Bd. of Trustees of N.H. Judicial Ret. Plan v. Sec'y of State

• Decision Date: 27 October 2010
• Docket Number: No. 2009-621.,2009-621.
• Citation: 7 A.3d 1166,161 N.H. 49
• Parties: BOARD OF TRUSTEES OF the NEW HAMPSHIRE JUDICIAL RETIREMENT PLAN and another v. SECRETARY OF STATE.
• Court: New Hampshire Supreme Court

7 A.3d 1166

161 N.H. 49

BOARD OF TRUSTEES OF the NEW HAMPSHIRE JUDICIAL RETIREMENT PLAN and another

v.SECRETARY OF STATE.

No. 2009-621.

Supreme Court of New Hampshire.

Argued: April 22, 2010.

Opinion Issued: Oct. 27, 2010.

Douglas, Leonard & Garvey, P.C., of Concord (Charles G. Douglas, III on the brief) and David M. Howe, of Concord, by brief, for the plaintiff.

Michael A. Delaney, attorney general (Richard W. Head, associate attorney general, on the brief and orally), for the defendant.

Getman, Schulthess & Steere, P.A., of Bedford (Andrew R. Schulman on the brief and orally), for the intervenor, New Hampshire Retirement System.

DUGGAN, J.

The defendant, the Secretary of State (State), appeals an order of the Superior Court ( Nicolosi, J.) enjoining the enforcement of the Sudan Divestment Act. We reverse and remand.

The record reflects the following facts. The plaintiff, New Hampshire Judicial RetirementPlan (Judicial Plan), and the intervenor, New Hampshire Retirement System (NHRS) (retirement systems, collectively), are "defined pension benefit plans," which invest and manage funds held by the State pursuant to RSA chapter 100-C (Supp.2009) and RSA chapter 100-A (2001 & Supp.2009). Each eligible retiree receives a specified benefit set forth by statute. The Judicial Plan is a defined benefit pension trust for all state court judges, see RSA 100-C:2, funded by contributions from its members and the State, and earnings on investments. See RSA 100-C:13. The NHRS is a defined benefit pension trust for state and political subdivision employees. See RSA 100-A:2, :3. It is funded exclusively through member and employer contributions and investment income.

RSA 100-A:16 (Supp. 2009). The NHRS trustees have the authority to set the trust's investment strategy, but that authority is accompanied by a strict fiduciary responsibility. See RSA 100-A:15, I-a.

In the early 1980s, the legislature borrowed $5,000,000 from the NHRS to finance unrelated state projects. The legislature also set contribution rates for state employees below what was determined by the NHRS trustees to be actuarially required. In response, the 1984 Constitutional Convention proposed Article 36-a to Part I of the New Hampshire Constitution, which the state's voters later approved by a margin of 288,994 to 48,690. Part I, Article 36-a provides:

The employer contributions certified as payable to the New Hampshire retirement system or any successor system to fund the system's liabilities, as shall be determined by sound actuarial valuation and practice, independent of the executive office, shall be appropriated each fiscal year to the same extent as is certified. All of the assets and proceeds, and income therefrom, of the New Hampshire retirement system and of any and all other retirement systems for public officers and employees operated by the state or by any of its political subdivisions, and of any successor system, and all contributions and payments made to any such system to provide for retirement and related benefits shall be held, invested or disbursed as in trust for the exclusive purpose of providing for such benefits and shall not be encumbered for, or diverted to, any other purposes.

Since 2004, the United States government has recognized that the government of Sudan has engaged in genocide against the non-Arab population in the Darfur region of that country. In 2007, Congress enacted the Sudan Accountability and Divestment Act of 2007 (SADA) "[t]o authorize State and local governments to divest assets in companies that conduct business operations in Sudan." Pub.L. No. 110-174, § 3(b), 121 Stat. 2516, 2518 (2007). Under SADA, a state or local government may divest its assets or prohibit investment of its assets in companies engaged in business with Sudan. Id.

In 2008, the New Hampshire General Court, pursuant to this Congressional authorization, enacted RSA chapter 100-D (Supp.2009), the Sudan Divestment Act (the Act). In enacting the legislation, the General Court made numerous legislative findings, relying upon federal government findings and reports. See Laws 2008, 364:1. These findings included that "genocide has occurred and may still be occurring in Darfur," the government of Sudan and its Janjaweed allies had killed an estimated 300,000 to 400,000 people and displaced more than 2,000,000 people from their homesbetween 2003-2006, and that "a company's association with sponsors of terrorism and human rights abuses, nomatter how large or small ... can negatively affect the value of an investment." Id. Based upon these findings, the General Court concluded that the state's financial resources should not be used to provide support for the Sudanese government, and therefore restricted publicly funded retirement systems from investing public funds or maintaining investments in certain "scrutinized companies" connected with that government. RSA ch. 100-D (Supp.2009).

