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Behrmann v. Farrell

September 26, 2006


The opinion of the court was delivered by: John G. Koeltl, District Judge


The plaintiff, John Behrmann, a member of Local 1-2, Utility Workers Union of America ("Local 1-2"), a local labor union representing employees of utility companies in the New York City area, alleges that the leaders of Local 1-2 breached their fiduciary duties and wasted union assets by retaining former Local 1-2 officer Joseph Flaherty as a paid consultant to the union. The plaintiff has sued Harry Farrell, the President of Local 1-2, Flaherty, and others. The plaintiff's claims arise from allegations that Flaherty had mismanaged Local 1-2's assets during a term he served as the union's chief officer and in particular from an agreement Flaherty signed with the national union-Utility Workers Union of America ("UWUA")-in 1999, in consideration for the dismissal of claims related to his alleged financial transgressions. The plaintiff alleges that in that agreement Flaherty promised not to seek office or employment in Local 1-2 and not to participate in its internal affairs.

Specifically, the plaintiff alleges that the defendants' decision to retain Flaherty as a consultant "ignores" Flaherty's previous failure to safeguard Local 1-2's assets, which led the UWUA to oust Flaherty and impose a trusteeship over Local 1-2. The plaintiff further alleges that Local 1-2's hiring of Flaherty as a consultant violated the terms of the agreement Flaherty signed with the UWUA.

The plaintiff asserts two principal claims: (1) violation of § 501 of the Labor-Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C. § 501, based on the alleged breaches of fiduciary duties and wasting of union assets, and (2) violations of sections 722 and 723 of the New York State Labor Law, based on the same conduct.

Because § 501 of the LMRDA contains an unusual pleading provision requiring union members to seek leave of the court based upon a verified application and "good cause shown" before bringing an action against union officers or agents,*fn1 the plaintiff first sought permission to bring suit against the defendants by an ex parte application before Judge Barbara S. Jones. Judge Jones granted the plaintiff's ex parte motion by memo endorsement on January 4, 2006, allowing this action to proceed.

The defendants*fn2 have moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) and 29 U.S.C. § 501(b) for lack of subject matter jurisdiction. The defendants allege that the plaintiff wrongly obtained leave to bring this action because the plaintiff misled the court in his ex parte application and because the plaintiff cannot show "good cause" supporting his allegations of breach of fiduciary duties and wasting of union assets, as required by § 501(b).

For the reasons explained below, the Court grants the defendants' motion with respect to all defendants and dismisses the plaintiff's two causes of action.



The defendants move to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and 29 U.S.C. § 501(b). While some courts have treated motions to dismiss claims under 29 U.S.C. § 501(b) as challenges to the court's subject matter jurisdiction pursuant to Rule 12(b)(1), see, e.g., Commer v. McEntee, 145 F. Supp. 2d 333, 338--39 (S.D.N.Y. 2001), aff'd in relevant part, 34 Fed. Appx. 802 (2d Cir. 2002); Charles v. Am. Fed. of Musicians, 241 F. Supp. 595, 598 (S.D.N.Y. 1965), and other courts have dismissed § 501(b) claims pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, see, e.g., Mead v. Brotherhood of Railway, Airline & Steamship Clerks, 378 F. Supp. 774, 775 (W.D.N.Y. 1974), aff'd, 512 F.2d 398 (2d Cir. 1975), the prevalent practice has been to treat such motions as motions to deny leave or to vacate an order granting leave to bring suit for failure to meet the special requirements of 29 U.S.C. § 501(b). See Dinko v. Wall, 531 F.2d 68, 73 (2d Cir. 1976) (noting that the court can allow a complaint by ex parte motion and then "allow[] defendants to move, in effect, to vacate that order"); Shea v. McCarthy, No. 91 Civ. 0588, 1991 WL 41642, at *4 (S.D.N.Y. March 18, 1991) (following Dinko in declining to characterize a deficiency in meeting the requirements of 29 U.S.C. § 501(b) as a lack of subject matter jurisdiction), rev'd on other grounds, 953 F.2d 29 (2d Cir. 1992); see also Saunders v. Hankerson, 312 F. Supp. 2d 46, 64--65 (D.D.C. 2004) (construing the defendant's jurisdictional challenge as a motion to vacate the court's prior finding of "good cause" under 29 U.S.C. § 501(b)). Hence, the Court will construe the defendants' motion to dismiss as a motion to vacate Judge Jones's order granting leave to sue for failure to comply with the requirements of § 501(b) and thereby to dismiss the Complaint as unauthorized.*fn3

Because § 501(b) imposes the "unusual" requirement that a plaintiff must obtain leave upon good cause shown to proceed with a suit, Dinko, 531 F.2d at 74, a court may "look somewhat beyond the complaint" in deciding a motion to vacate an order granting leave to sue pursuant to § 501(b), id. (quoting Horner v. Ferron, 362 F.2d 224, 229 (9th Cir. 1966)); see also Moran v. Flaherty, No. 92 Civ. 3200, 1993 WL 60898, at *6 (S.D.N.Y. Feb. 26, 1993) ("In determining whether good cause exists for plaintiffs' claims, the Court may consider matters outside the complaint."). The Court of Appeals explained:

The factual showing to institute a suit should be no more demanding than that required to defend it against a motion for summary judgment; indeed, it should be somewhat less, since at the earlier stage a plaintiff has not yet had a chance for discovery and a defendant will still have the later protection of a summary judgment motion. Dinko, 532 F.2d at 75.


The following facts are undisputed unless otherwise noted.

The plaintiff Behrmann is a member in good standing of Local 1-2 (Verified Compl. ¶ 3) and an employee of Consolidated Edison Company of New York, Inc. (Mem. in Supp. of Ex Parte M. for Permission to Bring Suit ("Ex Parte Mem."), at 1).

Among the defendants, Harry Farrell is the current President of Local 1-2, John Duffy is the current Vice President, Lucia Giacometti is the Secretary-Treasurer, and Walter Eberle is the Chairman of the Executive Board. (V. Compl. ¶¶ 4, 6.) The President, Vice President, and Secretary-Treasurer are the three highest officers of Local 1-2, and the Executive Board is the governing body of the local union which acts on behalf of its membership between membership meetings. (V. Compl. ¶¶ 4, 6.) Farrell, Duffy, and Giacometti were elected to office in a special election on June 11, 2005 and took office on June 20, 2005. (V. Compl. ¶ 4.)

In a declaration attached to the defendants' Motion to Dismiss, Farrell alleges that his slate of officers campaigned in part on its proposal to "obtain the experience and assistance of Joseph Flaherty, who had been an officer of the Local for many years prior to 1999." (Decl. of Harry Farrell, Jan. 26, 2006, ¶¶ 12--13.) In his Ex Parte Memorandum, the plaintiff alleges that the consequences of the June 11, 2005 special election are under challenge in a different forum. (Ex Parte Mem. 4 n.1.) Farrell alleges that the plaintiff ran against Farrell for President and lost in the June 2005 election (Farrell Decl. ¶ 11); the plaintiff's pleading and other papers are silent on this point.

Joseph Flaherty is currently a paid consultant to Local 1-2 and was appointed by Farrell on or about July ...

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