement" governed the relationship between the two unions during the consolidation period. The Reorganization Agreement placed SEIU HCMI under the governance of a temporary constitution and bylaws imposed by SEIU International. The agreement also called for SEIU HCMI to guarantee job protection for all full-time Local 79 staff through June 30, 2008, subject to their termination for cause. The Reorganization Agreement further required that any dispute not resolved by mutual agreement be submitted to the president of SEIU International, or the president's designee, or final resolution. Pursuant to his authority under the SEIU International constitution, the president of SEIU International officially merged the unions on September 4, 2007.
Local 79's long-time president, Willie Hampton, retired shortly after the unions began the process of merging. On May 14, 2007, Local 79's executive board approved a retirement benefits package providing Hampton with, among other things, lifetime health and life insurance benefits, a new car, and six months' severance pay. But before he retired, Hampton and Local 79 personnel expanded the benefits package through a contract entitled "Agreement Between Willie Hampton and SEIU Local 79" (hereinafter "Hampton Agreement"). As part of that agreement, and directly at issue in this litigation, the Hampton Agreement increased protections for several Local 79 employees. Specifically, the agreement guaranteed that:
[i]f during the 12 months following Willie Hampton's retirement any of the below listed individuals are terminated, they will receive salary and insurance coverage through June 30, 2008. This will not apply to individuals terminated for cause or who voluntarily resign or retire.
Plaintiffs Pearson, Childs, and Murdaugh were among the employees given protection under this clause.
The Hampton Agreement was signed by Hampton and Plaintiff Pearson, who was hired as Local 79's vice president shortly before the effective date of the Reorganization Agreement. It is doubtful, however, that Pearson had the authority to sign the agreement. Under the Local 79 constitution, the vice president was only empowered to represent the president when the president directed him to do so, to act as president in his absence at meetings, and sign any and all collective bargaining agreements on behalf of Local 79.
SEIU HCMI became suspicious of the Hampton Agreement and investigated its adoption and propriety. From its investigation, SEIU HCMI's counsel found that the Hampton Agreement was discussed and adopted at a Local 79 executive board meeting on June 27, 2007. But counsel also concluded that three executive board members never received notice of the meeting. Plaintiffs contested this conclusion in a SEIU International grievance proceeding described below, arguing that notice was sent to the three board members.
SEIU HCMI's investigation faulted Pearson for his role in the adoption of the Hampton Agreement. The union argued that under Local 79's constitution, Pearson lacked the authority to negotiate or sign the Hampton Agreement and breached a fiduciary duty he owed to Local 79 by doing so. The investigation also faulted Childs for her actions during the formulation of theHampton Agreement. Childs was a Local 79 staff member and the union's recording secretary. That position allowed her to take the minutes of union and board meetings, notify SEIU International of the results of Local 79 elections, and prepare copies of resolutions in advance of union votes. Between June 11 and June 28, 2007, Childs and Hampton co-signed Local 79 checks made out to several churches, schools, and other charities, for amounts totaling roughly $50,000. SEIU HCMI believed that it was improper for Childs to co-sign the checks, because the Local 79 constitution gives only the financial secretary-treasurer the power to disburse money paid to the union for the benefit of the organization and its members.
As a result of the investigation, Local 79 disciplined the offending employees and rescinded the Hampton Agreement. On August 30, 2007, Local 79 suspended Pearson and Childs, and then the union fired Pearson on September 27, 2007 and Childs on October 1, 2007. At a Local 79 executive board meeting on December 15, 2007, the board nullified all actions taken at the June 27, 2007 board meeting because Pearson was not authorized to negotiate or sign the Hampton Agreement. The board also disapproved the contributions made pursuant to the checks signed by Childs and benefits granted to Hampton before his retirement.
For his part, Plaintiff Murdaugh retired from his employment with Local 79 in 1999. Local 79 retained him as a consultant in 2000, after which he continued to receive his pension pursuant to an SEIU policy that allowed pensioners to provide consulting services. Murdaugh was released from service on August 30, 2007.
Plaintiffs appealed SEIU HCMI's decisions to the SEIU International president. Plaintiffs were jointly represented by counsel, and they submitted two briefs and twelve exhibits in support of their appeal. Plaintiffs argued that they were terminated without cause, in violation of the Reorganization Agreement. According to Plaintiffs, SEIU HCMI failed to provide them fair notice that their purported misconduct would be grounds for termination. They argued that Pearson and Childs were simply carrying out Local 79's ordinary course of business when they voted in favor of and acting pursuant to the Hampton Agreement. They also argued that Murdaugh was an employee protected by the Reorganization Agreement.
For its part, SEIU HCMI argued that Pearson and Childs violated the Labor-Management and Reporting Disclosure Act ("LMRDA"), 29 U.S.C. §§ 401-531. Section 501(a) of the LMRDA requires an officer of a labor organization "to refrain from dealing with such organization as an adverse party or holding or acquiring any pecuniary or personal interest which conflicts with the interest of such organization." 29 U.S.C. § 501(a). SEIU HCMI argued that Pearson violated § 501(a) by self-dealing—because the Hampton Agreement gave him protection greater than provided under the Reorganization Agreement—and violated § 501(a) by granting retirement benefits to Hampton upon the signing of the Hampton Agreement. SEIU HCMI argued that Childs violated the LMRDA because her act of signing the donation checks caused union funds to be spent in a manner that did not benefit union members. With respect to Murdaugh, SEIU HCMI argued that he was an independent contractor unprotected by the Reorganization Agreement's "for cause" provision.
On April 30, 2009, the SEIU International president's designee issued a lengthy written opinion ruling in favor of SEIU HCMI. The president, through his designee, first concluded that Pearson breached his fiduciary duty. The president agreed with the union that Pearson engaged in self-dealing by securing employment benefits for himself and other Local 79 employees and also by granting Hampton unauthorized retirement benefits. The president reasoned that Pearson had a fiduciary duty to protect union members' funds and "had a heightened responsibility [because] he acted as Local 79's representative in the negotiations over the former president's retirement benefits."
The president faulted Pearson for not obtaining counsel for the union in negotiating with Hampton, who himself was represented by counsel in the negotiations. The president accepted Pearson's contention that he played no role in negotiating Hampton's benefits package, and he found that the Hampton Agreement's terms were drafted by Hampton through his counsel. Nonetheless, the president concluded that Pearson's apparent lack of involvement did not absolve him from fault in executing an agreement from which Local 79 did not benefit. Rather, according to the president, Pearson's lack of involvement represented an abdication of his fiduciary responsibility. The president concluded that Pearson further abdicated his responsibility by failing to assure that all executive board members received notice of the June 27, 2007 meeting before the Hampton Agreement was adopted.
The president found that Childs was employed by Local 79, served as recording secretary for six years prior to her termination, and co-signed the union's donation checks. The president recounted the recording secretary's powers under the Local 79 constitution and noted that the constitution gave the financial secretary-treasurer, but not the recording secretary, the power to disburse union...
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