COUNSEL: WILLIAM W. TAYLOR, III, Zuckerman, Spaeder, Goldstein,
Taylor & Kolker, Washington, D.C. (Michael R. Smith, Ronald H. Weich,
Jonathan H. Levy, of counsel; Earl V. Brown, Jr., David L. Neigus,
Office of the General Counsel, International Brotherhood of Teamsters,
Washington, D.C., of counsel) for Defendant-Appellant.
KAREN B. KONIGSBERG, Assistant United States Attorney for the Southern
District of New York, New York, New York, (Steven M. Haber, Assistant
United States Attorney, Mary Jo White, United States Attorney, of
counsel) for Plaintiff-Appellee.
JUDGES: Before: WINTER, Chief Judge, PARKER, Circuit Judge, and
SCHWARZER, * District Judge. Judge Parker dissents in a separate
opinion.
* The Honorable William W Schwarzer, of the United States District Court
for the Northern District of California, sitting by designation.
OPINIONBY: WINTER
OPINION:
[*406]
WINTER,
[**2] Chief
Judge:
The International Brotherhood of Teamsters ("IBT") appeals from a
decision by Judge Edelstein interpreting a consent decree ("Consent
Decree" or "Decree") to require the IBT to pay for an Election Officer's
supervision of a rerun of the 1996 IBT elections. The IBT argues that
under the terms of the Decree, the government must pay the cost of
supervision if it chooses to have the rerun supervised. We agree. The
Decree provides that if the government chooses to
[*407]
supervise the 1996 elections, of which the rerun is conceded to be a
part, the government will bear the cost. Because the allegedly improper
conduct that necessitated the rerun is not attributable to the IBT under
the terms of the agreement, the government's argument that the IBT must
pay for the rerun's supervision is unavailing.
BACKGROUND
The instant matter involves another dispute over the meaning of the
Consent Decree entered into by the IBT and the government in March 1989.
See
United States v. IBT ("1996 Election Rules Order"), 86 F.3d 271, 272-73
(2d Cir. 1996) (collecting cases). A history of the parties'
extensive litigation over the Decree is included in an earlier opinion
of this court,
[**3]
United States v. IBT ("1991 Election Rules Order"), 931 F.2d 177, 180-82
(2d Cir. 1991), familiarity with which is assumed. In brief, the
Decree, which arose from the settlement of the government's civil RICO
action against the IBT, instituted various reforms designed to help end
the influence of organized crime within the IBT. Among the provisions of
the Decree is one stating that a court-appointed Election Officer shall
supervise the 1991 IBT elections at IBT expense. With regard to the 1996
elections, however, Paragraph 12(D)(ix) of the Decree states that
supervision is at the government's option and that, if the government
chooses to exercise that option, the consequent supervision will be at
the government's expense.
In the course of administering the Consent Decree prior to the 1991
elections, the district court rejected a claim by the IBT that
"supervise" was a narrow term, limited largely to passive oversight.
Instead, the court adopted the government's and Election Officer's view
that "supervise" was a "proactive" term that allowed the Election
Officer to regulate, manage, and carry out virtually every step in the
process of electing IBT international officers.
[**4]
United States v. IBT, 723 F. Supp. 203, 206-07 (S.D.N.Y. 1989). In
practice, this ruling led to the Election Officer's involvement in many
routine acts such as the printing, mailing, and counting of ballots. At
the time, this broad interpretation pleased the government because it
maximized the Election Officer's powers and because, under the
provisions of the Consent Decree, the IBT paid all the costs of
supervising the 1991 elections.
With regard to the 1996 IBT elections, the government exercised its
option under Paragraph 12(D)(ix) to have the elections supervised by the
Election Officer. While the broad interpretation of the term "supervise"
described above continued to maximize the Election Officer's powers, it
also increased the financial burden on the government because the
Consent Decree now required the government to pay the costs of such
supervision. As a result, the government paid for many routine expenses
of the 1996 elections -- again, for example, the printing, mailing, and
counting of ballots -- in addition to expenses that were directly
incurred by the Election Officer.
