John MALLICK, Appellant v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, et al.
No. 83-2200
United States Court of Appeals, District of Columbia Circuit.
Argued Sept. 26, 1984. Decided Nov. 27, 1984.
749 F.2d 771
In the absence of any specific criticisms by petitioners of the ICC‘s cost findings, we cannot find inadequate the cost evidence supporting the Commission‘s rate determination. Nor were the figures and use of precedents for revenue to variable cost ratios inadequately reasoned or presented. From its opinion and cost appendix, it appears that the Commission articulated and took into consideration relevant statutory factors. In the absence of any specific statutory guidance as to how an “appropriate rate” must be derived, we cannot require more from the Commission than the provision of substantial evidence, consistency with the statute, and reasoned decisionmaking. We are thus constrained to find that from its decision and opinions, the ICC‘s “path may reasonably be discerned.” Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974).
VIII. CONCLUSION
For the reasons herein before stated, we affirm the decisions of the ICC in 83-2399 and 83-1691 in their entirety.
Judgment accordingly.
Paul Alan Levy, Washington, D.C., with whom Alan B. Morrison, Washington, D.C., was on brief, for appellant.
John P. Counts, Washington, D.C., for appellees.
Before WRIGHT and WALD, Circuit Judges, and MACKINNON, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge WALD.
Concurring opinion filed by Senior Circuit Judge MACKINNON.
John Mallick appeals from a summary judgment dismissing his action against his union, the International Brotherhood of Electrical Workers (IBEW), and two IBEW officers under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA),
I. BACKGROUND
This lawsuit involves decisions made by the IBEW in litigating an earlier action, Boswell v. International Brotherhood of Electrical Workers, Civ. No. 79-2571 (D.N.J. Mar. 2, 1981). Boswell, also an IBEW member, sued the union and two union officers, charging that he had been disciplined for acts protected by the free speech provisions of the LMRDA. Boswell requested actual and punitive damages, rescission of the disciplinary measures imposed on him, and equitable relief requiring
The case was ultimately settled. As part of the settlement, the IBEW made changes in its constitution, and apparently paid Boswell a substantial sum of money and attorneys’ fees.4 Boswell signed a letter agreeing to the settlement, in which he promised not to reveal its financial terms unless the IBEW did so first. The district judge entered an order stating that the parties had settled on terms set forth in separate letters, and he redacted references to the financial terms of the settlement from the transcript of the settlement hearing. He did not, however, order any party not to disclose the terms of the settlement.5
In late 1981, Mallick wrote to the International President and International Secretary of the IBEW. He asked that he be allowed to examine IBEW books and records reflecting its expenditures in Boswell, including the amount of all attorneys’ fees and other costs of defending the union and its officials, as well as the amounts paid to Boswell and his counsel. Mallick later explained that he believes the IBEW litigates union democracy lawsuits without regard to costs or to the best interests of members, simply to discourage members from bringing such lawsuits. The IBEW refused his request,6 and on April 19, 1982, Mallick brought this action against the IBEW, its International President, and its International Secretary.
In his complaint, Mallick requested injunctive and declaratory relief granting him access to the disputed IBEW books and records. According to the complaint, disclosure of the Boswell costs would enable IBEW members to engage in more informed debate about whether the union was wise to defend the suit as it did, and would assist IBEW members in determining whether any of the Boswell payments were excessive or improper.7 On cross-motions for summary judgment, the district court granted summary judgment on all claims for the IBEW. Mallick v. International Bhd. of Elec. Workers, No. 82-1075 (D.D.C. Oct. 14, 1983) (order).
II. THE SUBSECTION 201(C) CLAIM
A
Mallick‘s first claim arises under
Every labor organization required to submit a report under this subchapter shall make available the information required to be contained in such report to all of its members, and every such labor organization and its officers shall be under a duty ... to permit such member for just cause to examine any books, records, and accounts necessary to verify such report.
