COUNSEL: [**1] CURTIS,
MALLET-PREVOST, COLT & MOSLE, Attorney for Plaintiff Mason Tenders
District Council and Executive Board of Mason Tenders, New York, NY, By:
PETER FLEMING, JR., ESQ., Of Counsel.
DOMINIC F. AMOROSA, ESQ., Attorney for Plaintiff James Lupo, New York,
NY.
Attorneys for Defendant: COMEY, BOYD & LUSKIN, Washington, DC, By:
ROBERT D. LUSKIN, ESQ., DAVID R. BOYD, ESQ., Of Counsel.
JUDGES: ROBERT W. SWEET, U.S.D.J.
OPINIONBY: ROBERT W. SWEET
OPINION: [*825]
OPINION
Sweet, D.J.
Plaintiffs Mason Tenders District Council of Greater New York (the
"District Council"), James Lupo, former president of the District
Council ("Lupo") and the members of the Executive Board of the District
Council, have moved by order to show cause for a preliminary injunction
pursuant to
Rule 65, Fed. R. Civ. P., preventing defendant Laborers'
International Union of North America ("LIUNA"),
[*826] the
District Council's parent union, from: (a) maintaining a trusteeship
imposed on the District Council by the parent union in November of 1994;
(b) implementing the provisions of a certain consent decree (the
"Consent Decree") entered into on December 27, 1994 on behalf of the
District Council by the trustee in December
[**2] of 1994
in the case of United States v. Mason Tenders District Council of
Greater New York, 94 Civ. 6487 (RWS); and (iii) causing the assets of
the District Council to be used to fund the activities of a monitor and
investigative officer required by the terms of the Consent Decree.
Defendant has moved for judgment on the pleadings pursuant to
Rule 12(c), Fed. R. Civ. P., on grounds that plaintiffs action is
barred by the doctrine of res judicata, and pursuant to
Rule 56, Fed. R. Civ. P., for summary judgment on all of plaintiffs
claims. For the reasons set forth below, all of these motions are
denied.
Parties
The District Council, which represents and controls twelve local labor
unions in the greater New York region (the "Local Unions"), is
headquartered in New York City. The other plaintiffs listed below claim
to bring this action on behalf of the District Council as well as on
their own behalf; defendant contests their standing to sue on behalf of
the District Council although no motion was ever advanced nor relief
requested specifically with respect to standing. Lupo was President of
the District Council from November 1992 until the imposition of the
trusteeship.
[**3] He is
also a union Delegate, representing one of the Local Unions. The
remaining plaintiffs are individuals who were the members of the
Executive Board of the District Council prior to the imposition of the
trusteeship. The Executive Board of the District Council, as an entity,
is also a plaintiff.
Defendant Laborers' International Union of North America ("LIUNA"), is a
national labor organization headquartered in Washington, D.C., that
oversees the operations of various local unions and district councils,
including the Local Unions and District Council.
Prior Proceedings
Plaintiffs filed their complaint in the action on January 19, 1995 and
the case was assigned to this Court based on its relation to United
States v. Mason Tenders District Council, 94 Civ. 6487 (the "Civil RICO
Action") which action is presently sub judice before this Court upon the
certification of the Attorney General pursuant to
18 U.S.C. § 1966.
Plaintiffs brought on the instant motion for preliminary injunction by
Order to Show Cause filed January 30, 1995. LIUNA filed its Answer on
February 8, 1995 and also moved on that date by notice of motion for
judgment on the pleadings on the
[**4] theory
that plaintiffs claims were precluded by the results of proceedings in
the Civil RICO Action. LIUNA filed opposition papers to the preliminary
injunction motion on February 8, 1995 and the hearing on the preliminary
injunction was scheduled. LIUNA filed its summary judgment motion on
February 10, 1995. Argument on the motions for judgment on the pleadings
and summary judgment was heard on February 15, 1995. An evidentiary
hearing on the motion for a preliminary injunction was conducted on
February 27, 1995. Final submissions were made and argument was beard on
March 23, 1995 at which time all motions were considered fully
submitted.
