Auto., Aero., Agri. Implement Wrks. v. Fortuno
| Decision Date | 05 August 2009 |
| Docket Number | Civil No. 09-1339 (JP). |
| Citation | 645 F.Supp.2d 56 |
| Parties | UNITED AUTOMOBILE, AEROSPACE, AGRICULTURAL IMPLEMENT WORKERS OF AMERICA INTERNATIONAL UNION, et al., Plaintiffs v. Luis A. FORTUÑO, et al., Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
Manuel A. Rodríguez-Banchs, Esq., Rio Piedras, PR, Miguel Simonet-Sierra, Esq., Simonet-Sierra Law Office, Guaynabo, PR, for Plaintiffs.
Idza Diaz-Rivera, Esq., Lavinia Aparicio-López, Esq., Dept. of Justice, Commonwealth of P.R., San Juan, PR, for Defendants.
Before the Court is a an amended motion requesting the entry of a preliminary injunction (No. 6) filed by Plaintiffs. Also before the Court is Defendants' opposition thereto (No. 29).1 Plaintiffs have filed the instant lawsuit pursuant to Article I, Section 10 (the "Contract Clause") and Article III, Section 2 of the United States Constitution; the Fifth, Ninth, Tenth, and Fourteenth Amendments to the United States Constitution; and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202; to enjoin Defendants from implementing phases one through three of Public Law No. 7 of March 9, 2009 ("Law 7"). For the reasons stated herein, Plaintiffs' motion for a preliminary injunction is hereby DENIED.
On February 25, 1998, the government of Puerto Rico enacted Public Law No. 45 ("Law 45"), P.R. Laws Ann. tit. 3, § 1451 et seq., authorizing public employees to organize into unions for the purpose of collective bargaining as to their salaries and other conditions of their employment. Law 45 requires employees to include in their collective bargaining agreements a provision to settle disputes through a grievance and arbitration procedure. Law 45 also created the Public Service Labor Relations Commission (the "PSLRC") and gave the PSLRC exclusive jurisdiction to adjudicate all labor disputes arising under the collective bargaining agreements. Section 5.1 of Law 45 created a statutory obligation for the government agencies to negotiate with the exclusive bargaining representative as to salaries and other conditions of employment for the public employees within the appropriate units.
Currently, more than fifty government agencies have in place collective bargaining agreements pursuant to Law 45. Plaintiffs allege that said agreements are contractual obligations that include economic and non-economic clauses, covering over fifty thousand government employees. Law 45 provides for a compulsory arbitration process in the case of an impasse in the negotiations between the exclusive bargaining representative and the government agency. Compulsory arbitration decisions involving economic issues are final and binding.
On March 9, 2009, Defendants signed Law 7, known as the "Law Declaring a Fiscal State of Emergency and Establishing Comprehensive Fiscal Stabilization Plan to Save Puerto Rico Credit." Law 7 states, inter alia, that Puerto Rico is in a fiscal state of emergency, and that the purpose of the law is to deal with the economic crisis through a three phase plan. The first phase, which was implemented upon the signing of Law 7, asked certain public employees to accept a permanent reduction of one day of work during every two-week period, and also asked for public employees to voluntarily resign from their employment.
The second phase, to be implemented if the first phase failed to achieve its objectives, involves the termination of public employees. Plaintiffs allege that up to 40,000 public employees could be laid off from their employment during this phase.
The third phase of Law 7, which was also effective the same day said law was enacted, temporarily repeals the government agencies' obligation to extend or negotiate expired contracts or contracts which expire within the next two years. Plaintiffs allege that by enacting Law 7, the government of Puerto Rico temporarily suspended any contractual obligations under valid and enforceable collective bargaining agreements.
Plaintiffs in this case are a number of labor unions, both at the national and local level, as well as public employees who are members of said unions. Plaintiffs allege that on its face and as it is applied, Law 7 deprives Plaintiffs of their rights under the Constitution of the United States and the Constitution of the Commonwealth of Puerto Rico, and also their statutory and contractual rights under Law 45. Specifically, Plaintiffs allege that it deprives public career employees of their property interest in their position as government employees.
