Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-96-01321/USCOURTS-caDC-96-01321-0/pdf.json

Parties Involved:
Engineers Union Local 444
Intervenor
Lawrence R. Ferriso
Petitioner
International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO
Intervenor
National Labor Relations Board
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 3, 1997 Decided September 23, 1997

No. 96-1321

LAWRENCE R. FERRISO,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED,

MACHINE AND FURNITURE WORKERS, AFL-CIO

AND ENGINEERS UNION LOCAL 444,

INTERVENORS

On Petition for Review of an Order of the 

National Labor Relations Board

Raymond J. LaJeunesse, Jr. argued the cause and filed the 

briefs for petitioner.

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Richard Cohen, Senior Attorney, National Labor Relations 

Board, argued the cause for respondent, with whom Linda 

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

Deputy Associate General Counsel, were on the brief.

James B. Coppess argued the cause for intervenors, with 

whom Laurence S. Gold and Peter E. Mitchell were on the 

brief. James G. Mauro, Jr. and Sheldon Engelhard entered 

appearances.

Before: WALD, WILLIAMS and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge: Lawrence R. Ferriso ("Ferriso"), 

although not a member of the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, 

or its Local 444 (respectively, the "International" and the 

"Local"; collectively, the "Unions"), is required to pay fees to 

the Unions by virtue of an "agency-shop" agreement between 

the Unions and Ferriso's employer, Paramax Systems Corporation. Agency-shop agreements require all of a bargaining 

unit's employees, whether or not they are union members, to 

pay fees (termed "agency fees") to a union for the benefits 

that the union confers on them, including collective bargaining and other forms of representation. When Ferriso requested that the International reduce his agency fees to 

reflect only those expenses properly chargeable to him, the 

International did so, but without providing any explanation of 

its calculations other than a list of what percentage of the 

expenses of each of its affiliates it believed was chargeable to 

Ferriso. Believing that the Unions were obliged to justify 

their calculations of his agency fees with a breakdown of their 

major categories of expenditures, verified by an independent 

audit, Ferriso filed an unfair labor practice charge with the 

National Labor Relations Board ("the NLRB" or "the 

Board"). The NLRB found that the Unions were required to 

provide Ferriso with data on their major categories of expenditures, but that no independent audit was necessary. On 

appeal, Ferriso argues that the latter finding was erroneous. 

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The Unions have intervened, and argue, with the Board, that 

this ruling should be upheld.

We conclude that Ferriso is correct, and that the Unions 

are required to provide him with an independent audit of 

their major categories of expenditures. We also find that the 

Board's apparent methodology for ascertaining what constitutes an appropriate audit is incorrect, and that such audits 

must, in general, conform to the ordinary norms for audits of 

comparable entities.

I. BACKGROUND

Ferriso joined the Local in 1974; in 1976, he resigned, but 

continued to pay dues to the Unions because of the agencyshop agreement. In March 1991, he read a notice in the 

union newsletter about procedures for reducing nonmembers' 

agency fees to eliminate charges for nonrepresentational activities. The notice said that objectors would receive a "detailed explanation" of the basis of the reduction and that any 

challenges would be resolved by an impartial arbitrator.

Ferriso sent a letter seeking a reduction. In June, he 

received a letter that said that the Union had reviewed its 

records and had reduced Ferriso's agency fee so that it only 

reflected collective-bargaining or representational costs. The 

letter listed the amounts of Ferriso's fees that went to the 

Local, to District Council 3 (a regional affiliate of the Unions), 

and to the International. It also indicated the percentage of 

the fees paid to each that were chargeable to Ferriso: 58.1 

percent for the International, 65 percent for the District, and 

98.9 percent for the Local. Ferriso's dues subsequently 

dropped in accordance with the calculations set forth in the 

letter.

