Petition for Writ of Certiorari — Prescott v. County of El Dorado
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{ FILED
02 68 60CT 25 2003
NO. 02-___amge OF THE CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM, 2002
STEVEN PRESCOTT; ROBERT F. BERRY; CHERYL JONES;
KAREN PIERCE; AND CHRISTINE M. TURNEY,
~ Petitioners,
V.
COUNTY OF EL DORADO; SHARON LIBICKI; AND EL DORADO
COUNTY EMPLOYEES ASSOCIATION, LOCAL NO. 1,
Respondents.
On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit
PETITION FOR A WRIT OF CERTIORARI
ZO
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
October 2002
\\A Vy
= =
QUESTIONS PRESENTED
Do public employees Possess standing to challenge, as void
as against Federal constitutional law and public policy, the
legality of provisions of the collective bargaining
agreement governing their terms and conditions of
employment?
May a public employer agree to be indemnified by a labor
union for the public employer’s liability for violating its
nonunion employees’ constitutional rights when it seizes
compulsory union fees in violation of this Court’s decision
in Teachers Local No. 1 y. Hudson, 475 U.S. 292 (1986)?
wtks
PARTIES TO THE PROCEEDINGS BELOW
There were no parties to the proceedings in the court whose
judgment is sought to be reviewed other than those named in the
caption:
- lii -
TABLE OF CONTENTS
Page
SPU UMINOE DUIUITID ovis osc ces da cedccoveecsa.. i
PARTIES TO THE PROCEEDINGS BELOW ................ ii
TABLE OF AUTHORITIES ............. he eaNeins dscns vii
ee brels ih tew i fouuc’..c.. 2
| ee eS ee ee 2
CONSTITUTIONAL AND STATUTORY PROVISIONS
sa ob nn oa oe ob vka wk ne 2
STATEMENT OF THE CASE .......................... 3
Or, SUNN oS ww A hs Ke wee pieee vias stews 4
II. Prior Proceedings and Proceedings Below ...... 6
REASONS FOR GRANTING THE WRIT ................. 10
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 .............. 10
-iV-
TABLE OF CONTENTS — CONTINUED
Page
A. The Conflict with Decisions on the Injury-in-Fact
Inflicted by Government Enforcement of an
AQUROY TROD TOD oo civ cece c ec ceccvesees 11
1. The Conflict with This Court............. 12
2. The Conflict Among the Circuits ......... 16
B. The Conflict with “Standing” Decisions ........ 17
1. The Conflict with This Court’s Decisions ... 17
2. The Conflict Among the Circuits
GE ke cecicnstiirads sateen, 20
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 ...... 23
A. The PR AS 2 ix Spe es eg ee ee a 23
B. The Importance of the Issue ................. 28
CIE inno n co cle TS ae Oa eo eee eh eek 30
-V-
-
TABLE OF CONTENTS -— CONTINUED
APPENDICES Page
A.
Decision of the United States Court of Appeals for
the Ninth Circuit (1 August 2002), reported at
298 F.3d 844 (9th Cir. 2002) ................ la
Final Judgment in a Civil Case Entered by the
United States District Court for the Eastern
District of California (17 April 2001) ......... _6a
Order on Pending Summary Judgment Motions
Entered by the United States District Court for the
Eastern District of California (17 April 2001)... 7a
Decision of the United States Court of Appeals for
the Ninth Circuit (12 May 1999), reported at 204
ee ee oe 19a
Decision of the United States Court of Appeals for
the Ninth Circuit (12 May 1999), reported at 177
P36 1102 (Sth Cir. 1999) oo vnc cevcveccccs. 22a
Final Judgment in a Civil Case Entered by the
United States District Court for the Eastern
District of California (1 April 1998) ......... 47a
-Vi-
TABLE OF CONTENTS — CONTINUED
Page
. Opinion and Order Denying Defendants’ Motion
to Dissolve or Modify the Preliminary Injunction,
and Granting in Part and Denying in Part Plain-
tiffs’ Motion for Summary Judgment Entered by
the United States District Court for the Eastern
District of California (26 January 1998) ....... 48a
. United States Constitution, Article II] ........ 69a
United States Constitution,
yf. I re ee 70a
United States Constitution,
Fourteenth Amendment ................ Tla
. Civil Rights Act of 1871, 42 U.S.C.
§ 1983 (West Supp. 1999) .............. 72a
Meyers-Milias-Brown Act,
Cal. Gov’t Code § 3502.5(a) ....°........ 73a
- Vii -
TABLE OF AUTHORITIES
Cases Page
Abood v. Detroit Board of Education,
on She CENTER Sal. Rdi a Bidar sé ove 12, 15, 23
Air Line Pilots Association v. Miller,
ee 13
Allen v. Wright,
ey SOE ik ink we oh chudud tenecdatsas 10
Andrews v. Education Association of Cheshire,
S49 F206 53S CE Cir. 1987) o.oo cccscccccccccces 17
Bowsher v. Synar,
SE POE 65s i nn neevddsknunech ues 15
Brewer v. Lewis,
989 F.2d 1021 (9th Cir. 1993) .................. 22
Carey v. Piphus,
eM NOD ih oN bk Walks ine elie oe 25
City of Newport v. Fact Concerts, Inc.,
a UO Ek ocienin Sein vce k a nc ook 25
Clements v. Fashing,
cetittectees ice. FO eT 20
Clinton v. City of New York,
Pe Wes GET CNMI vc kc cndccccccvece 10, 15, 18, 19
- Vili -
TABLE OF AUTHORITIES — CONTINUED
Page
Cramer v. Matish,
924 F.2d 1057 (table), 1990 WL
RS OT ere eee 22, 26
District of Columbia v. Carter,
ere rr 24
Ellis v. Railway Clerks,
te errr 15, 24, 28, 29
Elrod v. Burns,
es ee 65 5 och be vbk aenseeesenen ees 12
Federal Election Commission v. Akins,
Se ae EP ous cikdwinvekesetessdenasere 10
Foster v. Madhesian,
268 F.3d 629 (Sth Cir. 2002) ...... cc ccccees passim
Friends of the Earth, Inc. v. Laidlaw, :
ee Es. 0b ve ea Wieceaeasrcdedonecuens 7
Harik v. California Teachers Ass'n,
Fe Fe Oe A: BED voi vccncocccusees 11,24
Hohe v. Casey,
ie hog: le Bee eee passim
- ix -
TABLE OF AUTHORITIES — CONTINUED
Page
Hohe v. Casey,
740 F. Supp. 1092 (M.D. Pa. 1989), rev'd in
part, 956 F.2d 399 (3d Cir. 1992)................ 21
Hudson v. Teachers Local No. 1,
743 F.2d 1187 (7th Cir 1984),
ay Se UI wv kis od cccdce cdcccons 17
Knight v. Kenai Peninsula Borough School District,
131 F.3d 807 (9th Cir. 1997), cert. denied
sub nom. Anchorage Education Association v.
Patterson, 524 U.S. 904 (1998) ........... 12, 16, 20
Lawrence v. Chater,
POO Ae BU CIIOE oc ccécccccdidwin OF eT Cee 7
Lehnert v. Ferris Faculty Association,
| AR Cr Pre Po eee 15
Los Angeles v. Lyons,
See bo odd aid ae base ve 10, 16, 17, 18
Lujan v. Defenders of Wildlife,
Pe ROO Sb iced Obed swbi sconces 10, 22
Ex parte McCardle,
FE FSV ei ver eb wei bdvhedéccees 23
-X-
TABLE OF AUTHORITIES — CONTINUED
Page
Mitchum v. Foster,
og te ef ee ee ee ee ee 24
Monroe v. Pape,
Cg eg POPUP TOL TET EL TERT Eee 24, 29
National Law Center on Homelessness & Poverty v. Kantor,
Pe ee 8 a ls BE ov oo we ha ee ed ewes’ 23
National Organization for Women v. Scheidler,
SS Re eer ee er ee re 22
Northeastern Florida Chapter of the Associated General
Contractors of America v. Jacksonville,
Pe a CEE 8 8x8 nets baevees ss Ciiee ies 19
O’Shea v. Littleton,
ge | ET eee ee ere ret eer 18
Patterson v. American Tobacco Co., .
Dae Wat CORE, BRP vi eek cece stern aes 18
Prescott v. County of El Dorado,
915 F. Supp. 1080 (E.D. Cal. 1996) .............. 5, 6
Regents of University of California v. Bakke,
ee Sis EP CUA 6 Fak nance eile sen i Adee 20
« Xie«
TABLE OF AUTHORITIES — CONTINUED
Page
Sierra Club v. Morton,
ect ht LS PEPPePEe Terror reer 10
Simon v. Eastern Kentucky Welfare Rights Organization,
1 | erry rae Tar rare 10
Stamford Board of Education v. Stamford Education
Association,
697 F.2d 70 (2d Cir. 1982) ............ 18, 25, 26, 27
Steel Co. v. Citizens for a Better Environment,
gS NE ee ee 10, 23
Teachers Local No. 1 v. Hudson,
re ee Eh P90 eben bone Sees passim
Tierney v. City of Toledo,
B24 F268 1497 COM Ct. 1967) occ ce cseeccseds 17
Turner v. Fouche,
PO ee re re ee 19
Valley Forge Christian College v. Americans United for
Separation of Church & State,
ok ga oS re eee 10
Vermont Agency of Natural Resources v.
United States ex rel. Stevens,
re rae ere eee 10
- Xii-
TABLE OF AUTHORITIES — CONTINUED
Page
Ex parte Virginia,
oe Reh er re se errr cr 24
Warth v. Seldin, ,
eg te Bl, rrr viene vakalemee 10
Weaver v. University of Cincinnati,
FPO F226 1529 COC, TGF) avec cv cnedvinys passim
Wessel v. City of Albuquerque, |
299 F.3d 1186 (10th Cir. 2002) ... 2. cc ecveee passim
Wilson v. Garcia,
O72 TS: BO COR) 6 8 NEENAH 24 29
Wyatt v. Cole,
TG Ui TSG 6 vk ve cc esved recess vayeseos 25
Constitutions, Statutes, and Rules
United States Constitution,
Se 6a Ces Airis Sere re eee 2,19
SI 0 5 6 06 5 or eRTA AAR passim
NE BET ki ik'basan bed k bee eeeee eee 6 ae
Line Item Veto Act,
yack fom fF fF Seererrrervee re ieee. 18-19
- Xili -
TABLE OF AUTHORITIES — CONTINUED
Page
ee rrr 2
Civil Rights Act of 1871,
42 U.S.C. § 1983 (West Supp. 1999) Stakes 0's passim
Civil Rights Attorney’s Fees Award Act, 1976,
42 U.S.C. § 1988 (West Supp. 1999) ........ 16 25, 26
SS San ae 2
Meyers-Milias-Brown Act,
eR 4
i 4
eg gS 2,4
Cae eee POGOe sree) ................... 28
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
UNION REV. 1 (Summer 1995) .................. 28
1A MARTIN A. SCHWARTZ & JOHN E. KIRKLIN,
Section 1983 Litigation: Claims and Defenses § 1.3
SS Oe 24
IN THE
Supreme Court of the United States
OCTOBER TERM, 2002
No. 02-
STEVEN PRESCOTT; ROBERT F. BERRY; CHERYL L. JONES;
KAREN PIERCE; AND CHRISTINE M. TURNEY,
Petitioners,
Vv.
