Opinion
Civil Action No. 3:03CV-791-S.
June 18, 2004
MEMORANDUM OPINION AND ORDER
This matter is before the court on motion of the defendants, Robert Winstead and Gary Hug, to dismiss this action for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted.
This action, brought by the General Drivers, Warehousemen, Helpers Local Union No. 89 ("Local 89" or "the Local") arose from certain payments allegedly made from the funds of Local 89 between December 19, 1999 and January 14, 2000 by Winstead and Hug.
The original Complaint included two additional plaintiffs, Fred Zuckerman and Robert Colone, both members of Local 89. They are not named as plaintiffs in the Amended Complaint.
In September of 1998, Winstead, then President of Local 89, was indicted along with Lon Fields, Danny Ross and Skipper Martin for violations of Kentucky's campaign finance laws. A long legal battle ensued concerning the legality of the indictments. Ultimately, the four were pardoned by Governor Paul Patton prior to trial in June of 2003. It is alleged that between February 26, 1999 and January 11, 2000, Winstead signed checks totaling over $107,000 for legal fees in connection with the litigation over the indictments. On January 11, 2000, Hug, then Secretary-Treasurer of Local 89, allegedly co-signed checks with Winstead on the Local's account in payment of over $60,000 in legal fees.
It does not appear to be disputed that these checks were in fact written from Local 89 funds. However, a motion to dismiss was filed in lieu of an answer and these facts are not admitted in the record.
An election of new officers for the Local took place in December of 1999. Winstead and Hug were defeated. Allegedly, Winstead and Hug did not seek the approval of the new officers-elect and the membership for issuance of checks between the December 19, 1999 election and January 15, 2000 when the officers-elect took office. It is claimed that $74,107.09 in checks were issued without approval between December 19, 1999 and January 14, 2000.
In May of 2003, Fred Zuckerman and Robert Colone, members of Local 89, brought charges against Winstead and Hug, alleging violation of the IBT Constitution by their issuance of checks for lawyers fees without the appropriate authorizations. The matter was heard on July 17, 2003. On October 16, 2003, the IBT panel issued a written decision recommending that Winstead and Hug be held jointly and severally liable for $107,265.31. On October 17, 2003, the IBT General President adopted the panel's recommendation. Winstead and Hug appealed the decision. The General President declined to waive payment of the sum pending the appeal. By letter to each, the Local demanded payment within thirty days. They did not respond to the letters.
It is unknown whether the appeal has been resolved to date.
This lawsuit then ensued seeking to recoup the unauthorized funds for Local 89.
In Count One, the Local alleges violation of § 301(a) of the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 185(a), inasmuch as Winstead and Hug, union officials at the time, violated the IBT Constitution. The Local contends that they are therefore subject to suit by union members or by the union itself for equitable relief. Count One seeks an accounting, an injunction prohibiting Winstead and Hug from engaging in further wrongful acts, and restitution.
Count Two alleges violation of § 501(a) of the Labor Management Reporting and Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. § 501(a). It is alleged that Winstead and Hug breached their fiduciary duties to Local 89 when they signed and issued checks on the Local's account without the required authorizations. The Local seeks restoration of the funds what were allegedly misappropriated in violation of these fiduciary responsibilities.
Count Three alleges a state law breach of contract for failure to comply with the decision of the General President that they repay the Local. It seeks judgment in the amount previously ordered and pre-judgment interest. No argument has been made for the dismissal of Count Three.
Winstead and Hug have moved to dismiss the action on the ground that this court lacks jurisdiction. They contend that the claims against them are not properly brought under either § 301 of the LMRA or § 501 of the LMRDA inasmuch as they are former rather than current officers of Local 89. They further contend that the claims involve an intra-union dispute which is not a proper subject of a § 301 action. They urge that only equitable relief may be granted under the statutes. With respect to § 501 of the LMRDA, they urge that the statute does not create a private right of action for Local 89.
When a motion to dismiss is made, the court must take the allegations of the complaint as true and grant dismissal only when it is beyond doubt that the plaintiffs can prove no set of facts entitling them to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
The court rejects the arguments offered by the defendants, in light of the allegations of the Amended Complaint and current case law. Local 89 alleges violations of the union constitution. It is clear that union constitutions are "an important form of contract between labor organizations" the provisions of which may be enforced under § 301 of the LMRA. Wooddell v. Int'l Bhd. of Elec. Workers, Local 71, 502 U.S. 93, 101, 112 S.Ct. 494, 500, 116 L.Ed.2d 419 (1991).
Local 89 alleges that Winstead and Hug made payments without authorizations required by the union constitution. The United States Court of Appeals for the Sixth Circuit has recently stated that
A union or its members can ordinarily obtain an injunction prohibiting payments that were authorized by union officers in breach of their fiduciary duties or obtain reimbursement for such payments. 29 U.S.C. § 501(a); see also Guzman [ v. Bevona], 90 F.3d [641] at 648 [2d Cir. 1996]; Council 49, Am. Fed'n of State, County Mun. Employees Union v. Reach, 843 F.2d 1343, 1347-49(11th Cir. 1988); Kerr v. Shanks, 466 F.2d 1271, 1276 (9th Cir. 1972); McCabe [ v. Int'l Bhd. of Electrical Workers Local Union No. 1377], 415 F.2d [92] at 98 [6th Cir. 1969]; Local No. 92, Int'l Ass'n of Bridge, Structural Ornamental Iron Workers v. Norris, 383 F.2d 735, 737-40 (5th Cir. 1967).
In McCabe, supra., the Sixth Circuit noted that
the broad scope of § 501(a) has been acknowledged by the Court of Appeals for the Fifth Circuit in Norris and by the Court of Appeals for the Eighth Circuit in Johnson v. Nelson, 325 F.2d 646 (8th Cir. 1963), wherein it was stated . . . [that] it plainly appears that the statute is broad in its reach. "Officers and other union representatives may not act adversely to their organization or to the members as a group, or acquire a personal interest which is contrary to the interests of the organization."415 F.2d at 98. We also note that in Norris, supra, the defendant Green, financial secretary-treasurer of the Local, did not hold that position at the time of judgment, yet was ordered to pay restitution to the Local. See, 383 F.2d at 737, n. 4; 738, n. 10.
Counts One and Two seek only equitable relief in the form of an accounting, injunctive relief and restitution. Such a prayer for relief in Norris, supra., was considered "not as seeking `damages in the legal sense' but rather `requesting an equitable accounting wherein damages may be determined . . ." 383 F.2d at 741. The claims before this court have not been shown to compel a different conclusion.
The court concludes that the defendants have failed to establish entitlement to dismissal of the claims. Therefore IT IS HEREBY ORDERED AND ADJUDGED that the motions to dismiss (DNs 6 and 13) are DENIED.