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MCNAMARA v. JOHNSTON

United States District Court, Northern District of Illinois


June 6, 1973

BERNARD W. MCNAMARA ET AL., PLAINTIFFS,
v.
ROBERT JOHNSTON ET AL., DEFENDANTS, UAW, INTERVENOR.

The opinion of the court was delivered by: Bauer, District Judge.

  MEMORANDUM OPINION AND ORDER

This cause comes on the defendants' motion to dismiss the complaint.

This is an action for an alleged breach of the fiduciary duty imposed on defendants under Section 501(a) of the Labor-Management Reporting and Disclosure Act of 1959 (commonly referred to as the Landrum-Griffin Act) 29 U.S.C. § 501(a).

The plaintiffs are employed as production unit workers in the Fisher Body Plant of General Motors Corporation at Willow Springs, Illinois, and are dues paying members of the International United Automobile, Aerospace and Agriculutural Implement Workers of America ("UAW"), the designated collective bargaining representative of production unit workers in the plant. The plaintiff, Bernard W. McNamara, in addition to being a dues paying member of UAW, also serves in the capacity of Recording Secretary of UAW, Local 558, a post to which he was duly elected by the membership of the Local. The plaintiffs bring this action as members of UAW for the benefit of the union and its members.

The defendant, Robert Johnston, is Regional Director of UAW, Region 4, a region which includes the State of Illinois. Robert Johnston also serves as Chairman of the UAW Illinois State Community Action Program Council ("CAP").

Defendant James Wright is Chairman of the UAW Chicago Area CAP Council. Defendants Johnston, Wright and Peterson exercise custody and control over Illinois CAP funds, and all decisions respecting the use and expenditure of such funds.

Defendant Emil Mazey is Secretary-Treasurer of UAW International and in such capacity receives and handles union funds as hereinafter described.

Defendant Leonard Woodcock is International President of UAW and in such capacity exercises control and direction over the handling and expenditure of union funds.

The plaintiffs, in the complaint, allege, inter alia, the following facts:

  1.  Pursuant to the provisions of the UAW
      Constitution and the administrative
      instructions issued by the president of UAW
      International on May 19, 1969, each local
      union in the State of Illinois, including
      Local Union 558, is required to set aside a
      minimum of 3% of each member's monthly
      membership dues as a per capita payment to
      the UAW Illinois State CAP, and to remit such
      money to defendant Robert Johnston. Upon
      receipt of said money defendant Johnston
      allocates it proportionately to UAW Illinois
      State CAP and Chicago Area CAP.

  2.  The defendants Johnston, Wright and Peterson,
      unlawfully and wrongfully diverted a large
      part of said money into the political
      campaign coffers of candidates for public
      office and for various political expenditures
      and purposes totally unrelated to the
      interests and welfare of the union and its
      members or to the functions and purposes of
      the union as collective bargaining
      representative of plaintiffs and their fellow
      dues paying members of the union.*fn1 These
      actions of the defendants

      were in violation of 29 U.S.C. § 501(a) which
      sets forth their statutory duty of fidelity and
      trust to hold such money solely for the benefit
      of the union and its members.*fn2

  3.  Defendants Mazey and Woodcock instructed,
      controlled and directed defendants Johnston,
      Wright and Peterson in violation of their
      aforesaid statutory duty of fidelity and
      trust to hold such money solely for the
      benefit of the union and its members.
      Further, defendants Mazey and Woodcock, in
      violation of their statutory duty, have
      unlawfully and wrongfully diverted a
      substantial part of the membership dues for
      various political expenditures and purposes
      totally unrelated to the interests and
      welfare of the union and its members or to
      the functions and purposes of the union as a
      collective bargaining representative of
      plaintiffs and their fellow dues paying
      members of the union.*fn3

  4.  The "unlawful and unauthorized" diversion of
      union money and assets into political
      campaigns was not only made by defendants in
      violation of their statutory duty of fidelity
      and trust, but was also done contrary to an
      express and explicit resolution adopted by a
      referendum vote of the membership of UAW
      Local 558 on May 6, 1969.*fn4 Defendants
      were given

      formal notification of such a resolution and
      of the explicit objections of the members of
      UAW Local 558 to use of any part of their
      membership dues money by defendants for
      partisan political candidates and activites,
      or for ideological causes or support of
      organizations or groups espousing ideological
      causes. The defendants have ignored the
      objections expressed by the members of UAW
      Local 558 and the executive officers of UAW
      have failed and refused to institute a legal
      action in the name of the union to require
      defendants to render an accounting.

