Petition for Writ of Certiorari — Wareham Education Ass'n v. Massachusetts Labor Relations Commission

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IN THE

Supreme Court of the United States

WAREHAM EDUCATION ASSOCIATION,

BRIDGEWATER EDUCATION ASSOCIATION,

and FAIRHAVEN EDUCATORS’ ASSOCIATION,

Petitioners,

MASSACHUSETTS LABOR RELATIONS COMMISSION,

Davip Dupulis, ELEANOR Dupuis, BETSY ANN Woop,

CHARLES CIPOLLINI, and PETER ANTHONY,

Respondents.

On Petition for Writ of Certiorari to the

Supreme Judicial Court of Massachusetts

PETITION FOR WRIT OF CERTIORARI

ANN CLARKE ROBERT H. CHANIN

Massachusetts Teachers (Counsel of Record)

Ass’n JOHN M. WEST

20 Ashburton Place BREDHOFF & KAISER, P.L.L.C.

Boston, MA 02108 1000 Connecticut Avenue, N.W.

(617) 742-7950 Suite 1300

Washington, DC 20036

(202) 833-9340

Attorneys for Petitioners

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WILSON-EPes PRINTING Co., INC. - (202) 789-0096 - WASHINGTON, D.C. 20001

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QUESTIONS PRESENTED

1. Whether small unions—with simple and easily un-

derstandable financial records—can meet their burden of

providing adequate disclosure of the basis for the agency

fee that they seek to collect from nonmembers without

conducting an independent audit of those records, at a

cost many times that of the agency fees at stake.

2. Whether complete forfeiture of the agency fee is

an appropriate remedy for a union’s failure to provide

feepayers with a constitutionally adequate notice of the

basis for the fee.

(i)

TABLE OF CONTENTS

QUESTIONS PRESENTED oo............c.c.cccccccccccsscsccsecoseses

TABLE OF AUTHORITIES. ...u.u...0........:c.c.ccscscccsceccsosesee:

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BA ee eC Rae ee

CONSTITUTIONAL PROVISIONS AND STATUTES

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STATEMENT OF THE CASE

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A. Factual Background ..............................................

B. Proceedings Below ...................... ida iaesibsaveaacopensiies

C. The Federal Question ...........

REASONS FOR GRANTING THE WRIT .....

I. THIS COURT SHOULD REVIEW THE DECI-

II.

SION BELOW IN ORDER TO CORRECT THE

MISREADING OF HUDSON THAT REN-

DERS ILLUSORY THE RIGHT OF SMALL

UNIONS TO COLLECT AGENCY FEES BY

IMPOSING TRANSACTION COSTS FAR IN

EXCESS OF THE AMOUNT OF THE FEES

ESR alten Sen eer a a

THIS COURT SHOULD RESOLVE THE CON-

FLICT IN AUTHORITY CREATED BY THE

DECISION BELOW CONCERNING THE AP-

PROPRIATE REMEDY FOR A _ UNION’S

FAILURE TO PROVIDE A CONSTITUTION-

ALLY ADEQUATE NOTICE OF THE BASIS

FOR ITS AGENCY FEE ..... sapiieladaspelatien

SEES TE es Ee TE eee

Co AO NUN

TABLE OF CON TENTS—Continued

APPENDICES:

APPENDIX A

Opinion of the Supreme Judicial Court of Massa-

chussetts (July 15, 1999)

APPENDIX B

Decision and Order of the Massachusetts Labor

Relations Commission (October 29, 1997)

APPENDIX C

Massachusetts General Laws, Chapter L50E, See-

tion 12

Page

Ilda

Hla

TABLE OF AUTHORITIES

CASES Page

Abood v, Detroit Bd. of Edue., 431 U.S. 209

(1977) . passim

Andrews v, . Education Ass'n of C ‘heshire, 829 F.2d

835 (2d Cir, 1987) 14, 15

Belhumeur v. Labor Relations Comm'n, 411 Mass.

142, 580 N.B.2d 746 (1991), cert. denied, 508

U.S. 1004 (1992) 8,9, 17, 20

Browne v. Wisconsin Employment Relations

Comm'n, 169 Wis. 2d 79, 485 N.W.2d 3876

(1992) cee 16, 22

Carey v. Piphus, 485 U.S. 247 (1978) 22

Chicago Teachers Union v, Hudson, A75 U.S, 292

(1986)... sia passim

Dashiell v. Montgomer; ry ( ‘ounty, 925 i od 750 (Ath

Cir, 1991) 14

Finerty v. NLRB, 118 F.3d 1288 (D.C. Cir.), cert.

denied, 118 S. Ct. 558 (1997) 15

Gilpin v,. AFSCME, 875 F.2d 1810 (7th Cir.), ce ert.

denied, A983 U.S. 917 (1989) 19, 20, 22

Harrison v. Massachusetts Soec'y of Professors/

Faculty Staff Union, 405 Mass, 56, 587 N.E.2d

1237 (1989) 9

Hohe v. Casey, 956 F.2d 299 (Sd Cir. 1992) 14, 16, 22, 23

International Ass'n of Machinists v. NLRB, 133

F.8d 1012 (7th Cir.), cert. denied, 119 S. Ct. 47

(1998) Me EAR 17

International Ass'n of Machinists v. Street, 367

U.S. 740 (1961) 12

Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507

(1991) 12

Lowary v. Lexington Local Bd. of Educ., 908 F.2d

422 (6th Cir.), cert. denied, 498 U.S. 958

(1990) .. 16, 22, 23

Malden Educ. Ass'n, AG Mass. Labor Cases 1429

(Feb. 2, 1989) 4,7,9, 19

Memphis Community Sch. Dist. v. Stachura, 477

U.S. 299 (1986) 22

Pre scott v. County of El Dorado, 177 F.3d 1102

(9th Cir. 1999) ishacacacenteaiiieensiaaa ae

TABLE OF AUTHORITIES—Continued

Page

Price v. UAW, 927 F.2d 88 (2d Cir.), cert. denied,

602 U.S. 905 (1991) ......... nééheisitetibseiheniiaadseanan dates 15

School Comm. of Greenfield v. Greenfield Educ.

