Rhode Island Broth., Correct. Offic. v. Rhode Isl., 03-1913.

• Decision Date: 28 January 2004
• Docket Number: No. 03-1913.,03-1913.
• Parties: RHODE ISLAND BROTHERHOOD OF CORRECTIONAL OFFICERS, Plaintiff, Appellant, v. State of RHODE ISLAND; Lincoln Almond, in his capacity as Chief Executive Officer of the State of Rhode Island; Robert L. Carl, Jr., in his capacity as Director of the Department of Administration of the State of Rhode Island; Paul J. Tavares, in his capacity as General Treasurer of the State of Rhode Island; and Ashbel T. Wall II, in his capacity as the Director of the Department of Corrections of the State of Rhode Island, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

357 F.3d 42

RHODE ISLAND BROTHERHOOD OF CORRECTIONAL OFFICERS, Plaintiff, Appellant, v. State of RHODE ISLAND; Lincoln Almond, in his capacity as Chief Executive Officer of the State of Rhode Island; Robert L. Carl, Jr., in his capacity as Director of the Department of Administration of the State of Rhode Island; Paul J. Tavares, in his capacity as General Treasurer of the State of Rhode Island; and Ashbel T. Wall II, in his capacity as the Director of the Department of Corrections of the State of Rhode Island, Defendants, Appellees.

No. 03-1913.

United States Court of Appeals, First Circuit.

Heard December 4, 2003.

Decided January 28, 2004.

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Dennis T. Grieco II with whom Gidley, Sarli & Marusak, LLP was on brief, for appellant.

Thomas A. Palombo, Assistant Attorney General, Department of Attorney General, with whom Claire Richards, Special Counsel to the Governor, and John L.P. Breguet, Chief Legal Counsel, Department of Administration, Office of Labor Relations, were on brief, for appellee State of Rhode Island.

John L.P. Breguet, Chief Legal Counsel, Department of Administration, Office of Labor Relations, with whom Thomas A. Palombo, Assistant Attorney General, Department of Attorney General, and Claire Richards, Special Counsel to the Governor, were on brief, for appellee Robert L. Carl, Jr.

Before BOUDIN, Chief Judge, SELYA, Circuit Judge, and STAHL, Senior Circuit Judge.

BOUDIN, Chief Judge.

This suit involves the claims of the Rhode Island Brotherhood of Correctional Officers ("the Brotherhood") against the state of Rhode Island, its governor, and other officials (collectively, "Rhode Island"). Because the case was disposed of on a motion to dismiss, Fed.R.Civ.P. 12(b)(6), we accept for purposes of review the factual allegations (but not necessarily the characterizations) of the complaint, Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.), cert. denied, 528 U.S. 1062, 120 S.Ct. 616, 145 L.Ed.2d 511 (1999), which are briefly as follows.

In 1976 the Rhode Island General Assembly enacted an incentive pay statute giving extra pay to correctional officers who acquired specified educational credits, provided that the officers remained employed by the Department of Corrections for designated periods (or paid back some of the extra pay if they left early). 1976 R.I. Pub. Laws. ch. 290, § 2 (codified at R.I. Gen. Laws §§ 42-56.1-1 to -10 (1976)). The extra pay was fixed as a specified percentage of the officer's base salary, depending upon the number of educational credits obtained. R.I. Gen. Laws § 42-56.1-2 (1976).

Over the years after 1976 the state also entered into collective bargaining agreements with the correctional officers containing terms that mirrored the statute's provisions on incentive pay. However, the latest collective bargaining agreement containing such incentive pay provisions expired on June 30, 1996. The union alleges that the state required union members to sign individual contracts confirming the state's obligation to provide incentive pay under the terms of the statute; individual forms relating to incentive pay were signed, but whether they were contracts and if so what obligations they imposed and on whom remains to be discussed.

The Rhode Island legislature has several times enacted generous pay or pension statutes and later reconsidered them.¹ In 1996, the Rhode Island General Assembly amended the 1976 incentive pay statute, effective as of July 1, 1996, to provide that after that date incentive pay would no longer be a percentage of base salary but would be a specified flat sum, 1996 R.I. Pub. Laws. ch. 100, § 1 (codified at R.I. Gen. Laws §§ 42-56.1-2 (1997)). According to the union this generally results in lower incentive pay — hardly a surprise since base salaries tend to rise over time.

On October 2, 2003, the Brotherhood brought suit, 42 U.S.C. §§ 1983, 1988 (2000), against Rhode Island, seeking declaratory and injunctive relief to maintain the percentage formula and also seeking back payments. The claims were based on alleged violations of the contract clauses of the federal and Rhode Island constitutions, U.S. Const. art. I, § 10, cl. 1; R.I. Const. art. I, § 2; denial of substantive due process, U.S. Const. amend. XIV, § 1; R.I. Const. art. I, § 2; taking of property without just compensation (apparently under U.S. Const. Amend. V); breach of contract; promissory estoppel; and unjust enrichment/quantum meruit.

