Carver v. Nassau Cnty. Interim Fin. Auth.
| Decision Date | 27 September 2013 |
| Docket Number | Docket Nos. 13–0801,13–0840. |
| Citation | 730 F.3d 150 |
| Parties | James CARVER, as President of the Nassau County Police Benevolent Association, Gary Learned, as President of the Superior Officers Association of Nassau County, Thomas R. Willdigg, as President of the Nassau County Police Department Detectives' Association, Inc., Plaintiffs–Appellees, v. NASSAU COUNTY INTERIM FINANCE AUTHORITY, Ronald A. Stack, Leonard D. Steinman, Robert A. Wild, Christopher P. Wright, George J. Marlin, Thomas W. Stokes, in their official capacities as directors/members of the Nassau County Interim Finance Authority, Edward Mangano, in his official capacity as County Executive of Nassau County, George Maragos, in his official capacity as Nassau County Comptroller, County of Nassau, Defendants–Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
OPINION TEXT STARTS HERE
Alan M. Klinger, Stroock & Stroock & Lavan LLP, New York, NY, Harry Greenberg, Seth H. Greenberg (on the brief), Greenberg Burzichelli Greenberg P.C., Lake Success, NY, for Plaintiffs–Appellees.
Christopher J. Gunther, Skadden, Arps, Slate, Meagher & Flom, New York, NY, for Defendants–Appellants Nassau County Interim Finance Authority, Ronald A. Wild, Christopher P. Wright, George J. Marlin and Thomas W. Stokes, in their official capacities as directors/members of the Nassau County Interim Finance Authority.
Marc S. Wenger (Ana C. Shields, on the brief), Jackson Lewis LLP, Melville, NY, Special Consel for the County Attorney, for Defendants–Appellants, Edward Mangano,in his official capacity as County Executive of Nassau County, George Maragos, in his official capacity as Nassau County Comptroller, and County of Nassau.
Howard Wein, Koehler & Isaacs LLP, New York, NY, for Nassau County Sheriff's Correction Officers Benevolent Association as amicus curiae in support of Plaintiffs–Appellees.
Steven A. Crain and Daren J. Rylewicz, (Leslie C. Perrin, of counsel), Civil Service Employees Association, Inc., Albany, NY, for Civil Service Employees Association, Inc., as amicus curiae in support of Plaintiffs–Appellees.
Before: POOLER and CARNEY, Circuit Judges, and KORMAN, District Judge.*
Plaintiffs, representatives of various Nassau County police unions, brought suit to contest a wage freeze imposed in 2011 on Nassau County employees, including police officers, by the Nassau Interim Finance Authority (“NIFA”), a public benefit corporation formed by the New York State Legislature in 2000 in response to the County's unstable financial condition. The defendants are NIFA, Nassau County, and various officers of both. The police unions contend that the wage freeze was imposed in violation of the Contracts Clause, Article I, Section 10 of the Constitution, and that the authority conferred on NIFA to impose such a freeze had expired under the terms of the applicable statute, N.Y. Pub. Auth. Law § 3669(3).
The district court granted summary judgment to the police unions on their state law claim without reaching the constitutional question. On appeal, defendants argue that the applicable statute was wrongly construed. They also contend, principally, that the district judge abused his discretion in exercising jurisdiction over the pendent state law claim.
The Nassau Interim Finance Authority is a public benefit corporation created by the New York State Legislature in June 2000 in response to the growing financial crisis facing Nassau County. The County, which was $2.7 billion in debt, had been forced to allocate nearly one quarter of its spending to servicing that debt, and the County's debt was downgraded by rating agencies to one level above junk status. The Legislature passed the NIFA Act, creating NIFA as a public benefit corporation to oversee the county's finances. N.Y. Pub. Auth. Law § 3650 et seq. The Act provided that NIFA would be governed by a panel of directors, appointed by the governor, who serve four-year terms without compensation. Id. § 3653(1). The directors are assisted by a small professional staff.