COUNTY OF EL DORADO; KATHY LIBICKI; AND
EL DORADO COUNTY EMPLOYEES ASS’N, LOCAL NO. 1,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETITION FOR A 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 1 August 2002. :
se
OPINIONS BELOW
The panel opinion sought to be reviewed (Appendix
(“App.”) A at la) is reported at 298 F.3d 844. The judgment
(App. B at 6a), and opinion and order of the United States
District Court for the Eastern District of California on Petition-
ers’ and Respondents’ Cross-Motions for Summary Judgment
(App. C at 7a) are unreported. Also included are the panel
decision of the Ninth Circuit (App. D at 19a), on remand from
this Court, reported at 204 F.3d at 984, the original panel
decision of the Ninth Circuit (App. E at 22a), reported at 177
F.3d 1102, and the District Court’s unreported original
judgment (App. F at 47a) and opinion and order (App. G at
48a).
JURISDICTION
The court of appeals entered its judgment on 1 August
2002. 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, and § 3502.5(a) of
the California Government Code. Their pertinent text is set out
in Appendices H-L at 66a-70a.
xo
STATEMENT OF THE CASE
Like this Court’s earlier consideration, Prescott v. County
of El Dorado, 528 U.S. 1111 (2000), this case involves: (1) the
standing of public employees to challenge provisions of the
agreement governing their terms and conditions of employment;
and (2) whether a public employer may contract away (to the
union benefitting from its actions) liabilities arising from its
enforcement of an agency shop scheme which fails to comply
with “the constitutional requirements for the Union’s collection
of agency fees.” Teachers Local No. 1 v. Hudson, 475 U.S. 292,
310 (1986). ,
This civil rights action, brought under 42 U.S.C. § 1983,
sought and obtained declaratory, injunctive, and other relief to
prevent and redress violations of Petitioners’ constitutional
rights to be free from unlawful seizures of compulsory union
fees. See generally Hudson, 475 U.S. at 306-10. Included
within their Complaint, Petitioners Steven Prescott, et al. (“the
employees”), also challenged the “indemnification provision” of
the memorandum of understanding (“MOU”) between
Respondents County of El Dorado (“County”) and El Dorado
County Employees Association, Local No. 1 (“EDCEA”),
alleging that it is void as against public policy and
unenforceable (Record (“R.”) 1, Complaint, {J 14 and 31, and
Exhibit A, Article 4, § 3(J)). Applying Hudson, the lower courts
decided most of the employees’ claims and entered judgment
largely in their favor. However, the lower courts twice declined
to address the indemnification issue, declaring that the
employees lack standing to challenge this section of the MOU
governing their terms and conditions of employment. See App.
A at 3a-5a, 298 F.3d at 845-47; App. E at 41a-43a, 177 F.3d at
1111-12; App. G at 64a-66a.
I. The Facts.
The employees are employed by the County in a bargaining
unit represented by EDCEA. EDCEA is a “recognized
employee organization” and the County is a “public agency”
within the meaning of California’s Meyers-Milias-Brown Act
(“MMBA”), Cal. Gov’t Code § 3501(b) and (c). The employees
are not union members, and were not, when “agency fees” were
seized from their pay. App. A at 2a-3a.
Pursuant to the MMBA, Cal. Gov’t Code § 3502.5(a), the
EDCEA/County MOU imposed a forced-unionism obligation
(entitled “Fair Share”) by which the County agreed to deduct
fees from the wages of all bargaining unit employees who did
not join EDCEA, and to forward those fees to EDCEA. App. A
at 2a-3a. Included in this section of the MOU was an
indemnification provision, as follows:
Local 1 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 collection 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 [sic] time as well.
Id. at 3a, 298 F.3d at 845.
In April 1995, EDCEA sent a notice to the employees,
purportedly in compliance with Hudson’s requirements. On 12
May 1995, the County seized initiation fees and agency fees
from each employee’s bi-weekly salary, forwarding the fees to
EDCEA’s affiliate, Public Employees Union, Local No. 1.
ee
Respondents failed to comply with all of the procedural
protections required by this Court’s decision in Hudson before
fees were seized. Prescott v. County of El Dorado, 915 F. Supp.
1080, 1091-92 (E.D. Cal. 1996). As adjudicated by the lower
courts, EDCEA’s notice and procedure violated Hudson’s three
requirements, 475 U.S. at 310, failing to provide: (1) “an
adequate explanation of the basis for the fee” by failing to
provide audited financial disclosure, App. E at 29a-34a, 177
F.3d at 1106-09; (2) “a reasonably prompt opportunity to
challenge the amount of the fee before an impartial
decisionmaker,” as EDCEA’s challenge procedure would not
occur until more than a year after the first fee seizure, 915
F. Supp. at 1091, and the union required specific objections
submitted “under penalty of perjury,” App. G at 63a-64a
(permanently enjoining EDCEA from imposing requirements);
and (3) “an escrow for the amounts reasonably in dispute while
such challenges are pending,” as EDCEA escrowed only 4% of
the fee seized, App. E at 37a-40a, 177 F.3d at 1110-11.
Respondents County and Kathy Libicki (the County’s
Director of Human Resources) took no steps to comply with
Hudson’s requirements, relying wholly upon EDCEA’s
representations that it had done so. The County and Libicki
initially claimed that they undertook no independent review to
confirm EDCEA’s representations that it had complied with
Hudson’s requirements before seizing agency fees from the
employees. R. 23, Exhibit 3, page 2, Admission No. 3; R. 92,
pages 24-25; see also R. 90, | 23 (failing even to ascertain
whether the notice was sent to all “potential objectors,”
Hudson, 475 U.S. at 306). However, later discovery revealed
that they had concluded that EDCEA’s financial disclosure
probably did not comply with Hudson’s requirements. R. 92,
pages 35-36 and Exhibit 6A; see also R. 90, { 22. Nevertheless,
the County enforced the forced-unionism agreement in the belief
ie
that the indemnification agreement protected it from all liability
to the employees.
II. Prior Proceedings and Proceedings Below.
The employees filed their Complaint in October 1995,
seeking declaratory and injunctive relief, and damages, on the
grounds that Respondents were enforcing their “agency shop”
scheme in violation of Hudson, and that the indemnification
provision of the MOU is void as against public policy.
After preliminarily enjoining all fee seizures, Prescott, 915
F. Supp. at 1092, the District Court, on 26 January 1998, entered
its order, App. G at 48a-68a, and its judgment, on 1 April 1998,
largely in favor of the employees, App. F at 47a. The District
Cou:t permanently enjoined EDCEA from utilizing portions of
its Hudson procedure. App. G at 63a-64a. District Court
rulings that EDCEA’s unaudited financial disclosure and escrow
were adequate under Hudson were reversed on appeal. App. E
at 29a-34a, 37a-40a, 177 F.3d at 1106-09, 1110-11, cert.
granted, vacated, remanded, 528 U.S. 1111 (2000), reinstated
in pertinent part, App. D at 20a-21a, 204 F.3d at 984.
As to the employees’ claim that the indemnification
provision of the MOU is void as against public policy and
unenforceable, the District Court sua sponte declared that the
employees lack standing to challenge this term of the MOU
governing their terms and conditions of employment. App. G
at 64a-66a. Specifically, the District Court found that the
employees had “not demonstrated any of the three prerequisites
to standing.” The court reasoned 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.” Jd.
at 66a. The employees appealed, R. 54, attacking, inter alia, the
. -
District Court’s ruling that they lack standing to challenge the
indemnification provision. App. E at 41a, 177 F.3d at 1111.
Acknowledging “that [the employees] suffered some injury
when the fees were deducted from [their] paycheck(s],” the first
Court of Appeals panel nevertheless affirmed the District
Court’s standing ruling. Jd. at 42a, 177 F.3d at 1112
(identifying injury as failure to comply with Hudson's
standards; injury results from unioa’s conduct). Thus, both the
District Court and the original panel denied any nexus between
the indemnification provision and the County’s seizure of fees
from the employees. Id., 177 F.3d at 1112.
The original panel’s denial was rooted in its conclusion that
the employees were injured not by the County’s illegal fee
seizures, but because “fee deduction procedures were [not]
properly followed.” It then concluded that this miscast “injury”
was not “fairly traceable to the agreement,” and that it was
“speculative” to conclude that “striking of the agreement would
redress or prevent the injuries . . . suffered.” Jd., 177 F.3d at
1112.
The employees petitioned this Court for a writ of certiorari.
This Court apparently determined either “intervening
developments, or recent developments that [it] had reason to
believe the court below did not fully consider, reveal[ed] a
reasonable probability that the decision below rest[ed] on a
premise that the lower court would reject if given the
opportunity for further consideration.” Lawrence v. Chater, 516
U.S. 163, 167 (1996). This Court granted the petition, vacated
the decision below, and, on 18 January 2000, remanded the case
“for further consideration in light of Friends of the Earth, Inc.
v. Laidlaw,” 528 U.S. 167 (2000). 528 U.S. 1111 (2000).
dite
Further discovery on remand revealed the County knew,
prior to seizing the compulsory fees from the employees’ wages,
that EDCEA’s financial disclosure “may not meet [the] standard
of ‘legally audited’ financial disclosure.” R. 92, pages 35-36
and Exhibit 6A (original emphasis). Nevertheless, upon cross-
motions for summary judgment, the District Court again held
that the employees lack standing to.challenge the validity of the
indemnification clause, App. C at 15a-18a, and dismissed the
case, App. B at 6a. The employees again appealed. R. 99.
Retreating from the concession of its predecessor panel,
App. E at 42a, 177 F.3d at 1112; but see Hudson, 475 US. at
310, the second panel refused to acknowledge that employees
are injured by the illegal seizure of their property. Instead, the
second panel—like the District Court, App. C at 16a—identi-
fied the injury as a failure to comply with Hudson’s standards
and affirmed the District Court’s standing ruling. App. A at 4a-
Sa, 298 F.3d at 846-47.
Like the District Court, the panel recast the Complaint,
stating that “[t]he only cognizable injury the plaintiffs allege is
that the union did not give them adequate notice of the basis of
the fees.” Jd. at 2a, 298 F.3d at 845; see also id. at 3a-4a, 298
F.3d at 846 (“The only injury they alleged was that the union
failed to comply with the requirements of Hudson to provide
notice of the basis of the agency fees . . . and to maintain an
adequate portion of collected fees in escrow pending fee
arbitration.”). However, the Complaint five times identifies the
seizure of agency fees as the source of the employees’ injuries.
R. 1, #f 15, 19, 20, 21 & 24.'
' The panel likewise disregards prior proceedings herein, for in
addition to the failure to provide “adequate notice,” the District Court had
adjudicated four distinct procedural deficiencies. See page 5, supra.
vile
Based upon this misapprehension of the Record and prior
proceedings, and the flawed premise that inadequate notice—
and not the illegal seizure of property—causes injury, the panel
declared that the employees had not “met the redressability
requirement for standing,” because it was merely “speculative”
that the declaratory and injunctive remedy sought would not
“prevent future violations.” App. A at 4a, 298 F.3d at 846.
