Case Name: Peter CRAWFORD; Frederick J. Adam; Robert F. Brauman; Richard L. Brown; William A. Burbage; Robert Erchak; Ron E. Merzlak; Leroy Rogers; Roger F. Seely; Warren Wells; Dale Cross; Richard Pederson; Clyde B. Smith; Ernest Mueller; Ruel Neeley; Robert Buley; Thomas Giefer; Klemens Thomas; Howard L. Jones; Herbert A. Light; Joseph R. Mackensie; Michael T. McQuillen; John R. Yotz; Harold Bagnall; Richard P. Barthelemy; Clinton Davis; Edison L. Denney; George Gawrilow; John J. Lumley; Albert Newton; Eugene Palsson; Dale B. Petty; Deryl Roark; Donald D. Ecker; Karl A. Jadrnicek; Howard S. Morton; Richard W. Rew; Donovan Wholers; Donald K. Brewster; Peter Hayes; Laurence J. Stuppy, III; Roger Veon, Plaintiffs-Appellants, v. AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Defendant-Appellee. Transportation Communications International Union, Amicus Curiae
Court: United States Court of Appeals for the Fourth Circuit
Jurisdiction: United States
Decision Date: 1993-04-28
Citations: 992 F.2d 1295
Docket Number: No. 88-2083
Parties: Peter CRAWFORD; Frederick J. Adam; Robert F. Brauman; Richard L. Brown; William A. Burbage; Robert Erchak; Ron E. Merzlak; Leroy Rogers; Roger F. Seely; Warren Wells; Dale Cross; Richard Pederson; Clyde B. Smith; Ernest Mueller; Ruel Neeley; Robert Buley; Thomas Giefer; Klemens Thomas; Howard L. Jones; Herbert A. Light; Joseph R. Mackensie; Michael T. McQuillen; John R. Yotz; Harold Bagnall; Richard P. Barthelemy; Clinton Davis; Edison L. Denney; George Gawrilow; John J. Lumley; Albert Newton; Eugene Palsson; Dale B. Petty; Deryl Roark; Donald D. Ecker; Karl A. Jadrnicek; Howard S. Morton; Richard W. Rew; Donovan Wholers; Donald K. Brewster; Peter Hayes; Laurence J. Stuppy, III; Roger Veon, Plaintiffs-Appellants, v. AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Defendant-Appellee. Transportation Communications International Union, Amicus Curiae.
Judges: Before ERVIN, Chief Judge, RUSSELL, WIDENER, HALL, PHILLIPS, MURNAGHAN, WILKINSON, WILKINS, NIEMEYER, HAMILTON, and LUTTIG, Circuit Judges, and BUTZNER, Senior Circuit Judge.
Reporter: Federal Reporter 2d Series
Volume: 992
Pages: 1295–1318

Head Matter:
Peter CRAWFORD; Frederick J. Adam; Robert F. Brauman; Richard L. Brown; William A. Burbage; Robert Erchak; Ron E. Merzlak; Leroy Rogers; Roger F. Seely; Warren Wells; Dale Cross; Richard Pederson; Clyde B. Smith; Ernest Mueller; Ruel Neeley; Robert Buley; Thomas Giefer; Klemens Thomas; Howard L. Jones; Herbert A. Light; Joseph R. Mackensie; Michael T. McQuillen; John R. Yotz; Harold Bagnall; Richard P. Barthelemy; Clinton Davis; Edison L. Denney; George Gawrilow; John J. Lumley; Albert Newton; Eugene Palsson; Dale B. Petty; Deryl Roark; Donald D. Ecker; Karl A. Jadrnicek; Howard S. Morton; Richard W. Rew; Donovan Wholers; Donald K. Brewster; Peter Hayes; Laurence J. Stuppy, III; Roger Veon, Plaintiffs-Appellants, v. AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Defendant-Appellee. Transportation Communications International Union, Amicus Curiae.
No. 88-2083.
United States Court of Appeals, Fourth Circuit.
Argued Feb. 4, 1992.
Decided April 28, 1993.
Robert Fisher Gore, National Right to Work Legal Defense Foundation, Inc., Springfield, VA, argued (Rossie D. Aston, Jr., on brief), for plaintiffs-appellants.
Jerry David Anker, Air Line Pilots Ass’n, Washington, DC, argued (Gary Green, on brief), for defendant-appellee.