The letter did not provide any of the expense information 

underlying the Unions' calculations, and did not indicate that 

these calculations had been verified by any third party. It 

did describe the procedure by which Ferriso could challenge 

the calculations before an arbitrator. Ferriso elected not to 

invoke this procedure, and instead filed an unfair labor practice charge with the NLRB against the International and the 

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Local, claiming that they had failed to provide him with 

sufficient information to allow him to decide whether to 

challenge their calculations. The NLRB General Counsel 

issued a complaint, and the case was tried before an administrative law judge ("ALJ").

On December 2, 1992, the ALJ issued an opinion finding 

that the unions had violated section 8(b)(1)(A) of the National 

Labor Relations Act ("NLRA"), 29 U.S.C. § 158(b)(1)(A) 

(1994), by (i) failing to give Ferriso a breakdown of their 

major categories of expenses, and (ii) failing to have this 

breakdown verified by an independent auditor. International Union of Electronic, Electrical, Machine and Furniture 

Workers, Case No. 29-CB-8055 (Dec. 2, 1992). The Unions 

filed exceptions to this decision. On August 27, 1996, the 

Board issued a decision in which it adopted the ALJ's first 

finding, but declined to adopt the second, finding that verification by an independent auditor was not necessary. International Union of Electronic, Electrical, Machine and Furniture Workers, 322 N.L.R.B. No. 1, 1996 WL 501580 (Aug. 

27, 1996) (hereinafter "IUE"). Ferriso now appeals the latter 

ruling.

II. ANALYSIS

In Communications Workers of America v. Beck, 487 U.S. 

735 (1988), the Supreme Court explained the purpose of 

section 8(a)(3) of the NLRA, 29 U.S.C. § 158(a)(3) (1994), 

which permits unions and employers to enter into agencyshop agreements. The Court found that, in enacting this 

provision of the NLRA, Congress "authorized compulsory 

unionism only to the extent necessary to ensure that those 

who enjoy union-negotiated benefits contribute to their cost." 

Beck, 487 U.S. at 746. The Court accordingly concluded that 

section 8(a)(3) "authorizes the exaction of only those fees and 

dues necessary to 'performing the duties of an exclusive 

representative of the employees in dealing with the employer 

on labor-management issues,' " Id. at 762-63 (quoting Ellis v. 

Brotherhood of Railway, Airline & Steamship Clerks, 466 

U.S. 435, 448 (1984)). The Court described activities "gerUSCA Case #96-1321 Document #298211 Filed: 09/23/1997 Page 4 of 15
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mane to collective bargaining, contract administration, and 

grievance adjustment" as the "financial core" of union activities, which nonmembers may appropriately be compelled to 

support. Id. at 745.

A union's status as an exclusive bargaining representative 

gives rise to "a statutory obligation to serve the interests of 

all members [of the bargaining unit] without hostility or 

discrimination toward any, to exercise its discretion with 

complete good faith and honesty, and to avoid arbitrary 

conduct." Vaca v. Sipes, 386 U.S. 171, 177 (1967). This 

obligation is also called the duty of fair representation; actions for breach of this duty may be brought under section 

8(b) of the NLRA, 29 U.S.C. § 158(b) (1994). See Vaca, 386 

U.S. at 176. In Beck, the Court explained that nonmembers 

can bring a claim for improperly charged agency fees as a 

breach of the duty of fair representation, as the claim 

amounts to one that the union "failed to represent their 

interests fairly and without hostility by negotiating and enforcing an agreement that allows the exaction of funds for 

purposes that do not serve their interests and in some cases 

are contrary to their personal beliefs." 487 U.S. at 743.

A. The Independent-Auditor Requirement

Beck did not address how unions were to verify their 

calculations of the proportion of expenses attributable to 

representational activities. However, the Court considered a 

related issue in Chicago Teachers Union v. Hudson, 475 U.S. 

292 (1986). Hudson involved an agency-shop arrangement 

negotiated by the Chicago Teachers Union and the Chicago 

Board of Education. Because this arrangement was the 

result of state action, the First Amendment barred the union 

from including expenditures for "ideological activities unrelated to collective bargaining" in the agency fees it charged to 

nonmembers. Hudson, 475 U.S. at 305 (quoting Abood v. 