The panel also asserted that a public employer is not liable
when it seizes fees from employees absent compliance with “the
constitutional requirements for the . . . collection of agency
fees.” Hudson, 475 U.S. at 310. The panel concluded that a
public employer “has no responsibility for ensuring the
adequacy of the notice; that is the union’s responsibility.” App.
A at 4a, 298 F.3d at 846 (citing Foster v. Madhesian, 268 F.3d
689, 694 (9th Cir. 2001)).
2
« 86.
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, this case appears to present a routine standing
issue, addressed frequently by this Court. See Vermont Agency
of Natural Resources v. United States ex rel. Stevens, 529 U.S.
763, 771-78 (2000); Clinton v. City of New York, 524 U.S. 417
(1998); Federal Election Comm’n v. Akins, 524 U.S. 11 (1998);
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (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 repeated the familiar tripartite
showing required to establish 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, 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 lower court’s treatment of standing here is
not routine. Prescott v. County of El Dorado, 528 U.S. 1111
(2000). By misdefining the employees’ injury, the Ninth Circuit
writes out of civil rights law the government’s duty to refrain
from violating nonunion employees’ constitutional rights,
failing to apply this Court’s clearly-enunciated standards, see
Hudson, 475 U.S. at 307 n.20 ( “the government and union have
a responsibility to provide procedures that minimize th[e]
ott.
impingement [on First Amendment rights] and that facilitate a
nonunion employee’s ability to protect his rights”) as well as
those of virtually every other Circuit addressing this issue.
Consequently, the employees face the prospect of future
violations of their constitutional rights by both illegal agency fee
seizures absent compliance with the “constitutional
requirements for the . . . collection of agency fees,” id. at 310,
and by compelled subsidization of the public employer’s
defense against their successful lawsuit challenging past
violations of their constitutional rights.
A. The Conflict with Decisions on the Injury-in-Fact
Inflicted by Government Enforcement of an Agen-
cy Shop Scheme.
The panel’s decision conflicts with this Court’s standing
decisions, because it conflicts with this Court’s forced-unionism
jurisprudence. Although nonmembers are injured by the public
employer’s seizure of agency fees from their wages, the panel
radically abstracted their injury, attributing their “injury in fact”
to inadequate notice under Hudson. App. A at 2a, 298 F.3d at
845. Thus, the panel premised its decision on the implausible
proposition that the contents ofa union’s notice—rather than the
seizure of his or her property—injures an employee.
The Ninth Circuit has applied this analysis in a series of
cases, beginning with the first decision herein, App. E at 41a-
43a, 177 F.3d at 1111-12, and culminating in its decision on
remand from this Court. App. A at 4a; see also Foster v.
Madhesian, 268 F.3d 689, 694 (9th Cir. 2001); Harik v.
California Teachers Ass'n, 298 F.3d 863, 870 (9th Cir. 2002)
(reversing judgment against public officials for seizing fees
absent Hudson compliance).
ee
The panel’s conclusion defies this Court’s mandate that it
is the public employer’s responsibility, before it seizes fees from
“potential objectors,” to ensure that Hudson’s standards are
satisfied. Hudson, 475 U.S. at 306-07 & n.20; see also Knight
v. Kenai Peninsula Borough Sch. Dist., 131 F.3d 807, 817 (9th
Cir. 1997) (miscast by both the Foster and the Prescott panels).
1. The Conflict with This Court.
Hudson holds that an employer’s seizure of nonmembers’
fees is the constitutionally-injurious act, rejecting the argument
that only the union’s expenditure of nonmembers’ fees injures
them. Proceeding from the principle “that requiring employees
to support the collective-bargaining representative ‘has an
impact upon their First-Amendment interests’” (quoting Abood
v. Detroit Board of Education, 431 U.S. 209, 222 (1977)), this
Court identified a two-fold violation in any forced-unionism
scheme: that it “may well ‘interfere in some way with an
employee’s freedom: (1)] to associate for the advancement of
ideas, or [(2)] to refrain from doing so, as he sees fit.”” Hudson,
475 U.S. at 301. This Court reiterated that “the agency shop
itself impinges on the nonunion employees’ First-Amendment
interests,” noting that an “appropriately justified advance
reduction” of the fee is required. Jd. at 309. Recognition that it
is the taking which injures the constitutional rights of
nonmembers was cemented by this Court’s holding establishing
“the constitutional requirements for the . . . collection of agency
fees.” Id. at 310 (emphasis added); cf. Elrod v. Burns, 427 U.S.
347, 373 (1976) (“loss of First Amendment freedoms, for even
minimal periods of time, unquestionably constitutes irreparable
injury”) (emphasis added).
sit.
While declining to consider the case “through the prism of
the procedural due process protections necessary for
deprivations of property,” this Court recognized that the
infringement is dual, because “the procedures required by the
First Amendment also provide the protections necessary for any
deprivation of property.” Hudson, 475 U.S. at 304 n.13. It
therefore rejected the union’s argument that “any valid
constitutional objection to [its] procedure,” was addressed by
escrow of all monies seized from nonmembers. Jd. at 309. This
principle was again recognized when this Court rejected the
argument that “[iJllegality depends on the spending of
compelled agency fees for ideological purposes . . . not simply
the initial collection of those fees.” Air Line Pilots Ass'n v.
Miller, 523 U.S. 866, 876 n.4 (1998) (original emphasis).
Furthermore, the panel’s novel conclusion disregards the
government’s duty to refrain from unconstitutional conduct, and
its culpability for its unconstitutional seizure of “agency fees”
from nonunion public employees for a union’s benefit. See also
Foster, 268 F.3d at 694. This Court unambiguously declared in
Hudson 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 enforce a forced-
unionism provision, 475 U.S. at 307 n.20 (emphasis added).
Yet, another Ninth Circuit panel—relied upon by the panel
below, App. A at 4a—discarded that conclusive affirm-ance of
government responsibility in favor of a construction of § 1983
embracing the proposition that “the routine deduction of fees by
the [government] employer,” does not injure employees when
the necessary procedures have not been provided. Foster, 268
F.3d at 694.
-14-
Thus, the panel followed Foster’s decision elevating state
statutory policy ostensibly favoring seizure of agency fees, id.,
over the federal constitutional policy barring fee seizures absent
compliance with “the constitutional requirements for the . . .
collection of agency fees,” Hudson, 475 U.S. at 310.
Distribution of an inadequate Hudson notice does not cause
the injury necessary to establish standing. App. A at 4a, 298
F.3d at 846. Rather, nonmembers are injured by the seizure of
agency fees, an act committed solely by the public employer.
The panel’s iailure to acknowledge this point (the core of the
employees’ argument, see Plaintiffs-Appellants’ Reply Brief,
filed 1 December 2001, pages 4-22), underlies its standing
ruling: “The challenged indemnification clause upon which the
employer insisted caused neither the union to furnish, nor the
plaintiffs to receive, inadequate notice.” App. A at 4a, 298 F.3d
at 846. What the panel did not face was the fact that the
indemnification clause caused the County to agree to, and
enforce, the forced-unionism agreement, i.e., to seize agency
fees from the employees’ wages.
Having miscast the “injury” suffered by the employees from
whom forced union dues are seized, the panel consequently
ignores the palpable and direct effect of the indemnification
agreement in the seizure of agency fees. Moreover, the panel
ignores the real and imminent prospect of additional financial
injury (beyond the County’s past illegal seizures of agency fees),
insofar as the employees remain subject to the County/EDCEA
forced-unionism agreement.” Indeed, given the renewal of
? Petitioner Karen Pierce left her bargaining unit employment during
the pendency of this lawsuit, R. 68, Exhibit A, J 5, and therefore does not
face the prospect of compelled subsidization of EDCEA’s indemnification
expenditures. However, because the other employees possess standing on
(continued...)
o1$-
agency fee seizures after the District Court’s order of January
1998, App. G, they already have suffered that injury, when
EDCEA charged them for the costs of indemnifying the County
for its defense against their own meritorious lawsuit.
A union may not charge objecting nonmembers for
“expenses incident to [an illegal] strike,” because this Court
“can imagine no legitimate governmental interest that would be
served by compelling objecting employees to subsidize activity
that the State has chosen to disallow.” Lehnert v. Ferris Faculty
Ass'n, 500 U.S. 507, 531 (1991); accord id. at 562 (opinion of
Scalia, J.). Similarly, no legitimate governmental interest can
be served by compelling objecting employees to subsidize a
public employer’s costs of defending itself against those
employees’ successfully-adjudicated claims that it violated their
First and Fourteenth Amendment rights by seizing agency fees
in the absence of Hudson compliance.
This Court has consistently recognized the First Amend-
ment repercussions of forced-unionism schemes. Hudson, 475
USS. at 301 (quoting Abood, 431 U.S. at 222); see also Abood,
431 U.S. at 255 (Powell, J., concurring in the judgment);
Lehnert, 500 U.S. at 517-19; see also Ellis v. Railway Clerks,
466 U.S. 435, 447, 455-56 (1984) (“by 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”). The coerced subsidization imposed by
indemnification provisions in cases such as this serves no
legitimate governmental interest, but seriously “impact[s]” the
2 (...continued)
this basis, this Court need not consider Pierce’s status. Clinton, 524 U.S. at
431 n.19 (citing Bowsher v. Synar, 478 U.S. 714, 721 (1986)).
-16-
employees’ First Amendment rights. Hudson, 475 U.S. at 301;
cf. 42 U.S.C. § 1988 (fee-shifting provisions).
When it adopted the “injury-because-Hudson-was-not-
followed” reasoning (App. A. at 2a-4a, 298 F.3d at 845-46), the
panel below—like its predecessor panel, App. E—ignored the
employees’ real economic injury in EDCEA’s indemnification
of the County and Libicki from the costs of their defense of this
lawsuit. The County/EDCEA MOU thus adds to the injury of
the County’s unlawful seizure of agency fees the insult of
requiring the employees to subsidize the County’s financial
liability for that injury. Certainly, that injury is sufficient to
confer upon the employees standing to challenge the legality of
the indemnification agreement. Lyons, 461 U.S. at 111.
2. The Conflict Among the Circuits.
The Ninth Circuit’s decision also conflicts with decisions
of four other Circuits that have held employers liable for seizing
agency fees absent compliance with Hudson’s requirements.’
There is no other precedent consistent with this panel’s decision.
A public employer’s duty to refrain from inflicting
constitutional harm by seizing fees is unanimously recognized
in the Third, Sixth, Seventh, and Tenth Circuits, the only other
Circuits to consider the question. Wessel v. City of
Albuquerque, 299 F.3d 1186, 1197-99 (10th Cir. 2002) (“That
a public employer has certain obligations within the fair share
deduction framework established by courts is beyond dispute”),
reh’g denied (1 Oct. 2002); Hohe v. Casey, 956 F.2d 399, 405-
06, 411 (3d Cir. 1992) (“the employer and the union must have
> There is good cause to believe that it defies existing Ninth Circuit
precedent, since this rule was previously recognized in Knight, 131 F.3d at
817, based upon Hudson, 475 U.S. at 307 n.20.
«tts
a constitutional procedure in place before deducting fees”);
Tierney v. City of Toledo, 824 F.2d 1497, 1504, 1507 (6th Cir.
