Crosby v. City of Gastonia

• Decision Date: 10 March 2011
• Docket Number: No. 10–1153.,10–1153.
• Citation: 635 F.3d 634
• Parties: Dennis CROSBY, on behalf of himself and all others similarly situated; Jackie Steven Postell; Danny Ray Cochran, Plaintiffs–Appellants,v.CITY OF GASTONIA, a municipality existing under the laws of the State of North Carolina, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

635 F.3d 634

Dennis CROSBY, on behalf of himself and all others similarly situated; Jackie Steven Postell; Danny Ray Cochran, Plaintiffs–Appellants,

v.CITY OF GASTONIA, a municipality existing under the laws of the State of North Carolina, Defendant–Appellee.

No. 10–1153.

United States Court of Appeals, Fourth Circuit.

Argued: Dec. 9, 2010.Decided: March 10, 2011.

ARGUED: Fred William DeVore, III, DeVore, Acton & Stafford, Charlotte, North Carolina, for Appellants. Benjamin Robert Sullivan, Jr., Parker, Poe, Adams & Bernstein, LLP, Charlotte, North Carolina, for Appellee. ON BRIEF: Anthony Fox, Susan W. Matthews, Parker, Poe, Adams & Bernstein, LLP, Charlotte, North Carolina, for Appellee.Before Sandra Day O'CONNOR, Associate Justice (Retired), Supreme Court of the United States, sitting by designation, and KING and DAVIS, Circuit Judges.Affirmed by published opinion. Judge KING wrote the opinion, in which Justice O'CONNOR and Judge DAVIS joined. Judge DAVIS wrote a separate concurring opinion.

OPINION

KING, Circuit Judge:

Retired officers of the Gastonia, North Carolina Police Department appeal the district court's judgment in favor of the City of Gastonia with respect to several claims arising from the failure of the Gastonia Policemen's Supplemental Pension Fund (the “Fund”). The judgment incorporated by reference the court's final Order, which dismissed the officers' federal claim and granted summary judgment to the City on a pair of related state law claims. See Crosby v. City of Gastonia, 682 F.Supp.2d 537 (W.D.N.C.2010). We affirm.

I.

A.

The Fund came into being in 1955 by virtue of an Act of the North Carolina General Assembly. The Act entrusted management of the Fund to a Board of Trustees, comprised of three City officials, but the City proper was accorded no authority to direct or control the Fund's administration.

The Act was amended a number of times over the years, the most pertinent occasion being in 1959 when the General Assembly added a funding proviso. According to the amended Act, a retired officer who had earned a vested interest in the Fund by meeting age and service requirements

shall receive monthly for the remainder of his life from the [Fund], so long as funds are available, an amount equal to two percent for each five years of service, or major portion thereof, not to exceed fourteen per cent of his average monthly salary for the three highest salaried years while employed by [the Department].

1959 N.C. Sess. Laws ch. 301, § 2 (emphasis added). All subsequent amendments to the Act retained the funding proviso.

The City adopted a parallel Ordinance in 1983. The Ordinance more or less faithfully tracked the language of the Act, although it omitted the 1959 funding proviso, an apparent oversight that remained uncorrected for eight years. The year 1983 also marked the debut of an “Employee Information Guide” distributed generally to City employees. The 1991 version of the Guide explained merely that “[a]dditional pension funds are available as a supplement to the Retirement System for both Police and Fire personnel. Details concerning these are available in the respective departments.” J.A. 243. ¹

In 1989, the City issued a pamphlet entitled “Career Opportunities in Law Enforcement with the City of Gastonia Police Department.” The pamphlet, made available for a time to potential police officers, notes simply that “[t]he Gastonia Police Department also has a supplemental pension fund which pays 2% for every five years of service.” J.A. 252. Finally, in 2001, the Police Department created a website that, for at least a while, contained a statement that “[t]he Police Department also has a supplemental pension fund for police officers.” J.A. 255.

B.

In the early 1990s, the Fund began to experience financial difficulties, and, in 1995, the Board of Trustees ordered an audit. The audit revealed that the Fund would fail without additional income. Since its inception, the Fund had been supported through myriad sources, including surcharges on criminal fines, vending machine proceeds, direct allocations from the City, and refunds of State contributions to another retirement fund made on behalf of City officers who subsequently left employment prior to qualifying for benefits.

