Petition — Gabauer v. Woodcock
Supreme Court brief1979
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78-1873
In the Supreme Court of the Un
@ Court, U. &
OCTOBER TERM, 1978 FILED
NO. «seer JUN 18 {979
ERNEST GABAUER, JOE De LOS SAN‘OS, JR.,
COLEMAN G. LEWIS, JR., C. L. GR AEEPRODAK, JR., CLERK
ELBERT HILL and CLAUDE J. HUSKEY,
Petitioners,
vs.
LEONARD WOODCOCK, EMIL MAZEY, KENNETH
WORLEY, C. E. MATTIX, EDWARD LAVIN, JOHN T.
WEBSTER, ROY HARTZELL and DONALD YOUNG,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
DonaALp W. JONES
PREWITT, JONES & KARCHMER
110 Landmark Building
P. O. Box 1185 S.S.S.
Springfield, Missouri 65806
THOMAS M. HANNA
McMAHoN, BERGER, BRECKENRIDGE & HANNA
7701 Forsyth Blvd.
Clayton, Missouri 63105
RAYMOND J. LAJEUNESSE
Rex REED
8316 Arlington Blvd.—Suite 600
Fairfax, Virginia 22030
JOHN L. KILCULLEN
KILCULLEN, SMITH & HEENAN
1800 M Street, N.W.
Suite 600 i
Washington, D. C. 20036
Attorneys for Petitioners
June, 1979
E. L. MENDENHALL, INc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030
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Reasons for Granting the Writ .......................-seccseeeeeeees
I. Review should be granted to decide important
II.
questions of federal law under LMRDA Sec-
tion 501. The decision below threatens to nul-
lify the derivative action by the union mem-
bers to require their union officers to make an
accounting as to funds claimed to have been
expended in violation of the fiduciary duties
of the officers to hold union funds and prop-
erties “solely for the benefit of the organiza-
tion and its members.” ................:..0.0--+---- tr ae
This case calls for the Supreme Court to ex-
ercise its power of supervision. The Court of
Appeals has permitted the District Court to
dismiss a complaint without assuming the
facts alleged by Plaintiffs are true. Even if
the dismissal be viewed as a summary judg-
ment, the Court of Appeals has assumed as
true factual assertions made by Defendants
(many of which were not sworn to be defen-
dants) and has assumed that facts asserted
by Plaintiffs’ affidavit are not true, and sum-
mary judgment should not have been per-
mitted to be entered against Plaintiffs without
permitting them to have discovery first as
provided under F.R.C.P. 56(f). The decision
13
Il
below conflicts with rulings of the Supreme
Court and of other Courts of Appeal ................ 20
III. The remand of Count One for a hearing as to
whether Plaintiffs have “just cause” to in-
spect records as requested under LMRDA
Section 201 unnecessarily delays and frustrates
Plaintiffs’ rights. Other Circuits have ruled
that the union officers waive their right to
contest Plaintiffs’ showing of just cause by
failing to raise the point as in this case, and
the decision below is in conflict with those
PIE ios cscs wh ennhinounsetectabnaunsntin whetenecnstesthimmecinaiien 25
COTCRAIINIIE 5a senectinwsnrecenceaseoeenecemessosencoavecissmnestnecepsoononeneeensis 27
Appendix A—Opinion of the United States Court of
Appeals for the Eighth Circuit ..2...........-..-.-.-.-.---.---- -29
Appendix B—Order of the United States District Court 59
Appendenx C—Judgment of the United States Court of
Appeals for the Eighth Circuit -...................--...1ese--00- 68
Appendix D—Order of the United States Court of
Appeals for the Eighth Circuit Denying Petition for
PROMO MEIN sci n anna sas nsesincnnscensneseenenesenncnsvenssssnsnneeenssoncnsens 69
Appendix E—29 U.S.C. Sections 461, 463, 464, 501, 523
Ee re ie es MO hice akc ereccstneoninheennteanscitinatiiens 70
Citations
CASES
Abood v. Detroit Board of Education, 431 U.S. 209
411-412 (2d Cir. 1955), cert. denied 351 U.S. 983, 76
S.Ct. 1050, 100 L.Ed. 1487 (1956) ............-.....eseceseeeees 26
Ill
Antal v. District 5, United Mine Workers of America,
ee Re Ge Mail WIPED cite iectisteicesicstiectanienends 25
California Transport v. Trucking Unlimited, 402 U.S.
SO POE) ecient bcipidis aie Stihl ba annie daes siesta 21
Colby v. Klune, 178 F.2d 872 (2d Cir. 1949) 002... 25
Conley v. Gibson, 335 U.S. 41 (1957) 2 21
Crt ¥. Aan, 48 US. 6 (06) ........ 19, 20
Cross v. United States, 336 F.2d 431, 434 (2d Cir. 1964) 26
Fogelson v. American Woolen Co., 170 F.2d 660 (2d
Sek aE EAR te Tay sig Se ere ee 25
Fruit and Vegetable Packers, etc., Local 760 v. Morley,
EE RE UU OE Mg cc secs cceteeniabasivomens 26
Gardner v. Toilet Goods Assn., 387 U.S. 167 (1967) .... 21
Gilbert v. Hoisting & Portable Engineers, 384 P.2d 136
(Ore. En Banc 1963), cert. denied 376 U.S. 963 (1964) 14
Highway Truck Drivers and Helpers Local 107 v.
Cohen, 182 F.Supp. 608 (E.D.Pa. 1960), aff'd 284 F.2d
162 (3d Cir. 1960), cert. denied 365 U.S. 833 (1961)
snnesilasdeedicopalds tects icratonh otecatame sedi bismdabesidatndinnangiarsintaconninniat 14, 18
Johnson v. Nelson, 325 F.2d 646 (8th Cir. 1963) ............ 14
Libutti v. DiBrizzi, 337 F.2d 216 (2d Cir. 1954) ........... 15
Local 1419, I.L.A. v. Smith, 501 F.2d 791 (5th Cir. 1962)
pshiiiehehlbeesiciiinitidanastibic ia bint atisiladinppilintadliiesthanithans-cbsamincacniateise 25, 27
McNamara v. Johnston, 522 F.2d 1157 (7th Cir. 1975),
cert. denied 425 U.S. 911 (1976) ....... 16, 19, 21
Machinists v..Street, 367 U.S. 640 (1961) 0000. 17, 18
Miller v. American Telephone and Telegraph Co., 507
A a Cre a OD harness hctetiitshiteintoennne 21
Mooney v. Bartenders’ Local 284, 48 Cal.2d 841, 313 P.2d
5 REE Me SE OER 16
Poller v. C.B.S., 368 U.S. 464 (1962) 2. 22, 26
Posner v. Utility Workers Union, 47 Cal.App.3d 970,
he Ek} pec emean evermore . 14
IV
Railway Clerks v. Allen, 373 U.S. 113 (1963) ................ 17, 18
Rekant v. Schochtay-Gasos Union Local 446, 194
F.Supp. 187 (E.D.Pa. 1961), 205 F.Supp. 284 (E.D.Pa.
| -_ | DST es Pence nee erin Se SIR Ps 14
Robinson v. Nick, 235 Mo.App. 461, 16 S.W.2d 374
(SL Die Ame, WOGD) vscriecimiccntitinctiongiliciieninn 16
Schoenbaum v. Firstbrook, 405 F.2d 215 (2d Cir. 1965),
cert. denied 395 U.S. 906 —._..........................- 22, 24
Subin v. Goldsmith, 224 F.2d 753 (2d Cir.), cert. denied
350 U.S. 883, 76 S.Ct. 136, 100 L.Ed. 779 (1955) ........ 24, 26
Thomas v. Penn Supply & Metal Corp., 35 FRD 17
(REPe. 19GG) .ccciscnitgumeiciinadiaetbaiabna 14
Umdenstock v. American Mortgage & Investment Co.,
495 F.2d 589 (10th Cir. 1974) ............................... 24
Union Electric Co. v. Boehm, 92 F.Supp. 177 (E.D.Mo.
1950), appeal dismissed 186 F.2d 715 (8th Cir. 1951) 18
United States v. Boyle, 482 F.2d 755 (D.C. Cir. 1973),
curt. Gembedl GB6 UTR, BN ccisetiecticcitesiticheledieiicn 17
United States v. CIO, 335 US. 106 —...........-.......0...-.-.-..-.. 19
STATUTES
BB UBS.. TABRCR) sncrecncininitccciiecniieeinne ac 2
BB WBC. TEBE Cae), BD ccnvnerennesecntetsnnnesiticiiiacnibihets 4
Federal Corrupt Practices Act (FCPA), 18 U.S.C. 610
axsinsichtiinsintnnsiahiabiesetiaiaiaaaideaameaiialaa en 2, 3, 9, 17, 18, 19, 21, 22
Federal Election Campaign Act (FECA), 2 U.S.C.
441(b), P.L. 94-283, 90 Stat. 495, 496 0. 3, 18,19
Labor Management Reporting and Disclosure Act of 1959
(LMRDA):
BD UBL. BB .wcnsissishesnnsnseenendinmnanaaamnie 5
See. 301, 3D UB. Gee on ceciettuniens 3, 4, 20, 25, 27
Sec. 301-304, 29 U.S.C. 461-464 3, 4,5
Vv
UTED deserts <ialadsstbiprcecarucbensaansadcteieke. sai 5
Soe en, BP I, BON anna, co cteccnss 3, 4, 5, 6, 7, 10, 13,
14, 15, 17, 19, 22, 23
I, AP Pe UO ao ceccsasccsnseoncesersenecmaiasess 3, 5, 14, 20
8 RSC ERITREEE L/S B na Ny eRe 5
RULES
Federal Rules of Civil Procedure (FRCP):
| RL a EA ES eS SSA AO LE Ce OE RD 7,21
og |. BSN Re eae aeons 3, 7, 11, 20, 22, 23, 24
OTHER
Restatement, Trusts 2d ................... 14, 15, 16, 18
| EEN RS OR ee eR 14, 15, 16, 18
1CJ.S., Accounting .......00.000000..... odin bacpetasnepinieadh staeicla.) 15, 16
i MU I i See SP ee 15
In the Supreme Court of the United States
OCTOBER TERM, 1978
ERNEST GABAUER, JOE De LOS SANTOS, JR.,
* COLEMAN G. LEWIS, JR., C. L. GREENFIELD,
ELBERT HILL and CLAUDE J. HUSKEY,
Petitioners,
vs.
LEONARD WOODCOCK, EMIL MAZEY, KENNETH
WORLEY, C. E. MATTIX, EDWARD LAVIN, JOHN T.
WEBSTER, ROY HARTZELL and DONALD YOUNG,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Ernest Gabauer, Joe De Los Santos, Jr., Coleman G.
Lewis, Jr., C. L. Greenfield, Elbert Hill and Claude J.
Huskey (hereafter Petitioners) pray that a Writ of Cer-
tiorari issue to review a judgment of the United States
Court of Appeals for the Eighth Circuit in this case.
OPINIONS BELOW
The opinion of the Court of Appeals (App. A, infra,
pp. 29-58) is reported at 594 F.2d 662, 100 LRRM 2808.
The opinion of the District Court (App. B, infra, pp. 59-67),
is reported in part at 425 F.Supp. 1,* 94 LRRM 2497.
*The officially reported decision of the District Court does
not include the order entered January 19, 1977 (App. B, infra,
p. 67) dismissing both Counts of the Complaint.
JURISDICTION
The judgment of the Court of Appeals (App. C, infra,
p. 68), was entered on March 6, 1979. Rehearing was
denied on March 27, 1979. (App. D, infra, p. 69). The
jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).
QUESTIONS PRESENTED
1. Where union members allege in their complaint
under 29 U.S.C. 501(b) that Defendant union officers have
wrongfully spent union dues monies for political and ideo-
logical purposes contrary to the best interests of the union
membership, for purposes which are not authorized under
the union’s constitution and bylaws and for purposes
unrelated to the union’s collective bargaining functions,
and that Defendant officers have used union dues monies
to finance federal election campaigns in violation of the
Federal Corrupt Practices Act, 18 U.S.C. 610, was it proper
for the Court of Appeals to affirm dismissal of such com-
plaint for failure to state a claim upon which relief may
be granted?
2. Was it proper for the Court of Appeals to re-
solve factual disputes adversely to Plaintiffs’ claims [as to
whether particular expenditures of union dues monies were
authorized and as to whether union funds contributed to
federal election candidates were commingled with union
dues monies in violation of 18 U.S.C. 610 and as to Plain-
tiffs’ claims that Defendants knowingly breached their
duties of trust by secretly diverting union dues monies
to purposes and outside groups without adequate reports
or disclosures to the membership and contrary to the best
interests of the union members] without permitting Plain-
3
tiff union members to have any hearing or discovery,
where Plaintiffs had filed affidavits and discovery requests
under F.R.C.P. 56(f) stating that discovery was necessary?
3. In reversing the District Court’s dismissal of the
action under 29 U.S.C. 431(c), 461(b) [for an order to
allow Plaintiff union members to inspect union records],
should the Court have granted Plaintiffs’ summary judg-
ment where it is undisputed that Defendant union officers
had denied the requested inspection before the action was
commenced for reasons which are admittedly unlawful,
and where Plaintiff union members properly asserted in
their request that it was made for “just cause” and this
is not genuinely disputed by the Defendants?
STATUTES INVOLVED
This case involves interpretation of Sections 201, 301-
304, 501 and 603(a) of the Labor Management Report-
ing and Disclosure Act of 1959, 29 U.S.C. 431, 461-464,
501 and 523 (hereinafter LMRDA), and of the Federal
Corrupt Practices Act, 18 U.S.C. 610 which was in effect
when this action was instituted in District Court on March
21, 1972.1 Pertinent portions of these statutes are re-
printed in App. E, infra, pp. 70-81. See also provisions
of 29 U.S.C. 464 quoted at note 4, infra, and Civil Rule
56 (f) , quoted at note 5, infra.
1, Although 18 U.S.C. 610 was repealed by Act May 11, 1976,
P.L. 94-283, 90 Stat. 496, known as the Federal Election Cam-
paign Act Amendments of 1976, Title I, Section 114 of that Act,
90 Stat. 495, provided: “Except as otherwise provided by this
Act, the repeal by this Act of any section or penalty shall not
have the effect of releasing or extinguishing any penalty, for-
feiture, or liability incurred under such section or penalty, and
such section or penalty shall be treated as remaining in force
for the purpose of sustaining any proper action or prosecution
for the enforcement of any penalty, forfeiture, or liability.”
STATEMENT OF THE CASE
Nature of Action: Petitioners (plaintiffs below) are
six members of UAW International Union?’ and its Local
No. 25, in St. Louis, Missouri. They filed suit on March
21, 1972 in the Eastern District of Missouri (A. 13-25)
against officers and representatives of the UAW Interna-
tional Union and Local 25*, invoking jurisdiction under
28 U.S.C. 1331 (a) and 1337.
Under Count One, Plaintiffs sought court orders allow-
ing them to inspect and copy union financial and trustee-
ship records under Sections 201(c) and 301(a) and (b)
of LMRDA [29 U.S.C. 481(c), 461(a) and (b)]. Under
Count Two, Plaintiffs (having obtained leave of court to
do so, A. 6-12) brought a derivative action under Section
501(b) of LMRDA. [29 U.S.C. 501(b)], seeking to compel
the Defendant union officers to make an accounting of
union property and funds which Plaintiffs claimed had
been misappropriated or diverted secretly and without au-
thority to political and revolutionary groups and causes
opposed to the best interests of the union and its member-
ship in breach of fiduciary duties owed by the Defendant
officers under Section 501(a) of LMRDA [29 U.S.C.
2. The “UAW International Union” refers to International
Union, United Automobile, Aerospace and Agricultural Implement
Workers of America (hereafter “UAW’”’).