Facts
The District Council is an elected body composed of thirty-nine
delegates elected by and representing the Local Unions. The members of
the Local Unions perform a wide variety of laborers' jobs, including
general labor, bricklaying, masonry and asbestos removal. The District
Council engages in collective bargaining with employers on behalf of the
members of the Local Unions. The District Council also manages pension
and health insurance funds for the members. As of the end of 1993 these
funds included a pension fund of approximately
[**5] $ 180
million; an annuity fund of approximately $ 71 million; a welfare fund
of $ 21 million; and a legal services fund of approximately $ 2 million.
LIUNA is the District Council's parent organization. Parent
organizations like LIUNA are empowered by the Labor-Management
[*827]
Reporting and Disclosure Act ("LMRDA") to impose trusteeships like the
one at issue here. See
29 U.S.C. §§ 461-66. LMRDA also establishes certain requirements as
to the imposition of such trusteeships. The procedural requirements for
imposition of a trusteeship such as that in here in question are set out
in the constitution of LIUNA.
From 1989 to 1992 Frank Lupo, then the President of the District
Council, participated in real estate frauds benefiting him and his
co-conspirators and causing the Trust Funds to suffer monetary losses
measured in the tens of millions. He resigned the Presidency in November
of 1992 and three months later pleaded guilty to criminal RICO charges.
He was sentenced to four years imprisonment. Roger Levin, an attorney
("Levin"), also pleaded guilty to charges growing out of his involvement
in those fraudulent transactions. Frank Lupo and Levin both ultimately
cooperated with the Government
[**6] in its
investigation of the District Council.
In November of 1992 plaintiff Lupo was elected President of the District
Council.
Between 1988 and 1990 LIUNA imposed trusteeships upon three of the local
unions because of known criminal activities of elected officials and
appointees of these locals.
From December 1993 to September 1994 Allan Taffet, Assistant United
States Attorney in the Southern District of New York ("Taffet") held
conversations and corresponded with David Elbaor, outside counsel to
LIUNA ("Elbaor") n1 and its President,
Arthur Coia ("Coia"), on a number
of occasions inquiring whether and when LIUNA intended to impose a
trusteeship on the District Council and indicating Taffet's sense that a
trusteeship should be imposed in order to put an end to systemic
corruption in the District Council and the Local Unions. All of the
facts discussed above were known to Elbaor and
Coia
throughout the period from December 1993 to September 1994 and
Coia
knew of Taffet's repeated inquiries concerning LIUNA's imposition of
trusteeship on the District Council.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n1 Elbaor presently holds the position Trustee over the District
Council, imposed by
Coia's order, as discussed infra.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[**7]
The Government filed its complaint in the Civil Rico Action (the "Civil
RICO Complaint") on September 8, 1994. The Civil RICO Complaint alleged
inter alia that over a period of the last twenty years, executives and
appointees of the District Council repeatedly extorted payoffs from
employers in exchange for those officials' and appointees' condoning the
employers' use of non-union labor and the employers' failure to make
payments to the Trust Funds in accordance with collective bargaining
agreements; embezzled and converted Trust Fund monies through fraudulent
real estate transactions; engaged in kickback schemes with companies and
individuals providing services to the District Council and the Local
Unions; failed to police and knowingly condoned similar activities on
the part of officials of some of the Local Unions.
The Civil RICO Complaint also listed convictions and guilty pleas of
numerous individuals charged with extortion of payoffs from employers of
laborers represented by the District Council:
In March 1989, Basil Cervone was convicted of RICO conspiracy
involving illegal labor payments and embezzlement committed while
serving as Vice-President of the District [**8]
Council.
In March 1989, Joseph Cervone was convicted of five counts of
receipt of illegal labor payments and embezzlement committed while
serving as president of one of the Local Unions.
In March 1989 Peter A. Vario was convicted of RICO conspiracy
involving the receipt of illegal labor payments while serving as
Business Manager of one of the Local Unions.
In September of 1989 Michael LaBarbara pleaded guilty to six counts
of receiving illegal labor payments while serving as Business
Manager of one of the Local Unions.
