Opinion
Civil Action No. 99-6306.
September 28, 2004
MEMORANDUM AND ORDER
Presently before this Court is Plaintiffs' Renewed Motion for Summary Judgment (Doc. 52). For the reasons set forth below, upon consideration of Plaintiffs' Motion, Defendants' Cross-Motion for Summary Judgment (Doc.54), and all Responses and Replies thereto, this Court will grant in part and deny in part the Plaintiffs' Renewed Motion for Summary Judgment.
BACKGROUND
The plaintiff, Sharon Mitchell, and plaintiff class members (collectively, "the nonmembers") are or were at some time, employees of the City of Philadelphia ("City"). The nonmembers are represented, for purposes of collective bargaining, by District Council 33, American Federation of State, County, and Municipal Employees, and AFL-CIO (hereinafter "District Council 33"). In 1989, the City and District Council 33 agreed to deduct fair share fees from members of the bargaining unit who decided not to join the union. The current and preceding City/District Council 33 collective bargaining agreements have provided for mandatory deductions from the wages of non-union employees. All nonmembers employed by the City in the District Council 33 bargaining unit pay a uniform agency fee, regardless of the local which receives a portion of their fees. The agreement also indemnifies the City for any losses it may suffer from the improper deduction of fair share fees. District Council 33 has relied on a single individual, Vernon Person, to compute and prepare the annual notices regarding the fair share agreements payable by non-union members in the City's bargaining unit.
On an annual basis between 1990 and December 1997, notices were distributed to the nonmembers. In September 1998, Mr. Person was unable to fulfill his normal duties in preparing the annual notice. In September 2000, Mr. Person resumed working. At that juncture, nonmembers had not been provided with annual notices for intervening two years; however, fees were still deducted from the nonmembers' wages during that time. The notice provided to nonmembers on or after September 20, 2000 did not contain separate audits for each of the local units affiliated with District Council 33. District Council 33 is affiliated with fourteen (14) constituent locals, ten (10) of which represent different segments of City employees. The agency fees collected from nonmembers by the City are forwarded to District Council 33, which sends a portion of the collected union dues and agency fees to each local. The September 2000 notice represented an aggregate of the expenses for all the locals and delineated chargeable and non-chargeable costs.
On January 5, 2001, District Council 33 forwarded a new notice, dated December 29, 2000, to the nonmembers. The notice did not contain separate audits for each of the local unions; instead, it was an audit of consolidated local expenses. Plaintiffs contend that the Defendants have neglected to comply with the constitutional requirements for the collection of agency fees.
STANDARD OF REVIEW
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with 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). An issue is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A factual dispute is "material" if it might affect the outcome of the case under governing law. Id.A party seeking summary judgment always bears the initial responsibility for informing the district court of the basis of its motion and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). Where the non-moving party bears the burden of proof on a particular issue at trial, the movant's initial Celotex burden can be met simply by "pointing out to the district court that there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325, 106 S. Ct. at 2553-54. After the moving party has met its initial burden, "the adverse party's response, by affidavits or otherwise as provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). That is, summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S. Ct. at 2552-53. "[I]f the opponent [of summary judgment] has exceeded the `mere scintilla' [of evidence] threshold and has offered a genuine issue of material fact, then the court cannot credit the movant's version of events against the opponent, even if the quantity of the movant's evidence far outweighs that of its opponent." Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). Under Rule 56, the Court must view the evidence presented on the motion in the light most favorable to the opposing party. Anderson, 477 U.S. at 255, 106 S. Ct. at 2513-14.
DISCUSSION
Plaintiffs bring the following claims pursuant to 42 U.S.C. § 1983, and the First, Fifth and Fourteenth Amendments of the Constitution. Plaintiffs contend that Defendants, District Council 33 and the City, and its various affiliates, have been impermissibly collecting agency fees from the wages of the nonmembers. Plaintiffs claim that they are entitled to summary judgment on the issues about which this Court previously expressed concern.
Defendants argue that Plaintiffs suffered no real harm from the delay in sending notices and thus, are not entitled to relief. Furthermore, the defendants assert that they are entitled to summary judgment on the issues of 1) the validity of the indemnification clause and 2) notice requirements.
A. Compliance with Notice and Disclosure Requirements
I. Advance Notice Requirement
Plaintiffs claim that Defendants failed to comply with constitutional requirements because Defendants provided neither advance notice nor substantively adequate notices prior to deducting agency fees from the nonmembers' wages. Defendants aver that subsequent notices cured the constitutional violation. Defendants maintain that the auditing statements are not required to be as specific as the Plaintiffs allege.
