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Act of bad faith vs. a good faith interpretation

Discussion in 'Employment, Labor, Work Issues' started by Chaz B, Jul 12, 2019.

  1. Chaz B

    Chaz B Law Topic Starter New Member

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    Jurisdiction:
    D.C.
    I'm trying to understand a decision from the Court of Appeals for the DC circuit. At one point during the decision the court finds that “Appellant misreads Defries, arguing that a union officer necessarily breaches his fiduciary duty if he acts in bad faith notwithstanding his good-faith interpretation of his constitutional authority. The argument fails.”


    This was one of two citations to our briefs, but from what I can tell this does not represent the argument that was actually made. The section of our brief that was cited states that “this court directed that on remand, the district court consider appellant's evidence of bad faith in determining whether the in-town expense allowance was authorized by the union's constitution and governing documents. In particular, the Court referred the district court to Defries, which held that evidence that union officers had concealed the details of the severance plan was sufficient to support a jury verdict that the severance payments were unauthorized and thus violated the criminal provisions of section 501(c) of the LMRDA. The district court characterized the concealment evidence as probative of intent in Defries. But the evidence of concealment in Defries was probative that the payments were not authorized by the union’s constitution and governing documents. Defries makes this explicit when, after holding that the concealment negated authorization, the court ‘shifted from the authorization element of a section 501(c) violation to the question of intent to embezzle.’ Based on this misconstruction, the district court improperly distinguished Defries on the ground that, unlike the union officials in Defries, -redacted- is not a defendant in this case. As a result, the court dismissed as not probative the evidence that -redacted- denied the existence of the in-town expense allowance to union membership at the 1976 convention and misrepresented that officers could not be reimbursed without the itemized receipts required by articles 6 and 11 of the union's constitution.”


    Am I missing something? Did our lawyers argue that the officers acted in bad faith despite their good faith interpretations, or does that sound completely made up? The idea of a bad faith act coupled with a good faith interpretation seems nonsensical. I don't even understand how that would work, much less how that's what we argued.
     
  2. zddoodah

    zddoodah Well-Known Member

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    You seem to be asking for comment on a case decision we haven't read based on a single quoted sentence. That's not going to be very productive.

    Wanna tell us the name of the case or provide us a way to look it up here?
     
  3. Chaz B

    Chaz B Law Topic Starter New Member

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  4. adjusterjack

    adjusterjack Super Moderator

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    Yes, you are missing the fact that you lost and you need to give up this Quixotic tilting at windmills and get on with your life. The phrase "kicking a dead horse" also comes to mind.
     
  5. Tax Counsel

    Tax Counsel Active Member

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    What your attorneys argued in the final brief to the court was that the evidence of denials of the in town payments by Executive Council members (and specifically some members not parties to the case), coupled with the lack of receipts by the union officers getting the reimbursement when there would appear to be a tax incentive to provide the receipts, was clear evidence the that payments were not authorized and that the district court could not reasonably think otherwise. The discussion of Defries that you bring up was not big factor in the outcome here, but I'll explain what that's about anyway.

    The issue in Defries turned on whether the defendant in that criminal case in good faith thought the payments he was receiving was authorized even if they were not permitted. In other words, the defendant would win if the jury concluded that either the payments were permitted or, even if they weren't, the defendant in good faith thought they were. The Defries case then goes on to discuss the intent of the intent and specifically whether the advice of counsel he received might have been good enough to provide the good faith.

    Your lawyers, though, didn't discuss the good faith (or lack of it) by the actual defendants in the case much. Rather, your lawyers pivoted to spend most of the time arguing that these supposed acts of bad faith by persons other than the defendants help prove that the payments were not authorized. They didn't really argue the intent of the defendants who received the payments other than to say that their own claims that they thought was authorized weren't really believable.

    Although not written as clearly as I would like, my impression reading the court opinion as a whole, the brief you submitted, and Defries is that the court read the brief as basically saying that the denials, etc., (the acts of "bad faith" as the court put it) necessarily means that the defendants must lose notwithstanding any good faith interpretation they had that the payments were authorized. Remember, even if they payments were not authorized — and you brief spends much time arguing they weren't, if the defendants who got the payments thought in good faith they were entitled to them that would be enough to win on § 501 claim under Defries. Your brief didn't really say much to address the good faith aspect here.

    But ultimately it wasn't the Defries issue that did you in. That was a minor quibble. Rather, it appears that the district court held, and the appeals court affirmed, that the payments were in fact authorized. If the payments were authorized then the intent issue in Defries doesn't matter. The meat of the § 501 part of the Court of Appeals decision is this:

    This brings us back to where we were a decade ago: the resolution of Noble’s section 501 claim turns on the interpretation of the NALC constitution and Noble has given us no reason to second guess the Union’s own interpretation thereof. See Noble II,525 F.3d at 1242 (Kavanaugh, J.,concurring in part and dissenting in part)(“Our precedents and the statutory text and structure establish a basic principle of judicial restraint in these cases.... [W]e afford even greater deference to union officials when the union convention has approved the officers’ interpretation of the union constitution.”). We believe, then, that the district court correctly determined on remand that the evidence supported the defendants’ assertion that they simply preferred to pay taxes on their expense allowances rather than document their expenditures. Their choice may not be a model of administrative efficiency but it violates neither the Union constitution nor the LMRDA.
    Your lawyers in the brief spent much of their effort trying to rebut the notion that the payments were not authorized notwithstanding that the Executive Council and a majority of the national convention had on several occasions approved the payments. And given the district court opinion that was where they needed to focus their attention. Nevertheless, the arguments failed to convince the Court of Appeals that the District Court got it wrong. There was nothing nonsensical or illogical in the arguments in your brief. But you had an uphill battle because you had a high burden to prove not just that the evidence could be read to support your position but that it was the only way to read it. Because if the evidence could be viewed as supporting the the decision of the District court the appeals court is not going to overturn the district court. The district court heard the evidence and is the one that gets to determine what the facts of the case are and the appeals court will only overturn factual determinations if they are clearly erroneous.

    It appears that this 23 year long legal battle with the Union is over. It seems to me that it's time you let this one go and move on. It's not worth continuing to go over this now a year later wondering if you might have won if something had been argued differently. Even if a different approach might have won, you can't go back and change history to get a different result.
     
  6. army judge

    army judge Super Moderator

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    Res judicata.
     

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