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


THOMAS, PATRICK

v.

NLRB


99-1338a

D.C. Cir. 2000


*	*	*


Edwards, Chief Judge: The petitions for review in this case  challenge
an order of the National Labor Relations Board  ("NLRB" or "the
Board") dismissing a complaint alleging a  breach of a union's
statutory duty of fair representation  ("DFR"). Petitioners are
individual employees who are rep- resented in collective bargaining by
the International Union,  United Automobile, Aerospace and
Agricultural Implement  Workers of America ("the Union"); petitioners
are not mem- bers of the Union, however. The "Union" in this case in-
cludes two related entities: the International, which is the 
organizational body that coordinates the Union's activities  and is
also the collective bargaining agent for represented  employees; and
local chapters, which carry out the policies of  the International. As
nonmembers, petitioners may insist  that their union dues and fees be
used only to defray costs of  collective bargaining and contract
administration, not for  "nonrepresentational" activities such as
political or ideological  advocacy. Nonmembers who so insist are
charged a reduced  "agency fee" that is intended to correspond only to
that  portion of the Union's expenditures used for representational 


In the principal petition for review, several nonmembers  claim that
the method used by the Union to determine the  percentage of dues and
fees expended on representational  activities (and, concomitantly, the
reduced agency fee owed  by nonmembers) violates the Union's duty of
fair representa-


tion. The complaint before the Board charged that the Union  unlawfully
used a "local presumption" to calculate fees owed  by nonmembers.
Under the disputed local presumption, the  Union first determined the
percentage of dues and fees  expended by the International on
representational activities;  the Union then assumed that the
International and local  chapters spent the same proportion of their
fees on charge- able activities, even though Union records indicated
that local  chapters routinely spend a greater proportion of their
fees on  chargeable activities. The Board found that the Union's use 
of a local presumption was not a violation of the Union's duty  of
fair representation. See International Union, United  Auto., Aerospace
and Agric. Implement Workers, 328  N.L.R.B. No. 175, 1999 WL 632712


The second petition for review involves a complaint that  George Gally,
a nonmember of the Union since 1985, was  unlawfully discharged for
failure to pay union dues. The  complaint before the Board alleged
that Mr. Gally was enti- tled to a notice stating the amount by which
his fee would be  reduced if he filed an objection to the fee, as well
as an  explanation as to how the reduced fee was calculated. Unlike 
the other petitioners, Mr. Gally never filed an objection to the 
union fees, and he was terminated for nonpayment of full  union dues.
The Board upheld the discharge of Mr. Gally,  finding that the duty of
fair representation does not require  that potential objectors be
apprised of the percentage of  funds spent by the Union on
nonrepresentational activities.  See Order, 1999 WL 632712, at *6-7.


We uphold the Board's decision as to the local presumption,  grant Mr.
Gally's petition, and remand the case to the Board  for an appropriate
remedy. The Board determined that,  under the particular circumstances
of this case, the Union's  application of a local presumption was not
arbitrary, discrimi- natory, or in bad faith. There was substantial
evidence  presented in the record to support this conclusion. The 
Board concedes, however, that Mr. Gally's petition must be  granted
given this court's recent decision in Penrod v. NLRB,  203 F.3d 41
(D.C. Cir. 2000).


I. Background


The facts of this case are straightforward and undisputed.  Petitioners
work for a number of different employers with  whom the Union engages
in collective bargaining as the  lawful bargaining agent for
represented employees. The  petitioners, however, chose to become or
remain nonmembers  of the Union. The Union receives dues and fees from
all  employees in represented bargaining units. The dues and  fees
normally are collected by local chapters, which retain  38% of the
money and remit 62% to the International. The  locals remit an
additional 3% of collected monies to the  International's Community
Action Program, thus reducing  the locals' share of dues and fees to
35%. Both the locals and  the International spend funds to defray
costs of collective  bargaining and contract administration and also
to support  nonrepresentational activities such as lobbying and
political  campaigning. The Supreme Court has held, in Communica-
tions Workers v. Beck, 487 U.S. 735 (1988), that nonmembers  of a
union may request that their dues and fees be reduced by  the
percentage of funds allocated by the union to nonrepre- sentational
activities. Individuals who make such a request  have come to be known


In 1989, the Union established a two-step Beck "objection  procedure"
for nonmembers. In the first step, a nonmember  who objects to paying
fees for nonrepresentational activities  receives the Unions' Report
of Expenditures in Providing  Collective Bargaining Related Services
("Report"). In the  second step, an objector who is not satisfied with
the Report  can, within 45 days after the Report is issued, file a
written  objection which is then submitted to a neutral arbitrator for
 resolution. All claims submitted to arbitration are governed  by the
rules of the American Arbitration Association. During  the pendency of
a nonmember's claim, the Union is required  to place the disputed fees
in an interest-bearing escrow  account. In any case in arbitration,
the Union bears the  burden of establishing the accuracy of its fee
calculation.


