                 FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

DIANNE KNOX; WILLIAM L.               
BLAYLOCK; ROBERT A. CONOVER;
EDWARD L. DOBROWOLSKI, JR.;
KARYN GIL; THOMAS JACOB HASS;
PATRICK JOHNSON; JON JUMPER, On
Behalf of Themselves and the
Class They Seek to Represent,
              Plaintiffs-Appellees,        No. 08-16645
               v.                            D.C. No.
CALIFORNIA STATE EMPLOYEES               2:05-CV-02198-
                                             MCE-KJM
ASSOCIATION, LOCAL 1000, SERVICE
EMPLOYEES INTERNATIONAL UNION,               OPINION
AFL-CIO-CLC,
              Defendant-Appellant,
               and
STEVE WESTLY, Controller, State of
California,
                       Defendant.
                                      
      Appeal from the United States District Court
          for the Eastern District of California
      Morrison C. England, District Judge, Presiding

                  Argued and Submitted
        October 9, 2009—San Francisco, California

                 Filed December 10, 2010

    Before: J. Clifford Wallace, David R. Thompson and
             Sidney R. Thomas, Circuit Judges.

                           19875
19876 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
                Opinion by Judge Thomas;
                Dissent by Judge Wallace
19878 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION




                        COUNSEL

Jeffrey B. Demain, Altshuler Berzon LLP, San Francisco,
California, for the defendant-appellant.

W. James Young, National Right to Work Legal Defense
Foundation, Inc., Springfield, Virginia, for the plaintiffs-
appellees.


                         OPINION

THOMAS, Circuit Judge:

   This appeal presents the question of whether a union is
required, pursuant to Chicago Teachers Union v. Hudson, 475
U.S. 292 (1986), in addition to an annual fee notice to mem-
bers, to send a second notice when adopting a temporary,
mid-term fee increase. Under the circumstances presented by
this case, we conclude that a second notice is not required,
and we reverse the judgment of the district court.

                              I

                             A

  Congress has long recognized the “important contribution
of the union shop to the system of labor relations.” Locke v.
Karass, ___ U.S. ___, 129 S.Ct. 798, 803 (2009) (quoting
Abood v. Detroit Bd. of Ed., 431 U.S. 209, 222 (1977)). The
Supreme Court has underscored this Congressional policy by
enforcing the right of a union, as the exclusive collective-
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19879
bargaining representative of its employees, to require nonun-
ion employees to pay a fair share of the union’s costs. Ellis
v. Bhd. of Ry., Airline and S.S. Clerks, Freight Handlers,
Express and Station Employees, 466 U.S. 435, 448 (1984).
However, the Supreme Court has also recognized the First
Amendment limitation on collection of fees from dissenting
employees for the support of ideological causes not germane
to the union’s duties as collective-bargaining agent. Id. at 447.

   In Hudson, the Supreme Court established certain proce-
dural safeguards to balance these interests by requiring “an
adequate explanation of the basis for the fee, a reasonably
prompt opportunity to challenge the amount of the fee before
an impartial decisionmaker, and an escrow for the amounts
reasonably in dispute while such challenges are pending.” Id.
at 310. Notices issued pursuant to this language have become
known as “Hudson notice[s].” Wagner v. Prof’l Eng’rs in Cal.
Gov’t, 354 F.3d 1036, 1039 (9th Cir. 2004).

   After receiving a Hudson notice, “the nonunion employee
has the burden of raising an objection, but . . . the union
retains the burden of proof” as to the appropriate proportion
of fair share fees. Hudson, 475 U.S. at 306. It is the policies
underlying Hudson that inform the determination of whether
a Hudson notice is adequate: “Basic considerations of fair-
ness, as well as concern for the First Amendment rights at
stake, . . . dictate that the potential objectors be given suffi-
cient information to gauge the propriety of the union’s fee.”
Id.

                               B

   This appeal involves the adequacy of a Hudson notice
given by SEIU Local 1000 (the “Union”), the exclusive bar-
gaining agent for California state employees. The Union and
the State of California have entered into a series of Memo-
randa of Understanding controlling the terms and conditions
of employment for employees, including a provision requiring
19880 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
that all State employees in these bargaining units join the
Union as formal Union members, or if opting not to join, pay
an “agency” or “fair share” fee to the Union for its representa-
tional efforts on their behalf. Id. (known as an “agency shop
agreement”). The agency fee is calculated as a percentage of
the Union dues paid by members of the Union.

   The Union issues a Hudson notice to all nonmembers every
June. The constitutionally required notice is meant to provide
nonmembers with an adequate explanation of the basis of the
agency fee. Hudson, 475 U.S. at 310. The notice contains
information regarding the Union’s expenditures from the most
recently audited prior year, broken down by major category
of expense and then, within each category, allocated between
“chargeable” and “non-chargeable” classifications. “Charge-
able” expenses are those that are “germane” to the union’s
representational functions, and can be charged to all nonmem-
bers of the union. See Lehnert v. Ferris Faculty Ass’n, 500
U.S. 507, 519 (1991) (Blackmun, J., plurality opinion). “Non-
chargeable” expenses are those unrelated to the union’s repre-
sentational functions, such as partisan political expenditures
or purely ideological issues. Id. The union may charge non-
members for non-chargeable expenses, but the nonmember
has the option to object, and only be charged a reduced
agency fee based upon the percent of the union’s total expen-
ditures that can be classified as “chargeable.” In addition, the
nonmember is not charged for certain union-sponsored bene-
fits, such as a credit union credit card, that are not available
to nonmembers.

   The financial information in the notice forms the basis for
calculating the fee to be paid by nonmembers during the ensu-
ing fee year. The notice also provides that for thirty days after
the notice is issued, nonunion employees can object to the
collection of the full agency fee, and elect instead to only pay
a reduced rate during the upcoming fee year based on the per-
centage ratio of chargeable expenditures to total expenditures.
During that thirty day period, nonmembers can challenge the
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19881
Union’s calculation of its chargeable and non-chargeable
expenses, to be resolved by an impartial decision maker. Knox
v. Westly, No. 2:05-CV-02198, 2008 WL 850128, at *2 (E.D.
Cal. Mar. 28, 2008).

   A given agency fee is in effect from July 1 through June 30
of the following year (the “fee year”), at which point the
agency fee set forth in the Union’s next Hudson notice goes
into effect. The 2005 Hudson notice set the agency fee to be
paid by nonunion employees as 99.1% of the Union dues.1
The reduced agency fee of 56.35% of Union dues would be
charged to nonmembers who objected to paying the full
agency fee, and who requested a reduction pursuant to the
procedures and deadlines outlined in the notice. The notice
explicitly stated dues and fees were subject to change without
further notice to fee payers.

   During the summer of 2005, the legislative bodies within
the Union debated and approved a temporary assessment (also
referred to as a dues and fees increase) equal to .0025, or
.25% of Union members’ gross wages. The increase took
effect at the end of September 2005 and terminated at the end
of December 2006, and was expected to raise $12 million for
the Union.

   Specifically, on July 30, 2005 the Union’s Budget Commit-
tee proposed an emergency temporary assessment to create
what was termed in the agenda item introducing it as a “Polit-
ical Fight Back Fund.” This agenda item stated the Fund “will
be used for a broad range of political expenses” in response
to several “anti-union” propositions on the November 2005
special election ballot in California, and that the fund “will
not be used for regular costs of the union—such as office rent,
staff salaries or routine equipment replacement.” Id. On
August 27, 2005 Union delegates voted to implement the tem-
  1
  As noted, the gap between 99.1% and 100% represents the value of
member restricted benefits.
19882 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
porary dues increase. On August 31, 2005, the Union sent a
letter to all members and agency fee payers stating that they
were subject to the new increase, and that the fund would be
used “to defeat Propositions 76 and 75,” other future attacks
on the Union pension plan, and other activities.

   The Union material indicated that the fund would be used
for political activities. Yet, in response to inquiries, the Union
specifically stated it intended to split the increase “between
political actions and collective bargaining actions.” Further,
not all of the political activities fell into the “non-chargeable”
category. The assessment itself included no spending limita-
tions, and the money was actually used for a range of activi-
ties, both political and not, and both chargeable and not.2
Pursuant to the increase, the Controller began collecting addi-
tional fees from Plaintiffs at the end of September 2005.

