\nColleagues,<\/p>\n
The following letter was delivered to the Board of Local 47 on behalf of Lawyer Robert Hirschman and concerned members of Local 47 concerning the conduct of the Local in regards to the potential
\nsale of the property.<\/p>\n
It\u2019s a good read and will give you, FINALLY, many of the views of those opposing the sale.<\/p>\n
Please send all your comments to the blog.<\/p>\n
THE COMMITTEE<\/p>\n
From: Robert Hirshman and Associates<\/p>\n
January 5, 2016 Via Personal Delivery
\nMusicians Club Board of Directors
\nand Officers
\nAFM Local 47 Board of Directors
\nand Officers
\n817 North Vine St.
\nLos Angeles, CA 90038
\nJohn Acosta, President
\nRick Baptist, Vice-President
\nGary Lasley, Secretary-Treasurer
\nJudy Chilnick
\nDylan Sky Hart
\nBonnie Janofsky
\nPam Gates
\nJohn Lofton
\nAndy Malloy
\nPhil O\u2019Connor
\nBill Reichenbach
\nVivian Wolf<\/p>\n
Re:
\nViolations of 29 USC 501 et seq. (LMRDA)<\/p>\n
Dear members of the Boards of Directors and Officers:<\/p>\n
I am a member of Local 47 and the Musicians Club.<\/p>\n
In my capacity as a lawyer, I represent several members
\nof Local 47\/Musicians Club who, along with the interests
\nof all other members, are aggrieved by the manner in
\nwhich the Board is handling the proposed sale of the
\nMusicians Club\u2019s principal asset, the real property
\nand improvements located at 817 North Vine St. (\u201cthe Building\u201d).<\/p>\n
Based on a review of minutes of the Board of Directors of
\nthe Musicians Club and of Local 47; information, both orally
\nand in writing, presented to the members at the special
\nmeeting of members on October 5, 2015; written materials
\ncirculated in the Overture and on the website; the referendum-
\nballot mailed by authority of the Board and Officers to the
\nmembers in October, 2015; and on conversations with
\nvarious Board members and Officers, I have concluded
\nthat the Board of Directors, and each of them, are in breach
\nof their respective fiduciary duties to the members, in
\nviolation of 29 USC \u00a7501, the Labor-Management Reporting
\nand Disclosure Act (LMRDA)<\/p>\n
Labor-Management Reporting and Disclosure Act, Section 501<\/p>\n
Section 501 (a) of the LMRDA, entitled \u201cFiduciary Responsibility
\nof Officers of Labor Organizations,\u201d provides, in relevant part, that,<\/p>\n
\u201cThe officers \u2026 and other representatives of a labor organization
\noccupy positions of trust in relation to such organization and its
\nmembers as a group. It is, therefore, the duty of each such person,
\ntaking into account the special problems and functions of a labor
\norganization, to hold its money and property solely for the benefit
\nof the organization and its members and to manage, invest, and
\nexpend the same in accordance with its constitution and bylaws
\nand any resolutions of the governing bodies adopted thereunder,
\nto refrain from dealing with such organization as an adverse
\nparty or in behalf of an adverse party in any matter connected
\nwith his duties.\u2026\u201d<\/p>\n
\u201cThe purpose of Section 501 is to deal with misuse of union
\nfunds and union property in every manifestation by union
\nofficials.\u201d (See Wood vs. Journeymen Barbers, Hairdressers,
\nCosmetologists and Proprietors International Union, 454
\nFed 2nd 1347, 1354 (7th Cir. 1972.) Furthermore, Section 501
\nis broad in its reach and has been applied not only to the
\nmonetary interests of the union and its members, but to any
\narea of the union officials\u2019 authority. (See Stelling Et Al.
\n vs. International Brotherhood of Electrical Workers,
\nLocal 1547, 587 Fed 2nd 1379, 1386-87, 9th Cir. 1978,
\ncert. Denied, 442 U. S. 944 (1979).)<\/p>\n
For example, in International Longshoremen\u2019s vs. Virginia
\nInternational Terminals (928 Fed. Supp. 655 (E. D. Va.)
