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ROBINSON v. PENNSYLVANIA STATE CORRECTIONS OFFICERS ASS'N

United States District Court, M.D. Pennsylvania


February 4, 2005.

LEROY ROBINSON and JAY DINO, Plaintiffs
v.
PENNSYLVANIA STATE CORRECTIONS OFFICERS ASSOCIATION, et al., Defendants.

The opinion of the court was delivered by: CHRISTOPHER CONNER, District Judge

MEMORANDUM

Once again the court must consider the efforts of defendant, the Pennsylvania State Corrections Officers Association ("Association"), to impose a "fair share fee" on nonunion public employees in a manner consistent with the First Amendment. The court previously held that a fee assessed by the Association from December 2001 through mid-2003 was unconstitutional because advance notice was not provided to employees.*fn1 Now under review, in the context of cross-motions for summary judgment, is a subsequent fee collected from mid-2003 to mid-2004 and preceded by notice dated March 15, 2003. Whether this notice provided a constitutionally adequate explanation of the basis for the fair share fee is the dispositive issue for resolution. Page 2

I. Statement of Facts*fn2

  The Association was named as exclusive bargaining representative for employees of Pennsylvania corrections and forensic facilities in 2001 and soon entered into a new collective bargaining agreement on their behalf. One provision of the agreement required the Commonwealth to deduct a fair share fee from nonunion employees and to remit these funds to the Association to finance its activities. (Doc. 46 ¶¶ 1-3; Doc. 50 ¶¶ 1-3). The Association notified the Commonwealth that a fee of 1.00% of nonunion employees' gross pay was appropriate to meet the Association's expenses. In late 2001, without prior notice to employees, the Commonwealth began deducting the fee from salaries of nonunion employees and remitting these amounts to the Association. (Doc. 46 ¶¶ 4-5; Doc. 50 ¶¶ 4-5; see also Doc. 37 at 2).

  On March 15, 2003, the Association issued a notice to nonunion employees, stating that a new fair share fee would be assessed starting in April 2003.*fn3 The sixteen-page document explains the nature and basis of the fee. It lists thirty-two types of expenses, categorized by their relationship to the collective bargaining activities of the union, and indicates that only those Page 3 expenses that are "germane" to such activities will be charged to nonunion employees. (Doc. 44, Ex. 1; Doc. 46 ¶ 6; Doc. 50 ¶ 6). The percentage of "chargeable expenses" to total expenses, according to the notice, is approximately 77.67%. By multiplying this percentage by the dues rate for union members (1.50% of wages), the notice concludes that the fair share fee is 1.17% of wages. (Doc. 44, Ex. 1).

  Appended to the notice is an audit report of the "major categories of expenses" on which the fair share fee calculation was based. The report states that the purpose of the audit was to "obtain a reasonable assurance about whether the schedule of expenses and allocation between chargeable and nonchargeable expenses is free of material misstatement." (Doc. 44, Ex. 1). The attached schedule details seventeen categories of expenses incurred by the union in 2002, including "salaries and wages," "affiliation [costs]," and "rent and utilities." These categories are divided between chargeable and nonchargeable expenses, and notes to the report describe the union's methodology in classifying certain costs as chargeable to nonunion employees. The report states that the percentage of chargeable expenses to total expenses is approximately 77.67%, and, by multiplying this percentage by the union dues rate, concludes that the fair share fee is 1.17% of wages. (Doc. 44, Ex. 1).

  Shortly after distribution of the notice, plaintiffs and several other nonunion employees filed objections with the Association, challenging the "calculation of Page 4 chargeable expenses and the amount of the [f]air [s]hare [f]ee." The objections were referred to the American Arbitration Association ("AAA"), pursuant to procedures outlined in the notice, and hearings were scheduled for September 2003 before an arbitrator selected by the AAA. The hearings were subsequently rescheduled at the request of plaintiffs, and did not commence until March 2004. (Doc. 46 ¶¶ 8-9, 11-14; Doc. 50 ¶¶ 8-9, 11-14; Doc. 50, Exs. K, L; Doc. 51, App. E).