  Plaintiffs represent two classes of nonunion employees,
those who objected to the Union’s 2005 Hudson notice
(“objectors”) and those who did not (“nonobjectors”) (collec-
  2
   The district court and dissent both conflate political expenses and non-
chargeable expenses when condemning the assessment as “purely politi-
cal” and a drastic departure from usual Union spending. Yet, this is not
supported by the record. The later audit revealed the assessment included
both chargeable and non-chargeable expenses, and the chargeable percent-
age for the 2006 Hudson notice, which included the spending from the
assessment, was actually larger than that from the 2005 notice.
   In addition, not all political expenses are automatically non-chargeable.
Rather, if germane to collective bargaining, they can be chargeable just
like any other expense. See, e.g., Lehnert, 500 U.S. at 520; Foster v. Mah-
desian, 268 F.3d 689, 692 n.6 (9th Cir. 2001); Nat’l Treasury Employees
Union v. Chertoff, 452 F.3d 839, 853, 859-60 (D.C. Cir. 2006) (regulation
allowing employer to unilaterally abrogate collective bargaining agree-
ments fundamentally diminishes a union’s bargaining position and nulli-
fies the right to collective bargaining). Here, Proposition 76 would have
effectively permitted the Governor to abrogate the Union’s collective bar-
gaining agreements under certain circumstances, undermining the Union’s
ability to perform its representation duty of negotiating effective collective
bargaining agreements.
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19883
tively “Plaintiffs”). Knox, 2008 WL 850128, at *2. Plaintiffs
initiated this action in November 2005, alleging the assess-
ment violated their First, Fifth, and Fourteenth Amendment
rights under 42 U.S.C. § 1983. Plaintiffs filed for summary
judgment, and the Union filed a cross-motion for partial sum-
mary judgment. The district court granted Plaintiffs’ motion
in its entirety, and partially granted and partially denied the
Union’s motion. This timely appeal followed.

   We review de novo a district court’s grant of summary
judgment on the sufficiency of the Hudson notice. Cummings
v. Connell, 316 F.3d 886, 890 (9th Cir. 2003). On review, we
must determine, viewing the evidence in the light most favor-
able to the nonmoving party, whether there are any genuine
issues of material fact and whether the district court correctly
applied the relevant substantive law. Olsen v. Idaho State Bd.
of Med., 363 F.3d 916, 922 (9th Cir. 2004).

                               II

                               A

   [1] In reviewing the adequacy of the Hudson notice, we
employ our usual standard of review, as dictated by Hudson.
In that case, the Supreme Court articulated the legal standard
to be applied in this analysis as a balancing test, stating that
“[t]he objective must be to devise a way of preventing com-
pulsory subsidization of ideological activity by employees
who object thereto without restricting the Union’s ability to
require every employee to contribute to the cost of collective-
bargaining activities.” Hudson, 475 U.S. at 302 (quoting
Abood, 431 U.S. at 237).

   The Plaintiffs argue we should abandon the balancing test
established in Hudson, in favor of strict scrutiny review. They
argue that this case involves compelling their speech on polit-
ical issues, and that therefore the government-mandated
speech cases, and their application of strict scrutiny should
19884 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
apply, citing Riley v. Nat’l Fed’n of the Blind, 487 U.S. 781,
795 (1988) and Rosenberger v. Rector & Visitors, 515 U.S.
819, 827-29 (1995). We disagree.

  [2] First, Hudson itself articulated the legal standard to be
applied, and we are not free to reject the balancing test man-
dated by the Supreme Court.

   Second, we articulated the test in Grunwald v. San Ber-
nandino City Unified Sch. Dist., 994 F.2d 1370 (9th Cir.
1993). We noted in that case that in challenges to the First
Amendment procedure used by unions, the union need not
employ procedures that “would minimize further the burden
on agency fee payers.” Grunwald, 994 F.2d at 1376 n.7. “The
test, after all, is not whether the union and the [employer]
have come up with the system that imposes the least burden
on agency fee payers, regardless of cost (a test no system
could possibly satisfy); rather we inquire whether the system
reasonably accommodates the legitimate interests of the
union, the [public employer] and nonmember employees.” Id.

   Therefore, we will apply the normal Hudson balancing and
reasonable accommodation test we have used in the past when
deciding challenges to Hudson notice procedures.3 See, e.g.,
Wagner, 354 F.3d at 1039; Cummings, 316 F.3d at 890.
   3
     The dissent takes issue with the characterization of Hudson require-
ments as a balancing test, focusing instead on language requiring unions
to minimize impingement on nonmembers’ rights and emphasizing the
Union has no “right” to agency fees to be balanced by such a test. The dis-
sent insists a balancing test is inappropriate, yet, there is no other way to
faithfully characterize the procedure set out in Hudson. Hudson acknowl-
edges that competing interests are at play, and describes a particular set of
constitutionally acceptable procedures for attempting resolve with conflict
with fairness to both sides. That is a balancing test.
   In addition, we have consistently recognized that unions have a legiti-
mate interest and “settled” ability to charge agency fees. See, e.g., Cum-
mings, 316 F.3d at 889. We do not intimate this rises to the level of a
constitutional “right,” but that does not mean the union does not have any
rights at all in such a situation. Hudson, 475 U.S. at 302 (affirming union’s
right to “require nonunion employees, as a condition of employment” to
pay fair share fees).
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19885
                               B

   [3] Applying the balancing test, we conclude that the
Union did not violate the Hudson requirements. The Supreme
Court in Hudson recognized the impossibility of determining
the chargeability of a union’s anticipated expenditures at the
outset of the fee year, and specifically approved calculating
the present year’s objector fee based on the prior year’s total
expenditures. The Supreme Court explained, “We continue to
recognize that there are practical reasons why absolute preci-
sion in the calculation of the charge to nonmembers cannot be
expected or required. Thus, for instance, the Union cannot be
faulted for calculating its fee on the basis of its expenses dur-
ing the preceding year.” Hudson, 475 U.S. at 307 n.18 (inter-
nal quotation marks and citations omitted). Hudson thus
struck a balance between the rights and burdens in this con-
text, acknowledging that a union is not constitutionally
required to take any and all steps demanded by fee payers to
insure that its annual fee notice accurately predicts its actual
spending in the upcoming year.

   [4] Use of the prior year method is a practical necessity
because, for large public sector unions, the Hudson notice
must be based on audited financial statements, with the
union’s chargeable percentage calculation verified by an inde-
pendent auditor, and the union must send its fee payers the
independent auditor’s report with its Hudson notice. Hudson,
475 U.S. at 307 n.18. The audit requirement renders impossi-
ble any method of determining the chargeability of the
upcoming fee year’s expenditures other than basing it on the
prior year’s actual expenditures, because one cannot audit
anticipated future expenditures. Until the money has been
spent, the auditor cannot determine whether the expenditures
which the union claims it made for certain expenses were
actually made for those expenses. Prescott v. County of El
Dorado, 177 F.3d 1102, 1107 (9th Cir. 1999), vac’d &
remanded on other grounds, 528 U.S. 1111, reinstated in rel-
evant part, 204 F.3d 984 (9th Cir. 2000).
19886 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
   [5] The inevitable effect of the Hudson “prior year”
method is a lag of at least one year between the time when a
union incurs expenditures and when the audited ratio of its
chargeable expenditures to total expenditures is applied to cal-
culate the objectors’ fee for the next year. Fluctuation is
inherent in such a method: in each year, objectors may be
“underpaying” or “overpaying” fees when compared to the
chargeable percentage of the union’s actual expenditures in
that year because under Hudson’s “prior year” method the fee
is based upon the chargeable percentage of the prior year’s
actual expenses, but the inevitable effect of the Hudson
method is that these over- and undercharges even out over
time. The Hudson notice can never be more than a prediction,
which will inevitably be incorrect as to the union’s actual
expenditures. The Hudson notice is not, and cannot be
expected to be, more than that.

                               C

   [6] The district court faulted the Union for failing to make
an accurate prediction in its June 2005 Hudson notice of its
actual expenditures in the remainder of that fee year due to
the subsequent enactment of the temporary increase. Yet,
under the normal Hudson procedure, any payments over and
above the Union’s actual chargeable expenditures in the 2005
fee year would be incorporated into the rate for the next fee
year. The Supreme Court has determined that this is suffi-
ciently accurate to comply with the constitutional restrictions.
There is no principled distinction to be drawn between the
paradigmatic Hudson procedure and the one employed here.

   Indeed, in the usual Hudson notice situation, the actual
chargeable percentage of a union’s actual spending in any
given year, as well as the precise dollar amount of dues and
fees, will likely vary from the prior year’s figures set forth in
the applicable Hudson notice. The Plaintiffs allege the Union
did not provide a procedure that would avoid the risk that
nonmembers’ funds from the special assessment would be
        KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19887
used, even temporarily, to finance nonchargeable activities,
but merely offered dissenters the possibility of a rebate.
Therefore, the Plaintiffs reason, the procedure is unconstitu-
tional. This construction takes the central Hudson concepts
completely out of context and applies them in a way that
would not only invalidate the fee increase, but would invali-
date the very procedural system decreed by the Supreme
Court in Hudson. Plaintiffs appear to argue that because the
assessment was to be used for “purely” political reasons, it
could not be constitutionally collected from nonmembers in
the first place, and that any collection and then later incorpo-
ration of the non-chargeable amount into a future agency fee
objector rate would be tantamount to an impermissible rebate
of the earlier fee. Yet, the Union had already reduced the fee
for objecting nonmembers, and has demonstrated that the
assessment was not purely non-chargeable, nor intended to be
so. Further, the record belies the assertion that the charges
were used “purely” for non-chargeable expenses.4

   The section of Hudson discussing rebates did not condemn
the advance reduction procedure the Union used here, but
rather a “pure rebate” system where the union collects a fee
that is equal or nearly equal to full dues, and then provides a
rebate of the non-chargeable portion to objectors only at the
end of the fee year. See Hudson, 475 U.S. at 305; see also
Ellis, 466 U.S. at 443-44. Here the Union charged objectors
only 56.35% of the temporary increase, the chargeable per-
   4
     The district court and dissent argue the 2005 Hudson notice is inade-
quate partly because the prior year method does not speak to the “politi-
cal” nature of the assessment or the propriety of the Union’s chargeability
determinations. Yet, we have held there is a fundamental difference
between “chargeability” challenges and “procedural” Hudson notice chal-
lenges. Wagner, 354 F.3d at 1046-47. Plaintiffs explicitly concede theirs
is only a procedural notice challenge, not a challenge to the Union’s actual
spending of the fees. Since, according to Plaintiffs, chargeability is imma-
terial to their challenge, their chief argument (and that of the dissent)
premised upon the alleged non-chargeability of the increase (its purely
political nature), must fail.
19888 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
centage set forth in the June 2005 notice, rather than 100% of
the increase followed by a later rebate.

