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Sabolsky v. Budzanoski

decided: March 27, 1972.


Adams and James Rosen, Circuit Judges and Stapleton, District Judge.

Author: Rosen


This appeal requires review of the district court's order dismissing the plaintiff's complaint for lack of jurisdiction.

The plaintiffs are over 100 coal miners, suing individually and as representatives of all members of the United Mine Workers of America (UMWA), District No. 5. Named as defendants in the complaint filed on August 21, 1970 were the District President, Michael Budzanoski, District Secretary-Treasurer John Seddon, members of the District 5 Executive Board, Roland Nuccetelli, Frances McCallister, Albert Vilcoss, District Local 5, the International Union and thirty-seven local unions.

The gravamen of plaintiff's complaint is that both the International and District Constitutions require the disbanding of any local union with less than 10 working members;*fn1 that the officers of District No. 5 and the International have persisted in disregarding the requirement to disband a number of Unions (37) with less than 10 working members; that the maintenance of these locals "serves to perpetuate the political control of the incumbent UMWA officials"; and that union funds are being expended in connection with the maintenance of these non-functioning local unions. This conduct is claimed to be in clear violation of the fiduciary duty embodied in Section 501 of the Labor Management Reporting & Disclosure Act*fn2 ("LMRDA") which declares that union officials "occupy positions of trust in relation to" the union and its members, and requires union officers to hold its money and property solely for the benefit of the organization and its members and to manage, invest, and expend the same in accordance with its constitution and by-laws. The complaint further alleges that requests by plaintiffs seeking compliance with the pertinent constitutional provisions have been met with dilatory and equivocal responses by the International and District officers.

In addition to Section 501 of the LMRDA, supra, jurisdiction was alleged to exist under § 101 of the LMRDA (29 U.S.C. § 411); § 301 of the National Labor Relations Act of 1947 (29 U.S.C. § 185), and 28 U.S.C.A. § 1331. The district judge considered the primary aim of plaintiff's suit is "to compel the District 5 officers to comply with alleged requirements of the Constitution of the UMWA, International Union and the District 5 UMWA Union."*fn3 Because of the number of plaintiffs and the different types of defendants involved in this suit, the court noted its difficulty in finding "the specific jurisdictional grounds which connects any individual plaintiff with any separate defendant under the terms of the statutes which strictly limit the jurisdiction of the United States District Court to rather narrow and rather specifically confined causes of action, some of which contain specific procedural prerequisites."

Because the district court disposed of the matter on a motion to dismiss, we take the plaintiffs' allegations as true for the purpose of this appeal. Kahan v. Rosenstiel, 424 F.2d 161 (3d Cir. 1970), cert. denied 398 U.S. 950, 90 S. Ct. 1870, 26 L. Ed. 2d 290 (1970); Frank Mashuda Co. v. Allegheny County, 256 F.2d 241, 242 (3d Cir. 1958), aff'd 360 U.S. 185, 3 L. Ed. 2d 1163, 79 S. Ct. 1060 (1959). We conclude that the district court erred in finding a lack of jurisdiction under the section 501 claim, and confine ourselves to a statement of the principles relevant thereto,*fn4 which are set forth seriatum:

(1) The District Judge held that Section 501(b) of the LMRDA permits suits against "* * * any officer, agent, shop steward, or representative of any labor organization," and that the many local unions, District No. 5 UMWA and the UMWA International Union may not properly be joined in this suit. Misjoinder or non-joinder of parties is not ground for dismissal. F.R. Civ. P. rule 21, 28 U.S.C.A. The proper remedy in case of misjoinder is to grant severance or dismissal to the improper party if it will not prejudice any substantial right. The complaint was properly dismissed as to the UMWA International Union and District Union No. 5. Aho v. Bintz, 290 F. Supp. 577 (D. Minn. 1968).*fn5 However, the order of dismissal should not have been granted to the District 5 officers, who clearly fall within the statutory definition of the LMRDA.*fn6 (2) The district court further found that the procedural requirements*fn7 of Section 501(b) of Title 29 require strict compliance, and plaintiff's failure to observe these requirements mandated dismissal.

No formal hearing was held in the district court on defendant's motion to dismiss and plaintiff's motion for preliminary injunction. The motions were decided on briefs. It appears from the record that the failure of plaintiffs to apply for leave of court to file this suit was raised for the first time in the district court's opinion. The court did not make a specific finding that good cause had not been shown. It noted in passing that one factor in the showing of good cause requirement "can be the extent to which plaintiffs have utilized or exhausted their internal union remedies."

The complaint in this case was verified by over 100 plaintiffs. Section 501(b) specifically allows an "ex parte" grant of leave to proceed. The appellants contend that by filing the complaint they, in effect, made an ex parte application to the court. It has been held that a lack of formality in observing the procedures of Section 501(b) will not bar a court from granting leave, where appropriate. Executive Board, Local Union No. 28 v. I.B.E.W., 184 F. Supp. 649 (D. Md. 1960). As the court said in Horner v. Ferron, 362 F.2d 224 (9th Cir. 1966), " the allegations of the verified complaint may be sufficient to enable the court to determine whether there is 'good cause.'" Accordingly, the case will be remanded to the district court with directions to grant leave, nunc pro tunc, to file the complaint.

(3) The district court found that the complaint does not contain allegations of failure to hold money or property for the benefit of the organization nor of any expenditure not authorized by the Constitution, by-laws or resolutions, and that section 501(b) remedies are available only as a cause of action dealing with the fiduciary responsibility with respect to the money or property of the union. We read the complaint as setting forth allegations regarding the holding and expenditure of union funds. Moreover we disagree with the court's reading of the scope of Section 501.

Appellees point to the remarks of Senators Ervin and McClellan in Senate debate to support the contention that Section 501 relates solely to matters of money and property. This contention reflects the erroneous equation appellees make of the Senate debate with the legislative history of Section 501. A complete study of that history reveals that Senate Bill 1555 was amended by H.R. 8342 and, as finally enacted, "extends the fiduciary principle to all of the activities of Union Officials and other Union Agents or representatives."*fn8 In Highway Truck Drivers, Local 107 v. Cohen, 182 F. Supp. 608 (E.D. Pa. 1960), aff'd 284 F.2d 162 (3d Cir. 1960), cert. denied 365 U.S. 833, 5 L. Ed. 2d 744, 81 S. Ct. 747 (1961), the district court observed that the LMRDA was enacted in the wake of Congressional findings of crime and corruption in the labor and management field, 29 U.S.C. § 401(b), and that Section 501 "attempts to define in the broadest terms possible the duty which the new federal law imposes upon a union official." p. 617.

In Johnson v. Nelson, 325 F.2d 646 (8th Cir. 1963), the court made a thorough analysis of the legislative history of the LMRDA, and concluded that Section 501 imposes fiduciary responsibility in its broadest application and is not confined in its scope to union officials only in their handling of money and property affairs. In rejecting the narrow interpretation of Section 501 asserted by the union officers in Johnson, the court stated:

"The courts have with consistency refused to accede to the contention that § 501 is designed for the single purpose of establishing responsibility on the part of officers and other representatives in relation to the handling and managing of fiscal affairs of the labor organization. Quite to the contrary, indication is clearly present in the ...

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