Reply Brief — Freedman v. Morrissey

BA beara ate aa lle Ata

OCTOBER TERM, 1973

No. 73-611

AxsranaM EK. FREEDMAN,

Petitioner,

v.

James M, Morrissey, Josep Paprza, and RaLPH IpraHim,

Individually and on Behalf of the Members of the

Nationa Maritime Union or AMERICA,

Respondents and Cross-Petitioners,

and

JosepH Curran, SHannon Wai, Wo.u1uM Perry,

Martin E. Secat and Leon Karcumer,

Respondents.

CROSS-PETITIONERS’ REPLIES TO BRIEFS IN

OPPOSITION

_—_————————————

Artuur E. McInerney,

Counsel for Respondents and

Cross Petitioners,

74 Trinity Place,

New York, New York.

(212) WH 4-7482

Joun 8S. Cuapman, JR.,

Freperick M. Scuia

Of Counsel

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TABLE OF CONTENTS

PAGE

eg PPE TRE TEST OTE eee eee

Reply to the Defendants Curran and Wall ...... 2

Reply to the Defendant Segal ................. 4

I—The question of who is and who is not an

“officer”? of a National or International

Union does merit review by this Court .. 4

II—The second ecircuit’s decision not to sit

en banc left unresolved an intracircuit

GE ha haieaeiee encecn cece eae 5

IJI—The question really presented (per con-

tra, Segal Brief, Point II) is: may a

LMRDA fiduciary intentionally allow the

statute of limitations to expire against a

union fund in favor of a person to whom

he has made an unlawful payment with-

out incurring personal liability therefor

Reply to the Defendant Karchmer .............

In THE

Supreme Court of the United States

OCTOBER TERM, 1973

No. 73-611

ABRAHAM EK. FREEDMAN,

Petitioner,

v.

James M. Morrissey, JosepH Papiia, and RaLpu IsraHiM,

Individually and on Behalf of the Members of the

NationaL Maritime Union or AMERICA,

Respondents and Cross-Petitioners,

and

JosePpH Curran, SHannon Watt, WiLuiAM Perry,

Martin E. Secat and Leon Karcumenr,

Respondents.

»™

od

CROSS-PETITIONERS’ REPLIES TO BRIEFS IN

OPPOSITION

Preliminary Statement

It is significant that, although the judgment attacked by

Mr. Freedman is in favor of the NMU Officers’ Pension

Trust, none of the defendants, either trustee or union of-

ficer, has said one word in opposition to the Freedman pe-

tition for a writ. (See plaintiffs’ brief in opposition (No.

73-478), pp. 1-2).

Se i tet ene ee

9 ;

Reply to the Defendants Curran and Wall

I

With respect to the payment to Perry:

We do not challenge the facts found by the District Court.

The District Court found that Curran ‘‘dominated the peo-

ple who had anything to do with the payment from the

Officers’ Pension Plan to Perry.”’

What we do challenge is the failure to charge Curran

with this payment, as a matter of law. His domination

over the trustees made him responsible for their act in

making this improper payment to his good and close friend

when he had been warned that the payment would be im-

proper and knew in advance that the payment would be

made.

The argument that union officers are entitled to rely on

‘‘the opinion of the Union’s general counsel’’ (Curran and

Wall brief, pp. 2 and 8) is ill-founded. Curran did not

seek advice of counsel on the payment to Perry (our peti-

tion, p. 13). In fact, the union’s general counsel, Freedman

himself, states (Freedman petition, p. 26) :

‘‘Mr. Freedman’s only advice was given to the

trustees.’’

But in this situation, it would be surprising indeed if a

union official could claim protection from § 501 liability on

the basis of any such opportune advice—even had such

advice been sought.

With respect to the Shapiro trust:

(a) The finding by the Court of Appeals that the money

had not been paid to Shapiro is contrary to the NMU

financial statement and contrary to Treasurer Wall’s testi-

mony (our petition, pp. 20-21).

(b) The Shapiro trust was for the benefit of persons to

be selected by Curran. Curran testified that he intended

to use the fund to protect those removed by the decree en-

tered in this action (610a). There never was a pension

plan so indefinite and uncertain. The Plan (if the document

can be so designated) does not designate the class or type

of employee beneficiary. It does not require any particular

length of service. It does not set forth any guidelines as

to how pensions will be computed and how paid. It is a

blank check.

The Court of Appeals, in making the finding that the

money had never been paid out, relied upon a letter from

Mr. Epstein. This letter* was written after the trial had

been completed and should not have been allowed to over-

ride the testimony of Mr. Wall that the money had been

paid.

But even if taken as proof in the case, the letter opened

as many questions as it attempted to close; viz, What did

Mr. Epstein mean when he said that the $460,363 had been

transferred to an interest bearing account ‘‘under the con-

trol of the Union’’?: Did he mean that it was under the

control of Joseph Curran? Where and by whose authority

was the deposit made? In whose name was the deposit

made?

Curran and Wall refer to a memorandum which is said

to have been read at an alleged May, 1972 meeting ‘‘ describ-

ing the proposed action”. Incidentally, this memorandum

(Curran-Wall brief, p. 12) was not offered at the trial

either but was an enclosure delivered with Mr. Epstein’s

letter of July 20, 1972, after the trial had been concluded

(55-56a). The alleged meeting which purported to approve

the February payment was held four months after the

deposit was made. By this schedule the approval (if an

approval it was) was clearly exculpatory of liability

* Our petition, p. 19, incorrectly states the date of the Epstein

letter as July 20, 1973. It was dated July 20, 1972.

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for a wrongful payment and for that reason void under

$501. In fact, the meeting itself was not authorized

by the NMU Constitution, Article 4, Section 2(a) (145a).

