                        United States Court of Appeals


                     FOR THE DISTRICT OF COLUMBIA CIRCUIT


            Argued September 3, 1997   Decided September 23, 1997


                                 No. 96-1321


                            Lawrence R. Ferriso, 

                                  Petitioner


                                      v.


                       National Labor Relations Board, 

                                  Respondent


          International Union of Electronic, Electrical, Salaried, 

                   Machine and Furniture Workers, AFL-CIO 

                       and Engineers Union Local 444, 

                                 Intervenors


                  On Petition for Review of an Order of the 

                        National Labor Relations Board


     Raymond J. LaJeunesse, Jr. argued the cause and filed the 
briefs for petitioner.



     Richard Cohen, Senior Attorney, National Labor Relations 
Board, argued the cause for respondent, with whom Linda 
Sher, Associate General Counsel, and Aileen A. Armstrong, 
Deputy Associate General Counsel, were on the brief.

     James B. Coppess argued the cause for intervenors, with 
whom Laurence S. Gold and Peter E. Mitchell were on the 
brief.  James G. Mauro, Jr. and Sheldon Engelhard entered 
appearances.

     Before:  Wald, Williams and Ginsburg, Circuit Judges.

     Opinion for the Court filed by Circuit Judge Wald.

     Wald, Circuit Judge:  Lawrence R. Ferriso ("Ferriso"), 
although not a member of the International Union of Elec-
tronic, Electrical, Salaried, Machine and Furniture Workers, 
or its Local 444 (respectively, the "International" and the 
"Local";  collectively, the "Unions"), is required to pay fees to 
the Unions by virtue of an "agency-shop" agreement between 
the Unions and Ferriso's employer, Paramax Systems Corpo-
ration.  Agency-shop agreements require all of a bargaining 
unit's employees, whether or not they are union members, to 
pay fees (termed "agency fees") to a union for the benefits 
that the union confers on them, including collective bargain-
ing and other forms of representation.  When Ferriso re-
quested that the International reduce his agency fees to 
reflect only those expenses properly chargeable to him, the 
International did so, but without providing any explanation of 
its calculations other than a list of what percentage of the 
expenses of each of its affiliates it believed was chargeable to 
Ferriso.  Believing that the Unions were obliged to justify 
their calculations of his agency fees with a breakdown of their 
major categories of expenditures, verified by an independent 
audit, Ferriso filed an unfair labor practice charge with the 
National Labor Relations Board ("the NLRB" or "the 
Board").  The NLRB found that the Unions were required to 
provide Ferriso with data on their major categories of expen-
ditures, but that no independent audit was necessary.  On 
appeal, Ferriso argues that the latter finding was erroneous.  



The Unions have intervened, and argue, with the Board, that 
this ruling should be upheld.

     We conclude that Ferriso is correct, and that the Unions 
are required to provide him with an independent audit of 
their major categories of expenditures.  We also find that the 
Board's apparent methodology for ascertaining what consti-
tutes an appropriate audit is incorrect, and that such audits 
must, in general, conform to the ordinary norms for audits of 
comparable entities.

                                I. Background 


     Ferriso joined the Local in 1974;  in 1976, he resigned, but 
continued to pay dues to the Unions because of the agency-
shop agreement.  In March 1991, he read a notice in the 
union newsletter about procedures for reducing nonmembers' 
agency fees to eliminate charges for nonrepresentational ac-
tivities.  The notice said that objectors would receive a "de-
tailed explanation" of the basis of the reduction and that any 
challenges would be resolved by an impartial arbitrator.

     Ferriso sent a letter seeking a reduction.  In June, he 
received a letter that said that the Union had reviewed its 
records and had reduced Ferriso's agency fee so that it only 
reflected collective-bargaining or representational costs.  The 
letter listed the amounts of Ferriso's fees that went to the 
Local, to District Council 3 (a regional affiliate of the Unions), 
and to the International.  It also indicated the percentage of 
the fees paid to each that were chargeable to Ferriso:  58.1 
percent for the International, 65 percent for the District, and 
98.9 percent for the Local.  Ferriso's dues subsequently 
dropped in accordance with the calculations set forth in the 
letter.

