United States District Court for the District of Columbia
April 8, 2004.
NATHAN A. SAUNDERS, Plaintiff,
ESTER HANKERSON, et al. Defendants
The opinion of the court was delivered by: EMMET SULLIVAN, District Judge
This case arises from the alleged embezzlement of approximately five
million dollars in union funds by officials of the Washington Teachers'
Union ("WTU"). Plaintiff in Civil Action No. 02-2536, Nathan Saunders, is
a teacher of History and Government at Anacostia Senior Public High
School and a member in good standing of the WTU. Mr. Saunders commenced
this action on December 27, 2002, seeking compensatory and injunctive
relief from officials of both the WTU and the American Federation of
Teachers ("AFT"), the national union with which the WTU is affiliated.
The AFT, in turn, initiated Civil Action No. 03-79 against officials of
the WTU on January 17, 2003. Finally, a group of D.C. public school
teachers now seek certification as a class to bring a separate action
against officials of the WTU in Civil Action No. 03-261. The following motions are currently pending in Civil Action No.
02-2536: (1) plaintiff's Motion for Preliminary Injunction and
Appointment of an Independent Monitor; (2) defendant AFT's Motion to
Dismiss; (3) defendant WTU Executive Board's Motion to Dismiss; (4)
defendant WTU Trustees' Motion to Dismiss; and (5) renewed motion to
intervene as plaintiffs filed by Mary Baird Currie et al. Proceedings are
stayed as to all other defendants. There are currently no pending motions
in the related case of American Federation of Teachers v. Bullock et
al., 03-79. Pending motions in Civil Action 03-261 have been denied
without prejudice pending resolution of the issues before the Court in
the present case. Accordingly, this memorandum opinion focuses
exclusively on the motions pending in Saunders v. Hankerson, Civil Action
The Washington Teachers' Union ("WTU") is a five-thousand-member local
union representing public school teachers and professionals employed by
the Board of Education of the District of Columbia. First Am. Compl. ¶¶
29, 81. The WTU is affiliated with the American Federation of Teachers
("AFT"), a national union representing education professionals across the
country. Id. ¶ 82. The WTU, also known as Local #6 of the AFT, is
governed by the AFT Constitution and is expected to make "per capita"
dues payments of approximately $700,000 per annum to the AFT. Id. ¶ 72. Members of the WTU, including plaintiff, are also members of
the AFT. Id. ¶ 82.
Between 1995 and July 2002, Barbara Bullock served as the elected
President of the WTU. First Am. Compl. ¶¶ 1, 5, 106. Ms. Bullock was also
elected to the position of Vice President of the AFT, and she served in
that capacity from at least July 2000 to July 2002. Id. ¶¶ 15, 69. She has
since resigned from both her Presidency of the WTU and her post on the
AFT's Executive Council. Id. ¶¶ 15, 106-107. During the time frame
relevant to these actions, defendant Gwendolyn Hemphill served both as
Ms. Bullock's Special Assistant and as Legislative Representative for the
WTU. Id. ¶¶ 1, 4, 122-23. Defendant Leroy Holmes was employed as Ms.
Bullock's personal chauffeur. Id. ¶¶ 1, 4. Defendant James Baxter served
as the WTU's elected Treasurer from July 1994 until he took a leave of
absence as of September 2002. Id. ¶¶ 1, 17, 136.
Defendants Bullock, Baxter, Hemphill, and Holmes are alleged to have
participated in a scheme to defraud the WTU to the tune of $5 million
dollars, utilizing union funds to purchase luxury items for personal
use.*fn1 Ms. Hemphill's daughter and son-in-law, defendants Cheryl and
Michael Martin, along with Mr. Martin's business associate, defendant Errol Alderman, are also alleged to have
participated in and benefited from the scheme both as individuals and
through Expressions Unlimited, Michael Martin's business.*fn2 Id. ¶ 4.
Similarly, Ms. Bullock's sister, Gwendolyn Clark, is alleged to have
participated in and benefited from the scheme individually through a joint
bank account shared with Ms. Bullock, as well as through her business,
"Gwen's of Columbia." Id. Collectively, these defendants (Bullock,
Baxter, Hemphill, Holmes, C. Martin, M. Martin, Errol Alderman, Gwendolyn
Clark) are hereinafter referred to as "individual defendants." The
remaining organizational and institutional defendants*fn3 are alleged
either to have acted in concert with these defendants, or to have been
negligent in their responsibility to exercise oversight with respect to
the activities of the WTU and its officials. Id. ¶¶ 2, 3.
In April 2002, Ms. Bullock, without the approval of the WTU Executive
Board, and without complying with the requirements of the WTU bylaws, authorized the District of Columbia Public Schools
("DCPS") to deduct dues in the amount of $160.00 from each WTU member's
paycheck. Id. ¶ 31. As a result, $160.00 was deducted from plaintiff
Nathan Saunders' paycheck in July 2002. Id. ¶¶ 31, 33. Mr. Saunders
subsequently contacted the WTU to inquire as to why his dues deduction
was larger than usual, and was told that the DCPS was responsible for the
improper deduction. Id. ¶¶ 34-35. He was also told that a faxed request
for a refund to the WTU offices would result in a refund. Id. ¶¶ 34-35.
Although plaintiff complied with these instructions, he was not refunded
the amount of the deduction over and above his usual union dues until
January 21, 2003, almost one month after he commenced this action. Id.
¶ 35. The Complaint also alleges that several other union members lodged
complaints with the AFT in July 2002 regarding the unauthorized dues
deduction. Based in part on these complaints by WTU members, as well as
on a significant arrearage in per capita dues payments owed by the WTU to
the AFT, in September 2002 the AFT initiated an investigation into the
July 2002 dues deductions and the WTU's finances.
On October 23, 2002, "formal requests were made to Bullock, Baxter, and
Hemphill to repay the WTU all of the Union funds expended by or caused to
be expended by them for personal and otherwise unauthorized and/or
non-Union purposes." Id. ¶ 103. A second demand for payment was made on
December 23, 2002. Id. ¶ 104. None of the individual defendants complied with these demands.
Id. ¶ 106.
In November 2002, plaintiff participated in drafting a letter to the
WTU Executive Board and Board of Trustees requesting detailed information
regarding the WTU's financial status, as well as specific information
regarding the processes through which the unauthorized July 2002 dues
deduction took place, and by which teachers would be refunded excess
deductions. Id. ¶¶ 40-42. On November 21, 2002, plaintiff organized and
attended simultaneous demonstrations and pickets at the offices of the
WTU and the AFT, through which he demanded full disclosure of the facts
surrounding the unauthorized dues deduction and the resignation of Ms.
Bullock, as well as an immediate election to fill the positions of WTU
President, Vice President, and Treasurer. Id. ¶¶ 43-44, 46.
Significantly, the press release issued in conjunction with the
demonstrations demanded that the AFT account for its failure to detect
financial improprieties within the WTU. Id. ¶ 45. These actions did not
prompt refund of the improper dues deductions to WTU members.
At a WTU General Membership Meeting held in or about November or
December 2002, plaintiff introduced a motion to require repayment of all
improperly deducted funds to union members, as well as an accounting of
the local union's current financial status. Id. ¶¶ 47-52. Although those
motions were overwhelmingly approved by the general membership, the WTU Executive
failed to comply within the time frames set forth therein. Id.
On December 27, 2002, plaintiff, proceeding pro se, commenced Civil
Action 02-2356 and filed a motion for a temporary restraining order or
preliminary injunction, seeking immediate dissolution of the WTU Executive
Board and Board of Trustees, as well as the immediate appointment of an
independent monitor to (1) secure the WTU's remaining assets and
records, (2) provide full cooperation to law enforcement authorities in
ongoing criminal investigations into the activities of Bullock, Baxter,
Holmes and Hemphill, (3) complete audits of the WTU's financial records
as necessary, and (4) hold immediate elections for all offices. Id. ¶
53. Additionally, plaintiff asked the Court to (1) impose fines on each
of the responsible defendants, (2) mandate complete restitution, and (3)
order the AFT to repay all per capita payments made by the WTU to the AFT
during the period in which the embezzlement was taking place. At that
time, neither the WTU Executive nor the AFT had initiated any legal
action against any of the individual or institutional defendants.*fn4 Id. ¶
Upon defendant AFT's representations through counsel at the first
status hearing held in Civil Action 02-2356 that the AFT had taken over
the management of the WTU's assets and finances, was fully cooperating
with law enforcement agencies, and had dissolved the existing Executive
Board, plaintiff's motion for injunctive relief was withdrawn.*fn5
1/07/03 Status Hearing, Civil Action No. 02-2356.
The Court appointed counsel to represent plaintiff Saunders on January
21, 2003, and an Amended Complaint was filed with leave of the Court on
February 5, 2003. A renewed motion for preliminary injunction was filed
on March 3, 2003. II. PLAINTIFF'S CLAIMS
Plaintiff brings this suit as a derivative action on behalf of the WTU
pursuant to Fed.R.Civ.P. 23.1*fn6 and the Labor Management Reporting
and Disclosure Act ("LMRDA"), 29 U.S.C. § 401, 501(b) (2004).*fn7
Plaintiff also avails himself of the citizen-suit provision of the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), 18 U.S.C. § 1964 (c) (2004),*fn8 alleging
that the individual defendants formed an association-in-fact for the
purpose of defrauding the WTU, in violation of the federal
money-laundering statutes, 18 U.S.C. § 1956-57 and the LMRDA,
29 U.S.C. § 501(c). The First Amended Complaint charges all individual
defendants with civil conspiracy, violations of RICO, and a civil RICO
conspiracy. First Am. Compl. Counts XIV-XVI. Among the individual
defendants, Bullock, Baxter, and Hemphill, as well as James Goosby, as an
agent of the WTU, are also alleged to have breached fiduciary and
statutory duties to plaintiff and members of the WTU. Id. ¶¶ 101-102; Counts I, III.
Additionally, plaintiff has asserted common law claims of breach of
fiduciary duty, fraud, conversion, unjust enrichment, and aiding and
abetting, against various individual defendants. Id. Counts VIII-XII.
Finally, plaintiff charges defendant Independence Federal Savings Bank
("IFSB") with both common law negligence and aiding and abetting. Id.
Counts XVII-XVIII. Proceedings against individual defendants, as well as
against defendants Goosby and IFSB, are currently stayed in Civil Action
No. 02-2356 until resolution of pending motions to dismiss by the AFT,
WTU Executive Board, and WTU Board of Trustees.
With respect to the institutional defendants, plaintiff asserts claims
against the entire WTU Board of Directors and the WTU Board of Trustees,
on the grounds that those local officials who were not directly
participating in the embezzlement scheme nevertheless failed to fulfill
their fiduciary duty to oversee the assets of the WTU to the benefit of
the membership.*fn9 Id. ¶¶ 3, 85-87, 89-98, Count I. Specifically,
plaintiff contends that the WTU Executive Board and the Board of Trustees
failed to put in place necessary checks and balances to preclude
individual defendants Bullock, Baxter, Holmes and Hemphill from
converting union funds and filing false financial reports with the United States
Department of Labor. Plaintiff submits that these institutional
defendants failed to ensure that the WTU employed an accountant between
1996 and 2002, and failed to require that the members of the Executive
Council charged with handling the local's funds be bonded. Id. ¶¶ 87-88,
90-98, 109, 126, 138, 209, 210, 211, 215-217. Further, plaintiff alleges
that defendant Esther Hankerson, the WTU's General Vice President during
the relevant period, learned as early as 1997 of facts placing her on
notice of improper use of union funds but failed to act on this
knowledge.*fn10 Id. ¶¶ 3, 31.
