This Week at The Ninth: Informational Injury and Union Dues – JD Supra

This week, we examine one Ninth Circuit decision exploring the extent to which the deprivation of information and statutorily-conferred powers can satisfy Article IIIs injury-in-fact requirement, and a second declining to extend the Supreme Courts decision in Janus to former union-members asserting First Amendment right not to pay agreed-upon dues.

SOUTHCENTRAL FOUNDATION v. ANTHCThe Court holds that a board of directors alleged delegation of decision-making authority to an executive committee, and a confidentiality policy that allegedly restricted the flow of information to board members, sufficed to confer Article III standing under a statute entitling plaintiff to a voting representative on the board of directors.

Panel: Judges Gould, Bea, and Murguia, with Judge Murguia writing the opinion.

Key highlight: Because we conclude that Section 325 [of the Department of the Interior and Related Agencies Appropriations Act of 1998] conferred governance and participation rights to [plaintiff], which necessarily includes an entitlement to information necessary to effectively exercise those rights, we reverse the district courts dismissal of [plaintiff]s complaint for lack of Article III standing.

Background: Congress created the Alaska Native Tribal Health Consortium (the Consortium) under Section 325 of the Department of the Interior and Related Agencies Appropriation Act of 1998 to provide health services at the Alaska Native Medical Center in Anchorage, Alaska. Southcentral Foundation (Southcentral) is a nonprofit regional tribal health organization that provides health care to some 65,000 Alaska Natives as a member of the Consortium. Section 325 provides in relevant part that the Consortium shall be governed by a 15-member Board of Directors, which shall be composed of one representative of each of 13 regional tribal health organizations, including Southcentral, and two tribal representatives. The statute also provides that [e]ach member of the Board of Directors shall be entitled to cast one vote. Decisions of the Board of Directors shall be made by consensus whenever possible, and by majority vote in the event that no consensus can be reached.

Southcentral alleged that the Consortiums board, over Southcentrals objection, created an executive committee authorized to take actions without ratification by the full board. The executive committee then allegedly approved lucrative employment contracts for Consortium executives without disclosing the terms of those contracts to the full board. A few years later, the board also adopted a strict confidentiality policy that allegedly gave unidentified Consortium personnel absolute discretion to restrict information from being shared even with the Board of Directors, with a rebuttable presumption against disclosure. Southcentral sought declaratory relief that the Consortium violated Section 325 when it: (1) formed the Executive Committee and delegated the authority of the full board, and (2) erected informational barriers to board member decision-making. The district court dismissed the suit, concluding that Southcentral failed to allege an injury in fact sufficient to confer Article III standing.

Result: The Ninth Circuit reversed. The Court began by laying out the now-familiar requirements for Article III injury-in-fact: to confer standing, an injury must be particularized (affect[ing] the plaintiff in a personal and individual way) and concrete (de facto; that is, it must actually exist.). Applying that standard, the Court first addressed Southcentrals executive committee claim. The statutory language conferring governance and participation rights on representatives of each member health organization made clear that Southcentrals alleged injury was particularized and concrete, the Court reasoned, because the creation of the executive committee deprived Southcentral of precisely those express statutory powers. The Court was not convinced by the Consortiums argument that Section 325s participation rights only applied to providing health care, not management decisions, or its argument that Section 325 grants governance rights only to individual directors, rather than the organizations they represent. Because Congress endowed each specified regional health entity with the right to have a representative on the Board that stands in the shoes of the designating entity by acting on its behalf, Southcentral had alleged sufficient injury to its statutory decision-making power.

As for the confidentiality policy, the Court reached a similar conclusion. Because the Consortiums policy allegedly restricted information necessary to make decisions called for by the statute, the Court said Southcentral had adequately alleged Article III injury. In so holding, the Court rejected the Consortiums argument that to satisfy Article III, an alleged informational injury must stem from an express statutory right to receive such information. Making informed decisions requires having information, the Court reasoned. Because Southcentrals informational injury was inextricably tied to its interest in exercising its governance and participation rights under the statute, the Court concluded that Southcentral had alleged sufficient injury-in-fact. The case was remanded to the trial court for further proceedings.

BELGAU v. INSLEEThe Court holds that former union members who had agreed to allow their employer, the State of Washington, to deduct union dues even if they terminated their union membership had no First Amendment claim when that agreement was enforced.

Panel: Judges McKeown, Christen, and Harpool (W.D. Mo.), with Judge McKeown writing the opinion.

Key Highlight: We join the swelling chorus of courts recognizing that Janus does not extend a First Amendment right to avoid paying union dues.

Background: Plaintiffs were Washington state employees who had joined a union (WSFE) shortly after starting work. They had signed contracts allowing the state to deduct union dues from their paychecks. They subsequently agreed to revised contracts making their consent to the deduction of such dues irrevocable for one year.

In Janus v. American Federation of State, County, and Muni Employees, 138 S. Ct. 2448 (2018), the Supreme Court overturned longstanding precedent and held that public employers cannot automatically deduct union fees from the paycheck of nonunion employees because such deductions compel nonmembers to subsidize union speech. After Janus was issued, the plaintiffs notified their union that they no longer wanted to be members, and the union terminated their memberships. The state, however, continued to deduct their union dues until the irrevocable one-year terms for dues payment had expired.

In response, the plaintiffs filed a putative class action against various state officials and the union, pressing First Amendment claims. The district court granted summary judgment to the defendants.

Result: The Ninth Circuit affirmed. The Court began by holding that the plaintiffs constitutional claims against the union failed for lack of state action. First, the Court reasoned, the plaintiffs could not establish that the claimed constitutional deprivation resulted from the exercise of some right or privilege created by the State or by a rule of conduct imposed by the state or by a person from whom the State is responsible; rather, the source of their harm was their contract with the union, not any state statute or policy. Second, and in any event, the plaintiffs also could not establish that the party charged with the deprivation could be described in all fairness as a state actor: the union was plainly a private entity, and it had not been coerced or overseen by the state in shaping or entering the challenged agreements, nor had it acted in concert with the state. As the Court declared, Providing a machinery for implement the private agreement by performing an administrative task does not render Washington and the [union] joint actors.

The Court next turned to the plaintiffs claims against the state, holding that these likewise failed. The Court first addressed whether it had jurisdiction to consider this issue, given that the plaintiffs had sought only prospective relief and the state was no longer deducting fees from their paychecks. It determined that these claims satisfied the capable of repetition yet evading review exception to mootness, as the one-year period of fees-deductions was too short to allow full litigation, and other similarly situated employees might confront the same issue.

On the merits, the Court rejected the plaintiffs contention that the state had violated their First Amendment rights. As the Court explained, plaintiffs complained of obligations that were self-imposed rather than imposed by the State, and the First Amendment provides [no] right to disregard promises that would otherwise be enforced under state law. Although Janus had condemned the practice of automatically deducting agency fees from nonmembers who were not asked and not required to consent before the fees are deducted, the plaintiffs here had experienced no such compulsion. They had voluntarily joined the union and accepted the benefits of membership, and thus had agreed to bear the financial burdens of membership. The First Amendment, the Court held, does not prevent the State from honoring that agreement.

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This Week at The Ninth: Informational Injury and Union Dues - JD Supra