United States District Court, Eastern District of New York
October 28, 1999
STANLEY WHITE, ULYSSES BROWN, AND DONALD W. SWANSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS,
WHITE ROSE FOOD, A DIVISION OF DIGIORGIO CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM AND ORDER
This is an action brought pursuant to Section 301 of the Labor
Management Relations Act (the "LMRA"), 29 U.S.C. § 185, arising
from the disbursement of settlement funds following a plant
closing. This case has been the subject of a number of prior
decisions, resulting in a Second Circuit opinion on October 22,
1997, which set the "rules of the road" for the final
determination of this lawsuit. See White v. White Rose Foods,
128 F.3d 110 (2d Cir. 1997).
On appeal, the Second Circuit affirmed this Court's prior
dismissal as against the Furniture, Flour, Grocery, Teamsters,
Chauffeurs & Warehousemen Union, Local No. 138 ("Local 138").
However, the Second Circuit reversed this Court's dismissal of
the third amended complaint against the plaintiffs' previous
employer, the defendant White Rose Food, a division of
DiGiorgio's Corporation (the "defendant" or "White Rose"). Id.
Subsequently, this Court dismissed the plaintiffs' tax counts
in a decision dated July 12, 1999. White v. White Rose Food,
62 F. Supp.2d 878 (E.D.N.Y. 1999). As a result of the prior
decisions, the only remaining cause of action in the third
amended complaint is the Section 301 claim against White Rose,
contained in the first cause of action.
This action was commenced in August 1993 by the plaintiffs,
former employees of White Rose and members of Local 138. The
dispute centers on an agreement ("the Settlement Agreement")
between White Rose and Local 138 that followed the closing of
White Rose's Farmingdale, New York warehouse and a subsequent
labor strike. Under the terms of the Settlement Agreement,
eligible individuals could elect either (1) to receive payment
from a strike settlement fund; (2) to receive pension
contributions; (3) placement in preferential hiring lists at
other White Rose facilities, for a period of time; or (4)
immediate placement in a job at another facility.
The Settlement Agreement provided that White Rose would place
the sum of $1,500,000 in two separate payments in a special
escrow account to be distributed to eligible former employees of
the Farmingdale facility. The Settlement Agreement contained a
binding arbitration clause and expressly stated that it must be
ratified by the eligible rank and file members of Local 138 who
were former employees of White Rose. White Rose executed the
Settlement Agreement on July 23, 1992 and the Union membership
ratified it on September 21, 1992. Approximately 344 employees
accepted the settlements monies while the other members of Local
138 selected one of the other options, described above.
In January 1993, the entity that was to act as escrow agent and
distributor of the settlement funds determined that it was unable
to function in that capacity. Subsequently, on January 23, 1993,
Local 138 and White Rose entered into an "Amendment to Settlement
Agreement," (the "Amendment"), that provided for payment directly
from White Rose to the eligible employees, upon presentation of a
list of those employees and their completed W-4 forms. The
Amendment also provided for White Rose to issue payroll checks to
those former employees who elected to receive the settlement
funds. The Amendment further provided that from the settlement
sum of $1,500,000, White Rose shall issue "payroll checks, less
all required tax deductions." Pursuant to the Amendment, White
Rose made deductions for all applicable employer payroll taxes
from the checks that were issued. In this regard, the Amendment
White Rose shall issue appropriate payroll checks,
less all required tax deductions, for those former
White Rose employees who elect to receive settlement
money. The Company's contribution share for all
federal, state and local payroll taxes, and F.I.C.A.,
shall be included in the $1,000,000.00 and
$500,000.00 funds established in the Settlement
Agreement. Accordingly, the settlement funds
established by the Settlement Agreement which may go
directly to former White Rose employees shall be
reduced by the amount of such contributions.
The Amendment did not contain the language regarding membership
ratification that was found in the original Settlement Agreement,
and it was not presented to the rank and file for ratification.
On February 11, 1993, White Rose delivered to the Union its first
installment of the settlement funds. On September 23, 1993, White
Rose delivered the second installment. Each of the 344 former
employees who completed the withholding form received a total
gross remuneration of $3,799.10. White Rose withheld Federal
Unemployment Taxes ("FUTA"), State Unemployment Taxes ("SUI"),
and Federal Insurance Taxes ("FICA") in the total mounts of
$10,455, $82,677.67 and $99,977.11, respectively, amounting to
the total sum of $193,109.91, which was deducted by
White Rose from the $1,500,000 settlement sum.
At the crux of this case, the plaintiffs contend that the
Settlement Agreement, the collective bargaining agreement and the
Union Bylaws required that membership ratification be obtained
with regard to the Amendment prior to the disbursement of the
settlement funds that withheld the FUTA, FICA and SUI taxes. The
plaintiffs contend that Local 138 and White Rose (1) wrongfully
entered into an amendment to the settlement agreement that was
not ratified by the rank and file; and (2) the Amendment
permitted White Rose to wrongfully deduct the employer's share of
payroll taxes in the sum of $193,109.91 from the $1,500,000
settlement funds. On the other hand, the defendant's primary
contention is that Local 138 did not violate its duty of fair
representation in that it was not required to submit the
amendment to the members for ratification.
