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BURKE v. BEVONA

July 11, 1990

WILLIAM H. BURKE, PLAINTIFF,
v.
GUS BEVONA, AS PRESIDENT OF LOCAL 32B-32J, SERVICE EMPLOYEES INTERNATIONAL UNION, AFL-CIO, DEFENDANT.



The opinion of the court was delivered by: Korman, District Judge.

AMENDED MEMORANDUM AND ORDER

The issue presented by defendant's motion for summary judgment is whether plaintiff's action for breach of his employment contract is barred either because Gus Bevona, as President of Local 32B-32J, lacked the authority to make such a contract or because it does not satisfy the Statute of Frauds. The facts underlying this case are set out in the opinion of the Court of Appeals in Burke v. Bevona, 866 F.2d 532, 534-35 (2nd Cir. 1989). There, the Court of Appeals vacated the jury's finding that defendant had breached plaintiff's employment contract and held that the jury had been improperly and inadequately instructed on the substantive law when it was told that "if in fact Mr. Bevona binds the Union, then the promise could outlast his tenure." Id. at 537.*fn1 Although the issue of Bevona's authority to make a lifetime employment contract with plaintiff was "neither briefed nor argued below," the Court of Appeals held that it was preserved on appeal because it "involved federal statutory law governing democratic union procedures," and because the defense counsel "touch[ed] on it in his summation." Id. (citing the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 401 et seq. (1985); Finnegan v. Leu, 456 U.S. 431, 441, 102 S.Ct. 1867, 1873, 72 L.Ed.2d 239 (1982)).

The Court of Appeals also rejected the trial judge's finding that, because "declines in the membership of Local 32B-J could have necessitated [plaintiff's] termination," plaintiff's contract was excused from the writing requirement of the Statute of Frauds. Id. at 538. It held that, under New York law, only an express termination clause can take a contract out of the statute and that this was not such a clause. The Court of Appeals then remanded the breach of contract claim for further proceedings, including a trial de novo, id., but with the proviso that it "[would] not presume to predetermine whether on retrial plaintiff's proof concerning Bevona's authority to make a binding contract for lifetime employment will be sufficient to make a question of fact for the jury." Id. at 537.

The Court of Appeals went on to affirm the dismissal of plaintiff's fraud claim against Bevona because plaintiff failed to prove "fraudulent intent." It found that plaintiff could not sustain his claim for "prehiring misrepresentation" because he had been hired as promised and had not been discharged "until a year and a half later, when he fell out of grace with Bevona." Id. at 539 (citing DiRose v. PK Management Corp., 691 F.2d 628, 632-33 (2nd Cir. 1982), cert. denied, 461 U.S. 915, 103 S.Ct. 1896, 77 L.Ed.2d 285 (1983)). It also found that plaintiff, as an experienced union member and official, could not prove that he "reasonably could have believed that Bevona could guarantee him a lifetime term as an officer of Local 32B" as to prevail on his fraud claim. Id. (citing Lanzi v. Brooks, 54 A.D.2d 1057, 1058-59 (3rd Dep't 1976), aff'd, 43 N.Y.2d 778, 402 N.Y.S.2d 384, 373 N.E.2d 278 (1977)).

After remand, defendant moved for summary judgment on the grounds that Bevona did not have the authority to make a lifetime employment contract with plaintiff and that the contract is barred by the Statute of Frauds. Defendant argues that the authority to make a contract as extraordinary as one for lifetime employment can not be implied from a president's general powers to appoint necessary personnel. Because Bevona was not expressly authorized to employ plaintiff indefinitely, defendant argues that the contract is unenforceable. Defendant also argues that plaintiff's oral employment contract does not satisfy the Statute of Frauds because, "[b]y its express terms, [it] is not to be performed within one year from the making thereof. . . ." N.Y.Gen.Oblig.Law § 5-701(a)(1) (McKinney 1989).

A. The Lack of Authority Defense

In order for plaintiff to have an enforceable contract for lifetime employment with the union, the Court of Appeals held that he must establish that Bevona had the authority to make such a contract. Burke v. Bevona, 866 F.2d at 536. Whether such authority existed is determined both by public policy and principles of agency law. The Court of Appeals cited with approval the "New York rule" that a contract for lifetime employment is presumed to be unreasonable and unauthorized and will not be enforced unless it is proven that the person making it on behalf of the company was expressly authorized to do so. Id. (citing Heaman v. E.N. Rowell Co., Inc., 261 N.Y. 229, 231, 185 N.E. 83 (1933)). In Heaman, the New York Court of Appeals observed that:

  Alleged contracts of life employment are, however,
  so unusual as to have been, with rare exceptions,
  condemned by the courts as unreasonable and
  unauthorized. The president or other executive
  officer of a corporation has no authority as such
  to make a contract that one should remain in the
  corporate employ for life even under a general
  power "to appoint, remove and fix the compensation
  of employees." That any board of directors or
  other persons responsible for the management of a
  corporation should give such unusual power to an
  executive officer cannot be implied. Plain
  language of the managing board, clearly showing
  that such was the intention of the corporation,
  coupled with power actually or impliedly vested in
  the corporation itself, must be found to justify
  such a hiring.