Detroit Board of Education, 431 U.S. 209, 244 (1977) (Stevens, J., concurring)). The union had established a procedure 

under which nonmembers who objected to the amount of 

their fees could challenge them through a procedure that 

culminated in arbitration; those who prevailed would then be 

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issued a rebate of any excess charges. The Hudson Court 

found that this procedure fell short of constitutional standards in three respects: it did not provide sufficient assurance that funds would not be temporarily misused before a 

rebate was issued; it did not provide enough information 

about the basis of the union's calculations to allow nonmembers to make an informed decision about whether to bring a 

challenge; and it did not provide an adequately prompt 

opportunity for review by an impartial decisionmaker. Id. at 

305-07. In discussing the second of these requirements, the 

Court observed that "[t]he Union need not provide nonmembers with an exhaustive and detailed list of all its expenditures, but adequate disclosure surely would include the major 

categories of expenses, as well as verification by an independent auditor." Id. at 307 n.18.

Hudson does not apply directly to this case, because of the 

lack of state action. See Kolinske v. Lubbers, 712 F.2d 471 

(D.C. Cir. 1983) (finding that the NLRA's provision permitting agency-shop agreements does not suffice to render such 

agreements state action). But this circuit has found that the 

content of the NLRA's duty of fair representation is guided 

by the standards of Hudson. In Abrams v. Communications 

Workers of America, 59 F.3d 1373 (D.C. Cir. 1995), we noted 

that the holding of Hudson was rooted in " '[b]asic considerations of fairness, as well as concern for the First Amendment rights at stake,' " and so "applies equally to the statutory duty of fair representation." 59 F.3d at 1379 n.7 (quoting 

Hudson, 475 U.S. at 306). We accordingly adopted Hudson's 

standard for the nature of the disclosure that unions must 

make under the NLRA to nonmembers of the right to opt out 

and pay less than full union dues. See also Miller v. Air Line 

Pilots Ass'n, 108 F.3d 1415, 1420 (D.C. Cir. 1997) (finding 

that Hudson and Beck impose similar procedural obligations 

on unions, and therefore applying, in a case governed by 

Hudson, the holding of Abrams that employees may not be 

compelled to arbitrate agency-fee disputes).

Here, the NLRB found that Hudson's "major categories of 

expenditures" requirement is applicable under the NLRA, 

but that its "independent auditor" requirement is not. The 

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NLRB based this conclusion on its previous decision in 

California Saw & Knife Works v. International Association 

of Machinists and Aerospace Workers, 320 N.L.R.B. 224 

(1995) (hereinafter "California Saw"). Citing Abrams, California Saw had found that, because Hudson was based in 

part on "basic considerations of fairness," its conclusions were 

applicable under the NLRA. 320 N.L.R.B. at 232-33. But 

the Board concluded in California Saw that the Court's 

"basic considerations of fairness" rationale "expressly extended only to the notice requirement." Id. at 233 n.48. Because, 

with the exception of this requirement, the standards of 

Hudson "were not formulated to comport with a union's 

obligations under Beck to represent its employees fairly," the 

Board concluded that Hudson's "independent auditor" requirement did not apply to actions brought under the NLRA. 

Id. at 240-41. The Board apparently believed that "the more 

exacting accounting standards in Hudson derive from first 

amendment intolerance of any compulsory subsidization of 

fees under a state-authorized agency shop," id. at 240 n.82, 

and therefore should not apply to a case in which there is no 

question of state action. Although the Board rejected Hudson's "independent auditor" formula, it did find that some 

form of verification was required, stating that it would examine whether the verification arrangement before it satisfied 

the union's duty of fair representation under Beck. Id. at 

241.1

The NLRA does not speak directly to the question of 

whether an independent audit is required in these circumstances. In cases in which the NLRA is "silent or ambiguous 

as to the specific issue" before us, Chevron U.S.A., Inc. v. 

