IN THE UNITED STATES
DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
Jonathan M. Gould, on behalf of St.
Louis-Kansas City Carpenters’
Regional Council (Mid-America
Carpenters Regional Council)
Plaintiff,
V.
Douglas J. McCarron,
Defendant,
JURY TRIAL DEMANDED
VERIFIED APPLICATION
FOR LEAVE TO FILE VERIFIED COMPLAINT UNDER 29 U.S.C. §501 (b)
COMES
NOW, Plaintiff Jonathan M. Gould (“Mr. Gould”), on behalf of the St.
Louis-Kansas City Carpenters’ Regional Council (Mid-America Carpenters Regional
Council) (“CRC”), and for his Verified Application for Leave to File Verified
Complaint under 29 U.S.C. § 501
(b) against Defendant Douglas J. McCarron (“Mr. McCarron”), states:
INTRODUCTION
Mr. Gould files this Verified Application, and seeks
leave to file his Verified Complaint, under 29 U.S.C. § 501 (b). This stature provides for the equivalent of
a shareholder derivative action by a union member. Mr. Gould is a member of the
CRC and seeks to bring this action in a representative capacity on behalf of
and for the benefit of the CRC and its members. Under 29 U.S.C. § 501 (b), leave of court is required before a
Complaint can be filed. Mr. Gould has met the prerequisites to do so and has
shown good cause.
As the
General President of the United Brotherhood of Carpenters’ and Joiners of
America (“UBC”), Mr. McCarron owed the CRC and UBC fiduciary duties under 29
U.S.C. § 501
(a). Mr. McCarron violated his fiduciary duties by (1) allowing
misappropriation of CRC and UBC funds, (2) ignoring repeated overtures by Mr.
Gould to notify Mr. McCarron and the UBC that former Executive
Secretary-Treasurers’ Terry Nelson and Al Bond were leading efforts to
misappropriate CRC and UBC funds, (3) failing to take action for similar,
systematic acts of misconduct perpetrated by multiple CRC officers and Agents.
Mr. McCarron’s breaches foster a culture wrought with fraudulent
misappropriation and as demonstrated herein, have cost the CRC and UBC millions
of dollars in lost funds.
Mr.
Gould became aware of violations and reported his concerns to UBC
representatives as far back as 2014. Mr. McCarron disregarded this attempt by
Mr. Gould to end corruption within the CRC and UBC. Mr. Gould was ultimately
terminated from his employment as a CRC Representative in 2014. Extensive
discovery related to a civil lawsuit for wrongful termination confirmed the
fraudulent misappropriation of funds and breaches of fiduciary duty. In 2018,
Mr. Gould once again notified Mr. McCarron and the UBC of violations of law
and/or public policy, including Representatives operating CRC funded vehicles
without valid driver’s licenses. Finally, on October 3, 2021, Mr. Gould
demanded Mr. McCarron secure a forensic accounting and recover damages on
behalf of the CRC and UBC. After a month without response, Mr. Gould is certain
that Mr. McCarron is once again ignoring his duties as defined under the UBC
constitution and 29 U.S.C. §
501 (b). Further demand by Mr. Gould is futile, the UBC, and presumably Mr.
McCarron, are themselves under federal investigation in New Jersey. UBC
financials have been subpoenaed, as have the records of the CRC and UBC
accounting firm, Calibre CPA. Thus, for the detailed reasons discussed below,
and as set forth in the Verified Complaint, good cause exists to file this
lawsuit and for Mr. Gould to recover damages for the benefit of the CRC and
UBC.
(c). As of December 1, 2021, Mr. McCarron has not
contacted the Employee Benefits Security Administration to report excessive
and/or illegal investment fees paid to firms by former EST Al Bond.
LEGAL STANDARD
Section 501 (a) prescribes fiduciary duties union
officers, Agents, Shop Stewards, and other Representatives owe their unions. As
does the UBC Constitution. Section 501 (b) empowers union members to sue to
recover damages incurred as a result of 501 (a) violations where two conditions
are satisfied: (1) the union or its governing board or officers refuses or
fails to sue to recover damages or secure a forensic accounting within a
reasonable time following a union member’s request; and (2) the union member
obtains leave of court upon verified application and for good cause shown. Section 501 (b); see also Local 314
National Post Office Mail Handlers v National Post Office Mail Handlers,
572 F. Supp. 133, 138 (E.D. Mo. 1983).
“The
standard for determining whether the {good cause} requirement is met is whether
the plaintiff shows a reasonable likelihood of success and, with regard to any
material facts he alleges, he has reasonable ground for belief in their
existence.” Id. At 139 (internal quotation omitted).
ARGUMENT
Mr.
Gould satisfied both 29 U.S.C. § 501 (b) prerequisites: (1) he
demanded Mr. McCarron sue to recover damagers or secure a forensic accounting
on behalf of the CRC and UBC; and (2) good cause exists for bringing this
lawsuit.
