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HAGAN v. KILROY

March 19, 1985

ANDREW A. HAGAN, Plaintiff, against RICHARD I. KILROY, DONALD A. BOBO, JOSEPH A. GUERRIERI, JAMES KELLEY, JOHN LEIB [LIEB], L.E. BOSHER, JOHN C. CAMPBELL, CHARLES S. COLEMAN, ROBERT M. CURRAN, WILLIAM E. GRANLUND, JOHN R. JENKINS, FRANCIS T. LYNCH, E.J. NEAL, JOAQUIN F. OTERO, RICHARD C. SMITH, GERALD TOPPEN, and others, Defendants


The opinion of the court was delivered by: CARTER

CARTER, District Judge

Plaintiff, a member of the Brotherhood of Railway, Airline and Steamship Clerks, Freight Handlers, Express and Station Employees ("BRAC"), Lodge 705 and System Board 86, instituted this action pursuant to Section 501 of the Labor-Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C. § 501. *fn1" Brac is an unincorporated association and labor organization composed of members employed in the transportation industry throughout the United States and Canada. By order dated December 8, 1984, the court granted plaintiff leave to proceed with this litigation.

The International Union known as the Grand Lodge has its principal offices in Rockville, Maryland. The International has an International President, the chief executive officer of the Union, an International Secretary-Treasurer, eleven Vice Presidents and nine Trustees. It also has an Executive Council composed of these above named officers. Subordinate to the Grant Lodge are the various System Board units. System Board 86 has its principal offices in Philadelphia, Pa., and its members service the consolidated rail system ("Conrail") in the northeastern United States. Each System Board has its own set of officers and trustees distinct from the International. System Board 86's chief executive officer is its General Chairman. In addition, it has 14 Vice General Chairmen and a Board of Trustees. Each System Board maintains financial independence from the International by maintaining its fund in a separate bank account under the control of System Board officers. There is finally local lodges within each System Board. Plaintiff was a member of Lodge 705.

 Defendants are the International President, Secretary-Treasurer, eleven International Vice Presidents, nine International Trustees, the Supervisor-Trustee of System Board 86 and a Vice General Chairman of System Board 86. In the course of a hearing, February 27-March 1, 1984, when the court made clear that no action could be maintained against defendants J.J. Boyce, Robert Malcolm, Donald Purselley, Grace Vincent, D.D. Wiley and William Woods, International Trustees who took office after the alleged against the International Trustees in any event, plaintiff discontinued the action against the above individuals as well as Arlo Bertsch, Joseph Condo and William Flynn constituting all the International Trustees of the Grand Lodge.

 Defendant John Lieb at the time the action commenced had been appointed by Richard Kilroy, International President, as Supervisor-Trustee of System Board 86 pursuant to a trusteeship imposed by the Grand Lodge on System Board 86 pursuant to § 302 *fn2" of Title III of LMRDA. Before being appointed to this position, Lieb had been a System Bord [Board] 86 employee. The complaint alleges Lieb misappropriated System Board 86 funds by the submission of false expense statements. Defendant James Kelley, Vice General Chairman of System Board 86, is alleged to have misappropriated System Board funds in the same manner. These are the only defendants affiliated with System Board 86.

 Kilroy, the International President and Brac outside counsel, Joseph Guerrieri, are claimed to have acted to cover up the malfeasance of various officials of System Board 86 by ordering a cosmetic audit of the System Board's finances. Kilroy, in addition, is alleged to have breached a fiduciary duty to Brac in accepting a radar detector and a silver plated coffee service from System Board 86 former General Chairman, Al Archual. The remaining defendants are apparently charged with misfeasance in failing to institute litigation immediately upon plaintiff's demand that action be instituted against Kilroy, Lieb, Kelley, Guerrieri and Donald Bobo, International Secretary-Treasurer.

 In June, 1982, Kilroy received an unsigned communication from the Committee for Fair Trade Unionism alleging that Archual and the General Secretary-Treasurer, Robert McKinley, of System Board 86 had misappropriated funds from the union. Kilroy on advice of counsel decided to have an investigation and audit of System Board's 86 finances. The investigation and audit was authorized on June 25, 1982. Auditors from the International Union were sent to Pittsburg. The auditors completed auditing the bank statements, cash journals and disbursements for 1981 and for the first 6 months of 1982. The audit and investigation proceeded no further because of Archual's failure to produce his own expense account records.

 In October, 1982, Archual, McKinley and 14 Vice General Chairmen of System Board 86 were advised by the United States Attorney's office in Philadelphia that the grand jury was investigating the financial affairs of the System Board 86. When the government subpoened all the financial records of System Board 86 in connection with this investigation, Kilroy suspended the audit to await completion of the grand jury investigation. The grand jury procedings [proceedings] continued in the spring of 1983.

 Under pressure to do so by Kilroy, Archual and McKinley resigned their offices on October 1, 1983. On December 29, 1983, McKinley pleaded guilty to falsifying financial reports submitted to the United States Department of Labor. On February 16, 1984, Archual pleaded guilty to two felony counts of embezzlement of $121,138.45 from System Board 86. The government has since announced that its investigation has produced no further evidence of criminality.

 Kilroy imposed a trusteeship on System Board 86 effective September 7, 1983, and appointed Lieb as Supervisor-Trustee of the System Board and ordered the audit to be resumed.

 Brac's international convention and election took place July 25-29, 1983, and the Kilroy slate defeated its opponents. After being reelected, Kilroy terminated plaintiff's employment as director of Brac Community Services Department in Paramus, New Jersey, effective September 1, 1983. Plaintiff protested his removal and requested 74 instead of the offered 50 weeks of vacation pay. He appealed to Brac Executive Counsel and filed a charge of age discrimination with the EEOC in October, 1983. His appeal to the Executive Council failed, and the EEOC charge apparently remains in limbo.

 After instituting this action, plaintiff moved for a preliminary injunction to prohibit defendants from distributing any more of System Board 86 funds, to bar expenditure of any union funds for defense of any individuals in a criminal proceeding, to bar expenditure of union funds for defense of any defendant in this action and to bar Lieb from disbursing any of System Board funds for legal fees in defense of this action or any criminal action. Defendants' counsel advised the court that pending determination, Lieb would pay only for essential operational expenses, salaries and that no legal fees would be paid. Plaintiff was not appeased and seeks Lieb's removal, appointment of a receiver to take custody of System Board 86's property, an order for a complete financial report monthly to Executive Council and an order to prohibit outside counsel from any further representation of Brac officials.

 Defendants opposed the motion for preliminary relief, moved to dismiss the complaint on jurisdictional grounds, and to vacate the court's December 8 order granting plaintiff leave to sue.

 At the February-March hearing there was testimony that the silverplated coffee service was presented to Kilroy's wife by Archual on behalf of the System Board at a meeting of the System Board in October, 1981. The gift was made to Kilroy to commemorate his election to the Brac presidency. The plaintiff was among those present, and no complaint was made by plaintiff or by any other union representative that the gift was not appropriate until this proceeding was commenced. There was testimony at the hearing that it was traditional for the System Board to give a newly elected Grand Lodge President a gift. ...


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