II. THE SECOND CIRCUIT DECISION OF OCTOBER 22, 1997
On appeal, the Second Circuit affirmed the Court's dismissal of
the plaintiffs' claims against Local 138. The Court held that the
plaintiffs' claim that Local 138 breached its duty of fair
representation by entering into the Amendment without
ratification by the union membership was "time-barred by the
six-month limit of DelCostello," 128 F.3d at 114 (referring to
DelCostello v. International Bhd. of Teamsters, 462 U.S. 151,
163-64, 103 S.Ct. 2281, 2289-91, 76 L.Ed.2d 476 ).
Similarly, the Second Circuit held that this Court's dismissal of
the plaintiffs' claim that the union breached its duty of fair
representation by refusing to take its claim to arbitration, was
also "barred by the six-month limitations period of
DelCostello." Id. at 115.
With regard to the Section 301 claim against White Rose, the
Second Circuit held that:
[t]he fact that the plaintiffs are time-barred from
bringing a claim against the union does not mean that
the plaintiffs cannot prove that Local 138 breached
its duty of fair representation in an action against
White Rose. . . . [P]laintiffs suing under a §
301/DFR theory need not sue their union at all: it
could hardly be that running of the limitations
period as to the union extinguishes the right of
action against the employer. The fact that
DelCostello's limitation period has expired as
against Local 138 has no bearing on the validity of
the plaintiffs' suit against White Rose.
128 F.3d at 115-16.
The Second Circuit added, however, that "we express no view as
to whether the union's failure to submit the amendment for
ratification or to challenge the disbursements when made (absent
a demand from the membership at the time) amounts to a breach of
the duty of fair representation." Id. at 116.
In its decision of July 12, 1999, this Court denied the
defendant's motion for summary judgment dismissing the
plaintiffs' Section 301 cause of action. The Court held that
there were material triable issues as to whether Local 138's
conduct in entering into the Amendment permitting the employer to
withhold the payroll taxes in the sum of $193,109.91 from the
agreed upon settlement sum without ratification by the Local 138
membership, constituted the arbitrary, discriminatory or bad
faith conduct required to establish a "fair representation" cause
of action. 62 F. Supp.2d at 884-85.
In addition, the Court held that there were material triable
issues with regard to the conduct of Local 138 when it failed to
challenge the deduction made for employer payroll taxes, and, in
fact, may have permitted it. Id. at 885-86 In addition, the
Court raised another factual issue, namely, whether the Local 138
officer(s) who signed the Amendment, could reasonably believe
that they had the authority to bind
the members without their ratification. Id. at 884-85.
III. THE TRIAL — FINDINGS OF FACT
This opinion and order includes the Court's findings of fact
and conclusions of law as required by Fed.R.Civ.P. 52(a) See
Rosen v. Siegel, 106 F.3d 28, 32 (2d Cir. 1997); Colonial
Exchange Ltd. Partnership v. Continental Casualty Co.,
923 F.2d 257 (2d Cir. 1991). During this portion of the opinion, the Court
will make findings of fact which will be supplemented by
additional findings later in the opinion.
A. The Plaintiffs' Case
Stanley White, is a named plaintiff, and was a White Rose
employee from 1965 to 1991. He was a member of Local 138 from
1966 until he retired in 1993. White was involved in the strike
called by Local 138 in 1991. The strike lasted for 18 months and
was settled in 1992. The Settlement Agreement (Plfs.Ex. 1) was
signed by White Rose on July 23, 1992 and by Local 138 on
September 15, 1992.
In July, 1992, the members of Local 138 were asked to ratify
the Settlement Agreement at a union meeting called by John
Georgopoulos, the Union President. There were more than 200
members at the meeting. At that time, every member was given a
copy of the Settlement Agreement and White read it for the first
time. At that meeting, the Union members voted to ratify the
White first learned about the existence of the Amendment
(Plfs.Ex. 2) from his lawyer:
Let me show you what I described as Plaintiffs'
Exhibit 2 for Identification.
(Handed to the witness.)
MR. MENDELSON: On the amendment?
MR. MEDNICK: Yes.
Q You see the date January 23, 1993?
Q From January 23, 1993, to on or about April or May
of 1993, did you know of the existence of this
Q Now, after January 23, 1993, which is the last date
on this agreement, did anybody at Local 138 or
White Rose tell you personally that White Rose and
Local 138 had entered into the agreement you are
holding the amendment you are holding?
Q Now, how did you learn for the first time that such
an amendment to the settlement existed?
A I learned from my lawyer.
