Court Opinion

ID: 185201
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:59+00
Date Added: 2024-06-11T17:26:13.959606
License: Public Domain

United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

          Argued May 8, 2000       Decided June 9, 2000 

                           No. 99-1338

                     Patrick Thomas, et al., 
                           Petitioners

                                v.

                 National Labor Relations Board, 
                            Respondent

             International Union, United Automobile, 
     Aerospace & Agricultural Implement Workers of America, 
                        Local 95, et al., 
                           Intervenors

                        Consolidated with 
                             99-1378

                            ---------

           On Petitions for Review of an Order of the 
                  National Labor Relations Board

                            ---------

     Glenn M. Taubman argued the cause for petitioners.  With 
him on the briefs was W. James Young.

     Fred B. Jacob, Attorney, National Labor Relations Board, 
argued the cause for respondent.  With him on the brief were 
Linda Sher, Associate General Counsel, Aileen A. Armstrong, 
Deputy Associate General Counsel, and Margaret A. Gaines, 
Supervisory Attorney.

     James B. Coppess argued the cause for intervenors.  With 
him on the brief were Michael B. Nicholson and Laurence 
Gold.

     Before:  Edwards, Chief Judge, Randolph and Garland, 
Circuit Judges.

     Opinion for the Court filed by Chief Judge Edwards.

     Edwards, Chief Judge:  The petitions for review in this case 
challenge an order of the National Labor Relations Board 
("NLRB" or "the Board") dismissing a complaint alleging a 
breach of a union's statutory duty of fair representation 
("DFR").  Petitioners are individual employees who are rep-
resented in collective bargaining by the International Union, 
United Automobile, Aerospace and Agricultural Implement 
Workers of America ("the Union");  petitioners are not mem-
bers of the Union, however.  The "Union" in this case in-
cludes two related entities:  the International, which is the 
organizational body that coordinates the Union's activities 
and is also the collective bargaining agent for represented 
employees;  and local chapters, which carry out the policies of 
the International.  As nonmembers, petitioners may insist 
that their union dues and fees be used only to defray costs of 
collective bargaining and contract administration, not for 
"nonrepresentational" activities such as political or ideological 
advocacy.  Nonmembers who so insist are charged a reduced 
"agency fee" that is intended to correspond only to that 
portion of the Union's expenditures used for representational 
activities.

     In the principal petition for review, several nonmembers 
claim that the method used by the Union to determine the 
percentage of dues and fees expended on representational 
activities (and, concomitantly, the reduced agency fee owed 
by nonmembers) violates the Union's duty of fair representa-

tion.  The complaint before the Board charged that the Union 
unlawfully used a "local presumption" to calculate fees owed 
by nonmembers.  Under the disputed local presumption, the 
Union first determined the percentage of dues and fees 
expended by the International on representational activities;  
the Union then assumed that the International and local 
chapters spent the same proportion of their fees on charge-
able activities, even though Union records indicated that local 
chapters routinely spend a greater proportion of their fees on 
chargeable activities.  The Board found that the Union's use 
of a local presumption was not a violation of the Union's duty 
of fair representation.  See International Union, United 
Auto., Aerospace and Agric. Implement Workers, 328 
N.L.R.B. No. 175, 1999 WL 632712 (1999) ("Order").

     The second petition for review involves a complaint that 
George Gally, a nonmember of the Union since 1985, was 
unlawfully discharged for failure to pay union dues.  The 
complaint before the Board alleged that Mr. Gally was enti-
tled to a notice stating the amount by which his fee would be 
reduced if he filed an objection to the fee, as well as an 
explanation as to how the reduced fee was calculated.  Unlike 
the other petitioners, Mr. Gally never filed an objection to the 
union fees, and he was terminated for nonpayment of full 
union dues.  The Board upheld the discharge of Mr. Gally, 
finding that the duty of fair representation does not require 
that potential objectors be apprised of the percentage of 
funds spent by the Union on nonrepresentational activities.  
See Order, 1999 WL 632712, at *6-7.

     We uphold the Board's decision as to the local presumption, 
grant Mr. Gally's petition, and remand the case to the Board 
for an appropriate remedy.  The Board determined that, 
under the particular circumstances of this case, the Union's 
application of a local presumption was not arbitrary, discrimi-
natory, or in bad faith.  There was substantial evidence 
presented in the record to support this conclusion.  The 
Board concedes, however, that Mr. Gally's petition must be 
granted given this court's recent decision in Penrod v. NLRB, 
203 F.3d 41 (D.C. Cir. 2000).

