UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


PENROD, ROBERT

v.

NLRB


99-1121a

D.C. Cir. 2000


*	*	*


Tatel, Circuit Judge: This petition to review a decision of  the
National Labor Relations Board requires us to consider  what
information a union's duty of fair representation re- quires it to
give employees about their right under Communi- cations Workers of
America v. Beck, 487 U.S. 735 (1988), to  pay only that portion of
union dues attributable to "collective  bargaining, contract
administration, and grievance adjust- ment." Id. at 745. The Board
held that unions have no  obligation to tell employees who have not
yet exercised their  Beck rights what percentage of dues are spent on
nonrepre- sentational activities. The Board also ruled that the union
in  this case had given employees who had chosen to exercise  their
Beck rights sufficient information to satisfy its duty of  fair
representation. Finding a portion of the Board's decision  unsupported
by reasoned decisionmaking and the remainder  in conflict with Supreme
Court and circuit precedent, we  grant the petition for review.


I


Section 8(a)(3) of the National Labor Relations Act gives  unions the
right to negotiate union security provisions allow- ing them to
collect dues from all members of a bargaining  unit, including those
who decline full union membership. 29  U.S.C. s 158(a)(3); Marquez v.
Screen Actors Guild, Inc., 119 


S. Ct. 292, 296 (1998). Employees who choose not to become  full union
members are called "financial core" payors. See  NLRB v. General
Motors Corp., 373 U.S. 734, 742 (1963). In  Beck, the Supreme Court
held that section 8(a)(3) does not  obligate employees "to support
union activities beyond those  germane to collective bargaining,
contract administration, and  grievance adjustment." 487 U.S. at 745.
Unlike full union  members and financial core payors, employees who
object to  funding nonrepresentational activities, called "Beck objec-
tors," pay reduced dues. Beck objectors are also known as  "potential
challengers" because they have a right to challenge  the union's
calculation of the reduced dues; in response to  such challenges, the
union bears the burden of justifying its  calculation. See California
Saw & Knife Works, 320 NLRB  224, 240 (1995).


Petitioners Robert Penrod, Nadine Penrod, and Clement  Wierzbicki,
long-time employees of DynCorp Support Ser- vices Operations, resigned
from their union, International  Brotherhood of Teamsters, Local 166,
and exercised their  Beck rights. Petitioner John Burnham never became
a full  member of the union, instead informing Local 166 shortly 
after being hired that he wished to be a financial core payor.


Having received no information from Local 166 about their  Beck rights,
all four petitioners filed unfair labor practice  charges against the
union. Pursuant to an agreement set- tling these charges, Local 166
promised to give all new  employees and financial core payors initial
Beck notices out- lining their Beck rights and describing how to
exercise them.  The union also sent letters to the Beck objectors
informing  them that they must pay 93.6 percent of union dues and 
describing procedures for challenging that calculation. At- tached was
a letter from an independent auditor confirming  the accuracy of the
reduced fee calculation. The auditor in  turn attached a handwritten
worksheet listing nineteen cate- gories of expenditures, such as
"salaries," "benefits paid,"  "legal expenses," and "auto expenses."
For each expenditure  category, the auditor identified the amount and


"chargeable" and "nonchargeable" to Beck objectors. The  worksheet
referred to a "breakdown" and to "schedules," but  they were not
attached. The auditor's worksheet is attached  to this opinion as


Complaining that the information furnished by Local 166  and its
auditor was inadequate, petitioners renewed their  unfair labor
practice charges. In response, the NLRB's  General Counsel filed a
formal complaint charging Local 166  with failing to include in the
initial Beck notice the percentage  by which dues would be reduced for
new employees and  financial core payors who exercise their Beck
rights. The  General Counsel also charged that the financial
information  given to Beck objectors was "too vague to permit each of 
these employees to decide whether to challenge any of the 
expenditures listed in the Statement of Expenses."