Petitioners in this case (except for petitioner George Gally)  filed
Beck objections, requesting an accounting of the Union's 


nonrepresentational expenditures. None of the petitioners,  however,
invoked the arbitration process. Petitioner Gally  never filed an
objection, opting instead to cease paying dues  in 1990. Under the
applicable union-security clause, covering  the bargaining unit in
which Mr. Gally worked, a failure to  pay dues was grounds for
termination. At the Union's re- quest, Mr. Gally was terminated on
April 9, 1991. Subse- quently, on April 12, 1991, Mr. Gally filed a
charge with the  Board challenging his termination, and requesting
reinstate- ment and back pay.


In June 1992, the Union provided the required Report to  each Beck
objector. The Report calculated the Union's ex- penditures on
representational and nonrepresentational activ- ities for the 1991
fiscal year. The Report also contained a  certified public
accountant's audit of the International's finan- cial records, and
detailed how the 65% of fees received by the  International was spent.
The Report provided no breakdown  of the monies spent by the Union's
local chapters. The Union  explained this absence by invoking the
so-called "local pre- sumption," stating:


This report will not attempt separately to analyze the  expenditures of
each of the Local Unions in which UAW- represented employees
participate.... Because of the  accounting and reporting difficulties
inherent in attempt- ing to analyze separately the expenditures of
each of the  Local Unions, this Report will analyze only the expendi-
tures of the International Union, UAW. The same pro  rata allocation
between Chargeable Expenditures and  Remaining Expenditures determined
for the Internation- al's expenditures will then be applied to that
portion of  the dues and fees retained by the various Local Unions 


This procedure is justified because the vast majority of  the UAW's
Remaining Expenditures activities, including  especially political
lobbying and organizing, are funded  and conducted by the
International Union. Compared to  the International, Local Unions thus
invariably expend a  greater portion of the resources performing


Expenditure activities such as bargaining contracts, han- dling
grievances, conducting arbitration hearings and  otherwise
administering collective bargaining agree- ments. By applying the same
allocation of Chargeable  Expenditures and Remaining Expenditures to
the Local  Unions as that determined for the International Union, 
therefore, Objectors covered by NLRA union security  agreements are
being required to pay a smaller amount  than would be the case if each
Local Union's expendi- tures were separately analyzed.


Report of Expenditures Incurred in Providing Collective Bar- gaining
Related Services for Fiscal Year 1991, at 3-4, reprint- ed in Appendix
("App.") 58-59.


Petitioners filed charges with the NLRB, arguing that the  Union's
application of the local presumption violated the  Union's duty of
fair representation and, therefore, was an  unfair labor practice.
Petitioners requested that the union  security clause be struck from
the Union's collective bargain- ing agreements, that each employee be
notified of his rights  under the NLRA, and that petitioners be given
complete  restitution of all agency fees, with interest. On October
26,  1992, the General Counsel issued a consolidated complaint 
against the Union and its locals, contending that the Union  violated
s 8(b)(1)(A) of the National Labor Relations Act  ("NLRA" or "the
Act"), 29 U.S.C. s 158(b)(1)(A) (1994), by  relying on a "factually
unsupported 'local presumption.' "  The General Counsel also alleged
that Gally's termination  constituted an unfair labor practice under s
8(b)(1)(A) and  s 8(b)(2) of the Act, 29 U.S.C. ss 158(b)(1)(A),
(b)(2), because  the Union did not provide Gally with sufficient
information to  decide whether to file a Beck objection. On June 10,
1993,  the General Counsel moved both to transfer the case to the 
Board and for summary judgment. On June 16, 1993, the  Board issued an
order transferring the case to the Board and  a Notice to Show Cause
why the motion for summary judg- ment should not be granted. All


