Utility Workers United Association Local 537 v. Utility Workers Union of America AFL CIO System Lo ( 2023 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 22-2142 & 22-2262
_____________
UTILITY WORKERS UNITED ASSOCIATION, LOCAL
537, an unincorporated association, by J. Kevin Booth, Its
Trustee ad litem,
Appellee in 22-2142/
Cross-Appellant in 22-2262
v.
UTILITY WORKERS’ UNION OF AMERICA, AFL-CIO,
an unincorporated association; D. MICHAEL LANGFORD,
an individual; MICHAEL COLEMAN, an individual; JOHN
DUFFY, an individual; UTILITY WORKERS’ UNION OF
AMERICA, AFL-CIO, LOCAL 537,
an unincorporated association,
Appellants in 22-2142/
Cross-Appellees in 22-2262
_____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 2-19-cv-01077)
Magistrate Judge: Honorable Lisa Pupo Lenihan
_____________
Argued April 19, 2023
Before: HARDIMAN, PORTER, and FISHER, Circuit
Judges
(Filed: August 3, 2023)
Caitlin D. Kekacs
Andrew D. Roth [ARGUED]
Bredhoff & Kaiser
805 15th Street NW
Suite 1000
Washington, DC 20005
Michael J. Healey
Healey & Hornack
247 Fort Pitt Boulevard
4th Floor
Pittsburgh, PA 15222
Counsel for Appellant/Cross-Appellee
Samuel J. Pasquarelli [ARGUED]
Sherrard German & Kelly
535 Smithfield Street
Suite 300
Pittsburgh, PA 15222
Counsel for Appellee/Cross-Appellant
2
________________
OPINION OF THE COURT
________________
HARDIMAN, Circuit Judge.
These appeals involve a dispute between labor unions.
The controversy began when Local 537 of the Utility Workers’
Union of America, AFL-CIO (UWUA) sought to disaffiliate.
UWUA learned of Local 537’s planned disaffiliation vote and
imposed a trusteeship the same day that an overwhelming
majority of Local 537 members voted to form a new union—
Utility Workers United Association, Local 537 (Independent
537). UWUA obtained a preliminary injunction to enforce its
trusteeship over Local 537 and keep Local 537’s assets.
Independent 537 then brought a civil action to recover those
assets. The District Court granted Independent 537 summary
judgment and equitable relief but denied its request for
attorneys’ fees. Both parties appealed. We will affirm.
I
A
Members of Local 537 felt that they were getting
“nothing” from UWUA and wanted to withdraw from the
National Benefits Agreement UWUA had negotiated with a
public utility called American Water. App. 349. So the officers
of Local 537 decided to call a vote on disaffiliation. The
disaffiliation vote was scheduled for Monday, March 19, 2018,
with notices posted on March 2 and March 14. In anticipation
of disaffiliation, the officers of Local 537 formed a new union,
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Independent 537. Independent 537 was an unincorporated
association with the same officers as Local 537 and virtually
identical bylaws as UWUA.
UWUA officers learned of the impending vote on
Friday, March 16, three days before it was to occur. So they
met over the weekend on Sunday, March 18, to plan next steps.
UWUA President D. Michael Langford declared an emergency
trusteeship over Local 537, effective March 19, the same day
as the planned disaffiliation vote, and appointed UWUA Vice-
President John Duffy as Trustee.
On March 19, a series of meetings took place in which
nearly 90 percent of Local 537 members who cast ballots voted
to disaffiliate Local 537 from UWUA and to make Independent
537 the new bargaining representative of all 637 members in
the approximately 21 bargaining units then represented by
Local 537. That same day, UWUA President Langford sent
notices of the trusteeship to Local 537’s officers and members,
stating: “all moneys, books and property of the Local . . . must
be turned over to the Trustee,” and “[a]ll Local 537 System and
District Officers are hereby removed.” App. 354.
At first, the removed officers refused to comply with the
trusteeship. They continued to act as officers and declined to
turn over Local 537’s property to Trustee Duffy. That
prompted UWUA to sue the Local 537 officers in federal court
seeking a preliminary injunction to enforce the trusteeship and
to require the removed officers to turn over Local 537’s assets.
UWUA’s suit did not proceed far. On April 19, just
three weeks after it was filed, the removed officers agreed to
the entry of a consent order that granted UWUA the
preliminary injunctive relief it had requested. The removed
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officers delivered Local 537’s assets to Duffy and promised to
cease and desist from holding themselves out as officers of
both Local 537 and Independent 537.