Id. at 231-32, 185 N.E. 83 (citations omitted). The purpose of this rule is to prevent the current officers of a company from imposing unreasonable contracts upon future officers or by otherwise hampering their ability to hire personnel who would be responsive to the needs of the company. Carney v. N.Y. Life Ins. Co., 162 N.Y. 453, 455, 57 N.E. 78 (1900).

This rule was held to "have even greater significance when applied to labor organizations" by virtue of their "democratic" nature. Burke v. Bevona, 866 F.2d at 536-37 (citing Local 3489, United Steelworkers of America v. Usery, 429 U.S. 305, 309, 97 S.Ct. 611, 614, 50 L.Ed.2d 502 (1977); Madden v. Atkins, 4 N.Y.2d 283, 293, 174 N.Y.S.2d 633, 151 N.E.2d 73 (1958)). This is due to the existence of federal laws, which require "`open, periodic elections'" and whose "`overriding objective'" is to "`ensure a union administration's responsiveness to the mandate of union election.'" Id. at 537 (quoting Finnegan v. Leu, 456 U.S. 431, 441, 102 S.Ct. 1867, 1873, 72 L.Ed.2d 239 (1982)). Based on this authority, the Court of Appeals concluded that "[a]s a general rule, therefore, an elected president such as Bevona has no right to compel those who succeed him in office to honor his staff appointments."*fn2 Id. (citing Cehaich v. International Union, United Automobile, Aerospace and Agricultural Implement Workers, 710 F.2d 234, 239 & n. 9 (6th Cir. 1983)).

Plaintiff cannot sustain his claim against defendant for breach of his lifetime employment contract because he cannot prove, as he is required to by law, that either the Executive Board or the membership of Local 32B-32J expressly authorized the making of such a contract. See Annotation, Power of Corporate Officer or Agent to Hire Employees For Life, 28 A.L.R.2d 929, 933 (1953) ("In the absence of express authority, it has generally been held or recognized that corporate officers or agents do not have the power or authority to hire employees for life."); see also Heaman v. E.N. Rowell Co., Inc., 261 N.Y. at 232, 185 N.E. 83. The defendant has established, through unrebutted evidence, that the Executive Board never authorized Bevona to enter into a longterm or lifetime employment contract with any employee.*fn3 See Affidavit of Donald F. Mumm, September 14, 1989; Affidavit of Kevin McCulloch, September 13, 1989; Affidavit of John Sweeney, September 14, 1989; Affidavit of Gus Bevona, September 13, 1989; Affidavit of Joseph Baumann, September 13, 1989.

Plaintiff argues that, even if Bevona was not expressly authorized to make this contract, the union should nevertheless be bound because "Bevona [neither needed nor sought] the approval of the Executive Board for anything he did in the realm of employment practice" and that "throughout the first trial, defendant's counsel alleged over and over the President's unilateral power and discretion in the matter of hiring and firing." Affidavit of William Burke, February 9, 1990, at Paragraphs 44, 46. He argues that a reasonable person would have believed that Bevona had the implied authority to make a lifetime employment contract because it was commensurate with his general power to appoint necessary personnel and because "[he] was authorized to do what was reasonable and necessary to accomplish the merger of Local 307 into Local 32B-J." Affidavit of William Burke, April 20, 1990, at Paragraph 5. Moreover, plaintiff argues that defendant should be estopped from denying Bevona's lack of authority to employ plaintiff for life because defendant has reaped the fruits of plaintiff's promise to support the merger.

Under prevailing law, an unauthorized contract for lifetime employment may be enforced where: 1) the plaintiff has given valuable consideration in exchange for the defendant's promise; 2) it will not unreasonably infringe upon the decisions of future corporate officers; and 3) it is necessary to prevent injustice. See generally Annotation, Power of Corporate Officer or Agent to Hire Employees For Life, 28 A.L.R.2d 929, 935-38 (1953). In Usher v. N.Y. Cent. & H. R.R. Co., 76 A.D. 422, 78 N.Y.S. 508 (2nd Dep't 1902), aff'd, 179 N.Y. 544, 71 N.E. 1141 (1904), the Appellate Division illustrated the circumstances in which a defendant will be found to have had apparent authority, or will be estopped from denying that he had authority, to make a valid lifetime employment contract:

  [T]he case presented is not one of a simple and
  naked contract of employment, but is the case of
  the immediate and final settlement and adjustment
  of a claim for compensation for serious injuries
  alleged to have been occasioned by the defendant's
  negligence. . . . In such a case, where an
  employee has been rendered nearly helpless by the
  company's fault, and without any fault of his own,
  it could hardly be said to be unreasonable, in
  consideration of release of his claim for damages,
  for the company to agree to put him to such work
  as he was still competent to perform in his
  crippled condition, to pay him for it one-half of
  what he was previously able to earn and to keep
  him at it for life; that is, during good behavior,
  obedience, and competency

  It is within general knowledge that such contracts
  under such ...

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