[*828] In
September of 1989 James Abatiello pleaded guilty of four counts of
receiving illegal labor payments while serving as Assistant Business
Manager of one of the Local Unions.
In March 1990 Peter "Jocko" Vario (not the Peter A. Vario mentioned
above) was convicted of one count of RICO conspiracy involving the
receipt of illegal labor payments while President of one of the
Local Unions.
In March of 1987, Louis Giardina was convicted of RICO conspiracy,
aiding and abetting the receipt of illegal labor payments and
obstruction of a criminal investigation while serving as Treasurer
of the District Council and President of one of the Local Unions.
In [**9]
November of 1990 Louis Casciano pleaded guilty to RICO conspiracy
involving loansharking and receiving illegal labor payments while he
was Field Representative of the Trust Funds and Assistant to the
President of the District Council.
In November 1990 Albert Soussi pleaded guilty to RICO conspiracy
involving loansharking and aiding and abetting Casciano's receipt of
illegal labor payments while Soussi was a Field Representative of
the Trust Funds.
In December of 1992 Carmine Mandragona pleaded guilty to RICO
conspiracy involving the receipt of illegal labor payments while
serving as President of one of the Local Unions.
The Civil RICO Complaint sought the removal of the elected leaders of
the District Council; control by the Government over the election of new
officers; appointment of a special Investigations Officer with power to
charge and prosecute union members suspected of wrongdoing; and
appointment of a monitor to oversee the administration of the District
Council and the management of the Trust Funds, the services of such
monitor and Investigations Officer to be paid for out of the District
Council's funds.
In September 1994, after the Civil RICO Complaint was
[**10] filed
Taffet renewed his inquiry with Elbaor as to when LIUNA was going to
impose a trusteeship on the District Council.
Coia
knew of the Civil RICO Complaint and its filing, read it, and was again
told in September of 1994 that Taffet wanted LIUNA to impose a
trusteeship on the District Council.
On November 1, 1994, the Government filed a notice of motion in the
Civil RICO Action seeking partial summary judgment and a preliminary
injunction against the District Council (the "November 1 Motion").
Affidavits of Frank Lupo and Levin and other materials were filed by the
Government in support of that motion.
On November 4, 1994, Paul Coffey, Chief of the Organized Crime and
Racketeering Section of the United States Department of Justice
("Coffey") conveyed a copy of a draft civil RICO complaint (the "Draft
Complaint") to LIUNA's outside counsel with his own cover letter. The
Draft Complaint had been prepared by the office of the United States
Attorney for the Northern District of Illinois. It alleged, inter alia,
civil RICO violations on the part of LIUNA, its General Executive Board,
Coia,
Rollin Vinall, the General Secretary-Treasurer of LIUNA and other
officials of the parent
[**11] union.
The Draft Complaint named
Coia as a defendant in both his
official and individual capacities and charged him with associating with
known members of organized crime, soliciting and receiving illegal
payoffs, receiving kickbacks and violating the Hobbs Act. By the Draft
Complaint the Government sought to take over LIUNA at the national level
and to remove
Coia from the Presidency.
Coia
himself received the Draft Complaint on November 7. He sent out a notice
calling an emergency meeting of LIUNA's General Executive Board that
same day. There is no direct evidence of any discussions between the
Government and
Coia or his counsel connecting the
Draft RICO Complaint presented to
Coia by the Justice Department and
the Civil RICO Complaint and November 1 Motion in this District. Nor is
there any direct evidence linking the Draft RICO Complaint to the
imposition of the trusteeship. The record compels the inference that
avoidance of his own prosecution was at least one motive for
Coia's decision to impose the
trusteeship.
