Andrews v. Anne Arundel County, Md.

• Citation: 931 F. Supp. 1255
• Decision Date: 31 May 1996
• Docket Number: Civil Action No. AMD 96-173.
• Parties: Parker ANDREWS, et al., Plaintiffs, v. ANNE ARUNDEL COUNTY, MARYLAND, Defendant.
• Court: U.S. District Court — District of Maryland

931 F. Supp. 1255

Parker ANDREWS, et al., Plaintiffs, v. ANNE ARUNDEL COUNTY, MARYLAND, Defendant.

Civil Action No. AMD 96-173.

United States District Court, D. Maryland.

May 31, 1996.

COPYRIGHT MATERIAL OMITTED

Glenn M. Cooper and David M. Rothenstein, Bethesda, MD, for plaintiffs.

Phillip F. Scheibe, County Attorney and David A. Plymyer, Annapolis, MD, for defendant.

MEMORANDUM OPINION

DAVIS, District Judge.

I. INTRODUCTION

The plaintiffs are 13 former appointed and elected officials of Anne Arundel County, Maryland, all but one of whom retired from county employment between 1990 and 1994 pursuant to provisions of the County Retirement Plan for Appointed and Elected Officials (the "A & E Plan"). The defendant is Anne Arundel County — a chartered Maryland county ("the County"). Md.Code Ann., Art. 25A (1957, 1994 Repl.Vol.).

In 1994 and 1995, the County Council adopted, and the County Executive signed into law, Bill Nos. 61-94 and 74-95, respectively. The express purpose of these enactments was to reduce retroactively pension benefits ordinarily payable to plaintiffs and plaintiffs' survivors, and otherwise to effect cost-saving changes in the A & E Plan. Plaintiffs filed this action to enjoin the application of these bills to them and to recover lost benefits.

This action was originally filed in the Circuit Court for Anne Arundel County, Maryland. The plaintiffs' initial pleading was a complaint for ex parte and interlocutory injunctive and other relief. The circuit court issued an ex parte injunction (i.e., TRO), on or about December 20, 1995, and it held an evidentiary hearing on January 2, 1996. On January 4, 1996, the court extended the ex parte injunction and it issued an interlocutory injunction on January 18, 1996. The January 18, 1996, injunction ordered that (1) pension benefits being paid under the A & E Plan not be reduced pursuant to County Bill No. 74-95, and (2) the provisions of Bill No. 74-95, which increased the age of retirement from 50 to 60 and decreased the benefit formula from 2.5% to 2% of final average earnings for each year of credited service (under 20 years), not go into effect. The provision of the bill reducing the minimum annual pension for certain individuals from $4,800 to $1,200, was specifically excluded from the scope of the injunction.

Contemporaneously, the plaintiffs moved for partial summary judgment. The County timely removed the case to this Court on January 19, 1996, based on federal question jurisdiction. Currently pending are the plaintiffs' motion for partial summary judgment; plaintiffs' motion for leave to amend their complaint; the County's motion for judgment on the pleadings; and the plaintiffs' second motion for partial summary judgment. A hearing on all outstanding motions was held on May 20, 1996.

II. CLAIMS PRESENTED

The plaintiffs' complaint consists of four counts: a claim under the Anne Arundel County Code (count I); a claim under the Contract Clause to the U.S. Constitution (count II); a claim "for violation of" 42 U.S.C. § 1983 (count III); and a claim for relief under the Maryland Uniform Declaratory Judgment Act (count IV).¹

I am persuaded, in light of familiar summary judgment standards, Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), that plaintiffs are entitled to summary judgment on their claim that the County's retroactive divestment of their pension benefits violates the Contract Clause. I decline, however, to forecast that the Supreme Court will overrule one of its century-old precedents; I shall grant summary judgment in favor of the County as to the claim under 42 U.S.C. § 1983. Furthermore, all federal claims being thus adjudicated, I decline to go further to exercise supplemental jurisdiction over the non-federal claims. Accordingly, a declaratory judgment shall be entered as to the Contract Clause claim, and in the exercise of discretion appropriate to the circumstances of this case, the remaining state claims shall be remanded to state court for further proceedings, including amendment of the complaint.

