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