THE WITNESS: Yes. This second amendment I never
heard of. I never heard about this. This one I don't
know. I am talking about this one here (indicating).
When he says amendment, I don't know nothing abut
this, your Honor.
Tr. at 11-12, 39.*fn*
With regard to the payroll tax deductions, the Amendment, a
short two-page document, provides as follows:
. . Upon receipt of the Union's notification and
the properly completed I.R.S. W-4 Form, White Rose
shall issue appropriate payroll checks, less all
required tax deductions, for those former White Rose
employees who elect to receive settlement money. The
Company's contribution share for all federal, state
and local payroll taxes, and F.I.C.A., shall be
included in the $1,000,000.00 and $500,000.00 funds
established in the Settlement Agreement. Accordingly,
the settlement funds established by the Settlement
Agreement which may go directly to former White Rose
employees shall be reduced by that amount of such
(Emphasis in the original).
On January 20, 1993 at the request of President Georgopoulos,
White signed a W-4 "Employee's Withholding Allowance Certificate"
(Plfs.Ex. 3). At the time Georgopoulos gave White the W-4 form to
sign, he did not tell him that he had signed the Amendment the
day before, on January 19, 1993. When White received his
settlement check he noticed a "double deduction" on the check
stub. That is how he first learned about the payroll deduction
made by White Rose. Despite this, White cashed his settlement
checks. Other than this lawsuit, he never attempted to have the
Union resolve the dispute, nor did he pursue arbitration.
White described the strife-filled strike period, in which he
participated by picketing three times a week at the Farmingdale
plant. After the strike was settled, White "felt beaten that I
had lost my job . . . I felt beaten in that respect" and he was
"unhappy and dissatisfied with the company" and "angry." (Tr. at
29). Also, he conceded that the Union had been unable to stop
White Rose from closing the Farmingdale plant and moving it to
New Jersey. The Union sought to compel arbitration as to this
dispute and was unable to do so. White believes that both the
Union and White Rose "wronged him" with regard to the payroll
deductions from his checks.
White conceded that over the course of his years as a member of
Local 138, it represented him "pretty well" and prior to the
events at issue, he was satisfied with the representation of
Donald Swanson, another former employee of White Rose and a
member of Local 138, told a similar story. He was employed from
1977 to 1991 as a driver and warehouseman. Swanson also voted to
ratify the Settlement Agreement after President Georgopoulos gave
him a copy at the meeting in 1992. He never knew of the existence
of the Amendment until advised of it by his attorney in April or
Swanson was given a W-4 form to sign by President Georgopoulos
on January 20, 1993 (Plfs.Ex. 7). Significantly, as with White,
even though Georgopoulos had signed the Amendment the day before,
on January 19, 1993, he said nothing about it to Swanson. When
Swanson got his check on February 11, 1993 and looked at the stub
(Plfs.Ex. 8), he first found out about the deductions.
A crucial exhibit in this case is the Constitution and Bylaws
of Local 138 (Plfs.Ex. 10). Swanson received a copy of this
document, as did every Union member. He received it when he first
became a member in 1977. It was provided to him by President
Georgopoulos and Vice President Robert Skeries. Section 15.05 of
the Constitution Bylaws of Local 138 provides as follows:
Sec. 15.05 VOTING ON CONTRACT RATIFICATION AND
STRIKE AUTHORIZATION. Contract ratification and
strike authorization shall be made at meetings called
specifically for those purposes and shall include
only members covered by the contract unless the
Executive Board shall determine that the matter is of
such importance as to be submitted to the entire
Swanson did not request that the Union arbitrate this matter.
He stated "how are we going to go against them." In addition,
Swanson received a copy of a letter from Vice President Skeries
"stating everything was all right." This letter (Plfs.Ex. 4),
addressed to Steven Glassman, Esq., counsel for White Rose,
apparently contained a misrepresentation as to the content of the
Local 138 bylaws. It stated, in pertinent part, the following:
This will further advise you that it is the
position of Local 138 that the Settlement Agreement
and amendment thereto were concluded in compliance
with the Union's By-Laws and are binding on
Local 138 and all former White Rose employees who
were represented by Local 138.
To the contrary, the Court finds that the Amendment was not
"concluded" in compliance with the Union's Bylaws, which, in
Section 15.05, provide that "contract ratification . . . shall be
made at meetings called specifically for those purposes."
As a lay person, Swanson was permitted to voice his lay opinion
in answer to the question as to the basis for his lawsuit.
Now what did the union do wrong?
THE WITNESS: First they made an agreement to reduce
the money we were going to get. And they didn't even
tell us about it.
I am not a tax lawyer, but they got to make some
kind of bad moves or tax violations. And they
proceeded to deal with White Rose, Local 138, to
conceal this whole thing from the rank and file.
Q Mr. Swanson, do you believe that local had the
authority to bind its members to the amendment?
Q Why not?
