Servs. Emps. Int'l Union v. Nat'l Union of Healthcare Workers

• Decision Date: 22 May 2013
• Docket Number: No. 10–16549.,10–16549.
• Parties: SERVICES EMPLOYEES INTERNATIONAL UNION; David Regan; Eliseo Medina, as Trustees for SEIU United Healthcare Workers–West and fiduciaries of the SEIU United Healthcare Workers–West and Joint Employer Education Fund; SEIU United Healthcare Workers–West, an unincorporated association and fiduciary of the SEIU United Healthcare Workers–West and Joint Employer Education Fund; Rebecca Collins, as a participant in the SEIU United Healthcare Workers–West and Joint Employer Education Fund, Plaintiffs–Appellees, v. NATIONAL UNION OF HEALTHCARE WORKERS; John Borsos; Sal Rosselli; John Vellardita; Ralph Cornejo; Marti Garza; Glenn Goldstein; Jason Johnson; Mark Kipfer; Gabe Kristal; Jorge Rodriguez; Fred Seavey; Phyllis Willett, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

718 F.3d 1036

SERVICES EMPLOYEES INTERNATIONAL UNION; David Regan; Eliseo Medina, as Trustees for SEIU United Healthcare Workers–West and fiduciaries of the SEIU United Healthcare Workers–West and Joint Employer Education Fund; SEIU United Healthcare Workers–West, an unincorporated association and fiduciary of the SEIU United Healthcare Workers–West and Joint Employer Education Fund; Rebecca Collins, as a participant in the SEIU United Healthcare Workers–West and Joint Employer Education Fund, Plaintiffs–Appellees,

v.NATIONAL UNION OF HEALTHCARE WORKERS; John Borsos; Sal Rosselli; John Vellardita; Ralph Cornejo; Marti Garza; Glenn Goldstein; Jason Johnson; Mark Kipfer; Gabe Kristal; Jorge Rodriguez; Fred Seavey; Phyllis Willett, Defendants–Appellants.

No. 10–16549.

United States Court of Appeals,Ninth Circuit.

Argued June 13, 2012.

Submitted March 26, 2013.

Filed March 26, 2013.

Amended May 22, 2013.

Dan Siegel, Siegel & Yee, Oakland, California, for Defendants–Appellants.

Jeffrey B. Demain & Jonathan Weissglass, Altshuler Berzon LLP, San Francisco, California; Robert M. Weinberg, W. Gary Kohlmann, Leon Dayan, and Ramya Ravindran, Bredhoff & Kaiser, PLLC, Washington, D.C.; Glenn Rothner, Rothner, Segall & Greenstone, Pasadena, California, for Plaintiffs–Appellees.

Appeal from the United States District Court for the Northern District of California, William Alsup, District Judge, Presiding. D.C. No. 3:09–cv–00404–WHA.

Before: RONALD M. GOULD, RICHARD C. TALLMAN, and CARLOS T. BEA, Circuit Judges.

ORDER

The Opinion filed on March 26, 2013, is amended as follows:

Slip opinion page 9, lines 17–18: Replace with

Slip opinion page 9, line 25: After , insert

Slip opinion page 28, line 5: After § 501 of the LMRDA>, insert

With this amendment, the panel has voted to deny the petition for panel rehearing and to deny the petition for rehearing en banc.

The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.

The petition for panel rehearing and petition for rehearing en banc are DENIED. No future petitions for rehearing or petitions for rehearing en banc will be entertained.

OPINION

TALLMAN, Circuit Judge:

This appeal presents a classic union power struggle. We must resolve whether § 501 of the Labor Management Reporting and Disclosure Act creates a fiduciary duty to the union as an organization, not merely the union's rank-and-file members. We hold that it does.

The defendants, who by jury verdict ¹ were determined to be rogue local union officials who diverted union resources in an attempt to establish a new competing local union, breached this duty. The international union's executive committee had decided to consolidate all of its California unionized long-term healthcare workers from three different local unions into one. The defendants actively attempted to obstruct this consolidation, breaching the fiduciary duty they owed their own union as an organization. This breach involved a pattern of conduct of engaging in dual unionism that is not protected speech. Because this breach contravened the union's constitution, it could not have been authorized. We affirm the jury's verdict and uphold its award of damages.

I

The Services Employees International Union (“SEIU”) consists of 2.2 million members who work in healthcare, public services, and property services. United Health Workers (“UHW”) is one of many “local” unions affiliated with SEIU. At the time its dispute with the international union arose, UHW represented approximately 150,000 healthcare workers in California.

The SEIU constitution, which is binding on UHW, defines the relationship between SEIU and UHW. The SEIU constitution vests SEIU's International Executive Board with authority regarding alignment and jurisdiction of local unions like UHW. For at least the last decade, SEIU has regularly merged and realigned local unions.