Ass‘n, 385 Mass. 70, 431 N.E.2d 180 (1980)... 6,9

Tierney v. City of Toledo, 824 F.2d 1497 (6th Cir.

1987) ss.gnaseamneseltatgenipebeumaiinaiinamidaiiaaiadon tae nals 14

Wareham Education Association v. Labor Rela-

tions Commission, 430 Mass. 81, 713 N.E.2d 363

(1999) ST RMA nT ENE IO EE 1

Weaver v. U niversity of Cincinnati, 970 F.2d 1523

(6th Cir. 1992), cert. denied, 507 U.S. 917

(1993) Ce AD Rn A Suancesaaneisaamenbucagiamasiaie 22, 23

CONSTITUTIONAL AND STATUTORY

PROVISIONS

U.S Spig pee RI FAL URE LA 2

28 U.S 7 (a) siebainailglaciaotbidenaneat a ae 2

Mass. rn . - | h . Rene ae ....passim

Mass. Gen. L. ch. 211A, § 10(A) PEAS. s 7

Ntsc si

IN THe

Supreme Court of the United States

No. 99-

WAREHAM EpDuUCATION ASSOCIATION,

BRIDGEWATER EDUCATION ASSOCIATION,

and FAIRHAVEN EpucaTors’ ASSOCIATION,

. Petitioners,

MASSACHUSETTS LABOR RELATIONS COMMISSION.

Davip Dupuis, ELEANOR Dupuis, BETsy ANN Woop,

CHARLES CIPOLLINI, and PETER ANTHONY,

Respondents

On Petition for Writ of Certiorari to the

Supreme Judicial Court of Massachusetts

PETITION FOR WRIT OF CERTIORARI

Petitioners respectfully request that a writ of certiorari

issue to review the judgment of the Supreme Judicial

Court of Massachusetts in Wareham Education Associa-

tion v. Labor Relations Commission, 430 Mass. 81, 713

N.E.2d 363 (1999).

OPINIONS BELOW

The opinion of the Supreme Judicial Court of Massa-

chusetts is reported at 430 Mass. 81 and at 713 N.E.2d

363, and is reproduced in the Appendix to this Petition

(“App.”) at la. The decision and order of the Massa-

chusetts Labor Relations Commission is reported at 24

Mass. Labor Cases 23, and is reproduced in the Appendix

at 14a.

JURISDICTION

The judgment of the Supreme Judicial Court of Massa-

chusetts was entered on July 15, 1999. The jurisdiction

of this Court is invoked pursuant to 28 U.S.C. § 1257(a).

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

The First Amendment to the United States Constitution

provides in pertinent part that “Congress shall make no

law... abridging the freedom of speech... .”

The text of Mass. Gen. L. ch. 150E, § 12, is repro-

duced in the Appendix at 51a.

STATEMENT OF THE CASE

A. Factual Background

Petitioners Wareham Education Association (“WEA”),

Bridgewater Education Association (“BEA”), and Fair-

haven Educators’ Association (“FEA”) (collectively “As-

sociations”) are local unions that, pursuant to Massachu-

setts law, were recognized, respectively, as the exclusive

collective bargaining representatives for the teachers em-

ployed by the School Committees of Wareham, Bridge-

water, and Fairhaven, Massachusetts during the 1988-89

school year—which is the school year that is at issue in

this lawsuit.! Although the five individual respondents

were members of the bargaining units in question—and

thus were represented by the Associations—they elected

not to become Association members.

Massachusetts, like a number of other states, has pro-

vided by law that public-sector collective bargaining agree-

ments may require members of the bargaining unit who

decline to join the recognized union to pay an agency

1 With respect to respondent Betsy Ann Wood and WEA only,

the 1987-88 school year also is at issue. As this detail has no bear-

ing on the question presented here, we disregard it in this Petition.

POPES Pe

fee to help defray the costs incurred by the union in

providing representational services that benefit union mem-

bers and nonmembers alike. See Mass. Gen. L. ch. 150E,

§ 12. The collective bargaining agreements in effect at

all relevant times between the Associations and their re-

spective school committees contained such provisions,

and, accordingly, each of the individual respondents was

required to pay an agency fee to his or her Association—

a portion of which was transmitted by the Association to

its state and national affiliates, the Massachusetts Teach-

ers Association (“MTA”) and the National Education

Association (“NEA”) .?

As is the usual practice of unions, the agency fees re-

quested by the Associations for the 1988-89 school year

were based on their expenditures for the immediately

preceding school year. Feepayers were informed of the

procedure through which they could obtain a reduction

in the amount of the fee, if they objected to paying the

portion that supported Association activities that were not

germane to collective bargaining. In order to comply with

their burden under Chicago Teachers Union v. Hudson.

475 U.S. 292 (1986), of ensuring that “potential objec-

tors be given sufficient information to gauge the propriety

of the union’s fee,” id. at 306, the Associations also pro-

vided feepayers with certain financial information. With

respect to the portion of the agency fee that was to be

passed on to their state and national affiliates, the Asso-

ciations provided feepayers with a book entitled “MTA

and NEA Combined Agency Service Fee Information for

1988-89 and Related Information.” This book contained

information relative to MTA’s and NEA’s calculation of

their portions of the agency fee, including, inter alia,

audited financial statements of those organizations for the

1987-88 school year.

