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.
Thanks for the reply Tax Counsel. I probably should have clarified that this is not my case per se. This lawsuit started when I was four and had continued for essentially my whole life. The case played a large role in my house growing up so I feel a need to understand how things concluded.
Your reply gave me some insight into what the 2018 panel might have been saying about
Defries but it also raised many questions. But rather than try to voice all these questions it's easier for me to address their base: last year's decision greatly contradicts the COA's 2008 decision without any indication that it is doing so, to the point where it seems the 2018 panel was deliberately trying to be misleading. I'd like to know if I'm reasonably suspicious or if I'm just misunderstanding the decision or how our courts work so I've put together a list of my problems with the decision. I may just make a new post out of the list but as the only person to reply to my original questions I'm interested in your thoughts. I tried to include links to the decisions and the briefs but was told the content I wanted to post was not allowed.
1. The 2018 decision ends with the COA finding that:
Over the 23 years of this litigation, Noble has failed to adduce any evidence of wrongdoing by the defendants.
This stands in stark contrast with the COA's 2008 finding that:
Noble presented about as much evidence as one could hope a § 501 plaintiff could gather
The beginning of the decision 2018 reads a little differently when given the context of the 2008 decision:
A decade ago one of our colleagues urged an end to "this 14-year litigation odyssey." Noble v. Sombrotto (Sombrotto II), 525 F.3d 1230, 1242 (D.C. Cir. 2008) (per curiam) (Kavanaugh, J., concurring in part and dissenting in part). But as in the original Odyssey, there was still a ten-year ordeal to endure—and Noble's arguments, like Penelope's tapestry, have tended to unravel.
I find it hard to believe many appellants would be accused of causing an "ordeal" for pursuing an appeal after being told they had as much evidence as one could hope for. It took the district court nine years to decide the two narrow issues that were left on remand; if anyone is responsible for creating an ordeal it is the lower court. Like the decision that follows, the COA's literary reference leaves much to be desired. Penelope's death shroud was unraveled nightly as a means to deceive her suitors, a metaphor that seems more appropriate for this decision than the appeal it's deciding.
2. The appeal was based entirely on the district court's failure to do as the COA had directed in 2008. The COA's first instruction was in response to the district court's 2006 finding that we had provided no evidence:
The district court may have been under the misapprehension that proof of personal use may only be made by direct evidence. Under circumstances closely analogous to those before us, the Second Circuit did imply a requirement of direct proof for such an allegation in Morrissey v. Curran, 650 F.2d 1267, 1283–84 (2d Cir. 1981). There, the Second Circuit rejected for insufficient evidence a district court's finding "that all of the weekly allowances paid to the officers were used for their personal expenses" supported by the fact that the officers lacked receipts showing the expenses were made for union business. Id. Though Morrissey is unclear on whether those union officers were under an obligation to retain receipts as the NALC officers were here, if the Second Circuit has indeed adopted a requirement that allegations of personal use are susceptible of proof only by direct evidence, then we must part ways with our sister circuit on this point. A union member complaining of personal use of union funds by its officers will hardly ever be able to put on direct proof of such use unless an officer confesses to such. Here, Noble presented about as much evidence as one could hope a § 501 plaintiff could gather—that the union had disbursed far more funds for purportedly union-related expenses than officers responsible for the payments could account for. On remand, the district court must reach the issue of how the union's money was actually used, weighing Noble's circumstantial evidence of misuse against any evidence the officers present to the contrary.
The 2008 majority further elaborates on this order in mooting the manifestly unreasonable argument:
As to the in-town expense allowances, the district court will resolve on remand whether the officers used any portion of the allowances for their personal benefit rather than on legitimate union expenses. If so, it would be unnecessary for us to decide whether their actions also violated other duties under § 501. If not, then the officers received no personal benefit that we could review for manifest unreasonableness. The outcome of the remand will moot the issue either way.
Our brief argued that the district court had failed to determine if any portion had been used for personal benefit as the court had ordered. In his separate opinion, Williams pointed the district court to
Morrissey suggesting that the burden of proof was now on the defendants to prove the propriety of each expenditure.
But rather than acknowledge the 2008 decision and the arguments that it birthed, the 2018 panel claims to be reviewing the same argument from 10 years before:
Noble nonetheless continues to press the argument he has been making since 2008; and the defendants respond that the reimbursement policy is authorized by the Union constitution...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
The court pivots from the factual question of how the money was used to a question regarding the constitution's interpretation. The defendants never argued that the payments were authorized as it had nothing to do with the question the 2008 panel had set up. It should be clear that arguments based on the 2008 decision cannot be the same arguments that were before the 2008 panel.
