RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Anderson et al. v. Int’l Union, No. 01-1253
ELECTRONIC CITATION: 2004 FED App. 0170P (6th Cir.) Utd. Plant Guard Workers et al.
File Name: 04a0170p.06
_________________
UNITED STATES COURT OF APPEALS COUNSEL
FOR THE SIXTH CIRCUIT ARGUED: Barbara M. Harvey, Detroit, Michigan, for
_________________ Appellants. E. Michael Morris, MORRIS & DOHERTY,
Birmingham, Michigan, for Appellees. ON BRIEF: Barbara
GARY ANDERSON, LOUIS X M. Harvey, Detroit, Michigan, for Appellants. E. Michael
SCOHY, and GEORGE SQUIER, - Morris, MORRIS & DOHERTY, Birmingham, Michigan,
Plaintiffs-Appellees, - Charles J. Porter, OFFICE OF CHARLES J. PORTER,
- No. 01-1253 Clarkston, Michigan, for Appellees.
-
v. > MOORE, J., delivered the opinion of the court, in which
, GILMAN, J., joined. MERRITT, J. (pp. 24-26), delivered a
-
THE INTERNATIONAL UNION, separate dissenting opinion.
-
UNITED PLANT GUARD - _________________
WORKERS OF AMERICA -
(UPGWA), INTERNATIONAL - OPINION
- _________________
EXECUTIVE BOARD OF THE
-
UPGWA, PENSION - KAREN NELSON MOORE, Circuit Judge. This appeal
COMMITTEE OF THE UPGWA, - addresses the question of whether the doctrine of apparent
and RETIREMENT PLAN OF - authority bound a union to its officers’ self-dealing
THE UPGWA, - transaction entered into in clear violation of the union’s
Defendants-Appellants. - constitution. We hold that it did not.
-
N Gary Anderson (“Anderson”), Louis Scohy (“Scohy”), and
Appeal from the United States District Court George Squier (“Squier”), Plaintiffs-Appellees, are all former
for the Eastern District of Michigan at Detroit. officers of Defendant-Appellant, International Union, United
No. 96-70710—Gerald E. Rosen, District Judge. Plant Guard Workers of America (“UPGWA”). The other
defendants in this action are the International Executive
Argued: September 11, 2003 Board of the UPGWA (“IEB”), the Pension Committee of the
UPGWA (“Pension Committee”), and the retirement plan of
Decided and Filed: June 7, 2004 the UPGWA (“Retirement Plan”). While Plaintiffs-Appellees
were officers of UPGWA and members of the IEB, they voted
Before: MERRITT, MOORE, and GILMAN, Circuit in favor of resolutions that would eliminate their positions as
Judges. officers and provide them with early-retirement benefits
1
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Guard Workers et al. Utd. Plant Guard Workers et al.
above those permitted by UPGWA’s constitution. After the I. OVERVIEW
IEB was threatened with litigation, it deferred implementation
of the increased early-retirement benefits until presentation A. Factual Background
for a vote at the upcoming International Convention.
Subsequently, none of the Plaintiffs-Appellees continued in Plaintiffs-Appellees are former officers of UPGWA and
their positions as officers, and the International Convention former members of the IEB. UPGWA is a union that
voted against a resolution providing for the increased early- represents “Plant Guards, Security Officers, Security Police
retirement benefits. Officers, fire protection and other employees performing
protection and security activities for private and governmental
Plaintiffs-Appellees brought suit in the United States employers.” Joint Appendix (“J.A.”) at 307 (UPGWA Const.
District Court for the Eastern District of Michigan, asserting Art. II). UPGWA’s officers are elected “at the union’s
that this denial of the promised early-retirement benefits convention which is held every five years.” J.A. at 22 (Dist.
violated several provisions of the Employee Retirement Ct. Op. 1/17/97).1 Anderson and Squier were elected regional
Income Security Act (“ERISA”) of 1974. After the district directors for UPGWA in 1990, and their terms both expired
court granted summary judgment to Defendants-Appellants in 1995. Scohy was a vice-president of UPGWA, who was
on all of Plaintiffs-Appellees’ claims, a panel of this court also elected in 1990, and his term also expired in 1995.
reversed and remanded, requesting the district court to make
further factual findings on the issue of whether the Union In 1993 and 1994, while Plaintiffs-Appellees were in office,
President and the IEB had apparent authority to bind “the UPGWA experienced severe financial difficulties and the
UPGWA to the December 7, 1994 resolution. On remand, the IEB began exploring ways to cut costs and save money. In
district court denied the parties’ cross-motions for summary November 1994, in order to stem the union’s financial losses,
judgment, conducted a bench trial, and issued an opinion UPGWA President Eugene McConville [(“McConville”)]
concluding that the Union President and the IEB did have proposed that the union be restructured so as to eliminate
apparent authority to so bind UPGWA, and accordingly some regional directorships as well as the position of vice-
awarded Plaintiffs-Appellees the increased early-retirement president.” J.A. at 23 (Dist. Ct. Op. 1/17/97). As part of this
benefits. restructuring, McConville proposed offering early retirement
to all full-time officers and directors who met certain
We conclude that Plaintiffs-Appellees could not have eligibility requirements. McConville further proposed that
reasonably relied on the Union President’s or the IEB’s the IEB effectuate the restructuring and offer the early-
representations because the increased early-retirement retirement benefits in February 1995, rather than wait for
benefits clearly violated UPGWA’s constitution. Moreover, approval “at the international convention in May 1995,
we will not enforce this contract, which Plaintiffs-Appellees because the union’s accountants had advised that there would
entered into in violation of their fiduciary duties under
§ 501(a) of the Labor-Management Reporting and Disclosure 1
Act (“LMRDA”) of 1959. Therefore, we REVERSE the W e are relying upon the district court’s January 17, 1997 summ ary
district court’s judgment awarding Plaintiffs-Appellees the judgment opinion for uncontested background facts, and upon the district
court’s January 4, 2001 bench trial opinion for further factual findings,
increased early-retirement benefits. except to the e xtent that we consider tho se factua l findings to be clearly
erroneo us.