The Board rejected the General Counsel's charges. Inter- national Bhd.
of Teamsters, Local 166, AFL-CIO, 327 NLRB  No. 176 (1999). Although
agreeing that the duty of fair  representation required Local 166 to
provide initial Beck  notices to new employees and financial core
payors, the Board  determined that the union had not violated its duty
by failing  to include the percentage by which dues would be reduced. 
Citing the time and expense needed to make such calcula- tions, and
explaining that the duty of fair representation  affords unions a
"wide range of reasonableness," the Board  concluded that the decision
to furnish the percentage was a  "judgment call" within the union's
discretion. Id., slip op. at  3. With respect to employees who had
exercised their Beck  rights, the Board found that the auditor's
information was  sufficient for them to determine whether to challenge
the  reduced fee calculation. Id., slip op. at 4-5.


Petitioners challenge the Board's decision on three  grounds. The first
two concern the information given Beck  objectors. The one-page
handwritten list of expenditures,  they say, neither explained nor
justified the union's determi- nation that Beck objectors would be
required to pay 93.6  percent of dues. Their second challenge focuses


approximately twenty-five percent of total expenditures that  Local 166
paid to its affiliates. See Appendix A. The third  challenge relates
to new employees and financial core payors;  according to petitioners,
such employees are entitled to know  the precise amount by which their
dues would be reduced  were they to exercise their Beck rights. Local
166, defending  the Board's conclusion that it satisfied its duty of
fair repre- sentation, has intervened.


II


Grounded in section 9(a) of the NLRA, 29 U.S.C. s 159(a),  the
judicially created duty of fair representation reflects the  principle
that a union's status as exclusive representative of  employees in a
bargaining unit "includes a statutory obli- gation to serve the
interests of all members without hostility  or discrimination toward
any, to exercise its discretion with  complete good faith and honesty,
and to avoid arbitrary  conduct." Vaca v. Sipes, 386 U.S. 171, 177
(1967). Unions  breach their duty of fair representation when their
conduct  toward members of a bargaining unit is "arbitrary, discrimi-
natory, or in bad faith." Id. at 190.


The Supreme Court fleshed out the duty of fair representa- tion in the
Beck context in Chicago Teachers Union, Local  No. 1, AFT, AFL-CIO v.
Hudson, 475 U.S. 292 (1986). In  that case, the Court established
procedures that unions must  follow to protect objectors and described
the financial infor- mation that unions must give to potential
objectors. "Basic  considerations of fairness, as well as concern for
the First  Amendment rights at stake," the Court held, "dictate that
the  potential objectors be given sufficient information to gauge  the
propriety of the union's fee." Id. at 306. While Hudson  involved
public employees and arose under the First Amend- ment, this circuit
has applied its requirements to nonpublic  unions such as Local 166.
See, e.g., Abrams v. Communica- tions Workers of America, 59 F.3d
1373, 1379 n.7 (D.C. Cir.  1995). With this framework in mind, we turn
to petitioners'  three challenges.


General Disclosure to Beck Objectors


With respect to their first claim--that the list of nineteen 
expenditure categories was insufficient to allow them to de- termine
whether to challenge the reduced fee calculation-- petitioners
complain that the single sheet "contains no notes  or other written
explanation concerning how that union's  overall 93.6% chargeable,
6.4% nonchargeable calculation was  made." That lack of explanation,
petitioners contend, was  compounded by the "vague and unexplained"
line items and  the absence of referenced schedules and breakdowns.


The Board ruled that the Beck objectors had no need for  schedules,
breakdowns, or better-defined categories of ex- penses to determine
whether to challenge the reduced dues  calculation. Addressing the
Beck objectors' most fundamen- tal argument--that the single page of
financial information  failed to explain how the union arrived at its
93.6 percent  chargeable figure--the Board relied entirely on a
decision of  the Seventh Circuit, Gilpin v. American Fed'n of State, 
County, and Mun. Employees, AFL-CIO, 875 F.2d 1310,  1316 (7th Cir.
1989): "As the Seventh Circuit Court of  Appeals has remarked in
response to the same kind of  argument, 'if it did [include the
disclosure petitioners request- ed], the notice would be as long and
complicated as an SEC  prospectus.' The court discerned no reason for
imposing  such a requirement, and neither do we." 327 NLRB No. 176, 
slip. op. at 5 (citing Gilpin, 875 F.2d at 1316).