3. After moving to the question of the constitution's interpretation, the 2018 panel quotes from Kavanaugh's dissent regarding the union convention's vote on the allowances. But Williams had responded to that line of thought directly in his separate opinion:
Judge Kavanaugh does not address these additional allegations [of personal use], see Kavanaugh Op. at 3, but the subsequent interpretive votes are surely irrelevant here. The convention delegates voted only on whether the expense allowance program was constitutional, not whether the officers had actually used the money as the program required. The latter is a question of fact, not interpretation.
Nonetheless, the 2018 panel finds that because the convention had approved the allowance the district court correctly determined that the officers simply preferred to pay taxes on their expenses rather than document them. Williams actually spent several pages explaining the errors in Kavanaugh's dissent, but it's hard for me to determine what is and isn't concurring with the majority's decision. On the other hand, none of Kavanaugh's separate decision can be read as concurring with the majority, at least not in regard to the 501 issue.
4. In finding that the officers simply preferred to avoid the hassle of keeping receipts, the district court and the 2018 panel miss a crucial fact: the resolution that authorized the allowance specifically required the officers to keep receipts. In fact, it was this requirement along with the officers financial incentive to keep receipts that was considered "as much evidence as one could hope for":
In finding the Executive Council's repeated authorization of the "in-town" expense allowance reasonable, the district court relied on a clearly erroneous factual finding: that Noble produced "[n]o evidence" that officers had used the allowance for "purely personal reasons, unrelated to union business." To the contrary, Noble presented ample circumstantial evidence that officers were using the allowance for personal use. The officers had a direct financial incentive to keep receipts for all union-related expenses… Additionally, the 1980 Executive Council resolution authorizing the challenged allowance specifically charged each officer with retaining receipts for all expenses incurred and to keep them for a "reasonable period" of up to five years. The fact that the vast majority of allowances paid to Executive Council members during the pertinent period were not supported by receipts is thus considerable circumstantial evidence suggesting that much of this money went to officers' personal use.
In his separate opinion, Williams explains that failure to keep receipts was a violation of the LMRDA on its own:
I join the per curiam opinion's finding of clear error as to the historical fact of how the union's money was used. Such misuse represents a violation of § 501's independent duty to "account to [NALC] for any profit received . . . [in] transactions . . . on behalf of the organization," § 501(a), as well as the more general fiduciary duties the statute imposes
It seems odd that the defendants could decide that keeping receipts was too much of a burden when the LMRDA and the union's constitution both impose a requirement to keep receipts.
5. After using the union's vote as a scapegoat, the 2018 panel very briefly touches on the topic of how the money was actually used. They find that we may have won had we shown that an officer had received funds for nonexistent expenses, but that the district court correctly found that the existence of receipts bolsters the conclusion that none of the unreceipted portion of the allowance went to personal use.
Having found that we had provided "as much evidence as one could hope for" and that union members would hardly ever be able to provide direct evidence of personal use outside of confession, it seems to me that the 2008 majority was saying the burden of proof was now on the defendants. Indeed, the allowance required receipts, the COA said that any amount would be a violation, and Williams specifically pointed to
Morrissey suggesting that the defendants bear the burden of proving the propriety of each expenditure.
The district court was ordered to determine if any money was used for personal gain because the COA found that the lack of receipts was as much evidence as one could hope for, but the 2018 panel finds the exact opposite, that the receipts that existed outweighed the officers lack of receipts. The 2018 panel does not address
Morrissey or the burden of proof issue, nor do they address the other evidence of personal use. As Williams explained:
Given that Sombrotto encouraged the officers to apply for $500 monthly even when it exceeded their actual expenses, the district court clearly erred by finding "no evidence" of this practice.
Further, the 2018 panel fails to address our arguments regarding the receipts:
To qualify as a legitimate union expense, the Fiscal Committee, the DOL, and the IRS all require a record or notation on the receipt of a union purpose… virtually none [of the receipts] …itemize a union purpose
Sombrotto testified that every month, resident national officers applied for and were paid "$500 on the dot" during Sombrotto's 24-year term and for the "ten, 12, 16, 20 years before" he became president. With only one exception, there are no in-town expense checks issued for under $500 to Young and Hutchins covering six-and-one-half years of monthly checks at issue here. For all nine officers for whom we have receipts, covering 339 months of monthly statements, there is only one other check under $500--$499.98 as requested. The assertion of NALC Defendants-Appellees that all resident officers incurred expenses equal to or exceeding $500 each month is not credible and cannot support the decision below. Even a cursory review of the receipts belies the farcical assumption that all officers, going back as far as 1958 if Sombrotto's testimony is to be believed, had in-town union expenses of $500 each month, whether they were ill, on vacation, or working outside DC for significant parts of the month. If any receipts were attached to the monthly request, the request would commonly contain two lines: one line had the amount purportedly equal to the attached receipts ("receipted") and the other line, labeled "N.R." (no receipt) expenses would invariably be equal to the difference between $500 and the amount on the "receipted" line. On occasion, the receipts did not add up to the amount on receipted expenses line, but the officer received the full $500. Other times, the officer made mistakes adding up his receipted expenses. In such cases, the president or his assistant would alter the officer's submission by correcting the typed receipted amount and then crossing-out the amount typed for non-receipted expenses and handwriting a new "N.R." amount so that the lines would total $500. In other instances, the officer nominally requested $500, but his receipted and non-receipted expenses fell short of that total. The officer was nevertheless paid $500, after a reviewer increased the N.R. amount by hand so that the mathematical total was $500. These third-party alterations of the non-receipted amount, simply to produce a $500 total, cannot represent actual expenses incurred by the officer submitting the request.
