Thomas v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 8, 2000 Decided June 9, 2000

No. 99-1338

Patrick Thomas, et al.,

Petitioners

v.

National Labor Relations Board,

Respondent

International Union, United Automobile,

Aerospace & Agricultural Implement Workers of America,

Local 95, et al.,

Intervenors

Consolidated with

99-1378

---------

On Petitions for Review of an Order of the

National Labor Relations Board

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Glenn M. Taubman argued the cause for petitioners. With

him on the briefs was W. James Young.

Fred B. Jacob, Attorney, National Labor Relations Board,

argued the cause for respondent. With him on the brief were

Linda Sher, Associate General Counsel, Aileen A. Armstrong,

Deputy Associate General Counsel, and Margaret A. Gaines,

Supervisory Attorney.

James B. Coppess argued the cause for intervenors. With

him on the brief were Michael B. Nicholson and Laurence

Gold.

Before: Edwards, Chief Judge, Randolph and Garland,

Circuit Judges.

Opinion for the Court filed by Chief Judge Edwards.

Edwards, Chief Judge: The petitions for review in this case

challenge an order of the National Labor Relations Board

("NLRB" or "the Board") dismissing a complaint alleging a

breach of a union's statutory duty of fair representation

("DFR"). Petitioners are individual employees who are rep-

resented in collective bargaining by the International Union,

United Automobile, Aerospace and Agricultural Implement

Workers of America ("the Union"); petitioners are not mem-

bers of the Union, however. The "Union" in this case in-

cludes two related entities: the International, which is the

organizational body that coordinates the Union's activities

and is also the collective bargaining agent for represented

employees; and local chapters, which carry out the policies of

the International. As nonmembers, petitioners may insist

that their union dues and fees be used only to defray costs of

collective bargaining and contract administration, not for

"nonrepresentational" activities such as political or ideological

advocacy. Nonmembers who so insist are charged a reduced

"agency fee" that is intended to correspond only to that

portion of the Union's expenditures used for representational

activities.

In the principal petition for review, several nonmembers

claim that the method used by the Union to determine the

percentage of dues and fees expended on representational

activities (and, concomitantly, the reduced agency fee owed

by nonmembers) violates the Union's duty of fair representa-

tion. The complaint before the Board charged that the Union

unlawfully used a "local presumption" to calculate fees owed

by nonmembers. Under the disputed local presumption, the

Union first determined the percentage of dues and fees

expended by the International on representational activities;

the Union then assumed that the International and local

chapters spent the same proportion of their fees on charge-

able activities, even though Union records indicated that local

chapters routinely spend a greater proportion of their fees on

chargeable activities. The Board found that the Union's use

of a local presumption was not a violation of the Union's duty

of fair representation. See International Union, United

Auto., Aerospace and Agric. Implement Workers, 328

N.L.R.B. No. 175, 1999 WL 632712 (1999) ("Order").

The second petition for review involves a complaint that

George Gally, a nonmember of the Union since 1985, was

unlawfully discharged for failure to pay union dues. The

complaint before the Board alleged that Mr. Gally was enti-

tled to a notice stating the amount by which his fee would be

reduced if he filed an objection to the fee, as well as an

explanation as to how the reduced fee was calculated. Unlike

the other petitioners, Mr. Gally never filed an objection to the

union fees, and he was terminated for nonpayment of full

union dues. The Board upheld the discharge of Mr. Gally,

finding that the duty of fair representation does not require

that potential objectors be apprised of the percentage of

funds spent by the Union on nonrepresentational activities.

See Order, 1999 WL 632712, at *6-7.

We uphold the Board's decision as to the local presumption,

grant Mr. Gally's petition, and remand the case to the Board

for an appropriate remedy. The Board determined that,

under the particular circumstances of this case, the Union's

application of a local presumption was not arbitrary, discrimi-

natory, or in bad faith. There was substantial evidence

presented in the record to support this conclusion. The

Board concedes, however, that Mr. Gally's petition must be

granted given this court's recent decision in Penrod v. NLRB,

203 F.3d 41 (D.C. Cir. 2000).

I. Background

The facts of this case are straightforward and undisputed.

