The Volokh Conspiracy
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Last year, Eugene and I wrote an article about compelled subsidies and the Supreme Court's decision in Janus v. AFSCME, where (among other things) we talked about the possibility that those who were charged fees held unconstitutional by Janus might be able to bring claims against the unions who collected the money. Fred Smith and Aaron Tang, as well as Erwin Chemerinsky and Catherine Fisk, wrote skeptical responses.
On Tuesday, the Seventh Circuit decided the first court of appeals opinion about these post-Janus suits—in Mark Janus's very case, as well as a related case—and it ruled in favor of the unions. In an opinion by Chief Judge Wood, the court concluded that these suits are effectively suits for damages, and that they are subject to a "good faith" defense.
Here is the heart of its reasoning:
A. Existence of Good-faith defense
We now turn to the ultimate question in this case: to what remedy or remedies is Mr. Janus entitled? As the Supreme Court wrote in Davis v. United States, 564 U.S. 229 (2011), retroactivity and remedy are distinct questions. "Retroactive application does not … determine what 'appropriate remedy' (if any) the defendant should obtain." Id. at 243; see also American Trucking Ass'ns, Inc. v. Smith, 496 U.S. 167, 189 (1990) (plurality opinion) ("[T]he Court has never equated its retroactivity principles with remedial principles…."). It thus does not necessarily follow from retroactive application of a new rule that the defendant will gain the precise type of relief she seeks. See Powell v. Nevada, 511 U.S. 79, 84 (1994). To the contrary, the Supreme Court has acknowledged that the retroactive application of a new rule of law does not "deprive[ ] respondents of their opportunity to raise … reliance interests entitled to consideration in determining the nature of the remedy that must be provided." James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 544 (1991).
Sometimes the law recognizes a defense to certain types of relief. An example that comes readily to mind is the qualified immunity doctrine, which is available for a public employee if the asserted constitutional right that she violated was not clearly established. See, e.g., Ashcroft v. al-Kidd, 563 U.S. 731 (2011). We must decide whether a union may raise any such defense against its liability for the fair-share fees it collected before Janus II.
This is a matter of first impression in our circuit. But, as the district court noted, every federal appellate court to have decided the question has held that, while a private party acting under color of state law does not enjoy qualified immunity from suit, it is entitled to raise a good-faith defense to liability under section 1983. See Clement v. City of Glendale, 518 F.3d 1090, 1096–97 (9th Cir. 2008); Pinsky v. Duncan, 79 F.3d 306, 311–12 (2d Cir. 1996); Vector Research, Inc. v. Howard & Howard Attorneys P.C., 76 F.3d 692, 698–99 (6th Cir. 1996); Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1275–78 (3d Cir. 1994); Wyatt v. Cole, 994 F.2d 1113, 1118–21 (5th Cir. 1993) ("Wyatt II").
Mr. Janus takes issue with this consensus position. He points to the text of section 1983, which we grant says nothing about immunities or defenses. That, he contends, is the end of the matter. "Shall be liable to the party injured" is mandatory language that, in his view, allows for no exceptions. The problem with such an absolutist position, however, is that the Supreme Court abandoned it long ago, when it recognized that liability under section 1983 is subject to common-law immunities that apply to all manner of defendants.
The Court discussed that history in Wyatt I, where it noted that despite the bare-bones text of section 1983, it had "accorded certain government officials either absolute or qualified immunity from suit if the tradition of immunity was so firmly rooted in the common law and was supported by such strong policy reasons that Congress would have specifically so provided had it wished to abolish the doctrine." 504 U.S. at 163–64 (quoting Owen v. City of Independence, 445 U.S. 622, 637 (1980)) (internal quotation marks omitted). In Wyatt I, the Court had to decide how far its immunity jurisprudence reached, and specifically, whether private parties acting under color of state law would have been able, at the time section 1983 was enacted (in 1871), to invoke the same immunities that public officials had. (That is more than a bit counterfactual, as the Court did not recognize this type of private liability until 1982, but we put that to one side.) Surveying its immunity jurisprudence, including Mitchell v. Forsyth, 472 U.S. 511, (1985), Harlow v. Fitzgerald, 457 U.S. 800 (1982), Wood v. Strickland, 420 U.S. 308 (1975), and Pierson v. Ray, 386 U.S. 547 (1967), the Court "conclud[ed] that the rationales mandating qualified immunity for public officials are not applicable to private parties." 504 U.S. at 167, 112 S.Ct. 1827.
