David Noble, Jr. v. William Dunn, Jr. , 895 F.3d 807 ( 2018 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 22, 2018 Decided July 17, 2018
No. 17-7024
DAVID W. NOBLE, JR.,
APPELLANT
v.
WILLIAM M. DUNN, JR., ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:94-cv-00302)
Virginia W. Hoptman argued the cause for appellant. With
her on the briefs was Jerome A. Madden.
Peter D. DeChiara argued the cause for appellees. With
him on the brief were Nicholas R. Femia, Keith R. Bolek, and
Victoria L. Bor. Brian Powers and Bruce H. Simon entered
appearances.
Before: HENDERSON and KATSAS, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
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KAREN LECRAFT HENDERSON, Circuit Judge: For
nearly twenty-five years David W. Noble, Jr. has pressed his
claims against the now-former leadership of the National
Association of Letter Carriers (NALC or Union). A decade
ago one of our colleagues urged an end to “this 14-year
litigation odyssey.” Noble v. Sombrotto (Sombrotto II), 525
F.3d 1230, 1242 (D.C. Cir. 2008) (per curiam) (Kavanaugh,
J., concurring in part and dissenting in part). But as in the
original Odyssey, there was still a ten-year ordeal to
endure—and Noble’s arguments, like Penelope’s tapestry,
have tended to unravel.
Federal law requires labor unions to operate
transparently and as fiduciaries of their members. This
litigation is about Noble’s claims that his Union has violated
those requirements by failing to comply with document
requests and by permitting its officers to enrich themselves
beyond the salaries permitted by the Union constitution.
Even after our 2008 remand, however, Noble failed to give
the district court reason to rule for him; he meets with no
greater success on appeal.
I. Background
Noble was a letter carrier and NALC member for many
years before he became an employee at the Union’s
Washington, D.C. headquarters. He became troubled by the
senior leadership’s use of Union resources: they collected
per diem pay during the Union’s annual D.C. convention
even though they lived in the area year-round; they also
collected monthly reimbursements for undocumented
expenses; and the Union reimbursed them for Medicare and
Social Security withholdings.
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In February 1994, after unsuccessfully asserting his
claims through the Union’s internal procedures, Noble filed
a complaint in district court against NALC’s then-president
and nine other officers under the Labor-Management
Reporting and Disclosure Act (“LMRDA”), 29 U.S.C. § 401
et seq. Noble later added the Union itself as a defendant.
Noble alleged that the officers had breached their fiduciary
duties by granting themselves tax reimbursements,
unjustified per diem payments and undocumented expense
allowances, all in violation of section 501 of the
LMRDA. Noble further alleged that the officers had
wrongly refused his requests to inspect certain Union
financial records, in violation of section 201 of the LMRDA.
After more than a decade of litigation, the district court held
a bench trial and entered judgment for the Union and its
officers. Noble v. Sombrotto (Sombrotto I), No. 94-302,
2006 WL 2708796, at *1 (D.D.C. Sept. 20, 2006).
Noble appealed and, in May 2008, we affirmed in part
and vacated in part. See Sombrotto II, 525 F.3d at 1242. We
upheld the judgment for NALC on Noble’s claims regarding
the officers’ per diem payments and tax-withholding
reimbursements. At the same time, however, we held that
the district court had erred in two ways.
First, we concluded that the district court erroneously
dismissed Noble’s section 501 fiduciary duty claim related
to the officers’ undocumented expense reimbursements. The
district court’s dismissal of that claim was based on the
clearly erroneous finding that there was “no evidence” to
support Noble’s allegations of impropriety. But “Noble
presented ample circumstantial evidence that officers were
using the allowance for personal use,” that is, the officers
were foregoing significant tax savings by failing to
document their claimed expenses. Id. at 1236. When officers
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submitted receipts to document their spending, they were
entitled to reimbursement; when they simply requested
reimbursement without documentation, they were credited
up to $500 a month in taxable income. Id. The record
evidence showed that most of the officers did not
substantiate their expenses, preferring, they claimed, to
avoid the hassle of keeping track of receipts and itemizing
their reimbursement requests. Id. We concluded that the
district court had given short shrift to Noble’s argument that
the officers would have submitted receipts and received
reimbursement—instead of taxable income—had their
expenses been legitimate. Id. (“The officers had a direct
financial incentive” to substantiate expenses because “each
officer could easily have avoided a substantial additional tax
liability by keeping and submitting receipts for legitimate
union-related expenses he or she incurred each month.”).
