Locke v. Karass (07-610)

Oral argument: Oct. 6, 2008

Appealed from: United States Court of Appeals, First Circuit (Aug. 8, 2007)

EMPLOYMENT, COLLECTIVE BARGAINING, EXTRA-UNIT LITIGATION, UNION DUES, AGENCY FEES, MAINE STATE EMPLOYEES ASSOCATION

The state of Maine has designated the Maine State Employees Association (“MSEA”) as the exclusive “collective bargaining agent” for Maine state employees, including certain employees who are not members of the union. As a result, the nonmembers are required to pay service fees to MSEA, with part of the nonmembers’ fees pooled into the resources of a larger umbrella union. A group of nonmembers recently sued MSEA, claiming that this pooled arrangement with MSEA violates their First Amendment rights, because some of these litigation fees end up contributing to units outside MSEA. The District Court for the District of Maine held that the arrangement was constitutional and ruled for the unions, and the Court of Appeals for the First Circuit affirmed. At issue before the Supreme Court is whether such a pooling arrangement for extra-unit, collective-bargaining litigation expenses is constitutional. The Court’s decision will affect the financial burden on both nonmembers and local unions. Moreover, several circuit courts have decided differently on the issue of extra-unit litigation. With this case, the Court has the opportunity to reaffirm, clarify, or change the existing law.

· [Question(s) presented]

· [Issue(s)]

· [Facts]

· [Discussion]

· [Analysis]

Question(s) presented

In Ellis v. Railway Clerks, this Court unanimously “determined that the [Railway Labor Act], as informed by the First Amendment, prohibits the use of dissenters’ [union] fees for extraunit litigation.” Lehnert v. Ferris Faculty Ass’n, 500 U.S. 507, 528 (1991) (opinion of Blackmun, J., citing Ellis, 466 U.S. 435, 453 (1984)). In Lehnert, a four-member plurality therefore held “that the Amendment proscribes such assessments in the public sector.” Id. Moreover, Justice Scalia’s separate opinion, concurring in part in the judgment announced by Justice Blackmun, reasoned that “there is good reason to treat [Ellis and the Court’s other statutory cases] as merely reflecting the constitutional rule.” Id. at 555.

May a State, nonetheless, consistent with the First and Fourteenth Amendments, condition continued public employment on the payment of agency fees for purposes of financing a monopoly bargaining agent’s affiliates’ litigation outside of a nonunion employee’s bargaining unit?

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Issue(s)

Whether a state may constitutionally require its nonunion employees to pay fees to a union for representation, if the union may use the income from those fees to represent individuals outside of the state employees’ bargaining unit.

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Facts

The Maine State Employees Association (“MSEA”), a union which is part of a larger umbrella union, the Service Employees International Union (“SEIU”), represents two types of Maine state employees: those who are members of the union, and some who are not. See Locke v. Karass, 498 F.3d 49, 51, 52 (1st Cir. 2007). Maine has designated MSEA the exclusive bargaining agent for these nonmember state workers. As a result, MSEA provides its nonmembers with certain services, including “settling disputes, processing grievances, administering the agreement, negotiating the agreement, and any other activities that are required by or closely related to the union’s role as representative under the bargaining agreement.” Id. at 51 n.4. In return, MSEA receives a “service fee” (also called an “agency fee”) from all the nonmembers whom it represents. Id. This arrangement is called an “agency shop” agreement. Id. at 51 n.3. The service fee is calculated as union dues minus expenses not related to collective bargaining and administrative services. See id. at 51–52.

In April and June 2005, MSEA sent a notice to all nonmembers with a description of the service fee they were required to pay. See Locke, 498 F.3d at 52. Then, in July 2005, MSEA sent a notice with updated financial information, which classified all organizational expenditures, public relations, lobbying, and the costs of litigation not relevant to collective bargaining as nonchargeable to nonmembers. See id. On the other hand, MSEA classified as chargeable to nonmembers the costs of litigation relevant to collective bargaining and the affiliation fee that MSEA pays in a pooling arrangement to SEIU to be part of that umbrella union. See id. Pooling arrangements like the one at issue in Locke, where a local union “contributes money to the state or national union[ ] with the understanding that the latter will provide . . . resources to the local when that local needs them,” sometimes result in nonmember contributions to the costs of extra-unit litigation. Id. at 51 n.2. Extra-unit litigation “refers to litigation on behalf of, or by, a union entity other than the local which represents the nonmember employees.” Id. at 51 n.1. Because SEIU is an international organization, this pooling arrangement resulted in service fees of nonmembers occasionally contributing to extra-unit litigation. See id. at 52. In the notice sent to all nonmembers, MSEA included information on how to challenge the amount of the service fee, and stipulated that if any nonmember challenged the fee, all nonmember fees would be kept in an interest-bearing escrow account until after arbitration. See id. at 52–53.

