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December 19, 1979

James M. MORRISSEY and Ralph Ibrahim, Individually and on behalf of the members of the National Maritime Union of America, Plaintiffs,
Joseph CURRAN, as President of the National Maritime Union of America and Individually, Shannon Wall, as Secretary-Treasurer of the National Maritime Union of America and Individually, Mel Barisic, Rick S. Miller, James J. Martin, Peter Bocker, Leo Strassman, Robert Nesbitt, William Perry, Abraham E. Freedman, Martin Segal and Leon Karchmer, Individually, Defendants

The opinion of the court was delivered by: CONNER


All of the active parties, as well as a retired NMU member, Edward Pogor, have filed motions to amend or for reconsideration of this Court's Opinion dated July 27, 1979 ("the Opinion"), and of its Order dated August 8, 1979, and the Court has considered the extensive affidavits and memoranda filed in connection therewith. The Court's disposition of such motions is as follows:


 1. Re Strassman and Nesbitt

 At page 36 of its Opinion, the Court stated:

"Defendants Strassman and Nesbitt were apparently not personally served and have not voluntarily appeared; accordingly, they will not be bound by the judgment herein."

 Plaintiffs contend that Strassman and Nesbitt entered their appearances through the attorneys who represented all of the defendants except Joseph Curran and therefore should be bound by the judgment. The record does not sustain that contention. The marshal's return of service indicates that neither Strassman nor Nesbitt was served, despite at least two unsuccessful attempts on each. Separate answers to the original complaint were filed by Joseph Curran, by Martin E. Segal, and by Abraham E. Freedman, and a joint answer was filed by Mel Barisic, Rick Miller, James Martin and Peter Bocker. No answer was ever filed by Strassman or Nesbitt.

 The first mention of either Strassman or Nesbitt thereafter in the pleadings file was in listing them among the other defendants in the heading of defendants' supplemental answers to interrogatories filed in March 1974, over a year after the complaint was filed. This was after the original attorney of record, Abraham E. Freedman, who was general counsel of the NMU as well as a defendant in the case, had been replaced by outside trial counsel, George Koelzer. Thereafter the names of Strassman and Nesbitt were similarly included with those of the other defendants in the headings of two memoranda of law filed in January and February of 1975 in opposition to motions to amend the complaint and for a separate trial of certain issues, and in the headings of two notices of taking deposition filed in February and December of 1975. Their names were also included in the list of defendants represented by counsel in the transcripts of some of the pre-trial depositions and in some letters of defendants' counsel to the Court, as well as in defendants' post-trial briefs.

 However, that such inclusions were merely inadvertent seems evident from the omission of their names from other papers, most significantly from the heading of defendants' answer to the amended complaint filed in March of 1975. Such occasional and apparently inadvertent inclusions of the names of Strassman and Nesbitt are clearly insufficient to give the Court personal jurisdiction over them.

 While, as officers of the Union, Strassman and Nesbitt were undoubtedly aware that the action had been filed and that they were named as defendants, such knowledge is not a substitute for service on them. If it were, no motion under Rule 12(b)(2), F.R.Civ.P., could ever be granted, and the rule would be a nullity.

 There was nothing in the file of the case tending to indicate that either Strassman or Nesbitt ever saw any of the papers in which their names were listed among the defendants in whose behalf the paper was being filed, or that they were even aware of such inclusion. While they undoubtedly knew that Freedman and later Koelzer were defending the action on behalf of at least some of the officers other than Curran, there is no evidence that they ever authorized either attorney to represent them, or that they were ever consulted in connection with the defense.

 It is unfortunate that plaintiffs' counsel did not pursue further efforts to obtain service on Strassman and Nesbitt because, even if these two defendants continued to be successful in evading personal service, the Court would surely have approved some form of substituted service, for example by registered mail. Although both of them were apparently residents of New Jersey at the time the action was commenced, as officers charged with misapplication of the funds of a union headquartered in Manhattan, they were clearly subject to service under the New York long-arm statute, CPLR § 302. However, the mere fact that they could readily have been served does not dispense with the necessity of actual service.