2 MTA and NEA are not parties to this lawsuit.

With respect to their own portion of the agency fee,

the Associations did not provide audits. Several months

earlier, respondent Massachusetts Labor Relations Com-

mission (“Commission”) had issued an opinion in which

it stated that, as a general matter, “Hudson requires a

public employee union to provide for the fiscal year pre-

ceding the period for which the fee is demanded a copy

of an independent auditor’s financial statement of revenue

and expenses... .” Malden Educ. Ass'n, 15 Mass.

Labor Cases 1429, 1435 (Feb. 2, 1989). In a footnote,

however, the Commission elaborated as follows:

We recognize that small unions may find the expense

of an audit very burdensome. Therefore, we conclude

that, in lieu of an auditor’s report, a small local can

satisfy that informational requirement of Section 12

by supplying to fee payers at the time of demand a

sworn affidavit of a responsible union officer with

personal knowledge of the accuracy of the figures

upon which the union’s calculation of the fee are

based. An affidavit attesting to the accuracy of figures

on which the union’s calculation of the fee are based

must be accompanied with the written assurance that

the fee payer, upon request, either can obtain from

the union a list of all expenditures or, at the fee

payer’s option, can examine the union’s financial re-

ceipts and record of expenses (i.e. receipts, check

stubs, etc.) at a mutually convenient time.

Id. at 1435 n.10.

All three Associations clearly were “small unions” with-

in the meaning of the above footnote. Their 1987-88

revenues ranged from $9,400 (WEA) to $17,500 (BEA)

and $29,000 (FEA).2 WEA represented a_ bargaining

unit of 204 employees, one of whom (respondent Wood)

was a nonmember feepayer. The agency fee assessed by

WEA for the school year 1988-89 was $30. There were

3 These revenue figures exclude dues and fee collected by the

Associations that were passed on to MTA and NEA.

— ee

116 employees in BEA’s bargaining unit, including two

nonmembers (respondents David and Eleanor Dupuis),

who were each charged an agency fee of $30. The FEA

bargaining unit included 185 employees, of whom seven

(including respondents Cipollini and Anthony) were non-

members. FEA’s 1988-89 agency fee amounted to $45.

The financial records of the Associations were not com-

plex. For example, the Commission found WEA’s finan-

cial records to consist of the following:

Ledger pages

Approximately 40 cancelled checks, containing a one

or two word description of the expenditure

Approximately 48 check stubs

Approximately 21 receipts or invoices

Monthly bank statements

Monthly treasurer’s reports

An accountant’s summary of operations.

App. 23a-24a.* The cost to the Associations of obtaining

an audit of their financial records can be estimated from

the experience of several somewhat larger local associations

affiliated with MTA which obtained audits in 1989. The

cost of those audits ranged from $2,230.36 to $4,105.00,

and the Commission found that “the cost of an audit

would be the same for a union with a small income as it

would be for a union with a larger income.” App. 32a.

Accordingly, the Associations chose to proceed in the

manner authorized by the Commission in the above-quoted

footnote in Malden Education Ass'n. Specifically, each of

the Associations provided feepayers with a six-page “Local

Association Agency Fee Explanation 1988-89,” which

described how the Association had calculated its agency

fee, explained the criteria for categorizing various types

4The Commission’s descriptions of the financial records of BEA

and FEA—which are similar—can be found at App. 20a-2la and

27a, respectively.

of expenditures as chargeable or nonchargeable, set forth

the Association’s prior-year expenditures in some 14 cate-

gories, and indicated the amounts in each category that

were chargeable and nonchargeable to objecting feepayers.

The Explanation concluded with a declaration signed by

the Association treasurer stating, inter alia:

In signing this form, | certify that the information

contained herein is a true and accurate reflection of

the Association's actual expenditures during the 1987-

88 year to the best of my knowledge and ability.

Signed under the pains and penalties of perjury.

An accompanying letter informed the feepayer that

[i]n accordance with a decision of the Labor Rela-

tions Commission, you are entitled, upon request,

either to obtain from the Local a list of all expendi-

tures or to examine the Local’s financial receipts and

record of expenses at a time convenient to you and

to the Local.

B. Proceedings Below

This litigation began in 1989 and 1990, when the five

individual respondents filed charges with the Commission,

alleging that they had been provided with insufficient

information as to the basis of the agency fees assessed by

the Associations for the i988-89 school year, and that

those fees were in excess of the amount permitted by law.®

Following an investigation, the Commission issued sub-

stantively identical two-count complaints against each of

the Associations, charging that they had violated Mass.

Gen. L. ch. 1SOE, § 12—the state law provision authoriz-

ing agency fees—by demanding agency fees for that year

without providing the feepayers with audits of their prior-

year expenditures (Count I), and in excess of the amount

5 The Commission is the primary forum for litigation of public-

sector agency fee disputes in Massachusetts. See School Comm. of

Greenfield v. Greenfield Educ. Ass’n, 385 Mass. 70, 75-76, 431

N.E.2d 180, 184-85 (1982).

permitted by law (Count II). The Commission sub-

sequently ordered the complaints bifurcated, and addressed

Count II in separate proceedings that are not relevant to

this Petition.

With regard to Count I, the Commission conducted

multiple hearings and received several rounds of bricfs

from the parties. After seven years of proceedings, the

Commission issued a Decision and Order on October 29,

1997, App. 14a, in which it sustained the complaints. Ex-

pressly disavowing its previous conclusion in Malden

Educ. Ass'n, supra, that “small unions” could Satisfy

Hudson's disclosure requirement without providing an

audit to feepayers, App. 38a-39a; see supra p. 4, the

Commission held that the Associations’ failure to provide

audits was in violation of Section 12. After reviewing

the caselaw, the Commission now determined that “courts

have held that verification by an independent auditor is

a binding, constitutional requirement notwithstanding the

potentially onerous financial implications.” App. 39a. Ac-

cording to the Commission, these decisions reflected “the

courts’ reluctance to balance the competing interests of

the unions and fee payors.” App. 40a. Accordingly, the

Commission held that “Section 12 of the Law requires

unions, regardless of size, to provide an audit from an

independent auditor along with their service fee demands.”

