Appendix — United Steelworkers of America v. Cox (No. 94-724)

‘y) FILED.

~94 724 OCT 21 19%

NO.———oFFICE OF THE CLERK

IN THE

Supreme Court of the United States

~ OcToBer TERM, 1994

UNITED STEELWORKERS OF AMERICA,

Petitioner,

Vv.

Leste Ray Cox, et al.,

Respondents.

Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

CARL B. FRANKEL ROBERT M. WEINBERG *

United Steelworkers JEREMIAH A. COLLINS

of America PAGE KENNEDY

Five Gateway Center BREDHOFF & KAISER

Pittsburgh, PA 15222 1000 Connecticut Ave., N.W.

JosePH R. WHATLEY, JR. Suite 1800

Cooper, MITCH, CRAWFORD, Washington, D.C. 20086

KUYKENDALL & Wuatiey = (202) 838-9840

505 N. 20th Street * Counsel of Record

WILSON - Eras Pairing Co., Inc. - 789-0086 - WasniIneTOoN, D.C. 20001

@ A. \G?

TABLE OF CONTENTS

Page

A. Opinion of the United States Court of Appeals for

the Eleventh Circuit, dated April 5, 1994 _.......... la

B. Opinion and Order of the United States District

Court for the Northern District of Alabama,

Southern Division, dated December 16, 1991........ 72a

C. Opinion and Order of the United States District

Court for the Northern District of Alabama,

Southern Division, dated February 18, 1992........ 153a

D. Final Judgment as to Fewer Than All Claims of

the United States District Court for the Northern

District of Alabama, Southern Division, dated

eh RIG gece IT ETS MT Ct se 16la

E. Opinion of the United States Court of Appeals for

the Eleventh Circuit on Petitions for Rehearing

and Suggestions for Rehearing En Banc, dated

PE NUE « SUITED oncacandhdalehictirsiccbhitanghtindchinundaondwasemsickinarese 162a

ee

la

APPENDIX A

: UNITED STATES COURT OF APPEALS

ELEVENTH CIRCUIT

Nos. 91-7215, 92-6218

LESLIE Ray Cox; R.M. Cox; Larry DRIVER; BARRY

NICHOLS; JOHN BULLARD; ROBERT W. KENNEDY, JR.;

LoRENZO G. EasT; CLARENCE M. Pope, Jr.; C.R.

ALTEsS; JACK E. MERRYMON; TERRY P. WEST; R.S.

ARNOLD; M.W. MILSTEAD; J.W. WADE; MANNING

A.C. SNIDER; TERRY H. MELVIN; THomMas E. HILL;

Gary D. SWANN; RONALD E. FRAZIER; ANTHONY J.

CRAPET; ROBERT M. GREEN; HEATH L. MCMEANs,

Ill; BrLLy CARTER; Joz A. KNIGHT; GEORGE BOGLIN,

WARDELL CLARK, PHILLIP L. DRUMMOND, Don L.

FLuRRY, DENNIS R. FULTON, DENNIS E. JoNEs, W.T.

MAYBERRY, JAMES R. MILLER, WILLIE J. NATION,

OscaR LEE PERRY, ROBERT POOLE, BRACK WELLS,

WILLIE YOUNG, HARRY S. TURNER,

Plaintiffs-A ppellees,

Cross-A ppellants,

Vv.

ADMINISTRATOR UNITED STATES STEEL & CARNEGIE

and UNITED STEEL & CARNEGIE PENSION FUND,

Defendants,

UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC

and USX CorPorATIon, a/k/a

UNITED STATES STEEL CORPORATION,

Defendants-A ppellants,

Cross-A ppellees.

2a

LESLIE Ray Cox, R.M. Cox, Larry DRIVER, BARRY

NICHOLS, JOHN BULLARD, ROBERT W. KENNEDY, JR.,

LORENZO G. EAST, CLARENCE M. PopgE, C.R. ATLES,

JACK E. MERRYMON, TERRY P. WEST, R.S. ARNOLD,

M.W. MILSTEAD, J.W. WADE, A.C. SNIDER, TERRY H.

MELVIN, THOMAS E. HILL, GAry D. SWANN, RONALD

E. FRAZIER, ANTHONY J. CRAPET, ROBERT M. GREEN,

HEATH L. McMegans, III, BrLty CARTER, JoE A.

KNIGHT, GEORGE BOGLIN, WARDELL CLARK, PHILLIP

L. DRUMMOND, Don L. FLuRRY, DENNIS R. FULTON,

DENNIS E. JONES, W.T. MAYBERRY, JAMES R. MILLER,

WILLIE J. NATION, OSCAR LEE PERRY, ROBERT POOLE,

BRACK WELLS, WILLIE YOUNG, HARRY S. TURNER,

Plaintiffs-A ppellants,

V.

ADMINISTRATOR UNITED STATES STEEL & CARNEGIE,

UNITED STATES STEEL & CARNEGIE PENSION FUND,

USX CORPORATION, a/k/a UNITED STATES STEEL

CORPORATION,

Defendants-A ppellees.

Appeals from the United States District Court

for the Northern District of Alabama

April 5, 1994

Before ANDERSON and CARNES, Circuit Judges,

and SCHLESINGER’*, District Judge.

* Honorable Harvey E. Schlesinger, U.S. District Judge for the

Middle District of Florida, sitting by designation.

3a

CARNES, Circuit Judge:

This case arises out of the negotiations between the

USX Corporation (“USX” or “the Company”), formerly

known as United States Steel, and the United Steelwork-

ers of America (‘the Union’) leading to the 1983 Col-

lective Bargaining Agreement governing operations at the

USX steel mill in Fairfield, Alabama (“the Fairfield

Works”). The plaintiffs-appellees, who are or were Union

members and employees at the Fairfield Works, brought

this suit against USX, the administrator of the United

States Steel and Carnegie Pension Fund (“the Fund”),

and the Union, alleging that the Union negotiators Cco-

vertly requested and received pension benefits from the

Company to which they were not entitled and that, as a

result, the Union negotiators agreed to concessions that

damaged the plaintiffs. The district court granted sum-

mary judgment to the defendants on several of the plain-

tiffs’ claims, and certified its decision for appeal. We re-

view that decision, along with several of the court’s rul-

ings on discovery matters.

In part I, we discuss the facts and prior proceedings

of the case as background. In part II, we review the

district court’s grant of summary judgment for the de-

fendants and explain why we reverse that ruling. More

specifically, we discuss the standard of review in subpart

A, then we analyze the plaintiffs’ RICO claim in subpart

B and, in subpart C, their breach of contract claim

against USX under § 301 of the Labor Management Re-

lations Act, 29 U.S.C.A. § 185 (1978 & Supp.1993). In

part III, we review various rulings of the district court on

discovery. After explaining in part IV our lack of juris-

diction to review the district court’s decision not to cer-

tify a plaintiff class as to the claim for equitable relief,

we conclude in part V.

4a

I. BACKGROUND

The Fairfield Works steel mill in Jefferson County,

Alabama, had been closed, and its approximately 2,600

employees laid off, for over a year when, in September

1983, USX and the Union sought to reach an agreement

under which the mill could be reopened. William Miller,

USX Vice President for Labor Relations, headed the

USX negotiating team. The Union was represented by

Thermon Phillips, a member of the Union’s International

Executive Board and Director of District 36 (which in-

cludes Alabama) and by E.B. Rich, a sub-director of

District 36. Both Phillips and Rich had left USX to work

for the Union years before; neither had been with the

Company long enough to qualify for a pension.

The plaintiffs allege that shortly after the negotiations

began, Rich took Miller aside and gave him a note de-

manding that the Company grant retroactive leaves of

absence to a few specified Union representatives (includ-

ing themselves), so that the years they had spent working

for the Union would be counted for pension purposes as

years spent with USX and they would therefore become

eligible for USX pensions. According to the plaintiffs,

the Union negotiators surreptitiously informed Miller that

their agreement to any concessions at Fairfield was condi-

tioned on their receiving Company pensions.

The final Fairfield Works Agreement (“the Agreement”

or “FWA”), reached on Christmas Eve, 1983, did in-

clude sizable concessions, although the Union argues that

USX acceded to numerous Union demands before the

Agreement was reached, and USX argues that in return

for Union concessions it committed itself to making sub-

stantial capital investments to modernize the mill. Under

the Agreement, more than 500 jobs were eliminated;

local working conditions rules (governing such matters as

job assignments and crew sizes) were abolished alto-

gether, giving the Company sole discretion in determining

job assignments; all pending complaints, grievances, and

5a

arbitration cases were dismissed; maintenance and jani-

torial jobs were contracted out; and salary guarantees and

certain types of incentive pay were dropped. Towards the

end of the negotiations, one USX official estimated that

the Agreement would yield savings of 23.5 million dollars

per year. The plaintiffs assert that Rich and Phillips re-

fused to sign the final agreement until USX covertly

agreed to their pension demands. Miller testified in depo-

sition that the Union negotiators signed the Agreement

after he told them that he was under the impression that

their pension request “would be considered favorably”

but that he “could not assure them of that.”

In 1984, after the Agreement went into effect, Rich

contacted USX numerous times to inquire about the status

of the pension request. In the fall of 1984, the USX

Corporate Policy Committee approved a unilateral change

in policy to allow approval of indefinite retroactive leaves

of absence for former employees who had left to work for

the Union. J. Bruce Johnston, Executive Vice President

of Employee Relations, proposed the change, writing to

the Committee that “it is in the Company's interest to

foster and promote the goodwill of former employees who

were granted leaves of absence to work for the [Union].”

Shortly thereafter, the Company approved pensions for

six of the Union officials that Rich had named during

the negotiations (referred to by some as the “Fairfield

Six”), including Rich and Phillips themselves." Thus,

Rich and Phillips received for themselves and for others

that which they had covertly demanded during the nego-

tiations. In November 1984, USX began paying the Fair-

field Six their pensions, which were awarded retroactively

to February 29 of that year. However, USX did not di-

rectly inform the potential beneficiaries, other than the

Fairfield Six, of the change in its leave-of-absence policy.

In March 1985, Johnston did write a letter to Union

1 The other members of the Fairfield Six are Ralph Gurley, Carl

Statum, Virgil Pearson, and Fred Shepard.

6a

president Lynn Williams, informing him that “United

States Steel’s procedure was revised so that Leaves of

Absence applied for by International Union Representa-

tives may be permitted for longer periods than those es-

tablished in the Labor Agreement, in designated circum-

stances, at the discretion of the Company on a case-by-

case basis.” The letter also stated that, “[p]ursuant to the

above policy, we have approved requests for Leaves for

six (6) International Union Representatives.” The Union

apparently did not inform any of its other representatives

or members of the change in policy, so that the Fairfield

Six were the only ones who received pensions under the

new policy.

In May 1988, after several other Union representatives

heard rumors of the benefits the Fairfield Six were receiv-

ing, and applied for similar pensions, the United States

Steel Fund sent a letter to the Fairfield Six informing

them that it would begin depositing their benefits into

escrow accounts. According to the letter, recent decisions

by the Second, Third, and Fifth Circuits “raised serious

challenges concerning the legality of approving special,

retroactive leaves of absence which enable union officials

to receive credit for pension purposes for extended pe-

riods they spend in the service of the Union.” The letter

explained that “in light of current legal developments,”

continued payment of the benefits could subject the Fair-

field Six, USX, and the Fund “to criminal liability.”

In 1990, as a result of their actions concerning the

negotiations and pensions, USX, Rich, and Phillips were

convicted of violating 29 U.S.C.A. § 186 (1978 & Supp.

1993). Subsection (a) of that statute prohibits “any

employer” from paying, lending, or delivering “any money

or thing of value” to “any representative of any of his

employees who are employed in an industry affecting

commerce.” 29 U.S.C.A. § 186(a)(1) (1978 & Supp.

1993). Subsection (b) makes it “unlawful for any person

to request, demand, receive, or accept, or agree to receive

or accept, any payment, loan, or delivery of any money

Ja

or other things of value prohibited by subsection (a) of

this section.” 29 U.S.C.A. § 186(b)(1) (1978 & Supp.

1993). The appeal of those convictions is pending before

this Court.

Thirty-eight present and former USX employees brought

this suit in the Northern District of Alabama, seeking

monetary damages and equitable and declaratory relief

for a class of similarly situated workers. The final

amended complaint asserted five claims against USX, the

Fund, and the Union. Count One alleged that the defend-

ants violated the Racketeer Influenced and Corrupt Or-

ganizations Act (RICO), 18 U.S.C.A. §§ 1961 ef seq.

Count Two alleged that the Union breached its duty of

fair representation, and that the Company breached its

contractural duties, in violation of the Labor Manage-

ment Relations Act (LMRA) § 301, 29 U.S.C.A. § 185

(a). Count Three alleged that USX and the Union com-

mitted an unfair labor practice in violation of the Na-

tional Labor Relations Act (NLRA), 29 U.S.C.A. §§ 151

et seq., by failing to negotiate in good faith. Count Four

alleged that the defendants violated their fiduciary duties

under the Employee Retirement Income Security Act

(ERISA), 29 U.S.C.A. §§ 1001 ef seq., by failing to

notify the plaintiffs or the Department of Labor of the

change in the Company’s leave policy. Finally, Count

Five alleged violations of 29 U.S.C.A. § 186, and sought

an order enjoining the defendants from future violations.

The district court certified a plaintiff class, with re-

spect to the damages claim only, of all those who were

employed by USX in Jefferson County, Alabama, and

represented by District 36 of the Union at any time be-

tween July 1, 1983, and August 14, 1990. The court,

citing “the substantial conflicts within the class” over the

plaintiffs’ request that the Agreement be rescinded, de-

clined to certify a plaintiff class with respect to the plain-

tiffs’ claims to equitable relief. During the course of dis-

covery, the plaintiffs deposed Lynn Williams, president

of the International Union, and asked him about the

8a

letter he had received from J. Bruce Johnston in March

of 1985, informing him of USX’s change in the leave-of-

absence policy. Williams testified that he made no in-

quiry upon receiving the letter, but “had some conversa-

tion about it” with the Union’s attorneys. Plaintiffs’ coun-

sel then asked Williams “What did you say and what

did they say on that occasion about the March 5, 1985

letter?” The Union’s counsel instructed Williams not to

answer on the ground that the information sought was

protected by the attorney-client privilege. After the plain-

tiffs moved for an order compelling Williams to respond

to the question, the district court determined that the an-

swer was discoverable and, on January 10, 1991, ordered

that Williams answer. The court then certified the Un-

ion’s appeal from that order, and we granted the Union’s

petition for permission to appeal.

Also during the course of discovery, USX objected to

some of the plaintiffs’ deposition questions, document re-

quests, and interrogatories, on the ground that the infor-

mation sought was protected by the attorney-client privi-

lege. When the plaintiffs filed a motion to compel USX

to respond, the district court determined that USX, by

asserting the defense that it had intended to act in com-

pliance with the law, waived the privilege with respect

to those communications bearing on the question of

USX’s intent in awarding pension credits to Union of-

ficials. Accordingly, the court granted the plaintiffs’ mo-

tions to compel USX to produce materials bearing on

USX’s knowledge of the legality of its actions. The dis-

trict court certified USX’s appeal from that order, and we

granted USX leave to appeal, consolidating the two dis-

covery appeals into one and giving it number 91-7215.

The district court granted the defendants’ motion for

summary judgment on the plaintiffs’ claims under RICO

and claims under LMRA § 301 against both USX and

the Union, on the ground that the plaintiffs had failed to

show that the discussions about pension credits had

caused them any injury. The district court dismissed the

9a

unfair labor practice claim on the ground that the Na-

tional Labor Relations Board has exclusive jurisdiction

over such claims. The district court also granted the Un-

ion’s motion for summary judgment on the plaintiff's

ERISA claim against the Union. The district court en-

tered final judgment on those claims as to which sum-

mary judgment was granted, with the exception of the

claim against the Union for violation of the duty of fair

representation under LMRA § 301, which is therefore not

before this Court. In appealing that final judgment, the

plaintiffs have abandoned the ERISA claim against the

Union and NLRA claims. They appeal only the award

of summary judgment on the RICO claim and the § 301

claim against USX for breach of contract; they also ap-

peal a number of discovery orders the district court en-

tered prior to summary judgment. That appeal bears

number 92-6218, and has been consolidated with the

discovery appeal, number 91-7215.

Il. THE DISTRICT COURT’S GRANT OF

SUMMARY JUDGMENT

A. The Standard of Review

We review a “grant[] of summary judgment de novo,

applying the same legal standard applied by the district

court in the first instance.” Fitzpatrick v. City of At-

lanta, 2 F.3d 1112, 1117 (11th Cir.1993). Summary

judgment should be granted only “if the pleadings, deposi-

tions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is

no genuine issue as to any material fact.” Fed.R.Civ.P.

- 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317,

322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

There is a genuine issue of material fact “if the evidence

is such that a reasonable jury could return a verdict for

the nonmoving party.” Anderson v. Liberty Lobby, Inc.,

477 US. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d

202 (1986). “Credibility determinations, the weighing

of the evidence, and the drawing of legitimate inferences

10a

from the facts are jury functions, not those of a judge... .

The evidence of the non-movant is to be believed, and

all justifiable inferences are to be drawn in his favor.”

Id. at 255, 106 S.Ct. at 2513 (citing Adickes v. S.H.

Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598,

1608-09, 26 L.Ed.2d 142 (1970)). In other words, “{ilf

a reasonable fact finder could draw more than one infer-

ence from the facts, and that inference creates a genuine

issue of material fact, then the court should refuse to

grant summary judgment.” Barfield v. Brierton, 883 F.2d

923, 933-34 (11th Cir.1989).

The party seeking summary judgment bears the initial

burden of identifying for the district court those portions

of the record “which it believes demonstrate the absence

of a genuine issue of material fact.” Celotex Corp., 477

U.S. at 323, 106 S.Ct. at 2553. With regard to issues

on which the non-moving party bears the burden of proof,

the moving party need not support its motion with evi-

dence “negating the opponent’s claim.” Fitzpatrick v.

