WESSEL, SCOTT v. CITY OF ALBUQUERQUE
FILED
United States Court of Appeals
Tenth Circuit
AUG 13 2002
PATRICK FISHER
Clerk PUBLISH
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
RORY A. WESSEL; DONALD SCOTT;
FRANK PARRA; WALTER K. NEWTON;
PAULETTE MORA GONZALES; MARK
C. MORA; JANINE LAVIGNE; RAYMOND Nos. 01-2155
LARGO, SR.; MARK A. GARCIA; 01-2168
RUDY ARCHULETA, JR.; JERRY ANAYA;
SAM AGUILAR; RUEBEN LUCERO,
and all others similarly situated,
Plaintiffs-Appellants/Cross- Appellees,
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
(D.C. No. CIV-00-65-LH/KBM)
Raymond J. LaJeunesse, Jr., National Right to Work Legal Defense Foundation,
Inc., Springfield, Virginia (Robert L. Pidcock, Albuquerque, New Mexico, with
him on the briefs), for Appellants/Cross-Appellees.
Jeremiah A. Collins of Bredhoff & Kaiser, P.L.L.C., Washington, D.C. (Robert
Alexander of Bredhoff & Kaiser, P.L.L.C., Washington, D.C.; Jerry Todd
Wertheim of Jones Sneed Wertheim Wentworth & Jaramillo, PA, Santa Fe, New
Mexico; and Robert F. Tinnin and Thomas J. McBride of Hinkle Hensley Shanor
& Martin, LLP, Albuquerque, New Mexico, with him on the briefs), for
Appellees/Cross-Appellants.
Before EBEL and McKAY, Circuit Judges, and SAM,(1) Senior District Judge.
McKAY, Circuit Judge, delivering the opinion of the court(2) as to Issues 1-5:
Thirteen non-union members brought this 42 U.S.C. 1983 action against
the City of Albuquerque alleging that the City violated their First Amendment
rights through the compulsory deduction of union fair share fees from their
wages. The nonmembers filed this action in the United States District Court for
the District of New Mexico seeking a declaratory judgment and injunction to
(1) The Honorable David Sam, United States Senior District Judge for the
District of Utah, sitting by designation.
(2) Issues 1-3 and 5 are joined by Judges Ebel and Sam. Issue 4 is joined by
Judge Sam. Judge Ebel, joined by Judge Sam, delivers the opinion of the court on
Issue 6. Judge McKay has filed a separate dissent on Issue 6. Judge Ebel has
filed a separate dissent on Issue 4.
prevent further fair share deductions. They also sought damages or equitable
restitution in the amount of all or part of the fees unlawfully collected, nominal
damages, and attorney fees.
The district court granted the nonmembers leave to supplement their
complaint to set forth additional events which were a continuation of conduct
alleged in the original complaint. However, the district court denied the
nonmembers' request to add a sixth claim for relief, two new defendants, a jury
demand, and a demand for punitive damages on the ground of undue delay.
The parties filed cross-motions for summary judgment. The district court
granted summary judgment to the nonmembers on their second claim for relief,
holding that the Union's fair share notice was unlawful and violated the
nonmembers' constitutional right to disclosure of sufficient information to gauge
the propriety of the Union's fee. The court awarded the nonmembers nominal
damages of $1.00 but denied injunctive relief. The district court granted
Defendants summary judgment on all other claims. The parties cross-appealed to
this court.
The parties raise six issues on appeal. They are: (1) whether the 1996 City
of Albuquerque Fair Share Resolution provides legislative authorization for the
collection of fair share fees; (2) whether a union's notice to nonmembers of a fair
share fee payment's basis is constitutionally inadequate if the notice does not
include a full audit of the union's schedule of chargeable and nonchargeable
expenses; (3) whether the district court abused its discretion in refusing to enter a
permanent injunction against future unlawful fair share notices and in determining
that a refund of the entire fair share fee was not required where plaintiffs had
received a refund of all fair share amounts improperly charged to them; (4)
whether the Fair Share Resolution must be construed to only allow fees to be used
for bargaining-related expenses in the unit and as prohibiting collection of fees
representing the pro rata costs of union programs available to all bargaining units;
(5) whether the district court abused its discretion in denying plaintiffs' motion to
amend their complaint to add a new claim, two new defendants, a jury demand,
and a demand for punitive damages based on undue delay; and (6) whether an
agreement by a union to indemnify a public employer against claims arising out of
fair share fee collection violates the First Amendment and 42 U.S.C. 1983.
Issue 1 - Legislative Authorization:
We first address whether the 1996 City of Albuquerque Fair Share
Resolution provides legislative authorization for the collection of fair share fees.
The parties raised this issue in their cross-motions for summary judgment. The
district court granted summary judgment in favor of the City, holding that the Fair
Share Resolution does provide legislative authorization for the collection of fair
share fees. We review "the grant of summary judgment de novo, applying the
same standards used by the district court." Byers v. City of Albuquerque, 150
F.3d 1271, 1274 (10th Cir. 1998).
