U.S. Court of Appeals joins other circuits in issuing victory

U.S. Court of Appeals for the Third Circuit Joins Other Circuits in Issuing Post-Janus Victory for Unions

In an August 28, 2020 decision, the U.S. Court of Appeals for the Third Circuit joined four other circuits in upholding the dismissal of claims from former public employee fair share fee payers, seeking reimbursement of fees paid to their unions prior to the U.S. Supreme Court’s 2018 ruling in Janus v. AFSCME, Council 31, 138 S. Ct. 2448 (2018) (“Janus”). In Janus, the Supreme Court overturned forty years of Supreme Court precedent by holding that state legislation authorizing public sector unions to require fair share fees from nonmember bargaining unit employees violated the nonmembers’ First Amendment rights.

Since Janus, numerous lawsuits have been filed across the country by former fee-payers demanding reimbursement of fair share fees that their unions collected prior to Janus. The U.S. Courts of Appeals for the Second, Sixth, Seventh, and Ninth Circuits have addressed such claims and all ruled that public sector unions are not required to refund fair share fees that they collected prior to Janus.

On August 28, 2020, the U.S. Court of Appeals for the Third Circuit joined those circuits in finding that two Pennsylvania public sector unions were not required to refund fair share fees collected prior to Janus.

The Third Circuit case arose out of two appeals that the Court consolidated for disposition: Diamond, et al. v. Pennsylvania State Education Association, et al. (“Diamond”), on appeal from the District Court for the Western District of Pennsylvania, and Wenzig, et al. v. SEIU Local 668, et al. (“Wenzig”), on appeal from the District Court for the Middle District of Pennsylvania.

The plaintiffs in Diamond and Wenzig were bargaining unit employees who were required by their public sector unions to pay fair share fees or donate the fees to a union-approved charity. The plaintiffs sought to recoup the fees paid prior to Janus under 42 U.S.C. § 1983, alleging that the unions and their employers acted under color of the Pennsylvania law which authorized collecting fair share fees, in violation of their First Amendment rights, per Janus.

The District Courts dismissed the plaintiffs’ Section 1983 claims on grounds that when the unions collected the fair share fees, they did so in good faith, acting in reliance upon Pennsylvania law authorizing fair share fees (71 Pa. Stat. § 575(b)) and Supreme Court precedent upholding fair share fees as consistent with the First Amendment. See Abood v. Detroit Board of Education, 431 U.S. 209 (1977) (“Abood”).

On appeal, in a 2-1 decision, the Third Circuit affirmed the dismissal, although it was divided on the reasons for doing so. Judge Rendell followed the reasoning of the District Courts to determine that the unions were entitled to a good faith defense to the Section 1983 claims. Judge Fisher concurred in the affirmance, but for different reasons. Judge Phipps dissented.

Judge Rendell relied upon Third Circuit precedent to find that the unions were entitled to a good faith defense because, considering the unions’ subjective state of mind, there was no malice and no evidence that the unions either knew or should have known that the Pennsylvania law authorizing fair share fees or the decades-old precedent authorizing fair share fees as set forth in Abood were unconstitutional. (Op., p. 18). Judge Rendell also noted that principles of equality and fairness weighed in favor of the unions’ defense to the Section 1983 claims: “private parties like the Unions should be able to rely on statutory and judicial authorization of their actions without hesitation or fear of future monetary liability.” (Op., p. 19).

Judge Fisher concurred with the decision on different grounds. He relied upon the common law in existence in 1871 when Section 1983 was enacted. Judge Fisher determined that the then-existing common law did not impose retroactive liability upon parties acting in reliance upon a statute or precedent that was later invalidated, unless there was duress or fraud. Because there was no duress or fraud involved in plaintiffs’ payment of fair share fees to the unions, Judge Fisher agreed that the Section 1983 claims were properly dismissed. (Concurrence, p. 22).

Judge Phipps – who was appointed to the Third Circuit by President Trump in 2019 – issued a dissent on grounds that a good faith affirmative defense was not available at common law when Section 1983 was enacted, and so in his view the unions were not entitled to such a defense. Judge Phipps voted to reverse the District Courts’ orders dismissing the complaints and would have remanded the cases. (Dissent, p. 56).

The plaintiffs-appellants in Diamond and Wenzig may seek review of the Court’s decision by filing a petition for rehearing within 14 days from the date of the decision. They also could file a petition for writ of certiorari with the U.S. Supreme Court within 90 days from the date of the decision.

Whatever course plaintiffs-appellants take, the Third Circuit’s decision represents another victory for unions in a growing consensus among the U.S. Courts of Appeals that public sector unions are not liable under Section 1983 for refunding fair share fees that they collected prior to Janus.

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