Case 1:90-cv-05722-RMB -THK Document 1022 Filed 12/21/10 Page 1 of 20

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------X
UNITED STATES OF AMERICA, :
:
Plaintiff, :
: 90 Civ. 5722 (RMB) (THK)
-against- :
: DECISION & ORDER
DISTRICT COUNCIL OF NEW YORK CITY :
and VICINITY OF THE UNITED :
BROTHERHOOD OF CARPENTERS and :
JOINERS OF AMERICA, et al., :
:
Defendants. :
------------------------------------------------------------X

I. Introduction

This Decision & Order resolves three applications that challenge the determinations of

court-appointed Review Officer Dennis M. Walsh (“Walsh” or the “RO”) to “veto” (remove)

three individuals from their union positions. The three applications include: (1) an order to

show cause application filed on September 27, 2010 by Paul Willoughby, Conductor of Local

Union 157 of the United Brotherhood of Carpenters and Joiners of America (“UBC” or “Union”)

and also a shop steward (“Willoughby”), which seeks to vacate the Notice of Veto issued by the

RO on August 27, 2010 (see Willoughby OTSC, dated Sept. 27, 2010); (2) an order to show

cause application filed on October 4, 2010 by John Holt, a business representative of the Union

leadership body (“District Council”) (“Holt”), which seeks to vacate the Notice of Veto issued

by Walsh on September 3, 2010 (see Holt OTSC, dated Oct. 4, 2010); and (3) an “appeal” filed

on October 14, 2010 by John Daly, President of Local Union 608 and a business representative

of the District Council (“Daly”), which seeks to vacate the Notice of Veto issued by Walsh on

September 7, 2010 (see Mem. of Law on Behalf of Daly’s Appeal of the RO’s Decision, dated

Oct. 7, 2010 (“Daly Mem.”)).

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The thrust of the actions taken by the RO was to remove Willoughby from his positions

as Conductor of Local 157 and shop steward; to remove Holt from his position as a business

representative of the District Council; and to remove Daly from his positions as President of

Local Union 608 and a business representative of the District Council, following the RO’s

determination that Willoughby, Holt, and Daly each violated the Stipulation and Order between

the United States (“Government”), the District Council, and the Board of Trustees of the pension

plans and welfare funds established to benefit the Union (“Benefit Funds”), entered into on June

2, 2010. (See infra Part II.)1

The Court finds that Walsh acted within the scope of his authority; that he afforded

Willoughby, Holt, and Daly ample process; and that his determinations were based upon

substantial evidence and were not arbitrary or capricious. (See infra Part IV.)

For the reasons outlined below, the respective orders to show cause brought by

Willoughby and Holt and the appeal brought by Daly are denied.

II. Background

On September 6, 1990, the United States filed a complaint pursuant to the civil

enforcement provisions of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.

§ 1961 et seq. (“RICO”), alleging, among other things, that the New York chapter of the Union

1
At the oral argument held before the Court on October 21, 2010, Walsh argued that as a
result of his determinations, “the membership status [in the Union] of [Willoughby, Holt, and
Daly] has not been affected . . . . They have not been fined. They have not been suspended and
they have not been expelled.” (Tr. of Proceedings, dated Oct. 21, 2010 (“Hr’g Tr.”), at 11:24-
12:2 (emphasis added).) Walsh also said that he “did not file disciplinary charges against
[Willoughby, Holt, or Daly]. . . . [He] sent them a [Notice of Possible Action] which clearly
spelled out that they were at liberty to submit to [him] any facts, any law, any arguments or
exhibits.” (Hr’g Tr. at 11:10-15.)

Counsel for Willoughby responded at oral argument that “there is no question that the
outcome of the action [the RO] took was a disciplinary outcome,” despite the RO’s contention to
the contrary. (Hr’g Tr. at 18:21-24.)
2
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had been “infiltrated by corrupt individuals and organized crime figures who have exploited their

control over the District Council for personal gain.” (Compl., filed Sept. 6, 1990, ¶ 1.) On

March 4, 1994, United States District Judge Charles S. Haight, Jr. approved a Consent Decree

between the Government and the District Council which, among other things, enjoined “all

current and future officers, employees, and members of the District Council and its constituent

local [unions]” from “committing any act of racketeering activity.” (Consent Decree, dated Mar.

4, 1994, ¶ 2.a.)

