National Labor Relations Board v. Studio Transportation Drivers Local 399 , 525 F.3d 898 ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
NATIONAL LABOR RELATIONS 
BOARD,
Petitioner,
and
HYO CHOL LIM, No. 06-72695
Intervenor,
v.  NLRB No.
31-CB-11179
STUDIO TRANSPORTATION DRIVERS OPINION
LOCAL 399; INTERNATIONAL
BROTHERHOOD OF TEAMSTERS,
CHAUFFEURS, WAREHOUSEMEN AND
HELPERS OF AMERICA,
Respondent.

On Petition for Review of an Order of the
National Labor Relations Board
Argued and Submitted
February 4, 2008—Pasadena, California
Filed May 12, 2008
Before: Harry Pregerson and Kim McLane Wardlaw, Circuit
Judges, and Ronald B. Leighton,* District Judge.
Opinion by Judge Pregerson
*The Honorable Ronald B. Leighton, United States District Judge for
the Western District of Washington, sitting by designation.
5289
NLRB v. STUDIO TRANSPORTATION DRIVERS 5291
COUNSEL
Kellie Isbell, National Labor Relations Board, Washington,
D.C., for the petitioner.
John C. Scully, National Right to Work Legal Defense Foun-
dation, Inc., Springfield, Virginia, for the intervenor.
Robert A. Cantore, Gilbert & Sackman, Los Angeles, Califor-
nia, for the respondent.
OPINION
PREGERSON, Circuit Judge:
The National Labor Relations Board (“the Board”) asks this
court to enforce its order finding that Studio Transportation
Drivers, Local 399 (“the Union”) committed an unfair labor
practice against Hyo Chol Lim, who refused to join the
5292 NLRB v. STUDIO TRANSPORTATION DRIVERS
Union. We have jurisdiction under 29 U.S.C. § 160(e). We
grant the Board’s application to enforce the order.
I. Background
Hyo Chol Lim (“Lim”) was an employee of Hilltop Ser-
vices, a subsidiary of Universal Studios. The Union repre-
sented a bargaining unit of about ten air conditioning,
electrical, and general maintenance technicians who work for
Hilltop. Local 399 also represented about 2,500 drivers and
wranglers employed by major motion picture studios. Under
a collective bargaining agreement (“CBA”) between the
Union and the studios, the studios were required to hire driv-
ers and wranglers according to specific rules. The CBA’s
rules were violated whenever a studio hired a driver or wran-
gler who was not on the Union roster. A studio could also vio-
late the CBA by hiring a driver or wrangler from a lower
seniority tier if an employee listed on a higher seniority tier
was available. Within each seniority tier, however, a studio
was free to hire whichever employee it wished. When a studio
violated the CBA in hiring drivers or wranglers, the Union
would file a grievance, and an arbitrator would require the
studio to pay “liquidated damages” to the Union.1 These dam-
ages were awarded to the Union itself, as opposed to individ-
ual employees, because of the difficulty in determining which
employee from the Union roster would have been hired had
the studio followed the proper hiring procedure.
1
The parties use the term “liquidated damages” to refer to payments
made to the union as a whole rather than to the individually aggrieved
employees. This, of course, differs from the term’s standard understanding
in contract law, where it refers to a damages amount set forth in a contract
to be paid in the event of a breach. Black’s Law Dictionary 949-50 (8th
ed. 2004). All of the “liquidated damages” awards at issue here were for
violations in hiring drivers and wranglers, not for any hiring violations
related to Lim’s bargaining unit of Hilltop air conditioning, electrical, and
general maintenance technicians.
NLRB v. STUDIO TRANSPORTATION DRIVERS 5293
Local 399’s collective bargaining agreement includes a
union security clause. Union security clauses require all
employees to become members of the Union within a certain
period of time after being hired. In April 2002, Lim notified
the Union that he was asserting his rights as a Beck objector,
based on the right granted him under the Supreme Court’s
decision in Communications Workers of America v. Beck, 487
U.S. 735 (1988). Under that decision, employees who work
under collective bargaining agreements with union security
clauses can refuse to join the union as long as they agree to
pay their fair share of representational expenses. Id. at 762-63.
Lim was the only Beck objector in Local 399 at that time. The
Union conceded Lim’s right to refuse to join the Union under
Beck, but informed him that his fair share of representational
expenses would be 99.6% of dues owed by Union members.
Lim, represented by the National Right to Work Legal
Defense Foundation, filed a charge with the Board challeng-
ing this 99.6% figure and alleging that the Union’s method of
calculating dues was an unfair labor practice under
§ 8(b)(1)(a) of the National Labor Relations Act (the “Act”).
Specifically, Lim challenged the Union’s decision to use “liq-
uidated damages” obtained in the sum of $26,705 to fund
non-representational expenses like political and charitable
donations. Lim argued that this practice unfairly increased his
fair share fee by reducing the amount of money the Union
spent on non-representational expenses from its general fund,
and thus increased the percentage of representational
expenses that he owed.
The Acting Regional Director of the Los Angeles office of
the Board filed a complaint against the Union. The Board
contended that the Union’s liquidated damages income should
have been excluded from the calculation of the fair share fee
owed by Lim. The Board noted that if the “liquidated dam-
ages” income were excluded, Lim would have only paid as a
fee 98.8% of full union member dues, not 99.6%.
