Judge: Union doesn't get to force IL public worker retirement funds to factor politics into investment decisions

By Jonathan Bilyk | Mar 21, 2019

A federal judge has rejected the attempt by a union to win a court order requiring a pension fund for Illinois local governmental workers to take the political views of companies into consideration when investing public pension funds, as the judge said the Illinois Municipal Retirement Funds’ current practices don’t violate the First Amendment rights of union members.

On March 19, U.S. District Judge Robert Gettleman sided with the IMRF and dismissed the legal action brought by two members of the International Union of Operating Engineers Local 150 and its president.

“… The state compels plaintiffs to fund IMRF, which is designed to provide benefits to municipal workers,” Gettleman wrote in his opinion. “The IMRF … is a legitimate mission. The requirement set by law that IMRF invest its excess funds prudently is an equally legitimate requirement. So long as that mandate is performed in a viewpoint neutral manner … it is allowed under the First Amendment.”

The case landed on the docket in Chicago federal court in 2018, around the time the U.S. Supreme Court decided the case now known as Janus v American Federation of State County and Municipal Employees (AFSCME.)


James Sweeney  

In that decision, the nation’s high court found the state of Illinois and others trample the free speech and association rights of non-union employees by requiring them to pay so-called “fair share” or “agency” fees to unions, purportedly to cover the unions’ costs of negotiating on behalf of all employees in particular state employee bargaining units.

In response to the arguments presented by plaintiffs in that case, and, later, reacting to the decision itself, IUOE Local 150 filed lawsuits challenging the ability of various public bodies to fund various organizations.

Among these legal actions, Local 150 asserted the IMRF violated the free speech and association rights of its members by investing worker retirement funds in companies the union says also fund political action organizations which lobby against the union’s political stances.

Local 150 particularly mentioned contributions from companies like AT&T, ExxonMobil, Pfizer, UPS and Anheuser-Busch to the organization known as the American Legislative Exchange Council (ALEC), which they said “lobbies for the adoption of ‘model bills’ focusing on issues including weakening labor unions and public pension funds, by increasing employee contributions, raising the retirement age and number of years of service required for vesting, and, above all, moving from defined benefit to defined contribution plans.”

The complaint does not accuse the IMRF of donating to ALEC or other such political organizations directly.

The IMRF responded by asking the judge to dismiss the lawsuit, asserting the union and the defendants had no standing to sue, and further, that its investments are not “speech,” as they are done to maximize return on investment and benefit the workers and retirees in its pension system.

Judge Gettleman agreed Local 150 and its president, James Sweeney, lacked standing to sue, as neither the union nor Sweeney are members of IMRF. He further rejected their contention the union should be granted “associational” standing, because some of its members are IMRF participants.

The judge, however, said the two union members named as plaintiffs in the lawsuit, Morrie Laphen and Steven Karpowicz, should be allowed to sue.

“Janus makes clear … that compelling a person to subsidize the speech of other private speakers violates the First Amendment,” Gettleman wrote. “That is precisely what Karpowicz and Laphen allege.”

The judge, though, said in this instance, the IMRF is not another “private speaker,” but is a public body established by state law to manage retirement funds for many Illinois public employees.

“Like Janus, … the state requires plaintiffs to contribute to IMRF,” Gettleman said. “But unlike the union in Janus, the IMRF is not a private entity but … a ‘body politic’ established by state law.”

The judge said Janus is the wrong standard against which to judge Local 150’s case. Rather, he said it is more akin to the facts laid out in the U.S. Supreme Court’s 2000 decision in  Board of Regents of the University of Wisconsin System v Southworth, which held the university didn’t violate students’ speech rights by charging an activity fee and distributing it to campus organizations, including those with whose politics and positions a particular student may disagree.

Gettleman said the IMRF similarly collects funds from workers, and invests them in publicly traded companies solely to boost the return for the retirement fund, without consideration for how a company may later reinvest or spend those funds.

The IMRF has been represented by attorneys with the firm of Seyfarth Shaw LLP, of Chicago.

Local 150 has been represented by its in-house counsel and attorneys with the Indiana Iowa Illinois Federation for Fair Contracting, which is located adjacent to Local 150’s offices in suburban Countryside.

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Organizations in this Story

Illinois Municipal Retirement Fund International Union of Operating Engineers Local 150 Seyfarth Shaw, LLP U.S. District Court for the Northern District of Illinois

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