Making good on its threat over the last few weeks, the ghost of Membership First has risen with figures like Ed Asner, Ed Harris, Anne-Marie Johnson and Martin Sheen leading a group of some 68 actors in a suit aimed at stopping the proposed merger with AFTRA.
The core theme of the suit is grounded in the disclosure requirements inherent in federal labor law. The complaint rests, in part, on the applicability of the concept of a “meaningful” vote by union members. This principle is at the heart of labor’s bill of rights, the Labor-Management Reporting and Disclosure Act or LMRDA.
When I worked with dissident UAW members during their contract negotiations a few years ago we used this concept in our discussions. The core of this kind of claim is that union members are guaranteed certain voting rights by the LMRDA and their own union constitutions. To be meaningful such voting rights must be accompanied by the information needed to decide how to vote. Since, arguably, the merger document package does not contain a full assessment of the risks involved in a merger, SAG members cannot make a meaningful decision on whether to vote for or against merger.
When working on the UAW issues, we also paired the “meaningful” vote argument with a claim grounded in securities law as well, namely the obligation of employers who issue securities to provide full disclosure of both benefits and risks.
Here, a similar claim based in California corporate law could be invoked although the current version of the complaint, which can be amended, does not do so. SAG is a member governed mutual benefit corporation (a “non-profit” in common parlance) chartered under California law. Thus, state law sets in place certain requirements for the merger of SAG which include both disclosure to the board of the union “the terms and conditions” of the merger prior to their vote to approve the merger and approval by the members of the organization. For such a vote by union members to be meaningful it should receive disclose that contains a full assessment of the risks as well as the potential benefits of the merger. As one example, there is no meaningful disclosure to SAG members explaining why the new merged union is to be incorporated in Delaware. No for-profit corporation could get away with this approach.
If the complaint receives a sympathetic hearing in court, it will be because SAG and AFTRA leaders mistakenly approached the merger as if it were a political campaign where these same leaders are attempting to get themselves elected. In other words they may be portrayed successfully as trying to ram this proposal through for their own political goals without adequate discussion.
Prior elections of union leaders, prior attempts to merge and informational meetings are not adequate substitutes for genuine and meaningful written disclosure now when union members must really make a final decision about merger. This is amplified by the fact, again one that is touched upon in the complaint, that this kind of decision is what is known as an “end period” problem – a yes vote means the end of SAG and putting Humpty Dumpty back together again is well nigh impossible.
SAG and AFTRA leaders are not, of course, running a political campaign. They have an independent obligation to act as fiduciaries of the organization as a whole. It is one thing to get elected as advocates of merger but now they have a new obligation to insure that union members are able to cast a “meaningful” vote.
That means stepping back and asking what it is that the membership really needs in order to make a fair and balanced assessment of this proposal. Certainly a vote that is based on materials that do not fully disclose the facts and risks associated with a proposed merger would be suspect in any courtroom.