[*829] The
Constitution of LIUNA (the "LIUNA Constitution") sets forth the
following authority and procedures for the imposition and maintenance of
a trusteeship over a subordinate
[**12] body
such as the District Council:
When the 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 the legitimate
objects of such subordinate body of [LIUNA] . . . he may . . .
appoint a temporary trustee . . . to take charge and control of the
affairs of such subordinate body; provided, however, that prior to
the appointment of such trustee . . . he shall cause to be issued a
notice setting a time and place for hearing for the purpose of
determining whether such temporary trustee . . . shall be appointed,
but provided further, however, that where in the judgment of the
General President an emergency situation exists within the
subordinate body, a temporary trustee . . . may be appointed prior
to such hearing, but such hearing shall then commence within 30 days
and a decision made within 60 days after the appointment of such
temporary trustee . . . and further provided in all cases the
subordinate body shall be advised of the [**13]
reasons for the proposed or actual appointment of a trustee . . .
and that adequate notice of a hearing thereon at least 10 days prior
to the date of the hearing shall be given to the subordinate body
involved. During the period of trusteeship, all the officers of the
subordinate body are relieved of their particular trust. . . . The
trustee . . . shall be authorized to take full charge of the affairs
of the subordinate body, to appoint temporary officers or employees
at any time during the trusteeship . . . and to take such other
action as in the trustee's . . . judgment is necessary for the
preservation of the subordinate body and its interests. The trustee
. . . shall, from time to time, report on the affairs and
transactions of the subordinate body to the General President.
Copies of the November 1 Motion and its accompanying affidavits were
provided to LIUNA by the Government on November 8, 1994. This submission
can best be described as "voluminous." The substance of the submission
was discussed by
Coia and Elbaor on November 8. On
November 9, 1994, one day after LIUNA's receipt of the November 1 Motion
and its accompanying affidavits, at the meeting that had been noticed
[**14] on
November 7,
Coia proposed and the General
Executive Board of LIUNA approved, as set forth above, the imposition of
a temporary trusteeship over the District Council and the appointment of
Elbaor as temporary trustee. The General Executive Board also authorized
the hiring of counsel to represent Cola and LIUNA in matters relating to
the Draft RICO Complaint.
Coia announced the imposition of
the trusteeship to the members and officers of the District Council by
letter of November 14, 1994.
In a November 16 letter to
Coia, Samuel J. Caivano ("Caivano")
a Vice-President of LIUNA and manager for the New York/New Jersey
region, objected to the potentially unflattering light that
Coia's November 14 letter shed on
Caivano and his own anti-corruption efforts. In responding to Caivano's
assertions
Coia said, in a letter to Caivano
on that same date, that the "District Council is finished" and that one
of the things "at stake" was "the fate of our International Union"
(meaning LIUNA).
Despite the fact that the emergency trusteeship was actually imposed by
a vote of the LIUNA General Executive Board,
Coia asserted after the fact that
the action was his alone, in accordance with the LIUNA
[**15]
Constitution as set out above.
Coia asserted that he took these
actions because, in his own opinion, an "emergency situation", the
meaning of which will be discussed below, existed.
Coia's purported finding that an
emergency existed was based on the content of affidavits and other
materials filed by the Government in support of the November 1 Motion.
As set out above, the LIUNA Constitution provides that if the President
of LIUNA imposes an emergency trusteeship, a fair hearing must be
conducted within 30 days of imposition on the reasons for the
trusteeship
[*830] and a
decision rendered within 60 days of imposition as to whether the
trusteeship was warranted and should remain in place.
Elbaor took control of the District Council on November 15, 1994,
removing Lupo, the Executive Board and all the elected delegates from
their respective offices in the District Council. He also dismissed the
Trustees of the Trust Funds and appointed himself Chair of Trustees for
the Trust Funds. On November 17 Elbaor dismissed Peter Fleming as
attorney and his firm of Curtis, Mallet-Prevost, Colt & Mosle as counsel
to the District Council in the Civil Rico Action, appointing himself as
counsel to the District
[**16]
Council instead. On November 18 Elbaor informed this Court in the Civil
RICO Action that he had reached a tentative agreement with the
Government pursuant to which the District Council would consent to
certain of the remedies sought by the Government in the Civil RICO
Action in its motion for preliminary injunction. On December 27, 1994
Elbaor executed a consent decree on behalf of the District Council which
was entered that same date, under which, inter alia, (i) a monitor was
appointed with autonomous supervisory powers over the District Council;
(ii) an investigations officer was appointed with authority to
investigate and prosecute misconduct in the District Council and in
conjunction with the monitor, to impose fines upon and/or suspend or
expel union members, officers agents, representative and employees and
to bring civil actions on behalf or the District Council to recover
damages arising out of the wrongs alleged in the Civil RICO Complaint.
