## F I LED United States C ourt of Appeals Tenth Circuit 

### S e p t e m b e r19,2006 Elisab eth A. Shumaker C l erk of C ourt PU BL I SH UNI TED S TATES CO URT O F AP PEALS

T E N T H C IR C U IT RO RY A. W ESS EL, DO NA LD SCOTT, FRAN K PA RRA , W ALTER K. NEWTON, P AULET TE M ORA GONZ AL E S , M AR K M OR A, J ANI NE L A V IG N E , R A Y M O N D L A R G O , S R ., M AR K A. GAR CI A, RU DY AR CH UL E T A, J R. , J E RR Y ANAY A, S AM AGUI L AR , RU E BE N L UC E RO , and al l ot her s s i m i l ar l ys i tuat ed,

P l ai nti ffs-A pp el l ees, v. N os . 04- 2212 and 04- 2261 C IT Y O F A L B U Q U E R Q U E , JIM B A C A , M ay or , C i t yof A l buquer que, PE G G Y H A R D W I C K , D i r ect or E m pl oy ee Rel at i ons , C i tyof A l buquer que, L O C A L 624 AM E RI CA N F E DE RA T I ON OF S T AT E , CO UNT Y AND MUNI CI P AL E M P L OYE E S , AF L - CI O,

D efen dan t s- A pp el l ants . AP P EA L F ROM THE UNI TE D S TA TE S DI S TR I CT COURT

F OR THE DI S TR I CT OF NE W M EX I CO ( D. C. NO . CI V- 0 0 - 6 5 - LH/ KBM ) J e r e mi a h A. Co l l i n s , Br e d h o ff & Ka i s e r , P . L . L . C. , Wa s h i n g t o n , D. C. ( S t a n l e yK. K otovsky , Jr . , T i nn i n L aw F i rm , A l bu qu erque, N ew M exico, for D efen dan t sA p p ell an ts C ityo f A lbu q u erq u e, Ji m B ac a, an d P eg g yH ard w ick, an d R o b ert A l exande r , B r edhoff

& K ai s er , P. L . L . C . , W as hi ngt on, D . C . , and J err yT odd W er t hei m , J ones Snead W er t hei m W entw or t h & J ar ami l l o, PA , Sant a Fe, N ew-2-

M exi co, forD efe ndant - A ppel l antL ocal 624, A m er i can Fede r at i on of St at e, C o u n tya n d M u n icip a l E m p lo y e e s, w ith h im o n th e b rie fs) fo r D e fe n d a n tA pp el l ants . R aym ond J . L aJ eunes s e, J r . , N at i onal R i ghtt o W or k L egal D efe ns e Foundat i on, In c ., S p rin g field , V irg in ia ( R o b e rt L . P id d o c k , A lb u q u e rq u e , N e w M e x ico , w ith him on t he b ri ef) for Pl ai nti ffs-A pp el l ees. B efo re HA RTZ , M c KAY , and TY M KOVI CH , C i rcui tJudg es. TY M KOVI CH , C i r cui tJ udge. T hi s appea l i s ours econd r evi ew of the cons t i tut i onal i t yof fe es as s es s ed by t he C i t yof A l buquer que and i t s m uni ci pal uni on, L ocal 624, agai ns templ oy ees w ho w er e notm ember s of the uni on. T he Supr eme C our thas hel d t hatempl oy ees w ho ar e notm ember s of a uni on m aybe as s es s ed a fai rs har e of the cos t s of uni on expens es ar i s i ng fr om t he negot i at i on of col l ect i ve bar gai ni ng agr eement s and ot heruni on act i vi t i es t hatbenef i tal l of the empl oy ees of a publ i c s ect or e m p lo y e r. Lehner tv. Fer r i lFacul t y Ass ’ n. , 50 0 U . S . 50 7 (199 1). In the fir st appea l of thi s cas e, w e hel d t hatt he C i t y ’ s “fa i rs har e fe e” a s s es s ed foruni on act i vi t i es vi ol at ed the C ons t i tut i on. Fi ndi ng t he fe e over char ged non- m ember e m p lo y e e s b e c a u se it b ill e d th e m fo r a c tiv iti e s o f th e u n io n th a t d id n o t b e n e fit t hem, w e r emanded t he ca s e fora hea r i ng t o det er m i ne the amountof the o v e rc h a rg e a n d to re f u n d a n ye x c e s s fe e s to n o n -u n io n e m p lo y e e s . We ss e l v. C ity of A l buquer que , 2 9 9 F . 3 d 1 1 8 6 (10 th C ir . 2 0 0 2 ) ( We ss e l I)-3-

O n r emand, t he di s t r i ctcour tconcl uded thatt he C i t yand uni on had fa i l ed t o pr ove w hatpor t i on of fa i rs har e fe es w er e al l ocat ed foract i vi t i es benef i t t i ng L ocal 624. A s a r emedyfort he cons t i tut i onal vi ol at i on, t he courtor der ed Local 6 2 4 to re f

u n d a ll fe e s it c o llec ted f ro m th e n o n -m e m b e r e m p lo y e e s. In a d d iti o n to t hi s r efund, t he di s t r i ctcour tal s o rul ed thatt he C i t yw as r equi r ed t o r efund a m o u n ts it re c e iv e d f

ro m L o c a l 6 2 4 u n d e r a n in d e m n ifica tio n p ro v isio n w e h e ld voi d as agai ns tpubl i c pol i cyi n We ss e l I. In th is a p p e a l, th e C ity a n d L o c a l 6 2 4 c h a lle n g e b o th c o n c lu s io n s . W e a g re e w ith th e d istric t co u rt th a t L o c a l 6 2 4 fa iled to m e e t it s b u rd e n o f p ro o f in s h o w in g w h a t p o rt io n o f th e fa irs h a re fe e b e n e fitte d th e n o n -m e m b e r e m p lo y e e s . W e c o n c lu d e , h o w e v e r, th a t th e d istric t co u rt a p p lied th e w ro n g sta n d a rd in or der i ng t he C i t yt o r efund a m ount s i tr ece i ved undert he i ndemni fi cat i on p ro v is io n . H avi ng j ur i s di ct i on under28 U . S. C . § 1291, w e A FFIRM i n par t , and rem and for furt her proceedings. I . Backg r ound Un io n R e