On August 16, 1999, the Board issued its decision dismiss- ing the
complaint. The Board agreed that "the use of a  totally unreasoned or
unsupported local presumption would  not meet a union's duty of fair
representation, because it  would not provide objectors with
sufficient information to  enable them to decide whether or not to
challenge the union's  figures." Order, 1999 WL 632712, at *5. The
Board went on  to find that the Union "provided adequate support for
[its]  use of the local presumption in this case." Id. The Board 
stated that the Union's justification (i.e., that local chapters 
expend a greater proportion of their funds on representation- al
activities than the International) explained why the local 
presumption "is justified under the circumstances." Id. The  Board
found that, because the Union computed the amount of  chargeable
activities conducted by each local based on the  International's
actual expenditures, "the objecting employees  will likely pay less in
dues and fees." Id. The Board noted  further that the employees had a
remedy if they thought  otherwise: "[T]hey can lodge a challenge, and
the Local will  be put to its proof." Id. In dismissing the complaint,
the  Board held that the use of the local presumption "was not 
arbitrary, discriminatory, or in bad faith, and therefore does  not
violate the [Union's] duty of fair representation." Id.  Finally, the
Board held that Gally was not unlawfully termi- nated, because he had
no right to receive information regard- ing the percentage of funds
spent by the Union on nonrepre- sentational activities until after he


II. Analysis


A. Gally's Petition


After Mr. Gally's petition for review had been filed, the  court issued
Penrod, holding that potential objectors like Mr.  Gally are entitled
to be informed of the amount by which  their fees would be reduced
were they to become Beck  objectors. See Penrod, 203 F.3d at 47-48.
Board counsel  acknowledges that the Penrod decision controls the
disposi- tion of Mr. Gally's petition, because the Union never


the required information to Mr. Gally. It is unclear, however,  whether
Mr. Gally is entitled to the remedy he seeks, given  the Supreme
Court's holding that objecting nonmembers are  not excused from paying
disputed agency fees until a final  judgment is rendered in their
favor. See Brotherhood of Ry.  & S.S. Clerks v. Allen, 373 U.S. 113,
120 (1963). Accordingly,  we grant Mr. Gally's petition for review and
remand the case  to the Board to determine an appropriate remedy for
the  Union's statutory violation. See South Prairie Constr. Co. v. 
Local No. 627, Int'l Union of Operating Eng'rs, 425 U.S. 800,  805-06
(1976) (per curiam) (holding that appeals court  usurped role of NLRB
by reversing Board's legal conclusion  and proceeding to decide issue
of fact that should be decided  by Board in the first instance).


B. Beck Objectors' Petition for Review


1. Standard of Review


The complaint in this case contends that the Union breach- ed its
statutory duty of fair representation. Duty of fair  representation
claims are somewhat of an oddity under the  NLRA. This is so because
the NLRA, like the Railway  Labor Act, 45 U.S.C. ss 151-188 (1994 &
Supp. IV 1998), has  no express provision establishing a duty of fair
representation  or declaring a DFR breach to be an unfair labor
practice.  Rather, DFR is a judicially-crafted doctrine that was first
 recognized (in an application of the Railway Labor Act) by  the
Supreme Court in Steele v. Louisville & Nashville Rail- road Co., 323
U.S. 192, 204 (1944), in the context of a union's  negotiation of an
agreement that included racially discrimina- tory provisions. The duty
"has grown enormously in scope  since 1944, however, from avoiding
racial discrimination to  providing daily representation."
International Union of the  United Ass'n of Journeymen & Apprentices
of the Plumbing  & Pipefitting Indus. v. NLRB, 675 F.2d 1257, 1264
(D.C. Cir.  1982). The scope of DFR under both the Railway Labor Act 
and the NLRA is similar. See Davenport v. International  Bhd. of
Teamsters, 166 F.3d 356, 361 n.4 (D.C. Cir. 1999)  (noting that
"[c]ases describing the scope of the duty freely  cite precedents


Changing Law of Fair Representation (Jean T. McKelvey,  ed., 1985).


A union breaches its duty of fair representation when its  conduct
toward represented employees is "arbitrary, discrimi- natory, or in
bad faith." Vaca v. Sipes, 386 U.S. 171, 190  (1967). In the instant
case, petitioners' complaint is properly  understood as a claim that
the Union's use of the disputed  local presumption is arbitrary. There
is no contention that  the Union acted pursuant to some "bad faith"
motive or that  the Union has somehow engaged in unlawful
"discrimination."  Rather, an allegation of arbitrary action is at the
heart of the  complaint here.


