Trustees of the Operative Plasterers' and Cement Masons'local Union Officers and Employees Pension Fund,plaintiffs-appellees, v. Journeymen Plasterers' Protective and Benevolent Society,local Union No. 5, Defendant-appellant, 794 F.2d 1217 (7th Cir. 1986)

This is an action brought by the appellees, Trustees of the Operative Plasterers' and Cement Masons' Local Union Officers and Employees Pension Fund (Trustees), against the Journeymen Plasterers' Protective and Benevolent Society, Local Union No. 5 (Local 5) to compel contributions to a pension fund. Local 5 defended by claiming that the pension fund was illegal as violative of section 501 of the Labor Management Reporting and Disclosure Act (LMRDA or Landrum-Griffin), 29 U.S.C. § 501.¹  Specifically, Local 5 alleged that a breach of fiduciary duty occurred when the pension plan, which would benefit some of the delegates, was adopted at the international union's convention. Also, Local 5 contended that the plan was adopted in a manner which contravened portions of the international union's constitution. On cross-motions for summary judgment, the district court found for the Trustees. First, the district judge held that section 501 applied only "to the relationship between union officers and their locals, not the interest of delegates to convention voting on pleniary [sic] issues such as the creation of a pension fund for all officers and employees of the union." Trustees of the Operative Plasterers' and Cement Masons' Local Union Officers and Employees Pension Fund v. Journeymen Plasterers' Protective and Benevolent Society, Decision at 2 (N.D. Ill. Oct. 17, 1984). Second, the district judge held that section 501 should only be applicable "in the event of waste or fraud." Id. Finally, he held that section 501 could not apply to violations of an international union's constitution. Id. at 3. Although we decline to adopt the reasoning of the district court, we affirm its judgment.

* Almost fifteen years ago, in August 1971, the Operative Plasterers' and Cement Masons' International Association (International) held its forty-second convention. Local 5, a Chicago-area affiliate of the International, had delegates in attendance. At the convention, the delegates adopted Resolution 206 (R. 206)--a provision which established a pension plan for full-time salaried officers and employees of the local unions. This resolution further provided that "all Local Unions shall contribute a uniform percentage up to but not in excess of ten (10%) percent of the salaries of such officers and employees to support and to finance this pension plan." R. 21, Ex. C at 6; Appellant's App. at 11a. The plan was organized and placed under the auspices of the Trustees.

According to Local 5, its members had opposed the pension plan from its inception. Part of this opposition stemmed from the fact that Local 5's officers and employees already participated in a distinct, industry-wide pension plan. Local 5 took the position that the International, by forcing it to contribute to the R. 206 plan, made the local pay for benefits which it did not require. Therefore, to avoid paying for excess benefits, Local 5 refused to contribute to the plan.

On September 23, 1983, the Trustees filed the present action to enforce Local 5's obligations under the pension plan. Jurisdiction was premised on section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, and section 502 of the Employee Retirement Income Security Act, 29 U.S.C. § 1132. In the district court, Local 5 admitted that it had never tendered contributions to the pension fund. Yet, it defended its nonpayment by arguing that the pension plan was illegal inasmuch as it was established in violation of section 501 of the LMRDA. Specifically, Local 5 argued that section 159 of the International's constitution (allegedly prohibiting members from voting in an election in which they have a personal interest) and section 141 (allegedly requiring local union ratification of all actions affecting that local) were violated at the 1971 convention.² 

II

As noted above, the district judge, in granting summary judgment, held that section 501 applied only to the relationship between union officers and their locals, not to the interests of delegates to a convention voting on plenary issues. Furthermore, he held that section 501 was only applicable in the event of waste or fraud. Alternatively, he held that section 501 did not apply to violations of an international union's constitution.

We are unprepared on this record to address the sweeping propositions of law asserted without citation by the district judge. The proper scope of section 501 is not an issue susceptible to easy judicial resolution. Indeed, from the very earliest days of the LMRDA, it has been recognized that the precise contours of section 501 are difficult to delineate. Definitive interpretation of such an ambiguous provision must be undertaken with great caution even on the best of records.

The district court failed to exercise the appropriate caution in several respects. First, it failed to deal with several important threshold matters. For instance, in this litigation, the section is not raised offensively but by way of defense in a breach of contract action. The Supreme Court has held that illegality may be raised as a defense to a labor contract action under section 301. Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 102 S. Ct. 851, 70 L. Ed. 2d 833 (1982). However, unlike the situation in the present case, the contract in Kaiser was alleged to be intrinsically illegal as violative of the antitrust laws and section 8(a) of the National Labor Relations Act. Here, neither the parties nor the district court addressed the issue of whether the rule of Kaiser ought to apply to a situation such as the present one in which the contract is not intrinsically illegal and, at most, is the product of an internal decision-making process which breached a pre-existing fiduciary obligation.