Twenty current and former nonmembers did challenge the amount of the service fee, and arbitration began in December 2005. Locke, 498 F.3d at 53. In May 2006, an arbitrator upheld the amount of the fee. See id. Before the arbitration was complete, however, the nonmembers filed suit in the District of Maine seeking class action status, injunctive and declarative relief, damages, and restitution. See id. The nonmembers claimed that MSEA did not give them “constitutionally adequate notice and explanation of the service fee and how it was calculated.” Locke v. Karass, 425 F. Supp. 2d 137, 143 (D. Me. 2006). They also claimed that the service fee should not have included the cost of the extra-unit litigation and that the fees of nonmembers should have been reduced. See id. at 146–47.

The District Court for the District of Maine ultimately granted summary judgment for the unions, holding that both the fee and the notice of the fee were constitutional. See id. at 141. The Court of Appeals for the First Circuit affirmed, holding that the fees, which were “substantively related to the bargaining process,” were constitutional. Locke, 498 F.3d at 66. In February of 2008, the Supreme Court of the United States granted certiorari to decide whether it is constitutional for Maine to require state employees to pay this service fee to MSEA.

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Discussion

The Supreme Court’s decision in Locke v. Karass will determine if a nonunion member must pay union agency fees for which the union may use for litigation outside the individual’s bargaining unit. Recently, the Supreme Court has shown itself to be apprehensive about requiring nonmembers to pay certain union fees. SeePosting of Paul M. Secunda to Workplace Professor Blog (Feb. 19, 2008). See also Davenport v. Washington Educ. Ass’n, 127 S. Ct. 2372 (2007). Locke may allow the Court to reconsider the constitutionality of unions requiring certain financial contributions from non-union members. See Phineas E. Leahey, Locke v. Karass: Should the Court Overrule Lehnert’s Test for Determining Whether Union Expenditures Are Related to Collective Bargaining?, 9 Engage 115 (2008). A clarification from the Supreme Court is particularly important because several circuit courts differ on whether unions may charge nonmembers for extra-unit litigation. See Locke v. Karass, 498 F.3d 49, 60–62 (1st Cir. 2007).

The nonmembers argue that the Court has already resolved this issue in the past and that litigation expenses which are not connected with a bargaining unit are never chargeable to objecting employees. See Brief for Petitioners, Daniel Locke et al. at 11, 17. The unions, however, counter that the Court has not yet determined whether a union may use pooled resources for extra-unit litigation; indeed, the unions oppose any categorical rule regarding extra-unit litigation. See Brief for Respondent, Maine State Employees Association, SEIU Local 1989, Service Employees International Union at 22.

The First Amendment

Amicus Pacific Legal Foundation (“PLF”) argues that if the Court decides in favor of the unions, the First Amendment rights of free speech and free association of nonunion employees will be severely curtailed. See Brief of Amicus Curiae Pacific Legal Foundation et al. (“PLF”) in Support of Petitioners at 2, 7; Brief for Petitioners at 42. PLF argues that if a state requires nonmember employees to pay for litigation that does not affect the nonmembers’ own bargaining units, nonmembers will be forced to fund “political and ideological” activities even if they disagree with them. Brief of PLF at 2. PLF contends that litigation is “inherently expressive,” and thus tied particularly closely to First Amendment rights. Id. at 20.

In response, the unions argue that expenses for extra-unit litigation do not differ from other chargeable expenses and that a finding in favor of the nonmembers would give extra-unit litigation “special First Amendment status” with no sound basis. See Locke v. Karass, 498 F.3d 49, 68 (1st Cir. 2007); Brief for Respondent at 8, 32. In addition, the unions contend, a decision against the unions could allow nonmembers to avoid paying any fees just by claiming that they do not agree with the local union’s negotiation and bargaining agreements. See Brief for Respondent at 31–33.

