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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 8, 2004 Decided May 31, 2005
No. 04-5057
AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS,
APPELLANT
v.
ELAINE L. CHAO, UNITED STATES SECRETARY OF LABOR,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 03cv02464)
Leon Dayan argued the cause for appellant. With him on
the briefs were Robert M. Weinberg, Laurence Gold, Jonathan
P. Hiatt, Deborah Greenfield, and James B. Coppess.
Jeffrey Clair, Attorney, U.S. Department of Justice, argued
the cause for appellee. With him on the brief were Peter D.
Keisler, Assistant Attorney General, Kenneth L. Wainstein, U.S.
Attorney, Michael J. Singer, Attorney, Nathaniel I. Spiller,
2
Acting Associate Solicitor, U.S. Department of Labor, Andrew
D. Auerbach, Counsel, and William J. Stone, Senior Attorney.
Raymond J. LaJeunesse, Jr. and Nathan Paul Mehrens were
on the brief for amici curiae National Right to Work Legal
Defense Foundation, Inc., et al. in support of appellee.
Before: EDWARDS, ROGERS and ROBERTS, Circuit Judges.
Opinion for the Court filed by Circuit Judge ROGERS.
Opinion concurring in part and dissenting in part filed by
Circuit Judge ROBERTS.
ROGERS, Circuit Judge: The American Federation of Labor
and Congress of Industrial Organizations (“AFL-CIO”)
challenges the Secretary of Labor’s interpretation of her
authority under sections 201(b) and 208 of the Labor
Management Reporting and Disclosure Act of 1959
(“LMRDA”), 29 U.S.C. §§ 431(b), 438 (2000), in promulgating
the Labor Organization Annual Financial Reports (“final rule”),
68 Fed. Reg. 58,374 (Oct. 9, 2003) (to be codified at 29 C.F.R.
pts. 403, 408). Appealing the judgment of the district court
upholding the final rule, the AFL-CIO contends that the
Secretary exceeded her delegated authority in two respects:
First, by requiring labor organizations to include item-by-item
listings of ordinary receipts and disbursements in revised Form
LM-2, the Secretary ignored a limitation on her authority in
section 201(b). Second, by imposing a general trust reporting
requirement in new Form T-1 that is unrelated to preventing
circumvention or evasion of reporting requirements under
LMRDA Title II, the Secretary ignored a limitation on her
authority in section 208.
Neither the plain language of section 201(b), its legislative
3
history, nor prior administrative interpretation resolves the
ambiguity in section 201(b) regarding the level of detail that the
Secretary may require labor organizations to include in their
annual financial reports. In light of the Secretary’s explanation
for the changes to Form LM-2 in order to fulfill the purpose of
section 201(b), we hold that the Secretary’s promulgation of
revised Form LM-2 is a reasonable application of her authority
under section 201(b). We further hold that while the Secretary
has authority under section 208 to require labor organizations to
file reports on certain trusts where necessary to prevent
circumvention or evasion of reporting requirements under
LMRDA Title II, the Secretary’s promulgation of new Form T-1
has exceeded her authority by requiring general trust reporting.
Accordingly, we affirm the judgment of the district court in part,
reverse in part, and we vacate the provisions of the final rule
relating to Form T-1.
I.
Title II of the LMRDA, entitled “Reporting By Labor
Organizations, Officers and Employees of Labor Organizations,
and Employers,” requires labor organizations to report on a
number of activities. Section 201(b) of Title II requires each
covered labor organization (“union”) to file with the Secretary
an annual financial report “in such detail as may be necessary
accurately to disclose its financial condition and operations for
its preceding fiscal year” – “all in such categories as the
Secretary may prescribe.”1 29 U.S.C. § 431(b). Subparts (1),
1
Section 201(b) provides:
Every labor organization shall file annually with the
Secretary a financial report signed by its president and
treasurer or corresponding principal officers containing the
following information in such detail as may be necessary
accurately to disclose its financial condition and operations
4
(2), and (6) require reports of (1) “assets and liabilities,” (2)
“receipts” and their “sources,” and (6) “other disbursements”
and their “purposes.” Id. § 431(b)(1), (2), (6). Subparts (3), (4),
and (5) require more detailed reporting, subject to threshold
dollar amounts, of specific types of disbursements – including
salary and related payments to union officers and employees,
loans to union insiders, and loans to business enterprises. Id. §
431(b)(3)-(5). The financial report, upon filing with the
Secretary, becomes public information. Id. § 435. Section 208
of Title II authorizes the Secretary to prescribe the “form and
for its preceding fiscal year–
(1) assets and liabilities at the beginning and end of the
fiscal year;
(2) receipts of any kind and the sources thereof;
(3) salary, allowances, and other direct or indirect
disbursements (including reimbursed expenses) to each
officer and also to each employee who, during such fiscal
year, received more than $10,000 in the aggregate from such
labor organization and any other labor organization
affiliated with it or with which it is affiliated, or which is
affiliated with the same national or international labor
organization;
(4) direct and indirect loans made to any officer,
employee, or member, which aggregated more than $250
during the fiscal year, together with a statement of the
purpose, security, if any, and arrangements for repayment;
(5) direct and indirect loans to any business enterprise,
together with a statement of the purpose, security, if any,
and arrangements for repayment; and
(6) other disbursements made by it including the
purposes thereof;
all in such categories as the Secretary may prescribe.
29 U.S.C. § 431(b).
5
publication” of the various reports required under Title II.2 Id.
§ 438.
In promulgating the implementing regulations for section
201(b) in 1960, the Secretary of Labor required unions with
gross annual receipts equal to or greater than a certain dollar
threshold to file an annual financial report on Department of
Labor Form LM-2. See 25 Fed. Reg. 433 (Jan. 20, 1960)
(codified at 29 C.F.R. pt. 403). Unions with lower receipts filed
reports on simplified Forms LM-3 or LM-4. Id. at 433-34.
Form LM-2 called for reporting of assets and liabilities and
receipts and general disbursements in aggregate amounts. Form
LM-2 required unions to itemize their disbursements only with
respect to the transactions specified in subparts (3), (4), and (5)
of section 201(b). The 1960 regulations required unions to
retain, for a five-year period, vouchers, receipts, and other
underlying documentation in sufficient detail to permit these
reports to be “verified, explained or clarified, and checked for
accuracy and completeness.” Id. at 434; see also 29 U.S.C. §
436. With the exception of the dollar filing threshold, these
reporting requirements remained substantially unchanged for
more than four decades. See 57 Fed. Reg. 14,244 (Apr. 17,
1992). The Secretary periodically increased the filing threshold
for the Form LM-2 report so that, by 1994, only unions with
2
Section 208 provides that:
The Secretary shall have authority to issue . . . rules and
regulations prescribing the form and publication of reports
required to be filed under this subchapter and such other
reasonable rules and regulations . . . as he may find
necessary to prevent the circumvention or evasion of such
reporting requirements.
