Opinion
C.A. No. 03-CV-1699
March 28, 2003
MEMORANDUM AND ORDER
This memorandum concerns the Plaintiff United Union of Roofers, Waterproofers and Allied Workers, AFL-CIO's (the "International's") motion for preliminary injunctive relief. This motion was opposed by Composition Roofers Union, Local 30, United Union of Roofers, Waterproofers and Allied Workers, AFL-CIO ("Local 30") and the named individual defendants (collectively, "Defendants"). At a hearing on March 26, 2003, after receiving testimony, exhibits, and a joint stipulation, we granted the International's motion for a preliminary injunction, and we now set forth our reasoning below.
BACKGROUND
The International is an unincorporated association and a labor organization as defined by Section 2(5) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 152(5) and Section 3(i) of the Labor Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C. § 402(i)(5). Located at 1660 L Street, N.W., Washington, DC 20036, it includes more than eighty-five local unions, with approximately 24,000 members throughout the United States. (Joint Ex. 1).
The defendant, Local 30, is a Pennsylvania unincorporated association and a labor organization within the meaning of Section 2(5) of the LMRA, 29 U.S.C. § 152(5) and Sections 3(i) and (j)(5) of the LMRDA, 29 U.S.C. § 402(i), (j)(5). Local 30 is chartered by the International and has its principal place of business at 6447 Torresdale Avenue, Philadelphia, PA 19135. During the relevant period of time prior to March 21, 2003, individual defendant Michael McCann was the Business Manager and Financial Secretary of Local 30. The other individual defendant, David McBride, was the President of Local 30. (Joint Ex. 1).
The International and all of its subordinate bodies are governed by the provisions of the Constitution and By-Laws of the United Union of Roofers, Waterproofers and Allied Workers, AFL-CIO ("constitution" and "by-laws"). (Ex. P-1). As set forth in the provisions below, the constitution creates an emergency power that allows the International President to impose a trusteeship on a local union to correct corruption and financial malpractice; the by-laws set forth the requisite procedures for imposing a trusteeship.
Article VIII(2)(e) of the constitution, which was in effect at the time of the events involved, provides as follows:
e. [The International President] shall have the emergency power to impose a trusteeship upon any Local Union or subordinate body for the purpose of correcting corruption or financial malpractice, assuring the performance of collective bargaining agreements or other duties of a bargaining representative, restoring democratic procedures or otherwise carrying out the legitimate objects of such Local Union or subordinate body, and shall have the power to remove or substitute a trustee until such time that the
International Executive Board shall take final action. The imposition of a trusteeship shall be effected by causing written notice to be served in person or by certified mail upon the Local Union or subordinate body and any officers or representatives thereof, which notice shall state the action he has taken and the name of the trustee, if one has been appointed. In exercising such authority, the International President shall take such steps as he deems necessary for the protection of the rights and property of this International Union and of the rights and property of the Local Union upon which a trusteeship has been imposed. In the event the International President shall deem it necessary to impose a trusteeship, he shall follow the procedure as set forth in the By-Laws of the International Union.
(Ex. P-1, 19).
Article XI of the by-laws, also in effect at the time of the events involved, provides as follows:
Trusteeship
Section 1. Whenever the International President shall impose a trusteeship upon a Local Union or other subordinate body affiliated with the International Union, the officers and representatives of said Local Union or subordinate body shall stand suspended from office and shall function subject to the supervision and direction of the trustee appointed by the International President until the trusteeship is terminated.
Section 2. The International President shall, within seven (7) days of the imposition of a trusteeship, mail notice of the action taken to all members of the International Executive Board.
Section 3. Within ninety (90) days after the imposition of such trusteeship, the International President shall cause written notice to be served in person or by certified mail upon the Local Union or subordinate body and any officers, representatives or members thereof who have been suspended, fixing the date for a hearing to be convened within sixty (60) days from the date of said notice.
The International President shall appoint one or more persons to act as hearing officers on behalf of the International Executive Board, and such hearing officer or officers shall conduct a hearing in the vicinity of the Local Union or subordinate body involved.
Section 4. The International Executive Board may in its own discretion render an opinion solely on the basis of the hearing officer's report or may direct further inquiry to be held for the purpose of rendering their decision. The International Executive Board may decide to continue or discontinue any existing trusteeship or suspension and may restore any officers, representatives or members to their original status if such suspension has been found to be unwarranted. In the case of reinstatement of officers, such reinstatement shall be for the unexpired term of their office. The International Executive Board shall further have the authority to revoke the charter of a Local Union under trusteeship if it should decide that it is in the best interest of the members of the Local Union or of the International Union. In the event of such revocation, the provisions of Section 2, Article XII, of the International Constitution shall apply.
