State ex rel. Public Disclosure v. Wea

Page 352

130 P.3d 352

156 Wn.2d 543

STATE of Washington ex rel. WASHINGTON STATE PUBLIC DISCLOSURE COMMISSION, Petitioner, v. WASHINGTON EDUCATION ASSOCIATION, Appellant, Gary Davenport, Martha Lofgren, Walt Pierson, Susannah Simpson, and Tracy Wolcott, Petitioners, individually and on behalf of all other nonmembers similarly situated, v. Washington State Education Association, Respondent.

No. 74268-5.

No. 74316-9.

Supreme Court of Washington, En Banc.

Argued May 27, 2004.

Decided March 16, 2006.

Attorney General's Office, Mr. David T. Wendel, Olympia, Steven T. O'Ban, Chad Allred, Ellis Li & McKinstry PLLC, Seattle, Attorney General's Office, Ms. Linda A. Dalton, Olympia, for Petitioner/Appellant.

Ms. Judith A. Lonnquist, Seattle, Ms. Harriet K. Strasberg, Attorney at Law, Olympia, WA Education Association, Ms. Aimee Strand Iverson, Federal Way, for Appellee/Respondent.

Donald E. Clocksin, Olympia, Robert H. Chanin, Bredhoff & Kaiser, PLLC, Richard B. Wilkof, National Educ. Ass'n, Washington, DC, for Amicus Curiae National Educ. Ass'n.

Russell Clayton Brooks, Bellevue, Deborah J. La Fetra, Sacramento, Pacific Legal Foundation, for Amicus Curiae Pacific Legal Foundation.

Edward Earl Younglove, III, Younglove Lyman & Coker PLLC, Olympia, Joaquin M. Hernandez, Seattle, for Amicus Curiae Wash. Federation of State Employees.

James D. Oswald, Law offices of James D. Oswald, Seattle, for Amicus Curiae Wash. State Labor Council.

IRELAND, J.^*

¶ 1 In these consolidated cases, we review RCW 42.17.760, which governs a labor union's ability to use agency shop fees, the fees paid by educational employees who are not union members. Both cases stem from an Evergreen Freedom Foundation (Evergreen) complaint with the Public Disclosure Commission (PDC) that the Washington Educational Association (WEA) violated RCW 42.17.760 (hereafter § 760).

¶ 2 In the first consolidated case, the trial court found that WEA had intentionally violated § 760 and assessed $590,375 in penalties and costs. The Court of Appeals reversed, holding that RCW 42.17.760 is unconstitutional. We affirm the Court of Appeals.

¶ 3 In the second consolidated case, plaintiffs contend that chapter 42.17 RCW provides them a private right of action to recover for violations of § 760. Plaintiffs also assert tort claims based on violations of § 760. The trial court agreed that § 760 provides a private right of action, but the Court of Appeals reversed because it had held § 760 unconstitutional. The Court of Appeals remanded the case for dismissal. We affirm the Court of Appeals.

FACTUAL BACKGROUND

¶ 4 WEA is the exclusive bargaining agent for approximately 70,000 Washington State educational employees. Membership in WEA is voluntary. However, both members and nonmembers must contribute to WEA for the costs related to collective bargaining.¹ Per statute, members pay dues to the union; nonmembers pay agency shop fees, which are equivalent to member dues. RCW 41.59.100²; RCW 41.56.122.

¶ 5 A portion of members' dues goes to support political and ideological causes, which are unrelated to the union's collective bargaining activities on behalf of all employees. These expenses are typically called nonchargeable expenses. Nonmembers who do not wish to support these nonchargeable activities may obtain a rebate of that portion of their fees that was used for nonchargeable activities. The process by which the union rebates this amount to dissenting nonmembers was established by the United States Supreme Court in Chicago Teachers Union v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986).

¶ 6 Twice each year, WEA sends a "Hudson packet" to each nonmember. The Hudson packet includes a letter notifying the employee of his or her right to object to paying fees for nonchargeable expenditures. The packet gives the nonmember three choices: (1) pay agency shop fees equivalent to 100 percent of dues; (2) object to paying 100 percent and receive a rebate of nonchargeable expenditures, as calculated by WEA; or (3) object to paying 100 percent and challenge WEA's calculations of nonchargeable expenditures. The packet also provides financial information about WEA and its activities. During the years 1996 to 2000, WEA had approximately 3,500 nonmembers per year, which is approximately 5 percent of the total number of persons represented by WEA.