The plaintiffs seek an order of this Court requiring defendants to furnish an accounting and repay in damages to the Union all monies unlawfully diverted by them.*fn5

The defendants, in support of their motion to dismiss the complaint, contend:

  1.  The complaint does not state a cause of
      action upon which relief can be granted
      because the alleged unlawful expenditures are
      expenses entirely proper under Section 501,
      and the UAW Constitution.

  2.  Plaintiffs have failed to exhaust their Union
      remedies prior to bringing this action.

  3.  Plaintiffs have failed to allege the
      performance of the procedural requirements
      contained in Section 501(b) of the Act.

  4.  There was no showing of good cause made prior
      to the filing of the instant suit.

The plaintiffs, in opposition to the instant motion, contend that the complaint states a proper cause of action according to 29 U.S.C. § 501(a) and has met the procedural requirements of 29 U.S.C. § 501(b).

  It is the opinion of this Court that the plaintiffs' claims
do not constitute a proper cause of action under 29 U.S.C. § 501.
  Page 522

THE PLAINTIFFS' COMPLAINT FAILS TO SUFFICIENTLY STATE A CAUSE
  OF ACTION UNDER 29 U.S.C. § 501.

The jurisdiction of this Court is invoked under the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 501. This legislation confers fiduciary status upon union officers who deal with the property and funds of a union. As a fiduciary under the Act, a union officer must account to his union for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the union.*fn6 The statute further provides that any breach of fiduciary duty shall not be relieved by a subsequent exculpatory resolution passed either by the union itself or by its governing board. Should a union or its governing board fail or refuse to sue, recover damages or secure an accounting within reasonable time any member of the union may sue in a federal court in a derivative capacity for the benefit of the union.*fn7

The clear intent of Congress in enacting this legislation was to weed out instances of corruption and breach of trust; to preserve the rights of individual union members; and to insure high standards of responsibility on the part of, at that time, powerful and sometimes detached and autocratic union officers. Richardson v. Tyler, 309 F. Supp. 1020 (N.D.Ill. 1970); Purcell v. Keane, 277 F. Supp. 252 (E.D.Pa. 1967). Thus the precise issue of the instant action is whether the defendants breached their fiduciary duty in violation of 29 U.S.C. § 501.

Section 501(a) of the Act literally requires, and was intended to so require, union officers to expend union funds in accordance with the union's constitution and bylaws and any resolution of the governing bodies adopted thereunder.*fn8

Congress did not in Section 501, or elsewhere in the Act, attempt to regulate or limit the purposes for which a union may spend its money, and the use of the phrase "taking into account the special problems and [that] the labor organization" indicates an awareness of the fact that the labor union of today does not typically confine its activities to "business unionism."*fn9 What the Act does require is that expenditures of a union's funds as well as use of its other assets, be exclusively for purposes which are authorized by its constitution, bylaws, and any pertinent resolutions of its governing body.*fn10 Congress did not intend § 501 to be a bar to union expenditures for political activity. Nowhere in the Act is there an attempt to limit or regulate the purposes for which a union uses its funds. The very words which are embodied in § 501 of the Statute — ". . . taking into account the special problems and functions of a labor organization . . ." indicates a recognition of the political realities of modern unionism. Senator McClellan, the principal Congressional proponent of fiduciary responsibility for union officials, stated:

    "However, I am not offering my amendment on the
  direct question of political contributions.
  Everyone knows my views on the subject, I assume.
  This is not a drive at that situation. It is a
  drive at skullduggery of some leaders when they
  meet in executive sessions and pay off this one
  and pay off that one. . . . I may say that there
  never was any idea of my trying to curb the
  authority of the members of a union to do
  whatever the members want to do; rather it is my
  intention to protect the members from having the
  members of a board or a committee vote to do just
  about anything they want to do, as has been the
  case in many instances." 105 Cong.Rec. 6526
  (Daily Ed., April 23, 1959); II Legislative
  History of the Labor Management Act of 1959, at
  1131 (1959).*fn11

  It is clear that political expenditures of union funds which are authorized by its constitution, bylaws, and any pertinent resolution of its governing body is not within the prohibition of Section 501 of the Act.

