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INTERNATIONAL LONGSHOREMEN'S ASS'N v. SPEAR

February 20, 1998

INTERNATIONAL LONGSHOREMEN'S ASSOCIATION, AFL-CIO
v.
SPEAR, WILDERMAN, BORISH, ENDY, SPEAR & RUNCKEL, CHARLES T. JOYCE, AND THOMAS W. BLACKWELL



The opinion of the court was delivered by: BRODY

 Anita B. Brody, J.

 February 20, 1998

 Plaintiff International Longshoremen's Association, AFL-CIO ("ILA"), a labor organization, brought this action against the law firm of Spear, Wilderman, Borish, Endy, Spear & Runckel ("Spear Wilderman"), Charles Joyce ("Joyce"), who is a member of Spear Wilderman, and Thomas Blackwell, who is a former officer of ILA Local 1332, alleging violations of the Labor Management Reporting And Disclosure Act ("LMRDA") 29 U.S.C. § 501, the Labor Management Relations Act, 29 U.S.C. § 185, as well as state law claims of fraud, breach of contract, unjust enrichment and breach of fiduciary duties. Spear Wilderman and Joyce have moved to dismiss the complaint in its entirety, on the grounds that 1) § 501 does not confer federal subject matter jurisdiction over suits by labor organizations against individuals for breach of fiduciary duty; 2) private attorneys may not be held liable for breach of fiduciary duty under § 501; 3) liability of moving defendants under § 501 cannot be based on allegations of conspiracy with defendant Blackwell; 4) the remaining federal claim, against defendant Blackwell under 29 U.S.C. § 185, fails to state a claim, and; 5) after dismissing all the federal claims, this court should decline to exercise supplemental jurisdiction over the remaining state claims. *fn1"

 I. Background

 This lawsuit is the second action arising out of ILA's revocation of the charter of one of its Philadelphia - area affiliates, Local 1332. In September, 1995, after ILA notified Local 1332 that its charter was revoked for non-payment of dues, Local 1332 brought an action seeking to set aside the revocation. *fn2" Defendants Joyce and Spear Wilderman represented Local 1332 in that action, which was settled in February 1996. The settlement agreement provided, inter alia, that Local 1332's charter had been revoked effective September 25, 1995, and that Local 1332 would take necessary steps to transfer title of the local's property to ILA or designated trustees.

 In the current action, ILA alleges that during the pendency of the first action, on or about December 12, 1995, Joyce and Spear Wilderman "induced [Local 1332 president Blackwell and Local 1332 financial secretary Warren Robinson] to execute and deliver to Spear Wilderman a note in the amount of $ 53,578.40 purportedly in payment of attorneys fees for services rendered to the local in litigation including the case brought by Local 1332 against the ILA." (Amended Complaint P22) ILA further alleges that the note "authorizes the confession and entry of judgment against the local for the sum of the note and agrees to the sale of the local's real estate on writ of execution." Id.

 The core of ILA's complaint is that these actions violated Joyce's, Spear Wilderman's and Blackwell's fiduciary duties to Local 1332 as spelled out in 29 U.S.C. § 501(a). The core of Joyce and Spear Wilderman's motion to dismiss is that this case presents both the wrong plaintiff and the wrong defendants, i.e., that § 501 does not permit an action brought by a labor organization (which is what ILA is), nor does it permit an action brought against private attorneys providing representation to a labor organization. After reviewing the arguments made by the parties in their briefs and at oral argument, as well as the relevant case law, I am persuaded that defendants are correct as to their first argument: that § 501 does not confer subject matter jurisdiction over plaintiff's claims brought against defendants for breaches of fiduciary duty. *fn3" I will therefore grant the motion to dismiss.

 II. Discussion

 A. Motion to Dismiss under Fed.R.Civ.P.12(b)(1) The first ground asserted in defendants' motion to dismiss is jurisdictional. Thus, I should examine the allegations "and satisfy [myself] as to the existence of [my] power to hear the case." Boyle v. Governor's Veterans Outreach and Assistance Center, 925 F.2d 71, 74 (3d Cir. 1991), quoting Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884, 891 (3d Cir. 1977). The plaintiff, as the party asserting jurisdiction, has the burden of proving that jurisdiction is proper. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 80 L. Ed. 1135, 56 S. Ct. 780 (1936).

 Plaintiff is a labor organization, as that term is defined in the LMRDA, 29 U.S.C. § 402(i). (Amended Complaint at PP3-5,16,36) What I am asked to determine at this stage of the proceedings is the legal significance of that identity in the context of a § 501 suit. If plaintiff is correct that § 501 implies a right of action for labor organizations to sue in federal court for breach of fiduciary duty, and more specifically, that § 501 confers a right for an international union to sue in federal court for breach of fiduciary duty by a local union officer, then plaintiff has adequately established that I have jurisdiction. If, on the other hand, moving defendants are correct as to either of their arguments, then I have no power to hear the claims against them, and this action must be dismissed against them.

 B. Jurisdiction under 29 U.S.C. § 501

 The relevant portions of section 501 of the LMRDA provide: *fn4"

 
(a) Duties of officers; exculpatory provisions and resolutions void
 
The officers, agents, shop stewards, and other representatives of a labor organization occupy positions of trust in relation to such organization and its members as a group. It is, therefore, the duty of each such person, taking into account the special problems and functions of a labor organization, 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 bylaws, and any resolutions of the governing bodies adopted thereunder, to refrain from dealing with such organization as an adverse party or in behalf of an adverse party in any matter connected with his duties and from holding or acquiring any pecuniary or personal interest which conflicts with the interests of such organization....
 
(b) Violation of duties; action by member after refusal or failure by labor organization to commence proceedings; jurisdiction; leave ...

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