At the Boswell settlement hearing, counsel for the IBEW asked the district court to sign an order directing the payment of attorneys’ fees for Boswell, because the IBEW was “concerned about the possibility of strike suits.” Transcript of Proceedings, Boswell v. International Bhd. of Elec. Workers, at 20, R. Item 6, Exhibit C. The district court declined, “because I have no basis at all for arriving at the numbers.” Id. at 21.
The IBEW replies that the LM-2 report it filed for 1980-1981, the reporting year in which Boswell was settled, was accurate and showed no items that were grossly disproportionate in amount. On its view, Mallick therefore does not seek to “verify” the report, and consequently has no right to examine the underlying records.
Mallick does not concede that he must show anything on the face of the report suggesting improprieties. But he believes that even if there is such a requirement, he has met it. Specifically, Mallick notes that the LM-2 report showed a drop of nearly $400,000 in the balance of a special reserve fund IBEW maintains for legal expenses, called the Defense Fund. From 1973 to 1980, the Fund balance did not vary by more than 1% from $5,000,000; the $400,000 change in 1980-1981 represented a decline of about 8%.8 According to the IBEW constitution, the Fund “shall be for the sole purpose of providing legal defense. No disbursements shall be made from this fund except for the legal defense of L.U.‘s [local unions] and their members, or for the defense of an International Officer or Representative ... .” IBEW Const. art. XI, § 1 (1982), R. Item 8, Exhibit C at Exhibit A. Mallick argues that the sudden drop suggests an abnormally high outlay for legal expenses in that year.9
The IBEW has acknowledged that before Mallick brought this action, it had not disclosed to its members whether the Boswell costs were paid from the Defense Fund or the General Fund. The IBEW Constitution does not appear to require that all attorneys’ fees for IBEW representation be paid from the Defense Fund, and does not clearly state whether settlements and attorneys’ fees for adverse parties are ordinarily paid from the Fund at all.10
The 1980-1981 LM-2 report also stated that the IBEW had spent $2,082,887 in “Professional Fees.” This item, however, includes payments for auditing, economic research, and similar services, as well as for outside legal work. It does not include compensation to employees for professional services, which is accounted for separately.11
We must decide whether the LMRDA affords a union member in this position any remedy. That question involves two subsidiary inquiries. First, does the right of examination merely assist union members in forcing their unions to file accurate reports? And second, if the right of examination goes beyond this limited scope, does it extend to the facts presented here? To address these problems, we examine the statutory text in light of its legislative history.
B
The district court held that because Mallick had not shown that the LM-2 report was “untruthful, inaccurate, or incomplete,” District Court Op., supra note 2, at 3, examination of the underlying records was not necessary to verify the reports. This is a plausible reading of the statutory text, but it is certainly not the only possible interpretation. As the various theories of the parties and the rather tangled web of judicial decisions concerning subsection 201(c) make plain, its language is simply too general and ambiguous to resolve this controversy. Moreover, the Supreme Court has cautioned lower courts to be especially leery of interpreting the LMRDA based on uncertain inferences from word-by-word parsing of the statute. “We must look to the objectives Congress sought to achieve, and avoid ‘placing great emphasis upon close construction of the words.’ ” United Steelworkers v. Sadlowski, 457 U.S. 102, 111, 102 S.Ct. 2339, 2345, 72 L.Ed.2d 707 (1982) (quoting Wirtz v. Local 153, Glass Bottle Blowers Ass‘n, 389 U.S. 463, 468 n. 6, 88 S.Ct. 643, 646 n. 6, 19 L.Ed.2d 705 (1968) and Cox, Internal Affairs of Labor Unions Under the Labor Reform Act of 1959, 58 Mich.L.Rev. 819, 852 (1960)).
