1991) ("Properly read, § 501(a) creates a cause of action in favor of labor organization against officials who breach their duties to the organization"); Glenn v. Mason, LEXIS Genfed Lib., Dist. File, No. 79 Civ. 3918 (S.D.N.Y. August 18, 1980); BRAC v. Orr, 1977 U.S. Dist. LEXIS 15840, 95 L.R.R.M. 2701 (E.D.Tenn. 1977).
While the arguments put forth in Statham et al. may have an initial common sense appeal, they ultimately fail to persuade me that such an expansive reading of the statute is justified. Neither the report quoted by the Statham court, nor anything else in the text or legislative history of the LMRDA, reveals a concern for unions themselves having access to federal court.
The LMRDA was enacted after hearings and reports overseen by the Senate Select Committee on Improper Activiites in the Labor Management Committee ("the McLellan committee"), and represents an accommodation between two competing federal policies: noninterference in the internal affairs of unions and labor matters, and empowerment of individual union members within their unions. See e.g., Phillips v. Osborne, 403 F.2d 826, 828-30 (9th Cir. 1968) (discussing legislative history of LMRDA). "The Labor Management Reporting and Disclosure Act was based, in part, on a congressional finding 'from recent investigations in the labor and management fields, that there have been a number of instances of breach of trust, corruption, disregard of the rights of individual employees, and other failures to observe high standards of responsibility and ethical conduct ... .'" Hall v. Cole, 412 U.S. 1, 93 S. Ct. 1943, 1947, 36 L. Ed. 2d 702 (1973), quoting 29 U.S.C. § 401(b). The McLellan committee concluded that "much that is elicited in the Committee's findings of misconduct by union officials can be substantially improved ... by a revitalization of the democratic processes of labor unions." Phillips, 403 F.2d at 828, quoting Interim Report of the Select Committee on Improper Activities in the Labor Management Field, S.Rep.No. 1417, 85th Cong., 2d Sess., 452 (1958).
Thus, the LMRDA is in large measure an entitlement statute for union members, creating democratic rights within the union, and providing access to federal court to vindicate those rights as against their union leadership.
It is against this backdrop that I evaluate ILA's claim that finding a cause of action for a union to bring suit under § 501 comports with congressional intent. Statham and the lower court cases finding jurisdiction for a union § 501 action reasoned that the language of § 501(b) requiring that a union member first demand that the union sue or recover demages before initiating suit, while not itself granting jurisdiction, clearly evinces Congress' preference that the union itself bring an action for breaches of fiduciary duty by its officers.
See,e.g., ILA Local 1624 v. Virginia International Terminals, Inc., 914 F. Supp. 1335, 1339 (E.D.Va. 1996); Benjamin at 1365.
I am more persuaded, however, by the reasoning of those cases which have interpreted the prerequisites for a member to commence litigation under § 501(b) as indicative of congressional intent to limit frivolous or harassing litigation by union members. See, e.g., Sabolsky v. Budzanoski, 457 F.2d 1245, 1253 (3d Cir.), cert . denied, 409 U.S. 853, 34 L. Ed. 2d 96, 93 S. Ct. 65 (1972); Dinko v. Wall, 531 F.2d 68, 73 (2d Cir. 1976); Pawlak v. Greenawalt, 464 F. Supp. 1265, 1269 (M.D.Pa. 1979); Safe Workers' Organization v. Ballinger, 389 F. Supp. 903, 908 (S.D.Ohio 1974).
