Federal Circuits, 2nd Cir. (March 22, 1994)
Docket number: 93-9012
Permanent Link:
http://vlex.com/vid/padellaro-silverman-auld-cuevas-mell-36089011
Id. vLex: VLEX-36089011
Click here to download this article in graphic format (Acrobat Reader)

U.S. Court of Appeals for the 3rd Cir. - Byrne v. Calastro (3rd Cir. 2006)
Joseph E. Gulmi, New York City (Vincent F. Pitta, Barry N. Saltzman, Eve I. Klein, Annmarie P. Venuti, David L. Weissman, Shea & Gould, of counsel), for defendants-appellants.
Richard M. Seltzer, New York City (Dominique Bravo, Richard A. Brook, Joseph J. Vitale, Cohen, Weiss and Simon, of counsel), for plaintiffs-appellees.Before: CARDAMONE, JACOBS, and GOODWIN*, Circuit Judges.CARDAMONE, Circuit Judge:This is an appeal by a local teamsters union from a grant of a preliminary injunction that enjoined it from resisting, and directed it instead to submit to a temporary trusteeship imposed upon it by its parent, the International Brotherhood of Teamsters. The analytical framework upon which we rest our decision has two main components: one is the notion that federal courts should be slow to rush into what is essentially a matter of internal union governance; and the other, a corollary of the first, is that Congress--believing that an ounce of prevention today is worth a pound of cure tomorrow--has empowered the general president of a parent union to impose a temporary trusteeship on one of its locals when convinced an emergency exists warranting such action.Defendants are Local Teamsters Union Number 810 (Local 810), and its officers, Dennis Silverman, Max Sanchez, John Chambers, Stephen Silverman, Thomas Auld, Jose Cuevas and Bruno Franco (replacing retiree Mell Jones). They appeal a memorandum and order dated September 27, 1993 and a judgment dated September 29, 1993 both by the United States District Court for the Southern District of New York (Knapp, J.). See International Bhd. of Teamsters v. Local Union No. 810, 835 F.Supp. 727 (S.D.N.Y.1993). The September 29 judgment granted a preliminary injunction to plaintiffs International Brotherhood of Teamsters (IBT) and its temporary trustee, enjoining defendants from resisting the imposition of an emergency temporary trusteeship and from refusing to deliver to Joseph Padellaro, the temporary trustee, all of Local 810's records. We affirm.BACKGROUNDThis case arises against the backdrop of the March 14, 1989 consent decree entered into as a result of United States v. International Brotherhood of Teamsters, 88 Civ. 4486 (S.D.N.Y.). See generally United States v. International Bhd. of Teamsters, 814 F.Supp. 1165, 1167-68 (S.D.N.Y.1993) (describing consent decree). The United States had charged that the IBT General Executive Board permitted members of organized crime to exercise control over and to corrupt the international union and some of its local affiliates. The consent decree granted court-appointed officers broad power to investigate corruption and to supervise IBT until the election of a new general president. Ron Carey was elected to this post in 1991.In the instant matter, following an investigation into Local 810, a court-appointed investigations officer levied charges of misconduct against appellants Dennis Silverman, Max Sanchez, Stephen Silverman and John Chambers, as officers and trustees of Local 810. Dennis Silverman and Max Sanchez were accused of financial improprieties, and all four officers were charged with allowing union funds to be used to pay legal expenses for a Local 810 member. As a result of these charges, Judge Frederick B. Lacey, a former federal district court judge, serving as the court-appointed independent administrator, ordered the suspensions of these officers for periods ranging from three to six months. At the time of the imposition of the temporary trusteeship at issue in this case, Dennis Silverman, president of Local 810, had begun serving his suspension and Max Sanchez was acting president.Pursuant to one of Carey's promises in the IBT election campaign, he established in late 1992 an Ethical Practices Committee to review complaints regarding corruption or serious wrongdoing within IBT and its local affiliates. On August 25, 1993, Aaron Belk, the Administrator of the Ethical Practices Committee, uncovered information of ongoing misconduct on the part of Local 810 officials. This information was developed through conversations with two individuals, one a former business agent of the local, and the other a current delegate/business agent. The allegations included: 1) mismanaging of Local 810 pension and health and welfare funds; 2) collecting cash contributions from Local 810 business agents and staff for no apparent legitimate reason; 3) instituting pay and severance pay increases for Local 810 officers without approval of the membership; 4) paying exorbitant salary and benefits to the Silverman family; 5) paying full-time salaries to Local 810 employees who actually worked part-time; 6) failing to hold membership meetings and discouraging members from attending those meetings that were held; and 7) holding closed membership meetings limited solely to employees of Local 810 and its health and welfare fund. By letter dated August 30, 1993 Belk informed Carey of these allegations of ongoing misconduct and recommended that he place Local 810 under immediate temporary trusteeship.Based on the allegations of financial wrongdoing and lack of democratic procedures within the local and because Local 810's officers had been suspended, Carey imposed a temporary trusteeship over Local 810 without holding a hearing. Pursuant to the International Constitution (constitution) a notice dated September 10, 1993 was sent to officers and members of Local 810 informing them of the reasons for the temporary trusteeship. Carey appointed Joseph Padellaro as temporary trustee effective September 13, 1993. On that same day Padellaro appeared at the offices of Local 