RIPPLE, Circuit Judge.
The plaintiffs, nonunion teachers, filed a suit against the Chicago Teachers Union and the Chicago Board of Education that challenged the constitutionality of the procedural scheme employed by the Union to collect "fair share fees"
This litigation dates back to 1982. Several nonunion teachers brought suit against the Chicago Board of Education (Board) and the Chicago Teachers Union (CTU). The dispute pertains to an "agency shop agreement" entered into in 1982 between the Board and the CTU. An "agency shop agreement" is one that requires every employee in the collective bargaining unit, whether union or nonunion, to pay a fee to help defray the costs of collective bargaining and contract administration. These agreements originated in response to a perceived "free rider" problem created when nonunion members enjoy the benefits of union representation without contributing to the cost of that representation. The Supreme Court sanctioned the agency shop agreement concept in Abood v. Detroit Board of Education, 431 U.S. 209, 97 S.Ct. 1782, 52 L.Ed.2d 261 (1977).
Until 1982, members of the CTU financed the entire cost of collective bargaining and contract administration, and the nonunion teachers were "free riders." In 1981, however, the Illinois General Assembly amended the School Code to authorize the Board and the CTU to enter into an agency shop agreement. See Chicago Teachers Union v. Hudson, 475 U.S. 292, 294-95, 106 S.Ct. 1066, 1069-70, 89 L.Ed.2d 232 (1986). In 1982, the Board and the CTU entered into such an agreement, which required the Board to deduct fair share fees from non-members' paychecks. Id. at 295, 106 S.Ct. at 1070. However, the Illinois statute strictly limited the amount of money deductible from nonmembers' salaries to their proportionate share of the cost of "the collective bargaining process and contract administration." Id. at 295 n. 1, 106 S.Ct. at 1070 n. 1. Such a limitation on the amount of nonmembers' contributions is required by first amendment considerations, which, the Supreme Court has held, forbid a union from collecting "from dissenting employees any sums for the support of ideological causes not germane to its duties as collective-bargaining agent." Ellis v. Railway Clerks, 466 U.S. 435, 447, 104 S.Ct. 1883, 1891, 80 L.Ed.2d 428 (1984). The Supreme Court has also ruled that a union must supply nonmembers an adequate notice or explanation of the basis for the fair share fee so that the nonmembers may challenge the fee amount if they believe their first amendment rights were infringed as proscribed by Ellis. See Hudson, 475 U.S. at 306, 106 S.Ct. at 1075. At the heart of this dispute is the adequacy of the notice procedure employed by the CTU to explain the basis for the fair share fee amount collected from the plaintiffs. For advance clarification, this appeal involves three separate fair share notice procedures. The first (FSN-1) was in place for the
B. Procedural History
1. FSN-1 and the Supreme Court's Hudson decision
In 1983, the plaintiffs challenged the constitutionality of the CTU's fair share fee amount for the 1982-83 school year. See Hudson v. Chicago Teachers Union, 573 F.Supp. 1505 (N.D.Ill.1983). The CTU had computed the nonmembers' fair share fee of the relevant representational costs at ninety-five percent of union members' dues. Id. at 1509. The CTU also established a procedure for considering nonmembers' objections to the deduction (FSN-1). Id. at 1508. After receiving a minimal response from the CTU, the plaintiffs challenged FSN-1 in district court as violative of their first and fourteenth amendment rights. Id. at 1515.
The district court rejected these constitutional challenges. Id. On appeal, however, this court reversed. See Hudson v. Chicago Teachers Union, 743 F.2d 1187 (7th Cir.1984). We concluded that the constitution requires the CTU to implement a procedure that protects nonmembers from being compelled to subsidize ideological activities that are not germane to the collective bargaining process and that the CTU's FSN-1 was inadequate to meet this requirement. Id. at 1190, 1192. The Supreme Court granted certiorari and affirmed our judgment. See Chicago Teachers Union v. Hudson, 475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986). The Supreme Court concluded that FSN-1, as initially adopted by the CTU, contained three fundamental flaws: (1) its choice of a simple rebate remedy created an impermissible risk that nonmembers funds would be used (albeit temporarily) for an impermissible purpose; (2) the procedure failed to provide an adequate justification for the advance deduction of the fees; and (3) the procedure failed to provide a reasonably prompt resolution of disputes by an impartial decisionmaker. Id. at 304-09, 106 S.Ct. at 1074-77. The Court also concluded that the CTU's attempt to remedy these flaws by placing all nonmember funds in escrow did not cure problems (2) and (3) above. Id. at 309-10, 106 S.Ct. at 1077-78. The Court remanded the case to the district court to determine an appropriate remedy. Id. at 310, 106 S.Ct. at 1077.