29 U.S.C. § 438.
6
annual receipts of $200,000 or more were required to complete
this longer form. See 67 Fed. Reg. 79,280, 79,293 (Dec. 27,
2002).
On October 9, 2003, the Secretary promulgated the final
rule now challenged, calling for several significant changes to
the financial reporting requirements under section 201(b). The
final rule amended Form LM-2 to require unions to itemize
their general receipts and disbursements. Unions must identify,
in six supporting schedules, individual receipts and (non-salary)
disbursements made to support a particular union function of
$5,000 or more, and specify the name, address, purpose, date,
and amount associated with each transaction. 68 Fed. Reg. at
58,429-30. In addition to reporting such “major” transactions,
see id. at 58,388-89, each union officer and employee must
provide a functional accounting, estimating the portion of work
time spent on the corresponding activities. Id. at 58,429.
Unions also must identify the vendors and other entities that
received union receipts and disbursements of $5,000 or more
during the fiscal year. Id. Unions must further itemize all
accounts receivable and payable of $5,000 or more at the end of
the fiscal year and include an “aging” schedule for each item
showing the amount of money owed to or by the union that is
either 90 to 180 days or more than 180 days past due. Id. at
58,429, 58,452-53, 58,485, 58,491. The final rule raised the
filing threshold to $250,000. Id. at 58,383. Each union filing a
Form LM-2 report must also file a separate Form T-1 report on
significant trusts in which the labor organization is interested, id.
at 58,477, disclosing the trust’s assets, liabilities, receipts, and
disbursements, as well as certain asset acquisitions or
dispositions, liability liquidations, and loans extended below
market rate or written off. Id. at 58,518, 58,531.
The AFL-CIO sued the Secretary, seeking injunctive and
declaratory relief that the final rule is unlawful under the
7
Administrative Procedure Act, 5 U.S.C. § 706(2)(C) (2000). In
relevant part, the complaint alleged that both the itemization
requirement in the revised Form LM-2 and the trust reporting
requirement in Form T-1 were in excess of the Secretary’s
authority under the LMRDA. Because the final rule would
become effective in a matter of weeks, the complaint also
alleged that its effective date was unworkable. The district court
denied the AFL-CIO relief, except with respect to the
implementation date, which the court stayed until the later of
July 1, 2004, or ninety days after the Secretary makes available
a fully tested electronic reporting software. The AFL-CIO
appeals, and our review of the judgment denying relief is de
novo. Gas Appliance Mfrs. Ass’n v. Dep’t of Energy, 998 F.2d
1041, 1045 (D.C. Cir. 1993).
II.
The AFL-CIO does not contest that Congress has delegated
authority to the Secretary to promulgate rules to enforce section
201(b). Rather it challenges the Secretary’s interpretation of her
authority to require itemization in the revised Form LM-2 under
section 201(b) for subparts (1) “assets and liabilities,” (2)
“receipts,” and (6) “other disbursements.” We therefore proceed
under the familiar two-step approach of Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984),
to determine whether the Secretary’s interpretation is entitled to
deference. “[E]mploying traditional tools of statutory
construction” the court must determine whether “Congress has
an intention on the precise question at issue,” and if so “that
intention is the law and must be given effect.” Id. at 843 n. 9
(“Step 1”). If Congress has not directly spoken to the issue, the
court must defer to the Secretary’s interpretation of the statute
if it is reasonable and not “manifestly contrary to the statute.”
Id. at 844-45 (“Step 2”).
The AFL-CIO contends that the issue of itemization is
8
resolved under Chevron Step 1 because the accounting terms
“financial condition” and “operations” in section 201(b) have a
generally understood meaning in the accounting field, signaling
Congress’s intent to require an annual financial report similar to
those filed by corporations and nonprofits generally, and thus to
limit the Secretary’s authority to requiring aggregated financial
information in informative categories relevant to the unions that
are required to report the information. While acknowledging
that the operative statutory language of section 201(b) requires
a financial report containing information about assets, liabilities,
receipts, and disbursements “in such detail as may be necessary
accurately to disclose [a union’s] financial condition and
operations,” the AFL-CIO contends that the statute sets “a
concrete standard,” and, contrary to the Secretary’s view, does
not provide that the report shall be “at a minimum, in such detail
as may be necessary” or “ least in such detail as may be
at
necessary” to disclose financial condition and operations. Br. of
Appellant at 20. In the AFL-CIO’s view, section 201(b) vests
a limited authority in the Secretary to develop an annual report
modeled on a corporate balance sheet and income statement, and
to prescribe categories relevant to labor organizations for
reporting that information.
The Secretary, in response, maintains that the AFL-CIO’s
textual argument reads the statutory terms “financial condition”
and “operations” in section 201(b) too narrowly in light of the
broader purposes of the LMRDA disclosure provisions. If the
term “financial condition” referred only to a statement of assets
and liabilities, and “operations” to a statement of disbursements
and receipts, the Secretary maintains there would have been no
need for Congress to have included the phrase “in such detail as
may be necessary accurately to disclose” this information or
subparts 201(b)(1), (2), and (6) regarding “assets and liabilities,”
“receipts,” and “other disbursements.” The Secretary interprets
her rulemaking authority under section 208 to provide simplified
9
reporting requirements as necessarily presupposing general
authority to prescribe reporting detail in the first instance and
thus vesting “a broad legislative authority to determine the
appropriate form and the content of a required financial report.”
Br. of Appellee at 28-29.
While the AFL-CIO may be correct that the terms “financial
condition” and “operations” have a generally understood
meaning, in enacting section 201(b) Congress did not adopt the
precise terms of art – “statement of financial condition” and
“statement of operations” that connote the typical corporate
income statement and balance sheet, see American Institute of
Certified Public Accountants, Accounting Trends & Techniques
in Published Corporate Annual Reports 6-7 (11th ed. 1957) –
nor did it expressly provide, for example, that unions’ reports
should be made “in accordance with generally accepted
accounting principles,” cf. 12 U.S.C. § 1441a(k)(4)(B)(i) (2004).
These terms of art do not appear in the statutory text of the
LMRDA, and while there are references to “statements” in the
legislative history, specifically to “a statement of assets and
liabilities and a statement of receipts and expenditures,” S. Rep.
No. 86-187, at 8-9 (emphasis added), the word “statements”
itself does not define the required level of detail nor necessarily
preclude itemized reporting.
The AFL-CIO also purports to find support for its Chevron
Step 1 position in legislative history regarding the relationship
between the reporting requirements of the LMRDA and reporting
requirements of its predecessor, the Labor Management
Relations Act of 1947 (“Taft-Hartley Act”), ch. 120, § 9(f), 61
Stat. 136, 145 (1947). It maintains that section 201(b)’s
reporting requirements were intended to mirror the requirements
of section 9(f) of the Taft-Hartley Act, with three additional
requirements, in which specific detail was required, set forth in
subparts (3), (4) and (5). It points to legislative history which
10
states, “The information required to be filed by unions under this
title is similar to that required by section 9(f) of the [Taft-
Hartley] Act.” S. Rep. No. 86-187, at 8 (1959), reprinted in
1959 U.S.C.C.A.N. 2318, 2325; see H.R. Rep. No. 86-1147
(Conference), at 7, 31-32 (1959), reprinted in 1959
U.S.C.C.A.N. 2503, 2504. Section 9(f) of the Taft-Hartley Act
required a union that wished to use the facilities of the National
Labor Relations Board to file two reports, one addressing subject
matters similar to those listed in LMRDA section 201(a), and the
other reporting all receipts and their sources, total assets and
liabilities, and disbursements and their purposes. 61 Stat. at 145.