Additionally, plaintiff charges the Board of Trustees with failing to
fulfill its duties under the WTU constitution and by-laws to "attest to
the accuracy of all bank accounts of Local #6 at the end of each fiscal
year," to "examine all financial records, receipts, expenditures,
disbursements, vouchers, bills and statements," and to prepare, in
consultation with the Treasurer, an annual budget and quarterly reports
to be presented to the Executive Board and the WTU membership. Id. ¶¶
91-97. Finally, plaintiff maintains that the AFT bears significant
responsibility for the individual defendants' fraudulent actions because
it failed to enforce provisions in the AFT Constitution requiring local
unions to submit biennial audit reports and annual financial reports and
to investigate WTU's delinquency in payment of per capita dues to the
national union.*fn11 Id. ¶¶ 70-80, 261. Accordingly, plaintiff brings
this suit on behalf of the WTU and its membership, pursuant to Section
501 of the LMRDA and Section 301 of the LMRA, against the AFT and its
Secretary-Treasurer, Edward J. McElroy, in his official capacity, for
breach of fiduciary duty and breach of contract. Id. ¶¶ 75-79, Counts II,
IV. Plaintiff also asserts common law breach of fiduciary duty and
negligence claims against the AFT. Id. Counts VI and VII.
In support of his breach of fiduciary duty and breach of contract
claims against the AFT, plaintiff points to provisions in the AFT
constitution ("Constitution") requiring union locals to submit an annual financial statement, including statements of assets
and liabilities, as well as of income and expenses, within five months of
the end of the local's fiscal year. Id. ¶ 62, 224. Plaintiff also relies
on a provision added to the Constitution in 1993, which requires local
unions to submit biennial audits to both their members and the AFT. Id.
¶ 63, 224. Plaintiff maintains that the AFT Executive Council has the
power to enforce its constitutional requirements by revoking the charter
of a local union, either for non-payment of per capita dues to the AFT or
based on a finding that the existence of the local is "detrimental to the
development of democracy in education." Id. ¶¶ 66-67. Alternatively, the
AFT may, by vote of its Executive Council, investigate a local union when
the local's conduct "fails to comply with the provisions of the AFT
constitution or when the local's conduct is not in harmony with the
principles of the AFT and tends to bring the AFT into disrepute." Id. ¶
68. Plaintiff further asserts that the AFT has assumed a duty to union
locals by holding itself out as a source of guidance and information with
respect to union local financial management through documents found on
its website. Id. ¶ 64.
In the First Amended Complaint, plaintiff seeks permanent injunctive
relief precluding defendants Bullock, Baxter, Hemphill, Holmes,
Hankerson, as well as the members of both the Executive Board and Board
of Trustees, from holding any elected or appointed office in the WTU for the next ten years. He further
claims, on behalf of the WTU, compensatory damages against individual
defendants, including defendant Goosby, the WTU Board of Trustees, and
the WTU Executive Board for all sums wrongfully converted from the WTU
treasury between 1995 and 2002, as well as compensatory damages against
IFSB for negligent payment of checks drawn on the WTU account.
Additionally, plaintiff asks this Court to award treble punitive damages
against individual defendants pursuant to 18 U.S.C. § 1964(c) of RICO.
Finally, plaintiff requests, on behalf of the WTU, that the AFT be
required to make restitution of all sums paid as dues by the WTU to the
AFT from 1995 to 2002.
In his pending motion for preliminary injunctive relief, as well as in
his prayer for permanent relief, plaintiff also asks the Court, pursuant
to Fed.R.Civ.P. 53, to appoint, at AFT's expense, an independent
monitor with no prior affiliation with the AFT or WTU to oversee the
actions of the AFT Administrator selected by the national union to manage
the day to day activities of the WTU. Such an independent monitor would
report to the Court and the WTU membership with respect to whether the
AFT's actions are in the best interests of the WTU.
Finally, plaintiff currently seeks temporary injunctive relief barring
the AFT from (1) settling any claims or cases relating to the WTU; (2)
employing former Officers or Executive Board Members of the WTU; (3) making any expenditures outside the WTU's
ordinary course of business, including payment of delinquent per capita
dues from the WTU to the AFT; or (4) altering the WTU's constitution.
III. MOTIONS TO INTERVENE
A number of individuals, associations, and organizations have sought to
intervene or serve as amid curiae in this case.
A group of D.C. Public School teachers, hereinafter referred to as Mary
Baird Currie, et al, filed a motion styled as one to intervene and for
appointment of counsel on January 27, 2003. The Court construed the motion
as one for leave to serve as amicus curiae, and subsequently granted it
on March 10, 2003. 3/10/03 Status Conference, Civil Action No. 02-2356.
Marie Baird Currie, et al renewed their motion to intervene as plaintiffs
and for appointment of counsel on April 18, 2003.
Upon careful consideration of the motion, Fed.R.Civ.P. 19, and the
controlling case law, and for the reasons given in open court during the
status hearing held in this case on March 10, 2003, the renewed motion to
intervene is hereby DENIED WITHOUT PREJUDICE. It appears to the Court
that putative intervenors' interests are adequately represented by
plaintiff Nathan Saunders, and nothing in the renewed motion has persuaded
it otherwise. However, Marie Baird Currie, et al remain welcome to continue to participate in the case as amicus curiae, at their own
Another group of B.C. Public School teachers, hereinafter referenced as
Cynthia Greene et al, also sought the Court's permission to intervene in
this action. For essentially the same reasons, their motion to intervene
was construed as a request to serve as amicus curiae and granted at the
March 10, 2003 status hearing. Messrs. Roland Ashby-Rier and Alfred
Hubbard*fn12 made a submission to this Court as amicus curiae on January
17, 2003 and asked the Court appoint counsel to represent their interests
in this action. While the Court welcomes their submissions as amid, it
stated at the January 21, 2003 status hearing and reiterated at the March
10, 2003 status hearing that it is unable to provide for appointment of
counsel to represent them.
Finally, the American Federation of Labor Congress of Industrial
Organizations ("AFL-CIO"), the largest national confederation of labor
organizations in the United States, filed an unopposed motion to serve as
amicus curiae, which was granted on April 29, 2003. 4/29/03 Order, Civil
Action No. 02-2356. I. AFT MOTION TO DISMISS
A. Unions as defendants to Section 501(b) action
As an initial matter, defendant AFT correctly asserts that claims made
pursuant to Section 501 of the LMRDA cannot be brought against labor
organizations such as the AFT, but rather can be made only against
officers acting in their official capacities. Section 501 imposes
liability only on individual union officers for breach of fiduciary
obligations, and does not impose any duties on labor organizations as
such. Accordingly, plaintiff's Section 501(b) claims against the AFT in
Count II of the First Amended Complaint must be DISMISSED.
The language of Section 501(a) refers to the duties of officers,
agents, shop stewards, and other representatives of a labor organization
and "each such person," thereby supporting the proposition that the
statute is intended to reach only natural persons. 29 U.S.C. § 501 (a)
(2004). Additionally, the Second, Third, and Eighth Circuits have
expressly held that suits under the LMRDA can be brought only against
union officials. See, e.g., Sabolsky v. Budzanoski, 457 F.2d 1245, 1249
(3d Cir. 1972) (holding that local and international unions could not
properly be joined as defendants in an action brought pursuant to Section
501(b)); Pignotti v. Local #3 Sheet Metal Workers Int'l Ass'n,
477 F.2d 825, 832 (8th Cir. 1973) ("all parties agree that neither the
International Association nor Local No. 3 have violated § 501 as that section imposes liability only on the individual
union officials."). As was recently stated by the United States District
Court for the Southern District of New York,
There is simply nothing in the statute that permits
Section 501 claims against a labor organization for
alleged violations of individual officers and/or
representatives. The courts of appeal that have
addressed this issue have repeatedly held that an
action against a labor organization under Section
501(b) is not cognizable as a matter of law."
Corrmer v. McEntee, 145 F. Supp.2d 333, 339-40 (S.D.N.Y. 2001).
Indeed, plaintiff does not dispute that Section 501 does not provide
for relief against a union as a separate legal entity, conceding that its
provisions reach only individual union officers. Pl.'s Opp'n at 19.
Nevertheless, he asserts a theory, admittedly novel, that an
international union can be sued under Section 501 provided that it is
found to have acted as the agent of a local union. Id.
In support of this theory, plaintiff cites to case law from the U.S.
Supreme Court holding that unions are held to the same standards of
common law agency as corporations. United Mine Workers v. Coronado
Coal Co., 259 U.S. 344, 395 (1922). Under plaintiff's theory, the
AFT is a proper defendant to plaintiff's LMRDA claims because WTU's
decision to affiliate with the AFT is equivalent under the law of agency
to authorizing the AFT to act as the WTU's agent within the parameters
set forth in the AFT Constitution. Pl.'s AFT Opp'n at 16-19. Plaintiff
further opines that WTU members exercise control over the AFT by introducing and passing
resolutions at annual AFT conventions, and by maintaining the right to
withdraw affiliation from the AFT. Id. at 17. Under plaintiff's theory,
it then follows that if the AFT failed to satisfactorily perform the
fiduciary duties it assumed when it became the WTU's agent, the AFT is a
proper defendant to plaintiff's LMRDA claim.
The AFT agrees that agency rules apply in the labor context but argues
that plaintiff's novel theory fails to address the weight of authority
holding that a federal court does not have jurisdiction to entertain a
Section 501(b) suit against a "labor organization." AFT Reply at 2. Both
parties proceed to argue at length about whether a national union can be
held liable for the actions of a local affiliate under the related but
distinct theory that the local is an agent of the national. It appears
that issue has been squarely resolved by the U.S. Supreme Court's opinion
in Carbon Fuel v. United Mine Workers of America, which states that an
international union cannot be held liable for the acts of its local under
an agency theory absent evidence that the international "instigated,
supported, ratified, or encouraged the local's activity, or that the
local acted pursuant to agreement with the international." Carbon Fuel
Co. v. United Mine Workers of Am., 444 U.S. 212, 218 (1979). The Carbon
Fuel Co. Court expressly relied on Congress' intent when enacting the
Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, to limit the
liability of international unions for the actions of their locals:
In the face of Congress' clear statement of the limits
of an international union's legal responsibility for
the acts of one of its local unions, it would be
anomalous to hold that an international is nonetheless
liable for its failure to take certain steps in
response to actions of the local. Such a rule would
pierce the shield that Congress took such care to
Id. at 217-18. However, the authority narrowly defining the circumstances
under which a national union can be held liable under the theory that a
local is acting as the agent of an international union is of limited
utility in addressing the theory advanced by plaintiff; namely, that the
AFT was acting as the agent of a local union.
Even assuming, arguendo, that plaintiff's maintain a viable theory that
a national union could be held liable under the circumstances presented
by this case as an agent of the local union, plaintiff's allegations are
insufficient to establish the requisite agency relationship. There is
nothing in the First Amended Complaint suggesting that the WTU exercises
any greater control over the actions of the AFT than does any other local
union through the national union's internal democratic structures, or
that any specific agreement existed wherein the AFT agreed to act as the
WTU's agent under specific circumstances, such as the negotiation of a
collective bargaining agreement. Therefore, plaintiff's LMRDA claims against the AFT as a
legal entity must fail as a matter of law.
