360 F. Supp. 517

Bernard W. McNAMARA et al., Plaintiffs, v. Robert JOHNSTON et al., Defendants, UAW, Intervenor.

No. 71 C 654.

United States District Court, N. D. Illinois.

June 6, 1973.

*519William J. O’Brien, Chicago, Ill., for plaintiffs.

Harold A. Katz and Irving M. Friedman, of Katz & Friedman, Chicago, Ill., for defendants.

Stephen I. Schlossberg, Gen. Counsel UAW, Detroit, Mich., for defendant-intervenor.

MEMORANDUM OPINION AND ORDER

BAUER, District Judge.

This cause comes on the defendants’ motion to dismiss the complaint.

This is an action for an alleged breach of the fiduciary duty imposed on defendants under Section 501(a) of the Labor-Management Reporting and Disclosure Act of 1959 (commonly referred to as the Landrum-Griffin Act) 29 U.S.C. § 501(a).

The plaintiffs are employed as production unit workers in the Fisher Body Plant of General Motors Corporation at Willow Springs, Illinois, and are dues paying members of the International United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”), the designated collective bargaining representative of production unit workers in the plant. The plaintiff, Bernard W. McNamara, in addition to being a dues paying member of UAW, also serves in the capacity of Recording Secretary of UAW, Local 558, a post to which he was duly elected by the membership of the Local. The plaintiffs bring this action as members of UAW for the benefit of the union and its members.

The defendant, Robert Johnston, is Regional Director of UAW, Region 4, a region which includes the State of Illinois. Robert Johnston also serves as Chairman of the UAW Illinois State Community Action Program Council (“CAP”).

Defendant James Wright is Chairman of the UAW Chicago Area CAP Council. Defendants Johnston, Wright and Peterson exercise custody and control over Illinois CAP funds, and all decisions respecting the use and expenditure of such funds.

Defendant Emil Mazey is Secretary-Treasurer of UAW International and in such capacity receives and handles union funds as hereinafter described.

Defendant Leonard Woodcock is International President of UAW and in such capacity exercises control and direction over the handling and expenditure of union funds.

The plaintiffs, in the complaint, allege, inter alia, the following facts:

1. Pursuant to the provisions of the UAW Constitution and the administrative instructions issued by the president of UAW International on May 19, 1969, each local union in the State of Illinois, including Local Union 558, is required to set aside a minimum of 3% of' each member’s monthly membership dues as a per capita payment to the UAW Illinois State CAP, and to remit such money to defendant Robert Johnston. Upon receipt of said money defendant Johnston allocates it proportionately to UAW Illinois State CAP and Chicago Area CAP.
2. The defendants Johnston, Wright and Peterson, unlawfully and wrongfully diverted a large part of said money into the political campaign coffers of candidates for public office and for various political expenditures and purposes totally unrelated to the interests and welfare of the union and its members or to the functions and purposes of the union as collective bargaining representative of plaintiffs and their fellow dues paying members of the union.1 These actions of the de*520fendants were in violation of 29 U.S.C. § 501(a) which sets forth their statutory duty of fidelity and trust to hold such money solely for the benefit of the union and its members.2
3. Defendants Mazey and Woodcock instructed, controlled and directed defendants Johnston, Wright and Peterson in violation of their aforesaid statutory duty of fidelity and trust to hold such money solely for the benefit of the union and its members. Further, defendants Mazey and Woodcock, in violation of their statutory duty, have unlawfully and wrongfully diverted a substantial part of the membership dues for various political expenditures and purposes totally unrelated to the interests and welfare of the union and its members or to the functions and purposes of the union as a collective bargaining representative of plaintiffs and their fellow dues paying members of the union.3
4. The “unlawful and unauthorized” diversion of union money and assets into political campaigns was not only made by defendants in violation of their statutory duty of fidelity and trust, but was also done contrary to an express and explicit resolution adopted by a referendum vote of the membership of UAW Local 558 on May 6, 1969 4 Defendants were given *521formal notification of such a resolution and of the explicit objections of the members of UAW Local 558 to use of any part of their membership dues money by defendants for partisan political candidates and activites, or for ideological causes or support of organizations or groups espousing ideological causes. The defendants have ignored the objections expressed by the members of UAW Local 558 and the executive officers of UAW have failed and refused to institute a legal action in the name of the union to require defendants to render an accounting.
*520National Students Association (NSA)
Students for a Democractic Society (SDS)
Students Non-Violent Coordinating Committee (SNCC)
New Mobilization for Peace
Turn Toward Peace
Citizens Committee for a Nuclear Test Ban
National Committee for a Sane Nuclear Policy (SANE)
Americans for Democractic Action (ADA)
United World Federalists
Peace with Freedom, Inc.
Dubois Memorial Committee
United States Committee for the U.N.
American Association for the U.N.
Confederation Spanish Societies
United States Committee for Democracy in Greece