     The letter did not provide any of the expense information 
underlying the Unions' calculations, and did not indicate that 
these calculations had been verified by any third party.  It 
did describe the procedure by which Ferriso could challenge 
the calculations before an arbitrator.  Ferriso elected not to 
invoke this procedure, and instead filed an unfair labor prac-
tice charge with the NLRB against the International and the 



Local, claiming that they had failed to provide him with 
sufficient information to allow him to decide whether to 
challenge their calculations.  The NLRB General Counsel 
issued a complaint, and the case was tried before an adminis-
trative law judge ("ALJ").

     On December 2, 1992, the ALJ issued an opinion finding 
that the unions had violated section 8(b)(1)(A) of the National 
Labor Relations Act ("NLRA"), 29 U.S.C. s 158(b)(1)(A) 
(1994), by (i) failing to give Ferriso a breakdown of their 
major categories of expenses, and (ii) failing to have this 
breakdown verified by an independent auditor.  Internation-
al Union of Electronic, Electrical, Machine and Furniture 
Workers, Case No. 29-CB-8055 (Dec. 2, 1992).  The Unions 
filed exceptions to this decision.  On August 27, 1996, the 
Board issued a decision in which it adopted the ALJ's first 
finding, but declined to adopt the second, finding that verifi-
cation by an independent auditor was not necessary.  Inter-
national Union of Electronic, Electrical, Machine and Fur-
niture Workers, 322 N.L.R.B. No. 1, 1996 WL 501580 (Aug. 
27, 1996) (hereinafter "IUE").  Ferriso now appeals the latter 
ruling.

                                 II. Analysis


     In Communications Workers of America v. Beck, 487 U.S. 
735 (1988), the Supreme Court explained the purpose of 
section 8(a)(3) of the NLRA, 29 U.S.C. s 158(a)(3) (1994), 
which permits unions and employers to enter into agency-
shop agreements.  The Court found that, in enacting this 
provision of the NLRA, Congress "authorized compulsory 
unionism only to the extent necessary to ensure that those 
who enjoy union-negotiated benefits contribute to their cost."  
Beck, 487 U.S. at 746.  The Court accordingly concluded that 
section 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 dealing with the employer 
on labor-management issues,' " Id. at 762-63 (quoting Ellis v. 
Brotherhood of Railway, Airline & Steamship Clerks, 466 
U.S. 435, 448 (1984)).  The Court described activities "ger-



mane to collective bargaining, contract administration, and 
grievance adjustment" as the "financial core" of union activi-
ties, which nonmembers may appropriately be compelled to 
support.  Id. at 745.

     A union's status as an exclusive bargaining representative 
gives rise to "a statutory obligation to serve the interests of 
all members [of the bargaining unit] without hostility or 
discrimination toward any, to exercise its discretion with 
complete good faith and honesty, and to avoid arbitrary 
conduct."  Vaca v. Sipes, 386 U.S. 171, 177 (1967).  This 
obligation is also called the duty of fair representation;  ac-
tions for breach of this duty may be brought under section 
8(b) of the NLRA, 29 U.S.C. s 158(b) (1994).  See Vaca, 386 
U.S. at 176.  In Beck, the Court explained that nonmembers 
can bring a claim for improperly charged agency fees as a 
breach of the duty of fair representation, as the claim 
amounts to one that the union "failed to represent their 
interests fairly and without hostility by negotiating and en-
forcing an agreement that allows the exaction of funds for 
purposes that do not serve their interests and in some cases 
are contrary to their personal beliefs."  487 U.S. at 743.

