Council 31 of the Am. Fed'n of State v. Quinn

• Decision Date: 17 May 2012
• Docket Number: No. 11–3111.,11–3111.
• Citation: 680 F.3d 875
• Parties: COUNCIL 31 OF THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, AFL–CIO, Plaintiff–Appellant, v. Pat QUINN, Governor of the State of Illinois, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

680 F.3d 875

COUNCIL 31 OF THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, AFL–CIO, Plaintiff–Appellant,

v.Pat QUINN, Governor of the State of Illinois, et al., Defendants–Appellees.

No. 11–3111.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 24, 2012.

Decided May 17, 2012.

Stephen A. Yokich (argued), Attorney, Cornfield & Feldman, Chicago, IL, for Plaintiff–Appellant.

Brett E. Legner (argued), Attorney, Office of the Attorney General, Civil Appeals Division, Chicago, IL, for Defendants–Appellees.

Before MANION and ROVNER, Circuit Judges, and COLEMAN, District Judge.^*

MANION, Circuit Judge.

The State of Illinois, facing a “significant and unprecedented fiscal deficit,” has brokered a series of compensation agreements with Council 31 of the American Federation of State, County, and Municipal Employees, AFL–CIO, the exclusive bargaining representative for 40,000 state employees. In the agreements, the parties trimmed several hundred million dollars in fiscal years 2011 and 2012 by deferring employees' general wage increases and instituting a voluntary furlough program. Despite these cost-saving measures, the fiscal year 2012 budget did not contain sufficient appropriations for the deferred wage increases that were due to employees of 14 state agencies. Accordingly, the State instituted a pay freeze for those employees, thereby repudiating the agreements that the parties had previously reached. Council 31 then brought this suit on behalf of itself and the affected employees, alleging that the State's actions violated the Contracts Clause and the Equal Protection Clause of the U.S. Constitution, and resulted in several violations of state law. Council 31 sought a preliminary injunction that would order the State to pay the wage increases as they came due, and the State filed a motion to dismiss all claims. The district court denied Council 31's motion for a preliminary injunction and granted the State's motion to dismiss. Council 31 has appealed and we now affirm.

I.

Council 31 is the longtime exclusive bargaining representative for more than 40,000 Illinois state employees in approximately 51 different departments and agencies. Council 31's latest series of collective bargaining agreements with the State began on September 5, 2008, and runs through June 20, 2012. The collective bargaining agreements laid out the wages for affected employees in the form of base pay rates, annual increases, step increases, and longevity increases. The agreements also contained a general wage increase schedule that set a 1.5% increase effective January 1, 2009, a 2.5% increase effective July 1, 2009, a 2% increase effective January 1, 2010, a 2% increase effective July 1, 2010, a 2% increase effective January 1, 2011, a 4% increase effective July 1, 2011, and a 1.25% increase effective January 1, 2012. ¹

Facing the prospect of serious budgetary shortfalls for fiscal years 2011 and 2012, representatives of the State and Council 31 met in January 2010 to discuss potential cost-saving measures. The parties produced a mediated resolution which, in relevant part, limited the number of layoffs the State could make in fiscal year 2011 in exchange for a deferral of the general wage increases due to the employees. Specifically, the parties agreed to defer one-half of the 2% general wage increase due to employees on July 1, 2010 to June 1, 2011, and also one-half of the 2% general wage increase due on January 1, 2011 to June 1, 2011. This resolution saved the State more than $300 million in fiscal year 2011.

The parties met again in the fall of 2010 to resolve concerns about the impending budgetary shortfalls for fiscal year 2012. That meeting resulted in a cost-savings agreement that specified a goal of $100 million in total savings; the parties identified $50 million in cost-savings measures and promised to continue to seek further compromises that would save an additional $50 million. The biggest cost-savings measure laid out in the agreement was the deferral of half of the 4% general wage increase due to employees on July 1, 2011 to February 1, 2012. In exchange, the State agreed not to lay off any employees or close any facilities during fiscal year 2012.