After the 1996 elections resulted in the reelection of General President
Ronald Carey, the
[**5] Election
Officer found that IBT funds had been embezzled and used to support
Carey's reelection campaign. The Election Officer refused to certify the
results and thereafter ordered a rerun. Subsequently, three
non-Teamsters -- Martin Davis, Michael Ansara, and Jere Nash -pleaded
guilty to various federal charges relating to the 1996 elections,
including conspiracy to embezzle union funds (Ansara, Davis, and Nash)
and embezzlement of union funds (Davis). The district court appointed
Kenneth Conboy as an election officer with power to decide whether to
disqualify Carey from participating in the rerun. Conboy concluded that
Carey, along with another IBT official, Director of Government Affairs
William Hamilton, had participated in the scheme to embezzle IBT funds
and, accordingly, Conboy disqualified Carey from the rerun. Conboy's
decision was upheld by the district court,
United States v. IBT, 988 F. Supp. 759, 1997 U.S. Dist. LEXIS 20698,
1997 WL 801448 (S.D.N.Y. 1997), and is now the subject of a separate
appeal pending in this court.
Also subsequent to the Election Officer's decision not to certify the
election results, Congress enacted appropriations legislation
prohibiting government
[**6] funds
from being used to pay for supervision of the rerun.
[*408] The
Election Officer reacted to this development by filing an application
with the district court requesting that it enter an order ensuring full
funding for the rerun's supervision. The Election Officer did not take a
position as to who should be responsible for that funding. In response
to the Election Officer's request, the district court held that although
the rerun constitutes part of the 1996 elections, the funding obligation
for supervision must nevertheless be borne under the Consent Decree by
the IBT rather than by the government.
United States v. IBT, 989 F. Supp. 468, 1997 U.S. Dist. LEXIS 20216,
1997 WL 784592 (S.D.N.Y. 1997). In the district court's view,
because the IBT, through its agents Carey and Hamilton, engaged in the
misconduct necessitating the rerun, the IBT is responsible for funding
the rerun's supervision.
DISCUSSION
HN1
We review
de novo a district court's interpretation of a consent decree.
EEOC v. Local 40, Int'l Ass'n of Bridge, Structural & Ornamental Iron
Workers ("Local 40"), 76 F.3d 76, 80 (2d Cir. 1996).
HN2Although
consent decrees are judicial orders subject to enforcement by courts,
[**7] they are
also agreements between parties that "should be construed basically as
contracts."
United States v. IBT ("IRB Rules"), 998 F.2d 1101, 1106 (2d Cir. 1993)
(quoting
United States v. ITT Continental Baking Co., 420 U.S. 223, 236-37, 43 L.
Ed. 2d 148, 95 S. Ct. 926 (1975)). In enforcing a consent decree, a
court is constrained to read and apply the decree "'within its four
corners' and may not look beyond the document to satisfy one of the
parties' purposes."
United States v. IBT ("Wilson, Dickens & Weber"), 978 F.2d 68, 73 (2d
Cir. 1992) (quoting
United States v. Armour & Co., 402 U.S. 673, 682, 29 L. Ed. 2d 256, 91
S. Ct. 1752 (1971)). A court is not entitled to expand or contract
the agreement of the parties as set forth in the decree and must give
the explicit language of the decree great weight.
Local 40, 76 F.3d at 80;
Berger v. Heckler, 771 F.2d 1556, 1568 (2d Cir. 1985). In addition,
"[a] court may not replace the terms of a consent decree with its own,
no matter how much of an improvement it would make in effectuating the
decree's goals."
IRB Rules, 998 F.2d at 1107. Although courts have equitable powers
to enforce consent decrees,
[**8] see
United
States v. Local 359, United Seafood Workers, 55 F.3d 64, 69 (2d
Cir. 1995), such powers exist only to allow courts to ensure
compliance with the decrees' terms. See id.
The Consent Decree expressly addresses the issue before us. It is
undisputed that the rerun is a part of the 1996 elections. Therefore,
the Decree's provision that the IBT "consents to the Election Officer,
at Government expense, to supervise the 1996 IBT elections" governs. The
Consent Decree is the result of a bargain struck by the government and
the IBT in which the government agreed to settle its civil RICO suit
against the IBT in exchange for the IBT's promise to implement various
electoral and disciplinary reforms. As part of the bargain, the
government has the right, but not the obligation, to have the 1996 IBT
elections supervised by an Election Officer. If the government chooses
to exercise that right, however, the Decree provides that the government
must bear the costs of the supervision. Those costs may include routine
election expenses because the government early-on sought and obtained a
broad reading of the term "supervise."