p r e s e n ta tio n . T he A m er i can Fede r at i on of St at e, C ount y , and M uni ci pal E m pl oy ees ( A FSC M E ) , i s a l aboruni on t hatr epr es ent s m uni ci pal empl oy ees nat i onw i de. A FSC M E pr ovi des num er ous s er vi ces t o i t s l ocal aff i l i at es , i ncl udi ng contr actnegot i at i on, and r epr es ent at i on i n gr i evanc e and-4-

a rb itratio n p ro c e e d in g s. A F S C M E a lso p ro v id e s s o m e f u n d s to its a ffili a tes to payl ocal expen ses i ncu rr ed in providi ng t hese servi ces. L ocal 624 i s t he l ar ges tA FSC M E l ocal aff i l i at e i n N ew M exi co, r epr es ent i ng m uni ci pal empl oy ees of the C i t yof A l buquer que. T he C i t y , i n tur n, r ecogni zes L ocal 624 as t he exc l us i ve r epr es ent at i ve of muni ci pal empl oy ees for c o lle c tiv e b a rg a in in g p u rp o s e s . See A lb u q u e rq u e , N .M ., C o d e c h . 3 , art. 2 . C ity e m p lo y e e s m a yjo in A F S C M E b yp a y in g a fe e , w h ich is d iv id e d a m o n g th e lo c a l, c o u n c il, a n d n a tio n a l e n titie s . E m p lo y e e s w h o d o n o t w is h to jo in th e u n io n a re n o t r e q u ir e d to d o s o . See A lb u q u e rq u e , N .M . C o d e § 3 -2 -4 (A ) (“ C itye m p lo y e e s . . . h a v e th e rig h t to re f u s e to jo in a n d p a rt ic ip a te in th e a c tiv itie s o f e m p lo y e e o rg a n iz a tio n s .” ). U n d e r fe d e ra l law , h o w e v e r, if a t lea st 5 0 % o f e m p lo y e e s in th e b a rg a in in g u n it a re u n io n m e m b e rs, n o n -u n io n m e m b e rs m a yb e c h a rg e d a fa ir sh a re fe e , w h ich is t hei r“pr opor t i onat e s har e of the uni on’ s cos t s of negot i at i ng and admi ni s t er i ng t he col l ect i ve bar gai ni ng agr eementand adj us t i ng t he gr i evanc es and di s put es of bar gai ni ng uni templ oy ees . ” Id. Th e F irs t Ap

p e a l. In 2 0 0 0 , thirte e n C itye m p lo y e e s w h o c h o se n o t to jo in L o c a l 6 2 4 filed su it u n d e r 4 2 U .S .C . § 1 9 8 3 a g a in st th e C ity , v a rio u s C ity offi ci al s , L ocal 624 and A FSC M E . T he non- m emberempl oy ees cl ai m ed the defe ndant s vi ol at ed thei rFi r s tA m endmentr i ght s byr equi r i ng t hem t o pay d ispro p o rt ion atelyh igh fa irsh are fe es. B o th p arti es m o v ed fo r sum m ary-5-

j udgm ent . T he di s t r i ctcour trul ed thatL ocal 624’ s fai rs har e not i ce w as unl aw ful , butrul ed i n favorof the defendant s on al l ot hercl ai m s , i ncl udi ng t he con st i tuti on al i t yof the fai r s hare fees. I n 2002, w e r ever s ed the di s t r i ctcour t ’ s concl us i on t hatt he fa i rs har e fe es w er e cons t i tut i onal . A ppl y i ng Supr eme C our tpr ece dent , w e conc l uded thatat l eas ts om e of the purpos es forw hi ch the fe es w er e col l ect ed coul d notbe cha r ged b a c k to n o n -u n io n m e m b e rs . We ss e l I, 299 F. 3d at1196. I n par t i cul ar , w e found t he por t i on of the fe es col l ect ed thatw entt o A FSC M E ’ s nat i onal uni on “t o s erve as excl us i ve r epr es ent at i ve i n ot herbar gai ni ng uni t s . . . w oul d noti nur e t o t he benef i tof the mem ber s of the l ocal or gani zat i on and thei rcol l ect i on vi ol at es t he pr i nci pl es expr es s ed [byt he Supr eme C our ti n L ehn ert ] . ” Id . C ons equent l y , t he p o rtio n o f

th e fa ir sh a re fe e c o llec ted fo r th e se p u rp o se s w a s n o t ch a rg e a b le to non- uni on empl oy ees . W e al s o concl uded a pr ovi s i on i n t he col l ect i ve bar gai ni ng agr eemental l ow i ng t he C i t yt o be i ndemni fi ed byt he U ni on fors er vi ces , w hi ch w e re la te r d e te rm in e d to b e u n c o n s titu tio n a l, w a s v o id a s a g a in s t p u b lic p o lic y . Id. a t 1 1 9 9 . W e re m a n d e d to th e d istric t co u rt to d e ter m in e h o w m u c h o f th e fa ir s h a re fe e , if

a n y , c o u ld a p p ro p ri a te ly b e c h a rg e d to th e p la in tiffs . Id. at1196. R e m a n d . O n r emand, t he uni on defe ndant s ur ged the di s t r i ctcour tt o fi nd that the e n ti re fee w as p rop erlych arg ea b le t o n o n -m em b ers. T h e d istri ct co u rt d isa g re e d fo r tw o re a so n s. It f irst c o n c lu d e d th a t We ss e l I had al r eadydet er m i ned a t lea st s o m e p o rtio n o f th e fa ir sh a re fe e h a d b e e n c h a rg e d fo r a c tiv iti e s th a t d id-6-

notbenef

i tL ocal 624. Second, t he di s t r i ctcour thel d t hatt he defendant s had “fa i l ed t o s at i s fyt hei rbur den of pr oof w i t h r egar d t o anyof the fa i rs har e fe es col l ect ed fr om t he [non- m ember s ] ” bec aus e theydi d nots how “w hatpor t i on w ent to o th e r lo c a ls a n d , co n v e rse ly , . . . w h a t p o rtio n w e n t to e x p e n se s re late d to bar gai ni ng on behal f of Local 624. ” O p. at16. Si nce the uni on defe ndant s had fai l ed t o es t abl i s h w hatpor t i on of the fa i rs har e fe es w er e cha r geabl e t o nonun i on m em bers, t he d i stri ctcou rtrefund ed the enti re fee t o the pl ai nti ffs. T he di s t r i ctcour tal s o or der ed the C i t yt o r efund Local 624 paym ent s m ade pur s uantt o t he i ndemni fi cat i on cl aus e w e found t o be voi d i n We ss e l I. II . A n a ly sis T h e u n io n d e fe n d a n ts a n d th e C ityra ise tw o iss u e s o n th is a p p e a l. F irst, t heycl ai m t he di s t r i ctcour tw r ongl yconcl uded thatt he ent i r e fa i rs har e fe e w as n o t pro p erlych arg ea b le t o L o ca l 62 4 . S ec o n d , theyarg u e tha t th e d istri ct co u rt s houl d nothave or der ed the C i t yt o r efund the paym ent s forl i t i gat i on expens es pai d byL ocal 624 undert he i ndemni fi cat i on pr ovi s i on. W e addr es s eac h ar gum enti n tur n. A . Charge abilit

