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March 21, 1996

CHARLES GREENAWALT, et al, Defendants v. DONALD E. DEIVERT, Third Party Defendant

James F. McClure, Jr., United States District Judge

The opinion of the court was delivered by: MCCLURE

March 21, 1996


 This action arises under section 501 of the Labor Management Reporting and Disclosure Act of 1959 (LMRDA) *fn1" and state common law. Plaintiff challenges the receipt by Charles Greenawalt, former President of Teamsters, Chauffeurs, Warehousemen and Helpers, Local 764 (Local 764 or the union) of "severance pay" which they allege to be improper and in violation of union bylaws. Plaintiff also challenges the conduct of former union counsel, Ira Weinstock, Esq., whom it alleges advised the union that the transfer and the manner in which it was carried out were proper. Plaintiff seeks the return of $ 11,989.00 for cash and property allegedly improperly given to Greenawalt as "severance pay" based upon the improper and incorrect advice of Weinstock.

 Plaintiff alleges that defendants violated Local 764 bylaws in several respects. According to plaintiff's allegations, unlike any union officer or agent who preceded him at Local 764, defendant Greenawalt received what was denominated "severance pay" in the form of an automobile. The automobile which plaintiff received was the one assigned to him for his use during his tenure as president of Local 764. After plaintiff questioned the propriety of the transfer, defendants Greenawalt and Weinstock arranged to effect the transfer by estimating the market value of the automobile, having the union give Greenawalt a check for that amount, plus transfer taxes and federal, state and local tax on the amount he received. Greenawalt then paid the union for the estimated value of the vehicle. There was no mention of the cash transaction in the Executive Board minutes, nor was it ever approved by the Executive Board or the union membership.

 Plaintiff alleges that this transfer was a violation of section 15(c) of Local 764's bylaws which provide that "in such instances where the Local union provides an automobile [to a union representative or officer], title to the automobile shall remain at all times in the name of the Local Union." *fn2" They also allege the violation of section 15(d) of the local bylaws, which state that the Local Executive Board may provide benefits for the officers, but that "any such benefit adopted by the Executive Board shall be specifically set forth in the Minutes of the Executive Board meetings." According to plaintiff, "Greenawalt's severance pay was not approved by the Board or reflected in the Executive Board meeting minutes." Plaintiff also challenges the valuation placed on the automobile transferred to Greenawalt as unrealistically low.

 In a letter dated December 27, 1991 prepared by union counsel, Local 764 informed Greenawalt that the transaction was a violation of the local bylaws, had been found to be so in other cases, and characterized the entire transaction as an attempt to defraud union officers and the membership.

 Plaintiff brought this action alleging: 1) breach of fiduciary duties under LMRDA section 501 (Count I); 2) common law conversion (Count II); 3) fraudulent misrepresentation based upon representations made by defendants to the Union Executive Board (Count III); and 4) legal malpractice (Count IV).

 Plaintiff's complaint was accompanied by a verified application for leave to proceed under section 501 of LMRDA. In an order dated May 23, 1994, *fn3" this court denied plaintiff's application on the merits as to the union members and denied the request as moot as to the union. The court found that no prior approval was required from this court to permit the union to proceed with the claims asserted. *fn4" That ruling was made ex parte before the defendants were served.

 Defendants subsequently challenged that ruling in a Rule 12(b) motion to dismiss. *fn5" Defendants asserted that the union lacks standing to bring this action under section 501 of LMRDA. We denied the motion and found, contrary to defendants' assertions, that this court has jurisdiction over the union's claim under section 501.

 Presently before the court are 1) a joint motion for summary judgment filed by defendants Greenawalt and Weinstock (record document no. 63); and 2) a motion for summary judgment in his favor filed by third party defendant Deivert (record document no. 79).

 For the reasons which follow, we will enter an order granting both motions.


 Summary judgment standard

 Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)

...The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be 'no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is 'entitled to judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.

 Celotex v. Catrett, 477 U.S. 317, 323-24, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 The moving party bears the initial responsibility of stating the basis for its motions and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. He or she can discharge that burden by "showing...that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 323 and 325.

