160 F.3d 310 (6th Cir. 1998), 97-3314, Mascio v. Public Employees Retirement System of Ohio

Docket Nº:97-3314.
Citation:160 F.3d 310
Party Name:John J. MASCIO, Plaintiff-Appellee, v. PUBLIC EMPLOYEES RETIREMENT SYSTEM OF OHIO; Richard E. Schumacher, Defendants-Appellants.
Case Date:November 04, 1998
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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160 F.3d 310 (6th Cir. 1998)

John J. MASCIO, Plaintiff-Appellee,



Schumacher, Defendants-Appellants.

No. 97-3314.

United States Court of Appeals, Sixth Circuit

November 4, 1998

Argued June 11, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Jan. 11, 1999.[*]

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Benson A. Wolman (argued and briefed), Wolman, Genshaft & Gellman, Columbus, OH, for Plaintiff-Appellee.

James M. Harrison, Asst. Atty. General (briefed), Office of Attorney General of Ohio, Columbus, OH, Jeffrey S. Sutton, State Solicitor (argued and briefed), Columbus, OH, for Defendants-Appellants.

Before: NELSON and RYAN, Circuit Judges; ROSEN, District Judge. [*]

DAVID A. NELSON, J., delivered the opinion of the court, in which RYAN, J., joined. ROSEN, D.J. (pp. 315-326), delivered a separate dissenting opinion.


DAVID A. NELSON, Circuit Judge.

This is an appeal from a preliminary injunction in which the district court barred the Public Employees Retirement System of Ohio and its Executive Director from enforcing a newly enacted Ohio statute that mandates forfeiture of certain vested pension rights. Finding no abuse of discretion, we shall affirm the injunction.


The plaintiff, Jefferson County Common Pleas Judge John Mascio, retired from the bench in September of 1996. On October 1, 1996, Ohio's Public Employees Retirement System (PERS) began paying him the retirement benefits to which he was entitled by law. Notwithstanding his retirement, Mascio stood as a candidate for election to the seat

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he had just vacated. Elected without opposition in November of 1996, he began receiving a salary upon his return to the bench in January of 1997.

Had it not been for what came to be perceived as a statutory loophole, this kind of "double-dipping" would have been impossible under Ohio law. At the time of Judge Mascio's retirement, the Ohio Revised Code contained a provision that read as follows:

"No person holding office in this state ... who is re-elected to that office shall retire under Chapter 145. of the Revised Code with a date for the commencement of his retirement allowance that is during the period beginning on the thirty-first day before the date of his re-election and extending through the thirty-first day after the date on which his new term of office begins." Ohio Rev.Code § 3.16(A) (repealed 12/6/96).

The consequence of retirement in violation of § 3.16(A) was forfeiture of the elected office. Ohio Rev.Code § 3.16(B).

Judge Mascio was able to plan his retirement and subsequent election in such a way as to avoid the application of § 3.16. Filing for re-election without making his retirement plans public, he secured a place on the ballot without attracting an opponent. His re-election assured, he retired with a date for commencement of his retirement allowance that was more than thirty-one days prior to the election.

After the election, in an eleventh-hour effort to prevent Judge Mascio from double-dipping, the Ohio legislature passed Senate Bill 82. The new act became effective on December 6, 1996--about a month before Judge Mascio was to resume his judicial duties, but more than two months after he had begun collecting his retirement benefits.

As codified at Ohio Rev.Code § 145.38(C)(4), the new legislation provides in part as follows:

"A PERS retirant shall elect division (C)(1)(b) of this section if both of the following apply:

(a) The retirant held elective office in this state, or in any municipal corporation, county, or other subdivision of this state at the time of retirement under Chapter 145. of the Revised Code;

(b) The retirant was elected or appointed to the same office for the remainder of the term or the term immediately following the term during which the retirement occurred."

Division (C)(1)(b) provides that the retirant will "receive compensation for the employment and forfeit the pension portion of the retirement allowance." The retirant is precluded from electing division (C)(1)(a), under which certain persons can receive "both compensation for the employment and a retirement allowance."

In light of the new statute, the Retirement System notified Judge Mascio that his retirement allowance would be suspended effective January 1, 1997. Mascio then brought the present declaratory judgment/injunction suit, claiming a violation of his rights under the Contract Clause (Art. I, § 10) and Bill of Attainder Clause (Art. I, § 9) of the United States Constitution. Concluding that Mascio had demonstrated a substantial likelihood of success on the merits of these claims, the district court granted a preliminary injunction blocking suspension of the retirement allowance. This appeal followed.