App. 42a, characterizing the contrary conclusion in Malden

Educ. Ass'n as “dicta” which it “decline[d] to follow.”

App. 42a n.48. In its remedial order, the Commission

ordered WEA, BEA, and FEA, inter alia, to dissolve the

escrow accounts in which the individual respondents’ 1988-

89 agency fees had been placed, and to release those fees

in their entirety to the respondents. App. 44a.

The Massachusetts Supreme Judicial Court granted peti-

tioners’ application for direct review, pursuant to Mass.

Gen. L. ch. 211A, § 10(A), and on July 15, 1999, is-

sued an opinion affirming the Commission’s decision in

all respects. App. la.6 The court recognized that the in-

formation a union provides to feepayers concerning the

basis for its agency fee “is not intended to be disposi-

tive of any dispute,” but rather “is designed only to per-

mit an agency fee payer to decide whether to oblige the

union to prove before an independent fact finder that the

agency fee charged was properly determined.” App. lla

(quoting Belhumeur v. Labor Relations Comm'n, 411

Mass. 142, 146, 580 N.E.2d 746, 748 (1991), cert.

denied, 503 U.S. 1004 (1992)). It further acknowledged

that, for WEA, BEA, and FEA, “the cost of the audits

would likely eclipse the agency fees available to the

unions ....” App. 8a. Nonetheless, the court construed

this Court’s decision in Hudson as having established the

invariable “express requirement that a union must ac-

company any demand for agency fees with an independ-

ently audited verification of its major expenses.” App. 12a.

In response to the Associations’ contention that the re-

quirement of an audit would render it impractical for

them to collect agency fees, the court observed that, al-

though Massachusets law “permits the collection of agency

fees [by unions], it by no means requires them to do so.”

App. 9a.

The lower court also upheld the Commission’s remedial

order requiring the Associations to return the feepayers’

agency fees in their entirety. It noted the holdings of a

number of courts rejecting such a remedy for a notice vio-

lation as creating a “windfall” for the feepayers that would

“deprive the unions of funds to which they are unquestion-

ably entitled,” App. 12a, but found those cases distinguish-

able. In this case, the court stated, the Associations were

“free to renew their demands for any fees to which they

6 The individual respondents—charging parties in the Commis-

sion proceedings—were permitted to intervene as appellees.

sr ereeceeaacraaiiiciacaiiiiiaaiiaiiiaiiiiiiiiiiiaiaiiaiiaiiaiiaaiiiiiiaiial

may be entitled once they comply with the requirements

of [Hudson].” App. 13a.

C. The Federal Question

Both the Commission and the Massachusetts Supreme

Judicial Court consistently have “construed and applied

[Mass. Gen. L. ch. 150E, § 12] in a manner that avoids

infringing on constitutional rights.” Malden Educ. Ass'n,

15 Mass. Labor Cases at 143] (citing School Comm. of

Greenfield v. Greenfield Educ. Ass'n, 385 Mass. 70, 79-

86, 431 N.E.2d 180, 186-90 (1982)). Accordingly, al-

though in this case both tribunals held that the Associa-

tions’ failure to provide feepayers with audits was in viola-

tion of Section 12, they based their decisions exclusively

on federal constitutional law.

Observing that “a union demanding a service fee from

non-members must satisfy constitutional and statutory re-

quirements,” App. 38a, the Commission articulated its

inquiry in this case as interpreting the requirements of

“Section 12, as limited by the First Amendment to the

United States Constitution.” App. 37a. The Commis-

sion rested its analysis on Hudson. supra, and looked

almost exclusively to federal cases for guidance in inter-

preting Hudson's requirements. See App. 37a-43a. Simi-

larly, the court below based its holding on an exegesis of

Hudson, and—like the Commission—relied almost en-

tirely on federal law in conducting its analysis. See App.

8a-12a.7 Neither tribunal made any attempt to support its

decision on the basis of anything specific to Section 12

or any other provisions of Massachusetts law.

7 The court did cite two of its earlier decisions as being “in ac-

cord” with the conclusion it reached en the basis of the federal

cases, but in both cases the cited passages from those decisions

merely interpreted the requirements of Hudson, See App. 11a (cit-

ing Harrison v. Massachusetts Soc'y of Professors ‘Faculty Staff

Union, 405 Mass. 56, 64 n.&. 537 N.F.2d 1237 (1989); Belhumeur,

411 Mass. at 145, 580 N.E.2d at 747-48).

Similarly with regard to the question of remedy—which

became an issue in this lawsuit only on appeal, in the

wake of the Commission’s remedial order—the court dis-

cussed only federal cases in deciding to affirm the Com-

mission’s order. See App. 12a-13a.8

REASONS FOR GRANTING THE WRIT

I. THIS COURT SHOULD REVIEW THE DECISION

BELOW IN ORDER TO CORRECT THE MISREAD-

ING OF HUDSON THAT RENDERS ILLUSORY

THE RIGHT OF SMALL UNIONS TO COLLECT

AGENCY FEES BY IMPOSING TRANSACTION

COSTS FAR IN EXCESS OF THE AMOUNT OF

THE FEES AT STAKE

The challenged holding of the Massachusetts Supreme

Judicial Court—i.e., that a union cannot constitutionally

collect an agency fee from nonmembers whom it repre-

sents in collective bargaining without providing an audit,

regardless of the local union’s size, the complexity of its

financial records, and the cost of the audit in relation to

the amount of the fees at stake—is exemplary of an un-

fortunate tendency among lower courts to read a brief

line of footnote dicta from Hudson in a way that under-

mines the fundamental objective this Court consistently

has pursued with respect to agency fees. Unless corrected,

the decision below threatens to render illusory the right

of small unions to require nonmembers to help defray

the cost of representational services that benefit union

members and nonmembers alike.