And, following August 2009 indictments against several District Council members,

including Michael Forde, the Executive Secretary-Treasurer of the District Council and a trustee

of the Benefit Funds, see Superseding Indictment, United States v. Forde, et al., S3 08 Cr. 828

(S.D.N.Y.), the Union placed the District Council under emergency trusteeship and appointed

Frank Spencer, a UBC officer, as trustee to assume full supervisory authority over the District

Council.2 See United States v. Dist. Council, No. 90 Civ. 5722, 2010 WL 2287008, at *2

2
On July 28, 2010, Mr. Forde pled guilty to racketeering and racketeering conspiracy in
violation of 18 U.S.C. §§ 1962(c) & (d), and on November 19, 2010, he was sentenced to 132
months’ imprisonment. (See Tr. of Proceedings, dated July 28, 2010, No. 08 Cr. 828; Tr. of
Proceedings, dated Nov. 19, 2010, No. 08 Cr. 828.) On April 5, 2010, Brian Carson, a shop
steward, pled guilty to aiding and abetting the embezzlement of Union funds in violation of 18
U.S.C 664 & 2, and on August 13, 2010, he was sentenced to 19 months’ imprisonment. (See
Tr. of Proceedings, dated Apr. 5, 2010, No. 08 Cr. 828; Tr. of Proceedings, dated Aug. 13, 2010,
No. 08 Cr. 828.) On June 23, 2010, Michael Vivenzio, a shop steward, pled guilty to aiding and
abetting the embezzlement of Union funds in violation of 18 U.S.C 664 & 2, and on December
17, 2010, he was sentenced to 19 months’ imprisonment. (See Tr. of Proceedings, dated June 23,
2010, No. 08 Cr. 828; Tr. of Proceedings, dated Dec. 17, 2010, No. 08 Cr. 828.) On July 6,
2010, Michael Brennan, a shop steward and fiduciary to the Benefit Funds, pled guilty to
racketeering in violation of 18 U.S.C. § 1962(c), and on December 17, 2010, he was sentenced to
60 months’ imprisonment. (See Tr. of Proceedings, dated July 6, 2010, No. 08 Cr. 828; Tr. of
Proceedings, dated Dec. 17, 2010, No. 08 Cr. 828.) On October 27, 2010, Joseph Olivieri, a
trustee of the Benefit Funds and the Executive Director of the Association of Wall, Ceiling and
Carpentry Industries of New York, was convicted by a jury of perjury and is awaiting
sentencing, as are five other District Council members who pled guilty in 2010 to charges of
racketeering and embezzlement. (See Tr. of Proceedings, dated Oct. 27, 2010, No. 08 Cr. 828.)
3
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(S.D.N.Y. June 3, 2010) (Haight, J.). The trustee and the Government determined that “the

presence and activity of an independent court-appointed officer granted powers beyond those

provided to the Independent Investigator [who was appointed by the Court in 2002 to investigate

wrongdoing by District Council and Union members] . . . are essential to the eradication of

corruption and racketeering as they affect Union carpenters and Union employers.” (Stipulation

& Order Regarding Appointment of a Review Officer, dated June 2, 2010 (“RO Order”), at 3.)3

On June 2, 2010, Judge Haight appointed Dennis M. Walsh as Review Officer to succeed

Mr. Spencer for a term of thirty months. (See RO Order ¶ 3.) Pursuant to the RO Order, Walsh

has authority to: (1) “ensure compliance with the injunctions set forth in the Consent Decree”;

(2) “investigate the operations of the District Council and the operation of the Benefit Funds”;

and (3) “bring disciplinary charges against any District Council officers, representatives, agents,

employees, or members.” (RO Order ¶ 5.a.) The RO is afforded broad Review and Oversight

Authority (“R&O Authority”), including the authority “to review the persons currently holding

office or employment.” (RO Order ¶ 5.b.i.(3).) The RO may determine, among other things,

that a matter: (1) “constitutes or furthers an act of racketeering as defined in 18 U.S.C. § 1961”;

(2) “is contrary to or violates a law or Court order entered in this case”; (3) “is contrary to any

fiduciary responsibility imposed [upon the person] by 29 U.S.C. § 501 or the Employee

Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”)”; or (4) “is inconsistent

with the objectives of the [RO Order].” (RO Order ¶ 5.b.iii.(a), (c)−(e).) If the RO makes such a

3
The Government asserted at oral argument that pervasive corruption of the District
Council “is an institutional matter. We have had monitors in this case now for 16 years. We
have been unable to eradicate corruption among the leadership [of the Union] and among people
that have been entrusted to watch over the members’ interest, and we have here in this [RO
Order], a particular provision that deals exactly with this situation [i.e., RO Order ¶ 5.b]. . . .
[W]e believe that the [RO] acted fully in accordance with the document.” (Hr’g Tr. at 17:8-15.)
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determination, he “may veto or require the District Council to rescind its action, proposed action

or lack of action.” (RO Order ¶ 5.b.iii.)