Natural Resources Defense Council, Inc., 467 U.S. 837, 843 

(1984), "we have traditionally accorded the Board deference 

with regard to its interpretation of the NLRA as long as its 

interpretation is rational and consistent with the statute." 

__________

1 The Board's decision in the present case said that the standards 

of California Saw would apply to whatever verification arrangement the Unions adopted. See IUE, 322 N.L.R.B. No. 1 at 2 n.7 

("We note, however, that under California Saw the Board will 

examine whether a union's method of verifying its calculations 

satisfies the union's duty of fair representation.").

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NLRB v. United Food & Commercial Workers Union, 484 

U.S. 112, 123 (1987). Ferriso points out that the Supreme 

Court has said that "fair representation claims often involve 

matters not normally within the Board's unfair labor practice 

jurisdiction, which is typically aimed at effectuating the policies of the federal labor laws, not redressing the wrong done 

the individual employee," and expressed doubts as to "whether the Board brings substantially greater expertise to bear on 

these problems than do the courts." Breininger v. Sheet 

Metal Workers International, 493 U.S. 67, 74 (1989) (citations 

and internal quotations omitted). But in this passage the 

Court was considering only whether the NLRB's jurisdiction 

over fair representation claims should be exclusive, not 

whether the Board's decisions were entitled to Chevron deference. It is one thing to say, as the Court did in Breininger,

that the Board's expertise in this area does not so dwarf that 

of the courts as to justify depriving the courts of jurisdiction 

to hear fair representation claims, and quite another to deny 

that the Board has any special expertise in this area at all. 

This circuit has heretofore accorded the NLRB the usual 

measure of Chevron deference in matters relating to the duty 

of fair representation, see Finerty v. NLRB, 113 F.3d 1288, 

1291 (D.C. Cir. 1997), and Breininger does not justify a 

significant departure from this practice.

We nevertheless find that the Board's rejection of the 

"independent auditor" requirement was not rational, because 

any rational interpretation of the NLRA's duty of fair representation will necessarily include an independent-auditor requirement. First, the Board was mistaken in finding that 

Hudson's "basic considerations of fairness" language did not 

extend to its "independent auditor" requirement. Hudson

found that "[b]asic considerations of fairness" required that 

"potential objectors be given sufficient information to gauge 

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

then explained in a footnote what it meant by "sufficient 

information," saying that "adequate disclosure surely would 

include the major categories of expenses, as well as verification by an independent auditor." 475 U.S. at 307 n.18. It 

follows that everything encompassed by the latter phrase, 

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including "verification by an independent auditor," is required 

by "basic considerations of fairness."

California Saw suggested that the independent-auditor 

requirement might be peculiar to cases involving state action, 

observing that Hudson's "more exacting accounting standards" derived from "first amendment intolerance of any 

compulsory subsidization of fees under a state-authorized 

agency shop." California Saw, 320 N.L.R.B. at 240 n.82. 

We do not agree. Hudson grounded its discussion of information disclosure in both "basic considerations of fairness" 

and "concern for the First Amendment rights at stake," 475 

U.S. at 306, indicating that its disclosure requirements were 

not exclusively the product of First Amendment concerns. It 

is, of course, conceivable in the abstract that the content of 

the duty of fair representation under the NLRA might not 

coincide with that of the "basic considerations of fairness" 

discussed in Hudson. But we are persuaded that nonmembers cannot make a reliable decision as to whether to contest 

their agency fees without trustworthy information about the 

basis of the union's fee calculations, cf. Hudson, 475 U.S. at 

306, and that an independent audit is the minimal guarantee 

of trustworthiness. See Miller, 108 F.3d at 1420 (holding that 

similar procedural obligations apply under NLRA and Hudson ); Abrams, 59 F.3d at 1379 n.7 (same).

