# Petition for Writ of Certiorari — Prescott v. County of El Dorado > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1446%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2000 - **Citation:** 528 U.S. 1111 ## Text ND, FILED No.99- 8 #o 519 SEP 23 9 ai OFFICE OF THE CLERK N_1H Supreme Court of the United States OCTOBER TERM, 1999 STEVEN PRESCOTT; ROBERT F. BERRY; CHERYL JONES: KAREN PIERCE; AND CHRISTINE M. TURNEY, Petitioners, V. COUNTY OF EL DORADO; KATHY LIBICKI: AND EL DORADO COUNTY EMPLOYEES ASSOCIATION, LOCAL NO. i, Respondents. On Petition for Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit PETITION FOR WRIT OF CERTIORARI W. JAMES YOUNG* c/o National Right to Work Legal Defense Foundation, Inc. 8001 Braddock Road, Suite 600 Springfield, Virginia 22160 (703) 321-8516 ATTORNEY FOR PETITIONERS *Counsel of Record September 1999 q2¢° II. QUESTIONS PRESENTED Do public employees possess standing to challenge, as void as against Federal constitutional law and public policy, the legality of one of the terms of the collective bargaining agreement governing their terms and conditions of employment, in an action under 42 U.S.C. § 1983 (West Supp. 1999)? Is a collective bargaining agreement indemnifying a public employer from liability arising from its enforcement of a forced- unionism agreement absent compliance with “the constitutional requirements for the ... collection of agency fees,” Teachers Local No. | v. Hudson, 475 U.S. 292, 310 (1986), void as against Federal constitutional law and public policy? aa PARTIES TO THE PROCEEDINGS BELOW There were no parties to the proceedings in the court whose judgment is sought to be reviewed other than the parties named in the caption. ait. TABLE OF CONTENTS Page dag Valk w a a-ke ake wede oe i PARTIES TO THE PROCEEDINGS BELOW ................... il oe eka hk wee wale a vi i a een Wis bauk es Wake bh oh SO Sos l i ga gp 2 CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED... 2 I WOM oc cc cede nenewasceasdeeceeues 2 oad heh cbs sha SAKE AN SD AeA ee OS 3 ih. MO sda na anecessedsedacouaenns 5 REASONS FOR GRANTING THE WRIT..............0000000: 9 I. THE IMPORTANT QUESTION AS TO EMPLOYEES’ STANDING DIRECTLY ADDRESSES THE POWER OF INDIVIDUALS TO PROTECT THEMSELVES AGAINST THE GOVERNMENT’S IMPOSITION OF UNLAWFUL TERMS AND CONDITIONS OF eee hae LoS bs wwe daikne hw eX 9 A. The Conflict With This Court’s “Standing” TS cal Cc ce bh wily death etn Sins ss 10 B. The Conflict With This Court’s Decisions Specifying Governmental Responsibilities When Enforcing An Agency Shop Scheme .... 0... ccc cece ccesnes 15 «ty TABLE OF CONTENTS — CONTINUED C. The Conflict Among The | rrr rrr ey ee 18 Il. THERE IS WIDESPREAD CONFLICT AMONG THE CIRCUITS AS TO WHETHER UNIONS MAY INDEMNIFY STATE AND LOCAL GOVERNMENTS FOR THEIR CONSTITUTIONAL TORTS WHEN ILLEGALLY ENFORCING FORCED-UNIONISM (*. ..* 0 3, Sr ere ee ee ee ee a 22 A. The Pr rrr errr rrr rr er 22 B. The Importance Of The Issue .........-..--++--: 26 eile tree rea rere e rae Ce toe hk 28 APPENDICES A. Decision of the United States Court of Appeals for the Ninth Circuit (12 May 1999), reported at 177 F.3d 1102 (9th Cir. 1999)... .. cece eee eee e cence la B. Final Judgment in a Civil Case Entered by the United States District Court for the Eastern District of California (1 April 1998) ..............- ee eee 20a C. Opinion and Order Denying Defendants’ Motion to Dissolve or Modify the Preliminary Injunction, and Granting in Part and Denying in Part Plaintiffs’ Motion for Summary Judgment Entered by the United States District Court for the Eastern District of Cali- fornia (26 January 1998) ........-... sees eee 21a TABLE OF CONTENTS — CONTINUED Page Order of the United States Court of Appeals for the Ninth Circuit Denying Plaintiffs-Appellants’ Petition for Rehearing and Suggestion for Rehearing En Banc NTN és k tradndg bea 37a United States Constitution, Article III ........... 38a United States Constitution, First Amendment ..... 39a United States Constitution, Fourteenth etistun-oncesesac Ht RE Te ee Pee PP een 40a Civil Rights Act of 1871, 42 U.S.C. § 1983 (West nna 4la Meyers-Milias-Brown Act, Cal. Gov’t Code § 3502.5(a) .............. 42a - Vi - TABLE OF AUTHORITIES Cases Page Abood v. Detroit Board of Education, Rt Se ree ere 17, 22 Air Line Pilots Association v. Miller, $23 U.S. O66, 116 G. Ch; PACT och cas nccsseccas 16 Allen v. Wright, SGRUS.. Toe CUS 5 6 660640605 ckka keer 9 Bowman v. Loperena, SUS DB. Bee CTE 0 a ohn thane tansecasevasnevaniabs 2 Bowsher v. Synar, STB US; FRC 6 v6 bcs ces ulonties este wesete 17 Brewer v. Lewis, SOP F286 162 COUR CO. FUSE cc eccwencvesaseccaceus 2! Carey v. Piphus, GBS TB Be res oo ab 6055.65 25854 004 ss A ee 24 City of Newport v. Fact Concerts, Inc., GSS ULB. DOr Ce ovine 6050-40 s eas skh ackeneeteees 24 Clements v. Fashing, ae SST US, SEP si 6 CR 6 Cae hs 0h SS ices seenseuces 12 ; Clinton v. City of New York, 524 U.S. 417, 118 S. Ct. 2091 (1998) ........... = 08, 37 ec S™~— - Vil - TABLE OF AUTHORITIES — CONTINUED Page Cramer v. Matish, 924 F.2d 1057 (table), 1990 WL Pe Gils PID oo ois occ cvinnecencacea 20, 24, 25 District of Columbia v. Carter, | ee ET ch vb dese seer ne scdedeneaenenaes 23 Dixon v. City of Chicago, Se ee Se CS BED Gakcc uc dndeddpaveaewenna 24 Ellis v. Railway Clerks, Fi Bs Pere Aron ree 18, 23, 26, 27 Federal Election Commission v. Akins, SN ss che eK nkA CeO ROKW RR HERE R Ce ) Hohe v. Casey, re Gk SED vv avn cone wane ontnaws passim Hohe v. Casey, 740 F. Supp. 1092 (M.D. Pa. 1989), rev'd in SE Fae Oe Fe ae es NMED 65 bin cceccdedacdnaas 19 Jordan v. City of Bucyrus, 754 F. Supp. 554 (N.D. Ohio 1991) ............... 20, 25 Knight v. Kenai Peninsula Borough School District, 131 F.3d 807 (9th Cir. 1997), cert. denied sub nom. Anchorage Education Association v. Patterson, 523 U.S. ___, Es Ey RE SNOOE 6 6S65s sa rcccosdscus 13, 14, 19, 21 - Vili - TABLE OF AUTHORITIES — CONTINUED : Page Lehnert v. Ferris Faculty Association, ace CUED ck oc vhwae Dien eheswewea bees 17, 18 Los Angeles v. Lyons, ee Ae I os i os deb RRdotad Amedeo oe 9, 10, 18 Lujan v. Defenders of Wildlife, pA ee errr reer 9, 14, 20, 21 Ex parte McCardle, FE o's cc aA ORO RA Rt ae ed 21 Mitchum v. Foster, ee I o's sb OU adore eae eee nace eed 23 Monroe v. Pape, ee EE oc aa pCR KW ee eee e eek cle 23, 27 National Law Center on Homelessness & Poverty v. Kantor, ee By foe || Csr ane 21 National Organization for Women v. Scheidler, Oe eT re a Pere Tree Peer 21 Northeastern Florida Chapter of the Associated General Contractors of America v. Jacksonville, Pee ae I og Ra aa tae chad cansekns 11,12 O’Shea v. Littleton, St aes Ee ib ka ok a ado kaoda cho anaeene 10 “1X « TABLE OF AUTHORITIES — CONTINUED Page Patterson v. American Tobacco Co., 535 F.2d 257 (4th Cir.), cert. GORE, GE I: TROIS) ov vk cece senenensennes 10 Prescott v. County of El Dorado, DiS F. Supp. 1000 (ED. Cal. 1996)... wn ccc ccc. 4,5 Regents of University of California v. Bakke, SE id eas de ee eid dns enue aS 12 Sierra Club v. Morton, ee cy eee Chaves Aaa Rae 9 Simon v. Eastern Kentucky Welfare Rights Organization, EE So eS eee Leak 4 on k CREO SOO 9 Stamford Board of Education v. Stamford Education Association, ine & fe le) - : See 10, 24, 25, 26 Steel Co. v. Citizens for a Better Environment, Jad Wd. OS, LISS. Ce. 1OGS CISFE) 2. ccc cccens 9, 21 Teachers Local No. 1 v. Hudson, I EE GK NAN AG EAG KOR KAN ES AS passim Turner v. Fouche, OS Ro Ee an ee ane 12 Valley Forge Christian College v. Americans United for Separation of Church & State, 454 U.S. 464 (1982) ..... CRRENSR AAR SR GARE K EMEA OES 9 TABLE OF AUTHORITIES — CONTINUED Page Ex parte Virginia, At APOE 6.2 55 ke eeR Raed ee hee 23 Warth v. Seldin, eg OR) er ie akacunmeees 9 Weaver v. University of Cincinnati, 970 F.2d 1523 (6th Cir. 1992), cert. denied sub nom. Weaver v. Steger, 507 U.S. 917 (1993) ............ passim Weaver v. University of Cincinnati, 764 F. Supp. 1241 (S.D. Ohio 1991), aff'd in part, 970 F.2d 1523 (6th Cir. 1992), cert. denied sub nom. Weaver v. Steger, 507 U.S. 917 (1993) ....... 20 Wilson v. Garcia, eG Sis UE 6 ho adda doen aces heencauee 23, 27 Wyatt v. Cole, POT CCT TOPE TT Terr TT eee 24 -Xi- TABLE OF AUTHORITIES — CONTINUED Constitutions, Statutes, and Rules Page United States Constitution, “ CESS AREY FAA ea Pee ar eH eA Rr 4,11 Ee Sik hs Rb kee heel aa wan oew eka was passim ET ka Sibekvdaanhinn euch atk. kbs vee cas 2,17 Line Item Veto Act, STG Beek. 1200, 2 UBC. 6 GPl Ob 00g, cin oo 5 ok ci as 11 es ee EE Fas RA eT Sess 2 ES ED 5-0 0 ok. ok as dK RA eee wees 3 National Labor Relations Act, gk Se RD reer ree re erie eee ererere 16 29 U.S.C. § 186(c) ...... CE Taner er kee pee en ee 16 Civil Rights Act of 1871, 42 U.S.C. § 1983 (West Supp. 1999) .............. passim Civil Rights Attorney’s Fees Award Act, 1976, 42 U.S.C. § 1988 (West Supp. 1999) .............. 23, 25 EE eee ry eae Te eee eT Tee eee Tere eee ee 2 Meyers-Milias-Brown Act, ee 8 ee ere er ee 3 eR ge Perr ee errr re errr rer Te 3 Cal. Gov’t Code § 3502.5(a) .......eccceeceeeeeeee 2,4 -Xli- TABLE OF AUTHORITIES — CONTINUED Other Authorities Page Milton L. Chappell, Seeking a New Foundation: Legislative and Practical Alternatives to the Current Monopoly Bargaining Model that Will Enhance the Viability of Independent Teacher Groups, 16 GOV’T Sg a 8, rr ee re er 26 1A MARTIN A. SCHWARTZ & JOHN E. KIRKLIN, SECTION 1983 LITIGATION: CLAIMS AND DEFENSES § 1.3 CRBGE. TOE ota scarcsasccccsaceneateeespenineee 23 IN THE Supreme Court of the United States OCTOBER TERM, 1999 No. 99- STEVEN PRESCOTT; ROBERT F. BERRY; CHERYL L. JONES: KAREN PIERCE; AND CHRISTINE M. TURNEY, Petitioners, V. COUNTY OF EL DORADO; KATHY LIBICKI; AND EL DORADO COUNTY EMPLOYEES ASS’N, LOCAL NO. 1, Respondents. ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT PETITION FOR WRIT OF CERTIORARI Petitioners Steven Prescott, Robert F. Berry, Cheryl L. Jones, Karen Pierce, and Christine M. Turney respectfully pray that a writ of certiorari issue to review the judgment and opinion of the United States Court of Appeals for the Ninth Circuit, entered on 12 May 1999. OPINIONS BELOW The panel opinion sought to be reviewed (Appendix (“App.”) A, infra, \a) is reported at 177 F.3d 1102. The judgment of the United a States District Court for the Eastern District of California (App. B, infra, 20a) is unreported. The opinion and order of the United States District Court for the Eastern District of California on Petitioners’ and Respondents’ Cross-Motions for Summary Judgment (App. C, infra, 21a) is unreported. The court of appeals’ unreported order denying the Petition for Rehearing and Suggestion of Rehearing En Banc appears in App. D, infra, 37a. JURISDICTION The court of appeals entered its judgment on 12 May 1999. Petitioners’ timely Petition for Rehearing and Suggestion of Rehearing En Banc was denied on 25 June 1999 (App. D, infra, 37a). The time for petitioning for a writ of certiorari runs from the latter date. Bowman v. Loperena, 311 U.S. 262, 266 (1940). This petition is timely under Supreme Court Rule 13.1. This Court’s jurisdiction is invoked under 28 U.S.C. § 1254(1) (West 1993). CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED This case involves Article III, and the First and Fourteenth Amendments, of the United States Constitution, Title I of the Civil Rights Act of 1871, 42 U.S.C. § 1983 (West Supp. 1999), and § 3502.5(a) of the California Government Code. Their pertinent text is set out in Appendices E-I, infra, 38a-42a. STATEMENT OF THE CASE This case involves: (1) the standing of public employees to challenge provisions of the collective bargaining agreement (“CBA”) governing their terms and conditions of employment; and (2) whether a public employer may enter into and enforce an indemnification agreement that contracts away its liability, including even the costs of its own defense, when it enforces the agency shop scheme without complying with “the constitutional requirements for the Union’s x collection of agency fees.” Teachers Local No. | v. Hudson, 475 U.S. 292, 310 (1986). This is a civil rights action pursuant to 42 U.S.C. § 1983 (West Supp. 1999), seeking declaratory and other relief to prevent and redress the deprivation under color of California law of Petitioners’ rights, privileges, and immunities under the United States Constitu- tion. Petitioners Steven Prescott, ef al. (“the employees”), contend that the district court had jurisdiction under 42 U.S.C. § 1983 over all of their claims, including the allegation that the indemnification provisions of the CBA between Respondents County of El Dorado (“County”) and El Dorado County Employees Association, Local No. 1 (“EDCEA”) are void as against public policy and unenforceable (Record (“R.”) 1, Complaint, f] 14 and 31, and Exhibit A, Article 4, § 3(J)), under 28 U.S.C. § 1331. The district court and court of appeals decided most of the employees’ civil rights claims and entered judgment largely in their favor, but not on the claim pre- sented in this Petition. See App. A at 5a-13a, 177 F.3d at 1106-11; App. C at 23a-33a, 35a.! I. The Facts. Petitioners are five individuals employed by the County in a bargaining unit for which the collective bargaining representative is EDCEA. EDCEA is a “recognized employee organization” and the County is a “public agency” within the meaning of California’s Meyers-Milias-Brown Act, Cal. Gov’t Code § 3501(b) & (c). The employees are not ufion members, and were not members when ' The lower courts also rejected the employees’ request for restitution of fees illegally seized in the absence of compliance with Hudson’s requirements. See App. A at lla-12a, 177 F.3d at 1109-10; App. C at 35a. Because Respondents have agreed to refund all fees illegally seized from the employees in lieu of a trial as to the properly chargeable fee, id. at 11a-12a, 177 F.3d at 1111, that issue is moot, and is not raised in this Petition. i@- “agency fees” were seized from their pay. App. A at 2a-3a. EDCEA is affiliated with Public Employees Union, Local No.1. App. A at 2a. Pursuant to the Meyers-Milias-Brown Act, Cal. Gov’t Code § 3502.5(a), EDCEA and the County executed a Memorandum of Understanding (“MOU”), or CBA, which included a “UNION RIGHTS” article. Within that article was a section entitled “Fair Share,” by which the County agreed to deduct for the benefit of EDCEA agency fees from the wages of all bargaining unit employees who failed or refused to join EDCEA as voluntary members. /d. Concerned that it might be sued by nonunion employees for violation of their constitutional rights, the County, as part of the “Fair Share” section of the “UNION RIGHTS” article, included an indemnification provision, providing as follows: Local | shall defend, indemnify and hold harmless, release and save the County and its agents and employees against any and all