The Martin Sheen v. Screen Actors Guild lawsuit was filed with great fanfare on February 22, 2012, just as ballots were going out to SAG and AFTRA members to vote on merger. It demanded that the U.S. District Court in Los Angeles halt the pending vote for merger of SAG and AFTRA in its tracks because SAG and its officers had failed to exercise proper “due diligence” before proceeding with the merger vote. This was cast as a “breach of fiduciary duty” under both federal labor law and California law.
The filing of the lawsuit appeared to be strategically timed to cast a cloud over the merger balloting period. The cliffhanger atmosphere was increased when the plaintiffs filed a Motion for Preliminary Injunction, set for hearing on the same week that ballots were due to be counted. The Motion asked that the Court halt any tallying or announcement of the merger vote.
In the end, all of the legal maneuvering came to nothing. On March 28th — two days before the voting was to close — the District Court issued a detailed opinion rejecting plaintiffs’ request for injunctive relief. On March 30th, the votes were tallied, and the world learned that SAG and AFTRA members had each voted overwhelmingly in favor of merger. Upon the formal announcement of that vote, the new SAG-AFTRA was born.
The Sheen v. SAG lawsuit is still pending, however. Obviously, the requests for injunctive relief are now moot. It’s too late to stop the counting of the SAG-AFTRA merger vote, or to require further studies to be conducted or further information to be furnished to members before they are asked to vote. That train has left the station.
From a strictly technical standpoint, however, the District Court ruled that in their complaint, the plaintiffs had stated legally sufficient claims for various flavors of breach of fiduciary duty. This ruling means very little as a practical matter, however, even though it technically keeps the lawsuit alive.
That is because in ruling on a motion to dismiss, as was filed here, the District Court was basically required to look only within the four corners of the complaint, to assume that all of the factual assertions were true — no matter how unlikely — and to assume that plaintiffs would have no problem proving those assertions. It is, in essence, a hypothetical exercise.
In the real world, however, the rest of the District Court opinion makes it fairly clear that this lawsuit is dead. Here’s why.
Plaintiffs’ case made two main assertions:
1. That SAG’s constitution expressly required certain studies of the merger’s potential effect on the Pension and Health plans before voting could proceed.
2. That apart from specific constitutional language, general fiduciary principles required such further study of the merger’s impact, and further disclosure to members.
The District Court rejected these arguments in ruling on the request for a preliminary injunction — ironically, because of the very fact that these plaintiffs had been allowed to include their Minority Report in the materials sent to SAG and AFTRA voters. What’s more, that report included a link to a website where the plaintiffs’ arguments could be elaborated at unlimited length. The District Court ruled that even if the information provided by SAG to its members was assumed to be misleading, the contrary information provided by the plaintiffs “negates any misleading effect.”
The [minority report] expressly informs the Membership of Plaintiffs’ position that the SAG packet is insufficient and misleading. Although the Membership would potentially not have all the information regarding the extent of the merger, they are not required to know all details before casting a vote. The Membership is entitled to a meaningful vote, which can be achieved through notice that the information they have been given is incomplete.
[H]ere, the Membership has been informed that SAG’s referendum packet is potentially incomplete, that Plaintiffs interpret the SAG Constitution to require an impact study prior to merger, and that the Board has not conducted such a study except as a general review. . . . Ultimately, the Membership has sufficient information from which they can draw their own conclusions about the wisdom of merger under the present circumstances. Although they cannot know the results of an actuarial study that has not been conducted, the Members know enough to decide whether they need more information about the impact of merger on benefits. Some Members may decide that there are too many unknown variables to vote for merger at this time; others may decide that they are willing to risk the unknown in order to merge the unions quickly. At the end of the day, the Members are on notice that in-depth studies have not been conducted since 2003, and that is enough to enable a meaningful vote.
The District Court also noted the overwhelming vote of the SAG board in favor of merger, and the strong policies of federal courts (a) not to interfere in internal union affairs except where absolutely necessary, and (b) to give great weight to the union’s own interpretation of its constitution. The District Court found that plaintiffs were “unlikely to succeed on the merits under any theory.”
So why are we still here? The District Court has made it clear that it doesn’t think plaintiffs have much of a case. At this point, the lawsuit is kind of like a ghost ship, drifting about with no cargo and no ammunition. Unfortunately, as with the 2009 Gang of Four lawsuit (involving some of the same plaintiffs), it will probably require a motion by SAG and/or the individual defendants to get rid of this one.
One thing that stands out in all of this: The immense wisdom of the SAG board in voting to allow a minority report to be included in the merger ballot materials, even though the official standards for including such a report had not been met. It is largely because of that minority report that plaintiffs lost their bid for an injunction, and that the merger vote went forward.