Costs and the Free-Rider Problem

Supporters of the nonmembers argue that a judgment for the unions would force nonmembers to face “undue financial hardships” because of the added fee. Brief of PLF at 3. The nonmembers argue that the agency shop arrangement leaves them vulnerable to the possibility of having to “litigat[e] for years or decades seeking refunds of money that should never have been collected from them.” Brief for Petitioners at 41. Moreover, the Mackinac Center for Public Policy (“MCPP”) believes that society, not just nonmembers, would face increased costs if the Court ruled for the union. See Brief of PLF at 3-4. MCPP argues that forcing all state employees to pay agency fees discourages some individuals from becoming government employees, both because of the monetary cost as well as the “politicization of public employment through the adversarial nature of union bargaining.” Id. at 3.

On the other side, however, the unions argue that collective bargaining requires much time and money, and that exempting nonmembers from paying the agency fee would not only allow nonmembers to obtain benefits for free, but also would decrease the resources and discretion necessary to be an effective bargaining agent. See Brief for Respondent at 9–10, 46. The United States’ brief indicates that a decision in favor of the nonmembers would force unions to “choose between foregoing an efficient means of spreading risk, on the one hand, or permitting free riders, on the other.” Brief of Amicus Curiae United States at 19. Thus,the unions contend, a decision against the unions would exacerbate this “free-rider” problem because local unions may be less inclined or able to affiliate with a national umbrella union, which otherwise could provide pooled resources to support all collective bargaining endeavors. See id. at 10.

A Complicated Area of Law

Despite these differing viewpoints, amici on both sides agree that the current law governing these union pooling arrangements is confusing and time-intensive to apply. See, e.g., Brief of Amicus Curiae Commonwealth of Virigina in Support of Neither Party at 1, 2, 17; Brief of PLF at 17. As the Commonwealth of Virginia points out, all states would prefer a “single, administrable standard,” thereby avoiding the costs of extended litigation. Brief of the Commonwealth of Virigina at 1. The Court’s ruling either way may help to avoid the future “uncertainty and inconsistency that results from having to examine each specific pooling arrangement.” Brief of PLF at 17.

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Analysis

I. Do Extra-Unit Litigation Fees Constitute Chargeable Expenses to Nonmembers?

The nonmembers rely heavily on prior Supreme Court decisions, specifically Ellis v. Brotherhood of Railway Clerks, 466 U.S. 435 (1984) and Lehnert v. Ferris Faculty Association, 500 U.S. 507 (1991), to support their position that extra-unit litigation costs are categorically nonchargeable to objecting nonmembers. See Brief for Petitioners, Daniel Locke et al. at 11, 21. The unions, on the other hand, rely on these cases as evidence that prior Supreme Court decisions permit charging nonmembers for the costs of otherwise chargeable extra-unit litigation. See Brief for Respondent, Maine State Employees Association, SEIU Local 1989, Service Employees International Union at 9. The outcome in this case depends on how the Supreme Court interprets these prior decisions.

According to the nonmembers, the holding in Ellis established the categorical rule that nonmembers’ fees cannot be used to fund extra-unit litigation, thus resolving the very question before the Court in this case. See Brief for Petitioners at 11, 17. In addition, the nonmembers argue that the situation in Ellis is similar to that here, as it also involved a pooling arrangement, where nonmembers’ fees were combined into a “general treasury from which litigation could be funded in any bargaining unit.” Brief for Petitioners at 13.

The unions, however, interpret Ellis as a more limited decision, related only as to whether the specific litigation at issue provides a “sufficient direct benefit” to the nonmembers as to be chargeable. Brief for Respondent at 22. The Court of Appeals for the First Circuit agreed with the unions in finding that Ellis was not dispositive to this case. Ellis’ holding, according to the First Circuit, pertains only to the chargeability of extra-unit litigation paid for through direct contributions, or payments “given without expectation of reciprocal contribution at a later time,” and not pooling arrangements like the one at issue here. Locke v. Karass, 498 F.3d 49, 40 (1st Cir. 2007).