Responding to the audit's findings, the Board invoked a provision of the Act authorizing contributions from active officers working toward retirement. In 1996, the active officers approved by referendum a proposal to deduct 2% of their salaries for deposit with the Fund. Unfortunately, the officers' efforts failed to restore the Fund to solvency. A follow-up audit in 2001 concluded that salary contributions from active officers would have to be increased from 2% to “as much as” 7.5% to avoid utter depletion of the Fund within six years. J.A. 595.

In a second referendum, conducted in April 2002, the active officers voted 154 to 4 to “authorize the Board of Trustees to seek legislation to stop the 2% salary deduction,” and “allow the Board of Trustees to ask for legislation amending [the Act] to allow for an eligible employee to receive their contributions from the [F]und prior to leaving employment.” J.A. 516. Shortly thereafter, the Board asked the City to adopt a resolution requesting the General Assembly to amend the Act to implement the wishes of the active officers as expressed through the referendum. The City complied, with the result that the Assembly amended the Act in October 2002 to foreclose eligibility for supplemental benefits to all new hires, cease further contributions to the Fund from active officers, and refund the entirety of those officers' prior contributions. See 2002 N.C. Sess. Laws. ch. 130, § 1. The Board carried out its statutory mandate to pay benefits to vested retirees until August 2005, when its assets were at last exhausted.

C.

In October 2006, three of the retirees brought suit in state court against the City, which elected to remove the matter to the Western District of North Carolina. The plaintiffs in that proceeding sought to certify a class comprised of all the vested retirees, but while their motion for certification was pending, another group of more than sixty retired officers filed a similar federal action. The district court ultimately declined to certify a class, but it permitted consolidation of the two cases, the upshot being that, on June 24, 2008, the court received an Amended Complaint filed on behalf of all the plaintiffs.

The Amended Complaint asserted four counts for relief: (1) that the City was liable pursuant to 42 U.S.C. § 1983 for, among other things, “[i]nterfering with [the plaintiffs'] contractual rights as guaranteed by the Contract Clause of the United States Constitution”; ² (2) that the City had also run afoul of various provisions of the North Carolina Constitution; (3) that the conduct of the City toward the plaintiffs gave rise to a contract as defined by North Carolina law, which the City had failed to perform; and (4) that the City had breached a state law fiduciary duty to the plaintiffs.

The discovery process refined the plaintiffs' claims and theories, limiting the issues before the district court on cross-motions for summary judgment. ³ With respect to the initial count of the Amended Complaint, the court ruled that the City's conduct toward the plaintiffs was not an impairment of obligation within the meaning of the Contracts Clause. See Crosby, 682 F.Supp.2d at 544. Absent such an impairment, the court reasoned, it lacked jurisdiction over the subject matter of the claim. See id. at 545.

The ruling on the jurisdictional issue left only state law claims, which a North Carolina court might thereafter have adjudicated. The district court chose instead to decide the state claims on the merits in recognition of the developed record and because the case had been pending for more than three years. See Crosby, 682 F.Supp.2d at 545–46. Having elected to proceed, the court granted summary judgment to the City on the contract and fiduciary duty claims. In so doing, the court strongly intimated that the plaintiffs had failed to establish the existence of either an enforceable contract or a cognizable legal duty for which the City could be held liable, see id. at 546–47, but ultimately concluded that even in the presence of an enforceable contract, no breach had occurred, see id. at 549.⁴

The district court entered its judgment adverse to the plaintiffs on January 7, 2010. By notice timely filed on February 3, 2010, the plaintiffs appeal.

II.

A.

The City removed the initial filing to the district court on the ground that it gave rise to a federal question within the contemplation of 28 U.S.C. § 1331, in that the plaintiffs had asserted a claim pursuant to the Civil Rights Act of 1871. The current iteration of that Act provides in pertinent part:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States ... to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress....

42 U.S.C. § 1983.⁵ A federal civil rights claim based upon § 1983 has two essential elements: “[A] plaintiff must allege the violation of a right secured by the Constitution and laws of the United States, and must show that the alleged deprivation was committed by a person acting under color of state law.” West v. Atkins, 487 U.S. 42, 48, 108 S.Ct. 2250, 101 L.Ed.2d 40 (1988).

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