Accordingly, Count II of plaintiff's First Amended Complaint is hereby
DISMISSED as to defendant AFT. However, the authority discussed above
does not bar the remainder of plaintiff's claims against AFT
Secretary-Treasurer McElroy, acting in his official capacity, as well as
against officers of the WTU Executive Board and Board of Trustees in
their official capacities.
B. Subject Matter Jurisdiction
The AFT next contends that this Court lacks subject matter jurisdiction
to adjudicate plaintiff's claims against remaining defendants because
plaintiff has failed to satisfy the jurisdictional pre-requisites for
bringing claims pursuant to the LMRDA*fn13 and the LMRA.*fn14
1. LMRDA claim
Section 501(a) of the LMRDA defines the fiduciary duty of officers,
agents and other representatives of labor organizations, requiring each
person to hold union money or property for the sole benefit of the union
and its members. 29 U.S.C. § 501 (a) (2004). In the event that the
union fails to seek appropriate relief against a person alleged to have
violated this fiduciary duty, Section 501(b) permits any individual member of the
union to sue that person for the benefit of the organization.
29 U.S.C. § 501 (b); Yager v. Carey, 910 F. Supp. 704, 726 (D.D.C.
Before an action may be brought pursuant to Section 501(b), a plaintiff
must: (1) demonstrate that he has requested that the union or its
governing officers bring legal action, recover damages, secure an
accounting, or obtain other appropriate relief; (2) that upon request,
the union refused or failed to do so within a reasonable time; and (3)
obtain leave of the court to bring an action with a showing of good
cause. 29 U.S.C. § 501(b); see also 0'Connor v. Freyman, Civ. A. No.
85-0566, 1985 WL 121 at *1 (D.D.C. May 31, 1985).
a. Demand and Refusal
"To file an action under [Section 501] the plaintiff must first request
action by the union and be refused . . ." Bocchiere v. Biller, Civ. A.
No. 87-1804, 1988 WL 163032 at *2 (D.D.C. April 29, 1988), vacated on
other grounds, 1990 WL 67713 (D.C. Cir. May 16, 1990). "[T]he provision
of the statute requiring [a] demand to sue is mandatory and . . . its
requirements cannot be met by anything short of an actual request. An
allegation of the futility of such a request will not suffice." 0'Connor
v. Freyman, 1985 WL 121 at *2; see also Flaherty v. Warehousemen, Garage
& Serv. Station Employees' Local Union No. 334, 574 F.2d 484, 487 (9th Cir. 1978) (same); Yager v. Carey, 910 F. Supp. at
727 ("some form of request that the union or a governing member of the
union bring the action is a requirement that cannot be waived as
Defendant AFT argues that plaintiff failed to make a specific and
unequivocal demand that the AFT file suit against individual defendants.
The AFT overstates the threshold presented by this jurisdictional
It is important to note that the demand required by Section 501(b) is
not necessarily one to pursue legal action; rather, and this
jurisdictional prerequisite may be satisfied by a demand for an
accounting or "other appropriate relief." See 29 U.S.C. § 501 ("when
. . . the labor organization or its governing board or officers 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, such member may sue . . . or
secure an accounting or other appropriate relief for the benefit of the
labor organization.")(emphasis added)). The AFT's arguments fail to take
into account that the demand requirement may be satisfied by a request
for "other appropriate relief." See AFT Mot. at 15, AFT Reply at 14
(submitting that a union member must "request that the union or its governing officers bring legal action or secure an
accounting [for a violation of Section 501(a)].")
Plaintiff alleges in his amended complaint that he took a number of
actions, which, either individually or in the aggregate, are sufficient
to satisfy the demand element of Section 501(b)'s jurisdictional
prerequisite as to the WTU Executive Board, the WTU Board of Trustees,
and the AFT:
(1) In July 2002, plaintiff telephoned the WTU to
inquire as to the basis for the deduction of $160
in union dues from his paycheck and requested a
refund. As instructed by the person who answered
his call, he subsequently faxed a written request
for a refund. First Am. Compl. ¶¶ 35-36;
(2) Having failed to receive a refund or a
satisfactory reason for not receiving one, four
months later, in November 2002, plaintiff
participated in drafting a letter to the WTU,
defendant Hankerson, who at the time was serving
as the interim president of the local, the WTU
Executive Board, and the WTU Board of Trustees.
This letter not only reiterated plaintiff's demand
for a refund of the improper deduction, but also
inquired as to why the deduction was made and why
it was not immediately corrected when the error
was reported. First Am. Compl. ¶¶ 40-42;
(3) On November 21, 2002, plaintiff organized and
participated in a protest outside the AFT
offices. A press release was issued in conjunction
with the demonstration, demanding full disclosure
of the circumstances leading up to the improper
dues deduction. The press release also demanded
that the positions of WTU President, Vice
President, and Treasurer be filled immediately
through an election and stated that "the American
Federation of Teachers must respond to the entire
membership as to how the parent body, which has
ultimate oversight responsibility, could allow
such alleged improprieties to exist and yet still
expect dues paying members to continue to trust
their leadership." First Am. Compl. ¶¶ 43-46; (4) At a WTU membership meeting that took place in or
about November or December 2002, plaintiff
proposed and voted in favor of a motion demanding
an immediate refund of the improper dues deduction
and requesting, by no later than December 13,
2002, a written statement from the WTU Executive
Board stating when the refund would be mailed and
describing the process by which refunds were
allocated. First Am. Compl. ¶¶ 47-52.
The AFT responds that all of these actions amount to, at most, a request
for repayment of the improper deduction and a request for more
information regarding how the improper deduction came about. It further
notes that both of these demands have now been satisfied: WTU members
were reimbursed the full amount of the improper deduction, and the
results of the AFT's forensic audit of the WTU's finances were
disseminated by the AFT after this action was commenced. AFT Reply at 12
n. 9. It further maintains that none of plaintiff's actions were specific
enough to amount to a request that either the WTU or the AFT bring suit
pursuant to Section 501 against any party. Id. Finally, defendants submit
that plaintiff does not allege that he, or any other member of the WTU,
made any complaint to the WTU Executive Board, the Board of Trustees, or
the AFT specifically referencing the WTU's failure to generate annual
financial statements or perform biennial audits as required by the AFT
constitution, which is ultimately the basis of the breach of fiduciary
duty claims plaintiff now asserts. Neither party cites to controlling authority addressing the question of
whether the actions described by plaintiff are sufficient to meet the
"demand" element of Section 501(b)'s jurisdictional prerequisites.
Plaintiff cites persuasive authority from this District in support of his
contention that he need only to have asked both the WTU and the AFT to
take action, and these two entities need only have failed to take some
action to address the concerns he raised, in order to meet the
jurisdictional requirements of Section 501(b). See Pl.'s AFT Opp'n at
19-22. For instance, in Trine Council v. Biller, the United States
District Court for the District of Columbia found that a letter to a
national union president stating "[w]e of the Providence (Rhode Island)
local protest the purchase of a new building until after the National
Convention (and) until we know exactly how much it will cost and what our
dues will be" was sufficient to satisfy the jurisdictional prerequisites
of Section 501(b). Trine Council v. Biller, Civ. A. No. 82-1232, 1982 WL
2038 at *2 (D.D.C. May 26, 1982). Although the court in Cefalo v.
Moffett did not outline precisely how it did so, it found that "both
plaintiffs complained of the wrongs which they now assert in this
litigation to the Union and the Union took no action to redress those
wrongs," and held this action to be sufficient to meet Section 501(b)'s
jurisdictional requirements. Cefalo v. Moffett, 333 F. Supp. 1283, 1285
(D.D.C. 1971). The Second Circuit has held that a detailed letter alleging
constitutional violations at a meeting of a union local, demanding that a
vote be declared void, and requesting a "complete accounting" of union
expenditures, as well as a "true and accurate accounting" of all benefits
paid to union officers and staff, is sufficient to meet Section 501(b)'s
demand requirement. Dinko v. Wall, 531 F.2d 68
, 70-73 & n.2 (2d Cir.
1976). Similarly, the Third Circuit held in Sabolsky v. Budzanoski that a
letter to the United Mine Workers of America's International President,
which did not contain a request to bring suit but did seek internal
relief, represented a sincere effort to obtain internal compliance with
the International's constitution. Sabolsky, 457 F.2d at 1252; see also
Woods v. Local #12 Sheet Metal Workers Int'l Assoc., 438 F. Supp. 578,
580 (W.D. Pa. 1977) ("charge letter" filed pursuant to internal union
procedure, followed by union finding of "not guilty" and appeal to the
general President of International Union as to which President had made
no finding as of date of suit, was sufficient to satisfy Section 501(b)
jurisdictional prerequisite); but see Flaherty v. Warehousemen, Garage
& Serv. Station Employees' Local Union No. 334, 574 F.2d at 487 (finding
plaintiff's oral and written demands that it be provided with financial
records of the local insufficient to justify grant of leave to file
Section 501(b) action); Cassidy v. Horan, 405 F.2d 230
, 232 (2d Cir. 1968) (demand that officers return certain sums of money did not
satisfy statutory demand to sue).
There are several competing policy considerations underlying resolution
of the question of whether plaintiff's actions are sufficient to meet the
demand requirement enshrined in Section 501(b). First, "[b]ecause section
501(b) extends the jurisdiction of the federal courts, it is strictly
construed." Flaherty, 574 F.2d at 487; 0'Connor v. Freyman, 1985 WL 121
at *1. Moreover, Congress has expressed a clear preference for internal
resolution of union matters. See, e.g., Wirtz v. Local 153 Glass Bottle
Blowers Ass'n of United States and Canada, 389 U.S. 463, 470-71 n. 10
(1968). Furthermore, "Section 501(b) was designed to prevent the filing
of harassing and vexatious suits brought without merit or good faith
against union officials." Sabolsky, 457 F.2d at 1253. The Court is
mindful of these considerations.
Nevertheless, the express purpose of Section 501 is to enforce the
fiduciary obligations of union officers to union members, and the statute
is clearly designed to protect union members from precisely the type of
conduct at issue here. See O'Connor v. Freyman, Civ. A. No. 85-0566, 1985
WL 121 at * 2, 4. Section 501 should therefore be read and applied
accordingly. Plaintiff took the actions in question pro se and in the
good faith belief that they represented sufficient demands on both the
WTU and the AFT. A finding that they are sufficient to constitute a demand for "appropriate relief" would be consistent with the purposes
of the Act. See id. at * 2; Dinko, 531 F.2d at 73.
Ultimately, the Court is persuaded that the following language
contained in the press release plaintiff participated in drafting,
issuing, and distributing in conjunction with the November 2002
demonstration outside the AFT's offices is sufficient to constitute a
demand for "appropriate relief" with respect to the AFT and Secretary
the American Federation of Teachers must respond to
the entire membership as to how the parent body, which
has ultimate oversight responsibility, could allow
such alleged improprieties to exist and yet still
expect dues paying members to continue to trust their
First Am. Compl. ¶¶ 43-46. While it is true that the release does not cite
to the exact provisions of the AFT Constitution to which plaintiff now
cites, the quoted language does allege, essentially, that the AFT has a
fiduciary duty it failed to fulfill and does ask that the national union
account for its actions, or failure to act, to the WTU membership. As a
result, the Court finds that plaintiff "complained of the wrongs which
[he] now assert[s] in this litigation to the Union and the Union took no
action to redress those wrongs." See Cefalo, 333 F. Supp. at 1285.
