It is settled in this Circuit and others that a labor union may, consistent with § 501(b) of the Labor-Management Reporting Disclosure Act of 1959 (“LMRDA”), 29 U.S.C. § 401 et seq., voluntarily pay the attorney’s fees of its officers who prevail in the defense of claims asserted against them on the union’s behalf for breach of duty under § 501(a) of that Act. See, e.g., Morrissey v. Segal,
The United States District Court for the Southern District of New York (Haight, J.) concluded that prevailing union officers in such circumstances are entitled to reimbursement for their legal expenses under § 501(b), аnd ordered the union in this case — Local 1199, Drug, Hospital & Health Care Employees Union, RWDSU — to pay more than $387,000 in attorney’s fees to several of its former officers, who won summary judgment dismissing federal and state-law claims filed by the Union and individual Union members.
We conclude that § 501(b) does not compel payment of attorney’s fees, and we therefore vacate the district court’s award entered on the basis of § 501(b), and remand this case for consideration of alternative grounds (either not raised or not ruled upon in the district court) on which an еntitlement to fees may be predicated.
The present fee dispute is an episode in a decade-long litigation between rival factions of union officials over control of the union in the early and mid-1980s.
By orders dated May 27, 1993 and July 5, 1994, the district court granted motions for summary judgment filed by eight of the eleven original defendant officers,
Meanwhile, the eight defendant officers who had won summary judgment moved for an award of costs and attorney’s fees — the issue now here on appeal. They specified three sources of authority for an award of fees: (1) § 501(b); (2) the “bad faith” exception to the “American Rule” governing liability for attorney’s fees; and (3) various provisions of New York State law regarding “reimbursement of corporate officers and directors who have been vindicated in litigation against them.” See Doyle v. Turner,
The district court’s order awarding fees was entered on July 17, 1995. The Union originally filed an appeal of that order to this Court on July 26, 1995. Ten months later (after briefing but prior to argument), this Court granted a motion by the defendant officers to dismiss the appeal for lack of a final judgment because other claims and counterclaims remained pending in the district court. Upon dismissal of the appeal, the fee judgment became final for purposes of enforcement, and the defendant officers
Eventually, the Union and the defendant officers settled their remaining claims and counterclaims, with prejudice, by way of a Stipulated Order of Dismissal (dated July 10, 1996). Among the other principal terms of the Stipulated Order: (1) the Union agreed to pay the defendant officers $750,000 in nine equal monthly installments;
On appeal, both sides raise arguments that (variously) were not asserted in the district court, were not addressed there, or were not properly preserved for appeal to this Court. Thus the Union, despite failing to appeal from the district court’s orders granting the defendant officers summary judgment, now argues that those orders were erroneous and should be subject to this Court’s de novo review of summary judgment. The defendant officers, for their part, advance at least three new grounds for affirming the fee award: (1) reimbursement is justified by a “common benefit” analysis, because § 501(b) is a “trust statute”; (2) reimbursement is justified by “promissory-equitable estoppel,” because the Uniоn promised in writing (when the litigation started) to pay the costs of a successful legal defense; and (3) as a policy matter, vacating the award would “emasculate union democracy” by permitting unions to reimburse exonerated officers (or not) at whim.
DISCUSSION
Whether the Union was compelled, under § 501(b), to reimburse the defendant officers’ attorney’s fees is a question of law that we review de novo. See, e.g., Mautner v. Hirsch,
As noted, the Union now urges that we address a preliminary issue: the correctness of the district court’s summary judgment orders. According to the Union, those orders are “appropriately before this Court” because they constituted “[t]he predicate to the fee judgment,” by making the defendant officers “prevailing defendants” for purposes of recovering fees, Union Brief at 29, and because an appeal from final judgment permits attack upon “all prior non-final orders and rulings which produce the judgment,” Union Reply Brief аt 19 (citation omitted). At the same time, the Union concedes that our reversal of summary judgment would “not reinstate the litigation,” Union Brief at 29, and that “the summary judgment issues cannot be further pursued on the merits in the event of a reversal because the action has been dismissed with prejudice,” Union Reply Brief at 20 n. 12. We conclude that all disputes bearing on the merits of the under-
Because we reach the issue of attorney’s fees under § 501(b), answer that question in the Union’s favor, and vacate the district court’s order awarding fees, we do not consider argumеnts challenging the particulars of the fee judgment, such as the amount of the award or the sufficiency of the evidence supporting it. In short, our discussion is limited to analyzing whether § 501(b) requires reimbursement of vindicated officers’ attorney’s fees.