     A.The Independent-Auditor Requirement

     Beck did not address how unions were to verify their 
calculations of the proportion of expenses attributable to 
representational activities.  However, the Court considered a 
related issue in Chicago Teachers Union v. Hudson, 475 U.S. 
292 (1986).  Hudson involved an agency-shop arrangement 
negotiated by the Chicago Teachers Union and the Chicago 
Board of Education.  Because this arrangement was the 
result of state action, the First Amendment barred the union 
from including expenditures for "ideological activities unrelat-
ed to collective bargaining" in the agency fees it charged to 
nonmembers.  Hudson, 475 U.S. at 305 (quoting Abood v. 
Detroit Board of Education, 431 U.S. 209, 244 (1977) (Ste-
vens, J., concurring)).  The union had established a procedure 
under which nonmembers who objected to the amount of 
their fees could challenge them through a procedure that 
culminated in arbitration;  those who prevailed would then be 



issued a rebate of any excess charges.  The Hudson Court 
found that this procedure fell short of constitutional stan-
dards in three respects:  it did not provide sufficient assur-
ance that funds would not be temporarily misused before a 
rebate was issued;  it did not provide enough information 
about the basis of the union's calculations to allow nonmem-
bers to make an informed decision about whether to bring a 
challenge;  and it did not provide an adequately prompt 
opportunity for review by an impartial decisionmaker.  Id. at 
305-07.  In discussing the second of these requirements, the 
Court observed that "[t]he Union need not provide nonmem-
bers with an exhaustive and detailed list of all its expendi-
tures, but adequate disclosure surely would include the major 
categories of expenses, as well as verification by an indepen-
dent auditor."  Id. at 307 n.18.

     Hudson does not apply directly to this case, because of the 
lack of state action.  See Kolinske v. Lubbers, 712 F.2d 471 
(D.C. Cir. 1983) (finding that the NLRA's provision permit-
ting agency-shop agreements does not suffice to render such 
agreements state action).  But this circuit has found that the 
content of the NLRA's duty of fair representation is guided 
by the standards of Hudson.  In Abrams v. Communications 
Workers of America, 59 F.3d 1373 (D.C. Cir. 1995), we noted 
that the holding of Hudson was rooted in " '[b]asic consider-
ations of fairness, as well as concern for the First Amend-
ment rights at stake,' " and so "applies equally to the statuto-
ry duty of fair representation."  59 F.3d at 1379 n.7 (quoting 
Hudson, 475 U.S. at 306).  We accordingly adopted Hudson's 
standard for the nature of the disclosure that unions must 
make under the NLRA to nonmembers of the right to opt out 
and pay less than full union dues.  See also Miller v. Air Line 
Pilots Ass'n, 108 F.3d 1415, 1420 (D.C. Cir. 1997) (finding 
that Hudson and Beck impose similar procedural obligations 
on unions, and therefore applying, in a case governed by 
Hudson, the holding of Abrams that employees may not be 
compelled to arbitrate agency-fee disputes).

     Here, the NLRB found that Hudson's "major categories of 
expenditures" requirement is applicable under the NLRA, 
but that its "independent auditor" requirement is not.  The 



NLRB based this conclusion on its previous decision in 
California Saw & Knife Works v. International Association 
of Machinists and Aerospace Workers, 320 N.L.R.B. 224 
(1995) (hereinafter "California Saw").  Citing Abrams, Cali-
fornia Saw had found that, because Hudson was based in 
part on "basic considerations of fairness," its conclusions were 
applicable under the NLRA.  320 N.L.R.B. at 232-33.  But 
the Board concluded in California Saw that the Court's 
"basic considerations of fairness" rationale "expressly extend-
ed only to the notice requirement."  Id. at 233 n.48.  Because, 
with the exception of this requirement, the standards of 
Hudson "were not formulated to comport with a union's 
obligations under Beck to represent its employees fairly," the 
Board concluded that Hudson's "independent auditor" re-
quirement did not apply to actions brought under the NLRA.  
Id. at 240-41.  The Board apparently believed that "the more 
exacting accounting standards in Hudson derive from first 
amendment intolerance of any compulsory subsidization of 
fees under a state-authorized agency shop," id. at 240 n.82, 
and therefore should not apply to a case in which there is no 
question of state action.  Although the Board rejected Hud-
son's "independent auditor" formula, it did find that some 
form of verification was required, stating that it would exam-
ine whether the verification arrangement before it satisfied 
the union's duty of fair representation under Beck.  Id. at 
241.1

     The NLRA does not speak directly to the question of 
whether an independent audit is required in these circum-
stances.  In cases in which the NLRA is "silent or ambiguous 
as to the specific issue" before us, Chevron U.S.A., Inc. v. 
Natural Resources Defense Council, Inc., 467 U.S. 837, 843 
(1984), "we have traditionally accorded the Board deference 
with regard to its interpretation of the NLRA as long as its 
interpretation is rational and consistent with the statute."  