810 and was there informed that the local would accept his appointment only by court order.IBT therefore immediately filed a verified complaint in the Southern District of New York and moved for a temporary restraining order to enjoin Local 810 from refusing to recognize the temporary trusteeship. Later that same day--September 13--the district judge signed a temporary restraining order and an order to show cause, which enforced the imposition of the temporary trusteeship, and scheduled a hearing on whether preliminary injunctive relief should be granted. After a September 24, 1993 hearing on the preliminary injunction, the district court refused to hold a full evidentiary hearing on whether an emergency in fact existed and instead determined that the subject of the inquiry before it was whether Carey acted in good faith when he imposed the temporary trusteeship.By judgment dated September 29, 1993, Judge Knapp granted a preliminary injunction to IBT and Joseph Padellaro, enjoining Local 810 from resisting imposition of the temporary trusteeship. Local 810 and its officers appeal contending the district court not only should have examined IBT General President Carey's good faith in imposing the temporary trusteeship, but also should have taken proof on whether an emergency in fact existed when IBT, without holding a hearing, imposed the temporary trusteeship.DISCUSSIONI. Issuance of Preliminary Injunction--In GeneralWe review a district court's decision to grant or deny a preliminary injunction for abuse of discretion. See JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 79 (2d Cir.1990). Abuse of discretion usually consists of clearly erroneous findings of fact or the application of an incorrect legal standard. See Chemical Bank v. Haseotes, 13 F.3d 569, 572 (2d Cir.1994) (per curiam). Ordinarily, a party seeking a preliminary injunction must meet the burden established by our now familiar test: 1) irreparable harm should injunctive relief not be granted and 2) either a likelihood of success on the merits, or sufficiently serious factual questions making a fair ground for litigation with a balance of hardships tipping in the movant's favor. See id. at 572-73; Resolution Trust Corp. v. Elman, 949 F.2d 624, 626 (2d Cir.1991); Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam).Although the burdens assigned to the respective parties are no different in the labor trusteeship context, the scope of the examination by the district court is limited--because of the statutory scheme to be discussed in a moment--to whether the parent union showed a likelihood of success on the merits of its claim of right to impose the trusteeship and whether it would suffer irreparable harm should the preliminary injunction permitting a trusteeship not be granted. See National Ass'n of Letter Carriers v. Sombrotto, 449 F.2d 915, 923 (2d Cir.1971). Once the parent organization demonstrates likelihood of success on the merits of its claim of right to impose the trusteeship, the burden shifts to the local to show either that the trusteeship was not imposed in accordance with the procedural requirements of the union constitution or that the parent organization acted without good faith or for a statutorily unauthorized purpose. Id.; see also Teamsters Local Union No. 406 v. Crane, 848 F.2d 709, 712 (6th Cir.1988). If the familiar burden associated with obtaining a preliminary injunction were inflexibly applied to a parent union without regard to Congress' aim in the labor trusteeship context, a resisting local could easily thwart that aim simply by refusing to accept the imposition of the trusteeship. See Sombrotto, 449 F.2d at 920.II. Statutory Framework for Temporary TrusteeshipWe turn now to Congress' statutory scheme. The statute under which the district court derives its authority to enjoin Local 810 is the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. Secs . 461-466 (1988) (Reporting and Disclosure Act). Section 464(c) provides:In any proceeding pursuant to this section a trusteeship established by a labor organization in conformity with the procedural requirements of its constitution and bylaws and authorized or ratified after a fair hearing either before the executive board or before such other body as may be provided in accordance with its constitution or bylaws shall be presumed valid for a period of eighteen months from the date of its establishment and shall not be subject to attack during such period except upon clear and convincing proof that the trusteeship was not established or maintained in good faith for a purpose allowable under section 462 of this title.The Senate Report reveals that the purpose of the Reporting and Disclosure Act is to discourage improper conduct of union officials by making such conduct unprofitable. To accomplish this end, activities and arrangements engaged in by such officials are required to be reported, and are subject to full disclosure. See S.Rep. No. 187, 86th Cong., 1st Sess. 5 (1959), reprinted in 1959 U.S.C.C.A.N. 2318, 2321. In implementing this purpose a national or international labor organization, as here, may impose a trusteeship over one of its subordinate bodies to eradicate corruption or financial malfeasance, to ensure the performance of collective bargaining agreements, to restore democratic procedures or to ensure any other legitimate objects of a subordinate labor organization. See 29 U.S.C. Sec . 