A.
Mr. Gould
demanded Mr. McCarron secure an accounting or recover damages, to no avail.
1.
Facts
Surrounding Demand and its Futility
On October 3, 2021, Mr. Gould made a formal demand on
Mr. Bond to secure an accounting or recover damages pursuant to 29 U.S.C. § 501 (b). See Verified Complaint, ¶ 24, Exhibit 1. Mr. McCarron failed to
respond to Mr. Gould by November 5, 2021. Any further demand would be futile as
Mr. McCarron has ignored his responsibilities for at least seven years. See
Verified Complaint, ¶ 35, Exhibit 10.
2.
Futility
of Further Demand on the Union & Mr. McCarron
Any further demand would be “an exercise in futility” and is not
required. See, e.g., Sablosky v. Budzanoski, 457 F.2d 1245,
1252-53 (3d Cir. 1972); McNamara v. Johnston, 522 F.2d 1157, 1162-63 (7th
Cir. 1975); O’Rourke v. Crosley, 847 F.Supp. 1208, 1219 (D. N.J. 1994)
(“futility may serve as an exception to the ‘request’ requirement” under
Section 501 (b)).
In O’Rourke v. Crosley, the United States District Court for the
District of New Jersey found the plaintiff-union member was entitled to prove
his Section 501 (b) demand was futile where allegedly complained to the
defendant-union Business Manager and was ignored. Crosley, 847 F.Supp.
1208, 1219 (D. N.J. 1994).
In Saunders v. Hankerson,
the United States District Court for the District of Columbia held the
plaintiff-union member was entitled to an inference the union officers would be
biased with respect to any Section 501 (b) demand they take-action against
themselves, where Plaintiff made particularized allegations of wrongdoing by
several defendant-union directors and alleged acquiescence on the part of other
directors. Hankerson, 312 F.Supp.2d 46, 68 (D. D.C. 2004). The Hankerson
court applied the traditional Federal Rule of Civil Procedure for derivative
actions found in Rule 23.1, which requires the complaint to be verified and
state with particularity “(A) any effort by the plaintiff to obtain the desired
action from the directors or comparable authority and, if necessary, from the
shareholders or members; and (B) the reasons for not obtaining the action or
not making the effort.” Id. At 67-68.
In McNamara v. Johnston, the Seventh Circuit Court of
Appeals held the plaintiff-union members had no obligation to make a Section
501 (b) demand where the defendant-union officers had “consistently and
vigorously argued [they} were acting at all times in compliance with the
union’s Constitution and duty adopted resolutions, and it [was] apparent that
any demand upon the [union officers] for relief would have been futile.” Johnston,
522 F.2d 1157, 1162-63 (7th Cir. 1975). The Johnston court
recognized the similarities between an action under 29 U.S.C. § 501 and a shareholder’s derivative suit and noted
that the demand requirement is excused when futile in these cases. Id.
At 1162.
Like McNamara, the Eighth Circuit Court of Appeals has
recognized similarities between 501 (b) claims and shareholder derivative
actions. Local 314 Nat. Post Office Mail Handlers, 572 F.Supp. at 138.
Further demand is futile, and Mr. Gould has therefore satisfied Section 501
(b)’s first prong necessary to sue the Defendant on behalf of the CRC and UBC.
B.
Mr.
Gould’s allegations give rise to “reasonable likelihood of success” & satisfy
Section 501 (b)’s good cause requirement.
“The standard for determining whether
the [good cause] requirement is met is whether plaintiff shows a ‘reasonable
likelihood of success and, with regard to any material facts he alleges, [he
has] a reasonable ground for belief in their existence.’” Local 314 Nat.
Post Office Mail Handlers, 572 F.Supp. at 139. Thus, Mr. Gould must show a
reasonable likelihood of success on any of his claims that the Defendant
breached his fiduciary duties in 29 U.S.C. § 501 (a). These fiduciary duties include (1) holding
money and property solely for the benefit of the union and its members and to
manage, invest, and expend the same in accordance with the union’s Constitution
and by-laws; (2) refraining from dealing with the union as an adverse party on
behalf of an adverse party in any matter concerned with the officer’s union
duties and from holding or acquiring any pecuniary interest which conflicts
with the interests of the union; and (3) accounting to the organization for any
profit received by the officer in whatever capacity in connection with
transactions conducted by the officer or under his direction on behalf of the
organization. See Section 501 (a).
In
Loretangeli v. Critelli, the Third Circuit Court of Appeals reversed the
district court’s dismissal of a plaintiff-union members’ Section 501 (b)
claims, finding the members met the good cause standard. Critelli, 853
F.2d 186 (3d Cir. 1988). The plaintiffs alleged the defendant-union officers
made rebates to certain local unions despite a union Constitution provision
prohibiting the activity. Id. at 192. The Critelli court also
held that differences in interpretation of what activity the union’s Constitution
authorized should not be considered at the good cause stage of the proceedings.