   Additionally, the district court’s direction that a union must
issue a second Hudson notice when it intends “to depart dras-
tically from its typical spending regime and to focus on activi-
ties that [are] political or ideological in nature,” Knox, 2008
WL 850128 at *8, is practically unworkable. Union spending
may vary substantially from year to year—in one year there
may be a new collective bargaining agreement negotiated,
resulting in a high chargeable percentage for objectors that is
followed by an election year that results in a low chargeable
percentage for objectors. In fact, for example, the chargeable
percentage for 2006, the year incorporating the fee increase
spending, was higher than that for the 2005 Hudson notice.

   [7] Hudson’s prior year method assumes and accepts that
a union has no “typical spending regime,” and that even
though spending might vary dramatically, a single annual
notice based upon the prior year’s audited finances is consti-
tutionally sufficient. Otherwise, a union’s Hudson notice for
an upcoming partisan political election year, following a
negotiating year, could not be based upon the union’s actual
total expenditures in the previous year because the union
would intend in the coming fee year to “depart drastically
from its previous spending regime and to focus on activities
that are political or ideological in nature.” Yet, this is the sys-
tem set out by Hudson, and no following case has questioned
its continuing vitality. The fact that a projection of expendi-
tures may differ from actual expenditures should surprise no
one. The key analytic point for Hudson purposes is that
proper notice is given and subsequent adjustments made.

   The district court’s conclusion was also at odds with our
precedent. The district court required the Union to come up
with a system that imposes the least burden on agency fee
payers. However, the legal requirement for unions in this situ-
ation is to establish a system that merely “reasonably accom-
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19889
modates the legitimate interests of the union, the [public
employer] and nonmember employees,” as is the Union’s
obligation under Grunwald. 994 F.2d at 1376 n.7; accord
Andrews v. Educ. Ass’n of Cheshire, 829 F.2d 335, 340 (2d
Cir. 1987) (“When the union’s plan satisfies the standards
established by Hudson, the plan should be upheld even if its
opponents can put forth some plausible alternative less restric-
tive of their right not to be coerced to contribute funds to sup-
port political activities that they do not wish to support.”). The
2005 notice satisfied the standards established by Hudson.

   The Supreme Court’s decision in Davenport v. Washington
Education Ass’n, 551 U.S. 177 (2007), does not lead us to a
contrary conclusion. In Davenport, the Supreme Court held
the Hudson requirements outline a minimum set of procedures
by which a public sector union in an agency shop relationship
could meet its constitutional requirements, and that state leg-
islatures may place limitations on a union’s entitlement to
fees above those laid out in Hudson. Davenport arose in the
context of the state of Washington enacting legislation requir-
ing unions to give all nonmembers the objector fee rate unless
they affirmatively agreed to be charged for non-chargeable
activities (in contrast to the California rule where silence
equals consent, rather than dissent). Id. at 182-83. Davenport
held that while the “silence equals consent rule” is constitu-
tional, it is also constitutional for a state to make a “silence
equals dissent” rule. Id. at 190-91. Under Davenport, it is
state legislatures, rather than courts, that have the power to
implement higher standards. This holding does not alter our
conclusion in this case that the 2005 notice was adequate to
cover the subsequent dues increase, as Davenport does not
speak to such a situation.

                               III

   [8] The Union’s notice in this case complied with the Hud-
son procedural requirements. Therefore, we reverse the dis-
trict court, and remand with instructions to deny the Plaintiffs’
19890 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
motion for summary judgment. We also reverse the denial of
defendant’s motion for partial summary judgment regarding
the consent of nonobjectors under California law, and remand
with instructions to grant the motion. We reverse the award
of nominal damages to Plaintiffs.

  REVERSED AND REMANDED.



WALLACE, Circuit Judge, dissenting:

   I dissent from the majority’s opinion because it is not faith-
ful to the principles guiding the Court’s decision in Chicago
Teachers Union v. Hudson, 475 U.S. 292 (1986). The major-
ity begins from an inaccurate account of the interests at stake,
and applies the procedures set forth in Hudson without due
attention to the distinguishing facts of this case. The result is
contrary to well-established First Amendment principles.

                               I.

   I begin with the legal authorization for the agency shop sys-
tem because it provides the framework for my evaluation of
the issues in this case, and because I am of the view that the
majority’s opinion presents an incomplete account of the rele-
vant legal principles.

                               A.

   The National Labor Relations Act allows the states to regu-
late their labor relationships with public sector employees.
See 29 U.S.C. § 152(2). Many states, including California,
allow public-sector unions and government employers to
enter into “agency-shop” arrangements. Lehnert v. Ferris
Faculty Ass’n, 500 U.S. 507, 511 (1991); Cal. Gov’t Code
§ 3502.5(a). Defendant SEIU Local 1000 (Union) is the des-
ignated bargaining representative for California state employ-
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19891
ees, pursuant to such an agency-shop arrangement. The Union
is legally obligated to represent equally all employees in the
bargaining unit. Lucas v. NLRB, 333 F.3d 927, 931-32 (9th
Cir. 2003). The Union levies a fee on every employee whom
it represents in collective bargaining, even if the employee
refuses to join the Union. See, e.g., Int’l Ass’n of Machinists
v. Street, 367 U.S. 740, 760-764 (1961). The fees paid by bar-
gaining unit employees who are not members of the Union are
commonly known as “agency fees” or “fair share fees.” Plain-
tiffs in this case are eight nonmembers of the Union, repre-
senting a class of approximately 28,000 public employees,
who are required to pay an agency fee.

   Agency-shop arrangements present First Amendment con-
cerns. See id. at 749 (union shop presents First Amendment
“questions of the utmost gravity”); Railway Employees’ Dep’t
v. Hanson, 351 U.S. 225, 236-38 (1956). These concerns are
particularly sharp in the public sector: “agency-shop arrange-
ments in the public sector raise First Amendment concerns
because they force individuals to contribute money to unions
as a condition of government employment.” Davenport v.
Wash. Educ. Ass’n, 551 U.S. 177, 181 (2007). The Court
explained in Davenport that “[r]egardless of one’s views as to
the desirability of agency-shop agreements, . . . it is undeni-
ably unusual for a government agency to give a private entity
the power, in essence, to tax government employees.” Id. at
184, citing Abood v. Detroit Bd. of Educ., 431 U.S. 209, 255
(1977).

   Despite the infringement of First Amendment rights engen-
dered by the agency-shop arrangement, the Supreme Court
has deemed such arrangements to be constitutionally permis-
sible in principle. See Locke v. Karass, 129 S. Ct. 798, 801
(2009) (holding that “in principle, the government may
require this kind of payment [i.e. agency fees] without violat-
ing the First Amendment”). The Court has determined that
agency-shop arrangements are “justified by the government’s
interest in promoting labor peace and avoiding the ‘free-rider’
19892 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
problem that would otherwise accompany union recognition.”
Lehnert, 500 U.S. at 520-21; see also Abood, 431 U.S. at 222.

   Importantly, however, a union “[may] not, consistently
with the Constitution, collect from dissenting employees any
sums for the support of ideological causes not germane to its
duties as collective-bargaining agent.” Ellis v. Bhd. of Ry.,
Airline, & S.S. Clerks, 466 U.S. 435, 447 (1984). Instead,
nonmembers may only be compelled to contribute a fair share
of costs germane to collective bargaining. See Bhd. of Ry. &
S.S. Clerks v. Allen, 373 U.S. 113, 118-20 (1963). As a corol-
lary, nonmembers have a constitutional right to “prevent the
Union’s spending a part of their required service fees to con-
tribute to political candidates and to express political views
unrelated to its duties as exclusive bargaining representative.”
Abood, 431 U.S. at 234; see also, e.g., Commc’ns Workers v.
Beck, 487 U.S. 735, 762-63 (1988); Price v. Int’l Union,
United Auto., Aerospace & Agric. Implement Workers, 927
F.2d 88, 90-91 (2d Cir. 1991). “The amount at stake for each
individual dissenter does not diminish this concern. For, what-
ever the amount, the quality of respondents’ interest in not
being compelled to subsidize the propagation of political or
ideological views that they oppose is clear.” Hudson, 475
U.S. at 305.

