violations of Title I and V of the Labor Management Reporting and Disclosure Act (LMRDA). The second is whether membership approval is required for payment of an outside audit previously agreed to by both plaintiffs and defendants. We answer both in the negative.
Plaintiffs Mulligan and Jones-Rivers, elected officer and elected trustee, respectively, of the union and members of its executive board, and Rivers, all members of the defendant union, brought this action against the individual defendants Parker and McClain and against the union for compensatory and injunctive relief.
Plaintiffs' catalog of grievances is long, including claims that Parker assaulted and battered Mulligan, that the defendants interfered with plaintiffs' free speech rights, that they are in breach of their fiduciary duties, that Parker removed and replaced three union chief stewards contrary to the union constitution and the direction of the executive board, that defendants interfered both with Mulligan's discharge of his duties as a union steward and his efforts to obtain a fair hearing on his charges against Parker, and that defendants misappropriated union funds. They seek preliminary injunctive relief against the union's continued payment of the individual defendants' legal expenses,
and against any requirement of membership approval to pay audit expenses.
Before a preliminary injunction is issued the movant must show (1) a reasonable likelihood of success on the merits; (2) no adequate remedy at law; (3) that threatened injury to plaintiff outweighs threatened harm to the defendant; and (4) that granting the injunction will not disserve the public interest. Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 386 (7th Cir. 1984); see also Dos Santos v. Columbus-Cuneo Cabrini Medical Center, 684 F.2d 1346, 1349 (7th Cir. 1982).
For the following reasons, we grant plaintiffs' request for preliminary injunction.
A. Payment of Legal Expenses of Individual Defendants Parker and McClain
A union is customarily prohibited from paying the legal expenses of officers charged in Title V suits.
McNamara v. Johnston, 522 F.2d 1157, 1167 (7th Cir. 1975), cert. denied, 425 U.S. 911, 47 L. Ed. 2d 761, 96 S. Ct. 1506 . In McNamara, the Court stated that "union officials charged as defendants in suits of this nature should retain independent counsel and bear the financial burden of their defense." Id. True it is that the statement was dicta, but it is wholly consistent with the holdings of other courts where, as here, plaintiffs show a reasonable likelihood of prevailing and the charged conduct is seriously detrimental to the union.
The rationale behind not allowing the union to pay legal expenses in Title V suits is that if the Title V charges are proven to be true, the actions are seriously detrimental to the union and its membership. In such case the union should not bear the cost of the officers' defense. Milone v. English, 113 U.S. App. D.C. 207, 306 F.2d 814, 817 (D.C. Cir. 1972) ("As a general proposition we think funds of a union are not available to defend officers charged with wrongdoing which, if the charges were true, would be seriously detrimental to the union."); Frantz v. Sheet Metal Workers Union, Local 73, 470 F. Supp. 223, 229 (N.D. Ill. 1979) ("under these circumstances, the court concludes that the criminal suit against the officer has a direct and injurious impact upon the union and is, in reality, directed at the union. Indeed, a comparison of this action with other cases indicates that courts have blocked payment of union officials' attorney fees where the fees are incurred to defend charges of mishandling union funds." Highway Truck Drivers and Helpers, Local 107 v. Cohen, 182 F. Supp. 608, 621 (E.D. Pa. 1960), aff'd 284 F.2d 162 (3d Cir. 1960), cert. denied, 365 U.S. 833, 5 L. Ed. 2d 744, 81 S. Ct. 747 (1961) ("To allow a union officer to use the power and wealth of the very union which he is accused of pilfering to defend himself against such charges, is totally inconsistent with Congress' efforts to eliminate the undesirable element which has been uncovered in the labor management field."). Similarly here, the allegations against Parker and McClain involve, inter alia, the breach of fiduciary duty and misappropriation of union funds, allegations which, if true, would be detrimental to the union and its members. As such, the union is enjoined from paying the legal expenses of Parker and McClain with regard to the Title V suit.
The other charges against Parker and McClain regard alleged violations of Title I.
Whether the union may advance legal fees for suits under Title I rests on whether the officers in question were acting ultra vires. If the officers' actions were outside of the scope of their official authority, then a conflict of interest exists between the union and the officers and the union is prohibited from advancing legal fees to pay for their defense. Urichuck v. Clark, 689 F.2d 40, 43 (3d Cir. 1982). Here the alleged actions of Parker and McClain in unilaterally removing stewards in excess of their authority, in refusing to abide by the union's executive board decision and in attacking plaintiff Mulligan could be considered outside the scope of defendants' union authority.
Plaintiffs contend there is no adequate remedy at law because there is no guarantee that defendants Parker and McClain could be made to pay back the legal fees advanced by the union if they are not exonerated. The financial instability that could be caused to the union meets the standard set forth in Ronald Machinery, that the harm "cannot be prevented or fully rectified by the final judgment."
749 F.2d at 386. Moreover, the harm to the union and its membership from losing access to funds which are being advanced to pay for legal expenses outweighs the harm to the defendants.
In asking whether the plaintiff has some likelihood of success on the merits, it "is enough that the plaintiff's changes are better than negligible." Omega Satellite Products Co. v. City of Indianapolis, 694 F.2d 119, 123 (7th cir. 1982). Here plaintiff has shown that they have a far better than negligible likelihood of success on at least some of their claims.
The motion to enjoin payment of officers' legal expenses for Title I and Title V allegations is granted.
B. Payment for an Outside Audit
The parties have agreed that the necessary records will be produced to perform an outside audit. The other issue involves whether plaintiff Rita Jones-Rivers and the other two trustees of the union must have the audit expense (which will exceed $ 1,000) approved by the union membership. Defendants argue that the union constitution, Article VII, Sec. 4 applies.
Plaintiffs, on the other hand, argue that Article VII, Sec. 10 applies.
After a careful reading of the two sections in question, we hold that Section 10, which explicitly governs the actions of the trustees, is controlling. Section 10 gives the trustees considerable discretion to have the audit performed and to report the results of the audit. Section 10 does not limit the authority of the trustees by placing financial constraints on them.
Section 4, on the other hand, places a limitation on monies expended by the treasurer, as opposed to that authorized by the trustees. Furthermore, the reference to expenditures over $ 1,000 in Section 4 refers to expenditures authorized by the president or executive board, not to expenditures authorized by the trustees in accordance with their constitutional authority under Section 10. We note, as well, that 29 U.S.C. § 501(b) specifically authorizes payment of necessary expenses of this nature, and we question whether an agreed audit or any required as a matter of fiduciary care can be frustrated by a membership vote. We therefore grant plaintiffs' request for a preliminary injunction preventing defendants from requiring a membership vote to authorize payment for the outside audit.
JAMES B. MORAN,
Chief Judge, U.S. District Court
October 9, 1992.