Crosby v. City Of Gastonia

• Decision Date: 07 January 2010
• Docket Number: No. 3:06-CV-462-RJC-DSC.,3:06-CV-462-RJC-DSC.
• Citation: 682 F.Supp.2d 537
• Court: U.S. District Court — Western District of North Carolina
• Parties: Dennis CROSBY et al., Plaintiffs, v. CITY OF GASTONIA, a municipality existing under the laws of the State of North Carolina, Defendant.

682 F.Supp.2d 537

Dennis CROSBY et al., Plaintiffs,

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

No. 3:06-CV-462-RJC-DSC.

United States District Court,

W.D. North Carolina.

Charlotte Division.

Decided: Jan. 7, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Fred W. Devore, III, Devore, Acton & Stafford, P.A., Charlotte, NC, for Plaintiff.

Anthony Fox, Benjamin Robert Sullivan, Jr., Susan Williams Matthews, Charlotte, NC, for Defendant.

ORDER

ROBERT J. CONRAD, JR., Chief Judge.

THIS MATTER is before the Court on the parties' cross motions for summary judgment (Doc. Nos. 72, 93, 95, 100, 101). For the following reasons, the Court DENIES the plaintiffs' motion for summary judgment and GRANTS the defendant's motion for summary judgment.

I. BACKGROUND

This action concerns officers who dedicated their lives to a career of service to the City of Gastonia. Each plaintiff devoted over fifteen years as an officer with the Gastonia Police Department ("the Department"), risking life and limb daily to ensure the safety of the City's citizens, and eventually retiring from the Department. For this service, they should be honored and thanked. Whether the City of Gastonia is contractually or Constitutionally required to supplement their pensions, is however, a different question. For the reasons stated below, the Court answers that different question in the negative.

The Gastonia Policemen's Supplementary Pension Fund ("SPF" or "the Fund") was created by the North Carolina General Assembly in 1955 to provide supplemental benefits to retired members of the City of Gastonia Police Department. The SPF ran out of funds in 2005, and retired officers who had previously vested in the SPF sued the City of Gastonia over the Fund's failure.

When the General Assembly created the Fund in 1955, it provided that once a full-time member of the Gastonia Police Department had served for twenty years, if the officer then retired and was at least fifty-five years old, he would be eligible to receive benefits from the Fund.¹ (Doc. No. 72-2 at Sec. 2). The original 1955 Act set forth that:

Any full-time paid member of [the Department] who retires or is retired under the provisions of this Act shall receive monthly for the remainder of his life from the [Fund] an amount equal to two percent... for each five years of service, not to exceed fourteen per cent... of his average monthly salary for the three highest salaried years while employed by [the Department].

An Act to Establish a Supplemental Pension Fund for Policemen in the City of Gastonia, 1955 N.C. Sess. Laws ch. 946, § 3.

The General Assembly amended the Fund legislation in 1957, 1959, 1965, 1983, and finally in 2002. In 1959, four years after the Fund was established, the General Assembly added language to the Act that made benefits contingent upon funds being available. Specifically, the 1959 amendment changed the language of the Act to state:

Any full-time paid member of [the Department] who retires or is retired under the provisions of this Act 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, not to exceed fourteen per cent...of his average monthly salary for the three highest salaried years while employed by [the Department].

Act of April 15, 1959, H.B. 430, 1959 N.C. Sess. Laws ch. 301, § 2 (amending 1955 N.C. Sess. Laws ch. 946, § 3, as rewritten by 1957 N.C. Sess. Laws ch. 112 § 2) (emphasis added). This contingency that funds would be paid "so long as funds [were] available" was retained throughout the evolution of the Act in its subsequent amendments, including the 2002 legislation that essentially ended the Fund.

The Act directed a Board of Trustees to administer the SPF. The Board was comprised of Gastonia's Chief of Police, the Commander of Operations of the Police Department, ² and the City's Finance Officer.³ The Board was charged under the Act with investing all money coming into the possession of the SPF and paying out money to qualifying retirees. Further, the Board was authorized to receive any grants or donations on behalf of the fund.