                              B.

   In addition, procedural protections are constitutionally
required in connection with a union’s assessment and collec-
tion of an agency fee. In Hudson, the Court considered
whether a union’s procedure for the collection of agency fees
adequately protected the distinction between germane collec-
tive bargaining costs and nonchargeable political expendi-
tures. The Court explained that procedural protections were
constitutionally required in this context for two reasons:

    First, although the government interest in labor
    peace is strong enough to support an “agency shop”
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19893
    notwithstanding its limited infringement on nonun-
    ion employees’ constitutional rights, the fact that
    those rights are protected by the First Amendment
    requires that the procedure be carefully tailored to
    minimize the infringement. Second, the nonunion
    employee — the individual whose First Amendment
    rights are being affected — must have a fair opportu-
    nity to identify the impact of the governmental
    action on his interests and to assert a meritorious
    First Amendment claim.

Hudson, 475 U.S. at 302-03. The Court held that, “[s]ince the
agency shop itself is ‘a significant impingement on First
Amendment rights,’ . . . the government and union have a
responsibility to provide procedures that minimize that
impingement and that facilitate a nonunion employee’s ability
to protect his rights.” Id. at 307 n.20 (emphasis added), quot-
ing Ellis, 466 U.S. at 455.

   In Hudson, the defendant, a teacher’s union, had imple-
mented a fair share fee calculated as the proportion of charge-
able expenditures in the preceding fiscal year, that is, those
expenses related to collective bargaining and contract admin-
istration. The union also established a procedure for the con-
sideration of nonmembers’ objections. The union failed,
however, to provide nonmembers with any explanation of
how the fair share fee was calculated or explanation of the
union’s procedures. The Court held that the union’s procedure
was inadequate for three reasons: “because it failed to mini-
mize the risk that nonunion employees’ contributions might
be used for impermissible purposes, because it failed to pro-
vide adequate justification for the advance reduction of dues,
and because it failed to offer a reasonably prompt decision by
an impartial decisionmaker.” Id. at 309.

  First, the procedure at issue in Hudson was constitutionally
deficient because it merely offered dissenters the possibility
of a rebate; it failed to minimize the possibility that dissent-
19894 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
ers’ funds would be used for an improper purpose in the first
place. The Court stressed that the union should not be permit-
ted to exact an agency fee from dissenters “without first estab-
lishing a procedure which will avoid the risk that their funds
will be used, even temporarily, to finance ideological activi-
ties unrelated to collective bargaining.” Id. at 305 (emphasis
added; internal quotation marks omitted), citing Abood, 431
U.S. at 244 (concurring opinion).

   Second, the union’s procedures were held constitutionally
deficient because employees had not been provided with suf-
ficient information about the basis of the proportionate share:
“[b]asic considerations of fairness, as well as concern for the
First Amendment rights at stake, also dictate that the potential
objectors be given sufficient information to gauge the propri-
ety of the union’s fee.” Id. at 306. In Abood, the Court had
stated that it was a union’s duty to provide “the facts and
records from which the proportion of political to total union
expenditures can reasonably be calculated.” 431 U.S. at 239-
40, n.40, quoting Allen, 373 U.S. at 122. The Court went fur-
ther in Hudson, holding that the union was required to provide
this information without awaiting an objection. Hudson, 475
U.S. at 306.

   Third, Hudson held that there must be a dispute resolution
procedure. The Court stated that a union must provide both “a
reasonably prompt opportunity to challenge the amount of the
fee” as well as “a reasonably prompt decision by an impartial
decisionmaker.” Id. at 307, 310 (emphasis added). The proce-
dure at issue in Hudson was inadequate because it was con-
trolled by the union and did not provide for an impartial
decisionmaker. Id. at 308 (describing the “ ‘most conspicuous
feature of the procedure is that from start to finish it is entirely
controlled by the union’ ”). The Court further held that a
union must provide an “escrow for the amounts reasonably in
dispute while such challenges are pending.” Id. at 310.

  Drawing on these considerations, Hudson outlined three
requirements for a union’s collection of an agency fee: (1) “an
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19895
adequate explanation of the basis for the fee,” (2) a “reason-
ably prompt opportunity to challenge the amount of the fee
before an impartial decisionmaker,” and (3) “an escrow for
the amounts reasonably in dispute while such challenges are
pending.” Id. at 310.

                              C.

   Surprisingly, in the case before us the majority character-
izes the Hudson “test” as a “balancing test” or “reasonable
accommodation test.” The majority chooses, moreover, to
highlight the Union’s interests, stating that Congress has rec-
ognized the “important contribution of the union shop to the
system of labor relations,” and that “[t]he Supreme Court has
underscored this Congressional policy by enforcing the right
of a union, as the exclusive collective-bargaining representa-
tive of its employees, to require nonunion employees to pay
a fair share of the union’s costs.”

   The majority puts its finger on the wrong side of the scale.
A union has no “right” to the collection of agency fees, and
Hudson does not call for merely a “reasonable accommoda-
tion” of employees’ constitutional rights. From the framework
described above, I view the Union’s procedures much differ-
ently than the majority. I fear that the majority’s account of
the interests at stake, compounded by its view of the operative
legal test, invites confusion. Indeed, it tampers with vitally
important First Amendment principles.

                               1.

   I cannot begin from the proposition that we are required to
balance the “rights” of the Union against the rights of the
employees it represents. While the majority insists that the
only way “to faithfully characterize the procedures set out in
Hudson” is to “balance” the Union’s “right” to collect agency
fees against the first amendment rights of non-union employ-
ees [Maj. Op. 19884 n. 3], it is the majority that is unfaithful
19896 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
to Hudson and her progeny. The Union’s collection of fees
from nonmembers is authorized by an act of legislative grace,
not by any inherent “right” of the Union to the possession of
nonmembers’ funds. See Davenport, 551 U.S. at 185. This
should be clear to all. In Davenport, the Court explained that
its agency-fee cases “were not balancing constitutional rights
in the manner [the union] suggests, for the simple reason that
unions have no constitutional entitlement to the fees of
nonmember-employees.” Id. Along similar lines, the Second
Circuit has held that it is error to approach the agency-fee
issue “with a balancing test in which the cost to the union and
the practicality of the procedures were to be weighed against
the dissenters’ First Amendment interests.” Andrews v. Educ.
Ass’n of Cheshire, 829 F.2d 335, 339-40 (2d Cir. 1987).

   Davenport considered a Washington state law prohibiting
labor unions from using the agency-shop fees of nonmembers
for election-related purposes unless the nonmember affirma-
tively consented. 551 U.S. at 185. The Court considered
whether this restriction on a union’s spending of agency fees,
as applied to public-sector labor unions, violated the First
Amendment. The Court emphatically determined that the
restriction did not: “[t]he notion that this modest limitation
upon an extraordinary benefit violates the First Amendment
is, to say the least, counterintuitive.” Id. at 184. The union had
no right to the funds; instead, “[w]hat matters is that public-
sector agency fees are in the union’s possession only because
Washington and its union-contracting government agencies
have compelled their employees to pay those fees.” Id. at 187.

   Viewed properly, the collection of agency fees is author-
ized by legislative policy considerations pertaining to labor
relations. Locke, 129 S. Ct. at 803; Abood, 431 U.S. at 222.
There are several justifications for an agency shop, but only
one is implicated in this case: to prevent free-riding by non-
members who benefit from the union’s collective bargaining
activities. See Davenport, 551 U.S. at 181 (describing the
“primary purpose” of agency-shop arrangements as preven-
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19897
tion of free-riding by nonmembers); see also Abood, 431 U.S.
at 222; Ellis, 466 U.S. at 447-48. Political and ideological
expenditures fall outside “the reasons advanced by the unions
and accepted by Congress why authority to make union-shop
agreements was justified.” Lehnert, 500 U.S. at 554, quoting
Street, 367 U.S. at 768.

   Thus, the majority is mistaken. The Union’s interest in this
case is not a “right” to nonmembers’ funds. The Union’s
interest lies in receiving a fair contribution to its collective
bargaining expenses. The Union has no legitimate interest,
however, in collecting agency fees from nonmembers to fill
its political war-chest.

                               2.

   The majority describes Hudson as a “reasonable accommo-
dation test.” The majority points to the following statement
from Hudson: “[t]he objective must be to devise a way of pre-
venting compulsory subsidization of ideological activity by
employees who object thereto without restricting the Union’s
ability to require every employee to contribute to the cost of
collective-bargaining activities.” 475 U.S. at 302. The major-
ity also states that a union need not take “any and all steps
demanded by fee payers.” The majority looks to our decision
in Grunwald v. San Bernardino City Unified School District,
which stated: “[t]he test . . . is not whether the union and the
[employer] have come up with the system that imposes the
least burden on agency fee payers, regardless of cost.” 994
F.2d 1370, 1376 n.7 (9th Cir. 1993).