City of Atlanta, 2 F.3d 1112, 1115-16 (11th Cir.1993)

(quoting United States v. Four Parcels of Real Property,

941 F.2d 1428, 1437-38 (11th Cir.1991) (en banc)).

Once the moving party has carried its burden, the non-

moving party must show the existence of a genuine issue

of material fact to avoid summary judgment. /d.

B. The RICO Claim

The civil provision of the Racketeer Influenced and

Corrupt Organizations Act (RICO), 18 U.S.C.A. § 1964

(c) (1984 & Supp. 1993), provides that “{a]ny person

injured in his business or property by reason of a viola-

tion of section 1962 of this chapter may sue therefor in

any appropriate United States district court and shall re-

cover threefold the damages he sustains and the cost of

the suit, including a reasonable attorney’s fee.” Thus, to

recover on a civil RICO claim, the plaintiffs must prove,

first, that § 1962 was violated; second, that they were

injured in their business or property; and third, that the

lla

§ 1962 violation caused the injury. Avirgan v. Hull, 932

F.2d 1572, 1577 (11th Cir.1991), cert. denied, ——

US. , 112 S.Ct. 913, 116 L.Ed.2d 813 (1992).

Those who violate § 1962 are

those who engage in, or aid and abet another to

engage in, a pattern of racketeering activity if they

also do the following: invest income derived from

the pattern of racketeering activity in the operation

of an enterprise engaged in interstate commerce

(section 1962(a)); acquired or maintain, through

the pattern of racketeering activity, any interest in

or control over such an enterprise (section 1962

(b)); or conduct, or participate in the conduct of,

the affairs of such an enterprise through a pattern

of racketeering activity (section 1962(c)). Section

1962(d) makes it a crime to conspire to violate

sections 1962(a), (b), or (c).

Pelletier v. Zweifel, 921 F.2d 1465, 1495-96 (11th Cir.),

cert. denied, U.S. , 112 S.Ct. 167, 116 L.Ed.2d

131 (1991). “Racketeering activity” includes violations

of 29 U.S.C.A. § 186, which restricts the payments for

which a union representative can ask and which his em-

ployer can give. 18 U.S.C.A. § 1961(1)(C) (1984 &

Supp.1993); 29 U.S.C.A. § 186 (1978 & Supp.1993).

1. Violation of § 1962

USX argues that the plaintiffs failed to create a gen-

uine issue of material fact about the existence of a viola-

tion of § 1962, which is the first element of a civil RICO

claim, and the Union has adopted USX’s arguments.

First, USX argues that the plaintiffs did not proffer suf-

ficient evidence of the existence of a “pattern of racke-

teering activity.” Even as to the allegations, according to

the Company, the “[p]laintiffs allege nothing more than a

single, uncomplicated episode of alleged wrongdoing in

the nature of an alleged ‘garden-variety’ act of extortion

or bribery,” and a single act cannot constitute a “pat-

12a

tern.” Second, and in the alternative, USX argues that

even if the plaintiffs have met their burden of pleading

and have proffered sufficient evidence concerning the ex-

istence of a pattern of racketeering activity, they have

failed to meet their burden with respect to the other ele-

ments required under § 1962(a), (b), or (c). We ad-

dress these two contentions in turn.

a. The Pattern of Racketeering Activity

A “pattern of racketeering activity,” for purposes of

the RICO Act, “requires at least two acts of racketeer-

ing activity,” 18 U.S.C.A. § 1961(5) (1984 & Supp.

1993), and the Supreme Court has observed that “two

isolated acts of racketeering activity do not constitute a

pattern.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479,

496 n. 14, 105 S.Ct. 3275, 3285 n. 14, 87 L.Ed.2d 346

(1985). Instead, “ [i]t is the factor of continuity plus

relationship which combines to produce a pattern.’” Id.

(quoting S.Rep. No. 91-617, 91st Cong., Ist Sess. 158

(1969) (emphasis added)). More recently, the Court

has expanded on the definition of “continuity” and “re-

lationship.” Borrowing from Title X of the Organized

Crime Control Act of 1970, the Court has explained that

predicate acts are “related” if they “have the same or

similar purposes, results, participants, victims, or methods

of commission, or otherwise are interrelated by distin-

guishing characteristics and are not isolated events.” H.J.

Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 240,

109 S.Ct. 2893, 2901, 106 L.Ed.2d 195 (1989) (quot-

ing 18 U.S.C. § 3575(e)). As for ‘continuity,’ the Court

explained:

“Continuity” is both a closed- and open-ended con-

cept, referring either to a closed period of repeated

conduct, or to past conduct that by its nature proj-

ects into the future with a threat of repetition. See

Barticheck v. Fidelity Union Bank/First National

State, 832 F.2d 36, 39 (CA3 1987). It is, in either

13a

case, centrally a temporal concept—and particularly

so in the RICO context, where what must be con-

tinuous, RICO’s predicate acts or offenses, and the

relationship these predicates must bear one to an-

other, are distinct requirements. A party alleging a

RICO violation may demonstrate continuity over a

closed period by proving a series of related predi-

cates extending over a substantial period of time.

Predicate acts extending over a few weeks or months

and threatening no future criminal conduct do not

satisfy this requirement. .. .

Id. at 241-42, 109 S.Ct. at 2902.

We have held that “[a]cts that are part of the same

scheme or transaction can qualify as distinct predicate

acts,” Bank of America v. Touche Ross & Co., 782 F.2d

966, 971 (11th Cir.1986), as long as “each act consti-

tutes a separate violation of the state or federal statute

governing the conduct in question,” United States v.

Watchmaker, 761 F.2d 1459, 1475 (11th Cir.1985) (in-

ternal quotations omitted), cert. denied, 474 U.S. 1100,

106 S.Ct. 879, 88 L.Ed.2d 917 (1986). “‘If distinct

statutory violations are found, the predicate acts will be

considered to be distinct irrespective of the circumstances

under which they arose.’” United States v. Gonzalez, 921

F.2d 1530, 1545 (11th Cir.1991) (quoting Bank of

America, 782 F.2d at 971).

As the district court properly recognized, that which

USX argues is a single episode of bribery could be viewed

by a jury as a scheme consisting of multiple violations,

sufficiently interrelated and continuous to constitute a

pattern of racketeering activity. Each monthly payment

of pension benefits to the Fairfield Six could be inter-

preted as a “thing of value” for purposes of 29 U.S.C.A.

§ 186, and therefore as a separate predicate act for pur-

poses of RICO. See, e.g., United States v. Boffa, 688

F.2d 919, 935-36 (3d Cir.1982) (holding that a reason-

able jury could find that each monthly lease payment

14a

made to secure use of an automobile for a union official

for four months constituted a separate predicate act

under RICO), cert. denied, 460 U.S. 1022, 103 S.Ct.

1272, 75 L.Ed.2d 494 (1983). The jury could easily

determine from the proffered evidence that the payments

are connected by a common scheme, plan, or motive, and

therefore satisfy the relatedness requirement.

USX made payments to the Fairfield Six over a period

of three and one-half years (from December 1984 to May

1988). This case is therefore unlike Aldridge v. Lily-

Tulip, Inc., 953 F.2d 587 (11th Cir.1992), in which we

held that a fraud requiring the use of the mails for six

months “was accomplished in too short a period of time

. . . to qualify as a pattern of racketeering activity.” I/d.

at 593. Furthermore, as the district court observed, a

reasonable jury could find that the defendants carried on

racketeering activity during the 1983 negotiations, when

the Union negotiators made the illegal request, and

throughout 1984, when the pensions were established.

That period of time is sufficiently long for a reasonable

jury to conclude that the plaintiffs estblished closed-ended

continuity.

b. The Other Requirements of § 1962

USX argues in the alternative that even if the jury

could find that the defendants engaged in a pattern of

racketeering activity, the award of summary judgment

against the plaintiffs should be upheld because there is no

genuine issue of material fact that the additional elements

required for criminal liability under the various subsec-

tions of § 1962 exist. We disagree.

Under § 1962(c) it is unlawful for “any person em-

ployed by or associated with any enterprise engaged in,

or the activities of which affect, interstate or foreign

commerce, to conduct or participate, directly or indi-

rectly, in the conduct of such enterprise’s affairs through a

pattern of racketeering activity.” USX argues that a jury

tet iy

15a

could not find a violation of that subsection because USX

cannot be both the “person” and the “enterprise” con-

templated by § 1962(c). In United States v. Hartley, 678

F.2d 961, 986 (11th Cir.1982), a panel of this Court

held “that a corporation can simultaneously be named as

a defendant and satisfy the ‘enterprise’ requirement.”

(Emphasis added). USX argues that we should reverse

that position. That, of course, we cannot do, because

“[t]his panel is bound by the decisions of prior panels of

the Eleventh Circuit unless overruled by the en banc

court or the Supreme Court.” Pollgreen v. Morris, 911

F.2d 527, 534 (11th Cir.1990). Under Hartley, a rea-

sonable jury could conclude that the defendants violated

§ 1962(c); we therefore need not reach the plaintiffs’

counter-arguments that the jury could find violations of

§ 1962(a), (b), or (d), or that the jury could find a

violation of § 1962(c), even if Hartley is rejected, be-

cause the jury could find that the Fairfield Works, or the

Union, or District 36 of the Union, or the Fund, was the

“enterprise” for RICO purposes.

USX also argues that RICO is unconstitutionally vague.

In United States v. Van Dorn, 925 F.2d 1331, 1334 n. 2

(11th Cir.1991), this Court found the argument that

RICO is unconstitutionally vague to be “completely lack-

ing in merit.”

In summary, the plaintiffs have established the first

element of a civil RICO claim by producing evidence

from which a reasonable jury could conclude that the de-

fendants violated § 1962(c). Thus, the district court cor-

rectly declined to grant summary judgment on the first

RICO element. We turn now to causation, the second

element of a RICO claim, the ground on which the dis-

trict court did grant summary judgment for the defend-

ants.

16a

2. Causation

In awarding summary judgment to the defendants on

the RICO claim, the district court held that the plaintiffs

had failed to show the existence of a genuine issue of

material fact as to whether the alleged bribery of the

Union negotiators caused injury to the plaintiffs. The

court reasoned that the plaintiffs had produced no evi-

dence that the alleged bribes caused any of the -onces-

sions in the 1983 Fairfield Works Agreement [FWA],

and therefore they could not recover:

Considering [the] evidence in the light most favor-

able to the plaintiffs, the jury could find the pension

issue was the subject of secret discussions several

times during the FWA negotiations and that Rich

considered the pensions a condition of settlement,

but USX did not promise to favorably consider the

pension request until after the FWA was completed

and typed and when Rich and Phillips refused to

sign. There is also some evidence from which the

jury could infer that USX “committed” to providing

the pensions, and that USX intended to influence

Rich and Phillips in some manner.

There is no indication or evidence that the nego-

tiators on either side were swayed by their outstand-

ing request for pensions while they negotiated the

terms of the agreement. In light of the undisputed

evidence that the FWA never changed after USX

promised to consider the pension issue, the jury could

not reasonably infer that USX’s promise influenced

the negotiators to make concessions in the FWA.

More importantly, in view of the. additional un-

disputed evidence that the concessions resulted from

the need to make the Fairfield Works profitable be-

fore it was reopened, the jury could not soundly

infer that it was more likely that the concessions re-

sulted from the bribery of Union officials than from

economic necessity. From the evidence plaintiffs

17a

presented, a jury could only speculate about USX’s

motives in giving pensions to Union officials. There

is no evidence from which the jury could conclude

USX obtained the FWA concessions as a result of

paying Union officials pensions. Plaintiffs’ invitation

to assume that the concessions must have been the

result of bribery is not sufficient where the conces-

sions could just as likely have resulted from the need

to make Fairfield economically viable.

The district court’s assertion, that there was substantial

evidence that the concessions were caused by adverse eco-

nomic conditions in the steel industry at the time, appar-

ently refers to the deposition testimony of the negotiators:

that the pension question had not influenced the Agree-

ment; that the USX negotiators had said USX could not

afford to reopen the plant without concessions; and that

the Union negotiators did win a less concessionary agree-

ment than the Company had initially been willing to

accept.

We begin our analysis by observing that the plaintiffs

need not prove that the matter involving the personal

pension benefits caused all of the concessions in the

Agreement, or that the prevailing economic conditions

had no effect on the negotiations. It is well-established

that RICO plaintiffs must prove proximate causation in

order to recover. Holmes v. Securities Investor Protection

Corp., US. - . Lie SAX. i511,

1317-18, 117 L.Ed.2d 532 (1992); see also Reverend

Father O’Malley v. Reverend Father O'Neill, 887 F.2d

1557, 1561 (11th Cir.1989). In other words, “[c]ausa-

tion principles generally applicable to tort liability must

be considered applicable” in RICO cases. Brandenburg v.

Seidel, 859 F.2d 1179, 1189 (4th Cir.1988). A proxi-

mate cause is not, however, the same thing as a sole

cause. Instead, a factor is a proximate cause if it is

“a substantial factor in the sequence of responsible causa-

tion.” Hecht v. Commerce Clearing House, Inc., 897

18a

F.2d 21, 23-24 (2d Cir.1990). It is beside the point

whether the depressed condition of the steel industry also

contributed to the concessions. See W. Page Keeton et al.,

Prosser and Keeton on the Law of Torts § 41, at 268

(Sth ed. 1984) (“If the defendant’s conduct was a sub-

stantial factor in causing the plaintiffs injury, it follows

that he will not be absolved from liability merely because

other causes have contributed to the result, since such

causes, innumerable, are always present.” )

Moreover, there were many different concessions worth

varying amounts in the Agreement. The proximate cause

question is whether Rich and Phillips’ pursuit of the pen-

sions was responsible for changing the amount of any

concessions to which the Union agreed, not whether it

was responsible for the Union’s having to make any con-

cessions in the first place or most of the concessions in

the final analysis. For example, if the Agreement cost the

Union membership X million dollars in total concessions,

but would have cost only X million minus 100,000 dol-

lars in concessions but for the personal pension matter,

then that matter caused the membership 100,000 dollars

in injury. The district court appears to have recognized

as much, noting that “[p]laintiffs’ return to work under

less favorable conditions constituted an injury to their

business or property sufficient to satisfy RICO require-

ments, if plaintiffs could show they would have returned

to work under a less concessionary agreement absent the

RICO violations.” We agree with that proposition.

To avoid summary judgment, therefore, the plaintiffs

must point to evidence from which a reasonable jury

could infer that Rich and Phillips’ pursuit of pensions for

themselves and their friends caused some part of the total

dollar amount of concessions in the Fairfield Works

Agreement. The district court concluded that “the jury

could not reasonably infer that USX’s promise influenced

the negotiators to make concessions in the FWA,” be-

cause any deal on the pensions came after the Agreement

ee ees

19a

was in final form (although before it was signed). The

court seems to have assumed that the plaintiffs must prove

that USX’s ultimate agreement to provide the pension

benefits caused the concessions. However, the mere re-

quest for unearned pension benefits constituted a violation

of 29 U.S.C.A. § 186(b) and therefore was racketeering

activity under 18 U.S.C. § 1961(1)(C). That request, it

will be recalled, was first made early in the course of the

negotiations. Accordingly, the element of causation is

satisfied if the Union negotiators were influenced to make

any amount or degree of concessions in the subsequent

rounds of negotiations by their desire to convince the

Company to agree to their outstanding illegal request

coupled with the Company’s failure to reject the pension

request from the beginning.

Under the federal standard for the sufficiency of evi-

dence, a plaintiff may prove causation by circumstantial

evidence. Porter v. American Optical Corp., 641 F.2d

1128, 1142 (Sth Cir.1981), cert. denied, 454 U.S. 1109,

102 S.Ct. 686, 70 L.Ed.2d 650 (1981). “Inferences

from circumstantial facts may frequently amount to ‘full

proof’ of a given theory, and may on occasion even be

strong enough to overcome the effect of direct testimony

to the contrary.” Rutherford v. American Bank of Com-

merce, 565 F.2d 1162, 1164 (10th Cir.1977). Here,

although there may be no direct evidence that the Union

negotiators made concessions to obtain personal pension

benefits, there is a great deal of circumstantial evidence

that could lead a reasonable jury to that conclusion. We

are particularly reluctant to disregard inferences drawn

from circumstantial evidence as to the negotiators’ motive.

This Circuit is “mindful that ‘summary procedures should

be used sparingly . . . where motive and intent play lead-

ing roles, the proof is largely in the hands of the alleged

conspirators, and hostile witnesses thicken the plot.’”

Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d

1486, 1502 (11th Cir.1985) (quoting Norfolk Monu-

ment Co. v. Woodlawn Memorial Gardens, 394 U.S. 700,

20a

704, 89 S.Ct. 1391, 1393, 22 L.Ed.2d 658 (1969)),

cert. denied, 475 U.S. 1107, 106 S.Ct. 1513, 89 L.Ed.2d

912 (1986).

In the following paragraphs, we discuss the facts which

a reasonable jury could rationally find from the evidence

at the time summary judgment was granted, and the

evidence from which these facts could be found. Then,

we will discuss the cumulative effect of these facts and

the conclusions that rationally could be inferred) from

them. As we said in Swint v. City of Wadley, 5 F.3d

1435, 1439 (11th Cir.1993), “what we state as ‘facts’ in

this opinion for purposes of reviewing the rulings on the

summary judgment motion[ ] may not be the actual facts.

They are, however, the facts for present purposes, and

we set them out below.”

