Meredith v. Louisiana Federation of Teachers

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 98-30763

SALLY A. MEREDITH,
Plaintiff-Appellee-Cross Appellant,

versus

LOUISIANA FEDERATION OF TEACHERS; ET AL,

Defendants,

LOUISIANA FEDERATION OF TEACHERS,
Defendant-Appellant-Cross Appellee,

ST. TAMMANY FEDERATION OF TEACHERS AND SCHOOL EMPLOYEES;
THE CHICAGO INSURANCE COMPANY,
Defendants-Appellants.

Appeals from the United States District Court
For the Eastern District of Louisiana

April 11, 2000

Before HIGGINBOTHAM and SMITH, Circuit Judges, and FALLON, District
Judge.*

HIGGINBOTHAM, Circuit Judge:

This labor and contract case presents several questions about

the relationship between two unions and a union employee. The

Louisiana Federation of Teachers ("Louisiana Federation") and St.

Tammany Federation of Teachers and School Employees ("St. Tammany

Federation") appeal from a jury verdict in favor of Sally Meredith.

*
District Judge of the Eastern District of Louisiana, sitting
by designation.
We REVERSE in part and REMAND so the district court may determine

a question of jurisdiction.

I.

Sally Meredith was employed as a field representative for

Louisiana Federation from October 1984 to August 1991. While she

was employed with Louisiana Federation, her union was United

Professional Staff, which was composed solely of employees of the

Louisiana Federation.

In August, 1991, Meredith took a leave of absence from her

position with Louisiana Federation and worked for St. Tammany

Federation as a collective bargaining representative. Her leave of

absence was to last until December 31, 1991. She negotiated with

Fred Skelton, President of Louisiana Federation, and Elsie

Burkhalter, Vice President of Louisiana Federation and President of

St. Tammany Federation, to extend her leave at St. Tammany

Federation under the same terms of employment that she enjoyed at

Louisiana Federation. She left Louisiana Federation to help St.

Tammany Federation win a union election and remained to help

negotiate contracts after the union won the election.

St. Tammany Federation terminated her employment on June 13,

1994. The collective bargaining agreement between Louisiana

Federation and United Professional Staff had a three-year term and

provided that covered employees could be terminated for just cause

only. The St. Tammany Federation, which represents teachers in St.

Tammany Parish in collective bargaining with the St. Tammany Parish

2
School Board, does not have a collective bargaining agreement with

its staff.

On losing her position with St. Tammany Federation, Meredith

attempted to obtain reinstatement to her former position or a

comparable one with Louisiana Federation. Unsuccessful, she tried

to invoke the grievance procedures under the collective bargaining

agreement between Louisiana Federation and United Professional

Staff. United Professional Staff did not respond. Louisiana

Federation took the position that she no longer worked for them.

Meredith also sought to appeal her termination to St. Tammany

Federation, pointing to the collective bargaining agreement between

Louisiana Federation and United Professional Staff. The St.

Tammany Federation denied this request, asserting that that

collective bargaining agreement afforded no rights to employees of

St. Tammany Federation.

Meredith sued both unions, alleging breach of employment

contract, violation of the Labor Management Reporting and

Disclosure Act (LMRDA) for failure to give her hearings regarding

her termination by St. Tammany Federation and Louisiana

Federation's refusal to reinstate her, and breach of the

collective bargaining agreement by Louisiana Federation.

A jury awarded Meredith $20,000 in punitive damages for

violation of the LMRDA, $98,936 for breach of employment contract

by Louisiana Federation and St. Tammany Federation, $5,000 in pain,

suffering and mental anguish damages for bad faith breach of

contract by Louisiana Federation and St. Tammany Federation, and $1

3
against Louisiana Federation for breach of the collective

bargaining agreement between Louisiana Federation and United

Professional Staff. Finally, the court awarded Meredith attorney's

fees. The court also found that the policy issued by Chicago

Insurance Company, insurer for Louisiana Federation and St. Tammany

Federation, covered the judgment.

The unions appeal the award, the insurance company disputes

coverage, and Meredith cross-appeals the district court's refusal

to instruct the jury on non-pecuniary damages for breach of

contract under Louisiana law.

II.

Although Meredith pursued the first two steps of the grievance

procedures in the collective bargaining agreement between Louisiana

Federation and United Professional Staff, she did not take the

third step, seeking to compel arbitration. Louisiana Federation

argues that the district court lacked jurisdiction over Meredith's

claim for breach of collective bargaining agreement because she did

not exhaust her administrative remedies by seeking to compel

arbitration.

