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Complaint for Trusteeship and See Chicago Laborers District Council Trusteeship RICO Files

1

In the Matter of

Local Union Local Union 1001

Chicago, Illinois

Laborers’ International Union of North America

Independent Hearing Officer

Docket No. 03-21T

Decided: March 2, 2004

ORDER

PROCEDURAL HISTORY

This Order and Memorandum addresses the Complaint for Trusteeship

over Laborers’ International Union of North America (LIUNA) Local Union

1001 (Local 1001), Chicago, Illinois, filed by the LIUNA General Executive

Board (GEB) Attorney on September 25, 2003. See Complaint for

Trusteeship In Re Trusteeship Proceeding of Local 1001(Chicago, Illinois) of

9/25/03 (Trusteeship Complaint) (IHO Dkt. tab 2). By way of the Trusteeship

Complaint and an enclosed letter, the GEB Attorney properly informed Local

1001 members and officers of the reasons for and constitutional grounds

supporting the Trusteeship. See Letter from Robert D. Luskin to the Officers

and Members of Local 1001 (Chicago, Illinois) of 9/25/03 (Trusteeship

Notice) (IHO Dkt. tab 2). The Trusteeship Complaint alleges that the

imposition of a trusteeship is necessary due to a number of serious and

substantial irregularities in the operation of Local 1001 including: corruption,

financial misconduct, breaches of basic fiduciary practices, and undemocratic

practices. See Trusteeship Complaint (IHO Dkt. tab 2). In the Trusteeship

Notice, the GEB Attorney informed the members and officers of Local 1001

that the Independent Hearing Officer (IHO) would hold a hearing regarding

whether the Trusteeship is warranted on November 3, 2003. See Trusteeship

Notice (IHO Dkt. tab 2).
 

Local 1001’s Motion for an Extension of Time
 

On October 8, 2003, Local 1001 submitted a Motion to Extend Hearing

Date before the IHO, by and through one of its attorneys, Dan K. Webb.1 See

1 Mr. Webb is a partner in the law firm Winston & Strawn LLP.

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2 In the Matter of Local Union 1001 2004

Local 1001’s Motion to Extend Hearing Date before the Independent Hearing

Officer of 10/8/03 (Motion for Extension of Time) (IHO Dkt. tab 3). In that

motion, Mr. Webb represented that Local 1001 had chosen him as lead trial

counsel for the Trusteeship hearing and, due to a pre-existing trial

commitment, he was unavailable until on or about January 5, 2004. Id. The

GEB Attorney opposed the Motion for Extension of Time because the GEB

Attorney had already engaged in extensive negotiations with Local 1001 and

its attorneys regarding the need for a supervision or trusteeship.2 See GEB

Attorney’s Opposition and Response to Local 1001’s Motion to Extend the

Hearing Date of 10/15/03 (Opposition Motion) (IHO Dkt. tab 5). In addition,

the GEB Attorney contended that the law firm of Faraci and Faraci,

principally Peter Faraci3 and George Leighton (Judge Leighton), a formal

federal judge, had represented Local 1001 for a number of years.4 Id. As

__________________________

2 The IHO does not view the negotiations as evidence of the Local’s

awareness of a need for Trusteeship. The matter is discussed only to show

notice and the involvement of attorneys in the process. The GEB Attorney

engaged in negotiations with Local 1001 and its attorneys from in or about

Spring 2002 until the filing of the Trusteeship Complaint in September 2003.

For instance, GEB Attorney Robert Luskin had unsuccessfully attempted to

contact Business Manager Gironda by telephone several times in or before

March 2002, to arrange a meeting with Local 1001 Executive Board members

for discussion regarding an Agreement of Voluntary Supervision. See Letter

from Robert D. Luskin to Nicholas Gironda of 3/27/02 (IHO Dkt. tab 7).

After receiving no response, GEB Attorney Luskin wrote a letter requesting

that Business Manager Gironda select dates in April 2002, for a meeting in

Chicago with Local 1001’s Executive Board. Id. On May 7, 2002, GEB

Attorney Luskin met with Local 1001’s Executive Board and its attorneys in

Chicago. See Letter from Peter S. Faraci and George N. Leighton to Robert

D. Luskin of 5/20/02 (IHO Dkt. tab 7). Following that meeting, Mr. Faraci

and George Leighton received a proposed draft Supervision Agreement,

which they distributed to the Executive Board. Id. Thereafter, Mr. Faraci and

George Leighton informed GEB Attorney Luskin that the Executive Board

members would "consider whether Supervision of Local 1001 is warranted"

after the GEB Attorney provided detailed information regarding the

allegations in the draft Supervision Agreement for their review. Id.

3 All references to "Mr. Faraci" in this Order and Memorandum denote Peter

Faraci, as opposed to his father Dominick Faraci, unless otherwise noted.

4 The IHO notes that Peter Faraci wrote a letter to Secretary-Treasurer

DeChristopher in April 2002, in response to their meeting on April 5, 2002,

which outlined various fee arrangements "in the event that the International

Union (LIUNA) seeks to impose an Emergency Trusteeship on Local 1001."

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3 In the Matter of Local Union 1001 2004

counsel of record for Local 1001 in United States District Court litigation

opposing the LIUNA internal reform program, Mr. Faraci and Judge Leighton

were familiar with Local 1001 and all aspects of the LIUNA internal reform

process. Id. Finally, the GEB Attorney argued that the serious allegations

contained in the Trusteeship Complaint warranted a hearing without a two month

delay, especially considering the possibility that the proposed extension

would render the situation unresolved when the Construction & General

Laborers’ District Council of Chicago and Vicinity (Chicago District Council)

elections occurred in March 2004.5 See Opposition Motion (IHO Dkt. tab 5).

Thereafter, Local 1001 submitted a reply brief and exhibits, arguing that

fundamental fairness required that the IHO grant the requested 60-day

extension because, based upon the history of the matter, a 60-day delay would

not prejudice the parties; Local 1001 counsel needed to prepare to defend the

charges; and Chicago District Council Elections were not a basis for denying

the extension. See Local 1001’s Reply Brief in Support of Its Motion to

Extend the Hearing Date of 10/21/03 (IHO Dkt. tab 7). Local 1001 also

contended that failure to grant the delay would deprive Local 1001 of the right

to select counsel of its choosing. Id.