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Guard Workers et al. Utd. Plant Guard Workers et al.
be a large savings to the union if it could eliminate the full- Union, United Plant Guard Workers of America
time positions prior to the convention.” J.A. at 23 (Dist. Ct. (UPGWA), dated May 19, 1990.
Op. 1/17/97).
J.A. at 25 (Dist. Ct. Op. 1/17/97).
The IEB held a special meeting on December 6 through 9,
1994, to consider various cost-cutting measures, including The district court found that absent the December 7, 1994
McConville’s restructuring and early-retirement proposal. At resolution, none of the Plaintiffs-Appellees would have been
the special IEB meeting, David Kaufman (“Kaufman”), eligible for early retirement under the Retirement Plan, and
UPGWA’s accountant, made a presentation detailing the state that UPGWA’s constitution prohibited offering early
of UPGWA’s finances and the cost savings projected for retirement to Plaintiffs-Appellees. Article XI, Section 2 of
McConnville’s restructuring and early-retirement proposal. UPGWA’s constitution provides:
Kaufman reported to the IEB that eliminating the vice-
president’s position would save UPGWA $535,000 over five The International Executive Board is empowered to
years and that eliminating three regional directors would save formulate, maintain, and amend a Pension Retirement
UPGWA an additional $1.70 million over five years. The Plan to include, but not to exceed the following:
resolution proposed by McConville contemplated offering
early retirement to officers and directors who met the (A) All full-time elected officers and appointed
following eligibility requirements: International Union representatives who have at
least five years of service shall be eligible under
1. Must be 50 years of age or over as of December 31, such Plan.
1994.
2. Retirement must cause one full-time position to be (B) The normal retirement age shall be Sixty (60)
eliminated. years. Disability and early retirement benefits
3. Retirement must be taken on February 15, 1995. shall be in accordance with the normal
4. Acceptance of this window must be made by retirement age.2
December 8, 1994.
J.A. at 25 (Dist. Ct. Op. 1/17/97). The resolution further 2
Article III of UPG W A’s constitution specifies that the constitution
specified that the early-retirement package would contain the “can be amended only by a majority vote of the delegates at succeeding
following benefits: Conventions; provided , howe ver, that d uring the interim between
Conventions, this Constitution and By-Laws can be amended by a
majo rity vote o f the total International Membership voting in all Local
1. An officer or director will receive ten (10) years Unions.” J.A. at 307 . This article further provides that the IE B, by a two-
allocated to age and/or service, at their discretion for thirds vote, is em pow ered “to make such interim chang es in this
pension benefit computation. Constitution and By-Laws applicable only until the next regular
2. An officer or director shall be entitled to all benefits Constitutional Convention, as m ay from tim e to time be n ecessary to
as stated in Article XI, Sections 1 and 2(e) of the conform this Constitution and By-Laws with any applicable laws.” J.A.
at 307-08 (UP GW A Const. Art. III) (emphasis added).
Constitution and By-Laws of the International McCo nnville conceded at trial that the early-retirement benefits
embodied in the December 7, 1994 resolution “were not ‘in accordance
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Guard Workers et al. Utd. Plant Guard Workers et al.
J.A. at 310 (UPGWA Const. Art. XI, § 2 (emphases added)). and Section 501(a) of the Labor Management Reporting and
Under the Retirement Plan, “a covered employee is entitled Disclosure Act.” J.A. at 26 (Dist. Ct. Op. 1/17/97). Although
to full retirement only if he is at least 60 years of age, or a it is not reflected in the district court’s January 4, 2001
reduced retirement benefit if he is under age 60 but over age opinion, at trial all of the Plaintiffs-Appellees testified that
55 and has completed at least five years of service. No Article XI, Section 2 of the UPGWA’s Constitution was
provision is made for retirement under age 55.”3 J.A. at 25- discussed at the IEB meeting prior to the vote on the early-
26 (Dist. Ct. Op. 1/17/97). To be eligible for either normal or retirement proposal.
early-retirement benefits under the Retirement Plan,
employees must have completed five years of service. As of On December 7, 1994, the IEB voted in favor of adopting
February 15, 1994, neither Anderson nor Scohy was fifty-five the early-retirement proposal by a margin of eight in favor
years old and neither had completed at least five years of and three against; Plaintiffs-Appellees all voted in favor of the
service; Squier was fifty-nine years old, but had not proposal.4 On December 8, 1994, Plaintiffs-Appellees all
completed at least five years of service. accepted in writing the increased early-retirement benefits.
According to their acceptance letters, Anderson would receive
On December 7, 1994, before voting on the early- a monthly pension of $1,682.95, Scohy would receive a
retirement proposal, Plaintiffs-Appellees asked Gordon monthly pension of $3,437.87, and Squier would receive a
Gregory (“Gregory”), UPGWA’s attorney, whether he monthly pension of $2,478.82.
foresaw any legal problems with the early-retirement
proposal. According to Anderson and Scohy, Gregory told “On December 9, [1994], the IEB passed another
them that he was not aware of any problems. However, two resolution, this one consolidating, rearranging, and dissolving
days earlier, on December 5, 1994, Gregory had written to certain regions.” J.A. at 30 (Dist. Ct. Op. 1/17/97). The
McConville stating the opinion “that he believed that it was regions for which Squier and Anderson had been directors
likely that there would be an administrative and/or judicial were “to be dissolved effective February 15, 1995, i.e., the
challenge to the early retirement window based upon a date on which Plaintiffs retirements under the December 7
violation of Article XI, Section 2 of the Union Constitution resolution were to become effective.” J.A. at 30 (Dist. Ct.
