American Federation of Labor and Congress v. Chao, No. 04-5057.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtRogers
Citation409 F.3d 377
PartiesAMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Appellant v. Elaine L. CHAO, United States Secretary of Labor, Appellee
Docket NumberNo. 04-5057.
Decision Date31 May 2005
409 F.3d 377
AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Appellant
v.
Elaine L. CHAO, United States Secretary of Labor, Appellee
No. 04-5057.
United States Court of Appeals, District of Columbia Circuit.
Argued December 8, 2004.
Decided May 31, 2005.

Page 378

Appeal from the United States District Court for the District of Columbia (No. 03cv02464).

Leon Dayan argued the cause for appellant. With him on the briefs were Robert M. Weinberg, Laurence Gold, Jonathan P. Hiatt, Deborah Greenfield, and James B. Coppess.

Jeffrey Clair, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General, Kenneth L. Wainstein, U.S. Attorney, Michael J. Singer, Attorney, Nathaniel I. Spiller, Acting Associate Solicitor, U.S. Department of Labor, Andrew D. Auerbach, Counsel, and William J. Stone, Senior Attorney.

Raymond J. LaJeunesse, Jr. and Nathan Paul Mehrens were on the brief for amici curiae National Right to Work Legal Defense Foundation, Inc., et al. in support of appellee.

Before: EDWARDS, ROGERS and ROBERTS, Circuit Judges.

Opinion for the Court filed by Circuit Judges ROGERS.

Opinion concurring in part and dissenting in part filed by Circuit Judge ROBERTS.

ROGERS, Circuit Judge.


The American Federation of Labor and Congress of Industrial Organizations ("AFL-CIO") challenges the Secretary of Labor's interpretation of her authority under sections 201(b) and 208 of the Labor Management Reporting and Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. §§ 431(b), 438 (2000), in promulgating the Labor Organization Annual Financial Reports ("final rule"), 68 Fed. Reg. 58,374 (Oct. 9, 2003) (to be codified at 29 C.F.R. pts. 403, 408). Appealing the judgment of the district court upholding the final rule, the AFL-CIO contends that the Secretary exceeded her delegated authority in two respects: First, by requiring labor organizations to include item-by-item listings of ordinary receipts and disbursements in revised Form LM-2, the Secretary ignored a limitation on her authority in section 201(b). Second, by imposing a general trust reporting requirement in new Form T-1 that is unrelated to preventing circumvention or evasion of reporting requirements under LMRDA Title II, the Secretary ignored a limitation on her authority in section 208.

Neither the plain language of section 201(b), its legislative history, nor prior administrative interpretation resolves the ambiguity in section 201(b) regarding the level of detail that the Secretary may require labor organizations to include in their annual financial reports. In light of the Secretary's explanation for the changes to Form LM-2 in order to fulfill the purpose of section 201(b), we hold that the Secretary's promulgation of revised Form LM-2 is a reasonable application of her authority under section 201(b). We further hold that while the Secretary has authority under section 208 to require labor organizations to file reports on certain trusts where necessary to prevent circumvention or evasion of reporting requirements under LMRDA Title II, the Secretary's promulgation of new Form T-1 has exceeded her authority by requiring general trust reporting. Accordingly, we affirm the judgment of the district court in part, reverse in part, and we vacate the

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provisions of the final rule relating to Form T-1.

I.

Title II of the LMRDA, entitled "Reporting By Labor Organizations, Officers and Employees of Labor Organizations, and Employers," requires labor organizations to report on a number of activities. Section 201(b) of Title II requires each covered labor organization ("union") to file with the Secretary an annual financial report "in such detail as may be necessary accurately to disclose its financial condition and operations for its preceding fiscal year"—"all in such categories as the Secretary may prescribe."1 29 U.S.C. § 431(b). Subparts (1), (2), and (6) require reports of (1) "assets and liabilities," (2) "receipts" and their "sources," and (6) "other disbursements" and their "purposes." Id. § 431(b)(1), (2), (6). Subparts (3), (4), and (5) require more detailed reporting, subject to threshold dollar amounts, of specific types of disbursements—including salary and related payments to union officers and employees, loans to union insiders, and loans to business enterprises. Id. § 431(b)(3)-(5). The financial report, upon filing with the Secretary, becomes public information. Id. § 435. Section 208 of Title II authorizes the Secretary to prescribe the "form and publication" of the various reports required under Title II.2 Id. § 438.

In promulgating the implementing regulations for section 201(b) in 1960, the Secretary of Labor required unions with gross annual receipts equal to or greater than a certain dollar threshold to file an annual financial report on Department of Labor Form LM-2. See 25 Fed. Reg. 433 (Jan. 20, 1960) (codified at 29 C.F.R. pt. 403). Unions with lower receipts filed reports on simplified Forms LM-3 or LM-4. Id. at 433-34. Form LM-2 called for reporting of assets and liabilities and receipts and general disbursements in aggregate amounts. Form LM-2 required unions to itemize their disbursements only with respect

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to the transactions specified in subparts (3), (4), and (5) of section 201(b). The 1960 regulations required unions to retain, for a five-year period, vouchers, receipts, and other underlying documentation in sufficient detail to permit these reports to be "verified, explained or clarified, and checked for accuracy and completeness." Id. at 434; see also 29 U.S.C. § 436. With the exception of the dollar filing threshold, these reporting requirements remained substantially unchanged for more than four decades. See 57 Fed. Reg. 14,244 (Apr. 17, 1992). The Secretary periodically increased the filing threshold for the Form LM-2 report so that, by 1994, only unions with annual receipts of $200,000 or more were required to complete this longer form. See 67 Fed. Reg. 79,280, 79,293 (Dec. 27, 2002).