Petitioners work for a number of different employers with

whom the Union engages in collective bargaining as the

lawful bargaining agent for represented employees. The

petitioners, however, chose to become or remain nonmembers

of the Union. The Union receives dues and fees from all

employees in represented bargaining units. The dues and

fees normally are collected by local chapters, which retain

38% of the money and remit 62% to the International. The

locals remit an additional 3% of collected monies to the

International's Community Action Program, thus reducing

the locals' share of dues and fees to 35%. Both the locals and

the International spend funds to defray costs of collective

bargaining and contract administration and also to support

nonrepresentational activities such as lobbying and political

campaigning. The Supreme Court has held, in Communica-

tions Workers v. Beck, 487 U.S. 735 (1988), that nonmembers

of a union may request that their dues and fees be reduced by

the percentage of funds allocated by the union to nonrepre-

sentational activities. Individuals who make such a request

have come to be known as "Beck objectors."

In 1989, the Union established a two-step Beck "objection

procedure" for nonmembers. In the first step, a nonmember

who objects to paying fees for nonrepresentational activities

receives the Unions' Report of Expenditures in Providing

Collective Bargaining Related Services ("Report"). In the

second step, an objector who is not satisfied with the Report

can, within 45 days after the Report is issued, file a written

objection which is then submitted to a neutral arbitrator for

resolution. All claims submitted to arbitration are governed

by the rules of the American Arbitration Association. During

the pendency of a nonmember's claim, the Union is required

to place the disputed fees in an interest-bearing escrow

account. In any case in arbitration, the Union bears the

burden of establishing the accuracy of its fee calculation.

Petitioners in this case (except for petitioner George Gally)

filed Beck objections, requesting an accounting of the Union's

nonrepresentational expenditures. None of the petitioners,

however, invoked the arbitration process. Petitioner Gally

never filed an objection, opting instead to cease paying dues

in 1990. Under the applicable union-security clause, covering

the bargaining unit in which Mr. Gally worked, a failure to

pay dues was grounds for termination. At the Union's re-

quest, Mr. Gally was terminated on April 9, 1991. Subse-

quently, on April 12, 1991, Mr. Gally filed a charge with the

Board challenging his termination, and requesting reinstate-

ment and back pay.

In June 1992, the Union provided the required Report to

each Beck objector. The Report calculated the Union's ex-

penditures on representational and nonrepresentational activ-

ities for the 1991 fiscal year. The Report also contained a

certified public accountant's audit of the International's finan-

cial records, and detailed how the 65% of fees received by the

International was spent. The Report provided no breakdown

of the monies spent by the Union's local chapters. The Union

explained this absence by invoking the so-called "local pre-

sumption," stating:

This report will not attempt separately to analyze the

expenditures of each of the Local Unions in which UAW-

represented employees participate.... Because of the

accounting and reporting difficulties inherent in attempt-

ing to analyze separately the expenditures of each of the

Local Unions, this Report will analyze only the expendi-

tures of the International Union, UAW. The same pro

rata allocation between Chargeable Expenditures and

Remaining Expenditures determined for the Internation-

al's expenditures will then be applied to that portion of

the dues and fees retained by the various Local Unions

involved.

This procedure is justified because the vast majority of

the UAW's Remaining Expenditures activities, including

especially political lobbying and organizing, are funded

and conducted by the International Union. Compared to

the International, Local Unions thus invariably expend a

greater portion of the resources performing Chargeable

Expenditure activities such as bargaining contracts, han-

dling grievances, conducting arbitration hearings and

otherwise administering collective bargaining agree-

ments. By applying the same allocation of Chargeable

Expenditures and Remaining Expenditures to the Local

Unions as that determined for the International Union,

therefore, Objectors covered by NLRA union security

agreements are being required to pay a smaller amount

than would be the case if each Local Union's expendi-

tures were separately analyzed.

Report of Expenditures Incurred in Providing Collective Bar-

gaining Related Services for Fiscal Year 1991, at 3-4, reprint-

ed in Appendix ("App.") 58-59.

Petitioners filed charges with the NLRB, arguing that the

Union's application of the local presumption violated the

Union's duty of fair representation and, therefore, was an

unfair labor practice. Petitioners requested that the union

security clause be struck from the Union's collective bargain-

ing agreements, that each employee be notified of his rights

under the NLRA, and that petitioners be given complete

restitution of all agency fees, with interest. On October 26,

1992, the General Counsel issued a consolidated complaint

against the Union and its locals, contending that the Union

violated s 8(b)(1)(A) of the National Labor Relations Act

("NLRA" or "the Act"), 29 U.S.C. s 158(b)(1)(A) (1994), by

relying on a "factually unsupported 'local presumption.' "

The General Counsel also alleged that Gally's termination

constituted an unfair labor practice under s 8(b)(1)(A) and

s 8(b)(2) of the Act, 29 U.S.C. ss 158(b)(1)(A), (b)(2), because

the Union did not provide Gally with sufficient information to

decide whether to file a Beck objection. On June 10, 1993,

the General Counsel moved both to transfer the case to the

Board and for summary judgment. On June 16, 1993, the

Board issued an order transferring the case to the Board and

a Notice to Show Cause why the motion for summary judg-

ment should not be granted. All parties filed briefs in

response.