In an effort to reach a mutually acceptable resolution to the issue, the IHO

scheduled a telephone conference regarding Local 1001’s Motion for

Extension of Time. See IHO October 22, 2003 Order (IHO Dkt. tab 8). The

October 23, 2003 telephone hearing included discussions between the IHO,

GEB Attorney Luskin, Attorney Thomas, from the Office of the GEB

Attorney, and Attorney Webb. See IHO November 3, 2003 Order (IHO Dkt.

tab 11).

At the conclusion of the lengthy telephone hearing and upon

approval of the participating attorneys, the IHO continued

_______________________

GEB Ex. 48, p.3 (Letter from Peter S. Faraci to Sam DeChristopher,

Secretary-Treasurer, of 4/16/02). Markedly, the outline of legal services

scheduled to begin "early on or by May 7, 2002" included a "[r]eview of

pleadings already prepared," discussed the "preparation of [a] motion for

temporary restraining order and for a preliminary injunction," and anticipated

"preparation of hearing" and "gathering of evidence, including interview of

potential witnesses." Id.

5 The GEB Attorney argued that allowing the election of District Council

delegates, who might be subject to removal through a trusteeship, would be

unfair to both the members of Local 1001 and the District Council. See

Opposition Motion (IHO Dkt. tab 5).

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4 In the Matter of Local Union 1001 2004

settlement negotiations regarding the Trusteeship, specifically

the appointment of a mutually agreeable Deputy Trustee, until

the end of business on Friday, October 24, 2003. During the

telephone hearing, the IHO advised all parties that a

November hearing date would be reissued upon failure to

reach an agreement by the imposed deadline. Mr. Webb

represented that, in the absence of an agreement, he would

withdraw as counsel for Local 1001.

IHO November 3, 2003 Order (IHO Dkt. tab 11). The parties were ultimately

unable to reach an agreement regarding the appointment of a Deputy Trustee

acceptable to both of them. Consequently, on October 29, 2003, the IHO

scheduled the Trusteeship hearing for November 11, 2003. See IHO October

29, 2003 Scheduling Order (IHO Dkt. tab 9).

 

On or about October 31, 2003, Local 1001, by and through another one of

its attorneys, Judge Leighton, filed a Verified Complaint for Injunctive and

Other Relief, as well as an Emergency Motion for Preliminary Injunction in

the Circuit Court of Cook County, Illinois. See V.Compl. for Inj. and Other

Relief (Local 1001’s Complaint), County, Mun. Employees’, Supervisors’ and

Foremen’s Union, Local 1001 (Chicago, Illinois) v. Laborers’ Int’l Union of

N. Am., No. 03CH18226 (Cook Cty., IL Cir. Ct., Ch. filed October 31, 2003);

Emergency Mot. For Prelim. Inj. (Local 1001’s Emergency Injunction

Motion), Local 1001 v. LIUNA, No. 03CH18226 (Cook County, IL Cir. Ct.,

Ch. filed October 31, 2003) (IHO Dkt. tab 10). Local 1001’s Complaint

sought "to preliminarily enjoin LIUNA and those empowered to act on

LIUNA’s behalf" from denying Local 1001’s Motion for Extension of Time

and proceeding with the scheduled November 11, 2003 Trusteeship hearing

"on the grounds that doing so would deny Local 1001 the right to counsel of

its choice, would be manifestly unfair and prejudicial."6 Local 1001’s

Complaint, ¶ 1 (IHO Dkt. tab 10). Local 1001’s Emergency Injunction

Motion stated, inter alia, that the IHO never formally denied Local 1001’s

Motion for Extension of Time, but instead issued a scheduling order "which

neither addressed nor denied Local 1001’s motion." Local 1001’s Emergency

Injunction Motion, ¶¶ 4, 5 (IHO Dkt. tab 10). Local 1001 then argued, "the

______________________

6     Local 1001’s Complaint states, "Local 1001 retained Dan K. Webb of

Winston & Strawn LLP in March of 2003 to serve as lead trial counsel if

charges were brought by the IHO and resulted in a trusteeship hearing." Local

1001’s Complaint, ¶ 9 (IHO Dkt. tab 10); see also GEB Ex. 46 (Letter from

Dan K. Webb to Executive Board of Local 1001 of 3/4/03 (Winston Strawn

Engagement Letter)).

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5 In the Matter of Local Union 1001 2004

IHO’s decision to deny Local 1001’s motion for extension was arbitrary,

prejudicial, fundamentally unfair and deprived Local 1001 of its right to

counsel of its choosing." Id. at ¶ 6.

         LIUNA filed a Notice of Removal from the Circuit Court of Cook County

on November 4, 2003. See LIUNA’s Notice of Removal, Local 1001 v.

LIUNA, (No. 03-CV-7828) (N.D. Il). On November 5, 2003, Local 1001 filed

a Motion to Remand and an Emergency Motion to Stay the hearing date

pending resolution of its Motion to Remand. See Emergency Motion by Local

1001 to Stay 11/11/03 Hearing Date of 11/5/03, Local 1001 v. LIUNA, (No.

03-CV-7828); Memorandum in Support of Emergency Motion to Stay of

11/5/03, Local 1001 v. LIUNA, (No. 03-CV-7828); Plaintiff’s Motion to

Remand of 11/5/03, Local 1001 v. LIUNA, (No. 03-CV-7828). On November

6, 2003, LIUNA opposed the Emergency Motion to Stay and sought to

dismiss the action. See Defendant’s Motion to Dismiss and Opposition to

Emergency Motion to Stay, Local 1001 v. LIUNA, (No. 03-CV-7828). Judge

Gettleman issued an order denying Local 1001’s Motion to Remand. See

Minute Order of 12/5/03 by Hon. Robert W. Gettleman: Plaintiff’s Motion to

Remand is Denied, Local 1001 v. LIUNA, (No. 03-CV-7828). The court

dismissed the case without prejudice as moot on December 19, 2003. See

Minute Order of 12/19/03 by Hon. Robert W. Gettleman Terminating case

Local 1001 v. LIUNA (No. 03-CV-7828).

        On November 3, 2003, the IHO issued an Order denying the Motion for

Extension of Time and confirming the previously scheduled dates for the

Trusteeship hearing, November 11-13, 2003. See IHO November 3, 2003

Order (IHO Dkt. tab 11). The Order also addressed Local 1001’s position and

the GEB Attorney’s opposition thereto. Id. Specifically, the IHO focused on

whether Local 1001 had a right to counsel and whether denial of the motion

would hinder the Local’s right to a full and fair hearing.

