Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit

7-19-2004

Carino v. Stefan Precedential or Non-Precedential: Precedential

Docket No. 03-3679

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Recommended Citation "Carino v. Stefan" (2004). 2004 Decisions. Paper 435. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/435

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact [email protected]. PRECEDENTIAL Winston C. Extavour 203 Kings Highway East UNITED STATES Haddonfield, NJ 08033 COURT OF APPEALS Counsel for Appellant FOR THE THIRD CIRCUIT

James Katz No. 03-3679 Jennings Sigmond 1040 North Kings Highway, Suite 300 Cherry Hill, NJ 08034 GISELA CARINO, Counsel for Appellees Appellant

v. OPINION OF THE COURT MARC STEFAN, ESQ; BUTSAVAGE & ASSOCIATES, LLC. RENDELL, Circuit Judge. Appeal from the United States Gisela Carino brought suit against District Court for the attorney Marc Stefan and Stefan’s District of New Jersey employer, Bustavage & Associates, for (D.C. Civil No. 03-cv-01894) legal malpractice in representing her in District Judge: connection with a labor grievance Honorable Joseph H. Rodriguez proceeding against her employer. The District Court granted a motion to dismiss on the basis that the attorneys were Submitted Under immune from liability under 29 U.S.C. § Third Circuit LAR 34.1(a) 185(b), Section 301(b) of the Labor May 26, 2004 Management Relations Act (“LMRA”). We agree with the District Court and with Before: SCIRICA, Chief Judge, those courts of appeals who have spoken RENDELL and on this issue, and will affirm. ALARCÓN*, Circuit Judges.

(Filed July 19, 2004) I. Carino, a New Jersey resident, was employed as an insurance agent with Prudential Insurance Company of America * Honorable Arthur L. Alarcón, Senior from 1989 to 1998. During this time Judge, United States Court of Appeals for period, she was a member of the United the Ninth Circuit, sitting by designation. Food and Commercial Workers 2001, at the Sheraton Convention Center International Union, which had entered in Atlantic City, New Jersey. The firm into a collective bargaining agreement appointed Marc Stefan, Esquire, to appear with Prudential. on her behalf. Prudential terminated Carino’s Carino alleges that the following employment in October 1998, because it events occurred two days prior to her believed that she had engaged in hearing. Stefan telephoned her and asked professional misconduct by selling her to meet him at the Radisson Hotel in insurance policies to individuals in poor Mt. Laurel, New Jersey. At this meeting, health and naming disinterested parties as Stefan advised her that the venue for the the beneficiaries of the policies, and the arbitration meeting had been changed to company referred the charges against the Radisson Hotel. Furthermore, he Carino to the Federal Bureau of indicated that Prudential and FBI Investigation (“FBI”). 1 investigators were at the hotel interviewing witnesses who would testify against her F o l l o wi n g the proced ures regarding her alleged misconduct, that they established by the collective bargaining were prepared to take her to jail, and that agreement, the Union filed a grievance on she would need $100,000.00 to get out of C a r i n o ’ s b e h a l f , c o n t e s ti n g h er jail. termination. Dissatisfied with the review of the grievance, the Union exercised its Stefan then asked what Carino right to take the matter to arbitration.2 The hoped to get out of the arbitration hearing. Union retained Butsavage & Associates Carino replied that she wanted her (“Butsavage”), a Washington, D.C. law employment record cleared of Prudential’s firm, to represent Carino at the arbitration false charges; the FBI investigation closed; hearing, which was to be held July 27-29, a promise that Prudential would not sue her for attorney’s fees; and her pension 1 reinstated. Stefan claimed “that would be According to Carino, the FBI no problem and that he could work that out investigation disclosed no evidence of with Prudential.” Carino agreed she would wrongdoing on her part. withdraw the grievance in return for 2 Prudential’s acceptance of her conditions. Article 28 of the CBA provides that the Union may refer any grievance Stefan then suggested they go regarding the termination of a Prudential downstairs to the bar and wait for the Representative to arbitration if the Union arbitrating judge. After an hour of is dissatisfied with the outcome of the waiting, he told Carino that they could grievance procedure. Furthermore, it leave and “call it a mutual agreement.” He indicates that the Union is the only entity presented her with various forms, with the power to refer a matter to including a two-page document entitled arbitration.