2. District court's decision on class certification
In their initial action, the plaintiffs sought to maintain a class action on behalf of all similarly situated nonunion employees. See 573 F.Supp. at 1507. They had moved for certification of the class. However, because the district court upheld the constitutionality of FSN-1, the court dismissed the motion to certify as moot. Id. at 1522. On remand, the plaintiffs again moved for class certification. See Hudson v. Chicago Teachers Union, 117 F.R.D. 413, 414 (N.D.Ill.1987). The district court denied the motion. Id. at 415. It concluded that the decision to certify the class hinged on the single issue of the type of relief sought by the plaintiffs. The court reasoned that, while the plaintiffs' initial goal in the lawsuit appeared to be injunctive relief (a Rule 23(b)(2) class action),
3. District court's decision on FSN-3
Meanwhile, the CTU attempted to revise its fair share notice procedure to comply with Hudson's mandate. A revised procedure was implemented for the 1986-87 school year (FSN-2), but the plaintiffs challenged it as constitutionally inadequate under Hudson. While the adequacy of FSN-2 was before the district court, the parties agreed that all fair share fees collected by the CTU would be deposited with the clerk of the court pursuant to Rule 67 (Rule 67 funds).
The district court then considered another CTU motion to release the Rule 67 funds on the ground that FSN-3 complied with Hudson's mandate. The court rejected the plaintiffs' claim that FSN-3 failed to comply with Hudson. To the contrary, the court concluded that the ability of the plaintiffs to criticize the CTU's calculation of the fair share fee based on its employment of allegedly inappropriate cost allocation methods and an improper definition of collective bargaining actually demonstrated that the CTU was complying with the primary mandate of Hudson: providing sufficient information to potential objectors to enable them to gauge the propriety of the fee. Id. at 1340, 1343. The district court concluded that the plaintiffs' challenge to the CTU's methods for determining the fee mistakenly confused the separate issue of adequacy of notice with the issue of the accuracy of the fee itself. Id. at 1340. The court explained that, under Hudson, the notice procedure could pass constitutional muster without necessarily guaranteeing the accuracy of the fee. To address nonmembers' challenges to the accuracy of the fee, Hudson mandated that the CTU provide a reasonably prompt opportunity for the resolution of disputes by an impartial decisionmaker. Id. The purpose of the notice procedure was limited; it only had to give the plaintiffs enough information to evaluate the accuracy of the fee so that they could determine whether they wanted to challenge the fee. Moreover, the court noted that, if Hudson had intended the federal courts to scrutinize meticulously the accuracy of the fee, it would not have required the CTU to establish its own internal procedure for resolving fee disputes. Id. at 1340.
The court next addressed the plaintiffs' specific challenges to the fee calculation and the notice procedure. First, it concluded that the CTU's own arrangement for holding disputed funds in escrow would provide the plaintiffs protection until an impartial decisionmaker resolved their challenges to the fee. Id. at 1341. Thus, the court concluded that its holding these funds in escrow was duplicative and unnecessary. Id. The court rejected the plaintiffs' argument that FSN-3 had to explain the rationale for the underlying assumptions employed in calculating the fee. The court concluded that the mere disclosure of these underlying assumptions performed the constitutional function of enabling the plaintiffs to assess the propriety of the fee. Id. at 1341. It also rejected the plaintiffs' complaint that the notice lacked detailed breakdowns of activities and costs. The
The court then turned to the plaintiffs' objection that an independent auditor had not verified the CTU's underlying definition of "collective bargaining." The court agreed with the Second Circuit's reading of Hudson, which limited the auditor's role to the "usual function": ensuring the expenditures that the CTU claimed to make for certain expenses actually were made for those expenses. Id. at 1342 (citing Andrews v. Education Ass'n of Cheshire, 829 F.2d 335, 340 (2d Cir.1987)).