The LMRDA was enacted after lengthy congressional investigations disclosed that in many instances, union officials had run unions as private fiefdoms, in utter defiance of the interests of members. See Interim Report of the Select Committee on Improper Activities in the Labor or Management Field, S.Rep. No. 1417, 85th
It carried out that basic policy through a variety of provisions, including a comprehensive “Bill of Rights of Members of Labor Organizations,” which protects equal voting rights, freedom of speech and of assembly, and other basic safeguards for union democracy, see
Senator Goldwater offered the provision that became subsection 201(c) as an amendment from the Senate floor to the Kennedy-Ervin bill, which was one of a number of labor reform bills considered by the 86th Congress. The original text read:
Every labor organization required to submit a report under this title shall make available copies of such reports to each of its members and shall permit such members to examine the books, records, and accounts of such transactions as were or may be necessary to prepare or verify the reports required by section 101. The Secretary shall by regulation prescribe the form and manner for making such reports available to such members, and the time, place, circumstances, and conditions under which such books, records, and accounts may be examined by such members.15
Senator Goldwater simultaneously distributed to the Senate a memorandum explaining his amendment. The first sentence of that memorandum stated without qualification that the amendment “requires the union to permit the union members to examine the basic records upon which the report is based.” 105 Cong.Rec. 6520 (1959), reprinted in 2 LMRDA Legislative History, supra note 13, at 1125.
In support of his amendment, Senator Goldwater argued that if union members could not look into the accuracy of the reports, unions might simply file false reports and gamble that the Secretary of
Senator Goldwater responded to concern that his amendment could be used as a tool for harassing unions or passing their confidential information to management by offering a modified version of the amendment. That version read:
Every labor organization required to submit a report under this title shall make available copies of such reports to each of its members and shall permit such members for proper cause to examine the books, records, and accounts of such transactions as were or may be necessary to prepare or verify the reports required by section 101. The Secretary shall by regulation prescribe the cause, form, and manner for making such reports available to such members, and the time, place, circumstances, and conditions under which such books, records, and accounts may be examined by such members.
Id. at 6522 (emphasis added to indicate changed passages), reprinted in 2 LMRDA Legislative History, supra note 13, at 1127-28.17 Immediately before the amendment was adopted, Senator Javits, who prepared the compromise amendment with Senators Goldwater and Kennedy, stated:
I think this is an excellent solution of the matter, because it equates the rights of the union members with the rights of corporate stockholders, and it prevents a proliferation of the inspection. I believe the amendment is acceptable, because it would prevent vexatious forays into the unions’ books.
Id. at 6523, reprinted in 2 LMRDA Legislative History, supra note 13, at 1128.18
Representatives Landrum and Griffin subsequently introduced two identical bills in the House of Representatives. The Landrum-Griffin bill required unions to make their financial reports available to members, and “to permit such member for just cause to examine any books, records, and accounts necessary to verify such report.”
The legislative history in the House does not explain the significance of the differences between its version of subsection 201(c) and the version in the bill passed by the Senate.21 The House report does, how-
The members of a labor organization are the real owners of the money and property of such organizations and are entitled to a full accounting of all transactions involving such money and property. Because union funds belong to the members they should be expended only in furtherance of their common interest. A union treasury should not be managed as though it were the private property of the union officers, however well intentioned such officers might be, but as a fund governed by fiduciary standards.
.... [I]f unions are to enjoy the protection of rights and exercise the broad powers which are guaranteed to them by the National Labor Relations Act and the Railway Labor Act, they ought also to be held responsible for abuses that have accompanied the exercise of such powers and rights by some union leaders.
Similarly the rules governing the conduct of the union‘s business, such as dues and assessments payable by members, membership rights, disciplinary procedures, election of officers, provisions governing the calling of regular and special meetings—all should be known to the members. Without such information freely available it is impossible that labor organizations can be truly responsive to their members.
It is the purpose of this bill to insure that full information concerning the financial and internal administrative practices and procedures of labor organizations shall be, in the first instance available to the members of such organizations. In addition, this information is to be made available to the Government, and through the Secretary of Labor, is to be open to inspection by the general public. By such disclosure, and by relying on voluntary action by members of labor organizations, it is hoped that a deterrent to abuses will be established.
House Comm. on Education and Labor, Labor-Management Reporting and Disclosure Act of 1959, H.R.Rep. No. 741, 86th Cong., 1st Sess. 7-8, reprinted in 1959 U.S.Code Cong. & Ad.News 2424, 2430, and in 1 LMRDA Legislative History, supra note 13, at 759, 765-66.