3. Defendants include the then President (Leonard Wood-
cock) and Secretary-Treasurer (Emil Mazey) of UAW; UAW’s
Region 5 Director (Kenneth Worley), who served as “Admin-
istrator” (trustee) over the Chevrolet Unit of Local 25 and
Chairman of the UAW Region 5 Community Action Program Coun-
cil; an assistant to Worley in each of his capacities (C. E. Mattix) ;
Local 25 President (Edward Lavin); Local 25 Financial Secretary
(Roy Hartzell) ; Local 25 Recording Secretary (John T. Webster) ;
and the Financial Secretary of UAW Region 5 CAP Council and
Greater St. Louis UAW CAP Council (Donald Young). (A. 13-14).
PERRET
5
501(a)] and under the common law rights preserved to
Plaintiffs under 29 U.S.C. 413, 483, 523 and 524.4
Decisions Below: The District Court dismissed Count
Two for Failure to state a claim for which relief could
be granted, and dismissed Count One for improper venue
and pleading deficiency. (App. B, infra, pp. 61-67).
An en banc decision of the Eighth Circuit Court of
Appeals unanimously reversed the dismissal as to Count
One (in part) remanding Count One for further proceed-
ings to determine whether Plaintiffs had “just cause” to
inspect the union records, and affirmed dismissal of Count
Two by a four judge majority opinion (App. A, infra,
pp. 29-54) with three judges dissenting. (App. A, infra, pp.
54-58).
The four Judge majority found, contrary to Plaintiffs’
allegations in the complaint and in affidavits (A. 13-25,
153-286), that the Defendants had authority to expend
the union funds (derived from compulsory dues collected
under union shop agreements) for contributions to outside
4. Plaintiffs invoked , ndent jurisdiction of state law claims
preserved by these provisions of LMRDA. Plaintiffs also rely on
jurisdiction provided under 29 U.S.C. 461(b), 462, 463, 464(a)
and (b). (A. 39-43, 145). The last sentence of 29 U.S.C. 464(a),
relating to actions claiming unlawful imposition of trusteeships,
provides: “Any member or subordinate body of a labor organiza-
tion affected by any violation of this title (except section 301)
may bring a civil action in any district court of the United States
having jurisdiction of the labor organization for such relief (in-
cluding injunctions) as may be appropriate.” 29 U.S.C. 464(b)
provides: “For the purpose of actions under this section, district
courts of the United States shall be deemed to have jurisdiction of
a labor organization (1) in the district in which the principal
office of such labor organization is located, or (2) in any district
in which its duly authorized officers or agents are engaged in
conducting the affairs of the trusteeship.” A trusteeship had
been imposes by UAW officers over the Chevrolet Unit of Local
25 on June 12, 1970, which Plaintiffs claimed amounted to a
wholesale misappropriation of the assets and affairs of the local
unit in violation of 29 U.S.C. 501(a). (A. 22-23, 30-31, 39-44,
143-144, 153-172).
6
groups whose purposes Plaintiffs claimed were antithetical
to the interests of the UAW members. The majority opin-
ion found that even Plaintiffs’ claims that Defendants had
used union funds in violation of Federal Corrupt Practices
Act, 18 U.S.C. 610, did not state a claim because the Defen-
dants “relied on their apparent authority” to so use union
funds. (App. A, infra, p. 54). At note 7 of the majority’s
opinion, it was conceded that a Section 501 claim could
be stated for use of union funds in violation of the Federal
Election laws, but that such claim could not be made
where the Defendants claimed to have had “apparent au-
thority” to so spend the union funds. (App. A, infra, p.
54).
The dissenting opinion strongly argues that Plaintiffs
did state a claim for which relief may be granted under
LMRDA Section 501(b). It argues that the majority erred
in conferring unlimited discretion upon UAW International
officers in their expenditure of huge amounts of money
collected annually from compulsory dues (about $148 mil-
lion) and that the UAW constitution should not be con-
strued as granting such unlimited discretion. The dissent
‘pointed to Article 2 of the UAW constitution limiting the
assistance it should give to organizations to those “having
purposes and objectives similar or related” to those of
UAW; Article 7(2) which authorizes expenditures of UAW
funds to achieve purposes and objections “not inconsistent”
with purposes of the UAW, and which the UAW Executive
Board believes “will further the general interest and wel-
fare of the membership”; and to Article 23(1) which indi-
cates that the UAW’s Community Action Program (CAP)
is “to improve the economic and social conditions of UAW
members and their families and to promote the general
welfare and democratic way of life for all people.” (Empha-
sas by dissenting opinion, App. A, infra, pp. 55-56).
7
The dissenting opinion argues that the above quoted
language shows that the UAW officers do not have unlim-
ited discretion as to how to spend the union’s funds, and
that Plaintiffs’ allegations that Defendants had contributed
union assets “to various organizations and groups espousing
and promoting ideological doctrines and causes totally un-
related to, and in many instances antithetical to, the inter-
ests and welfare of the union and its members” (including
thirteen groups listed in the complaint and the majority
opinion) do state a claim. The dissenting opinion found
that the dismissal was improper under F.R.C.P. 12(b) be-
cause the majority improperly resolved factual disputes
contrary to Plaintiffs’ allegations (App. A, infra, p. 55,
note 1) and the dismissal was not proper under F.R.C.P.
56, because Plaintiffs were denied discovery and opportu-
nity to prove their claim, and Plaintiffs should have had
an opportunity to find out through discovery the goals
and methods espoused by the recipients of the challenged
UAW contributions. (App. A, infra, p. 57).
The dissenting opinion argues that if the ends and
means adopted by the recipient organizations were, as
alleged, antithetical to the interests and welfare of the
UAW membership and inconsistent with the objectives
of the UAW, Plaintiffs have a cause of action under
LMRDA Section 501 for misuse of union funds by UAW
officers, and it was not proper for the Court to ignore
the allegations of Plaintiffs that the questioned expendi-
tures “were in violation of the Union’s constitution.” (App.
A, infra, p. 57).
Facts - Count Two: UAW Local 25 and UAW Inter-
national Union have had collective bargaining agreements
covering Plaintiffs and their fellow workers at the General
Motors plant in St. Louis, Missouri since before 1961. Such
agreements include union‘shop clauses which required each
8
employee (including Plaintiffs) to pay dues and fees to
Local 25 as a condition of employment which average $10
per month per employee, and which total more than One
Million Dollars ($1,000,000) annually. (A. 14).
Substantial sums of Local 25 compulsory dues are
paid over to UAW International Union and other organiza-
tions controlled by Defendants. Since May 1969, Local
25 has paid three per cent’ (3%) of each member’s dues
to the Community Action Program (CAP) Funds, including
the Greater St. Louis CAP Fund, the Missouri CAP Fund,
and the UAW COPE Fund. Local 25 pays to such CAP
funds in excess of $30,000 per year from compulsory dues
income. (A. 20, 50-55).
The UAW International financial reports filed annually
with the Secretary of Labor disclosed contributions or dona-
tions of Million of Dollars to various political and other out-
side groups for years 1961 through 1967. Those reports (A.
222-272) show that donations of union funds went to
groups, purposes and causes totally unrelated to or in
many cases opposed to the interests of the Local 25 mem-
bers and their families. (A. 135-136). The UAW’s reports
for 1968 through 1970 do not list who the recipients of
such donations were, but for each of those years show
contributions ($1,753,718; $2,074,268; and $527,601) to out-
side groups which were not identified in any way. These
contributions were not for the benefit of UAW members
or their families, but were to support causes and purposes
opposed to the best interests of the UAW and its member-
ship. (A. 136).
The substantial reduction of reported outside contribu-
tions for 1970 results from a concealment of approximately
$1,000,000 to $2,000,000 of contributions through the crea-
tion of the CAP Council which has been used to divert
compulsory dues monies to various outside groups and
9
causes, the specific nature and amounts of which have
not been reported to the UAW membership and have not
been included in the UAW’s financial reports filed with
the Secretary of Labor. (A. 136, 273-275). The generalized
type of disclosures made in the 1968 and subsequent finan-
cial reports results from a deliberate concealment by Defen-
dant union officers from the Local 25 membership of the
uses and purposes to which their dues monies have been
put through the outside donations, but which uses are
contrary to the best interests and desires of UAW members
generally and have not been authorized by them. (A. 136).
Plaintiffs have discovered that some of the groups
which have been recipients of UAW Local 25 compulsory
dues monies include many groups who are controversial,
or who have engaged in revolutionary or disruptive tactics
and programs which are strongly opposed by the UAW
memberspip and are contrary to the best interests of the
UAW members. Plaintiffs have discovered their union
dues monies have been wrongfully given to outside groups
such as National Students Association (NSA), Students for
a Democratic Society (SDS), Students’ Non-Violent Coor-
dinating Committee (SNCC), Dubois Memorial Committee
and numerous other such groups. (A. 21-22, App. A, infra,
pp. 37-38).
Plaintiffs believe their compulsory dues n »nies have
been given as donations to candidates for federal elective
offices in violation of 18 U.S.C. 610. Various schemes and
devices have been used by Defendants to conceal such un-
authorized uses of union dues monies, and such criminal
uses of dues monies, including the creation of the CAP
council and the use of -fictitious “flower funds” which are
in reality political “slush funds”. (A. 138-139).
Funds have been given by CAP to various United
States Congressmen listed in Plaintiffs’ affidavit. (A. 140-
10
142). News reports have shown that Defendant Woodcock,
now Ambassador to China, had used his union office to seek
high political offices or appointments on his personal be-
half, and he has apparently been using union funds to ad-
vance his own selfish political interests rather than for the
benefit of the Union and its members. (A. 140-141). A
clipping from the Local 25 newsletter shows a United
States Senator thanking the CAP in St. Louis for contribu-
tions to his campaign. (A. 143, 276-277).
Some $30,000 to $60,000 per year have been unlawfully
taken by Defendants from Local 25 union dues income each
year since 1961 for such unauthorized or unlawful purposes.
(A. 150-151).
Plaintiffs’ action under Count Two seeks an order that
the Defendant union officers make an accounting as to the
uses to which the union dues monies taken from Local 25
since 1961 have been made, and seeks orders that the De-
fendants be required to reimburse the Union treasury for
any expenditures which were not properly authorized, or
which were contrary to the best interests of the UAW mem-
bers or were not legitimate purposes for which compulsory
dues could be expended since they were not “solely” for
the benefit of members as required under 29 U.S.C. 501(a).
When the Defendants sought to dismiss the action and
sought summary judgment against the Complaint, Plain-
tiffs filed a detailed affidavit, setting forth allegations in-
cluding those covered above. (A. 126-152, 153-286). Plain-
tiffs opposed the Defendants’ motion for summary judg-
ment because the case was not ripe for summary judgment,
since Defendants had failed to respond to interrogatories
propounded more than a year earlier (A. 73-93), Plaintiffs
had filed a motion to compel discovery (A. 103-104) and
Plaintiffs had not been afforded any opportunity for dep-
ositions. (A. 124-126, 128-129). Plaintiffs’ affidavit in op-
11
position to summary judgment specifically stated that it
was impossible for Plaintiffs to further respond to or defend
against the Defendants’ summary judgment motion until
discovery was permitted, which discovery Plaintiffs re-
quested permission to undertake before the court ruled on
the motion, as provided in F.R.C.P. 56(f).° (A. 128-129).
Facts - Count One: Plaintiffs had sought [through let-
ters dated August 19, 1971 (A. 26-28) and November 17,
1971 (A. 34-36) ] permission to inspect certain records of the
International and Local Union officers relating to Local 25
and the trusteeship imposed by the International Union
over the Chevrolet Unit of Local 25. Although these re-
quests by Plaintiffs were made in good faith and for just
cause, Defendants refused to grant permission for inspec-
tion for two stated reasons: (1) because Plaintiff Huskey
was alleged by Defendants not to be a member in good
standing, a position later reversed by Defendants; and (2)
because the Defendants would not permit Plaintiffs to in-
spect any records with assistance of their accountants and
attorneys, as Plaintiffs had requested, a position which the
Court of Appeals found to be unlawful. (A. 15-16; App. A,
infra, p. 35).
After this action was filed by Plaintiffs, defense coun-
sel appeared in Court and admitted that all reasons ad-
vanced by Defendants for refusing the inspection had been
without merit, but seeking to interpose after the action was
filed a claim that Plaintiffs did not have “just cause”. (A.
133-134). This newly asserted claim of lack of “just cause”
; 5. Federal Rule of Civil Procedure 56(f) states: “Should
it appear from the affidavits of a party opposing the motion [for
summary judgment] that he cannot for reasons stated present
by affidavit facts essential to justify his opposition, the court
may refuse the application for judgment or may order a contin-
uance to permit affidavits to be obtained or depositions to be
taken or discovery to be had or may make such other order as
is just.” See note 17, infra.
12
is without merit according to the unrefuted affidavit of
Plaintiff Huskey because of a long series of just causes
therein listed: Plaintiffs’ belief that Defendants are hid-
ing funds not included in Local 25 reports and secretly and
unlawfully using compulsory dues funds to finance cam-
paigns for federal elections in violation of the law and
that Defendants are using a series of schemes and devices
spelled out in the affidavit seeking to divert union funds
to purposes other than legitimate collective bargaining pur-
poses, and to purposes opposed to the best interests of the
UAW and its membership (A. 131-133); Defendants have
concealed the actual use of dues and fees derived from
Local 25 members through the CAP organizations, whose
expenditures have not been included in the UAW or Local
25 financial reports filed with the Secretary of Labor as
required by law (A. 132-133); the failure of Defendants to
file reports disclosing the identities of persons or groups
receiving donations of union funds. (A. 136). The record
also discloses that the trusteeship imposed over Local 25
was for unlawful purposes and that reports were not filed
as to that trusteeship within the time required by law, and
then the reports did not comply with the law and did not
disclose any lawful purpose for the trusteeship. (A. 30-31,
33-34, 38).
Defendants have presented no affidavits which dispute
the claims of “just cause” by Plaintiffs. However, the
Court of Appeals, while reversing the dismissal of Count
One, remanded Count One for the District Court to deter-
mine whether “just cause” exists for Plaintiffs to be per-
mitted to inspect the records. (App. A, infra, pp. 33-34).
13
REASONS FOR GRANTING THE WRIT
I. Review Should Be Granted to Decide Im-
portant Questions of Federal Law Under LMRDA
Section 501. The Decision Below Threatens to Nullify
the Derivative Action by the Union Members to Re-
quire Their Union Officers to Make an Accounting As
to Funds Claimed to Have Been Expended in Violation
of the Fiduciary Duties of the Officers to Hold Union
Funds and Properties ‘‘Solely for the Benefit of the
Organization and Its Members’’.
LMRDA Section 501, 29 U.S.C. 501 (App. E, infra, pp.
70-81), outlines the nature of the fiduciary duties owed by
labor organization officers and agents, and provides civil
and criminal penalties for breaches of those duties, Sub-
section (a) recognizes that the union officers “occupy posi-
tions of trust” and must therefore hold the union’s money
and property “solely for the benefit of the organization and
its members.” They must manage, invest and spend union
funds only as authorized under the union’s constitution
and bylaws, and resolutions thereunder. But the statute
specifically provides that union officers shall not be re-
lieved of these fiduciary duties by “general exculpatory”
provisions in the union constitution or bylaws, and any
generalized provisions purporting to give blanket immunity
to officers from liability for breaches of their fiduciary ob-
ligations “shall be void as against public policy”. Subsec-
tion (b) provides for derivative actions to be brought by
the members against officers who are “alleged to have vio-
lated the duties” mentioned above to “secure an accounting
or other appropriate relief”. Subsection (c) provides for
criminal penalties for the union officer who converts union
funds not only “to his own use” but also to “the use of
another”,
14
The federal statutes which recognize the fiduciary
duties of union officers do not replace the duties previously
existing under the common law of the States, but supple-
ment the rights and remedies previously existing.’ See
LMRDA Section 603, 29 U.S.C. 528. (App. E, infra, pp.
