Sharon R. Mitchell v. Desiderio

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 08-4230
_____________
SHARON R. MITCHELL; AUGUSTINE LOPRIORE; THOMAS M. BOWMAN;
PATRICIA A. CHRISTY; VENAIR M. CRUTCHFIELD; ERIC V. DESIDERIO;
KEVIN GALLAGHER; THEODORE W. HORNE; ANITA JACKSON;
BARRY M. JOHNSON; MARGARET A. KANE; JOSEPH M. MELLON, Sr.;
LORENZO NORTH; DAVID E. O'HARA; STEVEN PIOTROWICZ;
MARION L. PRESTON; STEVE PRZPIOSKI; WESLEY K. SCHLUETER;
EUGENE E. SMITH; DAINA E. STANFORD; ROSELLE TRIBBLE
v.
CITY OF PHILADELPHIA;
MAYOR EDWARD G. RENDELL, CITY OF PHILADELPHIA;
MANAGING DIRECTOR JOSEPH C. CERTAINE;
PERSONNEL DIRECTOR LINDA SEYDA;
FINANCE DIRECTOR BEN HAYLLAR;
DISTRICT COUNCIL NO. 33, AFSCME
On Appeal From the United States District Court
for the Eastern District of Pennsylvania
(No. 99-cv-06306)
District Judge: Honorable Petrese B. Tucker
Argued May 28, 2009
Before: FISHER, CHAGARES, and COWEN, Circuit Judges
(Filed: August 31, 2009 )

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William J. Young (argued)
National Right to Work Legal Defense Foundation
8001 Braddock Rd.
Ste. 600
Springfield, VA 22151
Counsel for Appellants
Kelly S. Diffily
Eleanor N. Ewing (argued)
City of Philadelphia
Law Dep’t
17th Fl.
1515 Arch St.
Philadelphia, PA 19102
Counsel for Appellees City of Philadelphia, Edward G. Rendell, Joseph Certaine, Linda
Seyda, and Ben Hayllar
Samuel L. Spear (argued)
Spear, Wilderman, Borish, Endy, Spear & Runckel
230 S. Broad St.
Ste. 1400
Philadelphia, PA 19102
Counsel for Appellee District Council No. 33
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OPINION OF THE COURT
_____________
CHAGARES, Circuit Judge.
This appeal presents several challenges to District Council 33’s (“DC 33”)
collection of fees from City of Philadelphia (“City”) employees who are not members of
the DC 33 union but who are represented by that union for collective bargaining
purposes. We will affirm the District Court’s judgment in all respects.

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I.
Because we write solely for the benefit of the parties, we will recite only the
essential facts.
DC 33 is the branch of the International American Federation of State, County,
and Municipal Employees (“AFSCME”) that represents City employees for collective
bargaining purposes. DC 33 is affiliated with 14 local unions (“locals”), and each
employee is assigned to one local. Though each employee is represented by DC 33 for
collective-bargaining purposes, some employees choose not to become members of the
union, which, along with its affiliates, engages in political lobbying and ideological
activity separate from collective bargaining. Employees who opt out of union
membership (“non-members”) do not pay full union dues. They pay a so-called “fair
share” fee: the percentage of the full union fee that corresponds to expenses incurred for
collective-bargaining-related activities only (“chargeable” expenses).
In December 1997, DC 33 sent each non-member a notice breaking down the fair
share fee set to take effect in July 1998. Each non-member was given a detailed
breakdown of AFSCME’s chargeable expenses. Each non-member also was given a
detailed breakdown of DC 33's chargeable expenses. But rather than be given a detailed
breakdown of the chargeable expenses of his or her particular local, each non-member
was given a detailed breakdown of the chargeable expenses aggregated across all the
locals. The fair share fee was the sum of the pro-rata shares of each of these three