1987) (“no union or employer may take any action to enforce a
non-union member’s duty to pay any dues, whether through a
deduction from wages or payment from wages already paid,”
absent Hudson compliance); Weaver v. University of Cincin-
nati, 970 F.2d 1523, 1538 (6th Cir. 1992) (“a public employer
ha[s] duties separate and apart from those of the union”);
Hudson v. Teachers Local No. 1, 743 F.2d 1187, 1191 (7th Cir.
1984) (public agency liable), aff'd, 475 U.S. 292 (1986); see
also Andrews v. Education Ass’n of Cheshire, 829 F.2d 335,
339 (2d Cir. 1987) (Hudson “mandated that the unions and
government use a narrowly drawn plan that protects the
nonmembers’ first amendment interests”).
The panel’s mischaracterization of the employees’
argument—that they argued that “the indemnification clause is
the legal cause of the inadequate Hudson notice,” App. A at 4a;
298 F.3d at 846; but see supra page 8—is contrary to both the
Record and the uniform rule of law recognized by this Court and
the other Circuits. —
This Court should grant certiorari to address the panel’s
deviation from this Court’s forced-unionism jurisprudence, and
that of the other Circuits, as to the injury-in-fact suffered by
nonunion employees subject to forced-unionism schemes.
B. The Conflict with “Standing” Decisions. —
1. The Conflict with This Court’s Decisions.
Insofar as the employees seek prospective declaratory and
injunctive relief that Respondents’ indemnification scheme is
void as against public policy, the panel failed to analyze
properly the employees’ standing under Lyons. Lyons holds that
litigants seeking such relief demonstrate standing when they
: 2
show a “real or immediate threat that [they] will be wronged
again—a ‘likelihood of substantial and immediate irreparable
injury.”” 461 U.S. at 111 (quoting O'Shea v. Littleton, 414 U.S.
488, 502 (1974)). The four employees who remain employed by
the County, subject to successor County/EDCEA MOUs and
their forced-unionism provisions, satisfy these requirements.
Nevertheless, because “[t]he remedy the plaintiffs seek,
invalidation of the indemnification clause, does not compensate
plaintiffs for past violations of Hudson, nor does it prevent
future violations,” the panel below declared that the employees
failed to meet “the redressability requirement for standing.”
App. A at 4a, 299 F.3d at 846.
In Stamford Board of Education v. Stamford Education
Association, 697 F.2d 70, 74 (2d Cir. 1982), a similar
indemnification provision was struck down. The Second Circuit
cited the union’s payment of the public employer’s damages for
entering into an unlawful agreement and the derivation of that
payment from, “at least in part, funds collected as dues from the
plaintiffs themselves or from members of the plaintiff class.”
Id. (citing Patterson v. American Tobacco Co., 535 F.2d 257,
269 (4th Cir. 1976) (union may not bargain away minority
employees’ right to equal treatment)). Similarly, the employees
here face the very real prospect of subsidizing the opposition to
their own lawsuit, when EDCEA indemnifies Respondents
County and Libicki, and charges bargaining unit employees for
those costs.
That the employees will be forced to subsidize the County’s
defense exceeds the showing of “contingent liability” sufficient
to confer standing upon the City of New York in Clinton v. City
of New York, 524 U.S. 417, 429-30 (1998). Opposing a
constitutional challenge to the Line Item Veto Act, 2 U.S.C.
§ 691, et seqg., the United States government argued that there
- 19.
was no “actual injury [to the City] because the claims are too
speculative,” 524 U.S. at 430, citing the fact that its liabilities
were dependent upon the action of the State of New York.
Rejecting this argument, this Court compared 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, “[e]ven
if the outcome of the second trial is speculative, the reversal,
like the President’s cancellation, causes a significant immediate
injury by depriving the defendant of the benefit of a favorable
final judgment.” Jd.
Similarly, the courts below were confronted with the self-
evident fact that indemnification lowers employer costs for
violating nonmember employee rights, thereby creating
disincentives to the public employer’s protection of the
employees’ constitutional rights. Moreover, it is uncontroverted
that the County, doing nothing to ensure that Hudson was
satisfied, seized agency fees notwithstanding its doubts about
the constitutional adequacy of EDCEA’s financial disclosure.
If “denial of a benefit in the bargaining process can itself create
an Article II injury, irrespective of the end result,” Clinton, 524
U.S. at 433 n.22 (citing Northeastern Florida Chapter of the
Associated Gen. Contractors of America v. Jacksonville, 508
U.S. 656, 666 (1993)), then certainly achievement of a term in
the bargaining process can likewise inflict an Article Ill injury.’
4 The employees need not demonstrate that the County would have
eschewed fee seizures absent the indemnification provision, see App. E at
42a-43a, 177 F.3d at 1112, to establish their standing. This Court has
repeatedly refused to impose such a requirement. Jacksonville, 508 US. at
664-65 (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
(continued...)
- 20.
2. The Conflict Among the Circuits on Standing.
In addition to the Ninth Circuit in this case, three other
courts of appeals—the Tenth, Sixth, and Third,
respectively—have faced the indemnification issue in the
context of forced-unionism agreements. See Wessel, 299 F.3d
at 1197-99; Weaver, 970 F.2d at 1536-38; Hohe, 956 F.2d at
411-12. Indeed, an earlier panel of the Ninth Circuit faced a
similar challenge. Knight, 131 F.3d at 817 (addressing merits
challenge to indemnification provisions brought by similarly-
situated employees).° None has eluded the merits by adopting
the position of the panel in this case.
Most recently, in Wessel, the Tenth Circuit specifically
criticized and rejected the Ninth Circuit’s approach. There, the
* (...continued)
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). :
* Other than a perfunctory citation which fails to support the
proposition for which it is cited, the panel disregarded this circuit authority.
App. A at 4a, 298 F.3d at 846. In Knight, the district court “quickly
disposed of” the argument that employees “are not a proper party to sue on
a contract of indemnity.” Petition for a Writ of Certiorari, Anchorage Educ.
Ass'n v. Patterson, No. 97-1454, App. C at 47a. However, perhaps
recognizing Knight’s conclusion on the standing issue, the panel renders
Knight through the prism of Foster, which declared that the seizure of fees
is not an “adverse action” under Knight, 131 F.3d at 817. Foster, 268 F.3d
at 694.
-21-
court referred to the Ninth Circuit’s erroneous identification of
the injury, noting that:
[t]he alleged injury results from the indemnification
provision’s negation of any incentive for the City to
ensure that the Hudson requirements were followed.
The nonmembers’ entire argument presumes that, if
the City faced potential liability, it would have
prevented the fair share fees from being deducted
unconstitutionally from the nonmembers’ paychecks.
299 F.3d at 1199 n.3.
The Third Circuit addressed the challenge of similarly-
situated employees to an indemnification agreement in Hohe,
956 F.2d at 411-12. There, the district court rejected the
employees’ challenge to the indemnification provision,
simultaneously rejecting 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). 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 plaintiffs’ challenge to [the
statute].” 740 F. Supp. at 1099. In a footnote, the district court
went on to state that, “[flor the same reasons we also reach that
conclusion with respect to the indemnification clause in the
collective bargaining agreement.” Jd. at n.5.
On appeal, the nonmembers argued that the indemnification
clause “is void as against public policy.” 956 F.2d at 411. The
22 -
Third Circuit explicitly held that employees subject to a
monopoly bargaining agreement 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.” Jd. at 411.
Later, the Sixth Circuit declared such clauses void as
against public policy. Weaver, 970 F.2d at 1536-38.° That
decision is devoid of any suggestion that employees lack
standing to challenge indemnification provisions. The court
found it sufficient that 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.” Id. at 1538 (other citations
omitted).
Any federal court’s merits judgment presupposes
determination that the parties possess the requisite standing.
National Org. 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). It is “an indispensable part of the
plaintiff's case.” Lujan, 504 U.S. at 5€t. 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 Sixth Circuit earlier issued an unpublished decision declaring
such clauses void as against public policy. Cramer v. Matish, 924 F.2d 1057
(table), 1990 WL 169640 (6th Cir. 1990). There, no question was raised that
employees possess standing to challenge one of their terms and conditions
of employment.
5.
the law, and when it ceases to exist, the only function remaining
to the court is that of announcing the fact and dismissing the
cause.” Steel Co., 523 U.S. at 94 (quoting Ex parte McCardle,
7 Wall. 506, 514 (1868)); see also National Law Center on
Homelessness & Poverty v. Kantor, 91 F.3d 178, | 80 (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.
This 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.
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 AGREEMENTS.
A. The Conflict.
Like this case, Hudson was brought pursuant to § 1983.
475 US. at 298 n.3. 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, 431 U.S. at 237).
“{A]nalyz[ing] the problem from the perspective of the First
Amendment concerns,” 475 U.S. at 304 n.13, the Court
determined that there are three “constitutional requirements for
- 2.
the . . . collection of agency fees.” Jd. at 310. The Court
specifically stated that, in this context, both “the government
and union have a responsibility 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).
Under this articulation of government responsibility, a
public employer may not, without running afoul of
constitutional norms, seize agency fees from nonmember
employees on behalf of a union absent strict adherence to these
“constitutional requirements.” Hudson, 475 U.S. at 310. If it
does so, it injures the nonmembers. Nevertheless, the Ninth
Circuit has rejected this Court’s decisionmaking in three cases
that write government liability out of § 1983 law. App. A at 2a-
4a, 298 F.3d at 846; Foster, 268 F.3d at 694; Harik, 298 F.3d at
870.
Section 1 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). Its purpose is 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 1A Martin A. Schwartz & John E. Kirklin, Section 1983
Litigation: Claims and Defenses § 1.3 (3d ed. 1997). Its passage
was rooted in grave distrust of state and local officials to enforce
federal constitutional rights against—and perhaps in league
ye
with—powerful local interests committed to violation of the
federal constitutional rights possessed by individuals.
Thus, State and local governments bear non-delegable
responsibility for their “constitutional torts.” 42 U.S.C.
§§ 1983, 1988. The purpose of § 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). Similar purpose can be
inferred from the fee-shifting provisions of § 1988.
Surprisingly, the courts of appeals are in deep conflict over
whether labor unions may agree to indemnify public employers
‘against any liability arising out of the unlawful enforcement of
compulsory-unionism provisions. The Ninth Circuit has twice
eluded this issue, but four other courts of appeals have faced it,
three in this specific context.
Shortly after the decision in this case, the Tenth Circuit
declared such agreements void as against public policy. Wessel,
299 F.3d at 1197-99 (2-1 decision). Another Circuit, the Sixth,
agrees. Weaver, 970 F.2d at 1536-38 (holding that “[a] clause
that relieves the employer of all consequences for its failure to
assume and conscientiously carry out its cuties, 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, 697 F.2d at 73-75. Only the Third Circuit
has found such agreements permissible and enforceable. Hohe,
956 F.2d at 411-12.
When the Third Circuit first addressed this controversial
issue, the Sixth Circuit already had addressed it in its
-26-"—
unpublished Cramer opinion. Citing Stamford, Cramer
reversed a district court judgment and remanded the case,
directing the lower court to “strike [this] . . . void provision[]
from the policy.” Cramer, 1990 WL 169640 at *4. The
provision was void as against public policy because, “[uJnder
Hudson, the public employer, not the union, has the primary
duty to ensure that the plan is constitutionally valid.” “[C]lauses
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.”