claims, demands, suits, orders, judgements or other forms of liability that shall arise out of or by reason of, action taken or not taken by the County under this Agreement. This includes but is not limited to the collec- tion and procedures for collection of fair share fees and reasonable cost of County’s attorney fees and costs along with reasonable cost of management preparations time as well. R. 1, Complaint, Exhibit A, Article 4, § 3(J). Beginning on 12 May 1995, the County seized initiation fees and agency fees from each employee’s bi-weekly salary, and forwarded the fees to EDCEA’s affiliate, PEU. However, Respon- dents failed to comply with all of the procedural protections required by this Court’s decision in Teachers Local No. 1 v. Hudson, 475 U.S. 292 (1986), before these fee seizures began. Prescott v. County of El Dorado, 915 F. Supp. 1080, 1091-92 (E.D. Cal. 1996). Respondents County and Kathy Libicki (the County’s Director of Human Resources) took no steps whatsoever to comply with Hudson’s ~ e requirements, relying wholly upon EDCEA’s representations that it had complied with Hudson’s requirements. The County and Libicki undertook no independent review to confirm that EDCEA had done so prior to seizing agency fees from the employees. R. 23, Plaintiffs’ Statement of Undisputed Material Facts in Support of Their Motion for Summary Judgment, Exhibit 3, page 2, Admission No. 3. II. Proceedings Below. The employees filed their Complaint against the County, Libicki, and EDCEA (collectively, “Respondents”) in October 1995. They sought a declaratory judgment; injunctive relief; nominal, punitive, and compensatory damages; and costs and attorneys’ fees, on the grounds that Respondents were enforcing the County/EDCEA “agency shop” scheme in violation of Hudson, and that the indemni- fication provision of their MOU is void as against public policy, invalid, and unenforceable. Simultaneously, the employees success- fully sought a preliminary injunction to stop all fee seizures, based upon the deficiencies of EDCEA’s notice and procedures. R. 6, Plaintiffs’ Motion for a Preliminary Injunction; 915 F. Supp. at 1092. After conducting limited discovery, the parties filed cross- motions for summary judgment, and EDCEA filed a motion to dissolve the preliminary injunction. R. 20, Plaintiffs’ Motion for Summary Judgment; R. 32, Defendants’ Motion for Summary Judgment; R. 35, Defendants’ Motion to Dissolve or Modify the Preliminary Injunction. The district court then entered its order on 26 January 1998, App. C at 21a-36a, and judgment in accord with that order on 1 April 1998. App. B at 20a. The employees, inter alia, had sought a final declaratory judgment that the indemnification provision of the County/EDCEA MOU was void as against public policy and unenforceable. The district court denied this claim in its entirety. While Respondents had addressed the merits of the employees’ argument in their Opposition to Plaintiffs’ Motion for Summary Judgment (R. 31), and me had attacked the employees’ claim on the merits in their own Motion for Summary Judgment (R. 32), the Record in the district court is absolutely devoid of argument on the issue of the employees’ standing to raise this element of their claim! Not once did Respon- dents suggest that the employees lacked standing to challenge the indemnification clause, and the district court likewise asked not a single question about the employees’ standing at hearing on the pending motions. R. 51, Hearing Transcript, 15 November 1996. In fact, the indemnification provision was not even discussed at those proceedings. -In its summary judgment decision, the district court sua sponte raised the standing issue for the first time, finding that the employees lacked standing to challenge this term of the CBA governing their terms and conditions of employment. App. C at 33a-34a. Specifi- cally, the district court found that the employees had “not demon- strated any of the three prerequisites to standing,” reasoning that the employees’ injury “is the result of the Union’s [sic] conduct, and is traceable to the hold harmless agreement in only the most indirect fashion.” App. C at 34a. Therefore, the district court entered judgment for Respondents on this element of the employees’ claim. Id. The employees timely appealed, R. 54, Notice of Appeal, seeking, inter alia, reversal of the district court’s sua sponte determination that they lacked standing to challenge a term of the CBA governing their terms and conditions of employment. Specifi- cally, they attacked the district court’s ruling that the employees lacked “standing to object to the provision which required EDCEA to indemnify the County from any liability which arises out of deductions of fees from employee wages, and to provide a defense against any claims.” App. A at 15a; 177 F.3d at 1111. Unlike the district court, the court of appeals’ panel acknowl- edged “that (the employees] suffered some injury when the fees were deducted from [their] paycheck[s].” App. A at 16a, 177 F.3d at 1112; compare App. C at 34a (identifying injury as failure to comply i with Hudson’s standards and finding that to be the result of the union’s conduct). However, it otherwise affirmed the district court’s standing ruling in all of its particulars. App. A at 16a-18a; 177 F.3d at 1112. Notwithstanding that the indemnification provision appears within the “Fair Share” section of the “UNION RIGHTS” article and contains specific language applying it to the County’s enforcement of the forced-unionism provisions, the panel declared that Prescott: cannot show any connection between the indemnification agreement and [his] injury. The agreement does no more than place the ultimate cost of any impropriety in the notice and the procedures where it belongs—on the union, which seeks the fees. Just how any injury can be traced to the indemnification provision itself is entirely unclear, but for Prescott’s claim that the provision will somehow cause the County to ignore its own duties. But that argument is no more than rank speculation, and any breach of the County’s duty can hardly be said to be traceable to the indemnification provision itself. App. A at 16a; 177 F.3d at 1112. In short, both the district court and the panel discerned no nexus between the indemnification provision and the County’s decision to seize fees from the employees. However, the panel then “switched gears,” suggesting—like the district court, App. C at 34a—that the employees’ injury was not in the illegal seizure of fees in the absence of compliance with Hudson, but because “fee deduction procedures were [not] properly fol- lowed.” The panel said: Speaking of speculation, it can hardly be said that our striking down of the provision would lead to some irenic world wherein all fee deduction procedures were properly followed because someone would finally have an incentive to assure that they were. As EDCEA points out, some- one—the union—already has that incentive in a powerful form. A failure to perform its duties properly “may result in its being unable to retain a portion of the fair share fee.” t. Hohe [v. Casey], 956 F.2d [399] at 412 [(3d Cir. 1992)].’ A failure to comply may also involve the union in substan- tial and expensive litigation, witness this case which has been in progress for over three years and will not be over for some time yet. Moreover, Prescott can suffer no ultimate damage to his interests because nothing in the indemnification agreement will prevent him from colle-t- ing any costs, expenses or losses imposed upon him by reason of the defective procedure. In short, it simply cannot be said that any injury suffered by Prescott is fairly traceable to the agreement, nor is the claim that our striking of the agreement would redress or prevent the injuries that he has suffered anything but speculative. ; ” It should be noted that in Hohe the court suggested that there was standing, but did not decide the issue. /d. at 411. App. A at 16a-17a; 177 F.3d at 1112 & n.72 A timely Petition for Rehearing and Suggestion of Rehearing En Banc was denied on 25 June 1999. App. D at 37a. ? The panel’s description of this incentive as “powerful” is somewhat curious, since it was denying to the union only the nonchargeable portion of the fee, that to which it was not entitled in the first instance. App. A at 10a-12a; 177 F.3d at 1109. . REASONS FOR GRANTING THE WRIT I. THE IMPORTANT QUESTION AS TO EMPLOYEES’ STANDING DIRECTLY ADDRESSES THE POWER OF INDIVIDUALS TO PROTECT THEMSELVES AGAINST THE GOVERNMENT'S IMPOSITION OF UNLAWFUL TERMS AND CONDITIONS OF EMPLOYMENT. At first blush, the first issue presented appears to be a routine standing question, an issue addressed many times by this Court. See Clinton v. City of New York, 524 U.S. 417, 118 S. Ct. 2091 (1998); Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 118 S. Ct. 1003 (1998); Federal Election Comm'n v. Akins, 524 U.S. 11 (1998); Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992); Allen v. Wright, 468 U.S. 737 (1984); Los Angeles v. Lyons, 461 U.S. 95 (1983); Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26 (1976); Warth v. Seldin, 422 U.S. 490 (1975); Sierra Club v. Morton, 405 U.S. 727 (1972). In these cases, among many others, this Court has repeatedly stated the familiar tripartite showing required to establish a litigant’s standing: “A plaintiff must allege [1] personal injury [2] fairly traceable to the defendant’s allegedly unlawful conduct and [3] likely to be redressed by the requested relief.” Allen v. Wright, 468 U.S. at 751, citing Valley Forge Christian College v. Americans United for Separation of Church & State, 454 U.S. 464, 471-76 (1982). However, the standing issue in this case is not routine. By ignoring the important interest of public employees in the govern- ment’s responsibility to refrain from violating their constitutional rights, the panel below failed to apply the standards set forth by this Court. As a consequence, in addition to the increased risk of future violations of their constitutional rights by illegal agency fee seizures in the absence of compliance with the “constitutional requirements for the ... collection of agency fees,” Teachers Local No. | v. Hudson, 475 U.S. 292, 310 (1986), these employees will be compelled to subsidize the public employer’s defense against their -10- meritorious lawsuit to vindicate their constitutional rights for violations that already have occurred. A. The Conflict With This Court’s “Standing” Decisions. Insofar as the employees seek prospective declaratory relief that Respondents’ indemnification scheme is void as against public policy, the panel failed appropriately to analyze the employees’ standing under this Court’s decision in Los Angeles v. Lyons, 461 U.S. 95, 111 (1983), which holds that litigants seeking such relief satisfy standing requirements when they show a “real or immediate threat that [they] will be wronged again—a ‘likelihood of substantial and immediate irreparable injury.’” /d., quoting O'Shea v. Littleton, 414 U.S. 488, 502 (1974). Surely this standard is satisfied by at least four of the employees, who remain County employees subject to the County/EDCEA MOU, and its forced-unionism provisions.’ In Stamford Board of Education v. Stamford Education Association, 697 F.2d 70, 74 (2d Cir. 1982), the court struck down a similar indemnification agreement, citing the fact that the union’s payment of the public employer’s damages for entering into an unlawful CBA will be derived from, “at least in part, funds collected as dues from the plaintiffs themselves or from members of the plaintiff class.” /d., citing Patterson v. American Tobacco Co., 535 F.2d 257, 269 (4th Cir.), cert. denied, 429 U.S. 920 (1976) (union may not bargain away minority employees’ right to equal treatment). Similarly, the employees here face the very real prospect of subsidizing the ’ Certainly, the prospect that the employees will be subjected to illegal fee seizures is more concrete than the prospect that Mr. Lyons would again be stopped for a traffic violation and subjected to a chokehold by a Los Angeles police officer. Lyons, 461 U.S. at 98, 100. atts Opposition to their own lawsuit, when EDCEA indemnifies Respon- dents County and Libicki, and attempts to charge bargaining unit employees for those costs. The prospect that the employees’ will be forced to subsidize the County’s defense is akin to the “contingent liability” found sufficient by this Court to confer standing upon the City of New York and the Snake River farmers’ cooperative in Clinton v. City of New York, 524 U.S. 417, __, 118 S. Ct. 2091, 2099-2100 (1998). There, in a challenge to the constitutionality of the Line Item Veto Act, 110 Stat. 1200, 2 U.S.C. § 691 et seq., the United States Government argued that there was no “actual injury [to the City] because the claims are too speculative,” 524 U.S. at__s, 118 S. Ct. at 2099, citing the Government’s failure to take certain actions necessary to obtain the benefit sought by the City. This Court rejected that argument, comparing the complained-of action (the President’s exercise of his authority under the Act) to an appellate court’s setting aside of a defense verdict, with remand for a new trial of a multibillion dollar damage claim. As the Court noted, “Even if the outcome of the second trial is speculative, the reversal, like the President’s cancella- tion, causes a significant immediate injury by depriving the defen- dant of the benefit of a favorable final judgment.” /d. Similarly, the panel below was confronted with the allegation that the indemnification clause was void as against public policy because it created disincentives to the public employer’s protection of the employees’ constitutional rights, and the uncontroverted fact that the public employer had done nothing to ensure that its employ- ees’ constitutional rights were not violated. This Court in Clinton discussed those cases where “denial of a benefit in the bargaining process can itself create an Article III injury, irrespective of the end result.” 524 U.S. ats n.22, 118 S. Ct. at 2101 1.22, citing Northeastern Florida Chapter of the Associated Gen. Contractors of America v. Jacksonville, 508 U.S. 656, 666 (1993). As this Court noted in Jacksonville, a showing that, but for the challenged action, a plaintiff would have received the benefit sought he. is not required to overcome a challenge to his standing. 