This passage principally refers to
Moreover, the legislative history of the “just cause” requirement of subsection 201(c) clearly shows that the Senate intended to encourage judicial borrowing of disclosure standards from a related area of the law: the rules governing a shareholder‘s right to examine corporate books. The Senate thus embedded in subsection 201(c) itself a plain reference to the same fiduciary responsibility in financial matters it created in
However, we need not decide whether the “necessary to verify” language of subsection 201(c) simply defines the records subject to examination, or imposes a requirement that the union member actually seek to verify the LM-2 reports. We hold only that when a union member points to a sudden, apparently significant, and unexplained change in an item on his union‘s LM-2 report, he has satisfied any connection that subsection 201(c) may require between the report and the underlying records.
In our view, this result is more consistent with the policies of the LMRDA than a theory that reduces the right of examination to a check on the union‘s arithmetic. Typically, union members will be interested in looking at underlying records precisely because they believe the LM-2 reports are accurate, and raise questions about the handling of union funds. Nor do we believe that subsection 201(c) requires that union members allege an actual breach of fiduciary duty in the handling of funds or any other wrongdoing. Permitting a union member to inspect union records is not a method of punishing a union or its officials; it is simply a method of ensuring that union members are sufficiently well informed to participate intelligently in union affairs. At least when the union‘s LM-2 reports show abrupt and unexplained shifts, a union may not simply dig in its heels and refuse to explain what the change means.
Cases dealing with the “necessary to verify” provision of subsection 201(c) have generally rejected a cramped literalism. In Rekant v. Rabinowitz, 194 F.Supp. 194 (E.D.Pa.1961), for example, the union member complained
that the report does not disclose the purpose of the “disbursements to officers” or of the “other disbursements” [items in the filed reports], that the item of “office and administrative expense” is too high because the union has only 23 members
and no office, that none of these items was ever discussed at union meetings, reported to or voted upon by the members of the union, and that despite his demand on the union to look at its books and records, he has not been permitted to do so.
Id. at 195. The plaintiff apparently did not allege that the union illegally failed to include the additional information he sought in the LM-2 reports, nor was there “a specific averment that the statements in the report are not true.” Id. Nonetheless, the district court held that “with a wider construction [the word ‘verify‘] also can mean to check generally on the accuracy or completeness of a statement or statements. Under the broader definition plaintiff‘s averments are sufficient ... .” Id.
A number of other cases deal with the connection between the LM-2 reports and the records sought as an aspect of just cause. In Fruit & Vegetable Packers and Warehousemen Local 760 v. Morley, 378 F.2d 738 (9th Cir.1967), for example, the court described “just cause” in the following way:
The standard for determining whether there was just cause is necessarily minimal. Just cause need not be shown beyond a reasonable doubt, nor by a preponderance of the evidence. It need not be enough to convince a reasonable man that some wrong has been done; it is enough if a reasonable union member would be put to further inquiry. Perhaps it will be that a certain item is disproportionately high ... or that an officer contends that he did not incur the claimed expenses .... Irrespective of the nature of the asserted cause, the test must be whether reason would require substantiation.
Id. at 744 (citations omitted).23
In Cumbea v. Local 400, Aluminum Workers’ International Union, 460 F.Supp. 60 (E.D.Va.1978), the union member noted “that despite regular dues increases a reserve fund denominated a ‘strike fund’ recently had been transferred into the general fund of the union. This admitted fact put plaintiff on inquiry as to why the transfer of a reserve fund to the general fund had become necessary.” Id. at 61. The Cumbea court rejected the union‘s argument that because the member alleged no breach of fiduciary duty, he had not shown just cause. Id. at 62. Instead, the court suggested that a member who simply wanted further information about an unusual transaction reflected on the LM-2 report satisfied Morley. Id. On the other hand, in Flaherty v. Warehousemen, Garage & Service Station Employees’ Local Union No. 334, 574 F.2d 484 (9th Cir.1978) (per curiam), the court rejected a union member‘s comprehensive request for a complete accounting of all union records. The court commented that the union member “never has contended that he desired to examine [the union‘s] books in order to verify its LM-2 reports and never raised any question concerning those reports .... While access to union records might indeed result in more intelligent voting ... that is not the purpose of section [201(c)] .... ” Id. at 486. The court also stated that “the purpose for the inquiry into the union‘s records must be to examine the basis for the union‘s financial report.” Id.