Although the Third Circuit has not directly addressed the issue I decide today, its decisions interpreting other provisions of § 501, other provision of the LMRDA, as well as its general directives regarding implied rights of action, inform my decision. In Sabolsky, the court adopted a liberal reading of the "demand" requirement of § 501(b), holding that a union member bringing the breach of fiduciary duty to the union's attention was sufficient. 457 F.2d 1245. In Loretangeli v. Critelli, 853 F.2d 186 (3d Cir. 1988), the court adopted a broad interpretation of the "good cause" requirement of § 501(b) in holding that the trial court could find good cause for a member's claim on the basis of the verified complaint, and was not to consider defenses which would require resolution of complex questions of law or disputed issues of fact. Both these rulings are consistent with the legislative scheme of empowering individual union members, as well as with the language of § 501(b). In Local No. 1, Broadcast Employees of the IBT et al. v. IBT et al., 419 F. Supp. 263 (E.D.Pa. 1976)(denial of preliminary injunction), 461 F. Supp. 961 (E.D.Pa. 1978)(final judgment), affirmed in relevant part , 614 F.2d 846 (3d Cir. 1980), authored by then-District Court Judge Becker, the court considered whether a local union could bring an action against its international union under § 412 of the LMRDA, and, by implication, under § 501.
The court interpreted "person" as used in § 412 to include a local union which is itself a member of an international union. 419 F. Supp. at 271-2. The reasoning of Local No.1 affirms that the focus of the LMRDA is on the rights of members, whether individual members of local labor organizations, or local members of international labor organizations.
The decision in Local No.1 is not in conflict with my decision today, as ILA, the plaintiff in this case, is not a "member of a labor organization" under the LMRDA. Even if I were to consider the real party in interest in this case to be Local 1332 (which had ceased to exist at the time the suit was filed), it is not suing an officer of a labor organization of which it itself is a member; rather, it is suing its own former officer (and attorneys).
Moreover, both the Supreme Court and the Third Circuit have given unambiguous directives regarding implied rights of action. In AT&T v. m/v Cape Fear et al., 967 F.2d 864 (3d Cir. 1992), the Court of Appeals reversed the district court's ruling that the Cable Act, which provides criminal penalties for damaging a submarine telecommunications cable, creates a private civil cause of action.
The language at issue in Cape Fear was "the penalties provided in this chapter for the breaking or injury of a submarine cable shall not be a bar to a suit for damages on account of such breaking or injury." Id. at 867, quoting 47 U.S.C. § 28. The Third Circuit determined that this language meant only that the penalties cannot prohibit a civil remedy, but that plaintiff must find a private remedy elsewhere.
In reaching this conclusion, the court of appeals applied the four- part test set forth in Cort v. Ash, 422 U.S. 66, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975), to conclude that no private right of action could be implied.
The Cort test is as follows:
First, is the plaintiff "one of the class for whose especial benefit the statute was enacted,"--that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? [Fourth,] is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?
422 U.S. at 78(citations omitted).
If I apply the Cort test to this case, I conclude that no right of action for unions may be implied. As to the first question, as discussed above, it is union members, not unions themselves, for whose especial benefit the statute was enacted; § 501(b) explicitly creates a federal right in favor of union members. Although it refers to a union "or its governing board or officers refusing or failing to sue or recover damages or securing an accounting or other appropriate relief", it does not specify the forum for such action. A union member is entitled to "sue" under this section, if the union fails to "sue or recover damages" (emphasis added); this implies that a labor organization might pursue a remedy in a non-judicial forum, i.e., charges brought pursuant to the union's constitution.
The second question, whether there is any indication of legislative intent to create or deny such a remedy, must also be answered in the negative, as evidenced by the legislative history previously reviewed. There is no indication that Congress intended to create a remedy for a union to sue under § 501; there is some (albeit inconclusive) evidence that Congress intended to deny such a remedy.
Nor is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff. As previously discussed, while § 501(b) contains safeguards to prevent a union member from using the section to harass union leadership, no such safeguard exists if a right of action is implied for a union. As a result, a jurisdictional grant to a union plaintiff would fail to balance the competing legislative interests in enhancing union democracy on the one hand, and in noninterference with internal union affairs on the other. Such a jurisdictional grant would at least present the potential for harassing litigation by a union against a dissident officer, or by an international union against a dissident local, in direct conflict with the legislative scheme.
The fourth factor, state versus federal concern, is less clear, but still does not point to a different outcome. While labor law is, in most respects, an area of exclusive federal concern, the claims sought to be asserted here are at bottom, state law issues of fraud, unjust enrichment and breach of contract.
