A labor union and the city of Fairfield are fighting in court over a large, inflatable rat balloon. A federal judge heard arguments by both sides yesterday in Cincinnati. U-S District Judge Sandra Beckwith could rule next month in the dispute between Fairfield and the International Union of Machinists and Aerospace Workers. The dispute began when union members picketing near a Fairfield auto dealership on July 31st were cited by police. Officers said the union violated a city ordinance by placing the rat balloon in the public right-of-way along a street. Union officials sued to demand money damages. They claim that Fairfield discriminated against them and violated their constitutional right of free speech.