STATEMENT OF ISSUES
1. Was it proper for the district court to consider defendants' summary judgment motion once plaintiffs had completed every item in the parties' agreed-upon discovery plan and declined to seek additional discovery whether by Rule 56(f) motion or otherwise?
2. Was the district court correct in entering summary judgment on the undisputed facts of this case given the extreme deference to union officials mandated by this Court's precedents, the highly discretionary language of the Union Constitution, a prior decision entering summary judgment on the identical facts, and plaintiffs' inability to offer any evidence to prove that the General Executive Board's decision to amend the Constitution was improper?
4. Was the district court correct in denying leave to proceed on plaintiffs' Labor Management Reporting and Disclosure Act ("LMRDA") claim where plaintiffs provided no credible evidence of a breach of fiduciary duty?
STATEMENT OF THE CASE
On January 18, 1995, the General Executive Board ("GEB") of the Laborers' International Union of North America ("LIUNA") reached a critical and unprecedented moment in its negotiations with the government. Department of Justice officials, having rejected LIUNA's settlement proposal for addressing the problem of mob influence in the Union, had issued an ultimatum: either agree to a consent decree allowing the government to takeover key union activities and expelling certain union members without a hearing; or face ruinous litigation, including a preliminary injunction battle, "within a matter of days." The GEB had only one final appeal, an audience with Assistant Attorney General JoAnn Harris the next day, without any real prospect of its being any more successful than an earlier appeal rejected by the DOJ in a matter of hours.
Faced with the government's Hobson's Choice, ten of the GEB's twelve members voted to take emergency remedial action, adopting the reforms that are at issue in this appeal. The immediate object was to persuade Ms. Harris that litigation was unnecessary because LIUNA was already acting to rid itself of organized crime influence. If that failed and a lawsuit were filed, LIUNA could still use the reforms to prove in court that a preliminary injunction was unnecessary and also fight the government's takeover efforts on the merits. In the meantime, the reforms would provide a fair and efficient mechanism for attacking mob influence within the Union. So clear was this final purpose that the only votes against the reforms were from two members of the Board then being targeted by the government as associates of organized crime -- plaintiff John Serpico and Samuel Caivano.
By any measure, the GEB's action was successful. It persuaded the government to forbear filing a lawsuit while the Union attempted to make the reforms work. And work they did, among other things allowing LIUNA to bring charges against those GEB members suspected of mob activity, who resigned their positions rather than submit to scrutiny of their organized crime connections.
These same GEB members have subsequently attempted to overturn the Board's reforms through separate lawsuits, supposedly filed in the name of "union democracy." The first of their actions -- filed by Samuel Caivano -- was heard by federal Judge Emmet G. Sullivan in Washington, D.C. Stressing the long-standing principle of noninterference by the courts in union affairs, Judge Sullivan granted summary judgment for LIUNA, upholding the validity of the reform amendments.
Despite this exhaustive ruling, Judge Zagel allowed plaintiff Serpico wide latitude to re-explore all the circumstances surrounding the GEB's action. First, he held off the formal filing of the summary judgment motion until the parties had agreed upon the discovery necessary for its resolution. He then gave plaintiffs a three-and-one-half month period to take all the discovery they had identified. Only when plaintiffs completed this discovery and sought nothing further by Rule 56(f) motion or otherwise did he proceed to consider the motion.
On January 30, 1996, the district court issued a comprehensive memorandum opinion. Citing this Court's rule of judicial deference to internal union decision-making and the discretionary language of the LIUNA Constitution, it found that plaintiffs had failed to provide the necessary evidence that the GEB's action on January 18, 1995 was
"unreasonable, perhaps even patently unreasonable." It went on, however, to find that even without such deference there was no question that the Board had reason to regard the situation as constituting an emergency on the critical date. Because plaintiffs' bad faith theory was logically and factually defective, the district court also found that claim unfounded. Nor had plaintiffs provided evidence of a breach of fiduciary duty by the GEB. For these reasons, the district court dismissed plaintiffs' claims and entered judgment for defendants.
The district court properly focused solely on the circumstances confronting the GEB on January 18, 1995, when the LIUNA reforms were adopted. Op., p.6. By contrast, plaintiffs' statement of facts focuses on irrelevant and incorrect detail about other matters, misrepresents the record facts on the key events leading up to the Board decision and repeatedly relies on speculation and innuendo. To correct these defects, and by way largely of background, appellees offer this alternative statement of the relevant undisputed facts, at the same time noting certain of plaintiffs' more egregious misrepresentations of the record in this case.
With more than 700,000 members, LIUNA is one of the largest labor unions in North America. Its operations are governed by a Constitution adopted or re-adopted at the Union's general convention, held every five years. Defs. Stmt. Uncont. F. 9-10- In the intervals between conventions, the "supreme authority" of the International Union "reside[s] in the General Executive Board" of LIUNA, which consists of the General President, the
The Constitution also vests the GEB with "legislative power," including the authority "to amend the constitution of the International Union" to conform to or comply with law or when a perceived emergency has developed. Art. II, ▀2(e); Art. VIII, ▀2(b).The GEB is directed to use its own subjective judgment in determining whether those necessary circumstances exist. Id.. As the Constitution provides:
"[The GEB] may exercise legislative power when, in its opinion, it deems it necessary to conform to or comply with the law; or when, in its judgment, the exercise of such power is deemed necessary, proper and appropriate in an emergency. It may exercise this power for the purpose of new legislation or to amend the Constitution of the International Union . . ." Id. (emphasis added).
The Constitution also provides alternative means of amending its terms, including referendum and a special convention. Art. II, ▀2(e); Art. V, ▀17. Consistent with the GEB's discretionary authority to amend the Constitution by itself, however, the Constitution grants the Board unfettered discretion to determine whether to use one of these alternative mechanisms. Id.; Art. VIII ▀▀2(b), 2(i). For example, the Constitution provides that the GEB "shall have the authority to submit or to decline to submit referenda to the membership." Art. VIII, ▀2(i). See also Art. II, ▀2(e). Similarly, with respect to a special convention, the Constitution provides that it "may be held" upon order of the GEB "when, in
' Initial citations are to the Record Volume number ("R.V. ") with a description of the document. Subsequent citations are to the document name only.
its opinion, it deems it necessary, advisable, and expedient" to do so. Art. V, ▀17 (emphasis added).
The Board also has paramount authority and discretion over the practical application of these various provisions. Thus, the Constitution grants the GEB "authority to interpret the provisions of [the International, Uniform Local and District] Constitutions and to review and pass upon interpretations of said Constitutions as may be made by the General President of the International Union ...." Art. VIII, ▀2(d). Likewise, "when it believes it necessary to fully accomplish an object or purpose of the International Union or of its affiliates and members," the GEB is empowered to "grant limited variances, tolerances or exemptions from specific provisions of the Constitution ...." Art. VIII, ▀2(a-ii).2* Finally, the GEB also has comprehensive residual powers, including the authority "to establish, declare, decide and enforce all matters of policy," "to take such action as may be necessary, appropriate and proper to preserve the International Union as an institution," and "to take such action as, in its opinion, it may deem beneficial or necessary to carry out the objects and purposes of the Organization." Art. II, ▀▀2(f), (j).
The GEB is required to meet only annually. Art. VIII, ▀2(v). Day-to-day operational control of LIUNA is therefore placed in the LIUNA General President, who "as the chief executive officer, shall have executive, administrative and judicial authority over the affairs and business of the International Union[.]" Art. IX, ▀1(a). Among his
2The Union rank-and-file has also given the GEB "all judicial authority" between conventions, including the power to "impose such judgment or take such actions it deems warranted or appropriate over any circumstance concerning which such action is taken." Art. VII, ▀2(a-vi).
specifically-granted powers is the unrestricted authority to "resolve such suits or proceedings as may be necessary to protect and conserve the property, welfare and interest of this International Union and its subordinate bodies[.]" Art. IX, ▀15.
2. The DOJ Threatens A Massive RICO Action.
On November 4, 1994, Robert Connerton, LIUNA's general counsel, received a letter from DOJ, informing him that the government was considering initiating a civil RICO action "to remedy long-standing organized crime influence in the affairs of LIUNA." See R.V.7, Exh. D (11/4/94 Letter), 1. A draft of a possible complaint, which the government specifically reserved the right to modify, was enclosed with the letter. Id. (Draft RICO Cmplt). It proposed to brand LIUNA as a racketeering "enterprise" and sought a broad range of injunctive relief against the Union, including a preliminary injunction appointing "one or more court liaison officers" to "discharge the duties" of the General President and GEB. Id. at 169, 204-12.