78-79). Indeed, it has been recognized that the common
law principles concerning the fiduciary duties of trustees
must be consulted in order to fashion a body of federal
common law under LMRDA Section 501. Johnson v. Nel-
son, 325 F.2d 646, 650-651 (8th Cir. 1963); Highway Truck
Drivers and Helpers Local 107 v. Cohen, 182 F.Supp. 608,
617 (E.D. Pa. 1960), aff'd 284 F.2d 162 (38rd Cir. 1960),
cert. den. 365 U.S. 833 (1961). Those cases recognized that
LMRDA Section 501 atternpted to define the fiduciary
duties of union officers “in the broadest terms possible”.
Ibid.
The common law duties of trustees are listed and ex-
plained in Sections 169-189, RESTATEMENT oF TRuUsTS 2d,
and in Professor Scott’s Treatise using the same section
numbers. Those duties include duties of keeping and ren-
dering accurate accounts to the beneficiaries and to furnish
complete information as to the income and expenditures of
the trust property. RESTATEMENT, Trusts 2d, §$172-173.
If the trustee is requested by the beneficiary for informa-
tion concerning the use of trust funds and the trustee re-
fuses to give that information, the trustee is guilty of a
breach of trust for which the beneficiary is entitled to
equitable relief in an actior for an accounting. RESTATE-
MENT, TrRuSTS 2d, §$197, 199-201; Scotr on Trusts, §§197,
7. Rekant v. Schochtay-Gasos Union Local 446, 194 F.Supp.
187 (E.D. Pa. 1961) (denying motion to dismiss), 205 F.Supp.
284 (E.D. Pa. 1962) (opinion after trial) (E.D. Pa. 1962); Thomas
v. Penn Supply & Metal Corp., 35 F.R.D. 17 (E.D. Pa. 1964);
Posner v. Utility Workers Union, 47 Cal.App.3rd 970, 121 Cal.
Rptr. 423 (1975); Gilbert v. Hoisting & Portable Engineers, 384
P.2d 136, 138-159 (Ore. En Banc 1963), cert. den. 376 U.S. 963
(1964).
15
199-201; 1 C.J.S., Accounting, §$14-47, particularly §21; 90
C.J.S., Trusts, §391, p. 709.
A breach of trust occurs if the fiduciary makes ex-
penditures which are unauthorized or outside his powers.
$201, Scorr and REsTaTEMEN't, Trusts 2d. The scope of a
trustee’s powers is considered at $$185-196 of Scorr and
RESTATEMENT, Trusts 2d. At $190.10, Scorr points out that
ordinarily the trustee is without power to make a gift of
trust property to persons other than the trust beneficiaries.
Such power can never be presumed without proof that the
beneficiary has consented to such outside gifts after full
knowledge of all relevant facts and without concealment,
deception or other misconduct by the trustee. §216, Scorr
and RESTATEMENT, Trusts 2d. If the trustee acts dishon-
estly or with improper motive, his action is outside his
power, Id., $187. This is true no matter how broadly the
trust instrument describes the trustee’s power or discretion,
because the trustee is obviously not empowered to act in
bad faith or with improper motive. Ibid.
The four judge majority below (with three judges
filing a strong dissent) approved the District Court’s dis-
missal of the derivative action brought under Count Two
of the complaint.
Under Part A, the majority opinion concludes, without
citation of authority and without noting the common law
principles of trust law discussed above, and without noting
that Plaintiffs invoked the court’s pendent jurisdiction of
state law claims* (see note 4, supra), that the Plaintiffs
could not use LMRDA Section 501 as an independent dis-
covery tool, and that LMRDA Section 201 provides the only
discovery too! available to Plaintiffs. (App. A, infra, p.
41). That narrow view of Section 501 also overlooks the
8. Libutti v. DiBrizzi, 337 F.2d 216 (2d Cir, 1954).
16
rights of Plaintiffs under the common law. See Mooney
v. Bartenders’ Local 284, 48 Cal.2d 841, 313 P.2d 857 (En
Banc 1957); Robinson v. Nick, 235 Mo.App. 461, 136 S.W.2d
374, 386-387 (St.L.Mo.App. 1940); 1 C.J.S., Accounting, §21,
in addition to the above citations to RESTATMENT, TRUSTS
and Scott oN TRUSTS.
Under Part B, the majority stated the dismissal of
Count Two was justified by McNamara v. Johnston, 522
F.2d 1157 (7th Cir. 1975), cert. den. 425 U.S. 911 (1976), a
case wherein UAW members in Chicago had similarly
sought an accounting as to what they claimed to have been
unauthorized expenditures by officers of the UAW of
union dues monies of the same type which the present
Plaintiffs claim to have been unauthorized. The majority
then quotes from UAW Constitution Art. 2, Sections 4-5,
Art. 23, Section 1, and mentions Art. 7, Section 2, Art. 23,
Section 8 (App. A, infra, pp. 42-43) and finds that those
provisions authorized the defendant officers to have broad
discretion to contribute union funds to outsiders including
political candidates and groups of the type alleged in the
complaint. The majority found the intended discretion to
have been unlimited. (“The union membership chose not
to specifically restrict the discretion of union officers.”,
App. A, p. 44). The dissenting opinion, however, finds
that the expenditures challenged by Plaintiffs are not im-
mune from scrutiny in this action and strongly argues that
Plaintiffs should be able to question the motives and pur-
poses of the Defendants and the outsiders to whom union
funds have been contributed, to determine whether the
funds have been used as authorized in the constitution or
whether, as alleged by Plaintiffs, union funds have been
used without proper authority for purposes which are ad-
verse to the best interests of the Plaintiffs and their fellow
UAW members. (App. A, infra, pp. 54-58).
17
The majority overlooked the significance of this
Court’s earlier decisions in Sireet,® Allen'® and Abood,”
where in each case, this Court has ruled the statute in-
volved was constitutional, to the extent that it allowed
compelling employees to pay union dues 2nd fees as a con-
dition of employment, only because those statutes them-
selves forbade the use of such compulsory dues for any
purposes other than collective bargaining purposes for the
benefit of the employees from whom the dues and fees are
exacted. As stated in Abood, 431 U.S. at p. 220, referring
to the holding in Street: ‘The Court ruled, therefore, that
the use of compulsory dues for political purposes violated
the Act itself.”
The majority erred in assuming that Defendants had
unlimited discretion to violate the federal labor statutes
and to spend compulsory dues for political and’ other non-
bargaining purposes and to use compulsory dues even for
financing campaigns for federal elective office in violation
of 18 U.S.C. 610. As ruled in United States v. Boyle, 482
F.2d 755 (D.C. Cir. 1972), cert. den. 414 U.S. 1076, where
defendant was convicted for misappropriating union funds
to the use of another in violation of LMRDA Section
501(c) because of a contribution to a candidate for federal
office in violation of 18 U.S.C. 610, the defendant cannot
claim authorization to do what is unlawful under federal
statutes.'*
9. Machinists v. Street, 367 U.S. 740 (1961).
10. Railway Clerks v. Allen, 373 U.S. 113 (1963).
( 11. Abood v. Detroit Board of Education, 431 U.S. 209
1977).
12. “Neither authorization by any union officer or body,
nor any resulting benefit to the union, would have rendered law-
ful the transfer of general union funds to a federal political cam-
paign. * * * Thus, approval or benefit cannot make the con-
version ‘to the use of another’ in this case any less unlawful. If
the use to which the money is knowingly transferred is unlawful,
then the transfer constitutes a violation of §501(c).” [482 F.2d
pp. 764-765].
18
Although the majority opinion admits that Defendants
could not claim authorization under their constitution to
make expenditures which violate specific provisions or
express policies of federal law (App. A, infra, p. 45),
the majority overlooked the fact that this Court has pre-
viously ruled that Congress did forbid use of compulsory
dues for non-bargaining purposes, as noted in Street, Allen
and Abood.
Defendants should not be permitted to claim authority
to give away compulsory dues funds in violation of federal
labor laws under which those funds have been collected,
and in violation of the general rule that trustees shall
not be assumed to have power to give away trust funds
to those who are not beneficiaries of the trust. Scortr
on Trusts, $190.10. Plaintiffs should have been permitted
to have depositions and discovery and a hearing on the
merits to question the motivation and purposes of Defen-
dants and the recipients of the union funds. Section 187,
Scott and RESTATEMENT, TRUSTS 2d.
In an action for an accounting, it should not be Plain-
tiffs’ burden to demonstrate that the challenged expendi-
tures were not authorized. Rather, it is the burden of
the Defendants to make a full disclosure of the expendi-
tures and to demonstrate how those expenditures were
authorized. Union Electric Co. v. Boehm, 92 F.Supp. 177,
180 (E.D. Mo. 1950), appeal dismissed 186 F.2d 715, 716
(8th Cir. 1951); Highway Truck Drivers v. Cohen, supra,
182 F.Supp. at p. 619.
Under Part C, the majority opinion ruled the Plaintiffs
could not rely upon allegations that Defendants had con-
tributed union funds to candidates for federal offices in
violation of 18 U.S.C. 610, because the Federal Election
Campaign Act Amendments of 1976 repealed 610 and
re-enacted its substance at 2 U.S.C. 44lb. However, the
19
Court overlooked the fact that Title I, Section 114 of that
Act, 90 Stat. 495 (quoted at note 1, supra) provided that
18 U.S.C. 610 shal: be “treated as remaining in force for
the purpose of sustaining any proper action or prosecution
for the enforcement of any penalty, forfeiture or liabil-
a
The majority erroneously relies on Cort v. Ash, 422
U.S. 66 (1975) as justifying the dismissal of Count Two.
That decision expressly noted that Congress has shown
concern, in permanently expanding §610 to unions, “with
protecting union members from use of their funds for
political purposes.”"* After noting that the relationship
of a stockholder to his corporation is vastly different from
the involuntary relationship between the union and its
members, the Court expressly indicated in Cort v. Ash,
supra, that it intimated no view whether the decision in
that case would mean a union member could not sue
his union officers in a derivative action implied under
18 U.S.C. 610 for unlawful expenditures of funds. 422
U.S. at 81 (note 13).
This case calls for the Court to answer the question
left open in Cort v. Ash, and to construe the provisions
of LMRDA Section 501 which have not previously been
construed by this Court. The majority opinion below,
and the McNamara decision from the Seventh Circuit
which was followed by the majority, too narrowly construe
the fiduciary duties of union officers, and the responsibil-
ities of federal courts under LMRDA Section 501. By
ruling that Plaintiffs’ only right to discovery is under
13. Since this action was instituted in March 1972, it was
clearly erroneous for the majority to view the 1976 amendments
as having extinguished Plaintiffs’ claims, in view of the pro-
vision quoted at note 1, supra. Cort v. Ash, infra, does not dis-
cuss this point.
14. 422 U.S. at 81 (note 13), citing United States v. CIO,
335 U.S. 106, at 135, 142 (Rutledge, J., concurring).
20
LMRDA Section 201 (App. A, infra, p. 41), the majority
overlooks 29 U.S.C. 523. Plaintiffs had a right before
enactment of LMRDA Section 201 to bring a common
law action for an accounting, and 29 U.S.C. 523 provides
that the LMRDA does not extinguish that right. The
District Court should have exercised pendent jurisdiction
along with the LMRDA Section 201 claim under Count
One or the District Court should have pendent jurisdiction
under Count Two. If Plaintiffs cannot maintain an ac-
counting action under Count Two, then the right of inspec-
tion under Count One is illusory, as without Count Two
Plaintiffs would have no remedy for the wrongful expendi-
tures revealed under the Count One action.”®
II. This Case Calls for the Supreme Court to
Exercise Its Power of Supervision. The Court of Ap-
peals Has Permitted the District Court to Dismiss a
Complaint Without Assuming the Facts Alleged by
Plaintiffs Are True. Even If the Dismissal Be Viewed
As a Summary Judgment, the Court of Appeals Has
Assumed As True Factual Assertions Made by Defen-
dants (Many of Which Were Not Sworn to by Defen-
dants) and Has Assumed That Facts Asserted by
Plaintiffs’ Affidavit Are Not True, and Summary
Judgment Should Not Have Been Permitted to Be
Entered Against Plaintiffs Without Permitting Them
to Have Discovery First As Provided Under F.R.C.P.
56(f). The Decision Below Conflicts With Rulings of
‘the Supreme Court and of Other Courts of Appeal.
As pointed out by the dissenting opinion below (App.
A, infra, pp. 54-55, note 1), the majority opinion committed
15. Cort v. Ash, supra, indicates at 422 U.S. p. 72 (note 6)
that the plaintiff in that case had voluntarily dismissed his state
law claim, thus precluding any possible claim of pendent juris-
diction, unlike the present case. The majority opinion below
(Continued on following page)
21
plain error in assuming the truth of facts opposed to Plain-
tiffs’ allegations while affirming the F.R.C.P. 12(b) (6) dis-
missal of the District Court. (App. B, infra, pp. 59-60).
This Court has repeatedly recognized the elementary rules
which must be followed in reviewing dismissals under
F.R.C.P. 12(b) (6). The motion to dismiss admits the alle-
gations of the complaint. Gardner v. Toilet Goods Assn.,
387 U.S. 167, 172 (1967). The complaint ‘must be taken
“at face value”. California Transport v. Trucking Un-
limited, 402 U.S. 508, 515-516 (1972). A complaint must
not be dismissed for failure to state a claim “unless it
appears beyond doubt that the plaintiff can prove no set
of facts in support of his claim which would entitle him
to relief.”” Conley v. Gibson, 335 U.S. 41, 46 (1957). Since
the complaint alleged that Defendants had used fraudulent
schemes to unlawfully and without authority divert large
sums of money to outsiders for improper purposes which
were contrary to the best interests of the UAW members,
and that compulsory dues have been used for federal elec-
tion campaigns in violation of 18 U.S.C. 610, it was clearly
erroneous for the majority to assume that the opposite
facts were true. It was clearly erroneous for the majority
to assume the good faith of Defendants when the complaint
clearly accused Defendants of bad faith use of fraudulent
schemes and devices to misappropriate union dues monies
to the use of others. The majority’s following of the
Seventh Circuit’s decision in McNamara v. Johnston, supra,
Footnote continued—
(App. A, infra. p. 54, note 7) recognizes Miller v. American Tele-
phone and Telegraph Co., 507 F.2d 759 (3rd Cir. 1974) as properly
holding that a stockholder has a right to bring a derivative action
under state law because of expenditures in violation of 18 U.S.C.
610 and also recognizes that if union members can prove union
funds have been spent in violation of 18 U.S.C. 610 federal law
expressly recognizes a derivative action to remedy such unlawful
use of union funds under 29 U.S.C. 501(b). That recognition
demonstrates the magnitude of the error and injustice in not al-
lowing Plaintiffs an opportunity for discovery or trial to prove
their Count Two claims.
22
shows that this is the second recent occasion where a
court of appeals has grossly departed from the accepted
standards for reviewing a dismisSal of an action of this
type. This case, therefore, calls for this Court to exercise
its supervisory powers to correct such gross departure
from accepted judicial proceedings.
Although the District Court characterizes its decision
as a dismissal for failure to state a claim upon which
relief could be granted (App. B, infra, pp. 64, 66), the ma-
jority attempts to justify the dismissal under the summary
judgment rule. (App. A, infra, p. 41, note 3). How-
ever, the majority failed to follow the accepted standards
for reviewing dismissals under F.R.C.P. 56. The majority
failed to view all pleadings, affidavits and documents in
the record in the light most favorable to Plaintiffs (against
whom the motion was filed), as required under the holding
in Poller v. Columbia Broadcasting System, 368 U.S. 464,
468, 473 (1962). The Second Circuit recognized that the
drastic procedures of summary judgment are generally not
appropriate in derivative actions because the defendants
have the exclusive knowledge of the facts and records
and in such actions have the burden of coming forward
with explanations to justify their actions which are called
into question by the complaint. Schoenbaum v. Firstbrook,
405 F.2d 215 (2d Cir. 1965), cert. den. 395 U.S. 906."®
Plaintiff Huskey filed an affidavit (A. 126-152) with
18 exhibits attached (A. 153-286) which contain extensive
accusations and allegations that Defendants have grossly
and in bad faith exceeded their power and authority in
converting union funds to the use of outside groups for
unlawful purposes. Our Statement of the Case mentions
some of those allegations, which include allegations of
16. That case involved a stockholder’s derivative action,
which is identical in concept to this action under 29 U.S.C. 501(b)
insofar as the point being considered is concerned.