The Court recognized that this outcome risked leaving private defendants in the unenviable position of being just as vulnerable to suit as public officials, per Lugar, but not protected by the same immunity. Id. at 168. But, critically for AFSCME, the Court pointed toward the solution to that problem. It distinguished between defenses to suit and immunity from suit, the latter of which is more robust, in that it bars recovery regardless of the merits. Id. at 166. It then confirmed that its ruling rejecting qualified immunity did "not foreclose the possibility that private defendants faced with § 1983 liability under [Lugar] could be entitled to an affirmative defense based on good faith and/or probable cause or that § 1983 suits against private, rather than governmental, parties could require plaintiffs to carry additional burdens." Wyatt I, 504 U.S. at 169.
Mr. Janus rejects the line that the Court drew between qualified immunity and a defense to liability; he sees it as nothing but a labeling game. But Wyatt I directly refutes this criticism. Adding to the language above from the majority, Justice Kennedy, in concurrence, explained why a defense on the merits might be available for private parties even if immunity is not. "By casting the rule as an immunity, we imply the underlying conduct was unlawful, a most debatable proposition in a case where a private citizen may have acted in good-faith reliance upon a statute." 504 U.S. at 173 (Kennedy, J., concurring). The distinction between an immunity and a defense is one of substance, not just nomenclature, and "is important because there is support in the common law for the proposition that a private individual's reliance on a statute, prior to a judicial determination of unconstitutionality, is considered reasonable as a matter of law." Id. at 174; see also Lugar, 457 U.S. at 942 n.23 ("Justice Powell is concerned that private individuals who innocently make use of seemingly valid state laws would be responsible, if the law is subsequently held to be unconstitutional, for the consequences of their actions. In our view, however, this problem should be dealt with not by changing the character of the cause of action but by establishing an affirmative defense.").
The Wyatt I Court remanded the case to the Fifth Circuit, which decided that the "question left open by the majority"—whether a good-faith defense is available in section 1983 actions—"was largely answered" in the affirmative by the five concurring and dissenting justices. Wyatt II, 994 F.2d at 1118. The court accordingly held "that private defendants sued on the basis of Lugar may be held liable for damages under § 1983 only if they failed to act in good faith in invoking the unconstitutional state procedures, that is, if they either knew or should have known that the statute upon which they relied was unconstitutional." Id.
Other circuits followed suit. In Jordan, the Third Circuit noted "the [Supreme Court's] statement [in Wyatt I] that persons asserting section 1983 claims against private parties could be required to carry additional burdens, and the statements in Lugar which warn us [that] a too facile extension of section 1983 to private parties could obliterate the Fourteenth Amendment's limitation to state actions that deprive a person of constitutional rights and the statutory limitation of section 1983 actions to claims against persons acting under color of law." 20 F.3d at 1277 (cleaned up). Those considerations, the court said, lead to the conclusion that " 'good faith' gives state actors a defense that depends on their subjective state of mind, rather than the more demanding objective standard of reasonable belief that governs qualified immunity." Id. The Sixth Circuit concurred in Vector Research, 76 F.3d at 699, as did the Ninth Circuit in Clement, 518 F.3d at 1096–97. Most recently, in a case decided after Harris v. Quinn, the Second Circuit allowed a good-faith defense to a section 1983 claim for reimbursement of agency fees paid prior to decision. Jarvis v. Cuomo, 660 F. App'x 72, 75–76 (2d Cir. 2016).
Mr. Janus pushes back against these decisions with the argument that there is no common-law history before 1871 of private parties enjoying a good-faith defense to constitutional claims. As we hinted earlier, however, the reason is simple: the liability of private parties under section 1983 was not clearly established until, at the earliest, the Court's decision in United States v. Price, 383 U.S. 787 (1966). For nearly 100 years, nothing would have prompted the question.