We review de novo the legal question of subject matter

jurisdiction.1 Federal courts lack jurisdiction to decide cases

alleging violations of a collective bargaining agreement under the

Labor Management Relations Act2 by an employee against his employer

1
See Martinez v. American Fed'n of Gov't Employees, 980 F.2d
1039, 1041 (5th Cir. 1993).
2
29 U.S.C. § 185.

4
unless the employee has exhausted contractual procedures for

redress.3 That rule does not bar jurisdiction when the union has

wrongfully refused to process the grievance.4 When an employer

refuses to use the procedure set forth in the collective bargaining

agreement, the employee need not seek to compel arbitration.5

In Rabalais v. Dresser Industries,6 we held that an employee

had not exhausted his contractual remedies by failing to seek

arbitration.7 The employer and union in Rabalais had examined the

grievance in preceding levels of the contractual procedure and

considered the grievance one not covered by the collective

bargaining agreement.8

The district court decided that Louisiana Federation was

estopped from raising the defense of non-exhaustion of remedies

because it repudiated the contractual procedures when it claimed

that Meredith was not covered by the collective bargaining

agreement between Louisiana Federation and United Professional

Staff. We agree. Unlike the employer in Rabalais, Louisiana

Federation claimed that Meredith was not covered by the collective

3
See Vaca v. Sipes, 386 U.S. 171, 184 (1967).
4
See id. at 185-86.
5
See Rabalais v. Dresser Indus., 566 F.2d 518, 519 (5th Cir.
1978).
6
Id.
7
See id. at 522.
8
See id.

5
bargaining agreement and did not consider her grievance.9 Under

these circumstances, the district court properly determined that

Louisiana Federation repudiated the contractual procedures.

A plaintiff must prove that the union breached its duty of

fair representation to prevail in a suit against the employer for

breach of a collective bargaining agreement.10 Louisiana Federation

also argues the jury could not have found that United Professional

Staff breached its duty of fair representation.11 Article VIII,

Section C of the collective bargaining agreement between Louisiana

Federation and United Professional Staff provides that members are

entitled to a representative at each step in the grievance

procedure. A union may not "arbitrarily ignore or give only

perfunctory review to a grievance."12 Since United Professional

Staff ignored Meredith's grievance, a rational jury could find that

9
Although Louisiana Federation argues that it did not
repudiate the grievance procedure because it believed that Meredith
was no longer its employee, the union does not argue that the
evidence was insufficient for the jury to find that it breached the
collective bargaining agreement. In any event, we agree with the
district court that Louisiana Federation's refusal to consider
Meredith's grievance constituted a repudiation of the contractual
procedure.
10
See Thomas v. LTV Corp., 39 F.3d 611, 621-622 (5th Cir.
1994).
11
United Professional Staff is no longer a defendant, since
Meredith's claims against it were severed from the case and her
claims against it in this suit dismissed without prejudice. A
plaintiff need not sue the union for breach of the duty of fair
representation to sue the employer for breach of a collective
bargaining agreement. See Thomas v. LTV Corp., 39 F.3d at 621.
12
Abilene Sheet Metal, Inc. v. N.L.R.B., 619 F.2d 332, 347 (5th
Cir. 1980).

6
United Professional Staff breached its duty of fair representation,

as the jury found here.

III.

Meredith claimed that she had identical contracts with

Louisiana Federation and St. Tammany Federation: the former was the

collective bargaining agreement between Louisiana Federation and

United Professional Staff and the latter an individually negotiated

contract incorporating identical terms.13 She alleged that

Louisiana Federation breached by failing to reinstate her

employment and failing to process her grievance and that St.

Tammany Federation breached by firing her without just cause. Just

cause is required for termination under the collective bargaining

agreement between Louisiana Federation and United Professional

Staff.

Under Louisiana law, employment is at-will unless it is for a

definite term.14 When an employee is hired for a "certain time" and

is terminated "without any serious cause," the employer is liable

to the employee for the amount of salary due under the contract.15

An oral contract for more than five hundred dollars may be proved

by the testimony of "one witness and other corroborating

13
Meredith alleged that the unions wrongfully discharged her.
A cause of action for wrongful discharge arises under Louisiana
Civil Code art. 2749. See Andrepont v. Lake Charles Harbor and
Terminal Dist., 602 So.2d 704, 709 (La. 1992).
14
See Brannan v. Wyeth Lab., Inc., 526 So.2d 1101, 1103 (La.
1988).
15
See La. Civil Code art. 2749.

