Teamsters Local 700 Not Liable for $2.3 Million Lease Agreement

Illinois Supreme Court Ruling Issued in Favor of Local 700

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On March 21, 2019, the Illinois Supreme Court issued its decision in 1550 MP Road, LLC v. Teamster Local Union No. 700 in favor of Teamsters Local 700, which states that the Union is not liable for a $2.3 million lease purchase agreement. The court’s decision vacates a 2015 circuit court decision, which was upheld in part by an appellate court.

The case involved Thomas Clair, a former officer of Teamsters Local 726, who entered into a lease/purchase agreement with a real estate developer without advising or obtaining the consent of the union’s membership. Local 726 was placed into an emergency Trusteeship by the International Brotherhood of Teamsters (International) as a result of financial irregularities unrelated to the lease/purchase agreement.

The Trustee assigned by the International subsequently questioned the validity of the lease/purchase agreement because it appeared that it was not entered into in accordance with Local 726’s by-laws, which track the requirements of the Illinois Property of Unincorporated Associations Act (PUAA). The bylaws and the PUAA layout how the Local legally leases or purchases property—both require notification to and a vote by the membership. The Trustee found no evidence that the membership was advised of or voted in favor of the lease/purchase agreement.

Local 726 ultimately lost its charter and its membership was transferred into a newly chartered statewide public-sector local, Teamsters Local 700. Local 700’s membership also included members from Local 714, which had also been placed into a Trusteeship and lost its charter.  Local 700 ultimately vacated the premises and the real estate developer filed suit to try and collect all of the remaining rents due under the lease. The developer later amended the complaint to include the International and a majority of the members of the International’s Executive Board because the International made the decision to terminate Local 726’s charter.

The case was tried in the Circuit Court of Cook County 2015. Judge Raymond Mitchell found Local 700 liable on several bases, and also found one International Vice President liable. All of Judge Mitchell’s holdings were reversed by the Appellate Court of Illinois for the First District in November of 2017, with the exception of Count I against Local 700 for breach of contract based on the argument that it was the legal successor of Local 726. That remaining basis for liability was overturned by the Illinois Supreme Court because neither Local 726 nor the real estate developer, who was represented by an attorney, ensured that the requirements of PUAA were followed. Specifically, the membership was not notified of the lease/purchase agreement and did not vote to authorize the agreement.

The Supreme Court concluded the agreement was void ab initio (i.e. it is as if the agreement never existed) based on the parties’ failure to comply with PUAA. The court recognized that the very purpose of PUAA is to protect members of an unincorporated association (like unions, clubs, societies, etc.) who can be financially liable for the debts of the association. As a result of the courts holding, it did not have to decide whether it should extend corporate successor liability to labor unions, and also did not have to reach the issues relating to damages.

“We are extremely pleased with the Supreme Court’s decision as it rightfully protects our members from a financial responsibility that they were not aware of and did not approve,” said Teamsters Local 700 President Michael G. Melone. “This was a long and extremely hard-fought battle, and we would like to express our gratitude to General President Hoffa for standing by us and supporting us in this fight. We also want to thank our legal team for all of their hard work and tireless hours they gave over the last few years to resolve this case.”

“This is a huge win for the members of Local 700,” said Secretary-Treasurer Vincent F. Tenuto, Jr. “It took a long time to get the result we wanted but it was worth all of the efforts put forth by the attorneys and staff of the Union. The current Executive Board is proud to be transparent with our members and fight for their best interests.”

Local 700 was represented in the appellate and Supreme Court proceedings by Sherrie E. Voyles and Brandon M. Anderson of Jacobs, Burns, Orlove & Hernandez as well as Richard J. Prendergast and Michael Layden and their team at Richard J. Prendergast & Associates.

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