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INTERNATIONAL BHD. OF TEAMSTERS v. HOFFA

May 14, 1965

INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, etc., Plaintiff,
v.
James R. HOFFA et al., Defendants



The opinion of the court was delivered by: ROBINSON

The pending motions in this case present for resolution issues as to the eligibility of members of a labor organization to maintain a derivative action against its representatives for alleged breaches of fiduciary obligation, and the proper role of the organization and its counsel in the litigation.

This action is brought in the name and for the benefit of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, an unincorporated labor organization, *fn1" by six individuals, as its trustees ad litem, who claim membership in it through membership in good standing in one of its affiliated local unions. The individual defendants are alleged to be the officers of the International who collectively compose its General Executive Board, and its International Trustees charges with the duty of auditing its financial records and approving proper and duly authorized expenditures of its funds. The corporate defendants are alleged to be fidelity bond insurance companies which have indemnified the International against specified breaches of fiduciary duty by the individual defendants. *fn2"

 The complaint *fn3" charges that the officer defendants, as members of the General Executive Board, have authorized disbursements from its funds in violation of fiduciary obligations imposed upon them by the Labor-Management Reporting and Disclosure Act of 1959 *fn4" and the common law of the District of Columbia. *fn5" It is asserted specifically that these defendants authorized expenditures for the cost of defense of the International's General President in three criminal proceedings brought against him. It is alleged on belief that other funds have been spent for the defense of the General President in other proceedings, and for the defense of other officials of the International and of affiliated local unions as well. *fn6"

 The complaint seeks injunctive relief against further expenditures of this character, an accounting by the individual defendants for the funds so spent, and a judgment in the International's favor against the individual defendants and their sureties for the amount determined to be owed.

 I

 The complaint charges that prior to the commencement of this suit, fourteen members in good standing of a local affiliate, four of whom are trustees ad litem herein, made demand upon, and met refusal by, the International's General Executive Board to take necessary action to prevent funds from being spent for these purposes and to recover funds allegedly already so spent. On its face it appears that the two remaining trustees ad litem did not participate in this effort, and it is nowhere claimed that they made any other pre-litigation demand that the International itself seek remediation or that they were in any wise justified in failing to do so. The International, accordingly, has moved that they be dropped from the case.

 The Act imposes upon 'officers, agents, shop stewards, and other representatives of a labor organization' *fn7" fiduciary obligations inuring to the benefit of both the organization and its collective membership. It is 'in relation to such organization and its members as a group' that their 'positions of trust' are held and the concommitant obligations delineated by the Act are owed. *fn8" And, more specifically, it is these representatives who are commanded to hold the organization's 'money and property solely for the benefit of the organization and its members.' *fn9"

 For a violation of duty, the Act provides, a member may sue, but his standing to do so is conditioned upon satisfaction of stated requirements. 'The labor organization or its governing board or officers,' after breach of obligation is asserted, must 'refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization' *fn10" and, even then, it is 'such member' who 'may sue.' *fn11" This can hardly be taken as a suggestion that a member who did not make such request is nevertheless authorized to bring the action.

 Despite the danger that in particular applications literalness may tend to stifle true legislative intent, *fn12" it is clear that here the statutory language must be given its natural meaning. The Act was not 'intended by Congress to constitute an invitation to the courts to intervene at will in the internal affairs of unions'; *fn13" rather, there was an underlying 'general congressional policy to allow unions great latitude in resolving their own internal controversies.' *fn14" That policy is best subserved by close adherence to the words Congress chose to use in prescribing the conditions under which judicial resolution of such a controversy might occur. *fn15" Particularly is this so where, as here, a statute which confers a new right as a matter of federal law also utilizes restrictive language in specifying the remedy for its infringement. *fn16" It seems consistent with the general frame as well as the language of the section under investigation *fn17" to construe it, as other courts have done, to mean that when no member makes the stipulated request the statutory action cannot be brought at all, *fn18" and when such a request is made only the members making it can later sue. *fn19" Here two of the trustees ad litem did not join in the prior demand *fn20" upon the General Executive Board, and their failure to do so disables them from maintaining this suit to the extent that it is founded upon the provisions of the Act.

 Nor is standing to sue derived from the consideration that the action seeks also to enforce a common law remedy *fn21" -- one, it seems, not superseded by the Act. *fn22" In an appropriate derivative proceeding, of which the stockholders' derivative suit is the most conspicuous example, *fn23" one secondarily interested in the subject matter is enabled to sue to vindicate a right when the party primarily interested refuses to do so. The litigation, a creature of equity, is permitted because the suitor has no remedy at law to redress the refusal of him who holds the primary right to sue, *fn24" but a previous demand for action, unless adequately excused, is a condition precedent to its maintenance. *fn25" Here, notwithstanding the ease with which satisfaction of such conditions may now be pleaded, *fn26" the complaint not only fails to show that the two questioned trustees ad litem met the requirement of a demand, but discloses affirmatively that they did not participate in the only demand that is alleged. By the most liberal standards these two have failed to demonstrate enough to presently enable them to remain in this action. *fn27"

 The International's motion to drop these parties is procedurally proper *fn28" and its position thereon factually and legally sound. The motion will be granted.

 II

 The International has moved for an order dropping it as the plaintiff and permitting its intervention as a defendant. It tenders an answer which, among other defenses presented, would assert the claim that any expenditures involved in this case were made pursuant to an amendment of its constitution adopted at its 1961 convention and were authorized by its General Executive Board consistently therewith. *fn29"

 It is evident that the International is an indispensible party. *fn30" It, not the trustees ad litem, would reap the benefit of any forthcoming recovery, and its presence is equally necessary to protect the defendants, in that event, from subsequent suit. *fn31" The present parties do not dispute ...


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