The court also determined that the CTU's method of verifying the distribution of its salary expenses between collective bargaining and non-collective bargaining activities passed muster. Id. at 1342. The court believed that the independent auditor had dug far enough beneath the surface to verify the conclusions reflected in the activity reports of salaried CTU personnel. Id. It further believed that the auditor's verification of salary expenses without resort to time reports was within the reasonable range of discretion accorded to the auditor. Id. at 1342-43.
In sum, the court concluded that the CTU's FSN-3 fulfilled the constitutional mandate of Hudson by providing the plaintiffs with adequate information to evaluate the propriety of the fee calculation. The court reiterated that the detail of plaintiffs' objections to the fee calculation and the notice itself demonstrated that FSN-3 was serving its purpose. Discerning no further reason to hold the disputed fees in escrow, the court granted the CTU's motion to release the Rule 67 funds, ordered the CTU to hold any disputed fees in its own escrow pending resolution of these disputes, and ordered the CTU to exempt the plaintiffs from the deadline (which already had passed during the course of the litigation) for filing fee objections under the CTU's internal dispute resolution procedure. Id. at 1344.
4. Plaintiffs' motion for final judgment
After the district court issued its order and opinion on November 16, 1988, the plaintiffs moved, inter alia, for entry of a final judgment based on the order. The court denied the motion because the November 16 order did not resolve all of the issues raised by the plaintiffs' amended complaint. The court noted that the Supreme Court's ruling in Hudson clearly entitled the plaintiffs to an award of damages arising from the constitutional deficiencies in FSN-1, but that the district court had yet to address the issue of damages. The court indicated that, under the Federal Rules of Civil Procedure, a judgment does not become final until the court awards damages or other relief.
The plaintiffs also moved for a stay of the November 16 order pending appeal of that order. The court determined that the plaintiffs actually sought a reinstatement of the Rule 67 escrow arrangement. In
5. Stipulation for entry of judgment
The district court set April 19, 1989, for a status hearing to address the remaining issues in the litigation. When plaintiffs' counsel failed to appear at the status hearing, the court dismissed the plaintiffs' case with prejudice. On April 28, 1989, the plaintiffs moved to vacate the order of dismissal. The court responded by setting another status conference for June 7, 1989. Following this conference, the parties entered into a Stipulation for Entry of Judgment, which was filed on June 21, 1989. This document stated that the parties "stipulate to the entry of a final judgment on the following terms":
See Stipulation for Entry of Judgment at 1-3 (Appellant's App. A-15). On June 22, 1989, the district court vacated its earlier dismissal of the plaintiffs' case and entered judgment in accordance with the terms of the parties' Stipulation for Entry of Judgment.
6. This appeal
Following the entry of judgment, the plaintiffs filed a notice of appeal on July 18, 1989. The plaintiffs raise two issues on appeal: (1) whether the district court erred in denying its motion for class certification in its October 14, 1987 order (117 F.R.D. 413); and (2) whether the district court's order of November 16, 1988 (699 F.Supp. 1334) "erroneously granted an effective summary judgment to [the CTU] on the constitutionality of FSN-3 under Hudson, without addressing most of the underlying legal issues, and in the teeth of manifest dispute as to many material facts." Appellant's Br. at 16.
A. Propriety of Our Review
Before we address these issues, we must
The Board first contends that we lack appellate jurisdiction. This argument focuses on the Stipulation for Entry of Judgement described in the preceding section. The thrust of the argument is that, even though the Stipulation expressly stated that the teachers accept the district court's two decisions as terminating the substantive issues in the litigation, "without waiving any right of appeal," the Stipulation constituted a settlement rather than "an involuntary and adverse judgment." A settlement is not appealable.
There appears to be a split among the circuits with respect to whether a stipulated judgment may be appealed. The Eleventh Circuit allowed an appeal when the parties' stipulation expressly stated an intent to appeal. See Dorse v. Armstrong World Indus., 798 F.2d 1372, 1376 (11th Cir.1986). By contrast, the Fifth Circuit did not allow an appeal from a consent judgment even though "it contained a recognition that the plaintiff wished to appeal" the issues contained within the judgment. Amstar Corp. v. Southern Pac. Transp. Co. of Texas & Louisiana, 607 F.2d 1100, 1100 (5th Cir.1979) (per curiam), cert. denied, 449 U.S. 924, 101 S.Ct. 327, 66 L.Ed.2d 153 (1980). But see Greenhouse v. Greco, 544 F.2d 1302, 1305 (5th Cir.1977) (party who consented to dismissing case as moot so as to appeal district court's order was not barred from appealing the case because the party did not consent to a judgment that would preclude appellate review).