Op. 1/17/97). The resolution did not eliminate the vice-
president’s position held by Scohy because that required
amending UPGWA’s constitution through a vote at the
with normal retirement age’ under Article XI, Section 2(b).” J.A. at 616 International Convention in May 1995.
(Dist. Ct. Op. 1/4/01).
3 On December 22, 1994, Jack Webb (“Webb”), a regional
Article XI of UP GW A’s Retirement Plan specifies that the IEB has director, wrote a letter to McConville asserting that by voting
“the right at any time and from time to time to terminate, modify or
amend in whole or in p art any o r all of the p rovisio ns of the Plan.” J.A. in favor of the increased early-retirement benefits, members
at 292 . The IEB is designated a s the “Plan Administrator” for purposes of the IEB violated Article XI, Section 2 of UPGWA’s
of the Employee Retirement Income Security Act (“ERISA”) of 1974, but
a Pension Comm ittee, composed of three members designated by the IEB,
is responsible for daily administration and interpretation of the Retirement 4
Plan. W hen the events giving rise to this litigation occurred, Scohy was Jack W ebb, Ronald W arfield, and Denise Sylvestre voted against the
the Chairman of the Pension Committee. Decemb er 7, 1994 resolution.
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Guard Workers et al. Utd. Plant Guard Workers et al.
constitution and their fiduciary duties, and threatening to sue person that another is his agent, regardless of whether an
if the IEB did not withdraw the December 7, 1994 resolution. actual agency relationship has been formed and (2) exists only
In an opinion letter written on January 4, 1995, Gregory to the extent that it is reasonable for the third person dealing
confirmed the possibility of a viable legal challenge to the with the agent to believe that the agent is authorized.” Id. at
early-retirement benefits embodied in the December 7, 1994 593. Because the record on the issue of apparent authority
resolution. On January 5, 1995, in response to Webb’s was limited, the panel remanded this case instructing the
threatened lawsuit, McConville circulated a referendum ballot district court “to make further factual findings on whether
to members of the IEB asking whether they wanted to delay principles of apparent authority can bind the union to the
implementation of the early-retirement benefits and December 7, 1994 resolution.” Id. (emphasis added). More
restructuring until authorized through a vote at the specifically, the panel instructed the district court to:
International Convention. The IEB voted to defer
implementation of the resolutions until the International determine if union president McConville, as president of
Convention, and the Plaintiffs-Appellees continued in their the union and a member of the [IEB], and the [IEB],
offices until that time. At the International Convention, were acting within their apparent or actual authority as
Squier “ran for re-election as regional director, but lost. representatives of the union’s retirement plan and
Anderson did not seek re-election,” and the membership whether plaintiffs reasonably relied upon this authority
voted to eliminate the vice-president’s position held by to enter into the agreement for early retirement benefits.
Scohy. J.A. at 33 (Dist. Ct. Op. 1/17/97). Additionally, the Whether plaintiffs’ reliance was reasonable may turn, in
membership voted against adopting the increased early- part, on whether they were aware of the possible legal
retirement benefits. challenges to the December 7, 1994, resolution before
they accepted the early retirement offer.
B. Procedural Background
Id. (citations omitted). The panel further instructed that,
Plaintiffs-Appellees filed various lawsuits against UPGWA “Apparent authority . . . may attach even when the agent’s
and other defendants, including two state-court actions and acts are unauthorized [and] that even in the presence of a
this federal action asserting ERISA violations. On ratification requirement, a third party may rely upon the
January 17, 1997, the district court issued an opinion rejecting apparent authority of the union representatives to enter into an
all of Plaintiffs-Appellees’ ERISA claims and granting agreement where there is a reasonable basis for such
summary judgment to Defendants-Appellants. Then, on July reliance.” Id.
31, 1998, a panel of this court reversed and remanded,
indicating that the relevant issue was whether McConville and On August 31, 1999, the district court issued an opinion
the IBE had apparent authority to bind UPGWA to the denying the parties’ post-remand motions for summary
December 7, 1994 resolution. Anderson v. Int’l Union, judgment. The court concluded that Article XI, Section 1 of
United Plant Guard Workers, 150 F.3d 590, 592 (6th Cir. the UPGWA Retirement Plan, Article XII, Section 5 of the
1998). UPGWA constitution, and McConville’s statements
manifested apparent authority in McConville and the IEB to
In this court’s 1998 opinion, the panel explained that offer the early-retirement benefits encompassed in the
“apparent authority (1) results from a manifestation by a December 7, 1994 resolution. The district court found it
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 11 12 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
relevant that the Retirement Plan document provides: “The 2001. In its opinion, the district court adhered to its previous
Union, acting through its International Executive Board, conclusion that UPGWA manifested authority in the IEB and
reserves and shall have the right at any time and from time McConville to offer the early-retirement benefits. Based
to time to terminate, modify or amend in whole or in part upon testimony heard at trial, the district court then concluded
any and all provisions in the Plan.” J.A. at 74 (Dist. Ct. that Plaintiffs-Appellees’ reliance on the IEB’s and
Op. 8/31/99) (emphases in original). The district court also McConville’s manifestations of authority was reasonable.