y of the FairShare Fee T he uni on defe ndant s ’ pr i m aryar gum enti s t hatt he ent i r e fa i rs har e fe e w as cons t i tut i onal l yperm i s s i bl e. I n s uppor tof thei rar gum ent , t heypr es ent ed t es t i m onyatt he r emand hear i ng t hatal l of the s er vi ces of A FSC M E , as an e x c lu siv e b a rg a in in g re p re se n tativ e a t th e n a tio n a l lev e l, are a lso a v a ilab le to-7-

L ocal 624 on an as - neede d bas i s . A ccor di ngl y , t heycl ai m t he ent i r e fa i rs har e fe e i s properl ychargeab l e t o n on -m em ber em ploy ees. T he u nion defend ants al so ar gue thatourdeci s i on i n We ss e l I di d notpr ecl ude the di s t r i ctcour tfr om re c o n sid e rin g w h e th e r e x p e n se s re late d to e x c lu siv e b a rg a in in g w e re in fa c t a char geabl e bene fi tt o L ocal 624. T he di s t r i ctcour tr ej ect ed thes e ar gum ent s . T he courtconcl uded that We ss e l I pr ecl uded r el i t i gat i on of w hetherexcl us i ve bar gai ni ng r epr es ent at i on i nur ed t o t he bene fi tof Local 624. T he di s t r i ctcour tal s o found the uni on d e fe n d a n ts h a d fa iled to m e e t th e ir b u rd e n o f sh o w in g w h a t p o rtio n o f th e fa ir s har e fe e w as uncons t i tut i onal . Speci fi cal l y , t he di s t r i ctcour tfound the uni on defe ndant s ( 1) di d nots how t hatfai rs har e fe es w er e “s pentonl yon act i vi t i es t hat t he uni on cons i der ed t o be cha r geabl e t o non- m ember s ” [O p. at11] ; ( 2) col l ect ed funds fors ervi ces t hatw er e notchar geabl e underSupr eme C our tpr ece dentand ourdeci s i on i n We ss e l I; and ( 3) char ged fors er vi ces pr ovi ded att he nat i onal l evel t oo nebul ous t o benef i tL ocal 624. T he courtfur t herfound the uni on defe ndant s ’ ar gum entt hatt heycoul d notappor t i on expens es forexcl us i ve r epr es ent at i on “l ack[ ed] cr edi bi l i t y ” as t heyhad det ai l ed i nfor m at i on appor t i oni ng o th e r c h a rg e a b le s e rv ic e s . Id. 1 . Sc op e o

f W esse l I .-8-

T h e u n io n d e fe n d a n ts’ first a rg u m e n t is th a t We ss e l I di d notfor ecl os e the pos s i bi l i t yt hatt he ent i r e fa i rs har e fe e w as char geabl e t o t he non- m ember empl oy ees . W e di s agr ee. O ur previ ou s deci si on con si dered “w hethert he fe es col l ect ed in this case v io late d th e . . . co n stitu tio n a l sta n d a rd o n e x tra -u n it ex p e n se s” a s a rticu late d in Lehner tv. Fer r i lFacul t y Ass oc. , 5 0 0 U .S . 5 0 7 (1 9 9 1 ). We ss e l I, 299 F. 3d at 1196. I n L ehn ert , t he Supr eme C our tnot es “[t ] her e mustbe s om e i ndi cat i on t hat t he paym enti s fors ervi ces t hatm ayul t i m at el yi nur e t o t he bene fi tof the m ember s of the l ocal uni on byvi r tue of thei rm ember s hi p i n t he par ent or gani zat i on. ” 500 U . S. at524. A ppl y i ng and quot i ng L ehn ert , w e hel d “extr auni texpens es [ar e] notchar geabl e i f they[ar e] ‘ unr el at ed t o an obj ect i ng empl oy ee’ s uni t . ’ ” We ss e l I, 2 9 9 F . 3 d a t1 1 9 6 . Af t e rr e v i e wi n g t h e r e c o r d , we found “s om e evi dence i n t he r ecor d t hata por t i on of the fe es col l ect ed w entt o t he n ati o n al U n ion to ‘[se rve ] as e x clus ive re p rese n tat ive in o ther b arg ainin g u n it s. ’” Id. R ej ect i ng t he uni on defe ndant s ’ ar gum entt hatt he ent i r e fe e w as cons t i tut i onal , w e hel d: Such fee s w oul d noti nur e t o t he bene fi tof the me m b ers o f the l ocal o rg a n iza tio n a n d th e ir c o llec tio n v io late s th e p rin c ip les e x p re ss e d in Le hn e rt . W e di s agr ee w i t h t he di s t r i ctcour t ’ s concl us i on t hatt he U ni on d i d n o t e x c e e d t h e c o n s t i tu t i o n a l l i mi t a t i o n s o n t h e t yp es of expens es pr oper l yi ncl uded i n a fa i rs har e fe e. Id . C o n se q u e n tly , w e re m a n d e d th e c a se to th e d istric t co u rt “ to h o ld a h e a rin g to det erm i ne w hi ch fe es ar e att r i but abl e t o bar gai ni ng- r el at ed expe ns es i n [Local-9-