A. The constitutionality of agency fees in the public

sector has been well established for over twenty years. In

Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977), this

Court recognized the agency fee’s impact on the First

Amendment interests of employees who did not wish

8 The Commission’s order itself provided no reasoning in support

of the remedies it imposed. See App. 44a.

to support the union that represeented them, but it none-

theless sustained the constitutionality of such fees because

of “the important contribution of the union shop to the

system of labor relations established by [the legislature].”

Id. at 222.

That “system of labor relations” rests on the core

principle—adopted by Congress in the private sector, and

by Massachusetts and many other states in the public

sector—of exclusive representation of all members of a

bargaining unit by the union that commands the support

of a majority of its members. The system of exclusive

representation, this Court has explained, has served the

United States well in promoting labor peace:

The designation of a single representative avoids the

confusion that would result from attempting to en-

force two or more agreements specifying different

terms and conditions of employment. It prevents

inter-union rivalries from creating dissension within

the work force and eliminating the advantages to the

employee of collectivization, It also frees the employer

from the possibility of facing conflicting demands

from different unions, and permits the employer and a

single union to reach agreements and settlements

that are not subject to attack from rival labor organ-

izations.

Id. at 220-21.

But, as this Court further explained, “[{t]he designation

of a union as exclusive representative carries with it great

responsibilities” in negotiating and administering collective

bargaining agreements and processing grievances, which

“often entail expenditure of much time and money. The

services of lawyers, expert negotiators, economists, and a

research staff, as well as general administrative personnel,

may be required.” Jd. at 221. And, “in carrying out

these duties, the union is obliged ‘fairly and equitably to

represent all employees .. . , union and nonunion,’ within

the relevant unit.” Jd. (quoting International Ass’n of

Bc SS'~CS

Machinists v. Street, 367 U.S. 740, 761 (1961)). Given

these responsibilities and obligations,

{a] union-shop arrangement has been thought to dis-

tribute fairly the cost of these activities among those

who benefit, and it counteracts the incentive that

employees might otherwise have to become “free

riders’—to refuse to contribute to the union while

obtaining benefits of union representation that neces-

sarily accrue to all employees.

Abood, 431 U.S. at 221-22.

While recognizing “the government's vital policy in-

terest in labor peace and avoiding ‘free riders,” Lehnert

v. Ferris Faculty Ass’n, 500 U.S. 507, 519 (1991), as a

basis for allowing agency fees, this Court also has been

mindful of the First Amendment interests at stake. And,

to protect those interests, it has imposed limitations on the

collection and use of agency fees. Thus, a union may not

charge nonmembers—over their objection—for expendi-

tures not germane to the union’s collective-bargaining activ-

ities, see id., and the union must utilize certain collection

procedures designed to minimize the infringement on the

nonmembers’ First Amendment interests. See Hudson,

supra. In short, the law of agency fee, as it has been shaped

by this Court, involves a balancing of vital interests on both

sides of the equation. In an oft-repeated phrase that

could stand as the guiding principle for this Court’s agency

fee jurisprudence, “the objective must be to devise a way

of preventing compulsory subsidization of ideological ac-

tivity by employees who object thereto without restricting

the Union’s ability to require every employee to contribute

to the cost of collective-bargaining activities.” Abood,

431 US. at 237.

B. That objective informed this Court’s decision in

Hudson, see 475 U.S. at 302, which set forth the pro-

cedures that a union must follow in order to collect an

agency fee. In holding that the procedures followed by

the Chicago Teachers Union in that case were constitu-

tionally inadequate, this Court articulated three funda-

mental procedural requirements for agency fee collection.

First, the union must avoid the risk that the funds of

objecting nonmembers will be used, even temporarily, for

purposes unrelated to collective bargaining; second, it

must provide nonmembers with adequate information about

the basis for the agency fee; and third, it must afford non-

members who wish to challenge the amount of the fee the

opportunity to obtain a reasonably prompt decision by an

impartial decisionmaker. /d. at 304-09.

With regard to the second of these procedural require-

ments—which is the one that is at issue here—this Court

noted that “potential objectors [must] be given sufficient

information to gauge the propriety of the union’s fee.”

Id. at 306. The Hudson Court found inadequate the

union’s disclosure in the case before it, because the union

had described only those of its expenditures that went for

admittedly nonchargeable purposes: “An acknowledge-

ment that nonmembers would not be required to pay any

part of 5% of the Union’s total annual expenditures was

not an adequate disclosure of the reasons why they were

required to pay their share of 95%.” Id. at 307. In an

accompanying footnote, this Court noted that “absolute

precision” in this regard was not required, and then made

the following comment:

The 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.

Id, at 307 n.18.

While the reference to an audit in this footnote clearly

was dicta—it was not necessary to this Court’s holding

that a disclosure identifying only the union’s noncharge-

able expenditures is inadequate—the principle is none-

theless now well established that, as a general matter,

an independent audit of the expenditures on which the

agency fee is based must be provided to feepayers. See,

e.g., Tierney v. City of Toledo, 824 F.2d 1497, 1503

(6th Cir. 1987); Andrews v. Education Ass'n of Cheshire,

829 F.2d 335, 338-40 (2d Cir. 1987); Dashiell v. Mont-

gomery County, 925 F.2d 750, 754-57 (4th Cir. 1991);

Hohe v. Casey, 956 F.2d 399, 415 (3d Cir. 1992);

Prescott v. County of El Dorado, 177 F.3d 1102, 1106-

09 (9th Cir. 1999). Accordingly, the Associations’ state

and national affiliates—MTA and NEA—and other large

unions typically include audits of their expenditures as

part of the packet of financial data that they provide to

feepayers. See, ¢.g., App. 4a (audits of MTA and NEA

were part of book entitled “MTA and NEA Combined

Agency Service Fee Information for 1988-89 and Re-

lated Information” provided to nonmembers ).