The government concedes in its brief that "in the ordinary
[**9] course
it is reasonable and appropriate to construe the funding provision as
requiring the Government to pay, if it elects to have the rerun
supervised." The government argues, however, that the funding provision
is inapplicable to the rerun because "it is not reasonable to construe
the parties' intent as requiring one party to bear the costs of a rerun,
even if that rerun is caused by the misconduct of the other party."
According to the government, the IBT is directly responsible for the
circumstances necessitating the rerun because of its "failure to achieve
compliance [with the Decree] by persons in positions of relevant
responsibility,"
United States v. Phelps Dodge Indus., Inc., 589 F. Supp. 1340, 1359
(S.D.N.Y. 1984), and because it "did not have in place adequate
procedures to guard against the commission of such unauthorized acts."
Kozera v. Westchester-Fairfield Chapter of Nat'l [*409] Elec.
Contractors Ass'n, 909 F.2d 48, 55 (2d Cir. 1990). In addition, the
government argues that the IBT is vicariously responsible for the
alleged misdeeds of its agents, Carey and Hamilton, under principles of
agency law and respondeat superior. Although notions of direct and
vicarious
[**10]
liability seem to merge in the present factual context, we address them
separately.
We reject the government's argument that the IBT is directly responsible
for causing the rerun. The government has not identified any provision
in the Consent Decree with which the IBT failed to comply because of
Carey's and Hamilton's acts. The wrongful acts here constituted
embezzlement from the IBT for the purpose of funding Carey's campaign.
The IBT's status as a victim of embezzlement is simply not a violation
of the Consent Decree. Furthermore, even if we assume that Carey and
Hamilton did violate the Decree, the IBT is not responsible for failing
to guard against such unauthorized acts. In Phelps Dodge and Kozera,
organizations were held to be directly liable for the harm done to third
parties by agents of the organizations. Here, however, Carey and
Hamilton are alleged to have embezzled money from the IBT. Unlike the
circumstances in Phelps Dodge and Kozera, Carey's and Hamilton's alleged
embezzlement directly harmed the IBT itself by depleting its funds. More
important, the embezzlement was not in the scope of their employment but
rather furthered their personal interests in
[**11]
retaining power within the IBT.
For similar reasons, the IBT is not vicariously liable for the acts of
Carey and Hamilton.
HN3"While an
employer may be liable for even intentional and criminal acts committed
by its employee, those acts must in some way further the interests of
the employer, and not solely benefit the employee."
FMC Corp. v. Boesky (In re Ivan Boesky Sec. Litig.), 36 F.3d 255, 265
(2d Cir. 1994). See also
In re American Biomaterials Corp., 954 F.2d 919, 925 (3d Cir. 1992)
("In no jurisdiction that our research has uncovered does an employee
who embezzles from the corporation act in the scope of employment in
doing so.").
To be sure, Carey's and Hamilton's acts ultimately caused injury to the
government by imposing responsibility for costs on the government for
choosing to supervise the rerun election. That injury, however, came
about because of the terms of the Consent Decree interpreted as the
government wished. The parties to the Consent Decree foresaw that
supervision by the federal Election Officer would be costly and included
explicit terms allocating those expenses. For its own reasons, the
government sought and obtained an expansive interpretation of the term
"supervision." Under
[**12] the
terms of that Decree and their earlier interpretation by the district
court, the government must bear the costs it has agreed to. We express
no opinion as to the liability of any other parties for the costs of
supervising the present rerun or as to whether the IBT may under
different circumstances be responsible for those costs.
We therefore reverse.
DISSENTBY: PARKER
DISSENT:
PARKER, Circuit Judge, dissenting:
I cannot agree with the majority's statement that "the government has
not identified any provision in the Consent Decree with which the IBT
failed to comply because of Carey's and Hamilton's acts." Ante at ."
In fact, the government has pointed to such a provision, and the
evidence supports a finding that the IBT failed to comply with such. I
would therefore find that the district court properly exercised its
broad discretion to ensure compliance with the Consent Decree in
ordering the IBT to pay for the cost of the rerun election. Accordingly,
I respectfully dissent.
It is undisputed that the IBT is a party to the Consent Decree and is
bound by its terms. These terms include the IBT's consent to the
provision allowing "the Election Officer, at Government
[**13]
expense, to supervise the 1996 IBT Elections." Consent Decree P
12(D)(ix). Pursuant to the Consent Decree, the IBT and its officers are
further "enjoined . . . from obstructing or otherwise interfering with
the work of" the Election Officer. Consent Decree P 10. Further, an
explicit purpose of the Consent Decree is to assure that the IBT is
"maintained democratically."
