The opinion of the court was delivered by: MCLEAN
This is an action by two members of Local 445 of the Teamsters Union against the Secretary-Treasurer, the Recording Secretary and two Trustees of the Local, seeking an accounting of union funds. The action purports to be based upon 29 U.S.C. § 501. By an ex parte order dated December 2, 1964, Judge Weinfeld granted plaintiffs permission to bring it.
Defendants move under Rule 12(b) to dismiss the complaint for failure to state a claim. The ground of the motion is that the complaint fails to allege that plaintiffs have made the request upon the Union which Section 501(b) requires as a prerequisite to such a suit.
'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.'
It should be noted that the word 'or' in the phrase 'fail to sue or recover damages' introduces an ambiguity into the statute. It would seem that the word should have been 'to,' i.e., that what Congress intended must have been to require a request that the union sue, such suit to be brought either to recover damages or for an accounting or for other appropriate relief. The statute was so construed in Penuelas v. Moreno, 198 F.Supp. 441 (S.D.Cal.1961). The use of the word 'or' is made the more puzzling by the fact that the Congressional Committee reports, both of the Senate and the House, and the bills to which those reports relate, use the word 'to' instead of 'or.'
Thus, the report of the House Committee on Education and Labor dated July 30, 1959 (H.R.Rep.No.741), states that Section 501(b):
'Provides that when the fiduciary duties declared in subsection (a) are alleged to have been violated and the union or its officers upon request of any member refuse or fail within a reasonable time to sue to recover damages or for an accounting or other appropriate relief, the requesting member may sue on behalf of the union for appropriate relief in any Federal district court or State court of competent jurisdiction.' (Emphasis supplied.)
It would seem that the confusing word 'or' must be a misprint in the statute which has heretofore escaped detection. This error, if it is an error, is not trivial, for it gives rise to one of the principal questions presented by this motion.
The complaint here alleges (Paragraph 15):
'Before commencing this suit, President Hopkins made a written demand upon defendant, Theodore G. Daley, for an accounting. A further demand for an accounting was made at the meeting of the Executive Board of Local 445, held on November 4, 1964. * * * Notwithstanding said demands, the Executive Board of Local 445 has failed or refused to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after having been requested to do so. Under these circumstances, any further demand for relief by the plaintiffs upon the Executive Board of Local 445, would be futile, since said board is hopelessly split 4 to 3 with the majority controlled by defendant, Theodore G. Daley.'
It is tolerably clear from this that the plaintiffs are not alleging that a demand was made that the Union sue, but only that the demand was made that Daley render an accounting. This is made crystal clear from the petition submitted by plaintiffs in support of their application for leave to bring this action. They there stated (Paragraph 13):
'In the light of the control of the Executive Board by Secretary-Treasurer Daley, and his resolution patting himself on the back in handling the strike benefits, it would be the height of folly to expect that a demand to the Executive Board to sue Daley for the return of the $ 7,490 and an accounting would progress further than the wastepaper basket. Under these circumstances, there is no need to make such a demand for no useful purpose would be served thereby.'
If a demand that the Union sue is a necessary prerequisite, it is apparent that no such demand has been made in this case. 'If the word 'or' in the statute were 'to,' as it was in the bills and in the Committee reports, there could be no doubt that a demand to sue is necessary. The court believes that this is how the statute was intended to read. Even taking it as it is, with its seeming misprint, it should, for the reasons stated in Penuelas v. Moreno, supra, be construed to have that meaning. This court so construes it.
It is equally apparent that plaintiffs claim that although no demand to sue was made, failure to make the demand should be excused, for it would be futile to make it, in view of the fact that defendants constitute a majority of the Local's Executive Board. After this complaint was drawn, and after Judge Weinfeld's order was made, the Court of Appeals held that such an allegation is insufficient. Coleman v. Brotherhood of Railway and Steamship Clerks, etc., 340 F.2d 206 (2d Cir. Jan. 8, 1965).
The court there said, after quoting the language of Section 501(b) pertaining to the request to be ...