  Before and during this period, plaintiffs prosecuted the above-captioned case on behalf of a class of nonunion employees.*fn4 They claim that the Association's fee assessment infringed upon their First Amendment rights. (Docs. 1, 16). The court ruled in January 2004 that the collection of fair share fees prior to the March 15, 2003, notice violated nonunion employees' rights, but deferred entry of judgment pending resolution of plaintiffs' remaining claims.*fn5 The parties thereafter filed cross-motions for summary judgment on the adequacy of the March 15, 2003, notice and objection procedures.*fn6 (Docs. 42, 44). Oral argument on the motions was held on January 31, 2005. (Doc. 68). Page 5

  II. Standard of Review

  Summary judgment is appropriate when the evidence of record unquestionably establishes the validity of one party's position. See FED. R. CIV. P. 56(c), (e); Pappas v. City of Lebanon, 331 F. Supp. 2d 311, 315 (M.D. Pa. 2004). Doubts over the weight to be accorded testimony and exhibits must be resolved in favor of the opposing party, which must be given the benefit of all reasonable inferences to be drawn from the evidence. Schnall v. Amboy Nat'l Bank, 279 F.3d 205, 209 (3d Cir. 2002). Only if the facts of the case, so construed, demonstrate that one party cannot succeed on its claim or defense should summary judgment be entered. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

  This task is more difficult when the court is presented with cross-motions for summary judgment: when both the plaintiff and the defendant are non-moving parties and each is entitled to consideration of the evidence in its favor. InterBusiness Bank, N.A. v. First Nat'l Bank of Mifflintown, 318 F. Supp. 2d 230, 235-36 (M.D. Pa. 2004). However, the dispositive issue in this case — the facial adequacy of the notice — does not implicate factual disputes susceptible to different standards of review. The notice has been submitted to the court, and both parties agree on its contents and authenticity. The only question, whether the notice satisfies constitutional disclosure requirements, is one of law and may be resolved on the summary judgment record. See Chi. Teachers Union, Local Page 6 No. 1 v. Hudson, 475 U.S. 292, 307 & n. 18 (1986); Hohe v. Casey, 956 F.2d 399, 403 (3d Cir. 1992).

  III. Discussion

  Many states, including Pennsylvania, permit "agency shop" arrangements between an employees' union and a public employer. See 43 PA. CONS. STAT. § 211.7; PA. STAT. ANN. tit. 71, § 575; see also Otto v. Pa. State Educ. Ass'n, 330 F.3d 125, 129 (3d Cir.), cert. denied, 540 U.S. 982 (2003). Under these arrangements, a single union is designated as the exclusive representative of employees, regardless of individual union membership. Abood v. Detroit Bd. of Educ., 431 U.S. 209, 224 (1977); see 43 PA. CONS. STAT. § 211.7. Other unions are precluded from participating in contract negotiations, and the final agreement reached by the designated union affects all employees. Abood, 431 U.S. at 224.

  That employees may reap the benefit of union negotiations without joining the organization creates an obvious "free-rider" problem. See id. at 222-26, 231, 234-35. The incentive for employees to join a union, and to assume the obligation of union dues, is to draw on the collective bargaining power of the organization. Id. at 221-22. Under an agency shop arrangement, however, employees enjoy the results of the union's exertions whether or not they accept membership. Individual employees have little incentive to forgo a percentage of their paycheck to obtain a benefit that they will receive anyway. See id. at 222-26, 231, 234-35. Page 7

  To counter this problem, Pennsylvania and most other states permit unions to impose a "fair share fee" on nonunion employees, requiring them to contribute an equal share to the union's costs of operation. See PA. STAT. ANN. tit. 71, § 575; see also Otto, 330 F.3d at 129. The fee, generally negotiated pursuant to the collective bargaining agreement, is normally set as a percentage of nonunion employees' salaries. It is then periodically assessed by the employer and remitted to the union. See Abood, 431 U.S. at 222-23, 235-36.

  The fee substantially eliminates the free-rider problem but it creates a constitutional free speech issue. See id.; see also Hudson, 475 U.S. at 302-03. It is a compulsory assessment on nonunion employees for the purpose of subsidizing speech by the union. Id.; Abood, 431 U.S. at 221-26, 235-36. The forced exaction that the fair share fee represents undoubtedly constitutes an infringement on nonunion employees' freedom of expression. Hudson, 475 U.S. at 302-03; Abood, 431 U.S. at 221-26, 235-36.

  Nevertheless, this infringement is constitutionally justified to support the national interest in collective bargaining. Id. at 231-35; accord Hudson, 475 U.S. at 302-03. The First Amendment is not an absolute. See, e.g., Marks v. United States, 430 U.S. 188, 193-94 (1977). The national interest in fostering collective bargaining activities supports the limited imposition on First Amendment rights represented by the fair share fee. See Abood, 431 U.S. at 225-26, 231. The fee Page 8 may be imposed "to finance expenditures by the [u]nion for the purposes of collective bargaining, contract administration, and grievance adjustment." Id.