On October 9, 2003, the Secretary promulgated the final rule now challenged, calling for several significant changes to the financial reporting requirements under section 201(b). The final rule amended Form LM-2 to require unions to itemize their general receipts and disbursements. Unions must identify, in six supporting schedules, individual receipts and (non-salary) disbursements made to support a particular union function of $5,000 or more, and specify the name, address, purpose, date, and amount associated with each transaction. 68 Fed. Reg. at 58,429-30. In addition to reporting such "major" transactions, see id. at 58,388-89, each union officer and employee must provide a functional accounting, estimating the portion of work time spent on the corresponding activities. Id. at 58,429. Unions also must identify the vendors and other entities that received union receipts and disbursements of $5,000 or more during the fiscal year. Id. Unions must further itemize all accounts receivable and payable of $5,000 or more at the end of the fiscal year and include an "aging" schedule for each item showing the amount of money owed to or by the union that is either 90 to 180 days or more than 180 days past due. Id. at 58,429, 58,452-53, 58,485, 58,491. The final rule raised the filing threshold to $250,000. Id. at 58,383. Each union filing a Form LM-2 report must also file a separate Form T-1 report on significant trusts in which the labor organization is interested, id. at 58,477, disclosing the trust's assets, liabilities, receipts, and disbursements, as well as certain asset acquisitions or dispositions, liability liquidations, and loans extended below market rate or written off. Id. at 58,518, 58,531.

The AFL-CIO sued the Secretary, seeking injunctive and declaratory relief that the final rule is unlawful under the Administrative Procedure Act, 5 U.S.C. § 706(2)(C) (2000). In relevant part, the complaint alleged that both the itemization requirement in the revised Form LM-2 and the trust reporting requirement in Form T-1 were in excess of the Secretary's authority under the LMRDA. Because the final rule would become effective in a matter of weeks, the complaint also alleged that its effective date was unworkable. The district court denied the AFL-CIO relief, except with respect to the implementation date, which the court stayed until the later of July 1, 2004, or ninety days after the Secretary makes available a fully tested electronic reporting software. The AFL-CIO appeals, and our review of the judgment denying relief is de novo. Gas Appliance Mfrs. Ass'n v. Dep't of Energy, 998 F.2d 1041, 1045 (D.C.Cir.1993).

II.

The AFL-CIO does not contest that Congress has delegated authority to the Secretary to promulgate rules to enforce section 201(b). Rather it challenges

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the Secretary's interpretation of her authority to require itemization in the revised Form LM-2 under section 201(b) for subparts (1) "assets and liabilities," (2) "receipts," and (6) "other disbursements." We therefore proceed under the familiar two-step approach of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to determine whether the Secretary's interpretation is entitled to deference. "[E]mploying traditional tools of statutory construction" the court must determine whether "Congress has an intention on the precise question at issue," and if so "that intention is the law and must be given effect." Id. at 843 n. 9, 104 S.Ct. 2778 ("Step 1"). If Congress has not directly spoken to the issue, the court must defer to the Secretary's interpretation of the statute if it is reasonable and not "manifestly contrary to the statute." Id. at 844-45, 104 S.Ct. 2778 ("Step 2").

The AFL-CIO contends that the issue of itemization is resolved under Chevron Step 1 because the accounting terms...

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38 practice notes
  • Part III
    • United States
    • Federal Register August 29, 2005
    • August 29, 2005
    ...was vacated by the District of Columbia Circuit on appeal. See American Federation of Labor and Congress of Indus. Organizations v. Chao, 409 F. 3d 377 (D.C. Cir. May 31, 2005), petition for rehearing and rehearing en banc filed July 15, 2005. The goal of these initiatives, like this propos......
  • Labor-management standards: Labor organization annual financial reports,
    • United States
    • Federal Register September 29, 2006
    • September 29, 2006
    ...Court of Appeals for the District of Columbia Circuit in American Federation of Labor and Congress of Industrial Organizations v. Chao, 409 F.3d 377 (2005). Under this rule, the Department will require that a labor organization (``union'') with total annual receipts of $250,000 or more file......
  • Standards of conduct: Labor organization officer and employee reports,
    • United States
    • Federal Register August 29, 2005
    • August 29, 2005
    ...was vacated by the District of Columbia Circuit on appeal. See American Federation of Labor and Congress of Indus. Organizations v. Chao, 409 F. 3d 377 (D.C. Cir. May 31, 2005), petition for rehearing and rehearing en banc filed July 15, 2005. The goal of these initiatives, like this propos......
  • Part V
    • United States
    • Federal Register September 29, 2006
    • September 29, 2006
    ...Court of Appeals for the District of Columbia Circuit in American Federation of Labor and Congress of Industrial Organizations v. Chao, 409 F.3d 377 (2005). Under this rule, the Department will require that a labor organization (``union'') with total annual receipts of $250,000 or more file......
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