New York State Correctional Officers & Police Benevolent Association, Inc. et al v. State of New York et al
Filing
22
MEMORANDUM-DECISION AND ORDER granting in part and denying in part # 13 Motion to Dismiss for Lack of Subject Matter Jurisdiction:ORDERED that defendants motion to dismiss plaintiffs complaint (Dkt. No. 13) is GRANTED IN PART AND DENIED IN PART; it is further ORDERED that defendants motion to dismiss plaintiffs complaint as against the State of New York, New York State Civil Service Department, New York State Civil Service Commission and New York State and Local Retirement System is GRANTED. All claims against these defendants are dismissed; it is further ORDERED that defendants motion to dismiss plaintiffs claims for monetary damages asserted against defendants Hite, Ahl, Hanrahan, Megna and DiNapoli in their official capacity is GRANTED; it is further ORDERED that defendants motion to dismiss plaintiffs claims for injunctive and declaratory relief asserted against defendants Hite, Ahl, Hanrahan, Megna and DiNapoli in their official capacity is GRANTED only to the extent that such claims seek retrospective relief; it is further ORDERED that defendants motion to dismiss plaintiffs Article 78 claims is GRANTED; it is further ORDERED that defendants motion is denied in all other respects. Signed by U.S. District Judge Mae A. D'Agostino on 12/3/12. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
THE NEW YORK STATE CORRECTIONAL
OFFICERS & POLICE BENEVOLENT ASSOCIATION,
INC., DONN ROWE, individually, and as President
of the New York State Correctional Officers & Police
Benevolent Association, Inc., on Behalf of Themselves
and All Others Similarly Situated,
Plaintiffs,
vs.
1:11-CV-1523
(MAD/CRH)
THE STATE OF NEW YORK, ANDREW M. CUOMO,
individually, and in his official capacity as Governor of
the State of New York, NEW YORK STATE CIVIL
SERVICE DEPARTMENT, PATRICIA A. HITE,
individually, and in her official capacity as Acting
Commissioner, New York State Civil Service Department,
NEW YORK STATE CIVIL SERVICE COMMISSION,
CAROLINE W. AHL and J. DENNIS HANRAHAN,
individually, and in their official capacities as Commissioners
of the New York State Civil Service Commission, ROBERT L.
MEGNA, individually, and in his official capacity as Director
of the New York State Division of the Budget, and THOMAS P.
DiNAPOLI, individually, and in his official capacity as Comptroller
of the State of New York, and NEW YORK STATE AND LOCAL
RETIREMENT SYSTEM,
Defendants.
____________________________________________
APPEARANCES:
SHEEHAN GREENE GOLDMAN &
JACQUES LLP
54 State Street, Suite 1001
Albany, New York 12207
Attorneys for Plaintiffs
ERIC T. SCHNEIDERMAN
Attorney General of the State of New York
The Capitol
Albany, New York 12224
Attorney for Defendants
OF COUNSEL:
Jeffrey P. Mans, Esq.
Charles J. Quackenbush, Esq.
Asst. Attorney General
Mae A. D’Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
INTRODUCTION
Plaintiffs commenced the within action alleging that defendants unilaterally increased the
percentage of contributions that plaintiffs, active and retired employees, are required to pay for
health insurance benefits in retirement and, thereby, violated the Contracts Clause and Due
Process Clause of the United States Constitution, impaired plaintiffs’ contractual rights under the
terms of their Collective Bargaining Agreement, and violated state law. Plaintiffs seek injunctive
relief, declaratory judgments and monetary damages. Presently before the Court is defendants’
motion to dismiss plaintiffs’ complaint pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). See
Dkt. No. 13. Plaintiffs have opposed the motion.1 Dkt. No. 17.
BACKGROUND2
Plaintiff, New York State Correctional Officers & Police Benevolent Association, Inc.
(“NYSCOPBA” or “the Union”) is the collective bargaining representative for members of the
Security Services Unit of State Employees including, inter alia, Correctional Officers,
Correctional Sergeants, Institution Safety Officers and Community Correctional Center Assistants
employed by the State of New York and the New York State Department of Corrections and
Community Supervision (“DOCCS”).
1
On December 29, 2011, Chief United States District Judge Gary L. Sharpe issued an Order pursuant to
General Order #12 of the United States District Court for the Northern District of New York. The within action was
deemed “related” to nine other actions filed in this Court. Dkt. No. 5. Defendants filed the same motion to dismiss in
each action. Each set of plaintiffs filed separate briefs in opposition to the motion. While the matters involve the
same defendants and overlapping claims, the Court finds that they are sufficiently distinguishable in terms of the class
of plaintiffs and facts to warrant separate Memorandum-Decisions and Orders.
2
The background information is taken from the complaint and is presumed true for the purposes of this
motion only. This does not constitute a factual finding by the Court.
2
Plaintiff Donn Rowe (“Rowe”) is the President and member of NYSCOPBA and an active
employee of the State of New York and a vested member in the New York State Employees
Retirement System (“NYS ERS”). Plaintiff Al Mothershed is an active employee of the State of
New York and a member of NYSCOPBA enrolled and receiving health benefits through the New
York State Health Insurance Program and a vested member in the NYS ERS. Plaintiffs Art W.
Jolley, Louis Giampaglia, David Faile, William West and Diane Davis are former State
employees and former members of NYSCOPBA now retired and receiving health benefits
through NYSHIP. During the relevant time, defendant Patricia Hite (“Hite”) was Acting
Commissioner of the Civil Service Department and Acting President of the Civil Service
Commission. Defendants Caroline W. Ahl (“Ahl”) and J. Dennis Hanrahan (“Hanrahan”) were
members of the Civil Service Commission. Defendant Robert Megna (“Megna”) was the
Director of the New York State Division of the Budget. Defendant Thomas P. DiNapoli
(“DiNapoli”) was the Comptroller of the State of New York responsible for the administration of
the New York State and Local Retirement System. The New York State and Local Retirement
System is responsible for making monthly pension payments to eligible retired State employees
less any deductions for the payment of retiree health insurance.
Article XI of the New York State Civil Service Law (“CSL”) provides for a statewide
health insurance plan for eligible State employees and retired State employees known as the New
York State Health Insurance Plan (“NYSHIP” or “Empire Plan”). New York Civil Service Law §
167(1) assigns the State contribution rate towards the cost of health insurance premium or
subscription charges for the coverage of State employees and retired State employees enrolled in
NYSHIP. Prior to 1983, the State was required to pay the full cost of premium or subscription
charges for the coverage of State employees and retired State employees enrolled in NYSHIP.
3
Chapter 14 of the Laws of 1983 amended Civil Service Law § 167(1)(a) to limit the amount that
the State was required to pay towards the cost of premium or subscription charges for the
coverage of State employees and retired State employees enrolled in NYSHIP, by providing that
the State was required to contribute only ninety percent (90 %) of the cost of such premium or
subscription charges for the coverage of State employees and retired State employees retiring on
or after January 1, 1983. The State would continue to contribute seventy-five percent (75 %) for
dependent coverage for State employees and retired State employees.
The Governor’s Program Bill Memorandum regarding the 1983 amendment provided that
“[t]he State and the employee organizations representing State workers have agreed to a
reduction of the State’s contribution for the premium or subscription charges for employees
enrolled in the statewide health insurance plan.”
The Division of the Budget’s Report on Bills also acknowledged that the rates were the
product of an agreement:
1.
Subject and Purpose: This bill would implement certain
unenacted portions of collectively negotiated health insurance
benefit and cost agreements between the State and the
employee organizations representing certain State employees.
*****
4.
Arguments in Support: This measure provides the necessary
authorization to implement negotiated agreements between the
State and the employee organizations representing State
employees. This action is appropriate in view of the “good
faith” efforts of the State and the employee organizations to
reach agreement on this critical issue.
*****
9.
Recommendation: Because this measure would implement
certain unenacted portions of collectively negotiated health
benefit and cost agreements between the State and employee
organizations representing certain State employees and result
4
in significant direct cost savings to the State, we recommend
its approval.
Between 1983 and 2011, Civil Service Law § 167(8) provided, inter alia,
[n]otwithstanding any inconsistent provision of law, where and to the
extent that an agreement between the state and an employee
organization entered into pursuant to article fourteen of this chapter so
provides, the state cost of premium or subscription charges for eligible
employees covered by such agreement may be increased pursuant to
the terms of such agreement.
NYSCOPBA and the State of New York entered into a Collective Bargaining Agreement
(“CBA”) and Interest Arbitration Award effective April 1, 2007 through March 31, 2009. Article
12 of the CBA governs the coverage of Health, Dental and Prescription Drug Insurance. Section
12.1 of the CBA provides as follows:3
The State shall continue to provide all the forms and extent of
coverage as defined by the contracts and Interest Arbitration Awards
in force on March 31, 2007 with the State health and dental insurance
carriers unless specifically modified or replaced pursuant to this
agreement.
Section 12.8 of the 2007-2009 NYSCOPBA CBA is entitled Premium Contribution and
provides:
(a) The State agrees to pay 90 percent of the cost of individual
coverage and 75 percent of dependent coverage, provided under the
Empire Plan. The State shall pay 90 percent for individual prescription
drug coverage and 75 percent for dependent prescription drug
coverage under the Empire Plan.
(b) The State agrees to pay 90 percent of the cost of individual
coverage and 75 percent of dependent coverage, toward the
hospital/medical/mental health and substance abuse components of
each HMO, not to exceed, 100 percent of its dollar contribution for
those components under the Empire Plan. The State will pay 90
percent of the cost of individual prescription drug coverage and 75
3
The relevant portions of the CBA were annexed to plaintiffs’ amended complaint.
5
percent of the cost of dependent prescription drug coverage under the
Health Maintenance Organizations.
(c) The unremarried spouse of an employee, who retires after April 1,
1979, with ten or more years of active State service and subsequently
dies, shall be permitted to continue coverage in the health insurance
program with payment at the same contribution rates as required of
active employees.
(d) The unremarried spouse of an active employee, who dies after
April 1, 979 and who, at the date of death was vested in the
Employee’s Retirement system and within ten years of his/her first
date of eligibility for retirement shall be permitted to continue
coverage in the health insurance program with payment at the same
contribution rates as required of active employees.
On August 17, 2011, the legislature passed Chapter 491 of the Laws of 2011 (“Chapter
491"). Chapter 491 amended § 167(8) and replaced the word “increased” with the word
“modified.” The amendment further provided that
[t]he president [of the Civil Service Commission], with the approval
of the director of the budget, may extend the modified state cost of
premium or subscription charges for employees or retirees not subject
to an agreement referenced above and shall promulgate the necessary
rules or regulations to implement this provision.
In August 2011, the New York State Civil Service Department issued an Empire Plan
Special Report announcing the implementation of new reduced State contribution rates in
NYSHIP for New York State Retirees, Vestees and Dependent Survivors and Employees of the
State of New York designated as Management/Confidential (M/C) and Legislature employees.
On September 21, 2011, defendant Hite requested defendant Megna’s approval to extend
the modified contribution rates. On September 22, 2011, defendant Megna approved the
extension of modified contribution rates.
On October 1, 2011, defendants implemented new reduced State contribution rates, which
resulted in a two percent (2 %) reduction in the State contribution rates for Individual coverage
6
from ninety percent (90 %) to eighty-eight percent (88 %), and Dependent Coverage, from
seventy-five percent (75 %) to seventy-three percent (73 %), for enrolled State retirees, including
NYSCOPBA retirees, who retired on or after January 1, 1983.