The LMRDA Senate Report stated, “The information to be
reported under the committee bill comprehends all the
information required to be reported under present law. The
committee bill, in addition, requires certain information to be
reported that does not have to be specifically detailed under
present law,” referencing the information required under the new
provisions, sections 201(b)(3), (4), (5), and 201(a). S. Rep. No.
86-187, at 36. The House Report called for repeal of section 9(f)
of the Taft-Hartley Act, in order to eliminate the filing of
duplicate reports, stating that its “bill will require labor
organizations to file substantially the same information with the
Secretary of Labor,” H.R. Rep. No. 86-741, at 33 (1959),
reprinted in 1959 U.S.C.C.A.N. 2424, 2456.
From this legislative history the AFL-CIO draws the
conclusion that the “present law” reference includes not only the
text of section 9(f) but also the implementing regulations
promulgated by the Secretary of Labor in 1948, which did not
require itemization and called only for aggregated reporting of
receipts and their sources, assets and liabilities, and
disbursements. See Registration Form for Labor Organizations,
22 Labor Relations Reference Manual 3002 (1948). For further
support of its position that in enacting the LMRDA Congress
intended unions to file reports similar to the aggregate income
11
statement/balance sheet reporting then required, the AFL-CIO
points to several statements in the legislative history of the Taft-
Hartley Act indicating that Congress contemplated a particular
kind of financial reporting by unions: (1) statements by Senator
Taft, a principal sponsor of the Taft-Hartley Act, that “financial
reports . . . are made in many unions today,” and explaining that
under the Taft-Hartley bill “the union must file statements as
corporations have had to file them,” see 2 National Labor
Relations Board, Legislative History of the Labor Management
Relations Act 1000, 1014, 1654 (1947); and (2) a statement in
the Taft-Hartley minority report by three Senators that
“[v]irtually all of the international unions of both the CIO and
the A.F. of L. already furnish regular financial reports and
accounts of their activities,” 1 National Labor Relations Board,
Legislative History of the Labor Management Relations Act 484
(1947).
Whatever persuasive force this legislative history of the
Taft-Hartley Act may have in devining congressional intent in
enacting the LMRDA, the AFL-CIO’s “present law” contention
fails because the revised 1957 Taft-Hartley regulations in effect
when Congress enacted the LMRDA required more detailed
reporting by unions, including certain itemized disclosures of
receipts and disbursements. See 22 Fed. Reg. 4,158, 4,158-60
(June 13, 1957). The 1957 regulations included several itemized
reporting schedules: Schedule A instructed unions to “[i]temize
any receipts from sale of assets,” and other schedules addressing
receipts from other sources and other disbursements required
unions to “[s]eparately identify each individual item representing
one or more transactions during the year with an individual or
organization if the total amount of such individual item is in
excess of 25 percent of the schedule total.” Id. at 4,160. The
isolated statements in the legislative history relied on by the
AFL-CIO do not contradict this reality.
12
Likewise, the AFL-CIO’s structural arguments do not
demonstrate a clear congressional intent. First, the AFL-CIO
would contrast the language in subparts (3), (4), and (5) of
section 201(b), in which Congress required specific details, with
that in subparts (1), (2), and (6), in which Congress did not, to
suggest that Congress intended that unions would report assets,
liabilities, receipts, and other disbursements only in aggregate
categories. However, the general provision providing that the
reports must contain “the following information in such detail as
may be necessary accurately to disclose” reasonably may be
interpreted to apply equally to the six specific subparts, including
assets and liabilities, receipts, and other disbursements. That
Congress required greater detail in subparts (3), (4), and (5) does
not necessarily mean that it intended to limit detail in reporting
under subparts (1), (2), and (6), particularly when it also granted
the Secretary discretionary authority to prescribe the required
“form” and “categories” for reporting. 29 U.S.C. §§ 431(c).
Section 208, in turn, by limiting the Secretary’s regulatory
authority to rules “necessary to prevent the circumvention or
evasion” of reporting requirements under LMRDA Title II, also
leaves undefined the level of detail that may be required. Id. §
438.
Second, the AFL-CIO contends that the Secretary’s
interpretation of subsection 201(b) puts that provision in an
irreconcilable tension with subsection 201(c). Subsection 201(c)
provides that any union member “for just cause” may examine
any books, records, and accounts necessary to verify the union’s
annual financial report. 29 U.S.C. § 431(c). In the AFL-CIO’s
view, requiring unions to reveal to the general public individual
item-by-item disbursement and receipt information that Congress
permitted unions to protect even from union members through
subsection 201(c)’s “just cause” provision renders that protection
meaningless. However, as the Secretary points out, there is no
necessary inconsistency between the itemization required by the
13
Form LM-2 under the final rule and subsection 201(c) because
subsection 201(c) simply requires disclosure of data underlying
subsection 201(b) reports, and additional detail in the subsection
201(b) reports would facilitate a union member’s right to probe
further pursuant to subsection 201(c).
Given the ambiguity in the statutory text and structure, and
the lack of clear intent in the legislative history regarding the
level of public financial reporting detail that the Secretary may
require, we agree with the Secretary that our inquiry should
proceed under Chevron Step 2. Under Chevron Step 2, courts
owe deference to an agency’s interpretation of a statute it is
entrusted to administer. Chevron, 467 U.S. at 844. At the same
time, when statutory language is ambiguous it is not a foregone
conclusion that an agency’s interpretation is a reasonable one to
which the court must defer. See Whitman v. Am. Trucking
Ass’ns, 531 U.S. 457, 480 (2001); Associated Gas Distribs. v .
FERC, 899 F.2d 1250, 1253 (D.C. Cir. 1990). Under Chevron
Step 2, “the question for the court is whether the agency's
interpretation is based on a permissible construction of the
statute,” Chevron, 467 U.S. at 843, in light of its “language,
structure, and purpose,” Int'l Alliance of Theatrical & Stage
Employees v. NLRB, 334 F.3d 27, 34 n.3 (D.C. Cir. 2003)
(citations omitted).
The Secretary contends that deference principles apply with
greater force here because Congress has empowered her to act to
prevent circumvention or evasion of the LMRDA. Citing
Mourning v. Family Publications Service, Inc., 411 U.S. 356
(1973), the Secretary maintains that absent an abuse of discretion
or an express statutory limitation on the broad delegation of
authority to the Secretary by Congress, the AFL-CIO cannot
show that the Secretary acted beyond her authority in
promulgating the final rule. However, the court is obligated not
only to construe the statute as a whole but to give meaning to
14
each word of the statute. See Alaska Dep’t of Envtl.
