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March 7, 2000


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


This case is before the Court on remand from the Court of Appeals. See Doyle v. Kamenkowitz, 114 F.3d 371 (2d Cir. 1997). At issue is the right of former officers of a labor union to recover from that union attorney's fees incurred by those former officers in successfully defending against claims for wrongdoing asserted against them by the union and its successor officers.

The union refuses to pay its former officers' attorney's fees. This Court held, in Doyle v. Turner, 886 F. Supp. 399 (S.D.N Y 1995), that § 501(b) of the Labor-Management Reporting Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. § 401 et seq., could be invoked by the former union officers to compel the union to pay their attorney's fees.

In a case of first impression in this Circuit, the Court of Appeals reasoned that while § 501(b) has been judicially construed "so as not to bar payment of successful defendants' legal expenses out of the union's coffers, . . . neither section 501 nor any general equitable principle compels a union to grant reimbursement." 114 F.3d at 375, 376. The Court of Appeals remanded the case to this Court for determination of whether an award of the defendant officers' attorney's fees may be based upon "other grounds or rationales," id. at 379.

The former union officers in question*fn1 now reassert their claims for union reimbursement of their attorneys fees. The union again resists any payment.


The facts and circumstances of this prolonged litigation are set forth in the decisions of the Court of Appeals and this Court previously cited, together with earlier opinions of this Court whose citations the Court of Appeals collected at 114 F.3d at 373 n. 1. Familiarity with all these opinions is assumed. For present purposes, it is sufficient to say that the defendants identified in footnote 1, all former officers of plaintiff Local 1199, Drug, Hospital and Health Care Employees Union, RWDSU, AFL-CIO (the "Union"), succeeded in obtaining judgments dismissing all the plaintiffs' claims of wrongdoing against them, and also succeeded on their counterclaims alleging that the Union was unlawfully withholding severance pay and vacation benefits from them. In all these successful litigation efforts, the former Union officers in question were represented by Gareth W. Stewart, Esq., and attorneys associated with him. Mr. Stewart's fees and expenses underlie the present claims against the Union for reimbursement.

In their initial fee application before this Court, the defendants in question (hereinafter "the defendants") asserted three bases for recovery: (1) § 501(b) of the LMRDA, as interpreted by caselaw; (2) the "bad faith" exception to the usual American Rule in respect of attorney's fees; and (3) provisions of New York law applicable to the reimbursement of corporate officers and directors who have been vindicated in litigation against them. See 886 F. Supp. at 400. I held that the defendants were entitled to claim reimbursement of attorney's fees from the Union "under the LMRDA and the cases construing it," and, having arrived at that conclusion, did not "reach the other asserted bases for payment." Id. at 402.

It appears from the Court of Appeals' opinion that on the appeal the defendants advanced three new grounds for affirming the fee award in their favor, not previously asserted before this Court: (1) the "common benefit" exception to the American Rule, on the theory that § 501(b) is a "trust statute;" (2) "promissory-equitable estoppel," because the Union promised in writing when the litigation started to pay the costs of a successful legal defense; and (3) the policy theory that vacating the award would "emasculate union democracy" by permitting a union to reimburse exonerated officers (or not) at the union's whim. See 114 F.3d at 374.


With all due respect, for this reader at least the Court of Appeals' opinion remanding the case contains two Delphic phrases.*fn2


The Court of Appeals said of its opinion that "our discussion is limited to analyzing whether § 501(b) requires reimbursement of vindicated officers' attorney's fees," 114 F.3d at 375, a question the Court answered in the negative. Thus the Court of Appeals did not address the other two bases for reimbursement defendants initially asserted before this Court (and which I did not reach): the "bad faith" exception to the American Rule; and New York law applicable to vindicated corporate officers and directors. See 886 F. Supp. at 400.

Similarly, the Court of Appeals did not address the three bases for reimbursement that defendants asserted for the first time in that Court: a "common benefit" analysis; a "promissory-equitable estoppel" theory founded on contract; and a "union democracy" analysis. See 114 F.3d at 374.

After discussing § 501(b) and cases interpreting that section of the LMRDA, the Court of Appeals stated its conclusion at 114 F.3d 379:

We therefore hold that union officials who successfully defend against claims under the LMRDA for breach of fiduciary duty may not — by invoking § 501(b) or general equitable principles — compel reimbursement from the union for the costs of their legal defense (including attorney's fees). (emphasis added)

The Court of Appeals did not define the phrase "general equitable principles." Thus the first Delphic obscurity relates to the phrase's limiting effect, if any, upon the alternative grounds for reimbursement that this Court is permitted to consider on remand.