A Because on the platform that Georgeopoulos (sic)
and Skerries (sic) ran, they promised us they
wouldn't do like the old union delegates did in the
past. They were ripping us off anyway, contracts,
any kind of amendments, anything to do with money,
it had to be strictly voted on by the rank and
file, or it didn't pass.
Q Mr. Georgeopoulos (sic) told you that while he was
campaigning for the presidency?
A Yes. I ran around and — with John Georgeopoulos
(sic) when he was campaigning.
Q Mr. Swanson, please tell the Court what in your
opinion you believed White Rose did wrong?
A They did the same thing, plus they were able to
pocket 194 million — no, $194,000 and put it in
their own pocket, and did the same thing. They did
this so we wouldn't know about it.
Tr. at 78-79.
Swanson admitted that when he received his check, even though
he could not know the exact amount he was entitled to, he knew it
was "short" and "they doubled up on my taxes." Also, he was "kind
of mad at everybody" including White Rose because he lost his job
with the company after 14 years of employment. In addition,
Swanson did not remember anything that Georgopoulos or Skeries
did to discourage him from asking the Union to arbitrate this
matter. Further, Swanson would not have expected White Rose to
communicate directly with him with regard to this situation.
Jerold E. Glassman, is an equity and managing partner in the
law firm of Grotta, Glassman & Hoffman, the attorneys for White
Rose. On July 23, 1997, Glassman signed the Settlement Agreement
on behalf of White Rose, as its labor counsel. After the
execution of this Agreement, the proposed escrow agent declined
to undertake the administrative burden of distributing the money.
Thereafter, the Amendment was entered into. On January 3, 1993,
Glassman signed the Amendment, as attorney, on behalf of White
Rose; Georgopoulos signed on behalf of Local 138. The Amendment
was drafted by Jed L. Marcus, one of Glassman's associates. With
regard to the Amendment, Glassman testified that all of the
provisions of the original Settlement Agreement remained intact
and in place, except that the settlement sum "shall be reduced by
the amount of such [employer] contributions." However, Glassman
stated that, despite the fact that the Settlement Agreement
provided for ratification by the Union membership, the Amendment
did not require ratification. Glassman explained why, in his
opinion, the Amendment did not have to be ratified:
A The original agreement which was subject to the
ratification of the membership, all four corners of
the substantive part of that agreement were not
changed in the supplemental agreement. And it was
made clear in the introductionary (sic) paragraph,
and in that paragraph that you reported to, that
the only supplement to the agreement was how the
money would be distributed. The substance of the
agreement was not changed whatsoever. And it is a
practice in our field that you don't reratify, or
you don't have to ratify an agreement that has been
Q What field are you discussing?
A Labor law.
Q Were you familiar with the ratification provision
in the union's by-laws?
Q Isn't it a fact that the ratification in the
original settlement agreement was put in there
because of the ratification provision in the
A I have no idea.
Q You have no idea?
A It is a practice in our industry with respect to
this particular kind of agreement that we put into
the agreement that it is subject to the
ratification of the membership, so we recognize it
was ratified, that the union wanted it ratified. As
a matter of fact, I wanted it ratified because of
the circumstances existing at the time this
agreement was negotiated.
Q So, it is your position since the original
agreement was ratified the amendment had not had to
The supplemental agreement did not change one iota.
All the company was expending was $1,500,000.
Tr. at 106-07, 109.
The Court disagrees with this premise by Glassman. The
Amendment radically changed the subject matter of the Settlement
Agreement, namely, the amount of money the Union members would
receive. The Amendment reduced that amount by the sum of
$193,109.91, and, according to the Bylaws, this substantial
reduction would require ratification by the members. The
defendant's theory that even under the terms of the original
Settlement Agreement the escrow agent would have deducted this
amount, is misplaced. It is not readily apparent what deduction,
if any, the escrow agent would have made. However, with
reasonable certainty, before making such deductions, the escrow
agent would have given notice to the Union members. More
importantly, the Settlement Agreement did not provide for such
deductions by the employer. By its terms, White Rose had to pay
$1,500,000 net. To reduce that amount by almost 13 percent
would require ratification by the Union membership.
When he signed the Amendment, Glassman knew that the employees'
share would be reduced by the employer's "share for all federal,
state and local payroll taxes and F.I.C.A." He conceded that
there is no such provision in the original Settlement Agreement.
Not surprisingly, considering the result, when Glassman signed
the Amendment there was no suggestion made that someone tell the
"rank and file" that their share of the settlement funds would be
reduced by more than $193,000.
