Appendix — Bryan v. Erkins
Supreme Court brief1986
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Supreme Court, U.S. |
86-372 | ‘Fiver
SEP 5 986
No.
JOSEPH F. SPANIOL, JR.
mn: soe
IN THE
Supreme Court of the United States
OCTOBER TERM, 1986
UNITED STEELWORKERS OF AMERICA,
Petitioner,
V.
ELBERT ERKINS, SAMUEL DENSON, BiLLY BRYAN,
ARTHUR COMER, GEORGE BULLARD, CHARLIE GREENE,
and U.S. FIDELITY & GUARANTY CORP.,
Respondents.
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
BERNARD KLEIMAN MICHAEL H. GOTTESMAN
JAMES D. ENGLISH (Counsel of Record)
Five Gateway Center ROBERT M. WEINBERG
Pittsburgh, PA 15222 BREDHOFF & KAISER
1000 Connecticut Ave., N.W.
Suite 1300
Washington, D.C. 20036
(202) 833-9340
Attorneys for Petitioners
WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON. D.C. 20001
TABLE OF CONTENTS
APPENDIX A—Opinion of United States Court of
Appeals for the Eleventh Circuit
fo gg eS a ae eae
APPENDIX B—Judgment of United States Court of
Appeals for the Eleventh Circuit
NE BI IS hg ven dactewsncle cies
APPENDIX C—Opinion of the United States District
Court for the Middle District of
Alabama (Nov. 27, 1984) ......0.........
APPENDIX D—Opinion of the United States Court of
Appeals for the Eleventh Circuit
et ec aoe eee
APPENDIX E—Order of the United States Court of
Appeals for the Eleventh Circuit
fe | pera eee
APPENDIX F—Opinion (Order) of the United States
District Court for the Middle Dis-
trict of Alabama (June 30, 1980)....
APPENDIX G—Opinion (Order) of the United States
District Court for the Middle Dis-
trict of Alabama (July 21, 1980) ....
APPENDIX H—Statutory Provisions Involved ....... mee
Sec. 3(0), LMRDA, 29 U.S.C.
En, Fee ee EDEN: OME
Sec. 501(b), LMRDA, 29 U.S.C.
8 RARER Even e Aa KR RE SU
Page
la
23a
40a
52a
53a
62a
66a
la
APPENDIX A
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 84-7455, 84-7774
ELBERT ERKINS and SAMUEL DENSON,
Plaintiffs-A ppellees,
Cross-A ppellants,
V.
BILLY BRYAN, ARTHUR COMER, GEORGE BULLARD
and CHARLIE GREENE,
Defendants-A ppellants,
Cross-A ppellees,
UNITED STATES FIDELITY & GUARANTY CORP.,
Defendant-Cross-A ppellee.
ELBERT ERKINS and SAMUEL DENSON,
Plaintiffs-A ppellees,
Cross-A ppellants,
V.
BILLY BRYAN, ARTHUR COMER, GEORGE BULLARD
and CHARLIE GREENE,
Defendants-A ppellants,
Cross-A ppellees,
U.S. FIDELITY & GUARANTY CORP.,
Defendant,
UNITED STEELWORKERS OF AMERICA,
Defendant-A ppellant,
Cross-A ppellee.
April 8, 1986
9)
“a
Appeals from the United States District Court
for the Middle District of Alabama
Before HILL and CLARK, Circuit Judges, and
MOYE *, Chief District Judge.
CLARK, Circuit Judge:
All parties below have appealed from the district court
decision in this suit for an accounting of union funds
under §501 of the Labor-Management Reporting and
Disclosure Act (LMRDA), 29 U.S.C. §50i(a), (b).
Elbert Erkins and Samuel Denson, plaintiffs below, were
members of Local 7326 (Local), United Steelworkers of
America (USW), when the Local struck plaintiffs’ em-
ployer, American Building Co. in Eufaula, Alabama. The
strike lasted from December, 1976 until May, 1978, when
employees voted to decertify USW as their bargaining
representative. During the course of the strike, USW
provided the Local with a strike fund of $405,000. Billy
Bryan, Arthur Comer, George Bullard and Charlie
Greene, defendants below, were either Local officials or
prominently involved in directing picketing and other
strike efforts. Together, these four individuals received
$140,000 from the strike fund in payment for various
expenses incurred on behalf of the Local.
Soon after the strike ended, plaintiffs challenged the
propriety of these payments, especially in view of the
fact that defendants had acquired significant items of
personal property during and after the strike while many
other union members were struggling just to meet house-
hold expenses. Plaintiffs investigated the use of strike
funds by defendants and in January, 1980, they requested
that USW bring suit against defendants for misapplica-
tion of union funds. When USW instead referred the case
* Honorable Charles A. Moye, Jr., Chief U.S. District Judge for
the Northern District of Georgia, sitting by designation.
3a
to the Department of Labor, plaintiffs sought leave to
bring suit on behalf of the union in federal court. Leave
was granted and suit was filed on May 1, 1980, two years
after the end of the strike.
In their suit, plaintiffs sought recovery of the $140,000
in payments, either from the individual defendants or
from their indemnitor, United States Fidelity and Guar-
anty Corporation (USF & G). In addition, plaintiffs re-
quested an award of $305,000 in attorney’s fees, payable
by the defendants or intervenor, USW. After a three day
non-jury trial, the district court ordered a recovery of
$14,461.30 from the individual defendants, payable to
USW. The court held that plaintiffs’ delay in joining
USF & G had discharged the indemnitor from any lia-
bility under the bond, and recovery could be had only
from the individuals. In a separate order, the court
awarded plaintiffs $42,000 in attorney’s fees, payable by
USW. 598 F. Supp. 240.
The parties present the following issues on appeal. De-
fendants argue that the strict court erred in finding
plaintiffs had standing to sue as union “members” under
§501(b) of LMRDA. Defendants contend that the statu-
tory definition of union “member” must yield to each
union’s definition of membership and plaintiffs would not
be considered members by USW standards. Alternatively,
defendants urge that this suit is time barred under recent
Supreme Court precedent applying a six-month statute of
limitations to cases brought under federal labor law. In-
tervenor USW joins in defendants’ arguments and fur-
thermore contests the order to pay $42,000 in attorney’s
fees. USW contends that the district court’s use of the
common benefit theory of fee awards is clearly at odds
with the language and legislative history of § 501(b),
which limits fee awards to the amount of money recov-
ered in an accounting suit (here only $14,461.30).
Plaintiffs for their part assert error in the district
court’s order to recover only $14,461.30. Plaintiffs con-
4a
tend that the district court arbitrarily approved numer-
ous payments not properly accounted for by defendants;
thus, they request a judgment for the full $140,000 paid
to defendants. Furthermore, plaintiffs contend that USF
& G was erroneously found discharged from the fidelity
bond since USF & G did not prove prejudice from the
delay in being joined as a defendant. Lastly, plaintiffs’
attorneys argue that the district court erroneously
awarded only 12% of their requested fee by arbitrarily
reducing the number of hours billed, the hourly rate and
eliminating the contingency factor.
We affirm the district court order and thus, reject all
these contentions.
I. Plaintiffs’ Standing Under § 501
Section 501{a) provides that “the officers, agents, shop
stewards, and other representatives of a labor organiza-
tion occupy positions of trust in relation to such organiza-
tion and its members as a group. It is therefore, the
duty of each such person ... to hold [the organization’s]
money and property solely for the benefit of the organi-
zation and its members.” 29 U.S.C. §501(a). Section
501(b) provides that “any member of the labor organiza-
tion” may sue a defaulting union officer in federal court
“to recover damages or secure an accounting or other
appropriate relief for the benefit of the labor organiza-
tion.” 29 U.S.C. § 501(b). Defendants argue that plain-
tiffs were not members of USW at the time of suit and
therefore cannot sue for an accounting. Our considera-
tion of this issue is foreclosed by the decision of a prior
panel in an interlocutory appeal in this case. See Erkins
v. Bryan, 663 F.2d 1048 (11th Cir. 1981) (Erkins 1).
That panel held that plaintiffs were USW members at the
time of filing suit and thus had standing to sue. Since
findings of fact and conclusions of law by an appellate
court bind all subsequent proceedings on the same case,
absent exceptional circumstances, we find that plaintiffs
5a
have standing. See Westbrook v. Zant, 743 F.2d 764, 768
(11th Cir. 1984).
II. Statute of Limitations for § 501 Accounting
Defendants assert that the district court erred in re-
fusing to apply the six-month statute of limitations of
the National Labor Relations Act (NLRA) to the present
action. Neither § 501 nor the LMRDA specifically pro-
vide a period of limitations. When confronted with such
legislative omissions, federal courts ordinarily adopt the
most analogous state statute of limitations. An excep-
tion to this rule occurs when state law would contradict
the purposes of the federal law or policy at issue; in that
case, courts look to related federal statutes or doctrines.
See UAW v. Hoosier Corp., 383 U.S. 696, 703-704, 86
S.Ct. 1107, 1111-1112, 16 L.Ed.2d 192 (1966). Defend-
ants urge that the recent Supreme Court decision in Del-
Costello v. International Brotherhood of Teamsters, 462
U.S. 5, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983), requires
this court to apply the NLRA statute of limitations in
this case.
DelCostello involved a hybrid action brought under fed-
eral labor law by a disgruntled union member against his
employer for breach of the collective bargaining agree-
ment and against the union for breach of its duty of fair
representation. The suit against the employer was
brought under § 301 of the National Labor Relations Act,
29 U.S.C. § 185. The suit against the union was brought
as an unfair representation claim pursuant to 29 U.S.C.
§ 158(b). The Supreme Court selected a federal rather
than state limitation for the case based upon several
considerations: the Court found no closely analogous
state limitations; federal labor policy in this context re-
quired particularly prompt resolution; and the interplay
of hybrid claims, one part (the unfair labor practice
claim) having an extremely short express federal limita-
tion (6 months under § 10, 29 U.S.C. § 160(b)), argued
6a
for a single federal limitation when combined. See 462
U.S. at 171, 103 S.Ct. at 2294. Thus, the Court applied
the six-month limitation normally applicable to unfair
labor practices, see 29 U.S.C. § 160(b), and emphasized
that such a result properly baiances “the national inter-
est in stable bargaining relationships and finality of pri-
vate settlements, and an employee’s interest in setting
aside what he views as an unjust settlement under the
collective bargaining system.” 462 U.S. at 171, 103 S.Ct.
at 2294 (quoting United Parcel Service, Inc. v. Mitchell,
451 U.S. 56, 101 S.Ct. 1559, 67 L.Ed.2d 732 (1981)).
The Supreme Court noted, however, that nothing in the
DelCostello analysis should upset the traditional rule of
UAW v. Hoosier, supra. See 462 U.S. at 171, 103 S.Ct.
at 2294.
In this circuit, the rationale of DelCostello has been
applied in two contexts other than a hybrid action, and
defendants argue that these cases should control our de-
cision here. The first such case is Erkins v. United Steel-
workers, 723 F.2d 837 (11th Cir. 1984) (Erkins II), a
pure breach of fair representation claim brought by the
instant plaintiffs and based on the failure of the union
to negotiate with the employer during the strike which
spawned the present case. The Erkins IJ panel applied
the NLRA limitation for unfair labor practices because
a fair representation claim bears a close resemblance to
an unfair practice and thus implicates the very balance
of interests at issue in DelCostello. See 723 F.2d at 838-
39.
Following Erkins II, another panel relied on DelCestello
in Davis v. UAW, 765 F.2d 1510 (11th Cir. 1985).
Davis involved abuse of free speech rights protected by
29 U.S.C. § 411(a) (2), part of the “Bill of Rights of
Members of Labor Organizations.” The panel noted that
the DelCostello analysis did not compel the use of the
NLRA limitation because free speech claims do not im-
plicate the collective bargaining structure as do unfair
Ta
practices and thus, do not require uniform limitations or
expedited resolution. See 765 F.2d at 1514. Rather, the
panel found that the expulsion of the plaintiffs from the
union was based upon friction between the local union
and the international union which threatened stable bar-
gaining relationships between the international union and
the steel industry. Referring to DelCostello, the panel
opinion stated: “We believe we are bound to find a
similar connection between labor peace and an action
based on a union’s alleged mistreatment of its members
by the denial of statutorily protected rights.” Jd. at
1514. Further, the panel found no analogous state cause
of action.
The cause of action under consideration here is quite
different from those described and we conclude that the
limitation period for filing a § 501 action is not governed
by DelCostello, Erkins IJ, or Davis. Plaintiffs in this
lawsuit sought an accounting for union funds allegedly
diverted to personal use by the individual defendants.
There is no claim against a union or an employer. Con-
sequently, neither the collective bargaining process nor
stability of labor union relations is involved.'
1 We distinguish the rulings of other circuits applying the six-
month NLRA limitations on similar grounds. Local Union 1397 v.
