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Donnelly v. United Fruit Co.

Decided: May 6, 1963.

FRANCIS A. DONNELLY, PLAINTIFF-APPELLANT,
v.
UNITED FRUIT COMPANY, A CORPORATION OF THE STATE OF NEW JERSEY, AND THE BROTHERHOOD OF MARINE OFFICERS, LOCAL 13212, DISTRICT 50, UNITED MINE WORKERS OF AMERICA, AN UNINCORPORATED ASSOCIATION, DEFENDANTS-RESPONDENTS



For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For reversal -- None. The opinion of the court was delivered by Francis, J.

Francis

[40 NJ Page 66] This suit seeks recovery for pecuniary loss suffered by plaintiff, an employee, allegedly as the result of breach of a collective bargaining contract entered into between defendants, employer and union. The asserted breach

of contract is of a twofold character: (1) discharge of plaintiff by defendant employer in violation of its terms; and (2) failure and refusal of defendants, employer and union, to process plaintiff's claim of unlawful discharge in accordance with the grievance procedure set out in the contract. The Law Division of the Superior Court entered summary judgment against plaintiff, 70 N.J. Super. 370 (1961), and the Appellate Division affirmed. 75 N.J. Super. 383 (1962). We granted plaintiff's petition for certification. 38 N.J. 316 (1962).

Plaintiff, Francis A. Donnelly, had been employed by defendant United Fruit Company as an assistant purser (a staff officer) for about four years prior to April 7, 1955. During that period he was a member of defendant labor union, Brotherhood of Marine Officers, Local 13212, District 50, United Mine Workers of America. Prior to the events which produced this litigation, United Fruit and the union had executed a contract which recognized the union as the exclusive representative of all staff officers employed on American flag vessels operated by the company, and which set forth the stipulations of the parties respecting wages, hours and conditions of employment. The agreement reserved to United the right to discharge an employee "for cause," and contained a clause banning discrimination by the employer against any member of the union.

The usual subject of grievances and arbitration was covered by the contract. It provided in Article XI:

"In the event of any dispute or controversy arising during the life of this Agreement, the Staff Officers will continue to work pending an adjustment of the trouble as follows:

Matter in dispute to be submitted to a Committee of four (4), two (2) of whom shall be representatives of the Brotherhood and two (2) of the Company; a decision of a majority of this Committee to be final and binding. In the event of failure on the part of the Committee of four (4), to reach an agreement, they shall proceed to select a fifth man as Chairman, which man must be satisfactory to both sides and the decision of a majority of this Committee so augmented shall be final and binding upon the parties signatory to this Agreement."

On April 3, 1955 Donnelly completed a voyage as assistant purser on the S.S. Fra Berlanga. On April 7 United notified him that his services were no longer required. On inquiry as to the reason for the discharge, he was told that it was his inefficiency. Donnelly then consulted Edward J. Farr, the secretary-treasurer of the union to whom the union had delegated the investigation and processing of grievances. He informed Farr of his difficulty and asked him to take the steps necessary under the bargaining agreement to bring about reinstatement.

There seems to be no substantial doubt that Farr conducted an investigation of the matter and of the company's claim that the dismissal was for just cause. It is clear also that officers of United were consulted as well as fellow employees of Donnelly. Moreover, Farr and a vice-president of the union conferred with representatives of United who explained the causes leading to the discharge. Whether that conference was the first formal step in the grievance procedure, i.e., the committee of four consideration of the matter, cannot be said with certainty. The record gives the impression that it was part of the union's informal investigation rather than pursuit of an actual step in the formal grievance process. In any event, Farr became satisfied that the discharge was for proper cause and declined to pursue the matter further, advising Donnelly that he had "no case." Subsequently, there were some additional meetings between Farr and Donnelly, and Farr and a United representative. But nothing came of them, and union and employer closed the matter, Farr telling plaintiff neither the union nor the company would proceed to arbitration.

On September 28, 1955 plaintiff submitted a letter of resignation to United through Farr. According to Donnelly's alleged understanding with Farr, delivery of the letter was to be conditional upon obtaining from United a good letter of recommendation which would enable him to secure employment elsewhere. A letter of recommendation was given by the company but it was not satisfactory to Donnelly.

Accordingly, he renewed his request for arbitration but Farr refused. Thereafter, Donnelly was unemployed for substantial periods until April 3, 1958 when he received an appointment from another employer as an assistant junior purser, a position of lower grade than he had held with United.