   But there is a wide gap between taking “any and all steps
demanded by fee payers” — that is, a least-restrictive means
test — and what the majority endorses. While Hudson does
not require a union to adopt procedures that impose the least
intrusive burden on fee payers possible, the majority affords
the union undue leniency. See, e.g., Andrews, 829 F.2d at
339-40. The majority ignores Hudson’s instruction that,
19898 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
because employees’ First Amendment interests are implicated
by the collection of an agency fee, “the procedure [must] be
carefully tailored to minimize the infringement.” Hudson, 475
U.S. at 302-03 (emphasis added). To eliminate any doubt, in
the footnote appended to this statement, the Court cites sev-
eral cases holding that when First Amendment rights are
implicated, the government must avoid burdening those
rights. Id. at 303, n.11, citing Roberts v. United States Jay-
cees, 468 U.S. 609, 637 (1984); Elrod v. Burns, 427 U.S. 347,
363 (1976); Kusper v. Pontikes, 414 U.S. 51, 58-59 (1973);
NAACP v. Button, 371 U.S. 415, 438 (1963).

   Hudson emphasized, moreover, that “procedural safeguards
often have a special bite in the First Amendment context.”
475 U.S. at 302 n.12 (internal quotation marks and alteration
omitted). In the agency fee context, Hudson described the
goal of procedural protections as to “minimize the risk that
nonunion employees’ contributions might be used for imper-
missible purposes” even temporarily, id. at 305, 309, and to
“facilitate a nonunion employee’s ability to protect his
rights,” id. at 307 n.20. I therefore conclude that the majori-
ty’s “reasonable accommodation test” is misguided and is
inconsistent with case law that we are required to follow.

                              II.

   The Union’s procedures in this case should be evaluated in
light of the principles set forth in Hudson and the legitimate
interests at stake. As the majority has already set forth the
facts of this case in some detail, I recite them only where par-
ticularly relevant to my views or where additional detail is
warranted. I also seek to draw more attention to the well-
reasoned decision of the district court.

                              A.

  Pursuant to Hudson, the Union issues a notice to agency fee
payers every June. At issue in this case is the Union’s June
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19899
2005 Hudson notice. That notice set the agency fee to be
extracted from nonmember’s paychecks at 99.1% of full
union membership dues. Nonmembers who objected to pay-
ing for nonchargeable expenses would pay a reduced agency
fee, set at 56.35% of full union membership dues. The agency
fees described in the notice were in effect until the following
July, when a new Hudson notice was to become effective. The
June 2005 Hudson notice also provided an objection period of
thirty days, during which nonmember fee payers could object
to the collection of the full agency fee and elect to pay the
reduced agency fee. Some of the plaintiffs in this action
objected to the June 2005 Hudson notice, while others did not.

   In the Summer of 2005, shortly after the expiration of the
period for objection to the June 2005 Hudson notice, the
Union’s legislative bodies began discussing a temporary dues
increase. The proposal was described as an “Emergency Tem-
porary Assessment to Build a Political Fight-Back Fund.” The
agenda for a July 30, 2005 Council Meeting described the
purpose of the assessment as follows: “[t]he funds from this
emergency temporary assessment will be used specifically in
the political arenas of California to defend and advance the
interests of members of Local 1000 . . . .” The agenda contin-
ued to describe:

    These temporary emergency assessments are made
    necessary by political attacks on state employees and
    other public workers launched by Governor Schwar-
    zenegger and his allies which threaten the wages,
    benefits and working conditions of Local 1000 mem-
    bers, and undermine the services they provide to the
    people of California.

The Union contemplated that the “Political Fight-Back Fund”
would not be used for the “regular costs of the union . . . such
as office rent, staff salaries or routine equipment replace-
ment.” Instead, the Fund would be used “for a broad range of
political expenses.”
19900 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
   The Union approved the temporary assessment at the end
of August 2005. The Union’s yearly Hudson notice had been
issued in June 2005, and that notice did not mention the possi-
bility of the later-enacted temporary assessment. After pas-
sage of the temporary assessment, the Union sent a letter to
members and nonmembers, dated August 31, 2005, informing
them that “Local 1000 delegates voted overwhelmingly for a
temporary dues increase to create a Political Fight-Back
Fund.” The letter stated that the funds collected from the dues
increase would be used for several political purposes: (1) to
defeat two propositions appearing on the November 2005 bal-
lot (Propositions 75 and 76); (2) to “defeat another attack on
[the] pension plan” in June 2006; and (3) “[i]n November
2006 . . . to elect a governor and legislature who support pub-
lic employees and the services [they] provide.” The letter
explained that the $45 per month cap on dues would not apply
to the temporary assessment. For sake of clarity, I point out
that this letter did not constitute “notice” as contemplated in
Hudson. The letter did not provide an explanation for the
basis of the additional fees being imposed, and it did not pro-
vide nonmembers with an opportunity to object to the addi-
tional fees.

   After receiving the Union’s letter, some nonmembers
attempted to object to the temporary assessment. For example,
plaintiff Dobrowolski contacted the Union to lodge his objec-
tion to the “Political Fight-Back Fund.” He was told, in effect,
that there was nothing he could do about it; he was not
allowed to object. The Union thereafter sent a letter to non-
members, like plaintiff Dobrowolski, who attempted to object
to the increase in fees. That letter, dated October 27, 2005,
stated in part:

       The Union has received your objection to the dues
    increase. We understand that you are a political
    objector and a fee payer in the Union and that you
    have raised an objection to paying this increase
    because you believe the money will be directed
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19901
    solely to political activities by the Union. We under-
    stand your frustration about paying a little more to
    the Union when you have not seen a new contract
    with a pay increase. However, we hope that by
    explaining the Union’s position concerning this dues
    and fees increase, you will better understand our
    position. . . .

       When we have a campaign that is split between
    political actions and collective bargaining actions the
    Union is required by law to annually audit the
    expenditures for those activities; the Union will fully
    comply with this requirement. However, the
    Supreme Court has stated that this audit must occur
    at the end of the fiscal year in which the activities
    take place, because next year’s objecting fee-payer
    rate must be based on that audit.

       This campaign will entail much workplace orga-
    nizing divided over two fiscal years. At the end of
    each year, the Union’s expenses for these activities
    will be audited, and the amount of expense which is
    not germane to collective bargaining will be used to
    set the objecting fee-payer rate for the next year.
    Presently you are an objecting fee-payer who pays
    the audited rate for this year. Next year, you will be
    able to exercise your objection again and pay the
    audited rate set for that year, based on the Union’s
    expenditures this year. That rate will fully account
    for any political actions of the nature to which you
    have objected.

   The temporary assessment took effect at the end of Septem-
ber 2005. At that time, the Controller of the State of Califor-
nia, defendant Steve Westly, began deducting the additional
fees automatically from all nonmember employees’ pay-
checks. Although the assessment was “temporary,” it was cer-
19902 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
tainly not of short duration, lasting from September 2005 until
the end of December 2006.

                              B.

   In November 2005, plaintiffs initiated this action in the
United States District Court for the Eastern District of Cali-
fornia, contending that the temporary assessment violated
their First, Fifth and Fourteenth Amendment rights. Plaintiffs
alleged, among other things, that the temporary assessment
constituted a seizure of their money for nonchargeable politi-
cal expenses, without constitutionally required procedural
safeguards. The district court granted a preliminary injunction
to plaintiffs. On cross-motions for summary judgment, the
district court entered summary judgment in plaintiffs’ favor.

   There are several important features of the district court’s
summary judgment. First, the district court addressed the bur-
den imposed by the temporary special assessment. The Union
argued that nonmembers who had objected to the June 2005
Hudson notice were assessed only a 14.09% increase in the
deduction from the objector’s salary. The district court opined
that the figure was “somewhat misleading” because it ignored
the fee increase imposed on nonunion employees who had not
objected to the Union’s June 2005 Hudson notice. The district
court indicated that the Union’s quantification of the tempo-
rary assessment was misleading in other respects as well, and
that the actual increase in fair share fee for nonmembers
ranged, on average, from 25% to 33%. The district court
deemed this “a material change in the amount of funds nonun-
ion employees were required to contribute to Union expendi-
tures.” The district court concluded, “the fair share fees paid
by both objectors and nonobjectors actually increased by a
much greater margin than Defendants would like to suggest.”

   Second, the district court discussed the characterization of
the temporary special assessment. Plaintiffs asserted that the
fund was intended solely for political and ideological pur-
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19903
poses. The Union characterized the assessment as “an ordi-
nary dues and fees increase” because, in retrospect, some of
the expenses funded through the temporary assessment were
eventually deemed chargeable to nonmembers. The district
court thought the Union’s position “def[ied] logic.” The
Union had described the proposed assessment as a political
fund, and specifically stated that the fund was not to be used
for regular costs.

