Carver et al v. Nassau County Interim Finance Authority et al

Filing 95

MEMORANDUM AND ORDER denying 68 Motion for Summary Judgment; granting 72 Motion for Summary Judgment; denying 79 Motion for Summary Judgment; denying 83 Motion for Summary Judgment. For the reasons stated herein, the court grants Plainti ffs' motion for summary judgment and denies Defendants' motions for summary judgment. The Clerk of the Court is directed to terminate the motions docketed under docket numbers 68, 72, 79 and 83 in this matter. Plaintiffs' are directed to a submit an appropriate judgment on notice within two weeks of the date of this order. (Ordered by Judge Leonard D. Wexler on 2/14/2013.) (Fagan, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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JAMES CARVER, as President of the Nassau
County Police Benevolent Association,
GARY LEARNED, as President of the Superior
Officers Association of Nassau County, and
THOMAS R. WILLDIGG, as President of the
Nassau County Police Detectives' Association,
Inc.,

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MEMORANDUM AND ORDER

cv 11-1614

Plaintiffs,
-against-

(Wexler, J.)

NASSAU COUNTY INTERIM FINANCE
AUTHORITY, RONALD A. STACK,
LEONARD D. STEINMAN, ROBERT A.
WILD, CHRISTOPHER P. WRIGHT,
GEORGE J. MARLIN, THOMAS W.
STOKES, in their official capacities as
directors/members of the Nassau County
Interim Finance Authority, EDWARD
MANGANO, in his official capacity as
COUNTY E)(ECUTIVE OF NASSAU
COUNTY, COUNTY OF NASSAU, and
GEORGE MARAGOS, in his official capacity
as NASSAU COUNTY COMPTROLLER,

Defendants.

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APPEARANCES:
STROOCK & STROOCK & LAVAN LLP
BY: ALAN A. KLINGER, ESQ.
180 Maiden Lane
New York, New York 10038
GREENBERG BURZICHELLI GREENBERG P.C.
BY: HARRY GREENBERG, ESQ.
3000 Marcus Avenue, Suite 1W7
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Lake Success, New York 11 042
Attorneys for Plaintiffs
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
BY: CHRISTOPHER GUNTHER, ESQ.
Four Times Square
New York, New York 10036-6522
Attorneys for Defendants
Nassau County Interim Finance Authority and
Individual Directors/Members
JACKSON LEWIS LLP
BY: MARK L. SUSSMAN, ESQ.
58 South Service Road, Suite 410
Melville, New York 11747
Attorneys for Defendants County of Nassau
Edward Mangano and George Maragos
WEXLER, District Judge
In this action Plaintiffs, officers representing three Nassau County Police Officers and
Detectives Unions (collectively the "Unions") challenge the imposition of a wage freeze imposed
by Defendant Nassau County Interim Finance Authority ("NIFA" or the "Authority"). The wage
freeze at issue impacts compensation agreements reached between the Unions and the County of
Nassau (the "County"). In addition to naming the Authority as a Defendant, Plaintiffs also name
the individual directors/members ofNIFA, the County, Nassau County Executive Edward
Mangano, and Nassau County Comptroller George Maragos. All individuals are named only in
their official capacities.
Federal jurisdiction is based upon Plaintiffs' claim that the wage freeze violates the
Contracts Clause of Article 1 of the United States Constitution. In addition to the Constitutional
claim, Plaintiffs allege that the freeze was imposed in violation of the express terms of Section
3669 of the New York Public Authorities Law- the statute that authorizes imposition of a wage

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freeze under certain circumstances. Plaintiffs seek a judgment declaring the wage freeze
unlawful, and an order enjoining its implementation.
The parties have engaged in expedited factual discovery which is now complete.
Presently before the court are the parties' cross-motions, pursuant to Rule 56 of the Federal Rules
of Civil Procedure, for summary judgment.
BACKGROUND

I.

