Otto v. Pennsylvania State Educ. Association-Nea, 01-3858.

Citation330 F.3d 125
Decision Date08 May 2003
Docket NumberNo. 01-3858.,No. 01-4110.,01-3858.,01-4110.
PartiesMarsha OTTO; F. Naylor Emery; Dennis A. Erb; Robert K. Gilbert; James W. Lossell; Barbara J. McAlley; Wesley S. Semple, On behalf of themselves and all other non-members similarly situated v. PENNSYLVANIA STATE EDUCATION ASSOCIATION-NEA; National Education Association; Shaler Area Education Association, On behalf of themselves and all other local associations similarly situated Appellants Marsha Otto; F. Naylor Emery; Dennis A. Erb; Robert K. Gilbert; James W. Lossell; Barbara J. McAlley; Wesley S. Semple, On behalf of themselves and all other non-members similarly situated Appellants v. Pennsylvania State Education Association-NEA; Shaler Area Education Association, On behalf of themselves and all other local associations similarly situated, National Education Association; Grove City Area Education Association; Jane Campbell; Barbara Leiby
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Milton L. Chappell (Argued), W. James Young, National Right to Work Legal Defense Foundation, Springfield, VA, for Appellees/Cross-Appellants.

John M. West (Argued), Laurence Gold, Bredhoff & Kaiser, Washington, DC, Mark P. Widoff, Pennsylvania State Education Association, Harrisburg, PA, for Appellants/Cross-Appellees.

Before: AMBRO and STAPLETON, Circuit Judges, and O'NEILL*, District Judge.


AMBRO, Circuit Judge.

We consider whether, under the First Amendment, certain expenses incurred by unions may be charged to non-members and whether a local union must obtain independent auditor verification of its charges (and, if so, what kind of verification we require).

The First Amendment affords public-sector employees the freedom not to associate with a labor organization. See Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292, 301, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986) (quoting Abood v. Detroit Bd. of Educ., 431 U.S. 209, 222, 97 S.Ct. 1782, 52 L.Ed.2d 261 (1977)). There are limits to this constitutional freedom, however, in light of organized labor's important role in advancing employment conditions. Abood, 431 U.S. at 225-26, 97 S.Ct. 1782. Thus, as a means of curing the so-called "free-rider" problem posed by its representation of non-members, a union may charge each non-member employee a fair-share, or agency, fee equal to his or her per capita share of the union's expenses arising from its duties as a collective-bargaining representative. See id. at 235-36, 97 S.Ct. 1782. But a union may not, consistent with the First Amendment, collect fair-share dues to support ideological causes or other expenses insufficiently related to collective bargaining. Id.

To ensure that non-members are assessed only for fair-share fees properly chargeable to them, the Supreme Court has ruled that unions must adopt procedural safeguards "carefully tailored to minimize the [First Amendment] infringement." Hudson, 475 U.S. at 303, 106 S.Ct. 1066. First, the union must provide a non-member with "sufficient information to gauge the propriety of the union's fee." Id. at 306, 106 S.Ct. 1066. This explanation of the basis for the fee is often referred to as a "Hudson notice." Second, a non-member must have an adequate opportunity to object to the fair-share fee allocation. See id. at 307, 106 S.Ct. 1066. The two safeguards are linked; without the Hudson notice, a non-member would lack a basis for deciding whether to object to a fair-share fee calculation. Penrod v. NLRB, 203 F.3d 41, 46 (D.C.Cir.2000).

When theory meets practice, questions abound. Do the financial information requirements apply to small local unions? How much verification of that information must there be? When a union represents more than one bargaining unit, can that union include, in the fair-share fee assessed to non-members of one bargaining unit, costs associated with another bargaining unit's litigation? What if those bargaining units are in different industries?


Shaler Area Education Association ("SAEA") is the exclusive bargaining representative for education professionals employed by the Shaler Area School District. SAEA is the local affiliate of the Pennsylvania State Education Association ("PSEA") — which represents, inter alia, both education and healthcare professionals in the Commonwealth — and the National Education Association ("NEA," and collectively with SAEA and PSEA, the "Unions"). During the 1994-1995 school year, the Shaler Area School District employed 355 education professionals, 344 of whom were members of the SAEA (and, thereby, the PSEA and NEA). Because all three Unions provide collective-bargaining services to the plaintiffs' bargaining unit, the eleven non-members paid fairshare fees to the SAEA, PSEA, and NEA pursuant to 71 Pa. Cons.Stat. Ann. § 575 (West 2003).