The union's disclosure in Gilpin was more extensive than  Local 166's.
In addition to listing thirty-five different types of  expenditures
(comparable to the nineteen categories provided  by Local 166), the
notice in Gilpin identified thirty-five  specific union activities,
indicating for each whether the union  considered it "wholly
chargeable," "wholly unchargeable," or  "mixed." Gilpin, 875 F.2d at
1316. For example, the notice  identified publishing a union
newsletter as "mixed" and ad- justing grievances as "wholly
chargeable." Id. For a pay- ment of $1.50, each employee could also
obtain an arbitrator's  "detailed ruling" said to sustain the union's


tions. Id. According to the Seventh Circuit, this information  "should
be enough ... to allow the employee to decide  whether there is any
reason to mount a challenge." Id.


By comparison, the Beck objectors in this case were given  only general
categories of expenditures. See Appendix A.  To be sure, two of these
categories--"contributions" and  "organizing"--were quite specific,
but both were totally "non- chargeable." The union offered no separate
list of activities,  nor provided any opportunity to obtain a detailed
explanation  of how the union calculated the allocation of expenses.
In  addition, the Beck objectors never received the "schedules"  and
"breakdown" said to be attached to the auditor's report.


The information provided in Gilpin, as the Seventh Circuit  found, gave
objectors a basis for objecting to the union's  calculation of reduced
dues. For example, they could have  reviewed the newsletter and made
their own judgment about  whether to challenge the union's
determination that newslet- ter costs were partially chargeable. Could
Beck objectors in  this case have made a similar judgment about the
general  categories of expenditures supplied by the auditor? For 
example, how could they have evaluated the union's determi- nation
that "salaries" were partially chargeable to Beck objec- tors in view
of the fact that the only other information they  were given about
salaries was the gross amount? Instead of  answering this question,
the Board simply cited Gilpin as  though the case dealt with the same
type of disclosure.  Because it did not, we think the Board's decision
reflects a  classic case of lack of reasoned decisionmaking. See
Macmil- lan Publishing Co. v. NLRB, 194 F.3d 165, 168 (D.C. Cir. 
1999) (The Regional Director's "rationale was the antithesis of 
reasoned decisionmaking, and as such was arbitrary and  capricious.")
(citing Motor Vehicles Mfrs. Ass'n v. State Farm  Mut. Auto. Ins. Co.,


Information about Payments to Affiliates


Petitioners' second complaint about the union's financial  disclosure
focuses on the information about Local 166's pay- ments to affiliated
unions. Representing almost twenty-five  percent of the union's total
expenditures, payments to affili- ates were 90.8 percent chargeable to
Beck objectors. See  Appendix A. In addition to arguing that Local 166
should  have explained this calculation, petitioners claim that they
are  entitled to know which affiliates received funds and how those 
affiliates used those funds. They rely on the following lan- guage
from Hudson: "[E]ither a showing that none of [the  money paid to
affiliates] was used to subsidize activities for  which nonmembers may
not be charged, or an explanation of  the share that was so used was
surely required." 475 U.S. at  307 n.18.


In concluding that Local 166's disclosure was adequate, the  Board
distinguished Hudson: "In that case, the union paid  more than half
its income to affiliated organizations, but  informed nonmembers only
that they were required to pay 95  percent of full dues. It did not
inform them of the basis on  which it was charging them that amount
or, apparently,  anything regarding how the amounts transferred to
affiliates  were spent or what percentages were chargeable and non-
chargeable." 327 NLRB No. 176, slip. op. at 5.


The Board's basis for distinguishing Hudson is curious. To  begin with,
two of the deficiencies in the Hudson notice that  the Board said made
Hudson different from this case were  also deficiencies in Local 166's
disclosure. The union in  Hudson, the Board said, "did not inform [the
employees] of  the basis on which it was charging them that amount or,
 apparently, anything regarding how the amounts transferred  to
affiliates were spent." Id. Yet this is precisely the  information
that Local 166 failed to provide and that petition- ers seek in this
case.