The Supreme Court has upheld the validity of "agency shop" arrangements, in which employees, regardless of affiliation, are obligated to contribute financially to the union designated as exclusive bargaining representative by the employer. Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292 (1986). See also Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977). The Court has ruled that unions must adopt constitutional safeguards in order to ensure that non-union members are only charged with fair share fees related to collective bargaining. In Ellis v. Railway Clerks, the Court asserted that "the government and union have a responsibility to provide procedures that minimize [First Amendment] impingement and that facilitate a nonunion employee's ability to protect his rights." 466 U.S. 435, 455 (1984). Two years later, in Hudson, the Court outlined the procedural safeguards to facilitate a nonunion employee's ability to protect his rights: (I) advance notice of the basis for the fee; (ii) a reasonably prompt opportunity to challenge the amount of the fee before an impartial decision-maker, and (iii) an escrow of any amount of the fee "reasonably in dispute."Hudson, 475 U.S. at 310. The Hudson Court abstained from defining what constitutes "adequate notice," but stated, at minimum, the notice must provide "sufficient information to gauge the propriety of the union's fees." Id.
In Hohe v. Casey the Third Circuit stated "although the contents of the notice required under Hudson may be debated, it is clear that Hudson mandates some form of advance notice of the union's intent to collect a fair share fee from nonunion employees." 956 F.2d 399, 410(3d Cir. 1992). See also Otto v. Pennsylvania State Educ. Assoc.-NEA, 330 F.3d 125 (3d Cir. 2003) (declining to find an exception to the advance notice requirement for new unions); Robinson v. Pennsylvania State Corr. Officers Assoc., 299 F. Supp. 2d 425 (M.D.Pa. 2004) (holding that the status of "new union" did not relieve it from its obligation to provide nonunion employees with notice explaining basis of fair share fee in order to protect the speech rights of nonunion employees).
In the instant case, both parties stipulate to the fact that District Council 33 did not provide the nonmembers with notices for twenty-two months. During that nearly two-year period, agency fees were deducted from the nonmembers' wages. See Stipulation of Facts ¶ 19. Despite the clear mandate of Hudson, District Council 33 failed to provide advance notice to the nonmembers. The Defendants claim that they were unable to comply withHudson due to the incapacity of the sole individual responsible for completing the notices. There is no legal authority that carves out exceptions for unforseen personal circumstances. Therefore, this Court finds that District Council 33 failed to comply with the constitutional requirements of Hudson when it failed to provide advance notice to the nonmembers before deducting agency fees from the nonmembers' wages.
II. Financial Disclosure Requirement
The union's responsibility does not end with the disbursement of advance notices. The union must also provide an auditing statement. Plaintiff claims that the late notices provided by District Council 33 are inadequate. District Council 33 contends that the Court does not require the auditing statements to be as specific as urged by the Plaintiffs.
Requiring financial audits and verification by an independent audit further protects nonmembers' First Amendments rights by ensuring that their fees are not allocated to ideological or political viewpoints. However, in Hudson, the Supreme Court recognizes that there are practical reasons why "absolute precision" in the calculation of the charge to nonmembers cannot be expected or required." 475 U.S. at 307 (citing Railway Clerks v. Allen, 373 U.S. 113, 122). Furthermore, the Court announced that "the union need not provide nonmembers with an exhaustive list of all of its expenditures, but adequate disclosure surely would include the major categories of expenses, as well as verification by an independent auditor." Id. The essence of Hudson and its progeny is that, at minimum, unions are required to supply financial information that equips nonmembers "with sufficient information to gauge the propriety of the [agency] fee." Hudson, 475 U.S. at 306.
In Otto, the Third Circuit addressed the level of audit verification that unions must attain. In that case, the union consisted of local associations that represented both educators and healthcare professionals. In the union's financial assessment, it pooled costs across the two occupational groups. Although this pooling arrangement was deemed acceptable, the Court declared that financial compilations and reviews were not sufficient. The Third Circuit held that compilations and reviews do not provide an adequate basis for a nonmember to decide whether to object to a fair-share fee. Otto, 330 F.3d at 134. The Court rationalized that the "scope of the inquiry and analytical procedures" of the two methods did not provide the requisite scrutiny necessary to attest to the accuracy of the financial statements. Id. Nevertheless, the Otto Court declined "to take a position on the precise procedures an accountant must follow when auditing a local union." Id. See also Hohe, 956 F.2d at 410 (holding notice inadequate when it did not identify the affiliated locals' major categories of expenses).
