Cummings v. Connell, CIV.S-99-2176 WBSDAD.

• Decision Date: 02 May 2001
• Docket Number: No. CIV.S-99-2176 WBSDAD.,CIV.S-99-2176 WBSDAD.
• Court: U.S. District Court — Eastern District of California
• Parties: Christine A. CUMMINGS, et al., Plaintiffs, v. Kathleen CONNELL, Controller, State of California, et al., Defendants.

177 F.Supp.2d 1060

Christine A. CUMMINGS, et al., Plaintiffs, v. Kathleen CONNELL, Controller, State of California, et al., Defendants.

No. CIV.S-99-2176 WBSDAD.

United States District Court, E.D. California.

May 2, 2001.

Order Amending Judgment on Denial of Reconsideration July 31, 2000.

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W. James Young, National Right to Work Legal, Defense Foundation Inc, Springfield, VA, Dylan Bradley Carp, Kirkpatrick and Lockhart LLP, San Francisco, CA, for Plaintiffs.

Warren Curtis Stracener, California Department of Personnel Administration, Legal Division, Sacramento, CA, Christopher C. Foley, Attorney General's Office of the State of California, Los Angeles, CA, Leslie R. Lopez, Attorney General's Office of the State of California, Harry J. Gibbons, Jr., Anne Maria Giese, California State Employees Association, Sacramento, CA, Jeffrey Brian Demain, Altshuler Berzon Nussbaum Rubin and Demain, San Francisco, CA, for Defendants.

MEMORANDUM AND ORDER

SHUBB, District Judge.

Named plaintiffs represent a class of state employees organized in bargaining units represented by defendant California State Employees Association, Local 1000 ("CSEA" or "the union"). Plaintiffs, who are not union members, allege that CSEA has been improperly withholding a portion of union dues from their paychecks without providing them with the procedural safeguards mandated by Chicago Teachers Union v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986). In addition, plaintiffs claim that the indemnification provision contained in the collective bargaining agreement between the union and the State of California is void as against public policy. Both plaintiffs and defendants move for summary judgment pursuant to Federal Rule of Civil Procedure 56.

I. Procedural and Factual Background

CSEA is the exclusive representative for collective bargaining purposes of all employees in bargaining units 1, 3, 4, 11, 14, 15, 17, 20, and 21. In March 1999, defendants Morgenstern and CSEA entered into collective bargaining agreements allowing the state employer to deduct and forward "fair share" fees from plaintiffs' ("fee payers" or "nonmembers") paychecks to CSEA. The "fair share" purportedly represents the nonmember's share of the cost of collective bargaining. In April and June 1999, CSEA sent two notices to non-members regarding the "fair share" deductions ("April notice" and "June notice"). The June notice included the "1998 Expenditure Report," which was based on an independent audit (the "Audit") of CSEA's 1998 financial records prepared by the Gibson and Company, Inc., a certified public accounting firm.

Plaintiffs filed their complaint and moved for a preliminary injunction in November 1999, claiming that the April and June notices were constitutionally inadequate under Chicago Teachers Union v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986), because defendants did not provide an actual copy of the Audit with the notices. On December 20, 1999, this court certified the class and partially granted plaintiffs' motion.¹ Specifically this court ordered that upon the posting of a security bond, "defendants ... shall be enjoined from seizing agency fees from plaintiffs or any member of the represented class until defendants have provided such plaintiff or member of the class with a copy of the auditor's report and the appropriate documentation." (Memorandum and Order filed Dec. 20, 1999, at 24:816).²

In January 2000, defendants mailed a copy of the Audit to plaintiffs. On January 19, 2000, plaintiffs moved for a temporary restraining order ("TRO"), claiming, among other things, that defendants did not change the deadline for plaintiffs to object to the notice after sending them the Audit. The court denied the motion for TRO in open court "on the condition that ... defendants shall provide to the class members an adequate notice again making reference to the audits that are now being distributed, and allowing the plaintiffs and the members of the class an opportunity to challenge the audits pursuant to the discussion in Chicago Teachers Union v. Hudson." (Transcript of Jan. 19, 2000 TRO hearing, at 28:13-20).

