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

Filing 89

MEMORANDUM AND ORDER denying 75 Motion for Summary Judgment; granting 79 Motion for Summary Judgment; granting 80 Motion for Summary Judgment. The Clerk of the Court is directed to enter judgment in favor of Defendants and against Plaintiffs and to mark the case closed. So Ordered by Judge Joanna Seybert on 4/26/2018. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------X
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
DEPARTMENT DETECTIVES’ ASSOCIATION, INC.,
Plaintiffs,

MEMORANDUM
AND ORDER

11-CV-1614(JS)(GRB)

-againstNASSAU 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 EXECUTIVE OF
NASSAU COUNTY; COUNTY OF NASSAU, and
GEORGE MARAGOS, in his official capacity
as NASSAU COUNTY COMPTROLLER,
Defendants.
-----------------------------------------X
DANNY DONOHUE, as President of the Civil
Service Employees Association, Inc.,
Local 1000, AFSCMA, AFL-CIO, JERRY
LARICCHIUTA, as Local President of CSEA
Nassau County Local 830, and CIVIL SERVICE
EMPLOYEES ASSOCIATION, INC., LOCAL 1000,
AFSCME, AFL-CIO,
Plaintiffs,
-againstNASSAU COUNTY INTERIM FINANCE AUTHORITY;
RONALD A. STACK, as Chairman and Director
of the Nassau County Interim Finance
Authority; GEORGE J. MARLIN, LEONARD D.
STEINMAN, THOMAS W. STOKES, ROBERT A. WILD
and CHRISTOPHER P. WRIGHT, as Directors

11-CV-1900(JS)(GRB)

of the Nassau County Interim
Finance Authority; EDWARD MANGANO,
in his official capacity as COUNTY
EXECUTIVE OF NASSAU COUNTY; and GEORGE
MARAGOS, in his official capacity as
NASSAU COUNTY COMPTROLLER,
and COUNTY OF NASSAU,
Defendants.
-----------------------------------------X
JOHN JARONCZYK, as President of the
Nassau County Sheriff’s Correction Officers
Benevolent Association, Inc., and NASSAU
COUNTY SHERIFF’S CORRECTION OFFICERS
BENEVLOENT ASSOCIATION, INC.,
Plaintiffs,

11-CV-2743(JS)(GRB)

-againstNASSAU COUNTY INTERIM FINANCE AUTHORITY;
RONALD A. STACK, as Chairman and Director
of the Nassau County Interim Finance
Authority; GEORGE J. MARLIN, LEONARD D.
STEINMAN, THOMAS W. STOKES, ROBERT A. WILD
and CHRISTOPHER P. WRIGHT, as Directors
of the Nassau County Interim Finance
Authority; EDWARD MANGANO, in his official
capacity as COUNTY EXECUTIVE OF NASSAU
COUNTY; and GEORGE MARAGOS, in his official
capacity as NASSAU COUNTY COMPTROLLER,
and the COUNTY OF NASSAU,
Defendants.
-----------------------------------------X
APPEARANCES
For Plaintiffs:
PBA:
Alan M. Klinger, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Harry Greenberg, Esq.
Seth Greenberg, Esq.
Greenberg Burzichelli Greenberg PC
3000 Marcus Avenue, Suite 1W7
Lake Success, NY 11042
2

CSEA:

Aaron Kaplan, Esq.
Civil Service Employees Association, Inc.
143 Washington Avenue
Albany, New York 12210

COBA:

Howard G. Wirn, Esq.
Koehler & Isaacs, LLP
61 Broadway, 25th Floor
New York, New York 10006

Defendants:
NIFA:

Nassau County:

Christopher J. Gunther, Esq.
Skadden, Arps, Slate, Meagher & Flom, LLP
Four Times Square
New York, New York 10036
Marc S. Wenger, Esq.
Ana C. Shields, Esq.
Jackson Lewis P.C.
58 South Service Road, Suite 250
Melville, New York 11747

SEYBERT, District Judge1:
The Plaintiffs in these cases are several employees’
unions.2