 

        In discussing Local 1001’s selection of Mr. Webb as counsel for the

Trusteeship hearing and the Local’s alleged right to counsel of its own

choosing, the IHO noted that:

federal case law unequivocally denies a local union the right

to an attorney in trusteeship proceedings, much less counsel of

its own choosing. See supra, Trusteeship Legal Standards.7

___________________________

7 In pertinent part, the Trusteeship Standards read:

Courts have found that the presence or participation of

attorneys is not mandated by the fair hearing requirement of

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6 In the Matter of Local Union 1001 2004

Based on those enunciated federal decisions, the IHO does not

concur that "Local 1001 has an unfettered right to select its

own counsel." Local 1001’s Reply Brief, p.7 (IHO Dkt. tab

7); see also Air Wisconsin Pilots, at *19. Article IX, Section 7

of the International Constitution clearly delineates Local

1001’s rights, which does not include any right to counsel.

See International Constitution, Article IX, Section 7.

IHO November 3, 2003 Order (IHO Dkt. tab 11).

 

       Subsequently, it became apparent that, although Local 1001 asserted that

it had selected Mr. Webb as its lead counsel for the hearing, he had spent

minimal time reviewing Local 1001’s case in the months prior to the issuing

of the Trusteeship Complaint. See GEB Ex. 52 (Winston & Strawn Invoice #

1754958 of 04/28/03) (billing $24,350.00 for 80 billable hours worked by

 

___________________________

29 U.S.C. § 464. An overwhelming weight of authority

supports this conclusion. See, e.g., Raushcher v. Bakery,

Confectionery & Tobacco Workers Int’l Union, 1993 U.S.

Dist. LEXIS 14288, NO. CIV. A. 93-5629, 1993 WL 409192,

T *2 (E.D. Pa. 1993); Tam v. Rutledge, 475 F. Supp. 559, 569

(D. Haw. 1979) (fact that local was not allowed to have

counsel present does not deprive local of fair hearing); Int’l

Bhd. of Elec. Workers Local 1186 v. Eli, 307 F. Supp. 495,

510 (D.Haw. 1969) (rejecting argument that refusal to permit

local to have counsel present during trusteeship hearing

deprived local of a fair hearing); Devine v. McCarron, 1997

U.S. Dist. LEXIS 9626, NO. 96 CIV. 5093 (CSH), 1997 WL

379708, at *6 (S.D.N.Y. 1997) (local union is not deprived of

a fair hearing if it is not allowed counsel present);

Boilermakers’ Bldg. Ass’n v. Int’l Bhd. of Boilermakers, Iron

Ship Builders, Blacksmiths, Forgers & Helpers, Boilermakers

Local 500, 1990 U.S. Dist. LEXIS 17204, NO. CIV. 90-318-

FR, CIV. 90-337-FR, 1990 WL 209714, at *13 (D. Or. Dec.

13, 1990) (assistance of counsel is not an essential element of

fair hearing requirement); Air Wis. Pilots Protection Comm. v.

Sanderson, 1989 U.S. Dist. LEXIS 6143, NO. 87 C 3382 1989

WL 58273, at *6 (N.D. Ill. 1989) (fact that charged party was

not allowed counsel present will not render hearing

procedurally defective).

IHO November 3, 2003 Order (IHO Dkt. tab 11).

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7 In the Matter of Local Union 1001 2004

partner S. Mendenhall and associate B. Franklin); (Winston & Strawn Invoice

# 1758188 of 05/19/03) (billing $6,382.50 for 18.5 billable hours worked by

partner S. Mendenhall); (Winston & Strawn Invoice # 1764095 of 06/26/03)

(billing $4,846.25 for 20.75 billable hours worked by partner S. Mendenhall

and associate B. Franklin); (Winston & Strawn Invoice # 1767814 of

07/18/03) (billing $10,078.75 for 35.25 billable hours worked by partner S.

Mendenhall, associate B. Franklin, and S. Wesclitz); (Winston & Strawn

Invoice # 1772651 of 08/18/03) (billing $3,363.75 for 9.75 billable hours

worked by partner S. Mendenhall); see also (Winston & Strawn Invoice #

1782937 of 10/22/03) (billing $10,522.50 for 30.50 billable hours worked by

partner S. Mendenhall). In total, Mr. Webb billed for only 15.75 hours of

work on behalf of Local 1001 by October 2003. See Winston & Strawn

Invoice # 1786655 of 11/14/03) (billing $87,036.25 for 257.50 billable hours

worked by partners D. Webb, M. Lydon, and S. Mendenhall, as well as

associates B. Franklin and C. Cullen) (IHO Dkt. tab 34). Mr. Lydon had spent

approximately the same amount of time as Mr. Webb in preparing the case,

and Mr. Mendenhall had worked over 250 hours on the case prior to the

hearing.

 

         The IHO further observed that both Mr. Faraci and Judge Leighton had

represented the Local for many years, including litigation opposing the

LIUNA internal reform process in the United States District Court for the

Northern District of Illinois.8 See IHO November 3, 2003 Order (IHO Dkt.

tab 11). Moreover, the current Trusteeship Complaint stems from the Chicago

District Council Trusteeship and Bruno Caruso disciplinary matter, during

which Attorney Faraci and Judge Leighton represented Local 1001. Id. Thus,

the IHO concluded, denial of the Motion for Extension of Time would not

impede Local 1001’s defense of the charges, "even supposing, arguendo, that

the Local did have a right to counsel at the Trusteeship hearing." Id.

 

        The IHO also found unpersuasive Local 1001’s averment that refusal of

the Motion for Extension of Time would deny Local 1001’s right to a full and

fair hearing. Id. Local 1001 had argued that, "despite receiving draft charges

from the GEB Attorney in early September 2003 and the formal charges filed

____________________________
 

8 Evidence shows that Local 1001 first retained Faraci & Faraci as legal

counsel in or about January 1999. See Local 1001 Ex. 4 (January 21, 1999

Executive Board Meeting Minutes) (Judge Leighton and Peter Faraci "were

introduced to the Executive Board," provided background information,

including their experience representing LIUNA Local Union 2, and described

the services they could perform; the Executive Board unanimously decided to

retain Faraci and Faraci).