(1) Willoughby

On August 4, 2010, Walsh issued a Notice of Possible Action to Willoughby indicating

that he was “considering issuing a veto of [Willoughby’s] serving as the [C]onductor of Local

Union 157 and as a steward representing the [District Council]” based on his authority under

¶ 5.b.iii of the RO Order.4 (Willoughby Notice of Possible Action Ltr., dated Aug. 4, 2010

(“Willoughby RO Ltr.”).) The RO Letter notified Willoughby that he was under investigation

for “suspected violations of the Consent Decree,” and specifically, that in or about 2001,

Willoughby “aided and abetted and participated in a scheme” with two employees of the District

Council Benefit Funds to convey bribe money from a construction contractor to one of the

employees in order “to defraud said Benefit Funds of contributions which should have been paid

by [the] contractor,” in violation of various provisions of New York Penal Law. (Willoughby

RO Ltr.) On August 27, 2010, Walsh issued a Notice of Veto of Willoughby’s union positions

which prevented Willoughby from continuing as Conductor of Local Union 157 and as a shop

steward. (See Willoughby RO Notice of Veto, dated Aug. 27, 2010.)

(2) Holt

On August 6, 2010, Walsh issued a Notice of Possible Action to Holt indicating that he

was “considering issuing a veto of the employment of [Holt] with the [District Council]” as a

business representative as a result of, among other things, Holt’s “knowing violat[ion]” of the

District Council’s Job Referral Rules when Holt “dispatch[ed] a member of a constituent local

4
The position of “Conductor” appears to be a leadership position. See NYDC: Local 157,
http://www.nycdistrictcouncil.com/index.php?id=143 (last visited Dec. 21, 2010).
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union to a job in the jurisdiction of the District Council” in September 2009.5 (Holt Notice of

Possible Action Ltr., dated Aug. 6, 2010 (“Holt RO Ltr.”).) On September 3, 2010, Walsh issued

a Notice of Veto of Holt’s union position which prevented Holt from continuing as business

representative of the District Council. (See Holt RO Notice of Veto, dated Sept. 3, 2010.)

(3) Daly

On August 24, 2010, Walsh issued a Notice of Possible Action to Daly indicating that he

was “considering issuing a veto of the employment and office of [Daly] with the [District

Council] and Local Union 608” as a result of, among other things: (1) Daly’s violations of the

District Council’s Job Referral Rules on January 19, 2009 and March 30, 2009 “by dispatching

[three members] of a constituent local union to a job” without a Union referral, and (2) Daly’s

“false answers to questions posed by the [RO] staff regarding [these events], . . . which were

material to an investigation of suspected violations of the Job Referral Rules.” (Daly Notice of

Possible Action Ltr., dated Aug. 24, 2010 (“Daly RO Ltr”).) On September 7, 2010, Walsh

issued a Notice of Veto of Daly’s union positions. (See Daly RO Notice of Veto, dated Sept. 7,

2010.)

III. Legal Standard

In reviewing the Review Officer’s decisions, the Court will “apply the same standard of

review applicable to review of final agency action under the Administrative Procedure Act

(“APA”), 5 U.S.C. § 701 et seq.” (RO Order ¶ 11.) Under § 10(e) of the APA, 5 U.S.C. § 706,

“a reviewing court determines de novo ‘all relevant questions of law.’” United States v. Dist.

Council, 941 F. Supp. 349, 361 (S.D.N.Y. 1996) (“Fiorino”) (citing cases). “In considering a

5
Holt was said to have dispatched a member of a constituent local union “to a worksite for
employment instead of the proper procedure of notifying the [‘Out of Work List’] for the next
union member to be dispatched to the jobsite.” (Mem. of RO in Response to the Court’s OTSC
Re: Application of John Holt, dated Oct. 14, 2010 (“Holt RO Response”), at 5.)
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relevant question of law under the APA, the reviewing court asks whether the agency’s action

was ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Id.

at 362 (citing 5 U.S.C. § 706(2)(A)).

An agency’s findings of fact “are entitled to affirmance” by the reviewing court “if they

are reasonable and supported by substantial evidence in the record as a whole,” and should be

vacated “only if they are unsupported by substantial evidence.” Fiorino, 941 F. Supp. at 361.

Court-appointed officers have been “granted broad power to investigate corruption.”

Int’l Bhd. of Teamsters v. Local Union No. 810, 19 F.3d 786, 788 (2d Cir. 1994); see also United

States v. Int’l Bhd. of Teamsters, 315 F.3d 97, 99 (2d Cir. 2002) (“Mireles & Roa”); United

States v. Local 359, United Seafood Workers, 55 F.3d 64, 66 (2d Cir. 1995).