Second, we could not determine the factual basis for the
district court’s finding that Noble’s section 201 claim was
moot. According to the district court, Noble had already
been given access to all Union documents he had requested,
there were no outstanding section 201 issues to resolve and
the claim was therefore moot. Id. at 1241. Noble argued that
holding was clearly erroneous. Id. Because we concluded
the district court had failed to explain how it had resolved
Noble’s document requests, we vacated the mootness
dismissal and remanded for further proceedings. Id. at
1241–42.
On remand the district court issued two orders, one on
Noble’s remaining section 501 claim and the other on his
section 201 claim. The district court carefully explained its
factfinding and analysis, but, as before, Noble lost on both
claims. On the section 501 claim, the district court evaluated
Noble’s circumstantial evidence of malfeasance resulting
5
from the officers’ use of the in-town expense allowance.
After evaluating the testimony of many officers, however,
the district court concluded that the circumstantial evidence
was outweighed by the officers’ plausible explanations for
not documenting their expenses: that it was simply too much
trouble to keep track of every expense and that they
preferred to pay tax on their reimbursements rather than take
the time to prepare an expense report. Moreover, several
officers presented expense reports for months in which they
did document their expenses; the reports appeared to show
at least $500 of legitimate expenses for each month for
which they submitted receipts. Because Noble offered no
direct rebuttal evidence of wrongdoing and because the
circumstantial evidence he offered inadequately rebutted the
officers’ testimony and evidence, the district court
dismissed the section 501 claim. See Noble v. Sombrotto
(Sombrotto III), 84 F. Supp. 3d 11, 30 (D.D.C. 2015)
(“[D]irect evidence rebuts [Noble’s] circumstantial
evidence and shows that [the individual defendants] used
their in-town allowances for union-related business.”).
On the section 201 claim, Noble greatly expanded his
document request on remand, insisting that he needed access
to “the entirety” of the Union’s records in order to complete
his investigation. The district court rejected that request as
well as a narrower request for all documents related to an
alleged Union account in a Minneapolis bank. The court
found that Noble had given no explanation of how a review
of documents related to such an account would help him
“verify [the Union’s] report” to the Secretary of Labor, as
required by section 201. 29 U.S.C. § 431(c). Accordingly,
the district court again dismissed the section 201 claim.
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Noble timely appealed both of the district court’s orders
on remand; we have jurisdiction of his appeal under 28
U.S.C. § 1291.
II. Analysis
We review the district court’s interpretation of the
LMRDA de novo. Sombrotto II, 525 F.3d at 1235. We defer
to “an interpretation of a union constitution rendered by
officials of a labor organization . . . unless the court finds
the interpretation was unreasonable or made in bad faith.”
Id. at 1236 (quoting Monzillo v. Biller, 735 F.2d 1456, 1458
(D.C. Cir. 1984)). We review the district court’s factual
findings for clear error.
A. Section 501 Claim
Section 501 of the LMRDA imposes a fiduciary duty on
all union officers. 29 U.S.C. § 501(a); see George v. Local
639, Int’l Brotherhood of Teamsters, 98 F.3d 1419, 1422
(D.C. Cir. 1996). A union-member plaintiff may recover
damages and obtain injunctive relief based on a union
officer’s breach of his statutory duty. 29 U.S.C. § 501(b);
see George, 98 F.3d at 1423.
Noble alleged that NALC officers violated their
fiduciary duty by accepting in-town expense allowances
without documenting the expenses for which they sought
reimbursement. Although officers were encouraged to
document their expenses by submitting receipts along with
their reimbursement requests, they often did not,
notwithstanding undocumented reimbursement was taxed as
regular income. According to Noble, the officers used the
$500 per month allowance to increase their salaries by
routinely requesting “reimbursement” for personal or
nonexistent expenses. Noble argued that this practice is
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forbidden not only by the fiduciary duty imposed by section
501 but also by the Union constitution, which specifies the
amount of officers’ salaries and allows officers discretion
only with regard to “benefits.”
Earlier in this case we concluded that the district court
had “relied on a clearly erroneous factual finding” in
dismissing this section 501 claim. Although the district
court had decided that “Noble produced ‘[n]o evidence’ that
officers had used the allowance for ‘purely personal
reasons, unrelated to union business,’” we found “[t]o the
contrary, Noble presented ample circumstantial evidence
that officers were using the allowance for personal use.”