found it relevant that the UPGWA constitution “provides that Specifically, Ronald Warfield (“Warfield”), an IEB member
the IEB ‘shall decide all questions involving interpretation of and also a Pension Committee member, testified that the
this Constitution and By-Laws, between Conventions.” J.A. Retirement Plan could be amended via an IEB resolution.
at 75. Additionally, the district court found that prior to their Additionally, all three Plaintiffs-Appellees testified that they
accepting the early-retirement benefits, McConville assured relied upon Gregory’s assurances “that there were no legal
Plaintiffs-Appellees that the early-retirement proposal had problems with the early retirement proposals.” J.A. at 643
been checked by the attorneys and accountants and was legal, (Dist. Ct. Op. 1/4/01). Although Gregory testified that he told
and that Gregory had assured Plaintiffs-Appellees that the Plaintiffs-Appellees that he had written on December 5, 1994,
early-retirement proposal was legal. an opinion letter for McConville explaining the possibility of
a § 501 challenge, the district court credited Plaintiffs-
In its August 31, 1999 opinion, the district court also Appellees’ testimony that Gregory had not told them about
concluded, however, that there was a genuine issue of the letter. Moreover, all of the witnesses at trial, including
material fact regarding whether Plaintiffs-Appellees’ reliance Gregory and Webb, testified that in response to an inquiry by
on these manifestations of apparent authority was reasonable. Webb, Gregory had stated that he was not aware of any legal
J.A. at 77 (Dist. Ct. Op. 8/31/99). The district court noted problems with the early-retirement proposal under either
that “whether Plaintiffs’ reliance was reasonable turns on Article XI, Section 2 of UPGWA’s constitution or under
whether they were aware of the [UPGWA] constitution’s § 501 of the LMRDA. Because Gregory had been UPGWA’s
requirement of a vote of the full membership on the early legal counsel for more than thirty-five years, the district court
retirement proposal and whether they were aware of the found “that it was reasonable for Plaintiffs to rely upon Mr.
possible legal challenges to the December 7, 1994 resolution Gregory’s assurances that there were no legal problems with
before the[y] accepted the early retirement offer.” J.A. at 77 the early retirement plan.” J.A. at 643-44 (Dist. Ct. Op.
(Dist. Ct. Op. 8/31/99) (citing Anderson, 150 F.3d 590)). The 1/4/01). Moreover, the district court found that even if
district court found that the parties had presented conflicting Plaintiffs-Appellees may have heard that Webb might
testimony regarding whether the Plaintiffs-Appellees were challenge the early retirement proposals, it was reasonable for
told prior to accepting the early-retirement proposal that there Plaintiffs-Appellees to rely upon Gregory’s and McConville’s
was the possibility of a legal challenge to the December 7, assurances that there were no legal problems with the plan.
1994 resolution, thereby creating a genuine issue of material Therefore, the court concluded that Plaintiffs-Appellees
fact and precluding summary judgment. “reasonably relied upon the apparent authority of the IEB to
adopt the Resolution on December 7, 1994 providing for an
The district court conducted a six-day bench trial in early retirement plan in accepting early retirement pursuant to
December 1999. After hearing testimony and considering that Resolution on December 8, 1994” and that UPGWA “is
exhibits, the district court issued an opinion on January 4, bound by the terms of the resolution passed December 7,
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 13 14 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
1994 modifying the UPGWA Retirement Plan to grant early those manifestations was reasonable; therefore, the district
retirement benefits to Plaintiffs.” J.A. at 645 (Dist. Ct. Op. court concluded that McConville and the IEB had apparent
1/4/01). authority to bind UPGWA to December 7, 1994 resolution.
Although we commend the district court for its thorough and
All defendants timely appealed the district court’s thoughtful opinion, we conclude that the district court
January 4, 2001 order. committed clear error by finding that the Plaintiffs-Appellees’
reliance on McConville’s and the IEB’s ostensible authority
II. ANALYSIS to bind UPGWA in this manner was reasonable.
A. Standard of Review An agent acting with apparent authority may bind his or her
principal to a contract with a third party. Id. As we explained
“In considering a district court’s decision following a bench in Anderson, apparent authority arises in situations when the
trial,” we review for clear error the district court’s findings of principal manifests to a third party that an agent is authorized
fact, and we review de novo the district court’s conclusions of to act upon the principal’s behalf and the third party
law. Overton Distribs., Inc. v. Heritage Bank, 340 F.3d 361, reasonably relies upon that authority. A third party may not,
366 (6th Cir. 2003) (internal quotation marks omitted). When however, reasonably rely upon an agent’s ostensible authority
deciding cases that turn upon the interpretation of a union’s if the third party knows that the agent is not authorized to act
constitution, “Courts are reluctant to substitute their judgment in a particular manner. See Dayton Bread Co. v. Montana
for that of union officials in the interpretation of the union’s Flour Mills Co., 126 F.2d 257, 261 (6th Cir. 1942). In
constitution, and will interfere only where the official’s Dayton Bread Co., we held that the third party did not
interpretation is not fair or reasonable.” United Food & reasonably rely upon the agent’s authority to bind the
Commercial Workers Int’l Union Local 911 v. United Food principal because it is well established that a salesman “has
& Commercial Workers Int’l Union, 301 F.3d 468, 478 (6th no implied authority to bind his principal by an absolute sale
Cir. 2002) (quoting United Bhd. of Carpenters, Dresden or contract,” and because the contracts at issue were
Local No. 267 v. United Bhd. of Carpenters, S. Cent. Ohio prohibited under applicable law. Id. In Dayton Bread Co.,
Dist. Council, 992 F.2d 1418, 1423 (6th Cir. 1993)). we explained
B. Apparent Authority The principal is often bound by the acts of his agent in
excess of or in abuse of his actual authority, but this is
When we remanded this case, we instructed the district only true between the principal and third persons who,
court to make further findings on the issue of whether believing and having a right to believe that the agent was
McConville or the IEB had apparent authority to bind acting within and not exceeding his authority, would
UPGWA to the early-retirement benefits embodied in the sustain a loss if the act was not considered that of the
December 7, 1994 resolution. Anderson, 150 F.3d at 592-93. principal. . . . If . . . a third person dealing with an agent
After conducting a bench trial, the district court found that knows he is acting under a circumscribed and limited
UPGWA manifested to Plaintiffs-Appellees that McConville authority and that his act is in excess of or an abuse of
and the IEB were its agents for the purposes of amending the the authority actually conferred, then clearly the
Retirement Plan, and that Plaintiffs-Appellees’ reliance upon principal is not bound.