2 “Grievance Release,” and asked her to sign Carino filed a timely Notice of Appeal. them. He did not explain what the forms were or why she had to sign them. After she signed them, Stefan said he would II. meet with Prudential and obtain its Our review of a district court’s agreement to what she wanted without any dismissal of a complaint under Rule problem. 12(b)(6) for failure to state a claim is Thereafter, Carino realized that the plenary, and we apply the same standard as documents she had signed made no the district court. Oatway v. Am. Int’l reference to Prudential’s concessions in Group, Inc.,

, 187 (3d Cir. return for her withdrawal and release. She 2003). In deciding a motion to dismiss, we contacted Stefan and his firm to complain, must accept all well-pleaded allegations in but heard no reply. In fact, she never the complaint as true, and view them in the heard from them again. light most favorable to the plaintiff. Id. We may grant such a motion only where Carino argues that Stefan deceived “it appears beyond doubt that the plaintiff her into settling her grievance in return for can prove no set of facts in support of his various promises which were never kept. claim which would entitle him to relief.” She claims that, as a result of Stefan’s Conley v. Gibson,

, 45-46 alleged misconduct, she lost her (1957). opportunity to arbitrate her claims, her employment record remains blemished and her pension was never restored. III. Carino filed a four count complaint This appeal presents a question of in the Superior Court of New Jersey first impression for our Court, namely, against Stefan and Butsavage alleging: (1) whether an attorney hired by a union to legal malpractice against Stefan; (2) perform services on behalf of a union intentional misrepresentation against member in connection with an arbitration Stefan; (3) breach of attorney’s fiduciary hearing conducted pursuant to a collective duty against Stefan; and (4) liability under bargaining agreement is immune from suit the doctrine of respondeat superior against for malpractice by that member. We Butsavage. Defendants removed the conclude that the LMRA bars such a suit. action to federal court based on diversity jurisdiction and, alternatively, based on federal jurisdiction under § 301 of the Section 301(b) of the LMRA LMRA. The defendants then moved to provides, in part, that “[a]ny money dismiss the complaint pursuant to Fed. R. judgment against a labor organization in a Civ. P. 12(b)(6) for failure to state a claim. District Court of the United States shall be The District Court granted this motion, and enforceable only against the organization

3 as an entity and against its assets, and shall and was in violation of an existing not be enforceable against any individual bargaining agreement. Id. at 402. The member or his assets.”

(b). Court noted that “the legislative history of Viewed narrowly, this language could be § 301 clearly reveals Congress’ intent to said to only exempt union members from shield individual employees from liability personal liability for judgments against the for damages arising from their breach of . union. However, the Supreme Court has . . a collective bargaining agreement, given the statute a more expansive reading, whether or not the union participated in or stating that § 301(b) “evidences ‘a authorized the illegality.” Id. at 407. congressional intention that the union as Our court has recognized that an entity, like a corporation, should in the Atkinson provides individual union absence of an agreement be the sole members and officers immunity from suit recovery for injury inflicted by it.’” for union wrongs . See, e.g., Wilkes-Barre Atkinson v. Sinclair Refining Co., 370 Pub. Co. v. Newspaper Guild of Wilkes- U.S. 238, 249 (1962) (quoting Lewis v. Barre, Local 120,

, 377 (3d Benedict Coal Corp.,

, 470 Cir. 1981); Republic Steel Corp. v. United (1960)). Confronted by an action against Mine Workers of America,

, a union and several of its officers in their 478 (3d Cir. 1978). And, “with individual capacities, the Court in monotonous regularity, [other courts of Atkinson dismissed the count against the appeals have] cited Atkinson to foreclose officers, stating that § 301 “cannot be state-law claims, however inventively evaded or truncated by the simple device cloaked, against individuals acting as of suing union agents or members, whether union representatives within the ambit of in contract or tort, or both, in a separate the collective bargaining process.” count or in a separate action for damages Montplaisir v. Leighton,