Conservation v. EPA, 540 U.S. 461, 489 n.13 (2004); Asiana
Airlines v. FAA, 134 F.3d 393, 398 (D.C. Cir. 1998). The
language of the LMRDA is more limited than that addressed in
Mourning. Sections 201(b) and 208 authorize the Secretary to
prescribe detail “necessary accurately to disclose [a union’s]
financial condition and operations” and “necessary to prevent the
circumvention or evasion of such reporting requirements,”
respectively, rather than more generally to act as is “necessary to
carry out the purposes” or “provisions” of a statute, as discussed
in Mourning. Cf. Mourning, 411 U.S. at 369-70. Therefore,
under Chevron Step 2, the court’s deference to the Secretary is
still limited by the particular language of sections 201(b) and
208. Even when Congress has stated that the agency may do
what is “necessary,” see AT & T Corp. v. Iowa Utils. Bd., 525
U.S. 366, 387-92 (1999); GTE Serv. Corp. v. FCC, 205 F.3d 416,
422-23 (D.C. Cir. 2000), whatever ambiguity may exist cannot
render nugatory restrictions that Congress has imposed. Cf. Am.
Trucking Ass’ns, 531 U.S. at 484.
In promulgating the final rule the Secretary justified the
revised Form LM-2 reporting requirements as follows:
The forms no longer serve their underlying purpose
because they fail to provide union members with
sufficient information to reasonably disclose to them
‘the financial condition and operation[s]’ of labor
organizations . . . . [I]t is impossible for union members
to evaluate in any meaningful way the operations or
management of their unions when the financial
disclosure reports filed . . . simply report large
expenditures for broad, general categories. The large
dollar amount and vague description of such entries
make it essentially impossible for anyone to determine
with any degree of specificity what union operations
15
their dues are spent on, without which the purposes of
the LMRDA are not met.
68 Fed. Reg. at 58,420 (emphasis added). Responding to
arguments that she lacked authority to require itemization, the
Secretary stated that the financial reporting requirements under
section 201(b) only set minimum standards because she may
require unions “to report every receipt and disbursement in any
amount.” Id. at 58,376. But, as the quotation from the preamble
indicates, the Secretary recognizes the limitation on her authority
to require greater detail only as “necessary accurately to disclose
[a union’s] financial condition and operations.” 29 U.S.C. §
431(b). The final rule limits the disclosures on Form LM-2 to
major transactions. To the extent the Secretary asserts she has
discretion over the “content” of a financial report, Br. of
Appellee at 29, this would be true only to the extent that she
means the authority to determine categories of data and level of
detail because, as the AFL-CIO points out, Congress
intentionally deleted the word “content” from an earlier version
of section 208. Compare 1 National Labor Relations Board,
Legislative History of the Labor-Management Reporting and
Disclosure Act 44 (1959) (text of S. 505), with 29 U.S.C. §
431(b).
In promulgating the revised Form LM-2, the Secretary
explained that the final rule promotes the two purposes of union
reporting: “to fully inform union members” about their union’s
“financial condition and operations” and “to deter union officials
and employees” from misusing union funds. 68 Fed. Reg. at
58,377. The Secretary reasoned that under current reporting
requirements, “[t]he large dollar amount and vague description
of . . . entries make it essentially impossible for members to
determine whether or not their dues were spent appropriately,
which is precisely the reason that the statute requires reporting.”
67 Fed. Reg. at 79,281-82. More detailed reporting would
16
“provid[e] union members with useful data that will enable them
to be responsible and effective participants in the democratic
governance of their unions.” Id. at 79,280-81. The AFL-CIO
has pointed to nothing in the contemporary understanding of the
LMRDA or its legislative history to suggest that the aggregate
reporting in the Form LM-2 required by the Secretaries, albeit
for four decades, represented the full exercise of the Secretary’s
authority. See 68 Fed. Reg. at 58,376-77. Rather, the “present
law” analysis, which the AFL-CIO contends informed
Congress’s intent with regard to the level of detail to be required
under section 201(b), supports the Secretary’s view that the
Taft-Hartley Act afforded the Secretary authority that
encompasses requiring itemized accounting of major
transactions. Although Congress intended to carry out its
prophylactic purposes through a multi-pronged approach,
including reporting, investigatory, and criminal provisions, see
29 U.S.C. §§ 432, 433, 453, 436, 439, 521; see United States v.
Budzanoski, 462 F.2d 443, 449-50, 452 (3d Cir. 1972); Int’l Bhd.
of Teamsters v. Wirtz, 346 F.2d 827, 831 (D.C. Cir. 1965); see
also Mallick v. Int’l Bhd. of Elec. Workers, 749 F.2d 771, 780
(D.C. Cir. 1984) (quoting H.R. Rep. No. 86-741, at 7), it
declined to specify what the balance should be among these
approaches, see Chevron, 467 U.S. at 865, and the Secretary
could reasonably conclude that “[p]roviding additional detail on
Form LM-2 . . . is necessary to give union members an accurate
picture of their labor organization’s financial condition and
operations,” 68 Fed. Reg. at 58,420.
In sum, section 201(b) authorizes the Secretary to require
certain information “in such detail” “in such categories,” but
only for the purpose of “accurately . . . disclos[ing] [a union’s]
financial conditions and operations.” 29 U.S.C. § 431(b). The
Secretary’s promulgation of revised Form LM-2 is a reasonable
application of this authority. Accordingly, we hold that the
Secretary’s revision of Form LM-2 is permissible and not
17
“manifestly contrary to the statute.” Chevron, 467 U.S. at 844-
45.
III.
The final rule also requires unions with annual receipts of
$250,000 or more to file a report on Department of Labor Form
T-1 regarding any “significant trust” “in which the labor
organization is interested.” 68 Fed. Reg. at 58,477. The
LMRDA defines a “trust in which the labor organization is
interested” as one that (1) was either “created or established by
a labor organization, or [where] one or more of the trustees or .
. . members of the governing body . . . is selected or appointed by
a labor organization,” and (2) “a primary purpose of which is to
provide benefits for the members of such labor organizations or
their beneficiaries.” 29 U.S.C. § 402(l). The final rule defines
a “significant trust” as one having annual receipts of $250,000 or
more during its most recent fiscal year, and for which the union’s
financial contribution to the trust, or the contribution made on
behalf of the union or as a result of a negotiated agreement to
which the union is a party, is $10,000 or more annually. 68 Fed.
Reg. at 58,478. Form T-1 requires a report on the financial
condition and operations of such union-related trusts, including
“the total value of all the trust assets,” “liabilities,” “receipts,”
and “disbursements,” and it requires itemization of receipts and
disbursements of $10,000 or more, similar to the revised Form
LM-2 requirement. See 68 Fed. Reg. at 58,531-32. A union is
excused from filing Form T-1 where the trust has made a similar
financial disclosure under other laws, such as the Internal
Revenue Code or the Employment Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. §§ 1023, 1024(a), 1030
(2000), or in an independent audit, 68 Fed. Reg. at 58,478.