On August 16, 1999, the Board issued its decision dismiss-

ing the complaint. The Board agreed that "the use of a

totally unreasoned or unsupported local presumption would

not meet a union's duty of fair representation, because it

would not provide objectors with sufficient information to

enable them to decide whether or not to challenge the union's

figures." Order, 1999 WL 632712, at *5. The Board went on

to find that the Union "provided adequate support for [its]

use of the local presumption in this case." Id. The Board

stated that the Union's justification (i.e., that local chapters

expend a greater proportion of their funds on representation-

al activities than the International) explained why the local

presumption "is justified under the circumstances." Id. The

Board found that, because the Union computed the amount of

chargeable activities conducted by each local based on the

International's actual expenditures, "the objecting employees

will likely pay less in dues and fees." Id. The Board noted

further that the employees had a remedy if they thought

otherwise: "[T]hey can lodge a challenge, and the Local will

be put to its proof." Id. In dismissing the complaint, the

Board held that the use of the local presumption "was not

arbitrary, discriminatory, or in bad faith, and therefore does

not violate the [Union's] duty of fair representation." Id.

Finally, the Board held that Gally was not unlawfully termi-

nated, because he had no right to receive information regard-

ing the percentage of funds spent by the Union on nonrepre-

sentational activities until after he filed a Beck objection. See

id. at *6-7.

II. Analysis

A. Gally's Petition

After Mr. Gally's petition for review had been filed, the

court issued Penrod, holding that potential objectors like Mr.

Gally are entitled to be informed of the amount by which

their fees would be reduced were they to become Beck

objectors. See Penrod, 203 F.3d at 47-48. Board counsel

acknowledges that the Penrod decision controls the disposi-

tion of Mr. Gally's petition, because the Union never provided

the required information to Mr. Gally. It is unclear, however,

whether Mr. Gally is entitled to the remedy he seeks, given

the Supreme Court's holding that objecting nonmembers are

not excused from paying disputed agency fees until a final

judgment is rendered in their favor. See Brotherhood of Ry.

& S.S. Clerks v. Allen, 373 U.S. 113, 120 (1963). Accordingly,

we grant Mr. Gally's petition for review and remand the case

to the Board to determine an appropriate remedy for the

Union's statutory violation. See South Prairie Constr. Co. v.

Local No. 627, Int'l Union of Operating Eng'rs, 425 U.S. 800,

805-06 (1976) (per curiam) (holding that appeals court

usurped role of NLRB by reversing Board's legal conclusion

and proceeding to decide issue of fact that should be decided

by Board in the first instance).

B. Beck Objectors' Petition for Review

1. Standard of Review

The complaint in this case contends that the Union breach-

ed its statutory duty of fair representation. Duty of fair

representation claims are somewhat of an oddity under the

NLRA. This is so because the NLRA, like the Railway

Labor Act, 45 U.S.C. ss 151-188 (1994 & Supp. IV 1998), has

no express provision establishing a duty of fair representation

or declaring a DFR breach to be an unfair labor practice.

Rather, DFR is a judicially-crafted doctrine that was first

recognized (in an application of the Railway Labor Act) by

the Supreme Court in Steele v. Louisville & Nashville Rail-

road Co., 323 U.S. 192, 204 (1944), in the context of a union's

negotiation of an agreement that included racially discrimina-

tory provisions. The duty "has grown enormously in scope

since 1944, however, from avoiding racial discrimination to

providing daily representation." International Union of the

United Ass'n of Journeymen & Apprentices of the Plumbing

& Pipefitting Indus. v. NLRB, 675 F.2d 1257, 1264 (D.C. Cir.

1982). The scope of DFR under both the Railway Labor Act

and the NLRA is similar. See Davenport v. International

Bhd. of Teamsters, 166 F.3d 356, 361 n.4 (D.C. Cir. 1999)

(noting that "[c]ases describing the scope of the duty freely

cite precedents under both statutes"); see generally The

Changing Law of Fair Representation (Jean T. McKelvey,

ed., 1985).