23
use of compulsory dues for non-bargaining purposes and
for contributions to the federal election campaigns in viola-
tion of 18 U.S.C. 610. It was, therefore, clearly erroneous
for the majority to assume the opposite facts were true
in reviewing the dismissal as having been entered under
F.R.C.P. 56, Poller v. C.B.S., supra.
After the District Court had indicated it was going
to treat the motions to dismiss as motions for summary
judgment (A. 121-122), Plaintiffs timely filed opposing
pleadings (A. 122-126) as well as the Huskey affidavit men-
tioned above. (A. 126-286). Plaintiffs alleged that Defen-
dants’ motion should not be considered ripe for determina-
tion under summary judgment procedures, because Defen-
dants had failed to answer interrogatories propounded by
Plaintiffs more than a year earlier (A. 73-93) as to which
Plaintiffs had previously filed motions to compel discovery.
(A. 103-104). Plaintiffs further asserted that discovery
must be afforded to Plaintiffs, as provided under F.R.C.P.
56(f) (quoted at note 5, supra), before Defendants’ motion
to dismiss could be properly treated as a summary judg-
ment motion, because it was impossible for Plaintiffs to
fully respond to the summary judgment motion without
discovery. (A. 124-126). Plaintiff Huskey’s affidavit re-
peated this assertion. (A. 128-129) .'"
17. Paragraph 4 of Huskey’s affidavit (A. 128-129) stated:
4. Affiant shows the Court that it ig impossible for
plaintiffs herein to provide affidavits as to many facts or
to provide copies of documents to document the facts alleged
in the complaint, due to the fact that the plaintiffs in this
action have not been afforded any opportunity to take depo-
sitions or to request production of documents in this partic-
ular case, and although the plaintiffs did file interrogatories
which were served upon the defendants’ attorneys more than
one year ago, on June 15, 1972, requesting the defendants
to answer detailed questions pertaining to facts and matters
which are proper subjects of discovery herein and the truth-
ful answers to which would further support the motion by
plaintiffs herein for summary judgment and would refute
(Continued on following page)
24
Other Circuits have ruled that because of F.R.C.P.
56(f), it is error for the District Court to grant a summary
judgment against Plaintiffs who have been deprived of
opportunities for discovery. Umdenstock v. American
Mortgage & Investment Co., 495 F.2d 589 (10th Cir. 1974);
Shoenbaum v. Firstbrook, supra.'* The majority’s decision
below is in conflict with those decisions from the Tenth
and Second Circuits, and constitutes such a clear departure
from accepted judicial proceedings as to call for exercise
of this Court’s supervisory powers.
Footnote continued—
the contentions made by the defendants in support of their
motions to dismiss which the Court is treating as a motion
for summary judgment, and although the plaintiffs have
filed motions to compel defendants to answer said inter-
rogatories or in the alternative for a default judgment
against the defendants, and motions to compel said answers
to be made, the Court herein has not required the defendants
to answer said interrogatories and until said answers are
provided and until said discovery is permitted including
depositions of each of the defendants, and production of all
of the documents which the plaintiffs have requested per-
mission to inspect under Count I and which are reasonably
necessary for the plaintiffs and their attorneys and accoun-
tants to inspect and copy, the plaintiffs are not able to pro-
vide many facts which are in existence but which the plain-
tiffs have not been permitted to discover and the Court is
therefore requested pursuant to Rule 56(f) to refuse the
application by the defendants for a judgment of dismissal
herein and to order a continuance of the requests by defen-
dants for such dismissal to permit full and complete dis-
covery herein to be made by the plaintiffs and to permit
the plaintiffs to thereafter further oppose the said motion
to dismiss and summary judgment motion based upon such
full and complete discovery.
18. At 405 F.2d, page 218, the Court stated:
Summary Judgment
[1, 2] The district court’s grant of summary judgment
against the plaintiff was accompanied by a refusal of his
request for discovery. This court has indicated that sum-
mary judgment should rarely be granted against a plaintiff
in a stockholder’s derivative action especially when the plain-
tiff has not had an opportunity to resort to discovery pro-
cedures. See, for example, Subin v. Goldsmith, 224 F.2d
753 (2d Cir.), cert. denied, 350 U.S. 883, 76 S.Ct. 136, 100
(Continued on following page)
25
IiI. The Remand of Count One for a Hearing As
to Whether Plaintiffs Have ‘‘Just Cause’’ to Inspect
Records As Requested Under LMRDA Section 201 Un-
necessarily Delays and Frustrates Plaintiffs’ Rights.
Other Circuits Have Ruled That the Union Officers
Waive Their Right to Contest Plaintiffs’ Showing of
Just Cause by Failing to Raise the Point As in This
Case, and the Decision Below Is in Conflict With Those
Decisions.
Defendants Hartzell, Worley and Mattix refused to
permit Plaintiffs to inspect any records with the presence
of an attorney or accountant. The decision below finds that
was unlawful, because Plaintiffs have “the right to be
assisted by experts in making the examination, Antal v.
District 5, United Mine Workers of America, 451 F.2d 1187
(3rd Cir. 1971).” (App. A, infra, p. 35). See also Judge
Griffin Bell’s opinion for the Fifth Circuit in Local 1419,
I.L.A. v. Smith, 301 F.2d 791, 796 (5th Cir. 1962), where it
was found that analogous cases which allowed stockholders
to have assistance of attorneys and accountants should be
followed in cases of this type, and that the rights of union
members under LMRDA 201 would be “utterly meaning-
less” if they could not have such assistance.
Footnote continued—
L.Ed. 779 (1955); Colby v. Klune, 178 F.2d 872 (2d Cir.
1949); Fogelson v. American Woolen Co., 170 F.2d 660 (2d
Cir. 1948). The plaintiff typically has in his possession only
the facts which he alleges in his complaint. Having little
or no familiarity with the internal affairs of the corporation,
he is faced with affidavits setting forth in great detail man-
agement’s version of what actions were taken and what
motives led the affiants to take these actions. Since the facts
in such a case are exclusively in the possession of the de-
fendants, summary judgment should not ordinarily be granted
where the facts alleged by the plaintiff provide a ground for
recovery, at least not without allowing discovery in order
to provide plaintiff the possibility of counteracting the effect
of defendants’ affidavits.
(Continued on following page)
26
The only reason given by Defendants for refusing the
requested inspection were admittedly unlawful reasons.
(A. 131-134, 278-286). Plaintiffs were never requested,
prior to filing of this action, to show any further just cause,
and Defendants, therefore, should have been ruled to have
waived any requirement for a hearing on the question of
“just cause”. Fruit and Vegetable Packers, etc., Local 760
v. Morley, 378 F.2d 738, 743-744 (9th Cir. 1967) held the
union officers waived any requirement for a showing of
“just cause” because they failed to respond to the request
for inspection. In this case, the waiver was even more
clear, because the only response made by Defendants to
Plaintiffs’ request was the refusal, fir unlawful reasons,
to allow the inspection and a failure by Defendants to raise
any question as to “just cause”. It was, therefore, unneces-
sary for the Court of Appeals to remand this case for a
determination of “just cause”.
The axiom “justice delayed is justice denied” is appli-
cable here, and the 1971 records inspection request should
not be further delayed by the requirement of an unneces-
sary hearing in the District Court, and possible further
Footnote continued—
[3] Indeed in many stockholder’s derivative actions
there will be issues as to the knowledge, intent and motive
which will require a full trial with an opportunity to observe
the demeanor of the witnesses, and to conduct cross-exami-
nation in open court. Im such cases summary judgment can-
not be granted even after discovery has been had. See
Subin v. Goldsmith, supra, 224 F.2d at 757. See also Poller
v. CBS, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458
(1962) (“We believe that summary procedures should be
used sparingly in complex antitrust litigation where motive
and intent play leading roles, the proof is largely in the
hands of the alleged conspirators, and hostile witnesses
thicken the plot.”); Cross v. United States, 336 F.2d 431, 434
(2d Cir. 1964); Alvado v. General Motors Corp., 229 F.2d
408, 411-12 (2d Cir. 1955), cert. denied 351 U.S. 983, 76
S.Ct. 1050, 100 L.Ed. 1497 (1956). (For a discussion of a
number of additional cases, see Judge Frank’s opinion in the
Subin case.)
27
appeals before the inspection is afforded, when the record
is clear there is no genuine dispute as to “just cause” and
Plaintiffs are entitled to inspect the records as a matter of
law under LMRDA Section 201. The decision below con-
flicts with Local No. 1419, I.L.A. v. Smith, supra, where the
Fifth Circuit approved summary judgment in similar cir-
cumstances.
CONCLUSION
For the foregoing reasons, the Petition for a Writ of
Certiorari should be granted.
Respectfully submitted,
DONALD W. JONES
PREWITT, JONES & KARCHMER
110 Landmark Building
P.O. Box 1185 S.S.S.
Springfield, Missouri 65806
THOMAS M. HANNA
McManon, BERGER, BRECKENRIDGE & HANNA
7701 Forsyth Blvd.
Clayton, Missouri 63105
RayMonp J, LAJEUNESSE
Rex REED
8316 Arlington Blvd.—Suite 600
Fairfax, Virginia 22030
JoHN L. KILCULLEN
KILCULLEN, SMITH & HEENAN
1800 M Street, N.W.
Suite 600
Washington, D. C. 20036
Attorneys for Petitioners
June, 1979
29
APPENDIX
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 77-1094
Ernest Gabauer, Joe DeLos Santos, Jr., Coleman G. Lewis,
Jr., C. L. Greenfield, Elbert Hill and Claude J. Huskey,
Appellants,
v.
Leonard Woodcock, Emil Mazey, Kenneth Worley, C. E.
Mattix, Edward Lavin, John T, Webster, Roy Hartzell and
Donald Young,
Appellees.
Appeal from the United States District Court for the
Eastern District of Missouri.
Submitted: April 13, 1978
Filed: March 6, 1979
Before GIBSON, Chief Judge, and LAY, HEANEY,
BRIGHT, ROSS, STEPHENSON and HENLEY, Cir-
cuit Judges, en banc.
HEANEY, Circuit Judge,
This case is before the Court en banc on the appellees
petition for rehearing. The appellants are members of the
United Automobile, Aerospace and Agricultural Implement
30
Workers of America (UAW) and its Local 25 in St. Louis,
Missouri. The appellees are, or were at the time this liti-
gation commenced, officers of the UAW International
Union, Local 25, or affiliated Community Action Program
Councils (CAP Councils). The complaint contains two
counts. In the first count, the appellants invoke §§201(c)
and 301(a) and (b) of the Labor-Management Reporting
and Disclosure Act (LMRDA), 29 U.S.C. §§431(c) and
461(a) and (b), to gain an opportunity to inspect various
union books and records. In the second count, the appel-
lants allege a cause of action based on §501 of the LMRDA,
29 U.S.C. §501, for the appellees’ involvement in the dis-
bursement of union funds to various political, social and
civic organizations. The District Court dismissed the first
count in part for improper venue and in part for a pleading
deficiency. The court also dismissed the second count in
its entirety for failure to state a claim upon which relief
could be granted. When the matter was first before us, we
affirmed in part and reversed in part as to the first count,
and affirmed the dismissal of the second count. We adhere
to our earlier opinion.’
COUNT I
The appellants filed their complaint in the Eastern
District of Missouri. In Count I, they requested an order
requiring the appellees to make available to them certain
union records. Section 201(b) requires that every labor
organization file with the Secretary of Labor an annual
report, signed by the president and treasurer of the organi-
1. We have adopted much of the unpublished opinion of the
panel that initially decided this matter. Our original opinion is
withdrawn. The District Court’s opinion is published at 425
F.Supp. 1 (E.D. Mo. 1976). See Huskey v. United Automobile,
Aerospace & A. I. Wkrs., 520 F.2d 1096 (8th Cir. 1975), cert. de-
nied, 423 U.S. 1061 (1976); Gabauer v. Woodcock, 520 F.2d 1084
(8th Cir. 1975), cert. denied, 423 U.S. 1061 (1976).
31
zation which describes, among other things, the disburse-
ments made by it during the preceding fiscal year. In
addition, §201(c) provides:
Every labor organization required to submit a report
under this title shall make available the information
required to be contained in such report to all of its
members, and every such labor organization and its
officers shall be under a duty enforceable at the suit
of any member of such organization in * * * the
district court of the United States for the district
in which such labor organization maintains its princi-
pal office, to permit such member for just cause to
examine any books, records, and accounts necessary
to verify such report.
29 U.S.C. §431(c).
Section 301(a) subjects labor organizations which es-
tablish and administer trusteeships over subordinate bodies
to certain additional reporting requirements. Every such
labor organization must file with the Secretary of Labor
semiannual reports signed by the president, treasurer, and
trustees which include the reasons for the establishment
or continuation of the trusteeship and the financial condi-
tion of the subordinate organization. In addition, the labor
organization must file the annual §201(b) financial report
on behalf of the local unit. Finally, §301(b) makes the
private inspection provisions of §201(c) applicable to all
§301 (a) reports.
The appellees filed a motion to dismiss the complaint,
stating, with respect to Count I, that venue was improper;
that the appellants failed to meet the just cause and speci-
ficity requirements of §201(c); and that the action was
barred in part by the statute of limitations. The District
Court granted the appellees’ motion to dismiss in part —
for improper venue and in part for a pleading deficiency.
32
Venue is governed by §201(c). This section keys
venue to the principal office of the labor organization
required to file the report in question. The appellants
seek to verify four annual financial reports for Local 25.
Three of these were prepared and signed by the president
and treasurer of the local, but one was apparently filed
by the UAW International and its trustees on behalf of
Local 25. In addition, the appellants seek certain reports
and records from the local CAP councils and other records
from the UAW which has its principal offices in Detroit.
The appellees conceded to the trial court that venue was
proper as to the records necessary to substantiate the
reports filed by local officials. Conversely, there can be
little dispute that venue was improper with respect to
the reports filed by the International officials pertaining
to files and records kept in Detroit.
The controversy involves the records necessary to ver-
ify the trustees reports filed pursuant to §301(a). The
lower court ruled that venue was improper as to these
reports:
As this Court reads 201(c), since the UAW was the
organization required to file a report by 301, a suit
for the records necessary to verify this report could
only have been brought against the UAW or its officers
and could not have been brought against Local 25
or its officers, even though the report concerned the
financial condition of Local 25. A suit under 201(c)
cannot be brought against the UAW in this Court
since venue would be improper.
Gabauer v. Woodcock, 425 F.Supp. 1, 4 (E.D. Mo. 1976).
The appellants insist that the existence of a trusteeship
should not change the place of venue for reports filed
on behalf of the local unit.
33
Although the venue provisions of §$301(b) and 201
(c) could be construed in the manner adopted by the
District Court, we think the better view would permit
suit for the verification of §201(b) reports signed by
trustees on behalf of a subordinate labor organization to
be brought at the location where the records necessary
to verify those reports are most likely to be. The trustee-
ship had been discontinued by the time the suit was com-
menced, so we cannot imagine that the UAW would have
kept the records at issue in its Detroit office during any
relevant period of time. Taking that fact into account,
we hold that venue was appropriate insofar as the appel-
lants sought records actually under the control of Local
25 officials, even though those records are relevant only
to reports filed by the UAW and its trustees. For the
records actually under the control of International officials,
however, venue may be found only in the district of the
principal International office.