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Guard Workers et al. Utd. Plant Guard Workers et al.
Id. (emphases added).5 C. Section 501 of the LMRDA
In this case, Plaintiffs-Appellees had actual knowledge of As an alternative basis for our holding, we conclude that
the limitations on pension benefits imposed by Article XI, Plaintiffs-Appellees may not enforce the increased early-
Section 2 of UPGWA’s constitution and should have known retirement benefits because Plaintiffs-Appellees violated
the appropriate procedures for amending UPGWA’s § 501(a) of the LMRDA. Section 501 of the LMRDA
constitution.6 Although Plaintiffs-Appellees may have imposes fiduciary duties upon the officers and agents of labor
believed that McConville and the IEB had the authority to unions and provides union members with a cause of action
bind UPGWA to the December 7, 1994 resolution, we against union officers and agents who violate those duties.
conclude that Plaintiffs-Appellees’ actual knowledge and Section 501(a)8 defines the scope of union officers’ and
imputed knowledge made this reliance unreasonable. agents’ fiduciary duties, and § 501(b) specifies prerequisites
Therefore, we conclude that McConville and the IEB did not to bringing suit to redress violations of § 501(a). We
have apparent authority to offer the increased early-retirement recognize that when defining the scope of fiduciary duties
benefits, and thus UPGWA is not bound by the December 7, imposed by § 501(a), courts must be cognizant of “the special
1994 resolution.7 problems and functions of a labor organization.” 29 U.S.C.
§ 501(a). We also recognize, however, that Congress passed
§ 501(a) to curb abusive practices by union officials.
5
Although Dayton Bread Co. v. Montana Flour Mills Co., 126 F.2d
257 (6th C ir. 194 2), is a diversity case applying O hio law, we find its
discussion of general agency principles instructive and consistent with estop pel, we are reluctant “to allow estopp el to override the clear terms”
other authorities. See Brandin g Iron M otel, Inc. v. Sandlian Equity, Inc. of an ERISA plan. Marks v. Newcourt Credit Group, Inc., 342 F.3d 444,
(In re Bra ndin g Iron M otel, Inc.), 798 F.2d 396, 401 (10th Cir. 1986); 456 (6th Cir. 2003).
Pasco County Peach Ass’n v. J.F. Solley & Co., 146 F.2d 880, 883 (4th
Cir. 1945); Harold Gill Reuschlein & W illiam A. G regory, The Law of 8
Agency and Partne rship 63-64 (2d ed . 1990). Subsection (a) provides, in pertinent part:
The officers, agents, shop stewards, and other representatives of
6 a labor organization occupy positions of trust in relation to such
Plaintiffs-Appellees’ actual and im puted know ledge sufficiently organization and its members as a group. It is, therefore, the
distinguishes the present case from Cen tral Sta tes Southeast & Southwest duty of each such person, taking into account the special
Areas Pension Fund v. Kraftco, Inc., 799 F.2d 1098 (6th Cir. 1986) (en problems and functions of a labor organization, to hold its
banc), cert. denied, 479 U.S. 1086 (1987), in which we held that a union’s money and property solely for the benefit of the organization
agent could bind the union based upon the doctrine of appa rent authority and its members and to manage, invest, and expe nd th e sam e in
even in the presence of a m emb ership-ratification requirement. accordance with its constitution and bylaws and any resolutions
7
of the governing bodies adopted thereunder, to refrain from
Although throughout much of this litigation the parties have focused dealing with such organization as an adverse party or in behalf
on ERISA, we note that our outcome today does not disrupt the terms of of an adverse party in any matter connected with his duties and
an ERISA plan. P laintiffs-App ellees may not claim benefits under the from holding or acquiring any p ecuniary or personal interest
terms of the Retirement Plan because the plan was never validly amended. which conflicts with the interests of such organization, and to
Sprague v. Gen. Motors Corp., 133 F.3d 388, 403 (6th Cir.) (en banc), account to the organization for any profit received b y him in
cert. denied, 524 U.S. 923 (1998). As will be discussed below, P laintiffs- whatever capacity in connection with transactions conducted by
Appellees have not established all of the elements of estoppel. Moreover, him or under his direction on behalf of the organization.
even if Plaintiffs-Appellees had established all of the elements of 29 U.S.C. § 50 1(a).
