Opposition — Gabauer v. Woodcock

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1 JUL 17 1970

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1978

No. 78-1873

ERNEST GABAUER, et al.,

Petitioners,

Vv.

LEONARD WOODCOCK, et al.,

Respondents.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Eighth Circuit

BRIEF IN OPPOSITION FOR RESPONDENTS

Morris J. LEVIN JOHN A. FILLION

LEVIN & WEINHAUS M. JAY WHITMAN

1602 Executive Office Bldg. 8000 East Jefferson Ave.

515 Olive Street Detroit, Michigan 48214

St. Louis, Missouri 63101

Counsel for Respondents

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

Er 00

TABLE OF CONTENTS

Page

Tater: OC Amt «i Aenea II

Cppplantah TI ia ne 1

Counterstatement of Questions Presented ...................... 2

Counterstatement of the Case 22.2.2... eee ene eee 2

pT REROSERSAR Say borane nis OU nen SSRN TIe ANSI Pica oe. a ot 6

CII siccctsinioticsnnsiopnniphnccdeicstacbesepassetdam ti aticatacea is 8

II

INDEX TO AUTHORITIES

Cases Page

Bright v. Taylor, 544 F.2d 854 (8th Cir. 1977) _..... 6

Gabauer et al. v. Woodcock et al., 425 F. Supp. 1

COED. FEO. BIR hs worncnpieieitiineiergabh hear eac tks, 1

Gabauer et al. v. Woodcock et al., 594 F.2d 662

(Oim Cir. SRT) SO ON a a passim

Gabauer Vv. Woodcock, 520 F.2d 1084 (8th Cir.

1975), cert. den. 423 U.S. 1061 (1976) _........ 5

Huskey v. Woodcock, 520 F.2d 1096 (8th Cir.

1975), cert. den. 423 U.S. 1061 (1976) ........... 5

Johnson V. Nelson, 325 F.2d 646 (8th Cir. 1963)... 6

McNamara V. Johnston, 522 F.2d 1157 (7th Cir.

1975), cert. den. 425 U.S. 911 (1976) ................ passim

Pignotti v. Sheet Metal Workers, 477 F.2d 825

(8th Cir. 1973), cert. den. 414 U.S. 1067 (1973).. 6

UAW Vv. Nat. Right to Work Legal Defense & Ed.

Foundation,—F. Supp.—(D.D.C. 1978), 95

L.R.R.M. 2584, aff’d in part, vacated in part &

remanded, 590 F.2d 1139 (D.C. Cir. 1978) ........ 2

Statutes

Federal Election Campaign Act, as amended, 2

UE. SR OCREO CEOTOD once 4

Internal Revenue Code, as amended, 26 U.S.C.

rae i) ) GERRI Ree RMT Se Rest cee 4

Labor-Management Reporting & Disclosure Act

of 1959, commonly known as “Landrum-Griffin”,

29 U.S.C. § 401-581 (1975) oo 2

§ 201(c), 29 U.S.C. § 461(e) ......................... 2,4,5,8

§501(a) & (b), 29 U.S.C. §501(a) & (b).... 2,3, 4,

5, 6, 7

IN THE

Siprenw Court of the United States

OCTOBER TERM, 1978

No. 78-1873

ERNEST GABAUER, et al.,

j Petitioners,

LEONARD WOODCOCK, et al.,

Respondents.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Eighth Circuit

BRIEF IN OPPOSITION FOR RESPONDENTS

Respondents Woodcock, Mazey, Worley, Mattix, Lavin,

Webster, Hartzell and Young, by counsel, respectfully

pray that the Court deny the Petition for Writ of Cer-

tiorari.

OPINION BELOW

The opinion below is reported at: Gabauer et al. V.

Woodcock et al., 594 F.2d 662 (8th Cir. 1979) (en

banc),' affirming in part and reversing in part, 425 F.

Supp. 1 (E.D. Mo. 1976).

1 The unpublished panel opinion was withdrawn. 594 F.2d 662, 664

n.l. (Pet. App. at 30) The Appendices to the Petition will be cited

in the form “Pet. App. at ——.”