Requiring employees to help finance the union as a collective bargaining
agent is constitutionally justified only if there has been a legislative assessment
by the public employer. Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507, 517
(1991). The Fair Share Resolution in this case expressly provides that "collective
bargaining agreements with City employee unions may include fair share
provisions if at least 50% of the recognized bargaining unit are union members."
Aplt. App. at 43. The Resolution conveys the clear intent of the City of
Albuquerque to permit the collection of fair share fees.
Beyond evidencing an intent to allow fair share fees, the legislative
assessment must be valid. The nonmembers argue that the language in a City
ordinance enacted previous to the Fair Share Resolution prohibits fair share fees
and that the Resolution cannot override the prior ordinance. The ordinance in
question provides that "City employees . . . have the right to refuse to join and
participate in the activities of employee organizations." Albuquerque, N.M.,
Code 3-2-4(A). The ordinance's plain language simply states that employees
are not required to join the union or take part in union activities. The ordinance
is silent as to the collection of fair share fees. Nonmember employees are only
required to pay the fair share fee representing the Union's cost of bargaining on
their behalf. "[T]he desirability of labor peace and eliminating `free riders'"
justify the payment of fair share fees "`for the purposes of collective bargaining,
contract administration, and grievance adjustment.'" Lehnert, 500 U.S. at 517
(quoting Abood v. Detroit Bd. of Educ., 431 U.S. 209, 225-26 (1977) (forced
contribution does not violate nonmembers rights because of the strong public
policy interests in labor peace and the elimination of "free riders")). Viewed in
the context of the public policy interests of allowing fair share fees, we hold that
the ordinance (which does not specifically address the fee issue) does not
necessarily prohibit these fees.
The subsequently enacted Fair Share Resolution makes clear the City of
Albuquerque's intent to allow fair share fees. The legislative assessment that is
constitutionally required in order to allow fair share fees does not demand
specific language or formality. See id. at 517; see also Abood, 431 U.S. at 222
("Such interference as exists is constitutionally justified by the legislative
assessment of the important contribution of the union shop to the system of labor
relations established by Congress."); see also Nashua Teachers Union v. Nashua
Sch. Dist., 707 A.2d 448, 450 (N.H. 1998) ("We interpret Abood also to permit
agency fees in the public sector where the legislature has implicitly authorized
them by statute as part of an overall legislative scheme to promote labor peace
through mandatory collective bargaining."). All that is necessary is the
expression of an interest to promote labor peace and prevent free riding with
orderly collective bargaining. Lehnert, 500 U.S. at 517; Abood, 431 U.S. at 222.
The Fair Share Resolution expressly states that "collective bargaining agreements
with City employee unions may include fair share provisions." Aplt. App. at 43.
The specific language employed in the Fair Share Resolution meets the Lehnert
necessary expression of the desirability of allowing fair share fees. We agree
with the district court that the Fair Share Resolution "is an adequate legislative
assessment by the City" allowing the deduction of fair share fees. Aplt. App. at
410.(1)
We acknowledge that some courts have found a conflict between fair share
resolutions and right-to-work laws, but our research suggests that the vast
majority of those decisions were based on fair share deductions equal to the
amount of dues paid by union members. See Baldwin v. Arizona Flame Rest.,
Inc., 313 P.2d 759, 762, 766 (Ariz. 1957) (recounting lower court's unreported
ruling that deduction of sum equivalent to union dues violated right-to-work law,
but declining to reach issue); City of Hayward v. United Public Employees, Local
390, 126 Cal. Rptr. 710, 714 (Cal. Ct. App. 1976) ("The forced payment of dues
or their equivalent is, at the very least, `participation' in an employee
organization."); Schermerhorn v. Local 1625, Retail Clerks Int'l Ass'n, 141
So.2d 269, 273, 276 (Fla. 1962) (holding that deduction of sum equal to union
dues violates state constitutional prohibition on denying right to work "on
(1) We do not address the nonmembers' argument that a resolution cannot
repeal or amend an ordinance. Because the ordinance does not prohibit fair share
fees, the Fair Share Resolution is not in conflict with the previously enacted
ordinance.
account of membership or non-membership in any labor union"); Higgins v.
Cardinal Mfg. Co., Inc., 360 P.2d 456, 466 (Kan. 1961) (holding that deduction
of sum equal to union dues violates state constitutional amendment prohibiting
employer from conditioning employment on union membership); Churchill v.
S.A.D. #49 Teachers Ass'n, 380 A.2d 186, 192 (Me. 1977) ("[T]he forced
payment of dues or their equivalent under an `agency shop' clause is tantamount
to coercion toward membership or, at the very least, toward participation in a
labor organization expressly forbidden by statute."); Indep. Guard Ass'n, Local
No. 1 v. Wackenhut Servs., Inc., 522 P.2d 1010, 1014 (Nev. 1974) (holding that
deduction of sum equal to union dues "is the equivalent of an agreement which
excludes persons from employment . . . based on nonmembership in a labor
organization"); New Jersey Turnpike Employees Union, Local 194 v. New Jersey
Turnpike Auth., 284 A.2d 566, 568 (N.J. Super. Ct. Ch. Div. 1971) (holding that
deductions violate statutory right not to join or assist union because non-member
employees will join union "if faced with assessments identical to union dues and
initiation fees"); Ficek v. Int'l Bhd. of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers and Helpers, Local No. 647, 219 N.W.2d 860, 873 (N.D.