   Third, taking all of the above together, the district court
concluded that the June 2005 notice did not provide potential
objectors with sufficient information to gauge the propriety of
the Union’s fee, in light of the temporary special assessment.
The June 2005 Hudson notice could not provide adequate
notice as to the temporary assessment because it relied on cat-
egories that were not relevant to the temporary assessment.
According to the Union’s statements, the temporary special
assessment was intended for a specific purpose and would not
be used for regular expenses. The district court pointed out
that, “after implementing the increase, the Union took the
position that nonunion employees had already been given an
opportunity to make an informed decision as to the Assess-
ment by means of the 2005 Hudson notice. The Union now
turns a blind eye to the inconsistency inherent in asking non-
union employees to compare apples, in the form of the prior
year’s financials, to oranges, in the form of a new Assess-
ment.”

   Finally, the district court concluded that the appropriate
remedy was a second Hudson notice, relying on Wagner v.
Professional Engineers in California Government, 354 F.3d
1036, 1041 (9th Cir. 2004). This remedy had to be made
available to nonmembers regardless of whether they had
objected to the June 2005 Hudson notice, because: “[i]n order
for any nonunion employees’ failure to object to have any
legal significance, the 2005 Hudson Notice must have been
valid and sufficient to cover the Assessment.” The district
19904 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
court held that objectors to the second Hudson notice would
be entitled to a refund, with interest, of any withheld amounts.

                                   III.

   In this case, the Union failed to protect adequately the First
Amendment rights of nonmembers from whom it collected an
agency fee. In collecting agency fees from nonmembers, the
Union is subject to constraints that are both procedural and
substantive in nature. See Grunwald, 994 F.2d at 1373. Proce-
durally, the Union did not provide nonmembers with suffi-
cient information to gauge the propriety of the agency fee.
The Union’s June 2005 Hudson notice was insufficient in
light of the temporary assessment. Notably, the Union
adopted no other procedures to protect nonmembers’ First
Amendment rights upon imposition of the temporary assess-
ment. Nonmembers were provided no additional notice,
opportunity to object, dispute resolution procedure, and so
forth. Compounding these procedural failures, there is a sub-
stantive problem. The temporary assessment is suspect,
because it was instituted shortly after the June general Hudson
notice and was explicitly and exclusively intended to fund the
Union’s political activities. The temporary assessment was a
special purpose fund that would not be used for regular Union
costs and therefore represented a departure from the Union’s
typical spending regime.1 I do not believe the Union suffi-
ciently minimized the risk that nonmembers’ funds would be
used to subsidize political and ideological activities in light of
these circumstances.
  1
   The majority avers that the special assessment does not represent a
substantial departure from the Union’s ordinary spending. Subsequent
audits, however, revealed that a very substantial portion of the Union’s
assessment, 72.6% in 2005 and 81.2% in 2006, was used for non-
chargeable purposes. In contrast, 31.2% of the Union’s total expenses was
determined to be non-chargeable in 2005, and 39.6% was deemed non-
chargeable in 2006. The special assessment, therefore, cannot be described
as being consistent with the Union’s usual spending — especially when
the Union explicitly stated that the assessment was necessary for political
purposes.
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19905
                              A.

  I first consider the adequacy of the Union’s June 2005 Hud-
son notice in light of the temporary assessment. The June
2005 Hudson notice provided, in part:

       Effective July 1, 2005 through June 30, 2006, the
    fee will be no more than 99.1% of regular member-
    ship dues. Regular monthly membership dues are
    currently 1.0% of monthly gross salary and are pres-
    ently capped at a maximum of $45 per month. Dues
    are subject to change without further notice to fee
    payers.

       Effective July 1, 2005 through June 30, 2006 (the
    “2005-6 Fee Payer Year”) [the Union] will charge
    fee payers who object to expenditures not germane
    to collective bargaining a fee of no more than
    56.35% of regular membership dues for that salary
    level.

The notice provided, in addition, for a “Political Action
Reduction:” “Fee payers are also entitled to have their fees
reduced by the pro rata portion of the fee that goes to the
Political Action Fund that [the Union] sets aside for contribu-
tions to candidates and initiative campaigns, and other parti-
san political activities.”

  To provide a point of comparison, the Union’s June 2006
Hudson notice, issued after the temporary assessment had
been enacted, provided as follows:

       Effective July 1, 2006 through June 30, 2007, the
    fee will be no more than 99.1% of regular member-
    ship dues. Regular monthly membership dues are
    currently 1.0% of monthly gross salary and are pres-
    ently capped at a maximum of $45 per month. Addi-
    tionally, a temporary assessment of 1/4 of 1% of
19906 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
    monthly gross salary is being collected through
    December 31, 2006. Dues are subject to change
    without further notice to fee payers.

       Effective July 1, 2006 through June 30, 2007 (the
    “2006-7 Fee Payer Year”) [the Union] will charge
    fee payers who object to expenditures not germane
    to collective bargaining a fee of no more than 68.8%
    of regular membership dues for that salary level.

Regarding the “Political Action Fund,” the 2006 Hudson
notice provided that fee payers were also entitled “to have
their fees reduced by the pro rata portion of the fee that goes
to the Political Action Fund. . . .”

   The Union submits that the Supreme Court has approved
the retrospective method by which it calculates the yearly
agency fee: a “look-back” procedure, by which the Union sets
the agency fee for the upcoming year according to the propor-
tion of chargeable versus nonchargeable expenditures in the
prior year. However, the Union’s June 2005 Hudson notice
was not adequate to provide an explanation of the basis for
the agency fee extracted from nonmembers’ paychecks for the
temporary assessment. To reiterate the obvious, the June 2005
Hudson notice provided no information regarding the tempo-
rary assessment, as it was enacted subsequently, in August
2005. The Union would respond that the notice was adequate
to cover such future contingencies. How could that be? The
temporary special assessment resulted in approximately a
25% increase in fair share fees — a fairly substantial increase.
Because the temporary assessment was exempted from the
dues cap, higher-earning employees might experience an
effective or actual increase that was even greater. Moreover,
while the assessment was “temporary,” it was in effect for the
bulk of the 2005 fee year, from the end of September 2005
until commencement of the next fee year in July 2006.

  The district court further held that the fee increase was
material, and I agree. The temporary special assessment might
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19907
therefore have affected a fee payer’s decision to object pursu-
ant to the June 2005 Hudson notice. See, e.g., Dashiell v.
Montgomery County, 925 F.2d 750, 756 (4th Cir. 1991) (“The
test of adequacy of the initial explanation to be provided by
the union is . . . whether the information is sufficient to enable
the employee to decide whether to object”). Indeed, because
the Union refused to give nonmember employees an opportu-
nity to object when information about the temporary assess-
ment was disclosed, these nonmembers were essentially left
in the “dark” about the nature of the agency fee during the
time period in which they were required to file objections. See
Hudson, 475 U.S. at 303 (emphasizing that unions cannot
leave “nonunion employees in the dark about the source of the
figure for the agency fee”). In other words, even though the
special assessment significantly altered the magnitude and
intended use of the agency fee, the Union and the majority
believe that nonmember employees were required to object
before the material information was revealed. Such an
approach simply cannot be reconciled with the procedures set
forth in Hudson. See id.; cf. Locke v. Karass, 382 F. Supp. 2d
181, 190 (D. Me. 2005) (explaining that the use of a previous
year’s financial audit to set the percentage of chargeable fees
would violate Hudson, when a union “cherry pick[s]” certain
financial data, and fails to disclose other material information,
in an effort to increase fees), affirmed by 498 F.3d 49 (2007)
and by 129 S. Ct. 798 (2009).

   The Union would respond, I venture, by asserting that the
temporary assessment did not alter the agency fee as a per-
centage of total union dues. The June 2005 Hudson notice dis-
closed that the agency fee was 99.1% of membership dues,
and that the objectors’ agency fee was 56.35% of membership
dues. The temporary assessment did not affect these percent-
ages. But such an argument rests on the faulty premise that,
if nonmembers’ fees remain constant as a percentage of mem-
bers’ dues through a given fee year, any absolute increase in
fees is protected from scrutiny by the yearly Hudson notice,
that is, that the proportionate share is what matters, and
19908 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
because this was not altered there can be no constitutional
violation.

   I am not convinced that the proportionate share is all that
matters in evaluating the adequacy of a Hudson notice. From
the standpoint of a potential objector, the magnitude of the
increase in fees imposed by the temporary assessment could
very well be material. This increase, as an absolute amount,
could affect a nonmember’s decision to object or not to object
even if the percentage fee remained static. And these non-
members are the ones whose First Amendment rights are in
jeopardy — not the Union’s. Moreover, the temporary assess-
ment was exempted from the cap on dues. Thus, even though
the fair share fee remained constant as a basic percentage
under the temporary assessment, because the assessment was
exempted from the $45 per month cap on dues, some employ-
ees would in fact experience a proportionately greater share
in monthly fee deductions. This is inconsistent with a static-
percentage justification for the Union’s failure to provide
additional notice regarding the temporary assessment.