Gaining the personal pension benefits was of para-

mount concern to Rich and Phillips in the Fairfield nego-

tiations, and it was a condition of their agreement to any

settlement. Emmett Bruce Thrasher, director of another

International Union district, testified at the criminal trial

that Rich had told him that achieving the pension bene-

fits would be a prerequisite of the Union negotiators’ con-

sent to any agreement in the Fairfield negotiations. USX’s

Vice President for Labor Relations, William Miller, took

notes at an October 27, 1983, meeting during the nego-

tiations which also refer to Rich’s demand for pension

benefits as “a condition of settlement” of any agreement

at Fairfield.

Rieh and Phillips brought their personal pension de-

mand up more than once, and it was discussed inter-

mittently throughout the negotiation process. Miller testi-

fied that Rich first raised the matter after one of the

early negotiating sessions by saying “I want this taken

care of” while handing Miller a piece of paper on which

the demand for pension credit for Fairfield Union officials

was written. On December 22, 1983, two days before the

end of the negotiations, Miller met in Pittsburgh with

2la

other high-ranking USX officials and listed the pension

credits for the Union officials as one of the items still on

the table. Miller testified that he reported that, “Mr.

Rich and Mr. Phillips had continued to talk about the

matter in the context of . . . other corporations and what

they were doing.” Furthermore, when Miller asked J.

Bruce Johnston, USX Executive Vice President for Em-

ployee Relations, for instructions on how to respond to

Rich and Phillips’ ultimatum on the pension question,

Johnston responded with a very detailed set of conditions

under which USX would agree to the pension request.

(Johnston testified that he told Miller not to guarantee

anything, but the notes Miller took during the conversa-

tion contain no such instruction.) It is permissible to

infer that Johnston would not have produced such a de-

tailed list of conditions for the pension benefits if the

subject of the pension benefits had been mentioned only

once months earlier and then dropped; therefore, the bene-

fits had been discussed several times over the course of

the negotiations while the concessions were being ham-

mered out.

The subject of personal pensions for Rich and Phillips

was always discussed between them and the USX ne-

gotiators in secret. Rich first raised the issue by slipping

Miller a handwritten note after a negotiating session.

Philips testified that thereafter, when the USX negotiators

discussed the subject, they never did so in the hotel con-

ference room where the formal negotiations were held,

but only in a small room across the hall or in the hall-

way or lobby.

After the concessions were negotiated, Rich and Phillips

refused to sign the Agreement until they received assur-

ances that their pension requests would be considered

favorably. Miller testified in deposition that Rich and

Phillips refused to sign the Fairfield Agreement until they

had received an answer to their request for pension credit,

and that as far as USX was concerned, “their signatures

22a

were essential.” Only after he told them that he thought

their pension request “would be considered favorably” did

they sign, Miller testified.

The words and actions of USX officials indicate that

the Company itself believed that it had made a commit-

ment to provide the pension benefits as part of the Fair-

field Works Agreement. Johnston’s signature appears on

the recommendation for pensions for the Fairfield Six,

which states that the “pensions . . . are recommended in

accord with the December 24, 1983 agreement between

the Company and the USW at Fairfield Works.” (Em-

phasis added). According to the original proposal, the

pensions were to start on September 1, 1984. A Sep

tember 25, 1984, letter to Johnston from J.D. Short,

USX’s Vice President for Employee Benefits, refers to

a change in the starting date to February 29, 1984, “as

I understand the commitment was made that” the pensions

would be effective as of March 1. The pension requests

submitted by each of the Fairfield Six bear the notation

“Per 12-24-83 Agreement.” Furthermore, when other

Union officials applied for similar pensions, Johnston

wrote Union president Lynn Williams that the policy was

being cancelled—but that the Fairfield Six would continue

to receive their payments. That action and the documents

quoted above indicate that USX’s supposedly unilateral

change in policy was actually the result of a commitment

to provide pensions to the Fairfield Six, a commitment

given in exchange for concessions from Rich and Phillips.

The defendants tried to keep the existence of the Fair-

field Six’s pensions secret. In 1986, two years after he

had begun receiving his pension, Rich told two other

Union representatives that the pension~ matter had not

been resolved in the Fairfield negotiations, so that they

need not apply for pensions. There is evidence that Phil-

lips emphatically denied that pension credits were even

discussed at the Fairfield negotiations. Although Union

president Williams received a letter from USX in 1985

stating that USX had changed its leave-of-absence policy

23a

to allow Union representatives longer leaves of absence

“at the discretion of the Company on a case-by-case basis,”

the Union never approached the Company about grant-

ing more such leaves of absence and seems not to have

informed any of its representatives of the opportunity.

Furthermore, in its answer to a lawsuit filed by Emmett

Bruce Thrasher, also a Union representative, the Union

denied the allegation that Rich, Phillips, and others had

received pensions as part of the Agreement. In another

lawsuit brought by William Sommerville, also a Union

representative, Union attorney Bernard Kleiman swore in

an affidavit that Rich, Phillips, and two others of the Fair-

field Six had not retired from USX as of January 30,

1986, although USX records clearly indicate that, for

pension purposes, they had retired.

USX, like the Union, told no other Union representa-

tive about the change in its pension policy, although a

number of other Union representatives would appear to

have qualified for it. During the negotiations, Miller

asked Schick, USX’s General Manager of Labor Rela-

tions, to prepare information on the Fairfield Six and

to keep the matter confidential. Ed Owens, a USX official

at the Fairfield plant, was asked to prepare pension docu-

ments for the Fairfield Six and not to “publicize” it; ac-

cording to USX, those documents have now disappeared.

A jury could find it strange that those who insist that

their conduct was proper and their intent pure went to

such great lengths to hide it all from the light of day.

From such secrecy much may be inferred.

Giving the Fairfield Six the pensions Rich and Phillips

demanded during contract negotiations cost the Company

a substantial sum of money, and the Company would not

have agreed to that private concession without a conces-

sion from the Union side in return. Johnston, testifying

about a request that International Union president Lynn

Williams made during the same period that USX extend

pension benefits for workers at another plant, said that

24a

he told Jim Short: “I’m sure not going to voluntarily

give away millions of dollars that we might not have to

give away in a year in which we are losing money at an

awesome rate.” He also recalled that “all during ’83 and

’°84 we had a very correct and very tough and very hard-

nosed arm’s length relationship with the Steelworkers.” It

strains credulity to suggest that a compa1y committed to

the profit motive, in a period in which it was in dire fi-

nancial straits, would in a “very hardnosed arm’s length

relationship” give away, for nothing in return, unearned

pension benefits that cost USX hundreds of thousands of

dollars.”

Instead of receiving personal pension benefits for them-

selves and their friends, Rich and Phillips could have de-

manded and obtained from USX a reduction in the Un-

ion’s concessions of an amount equal to the cost of the

pensions. That conclusion follows as a matter of eco-

nomics from the nature of the collective bargaining proc-

ess. There is no reason why a company that would agree

to give up a dollar in unlawful pension benefits to union

officials would not instead agree to accept one dollar less

in concessions from the Union. Indeed, assuming that

freedom from the risk of detection and prosecution is

worth something to corporations and their officials, it is

reasonable to infer that the Company would have been

willing to forego more than one dollar in concessions for

every dollar it could have avoided paying out in illegal

benefits.

2 At oral argument, counsel for the Union conceded that the

pensions “may well” have been worth hundreds of thousands of

dollars. USX’s records reveal that the pensions received by the

Fairfield Six paid from $888.67 per month to $1,183.25 per month.

According to the plaintiffs, the present value of such a pension for

Emmett Bruce Thrasher, a Union official who was not included in

the Fairfield Six, would have been $88,574.00 in 1987. Whatever

their precise value, it is clear that the pensions were worth a sub-

stantial amount of money.

ren

een j .

7 ——— el

25a

In summary, negotiating their personal pensions was of

paramount concern to Rich and Phillips, and they consid-

ered it to be a condition of settlement. The issue was dis-

cussed intermittently throughout the negotiations about

concessions, and always in secret. Rich and Phillips re-

fused to sign the negotiated agreement until they received

assurances that their pension réquests would be consid-

ered favorably. The Company and its officials believed

that it was committed to pay the pension benefits as part

of the Fairfield Works Agreement. All of the defendants

tried very hard to keep the pensions secret. The pensions

cost the Company a substantial sum of money, and it

would not have agreed to them without receiving some-

thing in return. Finally, instead of using their position

as Union negotiators to gain the pensions for themselves

and their friends, Rich and Phillips could have secured

a reduction in concessions equal to or greater in value

than the pensions. From all of those facts, a reasonable

jury could conclude that the pursuit of personal pension

benefits by Rich and Phillips, coupled with the Company’s

failure to reject the idea from the beginning, caused the

Agreement to contain more concessions from the Union

than it would have contained if Rich and Phillips had

been completely loyal to the rank and file Union mem-

bership.

The district court observed that “USX did not promise

to favorably consider the pension request until after the

FWA was completed and typed and when Rich and Phil-

lips refused to sign.” Because the Agreement’s text did

not change after USX promised that the request “would

be considered favorably,” the court concluded that the

plaintiffs could not show that the Union negotiators made

any concessions to secure their pensions. The district

court erred by placing too much reliance upon the timing

of the Company’s formal promise of the illegitimate pen-

sions. As we have explained above, there was ample evi-

dence that, even without a formal agreement, the combi-

nation of illicit behavior by Rich, Phillips, and the Com-

26a

pany caused the amount of the concessions actually ne-

gotiated to be more than they would otherwise have been.

Moreover, the district court placed too little weight on

the value of the signatures of Rich and Phillips to the ne-

gotiated Collective Bargaining Agreement. Even though

the agreement had already been negotiated and the con-

cessions agreed upon, Rich and Phillips had something

that the Company needed and was willing to trade for—

their signatures as the Union’s negotiators. USX was

willing to trade a promise to grant the pension benefits

(saying the requests “would be considered favorably”) in

exchange for those signatures, and that trade was made.

Instead of trading their signatures for personal pension

benefits, which the Union concedes “may well” have been

worth hundreds of thousands of dollars, Rich and Phillips

could have traded their signatures for the benefit of all of

the workers whom they represented—refusing to sign un-

til the Company agreed to reduce the amount of conces-

sions granted by the same hundreds of thousands of dol-

lars. Thus, even focusing exclusively upon the conclusion

of the collective bargaining process, a rational jury could

infer that as a result of their demand for personal pension

benefits, the Agreement was more concessionary than it

would have been otherwise. The district court should not

have granted summary judgment for the defendants on

the causation issue.®

3. Union Liability Under RICO

The Union argues in the alternative that the district

court’s grant of summary judgment for the Union should

8 USX and the Union argue that the grant of. summary judgment

can be affirmed on the alternative ground that the plaintiffs failed

to produce evidence from which the jury could conclude that they

were actually injured (as opposed to evidence from which the jury

could conclude that the injury was caused by the pension request).

However, because a rational jury could infer that the Agreement

was more concessionary than it otherwise would have been, the

jury could find injury.

cette ehiiee fete eae ee

Bit ain, AGI rt sor ste ie

27a

be affirmed because the Union is not liable under RICO -

for the acts of its representatives. The Union argues that

because it is the victim of the racketeering activity of its

negotiators, it should not be held liable for their viola-

tions.

The plaintiffs argue that the Union can be liable under

RICO, not only under the principle of respondeat su-

perior, but also because “the Union not only learned of

its employees’ illegal acts and failed to take action, but

also willfully participated, conspired, aided and abetted,

ratified and actively concealed the illegal acts of Rich and

Phillips,” while under a fiduciary duty to act in the best

interest of its members. They contend that the Union

is not a victim; the victims, they maintain, are the “rank-

and-file” workers.

We will address in turn the theories that the parties

have put forward.

a. Liability of “Victim” Enterprise Under RICO

According to the Union, “Congress did not intend

RICO liability to attach to legitimate enterprises that are

used as passive instruments for the racketeering activities

of employees or others,” but instead intended to protect

those enterprises. The Union argues that, in response to

Congress’ intention, “the cases . . . hold that where an

individual violates RICO by using an enterprise as the

instrumentality of his racketeering activities, liability at-

taches to the wrongdoing individual, not to the enter-

prise.”

The district court determined that there was no sup-

port in the record for the Union’s claim that it was a

victim. The only injury alleged was the injury to the

Union member plaintiffs; the Union produced no evi-

dence that the Union itself had been victimized. The

court therefore held that the Union had failed to demon-

Strate the absence of a genuine issue of material fact, and

refused to grant summary judgment on the basis that the

28a

Union was a victim of racketeering activity and therefore

could not be held liable for that activity.

However, we need not address the question of whether

the Union presented adequate evidence of its victimiza-

tion, because we reject the Union’s argument that “[t]he

law in this Circuit is fully consistent with” the cases

refusing to hold RICO enterprises liable for the violations

of their subordinates. Our review of the cases cited by the

Union reveals that although some courts have recognized

a narrow exception to vicarious liability under RICO, that

exception has been created in order to preserve the non-

identity rule (that under § 1962(c), the RICO defendant

and the RICO enterprise cannot be one and the same).

As discussed in subpart B.1.b, above, this Circuit has

unequivocally rejected that rule.

The cases that the Union cites for the proposition that

an enterprise is not liable under RICO for the acts of

its employees which abuse the enterprise all trace their

roots to Haroco, Inc. v. American Nat'l Bank & Trust

Co., 747 F.2d 384 (7th Cir.1984), affd, 473 U.S. 606,

105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). In Haroco,

the Seventh Circuit held that the American National

Bank could not be liable under 18 U.S.C. § 1962(c) be-

cause that subsection “requires separate entities as the

liable person and the enterprise which has its affairs con-

ducted through a pattern of racketeering activity.” Id.

at 400. The Haroco court reasoned that the “non-

identity” requirement of § 1962(c) would not allow cor-

rupt corporations to escape all RICO liability, because

§ 1962(a) contains no such requirement; under that sub-

section, “the liable person may be a corporation using

the proceeds of a pattern of racketeerifg activity in its

operations.” Jd. at 402. As a result, the “corporation-

enterprise” is “liable under RICO when the corporation

is actually the direct or indirect beneficiary of the pattern

of racketeering activity, but not when it is merely the

victim, prize, or passive instrument of racketeering.” Id.

29a

In Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1306

(7th Cir.1987), cert. denied, 492 U.S. 917, 109 S.Ct.

3241, 106 L.Ed.2d 588 (1989), “to avoid holding vi-

cariously liable a corporation that was the victim of a

RICO violation,” the Seventh Circuit held that a cor-

poration will be held vicariously liable for the RICO vio-

lations of its employees “only when 1) the corporation

has derived some benefit from the RICO violation and

2) imposing vicarious liability is not inconsistent with the

intent of Congress.” Id. (emphasis omitted). Following

the reasoning laid out in Haroco, the court held that

“[v]Jicarious liability . . . has only limited application to

civil RICO.” Id. The Seventh Circuit has voiced con-

cern “that respondeat superior might be used to circum-

vent § 1962(c)’s requirement that the person conducting

the racketeering activities be separate from the enterprise

through which those activities are conducted.” Ashland

Oil, Inc. v. Arnett, 875 F.2d 1271, 1281, (7th Cir.

1989). Nonetheless, the Seventh Circuit has approved

vicarious liability when holding the employer liable would

not violate the non-identity rule: “Respondeat superior is

. . entirely appropriate under both subsections (a) and

(b)” of § 1962, because those subsections contain no

non-identity requirement. Liquid Air Corp., 834 F.2d

at 1307. Similarly, respondeat superior will make liable

under § 1962(c) a corporation whose officers conspire to

conduct the affairs of another corporation through a pat-

tern of racketeering, because the second corporation then

serves as the RICO “enterprise.” Ashland Oil, 875 F.2d

at 1281.

Despite the inclusion of some broad language, the cases

cited by the Union stand only for the proposition that, in

order to preserve the non-identity rule, vicarious liability

Should not be imposed under § 1962(c) where the em-

ployer is also the RICO enterprise. Thus, although the

First Circuit in Schofield v. First Commodity Corp., 793

F.2d 28 (1st Cir.1986), stated broadly that “the concept

of vicarious liability is directly at odds with the Congres-

30a

sional intent behind section 1962(c),” id. at 32, the ac-

tual holding of that case was merely that “section 1962

(c) does not extend liability to the enterprise,” id. at 30

(emphasis added). That was reemphasized in a recent

First Circuit opinion which viewed Schofield as holding

merely that “[s]ection 1962(c) does not recognize cor-

porate liability on the enterprise’s part under a theory of

respondeat superior.” Miranda v. Ponce Federai Bank,

948 F.2d 41, 45 (1st Cir.1991) (emphasis added).

Similarly, the Eighth Circuit declined to apply respondeat

superior to a corporate defendant for the actions of its

chief financial officer, quoting Schofield: “Both the lan-

guage of [§ 1962(c)] and the articulated primary motiva-

tion behind RICO show that Congress intended to sepa-

rate the enterprise from the criminal ‘person’ or ‘per-

sons.” Luthi v. Tonka Corp., 815 F.2d 1229, 1230

(8th Cir.1987).

The D.C. Circuit, in Yellow Bus Lines, Inc. v. Drivers,

Chauffers & Helpers Local Union 639, 883 F.2d 132,

140 (D.C.Cir.1989), rev’d in part on other grounds, 913

F.2d 948 (D.C.Cir.1990) (en banc), cert. denied, ——

USS. , 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991),

adopted Haroco’s view of subsections (a) and (c) of

§ 1962:

Through section (a), Congress provided for punish-

ment of organizations which in fact gain from their

wrongdoing by focusing on profits gleaned from il-

legal activities, thus “sparing” organizations that do

not so profit. Section (c) likewise immunizes or-

ganizations which are merely “victims,” but this re-

sult depends on the requirement of non-identity of

person and enterprise which also places some cor-

rupt organizations beyond reach.

Because of its adoption of the Schofield court’s non-identity

rule analysis, the Yellow Bus Lines court sided “with

those courts that forbid identity of person and enterprise

under § 1962(c).” Id.