Defendants approved and filed emergency regulations to implement the reduction in State
contribution rates effective October 1, 2011, and a further reduction in State contribution rates for
employees retiring from State service on or after January 1, 2012, including NYSCOPBA
employees. These reductions will result in a six percent (6 %) reduction in the State contribution
rates for individual coverage from ninety percent (90 %) to eighty-four percent (84 %) and
dependent coverage from seventy-five percent (75 %) to sixty-nine percent (69 %) for those
retirees retiring from a title Salary Grade 10 or above, from a position equated to Salary Grade 10
or above, or for those who retire from a position which is not allocated or equated to a Salary
Grade.
On February 14, 2012, plaintiffs filed an amended complaint (Dkt. No. 9) asserting causes
of action for impairment of contract, violation of due process, violation of civil rights pursuant to
42 U.S.C. § 1983, and breach of contract. Plaintiffs also claim that Civil Service Law § 167(8) is
unconstitutional as applied and assert that defendants Hite and Megna lacked authority under §
167(8) to approve and implement the reduction in State contribution rates. Plaintiffs also seek an
order, pursuant to Article 78 of the New York Civil Practice Law and Rules, vacating and
annulling defendants’ actions in administratively approving, extending and implementing
increases in the contribution rates that retired State employees are required to pay for health
insurance benefits in retirement. Plaintiffs commenced this action against the individual
defendants in both their individual and official capacities.
DISCUSSION
7
Standard on a Motion to Dismiss under 12(b)(1)
In contemplating a motion to dismiss for lack of subject matter jurisdiction pursuant to
Rule 12(b)(1), the Court must “accept as true all material factual allegations in the complaint[.]”
Atl. Mut. Ins. Co. v. Balfour MacLaine Int’l Ltd., 968 F.2d 196, 198 (2d Cir. 1992). The court
may consider evidence outside the pleadings, e.g., affidavit(s), documents or otherwise competent
evidence. See Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986); Antares
Aircraft v. Fed. Rep. of Nigeria, 948 F.2d 90, 96 (2d Cir.1991). “The standards for considering a
motion to dismiss under Rules 12(b)(1) and 12(b)(6) are substantively identical.” Lerner v. Fleet
Bank, N.A., 318 F.3d 113, 128 (2d Cir. 2003).
Defendants move for dismissal pursuant to Fed. R. Civ. P. 12(b)(1) arguing that the
Eleventh Amendment precludes the Court from obtaining subject matter jurisdiction over the
following claims: (1) all of plaintiffs’ claims against the State of New York and its agencies; (2)
plaintiffs’ claims against defendants in their official capacities; and (3) plaintiffs’ Article 78 cause
of action. Defendants also allege that the principals of the Younger doctrine require abstention in
this matter.
I.
Eleventh Amendment
The Eleventh Amendment provides that “[t]he Judicial power of the United States shall
not be construed to extend to any suit in law or equity, commenced or prosecuted against one of
the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”
State Emp. Bargaining Agent Coalition v. Rowland, 494 F.3d 71, 95 (2d Cir. 2007) (citing U.S.
Const. amend. XI). The Eleventh Amendment bars federal courts from exercising subject matter
jurisdiction over claims against states absent their consent to such a suit or an express statutory
waiver of immunity. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 90–100
8
(1984); see also Huminski v. Corsones, 386 F.3d 116, 133 (2d Cir. 2004) (citation omitted).
Although the plaintiff generally bears the burden of proving subject matter jurisdiction, the entity
claiming Eleventh Amendment immunity bears the burden to prove such. See Woods v. Rondout
Valley Cent. Sch. Dist. Bd. of Educ., 466 F.3d 232, 237 (2d Cir. 2006).
Section 1983 imposes liability for “conduct which ‘subjects, or causes to be subjected’ the
complainant to a deprivation of a right secured by the Constitution and laws.” Rizzo v. Goode,
423 U.S. 362, 370–71 (1976) (quoting 42 U.S.C. § 1983). It is well-settled that states are not
“persons” under section 1983 and, therefore, Eleventh Amendment immunity is not abrogated by
that statute. See Will v. Mich. Dep’t. of State Police, 491 U.S. 58, 71 (1989).
A.
Federal Claims against State of New York, New York State Civil Service
Department, New York State Civil Service Commission and New York State and
Local Retirement System
Regardless of the type of relief sought, the Eleventh Amendment bars this Court from
assuming jurisdiction over plaintiffs’ claims asserted against the State of New York and its
agencies. When the state or one of its “arms” is the defendant, sovereign immunity bars federal
courts from entertaining lawsuits against them “regardless of the nature of the relief sought.”
Pennhurst, 465 U.S. at 100. In this case, the State has neither waived its immunity, nor has
Congress exercised its power to override Eleventh Amendment immunity. Accordingly,
plaintiffs’ claims against the State of New York, New York State Civil Service Department, New
York State Civil Service Commission and New York State and Local Retirement System are
dismissed. See McGinty v. New York, 251 F.3d 84, 100 (2d Cir. 2001) (dismissing the claims
against the Retirement System for lack of subject matter jurisdiction based upon the Eleventh
Amendment).
B.
Federal Claims Against State Officials in their Official Capacity
9
Plaintiffs also assert claims against defendants Cuomo, Hite, Ahl, Hanrahan, Megna and
DiNapoli in their official capacities. Eleventh Amendment immunity extends to state officials
sued in their official capacities for retrospective relief. See Kentucky v. Graham, 473 U.S. 159,
166 (1985). Actions for damages against a state official in his or her official capacity are
essentially actions against the state, and will be barred by the Eleventh Amendment unless: (1)
Congress has abrogated immunity, (2) the state has consented to suit, or (3) the Ex parte Young
doctrine applies. See Will, 491 U.S. at 71. In this matter, the issues presented before this Court
involve the third exception.
In Ex Parte Young, 209 U.S. 123 (1908), the Supreme Court established an exception to
state sovereign immunity in federal actions where an individual brings an action seeking
injunctive relief against a state official for an ongoing violation of law or the Constitution. This
doctrine provides “a limited exception to the general principle of sovereign immunity [that]
allows a suit for injunctive relief challenging the constitutionality of a state official’s actions in
enforcing state law under the theory that such a suit is not one against the State, and therefore not
barred by the Eleventh Amendment.” Ford v. Reynolds, 316 F.3d 351, 354-55 (2d Cir. 2003).
Under the doctrine, a suit may proceed against a state official in his or her official capacity,
notwithstanding the Eleventh Amendment, when a plaintiff, “(a) alleges an ongoing violation of
federal law and (b) seeks relief properly characterized as prospective.” See In re Deposit Ins.
Agency, 482 F.3d 612, 618 (2d Cir. 2007) (quotations and citations omitted); see also Santiago v.
New York State Dep’t of Corr. Serv., 945 F.2d 25, 32 (2d Cir. 1991) (holding that such claims,
however, cannot be brought directly against the state, or a state agency, but only against state
officials in their official capacities).
10
In Edelman v. Jordan, 415 U.S. 651, 653 (1974), the Supreme Court expanded upon Ex
Parte Young and held that even when a plaintiff’s requested relief is styled as an injunction
against a state official, if “the action is in essence one for recovery of money from the state, the
state is the real, substantial party in interest and is entitled to invoke its sovereign immunity from
suit even though individual officials are nominal defendants.” Retroactive relief is “measured in
terms of a monetary loss resulting from a past breach of a legal duty on the part of the defendant
state officials” regardless of how the relief is fashioned. Id. at 668. “Prospective relief includes
injunctive relief that bars a state actor from engaging in certain unconstitutional acts or abates
ongoing constitutional violations as well as the ‘payment of state funds as a necessary
consequence of compliance in the future with a substantive federal question determination.’ Id.
The “general criterion for determining when a suit is in fact against the sovereign is the effect of
the relief sought, namely, would the relief abate an ongoing violation or prevent a threatened
future violation of federal law?” Id. In Edelman, the majority concluded:
It is one thing to tell [a state official] that he must comply with the
federal standards for the future if the state is to have the benefit of
federal funds in the program he administers. It is quite another thing
to order the [state official] to use state funds to make reparation for the
past. The latter would appear to us to fall afoul of the Eleventh
Amendment if that basic constitutional provision is to be conceived of
as having any force.
Id. at 695 (quoting Rothstein v. Wymann, 467 F.2D 226, 236-237 (2d Cir. 1972)).
In order to determine whether the Ex parte Young exception allows plaintiffs’ suit against
the officials, this Court must first determine whether the complaint alleges an ongoing violation
of federal law and second, whether plaintiffs seek relief properly characterized as prospective.
See Verizon Md., Inc. v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 645 (2002). “[T]o successfully
avoid the Eleventh Amendment bar, a plaintiff must prove that a defendant’s violation of federal
11
law is of an ongoing nature as opposed to a case ‘in which federal law has been violated at one
time or another over a period of time in the past.’” Papasan v. Allain, 478 U.S. 265, 277–78
(1986) (quotation omitted). The inquiry for determining whether an “ongoing violation” exists is,
“does the enforcement of the law amount to a continuous violation of plaintiffs constitutional
rights or a single act that continues to have negative consequences for plaintiffs.” New Jersey
Educ. Ass’n v. New Jersey, No. 11-5024, 2012 WL 715284, at *4 (D.N.J. Mar. 5, 2012).
Defendants argue that Eleventh Amendment immunity extends to state officials but fail to
address the Ex Parte Young exception. Here, plaintiffs argue that a “straightforward inquiry”
reveals that plaintiffs have alleged a violation of federal law. Plaintiffs allege that defendant
officials are engaged in enforcing Chapter 491 of the Laws of 2011, a law that is contrary to
federal law because it impairs their rights under Article I, Section 10 of the U.S. Constitution.
Plaintiffs also allege that officials are implementing a state statute that violates federal due
process. An allegation that state officials are enforcing a law in contravention of controlling
federal law is sufficient to allege an ongoing violation of federal law for the purposes of Ex parte
Young. See Chester Bross Const. Co. v. Schneider, No. 12-3159, 2012 WL 3292849, at *6 (C.D.
Ill. Aug. 10, 2012) (citing Verizon Md., Inc., 535 U.S. at 645). Thus, plaintiffs have satisfied the
first prong of Ex Parte Young.
With respect to the nature of relief sought, plaintiffs’ “WHEREFORE” clause contains the
following requests:
(a)
declaring that State defendants’ actions implementing and
administratively extending reduced State contribution rates for
health insurance to plaintiffs, and all similarly situated
retirement eligible members and retired former members of
NYSCOPBA, and their eligible unremarried spouses and other
dependents, are unconstitutional in violation of the Contract
Clause of Article I of Section 10 of the United States
12
Constitution, and permanently enjoining State defendants from
implementing same;
(b)
declaring that State defendants’ actions implementing and
administratively extending reduced State contribution rates for
health insurance to plaintiffs, and all similarly situated
retirement eligible members and retired former members of
NYSCOPBA, and their eligible unremarried spouses and other
dependents, are unconstitutional in violation of Article I of
Section 6 of the New York State Constitution, and
permanently enjoining State defendants from implementing
same;4
(c)
declaring that State defendants’ actions implementing and
administratively extending reduced State contribution rates for
health insurance to plaintiffs, and all similarly situated
retirement eligible members and retired former members of
NYSCOPBA, and their eligible unremarried spouses and other
dependents, are unconstitutional in violation of their
Fourteenth Amendment Due Process rights under the United
States Constitution, and permanently enjoining State
defendants from implementing same;
(d)
declaring Chapter 491 of the Laws of 2011 unconstitutional,
as applied under Civil Service Law § 167(8), to the extent that
State defendants administratively extended and implemented
reduced State contribution rates to retired State employees
which impair the contract rights of NYSCOPBA, its retirement
eligible members and retired former members, and their
eligible unremarried spouses and other dependents, to continue
health benefits;
(e)
declaring that State defendants’ actions in administratively
approving, extending and implementing increases in the
contribution rates that retired State employees are required to
pay for health insurance benefits in retirement are ultra vires,
without lawful authority, unauthorized pursuant to New York
Civil Service Law § 167(8), in excess of jurisdiction;5
4
Ex Parte Young does not extend to state-law claims asserted against state officers. See Pennhurst State
Sch. & Hosp. v. Halderman, 465 U.S. 89 (1984). Whether this Court maintains subject matter jurisdiction over
plaintiffs’ state-law claims will be discussed infra.