\n the U.S. District Court opined that a union official may
\nbe held liable under Section 501 for mismanagement,
\nsecrecy, failure to disclose, failure to process grievances,
\nand failure to conduct union affairs as a \u201cposition of trust.\u201d
\n(See also International Longshoremen\u2019s vs. Virginia
\n International Terminals (928 Fed. Supp. 655 (E. D. Va.)<\/p>\n
Grievances of Members Relating to Way the Boards\/Officers
\nHave Handled the Proposed Sale of the Local 47 Building<\/p>\n
My clients\u2019 grievances (as well as the grievances of countless
\nothers) with respect to the proposed sale include (1) breach of
\nthe duty of impartiality, (2) misuse of union funds, (3) making
\nfalse and misleading representations to the members, (4) failing
\nto disclose material facts to the members, and (4) failing to
\ntake steps to protect property, and acting imprudently with
\nrespect to the proposed sale.<\/p>\n
Breach of Duty of Impartiality<\/p>\n
Section 501 (a) provides, in relevant part, that \u201cThe officers\u2026
\noccupy positions of trust in relation to such organization and
\nits members as a group.\u201d<\/p>\n
The phrase \u201cas a group\u201d means that the organization and its
\ngoverning body must act impartially and avoid favoring
\nthe interests of certain members over those of other members.
\nThat is especially true here where the Musicians Club
\nConstitution and Bylaws requires a vote of the members
\nto sell or transfer the Clubs real property, viz., 817 Vine St.
\nIn this situation, the only role of the Board and officers is to
\nput the question\/referendum to a vote of the members.<\/p>\n
California law is in accord: \u201cThe fiduciary duty of a trustee
\nincludes the duty to deal impartially with the beneficiaries.\u201d
\nHearst v. Ganzi (2006) 145 Cal.App.4th 1195, 1200 [52
\nCal.Rptr.3d 473, 475].<\/p>\n
However, the Board and officers of the Musicians Club
\nand Local 47 have breached their fiduciary obligations
\nto the members in the following respects:<\/p>\n
The Board and officers, in all of its written and oral
\ncommunications with the members, have taken the
\none-sided, biased position that the property must be
\nsold to ensure the viability of Local 47 in the future.
\nIn doing so, the Board spent $15,000 with Bridge
\nStreet, Inc., a public relations\/lobbying firm, who
\ndevised and designed four color written materials
\ncirculated to the members, and included in the
\nOverture, unabashedly and vigorously promoting
\na \u201cyes\u201d vote on the referendum. Moreover, the
\nBoard and officers mounted a telephone \u201cblitz\u201d
\ncampaign, at significant cost to local 47, urging
\nmembers to vote \u201cyes\u201d on the referendum, as if
\na sale of the building were the only choice for
\nthe survival of the union.<\/p>\n
And in that \u201cblitz\u201d significant misinformation
\nwas disseminated to the members, including
\nthat the Local was in debt to the tune of $700,000,
\nwhen in fact Local 47 has reserves of $900,000.<\/p>\n
Based on the materials reviewed, there appears to be no
\neffort made by the Board or officers to be impartial to
\nthe \u201cmembers as a group\u201d with respect to the referendum.