__________
     1 The Board's decision in the present case said that the standards 
of California Saw would apply to whatever verification arrange-
ment the Unions adopted.  See IUE, 322 N.L.R.B. No. 1 at 2 n.7 
("We note, however, that under California Saw the Board will 
examine whether a union's method of verifying its calculations 
satisfies the union's duty of fair representation.").



NLRB v. United Food & Commercial Workers Union, 484 
U.S. 112, 123 (1987).  Ferriso points out that the Supreme 
Court has said that "fair representation claims often involve 
matters not normally within the Board's unfair labor practice 
jurisdiction, which is typically aimed at effectuating the poli-
cies of the federal labor laws, not redressing the wrong done 
the individual employee," and expressed doubts as to "wheth-
er the Board brings substantially greater expertise to bear on 
these problems than do the courts."  Breininger v. Sheet 
Metal Workers International, 493 U.S. 67, 74 (1989) (citations 
and internal quotations omitted).  But in this passage the 
Court was considering only whether the NLRB's jurisdiction 
over fair representation claims should be exclusive, not 
whether the Board's decisions were entitled to Chevron defer-
ence.  It is one thing to say, as the Court did in Breininger, 
that the Board's expertise in this area does not so dwarf that 
of the courts as to justify depriving the courts of jurisdiction 
to hear fair representation claims, and quite another to deny 
that the Board has any special expertise in this area at all.  
This circuit has heretofore accorded the NLRB the usual 
measure of Chevron deference in matters relating to the duty 
of fair representation, see Finerty v. NLRB, 113 F.3d 1288, 
1291 (D.C. Cir. 1997), and Breininger does not justify a 
significant departure from this practice.

     We nevertheless find that the Board's rejection of the 
"independent auditor" requirement was not rational, because 
any rational interpretation of the NLRA's duty of fair repre-
sentation will necessarily include an independent-auditor re-
quirement.  First, the Board was mistaken in finding that 
Hudson's "basic considerations of fairness" language did not 
extend to its "independent auditor" requirement.  Hudson 
found that "[b]asic considerations of fairness" required that 
"potential objectors be given sufficient information to gauge 
the propriety of the union's fee."  475 U.S. at 306.  The Court 
then explained in a footnote what it meant by "sufficient 
information," saying that "adequate disclosure surely would 
include the major categories of expenses, as well as verifica-
tion by an independent auditor."  475 U.S. at 307 n.18.  It 
follows that everything encompassed by the latter phrase, 



including "verification by an independent auditor," is required 
by "basic considerations of fairness."

     California Saw suggested that the independent-auditor 
requirement might be peculiar to cases involving state action, 
observing that Hudson's "more exacting accounting stan-
dards" derived from "first amendment intolerance of any 
compulsory subsidization of fees under a state-authorized 
agency shop."  California Saw, 320 N.L.R.B. at 240 n.82.  
We do not agree.  Hudson grounded its discussion of infor-
mation disclosure in both "basic considerations of fairness" 
and "concern for the First Amendment rights at stake," 475 
U.S. at 306, indicating that its disclosure requirements were 
not exclusively the product of First Amendment concerns.  It 
is, of course, conceivable in the abstract that the content of 
the duty of fair representation under the NLRA might not 
coincide with that of the "basic considerations of fairness" 
discussed in Hudson.  But we are persuaded that nonmem-
bers cannot make a reliable decision as to whether to contest 
their agency fees without trustworthy information about the 
basis of the union's fee calculations, cf. Hudson, 475 U.S. at 
306, and that an independent audit is the minimal guarantee 
of trustworthiness.  See Miller, 108 F.3d at 1420 (holding that 
similar procedural obligations apply under NLRA and Hud-
son );  Abrams, 59 F.3d at 1379 n.7 (same).