1974) (holding that deduction of sum equal to union dues "imposes the practical
equivalent of compulsory [union] membership"). Indeed, some of these courts
have expressly distinguished their holdings from situations where deductions are
limited to the pro rata expenses incurred by the union in representing non-
members. See Churchill, 380 A.2d at 192 n.5 ("We do not intimate what our
decision would be if the so-called `agency shop' clause in the instant case had
required nonjoinder employees to pay to the bargaining agent only their
proportionate share of the costs of securing the benefits conferred upon all
members of the bargaining unit."); Smigel v. Southgate Comm. Sch. Dist., 202
N.W.2d 305, 307 (Mich. 1972) (holding that deduction of sum equal to dues
violates state law where "[t]here is not even the pretense that the sum to be
deducted is a pro rata share of representation expenses, or that it will even be
used for such purpose").
In the cases where courts have found no conflict between fair share
deductions and right-to-work laws, the deductions have consistently been limited
to proportionate costs. See Nashua Teachers Union v. Nashua Sch. Dist., 707
A.2d 448, 453 (N.H. 1998) (holding that deductions do not "encourage" union
membership "provided that such fees are tailored to non-union employees' pro
rata share of the cost of collective bargaining, contract administration, and
grievance adjustment"); Town of North Kingstown v. North Kingstown Teachers
Ass'n, 297 A.2d 342, 346 (R.I. 1972) (holding that deductions did not violate
statute guaranteeing employees freedom "to join or decline to join" union as long
as deductions were no "more than a proportionate share of the costs of securing
the benefits conferred upon all members of the bargaining unit"). This is true
even where that limitation has not been the explicit basis for the holding.
See Schaffer v. Bd. of Educ., 869 S.W.2d 163, 167 (Mo. Ct. App. 1993) (allowing
deduction of proportionate representation costs where statute forbids employers
from compelling employees to join union); see also Fort Wayne Educ. Ass'n, Inc.
v. Goetz, 443 N.E.2d 364, 371 (Ind. Ct. App. 1982) (allowing deduction of
proportionate representation costs where statute prohibits employer from
encouraging union "membership" based on absence of "any statutory right to
refrain from `assisting' or `participating' in a labor organization").
The Fair Share Resolution at issue in this case specifically limits
deductions to costs related to "an employee's proportionate share of the union's
costs of negotiating and administering the collective bargaining agreement and
adjusting the grievances and disputes of bargaining unit employees." Aplt. App.
at 44. Accordingly, contrary to the nonmembers' portrayal, we find the relevant
case law to be consistent with our conclusion that there is no conflict between the
Fair Share Resolution and the City's right-to-work ordinance.
Issue 2 - Fair Share Notice Deficiencies:
The second issue is whether a union's notice to nonmembers of a fair share
fee payment's basis is constitutionally inadequate if it does not include a full
audit of the union's schedule of chargeable and nonchargeable expenses. Before
addressing the alleged Fair Share Notice deficiencies, we must determine whether
the plaintiffs had standing to assert this claim. We conduct plenary review to
determine whether the nonmembers have standing. Roe No. 2 v. Ogden, 253 F.3d
1225, 1228 (10th Cir. 2001).
The City claims that the nonmembers lacked standing to complain of any
deficiencies in the Fair Share Notice. The City argues that the nonmembers
disclaimed any interest in appropriate constitutional notice because they paid no
attention to the notice's inadequacies in their objections and admitted that they
would have objected to the fees regardless of the Notice's contents. However, the
City overlooks the fact that the loss of a procedural right "is itself an injury"
sufficient to provide standing "without any requirement of a showing of further
injury." Bertulli v. Independent Ass'n of Continental Pilots, 242 F.3d 290, 295
(5th Cir. 2001). Additionally, "the right to procedural due process is `absolute' in
the sense that it does not depend upon the merits of a claimant's substantive
assertions and [therefore] the denial of procedural due process [is] actionable for
nominal damages without proof of actual injury." Carey v. Piphus, 435 U.S. 247,
266 (1978). We hold that the nonmembers did have standing. While they may
not have specifically stated that the deficient notice is what drove them to object,
the nonmembers did suffer from the lack of sufficient information and the
inclusion of inaccurate information in the notice.
Since the nonmembers had standing to assert this claim, the question then
becomes whether the notice to nonmembers of the fair share fee payment's basis
was also constitutionally inadequate since it did not include a full audit of the
Union's schedule of chargeable and nonchargeable expenses. The district court
granted the nonmembers summary judgment holding that the fair share notice
"was deficient" based on the Union's concession that the notice "contained
numerical errors [and] did not indicate which portions of dues went to each of the
three levels of the union." Aplt. App. at 411. Nevertheless, the nonmembers
challenge the district court's holding and claim that the notice was further
deficient because it did not include the full audit or the auditor's notes. We
review the grant of summary judgment de novo. Byers, 150 F.3d at 1274.