*521The plaintiffs seek an order of this Court requiring defendants to furnish an accounting and repay in damages to the Union all monies unlawfully diverted by them.5

The defendants, in support of their motion to dismiss the complaint, contend:

1. The complaint does not state a cause of action upon which relief can be granted because the alleged unlawful expenditures are expenses entirely proper under Section 501, and the UAW Constitution.
2. Plaintiffs have failed to exhaust their Union remedies prior to bringing this action.
3. Plaintiffs have failed to allege the performance of the procedural requirements contained in Section 501(b) of the Act.
4. There was no showing of good cause made prior to the filing of the instant suit.

The plaintiffs, in opposition to the instant motion, contend that the complaint states a proper cause of action according to 29 U.S.C. § 501(a) and has met the procedural requirements of 29 U.S.C. § 501(b).

It is the opinion of this Court that the plaintiffs’ claims do not constitute a proper cause of action under 29 U.S.C. § 501.

*522THE PLAINTIFFS’ COMPLAINT FAILS TO SUFFICIENTLY STATE A CAUSE OF ACTION UNDER 29 U.S.C. § 501.

The jurisdiction of this Court is invoked under the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 501. This legislation confers fiduciary status upon union officers who deal with the property and funds of a union. As a fiduciary under the Act, a union officer must account to his union for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the union.6 The statute further provides that any breach of fiduciary duty shall not be relieved by a subsequent exculpatory resolution passed either by the union itself or by its governing board. Should a union or its governing board fail or refuse to sue, recover damages or secure an accounting within reasonable time any member of the union may sue in a federal court in a derivative capacity for the benefit of the union.7

The clear intent of Congress in enacting this legislation was to weed out instances of corruption and breach of trust; to preserve the rights of individual union members; and to insure high standards of responsibility on the part of, at that time, powerful and sometimes detached and autocratic union officers. Richardson v. Tyler, 309 F.Supp. 1020 (N.D.Ill.1970); Purcell v. Keane, 277 F.Supp. 252 (E.D.Pa.1967). Thus the precise issue of the instant action is whether the defendants breached their fiduciary duty in violation of 29 U.S.C. § 501.

Section 501(a) of the Act literally requires, and was intended to so require, union officers to expend union funds in accordance with the union’s constitution *523and bylaws and any resolution of the governing bodies adopted thereunder.8

Congress did not in Section 501, or elsewhere in the Act, attempt to regulate or limit the purposes for which a union may spend its money, and the use of the phrase “taking into account the special problems and [that] the labor organization” indicates an awareness of the fact that the labor union of today does not typically confine its activities to “business unionism.” 9 What the Act does require is that expenditures of a union’s funds as well as use of its other assets, be exclusively for purposes which are authorized by its constitution, bylaws, and any pertinent resolutions of its governing body.10 Congress did not intend § 501 to be a bar to union expenditures for political activity. Nowhere in the Act is there an attempt to limit or regulate the purposes for which a union uses its funds. The very words which are embodied in § 501 of the Statute— “. . . taking into account the special problems and functions of a labor organization . . .” indicates a recognition of the political realities of modern unionism. Senator McClellan, the principal Congressional proponent of fiduciary responsibility for union officials, stated:

“However, I am not offering my amendment on the direct question of political contributions. Everyone knows my views on the subject, I assume. This is not a drive at that situation. It is a drive at skullduggery of some leaders when they meet in executive sessions and pay off this one and pay off that one. ... I may say that there never was any idea of my trying to curb the authority of the members of a union to do whatever the members want to do; rather it is my intention to protect the members from having the members of a board .or a committee vote to do just about anything they want to do, as has been the case in many instances.” 105 Cong.Rec. 6526 (Daily Ed., April 23, 1959); II Legislative History of the Labor Management Act of 1959, at 1131 (1959).11

*524It is clear that political expenditures of union funds which are authorized by its constitution, bylaws, and any pertinent resolution of its governing body is not within the prohibition of Section 501 of the Act.

Numerous sections of the UAW Constitution mandate the kind of expenditures which are challenged in the instant complaint.12 Plaintiffs have failed to cite to this Court any provision of the UAW Constitution violated by defendants. The Constitution of the UAW (Art. 7, Sec. 1) establishes the convention or the supreme governing body of the International Union. The official proceedings of the convention demonstrate the approval by resolution of UAW contributions to various organizations and groups concerned with such issues as civil rights, peace, foreign affairs, civil liberties,, consumer protection, legislation, education and economic policy.13 The 1970 UAW convention thus approved the type of contributions which are challenged by the plaintiffs.