624] as di s t i ngui s hed fr om t hos e w hi ch do noti nur e t o t he bene fi tof the l ocal bar gai ni ng uni t . ” Id. W e a g re e w ith th e d istric t co u rt th a t We ss e l I expl i ci t l yr es ol ved the qu est i on of the chargeab i l i t yof the enti re fai r s hare fee fo r s um s col l ect ed fo r use byA FSC M E as excl us i ve bar gai ni ng r epr es ent at i ve forot herl ocal uni ons . T he panel ’ s opi ni on i n Wesse l I w as unambi guous . W e s t at ed thatcol l ect i on of fe es fort hi s purpos e “vi ol at es t he pr i nci pl es expr es s ed i n L ehn ert , ” 299 F. 3d at1196, and r emanded fornece s s aryfac t - fi ndi ng on t he amount of the over char ge. A ccor di ngl y , t he di s t r i ctcour tdi d noterri n i t s under s t andi ng of the s cope of We ss e l I. 2. L aw of the C ase T h e u n io n d e fe n d a n ts a rg u e d b e lo w th a t th e law o f th e c a se d o c trin e sh o u ld n o t prec lud e the m fro m sh o w ing their fe es fo r ex clus ive b arg ainin g serv ices w ere pr oper l ychar geabl e t o L ocal 624. O n appea l , t heyar gue the t es t i m onyatt he r emand hear i ng demonst r at es t hatt he pane l i n We ss e l I w as w r ong i n i t s hol di ng t hata por t i on of the fe e w as notpr oper l ychar geabl e. A gai n, w e di s agr ee. G ener al l y , “once a courtdeci des an i s s ue, t he s ame i s s ue maynotbe r el i t i gat ed i n s ubs equentpr ocee di ngs i n t he s ame cas e. ” G rigsby v. Ba rnha rt , 294 F . 3d 12 15 , 12 18 (10th C i r. 20 02 ). “U nli ke res j ud i cat a, t he [law of the case doctr i ne] i s notan ‘ i nexor abl e comm and, ’ buti s t o be appl i ed w i t h good s ens e. ” Un itedS ta tes v . Mo n sis v a is , 946 F. 2d 114, 117 ( 10t h C i r . 1991) ( quot i ng Maj orv.-10-

B ent on , 647 F. 2d 110, 112 ( 10t h C i r . 1981) ) . A ccor di ngl y , t he doctr i ne i s s ubj ect to th re e e x c e p tio n s: “ (1 ) w h e n th e e v id e n c e in a su b se q u e n t trial is s u b sta n tially d iffe ren t; (2) w h en co n tr o ll ing au tho ri tyh as su b seq u en tl ym ad e a co n tr ary d e c isio n o f

th e law a p p lica b le to su c h iss u e s; o r (3 ) w h e n th e d e c isio n w a s c lea rly err oneous and w oul d w or k a mani fes ti nj us t i ce. ” G r igs by , 2 9 4 F .3 d a t 1 2 1 9 , n .4 . W e r ead “ t hes e exc ept i ons narr ow l y , r equi r i ng di s t r i ctcour t s t o appl yt he l aw of th e c a s e u n le s s o n e o f th e e x c e p tio n s s p e c ific a lly a n d u n q u e s tio n a b ly ap p lie s .” Mo n sis v a is , 9 4 6 F . 2 d at 11 7 (i n terna l qu o tat ion s o m itted). H er e, onl ythe fi r s texce pt i on m i ghtbe appl i cabl e. U ndert hi s exce pt i on, “[c ] our t s have ge ner al l yperm i t t ed a modi fi cat i on of the l aw of the ca s e w hen s ubs t ant i al l ydi ffe r ent , new evi dence has been i nt r oduced. ” Maj orv. B ent on , 647 F . 2 d 1 1 0 , 1 1 2 (10 th C ir . 1 9 8 1 ). T h e e x ce p ti o n d o es n o t app ly , h o w ev er, w h ere “the addi t i onal evi dence pr ovi ded . . . att he s uppl ement al hear i ng w as evi dence [the pr oponent ] had i n i t s pos s es s i on, butfai l ed t o pr oduce, att he t i m e of the or i gi nal hear i ng. ” Mo n sis v a is , 9 4 6 F .2 d a t 1 1 7 . I n We ss e l I, t he founda t i on forourhol di ng w as t he conc l us i on t hatchar ges forA FSC M E ’ s s ervi ce a s excl us i ve bar gai ni ng r epr es ent at i ve forl ocal uni ons ot hert han Local 624 “w oul d noti nur e t o t he bene fi tof the mem ber s of the l ocal o r g a n i z a t i o n . ” 2 9 9 F . 3 d a t1 1 9 6 ( c i t i n g Ap l t . Ap p . a t5 1 , 5 3 , 1 5 4 , 1 5 6 ) . On r emand, t he uni on defe ndant s s oughtt o count ert hi s concl us i on. T heyoffe r ed t es t i m onyt hatt he ac count i ng des cr i pt i on had no s ubs t ant i ve s i gni fi canc e and,-11-

t h e r e fo r e , f

u n d s d e d i c a t e d t o t h e s e f u n c t i o n s d i d b e n e fi tl o c a l u n i o n s . E s s e n t i a l l y, A FSC M E ar gues her e thati t s s er vi ces as nat i onal excl us i ve bar gai ni ng rep rese n tat ive fo r oth er loc al un ion s are av ail ab le t o L o ca l 62 4

— an d there fo re chargeab l e t o n on -m em bers. T hi s i s s ue w as addr es s ed i n We ss e l I. I n t hos e pr ocee di ngs , t he nonm ember empl oy ees i dent i fi ed A FSC M E ’ s bar gai ni ng r epr es ent at i ve s er vi ces as an exampl e of a non- char geabl e expe ns e. T heyar gued: T h e o rig in a l an d re v ise d n o tice s d o n o t li m it ex p e n se s c h a r g e a b le to nonm ember s t o t he cos t s of negot i at i ng and admi ni s t er i ng t he col l ect i ve bar gai ni ng agr eementw i t h t he C i t yand adj u sti n g t he gr i evanc es and di s put es of bar gai ni ng uni templ oy ees . B ot h expr es s l ys t at e that c h a rg e a b le e x p e n se s in c lu d e “ [ s]e rv in g a s e x c lu s iv e re p re se n tativ e in o th e r b a rg a in in g u n its .” We ss e l I, A p lt. A p p . at 2 0 9 . In re sp o n se , the u n io n d e fe n d a n ts c o n ten d e d : L ocal 624 admi t s t hatt he or i gi nal and r evi s ed not i ce c al cul at ed the char geabi l i t yper cent age ba s ed on expe ndi tur es germ ane t o col l ect i ve bar gai ni ng i ncl uded, w her e appr opr i at e, expendi tur es r el at ed t o “[s ] er vi ng as excl us i ve r epr es ent at i ve i n ot herbar gai ni ng uni t s . ” Local 624 di s put es a n yim p lic a tio n th a t s u c h e x p e n d itu re s a re n o t a u th o ri z e d . . . . Id. a t 2 5 3 . W e ar e notper s uaded on the bas i s of thi s pr i orr ecor d t hatt he uni on d e fe n d a n ts o n re m a n d h a v e p re se n ted su b sta n tiallyd iffe re n t ev id e n c e su c h th a t a d e p a rt u re f