                          I. Background

     The facts of this case are straightforward and undisputed.  
Petitioners work for a number of different employers with 
whom the Union engages in collective bargaining as the 
lawful bargaining agent for represented employees.  The 
petitioners, however, chose to become or remain nonmembers 
of the Union.  The Union receives dues and fees from all 
employees in represented bargaining units.  The dues and 
fees normally are collected by local chapters, which retain 
38% of the money and remit 62% to the International.  The 
locals remit an additional 3% of collected monies to the 
International's Community Action Program, thus reducing 
the locals' share of dues and fees to 35%.  Both the locals and 
the International spend funds to defray costs of collective 
bargaining and contract administration and also to support 
nonrepresentational activities such as lobbying and political 
campaigning.  The Supreme Court has held, in Communica-
tions Workers v. Beck, 487 U.S. 735 (1988), that nonmembers 
of a union may request that their dues and fees be reduced by 
the percentage of funds allocated by the union to nonrepre-
sentational activities.  Individuals who make such a request 
have come to be known as "Beck objectors."

     In 1989, the Union established a two-step Beck "objection 
procedure" for nonmembers.  In the first step, a nonmember 
who objects to paying fees for nonrepresentational activities 
receives the Unions' Report of Expenditures in Providing 
Collective Bargaining Related Services ("Report").  In the 
second step, an objector who is not satisfied with the Report 
can, within 45 days after the Report is issued, file a written 
objection which is then submitted to a neutral arbitrator for 
resolution.  All claims submitted to arbitration are governed 
by the rules of the American Arbitration Association.  During 
the pendency of a nonmember's claim, the Union is required 
to place the disputed fees in an interest-bearing escrow 
account.  In any case in arbitration, the Union bears the 
burden of establishing the accuracy of its fee calculation.

     Petitioners in this case (except for petitioner George Gally) 
filed Beck objections, requesting an accounting of the Union's 

nonrepresentational expenditures.  None of the petitioners, 
however, invoked the arbitration process.  Petitioner Gally 
never filed an objection, opting instead to cease paying dues 
in 1990.  Under the applicable union-security clause, covering 
the bargaining unit in which Mr. Gally worked, a failure to 
pay dues was grounds for termination.  At the Union's re-
quest, Mr. Gally was terminated on April 9, 1991.  Subse-
quently, on April 12, 1991, Mr. Gally filed a charge with the 
Board challenging his termination, and requesting reinstate-
ment and back pay.

     In June 1992, the Union provided the required Report to 
each Beck objector.  The Report calculated the Union's ex-
penditures on representational and nonrepresentational activ-
ities for the 1991 fiscal year.  The Report also contained a 
certified public accountant's audit of the International's finan-
cial records, and detailed how the 65% of fees received by the 
International was spent.  The Report provided no breakdown 
of the monies spent by the Union's local chapters.  The Union 
explained this absence by invoking the so-called "local pre-
sumption," stating:

     This report will not attempt separately to analyze the 
     expenditures of each of the Local Unions in which UAW-
     represented employees participate....  Because of the 
     accounting and reporting difficulties inherent in attempt-
     ing to analyze separately the expenditures of each of the 
     Local Unions, this Report will analyze only the expendi-
     tures of the International Union, UAW.  The same pro 
     rata allocation between Chargeable Expenditures and 
     Remaining Expenditures determined for the Internation-
     al's expenditures will then be applied to that portion of 
     the dues and fees retained by the various Local Unions 
     involved.
     
     This procedure is justified because the vast majority of 
     the UAW's Remaining Expenditures activities, including 
     especially political lobbying and organizing, are funded 
     and conducted by the International Union.  Compared to 
     the International, Local Unions thus invariably expend a 
     greater portion of the resources performing Chargeable 
     
     Expenditure activities such as bargaining contracts, han-
     dling grievances, conducting arbitration hearings and 
     otherwise administering collective bargaining agree-
     ments.  By applying the same allocation of Chargeable 
     Expenditures and Remaining Expenditures to the Local 
     Unions as that determined for the International Union, 
     therefore, Objectors covered by NLRA union security 
     agreements are being required to pay a smaller amount 
     than would be the case if each Local Union's expendi-
     tures were separately analyzed.
     
Report of Expenditures Incurred in Providing Collective Bar-
gaining Related Services for Fiscal Year 1991, at 3-4, reprint-
ed in Appendix ("App.") 58-59.

