Tag Archives: agency fees

A Small Chicago Firm Has Quietly Funded Nearly Two Dozen Anti-Union Lawsuits

Originally published in The Intercept on December 23, 2019.
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A lawyer who filed 21 class-action lawsuits against unions over the last two years has previously said that his lawsuits were not part of any concerted effort to target public-sector unions and that “the idea to bring these lawsuits was entirely my own.” It turns out, however, that his lawsuits are backed by a small finance litigation firm in Chicago, according to a court filing that has not been previously reported. The firm, Juris Capital, is in the business of bankrolling litigation upfront, making bets that it will enjoy an ample cut of a plaintiff’s proceeds.

Attorney Jonathan Mitchell filed his lawsuits in New York, New Jersey, Pennsylvania, Minnesota, Maryland, California, and Washington state in the weeks and months before the Supreme Court issued its decision in Janus v. AFCSME, a case that significantly weakened public-sector unions.

In its landmark Janus ruling, the Supreme Court said in June 2018 that public-sector unions cannot collect fees from workers who do not wish to be union members. The court deemed unconstitutional a longstanding practice of unions charging so-called agency fees to workers who did not opt to join a union but benefited from its bargaining nonetheless.

Mitchell’s litigation seeks hundreds of millions of dollars in retroactive payments from public-sector unions, refunds on behalf of workers ideologically opposed to ever having paid any union agency fees. Most states have two- to three-year statutes of limitations on these kinds of suits, while Minnesota’s goes back six years. In the immediate aftermath of the Janus decision, conservative legal foundations — including the Pacific Legal Foundation, the Buckeye Institute, and the National Right to Work Legal Defense Foundation — also filed similar lawsuits.

At the time of his initial court filings, Mitchell also had a pending nomination by President Donald Trump to serve as chair of the Administrative Conference of the United States, a federal agency dedicated to improving government administration. Tapping Mitchell, a former visiting professor at Stanford Law School and before that the Texas solicitor general, to lead the nonpartisan agency rankled some, as he had a long conservative legal record. (Mitchell’s nomination, which was not approved by the full Senate, was returned to the White House at the end of the last Congress, and he was not renominated this year.)

Mitchell’s law firm that brought the anti-union lawsuits, Mitchell Law PLLC, was registered in June 2018 — the same month as the Janus ruling. A month later, Noam Scheiber of the New York Times looked at Mitchell’s involvement in the lawsuits, writing that it suggested “a well-coordinated effort.” Mitchell declined Scheiber’s request to discuss the matter, citing his pending nomination “and my desire not to draw attention to the lawsuits.” Nobody knew who funded the work of Mitchell Law.

Not for lack of trying. Also in July 2018, Sen. Sheldon Whitehouse, D-R.I., who sits on the Senate Judiciary Committee, sent a letter to Mitchell, expressing his concern that the lawyer might be part of the same “coordinated, covert, and well-funded” effort to crush public-sector unions that led to the Janus ruling. Whitehouse requested, among other things, a list of all “persons or entities that have provided funding for or have a financial interest, including contingency interests” in the outcome of his post-Janus lawsuits, as well as details on how he identified plaintiffs for his suits.

In his response letter, Mitchell wrote that he “can assure you that I am not part of any ‘campaign’ or coordinated effort to litigate against public employee unions.” He claimed that the idea to “bring these lawsuits was entirely my own, and it was not made in conjunction or coordination with the Janus litigants or any of the entities that you mention in your letter.” He declined to share who was funding the litigation, citing attorney-client and “attorney-work product” privilege, but insisted that there was nothing covert about his efforts.

Thirteen months later, Mitchell had to file a rare disclosure form, providing information about his lawsuits that he’d never before had to share publicly. This was thanks to a rule in the U.S. District Court for the Northern District of California that requires mandatory disclosure of third-party funding agreements for class-action lawsuits.

In a filing dated August 13, 2019, Mitchell disclosed that “Juris Capital LLC has provided a non-recourse loan” to his law firm and that the “loan is to be repaid with the proceeds that Michell Law PLLC receives from any of the approximately 20 class-action lawsuits that the firm has brought against public-sector unions in the wake of Janus, including this case.” In sum, he concluded, “Juris Capital LLC therefore has a ‘financial interest in the subject matter in controversy.’”

Reached by phone, Mitchell declined to comment.

JURIS CAPITAL IS a decade-old privately held litigation finance firm incorporated in Chicago. Headed by David Desser, a self-described “pioneer in the commercial litigation finance industry,” Juris is one of just a few litigation finance firms in the U.S that provide upfront funding for pending litigation and take a cut of the plaintiff’s settlement or jury award. Desser once told the New York Times that overall, “our returns are well in excess of 20 percent per year” and that “we’re certainly beating the market.” While Juris is not required to identify its funders, media reports have previously described it as “backed by two hedge funds” and “a group of dedicated investors.”