There is no serious dispute over whether Congress delegated
authority to the Secretary to promulgate rules to enforce section
208. Indeed, section 208 provides that “[t]he Secretary shall
18
have authority to issue, amend, and rescind . . . such . . .
reasonable rules and regulations (including rules prescribing
reports concerning trusts in which a [union] is interested) as [s]he
may find necessary to prevent the circumvention or evasion of
[Title II’s] reporting requirements.” 29 U.S.C. § 438 (emphasis
added). Thus, the question presented by the AFL-CIO’s
contention that the Secretary lacks authority to require general
trust reporting is whether Form T-1 comports with the statutory
requirements that the Secretary “find [the rule] necessary to
prevent” evasion of LMRDA Title II reporting requirements. Id.
As the Secretary suggests, this question is properly resolved
under Chevron Step 2.
Under section 208, the Secretary may require reporting of
union-related trusts where a two-part nexus is met: A union must
have an interest in the trust as defined in 29 U.S.C. § 402(l), and
the required reporting must be “necessary” only for the purpose
of “prevent[ing] the circumvention or evasion of [union]
reporting requirements” under LMRDA Title II, id. § 438.
Given the ambiguity inherent in the word “necessary,” the
question remains whether, under Chevron Step 2, the Secretary’s
interpretation of what is “necessary,” as embodied in Form T-1,
is limited to preventing such circumvention or evasion, and thus
is a reasonable application of her authority, and therefore is
permissible and entitled to deference. See Chevron, 467 U.S. at
844-45. The AFL-CIO contends that the Secretary’s
interpretation is not permitted, contrasting the more restrictive
language in section 208 with broader rulemaking authority, such
as section 30 of the Securities and Exchange Act, 15 U.S.C.§
78dd (2000), and in Mourning, discussed supra Part II. Under
section 208, the AFL-CIO maintains, the Secretary must
determine that certain transactions are being rendered
unreportable by reason of the fact they are being carried out by
a trust in which a union is interested, and for those trusts the
Secretary is empowered to prescribe reports concerning such
19
trusts that disclose affected transactions. We conclude that
although the Secretary has identified circumstances where union
reporting requirements under Title II may be circumvented or
evaded, Form T-1 goes further to require general trust reporting,
and thus it is not a reasonable interpretation of her authority
under section 208.
The Secretary correctly points out that the statutory
definition of “trusts in which a union has an interest,” 29 U.S.C.
§ 402(l), is sufficiently broad to encompass trusts that are neither
financed nor controlled by unions. Its terms do not dictate a
narrow conception of union financial operations, such that, as the
AFL-CIO maintains, Taft-Hartley employee benefit plans funded
by employer rather than union contributions to an entity legally
separate from the union, whose funds are ordinarily disbursed to
third parties, would be beyond the reach of section 208. For such
trusts, the union has used its bargaining power to establish the
trust, to define the purposes for which funds may be used, to
appoint union representatives to the governing board in a number
equal to management representatives, and to obligate the
employer to direct funds to the trust’s account. See id. § 186 (c)
(5) (A) & (B). As the Secretary explained in proposing the final
rule:
Since the money an employer contributes to such a
“trust” for union members’ benefit might otherwise
have been paid directly to the workers in the form of
increased wages and benefits, the members on whose
behalf the financial transaction was negotiated have a
right to know what funds were contributed, how the
money is managed and how it is being spent.
67 Fed. Reg. at 79,283.
In “find[ing] necessary” the Form T-1 requirements, the
20
Secretary identified the types of union transactions rendered
unreportable by reason of the fact that a union has made a direct
or indirect contribution to a trust in which a union is interested.
In promulgating proposed Form T-1, the Secretary illustrated the
need for additional reporting on organizations that are not wholly
owned by unions by pointing to examples in which union
members could not obtain “detailed, reliable information on
significant trusts’ financial operations.” 67 Fed Reg. at 79,283.
The first example involved the use of joint training funds to host
extravagant parties for trustees and to pay union officials
supplementary salaries. Id. In a second example, twenty-nine
local unions made monthly contributions of $62,000 each to a
statewide strike fund that went unreported because no single
union wholly owned the fund. Id. The third example also
illustrated unreported union financial activity that involved a
building fund established by local union officials and financed
in part by union members’ pension funds. Id. Lastly, the
Secretary pointed to the example of a credit union that was 97%
financed by a local union and which made large loans to union
officials, employees, and their family members. Id.
The Secretary explained that such “separate organizations
pose the same transparency challenges as ‘off-the-books’
accounting procedures in the corporate setting: large-scale
potentially unattractive financial transactions can be shielded
from public disclosure and accountability through artificial
structures, classifications, and organizations.” 67 Fed. Reg. at
79,282. She concluded that reporting on such organizations that
meet the statutory definition of union-related trusts is necessary
to give union members an accurate picture of their union’s
financial condition and operations and to prevent the
circumvention or evasion of union reporting requirements on
their financial condition and operations. 68 Fed. Reg. at 58,420.
The examples illustrate that certain union transactions are being
rendered unreportable by reason of the fact they are being carried
21
out by organizations that are not wholly owned by the related
union.
The AFL-CIO concedes, as it must, that the Secretary is
empowered to prescribe reports concerning trusts that disclose
payments of salaries, compensation, other valuable perquisite to
a union officer or employee. Contrary to the AFL-CIO’s view,
however, neither the statutory definition of “trusts in which a
union is interested” nor section 208’s requirement that such
reporting be “necessary to prevent” limit the Secretary to
requiring reporting only after union members’ funds have been
misused where the trust has not been established or is not
controlled by a single union. Cf. Mourning, 411 U.S. at 373-74.
As the Secretary responds, the AFL-CIO’s “rigidly formalistic
interpretation” is inconsistent with section 208’s express
authorization of the Secretary “to require reporting on union-
related trusts whenever the Secretary determines such reporting
is necessary to effectuate the statute’s basic disclosure
obligation.” Br. of Appellee at 53. Section 208’s focus is not on
the independent legal status of the trust but on its control over
funds provided for the benefit of union members, even if those
funds are provided to a separately administered account rather
than directly to the union. 67 Fed. Reg. at 79,282. The trusts
that the Secretary has identified in her examples are established
by one or more unions or through collective bargaining
agreements calling for employer contributions, and the union has
retained a controlling management role in the organization. See
id. at 79,283. Their primary purpose is to benefit union members
or their beneficiaries. See id. They are financed by a union,
multiple unions, or employer contributions as a result of
collective bargaining agreements. See id. The Secretary
determined that previous reporting requirements allowed the
related union to circumvent or evade reporting on these trusts’
financial activities because the related union had not itself
established or did not alone control the trust. Id. at 79,282-83.
