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HIGHWAY TRUCK DRIVERS LOCAL 107 v. COHEN

March 24, 1960

HIGHWAY TRUCK DRIVERS AND HELPERS LOCAL 107, of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, an unincorporated association, by Thomas Graham, Carmen Grasso, Anthony Hnizdo, Jr., Karl M. Jensen, John C. Jones, Edward P. McCormick, John Regan, William D. Stasen and Robert D. Thomas, Trustees ad litem
v.
Raymond COHEN, Joseph E. Grace, Edward Battisfore, Edward Walker and Benjamin Lapensohn



The opinion of the court was delivered by: CLARY

This is a private suit brought under the recently enacted Labor Management Reporting and Disclosure Act of 1959, Public Law 86-257 (hereinafter referred to as the 'Act'), 29 U.S.C.A. § 401 et seq. That Act establishes a fiduciary responsibility on the part of officers of a labor organization § (501(a)), and further provided for a suit in a Federal district court to enforce these responsibilities § (501(b)). The present suit has been brought under § 501(b) to enforce certain of these duties.

The moving parties are nine rank-and-file members of Highway Truck Drivers and Helpers, Local 107, of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (hereinafter referred to as 'Local 107'), who were given leave by this Court on November 12, 1959 to file a complaint against the defendants, the governing officers of Local 107. *fn1" The complaint charged the defendants with a continuing mass conspiracy to cheat and defraud the union of large sums of money -- the conspiracy alleged to have begun in 1954 and continued to the present time.

 The defendants have yet to answer these very serious charges. Having been unsuccessful in first opposing the plaintiffs' petition for leave of this Court to sue, *fn2" defendants now move to have the complaint dismissed. They are supported in this motion by counsel for Local 107, which has been allowed to intervene as a party defendant. This motion to dismiss is presently before the Court along with the plaintiffs' prayer for a preliminary injunction to prohibit the defendants from using union founds to defray the legal costs and other expenses being incurred by the defendants (and several other members of Local 107) in the defense of civil and criminal actions brought against them in the Courts of Pennsylvania and also the present suit in our own Court. The charges in these cases, in essence, grow out of the alleged activities of the defendants complained of here. The question of the preliminary injunction will be taken up after we resolve the motion to dismiss the complaint.

 Motion To Dismiss

 Section 501(a) of the new Act establishes a federal duty on the part of labor union officials to abide by the ordinary rules of fiduciary responsibility. Section 501(a) states:

 Its complement, § 501(b) authorizes in a federal court to enforce the duties imposed by subsection (a). Section 501(b) states:

 'When any officer, agent, shop steward, or representative of any labor organization is alleged to have violated the duties declared in subsection (a) and the labor organization or its governing board or officers refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization, such member may sue such officer, agent, shop steward, or representative in any district court of the United States or in any State court of competent jurisdiction to recover damages or secure an accounting or other appropriate relief for the benefit of the labor organization. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown, which application may be made ex parte. The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit at the instance of the member of the labor organization and to compensate such member for any expenses necessarily paid or incurred by him in connection with the litigation.'

 On September 30, 1959 the plaintiffs filed an application for leave to sue under § 501(b) and annexed the complaint which has since been filed by Order of this Court. Aside from the alleged continued expenditure of union funds to defend the criminal and civil suits brought against the defendants and others mentioned above, the only specific acts of misconduct alleged in this complaint relate to events occurring between June 1, 1954 (the date the defendants took office) and September 1957. The remainder of the complaint contains several general claims of fraud and breach of duty and alleges that such acts are continuing to the present time, and that these can only be discovered by an accounting. In light of this fact, the defendants vigorously assert that we must dismiss the complaint, since § 501(a) and (b) apply prospectively only and can not be applied to acts occurring prior to September 14, 1959, the effective date of § 501.

 The defendants' contention that those alleged wrongs which occurred prior to the enactment of § 501 can not alone constitute a basis for recovery under that section, must be accepted. Aside from the fact that the plaintiffs have not attempted to meet this contention, the principle that a statute which creates a new substantive right or duty will not, in the absence of clear legislative intent to the contrary, be construed to apply retrospectively, is too well established to admit of argument. Brewster v. Gage, 1930, 280 U.S. 327, 50 S. Ct. 115, 74 L. Ed. 457; Miller v. United States, 1935, 294 U.S. 435, 55 S. Ct. 440, 79 L. Ed. 977; Home Indemnity Co. v. State of Missouri, 8 Cir., 1935, 78 F.2d 391; Peony Park, Inc. v. O'Malley, 8 Cir., 1955, 223 F.2d 668.

 Moreover the question of retrospective application of the Act has only recently been passed on by Judge Mathes in the Southern District of California, Flaherty v. McDonald, 1960, 183 F.Supp. 300. Although that case dealt with Title III of the Act, rather than Title V, we believe that that court's reasoning is applicable here. Like the trusteeship provisions of Title III, Title V creates new substantive rights and duties not formerly cognizable under federal law. They will not be applied retrospectively.

 Perhaps, the assertion that the basic and fundamental requirements of justice and fair play called for by § 501(a) of the Act -- requirements which are indeed developed but one step beyond the Seventh Commandment itself -- are 'newly created duties', seems startling even in our present day and age. In defense of this admitted paradox we may only point out that although the duties alleged to have been breached here have long been encompassed within the moral law, and presumably within the common law of the various states (although we would be hard pressed to substantiate this with case law in the labor field), these duties are new to federal law, on which the jurisdiction (and thus the sole power) of this Court to act is based. Therefore, we feel bound by the principle of statutory interpretation previously enunciated.