Facts: The Parties and the Creation ofNIFA
The facts set forth below are drawn from the documents properly before the court,

including the parties' statements pursuant to Rule 56.1 of the Rules of this Court.
As noted, Plaintiffs are representatives of three Nassau County Police Officers and
Detectives Unions. NIFA is a corporate governmental agency and an instrumentality of the State
of New York. It was created in 2000 by the Nassau County Interim Finance Authority Act (the
NIFA Act"). See County of Nassau v. Nassau Countv Interim Finance Authority, 920 N.Y.S.2d
873, 875 (N.Y. County 2011). NIFA was created in response to the County's impending descent
into insolvency. At the time, debt service in the County accounted for nearly one-fourth of the
County's budgeted spending, and rating agencies downgraded the County's bond rating to near
junk status. The Nassau County Legislature voted for unanimous approval of the NIFA Act as
"necessary and in the public interest." Countv of Nassau, 920 N.Y.S.2d at 875.
Under the NIFA Act, the Authority was authorized, inter alia, to issue bonds and notes for
County purposes and to oversee its finances. !d. at 876. Pursuant to the Act, the County was
provided with a $100 million state subsidy ($25 million per year through 2004) as well as a grant
of $5 million to assist the County in connection with its tax certiorari process. Id. To date, NIF A

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has issued more than $2 billion in bonds for the County's benefit, $1.5 billion of which remain
outstanding. Additionally, the Authority has also assisted Nassau by restructuring maturing debt,
refinancing existing debt, and borrowing money. Nassau County, 920 N.Y.S.2d at 876.
II.

NIFA Monitoring of the County's Finances: The Interim Financing and Control Periods
The NIFA Act provides for separate periods during which the Authority monitors County

finances- an "interim financing period," and a subsequent period, extending to the later of the
end of January I, 2030, or the date when NIFA's bonds are discharged. The NIFA Act also
allows to Authority to invoke a "control period," during which it may exercise additional
enumerated powers over County finances and contractual obligations.
A.

The Interim Finance Period

The NIFA Act's "interim finance period" referred initially to the time period from the
enactment of the NIFA Act through 2004. During this time, NIFA issued bonds to assist in the
restructuring of County debt and to address its cash flow needs. See N.Y. Pub. Auth. L. §3667.
During the interim finance period, the County was required to submit annual audit reports
demonstrating that its budget and financial plans comply with the NIFA Act, and that in making
certain budgetary calculations, the County adhered to Generally Acceptable Accounting
Principles See generally. N.Y. Pub. Auth. L.§ 3651(14). The initial interim financing period
provided for in the NIFA Act was scheduled to end in 2004. That period was extended by the
New York State Legislature through 2008. See id. There is no dispute that the interim finance
period expired in 2008, and is therefore no longer in effect. The NIF A Act makes clear that
despite the expiration of the interim financing period, the Authority remains obligated to
continue to oversee the County's financing. See, l<&, N.Y. Pub. Auth. L. §3667(4) (requiring the

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submission of budgets and revisions thereto so long as bonds issued by NIF A are outstanding).
B.

The Control Period

I.

NIFA's Power to Invoke a Control Period

The NIFA Act authorizes the Authority to institute, under certain limited circumstances,
what is referred to as a "control period," as set forth in Section 3669 of the Public Authorities
Law ("Section 3669"). N.Y. Pub. Auth. L. §3669; see N.Y. Pub. Auth. L. § 3651(5). During a
control period, NIFA has the power to exercise a higher level of monitoring and control over
County finances and contractual obligations. The circumstances requiring NIFA to impose a
control period are set forth in Section 3669. Those circumstances include, inter alia, a
determination that the County: (1) has failed to pay the principal of or interest on any of its bond
or notes when due or payable; (2) has incurred a major operating funds deficit of one percent or
more in the aggregate, or (3) has violated the NIFA Act in any way that "substantially impairs the
marketability of the county's bonds or notes." N.Y. Pub. Auth. L. §3669 (1).
NIFA is required to impose a control period either in the event that one of the Section
3669 enumerated events has occurred, or if there exists a substantial likelihood and imminence of
such occurrence. The Section 3669 control period is terminated when NIFA determines that the
conditions permitting the imposition ofthat period no longer exist. N.Y. Pub. Auth. L. §
3669(1 ). Additionally, the NIFA Act provides that a control period may not continue, in any
event, "beyond the later of(!) January 1, 2030 or (2) the date when all NIFA bonds are
"refunded, discharges or otherwise defeased." N.Y. Pub. Auth. L. §3669(1).
ii.