A union breaches its duty of fair representation when its

conduct toward represented employees is "arbitrary, discrimi-

natory, or in bad faith." Vaca v. Sipes, 386 U.S. 171, 190

(1967). In the instant case, petitioners' complaint is properly

understood as a claim that the Union's use of the disputed

local presumption is arbitrary. There is no contention that

the Union acted pursuant to some "bad faith" motive or that

the Union has somehow engaged in unlawful "discrimination."

Rather, an allegation of arbitrary action is at the heart of the

complaint here.

In considering DFR complaints that are premised on asser-

tions of arbitrary action, the courts and the Board accord

deference to a union, finding a DFR breach only if the union's

action "can be fairly characterized as so far outside a 'wide

range of reasonableness' " that it is entirely irrational. Air

Line Pilots Ass'n, Int'l v. O'Neill, 499 U.S. 65, 78 (1991)

(quoting Ford Motor Co. v. Huffman, 345 U.S. 330, 338

(1953)). The Board does not require that a union prove "that

the choices it makes are better or more logical than other

possibilities," but, instead, that the union "act[s] on the basis

of relevant considerations," not arbitrary ones. Reading

Anthracite Co., 326 N.L.R.B. No. 143, 1998 WL 726724, at *2

(1998); see also Marquez v. Screen Actors Guild, Inc., 525

U.S. 33, 45-46 (1998) (making it clear that a union has "room

to make discretionary decisions and choices, even if those

judgments are ultimately wrong"). Indeed, even though the

standard is based in principles of "reasonableness," proof of

negligence does not establish a breach of the duty. See

Le'Mon v. NLRB, 952 F.2d 1203, 1205 (10th Cir. 1991).

Just as the Board reviews the Union's actions with defer-

ence, we accord substantial deference to the Board's decision.

We will set aside a decision of the Board only if it "acted

arbitrarily or otherwise erred in applying established law to

the facts" at issue, International Union of Elec., Elec., Sala-

ried, Mach. & Furniture Workers v. NLRB, 41 F.3d 1532,

1536 (D.C. Cir. 1994) (internal quotation marks omitted), or if

its findings are not supported by "substantial evidence," 29

U.S.C. s 160(f) (1994). In the context of this case, the

substantial evidence standard is most pertinent. See Boiler-

makers Local No. 374 v. NLRB, 852 F.2d 1353, 1358 (D.C.

Cir. 1988) (reviewing Board's duty of fair representation

decision under substantial evidence standard); see also

Le'Mon, 952 F.2d at 1205-06 (reviewing for substantial evi-

dence where Board found no breach of duty); Tenorio v.

NLRB, 680 F.2d 598, 601 (9th Cir. 1982) (reviewing for

substantial evidence where Board found no breach of duty).

Substantial evidence "is 'more than a mere scintilla. It

means such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.' " Micro Pacific

Dev. Inc. v. NLRB, 178 F.3d 1325, 1329 (D.C. Cir. 1999)

(quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229

(1938)). This court will uphold the Board's decision upon

substantial evidence even if we would reach a different result

upon de novo review. See Perdue Farms, Inc., Cookin' Good

Div. v. NLRB, 144 F.3d 830, 834-35 (D.C. Cir. 1998). In

undertaking substantial evidence review, we consider not just

the evidence that supports the Board's decision, but any

evidence in the record that "fairly detracts from its weight."

Tenorio, 680 F.2d at 601. The posture of the instant case

calls for singular deference, as petitioners must show that

there was a lack of substantial evidence to support the

Board's finding that the Union's actions fell within a broad

range of reasonableness.

The significant nature of the deference due to the Board in

DFR cases is cogently explained by Chief Judge Posner in

International Ass'n of Machinists & Aerospace Workers v.

NLRB, 133 F.3d 1012, 1016 (7th Cir.), cert. denied sub nom.

Strang v. NLRB, 525 U.S. 813 (1998). Chief Judge Posner's

opinion aptly observes:

All the details necessary to make the rule of Beck

operational were left to the Board, subject to the very

light review authorized by Chevron. It is hard to think

of a task more suitable for an administrative agency that

specializes in labor relations, and less suitable for a court

of general jurisdiction, than crafting the rules for trans-

lating the generalities of the Beck decision ... into a

workable system for determining and collecting agency

fees.