462.To prevent federal courts from intervening in internal union affairs, Congress established for the first 18 months after a trusteeship is imposed a presumption of its validity. This presumption does not leave open to question the judgment that prompted its imposition by making that judgment subject to a question of fact, saving only cases where dishonesty or bad faith is shown. See Executive Bd. Local 1302, United Bhd. of Carpenters & Joiners of Am. v. United Bhd. of Carpenters & Joiners of Am., 477 F.2d 612, 615 (2d Cir.1973) (quoting S.Rep. No. 187, 86th Cong., 1st Sess. 18 (1959), reprinted in 1959 U.S.C.C.A.N. 2318, 2334 (S.Rep. 187); H.Rep. No. 741, 86th Cong., 1st Sess. 14 (1959), reprinted in 1959 U.S.C.C.A.N. 2424, 2436 (H.Rep. 741)). It is because of the existence of the statutory presumption of validity in Sec. 464(c) that the burden shifts to the local to demonstrate dishonesty or bad faith.In Sombrotto we held that although Sec. 464(a) expressly authorizes federal courts to grant injunctions only to prevent the imposition and maintenance of an illegal trusteeship--and that the law was not designed to impose a trusteeship--the statute nonetheless clearly allows a parent union to impose a trusteeship upon a local, if the parent's constitution provides for it, and if the purpose is one of those enumerated in Sec. 462. See 449 F.2d at 918-19. Were it otherwise, the trusteeship scheme Congress envisioned would be a nullity. Such trusteeships effectively aid in monitoring the democratic processes of local labor organizations and help prevent the infiltration of criminal elements and corruption. Hence, the salutary purposes of Sec. 462 are to be accomplished by the use of the Sec. 464 trusteeships. See Becker v. Industrial Union of Marine & Shipbuilding Workers of Am., 900 F.2d 761, 767 (4th Cir.1990) (citing H.Rep. 741 at 13, S.Rep. 187 at 17).III. Constitution Governing Relations Between IBT and Local 810The relationship between plaintiff IBT and defendant Local 810 is governed by the constitution and bylaws of IBT. The constitution is not only a contract between IBT and its locals, it also may be characterized as a "contract" between labor organizations representing employees in an "industry affecting commerce" within the meaning of Secs. 301 and 501 of the Labor Management Relations Act of 1947, 29 U.S.C. Secs . 185(a) and 142(1) (1988). Article VI, Sec. 5(a) of the constitution states:If the General President has or receives information which leads him to believe that any of the officers of a Local Union ... are dishonest or incompetent, or that such organization is not being conducted in accordance with the Constitution and laws of the International Union or for the benefit of the membership, or is being conducted in such a manner as to jeopardize the interests of the International Union or its subordinate bodies, or if the General President believes that such action is necessary for the purpose of correcting corruption or financial malpractice [or] restoring democratic procedures ... he may appoint a temporary Trustee to take charge and control of the affairs of such Local Union ... provided, however, that before the appointment of such temporary Trustee, the General President shall set a time and place for a hearing for the purpose of determining whether such temporary Trustee shall be appointed; and further provided that where, in the judgment of the General President, an emergency situation exists within the Local Union ... the temporary Trustee may be appointed prior to such hearing, but such hearing shall then commence within thirty (30) days and decision made within sixty (60) days after furnishing of the transcript of testimony.Consequently, where a parent labor organization's constitution allows imposition of a temporary trusteeship in the case of an emergency, and the proper procedural requirements are met, a federal court may not invalidate the trusteeship, unless the local is able to show by clear and convincing evidence that the trusteeship was not established in good faith or was for a purpose not authorized by the Reporting and Disclosure Act. If the constitution provides for such a procedure, the statutory presumption of validity arises even where a temporary trusteeship is imposed prior to a union hearing. See Sombrotto, 449 F.2d at 920; Becker, 900 F.2d at 769. The statutory plan plainly anticipates that litigation regarding trusteeships would go forward while the trusteeship is in effect. See 29 U.S.C. Secs . 462, 464(c).Defendants contend the statutory presumption of validity standard does not apply in the case at hand, since to rely on it would bootstrap a temporary trusteeship imposed without a prior internal union hearing into one that is presumably valid. They maintain that in order for the presumption of validity to arise there must be a full evidentiary hearing on whether or not an emergency in fact exists.This view misreads Sec. 464(c) of the Reporting and Disclosure Act. That section requires a national or international labor organization to comply with the procedural requirements of its constitution when imposing a temporary trusteeship on a subordinate labor organization, and it mandates that a hearing be held either before or after imposition of the trusteeship. The constitution allows imposition of a temporary trusteeship without a prior internal hearing if "in the judgment of the General President, an emergency situation exists within the Local Union." (emphasis added). No rule states that an actual emergency must exist. If an actual emergency was required, a temporary trusteeship would never be warranted because the determination of whether an emergency in fact existed would have to be made by a hearing held prior to imposition of such trusteeship.It is true that in the cases upon which defendants rely evidentiary hearings were held on whether or not an emergency existed. See International Bhd. of Teamsters v. Garage Employees Local Union No. 272, No. 92 Civ. 5445, 1992 WL 235173, 1992 U.S. Dist. LEXIS 13455 (S.D.N.Y. Sept. 8, 1992); Tile, Marble, Terrazzo, Finishers, Shop Workers, Granite Cutters Int'l Union v. Granite Cutters & Marble Setters & Handlers, Local 106, 621 F.Supp. 1188 (E.D.N.Y.1985), aff'd without op.,Try vLex for FREE for 3 days
Access legal information from United States including:
Try vLex without any commitment for 3 days and see why you need it.
3
days of Free Access