Second Circuit Re-Affirms the High Bar for Duty-of-Fair-Representation Claims Arising from Pension-Plan Elections

Introduction

In Scales v. Hotel Trades Council of New York Local 6, No. 23-873-cv (2d Cir. Mar. 21, 2025), the United States Court of Appeals for the Second Circuit confronted a familiar but nettlesome issue: when does a labor union’s alleged mishandling of an employee’s retirement-plan election rise to the level of a breach of the duty of fair representation (“DFR”) under the National Labor Relations Act (“NLRA”) and the Labor Management Relations Act (“LMRA”)?

Plaintiff-appellant William Scales, a hotel employee, claimed that his union, Local 6 of the Hotel Trades Council (“HTC” or “the Union”), arbitrarily allowed his 401(k) contributions to be diverted into an industry pension plan while he was on lay-off and then refused to rectify the error. After the district court dismissed the complaint and denied multiple requests for pro bono counsel, Scales appealed.

The Second Circuit affirmed, holding that:

• Scales failed to plead facts showing the Union acted arbitrarily, discriminatorily, or in bad faith, as required for a hybrid §301/DFR claim;
• No independent contractual duty in the Memorandum of Agreement (“MOA”) obligated the Union to notify laid-off employees of the 30-day pension-election window; and
• A conversion claim cannot proceed where it is merely a repackaged contract claim under New York law.

Summary of the Judgment

In a summary order (non-precedential under Local Rule 32.1.1), Judges Calabresi, Nathan, and Kahn unanimously affirmed Judge Cronan’s judgment:

1. Hybrid §301/DFR Claim: Dismissed for failure to plausibly plead that the Union’s conduct was arbitrary, discriminatory, or in bad faith, or that such conduct caused Scales’ injury.
2. Independent Breach-of-Contract Claim Against the Union: Dismissed because Scales could not point to MOA language imposing the alleged notice obligation on the Union.
3. Conversion Claim: Dismissed as duplicative of the contract theory and unsupported by allegations of a distinct tortious act.
4. Denial of Appointed Counsel: Affirmed; the district court properly applied Hodge and found the claims lacked “likely merit,” ending the inquiry.

Analysis

Precedents Cited

• White v. White Rose Food, 237 F.3d 174 (2d Cir. 2001) – Restated the two-prong test for “hybrid” §301/DFR claims.
• Vaughn v. Air Line Pilots Ass’n, 604 F.3d 703 (2d Cir. 2010) – Emphasized the “highly deferential” standard applied to union behavior.
• O’Neill, 499 U.S. 65 (1991) – Defined arbitrariness under DFR as conduct that is “so far outside a wide range of reasonableness as to be irrational.”
• United Steelworkers v. Rawson, 495 U.S. 362 (1990) – Explained that unions may owe contractual duties to employees only if the CBA specifically creates them.
• Rynasko v. NYU, 63 F.4th 186 (2d Cir. 2023) – Reiterated New York rule that conversion cannot be predicated on a mere breach of contract.
• Hodge v. Police Officers, 802 F.2d 58 (2d Cir. 1986) – Governs appointment of counsel for indigent litigants.

Collectively, these cases supplied the doctrinal framework: high deference to union decision-making, the necessity of contractual language to ground a stand-alone breach claim, and the prohibition on bootstrapping tort claims to contract disputes.

Legal Reasoning

1. No Plausible DFR Breach. The panel emphasized that mere delay, oversight, or even negligence is not enough; the plaintiff must plausibly allege conduct that is irrational (arbitrary), targeted (discriminatory), or motivated by ill intent (bad faith). Scales alleged “sabotage” and conflict of interest because union counsel also represented the Union in arbitration, but provided only conclusory assertions.
2. Causation Defect. Even if wrongful conduct were pled, Scales needed to link that conduct to his financial loss. The default placement arose from the MOA’s automatic-transfer clause, not any union directive.
3. No Contractual Hook. Under Rawson, employees can sue a union for contract breach only if the CBA expressly obliges the union to perform the disputed action. The MOA granted employees the choice of plan but was silent on union notification responsibilities, defeating the contract theory.
4. Conversion Claim Precluded. New York law bars conversion where the “specific, identifiable fund” at issue is subject to a mere contractual promise. Scales alleged no distinct interference with chattel separate from the contract dispute.
5. Denial of Counsel Proper. Applying Hodge, a court first asks whether the claim is “likely to be of substance.” After finding no merit, Judge Cronan was not required to weigh additional factors, rendering the denial well within discretion.

Impact on Future Litigation

While labeled a “summary order” (and therefore non-precedential), the decision offers practical guidance:

• Reaffirmation of High Pleading Burden. Employees challenging pension-plan mishaps must plead concrete facts showing union arbitrariness or bad faith. Mere administrative mistakes, absent aggravating factors, will not suffice.
• Contractual Clarity Required. Unions and employers drafting MOAs or CBAs should expressly allocate notice obligations if they wish to avoid ambiguity; silence will leave employees without a direct contract remedy against the union.
• Conversion as a Last Resort. Plaintiffs seeking tort remedies for pension disputes must allege wrongful dominion over funds that is independent of contractual rights.
• Pro Bono Appointments. District courts retain broad discretion to decline counsel where the pleadings do not pass the initial “likely merit” screen—helpful precedent for resource-strained pro bono panels.

Complex Concepts Simplified

• Hybrid §301/DFR Claim: A two-part lawsuit rolled into one. The employee sues (a) the employer for breaching the collective bargaining agreement (CBA) under §301 of the LMRA, and (b) the union for breaching its duty of fair representation under the NLRA. Success requires winning both prongs.
• Duty of Fair Representation (DFR): A union’s obligation to treat all members fairly, honestly, and without discrimination. Violation occurs only when actions are (1) arbitrary (irrational), (2) discriminatory (targeted at a protected group or individual), or (3) in bad faith (motivated by ill will).
• Arbitrary vs. Negligent: “Arbitrary” means a decision so irrational that no reasonable union would adopt it; “negligent” means careless but not irrational—the latter does not breach the DFR.
• Conversion: A tort where one wrongfully exercises control over someone else’s property. In New York, it cannot be based solely on a broken contract promise regarding money.
• Summary Order: A short appellate disposition without full opinion. Under Fed. R. App. P. 32.1 and Local Rule 32.1.1, it may be cited but does not create binding precedent.

Conclusion

Scales v. Hotel Trades Council of New York Local 6 underscores the formidable hurdles employees face when suing their unions over benefits-administration disputes. Absent explicit contractual language or detailed factual allegations pointing to irrational or ill-motivated union conduct, a duty-of-fair-representation claim will falter at the pleadings stage.

Although non-precedential, the decision is instructive: unions are granted “wide latitude” to manage grievances, and courts will not second-guess garden-variety administrative miscues. Likewise, litigants should not rely on tort labels (like conversion) to escape contractual limits, nor expect court-appointed counsel where the underlying claim appears facially weak.

For practitioners, the case is a cautionary tale on the need for precise CBA drafting and robust employee education regarding pension-plan elections—particularly during layoffs—if future litigation is to be avoided.