IV. Analysis

Willoughby, Holt, and Daly argue, in sum and substance, that: (1) Walsh acted beyond

the scope of the authority granted to him in the RO Order and issued “arbitrary and capricious”

Notices of Veto with respect to each of them, and (2) they were not afforded due process of law

when they were “vetoed” from their union positions. (See, e.g., Willoughby Mem. of Law, dated

Sept. 24, 2010 (“Willoughby Mem.”), at 6−8; Holt Mem. of Law, dated Sept. 30, 2010 (“Holt

Mem.”), at 6, 9−10; Daly Mem. at 9−10, 11−12.) Walsh responds, among other things, that: (1)

his decisions to issue the Notices of Veto were supported by substantial evidence, and (2) the

applicants were afforded ample process. (See, e.g., Mem. of RO in Response to the Court’s

OTSC Re: Application of Paul Willoughby, dated Oct. 12, 2010 (“Willoughby RO Response”),

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at 8, 12; Holt RO Response at 7, 10 13−14; Mem. of RO in Response to the Pet. of John Holt,

dated Oct. 27, 2010 (“Daly RO Response”), at 7−8, 12−13.)6

Paragraph 5.b of the RO Order authorizes the RO to “veto or require the District Council

to rescind its . . . lack of action.” (RO Order ¶ 5.b.iii.) The RO was authorized by this paragraph

to remove Willoughby, Holt, and Daly from their union positions because, as further discussed

below, their (mis)conduct rendered their continued leadership “inconsistent with the objectives

of the [RO Order].” (RO Order ¶ 5.b.iii.(e); see also Willoughby RO Ltr.; Holt RO Ltr.; Daly

RO Ltr.)

Willoughby

On September 27, 2010, Willoughby filed an order to show cause seeking to vacate the

Notice of Veto issued by Walsh on August 27, 2010. (See Willoughby OTSC; Willoughby

Mem.) On October 12, 2010, Walsh filed an opposition to the order to show cause application.

(See Willoughby RO Response.) On October 19, 2010, Willoughby filed a reply to Walsh’s

opposition. (See Willoughby Reply Mem. of Law, dated Oct. 19, 2010.)

Willoughby argues, among other things, that: (1) the RO acted beyond the scope of his

authority because “neither the position of [C]onductor of Local 157 nor the position of shop

steward constitutes an office of, or employment by, the District Council”; and (2) the RO

“violated Willoughby’s constitutional and statutory rights to due process.” (Willoughby Mem. at

6−8.) Walsh counters, among other things, that: (1) District Council includes “all constituent

local unions” (RO Order ¶ 1.b), and “the RO has the authority to review . . . Willoughby’s

positions with respect to his constituent local [union], Local 157”; and (2) “[t]he RO is not a state

6
In their submissions to the Court, neither Willoughby, nor Holt, nor Daly requests relief
in the form of further proceedings (or additional process) before the RO. (See Willoughby
OTSC; Holt OTSC; Daly Mem.)
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actor but rather a creation of [the RO Order] who took action pursuant to that agreement,” and is

not constrained by the constitutional standards of due process as a state actor might be.

(Willoughby RO Response at 8, 12.) The RO also contends that he afforded Willoughby a

reasonable opportunity (process) to defend against the Notice of Veto. (See Willoughby RO

Response at 13.)

The Court concludes that Walsh’s R&O Authority extends to review of Willoughby’s

positions as Conductor and shop steward because, among other reasons, the RO Order defines

District Council to include “all constituent local unions.” (RO Order ¶ 1.b (“As used herein,

‘District Council’ includes all constituent local unions . . . and any other fund or plan established

now or in the future for the benefit of the District Council’s employees or officers as defined in

29 U.S.C. § 1002(3)”); Hr’g Tr. at 20:8-9); see also United States v. Int’l Bhd. of Teamsters, 905

F.2d 610, 618 (2d Cir. 1990) (“Friedman & Hughes”). As the RO has the authority to “review

the persons currently holding office or employment” with the District Council, such authority

extends to Willoughby’s positions with respect to his constituent local union, Local 157. (RO

Order ¶ 5.b.i.(3).)

The Court also concludes, consistent with clear precedent, that the RO is not a state actor

and, therefore, “constitutional arguments may not be leveled at actions by the [RO].” United

States v. Mason Tenders Dist. Council, No. 94 Civ. 6487, 1998 WL 23214, at *7 (S.D.N.Y. Jan.

13, 1998). “It is well settled that the actions of an officer appointed by a federal district court to

oversee the implementation of a union consent decree do not constitute ‘state action’ for

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constitutional purposes.” Id. (citations omitted); see also United States v. Int’l Bhd. of

Teamsters, 941 F.2d 1292, 1295−97 (2d Cir. 1990) (“Senese”).7

As shown below, the RO did afford Willoughby (and also Holt and Daly) appropriate and

legally sufficient notice and opportunity to contest the Notice of Veto, and his actions were based

upon ample evidence and cannot be considered “arbitrary and capricious.” (See Holt RO Mem.

at 14.); see also Chase Grp. Alliance LLC v. City of N.Y. Dep’t of Fin., 650 F.3d 146, 150 (2d

Cir. 2010) (citing Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542 (1985)).

