Calabro v. City of Omaha

• Decision Date: 12 May 1995
• Docket Number: No. S-93-566,S-93-566
• Citation: 247 Neb. 955,531 N.W.2d 541
• Parties: Tom CALABRO et al., Appellees, v. CITY OF OMAHA, a Municipal Corporation, Appellant.
• Court: Nebraska Supreme Court

Page 541

531 N.W.2d 541

247 Neb. 955

Tom CALABRO et al., Appellees, v. CITY OF OMAHA, a Municipal Corporation, Appellant.

No. S-93-566.

Supreme Court of Nebraska.

May 12, 1995.

Syllabus by the Court

1. Summary Judgment. Summary judgment is proper only when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in a light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence.

3. Demurrer: Pleadings. In considering a demurrer, a court must assume that the pleaded facts, as distinguished from legal conclusions, are true as alleged and must give the pleading the benefit of any reasonable inference from the facts alleged, but cannot assume the existence of facts not alleged, make factual findings to aid the pleading, or consider evidence which might be adduced at trial.

4. Municipal Corporations: Public Officers and Employees: Ordinances: Pensions. A cost-of-living supplemental benefit provided to a city employee constitutes a pension despite the fact that it does not comply with the requirements of a city's home rule charter, when the ordinances enacting the supplemental benefit tie eligibility to receive the supplemental benefit with eligibility to receive regular pension payments, and nothing in the home rule charter or enacting ordinances puts the employee on notice that the supplemental benefit is a mere gratuity from the city.

5. Pensions: Words and Phrases. Ordinarily, "vesting" refers to a provision in a retirement plan whereby the member's right to a benefit becomes effective upon fulfillment of specified qualifying conditions, such as service for a certain period of time, which right is not forfeited by separation from service prior to the prescribed age for retirement.

6. Contracts: Pensions: Words and Phrases. "Vesting," in a legal sense, refers to a contractual right to and interest in a pension that may be upheld at law.

7. Constitutional Law: Public Officers and Employees: Pensions: Legislature. A public employee's constitutionally protected right in his or her pension vests upon the acceptance and commencement of employment, subject to reasonable or equitable unilateral changes by the Legislature.

8. Constitutional Law: Contracts: Public Officers and Employees. In order to determine whether a governmental entity unconstitutionally interfered with its employees' contractual rights under article I, § 10, clause 1, of the U.S. Constitution, one must engage in a three-part analysis. One must determine (1) whether there has been impairment of a contract; (2) whether the governmental entity's actions, in fact, operated as a substantial impairment of the contractual relationship; and, if so, (3) whether that impairment is nonetheless a permissible, legitimate exercise of the governmental entity's sovereign powers.

9. Constitutional Law: Municipal Corporations: Contracts. In order for a city's action to pass constitutional muster under the third part of the test for article I, § 10, clause 1, of the U.S. Constitution, it must be both reasonable and necessary to serve an important public interest.

10. Constitutional Law: Municipal Corporations: Contracts. The inquiry into the "necessity" component of the Contract Clause test can be considered in two levels: (1) whether less drastic modification of contractual obligations would have been sufficient to accomplish the city's purposes and (2) whether, without modifying its obligations at all, the city could have adopted alternative means of achieving its goals.

11. Municipal Corporations: Contracts: Public Officers and Employees: Pensions. A municipality may make reasonable changes or modifications in pension plans in which employees hold vested contract rights, but changes which result in disadvantages to employees must be accompanied by offsetting or counterbalancing advantages.

12. Commission of Industrial Relations: Administrative Law. The Commission of Industrial Relations is not a court and is in fact an administrative body performing a legislative function.

13. Constitutional Law: Courts. It is a settled principle of constitutional law that the construction and interpretation of the Constitution is a judicial function.

14. Constitutional Law. The Nebraska Constitution prohibits one branch of government from encroaching on the duties and prerogatives of the others or from improperly delegating its own duties and prerogatives.

15. Declaratory Judgment: Claims: Notice. A plaintiff's failure to file a notice of claim under Neb.Rev.Stat. § 14-804 (Reissue 1991) is not a ground for dismissing a declaratory judgment action under Neb.Rev. § 25-21,150 (Reissue 1989) when the plaintiff makes no claim for immediate money damages.