Anything to the contrary herein notwithstanding, the International Executive Board shall have the right at any time and from time-to-time to review trusteeships and take such action as may be indicated.
Section 5. A Local Union or other subordinate body, upon action of the International Executive Board, is to bear any part or all of the expenses incurred in connection with the imposition, servicing, administration and termination of the trusteeship, including any and all matters arising therefrom.
(Ex. P-1, 61-62).
Past judicial intervention in the affairs of Local 30 has been extensive, beginning in 1988. Serious problems of violence and financial mismanagement had affected the union, resulting in the criminal conviction of many of its leaders under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. Following the convictions, the government sought to impose a trusteeship on Local 30 under the civil injunctive provisions of RICO. Judge Bechtle denied the motion for the appointment of a trustee, and instead created a "decreeship," under which newly-elected union leaders would be subject to the supervision of the court. United States v. Local 30, United Slate, Tile and Composition Roofers, Damp and Waterproof Workers Ass'n, 686 F. Supp. 1139 (E.D.Pa. 1988).
Then in 1999, after over a decade of oversight facilitated by Chief Court Liaison Officer Robert E. Welsh, Jr., Judge Bechtle suspended the decreeship he had imposed upon the belief that activities and conditions at Local 30 had improved considerably. But at a hearing on September 7, 1999 he emphasized that Paragraph 7 of the Decree Order remained in effect, barring the individual defendants in the civil suit from involvement in the affairs of Local 30. He also noted that the court could revoke its suspension and revisit the Decree upon cause shown. (Tr. of 9/27/99 Hearing Before Hon. Louis C. Bechtle, 22-23). This case was reassigned to us when Judge Bechtle left the bench.
The Decree also had an express provision which stated that the court was retaining jurisdiction. United States v. Local 30, 686 F. Supp. at 1174.
Recent allegations, if true, would render Judge Bechtle's reservation of court authority particularly prescient. According to the International, its president conducted an investigation of the affairs and operations of Local 30 pursuant to his authority under Article VIII of the constitution, in response to information he had received. That investigation allegedly revealed numerous problems, including instances of physical violence, threats of violence, and extortion at job sites that the International asserts were not investigated properly by Local 30. The International was also concerned with allegations of financial malpractice and mismanagement, unauthorized reductions in the local's initiation fees, and the failure of the local board to fulfill its duties. Based on the results of the investigation, the International President appointed Thomas Pedrick as Trustee of Local 30 and directed him to take control of the organization with an Order dated March 21, 2003. (Ex. P-2).
Later that same day, acting on the authority granted to him by the International President, Thomas Pedrick appeared at the premises of Local 30 for the purpose of serving the International President's Order imposing the trusteeship and taking charge of the affairs and property of Local 30. Mr. Pedrick was met by the individual defendants Michael McCann and David McBride, along with other Local 30 officials. Upon receiving the order, they refused to allow the Mr. Pedrick to impose the trusteeship; specifically, they refused to turn over the property to Mr. Pedrick, along with the necessary keys and alarm codes. (Joint Ex. 1). That refusal in turn led to the International's petition for a temporary restraining order enjoining Defendants from interfering with Mr. Pedrick in his capacity as Trustee, as authorized by the International President.
We held a hearing on the International's action for a temporary restraining order and preliminary injunction, also on March 21, 2003. Satisfied that the International had met the requirements for the imposition of a temporary restraining order, specifically the threat of immediate and irreparable injury, we granted its petition and scheduled a preliminary injunction hearing for March 26, 2003. At the preliminary injunction hearing, the International called Lawrence R. Beebe as a witness, who testified that he had conducted an examination of the records of Local 30 on February 26 and 27, 2003, and notified the International President of the results of that examination before he issued his Order imposing a trusteeship over Local 30. (Ex. P-3). On cross-examination, Mr. Beebe explained that his examination led to the conclusion that Local 30 was insolvent. See (Tr. of 3/26/03 Prelim. Inj. Hearing). He also testified that Local 30 was substantially behind in paying bills that were due, that reports were often filed late, and that the minutes of the board were often inadequate. Counsel for Plaintiff called no other witnesses. After cross-examination, Defendants rested their case without presenting any witnesses.
Title III of the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 461-66, governs the imposition of trusteeships. This court has jurisdiction under section 301(a) of the Labor M anagement Relations Act, 29 U.S.C. § 185; 29 U.S.C. § 462, 464(a); and 28 U.S.C. § 1331.