Moreover, the claim by the plaintiffs that their lawsuit somehow helped to bring more information to SAG members is complete nonsense. The SAG Board had already voted to send out the minority report long before the lawsuit was filed. Nothing changed after the lawsuit was filed, except that the mythology surrounding the 2003 Mercer Report was laid to rest once and for all, which hurt plaintiffs’ case.
It’s time to scuttle this ship.
Some of the plaintiffs’ amen chorus –but not an actual plaintiff, that I’ve seen– seem to be in favor of keeping going if for no other reason than to use depositions and discovery as a fishing expedition for what they hope will be damaging information they can use later.
That would of course be expensive for all involved, and likely fruitless anyway. Defendants lawyers are not going to allow a generalized fishing expedition in discovery on all the mythological issues a small portion of that crowd have been fantasizing about for years. Five years (more or less) in on Foreign Royalties, that crowd still haven’t been able to use the courts to find the smoking gun on rampant corruption they insist surely must be somewhere.
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Ed. Comment: Rule 26 of the Federal Rules of Civil Procedure, together with the judge’s overall power to supervise things, makes it difficult to go on an endless fishing expedition in federal court. Here, because both sides have extensively laid out their evidence in connection with the Motion for Preliminary Injunction, it is hard to see how much additional discovery would be appropriate. A significant portion of the relevant facts are undisputed and a matter of record (i.e., what steps the union committees, officers, and national boards took; what material was sent out to the membership as part of the ballot materials; and so on). Given the judge’s stated skepticism about the case, it seems likely that he would be receptive to arguments from the defendants that discovery should be limited.
I know there was much consternation about not giving the Antis a minority report (and I was one of them), and I don’t know if the SAG Board allowed it as a goodwill gesture or they foresaw the legal ramifications, but God bless the incredibly smart, foreword thinking Board members for including the minority report.
I think when the tale is written of this long journey to SAG-AFTRA, that will be in the chapter titled “The Turning Point”.
Is it possible for those who signed on to this annoyance suit to start dropping away, one by one? Especially in the light of such massive acceptance of merger. I’m sure Mrs. Estevez and Mrs. Harris didn’t raise no dumb kids.
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Ed. Comment: Most likely the issue is an economic one, turning on how much longer these plaintiffs want to keep writing checks to cover attorneys’ fees, expert witness fees, and legal costs. The most sensible thing to do at this point would be for the plaintiffs to cut a deal with the defendants in which the lawsuit would be dismissed and each side would bear its own fees and costs. But good sense is not something we have seen in evidence with this crowd.
The contention is that there was long-standing financial impropriety within SAG-P&H. The decision to move forward is largely a financial one, for the simple reason that the anti-merger group has paid Casselman’s costs out of pocket. SAG and AFTRA spent, I have read, 5 million dollars of dues money on the merger. $400,000 has been spent on Bob Bush to legally defend against the SAG P&H case by Simmons, which may prove to be illuminative whether the Sheen v SAG case goes forward or not. There are other lawyers and other very large fees as well and they are being paid for by both SAG and AFTRA, now SAG-AFTRA, but with separate funds for a good long while, by dipping into their dues-payers money.
Casselman does have the right to discovery and deposition. It is whether a majority of the plaintiffs vote to use it and find a way to pay Casselman. That is the question. It is felt that depositions of Howard, Aquino, Vaughn, Duncan Crabtree-Ireland and David White would be of great value. Having to answer thoughtful, probing questions under oath is quite different from issuing press releases, or making statements of various kinds. None of the pro-merger people involved from SAG, let alone AFTRA, have ever had to answer anything, when less than truthful answers can put you in legal jeopardy.
If there has been the kind of illegal behavior stipulated in the Simmons case, or if Cassleman proceeds and finds out a somewhat different story from the witnesses, than has been told so far, I doubt the use of power to depose will be viewed as a fishing expedition.
But, either way, it will come out in court. And then the question of not doing an actuarial study will be seen in a different light.
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Ed. Comment: First, there is no connection whatever between the Simmons case against SAG P&H and the Sheen v. SAG litigation. None. Second, the likelihood that the Casselman firm might somehow uncover a “different story” from SAG witnesses is virtually nil — that story has already been told under oath in extensive court filings. Third, the judge in Sheen v. SAG has already concluded that the failure to conduct an “actuarial study” did not matter, so long as the members voting on merger were aware of that fact. The case really is dead in the water at this point.
Really, aspect? It’s been almost five years since the suit against SAG on foreign royalties was filed. How many depositions in front of plaintiffs attorneys have been taken since? According to Eric Hughes, *not one*.