This circuit has not encountered the precise issue presented in Dorse and Amstar. However, we approvingly cited the Dorse decision in Bash v. Firstmark Standard Life Insurance Co., 861 F.2d 159 (7th Cir.1988).
The Board also maintains that this appeal presents no justiciable controversy. The Board points out that, while the district court's order of November 16, 1988 determined the constitutionality of FSN-3, it did so in the context of adjudicating CTU's motion for a release of the Rule 67 funds being held in escrow with the court. The stipulated judgment now requires that those funds remain in escrow. Therefore, argues the Board, the underlying issue is moot and the district court's opinion is purely advisory. In the Board's view, the district court's opinion and reasoning cannot be viewed independently from the relief granted.
We recognize that this court "`reviews judgments, not statements in opinions.'" California v. Rooney, 483 U.S. 307, 311, 107 S.Ct. 2852, 2854, 97 L.Ed.2d 258 (1987) (per curiam) (quoting Black v. Cutter Laboratories, 351 U.S. 292, 297, 76 S.Ct. 824, 827, 100 L.Ed. 1188 (1956)). However, we must assess — pragmatically — the litigation in its totality. We think it clear that the district court's entry of a final judgment pursuant to the stipulation and judgment amounted to its denial of any relief to the plaintiffs with respect to their contention that FSN-3 is constitutionally infirm. That determination, in the context of this lawsuit, is hardly advisory. See United States v. Procter & Gamble, 356 U.S. 677, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958).
B. The Constitutionality of FSN-3 Under Hudson
The plaintiffs challenge the district court's conclusion that the CTU's FSN-3 was constitutionally sufficient under the Supreme Court's directives in Hudson. The Supreme Court listed three procedural prerequisites to the receipt of fair share fees:
475 U.S. at 310, 106 S.Ct. at 1078. The plaintiffs' attack focuses on the first requirement: an adequate explanation of the basis for the fee.
We believe the plaintiff's position suffers from a fundamental misapprehension as to what Hudson requires. Plaintiffs' complaints have little to do with the constitutional adequacy of FSN-3. Instead, the plaintiffs attack how the CTU calculated the fair share fee. They claim that the CTU has based its fee calculation on an incorrect definition of collective bargaining services, identified categorical expenses too broadly, relied on an economically "invalid" method for allocating costs between chargeable and non-chargeable categories, allocated as chargeable costs activities which do not benefit teachers, employed "incomplete, insufficient, and misleading" accounting verifications, and used incorrect formulas in calculating allocable
The singular role of the federal courts in reviewing the adequacy of a fair share notice is to determine whether the notice gives the nonunion members enough information to challenge the basis for the fee. See id. at 306, 106 S.Ct. at 1075 (holding that the notice procedure must provide potential objectors "sufficient information to gauge the propriety of the union's fee"); Gilpin v. American Fed'n of State, County, & Mun. Employees, 875 F.2d 1310, 1316 (7th Cir.) (court noting the notice procedure contained enough information "to allow the employees to decide whether there is any reason to mount a challenge"), cert. denied, ___ U.S. ___, 110 S.Ct. 278, 107 L.Ed.2d 258 (1989); Gwirtz v. Ohio Educ. Ass'n, 887 F.2d 678, 682 (6th Cir.1989) (holding that Hudson only requires union's procedure to provide adequate disclosure so that nonmember employees could "gauge the propriety of the union's fees"), cert. denied, ___ U.S. ___, 110 S.Ct. 1810, 108 L.Ed.2d 941 (1990); Andrews v. Education Ass'n of Cheshire, 829 F.2d 335, 340 (2d Cir.1987) (holding that once the union's procedure satisfies Hudson standard, it should be upheld even if nonmembers can provide better procedure).