III. FACTS

A. Background

Section 814 of the Anne Arundel County Charter provides for the establishment of pension benefits for all county employees "who are not covered by the State Retirement System...." Accordingly, the County sponsors five pension plans, including the A & E Plan. Under the A & E Plan, the participant's benefits are calculated pursuant to a percentage of the participant's final average earnings multiplied by the participant's years of service. As the A & E Plan was ultimately amended, years of service are credited by either (1) performing work for the county; (2) transferring years of service earned at another specified benefit plan within the state of Maryland; or (3) purchasing years of service credit for service performed with certain other public employers, within or without the State of Maryland. The Plan is funded by both employer and employee contributions.

The plaintiffs are seeking injunctive and other relief from County Council Bill Nos. 61-94 and 74-95, which affect their pension benefits from the County. The plaintiffs argue that those bills are unconstitutional and otherwise invalid in that they purport to reduce retroactively the pension benefits of those individuals that are already retired and participating in the A & E Plan. The Plan was closed in 1994 to new members. There are currently fewer than 100 members in the A & E Plan.²

B. Legislative Enhancements of Benefits Under the A & E Plan

On November 2, 1987, Anne Arundel County Council Bill No. 56-87 was enacted. The bill, inter alia, increased the A & E Plan participant's death benefit to a benefit equal to the participant's monthly pension benefit. The previous benefit had been a "cash refund" benefit in which the beneficiary (spouse or dependent child) received a refund of the participant's contributions less any retirement benefits already received.

On May 17, 1989, Anne Arundel County Council Bill No. 36-89 was enacted, amending Art. 7, § 3-207(a) of the Anne Arundel County Code to read as follows:

Each appointed official who retires on or after the normal retirement date who has been credited with five years of service is entitled to receive, commencing on the first day of the month coinciding with or next following the date of retirement, an annual pension equal to the greater of:

(1) $4,800; or (2) 2½ of the final earnings for each year of credited service which is not in excess of 20 years, plus an additional 2% of final earnings for each year of credited service after 20 years; but the maximum pension may not exceed 70% of final earnings.

It also amended § 3-101(i) of the County Code, defining the "normal retirement age" as "the first day of the month after the earlier of a participant's 50th birthday or the date as of which a participant completes 16 years of service." The bill became effective on July 1, 1989, and applied only to those officials who retired from county employment subsequent to July 1, 1990. The asserted reason for these generous amendments to the A & E Plan was to provide an incentive for high level executive department appointees to remain in service during the "lameduck" final term of the then County Executive. All the plaintiffs to this action are retired except plaintiff Ranking, who terminated her employment with the County (but did not retire) after approximately seven years of service.

C. Legislative Reductions in Benefits Sponsored by the New County Executive

In 1990, a new County Executive was elected. Not long after the new County Executive assumed office, and throughout the early 1990's, it became increasingly apparent to the County that the A & E Plan was seriously underfunded.³ In response, several bills were enacted which prospectively eliminated or reduced some A & E Plan benefits.⁴ In addition, in July 1994, County Council Bill No. 61-94 was enacted. Bill No. 61-94, effective September 1994, applied retroactively to all participants who had retired since December 19, 1987. It provided that the participant's surviving spouse was ineligible for death benefits unless the participant (1) had been at least 50 years old at retirement, (2) had at least 12 years of service, and (3) had been married to the surviving spouse for at least one year. In addition, the bill changed the death benefit payable to a surviving spouse and minor children to the greater of $120 or 50% of the retiree's accrued pension benefit.⁵

On November 15, 1994, County Council Bill No. 74-95 was enacted, effective, in part, on December 30, 1995, and, in part, on January 1, 1996. Bill No. 74-95 amended County Code §§ 3-101 and 3-207, retroactively repealing No. Bill 36-89. In effect, for persons in plaintiffs' status, it increased the retirement age to age 60, and it decreased the benefits formula from 2½% to 2%. Had the state court not issued its injunctions and allowed Bill No. 74-95 to go into effect as planned, the result would have been a substantial reduction in the current monthly payments to all of the retired plaintiffs.

IV. ANALYSIS OF CONTRACT CLAUSE CLAIM

Article I, § 10, cl. 1 of the U.S. Constitution states: "No State shall ... pass any Law impairing the Obligation of Contracts...." This clause is commonly known as the Contract Clause. It has been held that the clause does not work an absolute prohibition on the rights of States to impair contractual obligations. Nonetheless, the State's right to do so is limited to proper exercises of its police power. The Supreme Court has set forth a framework for analyzing claims of state impairment with both public and private contracts.

In United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977), the Court held that a New Jersey statute violated the Contract Clause by effecting a retroactive repeal of...