The SPF received funding from various sources. The initial Act made it lawful for the City to tax defendants convicted of offenses in the Municipal Court of the City of Gastonia up to one dollar to help fund the SPF. Such taxes were to be paid to the SPF's custodian, the Trustee position occupied by the Finance Officer. In April 1965, the Act was amended to allow the City to tax convicted defendants up to three dollars, rather than one dollar, in support of the SPF. In June 1965, the General Assembly amended the Act once again. The June 1965 amendments granted the City the "power and authority to decrease the court cost presently collected in every criminal case in the Gastonia Municipal Recorder's Court; provided, however, that out of every court cost collected in said court, at least three dollars... shall be paid... to the State Law Enforcement Officers' Benefit and Retirement Fund." 1965 N.C. Sess. Laws ch. 979, § 13. The June 1965 amendments also authorized the Gastonia City Council "to make such contributions from the [City's] General Fund... as they shall deem appropriate and from whatever sources they deem desirable." Id. § 11.

Proceeds from the Department's vending machines also helped fund the SPF. In addition, until 1986, if an officer left the Department before retiring, the State refunded to the City all contributions the City had made to the State Law Enforcement Officers' Benefit and Retirement Fund for that officer. The City in turn donated this money to the SPF until the City stopped receiving the refunds because of a 1986 change in state law. The City did not make donations to the Fund again until 1995, when it began contributing $20,000 annually to it.

Various amendments to the Fund legislation envisioned officer salaries as an income source for the SPF. The 1959 amendment authorized the Board of Trustees to call an election at any time, at which three-fourths of the members of the Police Department could vote to contribute two percent of the gross salary of each member of the Department to the SPF. This amendment directed the City of Gastonia, upon such a vote, to deduct two percent from each officer's pay and remit it to the Board. The 1965 amendments lowered the required officer vote from three-fourths to a simple majority when deciding whether to contribute two percent of officers' salaries to the Fund. The 1965 amendments also empowered the City to deduct two percent of officers' gross sala- ries, without a vote of the officers, to help fund the SPF.

The City never exercised its option to unilaterally deduct two percent of officers' salaries in support of the SPF. In the 1990s, however, the Fund began experiencing financial difficulties, and police officers voted to contribute two percent of their salaries to keep the Fund operational. The City gave effect to the officers' vote and deducted two percent of officer salaries, submitting the money to the SPF's Board as Fund property. By 2002, however, the Fund was in such financial straights that the police officers voted to discontinue the 2% contributions, refund all active officers' previous contributions, and allow the Fund to continue until its assets became depleted.⁴ Based on this vote, Gastonia's City Council adopted a resolution requesting the General Assembly to enact legislation giving effect to the officers' vote, and distributing all remaining assets to vested officers. The General Assembly adopted legislation in October 2002 that discontinued funding from officer salary contributions, which was at that time the SPF's main source of income. The 2002 legislation further refunded all past contributions of active officers, eliminating roughly half of the Fund's assets. This legislation did not adopt the City's request to distribute the remaining assets to vested members. Nonetheless, by the fall of 2005, the Fund's assets became depleted, and benefits ceased.

Plaintiffs assert claims for breach of contract and violation of the Contract Clause of the United States Constitution when the City of Gastonia failed to pay Fund benefits to vested officers. They further allege that the City breached a fiduciary duty to the plaintiffs by allowing the Fund to fail and by not paying fund benefits.

II. STANDARD OF REVIEW

Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The movant has the "initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)).

Once this initial burden is met, the burden shifts to the nonmoving party. The nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Id. at 322 n. 3, 106 S.Ct. 2548. The nonmoving party may not rely upon mere allegations or denials of allegations in his pleadings to defeat a motion for summary judgment. Id. at 324, 106 S.Ct. 2548. The nonmoving party must present sufficient evidence from which "a reason- able jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Sylvia Dev. Corp. v. Calvert County, Md., 48 F.3d 810, 818 (4th Cir.1995).

When ruling on a summary judgment motion, a court...