 Issues of fact are "'genuine' only if a reasonable jury, considering the evidence presented, could find for the non-moving party." Childers v. Joseph, 842 F.2d 689, 693-94 (3d Cir. 1988), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Material facts are those which will affect the outcome of the trial under governing law. Anderson, 477 U.S. at 248. In determining whether an issue of material fact exists, the court must consider all evidence in the light most favorable to the non-moving party. White v. Westinghouse Electric Company, 862 F.2d 56, 59 (3d Cir. 1988).

 Section 501 standing

 Third party defendant Deivert seeks summary judgment in his favor on the claims asserted against him by defendants Greenawalt and Weinstock for contribution and/or indemnification for alleged breaches of his fiduciary duty under section 501.

 Deivert argues that defendants lack standing to file such claims because they are not members of any group or class upon whom section 501(a) confers the right to bring an action. We agree with Deivert's argument.

 Section 501 (a) imposes upon the officers of all labor organizations a duty to hold the organization's 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 bylaws." 29 U.S.C. § 501(a). If a union official "profits personally through the use or receipt of union funds,...the official bears the burden of proving that the transaction was validly authorized in accordance with the union's constitution and bylaws after adequate disclosure, and that it does not exceed a fair range of reasonableness." Brink v. DaLesio, 667 F.2d 420, 424 (4th Cir. 1981), citing Morrissey v. Curran, 650 F.2d 1267, 1274-75 (2d Cir. 1981).

 Remedies and rights for the violation of section 501(a) are set forth in section 501(b). Section 501(b) specifically authorizes only union members to sue in federal court for the alleged violation of section 501(a). The right to do so is, however, made dependent upon plaintiff union members: 1) establishing that they sought to have the labor organization bring an action or recover damages or perform an accounting or obtain other appropriate relief, but the request was refused; and 2) obtaining leave of the court "upon verified application and for good cause shown." 29 U.S.C. § 501(b). *fn6"

 If the union seeks to sue, it does not require leave of court, but may sue on its own initiative without first obtaining leave or relying upon section 501(b). Building Material and Dump Truck Drivers, Local 420 v. Traweek, (Traweek), 867 F.2d 500, 506 (9th Cir. 1989).

 When individual union members sue under section 501, they are suing derivatively "'for the benefit of the labor organization.'" Nellis v. Air Line Pilots Association, 815 F. Supp. 1522 (E.D.Va. 1993), citing 29 U.S.C. § 501(b). See also: Traweek, 867 F.2d at 506 (Plaintiff in section 501 suit "acts in a representative capacity for the benefit of the union and on behalf of the union.")

 The union is clearly a member of the class for whose special benefit section 501 was enacted. Congress plainly intended section 501 to confer a right and a remedy on affected parties. A right of enforcement on the part of the union is consistent with the legislative scheme.

 The same cannot be said, however, of non-union members or former union officials. These individuals are not among those upon whom section 501 specifically confers a right of enforcement, and it is not the province of this court to expand those classes beyond those which Congress saw fit to include.

 Defendant Greenwalt was formerly a member of Teamsters Local 764, but is no longer. He resigned his membership when he resigned from his union office. Defendant Weinstock and his law firm, Ira Weinstock, P.C., are not presently, and never have been, members of Teamsters Local 764. Therefore, none of the defendants has standing to bring an action under section 501.

 Further, the nature of the relief which defendants seek is not expressly authorized by section 501. Defendants assert claims for contribution or indemnity. Neither is expressly referenced as being among the claims for which a section 501 action may be filed. In addition, as we discussed above, section 501 actions inure to the benefit of the union. Their purpose is to afford a vehicle for the recovery of property or funds of which the union, and by inference, union members, were wrongfully deprived by breaches of fiduciary duty. Permitting claims of contribution or indemnity to be asserted by alleged violators of section 501 is not a logical extension of that purpose. To find that it exists, we would, therefore, require express mention of the same in the statute itself.

 Deivert's motion to dismiss the third party claims asserted against him will, ...

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