The original Settlement Agreement unequivocally stated that
White Rose "shall deposit the total sum of 1.5 million dollars,
with the escrow agent, which sum shall be distributed to the
aforementioned employees in accordance with the instructions
given to it by the President of Local 138" (emphasis added). In
addition, the Agreement provided that this money shall be
distributed only if the Local 138 members do not engage in
picketing and acts of violence against White Rose. The Settlement
Agreement also states, "[T]hese amounts have been escrowed and
shall be disbursed in accordance with the terms of paragraphs 1
and 2 herein" (emphasis added). The Settlement Agreement was
about deducting the employer's share of taxes from the sum to be
THE COURT: Mr. Glassman, in the original agreement,
Plaintiff's Exhibit 1, was there any mention of the
company's contribution share for taxes to be deducted
from the 1.5 million?
THE WITNESS: It wasn't the company's obligation at
that point. We were only writing the check to the
THE COURT: I didn't ask you that question. And I
move to strike and I do strike your entire answer as
My question to you is: In the original agreement,
Plaintiff's Exhibit 1, was there any mention that the
1.5 million would be reduced by the company's
contribution share for taxes?
THE WITNESS: No, no mention whatsoever.
THE COURT: Was it agreed upon at that time?
THE WITNESS: It wasn't in issue at that time.
THE COURT: Not mentioned?
THE WITNESS: Not mentioned.
Tr. at 116-17.
The Court also notes Glassman's testimony that "all four
corners of that agreement (the Settlement Agreement), the
substantive part of that agreement were not changed in the
supplemental agreement." It appears to the Court that if all
other provisions of the Settlement Agreement were to remain
intact, paragraph 14 which provided for ratification by "the rank
and file members," was not effected by the Amendment. Thus, the
Amendment, by its own terms, did not dispense with the need for
rank and file ratification as set forth in the Settlement
In the final phase of the plaintiffs' case, by stipulation,
four exhibits annexed to an affidavit by George Conklin, Vice
President of White Rose, were admitted in evidence (Plfs. Exs.
11, 12, 13 and 14). These exhibits set forth the amount of
deductions made by White Rose from the settlement sum of
$1,500,000, as follows:
Total Deductions: $193,109.91
B. The Defendant's Case
Richard Neff was the sole witness presented by the defendant.
He is the Executive Vice President, Chief Financial Officer and a
Director of the DiGiorgio Corporation. He related the violent
history of the Local 138 — White Rose strike. In this strike,
White Rose incurred a security expense in excess of six million
dollars, with total damages of more than ten million dollars. In
sum, Neff testified that White Rose allocated only the sum of
$1,500,000 for the settlement, and no additional money.
The defendant also offered an additional document in support of
its defense. Defendant's Exhibit S, is a transcript of the
argument of a motion before the Court on February 24, 1995, in
which Leonard N. Flamm, attorney for the plaintiffs, made
statements at pages 3 and 4. At that argument, Flamm explained to
the Court why Local 138 was not joined as a defendant in this
hybrid case. Flamm stated that "the union was a bit player" and
"the role the union played was not sufficiently central to the
bi-product result of this arbitration that we wanted to take a
full DFR case against them." The Court notes that this statement
by plaintiffs' counsel was made in response to the Court's
inquiry as to why Local 138 was not initially joined as a party
defendant. It was clearly not intended to exculpate Local 138
with respect to a violation of the duty of fair representation.
IV. DISCUSSION AND CONCLUSIONS
A. Duty of Fair Representation Claim
It is well established that a union has a duty to represent
fairly all union members
in its negotiations with the employer. Spellacy v. Airline
Pilots Ass'n-Int'l, 156 F.3d 120, 126 (2d Cir. 1998) (citing
Air Line Pilots Ass'n v. O'Neill, 499 U.S. 65, 74, 111 S.Ct.
1127, 1134, 113 L.Ed.2d 51 ). This duty is "implied under
the scheme of the National Labor Relations Act." White, 128
F.3d at 113. In the seminal case of DelCostello v. International
Brotherhood of Teamsters, supra, the Supreme Court explained the
basis for the duty of fair representation, as follows:
The duty of fair representation exists because it is
the policy of the National Labor Relations Act to
allow a single labor organization to represent
collectively the interests of all employees within a
unit, thereby depriving individuals in the unit of
the ability to bargain individually or to select a
minority union as their representative. In such a
system, if individual employees are not to be
deprived of all effective means of protecting their
own interests, it must be the duty of the
representative organization to "serve the interests
of all members without hostility or discrimination
toward any, to exercise its discretion with complete
good faith and honesty, and to avoid arbitrary
DelCostello, 462 U.S. at 164 n. 14, 103 S.Ct. at 2290 n. 14
(quoting Vaca v. Sipes, 386 U.S. 171
, 177, 87 S.Ct. 903,
909-10, 17 L.Ed.2d 842 ) (emphasis added).