We permitted defense counsel to take part in the hearing by telephone. During that hearing, in which we issued the temporary restraining order, Defendants' counsel asked that a preliminary injunction hearing be held and represented to the court that they would be available, or make themselves available, for whenever the court scheduled the hearing. Defendants' counsel went so far as to suggest M arch 24 or 25 as possible dates. Plaintiff's counsel responded that it would not be available on either of those days, but would be available M arch 26. We therefore scheduled the preliminary injunction hearing for that date, thereby giving Defendants two more days than they suggested they needed.
Defense counsel did not object at the time we scheduled the hearing for March 26. Moreover, when the court asked if there was anything further to come before it, Defendants' counsel raised no objection to the scheduled hearing and made no motion for expedited discovery. (Tr. of 3/21/03 Hearing Before Hon. F.S. Van Antwerpen, 29-31). Defendants' Motion for Expedited Discovery and Motion for Continuance of Preliminary Injunction Hearing were not filed until the eve of trial on March 25, 2003. We find that these motions are not well taken. We believe they constitute a delaying tactic and nothing more. Defendants' counsel persisted in efforts to delay proceedings at the preliminary injunction hearing as well, which this court will not tolerate. We are therefore denying the Motion for Expedited Discovery and Motion for Continuance of Preliminary Injunction Hearing.
DISCUSSION
To obtain a preliminary injunction, "plaintiffs must show both (1) that they are likely to experience irreparable harm without an injunction and (2) that they are reasonably likely to succeed on the merits." Adams v. Freedom Forge Corp., 204 F.3d 475, 484 (3d Cir. 2000). If relevant, the court should also consider the likelihood of irreparable harm to the non-moving party and whether the injunction serves the public interest. Id. This court has previously explained that within the context of the LMRDA, a court should not set a parent union's burden to an unduly high standard when it seeks to enforce the imposition of a trusteeship upon a local union, as provided for in its constitution:
However, the statutory scheme permitting trusteeships in the labor organization context "clearly evidences an expectation that disputes over trusteeships would be litigated with the trusteeship in effect" and "if this burden were rigidly imposed on a parent union seeking to enforce a trusteeship against one of its resisting locals, the local, by failing to comply with its obligation under the union constitution to accept a trusteeship lawfully imposed, could turn the statutory scheme for handling the trusteeship problem on its head."
Transp. Workers Union, Local 234 v. Transp. Workers Union, 131 F. Supp.2d 659, 663 (E.D.Pa. 2001) (citing Nat'l Ass'n of Letter Carriers v. Sombrotto, 449 F.2d 915, 920-21 (2d Cir. 1971)). Before continuing with an examination of whether the International has met the requirements for a preliminary injunction, we review the statutory scheme enacted in the LMRDA.
Section 462 of the LMRDA states that a parent union may impose a trusteeship over a local only in accordance with the constitution and bylaws of the parent organization for the purpose of correcting corruption or financial malpractice, among other legitimate purposes. 29 U.S.C. § 462. Section 464 provides that a trusteeship imposed "in conformity with procedural requirements of [the labor organization's] constitution and bylaws and authorized or ratified after a fair hearing" is presumed valid for a period of eighteen months; because of that presumption, a court should not enjoin the trusteeship except upon "clear and convincing proof that the trusteeship was not established or maintained in good faith for a purpose allowable under section 462." 29 U.S.C. § 464(c). In accordance with these provisions, a court should find a preliminary injunction presumptively valid to impose a trusteeship if (1) the trusteeship was established in accordance with the provisions of the union's constitution and bylaws, (2) the trusteeship was authorized or ratified after a fair hearing, and (3) the trusteeship was installed for a permissible purpose. Transp. Workers Union, Local 234, 131 F. Supp.2d at 663.