On November 23, 1956 Donnelly instituted a declaratory judgment proceeding in the New York Supreme Court against United alone. There he sought, among other things, a declaration that his discharge was improper and that he had not been inefficient or insolent to the ship's master. United obtained summary judgment in its favor, which disposition was entered without prejudice. It is contended in the present case that the New York judgment is res judicata. Our Appellate Division held to the contrary. 75 N.J. Super., at p. 391. We agree and find no need for further discussion of the issue.

In November 1958 this damage action was brought in the Superior Court, Law Division, against United and the union. The claim against United was predicated on an alleged wrongful discharge from employment, and on a refusal to arbitrate the propriety of the discharge, all in violation of the collective bargaining agreement between United and the union. As to the union, the charge was improper refusal to seek and obtain arbitration of plaintiff's wrongful discharge grievance as it should have done under the bargaining contract.

The suit was removed to the United States District Court and then remanded to the Law Division where, following pretrial conference, cross-motions for summary judgment were made by the parties. The motions were presented on the pleadings, affidavits, interrogatories and deposition of plaintiff in this case, as well as on the pleadings and other pertinent papers in the New York case. The trial court granted summary judgment for both defendants on the grounds, (1) that under Marchitto v. Central R.R. Co. of N.J., 9 N.J. 456 (1952), the complaint did not state a claim

against the union on which relief could be granted; and (2) that the collective bargaining agreement conferred no individual right on plaintiff to insist that the union proceed to have his grievance processed in accordance with the union-management contract.

I.

In Marchitto, plaintiff was a member of the Brotherhood of Railroad Trainmen, and in the employ of Central Railroad of New Jersey as a switchtender. The Brotherhood had a collective bargaining agreement with the railroad under which plaintiff claimed he was entitled to extra wages and certain seniority rights. He sued the Brotherhood for damages alleging a willful and fraudulent failure to prosecute his claims through the grievance procedure created by the contract, thereby breaching its duty of trust to him. The trial court dismissed the complaint for failure to state a cause of action and this court affirmed.

The Supreme Court opinion pointed out that the Brotherhood was an unincorporated association, having no separate existence apart from its individual members, and not suable as an entity at common law. In legal effect, the court said, plaintiff and every other member were coprincipals linked together in a joint enterprise to accomplish a common purpose with their relationships to each other and to the group being governed by the association's constitution and bylaws, and by the common law. As a member of the group plaintiff was held to be jointly responsible with all other members for the actions of the group itself, and therefore as a principal he could have no cause of action against his coprincipals for the wrongful conduct of their common agent. 9 N.J., at pp. 466, 467.

At the time of Marchitto, New Jersey, like many other states, had a statute, N.J.S. 2A:64-1, which authorized suit against unincorporated associations consisting of seven or more persons, and having recognized names "in any civil

action affecting its common property, rights and liabilities, with the same force and effect as regards such common property, rights and liabilities as if the action were prosecuted by or against all the members thereof." The common assets of the association were made subject to levy on a judgment obtained in such an action. N.J.S. 2A:64-3. If the judgment was unsatisfied in whole or in part, the membership remained liable as at common law. N.J.S. 2A:64-4. It was provided also that the bringing of the suit against the entity on a claim for which the members are personally liable would not bar prosecution thereof against the members. The Legislature declared further that the act should not be construed to give an association "any of the powers or to impose any of the liabilities of a corporation, except as herein set forth." N.J.S. 2A:64-5.

In passing upon the application of this statute in Marchitto, the court regarded it as simply providing a procedural device to permit suit in a proper case against the organization by name. And the court held that no change was brought about thereby in substantive rights or liabilities. Therefore, since a principal cannot sue his coprincipal for a dereliction of their common agent, and since the statute did not expressly or impliedly change the substantive nature of that doctrine, Marchitto had no cause of action. 9 N.J., at pp. 466-467.

As the Appellate Division observed in the present case, the Marchitto doctrine has been criticized. 75 N.J. Super., at pp. 393, 394; 9 Rutgers L. Rev. 127, 140 (1954); 13 Rutgers L. Rev. 631, 632 (1959). The mists of the conceptual world of the early common law should not be allowed to obscure the public interest in imposing liability on a union as a juristic entity for torts and contract breaches committed against one or more of its own members. See United Mine Workers of America v. Coronado Coal Company, 259 U.S. 344, 42 S. Ct. 570, 66 L. Ed. 975 (1922). In modern industrial society, the restrictive principle of Marchitto ignores reality. Unions have become endowed with great privileges and responsibilities as representatives of their members.