In Chicago Teachers Union v. Hudson, the Supreme Court stated that "[t]he
Union need not provide nonmembers with an exhaustive and detailed list of all its
expenditures, but adequate disclosure surely would include the major categories
of expenses, as well as verification by an independent auditor." 475 U.S. 292,
307, n.18 (1986). Hudson clearly requires "verification by an independent
auditor." Id. The issue facing us is whether Hudson requires the Union to
include the auditor's reports and notes in the notice itself.
The original notice included the Union's schedules of expenses and a
statement that this was "independently audited financial information." Aplt. App.
at 58-60. The auditors' reports and notes to the schedules were not included. Id.
Verification by an independent auditor is required to give nonmembers "assurance
that the reviewed books . . . really do reflect the concrete world transactions to
which they refer." Prescott v. County of El Dorado, 177 F.3d 1102, 1107 (9th
Cir. 1999), remanded, 528 U.S. 1111, reinstated in relevant part, 204 F.3d 984
(2000). Verification is also necessary to give nonmembers sufficient information
to make "their own judgment about whether to challenge the union's
determination." Penrod v. NLRB, 203 F.3d 41, 46 (D.C. Cir. 2000). Without the
auditor's reports, nonmembers could not have sufficient information to make such
a determination. A simple statement that the Union's expenses were audited
conveys minimal, if any, assistance to nonmembers attempting to decide whether
to challenge the Union's determination. We hold that Hudson contemplates, in
the notice, "a report expressing the auditor's opinion on the schedule." Aplt. Br.
at 25. Several district courts and at least one circuit court have expressed a
similar view. See Penrod, 203 F.3d at 46; see also Masiello v. U.S. Airways, Inc.,
113 F. Supp. 2d 870, 877 (W.D.N.C. 2000); Reese v. City of Columbus, 798 F.
Supp. 463, 468 (1992), further proceedings, 826 F. Supp. 1115 (S.D. Ohio 1993),
aff'd in part, rev'd in part on other grounds, 71 F.3d 619 (6th Cir. 1995); but see
Weaver v. University of Cincinnati, 764 F. Supp. 1241, 1245 (S.D. Ohio 1991),
affirmed and remanded, 970 F.2d 1523 (6th Cir. 1992).
We decline, however, to adopt a blanket rule that an auditor's notes must
always be included in the notice. It is essential that the notice provide the
auditor's explanation of why the fees to be deducted are permissible; in our view,
it is immaterial whether this explanation comes in the form of a report or in the
underlying notes. If the report itself is simply a conclusory indication that the
proposed deductions have been audited, then disclosure of the notes may prove
necessary. However, it is the substance of the information, rather than the
nomenclature of the means by which it is communicated, that is the proper focus
of the inquiry under Hudson.
Because the Union already issued a revised notice including the auditor's
materials and because the district court correctly awarded nominal damages to
nonmembers based on the deficiencies in the notice, we hold that the nonmembers
are entitled to no further relief.
Issue 3 - Permanent Injunction and Amount of Refund:
The nonmembers next argue that the district court abused its discretion in
refusing to enter a permanent injunction against future unlawful fair share notices
and further erred in determining that a refund of the entire fair share fee was not
required. We review a denial of an injunction for an abuse of discretion,
considering "whether the facts indicate a danger of future violations." Roe v.
Cheyenne Mountain Conf. Resort, Inc., 124 F.3d 1221, 1230 (10th Cir. 1997). A
party moving for injunctive relief must satisfy the court that "there exists some
cognizable danger of recurrent violation." United States v. W.T. Grant, 345 U.S.
629, 633 (1953).
The district court determined that the nonmembers did not meet their
burden. The Union issued a corrected Fair Share Notice and committed itself to
include the required information in future notices. We hold that this is sufficient.
Therefore, the district court did not abuse its discretion in concluding that entry
of an injunction was not necessary.
We review de novo a denial of compensatory damages based on conclusions
of law. McLure v. Independent Sch. Dist. No. 16, 228 F.3d 1205, 1212 (10th Cir.
2000). The nonmembers were refunded the portion of the fair share fee that
exceeded what they could properly be charged. However, the nonmembers argue
that the district court should have awarded them a refund of all fees collected. In
light of the copious persuasive authority to the contrary, we cannot so hold.
A union's violation of procedural requirements for the collection of fair
share fees does not entitle nonmembers to a "free ride" but only to a refund of the
portion of the amounts collected that exceed what could be properly charged.
Prescott, 177 F.3d at 1109 (noting that Hudson did not hold that the proper
remedy was full restitution of all collected fees); Weaver v. University of
Cincinnati, 970 F.2d 1523, 1533 (6th Cir. 1992); Hohe v. Casey, 956 F.2d 399,
415-16 (3d Cir. 1992); Gilpin v. AFSCME, 875 F.2d 1310, 1314-16 (7th Cir.