The question presented by this Petition is whether this

audit requirement invariably applies to all unions, regard-

less of the size of the union, the complexity of its finan-

cial records, the amount of the fees at stake in relation

to the cost of the audit, and the potential availability of

alternative methods of providing feepayers with “sufficient

information to gauge the propriety of the union’s fee,”

Hudson, 475 U.S. at 306—and regardless of whether the

requirement of paying for an audit would effectively negate

“the Union’s ability to require every employee to contrib-

ute to the cost of collective-bargaining activities.” Abood,

431 US. at 237; Hudson, 475 U.S. at 302.

C. The court below answered this question “yes,” not-

withstanding its recognition that “the cost of the audits

would likely eclipse the agency fees available to the

unions.” The court suggested, in effect, that a small

DPA CTT 94

pi pala en a Git aaa ONC MATER ted OTT SiR ZEIT a TAA DAS VR

union’s recourse when confronted with audit costs vastly

disproportionate to the amount of the agency fees at stake

is simply to forgo collection of such fees. See App. 9a

(“It should be noted however that, although G.L. c. 150E,

§ 12, permits the collection of agency fees [by unions], it

by no means requires them to do so.”).

Other courts have adopted the same absolutist posi-

tion. For example, the Second Circuit (without having to

decide the issue presented here) rejected the notion that

the “fe]xcessive cost” of an audit was of any relevance,

and admonished the district court that it “should not have

approached this question with a balancing test in which

the cost to the union and the practicality of the procedures

were to be weighed against the dissenters’ First Amend-

ment interests,” Andrews, 829 F.2d at 339—even though

this Court repeatedly has described the “objective” of its

agency fee jurisprudence as an attempt to accommodate

just such competing interests. Abood, 431 U.S. at 237;

Hudson, 475 U.S. at 302.

On the other hand, a recent decision of the Ninth Cir-

cuit, while repeating some of the Andrews language,

pointed to the possibility that smaller unions might be able

to meet their Hudson obligations without an audit. In

holding that a union’s “local presumption” provided in-

sufficient disclosure to nonmembers,® the court stated:

9 The “local presumption” is one approach some small loc il unions

have adopted in an attempt to preserve their ability to collect an

agency fee after Hudson. Under this approach, nonmembers are

provided with full documentation (including audits) of the local

union’s parent affiliates, but for purposes of the notice to fee-

payers the assumption is made that the chargenble percentage of

the local’s expenditures is at least as high as that of the affiliates

which percentage is then used 1s the basis for calculating the local’s

fee as well. While some courts have upheld a form of local pre-

sumption, ¢.g., Finerty v. NLRB, 113 F.3d 1288, 1292 (D.C. Cir.),

cert. denied, 118 S. Ct. 558 (1997); Price v. UAW, 927 F.2d 88, 93-

94 (2d Cir.), cert. denied, 502 U.S. 905 (1991); Browne v. Wiscon-

“We do not decide that each little unit in the [parent af-

filiate’s] firmament must necessarily be subjected to a sep-

arate verified audit of its expenditures . . . .” Prescott,

177 F.3d at 1108. What was required, said the court,

was “some auditor verifiable methodology which is more

than a presumption.” Jd. That formulation would ap-

pear to sanction the financial disclosure provided by the

Associations in this case—which did not involve any “pre-

sumption,” but provided feepayers with “auditor veri-

fiable” data about the Associations’ expenditures, includ-

ing “an exhaustive and detailed list of all [their] expendi-

tures.” Hudson, 475 U.S. at 307 n.18.”

The Prescott court added that the methodology used to

provide the requisite notice to feepayers “must be utilized

with an eye on the purpose of the notice in the first place,

that is to allow [feepayers] a reasonable opportunity to

gauge whether the money taken from them is being spent

on chargeable expenses.” 177 F.3d at 1108-09. While

Prescott appears to acknowledge that this “reasonable op-

portunity” can, under some circumstances, be provided

via something less than a formal audit, the court below

insisted that nothing less would do—even if it imposed on

small unions transaction costs wholly out of proportion

to the amount of the agency fees at stake, thus effectively

nullifying such unions’ “ability to require every employee

son Employment Relations Comm’n, 169 Wis. 2d 79, 121-23, 485

N.W.2d 376, 393-94 (1992) (upholding modified presumption based

on audit of random sample of locals), others have found it uncon-

stitutional, particularly in the absence of any empirical data sup-

porting the presumption. E.g., Lowary v. Lexington Local Bd. of

Educ., 903 F.2d 422, 430-32 (6th Cir.), cert. denied, 498 U.S. 958

(1990) ; Hohe, 956 F.2d at 409-11; Prescott, 177 F.3d at 1108.

10 The court below apparently misread Prescott, quoting in sup-

port of its position a portion of that decision that did not address

the situation of small local unions, but rather considered whether—

for the parent affiliate—an accountant’s “review” could take the

place of a full audit. See App. 10a (quoting 177 F.3d at 1107-08).

FP OT eee

to contribute to the cost of collective-bargaining activities.”

Abood, 431 U.S. at 237.4

The issue presented by this Petition is important not

only for the three Associations directly involved, but for

numerous other unions as well. In Massachusetts, for

example, the vast majority of local associations affiliated

with MTA are small: of MTA’s 297 local affiliates in

1988-89, only 30 had annual income in excess of $25,000.