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8 In the Matter of Local Union 1001 2004

on September 25, 2003, it ‘was still somewhat in the dark regarding the

charges’ and has inadequate time to prepare a defense for the hearing." IHO

November 3, 2003 Order (IHO Dkt. tab 11), citing Local 1001’s Replay Brief,

p.6 (IHO Dkt. tab 7) (some internal quotations omitted). However, "there

ha[d] been substantial, direct communication between the GEB Attorney,

Local 1001, and Local 1001’s attorneys regarding the International Union’s

consideration of imposing a trusteeship" before the GEB Attorney filed the

Trusteeship Complaint on September 25, 2003. IHO November 3, 2003 Order

(IHO Dkt. tab 11). Accordingly, the IHO found that, even before the

Trusteeship Complaint was filed, Local 1001 "had an adequate understanding

of the impending charges based on discussions with the GEB Attorney over

18 months, the detailed 2002 letter from the GEB Attorney discussing the

basis for a trusteeship, and the draft complaint forwarded to the Local in the

beginning of September 2003."9 Id.

 

Local 1001’s Discovery Requests

 

      On November 5, 2003, Local 1001, by and through one of its attorneys,

Mr. Mendenhall,10 moved for the disclosure of any and all evidence and

exhibits that the GEB Attorney intended to introduce at the Trusteeship

hearing. See Local 1001’s Motion for Evidence and Exhibits to be Used at

Trial of 11/5/03 (IHO Dkt. tab 13). In that motion, Local 1001 averred, "As

of November 5, 2003, only five days before the hearing date, the GEB

attorney has failed to provide any evidence including exhibits that he will

attempt to use at trial in support of the charges filed against Local 1001." Id.

at ¶ 3. Local 1001 also moved that the GEB Attorney disclose, in writing, a

list of witnesses, and the identity of organized crime members with whom the

officers of Local 1001 allegedly associated. See Local 1001’s Motion for

Written Disclosure of Witness List of 11/5/03 (IHO Dkt. tab 13); Local

1001’s Motion to Specifically Disclose and Identify the Members of

Organized Crime With Whom the Officers of Local 1001 Have Allegedly

Associated of 11/5/03 (Local 1001’s Motion for Specificity) (IHO Dkt. tab

13) (collectively, Discovery Motions).

 

       In response to the Discovery Motions from Winston & Strawn, other

communications from Faraci and Faraci, and "inconsistent messages [from the

firms] about whether or not the lawsuit [in the Circuit Court of Cook County]

 

______________________________

9 The IHO further noted, "Neither LIUNA constitutions nor federal labor law

entitle Local 1001 to the type of extraordinary notice or specificity in pleading

in a trusteeship proceeding that the Local seems to be asserting a right to." Id.

10 Mr. Mendenhall is a partner in the law firm Winston & Strawn LLP.

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9 In the Matter of Local Union 1001 2004

would be dropped,"11 Attorney Thomas requested that the IHO require

clarification from the Local regarding who would be representing it and who

had authority to speak with the GEB Attorney on its behalf. See Letter from

Robert M. Thomas Jr. to Peter F. Vaira of 11/6/03 (IHO Dkt. tab 15).

Attorney Thomas also filed an opposition and response to the Local’s

Discovery Motions, which delineated that the GEB Attorney had an

agreement with Faraci & Faraci making the requested list of witnesses and

copies of exhibits available. See GEB Attorney’s Opposition and Response to

Local 1001’s Discovery Motions (GEB Attorney’s Opposition to Discovery)

(IHO Dkt. tab 14). The GEB Attorney specifically objected to the Local’s

request for detailed disclosures of evidence regarding specified officers and

members’ association with organized crime. See GEB Attorney’s Opposition

to Discovery (IHO Dkt. tab 14). The GEB Attorney noted that under similar

factual circumstances, the IHO has rejected requests for detailed disclosures in

trusteeship proceedings. Id. at p.4, citing Chicago District Council, 97-30T;

In the Matter of Local 210, IHO Order and Memorandum, 95-35T (April 17,

1995).

 

            On November 6, 2000, the IHO issued an Order requesting that the

Executive Board of Local 1001 notify the IHO which law firm represented the

Local to facilitate the disposition of pre-hearing discovery motions. See IHO

November 6, 2003 Order (IHO Dkt. tab 16). Mr. Mendenhall informed the

IHO that Mr. Webb was "currently serving as lead trial counsel for Local

1001," but requested that the IHO provide Faraci & Faraci with courtesy

copies of all documents. Letter from Samuel Mendenhall to Peter F. Vaira of

11/6/03 (IHO Dkt. tab 17). Thereafter, an Order responding to the Discovery

Motions delineated that: the GEB Attorney had agreed to expedite production

of all exhibits for reproduction by overnight delivery; the GEB Attorney

would provide a list of all documents unavailable for reproduction; the GEB

Attorney had produced a list of witnesses; and, the Trusteeship Complaint

offered sufficient detail regarding the organized crime figures with whom

particular members had associated.12 See IHO Discovery Order of 11/7/03

 

_________
 

11 Local 1001 and the GEB Attorney were apparently engaged in ongoing

negotiations regarding mutual concessions that might facilitate postponement

of the scheduled hearing.

12 Local 1001 made a similar evidentiary request regarding the alleged

organized crime associations of Joseph Spingola (Spingola). Local 1001’s

Motion for Specificity, p.3 (IHO Dkt. tab 13). The IHO found that, although

the IHO previously made specific findings regarding Spingola (Chicago

District Council, 97-30T), "the IHO raises a rebuttable presumption that any

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10 In the Matter of Local Union 1001 2004

(IHO Dkt. tab 22). The Order further stated that the IHO would conduct

intensive inquiry into the reliability of the informant testimony about

organized crime elicited at the hearing. Id. Thereafter, Local 1001 would

receive reasonable and sufficient time to respond and rebut the evidence. Id.

