Purcell v. Keane

• Decision Date: 31 January 1969
• Docket Number: No. 17090.,17090.
• Citation: 406 F.2d 1195
• Parties: Gervase J. PURCELL, Jr., Gregory Horan, John R. Keenan, Samuel J. Rosato, James J. Higgins, and Ronald McGuigan, on Behalf of Local 169, Affiliated With the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, a Labor Organization, Appellees, v. Frank KEANE, Archie McGowan, Frank Burdy, Bernard Marcus, Andrew O'Hara, William Maloney, Appellants, and Fireman's Fund American Insurance Company.
• Court: U.S. Court of Appeals — Third Circuit

406 F.2d 1195 (1969)

Gervase J. PURCELL, Jr., Gregory Horan, John R. Keenan, Samuel J. Rosato, James J. Higgins, and Ronald McGuigan, on Behalf of Local 169, Affiliated With the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, a Labor Organization, Appellees, v. Frank KEANE, Archie McGowan, Frank Burdy, Bernard Marcus, Andrew O'Hara, William Maloney, Appellants, and Fireman's Fund American Insurance Company.

No. 17090.

United States Court of Appeals Third Circuit.

Argued September 20, 1968.

Decided January 31, 1969.

Bernard N. Katz, Meranze, Katz, Spear & Bielitsky, Philadelphia, Pa., for appellants.

Edward B. Bergman, Solo, Abrams, Bergman, Trommer & Padova, Philadelphia, Pa., for appellees.

Before McLAUGHLIN, KALODNER and ALDISERT, Circuit Judges.

OPINION OF THE COURT

GERALD McLAUGHLIN, Circuit Judge.

This is an interlocutory appeal from an order denying defense motions to dismiss the complaint certified for this appeal by the District Court pursuant to 28 U.S.C. § 1292(b). Leave to appeal was granted by this Court on December 6, 1967.

The narrow issue here is whether exhaustion of internal union remedies is a condition precedent to suit brought under Section 501(b) of the Labor Management Reporting and Disclosure Act of 1959 (hereinafter LMRDA), 73 Stat. 535, 29 U.S.C. § 501(b) (1959).

Appellees are rank-and-file members of Warehouse Employees Local 169, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America. Essentially, their complaint, filed November 8, 1966, alleges numerous breaches of fiduciary duties by appellants who were officers or business agents of Local 169. The alleged breaches included various expenditures of union funds for personal use and failure to account for union funds advanced to appellants to attend a convention in Miami Beach, Florida.

A brief chronological narration of appellees' efforts to apprise the union of these alleged violations and to urge the union leadership to take effective action against appellants is vital to a clear understanding of the background of this case. On September 29, 1966, prior to the filing of the complaint, appellees forwarded a letter to all the members of the Executive Board of Local 169 which, in effect, detailed the violations and concluded with the paragraph:

"We therefore demand that the Executive Board take immediate steps to recover from the officers and agents whose names appear on the attached list the amounts of the unauthorized expenditures made by them. Immediate action by you is requested and you are advised that if you do not act promptly to recover these sums, we, as members of Local 169, shall do so ourselves, on behalf of the union, by means of a lawsuit if necessary, under the provisions of Section 501 of the Labor Management Reporting and Disclosure Act."

Attached to the letter was a list of the numbers of 287 union checks which allegedly represented the improper expenditures. The affidavit of Hartsough, president of the Local, notes the following events. A meeting of the Executive Board of Local 169 was held on October 4, 1966 at which a subcommittee was appointed to inquire into the charges contained in appellees' letter. About October 17 or 18, 1966, Hartsough asked McGowan, a member of the special subcommittee, when the report would be ready. McGowan, in essence, answered that he was too busy to do anything about it and, further, that he did not know when the subcommittee would meet. As a result of that conversation with McGowan, Hartsough sent the following letter to each of the members of the subcommittee on October 25, 1966:

"Dear Sir and Brother On October 4, 1966, at an Executive Board Meeting, a sub-committee was appointed by me, to go over certain allegations made regarding checks, etc.; since you are a member of the sub-committee I feel a report is now due. Awaiting your early response, I am Fraternally (Signed) EDW. J. HARTSOUGH Edw. J. Hartsough President EJH:mkb Delivered by hand: 10/25/66 by E J H"

Thereafter, on or about November 3, 1966, Purcell, one of the appellees, inquired of Hartsough whether the subcommittee report had been received. Hartsough answered in the negative and said further, that he had sent the above letter and had received no reply. This suit was commenced on November 8, 1966. Appellants, who are represented by counsel appointed and retained by the union, filed a motion to dismiss the complaint alleging, inter alia, failure to exhaust intra-union remedies. In an opinion and order dated November 20, 1967 the District Court Judge denied the motion to dismiss.