In determining the adequacy of FSN-3's notice, our course has been chartered by Ping v. National Educ. Ass'n, 870 F.2d 1369 (7th Cir.1989) and Gilpin. In interpreting the fair share notice prerequisite articulated in Hudson, the Ping court concluded that "the union must disclose sufficient information to permit non-members to make an informed decision about whether to object to the amount of the fair share fee." 870 F.2d at 1372 (citing Hudson, 475 U.S. at 306-07, 106 S.Ct. at 1075-76). One month following the Ping decision, the Gilpin court decided a challenge to the adequacy of a union's fair share notice. A comparison between the fair share notice upheld in Gilpin, and the CTU's FSN-3, leads us to conclude that FSN-3 likewise is adequate under Hudson.
875 F.2d at 1316. The court rejected the plaintiffs' complaint that the notice did not explain the principles under which chargeable expenses were allocated to the fee because "if it did, the notice would be as long and complicated as an SEC prospectus." Id. The court observed that the notice did indicate which activities were wholly or partly pursuant to collective bargaining activities and what percentage of each expenditure item is allocated for such. Id. Thus, the court concluded, "[t]his should be enough information ... to allow the employee to decide whether there is any reason to mount a challenge." Id.
In the present case, the CTU's thirty-nine page FSN-3 is more complete and more informative than the three page notice approved in Gilpin. It informs nonmember employees that their fair share fee reflects the nonmembers proportionate share of the costs of services rendered by the CTU, necessarily and reasonably incurred for the purpose of performing collective bargaining activities. The FSN-3 identifies and defines two categories: chargeable expenses and non-chargeable expenses. Each category is defined and further broken down to specific items of expenditures.
The FSN-3 provides a two page summary sheet that gives an overview of how the accounting reports were translated into calculation of the fair share fee. The summary breaks down the CTU's expenditures into thirteen functional categories, providing the percentage of total expenditures within each category. Twelve of the categories are treated as chargeable in calculating the fair share fee, and the thirteenth category groups all non-chargeable expenditures.
After reviewing the FSN-3, we conclude that the district court properly found that it was constitutionally adequate under Hudson and in accordance with our prior precedents because it provides sufficient information to enable the plaintiffs "to decide whether there is any reason to mount a challenge." Gilpin, 875 F.2d at 1316. We have reviewed other cases in which courts have found the notice provisions inadequate under Hudson. The CTU's FSN-3 suffers from none of the deficiencies identified in those cases.
C. Class Certification
Although we have ruled adversely to the plaintiffs' FSN-3 challenge, we still must address their class certification contention. On remand from the Supreme Court, the district court denied the plaintiffs' renewed motion to certify a class. It reasoned that the Supreme Court's adjudication of FSN-1 provided the injunctive relief initially sought by the plaintiffs and
To the extent that the plaintiffs' motion for certification sought monetary damages for constitutional violations under FSN-1, the district court correctly articulated the Supreme Court's and this circuit's rationale for denying certification on the "one-way intervention" rationale. See American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 547, 94 S.Ct. 756, 763, 38 L.Ed.2d 713 (1974); Roberts v. American Airlines, Inc., 526 F.2d 757, 763 (7th Cir.1975), cert. denied, 425 U.S. 951, 96 S.Ct. 1726, 48 L.Ed.2d 195 (1976); Jimenez v. Weinberger, 523 F.2d 689, 697-98 (7th Cir.1975), cert. denied, 427 U.S. 912, 96 S.Ct. 3200, 49 L.Ed.2d 1204 (1976); Peritz v. Liberty Loan Corp., 523 F.2d 349, 353-54 (7th Cir.1975). Moreover, to the extent that the plaintiffs' motion sought certification for purposes of obtaining injunctive relief or monetary damages based on FSN-3 or any future version of the notice procedure, we uphold the district court's decision to deny the class certification on the independent ground that, in light of our decision today, the matter is moot.
For the foregoing reasons, we affirm the judgment of the district court.
The notice then provides examples of chargeable expenses: "preparation for and negotiations of collective bargaining agreements with the Chicago Board of Education; contract administration including investigation and processing grievances; meetings, conferences, administrative, arbitral and court proceedings and pertinent investigation and research in connection with work related subjects and issues; handling work related problems of employees; communications with community organizations, civic groups, government agencies and the media respecting the Union's position on work related matters; lobbying and legislative activities with respect to matters concerning employees' work related issues; maintaining membership and recruitment of Board employees; employees group programs; and providing legal, economic and technical expertise in behalf of employees in all matters relating to work related matters."