California Saw cited legislative history in support of its 

rejection of an independent-audit requirement, observing 

that, in the process of deliberating on what was to become the 

Labor-Management Reporting and Disclosure Act of 1959 

("LMRDA"), the House considered but did not adopt proposals requiring unions to obtain independent audits. 320 

N.L.R.B. at 241 n.87. It is true that one of the bills that the 

House considered, H.R. 4473, would have required the financial records of unions to be independently audited, and that 

these provisions did not appear in the bill ultimately adopted 

by the House. See H.R. 4473 §§ 102(b)(10), 211(b), 86th 

Cong. (1959), reprinted in 1 NLRB, Legislative History of 

the Labor-Management Reporting and Disclosure Act of 

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1959 at 193, 237 (1959) (hereinafter "Leg. Hist.").2 The Beck

Court, however, rejected a similar argument based on the 

LMRDA's legislative history, noting that the House bill in 

question "did not purport to set out the rights of nonmembers who are compelled to pay union dues, but rather 

sought to establish 'a bill of rights for union members.' " 487 

U.S. at 758 (quoting H.R. REP. NO. 245, 80th Cong., 1st Sess. 

at 322 (1947)). The title and provisions of H.R. 4473 make 

clear that it, too, was addressed exclusively to the rights of 

union members. See, e.g., Title, 1 Leg. Hist. at 166 (referring 

to rights of union members); § 101(a), 1 Leg. Hist. at 174-75 

(same). We therefore do not find this argument persuasive.

B. Who Counts as an "Independent Auditor"?

The question remains of what suffices to satisfy the requirement of an "independent auditor" under the NLRA

what qualifications and what degree of independence the 

auditor must have. The Board and the Unions argue that we 

should not reach these issues, as they were not properly 

raised below. As to the question of what form of professional 

certification or license is required, the Board concedes that 

the General Counsel argued both before it and before the 

ALJ that verification by an independent auditor meant verification by an "independent accounting firm," and that Ferriso 

argued before the Board that it meant verification by a 

"certified public accountant," i.e., a CPA. NLRB Brief at 5-

6. This issue was therefore adequately raised.

As to the meaning of "independent," it is appropriate to 

reach this question in order to correct an error in the 

methodology the Board applied in California Saw. Although 

California Saw rejected the "independent auditor" formula, it 

did require some form of verification of a union's financial 

__________

2

In what seems to have been an error, California Saw also cited 

in support of its reading of the LMRDA's legislative history a 

portion of the LMRDA Conference Report that addressed a minor, 

unrelated change made by the conference committee. See H.R.

CONF. REP. NO. 86-1147 at 31-32 (1959), reprinted in 1 Leg. Hist. at 

935-36 (1959). The Board has not attempted to explain this citation.

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data. In the absence of any counterindications from us, the 

Board might choose to draw on the methodology it applied in 

California Saw for analyzing unions' data-verification arrangements in giving content to the "independent auditor" 

standard on remand. Some discussion of the reasoning of 

California Saw is therefore necessary.3

California Saw found that Beck was satisfied by an arrangement under which the international union was audited 

by outside CPAs, but the audits of the district and local 

unions were conducted by employees of the international 

union who were not CPAs. The Board found that because 

the auditors had accounting training, had served as Local or 

District treasurers, and applied an audit protocol developed 

by the union with an outside consultant, "the General Counsel 

has not demonstrated that the verification of expenses tasks 

at issue here are beyond the skills of the [union] auditors." 

California Saw, 320 N.L.R.B. at 241. As to auditor independence, the Board found that the union took "significant steps 

to assure objectivity" because auditors were not permitted to 

audit affiliates for which they currently or formerly worked 

or of which they were members. Id. at 241-42. The Board 

also observed that there had been no allegations that audits 

had been performed "in a less than honest, unbiased, or 

objective manner," and that the international union had an 

independent interest in obtaining objective audits of the 

books of its affiliates. Id. at 242.