2

COUNTERSTATEMENT OF QUESTIONS PRESENTED

I

Petitioners urge the expansion of federal jurisdiction

by transmuting § 501(a) & (b) of the LMRDA®? into a

vehicle by which an individual union member can impose

derivative damages on, and secure injunctive relief

against officers for certain expenditures, even though

those expenditures were authorized by the governing

bodies of the organization.

Did the Eighth Circuit, en bane, following the Seventh

Circuit’s McNamara v. Johnston, 522 F. 2d 1157 (7th

Cir. 1975) cert. den. 425 U.S. 911 (1976), correctly

refuse such an expansion of federal jurisdiction?

II

. International Union officials are sued, under § 201( ¢)

of the LMRDA,? in St. Louis, far from Detroit, where

the International Union “maintains its principal office.”

Various officials of St. Louis Local Unions are also sued.

All object to venue. Did the Court below properly re-

mand as to records in the control of the St. Louis offi-

cials, while affirming dismissal as to those in the control

of the Detroit officials?

COUNTERSTATEMENT OF THE CASE

This is the last of two companion cases, sponsored by

the same group,‘ premised on the same theory, and di-

* Labor-Management Reporting and Disclosure Act of 1959

(LMRDA), 29 U.S.C. §§ 401-531, § 501(a) & (b), commonly known

as “Landrum-Griffin.” (Pet. App. at 77-8).

%29 U.S.C. § 431(c) (1975). (Pet. App. at 72).

Ry See: UAW v. Nat. Right to Work Legal Defense & Ed. Founda-

tion,—F. Supp—(D.D.C. 1978), 95 L.R.R.M. 2584, 2586-7, aff'd in

part, vacated in part & remanded, 590 F.2d 1139 (D.C. Cir. 1978).

a

3

rected at the same end. The theory is that federal juris-

diction should be expanded by transmuting § 501(a) &

(b) of the LMRDA into a vehicle by which an individual

union member can impose derivative damages on, and

secure injunctive relief against officers for certain ex-

penditures, even though those expenditures were author-

ized by the governing bodies of the organization. The

target of this effort is the UAW’s Community Action

Program (CAP). McNamara v. Johnston, 522 F.2d 1157,

1163 (7th Cir. 1975), cert. den. 425 U.S. 911 (1976),

was directed against the Illinois CAP. The iustant case

is directed against Missouri CAP. The Seventh and

Eighth Circuits reached the same conclusion.

Facts

The 1968 UAW Convention gave the International

Executive Board (IEB) authority to establish a national,

state and local CAP structure to replace the soon-to-be-

terminated relationship with the AFL-CIO’s COPE pro-

gram. The IEB thereafter established a CAP structure,

which has since been ratified by the UAW Convention.

594 F.2d at 668-9 (Pet. App. 42) See: UAW Constitu-

tion (1977), Art. 23. Under this structure, state and

local CAP Councils were established in, among other

places, Illinois and Missouri. The defendants-respondents

here are the various elected officials of the St. Louis and

Missouri CAP Councils, as well as of the International

Union. (Pet. at 4 n.3). In McNamara, the defendants

held analogous positions. 522 F.2d at 1158-9.

The regular UAW CAP structure is financed by 3%

of monthly dues. Expenditures are made by vote of

elected delegates to each CAP Council, or, between meet-

ings, by the elected executive bodies of the Council. Any

UAW member who dissents from this use of his dues

has a right under Article 16 § 7 of the UAW Constitu-

tion to ubtain a pro-rata rebate which includes the 3%

4d

of dues alloted to CAP, as well as other expenditures for

political or ideological purposes. 594 F.2d at 668-669,

incl. n.4 (Pet. App. at 42), compare McNamara, 522

F.2d at 1164, 1166 n.11.

The regular CAP structure deals with community serv-

ice, as well as state and local political issues. A separate,

segregated fund—UAW Voluntary CAP—handles federal

elections. 594 F.2d at 673-4 (Pet. App. at 52-4).°

Proceedings Below

Disagreeing with the UAW Constitution and Conven-

tion, the petitioners filed suit under § 501(a) & (b) of

the LMRDA, 29 U.S.C. § 501(a) & (b), seeking injunc-

tive relief forbidding the organization’s officers from

spending funds for “partisan political activities or .. .

ideological causes” with which these particular plaintiffs

disagree, and derivative damages from these officials for

expenditures of this sort. 594 F.2d at 667-8 (Pet. App.

at 39-40). Compare: McNamara, 522 F.2d at 1162.