The trusteeship in this case was established in accordance with the provisions of the International's constitution and by-laws. The constitution vests in the International President "the emergency power to impose a trusteeship upon any Local Union . . . for the purpose of correcting corruption or financial malpractice." (Ex. P-1, 19) It further provides that "[i]n exercising such authority, the International President shall take such steps as he deems necessary for the protection of the rights and property of [the International and relevant local union]." (Ex. P-1, 19) So contrary to Defendants' assertion that the constitution does not give the International President discretion to decide what constitutes an emergency, we find that the language of Article VIII(e) of that instrument does in fact leave a significant amount of discretion in his hands. See Local 334 v. United Ass'n of Journeymen, 669 F.2d 129, 131 (3d Cir. 1982) (holding that a court's examination of a parent union's interpretation of its own constitution should be guided by whether the union's interpretation is "patently unreasonable"). And as Defendants concede, courts interpreting a union's constitution have held that a district court's review is limited to whether the parent union's president had a "good faith" or "reasonable belief" that an emergency existed. Int'l Bhd. of Teamsters v. Local Union Number 810, 19 F.3d 786, 791 (2d Cir. 1994). The testimony of Lawrence Beebe on cross-examination at the preliminary injunction hearing on March 26 provided credible evidence of financial malpractice at Local 30. Mr. Beebe explained that his examination led to the conclusion that Local 30 was insolvent. He also testified that Local 30 was substantially behind in paying bills that were due, that reports were often filed late, and that the minutes of the board were often inadequate. See (Tr. of 3/26/03 Prelim. Inj. Hearing). Regarding compliance with the by-laws of the International, we find that the requirements of Article XI of that instrument have been met to date, to the extent that the International has complied with the notice provisions that it sets out.
As we discuss below, we believe the court in Local Union Number 810 overstated the degree of deference a court should accord to a parent union when it stated that "a statutory presumption of validity arises even where a temporary trusteeship is imposed prior to a union hearing." 19 F.3d at 791. We find that the view consistent with the precedent in the Third Circuit and this district in particular is that a trusteeship may be imposed prior to a union hearing, but that no statutory presumption of validity will arise until such a hearing is actually held.
There is likewise no question that the trusteeship in this case was installed for a permissible purpose. Correcting corruption or financial malpractice are valid purposes for the establishment of a trusteeship under 29 U.S.C. § 462. The constitution and by-laws of the International also recognize those aims as valid purposes. (Ex. P-1, 19). If the International had also held a fair hearing after which the trusteeship was authorized or ratified, the court would be required to accord the trusteeship a presumption of validity and the burden would shift to Local 30 to establish by clear and convincing proof that the imposition of the trusteeship was not in good faith. See Transp. Workers Union, Local 234, 131 F. Supp.2d at 666. However, the parties do not dispute that to date, no hearing has occurred.
The International nevertheless argues that the trusteeship is entitled to a presumption of validity merely because it was imposed under emergency circumstances. See Local Union Number 810, 19 F.3d at 791 (according presumption of validity prior to hearing given constitutional authorization to impose temporary trusteeship in the case of an emergency and compliance with procedural requirements). An examination of precedent in the Third Circuit and in this district in particular suggests only that a temporary trusteeship may be imposed prior to a union hearing, but that no statutory presumption of validity will arise until such a hearing is actually held.
We therefore agree with Defendants to the extent they argue that two cases in this judicial district have held that no presumption of validity attaches to a trusteeship imposed without a prior hearing. Hardy v. Int'l Bhd. of Boilermakers, 682 F. Supp. 1323, 1328 (E.D.Pa. 1988); Plentty v. Laborers' Int'l Union, 302 F. Supp. 332, 337-38 (E.D.Pa. 1969). But simply because such a trusteeship does not enjoy a presumption of validity does not mean that it may not be imposed in emergency circumstances. Defendants are incorrect in arguing that a trusteeship cannot be imposed without a prior hearing.
As the Fourth Circuit explained in Becker v. Industrial Union of Marine and Shipbuilding Workers of America, because the LMRDA provides that a trusteeship may be "authorized or ratified after a fair hearing," a hearing meeting the requirements of the Act need not always precede the imposition of a trusteeship. 900 F.2d 761, 769 (2d Cir. 1990). Post hoc ratification of a trusteeship may occur, so long as the union's constitution provides for such a process, the ratification hearing otherwise meets the requirements of the LMRDA, and the hearing follows the imposition of the trusteeship with reasonable promptness. Id.; Nat'l Ass'n of Letter Carriers v. Sombrotto, 449 F.2d 915, 920 (2d Cir. 1971).
Courts in other circuits have expressed a similar rule, adding the qualification that emergency circumstances must exist when a parent international union imposes a trusteeship on a local union prior to a hearing. Laborers' Int'l Union v. Nat'l Post Office Mail Handlers, 880 F.2d 1388, 1395 (D.C. Cir. 1989) (recognizing that a trusteeship may be imposed prior to a hearing given a reasonable belief in the necessity for immediate action); Hotel Rest. Employees and Bartenders Int'l Union v. Rollison, 615 F.2d 788, 792 (9th Cir. 1980) (emphasizing prior holding that where an emergency exists, trusteeship may be imposed before a hearing).
