The opinion of the court was delivered by: Haight, Senior District Judge.
MEMORANDUM OPINION AND ORDER
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.
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
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
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
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
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
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 ...