-

SWAT Manatee RS Sacetbeba wiBe

Hi tins anh abated MG oe

3la

The Third Circuit, in Petro-Tech, Inc. v. Western Co.,

824 F.2d 1349 (3d Cir.1987), reviewed a complaint in

which Petro-Tech sought to recover from Western on six

counts under civil RICO; Western was named as the

RICO enterprise in only some of the counts. The Third

Circuit held that imposing “respondeat superior and aid-

ing and abetting liability’ on a corporate defendant

named as the RICO enterprise under § 1962(c) “would

disrupt the intended operation of § 1962(c), by making

the § 1962(c) enterprise . . . liable.” 7d. at 1359. How-

ever, in regard to those counts in which Western was not

the § 1962(c) enterprise, “theories of respondeat super-

rior and aiding and abetting liability are not out of

place,” because the non-identity rule was not involved.

Id. at 1361-62. The Third Circuit has also held that in-

junctive relief may be granted against an employer found

to be a RICO enterprise, even if damages may not.

United States v. Local 30, United Slate, 871 F.2d 401,

405 (3d Cir.1989).

The Ninth Circuit recently noted that there is “general

agreement that respondeat superior liability is inappro-

priate under 18 U.S.C. § 1962(c) when the enterprise

and person are not distinct.” Brady v. Dairy Fresh Prod-

ucts Co., 974 F.2d 1149, 1154 (9th Cir.1992). How-

ever, reasoning that “[r]Jespondeat superior and agency

liability will encourage employers to monitor more closely

the activities of their employees and agents to ensure that

these agents are not involved in racketeering activities,”

id. at 1155, the Brady court held that “an employer that

is benefitted by its employee or agent’s violations of sec-

tion 1962(c) may be held liable under the doctrines of

respondeat superior and agency when the employer is

distinct from the enterprise,” id. at 1154.

The Sixth Circuit was recently faced with the question

whether “ordinary principles of respondeat superior’ ap-

plied to the Mutual Life Insurance Company (MONY),

a group of whose employees violated § 1962(c) by sell-

32a

ing fraudulent life insurance policies. Davis v. Mutual

Life Ins. Co., 6 F.3d 367, 380 (6th Cir.1993). The

Davis court rejected the argument that “as a matter of

law, a corporate principal may not be vicariously liable

for its agents’ actions in violation of section 1962(c).”

Id. at 378. Finding that the cases declining to apply

vicarious liability were “intertwined with the widely-

embraced principie that a corporation may not be named

as both a defendant ‘party’ and as the RICO ‘enterprise,’ ”

id., the Davis court held that those cases are not control-

ling “where the corporate defendant charged with vicar-

ious liability is separate from the RICO ‘enterprise.’ ”

Id. at 379. Instead, Davis held that:

The rule to be drawn from these cases is that plain-

tiffs may not use RICO to impose liability vicariously

on corporate “enterprises,” because to do so would

violate the distinctiveness requirement. No such pro-

hibition, however, prevents the imposition of liability

vicariously on corporate ‘persons’ on account of the

acts of their agents, particularly where the corpora-

tion benefitted by those acts. Such a prohibition, if

“it existed, would prevent corporate persons from ever

being found liable under RICO, since corporate prin-

cipals may act only through their agents. Such a rule

would be manifestly contrary to the intent of Con-

gress, and we decline to adopt it.

Id. Because the RICO enterprise involved in Davis was

the association of MONY employees who were engaged

in the fraud, the non-identity rule was not threatened, and

the court upheld the jury’s finding that MONY was liable

for the acts of its agents. See id. at 377-78.

Our review of the law of other circuits thus reveals

that the RICO exception to the application of vicarious

liability is a narrow one, created to preserve the non-

identity rule, and it therefore protects only those employ-

ers who are also the RICO enterprise for purposes of

§ 1962(c). We, of course, have squarely rejected the

33a

non-identity rule, observing that liability for the acts of

one’s agents “is simply a reality to be faced by corporate

entities. With the advantages of incorporation must come

the appendant responsibilities.” United States v. Hartley,

678 F.2d 961, 989 n. 43 (11th Cir.1982). The narrow

exception to vicarious liability recognized by some cir-

cuits in order to preserve the non-identity rule is, there-

fore, inapplicable.

Even if we had adopted the non-identity rule, however,

the Union still would not be exempt from liability in this

case. Although the plaintiffs have alleged that the Union

is a RICO enterprise for purposes of § 1962(c), they also

allege that the Fairfield Works and the Fund are enter-

prises as well. The non-identity rule would not be threat-

ened by holding the Union liable for its agents’ corrup-

tion of the mill or the Fund.

b. Respondeat Superior Liability Under RICO

The plaintiffs argue that the Union can be held liable

under general agency principles and the respondeat su-

perior doctrine. The district court ruled against the plain-

tiffs on this issue, reasoning that the Union was not liable

under agency principles because “the plaintiffs do not

claim the Union negotiators, acting with apparent author-

ity, made misrepresentations to them upon which they

relied.” The plaintiffs argue, correctly, that there is no

requirement of reliance for a principal to be liable under

RICO for the acts of its agent.

Since the district court entered its order, this Court

spelled out the elements of respondeat superior liability for

RICO violations in Quick v. People’s Bank of Cullman

County, 993 F.2d 793 (11th Cir.1993). Although we

have rejected the “non-identity” rule, we have expressed

concern that enterprises that are merely victims of the

RICO violations perpetrated by their employees should

not be held liable for the acts of their employees under

respondeat superior. In Quick, 993 F.2d at 797-98, we

34a

held that respondeat superior liability may be applied un-

der § 1962(b) only to those enterprises that derive some

benefit from the RICO violation. The Quick court also

outlined the “general agency principles” to be applied in

determining whether a prima facie case of vicarious liabil-

ity under RICO has been made out:

Under general agency rules, a corporation (prin-

cipal) will be vicariously responsible for the wrong-

ful acts of its employees (agents) when the acts are:

(1) related to and committed within the course of

employment; (2) committed in furtherance [of the

business] of the corporation; and (3) authorized or

subsequently acquiesced in by the corporation.

Id. at 797 (quoting Liquid Air Corp. v. Rogers, 834

F.2d 1297, 1306 (7th Cir.1987) (bracketed material in

original), cert. denied, 492 U.S. 917, 109 S.Ct. 3241,

106 L.Ed.2d 588 (1989)). In Quick, we upheld the

application of respondeat superior to hold a bank liable

for the actions of one of its loan officers who, among

other misdeeds, demanded deposits and loan payments

from borrowers in cash and failed to credit them to the

proper accounts. Id. at 795. Because the officer’s “ac-

tivities were incident to his assigned duties and took

place at the Bank during business hours,” we determined

that the first element of vicarious liability was satisfied.

Id. at 797. Because the officer’s activities were related to

his function of making loans, we determined that the

second element was satisfied as well. Jd. at 797-98. As

to the third element, we determined that there was suf-

ficient evidence the bank had acquiesced in the officer’s

activities because it, among other things, attempted to

cover up the misconduct. Id. at 798.

In the present case, because the demand for personal

pension benefits that Rich and Phillips made was incident

to their duties as Union representatives in the Fairfield

Works negotiations, a reasonable jury could conclude that

their actions were committed in the course of their em-

35a

ployment, so the first Quick element is satisfied. Further-

more, because the demand was related to their function

of negotiating on behalf of the Union, a reasonable jury

could conclude that the second element, that the action

be committed in the furtherance of the business of the

principal, is also satisfied. Finally, the Union’s failure to

investigate the allegations against Rich and Phillips or to

discipline them until after their convictions, coupled with

its attempt to cover up their wrongdoing, could lead a

reasonable jury to find that the Union acquiesced in their

misdeeds.

A union’s failure to act may constitute acquiescence.

In Prater v. United Mine Workers of America, 793 F.2d

1201 (11th Cir.1986), in which a union had been noti-

fied of the violent acts of some of its members, we held

that “[b]y failing to take any action to stop the violence,

union officials acquiesce[d] in or ratified the illegal ac-

tivities of the union miners.” Jd. at 1210. Similarly, in

Vulcan Materials Co. v. United Steelworkers of Amer-

ica, 430 F.2d 446 (Sth Cir.1970), cert. denied, 401

U.S. 963, 91 S.Ct. 974, 28 L.Ed.2d 247 (1971), in

which union members illegally encouraged employees of

Vulcan not to report to work, we held that although a

union official “may have advised Vulcan employees to re-

turn to work, he never took action which could reason-

abl[y] have been expected to effectuate this end and thus

can be said to have, at the very least, acquiesced in and

condoned the illegal activity.” Jd. at 457. In Local 1814,

Int'l]. Longshoremen’s Ass'n v. NLRB, 735 F.2d 1384

(D.C.Cir.), cert. denied, 469 U.S. 1072, 105 S.Ct. 565,

83 L.Ed.2d 506 (1984), two union officials had been

convicted of violating the same anti-bribery statute that

Rich and Phillips have been convicted of violating. The

D.C. Circuit held that “the Union’s retention of [the of-

ficials} in their high controlling offices, long after the

grand jury indictments had put Local 1814 on notice

of their misdeeds, is tantamount to acquiescence or con-

donation of their unlawful acts.” Jd. at 1396. The Court

36a

noted that, “[u]nder such circumstances, one might rea-

sonably have expected a truly upright union to have taken

some disciplinary action.” Id.

In the present case, there is no evidence the Union

took any disciplinary action against Rich and Phillips,

or even made any effort to investigate their actions, until

after their criminal convictions. A jury could find that

the Union was put on notice of the misdeeds of its ne-

gotiators: by Johnston’s 1985 letter to Williams, the Un-

ion’s president, informing him of the decision to change

USX policy and to grant leaves of absence to six Union

Officials; by Johnston’s 1987 letter to Williams informing

him that the policy was being dropped, but that the six

previously granted pension would continue to receive pay-

ments; by the allegations in the Thrasher and Sommerville

suits; and by the indictment in the criminal case. A jury

could therefore determine that the Union’s failure to take

any action against two of its negotiators, after being put

on notice of their violation of the anti-bribery statute, con-

stitutes acquiescence in their actions.

A reasonable jury could therefore find that the plain-

tiffs have made out a prima facie case of respondeat su-

perior liability on the Union’s part. The remaining ques-

tion under Quick is whether the Union derived some ben-

efit from the negotiators’ RICO violation. In arguing that

Rich and Phillips’ solicitation of unearned pension credits

did benefit the Union, the plaintiffs point to deposition

testimony by Union president Lynn Williams, who stated

that:

I believe that every employee of the Union. . . that

come[s] from the shops where our members work,

ought to be entitled to an indefinite leave of absence

so long as they serve the Union, ought to be entitled

at whatever time in the future history, so long as

they haven’t left the Union, to go back to their origi-

nal place of employment, and I disagree very much

with the restrictions . . . which USX has put on that

all of these years in the Agreement. . . .

ili Sibi gibi aeihctaa en bt As 26k Sra Ha an

37a

So, I think that anybody, any representative that

can push the leave of absence question past that and

enable us to get wedges out there will enable us to

move that whole leave of absence question forward,

I would think in that instance, that is a good thing.

The Union argues that it did not benefit from Rich and

Phillips’ solicitation of pension credits for the Fairfield

Six, because no pension payment was made to the Union.

It dismisses the plaintiffs reliance on Williams’ comments,

contending that Williams was merely discussing recall

rights, not pension credits, and that he did not imply that

the Union would benefit by trading contract concessions

for those rights. Payment to Union officers, the Union

, argues, “does not establish a benefit to the Union, any

more than a bank could be said to benefit from a bribe

of a group of its employees.”

The Union’s argument that it would have benefitted

had USX granted recall rights to the negotiators, but did

not benefit from the pension rights that were granted, is

a distinction without a difference. The question is not

whether the Union benefitted in some overall calculation,

weighing the concessions made against the value of the

pensions received. The question is whether the Union

“derived some benefit from the RICO violation.” Quick,

993 F.2d at 797 (emphasis added). Williams’ testimony

establishes that the Union benefits when one of its rep-

resentatives is granted a leave of absence to work for the

Union. Whether that leave confers recall rights on the

employee, or pension benefits, or both, the point is that

such benefits make Union representation more attractive,

so that the Union has an easier time recruiting workers

to serve as representatives. A jury could therefore find

that the Union benefitted from the pension benefits given

to its negotiators. We therefore must reject the Union’s

argument that the award of summary judgment can be

upheld on the grounds that the Union cannot be liable

for the RICO violations of its negotiators.

38a

c. RICO Liability for Violation of Fiduciary

Duty

The plaintiffs further argue that the Union is liable for

the acts of its representatives because it has a fiduciary

duty to the rank and file to monitor the conduct of its

representatives and to remedy their illegal actions. The

district court rejected that argument, reasoning that even

if the Union were liable for failing to take action against

Rich and Phillips, that would not make the Union liable

for the negotiators’ racketeering activity: “[a] breach of

fiduciary duty is not, in itself, racketeering activity con-

stituting a predicate act under RICO.”

It is true that the duty of fair representation that the

Union owes to its members “applies to all union activity,

including contract negotiation” and is “akin to the duty

owed by other fiduciaries to their beneficiaries.” Air Line

Pilots Ass'n, Int'l v. O'Neill, 499 U.S. 65, 67, 74, 111

S.Ct. 1127, 1130, 1134, 113 L.Ed.2d 51 (1991). The

Union may therefore be liable for approving of, acquiesc-

ing in, or concealing a breach of trust committed by one

of its employees (although we do not reach that question

here). See Restatement (Second) of Trusts, § 224(2)(c).

As we discuss below, the existence of the fiduciary duty

may also be relevant to determining the Union’s liability

for aiding and abetting the RICO violations of its nego-

tiators. However, as the district court properly held, vio-

lating a fiduciary duty is not racketeering activity under

18 U.S.C. § 1961(1), and cannot lead to RICO liability

on the Union’s part. The district court correctly rejected

the plaintiffs fiduciary duty theory of liability.

d. Liability for Ratification of Agent’s RICO

Violations

The plaintiffs argue that the Union is liable for Rich’s

and Phillips’ RICO violations because its failure to inves-

tigate or discipline the two and its efforts to conceal the

pensions they received constitute ratification of their ac-

39a

tions. The Union contends that it cannot be liable for the

acts of its negotiators because it did not ratify their acts

with “full knowledge” of the bribery scheme. The dis-

trict court appears to have agreed with the Union’s posi-

tion. The court reasoned that the letters from Johnston,

and the allegations in the Thrasher and Sommerville cases,

were insufficient to give the Union knowledge that its

negotiators had broken the law. Distinguishing between

allegations and violations, the district court said “[t]he

Union’s knowledge of . . . allegations of section 186 vio-

lations by Union negotiators is not the same as knowledge

of section 186 violations by Union negotiators.” Without

evidence that the Union knew the truth of the allegations,

the district court reasoned that the plaintiffs could not

support their claim that the Union ratified Rich and

Phillips’ actions.

“A principal can ratify the unauthorized act of an

agent purportedly done on behalf of the principal either

expressly or by implication through conduct that is in-

consistent with an intention to repudiate the unauthorized

act.” McDonald v. Hamilton Electric, Inc., 666 F.2d

509, 514 (11th Cir.), cert. denied, 459 U.S. 879, 103

S.Ct. 175, 74 L.Ed.2d 144 (1982). The district court’s

reasoning would seem to require the plaintiffs to produce

direct evidence that the Union leadership was aware that

Rich and Phillips had in fact engaged in prohibited con-

duct. However, “proof of authorization of ratification can

be based upon circumstantial evidence.” James R. Sny-

der Co. v. Edward Rose & Sons, Inc., 546 F.2d 206, 209

(6th Cir.1976). A reasonable jury could infer that the

Union’s failure to act, after having been placed on no-

tice of the negotiators’ betrayal by the allegations, con-

Stituted ratification of their misconduct.

In Yellow Bus Lines, Inc. v. Local Union 639, 883

F.2d 132, 136 (D.C.Cir.1989), rev’d in part on other

grounds, 913 F.2d 948 (D.C.Cir.1996) (en banc), cert.

denied, —— U.S. ——, 111 S.Ct. 2839, 115 L.Ed.2d

40a

1007 (1991), a Union president received a letter from

the president of a bus company which contained allega-

tions that Union members had committed violent acts;

there was no evidence “to indicate that the union took

action to investigate the allegations or to curb any ex-

cesses” of the strikers. The D.C. Circuit held that from

the Union’s “apparent lack of concern with the violence

brought to its attention, the jury plausibly could conclude

that the [Union] ‘knowingly tolerated’ this state of affairs.

No more is required to support a finding of ratification.”

Id.

The situation in this case is similar to that in Yellow

Bus Lines, and we find the reasoning of that case to be

persuasive. Union president Williams testified that he

thought it would be “a good thing” for Union represen-

tatives to “push the leave of absence question forward;”

Williams received a letter from Johnston informing him

of the change in USX policy and that six Union repre-

sentatives had been given pensions; the Thrasher and

Sommerville suits were filed, alleging that Rich and Phil-

lips had received pensions out of the Fairfield negotia-

tions, and Rich and Phillips were indicted for receiving

the bribes. In spite of all that, the Union took no action.

From the Union’s failure to act, a reasonable jury could

conclude that the Union “knowingly tolerated” the situa-

tion, and thereby ratified it. The same failure to take

action that constitutes acquiescence for purposes of re-

spondeat superior liability (as we concluded above in

subpart II.B.3.b) is also sufficient to constitute ratification.