\nCrucially, no effort was apparently made to include not
\nonly an argument in favor of the sale, but an argument
\nagainst the sale. Thus, the Board and officers breached
\ntheir fiduciary obligations to the \u201cmembers as a group.\u201d<\/p>\n
Moreover, there is a compelling argument to vote \u201cno\u201d
\non the referendum, which the Board completely ignored.<\/p>\n
In the slideshow presented by the Board and officers at
\n the October 5, 2015 special meeting of members (and
\nalso available on the Local 47\/Musicians Club Website)
\nit is claimed that in 1950 the Local used the entire
\nbuilding, whereas today, \u201cthe local occupies less than
\n50% of the building.\u201d Yet the Board and officers admit
\nthat the reduction has positive benefits in that there has
\nbeen a reduction from 52 full-time employees to 22
\nfull time employees, generating a significant savings
\nin staffing costs. Furthermore, a vacancy of half the
\nbuilding has resulted in the receipt of significant rental
\nincome to the Local. For example, rental income in 2014
\nwas $170,000, and it is expected that rental income in
\n2015 will be about the same.<\/p>\n
Moreover, the Board admits, insofar as revenues and
\nexpenses, that \u201cwe are living within our means,\u201d which
\nI interpret as there are sufficient revenues to cover
\noperating expenses.<\/p>\n
With respect to what appears to be the Board\u2019s main concern
\n\u201cBuilding Repairs,\u201d the Board estimates that the \u201capproximate
\ncost of renovations [are] over $300,000,\u201d including $80,000
\nfor exterior repairs, $50,000 to upgrade the electrical grid,
\n$200,000 to replace the roof, and re-model and reconfigure
\nthe interior to lower costs of utilities.<\/p>\n
However, when compared to paying $1 million for broker
\nfees, escrow and closing costs if the building is sold,
\n$300,000 to renovate the existing building appears to
\nbe a bargain. (See Exhibit 1 attached.)<\/p>\n
There are several ways the amount can be financed. First,
\nthe Musicians Club is indebted to the Local in the amount
\nof approximately $500,000. Perhaps that loan can be called,
\ndepending on its terms. If not, because the Club owns the
\nbuilding outright and free and clear of any liens or mortgages,
\nthe Club is in a position to obtain a first mortgage at a
\nvery favorable interest rate (in the current economic climate)
\nand use the money to repair, renovate and rehab the building.
\nThus, a loan of $300,000 at an interest rate of 4.5% payable
\nover 15 years would require monthly payments, including
\nprincipal and interest, of about $2100 or an annual amount
\nof $25,000. An increase in membership dues of a mere $3.50
\nper year, per member (designated as a building or mortgage fund),
\nwould cover the cost of the mortgage payments. The question
\nshould have been put to the members as to whether they would
\nagree to an increase of $3.50 per year to keep the building. Instead,
\nthe Board presented the sale as a panacea to solve all of its financial
\nproblems, now and into the future. That appears to be an unrealistic
\nadventure in Fantasyland, as far as I\u2019m concerned.<\/p>\n
Furthermore, improvements to the building will likely increase
\nthe amount of rent paid by tenants.<\/p>\n
In addition to the Board\u2019s abject failure to include in materials
\naccompanying the ballot an argument against a sale, the ballot
\nitself is confusing and potentially misleading. It provides:<\/p>\n
\u201cShall the officers of the Musicians Club of Los Angeles
\n(the Club) be authorized to sell the Clubs real property \u2013
\nlocated at 817 Vine St., Hollywood, CA 90038 \u2013 for not
\nless than $22 million to the successful highest bidder?\u201d<\/p>\n
While a \u201cyes\u201d vote likely means the officers may sell the
\nProperty to the highest bidder provided the bid is no less
\nthan $22 million, the meaning of a \u201cno\u201d vote is unclear.
\nDoes it mean the officers are prohibited from selling the
\nBuilding for less than $22 million if there is no more
\nthan one bidder? Or does it mean that the officers may
\nsell the building to the only bidder even if the price is
\nless than $22 million?<\/p>\n
In that regard, the Board should have included what
\nwe\u2019ve all come to expect from a referendum vote \u2013
\nan explanation of what a \u201cyes\u201d vote means, and what
\na \u201cno\u201d vote means. The failure to do so was a breach
\nof the Board\u2019s fiduciary obligations to the members
\nto fully and fairly inform the members.<\/p>\n
And with respect to the ballots, I have heard that several
\nmembers received an envelope with no ballot in it. Given
\nthe demonstrated self-interest of the Board for a \u201cyes\u201d
\nvote that leaves open the question of possible ballot
\nstuffing to ensure the vote is in favor of a sale. And
\nthat suspicion is raised solely by the biased manner
\nin which the Board handled the whole referendum
\nprocess.<\/p>\n
Additionally, the manner in which the ballots of those
\nmembers who voted and returned their ballots, leaves
\nopen the question of Board impartiality, given their
\ndemonstrated fervor to obtain a \u201cyes\u201d vote.<\/p>\n
According to the procedure established by the Board
\nwith respect to the referendum, completed ballots are
\nretained in the office of the secretary\/Treas., Gary
\nLasley, a vocal proponent of a \u201cyes\u201d vote.<\/p>\n
Yet Local 47 Bylaws provide for significant safeguards with
\nrespect to the impartial safekeeping of completed ballots
\nuntil they are counted. In fact, completed ballots are retained
\nby the Post Office until they are ready to be counted. And then
\non the day appointed to count the ballots, counting is done
\nunder the supervision of an impartial, independent third-party
\norganization to ensure the count is accurate. No explanation
\nwas given for the departure from this long-standing practice.