In the present case, parties stipulate to the fact that both the September 2000 and January 2001 notices identified the major category of expenses and aggregated the expenses of all the locals affiliated with District Council 33. The Supreme Court has held that unions are not required to make an exhaustive showing detailing each expense. Financial disclosure is adequate as long as the nonmembers are able to discern how their agency fees are being used for collective bargaining. Specifically, the nonmembers must be "given sufficient information to gauge the propriety of the fee," as required by Hudson. 475 U.S. at 306 (citing Abood, 431 U.S. 209). Here, the financial notices delineate "chargeable" and "nonchargeable" expenses. Furthermore, the notices provided by District Council 33 itemize the major category of expenses of the affiliated locals. For example, the nonmembers can determine that a certain percentage of agency fees were expended on personnel costs, building costs, professional services, etc. If the nonmembers sought to challenges the allocation of the fees, they would be able to do so with the information supplied in the notice.
There is no legal authority that mandates or suggests that unions must provide anything more than the categorization of major expenses and identifying those expenses as chargeable and nonchargeable. In this regard, District Council 33 has fulfilled the substantive requirement of the Hudson notice.
This Court finds that District Council 33 failed to comply with the constitutional requirements of Hudson when it failed to provide advance notice to the nonmembers before deducting agency fees from the nonmembers' wages. Although the late notices were substantively adequate, they do not cure the constitutional violation. Consequently, this Court will grant summary judgment in favor of the Plaintiffs on this issue.
B. Indemnification Clause
We next address the Plaintiffs' contention that the indemnification clause in the collective bargaining agreement between District Council 33 and the City is void as against public policy. Specifically, Plaintiffs claim that such an indemnification clause encourages the City to ignore its constitutional obligations. The Third Circuit has provided controlling authority on this issue, however, the Plaintiffs urge this Court to follow Sixth Circuit precedent.
At issue in Hohe was an indemnification provision between the Commonwealth and the Union (Council 13) that provided, in relevant part: "The Union shall indemnify and hold the Employer [Commonwealth] harmless against any and all claims, suits, order, or judgments brought or issued against the Employer as a result of the action taken or not taken by the Employer . . ." Hohe, 956 F.2d at 411. The Court held that invalidation of the indemnification clause is not required by the First Amendment. The Court reasoned that even if the Union indemnified the Commonwealth, the nonmembers would still be able to collect costs and fees of litigation, thus, providing incentive for the Commonwealth to comply with constitutional requirements. Id. at 412.
Here, Plaintiffs contend that a similar provision in the collective bargaining agreement is invalid as against public policy. Given the Third Circuit's ruling, this particular indemnification clause should be held in the same regard as that presented in Hohe.
Therefore, this Court finds that indemnification clause is not void as against public policy. Consequently, this court will deny summary judgment on this issue.
C. Remedies
Plaintiffs seek full restitution of the impermissibly collected agency fees, nominal damages, and a permanent injunction against further collection of agency fees until District Council 33 is in full compliance with the Hudson requirements. Defendants argue that Plaintiffs did not suffer any actual damages, and therefore, are not entitled to any relief.
As the courts have indicated, any appropriation of nonunion employees' earnings for an impermissible use, even if the funds are later returned, constitutes a violation of the employee's First Amendment rights. As stated in Hohe, "when Plaintiffs have established a constitutional violation, the task of fashioning a proper remedy is one that should be performed by the District Court after all interested parties have had an opportunity to be heard." 956 F.2d 399 at 411 (citing Hudson, 475 U.S. at 309, n. 22).
In the instant case, this Court finds that the issue of damages still remains. When damages are "not readily ascertainable from the pleadings and the record, the Court will later set a hearing for the purpose of receiving evidence in order to ascertain the amount of damages." C.T. Middleton v. Specialty Prod., Inc., 1985 U.S. Dist. LEXIS 22198, at * 3 (E.D. Pa. February 28, 1985) (citations omitted).
Therefore, this Court will stay the issue of damages until hearing on the appropriate remedy is held.
CONCLUSION
Based on the foregoing reasons, the Court will grant in part and deny in part Plaintiffs' Renewed Motion for Summary Judgment.