The NIFA Act also provided $105 million in State taxpayer grants to Nassau County through 2004 and allowed NIFA to issue bonds to refinance and restructure the County's debt. Id. § 3656. The NIFA Act also provided for different oversight periods: the initial “interim finance period,” a subsequent “monitoring and review” period, and a third “control period” that could be triggered upon NIFA's determination that the county was likely to sustain an operating funds deficit of 1% or more. Id. §§ 3651(14), 3668–69. Once the County regained financial independence, the “monitoring and review” period ended, and NIFA's bonds were retired, the Act contemplated that NIFA would dissolve. Id. § 3652.
During the interim finance period, NIFA had the responsibility of approving the County's budgets and financial plans. Id. § 3667. This period was meant to conclude in 2004, though it was extended twice by the state legislature and ultimately ended in 2008. At that point, NIFA began a period of monitoring and oversight, during which it retained the power to review and audit County budgets, but was no longer required to approve the County's annual financial plans. Id. § 3668. If the County's financial situation were to deteriorate, however, NIFA would be obligated to order a control period. Id. § 3669. During a control period, NIFA is authorized to take necessary remedial measures, which include requiring the County to adopt a revised financial plan approved by NIFA, auditing the County government, approving or disapproving proposed County borrowing, and ordering a temporary wage freeze on County employees. Id.
On January 26, 2011, NIFA imposed a control period. After Nassau County unsuccessfully challenged the imposition of the control period in an Article 78 proceeding, County of Nassau v. Nassau County Interim Finance Authority, 33 Misc.3d 227, 920 N.Y.S.2d 873 (N.Y.Sup.Ct.2011), NIFA passed two resolutions freezing wages for all County employees on March 24, 2011. The wage freeze forced the County to breach the terms of the collective bargaining agreements it had entered into with the various County police unions. On April 1, 2011, the police unions commenced this action in federal court, alleging that the wage freeze violated the Contracts Clause, Article I, Section 10 of the Constitution. They later amended their complaint to add a second claim that NIFA lacked the authority under state law to order a wage freeze after the conclusion of the interim finance period.
After discovery on the Contracts Clause claim, the parties filed cross-motions for summary judgment. The district court granted summary judgment to the police unions, agreeing with their interpretation of the NIFA Act that NIFA's authority to freeze wages was limited to the duration of the interim finance period. The district court did not discuss the issue of jurisdiction beyond the observation that “[f]ederal jurisdiction is based upon Plaintiffs' claim that the wage freeze violates the Contracts Clause of Article I of the United States Constitution.” Carver v. Nassau Cnty. Interim Fin. Auth., 923 F.Supp.2d 423, 424 (E.D.N.Y.2013). Nevertheless, the district court did not reach this claim, observing that the statutory question was “most appropriate for summary disposition.” Id. at 427.
The district courts have supplemental jurisdiction over pendent state law claims “that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). Nevertheless, a district court “may decline to exercise supplemental jurisdiction over a claim” under any of four circumstances: “(1) the claim raises a novel or complex issue of State law, (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction, (3) the district court has dismissed all claims over which it has original jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.” Id. § 1367(c). We review a district court's decision to assert supplemental jurisdiction over a state law claim under an abuse-of-discretion standard. See Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d 234, 243 (2d Cir.2011).
This case concededly presents an unresolved question of state law and is also one in which there are exceptional circumstances which provide compelling reasons for declining jurisdiction. Unlike a case involving a dispute between private parties, this case involves the construction of a significant provision of an extraordinarily consequential legislative scheme to rescue Nassau County from the brink of bankruptcy, to monitor its financial condition, and to take steps necessary to prevent a relapse. In order to carry out this legislative scheme, the Legislature created NIFA, which it denominated a “corporate governmental agency and instrumentality of the state constituting a public benefit corporation.” N.Y. Pub. Auth. Law § 3652(1). The Legislature found and declared:
that the continued existence of such condition of fiscal difficulties is contrary to the public interest of the county and the state and seriously threatens to cause a decline in the general prosperity and economic welfare of the inhabitants of the county and the people of this state [and that] [t]he impairment of the credit of the county of Nassau may affect the ability of other municipalities in the state to issue their obligations at normal interest rates. Such effect is a matter of state concern.
N.Y. Pub. Auth. Law, ch. 43–A, art. 10–D, T. 1 (McKinney 2002). The legislative history also indicates that the County had:
request[ed] the enactment of all of the provisions of [the] act as necessary and in the public interest to accomplish the objective of...
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