NIFA's Duties and Powers During a Control Period

Section 3669(2) sets forth certain duties and powers granted to NIFA during a control

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period. Among those duties are the requirement that the Authority consult with the County and
prescribe the form of a financial plan. N.Y. Pub. Auth. L. §3669(2)(a). NIFA is also required, as
deemed necessary, to "review the operations, management, efficiency and productivity of county
operations, audit compliance with the financial plan and compliance with respect thereto." N.Y.
Pub. Auth. L. §3669(2)(b). Section 3669(2)(d) sets forth particular NIFA duties with respect to
prospective contracts, including the rights to review, revise and/or disprove the terms of any such
contract. Id. NIFA is also granted the power to review the terms of any proposed long or short
term borrowing during a control period. N.Y. Pub. Auth. L. §3669(2)(e). Additionally,
subsection (2) of Section 3669 grants NIFA the broad control period power to withhold any
transitional state aid from the County. N.Y. Pub. Auth. L. §3669(2)(g).
111.

NIFA's Power to Institute a Control Period Wage Freeze

In addition to the duties and powers granted under subsection (2) of Section 3669, the
control period section of the NIFA Act also grants the Authority the power to suspend any wage
increase previously agreed upon in connection with "collective bargaining agreements, or other
analogous contracts or interest arbitration awards." N.Y. Pub. Auth. L. §3669(3). The imposition
of a control period wage freeze requires more than the determination that a control period exists.
Instead, in addition to the declaration of a control period, a Section 3669 wage freeze may be
imposed only upon NIFA's enactment of a resolution that a wage freeze is "essential to the
adoption or maintenance of a county budget or a financial plan that is in compliance with" the
NIFA Act, and the Authority's separate declaration that there exists a "fiscal crisis." N.Y. Pub.
Auth. L. §3669(3).
Section 3669(3) places a time limit on any wage freeze imposed during a control period.

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That section, quoted in full below, refers to a wage freeze that lasts for "one year and" to a date
specified by the authority as necessary to achieve the objectives of the financial plan N.Y. Pub.
Auth. L. §3669(3). The final pertinent clause of Section 3669(3) states "which date shall in no
event be later than the end of the interim finance period .... " N.Y. Pub. Auth. L. §3669(3).
III.

The Declaration of a Control Period and the Institution of the Wage Freeze
Prior to January of2011, NIFA had never instituted a control period. It therefore never

had occasion to declare existence of a fiscal crisis or invoke a Section 3669 wage freeze. On
January 26,2011, NIFA enacted Resolution No. II, declaring a control period. The control
period was stated to have been enacted pursuant to Section 3669(1), on the ground that there was
a substantial likelihood and imminence of the County incurring a major operating funds deficit of
one percent or more in the aggregate results of operations during 20 II. On March 24, 2011,
NIFA adopted Resolutions 11-303 and 11-304, declaring the existence of a fiscal crisis and
suspending "all increases in salary and wages of employees of the County" set to take effect after
the date ofthe resolutions.'
IV.

Plaintiffs' Complaint and the Motions for Summary Judgment
In this lawsuit, the Unions do not challenge NIFA's decision to invoke a control period.