Plaintiff's actions are therefore more analogous to those deemed
sufficient to meet the demand element of Section 501's jurisdictional
requirement in Trine Council, Sabolsky, and Dinko than to those found to
be deficient in the cases relied upon by defendants. Similarly, the Court finds that the letter sent
by plaintiff to the WTU, defendant Hankerson, the WTU Executive Board,
and the WTU Board of Trustees in November 2002 was sufficient to meet
Section 501's demand requirement with respect to those defendants.
See Dinko, 531 F.2d at 70 n.2, 73.
The AFT next argues that, even if plaintiffs' actions are construed as
a demand sufficient to satisfy Section 501(b)'s jurisdictional
requirements, the national union has in fact subsequently brought an
action against what it considers to be "all of the bad actors here,"
namely the individual defendants, thereby precluding a finding that the
refusal requirement has been met. AFT Reply at 12 n. 9. Indeed, the AFT
commenced an action against the very same individual defendants named by
plaintiff in his suit, asserting essentially the very same claims. See
Am. Compl. Civil Action No. 03-79.
However, as plaintiff correctly points out, the AFT has consistently
denied any oversight responsibility with respect to the WTU, and has
not, over a year after plaintiff made his requests, brought any action
against any of its own officers for "allow[ing] such alleged
improprieties to exist." See First Am. Compl. ¶¶ 43-46. Moreover, the AFT
has not brought suit against the WTU Executive Board as an entity, nor
against the WTU Board of Trustees. The Court holds such circumstances to
be sufficient to constitute a "refusal" with respect to these defendants within
the meaning of the jurisdictional prerequisites.
A more difficult question is presented by the fact that the AFT did,
subsequent to the filing of plaintiff's suit, take formal action against
the individual defendants named in plaintiff's claims, as well as against
defendant IFSB. AFT also argues that this is not a case where the AFT
ignored or responded negatively to plaintiff's requests the AFT
initiated an investigation as early as September 2002, approximately one
month after WTU members began to complain to both the WTU and the AFT
about the unauthorized $160 dues deduction. AFT Mot. at 19. As soon as
the investigation was complete, and the AFT was assured that sufficient
grounds existed, it filed suit against individual defendants, and, on
January 27, 2003, it placed the WTU in "administratorship" pursuant to
the AFT Constitution. Id.
It is plaintiff's contention that the AFT's failure to take any action
between July 2002 and January 2003 against individual defendants and
defendant IFSB beyond initiation of an investigation into WTU's financial
practices, as well as the AFT's continuing failure to take action
against WTU and AFT officers responsible for ensuring that WTU complied
with the provisions of the AFT Constitution constitute "failure to act"
within a reasonable time with respect to those defendants. Plaintiff
further argues that the AFT's subsequent commencement of an action against individual defendants after plaintiff initiated his
suit neither precludes a finding that he had satisfied the jurisdictional
prerequisites at the time the suit was filed nor requires that plaintiff's
action now be dismissed as to individual defendants. Pl.'s AFT Opp'n at
22 n. 8 (citing to O'Connor v. Freyman, 1985 WL 121 at * 2, 5, in which
union was granted leave to intervene in plaintiff's action).
The Court finds that the refusal element has been met with respect to
defendant McElroy, and LMRDA's jurisdictional prerequisites have thus
been satisfied as to claims brought against the AFT Secretary-Treasurer.
Similarly, defendants the WTU Executive Board and the WTU Board of
Trustees have both denied responsibility and failed to take action in
response to plaintiff's demands as described herein, thereby satisfying
the LMRDA's jurisdictional prerequisites as to them.
b. Good cause
Contrary to the AFT's assertion, plaintiff has already sought, and this
Court has already granted, leave pursuant to 29 U.S.C. § 501(b) to file
his First Amended Complaint. See AFT Mot. at 20; AFT Reply at 14; Pl.'s
Motion for Leave to File Verified First Amended Compl.; 2/5/03 Order,
Civ. A. No. 02-2536. In so doing, the Court found that "good cause"
existed for Mr. Saunders to file a complaint pursuant to § 501(b).
Accordingly, the Court will construe AFT's arguments with respect to the
existence of this jurisdictional prerequisite as a motion to vacate the Court's
finding of "good cause."
The purpose of the "good cause" requirement embodied in Section 501(b)
is to "ensure that union officials will not be subjected to harassing law
suits." Bocchiere v. Biller, 1988 WL 163032 at *2 (D.D.C. April 29,
1988); see also O'Connor v. Freyman, 1985 WL 121 at *3. In order to
demonstrate "good cause", a plaintiff must show "a reasonable likelihood
of success and, with regard to any material facts he alleges, must have a
reasonable ground for belief in their existence." Bocchiere v. Biller,
1988 WL 163032 at *3; see also O'Connor v. Freyman, 1985 WL 121 at *4
(noting that the policies underlying Section 501 and the requirement that
a plaintiff make a showing of good cause "include the supervision of
union officials in the exercise of their fiduciary obligations and the
protection, through a preliminary screening mechanism, of the internal
operation of unions against unjustified interference and harassment.").
The standard is not an onerous one. See George v. Local Union No. 639,
98 F.3d 1419, 1423 (B.C. Cir. 1996) (rejecting authority requiring
plaintiff to demonstrate a "high probability that . . . allegations of
impropriety are true" and concluding that "good cause" requirement sets a
The good cause requirement is clearly met insofar as plaintiff's First
Amended Complaint is concerned. "In deciding whether plaintiff has made a good cause showing, it is inappropriate for
the court to resolve complex questions of law going to the substance of
the case. Issues of this kind should be appraised only on motion for
summary judgment or after a trial at which the parties and the Court can
have the benefit of a complete inquiry assisted by such pretrial
discovery as may be undertaken." O'Connor v. Freyman, 1985 WL 121 at *
5; see also George v. Local Union No. 639, 98 F.3d at 1422 ("it is
inappropriate at the good cause stage for the district court to consider
`defenses which require the resolution of complex questions of law going
to the substance of the case.'")(internal citations omitted). It is
enough that, taking all facts and circumstances into consideration,
including plaintiff's efforts to invoke internal remedies, his demands on
the union, refusal of the union to act in accordance with those demands,
plaintiff's reasonable likelihood of success, and his reasonable ground
for belief in his claims, the Court "determines that plaintiff has
alleged at least a colorable claim. . . ." O'Connor v. Freyman, 1985 WL
121 at * 5; see also George v. Local Union No. 639, 98 F.3d at 1422 ("the
good cause requirement of section 501(b) sets a low threshold").
At the time that it initially granted leave to file the First Amended
Complaint, the Court found that plaintiff had established "good cause"
under the standard set forth in the authority cited above. The AFT has not advanced any facts or arguments
persuading the Court that this decision was in error. Accordingly, any
motion by defendants to vacate the Court's finding that plaintiff has
established "good cause" to bring suit pursuant to Section 501(b) is
2. LMRA Claim
a. Breach of labor peace
Defendant AFT argues that, because the breach of the AFT Constitution
alleged by plaintiff does not threaten labor peace, but rather concerns
only internal union matters, the Court does not have subject matter
jurisdiction to hear plaintiff's LMRA claim. However, any such
prerequisite to assertion of an LMRA claim was abrogated by the U.S.
Supreme Court's decision in United Ass'n of Journeymen and Apprentices of
Plumbing and Pipefitting Industry of the United States and Canada v.
Local 334, 452 U.S. 615, 622-27 (1981) [hereinafter "Plumbers &
Pipefitters"], and therefore the Court need look no further to determine
whether the alleged breach of the AFT Constitution has any such impact.
Relying on a case that did not involve construction of the LMRA, the
AFT submits that, because § 301 of the LMRA extends federal jurisdiction
over union matters, it should be narrowly construed. AFT Mot. at 29
(citing Hardin v. City Title Escrow Co., 797 F.2d 1037, 1040 (D.C. Cir.
1986)). AFT further argues against expansive interpretation of a court's jurisdiction under § 301 by
citing to "a longstanding federal policy of noninterference in the
internal affairs of union and labor matters." AFT Mot. at 29 (citing
Wirtz v. Local 153 Glass Bottle Blowers Ass'n of United States and
Canada, 389 U.S. 463, 470-71 n. 10 (1968)). Based on these policy
considerations, the AFT contends that only those breach of union contract
cases involving external disputes should fall within federal
However, the Supreme Court addressed this argument in its opinion in
Plumbers & Pipefitters, stating that "[t] here is an obvious and
important difference between substantive regulation by the National Labor
Relations Board of internal union governance of its membership, and
enforcement by the federal courts of freely entered into agreements
between separate labor organizations." Plumbers & Pipefitters, 452 U.S.
at 626. Cases to the contrary cited by AFT pre-date the Supreme Court's
decision in Plumbers & Pipefitters. See AFT Mot. at 29, citing 1199 DC,
Nat'l Union of Hospital and Health Care Employees v. Nat'l Union of
Hospital and Health Care Employees, 394 F. Supp. 189, 191 (D.D.C. 1975),
aff'd, 533 F.2d 1205, 1207 (D.C. Cir. 1976).*fn15 Finally, it goes without saying that the U.S. Supreme Court's failure
to mention the "significant impact" requirement in an opinion issued
after Local 334 lends far greater support to plaintiff's assertion that
the requirement has been abrogated than to AFT's contention that it has
not. See AFT Mot. at 29. In the absence of any such jurisdictional
requirement under current law, the Court need not consider the issue any
b. Exhaustion of Administrative Remedies
AFT next argues that the Court does not have jurisdiction to entertain
plaintiff's Section 301 claims because he has failed to exhaust
administrative remedies. AFT Mot. at 28. However, one of the cases relied
upon by the AFT involves the specific context of prosecution of grievances
against an employer under a collective bargaining agreement. See Republic
Steel Corp. v. Maddox, 379 U.S. 650, 652 (1965); see also Compofelice v.
United Food and Commercial Workers, Local 400, Civ. A. No. 80-0046, 1980
WL 2167 at *3 (D.D.C. Oct. 10, 1980) (requiring exhaustion of internal
remedies in suit brought against union pursuant to § 301 for breach of duty of fair representation). Neither party has cited to any
authority setting forth an exhaustion requirement for claims brought
pursuant to § 301 of the LMRA for breach of a union constitution. It is
therefore questionable whether such a requirement exists at all, and, if
so, whether it is limited to exhaustion of remedies provided for by the
AFT Constitution itself. See Vaca v. Sipes, 386 U.S. 171, 184 n.9
In any event, plaintiff correctly asserts that no internal procedures
are set forth in either the AFT Constitution or the WTU Constitution and
by-laws for resolution of the type of complaint raised by plaintiff here.
Pl.'s AFT Opp'n at 4. There being no administrative procedures to
exhaust, the Court finds that there are no jurisdictional bars to
consideration of plaintiff's Section 301 claim.
C. Procedural requirements for derivative actions
Fed.R.Civ.P. 23.1 sets forth the following procedural requirements for
bringing a derivative action on behalf of an unincorporated association:
(1) the complaint must be verified and must allege
(a) that the plaintiff was a member at the time
of the transaction of which the plaintiff
(b) that the action is not a collusive one to
confer jurisdiction on a court of the United
States which it would not otherwise have;
(2) the complaint must allege with particularity the
efforts made by the plaintiff to obtain the action the
plaintiff desires from the directors, and the reasons for the
plaintiff's failure to obtain the action or for not
making the effort;
(3) the plaintiff must "fairly and adequately
represent the interests of the . . . members similarly
situated in enforcing the right of the corporation or
Fed.R.Civ.P. 23.1; see also Levant v. Whitley, 755 A.2d 1036
(B.C. 2000) (interpreting identical local rule). The AFT does not dispute
that the plaintiff has met the first requirement, but contends that he
has failed to meet the latter two.