133 F.3d at 1015. We agree. In other words, given the

nature of the DFR doctrine, a court reviews with deference a

Board decision that was itself made with deference to the

Union. This does not mean that our review is toothless but

merely that we must be very cautious in entertaining an

invitation to reverse the Board.

2. The Merits of Petitioners' Arguments

The Union and petitioners' employers have negotiated

through collective bargaining "union-security clauses" that

permit the Union to collect fees from all represented employ-

ees, even those who elect not to join Union membership. The

Supreme Court has held that the collection of fees is permis-

sible, subject to certain limiting conditions. In Abood v.

Detroit Board of Education, 431 U.S. 209 (1977), the Supreme

Court ruled that a union representing public employees could

collect "agency fees" from nonmembers, but that nonmem-

bers had a constitutional right not to have any portion of their

fees used for nonrepresentational, ideological activities. 431

U.S. at 234. Subsequently, in Chicago Teachers Union v.

Hudson, 475 U.S. 292 (1986), the Court explained how this

balance must be struck:

Basic considerations of fairness, as well as concern for

the First Amendment rights at stake, ... dictate that

the potential objectors be given sufficient information to

gauge the propriety of the union's fee. Leaving the

nonunion employees in the dark about the source of the

figure for the agency fee--and requiring them to object

in order to receive information--does not adequately

protect the careful distinctions drawn in Abood.

475 U.S. at 306.

The Court in Hudson found the information given nonmem-

bers inadequate, because it did not "identify[ ] the expendi-

tures for collective bargaining and contract administration

that had been provided for the benefit of nonmembers as well

as members--and for which nonmembers as well as members

can fairly be charged a fee." Id. at 306-07. The Court

explained:

We continue to recognize that there are practical reasons

why "[a]bsolute precision" in the calculation of the charge

to nonmembers cannot be "expected or required." Thus,

for instance, the Union cannot be faulted for calculating

its fee on the basis of its expenses during the preceding

year. The Union need not provide nonmembers with an

exhaustive and detailed list of all its expenditures, but

adequate disclosure surely would include the major cate-

gories of expenses, as well as verification by an indepen-

dent auditor. With respect to an item such as the

Union's payment of $2,167,000 to its affiliated state and

national labor organizations, for instance, either a show-

ing that none of it was used to subsidize activities for

which nonmembers may not be charged, or an explana-

tion of the share that was so used was surely required.

Id. at 307 n.18 (citations omitted) (alteration in original).

For our purposes, the most recent piece of the puzzle was

added by Beck. The Court's decision in Beck extends the

logic of Abood, which rested on constitutional grounds, to the

statutory DFR context. The Beck Court concluded that

s 8(a)(3) of the NLRA "authorizes the exaction of only those

fees and dues necessary" for the union to perform its duties

as the exclusive representative of employees on labor-

management issues. 487 U.S. at 762-63. Accordingly, the

Court held that nonmembers may bring a claim for improper-

ly charged agency fees as a breach of the duty of fair

representation. See id. at 745. Beck does not purport to

enunciate procedures by which unions are to verify their

calculations of the proportion of agency fees attributable to

representational activities.

This case is framed by the axes of Hudson and Beck.

Hudson establishes the procedural grounds by which unions

representing public employees must defend their apportion-

ment of charges for representational and nonrepresentational

activities. Beck establishes that private sector nonmember

employees may bring an action, based on the union's duty of

fair representation, contesting the use of agency fees for

nonrepresentational activities. Although Hudson involved

constitutional concerns, this court has applied the basic pro-

tections of Hudson to the Beck-defined DFR cases involving

private sector employees. See Abrams v. Communications

Workers, 59 F.3d 1373, 1379 n.7 (D.C. Cir. 1995); see also

Miller v. Air Line Pilots Ass'n, 108 F.3d 1415, 1424-25 (D.C.

Cir. 1997) (remanding for District Court to resolve factual

dispute as to whether audit met Hudson's requirements),

aff'd on other grounds, 523 U.S. 866 (1998). This court also

has held that Beck objectors are entitled to the same proce-

dural protections described in Hudson for challenging a

union's apportionment. See Ferriso v. NLRB, 125 F.3d 865,

869-70 (D.C. Cir. 1997). None of these cases, however,

addressed the issue raised here: May a union use a local

presumption to allocate between representational and nonre-

presentational activities?

Petitioners' complaint rests on two principal arguments.