After the consent decree was entered, the former
officers of Local 537 did not go away quietly. In their capacity
as individual employees, they filed petitions with the National
Labor Relations Board to decertify Local 537 as the bargaining
representative of the employee-members in three of the Local’s
bargaining units. They prevailed when, in December 2018, the
Board conducted decertification elections and certified
Independent 537 as the new bargaining representative of the
employee-members in each of the three bargaining units of the
former Local 537.
After the Board’s decision, UWUA withdrew its
trusteeship lawsuit, terminating the consent order. Neither the
Court nor the Board ever determined whether UWUA had
lawfully imposed the trusteeship.
By May 2019, representation of all bargaining units
previously represented by Local 537 had been transferred,
either to Independent 537 or another UWUA local affiliate. On
May 8, UWUA formally lifted the trusteeship and revoked
Local 537’s charter. UWUA then invoked a section in its
constitution permitting forfeiture of assets upon revocation of
a local union’s charter and took possession of Local 537’s
“books, monies and property.” App. 387, 523.
B
After UWUA revoked Local 537’s charter and seized
its assets, Independent 537 went to federal court. Independent
537 sued UWUA, Local 537, and three UWUA officers under
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the Labor Management Reporting and Disclosure Act
(LMRDA), 29 U.S.C. § 401 et seq., and the Labor
Management Relations Act (LMRA), 29 U.S.C. § 141 et seq.
Independent 537 requested an injunction ordering UWUA to
return: (1) all the books, records, and documents of Local 537;
(2) Local 537’s social funds belonging to the employees of the
districts now represented by Independent 537, plus interest;
(3) the dues, property, and assets of Local 537;
(4) reimbursement of any decrease in value of any of the
property taken from Local 537; and (5) punitive damages and
attorneys’ fees.
The parties consented to proceed before a Magistrate
Judge. The District Court entered three orders adverse to
UWUA: (1) an order denying UWUA’s Rule 12(b)(1) and
12(b)(6) motions to dismiss; (2) an order denying UWUA’s
summary judgment motion and granting summary judgment to
Independent 537 to the extent Independent 537 sought
equitable distribution of Local 537’s assets but denying
Independent 537’s request for attorneys’ fees; and (3) a final
judgment and decree of equitable relief distributing to
Independent 537 a portion of the funds held by former Local
537 and books and records related to the bargaining units or
districts now represented by Independent 537.
UWUA timely appealed, arguing that the District Court:
(1) lacked subject matter jurisdiction; (2) erred in its summary
judgment rulings; and (3) abused its discretion in awarding so
high an equitable sum. Independent 537 cross-appealed to
challenge the amount of the award, seeking to recoup all of
Local 537’s assets, as well as attorneys’ fees.
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II
We have appellate jurisdiction under 28 U.S.C. § 1291.
UWUA contends the District Court lacked subject matter
jurisdiction over Independent 537’s suit, although its
arguments relate to both subject matter jurisdiction and
statutory standing. The parties dispute whether: (A) there is a
contract between labor organizations over which we have
jurisdiction and (B) Independent 537 has standing to enforce
that contract. We review these legal issues de novo. See In re
Phar–Mor, Inc. Sec. Litig., 172 F.3d 270, 273 (3d Cir. 1999)
(jurisdiction); Leyse v. Bank of Am. Nat. Ass’n, 804 F.3d 316,
320 (3d Cir. 2015) (standing).
A
The District Court found there was jurisdiction under
both LMRA § 301, and LMRDA Title I, § 102. We agree that
the District Court had jurisdiction under LMRA § 301. Section
301 of the LMRA grants federal jurisdiction over “[s]uits for
violation of contracts between an employer and a labor
organization representing employees in an industry affecting
commerce . . . or between any such labor organizations. . . .”
29 U.S.C. § 185(a); see also id. § 185(c).
The existence of a contract is no longer a jurisdictional
element of a § 301 claim. Pittsburgh Mack Sales & Serv., Inc.
v. Int’l Union of Operating Engineers, Loc. Union No. 66, 580
F.3d 185, 190 (3d Cir. 2009) (citing Arbaugh v. Y & H Corp.,
546 U.S. 500 (2006) and adopting the standard set in Winnett
v. Caterpillar, Inc., 553 F.3d 1000, 1006–07 (6th Cir. 2009)).