 

Motion for Substitution of Lead Counsel and Extension of Hearing

 

       On November 7, 2003, Local 1001 filed a motion to substitute its lead

trial counsel and extend the date of the Trusteeship hearing until November

18, 2003. See Motion to Substitute Lead Trial Counsel and to Extend the

Hearing Date Before the Independent Hearing Officer to November 18, 2003

of 11/7/03 (Substitution and Extension Motion) (IHO Dkt. tab 24). The

Substitution and Extension Motion averred, "In March 2003, Local 1001

selected Dan K. Webb, of Winston & Strawn, to represent it in any trusteeship

hearing before the IHO. George N. Leighton, of Counsel, to Faraci & Faraci

was selected to second chair the litigation."13 Id. Citing an unsuccessful

attempt at judicial intervention to delay the hearing and a prior medical issue

that rendered Judge Leighton unavailable on November 11, 2003,14 Local

1001 sought to substitute Mr. Lydon, a partner of Mr. Webb’s, as lead trial

counsel, and extend the hearing date one week. Id.

 

         GEB Attorney Luskin opposed the Local’s continuance request for

substitution of trial counsel. See Letter of Robert D. Luskin to Peter F. Vaira

of 11/10/03 (IHO Dkt. tab 25). GEB Attorney Luskin stated that LIUNA had

proposed to Mr. Faraci that it would agree to the continuation requested by

Local 1001, provided the Local dismiss the State court action to avoid risking

interruption of the Trusteeship hearing by collateral litigation. Id.

Nonetheless, Mr. Faraci relayed to the GEB Attorney that Local 1001

"indicated they cannot accept your proposal because the question of

jurisdiction created by your removal action of this matter is too important of

an issue to abandon." Letter from Peter S. Faraci to Robert D. Luskin of

11/10/03 ((IHO Dkt. tab 26). Mr. Luskin maintained that LIUNA did not

request or require any agreement about jurisdiction if jurisdictional issues

remained after the termination of the trusteeship proceedings. See Letter of

Robert D. Luskin to Peter F. Vaira of 11/10/03 (IHO Dkt. tab 25).

 

___________

proof regarding Spingola’s organized crime association has no present weight

in this hearing." IHO Discovery Order of 11/7/03 (IHO Dkt. tab 22).

13 This was the first indication that Local 1001 had selected Judge Leighton

as second chair for the Trusteeship hearing.

14 The Substitution and Extension Motion further noted that Judge Leighton is

91 years of age. Id.

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11 In the Matter of Local Union 1001 2004

      The IHO refused to extend the hearing date. See IHO November 10,

2003 Order (IHO Dkt. tab 27). Mr. Lydon was permitted to attend the hearing

and did, in fact, act as lead counsel for all proceedings in this matter.15 The

Trusteeship hearing began on November 11, 2003, and continued November

12-13, 2003, and December 8-9, 2003 in Chicago, Illinois. Mr. Thomas

appeared on behalf of the GEB Attorney. Messrs. Lydon, Mendenhall, Peter

Faraci, and Judge Leighton were present on behalf of Local 1001.16 Local

1001 members and officers attended the hearing; most notably, on December

8, 2003, over 100 members appeared in support of the current administration.

A licensed court reporter duly recorded the proceedings. See Transcripts of In

the Matter of LIUNA Docket Number 03-21T (Tr.).

 

Pre-Hearing Motions

 

Motion to Dismiss for Failure to Comply with the Consent Decree

         On November 11, 2003, Local 1001 presented a Motion to Dismiss this

Matter for Failure to Comply with the Consent Decree (Consent Decree

Motion). See Local 1001’s Consent Decree Motion (IHO Dkt. tab 35). Local

1001 argued that "the GEB Attorney relied on the Consent Decree to establish

federal subject matter jurisdiction" in this case, "and the Court found federal

jurisdiction as ‘there is enough there in terms of Local 1001 . . . within the

parameters of federal jurisdiction with a consent decree." Id. at p.1. Local

1001 further argued that the GEB Attorney contended that the Consent Decree

governed the Trusteeship dispute and provided the basis for filing the

Trusteeship Complaint. Id. at p.2. Therefore, Local 1001 averred that the

GEB Attorney should be "estopped from denying that the Consent Decree

 

___________________________

 

15 The IHO was familiar with Mr. Lydon’s impressive background and

credentials, including both his service as Assistant U.S. Attorney for the

Northern District of Illinois and his complex litigation defense work for major

corporations. Mr. Lydon’s background and experience rendered him

eminently capable of handling the role of lead trial attorney for Local 1001.

As reflected earlier, Mr. Lydon also had previously participated in this matter,

as reflected in his firm’s billing statements.

16 Judge Leighton was present for the November 2003 hearing dates.

Thereafter, Judge Leighton informed the IHO that, in his judgment, "Local

1001 is adequately represented in the Trusteeship proceedings . . . that began

hearing November 11, 2003. The local’s attorneys are Mathias A. Lydon,

Esquire; Samuel Mendenhall, Esquire; and Peter S. Faraci, Esquire. For this

reason, I ask that my name be removed from your mailing list." Letter from

George N. Leighton to Peter F. Vaira of 11/25/03 (IHO Dkt. tab 29).

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12 In the Matter of Local Union 1001 2004

governs this matter," and the Trusteeship Complaint dismissed for failure to

comply with the Consent Decree.17 Id.

 

        LIUNA entered into a Consent Decree with the Construction & General

Laborers’ District Council of Chicago and Vicinity (Chicago District Council)

and the United States Attorney for the Northern District of Illinois on August

12, 1999. See United States of America and Laborers’ Int’l Union of N. Am.

v. Construction & General Laborers’ District Council of Chicago and

Vicinity, Consent Decree, No. 99 C 5229 (August 12, 1999). The Consent

Decree created the offices of Monitor, Adjudications Officer, and

Trustee/Supervisor. Id. at ¶¶ 16, 26, 32. All of these offices had terms that

expired within two years of their appointment, or in approximately September

2001. Id. at ¶¶ 25, 31, 33. None of the parties to the Consent Decree

petitioned the Court for an extension of any of those officers’ terms, nor have

any of those officers’ filed charges that are pending and relevant to this

matter. Id. Therefore, court supervision through the office of the Monitor no

longer exists under the Consent Decree.

 

     However, the decree does contain permanent injunctions against barred

conduct committed by "all current and future officers, agents, representatives,

employees and members of the CLDC and its affiliated entities . . . ." Consent

Decree, ¶ 14. Both the GEB Attorney and the government have standing to

apply to the court for any relief for violation of the permanent injunctions on

barred conduct, including civil and criminal contempt. In addition, nothing in

the Consent Decree superseded the substantive standards of LIUNA’s Ethical

Practices Code (EPC) or the GEB Attorney’s authority under the Constitution.