     California Saw cited legislative history in support of its 
rejection of an independent-audit requirement, observing 
that, in the process of deliberating on what was to become the 
Labor-Management Reporting and Disclosure Act of 1959 
("LMRDA"), the House considered but did not adopt propos-
als requiring unions to obtain independent audits.  320 
N.L.R.B. at 241 n.87.  It is true that one of the bills that the 
House considered, H.R. 4473, would have required the finan-
cial records of unions to be independently audited, and that 
these provisions did not appear in the bill ultimately adopted 
by the House.  See H.R. 4473 ss 102(b)(10), 211(b), 86th 
Cong. (1959), reprinted in 1 NLRB, Legislative History of 
the Labor-Management Reporting and Disclosure Act of 



1959 at 193, 237 (1959) (hereinafter "Leg. Hist.").2  The Beck 
Court, however, rejected a similar argument based on the 
LMRDA's legislative history, noting that the House bill in 
question "did not purport to set out the rights of non-
members who are compelled to pay union dues, but rather 
sought to establish 'a bill of rights for union members.' "  487 
U.S. at 758 (quoting H.R. Rep. No. 245, 80th Cong., 1st Sess. 
at 322 (1947)).  The title and provisions of H.R. 4473 make 
clear that it, too, was addressed exclusively to the rights of 
union members.  See, e.g., Title, 1 Leg. Hist. at 166 (referring 
to rights of union members);  s 101(a), 1 Leg. Hist. at 174-75 
(same).  We therefore do not find this argument persuasive.

     B.Who Counts as an "Independent Auditor"?

     The question remains of what suffices to satisfy the re-
quirement of an "independent auditor" under the NLRA--
what qualifications and what degree of independence the 
auditor must have.  The Board and the Unions argue that we 
should not reach these issues, as they were not properly 
raised below.  As to the question of what form of professional 
certification or license is required, the Board concedes that 
the General Counsel argued both before it and before the 
ALJ that verification by an independent auditor meant verifi-
cation by an "independent accounting firm," and that Ferriso 
argued before the Board that it meant verification by a 
"certified public accountant," i.e., a CPA.  NLRB Brief at 5-
6.  This issue was therefore adequately raised.

     As to the meaning of "independent," it is appropriate to 
reach this question in order to correct an error in the 
methodology the Board applied in California Saw.  Although 
California Saw rejected the "independent auditor" formula, it 
did require some form of verification of a union's financial 

__________
     2 In what seems to have been an error, California Saw also cited 
in support of its reading of the LMRDA's legislative history a 
portion of the LMRDA Conference Report that addressed a minor, 
unrelated change made by the conference committee.  See H.R. 
Conf. Rep. No. 86-1147 at 31-32 (1959), reprinted in 1 Leg. Hist. at 
935-36 (1959).  The Board has not attempted to explain this cita-
tion.



data.  In the absence of any counterindications from us, the 
Board might choose to draw on the methodology it applied in 
California Saw for analyzing unions' data-verification ar-
rangements in giving content to the "independent auditor" 
standard on remand.  Some discussion of the reasoning of 
California Saw is therefore necessary.3

     California Saw found that Beck was satisfied by an ar-
rangement under which the international union was audited 
by outside CPAs, but the audits of the district and local 
unions were conducted by employees of the international 
union who were not CPAs.  The Board found that because 
the auditors had accounting training, had served as Local or 
District treasurers, and applied an audit protocol developed 
by the union with an outside consultant, "the General Counsel 
has not demonstrated that the verification of expenses tasks 
at issue here are beyond the skills of the [union] auditors."  
California Saw, 320 N.L.R.B. at 241.  As to auditor indepen-
dence, the Board found that the union took "significant steps 
to assure objectivity" because auditors were not permitted to 
audit affiliates for which they currently or formerly worked 
or of which they were members.  Id. at 241-42.  The Board 
also observed that there had been no allegations that audits 
had been performed "in a less than honest, unbiased, or 
objective manner," and that the international union had an 
independent interest in obtaining objective audits of the 
books of its affiliates.  Id. at 242.