1989). A return of all fees "would undermine Abood's policy concern that every
employee contribute to the cost of collective bargaining." Weaver, 970 F.2d at
1533 (citations omitted). Additionally, "Hudson did not disturb the Supreme
Court's earlier decision in [Brotherhood of Railway Clerks v. Allen, 373 U.S.
113, 122 (1963)] `that the proper remedy for an unconstitutional fee collection is
not a refund of the total fee,' but is the refund of the portion of the exacted fees
proportionate to the union's nonchargeable expenditures." Id. (quotations and
citations omitted).
Nonmembers are not entitled to a free ride. The Union's efforts in
collective bargaining, contract administration, and grievance adjustment continue
to benefit nonmembers. Therefore, we hold that the nonmembers are only entitled
to the portion of the fees collected that exceeded what they could properly be
charged (an amount they have already received).
Issue 4 - Collection of Extra-Unit Fees:
The nonmembers claim that the Fair Share Resolution, properly construed,
only allows fees to be used for bargaining-related expenses in the unit and
prohibits collection of fees representing the local unit's pro rata costs of union
programs available to all bargaining units. The Supreme Court has held 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." Lehnert, 500 U.S. at 524.
Based on Lehnert, the district court held that the Union could collect extra-unit
fees and granted summary judgment in favor of the City. We review de novo the
grant of summary judgment. Byers, 150 F.3d at 1274.
The nonmembers argue that the plain language of the Fair Share Resolution
coupled with the Memorandum of Understanding limit the purposes for which the
fair share fees may be collected to those that directly benefit the local bargaining
unit. The Resolution provides, in pertinent part: "The fair share fee shall be an
employee's proportionate share of the union's costs of negotiating and
administering the collective bargaining agreement and adjusting the grievances
and disputes of bargaining unit employees." Aplt. App. at 43-44, 47.
Additionally, the Agreement between the City and the Union provides, in
pertinent part: "The amount of the agency fee shall include only costs related to
the negotiation and administration of the collective bargaining agreement and the
adjustment of grievances or disputes of bargaining unit employees." Aplt. App. at
182.
The above language is a common and permissible method of adopting the
constitutional standard expressed in Lehnert permitting the fair share of extra-unit
expenses. See Gilpin, 875 F.2d at 1311-12 (chargeable fee is "pro rata share of
the expenses that [a union] incurs in negotiating for and administering the
collective bargaining agreement"); see also Reese, 71 F.3d at 622-26 (statute
permitting fair share fees for expenses related to "unions' costs of negotiating,
ratifying, enforcing and administering the collective bargaining agreement
between the unions and the City" allowed extra-unit expenses under Lehnert).
The language of the Fair Share Resolution and the Memorandum of
Understanding clearly contemplate that nonmembers will be charged their
proportionate share of union programs which are available to all bargaining units
(including their local bargaining unit). If such fees are not permitted, then
nonmembers would be "free-riders" receiving a benefit from these programs
without cost to them. An "employee's proportionate share of the union's costs of
negotiating and administering the collective bargaining agreement and adjusting
the grievances and disputes of bargaining unit employees" includes extra-unit
expenses that inure to the benefit of the local nonmembers' unit. Aplt. App. at
43-44.
We agree with the district court that the Fair Share Resolution and the
Memorandum of Understanding basically adopt the constitutional standard set
forth in Lehnert. Any agreement attempting to limit that which is constitutionally
permissible must clearly indicate an intent to do so. The use of the word "union"
in the Fair Share Resolution lacks clear intent to confine it to limit permissible
expenses to those incurred solely by the "local" as opposed to the union generally.
See Aplt. App. at 43-44. In the absence of any contrary indication, we believe
that the only reasonable construction is that of an intent to adopt the
constitutionally defined fair share definition.
We now must determine whether the fees collected in this case violate the
Lehnert constitutional standard on extra-unit expenses. The Supreme Court has
made it clear that "[t]here must be some indication that the payment is for
services that may ultimately inure to the benefit of the members of the local union
by virtue of their membership in the parent organization." Lehnert, 500 U.S. at
524. The Sixth Circuit allowed extra-unit expenses that were related to collective
bargaining and that would benefit the specific local bargaining unit. See Reese,
71 F.3d at 623-24. However, the Reese court noted that "extra-unit expenses
[are] not chargeable if they [are] `unrelated to an objecting employee's unit." Id.
quoting Lehnert, 500 U.S. at 528. Furthermore, "the union may not claim a right
to receive from the non-union member full union dues covering all expenses
except those items which are ideological in purpose. Instead, it may collect only
for those expenses affirmatively related to the bargaining agreement because
these constitute the only expenditures that, consistent with the First and
Fourteenth Amendments under Abood and Hudson, the union may collect to
prevent nonmembers' `free riding.'" Tierney v. City of Toledo, 824 F.2d 1497,
1505 (6th Cir. 1987) (emphasis in original).
There is some evidence in the record that a portion of the fees collected
went to the national Union to "[serve] as exclusive representative in other
bargaining units." Aplt. App. at 51, 53, 154, 156. Such fees would not inure to
the benefit of the members of the local organization and their collection violates
the principles expressed in Lehnert. We disagree with the district court's
conclusion that the Union did not exceed the constitutional limitations on the
types of expenses properly included in a fair share fee.