[*410]
Consent Decree, 6th Whereas Clause.
This Court, as the majority notes, has previously interpreted the word
"supervise," as used in the Consent Decree, quite broadly. See
United States v. IBT ("1991 Election Rules Decision"), 931 F.2d 177, 187
(2d Cir. 1991) (Winter, J.). This broad construction has previously
led this Court to hold that the Consent Decree (to which the IBT agreed)
authorized certain rules to be promulgated by the Election Officer
governing the supervised elections. See Id. ("We find ample authority in
the Consent Decree for the [Election Rules order]. The Election Officer
has broad authority to 'supervise' the IBT election process . . . . The
Election Officer thus has substantial discretion to impose election
rules and procedures that ensure that the upcoming elections are free,
fair and
[**14]
informed."); see also
United States v. IBT, 723 F. Supp. 203, 207 (S.D.N.Y. 1989) ("To
this end, I approve the proposed actions of the Election Officer,
including the right to promulgate electoral rules and procedures for the
IBT nomination and election . . . ."), appeal dismissed, No. 89-6252 (2d
Cir. Dec. 13, 1989). Obviously, if the election rules are to have any
effect in ensuring free and fair elections, they must necessarily be
binding upon the union.
These election rules were initially proposed by the Election Officer,
and upon notice to the parties, were submitted to the district court for
approval. See
United States v. IBT ("1996 Election Rules Decision"), 896 F. Supp.
1349, 1353 (S.D.N.Y. 1995), aff'd as modified,
86 F.3d 271 (2d Cir. 1996). During this process, all parties to the
Consent Decree had the opportunity to participate in the development of
the rules and to comment on or object to them prior to the district
court's approval of them. See
Id. at 1355. Once the election rules were approved, they became
enforceable "under pain of contempt."
Id. at 1373. Abiding by the election rules is therefore properly
viewed as a term of the Consent Decree
[**15]
because the parties have consented to the supervision of the election.
The 1996 election rules, which were approved by both the district court
and this Court, see id., prohibit the use of IBT funds to benefit a
candidate for IBT office. Specifically, the 1996 election rules provide:
No labor organization, including but not limited to the
International Union . . . may contribute, or shall be permitted to
contribute, directly or indirectly, anything of value, where the
purpose, object or foreseeable effect of the contribution is to
influence, positively or negatively, the election of a candidate . .
. .
1996 Election Rules, Art. XII, § 1(b)(1). As this Court has noted:
Rules prohibiting the use of Union funds . . . to support or oppose
candidates for IBT office are important measures for bringing
democratic control to the IBT and for ridding it of influence by
criminal elements. Allowing the use of Union-controlled resources to
influence IBT elections would give an advantage over their opponents
to candidates supported by those who control the funds of local
unions.
1996
Election Rules Decision, 86 F.3d at 274. The 1996 election rules
also provide
[**16] that
if union funds are so used, the lack of institutional knowledge of such
use by the union does not provide a defense to a finding of a violation.
See Election Rules, Art. XII, § 1(b)(10) ("Ignorance by a candidate, by
a union, and/or by an employer that union or employer funds or other
resources were used to promote a candidacy shall not constitute a
defense to an allegation of a violation of the [Election] Rules."). This
is a rule of strict liability.
In applying these principles to the swap scheme involving Carey and
Hamilton, n1 the Election Officer initially stated:
In order to find a violation by the IBT, the Election Officer must
have evidence that the IBT's assets were contributed by the IBT with
the purpose, object or foreseeable effect of influencing the
campaign. . . .
There is insufficient evidence that IBT officials knew that they
were making payments [*411] and
contributions that would be used for campaign purposes. However, the
evidence clearly establishes that significant amounts of IBT funds
were used to benefit the Carey Campaign. . . . For these reasons,
while no violation is found against the IBT at this time, the
participation of the IBT and its officers [**17] and
employees in any schemes to benefit the Carey Campaign will be part
of a referral for further investigation . . . .