7
circumstances."16 The requirement of "one witness" may be met by

the plaintiff's own testimony, and the corroborating evidence may

be the fact that the plaintiff left a secure position to work for

the new employer.17

We are persuaded that the jury's finding of a contract is

supported by substantial evidence.18 Meredith testified that she

told Burkhalter that she demanded the same terms and "rights" that

she had under the collective bargaining agreement between Louisiana

Federation and United Professional Staff. She argues that this

included the same three-year duration of employment and the same

protection allowing termination only for cause on 30 days' notice.

In addition, she left a secure position to work for St. Tammany

Federation.

The unions argue that Meredith's state law breach of contract

claims are preempted by § 301 of the Labor Management Relations

Act19 (LMRA), which provides a cause of action for breach of a

collective bargaining agreement. Preemption is a question of law,

which we review de novo.20 The unions argue that the state law

16
See id. art. 1846.
17
See Higgins v. Smith Int'l, 716 F.2d 278, 283 n.3 (5th Cir.
1983), disavowed on other grounds by Overman v. Fluor Constructors,
Inc., 797 F.2d 217, 219 n.8 (5th Cir. 1986); Lanier v. Alenco, 459
F.2d 689, 692 (5th Cir. 1972).
18
See Overman v. Fluor Constructors, Inc., 797 F.2d 217, 219
(5th Cir. 1986).
19
29 U.S.C. § 185.
20
See Baker v. Farmers Elec. Co-op, Inc., 34 F.3d 274, 279 (5th
Cir. 1994).

8
claim is preempted because it depends on the terms of a collective

bargaining agreement. When evaluation of a state law claim is

"inextricably intertwined with consideration of the terms of [a]

labor contract," the state law claim is preempted by federal labor

contract law.21 A state law contract claim is preempted by the

LMRA when the resolution of the dispute requires the interpretation

of a collective bargaining agreement.22

Meredith cannot base a claim for breach of employment contract

under Louisiana law for breach of the collective bargaining

agreement by Louisiana Federation. Since the claim is based on the

breach of a collective bargaining agreement, it is preempted by the

LMRA.

Meredith's contract with St. Tammany Federation included the

terms of the collective bargaining agreement between Louisiana

Federation and United Professional Staff. Although the individual

contract between Meredith and Burkhalter incorporated the terms of

that collective bargaining agreement, the contract between Meredith

and St. Tammany Federation was an individually and not collectively

bargained agreement. The agreement was between St. Tammany

Federation and Meredith alone. When the contract is between the

individual and an employer, bargained for without union

representation, it is not preempted by the LMRA. We draw guidance

from Thomas v. LTV Corp.23 The plaintiff in Thomas was threatened

21
Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 213 (1985).
22
See Thomas v. LTV Corp., 39 F.3d 611, 619 (5th Cir. 1994).
23
39 F.3d 611 (5th Cir. 1994).

9
with termination for excessive absenteeism, and with the assistance

of a union representative he reached an individual agreement with

his employer to avoid termination under certain conditions.24

Although this agreement was separate from his union's collective

bargaining agreement, his state law claim for breach of the

separate contract was preempted because his union's bargaining

representation made it a collectively-bargained agreement.25

24
See id. at 614-15.
25
See id. at 617-18.

10
 Meredith struck her own bargain with St. Tammany Federation.

LMRA preemption would not here advance the goals of federal labor

law; it would improperly tread upon the power of individuals to

bargain for agreements governed by state law.

IV.

The Louisiana Federation and St. Tammany Federation argue that

they are not subject to the LMRDA because they are public sector

unions.26 The LMRDA governs unions that deal with "employers,"

where "employer" does not include a government.27 Courts do not

have subject matter jurisdiction to hear LMRDA claims against

public sector unions excluded from the statute's coverage.28

The district court found that Louisiana Federation did not

bargain solely with governments because its constitution states

that membership in Louisiana Federation is open to local unions

that are members of the American Federation of Teachers. The court

found that Louisiana Federation "seeks to represent" private sector

26
The unions also argue that Meredith failed to properly plead
a claim under the LMRDA. Meredith maintains that she learned
through discovery of an effort to oust her from the union because
she posed a political threat to Burkhalter, and that she then
asserted a claim under the LMRDA. The court denied the unions'
objection to including the claim, finding that the complaint
provided sufficient notice of it. We examine the pleadings and the
pretrial order to determine whether an issue was available for
trial. See Thrift v. Hubbard, 44 F.3d 348, 355 (5th Cir. 1995).
The pretrial order recites that violation of the LMRDA by any of
the defendants was a contested issue of law for trial. Since the
claim was included in the pretrial order, the issue was available
for trial.
27
See 29 U.S.C. § 402(i).
28
See Martinez v. American Federation of Government Employees,
980 F.2d 1039, 1041 (5th Cir. 1993).

