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January 12, 2021

Stroock

Yesterday, the Second Circuit affirmed Stroock’s victory for our clients American Federation of Teachers and New York State United Teachers in their defense against a putative class action seeking repayment of potentially millions of dollars in agency shop fees collected from non-union unit members over the course of decades.  In 2018, after forty years of Supreme Court precedent to the contrary, agency shop fees – sums paid to unions by non-members to cover collective bargaining and contract administration costs – were ruled unconstitutional in the public sector by the Supreme Court.  See Janus v. AFSCME, 138 S. Ct. 2448 (2018).  A slew of suits followed – supported by anti-union interests – to recover those fees, which had been collected in compliance with previously valid law affirmed by the Supreme Court.  Here, plaintiffs brought claims for disgorgement under 42 U.S.C. § 1983 and New York State tort law, sounding in conversion and unjust enrichment.  
 
The Second Circuit, affirming Judge Failla (S.D.N.Y.), ruled that the unions were shielded from liability by the “good faith” defense – i.e., a private entity’s compliance with previously valid law.  Moreover, the court upheld the constitutionality of New York Civil Service Law § 215, a post-Janus enactment passed to shield unions against claims for the return of agency shop fees, which plaintiffs attacked as an illegal attachment to an appropriations bill.  Furthermore, the court reasoned that plaintiffs lacked standing for any prospective claims, as the unions had not only acknowledged the unconstitutionality of agency shop fees, but also ceased the collection of same, therefore obviating any future injuries.  
 
While this is not the first decision in the Second Circuit to consider the applicability of the good faith defense to public-sector union agency shop fee collection post-Janus, this is the first post-Janus disgorgement opinion affirmed out of a New York district court, and the first to affirm the constitutionality of New York’s statutory bar on these claims. 

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