The existence of the contract is instead an element of the cause
of action. Id. So UWUA’s contention that Independent 537 “is
not and never has been a party” to any contract with the UWUA
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does not affect our jurisdiction. See UWUA Br. 22.
In any event, there is a contract between labor
organizations here: the UWUA constitution and its bylaws. See
United Ass’n of Journeymen and Apprentices of the Plumbing
and Pipefitting Indus. v. Local 334, 452 U.S. 615, 622 (1981)
(“[A] union constitution is a ‘contract’ within the plain
meaning of § 301(a).”). The Supreme Court has held that union
members are third-party beneficiaries of their parent union’s
constitution, which enables them to sue under § 301 for
violations of a union constitution even when they were not
original parties to the contract. Wooddell v. Int’l Bhd. of Elec.
Workers, 502 U.S. 93, 101 (1991). The former members of
Local 537 thus have rights as third-party beneficiaries of the
UWUA constitution, the contract between UWUA and Local
537.
UWUA also argues that Independent 537 did not allege
in its Complaint that its members have third-party beneficiary
rights. But it did, even if indirectly. The Amended Complaint
asserts that the constitution was a contract between UWUA and
the members of Local 537, including those who later joined
Independent 537. And Independent 537’s claim for social
funds is that the funds are the property of members (not any
specific union) and is based on the premise that the members
of Local 537 have rights as beneficiaries of the UWUA
constitution.
UWUA’s related fallback position, that third-party
rights are limited to “current” union members, is unsupported
by caselaw. See UWUA Br. 23–24. Although the parties in
Wooddell were then members of the unions they sued, nothing
in that case indicates that third-party beneficiary rights are
limited to current members. See Wooddell, 502 U.S. at 95–96,
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100; see also Lewis v. Int’l Bhd. of Teamsters, Chauffeurs,
Warehousemen & Helpers of Am., Loc. Union No. 771, 826
F.2d 1310, 1314 (3d Cir. 1987) (holding that federal courts
have jurisdiction under § 301(a) “over suits brought by an
individual union member against his or her local union or the
international union for violation of a union constitution”).
UWUA’s theory would deprive the family of deceased
members of any rights under union contracts. See generally
United Steelworkers of Am., AFL-CIO-CLC v. Rawson, 495
U.S. 362, 374–75 (1990) (assuming the right of survivors of
killed miners to sue under LMRA § 301 and reversing on other
grounds). And union members cannot be forced to remain with
a union merely to sue for their rights under a union constitution.
B
We turn next to the question of Independent 537’s
standing to sue on behalf of the former members of Local 537.
LMRA § 301(b) establishes that a labor organization “may sue
or be sued as an entity and in behalf of the employees whom it
represents in the courts of the United States.” 29 U.S.C. §
185(b) (emphasis added). Independent 537 is a labor
organization that represents employees in an industry affecting
commerce. And it satisfied § 301(b) because it sued on behalf
of the former members of Local 537.
UWUA argues that nowhere in the Amended Complaint
does Independent 537 say it is suing on behalf of anyone.
Although Independent 537 pleaded in its Amended Complaint
that it is the “successor” to Local 537, this claimed status is not
dispositive of Independent 537’s standing. App. 83–84. We
agree with the District Court that Independent 537 is not a legal
successor-in-interest. See Utility Workers United Ass’n, Loc.
537 v. Utility Workers’ Union of Am., AFL-CIO, 2022 WL
9254389, at *11–12 (W.D. Pa. Jan. 27, 2022). The NLRB has
already determined that Independent 537 is a completely new
labor organization. Dist. Ct. Dkt. No. 19-cv-00580-LPL, ECF
No. 23-3, Ex. 3; see also Utility Workers United Ass’n, Loc.
537 by Booth v. Pennsylvania Am. Water Co., 838 F. App’x
686, 688 n.2 (3d Cir. 2020) (affirming the same). And we agree
that Independent 537 has no right to sue on its own behalf for
the property of former Local 537. But this case is not about
successorship status for collective bargaining agreements, and
Independent 537 is not suing on its own behalf. Instead,
Independent 537 pleaded that its members, all of whom are
former members of Local 537, have third-party beneficiary
rights under the UWUA constitution, and that Independent 537
sued to enforce those rights on their behalf. See, e.g., App. 90
(“the dues, property and assets are the property of the
Association and its members. . . ) (emphasis added). Congress
expressly authorized such a suit on behalf of third-party
beneficiaries in the LMRA § 301(b). So Independent 537 has
standing.