\nAnd, again, the devious and inappropriate manner in which the
\nBoard has handled the referendum reasonably leads to suspicions
\nof misdealings and a lack of trust among the members.<\/p>\n
Yet the Board has rebuffed all complaints that the procedures
\nit adopted lack transparency and the safeguards of impartiality.<\/p>\n
(2) Other Concerns of the members<\/p>\n
(a) At the Special Meeting of members on October 5, 2015 the
\nBoard represented it had at least two offers to purchase the
\nLocal 47 Building for $24 million. The same representation
\nwas made by the Board in writing. (See attached marked Exhibit \u201c1\u201d)<\/p>\n
Yet on the referendum\/ballot, the Board seeks authority to sell
\nthe Building for not less than $22 million, representing a potential
\nloss to the Musicians Club\/Local 47 of $2 million \u2013 an amount
\nwhich, according to members of the Board, would solve the
\nalleged financial \u201cproblems\u201d of Local 47. But there was no
\nexplanation in the ballot or materials accompanying the
\nballot on this significant discrepancy. And if the vote is
\n\u201cyes\u201d the property can be sold for $22 mil.<\/p>\n
(b) Neither in its minutes nor elsewhere has the
\nBoard made a binding commitment to members
\nto replace the Building, once it is sold.<\/p>\n
Nor has the Board permitted the members to vote on
\nany aspect of replacement premises, if any, or its
\nlocation and amenities.<\/p>\n
What assurances do the members have there will be
\na replacement building if 817 Vine St. is sold?<\/p>\n
In that regard there is no provision in the Musician\u2019s
\nClub constitution\/bylaws permitting the Club to
\npurchase a new building.<\/p>\n
(c) While the minutes of the Musicians Club Board
\nMeeting of April August 11, 2015 recite that \u201cthe
\nBoard Of Directors for the Musicians Club of Los
\nAngeles has determined, after a duly diligent inquiry,
\nthat it is in the best interest of the Musicians Club
\nto solicit potential offers to purchase the Clubs
\n property located at 817 Vine St., Hollywood\u2026\u201d
\nHowever, the Board has not shared with the members
\nthe contents and details resulting from the \u201cdiligent
\ninquiry.\u201d Thus, many members question the Board\u2019s
\ndecision to present the issue to the members for a vote.<\/p>\n
(d) On Exhibit 1 the Board, whether negligently or
\nintentionally, represents the amount of the \u201csurplus
\nrevenue\u201d available after a sale of the building, purchase
\nof a new building and renovations to the new building.
\nThere, the Board represents that the \u201csurplus revenue\u201d
\nwill be $11 million when in fact, based on its own
\nfigures and on the ballot language, the surplus revenue
\nmay be no more than $8 million, an overstatement
\nof $3 million. Thus, if the building sells for $22 million
\n(as the Board will be authorized to do based on the
\nballot language), and estimated closing costs are $1
\nmillion (as the board represents \u2013 $999,600), the
\nsurplus revenue will only be $8 million. How can
\nthe members rely on the diligence, accuracy, and
\nbusiness acumen of a Board which makes such
\ninexcusable errors?<\/p>\n
(e) None of the Board members claim to have significant
\nexperience in the valuation or sale of commercial property,
\nparticularly unique commercial property such as our building.
\nIt takes a high level of expertise to determine the fair market
\nvalue of a unique building. And in my significant
\nexperience as a real estate and business attorney, I would
\nonly trust an appraiser holding the designation of Master
\nof the Appraisal Institute (MAI) to reach an accurate
\nconclusion of value of 817 Vine St. Yet a prominent
\nBoard member and officer was heard to naively say
\nthat he was relying on the potential buyers to set the
\nprice (that is, \u201cvalue\u201d) of the building.<\/p>\n
Moreover, my long experience as a real estate attorney
\ninforms me that real estate brokers, whether representing
\na buyer or seller, have an inherent conflict of interest
\nbetween representing the interests of their client and
\nrepresenting their own interests to earn a commission.