     Petitioners filed charges with the NLRB, arguing that the 
Union's application of the local presumption violated the 
Union's duty of fair representation and, therefore, was an 
unfair labor practice.  Petitioners requested that the union 
security clause be struck from the Union's collective bargain-
ing agreements, that each employee be notified of his rights 
under the NLRA, and that petitioners be given complete 
restitution of all agency fees, with interest.  On October 26, 
1992, the General Counsel issued a consolidated complaint 
against the Union and its locals, contending that the Union 
violated s 8(b)(1)(A) of the National Labor Relations Act 
("NLRA" or "the Act"), 29 U.S.C. s 158(b)(1)(A) (1994), by 
relying on a "factually unsupported 'local presumption.' "  
The General Counsel also alleged that Gally's termination 
constituted an unfair labor practice under s 8(b)(1)(A) and 
s 8(b)(2) of the Act, 29 U.S.C. ss 158(b)(1)(A), (b)(2), because 
the Union did not provide Gally with sufficient information to 
decide whether to file a Beck objection.  On June 10, 1993, 
the General Counsel moved both to transfer the case to the 
Board and for summary judgment.  On June 16, 1993, the 
Board issued an order transferring the case to the Board and 
a Notice to Show Cause why the motion for summary judg-
ment should not be granted.  All parties filed briefs in 
response.

     On August 16, 1999, the Board issued its decision dismiss-
ing the complaint.  The Board agreed that "the use of a 
totally unreasoned or unsupported local presumption would 
not meet a union's duty of fair representation, because it 
would not provide objectors with sufficient information to 
enable them to decide whether or not to challenge the union's 
figures."  Order, 1999 WL 632712, at *5.  The Board went on 
to find that the Union "provided adequate support for [its] 
use of the local presumption in this case."  Id.  The Board 
stated that the Union's justification (i.e., that local chapters 
expend a greater proportion of their funds on representation-
al activities than the International) explained why the local 
presumption "is justified under the circumstances."  Id.  The 
Board found that, because the Union computed the amount of 
chargeable activities conducted by each local based on the 
International's actual expenditures, "the objecting employees 
will likely pay less in dues and fees."  Id.  The Board noted 
further that the employees had a remedy if they thought 
otherwise:  "[T]hey can lodge a challenge, and the Local will 
be put to its proof."  Id.  In dismissing the complaint, the 
Board held that the use of the local presumption "was not 
arbitrary, discriminatory, or in bad faith, and therefore does 
not violate the [Union's] duty of fair representation."  Id.  
Finally, the Board held that Gally was not unlawfully termi-
nated, because he had no right to receive information regard-
ing the percentage of funds spent by the Union on nonrepre-
sentational activities until after he filed a Beck objection.  See 
id. at *6-7.

                           II. Analysis

A.   Gally's Petition

     After Mr. Gally's petition for review had been filed, the 
court issued Penrod, holding that potential objectors like Mr. 
Gally are entitled to be informed of the amount by which 
their fees would be reduced were they to become Beck 
objectors.  See Penrod, 203 F.3d at 47-48.  Board counsel 
acknowledges that the Penrod decision controls the disposi-
tion of Mr. Gally's petition, because the Union never provided 

the required information to Mr. Gally.  It is unclear, however, 
whether Mr. Gally is entitled to the remedy he seeks, given 
the Supreme Court's holding that objecting nonmembers are 
not excused from paying disputed agency fees until a final 
judgment is rendered in their favor.  See Brotherhood of Ry. 
& S.S. Clerks v. Allen, 373 U.S. 113, 120 (1963).  Accordingly, 
we grant Mr. Gally's petition for review and remand the case 
to the Board to determine an appropriate remedy for the 
Union's statutory violation.  See South Prairie Constr. Co. v. 
Local No. 627, Int'l Union of Operating Eng'rs, 425 U.S. 800, 
805-06 (1976) (per curiam) (holding that appeals court 
usurped role of NLRB by reversing Board's legal conclusion 
and proceeding to decide issue of fact that should be decided 
by Board in the first instance).

B.   Beck Objectors' Petition for Review

     1.    Standard of Review
          
     The complaint in this case contends that the Union breach-
ed its statutory duty of fair representation.  Duty of fair 
representation claims are somewhat of an oddity under the 
NLRA.  This is so because the NLRA, like the Railway 
Labor Act, 45 U.S.C. ss 151-188 (1994 & Supp. IV 1998), has 
no express provision establishing a duty of fair representation 
or declaring a DFR breach to be an unfair labor practice.  
Rather, DFR is a judicially-crafted doctrine that was first 
recognized (in an application of the Railway Labor Act) by 
the Supreme Court in Steele v. Louisville & Nashville Rail-
road Co., 323 U.S. 192, 204 (1944), in the context of a union's 
negotiation of an agreement that included racially discrimina-
tory provisions.  The duty "has grown enormously in scope 
since 1944, however, from avoiding racial discrimination to 
providing daily representation."  International Union of the 
United Ass'n of Journeymen & Apprentices of the Plumbing 
& Pipefitting Indus. v. NLRB, 675 F.2d 1257, 1264 (D.C. Cir. 
1982).  The scope of DFR under both the Railway Labor Act 
and the NLRA is similar.  See Davenport v. International 
Bhd. of Teamsters, 166 F.3d 356, 361 n.4 (D.C. Cir. 1999) 
(noting that "[c]ases describing the scope of the duty freely 
cite precedents under both statutes");  see generally The 

Changing Law of Fair Representation (Jean T. McKelvey, 
ed., 1985).