Not surprisingly, during oral argument on remand counsel for the parties disagreed about the phrase's meaning and effect. Counsel for defendants expressed the view that "general equitable principles" should be read as limited "to concepts of equity arising directly out of and directly implicating § 501(b)," but not intended "to preclude other equitable principles." Transcript of Oral Argument (hereinafter "Tr.") at 10. Counsel for the Union argued that the effect of the phrase was to limit defendants' reimbursement theories "to a specific statute that empowers them or a specific common law right acknowledged by this Court of general application and there are none"; specifically, counsel asserted, the phrase foreclosed reimbursement based upon "common benefit and union democracy." Tr. 27-28.


The second Delphic uncertainty is found in the Court of Appeals' language directing remand, following immediately upon the passage just quoted. The Court said:

Accordingly, we vacate the district court's order awarding attorney's fees to the defendant officers in this case. Because the district court based its fee award solely on § 501(b), without considering other possible grounds, we remand this case to the district court to determine whether the defendant officers may be awarded attorney's fees (and have preserved the right to seek such fees) on other grounds or rationales, including those proffered in the district court (i.e., the "bad faith" exception to the "American Rule" and various provisions of New York state law) and those argued here on appeal (i.e., "common benefit" analysis, promissory estoppel, or preservation of union democracy).

114 F.3d at 379 (emphasis added).

By the emphasized phrase, the Court of Appeals appears to contemplate determination by this Court on remand of the question whether defendants "preserved the right to seek such fees" (i.e., fees based upon the several alternative grounds) in this Court. I specify "in this Court" because it would lie beyond a district court's competence to decide whether a particular claim or issue has been preserved for resolution at the appellate level.

But the Court of Appeals' opinion does not accompany this passing reference to preservation of defendants' rights with any analysis of the factors which result in preservation or abandonment of a particular ground for reimbursement of attorney's fees. That leaves the parties free to quarrel about the meaning of the phrase, and of course they do.

Counsel for defendants contended that "the preserve language means whether the defendants have abandoned or decided not to rely on any ground that was pressed in the Court of Appeals and any ground pressed here," Tr. 12, and further that none of the grounds initially raised in the District Court or in the Court of Appeals has been abandoned, so that all the grounds previously asserted in either forum have been preserved for reassertion on remand. Counsel for the Union argued that the "preserved" language limited defendants to the three grounds initially relied upon before the District Court (§ 501(b), New York State law, and the bad faith exception), that the Court of Appeals' opinion eliminated § 501(b), and counsel for defendants "has now waived" the other two grounds because "[h]e does not advocate in his present motion [on remand] either of those grounds," Tr. 21, leading to the conclusion that, by reason of one phrase or the other, not one of the alternative grounds or rationales defendants asserted in either forum survives to fight another day on remand. Counsel's interpretations come down to a choice between everything and nothing: a difference in reasoning characteristic of this bitterly contested litigation.


The proper interpretation of these phrases in the Court of Appeals' opinion poses threshold issues of exegesis with which I must deal on remand.

1. "General Equitable Principles"

The phrase "principles of equity" (which I take to have the same meaning as "general equitable principles") first appears in the Court of Appeals' opinion at 114 F.3d at 379. The Court was there quoting from this Court's initial opinion, which regarded Morrissey v. Segal, 526 F.2d 121 (2d Cir. 1975), as controlling authority on the meaning of § 501(b), and derived from Morrissey v. Segal "principles of equity" which obligated the Union at bar to pay the legal expenses of its vindicated officers. That portion of this Court's opinion is found at 886 F. Supp. at 401-02, where I said: "[T]he eight defendant officers who had won summary judgment were vindicated just as surely as by a judgment in their favor after trial; the Union was therefore required by principles of equity to pay [the defendant officers'] legal expenses. That I conceive to be the holding of Morrissey v. Segal." (internal quotation marks omitted).

The Court of Appeals concluded that this Court misconceived the holding of Morrissey v. Segal, which in that Court's view stated the more limited proposition that § 501(b) permitted, but did not mandate, union reimbursement of vindicated officers. The Court of Appeals reasoned that such permissive power, coupled with other provisions of § 501(b) requiring "a preliminary showing of merit. . . ., should provide sufficient financial protection of union officials against nuisance suits." 114 F.3d at 378 (citation and internal quotation marks omitted). The Court of Appeals then said:

The district court therefore erred in deducing from Morrissey that reimbursement of attorney's fees is required by equitable principles. See Doyle, 886 F. Supp. at 401-02.