Mitchell Kraus, Transportation Communications Intern. Union, Rockville, MD, Marsha S. Berzon, Atshuler & Berzon, San Francisco, CA, for amicus curiae.
Before ERVIN, Chief Judge, RUSSELL, WIDENER, HALL, PHILLIPS, MURNAGHAN, WILKINSON, WILKINS, NIEMEYER, HAMILTON, and LUTTIG, Circuit Judges, and BUTZNER, Senior Circuit Judge.

Opinion:
OPINION
BUTZNER, Senior Circuit Judge:
Appellants are forty-two nonunion airline pilots employed by one of eight airline companies — Eastern, Braniff, Midway, Northwest, Pan American, United, Western, or USAir — operating under the labor scheme of the federal Railway Labor Act (RLA), 45 U.S.C. § 151 et seq. See 45 U.S.C. § 181 (air carriers regulated under the Act). Each of the airlines had an agreement with the Air Line Pilots Association (ALPA) (appellees), designating it as exclusive bargaining representative for the pilots employed by that airline. Under the authority of § 2, Eleventh, of the RLA, the agreement required pilots employed by the airlines either to join ALPA or to remit to ALPA an agency fee in lieu of dues to compensate it for its services in bargaining and representation. 45 U.S.C. § 152, Eleventh (a). The nonunion pilots contend that ALPA's expenditures of exacted funds violated their rights under the RLA and the First and Fifth Amendments. They also charge that ALPA's methods of collecting and accounting for agency fees exacted under these agreements violated the procedural requirements of Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986).
The district court entered judgment for ALPA. A panel of this court affirmed in Crawford v. Air Line Pilots Ass'n Int'l, 870 F.2d 155 (4th Cir.1989). The court subsequently granted rehearing en banc. Thereafter, while the case was pending, the Supreme Court granted certiorari in a public-sector union case involving somewhat similar issues. Lehnert v. Ferris Faculty Ass'n, 881 F.2d 1388 (6th Cir.1989), cert. granted, 496 U.S. 924, 110 S.Ct. 2616, 110 L.Ed.2d 637 (1990). This court then held its decision in abeyance pending the Supreme Court's decision in Lehnert. After that decision, Lehnert v. Ferris Faculty Ass'n, — U.S. -, 111 S.Ct. 1950, 114 L.Ed.2d 572 (1991), we requested supplementary briefs. Following receipt of the briefs, the case was argued before the full court, which now affirms the judgment of the district court.
I
The parties entered into a lengthy stipulation of facts before trial, and the district court augmented these with detailed findings of fact in its opinion. We review these findings for clear error. Lehnert v. Ferris Faculty Ass'n, — U.S. at -, 111 S.Ct. at 1965; Anderson v. Bessemer City, 470 U.S. 564, 575, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985).
The stipulation discloses that ALPA during the relevant period represented some 37,000 pilots at 43 airline companies, of whom 34,500 were members of ALPA. ALPA charges its members dues of 2.35 percent of their gross pay. The average ALPA member made $80,000 annually and paid $1,880 in union dues. ALPA is a unitary national labor organization that is not composed of local unions like most other labor organizations. Members' dues go to ALPA directly, and collective bargaining and negotiating policy are directed by the national officers and governing bodies of ALPA, with the assistance of the union's 300-member national staff. The pilots employed at each airline with a union contract elect a Master Executive Council for that airline, and negotiations affecting that airline's collective bargaining agreement are conducted by a committee appointed by the Master Executive Council, assisted by the ALPA staff. Negotiating strategy, and any agreement reached, must be approved by ALPA's national president.
Continental Air Lines in 1983 filed for bankruptcy and sought to abrogate its collective bargaining agreement with ALPA. Continental pilots responded by striking. ALPA members in other airlines by secret ballot repeatedly approved a special assessment to their dues to pay a monthly benefit to the striking Continental pilots, and these benefits were paid until February 1986. In 1985, United Air Lines entered negotiations with its pilots seeking a two-tier wage structure or "B-scale" that would pay newly hired pilots less than those already employed. ALPA resisted this demand, and a strike ensued. Eventually the parties signed a contract granting United a temporary B-scale to end in five years, with binding arbitration to determine its form thereafter. After this agreement, ALPA won similar agreements from other airlines, whose pilots it represented, seeking to impose B-scales.