5
See Footnote 4.
13
(f)
enjoining State defendants’ implementation of reduced
contribution rates for health insurance;
(g)
declaring that State defendants’ actions in administratively
approving, extending and implementing increases in the
contribution rates that retired State employees are required to
pay for health insurance benefits in retirement are unlawful
and in violation of the contract rights created pursuant to
Chapter 14 of the Laws of 1983 and the State’s longstanding
practice;
(h)
pursuant to Article 78 of the New York Civil Practice Law and
Rules, vacating and annulling the State defendants’ actions in
administratively approving, extending and implementing
increases in the contribution rates that retired State employees
are required to pay for health insurance benefits in retirement
as unlawful, in excess of jurisdiction, arbitrary, capricious and
an abuse of discretion;6
(i)
enjoining, prohibiting and restraining defendants DiNapoli and
the Retirement System from making any deductions from the
monthly pension payments of retired State employees
including plaintiffs, and all similarly situated retirement
eligible members and retired former members of NYSCOPBA,
or passing along any additional costs or charges as a result of
the reduced State contribution rates implemented by State
defendants challenged therein;
(j)
directing State defendants to reimburse and make whole
plaintiffs, and all similarly situated retirement eligible and
retired former members of NYSCOPBA, and their eligible
unremarried spouses and other dependents, for any and all
additional payments or deductions to pension payments, made
as a result of the reduced State contribution rates implemented
by State defendants challenged herein;
(k)
awarding plaintiffs’ reasonable attorneys’ fees costs and
disbursements of this action pursuant to 42 U.S.C. 1988, and
as otherwise allowed by law.
See Am. Cplt. (Dkt. No. 9). The Court will address each request for relief in turn.
1.
6
Monetary Relief
See Footnote 4.
14
Plaintiffs argue that they are entitled to ancillary damages necessary to effectuate relief
and cite to Milliken v. Bradley, 433 U.S. 267 (1977) as support for their claims for monetary
damages. In the Milliken case, the district court ordered implementation of student assignment
plans and educational components in the areas of reading, in-service teacher training, testing and
counseling to effectuate desegregation. The Supreme Court discussed the “prospectivecompliance” exception which permits federal courts to enjoin state officials to conform their
conduct to the requirements of federal law notwithstanding a direct and substantial impact on the
state treasury. Id. at 289. In Milliken, there was no money award in favor of the respondent or
any member of his class. The Court explained that the case “simply does not involve individual
citizens’ conducting a raid on the state treasury for an accrued monetary liability.” Id. Instead,
the decree required state officials to eliminate a segregated school system. Id. The Court
reasoned that
[t]hese programs were not, and as a practical matter could not be,
intended to wipe the slate clean by one bold stroke, as could a
retroactive award of money in Edelman. Rather, by the nature of the
antecedent violation, which on this record caused significant
deficiencies in communications skills — reading and speaking — the
victims of Detroit's de jure segregated system will continue to
experience the effects of segregation until such future time as the
remedial programs can help dissipate the continuing effects of past
misconduct. Reading and speech deficiencies cannot be eliminated by
judicial fiat; they will require time, patience, and the skills of specially
trained teachers. That the programs are also ‘compensatory’ in nature
does not change the fact that they are part of a plan that operates
prospectively to bring about the delayed benefits of a unitary school
system. We therefore hold that such prospective relief is not barred
by the Eleventh Amendment.
Id. at 290.
The facts and relief sought in Milliken are clearly distinguishable from those at hand and
thus, the Court is not persuaded that the holding supports plaintiffs’ claims herein. To the extent
15
plaintiffs seek monetary relief against defendants acting in their official capacity as agents of the
State, such claims are barred by the Eleventh Amendment. See Fulton v. Goord, 591 F.3d 37, 45
(2d Cir. 2009) (holding that “in a suit against state officials in their official capacities, monetary
relief (unlike prospective injunctive relief) is generally barred by the Eleventh Amendment”)
(citation omitted).
2.
Injunctive Relief
Plaintiffs also seek an order permanently enjoining defendants from implementing the
reduced State contribution rates, arguing that the continued effectuation of Chapter 491 will have
an impact upon plaintiffs/retirees who are receiving only a portion of their former income. As
discussed supra, defendants did not address Ex Parte Young or the inapplicability/applicability of
the doctrine herein. Defendants do not claim that plaintiffs seek improper injunctive relief that is
retrospective or designed to compensate for a past violation of federal law. Moreover, defendants
did not present any argument regarding the impact such an injunction would have on the state
treasury. To the extent that plaintiffs seek prospective injunctive relief against defendants,
plaintiffs have sufficiently alleged such claims and thus, based upon the purview of Ex Parte
Young, dismissal is not warranted. See Finch v. New York State Office of Children & Family
Serv., 499 F. Supp. 2d 521, 538 (S.D.N.Y. 2007) (citation omitted).
3.
Declaratory Judgment
Declaratory judgments form part of the injunctive relief allowed for under Ex Parte
Young. See Tigrett v. Cooper, No. 10-2724, 2012 WL 691892, at *6 (W.D. Tenn. Mar. 2, 2012).
However, declaratory relief is not permitted under Ex Parte Young when it would serve to declare
only past actions in violation of federal law: retroactive declaratory relief cannot be properly
characterized as prospective. Id.; Green v. Mansour, 474 U.S. 64, 74 (1985) (holding that the
16
Eleventh Amendment bars retrospective declaratory relief against state officials); New Jersey
Educ. Ass’n, 2012 WL 715284, at *5 (holding that a request for a declaratory judgment holding
that portions of a statute are unconstitutional is “nothing more than an indirect way of forcing the
State to abide by its obligations as they existed before the enactment of the Act and therefore,
essentially a request for specific performance” and, thus, not permitted).
In this matter, to the extent plaintiffs seek declaratory relief regarding the State
defendants’ past conduct, such claims must be dismissed because the Eleventh Amendment “does
not permit judgments against state officers declaring that they violated federal law in the past.”
Finch, 499 F. Supp. 2d at 538 (citing Puerto Rico Aqueduct and Sewer Auth. v. Metcalf & Eddy,
Inc., 506 U.S. 139, 146 (1993)); see also Nat’l Audubon Soc’y, Inc. v. Davis, 307 F.3d 835,
847-48 (9th Cir. 2002) (noting that retrospective declaratory relief would declare that the State
Defendants committed constitutional violations in the past; prospective relief would declare that
likely future actions are unconstitutional).
However, plaintiffs’ request for an order declaring Chapter 491 of the Laws of 2011
unconstitutional is prospective. See Verizon Md., 535 U.S. at 645 (“The prayer for injunctive
relief – that state officials be restrained from enforcing an order in contravention of controlling
federal law – clearly satisfies our ‘straightforward inquiry’”). As to this request, to the extent that
plaintiffs seek prospective declaratory relief, that relief is not barred by the Eleventh Amendment.
To summarize, the Eleventh Amendment deprives this Court of jurisdiction over all of
plaintiffs’ claims against the State of New York, New York State Civil Service Department, New
York State Civil Service Commission, New York State and Local Retirement System, and
plaintiffs’ claims for monetary damages against defendants in their official capacities.
17
Jurisdiction remains over plaintiffs’ claims for prospective injunctive and declaratory relief and
against defendants Cuomo, Hite, Ahl, Hanrahan, Megna and DiNapoli in their official capacities.
C.
New York State Law Contractual Impairment Claims Against Defendants in their
Official Capacities
Defendants also move for dismissal of plaintiffs’ state law contractual impairment claim
asserted against defendants in their official capacity. The jurisdiction of a federal court to
entertain supplemental state law claims under 28 U.S.C § 1367 does not override Eleventh
Amendment immunity. “Supplemental jurisdiction under 28 U.S.C. § 1367(a) does not constitute
a congressional abrogation of the Eleventh Amendment granting district courts the power to
adjudicate pendent state law claims.” Nunez v. Cuomo, No. 11-CV-3457, 2012 WL 3241260, at
*20 (E.D.N.Y. Aug. 7, 2012) (citations omitted). The Eleventh Amendment bars suits in federal
courts seeking relief, whether prospective or retroactive, against state officials for their alleged
violations of state law. See Pennhurst, 465 U.S. 89, 106. The Ex parte Young doctrine is
inapplicable where the officials are alleged to have violated state law. See Local 851 of Int’l Bhd.
of Teamsters v. Thyssen Haniel Logistics, Inc., 90 F. Supp. 2d 237, 247 (E.D.N.Y. 2000) (citing
Pennhurst, 465 U.S. at 104-06). However, the Eleventh Amendment does not bar a suit when an
official has allegedly acted entirely outside her state-delegated authority in a manner that violates
federal law. See Florida Dep’t of State v. Treasure Salvors, Inc., 458 U.S. 670, 696-697 (1982);
Pennhurst, 465 U.S. at 101 n.11. In Treasure Salvors, Inc., the Supreme Court held as follows:
[A]ction of an officer of the sovereign (be it holding, taking or
otherwise legally affecting the plaintiff's property) that is beyond the
officer’s statutory authority is not action of the sovereign, a suit for
specific relief against the officer is not barred by the Eleventh
Amendment. This conclusion follows inevitably from Ex parte
Young. If conduct of a state officer taken pursuant to an
unconstitutional state statute is deemed to be unauthorized and may be
challenged in federal court, conduct undertaken without any authority
whatever is also not entitled to Eleventh Amendment immunity.
18
Id. at 696. A state officer acts ultra vires when he acts beyond the scope of his statutory
authority, or pursuant to authority deemed to be unconstitutional. Id.
Here, plaintiffs must establish that defendants acted “without any authority whatsoever”
under state law. Sherwin-Williams Co. v. Crotty, 334 F. Supp. 2d 187, 196 (N.D.N.Y. 2004).
Plaintiffs allege that the state claims arise out of ultra vires acts by defendants Hite and Megna:
Upon information and belief, defendant Hite, in her capacity as
“Acting Commissioner” of the Civil Service Department, and “Acting
President” of the Civil Service Commission, has not filed an oath of
office as Commissioner or President, respectively.
Upon information and belief, defendant Hite, in her capacity as
“Acting President” of the Civil Service Commission, has not attended
or voted at any official meeting of the Civil Service Commission.
Defendant Hite lacks authority pursuant to Civil Service Law §
167(8), or otherwise to extend modified State contribution rates to
retired State employees and unrepresented State employees, as
proposed in her September 21, 2011 letter to defendant Budget
Director Megna.
As a result of defendant Hite’s lack of authority, defendant Megna
lacked authority on September 22, 2011, to approve the extension of
modified State contribution rates to retired State employees and
unrepresented State employees pursuant to Civil Service Law §
167(8), or otherwise.
Upon information and belief, other than for purposes of purportedly
extending modified State contribution rates challenged herein or
purportedly authorizing the filing of emergency regulations with the
Secretary of State necessary to implement the extension of modified
State contribution rates challenged herein, defendant Hite has not
otherwise purported to act in an official capacity as either “Acting
President” or “President of [the Civil Service] Commission.