The consent decree also provided that the compensation and expenses of
the monitor and the investigations officer were to be paid from the
funds of the District Council.
A hearing on the imposition of the trusteeship was convened
[**17] on
December 5, 1994 before a Special Hearing Panel comprised of Chuck
Barnes ("Barnes") and George R. Gudger ("Gudger") (the "December 5
Hearing"). Both Barnes and Gudger are Vice-Presidents of LIUNA and
members of its General Executive Board. They both participated in the
November 9 vote in favor of the emergency imposition of the trusteeship.
The purpose of the hearing was to prepare findings of fact after the
presentation of evidence by the relevant parties and to make
recommendations to the General Executive Board of LIUNA on the
imposition and maintenance of the trusteeship. Elbaor appeared as
trustee and also testified as to conditions at the District Council as
he had observed them and facts which he had discovered since taking
control of the District Council on November 15. Steve Hammon, Elbaor's
Deputy Trustee ("Hammon"), and James S. Ray, an ERISA attorney employed
by LIUNA ("Ray"), also testified.
The testimony of all three witnesses described the results of their
investigations into the wrongs described by the Government in the Civil
RICO Complaint and its accompanying documents. Also adduced at this
hearing was evidence of financial and other malpractice which had been
[**18]
uncovered subsequent to the imposition of the trusteeship. This new
evidence was summarized in the Findings and Recommendation (the
"Findings") of the Special Hearing Panel, which were adopted by the
General Executive Board on January 17, 1995 and published as an
attachment to Rollin Vinall's letter of January 19, 1995 to David
Elbaor. The Findings included the following new indications of
wrongdoing and malfeasance:
(i) no attempt had been made by present trustees of the Trust Funds to
recover from former trustees, lawyers, appraisers, accountants, sellers
and middlemen any of the $ 40 million lost from the Trust Funds through
the fraudulent activities of such individuals, described in the Civil
RICO Complaint;
(ii) trustees of the Trust Funds had failed to obtain fidelity bonds for
Trust Fund employees despite past embezzlement of over $ 400,000 by a
past Trust Fund administrator;
(iii) the District Council's program for collection of millions of
dollars in delinquent payments from employer/contractors was at that
time functioning in an ineffective manner despite ongoing payments of
substantial legal fees for collection services; and
(iv) the District Council had been levying
[**19] a 25%
per capita tax on union dues without such tax ever having been adopted
in accordance
[*831] with
the District Council's constitutionally mandated procedures.
These improprieties were uncovered after Elbaor took control of the
District Council on November 15, and were not disclosed in the Civil
Rico Complaint or in the November 1 Motion papers. The December 5
Hearing was the first occasion on which any member of the General
Executive Board of LIUNA learned of these improprieties.
In addition to these new improprieties, the three witnesses repeated,
and the Special Hearing Panel noted, the economic losses to the Trust
Funds of approximately $ 40 million due to the alleged wrongdoing of
District Council executives and employees, which was documented in the
Civil RICO Complaint and the November 1 Motion papers. Affidavits which
accompanied the November 1 Motion were presented to the Special Hearing
Panel as evidence of the existence of the emergency situation. Counsel
to Lupo objected to these as hearsay. Although it is uncontested that
Coia's original finding that an
emergency existed was based largely on two of those affidavits -- those
of Frank Lupo and Levin -- neither of those affiants
[**20]
appeared at the hearing for sworn testimony and cross-examination.
On the date of the hearing
Coia released a press statement
heralding the hearing as part of an "alliance" and an "historic
cooperative effort" between LIUNA and the United States Government. The
press release also makes reference to LIUNA's "unprecedented effort to
rid the Mason Tenders District Council . . . of pervasive corruption."
