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Inside The Union Refund Lawsuits

Shortly after I posted my initial take on the headline-grabbing set of class action lawsuits seeking millions of dollars in refunds from public sector unions after Janus, two interesting things happened.

First, Will Baude posted a thoughtful account on the Volokh Conspiracy explaining why he and Eugene Volokh believe "unions are likely to be liable for their pre-Janus conduct, for better or worse." Then, a high-level DOJ attorney e-mailed me raising similar counter-arguments to the ones advanced by Baude. (Whether the DOJ attorney did so out of intellectual curiosity or because the administration is planning to stake out a position on these suits in amicus filings, I cannot say).

In light of these developments, I thought I would post a lengthier discussion (trigger warning for all those who are not fans of § 1983 arcana!) of the relevant legal questions.

Let's start with the basic question before getting to the counter-arguments raised by Baude. The issue is whether objecting workers may sue for a refund of all fees they've paid to a public sector union, going back in time (or at least so far as the applicable statute of limitations will allow). That is, everyone agrees that no public sector union can collect fees after Janus was decided on June 27. But what about fees collected before then? Must the union return them to objecting workers, with interest?

The argument in the affirmative involves three steps, laid out with characteristic clarity by Baude (and echoed by the DOJ attorney who wrote me privately). I excerpt from Baude's Volokh Conspiracy post for simplicity:

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 . . . 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 Court 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 . . . Union collection of agency fees appears to be analogous . . . 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 . . .

Those three rules together mean that unions are likely to be liable for their pre-Janus conduct, for better or worse.

I have no real disagreement at steps one or two of this logical chain (although I'll note a quibble that I think is likely to be inconsequential at step one). My real contention is at step three.

To explain, I agree first with Baude that the standard approach to civil retroactivity is for Supreme Court decisions to announce the true meaning of the law both forward-looking and backward-looking into time. Baude cites Harper v. Virginia Department of Taxation for this point, and he's right. ("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 retroactive effect in all cases . . . regardless of whether such events predate or postdate our announcement of the rule.")

My small quibble is that Harper describes this rule as applying to cases where the Supreme Court "applies a rule of federal law to the parties before it." The reason for this requirement, the Court explains, is to avoid the "selective application of new rules" where the actual parties to the Supreme Court decision get the benefit of a backwards-looking rule, but where other similarly-situated parties would not. That, as even my 2-year-old son would understand, would be quite unfair.

Technically, though, Janus only awards a forward-looking declaratory judgment to the union challengers, noting that Janus intervened in a lawsuit "asking that the law be declared unconstitutional" without mention of a refund of fees previously paid) and holding that the union's "unconstitutional exactions cannot be allowed to continue indefinitely" but saying nothing about retrospective relief.

Thus, it appears that the Supreme Court made no pronouncement that Janus himself - the party before the Court - would get a monetary remedy. This means there is no "selective application" problem requiring application of Harper's civil retroactivity presumption. Everyone would get the benefit of the rule equally going forwarded, after June 27. And in theory, it's possible that no one - including Janus himself - would get retrospective relief for fees charged before June 27. (If you're really curious, the Supreme Court in Harper seemed to accept that this kind of an argument might work, only to disagree for case-specific reasons involving the language used in the prior Supreme Court decision at issue in that case, Davis v. Michigan Department of Treasury.)

I don't want to hang my hat on this technicality, though, for the simple reason that I doubt the five conservative justices in Janus meant to foreclose retrospective relief. I'm quite confident, in other words, that if a lower federal court were to decline to apply Janus retroactively on the ground that Janus itself didn't grant monetary relief to Mark Janus, the Supreme Court would grant cert and say: "We meant Janus to apply retroactively to everyone, including Mr. Janus."

So that means we should operate from the baseline that Janus announces the true meaning of the First Amendment for conduct before June 27, just as it does for conduct after it. And because Baude is correct that Lugar triggers private liability under § 1983 when private actors "invoke the aid of state officials to take advantage of state-created" procedures to obtain other private parties' property, the unions are proper defendants in a § 1983 union refund claim.

Where I part ways with Baude is at step three. He notes, correctly, that under Wyatt v. Cole, private parties do not enjoy qualified immunity from § 1983 claims. But here's the most important part of his post, buried away in the end: He concedes that Wyatt "reserved the possibility that private parties could make a separate 'good faith' defense distinct from qualified immunity."

