Grunwald v. San Bernardino City Unified School District

BRUNETTI, Circuit Judge:

Debra Grunwald and 48 other non-union teachers (“teachers”) filed suit in the district court under 42 U.S.C. § 1983 alleging that the procedure by which the San Bernardino Teachers Association (“SBTA”) and the San Bernardino City Unified School District (“the District”) collected agency shop fees violated their first and fourteenth amendment rights. The district court entered a permanent injunction upholding the method of the collection of agency shop fees as constitutional. The court also ordered the District to provide rebates to teachers who had not formally objected to the fees. The teachers appeal the district court’s failure to enjoin the collection of the fees, and SBTA cross-appeals the district court’s order to pay rebates to the teachers.

*1225 FACTS AND PROCEEDINGS BELOW

Plaintiffs-teachers are employed by the defendant San Bernardino City Unified School District. They are not members of the defendant San Bernardino Teachers Association, the exclusive collective bargaining representative for teachers in the District.

SBTA and the District have an agency shop agreement. An agency shop agreement requires non-union members to pay a fee to the union for acting as their bargaining representative. Teachers who choose not to join the SBTA are required to pay an agency fee to the SBTA in order to offset their pro rata share of the costs of representation. These agency fees are deducted by the District on a 10-month basis, corresponding to the 10-month school year during which teachers are paid, with the first deduction occurring on September 30 and the last on June 30. Initially, each deduction made by the District is in the amount of one-tenth of the annual membership dues. If a nonmember objects to the amount of the fee, he/she eventually pays a reduced fee that excludes the portion attributable to matters unrelated to collective bargaining expenses.

The teachers concede that agency fee arrangements can be constitutional, but argue that the procedures for collecting the fee and amount of the fee violate their constitutional rights. The SBTA procedure provides that from the start of the year, all agency fees will be placed into an independently managed interest-bearing escrow account.1 By October 15, a notice is sent to all fee payers. The notice advises them of their right to receive a rebate for the portion of the fee that is not attributable to collective bargaining expenses and explains how a fee payer requests a rebate. The objection procedure requires the teacher to send a letter to the California Teacher’s Association’s Membership Accounting Department. The notice also provides the SBTA’s calculation of the percentage of dues that the SBTA believes to be “chargeable,” with detailed back-up material.2

The notice explains that from the start of the school year the SBTA will place all agency fees received into escrow, but that an individual’s fees will be released from escrow if he or she does not submit an objection by November 15. If the individual does object, he or she may either (i) accept the SBTA’s calculation of the chargeable percentage, in which case a rebate is issued by December 7 for the entire year; or (ii) request the opportunity to have the amount of the fee determined in arbitration before a neutral decisionmaker, in which case a rebate check is not sent until after receipt of the arbitrator’s decision.

Under the SBTA’s procedure, in 1987-88 those fee payers who objected to paying the full fee but who accepted the SBTA’s determination of the chargeable portion received their rebate by early December. At that point they had only paid three-tenths of the total annual agency fee (via deductions at the end of September, October and November). They were issued rebate cheeks in the amount of the non-chargeable portion of the entire year’s fee. The fees received from those objectors who did not accept the SBTA’s determination of the chargeable amount remained in escrow until the dispute could be resolved through arbitration, which took place on January 11 through 16, 1988. Objectors received rebate checks for the entire year before the April 30 fee deduction.

Under the agency fee agreement, the SBTA requested payment from non-union teachers in February, March and April of *12261987. Plaintiffs-teachers requested no deduction be made. Deductions were to begin in May of 1987. The teachers filed this § 1983 suit in May, requesting a temporary injunction against the collection of the fees and damages. The district court refused to enjoin the collection of fees but issued a temporary restraining order requiring the SBTA to place all agency fees collected in an escrow account.

In June, the district court issued a preliminary injunction ordering the SBTA to place the fees in an escrow account. The court found that the SBTA’s procedures in collecting the agency fees, which included giving no advance notice of the deduction and initially deducting fees equal to 100% of union dues, were constitutional. In July, both parties waived a full trial. The teachers filed a motion for a permanent injunction. The court, in looking at the 1987-88 fee deductions and rebate procedures, again refused to enjoin the collection of the fees. It found the SBTA’s procedures were constitutional.3 The court also ordered the SBTA to pay a rebate to the teachers who filed the complaint because the court found the complaint substantially complied with the formal objection procedures required by the SBTA.

The teachers appeal the denial of the injunction, claiming the SBTA’s collection procedures are unconstitutional. The SBTA cross-appeals the order to pay rebates. The District joins in the SBTA’s arguments against rebates.4 We reverse in part and affirm in part.

STANDARD OF REVIEW

A district court’s conclusions on questions of law that implicate constitutional rights are reviewed de novo. Wood v. Sunn, 865 F.2d 982, 986 (9th Cir.1988).

