Thomas v. National Labor Relations Board , 213 F.3d 651 ( 2000 )

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.