Prater v. United Mine Workers of America, 793 F.2d

1201, 1210 (11th Cir.1986).

e. Aiding and Abetting Liability Under RICO

The plaintiffs argue that the Union is liable under

RICO for aiding and abetting the RICO violations that

Rich and Phillips committed, either because it failed to

take any action against them or because it affirmatively

4la

covered up their misdeeds. The district court held that

the Union cuuld not be liable for aiding and abetting the

actions of its representatives by virtue of “ ‘mere negative

acquiescence,’” but instead, “there must be evidence that

the Union committed an overt act designed to aide in

the success of the venture.” The court considered the

actions taken by the Union in the Thrasher and Sommer-

ville suits: denying the allegation that Rich, Phillips and

others received pensions as a result of the Fairfield Works

Agreement; and filing an affidavit by Union attorney

Bernard Kleiman, denying that Rich and Phillips were

retired from USX, when in fact they had retired and were

receiving pensions. It held that these actions could con-

stitute concealment subjecting the Union to liability if

the responsible Union officials knew the truth about the

pensions. Accordingly, the district court denied the

Union’s motion for summary judgment on the aiding and

abetting claim, although the denial appears to be without

prejudice to a renewal of the motion at the close of dis-

covery.

One who aids and abets two predicate acts can be

civilly liable under RICO. Petro-Tech, Inc. v. Western

Co. of North America, 824 F.2d 1349, 1356 (3d Cir.

1987). To establish civil liability for aiding and abetting,

the plaintiffs must show: (1) that the defendant was

generally aware of the defendant’s role as part of an over- .

all improper activity at the time that he provides the

assistance; and (2) that the defendant knowingly and

substantially assisted the principal violation. See Schne-

berger v. Wheeler, 859 F.2d 1477, 1480 (11th Cir.1988),

cert. denied, 490 U.S. 1091, 109 S.Ct. 2433, 104 L.Ed.2d

989 (1989); Woodward v. Metro Bank of Dallas, 522

F.2d 84, 94-95 (5th Cir.1975); Halberstam v. Welch,

705 F.2d 472, 477 (D.C.Cir.1983). The defendant’s

“[k]nowledge may be shown by circumstantial evidence,

or by reckless conduct.” Woodward, 522 F.2d at 96.

The same evidence that would support a jury’s finding

that the Union “knowingly tolerated” Rich and Phillips’

42a

actions pursuant to the plaintiffs’ ratification theory (the

letter from Johnston, the allegations in the Thrasher and

Sommerville suits, and the criminal indictment) will also

support a jury’s finding that the Union was aware of its

general role in the scheme.

As we have already concluded in our discussion of

causation in subpart II.B.2, above, the jury could infer

that the Union took steps to conceal the unearned pen-

sions that USX awarded to the Union’s negotiators.

Whether those steps constitute substantial assistance is a

question for the jury. The district court was therefore

correct in denying the Union’s motion for summary judg-

ment on the plaintiffs’ aiding and abetting claim.

f. Co-Conspirator’s Liability Under RICO

The plaintiffs’ final argument for Union liability is that

the Union violated 18 U.S.C. § 1962(d), which makes

it a crime “for any person to conspire to violate any of

the” other RICO provisions. (As we discussed in part

II.B, above, anyone “injured in his business or property

by reason of a violation of § 1962” may recover treble

damages.) To be adjudged liable, “each defendant in a

RICO conspiracy case must have joined knowingly in the

scheme and been involved himself, directly or indirectly,

in the commission of at least two predicate offenses.”

Feinstein v. Resolution Trust Corp., 942 F.2d 34, 41

(1st Cir.1991). Proof of an agreement is “the essence

of conspiracy.” United States v. Bright, 630 F.2d 804,

813 (Sth Cir.1980). “Thus, a defendant may wittingly

aid a criminal act and be liable as an aider and abettor,

but not be liable for conspiracy, which requires knowl-

edge of and voluntary participation in an agreement to do

an illegal act.” Id. (citations omitted). However, “[t]he

existence of the conspiracy agreement does not have to

be proven by direct evidence. Instead, it can be inferred

from “‘the conduct of the alleged participants or from

circumstantial evidence of the scheme.’” United States

v. LeQuire, 943 F.2d 1554, 1562 (11th Cir.1991) (quot-

43a

ing United States v. Ard, 731 F.2d 718, 724 (11th Cir.

1984)), cert. denied, US. , 112 S.Ct. 3037,

120 L.Ed.2d 906 (1992). As the district court properly

noted, evidence that a defendant assisted in the conceal-

ment of a conspiracy may support an inference that the

defendant joined in it while it was still in operation.

United States v. Gold, 743 F.2d 800, 825 (11th Cir.

1984) (quoting United States v. Freeman, 498 F.2d 569,

576 (2d Cir.1974)), cert. denied, 469 U.S. 1217, 105

S.Ct. 1196, 84 L.Ed.2d 341 (1985).

The district court reasoned that, if the plaintiffs were

able to show that the Union concealed the racketeering

activity of its representatives, a “jury could reasonably

infer that the Union joined in while the conspiracy was

still in operation,” and the Union would therefore be

liable. We agree. Because a jury could infer that the

Union took steps to conceal Rich’s and Phillips’ RICO

violations, a jury should decide whether the Union is

liable for conspiring with them.

g. Summary of Holdings on Union Liability

We agree with the district court that the Union cannot

be liable for its representatives’ RICO violations under

the theory that it violated a fiduciary duty to its members.

However, the plaintiffs are entitled to go to trial on their

claims that the Union is liable for Rich’s and Phillips’

RICO violations under respondeat superior, ratification,

aiding and abetting, and conspiracy theories. We there-

fore reject the Union’s argument that the award of sum-

mary judgment must be upheld because it cannot be

liable under RICO.

C. THE § 301 CLAIM AGAINST USX

The plaintiffs contend that the district court erred in

entering summary judgment against them on their “hy-

brid” claim against USX for breach of contract under

§ 301 of the Labor Management Relations Act, 29 U.S.C.

44a

§ 185. As the Supreme Court explained in DelCostello

v. International Bhd. of Teamsters, 462 U.S. 151, 163-

65, 103 S.Ct. 2281, 2290-91, 76 L.Ed.2d 476 (1983),

an individual employee may bring suit against his

employer for breach of a collective-bargaining agree-

ment. Ordinarily, however, an employee is required

to attempt to exhaust any grievance or arbitration

remedies provided in the collective-bargaining agree-

ment. . . . [H]owever, we recognized that this rule

works an unacceptable injustice when the union rep-

resenting the employee in the grievance/arbitration

procedure acts in such a discriminatory, dishonest,

arbitrary, or perfunctory fashion as to breach its duty

of fair representation. In such an instance, an em-

ployee may bring suit against both the employer and

the union, notwithstanding the outcome or finality of

the grievance or arbitration proceeding. Such a suit,

as a formal matter, comprises two causes of action.

The suit against the employer rests on § 301, since

the employee is alleging a breach of the collective-

bargaining agreement. The suit against the union is

one for breach of the union’s duty of fair representa-

tion. . . . The employee may, if he chooses, sue one

defendant and not the other, but the case he must

prove is the same whether he sues one, the other,

or both.

(internal citations and quotation omitted). The plain-

tiffs argue that,

{b]Jecause the [Fairfield Works] Agreement is void

and unenforceable, USX breached its contractual ob-

ligations when USX did not pay members of plain-

tiff class the full compensation which they should

have been paid (from 1984 to date) based on the

1983 Basic Labor Agreement, the 1987 Basic Labor

Agreement, and prior practices, without regard to

the [Fairfield Works] Agreement.

(The Basic Labor Agreement, between USX and the In-

ternational, governs all of USX’s plants in Canada and

45a

the United States, in the absence of local agreements. )

The district court rejected the claim on the same ground

on which it rejected the RICO claim—that “the court can

find no evidence of record from which a jury could con-

clude that the concessions in the FWA were given in ex-

change for the pensions.” Having decided that a jury

could infer that the Fairfield Works Agreement is more

concessionary than it would have been had the Union

negotiators not solicited and received unearned pension

benefits (in subpart II.B.2, above), we cannot agree with

the district court’s reasoning or affirm its order granting

summary judgment on that basis.

USX argues that we should affirm the grant of sum-

mary judgment on the alternative ground—which the dis-

trict court rejected—that the plaintiffs’ § 301 claim was

not timely brought. In DelCostello, the Supreme Court

held that the 6-month statute of limitations from § 10(b)

of the National Labor Relations Act should be applied

to § 301 suits. 462 U.S. at 169, 103 S.Ct. at 2293. The

district court, applying a discovery rule, held that the

suit was timely brought, because the defendants were un-

able to show that the plaintiffs should have uncovered

adequate grounds for filing suit prior to six months be-

fore the suit was actually filed in December 1988. On

appeal, USX argues that our decision in Hill v. Texaco,

Inc., 825 F.2d 333 (11th Cir.1987), precludes the ap-

plication of a discovery rule to actions brought pursuant

to a § 10(b) statute of limitations period. In that case,

we observed that principles of equitable tolling “cannot

be applied in the face of contrary congressional intent.”

Id. at 334. According to USX, because § 10(b) states

that “no complaint shall issue based upon any unfair

labor practice occurring more than six months prior to

the filing of the charge,” it would be contrary to Con-

gressional intent to apply equitable tolling principles to

a § 301 suit. However, we have already held that the dis-

covery rule applies to claims under § 301: “Generally,

a cause of action accrues under § 301, and the statute

46a

of limitations begins to run, when in the exercise of rea-

sonable diligence the claimant knew or should have known

of the injury.” Hill v. Georgia Power Co., 786 F.2d 1071,

1074-75 (11th Cir.1986) (emphasis added); see also

Santiago v. Lykes Bros. S.S. Co., 986 F.2d 423, 427

n. 3 (11th Cir.1993). We are, of course, bound by

these prior decisions. The district court’s refusal to grant

summary judgment on the ground of timeliness was there-

fore entirely correct.

USX also argues that summary judgment is proper on

the alternative ground that the plaintiffs’ § 301 claim is

meritless, because “operations in accordance with con-

sensual modifications” to the Basic Labor Agreement can-

not be a breach of contract. In USX’s view, the plain-

tiffs’ claim is one against the Union for breach of the duty

of fair representation in signing a bad contract, not

against the Company: “where, as here, the duty of fair

representation claim is based upon a breach of duty in

negotiating a labor agreement, no § 301 employer con-

tract breach is implicated at all.” However, the plaintiffs

do not allege merely that Rich and Phillips negotiated a

bad faith deal, and we have already concluded that a

reasonable jury could infer that USX took advantage of

Rich’s and Phillips’ willingness to pursue personal gain

by signing a more concessionary Fairfield Works Agree-

ment than they otherwise would have. And, “{o]f course,

a bargain by which a fiduciary takes advantage of his

position to profit at the expense of the beneficiary is

fraudulent and is voidable by the beneficiary.” 6A Ar-

thur Corbin, Corbin on Contracts, § 1456, at 534 (1962).

Rich and Phillips were fiduciaries of the rank-and-file un-

ion membership; the Supreme Court has held that the

“duty of fair representation” a Union owes to its mem-

bers “is . . . akin to the duty owed by other fiduciaries

to their beneficiaries.” Airline Pilots Ass’n, Int'l v.

O'Neill, 499 U.S. 65, 74, 111 S.Ct. 1127, 1134, 113

L.Ed.2d 51 (1991). The Agreement is therefore void-

able.

47a

That does not mean, however, that the plaintiffs are

entitled to recover the difference between what they were

paid under the Fairfield Works Agreement and what they

would have been paid under the Basic Labor Agreement.

Upon rescinding a voidable contract, the plaintiffs are

entitled “to the reasonable value of a performance ren-

dered” to the Company. 6A Corbin, § 1535, at 822.

“Reasonable value” is determined by the marketplace, free

of illegitimate taint. It is clear that the rates provided for

in the Basic Labor Agreement are not the reasonable

market value the plaintiffs would have received for their

labors, because it is undisputed that USX had shut down

the facility rather than pay those rates. Instead, the

proper measure of the value of the work done is the value

that the parties would have agreed upon had the Union

negotiators not violated their fiduciary duty. In other

words, if a jury finds that the contract was voidable, the

plaintiffs are entitled to recover the value of the conces-

sions that the Union negotiators would have extracted

from the company if the negotiators had not been pur-

suing their personal pension benefits.

Ill. THE ISSUES RELATING TO DISCOVERY

The Union and USX both appeal from orders of the

district court rejecting their invocation of the attorney-

client privilege during discovery. In the interlocutory ap-

peal and in the appeal of summary judgment on the

RICO claim, the plaintiffs complain of limits the district

court has placed on their discovery efforts. The areas

of discovery affected by the limits may be grouped into

four categories: USX pension practices at other plants;

grand jury materials; attorney work-product; and limiting

the deposition of USX and Union attorneys to written

interrogatories.

The Union argues that the plaintiffs failed properly

to raise the issues in the district court. According to the

Union, the plaintiffs should not be allowed to appeal the

limitations on their discovery efforts because the plain-

48a

tiffs failed to request further discovery into the four areas

in either of its Rule 56(f) motions.* (The plaintiffs did

request further discovery of the attorney-client communi-

cations and we discuss those requests below.) However,

we cannot agree that the plaintiffs should have included

the issues in their Rule 56(f) motions. As the plaintiffs’

observe, it would not make sense to require them to re-

quest “deferral of the summary judgment motions until

plaintiffs could complete discovery which the district court

already denied.” Having raised the issues below, and hav-

ing appealed from the entry of final judgment, the plain-

tiffs are entitled to raise the issues on appeal.

A. Standard of Review

To the extent that the appeals involve mixed questions

of law and fact, regarding the applicability of the attor-

ney-client privilege to particular communications that the

plaintiffs wish to discover, our review is plenary. In re

Grand Jury Matter No. 91-01386, 969 F.2d 995, 997

(11th Cir. 1992); In re Grand Jury Proceedings 88-9

(MIA), 899 F.2d 1039, 1042 (11th Cir.1990). Other-

wise, matters of discovery and evidence are committed

to the discretion of the district court. Wu v. Thomas,

996 F.2d 271, 275 (11th Cir.1993); Lee v. Etowah

* When the plaintiffs first raised this issue in the interlocutory

appeal, the Union filed a motion, which was carried with the case,

to dismiss the plaintiffs’ cross-appeal for want of jurisdiction.

The Union’s argument was that, because the district court denied

the plaintiffs’ motion for certification of those parts of the order

dealing with rulings adverse to the plaintiffs, they should be con-

sidered to be different orders for purposes of the interlocutory

appeal. The Union’s motion was made moot, however, when the

plaintiffs raised the same issues in their appeal from the district

court’s entry of final judgment on the RICO and § 801 claims.

“C[Wlhen reviewing an appeal from a final judgment, this court

can review rulings on previous interlocutory orders.” Jones v.

Preuit & Mauldin, 808 F.2d 1435, 1488 n. 1 (11th Cir.1987) (citing

Aaro, Ine. v. Daewoo Int'l (America) Corp., 755 F.2d 1898, 1400

(11th Cir.1985)). The Union’s motion to dismiss the cross-appeal

is therefore denied.

49a

County Bd. of Educ., 963 F.2d 1416, 1420 (11th Cir.

1992). Discovery orders should not be overturned “un-

less the district court has abused its discretion and such

abuse has resulted in substantial harm to the party seek-

ing relief.” Arabian American Oil Co. v. Scrafone, 939

F.2d 1472, 1477 (11th Cir.1991).

B. The Union’s Attorney-Client Privilege

The district court determined that the Union could not

assert the attorney-client privilege against the plaintiffs to

prevent them from discovering the content of Union Pres-

ident Williams’ discussion with the Union’s attorneys re-

garding USX’s change in its leave of absence policy. Al-

though the court rejected the plaintiffs’ argument that the

crime-fraud exception to the attorney-client privilege ap-

plies, it accepted their argument that the Garner doctrine

prevents the Union from invoking the privilege against

the plaintiffs, to whom, as members, the Union owes a

fiduciary duty.

According to Federal Rule of Evidence 501, “the priv-

ilege of a witness . . . shall be governed by the principles

of the common law as they may be interpreted by the

courts of the United States in the light of reason and ex-

perience.” The attorney-client privilege, “the oldest of the

privileges for confidential communications known to the

common law,” United States v. Zolin, 491 U.S. 554, 562,

109 S.Ct. 2619, 2625, 105 L.Ed.2d 469 (1989) (quot-

ing Upjohn Co. v. United States, 449 U.S. 383, 389, 101

S.Ct. 677, 682, 66 L.Ed.2d 584 (1981)), protects the

disclosures that a client makes to his attorney, in confi-

dence, for the purpose of securing legal advice or assist-

ance. In re Grand Jury (G.J. No. 87-03-A), 845 F.2d

896, 897 (11th Cir.1988). Based on the theory that

“sound legal advice or advocacy . . . depends upon the

lawyer’s being fully informed by the client,” the privilege

is designed “to encourage full and frank communication

between attorneys and their clients and thereby promote

broader public interests in the observance of law and ad-

50a

ministration of justice.” Upjohn, 449 U.S. at 389, 101

S.Ct. at 682. Despite its value in encouraging clients to

confide in their counsel, we have recognized that, as “ ‘an

obstacle to the investigation of the truth,’” the privilege

is not without exceptions. Garner v. Wolfinbarger, 430

F.2d 1093, 1101 (Sth Cir.1970) (quoting 8 Wigmore,

Evidence, § 2291, at 554), cert. denied, 401 U.S. 974,

91 S.Ct. 1191, 28 L.Ed.2d 323 (1971).

1. The Garner Doctrine

The Garner court determined that shareholders suing

their corporation may discover communications otherwise

protected by the attorney-client privilege upon a showing of

good cause. The Garner court observed that “management

does not manage for itself and that the beneficiaries of its

action are the stockholders.” Jd. at 1101. It is, therefore,

“difficult to rationally defend the assertion of the privi-

lege if all, or substantially all, stockholders desire to in-

quire into the attorney’s communications with corporate

representatives who have only nominal ownership inter-

ests, or even none at all.” Jd. However, Garner recog-

nized that “the complete removal of the attorney-client

privilege from the grasp of the corporation client . . .

would expose corporations to harassment suits by minority

stockholders and a possible deterioration of candid attor-

ney-client communication and effective corporate manage-

ment.” Cohen v. Uniroyal, Inc., 80 F.D.R. 480, 483

(E.D.Pa.1978). Garner therefore does not eliminate the

privilege altogether “merely because those demanding in-

formation enjoy the status of stockholders.” Garner, 430

F.2d at 1103. Rather, stockholders are given the oppor-

tunity “to show cause why [the privilege] should not be

invoked in the particular instance.” Jd. at’1104. The

Garner panel listed nine factors to be considered in de-

termining whether good cause has been shown:

[1] the number of shareholders {seeking discovery]

and the percentage of stock they represent; [2] the

S5la

bona fides of the shareholders; [3] the nature of the

shareholders’ claim and whether it is obviously color-

able; [4] the apparent necessity or desirability of the

shareholders having the information and the avail-

ability of it from other sources; [5] whether, if the

shareholders claim is of wrongful action by the cor-

poration, it is of action criminal, or illegal but not

criminal, or of doubtful legality; [6] whether the

communication related to past or to prospective ac-

tions; [7] whether the communication is of advice

concerning the litigation itself; [8] the extent to

which the communication is identified versus the ex-

tent to which the shareholders are blindly fishing;

[9] the risk of revelation of trade secrets or other in-

formation in whose confidentiality the corporation

has an interest for independent reasons.