The fiduciary duty of union officers under § 501 is based on general agency principles. Union officers are viewed as agents for their principal, the membership. It necessarily follows that an agent cannot be in breach of duty when he is acting pursuant to the direction of his principal. To find a breach of duty when an officer disburses funds in accordance with the constitution and bylaws of his union would be contrary to the letter and spirit of § 501. It would inject judicial interventions into the policy making process of a union.14

The defendants’ expenditures of union funds for contributions to political candidates and social causes was authorized by the UAW Constitution and thus cannot by itself constitute a violation of § 501 of the Act.15

This ruling is in keeping with the Congressional intent in enacting § 501 as described by Senator Morse:

“I have been assured that the fiduciary section will not prevent political contributions. I trust the courts will *525so interpret the language in the bill.” Vol. II, Leg.Hist., LMRDA, p. 1416; Cong.Rec., September 3, 1959, p. 16387.16

The plaintiffs have attempted to infer that the actions of the defendants were illegal (ultra vires) and thus a breach of the defendants’ fiduciary duty by stating that the defendants’ contributions were made in violation of 18 U.S.C. § 610.17 However, the Supreme Court in Pipefitters Local Union No. 562 v. United States, 407 U.S. 385, 92 S.Ct. 2247, 33 L.Ed.2d 11 (1972) has recently stated:

“We therefore hold that § 610 does not apply to union contributions and expenditures from political funds financed in some sense by voluntary donations of employees.” 18 Id. at 409, 92 S.Ct. at 2261.

Further, Section 610 does not authorize a private right of action and the plaintiffs’ conclusory allegations that § 610 has been violated cannot in themselves change the defendants’ union authorized political expenditures into a 29 U.S.C. § 501 violation. Ash v. Cort, 350 F.Supp. 227 (E.D.Pa.1972) 19 ; *526Schonfeld v. Raftery, 335 F.Supp. 846 (S.D.N.Y.1971). However, this ruling should not be interpreted as foreclosing the plaintiffs’ right of redress under § 610 through the proper authorities.20

Since the spring of 1968 the UAW has provided a procedure by which individual members21 as a matter of conscience may dissent from the political activity of the UAW and enter an objection to-the expenditure a portion of their dues for political purposes.22 In such cases the UAW refunds to the individual the proportion of union dues used for such purposes.23 Moreover, if a union member is dissatisfied with the proportional allocation made by the Secretary-Treasurer of the union, the dissenting member may appeal therefrom to the International Executive Board, and then, at his option, either to the UAW Convention or to the UAW’s unique Public Review Board.24

“(a) Any member shall have the right to object to the expenditure of a portion of his dues money for activities or causes primarily political in nature. The approximate proportion of dues spent for such political purposes shall be determined by a committee of the International Executive Board, which shall be appointed by the President, subject to the approval of said Board. The member may perfect his objection by individually notifying the International Secretary-Treasurer of his objection by registered or certified mail; provided, however, that such objection shall be timely only during the first fourteen (14) days of Union membership and during the fourteen (14) days following each anniversary of Union membership. An objection may be continued from year-to-year by individual notifications given during each annual fourteen (14) day period.
(b) If an objecting member is dissatisfied with the approximate proportional allocation made by the committee of the International Executive Board, or the disposition of his objection by the International Secretary-Treasurer, he may appeal directly to the full International Executive Board and the decision of the International Executive Board shall be appealable to the Public Review Board or the Convention Appeals Committee at the option of said member.”

*527Regardless of whether the plaintiffs could have used other procedural or legal remedies to redress their instant grievance, it is clear that the instant complaint brought under 29 U.S.C. § 501 is insufficient and must be dismissed.

The plaintiffs, in their complaint, have failed to state a claim upon which relief can be granted. Section 501 of 29 U.S.C. was never intended by Congress, nor interpreted by courts, to cover political contributions which have been authorized by a union’s constitution or other governing resolutions.

Further, the issue of the propriety of a union’s authorized charitable and political contributions presents a sensitive controversy over which a federal district court should be reluctant to act without a clear and specific grant of jurisdiction.

Accordingly, it is hereby ordered that the defendants motion to dismiss is granted.

McNamara v. Johnston
360 F. Supp. 517

Case Details

Name
McNamara v. Johnston
Decision Date
Jun 6, 1973
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360 F. Supp. 517

Jurisdiction
United States

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