     The Board's methodology contained two errors.  First, it 
imposed very little scrutiny on the verification arrangement 

__________
     3 Indeed, although California Saw rejected the "independent 
auditor" formula, it also seemed to conclude, somewhat confusingly, 
that the auditors in the arrangement before it qualified as "indepen-
dent," saying, for instance, that "[w]e do not accept the premise 
advanced by the General Counsel that the independence necessary 
to prepare verification-of-expense audits of District and Local 
Lodges consistent with a union's obligations under Beck can never 
be assured when there is an employer-employee relationship be-
tween the auditors and the [union]."  320 N.L.R.B. at 241.  It is 
therefore possible that the Board may view California Saw as 
having some weight as to the meaning of the term "independent."



before it, finding it sufficient that the audit had not been 
demonstrated to be "beyond the skills" of the auditors, and 
that the union had taken "significant steps" towards assuring 
objectivity.  Second, and more seriously, it made no reference 
to the accepted norms of the accounting profession in analyz-
ing the expertise and independence of the auditors.  Federal 
and state authorities and professional associations have devot-
ed considerable effort to developing standards of indepen-
dence and professionalism for audits of businesses, employee 
benefit plans, and the like;  potential objectors to agency fees 
should not be required to rely on an audit that does not meet 
the prevailing standards for audits of other comparable enti-
ties.4

     The Court emphasized in Hudson that "absolute precision" 
in the calculation of agency fees "cannot be expected or 
required," Hudson, 475 U.S. at 292 n.18 (quoting Abood, 431 
U.S. at 239-40, n.40).  Similarly, an audit under the NLRA 
need only conform to the prevailing norms for an adequate 
audit.  See Gwirtz v. Ohio Education Ass'n, 887 F.2d 678, 
680-82 (6th Cir. 1989) (approving use of an "adequate" audit-
ing standard that falls short of the "highest level of audit 
service available");  see also Abrams, 59 F.3d at 1381 (approv-
ing a procedure under which union employees keep records of 
their time for only one week out of thirteen).  The nature of 
an adequate audit may vary depending on the size and 
complexity of the auditing task, as this may affect the types 
of entities with which the union may appropriately be com-
pared.  The following is a summary of some of the relevant 
norms that we have identified, and of their likely implications, 
to guide the Board's decision on remand.

     1. "Independent"

     The American Institute of Certified Public Accountants 
("AICPA") has promulgated a wide range of standards of 

__________
     4 A "comparable" entity is one that, because of its size and the 
nature of its activities, presents an auditing task that is similar in 
difficulty and scope to the task at hand (which will in some cases be 
an audit of a single union, and in others an audit of a union and its 
affiliates).



accounting and auditing practice.  This includes a set of ten 
Generally Accepted Auditing Standards, the second of which 
addresses "independence."  See Codification of Statements 
on Auditing Standards, Statement on Auditing Standards 
No. 1, s 150 at 21 (AICPA 1995) (hereinafter "Auditing 
Standards").  AICPA's official interpretation of this standard 
requires that the auditor be "in public practice (as distinct 
from being in private practice)," and states in part:

     It is of utmost importance to the profession that the 
     general public maintain confidence in the independence 
     of independent auditors.  Public confidence would be 
     impaired by evidence that independence was actually 
     lacking, and it might also be impaired by the existence of 
     circumstances which reasonable people might believe 
     likely to influence independence.  To be independent, the 
     auditor must be intellectually honest;  to be recognized as 
     independent, he must be free from any obligation to or 
     interest in the client, its management, or its owners....  
     Independent auditors should not only be independent in 
     fact;  they should avoid situations that might lead outsid-
     ers to doubt their independence.

Auditing Standards, Statement on Auditing Standards No. 1, 
s 220 at 31.5  The Securities and Exchange Commission has 
also adopted a regulation setting forth the necessary qualifi-
cations of an accountant issuing a report on the financial 
statement of a publicly traded company.  That regulation's 
independence requirement bars an accountant from auditing 
a firm or its affiliates if that firm has employed him or anyone 
else from his office during the period covered by his report.  
17 C.F.R. s 210.2-01 (1996).  Based on these authorities, we 
think that it is unlikely that an arrangement like that at issue 
in California Saw would be consistent with the ordinary 
norms for the independence of an audit.