Id.

The plaintiffs argue that the Garner doctrine applies

to a union’s assertion of the attorney-client privilege

against its members. See Nellis v. Air Line Pilots Ass’n,

144 F.R.D. 68, 71 (E.D.Va.1992) (holding that the

Garner doctrine applies because unions owe a fiduciary

duty to their members under Air Line Pilots Ass'n v.

O’Neill, 499 U.S. 65, 74, 111 S.Ct. 1127, 1134, 113

L.Ed.2d 51 (1991)); Aguinaga v. John Morrell & Co.,

112 F.R.D. 671, 681 (D.Kan.1986) (holding that the

Garner doctrine applies to unions because “union officials’

association with their members possesses all the essential

characteristics of a fiduciary relationship”); Boswell v. In-

ternational Bhd. of Elec. Workers Local 164, 106 L.R.R.M.

(BNA) 2713, 1981 WL 27188 (D.N.J.1981) (applying

Garner to suit brought by union member against union).

The Union urges that we adopt the Ninth Circuit’s read-

ing of Garner in Weil v. Investment/Indicators Research

and Management, Inc., 647 F.2d 18, 23 (9th Cir.1981),

that “Garner’s holding and policy rationale simply do not

apply” outside the context of the shareholder derivative

suit. Alternatively, the Union argues that the plaintiffs

=. 9

52a

have failed to show good cause, because they are a small

percentage of the Union’s membership, seeking damages

from the Union for themselves, and have shown no need

to know what legal advice Williams received.

The district court determined that the Garner doctrine

should apply to the Union, because Garner was premised

“on the view that corporate management owed fiduciary

duties to the stockholders of the corporation,” and be-

cause “the relationship between union and union mem-

bers” likewise “has fiduciary overtones.” The court then

determined that the plaintiffs had shown good cause, be-

cause “the plaintiff class here is a significant percentage

of the total Union membership,” and “the plaintiffs’ suit

advances the general membership’s interest in providing a

check on the Union’s proper discharge of its fiduciary

duties to the members.” The court also noted that the

plaintiffs’ claim was colorable, that they had identified the

specific communication that they wished to discover, that

no trade secret is involved, and that there is no other

source “from which plaintiffs might gain the same in-

formation.”

Because we hold that even if the Garner doctrine ap-

plies, it does not support an exception to the attorney-

client privilege under the facts of this case, we need not

decide whether the Garner doctrine does apply to disputes

between a union and its members. We do note that the

Fifth Circuit has firmly rejected “the Ninth Circuit’s nar-

row interpretation of the types of suits covered by Gar-

ner.” Ward v. Succession of Freeman, 854 F.2d 780,

786 (5th Cir.1988) (citing In re International Sys. &

Controls Corp. Sec. Litig., 693 F.2d 1235, 1239 n. 1

(Sth Cir.1982)), cert. denied, 490 U.S. 1065, 109 S.Ct.

2064, 104 L.Ed.2d 629 (1989). However, in applying

Garner to suits brought by shareholders seeking to re-

cover for themselves at the corporation’s expense, the

Fifth Circuit:

recognize{d] reason in the Weil holding: Where

shareholders bring a successful derivative action on

53a

behalf of the corporation, they benefit al] sharehold-

ers. Where, however, shareholders seek to recover

damages from the corporation for themselves, they

do not even seek a gain for all others. In the latter

circumstance, the motivations behind the suit are

more suspect, and thus more subject to careful scru-

tiny, in determining if good cause for suspending the

privilege exists.

Id. at 786. After applying that “careful scrutiny,” the

Ward court determined that the plaintiffs had failed to

show good cause; one of the reasons given was that the

“[p]laintiffs cumulatively owned less than four [percent]

of the stock in LA Coke.” Id.

Even assuming the Gardner doctrine applies to unions,

on the facts of this case discovery of the attorney-client

communications should not be allowed. Although many

of the factors listed in Garner appear to support the plain-

tiffs’ argument that there is good cause for discovery, two

factors foreclose it: the fact that only a tiny percentage

of the defendant Union’s members are members of the

plaintiff class; and the fact that the interest of the plain-

tiff class is adverse to those who are not in the class.

Compare Ward, 854 F.2d at 786 (fact that plaintiffs

owned less than four percent of stock weighs against

finding of good cause) with Fausek v. White, 965 F.2d

126, 133 (6th Cir.) (fact that plaintiffs own 40% of

corporation’s stock weighs for finding good cause), cert.

denied, US. , 113 S.Ct. 814, 121 L.Ed.2d

686 (1992). Garner recognized that, in a shareholder

derivative suit, which the plaintiffs bring on behalf of the

corporation, “it is difficult to rationally defend the asser-

tion of the privilege if all, or substantially all, stockhold-

ers desire to inquire into the attorney's communications

with corporate representatives.” 430 F.2d at 1101 (em-

phasis added). This case, however, is unlike the share-

holder derivative suit in Garner, because the plaintiff class

in this case consists of only about one-half of one percent

of the international union’s membership. The plaintiffs

54a

argue that the district court’s assertion that the plaintiff

class represents “a significant percentage of the total Un-

ion membership” can be defended on the ground that the

class “represents practically one hundred percent of the

USX employees at [the Fairfield] Works who are covered

by the [Fairfield] Agreement.” The problem with that

reasoning is that the lawsuit was not filed against the

local union that represents only Fairfield workers; it was

filed against the international union. Moreover, the at-

torney-client communication in question was not to an

officer of the local union but to an officer of the interna-

tional union. Therefore, the proper measure of signifi-

cance for the plaintiff class is in terms of the national

union, whose membership is so large that it dwarfs the

size of the plaintiff class.

This case is also unlike the shareholder derivative suit

in Garner, and is unlike the shareholders’ suit against a

chief executive officer in Fausek, because there is no iden-

tity of interests between the plaintiffs and the non-plain-

tiff Union members. Instead, their interests are adverse.

The plaintiffs in the present case seek damages not on

behalf of the Union, but for their personal benefit at

the expense of the Union and its other members. Their

interests are directly adverse to those of the other Union

members. Garner noted that “[d]ue regard must be paid

to the interests of nonparty stockholders, which may be

affected by impinging on the privilege.” Jd. at 1101 n.

17. Where such a small fraction of the Union’s member-

ship seeks to pierce the attorney-client privilege at the

expense of the remaining ninety-nine and one-half per-

cent, “due regard” for the interest of the non-party mem-

bers requires that the plaintiffs’ request be rejected.

2. The Crime-Fraud Exception

The plaintiffs argue in the alternative that the district

court’s order compelling Williams’ testimony can be up-

held under the crime-fraud exception to the attorney-client

privilege, because “the Union by its counsel” subsequently

55a

made numerous false statements about the pension status

of its negotiators, as part of an effort to conceal their

illegal actions. The district court rejected this argument

because “there is no evidence showing the communica-

tion furthered any crime or fraud, or . . . was connected

with any crime or fraud.”

To determine whether the crime-fraud exception ap-

plies, we employ a two-part test laid out In re Grand

Jury Investigation (Schroeder), 842 F.2d 1223, 1226

(11th Cir. 1987):

First, there must be a prima facie showing that the

client was engaged in criminal or fraudulent conduct

when he sought the advice of counsel, that he was

planning such conduct when he sought the advice of

counsel, or that he committed a crime or fraud sub-

sequent to receiving the benefit of counsel’s advice.

Second, there must be a showing that the attorney’s

assistance was obtained in furtherance of the crimi-

nal or fraudulent activity or was closely related to it.

Accord, In re Federal Grand Jury Proceedings, 89-10

(MIA), 938 F.2d 1578, 1581 (11th Cir.1991).

While the plaintiffs’ evidence on the existence of Union

cover-up may satisfy the first prong of the test, we agree

with the district court that they have failed to satisfy the

second. The purpose of the second prong is to identify

“communications that should not be privileged because

they were used to further a crime or a fraud.” Schroeder,

842 F.2d at 1227. Although that determination “must

take into account that the [party seeking discovery] does

not know precisely what the material will reveal or how

useful it will be,” id., “[t]here is no reason to permit op-

ponents of the privilege to engage in groundless fishing

expeditions,” U.S. v. Zolin, 491 U.S. 554, 571, 109 S.Ct.

2619, 2630, 105 L.Ed.2d 469 (1989).

Before engaging in in camera review to determine

the applicability of the crime-fraud exception, the

ee |

56a

judge should require a showing of a factual basis

adequate to support a good faith belief by a reason-

able person that in camera review of the materials

may reveal evidence to establish the claim that the

crime-fraud exception applies.

Once that showing is made, the decision whether

to engage in in camera review rests in the sound dis-

cretion of the district court.

Id. at 572, 109 S.Ct. at 2631 (internal citations and

quotation omitted). The plaintiffs have failed to produce

any evidence that William’s communications with the

Union’s attorneys regarding the Johnston letter furthered

or were closely related to an effort on the Union’s part

to conceal the illegal actions of its negotiators. They

have therefore failed to show that the district court abused

its discretion in refusing to permit even an in camera

review of the communications involved.

3. Waiver

Finally, the plaintiffs argue that the Union waived the

attorney-client privilege by allowing counsel Kleiman to

testify in the criminal trial, and by filing Kleiman’s affi-

davits in lawsuits brought by Union representatives who

did not receive pensions. At the criminal trial, Kleiman

testified about the receipt of the letter from Johnston,

and what he did in response; Kleiman did not testify as

to the conversation he had with Williams about the letter.

The district court reasoned that the Union did not waive

the privilege because Kleiman did not disclose any con-

fidential communications.

The attorney-client privilege “belongs sdlely to the

client,” and the client may waive it, either expressly or

by implication. In re Von Bulow, 828 F.2d 94, 100, 101

(2d Cir. 1987). We have observed that the doctrine

of waiver by implication reflects the position that the

attorney-client privilege “‘was intended as a shield, not

epee ae ee

57a

a sword.’” GAB Business Services, Inc. v. Syndicate

627, 809 F.2d 755, 762 (11th Cir.1987) (applying

Florida law) (quoting Pitney-Bowes, Inc. v. Mestre, 86

F.R.D. 444, 446 (S.D.Fla.1980)). In other words, “{a]

defendant may not use the privilege to prejudice his op-

ponent’s case or to disclose some selected communica-

tions for self-serving purposes.” United States v. Bilzerian,

926 F.2d 1285, 1292 (2d Cir.), cert. denied, US.

» 112 S.Ct. 63, 116 L.Ed.2d 39 (1991); accord

United States v. Jones, 696 F.2d 1069, 1072 (4th Cir.

1982) (“Selective disclosure for tactical purposes waives

the privilege.”).

The plaintiffs’ position appears to be that, having

allowed Kleiman to testify about the Johnston letter and

the pension status of the Union’s negotiators, the Union

impliedly waived the privilege as to Williams’s communi-

cations with Kleiman on the subject: There is support

for that position in the version of the implied waiver rule

suggested in Wigmore’s treatise: “[t]he client’s offer of

his own testimony as to specific facts about which he has

happened to communicate with the attorney is not a

waiver .... But his offer of the attorney’s testimony

as to such specific facts is a waiver,” and “a waiver at a

first trial should suffice as a waiver for a later trial.” 8

Wigmore, Evidence § 2298, at 638, 639 (McNaughton

rev. 1961) (penultimate emphasis added). Wigmore

bases the distinction between the client offering testimony

On a subject, and the attorney doing the same, on his

view that “the attorney ought in general not to be used

as a witness.” Id. at 637.

However, Wigmore’s broad version of the rule goes

beyond the considerations of fairness that have motivated

the application of the rule; courts generally have not

found a waiver where the party attacking the privilege

has not been prejudiced:

The great weight of authority holds that the attorney-

client privilege is waived when a litigant places in-

j |

58a

formation protected by it in issue through some af-

firmative act for his own benefit, and to allow the

privilege to protect against disclosure of such infor-

mation would be manifestly unfair to the opposing

party.

Conkling v. Turner, 883 F.2d 431, 434 (Sth Cir.1989)

(emphasis added) (internal quotation omitted); see also

United States v. Aronoff, 466 F.Supp. 855, 863 (S.D.

N.Y.1979) (finding no waiver where party attacking

privilege alleges no prejudice); Goldman, Sachs & Co.

v. Blondis, 412 F.Supp. 286, 288 (N.D.Ill.1976) (ob-

serving that “it is a uniform rule that when a party’s con-

duct reaches a certain point of disclosure, fairness requires

that the privilege cease” (emphasis added)); Wender v.

United States Automobile Ass’n, 434 A.2d 1372, 1374-

75 (D.C.1981) (basing waiver analysis on considerations

of fairness); State v. Von Bulow, 475 A.2d 995, 1007

(R.I.) (citing Aronoff and basing implied waiver analysis

on considerations of fairness), cert. denied, 469 U.S. 875,

105 S.Ct. 233, 83 L.Ed.2d 162 (1984). In Sedco Int'l

S.A. v. Cory, 683 F.2d 1201, 1206 (8th Cir.), cert.

denied, 459 U.S. 1017, 103 S.Ct. 379, 74 L.Ed.2d 512

(1982), the Eighth Circuit observed that “[cJourts have

found waiver by implication” in three sets of circum-

stances: “[(1)] when a client testifies concerning por-

tions of the attorney-client communication, [(2)] when

a client places the attorney-client relationship directly at

issue, and [(3)] when a client asserts reliance on an

attorney’s advice as an element of a claim or defense.”

(Internal citations omitted). As a district court in our

Circuit has observed:

“Tajll of these established exceptions to the rules of

privilege have a common denominator; in each in-

stance, the party asserting the privilege placed infor-

mation protected by it in issue through some affirm-

ative act for his own benefit, and to allow the privi-

lege to protect against disclosure of such information

59a

would have been manifestly unfair to the opposing

party.”

Pitney-Bowes, Inc. v. Mestre, 86 F.R.D. 444, 447 (S.D.

Fla.1980) (quoting Hearn v. Rhay, 68 F.R.D. 574, 581

(E.D.Wash.1975) ).

Because the plaintiffs have failed to explain how they

have been prejudiced by any of the actions taken by the

Union’s lawyers in the criminal case, we decline to find

that the Union has impliedly waived its privilege. See

Remington Arms Co. v. Liberty Mutual Ins. Co., 142

F.R.D. 408, 415 (D.Del.1992) (holding that the “Court

cannot justify finding a waiver of privileged information

merely to provide the opposing party information help-

ful to its cross-examination or because information is

relevant”).

Because the attorney-client privilege is not rendered

inapplicable by the Garner doctrine or the crime-fraud

exception, and because it was not waived, the ruling of

the district court granting the plaintiff's motion to compel

William’s testimony is therefore reversed.

C. USX’S Attorney-Client Privilege

In the proceedings before the district court, USX has

consistently taken the position that “[a]t the time the re-

vised leave-of-absence policy was implemented in Oc-

tober, 1984, . . . USX believed the policy to be lawful.”

Memorandum of USX Corporation and United States

Steel and Carnegie Pension Fund In Support of Their

Motion To Dismiss, April 3, 1989, at 5; see also Pretrial

Order at 5. Although USX has denied any intent to

assert a defense of advice of counsel or to rely on any

privileged attorney-client communications in its defense,

the district court observed that “USX’s defense . . . neces-

sarily implicates all of the information at its disposal when

it made the decision to change the leave of absence policy

and later, to rescind the change.” Reasoning that “it

60a

would be inequitable to allow USX to present evidence

tending to show that it intended to comply with the law,

while allowing it to cloak in privilege those documents

tending to show it might have known its actions did not

conform to the law,” the district court held that USX

waived the attorney-client privilege with regard to such

communications.

USX argues that it was the plaintiffs who injected the

issue of USX’s “state of mind” into the case by including

allegations of intentional, criminal wrongdoing in their

complaint. Because 29 U.S.C. § 186, the criminal statute

that the plaintiffs claim USX violated, contains a com-

ponent of “willfulness,” USX argues that it has merely

denied the plaintiffs’ allegations, and that a mere denial

of mens rea should not constitute waiver of the attorney-

client privilege.

As we discussed in the previous section, the attorney-

client privilege “ ‘was intended as a shield, not a sword.’ ”

GAB Business Services, Incv. v. Syndicate 627, 809

F.2d 755, 762 (11th Cir.1987) (quoting Pitney-Bowes,

Inc. v. Mestre, 86 F.R.D. 444, 446 (S.D.Fla.1980)).

