Last month the Supreme Court held in Janus v. AFSCME that it is unconstitutional for the states to require public employees to pay labor unions if they choose not to become members (these payments were called "agency fees"). There has been plenty written about what this means for the future of public sector unions and what might happen next. But it turns out that there is another important question: what about the agency fees that unions had been collecting before Janus? Are unions liable for collecting them? Can they be forced to pay them back?
A series of lawsuits have been recently brought in seven states arguing that unions are liable, and now subject to quite significant liability. Noam Scheiber has a story in the New York Times about the suits, (and the lawyer bringing the suits, a former law professor and former Texas solicitor general, Jonathan Mitchell):
Even before the Supreme Court struck down mandatory union fees for government workers last month, the next phase of the conservative legal campaign against public-sector unions was underway.
In March, with the decision looming, lawyers representing government workers in Washington State asked a federal court to order one of the state's largest public-employee unions "to disgorge and refund" fees that nonmembers had already paid. Similar lawsuits were filed in California, New Jersey, New York, Pennsylvania, Minnesota and Ohio.
The complaints could upend the legal system by arguing that states and private parties like unions face liability even though they followed the law as it existed at the time. They could also cost unions hundreds of millions of dollars. ...
I'm quoted in the story (saying "If I were the unions, I'd be really nervous"), but I thought I'd say a little more here. As it happens, Eugene and I are co-writing an article about Janus (to be posted online and discussed here very soon) that discusses this possibility. Here is an adapted exerpt of what we say in the draft:
Janus makes it likely that unions can be sued for agency fees they collected in the past. The case for liability has three key steps.
First, Janus applies equally to conduct before it was decided as it does to conduct in the future. Under standard retroactivity doctrine, Supreme Court decisions are taken to state the true law as it has always been, rather than to change the law. The black letter rule is now:
When this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.
This means that courts must treat the involuntary collection of agency fees before Janus as unconstitutional.
Second, even though unions are themselves private organizations, not the government, they can still be sued under for constitutional violations because of the way they used the power of the state to collect money. They key precedent is a Supreme Cour case called Lugar v. Edmondson Oil. In Lugar, the Court allowed lawsuits against private debt collectors because they had made use of an unconstitutional state statute that allowed the attachment of property without due process. Even though the debt collectors were private, they could be sued because they had used an unconstitutional statute passed by the state, and had "invok[ed] the aid of state officials to take advantage of state-created attachment procedures."
Union collection of agency fees appears to be analogous. Just as with debt collection statutes, there were state statutes allowing the union to collect agency fees, and state officials who would deduct the fees from employee paychecks or otherwise make sure that the employees paid up. Even though they weren't responsible for the existence of the unconstitutional policy, they decided to make use of it, and used state power to do so. So the unions are likely to be liable under the same theory.
Third, unions do not have the qualified immunity defense that is available to government Section 1983 defendants. Most government officials have a qualified immunity defense when they were doing something that was thought to be constitutional at the time. But in a sequel to Lugar, called Wyatt v. Cole, the Supreme Court said that private entities do not get the same kind of defense.
Wyatt featured lawsuits against private parties who had made use of unconstitutional replevin, garnishment, or attachment statutes, much like in Lugar. But in Wyatt the Court said that even though the private parties could be sued for unconstitutional conduct, they didn't have the qualified immunity defense that the government would have.
Those three rules together mean that unions are likely to be liable for their pre-Janus conduct, for better or worse.Moreover, since Janus requires non-members to "affirmatively consent" to all agency fees the damages could be substantial. The only sure limit on such suits is the statute of limitations, which varies by state and is generally 2-3 years.
The unions might have various defenses to mitigate the damages. In Wyatt, the Court reserved the possibility that private parties could make a separate "good faith" defense distinct from qualified immunity, and some lower courts have recognized such a doctrine. And it is a common intuition that such retroactive liability is quite unfair.
But unions should not be too confident that they will have such a defense against Janus suits. First, this good faith defense has never been endorsed by the Supreme Court, and there is little clear authority for it. If one of the cases makes it to the Court, there is no guarantee that the Justices will recognize this defense.
Second, these particular suits may make the Court particularly unsympathetic to such a defense. The Court's opinion in Janus specifically noted that "public-sector unions have been on notice for years regarding this Court's misgivings about Abood" and opined that, since 2012, "any public-sector union seeking an agency-fee provision in a collective-bargaining agreement must have understood that the constitutionality of such a provision was uncertain." So the courts may well conclude that unions were knowingly gambling on the continued validity of Abood, and therefore cannot complain about their losses.
I'm sure there will be more to say about these suits as things develop -- and we'll have much more to say about Janus and the First Amendment itself, quite soon.