Also, I’d love to hear the source/verification of Simmons v. SAGPPHP having cost SAG $400,000 so far. Even if true, how many depositions of SAG/PPHP leadership in front of plaintiff’s attorneys in that case so far?
I understand there is a long-standing minority faith that if somehow, someone senior gets put under oath in front of hostile attorneys, the gig is up for a whole swath of senior SAG-AFTRA figures. All of the actually verifiable scenarios up to now over many years are very hostile to that fantasy.
The question is straightforward. The right to depose equals the right to expose. Wrongdoing, that is. If Casselman goes forward, he will be looking for the obvious – “was the decision not to do an actuarial study based in any way, in the avoidance of public disclosure of the sorry state of affairs over at SAG P&H, and the fact that two of the deposed, DCI and White, are SAG trustees and both knew it was a hornet’s nest of problems?”
I think you’ll agree that if Casselman via Sheen v SAG, or Simmons case produce previously undisclosed improprieties at SAG P&H, and those improprieties had been known by the membership before the vote, merger would probably not have passed.
The two cases are, of course, connected in that way. They both cover possible wrongdoing at the fund. Plaintiffs in Sheen v SAG were saying there needed to be an actuarial study done, and that “it doesn’t have to be done” was not good enough.
The judge, however, said SAG was right, and ruled that not making the right decision was the right of the membership. Hardly a rousing endorsement of the lack of information given the membership.
And Simmons is going to get to the heart of the matter regarding SAG P&H. He has a lot to talk about. And, of course, the question will then be asked “wouldn’t it have been good for the membership to know this before they voted?”
The characterization of Sheen v SAG as a personal attack on the membership at large in disingenuous, to say the least. It was a prudent effort to halt the destruction of the Screen Actors Guild. Judge Otero ruled largely against Sheen, but he also clearly cited merit in the due diligence portion of the suit and Casselman has the right to proceed. We still await his decision. But if he does proceed, the questions he will be asking Howard, Vaughn, Aquino, DCI, and White, under oath, will go to the heart of the matter. “Did you not do an actuarial study because you in any way knew there was financial impropriety of substantial proportions at SAG P&H, and that a careful overview of the actual numbers would have effectively ended a merger bid? If you knew the extent of some of the problems at SAG P&H, was it not fiduciary malfeasance to keep that information from the membership before the vote?”
Answers to those questions under oath will be illuminative. If Casselman proceeds.
And again, the connection for the Simmons case, is, those answers are going to come out anyway. So, even if Casselman does not proceed, Simmons will expose the problems at SAG P&H, and the glaring question will be “why did you not make this known to the members via an actuarial study before the vote?”
If there is nothing to hide, there is nothing to fear. However, if either case produces those results, the merger will have a pall hanging over its head: “why didn’t you find this out and fully disclose it to the membership before the vote if not to avoid a defeat of merger?”
And if the answer to that question is the obvious: “because we knew it would trigger a ‘no’ vote,” then, how does the new leadership go forward with any credibility?
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Ed. Comment: The above is posted notwithstanding its detachment from reality.
Well, aspect, get that “Hillberg ’13 –He’s Tanned. He’s Rested. He’s Ready!” presidential campaign rolling, because on the road you’re on that’s all you’re going to have left.
Aspect writes as if he/she has never participated in any way or on either side of a discovery process. The utter paucity of reality and the height of naivete in his/her post is truly risible.
We’re getting off track. If Casselman proceeds he has the right to depose. If the answers of the leadership of SAG don’t match their public answers, they have problems. Problems that will bring the case back before Otero? Probably not. But that’s not really the point. Casselman gets them on record admitting they did not do the study to avoid bad news that would scuttle merger? They will start to try to settle very quickly.
That will be shown, if he settles, to be because they lied. Casselman won’t agree to some sort of non-disclosure if they offer to pay his fee. That’s the only reason he’ll continue. Because he believes they lied. That’s why he took the case, because he believes they lied. An 11th hour case with plaintiffs who are going to have a hard time paying him? With a high burden of proof and a reversal of mainstream judicial tendency not to interfere in union referendums? Casselman took the case because he believes they lied and he thought he had a real shot at winning. He didn’t. But what he won is the opportunity to still prove they lied, among other things.
Simmons? Trouble. If half what he says is true, it begs the same question – “why didn’t you do a study before we voted to find this out?”
That’s a problem for all interested in honesty and transparency.
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Ed. Comment: The above is posted because you just can’t make this stuff up.
My opinion is that the Sheen lawyer will not proceed with the case because depositions are extremely cumbersome, long drawn-out affairs (and are vewy vewy expensive, Ma-Mu), and that in this case any information from the leadership of SAG-AFTRA will not differ from the present public record, and that all of the lawyers, both sides, already know this.