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RETAIL v. NATIONAL UNION OF HOSP. & HEALTH CARE EM

January 9, 1984

RETAIL, WHOLESALE, DEPARTMENT STORE UNION, AFL-CIO-CLC, ALVIN E. HEAPS as President thereof, and LENORE MILLER, as Temporary Trustees of National Union of Hospital and Health Care Employees, Plaintiffs,
v.
NATIONAL UNION OF HOSPITAL AND HEALTH CARE EMPLOYEES, a Division Of RWDSU, HENRY NICHOLAS as President thereof and JEROME BROWN, as Secretary-Treasurer thereof, Defendants



The opinion of the court was delivered by: SAND

SAND, J.

 This matter* was brought on by an order to show cause filed November 29, 1983. The plaintiffs Retail, Wholesale, Department Store Union ("RWDSU" or "International Union"), Alvin E. Heaps, as president thereof, and Lenore Miller, seek preliminary and permanent equitable relief to enforce a trusteeship imposed upon the defendant, the National Union of Hospital and Health Care Employees ("the National Union"). The National Union has cross moved to enjoin the plaintiffs from taking any further steps to implement the trusteeship in question. By agreement of the parties, a hearing on the motions for preliminary injunctions and the trial on the merits have been consolidated. The trial has been held over the past two days.

 Findings of Fact

 The plaintiff Retail, Wholesale, Department Store Union is an international labor union of approximately 250,000 members. Plaintiff Alvin Heaps is the president and plaintiff Lenore Miller is the secretary-treasurer of the plaintiff union. The defendant National Union of Hospital and Health Care Employees is a division of the plaintiff with a membership of approximately 128,000 members. Defendant Henry Nicholas is the president and defendant Jerome Brown is the secretary-treasurer of the defendant union.

 On November 29, 1983, the president of the International Union, plaintiff Alvin Heaps, issued a letter appointing plaintiff Lenore Miller temporary trustee of the defendant union. The letter recited that the basis for this action was

 
"for the purposes of preventing and correcting financial malpractice and otherwise carrying out the legitimate objectives and protecting the interests of this International Union and the said National Union, and assuring compliance with the provisions of the International Union's Constitution and the Constitution and bylaws of the said National Union."

 Mrs. Miller attempted to occupy the offices of the National Union in accordance with the appointment by President Heaps. However, she was refused admittance to the offices of the defendant and was otherwise prevented from assuming her office as temporary trustee.

 The purported financial malpractice engaged in by the National Union, as seen by the plaintiffs, relates primarily to the manner in which its Strike and Defense Fund has been administered. In essence, the plaintiffs have alleged that whereas the reported net assets of the National Union's Strike and Defense Fund were $10,620,461, only $5,592,105 was available in cash assets. The difference between these two figures is attributable to the fact that the National Union had advanced money from the Strike and Defense Fund to itself and to several other divisions of the union.

 Plaintiffs have also questioned the practice of the defendant in charging the Strike and Defense Fund a 10 percent administrative fee and the refusal of representatives of the National to attend a meeting called by President Heaps.

 There is no contention made by the plaintiffs in this case that they have any reason to believe that any funds that came into the possession and control of the National have been used for other than union purposes. Rather, the disagreement between the parties relates to the specific union purposes for which the Strike and Defense Fund can be used consistent with the law and the union's own internal regulations. If the Strike and Defense Fund is, as plaintiff contends, in the nature of a trust which can be utilized only for purposes of strike benefits, and which does not otherwise constitute an asset of the National, then the claim of the plaintiffs that the National has engaged in improper financial practices has credence. If, on the other hand, the Strike and Defense Fund is no more than another asset of the National, which it has chosen to identify by that name, but the use of which is subject to no legal prohibitions or restraints other than those determined by the authorized executive board members of the National, then this purported financial malpractice of the National did not occur.

 Fundamental to the resolution of this question are the facts and circumstances relating to the creation and management of the Strike and Defense Fund. It appears that the Strike and Defense Fund was created by the defendants' predecessor union sometime in 1969 pursuant to a resolution of the board, the minutes of which are not available. An account was opened and is still maintained at Amalgamated Bank. The resolution opening this account is the standard printed form of that banking institution. It begins "I, Doris Turner, hereby certify that I am secretary and the official custodian of the records of National Union Strike and Defense Fund, an unincorporated association," and then recites that the account is opened pursuant to the meetings of the members of the executive board.

 There exists no trust instrument or other document which defines the nature of this fund or which imposes any restrictions on its use. The Constitution of the National provides in Article 7, Section 3: "10 percent of all the dues collected shall be set aside by the National Union for a Strike and Defense Fund." Article 15, Section 4, provides: "All requests for benefits from the National Union Strike and Defense Fund shall be made in the first instance to the president of the National Union, who may appoint a standing committee of the National Executive board to act upon such requests." Such a committee was in fact created, the function of which was to pass upon requests for strike benefits.

 The evidence indicates that it has been the practice of the National and its executive committee to permit moneys to be advanced from the Strike and Defense Fund to the National Union and to other divisions. The practice of the National through the year 1981 had been to report separately the receipts and disbursements of the Strike and Defense Fund, and advances from the Strike and Defense Fund to divisions and to the National Union were characterized as loans, a term which the defendants' accountant candidly acknowledged is a term which connotes a transaction between two different entities.

 Some of the misunderstanding and confusion which surrounds this controversy results from the fact that for the last year, in addition to those financial statements which have previously been prepared, the National had prepared a consolidated financial statement which combined the Strike and Defense Fund with the other assets of the National Union. Of course, as the result of consolidation, the "loan" from the Strike and Defense Fund to the National was eliminated, since as a matter of standard ...


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