Existence of such privileges must be accompanied by a correlative duty not to misuse them to the injury of individual union members. Immunity from liability for misuse is inconsistent with basic notions of justice. The statute, N.J.S. 2A:64-1, is remedial legislation and ought to be given as liberal an interpretation as possible consistent with its language. In our judgment, study of the entire enactment reasonably justifies the view that the intention was to create substantive remedies as well as procedural rights. More specifically, the purpose was not only to authorize suit against the association as an entity in cases where tortious or contractual wrongs were inflicted by its agents upon individual members, but also to make the assets of the entity available for the payment of any judgment resulting from such action. Cf. Marshall v. International Longshore. & W.U. Local 6, 57 Cal. 2 d 781, 22 Cal. Rptr. 211, 371 P. 2 d 987 (Sup. Ct. 1962); Fray v. Amalgamated Meat Cutters, etc., 9 Wis. 2 d 631, 101 N.W. 2 d 782 (Sup. Ct. 1960).

In Marshall v. International Longshore. & W.U. Local 6, supra, the Supreme Court of California had this to say of the Marchitto doctrine:

"When these concepts are transferred bodily to other forms of voluntary associations such as fraternal organizations, clubs and labor unions, which act normally through elected officers and in which the individual members have little or no authority in the day-to-day operations of the association's affairs, reality is apt to be sacrificed to theoretical formalism. The courts, in recognition of this fact, have from case to case gradually evolved new theories in approaching the problems of such associations, and there is now a respectable body of judicial decision, especially in the field of labor-union law, with which we are here directly concerned, which recognizes the existence of unincorporated labor unions as separate entities for a variety of purposes, and which recognizes as well that the individual members of such unions are not in any true sense principals of the officers of the union or of its agents and employees so as to be bound personally by their acts under the strict application of the doctrine of respondeat superior." 22 Cal. Rptr., at p. 213, 371 P. 2 d, at p. 989.

We concur in those observations with respect to labor unions, the only aspect of the problem now before us. Moreover,

as to labor unions, they and the similar construction we would place on the scope of N.J.S. 2A:64-1 et seq. are in harmony with existing federal policy to be discussed hereafter. Accordingly, Marchitto is overruled and can no longer be regarded as the law of this State. No view is expressed as to whether the common law doctrine described in Marchitto or the effect of N.J.S. 2A:64-1 et seq. as applied therein, should receive continued recognition in cases involving voluntary associations generally.

In 1947, Congress adopted the Labor Management Relations Act, 29 U.S.C.A. § 141 et seq., section 301 which provides:

"Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter * * * may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties." Section 301(a).

Section 301(b) prescribes that a labor organization subject to the statute shall be bound by the acts of its agents, and may sue or be sued as an entity. A money judgment obtained in such a suit may be enforced only against the assets of the organization and is not enforceable against any individual member or his assets. 29 U.S.C.A. § 185(a) and (b).

The Congressional intention manifested by Section 301 was to eliminate the amorphous status of the union, and to personify it as a jural entity. For purposes of suits for breach of collective bargaining contracts in industries affecting commerce, rights and liabilities, which under the common law vested distributively in or were so imposed upon the members of a union, were by this enactment vested in or imposed upon the union. Substantive rights were created thereby and enforceable as such. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456, 457, 77 S. Ct. 912, 917, 918, 1 L. Ed. 2 d 972, 980-981 (1957); Dowd Box Co. v. Courtney, 368 U.S. 502, 82 S. Ct. 519,

7 L. Ed. 2 d 483 (1962); Local 174, Teamsters, Chauffeurs, Warehousemen and Helpers of America v. Lucas Flour Co., 369 U.S. 95, 104, 82 S. Ct. 571, 577, 7 L. Ed. 2 d 593, 599-600 (1962); Schatte v. International Alliance, etc., 182 F.2d 158, 164 (9 Cir. 1950), cert. denied 340 U.S. 827, 71 S. Ct. 64, 95 L. Ed. 608 (1950); Waialua Agr. Co. v. United Sugar Workers, 114 F. Supp. 243, 246 (D.C. Hawaii 1953); Textile Workers Union of America v. Aleo Mfg. Co., 94 F. Supp. 626, 628 (D.C.N.C. 1950); Wilson & Co. v. United Packinghouse Workers, 83 F. Supp. 162, 166 (D.C.S.D.N.Y. 1949); Annotation, 99 L. Ed. 529, 531-535 (1955); Sovern, "Section 301 and the Primary Jurisdiction of the NLRB," 76 Harv. L. Rev. 529, 537 (1963). According to the United States Supreme Court:

"* * * A principal motive behind the creation of federal jurisdiction in this field was the belief that the courts of many States could provide only imperfect relief because of rules of local law which made suits against labor organizations difficult or impossible, by reason of their status as unincorporated associations." Dowd Box Co. ...


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