SIM LAKE, District Judge.
Having reviewed the Magistrate Judge's Memorandum and Recommendation dated April 10, 2014,
It is, therefore,
The Clerk shah send copies of this Order to the respective parties.
NANCY K. JOHNSON, United States Magistrate Judge.
Pending before the court
Terry Stewart ("Stewart") filed this employment action against his union, the International Association of Machinists and Aerospace Workers ("IAM"), and District
Stewart, an African-American man, works as a machinist for the Union Pacific Railroad ("Union Pacific") in Houston, Texas, and is represented for collective bargaining purposes by the IAM.
In December 2006, Stewart was elected to the position of Lodge 2198 Local Chairman, to which he was reelected in December 2009.
On October 17, 2011, Stewart wrote a letter to the IAM President complaining that Duncan's selection of Davis was the result of racial discrimination.
In November 2011, Duncan announced that he had received complaints against Stewart and called for an investigation into
The IAM appointed a Trial Committee, which, after conducting a preliminary hearing in July 2012, determined that sufficient evidence existed to warrant a formal trial.
While Stewart's EEOC charge was pending, he informed the EEOC about IAM's charges against him, as he believed they were retaliatory.
Stewart filed this lawsuit on May 13, 2013.
On September 3, 2013, Stewart filed a motion to dismiss the Union's counterclaims.
Stewart and Hall both move to dismiss the Union's claim under 29 U.S.C. § 501 ("Section 501") for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1) on the basis that unions do not have standing to sue under the statute. Standing is a threshold consideration which defines the limits of a federal court's power to hear and adjudicate cases. See Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); McClure v. Ashcroft, 335 F.3d 404, 408 (5th Cir.2003). The doctrine has two components, one involving constitutional limitations on federal court jurisdiction and the other involving prudential limitations on its exercise. McClure, 335 F.3d at 408 (citing Raines v. Byrd, 521 U.S. 811, 820, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997)); see also Warth, 422 U.S. at 517-18, 95 S.Ct. 2197.
In order to have constitutional standing to bring suit, the plaintiff must have sustained an injury in fact "fairly traceable to the defendant's actions" and "likely to be redressed by a favorable decision" in court. Ensley v. Cody Res., Inc., 171 F.3d 315, 319 (5th Cir.1999); see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The prudential limitations include the general requirement that a plaintiff seek relief based on his own legal rights and interests and not those of third parties. Warth, 422 U.S. at 499, 95 S.Ct. 2197; Ensley, 171 F.3d at 319. This component requires that the court review the law on which a claim is based to determine whether it grants parties such as the plaintiff a right to relief. Warth, 422 U.S. at 500, 95 S.Ct. 2197.
The Fifth Circuit has instructed that while a dismissal for lack of constitutional standing should be granted under Rule 12(b)(1), dismissal for lack of prudential standing is properly granted under Rule 12(b)(6), which provides for dismissal for failure to state a claim upon which relief can be granted. See Blanchard 1986, Ltd. v. Park Plantation, LLC, 553 F.3d 405, 409 (5th Cir.2008); Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795 n. 2 (5th Cir.2011). Because Stewart and Hall dispute the Union's right to relief under Section 501, their motions to dismiss on this basis are properly brought under Rule 12(b)(6), not Rule 12(b)(1), and the court considers them as such.
Stewart and Hall also argue that these claims must be dismissed because they fall outside the scope of Section 501. Hall additionally moves to dismiss the Union's claims against him under Section 501 and for civil conspiracy on the basis that the Union has failed to allege sufficient facts concerning Hall's alleged actions sufficient to state the claims. Finally, Stewart moves to dismiss the remainder of the Union's claims against him for failure to state a claim, contending that the Union's breach of fiduciary duty claim under state law is barred by the statute of limitations and that the Union's other claims must be dismissed pursuant to the anti-fracturing doctrine.
Pursuant to Rule 12(b)(6), dismissal of an action is appropriate whenever the pleading, on its face, fails to state a claim upon which relief can be granted. When considering a motion to dismiss, the court should construe the allegations in the complaint favorably to the pleader and accept as true all well-pleaded facts. Harold H. Huggins Realty, Inc., 634 F.3d at 803 n. 44.