Based upon the vacancy in the office of President of the Civil Service
Commission, and defendant Hite’s failure to perform all of the duties,
functions and responsibilities of the President of the Civil Service
Commission, “Acting” or otherwise, State defendants Hite and Megna
completely lacked authority under the provisions of the Civil Service
19
Law 167(8), or otherwise, to approve and implement the aforesaid
reduction in State contribution rates for retired State employees.
Am. Cplt. at ¶¶ 115-118, 163, 164.
Plaintiffs also allege that “defendants’ implementation of the aforesaid reduced State
contribution rates for retirees is not based upon an extension of the terms contained in the CSEA
Agreement, and is therefore ultra vires, without lawful authority, unauthorized pursuant to Civil
Service Law 167(8), null and void.” Id. at ¶¶ 122, 169. At this stage of the litigation, plaintiffs
have sufficiently pled the ultra vires exception to the Eleventh Amendment and, thus, defendants’
motion to dismiss plaintiffs’ state-law claims, on this basis, is denied.
D.
Federal Claims Against Defendants in their Individual Capacities
Plaintiffs assert § 1983 claims for monetary damages, injunctive relief and declaratory
judgment against defendants Cuomo, Hite, Ahl, Hanrahan, Megna and DiNapoli, individually.
Suits against state officials in their personal capacity are not barred by the Eleventh Amendment,
even for actions required by their official duties, Hafer v. Melo, 502 U.S. 21, 27–28 (1991)
(holding that state officials may be personally liable for actions taken in their official capacity);
however, such actions may be subject to dismissal on other grounds. Here, defendants argue that
legislative immunity divests this Court of jurisdiction over plaintiffs’ claims against the
individual defendants in their individual capacities. However, legislative immunity is a personal
defense that may be asserted in the context of a challenge under Rule 12(b)(6) and is not proper
for review as a jurisdictional bar under Rule 12(b)(1). See State Emp., 494 F.3d at 82 n. 4.
Accordingly, that portion of defendants’ motion will be discussed infra.
II.
Eighth Cause of Action for Judgment Pursuant to Article 78 of the New York Civil
Practice Laws and Rules
20
Defendants move to dismiss plaintiffs’ claims under N.Y.C.P.L.R. Article 78, arguing
that, to the extent that plaintiffs are challenging official interpretations of CSL § 167(8),
defendants’ promulgations or regulations, and the propriety of the Civil Service President’s
appointment, New York State has not empowered the federal courts to entertain these actions.
Plaintiffs contend that the Article 78 claims are predicated on the federal constitutional claims
and derive from a common nucleus of operative fact. Therefore, plaintiffs argue that this Court
has the discretion to exercise pendent jurisdiction over these claims pursuant to 28 U.S.C. § 1367.
Section 1367 provides that a court “may decline to exercise supplemental jurisdiction” if
there are “compelling reasons for declining jurisdiction.” 28 U.S.C. § 1367(c)(4). “There does
not appear to be a consensus in this Circuit as to whether courts may, in their discretion, hear
Article 78 claims under the rubric of supplemental jurisdiction.” Minima v. New York City Emp.
Retirement Sys., No. 11-CV-2191, 2012 WL 4049822, at *8 (E.D.N.Y. Aug. 17, 2012) (citing
Clear Wireless L.L.C. v. Bldg. Dep’t of Lynbrook, No. 10-CV-5055, 2012 WL 826749, at *9
(E.D.N.Y. Mar. 8, 2012) (noting that “it is doubtful . . . that claims under Article 78 are even
amenable to a district court’s supplemental jurisdiction”); see also Morningside Supermarket
Corp. v. New York State Dep’t of Health, 432 F. Supp. 2d 334, 346 (S.D.N.Y. 2006) (refusing to
exercise jurisdiction over the plaintiffs’ Article 78 cause of action for an order annulling a
Department of Health ruling for an error of law, and as arbitrary and capricious). The
“overwhelming majority of district courts confronted with the question . . . have found that they
are without power to do so or have declined to do so.” Clear Wireless, 2012 WL 826749, at *9
(quoting Coastal Commc’ns Serv., Inc. v. City of New York, 658 F. Supp. 2d 425, 459 (E.D.N.Y.
2009)); see also DeJesus v. City of New York, No. 10-CV-9400, 2012 WL 569176, at *4
(S.D.N.Y. Feb. 21, 2012) (holding that Article 78 is a procedure, not a cause of action).
21
However, “[e]ven assuming that a federal district court could properly exercise
supplemental jurisdiction over an Article 78 claim, the court has ‘discretion under 28 U.S.C. §
1367(c) to determine whether to hear th[ose] claims.’” Morningside Supermarket Corp., 432 F.
Supp. 2d at 346 (citing Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 309 (2d Cir.
2004)).
In Morningside, the court held that
[f]ederal courts in New York agree that “Article 78 proceedings were
designed for the state courts, and are best suited to adjudication there.”
Moreover, “state law does not permit [these] proceedings to be
brought in federal court.” These are compelling reasons to decline
supplemental jurisdiction over Morningside’s third cause of action,
and there is nothing exceptional about Morningside’s claim that would
justify deviation from the well-reasoned and essentially unanimous
position of New York district courts on this issue.
Id. (internal citations omitted).
Here, plaintiffs seek to have this Court “annul” defendants’ actions pursuant to Article 78.
The caselaw on this issue is decidedly in defendants’ favor. While it is true that the federal
claims and state-law issues arise out of the same operative set of facts, this Court declines to
exercise supplemental jurisdiction over plaintiffs’ Article 78 claim because to do so would require
this Court to interpret state law before the New York State courts have an opportunity to analyze
and resolve the issues. See Support Ministries For Persons with AIDS, Inc. v. Vill. of Waterford,
N.Y., 799 F. Supp. 272, 280 (N.D.N.Y. 1992) (holding that “there is no reason for th[e] court to
embroil itself in a dispute between the State and a local government and to make this novel and
potentially extremely significant interpretation of state law”). The Court has reviewed the
holding in Yonkers Racing Corp. v. City of Yonkers, 858 F.2d 855 (2d Cir. 1988), a case cited by
plaintiffs, and finds the holding unpersuasive based upon the facts herein. In Yonkers, the Second
Circuit noted that the case “presented exceptional circumstances” and opted to exercise
22
jurisdiction over the plaintiffs’ Article 78 claim.7 The Yonkers holding has been cited as the
exception not the rule. See Coastal Commc’ns, 658 F. Supp. 2d at 459; see also Kelly v. City of
Mount Vernon, 344 F. Supp. 2d 395, 407 (S.D.N.Y. 2004).
Here, plaintiffs have not persuaded this Court that this case presents such extreme facts.
Based upon the circumstances herein, the Court finds that this specific state-created civil action
should not be brought in federal court. Accordingly, the Court follows the “essentially
unanimous position of the New York district Courts” and declines to exercise jurisdiction over
plaintiffs’ Eighth Cause of Action. See Morningside, 432 F. Supp. 2d at 347.
III.
Younger Doctrine
A federal court’s obligation to adjudicate claims within its jurisdiction is “virtually
unflagging.” New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 359
(1989) (holding that “abstention remains the exception, not the rule”). The Younger doctrine
“espouse[s] the policy that a federal court should not interfere with a pending state judicial
proceeding in which important state interests are at stake.” Wisoff v. City of Schenectady, No. 07CV-34, 2009 WL 606139, at *6 (N.D.N.Y. Mar. 9, 2009) (citing, inter alia, Middlesex County
Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423, 431–432 (1982)). In the Second Circuit,
courts applying Younger abstention “must determine (1) whether there is an ongoing state
proceeding; (2) whether an important state interest is involved; and (3) whether the federal
plaintiff has an adequate opportunity for judicial review of his constitutional claims during or
after the proceeding.” Univ. Club v. City of New York, 842 F.2d 37, 40 (2d Cir.1988) (internal
citations omitted).
7
In Cartegena v. City of New York, 257 F. Supp. 2d 708, 709 (S.D.N.Y. 2003), also cited by the parties
herein, the district court exercised jurisdiction over the Article 78 claims only after the parties withdrew their
jurisdictional objections and consented.
23
Generally, Younger is not applied against those not party to the pending state proceedings.
Hindu Temple Soc’y of N. Am. v. Supreme Court of State of New York, 335 F. Supp. 2d 369, 375
(E.D.N.Y. 2004). However, the Second Circuit has held that, “[i]n certain circumstances,
Younger may apply to the claims of third-parties who are not directly involved in any pending
state proceeding.” Spargo v. N.Y. State Comm’n on Judicial Conduct, 351 F.3d 65, 82 (2d Cir.
2003). “[A]lthough plaintiffs should not ‘automatically be thrown into the same hopper for
Younger purposes,’ there may be ‘some circumstances in which legally distinct parties are so
closely related that they should all be subject to the Younger considerations which govern any one
of them.’” Hindu Temple, 335 F. Supp. 2d at 375 (quoting, inter alia, Doran v. Salem Inn, Inc.,
422 U.S. 922, 928 (1975)). “Courts have consistently recognized while ‘[c]ongruence of interests
is not enough’ by itself, to warrant abstention, where the plaintiffs’ interests are so inextricably
intertwined that ‘direct interference with the state court proceeding is inevitable,’ Younger may
extend to bar the claims of plaintiffs who are not parties to the pending state proceeding.”
Spargo, 351 F.3d at 82 (holding that two plaintiffs [political supporters of a state judge, the third
plaintiff] presented First Amendment challenges with legal claims that were sufficiently
intertwined with the judge’s state claims in that the case presented one of the narrow
circumstances in which Younger applies to those not directly involved in the state court action)
(citations omitted). While plaintiffs may seek similar relief or present parallel challenges to the
constitutionality of a state statute or policy, absent other factors establishing interwoven legal
interests, Younger will not bar the federal action. Id. at 83. “Where courts have applied Younger
abstention to non-parties, those courts have limited the doctrine’s application to instances where
the non-parties ‘seek to directly interfere with the pending [state] proceeding.’” Citizens for a
Strong Ohio v. Marsh, 123 Fed. Appx. 630, 635 (6th Cir. 2005) (quoting Spargo, 351 F.2d at 85).
24
In a recent decision from the Eastern District, Donohue v. Mangano, No. 12-CV-2568,
2012 WL 3561796 (E.D.N.Y. Aug. 20, 2012), the defendants argued that the Younger doctrine
mandated abstention based upon an action in Supreme Court, Nassau County for injunctive and
declaratory relief that was filed by one of the three sets of plaintiffs. The plaintiffs not involved
in the state action argued that Younger did not extend to their claims because they were not a
party to the ongoing state court proceedings. See id. at *12. The court held that while it was
unlikely that the plaintiffs’ interests were inextricably intertwined for the purposes of Younger, it
declined to definitively rule on that issue. See id. Rather, the court held that the relief sought by
the plaintiffs in the state court action was remedial rather than coercive. See id. at *13. The
court, relying upon holdings in other Circuits, reasoned that a “coercive” action is a state-initiated
enforcement action in which the plaintiff does not have a choice to participate and one in which
the federal plaintiff is the state court defendant. See id. In contrast, a “remedial” proceeding is
one in which the plaintiff initiated an option to seek a remedy for the state’s wrongful action and
to vindicate a wrong inflicted by the state. With that reasoning, the court held that the Nassau
County action was “clearly remedial” and not the type of parallel state court proceeding requiring
abstention under Younger. See id. at *13-*14.
Here, as in Donohue, defendants’ arguments in support of abstention are imprecise.