App. 37a. The holding of the court below effectively

renders it impossible for these small unions—and their -

counterparts in Massachusetts and other states—to require

nonmembers to contribute their fair share to the support

of representational activities that provide an indivisible

service to all members of their bargaining units—and thus

threatens the very objective underlying this Court’s agency

fee jurisprudence.

D. Although a full explication of petitioners’ views as

to the type of disclosure that is necessary to provide fee-

payers with “sufficient information to gauge the propriety

of the union’s fee,” Hudson, 475 U.S. 306, must await

briefing on the merits, it may be helpful to explain the

dilemma created for the Associations and other small

unions by the imposition of a wholly inflexible audit re-

quirement.

11 Contrary to the view of the court below that Hudson's foot-

note reference to “verification by an independent auditor” was in-

tended to establish a requirement that is unvarving and inflexible.

the courts are far from unanimous in requiring such rigidity.

The language of footnote 18 has been described as “uncertain,”

Belhumeur, 411 Mass. at 145, 580 N.E.2d at 747; and apart frem

those cases that have approved 2 form of “local »resumntion,” see

supra note 9, the Seventh Circuit has recently recoynized the reality

that “CPAs are cost!v” in upholding a procecure under which local

unions had their books “audited” by lay employees of their paren*

union. International Ass'n of Machinists v. NILPR, 133 F.3d 1012,

1016-18 (7th Cir.), cert. denied, 119 S. Ct. 47 (1998).

The three Associations in this lawsuit all have small

memberships, which during the year in question ranged

from 114 to 203.4% They had revenues that year of be-

tween $9,400 and $29,000. WEA’s bargaining unit in-

cluded one nonmember, from whom it stood to collect an

agency fee of $30. BEA represented two nonmembers,

whom it charged a $30 fee, for total potential agency fee

income of $60. FEA’s bargaining unit included seven

nonmembers, who were assessed agency fees of $45, for

a total of $315.

The record also shows that the cost to each of the

Associations to conduct an audit of its financial records

would have been in the range of $2,230 to $4,105. Even

using the lowest of these figures, the cost of the audit

would—depending on the Association—have exceeded the

total amount of agency fees the Association could have

collected by multiples of 7 (FEA), 37 (BEA), or 74

(WEA). If the three Associations were required to con-

duct audits as a prerequisite for collecting agercy fees,

they would in all likelihood simply be forced to forgo

entirely their statutory and contractual rights to obtain a

financial contribution from the nonmembers that they are

legally obligated to represent. It is difficult to imagine, for

example, how WEA—consistent with the fiduciary duty it

owes to its members—could justify an expenditure in ex-

cess of $2,000 in order to collect a fee totaling $30.

Imposing on small unions—such as WEA, BEA, and

FEA—unaffordable transaction costs wholly dispropro-

tionate to the amount of the agency fees at stake would

be particularly unfortunate in view of the potential avail-

ability to such unions of alternative means of providing

12 By contrast, the union involved in Fluadson had over 26.000

members, see 475 U.S. at 294—some 130 times the size of the

largest of the three Associations involved in this lawsuit.

feepayers with “sufficient information to gauge the pro-

priety of the union’s fee.” Hudson, 475 U.S. at 306.

As noted above, the Commission had concluded—in an

earlier decision that it disavowed in this case—that, in

lieu of an audit, a small union could meet its burden

under Hudson by providing to feepayers an affidavit of a

union officer attesting to the accuracy of the figures upon

which the union’s fee was based, together with “written

assurance that the feepayer, upon request, either can ob-

tain from the union a list of all expenditures or, at the

feepayer’s option, can examine the union’s financial re-

ceipts and record of expenses (i.e. receipts, check stubs,

etc.) at a mutually convenient time.” Malden Educ. Ass'n,

15 Mass. Labor Cases at 1435. That is the procedure the

Associations used here. See supra pp. 5-6.

Where, as in this case, the union’s financial records

consist of a limited number of relatively simple documents

easily understandable by feepayers, see supra p. 5, and

where the union is of such size that it would not normally

find it necessary to obtain an audit for any other opera-

tional purpose, the procedure outlined by the Commission

in Malden Educ. Ass’n would appear to be particularly

well adapted to providing feepayers with an understanding

of the basis for the union’s agency fee without imposing

disproportionate transaction costs that would render col-

lection of any fee impossible. Indeed, the typical fee-

payer, who is likely unfamiliar with the jargon of auditors,

may well derive a better understanding of the union’s

expenditures from that kind of financial disclosure than

he or she would from a formal auditor’s report. Cf.

Gilpin v. AFSCME, 875 F.2d 1310, 1316 (7th Cir.)

(suggesting that an agency fee notice “as long and com-

plicated as an SEC prospectus” does not necessarily serve

the interests of feepayers), cert. denied, 493 U.S. 917

(1989).

The financial disclosure provided by the Associations

here would, moreover, appear to be fully consistent with

the spirit of Hudson’s footnote 18—in which this Court

suggested the requirement of an audited statement of the

union’s “major categories of expenses” only after noting

that “[t]he Union need not provide nonmembers with an

exhaustive and detailed list of all its expenditures.” 475

U.S. at 307 n.18 (emphasis added). Here, the Associa-

tions have provided the “exhaustive and detailed list of all

[their] expenditures” that the Hudson footnote deemed

not to be required.

In assessing whether, under circumstances where the

cost of an audit is prohibitive, some other method of giv-

ing feepayers “sufficient information to gauge the pro-

priety of the union’s fee,” id. at 306, might be adequate,

it also is helpful to keep in mind the purpose of the audit

requirement. As the court below correctly observed:

[T]he information that the union must provide under

the Hudson opinion is not intended to be dispositive

of any dispute. That information is designed only

to permit an agency fee payer to decide whether to

oblige the union to prove before an independent fact

finder that the agency fee charged was properly de-

termined.