The notice of the meeting was not published in the NMU

Pilot as required by that section. Moreover, the notice

was misleading and lacked candor, It failed to disclose

that the new plan would give the National Office (Curran)

power to select participants and fix the amount of their

respective benefits. The notice indicated that limits had

been placed upon Curran’s power to select, designate and

apportion (Curran-Wall brief, p. 12), whereas no such

limits were written in the Plan. The notice failed to tell

the members that the proposed plan had already cost NMU

over $460,000. On the contrary, the notice concluded with

this statement:

‘Tt is to be emphasized that the adoption of any or

all of the foregoing changes to the NMU Officers’ Pen-

sion Plan will be subject to the condition that they do

not involve any increase in cost to the Union.’’

Reply to the Defendant Segal

I

The question of who is and who is not an

“officer” of a National or International Union

does merit review by this Court.

Mr. Segal argues (Segal brief, p. 10) that upon remand

‘‘the District Court was faced with the task of determining

what amounts had been contributed by the NMU to the

plan on behalf of ‘non-officers’”’. That task should have

been simple if reference had been made to the plan itself,

which limited the participation to ‘‘elected officials’’; to

the decision of the Lumbard-Anderson panel in this case;

and to the stipulation that contributions to the plan for

non-elected persons were $1,628,921.

The provisions of the NMU Constitution which pur-

ported to permit appointments in lieu of elections (Segal

brief, p. 10) had already been declared void in Wirtz v.

Lea + atid Ih.

National Maritime Union of America, 399 F.2d 544 (2nd

Cir., 1968), as violative of the LMRDA. There was no

evidence that any payment had been made to the Officers’

Plan for persons appointed to fill a vacancy for an un-

expired term (Segal brief, p. 10).

Mr. Segal’s argument (Segal brief, p. 11 et seg.) deals

with what might have been rather than what was. But we

are dealing with what was. The Officers’ Plan was created

by NMU for the ‘‘exclusive benefit of its elected officials”

(SA51). The LMRDA provides that you cannot be an

officer of a national or international union unless duly

elected (Title 29 USC §481(a); SA40). Wirtz v. NMU,

399 F.2d 544 (1968), held that ‘‘patrolmen”, ‘‘field patrol-

men’’ and ‘‘agents’’ must be elected. The Hays decision

is not only at odds with the prior panel in this case

but also is squarely at odds with the Wirtz ho'ding.

The second circuit’s decision not to sit en banc

left unresolved an intracircuit conflict.

The second circuit had the power to sit en banc when

this Court granted a writ of certiorari and reversed in

Maggio v. Zeitz, 333 U.S. 56 (1948) (per contra Segal

brief, p. 13). As a matter of practice, however, the second

circuit had never sat en banc (333 U.S. 82, footnote 5) but

always deferred to the prior panel. Judge Oakes in his

dissent in Kisen v. Carlisle, 479 F.2d 1005 (1973), 1025 ob-

served: ,

‘The Learned Hand court was apparently able never

to sit en banc.”

But what happened here is surely a novel situation.

This is not the usual situation of a second panel deferring

to an earlier one when it should not do so (Maggio). Here

the second panel did not defer to an earlier panel when

it should have.

6

The question really presented (per contra,

Segal brief, Point Il) is: may a LMRIDA fidu-

ciary intentionally allow the statute of limita-

tions to expire against a union fund in favor

of a person to whom he has made an unlaw-

ful payment without incurring personal lia-

bility therefor?

Mr. Segal erroneously says that this issue ‘‘was not

seriously pursued in the courts below’’ (Segal brief, p. 13).

This subject is more fully answered below.

Reply to the Defendant Karchmer

As to the trustees’ personal liability for deliberately

allowing the statute of limitations to expire against their

trust with respect to the Brauch payment:

Mr. Karchmer is in error when he says, ‘‘ Plaintiffs first

surfaced the present issue before the Court of Appeals’

(Karchmer brief, p. 2). The matter was gone into at the

trial (660-661a; our petition, p. 16).

Mr. Karchmer (Karchmer brief, p. 4) is also in error

when he states that it “was not until January 11, 1972 that

the amendment was first judicially declared invalid and

that subsequent payments thereunder by the trustees to

non-elected officers were enjoined.’’ The amendment was

first judicially declared invalid on May 23, 1969. That

decision should have placed the trustees on notice. But

even if Mr. Karchmer were correct about the date, he, and

his fellow trustees Freedman and Segal, still had over three

months after January 11, 1972 to institute suit against

Brauch and to prevent the statute from running against

their trust.

LER EO A A NM ALNE ALL NAN AY GO oA ee ht ne!

When this action was instituted plaintiffs did not know

what unlawful payments, if any, had been made by the

trustees or to whom such payments had been made, or

when such payments had been made. Accordingly, they

could not have made the allegations in their complaint re-

quired by Subdivision (c) of Rule 19 of the Federal Rules

of Civil Procedure (Karchmer brief, p. 8). They only

knew that such payment to Perry had either been made

or was imminent. Perry was joined as a defendant.

The trustees, on the other hand, had all this information

readily at their disposal and could have joined those per-

sons to whom they had made unlawful payments, or they

could have instituted separate suits against such individ-

uals. They did neither.

Rule 20 of the Federal Rules of Civil Procedure is the

rule applicable here (permissive joinder) and not Rule 19.

Conclusion

It is again suggested that this Court may summarily

reverse on the issues presented in the plaintiffs’ cross-

petition.

Respectfully submitted,

Arruur E. McInerney,

Attorney for Plaintiff s-Cross-Petitioners,

Joun S. CHapMan, Jr.,

Freperick M, ScH.ater,

Of Counsel.

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