They commenced these cases against Nassau County Interim

Finance Authority (“NIFA”) and its Directors Ronald A. Stack,

These matters were re-assigned to the undersigned effective
April 9, 2018.
1

The Plaintiffs in 11-CV-1614 (the “Carver” case) are the Nassau
County Police Benevolent Association (“PBA”), the Superior
Officers Association of Nassau County (“SOA”), the Nassau County
Police Department Detectives’ Association, Inc. (“DAI”), and
their Presidents (collectively the “PBA Plaintiffs”). The
Plaintiffs in 11-CV-1900 (the “Donohue” case) are Civil Service
Employees’ Association units and their Presidents (collectively,
the “CSEA Plaintiffs”). The Plaintiffs in 11-CV-2743 (the
“Jaronczyk” case) are the Nassau County Sheriff’s Correction
Officers Benevolent Association (“COBA”) and its President
(collectively, the “COBA Plaintiffs”).
2

3

Leonard D. Steinman, Robert A. Wild, Christopher P. Wright, George
J. Marlin, Thomas W. Stokes (collectively, the “NIFA Defendants”)
and Nassau County, County Executive Edward Mangano, and County
Controller George Maragos (collectively, the “County Defendants”)
alleging that a wage freeze ordered by NIFA impaired collective
bargaining
violation

agreements
of

Constitution.

the

and/or

interest

Contracts

Clause

arbitration
of

the

awards

United

in

States

Currently before the Court are motions for summary

judgment brought by Plaintiffs, and cross-motions for summary
judgment brought by the NIFA Defendants and the County Defendants
in each action.

For the reasons set forth below, Plaintiffs’

motions are denied, and the Defendants’ cross-motions are granted.
BACKGROUND
I. Factual History
The

facts

are

taken

from

the

parties’

Rule

56.1

Statements and supporting documents, and are undisputed unless
stated otherwise.
A. The Parties
The individual plaintiffs in all three cases are named
in their capacities as presidents or former presidents of their
respective unions.

The Plaintiff unions are each recognized as

the exclusive bargaining representative for that organization:
the PBA represents the County’s uniformed police officers; the SOA
represents the superior officers of the County police departments;
4

the DAI represents detectives employed by the County; the CSEA
represents

County

employees;

and

COBA3

represents

corrections

officers and investigators at the County.
NIFA

is

a

corporate

governmental

agency

and

instrumentality of New York State that was created in 2000 by
passage of the Nassau County Interim Finance Authority Act (“NIFA
Act”).

The individual NIFA defendants are named in their official

capacities as Directors of NIFA.

Beginning January 1, 2010,

Defendant Mangano was the County Executive for Nassau County, and
Defendant Maragos was the County Comptroller.
B. Passage of the NIFA Act
In the face of the County’s dire fiscal condition, the
state legislature in June 2000 passed the NIFA Act, which was
intended to assist the County to become fiscally stable and to
reform its financial practices.

N.Y. PUB. AUTH. LAW § 3650 et seq.

Through NIFA, the State provided over $105 million in bailout
funds, and NIFA issued over $2 billion in bonds for the County’s
benefit.

In return, the County’s finances are subjected to

oversight until the debt is retired.

The name of the union in the Jaronczyk case is listed as COBA
for some unspecified time period and also as the Nassau County
Sheriff’s Officers Association (“SHOA”). The parties seem to
use the COBA and SHOA labels interchangeably. The Court will
use COBA to refer to these plaintiffs.
3

5

The NIFA Act established three periods of oversight:

an

initial interim finance period, followed by a monitoring and review
period, and under certain conditions, a control period.

NIFA is

authorized to impose a control period at any time that enumerated
events occurred or “a substantial likelihood and imminence of such
occurrence” existed.

N.Y. PUB. AUTH. LAW § 3669(1).

One such

enumerated event is that the County “shall have incurred a major
operating funds deficit of one percent or more in the aggregate
results of operations of such funds during its fiscal year assuming
all revenues and expenditures are reported in accordance with
generally accepted accounting principles.”

Id.

NIFA terminates

a control period “when it determines that none of the conditions
which would permit the authority to impose a control period exist.”
Id. One of the authorities granted to NIFA during a control period
is the power to declare a fiscal crisis and impose a wage freeze
upon a finding that such a freeze “is essential to the adoption or
maintenance of a county budget or a financial plan.”

Id.