Consequently, according to the unions and the First Circuit, the appropriate mechanism by which to measure whether extra-unit expenses are chargeable to nonmember is the three-prong test established by the Supreme Court in Lehnert. See Lehnert v. Ferris, 500 U.S. at 520. According to this test, chargeable activities must be: “germane” or relevant to the Union’s collective-bargaining responsibilities, justified by the underlying government interests involved, and not significantly burdensome on First Amendment protections of free speech. See id. The unions argue that this test is met here, so the extra-unit litigation expenses are chargeable to the nonmembers. See Brief for Respondent at 11.

The nonmembers disagree, however, arguing that the funding mechanism of extra-unit litigation is unimportant for the purposes of chargeability because Ellis controls and the categorical rule is that all extra-unit litigation is nonchargeable. See Brief for Petitioners at 17, 22–23. In addition, the nonmembers argue, even if the Lehnert test applies, the extra-unit litigation expenses are still nonchargeable to the nonmembers because they fail to meet the first and third prong of the Lehnert test. See id. at 22–23.

A. Are Extra-Unit Litigation Expenses Germane to Collective Bargaining Activities?

The first prong of the Lehnert test allows unions to charge nonmembers only for activities that are “germane” to collective-bargaining. Lehnert v. Ferris, 500 U.S. at 520. The Court in Lehnert defined “germane” as requiring: 1) that the charged expenses be substantively related to collective bargaining, and 2) that the services ultimately benefit the members of the local union. Locke v. Karass, 498 F.3d at 58 (quoting Lehnert v. Ferris, 500 U.S. at 524).

According to the nonmembers, extra-unit litigation is never germane to collective bargaining. Brief for Petitioners at 22. They argue that while in-unit litigation is substantively related to the union’s function as bargaining representative, extra-unit litigation “bears no such relation.” Id. at 18–19. Furthermore, the nonmembers argue that they do not gain sufficient benefit from extra-unit litigation to consider it chargeable. See id. at 20. In addition, the nonmembers contend, having to pay extra-unit litigation costs could even conflict directly with their interests. See id.

On the other hand, the unions challenge any categorical rule classifying extra-unit litigation as nonchargeable. See Brief for Respondent at 30. The unions argue that litigation, like many other expenses, covers a wide-range of topics and that a categorical rule ignores the diverse nature of litigation. Id. at 30–33. In addition, the unions contend, some extra-unit litigation addresses issues of direct interest and benefit to nonmembers, such as litigation addressing the interpretation of contract language in one unit that matches contract language in the nonmembers’ unit. Id. at 28. According to the First Circuit, pooling arrangements also benefit members of a local union by serving as a kind of “insurance” that makes more resources available to a local unit than it “could muster individually.” Locke v. Karass, 498 F.3d at 64.

B. Are Extra-Unit Litigation Expenses Justified by the State Interests Involved?

The second prong of the Lehnert test requires that all chargeable expenses be justified by the government’s interest in “labor peace and avoiding ‘free riders.’” Lehnert v. Ferris, 500 U.S. at 520. The unions point out that the Supreme Court has allowed agency-shops, even though such arrangements have First Amendment implications, because of the strong government interests in requiring all employees of a bargaining unit to contribute to the union so that certain employees would not be able to become “free riders” and obtain benefits for free. See Brief for Respondents at 14 (relying on Abood v. Detroit Board of Education, 431 U.S. 209, 221–22 (1977)). The unions contend that a local union often affiliates itself with a parent union in order to obtain pooled resources necessary to fulfill its duties as a collective bargaining representative. See Brief for Respondents at 16–17. Because excluding nonmembers from paying part of these fees would allow them to benefit from union representation for free, the unions argue that the “free-rider” concern is clearly present here. See Brief for Respondents at 10, 14.

The nonmembers, however, argue that extra-unit litigation does not create any “free-rider” problems because litigation outside the local bargaining unit is beyond the scope of the unions’ collective bargaining agreement with the nonmembers. See Brief for Petitioners at 23–24. In addition, the nonmembers argue, since extra-unit litigation is not germane to the local union’s collective bargaining activities for the nonmembers, the concern of “free-riders” is unfounded because extra-unit litigation provides no benefits to nonmembers. See Brief for Petitioners at 22, 24.

