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TUCKER v. SHAW

January 9, 1970

Joseph TUCKER, Nicholas Makris and Charles Tucker, on behalf of Local 70 Bartender's Union of Brooklyn and Queens, Plaintiffs,
v.
Elizabeth SHAW, as the Executrix of Vincent D. Shaw, deceased, Thomas J. Moore, Clinton Judge, Andrew J. Heummer, Thomas Fabbricatore, Peter J. Brennan, the United States Fidelity and Guaranty Co. and the Continental Insurance Co., Defendants


Travia, District Judge.


The opinion of the court was delivered by: TRAVIA

TRAVIA, District Judge.

This is an action under § 501(b) of the Labor-Management Reporting and Disclosure Act (LMRDA) of 1959, 29 U.S.C.A. § 501(b). The plaintiffs have sued various officials of their local union, Local 70 of the Bartenders' Union of Brooklyn and Queens; and several trustees of joint union-management welfare and pension plan trust funds. The defendants Heummer, Fabbricatore and Brennan, employer-appointed members of the joint trust funds, have moved to dismiss the sixth and seventh causes of action of the complaint on the ground that no jurisdiction of the subject matter exists as to them.

 The amended complaint, in relevant substance, alleges that the plaintiffs and defendants are all residents of the Eastern District of New York. The plaintiffs are members of Local 70 Bartenders' Union of Brooklyn and Queens, affiliated with and chartered by the Hotel and Restaurant Employees and Bartenders International Union, AFL-CIO, and the defendants are trustees of the joint trust funds. Jurisdiction is based solely on 29 U.S.C.A. § 501(a) and (b). Appropriate demands upon the Local's executive board to institute action and leave to sue granted by this Court are alleged.

 The sixth cause of action alleges the establishment of a welfare fund by the local and an employer's association in 1958, financed by employers' contributions. The union-appointed trustees are the defendants Shaw, Moore, and Judge, while the employer-appointed trustees are the defendants Heummer, Fabbricatore, and Brennan. Plaintiffs allege that all of these trustees "* * * are officers of local 70 within the meaning of 29 U.S.C. Section 402(n) and Section 402(q); and 29 U.S.C. Section 501(a)." The trustees administer and operate the fund. However, the amended complaint alleges, between April 1, 1962 and March 31, 1964, the trustees diverted several thousand dollars from the fund's cash account, while improperly spending other thousands of dollars on fees, commissions, and administrative expenses. In addition, the allegations continue, several thousand dollars were illegally spent on expenses during the period from April 1, 1960 to March 31, 1962. Furthermore, the employers owed several thousand dollars to the trust funds, which were not paid, and which the trustees negligently failed to collect. The actions of the trustees allegedly were in violation both of the union's governing international constitution and local by-laws, as well as of the duties established in 29 U.S.C.A. § 501(a).

 The seventh cause of action is similar to the sixth, except that it is directed to the defendants as trustees of the local's pension fund, established in 1965. As in the sixth cause of action, the defendants are alleged to be officers of the union within the meaning of 29 U.S.C.A. §§ 402(n) and (q) and 501(a). Improper expenditures by the defendants from the fund are alleged, amounting to several thousand dollars. Some of the allegations are of payments directly to the defendants, while others are of improper and excessive expenditures by the defendants.

 Plaintiffs now claim that the employer-appointed trustees are either officers or representatives within the meaning of 29 U.S.C.A. § 501(a) and (b).

 I. Section 501 of Title 29 does not expressly refer to trust funds, or to employer-appointed members of joint union-management trust funds. If § 501(b) is not applicable to this action, then there is no jurisdiction in this Court since there is neither diversity of citizenship nor any other basis for jurisdiction.

 On a prior appeal in this action, the Second Circuit posed - and left unanswered - the questions now squarely before this Court:

 
"First is the broad one that section 501(a) does not apply to any trustee of a welfare trust fund, whether he be union or employer appointed. Second is the more limited assertion that, in any event, section 501(a) cannot apply to the three defendant employer-trustees, who are not officers of the union or even members. Appellants offer a number of theories in support of their positions; e.g., the trustees are not 'officers, agents, shop stewards, and other representatives of a labor organization' as these terms are used in section 501(a) and defined in 29 U.S.C. §§ 402(i), (n), and (q); since the bonding requirement of section 502 specifically applies to trusts, the failure of section 501 to mention trusts indicates congressional intent to exclude them; another statute - The Welfare and Pension Plans Disclosure Act *fn4" ["4. 29 U.S.C. §§ 301-309."] - furnishes the sole obligations of a trustee of a welfare trust." Tucker v. Shaw, 378 F.2d 304, 307 (2d Cir. 1967).

 The allegation in the complaint that the employer-appointed defendants are "officers" of Local 70 within the meaning of 29 U.S.C.A. § 402(n) *fn1" appears untenable in light of the language of that subsection requiring such officers to be those who exercise executive functions of the union.