The initial interim period of oversight ended in 2008.
NIFA began monitoring and review in 2009.
C. Agreements and Interest Arbitration Awards
The
collective

Plaintiff

bargaining

throughout the years.

unions

have

agreements

entered

(“CBAs”)

with

into
the

various
County

The agreements discussed below are those

relevant to the issues in this case.
6

The CSEA and the County have been parties to numerous
CBAs, including one with a term of January 1, 2003 to December 31,
2007. The parties had difficulty negotiating a successor agreement
and ultimately agreed to interest arbitration to resolve their
issue. On December 11, 2008, the interest arbitration panel issued
an award covering the period of January 1, 2008 to December 31,
2015 (the “CSEA Award”).

In 2009 and 2010, the County and the

CSEA entered into supplemental agreements providing for voluntary
separation incentives, payroll lags, and retirement incentives.
The County’s agreements with the three police unions,
the PBA, DAI, and COBA, also went before interest arbitration
panels.

Each of these unions also agreed to re-open its contracts

and extend the term in exchange for union concessions.

As to the

PBA, an interest arbitration panel issued an award in 2007 for the
term of January 1, 2007 to December 31, 2012, which was then
extended by agreement through December 31, 2015.

An interest

arbitration panel in 2008 issued an award regarding the County’s
agreement with the DAI covering the period of January 1, 2007 to
December

31,

2012,

December 31, 2015.

which

was

subsequently

extended

through

In 2009, an interest arbitration panel issued

a contract for SOA covering the years 2008 through 2013, and that
term was also extended through December 31, 2015 by subsequent
agreement in 2009.

7

COBA and the County were parties to a CBA dated in March
2008 that covered the period from January 1, 2005 through December
31, 2012.
agreements

A second agreement expired on December 31, 2015.
included,

inter

alia,

wage

increases,

Both

longevity

payments, and increment wage increases.
D. New County Administration
Mangano, who ran for office on an anti-tax platform,
became County Executive on January 1, 2010.

On his first day in

office, Mangano authorized the repeal of the Home Energy Fuel Tax,
a tax on residential energy use.

That tax produced revenue of

approximately $20 million in 2010, and had projected annual revenue
of $40 million in subsequent years.

The County notes that the

loss of revenue from the repeal may have been offset by other gains
such as an increase in sales tax revenue.

Also upon Mangano’s

inauguration, the County did not move forward with a planned
cigarette tax and did not implement a scheduled property tax
increase.
In September 2010, the County presented a multi-year
financial plan. In September 2010, NIFA issued a Preliminary Staff
Review of the Proposed Multi-Year Financial Plan Fiscal 2011-2014
for its Directors.

(Donohue, Declaration of Aaron E. Kaplan

(“Kaplan Decl.”), Ex. 14 (“Review”), Docket Entry 65-6.)

The

Review expressed concerns regarding the County’s proposed plan,
noting that it “relies on significant State approvals, numerous
8

revenue actions, passage of ordinances by the County Legislature,
extraordinary

levels

of

unacceptable

borrowing

for

operating

expenses, and most importantly labor concessions that have not
been secured.

Each of these factors must be viewed as having a

high degree of risk.”

(Id., Overview at 1.)

The Review, noting

that the County Legislature was still deliberating and labor
negotiations continued, ultimately recommended that the Directors
postpone commenting on the proposed budget until more conclusive
information was available.

(Id., Conclusion at 8.)

NIFA also established two changes to how it analyzed the
County’s fiscal health.

Prior to September 2010, NIFA had allowed

the County to use budgetary accounting procedures that were not in
accordance with Generally Accepted Accounting Procedure (“GAAP”).
In September 2010, NIFA changed to the GAAP method with the result
that some revenues were reclassified to not count as revenues,
leading to an increase in budget deficits.

The County maintained

that this created a “paper deficit” and that its traditional budget
making

process

was

acceptable.

Furthermore,

NIFA

had

also

previously permitted the County to borrow money to pay property
tax certiorari judgments to residents.

In 2010, NIFA prohibited

this practice, resulting in an increase to the deficit.
On October 30, 2010, the County Legislature passed the
FY 2011 budget including items previously found to be at risk by
NIFA.