In considering DFR complaints that are premised on asser- tions of
arbitrary action, the courts and the Board accord  deference to a
union, finding a DFR breach only if the union's  action "can be fairly
characterized as so far outside a 'wide  range of reasonableness' "
that it is entirely irrational. Air  Line Pilots Ass'n, Int'l v.
O'Neill, 499 U.S. 65, 78 (1991)  (quoting Ford Motor Co. v. Huffman,
345 U.S. 330, 338  (1953)). The Board does not require that a union
prove "that  the choices it makes are better or more logical than
other  possibilities," but, instead, that the union "act[s] on the
basis  of relevant considerations," not arbitrary ones. Reading 
Anthracite Co., 326 N.L.R.B. No. 143, 1998 WL 726724, at *2  (1998);
see also Marquez v. Screen Actors Guild, Inc., 525  U.S. 33, 45-46
(1998) (making it clear that a union has "room  to make discretionary
decisions and choices, even if those  judgments are ultimately
wrong"). Indeed, even though the  standard is based in principles of
"reasonableness," proof of  negligence does not establish a breach of
the duty. See  Le'Mon v. NLRB, 952 F.2d 1203, 1205 (10th Cir. 1991).


Just as the Board reviews the Union's actions with defer- ence, we
accord substantial deference to the Board's decision.  We will set
aside a decision of the Board only if it "acted  arbitrarily or
otherwise erred in applying established law to  the facts" at issue,
International Union of Elec., Elec., Sala- ried, Mach. & Furniture
Workers v. NLRB, 41 F.3d 1532,  1536 (D.C. Cir. 1994) (internal
quotation marks omitted), or if 


its findings are not supported by "substantial evidence," 29  U.S.C. s
160(f) (1994). In the context of this case, the  substantial evidence
standard is most pertinent. See Boiler- makers Local No. 374 v. NLRB,
852 F.2d 1353, 1358 (D.C.  Cir. 1988) (reviewing Board's duty of fair
representation  decision under substantial evidence standard); see
also  Le'Mon, 952 F.2d at 1205-06 (reviewing for substantial evi-
dence where Board found no breach of duty); Tenorio v.  NLRB, 680 F.2d
598, 601 (9th Cir. 1982) (reviewing for  substantial evidence where
Board found no breach of duty).


Substantial evidence "is 'more than a mere scintilla. It  means such
relevant evidence as a reasonable mind might  accept as adequate to
support a conclusion.' " Micro Pacific  Dev. Inc. v. NLRB, 178 F.3d
1325, 1329 (D.C. Cir. 1999)  (quoting Consolidated Edison Co. v. NLRB,
305 U.S. 197, 229  (1938)). This court will uphold the Board's
decision upon  substantial evidence even if we would reach a different
result  upon de novo review. See Perdue Farms, Inc., Cookin' Good 
Div. v. NLRB, 144 F.3d 830, 834-35 (D.C. Cir. 1998). In  undertaking
substantial evidence review, we consider not just  the evidence that
supports the Board's decision, but any  evidence in the record that
"fairly detracts from its weight."  Tenorio, 680 F.2d at 601. The
posture of the instant case  calls for singular deference, as
petitioners must show that  there was a lack of substantial evidence
to support the  Board's finding that the Union's actions fell within a
broad  range of reasonableness.


The significant nature of the deference due to the Board in  DFR cases
is cogently explained by Chief Judge Posner in  International Ass'n of
Machinists & Aerospace Workers v.  NLRB, 133 F.3d 1012, 1016 (7th
Cir.), cert. denied sub nom.  Strang v. NLRB, 525 U.S. 813 (1998).
Chief Judge Posner's  opinion aptly observes:


All the details necessary to make the rule of Beck  operational were
left to the Board, subject to the very  light review authorized by
Chevron. It is hard to think  of a task more suitable for an
administrative agency that  specializes in labor relations, and less
suitable for a court 


of general jurisdiction, than crafting the rules for trans- lating the
generalities of the Beck decision ... into a  workable system for
determining and collecting agency  fees.


133 F.3d at 1015. We agree. In other words, given the  nature of the
DFR doctrine, a court reviews with deference a  Board decision that
was itself made with deference to the  Union. This does not mean that
our review is toothless but  merely that we must be very cautious in
entertaining an  invitation to reverse the Board.