The disputes with Continental and United weakened ALPA financially. In October 1985, ALPA's membership approved an increase in their dues to create a major contingency fund to be used in important labor disputes or for other expenditures that could not be funded adequately out of the normal budget. Funds were used to support the strikes at Continental and United and were used to prepare for a possible strike at Eastern Air Lines. Some funds were also used for the expense of union organizing drives. These organizing expenses, ALPA agrees, are not chargeable to nonunion agency fee payers.
The district court supplemented the stipulation by findings of fact and inferences that it reasonably drew from the facts, all of which are amply supported by the evidence. We quote the findings at some length, because they are essential to an understanding of why ALPA's expenditures are germane to collective bargaining with all the airlines whose pilots it represents.
[Cjollective bargaining negotiations at any one airline are directly affected by, and also directly affect, negotiations at all other airlines. Each airline strives to keep its labor costs no higher than those of its competitors. Thus, when one airline obtains some cost-cutting concession from ALPA, other airlines generally seek to obtain the same or an equivalent concession. On the other hand, when ALPA succeeds in negotiating a wage or benefit increase with one airline, that enhances its ability to negotiate a similar increase with other airlines.
Because of this industry pattern, the court found,
it was important to ALPA, in the interest of all the pilots which it represented, to ensure that what had happened at Continental, namely, a bankruptcy whereby the collective bargaining agreement was abrogated and pilots' salaries were cut in half, not become an industry norm to be sought by other airlines in the bargaining process. For this reason it was in the interest of all pilots, members and non-members alike, that ALPA used its funds to pay the pilots at Continental to make up for their lost wages.
The court further found that
in 1985, United sought in bargaining to impose a concession which American Airlines had achieved [with another union], namely, a B-Scale two-tier payment arrangement under which airline cockpit personnel hired after a certain date would be paid on a lower pay scale (the B-Scale). ALPA supported financially the pilots who struck United, and ultimately, after a twenty-nine day strike, secured from United a six-year parity requirement under the B-Scale arrangement. This accomplish ment has been used to benefit all members (and non-members) in all the airlines, not just those employed by United.
In its discussion of the major contingency fund, the court found that
[t]he United and Continental strikes considerably weakened ALPA's financial stability. Since a financially weak ALPA was vulnerable to a prolonged strike, ALPA lost its credibility with management because the other airlines knew it could not financially sustain a long strike. For this reason, the Major Contingency Fund was created.... It was from this fund that some expenditures, beginning in 1985, were made to support the striking pilots at Continental and United. Plaintiffs attack the fund as an improper expenditure of the dues of the objecting plaintiffs. Again the court finds the creation of the fund to be a device reasonably employed to implement the duties of the union as exclusive representative of the employees in the bargaining unit.
II
The principal complaint of the objecting nonunion pilots concerns ALPA's use of their agency fees to support strikes and other activities of bargaining units at airlines where they are not employed. Closely related is their complaint that ALPA used their agency fees to support the major contingency fund. The nonunion pilots assert that use of agency fees for expenses related to bargaining outside the unit at the airline where a pilot works violates both the Railway Labor Act and their constitutionally protected rights of free association.
Section 2, Eleventh of the Railway Labor Act provides that regulated carriers and unions may agree that "as a condition of continued employment, . all employees shall become members of the labor organization representing their craft and class." 45 U.S.C. § 152, Eleventh (a). This provision was added to the RLA in 1951. Five years later, the Supreme Court sustained the agency-fee provisions of the RLA against attack on their facial constitutionality under the First and Fifth Amendments. Railway Employees Dep't v. Hanson, 351 U.S. 225, 238, 76 S.Ct. 714, 721, 100 L.Ed. 1112 (1956). At the same time, it found that the requirement that unwilling workers pay agency fees to the union might under other circumstances pose a constitutional problem, since the enactment of § 2, Eleventh is "the governmental action on which the Constitution operates, though it takes a private agreement to invoke the federal sanction." Hanson, 351 U.S. at 232, 76 S.Ct. at 718.
The intrusion into individual freedom of choice is justified by Congress' desire to ensure "[ijndustrial peace along the arteries of commerce," Hanson, 351 U.S. at 233, 76 S.Ct. at 719, and by the need to reduce labor friction through "the elimination of the 'free riders' — those employees who obtained the benefits of the unions' participation in the machinery of the Act without financially supporting the unions." International Ass'n of Machinists v. Street, 367 U.S. 740, 761-62, 81 S.Ct. 1784, 1796, 6 L.Ed.2d 1141 (1961). However, the RLA does not give "unions, over an employee's objection, the power to use his exacted funds to support political causes which he opposes." Street, 367 U.S. at 768-69, 81 S.Ct. at 1800 (footnote omitted).