A complaint need not contain "detailed factual allegations" but must include sufficient facts to indicate the plausibility of the claims asserted, raising the "right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Plausibility means that the factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. A plaintiff must provide "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. In other words, the factual allegations must allow for an inference of "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
Section 501(a) imposes fiduciary duties on a union's "officers, agents, shop stewards, and other representatives." 29 U.S.C. § 501(a). Specifically, the Act provides that those individuals "occupy positions of trust in relation to such organization and its members as a group" and requires that they hold and manage the union's money and property for the sole benefit of the organization, refrain from self-dealing, and remain loyal to the organization. Id.
Subsection (b) creates a federal cause of action for individual union members to sue and "recover damages ... for the benefit of the labor organization" when a union officer is alleged to have breached his duties "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." 29 U.S.C. § 501(b). As the Supreme Court has noted, this language "certainly contemplates that a union may bring suit against its officers in some forum, but it does not expressly provide an independent basis for federal jurisdiction." Guidry v. Sheet Metal Workers Nat. Pension Fund, 493 U.S. 365, 374 n. 16, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990). Courts are divided as to whether Section 501 creates an implied cause of action for unions. See id. (acknowledging division but declining to resolve the issue).
Federal causes of action may be created either expressly or by implication. See Transamerica Mortg. Advisors Inc. (TAMA) v. Lewis, 444 U.S. 11, 15, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979). In determining whether a cause of action is implied, "[t]he judicial task is to interpret the statute Congress has passed to determine whether it displays an intent to create not just a private right but also a private remedy." Banks v. Dallas Hous. Auth., 271 F.3d 605, 611 (5th Cir.2001) (quoting Alexander v. Sandoval, 532 U.S. 275, 286, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001)). "Statutory intent on this latter point is determinative." Alexander, 532 U.S. at 286, 121 S.Ct. 1511.
In Traweek, the Ninth Circuit declined to recognize such a cause of action, emphasizing the "federal policy of noninterference in the internal affairs of unions and labor matters" and the "general principle... that the scope of federal jurisdictional statutes should be construed narrowly." Traweek, 867 F.2d at 506-07. The court focused on the plain language of subsection (b), stating that "[t]he clear language of the statute does not contemplate a suit brought by a union, but only addresses the availability of a suit when the union refuses to sue." Id.
The Eleventh Circuit interpreted the statute differently. In Statham, the court reasoned that subsection (b), by permitting a union member to sue only after the union has refused to take action, "shows Congress preferred that the union, rather than individual members, sue on its own behalf." Statham, 97 F.3d at 1419. The court noted that "[o]ne of the early cases on this issue reasoned that if Congress assumed unions could sue, and even preferred direct action by the union to a derivative-type suit by individuals, Congress must have intended that the unions have access to federal courts." Id. (citing BRAC v. Orr, 95 L.R.R.M. 2701, 2702 (E.D.Tenn.1977)).
The court addressed the argument that "Congress could conceivably have intended to relegate the unions to state law remedies," deciding that it is "far more in keeping with the statute as a whole to conclude that, having given the unions certain rights, Congress thought it implicit that the unions could enforce those rights in court. Allowing the individuals to assert the unions' claims was more extraordinary and therefore had to be spelled out." Id. at 1420-21. Thus, the court concluded "that section 501(a) was intended to create a federal cause of action that can be asserted by the union on its own behalf." Id. at 1421.
In Ward, the Seventh Circuit adopted this reasoning and expanded on how the derivative-type action created in subsection (b) reinforces the implication that subsection (a) contains an implied right of action for unions themselves. As the Fifth Circuit has explained, by providing that a suit by a union member under subsection (b) is "for the benefit of the labor organization," the statute creates a derivative system similar to shareholder derivative actions. Hoffman v. Kramer, 362 F.3d 308, 317 n. 4 (5th Cir.2004) (citing 29 U.S.C. § 501). Given this similarity, the court in Hoffman found "aspects and principles of the law regarding shareholder derivative lawsuits to be instructive" in interpreting Section 501. Id.
A derivative shareholder action allows shareholders to "enforce a corporate cause of action against officers, directors, and third parties" where the suit is a "valid claim on which the corporation could have sued" and "the corporation itself ha[s] refused to proceed after suitable demand." Ross v. Bernhard, 396 U.S. 531, 534, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970). The Ward court concluded that, given the similarities between derivative suits and the remedial structure of Section 501, "[i]t would be anomalous ... to read this statutory scheme as remitting the union's own
The court finds the reasoning of the Seventh and Eleventh Circuits to be persuasive and concludes that unions have an implied federal cause of action under Section 501(a) to sue for violations of the fiduciary duties imposed by the statute. Accordingly, Stewart and Hall's motions to dismiss on the ground that the Union is not a proper plaintiff under the statute must be denied.