Id. (citing Stamford, 697 F.2d at 73-75). Cramer concluded that
“[w]ith-out such a role, public employe[r]s would have no
incentive to fulfill their constitutional duties.” 1990 WL
169640 at *4 (emphasis added). Cramer thus held that a
union’s indemnification of a public employer in this context is
void as against public policy.
The Third Circuit declined to follow Cramer. Hohe, 956
F.2d at 411 (citing Cramer (other citation omitted)). Noting the
immunity from damages enjoyed by the Commonwealth and its
officers sued in their official capacity, the court rejected the
argument that indemnification encourages public employers to
violate employees’ constitutional rights by allowing escape from
liability for costs and attorneys’ fees pursuant to § 1988. The
court reasoned that “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 union has a significant incentive “to ensure that its
>
This distinguishes Hohe from the present case, where the
indemnification clause specifies that indemnification includes the
“reasonable cost of County’s attorney fees and costs.” App. A at 3a, 298
F.3d at 845.
~ 29s
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
indemnification clause is not required by the First Amendment.”
Id. at 412.
Shortly after Hohe, the Sixth Circuit decided Weaver,
adopting virtually every argument rejected by the Third Circuit.
The Sixth Circuit, carefully analyzing Stamford as well as Hohe,
concluded that the former was more persuasive than the latter.
The Sixth Circuit declared that “the indemnification agreement
in the present case was repugnant to public policy, and
therefore, invalid,” for two reasons. First, 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 (citations omitted). The Sixth Circuit concluded
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.” Id.
Most recently, the Tenth Circuit in Wessel addressed the
indemnification issue, agreeing with the Sixth Circuit. Wessel
rejected the district court’s argument that a public employer can
“do little, if anything, to deteci and prevent,”* Hudson
violations. 299 F.3d at 1197. The Tenth Circuit conscientiously
applied this Court’s Hudson mandate. It concluded that “if the
* That argument clearly is inapplicable here, where the County
determined before seizing fees that the union’s financial disclosure was
probably inadequate under Hudson.
«
Supreme Court had only been concerned with the union’s ability
to carry out the Hudson requirements, it would not have placed
the burden on both parties.” Wessel, 299 F.3d at 1198 (citing
475 U.S. at 307 n.20).
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 and Hudson, and when it
granted certiorari and vacated and remanded the prior panel’s
opinion.
. It is important in practice because the Court’s resolution of
this question will affect employees subject to large numbers 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 Gov’t Union Rev.
1, 23-28 (table) (Summer 1995). As the cases above illustrate,
public employee unions frequently assume the employer’s
liability in order to obtain and enforce forced-unionism
agreements. Indeed, California has recently amended the
MMBA to require that public employees indemnify local public
employers in the absence of a negotiated agreement. Cal. Gov’t
Code § 3502.5(b). There can be little doubt that the purpose is
to ensure that public employers seize fees even when they have
good cause to believe that a union has failed to comply with
Hudson’s requirements.
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
Baar TU MRT Ta
yer Tee sre pene, Menu re TIRT ET, P —— , :
- 29 «
by reason of, action taken. or not taken” pursuant “to the
collection and procedures for collection of fair share fees,” App.
A at 3a, 298 F.3d at 845, is important in principle, too. A
requirement that public employees financially support their
monopoly bargaining representative implicates fundamental
constitutional rights. Because the impairment 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 as to
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 embodied in § 1983,
which is to create a remedy “against those who representing a -
State in some capacity [a]re unable or unwilling to enforce a
state law.” Monroe v. Pape, 365 U.S. at 175-76.
This Court’s intervention is necessary to establish
conclusively nationwide that public employers, surrendering
their employees’ unfettered right to choose whether to support
their monopoly bargaining representative, cannot avoid their
“responsibility to provide procedures that facilitate a nonunion
employee’s ability to protect his rights.” Hudson, 475 U.S. at
307 n.20. Further, it is necessary to guarantee. that public
employers cannot, without economic consequence and 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.
so
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
October 2002
APPENDICES
APPENDIX A
OPINION OF THE UNITED STATES
COURT OF APPEALS FOR THE
NINTH CIRCUIT
1 August 2002
-la-
[298 F.3d 844]
United States Court of Appeals,
Ninth Circuit.
Steven PRESCOTT; Robert F. Berry; Cheryl L. Jones;
Karen Pierce; Christine M.
Turney, Plaintiffs-Appellants,
Vv.
COUNTY OF EL DORADO; Kathy Libicki; Local 1 El
Dorado County Employees
Association, Defendants-Appellees.
No. 01-15913.
Argued and Submitted April 9, 2002.
Filed Aug. 1, 2002.
[845] Before SCHROEDER, Chief Judge, B. FLETCHER
and KOZINSKI, Circuit Judges.
OPINION
SCHROEDER, Chief Judge.
This case was before us previously, when we held, inter alia,
that the plaintiffs lacked standing to challenge an
indemnification provision in a collective bargaining agreement.
Prescott v. County of El Dorado, 177 F.3d 1102, 1112 (9th
Cir.1999) (Prescott I). That provision requires the union to hold
the employer harmless from any liability arising out of the
collection of agency fees from non-union members of the
bargaining unit. Jd. Plaintiffs are non-union members of an
_
agency shop bargaining unit employed by defendant El Dorado
County, California.
The Supreme Court vacated our decision and remanded for
reconsideration of the standing issue in light of its decision in
Friends of the Earth, Inc. v. Laidlaw Environmental Services
(TOC), Inc., 528 U.S. 167, 120 S.Ct. 693, 145 L.Ed.2d 610
(2000). Prescott v. County of El Dorado, 528 U.S. 1111, 120
S.Ct. 929, 145 L.Ed.2d 807 (2000). We remanded in turn to
the district court. Prescott v. County of El Dorado, 204 F.3d
984-85 (9th Cir.2000) (Prescott IT ) (reinstating the original
opinion except as to standing and remanding to the district
court).
We now review the district court’s decision, on remand,
that the plaintiffs lack standing to challenge the indemnification
clause. We affirm, because there is no causal relationship
between the indemnification agreement and the injury plaintiffs
have suffered. The indemnification clause requires the union to
defend and indemnify the employer against all claims arising out
of the employer’s collection of agency fees. The only cognizable
injury the plaintiffs allege is that the union did not give them
adequate notice of the basis of the fees. Chicago Teachers Union,
Local No. 1 v. Hudson, 475 U.S. 292, 310, 106 S.Ct. 1066, 89
L.Ed.2d 232 (1986).
The facts and the background of the litigation are more
fully explained in our earlier opinion. Prescott I, 177 F.3d at
1104-05. Plaintiffs sued in federal court alleging that the process
by which the agency fees were deducted from their paychecks
violated the standards enunciated by the Supreme Court in
Hudson. They also challenged the validity, on public policy
-3a-
grounds, of the indemnification clause. Jd. Only the plaintiffs’
challenge to the indemnification clause remains at issue in this
appeal. The indemnification clause provides:
Local 1 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 collection 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 [sic] time as well.
Plaintiffs asked the district court to hold that the clause is
contrary to public policy and therefore unenforceable. Plaintiffs
[846]did not show, however, that the clause itself has caused
them any injury. The only injury they alleged was that the union
failed to comply with the requirements of Hudson to provide
notice of the basis of agency fees that plaintiffs must pay as
members of an agency shop and to maintain an adequate
portion of collected fees in escrow pending fee arbitration. See
Prescott I, 177 F.3d at 1104-05.
In order to have standing, a plaintiff must establish an
injury in fact, causation, and redressability. Laidlaw, 528 U.S. at
180-81, 120 S.Ct. 693. Plaintiffs maintain that there is a causal
relationship between the Hudson injury and the indemnification
clause. They contend that because the Hudson notice
requirement is triggered by the collective bargaining agreement,
and because the employer has stipulated that it would not have
- 4a.
entered into the collective bargaining agreement unless it
contained the indemnification clause, the indemnification clause
is the legal cause of the inadequate Hudson notice.
The district court correctly ruled, however, that this causal
relationship is too remote. The injury must be “fairly traceable
to the challenged action of the defendant.” Laidlaw, 528 U.S. at
180, 120 S.Ct. 693. It cannot be the result of the “independent
action of some third party not before the court.” Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119
L.Ed.2d 351 (1992) (quoting Simon v. E. Ky. Welfare Rights
Org., 426 U.S. 26, 41-42, 96 S.Ct. 1917, 48 L.Ed.2d 450
(1976).) Plaintiffs’ injury was not caused by the employer’s
entry into the collective bargaining agreement; it was caused by
the union’s inadequate notice of expenditures on which the
agency fees were based. Indeed, in this circuit, the employer has
no responsibility for ensuring the adequacy of the notice; that
is the union’s responsibility. Foster v. Mahdestan, 268 F.3d 689,
694 (9th Cir.2001); Knight v. Kenai Peninsula Borough Sch.
Dist., 131 F.3d 807, 817 (9th Cir.1997). The challenged
indemnification clause upon which the employer insisted caused
neither the union to furnish, nor the plaintiffs to receive,
inadequate notice.
In addition, and as a corollary, the district court also
correctly held that the plaintiffs have not met the redressability
requirement for standing. Redressability requires that it be
“likely, as opposed to merely speculative, that the injury will be
redressed by a favorable decision.” Laidlaw, 528 U.S. at 181,
120 S.Ct. 693. The remedy the plaintiffs seek, invalidation of
the indemnification clause, does not compensate plaintiffs for
past violations of Hudson, nor does it prevent future violations.
- 5a-
Cf. Latdlaw, 528 U.S. at 185-86, 120 S.Ct. 693 (“a sanction that
effectively abates that conduct and prevents its recurrence
provides a form of redress”).
Plaintiffs also contend that the district court failed to
comply with our mandate to require the union to retain a larger
percentage of agency fees in escrow. See Prescott I, 177 F.3d at
1111. After our prior remand, the district court entered an
order requiring ten percent of collected fees to be held in
escrow. This complied with our directive. The plaintiffs
nevertheless complain that the order was not expressly
embodied in the district court’s order resolving the standing
issue, its final order in the case. That order, however, explains
that the court had already ordered the escrow, and that its order
remained in full effect. The final judgment entered thus
encompassed all the interlocutory rulings of the court, including
the escrow order. See, ¢.g., City of Los Angeles v. Santa Monica
Baykeeper, 254 F.3d 882, 889 n. 1 (9th Cir.2001) (interlocutory
orders merge into the final judgment and [847]may be
challenged in appeal from that judgment).
AFFIRMED.
APPENDIX B
FINAL JUDGMENT OF THE
UNITED STATES DISTRICT COURT
FOR THE EASTERN
DISTRICT OF CALIFORNIA
17 April 2001
- 6a -
[Clerk’s stamp omitted in printing]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
JUDGMENT IN A CIVIL CASE
STEVEN H. PRESCOTT, et al.
v. CASE NUMBER:
CIV S-95-1859 LKK JEM
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 ENTER-
ED IN FAVOR OF DEFENDANTS AND
AGAINST PLAINTIFFS IN ACCORDANCE
WITH THE COURT’S ORDER OF APRIL
17, 2001.
