Warshauer v. Solis

• Decision Date: 03 August 2009
• Docket Number: No. 08-13739. Non-Argument Calendar.,08-13739. Non-Argument Calendar.
• Parties: Michael J. WARSHAUER, Plaintiff-Appellant, v. Hilda SOLIS, United States Secretary of Labor, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

577 F.3d 1330

Michael J. WARSHAUER, Plaintiff-Appellant, v. Hilda SOLIS, United States Secretary of Labor, Defendant-Appellee.

No. 08-13739. Non-Argument Calendar.

United States Court of Appeals, Eleventh Circuit.

August 3, 2009.

David Wayne Elbaor, Law Office of David Elbaor, Washington, DC, for Warshauer.

Stephanie R. Marcus, Michael Jay Singer, U.S. Dept. of Justice, Civ. Div., App. Staff, Washington, DC, for Defendants-Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before WILSON and ANDERSON, Circuit Judges, and GOLDBERG,^* Judge.

WILSON, Circuit Judge:

This appeal requires us to engage in an interpretation of the Labor-Management Reporting and Disclosure Act of 1959 ("LMRDA" or "Act"), and examine the Secretary of the United States Department of Labor's ("Secretary") authority under it. The case concerns certain website advisories the Secretary issued regarding reporting obligations under the Act, and the extent to which a designated legal counsel ("DLC") must file annual reports of payments the DLC makes over a designated dollar amount to a union or union officer or employee. A DLC is an attorney recommended by a labor union to its members for representation in personal injury lawsuits, who usually does not play a role in labor relations and is not in an actual or potential bargaining relationship with the labor organization. Our consideration of the plain language of the LMRDA leads us to conclude that the Secretary's interpretation is not arbitrary and capricious, such that the appellant, Michael Warshauer, a DLC, is required to file the annual reports. We also find that the Secretary was not required to engage in notice and comment rulemaking when she issued the website advisories.

I. BACKGROUND

A. Relevant LMRDA Provisions

Finding that "there ha[d] been a number of instances of breach of trust, corruption, disregard of the rights of individual employees, and other failures to observe high standards of responsibility and ethical conduct," in 1959 Congress enacted the LMRDA to protect the rights of employees and the public. 29 U.S.C. § 401(b). An important component of this protection were reporting requirements which would shed light on certain financial transactions. The instant case concerns one of these reporting requirements: § 203 of the LMRDA.

Section 203(a)(1) of the LMRDA requires the filing of a financial report from "[e]very employer who in a fiscal year made — (1) any payment or loan, direct or indirect of money or other thing of value (including reimbursed expenses), or any promise or agreement therefor, to any labor organization or officer ...." 29 U.S.C. § 433(a)(1).

Section 203(a)(1)'s reporting requirement applies only to "employers." The LMRDA defines an "employer" as:

[A]ny employer or any group or association of employers engaged in an industry affecting commerce (1) which is, with respect to employees engaged in an industry affecting commerce, an employer within the meaning of any law of the United States relating to the employment of any employees....

29 U.S.C. § 402(e).

To implement the LMRDA, Congress authorized the Secretary "to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under this [subchapter] and such other reasonable rules and regulations ... as [the Secretary] may find necessary to prevent the circumvention or evasion of such reporting requirements." 29 U.S.C. § 438.

B. Relevant Department of Labor Regulations

In 1963, the Department of Labor promulgated regulations to implement the employer reporting requirements of the LMRDA, specifying that "every employer required to file an annual report by section 203(a) of the Act and § 405.2 shall file such report on the United States Department of Labor Form LM-10 ... in the detail required by the instructions accompanying such form and constituting a part thereof." 29 C.F.R. § 405.3. The Instructions require employers to report only "certain transactions":

Only those employers as defined in the [LMRDA] who have been involved in certain financial transactions or arrangements with labor organizations, union officials, employees, or labor relations consultants, or who have made expenditures for certain objects relating to employees' or unions' activities.

The Instructions also exempt from reporting "sporadic or occasional gifts, gratuities, or favors of insubstantial value, given under circumstances and terms unrelated to the recipient's status in a labor organization; e.g., traditional Christmas gifts."