The Act, which became effective on July 1, 2008, imposes several requirements upon the retirement systems. First, it requires each retirement system to "make its best efforts to identify all scrutinized companies in which the public fund has direct or indirect holdings or could possibly have such holdings in the future." RSA 100-D:2, I. The Act defines "scrutinized companies" as companies that engage in business operations or contracts with the Sudanese government, that are complicit in the Darfur genocide, or that supply military equipment within Sudan. RSA 100-D:1, XV. Second, the Act requires the trustees to "engage" the "scrutinized companies," inform them of the Act, and notify the companies that the retirement systems will divest their holdings unless the companies cease active business operations in Sudan. RSA 100-D:3, II. Third, the system trustees must implement a divestment process if, after ninety days following the first "engagement" with a "scrutinized company," the company continues to have "scrutinized active business operations." RSA 100-D:3, III(a). Within nine months of a company's identification as "scrutinized," at least fifty percent of the fund's holdings in the company must be divested. RSA 100-D:3, III(a)(1). All of the fund's holdings must be divested within fifteen months. RSA 100-D:3, III(a)(2). Finally, the trustees are prohibited from acquiring securities of "scrutinized companies." RSA 100-D:3, IV. "[I]ndirect holdings in actively managed investment funds" are exempted from the divestment requirement. RSA 100-D:3, VI. Additionally, the Act contains a "safety valve" provision permitting the trustees to cease compliance with the Act if "clear and convincing evidence" shows that divestment is too costly, resulting in at least a half percent diminution of trust assets. RSA 100-D:7.

In September 2008, the Board of Trustees of the Judicial Plan filed a petition for declaratory judgment seeking a ruling that the Act was unconstitutional based upon Article 36-a. The NHRS intervened in November 2008 and moved for preliminary injunctive relief prohibiting enforcement of the Act. In granting the motion, the trial court found that the NHRS had demonstrated a substantial likelihood of success on its argument that Part I, Article 36-a rendered the Act unconstitutional. In July2009, the trial court approved the parties' stipulation for entry of the injunction as a final order. See Super. Ct. R. 161(b)(2). This appeal followed.

We hold that the Act is constitutional based upon: (1) a literal analysis of the text of Part I, Article 36-a of the New Hampshire Constitution; (2) the clear understanding of Part I, Article 36-a by the 1984 Constitutional Convention delegates as evidenced by their statements prior to overwhelmingly approving the amendment; and (3) the clear language of the ballot question describing the scope of Part I, Article 36-a. Accordingly, we reverse.

The sole issue on appeal is whether the Act violates Part I, Article 36-a of the New Hampshire Constitution. "Whether or not a statute is constitutional is a question of law, which we review de novo." Akins v. Sec'y of State, 154 N.H. 67, 70, 904 A.2d 702 (2006). We also reviewthe trial court's interpretation of the constitution de novo. Linehan v. Rockingham County Comm'rs, 151 N.H. 276, 278, 855 A.2d 1271 (2004). "In reviewing a legislative act, we presume it to be constitutional and will not declare it invalid except upon inescapable grounds." Baines v. N.H. Senate President, 152 N.H. 124, 133, 876 A.2d 768 (2005) (quotation omitted). "In other words, we will not hold a statute to be unconstitutional unless a clear and substantial conflict exists between it and the constitution." Id. (quotation omitted). As such, a statute will not be construed to be unconstitutional when it is susceptible to a construction rendering it constitutional. White v. Lee, 124 N.H. 69, 77-78, 470 A.2d 849 (1983). When doubts exist as to the constitutionality of a statute, those doubts must be resolved in favor of its constitutionality. See Hynes v. Hale, 146 N.H. 533, 535, 776 A.2d 722 (2001); see also Irish v. Gimbel, 691 A.2d 664, 669 (Me.1997). Furthermore, "[t]he wisdom, effectiveness, and economic desirability of a statute is not for us to decide." Smith Insurance, Inc. v. Grievance Committee, 120 N.H. 856, 863, 424 A.2d 816 (1980).

When our inquiry requires us to interpret a provision of the constitution, we must look to its purpose and intent. Warburton v. Thomas, 136 N.H. 383, 386-87, 616 A.2d 495 (1992). The first resort is the natural significance of the words used by the framers. Lake County v. Rollins, 130 U.S. 662, 670, 9 S.Ct. 651, 32 L.Ed. 1060 (1889). "The simplest and most obvious interpretation of a constitution, if in itself sensible, is most likely to be that meant by the people in its adoption." Id. at 671, 9 S.Ct. 651.

"[W]e will give the words in question the meaning they must be presumed to have had to the electorate when the vote was cast." N.H. Munic. Trust Workers' Comp. Fund v. Flynn, Comm'r, 133...