To prevail on a claim for a breach of the duty of fair
representation, by the rule as promulgated by the Supreme Court,
in the Vaca-Hines test, "Two elements must be proven for a
breach of duty of fair representation claim: The union's conduct
must, first, have been `arbitrary, discriminatory or in bad
faith,' . . . and second, it must have `seriously undermine[d]
the arbitral process.' Hines v. Anchor Motor Freight, Inc.,
424 U.S. 554, 567 96 S.Ct. 1048, 1057-58, 47 L.Ed.2d 231 (1976)";
Barr v. United Parcel Service, 868 F.2d 36, 43 (2d Cir. 1989)
see also Sim v. New York Mailer's Union No. 6, 166 F.3d 465,
472 (2d Cir. 1999); Cruz v. Local Union No. 3, 34 F.3d 1148,
1152 (2d Cir. 1994).
Negligence or "tactical errors" on the part of the union are
insufficient to establish a breach of the duty of fair
representation. Barr, 868 F.2d at 43-44. In addition, "as long
as the union acts in good faith, the courts cannot intercede on
behalf of employees who may be prejudiced by rationally founded
decisions which operate to their particular disadvantage." Cook
v. Pan American World Airways, Inc., 771 F.2d 635, 645 (2d Cir.
1985), cert. denied, 474 U.S. 1109, 106 S.Ct. 895, 88 L.Ed.2d
929, (1986) (quoting Capobianco v. Brink's Inc., 543 F. Supp. 971
975 n. 3 [E.D.N.Y. 1982]). "It is well established that while
`a union may not arbitrarily ignore a meritorious grievance or
process it in a perfunctory fashion', an employee does not have
an absolute right to have his or her grievance taken to
arbitration." Vaca, 386 U.S. at 191, 87 S.Ct. at 917. "The
Supreme Court has long recognized that unions must retain wide
discretion to act in what they perceive to be their members' best
interests." Peterson v. Kennedy, 771 F.2d 1244, 1253 (9th Cir.
1985); see also Ford Motor Co. v. Huffman, 345 U.S. 330,
337-38, 73 S.Ct. 681, 685-86, 97 L.Ed. 1048, (1953).
The rule as to "fair representation" was clearly stated
recently by the Second Circuit in Sim v. New York Mailer's Union
Number 6, 166 F.3d at 472 (2d Cir. 1999):
A union breaches its duty of fair representation if
its actions "can fairly be characterized as so far
outside a wide range of reasonableness . . . that
[they are] wholly arbitrary, discriminatory, or in
bad faith." Spellacy, 156 F.3d at 126 (alterations
in original) (quoting O'Neill, 499 U.S. at 67, 111
S.Ct. 1127). Bad faith requires a showing of
fraudulent deceitful, or dishonest action. See Mock
v. T, G, & Y. Stores Co., 971 F.2d 522, 531 (10th
The Court agrees with witness Swanson and finds that the Local
violated their own Bylaws by entering into the Amendment and
reducing the payments to the Union members. The Court finds that
Georgopoulos and Skeries intentionally concealed this
unauthorized action from the Union members. The Court further
finds that these actions on the part of the Local 138 leadership
constituted conduct in bad faith which undermined the entire
transaction between the Union members and White Rose.
Bad faith is defined in Black's Law Dictionary Sixth Edition
as: "The opposite of `good faith,' generally implying or
involving actual or constructive fraud, or a design to mislead or
deceive another, or a neglect or refusal to fulfill some duty or
some contractual obligation, not prompted by an honest mistake as
to one's rights or duties, but by some interested or sinister
motive. Term `bad faith' is not simply bad judgment or
negligence, but rather it implies the conscious doing of a wrong
because of dishonest purpose or moral obliquity; it is different
from the negative idea of negligence in that it contemplates a
state of mind affirmatively operating with furtive design or ill
In the context of a breach of the duty of fair representation,
bad faith requires a showing of fraudulent, deceitful or
dishonest action see Sim, 166 F.3d at 472, or, when the union
acts with an improper intent, purpose or motive, See Mock v.
T.G. & Y. Stores Co., 971 F.2d 522, 531 (10th Cir. 1992); or
other intentionally misleading conduct. See e.g. Baxter v.
United Paperworkers Int'l Union, Local 7370, 140 F.3d 745, 747
(8th Cir. 1998). The Court finds that the actions of the Local
138 leaders by entering into the Amendment without ratification,
or notice to the Union members, or an opportunity to be heard,
constituted bad faith.
A "union's actions are arbitrary, only if, in light of the
factual and legal landscape at the time of the union's behavior
is so far outside a `wide range of reasonableness' . . . as to be
intentional," Air Line Pilots Ass'n v. O'Neill, 499 U.S. at 67,
111 S.Ct. at 1130 (1991) (quoting Ford Motor Co. v. Huffman,
345 U.S. 330, 338, 73 S.Ct. 681, 686, 97 L.Ed. 1048 ).
Also, arbitrary conduct may consist of intentional omissions:
"arbitrary conduct amounting to a breach is not limited to
intentional conduct by union officials but may include acts of
omission which, while not calculated to harm union members, `may
be so egregious, so far short of minimum standards of fairness to
the employee and so unrelated to legitimate union interests as to
be arbitrary.'" NLRB v. Local 282 Int'l Brotherhood of
Teamsters, 740 F.2d 141, 147 (2d Cir. 1984) (quoting Robesky v.