The district court also did not consider whether the alleged section 501 breach was barred by the doctrine of laches. A common law claim for breach of a fiduciary duty is equitable in nature and, therefore, subject to the doctrine of laches. In similar fashion, the "weight of authority suggests that a Sec. 501(a) breach of fiduciary duty claim is governed by laches." White v. Fosco, 599 F. Supp. 710, 717 (D.D.C. 1984); Morrissey v. Curran, 482 F. Supp. 31, 40 (S.D.N.Y. 1979). In this case, Local 5 waited until the inception of this litigation--over twelve years after the allegedly improper vote--to bring its claim to court. Yet, the district court failed to address whether Local 5 had inexcusably or unreasonably delayed in bringing its action, White, 599 F. Supp. at 717, or whether the delay was prejudicial to the opposing party. Id.

Under other circumstances, it might be appropriate to remand this case to the district court for consideration of these threshold issues. However, that court also failed to deal with a more fundamental aspect of Local 5's case. Addressing this question now will terminate this litigation at this point and thus spare the litigants and the district court the time and expense of further proceedings.³ 

In attempting to delineate the contours of section 501, various circuits have taken approaches which are somewhat difficult to reconcile. For some, the breach of fiduciary duty proscribed by the section occurs only when that breach is grounded in an alleged misappropriation of money or property. See Gurton v. Arons, 339 F.2d 371 (2d Cir. 1964).⁴  Under this view, section 501 could not be used to attack the manner in which a union resolution was adopted. See Coleman v. Brotherhood of Railway and Steamship Clerks, 340 F.2d 206 (2d Cir. 1965). Other courts have taken a far more expansive view of the scope of section 501 and have viewed it as a weapon to correct abuses in the union's internal process of governance. See Pignotti v. Local # 3 Sheet Metal Workers' International Association, 477 F.2d 825 (8th Cir. 1973).⁵  To date, this circuit has not described, except in the most tentative and fact-specific way, the contours of this section. In Lux v. Blackman, 546 F.2d 713, 718 (7th Cir. 1976), while specifically noting that it was not necessary to describe the "full reach" of the section, we seemingly adopted the Gurton approach and held that section 501 was not available to redress claims that the appellants were improperly removed from office. On the other hand, in Hood v. Journeyman Barbers, 454 F.2d 1347, 1353 (7th Cir. 1972), we recognized that the legislative history relied upon by the Pignotti court was more accurate than that utilized by the Gurton court.⁶ 

Even if this circuit were to adopt a broad view of section 501, Local 5 could not prevail on its present claim. The Landrum-Griffin Act was designed " [t]o expose conflicts of interest and stamp out embezzlement and self-dealing by union officials," McNamara v. Johnston, 522 F.2d 1157, 1163 (7th Cir. 1975). The primary target of the Act's fiduciary duty provision (section 501) was not the union convention but rather the union official charged with the management of the memberships' assets. See Cox, Internal Affairs of Labor Unions Under the Labor Reform Act of 1959, 58 Mich. L. Rev. 819 (1960). While we do not preclude the possibility of the section's application in the convention context,⁷  it is clear that such an application must take into account the unique function of the international convention in the internal governance of the organization. Certainly where, as here, the complaining party did not reasonably raise and pursue the alleged procedural irregularity within the parliamentary structure of the union, it should not find an alternate forum in the federal courts when it is called upon to honor an obligation to which it has already acquiesced by its conduct.

At no time during the 1971 convention did any delegate--including those of Local 5--make an effort to object to the participation of local union officers or those who had reasonable expectations of holding such office from participating in the vote on the pension plan. Nor, in any subsequent convention--during the twelve years that passed between the plan's adoption and the International's 1984 convention--did any delegate (presumably elected with full knowledge of the 1971 proceedings), from Local 5 or elsewhere, attempt to rescind the plan on the ground that it was the product of an illegal vote. While subsequent conventions, at the suggestion of Local 5 and others, considered modifications and termination of the pension plan, they did not consider its revocation on the ground of illegality.

Since Local 5 did not attempt to utilize the International's internal political machinery--either at the time of the vote or during the ensuing twelve years--we hold that Local 5 is precluded from filing an action under section 501 to challenge a disputed convention vote. Therefore, we affirm the judgment of the district court.⁸