508 U.S. at 664-65. This Court has repeatedly rejected imposition of such a requirement. /d., citing Turner v. Fouche, 396 U.S. 346, 361 (1970) (non-property owning plaintiff need not show that he would have been appointed to school board but for requirement that members be property owners, only that he would have been considered for the position); Clements v. Fashing, 457 U.S. 957 (1982) (rejecting claim that dispute was “merely hypothetical” because litigants could not show they actually would have been elected, but for “automatic resignation” provisions of Texas state constitution); Regents of University of California v. Bakke, 438 U.S. 265, 281 n.14 (1978) (requisite injury shown by refusal of state to allow litigant to compete for benefit sought). Similarly, the employees here need not show that Respondents County and Libicki would have eschewed fee seizures in the absence of the indemnification provision. Indeed, the principle of res ipsa loquitor would seem to apply to a clause which appears within the “Fair Share” section of the “UNION RIGHTS” article of the MOU, and contains language specifically stating that its terms apply to “the collection and procedures for collection of fair share fees.” R. 1, Complaint, Exhibit A, Article 4, § 3(J). To hold, as the panel did, that the employees must make an additional showing is to hold that the clause is virtually devoid of meaning and effect. The panel below required the employees to make a showing never required by this Court to establish standing, stating that the employees were required to show that the relief granted “would lead to some irenic world wherein all fee deduction procedures were properly followed because someone would finally have an incentive to assure that they were.” App. A at 16a, 177 F.3d at 1112.4 A * In condemning the employees’ “speculation,” the panel misstated the “irenic world” sought by them. The world envisioned by the employees is not one “wherein all fee deduction procedures were properly followed.” App. A at 16a; 177 F.3d at 1112. Rather, it is a world wherein a public employer will decline to enforce—on behalf ofa union—the agency shop provision of its CBA (continued...) -13- : showing that the County would not have illegally seized the fees but for the disincentives represented by the indemnification clause is a showing never before required by this Court to establish standing. It is enough that the employees show that Respondents County and Libicki would have been forced to consider their own potential financial liability for unlawful fee seizures in the absence of the clause.* This, of course, Respondents County and Libicki would have been required to do, if the indemnification clause were not in the County/EDCEA MOU’ s agency shop provision, or if it were void as against public policy. * (...continued) when the constitutionally-adequate notice and procedures are not provided. While it is not unreasonable to recognize that the obligation to provide the notice and procedures falls mainly on the union, the duty to avoid constitutional harm by seizing fees or threatening termination upon non-payment falls squarely upon the public employer, a fact previously recognized by the Ninth Circuit, Knight v. Kenai Peninsula Borough School District, 131 F.3d 807, 817 (9th Cir. 1997), cert. denied on other grounds sub nom. Anchorage Education Association v. Patterson, 523 U.S.__, 118 S. Ct. 2060 (1998), based upon its reading of this Court’s decision in Hudson, 475 U.S. at 307 n.20. * The panel took great solace in EDCEA’s argument that the union “already has that incentive in a powerful form,” insofar as it might be denied “‘a portion of the fair share fee,” viz., the portion to which it was not entitled anyway, and that it faces “substantial and expensive litigation.” _Unmentioned by the panel was record evidence that EDCEA and its affiliate, PEU, collected agency fees from 484 other similarly-situated nonmembers (including 98 others in the County bargaining unit), yielding as much as $197,472.00 in 1995 alone. R. 24, Plaintiffs’ Statement of Undisputed Material Facts in Support of Their Motion for Summary Judgment, Exhibit 1 (Defendant Public Employees Union, Local #1’s Responses to Plaintiffs’ Interrogatories), page 17 and Exhibits B and C. Clearly, the rewards enjoyed by EDCEA and its affiliate in defying Hudson's mandate greatly outweigh even the most charitable estimate of their exposure in this lawsuit over the years for these five individuals. » BE Finally, the lower courts’ shifting justifications for the conclu- sion that the employees lack standing to challenge the indemnifica- tion clause mean, as a practical matter, that the employees had no real opportunity to make the requisite showing, thus raising serious due process questions. As noted supra, the district court’s determ:*ation that the employees lacked standing was made sua sponte, without any warning whatsoever. Respondents had not raised it as a defense to the employees’ challenge, R. 13, Defendants’ Answer, and had not argued it in their various summary judgment papers. R. 31 & 33. Likewise, the indemnification clause was not discussed at oral argument on the pending motions for summary judgment. R. 51, supra. Similarly, the panel rooted its holding in an assertion that the injury—that “fees were deducted from [the employees’] pay- check[s],” App. A at 16a; 177 F.3d at 1112—-was somehow “indi- rect,” and that the employees had failed to show the necessary link between the indemnification clause and the County’s failure to fulfill its duty “to evaluate the sufficiency of the union’s notice at the time the union seeks to take action against a nonmember for failure to pay the agency fee.” Knight, 131 F.3d at 817. Of course, the panel reached this new conclusion without mention of the manner in which the issue was decided by the district court, which as a practical matter amounted to an “ambush,” denying the employees the opportunity to make the necessary showing. These shifting justifications for finding that the employees lacked standing strongly suggest that the conclusions of the courts below were rooted not so much in doubts as to the employees’ standing as they were in the courts’ unwarranted desire to avoid deciding the issue. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (discussing burden at various stages in litigation). oe B. The Conflict With This Court’s Decisions Specifying Governmental Responsibilities When Enforcing An Agency Shop Scheme. Underlying the panel’s novel conclusion that employees lack Standing to challenge the legality of one of the terms of the CBA governing their terms and conditions of employment? is: (1) a disregard for the government’s duty to refrain from unconstitutional conduct, and its culpability for its unconstitutional seizure of “agency fees” from nonunion public employees for the benefit of a monopoly bargaining representative; at.d (2) confusion over the injury suffered by nonunion employees subjected to unlawful enforcement of a forced-unionism scheme. As to the first question, this Court unambiguously declared that “the government and union have a responsibility to provide procedures that minimize th[e] impingement [on First Amendment rights] and that facilitate a nonunion employee’s ability to protect his rights” when they enter into and attempt to enforce a forced-union- ism provision. Hudson, 475 U.S. at 307 n.20 (emphasis added). The panel discarded that definitive statement of government responsibil- ity to validate an agreement which it viewed as “plac[ing] the ultimate cost of any impropriety in the notice and the procedures where it belongs—on the union, which seeks the fees.” App. A at 16a; 177 F.3d at 1112. Moreover, the panel misstated the public employer’s responsi- bility when entering into forced-unionism agreements, i.e., to decline to enforce them when the notice and procedural safeguards required * Save for those cases finding claims barred for failure to exhaust contractual remedies, the employees have found no other authority holding that employees lack standing to challenge the legality of the contract establishing their terms and conditions of employment. Certainly, the panel below cited none. Hence, its conclusion was nothing if not “novel.” -16- by Hudson and its progeny have not been satisfied.’ Underlying the panel’s decision is confusion over the nature of a nonmember’s injury. The panel failed to recognize that a nonmember is not only injured by a failure to comply with Hudson, but also by the seizure of agency fees in the absence of “the constitutional requirements for the ... collection of agency fees.”* 475 U.S. at 310; cf Air Line Pilots Ass'n v. Miller, 523 U.S. 866, _-n.4, 118 S. Ct. 1761, 1767 n.4 (1998) (rejecting the argument that “[i]llegality depends on the spending of compelled agency fees for ideological purposes, ... not simply the initial collection of those fees”) (emphasis omitted). Additionally, the panel ignored the very real threat of palpable and direct injury upon enforcement of or compliance with the indemnification agreement. Owing to the forced-unionism agree- ment, the employees are forced to subsidize EDCEA’s expenditures. Thus, contrary to the panel’s dismissal of the employees’ injury and prospective injury as “speculative,” the prospect of additional financial injury (beyond the County’s past illegal seizures of agency fees) is both real and imminent, insofar as the employees remain ” Two methods of enforcement are available. Where, as here, the state’s wage assignment law authorizes involuntary fee deductions, the public employer seizes the fee from the employee’s wages and forwards it to the union. Other regimes bar union dues and fee deductions absent explicit written authorization by the employee, and require employers to discharge employees refusing to comply with union demands for payment of dues or fees. See, e.g., 29 U.S.C. § 186(c) (governing wage assignments under National Labor Relations Act, 29 U.S.C. § 151 et seq. * The panel seems to have assumed that a union always will bring itself into compliance with “the constitutional requirements for the Union’s collection of agency fees,” Hudson, 475 U.S. at 310, notwithstanding the financial or administrative burden, or other barriers to compliance. x subject to the County/EDCEA forced-unionism agreement.’ Indeed, given the renewal of agency fee seizures after the district court’s order of January 1998, App. C, they might already have suffered that injury. This Court has unequivocally recognized that a union may not charge objecting nonmembers for “the expenses incident to [an -illegal] strike.” Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507, 531 (1991); accord id. at 562 (opinion of Scalia, J.). As the Court said, “{w]e can imagine no legitimate governmental interest that would be served by compelling objecting employees to subsidize activity that the State has chosen to disallow.” /d. at 531. Similarly, no legiti- mate governmental interest can be served by compelling objecting employees to subsidize a public employer’s costs of defending itself against those employees’ valid claims that it violated their First and Fourteenth Amendment rights by seizing agency fees in the absence of compliance with Hudson. From its first public-sector agency fee case, this Court has: recognized that requiring nonunion employees to support their collective-bargaining representative “has an impact upon their First Amendment interests,” ... and may well “interfere in some way with an employee’s freedom to associate for the advancement of ideas, or to refrain from doing so, as he sees fit.” Hudson, 475 U.S. at 301, quoting Abood v. Detroit Bd. of Educ., 431 U.S. 209, 222 (1977); see also id. at 255 (Powell, J., concurring in ® While not reflected in the record, Petitioner Karen Pierce left her bargaining unit employment during the pendency of this lawsuit, and therefore does not face the prospect of compelled subsidization of EDCEA’s indemnifica- tion expenditures. However, because the other employees possess standing on this basis, this Court need not consider whether Pierce also possesses standing on this theory. Clinton, 524 U.S. at___n.19, 118 S. Ct. 2100 n.19, citing -~ Bowsher v. Synar, 478 U.S. 714, 721 (1986). ss the judgment); Lehnert, 500 U.S. at 517-19; see also Ellis v. Railway Clerks, 466 U.S. 435, 447, 455-56 (1984) (“[B]y allowing the union shop at all, we have already countenanced a significant impingement on First Amendment rights”; “[t]he First Amendment does limit the uses to which the union can put funds obtained from dissenting employees”). Thus, the coerced subsidization that occurs through the indemnification provision in a case such as this not only serves no legitimate governmental interest; it violates the employees’ First Amendment rights. When it shifted from the district court’s “injury because Hudson was not followed” justification (App. C. at 34a-35a), to an “injury in the fee seizures but no connection to indemnification” justification (App. A at 16a) for denying the employees’ standing, the panel below ignored that the employees face the prospective of real economic injury in EDCEA’s indemnification of the County and Libicki from their actions in enforcing the MOU’s agency shop provisions, and in defending this lawsuit. The County/EDCEA MOU thus adds the insult of requiring objecting nonmembers (among all represented employees) to subsidize the County’s injury of them by EDCEA’s assumption for all financial liability arising out of illegal County seizures of agency fees. Certainly, the very real prospect of that concrete injury is sufficient to confer standing upon the employees here to challenge the legality of that agreement in their suit for declaratory relief. Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). C. The Conflict Among The Circuits. In addition to the Ninth Circuit in this case, at least two other courts of appeals have faced the indemnification issue in the context of forced-unionism agreements. See Weaver v. University of Cin- cinnati, 970 F.2d 1523, 1536-38 (6th Cir. 1992), cert. denied sub nom. Weaver v. Steger, 507 U.S. 917 (1993); Hohe v. Casey, 956 F.2d 399, 411-12 (3d Cir. 1992). Another panel of the Ninth Circuit likewise faced nonunion employees’ challenge to an indemnification . #9. provision. Knight v. Kenai Peninsula Borough Sch. Dist., 13\ F.3d 807, 817 (9th Cir. 1997). None has eluded the merits by adopting the position of the panel in this case. The Third Circuit was the first court of appeals to address the merits of the issue in a published opinion, expressly holding that similarly-situated employees possess standing to challenge an indemnification agreement in Hohe, 956 F.2d at 411-12. There, the district court had rejected an employee’s challenge to the indemnifi- cation provision at the same time it rejected a challenge to a statute requiring the public employer (the Commonwealth of Pennsylvania) to withhold agency fees “even if the necessary procedural safeguards have not been implemented.” Hohe v. Casey, 740 F. Supp. 1092, 1098 (M.D. Pa. 1989), rev'd in pertinent part, 956 F.2d 399, 412 (3d Cir. 1992). As to that question, the district court held that even if the union’s procedure were held to be constitutionally defective, “[t]he fact that the Commonwealth might not have earlier barred fee collection would not make the plaintiffs more victorious,” and that “under the facts of this case it is unnecessary to consider the plain- tiffs’ challenge to [the statute].” 