So the Board's conclusion that Hudson differs from this  case boils
down to two distinctions. In Hudson, the union  spent fifty percent of
its budget on affiliates; here, it spent  twenty-five percent. In
Hudson, the union failed to identify 


the percentage of payments to affiliates chargeable to Beck  objectors;
here, the union said such payments were ninety  percent chargeable.
Nothing in Hudson suggests that the  level of required disclosure
turns on such factors. Hudson's  directive is quite simple: unless a
union demonstrates that  "none of [the amount paid to affiliates] was
used to subsidize  activities for which nonmembers may not be
charged," then  "an explanation of the share that was so used [is]
surely  required." 475 U.S. at 307 n.18. Because Local 166 disclosed 
that over ninety percent of the amount paid to its affiliates  was
chargeable to Beck objectors, Hudson requires that the  union explain
how its affiliates used the money.


Initial Notice to New Employees  and Financial Core Payors


This brings us to petitioners' challenge to the Board's  ruling that
the initial Beck notice given to new employees and  financial core
payors need not identify the percentage reduc- tion in dues that would
result from a Beck objection. Ex- plaining its decision, the Board
observed that calculating the  reduced fee "can be an expensive and
timeconsuming under- taking" and emphasized the "wide range of
reasonableness"  afforded unions in serving the employees they
represent. 327  NLRB No. 176, slip op. at 3. We need not consider
whether  to defer to such reasoning, for this issue is squarely con-
trolled by Hudson as interpreted by this court in Abrams.


In Hudson, the Supreme Court held that "[b]asic consider- ations of
fairness, as well as concern for the First Amend- ment rights at
stake, also dictate that the potential objectors  be given sufficient
information to gauge the propriety of the  union's fee." 475 U.S. at
306. Abrams expressly applies  Hudson's requirements to new employees
and financial core  payors. 59 F.3d at 1379. Since Hudson requires
that poten- tial objectors be told the percentage of union dues
chargeable  to them--for how else could they "gauge the propriety of
the  union's fee"--and since Abrams applies Hudson to new em- ployees
and financial core payors, they too must be told the 


percentage of union dues that would be chargeable were they  to become
Beck objectors.


The Board and Local 166 nevertheless insist that Hudson  applies only
to employees who have elected to exercise their  Beck rights, not to
new employees and financial core payors.  But Abrams could not have
been clearer. Like the Board  and Local 166, the dissent in Abrams
argued that Hudson's  requirements do not apply to new employees and
financial  core payors. Abrams, 59 F.3d at 1383-84 (Tatel, J., concur-
ring in part and dissenting in part). Abrams ruled to the  contrary:
"The dissent takes issue with our interpretation of  Hudson but the
quoted language makes clear that potential  objectors must be given
adequate notice. Although the Su- preme Court addressed the issue in
the context of 'informa- tion about the basis for the proportionate
share' of financial  core expenses, the same 'basic considerations of
fairness'  necessarily extend to a union's notice to workers of their
right  to object to payment of any expenses beyond the financial 
core." Abrams, 59 F.3d at 1379 n.6 (internal citation omit- ted).


The Board and Local 166 point out that Abrams concerned  the wording of
the initial Beck notice, not whether the union  must disclose the
percentage reduction. In order to conclude  that the wording was
inadequate, however, Abrams had to  hold that Hudson applies to new
employees and financial core  payors, and Hudson carries with it the
requirement that  unions give employees "sufficient information to
gauge the  propriety of the union's fee"--i.e., the percentage
reduction  (see supra at 9). 475 U.S. at 306. We recognize that this 
means that new employees and financial core payors must be  given the
same information as Beck objectors, but Abrams is  the law of this


Petitioners challenge the initial Beck notice for a second  reason.
They contend that the initial notice must not only  identify the
amount of the reduced fee but also explain the  method used to
calculate the fee. According to the Board,  petitioners failed to
raise this issue before the Board and so 


cannot raise it for the first time on appeal. We agree with  the
Board.


