The opinion of the court was delivered by: GLASSER
GLASSER, United States District Judge:
Plaintiff, the elected president of Local 010 of the Civil Service Employees Association ("CSEA"), seeks leave of this Court to file an action, pursuant to § 501 of the Labor Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C. § 501, against defendants, executive officers of CSEA, Inc. Essentially, the complaint alleges that the parent union has failed to allocate properly to Local 010 funds collected from agency fee shop payers, as required by the Constitution and Bylaws of CSEA. The issue before the Court is whether plaintiff has shown good cause for seeking redress under § 501. For the reasons stated herein, leave to file the complaint is granted.
Agency Shop Fee Payers are government employees who are not members of the union, but who nevertheless have a portion of their salaries withheld and transmitted to CSEA, Inc. The Bylaws of the Statewide CSEA Constitution state that each union local shall receive from the CSEA Treasurer 25% of the agency shop fees collected from the employees in such locals after appropriate reductions.
The plaintiff alleges that this refund was calculated in a manner that deprived the local of $30,000 over a three year period. He further alleges that he has exhausted his internal union remedies pursuant to 29 U.S.C. § 501(b) by notifying the union leadership of his complaint and receiving no response for four months. Defendants claim that even if they acted in violation of the CSEA Constitution, such a violation would not be actionable under § 501.
Section 501 imposes on officers and representatives of local unions a "fiduciary responsibility" to the union "to hold its money and property solely for the benefit of the organization and its members and to manage, invest and expend the same in accordance with its constitution and bylaws . . . to refrain from dealing with such organization as an adverse party . . . and from holding or acquiring any personal or pecuniary interest which conflicts with the interests of such organization. . . ." 29 U.S.C. § 501(a).
Section 501(b) creates a federal cause of action for union members against officers who violate the duties outlined in § 501(a) but only if the union fails to seek appropriate relief within a reasonable time and only after leave of court is obtained "upon verified application and for good cause shown." 29 U.S.C. § 501(b).
The question before this Court concerns the scope of this fiduciary duty. Defendants maintain that case law in this Circuit, as supported by the legislative history of the LMRDA, establishes that the duty prescribed by the Act is violated only where union officials utilize their trust positions to deprive the union of funds and to achieve personal financial benefits. A closer reading of the case law and legislative history demonstrates, however, that the fiduciary duty is wider in scope, and encompasses the violations alleged here.
In Morrissey v. Curran, 650 F.2d 1267 (2d Cir. 1981), a suit under § 501 was found to be cognizable where plaintiff alleged a breach of fiduciary duties by defendant union officers in authorizing and receiving various forms of improper payments and excessive compensation. The crux of the Morissey opinion was that authorization of the officers' activities by the union did not prevent challenge under § 501, since the activities were deemed to be unreasonable uses of union funds for the personal benefit of the officers. Id. at 1274. According to the court, authorization cannot be used "to shield the very acts that prompted the legislation, misappropriation and abuse of union funds by officers for their personal benefit." Id. at 1273-74, citing McNamara v. Johnston, 522 F.2d 1157, 1163 (7th Cir. 1975), cert. denied, 425 U.S. 911, 47 L. Ed. 2d 761, 96 S. Ct. 1506 (1976).
In the present suit, defendants cite the language in Morrissey and McNamara, supra, for the proposition that § 501 should be limited to those cases in which officers have personally benefitted at the expense of the union. But these opinions can more readily by understood as employing the "personal benefit" principle to carve out an exception to the general defense of union authorization. Where, as in the present case, the authorization defense is absent, § 501 coverage would still be available. Support for this reading is found in McNamara. There, a union member was denied leave to file a § 501 suit against union officers who, in accordance with general resolutions and the union constitution, authorized and contributed union funds to political candidates and social causes. The Seventh Circuit accepted the defendants' contention that "so long as an officer expends funds without personal gain in compliance with [union] standards, there is no breach of any duty under § 501." 522 F.2d at 1163. The court found that "[s]ection 501's language and the legislative history of the Landrum-Griffin Act make it clear that Congress placed primary reliance on union rules and policies to establish the scope of a union representative's fiduciary obligations." Id.
