Ernst v. Rising
| Citation | 427 F.3d 351 |
| Decision Date | 26 October 2005 |
| Docket Number | No. 02-2287.,02-2287. |
| Parties | J. Richard ERNST, William T. Ervin, James E. Wilson, and John Patrick O'Brien, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. Jay B. RISING, Treasurer of the State of Michigan; Christopher M. DeRose, Director, Department of Management and Budget Office of Retirement Systems; George M. Elworth, Member, Michigan Judges Retirement Board; Mark Haas, Member, Michigan Judges Retirement Board; Alton Davis, Member, Michigan Judges Retirement Board; Francis Spaniola, Member, Michigan Judges Retirement Board; and Chris J. Swope, Member, Michigan Judges Retirement Board, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
Kenneth A. Flaska, Dawda, Mann, Mulcahy & Sadler, Bloomfield Hills, Michigan, for Appellants. Larry F. Brya, Office of the Attorney General, Lansing, Michigan, for Appellees.
ON BRIEF:
Chester E. Kasiborski, Jr., Bernardi, Ronayne & Glusac, Detroit, Michigan, for Appellants. Larry F. Brya, Office of the Attorney General, Lansing, Michigan, for Appellees.
Before: BOGGS, Chief Judge; MARTIN, SUHRHEINRICH, BATCHELDER, DAUGHTREY, MOORE, COLE, CLAY, GILMAN, GIBBONS, ROGERS, SUTTON, and COOK, Circuit Judges.
CLAY, J., (pp. 373-81), delivered a separate dissenting opinion, in which MARTIN, DAUGHTREY, MOORE, and COLE, JJ., joined and in which ROGERS, J., joined as to Part II only.
Four state-court judges from Michigan filed this lawsuit under 42 U.S.C. § 1983, the Equal Protection Clauses of the United States and Michigan Constitutions, and Michigan common law, claiming that state-court judges based in Detroit and surrounding Wayne County (the 36th District) receive more favorable retirement benefits than state-court judges based elsewhere in the State. They brought the lawsuit on behalf of themselves and other similarly situated state-court judges; they filed the lawsuit in federal court; and they named several state officials, all with various responsibilities for managing the retirement system, in their official capacities as defendants ("the State" or "state defendants"). Among other forms of relief, plaintiffs asked the state defendants to "make restitution ... by paying ... with interest" the difference between the retirement benefits they received and the amounts they would have received had they been treated like the 36th-District judges.
The primary issue joined by the parties is whether a government retirement system that provides benefits for all state judges (and many other state officials) is an "arm of the State" or a "political subdivision" of the State. If the retirement system is an arm of the State, the parties agree, a federal-law money-damages action (or a state-law action of any sort) against the retirement system or its officials may not proceed in federal court in light of the Tenth and Eleventh Amendments to the United States Constitution. If the retirement system is a political subdivision of the State, the parties also agree, a money-damages action of this sort may proceed in federal court.
As we see it, the retirement system is most naturally characterized as an arm of the State. It is a product of state legislation. It is run by state officials or individuals appointed by state officials. It serves state officials—not just all state-court judges in Michigan but many of the top government officials in the State (e.g., the governor, the lieutenant governor, the secretary of state, the attorney general). It is funded by the state treasury as well as by contributions from state officials. And if the retirement system faces a monetary shortfall, state legislation requires the state treasurer to make up the difference with state funds. For these reasons and those elaborated below, the district court correctly characterized the retirement system as an arm of the State. Because plaintiffs have filed only federal claims that seek monetary relief or claims that primarily seek monetary relief and because the state-law claims must be dismissed regardless of the type of relief they seek, the district court correctly dismissed all claims. To the extent the district court meant to dismiss any of plaintiffs' claims with prejudice, however, that was error, and that portion of the order is reversed.
In 1992, the Michigan legislature enacted the Judges Retirement Act, Mich. Comp. Laws §§ 38.2101-.2670, which established the judges' retirement system in its current form. The retirement system provides defined-benefit and defined-contribution plans for most of Michigan's state-wide officials: state trial judges (which include probate judges, district court judges and circuit court judges), state intermediate appellate judges, state supreme court justices, the governor, the lieutenant governor, the secretary of state, the attorney general, the legislative auditor general and the constitutional court administrator. Id. § 38.2108.
The retirement system is managed by a board comprised of two state officials (the treasurer and the attorney general) and three appointees named by the governor with the advice and consent of the state senate. Id. § 38.2202(1). The state treasurer serves as the treasurer of the retirement system, id. § 38.2206(1); the state attorney general serves as the legal advisor to the retirementsystem, id. § 38.2207; and another state entity (the Michigan Department of Management and Budget) has responsibility "for the budgeting, procurement, and related management functions" of the retirement system, id. § 38.2205.
As amended by legislation enacted in 1996, the retirement system offers all members benefits under one of two pension plans: a defined benefit plan called "Tier 1" and a defined contribution plan called "Tier 2." Under both tiers, participating officials contribute a portion of their income to their retirement funds. And under both tiers, the State (and in some instances a local government as well) contributes funds to each individual's plan. Generally speaking, Tier 1 offers a guaranteed level of fixed benefits during retirement, while Tier 2 does not guarantee fixed benefits but offers potentially higher returns on contributions. All judges who began their service before March 31, 1997, joined Tier 1 because that was the only option available to them before that date. All judges who started after that date were required to join Tier 2. Under the 1996 amendment, Tier 1 participants were authorized to move to Tier 2 if they elected to do so by a certain date in 1998. See D. Ct. Op. at 2.
On September 5, 2001, Judges Ernst, Ervin, Wilson and O'Brien—a probate judge, a district judge, a circuit judge and a retired circuit judge—filed a complaint on behalf of themselves and other similarly situated judges in the Eastern District of Michigan. They alleged that inequities in the retirement system violate (1) the Equal Protection Clause of the United States Constitution, (2) its counterpart in the Michigan Constitution and (3) several state-law fiduciary duties. JA 9-37. The primary inequity, the complaint alleged, was that judges of the State's 36th Judicial District, based in Detroit and surrounding Wayne County, pay less in retirement contributions and receive more in contribution benefits than other state-court judges. See JA 17-19. The roots of this alleged pay-less-and-receive-more disparity are part history and part policy.
As a matter of history, the State and a local funding unit (usually a city or county) together paid all trial-level judicial salaries before 1980. Harvey v. State, 469 Mich. 1, 664 N.W.2d 767, 769 (2003) (hereinafter "Harvey"). Under this dual salary system, trial-level judges belonged to two retirement systems—a state system and a local system—and the State made retirement contributions to the one system and the relevant local government made contributions to the other. In 1980, through legislation designed to make the State responsible for all state-court operations, the legislature took on responsibility for the state and local components of the salaries (and retirement benefits) of the judges of the 36th District with the goal of eventually doing the same for all other judicial districts in the State. Id. Yet, Id. Under the current system, as a result, 36th-District judges are the only ones who receive retirement benefits from the State based on their total salary level. Other judges receive state retirement benefits based on their state salary component and local retirement benefits based on their local salary component. And while these other judges may treat up to 40 percent of their local salary component as state salary for purposes of calculating state retirement benefits, judges who choose this 40-percent option must make contributions of 7 percent of the salary they treat as state salary, while 36th-District judges must contribute only 3.5 percent of the salary they treat as state salary. To the extent certain local retirement benefits are inferior to the state retirement benefits, as allegedly is the case in some instances, some state trial judges end up paying more to the state retirement system in order to receive the same (or nearly the same) retirement income as the judges based in the 36th District.
As a matter of policy, the State has...
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