Knox v. Service Employees International Union, Local 1000 (10-1121)

Oral argument: Jan. 10, 2012

Appealed from: United States Court of Appeals for the Ninth Circuit (June 27, 2011)

California nonunion state employees sued their collective bargaining agent, alleging that the imposition of an additional agency fee assessment used to fund political actions without notice or an opportunity to object violated their First, Fifth, and Fourteenth Amendment rights. The district court granted summary judgment in favor of the nonunion employees. On appeal, the Ninth Circuit reversed. The nonunion employees now appeal. The Supreme Court will determine what disclosures unions must provide when imposing additional agency fees on nonmembers, and the extent to which unions can use nonmembers’ wages to fund expenditures without first obtaining consent.

Questions presented

1. In Teachers Local No. 1 v. Hudson, this Court held that "[b]asic considerations of fairness, as well as concern for the First-Amendment rights at stake, ... dictate that the potential objectors be given sufficient information to gauge the propriety of the union's [agency] fee" extracted from nonunion public employees. 475 U.S. 292, 306 (1986). May a State, consistent with the First and Fourteenth Amendments, condition employment on the payment of a special union assessment intended solely for political and ideological expenditures without first providing a notice that includes information about that assessment and provides an opportunity to object to its exaction?

2. In Lehnert v. Ferris Faculty Ass'n, this Court held that "the State constitutionally may not compel its employees to subsidize legislative lobbying or other political union activities outside the limited context of contract ratification or implementation." 500 U.S. 507, 522 (1991) (opinion of Blackmun, J.); accord id. at 559 (opinion of Scalia, J.) (concurring as to "the challenged lobbying expenses"). May a State, consistent with the First and Fourteenth Amendments, condition continued public employment on the payment of union agency fees for purposes of financing political expenditures for ballot measures?

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Issue

Whether a union can use nonunion members’ state-mandated fees to finance political expenditures or ballot measures, despite providing limited information about such uses, and without offering nonmembers any opportunity to object.

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Facts

California state employees are required to pay fees to Service Employers International Union, Local 1000 (the “Union”) for exclusive representation as their collective bargaining agent. See Knox v. California State Employees Ass’n, Local 1000, 628 F.3d 1115, 1117 (9th Cir. 2010).

Although they are not Union members, nonmembers are still required to pay the Union an “agency” fee as a condition of their employment by the state. See id. The agency fee for nonmembers is a percentage of the dues that Union members pay. See id.

Prior to collecting agency fees, employee unions must issue a Hudson notice to all nonmembers. See Knox, 628 F.3d at 1117 (citing Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292, 310 (1986)). A Hudson notice is a constitutionally mandated document that explains the basis of the agency fee to nonmembers, and that provides them with an opportunity to object to the fee and pay a reduced amount that covers only their relative percentage of “chargeable” union expenses. See id. The agency fee’s basis is derived from the audited expenditures of the prior fee year. See id. at 1118. Therefore, the Hudson notice contains information on a union’s expenditures from the prior year, broken down into “chargeable” and “non-chargeable” expenditures. See id. “Chargeable” expenditures are those related to a union's representative functions, while “non-chargeable” expenses cover activities outside of representation, including the funding of ideological activities and political expenditures. See id.

By default, employee unions generally charge nonmembers agency fees that include both chargeable and non-chargeable expenditures. See Knox, 628 F.3d at 1118. However, if a nonmember objects to the agency fee within thirty days of receiving a Hudson notice, that nonmember’s agency fee is limited to their pro-rata share of the prior year’s chargeable expenditures. See id.

The Hudson notice goes out to all nonmembers each June, and the related agency fee is in effect from July 1 through June 30 of the following year. See Knox, 628 F.3d at 1118. In June 2005, the Union released a Hudson notice that set the agency fee at 99.1% for nonmembers and 56.35% for nonmembers who objected within thirty days. See id. The notice also contained a disclaimer, which stated that the fees were subject to change without further notice. See id.

In September 2005, the Union issued a temporary increase to the ordinary agency fees equal to .25% of Union members' gross wages without providing nonmembers an opportunity to object to this fee increase. See Knox, 628 F.3d at 1118. The agenda of the Union’s Budget Committee stated that the additional fees would be used to fund political expenditures in response to several “anti-union” propositions on California’s special election ballot. See id. The agenda also stated that the additional fees would not be used to fund the Union’s everyday operating expenses. See id. at 1119. Although the agenda indicated that the additional fees would exclusively fund political expenditures, the Union later stated that it intended to use part of the fees to fund collective bargaining actions. See id. In effect, the money was used for both political and non-political expenditures, which were classified as both “chargeable” and “non-chargeable.” See id. 

