Baker v. Baltimore County, Md.

• Decision Date: 26 March 1980
• Docket Number: Civ. No. K-76-1016.
• Citation: 487 F. Supp. 461
• Court: U.S. District Court — District of Maryland
• Parties: George BAKER, on behalf of himself and all others similarly situated; Ray Fredericks v. BALTIMORE COUNTY, MARYLAND, a body corporate and a body politic.

487 F. Supp. 461

George BAKER, on behalf of himself and all others similarly situated; Ray Fredericks

v.

BALTIMORE COUNTY, MARYLAND, a body corporate and a body politic.

Civ. No. K-76-1016.

United States District Court, D. Maryland.

March 26, 1980.

David S. Harris, Baltimore, Md., for plaintiffs.

Leonard S. Jacobson, County Sol. for Baltimore County, and John A. Austin, Asst. County Sol. for Baltimore County, Towson, Md., for defendant.

FRANK A. KAUFMAN, District Judge.

In this class action plaintiffs, present or former Baltimore County police officers, seek injunctive and declaratory relief¹ from the continuing enforcement of Bill No. 138, which was enacted in 1959 by the County Council of Baltimore County and which is now codified as Title 20, Article II of the Baltimore County Code, 1968 Edition. Plaintiffs became members of the Police Department of Baltimore County on October 12, 1959. On October 15, 1959, the County Council passed Bill No. 138 amending the retirement plan applicable to County policemen. That ordinance was by its terms made retroactive to October 1, 1959, and thus altered the retirement plan applicable to plaintiffs, all of whom had entered into service on October 12, 1959. Plaintiffs contend that, by the passage of Bill No. 138, the County impaired the obligation of its contract with plaintiffs in violation of the Contract Clause of the United States Constitution.

Plaintiffs sue as individuals and as class representatives. Two classes have been certified pursuant to Federal Civil Rule 23(b)(2)²: 1) all police officers who became permanent³ employees of the Baltimore County Police Department on October 12, 1959 and who are presently on active status, and 2) all police officers who became permanent employees of the Baltimore County Police Department on October 12, 1959, and who have been placed on early retirement because of medical disability.⁴

The County has filed a motion to dismiss the within complaint. However, because the record contains affidavits and stipulations, in addition to pleadings, that motion, pursuant to Federal Civil Rules 12 and 56, is treated herein as a motion for summary judgment. The material and relevant facts, which are not in dispute, are as follows:

Facts

1. All of the members of the two plaintiff classes in this case became employees of the Baltimore County Police Department on October 12, 1959.

2. Bill No. 138 was passed by the County Council of Baltimore County on October 8, 1959, was presented to the County Executive on October 9, 1959, and is assumed, for purposes of this opinion, to have become effective on October 15, 1959.⁵

3. Prior to the enactment of Bill No. 138, policemen had been members of the PSF.⁶ All who had been policemen prior to October 1, 1959 were given by Bill No. 138 the option of choosing coverage under either the PSF or a new fund established by that Bill, namely, the ERS. All policemen hired on or after October 1, 1959 were required by Bill No. 138 to enroll in the ERS.

4. The two retirement plans, PSF and ERS, differ in several respects, including, inter alia, the following:

a. The PSF is unfunded. The ERS is funded.

b. The PSF is supported by employee contributions and by subsidy from the General Fund of Baltimore County. All of its funds are paid out at the end of each fiscal year. The maximum contribution by a policeman is 3% of his salary.⁷ The ERS is supported by employee contributions which range from 4½% to 5½% of the salary of members. The exact amount which each individual employee is required to contribute is actuarially determined. Since the ERS is funded, it does not expend its entire resources at the end of each fiscal year.

c. Under the PSF, if an employee retires before he has completed 10 years of active service, his contribution to the PSF is not refunded to him. That is because the PSF is unfunded, and thus consumes all of its assets at the end of each fiscal year. Under the ERS, an employee who withdraws from County employment prior to becoming eligible for retirement benefits receives a refund consisting of the total amount of his contributions plus interest.

d. A policeman covered by the PSF may retire after 20 years of active service with the County on 50% of the salary of an active member of the rank at which that employee retired. Under the ERS, a member may retire at age 60, or after 30 years of service, whichever happens first, on a pension to be calculated under a formula set forth in the ordinance. A member of the ERS who retires early receives a pension consisting of the actuarial equivalent of the contributions he has made to the retirement system, or may defer his pension until he is 60.

e. Under the PSF, the monthly retirement benefits for a typical patrolman retiring on January 1, 1980 in a non-disability status, who is not entitled to receive any credit for military service, who has been a policeman continuously since October 1, 1959, who elected the option that would pay the maximum monthly benefit to the retiree, and who was at least 50 years of age upon retirement, would be $723.96 per month. Under the ERS, the same retiree would receive $548.32 per month.

f. A PSF member retired because of a medical disability received in the line of duty may receive no more than 50% of the salary of an active officer of like rank. An ERS member may receive as much as 66 2/3 % of his average annual compensation (not tied to active salary) plus an annuity tied to the sum of his contributions.

