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September 25, 2009

The loss of an employee organization's certification to represent unit employees may result in unexpected financial consequences

The loss of an employee organization's certification to represent unit employees may result in unexpected financial consequences
Eastrich #80 Corp. v PBA-NYCTA, NYS Supreme Court, [Not selected for publication in the Official Reports]

If an employee organization ceases to be the exclusive representative of employees in a negotiating unit, it may lose its right to a dues checkoff. As the court's ruling in Eastrich #80 Corporation [Eastrich] illustrates, this possibility should be considered by the parties before the union signs any multi-year contractual arrangements related to its operations as a business such as a lease.

For many years the Patrolmen's Benevolent Association of the New York City Transit [Transit PBA] represented NYC Transit Authority police officers as the duly certified employee organization for members of this negotiating unit. Dues paid by unit members covered the Union's operating expenses.

Transit PBA signed a 10-year lease with Eastrich for office space at 299 Broadway in Manhattan. When Transit PBA and the New York City Police Department was merged in accordance with the City's Executive Order #19, PBA-NYCTA no longer represented any unit employees and it discontinued paying rent to Eastrich. Eastrich sued to collect the rent it claimed the union owed it.

The union argued that it was unable to honor the lease "since its performance was frustrated by the City of New York's merger action." Supreme Court decided that the defense of "frustration" was not available to Transit PBA because that defense applies only "if an involuntary and unforeseeable event frustrates the purpose of the contract...."

The court said the merger should have come as no surprise to the union as it had earlier attempted to block it through legal action. In the words of the court, "Rather than fighting the inevitable after reading the political 'writing on the wall,' the (Transit PBA's) leadership, subject to ratification of its former members, could have negotiated its own merger with the Patrolmen's Benevolent Association of the New York City Police Department [PBA] to serve the unique needs of its members as well as to honor its various contractual obligations incurred prior to the merger. It chose not to do so."

In this case "no catastrophe or other occurrence affected [Transit PBA] ability to continue in possession [of the office space] for the duration of the lease term," opined the court. Although the union's source of income had "dried up" as a result of the merger, the court said economic hardship was not a legally sufficient basis for Transit PB] to avoid its contractual obligations.

Noting that the Transit PBA always ran the risk that its members, based on dissatisfaction or lack of confidence, could vote to revoke their designation of the union as their exclusive bargaining agent, Supreme Court concluded that the entity Transit PBA, [apparently an unincorporated association] rather than its former officers and former members, had to honor the lease as Eastrich neither named nor served the unions' president or its treasurer as a representative on behalf of the individual members. Accordingly, said Supreme Court, the Eastrich's only recourse was to execute the judgment against any funds still remaining in the Transit PBA's treasury.

The loss of an employee organization's certification to represent unit employees may result in unexpected financial consequences

The loss of an employee organization's certification to represent unit employees may result in unexpected financial consequences
Eastrich #80 Corp. v PBA-NYCTA, NYS Supreme Court, [Not selected for publication in the Official Reports]

If an employee organization ceases to be the exclusive representative of employees in a negotiating unit, it may lose its right to a dues checkoff. As the court's ruling in Eastrich #80 Corporation [Eastrich] illustrates, this possibility should be considered by the parties before the union signs any multi-year contractual arrangements related to its operations as a business such as a lease.

For many years the Patrolmen's Benevolent Association of the New York City Transit [Transit PBA] represented NYC Transit Authority police officers as the duly certified employee organization for members of this negotiating unit. Dues paid by unit members covered the Union's operating expenses.

Transit PBA signed a 10-year lease with Eastrich for office space at 299 Broadway in Manhattan. When Transit PBA and the New York City Police Department was merged in accordance with the City's Executive Order #19, PBA-NYCTA no longer represented any unit employees and it discontinued paying rent to Eastrich. Eastrich sued to collect the rent it claimed the union owed it.

The union argued that it was unable to honor the lease "since its performance was frustrated by the City of New York's merger action." Supreme Court decided that the defense of "frustration" was not available to Transit PBA because that defense applies only "if an involuntary and unforeseeable event frustrates the purpose of the contract...."