Sombrotto II, 525 F.3d at 1236 (quoting Sombrotto I, 2006
WL 2708796 at *9). As Noble argued, “each officer could
easily have avoided a substantial additional tax liability by
keeping and submitting receipts for legitimate union-related
expenses he or she incurred each month” but most officers
rarely did so. Id. On remand the district court concluded that
both the officers’ evidence and supplemental briefing on the
expense-reimbursement policy adequately rebutted Noble’s
circumstantial evidence of impropriety. Sombrotto III, 84 F.
Supp. 3d at 29 (“Against this circumstantial case, the Court
must weigh the evidence presented by the individual
defendants in support of their contention that they did not
misuse the in-town allowances. At least with respect to [the
remaining individual defendants], direct evidence rebuts
this circumstantial evidence . . . .”).
Noble nonetheless continues to press the argument he
has been making since 2008; and the defendants respond
that the reimbursement policy is authorized by the Union
constitution. The Union executive council has repeatedly
reaffirmed the defendants’ interpretation of the NALC
constitution, JA124 (1975 council resolution), JA125–26
8
(1977 council resolution), JA127–28 (1980 council
resolution), as have overwhelming majorities of the Union’s
national convention, JA223–24 (minutes of 1996
convention).
This brings us back to where we were a decade ago: the
resolution of Noble’s section 501 claim turns on the
interpretation of the NALC constitution and Noble has
given us no reason to second guess the Union’s own
interpretation thereof. See Noble II, 525 F.3d at 1242
(Kavanaugh, J., concurring in part and dissenting in part)
(“Our precedents and the statutory text and structure
establish a basic principle of judicial restraint in these
cases. . . . [W]e afford even greater deference to union
officials when the union convention has approved the
officers’ interpretation of the union constitution.”). We
believe, then, that the district court correctly determined on
remand that the evidence supported the defendants’
assertion that they simply preferred to pay taxes on their
expense allowances rather than document their
expenditures. Their choice may not be a model of
administrative efficiency but it violates neither the Union
constitution nor the LMRDA.
Moreover, Noble’s “bad faith” argument does not save
his section 501 claim. In Sombrotto II and in United States
v. DeFries, 129 F.3d 1293, 1308 (D.C. Cir. 1997), we
distinguished between a good-faith interpretation of a union
constitution, which is entitled to judicial deference, and a
bad-faith interpretation, which is not. Noble misreads
DeFries, arguing that a union officer necessarily breaches
his fiduciary duty if he acts in bad faith notwithstanding his
good-faith interpretation of his constitutional authority.
Noble Br. 48. The argument fails. Noble might have
prevailed on remand by establishing either (1) that a Union
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officer had—somehow in bad faith—interpreted the NALC
constitution as authorizing the reimbursement policy or (2)
that an officer had embezzled Union funds by receiving
reimbursements for nonexistent expenses. The district court
correctly concluded that Noble had supported neither of
these theories. See Sombrotto III, 84 F. Supp. 3d at 29 (“At
most, then, the in-town allowances had been concealed by a
prior [Union] administration . . . . This differs enough from
DeFries that the Court cannot say that these individual
defendants . . . sought to conceal the existence of the
challenged payments.”); id. at 30 (“[T]he existence of a
significant record of receipts describing the types of union-
related expenses contemplated by the Resolution . . .
bolsters the conclusion that any unreceipted portion of these
defendants’ allowances was not used for personal gain.”).
B. Section 201 Claim
Noble’s section 201 claim involves his requests for
Union records that he alleges have been wrongfully
withheld over the course of this litigation, contrary to the
Union’s duty to disclose to Noble any records “necessary to
verify” the Union’s annual filing with the Secretary of the
U.S. Department of Labor. 29 U.S.C. § 431(c). Section 201
requires that a union member show “just cause” to examine
union records and that the records requested be “necessary
to verify” the union’s LM-2 annual report to the Labor
Secretary. Id. The just cause standard is not onerous: as the
Ninth Circuit has put it, “it is enough if a reasonable union
member would be put to further inquiry.” Fruit & Vegetable
Packers & Warehousemen Local 760 v. Morley, 378 F.2d
738, 744 (9th Cir. 1967). The burden of showing just cause
is on the union member, Mallick v. Int’l Bhd. of Elec.
Workers, 749 F.2d 771, 784 (D.C. Cir. 1984), and there must
10
be a connection between the records requested and the
information included in the union’s annual report, id. at 781.