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Thus the refund, like the fee originally collected, was based upon the aggregate1
chargeable expenses of all the locals, not the chargeable expenses of the particular local
to which the non-member receiving the refund belonged.
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amounts.
DC 33 continued to collect fair share fees at the January 1998 rate until September
2000, when it issued another notice. That notice, again aggregating local expenses,
explained the breakdown of the fair share fee that should have taken effect in July 1998
and the fair share fee that should have taken effect in July 1999. In January 2001,
aggregating local expenses once again, DC 33 issued a notice breaking down the fair
share fee that should have taken effect in July 2000. The July 1998 rate was less than
what the non-members were actually charged, but the July 1999 rate and July 2000 rate
were more. By May 2001, DC 33 had refunded each non-member those differences.1
DC 33 relies primarily on one individual, Vernon Person, to calculate the fair share
fee and prepare the notice. Person’s wife fell ill in late 1998, and he stopped working in
order to care for her. He was not able to resume his DC 33 responsibilities until January
2000. This is why DC 33 did not issue any notices between December 1997 and
September 2000.
Some of the non-members filed a federal class-action complaint against DC 33, the
City, and various City officials, pursuant to 42 U.S.C. § 1983, alleging that they failed to
comply with the constitutional requirements for collecting fair share fees imposed by the
Supreme Court in Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292 (1986).

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The non-members argued that DC 33 had failed to provide advance notice of the fair
share fees it ended up extracting between January 1998 and September 2000, and that the
late notices it did provide did not contain an audited breakdown of expenses that was
detailed enough to allow each non-member to determine whether the local portion of his
or her fair share fee was proper. They demanded total disgorgement of all the fees that
DC 33 had collected (notwithstanding the refunds), arguing in part that such relief was
awardable as punitive damages for DC 33's knowing failure to issue Hudson notices
while Person was away from work.
On cross-motions for summary judgment, the District Court held that DC 33 had
violated Hudson by failing to provide advance notices. But it also held that the notices
that eventually were provided were sufficiently detailed. It held that the correct measure
of damages was actual damages – the portion of the fair share fee collected that was
attributable to non-chargeable expenses – and scheduled a bench trial on that issue. At
trial, the District Court allowed DC 33 to call witnesses who were not identified as
potential witnesses in DC 33's pre-trial submissions and to introduce exhibits not listed in
those submissions. It also allowed DC 33 to designate Person as an expert witness
despite DC 33's failure to submit a written report concerning the opinions DC 33
anticipated him to offer, and the factual basis for those opinions.
After trial, the District Court determined that DC 33 had carried its burden of
proving chargeability of (among other items) the portion of the fair share fee attributable

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to AFSCME’s “assistance to affiliates” fee, which supplies AFSCME with funds to assist
its locals on an as-needed basis with collective-bargaining issues that may arise from time
to time; and DC 33's and each local’s personnel expenses.
The non-members then filed this appeal.
II.
The District Court had jurisdiction pursuant to 28 U.S.C. § 1331. We have
jurisdiction pursuant to 28 U.S.C. § 1291.
This appeal presents five issues: (1) whether a fair share notice that provides an
audited breakdown of a non-member’s pro-rata share of the aggregate expenses of all DC
33 locals – rather than the expenses of that non-member’s particular local – satisfies
Hudson’s financial disclosure requirement; (2) whether the remedy for knowingly
collecting a fair share fee without providing advance notice, in violation of Hudson, is
return of the entire fee collected (as restitution or punitive damages); (3) whether the
District Court’s failure to enforce the Federal Rules of Civil Procedure, Eastern District
of Pennsylvania Local Rules, and the District Court’s own announced procedures
warrants a new damages trial; (4) whether DC 33 carried its burden of proving
chargeability of ASFCME’s “assistance to affiliates” fee at the damages trial; and (5)
whether DC 33 carried its burden of proving chargeability of its and the locals’ personnel
costs at the damages trial. We will address each issue in turn.

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III.
The non-members argue that DC 33's fair share notices violate Hudson’s financial-
disclosure requirement because they provide an audited breakdown only of the locals’
aggregate chargeable expenses, not of each non-member’s particular local’s chargeable
expenses. The adequacy of a fair share fee notice under Hudson is an issue of law, so we
engage in plenary review of the District Court’s ruling. Walden v. Georgia-Pacific Corp.,
126 F.3d 506, 522 (3d Cir. 1997).
A fair share fee notice must provide non-members with “sufficient information to
gauge the propriety” of the fee. Hudson, 475 U.S. at 306. “[A]dequate disclosure surely
would include the major categories of expenses, as well as verification by an independent
auditor.” Id. at 307 n.18. But, “absolute precision” in the form of an “exhaustive and
detailed list” of all expenditures is not required. Id.
Providing sufficient information to gauge the propriety of the local portion of the
fair share fee has presented a recurring problem. For example, in Hohe v. Casey, 956
F.2d 399 (3d Cir. 1992), an AFSCME district council (comparable to DC 33) provided a
Hudson notice that, in describing the local portion of the fair share fee, disclosed only the
aggregate amount of the locals’ expenditures, and stated that the percentage of those
expenditures that were chargeable to non-members was at least as great as the percentage
of the district council’s expenditures that were chargeable. Id. We held that this
disclosure was inadequate. Id. True, because non-members were charged their pro-rata