Seven non-union education professionals brought this 42 U.S.C. § 19831 action to challenge the Unions' fair-share fee procedure and assessments.2 After the District Court confirmed that the plaintiffs had standing to object to the fair-share fees and the sufficiency of the Unions' Hudson notice,3 the parties filed a joint stipulation of facts followed by cross-motions for summary judgment. The District Court granted partial summary judgment in favor of the plaintiffs, declaring that the SAEA must verify its expenditures through an independent audit and that PSEA4 could not charge the plaintiffs for expenses incurred in litigation not relating specifically to the plaintiffs' own collective-bargaining unit. However, it also held that the Unions could assess education-professional plaintiffs for non-litigation expenditures related to the Unions' representation of healthcare professionals.

Both parties appealed, and together they present four issues for our review: (1) whether, by filing their complaint, plaintiffs objected properly to the Unions' fees and procedures; (2) whether a local union, regardless of size, must obtain an independent auditor verification of the expenditures listed in its fair-share calculation notice (and, if so, we need to decide at what level of auditor inquiry); (3) whether a union may charge non-members for collective-bargaining-related litigation costs incurred on behalf of another bargaining unit pursuant to an expense-pooling arrangement with that other bargaining unit; and (4) whether a union may charge nonmembers for pooled resources available to all local affiliates even though some of the affiliates represent employees in different professions. We rule in favor of plaintiffs as to issues one and two (and determine the level of verification required) and the Unions on issues three and four.


The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1343. We exercise appellate jurisdiction pursuant to 28 U.S.C. § 1291.

Whether plaintiffs properly objected to the Unions' fair-share fee calculation is a question of standing and is subject to de novo review. In re RFE Indus., Inc., 283 F.3d 159, 163 (3d Cir.2002). We also review de novo the District Court's grant of summary judgment. Cloverland-Green Spring Dairies, Inc. v. Pa. Milk Mktg. Bd., 298 F.3d 201, 210 (3d Cir.2002).

A. Objection Requirement

The Unions contend that plaintiffs failed to carry their burden of objecting to the fair-share fee calculation by not raising a "contemporaneous objection," i.e., by not objecting at the time of fee collection. Addressing this issue as a question of plaintiffs' standing to sue, the District Court rejected the Unions' contention on the ground that plaintiffs' complaint satisfied the objection requirement. We agree.

No Supreme Court case explicitly establishes a contemporaneous-objection requirement. While International Association of Machinists v. Street, 367 U.S. 740, 81 S.Ct. 1784, 6 L.Ed.2d 1141 (1961), held that each non-member must individually object to disputed fair-share fees, that requirement merely places the burden on dissenting employees affirmatively to opt out of fees to which they object, rather than allowing them to opt into fees with which they agree. See id. at 771, 81 S.Ct. 1784 (holding that because the individual Street plaintiffs "have in the course of [this action] made known to their respective unions their objection to the use of their money for the support of political causes[,]... the respective unions were without power to use payments thereafter tendered by them for such political causes"). Since Street, the Court has reiterated that non-members may raise their initial objection in a complaint. Abood, 431 U.S. at 239, 97 S.Ct. 1782 ("[T]he requirement in Street that dissent be affirmatively indicated was satisfied by the allegations in the complaint that was filed.") (citation omitted); Bhd. of Ry. & S.S. Clerks, Freight Handlers, Exps. & Station Employees v. Allen, 373 U.S. 113, 119 n. 6, 83 S.Ct. 1158, 10 L.Ed.2d 235 (1963) (citing Street, 367 U.S. at 771, 81 S.Ct. 1784) (employees in Railway Labor Act case "first made known their objection to the [unions'] political expenditures in their complaint filed in this action; however, this was early enough").

Yet the Unions argue that Hudson imposed a more onerous notice standard and that "post-Hudson cases have implicitly rejected the notion of objection-by-lawsuit." Even assuming arguendo that the Unions are correct, the contemporaneous-objection principle they espouse would nonetheless be inapplicable in this case because, as we explain more fully infra in Section III.B, "the notice procedures and the fee information given under the plan were inadequate." Lowary v. Lexington Local Bd. of Educ., 903 F.2d 422, 430 (6th Cir.1990). Thus the plaintiffs lacked sufficient information to formulate a contemporaneous objection.

B. Independent Auditor Verification

In Hudson, the Supreme Court held that a local union representing 27,500 employees and...

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