11
employees. The American Federation of Teachers represents some

private sector employees, the court reasoned, so Louisiana

Federation also represents private sector employees. The district

court determined that even though St. Tammany Federation is an

autonomous organization with its own constitution, it is an

affiliate of Louisiana Federation and the American Federation of

Teachers. This meant that although St. Tammany Federation itself

bargained solely with government, it was not exempt from the LMRDA

as a public sector union.

The district court's factual findings are inadequate to

support subject matter jurisdiction. If a union or any of its

locals bargain with private sector employees, the union is governed

by the LMRDA.29 In Martinez v. American Federation of Government

Employees, the district court had dismissed the complaint because

it decided that the union represented only governmental employees,

although the parties stipulated that the union's locals

"represented" both private and public sector employees.30 We

reversed and remanded because the court could not determine whether

any of the union's locals bargained with private employers or

whether "represent" meant only that some private sector employees

were members of the union.31

Here, the district court did not determine whether Louisiana

Federation or St. Tammany Federation actually bargains with private

29
See id. at 1040.
30
See id.
31
See id. at 1042.

12
sector employers. That is the determinative question on subject

matter jurisdiction over an LMRDA claim. The district court did

not reach the necessary factual conclusions to decide the

jurisdictional issue.

V.

The district court awarded Meredith attorney's fees because

the jury found that the defendants acted in bad faith and because

the award would benefit other union members. We review an award of

attorney's fees for abuse of discretion.32 Attorney's fees must

rest on bad faith prosecution of the case rather than bad faith in

the conduct giving rise to the claim.33 The district court decided

to award Meredith attorney's fees because the jury found that the

unions' conduct that gave rise to her cause of action was in bad

faith. The court did not find that the defendants conducted the

litigation in bad faith, so awarding attorney's fees on that ground

was error.

The district court decided the award of attorney's fees was

warranted in the alternative under the "common benefit" theory,

since Meredith's ability to litigate her claims without substantial

cost benefitted all union members. Under this theory, a court may

award attorney's fees when the plaintiff's "success in the

litigation confers a benefit on members of an ascertainable class,

and where the court's award of attorney's fees will make it

32
See Rogers v. Airline Pilots Ass'n, 988 F.2d 607, 615 (5th
Cir. 1993).
33
See id. at 616.

13
possible to spread the cost of litigation over the class of

beneficiaries of the suit."34 The court in Guidry v. International

Union of Operating Engineers, Local 40635 held that the common

benefit theory did not justify an award of attorney's fees when

"other members of the union could not have brought suit to redress

the injuries of an individual union member."36 Meredith's injuries

are unique and her litigation confers no relevant benefit on other

union members. Meredith seeks to distinguish Guidry on the ground

that the employee in Guidry sued the union rather than the

employer, but this distinction does not overcome the fact that no

one but Meredith benefits from the award of attorney's fees in this

case. The district court erred in awarding attorney's fees on this

alternative ground.

VI.

Meredith cross appeals, arguing that the district court erred

in refusing to instruct the jury on a Louisiana statute that allows

the recovery of nonpecuniary damages for breach of contract under

some circumstances.37 We review the denial of a requested damages

34
Guidry v. Int'l Union of Operating Engineers, Local 406, 882
F.2d 929, 944 (5th Cir. 1989).
35
Id.
36
Id.
37
Louisiana Civil Code art. 1998 provides:

Damages for nonpecuniary loss may be recovered when the
contract, because of its nature, is intended to gratify
a nonpecuniary interest and, because of the circumstances
surrounding the formation or the nonperformance of the
contract, the obligor knew, or should have known, that
his failure to perform would cause that kind of loss.

14
instruction for abuse of discretion.38 Meredith argues that this

instruction should have been given because she entered into her

employment contract for security and job satisfaction, which are

nonpecuniary interests.

The Louisiana Supreme Court has interpreted the statute to

provide for recovery when the object of the contract was

intellectual, moral, or religious enjoyment.39 In the employment

context, a Louisiana court denied recovery under this section when

the plaintiff suffered a breach of contract for employment as an

artisan, because the court found that the section provided for

recovery by the patron who would receive a nonpecuniary benefit

rather than the artisan who would do the work.40

The district court did not err in refusing to give the

requested instruction. This employment contract was not primarily

for nonpecuniary benefits.

VII.