United Steelworkers, 748 F.2d 180, 184 (8d Cir. 1984), concerned
alleged violations of LMRDA clearly implicating labor management
relations. Local Union officials had been disciplined for disagree-
ment with international union officials about “pollution control] in
steel plants, collective bargaining strategy, construction of new
plants, arbitration policies” as well as “internal union governance.”
748 F.2d at 182. In Vallone v. Local Union 705, 755 F.2d 520 (7th
Cir. 1984), union members likewise brought suit under LMRDA
for free speech violations occurring in connection with a dispute
about modifications of the labor contract. Linder v. Berge, 739
F.2d 686 (ist Cir. 1984), involved failure to provide copies of the
collective bargaining agreement to union members disputing their
discharge from union construction work. The link between labor-
management stability and LMRDA is clear in all these cases but
not in the instant case.
8a
Since this § 501 suit is not controlled by the rationale
of DelCostello and its progeny, the district court declined
to apply the NLRA limitation. Instead, the district court
applied the federal equitable doctrine of laches and still
found the suit timely filed. In so doing, the court recog-
nized another exception to UAW v. Hoosier’s suggested
reliance on state statutes of limitations. Policies under-
iying the creation of federal equitable claims are not well
served by applying rigid limitations; therefore, federal
courts considering federal equitable claims should rely on
equitable principles. See Holmberg v. Armbrecht, 327
U.S. 392, 66 S.Ct. 582, 90 L.Ed.2d 743 (1946). Since a
§ 501 suit for an accounting is essentially equitable in
nature, see Local 92, International Association of Bridge
Workers v. Norris, 383 F.2d 735, 741 (5th Cir. 1967)
laches is an appropriate test for timeliness. Accord Mor-
rissey v. Curran, 482 F. Supp. 31, 40 (S.D.N.Y. 1979) ;
Yablonski v. UMW, 80 L.R.R.M. (BNA) 2594 (D.D.C.
1971).- The district court in turn correctly applied the
doctrine, finding that plaintiffs’ May 1, 1980 filing caused
no undue prejudice to defendants and therefore the suit
was timely filed. See EEOC v. Dresser Industries, Inc.,
668 F.2d 1199 (1lith Cir. 1982) (laches requires un-
equitable delay in filing and undue prejudice to defend-
ants).
III. Misapplication of Strike Funds
Plaintiffs on cross-appeal assert that the district court
erred in its calculation of misspent funds. They contend
that defendants should remit all $140,000 paid them since
the expenses or compensation claimed were never sup-
ported by records, receipts or independent corroborating
testimony. Plaintiffs consider the failure to keep records
a per se breach of fiduciary duty under § 501.
Such a position ignores Congress’ admonition that
courts must “take into account the special problems and
functions of a labor organization” when construing fidu-
9a
ciary duty under § 501. See 29 U.S.C. § 501(a). Im-
posing liability on the mere failure to keep receipts would
ignore the fact that strike leaders are neither accountants
nor comptrollers; their positions as union leaders demon-
strate their organizational rather than financial exper-
tise. The district court employed a more appropriate
legal standard. A union official fulfills his fiduciary duty,
even though he may indirectly benefit from use of union
funds, whenever he can show that the funds were author-
ized by the union and were expended for the benefit of
the union. See Ray v. Young, 753 F.2d 386 (5th Cir.
1985); Morrissy v. Curran, 650 F.2d 1267 (2d Cir.
1981).
The district court correctly applied this rule with
regard to each category of contested payments. Plaintiffs
disputed the fact that defendant strike leaders received
far more than the $20 to $30 per week strike benefit paid
rank and file members. The lower court found most of
these payments authorized and reasonable simply because
defendants spent far more time and effort promoting the
strike and boycott than other union members.’ Not only
did their efforts benefit the union, they precluded defend-
ants from working elsewhere to meet their household ex-
penses. Conversely, the lower court disallowed a number
of third party payments as unauthorized by union rules
and manifestly unreasonable since such payments would
not have been made to rank and file members and the
union received no benefit from the payments.®
2 For example, defendant Billy Bryan, former president of the
Local, worked twelve to sixteen hours per day, five to six days a
week on strike maintenance. Charlie Greene acted first as assistant
and then principal treasurer for the strike fund, working three
to four days each week. These men, as well as the other defendants,
also made numerous trips in support of the strike and boycott.
3 These third party payments included strike fund checks nego-
tiated, for example, to pay for clothing, household goods, and auto
repairs on cars not used for union business.
10a
The trial court took a creative, but certainly not in-
equitable, approach in reviewing the final category of
payments, those for travel expenses. These payments can-
not be disallowed as a matter of law since there is no
showing that defendants’ trips were unauthorized. In-
deed, defendants must have incurred some expense since
plaintiffs failed to show that any of the trips did not
take place. Personal benefit occurs only if the pre-trip
expense money was not completely spent on the single
trip for which it was issued. Any overage would be un-
authorized and manifestly unreasonable since defendants
would have been overcompensated. See Ray v. Young,
supra at 392, (double reimbursement for expenses voids
authorization and requires reimbursement). The trial
court’s use of an average time, distance and cost for each
challenged trip seems an acceptable means, in the absence
of specific records, or determining whether defendants
were overcompensated for trip expenses. Approximation
is necessary as a matter of equity where plaintiffs have
failed to disprove the fact of a trip. The court’s function
in a § 501 accounting is not to impose, through the pen-
alty of reimbursement, specific record keeping procedures.
Courts should intervene in a union’s financial affairs only
when authorized payments are “significantly above a fair
range of reasonableness.” Morrissey v. Curran, supra at
1275. Thus, we affirm the district court order to return
$14,460 to the international union.
IV. Attorneys’ Fees
A. Setting the Appropriate Fee
Plaintiffs’ attorney assert several errors by the dis-
trict court in its calculation of their fee. First, they
claim that unrebutted affidavits regarding hours and
hourly rates were improperly ignored. Second, they ciaim
that the court failed to increase basic fees to reflect the
contingent aspects of the case, despite case law authoriz-
ing such upward adjustment. Third, they suggest that
a a |
lla
cutting the already diminished fee by an additional 60%
contradicts the lower court’s finding of substantial non-
monetary benefits produced by this suit. Despite these
arguments, we affirm the fee award of $42,000.
Section 501(b) of the LMRDA authorizes the award
of reasonable attorney fees and expenses in cases such as
this one.* The district court has properly considered
plaintiffs’ attorneys’ request for $203,587.50 in fees, plus
an enhancement of 50%, for a total of $305,381.25.
Plaintiffs claim that 1,749 hours were spent on the case
at an average rate of $116.40. Plaintiffs’ three attor-
neys claimed individual hourly rates of $125 (out-of-
town counse!) and $80 (local counsel). The district court
relying on Johnson v. Georgia Highway Express, Inc.,
488 F.2d 714, 717-18 (5th Cir.1974), eliminated about
one-third of the hours claimed as unnecessary, duplicative
or poorly documented. Next, the court selected $90 as the
appropriate hourly fee since plaintiffs’ affidavit listed
local community rates within a range of $75 to $200.
This figure is not clearly erroneous and is consistent with
the dictates of Johnson, supra. Indeed, the district court
merely employed a sense of “billing judgment” custom-
arily used in private practice. See Hensley, supra at
1940. Thus, the district court correctly found a starting
point fee of $90,000 to $100,000.
Furthermore, the district court clearly did not err in
refusing to enhance the starting point or “lodestar” fee.
Plaintiff’s attorneys cite the following justification for
enhancement by 50% : complex legal issues, high risk of
loss, substantial time investment with low probability of
compensation, important values at stake, and potentially
#29 U.S.C. §501(b) provides: “The trial judge may allot a rea-
sonable 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 lebor organization and to compensate such member
for any expenses necessarily paid or incurred by him in connection
with the litigation.”
12a
large monetary and non-monetary benefits to USW mem-
bers. The Supreme Court recently rejected such reasons
for enhancement. See Blum v. Stenson, 465 U.S. 886,
104 S.Ct. 1541, 79 L.Ed.2d 891 (1984). The Stenson
Court found that novelty and complexity are reflected in
the number of hours expended; additional compensation
is merely “double counting.” 104 S.Ct. at 1549. Further,
the benefits resulting from this litigation do not justify
an enhancement of the starting point fee. To the con-
trary, the results support the district court’s reduction
of the fee.
We find that the district court correctly decreased the
fee award from a maximum starting point of $100,000 to
only $42,000. The Supreme Court has recognized that
the quality of results obtained is an “important factor”
in reaching a final fee amount. “Where a plaintiff has
obtained excellent results, his attorney should recover a
fully compensatory fee .... If, on the other hand, a
plaintiff has achieved only partial or limited success, the
product of hours reasonably expended on the litigation
as a whole times a reasonable hourly rate may be an
excessive amount.” Hensley, supra at 1940-41. Plain-
tiffs certainly did not obtain excellent monetary results
here as only 10% of the amount sought was actually
obtained. Indeed, the trial court found that at most
$50,000 constituted questionable payments. In undertak-
ing any case counsel is obligated to consider the amount
involved, the merits of the client’s cause, and the chance
of success at the outcome of the representation. Here
plaintiffs sought recovery of $140,000 in the lawsuit but
requested $305,000 in fees at the conclusion of the case.
Fees of $300,000 or even $100,000 are inappropriate
where only $15,000 is recovered. In Blum v. Stenson,
supra, the Supreme Court specifically held that enhance-
ment of a fee is permissible where there is exceptional suc-
cess. As part of the same reasoning, it must be accepted
that fees have to be reduced on occasion when the result
13a
was less than a success, as occurred here. The result had
to have been foreseeable by counsel and they have to
share some of the loss along with plaintiffs, as the con-
verse would be true if exceptional success had been
achieved. We refuse to give any credit for the contin-
gency factor, since counsel failed to properly appraise the
ease at the outset. Also, in considering the level of suc-
cess, we note that counsel failed to join timely defendant
USF & G so that it would have been available as a de-
fendant to contribute to a possible settlement. The dis-
trict court properly considered Johnson, Hensley, and
Blum, and reached an appropriate fee award.
The court’s award is, moveover, consistent. with prior
eases under § 501. See Local 92, International Associa-
tion of Bridge Workers v. Norris, 383 F.2d 735 (5th Cir.
1971); Highway Truck Drivers v. Cohen, 220 F.Supp.
735 (E.D.Pa.1963). Plaintiffs’ counsel cite no cases in
which the spread between fees and recovery are as great
as that requested in this case. In fact, the award in this
case is more generous than those cited above. Here, plain-
tiffs’ counsel will receive three times the monetary re-
covery; in Cohen, the attorneys received half that much;
and in Norris, they received less than the award itself.
To the extent the fee exceeds the recovery, counsel has
been compensated for the non-monetary as well as the
monetary benefits produced by their efforts on plaintiffs’
behalf.
B. Union’s Liability for Fees
USW, the union beneficiary of all funds recovered by
plaintiffs in this suit, intervened to limit the fee award.
Under the terms of the statute, the union has an oppor-
tunity to prosecute plaintiff’s claim of misapplied funds.
If the union declines and the claim proves meritorious
nonetheless, the union may be required to pay the cost
of plaintiff’s efforts. USW asserts that even if plain-
tiff’s have recovered $14,460 in union funds, the inter-
14a
national union should not be required to pay more than
that amount for plaintiff’s attorneys’ fees. The district
court held to the contrary, citing the former Fifth Cir-
cuit opinion Local 92 v. Norris, 3838 F.2d 735 (5th
Cir.1967). Norris held that an international union could
be liable for attorney fees if the misapplied funds had
not yet been returned to the union. Additionally, Norris
held that the fees could exceed the recovery. Under the
rule of Bonner v. City of Prichard, 661 F.2d 1206 (11th
Cir.1981), we are bound by the holding of Norris.
USW claims that recent Supreme Court rulings on
attorney fee awards, princiapliy Fleischmann Distilling
Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S.Ct.
1404, 18 L.Ed.2d 475 (1967), and Alyeska Pipeline Co.
v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44
L.Ed.2d 141 (1975), have rendered Norris non-binding
precedent in this circuit. See County of Monroe, Florida
v. Davenport of Labor, 690 F.2d 1359 (11th Cir.1982)
(prior panel decision is not binding when contradicted by
intervening Supreme Court precedent). Furthermore,
USW argues that the holding in Norris ignores the plain
language and history of the statute, which clearly limits
fee awards to the amount of the recovery.
First, we cannot agree that Fleischmann and Aleyska
have undermined Norris’ precedential value. In both
cases the Supreme Court declined to authorize an award
of attorney fees when the federal statute which was the
basis of the lawsuit did not authorize such an award.
Fleischmann holds that where Congress has set out a
detailed scheme of remedies for a statutory cause of
action, courts may not expand those remedies on the basis
of general equitable principles. See 87 S.Ct. at 1408-09.
The remedies provided under § 501 of the LMRDA do
not approach the specificity of those considered in Fleisch-
mann, an action for trademark infringement under the
Lanham Act. The latter statute provides for injunction
and recovery of damages, defendant’s profits, and costs
including fees for clerks, marshals, court reporters, wit-
15a
nesses, printing, copying and docket fees. See 28 U.S.C.
