Labor: Union member sues union for breach of fiduciary duty

Where a union member must demand that their union take action to correct the alleged wrong prior to bringing suit, and the member here requested her union conduct an accounting of union funds and sue an officer for breach of fiduciary duty prior to bring suit, she satisfied this condition precedent.

Background

This case concerns whether Sandra Gardner, as a union member, can sue her union and the union’s officers for breach of fiduciary duty under 29 U.S.C. § 501. Union members must satisfy two conditions before bringing a § 501 claim: They must (1) demand that their union take action to correct the alleged wrong and (2) demonstrate that there is “good cause” to bring suit. The district court found that Gardner failed to satisfy the demand requirement and therefore could not pursue her case.

Jurisdiction

This case is peculiar because, at this stage, technically, there are no claims. If Gardner had filed her proposed complaint, this case would present two claims. The district court only declined to grant Gardner permission to proceed on Count One, and therefore, Count Two would remain live and unresolved, depriving this court of jurisdiction.

But that is not what happened. Gardner never filed her proposed complaint and therefore there never were any “live” claims. So, by denying Gardner’s application to file her § 501 claim, the district court disposed of all questions before it, rendering the district court’s denial of Gardner’s application a “final decision” for purposes of § 1291.

Standard

The demand requirement states that a union member may only sue if “the labor organization or its governing board or officers refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization.”

This court has yet to consider what constitutes a proper demand but several other circuits have. They agree that § 501(b) is designed to protect two often conflicting interests: those of union members and those of union officials.  On the one hand, “the Act is designed to protect union members, who may be of limited education and are rarely represented by counsel when sending letters to their union.” On the other, Congress put in place § 501(b)’s threshold requirement “to discourage misuse of litigation and to minimize judicial interference in the management of labor organizations.”

Courts have cautioned against taking an overly technical reading of the demand requirement. This court agrees that, in evaluating whether the demand requirement is met, courts should not impose any formalistic requirements. Rather, courts should read demands as a whole and in the context in which they were issued. The demand requirement is satisfied if a reasonable union would be put on notice of what corrective action the union member demands.

Merits

Gardner wanted “an accounting of the funds . . . and . . . [for IAM to] bring suit,” and “demanded that the IAM International President and Grand Lodge bring suit against . . . Cervantes.” Gardner’s letters made clear that she wanted both done, not one or the other. So, by failing to bring suit, the union did not carry out Gardner’s demand. This court thus holds that Gardner satisfied the demand requirement.

Because it finds that Gardner satisfied the demand requirement, the court reverses the district court’s denial of Gardner’s application for leave to file her § 501 claim. It remands for further consideration on whether Gardner satisfied the good cause requirement.

Reversed and remanded.

Dissenting opinion

Wilkinson, J., dissenting:

I would affirm the denial of Sandra Gardner’s application for leave to file her complaint. The majority boils § 501(b) down into two requirements: the member-plaintiff must (1) demand that the union take corrective action and (2) demonstrate “good cause” to bring the lawsuit.

According to the majority, the district court misapplied the former and declined to address the latter, warranting remand. Whatever the propriety of this formalistic distinction, it makes no difference here. We “may affirm on any grounds apparent from the record” and the record here makes apparent that Gardner lacks good cause.

Gardner v. International Association of Machinists and Aerospace Workers, Case No. 24-2089, Aug. 11, 2025. 4th Cir. (Gregory), from DMD at Greenbelt (Chasanow). Steven Paul Schneck for Appellant. Evan Randall Hudson-Plush for Appellees. VLW 025-2-317. 20 pp.