Mid-America Carpenters Regional Council v. Bond

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

MID-AMERICA CARPENTERS )

REGIONAL COUNCIL, )

)

Plaintiff, )

)

v. ) Case No. 4:22-cv-00291-SEP

)

ALBERT BOND, et al., )

)

Defendants. )

MEMORANDUM AND ORDER

Before the Court is Defendant Albert Bond’s Motion to Dismiss for Lack of Jurisdiction.

Doc. [72]. For the reasons set forth below, the motion is construed as a motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6) and is granted.

FACTS AND BACKGROUND1

Plaintiff is a labor organization that represents over 52,000 carpenters in Missouri,

Kansas, Illinois, and portions of Iowa. Doc. [1] ¶ 1. Plaintiff is the successor to the St. Louis-

Kansas City Carpenters Regional Council (St. Louis Council), where Defendant Albert Bond

worked as Executive Secretary-Treasurer before that organization was dissolved. Id. ¶¶ 2, 14-15.

While in that position, Bond, acting on behalf of the St. Louis Council and without its

authorization, entered into a series of agreements with Defendants Interrail Outdoor, LLC, and

Foxpoint Interactive, LLC. Id. ¶¶ 21, 41-43, 45-47. He also used Saint Louis Council assets to

fund personal expenses and authorized retroactive payment of his salary without authorization.

Id. ¶¶ 55-58, 63-64.

On March 10, 2022, Plaintiff filed its complaint against Bond, Interrail, and Foxpoint.

Doc. [1]. Counts I, IV, VI, and VII allege that Bond violated his fiduciary duties under Section

501(a) of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). Counts II

and V seek declaratory judgments against Interrail and Foxpoint, respectively. In Count III,

Plaintiff brings a state law claim for unjust enrichment against Interrail and Foxpoint. In

response, Defendant Bond asserts five state-law counterclaims against Plaintiff. See Doc. [41].

1 For purposes of a motion to dismiss, the Court assumes that the factual allegations in the complaint,

Doc. [1], are true. Neitzke v. Williams, 490 U.S. 319, 326-27 (1989).

On March 10, 2023, Defendant Bond filed a motion to dismiss for lack of jurisdiction.

Doc. [72]. Defendant argues, among other things, that Plaintiff has no cause of action under

Section 501 of the Labor-Management Reporting and Disclosure Act. Id. at 2; 29 U.S.C. § 501.

Specifically, Defendant claims that “Section 501(a) provides no statutory cause of action for a

union, such as the plaintiff in this case, to [sue for] a breach of fiduciary duty. . . .” Doc. [72] at

2. Defendant casts his arguments in jurisdictional terms, but because the motion calls on the

Court to consider the scope of Section 501’s private right of action as applied to unions—not

whether a private right of action exists at all—the issue is properly considered under Federal

Rule of Civil Procedure 12(b)(6). See Verizon Maryland, Inc. v. Pub. Serv. Comm’n of

Maryland, 535 U.S. 635, 642-43 (2002) (“[T]he absence of a valid (as opposed to arguable)

cause of action does not implicate subject-matter jurisdiction. . . .”); Int’l Union, Sec., Police &

Fire Pros. of Am. v. Faye, 828 F.3d 969 (D.C. Cir. 2016) (“[T]he question whether the plaintiff

has a cause of action is distinct from the question whether a district court has subject matter

jurisdiction.”); see also Less v. Lurie, 789 F.2d 624, 625 n.1 (8th Cir. 1986) (approving, when

appropriate, treatment of Rule 12(b)(1) motions as motions under Rule 12(b)(6)). The Court

therefore takes up the question whether Section 501 of the LMRDA provides unions, not just

union members, a federal cause of action under Rule 12(b)(6).

LEGAL STANDARD

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to

dismiss a claim for “failure to state a claim upon which relief can be granted.” The notice

pleading standard of Rule 8(a)(2) of the Federal Rules of Civil Procedure requires the plaintiffs

to give “a short and plain statement of the claim showing that the pleader is entitled to relief.”

To meet that standard and survive a Rule 12(b)(6) motion to dismiss, “a complaint must contain

sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citation omitted). The

requirement of facial plausibility means the factual content of the plaintiffs’ allegations must

“allow[ ] the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Park Irmat Drug Corp. v. Express Scripts Holding Co., 911 F.3d 505, 512

(8th Cir. 2018) (quoting Iqbal, 556 U.S. at 678).

DISCUSSION

Section 501(a) of the LMRDA, entitled “Duties of officers; exculpatory provisions and

resolutions void,” provides:

The officers, agents, shop stewards, and other representatives of a labor

organization occupy positions of trust in relation to such organization and its

members as a group. It is, therefore, the duty of each such person, taking into

account the special problems and functions of a labor organization, to hold its

money and property solely for the benefit of the organization and its members and

to manage, invest, and expend the same in accordance with its constitution and

bylaws and any resolutions of the governing bodies adopted thereunder, to refrain

from dealing with such organization as an adverse party or on behalf of an adverse

party in any matter connected with his duties and from holding or acquiring any

pecuniary or personal interest which conflicts with the interests of such

organization, and to account to the organization for any profit received by him in

whatever capacity in connection with transactions conducted by him or under his

direction on behalf of the organization. A general exculpatory provision in the

constitution and bylaws of such a labor organization or a general exculpatory

resolution of a governing body purporting to relieve any such person of liability for

breach of the duties declared by this section shall be void as against public policy.