Stewart and Hall also contend that, even if the Union is a proper plaintiff under the statute, its claims must nonetheless be dismissed for failure to comply with the prerequisites to suit set forth in subsection (b). The Union's claims, however, arise under Section 501(a); the requirements of subsection (b) apply only to actions brought by union members. "Indeed it would be absurd ... to require the union to make a demand upon itself to sue, and to refuse that demand, before properly invoking the court's jurisdiction." Int'l Longshoremen's Ass'n, S.S. Clerks Local 1624, AFL-CIO v. Va. Int'l Terminals Inc., 914 F.Supp. 1335, 1340 (E.D.Va.1996).
Stewart and Hall contend that the Union failed to allege sufficient facts to indicate the plausibility of their claims against them for breach of fiduciary duty under Section 501. Section 501(a) imposes three fiduciary duties on union officials:
Hoffman, 362 F.3d at 316 (citing 29 U.S.C. § 501(a)).
The Fifth Circuit has noted that "the fiduciary obligations imposed are primarily pecuniary in nature — that is, having to do with the custody, control, and use of a union's money and its financial interests or property and the conduct of union officials in relation thereto." Id. Accordingly, "disagreements over the wisdom or appropriateness of particular administrative and employment actions and decisions are usually not amenable to suit under the LMRDA." Id. at 322. Rather, "most of these matters are the sort of `internal union grievances' properly left to be worked out via union democratic processes ... and not by a federal court sitting as a sort of `super-review board.'" Id. (citing United Food & Commercial Workers Int'l Union Local 911 v. United Food and Commercial Workers Int'l Union, 301 F.3d 468, 475 (6th Cir.2002)).
Hoffman involved allegations that union officers were "derelict in the performance of their employment obligations" and that, by "accepting their salaries while not working full workweeks, they breached § 501(a) duties by misusing union funds for their personal benefit." Id. The court concluded that "the statute cannot plausibly read to give rise to a cause of action against a union officer whenever there is a disagreement concerning his work schedule or work ethic." Id.
Here, the Union's allegations against Stewart include claims that he misappropriated vending machine profits that were owed to union members; maintained a patronage system through which he appointed
The Union alleged that Hall, while serving as General Chairman, assisted Stewart in maintaining the patronage system by issuing false reports regarding Stewart's wrongdoing and traveling to Houston at union expense to suppress complaints about Stewart's misconduct.
Stewart and Hall contend that these allegations do not fall within the scope of Section 501 as set forth in Hoffman. Stewart and Hall cite only to Hoffman and two Second Circuit opinions cited by that court. See Dunlop-McCullen v. Local 1-S, AFL-CIO-CLC, 149 F.3d 85, 93 (2nd Cir.1998); Guzman v. Bevona, 90 F.3d 641, 646 (2nd Cir.1996).
The Union's allegations here are certainly more pecuniary in nature than the mere alleged "dereliction of employment duties" found insufficient in Hoffman. Unlike the plaintiff in Hoffman, the Union has alleged that Stewart converted money that was owed to union members. Furthermore, in Guzman, the Second Circuit affirmed the liability of union officers under Section 501 for "misus[ing] ... money to order surveillance of a loyal but outspoken union member." Guzman, 90 F.3d at 646. As the Union argues, this unlawful activity is comparable to Hall's alleged traveling to Houston at union expense to assist Stewart in suppressing complaints.
Hall further complains that, as to the Section 501 claim against him, the Union did not "plead facts, names, places, or dates as required."
Stewart contends that the Union's state-law claim of breach of fiduciary duty is barred by the statute of limitations. Under federal law, which governs the pleading requirements of a case in federal court, the statute of limitations is an affirmative defense, and the burden of proof is on the party pleading it. See TIG Ins. Co. v. Aon Re, Inc., 521 F.3d 351, 357 (5th Cir.2008); F.T.C. v. Nat'l Bus. Consultants, Inc., 376 F.3d 317, 322 (5th Cir. 2004). Therefore, a plaintiff is not "required to allege that his claims were within the applicable statute of limitations." Frame v. City of Arlington, 657 F.3d 215, 239-40 (5th Cir.2011). At the motion to
In Texas, the statute of limitations for a claim of breach of fiduciary duty is four years. Tex. Civ. Prac. & Rem.Code § 16.004. At this stage, the court cannot determine that the Union's allegations concern events that occurred more than four years before it filed its counterclaim. The Union referred to actions that Stewart allegedly took "as Local Chairman," a position he held until April 2012.
