766 Fed.Appx. 16 (5th Cir. 2019), 18-10423, Degan v. Board of Trustees of Dallas Police & Fire Pension System

Docket Nº:18-10423
Citation:766 Fed.Appx. 16
Opinion Judge:PER CURIAM:
Party Name:LaDonna DEGAN; Ric Terrones; John McGuire; Reed Higgins; Mike Gurley; Larry Eddington; Steven McBride, Plaintiffs-Appellants v. The BOARD OF TRUSTEES OF the DALLAS POLICE AND FIRE PENSION SYSTEM, Defendant-Appellee
Attorney:David M. Feldman, Shannon Rashida Smittick, Feldman & Feldman, P.C., Houston, TX, Kirk Louis Pittard, Esq., Kelly, Durham & Pittard, L.L.P., Dallas, TX, for Plaintiffs-Appellants David Harlan Harper, Attorney, Kelli Benham Bills, Nina Cortell, Jason Neal Jordan, Benjamin Lee Mesches, Haynes & Boo...
Judge Panel:Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.
Case Date:March 20, 2019
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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766 Fed.Appx. 16 (5th Cir. 2019)

LaDonna DEGAN; Ric Terrones; John McGuire; Reed Higgins; Mike Gurley; Larry Eddington; Steven McBride, Plaintiffs-Appellants

v.

The BOARD OF TRUSTEES OF the DALLAS POLICE AND FIRE PENSION SYSTEM, Defendant-Appellee

No. 18-10423

United States Court of Appeals, Fifth Circuit

March 20, 2019

UNPUBLISHED

Editorial Note:

Please Refer Federal Rule of Appellate Procedure Rule 32.1. See also U.S.Ct. of App. 5th Cir. Rules 28.7 and 47.5.

Appeal from the United States District Court for the Northern District of Texas, USDC No. 3:17-CV-1596

David M. Feldman, Shannon Rashida Smittick, Feldman & Feldman, P.C., Houston, TX, Kirk Louis Pittard, Esq., Kelly, Durham & Pittard, L.L.P., Dallas, TX, for Plaintiffs-Appellants

David Harlan Harper, Attorney, Kelli Benham Bills, Nina Cortell, Jason Neal Jordan, Benjamin Lee Mesches, Haynes & Boone, L.L.P., Dallas, TX, for Defendant-Appellee

Christopher John Caso, Esq., Assistant City Attorney, James Bickford Pinson, Assistant City Attorney, City Attorney’s Office for the City of Dallas, Dallas, TX, for Amicus Curiae City of Dallas, Texas

Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.

OPINION

PER CURIAM:[*]

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Several beneficiaries of the City of Dallas pension fund for police and firefighters (collectively "Plaintiffs") sued the City over changes to the pension fund they contend violate the United States and Texas Constitutions. Because we conclude that the Texas constitutional questions should be certified to the Supreme Court of Texas and that the resolution of those questions will impact the case as a whole, we certify the questions set forth below and stay the remainder of the case pending the outcome in the Supreme Court of Texas (i.e., whether certification is accepted and, if it is, what result is reached).

We briefly discuss the facts and the arguments and then articulate the certified question.

I. Background

The City of Dallas has provided its police and firefighters a pension fund program since at least 1997. The pension fund was created in accordance with state law and is administered by the Board of Trustees of the Dallas Police and Fire Pension System ("the Board").

Among the advantages of the pension fund are Deferred Retirement Option Plans or DROP accounts. DROP accounts are a statutory creation of the Texas legislature. See TEX. REV. CIV. STAT. ANN. art. 6243a-1, § 6.14 (2011).[1] They were created for City employees who reach retirement age but who elect to continue working. See id. § 6.14(a). Rather than retiring and receiving the pension funds they would be entitled to, employees continue working and the money they would have received each month under the pension is credited to an individual DROP account. See id. § 6.14(c). There, the employees’ money continues to garner interest. See id. § 6.14(c). Once employees leave active service, they begin receiving their monthly pension payments instead of the payments being credited to the DROP account. Id. § 6.14(a). They can also begin accessing the funds that previously built up in their DROP account. Id. § 6.14(a). By statute, employees were previously able to elect one of three ways to receive the DROP funds that were paid on top of their remaining pension benefits: (1) as "a single-sum distribution," (2) as "an annuity to be paid in equal monthly payments for the life of the member," or (3) as "substantially equal monthly or annual payments" in an amount designated by the member. Id. § 6.14(d).

The pension fund began to suffer various financial problems. In 2014, the Board proposed reducing the interest rate that applied to the increasingly dominant DROP accounts. See

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Eddington v. Dall. Police & Fire Pension Sys., No. 17-0058, __ S.W.3d __, __, 2019 WL 1090799, at *2 (Tex. Mar. 8, 2019). Members of the fund approved the proposal and the interest rate began to gradually drop. Id. But losses in the pension fund continued. The problem worsened when DROP participants increasingly began electing lump-sum withdrawals instead of spreading them out over time. The pension fund entered the same downward spiral that happens during a bank run.

Mayor Michael Rawlings halted the run in December 2016 by filing a state court lawsuit against the Board and the pension fund. He received a temporary restraining order prohibiting the pension fund from paying out funds from any DROP accounts. The next month, the Board adopted an addendum that temporarily prohibited any DROP withdrawals except for "required minimum distributions and unforeseeable emergency withdrawals." The addendum nullified "all DROP withdrawal requests on file with [Dallas Police and Fire Pension], including requests for both lump sum payments and monthly installments." After the temporary freeze, participants would then receive distributions based on their pro-rata share of DROP funds and a formula defined by the plan. Retirees could also elect to receive an annual distribution of $30,000 or $36,000 depending on the year. Finally, the addendum granted retirees the option of withdrawing funds for certain unforeseeable emergencies.

Months after the Mayor’s and Board’s actions, the Texas Legislature amended the pension statute. See Act of May 30, 2017, 85th Leg., R.S., ch. 318, 2017 Tex. Sess. Law Serv. Ch. 318 (H.B. 3158) (amending,...

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