Buffalo Teachers Federation v. Tobe, Docket No. 05-4744-cv.
| Citation | 464 F.3d 362 |
| Decision Date | 21 September 2006 |
| Docket Number | Docket No. 05-4744-cv. |
| Parties | BUFFALO TEACHERS FEDERATION, Buffalo Educational Support Team, NEA/NY, Transportation Aides of Buffalo, NEA/NY, Substitutes United Buffalo NEA/NY, Buffalo Council of Supervisors and Administrators, AFSCME Local 264, Professional Clerical and Technical Employees' Association and Local 409 International Union Operating Engineers, Plaintiffs-Appellants, v. Richard TOBE, Thomas E. Baker, Alair Townsend, H. Carl McCall, John J. Faso, Joel A. Giambra, Mayor Anthony Masiello, Richard A. Stenhouse, Roger G. Wilmers, in their official capacities as directors/members of the Buffalo Fiscal Stability Authority and George E. Pataki, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Andrew D. Roth, Bredhoff & Kaiser, Washington, D.C. (Laurence Gold, Bredhoff & Kaiser, P.L.L.C., Washington, D.C.; Robert H. Chanin, National Education Association, Washington, D.C., of counsel), for Plaintiffs-Appellants.
A. Vincent Buzard, Pittsford, New York (Paul R. Braunsdorf, Laura W. Smalley, Harris Beach PLLC, Pittsford, New York, of counsel), for Defendants-Appellees.
Before CARDAMONE, CALABRESI, and HALL, Circuit Judges.
When a state is sued for allegedly impairing the contractual obligations of one of its political subdivisions even though it is not a signatory to the contract, the state will not be held liable for violating the Contracts Clause of the United States Constitution unless plaintiffs produce evidence that the state's self-interest rather than the general welfare of the public motivated the state's conduct. On this issue, plaintiffs have the burden of proof because the record of what and why the state has acted is laid out in committee hearings, public reports, and legislation, making what motivated the state not difficult to discern. In the appeal before us, the record of why the state acted is available, and plaintiffs have not met their burden.
Plaintiffs are the Buffalo Teachers Union and a number of other unions in Buffalo, New York (Buffalo or City), representing public employees of the school district of the City of Buffalo — including teachers, principals, bus drivers, cooks, food service helpers, etc. (plaintiffs, unions, or appellants). Defendants are the Buffalo Fiscal Stability Authority (Buffalo Fiscal Authority, BFSA, or Board), its members, and New York State Governor George E. Pataki (collectively defendants). Plaintiffs, alleging that a wage freeze instituted by defendant Buffalo Fiscal Authority violates the Contracts Clause and the Takings Clause of the United States Constitution, sued defendants and sought a declaratory judgment with respect to the wage freeze's constitutionality and also an injunction against its enforcement. Both sides moved for summary judgment. The United States District Court for the Western District of New York (Skretny, J.) granted summary judgment for defendants in a judgment dated and entered August 19, 2005.
When in 2003 the speaker of the New York State Assembly became concerned by Buffalo's declining financial health, he requested the state comptroller's office to conduct a review of the City's finances. The resulting report detailed Buffalo's financial situation. The report recounted that the City had been operating for several years with a structural deficit and had been able to continue operations only with state aid and the use of the City's reserves. Buffalo had relied increasingly on state aid to fund its budget increases (state aid grew from $67 million in 1997-98 to $128 million in 2002-03). The City faced exponential increases in its budget deficits; the comptroller projected budget deficits of $7.5 million for 2002-03, $30-$46 million for 2004-05, $76-$107 million for 2005-06, and $93-$127 million for 2006-07.
Based on these and other bleak findings, the comptroller concluded Buffalo was not in a position to resolve its fiscal woes on its own. For example, the record on this appeal shows that to remedy budgetary shortfalls, the City had already laid off 800 teachers and 250 assistant teachers over a four year period. The report therefore suggested legislative intervention. Specifically, the comptroller recommended the creation of a control board — namely the BFSA — to oversee Buffalo's finances. The board would have powers and duties similar to those given to boards that already oversaw the budgets of other fiscally troubled municipalities in New York State. The comptroller advised also that in the event of a board-declared fiscal crisis the board should have the power to freeze future wage increases.