The RO Order states that the RO may prescribe procedures in exercising his R&O

Authority. (See RO Order ¶ 5.b.) Accordingly, on June 21, 2010, the RO promulgated the

procedures that he would follow in determining whether to take action pursuant to ¶ 5.b.iii of the

RO Order, including whether to issue a veto. (See Procedures for Certain Action Pursuant to

Paragraph 5.b of the Stipulation and Order Mem., dated June 21, 2010 (“RO Procedures

Mem.”).) Walsh stated that the procedures were not required by the RO Order but were,

nevertheless, promulgated to “facilitate an efficient means for the RO to make or supplement a

record” and to allow persons to make written submissions to the RO. (RO Procedures Mem.)

As set forth in the RO Procedures, if, as here, the RO is contemplating a veto under

¶ 5.b.iii, he will send a “written Notice of Possible Action” to “relevant parties . . . at least ten

days prior to issuance of a ‘veto.’” (RO Procedures Mem.) The Notice of Possible Action

7
Walsh contends, as noted, that his actions did not involve disciplinary proceedings under
¶ 5.f of the RO Order, see, e.g., United States v. Int’l Bhd. of Teamsters, 247 F.3d 370, 386 (2d
Cir. 2001) (“Carey & Hamilton”), but rather the exercise of R&O Authority under ¶ 5.b.
Moreover, the District Council contends that “[Paragraph] 5.f applies to intra-union charges,
members bringing charges against other members and, in some instances, [the RO] wishes to
bring disciplinary charges in terms of your membership rights, expulsion, suspension from
membership or fines. The procedures that were promulgated between the [D]istrict [C]ouncil
and the [RO] under 5.f would apply in those situations” but not to the present cases. (Hr’g Tr. at
16:16-24.)
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includes a “concise statement of the matter under consideration,” reference to the conditions of

¶ 5.b.iii(a)−(e) which might apply, and an invitation for the parties given notice to make a written

submission by a specified time “stating any facts, law or arguments . . . which might be, in their

view, relevant to consideration of the matter by the RO.” (RO Procedures Mem.)

These Procedures were followed here. And, there does not appear to have been any page

limitation on Willoughby, Holt, and Daly’s submissions, nor any prohibition against their

submitting affidavits or other exhibits to the RO. (See RO Procedures Mem.) At oral argument,

counsel for Walsh summarized the parties’ responses as follows: “In these three cases,

[Willoughby], through his counsel, did make a written submission. [Holt], through his counsel,

had a meeting with the [RO]. . . . [Daly] had a letter submission that he made to the [RO].”

(Hr’g Tr. at 10:5-7, 11-12.)

The Procedures also provided that the RO may “invite said parties to appear at a

designated time and place at a Pre-Action Conference to present information and arguments to

the RO, as well as respond to questions which might be posed by the RO or his representative.”

(RO Procedures Mem.) Once the deadline for a written submission and/or conference has

passed, the RO will take action pursuant to ¶ 5.b.iii or decide not to take action, or “may take

such other or further action authorized by the [RO Order].”8 (RO Procedures Mem.)

As noted, these Procedures applied to Willoughby and afforded him ample process.

Notwithstanding the fact that there was no limitation on the length or content of his submission,

on August 19, 2010, Willoughby elected to make a (two-page) written submission to the RO

through his counsel in response to the allegations set forth in the Notice of Possible Action. (See

8
The RO Procedures, according to Walsh, “provided for notice of the charges, a
reasonable time in which to prepare a response and for the submission of a written response or an
oral conference, whichever the parties chose.” (Hr’g Tr. at 9:22-25.)
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Willoughby Ltr., dated Aug. 19, 2010.) Counsel for Walsh stated in oral argument that,

following the Notice of Possible Action, “[i]t was then up to the party to make full use of [the

RO Procedures].” (Hr’g Tr. at 9:25-10:1.) Walsh further noted that he “believe[d] that [the

parties] closed the door by their response in each one of these situations. I had envisioned a

[P]re-[A]ction [C]onference where people would be present to state what needed to be stated and

to ask questions and to have an opportunity for me to ask questions. So that was a process that

was contemplated that was, frankly, closed off by the response of petitioners.” (Hr’g Tr. at 13:6-

12.)

And, counsel for Willoughby acknowledged at oral argument that he did not request a

conference with the RO on behalf of his client:

THE COURT: Did you ask for [a conference]?

MR. DOWD: No, because --

THE COURT: Did you ask for one?

MR. DOWD: I did not.

...

THE COURT: So when you wrote your letter to [Walsh], did you say, here is my
letter, and we would like to have a hearing or a meeting or a conference with you
to discuss A, B, C, or D?

MR. DOWD: I put in, your Honor, that my client [Willoughby], because of the
fact that we had no records from nine years ago, my client was afforded no
opportunity to review any papers or documents connected to the event reviewed
in [the RO’s] letter.