__________
     5 The AICPA has also adopted a Code of Professional Conduct, of 
which the first rule, Rule 101, is Independence.  See Code of 
Professional Conduct, reprinted in Larry P. Bailey, GAAS Guide 
at 44.05 (1995);  see also id. at 44.08--44.20 (reprinting official 
AICPA interpretations of this rule).



     2. "Auditor" 

     The most prevalent category of professional qualification in 
the accounting profession is a license to practice as a certified 
public accountant, or CPA.  "Some states have additional 
categories of accounting practitioners, such as public accoun-
tants or registered accountants, who are not certified but who 
are otherwise licensed to offer certain types of services to the 
general public."  D. Edward Martin, Attorney's Handbook of 
Accounting, Auditing and Financial Reporting s 1.01[1] at 
1-4 (1996).  Federal law permits audits of employee benefit 
plans and publicly traded firms to be performed either by 
certified public accountants or by licensed public accoun-
tants.6  Audits of unions should in general conform to a 
similar standard.

     Ferriso asserts that Hudson should be read to require that 
all audits be performed by CPAs.  Hudson did say, in 
discussing whether the contributions of nonmembers must be 
escrowed in full while a challenge to an agency fee is pending, 
that "[i]f, for example, the original disclosure by the Union 
had included a certified public accountant's verified break-
down of expenditures, including some categories that no 
dissenter could reasonably challenge, there would be no rea-
son to escrow" fees in these categories.  475 U.S. at 310.  
The context makes clear, however, that this reference to a 
certified public accountant was intended as an example, and 
that it is the term "independent auditor" that governs.7

__________
     6 See 17 C.F.R. s 210.2-01 (referring to "certified public accoun-
tants" and "public accountants");  29 U.S.C. s 1023(a)(3)(D) (defin-
ing a "qualified public accountant" permitted to audit an employee 
benefit plan to mean:  "(i) a person who is a certified public 
accountant, certified by a regulatory authority of a State;  (ii) a 
person who is a licensed public accountant, licensed by a regulatory 
authority of a State;  or (iii) a person certified by the Secretary ... 
for a person who practices in States where there is no certification 
or licensing procedure for accountants").

     7 A review of the briefs of the parties in Hudson confirms this 
conclusion.  Neither party referred to a "certified public accoun-
tant" in its brief.  The brief of the Chicago Teachers Union did, 



                               III. Conclusion


     For the foregoing reasons, we grant Ferriso's petition for 
review, and remand this cause to the NLRB for further 
proceedings consistent with this opinion.  On remand, the 
NLRB shall order that the Unions provide Ferriso with an 
independent audit of their financial data, and that the inde-
pendence and qualifications of the auditors conform to pre-
vailing norms for audits of comparable entities.

So ordered.


__________
however, discuss the possibility that a union could avoid the need to 
escrow the full agency fees of objectors pending a challenge if it 
escrowed the maximum amount that could conceivably be in dis-
pute, and asserted that "the risk of miscalculation [of this sum] can 
also be minimized if a union retains a neutral (such as an indepen-
dent auditor or impartial labor arbitrator) to make the calculations."  
Brief for the Chicago Teachers Union at 27 n.19, Hudson (No. 
84-1503).

     The Court's decision only to approve the use of an "independent 
auditor," and not an "impartial labor arbitrator," suggests that the 
Court believed that some professional qualifications were required 
to perform an audit.  In failing to approve the use of an "impartial 
labor arbitrator," the Court seemingly declined to approve a proce-
dure that was already in use by the National Education Association 
("NEA"), and that was described in great detail in a brief that the 
NEA filed as an amicus.  The NEA's procedure relied on a 
calculation made by an arbitrator with "experience in public sector 
labor relations," but not necessarily in accounting.  See Brief for 
the NEA as Amicus Curiae in Support of Petitioners at 10-17, 
Hudson, (No. 84-1503).

                  