By the terms of the transmittal letter, LIUNA was permitted two weeks "to bring any matters to [DOJ's] attention which [LIUNA] deem[ed] pertinent" to DOJ's decision whether to file suit. 11/4/94 Letter.3* The letter also specified that this could not be done by Mr. Connerton himself, whom the government viewed as a potential witness. Id. As a result, General President Coia retained Robert Luskin, a Washington D.C. lawyer who had
3 Seeking to mislead the Court into believing that DOJ "deadlines" were allowed to "come and go," plaintiffs falsely state that the DOJ's November 4 letter gave the LIUNA defendants two weeks "to resolve the issues with the DOJ to avoid the filing of the complaint." (Br. 9) No such statement appears in the letter or anywhere else. There is also no other "deadline" of any kind that the DOJ allowed to pass during the period leading up to the January 18, 1995 decision of the Board.
previously served as Special Counsel to the DOJ's Organized Crime and Racketeering Section and a respected authority on RICO litigation. R.V.7, Exh. F (Luskin Decl.), Ć2. Luskin was subsequently introduced to all of the members of the GEB, including John Serpico and Samuel Caivano, who unanimously approved his appointment to represent the Union and the Board. R.V.10, Exh. 2 (11/9/94 Minutes).4
Contacting the DOJ to arrange for a meeting within the time specified, Luskin also told the government that the disqualification of the LIUNA general counsel would necessarily delay any negotiations while Luskin educated himself on the facts alleged in the voluminous draft complaint. R.V.10, Exh. 5 (11/11/94 Letter). At an introductory meeting with the DOJ on November 16, 1995, an unspecified participant from among the twenty-odd government lawyers and FBI agents present asked whether Coia would be willing to step aside while the negotiations progressed. Luskin Decl., Ć3. Luskin explained why he viewed this request as inappropriate, but emphasized (as did Coia subsequently) that if the government had specific information showing that such a step was justified he would reconsider his position. Id. In a call with Luskin shortly thereafter, a high-level DOJ official expressly confirmed that Coia's recusal was not a prerequisite to negotiations. Id., Ć4.5*
4 Plaintiffs imply, without evidence, that there was something sinister in Luskin's having been first introduced to Coia by Tony Traini, a lawyer who has provided occasional legal services to Coia in his official capacity as General President. There is no basis in this record or elsewhere to question Luskin's obviously sound qualifications or the propriety of the engagement.
5 Plaintiffs falsely state that Luskin was told at the meeting that Coia "must" resign. (Br. 10) No such statement was ever made at the meeting or at any other time. Plaintiffs continually misrepresent the DOJ's position toward Coia, culminating in their flagrant distortion of the
After reviewing the draft complaint, Luskin wrote to Coia, Caivano and Serpico, inviting each of them to retain counsel of their own to represent them personally. Luskin Decl.,
5; R.V.10, Exh. 6 (11/18/94 Letter). As he explained in the letters, the draft RICO complaint either named them as defendants in their personal capacities (Coia and Caivano) or described them as associates of organized crime (Serpico), thereby making it inappropriate for Luskin to represent them other than in their official capacities. Id.; R.V.8, Exh. A (Luskin Dep.) 61.6 Coia accepted the invitation, hiring Williams & Connolly to represent him in both his official and personal capacities. Luskin Dep. 90. Luskin continued to represent all the officers, including Coia, in their official capacities as Board members. Id., 93.
3. The Government Proposes A Consent
At a meeting shortly after Thanksgiving,' the government offered to provide LIUNA with a plan to resolve the issues raised by the draft RICO complaint. Luskin Dep. 108-11. On December 14, 1994, it forwarded a proposed consent decree. R.V.7, Exh. E (Prop. Cons. Decree). Under the terms of the decree, Vice Presidents Caivano and Serpico, as well as General Counsel Robert Connerton, would be immediately and permanently barred from participation in LIUNA affairs. Defs. Stmt. Uncont. F. Ć41. No similar relief was
DOJ's January 12 letter (A infra p.12, n.11).
6 Plaintiffs misrepresent the contents of these letters (Br. 9), which do not refer to any actual conflict.
7 As they do throughout, plaintiffs misrepresent the pace and intensity of the negotiations by ignoring the scheduling effects of weekends and intervening holidays. (Br. 10)
sought against General President Coia in his personal capacity. The proposed consent decree did, however, call for a complete takeover of the Union by the government, which would thereafter administer most of LIUNA's internal affairs with the assistance of the courts. Prop. Cons. Decree, Ć3.
Although it would have had no adverse effect on Coia personally, LIUNA rejected the government's December 14 proposal. R.V.9, Exh. B (Coia Dep.I) 229-30; Luskin Dep. 426. Among other things, Luskin notified the DOJ that LIUNA would not agree to a solution in which any LIUNA member or officer, including Serpico and Caivano, was debarred from participation in the Union without a fair opportunity to answer charges of wrongdoing. Luskin Decl.,Ć 8. Luskin also told the DOJ that he believed the government's adversarial plan was misconceived. Luskin Dep. 129-30. He proposed instead a dramatically new approach under which the government would join forces with reform elements in a still-independent Union who would themselves spearhead the effort to rid LIUNA of mob influence. Luskin Decl., Ć6. Finding this novel approach "interesting," the government agreed to give Luskin an opportunity to draft a full proposal during the Christmas holidays and submit his plan immediately after the New Year. Luskin Dep. 131.8
On January 4, 1995, the GEB met to consider the progress of the negotiations and Luskin's counterproposal to the government. Stmt. Uncont. F. ĆĆ70-71. After briefing
8Continuing to mischaracterize these tense negotiations as a casual affair, plaintiffs insist that the government "had no problem with an additional delay of almost three weeks." (Br. 11) In fact, after reviewing and rejecting the proposed consent decree, LIUNA had little more than the week between Christmas and New Year's to assemble the many parts of its unique proposal. Luskin Dep. 131.
the Board in full,9 Luskin described in detail the documents he had prepared, including a new draft complaint in which the Union and the government acted as joint plaintiffs. Id.,
At the meeting, Vice President Serpico blocked any vote on the proposals. Coia Dep.I 225. His admitted reason was that he wanted to consult with his counsel to determine the effects on himself personally of the Luskin proposal. Pls. Stmt. Uncont. F. Ć72. He raised no issue of the need to consult the membership or any limitations on the GEB's constitutional authority. Luskin Dep. 470-72. The other Board members roundly criticized Serpico for his self-interested approach. In deference to him, however, Coia suggested that the GEB members defer a formal vote on the proposal until they learned how it was received by the DOJ. Coia Dep.I 225-26.10* Immediately thereafter, Luskin submitted it to the DOJ for comment. Pls. Stmt. Uncont. F. Ć74.
Within a few days, Luskin received word first informally and then officially that the DOJ's response was sharply negative. Id., Ć75. In a confirming January 12 letter, the DOJ raised six "non-negotiable" items for resolution of the matter, tracking the demands
9Plaintiffs imply that Luskin withheld the December 14 Consent Decree from the GEB by saying that it was only Luskin's "best recollection" that he shared this document and that Serpico did not recall being told that he was being targeted personally. (Br. 11) Luskin actually testified that he was certain the Consent Decree was presented. Luskin Dep. 158. And, whether or not Luskin referred specifically to Serpico, it is undisputed that Luskin gave the Board a detailed report on the negotiations, that Serpico understood he was personally at risk and that his personal lawyer was given a copy of the government's draft Consent Decree. Luskin Dep. 470-74, 488.
10Plaintiffs again try to imply something sinister in the fact that the proposals were not voted upon, ignoring that this was done at Serpico's insistence and for his benefit.
in the December 14 proposed consent decree. R.V.10, Exh. 11 (1/12/95 Letter).11 Luskin was told that, absent agreement on these items, litigation would follow "within a matter of days." Luskin Dep. 171-72, 176. This constituted the first and only time the government had made such a threat during the negotiations. Id.