For these reasons, we hold the District Court had subject
matter jurisdiction under LMRA § 301 and Independent 537
has standing to sue UWUA on behalf of the former members
of Local 537.
III
We next consider the District Court’s order partially
granting Independent 537’s motion for summary judgment and
denying UWUA’s cross-motion for summary judgment. Our
review is de novo. Tundo v. County of Passaic, 923 F.3d 283,
286 (3d Cir. 2019). Summary judgment is proper if the moving
party shows that “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
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Fed. R. Civ. P. 56(a).
UWUA asks us to reverse and vacate the summary
judgment for Independent 537 based on its view that
Independent 537’s consent to the preliminary injunction
enforcing the trusteeship rendered the disaffiliation ineffective.
UWUA claims that its revocation of Local 537’s charter was a
valid exercise of its power under the UWUA constitution,
giving UWUA a right to all the assets of the former Local 537.
The District Court disagreed, holding that Independent 537 is
entitled to summary judgment even if the forfeiture provisions
in the constitution remained applicable. Utility Workers, 2022
WL 254389, at *9. We agree with the District Court.
Independent 537 has a right to equitable distribution of
Local 537’s assets because UWUA breached the fiduciary duty
it owed to former members of Local 537 under LMRDA § 501.
That section provides, in relevant part:
The officers . . . 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
special 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 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. . . .
29 U.S.C. § 501(a).
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Duffy and Langford were “officers” of Local 537. See
LMRDA § 3(n), 29 U.S.C. § 402(n) (defining “Officer” to
include “any person authorized to perform the functions of
president, vice president, secretary, treasurer, or other
executive functions of a labor organization”). Duffy, as
Trustee, was authorized to “take full charge of the affairs” of
Local 537, to remove and temporarily appoint officers, and to
take such other action he deemed necessary to preserve Local
537’s interest. App. 401 (UWUA const., art. IV, sec. 6-B (2)).
Langford, as UWUA President, was authorized to supervise
and control Duffy’s conduct as Trustee. Id.Both Duffy and Langford owed fiduciary duties to
Local 537 under LMRDA § 501. As such, they had to refrain
from dealing adversely to Local 537 and “its members as a
group,” including by avoiding any conflict of interest. See
LMRDA § 501(a). Duffy and Langford breached that duty as
a matter of law. Once Duffy was appointed as Trustee, his
duties to UWUA in his role as its Vice President created a
direct conflict of interest with his duties to Local 537 and its
members as the Trustee of Local 537’s constructive trust.
Similarly, Langford’s duties to UWUA as its President created
a direct conflict of interest with his duties in supervising and
controlling the conduct of Langford as Trustee. Duffy and
Langford’s positions enabled their use of the trusteeship power
to keep Local 537 affiliated and bound by the constitution
while they proceeded to disband its membership and revoke its
charter, triggering forfeiture of its assets to and for the benefit
of UWUA. On UWUA’s view, Independent 537’s attempts to
disaffiliate were “in opposition to the UWUA’s interests from
the moment of its inception.” UWUA Br. 22. UWUA’s
revocation of the charter and seizure of Local 537’s assets—
only after the Local had no members left—was therefore self-
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dealing.
These breaches of fiduciary duty render unenforceable
UWUA’s invocation of the forfeiture provision of its
constitution. We will not reward UWUA for orchestrating a
conflict of interest. The District Court was correct to find that
Independent 537 is entitled to a share of the assets of the former
Local 537 on behalf of Local 537’s former members.
Independent 537 was thus entitled to summary judgment and
equitable distribution of the assets.
IV
Both parties contend that the District Court erred in the
amount of money it awarded Independent 537. As a threshold
matter, the parties disagree about our standard of review.
UWUA says abuse of discretion applies. Independent 537
seeks plenary review. Neither party cites any caselaw. We
agree with UWUA because we see no reason to deviate from
the standard we generally apply to equitable decisions: abuse
of discretion. See, e.g., In re Orthopedic Bone Screw Prod.
Liab. Litig., 246 F.3d 315, 320 (3d Cir. 2001).
After thoroughly considering UWUA’s appeal and
Independent 537’s cross-appeal, we perceive no abuse of
discretion in the equitable distribution of the assets. The
District Court awarded Independent 537 a sum of $632,667.01
of the $951,466 in Local 537’s assets, along with certain books
and records. The Court’s calculation was based on the parties’
accountings and proposed allocations, including UWUA’s
second allocation after it failed to comply with the first Court
order for proposed allocation. The Court distributed the
undifferentiated funds, earnings, and expenses “in proportion
to the historical contributions to UWUA [ ]’s funding of the
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bargaining units now represented by each union.” Utility
Workers, 2022 WL 254389, at *15.
