Retired Chicago Police Ass'n v. City of Chicago

• Decision Date: 23 August 1989
• Citation: 7 F.3d 584
• Parties: RETIRED CHICAGO POLICE ASSOCIATION, an Illinois not-for-profit corporation, individually and on behalf of its members and other individuals who are participants in the City of Chicago's Annuitant Healthcare Plan, and whose participation began after 1987, but prior to
• Court: U.S. Court of Appeals — Seventh Circuit

Page 584

7 F.3d 584

27 Fed.R.Serv.3d 311

RETIRED CHICAGO POLICE ASSOCIATION, an Illinois

not-for-profit corporation, individually and on behalf of

its members and other individuals who are participants in

the City of Chicago's Annuitant Healthcare Plan, and whose

participation began after 1987, but prior to August 23,

1989, Katherine Ryan, Bernard McKay, and Joseph Coglianese,

for themselves and for others similarly situated as

participants in the City of Chicago's Annuitant Healthcare

Plan whose participation began prior to January 1, 1988, and

the Retired Chicago Police Association, an Illinois

not-for-profit corporation, individually and on behalf of

its members and other individuals who are members of the

1987 class, Plaintiffs-Appellants,

and

Thomas J. Ahlfeld, Ignazio Bontempo, Patrick J. Boyle,

Donald M. Jacobson, Michael Monaghan, Arthur Papineau,

Lawrence J. Thomas, Bob Valleyfield, William L. Tlapa,

Stanley C. Lis, Benedict J. Scacchiti, Arthur T. Cholly,

William Danaher, and the Coalition of Active and Retired

Employees Political Action Committee, also known as

C.A.R.E.P.A.C., Appellants, v. CITY OF CHICAGO, a municipal corporation; Richard M. Daley,

Mayor of the City of Chicago; Miriam Santos, Treasurer of

the City of Chicago; Walter Knorr, Comptroller of the City

of Chicago; the Policemen's Annuity and Benefit Fund of

Chicago; the Firemen's Annuity and Benefit Fund of Chicago;

the Municipal Employees' Annuity and Benefit Fund of

Chicago; and the Laborers' and Retirement Board Employees'

Annuity and Benefit Fund of Chicago, Defendants-Appellees.

No. 92-2314.

United States Court of Appeals,

Seventh Circuit.

Argued April 6, 1993.

Decided Oct. 12, 1993.

John J. Lowrey, Clinton A. Krislov (argued), Jonathan Nachsin, Lisa E. Waisbren, Krislov & Associates, Chicago, IL, for plaintiffs-appellants.

Stuart D. Fullerton (argued), Office of Corp. Counsel, Lawrence Rosenthal, Deputy Corp. Counsel, Jean Dobrer, Kelly R. Welsh, Asst. Corp. Counsels, Benna R. Solomon, Office of Corp. Counsel, Appeals Div., Kevin M. Forde, Mary Anne Mason, Janice R. Forde, Katrina Veerhusen, Martin J. Burns, Jacobs, Burns, Sugarman & Orlove, Chicago, IL, for defendants-appellees.

Before RIPPLE and MANION, Circuit Judges, and ENGEL, Senior Circuit Judge. ^*

RIPPLE, Circuit Judge.

This case arises from the dissatisfaction of some City of Chicago employees with a settlement agreement reached in state court regarding a dispute over the terms of a health care plan offered by the City. Because the Retired Chicago Police Association v. City of Chicago action and the Ryan v. City of Chicago action are substantially similar, they were consolidated by the district court. The district court granted summary judgment against the Ryan plaintiffs on the basis of res judicata. It then denied the Retired Chicago Police Association's (RCPA) motions for preliminary injunction and for class certification, and subsequently dismissed RCPA's complaint for lack of associational standing. ¹ The RCPA and its proposed class, the Ryan plaintiffs, and the potential intervenors all appeal the judgment of the district court. For the reasons that follow, we affirm in part and reverse and remand in part.