29 U.S.C. § 501(a). Section 501(b), entitled “Violation of duties; action by member after

refusal or failure by labor organization to commence proceedings; jurisdiction; leave of

court; counsel fees and expenses,” then states:

When any officer, agent, shop steward, or representative of any labor organization

is alleged to have violated the duties declared in subsection (a) 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 trial judge may allot a reasonable part of the

recovery in any action under this subsection to pay the fees of counsel prosecuting

the suit at the instance of the member of the labor organization and to compensate

such member for any expenses necessarily paid or incurred by him in connection

with the litigation.

29 U.S.C. § 501(b) (emphasis added). In sum, Section 501(b) provides a “member of the labor

organization” with a federal cause of action to enforce the fiduciary duties listed in Section

501(a) “for the benefit of the labor organization.” Id. Given the plain language of the statute

granting only union members a federal cause of action, even Plaintiff admits that Section 501

does not grant it an express cause of action. Doc. [76] at 10. Instead, Plaintiff asserts that

Section 501 impliedly grants unions a federal cause of action. Id.

The question whether Section 501 provides unions with an implied cause of action has

divided federal courts. Compare Int’l Union, Sec., Police & Fire Pros. of Am. v. Faye, 828 F.3d

969 (D.C. Cir. 2016) (finding an implied cause of action); Int’l Union of Operating Engineers,

Loc. 150 v. Ward, 563 F.3d 276 (7th Cir. 2009) (same); Int’l Union of Elec., Elec., Salaried,

Mach. & Furniture Workers v. Statham, 97 F.3d 1416 (11th Cir. 1996) (same), with Bldg.

Material & Dump Truck Drivers, Loc. 420 v. Traweek, 867 F.2d 500 (9th Cir. 1989) (finding no

implied cause of action); Faye, 828 F.3d at 969 (Kavanaugh, J., dissenting) (same); United Bhd.

of Carpenters & Joiners of Am. v. Shapiro, 2023 WL 2161701, at *2 (W.D. Wash. Feb. 22,

2023) (same). The Eighth Circuit has taken no position. After due consideration, the Court

concludes that Section 501 does not create an implied cause of action for unions.

“[P]rivate rights of action to enforce federal law must be created by Congress.”

Alexander v. Sandoval, 532 U.S. 275, 286 (2001) (citing Touche Ross & Co. v. Redington, 442

U.S. 560, 578 (1979)). Courts should therefore be “reluctant to infer intent to provide a private

cause of action where the statute does not supply one expressly.” Sosa v. Alvarez-Machain, 542

U.S. 692 (2004). “Courts may find an implied cause of action only if they determine that the

statute ‘displays an intent to create not just a private right but also a private remedy.’” Faye, 828

F.3d at 985 (Kavanaugh, J., dissenting) (quoting Sandoval, 532 U.S. at 286).

The text of Section 501(b) “does not contemplate a suit brought by a union.” Traweek,

867 F.2d at 506. Section 501(b) empowers any “member of the labor organization” to sue a

union “officer, agent, shop steward, or representative . . . in any district court of the United

States” for breaching the fiduciary duties listed in Section 501(a). 29 U.S.C. § 501(b). Nowhere

does the text authorize suits brought by unions. “Indeed, the text of Section 501 strongly

suggests that Congress did not want unions to have a federal cause of action. . . . After all,

‘express provision of one method of enforcing a substantive rule suggests that Congress intended

to preclude others.’” Faye, 828 F.3d at 985 (Kavanaugh, J., dissenting) (quoting Sandoval, 532

U.S. at 290). Plaintiff makes several attempts to persuade the Court to reject the straightforward

reading of Section 501. They all fall short.

First, relying on the Seventh Circuit’s reasoning in Ward, Plaintiff argues that Section

501(a), rather than Section 501(b), creates an implied cause of action for unions. Doc. [76] at 10

(citing Ward, 563 F.3d at 286-87). In Ward, the court found that “the statutory language” of

Section 501(a) “manifests an intent ‘to create new rights’ for labor unions,” and “implies the

creation of a federal remedy for the union as well.” Ward, 563 F.3d at 286-87 (citing Sandoval,

532 U.S. at 289). The court also reasoned that the derivative action created in Section 501(b)—

which allows union members to sue “for the benefit of the labor organization,” 29 U.S.C.

§ 501(b)—“merely reinforces . . . the implication” that a union may sue under Section 501(a).

