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Kujawski v. Chao

October 24, 2007


The opinion of the court was delivered by: J. Phil Gilbert District Judge


This matter comes before the Court on plaintiff John P. Kujawski's ("Kujawski") motion for a preliminary injunction (Doc. 6). Defendant Elaine L. Chao, Secretary of the United States Department of Labor ("Secretary") responded to the motion with her own motion to dismiss this case pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 14). Kujawski has responded to that motion (Doc. 24). The Court held a hearing on September 14, 2007, at which Kujawski and Antoinette Cusanelli testified. For the following reasons, the Court will deny Kujawski's motion for a preliminary injunction.

I. Preliminary Injunction Standards

A party seeking a preliminary injunction must make a threshold showing that (1) it has some likelihood of success on the merits, (2) no adequate remedy at law exists, and (3) it will suffer irreparable harm if the injunction is not granted. Ferrell v. United States Dep't of Housing & Urban Dev., 186 F.3d 805, 811 (7th Cir. 1999). If the moving party is able to establish these three factors, the Court must then balance the harms to both parties using a "sliding scale" analysis, also taking into consideration the effect that granting or denying the injunction will have on the public. "[T]he greater the moving party's likelihood of prevailing on the merits, the less strongly it must show that the balance of harms weighs in its favor." Ferrell, 186 F.3d at 811.

II. Likelihood of Success on the Merits

This case arose after the Secretary issued advisories regarding certain reporting obligations under the Labor-Management Reporting and Disclosure Act of 1959 ("LMRDA"). Those advisories required Kujawski, a designated legal counsel ("DLC") of the Brotherhood of Locomotive Engineers and Trainmen ("BLE"), to file an annual report of his payments over a designated dollar amount to any union or union officer or employee. A DLC is an attorney recommended by the union to its members for representation in injury lawsuits, for example, suits under worker's compensation laws, the Federal Employers' Liability Act or other personal injury laws. Decades ago, unions instituted the DLC designation in order to assist its injured members and their families in locating honest and competent legal representation for their injury claims. See Brotherhood of R.R. Trainmen v. Virginia ex rel. Virginia State Bar, 377 U.S. 1, 2 (1964). Examination of the relevant issues necessarily begins with the LMRDA itself.

A. Relevant LMRDA Provisions

Concerned with corruption in the field of labor relations, Congress enacted the LMRDA in 1959 to protect the rights of employees and the public in general. See LMRDA § 2(b), 29 U.S.C. § 401(b). A major form of this protection was embodied in reporting requirements that would bring to the light of day certain financial transactions in the field of labor relations. One of those reporting requirements, § 203 of the LMRDA, is at issue in this case. The relevant portions follow:

Every employer who in any fiscal year made --

(1) any payment or loan, direct or indirect, of money or other thing of value (including reimbursed expenses), or any promise or agreement therefor, to any labor organization or officer, agent, shop steward, or other representative of a labor organization, or employee of any labor organization, except . . . payments of the kind referred to in section 186(c) of this title; * * * shall file with the Secretary a report, in a form prescribed by him, signed by its president and treasurer or corresponding principal officers showing in detail the date and amount of each such payment, loan, promise, agreement, or arrangement and the name, address, and position, if any, in any firm or labor organization of the person to whom it was made and a full explanation of the circumstances of all such payments, including the terms of any agreement or understanding pursuant to which they were made.

LMRDA § 203(a), 29 U.S.C. § 433(a). The exemption for "payments of the kind referred to in § 186(c)" includes payments made "with respect to the sale or purchase of an article or commodity at the prevailing market price in the regular course of business." 29 U.S.C. § 186(c)(3). Information subject to the attorney-client privilege is also excluded from the reporting requirement of § 203(a)(1). LMRDA § 204, 29 U.S.C. § 434.

Section 203(a) applies only to "employers." The LMRDA includes in its definition of "employer": any employer . . . engaged in an industry affecting commerce (1) which is, with respect to employees engaged in an industry affecting commerce, an employer within the meaning of any law of the United States relating to the employment of any employees. . . .

LMRDA § 3(e), 29 U.S.C. § 402(e).

Finally, to implement the LMRDA, Congress authorized the Secretary "to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under this subchapter and such other reasonable rules and regulations . . . as he may find necessary to prevent the circumvention or evasion of such reporting requirements." LMRDA § 208, 29 U.S.C. § 438.

B. Department of Labor Rules and Regulations

The Secretary has, indeed, issued rules and regulations under the authority Congress conferred. Those regulations require an employer to file an annual report "on the United States Department of Labor Form LM-10 entitled, 'Employer Report' in the detail required by the instructions accompanying such form and constituting a part thereof." 29 C.F.R. § 405.3 (footnotes omitted). The LM-10 form and its instructions were included as a part of the regulation when it was promulgated.

The guide accompanying the LM-10 and its instructions describe who must file the form: Who Must File. -- Not all employers subject to the Act are required to file a report. Only those employers as defined in the Act who have been involved in certain financial transactions or arrangements with labor organizations, union officials, employees or labor relations consultants, or who have made expenditures for certain objects relating to employees' or unions' activities must complete the attached Employer Report Form LM-10. . . .

The instructions accompanying the Form LM-10 also list payments that are exempt from reporting, including: sporadic or occasional gifts, gratuities, or favors of insubstantial value, given under circumstances and terms unrelated to the recipients' status in a labor organization; e.g., traditional Christmas gifts.

Employer Report Form LM-10 Instructions for ¶ 8A.

The Secretary has also published the LMRDA Interpretative Manual ("Manual") to give its staff and the public guidance on implementing the statute and regulations. The Manual contains the following explanation about the foregoing payments that need not be reported on the LM-10:

We should all take cognizance of the "de minimus non curat lex" doctrine. This means that courts will not find persons guilty of acts involving trivial sums of money. For our purpose, therefore, when an employer picks up the lunch tab when he and the union officer have had lunch together, no report will be required from either. Likewise, a Christmas gift of nominal value would not require reports. However, when the "de minimus" point has been passed, reports are required. A gift of a car by the employer to the union leader will of course require a report. Each case, as it arises, must be considered on its own facts.

Manual, § 241.700. The Secretary's decision not to enforce the reporting requirements for "trivial sums" has come to be known as the "de minimus rule." The Secretary has observed the de minimus rule since at least 1963.

Historically, the Secretary has interpreted the LM-10 filing requirement to apply only to employers who do attempt to influence or affect employees in exercising their rights to organize and bargain. Thus, until recently, it has not enforced the LM-10 filing requirement against DLCs or other attorneys who gave gifts or made loans to unions or union officers or employees regardless of the size of those gifts or loans.

The questions at issue in this case arose when, in 2005, the Secretary began issuing advisories on her website regarding the application of ยง ...

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