The Board's methodology contained two errors. First, it 

imposed very little scrutiny on the verification arrangement 

__________

3

Indeed, although California Saw rejected the "independent 

auditor" formula, it also seemed to conclude, somewhat confusingly, 

that the auditors in the arrangement before it qualified as "independent," saying, for instance, that "[w]e do not accept the premise 

advanced by the General Counsel that the independence necessary 

to prepare verification-of-expense audits of District and Local 

Lodges consistent with a union's obligations under Beck can never 

be assured when there is an employer-employee relationship between the auditors and the [union]." 320 N.L.R.B. at 241. It is 

therefore possible that the Board may view California Saw as 

having some weight as to the meaning of the term "independent."

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before it, finding it sufficient that the audit had not been 

demonstrated to be "beyond the skills" of the auditors, and 

that the union had taken "significant steps" towards assuring 

objectivity. Second, and more seriously, it made no reference 

to the accepted norms of the accounting profession in analyzing the expertise and independence of the auditors. Federal 

and state authorities and professional associations have devoted considerable effort to developing standards of independence and professionalism for audits of businesses, employee 

benefit plans, and the like; potential objectors to agency fees 

should not be required to rely on an audit that does not meet 

the prevailing standards for audits of other comparable entities.4

The Court emphasized in Hudson that "absolute precision" 

in the calculation of agency fees "cannot be expected or 

required," Hudson, 475 U.S. at 292 n.18 (quoting Abood, 431 

U.S. at 239-40, n.40). Similarly, an audit under the NLRA 

need only conform to the prevailing norms for an adequate 

audit. See Gwirtz v. Ohio Education Ass'n, 887 F.2d 678, 

680-82 (6th Cir. 1989) (approving use of an "adequate" auditing standard that falls short of the "highest level of audit 

service available"); see also Abrams, 59 F.3d at 1381 (approving a procedure under which union employees keep records of 

their time for only one week out of thirteen). The nature of 

an adequate audit may vary depending on the size and 

complexity of the auditing task, as this may affect the types 

of entities with which the union may appropriately be compared. The following is a summary of some of the relevant 

norms that we have identified, and of their likely implications, 

to guide the Board's decision on remand.

1. "Independent"

The American Institute of Certified Public Accountants 

("AICPA") has promulgated a wide range of standards of 

__________

4 A "comparable" entity is one that, because of its size and the 

nature of its activities, presents an auditing task that is similar in 

difficulty and scope to the task at hand (which will in some cases be 

an audit of a single union, and in others an audit of a union and its 

affiliates).

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accounting and auditing practice. This includes a set of ten 

Generally Accepted Auditing Standards, the second of which 

addresses "independence." See Codification of Statements 

on Auditing Standards, Statement on Auditing Standards 

No. 1, § 150 at 21 (AICPA 1995) (hereinafter "Auditing 

Standards"). AICPA's official interpretation of this standard 

requires that the auditor be "in public practice (as distinct 

from being in private practice)," and states in part:

It is of utmost importance to the profession that the 

general public maintain confidence in the independence 

of independent auditors. Public confidence would be 

impaired by evidence that independence was actually 

lacking, and it might also be impaired by the existence of 

circumstances which reasonable people might believe 

likely to influence independence. To be independent, the 

auditor must be intellectually honest; to be recognized as 

independent, he must be free from any obligation to or 

interest in the client, its management, or its owners.... 

Independent auditors should not only be independent in 

fact; they should avoid situations that might lead outsiders to doubt their independence.

Auditing Standards, Statement on Auditing Standards No. 1, 

§ 220 at 31.5 The Securities and Exchange Commission has 

also adopted a regulation setting forth the necessary qualifications of an accountant issuing a report on the financial 

statement of a publicly traded company. That regulation's 

independence requirement bars an accountant from auditing 

a firm or its affiliates if that firm has employed him or anyone 

else from his office during the period covered by his report. 