     A union breaches its duty of fair representation when its 
conduct toward represented employees is "arbitrary, discrimi-
natory, or in bad faith."  Vaca v. Sipes, 386 U.S. 171, 190 
(1967).  In the instant case, petitioners' complaint is properly 
understood as a claim that the Union's use of the disputed 
local presumption is arbitrary.  There is no contention that 
the Union acted pursuant to some "bad faith" motive or that 
the Union has somehow engaged in unlawful "discrimination."  
Rather, an allegation of arbitrary action is at the heart of the 
complaint here.

     In considering DFR complaints that are premised on asser-
tions of arbitrary action, the courts and the Board accord 
deference to a union, finding a DFR breach only if the union's 
action "can be fairly characterized as so far outside a 'wide 
range of reasonableness' " that it is entirely irrational.  Air 
Line Pilots Ass'n, Int'l v. O'Neill, 499 U.S. 65, 78 (1991) 
(quoting Ford Motor Co. v. Huffman, 345 U.S. 330, 338 
(1953)).  The Board does not require that a union prove "that 
the choices it makes are better or more logical than other 
possibilities," but, instead, that the union "act[s] on the basis 
of relevant considerations," not arbitrary ones.  Reading 
Anthracite Co., 326 N.L.R.B. No. 143, 1998 WL 726724, at *2 
(1998);  see also Marquez v. Screen Actors Guild, Inc., 525
U.S. 33, 45-46 (1998) (making it clear that a union has "room 
to make discretionary decisions and choices, even if those 
judgments are ultimately wrong").  Indeed, even though the 
standard is based in principles of "reasonableness," proof of 
negligence does not establish a breach of the duty.  See 
Le'Mon v. NLRB, 952 F.2d 1203, 1205 (10th Cir. 1991).

     Just as the Board reviews the Union's actions with defer-
ence, we accord substantial deference to the Board's decision.  
We will set aside a decision of the Board only if it "acted 
arbitrarily or otherwise erred in applying established law to 
the facts" at issue, International Union of Elec., Elec., Sala-
ried, Mach. & Furniture Workers v. NLRB, 41 F.3d 1532, 
1536 (D.C. Cir. 1994) (internal quotation marks omitted), or if 

its findings are not supported by "substantial evidence," 29 
U.S.C. s 160(f) (1994).  In the context of this case, the 
substantial evidence standard is most pertinent.  See Boiler-
makers Local No. 374 v. NLRB, 852 F.2d 1353, 1358 (D.C. 
Cir. 1988) (reviewing Board's duty of fair representation 
decision under substantial evidence standard);  see also 
Le'Mon, 952 F.2d at 1205-06 (reviewing for substantial evi-
dence where Board found no breach of duty);  Tenorio v. 
NLRB, 680 F.2d 598, 601 (9th Cir. 1982) (reviewing for 
substantial evidence where Board found no breach of duty).

     Substantial evidence "is 'more than a mere scintilla.  It 
means such relevant evidence as a reasonable mind might 
accept as adequate to support a conclusion.' "  Micro Pacific 
Dev. Inc. v. NLRB, 178 F.3d 1325, 1329 (D.C. Cir. 1999) 
(quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 
(1938)).  This court will uphold the Board's decision upon 
substantial evidence even if we would reach a different result 
upon de novo review.  See Perdue Farms, Inc., Cookin' Good 
Div. v. NLRB, 144 F.3d 830, 834-35 (D.C. Cir. 1998).  In 
undertaking substantial evidence review, we consider not just 
the evidence that supports the Board's decision, but any 
evidence in the record that "fairly detracts from its weight."  
Tenorio, 680 F.2d at 601.  The posture of the instant case 
calls for singular deference, as petitioners must show that 
there was a lack of substantial evidence to support the 
Board's finding that the Union's actions fell within a broad 
range of reasonableness.

     The significant nature of the deference due to the Board in 
DFR cases is cogently explained by Chief Judge Posner in 
International Ass'n of Machinists & Aerospace Workers v. 
NLRB, 133 F.3d 1012, 1016 (7th Cir.), cert. denied sub nom. 
Strang v. NLRB, 525 U.S. 813 (1998).  Chief Judge Posner's 
opinion aptly observes:

     All the details necessary to make the rule of Beck 
     operational were left to the Board, subject to the very 
     light review authorized by Chevron.  It is hard to think 
     of a task more suitable for an administrative agency that 
     specializes in labor relations, and less suitable for a court 
     
     of general jurisdiction, than crafting the rules for trans-
     lating the generalities of the Beck decision ... into a 
     workable system for determining and collecting agency 
     fees.
133 F.3d at 1015.  We agree.  In other words, given the 
nature of the DFR doctrine, a court reviews with deference a 
Board decision that was itself made with deference to the 
Union.  This does not mean that our review is toothless but 
merely that we must be very cautious in entertaining an 
invitation to reverse the Board.