This is Count II of the Complaint. Count I prays for the

inspection of certain records, some in Detroit and some

in St. Louis. Count I is premised on § 201(c) of the

LMRDA, 29 U.S.C. § 461(c) (1975).°

5 This is to comply with the Federal Election Campaign Act, as

amended, 2 U.S.C. §§ 431-455 (1976), esp., § 441b. While this case

has been in litigation, Congress also passed 26 U.S.C. § 527 (1975),

adjusting the taxability of entities like CAP, even where their

activities are exclusively non-federal. In response, the UAW, like

many organizations, has further segregated community service ex-

penditures from state/local “exempt function” (i.¢., political)

expenditures. The former continue to be handled by CAP. For the

latter, a similar, but segregated “PAC” structure has been estab-

lished. During the time in question in this case, however, CAP

handled both community service and state/local political expendi-

tures.

® We need not discuss the welter of collateral claims mentioned in

the Petition, as none are of significance or relevance. The short

answer is in the Eighth Circuit’s own recitation, 594 F.2d at 664-6

5

The District Court dismissed the § 501 claim (Count

II) for failure to state a claim, following McNamara v.

Johnston, 522 F.2d 1157 (7th Cir. 1975), cert. den. 425

U.S. 911 (1976). Recognizing the venue problem as to

Detroit records, the District Court dismissed Count I

with leave to refile as to the St. Louis records. 425 F.

Supp. 1, 5 (E.D. Mo. 1976). (Pet. App. at 64-6). Peti-

tioners refused to refile the § 201(c) claim (Count I).

On appeal, the panel affirmed as to the § 501 claim,

agreeing that McNamara should be followed.

As to the § 201(c) claim, it affirmed as to the Detroit

records, since the International Union’s “principal office”

was there. However, it reversed as to the St. Louis ree-

ords, holding that the District Court should not have

dismissed.

The Eighth Circuit reheard the § 501 claim (Count

II) en bane. The § 201(c) claim (Count I) was not re-

heard, and the full Court followed the panel decision—

affirming the dismissal of the International Union’s De-

troit officials for improper venue, since its “principal

office” was not in St. Louis; reversing and remanding as

to St. Louis records, since Local 25’s “principal office”

was in the Eastern District of Missouri.

On the § 501 issue (Count II) the full Court affirmed

dismissal, as had the panel, following the Seventh Cir-

cuit’s McNamara decision. 594 F.2d at 668-674 (Pet.

App. at 41-54). The dissent, authored by Judge Ross,

argued that dismissal was not appropriate, and a remand

should be had to inquire into whether the expenditures

(Pet. App. 30-35). Many of these red herrings are rooted in

Gabauer’s and Huskey’s removal from office for gerry-mandering

and misappropriation of union funds. They lost these issues in

earlier litigation. See: Gabauer v. Woodcock, 520 F.2d 1084 (8th

Cir. 1975), cert. den. 423 U.S. 1061 (1976); and Huskey v. Wood-

cock, 520 F.2d 1096 (8th Cir. 1975), cert. den., 423 U.S. 1061 (1976).

A review of these decisions is, perhaps, useful as background.

6

in question were “antithetical” to the interests of the

membership. 594 F.2d at 674-6 (Pet. App. 54-8). The

majority of the Eighth Circuit, agreeing with the Sev-

enth, held that Congress did not intend § 501 as a vehicle

for that sort of inquiry, at least in the circumstances

of this case.

ARGUMENT

As to the $501 claim, the Eighth Circuit rejected

petitioners’ arguments, expressly agreeing with the Sev-

enth Circuit’? using the following straight-forward, re-

strained analysis:

Congress, as evinced by both the language of § 501 and

its legislative history, intended that section to incorpo-

rate the common law approach to fiduciary responsibility.