Although the District Court understood that venue
was appropriate for some of the records sought, it dismissed
Count I in its entirety. The court explained: “[U]ntil
amended pleadings are filed for that part of Count I over
which this Court has venue, the question of the statute
of limitations cannot be resolved.” Id. To remedy this,
the court dismissed Count I, giving the appellants twenty
days within which to file an amended petition. We are
aware of no authority which suggests that a complaint
is subject to dismissal if it fails to plead in such a way
that the statute of limitations question can be resolved
on a motion to dismiss. In general, the limitations question
is an affirmative defense to be pleaded and proved by
the appellees. We note that Federal Rule of Civil Proce-
dure 12(e) provides:
34
If a pleading to which a responsive pleading is per-
mitted is so vague or ambiguous that a party cannot
reasonably be required to frame a responsive pleading,
he may move for a more definite statement before
interposing his responsive pleading. The motion shall
point out the defects complained of and ‘he details
desired.
The record in this case reflects no such motion, and we
can perceive no need for a sua sponte dismissal of the
complaint on this ground in this case.”
Since venue was proper with respect to the bulk of
the records sought, we reinstate the complaint aid remand
this case to the District Court for further proceedings.
In view of the continuing disputes as to whether just
cause has been shown for the examination of the books
and the nature and scope of the examination if such cause
has been shown, we deem it important to lay down guide-
lines for the assistance of the District Court.
First, the party seeking to examine the union records
has the burden of showing just cause.
Second, the just cause requirement must be read in
a narrow sense when invoked to resist an examination.
It is sufficient if a reasonable union member would be
put to further inquiry. Fruit and Vegetable Packers &
Ware. Local 760 v. Morley, 378 F.2d 738 (9th Cir. 1967);
Allen v. Local 92, Iron Workers. 47 L.R.R.M. 2214 (N.D.
Ala. 1960).
Third, a principal purpose of the reporting provision
is to provide union members with the vital information
necessary for them to take effective action in regulating
affairs of their organization. Individual members of
2. We express no view on the statute of limitations ques-
tion.
35
a union are fully competent to regulate union affairs if
they have minimum democratic safeguards and detailed
essential information about the union. S.Rep. No. 187,
86th Cong., Ist Sess. 8 (1959), reprinted in I NLRB, LEGIS-
LATIVE HISTORY OF THE LABOR-MANAGEMENT
REPORTING AND DISCLOSURE ACT OF 1959, at 405
(1959) [hereinafter cited as LEGISLATIVE HISTORY];
United States v. Budzanoski, 462 F.2d 443 (3rd Cir.), cert.
denied, 409 U.S. 949 (1972).
Fourth, the right to examine includes the right to
make such copies as are reasonably necessary for the con-
duct of the examination, subject to the right of the union
to protect itself against harassment and copying of pro-
tected materials, Conley v. United Steelworkers of Amer-
ica, etc., 549 F.2d 1122 (7th Cir. 1977), and the right to.
be assisted by experts in making the examination, Antal
v. District 5, United Mine Workers of America, 451 F.2d
1187 (3rd Cir. 1971).
Fifth, the records of the Missouri CAP Council and
the Greater St. Louis CAP Council are union records within
the purview of §201.
COUNT II
In Count II of their complaint, the appellants allege
that the appellees have violated §501 of the LMRDA
which provides in part as follows:
(a) * * * The officers, * * * and other rep-
resentatives of a labor organization occupy positions
of trust in relation to such organization and its mem-
bers 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
36
and its members and to manage, invest, and expend
the same in accordance with its constitution and by-
laws and any resolutions of the governing bodies
adopted thereunder, to refrain from dealing with such
organization as an adverse party or in behalf of an
adverse party in any matter connected with his duties
and from holding or acquiring any pecuniary or per-
sonal 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 excul-
patory 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.
(b) * * * When any officer, * * * or repre-
sentative 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, * * * or representative in any
district court of the United States * * * 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 ex
parte.
37
They allege that the violations consist of unlawfully and
wrongfully diverting a large part of
CAP fund money into the political campaigns of candi-
dates for public office and for various partisan political
activities totally unrelated to the interests and welfare
of the union and its members or to the functions
and purposes of the union as collective bargaining
representatives of plaintiffs and their fellow dues pay-
ing members of the union. Plaintiffs are further in-
formed and believe, and therefore aver, that defen-
dants have paid over and expended, and are now
continuing to pay over and expend, substantial
amounts of CAP fund money in the form of cash
contributions to candidates for federal office, including
candidates for President, Vice-President, Senate and
House of Representatives, and have otherwise ex-
pended said CAP funds to support the candidacy
of candidates for said offices, all in violation of the
federal statutory prohibitions against such expendi-
tures by labor organizations provided in the Federal
Corrupt Practices Act. 18 U.S.C. Section 610.
* * * [They] have regularly and over long periods
of time unlawfully and wrongfully diverted a sub-
stantial part of union membership dues money and
other union assets to various organizations and groups
espousing and promoting ideological doctrines and
causes totally unrelated to, and in many instances
antithetical to, the interests and welfare of the union
and its members * * * [including]:
National Students Associations (NSA)
Students for a Democratic Society (SDS)
Students Non-Violent Coordinating Committee
(SNCC)
38
New Mobilization for Peace
Turn Toward Peace
Citizens Committee for a Nuclear Test Ban
National Committee for a Sane Nuclear Policy
(SANE)
Americans for Democratic Action (ADA)
United World Federalists
Peace With Freedom Inc.
Dubois Memoriai Committee
Confederate Spanish Societies
United States Committee for Democracy in Greece
and numerous other such organizations.
The appellants further allege that:
[The] defendants have wrongfully refused to permit
the plaintiffs personally and through attorneys and
accountants of their choosing and designation to in-
spect the financial records of Local 25 and the various
funds controlled by the defendants into which the
fees, dues and assessments exacted from the plaintiffs
and their fellow members have been diverted by the
defendants, including the aforesaid CAP Council funds.
Defendants have rendered it impossible for the
plaintiffs to have taken any measures to prevent the
unlawful and wrongful diversions of union money and
assets as aforesaid due to the secrecy of the defendants
in committing said violations and due to the wrongful
taking over by the defendants of all of the assets,
properties, and affairs of the Chevrolet Unit of Local
25 in such manner as to prevent the plaintiffs from
being able to effectively exercise any rights under
39
the Local Union bylaws or Constitution or to be able
to have access in any meaningful way to any of the
intra-union remedies and procedures.
The appellants finally allege that they
* * * hav[e] fully exhausted all remedies and pro-
cedures available to them to the best of their abili-
ties[.]
Prior to filing this action, plaintiffs have requested
the Executive Boards of UAW International and UAW
Local 25, to file suit to secure an accounting by de-
fendants and to recover damages from them for viola-
tion of their fiduciary duties * * *, but the said
labor organizations and the governing boards and of-
ficers thereof have failed and refused to take such
action[.]
The appellants asked the District Court to:
A. Direct defendants * * * to furnish a full
and complete accounting for the period from 1962
to the present with respect to moneys received by
them in their capacity as officers or representatives
of Local 25, or the International Union, or in respect
of any other fund derived from dues and fees of mem-
bers of Local 25, including CAP funds, and to furnish
a full and complete accounting for such period respect-
ing all moneys expended by them including all
amounts expended for or in connection with partisan
political activities and support of ideological causes
or organizations or groups espousing ideological causes.
B. Direct defendants * * * [to] make avail-
able for inspection by plaintiffs and such accountants
and attorneys as they may employ all books, accounts,
and records pertaining to the financial affairs of Local
40
~ 25 UAW Region 5 CAP funds, Greater St. Louis CAP
funds, and any other funds derived from dues and
fees of the members of local 25.
C. Issue an order restraining and enjoining said
defendants in their capacities as officers or represen-
tatives of Local 25 or the International Union from
making any expenditures, either directly or indirectly,
for partisan political activities or for support of ideo-
logical causes or organizations or groups espousing
ideological causes, from the dues and fees paid in
by plaintiffs and other employees of the General Mo-
tors Corporation Chevrolet Assembly Plant under and
through the compulsory membership requirements of
the labor agreements as herein alleged.
D. Require the defendants individually to repay
to Local 25 all sums of money wrongfully diverted
by them into partisan political campaign activities and
ideological causes and organizations in violation of
the rights of such members and the plaintiffs as afore-
said.
E. Issue an order requiring UAW, UAW Local
25 and the officers thereof to pay reasonable attorney's
fees and other costs and expenses of this action, in-
cluding a reasonable fee of any accountants or other
persons whose services may be necessary to obtain
full and complete disclosure of the financial records
and data of UAW Local 25, and other funds adminis-
tered by defendants as herein alleged.
The District Court dismissed this count for failure
to state a cause of action. We feel that it acted properly.
41
A.
We do not view §501 as an independent discovery
tool to investigate official use of union funds. Section
201 provides that tool. If §501 were read as broadly
as appellants would have it, $201 would become super-
fluous. Section 501 is but one provision in an entire act.
It is not intended to encompass all of the duties and
rights of the entire act. Section 201 is the provision in-
tended by Congress to compel the union hierarchy to reveal
to the membership the nature and detail of official union
activities. As construed by this Court, that section will
provide the membership with the information they need.
Section 501, by contrast, describes not a general duty to
report but the nature of the obligation an individual as-
sumes with his union office. Thus, insofar as the appel-
lants invoke §501 as a discovery tool to investigate official
uses of their funds, their efforts are misplaced. Section
201 provides their remedy if one exists.
B.
We believe that the trial court properly followed Mc-
Namara v. Johnston, 522 F.2d 1157 (7th Cir. 1975), cert.
denied, 425 U.S. 911 (1976), and correctly held that the
appellees did not breach their fiduciary duty by making
the questioned expenditures.* In our view, the expendi-
3. The decision appealed from must be treated as an order
of summary judgment. Rule 12(b) states in pertinent part:
If, on a motion asserting the defense numbered (6) to dismiss
for failure of the pleading to state a claim upon which relief
can be granted, matters outside the pleading are presented
to and not excluded by the court, the motion shall be treated
as one for summary judgment and disposed of as provided
in Rule 56 * * *.
The lower court treated the matter as a motion for summary
judgment. This was clearly appropriate inasmuch as both parties
submitted extensive affidavits and exhibits relating to the stated
claim.
42
tures were clearly authorized by the union’s cénstitution
and resolutions of the union’s national convention.‘
The 1968 UAW convention gave the International Ex-
ecutive Board (IEB) interim authority to establish a na-
tional and local CAP structure to replace the soon-to-
be-terminated relationship with the AFL-CIO programs.
The IEB thereafter established a CAP structure which
has since been ratified by UAW cofiventions.
4. Though the appellants do not presently pursue their
private claims, those remedies remain unaffected by the outcome
of this derivative litigation. The UAW has adopted a rebate
procedure under which the appellants are entitled to a rebate
of a proportion of their dues corresponding to the amount of
union funds which are allocated to political activities. The UAW
Constitution, Article 16, Section 7, provides:
(a) Any member shall have the right to object to the
expenditure of a portion of his dues money for activities or
causes primarily political in nature. The approximate pro-
portion of dues spent for such political purposes shall be
determined by a committee of the International Executive
Board, which shall be appointed by the President, subject
to the approval of said Board. The member may perfect his
objection by individually notifying the International Secre-
tary-Treasurer of his objection by registered or certified
mail; provided, however, that such objection shall be timely
only during the first fourteen (14) days of Union member-
ship and during the fourteen (14) days following each an-
niversary of Union membership. An objection may be con-
tinued from year-to-year by individual notifications given
during each annual fourteen (14) day period.
(b) If an objecting member is dissatisfied with the
approximate proportional allocation made by the committee of
the International Executive Board, or the disposition of his
objection by the International Secretary-Treasurer, he may
appeal directly to the full International Executive Board
and the decision of the International Executive Board shall
be appealable to the Public Review Board or the Convention
Appeals Committee at the option of said member.
The appellees contend that the UAW’s rebate procedure,
together with the failure of the appellants to avail themselves
of that remedy, bars this suit, relying on Abood v. Detroit Board
of Education, 431 U.S. 209 (1977); Brotherhood of Railway and
S.S. Clerks v. Allen, 373 U.S. 113 (1963); International Ass’n of
Machinists v. Street, 367 U.S. 740 (1961); Railway Employes
Dept. v. Hanson, 351 U.S. 225 (1956). The appellants object that
(Continued on following page)
43
The 1972 UAW Constitution catalogues some of the
objectives of the UAW in Article 2:
Section 4. * * * to vote and work for the election
of candidates and the passage of improved legislation
in the interest of all labor. * * *
Section 5. To engage in legislative, political, educa-
tional, civic, welfare and other activities which fur-
ther, directly or indirectly, the joint interests of the
membership of this organization in the improvement
of general economic and social conditions * * *.
Article 23, Section 1, describes the objective and purpose
of the UAW Community Action Program:
[I]t shall engage in community, civic, welfare, edu-
cational, environmental, cultural, citizenship-legisla-
tive, consumer protection, community services and
other activities to improve the economic and social
conditions of UAW members and their families and
to promote the general welfare and democratic way
of life for all people.
Footnote continued—
the procedure is deficient in various respects. These arguments
are inapposite. In each of the cases cited in this note, individuals
sought to recover for themselves union dues or agency fees that
the union had devoted to political and ideological purposes. While
a rebate procedure may have some effect on such private claims,
compare Reid v. McDonnell Douglas Corporation, 443 F.2d 408
(10th Cir. 1971), after remand, 479 F.2d 517 (1973), with Seay
v. McDonnell Douglas Corporation, 427 F.2d 996 (9th Cir. 1970),
after remand, 533 F.2d 1126 (1976), it cannot bar derivative
claims of the sort pressed here.
Since the appellants in this case have eschewed their per-
sonal rights in favor of a derivative cause of action on behalf of
the union for the recovery of damages from union officers, the
issues in this case are very different than those of the cases cited
above. We need not consider, as did those courts, the fiduciary
duty of a union to its dissenting members. The issue in this case
is the very different duty of union officers to the union organiza-
tion. The adoption of a rebate procedure by the organization
has little relevance to the question whether an officer has ful-
filled the trust of his office.
44
Article 7, Section 2, authorizes the expenditure of union
funds to accomplish the objectives of the UAW and con-
fers on the International Executive Board substantial su-
pervisory discretion. To similar effect is Article 23, Sec-
tion 8. In addition, convention resolutions affirmatively
encouraged support for diverse causes, many of which
have no more proximate relation to collective bargaining
than do the groups disliked by the appellants. The mem-
bership did not try, by either the constitution or the resolu-
tions, to circumscribe the discretion of union officials. The
appellants argue that the pertinent provisions require that
expenditures be for “the benefit of the members” but
the language quoted above invokes much broader concerns.
The union membership chose not to specifically restrict
the discretion of union officers. Given the broad authori-
zations endorsed by the union membership and the absence
of specific restrictions, this Court has neither the power
nor standards by which to review expenditures challenged
by a minority of the union merely because of their politi-
cally controversial character.
The appellants contend that the constitutional provi-
sions and resolutions are void under §501 as general ex-
culpatory clauses. McNamara v. Johnston, supra, disposed
of an identical claim as follows:
Section 501 was intended to follow “the well-estab-
lished distinction between conferring authority upon
an agent or trustee, which is permissible and protects
him against liability, and attempting to excuse
breaches of trust, which is here made void as against
public policy.” H.R. Rep. No. 741, 86th Cong., 1st
Sess. 81-82, U.S. Code Congressional and Administra-
tive News, 2480 (1959). Without doubt, the provi-
sions and resolutions upon which the UAW relies fall
within the former category of measures that confer
authority.
Id. at 1164.
45
We agree with that disposition.