2. The Merits of Petitioners' Arguments


The Union and petitioners' employers have negotiated  through
collective bargaining "union-security clauses" that  permit the Union
to collect fees from all represented employ- ees, even those who elect
not to join Union membership. The  Supreme Court has held that the
collection of fees is permis- sible, subject to certain limiting
conditions. In Abood v.  Detroit Board of Education, 431 U.S. 209
(1977), the Supreme  Court ruled that a union representing public
employees could  collect "agency fees" from nonmembers, but that
nonmem- bers had a constitutional right not to have any portion of
their  fees used for nonrepresentational, ideological activities. 431 
U.S. at 234. Subsequently, in Chicago Teachers Union v.  Hudson, 475
U.S. 292 (1986), the Court explained how this  balance must be


Basic considerations of fairness, as well as concern for  the First
Amendment rights at stake, ... dictate that  the potential objectors
be given sufficient information to  gauge the propriety of the union's
fee. Leaving the  nonunion employees in the dark about the source of
the  figure for the agency fee--and requiring them to object  in order
to receive information--does not adequately  protect the careful
distinctions drawn in Abood.


475 U.S. at 306.


The Court in Hudson found the information given nonmem- bers
inadequate, because it did not "identify[ ] the expendi-


tures for collective bargaining and contract administration  that had
been provided for the benefit of nonmembers as well  as members--and
for which nonmembers as well as members  can fairly be charged a fee."
Id. at 306-07. The Court  explained:


We continue to recognize that there are practical reasons  why
"[a]bsolute precision" in the calculation of the charge  to nonmembers
cannot be "expected or required." Thus,  for instance, the Union
cannot be faulted for calculating  its fee on the basis of its
expenses during the preceding  year. The Union need not provide
nonmembers with an  exhaustive and detailed list of all its
expenditures, but  adequate disclosure surely would include the major
cate- gories of expenses, as well as verification by an indepen- dent
auditor. With respect to an item such as the  Union's payment of
$2,167,000 to its affiliated state and  national labor organizations,
for instance, either a show- ing that none of it was used to subsidize
activities for  which nonmembers may not be charged, or an explana-
tion of the share that was so used was surely required.


Id. at 307 n.18 (citations omitted) (alteration in original).


For our purposes, the most recent piece of the puzzle was  added by
Beck. The Court's decision in Beck extends the  logic of Abood, which
rested on constitutional grounds, to the  statutory DFR context. The
Beck Court concluded that  s 8(a)(3) of the NLRA "authorizes the
exaction of only those  fees and dues necessary" for the union to
perform its duties  as the exclusive representative of employees on
labor- management issues. 487 U.S. at 762-63. Accordingly, the  Court
held that nonmembers may bring a claim for improper- ly charged agency
fees as a breach of the duty of fair  representation. See id. at 745.
Beck does not purport to  enunciate procedures by which unions are to
verify their  calculations of the proportion of agency fees
attributable to  representational activities.


This case is framed by the axes of Hudson and Beck.  Hudson establishes
the procedural grounds by which unions  representing public employees
must defend their apportion-


ment of charges for representational and nonrepresentational 
activities. Beck establishes that private sector nonmember  employees
may bring an action, based on the union's duty of  fair
representation, contesting the use of agency fees for 
nonrepresentational activities. Although Hudson involved 
constitutional concerns, this court has applied the basic pro-
tections of Hudson to the Beck-defined DFR cases involving  private
sector employees. See Abrams v. Communications  Workers, 59 F.3d 1373,
1379 n.7 (D.C. Cir. 1995); see also  Miller v. Air Line Pilots Ass'n,
108 F.3d 1415, 1424-25 (D.C.  Cir. 1997) (remanding for District Court
to resolve factual  dispute as to whether audit met Hudson's
requirements),  aff'd on other grounds, 523 U.S. 866 (1998). This
court also  has held that Beck objectors are entitled to the same
proce- dural protections described in Hudson for challenging a 
union's apportionment. See Ferriso v. NLRB, 125 F.3d 865,  869-70
(D.C. Cir. 1997). None of these cases, however,  addressed the issue
raised here: May a union use a local  presumption to allocate between


Petitioners' complaint rests on two principal arguments.  First,
petitioners contend that the use of a local presumption  can never be
squared with Hudson. Second, petitioners  contend that the Union's use
of the local presumption in this  case was factually unsupported.
Respondent contends that  we may not consider the first argument,
because it was not  part of the complaint before the Board. While it
is true that  both petitioners and the General Counsel distanced them-
selves rhetorically from a per se assault on the local presump- tion,
a fair reading of the General Counsel's arguments before  the Board,
and petitioners' arguments before this court, belie  this claim. The
General Counsel, for instance, stated that a  local presumption is
"factually supported" only when the  Union "demonstrate[s] that the
local spent at least as great a  proportion of its total expenditures
for chargeable purposes  as did the [I]nternational." Br. of Counsel
for the General  Counsel to the NLRB 23, reprinted in App. 288. Under
this  formulation, there would be nothing left of the presumption. 