As we have just explained above, the International presented credible evidence that an emergency condition existed at Local 30 based on the testimony of Lawrence Beebe, the individual who conducted an examination of the local's records. Defendants are therefore incorrect in stating that no emergency exists such that would justify the imposition of a trusteeship. The temporary trusteeship may remain in place, subject to the condition that a hearing follows the imposition of the trusteeship with reasonable promptness. Becker, 900 F.2d at 769; Sombrotto, 449 F.2d at 920. The International's by-laws state that Local 30 must receive written notice fixing the date for a hearing "on the continuance of the trusteeship" within ninety days after the imposition of the trusteeship; further, the hearing itself must be held within sixty days from such notice. (Ex. P-1, 61). The determination whether a post hoc ratification hearing was reasonably prompt is fact and case specific, but ratification held eleven months after the imposition of a trusteeship has been found to constitute a fair hearing. 900 F.2d at 769. In this case, the International has indicated that it will conduct its investigation and hold a hearing a quickly as possible, which it must.
We now return to the requirements for granting a preliminary injunction. Based on the evidence presented, we find that the International will likely succeed on the merits of its claim of right to impose the trusteeship. First, the constitution vests in the International President "the emergency power to impose a trusteeship upon any Local Union . . . for the purpose of correcting corruption or financial malpractice." (Ex. P-1, 19) Second, although a fair hearing has not yet occurred, a hearing after the imposition of a temporary trusteeship may properly ratify the action of the International and give rise to a presumption of validity. See Int'l Bhd. of Teamsters v. Local Union Number 810, 19 F.3d 786, 793 (2d Cir. 1994). In this case, the constitution provides that "In exercising such authority, the International President shall take such steps as he deems necessary for the protection of the rights and property of [the International and relevant local union]." (Ex. P-1, 19) Because of the discretion afforded to the International President by that language of Article VIII of the constitution, the International most likely has a claim of right to impose the trusteeship in a situation such as this one where financial mismanagement and malpractice has been alleged.
We also find that the International would suffer irreparable harm if the preliminary injunction permitting the trusteeship is not granted. Courts in this district and elsewhere have recognized that harm to a union's reputation constitutes irreparable injury warranting a preliminary injunction. Executive Bd. of Transp. Workers Union, Local 234 v. Transp. Workers Union, 236 F. Supp. 480, 496 (E.D.Pa. 2002); Transp. Workers Union, Local 234 v. Transp. Workers Union, 131 F. Supp.2d 659, 669 (E.D.Pa. 2001); Local Union Number 810, 19 F.3d at 794. The International has asserted that the reputation of the union is at risk and that it, as well as Local 30, would suffer harm if deprived of the protections of the constitutional provisions to which Local 30 is contractually bound. Specifically, the International seeks to investigate and resolve any problems of corruption or financial malpractice. This concern is particularly important in light of the past history of Local 30 and the court's reservation of its authority to reinstate the decreeship imposed from 1988 to 1999.
Although the International risks irreparable harm, Local 30 does not face a similar risk. Given the past history of problems with Local 30, imposition of the trusteeship may forestall a revival of the decreeship and may be in the local's best interest. Irreparable harm to the individual defendants is not a concern, because they may be compensated for any damages suffered as a result of their removal from Local 30 leadership positions.
The court finds that preliminary injunctive relief is not adverse to the public interest in this case. We are allowing the International to proceed with its proper constitutional procedures without interference on the part of the court, and federal labor statutes "make it clear that a policy of judicial noninterference in internal union affairs fosters the public interest." Transp. Workers Union, Local 234, 131 F. Supp.2d at 669 (citations omitted). In addition, upholding the contractual provisions enumerated in the constitution of the International contributes to the stability of labor organizations, providing an additional reason why granting injunctive relief is in the public interest. Id.
Finally, Rule 65(c) mandates that the court require a posting of security, in an amount the court deems proper, for costs and damages that may be incurred or suffered by any party wrongfully restrained or enjoined. Fed.R.Civ.P. 65(c). Upon consideration of the record, the court has required the International to post a bond in the amount of $10,000.
CONCLUSION
For the reasons set forth above, we have granted the International's motion for a preliminary injunction enforcing the trusteeship imposed upon Local 30.
ORDER
AND NOW, this 28th day of March, 2003, it is hereby ORDERED that the foregoing memorandum is adopted as the findings of fact and conclusions of law supporting the preliminary injunction issued on March 26, 2003.
It is further ORDERED that Defendants' Motion for Continuance of Preliminary Injunction Hearing and Defendants' Motion for Expedited Discovery, both filed March 25, 2003, are DENIED; however, we will permit discovery in this case prior to the hearing on a final injunction.