Nonmembers sued the Union in November 2005, alleging that the assessment violated their First, Fifth, and Fourteenth Amendment rights. See Knox, 628 F.3d at 1119. The United States District Court for the Eastern District of California granted the nonmembers’ motion for summary judgment, finding that the Union’s Hudson notice did not provide nonmembers with the information necessary to make an informed choice about whether or not to object to the additional assessment. See Knox v. Westly, 2008 WL 85012, *10 (E.D. Cal. 2008). The district court also held that the Hudson notice failed to provide an adequate basis for the additional assessment. See id. The Union appealed the district court’s decision. See Knox, 628 F.3d at 1119. On appeal, the United States Court of Appeals for the Ninth Circuit reversed and held that the Union’s notice complied with the Hudson notice procedural requirements, and adequately protected nonmembers’ constitutional rights. See id. at 1120.

On September 29, 2011, the Union issued a notice stating that, pursuant to a refund request, it would voluntarily refund 100% of any 2005–2006 temporary fees paid by nonmembers. See Motion to Dismiss for Respondent, Service Employees International Union, Local 1000 at 5.

The Supreme Court granted certiorari on June 27, 2011, and the Union moved to dismiss the case as moot. The Supreme Court deferred its consideration of the mootness issue until a hearing of the case on the merits.

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Discussion

The nonmembers argue that the Union violated their First Amendment right to freedom of expression by using their wages to fund political expenses without adequate notice or consent. The nonmembers contend that the Supreme Court should analyze their case using strict scrutiny, and should require employee unions to provide nonmembers with information detailing the basis of any fee increases, as well as an opportunity to object. In contrast, the Union argues that the June 2005 Hudson notice provided nonmembers with adequate information to protect their constitutional rights, and that imposing further disclosure requirements would inflict harms on unionized employees.

Freedom of Expression

The Pacific Legal Foundation (“PLF”) contends that the First Amendment requires employee unions to obtain consent prior to funding political expression with nonmembers’ wages. See Brief of Amici Curiae Pacific Legal Foundation, et al, in Support of Petitioner at 1617. The PLF argues that the First Amendment’s freedom of expression encompasses not only the right to act, but also the right to refrain from acting without explanation. See id. at 22. The PLF also asserts that the right to dissent is crucial to freedom of expression, and that a standard of strict scrutiny with respect to the Union's actions is necessary to prevent employees from waiving their rights out of ignorance or coercion. See id. at 5–7. The PLF contends that employees often fail to voice dissident beliefs because of workplace intimidation or lack of education. See id. at 22. 

In contrast, the Union argues that no constitutional rights were violated: nonmembers did not fund political expression because union funds are fungible and nonmembers paid less than their share of chargeable union expenses that year. See Brief for Respondent, Service Employers International Union, Local 1000 at 21–22. Nonmembers must pay their relative percentage of chargeable expenses each year, calculated as their pro-rata share of the Union’s expenditures on representational functions from the preceding year. See Knox, 628 F.3d at 1118. Because 2005–2006 nonmember fees were insufficient to cover their share of actual chargeable expenses, the Union urges the Court to consider the funds’ fungible nature and to look to the Union’s total budget. See Brief for Respondent at 21–23. The Union argues that the funds’ exact source is a constitutionally insignificant bookkeeping matter; if nonmembers had paid their full share, then members' fees would have funded the political expenses instead of funding the nonmembers’ deficit. See id. at 24–25.

Harm to Unionized Employees

The PLF argues that nonmembers should have to opt-in prior to wage garnishment for any non-mandatory fees. See Brief of Amici Curiae Pacific Legal Foundation at 16–17. The PLF points out that from 19752008, the National Institute for Labor Relations Research counted over 9,000 incidents of union violence with fewer than 3% resulting in convictions. See id. at 10. The PLF also points out that from 20002007, the National Labor Relations Board received 1,325 complaints alleging union threats, harassment, or violence. See id. at 11. The PLF argues that requiring nonmembers to opt-out of garnishment will chill dissent by forcing any dissenters to single themselves out, becoming probable targets of union retaliation. See id. at 24–25. Furthermore, the PLF argues that public employees are prone to greater abuse by unions because the government’s monopolistic nature prevents specialized governmental employees from seeking alternate employment. See id. at 9. Additionally, the PLF points out that the primary method of detecting workplace abuse, the Labor-Management Reporting & Disclosure Act, exempts public unions from its reporting requirements. See id. at 9–10. Although an opt-in provision might not provide complete anonymity, the PLF argues that it would better protect vulnerable nonmembers’ right to dissent by removing unions’ incentives to pressure lone dissenters. See id. at 25.