4. LIUNA Takes Dramatic Action To Forestall Litigation.
Luskin requested an opportunity to appeal the DOJ's decision within the Justice Department. Luskin Dep. 219. He was thereupon permitted to meet with Deputy Assistant Attorney General John Keeney on January 13, 1995, the next day. Id., 217-18. Keeney said he would give Luskin's plea careful consideration, but then rejected it within a couple of hours. Id., 230. Luskin requested a further, and possibly last, appeal to Assistant Attorney General JoAnn Harris. Id., 220. Immediately thereafter, however, Luskin received word that his father had died suddenly. He therefore asked, as a personal favor, that the DOJ "stand down" for a couple of days. Id., 236. On the next business day, January 17, 1995, Luskin was told that Ms. Harris would see him two days later. Any appeal after that would be "on sufferance." Id., 252.
Given the deteriorating situation, the GEB reconvened on January 18, 1995, the day before the Harris meeting, to discuss the appropriate action in light of the expected failure of its last appeal, the government's litigation ultimatum and the prospect of an
11As they did in the district court, plaintiffs improperly doctor this lengthy letter, quoting only the first and last paragraphs to make the reference to Coia in paragraph one appear to be the basis of the government's threats of litigation in the conclusion. (Br. 13) In fact, the intervening pages of text deleted by plaintiffs show there is no connection between the two. None of the DOJ's six conditions for settlement related to Coia personally and the DOJ's letter requested no action whatsoever with respect to Coia. 1/12/95 Letter.
imminent preliminary injunction battle. Luskin Dep. 237. After fully briefing the Board, Luskin submitted for the GEB's approval a constitutional amendment containing a new LIUNA Ethics and Disciplinary Procedure ("EDP"). R.V.7, Exh. I (1/18/95 Minutes). It provided for an Ethical Practices Code to codify "standards of conduct for all financial practices relating to the handling of union, benefit and pension funds, the award and administration of contracts, conflicts of interest, and similar issues." Id.; R.V.7, Exh. G (EDP). The EDP itself also specifically defined and prohibited "barred conduct," which included committing acts of racketeering and knowingly associating with members or associates of an organized crime syndicate or allowing such members or associates to control or influence the affairs of the Union. Id., p.2.
The centerpiece of the EDP, however, was the appointment of four new independent officials to investigate and prosecute organized crime within the Union. EDP, ĆĆ13-9. These included an independent prosecutor, known as the GEB Attorney, and an Inspector General. Id. Together they could investigate and bring disciplinary charges against any union member, officer, or employee for violations of the EDP, the Ethical Practices Code, the Constitution, or any other disciplinary rule adopted by the GEB, and for certain violations of federal and state law. Id.
The EDP also called for an Independent Hearing Officer and an Appellate Officer to preside over cases brought by the GEB Attorney and the LIUNA Inspector General. Id. Further, these officials were to review cases in which the General President suspends an officer or elected official, which he may do when he "determines that an emergency situation exists in which the welfare or preservation of the Union is at stake."
Id., Ć12. Any such suspension must be followed by "the filing of formal charges in or within ten days of the date of suspension, and a hearing thereon" under the provisions of the EDP relating to hearings before the Independent Hearing Officer. Id..
In adopting the EDP, the GEB specifically invoked its authority under Article VIII, ▀2(b) to amend the Constitution where the Board perceives an emergency or believes action is necessary to conform to or comply with law. 1/18/95 Minutes, p.8. Thus, the minutes of the January 18 meeting state that the Board made express findings that an "emergency situation [had] developed" and that there was a need to act "to protect the welfare of our members and to comply with the law." Id.; O'Sullivan Decl., Ć10 12*
The EDP was adopted by the GEB by a vote of 10-2. O'Sullivan Decl. 19.13* Voting against the plan were plaintiff Serpico and Samuel Caivano, the two GEB members previously identified in the draft RICO complaint as controlled by organized crime and targeted in the government's December 14 draft consent decree for debarment from the Union. Id.; Prop. Cons. Decree 114(e). These members had been told before the meeting that they would be suspended in accordance with the new procedures if they were adopted.
12Plaintiffs falsely state that the minutes do not include these findings. (Br. 27)
13Each of the new positions was filled with a distinguished candidate. In addition to Luskin, who became GEB Attorney, Coia ultimately appointed, and the GEB later approved, the retention of: (1) Douglas Gow, a former number two official at the FBI, to serve as Inspector General; (2) Peter Vaira, a former U.S. Attorney for the Eastern District of Pennsylvania and Executive Director of the President's Commission on Organized Crime, as IHO; and W. Neil Eggleston, a former Chief Appellate Attorney in the office of the U.S. Attorney for the Southern District of New York and Associate Counsel to the President of the United States, as Appellate Officer. Judge Zagel noted that these officials "given their backgrounds, could be expected to be vigorous and unforgiving of irregularities let alone corruption." (Op., 10)
Luskin Dep. 488. Immediately after the vote, General President Coia took this action, which was ratified by the GEB as a whole. O'Sullivan Decl.,Ć9.
5. LIUNA's Reforms Alter The Government's Course.
The next day, January 19, 1995, Luskin met with the government and described the actions taken the previous day, including the adoption of the EDP, the appointment of the new independent officials and the suspension of Serpico and Caivano. Luskin Dep. 309-10. It is undisputed that the Board's dramatic remedial action, along with the additional defenses it would provide LIUNA in any subsequent litigation, "changed the context of the conversation rather dramatically." Id., 314-15.
The immediate result was to forestall the impending litigation. In contrast to the earlier appeal, Luskin's presentation and plea to Assistant Attorney General Harris caused the government to rethink its position. Luskin Dep. 217-18, 315. Ultimately, she resumed negotiations with LIUNA in an attempt to make litigation unnecessary. O'Sullivan Decl., Ć13. On February 13, 1995, LIUNA and the DOJ were able to reach an agreement governing subsequent relations between them for the subsequent three years. R.V.7, Exh. K (LIUNA-Govt. Agr.), Ć3
In that agreement, LIUNA agreed to the terms of a contingent consent decree calling for the appointment of court officers to oversee LIUNA's affairs. Id. The DOJ gave LIUNA a ninety-day grace period, however, within which to try out its internal reform program. Id., Ć11. After this initial period (which ended May 15, 1995), up until three years after the signing of the agreement, the Assistant Attorney General for the Criminal Division could decide to impose the contingent consent decree if she concluded, in her sole
discretion, that LIUNA has not achieved sufficient success in ridding itself of corruption, and therefore that "the imposition of a consent decree is necessary or desirable." Id., ĆĆ1-2. The decree's terms are significantly less costly, burdensome, and destructive of LIUNA's autonomy than the relief sought by the government in its draft RICO complaint. O'Sullivan Decl., Ć13. Nevertheless, neither the February 13 agreement nor the contingent consent decree restricts in any way the government's ability to prosecute Coia or any other member of LIUNA either civilly or criminally. LIUNA Govt. Agr.; R.V.7, Exh. L (Contingent Cons. Decree).
LIUNA thus obtained the chance to preserve its autonomy without the ruinous cost and potentially disastrous consequences of litigation. O'Sullivan Decl., ĆĆ13-14. For its part, the government guaranteed that LIUNA would either succeed in its reform program or that its consent decree would eventually be entered. Id., Ć14. To date, the government has declined to proceed with the decree, even as it continues to monitor LIUNA's progress. Id., ĆĆ15-16.
6. Caivano and Serpico Attempt To
Within the required ten days after the Serpico and Caivano suspensions, the GEB Attorney brought specific charges against them for their organized crime ties. O'Sullivan Decl., Ć12. Meanwhile, Caivano and Serpico filed separate lawsuits attempting to overturn the reforms and thereby block any inquiry into their mob connections. Id.. The gist of both complaints was that the reforms were supposedly undemocratic because they had
Caivano's suit, filed in Washington, D.C. in conformity with the venue provisions of the LIUNA Constitution 15 came to a decision first. R.V.7, Exh. B (Caivano Op.). In May 1995, U.S. District Judge Emmet G. Sullivan granted partial summary judgment in favor of the Union and dismissed the balance of the complaint. Judge Sullivan stressed that the courts have consistently required deference to the governing authority in a union, thereby foreclosing efforts by a dissident minority to use the courts "to second-guess the exercise of the GEB's discretion based on the benefit of hindsight." Id.., p.3. Judge Sullivan ruled that, given this standard and the undisputed facts, the actions of the GEB on January 18, 1995 had to be termed "reasonable and not made in bad faith." In short, "the GEB did not exceed its delegated authority under the LIUNA Constitution in enacting the ethics and disciplinary procedure ...." Id., p.2. Judge Sullivan also held that Caivano's challenge to his own disciplinary suit was at best premature because he had not exhausted his remedies under LIUNA's internal disciplinary process. Id, pp.4-7.