In the decade following our 2008 remand, Noble has
remained unable to identify with specificity the documents
he has requested but been denied. Indeed, eight years
elapsed before Noble requested “the entirety” of NALC’s
records. Noble v. Sombrotto (Sombrotto IV), 233 F. Supp. 3d
123, 128 (D.D.C. 2017). Noble contended in district court
that only by reviewing “the entirety” of the Union’s records
could he show the existence of an allegedly illicit bank
account he believed the Union’s Minneapolis chapter had
opened with Union funds, or at least establish that the
account’s funds were not included in the Union’s annual
report. Id. at 134 (“Mr. Noble admits that he does not know
and, consequently, is unable to explain how examination of
the Minneapolis bank account records—separate and apart
from the entirety of the NALC’s records—will assist him in
verifying that the bank account funds were reported in the
NALC’s LM-2 Reports.”). But by the sheer scope of the
request—tantamount to a “wholesale random audit,” id.
(quoting Bembry v. N.Y. Metro Postal Union, No. 08-civ-
2369, 2009 WL 690245, at *7 (S.D.N.Y. Mar. 12, 2009))—
Noble in effect conceded that he could not identify the
specific documents, or even categories of documents,
“necessary to verify” the Union’s annual report, 29 U.S.C.
§ 431(c).
Mallick, our leading section 201 case, is plainly
distinguishable. In Mallick, the plaintiff believed, after
reading his union’s annual report, “that the IBEW defends
union democracy suits . . . without regard to costs or to the
interests of the members, simply to discourage members from
bringing such lawsuits.” 749 F.2d at 776. Mallick then set out
to determine whether what looked like a sharp increase in union
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expenditures was an “unusual but essentially random
fluctuation” or “a very sharp increase in actual legal costs,
possibly caused by payments in a single major litigation.” Id.
Mallick suspected the latter: the union had recently settled, on
confidential terms, a lawsuit brought by a fellow member. Id.
at 774.
There was no suggestion of illegality in Mallick—the
plaintiff simply disagreed with the union’s legal strategy. The
dispute involved whether he was entitled to the union records
regarding its spending on litigation in view of the fact that his
request was triggered by his disagreement about legal strategy,
rather than by any alleged discrepancy in the LM-2 report. The
district court ruled for the union because Mallick had not
shown that the annual report was “untruthful, inaccurate, or
incomplete.” Id. We concluded that Mallick need not make that
showing and that section 201 requires only a “connection . . .
between the report and the underlying records.” Id. at 781. We
left for another day whether section 201 “simply defines the
records subject to examination, or imposes a requirement that
the union member actually seek to verify the LM-2 reports”—
it sufficed that Mallick had “pointed to a sudden, apparently
significant, and unexplained change in an item on his union’s
LM-2 report.” Id.
Unlike Mallick, however, Noble has made no argument on
appeal to connect his document requests to the Union’s LM-2
submissions except to reference the general connection
between, for example, bank records and financial reports. See
Noble Br. 35 (“[Noble’s] concerns deal directly with how the
union is handling union funds, which ultimately will or should
be reflected in the union LM-2 Reports . . . .”). But records
relating to one bank account, standing alone, would be of
minimal use in “verify[ing]” the aggregate numbers required
for the LM-2 report. 29 U.S.C. § 431(c). The court’s reliance
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on Noble’s unsubstantiated suspicion about one bank account
would convert the information required by section 201 into the
“wholesale random audit” the district court correctly rejected.
Sombrotto IV, 233 F. Supp. 3d at 134 (“Mr. Noble’s inability to
articulate how the bank records—separate and apart from the
entirety of the NALC’s records—could help him verify the
NALC’s LM-2 Reports reveals his crusade to undertake an
impermissible ‘wholesale random audit’ of the NALC’s
records.”).
Over the 23 years of this litigation, Noble has failed to
adduce any evidence of wrongdoing by the defendants.
Aside from precatory invocations of the LMRDA’s purpose,
Noble has proffered nothing that “warrant[s] a judicial
override of the union’s overwhelming approval of the
officers’ interpretation” of the Union’s constitution,
Sombrotto II, 525 F.3d at 1244 (Kavanaugh, J., concurring
in part and dissenting in part), and, thus, his section 501
claim is without merit. In addition, because he has failed to
show just cause for his section 201 document request, the
Union and, ultimately, the district court, reasonably rejected
it.
For the foregoing reasons, the judgment of the district
court is affirmed.
So ordered.