DISCUSSION

I. Constitutionality of Fee Collection Procedure

The teachers argue that the District’s procedure for the collection of agency shop fees violates their first and fourteenth amendment rights because the procedure by which SBTA collects the nonmember fees does not satisfy the requirements set out by the Supreme Court in Chicago Teachers Union v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986). Specifically, the teachers argue the deduction procedure violates their constitutional rights because the fee deducted is equal to 100% of members’ dues and no notice is given before the deductions occur.

The district court ruled the agency fee procedure was constitutional. The court held that Hudson does not require advance reductions in the amount of fees collected because the 100% escrow of all nonmember funds until the proportion of chargeable expenditures is determined satisfies the constitutional requirement that nonmember fees not be used for ideological purposes by the SBTA. The court also found that no advance notice of the agency fee deductions was required to satisfy Hudson.

The Supreme Court has recognized that a union representing public employees has a right to require nonunion employees to contribute to the union’s cost of collective bargaining as a condition of employment. Chicago Teachers Union v. Hudson, 475 U.S. 292, 301, 106 S.Ct. 1066, 1073, 89 L.Ed.2d 232 (1986); Abood v. Detroit Bd. of Educ., 431 U.S. 209, 232, 97 S.Ct. 1782, 1798, 52 L.Ed.2d 261 (1977). In Hudson, the Court acknowledged that the collection and expenditure of union fees implicate nonunion employees’ first amendment rights, both by forced subsidization of ideological views and by interference with the *1227freedom of association.5 Hudson, 475 U.S. at 301, 106 S.Ct. at 1073. In striking a balance between the union’s and the nonunion employees’ rights, “ ‘the objective must be to devise a way of preventing compulsory subsidization of ideological activity by employees who object thereto without restricting the Union’s ability to require every employee to contribute to the cost of collective bargaining activities.’ ” Id. at 302, 106 S.Ct. at 1073 (citations omitted).

The Court found that certain procedural safeguards must be incorporated into the collection procedure to achieve this objective and identified three procedural requirements a plan must meet in order to protect the nonunion members’ constitutional interests. First, the procedure must avoid the risk that nonunion members fees will be used, even temporarily, to finance ideological activities unrelated to collective bargaining. Id. at 305, 309, 106 S.Ct. at 1075, 1077. Second, the plan must also provide nonmembers adequate information of the basis for the calculation of the proportionate fee. Id. at 306, 106 S.Ct. at 1075. Lastly, the nonmembers must be given a reasonably prompt opportunity to challenge the amount before an impartial decision maker. Id. at 307, 106 S.Ct. at 1076.

The teachers contend that the SBTA’s procedure is unconstitutional because it fails to satisfy two of the procedural requirements set out in Hudson. The teachers argue the procedure fails to satisfy the first prong of Hudson because SBTA does not give advance reductions in fees, and that the plan fails to fulfill the second Hudson requirement because notice is not given before any deductions are made.

A. Advance Reduction.

The teachers first argue that SBTA’s failure to reduce the agency fee assessed by an amount equal to the percentage of funds not attributable to collective bargaining activities violates Hudson, even though the SBTA procedure does escrow 100% of the fees paid by nonmembers until the period for objection has passed.

The circuits differ over whether the advance reduction of fees is required by Hudson when the union escrows the fees. Compare Tierney v. City of Toledo, 824 F.2d 1497, 1502-03 (6th Cir.1987) (advance reduction required), with Crawford v. Airline Pilots Ass’n Int’l, 870 F.2d 155, 161 (4th Cir.1989) (no advance reduction required if fees escrowed), Hohe v. Casey, 868 F.2d 69, 72 (3rd Cir.1989) (no advance reduction required if fees escrowed), Andrews v. Education Ass’n of Cheshire, 829 F.2d 335, 339 (2d Cir.1987) (100% escrow satisfies Hudson), and Gibson v. The Florida Bar, 906 F.2d 624 (11th Cir.1990) (no advance reduction necessary).

In Tierney, the Sixth Circuit found advance reductions were required to satisfy Hudson’s first procedural requirement that the union procedure for collecting agency shop fees from nonunion members must avoid the risk that nonmembers’ funds may be used temporarily for an improper purpose. Tierney, 824 F.2d at 1502. The Tierney court held that Hudson does not allow the union to compel a nonunion employee to contribute any sum, even if placed in escrow, which unquestionably represents ideological expenses of the Union, and stated that “the Supreme Court’s approval of 100% escrow as satisfying Hudson’s first requirement refers to escrowing 100% of the remaining, non-clearly ideological proportion of the fee which the union may collect.” Id. at 1504. Therefore, they concluded a union must reduce the amount of fees collected by the amount of its ideological expenditures before it collects the agency shop fee — an advance reduction. Id. at 1502-03.