Randi Weingarten, president of the American Federation of Teachers, blasted Juris for hiding its donors.

“While labor unions are forced to publicly disclose nearly every financial transaction they make, those plotting our demise hide behind front groups to plow dark money into bad-faith lawsuits that tie up union resources and hurt working people,” she told The Intercept. “It’s well past time that Juris is exposed for what it is: a dark-money vehicle trying to deny workers a voice at work and in our democracy.”

The AFT lost 84,500 agency-fee payers immediately after the Janus ruling, though it added another 88,000 members between November 2017 and November 2018. Many conservative groups have been running campaigns since June 2018 encouraging public-sector union members to disaffiliate altogether.

In many ways, the cases being filed against public-sector unions appear quite unusual compared to the kinds of cases Juris and other finance litigation firms typically invest in. Generally finance litigation firms look for low-profile cases, in which the chances of winning or settling are high, so as to prioritize quick, reliable returns.

In 2010, Desser described his firm’s approach like this: “We are cherry-picking the absolute best cases with a fact pattern that we can deconstruct. We’re not interested in winning 1 out of 10 like in the venture capital world, where you look for that home run. … We want to win 7 out of 10, with doubles or triples on our money.” Desser did not return The Intercept’s requests for comment.

So far, the wave of post-Janus lawsuits, both those led by Mitchell and those led by conservative legal foundations, have not yet proved successful, as trial courts across the country have unanimously accepted unions’ arguments in roughly 25 cases that they were acting in good faith prior to Janus and therefore, should not be held responsible for funding the agency fees charged prior to last year’s Supreme Court decision. In some cases though, unions have settled rather than take all the legal challenges through court. A spokesperson for the National Right to Work Foundation told Bloomberg Law in late November that the organization has settled 10 cases and recovered tens of thousands of dollars in agency fees.

While unions have so far had success in the lower courts, the post-Janus litigation is now moving onto the appellate level, where their fortunes could change. In November, the U.S. Court of Appeals for the 7th Circuit became the first federal appeals court to endorse this “good-faith” argument in favor of unions, but six more appellate courts are set to decide on the issue soon. As Robert Iafolla noted recently in Bloomberg Law, “A single circuit ruling that rejects [this argument] would create a split that may pave the way for the issue to reach the Supreme Court.”

“I think in most cases, a finance litigation firm’s hope would be to not go to the Supreme Court, as that means it would be a case that is getting dragged on for years and years,” said Charles Agee, founder and CEO of Westfleet Advisors, a finance litigation consulting firm. “I think most litigation funders hope their cases settle before going to trial.”

Another possibility — though this, too, would be unusual — is that the lawsuits are being waged primarily to drain union coffers in defense. “Juris and others know that if you entangle unions in endless litigation, you can begin to starve our resources,” Weingarten of the AFT said. From this perspective, it’s a win-win for the plaintiffs — either they win and the investors take home profits, or they lose but the unions are still on the hook for hundreds of thousands of dollars in legal defense fees. One example lawyers point to of this sort of strategy is billionaire investor Peter Thiel backing a series of lawsuits against Gawker Media, including a case brought by Hulk Hogan, which ultimately bankrupted the company. Thiel described his investments as “one of my greater philanthropic things that I’ve done.”

Gary Chodes, who has worked in the litigation finance world for the last 15 years, told The Intercept that it would be really difficult to find out who was funding the post-Janus cases, though he has indeed seen some “politically oriented” lawsuits over the years. For example, he said, conservative-leaning think tanks supported Texas ranchers in lawsuits in which local governments used eminent domain to take away cattle ranchers’ water rights.

“Are those cases that will generate a lot of interest from the legal funding industry? No, they’re probably not economical winners,” he said. “But they’re important philosophical battles.”

Will Baude, a libertarian law professor who defended union agency fees as constitutional, told the New York Times that he would expect the Supreme Court to be less sympathetic to “good-faith” defenses than lower courts. “If I were the unions, I’d be really nervous,” he said.

Some of the post-Janus cases are also challenging the legal principle of exclusive representation, in which a union represents all workers in a unit if a majority of the unit endorses it. The majority rule principle is written into the National Labor Relations Act, and Catherine Fisk, an expert on labor law at the University of California, Berkeley told The Intercept that it would be “an extraordinary feat of judicial activism” if the Supreme Court struck that down.

Scott Barton, a spokesperson for Pacific Legal Foundation, told The Intercept that the law firm filed one post-Janus case in California this past summer but “have had no involvement with Jonathan Mitchell or his cases.” Lisa Gates, a spokesperson for the Buckeye Institute, told The Intercept that the think tank is involved in four cases (two in Ohio, one in Minnesota, and one in Maine) and “are not working with Jonathan Mitchell on any cases.” A spokesperson from the National Right to Work Legal Defense Foundation did not return requests for comment, though Mitchell told Whitehouse in 2018 that he was not working with them.