In seeking reversal of the order of the District Court the appellants say that in a suit brought under Section 501(b) of the LMRDA there is a mandatory obligation to exhaust internal remedies before bringing a court action. In support of that argument, it is urged that Section 101(a) (4) of the LMRDA, 73 Stat. 522, 29 U.S.C.A. § 411(a) (4) applies to suits brought under Title V of the LMRDA, 73 Stat. 535, 29 U.S.C.A. § 501 et seq. Section 101(a) (4) of the LMRDA (now 29 U.S.C.A. § 411(a) (4)) reads, in part, as follows:

"No labor organization shall limit the right of any member thereof to institute an action in any court, or in a proceeding before any administrative agency, irrespective of whether or not the labor organization or its officers are named as defendants or repondents in such action or proceeding * * * Provided, That any such member may be required to exhaust reasonable hearing procedures (but not to exceed a four-month lapse of time) within such organization, before instituting legal or administrative proceedings against such organizations or any officer thereof * * *."

Section 501(b) of the LMRDA makes no specific reference to the exhaustion provision set forth in Section 411(a) (4). It reads in part as follows:

"(b) 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 statute provides specifically and it has been so held by case authority that a request upon the union officers to take action is a condition precedent to suit by a union member. Coleman v. Brotherhood of Railway and S. S. Clerks, Freight Handlers, Exp. and Station Emp., 340 F.2d 206, 15 A.L.R.3d 933 (2 Cir.1965); Horner v. Ferron, 362 F.2d 224 (9 Cir.1966), cert. den. 385 U. S. 958, 87 S.Ct. 397, 17 L.Ed.2d 305; Persico v. Daley, 239 F.Supp. 629 (D.C. N.Y.1965); International Brotherhood of Teamsters, etc. v. Hoffa, 242 F.Supp. 246 (D.D.C.1965). Also, the complainant must obtain leave of court upon good cause shown before commencing suit. Addison v. Grand Lodge of International Association of Machinists, 318 F.2d 504 (9 Cir.1963); Coleman, supra; Executive Board, Local Union v. International Brotherhood of Electrical Workers, 184 F.Supp. 649 (D.C.Md.1960).

Appellants would now have us engraft upon the express provisions of 501(b) the exhaustion language contained in 411(a)(4) set forth above. Appellants argue that the requirement of exhaustion in this instance would be consonant with the Legislative intent expressed by Congress. We find the opposite to be true. The Congressional intent is clearly set forth in Section 2, 73 Stat. 519, 29 U.S.C.A. § 401 (1959). It reads, in part, as follows:

"(b) The Congress further finds, from recent investigations in the labor and management fields, that there have been a number of instances of breach of trust, corruption, disregard of the rights of individual employees, and other failures to observe high standards of responsibility and ethical conduct which require further and supplementary legislation that will afford necessary protection of the rights and interests of employees and the public generally as they relate to the activities of labor organizations, employers, labor relations consultants, and their officers and representatives.

"(c) The Congress, therefore, further finds and declares that the enactment of this chapter is necessary to eliminate or prevent improper practices on the part of labor organizations, employers, labor relations consultants, and their officers and representatives * * *."

This Circuit in Gartner v. Soloner, 384 F.2d 348 (3 Cir.1967), cert. den. 390 U.S. 1040, 88 S.Ct. 1633, 20 L.Ed.2d 302 (1968) considered the Legislative purpose of the LMRDA at length and stated at p. 355:

"The Eighty-sixth Congress of the United States, acting on recommendations of the McClellan Committee, was faced with the task of fashioning legislation to curb racketeering which threatened to annul the hard fought gains of this country\'s honest working men and women. The Labor-Management Reporting and Disclosure Act of 1959 was the Congressional answer which attempted to strengthen the individual rights of labor union members and to rid the labor movement of the unsavory elements with which it had unfortunately become associated."

See also: Nelson v. Johnson, 212 F. Supp. 233 (D.C.Minn.1962), affd. 8 Cir., 325 F.2d 646; United Brotherhood of Carpenters and Joiners of America v. Brown, 343 F.2d 872 (10 Cir.1965). Also, as was noted in the opinion of the District Court, it is significant that...