740 F. Supp. at 1099. In a footnote, the district court went on to state that, “For the same reasons we also reach that conclusion with respect to the indemnification clause in the collective bargaining agreement.” /d. atn.5. - On appeal, the nonmembers in Hohe only made the same arguments on the merits as the employees made here, i.e., that the indemnification clause “is void as against public policy.” 956 F.2d at 411. And the Third Circuit explicitly held that employees subject to the CBA possess standing to challenge its terms: “We find ourselves in disagreement with the ruling of the district court that it need not decide this issue. We say so because we think the theory - advanced by the plaintiffs’ attack on the clause raises a cognizable legal issue.” /d. at 411."° Shortly thereafter, the Sixth Circuit issued its published decision on the issue, becoming the first appellate court to declare such clauses void as against public policy in the context of forced- unionism agreements. Weaver, 970 F.2d at 1536-38.'' That decision is devoid of any suggestion whatsoever that employees lacked standing to sustain their successful challenge to the indemnification provision, finding it sufficient that the clause “protect[s] the University from any financial consequences of going along with '° As the Third Circuit recognized, the district court in Hohe had found it unnecessary to decide the issue because it “found no independent legal consequences flowing from the indemnification clause in the collective bargaining agreement.” 956 F.2d at 411. This is a virtually explicit reference to the second of the three requirements necessary to establish “standing,” i.e., that “there must be a causal connection between the injury and the conduct complained of—the injury has to be ‘fairly ... trace[able] to the challenged action of the defendant, and not ... th{e] result [of] the independent action of some third party not before the court.’"” App. A at 16a; 177 F.3d at 1111-12, citing Lujan, 504 U.S. at 560-61. On the merits, the Third Circuit held that the indemnification clause was not void. Hohe, 956 F.2d at 411-12. '' Another panel of the Sixth Circuit had issued an earlier decision declaring such clauses void as against public policy, but that decision was unpublished. Cramer v. Matish, 924 F.2d 1057 (table), 1990 WL 169640 (6th Cir. 1990). In that case, too, there was no question that employees possessed standing to challenge one of the provisions of the CBA governing their terms and conditions of employment. Other district courts in the Sixth Circuit, including the lower court in Weaver, had previously issued decisions declaring such clauses to be void as against public policy. Weaver v. University of Cincinnati, 764 F. Supp. 1241, 1247-48 (S.D. Ohio 1991), aff'd in pertinent part, 970 F.2d 1523 (6th Cir. 1992), cert. denied sub nom. Weaver v. Steger, 507 U.S. 917 (1993); Jordan v. City of Bucyrus, 754 F. Supp. 554, 558-59 (N.D. Ohio 1991). 7 procedures selected by the union that fail to comply with the constitutional standards enunciated in Hudson.” Weaver, 970 F.2d at 1538 (other citations omitted). Implicit in any federal court’s merits determination is a finding that the parties before the court possess the requisite standing, National Organization for Women v. Scheidler, 510 U.S. 249, 255 (1994) (standing is open to review at all stages of the litigation); cf. . Brewer v. Lewis, 989 F.2d 1021, 1025 (9th Cir. 1993) (standing is a jurisdictional question that must be addressed at the threshold of any case), for it is “an indispensable part of the plaintiff's case.” Lujan, 504 U.S. at 561. Indeed, when the party before the court lacks Standing, there is no case or controversy, and the court lacks jurisdiction. As this Court recently has reaffirmed, “‘Jurisdiction is the power to declare the law, and when it ceases to exist, the only furretron remaining to the court is that of announcing the fact and dismissing the cause.’” Steel Co. v. Citizens for a Better Environ- ment, 523 U.S. 83, __, 118 S. Ct. 1003, 1012 (1998), quoting Ex parte McCardle, 7 Wall. 506, 514 (1868); see also National Law Center on Homelessness & Poverty v. Kantor, 91 F.3d 178, 180 (D.C. Cir. 1996). Thus, implicit in the Sixth Circuit’s merits determination is the conclusion that it possessed jurisdiction to decide the issue presented to it. Perhaps the most apt authority disregarded by the court of appeals, though, was its own. Less than two years earlier, another panel of the court addressed the merits of a challenge to the enforce- ment of a similar indemnification provision brought by: similarly- situated employees. Knight v. Kenai Peninsula Borough School District, 131 F.3d at 817. There was no question but that the employees had standing to challenge the enforceability of the indemnification provision in that case; the district court had “quickly disposed of” the argument that employees “are not a proper party to sue on a contract of indemnity and that they have met their constitu- tional duty and are therefore not negligent.” Petition for a Writ of 2. Certiorari, Anchorage Educ. Ass'n, et al. v. Patterson, et al., No. 97- 1454, Appendix C at 47a. However, recognizing that Knight presumed that employees possess standing to challenge an indemnifi- cation provision in the CBA governing their terms and conditions of employment, the panel here suggests that the decision was rendered in some unidentified context other than a similarly-situated em- ployee’s challenge to the enforceability of the indemnification provision. App. A at 15a; 177 F.3d at 1111. In sum, then, the Court should grant certiorari to settle the conflict among the circuits as to whether employees subject to a forced-unionism provision agreement possess standing to challenge the legality of an indemnification clause in that agreement. II. THERE IS WIDESPREAD CONFLICT AMONG THE CIRCUITS AS TO WHETHER UNIONS MAY INDEMNIFY STATE AND LOCAL GOVERNMENTS FOR THEIR CONSTITUTIONAL TORTS WHEN ILLEGALLY ENFORCING FORCED-UNIONISM AGREEMENTS. A. The Conflict. Like this, Teachers Local No. I v. Hudson was a case brought pursuant to 42 U.S.C. § 1983. 475 U.S. 292, 298 n.3 (1986). There, this Court addressed “whether the [agency shop] procedure used by [a union] and approved by [a public employer] adequately protects the basic distinction drawn in Abood,” between “devis[ing] a way of preventing compulsory subsidization of ideological activity by employees who object thereto without restricting the Union’s ability to require every employee to contribute to the cost of collective- bargaining activities.” 475 U.S. at 302, quoting Abood v. Detroit Bd. of Educ., 431 U.S. 209, 237 (1977). “[{AJnalyz[ing] the problem from the perspective of the First Amendment concerns,” 475 U.S. at 304 n.13, the Court determined that “the constitutional requirements for the Union’s collection of agency fees include an adequate explanation of the basis of the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decisionmaker, x & and an escrow for the amounts reasonably in dispute while such challenges are pending.” /d. at 310. The Court specifically stated that, in this context, both “the government and union have a responsi- bility to provide procedures that minimize that impingement [on First Amendment rights] and that facilitate a nonunion employee’s ability to protect his rights.” Jd. at 307 n.20, citing Ellis, 466 U.S. at 455. It logically follows from this explicit statement of government responsibility that public employers may not, without running afoul of constitutional norms, collect agency fees from nonmember employees on behalf of the labor organization representing bargain- ing units of those employees absent strict adherence to these “constitutional requirements,” Hudson, 475 U.S. at 310, and that they are liable to the employees from whom they collect such fees if they do so. Section | of the Civil Rights Act of 1871, 42 U.S.C. § 1983, created a remedy “against those who representing a State in some capacity were unable or unwilling to enforce a state law,” Monroe v. Pape, 365 U.S. 167, 176 (1961) (original emphasis); see also District of Columbia v. Carter, 409 U.S. 418, 426 (1973), in order to “protect the people from unconstitutional action under color of state law ‘whether that action be executive, legislative, or judicial.’” Mitchum v. Foster, 407 U.S. 225, 242 (1972), quoting Ex parte Virginia, 100 U.S. 339, 346 (1879). The catalyst for this statutory enactment was widespread violence against blacks and their supporters by the Ku Klux Klan. Wilson v. Garcia, 471 U.S. 261,276 (1985); see also lA MARTIN A. SCHWARTZ & JOHN E. KIRKLIN, SECTION 1983 LITIGA- TION: CLAIMS AND DEFENSES § 1.3 (3d ed. 1997). It was rooted in a grave distrust of state and local officials to enforce federal constitutional rights against—and perhaps in league with-—powerful local interests committed to the violation of the federal constitutional rights possessed by individuals. Thus, in a broad sense, State and local governments bear responsibility for their “constitutional torts.” 42 U.S.C. §§ 1983 and 1988 (West Supp. 1999). The purpose of the Civil Rights Act of - 1871,42 U.S.C. § 1983, is “to deter state actors from using the badge of their authority to deprive individuals of their federally guaranteed rights.” Wyatt v. Cole, 504 U.S. 158, 161 (1992), citing Carey v. Piphus, 435 U.S. 247, 254-57 (1978); see also City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 268 (1981) (deterrence of future abuses of power is an important purpose of this section). Yet surprisingly, the United States Courts of Appeals are in deep conflict over whether public employers may negotiate and enforce agreements by which a labor organization indemnifies a public employer for any liabilities arising out of the unlawful enforcement of compulsory unionism provisions. While the Ninth Circuit avoided the question in this case, at least three other courts of appeals have faced this issue, two in this specific context.'? One, the Third Circuit, found that such agree- ments are permissible, and enforceable. Hohe v. Casey, 956 F.2d 399, 411-12 (3d Cir. 1992). Another Circuit, the Sixth, takes a directly contrary position. Weaver v. University of Cincinnati, 970 F.2d 1523, 1536-38 (6th Cir. 1992)(holding that “[a] clause that relieves the employer of all consequences for its failure to assume and conscientiously carry out its duties, including even the cost of defending legal actions, is against public policy”). A third Circuit, the Second, agrees with the Sixth in a related context. Stamford Bd. of Educ. v. Stamford Educ. Ass'n, 697 F.2d 70, 73-75 (2d Cir. 1982). While the Third Circuit’s decision was the first to address this controversial issue in a published opinion, the Sixth Circuit ad- dressed it earlier in an unpublished opinion in Cramer v. Matish, 924 F.2d 1057 (table), 1990 WL 169640 (6th Cir. 1990). Citing Stam- ford, Cramer reversed a district court judgment and remanded the case, directing the lower court to “strike [this] ... void provision[] from the policy.” Jd. at *4. The provision was void as against public '2 Another, the Seventh Circuit, enforced such an agreement on the facts of the case, but did not address the public policy issue raised herein. Dixon v. City of Chicago, 948 F.2d 355, 359-60 (7th Cir. 1991). Se policy because, “[u]nder Hudson, the public employer, not the union, has the primary duty to ensure that the plan is constitutionally valid,” and “clauses in collective bargaining agreements which purport to relieve public employers from liability for violations of federal constitutional and civil rights are void as against public policy.” Cramer, 1990 WL 169640 at *4, citing Stamford, 697 F.2d at 73-75. Cramer concluded that “[w]ithout such a role, public employe[r]s would have no incentive to fulfill their constitutional duties.” /d. (emphasis added). Cramer thus held that indemnification of a public employer by the union receiving the fees in this context is void as against public policy. The Third Circuit acknowledged in Hohe that it was departing from the Sixth Circuit’s unpublished Cramer decision, as well as a subsequent district court decision in the Sixth Circuit. 956 F.2d at 411, citing Cramer and Jordan v. City of Bucyrus, 754 F. Supp. 554, 559 (N.D. Ohio 1991). The Third Circuit declined to follow the Sixth Circuit’s reasoning. The court noted the employees’ conces- sion that the Commonwealth and its high executive officials sued in their official capacity in the suit are immune from damages. The court then rejected the argument that the clause would encourage the public employer to violate the employees’ constitutional rights by allowing it to escape liability for costs and attorneys’ fees pursuant to 42 U.S.C. § 1988, because “the clause (does not] explicitly provide that [the union] will indemnify the Commonwealth for the costs or fees involved in defending any claim based upon its deduction of fair share fees.” 956 F.2d at 411-12." Even if it did, because the monopoly bargaining agent nas a significant incentive “to ensure that its procedures comply with the Constitution,” i.e., that “(flailure to do so may result in its being unable to retain a portion of the fair share fee,” the Third Circuit held that “invalidation of the '. This distinguishes Hohe from this case, where the indemnification clause specifies that indemnification includes the “reasonable cost of County’s attorney fees and costs.” R. 1, Complaint, Exhibit A, Art. 4, § 3(J). es indemnification clause is not required by the First Amendment.” Jd. at 412. The Sixth Circuit’s decision in Weaver was the latest to decide this issue. This decision directly conflicts with that of the Third Circuit, and adopts virtually every argument rejected by the Third Circuit. The Sixth Circuit engaged in a detailed analysis of Stam- ford, as well as Hohe, concluding that the former was more persua- sive than the latter. The Sixth Circuit declared that “the indemnifica- tion agreement in the present case was repugnant to public policy, and therefore, invalid,” for two reasons. First, although “facially neutral,” the clause “protect[s] the university from any financial consequences of going along with procedures selected by the union that fail to comply with the constitutional standards enunciated in Hudson.” Second, the court recognized that “the university as a public employer had duties separate and apart from those of the union.” Weaver, 970 F.2d at 1538 (other citations omitted). The Sixth Circuit, therefore, concluded that a “clause that relieves the employer of al! consequences for its failure to assume and conscien- tiously carry out its duties, including even the cost of defending legal actions, is against public policy.” Jd. B. The Importance Of The Issue. This question manifestly is important, both in practice and principle, as this Court previously recognized by granting certiorari in cases such as Ellis v. Railway Clerks and Teachers Local No. | v. Hudson. It is important in practice, because the Court’s resolution of this question will affect employees subject to a large number of such agreements. Public-sector compulsory unionism agreements are lawful in at least twenty (20) states and the District of Columbia. Milton L. Chappell, Seeking a New Foundation: Legislative and Practical Alternatives to the Current. Monopoly Bargaining Model that Will Enhance the Viability of Independent Teacher Groups, 16 ee a GOv’T UNION REV. 1, 23-28 (table) (Summer 1995). As the cases above illustrate, public employee unions often are willing to assume the risk of the employer’s liability in order to obtain and enforce forced-unionism agreements, and many such clauses thus contain indemnification provisions. Whether public employers may be indemnified by labor unions from “any and all claims, demands, suits, orders, judgements or other forms of liability that shall arise out of or by reason of, action taken or not taken” pursuant “to the collection and procedures for collec- tion of fair share fees,” R. 1, Complaint, Exhibit A, Article 4, § 3(J), is important in principle, too, because a requirement that public employees support their monopoly bargaining representative implicates fundamental constitutional rights. Because the impair- ment of the First Amendment rights of public employees is implicit in any forced-unionism agreement, Hudson, 475 U.S. at 301 n.3; see also Ellis, 466 U.S. at 455, “the government and union have a responsibility to provide procedures that minimize that impingement and that facilitate a nonunion employee’s ability to protect his rights.” 