1. Demand on the Board
Plaintiff contends that he has satisfied Rule 23.1's demand requirement
by making numerous requests to directors and officers of the WTU to
remedy the July 2002 unauthorized dues deduction, account for how the
deduction came about, and provide an accounting of the local's current
financial status. AFT does not dispute that plaintiff made these demands
on the WTU but maintains that he failed to make a demand on the AFT,
thereby defeating his invocation of Rule 23.1. The Court finds that any
further demands on either the WTU Executive Board, Board of Trustees, or
the AFT would have been fufile within the meaning of the procedural
requirements of Fed.R.Civ.P. 23. General allegations that a plaintiff has attempted to alert the
membership to issues of misuse of accounts are insufficient to meet Rule
23.1's requirement that the plaintiff plead with particularity any
efforts he made to demand that the WTU or the AFT pursue legal action
against individual and institutional defendants. See Levant, 755 A.2d at
1050. "However, Rule 23.1 permits a plaintiff to plead futility in making
the demand on the board of directors or comparable authority." Id. Also,
"[i]t is well settled that the question whether a plaintiff has shown
that the demand requirement is excused is committed to the sound
discretion of the trial court." Smith v. Gordon, 668 F. Supp. 520, 522
(E.D. Va. 1987).
In the majority of jurisdictions, a plaintiff must make specific
allegations of bias or self-dealing on the part of directors in order for
a demand on the directors to be fufile, whereas in the minority of
jurisdictions, plaintiff need allege only that a board of directors
approved the alleged wrongdoing. Smith v. Gordon, 668 F. Supp. at 522-23.
"Under the law of this jurisdiction, plaintiffs can prove the futility of
exhausting their union remedies in two ways: (1) through inference from
the circumstances surrounding the grievance process, and (2) through
concrete evidence of personal animus." Pierce v. Bahr, Civ. A. No.
96-680, 1996 U.S. Dist. Lexis 6488 at *14 (D.D.C. May 9, 1996). Plaintiff
has made sufficient and particularized allegations of wrongdoing by a number of WTU Directors and has alleged
acquiescence of the remaining Directors as well as the WTU Board of
Trustees, thus giving rise to a permissible inference that these
individuals would be biased with respect to any request that they take
action against themselves. See Smith, 668 F. Supp. at 523.
Similarly, plaintiff has made specific allegations of bias against the
AFT and its Secretary Treasurer James McElroy, suggesting that a demand
against these parties would also be fufile; for instance, plaintiff has
alleged that McElroy served on the same AFT Executive Council as Barbara
Bullock and that the AFT has repeatedly denied responsibility for
oversight of the WTU. It can easily be inferred from AFT's dismissive
response to plaintiff's contentions that Secretary-Treasurer McElroy bore
any responsibility for ensuring that AFT received biennial audits and
annual financial statements from the WTU, as well as from its failure to
answer Mr. Saunders' November 2002 demand that the AFT account for how
the events underlying this action could have taken place under its
watch, that any demand on the AFT that it bring legal action against
Secretary-Treasurer McElroy would have been fufile.
AFT does not address plaintiff's futility argument, but rather
erroneously relies on the D.C. District Court's opinion in Pierce v.
Bahr for the proposition that, if the Court finds that plaintiff's LMRDA claim suffers from a jurisdictional defect based on
plaintiff's failure to make a demand to sue relevant union officials, then
a fortiori, plaintiff's Rule 23.1 derivative action must fail. See AFT
Mot. at 36 (citing Pierce v. Bahr, 1996 U.S. Dist. Lexis 6488 at *15).
However, this proposition misstates the holding in Pierce, in which none
of the plaintiffs invoked Fed. R. Civ. P. 23.1. Rather, Pierce holds
that, to the extent that one plaintiff's claim is derivative of another
plaintiff's LMRDA claim relating to inspection of documents, it too must
fail where the first plaintiff failed to exhaust internal union remedies
with respect to that demand. 1996 U.S. Dist. Lexis at *15. In any event,
the Court having found that plaintiff has satisfied the demand and
refusal requirements of Section 501, this argument is unavailing.
Accordingly, the Court finds that plaintiff has satisfied the second
prong of the procedural requirements for bringing a derivative action
pursuant to that Rule.
2. "Fairly and Adequately Represent"
The AFT contends that Mr. Saunders does not "fairly and adequately
represent" the interests of WTU members. AFT Mot. at 35-36. In support of
this contention, the AFT cites solely to the representations of counsel
for putative intervenors and amid in this action, who have vaguely
intimated that Mr. Saunders represents a "previous regime" of the WTU.
Id. Plaintiff correctly points out that defendants offer neither an explanation
of what this means nor any evidence to support the allegation. Pl.'s AFT
Opp'n at 30.
The defendant in a derivative action bears the burden of establishing
that plaintiff does not "fairly and adequately represent" similarly
situated members. See Levant, 755 A.2d at 1049. Furthermore, in
derivative actions brought pursuant to Fed.R.Civ.P. 23.1, the trial court
need not make a preliminary affirmative determination that the plaintiff
will fairly and adequately represent the interests of similarly situated
people as it must do in class actions. See id. A trial court's decision in
this regard is reviewed for abuse of discretion. See id. at 1049-50.
While factors such as "economic antagonism" and the "use of the
derivative action as leverage in a corporate or associational struggle"
may render a particular plaintiff an inappropriate representative in a
Rule 23.1 action, the AFT has by no means alleged facts sufficient to
even suggest that these factors are present here. The record is devoid of
any indication that Mr. Saunders stands to benefit unduly either
economically or in terms of "leverage" in some sort of leadership
"struggle" within the association by bringing this action. Given that all
WTU members were subject to the exact same improper dues deduction, and
that any existing or future vacancies in WTU offices will be filled through standard election procedures, there is no basis for making
any such inference. See First Am. Compl. at 1 31, AFT Const, art
VI § 15(d).
Conversely, plaintiff points out that he has vigorously prosecuted this
action on behalf of the WTU membership, initiating the case a month
before the AFT saw fit to bring its claims against the individual
defendants, securing pro bono representation, and holding an open meeting
with other union members to hear their concerns. Pl.'s AFT Opp'n at
Under these circumstances, the Court finds that the third requirement
for invocation of Fed.R.Civ.P. 23 has been met.
Having thus disposed of defendants' multiple procedural challenges, the
Court will now consider the merits of defendants' motions to dismiss. D. SECTION 501 CLAIM
With respect to plaintiff's remaining claim against AFT
Secretary-Treasurer McElroy in his official capacity, defendant AFT
contends that plaintiff has failed to establish that Secretary-Treasurer
McElroy owed any fiduciary duty to WTU local union members. AFT Mot. at
As an initial matter, the AFT contends that, in order for an officer of
a national union to owe a fiduciary duty to members of an affiliated
local union, the national union must exercise virtually "autocratic"
control over the finances of the local union. AFT Mot. at 11 (citing
International Union, United Mine Workers of America v. District 50,
United Mine Workers of America, 435 F.2d 421, 429 (D.C. Cir. 1970)); see
also Aho v. Bintz, 290 F. Supp. 577, 580 (D. Minn. 1968) (finding that
officers of International occupied a position of trust with regard to the
local and its members where defendants could be considered agents of the
local because they serviced the local, attended its meetings, advised its
officers, and talked directly with the employer, becoming "quasiofficers"
or at least representatives of the local). Although it is a national
labor organization, the AFT describes itself as essentially an amalgam of
autonomous entities, emphasizing that its locals are independently
certified by labor boards and are assigned distinct employer
identification numbers by the IRS. AFT Mot. at 3. AFT affiliates' collective bargaining agreements are negotiated exclusively
by the locals and designate the locals, rather than the AFT, as the
members' representatives. Id. The AFT maintains that it does not sign,
review, administer or exercise any control over these agreements. Id.
Finally, each local is governed by its own constitution and bylaws, as
well as the national AFT constitution. Id. The AFT does concede that it
provides member locals with certain services, including assistance and
training for professional development of teachers and classroom
employees, advocacy on behalf of members before Congress and the
Executive Branch, financial support for legal actions brought by locals,
and assistance with organizing new members. Id. at 3-4. Nevertheless, the
AFT maintains that it exercises no direct oversight over the operation of
its locals. Id. at 4.
Plaintiff disputes the existence of a standard requiring that an
officer of an International Union exert "autocratic control" over the
finances of a local before any fiduciary duty to members of that local is
triggered. He correctly asserts that the.C. Circuit in District 50 looked
only to the "Landrum-Griffith Act" ("LMRDA") as a potential source of
fiduciary obligations imposed on the national toward the local and did
not examine a national union's constitution. See District 50, 435 F.2d at
430-31. Significantly, District 50 did not involve a suit pursuant to the
LMRDA and therefore cannot impose any controlling requirements with respect to the degree of control that an international
officer must exercise over a local's finances in order to be held liable
pursuant to Section 501(b). Id.
The third opinion relied on by AFT for the proposition that no
fiduciary duty on the part of international officials exists absent
exercise of "autocratic control" over local finances is completely
inapposite, because the court there simply denied a local union's motion
to amend its complaint to refashion claims made pursuant to the LMRDA's
"Union Bill of Rights," embodied in 29 U.S.C. § 411(c), as Section 501(b)
claims. Local Union #575 v. United Ass'n of Journeymen and Apprentices of
the Plumbing and Pipefitting Industry of the United States and Canada,
995 F. Supp. 1151, 1163 (D. Colo. 1998). In that case, the plaintiff was
challenging a merger of union locals as violative of his rights as a
union member. The Court found that plaintiff had not alleged that the
International President was holding union funds for improper purposes, or
that he had acted beyond his authority, in bad faith, or unreasonably in
approving the merger, and therefore had not alleged a breach of fiduciary
duty under Section 501(b). Id. Significantly, unlike the plaintiff in
Local Union # 575, plaintiff Saunders has arguably alleged that
Secretary-Treasurer McElroy failed to hold union assets in accordance
with the AFT Constitution by accepting WTU's per capita payments to the
AFT while failing to enforce the AFT Constitution's audit and financial
It appears, therefore, to be an open question as to whether, on the
facts of this case, the degree of the AFT Secretary-Treasurer's
involvement in the financial affairs of AFT locals gives rise to a
fiduciary duty pursuant to Section 501(b). AFT has cited no authority
requiring that an international union exercise "autocratic control" over
a local before a fiduciary duty to local members on the part of
international officers attaches. The Aho court did not set forth a rigid
requirement that the precise facts extant in that case be present for an
international officer to be found to owe local members a fiduciary duty.
Aho v. Bintz, 290 F. Supp. at 580. Rather, it only held that such a duty
existed under the circumstances at issue in that case.
The Court need not, however, reach the issues of whether to apply the
"autocratic control" standard or whether plaintiff's allegations are
sufficient to meet it. Plaintiff correctly points out that, as a member
of the WTU, he was also a member of the AFT. He further contends that, as
a result, AFT officers, and the Secretary Treasurer in particular, owe a
fiduciary duty to plaintiff and other WTU members. Pl.'s AFT Opp'n at
13; see Aho v. Bintz, 290 F. Supp. at 580 ("[a]n argument can perhaps be
made that the statute in fact allows suit against officers and representatives of the International. By virtue of belonging to [the
local] plaintiffs herein are members of [the International].").