We find little merit in the appellees’ view that any
expenditure unrelated to legitimate collective bargaining
activities violates §501. The plain language of the section
belies their argument. Section 501 specifically provides
that union representatives have the duty to expend union
funds in accordance with the union’s constitution, bylaws
and resolutions of the governing bodies adopted there-
under. See Bright v. Taylor, 554 F.2d 854 (8th Cir. 1977);
Pignottt v. Local +3 Sheet Metal Workers’ Int. Ass’n,
477 F.2d 825 (8th Cir.), cert. denied, 414 U.S. 1067 (1973);
Johnson v. Nelson, 325 F.2d 646 (8th Cir. 1963); Highway
Truck Drivers & Helpers, etc. v. Cohen, 284 F.2d 162
(3rd Cir. 1960), cert. denied, 365 U.S. 833 (1961); Clark,
The Fiduciary Duties of Union Officials Under Section
501 of the LMRDA, 52 Minn. L. Rev. 437 (1967); Katz,
Fiduciary Obligations of Union Officers Under Section 501
of the Labor-Management Reporting and Disclosure Act
of 1959, Lab. L. J. 542 (June, 1963); Note, The Fiduciary
Duty of Union Officers Under the LMRDA: A Guide
to the Interpretation of Section 501, 37 N. Y. U. L. Rev.
486 (1962); Cox, Internal Affairs of Labor Unions Under
the Labor Reform Act of 1959, 58 Mich. L. Rev. 819 (1960);
Smith, The Labor-Management Reporting and Disclosure
Act of 1959, 46 Va. L. Rev. 195 (1960).
There will, of course, be exceptions to this rule, e.g.,
where the expenditures are violative of a specific provision
or express policy in the Act, such as §202(a) conflicts
of interest; §401(g), using union funds to promote the
candidacy of persons; and §503(a), making a loan to an
officer in excess of $2,000. But the exceptions are not
applicable here. Without express authorization of Con-
gress, we cannot take unto ourselves the role of deciding
which causes a union can or cannot support.
46
The legislative history of §501 also supports the view
we have adopted. See McNamara v. Johnston, supra. The
section originated in the House Education and Labor Com-
mittee. The report of the Committee emphasized that
the government must make certain that the power of labor
unions was used “for the benefit of employees whom the
unions represent * * * and not for the personal profit
and advantage of the officers and representatives of the
union.” H.R. Rep. No. 741, on H.R. 8342, 86th Cong.,
Ist Sess. 11 (1959), reprinted in I LEGISLATIVE HIS-
TORY at 769. Nothing in the report indicates any intent
on the part of the House Committee to tell unions that
they could not spend their money on unpopular causes
or organizations if such expenditures were authorized by
the membership. To the contrary, the report states that:
{O]ur language does not purport to regulate the
expenditures or investments of a labor organization.
Such decisions should be made by the members in
accordance with the constitution and bylaws of their
union. Union officers will not be guilty of breach
of trust when their expenditures are within the au-
thority conferred upon them either by the constitution
and bylaws or by a resolution of the executive board,
convention or other appropriate governing body (in-
cluding a general meeting of the members) not in
conflict with the constitution and bylaws.
Id at 81, reprinted in I LEGISLATIVE HISTORY at 839.°
5. Professor Archibald Cox served as a consultant to the
Senate Labor Committee in drafting the LMRDA. In writing
about the problem that concerns us here, he stated:
If there were any ambiguity it would be dispelled by the
statement of five members of the House Labor Committee in
reporting the committee bill for they were the five who spon-
sored the bill and they included Congressman O’Hara, who
proposed Section 501 in the Labor Committee.
(Continued on following page)
47
Senator McClellan was instrurnental in having the section
inserted in the Senate bill. The report of the Senate
Labor Committee states that the Committee followed three
principles in acting on the bill:
1. The committee recognized the desirability of
minimum interference by Government in the internal
affairs of any private organization. Trade unions have
made a commendable effort to correct internal abuses;
hence the committee believes that only essential stan-
dards should be imposed by legislation. Moreover,
in establishing and enforcing statutory standards great
care should be taken not to undermine union self-
government or weaken unions in their role as collec-
tive-bargaining agents.
2. Given the maintenance of minimum demo-
cratic safeguards and detailed essential information
about the union, the individual members are fully
competent to regulate union affairs. The committee
strongly opposes any attempt to prescribe detailed
procedures and standards for the conduct of union
business. Such paternalistic regulation would weaken
rather than strengthen the labor movement; it would
cross over into the area of trade union licensing and
destroy union independence.
3. Remedies for the abuses should be direct.
Where the law prescribes standards, sanctions for their
violation should also be direct. The committee rejects
the notion of applying destructive sanctions to a union,
i.e., to a group of working men and women, for an
Footnote continued—
Cox, Internal Affairs of Labor Unions Under the Labor Reform
Act of 1959, 58 Mich. L. Rev. 819, 829 (1960); See also Wollett,
Fiduciary Problems Under Landrum-Griffin, 13 Annual Confer-
ence on Labor 267, 278-279; Smith, The Labor-Management Re-
porting and Disclosure Act of 1959, 46 Va. L. Rev. 195, 228 (1960).
48
offense for which the officers are responsible and over
which the members have, at best, only indirect control.
Still more important the legislation should provide
an administrative or judicial remedy appropriate for
each specific problem. ,
S. Rep. No. 187, 86th Cong., Ist Sess. 7 (1959), reprinted
in I LEGISLATIVE HISTORY at 403. _
The Senate debates specifically dealt with §501. In
the course of the debates, the following colloquy occurred:
Mr. KENNEDY. Mr. President, I should like to
ask the Senator from Arkansas a few questions.
Suppouse an officer of a union expends money
for an educational purpose, to advance what he and
the other officers consider to be the interests of the
union. Assume that there is nothing dishonest about
the expenditure. It is not an expenditure for the
purpose of taking money in a back-door deal. It is
an honest expenditure for educational purposes, with-
out any impropriety. Under the amendment of the
Senator from Arkansas, would it be possible for a
member to sue, on the argument that the educational
purpose, which he does not like, is not really in keep-
ing with the purposes of a labor organization? Could
he take the case into court?
Mr. McCLELLAN. He might make such an alle-
gation, and he might go to court. Each case must
stand on its own merits. If the court found that
the money was used for legitimate union purposes,
for purposes which were proper under the constitution,
and that it had been voted to authorize the use of
money for educational purposes, I think it would come
within the purview of the authority and right of the
union officer. But, as my friend knows, the purpose
49
of this amendment is to get at those who organize
an executive board of their own, whose members are
all in cahoots. One says to the other, “I will keep
you employed at a good salary and give you a good
expense allowance. You just do what I want.” ,
That sort of thing is being done. Union treasuries
are being pilfered in that way. I believe that this
is a good amendment.
** *¢ &
Mr. KENNEDY. * * *
Mr. President, what I am attempting to do is
ascertain the purpose of the amendment. Is it the
purpose of the amendment to insist that union officers
who expend money shall not have a conflict of in-
terest, and that they shall not attempt, through indi-
rect means, to pilfer a union treasury for their own
benefit? If so, in my opinion it would be a proper
amendment.
Mr. McCLELLAN. That is exactly what I am
trying to do. I have not had the opportunity to study
the question as thoroughly as the Senator has done
during the course of the hearings. However, I know
that there have been flagrant and repeated abuses
in this area.
** & €
Mr. ERVIN. * * * We are under an obligation
to see that the money is safely kept, to the end that
it may be applied to duly authorized and legitimate
union purposes.
Mr. KENNEDY. As I understand, the Senator
from Arkansas holds that view also.
50
Mr. McCLELLAN. That is correct. If the Sen-
ator has any thought that I am trying to interfere
with COPE, that is not correct. There may be amend-
ments directed to that point, and to deal with that
direct question. However, I am not offering my
amendment on the direct question of political contribu-
tions. Everyone knows my views on that subject,
I assume. This is not a drive at that situation. It
is a drive at the skulduggery of some leaders when
they meet in executive session and pay off this one
and pay off that one.
105 Cong. Rec. 5856-5857 (1959), reprinted in II LEGIS-
LATIVE HISTORY at 1130-1131.
In discussing the Conference Report, S. Doc. No. 51,
86th Cong., 1st Sess. ( 1959), the Senate observed that:
The general principles stated in the bill are fa-
miliar to the courts, both State and Federal, and there-
fore incorporate a large body of existing law applicable
to trustees, and a wide variety of agents. The detailed
application of these fiduciary principles to a particular
trustee, officer, or agent has always depended upon
the character of the activity in which he was engaged.
They bear upon a family trustee somewhat differently
than a corporate director, upon an attorney quite dif-
ferently than a rea] estate agent. The bill wisely
takes note of the need to consider “the special prob-
lems and functions of a labor organization” in apply-
ing fiduciary principles to their officers and agents.
The bill does not limit in any way the purposes
for which the funds of a labor organization may be
expended or the investments which can be made. Such
decisions should be made by the members in accor-
dance with the constitution and bylaws of their union.
51
Union officers will not be guilty of breach of trust
under this section when their expenditures are within
the authority conferred upon them either by the con-
stitution and bylaws, or by a resolution of the execu-
tive board, convention or other appropriate governing
body—including a general meeting of the members—
not in conflict with the constitution and bylaws. This
is also made clear by the fact that section 501(a)
requires that the special problems and functions of
a labor organization be taken into consideration in
determining whether union officers and other repre-
sentatives are acting responsibly in connection with
their statutory duties. The problems with which labor
organizations are accustomed to deal are not limited
to bread-and-butter unionism or to organization and
collective bargaining alone, but encompass a broad
spectrum of social objectives as the union may deter-
mine.
105 Cong. Rec. 16415 (1959), reprinted in II LEGISLATIVE
HISTORY at 1433.
C.
The appellants’ allegations pertaining to 18 U.S.C.
§610 complicate the analysis but they do not change the
result of the case. We first consider the appellants’ re-
quest for future injunctive relief. At the outset, we note
that the Federal Election Campaign Act Amendments of
1976, Pub. L. 94-283, May 11, 1976, repealed §610 and
reenacted its substance at 2 U.S.C. §44lb. Thus, when
we speak of future injunctive relief, we must refer to
§441b. In Cort v. Ash, 422 U.S. 66 (1975), the Supreme
Court held that the Federal Election Campaign Act Amend-
ments of 1974 relegated a shareholder’s §610 claim for
injunctive relief against corporate officers to the initial
52
review of the Federal Election Commission (FEC). The
Court dismissed the shareholder’s claim even though the
complaint had been filed before the creation of the FEC.
In McNamara v. Johnston, supra, the Seventh Circuit con-
cluded that a union member’s $501 claim for future injunc-
tive relief was subject to the primary jurisdiction of the
FEC as well insofar as it was premised on violations of
§610. The same result obtains in this case under the
1976 amendments. Congress has explicitly expressed its
desire to have the FEC engage in methods of conference,
conciliation and persuasion before litigation ensues over
any federal election laws. 2 U.S.C. §437g; S. Rep. No.
94-677, 94th Cong., 2d Sess. 1-2 (1976), reprinted in [1976]
U. S. Code Cong. & Ad. News 929-930; H. Conf. Rep.
No. 94-1057, 94th Cong., 2d Sess. 45-50 (1976), reprinted
in [1976] U. S. Code Cong. & Ad. News 960-965. We
should not permit circumvention of such negotiation under
the guise of a parallel cause of action. Thus, the claim
for future injunctive relief must be dismissed for lack
of jurisdiction.
The appellants also press a derivative claim for dam-
ages for the expenditures already made that allegedly vio-
lated §610. Four of the appellees, the appellants claim,
devoted Community Action Program (CAP) funds to
federal political campaigns. This fact alone does not estab-
lish a violation of §610. A 1972 amendment to §610
explicitly permitted the expenditure of funds for “the es-
tablishment, administration and solicitation of contribu-
tions to a separate segregated fund to be utilized for politi-
cal purposes by a * * * labor organization.” This
amendment was intended to codify preexisting law. See
Pipefitters Local Union No, 562 v. United States, 407 U.S.
385, 408-412 (1972). Though the record on UAW contribu-
tions to federal campaigns is somewhat sketchy, it appears
53
that these donations did come from a “separate segregated
fund” or at least from a fund intended to qualify as such
under §610. The UAW’s CAP structure is predominantly
financed with regular dues, but it also includes a separate
V CAP fund supported by voluntary contributions desig-
nated for political causes.* The appellants have introduced
no evidence to indicate that any federal political contribu-
tions were made with general CAP funds, as opposed to
V CAP funds. Since V CAP is separately funded, it is
reasonable to infer that the UAW collectively thought
those monies could legally be used for federal campaigns.
The appellees, as agents, were entitled to rely on the
union’s grant of authority in making political contributions
from the V CAP funds. As stated in McNamara:
[Under the common law of fiduciary obligations, cod-
ified in §501,] it is * * * clear, and fundamental
fairness requires, that as between agent and principal,
an agent cannot be held liable for the use of the
principal’s property in an unlawful manner when it
is reasonable to infer that the principal authorized
the agent’s conduct.
522 F.2d at 1165 (Footnote omitted).
Of course, as pointed out by the McNamara opinion, appar-
ent authority does not immunize union officials from the
6. The 1972 UAW Constitution, Article 12, Section 20, for
example, provides:
The International Executive Board shall create and operate
a Political Action Committee to be known as UAW Volun-
tary Community Action Program Committee (UAW V.
CAP). This Commiitee shall be authorized to make policy
decisions concerning expenditures and contributions involv-
ing federal elections and to make expenditures and contri-
butions from a fund established by voluntary contributions
from UAW members, their families and friends * * *.
_As noted below, we do not hold that the V CAP Councils are
“segregated fund[s]” within the meaning of 22 U.S.C. §44l1b.
We merely hold that it is reasonable to infer that the CAP
structure if intended to comply with that statute.
54
criminal sanctions of §610, or the enforcement provisions
flowing from §441b, upon a showing that V CAP is in
some respects deficient.
There is no evidence in the record to indicate anything
but that the appellees relied on their apparent authority.
There is no evidence that would justify an inference that
the appellees did not comply with the requirements of
their constitution. Nor is there any evidence to the effect
that any of the appellees knew or suspected that their
constitution made any but adequate provision for the re-
quirements of §610. On this record, we think summary
judgment for the appellees was justified.’
We do not hold that the UAW’s CAP structure satisfied
the “segregated fund” requirements of §610 in the years
relevant to the damage claims, or that it presently satisfies
2 U.S.C. §441b. That issue is not before us. Insofar
as the appellants intend to challenge the validity of the
CAP structure, as opposed to a claim that particular officers
violated their duty to the union, they press claims against
the union, which are not cognizable under a §501 deriva-
tive action.
We affirm in part and reverse in part the dismissal
of the §201 claim. We affirm the dismissal of the §501
claim. We remand the case for for further proceedings
consistent with this opinion.
ROSS, Circuit Judge, Dissenting.
7. We do not hold that violations of 18 U.S.C. §610, and
of its successor statute 2 U.S.C. §441b, can never amount to a
violation of §501. Insofar as it is not reasonable to infer that a
given donation was authorized, we think there is a remedy under
§501 for violations of federal election laws. Cf. Miller v. American
Telephone & Telegraph Co., 507 F.2d 759 (3rd Cir. 1974). We
merely hold that apparent authority, if relied on in good faith,
is a defense to liability under §501. See McNamara v. Johnston,
522 F.2d 1157, 1163 (7th Cir. 1975), cert. denied, 425 U.S. 911
(1976).
55
COUNT II
I would reverse the dismissal of appellants’ section
501 claim, because I do not agree that as a matter of
law the challenged expenditures were “clearly authorized”
by the UAW constitution.