Lehnert v. Ferris Faculty Ass'n, — U.S. —, 111 S.Ct. 1950, 114 L.Ed.2d 572 (1991), concerned not a carrier regulated by the RLA but a public-employee union exacting agency fees pursuant to a state statute. However, "[b]ecause the Court expressly has interpreted the RLA 'to avoid serious doubt of [the statute's] constitutionality,' the RLA cases necessarily provide some guidance regarding what the First Amendment will countenance in the realm of union support of political activities through mandatory assessments." Lehnert, — U.S. at —, 111 S.Ct. at 1957 (citations omitted). Examining the prior cases, the Court deduced that the constitutionality of challenged agency-fee expenditures must be measured against a three-part test. Chargeable activities must
(1) be "germane" to collective-bargaining activity; (2) be justified by the government's vital policy interest in labor peace and avoiding "free riders"; and (3) not significantly add to the burdening of free speech that is inherent in the allowance of an agency or union shop.
— U.S. at —, 111 S.Ct. at 1959.
Applying these principles, the Court specifically rejected the agency-fee objectors' contention that the "local union may not utilize dissenters' fees for activities that, though closely related to collective bargaining generally, are not undertaken directly on behalf of the bargaining unit to which the objecting employees belong." The Court found this contention "to be foreclosed by our prior decisions." — U.S. at —, 111 S.Ct. at 1959. To require that expenses concern the specific bargaining unit "would be to ignore the unified-membership structure under which many unions, including those here, operate." — U.S. at —, 111 S.Ct. at 1961. Under this structure, "[t]he essence of the affiliation relationship is the notion that the parent will bring to bear its often considerable economic, political, and informational resources when the local is in need of them. Consequently, that part of a local's affiliation fee which contributes to the pool of resources potentially available to the local is assessed for the bargaining unit's protection, even if it is not actually expended on that unit in any particular membership year." - U.S. at -, 111 S.Ct. at 1961.
The Court recognized limitations on the union's power to spend exacted fees for bargaining activities unrelated to the bargaining unit: the Constitution bars "a direct donation or interest-free loan to an unrelated bargaining unit for the purpose of promoting employee rights or unionism generally," as well as a "contribution by a local union to its parent" that is "in the nature of a charitable donation." — U.S. at -, 111 S.Ct. at 1961. Nevertheless, extra-unit bargaining expenditures are legitimate if there is "some indication that the payment is for services that may ultimately enure to the benefit of the members of the local union by virtue of their membership in the parent organization." — U.S. at —-—, 111 S.Ct. at 1961-62. Among the expenditures approved by the Lehnert Court in this context were funds used to prepare for a potential strike. The Court upheld the district court's findings that such preparations are "reasonable bargaining tools." — U.S. at —, 111 S.Ct. at 1965.
The holding in Lehnert, read in conjunction with the district court's extensive findings of fact, makes the union's case for the challenged expenditures, if anything, stronger than it had been under previous precedent. ALPA's "unified-membership structure," — U.S. at -, 111 S.Ct. at 1961, is even tighter than that of the union in Lehnert. As the district court found, negotiations at other airlines were not only germane to the bargaining process at each airline bargaining unit, but in essence determined the result of the bargaining process. Expenditures to prevent the extraction of concessions from ALPA by individual airlines handily meet the Lehnert test. Because support for the striking pilots was of crucial importance in establishing the union's bargaining position in each airline unit, the requirement that agency-fee objectors provide funds for the strike benefits was clearly justified by the bargaining pattern and practice in the airline industry.
Ill
Appellants attempt to challenge the use of their fees for the major contingency fund as an "involuntary loan." While the Lehnert Court cautioned in dictum that exacted funds could not be used for an "interest-free loan to an unrelated bargaining unit for the purpose of promoting employee rights or unionism generally," — U.S. at —, 111 S.Ct. at 1961, the ALPA fund does not match that description. The fund is, in the findings of the district court, "a device reasonably employed to implement the duties of the union as exclusive representative of the employees in the bargaining unit." Like the payments to the national union approved in Lehnert, the fund "contributes to the pool of resources potentially available to the local" and thus "is assessed for the bargaining unit's protection, even if it is not actually expended on that unit in any particular membership year." — U.S. at —, 111 S.Ct. at 1961. Here, the purposes for which the fund was created were, by finding of the district court, germane to collective bargaining. As they were designed to further the union's duty of representation, they were by definition justified by the policies underlying the RLA. Finally, we do not believe that the burden to constitutional rights imposed by permissible exaction of fees is heightened simply because the funds are assessed in advance of labor actions rather than contemporaneously or afterwards.