Defendants argue that the Court should abstain from hearing this matter based upon a civil matter
currently pending in Albany County but offer no further analysis or argument in favor of
Younger. In the Albany County action, the petitioner, Retired Public Employees Association
(“RPEA”), filed a petition pursuant to Article 78 against defendants herein. The petitioners,
retirees from State service prior to October 1, 2011, petitioned for an order declaring the
administrative implementation of an increase in the percentage of contributions by State retirees
25
and/or their dependents based upon CSL § 167(8) invalid, null and void. The petitioners are also
seeking an order declaring the emergency regulation filed on October 1, 2011 invalid, null and
void, and are further seeking injunctive relief and a refund. On February 24, 2012, the
respondents filed a motion to dismiss.8 Defendants argue that the RPEA case involves the same
claims/issues presented herein and a facial challenge to CSL § 167(8).
The Court has reviewed the RPEA pleadings annexed to defendants’ motion. Defendants
do not dispute that plaintiffs herein are not a party in the state proceeding. Therefore, for the
Younger doctrine to apply herein, defendants must establish that plaintiffs and the RPEA
petitioners’ interests are “inextricably intertwined.” Defendants have failed to demonstrate that
plaintiffs’ interests are so closely related that abstention is warranted. In the state action,
petitioners have not asserted a contractual impairment claim based upon a CBA. Defendants have
not established that plaintiffs’ interests will interfere with the state court proceeding, nor has it
been established that plaintiffs have an adequate opportunity for judicial review of their federal
claims in the pending state court action. Moreover, the state court action does not contain claims
against defendants in their individual capacities. Courts have made clear that the Younger
doctrine should be applied sparingly and cautiously to federal plaintiffs not parties to an ongoing
state action. Accordingly, this Court finds that the parties and their claims are not “so closely
related” to require Younger abstention.9
Standard on a Motion to Dismiss under 12(b)(6)
A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure tests the legal sufficiency of the party’s claim for relief and pleadings
8
9
Based upon the record and this Court’s independent research, the motion to dismiss is still pending.
Because the Court finds that defendants have failed to establish the first Younger factor, the Court need not
discuss the issue of whether the relief sought by the RPEA petitioners is “remedial” or “coercive.”
26
without considering the substantive merits of the case. Global Network Commc’ns v. City of New
York, 458 F.3d 150, 155 (2d Cir. 2006); Patane v. Clark, 508 F.3d 106, 111–12 (2d Cir. 2007). In
considering the legal sufficiency, a court must accept as true all well-pleaded facts in the pleading
and draw all reasonable inferences in the pleader's favor. See ATSI Commc’ns, Inc. v. Shaar
Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (citation omitted). This presumption of truth,
however, does not extend to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citation omitted). “Generally, consideration of a motion to dismiss under Rule 12(b)(6) is
limited to consideration of the complaint itself” unless all parties are given a reasonable
opportunity to submit extrinsic evidence. Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006). In
ruling on a motion to dismiss pursuant to Rule 12(b)(6), a district court generally must confine
itself to the four corners of the complaint and look only to the allegations contained therein.
Robinson v. Town of Kent, N.Y., No. 11 Civ. 2875, 2012 WL 3024766, at *3-4 (S.D.N.Y. July 24,
2012) (citing Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007)).
To survive a motion to dismiss, a party need only plead “a short and plain statement of the
claim,” see Fed. R. Civ. P. 8(a) (2), with sufficient facts “to ‘sho[w] that the pleader is entitled to
relief[.]’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (quotation omitted). Under this
standard, the pleading’s “[f]actual allegations must be enough to raise a right of relief above the
speculative level,” see id. at 555 (citation omitted), and present claims that are “plausible on
[their] face.” Id. at 570. “The plausibility standard is not akin to a ‘probability requirement,’ but
it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at
678 (citation omitted). “Where a complaint pleads facts that are ‘merely consistent with’ a
defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement
to relief.’” Id. (quoting Twombly, 550 U.S. at 557). Ultimately, “when the allegations in a
27
complaint, however true, could not raise a claim of entitlement to relief,” Twombly, 550 U.S. at
558, or where a plaintiff has “not nudged [its] claims across the line from conceivable to
plausible, the [ ] complaint must be dismissed[.]” Id. at 570.
I.
Claims Against Officials in their Individual Capacity and Legislative Immunity
“[L]egislators are absolutely immune from suit in their individual capacities for all actions
taken ‘in the sphere of legitimate legislative activity.’” Bogan v. Scott–Harris, 523 U.S. 44, 54
(1998). Legislative immunity only protects municipal officers from civil liability when they are
sued in their personal capacities, and not when sued in their official capacities. Baines v.
Masiello, 288 F. Supp. 2d 376, 383 (W.D.N.Y. 2003) (citations omitted). Legislative immunity
may bar claims for money damages, injunctions and declaratory relief brought against state and
local officials in their personal capacities. State Emp., 494 F.3d at 82 (citation omitted); Bogan,
523 U.S. 44, 54 (1998). “Whether an act is legislative turns on the nature of the act, rather than
on the motive or intent of the official performing it.” Christian v. Town of Riga, 649 F. Supp. 2d
84, 103-104 (W.D.N.Y. 2009) (holding that legislative immunity shields an official from liability
if the act in question was undertaken “in the sphere of legitimate legislative activity”) (quotation
omitted).
Two factors are relevant to determining whether a defendant’s acts are within that sphere:
(1) whether the actions were an integral part of the legislative process; and (2) whether the actions
were legislative “in substance” and “bore the hallmarks of traditional legislation.” Bogan, 523
U.S. at 54-56. Such traditional legislation includes “policymaking decisions implicating
budgetary priories and services the government provides to it’s constituents.” Id. Legislative
immunity applies to acts within the “legislative sphere” even where the conduct, “if performed in
28
other than legislative contexts, would in itself be unconstitutional or otherwise contrary to
criminal or civil statutes.” Doe v. McMillan, 412 U.S. 306, 312–13 (1973) (quotation omitted).
Before defendants in the instant case can invoke legislative immunity, they have the
burden of establishing both of the following: (1) that the acts giving rise to the harm alleged in the
complaint were undertaken when defendants were acting in their legislative capacities under the
functional test set forth in Bogan; and (2) that the particular relief sought would enjoin defendants
in their legislative capacities, and not in some other capacity in which they would not be entitled
to legislative immunity. State Emp., 494 F.3d at 89; see also Canary v. Osborn, 211 F.3d 324,
328 (6th Cir. 2000) (holding that the burden is on the defendants to establish the existence of
absolute legislative immunity).
Here, defendants argue that by issuing the regulations, they were fulfilling discretionary,
policymaking functions implicating State budgetary priorities. As discussed supra, plaintiffs
claim that defendants acts were ultra vires, without authority and null and void. Cplt. at ¶¶ 115118, 163, 164. Taking the allegations in the complaint as true, as the Court must do on a motion
to dismiss, plaintiffs have sufficiently alleged that defendants Hite and Megna were acting beyond
the scope of their authority as public officials. Drawing all reasonable inferences in plaintiffs’
favor, the Court finds that the allegations are sufficiently pled to defeat defendants’ motion at this
stage of the litigation. See Collin Cnty. Tex. v. Homeowners Ass’n for Values Essential to
Neighborhoods (HAVEN), 654 F. Supp. 943, 949 (N.D.Tex. 1987) (holding that the plaintiff’s
allegations that the defendants’ actions were “ultra vires” in character and that they acted outside
of their capacities as public officials arguably “deprives the defendants of Rule 12(b)(6) dismissal
based upon an absolute immunity defense”). At this stage of the litigation, based upon the sparse
record, the Court cannot state as a matter of law, that defendants are entitled to legislative
29
immunity. See Phillips v. Town of Brookhaven, 216 A.D.2d 374, 375 (2d Dep’t 1995) (“It cannot
be determined on the instant record that the individual defendants were acting exclusively in a
legislative capacity, which is required for immunity to attach”); see also Moxley v. Town of
Walkersville, 601 F. Supp. 2d 648, 662 (D. Md. 2009) (holding that “the doctrine of legislative
immunity is not uniquely asserted on motions to dismiss). This ruling does not prevent
defendants from renewing their motion with respect to the applicability of the doctrine of
legislative immunity after sufficient discovery and development of the record.
II.
Contract Clause
Article I, Section 10 of the Constitution prohibits states from passing any law “impairing
the Obligation of Contracts.” While the language of the Contracts Clause is absolute on its face,
“[i]t does not trump the police power of a state to protect the general welfare of its citizens, a
power which is ‘paramount to any rights under contracts between individuals.’” Buffalo Teachers
Fed’n v. Tobe, 464 F.3d 362, 367 (2d Cir. 2006) (holding that courts must accommodate the
Contracts Clause with the inherent police power of the state to safeguard the vital interests of its
people) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 241 (1978). To state a
cause of action for violation of the Contracts Clause, a complaint must allege sufficient facts
demonstrating that a state law has “operated as a substantial impairment of a contractual
relationship.” Nunez v. Cuomo, No. 11-CV-3457, 2012 WL 3241260, at *6 (E.D.N.Y. Aug. 7,
2012) (citing Harmon v. Markus, 412 Fed. Appx. 420, 423 (2d Cir. 2011)). In this regard, there
are three factors that the Court will consider: (1) whether a contractual relationship exists; (2)
whether a change in law impairs that contractual relationship; and (3) whether the impairment is
substantial. Harmon, 412 Fed. Appx. at 423. A state law that impairs a contractual obligation
will not be deemed unconstitutional so long as: (1) it serves a demonstrated legitimate public
30
purpose, such as remedying a general social or economic problem; and (2) the means chosen to
accomplish the public purpose is reasonable and necessary. See Buffalo Teachers Fed’n, 464
F.3d at 368.
A.
Existence of a Contractual Relationship In Vested Rights
Defendants argue that no express or implied contract obligates them to provide “optional
health insurance with a perpetually fixed contribution rate.” Rather, defendants contend that the
CBA provided members with guarantees for the duration of the collective bargaining agreement
only. Plaintiffs claim that the State has a contractual obligation to contribute a fixed amount
toward all retiree health insurance for those who retired on or after January 1, 1983 as well as for
NYSCOPBA State employees who will retire prior to the negotiation of a successor CBA,
pursuant to the current 2007-2009 CBA still in effect.
“All courts agree that if a document unambiguously indicates whether retiree medical
benefits are vested, the unambiguous language should be enforced.” Am. Fed’n of Grain Millers,
AFL-CIO v. Int’l Multifoods Corp., 116 F.3d 976, 980 (2d Cir. 1997) (citing, inter alia, UAW v.
Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir. 1983)). “It is a court's task to enforce a clear and
complete written agreement according to the plain meaning of its terms, without looking to
extrinsic evidence to create ambiguities not present on the face of the document” and a “mere
assertion by a party that contract language means something other than what is clear when read in
conjunction with the whole contract is not enough to create an ambiguity.” New York State Court
Officers Ass’n v. Hite, 851 F. Supp. 2d 575, 579-580 (S.D.N.Y. 2012) (citations omitted). There
is a lack of consensus among the Circuits regarding the interpretation of documents that are
ambiguous. Am. Fed’n, 116 F.3d at 980. Some Circuits have held that “when the parties contract
for benefits which accrue upon achievement of retiree status, there is an inference that the parties
31
likely intended those benefits to continue as long as the beneficiary remains a retiree.” See Yardman, Inc., 716 F.2d at 1479. While the Yard-man “inference” was discussed by the Second
Circuit in Am. Fed’n, the court did not specifically adopt the holding. Specifically, the Court
noted that
[w]hen documents are ambiguous, other circuits have disagreed as to
whether at trial, there should be a presumption that retiree benefits are
vested or that retiree benefits are not vested. Compare Yard-Man, 716
F.2d at 1482 (6th Cir.) (apparently presuming that retiree benefits are
vested), with Bidlack, 993 F.2d at 608-09 (7th Cir.) (apparently
presuming that retiree benefits are not vested). Because we conclude
below that there is no need for a trial as the documents at issue in this
case could not reasonably be interpreted as promising vested retiree
benefits, we need not decide what presumption, if any, would be
appropriate at trial.
