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Otto v. Pennsylvania State Education Association

May 08, 2003

MARSHA OTTO; F. NAYLOR EMERY; DENNIS A. ERB; ROBERT K. GILBERT; JAMES W. LOSSELL; BARBARA J. MCALLEY; WESLEY S. SEMPLE, ON BEHALF OF THEMSELVES AND ALL OTHER NON-MEMBERS SIMILARLY SITUATED
v.
PENNSYLVANIA STATE EDUCATION ASSOCIATION-NEA; NATIONAL EDUCATION ASSOCIATION; SHALER AREA EDUCATION ASSOCIATION, ON BEHALF OF THEMSELVES AND ALL OTHER LOCAL ASSOCIATIONS SIMILARLY SITUATED APPELLANTS
MARSHA OTTO; F. NAYLOR EMERY; DENNIS A. ERB; ROBERT K. GILBERT; JAMES W. LOSSELL; BARBARA J. MCALLEY; WESLEY S. SEMPLE, ON BEHALF OF THEMSELVES AND ALL OTHER NON-MEMBERS SIMILARLY SITUATED APPELLANTS
v.
PENNSYLVANIA STATE EDUCATION ASSOCIATION-NEA; SHALER AREA EDUCATION ASSOCIATION, ON BEHALF OF THEMSELVES AND ALL OTHER LOCAL ASSOCIATIONS SIMILARLY SITUATED, NATIONAL EDUCATION ASSOCIATION; GROVE CITY AREA EDUCATION ASSOCIATION; JANE CAMPBELL; BARBARA LEIBY



Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil Action No. 96-cv-01233) District Judge: Honorable Yvette Kane

Before: Ambro and Stapleton, Circuit Judges, and O'NEILL*fn1, District Judge

The opinion of the court was delivered by: Ambro, Circuit Judge

PRECEDENTIAL

Argued June 27, 2002

OPINION OF THE COURT

We consider whether, under the First Amendment, certain expenses incurred by unions may be charged to non-members and whether a local union must obtain independent auditor verification of its charges (and, if so, what kind of verification we require).

The First Amendment affords public-sector employees the freedom not to associate with a labor organization. See Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292, 301 (1986) (quoting Abood v. Detroit Bd. of Educ., 431 U.S. 209, 222 (1977)). There are limits to this constitutional freedom, however, in light of organized labor's important role in advancing employment conditions. Abood, 431 U.S. at 225-26. Thus, as a means of curing the so-called "free-rider" problem posed by its representation of non-members, a union may charge each non-member employee a fair-share, or agency, fee equal to his or her per capita share of the union's expenses arising from its duties as a collective-bargaining representative. See id. at 235-36. But a union may not, consistent with the First Amendment, collect fair-share dues to support ideological causes or other expenses insufficiently related to collective bargaining. Id.

To ensure that non-members are assessed only for fair-share fees properly chargeable to them, the Supreme Court has ruled that unions must adopt procedural safeguards "carefully tailored to minimize the [First Amendment] infringement." Hudson, 475 U.S. at 303. First, the union must provide a non-member with "sufficient information to gauge the propriety of the union's fee." Id. at 306. This explanation of the basis for the fee is often referred to as a "Hudson notice." Second, a non-member must have an adequate opportunity to object to the fair-share fee allocation. See id. at 307. The two safeguards are linked; without the Hudson notice, a non-member would lack a basis for deciding whether to object to a fair-share fee calculation. Penrod v. NLRB, 203 F.3d 41, 46 (D.C. Cir. 2000).

When theory meets practice, questions abound. Do the financial information requirements apply to small local unions? How much verification of that information must there be? When a union represents more than one bargaining unit, can that union include, in the fair-share fee assessed to non-members of one bargaining unit, costs associated with another bargaining unit's litigation? What if those bargaining units are in different industries?

I. BACKGROUND AND PROCEDURAL HISTORY

Shaler Area Education Association ("SAEA") is the exclusive bargaining representative for education professionals employed by the Shaler Area School District. SAEA is the local affiliate of the Pennsylvania State Education Association ("PSEA") -- which represents, inter alia, both education and healthcare professionals in the Commonwealth -- and the National Education Association ("NEA," and collectively with SAEA and PSEA, the "Unions"). During the 1994-1995 school year, the Shaler Area School District employed 355 education professionals, 344 of whom were members of the SAEA (and, thereby, the PSEA and NEA). Because all three Unions provide collective-bargaining services to the plaintiffs' bargaining unit, the eleven non-members paid fair-share fees to the SAEA, PSEA, and NEA pursuant to 71 Pa. Cons. Stat. Ann. § 575 (West 2003).

Seven non-union education professionals brought this 42 U.S.C. § 1983 *fn2 action to challenge the Unions' fair-share fee procedure and assessments. *fn3 After the District Court confirmed that the plaintiffs had standing to object to the fair-share fees and the sufficiency of the Unions' Hudson notice, *fn4 the parties filed a joint stipulation of facts followed by cross-motions for summary judgment. The District Court granted partial summary judgment in favor of the plaintiffs, declaring that the SAEA must verify its expenditures through an independent audit and that PSEA *fn5 could not charge the plaintiffs for expenses incurred in litigation not relating specifically to the plaintiffs' own collective-bargaining unit. However, it also held that the Unions could assess education-professional plaintiffs for non-litigation expenditures related to the Unions' representation of healthcare professionals.

Both parties appealed, and together they present four issues for our review: (1) whether, by filing their complaint, plaintiffs objected properly to the Unions' fees and procedures; (2) whether a local union, regardless of size, must obtain an independent auditor verification of the expenditures listed in its fair-share calculation notice (and, if so, we need to decide at what level of auditor inquiry); (3) whether a union may charge non-members for collective-bargaining-related litigation costs incurred on behalf of another bargaining unit pursuant to an expense-pooling arrangement with that other bargaining unit; and (4) whether a union may charge non-members for pooled resources available to all local affiliates even though some of the affiliates represent employees in different professions. We rule in favor of plaintiffs as to issues one and two (and determine the level of verification required) and the Unions on issues three and four.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1343. We exercise appellate jurisdiction pursuant to 28 U.S.C. § 1291.

Whether plaintiffs properly objected to the Unions' fair-share fee calculation is a question of standing and is subject to de novo review. In re RFE Indus., Inc., 283 F.3d 159, 163 (3d Cir. 2002). We also review de novo the District Court's grant of summary judgment. Cloverland-Green ...


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