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share of this percentage of the district council’s expenses, the disclosure accurately
revealed how the fee was calculated. Id. But it did not reveal enough to allow non-
members to determine whether that fee was proper. Id. For example,
the notice . . . did not disclose the affiliated locals’ “major categories of expenses”
nor was there any assertion that the locals’ categories of expenses mirrored those
of [the district council]. Moreover, although the notice stated that [the district
council] had assumed that affiliated locals’ percentage of chargeable expenses was
at least as great as its own, the notice offered no reason or explanation why [the
district council] was justified in making this assumption.
Id. (quoting Hudson, 475 U.S. at 307 n.18). We did not squarely hold that disclosure of
the aggregate expenses of all the locals would have satisfied Hudson, although that was
the argument made by the non-member appellants – who were represented by the same
organization that represents the non-member appellants in this case – in whose favor we
ruled. See Non-members’ Br., Hohe v. Casey, 956 F.2d 399 (3d Cir. 1992) (No. 91-
5002), 1991 WL 11245162 (“Adequate disclosure under Hudson could simply include
major categories of expenses for chargeable purposes, aggregated for all locals . . . .”).
We indirectly endorsed this aggregate approach in the later case of Otto v. Pa.
State Educ. Ass’n, 330 F.3d 125 (3d Cir. 2003). There, we held that all the locals’
expenses must undergo an independent audit. Id. But, we stated that this audit may be
performed on an aggregate (rather than local-by-local) basis: “unions without the
financial wherewithal to afford the Hudson-required audit might choose to enter into
combinations with other small unions to achieve necessary economies of scale.” Id. at
135. And it would make little sense to allow local unions to aggregate their expenses for

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an audit but then force them to disaggregate their expenses before the Hudson disclosures
are made.
Our approval of aggregate audits in Otto, coupled with the Supreme Court’s
holding in Hudson that absolute precision in computing the fair share fee (and therefore
in disclosing how that fee was computed) is not required, leads us to conclude that the
late Hudson notices provided an adequate financial disclosure.
IV.
The non-members argue that the District Court erred in declining to order DC 33
to return the entire fee it collected (as a form of restitution or punitive damages) while
knowingly failing to provide advance notice, in violation of Hudson. They argue that it
was improper for the District Court to award only nominal damages on the ground that
DC 33 had already refunded any overcharges.
Because restitution is an equitable remedy, we review the District Court’s decision
not to award restitution for an abuse of discretion. See Voest-Alpine Trading USA Corp.
v. Vantage Steel Corp., 919 F.2d 206, 211 (3d Cir. 1990). We review the District Court’s
decision not to award punitive damages for an abuse of discretion, as well. See Cooper
Indus. v. Leatherman Tool Grp., 532 U.S. 424, 433 (2001).
Whether restitution is appropriate depends upon whether it is necessary to prevent
unjust enrichment or to deter future similar misconduct. See Wessel v. City of
Albuquerque, 463 F.3d 1138, 1147 (10th Cir. 2006). Punitive damages in § 1983 cases