A

The UHW itself was formed as the result of SEIU's merger of two local healthcare unions in California in 2005. Harmony between the international and its newly created local union was short-lived. Shortly after UHW's creation, UHW officials began to spar with SEIU leadership over SEIU's jurisdictional plan for long-term care workers in California. The international union intended to move 150,000 long-term care workers from three separate unions, including some 65,000 from UHW, into a new local union chartered by SEIU.

The controversy began to heat up in 2008. In January of that year, an SEIU executive vice president issued a report concluding that long-term care workers would be better served if they had a union of their own. On January 25, 2008, the UHW Executive Board passed a resolution instructing UHW officers “to take any and all appropriate measures” to protect the ability of UHW long-term care workers to vote on any plans to split them into a new union. For good measure, the UHW Executive Board passed an additional, similarly worded measure in March 2008.

SEIU decided to appoint a “hearing officer” in early 2008 to further analyze the long-term care workers issue. In August 2008, the hearing officer released his findings, endorsing the creation of a new SEIU union of long-term care workers. Based on this recommendation and other findings, SEIU's International Executive Board issued a written resolution on January 9, 2009, directing consolidation of long-term care workers into a new California union.

B

As the long-term care worker realignment controversy accelerated and tensions escalated between officials of the international union and UHW, SEIU began to consider placing UHW into “trusteeship.” The SEIU constitution grants SEIU the authority to place a local union into trusteeship “to protect the interests of the membership” from local union malfeasance. Instituting a trusteeship allows SEIU to appoint new officers to “take charge and control of the affairs of a Local Union” with the “effect of removing the officers of the Local Union.” Essentially, a trusteeship allows the parent union to replace the existing local union leadership.

In August 2008, while SEIU's appointed hearing officer was recommending the realignment of UHW's long-term care workers, SEIU convened a hearing to discuss whether to place UHW in trusteeship. Former United States Secretary of Labor Ray Marshall presided over the trusteeship hearing. Secretary Marshall eventually issued his report on January 21, 2009, twelve days after SEIU had adopted its realignment plan. The report recommended that UHW be placed into trusteeship if it “refuse[d] to abide by and cooperate with” SEIU's realignment decision regarding long-term care workers. Secretary Marshall suggested that UHW be given five days to accept the long-term care decision or face trusteeship.

The SEIU International Executive Board approved Secretary Marshall's recommendations on January 22, 2009, giving UHW until January 27, 2009, to confirm in writing that it would not oppose the creation of the new long-term care workers union. The UHW would not so promise, and SEIU placed UHW into trusteeship on January 27, 2009.

C

The jury found that the defendants did not take these developments kindly. Before the controversy reached its climax, the defendants, local UHW officials, took a number of actions that SEIU proved at trial violated the officials' fiduciary duties to UHW. The jury, by its verdict, found that defendants, while still employed as UHW officers, engaged in action designed to weaken UHW in the event of a trusteeshipwhile acting to form and promote a rival union.

The evidence at trial showed that UHW officials sought to create an ungovernable situation for trustees appointed to administer UHW by: (1) blocking access to UHW buildings to prevent the SEIU-appointed trustees from entering; (2) removing UHW property from UHW buildings, including office equipment, computers, and employee grievance files; (3) instructing lower-level UHW officials and rank-and-file members not to recognize the authority of the trustees; (4) harassing SEIU staff by storming SEIU's Alameda, California, office; and (5) terminating UHW collective bargaining agreements with California employers.

At the same time, the defendants, while still on the UHW payroll, began to create and promote the new union. The evidence showed that the defendants: (1) searched and prioritized office space for the new union in December 2008 and January 2009; (2) instructed staff to collect signatures on a “disaffiliation” petition in an attempt to disaffiliate UHW from SEIU; (3) researched the “decertification” of UHW, which would have terminated UHW's role as collective bargaining agent for its members, thus allowing a new union to become the bargaining representative of those members; (4) announced to members three days before the trusteeship was imposed that members could decertify and join a “new, independent, democratic, progressive union;” (5) created an off-line database of member contact information before the trusteeship was imposed for use after the trusteeship went into effect, at least in part to solicit UHW members to join the new union; and (6) registered the domain NUHW.org and drafted a press release announcing the new union on January 27, 2009, the day the UHW trusteeship was imposed.

Within a week after the trusteeship was announced, the individually named defendants had created the National Union of Healthcare Workers (“NUHW”) and had filed petitions to have UHW removed as the bargaining representative for its current members.

D

Litigation began in March 2009 when SEIU sought a temporary restraining order (“TRO”) from the United States District Court for the Northern District of California requiring the return of all UHW property possessed by the defendants. The defendants resisted the TRO on the grounds that they did not possess any UHW property. The defendants argued that, because they did not possess any...