Documents submitted show that during the fall of 2010 until
9

January 2011, exchanges took place between the County and NIFA
regarding the latter’s concerns about the FY 2011 budget and the
possibility that the County faced a one-percent deficit in major
operating funds.

The County and NIFA discussed refinancing and

restructuring the County’s debt, but no action was taken.

At a

NIFA meeting on December 30, 2010, NIFA allowed the County an
additional month to submit materials to it addressing the deficit.
Over the next month, the County provided information, and the CSEA
agreed to a restructured salary schedule and other cost-savings
measures.
E. NIFA’s Declaration of a Control Period
On January 26, 2011, NIFA issued Resolution No. 11
entitled “Declaration of a Control Period upon Finding Likelihood
and Imminence of a Deficit of More Than One Percent in the County's
Fiscal Year 2011 Budget.” (Kaplan Decl., Ex. 36.) In the attached
Determination, NIFA expressly stated that it was invoking its
statutory

authority

to

impose

a

control

period

“upon

its

determination at any time . . . that there exists a substantial
likelihood and imminence of . . . a major operating funds deficit
of one percent or more in the aggregate results of operations of
such funds during its fiscal year . . . .”

(Id., Determination

at 5 (quoting N.Y. PUBL. AUTH. LAW § 3669(1)).)
directed

the

County

to

submit

10

a

new

plan

Resolution No. 11
for

FY

2011

by

February 15, 2011.

NIFA did not declare a fiscal emergency at

this time.
On January 31, 2011, the County commenced a proceeding
in New York State Supreme Court challenging NIFA’s decision to
impose a control period, arguing that NIFA lacked the authority to
make

that

decision

and

alternatively,

inappropriate and unwarranted.

that

the

decision

was

On March 11, 2011, the state court

denied the County’s motion for a preliminary injunction, finding
that NIFA had the authority to declare a control period.

Cty. of

Nassau v. NIFA, 33 Misc. 3d 227, 920 N.Y.S.2d 873 (Sup. Ct. 2011).
The

County’s

claim

that

NIFA’s

decision

was

arbitrary

and

capricious was not decided, and the court converted NIFA’s motion
to dismiss that claim to a motion for summary judgment and set a
briefing schedule.
Soon after the decision denying a preliminary injunction
was issued, the County asked NIFA to exercise its statutory
authority to impose a wage freeze with respect to County employees,
including the Union member Plaintiffs.

On March 22, 2011, Mangano

sent NIFA a revised plan for FY 2011 which also included the
request for a wage freeze.

On March 24, 2011, NIFA found that the

revised plan did not present a balanced budget. Among other
decisions, NIFA determined that a wage freeze was essential to the
County’s adoption and maintenance of a budget for FY 2011.
Resolution No. 11-303, Kaplan Decl. Ex. 39.)
11

(NIFA

NIFA went on to

declare a fiscal crisis in the County and impose a wage freeze.
(NIFA Resolution No. 11-304, Kaplan Decl. Ex. 39.)

Resolution 11-

304 ordered that “all increases in salary or wages of employees of
the County, which will take effect after the date of this order
pursuant to collective bargaining agreements, other analogous
contracts, or interest arbitration awards, now in existence or
hereafter entered into, requiring such salary increases as of any
date thereafter are suspended.”

(Id.)

It further suspended

increased payments for holiday and vacation differentials, shift
differentials, and step-ups.

The duration of the wage freeze was

for one year.4
On March 29, 2011, the County announced it was abandoning
its state court proceeding against NIFA.

The Plaintiffs commenced

these actions shortly thereafter, arguing that there were other
options, including raising taxes and cost-savings measures, that
were available to the County and that defendants should have
pursued those other options before implementing a wage freeze
against the unionized workers.
II.

Procedural History
The Carver case was filed on April 1, 2011, and the

Donohue and Jaronczyk cases followed on April 18, 2011 and June 7,

On March 22, 2012, NIFA determined that the fiscal crisis still
existed and continued the wage freeze for another year.
4

12

2011, respectively. Plaintiffs in all three cases asserted a claim
under the contracts clause of the United States Constitution.

In

addition, Plaintiffs in Donohue and Jaronczyk asserted a due
process claim arising when their property rights were affected
without notice or an opportunity to be heard in violation of the
Fifth and Fourteenth Amendments to the U.S. Constitution.