     2.    The Merits of Petitioners' Arguments
          
     The Union and petitioners' employers have negotiated 
through collective bargaining "union-security clauses" that 
permit the Union to collect fees from all represented employ-
ees, even those who elect not to join Union membership.  The 
Supreme Court has held that the collection of fees is permis-
sible, subject to certain limiting conditions.  In Abood v. 
Detroit Board of Education, 431 U.S. 209 (1977), the Supreme 
Court ruled that a union representing public employees could 
collect "agency fees" from nonmembers, but that nonmem-
bers had a constitutional right not to have any portion of their 
fees used for nonrepresentational, ideological activities. 431
U.S. at 234.  Subsequently, in Chicago Teachers Union v. 
Hudson, 475 U.S. 292 (1986), the Court explained how this 
balance must be struck:

     Basic considerations of fairness, as well as concern for 
     the First Amendment rights at stake, ... dictate that 
     the potential objectors be given sufficient information to 
     gauge the propriety of the union's fee.  Leaving the 
     nonunion employees in the dark about the source of the 
     figure for the agency fee--and requiring them to object 
     in order to receive information--does not adequately 
     protect the careful distinctions drawn in Abood.
475 U.S. at 306.

     The Court in Hudson found the information given nonmem-
bers inadequate, because it did not "identify[ ] the expendi-

tures for collective bargaining and contract administration 
that had been provided for the benefit of nonmembers as well 
as members--and for which nonmembers as well as members 
can fairly be charged a fee."  Id. at 306-07.  The Court 
explained:

     We continue to recognize that there are practical reasons 
     why "[a]bsolute precision" in the calculation of the charge 
     to nonmembers cannot be "expected or required."  Thus, 
     for instance, the Union cannot be faulted for calculating 
     its fee on the basis of its expenses during the preceding 
     year.  The Union need not provide nonmembers with an 
     exhaustive and detailed list of all its expenditures, but 
     adequate disclosure surely would include the major cate-
     gories of expenses, as well as verification by an indepen-
     dent auditor.  With respect to an item such as the 
     Union's payment of $2,167,000 to its affiliated state and 
     national labor organizations, for instance, either a show-
     ing that none of it was used to subsidize activities for 
     which nonmembers may not be charged, or an explana-
     tion of the share that was so used was surely required.
     
Id. at 307 n.18 (citations omitted) (alteration in original).

     For our purposes, the most recent piece of the puzzle was 
added by Beck.  The Court's decision in Beck extends the 
logic of Abood, which rested on constitutional grounds, to the 
statutory DFR context.  The Beck Court concluded that 
s 8(a)(3) of the NLRA "authorizes the exaction of only those 
fees and dues necessary" for the union to perform its duties 
as the exclusive representative of employees on labor-
management issues. 487 U.S. at 762-63.  Accordingly, the 
Court held that nonmembers may bring a claim for improper-
ly charged agency fees as a breach of the duty of fair 
representation.  See id. at 745.  Beck does not purport to 
enunciate procedures by which unions are to verify their 
calculations of the proportion of agency fees attributable to 
representational activities.

     This case is framed by the axes of Hudson and Beck.  
Hudson establishes the procedural grounds by which unions 
representing public employees must defend their apportion-

ment of charges for representational and nonrepresentational 
activities.  Beck establishes that private sector nonmember 
employees may bring an action, based on the union's duty of 
fair representation, contesting the use of agency fees for 
nonrepresentational activities.  Although Hudson involved 
constitutional concerns, this court has applied the basic pro-
tections of Hudson to the Beck-defined DFR cases involving 
private sector employees.  See Abrams v. Communications 
Workers, 59 F.3d 1373, 1379 n.7 (D.C. Cir. 1995);  see also 
Miller v. Air Line Pilots Ass'n, 108 F.3d 1415, 1424-25 (D.C. 
Cir. 1997) (remanding for District Court to resolve factual 
dispute as to whether audit met Hudson's requirements), 
aff'd on other grounds, 523 U.S. 866 (1998).  This court also 
has held that Beck objectors are entitled to the same proce-
dural protections described in Hudson for challenging a 
union's apportionment.  See Ferriso v. NLRB, 125 F.3d 865, 
869-70 (D.C. Cir. 1997).  None of these cases, however, 
addressed the issue raised here:  May a union use a local 
presumption to allocate between representational and nonre-
presentational activities?