§ 1920. Notably omitted is any reference to attorney
fees. Section 501(b) provides that plaintiffs may sue for
an accounting, damages or “other appropriate relief’
and provides for an award of attorney fees. While this
language is more specific than that of other sections of
the LMRDA, see, e.g., 29 U.S.C. § 412 (suit for “such
relief (including injunctions) as may be appropriate’’),
it hardly sets forth the comprehensive remedies found
in the Lanham Act. Furthermore, there is no evidence
that Congress meant to prohibit equitable remedies under
§ 501. On the contrary, Congress’ reference to an ac-
counting seems an affirmative invitation to rely upon
equity in enforcing fiduciary duties. See Norris, 383
F.2d at 743. Thus, Fleischmann is not authority for our
overruling Norris and holding that an attorney’s fee may
not exceed the amount of the recovery.
USW’s reliance on Alyeska is similarly unpersuasive.
In that case the Supreme Court held that courts may not
shift attorney’s fees simply to encourage private enforce-
ment of legislation in the public interest. See id. 95 S.Ct.
at 1627. If Congress has not provided expressly for fee-
shifting, courts may not fill the gap by rewarding suc-
cessful plaintiffs for acting as “private attorneys gen-
eral.”
While Alyeska may spell the end of fee-shifting in the
absence of statutory authorization, it does not control the
present case. First, and most obviously, § 501 of the
LMRDA expressly authorizes fee-shifting. Second, the
Supreme Court’s analysis in Alyeska focused on the pri-
vate attorney general concept. See 421 U.S. at 260, 95
S.Ct. at 1623. It could not deal with the common benefit
theory, the principle at issue in this case, because under
the facts of Alyeska, fees could not be shifted to the di-
rect beneficiaries of the suit.’ Thus, the holding of
°The plaintiffs in Alyeska, several environmental groups, had
sought to prevent construction of the trans-Alaska pipeline by
EE SESS
l6a
Alyeska in no way impairs the holding of Norris. In-
deed, fee-shifting in excess of the recovery under § 501
has survived Aleyska intact. The District of Columbia
Circuit, for example, has implicitly reaffirmed such fee-
shifting in post-Alyeska cases. See, e.g., Usery v. Local
639, International Brotherhood of Teamsters, 543 F.2d
369 (D.C.Cir.1976) (noting that Aleyska did not impair
the comrion benefit theory used in LMRDA cases) ; Mon-
zillo v. Bilier, 785 F.2d 1456 (D.C.Cir.1984).
While we affirm that Norris remains good law, we
also point out that its allowance of fees in excess of
judgment is fully consistent with the legislative purpose
of § 501. As the Supreme Court has noted, the LMRDA
reflects “calculated ambiguity [and] political compro-
mise” rather than a precise congressional directive. See
Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1948, 1949 n.17, 36
L.Ed.2d 702 (1973) (quoting Cox, Internal Affairs of
Labor Unions Under the Labor Reform Act of 1959, 58
Mich.L. Rev. 819, 852 (1960)). The better guide to
statutory construction here is Congress’s ultimate purpose
in legislating, not its “plain language.”* See id. The
bringing suit against the Secretary of the Interior. The groups
sought an injunction against issuance of permits facilitating the
acquisition of land for the pipeline. See 421 U.S. at 242-45, 95
S.Ct. at 1614-15. At the close of litigation, the District of Co-
lumbia Circuit directed the pipeline company to reimburse one-
half of the plaintiffs’ attorneys’ fees. See id. at 1616. Consequently,
the cost of litigation would have been borne by the pipeline’s cus-
tomers but the benefits of enforcing the environmental laws at issue
would have redounded to the general public.
® This response to the “plain language” argument applies equally
well to USW’s argument on legislative history. USW relies on the
fact that from the Senate floor, prior to passage, Senator Gold-
water criticized the leg ‘ation on this very point. He noted that
the language of section .01 differed from that in other parts of
the bill, the latter specifically authorizing fees in addition to,
rather than as a portion of, the monetary recovery. See 105 Cong.
Rec. 16489 (daily ed. Aug. 20, 1959) (statement of Sen. Goldwater).
Senator Goldwater warned that this difference would inhibit mem-
17a
LMRDA’s purpose is to impose fiduciary duties on union
leaders and to remove disincentives to enforcement of
those duties by union members. See Bakery Workers v.
Ratner, 335 F.2d 691, 696 (D.C.Cir.1964). Strictly lim-
iting fees to the amount recovered would frustrate that
purpose. See id.
Nowhere is this realization clearer than in the courts’
routine allowance of fees in suits for injunction or other
non-monetary relief under LMRDA. See, e.g., Monzillo
v. Biller, 7385 F.2d 1456 (D.C.Cir.1984) (suit for injunc-
tion); Marshall v. United Steelworkers, 666 F.2d 845
(3d Cir.1981) (suit to overturn election results) ; Usery
v. Local 630, International Brotherhood of Teamsters,
543 F.2d 369 (D.C.Cir.1976) (intervention in suit to
overturn election results). Such fee-shifting is based on
the common benefit theory, the equitable principle which
requires that those who directly benefit by litigation
must reimburse the successful plaintiff’s costs or stand
unjustly enriched. See Usery, supra at 382 (citing
Sprague v. Ticonic National Bank, 307 U.S. 161, 59
S.Ct. 777, 83 L.Ed.2d 1184 (1939) ).
Since neither Supreme Court precedent nor congres-
sional intent limit the scope of §501(b), we reject
USW’s contention that fee-shifting in excess of the re-
covery is always impermissible. Rather, we find such -
relief necessary to effect the equitable goals of § 501.
Nonetheless, fees above the recovery are not automati-
ber enforcement since the cost of litigation could exceed the fund
recovered. USW concluded that since neither house amended the
bill to conform section 501 with other sections, Congress intended
to strictly limit fees to the amount of the recovery. While USW’s
research is sound, its conclusion is faulty. It is true that Congress
generally acts for a reason, and often for reasons set forth in the
legislative history, but we can never be sure, in the absence of an
explicit statement, why Congress fails to act. Any conclusions about
legislative intent drawn from the sequence of events merits the
same skepticism due the plain language of the statute.
18a
cally shifted simply because they represent a reasonable
amount under the Hensley-Stenson factors discussed at
part IV A, supra. To shift the excess, the plaintiff must
prove that litigation confers significant non-monetary
benefits on those persons who will ultimately pay the
fees. See Hall v. Cole, 412 U.S. 1, 92 S.Ct. 19438, 36
L.Ed.2d 702 (1973). Furthermore, those fees must
spread the cost proportionally among those who benefit.
See Shimman v. Local 18, International Union of Oper-
ating Engineers, 744 F.2d 1226, 1235 (6th Cir.1984)
(quoting Mills v. Electric Auto-Lite Co., 396 U.S. 375,
90 S.Ct. 616, 24 L.Ed.2d 593 (1970)).
Proportionality of cost and benefit is obvious here,
since the strike funds were actually provided by USW
and USW would both recover them and pay the fees
under the district court order. As the District of Colum-
bia Circuit has noted, payment of fees by the union un-
der LMRDA is a quintessential example of proportional-
ity: there is “a close match between the par_y assessed
and the beneficiary of the litigation.” See Usery, supra
at 383. Thus, we reject USW’s claim that only the de-
funct Local will benefit from this suit. In reality, nei-
ther the Local nor the plaintiffs will realize a penny.
Substantiai non-monetary benefits from the suit are
less obvious, but not clearly erroneous. The district court
found two. First, the suit exposed the practical flaws
in USW’s strike fund accounting procedures. Second,
plaintiffs’ ultimate recovery demonstrates that USW can-
not rely on Department of Labor investigations to find
fiduciary breaches in Local affairs. USW considers these
benefits insubstantial because it plans no change in ac-
counting procedures nor has the court ordered any. Thus,
the so-called “benefit” would only “result [from] the
realization that the union would have to reform itself
or risk exposure to further liability.” Shimman v. Local
18, International Union of Operating Engineers, 744 F.2d
1226, 1235 n.13 (6th Cir. 1984). USW suggests that we
= oer
— u
ae
19a
follow the Sixth Circuit, which has refused to shift fees
in just this sort of case because the benefit, in its opin-
ion, is no different from results achieved under the pri-
vate attorney general theory.
We decline to apply Shimman to this case. Shimman’s
primary benefit, in the sum of $225,000, ran solely to the
named plaintiff, compensating him for assault and bat-
tery and violation of his free speech rights. Any incen-
tive for change in union policy was largely ancillary to
plaintiff’s personal recovery. Here, in contrast, the mone-
tary recovery, as well as the incentive to change, directly
concerns USW rather than the plaintiffs. Furthermore,
we do not find such incentive an insubstantial benefit.
Substantiality does not rest on compulsory reform or in-
junctive relief. The District of Columbia Circuit has
found substantial benefits as the result of preliminary
injunctions and the mere filing of suit for such an in-
junction. See Yablonski v. UMW, 466 F.2d 424 (D.C.
Cir. 1972). Compulsion was not possible in Yablonski
since the merits were never reached, yet, the court found
a benefit and shifted fees. Similarly, that circuit and the
Third Circuit have found benefits sufficient to shift fees
where the plaintiff has only intervened in a suit brought
by the Secretary of Labor. See Marshali v. United Steel-
workers, 666 F.2d 845 (8d Cir. 1981); Usery v. Local
639, International Brotherhood of Teamsters, 543 F.2d
369 (D.C. Cir. 1976). The benefits were said to be the
intervenor’s unique perspective on the case and the possi-
bility he might discover new evidence or develop legal
arguments for the Secretary’s litigation. See Marshall,
666 F.2d at 853; Usery, 543 F.2d at 383-84. Certainly,
if the intervenor’s contributions constitute a benefit suffi-
cient to shift fees, plaintiffs’ impeachment of USW’s
strike fund accounting provides a substantial benefit to
the members of USW. Thus, we affirm the district court
order that USW pay $42,000 for plaintiffs’ attorneys’
fees.
20a
V. Liability Under the Fiduciary Bond
The final issue on appeal concerns the extent of recov-
ery under USW’s fiduciary bond for the defendants. Sec-
tion 502 of LMRDA requires that “every officer, agent
. or other representative or employee of any labor
organization . . . who handles funds or other property
thereof shall be bonded to provide protection against loss
by reason of acts of fraud or dishonesty.” 29 U.S.C.
§ 502(a). USF & G, defendant below, had bonded the
defendant officials of the Local. Although USF & G was
not originally a party to this suit, plaintiffs learned of
the USF & G bond about one month after the suit was Y
filed. The bonding company was not joined as a defend-
ant, however, until three years after filing. After a trial
on the merits, the district court found that plaintiffs
could not recover from USF & G because they had failed
to meet the notice and claim provisions of the bonding
contract.
Plaintiffs claim error in the district court’s finding.
They contend that rank and file union members cannot
be barred from recovery for failure to comply with notice
and claim provisions. See Giordani v. Hoffman, 295 F.
Supp. 463 (E.D. Pa. 1969); Purcell v. Keane, 277 F.
Supp. 252 (E.D. Pa. 1967). Although Giordani and
Purcell allowed claims in spite of failure to comply with
the bond provisions, those cases are not controlling here. |
Since the bonding companies had been jointed in the orig- |
inal complaints in those cases, prejudicial delay was not
at issue. Here, plaintiffs delayed for three years after
they received actual knowledge of the bond’s existence;
during that time, they never inquired as to the bond’s pro-
visions. Plaintiffs claim they were distracted by the hotly
contested issue of standing to sue. While distraction cer-
tainly is possible, it is no excuse for failure to diligently
pursue all claims arising from the misapplication of
strike funds. See United Kians v. McGovern, 621 F.2d
152 (5th Cir. 1980) (once plaintiff has inquiry notice
ee
2la
of claims, statute of limitation begins to run). Contrary
to plaintiffs’ assertions, prejudice to USF & G from this
delay in joinder is certainly not speculative. USF & G
was denied the opportunity to challenge plaintiffs’ stand-
ing under § 501, to argue for or against intervention by
USW, and to participate in much of the discovery prior
to trial. We conclude, therefore, that plaintiffs’ claim
against USF & G is barred for lack of due diligence.
We affirm the district court’s finding.
AFFIRMED.
22a
APPENDIX B
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
[Caption Omitted in Printing]
Before HILL and CLARK, Circuit Judges, and MOYE”,
Chief District Judge. .
JUDGMENT
These causes came on to be heard on the transcript
of the record from the United States District Court for
the Middle District of Alabama, and were argued by
counsel ;
ON CONSIDERATION WHEREOF, it is now here
ordered and adjudged by this Court that the judgments
of the said District Court in these causes be and the
same are hereby, AFFIRMED;
It is further ordered that each party bear their own
costs on appeal.
Entered: April 8, 1986
For the Court: Spencer D. Mercer, Clerk
By: Deputy Clerk
ISSUED AS MANDATE:
* Honorable Charles A. Moye, Jr., Chief U.S. District Judge for
the Northern District of Georgia, sitting by designation.