16. Civil Rights: Claims: Notice. A plaintiff's failure to file a notice of claim under Neb.Rev.Stat. § 14-804 (Reissue 1991) cannot defeat the plaintiff's civil rights claim under 42 U.S.C. § 1983 (1988).

17. Parties: Pleadings: Words and Phrases. A necessary party is one who may be compelled to respond to the prayer of the plaintiff's petition, and where there is nothing such a one is called upon to do, or can be compelled to do as a duty, one is not a necessary party.

18. Parties: Words and Phrases. An indispensable or necessary party to a suit is one who has an interest in the controversy to an extent that such party's absence from the proceedings prevents a court from making a final determination concerning the controversy without affecting such party's interest.

Herbert M. Fitle, Omaha City Atty., Kent N. Whinnery, and Wendy E. Hahn, Omaha, for appellant.

John P. Fahey and Robert W. Kortus, of Broom, Johnson, Fahey & Clarkson, Omaha, for appellees.

WHITE, C.J., CAPORALE, FAHRNBRUCH, LANPHIER, WRIGHT, and CONNOLLY, JJ.

CONNOLLY, Justice.

Certain current and retired firefighters (the plaintiffs) filed this class action seeking a declaration of their rights under a supplemental cost-of-living benefit provided by the City of Omaha, which the city eliminated in 1989. The plaintiffs' claims raise two threshold issues: (1) Did the supplemental cost of living benefit constitute a pension? and, if so, (2) When did the plaintiffs' constitutionally protected contract right in the pension vest? The district court for Douglas County granted the plaintiffs' motion for summary judgment, holding that the city violated the federal constitutional rights of the represented class when it terminated the plaintiffs' supplemental cost-of-living benefit. We affirm because the supplemental benefit constituted a pension in which the plaintiffs obtained a vested, constitutionally protected contractual right when they accepted and commenced employment with the city.

I. FACTUAL BACKGROUND

1. HOME RULE CHARTER

The Omaha Home Rule Charter of 1956 (Home Rule Charter), § 6.09, granted the City of Omaha the power to enact a pension and retirement system. Section 6.09, in relevant part, stated:

The Council shall have authority to establish a pension and retirement system or systems for any or all groups of officers and employes in the service of the city. Each pension and retirement system shall be financed on an actuarially funded basis, with the city and the employe making substantially equal contributions.... Moneys required for pension administration ... shall be provided by appropriation from the general fund.... The provisions of pension ordinances shall require actuarial evaluations at least once every five years, which shall serve as the basis for the determination of contribution rates and shall also provide for the maintenance of adequate actuarial reserves. Officers and employes of the city, except elected officials shall become members of the system as a condition of employment.... Provisions for vesting may be included. The legal right to a pension or benefit for the members and beneficiaries entitled thereto shall become effective when such pensions or benefits become payable, and the same shall not be impaired, abrogated, or diminished thereafter.

Section 6.10 of the Home Rule Charter required that a board of trustees be created by city ordinance and that title to the trust would vest in that board.

2. 1961 PENSION PLAN

Pursuant to the above provisions in the Home Rule Charter, the City of Omaha established the Police and Firemen's Retirement System (1961 pension plan) on July 1, 1961. The 1961 pension plan included provisions for vesting based on either 20 or 25 years of service or disability. Additionally, the 1961 pension plan conformed with the requirements of the Home Rule Charter by providing for financing on an actuarial basis, funding based on equal contributions by the city and the employees, an actuarial evaluation at least every 5 years, funding from an independent trust fund, and the creation of a board of trustees.

3. SUPPLEMENTAL BENEFIT PLAN

On August 21, 1973, the City of Omaha enacted a system of "Supplemental Retirement Benefits" (supplemental benefit plan). The supplemental benefit plan provided for the payment of cost-of-living supplemental benefits in recognition of the adverse effects that retirees and their dependents were experiencing due to high inflation. In order to receive the cost-of-living supplemental benefit, an employee had to be eligible to receive benefits under the provisions of the 1961 pension plan. The supplemental benefit plan called for an increase in pension payments equal to a rate representing the percentage increase in cost of living as reflected in the Consumer Price Index. The ordinance enacting the supplemental benefit plan provided...