The district court is directed to hold a hearing to determine which fees are
attributable to bargaining-related expenses in the unit as distinguished from those
which do not inure to the benefit of the local bargaining unit.
Issue 5 - Amendment of the Complaint:
We next consider whether the district court abused its discretion in denying
plaintiffs' motion to amend their complaint to add a new claim, two new
defendants, a jury demand, and a demand for punitive damages on the ground of
undue delay. We will not reverse a decision denying leave to amend a complaint
"absent an abuse of discretion." TV Communications Network, Inc. v. Turner
Network Television, Inc., 964 F.2d 1022, 1028 (10th Cir. 1992).
The district court found that "Plaintiffs did not promptly move to amend
their Complaint once they received [the additional] information nor did they move
for an extension . . . ." Aplt. App. at 382. The district court denied Plaintiffs'
request holding that it was "unduly delayed." Id. Leave to amend may properly
be denied for undue delay. McKnight v. Kimberly Clark Corp., 149 F.3d 1125,
1130 (10th Cir. 1998); Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir.
1993). The district court did not abuse its discretion by refusing to allow the
nonmembers to amend their complaint based on undue delay.
EBEL, Circuit Judge, delivering the opinion of the court(2) as to Issue 6 -
Constitutionality of the Indemnification Agreement:
The nonmembers seek to void the indemnification agreement between the
City and the Union. The memorandum of understanding between the City and the
(2) This portion of the opinion is joined by Judge Sam.
Union provides that "[t]he Union shall indemnify and hold the City harmless from
any claim or challenge to this fair share MOU, the calculation and imposition of
the fair share amount, or any other claims involving fair share payments under
this MOU." The collective bargaining agreement requires the Union to
"indemnify and hold the City harmless against any and all claims, demands, suits
or other forms of liability, including payment of reasonable attorney fees and
costs for counsel selected by the City, for any claim or challenge to the imposition
of an agency fee."
The nonmembers argue that these provisions are "void and unenforceable
as against public policy inherent in the First Amendment." Because the City has a
duty to ensure that constitutional fair share procedures are in place, the
nonmembers contend that the City's effort to escape liability for its failure to
fulfill that duty violates public policy. The district court disagreed, reasoning that
the memorandum of understanding and collective bargaining agreement, read in
their entireties, "not only demonstrate that the City is aware of its obligation to
have a constitutional procedure in place, but also set out the procedure and
require the Union to comply with the procedures before the City will deduct `fair
share' fees." The court "read the indemnification clause as protecting the City
from any violations by the Union and for which the City can do little, if anything,
to detect and prevent." The court thus concluded that the provisions were "not
unconstitutional and void as against public policy."
We find the district court's interpretation of the indemnification provisions
to be unreasonable. There is nothing in the text of the provisions to suggest that
the City is to be indemnified only for "violations by the Union . . . for which the
City can do little, if anything, to detect and prevent." Rather, the City is to be
indemnified for any liability ƒ including costs and fees ƒ arising from any claims
"involving fair share payments." It seems clear that this broad scope
encompasses not only liability resulting from the Union's mistakes, but also from
the City's failure to fulfill its own obligations.
That a public employer has certain obligations within the fair share
deduction framework established by courts is beyond dispute. See Hudson v.
Chicago Teachers Union, 743 F.2d 1187, 1192 (7th Cir. 1984) (holding that First
Amendment creates a duty for employer "to establish workable procedures for
protecting dissenters' rights"), aff'd, 475 U.S. 292, 307 n.20 (1986) ("[T]he
government [employer] and union have a responsibility to provide procedures that
minimize that impingement [on nonunion employees' First Amendment rights]
and that facilitate a nonunion employee's ability to protect his rights."); Mitchell
v. Los Angeles Unified Sch. Dist., 739 F. Supp. 511, 516 (C.D. Cal. 1990)
("Under Hudson, a public employer, as well as the public employees union, has a
responsibility to see to it that adequate procedures are provided which minimize
the impingement of the non-members' constitutional rights."); Dixon v. City of
Chicago, 669 F. Supp. 851, 852 (N.D. Ill. 1987) (rejecting public employer's
argument "that it itself has no duty to ensure or establish the constitutionally
adequate procedure described by Hudson"); see also Knight v. Kenai Peninsula
Borough Sch. Dist., 131 F.3d 807, 817 (9th Cir. 1997) (holding that public
employer's "duty to nonmembers is to evaluate the sufficiency of the union's
notice at the time the union seeks to take action against a nonmember for failure
to pay the agency fee, and not at the time of the initial mailing of the Hudson
notice").
In light of these duties, the Sixth Circuit has held that an indemnification
clause similar to the clause at issue in this case is "repugnant to public policy, and
therefore, invalid." Weaver v. Univ. of Cincinnati, 970 F.2d 1523, 1538 (6th Cir.
1992). Because "[b]oth parties to a fair share agreement must be held
accountable for their responsibility to see that Hudson's commands are followed,"
the Weaver court concluded that a "clause that relieves the employer of all
consequences for its failure to assume and conscientiously carry out its duties,
including even the cost of defending legal actions, is against public policy." Id.