475 U.S. at 307 n.20. Questions, such as that presented here, of how that responsibility is to be enforced against State and local complicity in the efforts of discrete, locally-powerful groups to violate the constitutional rights of another discrete, less-politically powerful group, see Wilson v. Garcia, 471 U.S. at 276, necessarily are important. Indeed, they are at the core of the fundamental congressional policy to create a remedy “against those who repre- senting a State in some capacity [a]re unable or unwilling to enforce a state law,” Monroe v. Pape, 365 U.S. at 175-75, represented by the Civil Rights Act of 1871, 42 U.S.C. § 1983. This Court’s intervention is necessary to establish conclusively nationwide that public employers that have surrendered their employees’ unfettered right to choose whether to support their monopoly bargaining representative cannot avoid their “responsibil- ity to provide procedures that facilitate a nonunion employee’s ability to protect his rights” Hudson, 475 U.S. at 307 n.20, and cannot without economic consequence, in league with a labor union, ~. “subject, or cause[] to be subjected, any citizen of the United States ... to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws.” 42 U.S.C. § 1983 (West Supp. 1999). CONCLUSION For the reasons stated above, this petition for a writ of certiorari should be granted, and the case set for plenary briefing and argument on the important questions presented herein. __ Respectfully submitted, W. JAMES YOUNG* c/o National Right to Work Legal Defense Foundation, Inc. 8001 Braddock Road, Suite 600 Springfield, Virginia 22160 (703) 321-8510 ATTORNEY FOR PETITIONERS *Counsel of Record September 1999 APPENDICES 4 _ =o , > cares Jes tok CAP arn) re f - : n : es Sy tem y _ v 7 Las Se — ‘ cee) eye Te ”~ : her 7 = a fod . r - oes 7] - iS i } 2 en tell Pea « _ a nt 4 “7 an — Se - -_ =) 7 ee = oi | ‘a eo _ fe -izt a Saat ai 7 ie 7 2 = ee * go t oS ee tee eee oo ee ie ¢ Su . | eae SS : a eer WAGs te ‘ _ : Le re" any te a = 7s 7 viel 2 in Ca ere ae a is a as = 7 = one o . , : = Pa Sd eS, Wie 7 ity i cas — > ie tr ype 7 vs a wt eee > 4 is - bats . a * al Seer! = oo oe Pa 7 v= =%, >= rs a = Vie ane ie ' Eien, oe ih oe a0 5 | an a phils ru i ne : 5 n on us; vo 4 — se ae = 7, a ar) . a , 7 iw ao - iy = Vie | t aly ye ay a - a io =J) oe a > a) » a s7.% the - | 5 =" _ -h > - : a | ae > a Be. if 7 7 j aca = 2) = ee 7 -— ¢ : = oan = - ; 4- io } = APPENDIX A DECISION OF THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT 12 May 1999 ira 2 S Eon oe - la- {177 F.3d 1102] Steven PRESCOTT; Robert F. Berry; Cheryl L. Jones; Karen Pierce; Christine M. Turney, Plaintiffs-Appellants, v. COUNTY OF EL DORADO; Kathy Libicki; Local 1 El Dorado County Employees Association, Defendants-Appellees. No. 98-15579. United States Court of Appeals, Ninth Circuit. Argued and Submitted March 9, 1999. Decided May 12, 1999. kek [1103]Before: FERNANDEZ and McKEOWN, Circuit Judges, and WEINER,’ District Judge. Opinion by Judge FERNANDEZ; Concurrence by Judge McKEOWN. [1104]FERNANDEZ, Circuit Judge: Steven Prescott, an employee of the County of El Dorado, California, appeals from a determination of the district court that granted him limited relief on his claim that the assessment of fair- share agency shop fees against him was not fair.” The fees were for ' Honorable Charles R. Weiner, Senior United States District Judge for the Eastern District of Pennsylvania, sitting by de gnation. ? Robert E. Barry, Cheryl L. Jones, Karen Pierce and Christine M. Turney also appeal. What we hold regarding Prescott applies equally to them. o 2a « the purpose of supporting the El Dorado County Employees Associa- tion, Local # 1 (EDCEA), the union which represents him and the other employees of the County who are in his bargaining unit. Prescott is not a member of the EDCEA. He objects to the district court’s approval of the escrow provisions, its failure to order full restitution of fees, its remanding him to using the union’s arbitration procedures, and its failure to strike down an indemnification provision under which the EDCEA protects the County against losses. We affirm in part, reverse in part, and remand. BACKGROUND Prescott, an employee of the County, is covered by a collective bargaining agreement (CBA) between the County and the EDCEA. The CBA establishes an agency shop arrangement. Employees in the bargaining unit must either be members of the union or pay a fair- share agency fee. Those who are not members, but who must pay the fair-share fee, are sometimes referred to as nonmembers or fee payers. EDCEA is an affiliate of the Public Employees Union, Local # | (PEU), and all dues for the EDCEA are paid to PEU. Members dues amount to | percent of gross salary, up to a maximum of $34, plus $1 per pay period. It appears that fee payers are not charged the $1, which EDCEA receives and controls. EDCEA has 570 members and 1 14 fee payers; PEU has more than 9100 members and 482 fee payers. In April 1995, EDCEA gave notice to nonmembers that the County would begin to deduct a fair-share feé from their paychecks, which amounted to 98 percent of the full union dues. That reflected PEU's determination that 98 percent of its expenditures were for chargeable activities, that is, activities which did benefit nonmembers. It explained that the union uses the fair-share fee to 4efray the costs incurred for both individual and group representation in employment relations with the County, and that the actual costs for nonchargeable expenditures were less than 2 percent. Nonmembers were also subject to a deduction equivalent to the union initiation fee (variously said to be $35 or $45). PEU's procedure was to collect the entire agency fee from all nonmember employees, but to place 2 percent of that fee into an interest bearing escrow account. The notice provided that if a nonmember did not agree with the computation "the Union will set -3a- aside 4% of the fair-share fee in an interest-bearing trust for each fee payer who registers his dissent, to be held in an escrow account..." It further explained that "[o]nce the fee payer has objected to the amount of the fees paid into escrow, he/she may demand that the fees [2%] paid to escrow be paid to them and their monthly agency fee reduced by that amount thereafter.” The notice included a schedule of PEU's projected expenditures for the 1995 fiscal year, based upon expenditures for the 1994 fiscal year. Those were, it was said, reported "on a [PEU] wide basis...." The fund resulting from the $1 per member fee retained by the EDCEA, which Prescott estimates at nearly $15,000 annually, was not _ separately mentioned in this, or other, financial schedules.’ The projection identified the major categories of expenses and an asterisk was placed next to those categories which the union identified as "nonrepresentational expenditures,” including (1) ideological expenditures, (2) social events, gifts and donations, (3) contributions to political education fund, and (4) [1105]blood bank. The notice explained that "[f]air-share fees do not include any expenses incurred for political action, social activities or organizing expenses. Organiz- ing expenses are those incurred to bring new bargaining units into representation by [PEU]." The notice also included a statement of PEU's revenues and expenses for the 1994 fiscal year, which listed the major categories of expenses and indicated whether they were paid from the general operating fund or the political education fund. According to the 1994 statement, only contribution expenses and bank charges were paid by the political education fund. Contributions for political education and social events, gifts, etc., came from the general fund. The notice also included a letter from a certified public accountant, which reported that the 1994 statement was reviewed in accordance with standards established by the American Institute of Certified Public Accountants, and that it conformed with generally accepted accounting principles. > The letter did specify that the fees would be “98% of the 1% of the fee payers gross salary,” while dues are “1% of gross salary, plus $1 per pay period.” - 4a - - The district court agreed with Prescott to the extent that he objected to certain procedures that PEU had created for the purpose of challenging the fees. It, therefore, entered a preliminary injunction prohibiting the collection of fees until the procedures were corrected. See, Prescott v. County of El Dorado, 915 F. Supp. 1080, 1092 (E.D. Cal. 1996) (Prescott I). They have been corrected, but the court, upon cross motions fo: summary judgment, made the injunction permanent.’ Neither the County nor EDCEA has appealed from that judgment. The district court did not otherwise agree with Prescott, and granted summary judgment against him on the other issues. Thus, he has appealed. JURISDICTION AND STANDARDS OF REVIEW The district court had jurisdiction pursuant to 28 U.S.C. §§ 1331 & 1343. We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the district court's grant of summary judgment de novo. See Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996). That, of course, means that we must determine for ourselves whether "genuine issues of material fact exist and whether the district court correctly applied the relevant substantive law." Jd. Insofar as Prescott attacks the indemnification provision between EDCEA and the County, standing is in question. We review standing questions de novo. See San Diego County Gun Rights Comm. v. Reno, 98 F.3d 1121, 1124 (9th Cir. 1996). DISCUSSION While the district court did grant partial relief to Prescott, it deflected his attacks on the adequacy of the financial statements regarding PEU's and EDCEA's income and expenses, about the size of the required escrow account, about the need for full restitution to Prescott, about the proper forum to decide whether the fair-share fee \. * The parties indicated to the district court that the case could be decided on summary judgment. Although it was somewhat dubious, the court took them up on that. - Sa- was fair, and about the propriety of the indemnification clause in favor of the County. In short, Prescott won a skirmish and continues to hold that piece of ground, but he lost the rest of the engagement. He asks us to come to his rescue. We shall, in part. In order to do so, we must survey the contours of the field adumbrated by the Supreme Court. From the very beginning, the Court has expressed the view that, while it is appropriate to impinge upon objecting employees’ freedom of choice in order to require those who share in the benefits of union representation to help "defray the expenses ... of collective agree- ments, [and] the expenses entailed in the adjustment of grievances and disputes," it is not appropriate to take their money "to support candidates for public office, and advance political programs” of the union. J/nternational Ass'n of Machinists v. Street, 367 U.S. 740, 768, 81 S.Ct. 1784, 1800, 6 L.Ed.2d 1141 (1961). And it is the union, [1106]not the employee, that bears the burden of demonstrating just what proportion of union expenditures is devoted to functions other than those which can properly be charged to dissenting employees. See Brotherhood of Ry. and S.S. Clerks v. Allen, 373 U.S. 113, 122, 83 S.Ct. 1158, 1163-64, 10 L. Ed. 2d 235 (1963). Those earlier cases involved the unique area of railroading, but when it was called upon to consider the area of public employee unions, the Supreme Court reached the same conclusions. Again, it recognized the fact that agency shop provisions do impinge upon an employee's freedom of choice, but emphasized the more potent fact that they counteracted the incentive to become a free rider, who refuses to contribute to the union while happily obtaining the benefits of union representation. See Abood v. Detroit Bd. of Educ., 431 U.S. 209, 221- 22, 97 S.Ct. 1782, 1792-93, 52 L. Ed. 2d 261 (1977). Again, it declared that an objecting employee could not be forced to pay dues or assessments to support or advance the union's political or ideological causes, which were "not germane to its duties as collective-bargaining representative." Jd. at 235, 97 S.Ct. at 1800. Then, in Ellis v. Brotherhood of Ry. Airline & S.S. Clerks, 466 U.S. 435, 448, 104 S.Ct. 1883, 1892, 80 L. Ed. 2d 428 (1984). The court summed up as follows: - 6a- Hence, when employees such as petitioners object to being burdened with particular union expenditures, the test must be whether the challenged expenditures are necessarily or reasonably incurred for the purpose of performing the duties of an exclusive representative of the employees in dealing