Asked about Juris Capital and whether he believes that Mitchell was sufficiently forthright during his nomination process, Whitehouse told The Intercept, “Jonathan Mitchell has a thriving anti-union law practice that appears to be an arm of the corporate donor campaign that gave us Janus v. AFSCME. The corporate interests behind that anti-worker campaign don’t want the public to see what they’re up to, but nominees for important federal posts need to tell the truth to Congress.”

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The Right Is Trying to Bring Down Public Sector Unions. It May Bring Much More Down With It.

Originally published in The Intercept on February 25, 2018.
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In the middle of last week, Dixon O’Brien, a 60-year-old engineer, and his union, the International Union of Operating Engineers Local 150, quietly filed a federal lawsuit against Lincolnshire, a village in a northern suburb of Chicago. Together they raised issue with Lincolnshire officials using taxpayer dollars to fund a statewide lobbying group, the Illinois Municipal League, which advocates for things like limiting collective bargaining and reducing pension benefits. “O’Brien objects to the use of his tax money to fund private organizations that lobby and/or engage in other political activities that run directly against his economic interests and his political beliefs,” the complaint reads.

On Thursday, the head of the same union filed a federal lawsuit against Illinois Gov. Bruce Rauner, challenging portions of state law that requires unions to provide representational services to non-dues paying members. “It is absurd that state law forces unions to provide equal representation and service to public sector workers who are not members and pay nothing toward associated costs,” said union President James Sweeney in a statement.

And then on Friday, the International Union of Operating Engineers Locals 139 and 420 filed a federal lawsuit against Wisconsin Gov. Scott Walker, challenging a law he signed in 2011 that dramatically restricts public employee collective bargaining rights. The unions argue that the law’s restrictions impinge upon their protected free speech rights under the First Amendment.

These three consecutive lawsuits are a warning to the Supreme Court that if it buys into an extreme conservative argument being used to undermine labor unions, the justices are going to take a lot more than just agency fees down with them.

On Monday the Supreme Court will hear oral arguments in Janus v. AFSCME, Council 31 – a case experts have long predicted could strike a mortal blow to public sector unions. The plaintiff, an Illinois state worker named Mark Janus, has argued that he has a First Amendment right to avoid paying anything to a union that bargains on his behalf. With the current ideological leanings of the court, the plaintiff — and the conservative groups backing his lawsuit — face strong odds of victory.

But while most of the media has focused on the fact that the Janus case stands to decimate union coffers – and by extension, Democratic Party coffers – some labor activists and legal scholars have begun sounding the alarm on what they say would be the unintended consequences of the suit, effectively opening up the floodgates for countless lawsuits like the recent ones filed by the International Union of Operating Engineers. If Mark Janus doesn’t have to pay his agency fees because collective bargaining is speech he disagrees with, then collective bargaining is speech. And it can’t be restricted. Indeed, when some of the lazier advocates of Janus lay out the case, they accidentally argue on behalf of  unions’ right to free speech. “Because government is both employer and policymaker, collect­ive bargaining by the union is inherently political advocacy and indistinguishable from lobbying,” wrote George Will on Sunday, directly implicating the First Amendment.

For more than 40 years, the Supreme Court has held that there’s a constitutional difference between a union’s political activities and its collective bargaining work. Compelling workers to fund the former would infringe on their freedom of speech, the court ruled in the 1977. But under current law, collective bargaining is different. Imposing conditions, such as requiring mandatory dues, or limiting the scope of their negotiations to wages and benefits, is fair game.

If the Janus plaintiffs win their case, this critical distinction would be dismantled. (A decision is expected by June, when the court’s term ends.) A union’s bargaining and political lobbying would be treated the same — as protected free speech. In other words, the court would actually be elevating the free speech standards of bargaining. That, in turn, could bring with it new legal protections.

“If the plaintiffs are right that collective bargaining is political speech indistinguishable from lobbying, well, the flip side of that coin is that that protected free speech can’t be restricted,” said Ed Maher, a spokesperson for the International Union of Operating Engineers. “We don’t think this has been thoughtfully considered by the plaintiffs, and it is our belief that a win for Janus will open a tremendous Pandora’s box.”

This Pandora’s box, Maher suggested to The Intercept, holds all sorts of chaotic possibilities for the U.S. legal system and state governments across the country. Nearly all states impose some form of restriction on collective bargaining, limiting who can bargain and what workers can bargain over. If the Janus plaintiffs win in court, the theory goes, then workers could start bringing First Amendment challenges to limitations on their bargaining rights, like the restrictions Walker, the Wisconsin governor, passed in 2011.