By dismissing the section 501 claim at this stage of
the proceedings,’ the majority in effect confers unlimited
discretion upon UAW International officers in their ex-
penditure of the huge amounts of money collected annually
from the union membership.? In my opinion, the UAW
1. Although treated as a summary judgment because mat-
ters outside the pleadings were considered, Count II was dismissed
for failure to state a claim. See FED. R. CIV. P. 12(b). We
therefore review the dismissal in light of the following stan-
dards:
[A] complaint should not be dismissed for failure to state
a claim unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would
entitle him to relief. * * *
[A] complaint should not be dismissed merely because a
plaintiff’s allegations do not support the particular legal
theory he advances, for the court is under a duty to examine
the complaint to determine if the allegations provide for
relief on any possible theory. Nor should a complaint be
dismissed that does not state with precision all elements
that give rise to a legal basis for recovery. Finally, a com-
plaint should not be dismissed merely because the court
doubts that a plaintiff will prevail in the action. That de-
termination is properly made on the basis of proof and not
merely on the pleadings.
The question, therefore, is whether in the light most
favorable to the plaintiff, the complaint states any valid
claim for relief. Thus, as a practical matter, a dismissal
under Rule 12(b)(6) is likely to be granted only in the un-
usual case in which a plaintiff includes allegations that show
on the face of the complaint that there is some insuperable
bar to relief.
Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th
Cir.) (citations omitted), petition for cert. filed, 47 U.S.L.W.
3278 (U.S. Oct. 24, 1978) (No. 75-585).
2. The record reflects that the combined dues income of the
International and Local unions for the years 1969, 1970 and 1971
averaged $148,409,826.00 per year.
56
constitution does not grant completely unfettered discretion
to the officers in their expenditures of union funds.®
The UAW’s objectives as set forth in Article 2 of
its constitution include improving working conditions, seek-
ing election of candidates and passage of legislation “in
the interests of all labor,” working for repeal of laws
“unjust to labor,” obtaining unemployment insurance, en-
gaging in political and other activities “which further,
directly or indirectly, the joint interests of the membership
* * * in the improvement pf general economic and
social conditions,” and assisting organizations “having pur-
poses and objectives similar or related” to those of the
UAW. (Emphasis supplied.)
Article 7(2) authorizes expenditure of UAW funds
to achieve these purposes and objectives “not inconsistent
therewith” and purposes the Executive Board believes
“will further the general interest and welfare of the mem-
bership.” (Emphasis supplied.)
Article 23(1) indicates that the function of the UAW
Community Action Program is “to improve the economic
and social conditions of UAW members and their families
and to promote the general welfare and democratic way
of life for all people.” (Emphasis supplied.)
I do not consider the above-quoted language meaning-
less or superfluous. The union constitution clearly con-
templates a relationship of some kind between the use
of union funds and the interests and welfare of the union
membership. Had the contested contributions been made
3. Any resolution passed by the governing officers which
conflicted with the provisions of the UAW constitution or ex-
ceeded the powers conferred therein would be invalid and could
not be relied upon as authority for expenditures of union funds.
Highway Truck Drivers and Helpers, Local 107 v. Cohen, 284
F.2d 162, 164 (3d Cir. 1960), affirming, 182 F.Supp. 608, 616-22
(E.D. Pa. 1960).
57
to foreign governments, terrorist organizations or groups
seeking destruction of the “democratic way of life,” none
of the avowed objectives of the UAW would have been
served and the donations clearly would not have been
authorized.
Appellants assert in Count II that appellees have con-
tributed union assets “to various organizations and groups
espousing and promoting ideological doctrines and causes
totally unrelated to, and in many instances antithetical
to, the interests and welfare of the union and its members.”
The complaint lists thirteen organizations as recipients of
these union funds as heretofore set forth in the majority
opinion.
Because appellants were denied discovery and an op-
portunity to prove their claim, the record does not reflect
the goals and methods espoused by the recipients of the
challenged UAW contributions. If the ends and means
adopted by these organizations were, as alleged, antithetical
to the interests and welfare of the UAW membership
and inconsistent with the objectives of the UAW, I believe
appellants have a cause of action under section 501 for
misuse of union funds by UAW officers.
Both the majority and the panel of the Seventh Circuit
in McNamara v. Johnston, 522 F.2d 1157 (7th Cir. 1975),
cert. denied, 425 U.S. 911 (1976), pay lip service to the
requirement that union funds be spent as authorized by
the constitution, bylaws or appropriate convention resolu-
tion. But they ignore the allegation of appellants that the
questioned expenditures were in violation of the union’s
‘constitution since they were alleged to be not “in the
interests of all labor” or “which further, directly or in-
directly, the joint interests of the membership * * *”
or in “the general interest and welfare of the membership.”
It is upon this aspect of the case that I have attempted
58
to focus my dissent and the aspect thereof which the
majority has all but ignored.
Judge Stephenson and Judge Henley join in this dis-
senting opinion.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS,
EIGHTH CIRCUIT.
59
APPENDIX B
ORDER
(Filed in U.S. District Court December 29, 1976)
This motion is before the Court on a separate motion
of plaintiffs to disqualify the following counsel from repre-
senting the individual defendants in this action:
(a) Stephen I. Schlossberg, who is General Coun-
sel of International Union, United Automobile, Aero-
space and Agricultural Implement Workers of Amer-
ica, and any others who have represented said UAW
International Union, of which plaintiffs are members;
(b) Youngdahl, Brewer, Forster, Huckabay and
Uhlig, and ‘James E. Youngdahl, which firm and attor-
ney are Regional Counsel for the International Union,
United Automobile, Aerospace and Agricultural Imple-
ment Workers of America;
(c) Morris J. Levin, who has been retained as
local counsel by the above-named General Counsel
Schlossberg herein, and who has thus been retained
to represent the said labor organization, or Local 25
thereof; and
(d) Any other attorney (or firm of attorneys
with a member thereof) who now represents, or who
has previously represented, the said International
UAW labor organization, or Local 25, or any subdivi-
sion or alter ego thereof.
The grounds relied on by plaintiffs in their motion
to disqualify counsel are applicable only to the Section
501 action of Count II. Count I is not mentioned in plain-
tiffs’ motion or the brief in support of the motion. If
60
Count I were the sole basis for this suit, plaintiffs’ motion
would require little discussion. It has been held that
a Section 201 suit may be brought against officials of
a union without joining the union as a party. Rekant
v. Rabinowitz, 194 F. Supp. 194 (E.D. Pa. 1961). This
holding is also applicable to §301 suits since §201(c)
is made applicable by §301(b) to reports filed under
§30i(a). However, it is clear on the face of §201(c)
that, in an action brought under §201 or §301, this Court
only has jurisdiction over officials in their capacity as
officers and not over the officials as individuals. This
being the case, it is permissible for a union to supply
counsel for defendant officers in a suit brought pursuant
to §201(c).
With respect to Count II, a Section 501 action, in
McNamara v. Johnston, likewise a Section 501 action, 522
F. 2d 1157-67 (Cert. denied 425 U. S. 911), the Court
had this to say:
“Union officials charged as defendants in suits
of this nature should retain independent counsel and
bear the financial burden of their defense. Then, if
they prevail, they may properly be reimbursed by
the union for the costs of their legal defense. (See
Holdeman v. Sheldon, 311 F. 2d 2, 3 (2nd Cir. 1962),
aff’g 204 F. Supp. 890, 895 (S.D. N.Y.)”
Accordingly, this motion would be sustained except
for the prior ruling of this Court dismissing Count II
for failure to state a cause of action. In view of such
prior ruling the motion is stricken, having been made
moot by such ruling.
/s/ Roy W. Harper
U.S. District Judge
61
ORDER
(Filed in U.S. District Court December 29, 1976)
This matter is before the Court on a separate motion
of the International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America (UAW)
and its Local 25, to intervene.
Rule 24(c), Federal Rules of Civil Procedure, requires
that a motion to intervene “shall be accompanied by a
pleading setting forth the claim or defense for which inter-
vention is sought.”
The proposed intervenors’ memorandum in support
of the motion to intervene states: “As required by Rule
24(c), we submit herewith a copy of UAW’s motion to
dismiss as the ‘pleading setting forth the * * * defense
for which intervention is sought.’ ”
A motion to dismiss is not a pleading. Therefore,
Rule 24(c) has not been complied with and the motion
to intervene is denied.
/s/ Roy W. Harper
U.S. District Judge
MEMORANDUM AND ORDER
(Filed in U.S. District Court December 29, 1976)
This action was brought by plaintiffs, citizens of Mis-
souri, and members of the UAW and Local 25, against
defendants, who are officers, agents and representatives
of UAW. The complaint states that defendant Woodcock
is President of UAW; defendant Mazey is Secretary-Trea-
surer of UAW; defendant Worley is Director of UAW
Region 5, Chairman of UAW Region 5 Community Action
62
Program Council, and Administrator of the Chevrolet unit
of UAW Local 25; defendant Mattix is Assistant Director
of UAW Region 5, and Assistant Administrator of the
Chevrolet unit of Local 25; defendant Lavin is President
of UAW Local 25; defendani Webster is Recording Secre-
tary of UAW Local 25; defendant Hartzell is Financial
Secretary of UAW Local 25; and defendant Young is Finan-
cial Secretary of UAW Region 5 CAP Council, and Finan-
cial Secretary-Treasurer of the Greater St. Louis UAW
CAP Council.
The complaint contains two counts. In Count I juris-
diction is alleged under Section 201(c) and Section 301(a)
aad (b) of the Labor Management Reporting and Disclo-
sure Act (LMRDA), 29 USC 431(c) and 461(a) and (b).
Plaintiffs allege, in part, in Count I that on or about
June 12, 1970, defendants Woodcock and Mazey, acting
through the International Executive Board of UAW, im-
posed an administratorship over the Chevrolet unit of Local
25, thereby displacing the authority of the duly elected
officers of said local. Defendants Worley and Mattix were
designated as Administrator and Assistant Administrator,
respectively, and proceeded to assume control and exercise
authority over the affairs of the aforesaid Chevrolet unit,
together with all of the money and assets of said unit.
Plaintiffs further allege in Count I that defendants Wood-
cock, Mazey, Worley and Mattiz were obligated to file
a report pursuant to the provisions of Section 301(a), ~
and the other defendants were obligated to file a report
pursuant to the provisions of Section 201 (c).
Plaintiffs in Count I seek under 201(c) and 301(a)
and (b) to examine books, records and accounts for the
years 1967, 1968, 1969 and 1970, necessary to verify the
two types of reports. They wish to verify the reports
filed by Local 25 pursuant to 201(b) and to verify the
63
reports filed by the UAW pursuant to Section 301(a).
In Count I plaintiffs pray the Court to enter an order
requiring defendants to make available to plaintiffs, and
such attorneys and accountants as may be designated by
plaintiffs, all of the records and documents as set out
in a letter attached to the complaint for the years 1967,
1968, 1969 and 1970.
Count II is an action brought by the plaintiffs pursuant
to the Labor Mar.agement Reporting and Disclosure Act
(popularly referred to as the Landrum-Griffin Act, Section.
501, 29 USC) against union officers for breach of fiduciary
duty in accordance with general resolutions and the Union
constitution authorizing contribution of Union funds to
political candidates in social causes.
Plaintiffs pray in Count II, among other things, that
the Court issue an order enjoining defendants in their
capacities as officers or representatives of Local 25 or
the International Union, from making any expenditures
for partisan political activities or for support of ideological
causes or organizations or groups espousing ideological
causes from the duties and fees paid in by plaintiffs and
other employees of the General Motors Chevrolet Assembly
Plant under and through the compulsory members require-
ments.
This matter is before the Court on defendants’ mo-
tion to dismiss.
The basis for dismissal under Count I is:
A): Venue is improper;
B): Failure to state a claim upon which relief
can be granted because plaintiffs failed to meet the
just cause and specificity requirements of §201(c)
of the Labor Management Reporting and Disclosure
64
Act, 29 USC 431(c), under which jurisdiction is al-
leged; and
C): This action is, in part, barred by the statute
of limitations.
The basis for dismissal under Count II is:
A): Failure to state a claim upon which relief
can be granted under §501 of the Labor Management
Reporting and Disclosure Act, 29 USC 501, under
which jurisdiction is alleged; and
B): This action is, in part, barred by the statute
of limitations.
Plaintiffs bring suit not against the UAW or Local
25, but instead against certain officers of these unions,
which is permissible. Section 201(c) contains a clause
pertaining to venue which provides that “[E]very such
labor organization and its officers shall be under a duty
enforceable at the suit of any member of such organiza-
tion in any state court of competent jurisdiction or in
the district court of the United States for the district
in which such labor organization maintains its principal
office to permit such member for just cause to examine
any books, records and accounts necessary to verify such
report.”
Defendants concede that venue is proper as to plain-
tiffs’ demands to examine the records necessary to verify
the reports filed by Local 25 pursuant to 201(b). Defen-
dants contend, however, that venue is improper as to plain-
tiffs’ demands to the records necessary to verify the report
filed pursuant to 301(a) by the UAW, whose principal
office is not located in this district. As this Court reads
201(c), since the UAW was the organization required to
file a report by 301, a suit for the records necessary to
65
verify this report could only have been brought against
the UAW or its officers and could not have been brought
against Local 25 or its officers, even though the report
concerned the financial condition of Local-25. A suit under
201(c) cannot be brought against the UAW in this Court
since venue woula be improper. Regardless of the wisdom
of the venue provisions of 201(c), plaintiffs* cannot avoid
these provisions by bringing suit against the officers of
the UAW instead of the UAW itself.
Therefore, that portion of Count I which relates to
the report filed by the UAW pursuant to 301(a) should
be dismissed for improper venue or transferred to the
proper district, whereas that part of Count I which seeks
records before the administratorship was imposed on Local
25 would be proper before this Court as against the officers
of Local 25, as it has been held that a section 201 suit
may be brought against officers of a union without nam-
ing the union as a party. Rekant v. Rabinowitz, 194 F.
Supp. 194 (E.D. Pa. 1961). This holding is also applicable
to section 301 suits since 201(c) is made applicable by
301(b) to reports filed under 301(a). However, it is clear
on the face of 201(c) that, in an action brought under
201 or 301, this Court only has jurisdiction over officials
in their capacity as officers and not over the officials
as individuals.
Furthermore, until amended pleadings are filed for
that part of Count I over which this Court has venue,
the question of the statute of limitations cannot be resolved.
With respect to the contention of defendants that Count
I should be dismissed for failure to state a claim upon
which relief can be granted, there is no merit. Springfield
*Original memorandum had word “defendant” here, but this
was changed to “plaintiff” by direction of Judge Harper's letter
to counsel dated February 9, 1977.
66
Television, Inc. v. City of Springfield, Mo., 428 F. 2d 1375
(8th Cir. 1970), Lewis v. Chrysler Motors Corp., 456 F.
2d 605 (8th Cir. 1972).
Accordingly, the defendants’ motion to dismiss Count
I is sustained on the basis set out above, and plaintiffs
are given twenty (20) days within which to file an
amended petition in line with this memorandum.
With respect to Count II, the briefs of the parties
indicate similar suits involving this same question have
been filed against the defendants in several districts around
the country. An examination of McNamara v. Johnston,
522 F. 2d 1157 (7th Cir. 1974), discloses that case to be
one on all fours with Count II of this action, except for
some of the named parties. It would be repetitious for
this Court to deal with the question here. Suffice it to
say that the district court dismissed the complaint for
failure to state a claim (369 F. Supp. 517), the Seventh
Circuit Court of Appeals affirmed, and the Supreme Court
denied certiorari (425 U. S. 911).
Accordingly, the defendants’ motion to dismiss Count
II for failure to state a claim upon which relief can
be granted under Section 501 of the Labor Management
Reporting and Disclosure Act, 29 USC 501, is sustained.
/s/ Roy W. Harper
U.S. District Judge
67
ORDER
(Filed in U.S. District Court January 19, 1977)
Plaintiffs having failed to file a petition amending
Count I of their complaint within the twenty (20) days
granted in this Court’s Order dated December 29, 1976,
and the defendants’ motion to dismiss Count II of plaintiffs’
complaint having been sustained;
IT IS HEREBY ORDERED AND ADJUDGED that
Count I of plaintiffs’ complaint be and the same is hereby
dismissed without prejudice, and,
IT IS FURTHER ORDERED AND ADJUDGED that
Count II of plaintiffs’ complaint be and the same is hereby
dismissed.