14This argument was presented for the first time in a letter from John Serpico at the January 18 meeting, shortly after he had been notified that he would be suspended in the wake of the adoption of the new code. R.V.10, Exh. 15 (1/18/95 Letter). In that letter, Serpico dropped his argument from the January 4 GEB meeting where he had expressed a desire to determine the effects on himself personally.
15The LIUNA Constitution requires all suits challenging the constitutionality of Union actions to be filed in Washington, D.C. Art. XVI, ▀4. Judge Zagel later ruled that certain provisions in the labor statutes trump this requirement. Order dated 8/2/95.
Rather than face a disciplinary hearing, Caivano agreed to drop any further legal challenges, resign his position as Vice-President. give up all his positions with LIUNA- entities, and not seek or accept LIUNA positions in the future. O'Sullivan Decl., Ć18. In return, the International contributed to his attorneys' fees and dropped its disciplinary charges. Id..
Unlike Caivano, Serpico elected to participate briefly in a disciplinary hearing while his lawsuit was pending. Defs. Stmt. Uncont. F. Ć79. After four days of testimony about his mob connections, however, Serpico also agreed to resign his position as a LIUNA Vice President and to dismiss those counts of his complaint challenging the Union's right to suspend him for his organized crime ties. Id., Ć80. In return, the GEB Attorney dropped the disciplinary charges against him and reimbursed him for certain legal expenses. Id. Serpico was allowed to pursue the balance of his action, challenging the legality of the LIUNA reforms. O'Sullivan Decl., Ć19.
On September 6, 1995, defendants presented a motion for summary judgment on all remaining claims in Serpico's case and two other cases raising the identical issues before the district court. 9/6/95 Tr., p.6.16 Before formally receiving the pleading, Judge Zagel had the parties agree on a discovery plan and then waited further until plaintiffs informed him that the agreed-upon discovery had been or was about to be completed. He
16 Plaintiffs falsely assert that the summary judgment process did not begin until October 26, 1995. In fact, plaintiffs received a complete set of defendants' summary judgment materials seven weeks earlier. 9/6/95 Tr., p.6.
then gave plaintiffs six additional weeks to file a response brief. Id.; Order dated 12/8/95. Plaintiffs did not object, made no additional request for discovery and filed no Rule 56(f) motion.
On January 30, 1996, Judge Zagel entered a comprehensive opinion granting summary judgment for defendants on Count I and denying plaintiffs the required leave to proceed on its LMRDA claim in Count II. Op., p.12. Judge Zagel began by stressing that this Court has repeatedly held that union officials should be granted a high degree of deference in the determination of their own affairs. Id., p.5. This includes the interpretation of a union's constitution. Id. Under such circumstances, and given that "[t]he LIUNA Constitution has also built in a mechanism of deference," there were insufficient facts to contest the appropriateness of the GEB's action. Id.
Even apart from the deference ordinarily accorded GEB decisions, moreover, Judge Zagel found that the "Board did not exceed its constitutional authority in adopting the Disciplinary Procedure." Id., p.6. As he stressed, "this Court's role is not to judge in hindsight whether the Board took the most appropriate action," only whether the Board could reasonably have concluded "that an emergency existed that necessitated immediate action." Id., p.7. He found it "clear" that "a breakdown in negotiations and a formal threat to file the [RICO] complaint within a short period of time created an emergency situation entitling the Board to take legislative action at its January 18 meeting." Id.
Next, the district court stressed that "[plaintiffs'] assertion that the Board acted in bad faith is not sustainable." Op., p.8. As Judge Zagel emphasized, any such theory presupposed an actual agreement with the government in which the GEB members avoided
personal sanctions in return for enacting the EDP. But "[i]t is for the government to decide who it will prosecute." Id. Particularly since the government "is not a defendant here," there was no basis to find that it had engaged in the kind of bad faith in its negotiations with LIUNA that plaintiffs' speculative theory proposed. Id.
Finally, Judge Zagel denied plaintiffs leave to appeal on their claim under Section 501 of the LMRDA. Op., p.11. Stressing that plaintiffs "must show a reasonable likelihood of success and, with respect to any material facts [they] allege, must have a reasonable ground for belief in their existence," he found that "[p]laintiffs have submitted no credible evidence to support their theory of the Board's self-motivation." Id. Rather, "[t]he Board took the government's best offer." Id.. The Section 501 claim therefore could not survive.
Notices of appeal were subsequently filed in the two cases filed by Serpico and the plaintiffs from his Chicago locals. 17A Buffalo local that had also filed one of the consolidated cases dropped its suit.
SUMMARY OF ARGUMENT
Plaintiffs got all the discovery they ever asked for. Before briefing on the summary judgement motion was even contemplated, the parties worked out a comprehensive plan of discovery, all of which was completed. Plaintiffs never objected subsequently, never filed a Rule 56(f) motion and never sought additional time to take any other discovery. Plaintiffs unilaterally elected not to pursue the very discovery they now say they need.
17As noted in defendants' jurisdictional statement, no counsel for Serpico in the district court filed a notice of appeal in his case, No. 95 C 614. Rather, counsel for Local 1 in case No. 95 C 1725 purported to file a notice on Serpico's behalf.
On the merits, plaintiffs could not meet their heavy burden under this Court's legal standards of demonstrating that the GEB's exercise of its broad discretion under the LIUNA Constitution was "unreasonable, perhaps patently so." As both Judge Sullivan and Judge Zagel also found, however, the uncontested facts regarding the events of January 18, 1995 conclusively disproved plaintiffs' claim of wrongdoing, no matter what legal standard applied. In addition, those facts proved that there was no substance to plaintiffs' charge of bad faith, particularly given that plaintiffs' entire theory depended on speculation about a secret deal with the government that made no logical sense and that the undisputed record facts decisively refuted.
Finally, as the district court also found, there was no credible evidence to support plaintiffs' breach of-fiduciary-duty claim. For all these reasons, summary judgment was proper in this case, and the decision below should be affirmed.
I. Plaintiffs Had Ample Time And All The Discovery They Ever Requested Before Responding To The Motion.
No argument in plaintiffs' brief better epitomizes the groundless character of this appeal than their assertion that Judge Zagel proceeded with "undue haste" to consider the summary judgment motion. (Br. 21) In fact, far from having "exerted extraordinary pressure" on plaintiffs (Br. 20), the district court bent over backwards to accommodate their professed discovery needs, even refusing to allow the summary judgment motion to be filed until plaintiffs pronounced themselves ready to proceed. Plaintiffs' contrary argument depends on several false statements about the proceedings below and, in any event, disregards the clear requirements of the Federal Rules.
The basic facts are these: Defendants first presented their summary judgment motion to the court and plaintiffs on September 6, 1995, not October 26, 1995 as stated in plaintiffs' brief. 9/6/95 Tr., p.5. Following his own unique procedure, Judge Zagel declined to receive the motion until the parties could discuss, and if possible agree upon, the discovery appropriate to the motion. Id., p.6. During the following week, the parties did just that. On September 13, 1995, they appeared in open court and together proposed a document production by defendants and the depositions of Coia and Luskin, all of which was scheduled for October. 9/13/95 Tr., p.3. In the words of plaintiffs' counsel, this discovery would be sufficient to "put [plaintiffs] in a position to know on some basis of what we have whether we can substantiate our allegations." Id., p.5.
Rather than allow the motion to be filed even at this point, Judge Zagel deferred any discussion of a briefing schedule until October 26, 1995, when most, if not all, of the discovery was expected to be finished. Id., p.8. When the parties appeared on that day, plaintiffs admitted that they were satisfied with the document production, that they had completed a two-day deposition of Robert Luskin, and that the only remaining discovery was the deposition of Arthur Coia, scheduled for the following week. 10/26/95 Tr., p.3. On that basis, the district court deemed the summary judgment motion filed as of October 30, 1995, and set a briefing schedule giving plaintiffs five additional weeks to file their response. Id., p. 11. Plaintiffs raised no objection to this procedure. Id.
The Coia deposition took place as scheduled on October 31, 1995. Coia Dep.I 1. Although the original discovery plan contemplated only a single day with Coia, plaintiffs subsequently demanded additional time because the examination by their first three lawyers
failed to leave sufficient time for a fourth. Far from having "stonewalled," as plaintiffs assert (Br. 20), defendants agreed to provide Coia notwithstanding the clearly- improper character of plaintiffs' tag-team approach. Coia Dep.II 1. Contrary to plaintiffs' assertion (Br. 20), no motion to compel on the issue was ever filed.