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are available where the defendants have acted with a “reckless or callous disregard of, or
indifference to, the rights and safety of others.” Keenan v. City of Phila., 983 F.2d 459,
469-70 (3d Cir. 1992). Punitive damages are to be “reserved for special circumstances,”
id. at 470 (quoting Savarese v. Agriss, 883 F.2d 1194, 1205 (3d Cir. 1989)), that is, for
“cases in which the defendant’s conduct amounts to something more than a bare violation
justifying compensatory damages or injunctive relief,” id. (quoting Cochetti v. Desmond,
572 F.2d 102, 105-06 (3d Cir. 1978)). The Supreme Court and this Court have also
addressed the issue of disgorgement in the fair share fee context, in particular. The
Supreme Court in Hudson and this Court in Hohe have cautioned against depriving a
union of “fees to which it is unquestionably entitled.” 475 U.S. at 310; 956 F.2d at 406.
By definition, a union is “unquestionably entitled” to the portion of the fair share fee
collected properly attributable to chargeable expenses. See, e.g., Wessel v. City of
Albuquerque, 299 F.3d 1186, 1194-95 (10th Cir. 2002) (“A union’s violation of
procedural requirements for the collection of fair share fees does not entitle nonmembers
to a ‘free ride’ but only to a refund of the portion of the amounts collected that exceed
what could be properly charged.” (citing Prescott v. County of El Dorado, 177 F.3d 1102,
1109 (9th Cir. 1999); Weaver v. Univ. of Cincinnati, 970 F.2d 1523, 1533 (6th Cir.
1992); Hohe, 956 F.2d at 415-16; Gilpin v. AFSCME, 875 F.2d 1310, 1314-16 (7th Cir.
1989))).
The District Court acted well within its discretion in concluding that DC 33's and

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the City’s actions were not willful and malicious, but merely were the result of an
excusable, one-time lapse of an otherwise dedicated employee. For this same reason,
ordering full restitution would not have increased DC 33's and the City’s likelihood of
future compliance. Thus, the District Court did not abuse its discretion in declining to
order full disgorgement via punitive damages or equitable restitution.
V.
The non-members argue that the District Court’s failure to enforce Federal Rule
of Civil Procedure 26(a) (because it allowed Person to testify as an expert without making
certain required disclosures), Eastern District of Pennsylvania Local Rule 16.1, and the
District Judge’s own announced procedures (because it allowed DC 33 to call other
witnesses and present exhibits not expressly identified in DC 33's pre-trial submissions)
warrants a new damages trial. We review the District Court’s application of these
Federal and local rules, to which objections were made during trial, for abuse of
discretion. See Rinehimer v. Cemcolift, Inc., 292 F.3d 375, 382-83 (3d Cir. 2002);
United States v. Eleven Vehicles, 200 F.3d 203, 215 (3d Cir. 2000).
Federal Rule of Civil Procedure 37(c)(1) provides that expert testimony used at
trial despite a failure to make the disclosures required by Rule 26(a) need not be
disallowed if the failure is “harmless.” Eastern District of Pennsylvania Local Rule
16.1(a) provides that “variations from the pre-trial procedures established by the Rule
may be ordered by the assigned judge to fit the circumstances of a particular case.”

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Violation of a Local Rule justifies a new trial only where the complaining party has
suffered unfair prejudice. See Eleven Vehicles, 200 F.3d at 215. Further, District Judges
have inherent authority to depart from their own pre-trial procedures. See In re School
Asbestos Litig., 977 F.2d 764, 793-94 (3d Cir. 1992). Violation of such pre-trial
procedure, like violation of a Local Rule, justifies a new trial only where the complaining
party has suffered unfair prejudice. See Eleven Vehicles, 200 F.3d at 215.
The District Court’s failure to enforce Federal Rule of Civil Procedure 26(a) was
not an abuse of discretion. The non-members suffered no prejudice from the District
Court’s decision to allow Person to testify as an expert. They deposed him two years
before trial, had access to the materials he used to form his opinions for even longer than
that, and were given the opportunity to cross-examine him at length at trial. Neither was
its decision to allow DC 33 to present witnesses and exhibits not identified in DC 33's
pre-trial submissions. The District Court was authorized to relax the pre-trial witness and
exhibit identification requirement by the very text of Local Rule 16.1. Finally, the
District Court did not abuse its discretion in varying from its own pre-trial procedures,
because it had inherent authority to do just that. In any event, the non-members have not
endeavored to explain how any of these actions prejudiced their ability to participate
effectively at trial.
VI.
The non-members argue that DC 33 failed to carry its burden of proving