   Furthermore, by exempting the temporary assessment from
the cap, the Union acted contrary to the June 2005 Hudson
notice. The June 2005 Hudson notice, stated: “currently 1.0%
of monthly gross salary and are presently capped at a maxi-
mum of $45 per month.” Exceptions from the cap, or the
elimination of it, was not contemplated in the June 2005 Hud-
son notice. The Union’s June 2005 Hudson notice also stated:
“[d]ues are subject to change without further notice to fee
payers.” I cannot put much weight in this sweeping reserva-
tion of assumed authority; in any event, the notice did not dis-
close that the cap could be eliminated. For these additional
reasons, I conclude that the temporary assessment might be a
material factor in a nonmembers’ decision to object.

   I conclude that the Union’s June 2005 notice did not fulfill
its obligations under Hudson. The purpose of a Hudson notice
is to enable informed consent or objection. See Cummings v.
        KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19909
Connell, 316 F.3d 886, 895 (9th Cir. 2003), cert. denied, 539
U.S. 927 (2003) (holding that the Hudson notice was designed
to provide nonmembers with information necessary to evalu-
ate whether to object to a union’s calculation of chargeable
expenses); Hohe v. Casey, 956 F.2d 399, 410 (3d Cir. 1992)
(“the issue is whether the notice provided nonmembers with
. . . sufficient information to determine whether they were
only being compelled to contribute to chargeable activities”).
The Union’s June 2005 Hudson notice was inadequate to pro-
vide fee payers with a basis on which to adjudge the propriety
of the Union’s agency fee, and to decide whether or not to
object.

   Because the Union’s June 2005 Hudson notice was inade-
quate, an employee’s failure to object to it does not constitute
an effective waiver, an abandonment of a known right.
Lowary v. Lexington Local Bd. of Educ., 903 F.2d 422, 430
(6th Cir. 1990). Until Hudson’s requirements are satisfied,
employees must be afforded subsequent opportunities to
object. See Mitchell v. L.A. Unif. Sch. Dist., 963 F.2d 258,
261-63 (9th Cir. 1992).

   The June 2005 Hudson notice was not adequate to provide
notice as to the temporary assessment for an additional rea-
son, which warrants separate attention. The temporary assess-
ment was a special purpose fund. The Union envisioned the
temporary assessment as a political fundraising vehicle, to
build a “Political Fight-Back Fund.” The Union contemplated
that the temporary assessment would provide a distinct source
of capital for political activities and that it would not be used
for the regular expenses of the union.2 Recognizing the unique
character of the temporary assessment has two implications.
  2
   The majority acknowledges that the Union’s August 2005 letter to
members and agency fee payers specifically stated that the fee increase
would be used for political activities. In fact, that letter makes no mention
whatsoever of any non-political reason for the increase. Nevertheless,
based on the October 2005 letter, the majority reasons that the Union “in-
19910 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
   First, the June 2005 Hudson notice could not be adequate
to enable nonmembers’ informed objection to the agency fee.
The June 2005 Hudson notice contemplated ordinary expendi-
tures; the temporary special assessment stood apart from that.
As the district court stated, the union asked nonmembers to
compare “apples, in the form of the prior year’s financials, to
oranges, in the form of a new [a]ssessment, an [a]ssessment
which was not to be utilized for Union operations but was
instead earmarked for discrete political purposes.” Even if
agency fees remained constant as a percentage of total mem-
ber dues, nonmembers might well object to paying increased
fees for purely political purposes; for example, they might
object in light of the departure from the Union’s normal
spending regime.

   Second, as a substantive matter, the Court has repeatedly
stressed that a union may extract from nonmembers “only

tended to split the increase ‘between political actions and collective bar-
gaining actions.’ ” Maj. Op. at 19881. The October letter, however, does
not state that the fee increase would be split between political and collec-
tive bargaining activities. Instead, the letter indicates that the Union would
be undertaking a “year-long campaign” that would be “split” between both
political and non-political functions. Nothing in the letter states that the
“campaign” would be funded exclusively by the assessment. In fact, the
Union’s letter then identified a 2004 “Call the Governor” program, which
apparently was funded by the Union’s general fund from the previous
year, as an example of a non-political “campaign” activity. Thus, when the
August and October letters are read together, it appears the Union intended
to use the fee increase to fund political aspects of the campaign, while it
intended to fund non-political activities with general member and agency
fees.
   Similarly, the majority misapprehends the record when it suggests that
the fee assessment contained no spending limitations. Maj. Op. at
19881-82. When the Union decided to increase fees, its budget committee
indicated that the increase would “not be used for regular costs of the
[U]nion.” The agenda for the counsel meeting, wherein the Union resolved
to increase fees, further states that “[t]he funds from this emergency tem-
porary assessment will be used specifically in the political arenas of Cali-
fornia.” These appear to be spending limitations.
         KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19911
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.” Price, 927 F.2d at
90-91 (internal quotation marks omitted). In Lehnert, the
Court outlined a framework for evaluating whether an activity
was germane to a union’s role as exclusive bargaining agent:
“chargeable activities must (1) be ‘germane’ to collective-
bargaining activity; (2) be justified by the government’s vital
policy interest in labor peace and avoiding ‘free riders’; and
(3) not significantly add to the burdening of free speech that
is inherent in the allowance of an agency or union shop.” 500
U.S. at 519.

   To protect the distinction between chargeable and non-
chargeable activities, a union is required to adopt procedures
that minimize the risk that nonmembers will be compelled to
subsidize political or ideological activities with which they do
not agree.3 In Hudson, the Court explained, “[t]he Union
  3
    The majority incorrectly concludes that Plaintiffs’ appeal “must fail”
because chargeability of the assessment is “immaterial” to their procedural
Hudson challenge. Maj. Op. at 19887 n.4. While it is true that the Plain-
tiffs in this case do not raise a direct challenge to the Union’s chargeability
determinations, this does not mean that the political nature of the Union’s
special assessment is irrelevant. Indeed, the Hudson procedures were
adopted to provide nonunion employees with a fair opportunity to object
to a union’s use of agency fees for political, ideological, and otherwise
non-chargeable activities. See 475 U.S. at 306 (“Basic considerations of
fairness, as well as concern for the First Amendment rights at stake, . . .
dictate that the potential objectors be given sufficient information to gauge
the propriety of the union’s fee”). Here, the Union’s decision to raise fees
to fund political activities is relevant in determining whether the Union
provided sufficient information for nonunion employees to “gauge”
whether or not to object.
  The majority’s reliance on Wagner, 354 F.3d at 1046-47, is mispled.
While Wagner observed that a procedural Hudson challenge raises differ-
ent questions than a challenge to a union’s chargeability determinations,
Wagner does not stand for the proposition that the potential chargeability
of a union’s mid-year fee increase cannot be considered in determining
whether a union has satisfied the procedural requirements set forth in Hud-
son. See id.; Hudson, 475 U.S. at 306.
19912 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
should not be permitted to exact a service fee from nonmem-
bers without first establishing a procedure which will avoid
the risk that their funds will be used, even temporarily, to
finance ideological activities unrelated to collective bargain-
ing.” Hudson, 475 U.S. at 305; Abood, 431 U.S. at 244 (con-
curring opinion).

   The temporary assessment was contemplated as a political
fundraising vehicle; it therefore cannot be justified by the
interest in preventing nonmembers from free-riding on the
Union’s collective bargaining efforts. The temporary assess-
ment clearly burdened the speech of nonmembers. But the
Union undertook no efforts, in connection with the imposition
of the temporary assessment, to minimize the impact on non-
members’ First Amendment rights. Taking these consider-
ations together, I conclude that, in connection with the
imposition and collection of the temporary assessment, the
Union did not fulfill its obligation to be mindful of nonmem-
bers’ First Amendment rights.

  The Union and the majority seek to evade the fact that the
temporary assessment was enacted to fund political activities
by arguing that the fund was ultimately used for some
expenses that were chargeable to nonmembers.4 I agree with
   4
     The Union’s ideological challenge to Proposition 76 cannot be catego-
rized, as the majority attempts, as an expense chargeable to objecting
agency-fee payers. According to the majority, expenses related to the
Union’s political challenge to this ballot measure might be considered
chargeable because Proposition 76 “would have effectively permitted the
Governor to abrogate the Union’s collective bargaining agreements under
certain circumstances.” Maj. Op. at 19882 n.2. A review of Proposition
76, however, reveals that any connection between the Union’s challenge
was too attenuated to its collective bargaining agreement to be considered
a chargeable expense. The purpose of the ballot measure was to limit the
annual amount of total state spending to the prior year’s spending plus a
reasonable amount of growth. See Sec’y of the St. of Cal., Official Voter
Information Guide: Special Statewide Election 60 (2005). It also would
have set aside budget surpluses for future use. Id. To achieve these initia-
         KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19913
the district court’s assessment of the Union’s post hoc ratio-
nalization: “[f]ollowing the union’s logic it should be required
only to show that some small fraction of this fund was used
for chargeable purposes in order to justify subverting its Hud-
son responsibilities.” The district court further reasoned that,
even if the temporary assessment was not intended solely for
political purposes, it was indeed intended predominantly for
political purposes. As such, the district court continued, “it is
clear that the Union’s intent was to depart drastically from its
typical spending regime and to focus [the temporary special
assessment funds] on activities that were political or ideologi-
cal in nature.”