On January 17, 1995, the General Executive Board of LIUNA voted to
ratify the emergency imposition of the trusteeship and, separately, to
authorize ongoing maintenance of the trusteeship. At the same time the
General Executive Board adopted the Findings. The Special Hearings Panel
noted in the Findings that the affidavits were, in fact, hearsay, but
that they were admitted into the Panel's non-judicial inquiry over
counsel's objection because to exclude them would be "to substitute form
for undeniable reality." The Findings also make note of the witnesses'
testimony on additional discoveries of wrongdoing made by the witnesses
after the imposition of trusteeship.
Discussion
A. Legal Standards
1. Preliminary Injunction
(a) In General [**21]
HN1
The
standard for granting a preliminary injunction in this Circuit is a
showing of (1) irreparable injury and (2) a likelihood of success on the
merits or (a) sufficiently serious questions going to the merits to make
them a fair ground for litigation and (b) the balance of hardships
tipping in favor of the movant.
Blum v. Schlegel, 18 F.3d 1005, 1010 (2d Cir. 1994);
Laureyssens v. Idea Group, Inc., 964 F.2d 131, 135-36 (2d Cir. 1992);
SEC v. Unifund SAL, 910 F.2d 1028, 1038 n. 7 (2d Cir. 1990);
Citibank, N.A. v. Nyland (CF8) Ltd., 839 F.2d 93, 97 (2d Cir. 1988).
The Second Circuit considers the showing of irreparable harm to be
"perhaps the single most important prerequisite for the issuance of a
preliminary injunction."
Citibank. N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir. 1985)
(quoting Bell & Howell:
Mamiya Co. v. Masel Supply Corp., 719 F.2d 42, 45 (2d Cir. 1983)).
Irreparable injury is one that cannot be redressed through a monetary
award. Where money damages are adequate compensation, a preliminary
injunction will not issue. See
JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 79 (2d Cir. 1990).
Monetary loss will not suffice unless the movant
[**22] shows
damage that cannot be rectified by financial compensation. See
Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 975 (2d Cir.
1989). The law in this Circuit requires a showing that irreparable
damages are likely, not merely possible.
JSG Trading Corp., 917 F.2d at 79;
Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.
1979) (per curiam).
(b) Preliminary Injunction in the Context of Labor Union Trusteeships
Although the question presented by plaintiff's motion is whether to
grant injunctive relief lifting, rather than imposing, trusteeship,
[*832] this
Court is guided by those cases in which a trusteeship was sought to be
imposed via injunction.
HN2The
decision whether to grant preliminary injunctive relief enforcing a
labor union trusteeship is left to the district court's discretion. See
Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 45 L. Ed. 2d 648, 95 S.
Ct. 2561 (1975);
International Brotherhood of Boilermakers v. Local Lodge D129, 910 F.2d
1056, 1059 (2d Cir. 1990);
AMR Servs. Corp. v. International Brotherhood of Teamsters, 821 F.2d
162, 163 (2d Cir. 1987) (per curiam);
Coca-Cola Co. v. Tropicana Prods., Inc., [**23] 690 F.2d
312, 315 (2d Cir. 1982).
The Court of Appeals has set forth a detailed allocation of burdens when
a preliminary injunction is sought in the context of a trusteeship
imposed by a parent labor organization upon a local union. In a case in
which the parent union sought injunctive relief the Second Circuit held
that
HN3"once the
parent organization demonstrates likelihood of success on the merits of
its claim of right to impose the trusteeship and irreparable harm if it
is not, then in light of [LMRDA's] provisions, the burden shifts to the
local to show that the trusteeship was not imposed in accordance with
the procedural requirements of the union constitution or that the parent
organization acted without good faith or for a purpose not authorized by
[LMRDA]."
International Brotherhood of Teamsters. et al. v. Local 810, 19 F.3d
786, 792 (2d Cir. 1994). Further, where, as here, a parent union's
constitution sets out provisions by which a trusteeship can be imposed
on an emergency basis, and it is shown that those provisions are
complied with, the trusteeship may not be invalidated unless the party
challenging it can make its showing of procedural deficiency, bad faith
or
[**24]
unauthorized purpose by clear and convincing evidence.
Id. at 791,