First, petitioners contend that the use of a local presumption

can never be squared with Hudson. Second, petitioners

contend that the Union's use of the local presumption in this

case was factually unsupported. Respondent contends that

we may not consider the first argument, because it was not

part of the complaint before the Board. While it is true that

both petitioners and the General Counsel distanced them-

selves rhetorically from a per se assault on the local presump-

tion, a fair reading of the General Counsel's arguments before

the Board, and petitioners' arguments before this court, belie

this claim. The General Counsel, for instance, stated that a

local presumption is "factually supported" only when the

Union "demonstrate[s] that the local spent at least as great a

proportion of its total expenditures for chargeable purposes

as did the [I]nternational." Br. of Counsel for the General

Counsel to the NLRB 23, reprinted in App. 288. Under this

formulation, there would be nothing left of the presumption.

Accordingly, we will address both contentions raised by peti-

tioners.

On the first point, we reject petitioners' claim that a local

presumption is per se unlawful. Indeed, the law of the circuit

is clear on this point, for this court previously has approved

the use of a local presumption. See Finerty v. NLRB, 113

F.3d 1288 (D.C. Cir. 1997). The petitioners in Finerty chal-

lenged the Communications Workers of America's ("CWA")

calculation of chargeable versus non-chargeable activities,

because it was based on the CWA's national expenditures,

and not broken down unit-by-unit. The court, relying on

Lehnert v. Ferris Faculty Association, 500 U.S. 507, 524

(1991), upheld the Board's finding that such notice did not

violate the CWA's duty of fair representation. Finerty ob-

served that

judicial precedent supports the Board's finding that use

of a "local presumption" in allocating expenses--i.e., an

assumption that allocation on a union-wide basis is

equivalent to allocation on a unit-by-unit basis--is rea-

sonable.

113 F.3d at 1289 (emphasis added).

In upholding the use of the local presumption, the decision

in Finerty was guided by Price v. International Union,

United Automobile, Aerospace & Agricultural Implement

Workers, 927 F.2d 88 (2d Cir. 1991). See Finerty, 113 F.3d at

1292. Price, in fact, involved the same fee reduction proce-

dure at issue in the instant case. Both Price and Finerty

place emphasis on the Supreme Court's observation in Hud-

son that " '[a]bsolute precision' in the calculation of the

charge to nonmembers cannot be 'expected or required.' "

See id. (quoting Price, 927 F.2d at 94 (quoting Hudson, 475

U.S. at 307 n.18)).

Admittedly, Finerty did not squarely face the issue pre-

sented here. In Finerty, the Union took all of its expenses,

separated them into chargeable and non-chargeable expenses,

and assumed that this proportion would apply throughout all

of its units. Here, the Union has conducted an audit of only

65% of its fee expenditures (those fees collected by the

International), and then assumed that the locals had at least

the same proportion of non-chargeable expenses as the Inter-

national. When considering the permissibility in general of a

local presumption, however, this is a distinction without dif-

ference. Finerty stands firmly for the proposition that a

union may forego calculation of local-by-local expenditures

and rely on overall expenditures to calculate an advance fee

reduction. This is all, as a matter of broad principle, that is

at issue with respect to the general permissibility of the local

presumption.

Petitioners strain to suggest that reading Finerty to ap-

prove of the use local presumptions creates an intra-circuit

conflict, because of this circuit's endorsement of Hudson

procedures in the context of private employment relation-

ships. Petitioners' assertion rests on a reading of Hudson

that this circuit has rejected, namely, that Hudson requires

each individual local to calculate its expenditures to meet the

Hudson/Beck requirements. Petitioners seem to suggest

that those cases that applied Hudson principles to private

employees (e.g., Ferriso and Abrams) by implication institut-

ed a requirement that every level of union hierarchy precisely

calculate its expenses. Hudson does not mandate this out-

come. The only language that arguably supports this reading

of Hudson is the Court's comment that the teacher's union's

payment of $2,176,000 (53% of its total expenditures) to

affiliated state and national labor organizations required "ei-

ther a showing that none of it was used to subsidize activities

for which nonmembers may not be charged, or an explanation

of the share that was so used." 475 U.S. at 307 n.18. This

does not preclude the use of a local presumption to explain

the calculation of the reduced agency fee; it simply requires

this court to inquire whether that explanation is sufficient to

meet the overarching requirement of Hudson, that nonmem-

bers receive an "adequate disclosure of the reasons why" they

must pay a certain agency fee. Id. at 307.

We recognize that some of our sister circuits have ap-

proached this question from a different perspective. See

Prescott v. County of El Dorado, 177 F.3d 1102, 1108 (9th Cir.