with the employer on labor-management issues. Under this standard, objecting employees may be compelled to pay their fair share of not only the direct costs of negotiating and administering a collective-bargaining contract and of settling grievances and disputes, but also the expenses of activities or undertakings normally or reasonably employed to implement or effectuate the duties of the union as exclusive representative of the employees in the bargaining unit. Id. at 448, 104 S.Ct. at 1892. So much for the substance, but what about the procedure? The Court addressed that question in Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L. Ed. 2d 232 (1986), where it concluded that "the constitutional requirements for the _Union's collection of agency fees include an adequate explanation of the basis for the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decisionmaker, and an escrow for the amounts reasonably in dispute while such challenges are pending.” /d. at 310, 106 S.Ct. at 1078. It is with these general principles in mind that we turn to the principal disputes in the agon between Prescott and the EDCEA. A. Explanation of the Basis of the Fee There can be little doubt that PEU did give a rather detailed notice and a goodly amount of explanation of the fee to the nonmem- ber fee payers. But quantity is not necessarily quality, and Prescott claims that the notice fell short because the financial schedules were not properly verified. That the schedules were not audited can hardly be doubted, but EDCEA asserts that they need not be. The district court agreed. See Prescott I,915 F.Supp. at 1089-90. We do not. - Ja- An accountant or auditor can provide three levels of service: a compilation, a review, or an audit. A compilation involves the preparation of a financial statement regarding which the accountant expresses no assurance of accuracy, completeness, or conformity with generally accepted accounting principles. Larry P. Bailey, Miller GAAS Guide 14.19-14.20 (1999). A review constitutes a higher level of service, resulting in an expression of limited assurance. In a review, an accountant relies on the representations of [1107]manage- ment to issue a report "stating that he or she is not aware of any material modifications that should be made to the financial statement in order for it to be in conformity with” generally accepted accounting principles. Jd. at 14.25; see generally, id. at 14.25-14.28. In contrast, an audit consists of sufficient independent examination to express an opinion on the fairness, in all material respects, of the financial statement. Jd. at 1.03, 11.05-11.06. An audit, unlike a review, generally requires the accountant to assess the organization's internal control procedures, examine evidence supporting the amounts in the financial statement using an appropriate sampling frequency, observe inventories, and confirm accounts receivable. Jd. at 14.25-14.26, 11.05-11.06; see id. at 9.03-9.31 (sampling techniques). Although audits may vary in procedures and sampling rates, and therefore in level of audit risk, see id. at 9.05-9.07, an audit, as opposed to a review, offers at least some verification of the amounts disclosed in the financial statement. The Supreme Court has emphasized that, "[l]eaving 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 informa- tion—does not adequately protect” them. Hudson, 475 U.S. at 306, 106 S.Ct. at 1076. In elaborating what sufficient information might be, the court said that, "[t]he Union need not provide nonmembers with an exhaustive and detailed list of all its expenditures, but adequate disclosure surely would include the major categories of expenses, as well as verification by an independent auditor.” /d. at 307 n. 18, 106 S.Ct. at 1076 n. 18. Later on, the Court returned to that theme when it spoke of the weight of "a certified public accountant's verified breakdown of expenditures...." Jd. at 310, 106 S.Ct. at 1077. And yet again the Court spoke of a determination made "on the basis - 8a- of the independent audit," and stated that an escrow figure "must itself be independently verified." /d. at 310 n. 23, 106 S.Ct. at 1078 n. 23. Those statements would seem to make it clear enough that what is required is a real independent verification of the financial data in question to make sure that expenditures are being made the way that the union says they are. For example, was an amount supposedly directed to "x" for negotiation expenses really dispersed to him, or did it go to "y", who is a union lobbyist? The district court did not believe that the Supreme Court really meant what it seemed to have said, but we have no doubt that the Court did understand its own use of language. This is not the first time that a court has said that. Indeed, we said as much in Knight v. Kenai Peninsula Borough School Dist., 131 F.3d 807 (9th Cir.1997), cert. denied, U.S. , 118 S.Ct. 2060, 141 L. Ed.2d 138 (1998). There we explained that "(t]he purpose of an audit is to have an independent accountant determine whether the union has actually spent the amounts of money it claimed to have spent on the chargeable activities." /d. at 813. We went on to reject an attempt by the union to rely on figures-when "no independent accountant has determined whether [the union] actually spent the amounts it claimed to have spent on chargeable expenses in the unaudited report." Jd. We held, therefore, that the union's notice did not satisfy Hudson. The holdings of other courts are to the same effect. See Gwirtz v. Ohio Educ. Ass'n., 887 F.2d 678, 682 n. 3 (6th Cir.1989) ("[A]n auditor's role is to verify the expenditures made by the union so as to ensure that the expenditures that the union claims it made for particular expenses were actually made for those ex- penses."); Andrews v. Education Ass'n, 829 F.2d 335, 340 (2nd Cir.1987) (same). We do not see how a mere review of the union's records can offer the "verification" that the Supreme Court and we have spoken of. Audits are often required in the business and public arenas, where others seek assurance that the reviewed books of an organization really do reflect the concrete world transactions to which they refer. It is just that kind of assurance that [1108]nonmembers are entitled to, even though it may prove somewhat costly to obtain it. As the Second Circuit has pointed out, it is not a question of balancing the cost to the union against the First Amendment rights of the fee payers. "Excessive cost cannot form the basis for allowing the union or the - 9a - government to avoid Hudson's requirement that the procedures used by the union to allocate bargaining and administrative costs be carefully tailored to minimize the intrusion on the nonmembers’ rights." Andrews, 829 F.2d at 339. In short, a true audit was required.° A somewhat smaller, yet important, piece of the puzzle is the district court's reliance on what has been called the local union presumption. See Prescott 1,915 F.Supp. at 1088-89. That is based on the assumption that local union units have spent their budgets in at least as favorable a way from a nonmember's standpoint as the overall larger union unit with which they are affiliated. That scheme gives no real information about just how the more local units really did spend their funds, but it does avoid the need of detailed information at least at the notice level. See Price v. International Union, United Auto., Aerospace & Agric. Implement Workers, 927 F.2d 88, 93-94 (2d Cir.1991); see also Finerty v. NLRB, 113 F.3d 1288, 1289, 1291-92, (D.C. Cir.1997), cert. denied, _U.S.__, 118 S.Ct. 558, 139 L. Ed.2d 400 (1997). Besides the cost savings, it has been said that there is some justification for the presumption because an objector can challenge it, whereupon the burden of persuasion on the question of the local unit's expenditures will fall upon the union. See Price, 927 F.2d at 94. With all due respect, that seems to put the cart before the horse because the notice is supposed to allow the nonmember to decide if there is a problem in the first place. The reason for the presumption seems to be that the larger unit (here PEV) will certainly spend more on nonchargeable expenses than the local union (here EDCEA). But we see no reason to assume that is true. Rather, we agree with the Sixth Circuit "that such a local union presumption is unconstitutional” because " 'the use of the local union presumption increases the risk that the reduced fee collection from the objector would be in excess of what is appropriate.’ " Lowary v. Lexington Local Bd. of Educ., 903 F.2d 422, 431 (6th Cir.1990) (citation omitted). As the Third Circuit has said, the point of the notice is not simply to tell nonmembers how the union went about its business. It is to provide "nonmembers with information > We express no opinion on the exact type of audit required under Hudson. y - 10a - sufficient to gauge the propriety of the fee." Hohe v. Casey, 956 F.2d 399, 410 (3d Cir.1992). Without conveying to nonmembers: the information on EDCEA's major categories of expenses but, rather, assuming that they were the same as those of PEU, nonmembers were left "in the dark about the portion of the fee attributable to chargeable expenses and [were] placed ... in the position of having to object to obtain the information needed to gauge the propriety of the fee." /d. at 411. Nor can it be said that the amounts will always be so insignifi- cant that Hudson's demand for something less than absolute precision will always be satisfied. After all, in this case the total set aside for dissenters’ challenges did not exceed 4 percent, and the amount involved in subventions to the local units was over 2 percent. Moreover, we see little reason to assume that the local units will use the same degree of care as the larger unit when it comes to handling their finances. We do not decide that each little unit in the PEU firmament must necessarily be subjected to a separate verified audit of its expendi- tures, but we do decide that some auditor verifiable methodology which is more than a presumption is required if PEU and EDCEA are to fulfill their notice obligations. That methodology must be utilized with an eye on the purpose of the notice in the first place, that is to allow Prescott and others a reasonable opportu-[1109]nity to gauge whether the money taken from them is being spent on chargeable . expenses. Because the unaudited schedules attached to the notice were insufficient, we must turn to consider what steps were then required to protect Prescott. B. Restitution Prescott asserts that he must simply be given full restitution of all amounts collected from him, even though it must of necessity be true that some substantial portion of the fee was used for properly chargeable purposes. With that extreme position we do not agree. -lla- As we see it, the court in Hudson did not insist on anything quite so radical; it did not see complete restitution as apodictic. Rather, it reflected on the fact that an escrow account would help alleviate the danger of even temporary use of nonmember fees for improper purposes. See Hudson, 475 U.S. at 309, 106 S.Ct. at 1077. It pointed out that the escrow solution alone would not solve the whole problem, if the notice was insufficient or if the challenge procedure fell short. But, even then, it did not say that a 100 percent escrow was required, and it did not hold that the proper remedy was full restitution of all collected fees. /d. at 310, 106 S.Ct. at 1077-78. Prescott suggests that we have already decided that the remedy is restitution. We have done no such thing. Prescott seeks to support his position by pointing to our decision in Dean v. Trans World Airlines, Inc., 924 F.2d 805 (9th Cir.1991). There, an airline pilot was not satisfied with the notice he was given, so he unilaterally reduced the fee demanded by the union from $36 per month to $10 per month. /d. at 807. We agreed with him that the union had failed to institute the proper procedures. Thus, we said, “the union has no right to enforce an agency shop agreement to collect fees for use in any union activity beyond collective bargaining” and its failure to comply with Hudson "can serve as a justification for Dean's unilateral reduction of fees." Jd. at 809. Nothing in that determination suggests that a nonmember employee is entitled to full restitution whenever the union stumbles in its efforts to comply with Hudson. - Similarly, in Knight, upon which Prescott also relies, we merely said that the union's failure to comply with Hudson meant that it "was not entitled to the fees that it collected." 131 F.3d at 815. We did not say that meant that the union could not receive any fees whatsoever, and we went on to say that the employee was entitled to relief, but that we would "leave the measure of damages and the suitability of other relief for the district court to determine in the first instance." Jd. Had we believed that the measure was simply complete restitution, we could easily have said so, but we did not and we see no reason for laying down so draconian a rule. - 12a- In our opinion, the Seventh Circuit got it just right when it said that a demand for full restitution was punitive insofar as it sought to deprive the union of fees to which it was, doubtlessly, entitled. See Gilpin v. American Fed. of State, County, and Mun. Employees, 875 F.2d 1310, 1315 (7th Cir.1989). It continued: [T]he union negotiated on behalf of these employees as it was required by law to do, adjusted grievances for them as it was required by law to do, and incurred expenses in doing these things.... The plaintiffs do not propose to give back the benefits that the union's efforts bestowed on them. These benefits were rendered with a reasonable expectation of compensation founded on the collective bargaining agreement and federal labor law.... Id. at 1316. In fine, we agree with the district court that full restitution would be inappropriate, even though PEU did fail to meet all of its Hudson obligations. Any other rule would tend to suggest that the full constitutionality of the procedures and results must be established before fees are deducted. That would, as the Third Circuit [1110]}has suggested, "render the escrow requirement," contemplated by Hudson, "completely unnecessary." Hohe, 956 F.2d at 406. That, of course, underscores an alternate source of protection for nonmember employees—the interest bearing escrow account itself. C. The Escrow The district court determined that the escrow cushion created by PEU's procedures was sufficient because it appeared that noncharge- able expenses were only 2 percent and, upon objection, the union would set aside 4 percent of which half went directly back to the dissenting fee payer while the other 2 percent remained in escrow pending adjudication. See Prescott I, 915 F.Supp. at 1091. Prescott asserts that the size of the escrow is plainly insufficient, and we are inclined to agree with him. We will explain, although we will not undertake to determine the proper amount in the first instance. 