Qantas Empire Airways, Ltd., 573 F.2d 1082, 1090 [9th Cir.
In Cruz v. Local Union Number 3 of the International
Brotherhood of Electrical Workers, 34 F.3d 1148 (2d Cir. 1994),
the Second Circuit affirmed a verdict in favor of the union
members, whose complaints about non-seniority layoffs were
ignored by union officials. In this case, the union officials'
conduct was far more egregious — consisting of affirmative acts
of disloyalty, covered up by deceitful behavior.
Citing Kozera v. Westchester-Fairfield, 909 F.2d 48, 54 (2d
Cir. 1990), White Rose raises the issue of its reliance on the
apparent authority of the Union officers. In Kozera, the Second
Circuit stated that even though the agreement at issue had not
been ratified by the membership, "we conclude that,
notwithstanding the issue of the duty of fair representation and
disclosure owed by the Local Union's president and manager to the
membership, the Chapter could reasonably believe that officers of
the Local Union had authority pursuant to the arbitration award
to bind the union membership." In view of the collusive actions
by White Rose and the Union, the Court is unpersuaded by this
argument. Also, the Court is of the view that, given the
contractual requirement for prior ratification by the Union
members of the Settlement Agreement, White Rose and its counsel
should have known that the
Amendment to the same agreement, which markedly reduced the money
paid to the members, required similar action.
In Lewis v. Whelan, et al., 99 F.3d 542 (2d Cir. 1996), the
employer and the union concealed the terms of a modification of a
collective bargaining agreement. In Lewis, as in the instant
case, the employer also claimed that it was protected from
ignoring the original contract provision because it reasonably
relied, in good faith, on the union president's apparent
authority to enter into the modification. The District Court,
affirmed by the Second Circuit, rejected the employer's
contentions and held that since the employer and Union together
never revealed the existence of a contract modification but, in
fact, concealed it from the union's rank and file, this was
evidence of tortious intent. Because the employer actively
participated with the union president in concealing the
modification, the court held that the employer could not rely on
the president's apparent authority to act for the union.
99 F.3d 542 at 544. The employer and the union were found to be jointly
and severally liable for the contract violation and the union was
held to have engaged in a breach of the duty of fair
This concealment activity, present in Lewis and in this case,
precludes the use of the doctrine of apparent authority by White
Rose. See Kozera, supra. Because White Rose was a party to the
concealment, its argument that it reasonably believed the
President of Local 138 had apparent authority to enter into the
Amendment, is unpersuasive. Also, White Rose's efforts to
exculpate itself by obtaining a "release" letter from the Union
Vice President (Plfs.Ex. 4) is equally unavailing.
In its post-trial brief, White Rose also argues that the Union
failed to exhaust its administrative remedies as set forth in the
Collective Bargaining Agreement. The Supreme Court has stated
courts have discretion to decide whether to require
exhaustion of internal union procedures. In
exercising this discretion, at least three factors
should be relevant: first, whether union officials
are so hostile to the employee that he could not hope
to obtain a fair hearing on his claim; second,
whether the internal union appeals procedures would
be inadequate either to reactivate the employee's
grievance or to award him the full relief he seeks
under § 301; and third, whether exhaustion of
internal procedures would unreasonably delay the
employee's opportunity to obtain a judicial hearing
on the merits of his claim. If any of these factors
are found to exist, the court may properly excuse the
employee's failure to exhaust.
Clayton v. International Union, United Automobile Workers,
451 U.S. 679, 689, 101 S.Ct. 2088, 2095, 68 L.Ed.2d 538 (1981)
(citing in NLRB v. Marine Workers, 391 U.S. 418, 88 S.Ct. 1717,
20 L.Ed.2d 706 ) (emphasis added). The Court is of the view
that it would have been futile for the plaintiffs to have
requested Local 138 to arbitrate the validity of the Amendment to
the Settlement Agreement. The Union President signed the
Amendment and the Vice President confirmed it by letter. In fact,
Robert Skeries, the Vice President of Local 138 indicated in the
letter dated August 23, 1993 (Plfs.Ex. 4) that "it is the
position of Local No. 138 that the Settlement Agreement and
amendment thereto were concluded in compliance with the Union's
By-Laws and are binding on Local 138 and all former White Rose
employees who were represented by Local 138."
Based upon the alleged belief of the Local 138 hierarchy that
the amendment to the Settlement Agreement was proper without the
members ratification, with reasonable certainty, it would have
been futile for the union members to seek internal arbitration.