A
Section 501(b) creates a cause of action for individual union members who, having secured “leave of the court” to do so, seek “relief for the benefit of the labor organization,” in circumstances where a union official “is alleged to have viоlated the [fiduciary] duties declared in subsection (a) of [§ 501],” and the union refuses or fails to sue for appropriate relief despite being requested to take such action. See 29 U.S.C. § 501(b). The statute also allows member-plaintiffs to receive reimbursement for their costs in pursuing the lawsuit:
The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit at the instance of the member of the labor organization and to compensate such member for any expenses necessarily paid or incurred by him in connection with the litigation.
Id. The full text of the subsection is set out in the margin.
As the district court observed, § 501(b) “does not deal expressly with the payment or reimbursement of attorney’s fees incurred by union officers who are charged with violating their fiduciary duties.” Doyle,
Moreover, no case of which we are aware holds or suggests that a union may be compelled to reimburse attorney’s fees. For example, in Cassidy v. Horan,
B
In arriving at the opposite conclusion, the district court relied chiefly upon Judge Lumbard’s opinion in Morrissey v. Segal,
Morrissey involved a suit by union members under § 501 to recover wrongful pension payments made from the union’s fund to certain ineligible employees. See
On appeal, this Court considered a narrow question: “the extent to which the defendants may charge the [pension] fund for counsel fees incurred in defense of [the union’s] action.” Id. Given the posture of that case — the union having reimbursed the defendants in full — no issue arose as to what duty the union owed; the opinion dealt solely with the limits of what the union could do in the way of reimbursement if it so chоse. At a later stage of proceedings in the same litigation, Judge Newman characterized our holding in Morrissey as merely the approval of a reimbursement that the union had the power to make:
In Morrissey v. Segal, ... this Court upheld an allocation of the costs of legal services that could be reimbursed by a union in a § 501 action, where the defendant officer was held liable on some charges while other charges were dismissed. The Court approved reimbursement for his fees with respect to the dismissed charges.
Morrissey v. Curran,
Judge Lumbard’s opinion in Morrissey, on which the district court relied, thus dealt with what was permissible by way of reimbursement rather than what was mandatory. That is illustrated by the Morrissey court’s distinction of eases (cited by the trustees there) holding that union funds could not properly be expended for officials’ personal defense “prior to a full determination on the merits.” Morrissey,
‘ [although these decisions indicate that trustees might seek reimbursement in the event that they were eventually exonerated, see, e.g., Holdeman v. Sheldon,311 F.2d 2 , 3 (2d Cir.1962); Highway Truckers I, supra, at 622, in no case was it suggested that indemnification would be required or even proper after an adjudication that trustees had breached their duty to the union.”
Id. (emphasis added). Because the trustees in Morrissey had not been “exonerated for their conduct in the Perry transaction,” we concluded that “the pоlicy behind § 501 requires that trust funds not be used to defray their litigation expenses.” Morrissey,
Morrissey’s citation to cases such as Holdeman, Kerr, and Highway Truckers I— for the proposition that the trustees “might seek reimbursement in the event that they were eventually exonerated,” see
The defendant trustees, however, are entitled to be reimbursed for those fees incurred in defending their behavior in the non-Perry payments. The beneficent aims of § 501 should not be frustrated by construing its terms with such uncompromising rigor that competent individuals are discouraged from assuming a fiduciary role in union affairs. A pension trustee who has acted blamelessly in a good faith effort to promote what he reasonably believed to be the purposes of the trust should not be required to shoulder the burden of his defense when subsequent events prove his decisiоn to have been an improvident one. See 3 Scott, The Law of Trusts, § 188.4, at 1535 (3d ed.1967).