Instead, Plaintiffs challenge only the decision to declare a fiscal crisis and institute a wage freeze
pursuant to Section 3669(3). Plaintiffs set forth three separate causes of action. The first alleges
that the wage freeze violates the Contracts Clause of Section 1 of the United States Constitution.
Plaintiffs' second and third causes of action assert that the wage freeze violates the express terms
of the powers set forth in Section 3669. Specifically it is argued: (1) that NIFA has no power to
NIFA also instituted a wage freeze in 2012. The legality of that freeze is not
before the court.
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institute a wage freeze after expiration of the interim finance period, and (2) that the wages due
to the Unions are the result of a state court judgment and not within the definition of "collective
bargaining agreements, or other analogous contracts or interest arbitration awards," subject to
Section 3669(3).
The parties have cross moved for summary judgment as to all claims. As to the
Constitutional claim, the parties differ as to whether the Contract Clause is implicated and, if
implicated, whether it is violated by the wage freeze. As to Section 3669, the parties differ as to
the proper interpretation of the statutory language - which each side characterizes as plain in
meaning. The court turns now to the merits of the motions.
DISCUSSION
I.

Standards for Summary Judgment
A motion for summary judgment is granted only if the court determines that no genuine

issue of material fact exists and the moving party is entitled to judgment as a matter of law.
FRCP 56(c); Anderson v. Libertv Lobby, Inc., 477 U.S. 242, 250 (1986). Summary judgment is
properly granted if the moving party "shows that there is no genuine dispute as to any material
fact" and he is therefore entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
II.

Disposition of The Motions
As noted, the motions are directed to both Constitutional and statutory questions. The

court turns first to the question most appropriate for summary disposition, the statutory issue of
whether the plain language of Section 3669 authorizes a wage freeze after expiration of the
interim finance period.

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A.

Section 3669: Propriety of A Wage Freeze After the Interim Financing Period

As noted above, Section 3669(3) refers to a time limit to be placed on any wage freeze
imposed during a control period. The precise language at issue provides, in pertinent part, that
any wage freeze imposed:
shall continue until one year after the date of the order and, to the extent of any
determination of the authority that a continuation of such suspensions to a date specified
by the authority, is necessary ... such suspensions shall be continued to the date specified
by the authority, which date shall in no event be later than the end of the interim finance
period ....
N.Y. Pub. Auth. L. §3669(3) (emphasis added).
Both parties interpret the statutory language to allow NIF A to impose wage freezes that
last a year or longer. At issue is whether the final clause quoted above, i.e., "which date shall in
no event be later than the end ofthe interim finance period," applies uniformly to any wage
freeze - a one year freeze or a freeze extended by NIFA to a date specified (hereinafter a "date
specified" freeze).
The Unions interpret the time limiting language to apply to any wage freeze- whether
one year or date specified - and conclude that such wage freezes can be imposed only during the
interim financing period. Defendants, on the other hand, interpret the limiting language of the
final clause to refer only to date specified wage freezes. Thus, it is argued that the language
stating that the end point of a wage freeze "shall in no event be later than the interim finance
period," is said to apply only to "date specified" wage freezes, which may not extend beyond the
end ofthe interim finance period. One year wage freezes are, according to Defendants, allowed to

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be imposed at any time, during any control period, whether imposed during or after the interim
finance period.
As with any case of statutory interpretation, the court begins with the plain language of
the statute. Where that language is plain and unambiguous, the court need look no further for the
meaning of the words used. Connecticut Nat. Bank v. Germain, 503 U.S. 249,253-54 (1992)
(when words of statute are unambiguous court must assume that "legislature says in a statute
what it means and means in a statute what it says there"). The language of a statute is best
understood by considering that language in the context of the overall statutory scheme. Saks v.
Franklin Covey Co., 316 F.3d 337,345 (2d Cir. 2003). Thus, the "preferred meaning of a
statutory provision is one that is consonant with the rest of the statute." Id. (citation omitted). If
the plain meaning of the language can be discerned by examining that language in the context of
the statute, the court need look no further that those words. Louis Vuitton Malletier S.A. v. L Y
USA. Inc., 676 F.3d 83, 108 (2d Cir. 2012).
Upon consideration of the language at issue here, the court agrees with Plaintiffs' reading
of the NIF A Act, and holds that the language of Section 3669 unambiguously limits NIFA's
power to impose a control period wage freeze to the end of the interim finance period - which
period ended in 2008. The presence of the word "and" in Section 3669(3) militates heavily in
favor of the Union's interpretation. Thus, the statute states that a wage freeze may be imposed for
a period of one year and to a date specified. The final limiting clause, which refers to "such
suspensions" makes no distinctions between the two possible end dates- it states only that the
end point of any freeze "shall in no event be later than the end of the interim finance period."
The Court recognizes that the Union's interpretation of Section 3669(3), which it has