Accordingly, we will address both contentions raised by peti-


On the first point, we reject petitioners' claim that a local 
presumption is per se unlawful. Indeed, the law of the circuit  is
clear on this point, for this court previously has approved  the use
of a local presumption. See Finerty v. NLRB, 113  F.3d 1288 (D.C. Cir.
1997). The petitioners in Finerty chal- lenged the Communications
Workers of America's ("CWA")  calculation of chargeable versus
non-chargeable activities,  because it was based on the CWA's national
expenditures,  and not broken down unit-by-unit. The court, relying on
 Lehnert v. Ferris Faculty Association, 500 U.S. 507, 524  (1991),
upheld the Board's finding that such notice did not  violate the CWA's
duty of fair representation. Finerty ob- served that


judicial precedent supports the Board's finding that use  of a "local
presumption" in allocating expenses--i.e., an  assumption that
allocation on a union-wide basis is  equivalent to allocation on a
unit-by-unit basis--is rea- sonable.


113 F.3d at 1289 (emphasis added).


In upholding the use of the local presumption, the decision  in Finerty
was guided by Price v. International Union,  United Automobile,
Aerospace & Agricultural Implement  Workers, 927 F.2d 88 (2d Cir.
1991). See Finerty, 113 F.3d at  1292. Price, in fact, involved the
same fee reduction proce- dure at issue in the instant case. Both
Price and Finerty  place emphasis on the Supreme Court's observation
in Hud- son that " '[a]bsolute precision' in the calculation of the 
charge to nonmembers cannot be 'expected or required.' "  See id.
(quoting Price, 927 F.2d at 94 (quoting Hudson, 475  U.S. at 307


Admittedly, Finerty did not squarely face the issue pre- sented here.
In Finerty, the Union took all of its expenses,  separated them into
chargeable and non-chargeable expenses,  and assumed that this
proportion would apply throughout all  of its units. Here, the Union
has conducted an audit of only 


65% of its fee expenditures (those fees collected by the 
International), and then assumed that the locals had at least  the
same proportion of non-chargeable expenses as the Inter- national.
When considering the permissibility in general of a  local
presumption, however, this is a distinction without dif- ference.
Finerty stands firmly for the proposition that a  union may forego
calculation of local-by-local expenditures  and rely on overall
expenditures to calculate an advance fee  reduction. This is all, as a
matter of broad principle, that is  at issue with respect to the
general permissibility of the local  presumption.


Petitioners strain to suggest that reading Finerty to ap- prove of the
use local presumptions creates an intra-circuit  conflict, because of
this circuit's endorsement of Hudson  procedures in the context of
private employment relation- ships. Petitioners' assertion rests on a
reading of Hudson  that this circuit has rejected, namely, that Hudson
requires  each individual local to calculate its expenditures to meet
the  Hudson/Beck requirements. Petitioners seem to suggest  that those
cases that applied Hudson principles to private  employees (e.g.,
Ferriso and Abrams) by implication institut- ed a requirement that
every level of union hierarchy precisely  calculate its expenses.
Hudson does not mandate this out- come. The only language that
arguably supports this reading  of Hudson is the Court's comment that
the teacher's union's  payment of $2,176,000 (53% of its total
expenditures) to  affiliated state and national labor organizations
required "ei- ther a showing that none of it was used to subsidize
activities  for which nonmembers may not be charged, or an explanation
 of the share that was so used." 475 U.S. at 307 n.18. This  does not
preclude the use of a local presumption to explain  the calculation of
the reduced agency fee; it simply requires  this court to inquire
whether that explanation is sufficient to  meet the overarching
requirement of Hudson, that nonmem- bers receive an "adequate
disclosure of the reasons why" they  must pay a certain agency fee.


We recognize that some of our sister circuits have ap- proached this
question from a different perspective. See  Prescott v. County of El
Dorado, 177 F.3d 1102, 1108 (9th Cir. 