Jack L. Wagner
Clerk of the Court
ENTERED: April 17, 2001
by: /s/
A. Sourvannarath, Deputy Clerk
APPENDIX C
ORDER DENYING
PLAINTIFFS’ MOTION FOR
SUMMARY JUDGMENT IN THE
UNITED STATES DISTRICT COURT
FOR THE EASTERN
DISTRICT OF CALIFORNIA
17 April 2001
- Ja-
[Clerk’s stamp omitted in printing]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
STEVEN H. PRESCOTT, et al.,
Plaintiffs, NO. CIV. S-95-1859
LKK/JFM
ORDER
COUNTY OF EL DORADO, et al.,
Defendants.
/
The plaintiffs, non-union employees of El Dorado County
(the “County”), sued the El Dorado County Employees
Association (“EDCEA” or the “Union”), as a local affiliate of
the Professional Employees Union, Local #1 (“PEU”), for
failing to provide them proper notice and _ procedural
requirements with the collection of its agency fee in violation of
the First, Fifth and Fourteenth Amendments to the United
States Constitution. This matter comes before the court on
cross-motions for summary judgment. I resolve the matter
based on the papers and pleadings filed herein and after oral
argument.
PROCEDURAL HISTORY
On February 26, 1996, 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
- 8a-
of El Dorado, 915 F. Supp. (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. Id. 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 major
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 provide a breakdown of the expenditures for
each local affiliate because 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.
- 9a -
The parties then cross-moved for summary judgment.
Plaintiffs continued to maintain that the notice and procedures
violated the First, Fifth and Fourteenth Amendments because
they (1) did not contain audited financial disclosures of the
expenditures of EDCEA and affiliated labor organizations
receiving money from EDCEA, (2) utilized an unconstitutional
standard of chargeability, and (3) contained unduly burdensome
procedures for challenging the fee. Plaintiffs sought 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 requested a declaratory
judgment that the indemnification agreement between the
County and EDCEA was void as against public policy.
Defendants argued that the court should grant them
summary judgment primarily for the reasons discussed in the
court’s preliminary injunction order. With regard to the
“verification by an independent auditor” required by Hudson,
defendants argued that an accountant’s review sufficed because
it provided 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 moved to
dissolve the preliminary injunction on the basis that the 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.
In consideration of the motions for summary judgement,
the court held that defendants’ “accounting review” satisfied the
- 10a -
constitutional requirements set forth in Hudson. See Order filed
January 26, 1998 at 12. The court also reaffirmed its holding
that a 4% escrow amount was sufficient, see id. at 13, and held
that the local union presumption was valid under Hudson. See
id. at 16. The court then made permanent the preliminary
injunction issued on February 26, 1996. See id. at 17. Finally,
the court dismissed plaintiffs’ challenge to the indemnity clause
between the Union and the district because the plaintiffs had
failed to demonstrate standing to pursue such a claim. See id. at
19.
On appeal, the Ninth Circuit reversed in part and affirmed
in part this court’s order. In relevant part, the court affirmed
this court’s holding that the plaintiffs lacked standing to
challenge the indemnity agreement. See Prescott v. El Dorado,
177 F.3d 1102, 1111-1112 (9" Cir. 1999) (“Prescott IT”). The
court noted that plaintiffs could not show any connection
between the indemnity agreement and their injury and that they
could not demonstrate that a favorable decision would
ameliorate their injury or prevent future recurrence of the
violation. See id. at 1112. The Supreme Court granted
certiorari, vacated the Ninth Circuit’s judgment and remanded
the case for further consideration in light of Friends of the Earth
v. Laidlaw, 528 U.S. 167 (2000). The remaining issue in this
lawsuit is the plaintiffs’ challenge to the indemnity agreement.’
' The court disposed of the other issues remanded by the Circuit
in Prescott I. See Order filed November 17, 1999. Specifically, the
court held that the Union must hold 10% of the nonmembers’ fees in
escrow. Defendants complied with the other order issued by the
Ninth Circuit when it completed an independent audit of the PEU.
(continued...)
-lla-
II.
THE FACTS’
The “Union Rights” article of the Collective Bargaining
Agreement between the County and the EDCEA contains a
“hold harmless” section in which the EDCEA indemnifies and
holds the County harmless against any suit for actions taken
under the “Union Rights” article. In pertinent part, the article
provides:
Local 1 shall defend, indemnify and hold harmless,
release and save the County and its agents and
employees against any and all claims, demands, suits,
orders, judgments 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 not limited to the collection and procedure 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.
Pursuant to the “Hold Harmless” section, the EDCEA
attorneys in this action have entered an appearance on behalf of,
' (...continued )
Contrary to plaintiffs’ suggestion, the court need not enter declaratory
or injunctive relief for the plaintiffs on those issues.
? The facts as stated herein are considered undisputed for the
purposes of summary judgment. Ifa fact objected to by an opposing
party is included in this section, then the court has overruled that
objection.
- 12a-
and are providing representation to defendants County of El
Dorado and Kathy Libicki (“the County Defendants”). The
entire compensation paid to counsel for the County Defendants
for the representation they are providing in this case has been
and is being paid for by the EDCEA. The County Defendants
required inclusion of the “Hold Harmless” section as part of the
“Union Rights” article of the Memorandum of Understanding.
Absent the hold harmless clause, the County Defendants would
not have entered into or enforced an agreement including a
provision requiring union membership, or in lieu of union
membership, payment of an agency fee.
III.
SUMMARY JUDGMENT STANDARDS
UNDER FED. R. CIV. P. 56
Summary judgment is appropriate when it is demonstrated
that there exists no genuine issue as to any material fact, and
that the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56 (c); See also Adickes v. S.H. Kress & Co.,
398 U.S. 144, 157 (1970); Secor Limited v. Cetus Corp., 51
F.3d 848, 853 (9" Cir 1995).
Under summary judgment practice, the moving party
[A]lways bears the initial responsibility of informing
the district court of the basis for its motion, and
identifying those portions of “the pleadings,
depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,”
which it believes demonstrated the absence of a
genuine issue of material fact.
- 13a-
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[W]here
the nonmoving party will bear the burden of proof at trial on a
dispositive issue, a summary judgment motion may properly be
made in reliance solely on the ‘pleadings, depositions, answers
to interrogatories, and admissions on file.” Id. Indeed,
summary judgment should be entered, after adequate time for
discovery and upon motion, against a party who fails to make a
showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear
the burden of proof at trial. See id. at 322. “[A] complete
failure of proof concerning an essential element of the nonmov-
ing party’s case necessarily renders all other facts immaterial.”
Id. In such a circumstance, summary judgment should be
granted, “so long as whatever is before the district court
demonstrates that the standard for entry of summary judgment,
as set forth in Rule 56(c), is satisfied.” Id. at 323.
If the moving party meets its initial responsibility, the
burden then shifts to the opposing party to establish that a
genuine issue as to any material fact actually does exist. Matsu-
' _Co. v. Zeni io Corp., 475 U.S. 574,
586 (1986); See also First Natl Bank of Ariz. v. Cities Serv.
Co., 391 U.S. 253, 288-89 (1968); Secor Limited, 51 F.3d at
853.
In attempting to establish the existence of this factual
dispute, the opposing party may not rely upon the denials of its
pleadings, but is required to tender evidence of specific facts in
the form of affidavits, and/or admissible discovery material, in
support of its contention that the dispute exists. Fed. R. Civ. P.
56(e); Matsushita, 475 U.S. at 586 n.11; See also First Natl
- 14a-
Bank, 391 U.S. at 289; Rand v. Rowland, 154 F.3d 952, 954
(9" Cir. 1998). The opposing party must demonstrate that the
fact in contention is material, i.e., a fact that might affect the
outcome of the suit under the governing law, Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Owens v.
Local No. 169, Assoc. of Western Pulp and Paper Workers, 971
F.2d 347, 355 (9" Cir. 1992) (quoting T.W. Elec. Serv., Inc.
v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9" Cir.
1987), and that the dispute is genuine, i.e., the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party, Anderson, 477 U.S. 248-49; see also Cline v. Industrial
Maintenance Engineering & Contracting Co., 200 F.3d 1223,
1228 (9* Cir. 1999).
In the endeavor to establish the existence of a factual
dispute, the opposing party need not establish a material issue
of fact conclusively in its favor. It is sufficient that “the claimed
factual dispute be shown to require a jury or judge to resolve the
parties’ differing versions of the truth at trial.” First Natl Bank,
391 U.S. at 290; See also T.W. Elec. Serv., 809 F.2d at 631.
Thus, the “purpose of summary judgment is to ‘pierce the
pleadings and to assess the proof in order to see whether there
is a genuine need for trial.” Matsushita, 475 U.S. at 587
(quoting Fed. R. Civ. P. 56(e) advisory committee’s note on
1963 amendments); see also International Union of Bricklayers
& Allied Craftsman Local Union No. 20 v. Martin Jaska, Inc.,
752 F.2d 1401, 1405 (9™ Cir. 1985).
In resolving the summary judgment motion, the court
examines the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, ifany. Rule
56(c); See also In re Citric Acid Litigation, 191 F.3d 1090,
- 1Sa-
1093 (9" Cir. 1999). The evidence of the opposing party is to
be believed, see Anderson, 477 U.S. at 255, and all reasonable
inferences that may be drawn from the facts placed before the
court must be drawn in favor of the opposing party, see Matsu-
shita, 475 U.S. at 587 (citing United States v. Diebold, Inc.,
369 U.S. 654, 655 (1962) (per curiam)); See also Headwaters
Forest Defense v. County of Humboldt, 211 F.3d 1121, 1132
(9" Cir. 2000). Nevertheless, inferences are not drawn out of
the air, and it is the opposing party’s obligation to produce a
factual predicate from which the inference may be drawn. See
Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45
(E.D. Cal. 1985), afPd, 810 F.2d 898, 902 (9" Cir. 1987).
Finally, to demonstrate a genuine issue, the opposing party
“must do more than simply show that there is some
metaphysical doubt as to the material facts. .. . Where the
record taken as a whole could not lead a rational trier of fact to
find for the nonmoving party, there is no ‘genuine issue for
trial.” Matsushita, 475 U.S. at 587 (citation omitted).
IV.
STANDING
Plaintiffs seek an order declaring the Union’s indemnity
agreement with the County void as a matter of public policy.
Specifically, they maintain that the indemnity agreement
removes incentive for the County to ensure that the Union
abides by the requirements of Hudson. Before addressing the
merits of their argument, however, I must first determine
whether they have standing to challenge the agreement.
- l6a-
Standing requires a showing that plaintiff has “personally
suffered some actual or threatened injury as a result of the
putatively illegal conduct of the defendant.” Scott v. Rosenberg,
702 F.2d. 1263, 1267 (9 Cir. 1993). Plaintiff must also
demonstrate “that the injury can be fairly traced to the
challenged action, [and that it] is likely to be redressed by a
favorable decision.” Id. (quoting Simon v. Eastern Kentucky
Welfare Rights Org., 426 U.S. 26, 38 (1976)); see also
Preferred Communications, Inc. v. City of Los Angeles, 754
F.2d 1396, 1403, (9" Cir. 1985).
Plaintiffs have failed to demonstrate how the remedy they
seek will prevent any future violation of their rights under
Hudson. Although the plaintiffs may have suffered a violation
of the standards enunciated in Hudson, that injury resulted from
the Union’s conduct, and, notwithstanding the defendants’
stipulation, the hold harmless agreement is a cause of the injury
only in the most indirect fashion.’ In this motion, plaintiffs do
not seek to make themselves whole for this past violation.