(1st for violation of a collective bargaining Cir. 1989); see also Morris v. Local 819, contract for which damages the union Int’l Bhd. of Teamsters,

, 784 itself is liable.” Id. As a result, the law is ( 2 d C i r . 1 999); Eva nge l i st a v. clear that individual union officers are not Inlandboatmen’s Union of the Pacific, 777 personally liable to third parties for actions F.2d 1390, 1400 (9th Cir. 1985); Ramsey taken on behalf of the union in the v. Signal Deliver Service, Inc., 631 F.2d collective bargaining process. 1210, 1212 (5th Cir. 1985). The Supreme Court thereafter The only courts of appeals to have extended the Atkinson rule in Complete considered the specific question presented Auto Transit, Inc. v. Reis,

here, where attorneys acted on behalf of (1981), holding that a damage claim may the union, have uniformly concluded that not be maintained against an individual Atkinson prohibits claims made by a union union officer even if the individual’s member against attorneys employed by or conduct was unauthorized by the union retained by the union to represent the

4 member in a labor dispute. See Waterman Appeals rejected the athlete’s contention v. Transport Workers’ Union Local 100, that an exception to the Atkinson rule

(2d Cir. 1999); (“[U]nder should be fashioned for attorneys Atkinson, a union’s attorneys may not be employed by or retained by the union. sued by an individual union member for Peterson, 771 F.2d at 1257. The court actions taken pursuant to a collective noted that a union may choose to have its bargaining agreement.”); Arnold v. Air members’ labor grievances handled by a Midwest, Inc.,

(10th union representative with no legal training, Cir. 1996) (“[A]n attorney who performs or by an attorney. Id. at 1258. If the union services for and on behalf of a union may chooses to make use of an attorney, that not be held liable in malpractice to attorney has not “entered into an ‘attorney- individual grievants where the services client’ relationship in the ordinary sense performed constitute a part of the with the particular union member who is collective bargaining process.”); Breda v. asserting the underlying grievance,” but Scott,

(9th Cir. 1993) merely “assume[s] a function that often is (holding that employees cannot sue inside performed by a union’s business agents or or outside counsel for services rendered representatives.”

Although “[t]hat under a collective bargaining agreement); union member is surely justified in Montplaisir,

(“[F]or expecting the attorney to perform in a purposes of the Atkinson principle, competent and professional manner . . . [attorneys] must be treated the same as when the union is providing the services, it other union agents.”); Peterson v. is the union, rather than the individual Kennedy,

(9th Cir. business agent or attorney, that represents 1985), cert. denied,

(1986) and is ultimately responsible to the (“Where, as here, the attorney performs a member.” Id. Based on this “functional function in the collective bargaining assessment of the attorney’s role as a process that would otherwise be assumed union representative within the collective by the union’s business agents or bargaining process,” the court concluded representatives, the rationale behind the that Atkinson protected union attorneys Atkinson rule is squarely applicable.”). from individual liability for acts performed on behalf of the union. Id. at 1259. In Peterson, the first case to consider the question, a professional In addition to relying on the rule football player brought a malpractice suit promulgated by the Supreme Court in against two attorneys provided by the Atkinson, the courts have identified player’s union, claiming that they had several policy considerations weighing furnished him with inaccurate advice upon against the imposition of malpractice which he had detrimentally relied in liability on union attorneys representing pursuing his grievance against his former union members in labor grievances under employer. The Ninth Circuit Court of a collective bargaining agreement. First,

5 while a plaintiff with a breach of the duty state law claim,3 and that, as a result, § of fair representation claim against a union 301(b) cannot be a basis for barring her must prove that the union’s conduct was claim. But the question of whether the arbitrary, discriminatory, or in bad faith, a preemptive power of § 301 of the LMRA plaintiff with a malpractice claim against is so complete as to transform her state law an attorney must only prove that the claim into a federal claim is distinct from attorney’s conduct was negligent. As a the question of whether § 301(b) applies so result, it would be “anomalous” if the as to bar her claim. Any court considering union attorney could be liable if merely her suit against the union attorneys, negligent, while the union would be liable whether it be a federal court with federal only if a higher standard were met, question jurisdiction, a federal court sitting namely, arbitrariness or bad faith. See, in diversity, or a state court, would be e.g, Arnold,