ro m th e la w o f

th e c a s e is w a rr a n te d . G r igs by , 294 F. 3d at1219 n. 4; Maj or , 6 4 7 F .2 d a t 1 1 2 . A c c o rd in g ly , the d istric t co u rt d id n o t er r o n re m a n d in r el y i ng on ourdeci s i on i n We ss e l I.-12-

H avi ng s ai d t hi s , w e not e the di s t r i ctcour tdi d acc eptt es t i m onyr egar di ng the u n ion d efen d an ts’ tr ea tm en t of ex clus ive b arg ainin g ex p en ses. T h e c o u rt c o n c lu d e d th e e v id e n c e d id n o t sh o w su c h e x p e n se s w e re p ro p e rlyc h a rg e a b le to n o n -un ion m em b ers u n d er L ehn ert . E ven i f the l aw of the ca s e doctr i ne di d not a p p l y , w e a r e b o u n d b yt h e d i s t r i c tc o u r t ’ s fa c tu a l fi n d i n g s i n th i s r e g a r d . We t hus tur n t o t he evi dence pr oduced on r emand. 3. B ur den of

P r oof I n a thor ough w r i t t en or der , t he di s t r i ctcour tconcl uded the uni on d efen d an ts ha d n o t sat isfied th eir bu rde n o f sh o w ing that the fair sha re fee s w ere coll ect ed to fi nan ce cost s ass ociat ed w i t h “o t herw i se chargeable act i vit i es” cons i s t entw i t h ourdeci s i on i n We ss e l I. W e agr ee fort w o r eas ons . Fi r s t , t he r ecor d demonst r at es t he uni on defe ndant s fai l ed t o pr oduce a nyevi dence s how i ng w hatpor t i on of the fa i rs har e fe e funde d A FSC M E ’ s w or k as excl us i ve bar gai ni ng r epr es ent at i ve. Second, t he uni on defe ndant s ’ w i t nes s es fai l ed t o convi nce the dis t ri ctcou rtt hat tho se fun ds used for excl usi ve represent at i on w ere al so avai l abl e t o L ocal 624 and ther efor e cha r geabl e. O urr evi ew of the di s t r i ct c o u rt ’s fa c tu a l d e te rm in a tio n s is fo r c le a r e rr o r. Ni et o v. Kapoor , 268 F. 3d 1208, 1 2 2 1 (1 0 th C ir . 2 0 0 1 ). T h e p rim a ryre a so n th e d istric t co u rt fo u n d th e e n tire fa ir sh a re fe e sh o u ld be r efunde d w as t he uni on defe ndant s ’ i nabi l i t y( orunw i l l i ngnes s ) t o s epar at e out t he cos t s of s ervi ng as excl us i ve bar gai ni ng r epr es ent at i ve fr om t hei rt ot al-13-

ex p en d itu res. U n d er L ehn ert , “the uni on bear s t he bur den of pr ovi ng t he p ro p o rt io n o f

c h a rg e a b le e x p e n s e s to to ta l e x p e n s e s .” 5 0 0 U .S . a t 5 2 4 . O n r emand, t he uni on defe ndant s ’ w i t nes s es conce ded theycoul d not “det erm i ne the cos tof s ervi ng as excl us i ve bar gai ni ng r epr es ent at i ve i n ot her bar gai ni ng uni t s . ” A pl t . A pp. at219–20. B as ed on thi s t es t i m ony , t he di s t r i ct cour tconcl uded the uni on defe ndant s ’ at t empt t o j us t i fyt hei ri nabi l i t yt o m eet t heirbu rden “d oes no tprovide a defense fo r notm eet i ng i t . ” O p. at14 . B ecause of the l ack of

evi dence , “[t ] he por t i on t hatr el at es t o t he uni on s er vi ng as t he excl us i ve bar gai ni ng r epr es ent at i ve of l ocal s ot hert han Local 624 w as not p rop erlyco ll ec ted f

rom n o n -m em b ers a n d m u st al so b e re fu n d ed . ” O p . at 15 . It w as u n d ispu ted th at so m e p o rt ion o f th e fair sha re fee w en t t o fu n d A F S C M E ’s w or k as excl us i ve bar gai ni ng r epr es ent at i ve. Si nce the uni on defe ndant s di d not i dent i fyt he var i ous component s t hatm ade up the fe es , and bec aus e theyhad the bur den of pr oof, t he courtor der ed them t o r efund the ent i r e amount . W e agr ee w ith th is c o n c lu s io n . E ven i f w e w er e t empt ed t o departfr om t he l aw of the ca s e and c ons i der th e u n io n d e fe n d a n ts’ te stim o n yth a t ex c lu siv e b a rg a in in g e x p e n se s w e re p ro p e rly char geabl e, w e w oul d s t i l l aff i r m . T he di s t r i ctcour tconcl uded thatt he uni on defe ndant s ’ t es t i m onyl acke d cr edi bi l i t yand s peci fi ci t ys uch thati tcoul d not cr edi tt he expl anat i on of the uni on defe ndant s ’ i nt erpr et at i on of exc l us i ve bar gai ni ng s ervi ces . “W e gi ve the di s t r i ctcour t ’ s det er m i nat i ons r egar di ng t he-14-