The Union argues that requiring it to provide nonmembers with information detailing the basis of temporary fee increases will harm unionized employees more than the current Hudson approach. See Brief for Respondent at 25. The Union argues that details regarding the basis of temporary increases will have to come from predictions (which can easily be manipulated) about how the union will use the temporary dues; those figures cannot be derived from prior expenditures. See id. at 25–26. The Union contends that this predictive approach creates the impossible task of forecasting future spending accurately, and exposes unions to litigation if expenditures do not mirror projections. See id. at 26–27. The National Education Association contends that Hudson balanced nonmembers’ First Amendment rights against the burden imposed on a union, declining to require this type of predictive calculation. See Brief of Amicus Curiae National Education Association in Support of Respondent at 8.  Further, because union funds are fungible, under the predictive approach, unions could expend a greater percentage of ordinary agency fees on non-chargeable activities, then impose a temporary fee increase to fund chargeable activities, thereby imposing a greater portion of total union expenditures on nonmembers than under the Hudson approach. See Brief for Respondent at 28–29. Thus, the Union argues that the current Hudson notice protects unionized employees more than a predictive approach by supplying objective and verifiable information. See id.

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Analysis

At issue is whether the Respondent Union's notice to Petitioners Dianne Knox and other nonunion members (collectively “Knox”) concerning a temporary payment to fund political expenditures complied with the First and Fourteenth Amendment considerations laid down in Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292 (1986) and Lehnert v. Ferris Faculty Ass’n, 500 U.S. 507 (1991). Assuming the case is fit for review, the Supreme Court must determine whether to uphold the Ninth Circuit’s ruling in favor of the Union, or to hold that Knox’s constitutional rights were violated.

Mootness

Article III federal courts are only entitled to hear cases that resolve actual “controversies.” U.S. Const. art. III, §2. The relevant controversy must exist at all stages of litigation, not simply at the time the initial complaint was filed. See Lewis v. Continental Bank Corp., 494 U.S. 472, 477 (1990). A controversy ceases to exist when it becomes impossible to grant any effectual relief despite a plaintiff’s success in court, or when a plaintiff obtains relief outside of court that is the same relief which would have followed a favorable decision. See Mills v. Green, 159 U.S. 651, 653 (1895); Brownlow v. Schwartz, 261 U.S. 216, 217 (1923).

The Union asserts that this case is moot because the Knox cannot obtain further relief in the event of a favorable decision. See Motion to Dismiss for Respondent, Service Employees International Union, Local 1000 at 8–9. Specifically, the Union alleges that their offer to refund the special assessment satisfies the full relief mandated by the district court, and therefore that Knox cannot attempt to obtain any further retroactive relief. See id.

In response, Knox argues that the case is not moot because the Union voluntarily ceased its special assessment and therefore could reinstate the assessment at any time. See Opposition to Motion to Dismiss as Moot for Petitioner, Dianne Knox et al. at 9–10. Where there is a voluntary cessation, courts often place a heavy burden on the movants to prove that the behavior at issue could not reasonably be expected to recur. See id. at 10. Knox argues that a change in policy following litigation is not sufficient to meet such a heavy burden. See id. at 11.

Strict Scrutiny Standard of Review

Knox argues that the Union’s use of mandatory funds to support its political goals violated non-union members’ First Amendment rights, and that the issue demands review under strict scrutiny. See Brief for Petitioners, Dianne Knox et al. at 11–12. Under strict scrutiny review, the government is required to assert a compelling state interest while employing means that are narrowly tailored to achieving the compelling state interest. See id. at 12. Knox alleges that strict scrutiny applies here because compulsory unionism (and the mandatory union fees that follow) constitutes a species of compelled expressive association, which is generally subject to the strict scrutiny standard of review. See id. at 13–14. Further, Knox alleges that the union dues constitute a political loan because those dues enable the Union to express political speech. See id. at 17–19. Pointing to recent Supreme Court precedent that reviewed similar facts under a strict scrutiny standard, Knox argues that the same standard should be applied here. See id. (citing Arizona Free Enter. Club’s Freedom Club PAC v. Bennett, 131 S. Ct. 2806, 2821 (2011)).

The Union contends that a strict scrutiny standard of review would be inappropriate in this case. See Brief for Respondent, Service Employees International Union, Local 1000 at 31. First, the Union notes that courts have previously used less demanding standards - even rejecting several requirements which might indicate a strict scrutiny-like standard - when assessing whether union fee situations infringed upon an individual’s First Amendment rights. See id. at 31–33 (citing Lehnert v. Ferris Faculty Ass’n, 500 U.S. 507, 519 (1991)). Secondly, the Union argues that the mandatory fees do not constitute compelled expressive association in violation of the First Amendment because courts have declined to equate mandatory fees to forced speech. See id. at 34–35. The Union also denies that union dues constitute a political loan; enhancing a group’s speech through a neutral state regulation (in this case, the statute requiring nonmember fees) has never triggered strict scrutiny, the Union argues. See id. at 37–38.