USX waives the privilege if it injects into the case an

issue that in fairness requires an examination of otherwise

protected communications. Id. In Conkling v. Turner,

883 F.2d 431, 434-35 (Sth Cir. 1989), the plaintiff

claimed that the RICO statute of limitations period was

tolled because he did not know that a statement made

by the defendants was false until told by his attorney 18

years after the fact. The Fifth Circuit held that by doing

so, he waived the privilege as to communications from

his attorney about the statement; “the attorney-client

privilege is waived when a litigant ‘place[s] information

protected by it in issue through some affirmative act for

his own benefit, and to allow the privilege to protect

against disclosure of such information would be mani-

festly unfair to the opposing party.’” Id. at 434 (quoting

Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D.Wash.1975) )

6la

(alteration in original). See also Lorenz v. Valley Forge

Ins. Co., 815 F.2d 1095, 1098 (7th Cir.1987) (“To

waive the attorney-client privilege . . . a defendant must

do more than merely deny a plaintiff’s allegations. The

holder must inject a new factual or legal issue into the

case.”); Sedco Int'l S.A. v. Cory, 683 F.2d 1201, 1206

(8th Cir.) (“[B]y asserting fraud, [the defendant] .. .

waived his right to assert the privilege to prevent dis-

closure of communications which might have proven he

did not rely on [the plaintiffs’] statements.”), cert. denied,

459 U.S. 1017, 103 S.Ct. 379, 74 L.Ed.2d 512 (1982).

The defendant need not raise an affirmative defense to

inject a new issue into the case, although it frequently

occurs that way. Cf. Lorenz, 815 F.2d at 1098 (stating

that new issues are “[mJost often” injected “through the

use of an affirmative defense”).

United States v. Bilzerian, 926 F.2d 1285, 1292 (2d

Cir.), cert. denied, US. , 112 S.Ct. 63, 116

L.Ed.2d 39 (1991), although a criminal case, is instruc-

tive. Prior to his trial for securities fraud, Bilzerian an-

nounced his intention to testify that he believed in good

faith that certain disclosures he made to the Securities

and Exchange Commission were legal. The district court

ruled that if he were to do so, he would waive the at-

torney-client privilege with respect to those communica-

tions with his counsel regarding the legality of his actions.

Bilzerian therefore declined to assert his good faith belief.

He was convicted, and he challenged the conviction,

arguing that the district court had prevented him from

denying criminal intent—an essential element of the crime

with which he was charged. The Second Circuit rejected

his argument, reasoning that:

Bilzerian’s testimony that he thought his actions were

legal would have put his knowledge of the law and

the basis for his understanding of what the law re-

quired in issue. His conversations with counsel re-

garding the legality of his schemes would have been

62a

directly relevant in determining the extent of his

knowledge and, as a result, his intent.

Id. The court held that Bilzerian had not been deprived

of the right to deny criminal intent; he “was free to deny

criminal intent . . . without asserting good faith.” Jd. at

1293. ;

Similarly, in the present case, USX could have denied

criminal intent without affirmatively asserting that it be-

lieved that its change in pension fund policy was legal.

Having gone beyond mere denial, affirmatively to assert

good faith, USX injected the issue of its knowledge of the

law into the case and thereby waived the attorney-client

privilege.

The district court ordered the disclosure of those at-

torney-client communications bearing on USX’s knowl-

edge of the law relating to its leave of obsence policy,

from the date Rich and Phillips first proposed the pay-

ments to May 22, 1988 (the date the Company ceased

making direct payments to the Fairfield Six). USX argues

that because the Company admits it was not certain of

the plan’s legality after the Third Circuit’s 1986 decision

in Trailways Lines, Inc. v. Trailways, Inc., 785 F.2d

101 (3d Cir.), cert. denied, 479 U.S. 932, 107 S.Ct. 403,

93 L.Ed.2d 356 (1986), the waiver should only apply to

communications made before that date. We cannot say,

however, that the district court abused its discretion in

determining that the communications USX had with its

attorneys, after Trailways and prior to its decision to

cease making direct payments, might bear on what USX

knew about the legality of the plan, and when USX

knew it. Accordingly, the order of the district court is

affirmed.

63a

D. Plaintiffs’ Attempt to Obtain Discovery of Pension

Practices at Other Plants

1. The Parton Matter

The district court granted the defendants’ motion for a

protective order preventing the plaintiffs from deposing

twelve people to inquire about Jack Parton, a Union ne-

gotiator at USX’s Gary, Indiana, plant. According to the

plaintiffs, Parton was granted a series of one-year leaves

of absence beyond USX’s two-year limit, so that he too

earned pension credit at USX while working for the Un-

ion, and thus discovery should be allowed so they can

show that his case is part of USX’s pattern of RICO

violations.

The district court determined that it could “find no re-

lationship and no substantial similarity between the Parton

matter and the incidents at the Fairfield Works that are

the subject of this lawsuit.” We disagree. The plaintiffs

have produced evidence showing that the manager of em-

ployee relations at the Gary Works promised, in the final

hours of negotiations on local issues there, to “take care

of” Parton should he be reelected to his position within

the Union. Internal USX memoranda reveal that Johnston

initially refused to agree to the request; however, on No-

vember 18, 1983 (the month before he agreed that Rich

and Phillips’ request would be considered favorably),

Miller granted Parton an extension on his leave of ab-

sence. While the district court retains the power to grant

a protective order when the information sought in a dep-

osition clearly would be irrelevant, Salter v. Upjohn Co.,

593 F.2d 649, 651 (5th Cir.1979), “relevance is broadly

defined in the context of discovery,” Wyatt v. Kaplan,

686 F.2d 276, 284 (5th Cir.1982). The Parton matter

is plainly relevant to plaintiffs’ efforts to establish a pat-

tern of RICO violations. The order of the district court

is therefore reversed.® The district court does retain its

5 The plaintiffs have filed a motion to supplement the record on

appeal to provide this Court with a more complete record on which

64a

authority to keep discovery about the Parton matter

within reasonable bounds.

2. Negotiations at Other Plants

The district court also denied the plaintiffs’ request

that the defendants produce virtually all documents relat-

ing to USX business plans for negotiations with the Union

at other USX facilities from 1980 to the present. The

plaintiffs argue that such an inquiry is necessary so that

they can address the defendants’ contention that the con-

cessions in the Fairfield agreement were the result of eco-

nomic necessity rather than the bribes. The district court

found that the request was unduly burdensome, particu-

larly given the fact that “[a]greements at other plants

present uncontrollable variables resulting from differences

in size, location, equipment, productivity, and other un-

knowable factors, which makes the collective bargaining

process unique to each plant. A comparison of the bar-

gaining results between plants is, therefore, the proverbial

comparison of apples and oranges.” USX characterizes

the plaintiffs’ request as an overwhelmingly burdensome

fishing expedition, and objects on the ground that the

documents requested contain business secrets.

“Where a significant amount of discovery has been ob-

tained, and it appears that further discovery would not be

helpful in resolving the issues, a request for further dis-

covery is properly denied.” Avirgan v. Hull, 932 F.2d

1572, 1580 (11th Cir.1991). By any measure, the plain-

tiffs have had a significant amount of discovery in this

case. The plaintiffs were allowed discovery of those of

USX’s business plans that were related to the Fairfield

Works; they have taken 36 depositions and have received

to evaluate the defendants’ arguments. Although we have the

“inherent equitable power[]” to supplement the record on appeal,

Jones v. White, 992 F.2d 1548, 1566 (11th Cir.1993), the materials

offered are not necessary for us to decide this issue, and we there-

fore decline to exercise that power. The motion is denied.

65a

over 50,000 documents from USX alone. Limitations on

the scope of discovery are “appropriate when discovery

would burden the party from whom it is sought unduly,

in comparison with any advantage it would provide to the

discovering party . . . because a particular matter is of

only minor importance.” Charles A. Wright & Arthur

R. Miller, Federal Practice and Procedure: § 2040, at

286 (1970). We have already held, in subpart II.B.2

above, that the plaintiffs do not need to show that the

prevailing economic conditions had no effect on the ne-

gotiations. The substantial burden that the requested dis-

covery would have on the defendants therefore far out-

weighs any benefits plaintiffs would gain by being able

to present a comparison of the results of the Fairfield ne-

gotiations to those at other plants. The district court’s

order denying that discovery was not an abuse of discre-

tion, and it is affirmed.

E. The Grand Jury Materials

The district court also denied the plaintiffs’ motion to

compel production of testimony and documents presented

to the grand jury in the criminal case. The plaintiffs ar-

gue that because the defendants have in their possession

a copy of all of the documents and transcripts of all of

the testimony presented to the grand jury, and the de-

fendants’ witnesses have been uncooperative, they need

access to the materials. The plaintiffs also argue that the

defendants’ interest in preserving the secrecy of the ma-

terial is minimal, given that the criminal trial is over.

In the proceedings of November 28, 1990, the district

court emphasized that its denial of the plaintiffs’ motion

“does not preclude [the plaintiffs] from renewing the mo-

tion with a specific showing of need. . . . I didn’t feel

that you made the particularized showing on any of those

grand jury proceedings in order to” compel discovery.

It has long been the law of this Circuit

66a

that disclosure of grand jury testimony is properly

granted where there is a compelling need for such

disclosure and such disclosure is required by the

ends of justice. Disclosure even in these circum-

stances must be closely confined to the limited por-

tions of the testimony for which there is found to

be a particularized need.

Allis-Chalmers Mfg. Co. v. City of Fort Pierce, 323 F.2d

233, 242 (Sth Cir.1963) (emphasis added). The plain-

tiffs have made no effort to identify those portions of the

grand jury transcripts for which they have a particularized

need. Given the opportunity to renew the motion upon a

showing of such need, the plaintiffs are unable to demon-

strate that the court’s order “resulted in substantial harm”

warranting a determination that the court abused its dis-

cretion. Arabian American Oil Co. v. Scarfone, 939 F.2d

1472, 1477 (11th Cir.1991). The district court did not

abuse its discretion, and its order is affirmed.

F. Attorney Work Product

The plaintiffs moved to compel discovery of one docu-

ment produced by USX attorneys concerning the leave

of absence policy, and several documents produced by

Union attorneys, relating to statements made by the Fair-

field Six or by Emmett Bruce Thrasher that relate to

matters in the litigation. They also moved to compel an

answer to an interrogatory asking the Union to identify

each statement taken by its attorneys during their inves-

tigation into requests by Union officials for USX pen-

sions. The district court denied the motions and sanc-

tioned the plaintiffs for bringing them; the = ap-

peal that order.

The attorney work-product privilege traces its roots to

the recognition by the Supreme Court, in Hickman v.

Taylor, 329 U.S. 495, 510-11, 67° S.Ct. 385, 393, 91

L.Ed. 451 (1947), that “it is essential that a lawyer

work with a certain degree of privacy, free from unneces-

re

Se ae ee p™

67a

sary intrusion by opposing parties and their counsel.” The

privilege is presently codified in Fed.R.Civ.P. 26(b) (3),

which provides, in part:

(3) Trial Preparation: Materials. ... | [A] party

may obtain discovery of documents and tangible

things otherwise discoverable under subdivision (b)

(1) of this rule and prepared in anticipation of liti-

gation or for trial by or for another party or by or

for that other party’s representative (including the

other party’s attorney, consultant, surety, indemni-

tor, insurer, or agent) only upon a showing that the

party seeking discovery has substantial need of the

materials in the preparation of the party’s case and

that the party is unable without undue hardship to

obtain the substantial equivalent of the materials by

other means. In ordering discovery of such materials

when the required showing has been made, the court

shall protect against disclosure of the mental impres-

sions, conclusions, opinions, or legal theories of an

attorney or other representative of a party concerning

the litigation.

Material that reflects an attorney’s mental impressions,

conclusions, opinions, or legal theories, is referred to as

“opinion work product.” In re Murphy, 560 F.2d 326,

336 (8th Cir.1977); cf. Hickman, 329 U.S. at 511, 67

S.Ct. at 393; Upjohn Co. v. United States, 449 U.S. 383,

399, 101 S.Ct. 677, 687, 66 L.Ed.2d 584 (1981). “Not

even the most liberal of discovery theories can justify un-

warranted inquiries into the files and the mental impres-

sions of an attorney.” Hickman, 329 U.S. at 510, 67

S.Ct. at 393. In Upjohn, the Supreme Court made clear

that an attorney’s notes and memorandum of a witness’s

oral statements is considered to be opinion work product.

Upjohn, 449 U.S. 383, 399-400, 101 S.Ct. 677, 687-88,

66 L.Ed.2d 584 (1981). As Rule 26(b)(3) makes ap-

parent, “opinion work product can not be discovered upon

a showing of substantial need and an inability to secure

the substantial equivalent of the materials by alternate

68a

means without undue hardship.” Murphy, 560 F.2d at

336; see also National Union Fire Ins. Co. v. Murray

Sheet Metal Co., Inc., 967 F.2d 980, 983 (4th Cir.1992);

In re Sealed Case, 676 F.2d 793, 809-10 (D.C.Cir.1982).

Instead, “opinion work product enjoys a nearly absolute

immunity and can be discovered only in very rare and

extraordinary circumstances.” Murphy, 560 F.2d at 336.

The crime-fraud exception presents one of the rare and

extraordinary circumstances in which opinion work prod-

uct is discoverable. The exception applies to work-prod-

uct in the same way that it applies to the attorney-client

privilege. In re International Sys. & controls Corp. Sec.

Litig., 693 F.2d 1235, 1242 (5th Cir.1982); see also In

re Antitrust Grand Jury, 805 F.2d 155, 164 (6th Cir.

1986); Sealed Case, 676 F.2d at 812; In re John Doe

Corp., 675 F.2d 482, 492 (2d Cir.1982); In re Grand

Jury Proceedings (FMC Corp.), 604 F.2d 798, 803 (3d

Cir.1979). Before the crime-fraud exception will be in-

voked, the plaintiffs must satisfy the two-part test of In

re Grand Jury Investigation (Schroeder), 842 F.2d 1223,

1226 (11th Cir.1987), which we discussed in subpart

III.B, above. See also In re Federal Grand Jury Proceed-

ings 89-10 (MIA), 938 F.2d 1578, 1581 (11th Cir.

1991). Even if the Union engaged in an effort to con-

ceal the unlawful activities of its negotiators, as a jury

might find (see subpart II.B.2, above), after our own in

camera inspection, we agree with the district court that

the documents in question were not created to further any

crime or fraud; nor are they closely related to any.

The remaining two grounds on which the plaintiffs ar-

gue for reversal are not among the very rare and extraor-

dinary circumstances in which opinion work product is

discoverable. First, the plaintiffs argue that USX waived

the privilege by asserting that it thought its actions were

legal, and the Union waived the privilege by allowing

one of its attorneys, Kleiman, to testify at the criminal

trial and by asserting that it was unaware of Rich and

Phillips’ actions. The subject-matter waiver doctrine pro-

Se ee Ea eee eee

ee aon es 4s oes .

69a

vides that a party who injects into the case an issue that

in fairness requires an examination of communications

otherwise protected by the attorney-client privilege loses

that privilege. GAB Business Services, Inc. v. Syndicate

627, 809 F.2d 755, 762 (11th Cir.1987). However, as

the Fourth Circuit has observed in In re Martin Marietta

Corp., 856 F.2d 619, 625-26 (4th Cir.1988), cert. de-

nied, 490 U.S. 1011, 109 S.Ct. 1655, 104 L.Ed.2d 169

(1989), the subject-matter waiver doctrine does not ex-

tend to materials protected by the opinion work product

privilege. The Martin Marietta court’s reasoning was that

the plain language of Fed.R.Civ.P. 26(b)(3) suggests

that opinion work product should not be subject to such

an implied waiver, and that the rationale behind the doc-

trine (the fear that a party might “ ‘make affirmative testi-

monial use’” of a communication and then seek to shield

it from disclosure) does not apply to mental impressions

and legal theories. Id. at 626 (quoting Duplan Corp. v.

Deering Milliken, Inc., 540 F.2d 1215, 1223 (4th Cir.

1976)). We agree. Where a party asserts that he be-

lieved his actions to be lawful, he waives the attorney-

client privilege as to what his attorney told him about

the legality of his actions (see subpart III.C, above); his

attorney’s work product, however, is a different matter.

The plaintiffs also argue that the Garner doctrine ap-

plies to work product. Garner v. Wolfinbarger, 430 F.2d

1093, 1103-04 (Sth Cir.1970), cert. denied, 401 US.

974, 91 S.Ct. 1191, 28 L.Ed.2d 323 (1971), held that

shareholders suing their corporation may discover com-

munications otherwise protected by the attorney-client

privilege upon a showing of good cause. The plaintiffs

seek to extend that holding to apply to the relationship

between the workers at the Fairfield plant and their Union

and their pension fund, as well as to the work product

privilege. However, the \fth Circuit has held that the

Garner docirine does not apply to attorney work product.

In re International Sys. & Controls Corp., 693 F.2d 1235,

1239 (Sth Cir. 1982) (footnotes omitted). We agree.

70a °

Furthermore, at least as far as the Union is concerned,

we have already held, in III.B above, that the Garner

exception is not justified on the facts of this case. The

district court therefore did not abuse its discretion, and

its order is affirmed.

G. Rule 31 Deposition of Attorneys

The final discovery order that the plaintiffs appeal is

the sua sponte ruling of the district court, pursuant to

Rule 31, that the plaintiffs may depose the defendants’

attorneys only by written questions. The plaintiffs argue

that they should be allowed to take oral depositions, citing

the hostility of the witnesses and the defendants’ efforts

at concealment. The district court reasoned that, “[i]n

view of the plaintiffs’ continuing efforts to breach the de-

fendants’ attorney-client privilege, the court is convinced

that these depositions, in the absence of firm control by

the court, will almost certainly be attended by continuing

disputes and may require that they be supervised by a

judicial officer.” That order was not an abuse of discre-

tion, and we affirm it.