The

Donohue and Jaronczyk complaints also included state law claims of
violations of New York Public Authorities Law § 3669(3)(b) and of
Article 5, § 7 of the New York State Constitution.5
The cases as originally commenced also contained a claim
that NIFA’s authority to impose a wage freeze was limited to the
interim finance period.

By Memorandum and Order dated February

14, 2013, District Judge Leonard D. Wexler granted summary judgment
for Plaintiffs in the Carver action on the lone ground that NIFA’s
imposition of the wage freeze exceeded its authority under the
NIFA Act.

Carver v. NIFA, 923 F. Supp. 2d 423 (E.D.N.Y. 2013).

The federal contracts clause claim was not addressed.

The Donohue

and Jaronczyk cases and motion practice were held in abeyance
pending a decision on the appeal of the Carver decision.
On appeal, the Second Circuit vacated Judge Wexler’s
decision,

determining

that

the

case

presented

an

unresolved

In light of the state court ruling, Plaintiffs in Donohue and
Jaronczyk requested, with defendants’ consent, that their
original complaints be considered the operative pleadings. That
request was granted. (See Minute Order of Feb. 14, 2017.)
5

13

question of state law that was more properly addressed by the state
court.

Carver v. NIFA, 730 F.3d 150 (2d Cir. 2013).

It remanded

the case with directions to dismiss the state law claim, but retain
jurisdiction over the federal claim.
stayed

the

federal

action

pending

On remand, Judge Wexler
completion

proceedings commenced in Nassau County.

of

state

court

See Carver, 11-CV-1614,

Docket Entry 105.
All the Plaintiffs commenced actions in state court
regarding NIFA’s wage freeze authority. The New York State Supreme
Court determined that NIFA had the statutory authority to impose
the wage freezes during a control period, and the Appellate
Division affirmed that determination.

See Carver v. NIFA, 142

A.D.3d 1003, 1008, 38 N.Y.S.3d 197 (App. Div. 2d Dep’t), leave to
appeal denied, 28 N.Y.3d 911, 69 N.E.3d 1022, 47 N.Y.S. 2d 226
(2016) (Table).

The state cases having concluded, the parties in

all three cases requested that the federal actions be reopened and
the federal constitutional claim resolved. In light of the passage
of time and intervening decisions, Judge Wexler directed that the
motions and cross-motions be re-briefed.

Those re-filed motions

are currently before the Court.
The briefing is entirely focused upon Plaintiffs’ claims
of violations of the contracts clause in which they argue that the
wage freeze acted to impair agreements between the unions and
Nassau County.

The lone federal cause of action remaining in the
14

Carver action is the contracts clause claim as it appears that the
state claims were resolved in the state court action.

On April

12, 2018, the Plaintiffs in Donohue and Jaronczyk were directed to
advise the Court as to whether they intended to pursue any claims
from their original complaints in addition to the contracts clause
claims.

Counsel in both cases have advised the Court that the

sole claim remaining is the contracts clause claim, and that they
do not intend to pursue any other claim.

(See Donohue, Docket

Entry 74; Jaronczyk, Docket Entry 88.)
DISCUSSION
I.

Legal Standards
Pursuant to Rule 56 of the Federal Rules of Civil

Procedure, summary judgment is appropriate only if “the movant
shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”

FED. R.

CIV. P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48, 106 S. Ct. 2505, 106 L. Ed. 2d 202 (1986).

In determining

a motion for summary judgment, the court “is not to weigh the
evidence but is instead required to view the evidence in the light
most favorable to the party opposing summary judgment, to draw all
reasonable

inferences

favor

credibility assessments.”

of

that

party,

and

to

eschew

Amnesty Am. v. Town of W. Hartford, 361

F.3d 113, 122 (2d Cir. 2004).

After the moving party has met its

burden, the opposing party “‘must do more than simply show that
15

there is some metaphysical doubt as to the material facts. . . .
[T]he nonmoving party must come forward with specific facts showing
that there is a genuine issue for trial.’” Caldarola v. Calabrese,
298 F.3d 156, 160 (2d Cir. 2002)

(quoting Matsushita Elec. Indus.

Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S. Ct. 1348,
89 L. Ed. 2d 538 (1986)).
II.

Contracts Clause Claims
The contracts clause provides, in pertinent part, that

“no state shall . . . pass any . . .
of Contracts. . .”

Law impairing the Obligation

U.S. CONST., ART. I, § 10, cl. 1.

Although the

language appears mandatory and absolute, courts have acknowledged
that some impairment is Constitutionally-permissible.

See, e.g.,

Condell v. Bress, 983 F.2d 415, 417 (2d Cir. 1993).

The state

may, in an exercise of its police power, abridge a contract when
that impairment is “reasonable and necessary to serve an important
public purpose.”

United States Trust Co. v. New Jersey, 431 U.S.

1, 25, 97 S. Ct. 1505, 52 L. Ed. 2d 92 (1977).

To determine

whether a law impermissibly impairs a contract, a court considers
whether the impairment is substantial, whether the law serves a
legitimate public purpose, and if so, “are the means chosen to
accomplish

this

purpose

reasonable

and

necessary.”

Buffalo

Teachers Fed’n v. Tobe, 464 F.3d 362, 368 (2d Cir. 2006).
It

is

clear,

however,

that

the

contracts

clause

“prohibits the impairment by the state of existing contracts” but
16

does not apply to contracts created after the allegedly-offensive
law was enacted.

Fabri v. United Techs. Int’l, Inc., 387 F.3d

109, 124 (2d Cir. 2004)

(emphasis in original); see also Kinney

v. Conn. Judicial Dep’t, 974 F.2d 313, 315 (2d Cir. 1992)

(“of

course, the offending statute necessarily must be enacted after
the contract in question has come into effect”).

The sequence of

the timing of the union contracts and the legislation raises a
threshold question in this case.

The NIFA Act was passed by the

state legislature in June 2000, the agreements and/or interest
arbitration awards affected by the wage freeze were entered into
on various dates between 2007 and 2010, and NIFA declared a fiscal
crisis and imposed a wage freeze on March 24, 2011.

Defendants

argue that the relevant offending statute was the NIFA Act and
thus there is no contracts claim as to the subsequent agreements;
Plaintiffs argue that the wage freeze decision was the “law” and
that the impaired agreements were entered into prior to that
ruling.

The Court must first determine whether the legislative

act from which Plaintiffs’ claims arise was the passage of the
NIFA Act by the state legislature or the imposition of the wage
freeze by NIFA.
A.

The NIFA Act and Formation of NIFA
In June 2000, the New York State legislature created

NIFA “in response to the growing financial crisis facing Nassau
County.”

Carver, 730 F.3d 150, 152 (2d Cir. 2013); see NIFA Act,
17

N.Y. PUB. AUTH. LAW § 3650 et seq.

NIFA was created as a “corporate

governmental agency and instrumentality of the state constituting
a public benefit corporation.”
public

benefit

corporation

N.Y. PUB. AUTH. LAW § 3652 (1).
“is

a

corporation

organized

A
to

construct or operate a public improvement wholly or partly within
the state, the profits from which inure to the benefit of this or
other states, or to the people thereof.”

N.Y. GEN. CONSTR. LAW § 66.

The NIFA Act indicated that “the creation of the authority and the
carrying out of its corporate purposes are in all respects for the
benefit of the people of the state of New York and are public
purposes.”

N.Y. PUB. AUTH. LAW § 3661.
The NIFA Act authorizes NIFA to impose a “control period”

in the event of various occurrences including a major operating
funds deficit.

N.Y. PUB. AUTH. LAW § 3669.

During a control period,

NIFA is authorized to declare a fiscal crisis, and thereafter, a
wage freeze.

Specifically, NIFA “shall be empowered to order

that all increases in salary or wages of employees of the county
and employees of covered organizations which will take effect after
the date of the order pursuant to collective bargaining agreements,
other analogous contracts or interest arbitration awards, now in
existence

or

hereafter

entered

into,

requiring

increases as of any date thereafter are suspended.”
LAW § 3669.

18

such

salary

N.Y. PUB. AUTH.