Given that the 2018 panel and the district court rely on the receipts as proving that none of the allowance went to personal use, it seems odd that the COA makes no mention of the arguments against the receipts' credibility.
6. The COA's second order was for the district court to review the evidence of bad faith in light of
Defries:
We note as well that the district court's memorandum opinion made no mention of Noble's evidence of bad faith regarding the "in-town" expense allowance. The evidence Noble presented showing that NALC presidents twice misleadingly denied the allowance's existence when challenged on the issue at National Conventions is troubling…On remand, we would refer the district court to our decision in United States v. DeFries, 129 F.3d 1293 (D.C. Cir. 1997), which suggests that courts should closely scrutinize self-serving courses of conduct when union officers conceal vital information from union members. See id. at 1307 (holding that when union executive committee concealed information on challenged severance payments from its members, it was not "reasonable to say that the severance payment was authorized'" despite union bylaws expressly empowering the executive committee to set its own compensation).
But the 2018 panel approaches
Defries from another angle. Having found that the 501 issue turned on the union's interpretation, and that the union convention had already affirmed the officers interpretation, the 2018 panel frames the bad faith argument as one of bad faith acts versus good faith interpretation. In reality our argument was that the concealment was evidence of a bad faith interpretation. Williams elaborates on
Defries in response to the per diem issue from the 2008 decision:
Under our precedent in United States v. DeFries, 129 F.3d 1293 (D.C. Cir. 1997), these allegations state a violation of § 501(a). Payments to the officers are invalid if made without informed consent, for "authorization secured 'without disclosure of . . . material information' is a nullity." Id. at 1307 (omission in original). DeFries's "nullity" phrase comes from United States v. Butler, 954 F.2d 114 (2d Cir.1992), a case with facts strikingly similar to those here. The Butler court upheld the embezzlement conviction under § 501(c) of a union official who had secured approval for "fixed expense payments for attending trustee meetings" without revealing that he and other recipients "were already being fully compensated for actual expenses." Id. at 119. The Second Circuit held that approval given under these circumstances was worthless. The Fourth and Fifth Circuits have agreed, holding that when union officers benefit directly from an expenditure, they must prove "that the funds . . . were obtained with the valid authorization of the union after adequate disclosure."
Here the 2008 panel is saying that bad faith interpretation negates authorization but the 2018 panel inverts this conclusion, finding that authorization negates bad faith.
7. After finding that we had misread
Defries, the 2018 panel addresses the question of bad faith interpretation, quoting the district court's finding that there was only evidence of concealment from a prior administration. The problem here is there was evidence of concealment from two administrations. Below is the full quote from the district court with the parts the COA left out in bold:
At most, then, the in-town allowances had been concealed by a prior administration, and described by the administration with which the individual defendants are affiliated as if they required "accounting," when in fact they did not. This differs enough from DeFries that the Court cannot say that these individual defendants... sought to conceal the existence of the challenged payments. At the same time, the history of prior concealment and the confusion about accounting in 1986 paint a picture that counsels in favor of a more careful review of how the individual defendants used their in-town allowances.
This omission is significant. The 2008 panel ordered the district court to review the evidence of bad faith in light of
Defries because they believed the concealment was both troubling and striking. Even the district court found that the evidence warranted a more careful review of the allowance. But for some reason the 2018 panel only discussed the prior administration's concealment.
The prior administration's concealment presented on its own lends itself to the theory of bad faith acts vs good faith interpretations. Without considering the element of authorization, it makes sense that the bad faith acts of a prior administration would not trump the good faith interpretations of the defendants. But it's the defendants' concealment that gives context to the prior administration's acts, and it should go without saying that it's the defendants that are the subject of the appeal. It seems a little ironic that the 2018 panel glosses over the defendants' actions while discussing concealment.