Ward, 563 F.3d at 287. According to the Seventh Circuit, Section 501(b) “does nothing more

than grant union members the right to sue on a union’s behalf,” since Section 501(a) does not

suggest that “union members themselves could sue for fiduciary violations committed against the

union.” Id. And because Section 501(b) “conditions union members’ right to sue on the union’s

refusal or failure to bring suit itself,” that implies that unions can sue under the statute in federal

court. Id.; see also id. at 288 (“It would be anomalous indeed to read this statutory scheme as

remitting the union’s own suit—which is primary under the statutory hierarchy—to state

court.”).

The problem with that reasoning is that it finds no support in the text of Section 501.

Section 501(a) imposes certain duties on “officers, agents, shop stewards, and other

representatives of a labor organization,” which Section 501(b) empowers union members to

enforce “for the benefit of the labor organization” through a derivative suit. See 29 U.S.C.

§ 501(a), (b); see also Traweek, 867 F.2d at 506 (“[I]n § 501(b) actions, the individual member

acts in a representative capacity for the benefit of the union and on behalf of the union. A

plaintiff in a § 501(b) action cannot seek to recover damages personally, but must seek a remedy

for the union as a whole.”). The fact that a union member may not bring suit under Section

501(b) until the union refuses or fails to bring a lawsuit does not, by itself, imply that Congress

intended to give unions a federal cause of action. “[T]his language does not concern a union’s

refusal or failure to bring a claim under section 501; instead, it allows union members to bring an

action after the union’s refusal to bring a claim generally, such as a state law claim, an avenue

that has long been available to unions.” Shapiro, 2023 WL 2161701, at *4; see also Faye, 828 at

986 (Kavanaugh, J., dissenting) (“When Congress enacted Section 501, it knew that unions

already had state-law causes of action available to them.”) (citations omitted).

Plaintiff also argues that the Eighth Circuit has urged a “broad interpretation” of Section

501, which supports finding an implied cause of action. Doc. [76] at 4-5, 8 (first citing United

States v. Goad, 490 F.2d 1158, 1161 (8th Cir. 1974); then citing Gaston v. Teamsters Loc. 600,

Int’l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 614 F.3d 774, 778 (8th

Cir. 2010); and then citing Int’l Ass’n of Machinists & Aero. Workers v. Schimmel, 128 F.3d 689,

694 (8th Cir. 1997)). But even a “broad interpretation” of a statute must adhere to the text

passed by Congress and approved by the President. And Plaintiff points to nothing in any Eighth

Circuit opinion that is incompatible with the conclusion that unions lack an implied cause of

action under Section 501.

Plaintiff claims that, “as a result of the Eighth Circuit’s broad interpretation of Section

501, claims brought by labor organizations within this Circuit have been determined on their

merits under both [Sections] 501(a) and (b).” Doc. [76] at 7 (first citing Loc. 314, Nat. Post Off.

Mail Handlers v. Nat’l Post Off. Mail Handlers, 572 F. Supp. 133 (E.D. Mo. 1983); then citing

Stodghill v. Serv. Emps.’ Int’l Union, Loc. 50, AFL-CIO, 13 F. Supp. 2d 960 (E.D. Mo. 1998)).

But the two cited cases are unilluminating, because the issue of whether unions possess a federal

cause of action under Section 501 was neither raised nor decided in either. See United States v.

Shabani, 513 U.S. 10, 16 (1994) (“[Q]uestions which ‘merely lurk in the record’ are not

resolved, and no resolution of them may be inferred. . . .” (quoting Ill. Bd. of Elections v.

Socialist Workers Party, 440 U.S. 173, 183 (1979)).

Lastly, Plaintiff argues that dismissing this case would waste “judicial resources and

those of the union members on whose behalf Plaintiff filed this suit . . . only to have the Plaintiff

in this case relegated to state court as their only means of holding Bond accountable for his

misappropriation of union funds.” Doc. [76] at 13. Because Plaintiff provides no legal authority

suggesting that a court may consider the resources of the Court, the parties, or third parties when

determining whether a statute provides a cause of action, the Court disregards that argument.

CONCLUSION

For the foregoing reasons, the Court dismisses with prejudice Plaintiff’s LMRDA claims,

as well as its LMRDA-predicated declaratory judgment claims, for failure to state a claim. The

Court declines to exercise supplemental jurisdiction over Plaintiff’s state-law unjust enrichment

claim or Defendant Bond’s state-law counterclaims; the state-law claims are dismissed without

prejudice. See 28 U.S.C. § 1367(c); Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639

(2009).

Accordingly,

IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss, Doc. [72], is

GRANTED.

IT IS FURTHER ORDERED that Counts I, II, 1V, V, VI, and VII of the Complaint are

DISMISSED with prejudice.

IT IS FURTHER ORDERED that Count III of the Complaint and all of Defendant

Bond’s counterclaims are DISMISSED without prejudice.

IT IS FURTHER ORDERED that all remaining pending motions are DENIED as

moot.

A separate order of dismissal accompanies this Memorandum and Order.

Dated this 31“ day of March, 2023. .

SARAH E. PITLYK

UNITED STATES DISTRICT JUDGE