It is also false to say, as plaintiffs do, that the district court "cut off any further discovery by plaintiffs." (Br. 20-21) Rather, what "cut off" discovery was that plaintiffs received everything they sought and requested nothing further. In particular, despite ample opportunity to do so, plaintiffs never filed any motion under Rule 56(f) or made even so much as a verbal request for more discovery.18
This Court has repeatedly stressed that a party seeking additional discovery to respond to a summary judgment motion may not rely on general assertions that discovery has been insufficient. Rather, it must comply with Rule 56(f), which, among other things, requires an affidavit detailing the specific information required. E.g., King v. Cooke, 26 F.3d 720, 726 (7th Cir. 1994). See Chambers v. American Trans Air. Inc., 17 F.3d 998, 1001-02 (7th Cir. 1994) (failure to file Rule 56(f) affidavit fatal). In this case, however, plaintiffs not only failed to provide a Rule 56(f) affidavit, they never even filed a motion. To this day, they still have not specified what they were supposedly unable to obtain during the four-month discovery period provided by the district court.
18Plaintiffs appeared before the district court on multiple occasions during the fall, and even sought and obtained an extra week (for a total of six weeks) to file their summary judgment response, without ever once mentioning the need for additional discovery. Order dated 12/8/95.
This failure by itself disposes of the discovery issue, and the Court need not consider it further. It should be stressed, however, that the additional discovery plaintiffs vaguely allude to in their brief only confirms this conclusion. For example, paraphrasing the Sixth Circuit, plaintiffs suggest that they may have needed to take discovery from the DOJ. (Br. 21) Nowhere, however, do they explain why such discovery was not taken.
For good reason. Early in the fall plaintiffs served the DOJ with a subpoena duces tecum designed to obtain this very discovery. R.V.7, Exh. O (10/4/5 Letter). The government promptly notified plaintiffs that they had failed to follow proper procedures and provided them with detailed instructions on how to proceed. Id. Plaintiffs did not follow the instructions, did not revise the request and did not ask the court for assistance. Rather, they simply let the matter drop.19
These facts, and the absence of any Rule 56(f) motion, demonstrate that plaintiffs were never really interested in any additional discovery. Like mushrooms, plaintiffs' theories of conspiracy and bad faith grew best in darkness. By the time plaintiffs completed the very substantial discovery they said they wanted, plaintiffs' real complaint was that they had too much discovery, not too little. The undisputed facts shed too much clear, clean light on the subject to allow their denatured theories to survive. Plaintiffs' discovery argument is unfounded and is not a basis for relief here.
19Likewise, when the non-appealing Buffalo plaintiffs expressed dissatisfaction with aspects of Luskin's testimony, the district court gave them several different options, including the right to show that they were therefore unable to respond to the summary judgment motion. 10/26/95 Tr., pp. 11-12. Again, plaintiffs simply let the matter drop, largely because, as they later admitted, they already had the information they sought from Luskin. Coia Dep.I 181.
II. The District Court Correctly Ruled, On Appropriate
The sole question before the district court on defendants' summary judgment
Whether LIUNA's General Executive Board properly construed and exercised its powers when, on January 18, 1995, it amended the LIUNA Constitution and adopted a formal Ethics and Disciplinary Procedure to combat organized crime.
Contrary to plaintiffs' statement in their brief, Judge Zagel did not apply a "reasonableness standard" to this question. (Br. 21) Instead, the district court considered this issue in light of the rigorous legal standards set forth by this Court's precedents, the language of the LIUNA Constitution and the undisputed record facts. Op., pp.5-7.
1. The Rule of Judicial Deference. The legal standards governing this case appeared most recently in Air Wisconsin Pilots Protection Committee v. Anderson, 909 F.2d 213 (7th Cir. 1990), cert. denied, 498 U.S. 1085 (1991). In Air Wisconsin, this Court barred the lower courts from interfering with a GEB's interpretation of a union constitution except where a plaintiff can carry a heavy burden of showing that the Board action was "unreasonable, perhaps even patently unreasonable." 909 F.2d at 218. As the First Circuit has explained this standard, a dissident plaintiff cannot succeed and the GEB's decision must be upheld unless the Board's view "totally lacked any plausible foundation and was, therefore, unconscionable and outrageous." Local 48 v. United Bhd. of Carpenters and Joiners, 920 F.2d 1047, 1054 (1st Cir. 1990). See also Newell v. IBEW, 789 F.2d 1186, 1189 (5th Cir. 1986) (applying "patently unreasonable" test); Stelling v. IBEW, 587 F.2d 1379 (9th Cir. 1978), cert. denied, 442 U.S. 944 (1979) (same).
This "patently unreasonable" test has prevailed in the Seventh Circuit for almost twenty years, since the 1977 decision in Local Union No. 657 v. Sidell, 552 F.2d 1250, 1257 (7th Cir. 1977). Contrary to plaintiffs' wishful assertion, Maher v. Electrical Workers Union, 15 F.3d 711 (7th Cir. 1994) did not overrule Sidell and Air Wisconsin. The abbreviated, three-page discussion in Maher, where the Court upheld the union action, simply cannot be extrapolated into an implicit repudiation of these cases. Recent decisions in this Circuit have therefore continued to acknowledge the "patently unreasonable" test as controlling precedent. E.g., Local 715 v. Michelin American Small Tire, 848 F. Supp. 1400, 1408 (N.D. Ind. 1994).
Nor are these venerable precedents inconsistent with plaintiffs' new-found advocacy of union democracy. Not only is Air Wisconsin not hostile to union democracy, it is essential to it. A union is a private, voluntary organization entitled to pursue its own interests as it perceives them. Its critical decisions should be made by its regularly-elected leadership, not a dissident and self-interested minority like plaintiffs who manage to invoke the aid of a court. Air Wisconsin, supra, 909 F.2d at 218 (judicial deference rule "protect[s] the internal affairs of unions from heavy-handed judicial interference"). By deferring to judgments of the union leadership that are not patently unreasonable, the Court necessarily vindicates the very "paramount right of union members to self-determination" that plaintiffs say they advocate in this case.20
20 By themselves, the Caivano decision and Judge Zagel's ruling below demonstrate conclusively that the GEB's action was not "patently unreasonable or "totally lack[ing] any plausible foundation . . . and unconscionable and outrageous." If two respected federal judges not only could see the sense of the reforms, but also termed them "reasonable as a matter of law," plaintiffs cannot meet their burden to show that "no reasonable person" could
2. The LIUNA Constitution. The "patently unreasonable" test is not essential to the result below, however. Judge Sullivan reached the same conclusion under the D.C. Circuit's somewhat less rigorous rule of judicial deference. One reason is that the plain language of the LIUNA Constitution itself sets an extremely high threshold before GEB action can be challenged in this context.
The Constitution directs the GEB to exercise its amendatory powers "when in its opinion, it deems it necessary to conform to or comply with the law." Art. VIII, ▀2(b)(emphasis added). Additionally, and independently, the GEB is to amend the Constitution "when, in its judgment, the exercise of such power is deemed necessary, proper and appropriate in an emergency." Id. Not only do these provisions grant the GEB broad discretion to amend the Constitution, but the exercise of that discretion depends solely on the Board's subjective view of the circumstances. Even if erroneous, that view, once actually formed and relied on, is not open to challenge.
Numerous other provisions in the LIUNA Constitution confirm that the membership intended the GEB to have broad discretionary power to amend the Constitution. The Constitution expressly confers upon the GEB authority "to interpret the provisions of [the International and Local] Constitutions," "to take such action as, in its opinion, it may deem beneficial or necessary to carry out the objects and purposes of the Organization" and to grant constitutional variances and exemptions whenever it "believes it necessary to fully accomplish an object or purpose" of the Union. Art. VIII, ▀▀2(a-i), ▀2(d); Art. II, ▀2(j)
conclude that the amendments were necessary to deal with an emergency or to conform to or comply with law.
The Constitution also gives the GEB sole discretion to decide whether to use any of the possible alternatives to Board action. It alone has "the authority to submit or decline to submit referenda to the membership." Art. VIII, ▀2(i). Likewise, a "Special Convention may be held upon order of the [GEB] . . . when, in its opinion, it deems it necessary, advisable and expedient to hold such Convention." Art. V, ▀17 (emphasis added).