The LMRDA Interpretive Manual ("Manual") was also published in 1963, giving guidance on implementing the statute and regulations. Like the Instructions, the Manual explained that certain payments need not be reported. It used a discretionary "subjective standard" to determine what payments qualified as of "insubstantial value," requiring that "each case ... be considered on its own facts." The Secretary's decision not to enforce the reporting requirements for payments of "insubstantial value" is known as the de minimis exemption.

Warshauer introduced testimony of former Department of Labor officials, suggesting that historically the Secretary interpreted the LM-10 reporting requirement to apply only to employers who engaged in persuader activities.¹ Moreover, it is clear that historically, "insubstantial value" was determined on a case-by-case basis, rather than a fixed dollar amount. The issues in this case arose when the Secretary allegedly departed from these historical practices by publishing advisories on her website regarding the application of § 203(a)(1) to DLCs and the de minimis exemption.

C. Website Advisories

In 2005, the Secretary issued website advisories pertaining to Form LM-10 filers. A list of rules, called "Frequently Asked Questions," or "FAQs," detailed the reports to be filed, records to be kept, and calculations to be made annually by employers. In November 2005, the Secretary posted an FAQ, which specifically identified DLCs as falling within the definition of "employer" under the LMRDA, essentially directing DLCs to file the LM-10. Another FAQ stated that the de minimis rule for exempting transactions of "insubstantial value" from reporting would depend on a fixed dollar amount. In March 2006, the website announced that the fixed amount was $250 — "gifts and gratuities with an aggregate value of $250 or less provided by an employer will be considered insubstantial for the purposes of LM-10 reporting."

The Secretary published these website advisories without giving notice to the public or offering an opportunity for public comment.

D. Application to Warshauer

Michael Warshauer, an attorney who practices in Atlanta, Georgia, specializes in actions under the Federal Employers Liability Act ("FELA"). A rail labor union, the United Transportation Union ("UTU"), appointed him as a DLC. As a DLC, the UTU recommends Warshauer to its members for representation in workers' compensation cases, personal injury cases, and other matters. Warshauer offers this legal counsel to UTU members at a reduced fee of 25% of the recovery. Warshauer engages in normal business entertaining of potential UTU clients.

In October 2002, the Department of Labor sent Warshauer a letter informing him that "payments made or promised to the UTU, ... either directly or indirectly, by each DLC that is an `employer' within the meaning of section 3(e) of the LMRDA, must be disclosed on Employer Report, Form LM-10, in accordance with the statute and with Department of Labor Interpretive Regulations ...." However, Warshauer did not file the Form LM-10, based on his belief that he does not qualify as an "employer" under § 203(a)(1) of the LMRDA.

E. Procedural History

Warshauer filed the present action under the Administrative Procedure Act ("APA") seeking to enjoin the Secretary of Labor ("Secretary") from enforcing reporting requirements under § 203(a)(1) of the LMRDA without the Secretary first engaging in notice and comment rulemaking. He also sought declaratory relief invalidating such reporting requirements with respect to DLCs and the Secretary's website advisories regarding the de minimis exemption.

After discovery, both parties filed motions for summary judgment. The district court granted the Secretary's motion. The court held that the website advisories regarding both coverage of DLCs and the $250 threshold for reporting were interpretive guidance, not substantive rules, and thus, even if they departed from the Secretary's prior interpretation, notice and comment rulemaking was not required. In the alternative, the court held that even if it were to rule that notice and comment rulemaking was required, the evidence viewed in the light most favorable to Warshauer "fails to support a determination that the Secretary departed from previously-established official policy" regarding either reporting by DLCs or the de minimis exemption. It also ruled that the Secretary's interpretation of the term "employer" reflected the plain meaning of the statute and thus was not arbitrary and capricious. The court held that the Secretary's interpretive guidance was entitled to respect under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), and therefore should be upheld under the APA.

II. STANDARD OF REVIEW

"[W]e review the district court's grant of summary judgment de novo, with all facts and reasonable inferences therefrom reviewed in the light most favorable to the nonmoving party." Harbert Int'l, Inc. v. James, 157 F.3d 1271, 1277 (11th Cir.1998) (citation omitted). We review questions of statutory interpretation de novo, although an agency's interpretive guidance construing a statute is entitled to deference "proportional to its power to persuade." United States v. Mead Corp., 533 U.S. 218, 235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) (internal quotation marks and citations...