Id.
In
George v. Local Union No. 639, the D.C. Circuit Court of Appeals
reversed the district court’s ruling and held the plaintiff-union member’s
claim that officers breached their fiduciary duty by paying “supplemental
strike benefits,” satisfied the good cause standard. George, 98 F.3D
1419 (D.C. Cir. 1996). The court held the district court improperly required
the union member to demonstrate a “high probability that his allegations are
true.” Id. at 1420. The George court found “it would make little
sense to require plaintiff to show a high likelihood of success on the merits.”
Id.
In
Cowger v. Rohrbach, the Ninth Circuit Court of Appeals reversed the
district court and found the plaintiff-union member established good cause by
alleging the defendant-union official misappropriated union funds for his
personal benefit, despite arguing his use of the funds was authorized. Cowger,
868 F.2d 1064, 1068 (9th Cir. 1989). The Rohrbach court held
authorization was not a complete defense to a Section 501 claim for
breach of fiduciary duty. Id. As the plaintiff set forth facts showing
misappropriation of union funds by the official for his personal benefit, “this
[was} sufficient to satisfy the threshold ‘good cause’ requirement of section
501 (b).” Id.
Mr.
Gould has attached evidence demonstrating Mr. McCarron breached his fiduciary
duties owed to the CRC and UBC. Considering the foregoing and based upon the
facts stated herein and in the Verified Complaint, Mr. Gould’s allegations
against Mr. McCarron more than satisfy Section 501 (b)’s good cause standard.
1.
Underlying
Facts Establishing Good Cause against Mr. McCarron
As the UBC’s General President, Mr. McCarron owed
fiduciary duties to the CRC and UBC to review CRC financials and report his
findings to the rank-and-file members of the CRC and UBC. Mr. McCarron owed the
CRC fiduciary duty to take action to remediate acts of misappropriation
conducted by Executive Board members and Business Representatives, including
former Executive Secretary-Treasurer, Al Bond. Mr. McCarron breached his
Section 501 (b) fiduciary duties by authorizing the transfer of CRC funds and
failing to act against fraudulent misappropriation of CRC and UBC funds.
Specifically, Mr. Gould alleges, with particularity, numerous fiduciary
breaches, including improper CRC reimbursements to its Executive Board and Business
Representatives for:
a.
Flying family and
friends to Conventions or Conferences;
b.
Expenses for
family and friends at Conventions or Conferences;
c.
Unlimited alcohol
expenses at Conventions or Conferences;
d.
CRC vehicle
policy that illegally inflated UBC pension funds;
e.
CRC providing non-business-based
meals to employees;
f.
Concert tickets;
g.
Musical tickets;
h.
Play tickets;
i.
Comedy Act
tickets;
j.
Sporting Event
tickets;
k.
Tour Tickets;
l.
Souvenirs, gifts,
personal effects, cigars;
m. Illegal loans
in excess of $2000 to CRC employees;
n.
Unlimited alcohol
expenses with no business purpose;
o.
Reimbursement of
medical insurance deductibles for employees;
p.
Lavish birthday
and retirement parties for employees;
q.
Insurance
deductibles following employee auto accidents;
r.
Massages, clothing, tobacco products, and
golf;
s.
Petty Cash
transactions that lacked proper documentation;
t.
Mr. Bond
coercing/tricking CRC Delegates into an $85,000 per year wage increase;
u.
Income tax
evasion
v.
Unreported personal
relationships between CRC employees and CRC leadership;
w. Unreported personal relationships with CRC contractors
receiving financial assistance from the CRC;
x.
Reimbursements lacking proper receipts or
receipts all together: 1) place of transaction; 2) union purpose of the
transaction; 3) when the transaction occurred; 4) individuals present at the
transaction; 5) itemized receipts; or the “5 Ws”
y.
Other incidentals being paid for by the CRC
for business representatives, employees, board members, and guests.
See Verified
Complaint, ¶¶ 47-55 and Exhibits 24-89 attached
thereto.
These
violations have fostered and ignored a culture of misappropriation spearheaded
by former EST Bond’s actions and Mr. McCarron’s complicity and failure to act.
As a result, Mr. Gould has demonstrated a reasonable likelihood of success and,
therefore, satisfies Section 501 (b)’s good cause requirement.
CONCLUSION
For the reasons described herein, Mr. Gould has
satisfied Section 501 (b)’s demand and good cause requirements and, therefore,
respectfully requests this Court grant leave to file Mr. Gould’s Verified
Complaint.
JonathanM.Gould
By:
_______________
JonathanM.Gould
7357
Providence Dr.
Edwardsville,
Il. 62025
618-980-0205
cell
gouldj77@icloud.com