5294 NLRB v. STUDIO TRANSPORTATION DRIVERS
The parties agree on the basic framework for how Lim’s
representational fees should have been calculated. They agree
that the fair share fee for Beck objectors like Lim should be
calculated as a percentage of the regular dues owed by Union
members. They also agree that the percentage used to calcu-
late the fair share fee of Beck objectors is the percentage of
the Union’s expenses that qualify as “representational.”2
Finally, the parties agree on how much the Union spent on
representational expenses ($3,193,034) in the year 2001, the
year being used in the calculation of Lim’s representational
fees. The parties disagree, however, on the appropriate total
amount for non-representational expenses. The Union argues
that the $26,705 “liquidated damages” award may be applied
to reduce its non-representational expenses in calculating the
fair share fee chargeable to Lim. The Board, on the other
hand, disagrees, and contends that the Union may not use the
“liquidated damages” award to reduce non-representational
expenses in the calculation. The difference between the two
calculations is summarized in the following table:
Union’s Union’s Non- Union’s % of Member
Representational Representational Total Dues Chargeable
Expenses Expenses Expenses to Lim3
Board’s $3,193,054 $38,484 $3,231,538 98.8%
Calculation
Union’s $3,193,054 $11,779 $3,204,833 99.6%
Calculation
The case was heard before an Administrative Law Judge
2
Because none of the parties challenge this approach, we do not con-
sider whether it satisfies the Supreme Court’s requirement that Beck objec-
tors only pay their fair share of representational expenses. See Beck, 487
U.S. at 762-63.
3
This percentage is calculated by dividing the union’s representational
expenses by the union’s total expenses.
NLRB v. STUDIO TRANSPORTATION DRIVERS 5295
(“ALJ”) on November 3, 2003. The ALJ found that the Union
violated the Act, ordered the Union to recalculate the fair
share fee required of Beck objectors like Lim, and to reim-
burse Lim according to the Board’s calculation. A three-
member panel of the Labor Board unanimously agreed with
the ALJ’s finding that the Union’s practices violated the Act.
The Board applied to this court to enforce its order, which we
now consider.
II. Standard of Review
“The Board’s order will be upheld on appeal if it correctly
applied the law and its factual findings are supported by sub-
stantial evidence.” Glendale Associates, Ltd. v. NLRB, 347
F.3d 1145, 1151 (9th Cir. 2003). This court defers “to the
NLRB’s interpretation of the NLRA if its interpretation is
rational and consistent with the statute.” United Food and
Commercial Workers Union, Local 1036 v. NLRB, 307 F.3d
760, 766 (9th Cir. 2002) (citation omitted).
III. Discussion
Section 8(a)(3) of the National Labor Relations Act allows
unions and employers to agree to union security clauses. Spe-
cifically, that section provides that “nothing in this subchapter
. . . shall preclude an employer from making an agreement
with a labor organization . . . to require as a condition of
employment membership” in the union. 29 U.S.C.
§ 158(a)(3). It goes on to state that “no employer shall justify
any discrimination against an employee for nonmembership
in a labor organization . . . if he has reasonable grounds for
believing that membership was denied or terminated for rea-
sons other than the failure of the employee to tender the peri-
odic dues and initiation fees uniformly required as a condition
of acquiring or retaining membership.” Id.[1] In Communications Workers of America v. Beck, the
Supreme Court held that Ҥ 8(a)(3) permits an employer and
5296 NLRB v. STUDIO TRANSPORTATION DRIVERS
a union to enter into an agreement requiring all employees to
become union members as a condition of continued employ-
ment, but the ‘membership’ that may be so required has been
‘whittled down to its financial core.’ ” 487 U.S. 735, 745
(1988) (quoting NLRB v. Gen. Motors Corp., 373 U.S. 734,
742 (1963)). Beck held that § 8(a)(3) “authorizes the exaction
of only those fees and dues necessary to ‘performing the
duties of an exclusive representative of the employees in deal-
ing with the employer on labor-management issues.’ ” Id. at
762-63 (quoting Ellis v. Railway Clerks, 466 U.S. 435, 448
(1984)). The fees and dues exacted for performing representa-
tional duties are sometimes called “fair share” fees, because
they represent fair and reasonable cost of providing represen-
tational services to each employee represented by the union,
whether such employee is a Beck objector or full-fledged
union member. Beck objectors are thus not required to pay for
expenses that are not germane to representation, such as polit-
ical or charitable donations.
[2] Here, the Board held that the union violated the Act by
offsetting its “liquidated damages” from its nonrepresenta-
tional expenses. The Board relied on its previous decision in
Teamsters Local 618 (Chevron Chemical Co.), in which it
held that a union could not offset from nonrepresentational
expenses the interest and dividend income it had received,
because “there [was] no evidence in the record . . . that the
interest and dividend income was generated solely from funds
(or assets purchased from funds) other than dues and fees for
representational services exacted equally from all unit
employees, including objectors . . . .” 326 NLRB 301, 302
(1998). Similarly, the “liquidated damages” in this case were
derived from arbitration that had been funded partially by
Beck objectors like Lim. Therefore, the Board held that the
union could not offset these “liquidated damages” from its
nonrepresentational expenses.
[3] The Board’s interpretation is rational and consistent
with the Act. Whenever a union’s representational expenses
NLRB v. STUDIO TRANSPORTATION DRIVERS 5297
generate secondary income—be it interest and dividend
income in Chevron Chemical Co. or “liquidated damages” in
this case—the union could use those funds for representa-
tional expenses, which would in turn lower the dues required
of full union members and Beck objectors alike. Therefore, in
choosing to spend the secondary income on political and char-
itable contributions rather than on representational expenses,
the union is essentially increasing the dues required of Beck
objectors in order to pay for these contributions. That is
exactly what the Supreme Court prohibited in Beck. 487 U.S.
at 762-63.
IV. Conclusion
[4] We hold that the Board’s interpretation of the National
Labor Relations Act is rational and consistent with the Act,
and we therefore GRANT the Board’s application to enforce
its order.
GRANTED.