Long practice within LIUNA also confirms the Board's authority to subjectively determine whether an amendment is appropriate. In 1988, for example, well before his last-minute conversion to the cause of "union democracy," former Vice President Serpico joined his fellow GEB members in unanimously approving constitutional amendments to create retiree councils and liberalize retiree dues. R.V.7, Exh. I, Att. 4 (2/8-15/88 Minutes). According to the minutes of the GEB meeting on February 8-15, 1988, an "emergency" existed because the creation of retiree programs "to maintain fraternal ties, and to provide social and recreational opportunities for retirees" was long overdue and was critical to the International's "ability to service its interests and those of its members." Id
In short, the truth about "union democracy" in this case is that the rank-and-file of LIUNA long ago decided that their best interests lay in permitting the GEB to use its subjective judgment to amend the Constitution to meet the Union's needs. Only now, as he has become personally concerned about how an appropriately-sponsored Board amendment might be used to challenge his history of organized crime connections, has plaintiff Serpico sought to have this Court re-write both the LIUNA Constitution and past practice to deny the membership what it voted for.
Nothing less is implied in plaintiffs' attempt to import into the LIUNA Constitution the definition of an emergency used in trusteeship cases. (Br. 23) The trusteeship decisions on which plaintiffs rely have evolved from a comprehensive statutory scheme set forth in Title III of the LMRDA, which has its own substantive and procedural requirements and a unique standard of judicial review. See 29 U.S.C. ▀464(c). No court has ever considered applying these principles outside of the trusteeship context. Their application here would be doubly inappropriate. Unlike the statute, the Constitution adopted by the LIUNA members grants broad discretionary and subjective powers to the GEB to amend the Constitution. And, it specifies that the GEB's interpretation of these provisions in performing its constitutional role of safeguarding the Union -- not some novel approach imported by plaintiffs from other contexts to serve their own interests -- should govern the Board's action. Art VIII, ▀▀2(a-ii),(c),(d).
3. The Undisputed Facts. As Judge Zagel emphasized, however, it makes no difference in the end whether this case is judged under the "patently unreasonable" test, the language of the LIUNA Constitution or otherwise. Op., p.6. The reason is that the undisputed facts demonstrate conclusively that "the Board did not exceed its constitutional authority in adopting the Disciplinary Procedure." Id. They show, first, that the Board reasonably perceived an emergency on January 18, 1995, and second that, faced with credible allegations of pervasive institutional corruption, the GEB properly concluded that the amendments were necessary to conform to or comply with the law.21
21* Although Judge Zagel found it unnecessary to reach the second basis of the GEB's decision, this Court can uphold the decision below on any appropriate ground. Simmons v. Pryor, 26 F.3d 650, 653 (7th Cir. 1993), cert. denied, 114 S.Ct. 1883 (1994). The
The following facts are uncontroverted:
government's draft RICO complaint specifically charged that LIUNA was operated illegally because it had no mechanism to deal with organized crime. Draft RICO Cmplt., 169. The EDP expressly resolved this issue and thereby caused the LIUNA Constitution to conform to or comply with law. EDP, Ć1 Under the LIUNA Constitution, this basis is sufficient to uphold the GEB's actions even if no emergency existed. Art. VIII, ▀2(b).
In short, when the GEB met on January 18, 1995, it correctly believed "the planes were in the air." The Union's last appeal was the next day. The filing of the government's complaint was imminent, and the government had made clear that it would "move promptly, very promptly for a preliminary injunction." Luskin Dep. 225, 236.22
The GEB seemingly had no options to avert the crisis. The sole alternative acceptable to the government was agreement by LIUNA to the government-drafted proposed consent decree of December 14, 1994. See 1/12/95 Letter. Like a preliminary injunction in litigation, however, that decree would have resulted in a government takeover of the Union. Prop. Cons. Decree, Ć14. In addition, it would have expelled Caivano and Serpico without due process. Id., Ć8
Although DOJ had previously rejected voluntary action by the Union as a means to forestall litigation, adoption of the Ethics and Disciplinary Procedure addressed at least some of these dire circumstances:
22 Luskin did not "concede" that "no immediate relief would have occurred," as plaintiffs' contend (Br. 30, n.11, citing Luskin Dep. 398). Rather he said that no relief would be entered "automatically."
Last but not least, the Ethics and Disciplinary Procedure gave LIUNA, for the first time, a substantive means and an independent investigative procedure to strike at mob influence in the Union. As Coia testified, "it was appropriate, ethically right," the best way to break the stranglehold of La Cosa Nostra ("LCN") influence on key parts of the Union. Coia Dep.II 94, 123-27.
Facing these compelling and undisputed facts, along with the insurmountable legal standards and constitutional language, plaintiffs' brief resorts to a litany of speculative arguments, which, if anything, actually support the decision below. (Br. 26-27) Plaintiffs begin by noting that the DOJ had rejected the EDP concept and did not know it was before the GEB for adoption, as if to prove that the GEB could not reasonably have believed that it would dissuade the DOJ from filing a lawsuit. But not only was it reasonable to believe that actions would speak louder than words, it is uncontested that they did so. The actual adoption of the EDP "changed the context of the conversation [with the DOJ] rather dramatically." Luskin Dep. 314-315. Although the government was not yet ready to abandon its hardline position, the new procedures restarted the negotiations and eventually led to a provisional resolution of the government's claims.
Next, plaintiffs assert that there is no evidence that the stated basis for the adoption of the EDP was in fact the basis. Contrary to their assertion, however, the minutes themselves state that the Board was acting because an "emergency situation [had] developed." 1/18/95 Minutes. There is no contrary evidence. Plaintiffs say they were entitled to pursue discovery about how thoroughly the Board considered the circumstances, but plaintiffs have already done so, and the results are devastating to their claims. In a deposition taken by
plaintiffs, Luskin testified, without contradiction, that he fully informed the GEB about "what had transpired with the Department of Justice, what the likelihood of litigation was, what if anything was likely to happen next in [LIUNA's] discussions with the Department of Justice, what the possible outcomes were and what effect . . . they would have, and what actions the Union might take in connection with those developments." Luskin Dep. 245.
Plaintiffs further argue that the threat of litigation was an insufficient basis to find an emergency, asserting that "a big fat RICO action" is nothing to be afraid of. (Br. 27). Once again, the record is directly to the contrary. Uncontradicted evidence showed that:
Perhaps plaintiffs in the security of their own offices, without any real responsibilities for union affairs and concerned only for their self-interest, do not need to be concerned about "a big fat RICO action" or its consequences. But the members of the GEB did not have any similar luxury on January 18, 1995. Nor would they have acquitted their constitutional responsibility to the Union membership to "preserve the International Union as an institution" or done what is "necessary to carry out [its] objects and purposes" if they had adopted plaintiffs' cavalier attitude. Art. II, ▀▀2(f),(j). Indeed, it is plaintiffs' approach, not that of the GEB, that would have rendered these terms of the LIUNA Constitution "not worth the paper they are written on." (Br. 27)
Finally, plaintiffs assert that the outcome of a RICO lawsuit was too speculative to warrant decisive GEB action. Id. The record was, however, uncontradicted that the mere filing of the litigation would have cost the Union "millions of dollars" and that the most likely outcome was the end of "the union running the union as an organization." Coia Dep.II 6, 28. In addition, plaintiffs' argument only emphasizes the propriety of the GEB's decision here. The GEB had a difficult call to make on January 18, 1995. It faced ruinous litigation and possibly disastrous long-term consequences, without any certainty about what the exact outcome would be. In precisely the manner authorized by the LIUNA membership in its Constitution, the GEB made the best judgment it could in these trying circumstances. If the decisions of this Court and the language of the LIUNA Constitution mean anything, it is that the GEB cannot be second-guessed on the basis of plaintiffs' speculation about what other outcomes there could have been.
The irony in plaintiff's argument is that we do know, after the fact, how the GEB's decision turned out. The government did not sue. Still independent, LIUNA has made great strides in ridding itself of organized crime. Far from "unreasonable, perhaps patently so," the GEB's decision has proved to be one of the great successes in union reform in recent memory. For all these reasons, summary judgment was proper on plaintiffs' claims.