IBT Election Officer Decision, dated Aug. 21, 1997 ("Rerun Decision"),
slip op. at pp. 101-02 (emphasis added). Subsequently, following the
guilty pleas and allocutions of Davis, Nash and Ansara, the Election
Officer found that the evidence demonstrated that Carey and Hamilton had
knowledge of, and were involved in, this scheme. IBT Election Officer
Decision, dated Nov. 17, 1997 ("Disqualification Decision"), slip op. at
pp. 21, 36, aff'd,
988 F. Supp. 759, 1997 U.S. Dist. LEXIS 20698, 1997 WL 801448 (S.D.N.Y.
1997), appeal pending, Dkt. No. 98-6014 (2d Cir. filed Jan. 20,
1998).
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n1 Basically, the swap scheme involved donations of IBT funds to certain
organization, and subsequent donations, in lesser amounts, to the Carey
campaign from affiliates of those organizations.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Reading these two Election Officer decisions together, n2 it is clear
that the IBT violated the 1996 election
[**18] rules.
The Election Officer first found no violation by the IBT because there
was insufficient evidence to show that IBT officials were involved in
the scheme, but subsequently, in a separate decision, found that the
evidence showed such involvement. As laid out above, under the election
rules, because IBT officials used IBT funds to benefit the Carey
Campaign, the IBT violated the election rules. Due to the strict
liability standard under the rules, a lack of knowledge by IBT does not
change IBT's status as a violator. n3
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n2 The district court, and this Court, are entitled to rely upon the
findings of court appointed officers. See
Juan F. v. Weicker, 37 F.3d 874, 879-80 (2d Cir. 1994).
n3 I also note that I am unconvinced by the majority's attempt to
distinguish
United States v. Phelps Dodge Indus., Inc., 589 F. Supp. 1340 (S.D.N.Y.
1984) on the basis that Carey's and Hamilton's action directly
harmed the IBT, and that they were not acting within the scope of their
employment. Ante at ." In Phelps Dodge, the court held that the
defendant:
has a duty to ensure compliance with [provisions of a consent
decree], penalties for noncompliance are imposed not as a matter of
vicarious liability, nor of apparent authority, nor of respondeat
superior, but instead simply for failure to achieve compliance by
persons in positions of relevant responsibility.
Id. at 1359. The court also noted that whether the employee acted
for the benefit of the employer was irrelevant, "liability for civil
penalties, on the other hand, accrues without regard to the actor's
intent; the government need only prove that the Order has in fact been
violated."
Id. at 1359-60 (citations omitted).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[**19]
Moreover, Art. XII, § 1(b)(3) of the 1996 election rules provides: "No
Union funds of other things of value shall be used, directly or
indirectly, to promote the candidacy of any individual." 1996 Election
Rules, Art. XII, § 1(b)(3). There is no question that union funds were
used to promote Carey's candidacy. Once again, this appears to be a rule
of strict liability that was violated by the IBT.
As noted above, the election rules are to be read into the Consent
Decree. Thus, a violation of the election rules amounts to a violation
of a term of the Consent Decree, specifically the term in which the IBT
consented to supervision of the election. Given this violation, the
district court's decision is properly viewed as remedial, rather than
interpretive, in nature, and is therefore subject only to abuse of
discretion review. See
Juan F. v. Weicker, 37 F.3d 874, 879 (2d Cir. 1994);
Berger v. Heckler, 771 F.2d 1556, 1569 (2d Cir. 1985). As such, the
district court is afforded broad discretion to ensure compliance with
consent decrees: "Ensuring compliance with a prior order is an equitable
goal which a court is empowered to pursue even absent a finding of
contempt."
Berger, [**20] 771 F.2d
at 1569. Further, we have noted that "a court has an affirmative
duty to protect the integrity of its decree. This duty arises where the
performance of one party threatens to frustrate the purpose of the
decree."
Id. at 1568 (citations omitted).
I therefore believe that the district court did not abuse its discretion
in requiring the IBT to bear the costs of the rerun election. Requiring
the IBT to bear those costs is an appropriate remedy for a violation of
the Consent Decree which violation made the rerun necessary in the first
place, and threatened to frustrate the purposes of the Consent Decree.
Such a remedy will serve to
[*412] make
the government whole and further the purposes of the Consent Decree by
providing supervision to ensureeceive the benefit of its
bargain--assuring IBT democracy--which it has already paid for, in
compliance with the Consent Decree's directive (in amounts exceeding $
17 million), and which it would have received but for the violations of
the election rules by the IBT.
Accordingly, I respectfully dissent.