This exegetic analysis makes it clear that the Court of Appeals has precluded defendants' reliance upon "general equitable principles" as a means of avoiding what the Court held to be the plain language of § 501(b). See 114 F.3d at 375 ("But we do not think that the plain language of the statute can support the creation of a right of reimbursement against a union that is unwilling to pay; substantially for that reason, we conclude that § 501(b) does not compel such payment or reimbursement."). Accordingly, by the phrase "general equitable principles," thus construed, the Court of Appeals' opinion bars any effort by defendants to derive or deduce from § 501(b) principles of equity entitling them to reimbursement of attorney's fees from the unwilling Union. Equitable principles which spring from sources entirely unrelated to § 501(b), if such there be, would on this analysis not be barred from consideration.

The effect of this construction of the phrase upon the defendants' several asserted grounds for reimbursement is considered infra.

2. "Preserved the Right to Seek"

The question of whether a litigant has preserved or abandoned a claim or issue arises most frequently in appellate practice, where the matter is governed by Fed. R.App.P.28, requiring, inter alia, an appellant's brief to contain all his contentions. See, e.g., Cruz v. Gomez, 202 F.3d 593 (2d Cir. 2000) ("When a litigant — including a pro se litigant — raises an issue before the district court but does not raise it on appeal, the issue is abandoned.") (202 F.3d at 596 fn. 3); LoSacco v. City of Middletown, 71 F.3d 88, 91 (2d Cir. 1995) ("Although LoSacco stridently opposed the motion, he did not raise this issue in his appellate brief. Consequently, he has abandoned it.").

In its present procedural posture, the case at bar presents the issue whether defendants have abandoned their right to assert any particular grounds for reimbursement of attorney's fees in the District Court on remand.

The Union's first contention is that defendants have abandoned the other two grounds asserted in their first fee application in 1994: the "bad faith" exception, and New York statutes pertaining to corporate officers and directors,*fn3 by not raising them again on the present application following remand. There is no substance to this contention. Even if defendants had not mentioned these grounds in their present briefs, they were asserted in their 1994 briefs and this Court did not reach them for decision; simple fairness requires that they be regarded as preserved for initial consideration by the District Court. But the fact is that defendants' present briefs rely on New York law (Main Brief at 31-32 and Reply Brief at 12-14) and reassert the "bad faith" exception to the American Rule (Main Brief at 45 and Reply Brief at 14-15).*fn4

There remains for consideration whether the three grounds defendants first asserted in the Court of Appeals are "preserved" for decision by the District Court on remand. To reiterate, those grounds are "common benefit," the Union's purported written promise to reimburse, and "union democracy."

The Union states correctly that defendants asserted none of these grounds in this Court in their initial fee application. The question is whether they should for that reason be regarded as precluded or abandoned on remand.*fn5

In the absence of a rule of procedure squarely addressing the question (and none is cited), I think that in these circumstances the District Court has some discretion in deciding whether or not to entertain a claim. It is a discretion akin to that enjoyed by the Court of Appeals, whose power to regard a claim as abandoned has been previously noted. In In re McLean Industries, Inc., 30 F.3d 385, 387 (2d Cir. 1994), cert. denied, 513 U.S. 1126, 115 S.Ct. 934, 130 L.Ed.2d 880 (1995), the Second Circuit said:

In this Circuit, we reserve considerable discretion to review purely legal questions not formally raised in the district court. Moreover, we have made plain that arguments made on appeal need not be identical to those made below if they involve only questions of law and additional findings of fact are not required. (citations and internal quotation marks omitted).

Applying those criteria to the case at bar, I regard the "common benefit" and "union democracy" grounds for reimbursement, briefed in the Court of Appeals but not previously asserted in this Court, as sufficiently preserved for my consideration on remand. They present only questions of law, and require no further findings of fact.*fn6

I reach a different conclusion with respect to the claim based upon the Union's purported written agreement to reimburse these defendants for their attorney's fees. That claim is based upon a copy of a document which defendants presented to the Court of Appeals, addressed to unnamed "officers" by an individual named "Jerry Tauber," whose position and authority do not appear, and bearing an incomplete date ("April 17, 198"). The document, even assuming that the proffered copy is the same as the original, cries aloud for explication by further fact finding. If defendants wished to rely upon such an agreement in demanding reimbursement of attorney's fees, they should have included it in their initial application in 1994. Defendants' contract theory of reimbursement is not timely asserted, does not invoke only a question of law, and would necessitate further factual inquiries. Exercising my discretion in accordance with the criteria enunciated in McLean Industries, I conclude that this rationale for reimbursement is not preserved for consideration by this Court on remand.


I turn now to the defendants' surviving grounds for reimbursement by the Union of ...

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