The two record excerpts petitioners point to--a paragraph  in the
petitioners' final unfair labor practice charge and three  paragraphs
in the General Counsel's fourth amended com- plaint--cannot fairly be
read to raise the issue. Both refer  only to the financial information
designed for Beck objectors,  not to the initial Beck notice given to
new employees and  financial core payors. Rejecting petitioners'
contention that  the method of calculation is "implicit" in the issue
of disclo- sure of the fee itself, we conclude that we may not
consider  petitioners' claim that the initial Beck notice must include
an  explanation of the method used to calculate the fee. See 29 
U.S.C. s 160(e) ("No objection that has not been urged before  the
Board ... shall be considered by the court, unless the  failure or
neglect to urge such objection shall be excused  because of
extraordinary circumstances."); Harter Tomato  Prods. Co. v. NLRB, 133


III


The petition for review is granted, and this case is remand- ed to the
Board for proceedings consistent with this opinion.


So ordered.


APPENDIX A


NOT AVAILABLE ELECTRONICALLY


Tatel, J., concurring: I dissented in Abrams because I saw  nothing in
Hudson that required its application to new em- ployees and financial
core payors. Abrams, 59 F.3d at 1383- 84 (Tatel, J., concurring in
part and dissenting in part). This  case demonstrates the consequences
of Abrams: judicial  usurpation of the Board's traditional authority
to determine  national labor policy.


To protect employees' Beck rights, the Board has crafted a  three-step
process, calibrating the nature and amount of  information that unions
must give employees to the decision  they must make at each stage. New
employees and financial  core payors receive an initial Beck notice
informing them of  their Beck rights and how to exercise them. See
California  Saw & Knife Works, 320 NLRB at 233. Beck objectors are 
told the amount of the reduced dues as well as how that  amount was
calculated. See id. Beck objectors who chal- lenge the union's
calculation receive still more information,  with the union bearing
the burden of proving the accuracy of  its calculation. See id. at
240. Balancing employees' need for  information against the burden on
unions of providing the  information, this process reflects the
Board's application of  the duty of fair representation in the Beck


Consistent with this approach, the Board held in this case  that unions
were not required to disclose to new employees  and financial core
payors the percentage by which their dues  would be reduced were they
to exercise their Beck rights.  Not only does the Board believe that
new employees and  financial core payors have no need for this
information to  decide whether to exercise their Beck rights, but it
concluded  that providing the information would be an "expensive and 
timeconsuming undertaking." International Bhd. of Team- sters, Local
166, 327 NLRB No. 176, slip. op. at 3. Whether  to disclose the
percentage is a "judgment call," within the  "wide range of
reasonableness" afforded unions in carrying  out their duty of fair
representation, the Board found. Local  166's failure to disclose the
percentage was not "arbitrary,  discriminatory, or in bad faith."


Absent Abrams, we would evaluate the Board's reasoning  pursuant to a
highly deferential standard. See Ferriso v.  NLRB, 125 F.3d 865, 869
(D.C. Cir. 1997). Yet as our 


opinion in this case demonstrates, Abrams' extension of Hud- son to new
employees and financial core payors has foreclos- ed us from
considering the Board's rationale at all, requiring  that we ignore
not just our traditional deference to the Board,  but also the "wide
range of reasonableness" afforded unions  in satisfying their duty of
fair representation. See Marquez,  119 S. Ct. at 300. "It is hard to
think of a task more suitable  for an administrative agency that
specializes in labor rela- tions, and less suitable for a court of
general jurisdiction, than  crafting the rules for translating the
generalities of the Beck  decision ... into a workable system for
determining and  collecting agency fees." International Ass'n of
Machinists &  Aerospace Workers v. NLRB, 133 F.3d 1012, 1015 (7th Cir.
 1998). By commandeering a judgment that should have been  left to the
Board's expertise, Abrams has produced a result  that I doubt Hudson