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 17 18 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
Morrissey v. Curran, 650 F.2d 1267, 1272-73 (2d Cir. 1981). UPGWA’s constitution specifies, however, that only full-time
Although the precise contours of the fiduciary duties imposed officers and union representatives who have attained at least
by § 501(a) are not fully delineated in the statutory text, it is five years of service are eligible for pension benefits.
clear that Congress intended unions’ constitutions and by- Moreover, UPGWA’s constitution specifies that qualifying
laws to play a major role in shaping these duties. See individuals may receive normal retirement benefits at age
Guzman v. Bevona, 90 F.3d 641, 648 (2d Cir. 1996). Section sixty and that “early retirement benefits shall be in
501(a) directs union officers and agents to expend the union’s accordance with the normal retirement age.” J.A. at 310
money and property, “in accordance with its constitution and (emphasis added). It is clear that UPGWA’s constitution
bylaws and any resolutions of the governing bodies adopted allows for early-retirement benefits to be offered only on a
thereunder.” 29 U.S.C. § 501(a) (emphasis added). We have reduced basis, and also requires pension recipients to have
previously held that union officers and agents violate § 501(a) worked for UPGWA for at least five years; a contrary
by engaging in transactions that provide a direct personal interpretation would be unreasonable and not entitled to
benefit to themselves and that contravene their union’s deference. It is undisputed that as of December 7, 1994,
constitution. McCabe v. Int’l Bhd. of Elec. Workers Local Plaintiffs-Appellees were not entitled to any retirement
Union No. 1377, 415 F.2d 92, 97-98 (6th Cir. 1969) (holding benefits under the Retirement Plan and that the early-
that union officers violated § 501(a) by accepting retirement benefits encompassed in the December 7, 1994
reimbursement for out-of-pocket expenses incurred while resolution exceeded the limits imposed by UPGWA’s
conducting union business in addition to per diem payments constitution. Plaintiffs-Appellees were to receive a direct
that were not authorized by their union’s constitution).9 personal benefit from the December 7, 1994 resolution,
Although § 501(a) imposes fiduciary duties beyond those because at that time none of them were eligible for any
outlined in a union’s constitution and by-laws, it is not retirement benefits. Additionally, the retirement benefits
necessary for us to expound upon the boundaries of § 501(a) embodied in the December 7, 1994 resolution exceeded the
because in this case the early-retirement benefits Plaintiffs- limits imposed by UPGWA’s constitution, and the IEB did
Appellees seek to enforce violate UPGWA’s constitution. not amend the constitution.10 Therefore, we conclude that
Plaintiffs-Appellees violated their fiduciary duties under
UPGWA’s constitution empowers the IEB to create a § 501(a).11 This conclusion does not end our analysis,
pension plan for all full-time officers and appointed
representatives. J.A. at 310 (UPGWA Const. Art. XI, § 2).
10
Mo reover, the IEB could not have am ended U PG W A’s
constitution in this manner, as the IEB is only authorized to amend
9 temporarily the constitution to conform the constitution to changes in the
Our positio n is consistent with other circuits that have add ressed this
issue. See, e.g., Guzman v. Bevona, 90 F.3d 641, 647-48 (2d Cir. 1996) law. J.A. at 307-08 (U PGW A Const. Art. III).
(holding that union officers violate d § 501(a) by expending union funds 11
on surveillance of union member, who criticized the union’s leadership, Because the December 7, 1994 resolution was not validly
in violation of the union’s constitutio n); Brink v. DaLe sio, 667 F.2d 420 authorized by the International Convention, see supra Part II.B., the more
(4th Cir. 19 81); Stelling v. Int’l Bhd. of Elec. Workers Local Union No. deferential “manifestly unreasonable” standard that the Sec ond Circuit
1547, 587 F.2d 1379 (9th C ir. 197 8), cert. denied, 442 U .S. 944 (1979 ); first enunciated in Morrissey v. Curran, 650 F.2d 12 67, 1274 (2d Cir.
Sabolsky v. Budzanoski, 457 F.2d 124 5 (3d Cir.), cert. denied, 409 U.S. 1981), is inapplicable. In Morrissey, the Second Circuit held that
853 (19 72). authorization is not a complete defense to self-dealing transactions entered
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 19 20 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
however, because Defendants-Appellants did not bring a retirement proposal; however, we do not think that this
§ 501 suit against Plaintiffs-Appellees. distinction warrants a different result in this case. See id;
Cement Masons, 794 F.2d at 1220. A union or its members
The procedural posture of this case is unique, in that neither can ordinarily obtain an injunction prohibiting payments that
UPGWA nor its members brought a § 501 action against were authorized by union officers in breach of their fiduciary
Plaintiffs-Appellees; rather Defendants-Appellants assert that duties or obtain reimbursement for such payments. 29 U.S.C.
§ 501(a) provides a defense to Plaintiffs-Appellees’ breach of § 501(a); see also Guzman, 90 F.3d at 648; Council 49, Am.
contract action. No circuit has yet issued a published opinion Fed’n of State, County & Mun. Employees Union v. Reach,
expressly deciding whether § 501(a) can be asserted as a 843 F.2d 1343, 1347-49 (11th Cir. 1988); Kerr v. Shanks, 466
defense to a breach of contract action. But see Trs. of the F.2d 1271, 1276 (9th Cir. 1972); McCabe, 415 F.2d at 98;
Operative Plasterers’ & Cement Masons’ Local Union Local No. 92, Int’l Ass’n of Bridge, Structural & Ornamental
Officers & Employees Pension Fund v. Journeymen Iron Workers v. Norris, 383 F.2d 735, 737-40 (5th Cir. 1967).
Plasterers’ Protective & Benevolent Soc’y, Local Union No.