Flaherty concerned a blanket request for examination of union financial records, with no reason offered except political opposition to union officials. The Flaherty per curiam opinion explicitly relied on
The language of these decisions, and that of others interpreting subsection 201(c),25 does not always fall into a neat pattern. But their rejection of the theory that a subsection 201(c) claimant must show outright error or grossly suspicious items on the LM-2 report is clear enough. They thus support our view that at least when a union member demonstrates a sudden, apparently significant, and unexplained change in an LM-2 item, he has satisfied any connection the “necessary to verify” provision may require between the LM-2 report and the underlying records.
Mallick has clearly satisfied this principle. As we note above, the 8% change in the balance of the Defense Fund was far greater than changes in preceding years, and the significance of the change was entirely unclear. Litigation expenses were reported in such broadly inclusive and vaguely defined categories that union members could not have intelligently determined what meaning, if any, this abrupt change had. The IBEW argues that this change might reflect expenditures unconnected with Boswell, and that the Boswell figures alone could not “verify” the Defense Fund balance. But where a union member has some notion of what may account for a changed item and therefore does not ask for all the records underlying that item, we think it would be hypertechnical to deny examination on the ground that the member asked to see too few records.
C
The IBEW argues that even if Mallick is otherwise entitled to inspect the records reflecting the Boswell costs, disclosure of the settlement terms would seriously damage the union‘s interests. Specifically, the union claims that disclosure would encourage nuisance suits against the IBEW, and would establish a target amount at which subsequent litigants against the IBEW will aim. We think that whether these concerns are enough to defeat Mallick‘s request for examination should be addressed in the first instance by the district court in deciding whether “just cause” for examination exists.26 However, we add a few words for its guidance.
Nonetheless, other principles may limit the right of examination. Hostility to the policies of union officials is not, however, one of these limitations. Traditionally, a shareholder‘s opposition to corporate management was not an improper purpose for examining corporate records.31 The pervasive support for union democracy that undergirds the LMRDA leads us to reach a parallel result here: an otherwise sufficient showing under subsection 201(c) cannot be attacked because the union member opposes union policies.32
On these facts, the question of just cause requires balancing the IBEW‘s financial interest in nondisclosure against the injury to the interest of Mallick and other union members in determining how funds held in trust for them are being spent. In our opinion, this question cannot be answered by broad generalizations about the desirability of encouraging confidential settlements, although that general policy will be part of the backdrop. Nor should the district court look into the wisdom of current union policies or those advocated by Mallick: the LMRDA leaves those controversies to the union and its membership. Instead, the district court must decide whether the genuine harm to the IBEW, pragmatically viewed, outweighs the strong policy favoring access for union members who have otherwise satisfied the statutory requirements for examination.34 Since “[t]he just cause requirement must be read in a narrow sense when invoked to resist an examination which is admittedly not for harassment,” Morley, 378 F.2d at 738, the harm to the union must be significant. If the IBEW demonstrates that disclosure of this information would be comparable to, for example, a corporation‘s disclosure of trade secrets, confidential earnings projections, or the like, or a union‘s disclosure of organizing strategy, negotiating plans, or other secrets, then examination should be refused. If, however, the IBEW‘s fears prove speculative and remote, Mallick‘s request should be granted.