Am. Fed’n, 116 F.3d at 980, n.3.
Moreover, while extrinsic evidence may be used to interpret ambiguous CBAs, it may not
be used to alter the meaning of unambiguous terms. Am. Fed’n, 116 F.3d at 981 (citations
omitted). In Am. Fed’n, the Second Circuit concluded that, “to reach a trier of fact, an employee
does not have to ‘point to unambiguous language to support [a] claim. It is enough [to] point to
written language capable of reasonably being interpreted as creating a promise on the part of [the
employer] to vest [the recipient's] . . . benefits.’” Id. at 980 (quotation and other citation omitted);
Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 78 (2d Cir. 1996). A district court may
not base its finding of ambiguity on the absence of language, and the court may only consider oral
statements or other extrinsic evidence after it first finds language in the documents that may
reasonably be interpreted as creating a promise to vest benefits. Id.; see also Parillo v. FKI
Indus., Inc., 608 F. Supp. 2d 264 (D. Conn. 2009). A single sentence in plan documents can
suffice to raise a question that requires resolution by a trier of fact. See Joyce, 171 F.3d at 134.
32
In this matter, the CBA creates a contractual relationship between plaintiff, including
active employees and retirees, and defendants. See Nunez, 2012 WL 3241260, at *6. Plaintiffs
allege that pursuant to the terms of the CBA, “the health insurance benefits and contributions
provided to plaintiffs constitute vested property rights.” Am. Cplt. at ¶ 80. Plaintiffs allege that:
Consistent with Chapter 14 of the Laws of 1983 and the underlying
agreements referenced above, during all relevant times, prior to the
enactment of Chapter 491 of the Laws of 2011, and the unilateral
actions of the State defendants administratively approving, extending
and implementing increases in the contribution rates that retired State
employees are required to pay for health insurance benefits in
retirement challenged by the plaintiffs herein, the State contribution
rate towards the cost of health insurance premium or subscription
charges for the coverage of State employees and retired State
employees, and their dependents, enrolled in NYSHIP or an optional
benefit plan thereunder, was: one-hundred percent (100%) for
individual coverage for retired State employees who retired before
January 1, 1983; ninety percent (90%) for individual coverage for
State employees and retired State employees who retired after January
1, 1983; and, seventy-five percent (75%) for dependent coverage for
State employees and retired State employees.
*****
During all relevant times regarding the 2007-2009 NYSCOPBA CBA,
including March 31, 2007, the State contribution rate towards the cost
of health insurance premium or subscription charges for the coverage
of State employees and retired State employees, and their dependents,
enrolled in NYSHIP or an optional benefit plan thereunder, was
established at: one-hundred percent (100%) for individual coverage
for retired State employees who retired before January 1, 1983; ninety
percent (90%) for individual coverage for State employees and retired
State employees who retired after January 1, 1983; and, seventy-five
percent (75%) for dependent coverage for State employees and retired
State employees.
Am. Cplt. at ¶¶ 62, 70.
Plaintiffs allege that pursuant to the Taylor Law (Civil Service Law Article 14) and the
specific terms of the CBA, the agreement to provide health coverage at the rates set forth in the
33
CBA remains in full force and effect until a successor agreement or award. Id. at ¶ 66. Plaintiffs
further allege that,
[b]y its terms, §§ 12.1 and 12.8 of the 2007-2009 NYSCOPBA CBA
contractually obligated the State to continue to provide health
insurance under NYSHIP, in effect on March 31,2007, to State
employees who are NYSCOPBA members including the continuation
of the State contribution rates set forth in paragraphs 62 and 70 above,
until a successor collective bargaining agreement or interest award
specifically modifies or replaces such terms.
By its terms, §§ 12.1 and 12.8 of the 2007-2009 NYSCOPBA CBA
contractually obligated the State to continue to provide health
insurance under NYSHIP, in effect on March 31,2007, to retired State
employees who were former NYSCOPBA members including the
continuation of the State contribution rates in effect at the time of
retirement, as set forth in paragraphs 62 and 70 above.
Id. at ¶¶ 71-72.
In paragraph 69, plaintiffs cite to the plain language of the CBA, which
states as follows:
(a) The State agrees to pay 90 percent of the cost of individual
coverage and 75 percent of dependent coverage, provided under the
Empire Plan. The State shall pay 90 percent for individual prescription
drug coverage and 75 percent for dependent prescription drug
coverage under the Empire Plan.
(b) The State agrees to pay 90 percent of the cost of individual
coverage and 75 percent of dependent coverage, toward the
hospital/medical/mental health and substance abuse components of
each HMO, not to exceed, 100 percent of its dollar contribution for
those components under the Empire Plan. The State will pay 90
percent of the cost of individual prescription drug coverage and 75
percent of the cost of dependent prescription drug coverage under the
Health Maintenance Organizations.
(c) The unremarried spouse of an employee, who retires after April 1,
1979, with ten or more years of active State service and subsequently
dies, shall be permitted to continue coverage in the health insurance
program with payment at the same contribution rates as required of
active employees.
34
(d) The unremarried spouse of an active employee, who dies after
April 1, 1979 and who, at the date of death was vested in the
Employee's Retirement system and within ten years of his/her first
date of eligibility for retirement shall be permitted to continue
coverage in the health insurance program with payment at the same
contribution rates as required of active employees.
Plaintiffs further allege that based upon the CBA negotiations, Chapter 14 of the Laws of
1983, and the past practices and representations by the State, the State was contractually obligated
to provide health insurance benefits at the rates set forth in paragraphs 62 and 70. Am. Cplt. at ¶
74.
Plaintiffs allege that this provision does not differentiate between active employees and
retirees and does not indicate the duration for the contribution. Defendants do not point to any
provision of the contract that differentiates between the classes of plaintiffs herein. Indeed,
plaintiffs in this action consist of the Union, active members of the Union and former members of
the Union. Plaintiffs Rowe and Mothershed (active employees) argue that they are vested in the
NYS ERS and subject to the State’s implementation of the reduction in contribution rates. The
retired employees allege that they are covered by the terms of the CBA that were in effect at the
time of their retirement insofar as it provides for the continuation of their health benefits.
Defendants argue that the union only represents current employees, not retirees. However,
defendants do not address the issue of whether the language of the CBA contemplates a vesting
of benefits in employees who have yet to retire.
Based upon the record, as it presently exists, plaintiffs allegations identify written
language capable of reasonably being interpreted as creating a promise to provide plaintiffs with a
vested interest in perpetually fixed NYSHIP contribution.
Defendants argue that Sections 12.1 and 12.8 apply “ for the duration of the CBA.”
However, the record, as it presently exists, does not support that conclusion. In the excerpts from
35
the CBA annexed to the complaint, the court finds no such language or any other limiting
language. See Professional Firefighters Ass’n of Omaha, Local 385 v. City of Omaha, No. 10CV-198, 2010 WL 2426446, at *2 (D. Neb. June 10, 2010) (noting that the CBA did not contain
the limitations expressed by the defendants and the defendants offered no law to support their
claim) (citing Am. Fed’n, 513 F.3d at 883). Defendants fail to submit any further argument in
support of dismissal on this issue and cite to one case in support of the proposition that history
cannot serve to bind the State to promises that it never made. See Aeneas McDonald Pol.
Benevolent Ass’n v. City of Geneva, 92 N.Y.2d 326, 333 (1998). However, Aeneas is readily
distinguishable from the facts at hand.
In Aeneas, the labor relationship between the City and the police department had been
governed by collective bargaining agreements. However, none of the agreements addressed the
issue of health benefits for retirees. This fact alone sets Aeneas apart from the instant case. Here,
there is a CBA between defendants and plaintiffs that contains specific language addressing
health benefits. See Della Rocco v. City of Schenectady, 252 A.D.2d 82, 84 -85 (3d Dep’t 1998)
(distinguishing Aeneas because the action before the court contained a “continuum of collective
bargaining contracts between defendant and plaintiffs, each containing identical clauses which
provided for hospitalization and major medical coverage for retired members and their families”).
Defendants also argue that plaintiffs do not have a statutorily implied right to a fixed
amount toward retiree health insurance. In response, plaintiffs state that they are not asserting
their contractual right to a certain health insurance premium derived from CSL § 167(1)(a), see
Dkt. No. 17, p. 18, n.3, and argue that this case is factually distinct from the recent Southern
District decision in New York State Court Officers Ass’n v. Hite, 851 F. Supp. 2d 575 (S.D.N.Y.
36
2012).10 The relevant provision of the CBA at issue in the NYSCOA case provided that
“[e]mployees . . . shall receive health and prescription drug benefits . . . at the same contribution
level . . . that applies to the majority of represented Executive Branch employees.” Id. at 577.
The court held that “[t]he contract does not guarantee that Union members will receive health
benefits at the rates set by Civil Service law § 167(1).” Id. The NYSCOA case is both factually
and procedurally distinguishable from this action. Most importantly, the matter was before the
Southern District Court on a motion for a preliminary injunction, not a motion to dismiss and,
thus, different standards of proof and analysis were applied. See Lawrence v. Town of
Brookhaven Dep’t of Hous., Cmty. Dev. & Intergov. Affairs, No. 07-CV-2243, 2007 WL
4591845, at *13 (E.D.N.Y. Dec. 26, 2007). “[U]nlike a preliminary injunction motion, dismissal
pursuant to Rule 12(b)(6) is not based on whether Plaintiff is likely to prevail, and all reasonable
inferences must be viewed in a light most favorable to Plaintiff.” Id. “In opposing a motion to
dismiss, a plaintiff is not required to prove her case; she must simply establish that the allegations
in the Complaint are sufficient to render her claims plausible.” Id. (citing Iqbal, 490 F.3d at 158)
(internal citation omitted). Moreover, the CBA at issue herein contains specific written language
that is reasonably interpreted as a promise to vest the benefits. For these reasons, this Court finds
the holding in NYSCOA inapplicable to the issues before the Court at this juncture.
In the alternative, plaintiffs argue that, should the Court deem the language of the statute
ambiguous, extrinsic evidence demonstrates the parties’ intent to contract for vested benefits.
Such evidence includes the Bill Jacket to Chapter 14 of the Laws of 1983 and past practices and
representations by the State. In addition, plaintiffs cite to various holdings from New York State
10
After the Southern District Court issued the decision on the motion for a preliminary injunction, the case
was transferred to the Northern District of New York. The matter is presently pending herein under Docket No. 12CV-532.
37
courts and district court decisions in both this Circuit and others where the courts concluded, as a
matter of law, that the subject CBA created vested, lifetime rights to unchanged health insurance
benefits. At this juncture, the Court will not consider such extrinsic evidence and further, the
Court is not compelled to follow the holdings of the cases cited by plaintiffs. Those actions
involved motions for summary judgment and thus, a comprehensive analysis of the record and a
vastly different standard of proof on both parties. See Myers, 244 A.D.2d at 847; Joyce, 171 F.3d
at 133-34.
As discussed supra, the Court has found that plaintiffs have satisfied their burden to
identify specific written language that is reasonably susceptible to interpretation as a promise to
provide a perpetually fixed contribution rate. On a motion to dismiss, that is all that plaintiffs
must establish. Consequently, at this stage of the litigation, plaintiffs have adequately pled the
existence of a contractual right in perpetually fixed contributions to survive a motion to dismiss.