We now join our sister circuits in recognizing that, under appropriate circumstances, a private party that acts under color of law for purposes of section 1983 may defend on the ground that it proceeded in good faith. The final question is whether that defense is available to AFSCME.
B. Good-faith Defense for AFSCME
Although this is a new question for us, we note that every district court that has considered the precise question before us—whether there is a good-faith defense to liability for payments collected before Janus II—has answered it in the affirmative. While those views are not binding on us, the unanimity of opinion is worth noting.
The first task we have under Wyatt I is to identify the "most closely analogous tort" to which we should turn for guidance. 504 U.S. at 164 (citations and internal quotation marks omitted). Arguing in some tension with his statute-of-limitations position, Mr. Janus says that his claim lacks any common law analogue. His back-up position is that good faith is pertinent only if the underlying offense has a state-of-mind element, and he asserts that the most analogous tort in his case lacks such an element.
Mr. Janus compares the First Amendment violation in his case to conversion. But that analogy does not work, at least with regard to the state's deduction of fair-share fees and its transfer of those fees to the union. Conversion requires an intentional and serious interference with "the right of another to control" a chattel. Restatement (Second) of Torts § 222A (1965). At the time AFSCME received Mr. Janus's fair-share fees, he had no "right to control" that money. Instead, under Illinois law and Abood, the union had a right to the fees under the collective bargaining agreement with CMS. This rules out conversion. As the Supreme Court said in Chicot Cnty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371 (1940), "the actual existence of a statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored." Id. at 374.
There are also at least two privileges that may be relevant to a conversion-style claim: authority based upon public interest, Restatement (Second) of Torts § 265 (1965), and privilege to act pursuant to court order, Restatement (Second) of Torts § 266 (1965). Section 265 provides that "one is privileged to commit an act which would otherwise be a trespass to a chattel or a conversion if he is acting in discharge of a duty or authority created by law to preserve the public safety, health, peace, or other public interest, and his act is reasonably necessary to the performance of his duty or the exercise of his authority." While the usual context for the assertion of this privilege is law enforcement, it is not too much of a stretch to apply it to the union's conduct here. CMS and AFSCME acted pursuant to state law. That sounds like action in discharge of a duty imposed by law. Section 266, which provides a privilege when one acts pursuant to a court order, is not directly applicable because there was no court order directing AFSCME to receive fair-share fees—Abood was permissive, not mandatory. Nevertheless, CMS and AFSCME did rely on the Supreme Court's opinion upholding the legality of exactly this process.
AFSCME contends that the better analogy is to the tort of abuse of process. Abuse of process occurs where a party "uses a legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it is not designed." Restatement (Second) of Torts § 682 (1977). Alternatively, the most analogous tort might be interference with contract. See Restatement (Second) of Torts § 766A (1979). Under the agency-fee arrangement, a certain portion of the salary CMS contracted to pay employees went instead to the union. This arguably made the contract less lucrative for objecting employees and violated their First Amendment rights.
None of these torts is a perfect fit, but they need not be. We are directed to find the most analogous tort, not the exact-match tort. This is inherently inexact. Although there are reasonable arguments for several different torts, we are inclined to agree with AFSCME that abuse of process comes closest. But perhaps the search for the best analogy is a fool's errand. As several district courts have commented, the Supreme Court in Wyatt I embarked on the search for the most analogous tort only for immunity purposes—the Court never said that the same methodology should be used for the good-faith defense. See, e.g., Carey, 364 F. Supp. 3d at 1229–30; Babb, 378 F. Supp. 3d at 872–73; Diamond, ––– F.Supp.3d –––– at –––– – ––––, 2019 WL 2929875 at *25–26. In the alternative, therefore, we leave common-law analogies behind and consider the appropriateness of allowing a good-faith defense on its own terms.