We agree with Tierney and hold that advance reductions of agency shop fees are required by Hudson even where *1228the agency fee procedure includes an escrow of 100% of the collected agency fees.6 Because the collection of agency shop fees infringes nonunion employees’ First Amendment rights, the procedure for the collection of the fees must be carefully tailored to minimize the infringement. Hudson, 475 U.S. at 303, 106 S.Ct. at 1074. In order to be carefully tailored, the union must deduct only the amount it is entitled to, i.e. the amount arguably related to its collective bargaining expenses.

The SBTA’s procedure is not carefully tailored to minimize any infringement. The SBTA collects an agency fee equal to 100% of the union dues, thereby collecting more than they are entitled to since only some of the dues are attributable to collective bargaining expenses.7 The SBTA can only deduct a reasonable estimate of the percentage of fees attributable to collective bargaining. Thus, the SBTA must first determine the percentage of union expenses spent on activities unrelated to collective bargaining and then calculate the advance reduction from the nonmembers’ dues before it can make any deductions.

An agency fee collection procedure must include advance reductions and because SBTA’s procedure does not provide for advance reductions, it is constitutionally infirm.

B. Notice.

Plaintiffs also argue that the SBTA’s plan is unconstitutional because notice is not given in advance of the first deduction of fees from the teachers’ pay checks as required by the second prong of Hudson. The district court rejected this argument because it found Hudson did not require advance notice.

Tierney required unions to give notice before any fees are deducted in order to fulfill Hudson’s second requirement of providing nonmembers with adequate information to contest the fee. Tierney, 824 F.2d 1497 at 1503 (6th Cir.1987). Advance notice must be given to protect the nonmember’s first amendment interest — a fair opportunity to identify the impact of the government action on his interests and assert a meritorious first amendment claim. Tierney, 824 F.2d at 1503.

We agree with Tierney and hold that notice of and adequate information concerning the agency fee must be given to all nonmembers before any fees may be collected from them. Id. at 1503. Hudson requires the union to give “potential objectors ... sufficient information to gauge the propriety of the union’s fee.” Hudson, 475 U.S. at 306, 106 S.Ct. at 1075 (emphasis added). If the SBTA must notify “potential” objectors by sending out notice of the agency fee before the first deduction is made, then the failure of the SBTA’s procedure to give advance notice of the agency fee deduction renders the plan unconstitutional.

*1229II. Rebates to Teachers Who Did Not Comply With Objection Procedure

SBTA’s agency fee collection procedure sets out specific steps for objecting fee payers to follow to receive a rebate. The procedure requires a fee payer to send a letter to the SBTA indicating that the fee payer objects to his fee being spent on nonchargeable activities and requesting a rebate. The Union argues the teachers failed to comply with the objection procedure and are thus not entitled to rebates.

The teachers in this ease did not send an objection letter to the SBTA. Instead, they filed suit on May 27, 1987, one day before the SBTA sent out its Hudson notices that outlined the right to object. The district court found that the teachers had substantially complied with the notice requirement for objections because plaintiffs’ complaint objected to the agency fee collection procedure as unconstitutional. We agree. The court ordered the SBTA to pay rebates to all plaintiffs for the 1986-87 school year.

The Supreme Court has clearly held that the nonunion employee has the burden of raising an objection. Hudson, 475 U.S. at 306, 106 S.Ct. at 1075. “The nonmember’s ‘burden’ is simply the obligation to make his objection known.” Id. at 306 n. 16, 106 S.Ct. at 1076 n. 16. Prior to Hudson, in Brotherhood of Railway & Steamship Clerks v. Allen, 373 U.S. 113, 119, 83 S.Ct. 1158, 1162, 10 L.Ed.2d 235 (1963), employees opposed to the use of union security fees did not object to the union but filed suit instead. The Supreme Court found that the complaint served as a sufficient notice of objection. Id. at 119, n. 6, 83 S.Ct. at 1162, n. 6. In Abood v. Detroit Board of Education, 431 U.S. 209, 241, 97 S.Ct. 1782, 1802, 52 L.Ed.2d 261 (1977), the Supreme Court again found that sufficient notice of objection was given by the nonunion employees’ complaint, which alleged that they were opposed to the union’s use of fees for causes unrelated to collective bargaining.