Consent Decree, ¶¶ 1, 2. Moreover, the International Union Constitution

(International Constitution) and LIUNA’s Ethics and Disciplinary Procedure

(EDP) empower the IHO with independent authority to preside over

trusteeships. Based on the foregoing authority, the IHO held that his

constitutional authority to conduct trusteeship hearings was unaffected by the

consent decree and did not dismiss the Trusteeship Complaint.

 

___________________________
 

17 Specifically, Local 1001 averred that the GEB Attorney did not comply

with the Consent Decree by bringing the instant charges in violation of the

following language: "Notwithstanding any delegation to investigate or

prosecute, no charge may be brought under this decree without the consent

and approval of the Monitor." See Local 1001’s Consent Decree Motion

(IHO Dkt. tab 35) (emphasis added), citing Consent Decree, ¶ 15.

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13 In the Matter of Local Union 1001 2004

Motions in Limine

      At the hearing, Local 1001 presented five motions in limine to exclude

certain allegations and evidence regarding organized crime. Those motions

included: Local 1001’s Motion In Limine to Strike All Pre-1995 Allegations

Regarding Organized Crime and to Preclude the Use of Any Evidence Related

to Such Allegations; Local 1001’s Motion In Limine Regarding Evidence of

Alleged Prior LCN Influences Not Related to Current Board Members:

Michael Palermo; Local 1001’s Motion In Limine Regarding Evidence of

Alleged Prior LCN Influences Not Related to Current Board Members: Bruno

Caruso; Local 1001’s Motion In Limine Regarding Evidence of Alleged Prior

LCN Influences Not Related to Current Board Members: Ernest Kumerow;

and Local 1001’s Motion In Limine Regarding Evidence of Alleged Prior

LCN Influences Not Related to Current Board Members: Joseph Spignola

(collectively, Local 1001’s Motions In Limine). See Local 1001’s Motions In

Limine (IHO Dkt. tab 36). Without addressing each motion specifically, the

IHO notes that the substance of those motions was a desire to preclude

evidence that was arguably tangential to the current officers of the Local. The

IHO recognized that the GEB Attorney must tie evidence regarding organized

crime to the current matter, but determined that the relevancy of specific

evidence could adequately be addressed when introduced.

 

Motion for Saturday or Evening Hearing Dates

 

   At the beginning of the Trusteeship hearing on November 11, 2003, Local

1001 filed a Motion for Portions of the Hearings to Take Place on Saturdays

or in the Evenings (Motion for Alternate Hearing Schedule). See Local

1001’s Motion for Alternate Hearing Schedule (IHO Dkt. tab 37). Mr.

Mendenhall presented that the members of Local 1001 are all County and

Municipal public service employees who were unable to attend hearings

scheduled during working hours. Tr. 37:15-21 (MENDENHALL). The IHO

acknowledged the interest the membership had in the proceedings, but

declined to reschedule existing hearing dates in the interest of the planned

witnesses. Cf. In the Matter of Local Union 1175, IHO Order and

Memorandum, 03-10T (June 11, 2003) (declining to hold evening or weekend

hearings). However, in conformance with the usual custom and practice in

Trusteeship proceedings, the IHO assured counsel that the membership would

be afforded the opportunity to voice their opinions on the record. Over 100

members appeared in support of the Local on December 8 and 9, 2003.

LEGAL STANDARDS

 

Trusteeship Requirements

      In order to impose a proper trusteeship over Local 1001, LIUNA must

adhere to both federal law and its own internal constitutions. The Labor-

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14 In the Matter of Local Union 1001 2004

Management Reporting and Disclosure Act of 1959 (LMRDA) "contemplates

three essential conditions of validity [of a trusteeship]: adherence to the

constitution, a fair hearing, and a permissible purpose." Luggage Workers

Union, Local 167 v. International Leather Goods, Plastics & Novelty

Workers’ Union, et al., 316 F. Supp. 500, 504 (D. Del. 1970). The LMRDA

allows labor organizations to establish trusteeships over subordinate bodies to

correct corruption or financial malpractice, assure the performance of

collective bargaining agreements or other duties of a bargaining

representative, restore democratic procedures, or otherwise carrying out the

legitimate objects of such labor organization. 29 U.S.C. § 462.

 

        The LMRDA empowers LIUNA to impose a trusteeship if it does so in

conformance with its own constitutions and bylaws. 29 U.S.C. §§ 462-464.

LIUNA constitutions and by-laws mirror the federal statute. See Matter of

Tomasello & Curvin, 1998 A.O. 17, 27 (97-021-IHO, 97-022-IHO)

(International’s authority to impose trusteeship over a Local expressly

provided in Constitution and confirmed in EDP). Pursuant to Article IX,

Section 7 of the International Constitution, the LIUNA General President may

appoint a trustee when:

 

[t]he General President finds, in his opinion, that action by

him is necessary for the purpose of correcting corruption or

financial malpractice, assuring the performance of collective

bargaining agreements or other duties of a bargaining

representative, restoring democratic procedures or otherwise

carrying out legitimate objects of such subordinate body or the

International Union, or to protect the organization as an

institution. . . .

 

International Constitution, Article IX, Section 7.

 

        In addition, LIUNA may impose a trusteeship over a subordinate body to

correct officers’ mismanagement and corruption. Id. The LIUNA General

President delegates his power "to impose and review the imposition of

trusteeships over any district council, local, or other entity within the Union"

to the GEB Attorney. EDP, Section 3. Pursuant to Section 5 of the EDP, the

LIUNA IHO "shall preside over and provide rulings in" the imposition of all

trusteeship. Id. When the International Union fully complies with its own

requirements before imposing a trusteeship, the imposition does not violate

union officers’ due process rights. 29 U.S.C. §§ 411(a), 462, 464(c); see also

Trusteeship of Local 73, 1996 A.O. 5, 10 (95-013-TB) (imposition of

trusteeship over Local does not implicate Section 101(a) due process rights,

unless union membership rights denied).

 

        For proper authorization of a labor organization’s imposition of

trusteeship over a subordinate body, the LMRDA requires that the governing

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15 In the Matter of Local Union 1001 2004

body seeking to impose a trusteeship must give the targeted entity a full and

fair hearing. 29 U.S.C. §§ 461, 462, 464(c). "The right to a fair hearing under

§ 464(c) requires that a subordinate body be given more than just the

opportunity to be heard before an official body." Laborers’ Int’l Union of N.