The central issue posed by plaintiff's breach of fiduciary duty claim,
then, is the scope of the fiduciary duty to its members imposed on the
AFT by its constitution. Significantly, neither party cites to any
authority addressing the nature of a national union's duties where its
constitution requires locals to submit a biennial audit and annual
financial statements to the International Union.
The AFT submits that the constitutional provisions on which plaintiff's
claims rely do not impose any affirmative duties on the AFT to ensure
that an audit is generated by each local biennially and submitted to the
AFT national office, or that financial statements are produced annually
and submitted to the Secretary Treasurer within five months of the end of
the local's fiscal year. The relevant constitutional provisions provide:
Effective September 1, 1993, and at least every two
years thereafter, each affiliated local and state
federation shall convene a committee of at least three
members to conduct an internal financial review
according to a format to be determined by the AFT
executive council, or the local or state federation
shall contract for an outside audit that meets the
standards of generally accepted accounting
principles. Either of these reviews must be made
available to its membership and provided to the
national office by January 1, 1994, and at least every
two years thereafter
AFT Const, art IV § 6 (emphasis added).
Beginning January 1, 1971, each local shall submit a
financial statement for the local, including a
statement of assets and liabilities and a statement of
income and expenses to the AFT secretary-treasurer within five months of the end of
fiscal year for the local.
AFT Const. art. IX § 8 (emphasis added).
Rather, AFT's is position that the Constitution contemplates that these
documents be prepared for the benefit of the local membership, and that
the AFT serve as a mere repository of this information for the benefit of
the local members. AFT Mot. at 23. Finally, the AFT submits that, in the
absence of an affirmative duty to act, the AFT did not ratify or
participate in individual defendants' wrongful activities, and therefore
cannot be charged with breach of a fiduciary duty.
The national union does concede that it may make use of the documents
from time to time for internal purposes such as making grants to locals
or providing assistance, but it contends that such use does not impose
any obligation to ensure that the documents are prepared and filed.
Rather, the AFT analogizes these constitutional requirements to existing
statutory requirements that locals file documents with the IRS and
Department of Labor, which do not give rise to liability on the part of
these federal agencies for failure to detect and prevent embezzlement by
local officials should locals fail to file. AFT Mot. at 13 n. 5. AFT
submits that the local alone is responsible for ensuring that audits take
place and that the local exercises complete control over the records
necessary to perform the audit.
AFT further contends that the breach of fiduciary duty claim in Count
VI, as well as the breach of contract claim in Count IV and the negligence claim in Count VII, to the extent they rely on the provisions
of the AFT Constitution as the source of any duty assumed by the AFT, are
pre-empted by Section 301 of the Labor Management Relations Act (LMRA).
AFT Mot. at 22. Section 301 provides that
Suits for violations of contracts between an employer
and a labor organization representing employees in an
industry affecting commerce as defined in this
chapter, or between any such labor organizations, may
be brought in any district court of the United States
having jurisdiction of the parties.
29 U.S.C. § 185 (emphasis added).
To the extent that plaintiff's breach of fiduciary duty claim is
premised on the provisions of the AFT Constitution, AFT is correct, and
the claim is pre-empted by Section 301 of the LMRA.*fn16 Similarly,
because the common law breach of contract and negligence claims asserted
in Count VI and VII are also premised on violation of AFT's alleged
duties under the AFT Constitution, these claims are also preempted by
§ 301 and must be dismissed as such. E. Section 301 Claim
AFT further argues that plaintiff's Section 301 claim must also be
dismissed for lack of subject matter jurisdiction and failure to state a
claim. AFT Mot. at 21. The jurisdictional issues having been addressed
above, the Court finds that the AFT has failed to meet the liberal motion
to dismiss standard, which provides that "the complaint should not be
dismissed under Rule 12(b)(6) 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,'" on this issue. Warren v. D.C., 353 F.3d 36, 37
(D.C. Cir. 2004) (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). On
the facts alleged in the Complaint, drawing all inferences in favor of
the plaintiff, the Court finds that plaintiff has stated a Section 301
In essence, AFT argues that, notwithstanding the fact that article IV
§ 6 of its Constitution requires locals to submit a biennial audit to
the national office, nothing in the language of that provision, or the
remainder of the AFT Constitution, requires the AFT to review the audits
submitted by the locals, "conduct an unprovoked investigation" of a local
that does not submit such an audit, or take any other action with respect
to the audits "beyond acting as a depository." AFT Mot. at 23. It further
contends that the Court cannot make the legal inference that the AFT owes
WTU members any duty with respect to such audits, including the duty to
investigate a local's failure to provide an audit or perform one if a
local does not comply with the AFT constitution, based solely on the AFT
Constitution's requirement that locals perform audits and provide the AFT
with copies. Id. at 24-25. Rather, it contends that the AFT Constitution
merely sets forth minimum requirements, consistent with federal laws, for
the sole benefit of local members, and for which the AFT has no
"policing" responsibility. AFT Reply at 9 n.6.
"General rules of statutory construction apply when interpreting a
labor union's constitution, including the rule that unless specifically
defined, a word will be given its plain and ordinary meaning." Local
Union # 575, 995 F. Supp. at 1156. Courts generally defer to a union's
construction of its constitution unless it is manifestly unreasonable.
Noble v. Sombrotto, 260 F. Supp.2d 132, 136 (D.D.C. 2003); see also AFT
Const. art VI, § 10 ("The Executive Council shall have the power to
interpret and enforce this constitution."). The Third Circuit has
cautioned, in the context of interpreting the obligations assumed by an
international union in its constitution that
[i]mposing upon an international union the legal
obligation to protect union members from allegedly
abusive tactics by local officers could alter the
delicate balance between local unions and their
internationals, to the sacrifice of local union
Brenner v. Local 514, 927 F.2d 1283
, 1292 (3d Cir. 1991).
The constitutional provisions relied on by plaintiff in this case are
plainly mandatory, stating that "at least every two years . . . each
affiliated local . . . shall conduct an internal financial review
according to a format to be determined by the AFT executive council, or
. . . shall contract for an outside audit that meets the standards of
generally accepted accounting principles . . . these reviews must be made
available to its membership and provided to the national office . . ., " and that "each local shall submit a financial statement
for the local . . . to the AFT secretary-treasurer within five months of
the end of the fiscal year for the local." AFT Const, art IV, § 6; art.
IX, § 8 (emphasis added). Plaintiff argues that, by imposing affirmative
duties on its locals, the AFT in turn assumed affirmative obligations to
enforce them. See Pl.'s AFT Opp'n at 7-8. However, the plain language of
the Constitution is silent as to any such obligation.
Indeed, plaintiff concedes that the AFT Constitution does not
explicitly create a contractual obligation to enforce the audit and
financial reporting requirements imposed on the locals. Pl.'s AFT Opp'n
at 4, 5 ("the AFT's Constitution does not expressly state what action the
AFT will take if the officers of a local union flout the requirement that
they submit the audit and financial statements"); ("the AFT Constitution
does not explicitly require the AFT to enforce its audit provisions").
In the face of the absence of plain language in the AFT Constitution
reflecting the obligation on which plaintiff bases his claim, he argues
that the context of the AFT Constitution as a whole, which confers
significant powers on the AFT to enforce the Constitution's financial
reporting requirements, ranging from investigation to imposition of an
administratorship, to suspension or revocation of charter, suggests that
the AFT had affirmative duties to act under the audit and financial
reporting provisions. Pl's AFT Opp'n at 6. Plaintiff also cites to
affirmative acts by the AFT that he contends demonstrate an assumption of
a duty to ensure that audits were performed, including publication of documents providing guidance to
locals for conducting audits and maintenance of a financial services
hotline for local officers. Pl.'s AFT Opp'n at 7. Plaintiff submits that
the AFT Constitution as a whole, as well as the AFT's conduct in holding
itself out as a financial authority for locals, clearly support a
construction of the AFT Constitution that leads to the conclusion that
the AFT had an implied duty to enforce the financial reporting
requirements it imposed on its locals. Pl.'s Opp'n at 7.
The AFT responds that "retention of regulatory and supervisory powers"
by the national union in its constitution "merely gave it a discretionary
right, as distinguished from a duty, to intervene in the affairs" of the
WTU. See Brenner v. Local 514, 927 F.2d at 1292. One provision in the AFT
Constitution analogous to the one in question in Brenner provides that a
local's charter "may be suspended or revoked by the executive council
when the existence of such local . . . is detrimental to the development
of democracy in education." AFT Const. art IV § 8. Others provide that
the AFT's Executive Council "may authorize the president to appoint a
committee of the executive council to conduct an investigation of a
local." AFT Const. art VI, § 14. Another states that the AFT "may
establish an administratorship for the purpose of, inter alia, correcting
financial malpractice or misappropriation or loss of funds. AFT Const art
VI, § 14. It is clear from the language used in these provisions, and
particularly from the use of the word "may," that these provisions create
discretionary powers in the AFT. Nevertheless, plaintiff contends that disposition of cases requiring
interpretation of a union constitution on a motion to dismiss is
inappropriate, and that courts have recognized the need for discovery to
ascertain the proper interpretation of a union's constitution where it is
silent on a pertinent question. Pl's Opp'n at 8; see Noble, 260 F.
Supp.2d at 136 (facts underlying determination of whether a union's
interpretation of its constitution is reasonable may be the subject of
discovery or genuine issues of material fact). Indeed, the case on which
the AFT relies was decided on a motion for summary judgment, after full
development of the factual record surrounding the adoption of the
disputed provision. See Brenner v. Local 514, 927 F.2d 1283. The Court
concludes that it would benefit from similar development of the factual
record in this case to elucidate the intentions of the parties with
respect to the AFT's enforcement obligations, if any, when the financial
reporting provisions at issue here were adopted. See Noble, 260 F.
Supp.2d at 136. Accordingly, AFT's motion to dismiss plaintiff's Section
301 claim is DENIED.
F. Count V Documents
Plaintiff claims that he is entitled, pursuant to 29 U.S.C. § 431 (c),
to review documents and records necessary to verify the WTU's financial
reports to the Department of Labor. AFT responds that plaintiff has an
obligation to exhaust reasonable union procedures before litigating his
claims under § 431(c), noting that the First Amended Complaint has failed
to allege that he has attempted to do so, or that the WTU or AFT have
constrained his right to inspect records. AFT Mot. at 31. Accordingly, AFT submits that Count V should be
Plaintiff responds that he did make sufficient requests to inspect the
documents of the WTU, both by letter sent in or about November 2002 to
the WTU, and by way of the November 21, 2002 protest outside the offices
of the AFT. Pl's Opp'n at 25-26. Plaintiff further argues that no
exhaustion requirement exists under the relevant statutory provision.
Id. at 26-27.