\nWith this conflict of interest in mind, I do not rely on
\na broker or agent\u2019s opinion of value of a property, unless
\nthe property is a cookie cutter, tract home, where the
\nvalue of one house is likely to be the value of all
\nhomes of the same floor plan. But 817 Vine St. is a
\nunique one-of-a-kind building and its location (the
\nland value) is somewhat unique.<\/p>\n
Yet the Board has not hired an independent appraiser
\n(beholden only to the Board) to determine the fair
\nmarket value of 817 Vine St. Instead \u2013 and given the
\ninherent conflict of interest \u2013 it is imprudently
\n relying on a broker\u2019s opinion of the value of the
\nproperty. In my opinion, that is another breach of
\nfiduciary duty by the Board to the members.<\/p>\n
CONCLUSION<\/p>\n
To avoid significant legal costs I suggest a meeting
\nnext week with the Board to discuss the members
\ngrievances and determine if there is an amicable
\nresolution acceptable to both sides which must
\nnecessarily involve a recall of the current referendum,
\nthe distribution of accurate financial information, and
\nan argument against a sale, as well as an argument for
\na sale. Local 47 has about 7,000 members, the vast
\nmajority of whom are not actively involved in union
\nactivities. These folks, who have voted, have done so
\nin reliance on false representations, on the lack of accurate
\nfinancial information, and on a totally one-sided argument
\nin favor of a sale. That situation must be remedied before
\nwe can say there has been a meaningful vote by the members.<\/p>\n
In that regard, the LMRDA guarantees union members not
\nonly an equal vote, but also a “meaningful” vote. Bunz v.
\nMotion Picture Mach. Operators’ Union, 567 F.2d 1117,
\n1121 (D.C. Cir. 1977). Whether members were afforded a
\nmeaningful vote depends on “whether they were given adequate
\nnotice and information regarding the subject matter and
\nnature of the vote” and whether they “had enough time and
\nopportunity to mount effective support or opposition to
\nthe leadership’s position.” Bauman v. Presser, 117
\nL.R.R.M. (BNA) 2393, 1984 WL 3255, at *7 (D.C. Cir. 1984).<\/p>\n
If we cannot reach an amicable resolution, I am authorized
\nto file a lawsuit seeking to enjoin (stop) the Local and Musicians
\nClub from continuing with the current ballot process, together
\nwith an order by the court that a new ballot process begin along
\nthe lines I have suggested in this letter. If a lawsuit becomes
\nnecessary, the Local and Musicians Club will likely incur
\nhundreds of thousands of dollars in legal fees and court costs
\nand is unlikely to prevail. Is that how the membership wants
\nits monies spent? I doubt it.<\/p>\n
I therefore appeal to your good sense and goodwill to make a
\nsubstantial effort to resolve the legal issues raised by the
\nirregular and improper ballot process currently pending.<\/p>\n
Very truly yours,<\/p>\n
ROBERT HIRSCHMAN & ASSOCIATES<\/p>\n","protected":false},"excerpt":{"rendered":"
Colleagues, The following letter was delivered to the Board of Local 47 on behalf of Lawyer Robert Hirschman and concerned members of Local 47 concerning the conduct of the Local in regards to the potential sale of the property. It\u2019s a good read and will give you, FINALLY, many of the views of those opposing […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-144","post","type-post","status-publish","format-standard","hentry","category-committee-newsletters"],"_links":{"self":[{"href":"http:\/\/www.responsible47.com\/index.php?rest_route=\/wp\/v2\/posts\/144","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.responsible47.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.responsible47.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.responsible47.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.responsible47.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=144"}],"version-history":[{"count":0,"href":"http:\/\/www.responsible47.com\/index.php?rest_route=\/wp\/v2\/posts\/144\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.responsible47.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.responsible47.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=144"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.responsible47.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}