The posture of this case differs little from its posture during the hearing on the temporary restraining order. Local 705 first argues that it can show that there are explanations for the alleged misconduct and therefore there is no need for an emergency trustee. The merits of the charges of financial mismanagement against the officers and executive board of Local 705 will be determined in internal proceedings within the Teamsters union, with a final determination by the hearing panel. Local 705 disputes in this court the alleged mismanagement and asserts that it can explain the incidents. But the proper venue for that course of action lies in the internal union hearing that is to review the decision of president Carey to impose an emergency trustee. The court's task presently is to determine whether there was a basis for the temporary emergency trustee.
Secondly, Local 705 argues there is no emergency situation requiring an emergency trustee and thus Carey's establishment of the emergency trustee was improper. The emergency trusteeship was imposed under the authority of the Teamsters' constitution and based on general president Carey's determination that such action was necessary to ensure that Local 705 operates in a fiduciary manner in compliance with the Teamsters' constitution. Federal law only requires that the administration of trusteeships be conducted in accordance with the constitution and bylaws of the labor organization and for the purpose of correcting corruption. See Roland v. Air Line Employees, 753 F.2d 1385, 1390-91 (7th Cir. 1985) (quoting the Labor-Management Reporting and Disclosure Act, 29 U.S.C. §§ 462, 464(c)); International Union, Allied Indus. Workers v. Local Union No. 589, Allied Indus. Workers, 693 F.2d 666, 675 (7th Cir. 1982) (same). There is a reasonable showing on the record that Carey followed the Teamsters' constitution and that the purpose was to correct corruption. Carey's action was taken in direct response to the extensive IRB findings, with extensive details of Local 705 officials' misuse of Teamster funds and property, and to IRB's recommendation that Carey place Local 705 in trusteeship. Additionally, the United States District Court for the Southern District of New York upheld sanctions against Local 705's former principal officer, Daniel Ligurotis ("Ligurotis"), for extensive financial wrongdoing, and specifically found that Local 705's executive board ratified Ligurotis' past misconduct. See United States v. International Brotherhood of Teamsters, 814 F. Supp. 1165, 1177, 1178, 1181 (S.D.N.Y. 1993). The IRB report also detailed that Local 705's executive board engaged in financial malpractice. Among other things, the IRB reported that the executive board approved expenditures of discretionary funds to Ligurotis, knowing Ligurotis had embezzled in excess of $ 75,000 from Local 705's treasury. Further, the IRB indicated that discretionary severance payments which total over $ 191,000 were improperly distributed to former employees, at least three of whom were alleged to be involved in misconduct.
The IRB report and the IRB rules requiring prompt action furnish the basis for Carey's judgment and the emergency trustee. See Roland v. Air Line Employees, 753 F.2d at 1394 (as long as president reasonably believes an emergency of sufficient importance exists, he is entitled to impose trusteeships). Notwithstanding Local 705's argument that the presumption of validity of a trusteeship established by a labor organization does not arise until after the trusteeship has been authorized or ratified in conjunction with a fair hearing, see 29 U.S.C. § 464(c), the court possesses authority to impose an injunction prior to the union hearing and gives the general president's decision to create an emergency trusteeship deferential review. See id, at 1394-95, 1396; see also Teamsters Local Union No. 406 v. Crane, 848 F.2d 709, 713-14 (6th Cir. 1988).
Last, Local 705 asserts that Carey's motivation for imposition of the trustee was for personal, political reasons and thus the trusteeship is improper. Local 705 has not made a showing of bad faith or improper motivation. This showing must normally be made by clear and convincing evidence if a hearing has been conducted. 29 U.S.C. § 464(c); International Brotherhood of Boilermakers v. Local Lodge D238, 865 F.2d 1228, 1236 (11th Cir. 1989). Nonetheless, on the present record, Local 705 has failed to present sufficient evidence to raise any presumption of bad faith. General president Carey did not just pull the allegations of mismanagement out of the air. His actions were taken in direct reaction to the IRB's investigation. Carey's reasons are set forth in a notice to the officers and members of Local 705 dated June 15, 1993. Local 705 has failed to produce any material evidence to rebut the evidence showing proper purpose. Additionally, Local 705 admits that a loan was made and that severance payments were made. Again, its explanations can be presented at the internal hearing. Furthermore, even if general president Carey had a personal motivation, objectively viewed, Carey acted under a very clear-cut provision of the constitution which binds both the Teamsters and Local 705. There is substantial evidence to support his decision and there was a good amount of pressure exerted on Carey by the IRB to act quickly. There is nothing objectively arbitrary in his action. Accordingly, the court finds that the plaintiffs have demonstrated a likelihood of success on the merits.
The court further finds that there is no adequate remedy available at law, and to permit the present executive board to remain in control of Local 705 and to thwart the efforts of the emergency trustee would create an irreparable injury to the Teamsters. The harm to the Teamsters exists in that its local affiliate is operating under allegations of serious financial wrongdoing. The reputation of the union and its image are at stake. Further, the acquiescent executive board would still be running Local 705 absent the trusteeship. The court also finds that there is a risk that Local 705's officers, who are the subject of the investigation, will return to their uncooperative attitude. Local 705 has demonstrated its willingness to resist the trustee and there is an incentive for the persons subject to the investigation to resist. This resistance is not reasonable. Cf. National Ass'n of Letter Carriers v. Sombrotto, 449 F.2d 915, 921 (2d Cir. 1971) (there is a strong expectation that disputes regarding union trusteeships will be litigated while the trusteeship is in effect). The public interest in this case also weighs in favor of the Teamsters where the activities of its local union are at stake which threaten Local 705's members' financial interests. The fiduciary nature of the relationship between Local 705 and its members requires the court to take great care in protecting the beneficiaries of this relationship from the alleged destructive actions of the fiduciary. Also, attempts by the Teamsters to correct and prevent financial malpractice which might be occurring in its local unions is a worthy goal that serves to benefit the public.
The court must emphasize that it is not passing judgment on the merits of the underlying claims of financial malpractice, nor is it determining whether or how long the trustee must remain in control of Local 705. The court is enforcing the Teamsters' constitution and preserving the status quo until these matters can be resolved after the internal union hearing. The Teamsters have complied with its constitution, whereas Local 705 has not. Because the final decision, which is to be rendered by the union panel, must be executed within sixty days after the hearing, the preliminary injunction will only run until the final decision is made. See, e.g., Merrill Lynch v. Salvano, 999 F.2d 211, 1993 U.S. App. LEXIS 17108, No. 92-3854, slip op. at 5, 8-9 (7th Cir. July 8, 1993) (district courts may issue preliminary injunctive relief in disputes ultimately to be resolved by arbitration, but must be careful in extending the injunction after arbitration proceeds).
For the foregoing reasons, the court grants the preliminary injunction.
IT IS SO ORDERED.
CHARLES RONALD NORGLE, SR., Judge
United States District Court
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