William E. Brock, Secretary, U.S. Department of Labor,plaintiff-appellee, v. Joseph P. Mazzola, Robert E. Buckley, Robert J. Costello, Etal., Defendants- Appellants, 794 F.2d 427 (9th Cir. 1986)

This appeal arises out of an action brought by the Secretary of Labor charging trustees of the Pension Fund of Local 38 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry (the "Fund") with breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1982).¹  Judgment was entered against the trustees ordering them to make good to the Fund for losses resulting from the breach of fiduciary duty in making loans at below-market rates. See Donovan v. Mazzola, 761 F.2d 1411 (9th Cir. 1985); Donovan v. Mazzola, 716 F.2d 1226 (9th Cir. 1983), cert. denied, 464 U.S. 1040, 104 S. Ct. 704, 79 L. Ed. 2d 169 (1984).

After judgment was entered, appellant Joseph P. Mazzola, who was business manager and treasurer of Local 38 as well as one of the trustees ordered to make restitution to the Fund, wrote a letter to union members advising them that he would make a report at an upcoming membership meeting on the "restitution liabilities levied by Judge Weigel on the ... Trustees." The letter went on to say:

The Executive Board is recommending that the Union pay the amount of such restitution liabilities levied by the court on the labor Trustees, excluding legal fees. The amount of the restitution liabilities of the labor Trustees could run into hundreds of thousands of dollars as you will hear in the report. The Executive Board also recommends that there be no dues increase or special assessment as a result of this action. A secret ballot vote will be taken on this recommendation.

When a copy of the Mazzola letter was sent anonymously to Judge Weigel, the district judge presiding over the ERISA action, the Secretary requested an injunction prohibiting the trustees from receiving reimbursement from their union for their ERISA liabilities. Following a show-cause hearing, Judge Weigel enjoined the trustees "from receiving any reimbursement, either direct or indirect, of any expense incurred by them in connection with this lawsuit, including any amounts paid by them as restitution for their breaches of fiduciary obligations ... from any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959 ...."²  Judge Weigel explained his rationale for issuing the injunction as follows:

Because said conduct did not benefit any sponsoring labor organization, any reimbursement to defendant trustees for the judgment of restitution by any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959, whether or not such reimbursement were authorized by the general membership of such organization, would violate the provisions of Sec. 501(a) of that Act. See Morrissey v. Segal, 526 F.2d 121, 126-27 (2d Cir. 1975); Kerr v. Shanks, 466 F.2d 1271, 1277 (9th Cir. 1972). The Court therefore exercises its equitable power to prevent defendants from violating federal law in the course of satisfying the Court's judgment of restitution. See United States v. Coca-Cola Bottling Co., 575 F.2d 222, 278 (9th Cir.), cert. denied, 439 U.S. 959 [99 S. Ct. 362, 58 L. Ed. 2d 351] (1978); see also, Federal Trade Comm'n v. Ruberoid, 343 U.S. 470, 473 [72 S. Ct. 800, 803, 96 L. Ed. 1081] (1952).

We have jurisdiction to hear the trustees' timely appeal of the injunction under 28 U.S.C. § 1292(a) (1) (1982).

The trustees contend on appeal that the district court exceeded its jurisdiction under ERISA by granting relief against threatened violations of the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. §§ 153, 158-60, 164, 186, 187, 401-531 (1982) (popularly known as the Landrum-Griffin Act). While they do not question the Secretary's standing to bring an action to redress breaches of fiduciary duty under ERISA (see section 502(a) (2), (5), 29 U.S.C. § 1132(a) (2), (5)), they assert that the Secretary has no standing to bring an action to redress violations of the Landrum-Griffin Act. The trustees rely upon section 501(b) of Landrum-Griffin, which explicitly provides that only union members have standing to sue if the union itself fails to bring an action after being requested to do so. Thus the thrust of the trustees' case on appeal is that the district court, in granting the Secretary's request for an injunction to prohibit violations of the Landrum-Griffin Act, contravened the will of Congress that only aggrieved union members may seek relief to redress or prevent violations of Landrum-Griffin.

The Secretary defends the injunction on the basis of the district court's broad equitable powers to redress breaches of fiduciary duty under ERISA. As its caption implies, section 409(a) establishes "Liability for Breach of Fiduciary Duty." Specifically, it provides that:

Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary....

29 U.S.C. § 1109(a) (1982). The Secretary argues that the language of section 409(a) making errant fiduciaries subject to "such other equitable or remedial relief as the court may deem appropriate" is broad enough to support an injunction prohibiting ERISA fiduciaries from receiving money from a union in violation of the Landrum-Griffin Act. Thus the question we must decide is whether a district court exercising jurisdiction under ERISA may enjoin violations of the Landrum-Griffin Act notwithstanding the absence of a union plaintiff.³ 

Section 501(a) of the Landrum-Griffin Act makes union officials fiduciaries in the management of union assets.⁴  Section 501(b) creates liability for breach of fiduciary duty. Specifically, it provides:

When any ... representative of any labor organization is alleged to have violated the duties declared in subsection (a) of this section 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 ... representative in any district court of the United States or in any State court of competent jurisdiction to recover damages or 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.

