The opinion of the court was delivered by: PENN
JOHN GARRETT PENN, District Judge.
This matter comes before the Court on a motion of defendants Connerton and Bernstein to dismiss certain allegations of the complaint for failure to state a claim upon which relief can be granted.
"A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief". Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-102, 2 L. Ed. 2d 80 (1957); Phillips v. Bureau of Prisons, 192 U.S. App. D.C. 357, 591 F.2d 966, 968 (D.C.Cir.1979). Applying this stringent test to the allegations of the complaint, the Court grants the motion to dismiss in part, and denies the motion in part.
The facts which plaintiffs allege in support of their claims against Connerton and Bernstein are as follows.
In 1969, Messrs. Connerton and Bernstein undertook to represent members of the Mail Handlers Division of the Laborers International Union of North America ("LIUNA") in a class action suit (hereinafter "postal workers litigation") against the United States Postal Service ("USPS").
Although Connerton and Bernstein were full-time salaried counsel to LIUNA at the time (General Counsel and Associate General Counsel respectively), they represented their LIUNA clients in this litigation privately rather than as LIUNA counsel.
Plaintiffs further allege that Connerton and Bernstein made use of LIUNA publications to solicit LIUNA class members for the lawsuit.
The suit was settled without a trial, and as part of the settlement Connerton and Bernstein were awarded attorneys' fees out of the class' recovery fund. The attorneys' fees were awarded to Connerton and Bernstein in their private capacity rather than in their capacity as union counsel.
Plaintiffs allege that the aforementioned actions of Connerton and Bernstein constituted statutory and common law breach of fiduciary duty, conversion of union funds, and violations of several provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO").
Specifically, plaintiffs allege that: (1) by bringing the suit in their private rather than in their union capacity, and by retaining the attorneys' fees, Connerton and Bernstein breached their fiduciary duty to LIUNA in violation of Section 501(a) of the Labor-Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C. § 501(a) ("Section 501(a)"), and the common law of trusts of the District of Columbia ("common law");
(2) the use of LIUNA facilities and publications to solicit members for the postal workers litigation was an abuse of defendants' positions as LIUNA officers, employees, and attorneys in violation of Section 501(a) and the common law;
(3) the failure to turn over to the union the profits of the litigation (the attorneys' fees) was a conversion of union funds in violation of Section 501(c) of the LMRDA, 29 U.S.C. § 501(c) ("Section 501(c)"), and constituted racketeering activity in violation of Sections 1961(1) and 1962 of RICO, 18 U.S.C. §§ 1961(1), 1962;
and (4) the failure to turn over to the union the profits of the litigation injured plaintiffs' business and property in violation of 18 U.S.C. § 1964(c) by depleting the union's treasury.
Defendants Connerton and Bernstein seek to dismiss these claims on several grounds. With regard to the breach of fiduciary duty allegations,
defendants assert that: (1) the claims are barred by collateral estoppel;
(2) the allegations fail to state a claim which can be maintained by the union;
(3) as a matter of law, union attorneys may handle cases in their private capacities and receive attorneys' fees;
(4) the allegations are barred by the statute of limitations and laches;
and (5) Mr. Bernstein was not subject to Section 501 at the time of the postal workers litigation and, therefore, is not liable under that section.
Defendants assert that the Section 501(c) claim is insufficient as a matter of law because (1) it fails to allege adequately fraudulent intent,
and (2) the attorneys' fees never belonged to LIUNA and therefore were not "union funds" for purposes of Section 501(c).
With regard to the RICO claims, defendants assert that since the predicate act, the 501(c) violation, is deficient as a matter of law, the RICO claims must fail as well.
They further assert that the complaint fails to allege several necessary elements of a RICO claim, viz., that the union's affairs were conducted "through a pattern of racketeering";
that there was a specific "racketeering enterprise injury";
and that Connerton and Bernstein were connected to organized crime.
The Court will examine these allegations and defenses beginning with the Section 501(c) and RICO claims.
Plaintiffs allege that the failure of Connerton and Bernstein to turn over to the union the profits (attorneys' fees) from the postal workers litigation constituted a conversion of union funds in violation ...