UWUA argues that the District Court abused its
discretion by not awarding it $193,486.01, the pro rata share of
the dues paid to Local 537 during the time when the Local was
in trusteeship. UWUA is right that it was legally obligated by
the consent order to represent the members of Local 537 during
the trusteeship. Consistent with that principle, the Court
awarded UWUA legal and arbitration expenses, an equitable
decision supported by Independent 537’s position on the
allocation. See Utility Workers United Ass’n, Loc. 537 v. Utility
Workers’ Union of Am., AFL-CIO, 2022 WL 2289832, at *1 &
n.3, 3 (W.D. Pa. June 13, 2022). But that doesn’t mean that the
District Court abused its discretion in denying UWUA the rest
of the dues unrelated to the legal fees. We are persuaded by
caselaw establishing that contributions from individual union
members are held in trust to benefit those members. See, e.g.,
United States v. Goad, 490 F.2d 1158, 1162 (8th Cir. 1974);
see also Boilermakers v. Loc. Lodge D129, 910 F.2d 1056,
1062 (2d Cir. 1990) (holding that a portion of defunct local
union’s assets that did not belong to the International
“should . . . be returned to the reconstituted local in whatever
form it now exists”). So there was no abuse of discretion in
awarding Independent 537 the dues paid during the
trusteeship.1
1
UWUA is correct that Independent 537 made no arguments
against UWUA’s claim to the $193,486.01. But UWUA itself
failed to make a specific argument that this was a forfeiture.
Therefore UWUA forfeited any forfeiture argument. See Altice
USA, Inc. v. New Jersey Bd. of Pub. Utilities, 26 F.4th 571, 575
14
Independent 537 argues on cross-appeal that it should
have received all of Local 537’s former assets.2 It cites Tile for
the proposition that all assets move to a new union after
disaffiliation. See Tile, Marble, Terrazzo, Finishers,
Shopworkers and Granite Cutters Int’l Union AFL-CIO v. Tile,
Marble, Terrazzo, Helpers and Finishers Loc. 32, 896 F.2d
1404, 1413 (3d Cir. 1990). But in Tile, “virtually the whole
membership of TMT Local 32 resigned.” Id. Here, not every
member of Local 537 joined Independent 537. The District
Court was correct that Independent 537 cites no caselaw
holding that all assets of a prior union automatically pass to a
new union. For these reasons, the District Court did not abuse
its discretion in awarding Independent 537 $632,667.01 in
equitable relief.
V
Finally, Independent 537 cross appeals the District
Court’s order denying attorneys’ fees. We agree with the
District Court that Independent 537 has no legal entitlement to
attorneys’ fees. Nothing in the UWUA constitution authorizes
an award of attorneys’ fees for its breach, and “no statute
authorizes fee shifting in section 301 cases.” Ames v.
Westinghouse Elec. Corp., 864 F.2d 289, 293 (3d Cir. 1988).
We therefore apply “the American rule that each party to a
lawsuit pay its own attorneys’ fees.” Id.
n.2 (3d Cir. 2022). We also review the District Court’s
equitable division of the assets for abuse of discretion and
discern none here.
2
“All” assets does not include per capita dues to UWUA,
which would not be part of Local 537’s property.
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Independent 537 nevertheless claims it is entitled to
attorneys’ fees as a matter of equity because UWUA had no
colorable basis to oppose the return of social funds. But even
if we were to agree that equity could authorize an award of fees
and the District Court had determined UWUA acted in bad
faith in refusing to acknowledge that the disaffiliated members
of Local 537 had a right to their social fees, Independent 537
proposed no specific amount expended to recover those fees by
litigation. Independent 537 instead claims the number is too
hard to calculate and so it should be awarded all its attorneys’
fees. Such a blanket award would not be equitable, so the
District Court did not err in declining to grant attorneys’ fees
to Independent 537.
* * *
Independent 537 properly brought this suit on behalf of
its members who are former members of Local 537.
Independent 537 was entitled to summary judgment and
equitable distribution of the assets of the former Local 537. The
District Court did not abuse its discretion in calculating the
equitable award. Nor did the Court err in declining to award
attorneys’ fees. We will therefore affirm the orders of the
District Court in all respects.
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