17 C.F.R. § 210.2-01 (1996). Based on these authorities, we 

think that it is unlikely that an arrangement like that at issue 

in California Saw would be consistent with the ordinary 

norms for the independence of an audit.

__________

5 The AICPA has also adopted a Code of Professional Conduct, of 

which the first rule, Rule 101, is Independence. See Code of 

Professional Conduct, reprinted in Larry P. Bailey, GAAS Guide

at 44.05 (1995); see also id. at 44.0844.20 (reprinting official 

AICPA interpretations of this rule).

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2. "Auditor" 

The most prevalent category of professional qualification in 

the accounting profession is a license to practice as a certified 

public accountant, or CPA. "Some states have additional 

categories of accounting practitioners, such as public accountants or registered accountants, who are not certified but who 

are otherwise licensed to offer certain types of services to the 

general public." D. Edward Martin, Attorney's Handbook of 

Accounting, Auditing and Financial Reporting § 1.01[1] at 

1-4 (1996). Federal law permits audits of employee benefit 

plans and publicly traded firms to be performed either by 

certified public accountants or by licensed public accountants.6 Audits of unions should in general conform to a 

similar standard.

Ferriso asserts that Hudson should be read to require that 

all audits be performed by CPAs. Hudson did say, in 

discussing whether the contributions of nonmembers must be 

escrowed in full while a challenge to an agency fee is pending, 

that "[i]f, for example, the original disclosure by the Union 

had included a certified public accountant's verified breakdown of expenditures, including some categories that no 

dissenter could reasonably challenge, there would be no reason to escrow" fees in these categories. 475 U.S. at 310. 

The context makes clear, however, that this reference to a 

certified public accountant was intended as an example, and 

that it is the term "independent auditor" that governs.7

__________

6

See 17 C.F.R. § 210.2-01 (referring to "certified public accountants" and "public accountants"); 29 U.S.C. § 1023(a)(3)(D) (defining a "qualified public accountant" permitted to audit an employee 

benefit plan to mean: "(i) a person who is a certified public 

accountant, certified by a regulatory authority of a State; (ii) a 

person who is a licensed public accountant, licensed by a regulatory 

authority of a State; or (iii) a person certified by the Secretary ... 

for a person who practices in States where there is no certification 

or licensing procedure for accountants").

7 A review of the briefs of the parties in Hudson confirms this 

conclusion. Neither party referred to a "certified public accountant" in its brief. The brief of the Chicago Teachers Union did, 

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III. CONCLUSION

For the foregoing reasons, we grant Ferriso's petition for 

review, and remand this cause to the NLRB for further 

proceedings consistent with this opinion. On remand, the 

NLRB shall order that the Unions provide Ferriso with an 

independent audit of their financial data, and that the independence and qualifications of the auditors conform to prevailing norms for audits of comparable entities.

So ordered.

__________

however, discuss the possibility that a union could avoid the need to 

escrow the full agency fees of objectors pending a challenge if it 

escrowed the maximum amount that could conceivably be in dispute, and asserted that "the risk of miscalculation [of this sum] can 

also be minimized if a union retains a neutral (such as an independent auditor or impartial labor arbitrator) to make the calculations." 

Brief for the Chicago Teachers Union at 27 n.19, Hudson (No. 

84-1503).

The Court's decision only to approve the use of an "independent 

auditor," and not an "impartial labor arbitrator," suggests that the 

Court believed that some professional qualifications were required 

to perform an audit. In failing to approve the use of an "impartial 

labor arbitrator," the Court seemingly declined to approve a procedure that was already in use by the National Education Association 

("NEA"), and that was described in great detail in a brief that the 

NEA filed as an amicus. The NEA's procedure relied on a 

calculation made by an arbitrator with "experience in public sector 

labor relations," but not necessarily in accounting. See Brief for 

the NEA as Amicus Curiae in Support of Petitioners at 10-17, 

Hudson, (No. 84-1503).

USCA Case #96-1321 Document #298211 Filed: 09/23/1997 Page 15 of 15