App. lla (quoting Belhumeur, 411 Mass. at 146, 580

N.E.2d at 748). In deciding whether to challenge the

amount of the agency fee, the feepayer is contemplating

an act that—in contrast to many other acts undertaken in

reliance on audited financial statements—is virtually cost-

free and risk-free: if in doubt, the feepayer need only

file his or her challenge, which. costs nothing but a 33-

cent stamp. See Gilpin, 875 F.2d at 1316 (“[MlJounting

a challenge is for all practical intents and purposes free.

ow De

- 21

To insist, therefore, that a union’s burden of document-

ing the basis for its agency fee can never be satisfied

through anything less than a formal audit—even where

that requirement would make collection of any fee pro-

hibitively expensive—appears inconsistent with this Court’s

repeated admonition that the objective “must be to devise

a way of preventing compulsory subsidization of ideo-

logical 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.”

Abood, 431 U.S. at 237; Hudson, 475 U.S. at 302 (em-

phasis added).

II. THIS COURT SHOULD RESOLVE THE CONFLICT

IN AUTHORITY CREATED BY THE DECISION

BELOW CONCERNING THE APPROPRIATE REM-

; EDY FOR A UNION’S FAILURE TO PROVIDE A

CONSTITUTIONALLY ADEQUATE NOTICE OF

THE BASIS FOR ITS AGENCY FEE

: The remedial issue presented by the decision below

also is worthy of this Court’s attention. Upon finding the

Associations’ notices to feepayers to be constitutionally

inadequate because of the absence of audits, the Massa-

chusetts Supreme Judicial Court turned to the question

of remedy. The court affirmed the Commission’s order

requiring the Associations to return to the individual re-

spondents the full amount of the agency fees collected

from them during the year in question—which to that

point had been held in an escrow account. See App.

12a-13a; App. 44a (Commission order).

The holding of the court below that forfeiture of the

entire agency fee constitutes an appropriate remedy for a

failure to provide a constitutionally adequate notice of

the basis for the agency fee is contrary to the holdings

of at least four federal courts of appeals and one state

supreme court that have considered the issue. See Gilpin

v. AFSCME, 875 F.2d 1310, 1313-16 (7th Cir.), cert.

denied, 493 U.S. 917 (1989); Lowary v. Lexington Local

Bd. of Educ., 903 F.2d 422, 432-33 (6th Cir.), cert.

denied, 498 U.S. 958 (1990); Weaver v. University of

Cincinnati, 970 F.2d 1523, 1533-34 (6th Cir. 1992),

cert. denied, 507 U.S. 917 (1993); Hohe v. Casey, 956

F.2d 399, 415-16 (3d Cir. 1992); Prescott v. County of

El Dorado, 177 F.3d 1102, 1109-10 (9th Cir. 1999);

Browne v. Wiscensin Employment Relations Comm'n,

169 Wis. 2d 79, 130-34, 485 N.W.2d 376, 397-98

(1992).

These latter holdings are bottomed on the proposition

that full restitution of the agency fees—much or all of

which is properly chargeable to feepayers—would amount

to a punitive remedy of the kind that, absent willful or

malicious constitutional violations, this Court has rejected

as an inappropriate remedy in civil rights cases. Carey v.

Piphus, 435 U.S. 247 (1978); Memphis Community Sch.

Dist. v. Stachura, 477 U.S. 299 (1986). As the Seventh

and Ninth Circuits have observed:

The 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 compensa-

tion founded on the collective bargaining agreement

and federal labor law....

Prescott, 177 F.3d at 1109 (quoting Gilpin, 875 F.2d at

1316). Accordingly, these courts have found the proper

remedies for failure to provide adequate notice (including

the lack of an audit) to include injunctions against fur-

ther collection of agency fees until such notice is pro-

vided, e.g., Weaver, 970 F.2d at 1534, and nominal dam-

ages, e.g., Hohe, 956 F.2d at 415-16.

The court below purported to distinguish several of

these cases by asserting, without citation, that there the

issue had been whether the unions could ever recover

the agency fees in question, App. 13a, while in the case

before it the court read the Commission’s order as allow-

ing the Associations to renew their demands for the 1988-

89 agency fees “once they comply with the requirements

of [Hudson],” App. 13a—presumably by furnishing audits

for 1987-88. But this is a distinction without a meaning-

ful difference. As a practical matter, it is questionable

whether audits of the Associations’ expenditures during

the 1987-88 school year could be prepared at this point.

But even if the Associations were able to prepare audits

so long after the events in question, once refunds have

been made to the individual respondents from the escrow

accounts, it is to say the least doubtful whether those

funds could be recouped.!*

In sum, the remedy ordered by the Commission and

affirmed by the Massachusetts Supreme Judicial Court

“depriv[es] the Union of access to some . . . funds that

it is unquestionably entitled to retain.” Lowary, 903

F.2d at 433 (quoting Hudson, 475 U.S. at 310). Despite

the attempt of the lower court to distinguish the cases

cited above, the fact is that the courts in those cases have

concluded that this is not a proper remedy for a union’s

failure to comply with Hudson’s disclosure requirement.

13 The record does not disclose whether the individual respond-

ents remain employed in the same schoo! districts and, if so,

whether those districts’ collective bargaining agreements still con-

tain agency fee provisions. Unless both of these conditions are met,

it is difficult te see what meons would be available to the Associa-

tions at this point to collect their 1988-89 agency fees.

This Court should grant certiorari in order to resolve this

conflict.

CONCLUSION

The Petition for Writ of Certiorari should be granted.

Respectfully submitted,