However, the Court cannot make any conclusions as a matter of law with respect to this issue.
B.
Substantial Impairment
Even assuming plaintiffs possessed a valid contractual interest in a perpetual NYSHIP
contribution rate, defendants argue that they have not substantially impaired plaintiffs’ rights.
Defendants contend that the NYSHIP program is still in place and thus, defendants are fulfilling
their contractual obligations. Moreover, defendants contend that the adjustment to the subsidy
rate was a foreseeable variable and within the parties’ reasonable expectations.
An impairment of a contract must be “substantial” for it to violate the Contracts Clause.
Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411 (1983).
Impairments that affect the terms upon which the parties have reasonably relied or that
significantly alter the duties of the party are substantial. Allied Structural Steel Co., 498 U.S. at
38
245. The primary consideration in determining whether the state law has, in fact, operated as a
substantial impairment is the extent to which reasonable expectations under the contract have
been disrupted. Sanitation and Recycling Indus., Inc. v. City of New York, 107 F.3d 985, 993 (2d
Cir. 1997) (“Impairment is greatest where the challenged government legislation was wholly
unexpected”). “[A] law that provides only one side of the bargaining table with the power to
modify any term of a contract after it has been negotiated and executed is perhaps the epitome of
a substantial impairment.” Donohue, 2012 WL 3561796, at *26 (“This far-reaching power [ ] can
arguably be itself a substantial impairment to a contractual relationship”) (citing Baltimore
Teachers Union, Am. Fed’n of Teachers Local 340, AFL-CIO v. Mayor and City Council of
Baltimore, 6 F.3d 1012, 1016 (4th Cir. 1993)).
In this matter, plaintiffs allege that the new reduced contribution rates resulted in an
increase in the cost of health insurance for NYSCOPBA retirees in the amount of twenty percent
(20%) for individual coverage and eight percent (8%) for dependent coverage. Am. Cplt. at ¶
103. Plaintiffs also claim that the emergency regulations will result in a further reduction in State
contribution rates for employees retiring from State service on or after January 1, 2012 including
NYSCOPBA employees which will result in a reduction from ninety percent (90%) to eighty-four
percent (84%) for individual coverage and from seventy-five percent (75%) to sixty-nine percent
(69%) for dependent coverage. Id. at ¶ 104. Plaintiffs further allege that the implementation of
the reduced rate results in increases to the cost of health insurance for plaintiffs that is “not
limited in duration.” Id. at ¶¶ 128-129. Moreover, plaintiffs claim that the implementation
“substantially impairs the contract rights of NYCOPBA, its members and former members.” Id.
at ¶ 131. Plaintiffs argue this results in a loss of pension income. Id. at ¶ 128.
39
Defendants argue that CSL § 167(8) reflected “the lawmakers’ understanding” that the
cost of NYSHIP coverage was subject to adjustment. In support of this assertion, defendants rely
upon extraneous documents not incorporated, mentioned or relied upon in the amended
complaint. Thus, the Court will not consider the documents in the context of the within motion.
Moreover, even assuming that the Legislature was aware of the possible changes in coverage and
costs, defendants have not established, or even alleged, a similar understanding on the part of
plaintiffs. To the contrary, Section 12.1 provides that coverage shall be paid, “unless specifically
modified or replaced pursuant to this Agreement.” To this end, plaintiffs allege that “[i]t was
plaintiffs’ intent and understanding that §§ 12.1 and 12.8 of the [ ] CBA contractually obligated
the State to continue to provide health insurance benefits under NYSHIP . . . including the State
contribution rates set forth in paragraphs 62 and 70 above, until a successor collective bargaining
agreement or interest arbitration award specifically modifies or replaces such terms.” Am. Cplt.
at ¶¶ 73-76. Further allegations of plaintiffs’ expectations are articulated. Plaintiffs allege that
the “State’s longstanding practice and established course of conduct further establishes the
parties’ intent and the State’s contractual obligation to provide for the continuation of health
insurance benefits for retired State employees, including the continuation of . . . rates in . . . as set
forth in paragraph 62 above.” Id. at ¶ 79. Plaintiffs argue that they “reasonably relied” upon the
expectation that the State would continue to contribute towards their health insurance costs in
retirement at the same contribution rates set forth. Id. at ¶ 128. Based upon the allegations in the
complaint, language in the CBA and CSL § 167(8), plaintiffs have sufficiently alleged that the
impairment was not reasonably expected.
Further, plaintiffs allege that defendants unilaterally altered the terms of the CBA after it
had been negotiated and executed. Id. at ¶ 110. Plaintiffs contend that, pursuant to the “Taylor
40
Law, terms and conditions of employment cannot be changed by the State defendants absent
collective bargaining or an interest award.” Id. at ¶ 81. Moreover, plaintiffs claim that “[t]he
unilateral implementation of the aforementioned reduced State contribution rates [. . . ] violated,
impaired and continues to violate and impair Article 12 of the [ ] CBA, including but not limited
to 12.1 and 12.8, as well as prior NYSCOPBA collective bargaining agreements and interest
arbitration awards, . . . Chapter 14 of the Laws of 1983, past State practice, and relevant
documentation and representations made by the State.” Id. at ¶ 110. Based upon the record as it
currently exists, plaintiffs have pled sufficient facts supporting a plausible claim that the
impairment to their contractual rights was substantial.11
C.
Legitimate Public Purpose and Reasonable and Necessary
When a state law constitutes substantial impairment, the state must show a significant and
legitimate public purpose behind the law. See Energy Reserves Group, 459 U.S. at 411-12. A
law that substantially impairs contractual relations must be specifically tailored to “meet the
societal ill it is supposedly designed to ameliorate.” Allied Structural Steel, 438 U.S. at 243. The
Second Circuit has held that “[a] legitimate public purpose is one ‘aimed at remedying an
important general social or economic problem rather than providing a benefit to special
interests.”’ Buffalo Teachers Fed’n, 464 F.3d at 368. “Courts have often held that the legislative
interest in addressing a fiscal emergency is a legitimate public interest” however, “the purpose
may not be simply the financial benefit of the sovereign.” Id. (citation omitted). Moreover,
“[a]lthough economic concerns can give rise to the [ ] use of the police power, such concerns
11
Defendants cite to Local 342, Long Island Pub. Serv. Emp., UMD, ILA, AFL-CIO v. Town Bd. of the Town
of Huntington, 31 F.3d 1191, 1194 (2d Cir. 1994) in support of the argument that the law did not prevent the parties
from fulfilling their obligations and thus, there was no substantial impairment. The Court has reviewed the holding
and finds the facts vastly dissimilar from those at hand. Moreover, Local 342 was before the Southern District on a
motion for a preliminary injunction which, as discussed supra, requires a different standard of proof than a motion to
dismiss. Thus, at this stage of the litigation, given the factual and procedural differences, the Court is not compelled
to abide by the holding in Local 342.
41
must be related to ‘unprecedented emergencies’ such as mass foreclosures caused by the Great
Depression.” Id. “That a contract-impairing law has a legitimate public purpose does not mean
there is no Contracts Clause violation. The impairment must also be one where the means chosen
are reasonable and necessary to meet the stated legitimate public purpose.” Id. at 369. On a
motion to dismiss, the court is not bound to accept the legislature’s justification for the public
purpose. See Nat’l Educ. Ass’n -Rhode Island by Scigulinsky v. Retirement Bd. of Rhode Island
Emp. Retirement Sys., 890 F. Supp. 1143, 1162 (D.R.I. 1995).
The “reasonable and necessary” analysis involves a consideration of whether the
adjustment of the rights and responsibilities of contracting parties is based upon reasonable
conditions and is of a character appropriate to the public purpose justifying the legislation’s
adoption. Am. Fed’n of State, County & Mun. Emps. v. City of Benton, Arkansas, 513 F.3d 874,
879-880 (8th Cir. 2008) (citing Energy Reserves Group, Inc., 495 U.S. at 412 (1983)). Before
analyzing whether an act is reasonable and necessary, the court must determine the degree of
deference afforded to the legislature. Where the state impairs a public contract to which it is a
party, the state's self-interest is at stake and, thus, the court will afford less deference to the state’s
decision to alter its own contractual obligations. United Auto, 633 F.3d at 45; see also Buffalo
Teachers Fed’n, 464 F.3d at 369 (holding that “[w]hen a state’s legislation is self-serving and
impairs the obligations of its own contracts, courts are less deferential to the state’s assessment of
reasonableness and necessity”). “The relevant inquiry for the Court is to ensure that states neither
‘consider impairing the obligations of [their] own contracts on a par with other policy
alternatives’ nor ‘impose a drastic impairment when an evident and more moderate course would
serve its purposes equally well,’ nor act unreasonably ‘in light of the surrounding
circumstances.’” Donohue, 2012 WL 3561796, at *30 (citing U.S. Trust, 431 U.S. at 30–31). In
42
this matter, the State is a party to the CBA and, thus, the Court will afford less deference to the
State’s decisions.
“To be reasonable and necessary under less deference scrutiny, it must be shown that the
state did not (1) ‘consider impairing the . . . contracts on par with other policy alternatives’ or (2)
‘impose a drastic impairment when an evident and more moderate course would serve its purpose
equally well,’ nor (3) act unreasonably ‘in light of the surrounding circumstances.’” Buffalo
Teachers Fed’n, 464 F.3d at 371. Some factors to be considered under this inquiry include:
“whether the act (1) was an emergency measure; (2) was one to protect a basic societal interest,
rather than particular individuals; (3) was tailored appropriately to its purpose; (4) imposed
reasonable conditions; and (5) was limited to the duration of the emergency.” Donohue, 2012
WL 3561796, at *30 (citing, inter alia, Energy Reserves Grp., 459 U.S. at 410 n.11).
In a case in this district, Senior United States District Judge Lawrence E. Kahn addressed
the issue of reasonableness while affording “less deference” to the State’s decisions. Donohue v.
Patterson, 715 F. Supp. 2d 306, 322 (N.D.N.Y. 2010). The Donohue case involved an emergency
appropriations bill which enacted unpaid furloughs, a wage freeze, and a benefits freeze on
certain groups of state employees in contravention of a number of CBAs. Id. at 313. The
“extender bill” expressly imposed the altered terms “[n]ot withstanding any other provisions of
this section or of any other law, including article fourteen of this chapter, or collective bargaining
agreement or other analogous contract or binding arbitration award.” Id. at 314. The court
assumed there was a legitimate public purpose and directed it’s attention to the reasonableness
issue. Judge Kahn noted that the defendants failed to present any showing of a substantial record
of any legislative consideration of policy alternatives to the challenged bill:
Defendants do not, and evidently cannot, direct the Court to any
legislative consideration of policy alternatives to the challenged terms
43
in the bill; rather, the only support offered by Defendants for their
assertion that the contractual impairment was not considered on par
with other alternatives is a list of assorted expenditure decisions made
by the State over the past two years, such as hiring freezes and delays
of school aid. This will not do. That the State has made choices
about funding and that a fiscal crisis remains today surely cannot,
without much more, be sufficient justification for a drastic
impairment of contracts to which the State is a party. Without any
showing of a substantial record of considered alternatives the
reasonableness and necessity of the challenged provisions are cast in
serious doubt.
Id. at 322.