Am. Local Union # 43 v. Laborers’ Int’l Union of N. Am. (Local 43 v.

LIUNA), No. C03-26 LRR at 9 (N.D. IO May 14, 2003), citing Becker v.

Industrial Union of Marine & Shipbuilding Workers, 900 F.2d 761, 768 (4th

Cir. 1990) (internal citations omitted). A fair hearing under § 464(c) requires

that the subordinate body receive written notice of the hearing, which "sets

out in writing the factual basis for the alleged violations of law of the union’s

constitution that justify the imposition" of a trusteeship. Becker, 900 F.2d at

768; see also In the Matter of Local 1058, IHO Order and Memorandum, 00-

85T (May 31, 2000) (degree of detail must be sufficient to provide

subordinate body with reasons for trusteeship and fair notice of hearing).

 

        The trusteeship notice need not rise to the level of detail required in

judicial proceedings. Cf. Luggage Workers Union, Local 167 v. International

Leather Goods, Plastics & Novelty Workers Union, 316 F. Supp. 500, 508 (D.

Del. 1970) (notice insufficient for failure to inform local union of acts

supporting imposition of trusteeship). The notice should provide the "date,

time and location of the hearing and indicate that the local will have an

opportunity to respond to the charges." Local Union 43 at 10, citing Becker,

900 F.2d at 768 (internal citations omitted); see also International

Constitution, Article IX, Section 7. LIUNA’s International Constitution

requires adequate notice of the hearing "at least 10 days prior to the date of

the hearing." International Constitution, Article IX, Section 7. "At the

hearing itself, the union seeking to impose the trusteeship must present

evidence and witnesses in support of the reasons for imposing the

trusteeship." Local Union 43 at 9-10, citing Becker, 900 F.2d at 768. Further,

the "local must be accorded the opportunity to cross examine [the parent

union’s] witnesses and present rebuttal evidence." Id.

 

Barred Conduct

 

Both LIUNA’s EDP and EPC specifically prohibit "all current and future

officers, agents, representatives, employees, and members of the Union from

engaging in ‘barred conduct.’" EDP, Section 1, p.24; EPC, Barred Conduct,

p.22. "Barred Conduct" includes, inter alia, committing any act of

racketeering, as defined in 18 U.S.C. § 1961(1) and 29 U.S.C. §§ 186, 501(c).

See EDP, Appendix A, p.36; EPC, Barred Conduct, p.22. "Racketeering

activity’ means, inter alia, any act or threat involving the aforementioned

crimes that are chargeable under State law and punishable by imprisonment

for more than one year; or any act which is indictable under enumerated

sections of Titles 18 and 29 of the United States Code. Id.; see also In the

Matter of Stephen Buckley, IHO Order and Memorandum, 99-52D (October 3,

2000); In the Matter of Alan Wasserman, IHO Order and Memorandum, 97-

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16 In the Matter of Local Union 1001 2004

57D (October 7, 1998). Although LIUNA’s EPC and EDP do not define

"barred conduct" with an express mental state requirement, a knowledge

standard is implicit in the nature of a offense. See, e.g., In the Matter of

Dennis Gleason, Jim Felkner Jr., and L.T. Robertson, 2000 A.O. 151 (00-006-

IHO); Victor Claro v. Carlos M. Marques, 1998 A.O. 183 (98-023-IHO),

citing, In the Matter of Dennis Martire, 1997 A. O. 81, 93 n.8 (97-008-IHO).

The EDP and the EPC also prohibit LIUNA members from permitting

any member or associate of the LCN to exercise control or influence in the

conduct of the affairs of the Union. EDP, Section 1, p.24; EPC, Barred

Conduct, p.22. The IHO liberally construes LCN influence on union affairs.

In the Matter of Napoli & Fallacara, IHO Order and Memorandum, 96-65D

(September 25, 1997); In the Matter of Bifulco et al., IHO Order and

Memorandum, 96-48D (March 17, 1998). The IHO will look at any

relationship that permitted access to union affairs by barred persons. Bifulco,

96-48D. The relationship need not directly affect the operation of the union.

See, e.g., In the Matter of Coia, IHO Order and Memorandum, 97-52D

(March 8, 1999) (relationship to the affairs of the union need not on its face

affect the operation of the union); Napoli, 96-65D (apparent from the

agreement between LIUNA and the Department of Justice (DOJ), and text of

the EDP and EPC, that major aim of reform process is ridding union of

organized crime influence).

Fiduciary Duties of Labor Union Officers

Federal Labor Law

In order to safeguard labor organizations, federal law governing the

fiduciary duty of labor union officers is expansive. Title 29 U.S.C. § 501(a)

states:

The officers, agents, shop stewards, and other representatives

of a labor organization occupy positions of trust in relation to

such organization and its members as a group. It is, therefore,

the duty of each such person, taking into account the special

problems and functions of a labor organization, to hold its

money and property solely for the benefit of the organization

and its members and to manage, invest, and expend the same

in accordance with its constitution and bylaws and any

resolutions of the governing bodies adopted thereunder, to

refrain from dealing with such organization as an adverse

party or in behalf of an adverse party in any matter connected

with his duties and from holding or acquiring any pecuniary or

personal interest which conflicts with the interests of such

organization, and to account to the organization for any profit

received by him in whatever capacity in connection with

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17 In the Matter of Local Union 1001 2004

transactions conducted by him or under his direction on behalf

of the organization. A general exculpatory provision in the

constitution and bylaws of such labor organization or a general

exculpatory resolution of a governing body purporting to

relieve any such person of liability for breach of the duties

declared by this section shall be void as against public policy.

29 U.S.C. § 501(a).

Title 29 U.S.C. § 501(c) prohibits the use of union property or funds for

personal use. Section 501(c) reads in pertinent part that:

[a]ny person who embezzles, steals, or unlawfully and

willfully abstracts or converts to his own use, or the use of

another, any of the moneys, funds, securities, property or other

assets of a labor organization of which he is an officer, or by

which he is employed, directly or indirectly shall be fined not

more than $10,000 or imprisoned for not more than five years,

or both.