IV. CLASS CERTIFICATION

The district court declined to certify the plaintiff class

for the plaintiffs’ claims for equitable relief, and the plain-

tiffs seek to appeal. Because the plaintiffs seek rescission

of the current Fairfield Works Agreement, the district

court determined that the conflict between those members

of the class who have been recalled to work under that

agreement and those that have not made certification in-

appropriate. Because we do not have jurisdiction over

the appeal, we do not reach the plaintiffs’ arguments for

reversal.

The decision of a district court denying class certifica-

tion “does not of its own force terminate the entire liti-

gation because the plaintiff is free to proceed on his

individual claim. Such an order is appealable, therefore,

Nowe — 4 be - —— “3

AS EER a Ree Rea

a San Re te he

De Tie et SCTE Oe ReaD RR se

tetas ibe a SA

7la

only if it comes within an appropriate exception to the

final-judgment rule.” Coopers & Lybrand vy. Livesay,

437 U.S. 463, 467, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351

(1978). The plaintiffs having shown no applicable ex-

ception to the final judgment rule, we dismiss their appeal

without expressing any view on the merits. See Gonzalez

v. Texas Employment Comm'n, 563 F.2d 776, 777 (Sth

Cir.1977) (dismissing appeal when “appellant, upon

whom the burden to show jurisdiction rests, has not dem-

onstrated the applicability of any of the exceptions to”

the rule that denials of class certification are not immedi-

ately appealable) (internal citation omitted).

V. CONCLUSION

We REVERSE the district court’s grant of summary

judgment on the plaintiff's RICO claim against USX and

the Union, as well as the court’s grant of summary judg-

ment on the plaintiffs’ § 301 claim against USX for

breach of contract. We also REVERSE the decision of

the district court granting the defendants a protective or-

der preventing plaintiffs from taking depositions to in-

quire into the Parton matter. Finally, we REVERSE the

district court’s decision that the Garner doctrine prevents

the Union from asserting the attorney-client privilege

against the plaintiffs. In all other respects, we AFFIRM,

with the exception of the district court’s denial of class

certification as to the plaintiff's equitable and declaratory

relief, which we have no jurisdiction to review.

72a

APPENDIX B

[Filed Dec. 16, 1991]

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

CV-88-N-2069-S

LESLIE RAy Cox, et al.,

vw. Plaintiffs,

UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC;

USX CorRPORATION, a/k/a U.S. STEEL CORPORATION;

and THE UNITED STATES STEEL & CARNEGIE PENSION

FUND,

Defendants.

MEMORANDUM OF OPINION

I. Introduction.

This is a civil action brought by a class of plaintiffs

who are present and former employees of defendant USX

Corporation (“USX” or “the Company”) in Jefferson

County Alabama and who were represented by the United

Steelworkers of America, AFL-CIO-CLC (“the Union”)

at any time from July 1, 1983 to the present.’ The plain-

tiffs accuse the Company, the Union and United States

Steel & Carnegie Pension Fund (“the Fund”), of wrong-

doing in connection with the negotiation and implementa-

tion of the December 1983 Fairfield Works Agreement

(“the FWA”) between USX and the Union. More spe-

cifically, plaintiffs claim that in response to demands of

1The class was certified with respect to damages claims only.

73a

certain Union negotiators, the Company agreed to amend

its leave of absence policy for Union officials in such a

way as to make those negotiators eligible for Company

pensions to be paid by the Fund. The plaintiffs charge

the defendants with: (1) violations of the Racketeer In-

fluenced and Corrupt Organizations Act, 18 U.S.C.

§ 1961 et seq. (Count I); (2) breach of the Union’s duty

of fair representation, and breach of contract by the Com-

pany, 29 U.S.C. § 185(a) (Count II); (3) violations of

the National Labor Relations Act (“NLRA”), 29 U.S.C.

§ 158(d) (Count III); (4) breach of Employee Retire-

ment Income Security Act (“ERISA”) fiduciary duties,

29 U.S.C. § 1132 et seg. (Count IV); and (5) violations

of 29 U.S.C. § 186 (Count V).

In Count I of their amended complaint, plaintiffs allege

USX engaged in “racketeering activity’ by giving the

Union negotiators a “thing of value” in violation of sec-

tion 302 of the Taft-Hartley Act, 29 U.S.C. § 186. Plain-

tiffs claim USX, with income from a pattern of the alleged

racketeering activity, invested in, acquired or controlled,

and conducted the affairs of the Fairfield Works,? the

Fund, the Union and District 36 of the Union. The

Union and the Fund allegedly conspired with the Com-

pany and with the Union negotiators to violate the pro-

visions of 18 U.S.C. § 1962, in violation of 18 U.S.C.

§ 1962(d). Plaintiffs allege they were injured in their

business or property because concessions in the Fairfield

Works Agreement resulted in reduced compensation and

fewer jobs.

In Count II of their amended complaint, plaintiffs sue

USX for breach of contract and the Union for breach of

its duty of fair representation, a so-called “hybrid § 301”

2 Prior to 1964, U.S. Steel’s operations in Fairfield were sepa-

rately incorporated as the Tennessee Coal & Iron & Railway Com-

pany. PA 262c. In 1964, the Company reorganized and all the

subsidiaries, like Tennessee Coal & Iron, ceased to operate as sub-

Sidiaries and became just steel plants within the organization.

PA 262b-262c.

74a

claim brought under section 301 of the Labor Manage-

ment Relations Act, 29 U.S.C. § 185(a).’ Plaintiffs claim

USX breached the 1983 and 1987 Basic Labor Agree-

ments by operating the Fairfield Works pursuant to the

Fairfield Works Agreement. Plaintiffs claim the Union

breached its duty of fair representation by the negotia-

tors’ request for and acceptance of long term leaves of

absence in return for making concessions to the Company.

In Count III of their amended complaint, plaintiffs

claim the Union and USX committed an unfair labor

practice in violation of 29 U.S.C. § 158(d) by failing to

negotiate in good faith during the FWA negotiations.

In Count IV of their amended complaint, the plaintiffs

claim the defendants violated the ERISA by failing to

notify them or the Department of Labor of the amend-

ment to the Company’s Leave of Absence policy. Plain-

tiffs claim this failure was a breach of USX’s and the

Fund’s fiduciary duties under ERISA. Plaintiffs also

claim USX and the Fund breached their fiduciary duties

by making wrongful payments from the Fund to the

Union officials.

In Count V, plaintiffs seek an order enjoining defend-

ants from committing violations of 29 U.S.C. § 186 in

the future.

The action is now before the court on defendants’ mo-

tions for summary judgment as to all counts of the plain-

tiffs’ amended complaint. The motions have been fully

briefed and are ripe for consideration.

3 “In a hybrid section 301 claim, ‘a union member sues his em-

ployer for breach of the collective bargaining agreement, while

also contending that his union breached its duty of fair representa-

tion... .. A ‘straightforward’ section 301 claim involves a union

suing an employer for breach of a collective bargaining agree-

ment.” United Paperworks Int’l, Local #395 v. Itt Rayonier, Inc.,

931 F.2d 832, 834 n. 7 (11th Cir.1991), citing International Ass’n

of Machinists and Aerospace Workers, Local Lodge No. 1688 v.

Allied Products Corp., 786 F.2d 1561, 1568 (11th Cir.1986).

75a

II. Statement of Facts.*

In 1981, the Fairfield Works consisted of steel making

and flat roll product operations. Affidavit of Lewis Mil-

ton McClean, Jr., United Steelworker’s Submission of

Evidence, p. 189.° A new Pipe Mill was due to be com-

pleted by the end of 1983. Id. The Company closed

down the steel making and flat roll product operations

at Fairfield in June 1982, because Fairfield had been

experiencing losses in excess of one hundred million dol-

lars per year for a number of years. Jd. at 189-90. Na-

tional steel production had dropped to a low level in

1982. Id. at 190. Lynn Williams, President of the Union,

testified that 1983 was “one of the most horrendous peri-

ods in the Union history.” Plaintiffs’ Appendix, p. 547.°

During the Fairfield Works shut down, between June

1982 and January 1984, Union members employed at

Fairfield did not pay dues unless the member earned a

paycheck or collected vacation pay.’ PA 561-562.

In September 1983, the Company and the Union began

negotiations aimed at reopening the Fairfield Works.

USWE 190. E.B. Rich and Thermon Phillips negotiated

on behalf of the Union. Phillips was Director of District

4 Plaintiffs did not include a statement of facts in their brief.

In an earnest attempt to find all the evidence favorable to plaintiffs,

the court has extracted most of the statement of facts from plain-

tiffs’ brief. The court has not included factual statements which

were not supported by citation to the evidence, nor has it included

factual statements which were supported by incorrect citations

of evidence. Considering the immense amount of evidence the

parties have accumulated, the plaintiffs have not chosen the most

helpful way to present their case.

5 The Union’s submission of evidence will hereinafter be styled,

“USWE.”

* Plaintiffs’ Appendix will hereafter be styled “PA.”

™The Union members recommenced paying dues when the Works

reopened. PA 555, 565.

76a

36 of the International Union,® and Rich was Sub-district

Director for District 36. Although Rich and Phillips

worked for the International Union, Theodore Stevenson,

Jr. testified that he dealt with them about local issues

rather than the presidents of the local unions. PA 232-

236, 661.° At the inception of the negotiations, William

Miller presented the Union negotiators with a proposed

agreement containing all the concessions USX hoped to

achieve. PA 130. The Company representatives advised

the Union that if it could not achieve substantial labor

cost reductions at the Fairfield Works, it intended to

source the new Pipe Mill from the Lorrain or Gary plants

of USX, and that it would give serious consideration to

permanently shutting down the remaining portions of the

Fairfield Works. USWE 191.

In the early days of the negotiations, E.B. Rich gave

William Miller, Jr.*° a list of names and, possibly, a draft

of some language providing for indefinite Company

leaves of absence for Union staff. PA 100a, 100b, 175,

8 Thermon Phillips was a member of the International Union’s

Executive Board, Secretary of the Union Negotiating Committee

which negotiated the March 1, 1983 Basic Labor Agreement and

the February 1, 1987 Basic Labor Agreement, and the Union Chair-

man of the Basic Steel Industry Audit and Review Committee.

PA 660-661.

® There is no support in the cited record for plaintiffs’ claim

that Rich and Phillips were involved in processing grievances and

arbitrations filed by rank-and-file members of the Union against

the Company, or for plaintiffs’ claim that Rich and Phillips had

responsibility for implementing the FWA and the BLA. Mr.

Stevenson did not discuss the procedure for handling grievances

and arbitration, nor did he discuss Phillips’ and Rich’s role with

regard to the collective bargaining agreements; he merely stated

that he dealt with Rich and Phillips with regard to local matters,

without elaboration. The court cannot assume Mr. Stevenson meant

that Rich and Phillips had implemented the FWA and the BLA,

or that they handled grievances and arbitration.

10 Mr. Miller was one of the Company’s negotiators.

me Se ee

ee ee ee 5

F ‘ Rw ese

aah Soins lhe

Sig 5 le Shh Le ie ni Sa

x

bs

4

=

:

Ve

T7Ta

191.% Mr. Miller gave the list of full time Union em-

ployees to Mr. Schick, who gave it to Mr. Hensarling ”

to get information about the people on the list. PA 100a-

100b, 191. Mr. Schick testified that the matter was kept

confidential because the negotiations were not public at

that time. PA 195a-195b.*

On October 27, 1983, Mr. Miller or Mr. Carney “

questioned Thermon Phillips about leaves of absence. PA

169-177. Mr. Miller testified that Rich, Phillips and Car-

ney were present with him at that meeting, where the

leaves of absence for the nine individuals listed by Rich

were discussed. PA 100g-100h. Mr. Miller’s notes of

that meeting indicate the leaves of absence were presented

as “[a] condition of settlement.” PA 294. Mr. Miller and

Mr. Carney did not agree the pensions would be forth-

coming, and they told Rich and Phillips they “knew of

no way that that could be done.” PA 100g, 100h. Nev-

ertheless, Mr. Miller testified that the leave of absence

issue was one of the pension items on the negotiating

table in October of 1983. PA 100c.

Thermon Phillips testified ** that, after the agreement

was completed on December 23, he, E.B. Rich, Mr. Car-

ney and Mr. Miller discussed the leave of absence matter

in a small room across the hall from the larger room

11 Rich relied on his Fifth Amendment right and refused to

answer when he was asked if a Union attorney had reviewed the

language. PA 179.

12 Tt is apparent that Mr. Schick and Mr. Hensarling were Com-

pany employees, but plaintiffs have not provided evidence about

their positions at USX. PA 100a-100b, 191, 169-77.

18 Ted Stevenson, Jr. testified that he was not present at any

meetings where leaves of absence and Company pensions for Union

staff were discussed. PA 239.

14 Mr. Carney was with the Company’s law department. PA 100e.

13Mr. Phillips and Mr. Rich read portions of their previous

grand jury testimony at their depositions, but otherwise refused to

testify.

78a

where they had been negotiating the Fairfield Works

Agreement. PA 168-177. Although they did not raise

the question on the last day of negotiations until after

the agreement was complete, Rich and Phillips would not

sign the final agreement until they had “an answer on

their item.” PA 101, 79-80, 114-116, 134-146. Miller

testified that Rich and Phillips’ signatures on the written

agreement were essential. PA 141. Miller and Jim Car-

ney spoke with J. Bruce Johnston and Miller told John-

ston that he believed Rich and Phillips were serious in

their refusal to sign the agreement until USX responded

to their request. PA 79-81, 102. Méiller testified that

Johnston responded, without hesitation, by outlining spe-

cific and detailed conditions under which the Company

would be willing to consider granting the leaves of ab-

sence and pensions. PA 80-81, 102-103, 109-113, 286.

Miller and Carney told Rich and Phillips of the specific

conditions Johnston had given them. PA 104, 143-146.

Rich and Phillips signed the agreement after Miller

told them he believed USX would favorably consider their

request. Id.° The FWA was in its final form when

Rich and Phillips raised the pension issue on the last

day of negotiations, and it was not changed from its final

form before it was signed. PA 101, 134-46.

The Fairfield Works Agreement of December 24, 1983

resulted in: (1) elimination of over 500 jobs in the Fair-

field Works (PA 273-277, 404); (2) elimination of all

incentive pay except direct incentive pay, which was

capped at 135% (PA 278); (3) elimination of all prior

local working conditions and past practices concerning,

inter alia, manning, crew sizes, job assignments, hours

of work, and coffe breaks (PA 272, 405); (4) combi-

nation of maintenance shops into central shops (PA 275-

277); (4) transfer of the rail and transportation division

to Birmingham Southern Railroad’ (PA 273-274); (5)

16 One of USX’s conditions was that the pensions would be made

retroactive to “March 1.” PA 103, 286.

79a

contracting maintenance jobs (PA 276); (6) contract-

ing janitorial and refuse hauling services (PA 277); (7)

elimination of the biweekly 80 hour salary guarantee

(PA 406); (8) granting to the Company full and sole

discretion in determining manning and job assignments

(PA 405); and (9) dismissal of pending complaints,

grievances and arbitration cases. In August 1983, USX

had estimated that the Fairfield Works would realize a

profit of about $43 million in 1985, and in November

1983 USX had adjusted the estimated 1985 profit to $53

million. PA 471. In projecting the 1985 profit and loss,

USX considered the impact of employee reductions, a

135% cap on direct incentives, elimination of indirect in-

centives, reduction in benefits to management levels and

elimination of a bi-weekly salary guarantee. Id. In a

December 20, 1983 analysis of savings associated with

the Fairfield negotiations, the Company projected $23.5

million in annual net savings, including a $1 million sav-

ings from establishment of a management health care

package. PA 474. However, in a December 23, 1983

telephone conversation, Phillips told Miller that the Un-

ion would not agree to the Company’s first preference of

a transfer to the management health care package, but

that they would consider the Company’s second prefer-

ence, further reductions in the work force. PA 107-108.

Charles Schroeder of USX projected that USX would

net employment cost savings associated with the final De-

cember 24 local agreement of $24 million per year. PA

404, 474. Larry Regan, President of Local 1014 at

USX’s Gary Works, stated by affidavit:

Although USX was seeking local labor concessions

in 1983 from the Union at several USX plants, the

December 24, 1983 Fairfield Works Agreement con-

tains the most severe concessions ever made to my

knowledge in any local issues agreement ever ne-

gotiated between USX and the Union. To the best

of my knowledge, no other steel plant in USX op-

80a

erates under the extreme labor concessions contained

in the 1983 Fairfield Works Agreement.

PA 579. The Company made a commitment in the 1983

Fairfield Works Agreement to install a slab caster at Fair-

field, but the caster was not operational until 1989. PA

182-183. David Roderick testified that, on a long term

basis, Fairfield Works vould not be quality competitive

or cost competitive without a Slab Caster. PA 188.”

Details called for by the Fairfield Works Agreement were

not finalized as late as October 1984. PA 217-218.”

On July 20, 1984, Miller sent Johnston a proposal

Miller had received from Jack Golden™® for an amend-

ment to the Company’s leave of absence policy to allow

certain individuals to receive indefinite leaves of absence.

PA 297b-297g. In response to a July 12, 1984 Birming-

ham Post Herald report that Fairfield Works union main-

17 Mr. Roderick testified that the Company took a long time in

determining what type of Caster to build, and that it took several

years to engineer and build the Caster.

18Qn May 8, 1991, the Birmingham Post Herald reported that

Fairfield Works was a semifinalist for the 1990 Alabama U.S.

Senate Productivity Awards, and would receive a U.S. Senate Pro-

ductivity Award Certificate of Merit recognizing productivity im-

provement. PA 643.

19 There is no support in the cited portions of Mr. Short’s

deposition for plaintiffs’ claim that the Fairfield Works Agree-

ment negotiations continued into 1984. The Agreement was signed

on December 24, 1983. As the portio

This text is long and has been trimmed here. Open the source document for the complete record.