Instead, the plaintiffs seek to strike the indemnity agreement in
order to prevent the Union from using their dues for political
and ideological causes with which they disagree, and which are
said to be unrelated to the Union’s duty as collective bargaining
agent. See Hudson, 475 U.S. at 298. Even if this court
ultimately struck the indemnity agreement it would not follow
that plaintiffs’ injury would be avoided. Rather, whether or not
the Union will violate plaintiffs’ right under Hudson will turn
> While plaintiffs stipulation makes no sense factually or legally,
the court accepts it for the purpose of this motion. Nonetheless, the
stipulation does not resolve the issue of whether the order sought will
provide relief.
- 17a-
on the Union’s conduct independent of the indemnity
agreement. Therefore, because plaintiffs cannot connect a
favorable judgment in this case with receiving relief from the
injury they have failed to demonstrate standing. See, e.g., Simon
v. Eastern Ken Welfare Rights Organization, 426 U.S. 26
(1976) (standing denied because it was speculative as to
whether the hospitals involved would change their polices to
provide for better treatment of the indigent if the plaintiffs
successfully invalidated the IRS code which only required the
hospitals to provide emergency care for the indigent); Warth v.
Seldin, 422 U.S. 490 (1975) (denying standing to challenge
zoning regulations because there was no showing that plaintiffs
would personally benefit by obtaining housing if the court
found the regulation unconsttutional); Linda R.S. v. Richard
D., 410 U.S. 614, 618 (1973) (“[Prevailing on the merits]
would result in jailing of the child’s father. The prospect that
prosecution will . . . result in payment of support [which would
remedy the alleged injury] can, at best, be termed only
speculative.”)
The Court’s holding in Friends of Earth Inc. v. Laidlaw,
does not affect this conclusion. There, the court held that
environmental groups had standing to seek relief under the
Clean Water Act when they could demonstrate that the alleged
violations of a polluter has caused their members to refrain from
activity they had previously and would have otherwise
undertaken in the affected area. 528 U.S. at 183. Although the
injury sutfered by the organization members in Friends of Earth
Inc. could have been redressed by a favorable decision, as
explained above, the same is not true in this case with respect to
plaintiffs’ challenge to a third-party indemnity agreement.
- 18a -
V.
ORDERS
Accordingly, defendants’ motion for summary judgment is
GRANTED and the Clerk is directed to CLOSE the case.
IT IS SO ORDERED.
DATED: April 12, 2001.
Ls/
LAWRENCE K. KARLTON
Senior Judge
United States District Court
APPENDIX D
DECISION OF THE UNITED STATES
COURT OF APPEALS FOR THE
NINTH CIRCUIT
2 March 2000
- 19a-
[204 F.3d 984]
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.
March 2, 2000.
W. James Young, National Right to Work Legal Defense
Foundation, Inc., Springfield, Virginia, for the plaintiff-
-appellant.
Fred J. MHiestand, Sacramento, California, for the
defendant-appellee.
On Remand from the United States Supreme Court
Before: FERNANDEZ and McCKEOWN, Circuit Judges, and
WEINER,’ District Judge.
! Honorable Charles R. Weiner, Senior United States District
Judge for the Eastern District of Pennsylvania, sitting by designation.
- 20a -
Steven Prescott,” an employee of the County of El Dorado,
California, appealed the 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. We
affirmed the district court in part, reversed in part, and
remanded. See Prescott v. County of El Dorado, 177 F.3d 1102
(9th Cir.1999) (Prescott I ).
Prescott sought certiorari relief from the United States
Supreme Court and it, without further specification, granted
certiorari and then vacated and remanded our decision for
further consideration’ in light of its recent holding in Friends of
the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S.
167, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000). Friends of the
Earth is a standing case, and the only portion of our decision
that dealt with standing was part E, which discussed the issue of
indemnification. See Prescott I, 177 F.3d at 1111-12. In that
portion, we affirmed the district court’s determination that
Prescott lacked standing to object to a contract provision
between the El Dorado County Employees Association, Local
No. 1 and the County, pursuant to which the former agreed to
indemnify the latter “from any liability which arises out of
deductions of fees from employee wages, and to provide a
defense against any claims.” Jd. at 1111.
? Robert F. Barry, Cheryl L. Jones, Karen Pierce and Christine
M. Turney also appeal. What we hold regarding Prescott applies
equally to them.
3 See Prescott v. El Dorado, _U.S.__, 120 S. Ct. 929, 145 L.
Ed.2d 807 (2000).
-2la-
Because the district court should address the standing issue
in the first instance, we now return the issue to that court for
any necessary further development of the facts and for its
consideration of Friends of the Earth in that respect under the
facts of this case.
We reinstate our opinion in Prescott I, with the exception of
part E. That part shall remain vacated. We also reinstate the
concurring opinion. Moreover, we vacate the district court’s
standing determination, which was discussed in part E, and
remand that issue for further consideration.
[985]Therefore, in light of Prescott I, as modified, we
ORDER that the district court’s decision is AFFIRMED in
part, REVERSED in part, VACATED in part, and
REMANDED.
APPENDIX E
DECISION OF THE UNITED STATES
COURT OF APPEALS FOR THE
NINTH CIRCUIT
12 May 1999
[177 F.3d 1102]
Steven PRESCOTT; Robert F. Berry; Cheryl L. Jones;
Karen Pierce; Christine M. Turney, Plaintiffs-Appellants,
- 22a -
Vv.
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.
* eH
[1103]Before: FERNANDEZ and McKEOWN, Circuit
Judges, and WEINER,’ District Judge.
Opinion by Judge FERNANDEZ; Concurrence by Judge
McKEOWN.
[1104]FERNANDEZ, Circuit Judge:
1 Honorable Charles R. Weiner, Senior United States District
Judge for the Eastern District of Pennsylvania, sitting by designation.
- 23a -
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 the purpose of supporting the El Dorado County
Employees Association, 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 tair-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 # 1 (PEU), and all dues
for the EDCEA are paid to PEU. Members dues amount to 1
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,
? Robert E. Barry, Cheryl L. Jones, Karen Pierce and Christine
M. Turney also appeal. What we hold regarding Prescott applies
equally to them.
- 24a -
which EDCEA receives and controls. EDCEA has 570 members
and 114 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 fee 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 defray 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 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 there-after.”
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
- 25a -
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. Organizing 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 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
> 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.”
- 26a -
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 for
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.” Id. 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).
* 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.
- 27a -
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 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 agreements, [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.
International 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).
- 28a -
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.” Id. 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:
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.
- 29a -
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.” Id. 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 nonmember 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.
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,
eT ae
- 30a -
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]management
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. Id. 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. Id. 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. id. 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, “[ljeaving the
nonunion employees in the dark about the source of the figure
for the agency fee—and requiring them to object in order to
receive information—does not adequately protect” 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
-3la-
verification by an independent auditor.” Id. 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 accouniant’s
verified breakdown of expenditures....” Id. at 310, 106 S.Ct. at
1077. And yet again the Court spoke of a determination made
“on the basis of the independent audit,” and stated that an
escrow figure “must itself be independently verified.” Id. 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,
__US.__, 118 S.Ct. 2060, 141 L.Ed.2d138 (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.” Jd. 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.” Id. We held, therefore, that the union’s
notice did not satisfy Hudson. The holdings of other courts are
- 32a-
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 expenses.”); Andrews p.
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 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.5
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 I, 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
a)
° We express no opinion on the exact type of audit required
under Hudson.
- 33a -
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 PEU) 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 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
PE
- 34a -
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.” Id. at
411.
Nor can it be said that the amounts will always be so
insignificant 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 expenditures, 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.
- 35a-
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.
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. Id. at 310, 106 S.Ct. at 1077-78. Prescott
suggests that we have already decided that the remedy #s
restitution. We have done no such thing.
Prescott seeks to support his position by pointing to our
decision in Dean v. Trans World Atrlines, 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. Id. 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
Hee A aE Ayer At em hates yan RAR AN RE EY Ys
- 36a -
unilateral reduction of fees.” Id. 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.” Id. 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.
In our opinion, the Seventh Circuit got it just right when
i 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 venefits 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....
- 37a-
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. r
C. The Escrow
The district court determined that the escrow cushion
created by PEU’s procedures was sufficient because it appeared
that nonchargeable 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.
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
qos:
- 38a -
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 substantiation 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 improper 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 allocations, 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 persuasion because it is
seeking to mulct an unwilling person for fees and must show its
- 39a -
entitlement to them. See Lehnert v. Ferris Faculty Ass’n., 500
U.S. 507, 524, 111 S.Ct. 1950, 1962, 114 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
insouciance; it has, instead, misunderstood the financial
statement requirements which we now make plain.
° 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.
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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.
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.
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
-4la-
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.” Id.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. Id.
Here, the issue has not been waived, but Prescott hurdled
that trench only to run into a standing revetment. In order to
meet 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
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- 42a -
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), cert. denied, US. _,119S.Ct. 1802,
143. L.Ed.2d 1007 (1999) - lo. 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.
- 43a -
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, 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 costs 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
a —
” It should be noted that in Hobe the court suggested that there
was standing, but did not decide the issue. Jd. at 411.
- 44a -
philippics—the nonmember employees 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 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 chargeable 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,
- 45a -
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, EDCEA, cannot rely on the parent
union’s (PEU’s) constitutionally insufficient data, we need not
decide the issue of the constitutionality 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
unavoidable.... 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 constitutional 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
- 46a -
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 F
FINAL JUDGMENT IN A CIVIL
CASE ENTERED BY THE UNITED STATES
DISTRICT COURT FOR THE
EASTERN DISTRICT OF CALIFORNIA
1 April 1998
- 47a -
[Clerk’s stamp omitted in printing]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
JUDGMENT IN A CIVIL CASE
STEVEN H PRESCOTT
v. CASE NUMBER: 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
ACCORDANCE 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 G
OPINION AND ORDER OF THE
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
26 January 1998
- 48a -
[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 E] Dorado County
(the “County”), challenge the right of the El Dorado County
Employees Assoctation (“EDCEA” or the “Union”), as a local
affiliate of the Professional Employees Union, Local #1
(“PEU”), to collect fees pursuant to the agency shop provisions
of the collective bargaining agreement entered into betwecn 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. Id. 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
- 49a -
PEU’s major 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 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
accountants “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
- 50a -
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 preliminary injunction order. With regard to the
“verification by an independent 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 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 standards for resolution of a matter on summary
judgment are well-known and need not be repeated here. See, ¢.g.,
Clark v. County of Placer, 923 F. Supp. 1278, 1281-82, (E.D. Cal.
1996).
-5la-
The High court has held that there are “constitutional
requirements 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 in dispute 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.
Id; see also, ¢.g., Damiano v. Matish, 830 F.2d 1363, 1370 (6
Cir. 1987) (disclosure 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 nonmembers” 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 expenditures.” Id. Nonetheless, the
Court decreed that “adequate disclosure surely would include
- 52a -
the major categories of expenses, as well as verification by an
independent auditor.” Id.
Clearly the Courts footnote recognizing “practical
considerations,” 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.
- 53a-
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 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 independent auditor. . . [w]Jithin 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 performing the “verification”
must perform an audit as that term is defined by the accounting
profession.