On January 25, 2000, the Controller's Office mailed the "January 2000 Amended Notice" (the "amended notice") to the fee payers. Among other things, the amended notice referenced the Audit and extended the period for nonunion members to challenge the fee calculation until March 1, 2000. The court heard plaintiffs' January 19 motion as a preliminary injunction on February 23, 2000, and denied the motion.

In May, CSEA mailed the "May 2000 Notice To Fee Payers" ("May notice"). This notice included an "allocation audit," which verifies a union's allocation of chargeable and non-chargeable expenses, and integrated the prior notices and the "1998 Expenditure Report." Plaintiffs agreed during oral argument that the May notice met the requirements of Hudson. The May notice allowed fee payers to retroactively object to all prior deductions, beginning with the first deduction in April 1999. According to defendants, by the end of March 2001, all objectors will have received a refund of the entire non-chargeable portion of the 1999 "fair share" fee, with interest.

Plaintiffs move for summary judgment on the adequacy of the April, June and January notices, as well as the validity of the indemnification provision contained in the collective bargaining agreements between the State of California and CSEA. Defendants move for summary judgment on the grounds that (1) the June and January notices are adequate as a matter of law; (2) plaintiffs have not suffered any compensable harm; (3) if plaintiffs have suffered compensable harm, their challenges to CSEA's expenditures have no merit; (4) plaintiffs do not have standing to challenge the indemnification provision; and (5) the indemnification provision is valid as a matter of law.³

II. Discussion

The court must grant summary judgment to a moving party "if the pleadings depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party adverse to a motion for summary judgment may not simply deny generally the pleadings of the movant; the adverse party must designate "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Simply put, "a summary judgment motion cannot be defeated by relying solely on conclusory allegations unsupported by factual data." Taylor v. List, 880 F.2d 1040, 1045 (9th Cir.1989). The non-moving party must show more than a mere "metaphysical doubt" as to the material facts. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

A. Adequacy of Notices Mailed by CSEA

Nonunion public employees can be compelled to pay their pro rata share of the costs of collective bargaining, contract administration, and grievance adjustment. See Hudson, 475 U.S. at 294, 106 S.Ct. 1066. However, public employees cannot be compelled to support ideological causes that they oppose. See Abood v. Detroit Bd. of Educ., 431 U.S. 209, 235, 97 S.Ct. 1782, 52 L.Ed.2d 261 (1977) "[T]he Constitution requires that such expenditures be financed from charges, dues or assessments paid by employees who do not object to advancing those ideas ...." Id. at 235-36, 97 S.Ct. 1782.

In Hudson, the Supreme Court considered the procedural safeguards necessary to protect nonmembers' First Amendment rights. Hudson, 475 U.S. at 302, 106 S.Ct. 1066. "The objective must be to devise a way of preventing compulsory subsidization of ideological activity by employees who object thereto without restricting [a union's] ability to require every employee to contribute to the cost of collective-bargaining activities." Id. According to the Court, the minimal procedural requirements for deducting union fees from nonmembers paychecks include "an adequate explanation of the basis for the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decisionmaker, and an escrow for the amounts reasonably in dispute while such challenges are pending." Id. at 310, 106 S.Ct. 1066. To comply with Hudson, unions generally send a "Hudson notice" to nonmembers.

1. Adequacy of the April and June Notices

The April and June notices were not adequate under Hudson because they did not adequately explain the basis for the fee. Specifically, the union failed to provide a copy of the Audit in the absence of a fee payer's formal request. Accordingly, plaintiffs are entitled to summary judgment with respect to these two notices.

Hudson requires that unions provide "adequate" or "sufficient" financial disclosure so that nonmember employees may "gauge the propriety of the union's fee." Hudson, 475 U.S. at 306, 106 S.Ct. 1066. The union must provide nonmembers an "adequate explanation of the basis for the fee." Id. at 310, 106 S.Ct. 1066. "The union need not provide non-members 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." Id. at 307 n. 18, 106 S.Ct. 1066.

The Ninth Circuit has held that an adequate explanation of the basis of the fee includes an audit verifying that the union "actually spent the amounts of money it claimed to have spent on the chargeable activities." See Knight v. Kenai Peninsula Borough Sch. Dist., 131 F.3d 807, 813 (9th Cir.1997); see also Prescott v. El Dorado County, 177 F.3d 1102, 1107-08 (9th Cir.1999) ("real independent verification of the financial data in question" required under Hudson), vacated in part and...