The McNamara holding is predicated upon two conditions, namely, compliance with the union constitution and resolutions and the absence of personal gain. It can be argued that a failure to meet either one of these conditions would support a finding of breach of fiduciary duty. Such a rule has been embraced by several legal scholars and finds some support in the case law. See Hood v. Journeymen Barbers, Hairdressers, etc., 454 F.2d 1347, 1355 (7th Cir. 1972) ("Failure to meet [pension fund] requirements is a failure to expend monies in accordance with a resolution adopted by a governing body under the Union's Constitution . . . and therefore clearly in breach of the fiduciary duties in Section 501(a)"; Morrissey v. Curran, 302 F. Supp. 32, 35 (S.D.N.Y. 1969), aff'd in part, rev'd in part, 423 F.2d 393 (2d Cir.), cert. denied, 399 U.S. 928, 90 S. Ct. 2245, 26 L. Ed. 2d 796 (1970) (union officers and pension trustees found to violate § 501 for including non-officer employees within coverage of union pension fund, in contravention of union constitution); J. Bellace & A. Berkowitz, The Landrum-Griffin Act -- Twenty Years of Federal Protection of Union Member's Rights, 293-95 (1979) (arguing in favor of a rule whereby violation of the union constitution would be a per se breach of fiduciary duty); Smith, The Labor-Management Reporting and Disclosure Act of 1959, 46 Va. L. Rev. 195, 228 (1960) (employing union constitution and resolutions as standard for measuring the scope as of § 501's fiduciary duty). Moreover, it is suggested by the language of the statute itself. 29 U.S.C. § 501(a).
Admittedly, the case law in this Circuit has exhibited a trend toward limiting the scope of the fiduciary duty in § 501. See, e.g., Head v. Brotherhood of Small Ry. Clerks, 512 F.2d 398 (2d Cir. 1975); Gurton v. Arons, 339 F.2d 371 (2d Cir. 1964). While extending § 501's coverage to the case before it, the court in Morrissey, supra, cited the long-standing principle of minimum interference with union affairs and recognized "that the Act does not give courts a license to interfere broadly in internal union affairs." 650 F.2d at 1273, citing Gurton v. Arens, supra, 339 F.2d at 375. But neither Morrissey nor the other opinions in the circuit that have limited the scope of § 501 have precluded § 501 jurisdiction where, as here, the union constitution has been violated. The restrictive language appearing in dicta could arguably be applied to the case at hand, but this would be inappropriate in light of the questionable analysis of legislative history that was made in these cases.
It is undisputable that, in enacting § 501 in 1959, Congress was primarily concerned with combatting the looting of union assets by officers and representatives. At hearings conducted by Senator McClellan Congress learned of repeated instances in which union officials abused their positions of trust to gain personal financial benefits.See 105 Cong. Rec. 6523-30 (1959). In fact, Senator McClellan's remarks concerning the Senate's proposed version of § 501
have been cited in this Circuit to justify a narrow reading of the statute. See, e.g, Gurton v. Arons, supra, 339 F.2d at 375 (approving of the district court's analysis, 234 F. Supp. 429, 442 (1964)).
It was not the bill proposed by Senator McClellan that was enacted by Congress, however, but rather the House version sponsored by Congressman Elliot. The report accompanying the House bill stated that "the committee bill is broader and stronger than the provisions of S. 1555 [the Senate version] which relate to fiduciary responsibilities. . . . S. 1555 applied the fidiciary principle to union officials only in their handling of "money or other property". . . . [T]he committee bill extends the fiduciary principle to all the activities of union officials and other union agents or representatives." H.R. Rep. No. 741, 86th Cong. 1st Sess. 81 (1959), reported at 2 U.S. Code Cong. & Ad. News, 86th Cong., 1st Sess. 1959, p. 2480. Representative Elliot explained further that his committee "wrote a comprehensive statement of the fiduciary duties of union officers. 105 ...