1999) (finding use of local presumption unconstitutional), va-

cated, 120 S. Ct. 929, reinstated in part, 204 F.3d 984 (9th

Cir. 2000); Hohe v. Casey, 956 F.2d 399, 410-11 (3d Cir. 1992)

(rejecting a local presumption); Lowary v. Lexington Local

Bd. of Educ., 903 F.2d 422, 431 (6th Cir. 1990) (finding a local

union presumption unconstitutional). In our view, however,

these decisions do not stand for the broad proposition that a

local presumption is per se unlawful. See Prescott, 177 F.3d

at 1108 (stating that the court did "not decide that each little

unit in the [Union's] firmament must necessarily be subjected

to a separate verified audit of its expenditures"); Hohe, 956

F.2d at 410 (finding notice inadequate because the union

offered no "explanation or justification" for presumption);

Lowary, 903 F.2d at 431 (declaring unconstitutional local

presumption that operated to shift the burden of proof in

arbitration). Nonetheless, the fundamental issue before this

court, as even petitioners grudgingly concede in their reply

brief, is whether the Board reasonably allowed the use of the

local presumption in this case. We turn now to that issue.

On the record at hand in this case, we find substantial

evidence to support the Board's conclusion that the Union

acted within a "wide range of reasonableness," Ford Motor

Co., 345 U.S. at 338, and that the Union's use of the local

presumption was not arbitrary. The Board found that the

Union's use of the local presumption was not "arbitrary,

discriminatory, or in bad faith" for two primary reasons.

First, the Board found that the Union's reasoning that locals

proportionately spend at least as much on representational

activities to be "justified under the circumstances." Order,

1999 WL 632712, at *5. Second, the Board noted that the

employees could challenge the locals' allocation if they chose,

and "the Local will be put to its proof." Id. The Board's

decision also mentions in passing the Union's suggestion that

use of the local presumption reduced accounting and report-

ing tasks, which the Board has otherwise recognized to be

"expensive and time-consuming undertakings." Id. We do

not view this passing observation as a principal justification

for the Board's decision and we find no support for it in the

record. Therefore, we give it no weight in our review of the

Board's order.

Petitioners argue that, with respect to the first justification,

the Board blindly accepted the Union's justification without

any substantial evidence to support it. The Board points out

that there is in fact evidence in the record to support the

Union's assumption that locals almost always spend propor-

tionately more on chargeable expenses than the International.

The record contains an audit of Local 6000, and this audit

indicates that the local spent 90.66% of its dues on chargeable

expenses in 1992, while the International allocated 75.69% of

its expenses to chargeable expenses during the same year.

The record also contains evidence of local expenditures in

1988; in particular, an arbitrator found that each of five locals

spent proportionately more on chargeable activities in 1988

than did the International. See In re International Union &

Locals 6000, 723, 571, 699, & 70, United Auto., Aerospace, &

Agric. Implement Workers, 94 Lab. Arb. (BNA) 1272, 1294

(1990) (referred to in UAW Resp'ts Response to Notice to

Show Cause and Br. in Support of a Grant of Summ. J. to the

UAW Resp'ts at 34-35 & n.14, reprinted in App. 193-94).

The General Counsel presented no evidence that a local had

ever spent less, as a percentage of total expenditures, on

chargeable expenses than had the International. Although

the cumulative evidence is not overwhelming on this issue, we

cannot find that the Board was unreasonable in concluding

that the Union acted rationally "on the basis of relevant

considerations," Reading Anthracite Co., 1998 WL 726724, at

*2, in determining that local unions normally spend propor-

tionately more on chargeable expenses than does the Interna-

tional.

Moreover, the Union's organizational structure lends fur-

ther support to the Board's conclusion that the Union did not

arbitrarily presume that the International conducts more

nonrepresentational activity than the locals. The Internation-

al maintains several distinct funds and departments that

engage in nonrepresentational activity: the Organizational,

Education, and Communication Fund, the Community Action

Program, the International Affairs Department, the Commu-

nity Services Department, and the National Organizing De-

partment. All of the expenditures associated with these

International bodies are considered to be non-chargeable to

nonmembers.

Petitioners offer no good argument to counter the Board's

second justification. The reason for this is obvious: the

Board's judgment in this case is greatly bolstered by the

undisputed evidence on the procedures available to nonmem-

bers to challenge the Union's fee allocation. Even the Gener-

al Counsel acknowledged that, given the challenge procedure,

"the risk of overpayment is minimized." Br. of Counsel for

the General Counsel to the NLRB 23, reprinted in App. 288.