29 U.S.C. § 501(b) (1982).

There is no disagreement that a union plaintiff is a condition precedent to an action brought under section 501(b) of the Landrum-Griffin Act.⁵  Our court has so held. Horner v. Ferron, 362 F.2d 224, 229 (9th Cir.), cert. denied, 385 U.S. 958, 87 S. Ct. 397, 17 N.E.2d 305 (1966). Section 501(b), in denying non-union plaintiffs standing to sue, reflects a Congressional concern that regulation of unions could lead to excessive governmental intervention in the internal affairs of unions. This concern was clearly expressed in the Senate Committee Report on the Landrum-Griffin Bill as follows:

In acting on this bill the committee followed these principles:

1. The committee recognized the desirability of minimum interference by Government in the internal affairs of any private organization. Trade unions have made a commendable effort to correct internal abuses; hence the committee believes that only essential standards should be imposed by legislation. Moreover, in establishing and enforcing statutory standards great care should be taken not to undermine union self-government or weaken unions in their role as collective-bargaining agents.

S.Rep.No. 187, 86th Cong., 1st Sess., reprinted in 1959 U.S. Code Cong. & Ad. News 2318, 2323 (emphasis added). Thus while Congress made union representatives liable for breaches of duty, Congress limited the opportunities for judicial intervention in the internal affairs of unions by confining the exercise of judicial power to actions brought by union plaintiffs. Evidently Congress was concerned that if non-union plaintiffs had standing to sue under section 501, unions and their leaders would be vulnerable to harassment by outsiders motivated by considerations other than the welfare of the union and its members.

In enjoining violations of the Landrum-Griffin Act in this ERISA action, the district court effectively circumvented the Congressional command that only union plaintiffs have standing to bring actions to redress or prevent Landrum-Griffin violations. We cannot agree with the Secretary that section 409(a) of ERISA, which grants district courts equitable power to fashion appropriate relief for violations of ERISA, manifests a Congressional intent to override the specific standing requirements of section 501(b) of the Landrum-Griffin Act. In defending the district court's use of the equitable powers granted by ERISA to prevent violations of the Landrum-Griffin Act, the Secretary invites us to interpret ERISA in a way that would give the Secretary standing to seek redress of violations of the Landrum-Griffin Act, which Congress pointedly chose not to do. Thus we hold that a district court cannot enjoin violations of the Landrum-Griffin Act in an ERISA action brought by the Secretary of Labor.⁶ 

We find support for our interpretation of ERISA in Massachusetts Life Ins. Co. v. Russell, --- U.S. ----, 105 S. Ct. 3085, 3090, 87 L. Ed. 2d 96 (1985). In Massachusetts Life, the Supreme Court held that under ERISA a fiduciary to an employee benefit plan could not be held personally liable to a plan beneficiary for extra-contractual damages such as damages for emotional distress or punitive damages. The Court rejected the argument that section 409(a) of ERISA, in providing for "such other equitable or remedial relief as the court may deem appropriate," gave courts wide discretion to award extra-contractual damages. A fair reading of ERISA, the Court reasoned, indicated that Congress intended to authorize only "plan-related" statutory relief. Id., 105 S. Ct. at 3091. The Court said:

A fair contextual reading of [ERISA] makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary.

Id. at 3090. Similarly, the concerns animating ERISA--possible misuse of the assets of employee benefit plans--are obviously different from the concerns animating the Landrum-Griffin Act--possible misuse of union assets. An injunction in an ERISA case prohibiting threatened violations of Landrum-Griffin is thus no more plan-related than the extra-contractual ERISA damages rejected in Massachusetts Life. Congress expressly provided for Landrum-Griffin remedies in that statute, and limited those remedies to actions brought by union plaintiffs.⁷ 

Both the district court and the Secretary rely on United States v. Coca-Cola Bottling Co., 575 F.2d 222, 228 (9th Cir.), cert. denied, 439 U.S. 959, 99 S. Ct. 362, 58 L. Ed. 2d 351 (1978), and FTC v. Ruberoid, 343 U.S. 470, 473, 72 S. Ct. 800, 803, 96 L. Ed. 1081 (1952). Such reliance is misplaced. Those cases were brought under the antitrust laws and dealt with equitable relief fashioned to serve the purposes of the antitrust laws.⁸  In contrast, the instant case involves equitable relief fashioned in an ERISA case to serve the purposes of a different statute, one which narrowly restricts the class of plaintiffs with standing to sue. Further, in Coca-Cola Bottling, our court quoted Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S. Ct. 1086, 1089, 90 L. Ed. 1332 (1946), as follows: " [T]he comprehensiveness of this equitable jurisdiction is not to be denied or limited in the absence of a clear and valid legislative command." Section 501(b) of the Landrum-Griffin Act provides such "a clear and valid legislative command"--that only union plaintiffs may bring actions to redress violations of that statute.⁹ 

To the extent that it prohibits the trustees from receiving reimbursement for their ERISA liabilities "from any labor organization subject to the Labor-Management Reporting and Disclosure Act of 1959", the injunction is VACATED.