The granting of a preliminary injunction is subject to appellate review under an "abuse of discretion" standard. The injunction will seldom be disturbed unless the district court relied upon clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous legal standard. See Blue Cross & Blue Shield Mut. of Ohio v. Blue Cross and Blue Shield Ass'n, 110 F.3d 318, 322 (6th Cir.1997).

In exercising its discretion with respect to a motion for a preliminary injunction, a district court must give consideration to four factors: "(1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury without the injunction; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served

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by issuance of the injunction." Rock & Roll Hall of Fame & Museum, Inc. v. Gentile Prods., 134 F.3d 749, 753 (6th Cir.1998).

In this circuit, "the four considerations applicable to preliminary injunction decisions are factors to be balanced, not prerequisites that must be met." In re DeLorean Motor Co., 755 F.2d 1223, 1229 (6th Cir.1985). This court "will reverse a district court's weighing and balancing of the equities only in the rarest of circumstances." Moltan Co. v. Eagle-Picher Indus., Inc., 55 F.3d 1171, 1175 (6th Cir.1995).

In its balancing of the four factors in the case at bar, the district court placed great weight on the circumstance that, as the court saw it, Judge Mascio had shown a strong likelihood of success on the merits of both his Bill of Attainder and Contract Clause claims. We find it unnecessary to address the Bill of Attainder Clause question, because it seems to us that the district court was clearly correct in its assessment of the likelihood that Judge Mascio would prevail on the Contract Clause issue.

The Contract Clause provides that "[n]o state shall ... pass any ... Law impairing the Obligation of Contracts." U.S. Const. art. I, § 10, cl.1. To prove a violation of this provision, a plaintiff must demonstrate that a "change in state law has 'operated as a substantial impairment of a contractual relationship.' " General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S.Ct. 1105, 117 L.Ed.2d 328 (1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978)). In deciding whether such a demonstration has been made, the court must ask whether "(1) a contract exists, (2) a change in law impairs that contract, and (3) the impairment is substantial." Linton v. Comm'r of Health & Environment, 65 F.3d 508, 518 (6th Cir.1995), cert. denied, 517 U.S. 1155, 116 S.Ct. 1542, 134 L.Ed.2d 646 (1996). If a contractual obligation is substantially impaired by the change in law, the court must further inquire whether the adjustment of the rights of the parties to the contractual relationship was reasonable and appropriate in the service of a legitimate and important public purpose. See Allied Structural Steel, 438 U.S. at 242-44, 98 S.Ct. 2716.

The retirement benefits of Ohio public employees vest, by statute, at the time when the retirement allowance or pension is granted by the public employees retirement board. Ohio Rev.Code § 145.561. The effect of this vested rights statute is "to make the engagement of public authorities to pay a pension, upon conditions fulfilled, a contractual obligation founded upon a valid consideration, giving to the pensioner a vested right in his pension which cannot afterwards be impaired or revoked." State ex rel. Cunat v. Trustees of Cleveland Police Relief & Pension Fund, 149 Ohio St. 477, 482, 79 N.E.2d 316 (1948), supplemented, 150 Ohio St. 377, 82 N.E.2d 743 (1948).

Judge Mascio's pension was fully vested as of October 1, 1996, the date on which he began receiving benefits. As of that date, in other words, Mascio had a contractual right to continued receipt of the benefits. Forfeiture of the benefits would obviously constitute a substantial impairment of this vested contract right. 1

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The defendants argue that no impairment could occur unless, as of December 6, 1996, Mascio had a present right to receive both his pension and his judge's salary. We disagree. The newly enacted statute effected a forfeiture of pension benefits, not a forfeiture of salary. Although it is conceivable that under the new law Mascio could have continued to receive his pension benefits by resigning from the office to which he had been re-elected, his contractual right to the pension benefits was not conditioned on his giving up his judicial salary.

In reliance on a line of cases that includes Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983), the defendants attempt to justify the new statute as a "regulation" that has "a significant and legitimate public purpose." See id. at 411, 103 S.Ct. 697. Substantial impairment of Judge Mascio's vested contract rights is justified, according to the defendants, "by the state's significant and legitimate public purpose in passing S.B. 82: protecting the...

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