4 - 13a- As we have already held, the difficulty here is that the procedure was flawed at its inception because of the failure to use audited financial statements. That means that the union's sanguine assumption that nonchargeable expenses amount to a mere 2 percent is unverified and provides insufficient notice to those who wish to gauge the accuracy of the union's representations. Because the district court was satisfied with the notice, its satisfaction with the size of the escrow account followed. Prescott was not able to point to much in the way of specific errors in PEU's calculations, but, then, if he was not left entirely "in the dark,” see Hohe, 956 F.2d at 411, he was at least presented with a fuliginous vista. EDCEA was required to give him more illumination than it did. In many ways, "[i]t is certainly in the union's interest to disclose sufficient financial data and other information about the agency fee prior to objections by non- members. Specific substantia- tion of the agency fee should reduce objections by non-members. Ambiguity rarely will have this effect, however...." Tierney v. City of Toledo (Tierney III), 917 F.2d 927, 938 n. 9 (6th Cir.1990). Due to its lack of proper verification, PEU's schedules failed in that respect. But that very failure meant, of necessity, that Prescott was unable to fully carry his burden of going forward with evidence of improoer allocations. See Air Line Pilots Ass'n. v. Miller, 523 U.S. 866, _, 118 S.Ct. 1761, 1768, 140 L.Ed.2d 1070 (1998). He did point to some anomalies, for example, newsletter expenses and subventions to local units like EDCEA. But who is to say what else - lies buried beneath the surface of the merely reviewed books? If a nonmember fee payer has carried the burden of pointing to questionable a!locations, the burden of persuading the court that an expenditure was on the correct side of the line is with the union. It has the burden of persuusion because it is seeking to mulct an unwilling person for fees and must show its entitlement to them. See Lehnert v. Ferris Faculty Ass'n., 500 U.S. 507, 524, 111 S.Ct. 1950, 1962, 114 - l4a- L. Ed.2d 572 (1991); Hudson, 475 U.S. at 306, 106 S.Ct. at 1075-76; Lowary, 903 F.2d at 431; Price, 927 F.2d at 94.° Because of the nature of the defect here, the amount in dispute for the purpose of setting up an escrow account is rather problematic. Of course, it is not satisfactory for a union to fail to make disclosures, and then comfortably sit back while the entire fee is escrowed and the nonmember employees are left to strike out at their antagonist like andabatae. See Grunwald v. San Bernardino City Unified Sch. Dist., 994 F.2d 1370, 1375 (9th Cir.1993). That, however, does not mean that an interest bearing escrow procedure is [1111]improper, for there will be times when it is needed (even up to 100 percent) while the parties work out their differences. See id. at 1374; Crawford v. Air Line Pilots Ass'n Int'l, 870 F.2d 155, 161 (4th Cir.1989), adopted en banc, 992 F.2d 1295, 1302 (4* Cir.1993); Hohe v. Casey, 868 F.2d 69, 72 (3d Cir.1989); Andrews, 829 F.2d at 338; see also Gibson v. Florida Bar, 906 F.2d 624, 631 (11th Cir.1990). In this case, the union has not acted with abandon or insouci- ance; it has, instead, misunderstood the financial statement require- ments which we now make plain. Nevertheless, it cannot be said that a mere 4 percent of the union's charges remains in reasonable dispute. We are dubious about the suggestion that the amount in dispute should be considered to be as high as 100 percent; surely PEU is using some substantial amount of the fees charged for plainly proper purposes. We say this with some trepidation, because it can easily be argued that unverified financial statements are like no information at all. Again, that does appear to overstate matters, and we do not think it our place to attempt to determine precisely how much should be set aside under the circumstances of this case. That, like other determinations in this area, is more properly for the district court in the first instance. See Hudson, 475 U.S. at 310, 106 S.Ct. at 1078. ® No doubt the protesting employee may ultimately have a separate burden of persuasion on the issue of whether he, himself, actually overpaid. See Harmsen v. Smith, 693 F.2d 932, 945 (9 Cir. 1982). We suppose that in most instances resolution of that issue will be parasitic on the determination regarding the union’s allocation. but do not hold that is necessarily so. - |Sa- Once it is recognized that further proceedings are necessary, the next question is: in what forum should those proceedings take place? D. The Forum The district court determined that the disputes between EDCEA and Prescott over the allocation of expenses between those which were chargeable and those which are not must be handled through the arbitration procedure created by PEU pursuant to Hudson. In that it erred. x - As we have said previously, "nonmembers are not required to exhaust union remedies to which they did not agree before challenging the chargeability determinations in federal court." Knight, 131 F.3d at 816. Since then, the Supreme Court has also so decreed. There is "no warrant for blocking dissenting employees from bringing their claims in federal court in the first instance, if that is their preference." Miller, 523 U.S. at___, 118 S.Ct. at 1768. Therefore, "unless they agree to the procedure, agency-fee objectors may not be required to exhaust an arbitration remedy before bringing their claims in federal court.” /d.at__, 118 S.Ct. at 1769. E. Indemnification Prescott finally complains about the district court's failure to accord him standing to object to the provision which required EDCEA to indemnify the County from any liability which arises out of deductions of fees from employee wages, and to provide a defense against any claims. We agree with the district court. We have alluded to this issue before. In Knight, 131 F.3d at 817, we determined that a public entity did not even have a duty to fee payers until the union sought to take some action against them for failure to pay the fees. However, we declined to entertain an attack upon an indemnification provision because the issue had been waived by the failure to raise it in the opening brief. Jd. Here, the issue has not been waived, but Prescott hurdled that trench only to run into a standing revetment. In order to meet - 16a - constitutional standing requirements, a plaintiff must establish three elements. First, the plaintiff must have suffered an "injury in fact"—an invasion of a legally protected interest which is (a) concrete and particularized ... and (b) "actual or imminent, not ‘conjectural’ or 'hypothetical’....". Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be "fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] the independent ac-[{1112]tion of some third party not before the court." .... Third, it must be “likely,” as opposed to merely "speculative," that the injury will be "redressed by a favorable decision.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561, 112 S.Ct. 2130, 2136, 119 L. Ed.2d 351 (1992) (citations omitted); see also, Bennett v. Spear, 520 U.S. 154, 167-71, 117 S.Ct. 1154, 1163-65, 137 L. Ed.2d 281 (1997); Maricopa-Stanfield Irrigation & Drainage Dist. v. United States, 158 F.3d 428, 433-35 (9th Cir.1998), petition for cert. filed, US.___,119S.Ct. 1802, ~L.Ed.2d (1999) (No. 98-1115). Prescott cannot meet these strictures. While it can be assumed that Prescott suffered some injury when the fees were deducted from his paycheck, that is all he has shown. He certainly cannot show any connection between the indemnification agreement and that injury. The agreement does no more than place the ultimate cost of any impropriety in the notice and the procedures where it belongs—on the union, which seeks the fees. Just how any injury can be traced to the indemnification provision itself is entirely unclear, but for Prescott's claim that the provision will somehow cause the County to ignore its own duties. But that argument is no more than rank speculation, and any breach of the County's duty can hardly be said to be traceable to the indemnification provision itself. Speaking of speculation, it can hardly be said that our striking down of the provision would lead to some irenic world wherein all fee deduction procedures were properly followed because someone would finally have an incentive to assure that they were. As EDCEA points - 17a- Out, someone—the union—already has that incentive in a powerful form. A failure to perform its duties properly "may result in its being unable to retain a portion of the fair share fee." Hohe, 956 F.2d at 412.’ A failure to comply may also involve the union in substantial and expensive litigation, witness this case which has been in progress for over three years and will not be over for some time yet. Moreover, Prescott can suffer no ultimate damage to his interests because nothing in the indemnification agreement will prevent him from collecting any costs, expenses or losses imposed upon him by reason of the defective procedure. In short, it simply cannot be said that any injury suffered by Prescott is fairly traceable to the agreement, nor is the claim that our striking of the agreement would redress or prevent the injuries that he has suffered anything but speculative. CONCLUSION In cases like this, the desire of unions to assure that everyone in the bargaining unit pays for the c»sts of the benefits conferred upon him runs up against the desire of employees to join and support what they like when they like. Thus, cases of this type can generate high emotions and lend themselves to philippics—the nonmember employ- ees are sometimes called radicals or free riders and the unions are sometimes said to be insincere hypocrites who simply seek more money to manipulate. Here, however, no one claims that we face either sansculottes on the one hand or pecksniffians on the other. Rather, it is clear that we are dealing with individuals who have an honest dispute over what the Constitution requires. There is nothing new about the requirement that PEU and EDCEA must send out a proper notice to all nonmember employees, but we now make it clear that the financial statements accompanying the notice must be audited (not merely reviewed) in order to assure ” It should be noted that in Hohe the court suggested that there was standing, but did not decide the issue. /d. at 411. - 18a- that "the union has actually spent the amounts of money it claimed to have spent on the chargeable activities." Knight, 131 F.3d at 813. In the meantime, all disputed fees, and absent an audited statement that could be a very substantial portion of what the union has charged, must be deposited into an interest bearing escrow account. The district court must then determine just what is charge- able and what is not. However, full restitution of the fees is not required if, as we think will surely be the case, at least some portion will be allocated to properly chargeable expenses. AFFIRMED in part, REVERSED in part, and REMANDED. The parties shall bear their own costs on appeal. McKEOWN, Circuit Judge, concurring: Although I agree that the PEU's notice does not satisfy the requirements of Chicago Teachers Union, Local No. 1. v. Hudson, 475 U.S. 292, 306, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986), and that remand is therefore necessary, I write separately because I believe that the majority unnecessarily reaches the issue of the constitutionality of the local union presumption. We all agree that the PEU's failure to provide audited verification of its expenses violates Hudson. Because it is clear that the local affiliate, FOCEA, cannot rély on the parent union's (PEU's) constitu- tionally insufficient data, we need not decide the issue of the constitu- tionality of the local union presumption. While the majority properly interprets the Supreme Court's decision in Hudson, it ignores the Supreme Court's strong warning against premature adjudication of constitutional questions: As we have explained: If there is one doctrine more deeply rooted than any other in the process of constitutional adjudication, it is that we ought not to pass on questions of constitutionality ... unless such adjudication is unavoid- able.... It has long been the Court's considered practice not ... to decide any constitutional question in advance of the necessity of its decision ... or to formulate a rule of constitu- - 19a - tional law broader than is required by the precise facts to_ which it is to be applied. Clinton v. Jones, 520 U.S. 681, 690 n. 12, 117 S.Ct. 1636, 137 L. Ed.2d 945 (internal quotation marks and citations omitted). If the notice based on the parent union's data is legally deficient, then the derivative data is similarly tainted for notice purposes. The "doctrine of avoidance," id. at 690, requires that we not reach out to decide whether the local union presumption passes constitutional muster as a general matter when, on the facts presented here, the EDCEA's reliance on the PEU's data is itself constitutionally deficient. In light of our reversal, at this point, the majority is only speculating as to what local union data the EDCEA and the PEU might bring before the district court on remand. In addition, I have no doubt about the good faith of the parties in presenting this case, and do not join in the majority's gratuitous (and, by its own recognition, inapt) commentary regarding the conduct of other litigants in "cases of this type.” APPENDIX B FINAL JUDGMENT IN A CIVIL CASE ENTERED BY THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA 1 April 1998 - 20a - [Clerk’s Stamp Omitted in Printing} UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA JUDGMENT IN A CIVIL CASE STEVEN H PRESCOTT v. CASENUMBER: CIV S-95-1859 LKK JFM COUNTY OF EL DORADO, et al XX - - Decision by the Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered. IT IS ORDERED AND ADJUDGED THAT JUDGMENT IS HEREBY ENTERED IN AC- CORDANCE WITH THE COURT’S ORDER OF 1/26/98. Jack L. Wagner, Clerk of the Court ENTERED: April 1, 1998 by: /s/ K Carlos, Deputy Clerk APPENDIX C OPINION AND ORDER OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA Filed 26 January 1998 -2la- [Clerk’s Stamp Omitted in Printing] UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA STEVEN H. PRESCOTT, et al., NO. CIV. S-95-1859 LKK/JFM Plaintiffs, v. ORDER COUNTY OF EL DORADO, et al., Defendants. / The Plaintiffs, non-union employees of El Dorado County (the “County”), challenge the right of the El Dorado