23a
APPENDIX C
UNITED STATES DISTRICT COURT
M.D. ALABAMA, N.D.
Civ. A. No. 80-180-N
ELBERT ERKINS and SAMUEL DENSON,
Plaintiffs,
Ve
BILLY BRYAN, and ARTHUR COMER, and
GEORGE BULLARD, and CHARLIE GREENE
Nov. 27, 1984
William I. Grubb, II, Eufaula, Ala., Thomas M. Jacob-
son, Milwaukee, Wis., Walter Kelly, Milwaukee, Wis., for
plaintiffs.
Jerome A. Cooper, Birmingham, Ala., for defendants.
MEMORANDUM OPINION
HOBBS, District Judge.
This action was commenced under Section 501(b) of
the Labor-Management Reporting and Disclosure Act
(LMRDA), 29 U.S.C. § 501 (1975), by two members of
Local 7326, United Steelworkers of America, against de-
fendants Billy Bryan, George Bullard, Arthur Comer,
and Charlie Greene. Plaintiffs alleged that said defend-
24a
ants breached their fiduciary duties owed to Local 7326
by misappropriating strike funds for their own personal
benefit in violation of 29 U.S.C. §501(a). After con-
ducting a three day trial without a jury, the Court con-
cluded that the union was entitled to reimbursement from
the defendants in the amount of $14,461.30, plus costs
and interest.
This cause is now before the Court on the motion of
plaintiffs for an award of attorneys’ fees. Plaintiffs’
attorneys contend that they are entitled to $305,381.25 as
compensation for the services rendered to their clients in
this law suit. Under LMRDA, 29 U.S.C. § 501(b), plain-
tiffs seek to recover these fees jointly and severally from
defendants and from the United Steelworkers of America.
The Court has reviewed plaintiffs’ motion, accompanied
by the time sheets of plaintiffs’ attorneys and supporting
affidavits, in light of the twelve factors listed in Johnson
v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.
1974), and in light of Hensley v. Eckerhart, 461 U.S.
424, 103 S.C.t 1933, 76 L.Ed.2d 40 (1983). Considera-
tion of these decisions, together with the facts of the in-
stant case, leads the Court to conclude that plaintiff’s are
entitled to $42,000.00 in attorneys’ fees.
I. Factual Background
Elbert Erkins and Samuel Denson, plaintiffs in the
above-styled action, were rank and file members of the
United Steelworkers of America (International) and of
its affiliate, Local 7326. Defendants Billy Bryan, George
Bullard, Arthur Comer, and Charlie Green were also
members of the International and Local 7826. During
the relevant times herein, each defendant occupied at
one time or another a position of fiduciary responsibility
in Local 7326.
From December 1976 through May 1978, approxi-
mately three hundred members of Local 7326 engaged in
a strike against their employer, the American Buildings
ii cecaieicbas ie x arabian
25a
Company of Eufaula, Alabama. This strike commenced
at the expiration of the employment agreement between
Local 7326 and the company. It was prompted by the
company’s demand for new terms in the collective bar-
gaining agreement.
During the eighteen moiith strike, the International
sent a total of $450,000 to the union local, along with
instructions that the money be deposited into a special
checking account which would contain only strike and
defense funds. In order to qualify for benefits from this
fund, a striker was required to perform for the union,
which usually meant walking a shift at the picket line.
In return he would receive a weekly benefit of twenty
(later thirty) dollars. A striker could also petition the
strike committee to obtain money from the fund to pay
bills or other obligations. To obtain this addiitonal assist-
ance, the striker would have to demonstrate an urgent
need. The members of the union were instructed at the
outset of the strike to exhaust their own financial re-
sources and seek alternative sources of income (e.g., un-
employment compensation) before petitioning the com-
mittee for assistance. During the course of the strike,
literally hundreds of union members’ bills were paid from
the strike funds.
Despite vigorous efforts by the union, the strike was
lost when the employees voted not to be represented by
the union at a decertification election. The results of this
election became final when the union’s objections to the
decertification election were rejected by the National
Labor Relations Board.
After losing the decertification election, Local 7326 was
no longer authorized to represent the employees at the
company’s Eufaula plant. Since Local 7326 did not serve
as the bargaining representative for employees of any
other employer, a representative of the International was
appointed as administrator to conclude the affairs of Lo-
ee ae ee
26a
cal 7326. Following his appointment, Local 7326 ceased
to exist for all practical purposes. Funds which were not
expended during the strike or during the period when
the local’s affairs were being concluded by the admin-
istrator were eventually returned to the International.
Shortly after the conclusion of the strike, plaintiffs and
other union members met with the administrator to dis-
cuss whether any of the defendants had misappropriated
strike funds. Following this meeting plaintiffs remained
suspicious that strike funds had been wrongly appropri-
ated by defendants. They decided to conduct their own
investigation. They traveled to Milwaukee, Wisconsin in
June 1979 to secure the assistance of Mr. Thomas Jacob-
son, an attorney. At first plaintiffs were unable to meet
the fee demands of Mr. Jacobson. However, they re-
turned in October 1979 with sufficient funds to retain
him. After traveling to Eufaula and conducting his own
investigation, Mr. Jacobson discovered sufficient informa-
tion to warrant contacting the International and demand-
ing that the union file suit against the defendants. The
International refused and instead forwarded the informa-
tion provided to it by Mr. Jacobson to the Department of
Labor for its consideration.
On May 1, 1980, plaintiffs sought leave from this
Court to file suit against defendants under Section
501(b). In their verified proposed complaint, plaintiffs
asserted that defendants committed numerous violations
of their fiduciary obligations as officers or representatives
of Local Union 7326. The verified proposed complaint
requested an accounting and reimbursement of any mis-
appropriated strike funds. The Court heard testimony
from the plaintiffs and determined that the good cause
requirement of Section 501(b) had been satisfied. The
Court also found that plaintiffs had satisfied the statu-
tory requirement of making a demand upon the Inter-
national to bring suit against defendants. Because the
27a
International had refused to sue the defendants, this
Court allowed plaintiffs to proceed with their complaint.
On June 12, 1980, the International filed a motion to
intervene in this lawsuit for the special purpose of seek-
ing to vacate this Court’s order allowing plaintiffs to
commence this action. The Court allowed the Interna-
tional to intervene for this limited purpose. When at a
hearing plaintiffs, through their attorney, conceded that
they were not union members at the time suit was filed,
this Court held that plaintiffs lacked standing to bring
this suit, and, therefore, withdrew its leave to file suit.
494 F. Supp. 732. Plaintiffs appealed, and the Court of
Appeals reversed, holding that plaintiffs remained ‘“mem-
bers” of the union within the meaning of Section 501(b).
Erkins v. Bryan, 663 F.2d 1048 (11th Cir. 1981), cert.
denied, 459 U.S. 989, 103 S.Ct. 348, 74 L.Ed.2d 384
(1982).
Plaintiffs also sought to bring a class action alleging
that the union breached its duty of fair representation.
This Court held such suit was time barred. Plaintiffs
appealed to the Court of Appeals, which affirmed this
ruling. Plaintiffs also were instrumental in having a fed-
eral suit brought against these same defendants for
criminal conversion. After a lengthy trial, the defend-
ants were acquitted of the crimina! charges by a jury
verdict.
After the conclusion of the criminal case, plaintiffs
presented evidence in this civil suit over the course of
three days regarding the travel expenses, strike benefits,
and payments for personal expenses that defendants had
‘eceived from the strike and defense fund. Out of the
$450,000 allotted for the three hundred members of Local
26, the four defendants received thirty-one percent of
ine funds, or $140,000.
It is undisputed, however, that the four defendants re-
mained as leaders of the strike for substantially its en-
red ee da cin aa eee
28a
tire duration of eighteen months. Their duties as leaders
of the strike precluded them from obtaining other work,
whereas most of the other union members obtained other
jobs within a few weeks or months of the beginning of
the strike. Moreover, all of the defendants made many
trips to other states in aid of the strike, and much of the
money which they received from the defense fund was
by way of reimbursement for such travel expenses.
The documentation presented by plaintiffs to substanti-
ate charges of abuse and mismanagement by defendants
included over two hundred checks that plaintiffs had
selected to challenge as having been issued to one or more
of the defendants in breach of their fiduciary duty. The
Court notes that in order to secure this judgment against
defendants, plaintiffs had to overcome difficult legal and
factual obstacles that arose during the course of this pro-
tracted litigation.
II. Attorneys’ Fees
A. Extent of Union Liability
A threshold question for this Court to consider in
arriving at a reasonable figure for attorneys’ fees is
whether the Court will show plaintiffs’ award to exceed
their recovery in the case. The question is an important
one in a case where plaintiffs claim attorneys’ fees of
$305,387.25, and their judgment amounted to only
$14,461.30. ;
The statutory provisions: governing attorneys’ fees in
actions brought under the Labor-Management Reporting
and Disclosure Act is §501(b) of the Act. This section
provides that a trial judge
may allot a reasonable part of the recovery in any
action under this subsection to pay the fees of coun-
sel prosecuting the suit at the instance of the mem-
ber of the Jabor organization and to compensate such
member for any expenses necessarily paid or incurred
by him in connection with the litigation.
29a
29 U.S.C. §501(b). The International interprets this
section to mean that the amount recovered by plaintiffs
becomes the fund out of which the Court may allot “a
reasonable part” as attorneys’ fees, so that the fees can
never exceed the recovery. The union argues that the
legislative history supports its position. Moreover, the
union argues that plaintiffs are seeking to impose on the
union the obligation to pay hundreds of thousands of
dollars in a law suit where it is not even a party. Its
only participation has been by way of limited interven-
tion (1) to oppose the bringing of the law suit for its
alleged use and benefits, and (2) to oppose plaintiffs’
efforts to collect staggering attorney fees from the union.
Plaintiffs argue that so restrictive an interpretation of
the LMRDA provisions does not take the Act’s broad
purposes into account. LMRDA establishes fiduciary ob-
ligations for union officers who occupy positions of trust
in a labor organization. 29 U.S.C. §501(a). When these
duties are violated, the Act provides criminal penalties
for those who embezzle union funds. § 501(c). It also
allows members of the union to file a civil suit for an
accounting of union assets. §501(b). Congress, in en-
acting LMRDA, remarked that
A union treasury should not be managed as the pri-
vate property of union officers, however well inten-
tioned, but as a fund governea by fiduciary stand-
ards appropriate to this type of organization. The
members who are the real owners of the money and
property of the organiaziton are entitled to a full
accounting of all transactions involving their prop-
erty.
Senate Comm. on Labor and Public Welfare, Labor-
Management Reporting and Disclosure Act of 19859,
S.Rep. No. 187, 86th Cong., 1st Sess., reprinted in 1959
U.S. Code Cong. & Ad. News 2318, 2324.
Whatever may be the merits of the proper interpreta-
tion of the intention of Congress, courts have consistently
30a
rejected the unions’ contentions that counsel fees should
be limited to the amount of the monetary recovery. Local
No. 92 v. Norris, 383 F.2d 735, 742 (5th Cir. 1967) ;
Bakery and Confectionery Workers Intl v. Ratner, 335
F.2d 691 (D.C. Cir. 1964); Highway Truck Drivers &
Helpers Local 107 v. Cohen, 220 F. Supp. 735 (E.D. Pa.
1963). Awards have been based on the theory that the
union has benefitted from the results of the litigation in-
itiated by plaintiff. Under this theory, the benefits of the
litigation may accrue to unions that were not formal
parties in the case, and may exceed the monetary recov-
ery in cases where plaintiffs obtained a favorable, non-
monetary benefit for the union. Jd. In no case, however,
has the claim for attorney fees been so disproportionate
to plaintiff’s potential or actual recovery as in the instant
case.
In Bakery and Confectionery Workers Int'l v. Ratner,
335 F.2d 691 (D.C. Cir. 1964), for example, the court re-
ferred to “the establishment of proper accounting proce-
dures, the calling of a convention for membership expres-
sion and control, and the requirement of conformity by
the officers with the International constitution” as pos-
sible benefits for the Bakery and Confectionery Workers
that would merit an award of counsel fees. The monetary
recovery, observed the court, may constitute a source for
the payment of counsel fees, but the recovery is not the
exclusive source for these fees. 335 F.2d at 696-97.
In the present case, the Court is of the opinion that
plaintiffs conferred some benefit upon the union which
is in excess of their monetary recovery. This lawsuit
benefitted the International in two respects. First, it
demonstrated to the union that the International’s elab-
orate system for controlling expenditures of its general
funds [see Declaration of Thomas Striegel] existed only
on paper in regard to Local 7326. Defendants admin-
istered over $450,000 of union funds, but did not main-
tain adequate records of their expenditures, and misap-
propriated $14,461.30.