II. There Was No Evidence Of Bad Faith.
Without evidence that the GEB's action was "unreasonable, perhaps even patently unreasonable," or inconsistent in any way with the express language of the LIUNA Constitution, plaintiffs next attempt in this Court, as they did below, to circumvent the required dismissal by impugning the motives of General President Coia and the GEB. Like Judge Sullivan, Judge Zagel rejected plaintiffs' rhetoric and innuendo on this subject because they were unsupported in, and indeed refuted by, the record facts. This Court should reach the identical conclusion.
In the district court, plaintiffs attempted to show bad faith primarily by attacking Arthur Coia. Through a variety of misrepresentations, several of which are repeated here,23 they tried to create the impression of a secret deal or understanding with
23 Among other things, plaintiffs assert that the DOJ insisted at the November 16 meeting that Coia "must" resign, whereas no such statement was ever made. See supra, pp.8-9, n.5. They state that Luskin reported only to Coia, which ignores the multiple special GEB meetings in which Luskin reported to the entire Board on all aspects of the negotiations. See infra, p.45-6. They then misrepresent the contents of the January 12 DOJ letter to make it appear that Coia was still a target whereas the six "non-negotiable" items in the letter (all omitted by plaintiffs) do not even mention Coia. See supra, p. 12, n. 11.
the government under which the DOJ agreed to treat Coia as "a favored son" if he would "sacrifice" or "serve up" Serpico and Caivano in return.
No part of this argument was or is defensible on the record facts. Nine other members of the GEB, an overwhelming majority, voted for the reforms. Not one of these other members has ever, to this day, been accused of impropriety of any kind. In addition, contrary to the implication in plaintiffs' brief, these other members were fully informed when they voted on the EDP. They knew "what had transpired with the Department of Justice, what the likelihood of litigation was, what if anything was likely to happen next in [LIUNA's] discussions with the Department of Justice, what the possible outcomes were and what effect . . they would have, and what actions the Union might take in connection with those developments." Luskin Dep. 245.
Second, there is not a scintilla of evidence to support any kind of deal or understanding with the DOJ on Coia's behalf or anyone else's. As Judge Zagel stated, "[i]t is for the government to decide who it will prosecute" and who not. Op., p.8. In this case, the undisputed facts are that the government decided unilaterally, at the time of the December 14 Consent Decree, to drop Coia as a defendant in his personal capacity and to focus instead on Serpico and Caivano. Defs. Stmt. Uncont. F.
41. It never altered that decision thereafter. There is no document, testimony or other evidence to show that the DOJ made this decision at the behest of or with the agreement, tacit or otherwise, of the GEB. As for the EDP itself, even plaintiffs admit that it was adopted without the prior knowledge or agreement of government officials and came as a complete surprise to them. (Br. 26)
Nor did Coia and the other GEB members "protect themselves" with the EDP. Adoption of the EDP was not conditioned on any government or concession whatsoever and, if anything, increased the discomfort of any alleged wrongdoer on the GEB by adding a new, independent group of officials who could prosecute them. Unlike most settlements with the government, moreover, the February 13 agreement did not insulate any union official from prosecution by the government. LIUNA Govt. Agr.,
2. To this day, the government retains the right to proceed against the very officials who plaintiffs say were out to "protect themselves." Id. Far from having been treated as a "favored son," Coia has been under continuous investigation by the GEB Attorney almost since the day the EDP was adopted. Coia Dep.I, 124-25; Luskin Dep. 406-07.
Finally, far from having "sacrificed" Caivano and Serpico, the GEB actually protected them. LIUNA always retained the option of entering into the December 14 Consent Decree, which would have resolved the crisis by permanently debarring Serpico and Caivano from the Union without a hearing. Prop. Cons. Decree, 114(e); Luskin Dep. 20203. Nevertheless, Coia and the GEB expressly refused to do so. Coia Dep.I 229-30. They took action against Serpico and Caivano only after adoption of the EDP guaranteed these members full due process in adjudicating the charges against them. Defs. Stmt. Uncont. F. 164.
Unable to avoid these crippling defects in their case below, plaintiffs' brief in this Court attempts to dress up their old "bad faith" argument in different garb. Thus, they contend that "the GEB sought to ensure their continued positions and perks by excluding a probability that the members would reject their cozy arrangement." (Br. 30) But these are
indisputably the Emperor's new clothes, for no part of this sentence has any basis in logic or the record in this case.
First, it is nonsensical to assert, as plaintiffs do, that the GEB sought to "ensure" anything by adopting the EDP unilaterally, without any knowledge by, promise from or agreement with the government. Even plaintiffs acknowledge that the government had previously rejected the approach embodied in the EDP as the solution to the controversy. (Br. 26) The EDP in fact represented a calculated gamble to avoid the Scylla and Charybdis of the government's only two options -- ruinous litigation or unconditional surrender under the terms of a consent decree ensuring a government takeover and expelling Serpico and Caivano without a hearing. The reforms might cause the government to forbear and would, in any event, give LIUNA defenses in a preliminary injunction hearing or on the merits. They "ensured" nothing, however, other than that the Union would henceforth have a means to attack internal corruption.
Nor did the GEB's action ever protect "their continued positions and perks." The reason is that those "positions and perks" were never at risk. Neither the draft RICO complaint nor the December 14 Consent Decree sought the removal of the GEB majority from their offices. They sought only to take away the duties these Board members were constitutionally obligated to perform, while otherwise leaving them in full possession of their titles, salaries, offices and other benefits. E.g., Prop. Cons. Decree, Ć14.
Plaintiffs therefore have the situation exactly backwards. Whereas they contend that the GEB members shirked their constitutional responsibilities in an effort to "protect their positions and perks," the Board members, by their actions, actually preserved
the duties they were elected by the rank-and-file to perform while placing their otherwise secure positions and perks at greater risk from newly-independent investigative officials within the Union, as well as continued scrutiny from the government. Plaintiffs' real complaint is not that the GEB members protected themselves, but that they did not protect Serpico's "position and perks" in the face of detailed charges of his association with and influence by organized crime.
The second part of plaintiffs' claim here -- "the probability that the members would reject the EDP" -- is manufactured out of whole cloth. There is no evidence anywhere in the record that the membership would have rejected the EDP or that any GEB member believed that it would do so. Equally untenable is plaintiffs' notion that the GEB should have requested time from the DOJ to poll the membership on whether the EDP should be adopted. As plaintiffs' elsewhere acknowledge, the government had previously rejected the EDP. It was completely unaware that the EDP would be adopted unilaterally, was startled by the news and was left uncertain how to react. Luskin Dep. 271-74, 391. This was exactly what the GEB sought by its surprise action. By here asserting that the GEB should have asked the government to agree to a Union vote, plaintiffs advocate taking the very action that would have undermined the most immediate benefits of adopting EDP in the first place.
There is also no reason to believe, or evidence to support the view, that the government would have agreed to such an extended delay, even if it could have been asked. In light of such a GEB failure to substitute actions for words, the only conceivable result was that the government would have reiterated its rejection of the entire concept, vote or no vote,
and then filed its lawsuit. Significantly, later in the negotiations, the government flatly rejected just such a Union request to submit certain electoral reforms to the membership. Coia Dep.II 32. Finally, plaintiffs' unsupported assertion that the government permitted a vote in the case of the Teamsters' consent decree misses the point. That decree resolved years of existing litigation between the parties, where there was no urgency whatsoever in the proceedings. As plaintiffs themselves admit, the government in this case was so intent on proceeding that it proposed to file the litigation and talk later, bringing on the very harms that the EDP was designed to avert. (Br. 13)
In short, there was no reason to approach the membership, no time to do so, no way to ask the government for a continuance and no basis to believe that the government would permit a vote even if it could have been asked. The GEB accordingly did what they were directed by the membership to do: apply their judgment, interpret the Constitution, evaluate the circumstances and take the necessary action in the best interests of the Union. Unable to challenge this conclusion on the record facts, plaintiffs once again fall back upon the supposed need to take additional discovery to address the issue of what the government would or would not allow. But plaintiffs had ample opportunity to take this very discovery. They even began to do so until they decided that they were better off with raw argument rather than the actual facts, and allowed their subpoena duces tecum to the DOJ to lapse.
Finally, most dishonest of all is plaintiffs' assertion that the GEB secured for itself a "cozy relationship." Apparently by design, plaintiffs are vague about what "cozy relationship" they are referring to. Id. Certainly, it cannot be a reference to the EDP itself, which transfers away from the GEB and General President Coia their earlier control over
Union discipline and grants that authority to a foursome of independent officers who "given their backgrounds, could be expected to be vigorous and unforgiving of irregularities let alone corruption. " Op., p. 10. Coia himself has seen the fruits of this decision by having been the target of a relentless inquiry by these independent authorities. Coia Dep.I 124-25; Luskin Dep. 406-07. Calling this arrangement "cozy" is to substitute an empty rhetorical flourish for the record facts.