cr edi bi l i t yof w i t nes s es gr eatdefe r ence . ” D i l lv. C i t y of E dm ond , 155 F. 3d 1193, 1 2 1 1 n .9 (1 0 th C ir . 1 9 9 8 ). W e agr ee w i t h t he di s t r i ctcour tt hatt he l ack of expl anat i on under m i ned the u n io n d e fe n d a n ts’ c laim s. F irst, th e d istric t co u rt fo u n d th a t th e u n io n d e fe n d a n ts h a d “ n o t sh o w n w ith a n yp e rsu a siv e n e ss th a t th e m o n e yin th e c o m m o n f u n d in to w hi ch fe es os t ens i bl ychar geabl e t o non- m ember s w er e pl ace d w as s pentonl yon a c tiv itie s th a t th e u n io n c o n s id e re d to b e c h a rg e a b le to n o n -m e m b e rs .” O p . a t 1 1 . S e c o n d , the c o u rt fo u n d th a t so m e o f th e fe e s p o o led a n d p re su m a b lya v a ilab le to L o c a l 6 2 4 “ w e re c o llec ted in o rd e r to re c o u p e x p e n se s th a t w e re n o t ch a rg e a b le to n o n -m e m b e rs in th e first p lac e . . . . [ E ]a rm a rk in g th e fe e s fo r a c h a rg e a b le p u rp o se d o e s n o t p u rg e th e ir u n c o n stitu tio n a l tain t w h e n th e fe e s a re c o llec ted to fi nance non- char geabl e ac t i vi t i es . ” Id. at12. T hi r d, as di s cus s ed above , t he di s t r i ctcour tdi s count ed the expl anat or yt es t i m onyof the uni on defe ndant s s i nce i tw as notper s uaded thatt he U ni on coul d nots epar at el yacc ountforfee s e x p e n d e d o n e x c lu s iv e b a rg a in in g re p re s e n ta tio n . See O p. at13–14. Fi nal l y , t he di s t r i ctcour tw as t r oubl ed byt he fa ctt hatt he U ni on cr eat ed a c at egoryof c h a r g e a b l e e x p e n s e s i tc o u l d n e i t h e re x p l a i n i n d e t a i l n o rq u a n t i f y. Di d t h e u n i o n s i mpl yma k e u p t h e a mou n to f t h e fa i rs h a r e fe e ? D i d i tgues s as t o w hatt he amount of the fe e s houl d be? T he uni on w as r eadi l yabl e t o i dent i fyi t s char geabl e ac t i vi t i es w hen i tbi l l ed n o n -m e m b e rs fo r th e m . It se e m s p a rticu lar lyc o n v e n ien t th a t itis s uddenl yunabl e t o i dent i fyw hi ch of the fe es ar e thos e the C our tof A ppeal s hel d w er e i m pr oper l ycol l ect ed.T he di s t r i ctcour tar t i cul at ed anotherr eas on forconcl udi ng t he uni on 1 d e fe n d a n t s e v i d e n c e d i d n o ts a t i s f y L ehn ert : th e fa c t th a t “u n io n e m p lo y e e s g a in

. . . exp eri ence . . . do es not j ust i fyt he u nion cha rgi ng no n-m em bers for otherw i se n o n -c h a rg e a b le e x tra -u n it ac tiv iti e s.” O p . at 1 3 . T h e c o u rt re a so n e d th a t th is expert i s e w oul d not“ul t i m at el yi nur e t o t he bene fi tof the mem ber s of the l ocal u n i o n , ” a s r e q u i r e d b y L ehn ert . See 5 0 0 U .S . a t 5 2 4 . W e d i s a g r e e — s u c h e x p e r t i s e c o u l d i n u r e t o Lo c a l 6 2 4 ’ s b e n e fi ta ts o me l at erdat e, even i f i tdoes notdo s o “i n anypar t i cul arm ember s hi p y ear . ” See i d. “The es s ence of the affi l i at i on r el at i ons hi p i s t he not i on t hatt he par entw i l l br i ng t o beari t s oft en cons i der abl e ec onom i c, pol i t i cal , and i nfor m at i onal r es our ces w hen the l ocal i s i n need of t hem. ” Id. a t 5 2 3 .

-15- O p. at14. I n s um , t he di s t r i ctcour tconcl uded i tw as “the uni on’ s bur den t o s how t hat t he fa i r s hare fees w ere col l ect ed to fi nan ce ‘cost [s] associ at ed w i t h o t herw i se ch arg ea b le ac ti v it ies. ’ L ehn ert , 5 0 0 U .S . a t 5 2 4 . T h is it h a s n o t d o n e .” O p . a t 1 5 . W hi l e w e mi ghthave dr aw n di ffe r enti nfer ence s fr om t hi s evi dence , w e ca nnot concl ude the di s t r i ctcour tcl ear l yerr ed i n fi ndi ng t he uni on defe ndant s had not m ett hei rbur den of pr oof. 1 B . Indem ni

f i cati on and R es tituti on In a se p a ra te r u lin g , the d istric t co u rt o rd e re d th e C ityto re tu rn p a ym e n ts it r ece i ved undert he i ndemni fi cat i on pr ovi s i on found unl aw ful i n We s s e l I. B o th t he uni on defe ndant s and the C i t ychal l enge the pr opr i etyof r es t i tut i on s i nce the dis t ri ctcou rtnev er m ade a fi nd i ng t hat the C i t y ’s po l i ci es vi olat ed the Fir st A m endment . B efor e w e addr es s t he mer i t s of thi s cl ai m , w e mustfi r s tcl ar i fy w hati s and i s notats t ake he r e.-16-

I n We ss e l I, w e hel d t he i ndemni fi cat i on agr eementbetw een the C i t yand L o c a l 6 2 4 w a s v o id a s c o n tra ryto p u b lic p o licyb e c a u se it w o u ld a llo w th e C ity t o s eek i ndemni fi cat i on “fori t s ow n uncons t i tut i onal pr act i ces and pol i ci es . ” 299 F. 3d at1199 n. 4. I n par t i cul ar , t he agr eementr equi r ed Local 624 t o i ndemni fy t h e C i t y “ a g a i n s ta n y a n d a l l c l a i m s , d e m a n d s , s u i t s o ro t h e rfo r m s o f l i a b i l i t y, i ncl udi ng paym ent s of r eas onabl e att or neyfee s and cos t s . . . foranycl ai m or chal l enge t o t he i m pos i t i on of an a gencyfee . ” Id. a t 1 1 9 7 . P u rsu a n t to th is p ro v isio n , L o c a l 6 2 4 h a d re im b u rse d th e C ityfo r so m e o f its leg a l ex p e n se s in t hi s cas e. R el y i ng on ourhol di ng i n We ss e l I, the d istric t co u rt o rd e re d th e C ity to return to L o ca l 62 4 the in d em n ifi ca ti o n ith ad rec eive d . [O p . at 22 . ] T h e c o u rt al s o enj oi ned the C i t yfr om s eeki ng futur e i ndemni fi cat i on fr om L ocal 624 under th is p ro v is io n . [ Id. ] N ei t herthe C i t ynorL ocal 624 chal l enge the pr os pect i ve i nj unct i on— t hey ar gue onl yt hatt he courterr ed byor der i ng r es t i tut i on of paym ent s m ade t o t he Ci t yfo rt h e c o s to f