22
Form T-1 captures such trusts where the trust involves at least
$10,000 of union members’ funds and requires reporting on
those trusts’ use of the union members’ funds. Section 208 does
not limit the Secretary to requiring reporting only in order to
disclose transactions involving the misuse of union members’
funds because leaving the decision about disclosure to such trusts
illustrated by the Secretary’s examples would allow unions to
circumvent or evade reporting on the use of members’ funds
diverted to the trust.
However, the AFL-CIO contends that LMRDA Title II
reporting requirements, with which section 208 is solely
concerned, embodies Congress’s categorical legislative judgment
that it is in the public interest to require unions to file financial
reports disclosing union financial condition and operations and
to require union officers and employees to file more narrowly
focused financial reports. See 29 U.S.C. §§ 432(a), 433(a). The
AFL-CIO maintains that the Secretary, in promulgating Form T-
1, justified its requirements by reference to her determination
that it was in the public interest to enable union members to
“determine whether [trust] funds are being spent in ways that
benefit the members for whom they were created,” 67 Fed. Reg.
at 79,283, rather than by reference to whether the requirements
were “necessary to prevent” union circumvention or evasion of
Title II reporting requirements. In its view, the Secretary has
effectively established a new reporting requirement under section
201(b) for some trusts in which a union has an interest without
reference to the limitation in the “necessary to prevent” clause of
section 208.
There can be little doubt that some of the trust reporting the
Secretary has required on Form T-1 is tied to a union’s financial
reporting requirements under LMRDA Title II. Form T-1
includes reporting on trusts illustrated by the Secretary’s
examples: trusts funded by union members’ funds from one or
23
more unions and employers, and, although unions retain a
controlling management role, no individual union wholly owns
or dominates the trust, and therefore the use of the funds is not
reported by the related union under Title II. See 68 Fed. Reg. at
58,374. This includes trusts established by one or more unions
with union members’ funds because such establishment is a
reasonable indicium of union control of that trust. The AFL-CIO
does not dispute that Title II would otherwise require a union to
report its uses of such members’ funds. Rather, the AFL-CIO
contends that the actual requirements of the final rule are far
broader than suggested by the Secretary’s examples, and the
Secretary’s conclusion that additional reporting on significant
trusts was “necessary to prevent” was based merely on the fact
that the organizations met the statutory definition of “trusts in
which [a union] has an interest,” and not on the realization that,
as the examples illustrated, a union could circumvent or evade
Title II’s financial reporting requirements by directing union
members’ funds to such trusts.
Form T-1 requires reporting of all trust assets, liabilities,
disbursements, and receipts, and itemization of all major
disbursements and receipts. Where a union has directed
members’ funds to the trusts identified in the Secretary’s
examples, a union’s report on such trust’s use of the funds has no
less a direct nexus to the union’s reporting obligation under Title
II than the salary, compensation, and other valuable perquisite to
a union official or employee that the AFL-CIO concedes has a
direct nexus. The Form T-1 requirements, however, are not
limited to addressing only the types of union transactions the
Secretary offers to illustrate that additional trust reporting was
required to prevent circumvention or evasion of union Title II
reporting requirements. Form T-1 reaches information unrelated
to union reporting requirements and mandates reporting on trusts
even where there is no appearance that the union’s contribution
of funds to an independent organization could circumvent or
24
evade union reporting requirements by, for example, permitting
the union to maintain control of the funds. This is the salient
point our dissenting colleague misses, for the plain text of
section 208 itself limits the Secretary’s authority with respect to
trust reporting. See dissenting op. at 4-5. For example, where the
union’s management role is limited to selecting a single member
of a trust’s governing board, see 29 U.S.C. § 402(l)(1), and
neither the related union’s financial contribution nor that of other
unions to the trust dominates the trust’s revenues, Form T-1
nonetheless requires the union to report on the trust’s other
receipts over $10,000. Yet, absent circumstances involving
dominant union control over the trust’s use of union members’
funds or union members’ funds constituting the trust’s
predominant revenues, a report on the trust’s financial condition
and operations would not reflect on the related union’s financial
condition and operations, or at least the Secretary has not so
found, much less made a determination that such a report would
be necessary to prevent circumvention or evasion of union
reporting requirements. Our dissenting colleague acknowledges
the Secretary must make such findings. See dissenting op. at 4,
8.
At no point, for example, has the Secretary suggested that a
union’s role in selecting one member of the governing board of
an independent organization qualifying as a union-related trust
to which at least $10,000 in union members’ funds was
contributed – which, under the Form T-1 formulation, could
comprise infinitely less than 4% of the trust’s total revenues,
depending on how large the union’s total revenues are –
demonstrated sufficient union influence over those members’
funds, or any other connection that could give rise to
circumvention or evasion of a union’s Title II reporting
requirements. Form T-1, however, would require full financial
reporting by such organization. The Secretary’s determination
that union members would benefit from “more information about
25
the financial activities of a ‘fund in which [a union] has an
interest,’” 67 Fed. Reg. at 79,283, obviously is not the same as
the determination required by section 208 that reporting on such
a fund is necessary to prevent union circumvention or evasion of
Title II reporting requirements. Similarly, the Secretary also
misconstrued her authority under section 208 when she explained
that she was attempting to remedy a problem of existing
reporting requirements, namely that “if a union transfers funds
to another organization, but does not disclose disbursements
made by that organization, union members may have no way to
determine whether the funds in question were actually spent for
the benefit of members.” Id. at 79,282. While that may be true,
section 208 limits the Secretary’s authority to require reporting
on trusts to instances where necessary to avoid a union’s
circumvention or evasion of its Title II reporting requirements;
the statute does not provide general authority to require trusts to
demonstrate that they operate in a manner beneficial to union
members. Thus, although the Secretary’s examples illustrate the
type of transactions that pertain to the circumvention or evasion
of union Title II reporting requirements and therefore
permissibly could be included in Form T-1, the flaw in Form T-1
is that it also reaches information unconnected to the
circumvention or evasion of union Title II reporting
requirements.
That Form T-1 reaches information unrelated to a union’s
Title II reporting requirements is underscored by contrasting the
bright line $10,000 test with an alternative test explored by the
Secretary. In proposing Form T-1, the Secretary initially
considered use of a “single entity” test – defined in the notice of
proposed rulemaking as “an entity that is ‘dominated or
controlled by the labor organization to such a degree that assets,
liabilities, receipts, and disbursements of the entity effectively
are those of the union itself.’” 68 Fed. Reg. at 58,415 (quoting
67 Fed. Reg. at 79,285). The Secretary ultimately rejected this
26
test because it was “less effective than other criteria” inasmuch
as a union could conceal its relationship with the related
organization, and the test “might be difficult to apply” in some
cases. Id. at 58,415. Whatever may be the merits of the single
entity test, in opting for the bright line test for its ease of
application, the Secretary overstepped the limits of section 208.