C. Do Extra-Unit Litigation Expenses Increase First Amendment Burdens?

The third prong of the Lehnert test requires that chargeable expenses do not significantly increase the burdens on free speech that are “inherent in the allowance of an agency shop.” Lehnert v. Ferris, 500 U.S. at 520. Both the union and the nonmembers agree that the First Amendment permits charging nonmembers for the costs of in-unit litigation that is related to collective-bargaining. See Brief for Petitioners at 18.

However, central to the nonmembers’ argument is that extra-unit litigation is fundamentally different from in-unit litigation for purposes of the First Amendment. The nonmembers argue that extra-unit litigation will always fail this third prong of the Lehnert test because “litigation is a form of petition, association, and expression protected by the First Amendment,” and thus, compelling nonmembers to pay extra-unit litigation expenses significantly burdens free speech. See Brief for Petitioners at 18, 22–23. Furthermore, the nonmembers argue that since extra-unit litigation forces them to pay even if they object, the Supreme Court must use strict scrutiny to determine the chargeability of union activities. See id. at 28. Under strict scrutiny analysis, the Court can allow First Amendment infringements only when such infringements arenarrowly tailored to “serve a compelling state interest.” Id. at 28–29. The nonmembers argue that pooling arrangements fail strict scrutiny analysis because they are not the least restrictive means of achieving the state interest involved. See id. at 14.

Conversely, the unions argue that there is no relevant distinction, for purposes of the First Amendment, between extra-unit litigation and other chargeable extra-unit expenses because they are evaluated under the same “criteria of germaneness.” Brief for the Respondent at 8. Furthermore, the unions emphasize that First Amendment rights are sufficiently protected under the Lehnert standard because under Lehnert’s general chargeability rule, nonmembers can only be charged for extra-unit litigation expenses if they are related to a chargeable activity. Id. at 11-12. Indeed, the First Circuit also rejected any categorical rule making all extra-unit litigation nonchargeable. See Locke v. Karass, 498 F.3d at 64. According to the First Circuit, while some litigation is “purely expressive” and nonchargeable, some litigation is “central to the negotiations and administration of a collective bargaining agreement” and therefore within the scope of chargeable activities. See id.

II. Should the Supreme Court Revisit Lehnert's Chargeability Standard?

The nonmembers urge the Court to use this case as an opportunity to revisit the Court’s decision in Lehnert and establish bright line rules regarding the chargeability standard for nonmembers. See Brief for Petitioners at 38. The nonmembers suggest that the circuit court split on whether extra-unit litigation expenses are chargeable is evidence that the Lehnert test created unacceptable confusion in the lower courts. See id. The nonmembers urge the Court to replace Lehnert’s three-part test with Justice Scalia’s proposed “statutory duties” test, which would holdchargeable only those activities related to the union’s statutory duties as the exclusive bargaining unit representative. Id. at 8, 26.

In contrast, the unions argue that a complete review of the validity of the Lehnert test is not properly before the Court. See Brief for Respondent at 37. Furthermore, the unions contend that the Lehnert decision did not cause great confusion in the lower courts. See id. at 38. According to the unions, the circuit court split is only related to whether or not there should be a categorical rule against charging nonmembers for the costs of extra-unit litigation. See id.

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Conclusion

Locke v. Karass will decide whether unions are constitutionally permitted to charge nonmembers for the costs of extra-unit litigation funded through a pooling arrangement. The nonmembers argue that extra-unit litigation is categorically nonchargeable, based both on First Amendment protections and Supreme Court precedent regarding chargeability. The unions argue against such a categorical rule, urging the Court to determine the chargeability of extra-unit litigation expenses according to the three-part test established in Lehnert. The outcome of this case will affect the financial obligations of nonmembers, as well as the ability of unions to fund litigation through pooling arrangements with affiliates.

Authors

Prepared by: Katy Hansen and Zsaleh Harivandi

Edited by: Hana Bae

Acknowledgments

The authors would like to thank Professor Angela Cornell for her research help with this case.

Additional Sources

· LII Law About: Collective Bargaining

· Circuit Court Split: Otto v. Pa. State Educ. Ass’n,330 F.3d 125 (3d Cir. 2003)

· Circuit Court Split: Reese v. City of Columbus, 71 F.3d 619 (6th Cir. 1995)

· Circuit Court Split: Pilots Against Illegal Dues v. Air Line Pilots Ass’n, 938 F.2d 1123 (10th Cir. 1991)

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