l i t i g a t i o n i n t h e s e ma t t e r s . T h u s , t h i s i s n o ta c a s e wh e r e we ar e as ked t o pr os pect i vel y“perm i tenfor cementof thos e [voi ded] pr ovi s i ons , ” as pl ai nt i ffs ar gue. A pl e. B r . at38. R ather , t he onl yi s s ue befor e us i s w hether r es t i tut i on i s r equi r ed w her e one pa r t yhas per for m ed on a c ont r actt hatw as l at er voi ded as contr aryt o publ i c pol i cy . T he non- uni on empl oy ees ar gue that r es t i tut i on i s al s o nece s s aryher e t o pr eventt he C i t yfr om benef i t t i ng fr om t he voi ded contr actual pr ovi s i on.In re latio n to th e R e sta tem e n t (S e c o n d ) o f C o n tra c ts, c ited a b o v e , this 2 se c tio n “ re fo rm u late s th e a p p lica b le r u les w ith o u t p ro p o sin g to a lter s p e c ific o u tcom es.” R estatem en t ( T h ir d ) of R esti tuti o n § 3 2 cm t. a (T . D . N o . 3 , 2 0 0 4 ). -17- T he part i es agr ee the gene r al rul e i s t hatr es t i tut i on i s notpr operw her e one p a rt yh a s p e rfo rm e d o n a c o n tr a c t la te r v o id e d fo r p u b lic p o lic yre a s o n s . See, e. g. , Hog ue v. Superi or Ut i ls. , 2 1 0 P . 2 d 9 3 8 , 9 4 0 (N . M . 1 9 4 9 ); R es t at ement (S e c o n d ) o f

C o n tra c ts § 1 9 7 . U n d e r th is ru le, th e c o u rt “ w ill sim p lylea v e b o th par t i es as i tfi nds t hem, even though t hi s m ayr es ul ti n one of them re t ai ni ng a benef i tt hathe has r ece i ved as a r es ul tof the tr ans act i on. ” Id. § 197, cmt . a. T h is ru le is s u bje c t to v a ri o u s e x c e p tio n s . Hogue , 210 P. 2d at940 ( s t at i ng t hat“w her e the publ i c i nt er es ti s i nvol ved . . . aff i r m at i ve r el i ef w i l l notbe deni ed, al t hough one of the gui l t ypar t i es m aybenef i t ”) ; R es t at ement( Second) of C ont r act s § 197 ( author i zi ng r es t i tut i on i n al l cas es w her e “de ni al of r es t i tut i on w o u ld c a u se d isp ro p o rtio n a te fo rfe itu re ” ); i d. § 198( b) ( author i zi ng r es t i tut i on w her e the part ys eeki ng r es t i tut i on “w as notequal l yi n t he w r ong w i t h t he p ro m iso r” ); i d. § 199( b) ( author i zi ng r es t i tut i on w her e the cl ai m ant“di d not engage i n s er i ous m i s conduct ” and “ al l ow ance of the cl ai m w oul d putan end t o a c o n tin u in g s itu a tio n th a t is c o n tr a ry to p u b lic p o lic y ” ). A m or e r ece ntfor m ul at i on of the exc ept i ons i dent i fi ed i n t he R es t at ement ( Second) of C ont r act s i s found i n t he R es t at ement( T hi r d) of R es t i tut i on, c u rre n tlyu n d e r c o n sid e ra tio n b yth e A m e ric a n L a w In stitu te. It p o in ts to 2 res t i tuti on as approp ri at e i n cir cum st ances w here on e part yi s unj us t l y enr i chedatIt re a d s in f u ll: 3 (1) R est i tuti on w i l l be all ow ed, w hetheror not necessaryt o p reventunj ust enr i chment , i f r es t i tut i on i s r equi r ed byt he pol i cyof the under l y i ng pr ohi bi t i on. (2) R est i tuti on w i l l al so be all ow ed, as necessaryt o p reventunj ust e n ric h m e n t, i f

th e a llo w a n c e o f

re stitu tio n w ill n o t d e fe a t o r f ru stra te t he p oli cyof the un derl y i ng prohibi t i on . T here i s no u njust enr i chmenti f the cl ai m antr ece i ves t he count erper for m ance s peci fi ed b yth e p a rt ie s ’ u n e n fo rc e a b le a g re e m e n t. ( 3) R es t i tut i on w i l l be deni ed, not w i t hs t andi ng t he enr i chment of the defe ndantatt he cl ai m ant ’ s expens e, i f a c l ai m unders ubs ect i on ( 2) is fo re c lo se d b yth e c laim a n t’s in e q u itab le c o n d u c t. R e s t a t e m e n t ( T h i r d ) o f R e s t i tu t i o n § 32 (T.D. No. 3, 2004) -18- t he ex pen se of t he o t her, even “un der an ag reem ent that i s i l l egal orotherw i se unenfor cea bl e for r eas ons of publ i c pol i cy . ” § 32 ( T . D . N o. 3, 2004) . A not her 3 c irc u m sta n c e w h e re re stitu tio n m ig h t b e a p p ro p ria te is w h e re it w ill det erfu ture m isc o n d u c t. T h e d ra f t R e sta tem e n t su g g e sts c o u rts lo o k to a v a rie tyo f fa c to rs to as s es s t he nee d forr es t i tut i on, i ncl udi ng ( 1) t he natur e of the i l l egal i t y ; ( 2) t he e x ten t o f

th e p a rty ’s c u lp a b ili ty ; (3 ) w h e th e r illeg a l co n d u c t w a s c e n tra l o r m e re ly t angent i al t o t he per for m ance of the contr act ; and ( 4) t he s t r ength of the det err ent e ffe c t o f th e d e c is io n . Id. T he ques t i on her e then i s w hetherr es t i tut i on i s nece s s aryt o ( 1) pr event unj us tenr i chmentof the C i t y , or( 2) det erfutur e mi s conductbyt he C i t yorot her m u n icip a lit ies . T h e first fa c to r d o e s n o t ap p e a r to a p p ly : th e u n io n d e fe n d a n ts ar e nots eeki ng r ei m bur s ement , r athert he non- m emberempl oy ees ar e s eeki ng d is g o rg e m e n t o f