Hudson and Lehnert Nonmember Fee Requirements

Knox argues that the Union violated the Supreme Court’s holding in Hudson by employing insufficient notification procedures. See Brief for Petitioners at 19–20, 24. Under Hudson, a union must provide notice, reasoning, and adequate opportunity for nonmembers to opt out before extracting mandatory fees. See Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292, 310 (1986). Knox alleges that the Union’s initial notice only mentioned regular fees, without mentioning the subsequent political assessment. See Brief for Petitioners at 20. Forcing nonmembers to wait until the following year’s Hudson notice to voice their disapproval, Knox argues, would be an insufficient remedy because it would constitute a political loan in the meantime. See id. at 21. Knox argues that nonmembers’ First Amendment rights were infringed and a Hudson violation occurred because the Union failed to provide nonmembers with sufficient notice and opportunity to opt out of the Union’s political contributions before the assessment was collected. See id. at 23–24.

Contrary to Knox’s allegations, the Union argues that its notice complied with Hudson and provided sufficient constitutional protection. See Brief for Respondent at 9–10. The Union notes that the increase in dues did not fund substantially different activities from those chargeable activities mentioned in the Hudson notice, nor did nonmembers even pay their proportionate share of chargeable expenses. See id. at 10–11. Similarly, the Union argues that the initial Hudson notice adequately notified nonmembers that the Union intended to use fees for political reasons and that nonmembers had the right to object. See id. at 17. Information about the specific political expenditures, Hudson argues, is unnecessary to fulfill the Hudson standard, especially considering the imprecise nature of yearly spending. See id. at 17–18. Given the information provided in the notice and Knox’s alleged acquiescence, the Union asserts that it satisfied the requirements under Hudson. See id. at 20–21.

Knox also contends that the Union violated the Court’s ruling in Lehnert, which held that nonmembers generally may not be compelled to subsidize a union’s political expenditures. See Brief for Petitioners at 24; Lehnert v. Ferris Faculty Ass’n, 500 U.S. 507, 522 (1991). There is an exception to Lehnert when an expenditure is (1) germane to collective-bargaining activity, (2) necessary to satisfy the government’s interest in labor peace and avoiding “free riders,” and (3) does not further burden free speech to achieve those interests (although Knox notes that this is a point that requires clarification). See Brief for Petitioners at 25–26, 29; Lehnert, 500 U.S. at 519. Knox argues that the Union’s expenditure does not fall within this exception. See Brief for Petitioners at 30. Emphasizing the narrowness of the Lehnert exception, Knox asserts that the Union’s limited mention of collective-bargaining is insufficient to satisfy the first prong, and that compelling support for political lobbying is not necessary to satisfy a union’s interests in labor peace and the removal of free riders. See id. at 31–33, 35. Thus, Knox concludes that the Ninth Circuit's ruling misapplied Lehnert and should be reversed. See id. at 38–39.

The Union argues that the question under Lehnert has not been properly presented because Knox failed to pursue the matter in earlier stages of litigation and the Ninth Circuit did not rule on the issue. See Brief for Respondent at 43–44. However, assuming arguendo that the Court does address this question, the Union asserts that the political expenditures were sufficiently related to collective-bargaining activity because the Union used the funds to oppose a measure that would have limited its ability to manage effective collective bargaining agreements. See id. at 49–50. Furthermore, the Union argues that its expenditures were justified under the second Lehnert prong because the opposed measure, if passed, would lead to labor unrest. See id. at 50–51. Lastly, the Union does not believe that it burdened Knox’s First Amendment rights because the purpose of the expenditure was to uphold the rights of both members and nonmembers to collectively bargain. See id. at 52–53; Lehnert, 500 U.S. at 519. Therefore, the Union concludes that its actions complied with the Lehnert requirements. See Brief for Respondent at 52–53.

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Conclusion

In this case, the Supreme Court will determine the disclosures unions must make before imposing temporary fee increases on nonmembers, and the extent to which unions can use nonmembers’ wages to fund union expenditures without obtaining prior consent. The Respondent, Service Employees International Union, Local 1000, argues that the case is moot, but, in the alternative, asserts that it provided adequate notice to nonmembers that their funds would be used for political expenditures and provided them with a sufficient opportunity to object. However, the Petitioner nonmembers maintain that the notice was insufficient and violated their First Amendment rights, and that the Union’s expenditures must therefore pass a strict scrutiny standard of review. The Supreme Court’s decision in this case will affect the fee-related information that unions must disclose to nonmembers, and the ways in which unions may use nonmembers’ wages.

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Authors

Prepared by: Heather Byrne and Judah Druck

Edited by: Jacqueline Bendert

Additional Sources

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Edited by