To the extent this is a reference to GEB's current relationship with the DOJ, it is equally specious. The government can, at any time, decide to pull the plug on the reforms and proceed with its own consent decree against the Union. Similarly, it has retained its rights to proceed against any GEB or other union member with criminal or civil charges. Particularly given that, as Judge Zagel stressed, there is no evidence of government bad faith, the GEB is in no way better off, or in a cozier relationship with the DOJ, than it was before the EDP was adopted. Rather, the reverse is true.
Finally, there is no truth to plaintiffs' slur, made without support in the district court and repeated here, that "[t]he only person who cannot be permanently suspended under the Disciplinary Procedure is Arthur A. Coia." (Br. 16) In the first place, the EDP does not give anyone the power to permanently suspend anybody. There is a provision only for a temporary suspension, which must be followed immediately by the bringing of charges and a hearing before an independent hearing officer, with a further right of appeal before still another independent officer. In any event, section 3 of the EDP confers all of the General President's disciplinary powers on the GEB Attorney who therefore can take this very action against Coia.
In sum, plaintiffs' unsupported and self-contradictory rhetorical attack on the GEB's good faith cannot overcome the undisputed facts showing that the GEB adopted the EDP in an effort to dissuade the government from pursuing ruinous litigation, to protect the Union in the event of such litigation and to attack the underlying illegality that had provoked the government's threats in the first place. Summary judgment was therefore proper, and the appeal must be rejected.
Section 5O1(b) of the LMRDA, which creates the breach-of-fiduciary-duty claim plaintiffs attempt to state in Count II, provides: "No [▀501 suit] shall be brought except upon leave of the court obtained upon verified application and for good cause shown . . ." 29 U.S.C. ▀501(b) (emphasis added). As the courts have stressed, "[t]he 'good cause' condition precedent to maintenance of an action by a union member under ▀501(a) prevents groundless or vexatious suits against union officials." Kausler v. Campey,, 788 F. Supp. 423, 425 (W.D. Mo. 1992), appeal dismissed, 989 F.2d 296 (8th Cir. 1993). See also Dinko v. Wall, 531 F.2d 68, 74 (2d Cir. 1976); Homer v. Ferron, 362 F.2d 224, 228 (9th Cir.), cert. denied, 385 U.S. 958 (1966). Under this standard, "plaintiff must show a reasonable likelihood of success and, with regard to any material facts he alleges, must have a reasonable ground for belief in their existence." Dinko, supra, 531 F.2d at 75. The enforcement of this threshold requirement serves to protect "the internal operations of unions against unjustified interference or harassment." Id.24
"Section 501 is not an invitation for courts to substitute their judgment on how a union should be managed for that of the union officers." Council 49 v. Reach, 843 F.2d 1343, 1347 (11th Cir. 1988). Rather, "Section 501(a)'s primary goal is to deal with the problem of corrupt management of funds by union officials." Tile Marble, Terrazzo Finishers. Shopworkers and Granite Cutters International Union v. Ceramic Tile Finishers Union ("Tile Finishers"), 972 F.2d 738, 744 (7th Cir. 1992). Accordingly, ▀501 generally applies only when a union official makes unauthorized use of union funds. "[S]o long as the [challenged] expenditures were authorized in some fashion, plaintiffs can have no cause of action on behalf of the union for breach of fiduciary duty." McNamara v. Johnston, 522 F.2d 1157, 1166 (7th Cir. 1975), cert. denied, 425 U.S. 911 (1976). See also Tile Finishers, supra, 972 F.2d at 745.
In Tile Finishers, however, this Court acknowledged a line of ▀501 decisions under which a court may review an authorized expenditure in cases of "a union officer's diversion of union funds or property into his own hands." Ray v. Young, 753 F.2d 386, 389 (5th Cir. 1985). Under these cases, an authorized expenditure of union funds that directly benefits a union official may be found to violate ▀501 if the expenditure is "manifestly unreasonable." Ray, supra, 753 F.2d at 389; Morrissey v. Curran, 650 F.2d 1267, 1274 (2d Cir. 1981).
In this case, it makes no difference which of these approaches to ▀501 applies. For all the reasons set forth previously, the adoption of the EDP, creating the four new disciplinary positions, was an action taken in accordance with the LIUNA Constitution's express grant of legislative authority to the GEB. See Art. VIII, ▀2(b). The application of
union resources to fund the four new positions was likewise an action of the GEB expressly authorized by the LIUNA Constitution. See Art. VIII, ▀2(m) (GEB authorized to make such expenditures . . . "as in their judgment, they deem proper and necessary to carry out the objects, purposes, and policies of the International Union"). Accordingly, under McNamara, "plaintiffs can have no cause of action on behalf of the union for breach of fiduciary duty." 522 F.2d at 1166.
On the other hand, under the dicta in Tile Finishers, plaintiffs still cannot show any breach by the defendants of their fiduciary duties because the adoption of the EDP was not "manifestly unreasonable." Not only has LIUNA received substantial benefit from the application of the disciplinary reforms against organized crime, but no defendant received any personal benefit from the creation of the new disciplinary positions. See Ray, supra, 753 F.2d at 391 (where benefit is only indirect, valid authorization is complete defense).25
To avoid this result, plaintiffs craft an entirely new theory in this Court and argue that the GEB breached a duty to apprise the membership of the progress of negotiations with the government, asserting that its failure to do so could only have been the result of a desire to stifle discussion and dissent. Under the law of this Circuit, this new allegation fails to state a ▀501 claim. Title Finishers, supra, 972 F.2d at 744.
It is also logically unsound and factually untrue. Apparently, plaintiffs would have had the GEB advise, not only the 700,000 members of LIUNA, but also any member of
25Even if every one of plaintiffs' allegations were true (which they are not), and the defendants adopted the EDP to save their individual leadership positions within the Union, such a benefit would not qualify as a direct financial benefit sufficient to create a ▀501 violation under the applicable case law. See Ray, supra, 753 F.2d at 390; Council 49, supra, 843 F.2d at 1343 n.3
the general public who reads The Laborer, of the Union's highly-sensitive discussions with the government regarding a resolution of the threatened lawsuit. Yet, this would have brought on exactly the harm to the Union's programs that the uncontradicted evidence showed would result from publicity surrounding the government's proposed RICO action. For precisely this reason, the LIUNA Constitution is exactly to the contrary. It gives the General President unilateral authority to settle and resolve lawsuits in his own discretion. Art. IX, ▀15.
In this case, General President Coia did not even exercise this discretion by himself. Rather, he called five separate GEB meetings to discuss the matter during a period in which there would not necessarily have been even one. There, Luskin gave full presentations to the Union's highly-experienced Board representatives on the progress of the negotiations, and each officer had ample opportunity to ask questions or raise objections. Luskin Dep., 4749 (11/29 Mtg.), 14246, 158-65 (1/4 Mtg.), 238, 244-45, 258-59, 273-75 (1/18 Mtg.), 410 (2/13 Mtg.). In fact, Serpico's own conduct proves the opposite of what he contends here. He was able to object (albeit on purely personal grounds) when the EDP was first discussed at the beginning of January and raise his "union democracy" claim when the matter later came up for a vote. Serpico and Caivano were not muzzled, they were outvoted.
Plaintiffs say they have uncovered reasons to believe that the GEB was not fully apprised of the facts when it voted and now seek to take the depositions of the GEB members to confirm their suspicions. But, whatever these unidentified "reasons" are, plaintiffs' had ample opportunity in the district court to seek discovery of the GEB, but
declined to do so. What discovery they did take, meanwhile, refutes their speculation that the GEB was less than fully informed at the time it adopted the EDP. Luskin testified at considerable length and without contradiction, about the detailed factual presentation he made to the GEB on January 18, 1995. Id., 238, 244-45, 258-59, 273-75. Although plaintiff Serpico has asserted that Luskin did not render a formal legal opinion, it is undisputed that the members of the GEB knew from long experience what their amendatory powers were and, as the minutes show, specifically tied their decision to those powers. 1/18/95 Minutes. Plaintiffs' attempt to question the Board's action must therefore fail.
For all the foregoing reasons, the decision below should be affirmed.
Dated:July 11, 1996
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