In light of the comptroller's report, the state legislature passed on July 3, 2003 the Buffalo fiscal stability authority act (Act) to address the City's financial crises. See N.Y. Pub. Auth. Law § 3850-a (McKinney Supp.2006). To explain passage of the Act, the legislature stated,
It is hereby found and declared that the city [of Buffalo] is in a state of fiscal crisis, and that the welfare of the inhabitants of the city is seriously threatened. The city budget must be balanced and economic recovery enhanced. Actions should be undertaken which preserve essential services to city residents, while also ensuring that taxes remain affordable. Actions contrary to these two essential goals jeopardize the city's long-term fiscal health and impede economic growth for the city, the region, and the state.
See 2003 N.Y. Sess. Laws Ch. 122 § 5695 (McKinney) (emphasis added); see also N.Y. Pub. Auth. Law § 3850-a (McKinney Supp.2006) (setting forth legislative declaration of need for state intervention).
The aim of the Act is to have Buffalo achieve fiscal stability by 2007-08. See N.Y. Pub. Auth. Law § 3857(1) (McKinney Supp.2006). To attain that goal, the Act created the Buffalo Fiscal Authority, a public benefit corporation. See id. § 3852(1). Central to the Act is a requirement that the City submit financial plans each year over a four year period to the Buffalo Fiscal Authority for approval. See id. §§ 3856 & 3857. Under the terms of the Act, the Board is to review, approve, and monitor implementation of the City's financial plans to ensure that the City is abiding by the fiscal limitations and benchmarks imposed by the Act. See id. §§ 3856-59. The Act also provides a means by which the Board may modify the financial plans to bring them into compliance with the Board's strictures. Id. § 3857. If Buffalo fails or refuses to modify its financial plans, the Board may take corrective steps on its own. Id. § 3857(2), 3858(2). In particular, the Board may impose a wage and/or hiring freeze upon a finding that such a freeze is "essential to the adoption or maintenance of a city budget or a financial plan" that is in compliance with the Act. Id. § 3858(2)(c)(i).
On October 21, 2003 the Buffalo Fiscal Authority approved the City's first four-year financial plan under the Act. Prior to the submission of the plan, the Board had already ordered the City to institute a hiring freeze and had also instructed the City to exclude from the plan wage increases that were not contractually required. The City approved a tax increase for its 2004-05 budget and planned for another tax increase in the last year of the four-year plan; together the city tax increases amounted to $6.3 million.
Six months later, in reviewing how the plan's implementation was proceeding, the Board realized the plan no longer complied with the Act. The BFSA discovered that for the 2004-05 fiscal year Buffalo projected a budget gap $20 million greater than the $30 million gap previously estimated. The Board was further troubled by the estimate that the projected City budget gap for the next four years would exceed $250 million.
As a result of these concerns, on April 21, 2004 the Buffalo Fiscal Authority invoked its wage freeze power and determined "that a wage freeze, with respect to the City and all Covered Organizations, is essential to the maintenance of the Revised Financial Plan and to the adoption and maintenance of future budgets and financial plans that are in compliance with the Act." The Board further resolved that "effective immediately, there shall be a freeze with respect to all wages . . . for all employees of the City [which] shall apply to prevent and prohibit any increase in wage rates." The wage freeze took effect that day, and effectively prohibited members of the plaintiff unions from enjoying a two percent wage increase that the unions had negotiated as part of their labor contracts with the City.
Following the imposition of the wage freeze, plaintiffs filed suit against the Board on June 17, 2004 in the district court, seeking a judgment declaring the wage freeze unconstitutional under the Contracts and Takings Clauses, and seeking an injunction to bar the wage freeze's enforcement. On February 28, 2005 the parties filed cross-motions for summary judgment. After full briefing and oral argument, the district court denied plaintiffs' motion and granted summary judgment in favor of the defendants. It held that as a matter of law the wage freeze offended neither the Contracts or Takings Clauses of the Constitution. From the district court's judgment, plaintiffs appeal.
Our standard of review here is well known. We review the grant of summary judgment de novo, Virgin Atlantic Airways Ltd. v. British Airways PLC, 257 F.3d 256, 262 (2d Cir.2001), viewing the facts in the light most favorable to plaintiffs and resolving all factual ambiguities in their favor, Cioffi v. Averill Park Cent. Sch. Dist. Bd. of Educ., 444 F.3d 158, 162 (2d Cir.2006). Under this standard, we are only to "determine whether there is a genuine issue for...
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