Morrissey,
The district court therefore erred in deducing from Morrissey that reimbursement of attorney’s fees is required by equitable principles. See Doyle,
The samе analysis applies here. Section 501(b) states that “[t]he trial judge may allot
We therefore hold that union officials who successfully defend against claims under the LMRDA for breach of fiduciary duty may not — by invoking § 501(b) or general equitable principles — compel reimbursement from the union for the costs of their legal defense (including attorney’s fees). Accordingly, we vacate the district court’s order awarding attorney’s fees to the defendant officers in this case. Because the district court based its fee award sоlely on § 501(b), without considering other possible grounds, we remand this case to the district court to determine whether the defendant officers may be awarded attorney’s fees (and have preserved the right to seek such fees) on other grounds or rationales, including those proffered in the district court (ie., the “bad faith” exception to the “American Rule” and various provisions of New York state law) and those argued here on appeal (ie., “common benefit” analysis, promissory estoppel, or preservation of union democracy).
CONCLUSION
The order of the district court awarding attorney’s fees to the defendant officers is vacated, and this ease is remanded to the district court for further proceedings consistent with this opinion.
Notes
. The history of this litigation, and the dispute underlying it, is documented in a series of opinions by the district court. See Doyle v. Turner, No. 86-CV-2792 (CSH),
. The eleven defendant officers named in the Union’s complaint were; Doris Turner, Telbert King, Herb Binger, Ramon P. Malave, Claude Ferrara, Jo-Ann Marshall, Barington Mоore, Karl Rath, Floris Saunders, Floyd Shephard, and Philip Kamenkowitz. All but Turner, King, and Kamenkowitz moved for, and were granted, summary judgment. See Doyle v. Turner,
. The defendant officers first attempted to collect the fee judgment one year earlier, through a writ of execution filed on July 27, 1995. In an order dated August 8, 1995, the district court (Stein, /.) dissolved the writ and directed that execution on the judgment be stayed. The defendant officers filed a petition for a writ of mandamus challenging the district court’s order, but this Court denied the petition. See In re Ferrara, No. 95-3064 (2d Cir. Sept. 26, 1995).
. Pursuant to the Union's rеquest at oral argument, this Court issued an order dated November 5, 1996 staying the Union's obligation to make the monthly payments under the Stipulated Order of Dismissal, pending resolution of this appeal and any further decision on attorney's fees by the district court.
.The defendant officers also argue that the case is not ripe for appeal because there has been no “judgment” in the district court within the meaning of Fed.R.Civ.P. 58, and hence no finality. This argument is meritless: the fee judgment from which the Union appeаls was entered by the district court clerk on July 17, 1995; and the Stipulated Order of Dismissal was entered on July 15 the following year. Similarly, we reject the defendant officers’ contention that, because all of the payments authorized by the Stipulated Order of Dismissal have not yet been made, the dismissal is only a “conditional order.”
. Section 501(b) reads in full:
When any officer, agent, shop steward, or representative of any labor organization is alleged to have violated the duties declared in subsection (a) of this sectiоn and 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 such officer, agent, shop steward, or representative in any district court of the United States or in any State court of competent jurisdiction to recover damages оr secure an accounting or other appropriate relief for the benefit of the labor organization. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown, which application may be made ex parte. The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit at the instance of the member of the labor organization and to compensate such member for any expenses necessarily paid or incurred by him in connection with the litigation.
29 U.S.C. § 501(b).
. For similar reasons, the district court erred in distinguishing our opinion in Cassidy v. Horan,
. The district court also mentioned Morrissey's citation to a student law review article that raised the question of a union officer's “right to compеl reimbursement [of attorney's fees] from the union.” Doyle,