That, then, is the (multi-) million dollar question for unions: Even if they don't enjoy a qualified immunity from suit, can they nevertheless raise their good faith reliance on state agency fee statutes as an affirmative defense to retrospective liability? I want to suggest that the answer to this question is quite clear in the unions' favor.

To see why, one must go back to the origins of § 1983. As the Supreme Court has long recognized, "[Section 1983] creates a species of tort liability." While the statute itself makes no mention of immunities or defenses from such liability, the court has granted immunity to government actors nonetheless if they "were shielded from tort liability" under the "most closely analogous tort" at common law.

Wyatt v. Cole posed the question whether private actors could benefit from the same qualified immunity defense as government actors. The Court's answer was "no," but for a very particular reason. Qualified immunity, the Court recognized in Wyatt, is something special and ahistorical. For qualified immunity is not just a defense from liability, but an immunity from suit altogether that can be objectively determined and thus immediately appealed if denied.

This means the private actors in Wyatt wanted something much more than to avoid personal liability for using a state statute to obtain private party: they wanted to be immune from the lawsuit altogether. The court said they enjoyed no such immunity, because unlike government actors whom society may wish to vest with discretion when making difficult on-the-spot decisions, "private parties hold no office requiring them to exercise discretion."

The upshot of Wyatt, then, is that private parties who obtain property belonging to other private parties by relying on an unconstitutional statute (just like in Janus) can be forced to defend a lawsuit. But Wyatt emphatically doesn't hold that such parties should actually be held liable for a refund in that suit.

That is because the common law origins of § 1983 still inform the separate question of whether the private party defendants can raise an affirmative defense to liability. Indeed, to know what kind of affirmative defenses a defendant can raise, the court has instructed us to look at the defenses that were available to the most analogous tort at common law. The argument to the contrary - that private defendants can't raise the same defenses that would've been available to them at the common law - borders on the absurd: that Congress enacted § 1983 not just to hold government actors liable for civil rights violations, but also to radically expand liability for private parties by silently abrogating all of the common law defenses they'd long enjoyed.

So what, then, is the most analogous common law tort to what the union fee objectors are alleging in these refund suits? It's the common law tort of malicious prosecution and abuse of process, which "provided causes of action against private defendants for unjustified harm arising out of the misuse of governmental processes" - like a statute authorizing agency fees. And in the specific context of that common law tort action, it is undisputed that defendants (like the unions here) could raise the affirmative defense of good faith.

In fact, every lower court to address the question has concluded as much, including in a case that should be of particular relevance here: the Fifth Circuit in Wyatt v. Cole itself, which held on remand (after the Supreme Court's ruling denying qualified immunity) that the very same private defendants could prevail based on the good faith defense: "[W]e think that private defendants, at least those invoking ex parte prejudgement statutes, should not be held liable under § 1983 absent a showing of malice and evidence that they either knew or should have known of the statute's constitutional infirmity."

Here's the first kicker: the plaintiffs who lost on remand in Wyatt filed a cert petition seeking review of the Fifth Circuit's decision to recognize a good faith defense. The Supreme Court denied cert.

And here's the second: if the private defendants acted in good faith by relying on a state replevin statute in Wyatt, how much more can that be said for public sector unions? The unions, after all, relied on similar state statutes authorizing collecting of agency fees. But the agency fee statutes also had the additional pedigree of the Supreme Court's decision in Abood, which remained good law until Janus. It's hard to imagine a course of action that is more well-grounded in the law - and thus more in good faith - than a party's decision to do something that is both (a) authorized by state law and (b) blessed by an on-point Supreme Court ruling.

And so that leaves me at the same place where I concluded my first post: If relying on these sources of law is "not good enough, we have bigger problems than the impending losses to public sector unions. Sending unions into bankruptcy because they mistakenly trusted the Supreme Court when it stood by Abood in 2012 (and declined to overrule it again in 2014) would be more than a blow to middle-class workers; it would be a serious danger to the rule of law."

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Previously: The Bearable Lightness Of Janus.

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Comments welcome.



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Posted on August 8, 2018


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