Cf. Stamford Bd. of Educ. v. Stamford Educ. Ass'n, 697 F.2d 70, 73 (2d Cir.
1982) (voiding indemnification clause in discriminatory labor agreement because
it gives employers "little reason to be concerned over whether labor agreements
discriminate against women").
The Third Circuit has taken the contrary approach, holding that, even if a
public employer is indemnified, the union, "upon whom most obligations fall, has
a significant incentive to ensure that its procedures comply with the Constitution"
in that "[f]ailure to do so may result in its being unable to retain a portion of the
fair share fee." Hohe v. Zimmerman, 956 F.2d 399, 412 (3d Cir. 1992). Thus,
"invalidation of the indemnification clause is not required by the First
Amendment." Id. Notably, the Hohe court also observed that the clause at issue
did not provide for the indemnification of any costs or fees incurred by the public
employer in defending against a claim, and that the employer presumably would
have some incentive to avoid such claims. See id. at 411-12. By contrast, the
agreement between the Union and the City expressly mandates the
indemnification of costs and fees, seemingly removing any significant incentive
for the City to avoid litigation. Regardless of this distinction between the cases,
we believe that the Hohe court's focus is misplaced. The question is not whether
the union alone has ample incentive to put proper procedures in place, but
whether both the public employer and union do. After all, if the Supreme Court
had only been concerned with the union's ability to carry out the Hudson
requirements, it would not have placed the burden on both parties. Hudson, 475
U.S. at 307 n.20.
The City also looks for support to the Ninth Circuit, which has held that
employers "owe no specific duty to employees to ensure that a proper Hudson
notice is received by each employee before agency fees are deducted." Foster v.
Mahdesian, 268 F.3d 689, 694 (9th Cir. 2001), cert. denied sub nom. Foster v.
Gracy, No. 01-1307, 2002 WL 386663 (U.S. June 3, 2002). This narrow holding
does not suggest, however, that an employer has no duty whatsoever under
Hudson, nor that an employer properly can shield itself from liability for any
claims "arising from fair share payments."(3)
Accordingly, we reverse the district court's ruling and hold that the
indemnification provisions are void as contrary to public policy.(4)
To conclude, the decision of the district court is REVERSED and
REMANDED with respect to Issues 4 and 6. In all other respects, the decision of
the district court is AFFIRMED.
McKAY, Circuit Judge, dissenting in part:
I respectfully disagree with the majority's resolution of Issue 6 ƒ
Constitutionality of the Indemnification Agreement. I would join the Third and
Ninth Circuits which have held that, because the union "has a significant
incentive to ensure that its procedures comply with the Constitution[,] . . .
invalidation of the indemnification clause is not required by the First
Amendment." Hohe, 956 F.2d at 412; see also Prescott, 177 F.3d at 1112
(nonmember county employee lacked standing to object to union's agreement to
indemnify county from any liability arising out of deductions of fees from wages
of nonmembers pursuant to agency shop arrangement); see also Foster v.
Mahdesian, 268 F.3d 689, 694 (9th Cir. 2001) (employers do not owe a "specific
duty to employees to ensure that a proper Hudson notice is received by each
employee before agency fees are deducted"); but see Weaver, 970 F.2d at 1536-38
(Hudson should be read to void, as "against public policy," an agreement under
which a union agrees to indemnify the employer from liability arising from
challenges to agency fees).
(3) A previous Ninth Circuit panel declined to reach the issue presented in
this case, concluding that the objecting employee lacked standing because
"[w]hile it can be assumed that [he] suffered some injury when the fees were
deducted from his paycheck . . . . He certainly cannot show any connection
between the indemnification agreement and that injury." Prescott v. County of El
Dorado, 177 F.3d 1102, 1112 (9th Cir. 1999), vacated on other grounds, 528 U.S.
1111 (2000). Although standing has not been raised as an issue by the parties in
this case, we disagree with the Ninth Circuit's analysis. The alleged injury results
from the indemnification provision's negation of any incentive for the City to
ensure that the Hudson requirements were followed. The nonmembers' entire
argument presumes that, if the City faced potential liability, it would have
prevented the fair share fees from being deducted unconstitutionally from the
nonmembers' paychecks.
(4) Defendants also contend that voiding the indemnification provision is
unwarranted because "[t]o allow a claim to be maintained against a public
employer under [1983] for failing to correct a union's alleged errors would be
contrary to the well-settled proposition that, under 1983, a governmental entity
may only be held liable for constitutional injuries that are caused by its own
policies." (Resp. at 41 (emphasis in original) (citing Monell v. Dep't of Social
Servs., 436 U.S. 658, 694 (1977).) Whatever validity this argument may have
under some circumstances is negated by the all-encompassing scope of the
indemnification provisions at issue. As discussed above, the City is to be
indemnified not only for claims based on the Union's unconstitutional practices or
policies, but for its own unconstitutional practices and policies. If the City
consistently made no effort to ensure that the Union's fair share procedures
complied with Hudson, such a failure would likely be cognizable under 1983 and
covered by the indemnification provision.