1999) (finding use of local presumption unconstitutional), va- cated,
120 S. Ct. 929, reinstated in part, 204 F.3d 984 (9th  Cir. 2000);
Hohe v. Casey, 956 F.2d 399, 410-11 (3d Cir. 1992)  (rejecting a local
presumption); Lowary v. Lexington Local  Bd. of Educ., 903 F.2d 422,
431 (6th Cir. 1990) (finding a local  union presumption
unconstitutional). In our view, however,  these decisions do not stand
for the broad proposition that a  local presumption is per se
unlawful. See Prescott, 177 F.3d  at 1108 (stating that the court did
"not decide that each little  unit in the [Union's] firmament must
necessarily be subjected  to a separate verified audit of its
expenditures"); Hohe, 956  F.2d at 410 (finding notice inadequate
because the union  offered no "explanation or justification" for
presumption);  Lowary, 903 F.2d at 431 (declaring unconstitutional
local  presumption that operated to shift the burden of proof in 
arbitration). Nonetheless, the fundamental issue before this  court,
as even petitioners grudgingly concede in their reply  brief, is
whether the Board reasonably allowed the use of the  local presumption


On the record at hand in this case, we find substantial  evidence to
support the Board's conclusion that the Union  acted within a "wide
range of reasonableness," Ford Motor  Co., 345 U.S. at 338, and that
the Union's use of the local  presumption was not arbitrary. The Board
found that the  Union's use of the local presumption was not
"arbitrary,  discriminatory, or in bad faith" for two primary reasons.
 First, the Board found that the Union's reasoning that locals 
proportionately spend at least as much on representational  activities
to be "justified under the circumstances." Order,  1999 WL 632712, at
*5. Second, the Board noted that the  employees could challenge the
locals' allocation if they chose,  and "the Local will be put to its
proof." Id. The Board's  decision also mentions in passing the Union's
suggestion that  use of the local presumption reduced accounting and
report- ing tasks, which the Board has otherwise recognized to be 
"expensive and time-consuming undertakings." Id. We do  not view this
passing observation as a principal justification  for the Board's
decision and we find no support for it in the 


record. Therefore, we give it no weight in our review of the  Board's
order.


Petitioners argue that, with respect to the first justification,  the
Board blindly accepted the Union's justification without  any
substantial evidence to support it. The Board points out  that there
is in fact evidence in the record to support the  Union's assumption
that locals almost always spend propor- tionately more on chargeable
expenses than the International.  The record contains an audit of
Local 6000, and this audit  indicates that the local spent 90.66% of
its dues on chargeable  expenses in 1992, while the International
allocated 75.69% of  its expenses to chargeable expenses during the
same year.  The record also contains evidence of local expenditures in
 1988; in particular, an arbitrator found that each of five locals 
spent proportionately more on chargeable activities in 1988  than did
the International. See In re International Union &  Locals 6000, 723,
571, 699, & 70, United Auto., Aerospace, &  Agric. Implement Workers,
94 Lab. Arb. (BNA) 1272, 1294  (1990) (referred to in UAW Resp'ts
Response to Notice to  Show Cause and Br. in Support of a Grant of
Summ. J. to the  UAW Resp'ts at 34-35 & n.14, reprinted in App.
193-94).  The General Counsel presented no evidence that a local had 
ever spent less, as a percentage of total expenditures, on  chargeable
expenses than had the International. Although  the cumulative evidence
is not overwhelming on this issue, we  cannot find that the Board was
unreasonable in concluding  that the Union acted rationally "on the
basis of relevant  considerations," Reading Anthracite Co., 1998 WL
726724, at  *2, in determining that local unions normally spend
propor- tionately more on chargeable expenses than does the Interna-


Moreover, the Union's organizational structure lends fur- ther support
to the Board's conclusion that the Union did not  arbitrarily presume
that the International conducts more  nonrepresentational activity
than the locals. The Internation- al maintains several distinct funds
and departments that  engage in nonrepresentational activity: the
Organizational,  Education, and Communication Fund, the Community
Action  Program, the International Affairs Department, the Commu- nity
Services Department, and the National Organizing De-


partment. All of the expenditures associated with these  International
bodies are considered to be non-chargeable to  nonmembers.