     Petitioners' complaint rests on two principal arguments.  
First, petitioners contend that the use of a local presumption 
can never be squared with Hudson.  Second, petitioners 
contend that the Union's use of the local presumption in this 
case was factually unsupported.  Respondent contends that 
we may not consider the first argument, because it was not 
part of the complaint before the Board.  While it is true that 
both petitioners and the General Counsel distanced them-
selves rhetorically from a per se assault on the local presump-
tion, a fair reading of the General Counsel's arguments before 
the Board, and petitioners' arguments before this court, belie 
this claim.  The General Counsel, for instance, stated that a 
local presumption is "factually supported" only when the 
Union "demonstrate[s] that the local spent at least as great a 
proportion of its total expenditures for chargeable purposes 
as did the [I]nternational."  Br. of Counsel for the General 
Counsel to the NLRB 23, reprinted in App. 288.  Under this 
formulation, there would be nothing left of the presumption.  

Accordingly, we will address both contentions raised by peti-
tioners.

     On the first point, we reject petitioners' claim that a local 
presumption is per se unlawful.  Indeed, the law of the circuit 
is clear on this point, for this court previously has approved 
the use of a local presumption.  See Finerty v. NLRB, 113
F.3d 1288 (D.C. Cir. 1997).  The petitioners in Finerty chal-
lenged the Communications Workers of America's ("CWA") 
calculation of chargeable versus non-chargeable activities, 
because it was based on the CWA's national expenditures, 
and not broken down unit-by-unit.  The court, relying on 
Lehnert v. Ferris Faculty Association, 500 U.S. 507, 524 
(1991), upheld the Board's finding that such notice did not 
violate the CWA's duty of fair representation.  Finerty ob-
served that

     judicial precedent supports the Board's finding that use 
     of a "local presumption" in allocating expenses--i.e., an 
     assumption that allocation on a union-wide basis is 
     equivalent to allocation on a unit-by-unit basis--is rea-
     sonable.
113 F.3d at 1289 (emphasis added).

     In upholding the use of the local presumption, the decision 
in Finerty was guided by Price v. International Union, 
United Automobile, Aerospace & Agricultural Implement 
Workers, 927 F.2d 88 (2d Cir. 1991).  See Finerty, 113 F.3d at 
1292.  Price, in fact, involved the same fee reduction proce-
dure at issue in the instant case.  Both Price and Finerty 
place emphasis on the Supreme Court's observation in Hud-
son that " '[a]bsolute precision' in the calculation of the 
charge to nonmembers cannot be 'expected or required.' "  
See id. (quoting Price, 927 F.2d at 94 (quoting Hudson, 475
U.S. at 307 n.18)).

     Admittedly, Finerty did not squarely face the issue pre-
sented here.  In Finerty, the Union took all of its expenses, 
separated them into chargeable and non-chargeable expenses, 
and assumed that this proportion would apply throughout all 
of its units.  Here, the Union has conducted an audit of only 

65% of its fee expenditures (those fees collected by the 
International), and then assumed that the locals had at least 
the same proportion of non-chargeable expenses as the Inter-
national.  When considering the permissibility in general of a 
local presumption, however, this is a distinction without dif-
ference.  Finerty stands firmly for the proposition that a 
union may forego calculation of local-by-local expenditures 
and rely on overall expenditures to calculate an advance fee 
reduction.  This is all, as a matter of broad principle, that is 
at issue with respect to the general permissibility of the local 
presumption.

     Petitioners strain to suggest that reading Finerty to ap-
prove of the use local presumptions creates an intra-circuit 
conflict, because of this circuit's endorsement of Hudson 
procedures in the context of private employment relation-
ships.  Petitioners' assertion rests on a reading of Hudson 
that this circuit has rejected, namely, that Hudson requires 
each individual local to calculate its expenditures to meet the 
Hudson/Beck requirements.  Petitioners seem to suggest 
that those cases that applied Hudson principles to private 
employees (e.g., Ferriso and Abrams) by implication institut-
ed a requirement that every level of union hierarchy precisely 
calculate its expenses.  Hudson does not mandate this out-
come.  The only language that arguably supports this reading 
of Hudson is the Court's comment that the teacher's union's 
payment of $2,176,000 (53% of its total expenditures) to 
affiliated state and national labor organizations required "ei-
ther a showing that none of it was used to subsidize activities 
for which nonmembers may not be charged, or an explanation 
of the share that was so used." 475 U.S. at 307 n.18.  This 
does not preclude the use of a local presumption to explain 
the calculation of the reduced agency fee;  it simply requires 
this court to inquire whether that explanation is sufficient to 
meet the overarching requirement of Hudson, that nonmem-
bers receive an "adequate disclosure of the reasons why" they 
must pay a certain agency fee.  Id. at 307.

