Opinion ID: 569313
Heading Depth: 3
Heading Rank: 1

Heading: Standard of Chargeability and Escrow Verification

Text: 98 The plaintiffs argue that the district court judge erred in refraining from ruling on two of their claims: (1) the decision about categories of chargeable expenditures and (2) the absence of an auditor to determine and verify escrow amounts because the plaintiffs had not first resorted to the arbitration process. The plaintiffs contend that Chicago Teachers Union v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986), does not require exhaustion by arbitration. With respect to the actual claims, the plaintiffs first argue that the union's legal definition of chargeable expenditures is constitutionally overbroad. They allege (1) that the union uses a forced cross-bargaining unit subsidization concept rather than basing the charges on the actual bargaining unit, and (2) that the union includes most lobbying costs. Second, they claim that the union's failure to have a certified public accountant verify the escrow amount violates Hudson. 99 The union replies that the notice on its face is not overbroad. Furthermore, the union contends that the district court correctly understood that the plaintiffs' real concern was with the fee calculation. The union argues that it provided the plaintiffs with the opportunity to have arbitration and the plaintiffs declined, thus the district court correctly found the challenge to fee calculation barred. The union also contends that since 1985 it has more than complied with constitutionally required procedures by escrowing all of the contested reduced fee paid. 100 In Hudson, the Court held that the union must provide for a reasonably prompt decision by an impartial decisionmaker. 475 U.S. at 307, 106 S.Ct. at 1076. The Court gave two possibilities: (1) a state could choose to provide extraordinarily swift judicial review for these challenges, id. at 308 n. 20, 106 S.Ct. at 1076 n. 20; or (2) the union could provide an expeditious arbitration. Id. at 308 n. 21, 106 S.Ct. at 1077 n. 21. The Court added that the arbitrator's decision would not receive preclusive effect in any subsequent § 1983 action. Id. 101 Recent appellate courts have sought to decide whether and when plaintiffs must exhaust union arbitration procedures before appealing to a federal court. In Tierney v. City of Toledo, 917 F.2d 927, 940 (6th Cir.1990), the court concluded that, as a general matter, exhaustion was not necessary before constitutional claims were brought in federal court but did not address the scope of constitutional claims. However, in Hudson v. Chicago Teachers Union, 922 F.2d 1306 (7th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2852, 115 L.Ed.2d 1020 (1991), the court stated that judicial review without prior arbitration was limited to ensuring that the proper procedure--fair share notice, an impartial decisionmaker to determine fee amount, and escrow protection--was followed. Id. at 1314. [T]he singular role of the federal courts in reviewing the adequacy of fair share notice is to determine whether the notice gives the nonunion members enough information to challenge the basis for the fee. Id. It noted that, if the decision on fee calculation was adverse to the plaintiffs, they could seek review in the federal courts. Id. It refused to become involved in more specific determinations and micromanagement prior to arbitration. In Dashiell, the court did not address the exhaustion issue. Nevertheless, it seemed to be in accord with the Seventh Circuit by stating that the First Amendment 102 requires only that the union disclose as part of its initial explanation to employees (1) such information that reveals to the employees major descriptive categories of expenses which will be assessed against the employees; (2) the component dollar amount of each category so chargeable; and (3) information to show that the financial figures have been verified by an independent auditor. 103 925 F.2d at 757. 104 We decline to decide the arbitration issue because even if the court had considered the claims, dismissal would have been proper. The notice of chargeable expenditures is not overbroad. It provides, Objectors shall be charged for all activities germane to collective bargaining. The language parallels that in Lehnert v. Ferris Faculty Ass'n, --- U.S. ----, 111 S.Ct. 1950, 1957, 114 L.Ed.2d 572 (1991), and thus is permissible. Even the more specific standard found in Article 27 of the union's constitution, All funds expended, directly or indirectly, on legislative activity not pertinent to the Union's role as bargaining representative, is not overbroad. See Art. 27 § 8(d) (1986); Art. 27 § 3(d) (1988). Although in Lehnert, the Court held that the objectors to public sector unions could not be charged for legislative lobbying or other political union activities outside the limited context of contract ratification or implementation, id., 111 S.Ct. at 1961, the Court's rationale was that connection between the challenged lobbying activities and the union's function as bargaining representative is too attenuated.... Id. at 1959-60. Thus, the Court based its decision on which activities would qualify as related to the function of bargaining representative. Although after Lehnert the union may find it difficult to apply the standard to many lobbying costs, the union's use of the identical phrase in its standard is not overbroad. 17 Furthermore, contrary to the plaintiffs' contention of the problems with cross-subsidization, Lehnert found that a local bargaining representative may charge objecting employees for their pro rata share of the costs associated with otherwise chargeable activities of its state and national affiliates, even if those activities were not performed for the direct benefit of the objecting employees' bargaining unit. Id. at 1961. Thus, in this regard, the notice of chargeable activities also is not overbroad. 105 The plaintiffs further contend that the union violated Hudson by failing to have a certified public accountant verify the amount in escrow and certify that the only monies not in escrow were those that no objector could reasonably challenge. However, since 1985, the union has placed in escrow the entire amount of the reduced fee paid by an objector who seeks to challenge the amount. Hudson states, If the Union chooses to escrow less than the entire amount, however, it must carefully justify the limited escrow on the basis of the independent audit, and the escrow figure must be independently verified. 475 U.S. at 310 n. 23, 106 S.Ct. at 1077 n. 23. Because the union has escrowed the entire amount, these further requirements are inapplicable. The union, of course, should provide notice of its procedures in this regard; however, the absence of any such notice has not harmed the plaintiffs.