 To avoid the effect of this conclusion plaintiffs' attorney has astutely advanced the somewhat novel contention that §§ 157 and 158(a)(3) of Title 29 U.S.C.A. (popularly referred to as the Taft-Hartley Act) create an independent basis for recovery in this action. Since the Taft-Hartley Act became law on June 23, 1947 it would, of course, if applicable here, dispel any problem of retrospective application. However, we are convinced that it is not applicable and that the plaintiffs' argument must fail.

 Generally speaking the sections of the Taft-Hartley Act relied upon by the plaintiffs recognize under federal law the right of employees to organize unions and further makes it an unfair labor practice for an employer to discriminate in regard to the hiring or tenure of employment except that they may discriminate against an employee for nonpayment of union dues, (i.e., § 158(a)(3) recognizes the right of a union and an employer to enter a union shop agreement whereby a new employee must within 30 days join the union or lose his job.)

 From this, plaintiffs argue that the employee under a collective bargaining agreement containing this union shop clause (which clause is contained in a great majority of Local 107's contracts) must pay dues to the union in order to retain his job as a result of the specific command of federal law. Having reached this point, they maintain that it necessarily follows that the union and its officers must use the dues money they thus receive by virtue of federal law to further proper union objectives and not for purely private gain. This they argue is a federally created duty concomitant with the federally created right to exact dues. To strengthen this argument plaintiffs' counsel points to a series of Supreme Court cases beginning with Steele v. Louisville & Nashville Railroad Co., 1944, 323 U.S. 192, 65 S. Ct. 226, 89 L. Ed. 173, and Tunstall v. Brotherhood of Locomotive Firemen & Enginemen, 1944, 323 U.S. 210, 65 S. Ct. 235, 89 L. Ed. 187, which they maintain bear out this conclusion.

 In the Steele case, supra, the Brotherhood of Firemen and Enginemen was a labor organization recognized under the Railway Labor Act, 45 U.S.C.A. 151 et seq. as exclusive bargaining agent for all firemen on the Louisville & Nashville Railroad. The Brotherhood had entered into a collective bargaining agreement with the railroad, which contract obviously discriminated against Negro firemen. The Negro firemen brought suit. The Supreme Court reversed the state court and held that the Railway Labor Act requires the union 'in collective bargaining and in making contracts with the carrier, to represent non-union or minority union members of the craft without hostile discrimination, fairly, impartially, and in good faith.' 323 U.S. at page 204, 65 S. Ct. at page 233. The Tunstall case, supra, decided the same day, added the proposition that the breach of this federally created duty justified resort to a federal court for relief. See also Syres v. Oil Workers International Union, 1955, 350 U.S. 892, 76 S. Ct. 152, 100 L. Ed. 785 (his case appears to overrule Williams v. Yellow Cab Co., 3 Cir., 1952, 200 F.2d 302, which had refused to extend the reasoning of the Steele case to cases involving the Taft-Hartley Act); Conley v. Gibson, 1957, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80; Ford Motor Co. v. Huffman, 1953, 345 U.S. 330, 73 S. Ct. 681, 97 L. Ed. 1048; Brotherhood of Railroad Trainmen v. Howard, 1952, 343 U.S. 768, 72 S. Ct. 1022, 96 L. Ed. 1283; Cunningham v. Erie Railroad Co., 2 Cir., 1959, 266 F.2d 411; McMullans v. Kansas, Oklahoma & Gulf Ry. Co., 10 Cir., 1956, 229 F.2d 50.

 In answer to this argument based upon the fundamental proposition that where a government confers rights upon a group (which necessarily impede to a lesser or greater degree upon the rights of other members of society) it must necessarily impose a corresponding duty upon that group to properly exercise the rights conferred, the defendants argue that (1) the very reason why Congress enacted the new Labor Management Reporting and Disclosure Act was to provide redress for the type wrongs complained of here, which wrongs were presumably not prohibited by prior federal law; (2) nothing in the Taft-Hartley Act provides for jurisdiction in this type of action, and there is not the slightest intimation in either the legislative history of that Act or in its subsequent enforcement in the courts, which would indicate that it was intended to regulate the collection or spending of union dues; (3) rather than confer the right of unions to make security agreements with an employer which would compel a worker to join a union, the act restricted the union in such matters and in this respect differs from the Railway Labor Act; and (4) at any rate, the Taft-Hartley Act sets up a structure for the solution of federal disputes within the exclusive jurisdiction of the National Labor Relations Board, rather than with the federal courts.

 We are not convinced that these arguments are a sufficient answer to the plaintiffs' contention, although we are not in complete disagreement with the defendants on any one of them. The fact that Congress may not have believed that prior federal law prohibited the type activity here complained of, is far from conclusive on the question of whether the Taft-Hartley Act does in fact afford such protection. That question is for a court of law. Nor does the fact that no one since the enactment of the Taft-Hartley Act has advanced the theory now pressed so ably and sincerely by counsel for the plaintiffs, convince us that their argument must fail. We have not yet completely abandoned the concept of a 'legal pioneer' or what at first glance might be labeled a 'wild theory'.

 Defendants third argument (i.e., that the Taft-Hartley Act did not confer any right to collect dues, since the unions had this right and indeed exercised it more zealously in many instances, prior to that law's enactment) we find more persuasive. Nevertheless, we will not rest our rejection of plaintiffs' argument solely upon this ...


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