February 16, 2012 2:57pm PT by Jonathan Handel
Anti-Merger Lawsuit Looming Against SAG (Exclusive)
Opponents of SAG-AFTRA merger have prepared a lawsuit against the union and its officers, and are prepared to go into federal court by Tuesday in an effort to halt the merger referendum, The Hollywood Reporter has learned.
Counsel for the opponents, David Casselman of Wasserman, Comden, Casselman & Esensten, told THR he has been negotiating with SAG lawyers seeking additions to the referendum packet to be sent to members – specifically, “an agreement on key facts in dispute for joint presentation to the members.”
However, if negotiations fail, Casselman’s clients – who he said number about 100, but didn’t name – are likely to give the thumbs up on going into court by Tuesday. Monday is a holiday, Presidents’ Day, and courts are closed.
“The current merger plan and announcements fail to fully and fairly disclose the truth,” Casselman said. “From protection of pension and heath benefits, split earnings, to negotiating strength, the members are receiving misleading information, rather than the facts.”
How likely is a lawsuit? Casselman didn’t lay odds, but said that if he and union lawyers reached agreement on additions to the referendum packet, “we hope that suit will not be necessary, barring other problems.”
He added that SAG and merger opponents had tentatively agreed on wording of the opposition statement to be included in the referendum materials.
If filed, the lawsuit will allege that the Phase I agreement, incorporated in SAG’s constitution, requires that a detailed study be done of the financial impact of merger on the unions’ pension and health plans. It will seek to delay the scheduled merger referendum until a study is performed and, in Casselman’s words, “full and fair disclosures to (union) members.”
The suit will also allege breach of fiduciary duty by officers and perhaps other board members under federal labor law, asserting that they’re deceiving the members as to the effects of merger.
“These complaints are without merit,” SAG general counsel Duncan Crabtree-Ireland told THR.
The language of the Phase I agreement requires only that certain committees “recommend that the consolidation of the respective pension plans be studied so that it may ascertained (a) what, if any, merger plan can be achieved which will satisfy the requirements of law and the protection of all eligible members against loss of benefits, presently or in the future; and (b) the willingness of industry trustees to consolidate the plans.”
It’s not clear how merger opponents translate “recommend” into a requirement that the boards commission a study. Crabtree-Ireland said that the SAG board “considered and acted on all recommendations in connection with the merger process and approved the Feasibility Report as fully addressing those recommendations.”
The Feasibility Report addressed legal issues, but not financial ones specific to the SAG and AFTRA plans, nor the willingness of trustees to modify the plans if the unions merge. On the latter point, sources close to the union have previously told THR that the plans’ management-side trustees were not willing to study or address any of these matters until and unless the unions merge.
AFTRA suspended Phase I in 2008, and in response the SAG board passed a motion interpreting the guild’s constitution to reflect that Phase I was terminated. Since that time, joint contract negotiations on the TV/theatrical and commercials contracts have been conducted under what the unions have publicly called “the Phase I framework” pursuant to separate agreements, but not under Phase I itself.
Casselman countered that “there is grave doubt in our view about the claimed suspension or removal of the Appendix I requirements.” He also asserted that the provisions regarding a pension plan study had been restated in board resolutions in 2003, 2008 and 2012. A SAG source said this was absolutely not the case.
With regard to the fiduciary duty claim, Crabtree-Ireland said “Throughout the nationwide Presidents’ Listening Tour and the member-led Group for One Union merger discussions the board has acted with the utmost fidelity to the interests of our broad-based and diverse membership.”
Litigation is costly, but Casselman said “we are committed to the end.” He added that the case was not being handled on contingency.
His clients might not end up footing the bill, however. If the plaintiffs prevail on the fiduciary duty claim, the judge has discretion to require that SAG pay their attorneys fees (which could be substantial), their court costs (which are usually not particularly large) and any other necessary expenses (which might include big-ticket consultants and expert witnesses).
Such fee shifting is contrary to the general rule in U.S. lawsuits, which is that each side bears its own fees and costs, but that rule doesn’t apply when statutes, such as this one, explicitly provide otherwise.
Casselman told THR that the named plaintiffs were undetermined, but that there may be “a large number,” and that in any case the plaintiffs would be representing all SAG members in a derivative capacity.
If not delayed by a suit, merger ballots are scheduled to go out on or about February 27, with a return date of March 30.