a legitimate interest, in an institutional sense, not only in having a judicial determination as to the validity of this action but also in the opportunity to be heard before the issue is resolved. This opportunity will be afforded whenever the International is prepared to utilize it in a proper manner.
The attorney who signed the International's proposed answer in intervention and who would serve as its counsel,
however, has already entered his appearance and filed an answer for the International's General Secretary-Treasurer, a member of its General Executive Board and an individual defendant herein. His answer, like the International's admits, but claims justification for, past expenditure of International funds in the defense of certain International officers accused of criminal offenses. It further admits that as a member of the General Executive Board he authorized such expenditures. The trustees ad litem have moved for an order disqualifying his attorney from acting as counsel for the International, and striking its answer in intervention tendered by him, on the ground that such representation would involve a disabling conflict of interests.
As a matter of general common law in this jurisdiction, the 'funds of a union are not available to defend officers charged with wrongdoing which, if the charges were true, would be seriously detrimental to the union and its membership,'
and the same broad principle flows from the Act.
Simultaneous representation of the organization and an individual defendant charged with unauthorized disbursement of its funds would not only to that extent provide assistance of a forbidden type but would produce other detrimental consequences as well.
In Milone v. English,
where, unlike here, International officials were charged with fraud, and it was sought to require defendant officers to repay to the International the amount of its expenditures in defense of the suit, which included defense also of the officers, and to enjoin representation of the International and officer defendants by the same counsel, it was stated:
'The treasury of a union is not at the disposal of its officers to bear the costs of their defense against charges of fraudulently depriving the members of their rights as members. It is clear the complaint in this case charged individual officer defendants with conduct which was seriously detrimental to the interests of the International and to the rights of its members. And in deciding whether or not union funds may be used to defend such a suit the final outcome of the charges is not determinative; for if the charges have substance a sound resolution may be prevented by the very fact of dual representation during the process leading to a decision with respect to the charges. Different counsel would be required in this process. In other words, counsel who are chosen by and represent officers charged with the misconduct, and who also represent the union, are not able to guide the litigation in the best interest of the union because of the conflict in counsel's loyalties. In such a situation it would be incumbent upon counsel not to represent both the union and the officers.'
This Court has similarly forbidden the representation by organization counsel of defendant officers charged with delinquencies in their capacity as such.
Again analogizing the stockholders' derivative action, Murphy v. Washington American League Base Ball Club
established for this circuit the proposition that the corporation and an individual defendant cannot be represented by the same counsel, a conclusion reached elsewhere as well.
Where, as here, union officials are charged with breach of fiduciary duty, the organization is entitled to an evaluation and representation of its institutional interests by independent counsel, unencumbered by potentially conflicting obligations to any defendant officer.
The fact, pointed to by the International, that in Milone the charges were of fraudulent diversion whereas here they are not, does not remove this case from the mainstream of judicial opinion. As was stated in Murphy,
'True, the complaint in the instant case charges 'misconduct' and 'improper and wrongful acts,' rather than fraud or criminality. But we think the principle of the Milone decision may be found to apply here, requiring that the corporation and the individual defendants be separately represented.'
And, as Milone admonishes, 'if the charges have substance a sound resolution may be prevented by the very fact of dual representation during the process leading to a decision with respect to the charges.'
Nor is the International's contention that the similarity of the defenses offered by the organization and the individual defendants eliminates possible conflict of interest persuasive to any greater degree. Potential, no less than actual, conflict disqualifies counsel from serving in a double capacity, and the potentiality of conflict is clearly present here. Counsel representing an individual defendant must not only bend every effort to demonstrate that he did not violate his fiduciary obligations but must also assert any and all legitimate claims that, notwithstanding any violation adjudged, the organization is barred from attaching responsibility to him. But if -- despite the constitutional amendment and other defensive events -- breach of duty be found, counsel representing the International will be equally bound to seek from him restoration of the funds expended.
In that event the interests of the International and the officer would become seriously adverse, and the responsibilities of counsel irreconciliably conflicting, and, however forthright and objective counsel serving both may endeavor to be, the duality of the role would be untenable.
A motion to disqualify counsel is the appropriate remedy for dual representation and the onset of the litigation the proper time for its presentation.
The motion of the trustees ad litem for disqualification will be granted and the International's proposed answer in intervention rejected.
The International's motion that it be dropped as a plaintiff and permitted to intervene as a defendant will be denied without prejudice to renewal by independent counsel appearing in its behalf.
Counsel will present an appropriate order effectuating the Court's action consistently with this opinion.