/s/ Roy W. Harper
United States District Judge
Dated this 19th day
of January, 1977.
68 ‘
APPENDIX C
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
September Term, 1978
No. 77-1094
Ernest Gabauer; Joe Delos Santos, Jr.; Coleman, G. Lewis,
Jr.; C. L. Greenfield; Elbert Hill and Claude J. Huskey,
Appellants,
Vs.
Leonard Woodcock; Emil Mazey; Kenneth Worley; C. E. —
Mattix; Edward Lavin; John T. Webster; Roy Hartzell
and Donald Young,
Appellees.
Appeal from the United States District Court for the
Eastern District of Missouri
JUDGMENT
(Filed March 6, 1979)
This cause came on to be heard on the record of
the United States District Court for the Eastern District
of Missouri and briefs of the respective parties and was
argued by counsel.
On Consideration Whereof it is now here ordered and
adjudged by this Court that the judgment of the said
District Court as to the dismissal of the §501 claim be
affirmed; and as to the dismissal of the §201 claim be
and is hereby affirmed in part and reversed in part.
And it is further ordered by this Court that this cause
be and is hereby remanded to the said District Court
for further proceedings consistent with the majority opin-
ion of this Court.
March 6, 1979
69
APPENDIX D
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
September Term, 1978
77-1094
Ernest Gabauer, et al.,
Appellants,
Vs.
Leonard Woodcock, et al.,
Appellees.
Appeal from the United States District Court for the
Eastern District of Missouri
The Court having considered petition for rehearing
en banc filed by counsel for appellants and, being fully
advised in the premises, it is ordered that the petition
for rehearing en banc be, and it is hereby, denied.
Considering the petition for rehearing en banc as a
petition for rehearing, it is ordered that the petition for
rehearing also be, and it is hereby, denied.
March 27, 1979
70
APPENDIX E
TITLE II—REPORTING BY LABOR ORGANIZATIONS,
OFFICERS AND EMPLOYEES OF LABOR ORGAN-
IZATIONS, AND EMPLOYEKS
Report of Labor Organizations
(29 U.S.C. 431)
Sec. 201. (a) Every labor organization shall adopt a
constitution and bylaws and shall file a copy thereof with
the Secretary, together with a report, signed by its presi-
dent and secretary or corresponding principal officers, con-
taining the following information—
(1) the name of the labor organization, its mail-
ing address, and any other address at which it main-
tains its principal office or at which it keeps the records
referred to in this title;
(2) the name and title of each of its officers;
(3) the initiation fee or fees required from a
new or transferred member and fees for work permits
required by the reporting labor organization;
(4) the regular dues or fees of other periodic
payments required to remain a member of the report-
ing labor organization; and
(5) detailed statements, or references to specific
provisions of documents filed under this subsection
which contain such statements, showing the provisions
made and procedures followed with respect to each
of the following: (A) qualifications for or restrictions
on membership, (B) levying of assessments, (C) par-
ticipation in insurance or other benefit plans, (D)
.
71
authorization for disbursement of funds of the labor
organization, (E) audit of financial transactions of the
labor organization, (F) the calling of regular and spe-
cial meetings, (G) the selection of officers and stew-
ards and of any representatives to other bodies com-
posed of labor organizations’ representatives, with a
specific statement of the manner in which each officer
was elected, appointed, or otherwise selected, (H) dis-
cipline or removal of officers or agcats for breaches
of their trust, (1) imposition of fines, suspensions,
and expulsions of members, including the grounds for
such action and any provision made for notice, hearing,
judgment on the evidence, and appeal procedures, (J)
authorization for bargaining demands, (K) ratification
of contract terms, (I.) authorization for strikes, and
(M) issuance of work permits. Any change in the
information required by this subsection shall be re-
ported to the Secretary at the time the reporting labor
organization files with the Secretary the annual finan-
cial report required by subsection (b).
(b) Every labor organization shall file annually with
the Secretary a financial report signed by its president
and treasurer or corresponding principal officers contain-
ing the following information in such detail as may be
necessary accurately to disclose its financial condition and
operations for its preceding fiscal year—
(1) assets and liabilities at the beginning and
end of the fiscal year;
(2) receipts of any kind and the sources thereof;
(3) salary, allowances, and other direct or indi-
rect disbursements (including reimbursed expenses)
to each officer and also to each employee who, during
such fiscal year, received more than $10,900 in the
72
aggregate from such labor organization and any other
labor organization affiliated with it or with which
it is affiliated, or which is affiliated with the same
national or international labor organization;
(4) direct and indirect loans made to any officer,
employee, or member, which aggregated more than
$250 during the fiscal year, together with a statement
of the purpose, security, if any, and arrangements
for repayment;
(5) direct and indirect loans to any business en-
terprise, together with a statement of the purpose,
security, if any, and arrangements for repayment; and
(6) other disbursements made by it including
the purposes thereof;
all in such categories as the Secretary may prescribe.
(c) Every labor organization required to submit a
report under this title shall make available the informa-
tion required to be contained in such report to all of
its members, and every such labor organization and its
officers shall be under a duty enforceable at the suit of
any mernber of such organization in any State court of
competent jurisdiction or in the district court of the United
States for the district in which such labor organization
maintains its principal office, to permit such member for
just cause to examine any books, records, and accounts
necessary to verify such report. The court in such action
may, in its discretion, in addition to any judgment awarded
to the plaintiff or plaintiffs, allow a reasonable attorney’s
fee to be paid by the defendant, and costs of the action.
* + *
73
TITLE INI—TRUSTEESHIPS
Reports
(29 U.S.C. 461)
Sec. 301. (a) Every labor organization which has or
assumes trusteeship over any subordinate labor organiza-
tion shall file with the Secretary within thirty days after
the date of the enactment of this Act or the imposition
of any such trusteeship, and semiannually thereafter, a re-
port, signed by its president and treasurer or corresponding
principal officers, as well as by the trustees of such subordi-
nate labor organization, containing the following informa-
tion: (1) the name and address of the subordinate or-
ganization; (2) the date of establishing the trusteeship;
(3) a detailed statement of the reason or reasons for
establishing or continuing the trusteeship; and (4) the
nature and extent of participation by the membership of
the subordinate organization in the selection of delegates
to represent such organization in regular or special conven-
tions or other policy-determining bodies and in the election
of officers of the labor organization which has assumed
trusteeship over such subordinate organization. The initial
report shall also include a full and complete account of the
financial condition of such subordinate organization as of
the time trusteeship was assumed over it. During the
continuance of a trusteeship the labor organization which
has assumed trusteeship over a subordinate labor organiza-
tion shall file on behalf of the subordinate labor organiza-
tion the annual financial report required by section 201(b)
signed by the president and treasurer or corresponding
principal officers of the labor organization which has as-
sumed such trusteeship and the trustees of the subordinate
labor organization.
74
(b) The provisions of section 201(c), 205, 206, 208,
and 210 shall be applicable to reports filed under this
title.
(c) Any person who willfully violates this section
shall be fined not more than $10,000 or imprisoned for
not more than one year, or both.
(d) Any person who makes a false statement or re-
presentation of a material fact, knowing it to be false,
or who knowingly fails to disclose a material fact, in any
report required under the provisions of this section or
willfully makes any false entry in or willfully withholds,
conceals, or destroys any documents, books, records, re-
ports, or statements upon which such report is based, shall
be fined not more than $10,000 or imprisoned for not
more than one year, or both.
(e) Each individual required to sign a report under
this section shall be personally responsible for the filing
of such report and for any statement contained therein
which he knows to be false.
Purposes for Which a Trusteeship May Be Established
(29 U.S.C. 462) |
Sec. 302. Trusteeships shall be established and admin-
istered by a labor organization over a subordinate body
only in accordance with the constitution and bylaws of
the organization which has assumed trusteeship over the
subordinate body and for the purpose of correcting corrup-
tion or financial malpractice, assuring the performance
of collective bargaining agreements or other duties of a
bargaining representative, restoring democratic procedures,
or otherwise carrying out the legitimate objects of such
labor organization.
75
Unlawful Acts Relating to Labor Organization Under
Trusteeship
(29 U.S.C. 463)
Sec. 303. (a) During any period when a subordinate
body of a labor organization is in trusteeship, it shall
be unlawful (1) to count the vote of delegates from such
body in any convention or election of officers of the labor
organization unless the delegates have been chosen by
secret ballot in an election in which all the members
in good standing of such subordinate body were eligible
to participate or (2) . to transfer to such organization any
current receipts or other funds of the subordinate body
except the normal per capita tax and assesments payable
by subordinate bodies not in trusteeship: Provided, That
nothing herein contained shall prevent the distribution
of the assets of a labor organization in accordance with
its constitution and bylaws upon the bona fide dissolution
thereof.
(b) Any person who willfully violates this section
shall be fined not more than $10,000 or imprisoned for
not more than one year, or both
Enforcement
(29 U.S.C. 464)
Sec. 304. (a) Upon the written complaint of any
member or subordinate body of a labor organization alleg-
ing that such organization has violated the provisions of
this title (except section 301) the Secretary shall investi-
gate the complaint and if the Secretary finds probable
cause to believe that such violation has occurred and has
not been remedied he shall, without disclosing the identity
of the complainant, bring a civil action in any district
court of the United States having jurisdiction of the labor
76
organization for such relief (including injunctions) as may
be appropriate. Any member or subordinate body of a
labor organization affected by any violation of this title
(except section 301) may bring a civil action in any district
court of the United States having jurisdiction of the labor
organization for such relief (including injunctions) as may
be appropriate.
(b) For the purpose of actions under this section,
district courts of the United States shall be deemed to
have jurisdiction of a labor organization (1) in the district
in which the principal office of such labor organization
is located, or (2) in any district in which its duly authorized
officers or agents are engaged in conducting the affairs
of the trusteeship.
(c) In any proceeding pursuant to this section a trust-
eeship established by a labor organization in conformity
with the procedural requirements of its constitution and
bylaws and authorized or ratified after a fair hearing either
before the executive board or before such other body as
may be provided in accordance with its constitution or
bylaws shall be presumed valid for a period of eighteen
months from the date of its establishment and shall not
be subject to attack during such period except upon clear
and convincing proof that the trusteeship was not estab-
lished or maintained in good faith for a purpose allowable
under section 302. After the expiration of eighteen months
the trusteeship shall be presumed invalid in any such
proceeding and its discontinuance shall be decreed unless
the labor organization shall show by clear and convincing
proof that the continuation of the trusteeship is necessary
for a purpose allowable under section 302. In the latter
event the court may dismiss the complaint or retain juris-
diction of the cause on such conditions and for such period
as it deems appropriate.
77
TITLE V—SAFEGUARDS FOR LABOR ORGANTIZA-
TIONS
Fiduciary Responsibility of Officers of Labor Organizations
(29 U.S.C. 501)
Sec. 501. (a) The officers, agents, shop stewards, and
other representatives of a labor organization occupy posi-
tions of trust in relation to such organization and its mem-
bers as a group. It is, therefore, the duty of each such
person, taking into account the special problems and func-
tions of a labor organization, to hold its money and prop-
erty 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 wich such organization as an ad-
verse party or in 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 by-
laws 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.
(b) When any officer, agent, shop steward, or repre-
sentative of any labor organization is alleged to have vio-
lated 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
78
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.
(c) Any person who embezzles, steals, or unlawfully
and willfully abstracts or converts to his own use, or
the use of another, any of the moneys, funds, securities,
property, or other assets of a labor organization of which
he is an officer, or by which he is employed, directly
or indirectly, shall be fined not more than $10,000 or
imprisoned for not more than five years, or both.
* = *
Retention of Rights Under Other Federal and State Laws
(29 U.S.C. 523)
Sec. 603. (a) Except as explicitly provided to the
contrary, nothing in this Act shall reduce or limit the
responsibilities of any labor organization or any officer,
agent, shop steward, or other representative of a labor
organization, or of any trust in which a labor organization
is interested, under any other Federal law or under the
laws of any State, and, except as explicitly provided to
the contrary, nothing in this Act shall take away any
79
right or bar any remedy to which members of a labor
organization are entitled under such other Federal law
or law of any State.
(b) Nothing contained in titles I, II, II, IV, V, or
VI of this Act shall be construed to supersede or impair
or otherwise affect the provisions of the Railway Labor
Act, as amended, or any of the obligations, rights, bene-
fits, privileges, or immunities of any carrier, employee,
organization, representative, or person subject thereto; nor
shall anything contained in said titles (except section 505)
of this Act be construed to confer any rights, privileges,
immunities, or defenses upon employers, or to impair or
otherwise affect the rights of any person under the Na-
tional Labor Relations Act, as amended.
Effect on State Laws
(29 U.S.C. 524)
Sec. 604. Nothing in this Act shall be construed to
impair or diminish the authority of any State to enact
and enforce general criminal laws with respect to robbery,
bribery, extortion, embezzlement, grand larceny, burglary,
arson, violation of narcotics laws, murder, rape, assault
with intent to kill, or assault which inflicts grievous bodily
injury, or conspiracy to commit any of such crimes.
TITLE 18
UNITED STATES CODE ANNOTATED
§ 610. Contributions or expenditures by national
banks, corporations or labor organizations
It is unlawful for any national bank, or any corporation
organized by authority of any law of Congress, to make
80
a contribution or expenditure in connection with any elec-
tion to any political office, or in connection with any
primary election or political convention or caucus held
ts select candidates for any political office, or for any
corporation whatever, or any labor organization to make
a contribution or expenditure in connection with any elec-
tion at which Presidential and Vice Presidential electors
or a Senator or Representative in, or a Delegate or Resident
Commissioner to Congress are to be voted for, or in connec-
tion with any primary election or political convention or
caucus held to select candidates for any of the foregoing
offices, or for any candidate, political committee, or other
person to accept or receive any contribution prohibited
by this section.
Every corporation or labor organization which makes
any contribution or expenditure in violation of this section
shall be fined not more than $5,000; and every officer
or director of any corporation or officer of any labor organ-
ization, who consents to any contribution or expenditure
by the corporation or labor organization, as the case may
be, and any person who accepts or receives any contribu-
tion, in violation of this section, shall be fined not more
than $1,000 or imprisoned not more than one year, or
both; and if the violation was willful, shall be fined not
more than $10,000 or imprisoned not more than two years,
or both.
For the purposes of this section “labor organization”
means any organization of any kind, or any agency or
employee representation committee or plan, in which em-
ployees participate and which exist for the purpose, in
whole or in part, of dealing with employers concerning
grievances, labor disputes, wages, rates of pay, hours of
employment, or conditions of work.
81
As used in this section, the phrase “contribution or
expenditure” shall include any direct or indirect payment,
distribution, loan, advance, deposit, or gift of money, or
any services, or anything of value (except a loan of money
by a national or State bank made in accordance with
the applicable banking laws and regulations and in the
ordinary course of business) to any candidate, campaign
committee, or political party or organization, in connection
with any election to any of the offices referred to in
this section; but shall not include communications by a
corporation to its stockholders and their families or by
a labor organization to its members and their families
on any subject; nonpartisan registration and get-out-the-
vote campaigns by a corporation aimed at its stockholders
and their families, or by a labor organization aimed at
its members and their families; the establishment, admin-
istration, and solicitation of contributions to a separate
segregated fund to be utilized for political purposes by
a corporation or labor organization: Provided, That it
shall be unlawful for such a fund to make a contribution
or expenditure by utilizing money or anything of value
secured by physical force, job discrimination, financial re-
prisals, or the threat of force, job discrimination, or finan-
cial reprisal; or by dues, fees, or other monies required
as a condition of membership in a labor organization or
as a condition of employment or by monies obtained in
any commercial transaction.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.