3la
Second, the case pointed out the need for union officials
to take their fiduciary obligations seriously, and vigor-
ously to investigate charges of wrongdoing by local offi-
cials. Before plaintiffs instituted this action, they met
with union officials and asked them to investigate plain-
tiffs’ charges that defendants had abused their positions
of trust in the local union. The International seemingly
refused to investigate, and at all events refused to file
suit against defendants, electing to forward the informa-
tion it had received from plaintiffs to the Department of
Labor. There is every reason to believe that if the Inter-
national had elected to conduct its own internal investi-
gation of the local and to file suit, the same results
achieved by plaintiffs could have been attained at much
less cost than the cost claimed by plaintiffs. To the ex-
tent, however, that the International allows itself to be
put in a position where third parties enforce its fiduciary
obligations and investigate charges against local officers,
judicial decisions binding on this Court require that the
International must be prepared to pay for all or a part
of this outside help, even if the costs exceed the monetary
recovery.
B. Determination of Fee Award
Having decided that plaintiff’s attorneys are entitled
to an award of fees, the Court must now determine the
amount that counsel should receive. Plaintiffs have the
burden of proving to the Court that they are entitled to
an award of attorneys’ fees. Johnson v. Georgia Highway
Express, Inc., 488 F.2d 714, 720 (5th Cir. 1974). They
have submitted affidavits and time sheets in support of
their claim that they should receive the sum of $305,-
381.25. Plaintiffs arrive at this figure by multiplying the
hours that three of plaintiff’s attorneys worked on this
matter times the hourly rate for each attorney. This re-
sults in a total of $203,587.50. Plaintiffs then increase
this figure by a factor of fifty percent, a fee enhance-
ment that plaintiffs claim is appropriate in this case.
32a
In evaluating plaintiff’s motion, the Court has paid
particular attention to Hensley v. Eckerhart, 461 U.S.
424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), and Johnson
v. Georgia Highway Express, Inc., 488 F.2d 714 (5th
Cir. 1974). Hensley teaches that the “most useful start-
ing point for determining the amount of a reasonable fee
is the number of hours reasonably expended on the liti-
gation multiplied by a reasonable hourly rate. This cal-
culation provides an objective basis on which to make an
initial estimate of the value of a lawyer’s services.” 103
S.Ct. at 1939.
rhe figures that plaintiffs have submitted to the Court
on this issue are as follows:
Thomas M. Jacobson (1045.50 hrs at $125) $130,687.50
Thomas M. Jacobson (travel, 93 hrs at $25) 2,325.00
Walter F. Kelly (483 hrs at $125) 60,375.00
William I. Grubb (127.50 hrs at $80) 10,200.00
TOTAL (without 50% enhancement) $203,587.50
Plaintiffs have also included itemizations of the time
that counsel have spent on this case, along with support-
ing affidavits from local attorneys regarding plaintiffs’
hourly rates. In these affidavits, the attorneys state their
belief that plaintiffs’ request are reasonable and the local
attorneys charge anywhere from $75 to $200 per hour
for services similar to those performed by plaintiffs’
counsel.
The Court believes that counteraffidavits and discovery
could possibly form the basis for challenging whether all
of counsel’s time was reasonably spent, but this Court is
mindful of the Supreme Court’s admonition in Hensley
not to turn the attorney fee petition into a second major
trial. Already the time claimed for the fees of plaintiffs’
attorneys is many times the amount in controversy. Ac-
cordingly, this Court will review plaintiffs’ submissions
in light of the Court’s experience as a member of the
local bar for approximately thirty years and as one who
33a
routinely has set fees for lawyers in litigation in this
Court for the past several years, taking such aid as the
affidavits filed by the parties afford.
The Court is of the opinion that if the only considera-
tion in setting fees in this case is the number of hours
reasonably spent by plaintiffs’ attorneys times an appro-
priate hourly rate, plaintiffs would be entitled to an
hourly rate of $90 per hour. Fees awarded by this Court
have ranged from $40 an hour for beginning attorneys
to as much as $100 an hour in a contingent fee case with
excellent results for a skillful, prevailing attorney. This
Court recognizes that plaintiffs were represented by able,
dedicated attorneys.
After reviewing counsel’s itemizations, the Court be-
lieves that some of the time listed was unnecessary, du-
plicative or poorly documented. For example, plaintiff
had three attorneys present throughout the trial; defend-
ants had one. But defendants are asked to pay for law-
yers for their adversaries which clearly they could not
have afforded for themselves. This Court recognizes that
three attorneys at a trial may be helpful, but this Court
has held that such a luxury as even two counsel at a
trial should not be paid for by the losing party where
defendants were represented by only one attorney—par-
ticularly is this true where defendants have very limited
resources. Joyner v. AAA Cooper Transportation Co.,
CA No. 82-884-N (M.D. Ala. Mar. 8, 1984), and see John-
son v. Georgia Highway Express, 488 F.2d 714, 717 (5th
Cir. 1974). This Court is satisfied that much of the work
of the attorneys outside the courtroom was also duplica-
tive even where the attorneys sought to limit the amount
of duplicative work.
A careful scrutiny might afford a basis for challenging
some of the hours claimed on a basis other than duplica-
tive hours. For example, the record of Mr. Kelly is item-
ized entirely in one hour increments, and the accom-
34a
panying explanation in some cases does not seem to
justify the amount of time claimed. But this Court is
satisfied that the attorneys for plaintiffs have spent hun-
dreds of hours productively on this case. If the amount
in controversy and the results achieved justified fees
based on the simple arithmetic of multiplying hours pro-
ductively employed, times a reasonable hourly rate for
plaintiffs’ attorneys, the Court would conclude that the
fee should be no less than $95,000 to $100,000. The Court
has reduced the amount that plaintiffs may require the
union and/or the defendants to pay for plaintiffs’ attor-
neys based on the results obtained and the amount in
controversy.
Johnson v. Georgia Highway Express, 488 F.2d at 717,
notes the factors that should be considered by the district
court in arriving at an appropriate fee.
(1) Time and labor required: The Court has con-
cluded that plaintiffs’ attorneys spent more time than was
reasonably required to prosecute this case successfully,
but that plaintiffs’ attorneys spent a thousand or more
productive hours in representing their clients.
(2) The novelty and difficulty of the questions: The
case presented a novel question on the issue of standing
that was resolved in favor of plaintiffs on appeal. Erkins
v. Bryan, 663 F.2d 1048 (11th Cir. 1981). In addition,
plaintiffs’ proof depended on the difficult chore of assem-
bling and reviewing numerous checks in an effort to make
sense out of the Local’s chaotic financial! records. Beyond
the complexities of the accounting, the trial itself repre-
sented no novel or difficult questions.
(3) The skill requisite to perform the legal service
properly: Attorneys for plaintiff demonstrated skill! and
tenacity in persevering in the representation of their
clients, despite many obstacles which they had to over-
come.
35a
(4) The preclusion of other employment by the attor-
ney due to acceptance of the case. Counsel’s representa-
tion of plaintiffs did not create any conflicts of interest
which hindered their ability to represent other clients,
nor did it impose upen the time of attorneys involved to
an unusual degree.
(5) The customary fee. The Court has answered this
question in its discussion of an appropriate hourly rate.
(6) Whether the fee is fixed or contingent. The John-
son court employs this variable as an aid to the Court
“in demonstrating the attorney’s fee expectations when
he accepted the case.” 488 F.2d at 718. Plaintiffs have
asked the Court to view the fee as contingent and add
50 percent to a generous hourly rate by way of enhance-
ment. The Court recognizes some merit in the argument
of plaintiff’s counsel that the $10,000 retainer fee (which,
counsel inform the Court, was spent on expenses) should
not alter the substantial contingent nature of the fee
agreement in this case. A case in which an attorney is
paid ten thousand dollars as a retainer is not entirely
contingent, but in view of the hundreds of hours ex-
pended by plaintiffs’ attorneys, the ten thousand dollars
was clearly inadequate payment and the representation
should invoke consideration similar to a contingent fee
case. Copeland v. Marshall, 641 F.2d 880, 893 (D.C. Cir.
1980) (en banc).
(7) Time limitations imposed by the client or the
circumstances. The Court is not aware of any unusual
time constraints in this matter.
(8) The amount involved and the results obtained.
The Court is of the opinion that, considering the amount
involved, no attorney could reasonably have believed that
he would be entitled to a $300,000 fee in this case if his
own client were paying the bill. The total amount of
money received by all defendants from. the strike fund
was $140,000. Plaintiffs realized from the start that
36a
defendants were entitled to a large part of this money
for work they performed during the strike and for ur-
gent expenses which were paid for them as for other
union members. The maximum possible recovery for
plaintiffs at the outset of the trial was in the area of
$50,000.00.
Plaintiffs’ attorneys might well have anticipated that
they would expose mismanagement in the union, which
would benefit the International, and serve as additional
justification for the suit. The level of mismanagement,
however, was directly related to the amount of funds
misused by defendants. In this respect, plaintiffs should
have been alerted that the amount of their attorney fees
involving three attorneys with two of them from more
than a thousand miles distance from the trial, was out of
all proportion to the potential recovery.
Admittedly, plaintiffs had difficulty in marshalling the
evidence to prove their case in large part because of the
inadequate records and memories of defendants. Never-
theless, if the maximum possible recovery was some-
where in the area of $50,000, the actual results obtained,
$14,461.30, were a good deal less.
If plaintiff succeeded on some of his claims, but failed
to succeed on others, the time spent pursuing the unsuc-
cessful claims is not compensable if the unsuccessful
claims are not related to the successful ones. Hensley,
103 S.Ct. at 1940. On the issue of whether plaintiffs’
claims were related, the Court will treat all claims as
related. None of plaintiffs’ time will be disallowed for
unsuccessfully pursuing an unrelated claim.
(9) The experience, reputation, and ability of the at-
torneys. The quality of counsel’s representation has al-
ready been noted in determining an appropriate hourly
rate. This Court recognizes that plaintiffs were repre-
sented by able, dedicated attorneys.
37a
(10) The “undesirability” of the case. The Court does
not believe that counsel will suffer economic hardship
resulting from their representation of plaintiffs in this
matter, or that the case was “undesirable” except for
the length of time from the filing of the suit to its conclu-
sion and the travel involved for all of plaintiffs’ attorneys.
’ (11) The nature and length of the professional rela-
tionship with the client. Plaintiffs’ attorneys did not have
a prior relationship with their clients.
(12) Awards in similar cases. Judgments in two sim-
ilar cases have been roughly equivalent to plaintiffs’ mon-
etary judgment. In Local No. 92 v. Norris, 383 F.2d
735 (5th Cir. 1967), plaintiffs obtained a judgment of
$22,896.01, and received attorneys’ fees of $15,729.47.
In Highway Truck Drivers v. Cohen, 220 F. Supp. 735
(E.D. Pa. 1963), plaintiff received a verdict of $24,921.44,
and $38,000.00 in attorneys’ fees.
The twelve factors listed above are not accorded equal
weight in arriving at a reasonable fee. Under Hensley,
“the most critical factor” used in evaluating the product
of the attorneys’ reasonable hours times a reasonable rate
is the results obtained by plaintiff. 103 S.Ct. at 1941.
In this case, the fee award has been primarily influenced
by the fact that plaintiffs did not achieve a level of suc-
cess that would make the hours reasonably expended a
satisfactory basis for making the fee award. Jd. at 1940.
The Court in Hensley noted that where “plaintiff has
achieved only partial or limited success, the product of
hours reasonably expended on the litigation as a whole
times a reasonable hourly rate may be an excessive
amount. This will be true even where plaintiff’s claims
were interrelated, nonfrivolous, and raised in good faith.”
103 S.Ct. at 1941.
For example, in Earl v. Bealieu, 620 F.2d 101 (5th
Cir. 1980), a Truth-in-Lending Act case, plaintiff’s re-
covery was $220, and plaintiff sought, $1,020 for plain-
38a
tiff’s attorney fees. The court in Earl limited the attor-
ney fees to the amount of the recovery; i.e., $220. The
court emphasized that the basis for so limited an award
was “the amount involved and the results obtained.”
Id. at 103.
In eases such as this one, where the fee awarded ex-
ceeds the amount of the judgment, the Court believes
that there should be a relationship between the two. In
Pearson v. Colonial Financial Services, Inc., 5380 F. Supp.
599 (1982), a case brought before this Court, plaintiff
sought attorneys’ fees from the losing party which were
fifteen times her recovery. Plaintiff received an award
of attorney fees in excess of her judgment, but this
award was for $6,000 in fees to plaintiff’s attorneys
rather than the $31,594.00 which had been sought. In
rejecting most of plaintiff’s claim for attorney fees, this
Court made it clear that the primary reason was that the
claimed fee was out of proportion to the amount in con-
troversy and to the results obtained. Jd. at 602.
In the present case, the union has made a strong argu-
ment based on legislative history that the union cannot
be required to pay a fee in excess of the amount recov-
ered. Judicial precedent deemed binding on this Court
has held that the union can be required to pay in excess
of the amount of the judgment. The Court notes, however
that plaintiffs are seeking attorneys’ fees and costs which
are more than twenty times the amount of the judgment.