 This conclusion is supported by a colloquy during Congressional debates on the LMRDA between Senator Allott and Senator Goldwater which raised the question whether the definition of "officers" now substantially in 29 U.S.C.A. § 402(n) included trustees of welfare and pension funds. The Senators concluded that it did not. Both Senator Allott and Senator Goldwater indicated that they would have preferred an amendment to enlarge the definition to include such trustees. 2 Leg. Hist. LMRDA 1091(3). *fn2" But that proposal was withdrawn. 2 Leg. Hist. LMRDA 1095(3)-1096(1). Absent language such as was in the McClellan amendment to S. 1555, § 509 (§ 610 of S. 1555, 1 Leg. Hist. LMRDA 576-577, as passed by the Senate), *fn3" which specifically referred to trust funds, trustees would not be "officers" for the purposes of 29 U.S.C.A. § 501. Whether union-appointed trustees could be "other representatives of a labor organization," see 29 U.S.C.A. §§ 402(q) *fn4" and 501(a), (b), was not alluded to in this colloquy.

 Comparison of statutory sections, Congressional reports, and Congressional debates at the time of the passage of § 501 of the LMRDA (popularly known as the Landrum-Griffin Act) indicates that, at least as to employer-appointed trustees, Congress did not intend pension and welfare fund trustees to be subject to the fiduciary duties specially established by § 501(a) or to be subject to the newly created Federal Court jurisdiction of § 501(b).

 Sections 501 and 502 appear to have distinct roles in the protection of union members against breaches of fiduciary duties by their leaders. Section 501(a) *fn5" fixes fiduciary duties on various union officials - apparently a duty previously not generally present in the law, Federal or State. Compare § 501(a) with N.Y. Labor Law, McKinney's Consol. Laws, c. 31, §§ 722, 723 (fixing fiduciary duties on union officials and agents; adopted 1959 [same year as § 501]). However, no fiduciary duty is fixed in specific terms on trustees of union-employer trust funds by § 501. Instead, "trust in which a labor organization is interested" is specifically defined, § 402(l); *fn6" it is specifically included in § 502, *fn7" which requires bonding of trust officials (as well as of union officials who handle funds); and it is also specifically included in § 523(a), *fn8" which preserves any duties of and rights against trust officials and union members under State laws.

 Prior to enactment of the LMRDA of 1959, New York, at least, did have a statutory provision making trustees of union trust funds fiduciaries. See N.Y. Insurance Law, McKinney's Consol. Laws, c. 28, § 37- l (6); N.Y. Banking Law, McKinney's Consol. Laws, c. 2, § 71 (6); cf. N.Y. CPLR § 7701 (actions "to determine a matter relating to any express trust * * *").

 Thus, Congress, as is evident from § 523(a), concerned with preserving State laws and remedies where not superseded by Federal law, and, as is indicated in Gurton v. Arons, 339 F.2d 371, 375 (2d Cir. 1964), concerned with not having Federal courts interfere inordinately in the internal affairs of unions, created only a limited right and a limited remedy. Neither the New York Labor Law, nor the Insurance Law, nor the Banking Law, require trustees or union officials to be bonded. This gap is filled by § 502 of the Federal law.

 Trusts are explicitly dealt with in the Federal law where Congress' intent to control them is apparent. Thus, 29 U.S.C.A. §§ 301 et seq. provide for publication, disclosure and reporting of union pension and welfare plans. No regulation of the internal affairs of these plans is provided for in these sections. Penalties and liabilities for failures to report and disclose are provided. 29 U.S.C.A. § 308. Similarly, 29 U.S.C.A. § 186(e) provides for jurisdiction of suits to restrain payments by employers to trust funds not complying with the exceptions in § 186(c)(5). *fn9" See also Giordani v. Hoffmann, 295 F. Supp. 463, 477 (E.D. Pa. 1969). Plaintiffs seek to make an analogy to the fact that under § 186(a)(1) and (c)(5), a trust fund may be treated as a "representative." They argue that therefore the trust fund - or the trustees, even if employer appointed - is a "representative" for the purposes of § 501. However, in each of the sections, both the word "trust" is used differently, compare § 402(l) with § 186(c)(5), and the word "representative" is used differently. In § 186(a)(1), *fn10" "representative" is "representative of any of his [the paying employer's] employees," while in § 501(a), the "representative" is "of a labor organization " (emphasis supplied). Thus, in § 186(a)(1), the statute is referring to the labor union itself, its agents, and others representing the interests of employees, and has been interpreted to include employer trustees of trusts, Giordani v. Hoffmann, supra, 295 F. Supp. at 475, as representatives of the employees. On the other hand, § 501(a) seems to be limited to those who are in some manner working for or connected with the labor organization, and not to those working on a board of trustees as coordinate representatives of a management which is usually in an "adversary" position in other labor-management relations.

 Section 501(b) *fn11" provides for jurisdiction over the same "* * * [officers], [agents], shop [stewards], or [representatives] of [a] labor organization * * *" as are subjected to fiduciary duties by § 501(a). No ...


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