? 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.
* Luther, the Union’s accountant testified that the phrase
“verification by an independent auditor” within the accounting
profession “deals with the preperation of some form of sudised
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.
- 54a -
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 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
* 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.
As-'n., 887 F.2d 678, 681 (6" Cir. 1989) (Auditing Standard No. 29
proper reporting mechanism and constitutes independent audit
(continued...)
Cait
- 55a -
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 purpose 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 understands the evidence before it, a
> (...continued)
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, 784 F. 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 1 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).
° 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 the allocation of expenditures between
chargeable and nonchargeable categories, I 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
(continued...)
- 56a -
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 1
12. An audit “is concerned with whether the recorded
information properly reflects the economic events that occurred
during the accounting period.” Id. at 11 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.” Id.
at 1 14.° Defendants’ expert, John D. Moyle, agrees that an
® (...continued )
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 9 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.
(continued...)
- 57a -
audit tests evidentiary matter to provide a reasonable assurance
that records are accurate, while a review assesses whether the
material is presented according to accepted classifications. See,
supra, 0.6.”
PEU’s accountant’s explanation of the auditing and review
functions confirms the distinctions highlighted above. Luther
testified that the difference between a review and an audit is that
an audit would normally include the observation of physical
inventory and analysis of documents, see Luther Depo. at 12-13,
while a review would involve discussions with personnel and
analysis of documents to insure that the expenditures were
® (...continued)
See Suppl. Ross Decl. at 1 8 (citing Alvin A. Arens, et. al., Auditing,
An Integrated Approach (5" ed.); Kell, Boynton, & Ziegler, Modern
Auditing (3™ ed.), Chapter 2, p. 46).
” Moyle further explains that an “auditor performs tests of the
accounting systems and records to obtain sufficient competent
evidential matter to afford a reasonable basis for an opinion regarding
whether the financial statements, are, in all material respects, fairly
presented in accordance with GAAP.” See Moyle Decl. at 112. In the
next paragraph of his declaration, Moyle states that the purpose of an
auditor’s opinion is to provide “reasonable assurance”. Id. at 1 13.
This purpose indicates that the focus of the audit is on testing the
reliability of the records. In contrast, Moyle explains that the review
is limited to “negative assurances” that nothing came to the CPA’s
attention that would indicate that the management's assertions are not
presented in accordance with the established criteria. Id. at 1 16.
Since a review is based on “negative assurances,” it will approve of the
financial statements so long as they are presented according to
accepted classifications; there will be no independent verification that
the presentation is an accurate reflection of reality.
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properly classified. Id. at 24-26.'° Although Luther asserts that
PEU’s final review statement reflected changes made to the
information as provided by the client, id. at 63, his description
of those changes demonstrates that they revolved around
classification of statements."
Defendants contend that a review is sufficient under Hudson
given that under accounting standards the fair presentation of
financial statements is the responsibility of the entities’
management. Moyle Decl. at 1 10. Once again, it is unclear to
the court why accounting standards should govern.
Nevertheless, the contention is consistent with Hudson’s
requirement \that the Union provide the categories of
expenditure with the independent auditor verifying them.”
© Luther testified that he received expenditures information,
receipts, and specific coding to asset or liability categories from PEU.
See Luther Depo. at 55. He then produced a ledger which contained
a separate account for each category of assets, liabilities, and equity.
Id. at 37-38. Luther explains that the categories he created do not
necessarily reflect the internal accounting system of the union, but are
similar to it. Id. at 41. Luther’s working documents were based on
information and documentation provided by the client, and sometimes
information specifically requested by the accountant. Id..at 11 46, 48.
"For example, Luther testified that if he came across a check
during a review which appeared to be submitted by the client in the
wrong category, he would normally recommend that it be reclassified
into the proper category. See Luther Depo. at 50. Luther then
testified that if the client refused to reclassify, and if the-failure was
material, he might not issue the review. Id. at 50-51.
12 As this court understands the evidence, a review verifies the
(continued...)
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Moreover, a conclusion that a review satisfies Hudson is
consistent with its emphasis on practicalities. See Hudson, 475
U.S. at 307, n.18. In his deposition, PEU’s accountant
estimates that he billed PEU between $2,500 and $3,000 for
the reviewed financial statement for the 1994 year. See Luther
Depo. at 20. Based on his personal experience, Luther testified
that an audit coverisy the same scope as the review would costs
between $12,000 and $15,000. Id. at 22 & 74. He also
testified that it would cost as much as $45,000 to do an audit of
all units. Id.
While to say the least the matter is not free from doubt, the
court concludes on the basis of the above considerations that a
review satisfies the Hudson purpose. Accordingly, no higher
verification is required, although it may be desirabie.”*
12 (...continued) |
classifications made by the union. The ordinary meaning of
“classification” is “the act or a method of distributing into groups,
classes, or families: an assigning to a proper class.” The ordinary
meaning of “classify” is “to group or segregate in classes that have
systematic relations usu. founded on common properties or characters:
sort.” See Webster's Dictionary, at 417, col. 1. Thus, the act of
classifying, the process being verified by a review, appears to be what
the High Court required the union to provide verification of through
an independent auditor.
‘8 It must be kept in mind that what is being considered is
constitutional minima, and not what might be the most efficacious
process. Although aspects of Hudson may suggest otherwise, neither
this court, nor the Supreme Court for that matter, is in the business of
legislating.
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Accordingly, summary judgment will be entered on behalf of
defendants as to this claim.
II.
SUFFICIENCY OF THE ESCROW
The court in its previous order explained why it believed
that plaintiffs’ challenge to the escrow amount does not lie.
Plaintiff challenges that explanation on the basis that the court
has failed to apply rigorous First Amendment standards. As I
explained there, however, the language of the First Amendment
hardly commands any of the procedures developed in Hudson.
Rather, the procedures mandated by the Supreme Court must
be viewed as providing a prophylactic border surrounding First
Amendment values. As such, however, they must be balanced
against the competing interests of fairness and labor peace
embodied in the agency shop. Abood v. Detroit Bd. of Education,
431 U.S. 209, 218 (1977). In resolving these competing values
the High Court requires unions to escrow “the amounts
reasonably in dispute while such challenges are pending.”
Hudson, 475 U.S. at 310. In the matter at bar, this court
continues to find that plaintiffs have not demonstrated that an
amount greater than 4% is in dispute. Accordingly, injunctive
relief will not be granted, and defendants’ motion for summary
judgment will be granted."*
‘4 The court wishes to emphasize that it is not finding that 4%
in fact represents the amount of nonchargeable expenditures. Indeed,
defendants’ counsel’s acknowledgment during oral argument that the
union did not keep records of the labor and expenditures involved for
many of its political activities raises substantial questions as to the
(continued...)
- 6la-
III.
LOCAL UNION PRESUMPTION
In its preliminary injunction order the court relied on the
local union presumption. Plaintiffs claim that the decisions
cited by the court to support the local union presumption have
been superseded. See Lowary v. Lexington Local Bd. of Educ.
(“Lowary IT’), 903 F.2d 422, 430 (6 Cir. 1990), superseding
Gillespie v. Willard City Board of Education, 700 F. Supp. 898,
903 (N.D. Ohio 1987); Hohe v. Casey, 956 F.2d at 399, 409-11
(3™ Cir. 1992), superseding Hohe v. Casey, 695 F. Supp. 814,
819 (M.D. Pa. 1988), afPd, 868 F.2d 69 (3™ Cir. 1989), cert.
denied, 493 U.S. 848 (1989). Plaintiffs also contend that
Tierney v. City of Toledo, 917 F.2d 927, 937 (6 Cir. 1990)
rejects the local union presumption. They then contend that
this court should follow suit. For the reasons explained below,
the court declines to do so.
The Tierney decision is inapposite. There, the Sixth Circuit
addressed the failure of a local union to explain how the dues
paid to the international union were spent. Here, plaintiffs
challenge the Union’s alleged failure to account for the expendi-
tures of its local affiliates. Thus, the reluctance to invoke a
presumption in Tierney makes sense for the same reason that the
efficiency of invoking it here also makes sense: the local union
is presumed to spend less on nonrepresentational activities.
Moreover, since Hudson specifically required local unions to
4 (...continued)
manner of determining the escrow figure. The issue, however, is what
is in contention, and in that regard the evidence does not demonstrate
that more than 4% is in contention.
- 62a -
account for their payments to state and national labor
organizations, see Hudson, 475 U.S. at 307, n.18, the Sixth
Circuit had no choice but to invalidate the notice.
Lowary IT is also inapposite. As this court observed in the
preliminary injunction opinion, Lowary II rejected the
presumption in the context of an arbitration hearing. Since in
an arbitration, “the nonmember’s burden is simply to make his
objection known,” see Lowary II, 903 F.2d at 431, it was
impermissible to place an additional burden on the nonmember,
during arbitration, to rebut a presumption that the union spent
its money properly. Jd. Unlike an arbitration, the presumption
here does not affect the nonmembers’ ability to prevail at arbi-
tration, nor would it appear to affect his or her ability to make
a decision as to whether to challenge the fee.
Plaintiff is correct about the Third Circuit’s rejection of the
local union presumption. See Hohe v. Casey, 956 F.2d at 409-
11. Even if Hohe were binding, however, it would not be
dispositive under the facts at bar. Hohe did not categorically
reject the local union presumption; rather, it held that the union
could not assume that local expenditures mirrored state
expenditures when the notice itself offered no reason or
explanation of why such an assumption was justified. Id. at
410. The Hohe court specifically noted that while nonmembers
of the local received only information about the parent union’s
expenditures, they were not informed of the percentage of their
local dues which went to the parent union.
In contrast to Hohe, the nonmembers here are told (rightly
or wrongly) that all their dues go to PEU. Moreover, the
figures presented in the budget provide a good explanation of
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why the presumption is justified. The notice indicates that
$56,544.00 of PEU’s $2,626,954 budget goes to “Unit Funds.”
This amounts to 2.15% of the budget. Since there are 40 local
units, EDCEA receives $1,413.60 (0.05% of PEU’s budget).
As a practical matter, there does not seem to be a high
likelihood that EDCEA (or any other local affiliate) would
spend a higher percentage of $1,413.60 on political activities
than PEU would spend of its $2.5 million. Thus, unlike Hohe,
the Union offers some reason why nonmembers in the local
union can rely on PEU’s books for a breakdown of their dues.
For the reasons discussed in the preliminary injunction
order, the court still concludes that the local union presumption
is appropriate and permissible under Hudson. See Lucid v. City
and County of San Francisco, 774 F. Supp. 1234, 1237 (N.D.
Cal. 1991) (“No authority requires such a breakdown [of
expenses incurred on a bargaining unit basis] and we decline to
extend existing law to create one. Requiring such a breakdown
may be extremely impracticable, if not impossible, as well as
unduly burdensome.”); see also Andrews v. Education Association
of Chesire, 653 F. Supp. 1373, 1377-78 (D.Conn. 1987)
(without presumption, unions would be put to “the potentially
prohibitive cost” of proving the individual percentages of a very
large number of affiliates), aff'd as modified on other grounds, 829
F.2d 335, 338-339 & n.1 (2d Cir. 1987). Accordingly,
summary judgment will be entered on behalf of defendants on
this claim.
WATS Bay BLINN
i WON
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