C. Good-faith Defense under Wyatt I
Like our sister circuits, we read the Court's language in Wyatt I and Lugar, supplemented by Justice Kennedy's opinion concurring in Wyatt I, as a strong signal that the Court intended (when the time was right) to recognize a good-faith defense in section 1983 actions when the defendant reasonably relies on established law. This is not, we stress, a simple "mistake of law" defense. Neither CMS nor AFSCME made any mistake about the state of the law during the years between 1982 and June 27, 2018, when Janus II was handed down. Abood was the operative decision from the Supreme Court from 1977 onward, until the Court exercised its exclusive prerogative to overrule that case. Like its counterparts around the country, the State of Illinois relied on Abood when it adopted a labor relations scheme providing for exclusive representation of public-sector workers and the remit of fair-share fees to the recognized union. The union then relied on that state law in its interactions with other actors.
We realize that there were signals from some Justices during the years leading up to Janus II that indicated they were willing to reconsider Abood, but that is hardly unique to this area. Sometimes such reconsideration happens, and sometimes, despite the most confident predictions, it does not. See, e.g., Dickerson v. United States, 530 U.S. 428 (2000) (reaffirming the Miranda rule); see also Agostini, 521 U.S. at 237 ("We do not acknowledge, and we do not hold, that other courts should conclude our more recent cases have, by implication, overruled an earlier precedent." (cleaned up)). The Rule of Law requires that parties abide by, and be able to rely on, what the law is, rather than what the readers of tea-leaves predict that it might be in the future.
Notably, Mr. Janus does not allege that CMS and AFSCME, acting pursuant to state law, failed to comply with Abood. Mr. Janus says only that AFSCME did not act in good faith because it "spurned efforts to have agency fees placed in escrow while their constitutionality was determined." But AFSCME was under no legal obligation to escrow the fair-share fees for an indefinite period while the case was being litigated. Such an action, as AFSCME says, would (in the absence of a court order requiring security of some kind) "have been hard to square with the fiduciary duty the Union owes to its own members," as the unit's exclusive representative.
Until Janus II said otherwise, AFSCME had a legal right to receive and spend fair-share fees collected from nonmembers as long as it complied with state law and the Abood line of cases. It did not demonstrate bad faith when it followed these rules.
There is something quite intuitive about this result. As we noted in the piece, to hold unions liable for doing what the Supreme Court said they could do up to 2018 recalls the "Otter Principle" from the great authority, Animal House: "You fucked up! You trusted us!"
But I will repeat here what Eugene and I wrote last year, which I still think is correct. This outcome may not be legally correct, and may not survive Supreme Court review:
Post-Janus suits against unions could also provide the setting for an "affirmative defense based on good faith and/or probable cause," or a new remedial twist to the Court's civil retroactivity doctrine. Indeed, some lower courts have given private parties a good faith defense to suits under § 1983, to eliminate the apparent unfairness created by the combination of Wyatt and Lugar. A few lawsuits brought against unions under Harris v. Quinn (a precursor to Janus) were dismissed by the lower courts on such grounds. But unions still 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 the defense. And if the Court turns to private law analogues for such a defense, it might find that restitution and unjust enrichment provide the better analogue. Second, these particular suits may present a particularly unsympathetic vehicle to the Court. In a discussion of union reliance on Abood, 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 even if such a good faith defense were recognized, the courts may well conclude that unions were knowingly gambling on the continued validity of Abood, and therefore cannot complain about their losses.
The Seventh Circuit's rejection of the analogy to "conversion," for instance, rests on a view that Abood was "the law" and that nonmembers had no "right to control" their money until the Supreme Court said so. But the conclusion of Janus was that the Constitution provided such a right, and that Abood had been a misinterpretation of the law in failing to recognize that right. And in an earlier part of the Seventh Circuit opinion it claimed to "to assume for the sake of argument that the right recognized in Janus II should indeed be applied … Mr. Janus himself and all others whose cases were in the pipeline at the time of the Court's decision." Some of the court's subsequent analysis seems to be at odds with this assumption.
To be sure, I think it is quite plausible that lower courts will unanimously reject the plaintiffs claims, following the logic of yesterday's Seventh Circuit decision. And if they do, the Supreme Court will probably not review the cases. But if a split emerges, Supreme Court review seems likely. And if the Supreme Court does review the issue, it is really not clear whether it will find a good faith defense in these circumstances.