These fees and costs are $290,000.00 greater than the
monetary benefit to the union, in a case that was al-
legedly brought for its benefit.
In ruling on plaintiff’s petition, this Court has tried
to establish a correlation between the amount of the judg-
ment and the aniount awarded for attorneys’ fees. If no
such correlation is required, the fee to be awarded could
become a devastating weapon with which to bludgeon
settlements. 530 F. Supp. at 601. In a hypothetical case,
39a
an attorney could demand that a union pursue a claim
against a former officer of a defunct local union. The
union may know that the former officer is insolvent. It
may also know that it would cost far, far more to pursue
the claim than the claim is worth. Nevertheless, the
union must sue the former union officer over even trivial
amounts. This could hardly have been the intent of Con-
gress, nor would it be in the public interest.
After a review of the legislative history of LMRDA,
this Court has found no indication that Congress, in
allowing third parties to enforce the fiduciary obligations
of union officials, intended that these parties should hold
such a club to coerce decisions of a labor organization.
The union should be allowed to exercise its own judg-
ment regarding the merits of a suit without the fear of
being forced to pay staggeringiy large attorneys’ fees
which are not related to the expected recovery. In light
of these considerations, the Court will order, by separate
judgment, that defendants and the union are jointly lia-
ble for attorneys’ fees to plaintiffs in the amount of
$42,000.00.
40a
APPENDIX D
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
No. 80-7559
ELBERT ERKINS, SAMUEL DENSON and PERRY CULPEPPER,
Plaintiffs-A ppellants,
V.
BILLY BRYAN, ARTHUR COMER, GEORGE BULLARD and
CHARLIE GREENE,
Defendants-A ppellees,
UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC,
Intervenor-A ppellee.
Dec. 14, 1981
Appeal from the United States District Court
for the Middle District of Alabama
Before TUTTLE, HENDERSON and HATCHETT,
Circuit Judges.
TUTTLE, Circuit Judge:
By this appeal we are required to construe and apply
the provisions of the Landrum-Griffin Act, particularly 29
U.S.C. §501{b) when persons alleging themselves to be
members of a local union seek permission of a United
| States district .ourt to file an action against former of-
ficers of the local alleging misappropriation of union
funds, in which action the prospective plaintiffs seek to
make a recovery for the benefit of the union.
4la
This section provides:
When any officer, agent, shop steward, or repre-
sentative of any labor organization is alleged to have
violated the duties declared in subsection (a) of
this section and the labor organization or its gov-
erning board or officers refuse or fail to sue or re-
cover damages or secure an accounting or other ap-
propriate relief within a reasonable time after being
requested to do so by any member of the labor or-
ganization, 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 com-
petent jurisdiction to recover damages or secure an
accounting or other appropriate relief for the bene-
fit of the labor organization. No such proceeding
shall be brought except upon leave of the court ob-
tained 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 re-
covery 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 compen-
sate such member for any expenses necessarily paid
or incurred by him in connect’on with the litigation.
29 U.S.C. § 501 (b).
The petitioners, here the appellants, filed their petition
with the district court seeking permission to file their
suit as members of Local 7326 of the International Union,
United Steel Workers, alleging that several former of-
ficers had, during a strike in which the petitioners had
participated, embezzled and misappropriated money fur-
nished to the Union by the International for strike bene-
fits. The petition alleged that the petitioners were, at the
time, members of Local 7326. They alleged sufficient facts
which would have supported a complaint alleging mis-
application of funds as outlined in § 501(b). They also
42a
alleged that they had “made demand by letter to United
Steel Workers of America [their international union} to
take the necessary action to prevent any further union
funds from being misused by defendants for the above-
mentioned purposes, and to take immediate steps, by filing
court action, to recover from the individual defendants
the funds the defendants have wrongfully expended.”
They alleged the officers of the International had failed
under a reasonable time to take such action. Based on
such application, sworn to by the parties and presented to
the court ex parte as is permitted under the statute, the
trial court entered its order granting leave to file the
petitioners’ complaint.
Thereafter, after granting leave to the named respond-
ents to delay the filing of their response, the trial court
set down for a hearing a motion by United Steel Workers
of America for permission to intervene for the purpose
of moving the court to revoke its order permitting the
filing of petitioners’ complaint. This motion to intervene
was supported by a long affidavit by the associate general
counsel of the United Steel Workers of America, who
outlined the usual procedures for the handling of the
affairs of locals which are in similar circumstances to
Local No. 7326. Neither the petition to intervene nor the
Frankel affidavit categorically stated that the petitioners
were no longer “members” of the union. This affidavit
was extensively answered by counsel for petitioners prior
to the hearing conducted by the trial court. The court
did not enter an order allowing the intervention, but con-
sidered the pleading and affidavit as though it had
done so.
The historical facts necessary for us to consider the
correctness of the trial court’s order revoking its original
grant of permission to the petitioners to file their com-
plaint are not in dispute. The membership of Local 7326
consisted entirely of production and maintenance em-
ployees employed by American Buildings Company in
43a
Eufaula, Alabama. As of January 1, 1978 there were
approximately 300 workers employed in the plant. There
was a similar number of members of the Local in De-
cember of 1976, at the time of the expiration of the most
recent collective bargaining agreement between the Local
and the Company. Following the expiration of that
agreement, USW commenced a strike against the Com-
pany over the terms of a proposed new agreement. The
strike was authorized by a vote of the membership
of Local 7326. It proved to be a long, bitterly contested
struggle which was lost in the end of the Union. In sup-
port of the strike the AFL-CIO declared a boycott of the
Company’s products. The Local lost the right to repre-
sent the Company’s employees following its defeat in a
National Labor Relations Board decertification election
conducted on May 18, 1978. This election became final by
the Board’s certification of the results of the election on
July 14, 1978.
Local 7326 did not serve as collective bargaining repre-
sentative for employees of any other employer than
American Building Company. Thereupon, by letter dated
July 14, 1978, the director of the district of USW in
which Local 7326 was located requested that an adminis-
trator be appointed for Local 7326. This was apparently
done under the provisions of Article IX of International’s
constitution which provides “in the event the Interna-
tional president shall have reason to believe any local
union is failing to comply with any provision of the con-
stitution, or that action may be required for one of the
purposes specified in the following paragraph, the Inter-
national president may, unilaterally or at the request of
officers or members of the local union, institute proceed-
ings ... which may after appropriate hearings result
in suspending or revoking the charter of any such local
union.” Included as one of the purposes mentioned above
for which such action can be taken is “otherwise carrying
out the legitimate objects of the International union or
44a
such local.” Presumably, in the opinion of the district
director, such administrator was to be appointed because,
in the language of the general counsel's affidavit: “This
is the usual first step in a procedure followed in cases
where locals have ceased to represent any employees.”
[Emphasis added.
Following this appointment, the parties apparently
agree that Local 7326 has been dormant; no dues have
been paid and no meetings have been held. There appar-
ently have been no collective bargaining or other union
activities.!*!
The International contends that under these circum-
stances, the petitioners were no longer “members” of the
Union. Petitioners, on the other hand, contend that until
the charter has been revoked, the administrator has com-
pleted his audit and the funds have been properly dis-
bursed, they are still members of the Local and of the
International. They further contend that even if they
were not technically “members” at the time the suit was
filed, they nevertheless should be treated as “members-
in-substance” and be permitted to file the complaint as
members.
Although the petitioners, in their opposition to the
trial court’s reconsideration of its order granting permis-
sion to file the complaint, included a paragraph quoting
from the Landrum-Griffin Act section under “definitions”
dealing with “members,” the trial court did not men-
tion this definition in its disposition of the case. It held
in effect, that the decertification brought about the dor-
mancy of the Local which resulted in the loss of member-
ship by all of its previous members, including the peti-
tioners. It held that since they were not technically
members they were not qualified under the statute to
file such a complaint. The court bolstered its determi-
{* The original opinion contained the following sentence at this
point, which was stricken by subsequent order, see infra App. 52a:
“Petitioners are still employees of American Buildings Company’”’}.
45a
nation of this issue by equating the status of a “mem-
ber” under § 502 with that of a former stockholder in a
derivate suit, citing in support of this theory, Phillips
v. Osborne, 403 F.2d 826 (9th Cir. 1968). This Court
has held that a former stockholder is not qualified to
bring an action on behalf of his corporation under Fed.
R.Civ.Proc. 23.1. Schilling v. Belcher, 582 F.2d 995
(5th Cir. 1978), where we stated: “Only a shareholder,
by virtue of this ‘proprietary interest in the corporate
enterprise,” Ashwander v. Tennessee Valley Authority,
297 U.S. 288, 321, 56 S.Ct. 466, 471, 80 L.Ed. 688 (1936),
may “ ‘step into the corporation’s shoes and . . . seek in
its right the restitution he could not demand in his own.’ ”
The difficulty with this reasoning is that this statute
makes a “member” of the union a statutory representa-
tive “to recover damages or secure an accounting or other
appropriate relief for the benefit of the labor organiza-
tion.” 29 U.S.C. §501(b). It is thus not necessary that
the petitioners in such an action as this have any personal
stake in the outcome of the litigation. If the petitioners
are members, the law says they have the standing to
conduct litigation.
Moreover, it is appropriate when considering the mean-
ing of the words in § 501(b) to look at the definition
section of Chapter 11, of which this section is a part.
This definition section is found at 29 U.S.C. § 402, in
which it is stated:
For the purposes of this chapter... {O “mem-
ber” or “member in good standing,” when used in
reference to a labor organization, includes any person
who has fulfilled the requirements for membership
in such organization, and who neither has voluntarily
withdrawn from membership nor has been expelled
or suspended from membership after appropriate
proceedings consistent with iawful provisions of the
Constitution and bylaws of such organization.
eee
46a
The proof before the court at the time of the hearing
was that these petitioners '*) had not voluntarily with-
drawn from membership and they had not been expelled
or suspended from membership. It is difficult to under-
stand, therefore, how the International can contend that
they were not “members” of the Local at the time the
suit was filed. When it was creating a new right in
“members” of a union, it was surely within the power
of Congress to say “for the purposes of this Chapter we
- now say who is a member.” This is the precise language
of the statute.
The effect to be given to this definition has been ably
described by the Court of Appeals for the Seventh
Circuit:
As is apparent from the choice of terms, Congress
did not limit the protections of the Landrum-Griffin
Act to those whom the union recognizes as members.
Rather, one who has fulfilled the membership re-
quirements, that is, one who is a member in sub-
stance, is protected. Hughes v. Local 11, Interna-
tional Association of Bridge, Structural & Orna-
mental Ironworkers, 287 F.2d 810, 814 (3d Cir.),
cert. denied, 368 U.S. 829, 82 S.Ct. 51, 7 L.Ed.2d 32
(1961). There is little dispute that the laid-off em-
ployees satisfied the union’s membership require-
ments. There is also little dispute that the laid-off
employees were not members in good standing be-
cause they had not paid dues since their layoff. But
under section 402(c), one who has met the member-
ship requirements remains a member within the
meaning of the Act until one of two events occur:
(1) the member voluntarily withdraws from the
union or (2) the union expels or suspends the mem-
ber after “appropriate proceedings” held pursuant to
[* The original opinion contained the following words at this
point, which were stricken by subsequent order, see infra App. 52a:
“were still employees, they”).
47a
lawful constitutional or bylaw provisions. See Bren-
nan v. Independent Lift Truck Builders Union, 490
F.2d 213, 217 & n.6 (7th Cir. 1974). Neither of
these events occurred here; the union simply classi-
fied the laid-off employees as being no longer in good
standing. Since laid-off employees did not volun-
tarily withdraw and the union did not expel or sus-
pend them, they are “members” and therefore pro-
tected by the equal rights guarantees of section 411,
subject to the union’s reasonable rules and regula-
tions.
Alvey v. General Elec. Co., 622 F.2d 1279, 1284 (7th
Cir. 1980).
We recognize that a particular union may have in-
ternal rules of membership, but these cannot limit the
definition of “member” as contained in the statute that
creates a cause of action by a “member.” See Hughes
v. Local 11, etc., 287 F.2d 810, 817 (8d Cir. 1960). In
any event, there is nothing in the constitution’ of the
International that is inconsistent with the definition of
“member” in the statute. The assistant general counsel’s
affidavit, as quoted above, simply states that the admin-
istrator, William Caldwell, “took over the affairs of the
local upon his appointment. This is the usual first step
in the procedure followed in cases where locals have
ceased to represent any employees.” Article IX provides
that when an administrator is appointed for a local
union, he
shall have the right to demand and receive in the
name of the International union, and the local union
officers shall have the obligation to turn over, the
charter and all books, records, monies, assets and
1 Parts of the constitution were quoted in affidavits of the Inter-
national. Petitioner moved this Court to supplement the record by
receiving the entire constitution in evidence. This was not objected
to by the International. We, therefore, grant that motion.
ft
48a
property of the local union, to be held in trust for
the local union and to be used and expended only in
the proper conduct of its affairs. The administrator
shall have the right to replace officers, grievants or
other committee members or stewards removed by
the International executive board or the administra-
tor, by appointing temporary officers, grievants or
other committee members or stewards. |Emphasis
added. |
Thus, it is plain that the appointment of an adminis-
trator does not in and of itself terminate the Local.