 If Strassman and Nesbitt had themselves done anything, even inadvertently, which created the reasonable impression that they were submitting to the Court's In personam jurisdiction, thereby causing plaintiffs' counsel to forego an obvious opportunity to serve them, the Court might properly treat their conduct as a voluntary appearance, but there is no evidence that they themselves as distinguished from the defendants' attorneys did anything to estop them to deny personal jurisdiction. Under these circumstances, it would be manifestly unfair to Strassman and Nesbitt to bind them by the judgment even if the Court had the power to do so, which it does not.

 The above-quoted portion of the Court's Opinion will therefore remain unchanged.

 2. Re Deep Sea pensions

 At page 54 of the Opinion, it was stated:

"However, an officer who put in sufficient time at sea to earn a seaman's pension would have less time as a Union officer and would accordingly receive a proportionately reduced pension from the SPP."

 Plaintiffs assert that this statement is incorrect because the period of service as a Union officer (originally all such time but now only the first five years) is counted for the purpose of determining eligibility for a Deep Sea pension.

 Plaintiffs' argument is a Non sequitur. Although some (originally all) of the time as an officer is credited against a Deep Sea pension, the reverse is not true. Time as a seaman is not credited in determining the amount of pension benefits under either the Officers Pension Plan or the Staff Pension Plan. The longer the time a man spends in covered employment under the Deep Sea plan, the lower will be his pension as an officer. Because the officers' pensions are much greater than the Deep Sea pensions, it is unlikely that an officer's Deep Sea pension would exceed the amount by which his officer's pension was reduced because of the time he spent as a seaman before he became an officer. Thus, in determining the reasonableness of the officers' pension plans, the fact that some of them are also eligible for Deep Sea pensions may be disregarded.

 3. Re personal automobiles

 At pages 48-49 of the Opinion, it was stated that plaintiffs' claim that the provision of automobiles for the personal use of NMU officers constitutes a misuse of Union funds was expressly excluded as an issue in this case, and had been asserted in a later-filed action between the same parties then pending before Judge Ward of this Court.

 Plaintiffs now state that "That claim in the action before Judge Ward was withdrawn, without prejudice, because proof on that issue had been submitted in this action."

 The withdrawal is unfortunate and inexplicable because during the trial of this action it was repeatedly stated that the issue of the personal automobiles was no longer in this case. It would be manifestly unfair to defendants for the Court to decide the issue on the basis of the present record, after defendants had been led to believe that in this case they need adduce no evidence on that issue.

 If plaintiffs are unable to reassert this claim in the action before Judge Ward, and are willing to stand on the present record in this case, they may move to reopen the trial to permit defendants to introduce any evidence they may have in opposition to the claim. In opposition to such motion, defendants will, of course, be permitted to demonstrate any prejudice to them resulting from the delay in the trial of this claim.

 4. Re surcharge

 At pages 40-41 of the Opinion, the Court stated that "during the trial of this action plaintiffs, with the approval of the Court, expressly waived any claim of surcharge."

 Plaintiffs' counsel Arthur E. McInerney asserts that it was his intention to waive surcharge only with respect to the alleged excessiveness of Curran's pension. It is true that the oral waiver occurred during a discussion of "the question whether the issue of Mr. Curran's pension benefits is properly before the Court." (Transcript ("Tr.") 216). The Court indicated that it would permit plaintiffs to adduce evidence on the issue, and that if the defendants "feel you have been prejudiced in any way because of a failure to get more specific notice, I will make sure you are not harmed by giving you the right to come in after we adjourn here to bring in any evidence you want to bring in, bearing on these issues" (Tr. 221) and that "(if) you want more discovery after the trial, you may have it." (Tr. 222). Mr. George Koelzer, the attorney for the non-Curran defendants, then stated, "My position is slightly different and I accept the Court's ruling * * *. However, the gentlemen I represent conceivably now, in the light of the Court's ruling a few moments ago, could be liable for a surcharge. That has never been raised * * *. (T) here has not even yet been intimated in any papers anywhere on file that I know of that there would be any conceivable claim for surcharge against my defendants in the event the Court did rule that the Curran benefits were excessive." (Tr. 222-23).