Chicago Insurance Company disputes coverage. We review de

novo the district court's interpretation of the contract.41

The district court determined that Chicago Insurance Co. was

liable for the judgments against the unions and denied the

38
See Jackson v. Taylor, 912 F.2d 795, 798 (5th Cir. 1990).
39
See Meador v. Toyota of Jefferson, Inc., 332 So.2d 433, 435
(La. 1976).
40
See Komsala v. Paul, 644 So.2d 856, 858-59 (La. App. 1 Cir.
1994).
41
See Snug Harbor Ltd. v. Zurich Ins. Co., 968 F.2d 538, 541
(5th Cir. 1992).

15
company's motion to exclude coverage. The court found the policy

exclusions ambiguous and construed the ambiguity in the insured's

favor. The court found that no policy exclusion clearly eliminated

the LMRA and LMRDA claims from coverage under the policy and that,

although the policy did not cover breach of contract, the policy

did not exclude "bad faith breach of contract." The court did not

address whether the policy excluded liability for punitive damages,

although the language of the policy explicitly does so.

The policy covers "loss" for a "Wrongful Act, Personal Injury

or Publisher's Liability." The policy defines "wrongful act" to

include only negligence and limits "personal injury" to slander,

false arrest, wrongful detention or imprisonment, malicious

prosecution, wrongful entry or eviction, or other invasion of the

right of private occupancy. Chicago argues that intentional wrongs

are not covered by the policy because "wrongful acts" are defined

to include only negligence.

Under Louisiana law, insurance contracts are to be liberally

interpreted in favor of coverage.42 Exclusions from coverage must

be unambiguous, and an ambiguity in an insurance contract will be

construed against the drafter.43 The award under the LMRDA

consisted of $20,000 in punitive damages, and the district court

determined that this amount was covered under the policy. However,

the policy's exclusion of punitive damages from the definition of

42
See Capital Bank & Trust Co. v. Equitable Life Assurance
Soc'y of U.S., 542 So.2d 494, 496 (La. 1989).
43
See, e.g., Borden, Inc. v. Howard Trucking, 454 So.2d 1081,
1090 (La. 1983).

16
loss is unambiguous, and the trial court erred in finding the

insurer liable for the punitive damages award.

The policy unambiguously excludes damages for breach of

contract, and the district court erred in concluding that these

damages were covered by the policy. The jury also awarded $5,000

for pain, suffering and mental anguish pursuant to its conclusion

that the unions breached the employment contracts in bad faith.

The district court erred in concluding that the "bad faith breach

of contract" is sufficiently distinct from an action for breach of

contract to render the exclusion for breach of contract ambiguous.

Louisiana law enhances the liability for a breach in bad faith,

creating liability for all damages resulting from the breach.44 A

bad faith breach of contract may sound in tort or contract,

depending on whether the duty breached is one owed to all persons

or to only to those having rights under the contract.45 If the duty

is owed only to those with contractual rights, a claim for its

breach is a contract action.46 The duties violated here arose

solely from a contractual relationship. The district court erred

in determining that the damages for breach of contract, including

"bad faith" breach of contract, were covered by the policy since

the exclusion for breach of contract is unambiguous.

44
See Barbe v. A.A. Harmon & Co., 705 So.2d 1210, 1221 (La.
App. 4 Cir. 1998).
45
See Billeaud Planters, Inc. v. Union Oil Co., 245 F.2d 14,
19 (5th Cir. 1957).
46
See id.

17
 We find no error in the district court's conclusion that the

damages of $1 for Meredith's LMRA claim are covered by the policy.

VIII.

In sum, Meredith cannot assert a breach of contract claim

under state law for breach of a collective bargaining agreement by

Louisiana Federation. That claim is preempted by the LMRA. The

court erred in awarding Meredith attorney's fees under either the

bad faith or common benefit theories. Finally, the $20,000

punitive damages award and awards of damages for breach of contract

and bad faith breach of contract are unambiguously excluded from

coverage by Chicago Insurance Company's policy. These rulings are

REVERSED.

We must REMAND for the lack of findings in support of subject

matter jurisdiction on the LMRDA claim. The district court did not

determine whether the Louisiana Federation or any local of

Louisiana Federation bargains with any private employer. The court

did find that St. Tammany Federation did not bargain with any

private employer. Since both may be public sector unions, the

court may lack jurisdiction to decide the LMRDA claim.

The judgment is otherwise AFFIRMED.

Meredith's motion for sanctions against the unions for their

motion to strike a portion of her record excerpts is DENIED.

AFFIRMED in part, REVERSED in part, and REMANDED with

instructions; MOTION FOR SANCTIONS DENIED.

18