While unambiguous and easy to apply, the $10,000 threshold in
Form T-1 is not tied, as the single entity test was, to a union’s
Title II reporting requirements, and it therefore is manifestly
contrary to the statute. Under Form T-1, the bright line test
reaches trusts in which a union has neither management control
nor financial domination nor any other characteristic found by
the Secretary that might give rise to circumvention or evasion of
reporting requirements. Where a union has minimal control over
trust fund spending and a union’s contribution is so small a part
of the trust’s revenues, and the trust is not otherwise controlled
by unions or dominated by union members’ funds, the trust
lacks the characteristics of the unreported union transactions in
the Secretary’s examples on which the Secretary based the final
rule, and the Secretary has made no other findings that union
contribution to such trusts could give rise to the circumvention
or evasion of union reporting requirements.
Because section 208 limits the Secretary’s authority to
promulgate rules requiring financial reporting to what she
determines is “necessary to prevent” circumvention or evasion
of a union’s Title II reporting requirements, we hold that to the
extent the Form T-1 requirements apply to union transactions
unteathered to that limitation, the promulgation of Form T-1
exceeds the Secretary’s authority by requiring general trust
reporting.
Accordingly, we affirm the judgment of the district court in
part and reverse in part, and we vacate the provisions of the final
rule relating to Form T-1.
ROBERTS, Circuit Judge, concurring in part and dissenting
in part: I concur in Parts I and II of the court’s opinion. I must
dissent, however, from the conclusion in Part III that the Secre-
tary’s interpretation of her trust reporting authority was unrea-
sonable under step two of Chevron.
I begin with the statutory language. The source of the
Secretary’s authority for requiring reporting by union-affiliated
trusts is section 208:
The Secretary shall have authority to issue, amend, and
rescind rules and regulations prescribing the form and
publication of reports required to be filed under this
subchapter and such other reasonable rules and regulations
(including rules prescribing reports concerning trusts in
which a labor organization is interested) as he may find
necessary to prevent the circumvention or evasion of such
reporting requirements.
LMRDA § 208, 29 U.S.C. § 438 (emphasis added).
We need not guess at what constitutes a “trust in which a
labor organization is interested,” for section 3(l) provides a
definition:
“Trust in which a labor organization is interested” means a
trust or other fund or organization (1) which was created or
established by a labor organization, or one or more of the
trustees or one or more members of the governing body of
which is selected or appointed by a labor organization, and
(2) a primary purpose of which is to provide benefits for the
members of such labor organization or their beneficiaries.
29 U.S.C. § 402(l).
The Secretary’s rule requires unions that meet the criteria
for LM-2 reporting to file an additional report for “any trust in
which the labor organization is interested, if the trust has
$250,000 or more in annual receipts and the labor organization
contributed $10,000 or more to the trust during the reporting
year, or that amount was contributed on the labor organization’s
2
behalf.” Labor Organization Annual Financial Reports; Final
Rule, 68 Fed. Reg. 58,374 (Oct. 9, 2003). The Secretary
considered other approaches to defining which trusts posed a
risk of being used to circumvent or evade required union
reporting, but rejected them “in favor of the statutory definition
of a trust in which a labor organization is interested,” adding
dollar thresholds “so that an undue reporting burden is not
imposed on unions with limited finances.” Id. at 58,413, 58,415.
The Secretary explained why such related entities pose a
danger of allowing unions to circumvent their reporting obliga-
tions. The Secretary’s proposed rulemaking notes that “labor
organizations have become more multifaceted and have created
hybrid structures for their various activities.” Labor Organiza-
tion Annual Financial Reports; Proposed Rule, 67 Fed. Reg.
79,280 (Dec. 27, 2002). Trusts in which unions have an interest
“pose the same transparency challenges as ‘off-the-books’
accounting procedures in the corporate setting: large-scale,
potentially unattractive financial transactions can be shielded
from public disclosure and accountability through artificial
structures, classification and organizations.” Id. at 79,282.
Under the earlier rules, union members may have had “no way
to determine whether the funds in question were actually spent
for [their] benefit.” Id.
The Secretary pointed to several cases in which union
members could not obtain information about a particular trust
because no union was required to file a report on its behalf. In
one instance, a credit union with 97 percent of deposits attribut-
able to one union local doled out more than half its loans to four
loan officers, three of whom were union officials. Id. at 79,283.
In another, transactions involving a strike fund to which 29
unions contributed went completely unreported because “no
single union wholly owned the fund.” Id. The Secretary
reasoned that trust reporting would “properly ensure union
democracy, fiscal integrity and transparency in a manner
3
consistent with the intent of Congress in enacting the LMRDA.”
Id.; see S. Rep. No. 86-187, at 41 (1959) (“The committee
expects that, in exercising his rulemaking power under [the
Senate version of LMRDA § 208], the Secretary of Labor will
be vigilant in making sure that all types of special funds shall be
reported.”). As the district court concluded, “the rulemaking
record shows clearly that the Secretary explained, in great detail,
her determination that the Form T-1 [trust reporting] is neces-
sary to prevent the circumvention of the LMRDA reporting
requirements.” AFL-CIO v. Chao, 298 F. Supp. 2d 104, 118
(D.D.C. 2004).
Under step two of Chevron, that determination is not to be
disturbed unless “arbitrary or capricious in substance, or
manifestly contrary to the statute.” Household Credit Servs.,
Inc. v. Pfennig, 124 S. Ct. 1741, 1748 (2004) (internal quotation
marks omitted). “We accord deference to agencies under
Chevron . . . because of a presumption that Congress, when it
left ambiguity in a statute meant for implementation by an
agency, understood that the ambiguity would be resolved, first
and foremost, by the agency, and desired the agency (rather than
the courts) to possess whatever degree of discretion the ambigu-
ity allows.” Smiley v. Citibank (South Dakota), N.A., 517 U.S.
735, 740-41 (1996). The usual deference is heightened in this
case, however, for several reasons:
First, the statute speaks in terms of what is “necessary” to
prevent circumvention or evasion of the reporting required under
the statute. This is an inherently discretionary standard that
clearly invites further definition by the Secretary. See
McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 413–15
(1819); see also Nat’l R.R. Passenger Corp. v. Boston & Maine
Corp., 503 U.S. 407, 419 (1992) (ICC interpretation of “re-
quired” to mean “useful and appropriate” was reasonable in
context of statute). Determining what is “necessary” unavoid-
4
ably calls for the exercise of the Secretary’s judgment and
expertise.
Second, Congress did not merely delegate to the Secretary
the authority to require such trust reporting as may be necessary
to prevent circumvention or evasion, but instead such reporting
“as [s]he may find” necessary to that end. 29 U.S.C. § 438
(emphasis added). We have noted in the past the “distinction
between the objective existence of certain conditions and the
Secretary’s determination that such conditions are present,”
stressing that a statute phrased in the latter terms “ ‘fairly exudes
deference’ to the Secretary.” Kreis v. Sec’y of the Air Force,
866 F.2d 1508, 1513 (D.C. Cir. 1989). While not foreclosing
review altogether, but cf. Drake v. FAA, 291 F.3d 59, 72 (D.C.