I

BACKGROUND

A. Early History of the City's Health Care Plan

This case has a lengthy and complex procedural history, both in the Illinois state courts and in the federal district court. We shall set forth only those facts necessary for resolution of this appeal. The four pension funds here at issue, the Policemen's Annuity and Benefit Fund, the Firemen's Annuity and Benefit Fund, the Municipal Employees' Annuity and Benefit Fund, and the Laborers' and Retirement Board Employees' Annuity and Benefit Fund (the Funds) were organized under the authority of the state pension code to provide for and administer pension benefits for certain retired city employees. Since the early part of the last decade, the Funds' annuitants participated in the City's health care plan. This plan made health care coverage available for retired employees. In 1982, the City, as it had been doing periodically, increased the premium rates charged to annuitants and set a fixed premium for coverage. The state of Illinois then enacted legislation to address specifically annuitants' health benefits coverage. The legislation required the Police and Firemen's Funds to purchase group health insurance for their beneficiaries and required the City to subsidize partially the costs of annuitant health care coverage. According to the City, any premium not covered by the City's subsidy

                had to be paid by the individual annuitants. 2  The legislation further required the City to levy a special tax to raise sufficient revenue to cover the Funds' new mandatory monthly contributions.   At the time of the enactment of the legislation, the subsidies from the City to the Funds covered the entire monthly premium charged under the City's plan.   However, during the ensuing years, the costs of health care spiraled upward.   The Funds did not make contributions out of the annuitants' benefits.   Consequently, as the 1982 premiums began to cover decreasing percentages of the total cost of annuitant coverage, the City has shouldered an ever-increasing share of total annuitant health care costs with additional subsidies
                

B. The State Litigation

In 1987, the City brought suit against the Funds in state court. It sought a judgment permitting it to terminate annuitant health care coverage under its plan and declaring that it had no obligation to subsidize coverage. It also sought to recover the money it had already expended on health care benefits. See City of Chicago v. Korshak, Circuit Court of Cook County, Chancery Div. No. 87 CH 10134. The Trustees of the Funds counterclaimed and filed a motion for an injunction to bar the City's threatened termination of health care coverage.

A group of annuitants then moved to intervene in the litigation. They sought to protect the interests of the individual annuitants who participated in the City's plan by requiring that the plan be maintained as previously set by the City. On May 5, 1988, the state court granted their motion to intervene and designated these intervenors as representatives for a certified class of annuitants who had retired on or before December 31, 1987 (the 1987 or Korshak class). The RCPA also moved for intervention and class certification, but both of those motions were denied.

On May 16, 1988, the court dismissed the City's complaint, but proceeded to conduct a bench trial on the Funds' counterclaims. Before the court issued its ruling, however, the City and the Funds reached a settlement agreement in which they agreed to co-sponsor legislation that would change the Illinois Pension Code. The resulting legislation increased the amount that the Funds would contribute to the health care premium of each annuitant. It also required the City to continue to provide health care coverage through 1997 by paying at least fifty percent of the cost, an obligation that would continue to be funded by a special tax. Annuitants would be responsible for paying any costs remaining after all contributions and subsidies had been paid. If no new agreement was reached by the expiration of this legislation, the plan would return to its pre-settlement terms.

After the legislation allowing the pension changes was enacted, the state court conducted a fairness hearing in regard to the terms of the settlement agreement. At the hearing, several class members testified against the settlement and none spoke in favor of it. The annuitant-intervenors were not pleased with the terms of the settlement; their goal had been to prohibit the City from changing the terms of the health care plan for existing participants and from thereby raising the costs to each annuitant. Over these objections, the court approved the settlement agreement. The 1987 class then filed an appeal.

C. The Present Action

While the appeal was pending in the Illinois courts, the RCPA filed a class action (the RCPA claim) against the City, several city officials, and the Funds in federal district court. The proposed class comprised: "all annuitants of the City of Chicago Police, Fire, Municipal and Laborers' Pension Funds and their spouses, survivors and dependents who are current participants in the City's Annuitant Healthcare Plan" and whose participation began after December 31, 1987 (the end date of the Korshak class) and prior to August 23, 1989 (the date on which the Korshak legislation, described above, was enacted). R. 1 at 3-4. The proposed RCPA In its complaint, the RCPA alleged that the City and the Funds had violated 42 U.S.C. § 1983 (1988) by abrogating annuitants' rights secured under the Contract Clause and the Fourteenth Amendment of the United States Constitution. In essence, the plaintiffs alleged that the settlement agreement stemming from the state litigation altered the terms of the City's health plan and the related obligations of the City and the Funds in violation of the Contract Clause, as well as the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The RCPA also asserted state breach of contract and estoppel claims, as well as violations of the Illinois Constitution. The RCPA contended that the City had promised the annuitants they would have lifetime health care coverage at unchanged rates. It further asserted that the Funds had advised annuitants that premium subsidies would be paid throughout an annuitant's retirement by his respective Fund, thus providing essentially free health care coverage for life. The annuitants would pay only for additional coverage for spouses and dependents. The RCPA alleged that these promises had been made to the annuitants in a variety of ways, through oral representations at retirement seminars, in a booklet prepared by the City to explain the benefits of its health care plan, and by word of mouth and general understanding....