B. Analysis of NIFA’s wage freeze
The contracts clause’s prohibition “is aimed at the
legislative power of the State, and not at the decisions of its
courts, or the acts of administrative or executive boards or
officers, or the doings of corporations or individuals.”

New

Orleans Water-Works Co. v. La. Sugar Refining Co., 125 U.S. 18,
30, 8 S. Ct. 741, 31 L. Ed. 2d 607 (1888).

“Any enactment, such

as a by-law or ordinance of a municipal corporation, to which a
state gives the force of law, is a statute of the state within the
meaning of the Contract Clause.”

Montauk Bus Co. v. Utica City

Sch. Dist., 30 F. Supp. 2d 313, 319 (N.D.N.Y. 1998) (citing New
Orleans Water–Works, 125 U.S. at 31).
determine

whether

NIFA

was

acting

Thus, the Court must
legislatively

or

administratively when it imposed the wage freeze.
There is nothing in the record to indicate that NIFA is
itself a legislative body.

See Schulz v. Kellner, No. 07-CV-0943,

2011 WL 2669456, at *9 (N.D.N.Y. July 7, 2011)
clause

claim

because

Defendant-Commissioners

of

(no contracts
NY

Board

of

Elections “are not legislative bodies and therefore are not proper
parties in an action pursuant to the Contracts Clause”).

Further,

the

to

imposition

legislative act.

of

the

wage

freeze

does

not

appear

be

a

NIFA did not hold hearings, promulgate a law or

ordinance, or create new legal standards when it acted.

See

generally Matter of Alca Indus. v. Delaney, 92 N.Y.2d 775, 778,
19

709 N.E.2d 97, 686 N.Y.S.2d 356 (1999) (distinguishing decisions
based on individual circumstances from creation of a rule that
“implement[s] a standard or procedure that directs what action
should

be

taken

regardless

of

individual

circumstances”).

Instead, it exercised statutory authority given to it by the state
legislature under the NIFA Act.

Put in other words, the State

exercised its authority in passing the NIFA Act, and NIFA’s
imposition of the wage freeze was not a separate legislative
action, but only an application of previously created law.
such, NIFA’s actions are administrative in nature.

As

See, e.g.,

Waltz v. Bd. of Ed. of Hoosick Falls Cent. Sch. Dist., No. 12-CV0507, 2013 WL 4811958, at *8 (N.D.N.Y. Sept. 10, 2013)

(school

board act approving CBA after a vote not a legislative act under
the contracts clause); Chaffer v. Bd. of Ed. of City Sch. Dist.,
229 F. Supp. 2d 185, 191 (E.D.N.Y. 2002)

(school board’s decision

to terminate an employment contract not a legislative act); Jamaica
Ash & Rubbish Removal Co. v. Ferguson, 85 F. Supp. 2d 174, 183-84
(E.D.N.Y. 2000)

(act taken by Trade Waste Commission was “nothing

more than an administrative act, carried out by a commission
authorized and created by New York City law”).
In declaring a fiscal crisis and imposing the wage
freeze, NIFA did not create a “new rule,” but merely exercised
authority delegated to it by the legislature in 2000.

Such an

exercise does not fall within the contract clause’s prohibition.
20

See Tocci Bros., Inc. v. City of N.Y., No. 00-CV-0206, 2000 WL
1134367, at *9 (E.D.N.Y. Aug. 3, 2000)

(administrative acts taken

pursuant to legislative authority do not implicate the contracts
clause or else “every administrative action would become subject
to the Contracts Clause, a result clearly prohibited by controlling
precedent.”); W. 95 Hous. Corp. v. N.Y. City Dep’t of Hous. Pres.
& Dev., No. 01-CV-1345, 2001 WL 664628, at *8 (S.D.N.Y. June 12,
2001), aff’d, 31 F. App’x 19 (2d Cir. 2002)

(City agency’s

interpretation of regulations was not an act of legislation and
thus could not form the basis of a contract clause claim); Jamaica
Ash, 85 F. Supp. 2d at 183 (granting of license by a commission
bore “none of the hallmarks of a legislative act; it was an
application of the law, not the creation of a law”).

The NIFA Act

itself acknowledges that the state legislature was conferring NIFA
with specific powers by stating that NIFA would perform “an
essential governmental function in the exercise of the powers
conferred upon it by this title,” not the creation of such powers.
N.Y. PUB. AUTH. LAW § 3661 (emphasis supplied).