¶ 7 When a nonmember challenges WEA's calculation of nonchargeable expenditures, an arbitrator determines the amount of the nonmember's fees that should be rebated. Pending the outcome of the arbitration, WEA escrows any fees that are reasonably in dispute. The WEA rebates to the employee the amount determined by the arbitrator, and transfers the remainder to the WEA general account. During the years 1996 to 2000, the rebates ranged from $44 to $76. Clerk's Papers (CP) at 839. Nonmembers who did not object and did not request rebates did not receive rebates. Their fees were transferred from escrow to WEA's general account. Political expenditures were made from this account pursuant to a 1996 agreement with the PDC. At issue are the fees paid by the nonobjecting nonmembers.

PROCEDURAL BACKGROUND

¶ 8 This is the latest in a series of actions by Evergreen against WEA. These cases include State ex rel. Evergreen Freedom Foundation v. Washington Education Ass'n, 140 Wash.2d 615, 999 P.2d 602 (2000) and State ex rel. Evergreen Freedom Foundation v. Washington Education Ass'n, 111 Wash.App. 586, 49 P.3d 894 (2002).

¶ 9 The current action began in August 2000, when Evergreen filed a complaint with the PDC, alleging that WEA had violated RCW 42.17.760. The complaint asserted that WEA failed to get the affirmative authorization of all nonmembers before using the nonmembers' fees for political purposes, as required by the statute. In order to avoid yet another lawsuit, WEA entered into a stipulation with the PDC. In that stipulation, WEA acknowledged that it had violated § 760 during the 1999-2000 fiscal year. The PDC referred the case to the attorney general for prosecution.

¶ 10 The State filed suit against WEA in October 2000, alleging WEA had violated § 760 during the previous five years, 1996 to 2000. Both parties moved for summary judgment. The trial court granted the PDC's motion for partial summary judgment, ruling § 760 is constitutional and it "requires affirmative authorization from agency fee payers . . . and defendant's Hudson procedures do not satisfy this requirement." CP at 349-50. The court ruled that it was a question of fact whether WEA had "used" those agency fees for political purposes. The case proceeded to a bench trial on the issue of whether the WEA had "used" for political purposes the fees of nonmembers who had failed to object by completing and returning the form contained in the Hudson packet.

¶ 11 At trial, three experts testified concerning WEA's accounting procedures and whether WEA had used the fees of the nonobjecting nonmembers. Two of the three experts, including the parties' jointly retained expert, testified that WEA had not used the fees of the nonobjecting nonmembers for political expenditures.

¶ 12 However, the trial court concluded that WEA had used those fees. The court assessed a sanction of $200,000, calculated by multiplying $25 by the approximately 4,000 nonmembers who had failed to respond to the Hudson packet. The court then doubled the fine to $400,000, as allowed by RCW 42.17.400(5). The court awarded the PDC costs and fees of $190,375 for a total judgment against WEA of $590,375. The trial court also issued a permanent injunction, precluding WEA from collecting the full amount of agency fees mandated by RCW 41.59.100 and requiring WEA to institute new procedures for segregating the amounts collected from members and the amounts collected from nonmembers.

¶ 13 WEA appealed. On appeal, Division Two of the Court of Appeals held § 760 unconstitutional because its "affirmative authorization requirement unduly burdens unions." State ex rel. Wash. State Pub. Disclosure Comm'n v. Wash. Educ. Ass'n, 117 Wash.App. 625, 640, 71 P.3d 244 (2003). The State sought review in this court.

¶ 14 The other consolidated case arose in March 2001, when several educational employees, Gary Davenport, Martha Lofgren, Walt Pierson, Susannah Simpson, and Tracy Wolcott (Davenport), who are not members of the union, filed a class action against WEA on behalf of present or former public school employees. Davenport claims a private right of action under the Public Disclosure Act (PDA). Davenport seeks a refund of that portion of agency shop fees used for political expenditures. Davenport also alleges tort claims for breach of fiduciary duty, conversion, and fraudulent concealment. The trial court dismissed the breach of fiduciary duty claim but denied dismissal of the other claims. In addition, the trial court ruled that § 760 provides a private right of action. The trial court then stayed further proceedings while the parties sought interlocutory appeal. The Court of Appeals granted review. After holding § 760 unconstitutional in the consolidated case, the Court of Appeals remanded the Davenport case to the trial court for dismissal. Davenport petitioned for review in this court.

¶ 15 This court granted the State's and Davenport's petitions for review and consolidated the two cases. We affirm the Court of Appeals.

ISSUES

1. Does WEA's Hudson process satisfy RCW 42.17.760's requirement of affirmative authorization?

2. Does the requirement of affirmative authorization render RCW 42.17.760 unconstitutional?

3. Does chapter 42.17 RCW create a private right of action?

ANALYSIS

1. Does WEA's Hudson process satisfy RCW 42.17.760's requirement of affirmative authorization?

¶ 16 Enacted in 1992 as part of Initiative 134 (I-134), the Fair Campaign Practices Act, § 760 restricts the ability of unions to use for political purposes the agency fees paid by employees who have not joined the union. Laws of...