(Hr’g Tr. at 14:7-10, 15-22.)

Walsh’s determination with respect to Willoughby meets the substantial evidence

standard − and was not arbitrary or capricious. See Fiorino, 941 F. Supp. at 362 (“Substantial

evidence is more than a mere scintilla,” but less than the weight of the evidence, and the

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“standard may be met despite the possibility of drawing two inconsistent conclusions from the

evidence.” (internal citations and quotation marks omitted)); see also United States v. Dist.

Council, 880 F. Supp. 1051, 1068 (S.D.N.Y. 1995) (the RO is entitled to “some latitude in basing

decisions upon his own perceptions, conclusions, and assertions regarding the information he has

received”). Walsh’s decision was supported by a declaration of Jack Mitchell (“Mitchell”), a

Special Investigator for the New York State Organized Crime Task Force (“OCTF”), dated

August 26, 2010 (“Mitchell Declaration”). Mitchell had “participated in the investigation of

[Willoughby] that uncovered bribery by a contractor . . . of union officials and others.”

(Willoughby RO Response at 6.) Mitchell’s Declaration was based upon his “direct

observations, review of OCTF investigative reports, transcripts of conversations recorded during

the investigation, discussions with Special Agents from the United States Department of Labor

and [his] recollection of the events.” (Willoughby RO Response at 6.) The Mitchell Declaration

set forth, among other things, “proof received through an undercover agent, and corroboration

through recordings, supporting [Willoughby’s] role in conveying a bribe payment of [$2,000

cash].” (Willoughby RO Response at 13.) Viewing this evidence, along with Willoughby’s

written submission, “the RO found reasonable cause to believe that [Willoughby] had conveyed

a labor bribe and chose to veto [Willoughby’s] employment.” (Willoughby RO Response at 13.)

The Court concludes that the RO’s powers are broad and should be broadly construed.

See Dist. Council, 880 F. Supp. at 1062; Carey & Hamilton, 247 F.3d at 376 (court-appointed

review officers “vested with broad investigative and disciplinary powers, including the power to

investigate allegations of corruption”); (see also Willoughby RO Response at 8 (quoting RO

Order at 3).) The RO Order specifies that, in reviewing the RO’s decision, the Court will apply

“the same standard of review applicable to review of final agency action under the [APA].” (RO

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Order ¶ 11.) The courts afford “great deference” to the decisions of court-appointed officers.

See United States v. Int’l Bhd. of Teamsters, 970 F.2d 1132, 1137−38 (2d Cir. 1992) (“Parise”)

(quoting Friedman & Hughes, 905 F.2d at 616−17); Carey & Hamilton, 247 F.3d at 379

(“extremely deferential standard of review”). Applying this standard and for the reasons stated

above, the Court upholds the RO’s determination with respect to Willoughby.

Holt

On October 4, 2010, Holt filed an order to show cause application seeking to vacate the

Notice of Veto issued by Walsh on September 3, 2010. (See Holt OTSC; Holt Mem.) On

October 14, 2010, Walsh filed an opposition to the order to show cause application. (See Holt

RO Response.) On October 19, 2010, Holt filed a reply to Walsh’s opposition. (See Holt Reply

Mem. of Law, dated Oct. 19, 2010.)

Holt argues, among other things, that the Notice of Veto should be vacated because:

(1) Walsh “acted outside his jurisdiction” because he was not authorized to “go back in time and

investigate matters which had occurred . . . prior to the date of his appointment as Review

Officer”; (2) Holt was “denied basic due process” because “there was no hearing at which any

witnesses appeared,” and Walsh “refused” to provide Holt with copies of “relevant documents”

prior to the issuance of his Notice of Veto; and (3) Walsh’s decision to issue the Notice of Veto

was “arbitrary, capricious, and an abuse of discretion” because he did not take “all of the relevant

issues and factors into account,” such as the fact that Holt “had already been subject to discipline

for the very infraction . . . that was the basis of the [Notice of Veto].” (Holt Mem. at 3−4, 6,

9−10.) Walsh counters, among other things, that: (1) “the RO has been granted broad power to

eradicate corruption,” the RO “has been specifically authorized to review persons currently

holding office or employment and to issue a veto if a person’s conduct violates [the RO Order or

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the Consent Decree] in any number of ways,” and the RO Order “provides no time limitation

whatsoever regarding the RO’s exercise of his [R&O Authority]”; (2) “[s]ince the RO is not a

state actor, . . . there was no constitutional right of due process,” and further, “the procedures that

the RO chose to promulgate and followed here do satisfy rudimentary due process

requirements”; and (3) it was within the RO’s discretion to determine that there was “substantial

evidence of such a violation having occurred.” (Holt RO Response at 7, 10, 13−14.)