Numerous sections of the UAW Constitution mandate the kind of expenditures which are challenged in the instant complaint.*fn12 Plaintiffs have failed to cite to this Court any provision of the UAW Constitution violated by defendants. The Constitution of the UAW (Art. 7, Sec. 1) establishes the convention or the supreme governing body of the International Union. The official proceedings of the convention demonstrate the approval by resolution of UAW contributions to various organizations and groups concerned with such issues as civil rights, peace, foreign affairs, civil liberties, consumer protection, legislation, education and economic policy.*fn13 The 1970 UAW convention thus approved the type of contributions which are challenged by the plaintiffs.

The fiduciary duty of union officers under § 501 is based on general agency principles. Union officers are viewed as agents for their principal, the membership. It necessarily follows that an agent cannot be in breach of duty when he is acting pursuant to the direction of his principal. To find a breach of duty when an officer disburses funds in accordance with the constitution and bylaws of his union would be contrary to the letter and spirit of § 501. It would inject judicial interventions into the policy making process of a union.*fn14

The defendants' expenditures of union funds for contributions to political candidates and social causes was authorized by the UAW Constitution and thus cannot by itself constitute a violation of § 501 of the Act.*fn15

This ruling is in keeping with the Congressional intent in enacting § 501 as described by Senator Morse:

    "I have been assured that the fiduciary section
  will not prevent political contributions. I trust
  the courts will

  so interpret the language in the bill." Vol. II,
  Leg.Hist., LMRDA, p. 1416; Cong.Rec., September
  3, 1959, p. 16387.*fn16

The plaintiffs have attempted to infer that the actions of the defendants were illegal (ultra vires) and thus a breach of the defendants' fiduciary duty by stating that the defendants' contributions were made in violation of 18 U.S.C. § 610.*fn17 However, the Supreme Court in Pipefitters Local Union No. 562 v. United States, 407 U.S. 385, 92 S.Ct. 2247, 33 L.Ed.2d 11 (1972) has recently stated:

    "We therefore hold that § 610 does not apply to
  union contributions and expenditures from political
  funds financed in some sense by voluntary donations
  of employees."*fn18 Id. at 409, 92 S.Ct. at 2261.

Further, Section 610 does not authorize a private right of action and the plaintiffs' conclusory allegations that § 610 has been violated cannot in themselves change the defendants' union authorized political expenditures into a 29 U.S.C. § 501 violation. Ash v. Cort, 350 F. Supp. 227 (E.D.Pa. 1972)*fn19; Schonfeld v. Raftery, 335 F. Supp. 846 (S.D.N.Y. 1971). However, this ruling should not be interpreted as foreclosing the plaintiffs' right of redress under § 610 through the proper authorities.*fn20

Since the spring of 1968 the UAW has provided a procedure by which individual members*fn21 as a matter of conscience may dissent from the political activity of the UAW and enter an objection to the expenditure a portion of their dues for political purposes.*fn22 In such cases the UAW refunds to the individual the proportion of union dues used for such purposes.*fn23 Moreover, if a union member is dissatisfied with the proportional allocation made by the Secretary-Treasurer of the union, the dissenting member may appeal therefrom to the International Executive Board, and then, at his option, either to the UAW Convention or to the UAW's unique Public Review Board.*fn24

Regardless of whether the plaintiffs could have used other procedural or legal remedies to redress their instant grievance, it is clear that the instant complaint brought under 29 U.S.C. § 501 is insufficient and must be dismissed.

The plaintiffs, in their complaint, have failed to state a claim upon which relief can be granted. Section 501 of 29 U.S.C. was never intended by Congress, nor interpreted by courts, to cover political contributions which have been authorized by a union's constitution or other governing resolutions.

Further, the issue of the propriety of a union's authorized charitable and political contributions presents a sensitive controversy over which a federal district court should be reluctant to act without a clear and specific grant of jurisdiction.

Accordingly, it is hereby ordered that the defendants motion to dismiss is granted.


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