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International Union v. Local Union No. 589

November 22, 1982

INTERNATIONAL UNION, ALLIED INDUSTRIAL WORKERS OF AMERICA, AFL-CIO, AND GEORGE SKELTON, DOMINICK D'AMBROSIO, LYLE DAUGHERTY AND DENNIS LEZIER, PLAINTIFFS, COUNTERDEFENDANTS, APPELLANTS,
v.
LOCAL UNION NO. 589, ALLIED INDUSTRIAL WORKERS OF AMERICA, AFL-CIO AND NANCY EDGELL AND KAREN S. NUTTLE, DEFENDANTS, COUNTERPLAINTIFFS, APPELLEES



Appeal from the United States District Court for the Northern District of Indiana, Fort Wayne Division. No. F 81-188 -- Jesse E. Eschbach, Judge.

Bauer, Coffey, Circuit Judges, and Bonsal,*fn* Senior District Judge.

Author: Per Curiam

The International Union, Allied Industrial Workers of America and George Skelton, appointed by the International to administer Local Union No. 589 (Local), brought this action under the Labor-Management Relations Act of 1947, as amended, 29 U.S.C. § 185(a). Plaintiffs alleged that the Local was preventing Skelton from carrying out his administrative duties by refusing to relinquish control of its books and records and by interfering with the collective bargaining and grievance procedures. The district court held that the International was guilty of bad faith in assuming control over the Local and ordered the trusteeship imposed by the International dissolved. In entering its order the district court thoroughly and carefully analyzed all the issues raised in this appeal. Accordingly, we affirm and adopt the excellent opinion of the district court, which is reprinted below.

MEMORANDUM OF DECISION AND JUDGMENT ORDER

On June 29, 1981, plaintiff International Union, Allied Industrial Workers, appointed its regional representative, plaintiff George Skelton, as administrator of defendant Local Union No. 589, Allied Industrial Workers, with instructions to govern the local union subject to the supervision of the president of the international union. When the officers and members of Local 589 offered some resistance to the appointment of the administrator, the international union and administrator Skelton commenced this action under 29 U.S.C. § 185(a) against Local 589 and the local union's president, Nancy Edgell and secretary/treasurer, Karen Nuttle, alleging violations of the international union's constitution and requesting preliminary and permanent injunctive relief.

On August 26, 1981, defendants filed a counterclaim (denominated "Complaint") pursuant to 29 U.S.C. § 464 seeking to free the local union from the administrator's control. On August 27, 1981, plaintiffs filed a motion to strike, or in the alternative, to stay consideration of the counterclaim.

The cause came on for trial to the court on August 28, 1981 on the issues raised by plaintiffs' complaint. Trial on the merits was advanced and consolidated with the hearing on plaintiffs' request for preliminary injunction. Immediately prior to the commencement of the trial, this court indicated on the record in open court that consideration of defendants' counterclaim would be stayed because it had been filed only two days before the trial and because it appeared that two of the parties named as counterdefendants had not been served with copies of the counterclaim at that time. On September 17, 1981, more than two weeks after the trial, plaintiffs filed a motion pursuant to Fed.R. Civ. Proc. 25(c) seeking to substitute one Dennis Leazier as a party plaintiff in place of George Skelton. While decision on the August 28, 1981 trial was under advisement, an evidentiary hearing was held on November 9, 1981 for consideration of issues relating to the motion for substitution of parties.

On the basis of the evidence adduced at trial, together with the evidence presented at the November 9, 1981 hearing, the court has concluded that all of plaintiffs' claims for relief, with the exception of the claim for unpaid percapita tax, must be denied. The court has further concluded that the international union's direct control of Local 589 by means of the administrator must be terminated. Pursuant to the motion for substitution of parties, Dennis Leazier will be joined as a plaintiff in this action. This memorandum of decision and order shall constitute the court's findings of fact and conclusions of law in accordance with Fed. R. Civ. Proc. 52.