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accepted, limits the power ofNIFA to impose a wage freeze to the end of the interim finance
period, which period has long since expired. While this interpretation restricts NIFA's exercise of
a strong power over County finances, such limitation is consistent with the NIFA Act as a whole.
The statute is written to envision early and strict control over the County's finances, followed by
an easing of such control over time. While the right to impose a control period may be exercised
at any time (prior to January of 2030 or when all NIFA bonds are discharged), it makes sense to
limit the availability of the extreme tool of the retrospective wage freeze to early in the NIFA
monitoring process, when greater powers of oversight are available to the Authority. This
interpretation continues to allow for the strong oversight tools set forth in Section 3669(2) to be
exercised during any control period, while reserving the wage freeze tool for use in the earlier
interim financing period.
The court's interpretation is further supported by the fact that the power to impose a wage
freeze is set forth in a subsection of Section 3669 that is separate and apart from those
delineating NIFA's many other control period rights over County finances. It is clear that such a
freeze was not to be routinely imposed, even during the control period's time of heightened
oversight. Instead, the wage freeze, admittedly an important tool in NIFA's arsenal, was to be
imposed only upon a subsection (3) separate finding supporting a declaration of a fiscal crisis. It
is not surprising that the legislature chose to further limit the wage freeze power to the interim
finance period only, preferring not to extend that power to any subsequently imposed control
period.
It would have been simple for the legislature to write the NIFA Act as Defendants seek to

have it interpreted. Thus, the legislature could have stated that a control period wage freeze may

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be imposed during any control period, for a period of one year or during the interim finance

period, to a date specified. The NIFA Act could then have gone on to make clear that the latter
type of freeze, which presumably would last for more than one year, may not continue beyond the
end of the interim finance period. Such language was not, however, chosen and amounts to a
strained interpretation of the NIFA Act.
In sum, the court holds that the language of Section 3669(3) is clear. It limits the
imposition of wage freezes of previously bargained for rights to the time when a control period
and fiscal crisis are declared during the interim finance period. Such wage freezes are neither
contemplated nor allowed thereafter. It is not for the court to re-write legislation to grant NIFA
powers broader than those intended by the legislature. That body chose to extend the interim
financing period, and thus the power to impose a control period wage freeze, from 2004 through
2008. The legislature could have easily extended the interim finance period further, but it did not.
In view of the plain language of the NIFA Act, this court, recognizing that it is without power to

legislate increased powers to NIF A, holds that the Authority went beyond its statutory
authorization when imposing the 20 II control period wage freeze.
III.

Additional Grounds and Stay Pending Appeal
In view of the fact that the court has found that Section 3669 does not authorize the

imposition of a wage freeze beyond the interim finance period, the court need reach neither the
Constitutional issue raised, nor the additional statutory ground raised by the Unions. No opinion
as to either ground is expressed herein. The court grants Plaintiffs' motion for summary judgment
and denies Defendants' cross-motion. The court will stay the operation of any judgment entered
herein pending appeal, if any, of this matter to the Court of Appeals for the Second Circuit.

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CONCLUSION
For the forgoing reasons, the court grants Plaintiffs' motion for summary judgment and
denies Defendants' motions for summary judgment. The Clerk of the Court is directed to
terminate the motions docketed under docket numbers 68, 72, 79 and 83 in this matter. Plaintiff
are directed to a submit an appropriate judgment on notice within two weeks of the date of this
order.
SO ORDERED.

Is/

~LE~O~N~ARD~
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UNITED STATES DISTRICT JUDGE
Dated: Central Islip, New York
February 14,2013

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