The wage freeze

authority is one of those powers expressly granted by the state.
See also Carver, 142 A.D.3d at 1008 (“the legislature clearly and
unequivocally conferred wage freeze authority upon NIFA during
control periods”).
The Buffalo Teachers case addressed a similar situation
regarding the actions of a state-created fiscal board.
21

There,

the state legislature, to address a severe fiscal crisis in the
city of Buffalo, passed the Buffalo Fiscal Stability Authority Act
(the “BFSA Act”), which created the Buffalo Fiscal Authority
(“BFA”) and gave it various authority including, inter alia, the
power to impose a wage and/or hiring freeze.
464 F.3d at 366.

Buffalo Teachers,

Within months of its establishment, the BFA

imposed a wage freeze.

Unlike the cases currently before this

Court, however, the BFA’s wage freeze impacted union contracts
that had been negotiated and executed before the state legislature
had passed the legislation that created the BFA.

As the contracts

at issue existed before both the BFSA Act and the wage freeze by
the BFA, the Second Circuit was not called upon to directly address
whether the BFA’s wage freeze was a separate legislative act.

In

dicta, however, the Second Circuit clearly treated the BFSA Act as
the legislation that impaired the pre-existing contracts--“[t]he
New York legislature had a legitimate public purpose in passing
the [BFSA] Act and its wage freeze power.”

Id. at 368.

Another

court addressing the BFA’s actions was more direct about the
administrative nature of that board’s acts. See Foley v. Masiello,
38 A.D.3d 1201, 833 N.Y.S.2d 342 (4th Dep’t 2007).

Although the

basis of the motion in that case was application of the appropriate
statute of limitations, the court clearly stated that the BFA’s
“action in imposing the wage freeze was administrative rather than
legislative

given

its

individualized
22

application,

limited

duration, and informal adoption, i.e., resolution by the governing
body.”

Id. at 1202 (internal quotation and citations omitted).
NIFA was exercising authority granted to it by the state

legislature.

This exercise was administrative, not legislative,

and thus cannot form the basis of a contracts clause claim.

As

the NIFA Act, the enabling statute, was passed into law prior to
the affected union contracts, there can be no contracts claim on
that basis either.6
judgment

are

Accordingly, defendants’ motions for summary

granted,

and

all

Plaintiffs’

cross-motions

are

denied.
CONCLUSION
The cases and pending motions are resolved as follows:
11-CV-1614 Carver action: Plaintiffs’ motion,
Docket Entry 116, is DENIED; Defendants’ crossmotions, Docket Entries 114 and 115, are GRANTED.
11-CV-1900
Donohue
action:
Plaintiffs’
motion, Docket Entry 65, is DENIED; Defendants’
cross-motions, Docket Entries 66 and 69, are
GRANTED.
Plaintiffs argue that a ruling that the contracts clause does
not apply would leave them without a remedy. The wage freeze
power was expressly authorized by NIFA Act. Plaintiffs could
have commenced an Article 78 proceeding in state court to
determine whether the exercise of that authority by NIFA in 2011
was reasonable. As Plaintiffs do not apparently challenge the
constitutionality of the NIFA Act but rather only its
application to its members, they had the option to challenge the
wage freeze in an article 78 proceeding, which “is generally the
proper vehicle to determine whether a statute, ordinance, or
regulation has been applied in an unconstitutional manner.”
Kovarsky v. Hous. & Dev. Admin. of City of N.Y., 31 N.Y.2d 184,
191, 286 N.E. 2d 882, 335 N.Y.S.2d 383 (1972).
6

23

11-CV-2743 Jaronczyk action:
Plaintiffs’
motion, Docket Entry 75, is DENIED; Defendants’
cross-motions, Docket Entries 79 and 80, are
GRANTED.
In each case, the Clerk of the Court is directed to enter
judgment in favor of Defendants and against Plaintiffs and to mark
the case closed.
SO ORDERED

/s/ JOANNA SEYBERT______
JOANNA SEYBERT, U.S.D.J.
Dated:

April
26 , 2018
Central Islip, New York

24