The court said the merger should have come as no surprise to the union as it had earlier attempted to block it through legal action. In the words of the court, "Rather than fighting the inevitable after reading the political 'writing on the wall,' the (Transit PBA's) leadership, subject to ratification of its former members, could have negotiated its own merger with the Patrolmen's Benevolent Association of the New York City Police Department [PBA] to serve the unique needs of its members as well as to honor its various contractual obligations incurred prior to the merger. It chose not to do so."

In this case "no catastrophe or other occurrence affected [Transit PBA] ability to continue in possession [of the office space] for the duration of the lease term," opined the court. Although the union's source of income had "dried up" as a result of the merger, the court said economic hardship was not a legally sufficient basis for Transit PB] to avoid its contractual obligations.

Noting that the Transit PBA always ran the risk that its members, based on dissatisfaction or lack of confidence, could vote to revoke their designation of the union as their exclusive bargaining agent, Supreme Court concluded that the entity Transit PBA, [apparently an unincorporated association] rather than its former officers and former members, had to honor the lease as Eastrich neither named nor served the unions' president or its treasurer as a representative on behalf of the individual members. Accordingly, said Supreme Court, the Eastrich's only recourse was to execute the judgment against any funds still remaining in the Transit PBA's treasury.

The loss of an employee organization's certification to represent unit employees may result in unexpected financial consequences

The loss of an employee organization's certification to represent unit employees may result in unexpected financial consequences
Eastrich #80 Corp. v PBA-NYCTA, NYS Supreme Court, [Not selected for publication in the Official Reports]

If an employee organization ceases to be the exclusive representative of employees in a negotiating unit, it may lose its right to a dues checkoff. As the court's ruling in Eastrich #80 Corporation [Eastrich] illustrates, this possibility should be considered by the parties before the union signs any multi-year contractual arrangements related to its operations as a business such as a lease.

For many years the Patrolmen's Benevolent Association of the New York City Transit [Transit PBA] represented NYC Transit Authority police officers as the duly certified employee organization for members of this negotiating unit. Dues paid by unit members covered the Union's operating expenses.

Transit PBA signed a 10-year lease with Eastrich for office space at 299 Broadway in Manhattan. When Transit PBA and the New York City Police Department was merged in accordance with the City's Executive Order #19, PBA-NYCTA no longer represented any unit employees and it discontinued paying rent to Eastrich. Eastrich sued to collect the rent it claimed the union owed it.

The union argued that it was unable to honor the lease "since its performance was frustrated by the City of New York's merger action." Supreme Court decided that the defense of "frustration" was not available to Transit PBA because that defense applies only "if an involuntary and unforeseeable event frustrates the purpose of the contract...."

The court said the merger should have come as no surprise to the union as it had earlier attempted to block it through legal action. In the words of the court, "Rather than fighting the inevitable after reading the political 'writing on the wall,' the (Transit PBA's) leadership, subject to ratification of its former members, could have negotiated its own merger with the Patrolmen's Benevolent Association of the New York City Police Department [PBA] to serve the unique needs of its members as well as to honor its various contractual obligations incurred prior to the merger. It chose not to do so."

In this case "no catastrophe or other occurrence affected [Transit PBA] ability to continue in possession [of the office space] for the duration of the lease term," opined the court. Although the union's source of income had "dried up" as a result of the merger, the court said economic hardship was not a legally sufficient basis for Transit PB] to avoid its contractual obligations.

Noting that the Transit PBA always ran the risk that its members, based on dissatisfaction or lack of confidence, could vote to revoke their designation of the union as their exclusive bargaining agent, Supreme Court concluded that the entity Transit PBA, [apparently an unincorporated association] rather than its former officers and former members, had to honor the lease as Eastrich neither named nor served the unions' president or its treasurer as a representative on behalf of the individual members. Accordingly, said Supreme Court, the Eastrich's only recourse was to execute the judgment against any funds still remaining in the Transit PBA's treasury.

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