5, 794 F.2d 1217, 1220 (7th Cir. 1986) [hereinafter Cement In the case at bar, because the IEB deferred implementation
Masons] (questioning whether § 501(a) can be raised as a of the increased early-retirement benefits and the International
defense to a breach of contract action because a violation of Convention ultimately voted against their implementation, an
§ 501(a) does not render a contract intrinsically illegal). A injunction against implementation of the benefits was not a
basic principle of contract law supports our conclusion that possibility. Denying UPGWA and its members use of
§ 501(a) can be asserted as a defense to this breach of contract § 501(a) as a defense in this situation, where they were unable
action. to use it offensively, makes little sense and would thwart the
purposes of that provision.12 Moreover, “Refusing to enforce
Federal courts may not enforce a contract if the result a promise that is illegal under the antitrust or labor laws is not
would be to compel a violation of the law. Kaiser Steel Corp. providing an additional remedy contrary to the will of
v. Mullins, 455 U.S. 72, 77 (1982). As explained above, the Congress. . . .[A]ny one sued upon a contract may set up as a
early-retirement benefits resolution violated § 501(a) of the defen[s]e that it is a violation of the act of Congress, and if
LMRDA. In Kaiser Steel, the Supreme Court refused to found to be so, that fact will constitute a good defen[s]e to the
enforce a collective bargaining agreement provision that was action.” Kaiser Steel, 455 U.S. at 82 n.7 (quotation omitted).
illegal under federal labor and antitrust laws. Kaiser Steel,
455 U.S. at 85-87. It is true that the federal labor and antitrust Plaintiffs-Appellees argue that UPGWA may not rely upon
laws at issue in Kaiser Steel made intrinsically illegal the illegality as a defense to enforcement of the early-retirement
collective bargaining provision under consideration, whereas benefits because either the IEB or the convention delegates
§ 501(a) does not make intrinsically illegal the early-
12
Because § 50 1(a) is being raised as a de fense, neither M ichigan’s
into by union officers and agents, b ut that if such tra nsactio ns are validly statute of limitations for breach of fiduciary duty claims nor the doctrine
authorized, then courts should no t interfere unless the transaction “is so of laches prevents Defendants-App ellants from relying upon this
manifestly unreasonable as to evidence a breach of fiduciary obligation provision. Likewise, the procedural requirements contained in § 501(b)
imposed by § 501(a).” Id. are not applicable.
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 21 22 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
could have eliminated the § 501 problem by amending Brown-Graves Co. v. Central States, Southeast & Southwest
UPGWA’s constitution. We reject this argument. First, the Areas Pension Fund, 206 F.3d 680, 684 (6th Cir. 2000).
IEB did not have the authority to amend UPGWA’s Here, Plaintiffs-Appellees did not detrimentally or justifiably
constitution in this manner. Second, if UPGWA was required rely upon the December 7, 1994 resolution. In January 1995,
to amend its constitution when its officers exceeded their the IEB voted to rescind the resolutions authorizing the
powers thereunder, the constitution would not serve its increased early-retirement benefits, and Plaintiffs-Appellees
purpose of limiting the officers’ powers. Third, we question all continued in their respective offices until the end of their
whether a vote to amend UPGWA’s constitution could cure terms in May 1995. Therefore, Plaintiffs-Appellees did not
after-the-fact this self-dealing violation of § 501(a). See rely to their detriment on the increased early-retirement
Janice R. Bellace & Alan D. Berkowitz, THE LANDRUM- benefits. As discussed above, the IEB exceeded its authority
GRIFFIN ACT: Twenty Years of Federal Protection of Union under UPGWA’s constitution in offering the early-retirement
Members’ Rights 299 (1979). benefits, and Plaintiffs-Appellees had actual knowledge of the
limitations imposed by Article XI, Section 2 of UPGWA’s
Therefore, we hold that § 501(a) can properly be raised by constitution. Therefore, Plaintiffs-Appellees’ expectation that
a union or its members as a defense to a transaction entered they would receive the increased early-retirement benefits
into by union officials, which grants those officials a direct was not justifiable. Moreover, Plaintiffs-Appellees cannot
personal benefit in violation of the union’s constitution. This assert estoppel when the passage of the December 7, 1994
holding is necessary to ensure that union officers or agents do resolution constituted a breach of fiduciary duty under
not thwart the purposes of § 501(a) by binding unions to § 501(a) of the LMRDA. See Meyers v. Moody, 693 F.2d
contracts with union officials that violate this provision. 1196, 1208 (5th Cir. 1982), cert. denied, 464 U.S. 920 (1983)
(“The doctrine of estoppel is for the protection of innocent
D. Estoppel and Ratification persons, and only innocent persons may invoke it.”).
Our holding that the December 7, 1994 resolution Nor may Plaintiffs-Appellees obtain the early-retirement
constitutes an unenforceable contract should not be benefits embodied in the December 7, 1994 resolution on the
interpreted as foreclosing the possibility of estoppel in an theory of ratification. On appeal, Plaintiffs-Appellees
appropriate case. This, however, is not an appropriate case. strenuously assert that UPGWA ratified the early-retirement
benefits by eliminating their positions and thereby retaining
The elements of estoppel are: (1) conduct or language the cost savings associated with the early-retirement proposal.
amounting to a representation of fact; (2) the party to be It is true, “Ratification occurs where the principal receives
estopped must be aware of the true facts; (3) the party to and retains the benefits of a transaction with full knowledge
be estopped must intend that the representation be acted of all of material facts.” Davis v. Mut. Life Ins. Co. of New
on such that the party asserting the estoppel has the right York, 6 F.3d 367, 374 (6th Cir. 1993), cert. denied, 510 U.S.