See Clayton v. International Union United Automobile Workers,
451 U.S. at 689, 101 S.Ct. at 2095 (declining "to impose a
universal exhaustion requirement
lest employees with meritorious § 301 claims be forced to exhaust
themselves and their resources by submitting their claims to
potentially lengthy internal union procedures that may not be
adequate to redress their underlying grievances."). Therefore, in
this case, the Court finds that the members were not required to
pursue internal grievance procedures or arbitration before
bringing this lawsuit.
In this case, the Court finds that the acts and conduct of
President Georgopoulos and Vice President Skeries in
surreptitiously entering into this Agreement to reduce the union
members share of the agreed Settlement amount, by the sum of
$193,109.91 was not only arbitrary but deceitful, and "seriously
undermined the arbitral process." In addition, the Court finds
that Local 138 acted arbitrarily and in bad faith when it failed
to challenge the settlement fund deduction when actually made.
White Rose points to Section 8.02 of the Bylaws as the
authority of the Executive Committee of Local 138, which includes
President Georgopoulos and Vice President Skeries, to enter into
the Amendment without the requirement of membership ratification.
The Court sees nothing in that section giving the President and
Vice President of the Union the authority to enter into a
contract which deprived its members of $193,109.91 of its monies,
without ratification by or even notice to the members.
Having reviewed the evidence in this case, the Court finds that
the plaintiffs proved, by a preponderance of the credible
evidence, that the actions of the President and Vice President of
Local 138 were arbitrary, deceitful and dishonest. These Union
officials knowingly and deliberately entered into the Amendment,
which reduced the Local 138 members' share of the settlement by
the sum of $193,109.91 from the $1,500,000 agreed upon in the
original Settlement Agreement, without the knowledge or consent
of the member beneficiaries. Not only did the Union officials
intentionally decline to submit this significant document for
ratification by the members, they wilfully failed to advise the
members of this major change, when they had the opportunity to do
so the day following the execution of the Amendment.
Finally, the Court finds that the plaintiffs established, by a
preponderance of the credible evidence, that there was a direct
casual connection between the Union's unlawful conduct and the
loss of the $193,109.91 wrongfully deducted from the agreed
settlement sum. See e.g., Ackley v. Western Conf. of Teamsters,
958 F.2d 1463, 1472 (9th Cir. 1992); Williams v. Romano Bros.
Beverage Co., 939 F.2d 505, 508 (7th Cir. 1991); cf. Spellacy
v. Airline Pilots Ass'n-Intl., 156 F.3d 120 (2d Cir. 1998).
Accordingly, judgment is granted in favor of the plaintiffs
against the defendant White Rose in the sum of $193,109.91
together with the prejudgment interest from September 23, 1993.
B. As to Attorneys' Fees
The general rule is that each party should pay their own legal
fees, regardless of the outcome of the lawsuit, unless authorized
by statutory or contractual provision; Alyeska Pipeline Serv.
Co. v. Wilderness Soc'y, 421 U.S. 240, 254-57, 95 S.Ct. 1612,
1620-21, 44 L.Ed.2d 141, (1975); Sierra Club v. United States
Army Corps of Engineers, 776 F.2d 383, 390 (2d Cir. 1985) cert.
denied, 475 U.S. 1084, 106 S.Ct. 1464, 89 L.Ed.2d 720 (1986).
In an action by union members against their union under the
statute involved in this case, attorney's fees may be awarded. As
stated in Cruz v. Local Union No. 3, supra at 1159;
This Court has held that a union member, in a suit
against the union brought pursuant to the
Labor-Management Reporting and Disclosure Act of
1959, . . . need not recover compensatory damages
from the union in order to be entitled to a fee
award. Rosario v.
Amalgamated Ladies' Garment Cutters' Union,
749 F.2d 1000, 1007 (2d Cir. 1984). The Rosario court
explained that awarding attorneys fees in such cases
is valid because the liability verdict recognized the
"deprivation of the plaintiffs' due process rights"
by the union, and thus was "of benefit to the union
and its membership regardless of the amount of
provable damage to the plaintiffs." Id. This
principle is certainly appropriate in duty of fair
representation suits, since it is apt to encourage
unions to more zealously represent employees'
interest. See Hall v. Cole, 412 U.S. 1, 8, 93 S.Ct.
1943, 1948, 36 L.Ed.2d 702 (1973) (attorneys fees
appropriate where the lawsuit vindicated valuable
rights of union membership, and will improve union
(Emphasis added) see also Lewis v. Whelan, 99 F.3d 542, 545 (2d
Accordingly, in this case, the Court awards reasonable
attorneys' fees to the prevailing plaintiffs. The attorneys for
the plaintiffs are directed to serve and file an affidavit and
corroborative documents in support of their request for
attorneys' fees on or before November 8, 1999. The attorneys for
the defendant may serve opposing papers on or before November 22,
1999. The plaintiffs' attorneys may serve a reply, if desired, on
or before November 29, 1999. This matter is set down for oral
argument and decision, if possible, on December 10, 1999 at 10:30