29 U.S.C. § 501(c).

In addition to the broad description of the fiduciary duty of union officials

contained in 29 U.S.C. § 501(a), the Employee Retirement Income Security

Act of 1974 (ERISA) specifically addresses the fiduciary duties of benefit

plan trustees:

(a) Prudent man standard of care.

(1) Subject to sections 403(c) and (d), 4042, and 4044

[29 USCS §§ 1103(c), (d), 1342, 1344], a fiduciary

shall discharge his duties with respect to a plan

solely in the interest of the participants and

beneficiaries and –

(A) for the exclusive purpose of:

(i) providing benefits to participants and

their beneficiaries; and

(ii) defraying reasonable expenses of

administering the plan;

(B) with the care, skill, prudence, and diligence

under the circumstances then prevailing that

a prudent man acting in a like capacity and

familiar with such matters would use in the

conduct of an enterprise of a like character

and with like aims;

29 U.S.C. § 1104.

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18 In the Matter of Local Union 1001 2004

Title 18 U.S.C. § 1027 prohibits false statements and concealment of

facts in relation to documents required by ERISA. The statute prohibits:

whoever, in any document required by ERISA to be published,

or kept as part of the records of any employee welfare benefit

plan or employee pension benefit plan, or certified to the

administrator of any such plan, makes any false statement or

representation of fact, knowing it to be false, or knowingly

conceals, covers up, or fails to disclose any fact the disclosure

of which is required by such title [29 U.S.C. §§ 1001 et seq.]

or is necessary to verify, explain, clarify or check for accuracy

and completeness any report required by such title to be

published or any information required by such title to be

certified, shall be fined under this title, or imprisoned not more

than five years, or both.

18 U.S.C. § 1027

Ethical Practices Code

Several sections of the LIUNA EPC also address the fiduciary

responsibility of LIUNA officers. The EPC recognizes that any elected or

appointed person who represents LIUNA and its members has a sacred trust to

serve the best interests of the members and their families. EPC, Business and

Financial Activities of Union Officials, p.20. "Therefore, every officer and

representative must avoid any outside transaction which creates an actual or

potential conflict of interest. The special fiduciary nature of Union office

requires the highest loyalty to the duties of the office." Id.

According to the Financial Practices section of the EPC, "Union funds are

held in trust for the benefit of the membership. The membership is entitled to

assurance that union funds are not dissipated and are spent for proper

purposes. The membership is also entitled to be reasonably informed as to

how union funds are invested or used." EPC, Financial Practices, p.18. The

EPC prohibits local unions from investing of any of its funds "in a manner

which results in the personal profit or advantage of any officer or

representative of the Union." Id.

The EPC further dictates proper financial procedure for benefit funds, as

well as the related fiduciary responsibility of Union trustees. "Complete

records of the financial operations of all health, welfare and retirement funds

and programs shall be maintained in accordance with the best accounting

practice. Each Union trustee shall require that each such fund be audited

regularly." EPC, Health, Welfare and Retirement Funds, p.20.

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19 In the Matter of Local Union 1001 2004

EVIDENTIARY ISSUES

Burden of Proof

The GEB Attorney must establish the grounds for a trusteeship by a

preponderance of the evidence. See In the Matter of Local 225, IHO Order

and Memorandum, 97-54T (March 17, 1998), citing In the Matter of

Construction & Laborers’ District Council of Chicago and Vicinity (Chicago

District Council), IHO Order and Memorandum, 97-30T (February 7, 1998).

A preponderance of the evidence "means such evidence as, when weighed

against that opposed to it, has the more convincing force" that something is

more likely so than not so. Hopkins v. Price Waterhouse, 737 F. Supp. 1202,

1203 (D.C. Cir. 1990); see also Nissho-Iwai Co. v. M/T Stolt Lion, 719 F.2d

34, 38 (2nd Cir. 1983). In determining whether any fact at issue has been

proven by a preponderance of the evidence, the IHO may consider and weigh

the testimony of all witnesses, regardless of who may have called them, and

all exhibits received in evidence, regardless of who may have produced them.

See Claro v. Marques, 1998 A.O. 203, 204 (98-023-IHO); see also Merzon v.

County of Suffolk, 767 F. Supp. 432, 444 (E.D.N.Y. 1991).

"A union need establish only one proper purpose to impose a

trusteeship." Chicago District Council, 97-30T; see also, Mason Tenders

District Council v. LIUNA, 884 F. Supp. 823, 836 (S.D.N.Y. 1995); LIUNA

Local Union #43, No. C03-026 (N.D. Iowa May 14, 2003). In this case, the

GEB Attorney has averred a number of grounds for imposing a trusteeship.

The Trusteeship Complaint charges that the corruption of La Cosa Nostra

(LCN) influence, a lack of democratic practices, barred conduct, ERISA

reporting violations, and protecting Local 1001 as an institution warrant the

imposition of a Trusteeship. See Trusteeship Complaint (IHO Dkt. 2).

Hearsay Evidence

LIUNA trusteeship proceedings are similar to administrative proceedings

in which the "rules governing the admission of evidence . . . are considerably

more relaxed." United States v. I.B.T (Wilson, Dickens & Weber), 978 F.2d

68, 72 (2d Cir. 1992); Rocker v. Celebrezze, 358 F.2d 119, 122 (2d Cir. 1966)

(footnote omitted). The hearing officer in union disciplinary proceedings

arising under the Teamsters Consent Decree regularly admits hearsay

evidence. See United States v. I.B.T (Cimino), 964 F.2d 1308, 1312 (2d Cir.

1992) aff’g, 777 F. Supp. 1130 (S.D.N.Y. 1991); Senese & Talerico, 941 F.2d

at 1297. Accordingly, reliable hearsay evidence is admissible in labor

arbitration. See, e.g., Associated Cleaning Consultants and International Bhd.

of Printing and Allied Trades Local 327, 94 LA 1246 (1990); In the Matter of

Joseph P. Crincoli (Crincoli), IHO Order and Memorandum, 97-04D (Oct.

27, 1997); Chicago District Council, 97-30T; Elkouri and Elkouri, How

Arbitration Works (4th ed. 1994).

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20 In the Matter of Local Union 1001 2004

The IHO has adopted the standard of reliability test of the Court in

Cimino, 964 F.2d 1308. Bifulco, 96-48D. The IHO bases hearsay evidence

decisions on a thorough review of what is probative and reliable. Chicago

District Council