th e in d e m n ific a tio n p ro c e e d s .-19-

T he det err ence r at i onal e mi ghtappl y , how ever . T hatr at i onal e may gener al l ybe appr opr i at e i n atl eas tt w o ci r cumst ance s i n t he cont extof u n c o n stitu tio n a llyc o llec ted fa ir sh a re fe e s. F irst, w h e re th e C ityk n o w in g ly par t i ci pat ed oracqui es ced i n t he uncons t i tut i onal conductof the uni on defe ndant s . Second, even i f the C i t ydi d notknow i ngl yal l ow t he vi ol at i on, w here i tfai l ed to exerci se r easona ble prud ence to ensure t he u nion defend ants ’ fa ir sh a re p ro c e d u re s w e re c o n stitu tio n a l. Kn o w in gP a r tic ip a tio n . T h e first c o n sid e ra tio n is w h e th e r th e C ity know i ngl ypar t i ci pat ed oracqui es ced i n t he cons t i tut i onal vi ol at i on. I n We ss e l I, w e d e c lar e d th e in d e m n ifica tio n p ro v isio n v o id o n th e g ro u n d th a t th e C itysh o u ld notbe i ndemni fi ed “fori t s ow n uncons t i tut i onal pr act i ces and pol i ci es . ” Wes s el I, 2 9 9 F .3 d a t 1 1 9 9 . W e a lso h e ld “ [ t]h a t a p u b lic e m p lo y e r h a s c e rta in obl i gat i ons w i t hi n t he fa i rs har e deduc t i on fr amew or k es t abl i s hed bycour t s . ” Id. at1197. T hes e dut i es i ncl ude a dutyt o es t abl i s h pr ocedur es t hatpr ot ect di s s ent er s ’ r i ght s , m i ni m i ze i m pi ngementon non- uni on empl oy ees ’ cons t i tut i onal ri g h ts , a n d e n s u re th a t th e u n io n ’s n o tic e is a d e q u a te . See i d. a t 1 1 9 8 . F u rth erm o re, w e stated that “[ i] f th e C ityco n sist en tl ym ad e n o effo rtto en su re t hatt he U ni on’ s fai rs har e pr ocedur es compl i ed w i t h [ C hi cago Teache rs Uni on Local, No. 1 v. Huds on , 475 U . S. 292 ( 1986) ] , s uch a fai l ur e w oul d l i kel ybe cogni zabl e under§ 1983 and cove r ed byt he i ndemni fi cat i on. ” Id. a t 1 1 9 9 n .4 .-20-

B eca us e the br eadth of the i ndemni fi cat i on cl aus e w oul d covert he types of vi ol at i ons des cr i bed above , w e found i tcontr aryt o publ i c pol i cyi n We ss e l I. We d id n o t co n c lu d e , h o w e v e r, th a t th e C ityh a d v io late d th e F irst A m e n d m e n t in its i m pl ement at i on of i t s fai rs har e pol i ci es . W e found onl yt hatt he i ndemni fi cat i on pr ovi s i on w oul d al l ow paym ent s forknow i ng vi ol at i ons of the cons t i tut i onal not i ce r equi r ement s of Huds on , o r co n scio u s d isr eg ard o f it s b asic fair sha re pr ocedur es . T hus , w e di d notconcl ude as a fa ctual m at t ert hatt he C i t yhad know i ngl ypar t i ci pat ed oracqui es ced i n t he uni on defe ndant s ’ Fi r s tA m endment v io latio n . N o r d id th e d istric t co u rt m a k e a fin d in g o n re m a n d th a t th e C ity v io la te d th e F ir s t A m e n d m e n t. R e a s o n a b le P r u d e n c e . O n this reco rd, ho w ev er, th e d istri ct co u rt concl uded ther e i s s om e s uppor tt hatt he s econd c ons i der at i on had bee n m et

— t he C ityfa iled to e x e rc ise re a so n a b le p ru d e n c e in e n su rin g th e u n io n d e fe n d a n ts’ fa ir s har e pr ogr am sat i s fi ed cons t i tut i onal s t andar ds . T he di s t r i ctcour tfound the nonm em b er e m p loy ee s h ad “su ffere d irrep ara b le i njury. . . d u e to th e C ity ’s fa il u re t o ful fi l l i t s obl i gat i on t o pr ot ectt hem. ” O p. at21. I tconcl uded “i nas m uch as t he l egal l yi nadequa t e fa i rs har e not i ce a nd t he col l ect i on of the fa i rs har e fe es v io late d th e P lain tiffs’ F irst A m e n d m e n t rig h ts, [ ] th e C ityc o u ld n o t p o ss ib ly have f ul fi l l ed i t s obl i gat i on t o ‘ pr ovi de pr ocedur es t hatm i ni m i ze that i m pi ngement[on non- m ember s ’ Fi r s tA m endmentr i ght s ] and. . . fac i l i t at e a-21-

nonuni on empl oy ee’ s abi l i t yt o pr ot ecthi s r i ght s . ’ ” O p. at20 n. 5 ( quot i ng Huds on , 4 7 5 U .S . a t 3 0 7 n .2 0 ). I n r eac hi ng t hi s concl us i on on r emand, t he di s t r i ctcour tdi d notappl yt he l egal fr amew or k di s cus s ed above . I t s concl us i ons w er e made i n t he cont extof a m o ti o n fo r pre li m inaryinjun cti o n that p ri n cipa ll yso u g h t pro sp ec ti v e re li ef. In l i ghtof ourdi s cus s i on of the appl i cabl e fr amew or k, i ti s now appr opr i at e fort he dis t ri ctcou rtt o m ake the equ i t able det erm i nati on of rest i tuti on i n the fi rs t i ns t ance . W e ther efor e r emand forfur t herpr ocee di ngs on w hetherr es t i tut i on s houl d be or der ed i n l i ghtof the pr i nci pl es di s cus s ed above . I I I . C oncl usi on Fort hes e r eas ons , w e R E M A N D forfur t herpr ocee di ngs on t he i s s ue of r es t i tut i on and A FFIRM al l ot heras pect s of the di s t r i ctcour t ’ s deci s i on.