Public sector unions not liable for repayment of agency fees

In Danielson v. Inslee, 2019 DJDAR 12037, the 9th U.S. Circuit Court of Appeals affirmed the dismissal of a lawsuit that public employees filed against the exclusive representative of their bargaining unit, and held that public sector unions are not liable for repayment of mandatory agency fees received prior to the U.S. Supreme Court's 2018 decision in Janus v. AFSCME, 138 S. Ct. 2448 (2018).

As you will recall, prior to Janus, if an agency shop arrangement existed, a public employee, as a condition of continued employment, had to either: (1) join the recognized employee organization and pay member dues, or (2) not join, but still pay a service fee (i.e., agency fee) to the organization for its collective bargaining activities. Although employees who held bona fide religious objections to financially supporting or joining public employee organizations were not required to pay agency fees, they still had to make a charitable contribution in the same amount to a designated non-religious, non-labor charity. For more than 40 years, that had been the law. Janus, however, changed all that. In Janus, the Supreme Court overturned its 1977 decision in Abood v. Detroit Bd. of Ed., and declared mandatory agency fees unconstitutional.

Although Janus resulted in the immediate cessation of the mandatory collection of agency fees, some public sector employees felt that was not enough. In Washington, three public sector employees, Dale Danielson, Benjamin Rast and Tamara Roberson, filed a putative class action pursuant to 42 U.S.C. Section 1983 against the state and their union. The plaintiffs sought declaratory and injunctive relief, and reimbursement of agency fees based on the theory that any agency fees paid prior to Janus should be returned as they were allegedly collected unlawfully and should have always been considered unconstitutional. The district court dismissed the state defendants from the case. Shortly after, the union filed a motion for judgment on the pleadings or summary judgment, arguing that the claims for declaratory and injunctive relief should be dismissed as moot based on Janus and its subsequent compliance. Further, the union argued the claim for monetary relief should also be dismissed because it had relied in good faith on presumptively valid state law and then-binding Supreme Court precedent. The district court agreed and dismissed the plaintiffs' claims. The plaintiffs appealed the dismissal of their claims for monetary relief against the union.

On appeal, the plaintiffs argued that the union could not raise "good faith" as an affirmative defense to liability under Section 1983. In support of this argument, the plaintiffs first claimed that the 9th Circuit should disregard its prior decision in Clement v. City of Glendale, which recognized good faith as a valid defense to a Section 1983 claim, and instead look to its subsequent decision in Howerton v. Gabica, which, according to the plaintiffs, reached a contrary conclusion.

The 9th Circuit, however, disagreed and distinguished Howerton by pointing out that Howerton did not involve good faith as a defense to a Section 1983 lawsuit, but qualified immunity, which was not at issue. Therefore, as the court explained, the holdings in Clement and Howerton were not contrary, but were, in fact, consistent with each other.

The plaintiffs then argued that even if the Union could assert good faith as a defense to liability from damages, since they were not seeking damages, but restitution for agency fees collected in violation of Janus, the good faith defense was inapplicable. Again, the 9th Circuit disagreed. It disposed of this argument by noting that the plaintiffs' constitutional injury was "the intangible dignitary harm suffered from being compelled to subsidize speech they did not endorse. It is not the diminution in their assets from the payment of compulsory agency fees." On that basis, the 9th Circuit determined that the plaintiffs were in fact seeking compensatory damages, not true restitution.

Finally, in affirming the district court's dismissal of the plaintiffs' claims, the 9th Circuit held that the Union properly relied on both presumptively valid state law and then-binding Supreme Court precedent under Abood. On that basis, the 9th Circuit determined that the union could properly invoke a good faith defense to retrospective monetary liability under Section 1983. The 9th Circuit explained, "We hold that the Union is not retrospectively liable for doing exactly what we expect of private parties: adhering to the governing law of its state and deferring to the Supreme Court's interpretations of the Constitution. A contrary result would upend the very principles upon which our legal system depends. The good faith affirmative defense applies as a matter of law, and the district court was right to dismiss Plaintiffs' claim for monetary relief."

Thus, the Danielson decision, together with California Government Code Section 1159 (which provides state statutory immunity from claims seeking reimbursement of mandatory agency fees paid pre-Janus), effectively relieves public sector unions in California from liability for any pre-Janus agency fee deductions.

As of the date of this publication, the appellants in Danielson have not sought Supreme Court review. 