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Service Employees International Union v. Roselli

May 14, 2009

SERVICE EMPLOYEES INTERNATIONAL UNION, DAVID REGAN AND ELISEO MEDINA, AS TRUSTEES FOR SEIU UNITED HEALTHCARE WORKERS-WEST AND FIDUCIARIES OF THE SEIU UNITED HEALTHCARE WORKERS-WEST AND JOINT EMPLOYER EDUCATION FUND, SEIU UNITED HEALTHCARE WORKERS-WEST, AN UNINCORPORATED ASSOCIATION AND FIDUCIARY OF THE SEIU UNITED HEALTHCARE WORKERS-WEST AND JOINT EMPLOYER EDUCATION FUND, AND REBECCA COLLINS, AS A PARTICIPANT IN THE SEIU UNITED HEALTHCARE WORKERS-WEST AND JOINT EMPLOYER EDUCATION FUND, PLAINTIFFS,
v.
SAL ROSELLI, JORGE RODRIGUEZ, JOAN EMSLIE, JOHN BORSOS, JOHN VELLARDITA, GABE KRISTAL, PAUL KUMAR, MARTHA FIGUEROA, BARBARA LEWIS, PHYLLIS WILLETT, DANIEL MARTIN, LAURA KURRE, RALPH CORNEJO, WILL CLAYTON, GLENN GOLDSTEIN, FRED SEAVEY, MARK KIPFER, AARON BRICKMAN, IAN SELDEN, GAIL BUHLER, FREJA NELSON, ANDREW REID, NATIONAL UNION OF HEALTHCARE WORKERS; MARYRUTH GROSS, CONNIE WILSON, ARLENE PEASNALL, CHERIE KUNOLD, FAYE LINCOLN, AND DOES 1 THROUGH 100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: William Alsup United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS

INTRODUCTION

This action is a small theater of a larger war between two rival healthcare unions vying for the hearts and minds of the rank and file. The larger contest is legitimate on both sides.

The smaller theater - this lawsuit - is directed at specific wrongs allegedly done by former officers of the old union before they bolted to organize the new union. While adjusting the rights of the litigants in this litigation, the Court must be careful to prevent either side from exploiting this action to handicap the other in the larger contest. Defendant Borsos moves to dismiss claim one and claims three through six. Defendants NUHW, Rosselli, Kumar and Figueroa move to dismiss claim seven. The TRO issued earlier lays out the basic fact pattern, so this order will proceed directly to the analysis of the motions to dismiss.

ANALYSIS

On these motions to dismiss, the threshold question is subject-matter jurisdiction. This order holds that subject-matter jurisdiction has been adequately pled, for the following reasons.

1. SUBJECT-MATTER JURISDICTION

Section 501(a) of the LMRDA expressly imposes fiduciary duties on the "officers, agents, shop stewards, and other representatives of a labor organization" in relation to the union and its members. It lists a half-dozen specific statutory fiduciary duties owed to the union and its members. Section 501(b) expressly allows a union member to sue in federal court - on behalf of the union - to enforce these duties, if the union itself refuses to do so, subject to obtaining leave of court to sue derivatively on behalf of the union. It is worthwhile to lay out the words. Section 501, entitled "Fiduciary responsibility of officers of labor organizations," includes the following:

(a) Duties of officers; exculpatory provisions and resolutions void. The officers, agents, shop stewards, and other representatives of a labor organization occupy positions of trust in relation to such organization and its members as a group. It is, therefore, the duty of each such person, taking into account the specific problems and functions of a labor organization, to hold its money and property solely for the benefit of the organization and its members and to manage, invest, and expend the same in accordance with its constitution and bylaws and any resolutions of the governing bodies adopted thereunder, to refrain from dealing with such organization as an adverse party or in behalf of an adverse party in any matter connected with his duties and from holding or acquiring any pecuniary or personal interest which conflicts with the interests of such organization, and to account to the organization for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the organization. A general exculpatory provision in the constitution and bylaws of such a labor organization or a general exculpatory resolution of a governing body purporting to relieve any such person of liability for breach of the duties declared by this section shall be void as against public policy.

(b) Violation of duties; action by member after refusal or failure by labor organization to commence proceedings; jurisdiction; leave of court; counsel fees and expenses. When any officer, agent, shop steward, or representative of any labor organization is alleged to have violated the duties declared in subsection (a) of this section and the labor organization or its governing board or officers refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization, such member may sue such officer, agent, shop steward, or representative in any district court of the United States or in any State court of competent jurisdiction to recover damages or secure an accounting or other appropriate relief for the benefit of the labor organization. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown, which application may be made ex parte.

It is true that Section 501(b) does not also say that labor unions themselves can sue for their own account - but that is already manifestly implied in Section 501(a). It would be topsy-turvy to create a federal fiduciary duty in favor of unions yet not create a federal right of action by unions to vindicate it. It would be even more topsy-turvy to allow derivative actions on behalf of unions but not to allow direct actions by unions themselves. The classic case before the McClellan Committee was the union boss who looted the treasury. Congress plainly meant for the union itself, once under new leadership, to be able to sue the ex-boss to recover the money. Indeed, Subsection (b) expressly contemplated the "governing board" of the union will have had its own opportunity to "sue," before providing that a member might sue derivatively on behalf of the union. It is very hard to see how Congress would have made the member's right of action turn on whether the union itself had already sued unless Congress meant for the union to have the right to sue as well. That unions were omitted from (b) was only because Congress thought they were already covered in (a). Subsection (b) was used to expand the ways in which the fiduciary duties would be vindicated, not to reduce them.

Although the Supreme Court and the Ninth Circuit have not ruled on the precise point, this order adopts the reasoning of the Seventh Circuit and Eleventh Circuit in holding that Section 501(a) implies a federal right of action in favor of labor unions to enforce the duties established therein. Int'l Union of Operating Eng'rs, Local 150 v. Ward, ____ F.3d ____, 2009 WL 1011188 (7th Cir. Apr. 16, 2009). Int'l Union of Electronic Workers v. Statham, 97 F.3d 1416, 1421 (11th Cir. 1996).

In holding that Section 501(b) is limited to suits by union members and that unions themselves cannot sue under Section 501(b), Building Materials & Dump Truck Drivers Local 420 v. Traweek, 867 F.2d 500, 506--07 (9th Cir. 1989), did not consider whether Section 501(a) implies a right of action by unions. The actual holding of Traweek expressly pertained only to Section 501(b) and not to Section 501(a). Id. at 507 (col. one).

Moreover, Traweek involved a union suit against a mere member (for unpaid dues). Section 501(a), however, contemplates suits against "officers, agents, shop stewards and other representatives of a labor organization," not against mere members. The present suit is aimed at "officers, agents, shop stewards and other representatives." It is not ...


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