In light of the AFT's representation that it "is prepared to make the
WTU's records available to plaintiff consistent with his rights as a WTU
member" and that "no actual dispute exists," plaintiff's claim under
Count V is now moot. AFT Reply at 23 n. 19, 24. The AFT is hereby
directed to make the relevant documents available to plaintiff for
G. Independent Right of Action Pursuant to 29 U.S.C. § 411 (a)(3)(A)
Plaintiff submits that the only claims he brings pursuant to this
provision are against Bullock and Baxter for increasing the dues of WTU
members without authorization. Pl.'s AFT Opp'n at 27 n. 10. In view of
the fact that plaintiff has received a full refund of the July 2002
unauthorized dues deduction of $160.00, this claim is now moot. V. WTU EXECUTIVE BOARD MOTION TO DISMISS
Plaintiff's First Amended Complaint asserts a single Count against the
WTU Executive Board. In Count I, plaintiff alleges that members of the
WTU Executive Board, in their official capacities as officers, agents, or
representatives of the WTU, owed a fiduciary duty to the WTU and its
members to "manage, invest, and expend the WTU's money and property in
accordance with the WTU's constitution and by-laws." First Am. Compl. 1
211. Plaintiff contends that the members of the WTU Executive Board who
were not directly involved in the embezzlement of union funds breached
their duties to the WTU and its members by:
a. failing to ensure that Bullock and Baxter submitted
accurate budgets and financial statements to the
b. failing to maintain adequate oversight of the
activities of Bullock, Baxter, and Hemphill;
c. failing to ensure that the officers of the WTU
were adequately bonded; and
d. otherwise failing to manage, invest, and expend the
WTU's money and property in accordance with the
WTU's constitution and by-laws.
First Am. Compl. 1 217. Plaintiff asks this Court to issue an Order
enjoining members of the WTU Executive Board from holding any elected or
appointed office in the WTU for the next 10 years. Prayer for Relief (b).
Members of the WTU Executive Board, in their official capacities, move
to dismiss plaintiff's action against them in its entirety pursuant to
Fed.R.Civ.P. 12(b)(1) and Fed.R.Civ.P. 12(b)(6). WTU Mot. at 1-2;
WTU Mem. in Supp. of Mot. to Dismiss ("WTU Mem.") at 2. In support of its
motion, the WTU Executive Board ("Board") contends that plaintiff has failed to satisfy jurisdictional prerequisites
to this court's assertion of jurisdiction over this action pursuant to
Section 501(b) of the LMRDA. WTU Mem. at 2.
Plaintiff's First Amended Complaint alleges that the WTU Executive
Board was the governing body of the WTU, with general oversight
responsibilities. First. Am. Compl. ¶ 84. As part of these
responsibilities, the Board "was required to maintain adequate oversight
of the activities of individuals handling the WTU's funds and to demand
regular accountings of how those funds were being spent." Id. 1 85. The
WTU Constitution and by-laws authorized the Executive Board to hire and
fire union employees, including the Treasurer and any accountant (s).
Id. 1 86. Plaintiff alleges, on information and belief, that the Board
failed to hire an accountant between 1996 and 2002. Id. 1 88.
The Executive Board responds that it is composed almost exclusively of
volunteers who are, for the most part, actively employed by the D.C.
public school system. WTU Mem. at 3. It further submits that it has
"limited authority" and meets only twice monthly. Id. Nevertheless, it
acknowledges that the WTU Constitution and Bylaws require that it "take
such action as may be necessary between meetings" of the Union, and
confers on it the authority to establish committees deemed "necessary to
carry on the functions of the organization." Id. Further, the Board
concedes that it has authority to hire employees but counters that the
dismissal of professional or other employees is governed by contract and that it had no authority with
respect to the Union's elected officers. Id.
B. Subject Matter Jurisdiction
1. Public Sector Unions
The WTU Executive Board initially maintained that the LMRDA does not
apply to unions or members of unions consisting exclusively of public
sector employees. See 29 U.S.C. § 402(e) (definition of employers covered
by the LMRDA "does not include the United States or any corporation
wholly owned by the Government of the United States or any State or
political subdivision thereof"); 29 U.S.C. § 402 (f); Commer v. McEntee,
145 F. Supp.2d 333, 338 (S.D.N.Y.), aff'd in part, vacated in part on
other grounds, 34 Fed. Appx. 802 (2d Cir. 2002) (unpublished opinion).
However, the Board subsequently waived this ground in its Reply brief.
WTU Board Reply at 2.
Like the AFT, and relying on the same authorities, the Executive Board
contends that plaintiff failed to make an actual demand upon the WTU to
initiate legal action against officers of the Executive Board. WTU Mem.
at 6, 7. The Executive Board further urges that the demand requirement
must be strictly construed as contemplating a demand to institute legal
action, and cannot be excused on the grounds of futility. Id.
Plaintiff again maintains that the series of actions he took between
July 2002 and November 2002 in an effort to obtain restitution of the
improper dues deduction and secure "internal union `housekeeping'" are sufficient to satisfy Section 501(b)'s demand
requirement and states that the "WTU ignored . . . repeated requests that
it remedy the misconduct of which he complained." Pl.'s Opp'n at 5-6. As
of the date plaintiff filed his initial complaint against the Executive
Board of the WTU, the WTU had taken no action whatsoever to refund
improper dues deduction or provide any accounting for those deductions.
Id. at 6.
For the reasons previously set forth in Section IV B 1. A of this
opinion, the Court finds that plaintiff's actions were sufficient to
satisfy the demand requirement of Section 501 with respect to the WTU
3. Refusal to act
The WTU Executive Board contends that plaintiff's "conclusory
statements" that the "WTU Executive Board refused to address the concerns
of Plaintiff and other WTU members regarding union financial activities"
despite the adoption of a resolution at a general meeting requiring them
to do so are insufficient to satisfy the "refusal" element of Section
501(b)`s jurisdictional requirements. Moreover, the Board contends that
nearly all the relief sought in plaintiff's November 2002 letter to the
WTU Executive Board has been obtained. WTU Reply at 8.
Plaintiff concedes that the Board provided information sought by
plaintiff "on or about January 6, 2003." First Am. Compl. 1 52. The WTU
Executive Board maintains that, to the extent any information was not
provided, its members are entitled to rely on the fact that there are ongoing criminal investigations with which they do not want to
interfere. WTU Reply at 8 n. 11. Additionally, the Executive Board points
to the AFT's forensic audit of the WTU finances as a source of a great
deal of the information plaintiff sought in his November 2002 letter to
the WTU. Id. at 8. Finally, the Executive Board emphasizes that plaintiff
and all members of the WTU have received refunds of their wrongfully
deducted dues. First. Am. Compl. ¶ 35-36. In other words, in the opinion
of the Executive Board, all of plaintiff's demands on it have been met,
and plaintiff therefore cannot maintain that those demands have been
refused or that the WTU Board has failed to act.
However, like the AFT, the WTU Executive Board continues to deny an
oversight responsibility, or breach thereof, on its part. Because that
aspect of plaintiff's demands as described herein have not been acted on
by the WTU Executive Board to date, the Court finds that the refusal
jurisdictional prerequisite of Section 501(b) has been met with respect
to the WTU Executive Board.
4. "Good cause"
The Board does not cite to any authority addressing this argument that
has not already been discussed in relation to AFT's Motion to Dismiss.
The Board simply suggests that, under the relevant standards, examining
all the facts and circumstances of plaintiff's action, including (1)
plaintiff's failure to invoke internal union remedies; (2) plaintiff's
incoherent demands on the union; (3) the absence of any refusal by the
union to act; (4) the fact that the AFT has filed and is vigorously
prosecuting a suit against individual defendants; (5) the "palpable vitriol of some criticisms" made by plaintiff; and
(6) the "significant" number of teachers seeking to intervene to oppose
plaintiff serving as the WTU's representative in this case, the Court
should find that plaintiff has failed to establish "good cause" for
granting leave to file a complaint pursuant to Section 501(b).
For the reasons previously articulated in this memorandum opinion, the
Court, upon careful reconsideration of its initial ruling granting
plaintiff leave to file his First Amended Complaint upon a showing of
"good cause," finds that this requirement has indeed been met. The WTU
Executive Board's jurisdictional challenges suffering the same fate as
those interposed by the AFT, the Executive Board's Motion to Dismiss is
VI. WTU TRUSTEES' MOTION TO DISMISS.
Defendants John Donnelly, Urman Edwards, and John Traina are "retired
D.C. Public School teachers who served as unpaid volunteer members of the
WTU Board of Trustees." Trustees Mem. at 3. The First Amended Complaint
alleges that the Board of Trustees ("Trustees") has oversight
responsibilities for the WTU's finances, and is required to monitor the
local's funds and financial records. First. Am. Compl ¶ 89-90. The Board
of Trustees also has authority to demand regular accountings of how the
WTU's funds were spent. Id. at 1 90, WTU Constitution and Bylaws at art.
VIII § 7(b). Perhaps most importantly, the Trustees are required to (1)
consult with the WTU Treasurer in the preparation of quarterly reports,
to which the signatures of the Trustees are to be affixed, (2) to present
their findings to the Executive Board and the entire WTU membership; and (3) to attest to
the accuracy of all WTU bank accounts at the end of the fiscal year. WTU
Constitution and Bylaws at art. VIII § 7(b), (c). Plaintiff contends
that the Trustees failed to perform these duties and therefore breached
their fiduciary duties to the WTU and its members. First Am. Compl.
Trustees move to dismiss Count I pursuant to Fed.R. Civ. 12(b)(1) and
Trustees first respond to plaintiff's allegations by pointing out that
they were not provided with an office, desk, computer, or staff with
which to perform the duties cited to by plaintiff. Trustee Mem. at 3.
Rather, they contend that their roles were limited to approval of the
annual budget, a document of no more than two pages created and prepared
by Baxter, the WTU's Treasurer. Id.
B. Failure to state a claim
Trustees next argue that plaintiff fails to state a claim against
them. In so doing, they contend that plaintiff's allegations using
"amorphous language," that they failed to exercise sufficient vigilance
against the possibility that individual defendants, who were "longtime
union stalwarts" and "widely regarded to be trustworthy reformers," were
embezzling funds from the WTU are insufficient to state a claim for
breach of fiduciary duty pursuant to Section 501(b). Trustees Mem. at 4.
Furthermore, the Trustees contend that plaintiff has failed to allege how
the performance of their duties, as outlined in the WTU Constitution and
Bylaws, would have prevented the conduct of individual defendants,
particularly given plaintiff's allegations of a highly secretive and tightly controlled "association in fact." Id.
at 5. Finally, the Board submits that plaintiff has failed to allege any
conduct or knowledge on the part of Trustees suggesting that they could
have discovered fraud but "turned a blind eye" to individual defendants'
Trustees further contend that the LMRDA was not intended to "punish
innocent bystanders" but rather to root out embezzlement and misuse of
union funds by officers. Id. They suggest, citing to Moran v. Flaherty,
in which the court found that plaintiff had not demonstrated any factual
basis for a claim that the local President had failed to adequately
supervise an embezzling treasurer, that courts "have been reluctant to
allow suits against innocent union officers." Id. (citing Moran v.
Flaherty, Civ. A. No. 92-3200, 1993 WL 60898 at * 3, 9 (S.D.N.Y. Feb.
26, 1993)). However, Moran does not stand for that proposition. Rather,
it simply states that plaintiffs in that case failed to demonstrate any
factual basis for their claim of inadequate supervision, leaving open the
possibility that such a claim could be asserted upon demonstration of a
sufficient factual predicate. Id. at * 9; see also Carr v. Learner,
547 F.2d 135, 137 (1st Cir. 1976) (holding plaintiff made insufficient
showing that defendants had breached a fiduciary duty and that
allegations of poor performance in the complex and adversarial context of
collective bargaining is insufficient to state a claim under Section
Conversely, plaintiff here has alleged, and Trustees have conceded,
that there were a number of duties Trustees did not fulfill: preparation
and publication of quarterly reports, attestation to the accuracy of local's bank accounts at the end of the year, as well
as oversight powers that they did not exercise (i.e., authority to demand
accounting). Trustees Mem. at 3. Rather, it appears that Trustees in this
case contented themselves with rubber stamping Baxter's annual budget,
citing individual defendants' reputations and a lack of resources as
justification for doing so. Such abdication of responsibilities and
duties imposed under the WTU Constitution constitutes a classic example
of breach of a fiduciary duty.