Even though a public employer is required to adopt procedures that comply
with Hudson, it does not reasonably extend that the employer should be required
to monitor and edit the annual notices prepared by the union. In Hudson, the
Supreme Court held that it is the obligation of the union to establish a procedure
for resolving objections to the amount of the fee charged by the union. 475 U.S.
at 306, n.17. It follows that a public employer with no obligation to consider
objections to a fee charged by the union is not obligated to review, in advance,
the propriety of the fee calculation or the sufficiency of the notice. The City and
the "union have a responsibility to provide procedures that minimize th[e]
impingement [from the agency shop] and that facilitate a nonunion employee's
ability to protect his rights," Hudson, 475 U.S. at 307-08, n.20. Even though the
City has its own Hudson duty, it does not logically extend that the City should
have an independent duty to monitor the Union's compliance with Hudson. In
spite of this, the majority's opinion on this issue places on the City an
independent First Amendment duty to monitor the Union's compliance because of
its belief that an indemnification clause might reduce the City's vigilance in
monitoring such compliance.
The indemnification clause did no more than "protect[] the City from any
violations by the Union and for which the City can do little, if anything to detect
and prevent." Aplt. App. at 415. Therefore, I would hold that indemnification
clauses that relieve a public employer from liability for violation of nonmembers'
First Amendment rights by collecting compulsory union fees when constitutional
requirements are not met are not void as against public policy.
EBEL, Circuit Judge, concurring and dissenting in part:
I disagree with the majority's resolution of Issue 4 ƒ Collection of Extra-
Unit Fees. There is no dispute that AFSCME International (the national Union
organization) and Council 18 (the regional Union organization) may receive a
portion of the fees; the dispute is whether the fees may include costs that are not
related to the collective bargaining agreement between the City and Local 624, or
to the activities of employees within Local 624's bargaining unit. As the majority
recognizes, the Fair Share Resolution provides that "[t]he fair share fee shall be
an employee's proportionate share of the union's costs of negotiating and
administering the collective bargaining agreement and adjusting the grievances
and disputes of bargaining unit employees." Further, the Agreement between the
City and the Union provides that "[t]he amount of the agency fee shall include
only costs related to the negotiation and administration of the collective
bargaining agreement and the adjustment of grievances or disputes of bargaining
unit employees." Contrary to this limiting language, the fair share fees deducted
from the nonmembers represented some costs that were not related to their
bargaining unit. Indeed, the notice regarding the fair share fees included as a
"chargeable" expense "[s]erving as exclusive representative in other bargaining
units."
The City insists that the Resolution is broad enough to encompass
contributions to the union's state and national levels because the language that
seemingly limits deductions to costs incurred by the local bargaining unit "is a
common way to paraphrase the constitutional standard," and thus should be
interpreted as authorizing anything permitted under the Constitution. As support,
they cite several cases where courts describe fair share fees as the proportionate
share of costs incurred in negotiating and administering the collective bargaining
agreement. For the most part, those cases simply state the general principle that
unions can "require non-union members to contribute a fair share of the union's
costs of negotiating, administering, and enforcing a collective bargaining
agreement as a condition of employment." Damiano v. Matish, 830 F.2d 1363,
1368 (6th Cir. 1987); accord Gilpin v. American Fed. of State, Cty., and Mun.
Employees, 875 F.2d 1310, 1311-12 (7th Cir. 1989); Tierney v. City of Toledo,
824 F.2d 1497, 1504-05 (6th Cir. 1987); Robinson v. New Jersey, 741 F.2d 598,
601 n.1 (3d Cir. 1984). The courts were summarizing the governing rule ƒ fair
share fees may roughly correspond to costs related to a collective bargaining
agreement. The City has pointed to no case upholding the deduction of costs not
related to the local unit where the legislative authorization for fair share fees was
limited to costs tied to the local bargaining unit and its collective bargaining
agreement.
The City offers an affidavit from an Assistant City Attorney who states that
the City Council intended "to allow City unions to collect fair share fees to the
full extent permitted by the United States Constitution." Aple. App. 17.
However, where legislative language is unambiguous, courts "do not permit it to
be expanded or contracted by the statements of individual legislators or
committees during the course of the enactment process," West Virginia Univ.
Hosps., Inc. v. Casey, 499 U.S. 83, 98-99 (1991), much less to be expanded by
after-the-fact assertions by someone who is not even a member of the legislative
body that enacted the provision. We are bound by the terms of the Fair Share
Resolution and the related agreements. Accordingly, the deduction of fees for
costs not incurred for the purposes quoted above lacked legislative authorization
and thus violated nonmember employees' First Amendment rights.
Unlike the majority, I do not believe that the Fair Share Resolution's
language is coextensive with the constitutional standard of permissibility under
Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507, 524 (1991). I agree that the
district court should hold a hearing to determine which fees are permissible, but I
believe that the touchstone for the inquiry is the language set forth in the Fair
Share Resolution and the related agreements, which is narrower than the
constitutional standard.