The Board correctly found that these procedures mitigated

petitioners' concerns that any of their payments would be

unlawfully used for nonrepresentational activities. Any chal-

lenge to the local fee calculation is presented to a neutral

arbitrator, appointed by the American Arbitration Association

("AAA"), who considers the challenge according to AAA

established procedures. Upon initiation of a fee challenge,

the entire reduced fee paid by an objector is held in an

interest-bearing escrow account until the arbitrator resolves

the challenge. The Union has the burden of proving to the

arbitrator that it has accurately calculated the fee reduction,

and, unlike in Lowary, 903 F.2d at 431, the Union is entitled

to no local presumption during the arbitration proceedings.

In other words, the Union must introduce evidence demon-

strating that the chargeable percentage of expenditures for

the challenger's local was higher than the national chargeable

percentage.

Petitioners unconvincingly argue that this procedure puts

the cart before the horse, because the thrust of Hudson is

that a potential objector should not have to object prior to

knowing the basis for the Union's allocation. This is a

crabbed reading of Hudson. Hudson requires that the Union

provide potential objectors "sufficient information to gauge

the propriety of the union's fee." 475 U.S. at 306. The Court

clearly contemplated that some estimates would have to be

made. The only question here is whether, given the facts

presented to the Board, and the procedures adopted by the

Union, potential objectors have "sufficient information," not

exact information. In this case, the procedures amply protect

those objectors who feel that their local spends proportionate-

ly more on nonrepresentational expenses than does the Inter-

national.

Moreover, the principle undergirding Hudson and Beck is

that a nonmember's funds should not be used by the Union

for activities to which he has objection. The procedure

adopted by the Union adequately protects nonmember objec-

tors from this outcome. See Ellis v. Brotherhood of Ry.,

Airline & S.S. Clerks, 466 U.S. 435, 444 (1984) (approving an

advanced fee-reduction system and an interest-bearing es-

crow account for objectors as an alternative to rebate

scheme). Indeed, the objection procedure is a perfectly

sensible system. The Union's system allows nonmembers

who have some reason to question the level of their local's

non-chargeable activity to easily raise a challenge, thus forc-

ing the Union to justify its fee allocation. And there is

absolutely no risk that the funds collected from any such

individuals will be used for non-chargeable activities.

Finally, and most importantly, petitioners' crabbed inter-

pretation of Hudson entirely ignores the fact that this case

presents a DFR claim. The Court in Hudson was not

required to assess a nonmember's objection in connection

with a claimed breach of a union's duty of fair representation.

And the Court certainly never suggested, either in Hudson or

in Beck, that the DFR doctrine changes complexion when

applied in a case of this sort. The duty of fair representation

protects against bad faith, discriminatory, and arbitrary ac-

tion by a union against represented employees. Where, as in

the instant case, a union uses a rational method to apportion

fees and takes positive steps to establish neutral and fair

procedures to protect the legal rights of nonmembers, a

complainant is hard pressed to show a DFR breach.

Given the evidence presented to the Board regarding the

available audits of local chapters' expenditures, the structure

of the International and its relationship to nonrepresentation-

al expenditures, and the challenge procedure, and given the

deferential review mandated by the posture of this case, we

are constrained to uphold the Board's conclusion that the

Union did not violate its duty of fair representation. We

cannot say that the Board erred in finding that the Union's

actions were not "irrational" or "without a rational basis or

explanation." Marquez, 525 U.S. at 46. The Board was not

asked to decide whether the Union's choices were "better or

more logical than other possibilities," but only whether the

Union "act[ed] on the basis of relevant considerations."

Reading Anthracite Co., 1998 WL 726724, at *2. There is

substantial evidence to support the Board's finding that the

Union did not breach its duty of fair representation. There-

fore, this court has no business second-guessing the Board's

judgment. As Chief Judge Posner noted in International

Ass'n of Machinists, "[i]t is hard to think of a task more

suitable for an administrative agency that specializes in labor

relations, and less suitable for a court of general jurisdiction,

than crafting the rules for translating the generalities of the

Beck decision ... into a workable system for determining and

collecting agency fees." 133 F.3d at 1015.

III. Conclusion

For the reasons articulated herein, we grant Mr. Gally's

petition for review and remand the case to the Board to

determine the appropriate remedy. We deny the petition for

review regarding the Union's use of a local presumption.