     We recognize that some of our sister circuits have ap-
proached this question from a different perspective.  See 
Prescott v. County of El Dorado, 177 F.3d 1102, 1108 (9th Cir. 

1999) (finding use of local presumption unconstitutional), va-
cated, 120 S. Ct. 929, reinstated in part, 204 F.3d 984 (9th 
Cir. 2000);  Hohe v. Casey, 956 F.2d 399, 410-11 (3d Cir. 1992) 
(rejecting a local presumption);  Lowary v. Lexington Local 
Bd. of Educ., 903 F.2d 422, 431 (6th Cir. 1990) (finding a local 
union presumption unconstitutional).  In our view, however, 
these decisions do not stand for the broad proposition that a 
local presumption is per se unlawful.  See Prescott, 177 F.3d 
at 1108 (stating that the court did "not decide that each little 
unit in the [Union's] firmament must necessarily be subjected 
to a separate verified audit of its expenditures");  Hohe, 956
F.2d at 410 (finding notice inadequate because the union 
offered no "explanation or justification" for presumption);  
Lowary, 903 F.2d at 431 (declaring unconstitutional local 
presumption that operated to shift the burden of proof in 
arbitration).  Nonetheless, the fundamental issue before this 
court, as even petitioners grudgingly concede in their reply 
brief, is whether the Board reasonably allowed the use of the 
local presumption in this case.  We turn now to that issue.

     On the record at hand in this case, we find substantial 
evidence to support the Board's conclusion that the Union 
acted within a "wide range of reasonableness," Ford Motor 
Co., 345 U.S. at 338, and that the Union's use of the local 
presumption was not arbitrary.  The Board found that the 
Union's use of the local presumption was not "arbitrary, 
discriminatory, or in bad faith" for two primary reasons.  
First, the Board found that the Union's reasoning that locals 
proportionately spend at least as much on representational 
activities to be "justified under the circumstances."  Order, 
1999 WL 632712, at *5.  Second, the Board noted that the 
employees could challenge the locals' allocation if they chose, 
and "the Local will be put to its proof."  Id.  The Board's 
decision also mentions in passing the Union's suggestion that 
use of the local presumption reduced accounting and report-
ing tasks, which the Board has otherwise recognized to be 
"expensive and time-consuming undertakings."  Id.  We do 
not view this passing observation as a principal justification 
for the Board's decision and we find no support for it in the 

record.  Therefore, we give it no weight in our review of the 
Board's order.

     Petitioners argue that, with respect to the first justification, 
the Board blindly accepted the Union's justification without 
any substantial evidence to support it.  The Board points out 
that there is in fact evidence in the record to support the 
Union's assumption that locals almost always spend propor-
tionately more on chargeable expenses than the International.  
The record contains an audit of Local 6000, and this audit 
indicates that the local spent 90.66% of its dues on chargeable 
expenses in 1992, while the International allocated 75.69% of 
its expenses to chargeable expenses during the same year.  
The record also contains evidence of local expenditures in 
1988;  in particular, an arbitrator found that each of five locals 
spent proportionately more on chargeable activities in 1988 
than did the International.  See In re International Union & 
Locals 6000, 723, 571, 699, & 70, United Auto., Aerospace, & 
Agric. Implement Workers, 94 Lab. Arb. (BNA) 1272, 1294 
(1990) (referred to in UAW Resp'ts Response to Notice to 
Show Cause and Br. in Support of a Grant of Summ. J. to the 
UAW Resp'ts at 34-35 & n.14, reprinted in App. 193-94).  
The General Counsel presented no evidence that a local had 
ever spent less, as a percentage of total expenditures, on 
chargeable expenses than had the International.  Although 
the cumulative evidence is not overwhelming on this issue, we 
cannot find that the Board was unreasonable in concluding 
that the Union acted rationally "on the basis of relevant 
considerations," Reading Anthracite Co., 1998 WL 726724, at 
*2, in determining that local unions normally spend propor-
tionately more on chargeable expenses than does the Interna-
tional.

     Moreover, the Union's organizational structure lends fur-
ther support to the Board's conclusion that the Union did not 
arbitrarily presume that the International conducts more 
nonrepresentational activity than the locals.  The Internation-
al maintains several distinct funds and departments that 
engage in nonrepresentational activity:  the Organizational, 
Education, and Communication Fund, the Community Action 
Program, the International Affairs Department, the Commu-
nity Services Department, and the National Organizing De-

partment.  All of the expenditures associated with these 
International bodies are considered to be non-chargeable to 
nonmembers.