Stewart contends that the "essence" of the Union's claims against him is for breach of fiduciary duty and that the Union has improperly attempted to "turn one cause of action into numerous independent claims."
Here, the Union does not present a detailed argument supporting its claim that the Union's additional state-law claims are mere "attempts to dress the claim up as something else."
Hall contends that the Union has not pled sufficiently specific facts to support a claim against him for civil conspiracy. Under Texas law, a civil conspiracy "is a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means." Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 701 (Tex.App.-Fort Worth 2006, pet. denied). The essential elements are: "(1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) one or more
Citing no legal authority, Hall protests that the "times and places the alleged conspiracy formed are missing" and the "actual terms of the conspiracy are not set forth."
Here, the Union has provided such "plausible grounds to infer an agreement." Id. The Union alleges that Hall and Stewart agreed to undertake an unlawful course of conduct whereby Stewart committed tortious acts in violation of state law and Hall suppressed complaints and filed false reports so as to prevent Stewart's actions from being exposed. The counterclaim includes specific examples of unlawful acts allegedly taken by Stewart, such as abusing his position as Local Chairman by creating positions to which he appointed supporters and manipulating the distribution of overtime claims and resolution of union member claims against Union Pacific.
"[A] naked assertion of conspiracy ... gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of entitlement to relief." Twombly, 550 U.S. at 557, 127 S.Ct. 1955. The court finds that the Union's allegations regarding Stewart and Hall's coordinated unlawful actions provide the requisite "factual enhancement." Accordingly, Hall's motion to dismiss the Union's civil conspiracy claim must be denied.
The Union moves to dismiss Stewart's Title VII retaliation claim on the basis that he failed to exhaust his administrative remedies. "It is well-settled that courts have no jurisdiction to consider Title VII claims as to which the aggrieved party has not exhausted administrative remedies." Nat'l Ass'n of Gov't Employees v. City Pub. Serv. Bd. of San Antonio, Tex., 40 F.3d 698, 711 (5th Cir.1994). The Fifth Circuit has "held that `a judicial complaint filed pursuant to Title VII may encompass any kind of discrimination like or related to allegations contained in the charge and growing out of such allegation during the pendency of the case before the Commission.'" Id. (quoting Sanchez v. Standard Brands, Inc., 431 F.2d 455, 466 (5th Cir.1970)).
In Texas, a state that has an agency with authority similar to that of the EEOC, a complainant must file a charge of discrimination within 300 days of learning of the alleged discriminatory practice. Huckabay v. Moore, 142 F.3d 233, 238 (5th Cir.1998); see also 42 U.S.C. § 2000e-5(e)(1). Exhaustion "serves the dual purposes of affording the EEOC and the employer an opportunity to settle the dispute
Here, Stewart filed charge a of discrimination with the EEOC on January 5, 2012, alleging that District 19 denied him the position of General Chairman on the basis of race.
The Union argues that, because a charge of discrimination alleging retaliation was not filed until more than 300 days after any alleged acts of retaliation, Stewart failed to exhaust his Title VII retaliation claim. The Union does not address Stewart's claim that, after filing his original charge, he informed the EEOC of the retaliatory events as they were occurring. Accepting as true Stewart's claim that he reported this retaliation to the EEOC, as it must, the court finds that Stewart has alleged a plausible claim of retaliation and that the question of exhaustion would be best resolved through discovery and summary judgment or trial. Accordingly, the Union's motion to dismiss must be dismissed.
Based on the foregoing, the court
The Clerk shall send copies of this Memorandum and Recommendation to the respective parties who have fourteen days from the receipt thereof to file written objections thereto pursuant to Rule 72(b) and General Order 2002-13. Failure to file written objections within the time period mentioned shall bar an aggrieved party from attacking the factual findings and legal conclusions on appeal.
The original of any written objections shall be filed with the United States District Clerk electronically. Copies of such objections shall be mailed to opposing parties and to the chambers of the undersigned, 515 Rusk, Suite 7019, Houston, Texas 77002.