The Complaint is devoid of allegations of adverse deal-

ing, personal gain, disobedience of the principal and

other such conduct. In the UAW’s case, there is specific

authorization from the principal for the conduct of which

petitioners complain. So, under the established rules of

agency, the agent officers cannot be held derivatively

liable for the use of the organization’s property, even

in an unlawful manner, since the principal authorized

the agent’s conduct.* Petitioners’ contention that the

UAW Constitution and Resolutions are “exculpatory,” is

rejected by a quotation of McNamara:

7“We believe that the trial court properly followed \feNameara Vv.

Johnston, 522 F.2d 1157 (7th Cir. 1975), cert. den. 425 U.S. 911. .

(1976), and correctly held that the appellees did not breach their

fiduciary duty by making the questioned expenditures.” 594 F.2d

at 668 (Pet. App. at 41).

8 This is consistent with the Eighth Circuit’s own holdings that,

if the officials had refused to make authorized expenditures for

social or political purposes, the disobedience would subject them

to suit under § 501(b). Johnson v. Nelson, 325 F.2d 646 (8th Cir.

1963) ; Pignotti v. Sheet Metal Workers, 477 F.2d 825 (8th Cir.

1973) ; and Bright v. Taylor, 554 F.2d 854 (8ta Cir. 1977).

7

“Section 501 was intended to follow the ‘well-estab-

lished distinction between conferring authority upon

an agent or trustee, which is permissible and pro-

tects him against liability, and attempting to excuse

breaches of trust, which is here made void as against

publie policy.’ H.R. Rep. No. 741, 86th Cong., 1st

Sess. 81-82, U.S. Code Congressional and Adminis-

trative News, 2480 (1959). Without doubt, the pro-

visions and resolutions upon which the UAW relies

fall within the former category of measures that

confer authority.” [McNamara, 522] at 1164

We agree with that disposition. [Gabauer v. Wood-

cock, 504 F.2d 662, 670 (8th Cir. 1979) (en banc)

(Pet. App. at 44-5) ]

Examining the legislative history, both Circuits found

that Congress had disavowed any intent to prohibit union

involvement in politics. Like the Seventh Circuit, the

Eighth concluded that: “Without express authorization

of Congress, we cannot take unto ourselves the role of

deciding which causes a union can or cannot support.”

594 F.2d at 670 (Pet. App. at 45).

There is, in short, no split of the Circuits. There is

complete agreement, expressed in cases which are, in

every respect, identical. There is agreement on the analy-

sis of the statute, on the intent of Congress, and on both

the impropriety of and the dangers of expanding federal

jurisdiction in this area.

Petitioners’ arguments, shorn of their conclusory fur,

are simply that—regardless—the judiciary should be

turned to these purposes, especially on a motion to dis-

miss. But, even on petitioners’ and the dissent’s assump-

tions, suffice it to observe that what is, and is not ap-

propriate to treatment “on the papers” is best left to

the Circuits. This Court has rightly been reluctant to

review such a work-a-day issue.

8

As for the § 201(c) claim (Count I), there is hardly

anything to review. The Court of Appeals, for the most

part, reversed—holding that the Complaint should be

reinstated as to St. Louis records. Petitioners won these

issues before the Court of Appeals. Al! they lost was

their claim against the International Union and its De-

troit records. But that result is so obviously correct as

to not merit revisitation. The International Union’s

headquarters is in Detroit. Section 201(c), 29 U.S.C.

§ 461(c), expressly limits venue to the “district in which

such labor organization maintains its principal office.”

(Pet. App. at 72). On its face, that district is the East-

ern District of Michigan, not the Eastern District of

Missouri. For some reason, petitioners dislike Detroit.

But that is their problem, not this Court’s.

CONCLUSION

For the foregoing reasons, the Court should deny the

Petition.

Respectfully submitted,

Morris J. LEVIN JOHN A. FILLION

LEVIN & WEIN HAUS M. JAY WHITMAN

1602 Executive Office Bldg. 8000 East Jefferson Ave.

515 Olive Street Detroit, Michigan 48214

St. Louis, Missouri 63101

Counsel for Respondents.

July 18, 1979