. Second, compelled, as a matter of substantive law, state statutes of limitations for malpractice to conclude that § 301(b) bars her claim are generally longer than the time limit for under Atkinson. In Aragon v. Papy, the filing of suits by union members Kaplon, Vogel and Phillips, 262 Cal. Rptr. claiming that their employer or their union 646 (Cal. Ct. App. 1989), after the Ninth mishandled their labor grievances. “If Circuit had held that complete preemption union attorneys were sub ject to did not apply to plaintiff’s malpractice malpractice liability in such cases, litigants claim against attorneys provided by her would be able to proceed against the union and remanded the case to state court, attorney long after the expiration of the see Aragon v. Federated Dept. Stores, 750 statutory period for suits against both the F.2d 1447 (9th Cir.), cert. denied, 474 U.S. union and the employer.” Peterson, 771 902 (1985), the California Court of Appeal F.2d at 1259. Finally, were union concluded “federal case law and policy members permitted to sue union attorneys, considerations provide immunity under § the attorneys could be held liable for damages “flow[ing] from the union’s political or tactical choices,” which “could, 3 The doctrine of complete preemption, in turn, severely hamper unions in an “independent corollary” to the well- enlis ting q u a l i ty re p r e s e n ta t i o n .” pleaded complaint rule, applies where a Montplaisir,

. federal law with “extraordinary” We note that Carino has advanced preemptive force essentially transforms a several arguments in an effort to avoid the claim under state law into a claim under Atkinson rule, but we find them federal law for jurisdictional purposes. unconvincing. First, she contends that the See Caterpillar, Inc v. Williams, 482 U.S. LMRA does not completely preempt her 386, 393 (1987). It is to be distinguished from the use of preemption as a defense, which applies federal law to bar state law claims.

6 301(b) to retained counsel functioning as consistently been found to be immune.” union agents in the collective bargaining Arnold,

; see Peterson, 771 process.” Aragon, 262 Cal. Rptr. at 654. F.2d at 1251, 1261 (applying Atkinson In reaching its conclusion, the court immunity to pre-arbitration counseling). reiterated that the Ninth Circuit’s decision Lastly, Carino notes that under New regarding complete preemption had no Jersey law “a lawyer’s duty may run to bearing on “whether the immunity set forth third parties who foreseeably rely on the in Section 301(b) . . . was available to the lawyer’s opinion or other legal services.” [attorneys] as a defense.” Id. at 650. Petrillo v. Bachenburg,

, Again, the issue is not one of preemption, 1359-60 (1995). As a result, she argues but, rather, one of applicable substantive that while Stefan was retained by the law. Union, he still owed a duty of care to her. Second, Carino maintains that even While this may indeed be true, this does if § 301(b) applies, the immunity it not alter the fact that he was acting on provides to union attorneys does not apply behalf of the Union. The fact that he may because Stefan performed no services have also have owed a duty to her does not within the collective bargaining process. remove the Atkinson bar. Carino is correct that the protection of § 301(b) only applies where a union agent’s liability grows out of activities performed IV. in relation to a collective bargaining Accordingly, guided by Atkinson agreement. Wilkes-Barre, 647 F.2d at 377. and Reis and the logic of the opinions of However, her assertion that Stefan our sister courts of appeals, we join these provided no services because he convinced courts in holding that § 301 of the LMRA her to withdraw her grievance rather than immunizes attorneys employed by or hired arbitrate it is clearly incorrect. Stefan’s by unions to perform services related to a actions, tortious or otherwise, grew out of collective bargaining agreement from suit the retention of his law firm by the Union for malpractice. Thus, for all of the to represent Carino during the arbitration reasons above, we will affirm. of the grievance the Union had filed on her behalf under the collective bargaining agreement. While he may have deceived Carino into withdrawing her grievance, advising her to withdraw was an activity performed in relation to the collective bargaining agreement. The fact that he did not take the matter to arbitration “is insufficient to distinguish it from the activity by union attorneys which has

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