5. None of the members of either plaintiff subclass has ever been enrolled in the PSF. When plaintiffs became full-time employees on October 12, 1959, they were enrolled in the ERS.

6. While all of the members of the two plaintiff classes knew that the retirement plan in which they were being enrolled was not the PSF, and that it differed from the PSF, plaintiffs state — and in the present summary judgment context of this case, it is assumed — that they did not know what the precise differences were.⁸ Most or all plaintiffs were sent a letter dated September 29, 1959 indicating that changes in the retirement plan were contemplated. Further, most or all plaintiffs, when hired, filled out a Designation of Beneficiary form which on its face indicated that the person filling it out had been enrolled in the ERS and not the PSF.

7. At the time the pension plan was altered, none of the plaintiffs had fulfilled the requirements for retirement under the PSF.

Jurisdiction

Plaintiffs allege that federal question jurisdiction is present in this case under 28 U.S.C. § 1331(a).⁹ The jurisdictional amount requirement is met. So is the "arising under" requirement of section 1331. Article I, section 10, clause 1 of the United States Constitution, the Contract Clause, provides: "No State shall pass any * * * Law impairing the Obligation of Contracts." Plaintiffs contend that there was a contract formed on October 12, 1959 between the class of police officers hired on October 12, 1959 and the County pursuant to which the County agreed that it would place those officers in the PSF, and that the County would pay those officers the benefits set forth in the PSF as of October 12, 1959. Plaintiffs contend further that the action of the County in legislatively altering the pension plan on October 15, 1959, in making those alterations retroactive to October 1, 1959 and thus applicable to the class hired on October 12, 1959, and in enrolling the class hired on October 12, 1959 in the ERS instead of in the PSF, impaired plaintiffs' contract rights in the pension benefits to which they claim entitlement, i.e., the benefits they would have received had they been enrolled in the PSF.

"For a cause of action to `arise under' federal law, and thus to satisfy the requirements of § 1331, a federal right, privilege or immunity must be an essential element of the plaintiff's cause of action." McCorkle v. First Pennsylvania Banking and Trust Co., 459 F.2d 243, 250 (4th Cir. 1972). "A federal cause of action is stated under the contract clause of the United States Constitution when one alleges that he or she has a contract with the state, which the state, through its legislative authority, has attempted to impair. Citation omitted. Mere refusal to perform a contract by a state does not raise a constitutional issue, but when a state uses its legislative authority to impair a contract a constitutional claim is stated. Citation omitted." E & E Hauling, Inc. v. Forest Preserve District of DuPage County, 613 F.2d 675, 678 (7th Cir. 1980). In this case, plaintiffs have alleged that there was a contract between themselves and the County formed on October 12, 1959, and that by legislation of October 15, 1959 the County sought to alter that contract. Thus, subject matter jurisdiction exists in this case under section 1331.¹⁰

Neither Berry v. City of Portsmouth, 562 F.2d 307 (4th Cir. 1977) (per curiam), nor Heath v. City of Fairfax, 542 F.2d 1236 (4th Cir. 1976) (per curiam), leads to any different conclusion herein. In Berry, the district court had dismissed the action, without prejudice, for lack of a substantial federal question. The Fourth Circuit affirmed. Plaintiffs in that case had challenged an amendment to a Portsmouth City ordinance. Prior to its amendment, the ordinance by its own original terms had allowed the city to reduce the disability pension of an individual who, after he began to receive such benefits and before his normal retirement date, either engaged in gainful employment or was capable of so doing. That provision in the ordinance had seemingly not been enforced. Id. at 310-11. The amendment, passed in 1975, did not change the power of the Board to reduce disability payments, but only instituted a requirement that individuals on disability pensions submit certain information on a given timetable to the Board of Trustees of the Fire and Police Retirement System. Presumably, the fact that the amendment was passed indicated...