Since the Local cannot exist without members, it seems
clear even under the constitution, that the persons who
are in good standing upon the date of the appointment
of the administrator continue to be members unless they
are subsequently suspended or expelled or elect to “volun-
tarily withdraw.”
The record is silent as to what activities the adminis-
trator engaged in during the 18 months between the
time he took charge and the filing of the petition now
before the Court. It is clear, however, that the charter
had not been surrendered or canceled by the Interna-
tional, no proceedings had been started against any mem-
bers looking towards their expulsion and none of them
had voluntarily withdrawn from membership. The record
discloses that there was some $2,000 in the treasury of
the Local at the time the administrator was appointed
and the record is not at all clear that pending the final
winding up of the Local’s affairs these funds belonged
to the International as distinguished from the Local for
whom, under the language quoted above, they were “to
be held in trust . . . and to be used and expended only
in the proper conduct of its affairs.”
The International further claims, however, that an in-
gredient in the trial court’s decision granting such a pe-
tition is that there must be a finding that there had been
a showing of “good cause.” The International contends
49a
that the way it handled the matter instead of filing suit
as outlined in the statute itself would have been more
beneficial to the Union than to have acted as requested
by the members. This, of course, cannot establish a want
of good cause, because the language of the statute is
clear and simple. The petitioners may act once they have
notified the International and have requested that a suit
be brought and there is a failure within a reasonable
time to bring such suit. The trial court could not second
guess the purpose of the statute by saying that some
other precondition to the filing of a petition may take
the place of the one laid down in the text of the section.
The trial court found that this precondition had been
satisfied.
In its motion to the trial court to vacate its original
order, the International stated that one of its purposes
was to “enable the Court to consider the matter of plain- .
tiff’s compliance with the jurisdictional prerequisites to
this action and the question of ‘good cause’ under 29
U.S.C. § 501(b) on the basis of a full record.” Upon the
trial court’s reconsideration, responding to such motion,
the court did not withdraw or modify its earlier deter-
mination that the preconditions other than that of mem-
bership had been satisfied. It held only that the mem-
bership requirement had not been satisfied and made this
the basis of its withdrawal of its earlier order.
Whatever may ordinarily be the requirement of the
section as to the establishment of good cause, we are
satisfied that it was adequately established in this case,
once we have determined that these petitioners were mem-
bers as contemplated by the Act. See, e.g., Horner v.
Ferron, 362 F.2d 224 (9th Cir. 1966) and Dinko v. Wall,
531 F.2d 68 (2d Cir. 1976), which comments on Horner
v. Ferron as the “most extensive treatment of good
cause” to be found. Rather than accepting the standard
of Dinko that the good cause requirement in § 501(b)
means “that plaintiff must show a reasonable likelihood
meICNES ites ie a ag
50a
of success and, with regard to any material facts he al-
leges, must have a reasonable ground for belief in their
existence,” we associate ourselves with the standard of
the Court of Appeais for the Ninth Circuit as announced
in Horner, supra. There, the Court said:
Thus if the defendant can establish by undisputed
affidavit, facts which demonstrate that the plaintiff
is not a member of the defendant union, or that the
action is outlawed by a statute of limitations, or
that the action cannot succeed because of the ap-
plication of the principles res judicata or collateral
estoppel, or that plaintiff has not complied with some
controlling condition precedent to the bringing of
such a suit, then although these defects do not ap-
pear on the face of the complaint, they may warrant
denial of the application.
However, we think it inappropriate to consider, at
such a hearing, defenses which require the resolu-
tion of complex questions of law going to the sub-
stance of the case. Defenses of this kind should be
appraised only on motion for summary judgment or
after a trial. Defenses which necessitate the deter-
mination of a genuine issue of material fact, being
beyond the scope of summary judgment procedure,
are a fortiori, beyond the scope of a proceeding to
determine whether a section 501(b) compiaint may
be filed. Defenses involving disputed questions of
fact should be appraised only after a trial at which
the parties and the court can have the benefit of a
complete inquiry, assisted by such pre-trial discovery
as may be undertaken. [Footnotes omitted.]
362 F.2d at 229.
Under such a standard, we conclude that good cause
was shown in this case.
Upon the filing of the motion by the law firm of
Cooper, Mitch and Crawford, for a delay within which
to plead to the original complaint, the petitioners filed
5la
their motion “to disqualify the law firm of Cooper, Mitch
and Crawford and any and all individual attorneys
therein from providing legal service of any nature to the
named defendants herein.” The motion aiso sought an
order “enjoining the United Steel Workers of America
from engaging legal counsel or retaining legal counsel on
behalf of the individual defendants herein.” The grounds
for the alleged disqualification were the assertions by the
petitioners that the said law firm had represented the
Local in proceedings before the National Labor Relations
Board prior to the decertification order and that the In-
ternational should be enjoined from otherwise providing
counsel because of a conflict of interest, pursuant to the
Labor Management Reporting and Disclosure Act of
1959. The trial court did not pass on these motions.
They remain to be dealt with upon remand.
The trial court’s order of June 30, 1980, 494 F.Supp.
732, withdrawing the leave to file a complaint previously
granted on May 1, 1980 is REVERSED and the case
is REMANDED to the district court for further proceed-
ings not inconsistent with this opinion.
52a
APPENDIX E
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
No. 80-7559
ELBERT ERKINS, SAMUEL DENSON and PERRY CULPEPPER,
Plaintiffs-A ppellants,
Vv.
BILLY BRYAN, ARTHUR COMER, GEORGE BULLARD and
CHARLIE GREENE,
Defendants-A ppellees,
UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC,
Intervenor-A ppellee.
March 19, 1982
On Petition for Rehearing, 663 F.2d 1048, and Sug-
gestion for Rehearing En Banc; Truman M. Hobbs,
Judge.
Before TUTTLE, HENDERSON, and HATCHETT,
Circuit Judges.
PER CURIAM:
The statement contained in the opinions that “peti-
tioners are still employees of American Building Com-
pany,” appears not to be supported by the evidence in the
record. It is therefore stricken from the opinion.
The Petition for Rehearing is DENIED.
No member of this panei or Judge in regular active
service on the Court having requested that the Court be
polled on rehearing en banc (Rule 35, Federal Rules of
Appellate Procedure; Local Eleventh Circuit Rule 25),
the suggestion for Rehearing En Banc is DENIED.
53a
APPENDIX F
UNITED STATES DISTRICT COURT
M.D. ALABAMA, N.D.
Civ. A. No. 80-180-N
ELBERT ERKINS, and SAMUEL DENSON,
and PERRY CULPEPPER,
Plaintiffs,
V.
BILLY BRYAN, and ARTHUR COMER, and
GEORGE BULLARD, and CHARLIE GREENE,
Defendants.
June 30, 1980
ORDER
HOBBS, District Judge.
This case illustrates again the pitfails of ex parte or-
ders; even in those circumstances where Congress by
Statute has expressly authorized such orders.
The plaintiffs in accordance with Section 501(b) of
the Labor Management Reporting and Disclosure Act of
1959 (29 U.S.C. § 501(b)) petitioned this Court for leave
to file a complaint against certain officers of Local Union
No. 7326 of United Steelworkers of America who al-
legedly took union funds and expended them for unau-
thorized and improper purposes including purchases for
the personal benefit of said officers. Plaintiffs by this
complaint seek to compei the officers of the local union
to account for all expenditures made by them out of
54a
union funds and to require the defendant union officials
to reimburse Local 7326 and USW for all improper ex-
penditures of union funds made or authorized by them.’
Section 501(b) provides as follows:
When any officer, agent, shop steward, or repre-
sentative of any labor organization is alleged to have
violated the duties declared in subsection (a) of this
section and the labor organization or its governing
board or officers refuse or fail to sue or recover dam-
ages or secure an accounting or other appropriate re-
lief within a reasonable time after being requested to
do so by any member of the labor organization, such
1USW was granted the right to be heard on its plea for recon-
sideration of the ex parte order of this Court in granting plaintiffs
the right to file their complaint for the benefit of USW against
officers of Local Union No. 7326. Plaintiffs challenge the right of
USW to “intervene” in this proceeding by way cf urging such
reconsideration, because Rule 24(c) requires that a motion “to
intervene be accompanied by a pleading setting forth the claim
or defense for which the intervention is sought.” Plaintiffs cor-
rectly argue that USW has no intention of filing a pleading setting
forth a claim or defense. But USW has filed a Motion to Vacate
Leave to File a Complaint with accompanying memorandum and
affidavits. The Federal Rules of Civil Procedure were not written
with the almost unique situation in mind in which a plaintiff must
obtain permission of court in order to file a complaint. In the
instant proceeding, USW does not desire to join issue on the com-
plaint. It simply desires to question the jurisdiction of this Court
under § 501(b) of Title 29 to allow this suit to be brought by these
plaintiffs for the benefit of USW.
Although the Court is of the opinion that USW has a right
to ask for such reconsideration, if the plaintiffs lack standing to
bring this suit, the Court could and should on its own motion,
re-examine a ruling where the Court has the independent obliga-
tion under § 501(b) to determine prior to the commencement of
the suit whether the conditions precedent to bringing the suit have
been met. This Court, therefore, does consider the ora! arguments
advanced by the plaintiffs and counsel for USW as weil as the
memoranda and affidavits filed by them in determining whether
its original order was proper.
55a
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 jurisdic-
tion 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 the court obtained upon verified
application and for good cause shown, which applica-
tion 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 prose-
cuting 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.
The purpose of allowing suit by union members is “to
further union democracy and thereby prevent misuse of
power of union leaders.” Phillips v. Osborne, 403 F.2d
826 (9th Cir. 1968). The suit is for the benefit of the
union, not its individual members or the named plaintiffs.
As is clear from its reading, $ 501(b) imposed certain
conditions precedent to suit.
First, a demand must be made on the union to bring
an action to recover the allegedly misappropriated funds.
Plaintiffs made such a demand.
Second, the labor organization must refuse or fail to
sue to recover damages or secure an accounting or other
appropriate relief within a reasonable time after being
requested to do so. The union in this case has failed to
sue although it was provided with a letter in mid-De-
cember, 1979, requesting an accounting and alleging mis-
appropriation of union funds by officers of Local Union
No. 7326. A representative of USW responded to this
letter by requesting the basis for the charges against
officials of the Local union. In February 1980, plaintiffs
sent an affidavit to USW which contained information
56a
suggesting that union funds were misappropriated by
local officials. A series of letters were exchanged between
the attorney for the plaintiffs and a representative of
USW. On March 6, 1980, the representative of USW
wrote the plaintiffs’ attorney stating that USW had de-
termined to turn the matter over to the United States
Department of Labor for investigation of the charges
against the Local officers.
USW contends that its action in turning this matter
over to the Department of Labor was reasonable and in
no way manifests a decision on its part not to pursue
the alleged wrongdoers. Although USW’s election may be
logical and in the best interest of the union, it does not
obviate the fact that the union has refused to bring suit
after a demand of several months standing. This Court,
therefore, finds that the second condition precedent to suit
has been met.
The third condition precedent to bringing suit is that
the plaintiff be a “member” of the union. The complaint
alleges that plaintiffs “were at all times material hereto
members in good standing” of Local 7326 of USW. With-
out question, plaintiffs were members of the union for
purposes of § 5061(b) during the time of the alleged mis-
appropriation of funds. The USW points out, however,
that plaintiffs are not now, and were not at the time
suit was filed, members of the union.
Local 7236 went on strike against the only employer
employing any of its members in December, 1976. The
strike was long and bitter, ending in failure in May,
1978. Thereafter, USW lost the right to represent the
company’s employees following its defeat in a National
Labor Relations Board decertification election conducted
in May, 1978. The Board overruled USW objections to
the decertification election on July 14, 1978.
Following the loss of the election, Local 7326 had no
bargaining representative status, and in July, 1978, an
57a
administrator was appointed to conclude the affairs of
Local 7326. The Local was dormant for some eighteen
months or more prior to the filing of the instant suit.
No dues have been received nor have any meetings been
held. In short, no activities of any kind have occurred
since at least October, 1978, in connection with USW
Local 7326.
During the strike, USW placed money in a special
strike fund for the use of Local 7326 to cover expenses
of the strike and to aid members through the economic
hardship of the strike. The Local was responsible for
the distribution of these funds, and it is with respect to
these funds that plaintiffs charge misappropriation by
officers of Local 7326. Pursuant to agreement between
USW and its locals, any funds remaining in local strike
funds after conclusion of strikes are returned to USW.
All dues paid by members of the USW are the property
of USW rather than the local, and in the event of the
revocation of a local union’s charter or if a local union
disbands, all assets of the local are returned to USW.
Article IX, Sec. 4, of USW Constitution.