to believe it was so intended; (4) the party asserting the 1193 (1994). In this case, however, elimination of Plaintiffs-
estoppel must be unaware of the true facts; and (5) the Appellees’ positions was not dependent upon providing the
party asserting the estoppel must detrimentally and increased early-retirement benefits. Although Plaintiffs-
justifiably rely on the representation. Appellees, as members of the IEB, may not have voted to
eliminate their positions absent the generous early-retirement
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 23 24 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
offer, the elimination of their offices could and did occur ______________
without their consent. UPGWA’s constitution gave the IEB
the authority to consolidate regions and eliminate directors’ DISSENT
positions, which the IEB did through the January 24, 1995 ______________
resolution, and UPGWA’s constitution gave the convention
delegates the authority to eliminate the vice-president’s MERRITT, Circuit Judge, dissenting. The plaintiffs
position, which the delegates did at the International entered into an agreement with the union to give up their jobs,
Convention in May 1995. salaries and expectations of future retirement benefits in
return for yearly early retirement benefits of approximately
III. CONCLUSION $20,000 for Anderson, $30,000 for Squier and $40,000 for
Scohy — less than half their salaries. There is no showing of
For the foregoing reasons, we REVERSE the district bad faith. They responded to the union’s offer made by its
court’s judgment awarding Plaintiffs-Appellees the requested President, originating with its accountants and blessed as to
increased early-retirement benefits. Additionally, Plaintiffs- legality by its counsel. The district court was correct to
Appellees’ motions to dismiss and motion for costs are conclude that the Union, through its retirement plan, as well
DENIED. as the actions of its president and the advice of its counsel,
manifested authority in the Board to offer the early retirement
contracts to the plaintiffs. The Retirement Plan specifically
provides that the Union “acting through its...Board” shall
have the right to modify the plan. Moreover, the Union’s
constitution provides that the Board “shall decide all
questions involving interpretation of the Constitution and By-
Laws, between Conventions.” Both the Union President and
the Union’s attorney, Gordon Gregory, assured the plaintiffs
that there were no legal problems with the retirement plan.
The district court was also correct that the plaintiffs were
reasonable in relying on such manifestations. Their beliefs
that Board approval would bind the Union were reinforced by
Board member Ronald Warfield, who at the time was a
member of the pension committee; by Union President
McConville, who presented the plan to them to begin with as
a way to save the Union money and who assured them that
the Board could bind the Union to such a plan; and by Gordon
Gregory, who had been an attorney for the Union for 35
years, and whose opinion they sought and who repeatedly
assured them that the Board action would be sufficient to
make the plan binding. President McConville and Attorney
No. 01-1253 Anderson et al. v. Int’l Union, Utd. Plant 25 26 Anderson et al. v. Int’l Union, No. 01-1253
Guard Workers et al. Utd. Plant Guard Workers et al.
Gregory even testified that they thought the plaintiffs were not void the contract as illegal. Neither the language of the
reasonable in believing that Board approval could make the statute nor the case-law contemplates rendering the union
plan binding. It is true that the plaintiffs were made aware contract void. The majority seems to admit this point, but
that there might be some legal challenge to the retirement downplays its significance. A contract should not be rendered
plan, but that alone is not sufficient to make their reliance void at the behest of the party that induced its formation at the
unreasonable in light of all the assurances they received, expense of actors who lack culpability or any wrongful intent.
especially when the plan was not even their idea, but rather If the Union members claim a breach of duty by the plaintiffs,
was presented to them as a way for the Union to save money. that claim should be pursued in an action for damages in tort
Indeed, the plaintiffs were praised for sacrificing their own or restitution under the statute. Voiding the contract and
jobs in order to save the Union money. leaving the plaintiffs out in the cold is too drastic a remedy
and has no relation to any damages Union members may have
The Union argues that the plaintiffs cannot claim suffered.
reasonable reliance on Attorney Gregory’s advice when
Gregory advised them otherwise on January 4th, Furthermore, as I explained above, I do not believe the
recommending that the Board rescind the vote. But plaintiffs breached a duty to the Union members in the first
Gregory’s advice on January 4th is irrelevant to the question place. Again, there was no showing of bad faith on their part,
of whether a contract had been created on December 7th. By and the retirement plan was not their idea, but rather was the
that point the plaintiffs had already relied on the apparent idea of the Union accountant, and was presented to them by
authority of the President and the Board and the advice of the Union president as a way of saving the Union money. We
counsel. Had the plaintiffs been the ones who sought to get should not now allow the Union to avoid the contract it
out of the December 7th agreement while the Union sought to drafted and asked them to sign, especially by means of a
enforce it, the plaintiffs would likely have been bound. statutory provision that only provides a cause of action for
third-party Union members. Doing so turns Section 501 into
The Union believes that the early retirement agreement a one-sided escape route for Unions that Congress never
violates Section 501 of the Labor Management Reporting and intended.
Disclosure Act (LMRDA), which makes it a breach of duty
for a Union official to expend Union money in violation of For the aforementioned reasons, I respectfully DISSENT.
the Union constitution, and which provides a cause of action
for individual Union members when the Union’s constitution
is so violated. 29 U.S.C.A. § 501 (2003). But Section 501
does not provide that a Union may itself persuade otherwise
innocent Union officers to sign a contract and then use that
provision as a defense to the contract that the Union has
entered into. As the majority notes, there is no precedent for
allowing a Union to use Section 501 in this manner.
Moreover, even if a Union’s officers had breached a
Section 501 duty by entering into such a contract, that does