The Court concludes that, as in the cases of Willoughby and Daly, the RO’s powers and

authority are broad and should be so construed. See Dist. Council, 880 F. Supp. at 1062. The

RO Order specifies no time limitation regarding the RO’s exercise of his authority. (See Holt

RO Response at 7.) Rather, the RO Order granted Walsh (broad) authority “to review the

persons currently holding office or employment, . . . and is granted the authority to review, all

proposed appointments to office or employment.” (RO Order ¶ 5.b.i.(3).) This provision of the

RO Order, as noted, does not provide a time limitation or statute of limitations constraining the

RO’s review. (See also Holt RO Response at 7 (the scope of the RO’s power was “designed to

eradicate corruption in the District Council”).)

Like Willoughby and Daly, Holt was afforded ample process to contest the Notice of

Veto. See Mason Tenders Dist. Council, 1998 WL 23214, at *7. Holt appears to have elected

not to make any written submission to Walsh (although he was entitled to do so), but on August

27, 2010, Holt and his counsel attended a conference with Walsh at which arguments were

presented on Holt’s behalf to counter the allegations set forth in the Notice of Possible Action.

(See Holt Mem. at 3; Holt RO Response at 4.) Walsh stated that counsel for Holt “called me and

requested that I meet with him and [Holt] and I did. I took the investigator who was the

declarant underlying that decision [i.e., O’Flaherty] and the four of us met for a couple of hours

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in a conference room at the union.” (Hr’g Tr. at 13:19-22.) According to Walsh, at the

conference, Holt and his counsel “articulated [Holt’s] version of the underlying events and, after

being given a copy of the [Investigative Report],” argued, among other things, that the telephone

record showed that Holt placed a personal call unrelated to union employment to the member of

the constituent local union in question. (Holt RO Response Ex. A at 8.) As noted by counsel for

Walsh at oral argument, “[t]he information received [at the conference was] considered by the

[RO]” in his determination. (Hr’g Tr. at 10:8-9.)

The Court also concludes that Walsh’s determination meets the substantial evidence

standard − and was not arbitrary or capricious. See Fiorino, 941 F. Supp. at 362; see also Dist.

Council, 880 F. Supp. at 1068. Walsh considered a report of the Independent Investigator

William P. Callahan, dated November 23, 2009 (“Investigative Report”), the declaration of

William J. O’Flaherty (“O’Flaherty”), a staff investigator for the RO, dated September 3, 2010

(“O’Flaherty Declaration I”), and the statements and arguments made by Holt and his counsel

during the conference with Walsh held on August 27, 2010. (See Holt RO Response at 4.) The

Investigative Report “summarized the interviews of numerous witnesses and set forth pertinent

information from telephone records supporting his recommendation that action be taken against

[Holt] for [violating the Job Referral Rules].” (Holt RO Response at 5.) Holt “denied a number

of times that he had sent [a union member] to the job site,” but the union member in question

acknowledged that Holt had referred him to the job site “when he arrived at the job site,

according to the [shop steward] and to [another union member].” (Holt RO Response at 5.) The

Investigative Report also indicated that “Holt may have removed a shop steward from his

employment improperly and fabricated union charges against said [shop steward], along with

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requesting a shop steward review to cover up the detection of his improper actions.” (Holt RO

Response at 5.)

The O’Flaherty Declaration I summarized pertinent facts from the conference O’Flaherty

attended with the RO and Holt and his counsel on August 27, 2010. (See Holt RO Response at

5.) O’Flaherty relates that Holt denied that he dispatched a member of a constituent local union

to a job site but concludes that this statement was “false and unsupported by witnesses.” (Holt

RO Response Ex. 4.) Viewing the evidence, “the RO issued the [Notice of Veto] finding

reasonable cause to believe,” among other things, that Holt violated the Job Referral Rules when

he dispatched a member of a constituent local union to a job in the jurisdiction of the District

Council in September 2009. (Holt RO Response at 6.) The Court upholds the RO’s

determination with respect to Holt.

Daly

On October 14, 2010, Daly filed an appeal from Walsh’s decision to issue a Notice of

Veto. (See Daly Mem.) On October 27, 2010, Walsh filed an opposition to Daly’s appeal. (See

Daly RO Response.) On November 4, 2010, Daly filed a reply to Walsh’s opposition. (See Daly

Reply Mem. of Law, dated Nov. 4, 2010.)