  The fee may not be used, however, to subsidize "ideological" and "political" activities. Robinson v. Pa. State Corr. Officers Ass'n, 299 F. Supp. 2d 425, 428 (M.D. Pa. 2004) (quoting Hudson, 475 U.S. at 305).

 

Whatever the benefits of union representation, they cannot outweigh the First Amendment rights of nonunion employees to support only that political speech with which they agree. Unions may not use funds obtained through a fair share fee to advance "political views, . . . political candidates, or . . . other ideological causes not germane to [their] duties as . . . collective-bargaining representative." Any appropriation of a nonunion employee's earnings for an impermissible use, even if the funds are later returned, constitutes a violation of the employee's First Amendment rights.
Id. (quoting Abood, 431 U.S. at 235) (internal citations omitted).

  The Constitution limits the fair share fee to nonunion employees' pro rata share*fn7 of the union's expenditures for collective bargaining activities. See Page 9 Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507, 524 (1991); Abood, 431 U.S. at 225-26, 231; Ping v. Nat'l Educ. Ass'n, 870 F.2d 1369, 1372 (7th Cir. 1989). The fee may be used only to standardize the financial burden on employees in supporting these activities. See Lehnert, 500 U.S. at 524; Abood, 431 U.S. at 225-26, 231. In other words, the revenues that would generated by assessment of the fee on all employees — union and nonunion — must equal (or at least reasonably approximate) the expenses of the union related to chargeable activities. Id.; see also Hudson, 475 U.S. at 306-07. A fee that generates revenues in excess of these costs represents an unwarranted infringement on nonunion employees' First Amendment rights. Abood, 431 U.S. at 225-26, 231.

  To ensure that the fee does not exceed constitutional limitations, the Supreme Court, in the seminal case of Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292 (1986), announced several "procedural safeguards" that must be instituted prior to collection of a fair share fee. See id. at 305-06, 309. "Perhaps the most important of these is advance notice to nonunion employees explaining the method by which the fee was calculated."*fn8 Robinson, 299 F. Supp. 2d at 428. Advance notice is necessary to provide employees with Page 10 "sufficient information to gauge the propriety of the union's fee" and, if appropriate, to lodge an objection thereto. Hudson, 475 U.S. at 306.

  The content of the notice is a matter of significant debate. See Otto, 330 F.3d at 128; Tierney v. City of Toledo, 917 F.2d 927, 933-38 (6th Cir. 1990); Prescott v. County of El Dorado, 915 F. Supp. 1080, 1086 & n. 9 (E.D. Cal. 1996). The Supreme Court stated in Hudson that the notice must provide an "adequate explanation of the basis for the fee." Hudson, 475 U.S. at 310. In a footnote, the Court remarked that it should include "the major categories of expenses" incurred by the union during the previous year, verification by an "independent auditor," and "an explanation of the share" of expenses devoted to collective bargaining activities. Id. at 307 n. 18. Beyond these nebulous formulations, however, the Court declined to address further the nature of a constitutionally sufficient notice.*fn9

  The requisite content of the Hudson notice must be assessed in light of the purpose contemplated by the Supreme Court. See Hohe, 956 F.2d at 410; see also Gilpin v. Am. Fed'n of State, County, & Mun. Employees, 875 F.2d 1310, 1316 (7th Cir. 1989); Damiano v. Matish, 830 F.2d 1363, 1369-70 (6th Cir. 1987); cf. Air Line Pilots Ass'n v. Miller, 523 U.S. 866, 876-77 (1998). The notice was not intended Page 11 to provide a full financial background of the union. See Hohe, 956 F.2d at 410; see also Gilpin, 875 F.2d at 1316 (stating that notice should not be as "complicated as an SEC prospectus"). Nor was it meant to detail with "absolute precision" the expenses and revenues involved in the fair share fee calculation. Hudson, 475 U.S. at 307 n. 18; see also Hohe, 956 F.2d at 410; Tavernor v. Ill. Fed'n of Teachers, 226 F.3d 842, 850 (7th Cir. 2000). Rather, it was designed to give nonunion employees the information necessary to evaluate whether they should challenge the union's fair share fee as an unconstitutional infringement on their expressive rights.*fn10 See Hudson, 475 U.S. at 306-07 & n. 18; Hohe, 956 F.2d at 410-11; see also Hudson v. Chi. Teachers Union, Local No. 1, 922 F.2d 1306, 1314 (7th Cir. 1991).