Cir. 2002) (“What may be thought necessary may not in fact be
necessary, but a court may pass judgment only on the latter, not
the former.”), section 208 by its terms “substantially restrict[s]
the authority of the reviewing court to upset the Secretary’s
determination,” Kreis, 866 F.2d at 1514.
Third, the delegation at issue here is to the Secretary to
promulgate rules she finds necessary “to prevent” a future
contingency — circumvention or evasion of required reporting.
29 U.S.C. § 438. The delegation necessitates a predictive
judgment about risk, and “an agency’s predictive judgment
regarding a matter within its sphere of expertise is entitled to
‘particularly deferential’ review.” Fresno Mobile Radio, Inc. v.
FCC, 165 F.3d 965, 971 (D.C. Cir. 1999). The trust reporting
rule represents the Secretary’s best judgment as to when union-
affiliated trusts are likely to pose a risk of being used to circum-
vent the reporting requirements. It is a prophylactic rule and,
as such, need not be crafted with “exacting precision.” Biloxi
Reg’l Med. Ctr. v. Bowen, 835 F.2d 345, 350 (D.C. Cir. 1987).
In the face of a statutory delegation freighted with defer-
ence, the majority applies the very antithesis of deferential
review. My colleagues fault the Secretary’s rule because they
5
believe that the level of trust reporting specified by the Secretary
would only be necessary to prevent evasion of the LMRDA
requirements in “circumstances involving dominant union
control over the trust’s use of union members’ funds or union
members’ funds constituting the trust’s predominant revenues,”
Op. at 24, and that the Secretary’s examples do not demonstrate
a risk of evasion where such circumstances are not present. But
nothing in either the LMRDA or the usual standards governing
review of agency action under Chevron step two demands that
the Secretary recite examples to support every possible applica-
tion of the rule. Rather, we require only that she provide a
reasoned explanation for her judgment that reporting is “neces-
sary to prevent . . . circumvention or evasion.” 29 U.S.C. § 438.
She has clearly done so here. See supra pp. 2–3.
The majority’s main objection is that the Secretary’s rule
“mandates reporting on trusts even where there is no appearance
that the union’s contribution of funds to an independent organi-
zation could circumvent or evade union reporting requirements
by, for example, permitting the union to maintain control of the
funds.” Op. at 23 (emphasis added). What the majority calls an
“independent organization” is, of course, defined in the statute
as a “[t]rust in which a labor organization is interested,” because
it “was created or established by a labor organization, or one or
more of the trustees or one or more members of [its] governing
body . . . is selected or appointed by a labor organization,” and
because “a primary purpose of [the organization] is to provide
benefits for the members of such labor organization or their
beneficiaries.” 29 U.S.C. § 402(l). The majority may be
perfectly comfortable that there is no risk that such an organiza-
tion may be used by a union to circumvent or evade reporting
requirements, but it is surely reasonable for the Secretary — to
whom the responsibility has been delegated — to reach a
different conclusion.
6
The majority’s reading, far from defining the “bounds of the
permissible” under Chevron step two, Barnhart v. Walton, 535
U.S. 212, 218 (2002), is itself rather implausible. First, it
renders largely superfluous the judgment made by Congress
when it specifically defined a “trust in which a labor organiza-
tion is interested.” If “circumvention or evasion” carries within
it an implicit requirement of union dominance or control beyond
the definition in section 3(l), there is no need for that definition
at all. The majority’s approach is akin to a court, presented with
a statute permitting the regulation of trucks weighing over ten
tons where “necessary to prevent damage to highways,”
nevertheless exempting trucks under twenty tons on the ground
that they present no such risk — as though Congress had made
no judgment on the matter. See Fed. Elec’n Comm’n v. Nat’l
Right to Work Comm., 459 U.S. 197, 210 (1982) (Court will not
“second-guess a legislative determination as to the need for
prophylactic measures where corruption is the evil feared”).
Second, the majority takes an exceedingly narrow view of
the purpose of the reporting requirements. It dismisses as
somehow irrelevant the Secretary’s concern that in the absence
of trust disclosure, “union members may have no way to
determine whether [union funds transferred to trusts] were
actually spent for the benefit of members.” 67 Fed. Reg. at
79,282; see Op. at 25. Yet, in making the definition of a “trust
in which a labor organization is interested” turn on whether one
of the primary purposes of the trust is “to provide benefits for
[union] members . . . or their beneficiaries,” Congress plainly
evinced the very same concern. See LMRDA § 3(l). Indeed, the
whole point of the LMRDA is to ensure, through broad financial
disclosure, that members’ funds are not being misappropriated
by those to whom the funds have been entrusted. See H.R. Rep.
No. 86-741, at 7 (1959) (“[t]he members of a labor organization
are the real owners of the money and property of such organiza-
tion and are entitled to a full accounting of all transactions
7
involving such money”). The statute does not prescribe
reporting merely for reporting’s sake.
It is a final strike against the plausibility of the majority’s
reading that it takes no account of the Secretary’s need for a
bright-line rule in managing what is, fundamentally, a reporting
and disclosure scheme. Unlike the express statutory criteria of
section 3(l) and the Secretary’s dollar threshold, the majority’s
“circumstances involving dominant union control” test, Op. at
24, “would be hard to apply, jettisoning relative predictability
for the open-ended rough-and-tumble of factors,” Jerome B.
Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527,
547 (1995). The circumstances of union control will come in
many varieties. Presumably, one union-appointed trustee will
normally not be enough; but if there are only three trustees, or
if one of the other trustees is affiliated with another union, it
might be. In deciding to incorporate the statutory definition into
her rule, the Secretary explained the difficulties of an alternative
approach along the lines endorsed by the majority. See Op. at
25–26. She specifically noted that looking to the degree of
union ownership and control “does not appear to be a workable
or appropriate approach. Union ownership and control in the
context of a union’s participation in a trust that provides benefits
to the union membership are very difficult concepts to quantify.”
68 Fed. Reg. at 58,415. The difficulties of such an approach,
with the likelihood of attendant litigation, are precisely why the
“single entity” test received zero favorable comments during
rulemaking and ultimately was rejected by the Secretary in favor
of the statute’s bright-line rule. See id. at 58,416.
Perhaps the Secretary was wrong in her assessment about
what degree of union involvement in the affairs of a trust poses
a danger of the trust being used to circumvent or evade reporting
requirements, but see Time Warner Entertainment Co. v. FCC,
240 F.3d 1126, 1141 (D.C. Cir. 2001) (FCC’s attribution of
influence based on control of 5% of company’s voting shares
8
was reasonable), and wrong in her judgment that a multi-factor
domination or control test would prove unworkable, and perhaps
the majority’s approach is right. That is not the question before
the court. The statute plainly delegates the authority to make
such policy-laden judgments to the Secretary — the question is
what “[s]he may find necessary to prevent the circumvention or
evasion of . . . reporting requirements,” 29 U.S.C. § 438
(emphasis added) — and the Secretary has reasonably exercised
that authority. I therefore respectfully dissent from Part III of
the court’s opinion.