Thereafter, exercising supplemental jurisdiction over the state law claims, 28 U.S.C. § 1367(a) (2000), the district court dismissed all of the claims on the merits, save that it dismissed the claims based on the alleged individual contracts for lack of standing. R.I. Bhd. of Corr. Officers v. Rhode Island, 264 F.Supp.2d 87 (D.R.I. 2003). The union now appeals. Our review of a decision granting a motion to dismiss on the papers is plenary. Stein v. Royal Bank of Canada, 239 F.3d 389, 392 (1st Cir.2001).

The contract clause of the federal constitution limits the ability of a state to abrogate rights created by pre-existing contracts, including contractual rights against the state created by legislation. E.g., Parella v. Ret. Bd. of Rhode Island Employees' Ret. Sys., 173 F.3d 46, 60 (1st Cir.1999); Parker v. Wakelin, 123 F.3d 1, 4-5 (1st Cir.1997), cert. denied, 523 U.S. 1106, 118 S.Ct. 1675, 140 L.Ed.2d 813 (1998). But recognizing that legislation is ordinarily subject to change, the Supreme Court requires that the legislature's intent to create such rights against the state be unmistakably clear, see United States v. Winstar Corp., 518 U.S. 839, 872, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996) (plurality opinion); Dodge v. Bd. of Educ., 302 U.S. 74, 78-79, 58 S.Ct. 98, 82 L.Ed. 57 (1937); Parella, 173 F.3d at 59-60; and even where contractual rights do exist, the legislature may abrogate them under certain circumstances. U.S. Trust Co. v. New Jersey, 431 U.S. 1, 25, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977); Parella, 173 F.3d at 59. Here, inquiry stops at the first stage since we agree with the district court that the 1976 statute did not unmistakably create contractual rights.²

The 1976 statute merely provides that the incentive pay specified will be afforded if the educational qualifications are met by the employee. It does not say that the provisions are a contractual commitment by the state or will never be changed, nor is there language authorizing the state to enter into contracts guaranteeing such benefits forever. See Parella, 173 F.3d at 60. The framework is similar to other statutes regularly found not to create private contractual rights. See note 1, above.³

The Brotherhood's main statutory-language argument to the contrary is that the 1976 provisions make references to writings in two instances: first, the eligibility provision requires that the employee "agree in writing to remain" in the Department of Corrections for a specified period, R.I. Gen. Laws § 42-56.1-2 (1976); second, the payment provision directs an administrator to supply the "agreement form" containing the time constraints for completing educational programs, R.I. Gen. Laws § 42-56.1-6 (1976). The provisions explain at least one of the forms relied on by the union as independent contracts.

Whatever the status and meaning of these two documents (an issue to which we will return), the two references to writings in the statute do not show that the statutory provisions for incentive pay were themselves unmistakably intended to create (or authorize creation of) private contractual rights against the state. The statute requires a document from the employee acknowledging the statutory commitment of the employee to remain or repay a portion of past incentive pay. The only obligations imposed on the state are to follow the statute — which has now been amended.

It would have been child's play for the Rhode Island legislature to say explicitly in 1976 that educational credits once earned created private rights or that incentive pay could never be differently calculated for existing employees who had qualified for incentive pay. True, civil service jobs commonly create expectations that holders will likely enjoy no reductions in pay (but instead get periodic increases); but expectations alone are not contracts — contracts are written to protect expectations. Indeed, legislation constantly creates expectations that are disappointed by later modifications, repeal or lack of funding.

Of course, the employees in this case assert not only expectations but reliance. In private ordering (e.g., a corporate pension plan), courts commonly overlook the lack of an explicit promise where the employee performs in accordance with a promulgated plan and the employer then reduces the benefits. Nat'l Educ. Ass'n-R.I ex rel. Scigulinsky v. Ret. Bd. of R.I. Employees' Ret. Sys., 172 F.3d 22, 26 (1st Cir.), cert. denied, 528 U.S. 929, 120 S.Ct. 326, 145 L.Ed.2d 254 (1999). But for good reason public statutes are not construed in the same fashion as private contracts. Id. at 27. This is a disadvantage for public employees (who happen to include judges); yet no shortage of applicants has ensued.

United States v. Winstar Corp., 518 U.S. 839, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996), relied upon in other respects by the Brotherhood, does not support the union's argument that contractual rights spring from the 1976 statute. Virtually all of the opinions assumed that the unmistakability doctrine applies to legislation claimed to provide private contractual rights.⁴ The core dispute that divided the Court three ways concerned the ability of Congress to override what most of the Justices deemed to be promises made in prior agreements between banks and their regulators.

Thus, Winstar did not alter the traditional presumption that state legislation does not ordinarily create private contractual rights. Indeed, since the Winstar decision, this court has regularly followed that presumption. E.g., ...