  It follows that the cardinal purpose of the Hudson notice is disclosure of the relationship between the fair share fee and nonunion employees' pro rata share of union expenses attributable to collective bargaining activities. See Hudson, 475 U.S. at 306-07; Hohe, 956 F.2d at 410. As discussed previously, the Page 12 only constitutionally permissible function of the fair share fee is to standardize the financial burden on union and nonunion employees in supporting the collective bargaining activities of the "agency shop" union. See Lehnert, 500 U.S. at 524; see also Abood, 431 U.S. at 225-26, 231. Revenues generated by assessment of the fair share fee on all employees — union and nonunion — must equal the union's expenses devoted to collective bargaining activities.*fn11 Id.; see also Hudson, 475 U.S. at 306-07. A notice that does not describe this essential equation fails the fundamental goal of Hudson and does not sufficiently protect the constitutional rights of nonunion employees.

  The specific conditions identified in the Hudson footnote are merely means to achieve this overarching end. A list of the "major categories" of expenses assists nonunion employees in determining the extent and nature of the union's chargeable expenditures. See Hohe, 956 F.2d at 410. Verification by an "independent auditor" provides reasonable assurance of the accuracy of financial disclosures. Otto, 330 F.3d at 134-35. And "an explanation of the share" of expenses devoted to collective bargaining activities permits employees to evaluate the union's justification for the fee. Hohe, 956 F.2d at 410. But these details are meaningless in assessing the constitutionality of a fair share fee unless they are accompanied by disclosure of the relationship between the fair share fee and nonunion employees' pro rata share of union Page 13 expenses attributable to collective bargaining activities. See Lehnert, 500 U.S. at 524; Abood, 431 U.S. at 225-26, 231; Hohe, 956 F.2d at 410-11; see also Hudson, 475 U.S. at 306-07.

  The Sixth Circuit has gone further, holding in Tierney v. City of Toledo, 917 F.2d 927 (6th Cir. 1990), that the Hudson notice must disclose the union's total annual income — including profits from sources other than employee dues and fees — when necessary to corroborate the union's assertions regarding funding of political activities. See id. at 938. This conclusion is untenable. The accuracy of expenses listed in the notice is reasonably assured through the independent auditor requirement, see Otto, 330 F.3d at 134-35,*fn12 and substantive challenges to the veracity of these figures should be resolved through objections to the fair share fee calculation itself, see Hudson, 922 F.2d at 1313-14.*fn13 Although unclear from the opinion, the notice in Tierney apparently disclosed collective bargaining expenses from the previous year and revenues to be generated by the fair share fee as applied to all employees. See Tierney, 917 F.2d at 938-39. The Sixth Circuit did not cogently explain the need for more elaborate financial Page 14 information, and this court declines to modify the careful balance struck in Hudson "[a]bsent a counter directive by the Supreme Court." Otto, 330 F.3d at 132-33.

  The Hudson notice need provide only enough information for nonunion employees to gauge whether the fair share fee proposed by the union arguably exceeds their pro rata share of expenses attributable to collective bargaining activities. Hudson, 475 U.S. at 306-07; Hohe, 956 F.2d at 410. It should list the prior year's expenditures, reasonably categorized to indicate their use, with verification by an independent auditor. Hudson, 475 U.S. at 307 n. 18; see also Hohe, 956 F.2d at 410-11; Otto, 330 F.3d at 134-35 & n. 9. These expenditures should be further divided into "chargeable" and "nonchargeable" costs, with a general explanation of the basis for these allocations. Hudson, 922 F.2d at 1314-16; see also Hohe, 956 F.2d at 410-11; Gilpin, 875 F.2d at 1316; Damiano, 830 F.2d at 1369-70. Most importantly, the notice must link the total chargeable expenditures to the revenues to be generated by the fair share fee, if applied to all employees.*fn14 Hudson, 475 U.S. at 306-07; see also Lehnert, 500 U.S. at 524. Only with this information can the potential objector make an intelligent Page 15 decision on whether to test the validity of the fee through formal objection.*fn15 See Hudson, 475 U.S. at 306-07; Hohe, 956 F.2d at 410-11.

  The notice issued by the Association on March 15, 2003, followed the disclosures suggested by the Hudson footnote. It lists seventeen "major categories" of expenses incurred by the Association in the previous year. These expenses are verified by an "independent auditor."*fn16 And notes to the audit provide an "adequate explanation" of the union's method for determining the Page 16 share of expenses attributable to collective bargaining activities. See Hudson, 475 U.S. at 307 n. 18.

  However, the notice failed in its primary duty: to link the fair share fee to nonunion employees' pro rata share of union expenses attributable to collective bargaining activities. See id. at 306. The notice issued by the Association identifies the expenses attributable to collective bargaining activities and converts this amount into a percentage of total expenditures, which is then multiplied by the union dues rate to arrive at the fair share fee. The error in this calculation is that it is based on union dues, rather than the revenues necessary to cover chargeable expenses. See Abood, 431 U.S. at 225-26, 231. Union dues may bear little or no relation to chargeable (or total) expenses of the union,*fn17 and are essentially irrelevant to computation of the fair share fee.