III. THE SUBSECTIONS 501(A) AND 101(A) CLAIMS
Mallick also argues that the IBEW has a fiduciary duty under
However, we need not decide under what circumstances section 501 might enable a union member to examine records unavaila-
Finally, Mallick brings two related claims under
Mallick also relies on Lodge 1380 Brotherhood of Railway, Airline, & Steamship Clerks v. Dennis, 625 F.2d 819 (9th Cir.1980), in which a union member sought a list of the membership as essential to communicate his views to them, and so to exercise his right of free speech. The court held his complaint adequate to survive a motion to dismiss. See id. at 827-28. Again, we need not determine whether Dennis was correct to conclude that Mallick‘s claim is at a much greater remove from the statutory right to freedom of speech. That right simply does not guarantee access to all information a member might want to speak about. Cf. United Steelworkers v. Sadlowski, 457 U.S. 102, 111 (1982) (scope of § 101(a)(2) narrower than that of first amendment). Mallick must be able to ground his claims on a violation of a specific right enumerated in subsection 101(a), see Bunz v. Moving Picture Machine Operators’ Protective Union Local 224, 567 F.2d at 1120, and this he has failed to do. Accordingly, we affirm summary judgment against him on the subsection 101(a) claims.
CONCLUSION
Because we believe that Mallick has sufficiently connected the IBEW‘s LM-2 re-
Affirmed in part, vacated in part, and remanded.
MacKINNON, Senior Circuit Judge, concurring.
I concur in the opinion of Judge Wald and have some additional observations.
At oral argument we requested the Union to file with the clerk its complete Form LM-2 as allegedly filed under the Labor-Management Reporting and Disclosure Act of 1959. This was done and in item 63 it discloses “Professional Fees $2,082,887.” This figure first surfaced in this case during oral argument in response to a question from the bench. Before that disclosure the court never knew that we were not considering merely a figure of around $400,000 which had been determined by the plaintiff by noting the reduction in the “reserve for defense fund” during the Fiscal Year July 1, 1980 to June 30, 1981. Up to the disclosure of the $2 million figure, so far as would appear from the material that was in the record before the court, the only other item in the LM-2 report that would exclude expenses in connection with litigation, including the Boswell case, would be schedule 14, “Other Disbursements,” for which a “schedule attached” notation appeared in the filed material the court had. But there was no “schedule attached” to the record filed with this court.
We have now been given what appears to be the complete Form LM-2 as allegedly filed with the Department of Labor. We do not know whether this complete report had earlier been given to Mallick in response to this request of the Union as it was required to do. If the Union only gave him the few pages from the LM-2 report that we found in the record in this court, the Union‘s response to Mallick‘s request as a union member was insufficient. For such possible insufficiency, if it existed, the Union would be subject to the court granting a motion for summary judgment.
This brings us to the complete LM-2 report as we now have it, and to the “just cause” requirement of the statute which must be shown for a union member to be able to investigate the Union books.
Item 63 shows “Professional Fees $2,082,887.” It is noted that this figure purports to be all paid for “fees.” That designation “fees” would not be sufficient to cover any sum paid as damages, or in lieu of damages, by the Union for its tortious conduct or specifically on behalf of its officers for their tortious treatment of Boswell.
However, assuming that some sum was paid to Boswell as damages for the officers’ individual breach of their duties, or for the Union‘s breach of its duties, that item of “damages” is not indicated as being shown in item 63, which is restricted to “professional fees“—it still might be shown elsewhere in the report. The only other place that I can find it might be disclosed is schedule 14—“Other Disbursements.” For this item there is a “schedule attached” itemizing the total sum of $6,744,109. This schedule 14 which breaks down the “Other Disbursements” to total exactly the total sum shown on the face of the regular report contains 11 specific items. These run as low as $897.66 and as high as $2,710,757.77. But the description of none of the items include any sum paid by way of “damages” to Boswell in any litigation, or to any other person. Thus, if any sum was paid for “damages” to Boswell, it does not appear that the LM-2 report properly discloses it in any item.
If there is such an item as damages paid to Boswell to settle the litigation, and the Union contends that they filled out the report completely, that claim could be negated by pointing out that such item is not called for by the professional fees item and is not disclosed in the “Other Disbursements” item.
In addition to the foregoing, the magnitude of the “Professional Fees” item of $2,082,887, and the absence of any detailed specification of the expenditures it covered, cries out for closer examination. This is particularly so when the Union in schedule 14, “Other Disbursements,” considered that they should disclose items as small as $897.66.