Finally, Article XI, Section 7 of the USW Constitu-
tion, provides:
A member whose membership is terminated shall
have no right or interest in any property of the
Local Union or of the International Union, including
any dues, assessments or other financial obligations
paid by such member in advance of the effective date
of such termination.
Plaintiffs concede that since they are no longer union
members they have no derivative interest in any recovery
effected by them on behalf of the union. They insist,
however, that they have an interest in righting a wrong
which the local union officers inflicted on them and other
members of Local 7326. Plaintiffs argue that USW has
no interest in stopping wrongdoing of local union officers
58a
and that its action from the time of plaintiffs’ original
demand for an investigation to the present has been
protective of the local officers. Plaintiffs argue that un-
less they are allowed to prosecute this action, any effort
by USW will be feeble at best and will strangle in
bureaucratic inertia and dilatory “buck-passing.” Hope-
fully, USW will recognize its interest in pursuing wrong-
doing where it occurs on the part of Local officers. The
interest of USW in taking strong action to halt the mis-
appropriation of funds provided by it to strikebound
Locals would seem obvious.
This Court, however, recognizes the possibility that
USW may be less than vigorous in pursuing this matter.
However, the issue remains as to whether plaintiffs meet
the third condition precedent to suit under 29 U.S.C.
§ 501(b); ie, that they be Union members. This Court
on re-consideration holds that they do not, and therefore,
withdraws its leave to file this action granted herein on
May 1, 1980.
Plaintiffs rely on Phillips v. Osborne, 403 F.2d 826
(9th Cir. 1968) in support of the proposition that they
meet the requirement of union membership imposed by
the statute. In Phillips, supra, the erstwhile plaintiff was
a union member at the time he brought suit according to
the Constitution and By-Laws of the Union. The court
nevertheless held that he could not bring the suit because
he had also joined a rival labor organization and his in-
terest at the time he filed suit was actually antagonistic
to the union for which he sought to bring the action, and
for purposes of § 501(b), he was not an appropriate per-
son to bring an action for the benefit of the Union.
Plaintiffs’ attorney points out that no such antagonistic
interest prevails with the instant plaintiffs. They are
not members of a rival union. But unlike the plaintiff
who was disqualified in Phillips, the instant plaintiffs
were not members of USW when suit was filed.
59a
In Phillips, supra, the court pointed out that § 501 (b)
gives the union members a right akin to the right of
shareholders in a shareholder derivative suit. The Court
stated:
The condition of membership, which is expressly re-
quired by the Section, seeks to insure that a rep-
resentative of the union, the real party in interest,
will properly represent the union’s interests in the
litigation. Phillips, supra, at 832.
The plaintiffs in the instant suit, therefore, may be
viewed as in the same position as a plaintiff who seeks
to bring a shareholder derivative suit after he has sold
his stock in the corporation. He may have owned his
stock at the time of the alleged wrong, and he may have
been derivatively injured by such wrong, but essential
to his being allowed to bring the shareholder suit for
the benefit of the corporation is that he be a shareholder
at the time of filing suit. 7A C. Wright & A. Miller,
Federal Practice and Procedure, 325 (1972); 19 Am.Jur.
2d, Corporations, § 559. A complete victory in this case
by the plaintiffs will be of no tangible benefit to the
plaintiffs since they are not members, and a recovery
for the USW will not be to their benefit, derivatively or
otherwise. Conversely, a loss of this case will in no way
be of any tangible detriment to them, derivatively or
otherwise.
In Schilling v. Belcher, 582 F.2d 995, (5th Cir. 1978),
the court considered the standing of a former stockholder
to bring an action on behalf of the corporation. At page
999, the Schilling court stated:
Fed.R.Civ.P. 23.1 contains two discrete standing re-
quirements: (1) the plaintiff must have owned stock
in the defendant corporation at the time of the trans-
action of which he complains, the so-called ‘“contem-
poraneous ownership” requirement, and (2) the
plaintiff must be a shareholder of the defendant cor-
60a
poration at the time suit is brought. The latter re-
quirement) unlike the contemporanecus ownership
rule, is not expressly stated in the rule, but rather
is implied by the statement that an action under
Rule 23.1 may be “brought by one or more share-
holders .. . to enforce a right of a corporation.”
Only a shareholder, by virtue of his “proprietary in-
terest in the corporate enterprise,” Ashwander v.
Tennessee Valley Authority, 297 U.S. 288, 321 56
S.Ct. 466, 471, 80 L.Ed. 688 (1936), may “step into
the corporation’s shoes and . . . seek in its right the
restitution he could not demand in his own.” Cohen
v. Beneficial Indus. Loan Corp., 387 U.S. 541, 548,
69 S.Ct. 1221, 1226, 93 L.Ed. 1528 (1949). Thus,
it is generally held that the ownership requirement
continues throughout the life of the suit and that the
action will abate if the plaintiff ceases to be a share-
holder before the litigation ends. C. Wright & A.
Miller, 7A Federal Practice and Procedure § 1826,
at 325 (1972); see Tryforos v. Icarian Dev. Co., 518
F.2d 1258 (7th Cir. 1975), cert. denied, 423 U.S.
1091, 96 S.Ct. 887, 47 L.Ed.2d 103 (1976); Niesz
v. Gorsuch, 295 F.2d 909 (9th Cir. 1961); 3B
Moore’s Federal Practice § 23.1.17, at 23.1-63 (2d
ed. 1978); see also Annot., 168 A.L.R. 906 (1947).
The Schilling court also quoted from Kauffman v.
Dreyfus Fund, Inc., 484 F.2d 727, 735-736 (3rd Cir.
1970) as follows:
Standing [to bring a derivative action in behalf of a
corporation] is justified only by [the] proprietary
interest created by the stockholder relationship and
the possibie indirect benefits the nominal! plaintiff
may acquire qua stockholder of the corporation which
is the real party in interest.
Plaintiffs also rely on Axelrod v. Stoltz, 264 F.Supp.
5386 (E.D.Pa. 1967). In Alexrod, supra, the party seek-
ing to bring the suit was suspended from union mem-
6la
bership, and the union contended that it had to take
formal action to reinstate the party before he was a
“member” within the meaning of § 501(b). The court
in Alexrod held that Axelrod became a “member” of the
union when his period of suspension expired even though
the union had not taken any affirmative action to
reinstate.
As the Avelrod court stated:
When Axelrod’s period of suspension ended, there
was no requirement for any proceedings looking to
reinstatement. When he tendered dues after the ex-
piration of the suspension period, he had done all
that was necessary to the restoration of his benefits
and privileges as a union member. The rejection
of the tender of dues was improper. Axelrod v.
Stoltz, supra,.at 540.
Thus, the Axelrod court recognized the requirement of
3 501(b) that in order to maintain the action the plain-
tiff had to be a member of the union, and it expressly
found such membership existed.
Plaintiffs argue that their lack of union membership
is through no fault of theirs, but results from the fact
that their local union ceased to function. This is ob-
viously true, but this does not give them the standing
of “membership” which is required to bring this action.
To paraphrase the language of Schilling, supra, at p.
1002, “fa close reading” of § 501(b) persuades us that
Congress “has not chosen to entrust the heavy respon-
sibility of vindicating unenforced” union “rights to a
representative who is no longer a member of the class
which will benefit or suffer from his actions.” Accord-
ingly, it is
ORDERED that leave to file the complaint herein
granted on May 1, 1980, be, and is hereby, WITH-
DRAWN.
62a
APPENDIX G
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
Civil Action No. 80-180-N
ELBERT ERKINS and SAMUEL DENSON,
and PERRY CULPEPPER,
Plaintiffs
VS.
BILLY BRYAN, and ARTHUR COMER, and
GEORGE BULLARD, and CHARLIE GREENE,
Defendants
[Filed July 21, 1980]
ORDER
This cause is before the Court on plaintiffs’ motion
for reconsideration filed herein on July 14, 1980. In
their motion plaintiffs now state that they do not concede
that they were not members of Local 7326 when the
complaint was filed. Plaintiffs argue that because the
closing audit has not occurred under administratorship,
the local union has not been dissolved. Based on this
fact, plaintiffs now make the assertion that they are
still members of the union for the purpose of construing
29 U.S.C. § 501 (b).
The argument presented to this Court orally by plain-
tiffs’ counsel on June 20, 1980, and the documents on
63a
file in this cause simply do not support plaintiffs’ present
assertion of present membership in the local union.
From the argument reported stenographically and
transcribed in part at the Court’s request, plaintiffs’
counsel again and again acknowledged that plaintiffs
were not mebers of the union at the time the complaint
was filed. Counsel contended that Title 29, § 501(b)
was met if plaintiffs were loyal union members at the
time the union was decertified. For example:
MR. JACOBSON: If Your Honor please, as I
recall, when we met in the Court’s chambers, I recall
distinctly indicating to the Court, and the complaint
so indicates, that Mr. Erkins and Mr. Denson and
Mr. Culpepper were members of the union at the
relevant—what we allege is the relevant period of
time, which was up to the time the union was de-
certified, and that we did indicate to the Court that
the union local was no longer in existence, because
the strike had been lost and that the local had been
decertified, and I do apologize to the Court if I gave
the Court the impression they were members at the
time of the complaint.
And later:
MR. JACOBSON: Now, on the issue of member-
ship, which bothers the Court, because clearly they
were not members at the time. . .
And later:
MR. JACOBSON: A common sense reading of
what membership has got to mean in this situation,
it’s got to mean that as far as the strike which ends
up in decertification. It is the members in good
standing during the strike up to the point of de-
certification, and none of these plaintiffs, Your
Honor, crossed that picket line.
64a
Thus, plaintiffs’ counsel conceded that plaintiffs were
not union mmebers when suit was filed and argued force-
fully that this fact was irrelevant in light of the plain-
tiffs’ undisputed membership when the alleged impro-
prieties occurred.
As stated in this Court’s order entered herein on
June 30, 1980, vacating leave to file suit granted on
May 1, 1980:
Following the loss of the election, Local 7326 had no
bargaining representative status, and in July, 1978,
an administrator was appointed to conclude the
affairs of Local 7826. The Local was dormant for
some eighteen months or more prior to the filing of
the instant suit. No dues have been received nor
have any meetings been held. In short, no activities
of any kind have occurred since at least October,
1978, in connection with USW Local 7326.
The union is in a caretaker status until it is accounted
for and dissolved, but the fact that this process has not
concluded is insufficient to support p‘aintiffs’ newly-
found assertion of present union membership nor does
that fact have any effect on this Court’s determination
that plaintiffs lack standing to sve under 29 U.S.C.
§ 501(b).
Plaintiffs’ counsel argued vigorously at the hearing
that these plaintiffs were not to blame because they were
no longer union members. Plaintiff’s counsel insisted
that plaintiffs had been loyal members throughout the
strike and were loyal members when the alleged wrongs
took place. These facts are not in dispute, put they do
not give “standing.”
The basis for the Court’s withdrawal of its right to
file the complaint was based upon the plaintiffs’ lack of
any derivative interest in the outcome of the lawsuit.
Any derivative interest these plaintiffs might have had
in the outcome of this lawsuit was extinguished on the
65a
decertification of the union and the absence of any
activity by the union or by these plaintiffs as union
members for eighteen months prior to the filing of this
suit. The outcome of plaintiffs’ claim in this suit would
in no way benefit plaintiffs, whether the process of
liquidating the union has been concluded or not. The
mere fact that this defunct union has not been liquidated
cannot give these plaintiffs a derivative interest in the
outcome of the lawsuit. In the opinion of this Court,
these plaintiffs are not proper representatives to bring a
suit for the benefit of the union. Membership in the
union is a clear requirement by Congress when it
bestowed the right of action in 29 U.S.C. § 501(b).
Accordingly, it is ORDERED that plaintiff’s motion
for reconsideration be, and it is hereby, denied.
DONE this 21st day of July, 1980.
/s/ Truman Hobbs
United States District Judge
66a
APPENDIX H
STATUTORY PROVISIONS INVOLVED
Sections 3(0) and 501(b) of the Labor-Management
Reporting and Disclosure Act of 1959, 29 U.S.C. §§ 402 (0),
501(b), provide in pertinent part as follows:
§ 3. Definitions
For the purposes of this chapter—
(o) ‘Member’ or ‘member in good standing,’ when
used in reference to a labor organization, includes
any person who has fulfilled the requirements for
membership in such organization, and who neither
has voluntarily withdrawn from membership nor has
been expelled or suspended from membership after
appropriate proceedings consistent with lawful pro-
visions of the constitution and bylaws of such organ-
ization.
$501. Fiduciary responsibility of officers of labor
organizations
(b) When any officer, agent, shop steward, or
representative of any labor organization is alleged
to have violated the duties declared in subsection (a)
of this section and the labor organization or its gov-
erning board or officers refuse or fail to sue or re-
cover damages or secure an accounting or other ap-
propriate relief within a reasonable time after being
requested to do so by any member of the labor organ-
ization, 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 com-
petent jurisdiction to recover damages or secure an
accounting or other appropriate relief for the benefit
of the labor organization. No such proceeding shall
67a
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.
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.