  The Association may have been led astray by dicta in several cases, which appear to sanction the calculation of a fair share fee based upon "the proportion of chargeable expenditures to total dues." Tierney, 917 F.2d at 938-39; see also, e.g., Damiano, 830 F.2d at 1367 & n. 5; Laramie v. County of Santa Clara, 784 F. Supp. 1492, 1499 (N.D. Cal. 1992). The court rejects these formulations and the accompanying suggestion that "the Supreme Court has Page 17 not specified what methodology a union must use to calculate the [fair share] fee." Tierney, 917 F.2d at 938-39. To the contrary, the Supreme Court has repeatedly provided a formula for computing the fair share fee: the employee's pro rata share of chargeable expenses. Lehnert, 500 U.S. at 524; Abood, 431 U.S. at 225-26, 231.

  This share, phrased as a percentage of salary, is calculated by dividing chargeable expenses of the union by the total salary of all employees, union and nonunion.*fn18 See Hohe v. Casey, 740 F. Supp. 1092, 1097 (M.D. Pa. 1990), vacated in part on other grounds, 956 F.2d 399 (3d Cir. 1992); see also Bagnall v. Airline Pilots Ass'n, Int'l, 626 F.2d 336, 339 (4th Cir. 1980); S.E.C. v. Infinity Group Co., 993 F. Supp. 321, 323 (E.D. Pa. 1998), aff'd, 212 F.3d 180 (3d Cir. 2000). The resulting percentage represents each employee's "fair share" (i.e., pro rata share) of the chargeable expenses of the union. See Lehnert, 500 U.S. at 524; Abood, 431 U.S. at 225-26, 231. By applying this methodology, and describing it in a Hudson notice, the union informs non-members of chargeable expenses and expected revenues and provides them with a basis on which to assess the constitutionality of the fee. See Hudson, 475 U.S. at 306-07; Hohe, 956 F.2d at 410-11.

  The fair share fee calculation presented in the March 15, 2003, notice was not based on chargeable expenses, as required by the First Amendment, but Page 18 instead was based on union dues. The notice is devoid of any reference to revenues anticipated from the fair share fee, as applied to all employees, and it offers no information by which these revenues may be determined.*fn19 Without disclosure of this information, the constitutionality of the fair share fee cannot be reasonably evaluated, or even broached.*fn20 See Hudson, 475 U.S. at 306-07; Hohe, 956 F.2d at 410; see also Hudson, 922 F.2d at 1314.

  The Association seems to have missed the Hudson forest for the trees. Like those in Hudson and other cases, the notice issued by the Association contains specific financial information concerning union activities. Cf. Hudson, 475 U.S. at 307; Hohe, 956 F.2d at 410; Gillespie v. Willard City Bd. of Educ., 700 F. Supp. 898, Page 19 902-03 (N.D. Ohio 1987). Indeed, the sixteen-page document provides a level of detail that likely exceeds the minimums identified in the Hudson footnote and, in all respects, appears to represent a credible effort by the Association to satisfy constitutional obligations.

  But there is no good faith exception to the First Amendment in the Hudson context. For all of its detail relating to union expenses, the notice did not disclose the revenues to be generated by assessment of the fee on all employees. In failing to provide the constitutionally crucial link between fair share fee revenues and chargeable expenses, the notice failed to provide the information fundamentally necessary to allow nonunion employees "to gauge the propriety of the union's fee." Hudson, 475 U.S. at 306. It thus did not adequately protect their rights to freedom of expression. Id.; Hohe, 956 F.2d at 410; Gillespie, 700 F. Supp. at 902-03.

  The notice provided by the union on March 15, 2003, failed in the central purpose of Hudson and must be deemed inadequate as a matter of law. Summary judgment will be granted in favor of plaintiffs on the unconstitutionality of the fair share fee assessment based on that notice.

  An appropriate order will issue. Page 20

  ORDER

  AND NOW, this 4th day of February, 2005, upon consideration of the crossmotions for summary judgment (Docs. 42, 44), and for the reasons set forth in the accompanying memorandum, it is hereby ORDERED that:

1. Plaintiffs' motion for partial summary judgment (Doc. 42) is GRANTED.
2. Defendants' motion for summary judgment (Doc. 44) is DENIED.
3. The Clerk of Court is directed to defer the entry of judgment until the conclusion of this case.


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