Daly argues, among other things, that: (1) the RO Order “contains no language justifying

the removal of an elected officer of the Local union, indicating therefore that the [RO] does not

have such authority”; (2) the Notice of Veto is “not in accordance with the law because it

exceeded [the RO’s] specific authority under the [RO Order] and denies Daly’s right to process”

when “[a]t no point was Daly permitted an opportunity to cross-examine the witnesses, offer his

own witnesses, or otherwise challenge the allegations against him or offer mitigating evidence”;

and (3) the Notice of Veto is “arbitrary and capricious” because it contains no “satisfactory

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explanation for [the RO’s] action” and is “inconsistent with past treatment of similar violations

of the Job Referral Rules.” (Daly Mem. at 9−10, 11−12.) Walsh counters, among other things,

that: (1) “though the RO was empowered to exercise his R&O Authority without following

designated procedures, he established procedures providing for notice and an opportunity to be

heard and followed those procedures to the letter,” and Daly “chose not to fully take advantage

of the process in place”; (2) “the plain language of the [RO Order] gives the RO [R&O

Authority] over both [Daly’s] positions as a business agent of the District Council and as

[elected] president of his constituent local,” and it was “precisely with respect to these types of

supervisory positions that set a tone for the membership that the parties intended the RO to have

this type of review capability”; and (3) “the policies of . . . other union official[s] are not a valid

point of comparison,” and “the RO has vetoed another business agent, John Holt, for violating

the Job Referral Rules.” (Daly RO Response at 7−8, 10, 12−13.)

The RO’s authority is broad and should be so construed. See Dist. Council, 880 F. Supp.

at 1062. “Paragraph 5.b provides for the review of persons currently holding office or

employment,” and does not distinguish between elected and appointed positions. (Hr’g Tr. at

10:18-19.) Walsh notes that “it was precisely with respect to these types of supervisory [i.e.,

elected] positions that set a tone for the membership that the parties [to the RO Order] intended

the RO to have this type of review capability.” (Daly RO Response at 8.) The RO has been

granted broad power to “eradicate corruption” and has been specifically authorized to issue a

veto if a person’s conduct is inconsistent with the objectives of the RO Order, such as Daly’s

violation of the Job Referral Rules. (See RO Order ¶ 5.b.iii.(e).)

Daly (like Willoughby and Holt) was afforded sufficient process by Walsh. See Mason

Tenders Dist. Council, 1998 WL 23214, at *7. Although there were no page or content

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limitations upon his submission, on September 3, 2010, Daly, through his counsel, chose to

submit a (two-page) letter in response to the Notice of Possible Action in which he asserted that

his contacts with the carpenters in question involved “shaping jobs,” “a practice permitted for

many years and engaged in by many business representatives, which allowed carpenters to

present themselves at a site and work . . . and did not involve a referral from the union.”9 (Daly

Mem. at 3; Daly Mem. Ex. D.) Daly asserted that any prohibition of such a practice was not

effectuated until September 30, 2009, after Daly committed the acts in question. (See Daly

Mem. at 3; Daly Mem. Ex. D.) His submission makes clear that Daly understood the allegations,

i.e., the incidents the RO was considering as a basis for a veto, and that he availed himself of the

opportunity to respond in writing to the Notice of Possible Action. Daly “declined to participate

in the process in any deeper way and waived any further benefits of the procedures.” (Daly RO

Response at 12.)

Walsh’s determination meets the substantial evidence standard − and was not arbitrary or

capricious. See Fiorino, 941 F. Supp. at 362; see also Dist. Council, 880 F. Supp. at 1068.

Walsh determined to issue a veto after having considered a declaration of O’Flaherty, dated

September 3, 2010 (“O’Flaherty Declaration II”) and the letter submitted by Daly’s counsel on

September 3, 2010. (See Daly RO Response at 4−5.) The O’Flaherty Declaration II

“summarizes pertinent facts from the investigation into [Daly’s] violation of the Job Referral

Rules,” including “information from telephone records that [O’Flaherty] reviewed.” (Daly RO

Response at 5.) These records show that Daly referred three union members to two job sites who

were “not on the District Council’s [Out of Work List] at the time [they] started work at the

9
Daly apparently opted to rely upon his written submission and did not ask for a
conference. (See Hr’g Tr. at 10:11-13 (“[Daly] had a letter submission that he made to the [RO].
And in fact, there were a number of letters, but one prior to the [RO’s] decision.”).)
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[respective] job site[s]." (Daly RO Response at 5-6.) O'Flaherty also concludes that, during an

August 12,20 I 0 interview with Daly and Mitchell at the District Council, "Daly falsely claimed

that [the three union members] had been requested by the contractor at the Oob site] off of the

District Council [Out of Work List]." The RO's decision that Daly sent three union members to

job sites in violation of the Job Referral Rules "is consistent with the facts and the logical

inferences of those facts." (Daly RO Response at 15.) The Court upholds the RO's

determination with respect to Daly.

V. Conclusion and Order

For the reasons stated herein, the respective orders to show cause brought by Willoughby

[#998J and Holt [#1002], and the appeal brought by Daly [#1009] are denied. The Clerk of

Court is respectfully requested to enter judgment in these cases.

Dated: New York, New York

December 21, 2010

RICHARD M. BERMAN, U.S.D.J.

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