And, as the three cases filed last week demonstrate, they’ve already started.

Courts have long sought to avoid applying First Amendment rights to unions. From the earliest court decisions that concerned worker protests in the 19th century, as labor writer and strategist Shaun Richman has written, judges have tended to treat unions “as criminal conspiracies that interfere with employers’ property and contract rights.” And while courts have chipped away further at the free speech rights of workers and unions over the last half-century, they have also expanded the free speech protections afforded to employers and corporations.

Ann C. Hodges, a labor law professor at the University of Richmond agrees that a win for the Janus plaintiffs could invite all sorts of new legal challenges. Writing recently for the American Constitution Society, Hodges said:

Courts have regularly ruled that states like Wisconsin can provide collective bargaining rights to some groups of employees and not others, using the rational basis test to find no equal protection violation… But if all union activity is protected political speech, then these distinctions implicate fundamental rights, invoking strict scrutiny for such classifications. Thus, the differential treatment of employee groups by the states may not survive. Indeed, unions may even have an argument that there is a constitutional right to collective bargaining.

Equally unlikely to survive are many governmental employer restrictions on employee speech. A long line of cases allows government employers to impose various restrictions on employee speech. The Supreme Court distinguishes employee from citizen speech, permitting employers to limit and control employee speech in the interests of the government as employer… A ruling in favor of the Janus plaintiffs could obliterate the distinction, requiring employers to tolerate much unwanted speech by their employees.

Some left activists remain understandably skeptical that Janus could lead to some interesting or even good opportunities for labor, arguing, as Richman wrote, that a judiciary that “that could buy such a craven argument as Janus will refuse to take the precedent to its logical conclusion and shamelessly waving away workers’ free speech rights.” But if the anti-Trump backlash leads to a wave of liberal judge appointments, the legal landscape could grow significantly more friendly for unions over the next few election cycles. Plus, unless Janus ends with an extremely narrow ruling, it would be a while before the Supreme Court could really stamp out all the knock-on cases, even if it wanted to. In other words, legal chaos could reign for years in the lower courts.

Richman goes so far as to say that Janus “could hand new liberal majorities a roadmap for restoring a legal balance of power between corporations and workers.” Or, as Sweeney of Local 150 puts it, “The free speech rights being invoked by the union-busters behind Janus work both ways.”

California Teachers Unions Push for Cushion Before Upcoming SCOTUS Case

Originally published in The American Prospect’s Tapped blog on September 8, 2015.
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This fall, the Supreme Court will hear arguments in Friedrichs v. California Teachers Association, a case that could severely weaken the power of public-sector unions. The justices will decide whether such unions can charge “agency fees” (also known as “fair share fees”) to individuals who wish to dissociate with their union’s political lobbying but still benefit from workplace collective bargaining.

These reduced annual dues help stave off “free riders”—those who enjoy the advantages of union membership without financially contributing to the union’s work. The case’s lead plaintiff, Orange County teacher Rebecca Friedrichs, insists her free-speech rights are denied by paying agency fees, and argues that unions won’t actually suffer if she wins in court. “It’s hard for me to describe,” she told The Washington Post. “I just want liberty. I want to stop this silencing of my voice and the silencing of millions of teachers out there.”

As the Prospect’s Justin Miller put it, “the Friedrichs case has the potential to overturn decades of legal precedent [since 1977] that has become intractably embedded in union strategy—and state law.”

In the meantime, The Sacramento Bee reported that teacher unions in California are pushing Governor Jerry Brown to embrace a last-minute measure that would permit unions to address all new teachers during their orientations. Such conversations could help unions recruit new members, and thereby mitigate the negative effects of an unfavorable ruling in Friedrichs. As reporter Christopher Cadelago wrote:

Up against the clock in the Legislature, the labor groups are pushing for a bill that could give unions some time—a half-hour—to meet with employees to voice the benefits of union participation. That, some believe, could prevent workers from fully withdrawing from their ranks if the court rules against fair share fees.

One version of the teacher unions’ bill is “nearly identical” to a California bill that grants unions up to 30 minutes to speak to new home health-care workers during their orientation period. That law was passed shortly after the Supreme Court’s 2014 Harris v. Quinn ruling, which said that Illinois home health-care workers could not be required to pay agency fees. (Harris v. Quinn avoided the free-speech questions that will be considered in Friedrichs.)

Groups like the Association of California School Administrators, the California Association of School Business Officials, and the California Special Districts Association say that bills like the ones proposed by the teacher unions should be considered only after the Supreme Court makes its final decision in Friedrichs, and only when there is more time available for public comment.

I’d guess that if California legislators were planning on supporting a bill like this, they’d wait until after the Friedrichs decision came down, just as the home health-care worker bill passed after the Harris case was decided. Either way, we won’t have to speculate for much longer, because California’s legislative session ends this week.