While both Allen and Abood involved disputes where the unions did not have objection procedures in place at the time the lawsuits were filed, in Hudson the Supreme Court appeared to endorse a complaint as providing adequate notice despite the fact that the union did have an objection procedure. In Hudson, the union had an objection procedure established at the time the nonmember employees filed their lawsuit. Hudson, 475 U.S. at 296, 106 S.Ct. at 1070. There were seven plaintiffs in the case, three of whom did not file a formal objection according to the procedure. Id. at 297, 106 S.Ct. at 1071. The Court found the union’s procedure unconstitutional and remanded the case to the district court to determine an adequate remedy for all the plaintiffs, not just the four who formally objected. Id. at 310, 106 S.Ct. at 1077. Thus, a complaint may provide sufficient notice of objection.

In this case, the teacher’s complaint challenged the constitutionality of the SBTA’s plan, giving the SBTA sufficient notice of their objection to the collection of fees.

III. Attorney’s Fees

The teachers request attorney’s fees. 42 U.S.C. § 1988 authorizes the court to award attorney’s fees to prevailing parties who bring suit under one of several statutes, including 42 U.S.C. § 1983. The Supreme Court defined “prevailing party” in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). “Plaintiffs may be considered ‘prevailing parties’ for attorney’s fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.” Id. at 433, 103 S.Ct. at 1939. The teachers in this case are prevailing parties as they succeeded in having the SBTA’s procedure declared unconstitutional. Thus, they are entitled to attorney’s fees in an amount to be determined by the district court on remand.

CONCLUSION

The district court’s award of rebates to the plaintiffs for the 1986-87 school year is affirmed. The SBTA’s procedure for collection of agency shop fees fails to protect the nonmembers’ constitutional rights as identified in Hudson. Therefore, we reverse the district court’s decision finding *1230the plan constitutional and remand for the entry of an appropriate injunction against the collection of agency shop fees until such time as the SBTA changes its procedure regarding advance reductions and advance notice. Further, the plaintiffs are entitled to attorney’s fees in an amount to be determined by the district court.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED.

. The description that follows is of the procedure in effect for the 1987-88 school year. [Stipulation, Ex. 9] Plaintiffs’ lawsuit dealt with the 1986-87 year as well as 1987-88, but the parties agreed that for purposes of determining whether a permanent injunction should be entered, the relevant procedure to be considered was that for 1987-88. [RT 62, page 15] No issue is presented on appeal regarding the 1986-87 procedure, other than whether the district court was correct in treating the filing of the lawsuit as a proper substitute for the filing of objections under the SBTA’s procedure.

. The district court specifically found that the information provided in the notice is adequate [CR 10, p. 2 ER], and plaintiffs do not contend otherwise.

. The court did order the SBTA to include language in its procedural notice that said the union bears the burden of proof on the issue of what percentage of fees is chargeable to collective bargaining. This part of the court’s judgment was not contested.

. The District also seeks enforcement of an indemnity agreement between SBTA and the District. The District did not cross-claim against the SBTA for indemnity below. Generally, we will not consider issues raised for the first time on appeal. In re Wind Power Systems, Inc., 841 F.2d 288, 290 n. 1 (9th Cir.1988). Therefore, we will not address the merits of the District’s arguments regarding the indemnity agreement.

. Plaintiffs argue that their case also implicates the fourteenth amendment and due process. The Supreme Court, however, analyzes agency fee procedures in terms of the first amendment. Hudson, 475 U.S. at 304 n. 13, 106 S.Ct. at 1074 n. 13. "We are convinced that ... the procedures required by the First Amendment also provide the protections necessary for any deprivation of property.” Id.

. The circuits that have disagreed with Tierney and permitted 100% escrow of fees have done so largely in reliance on Hudson's language which holds that among the "constitutional requirements for the Union’s collection of agency fees” is "an escrow for the amounts reasonably in dispute while such challenges are pending.” Hudson, 475 U.S. at 310, 106 S.Ct. at 1077. This was never meant to imply either that 100% of fees could be escrowed absent adequate procedural safeguards or that funds clearly marked for use on representational activities are required to be escrowed. Instead, the Hudson court’s language merely indicates that any amount “reasonably in dispute," i.e., that portion of an agency fee which is neither clearly to be used for representational purposes nor for prohibited ideological activities, must be placed in escrow. See id. at 309-10, 106 S.Ct. at 1077.

. The dissent contends that the disputed dues only amount to eight dollars per month and therefore the entire dispute does not belong in the courts. The money at stake in Hudson was seventeen dollars a month. Denying teachers here an opportunity to challenge the union’s actions in court simply because their claim involves nine dollars less than the Hudson teachers’ would improperly place a pricetag on constitutional rights. The Hudson court specifically decried such an approach, stating that “[t]he amount at stake for each individual [should] not diminish ...” any constitutional concerns. 475 U.S. at 305, 106 S.Ct. at 1075.

Nor should the teachers be denied their day in court because their claims arise from their political differences with the union, as the dissent also contends. The teachers' claims may have political undertones, but this is true of many first amendment claims which the courts continually hear.