The general purpose of injunctive relief is to prevent future acts or omissions of the non-movant that constitute violations of the law or harmful conduct. United States v. Oregon Med. Soc., 343 U.S. 326, 333, 72 S.Ct. 690, 96 L.Ed. 978 (1952). The United States Court of Appeals for the First Circuit has set forth a quadripartite test for trial courts to use when considering whether to grant preliminary injunction requests. Lanier Prof. Serv's, Inc. v. Ricci, 192 F.3d 1 (1st Cir. 1999); Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991). A preliminary injunction is appropriate if: (1) the petitioner has exhibited a likelihood of success on the merits; (2) the petitioner will suffer irreparable injury if the injunction is not granted; (3) such injury outweighs any harm which granting injunctive relief would inflict on the respondent; and (4) the public interest will not be adversely affected by granting the injunction. Narragansett Indian Tribe, 934 F.2d at 5; see, e.g., Aoude v. Mobil Oil Corp., 862 F.2d 890, 892 (1st Cir.1988); Hypertherm, Inc. v. Precision Products, Inc., 832 F.2d 697, 699 & n. 2 (1st Cir.1987). Whether to issue a preliminary injunction depends on balancing equities where the requisite showing for each of the four factors turns, in part, on the strength of the others. Concrete Machinery Co., Inc. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 611-13 (1st Cir.1988).
Given the number of parties involved, and that the issues raised in Plaintiffs' motion are mainly issues of law that do not require the need for an evidentiary hearing, the Court will decide Plaintiffs' motion based on the parties' briefs, in lieu of holding a hearing on the same. Although a hearing is often held prior to entry of a preliminary injunction, a hearing is not an indispensable requirement. Aoude v. Mobil Oil Corp., 862 F.2d at 893.
The Court will now consider Plaintiffs' motion for a preliminary injunction in light of the test set forth by the First Circuit, supra. Narragansett Indian Tribe, 934 F.2d at 5.
Plaintiffs first argue that they are likely to succeed on the merits of this lawsuit because Law 7 violates the Contract Clause of the United States Constitution. The Contract Clause protects individual and other legal entities who have freely entered into contracts from retroactive litigation impairing the obligations under those contracts. See U.S. Const. Art. I, § 10; see also Redondo Constr. Corp. v. Izquierdo, 550 F.Supp.2d 257, 265 (D.P.R. 2008). Specifically, it provides that "[n]o state shall . . . pass any . . . [l]aw impairing the [o]bligation of [c]ontracts . . ." See U.S. Const. Art. I, § 10.
For a plaintiff to prevail on a Contract Clause claim, a two part test applies. The first inquiry is whether "a change in state law has resulted in the substantial impairment of a contractual relationship." Parella v. Retirement Bd. of the Rhode Island Employees' Retirement System, 173 F.3d 46, 59 (1st Cir.1999) (internal quotation marks and citations omitted). This inquiry is broken down into three separate elements: (1) whether there is a contractual relationship, (2) whether a change in law impairs that contractual relationship, and (3) whether the impairment is substantial. Id. If these three elements are all answered affirmatively, the second inquiry is for the Court to determine "whether or not the impairment is nonetheless justified as reasonable and necessary to serve an important public purpose." Id. (quoting United States Trust Co. v. New Jersey, 431 U.S. 1, 25, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977)).
The First Circuit has held that the Contract Clause is applicable to contracts entered into by the state, but typically "state statutory enactments do not of their own force create a contract with those whom the statute benefits." Hoffman v. Warwick, 909 F.2d 608, 614 (1st Cir.1990). As to the second inquiry stated above, this Court has held that "when a state itself is a party to a contract, a court must scrutinize the state's asserted purpose with an extra measure of vigilance." Boneta v. Fernández, 950 F.Supp. 432, 433 (D.P.R.1996) (quoting McGrath v. Rhode Island Retirement Board, 88 F.3d 12, 16 (1st Cir.1996)). The First Circuit stated that:
[A] state must do more than mouth the vocabulary of the public weal in order to reach safe harbor; a vaguely worded or pretextual objective, or one that reasonably may be attained without substantially impairing the contract rights of private parties, will not serve to avoid the full impact of the Contracts Clause.
McGrath, 88 F.3d at 16. However, the First Circuit held that "even a state law that creates a substantial impairment does not transgress the Contract Clause as long as it is appropriate for, and necessary to, the accomplishment of a legitimate public purpose." Houlton Citizens' Coalition v. Town of Houlton, 175 F.3d 178, 191 (1st Cir.1999) (citations omitted).
Plaintiffs allege that the enactment of Law 7 by Defendants substantially impairs Defendants' contractual obligations with no direct relationship with the declared purpose of dealing with the fiscal crisis. Specifically, Plaintiffs allege that Law 7 impairs the contractual obligation to negotiate non-economic clauses included in many or all...
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