     Petitioners offer no good argument to counter the Board's 
second justification.  The reason for this is obvious:  the 
Board's judgment in this case is greatly bolstered by the 
undisputed evidence on the procedures available to nonmem-
bers to challenge the Union's fee allocation.  Even the Gener-
al Counsel acknowledged that, given the challenge procedure, 
"the risk of overpayment is minimized."  Br. of Counsel for 
the General Counsel to the NLRB 23, reprinted in App. 288.  
The Board correctly found that these procedures mitigated 
petitioners' concerns that any of their payments would be 
unlawfully used for nonrepresentational activities.  Any chal-
lenge to the local fee calculation is presented to a neutral 
arbitrator, appointed by the American Arbitration Association 
("AAA"), who considers the challenge according to AAA 
established procedures.  Upon initiation of a fee challenge, 
the entire reduced fee paid by an objector is held in an 
interest-bearing escrow account until the arbitrator resolves 
the challenge.  The Union has the burden of proving to the 
arbitrator that it has accurately calculated the fee reduction, 
and, unlike in Lowary, 903 F.2d at 431, the Union is entitled 
to no local presumption during the arbitration proceedings.  
In other words, the Union must introduce evidence demon-
strating that the chargeable percentage of expenditures for 
the challenger's local was higher than the national chargeable 
percentage.

     Petitioners unconvincingly argue that this procedure puts 
the cart before the horse, because the thrust of Hudson is 
that a potential objector should not have to object prior to 
knowing the basis for the Union's allocation.  This is a 
crabbed reading of Hudson.  Hudson requires that the Union 
provide potential objectors "sufficient information to gauge 
the propriety of the union's fee." 475 U.S. at 306.  The Court 
clearly contemplated that some estimates would have to be 
made.  The only question here is whether, given the facts 
presented to the Board, and the procedures adopted by the 
Union, potential objectors have "sufficient information," not 

exact information.  In this case, the procedures amply protect 
those objectors who feel that their local spends proportionate-
ly more on nonrepresentational expenses than does the Inter-
national.

     Moreover, the principle undergirding Hudson and Beck is 
that a nonmember's funds should not be used by the Union 
for activities to which he has objection.  The procedure 
adopted by the Union adequately protects nonmember objec-
tors from this outcome.  See Ellis v. Brotherhood of Ry., 
Airline & S.S. Clerks, 466 U.S. 435, 444 (1984) (approving an 
advanced fee-reduction system and an interest-bearing es-
crow account for objectors as an alternative to rebate 
scheme).  Indeed, the objection procedure is a perfectly 
sensible system.  The Union's system allows nonmembers 
who have some reason to question the level of their local's 
non-chargeable activity to easily raise a challenge, thus forc-
ing the Union to justify its fee allocation.  And there is 
absolutely no risk that the funds collected from any such 
individuals will be used for non-chargeable activities.

     Finally, and most importantly, petitioners' crabbed inter-
pretation of Hudson entirely ignores the fact that this case 
presents a DFR claim.  The Court in Hudson was not 
required to assess a nonmember's objection in connection 
with a claimed breach of a union's duty of fair representation.  
And the Court certainly never suggested, either in Hudson or 
in Beck, that the DFR doctrine changes complexion when 
applied in a case of this sort.  The duty of fair representation 
protects against bad faith, discriminatory, and arbitrary ac-
tion by a union against represented employees.  Where, as in 
the instant case, a union uses a rational method to apportion 
fees and takes positive steps to establish neutral and fair 
procedures to protect the legal rights of nonmembers, a 
complainant is hard pressed to show a DFR breach.

     Given the evidence presented to the Board regarding the 
available audits of local chapters' expenditures, the structure 
of the International and its relationship to nonrepresentation-
al expenditures, and the challenge procedure, and given the 
deferential review mandated by the posture of this case, we 

are constrained to uphold the Board's conclusion that the 
Union did not violate its duty of fair representation.  We 
cannot say that the Board erred in finding that the Union's 
actions were not "irrational" or "without a rational basis or 
explanation."  Marquez, 525 U.S. at 46.  The Board was not 
asked to decide whether the Union's choices were "better or 
more logical than other possibilities," but only whether the 
Union "act[ed] on the basis of relevant considerations."  
Reading Anthracite Co., 1998 WL 726724, at *2.  There is 
substantial evidence to support the Board's finding that the 
Union did not breach its duty of fair representation.  There-
fore, this court has no business second-guessing the Board's 
judgment.  As Chief Judge Posner noted in International 
Ass'n of Machinists, "[i]t is hard to think of a task more 
suitable for an administrative agency that specializes in labor 
relations, and less suitable for a court of general jurisdiction, 
than crafting the rules for translating the generalities of the 
Beck decision ... into a workable system for determining and 
collecting agency fees." 133 F.3d at 1015.

                         III. Conclusion

     For the reasons articulated herein, we grant Mr. Gally's 
petition for review and remand the case to the Board to 
determine the appropriate remedy.  We deny the petition for 
review regarding the Union's use of a local presumption.