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chargeability of ASFCME’s “assistance to affiliates” fee at the damages trial. We engage
in clearly-erroneous review of the District Court’s findings of fact, Gordon v. Lewistown
Hosp., 423 F.3d 184, 201 (3d Cir. 2005), and plenary review of its conclusions of law,
Blasband v. Rales, 971 F.2d 1034, 1040 (3d Cir. 1992).
A non-member properly may be charged for his “pro-rata share of the costs
associated with otherwise chargeable activities of [his local’s] state and national affiliates,
even if those activities were not performed for the direct benefit of [his local].” Lehnert
v. Ferris Faculty Ass’n, 500 U.S. 507, 524 (1991). Thus, expenses incurred by a parent
union (like AFSCME) may properly be chargeable to a non-member even if those
expenses are for services that do not have a “direct and tangible impact” on his local. Id.
Particularly relevant here, a fee “which contributes to the pool of resources potentially
available to the local is assessed for the [local’s] protection” is chargeable, “even if it is
not actually expended on that [local] in any particular membership year.” Id. at 523.
As for the quantum of evidence needed to sustain such a showing, all that is
required is “some indication that the payment is for services that may ultimately inure to
the benefit of the members of the local union by virtue of [its] membership in the parent
organization.” Id. at 524 (emphasis added). The union must prove this “indication” by a
preponderance of the evidence. Ellis v. Bhd. Ry., Airline & S.S. Clerks, 466 U.S. 435,
457 n.15 (1984). That is, the union must prove that such an “indication” more likely
than not exists.

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The District Court did not err in holding that the evidence presented at trial
cleared this very low hurdle. For example, AFSCME’s accounting manager testified that
it provides a wide variety of support to the locals:
They receive all types of support and it depends if [AFSCME] thinks that
we should be doing some of the support or if the individual affiliate calls in and
requests a particular kind of support. Maybe they need their budget analyzed,
maybe they need some help in their contract negotiations, maybe there’s an
organizing drive that [AFSCME] says that they want to produce so they will be
the ones that will say, you know, we need to, you know, work in conjunction with
this. But this is what we do.
Joint Appendix 588. The District Court was entitled to find that this testimony, more
likely than not, provided “some indication” that the “assistance to affiliates” fee is for
services that “may ultimately inure” to the locals’ benefit.
VII.
The non-members argue that DC 33 failed to carry its burden of proving the
chargeability of its and the locals’ personnel costs at the damages trial. We engage in
clearly-erroneous review of the District Court’s findings of fact, Gordon, 423 F.3d at 201,
and plenary review of its conclusions of law, Blasband, 971 F.2d at 1040.
In general, a union expense is chargeable if it is
necessarily or reasonably incurred for the purpose of performing the duties of an
exclusive representative of the employees in dealing with the employer on labor-
management issues. Under this standard, objecting employees may be compelled
to pay their fair share of not only the direct costs of negotiating and administering
a collective-bargaining contract and of settling grievances and disputes, but also
the expenses of activities or undertakings normally or reasonably employed to
implement or effectuate the duties of the union as exclusive representative of the
employees in the bargaining unit.

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The non-members, in their reply brief, make detailed hearsay challenges to some2
of DC 33's evidence. But, in their opening brief, they do nothing more than mention the
word “hearsay” several times. They do not appear even to have cited the Federal Rules of
Evidence in the relevant portion of the argument section of their opening brief.
Therefore, these challenges are waived. See, e.g., Mitchell v. Cellone, 389 F.3d 86, 92
15
Ellis, 466 U.S. at 448. DC 33 must prove chargeability by a preponderance of the
evidence. Id. at 457 n.15.
First, the non-members argue that the District Court impermissibly placed the
burden on them to disprove chargeability (rather than on the union to prove
chargeability). The District Court did this, they contend, by allowing DC 33 to take
advantage of Person’s treating all time as chargeable, by default, and then deducting
provably non-chargeable time from this total to arrive at a final figure. We confronted
this argument in Hohe, and we rejected it. See 956 F.2d at 414-15.
Second, the non-members argue that the District Court erred in allowing DC 33 to
carry its burden by presenting evidence other than “contemporaneously-recorded hard
data concerning its expenses and employees’ time . . . .” Non-members’ Br. at 51. But
the non-members point us to no court of appeals authority standing for this proposition.
True, such evidence may be more credible than after-the-fact interviews with employees
(of the sort Person did here), but that does not mean that the District Court was
foreclosed from considering other types of proof (even if less reliable). Cf. Fed. R. Evid.
611(a) (“The court shall exercise reasonable control over the mode . . . of . . . presenting
evidence . . . .”).2

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(3d Cir. 2004) (holding that appellant waives claim that is not “substantively argued” in
opening brief).
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VIII.
For the reasons given above, we will affirm the District Court’s judgment in all
respects.

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