Rather, the court noted that defendants relied upon “generalities” and failed to
demonstrate that they “did not impose a drastic impairment when a more moderate course was
available.” Id. The court addressed the affidavits submitted by the defendants in support of the
motion and held as follows:
While Defendants have identified a fiscal emergency and note that
state personnel comprise a significant source of state spending, their
argument equates the broad public purpose of addressing the fiscal
crisis with retrieving a specific level of savings attributed to the
provisions. The two are not the same. Where reasonable alternatives
exist for addressing the fiscal needs of the State which do not impair
contracts, action taken that does impair such contracts is not an
appropriate use of State power. In its submissions to the Court, the
State artificially limits the scope of alternatives for addressing the
fiscal crisis to retrieving a certain amount of savings from unionized
state employees. According to this view, the reasonableness and
necessity of the challenged provisions is demonstrated simply because
there is a fiscal crisis and Plaintiffs have not identified alternative
sources from their own contracts for the same level of funding as that
desired by the State. Plaintiffs are not charged with that
responsibility. The desired savings need not come from state personnel
in the amount identified by the State. Rather, the State must consider
both alternatives that do not impair contracts as well as those which
might do so, but effect lesser degrees of impairment.
Id. at 323.
Judge Kahn concluded that,
44
[m]ost importantly, the Court cannot ignore the conspicuous absence
of a record showing that options were actually considered and
compared, and that the conclusion was then reached that only the
enacted provisions would suffice to fulfill a specified public purpose.
While the Court would afford significant deference to a legislative
judgment on an issue of this type where the State is not a party to the
impaired contract, the Court cannot do so here — not only because
the state is a contractual party but, far more critically, because actual
legislative findings in support of the provision cannot be located; due
to the take-it-or-leave nature of the extender bill, in conjunction with
the Senate's contemporaneous and unanimous statement opposing the
challenged provisions, there is no adequate basis before the Court on
which it may be established that the provisions are reasonable and
necessary.
Id. at 323.
While a fiscal crisis is a legitimate public interest, defendants cannot prevail on a motion
to dismiss the complaint with an argument limited to “emphasizing the State's fiscal difficulties.”
See id. Broad reference to an economic problem simply does not speak to the policy
consideration and tailoring that is required to pass scrutiny under plaintiffs’ Contracts Clause
challenge. Id.
At this stage of the litigation, all that is required is that plaintiffs plead a “cognizable claim
for a remedy which may be proved at trial.” See Henrietta D. v. Giuliani, No. 95-CV-0641, 1996
WL 633382, at *12 (E.D.N.Y. Oct. 25, 1996). Plaintiffs allege that nothing contained in Chapter
491, the Civil Service Department’s August 2011 Empire Plan Special Report(s), or the
emergency regulations identified a legitimate State purpose to reduce the State contribution rate
for State retirees, or that the same was necessary and reasonable to accomplish said purpose. Am.
Cplt. at ¶¶ 90, 92, 100, 105. Plaintiffs contend that the State’s substantial impairment of their
contract rights is not reasonable or necessary to achieve a significant public purpose and is an
abuse of power. Id. at ¶ 132. Plaintiffs assert that the unilateral implementation of the
aforementioned reduced contribution rates violates the CBA, past State practices and
45
representations made by the State and is an abuse of power. Id. at ¶¶ 110, 133. On a motion to
dismiss, the Court must accept these allegations as true. Thus, the court finds that plaintiffs have
pled sufficient facts suggesting that defendants’ actions were not reasonable and necessary.
While defendants rely upon the economic emergency, a resolution of the issues
surrounding defendants’ fiscal crisis and economic situation will involve questions not
appropriately resolved on a motion for dismissal. See Nat’l Educ. Ass’n, 890 F. Supp. at 1164
(holding that a determination of the reasonableness of the defendants’ actions based upon the
economic crisis involving the Retirement System was premature on a motion to dismiss). Courts
have held that “[r]esolution of . . . whether the contract-impairing enactment was ‘reasonable and
necessary to serve an important public purpose’ . . . is not appropriate in the context of a motion
to dismiss.” JSS Realty Co., LLC v. Town of Kittery, Maine, 177 F. Supp. 2d 64, 70 (D. Me.
2001). Defendants argue that the amendment to CSL § 167 was for a legitimate public purpose
based upon the State's economic emergency and fiscal crisis. Even assuming that the Court
accepts that explanation as a legitimate purpose, defendants fail to demonstrate that the means
chosen were necessary. Defendants do not explain why the language and provisions of Chapter
491 were selected and rather, rely upon the measures that the State refrained from enacting as a
means of demonstrating reasonableness including the State's decision not to eliminate the
NYSHIP program or rewrite CSL § 167 to prescribe more severe modifications. These assertions
are unsupported by the record. Moreover, as Judge Kahn noted, listing the various ways that the
State has attempted to “overhaul” the economy, i.e., prison consolidation, mergers of state
agencies, and reforms to the juvenile system, without more, is insufficient justification for
impairing State contracts. See Donohue, 715 F. Supp. 2d at 323.
46
To summarize, although defendants may prove otherwise upon completion of discovery
and a motion for summary judgment, at this stage of the litigation, plaintiffs have met their
burden and have alleged a plausible cause of action for a violation of the Contracts Clause.
However, the parties are cautioned to appreciate the “distinction” between the Rule 12(b)(6)
standard and the summary judgment standard. The burden on the non-movant is significantly
different on a motion for summary judgment. “Even if the same relevant documents were
considered at each stage, general facts . . . receive consideration at summary judgment, but not in
the Rule 12(b)(6) analysis.” Werbowsky v. Am. Waste Serv., Inc., No. 97-4319, 1998 WL
939882, at *5 (6th Cir. Dec. 22, 1998) (holding that the Rule 12(b)(6) ruling was not a final
judgment, and did not bind the district court at summary judgment). If presented with a motion
for summary judgment, plaintiffs will face the burden of citing to facts in the record and “must go
beyond the pleadings and come forth with genuine issues of fact for trial.” See Connection
Training Servs. v. City of Philadelphia, 358 Fed. Appx. 315, 318 (3d Cir. 2009).
II.
Due Process
Initially, the Court is compelled to point out that both defendants and plaintiffs present
nebulous arguments with respect to this claim. Plaintiffs simply claim that defendants violated
their Fourteenth Amendment rights to be afforded adequate notice and a reasonable opportunity
to be heard before being deprived of property to which they were lawfully entitled. Plaintiffs
argue that they possessed sufficient collective bargaining and statutorily created contract rights
and that defendants abolished the benefit without proper notice to plaintiffs. Defendants argue
that plaintiffs do not have a legitimate claim of entitlement to a property interest in insurance cost
percentages and, therefore, cannot sustain a claim under Due Process.
47
The Fourteenth Amendment provides, in relevant part, that “[n]o state shall . . . deprive
any person of life, liberty, or property, without due process of law.” U.S. Const. amend. XIV, §
1. In order to demonstrate a violation of either substantive or procedural due process rights, the
plaintiff must first demonstrate the possession of a federally protected property right to the relief
sought. Puckett v. City of Glen Cove, 631 F. Supp. 2d 226, 236 (E.D.N.Y. 2009) (citing Lisa’s
Party City, Inc. v. Town of Henrietta, 185 F.3d 12, 16 (2d Cir.1999)). Property interests “are
created and their dimensions are defined by existing rules or understandings that stem from an
independent source such as state law-rules or understandings that secure certain benefits and that
support claims of entitlement to those benefits.” Bd. of Regents of State Coll. v. Roth, 408 U.S.
564, 577 (1972) (holding that the plaintiff must have more than a unilateral expectation; the
plaintiff must have a legitimate claim of entitlement to the benefit). The Second Circuit has held
that, “[i]n order for a person to have a property interest in a benefit such as the right to payment
under a contract, [h]e must have more than a unilateral expectation of it. He must, instead, have a
legitimate claim of entitlement to it.” Local 342, Long Island Pub. Serv. Emp., UMD, ILA, AFLCIO v. Town Bd. of the Town of Huntington, 31 F.3d 1191, 1194 (2d Cir. 1994) (citations
omitted). “When determining whether a plaintiff has a claim of entitlement, we focus on the
applicable statute, contract or regulation that purports to establish the benefit.” Martz v. Vill. of
Valley Stream, 22 F.3d 26, 30 (2d Cir.1994). “Courts have determined that in appropriate
circumstances, contractual rights arising from collective bargaining agreement give rise to
constitutional property right.” Jackson v. Roslyn Bd. of Educ., 652 F. Supp. 2d 332, 341
(E.D.N.Y. 2009) (citing Ciambriello v. Cty. of Nassau, 292 F.3d 307, 314 (2d Cir. 2002). A
“property interest in employment can be created by ordinance or state law.” Winston v. City of
New York, 759 F.2d 242, 247 (2d Cir. 1985) (holding that the plaintiffs’ benefits were found in
48
the New York State Constitution and vested in the plaintiffs by the terms of a statutory scheme).
The Second Circuit has held that,
[i]n determining whether a given benefits regime creates a property
interest protected by the Due Process Clause, we look to the statutes
and regulations governing the distribution of benefits. Where those
statutes or regulations meaningfully channel official discretion by
mandating a defined administrative outcome, a property interest will
be found to exist.
Kapps v. Wing, 404 F.3d 105, 113 (2d Cir. 2005) (internal citations and quotation marks omitted).
Courts in this circuit have held that statutory framework may create a property interest. See
Kapps, 404 F.3d at 104; Basciano v. Herkimer, 605 F.2d 605 (2d Cir.1978) (holding that city
administrative code created a property right in receipt of accident disability retirement benefits,
where the code required officials to give benefits to applicants who met specified criteria); see
also Winston, 759 F.2d at 242; Sparveri v. Town of Rocky Hill, 396 F. Supp. 2d 214, 218 (D.
Conn. 2005) (noting that the plaintiff claimed that her entitlement to the level of pension and
healthcare benefits was rooted in the statutory pension scheme established by the Town Charter
and Plan ordinance).
In the amended complaint, plaintiffs’ Third Cause of Action contains allegations relating
to due process. Plaintiffs allege that the implementation of the reduced contribution rates violate
plaintiffs’ rights to be afforded adequate notice and a reasonable opportunity to be heard before
being deprived of property to which they were lawfully entitled. Am. Cplt. ¶ 146. Plaintiffs
allege that their property rights are based, in part, upon statutory rights contained in Chapter 14 of
the Laws of 1983. Id. at ¶ 148. While the Court cannot conclude as a matter of law that
plaintiffs’ possessed a property interest within the meaning of the Fourteenth Amendment,
plaintiffs have sufficiently articulated claims for due process violations to survive a motion to
dismiss.
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CONCLUSION
IT IS HEREBY
ORDERED that defendants’ motion to dismiss plaintiffs’ complaint (Dkt. No. 13) is
GRANTED IN PART AND DENIED IN PART; it is further
ORDERED that defendants’ motion to dismiss plaintiffs’ complaint as against the State
of New York, New York State Civil Service Department, New York State Civil Service
Commission and New York State and Local Retirement System is GRANTED. All claims
against these defendants are dismissed; it is further
ORDERED that defendants’ motion to dismiss plaintiffs’ claims for monetary damages
asserted against defendants Hite, Ahl, Hanrahan, Megna and DiNapoli in their official capacity is
GRANTED; it is further
ORDERED that defendants’ motion to dismiss plaintiffs’ claims for injunctive and
declaratory relief asserted against defendants Hite, Ahl, Hanrahan, Megna and DiNapoli in their
official capacity is GRANTED only to the extent that such claims seek retrospective relief; it is
further
ORDERED that defendants’ motion to dismiss plaintiffs’ Article 78 claims is
GRANTED; it is further
ORDERED that defendants’ motion is denied in all other respects.
IT IS SO ORDERED.
Dated: December 3, 2012
Albany, New York
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