County Employees Association (“EDCEA” or the “Union”), as a local affiliate of the Pro- fessional Employees Union, Local #1 (“PEU”), to collect fees pursuant to the agency shop provisions of the collective bargaining agreement entered into between the Union and plaintiffs’ employer. In its previous order the court preliminarily enjoined the Union from collecting a fair share agency fee until it provided a challenge procedure which allowed for the dispute to be resolved within 120 days from the date on which the fee was seized from the nonmembers’ paychecks. See Prescott v. County of El Dorado, 915 F. Supp. 1080 (E.D. Cal. 1996). The court also ordered the Union not to impose upon nonmembers the “under penalty of perjury” and specificity requirements for challenging the fee. Jd. The court, however, denied the balance of plaintiffs’ motion. First, the court found that the notice provided an adequate basis for the fee because it identified PEU’s iwajor expense categories and provided nonmembers with sufficient information to ascertain which of those categories the Union deemed chargeable to nonmembers. The court reasoned that under Chicago Teachers Union, Local No. 1, AFL-CIO v. Hudson (“Hudson’’), 475 U.S. 292, 306, n.18 (1986), the Union is only required to provide the nonmember with sufficient information to decide whether to challenge the legitimacy of the Union’s fee, and did not require that the Union justify its expense in detail prior to the challenge. Employing the “local union presumption,” the court also held that PEU need not - Me provide a breakdown of the expenditures for each local affiliate, since local affiliates generally spend less money on political activity than State or national unions. Recognizing the very limited record describing the difference between various types of financial reviews, the court also determined that, while adequate notice under Hudson must include “verification by an independent auditor,” an accountant’s “review” appeared to provide the verification required by the Supreme Court. The court noted, however, that the lack of a full record deprived it of an opportunity to definitively resolve the issue. See Prescott, 915 F. Supp at 1089, n. 13. Finally, the court held that plaintiffs did not demonstrate a likelihood for success on their challenge to the 4% escrow figure because plaintiffs did not show that more than 4% was reasonably in dispute. The parties now cross move for summary judgment. Plaintiffs continue to maintain that the notice and procedures violate the First, Fifth and Fourteenth Amendments because they (1) do not contain audited financial disclosures of the expenditures of EDCEA and affiliated labor organizations receiving money from EDCEA, (2) utilize an unconstitutional standard of chargeability, and (3) contain unduly burdensome procedures for challenging the fee. Plaintiffs seek a declaratory judgment stating that the defendants have violated the constitutional requirements for collecting an agency fee, a permanent injunction against all fee “seizures” from the nonmembers, and restitution of all fees already “seized” from nonmembers. Finally, plaintiffs request a declaratory judgment that the indemnification agreement between the County and EDCEA is void as against public policy. Defendants argue that the court should grant them summary judgment primarily for the reasons discussed in the court’s prelimi- nary injunction order. With regard to the “verification by an inde- pendent auditor” required by Hudson, defendants argue that an accountant’s review suffices because it provides nonmembers with the information pertinent in assessing the validity of the fee, and that an audit would burden the Union with an unnecessary cost. Defendants also move to dissolve the preliminary injunction on the basis that the - 23a- Union has instituted a procedure which permits a nonmember to have a hearing within sixty days from making a challenge to the fee, and to obtain a final decision within thirty days from the hearing. I turn first to a brief description of the overall problem, and then address the particular claimed deficiencies. ' - The High court has held that there are “constitutional require- ments for the Union’s collection of agency fees [which] include an adequate explanation of the basis for the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decisionmaker, and an escrow for the amounts reasonably insdispute while such challenges are pending.” Hudson, 475 U.S. at 310. The purpose of the prerequisites is to insure that nonunion employees have “a fair opportunity to identify the impact of the governmental action on his interests and to assert a meritorious First Amendment claim.” Hudson, 475 U.S. at 303. In sum, the procedures seek to insure that the nonmember has sufficient information to make an intelligent choice to either accept or challenge the fee. Jd; see also, e.g., Damiano v. Matish, 830 F.2d 1363, 1370 (6" Cir. 1987) (disclo- sure must provide nonunion employees with sufficient information so as to enable them to make an intelligent choice), and Laramie v. County of Santa Clara, 784 F. Supp. 1492, 1497 (N.D. Cal. 1992) (union must “provide enough information to nonmembers so that they may understand the charges and then reasonably challenge the basis of the fair share’’). I. THE ROLE OF THE INDEPENDENT AUDITOR The Court explained in Hudson that “practical reasons” preclude “*{a]bsolute precision’ in the calculation of the charge to nonmem- bers” and thus “cannot be ‘expected or required.’” Hudson 475 U.S. at 307, n.18. Moreover, the Court held that “[t]he Union need not provide nonmembers with an exhaustive and detailed list of all its The standards for resolution of a matter on summary judgment are well- known and need not be repeated here. See, e.g., Clark v. County of Placer, 923 F. Supp. 1278, 1281-82, (E.D. Cal. 1996). - 24a - expenditures.” /d. Nonetheless, the Court decreed that “adequate disclosure surely would include the major categories of expenses, as well as verification by an independent auditor.” /d. Clearly the Court’s footnote recognizing “practical consider- ations,” abjuring “absolute precision,” but requiring the “verification by an independent auditor” raises more questions than it answers. Thus, unanswered are the level of verification short of absolute precision required, whether the verification, although it must be performed by an independent auditor, must be in the form of an audit, and whether what must be verified is the breakdown between chargeable versus nonchargeable expenses. A. VERIFICATION OF ALLOCATIONS In its prior order this court rejected plaintiffs’ contention that the independent auditor must verify the allocation between chargeable and nonchargeable expenditures within each major expense category. See Prescott, 915 F. Supp. at 1087. At oral argument on this motion, counsel for plaintiffs’ counsel asserted that the auditor’s function is to provide a verification of the expenditures such that the Union, and the nonmembers, can confirm that those expenditures which the Union claims are nonchargeable are actually spent on those matters which the Union characterizes as nonchargeable. Accordingly, the court affirms its prior order that the auditor need not verify the allocation between the chargeable and nonchargeable expenditures within each major expense category. Below in addressing the question of what level of “verification” is required under Hudson the court will further consider the auditor’s role in the process. = B. THE MEANING OF “VERIFICATION” The parties agree that the Union’s accountant performed a “review” of PEU’s books rather than an “audit.” The dispute is whether such a review satisfies the requirement for “verification by an independent auditor.” To resolve the dispute, the court applies its ee | i i | | i - 25a- understanding of Hudson to the evidence adduced by the parties in connection with this motion.’ Defendants acknowledge that their accountant’s review of PEU’s financial statements did not constitute a “verification by an independ- ent auditor. . . [w]ithin the meaning of the accounting profession. . . .” Charles A. Luther Depo. At 81.’ Plaintiffs argue that by using the term “auditor” the Supreme Court mandated that the person perform- ing the “verification” must perform an audit as that term is defined by the accounting profession. Plaintiffs’ argument confuses the question of who must perform, “an independent auditor,” with what must be performed, disclosure and verification of “the major categories of expenses.” Both parties agree that an “auditor can be an accountant,” and that an accountant can perform both reviews and audits. Put simply then, an independent auditor could be either an accountant performing a review, or an accountant performing an audit. Thus, the High Court’s use of the term “independent auditor” does not command an audit. Yet a second reason suggests that the professions’ understanding of the phrase is not dispositive. Nothing in Hudson suggests either that the Supreme Court was aware of the meaning attributed to the phrase by the accounting profession, or that it intended to apply that At oral argument, both counsel assured the court that the case could be resolved on summary judgment based upon the record now before me. While the court believes that a full trial would be helpful, particularly in relation to the duties of accountants, the parties’ position weighs heavily against the court’s insisting on trial. 3 Luther, the Union's accountant testified that the phrase “verification by an independent auditor” within the accounting profession “deals with the preparation of some form of audited statement.” Luther Depo. at 81. Plaintiffs’ expert puts it that “[o}ne such level of service [provided by an accountant] includes functioning as an ‘independent auditor."” See Decl. of Irving B. Ross at * 12. - 26a - meaning.’ Rather, reading the phrase in the context employed by the High Court suggests something quite different than the elaborate procedures contemplated by the profession.* Concluding that the phrase employed by the court is not self-defining, I turn to the Court’s explanation the purpose of verification. The Supreme Court explained that the purposed of verification is to permit the nonmember an opportunity to make an informed choice of whether to challenge the basis for the fee. Accordingly, the Court merely required that unions provide an explanation of the major categories and that those categories be verified.® As this court + Indeed, the language employed by the Court suggests that it was not speaking in the language of accountants. As one declaration puts it, “[p]rofessional reporting standards utilized by accountants do not use the term ‘verification.’ CPAs provide compilation, review, audit, or attestation services and, as a result of the services, provide reports or opinions.” Decl. of John D. Moyle, at ¥ 8. > Plaintiffs’ leap from who to what is shared by most reported cases. Nonetheless, even requiring an audit does not resolve the question of the scope of the task, given the variety of audit types existing within the accounting profession. See Gwirtz v. Ohio Educ. Ass 'n., 887 F.2d 678, 681 (6" Cir. 1989) (Auditing Standard No. 29 proper reporting mechanism and constitutes independent audit because it subjects financial statements to detailed testing); Hohe v. Casey, 727 F. Supp. 163, 167 (M.D. Pa. 1989) (auditor must perform evaluation of client’s internal controls sufficient to form an opinion); Mitchell v. Los Angeles Unified School Dist., 744 F. Supp. 938, 941, n.4 (C.D. Cal.) (modified SAS 29 audit verifying expenditures claimed actually made suffices if performed in accordance with generally accepted accounting principles) rev'd on other grounds by 963 F.2d 258 (9® Cir. 1992); but see Laramie, 78% «. Supp. at 1497 (“review” suffices). There are also higher levels of verifications than an audit (e.g., attestation) and different levels of assurances within the auditing function. See Ross Decl. at 4 12 (an “attestation” is an “extension of the generally accepted auditing standards.”); see also Luther Depo at 72 (noting that the American Institute of Certified Accountants has set forth 66 different auditing standards). 6 This court has no doubt that dicta in its previous opinion has added to the confusion. There, in rejecting plaintiffs’ contention that the auditor must verify that - 27a- understands the evidence before it, a review satisfies the “categorical” verification and an audit (at whatever level) while providing greater assurance concerning the expenditures reported, does not provide additional information regarding the classification of expenses in the financial statements. Plaintiffs’ expert explains that an accountant performs an audit _to express a “conclusion about the reliability of a written assertion that is made by another party[.]” See Ross Decl. at 9 12. An audit “is concerned with whether the recorded information properly reflects the economic events that occurred during the accounting period.” /d. at 44 12, 14, 16.’ In contrast, an accounting review is “the process of recording, classifying and summarizing economic events in a logical manner for the purpose of providing financial information.” /d. at § 14.5 Defendants’ expert, John D. Moyle, agrees that an audit tests evidentiary matter to provide a reasonable assurance that records are the allocation of expenditures between chargeable and nonchargeable categories, | opined that the role of the auditor is to “ensure that the expenditures which the union claims it made for certain expenses were actually made for those expenses.” Prescott, 915 F. Supp. at 1087 (quoting Laramie, 784 F. Supp. at 1497). This court’s previous opinion, while citing to various Circuit Court opinions, failed to address the more modest purpose articulated in Hudson itself. To the extent the previous dicta conflicts with this opinion, the court must disavow it. ” The techniques employed during an audit “include a study and evaluation of the client’s internal accounting controls, tests of accounting records, and the obtaining of corroborating evidential matter through inspection, observation and confirmation.” See Ross Decl. at 4 12. 8 These descriptions are corroborated by plaintiffs’ experts’ citation to various accounting texts which describe auditing as a function which provides a verification of financial data by testing the validity of the data, as opposed to the acceptability of its presentation. See Suppl. Ross Decl. at { 8 (citing Alvin A. Arens, et. al., Auditing, An Integrated Approach (5* ed.); Kell, Boynton, & Ziegler, Modern Auditing (3™ ed.), Chapter 2, p. 46). - 28a - accurate, while a review assesses [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1446%3A1. Public record. Not legal advice.