Accordingly, applying the test enunciated by the Court in Lehnert, we hold that a pro rata share of strike support benefits for pilots in other bargaining units and of the pro rata cost of the major contingency fund may be charged to objecting agency-fee payers. Accord Pilots Against Illegal Dues v. Airline Pilots Ass'n., 938 F.2d 1123, 1131 (10th Cir. 1991).
In their supplemental briefs, both parties debate the implications of Lehnert for litigation expenses. However, nowhere in appellants' complaint, the stipulations of fact, or the district court's findings is there any mention of extra-unit litigation expenses in this case. The issue simply has not been properly presented and preserved below, and therefore we express no view about it. See United States v. One 1971 Mercedes Benz, 542 F.2d 912, 915 (4th Cir.1976).
IV
The appellants also complain that 1985 and 1986 rebate system for agency fees did not comply with the requirements imposed by Chicago Teachers v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986). They do not complain about the current rebate system. Hudson holds that union procedures for accounting and rebate or advance reduction of agency fees must "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, 106 S.Ct. at 1078.
Pointing out that Htidson dealt with a public employer and public employees, ALPA contends that state action and consequent applicability of the First Amendment are not involved in this case, because airline transportation is a private industry. Supporting this thesis with recent Supreme Court decisions that deny the applicability of the state action doctrine to private transactions, ALPA asserts that the procedures required by Hudson do not apply to private collective bargaining agreements.
We cannot accept ALPA's position. It is squarely rebutted by Hanson, 351 U.S. at 232, 76 S.Ct. at 718, and we do not agree that the Supreme Court has implicitly overruled Hanson. ALPA must, and now does, provide nonunion pilots the same procedural protection required by Hudson.
From 1978 until 1983, ALPA rebated to each nonunion agency fee payer who objected to use of agency fees for political purposes a percentage of the fee paid, plus interest, based on ALPA's computation of the percentage of its total expenditures that were used for political purposes. ALPA revised its rebate procedures after the Supreme Court decided Ellis v. Brotherhood of Ry. Clerks, 466 U.S. 435, 104 S.Ct. 1883, 80 L.Ed.2d 428 (1984). The new procedures, designed to conform to Ellis, established an interest-bearing escrow account into which ALPA deposited 150 percent of the amount it estimated would be rebatable at the end of the relevant year. In 1986, after the Supreme Court's decision in Hudson, ALPA set up a procedure by which dissenting agency fee payers could seek arbitration of disputes about the proper amount of rebates. ALPA pays the expense of arbitration. By mutual agreement, arbitration for years since 1985 has been stayed pending this litigation.
In November 1987, ALPA granted agency fee payers an option to receive either an advance reduction of their dues or a rebate with interest from the escrow account. In December 1987, a summary and explanation of the 1986 rebate system was sent to all agency fee payers. Previously, such information had been sent only to agency fee payers who had objected to use of their fees for nonchargeable expenses.
The district court held that appellants' claims were barred by the statute of limitations; however, the court also found that
the procedures for the year 1987 are well within the requirements of Hudson, and the procedures for the year 1986 substantially within them. For the years prior to 1985 there may have been deficiencies; however, no specific damage to any plaintiff as a result of any deficiency in the rebate program itself has been shown, and the court is unwilling to require an audit, notice, or an opportunity to object on the possibility that there may be revealed some inappropriate expenditures warranting additional rebates.
A panel of this court held that the appellants' claims were not time-barred. For reasons stated in its opinion, we affirm that ruling. Crawford, v. Air Line Pilots Ass'n Int'l, 870 F.2d 155, 159 (4th Cir.1989). The panel affirmed the alternative holding of the district court that the challenged plans substantially complied with Hudson and that appellants had proved no damages arising out of delay or minor procedural deficiencies. With respect to the procedural aspect of the rebate system, we affirm the district court for reasons stated in the panel opinion. See Crawford, 870 F.2d at 159-61.
AFFIRMED.