Plaintiff correctly argues that there is no requirement in the statute
or case law limiting liability under Section 501(b) to officers who
actually misappropriate union funds for their own benefit. Pl.'s Opp'n at
4. In fact, the Southern District of New York recently denied summary
judgment in favor of the president of a union local where plaintiff
alleged that the defendant had failed to properly supervise the union
bookkeeper, allowing the bookkeeper to close accounts without inquiring
as to where the funds were transferred. Dunlop-McCullen v. Pascarella,
Civ. A. No. 97-0195, 2002 WL 31521012 at * 16 (S.D.N.Y. Nov. 13, 2002).
Plaintiff also correctly argues that there need not be any allegations
that any of the individual defendants were connected with the "mafia" or
had any criminal record in order for plaintiff to sufficiently allege
that, had the Trustees exercised their duties diligently, they would have
known of individual defendants' wrongdoing. Pl.'s Opp' n at 6, n. 6.
Rather, these simply represent circumstances that may be held to place
union officials on notice, or give rise to a finding of willful
blindness. Id. The duties plaintiff alleges were imposed on Trustees are precisely
those contemplated by Section 501(b): the duty to monitor and oversee
union funds. Plaintiff is also correct in his contention that he is not
required to allege with specificity at the motion to dismiss stage how
Trustees' fulfillment of their fiduciary duties would have prevented the
harm at issue, so long as reasonable inferences can be made that it would
have. Pl.'s Opp'n at 2 n. 1. Accordingly, the Board of Trustees' motion
to dismiss for failure to state a claim is DENIED.
B. Subject Matter Jurisdiction
1. Demand and Refusal
Like all other defendants, Trustees cite to this District Court's
decision in Yager v. Carey, as well as to the Southern District of New
York's decision in Commer v. McEntee, and assert that plaintiff's various
courses of conduct do not amount to an "actual" demand "to initiate legal
action." See also Agola v. Hagner, 556 F. Supp. 296, 301 (E.D.N.Y. 1982)
(holding that repeated requests for strike payments, followed by letter
to international outlining failure to make strike payments and
threatening to institute legal action were insufficient to satisfy demand
requirement under Dinko v. Wall standard); Trustees Mem. at 8. However,
the Dinko standard was rejected by D.C. Circuit in George v. Local Union
No. 639. See 98 F.3d at 1422 Plaintiff responds that the November 2002
letter he participated in drafting, which was addressed to the WTU Board
of Trustees, among others, represents an adequate demand against these defendants, on which they failed to act within a reasonable time.
Pl.'s Opp'n at 7.
For the reasons set forth with respect to the similar jurisdictional
challenges posed by other defendants, the Court finds that Section
501(b)'s jurisdictional requirements have been met with respect to the WTU
Board of Trustees.
2. Good cause
Trustees contend that plaintiffs' "unadorned assertions" in Count I are
insufficient to meet the good cause requirement set forth in Section
501(b) and that to allow them to do so would "eviscerate" the
"prophylactic purpose" of the "good cause requirement." Trustees Mem. at
12 (citing Sabey v. Local 12230 of the United Steelworkers of America,
Civ. A. No. 81-80e, 1982 WL 31338 at * 8 (W.D.N.Y. Mar. 18, 1982)). For
the reasons previously given, the Court will not reconsider its earlier
ruling that plaintiff has satisfied Section 501(b)'s good cause
VII. MOTION FOR PRELIMINARY INJUNCTION
The AFT assumed administratorship over the WTU on January 27, 2003. On
March 10, 2003, plaintiff moved for preliminary injunctive relief
pursuant to Fed.R.Civ.P. 65 in the form of an Order enjoining AFT, as
administrator of the WTU, from:
i. Settling any claims or cases relating to the
ii. employing any Officers or Executive Board
Members of the WTU;
iii. making expenditures on behalf of the WTU that
are "outside the ordinary course of business,"
including payment of delinquent back dues from WTU
to the ATF;
iv. altering WTU's Constitution. Additionally, plaintiff asks the Court to appoint a monitor pursuant to
Fed R. Civ. P. 53 at AFT's expense to oversee AFT's compliance with this
injunctive relief and to ensure that the ATF acts in the best interests
of the WTU in administering the local's affairs. The monitor would
provide regular reports and recommendations to the Court and the WTU
Plaintiff contends that, although AFT has assumed an administratorship
of the WTU, AFT's potential liability to the WTU for duties imposed by
the AFT Constitution creates a conflict of interest warranting
supervision of the AFT's administration of the WTU by an independent
monitor ("IM") charged with protecting the WTU's interests. Pl.'s Mot.
for Prelim. Inj. ("Pl.'s Mot.") at 1. As evidence of the need for
independent monitoring of AFT's administratorship of the WTU, plaintiff
points out that, once it discovered individual defendants' wrongdoing as
early as July 2002, the AFT waited six months, until January 22, 2003, to
assume an administratorship of the WTU. Pl.'s Mot. at 1. Similarly, he
emphasizes that the AFT did not seek legal redress against individual
defendants until January 2003 and did not add Independence Federal
Savings Bank ("IFSB") as a defendant until February 2003. Id. Perhaps
most importantly, plaintiff complains that the AFT has yet to take action
against any officers of the AFT, the WTU Executive Board, or the Board of
Trustees with respect to their failure to exercise appropriate oversight
over the WTU's financial affairs. Id. Moreover, although it has disbanded the former Executive Board, the AFT retained
former General Vice President Hankerson to serve as Interim President of
the WTU, notwithstanding the fact that Ms. Hankerson has admitted to
having some knowledge as early as 1997 of Ms. Bullock's fraudulent
activities and to having failed to report them to anyone. Id. at 5 n. 2.
Additionally, plaintiff alleges, citing to the forensic audit
commissioned by the AFT, that the unauthorized dues deduction that
sparked this litigation "coincided with large lump sum payments of
delinquent per capita dues to the AFT." Pl.'s Mot. at 4.
Significantly, plaintiff does not challenge or seek termination of
AFT's administratorship over the WTU. Id. at 2, 15. Rather, he concedes
that the AFT has an important role to play as an administrator but
maintains that members of the WTU are entitled to assurances that
decisions made within areas in which the AFT may have a conflict of
interest, including settlement of the WTU's claims and future governance
of the WTU, will be made in the best interests of the WTU members.
Accordingly, he seeks oversight of AFT's administratorship in "certain
discrete areas" by a neutral third party with the power to make reports
and recommendations to the Court. Plaintiff submits that his proposal
would not lead to external interference in the AFT's day-to-day
management of the WTU's affairs, but rather would focus on the larger
decisions affecting the WTU's future, ensuring transparency and
accountability currently absent from the AFT's administration of the
WTU's affairs. Id. at 15. C. Preliminary Injunction
"The case law in this Circuit is well established that when considering
a plaintiff's request for a preliminary injunction, the court must
examine whether (1) there is a substantial likelihood of success on the
merits, (2) plaintiff will be irreparably injured if the requested
injunction is denied, (3) an injunction will substantially injure the
opposing party and (4) the public interest will be furthered by issuance
of the injunction." AFL-CIO v. Chao, 297 F. Supp.2d 155, 161 (D.D.C.
2003) (citing Davenport v. Int'l Brotherhood of Teamsters, 166 F.3d 356,
360 (D.C. Cir. 1999)). Because it effectively disposes of plaintiff's
motion, the Court will consider the irreparable harm prong of the
preliminary injunction standard first.
1. Irreparable harm
The central premise for plaintiff's motion is that AFT is in essence
partly responsible for the misappropriation of WTU funds by individual
defendants because it breached obligations to the WTU membership set
forth in the AFT Constitution. Assuming, arguendo, the validity of this
proposition, plaintiff's claim for injunctive relief still fails.
Taking each of plaintiff's requested areas of concern in turn, with
respect to financial matters, plaintiff alleges that injunctive relief
and appointment of an independent monitor are necessary to prevent the
AFT from giving itself preference to the WTU's other creditors to recover
per capita dues owed by the WTU to the AFT. Pl.'s Mot. at 13.
Additionally, plaintiff maintains that the AFT has not yet accounted for the significant payment of per capita dues made by the WTU
to the AFT immediately prior to the unauthorized dues deduction. Id.
Furthermore, one of the remedies plaintiff seeks for AFT's negligence and
breach of fiduciary duty is reimbursement of all per capita dues paid by
the WTU during the time when AFT was negligent or in breach of its
fiduciary duties. First Am. Compl.
As an initial matter, the AFT argues that the LMRDA explicitly
authorizes collection of the "normal per capita tax" by the national
union during a period of trusteeship. See 29 U.S.C. § 463. Moreover, it
is undisputed that, from the moment the AFT took over the WTU local and
imposed an administratorship on January 27, 2003, the AFT assumed a
fiduciary duty under Section 501(a) toward the WTU membership.
Therefore, any harm to the WTU's financial interests arising pursuant to
the administratorship can be remedied through a future 501(b) suit, and
any monies improperly paid by the WTU to the AFT during the course of the
administratorship could be recovered, thereby precluding a finding of
Plaintiff also alleges potential irreparable harm arising from the
AFT's retention of former General Vice President Ester Hankerson as
Interim President of the WTU. Pl.'s Mot. at 14. However, the AFT
represents that Ms. Hankerson is currently on a leave of absence and is
no longer participating in the administration of the WTU, thereby
eliminating any probability of irreparable harm associated with her
tenure as Interim President. Opp'n at 18.
Plaintiff next argues that, in at least some instances, the WTU would
be irrevocably bound by actions taken by the AFT in its capacity as administrator of the WTU, such as settlement of claims against
individual defendants, that would not be subject to collateral challenge
in a suit pursuant to Section 501(b). Pl.'s Reply at 9. The AFT responds
that no conflict of interest exists with respect to settlement of
claims, because any desire on the AFT's part to prioritize payment of
WTU's delinquent per capita dues to the AFT would place the AFT's
interests in alignment with those of the WTU membership to obtain the
maximum restitution possible from individual defendants. Opp'n at 17. The
AFT further submits that, even if the AFT is liable to the WTU based on
individual defendants' misappropriation of funds, the AFT's interests
remain in obtaining the greatest settlement possible from the individual
defendants. Id. Regardless of whether or not these arguments are
accepted, plaintiff has not alleged any facts suggesting that he does not
have an adequate remedy at law for any harm to the WTU's interests under
Finally, with respect to plaintiff's concerns regarding potential
changes to the WTU constitution during the period of the
administratorship, the AFT submits that there is no threat of imminent
harm, since there are "no plans at this time to alter the WTU
Constitution." The AFT provides further assurances that should any need
to alter the WTU constitution arise in the future, the AFT will follow
the regular procedures for such amendments, including a ratification vote
by the full membership.
Therefore, on the facts now before the Court, plaintiff has failed to
establish that he will suffer irreparable harm absent entry of the injunctive relief he seeks and appointment of an Independent
Monitor to ensure the AFT's compliance therewith. Plaintiff's motion for
a preliminary injunction is therefore properly DENIED.
An appropriate Order accompanies this Memorandum Opinion