Thus, the inevitability of finding a federal cause of action for a union to bring a § 501 action is simply not supported by the language or purpose of the statute. As the Third Circuit was persuaded in Cape Fear that a right of action could not be implied from the language or purpose of the Cable Act, I am also persuaded that a right of action for a union under § 501 may not be implied from the statute or its purpose.
ILA argues that it makes no sense to deny a federal forum to a labor organization to recover for breaches of fiduciary duty by its officers, agents, shop stewards or other representatives when such duties are created by federal law. I am not convinced that it makes no sense, as the provision of a remedy for unions was simply not the focus of the legislation, as noted in the sections of the statute and its legislative history earlier cited. Moreover, the union has adequate remedies under state law (notably the supplemental state claims brought in this action, for fraud, breach of contract, breach of fiduciary duty, and unjust enrichment). If the union did not pursue the state claims, a member of ILA could bring an action under § 501(b) to recover damages caused by defendants' alleged breach of fiduciary duty. In any event, it is for Congress to create federal jurisdiction where none exists.
As noted earlier, I need not decide whether § 501 confers federal subject matter jurisdiction over an action brought against private attorneys for breach of the fiduciary duty owed by "officers, agents, shop stewards or other representatives" of a labor organization. The only federal claims ILA raised against defendants Joyce and Spear Wilderman were under § 501. Joyce and Spear Wilderman, however, also argue that the remaining federal claim, asserted solely against Blackwell, fails to state a claim. Although they do not represent Blackwell, it is in their interest to have this claim dismissed, as there will then be little or no justification for retaining supplemental jurisdiction over the state claims. Blackwell has not responded to the complaint or otherwise entered an appearance in this action. Default was entered against Blackwell on October 24, 1997. Since I have ruled that I do not have subject matter jurisdiction over claims brought by ILA under § 501, no default judgment can be entered on its § 501 claims against Blackwell. The remaining federal claim against Blackwell is brought under section 301 of the Labor Management Relations Act 29 U.S.C. § 185, for breach of the ILA constitution, specifically its statement of purpose. That claim, which seeks equitable relief in the form of restitution of salary paid to Blackwell during the period when he was allegedly violating his duty to act in the best interests of Local 1332, presents an arguable basis for subject matter jurisdiction. Since Blackwell is in default, any non-jurisdictional attacks on the sufficiency of the claim are waived. When plaintiff moves for entry of default judgment on this claim, and supplies affidavits or other evidence from which restitution may be determined, I will determine the appropriate relief.
ILA has also brought state law claims for fraud (against all defendants), breach of contract (against Blackwell), unjust enrichment(against all defendants) and breach of fiduciary duties (against all defendants). I shall retain supplemental jurisdiction over ILA's claim for breach of contract and unjust enrichment against Blackwell, as they involve identical facts, and seek identical relief, as the § 301 claim. I shall decline to exercise supplemental jurisdiction over the remaining state law claims against Blackwell, Joyce and Spear Wilderman, as they are not sufficiently related to the remaining federal claim to warrant supplemental jurisdiction. No discovery has taken place, and resolution of these claims in state court will best serve judicial economy.
An appropriate order follows.
AND NOW, this 20th day of February 1998, upon consideration of defendants Joyce and Spear Wilderman's motion to dismiss, plaintiff ILA's response in opposition, moving defendants' reply brief and ILA's sur-reply brief, and after oral argument, IT IS ORDERED THAT defendants Joyce and Spear Wilderman's motion is GRANTED, for the reasons stated in the accompanying memorandum.
1) Counts One, Two, Three, Four and Five of the Amended Complaint are DISMISSED WITH PREJUDICE against all defendants, for lack of subject matter jurisdiction. 2) Counts Seven, Nine (against defendants Joyce and Spear Wilderman only) and Ten are DISMISSED WITHOUT PREJUDICE pursuant to 28 U.S.C. § 1367(c).
3) I retain jurisdiction over Counts Six, Eight and Nine (against defendant Blackwell only). Plaintiff shall, within 10 days of the date of this order, submit its application for entry of default judgment against Blackwell on these claims, together with affidavits enabling the court to determine the amounts due.
ANITA B. BRODY, J.