 After further discussion, the Court asked plaintiffs' counsel, Mr. McInerney, "Whether he is really claiming surcharge." He responded, "I will take the charge of Mr. Koelzer's client(s) out of it."

 After some clarification, the Court stated "All right. The issue of surcharge is out then." Mr. McInerney quickly added, "Except for Mr. Curran." (Tr. 227-28).

 Curran's counsel, Mr. Dooley, then interjected, "If the surcharge is out, Joe Curran is out there alone bearing the cost of this suit and if that isn't prejudice, I don't know what prejudice is." The Court responded, "You can brief this after trial as to whether the surcharge is in or out. We will go ahead and receive evidence now as though it is in." (Tr. 228).

 From the context of the discussion in which the waiver was made, it seems clear that Mr. McInerney did intend to waive a claim of surcharge against the non-Curran defendants only with respect to Curran's pension benefits.

 In their main post-trial briefs, the parties did not discuss the issue of surcharge; plaintiffs merely proposed conclusions of law to the effect that all of the defendants except Perry would be surcharged for all the expenditures made in violation of Section 501. Moreover, even in their present submissions, the parties cite no authorities either supporting or opposing the availability of surcharge as a remedy in this case.

 There is a serious question whether surcharge of the non-Curran defendants would be appropriate in this case, whether or not the claim of surcharge against them was waived.

 Section 501 does not mention surcharge but merely states that, after obtaining Court authorization, a union member may sue "to recover damages or secure an accounting or other appropriate relief." Nor is there any reference to surcharge in the legislative history of the LMRDA, in which "the question of remedies was given scant attention." Clark, The Fiduciary Duties of Union Officials Under Section 501 of the LMRDA, 52 Minn.L.Rev. 437, 470 (1967). And it is interesting that in a section of the Clark article entitled "Remedies Envisioned by Section 501(b)" there is no mention of surcharge.

 The only case which the Court has been able to find in which a union officer or trustee was surcharged for monies improperly paid to others is Morrissey v. Curran, 483 F.2d 480 (2d Cir. 1973), Cert. denied, 414 U.S. 1128, 94 S. Ct. 865, 38 L. Ed. 2d 752 (1974). In that case, the Court of Appeals affirmed the judgment of Judge Dudley Bonsal of this Court surcharging Abraham E. Freedman, a trustee of the Officers Pension Plan, for retirement benefits paid to William Perry who, although he had served as Assistant to the President, Joseph Curran, had never been an officer of the Union.

 The Court cited no prior decisions in support of its ruling, but merely stated that the record amply supported Judge Bonsal's finding that Freedman had shown a "reckless indifference" to his duty as trustee and that the issue of Perry's entitlement to an officer's pension did not involve "complex legal questions on which reasonable men could disagree." 483 F.2d at 484-85.

 In the rather unusual circumstances of the present case, surcharge of the other officers for monies improperly paid to Curran seems inappropriate in view of Curran's virtually absolute dominance of the Union. The other officers were not directly involved in authorizing most if not all of the challenged expenditures and they probably could not have stopped them if they had tried. Even if they went directly to the Union membership and attempted to obtain support for stopping the expenditures, they might not have been successful and they would doubtless have been omitted from the slate of nominees for the next election if, indeed, they had not been removed before that time.

 Moreover, the Court, in deciding that the action had not been barred by laches, relied heavily on the fact that surcharge had been waived. It would be manifestly unfair to permit plaintiffs to delay instituting action for a number of years while the defendant officers failed to protest the making of payments which, while improper, did not directly benefit them, and then charge them personally for all the monies so disbursed, without giving them notice of the claimed impropriety and an opportunity to attempt to rectify it and curtail their liability.

 The Court therefore will not surcharge any of the non-Curran defendants in this action. Each will be liable only for the monies improperly disbursed to him or for his benefit, with interest from the date of disbursement. Curran, of course, will be surcharged only for ...

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