I. BACKGROUND

Plaintiff international union is a "labor organization representing employees in an industry affecting commerce" within the meaning of the federal labor statutes. Defendant Local 589 is also a "labor organization representing employees in an industry affecting commerce." As a subordinate body of the international union, the local is subject to the provisions of the international union's constitution.

Local 589 is the bargaining representative for the employees at the Pines of America plant in Fort Wayne, Indiana. At least until the action of the administrator in removing them, defendant Nancy Edgell was the duly elected president of the local union and defendant Karen Nuttle was its secretary/treasurer.

Employing what is known as a "checkoff" system, the employer, Pines of America, withholds the local union's dues from each member's pay and remits the dues to the local union. Under the international union's constitution, the local, in turn, is required to pay the international a fixed sum each month for each working member of the local; these monthly payments are known as the "percapita" tax, and are payable on or before the fifteenth day of the following month.

In 1979, the membership of Local 589 voted to suspend the percapita payments because of reports that the international union's regional director for the region encompassing Local 589 had misappropriated union funds. The local made no further percapita payments during the remainder of 1979 and throughout 1980.

Each local union is advised and assisted by a "regional representative" of the international union who typically is assigned to several locals in a given area. The duties of a regional representative with respect to each local union include administering grievance procedures and supervising collective bargaining. From 1975 to 1980, Mary Gildea served as the regional representative for Local 589 and discharged her duties to the satisfaction of the local's membership. In December of 1980, Mary Gildea was replaced by George Skelton. Skelton is the father-in-law of Phil Ley, the assistant plant manager at the Pines of America plant. Given his management position with the employer, Mr. Ley is frequently the subject of employee grievances. Hence, upon assuming the regional representative's duties in supervising Local 589's grievance procedures, Mr. Skelton potentially would be called upon to render guidance and support in relation to grievances arising out of disputes between members of Local 589 and his son-in-law, Mr. Ley. The members of Local 589, therefore, viewed the relationship between their new regional representative, Skelton, and their employer's assistant plant manager as posing a serious conflict of interest.

After learning of Skelton's appointment, the members of Local 589 voted to continue the suspension of percapita payments as a protest against Skelton's apparent conflict of interest.

When Mr. Skelton appeared at the local union's December, 1980, monthly meeting, a majority of the members objected to his presence because of the conflict-of-interest issue. Defendant Edgell, the local's elected president, asked Skelton to leave. When Skelton refused to depart, the members voted to adjourn the meeting. Afterward, Edgell telephoned Dominick D'Ambrosio, president of the international, and told him of the opposition to Skelton, explaining that it derived from the perceived conflict of interest inherent in Skelton's relationship to the employer's assistant plant manager. Although President D'Ambrosio promised to look into the matter and report back to Edgell, he failed to report back to Edgell concerning the dissatisfaction with Skelton.

Receiving no response from the international union, the members and officers of Local 589 refused to allow Skelton to attend grievance sessions and local union meetings and generally declined to cooperate with him.

In a letter dated February 13, 1981, the treasurer of the international union notified Local 589 that it was in arrears on percapita payments for the period from August 1979 to December 1980. Although this letter indicated in general terms that payment of percapita was required by the union constitution,*fn1 it failed to specify any adverse consequences for nonpayment of percapita.

After receiving the notice of percapita arrears, the members of Local 589 voted to pay the percapita to and including June of 1980.*fn2 During the first week of June 1981, defendant Karen Nuttle, acting on behalf of Local 589, tendered a check to the international union for the percapita taxes through June of 1980. The check, which was inadvertently dated "1980" instead of "1981," was never cashed. The international union never deposited the check and has made no effort to return it to Local 589 for correction, if any was in fact necessary.

On June 29, 1981, without any advance notice to defendants, President D'Ambrosio appointed George Skelton to be the administrator of Local 589. Skelton was instructed to take custody of all books, records, papers and properties of the local, and to administer its affairs. Upon his appointment as administrator, Skelton made demand on defendants Edgell and Nuttle for possession of the local union's office, together with all books, ...


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