After this agreement, Governor Pat Quinn submitted a proposed budget for fiscal year 2012 to the State General Assembly that “sought to fully fund all collective bargaining contracts.” The budget that passed the General Assembly, however, was markedly different: that version of the budget did not contain the necessary appropriation authority to implement the annual general wage increases, step increases, and longevity increases due under the collective bargaining agreements to the employees of 14 state agencies.² After cutting an additional $376 million from the budget by line-item veto, Governor Quinn approved a total budget of $33 billion on June 30, 2011. Notably, Governor Quinn's cuts made via line-item veto did not affect any appropriations for the employees' pay increases; rather, the budget passed by the General Assembly lacked the necessary appropriations for the pay increases. A memorandum from the State's Department of Central Management Services Director Malcolm Weems that was issued on July 1, 2011, the day after the budget became law, emphasized that the funding shortfall was caused by the legislature, not the Governor: “[T]he budget that was passed by the General Assembly and sent to the Governor DOES NOT contain appropriation authority to implement cost of living adjustments, longevity enhancements or step increases for employees coveredby a collective bargaining agreement in the [14 affected agencies].”

In the same July 1 memorandum, Director Weems relayed the bad news that the State was instituting a pay freeze on the employees of the 14 agencies: “[D]ue to the absence of sufficient appropriations by the General Assembly, the above listed agencies cannot implement the FY12 increases.” This directive was subsequently enacted in a set of Emergency Rules that amended the State's pay plan. 35 Ill. Reg. 11,657 (July 15, 2011). Those Emergency Rules were later made permanent and took effect on December 6, 2011. 35 Ill. Reg. 20,144 (Dec. 23, 2011). (Because there is no substantive difference between the Emergency and Permanent Rules, we will simply refer to them as the “Rules.”)

The pay freeze affected approximately 30,000 Council 31–represented employees across the 14 agencies and saved the State about $75 million. Council 31 argued that there were several viable alternatives that the State could have pursued to make up the lack of appropriations for the 14 agencies. Those alternatives included allocating some of the “hundreds of millions of dollars” in unexpended appropriations from fiscal year 2011, slowing the rate at which the State fills positions that become vacant during fiscal year 2012 or even instituting a hiring freeze on such positions, transferring funds from other appropriations items for the affected agencies, seeking legislative authority to use some of the savings from the governor's line-item vetoes, and seeking supplemental appropriations from the General Assembly.

But the State did not pursue any of those alternatives. So, on July 8, 2011, Council 31, on behalf of itself and its affected members, filed this suit against the State, Governor Quinn, and Director Weems. Less than two weeks later, Council 31 filed an amended complaint that listed five claims. Counts I and II, brought under 42 U.S.C. § 1983, alleged that Governor Quinn and Director Weems violated the Contracts Clause and Equal Protection Clause of the U.S. Constitution, and Counts III, IV, and V alleged state statutory and constitutional claims.

On August 9, 2011, the defendants moved to dismiss this suit for failure to state a claim as well as under the Eleventh Amendment's sovereign immunity protection. On August 19, 2011, Council 31 filed a motion for a preliminary injunction to enforce its Contracts–Clause claim by enjoining the Rules and thus requiring the State to pay out wage increases as they came due. After supplemental briefing and an evidentiary hearing, the district court granted the defendants' motion to dismiss all claims and denied Council 31's request for preliminary injunctive relief. Specifically, the district court noted that the Eleventh Amendment barred Council 31's state-law claims against all defendants, and that Council 31 could not bring its § 1983 claims against the State; rather, such claims could be asserted only against Governor Quinn and Director Weems in their official capacities. The district court further held that the Eleventh Amendment barred Council 31's Contracts–Clause claim against Governor Quinn and Director Weems and, additionally, that the amended complaint failed to adequately state either a Contracts–Clause claim or an Equal Protection claim.

At the same time that this suit was unfolding, the parties engaged in arbitration. On July 19, 2011, the arbitrator found that the pay freeze violated the terms of the collective bargaining agreements and ordered the State immediately to pay the 2% wage increase that was due on July 1, 2011 (recall, the collective bargaining agreement originally provided for a 4% increase, but the parties had negotiated a deferral of half of that amount to a later date). The arbitrator further ordered the State to continue to pay the increased wages, and to make whole those employees who did not receive the increased wages due on July 1. The State then filed suit in the Circuit Court of Cook County to vacate the arbitrator's award; Council 31 counterclaimed for enforcement of the award. State v. Am. Fed'n of State & Mun. Emps., Council 31, No. 2011–CH–25352 (Cook Cnty.Cir.Ct.Chancery Div. Mar. 15, 2012) (http:// www. cookcounty clerkofcourt. org). ³ This state-court case remains pending during Council 31's present appeal taken from the district court.

II.

The two claims at issue...