tives, Proposition 76 allowed the governor to reduce spending under cer-
tain circumstances. For instance, if passed, the proposition would have
given the Governor limited “authority to reduce appropriations” for future
state contracts, collective bargaining agreements, and entitlement pro-
grams. Id. Thus, properly understood Proposition 76 was a ballot measure
related to the allocation of tax revenue for funding government activities,
which included the amount of financial support available to fund public
employment. See id.
   To be sure, there are some limited circumstances where a union’s politi-
cal activities can be deemed chargeable. According to the Supreme Court,
lobbying or other political activities are chargeable when they directly
relate to “ratification of negotiated agreements by the proper . . . legisla-
tive body” or “to acquiring appropriations for approved collective-
bargaining agreements.” Lehnert, 500 U.S. at 520. Where, however, as in
the instant case, the “challenged . . . activities relate . . . to financial sup-
port of . . . public employees generally, the connection to the union’s func-
tion as bargaining representative is too attenuated to justify compelled
support by objecting employees.” Id. Accordingly, contrary to the majori-
ty’s contention, the district court and I do not “conflate” political expenses
with non-chargeable expenses. Maj. Op. at 19882 n.2. We simply recog-
nize that the Union’s intended uses for the assessment, all of which per-
tained to core political activities such as the Union’s challenge to
Proposition 76, cannot be construed as legally chargeable. Additionally, it
is peculiar that the majority even makes the assertion that the Union’s
political expenses would be chargeable if, as the majority avers, “chargea-
bility is immaterial” to the instant case. Maj. Op. at 19887 n.4.
19914 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
   In sum, the Union’s procedures were not adequate under
the circumstances. The June 2005 Hudson notice was inade-
quate to provide nonmembers with sufficient information
from which to evaluate the propriety of the Union’s agency
fee. After enacting the temporary special assessment, the
Union made no effort whatsoever to minimize the infringe-
ment of nonmembers’ rights. The Union did not provide
notice regarding the temporary assessment; the Union also did
not provide nonmembers with an opportunity to object to the
temporary assessment. The Union did not provide a procedure
for resolving disputes and did not place disputed amounts in
escrow. Indeed, when nonmembers attempted to object to the
temporary assessment, they were refused a forum for their
dispute and were never provided with the opportunity to
obtain the decision of a neutral hearing officer.

                              IV.

   This brings me to the crux of the Union’s argument: that
Hudson approved calculating an agency fee as the proportion
of chargeable to nonchargeable expenses in the prior fiscal
year. The Union asserts that the prior-year method is virtually
required here, as it is a large public sector union and must cal-
culate its agency fee on the basis of audited financial reports.
Because of the audit requirement, moreover, the Union asserts
that it could not prospectively apportion the temporary assess-
ment between chargeable and nonchargeable expenses.

   The majority agrees that the Union complied with its obli-
gations. The majority recites that “absolute” precision cannot
be expected or required in the calculation of an agency fee,
and that the Union cannot be “faulted” for calculating its
agency fee on the basis of the prior fiscal year’s expenditures.
Further, the majority states that the Union could not deviate
from the prior-year method of calculating the agency fee with
respect to the special assessment. The majority explains that
the prior-year method makes lag inherent; in any given year,
an objector might be “underpaying or overpaying,” but “the
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19915
inevitable effect of the Hudson method is that these over- and
undercharges even out over time.”

   This strikes me as a strange argument when dealing with a
First Amendment challenge. First, the Hudson notice proce-
dure is not per se adequate to protect the rights of nonmem-
bers in all situations. Instead, where, as here, there is a
substantial deviation from the normal Hudson process, adap-
tation is required. Second, the prior-year calculation method
does not establish the adequacy of the June 2005 Hudson
notice nor does it demonstrate that the Union’s procedures
were adequate when viewed as a whole.

                             A.

   We should not measure the Union’s conduct by the discrete
Hudson procedures alone. Hudson establishes a floor. See
Keller v. State Bar of Cal., 496 U.S. 1, 17 (1990). In Daven-
port, the Court stressed, “we have described Hudson as ‘out-
lin[ing] a minimum set of procedures by which a [public-
sector] union in an agency-shop relationship could meet its
requirement under Abood.’ ” 551 U.S. at 185.

   Here, the temporary assessment was not like the Union’s
ordinary dues and not like the facts presented in Hudson. Sev-
eral features of the special assessment distinguish this case.
The temporary assessment was imposed mid-year and not in
the normal course of the Hudson process. The temporary
assessment imposed a material increase in agency fees over
those contemplated in the Hudson notice, and was exempt
from the dues cap (which was inconsistent with the Hudson
notice). Hudson did not consider a fee increase outside of a
normal periodic notice process. Likewise, Hudson did not
contemplate a special-purpose assessment, as here. Even
assuming the Union did here what was done in Hudson, it
could not be sufficient to satisfy its duties in light of the
unique circumstances of this case.
19916 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
  I cannot agree with the proposition that the Union’s June
2005 Hudson notice satisfied the Union’s obligations to non-
members until issuance of the next yearly Hudson notice. The
Union’s mid-year conduct cannot be insulated from scrutiny.
Rather, there must be some limitation on a union’s imposition
of fee increases between Hudson annual notices.

                               B.

   The Union contends that it complied with the procedures
set forth in Hudson, because the Court approved the calcula-
tion of an agency fee based on the proportion of the prior
year’s chargeable to nonchargeable expenditures. Indeed, in a
footnote, the Court stated that a union “cannot be faulted for
calculating its fee on the basis of its expenses during the pre-
ceding year.” Hudson, 475 U.S. at 307 n.18. The Union repre-
sents, furthermore, that its hands were tied with regard to the
temporary assessment, because it is required to base its
agency fee calculation on audited financial statements. See
Knight v. Kenai Peninsula Borough Sch. Dist., 131 F.3d 807,
812-13 (9th Cir. 1997), cert. denied, 524 U.S. 904 (1998);
Prescott v. County of El Dorado, 177 F.3d 1102, 1006-09 (9th
Cir. 1999), vacated and remanded on other grounds, 528 U.S.
1111, reinstated, 204 F.3d 984 (9th Cir. 2000).

   The prior-year calculation method used here does not sat-
isfy all of the Union’s obligations, however. The Union’s
allocation of expenses as chargeable or nonchargeable pres-
ents a distinct issue in the adequacy of its Hudson notice. See,
e.g., Seidemann v. Bowen, 499 F.3d 119, 127 (2d Cir. 2007)
(there is a “clear distinction between the adequacy of a
union’s notice . . . and the propriety of a union’s chargeability
determinations”); Hudson v. Chicago Teachers Union, 922
F.2d 1306, 1309, 1314 (7th Cir. 1991) (pointing out that a
party had confused adequacy of the notice with the accuracy
of the fee itself). Thus, even if the Union “cannot be faulted”
for relying on prior-year expenditures in calculating the
agency fee, it is not relieved from its other Hudson obliga-
       KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19917
tions. The Union must still provide adequate notice to enable
an informed decision, an opportunity to lodge objections, a
prompt hearing on objections by a neutral decisionmaker, and
escrow of any amounts in dispute. Even if we look only to
compliance with Hudson, therefore, the Union still falls short
of the mark.

   I recognize that the Union, in relying on prior-year expen-
ditures as the basis for its agency fee, is subject to an audit
requirement. In my view, application of the audit requirement
relates to the appropriate remedy in this case, a question we
do not reach. A district court, with a proper record, could
evaluate the audit requirement in light of the temporary
assessment. Indeed, the purpose of an audit is to verify that
a union actually spent the amount of money it claims; the
audit is not intended to verify the union’s allocation as a
“legal, not an accounting, decision regarding the appropriate-
ness of the allocation of expenses to the chargeable and non-
chargeable categories.” Andrews, 829 F.2d at 340; accord
Gwirtz v. Ohio Educ. Ass’n, 887 F.2d 678, 682 n.3 (6th Cir.
1989); Ping v. Nat’l Educ. Ass’n, 870 F.2d 1369, 1374 (7th
Cir. 1989). In any event, the audit requirement does not relate
to the other Hudson protections implicated by this case, and
is ultimately of limited help to the Union. Even a temporary
violation of the First Amendment is a significant violation.

                              V.

   The majority construes the issue in this appeal as “whether
a union is required . . . to send a second notice when adopting
a temporary, mid-term fee increase.” By framing narrowly the
issue in this case, the majority shifts attention to the remedy
adopted by the district court. But the district court’s remedy
is only one consideration in this case — one we do not even
reach — and should not be set up as a strawman for attack.

  In this case, the Union’s provision of an annual Hudson
notice was insufficient to enable nonmembers to protect their
19918 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
First Amendment rights upon imposition of the temporary
assessment. The Union, furthermore, made no effort to mini-
mize the infringement of nonmember’s First Amendment
rights despite substantially increasing the fees extracted from
their paychecks. I believe that the majority’s opinion does not
carry out the principles of Hudson. I therefore dissent.