Petitioners offer no good argument to counter the Board's  second
justification. The reason for this is obvious: the  Board's judgment
in this case is greatly bolstered by the  undisputed evidence on the
procedures available to nonmem- bers to challenge the Union's fee
allocation. Even the Gener- al Counsel acknowledged that, given the
challenge procedure,  "the risk of overpayment is minimized." Br. of
Counsel for  the General Counsel to the NLRB 23, reprinted in App.
288.  The Board correctly found that these procedures mitigated 
petitioners' concerns that any of their payments would be  unlawfully
used for nonrepresentational activities. Any chal- lenge to the local
fee calculation is presented to a neutral  arbitrator, appointed by
the American Arbitration Association  ("AAA"), who considers the
challenge according to AAA  established procedures. Upon initiation of
a fee challenge,  the entire reduced fee paid by an objector is held
in an  interest-bearing escrow account until the arbitrator resolves 
the challenge. The Union has the burden of proving to the  arbitrator
that it has accurately calculated the fee reduction,  and, unlike in
Lowary, 903 F.2d at 431, the Union is entitled  to no local
presumption during the arbitration proceedings.  In other words, the
Union must introduce evidence demon- strating that the chargeable
percentage of expenditures for  the challenger's local was higher than


Petitioners unconvincingly argue that this procedure puts  the cart
before the horse, because the thrust of Hudson is  that a potential
objector should not have to object prior to  knowing the basis for the
Union's allocation. This is a  crabbed reading of Hudson. Hudson
requires that the Union  provide potential objectors "sufficient
information to gauge  the propriety of the union's fee." 475 U.S. at
306. The Court  clearly contemplated that some estimates would have to
be  made. The only question here is whether, given the facts 
presented to the Board, and the procedures adopted by the  Union,
potential objectors have "sufficient information," not 


exact information. In this case, the procedures amply protect  those
objectors who feel that their local spends proportionate- ly more on
nonrepresentational expenses than does the Inter- national.


Moreover, the principle undergirding Hudson and Beck is  that a
nonmember's funds should not be used by the Union  for activities to
which he has objection. The procedure  adopted by the Union adequately
protects nonmember objec- tors from this outcome. See Ellis v.
Brotherhood of Ry.,  Airline & S.S. Clerks, 466 U.S. 435, 444 (1984)
(approving an  advanced fee-reduction system and an interest-bearing
es- crow account for objectors as an alternative to rebate  scheme).
Indeed, the objection procedure is a perfectly  sensible system. The
Union's system allows nonmembers  who have some reason to question the
level of their local's  non-chargeable activity to easily raise a
challenge, thus forc- ing the Union to justify its fee allocation. And
there is  absolutely no risk that the funds collected from any such 
individuals will be used for non-chargeable activities.


Finally, and most importantly, petitioners' crabbed inter- pretation of
Hudson entirely ignores the fact that this case  presents a DFR claim.
The Court in Hudson was not  required to assess a nonmember's
objection in connection  with a claimed breach of a union's duty of
fair representation.  And the Court certainly never suggested, either
in Hudson or  in Beck, that the DFR doctrine changes complexion when 
applied in a case of this sort. The duty of fair representation 
protects against bad faith, discriminatory, and arbitrary ac- tion by
a union against represented employees. Where, as in  the instant case,
a union uses a rational method to apportion  fees and takes positive
steps to establish neutral and fair  procedures to protect the legal
rights of nonmembers, a  complainant is hard pressed to show a DFR


Given the evidence presented to the Board regarding the  available
audits of local chapters' expenditures, the structure  of the
International and its relationship to nonrepresentation- al
expenditures, and the challenge procedure, and given the  deferential
review mandated by the posture of this case, we 


are constrained to uphold the Board's conclusion that the  Union did
not violate its duty of fair representation. We  cannot say that the
Board erred in finding that the Union's  actions were not "irrational"
or "without a rational basis or  explanation." Marquez, 525 U.S. at
46. The Board was not  asked to decide whether the Union's choices
were "better or  more logical than other possibilities," but only
whether the  Union "act[ed] on the basis of relevant considerations." 
Reading Anthracite Co., 1998 WL 726724, at *2. There is  substantial
evidence to support the Board's finding that the  Union did not breach
its duty of fair representation. There- fore, this court has no
business second-guessing the Board's  judgment. As Chief Judge Posner
noted in International  Ass'n of Machinists, "[i]t is hard to think of
a task more  suitable for an administrative agency that specializes in
labor  relations, 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." 133 F.3d at 1015.


III. Conclusion


For the reasons articulated herein, we grant Mr. Gally's  petition for
review and remand the case to the Board to  determine the appropriate
remedy. We deny the petition for  review regarding the Union's use of
a local presumption.