Dodd v. City of Chattanooga

• Decision Date: 15 March 2016
• Docket Number: Case No. 1:14–cv–358
• Citation: 215 F.Supp.3d 608
• Parties: Bobby DODD, Plaintiff, v. CITY OF CHATTANOOGA, Tennessee ; and Chattanooga Fire and Police Pension Fund, Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

215 F.Supp.3d 608

Bobby DODD, Plaintiff,

v.CITY OF CHATTANOOGA, Tennessee ; and Chattanooga Fire and Police Pension Fund, Defendants.

Case No. 1:14–cv–358

United States District Court, E.D. Tennessee, Southern Division, at Chattanooga.

Signed March 15, 2016

W. Gerald Tidwell, Jr., Wesley Adam Izell, Tidwell & Izell, P.C., Chattanooga, TN, for Plaintiff.

W. Scott Parrish, Zachary H. Greene, Miller & Martin, PLLC, Cameron S. Hill, Melanie Prince, William E. Robinson, Baker, Donelson, Bearman, Caldwell & Berkowitz, Chattanooga, TN, for Defendants.

ORDER

HARRY S. MATTICE, JR., UNITED STATES DISTRICT JUDGE

Before the Court are Plaintiff's Motion for Summary Judgment (Doc. 41), Defendant City of Chattanooga, Tennessee's Motion for Summary Judgment (Doc. 37), and Defendant Chattanooga Fire and Police Pension Fund's Motion for Summary Judgment (Doc. 43). For the reasons stated herein, Plaintiff's Motion (Doc. 41) will be DENIED , and Defendant's Motions (Docs. 37, 43) will be GRANTED .

I. INTRODUCTION

Plaintiff Bobby Dodd filed the instant action in the Chancery Court for Hamilton County, Tennessee on November 19, 2014, claiming that certain changes to the Chattanooga Fire and Police Pension Fund (hereinafter "Pension Plan") violated his state and federal constitutional rights. On December 18, 2014, Defendant City of Chattanooga and Defendant Chattanooga Fire and Police Pension Fund (hereinafter "Defendants")¹ removed the action to this Court based on federal question and supplemental jurisdiction. See 28 U.S.C. § 1331 ; 28 U.S.C. § 1367. The facts, which are largely undisputed, are as follows:

Plaintiff began working for the Chattanooga Police Department on June 6, 1986 as a patrol officer. Over the course of his career with the Department, Plaintiff amassed twenty-five and one half years of service, and retired as Chief of Police effective December 31, 2013.² Upon reaching twenty-five years of service, Plaintiff became eligible for a service retirement pension. Chattanooga, Tenn. City Code § 2–411(a) ("From and after July 1, 1999, a member of the Pension Fund who was employed in the Fire Department or Police Department may at his or her election retire upon completion of twenty-five (25) years of active service in the Fire or Police Departments, and upon notifying the Board in writing of such election, receive an annual Service Retirement Pension.").³ Upon retirement, a retiree receives his/her pension as a "single life annuity," through which the retiree is given a monthly payment until his/her death in an amount calculated by a formula not at issue in this litigation. Alternatively, a retiree could elect to have his/her pension spread out over his/her lifetime and that of a designated beneficiary. These so-called "Joint and Survivor" options are governed by City Code § 2–418, which reads, in relevant part

[w]hen a member reaches the conditions for retirement benefits under Section 2–411 ... he or she may elect to have the pension benefits under said Sections converted into an optional retirement benefit which is the actuarial equivalent of such benefit based upon a mortality basis approved from time to time by the Board, and the age of the member and of the beneficiary as of the date the member becomes eligible to exercise the option ... Option D: A decreased retirement benefit payable to the retired participant for life which shall continue after his or her death to their surviving beneficiary at fifty percent (50%) of that payable to the retired participant.

City Code § 2–418(1). By electing an option under § 2–418, a retiree receives the functional equivalent of a single life annuity, but spreads his/her benefits out over two lifetimes. At all times relevant to this litigation, City Code § 2–411(a) and § 2–418 have not changed.

Furthermore, for the vast majority of Plaintiff's career, the Pension Plan included a provision that allowed a retiree to receive a single life annuity, and for his/her surviving spouse to receive a death benefit similar to Option D under § 2–418 of the Pension Plan. This benefit was codified in City Code § 2–411(c) and read, in pertinent part, as follows:

Upon the death of any member employed on November 3, 1992, who is retired under the provisions of this Section ... there shall be paid to said member's beneficiary a death benefit of $10,000.00, and the benefits under Section 2–418, and the surviving spouse shall be paid the sum of $500.00 per month until death if said spouse is not a beneficiary under one of the options listed in Section 2–418. If the member has not elected any option [under City Code § 2–418] prior to his or her death, a benefit shall be payable to the deceased's surviving spouse, if any, as though he or she had elected Option D, Section 2–418.

City Code § 2–411(c) (as codified in 2011) (emphasis added). The Court will refer to the emphasized language above as the "Default Death Benefit."⁴ The effect of the language contained in the Default Death Benefit is as follows: a married retiree could choose not to elect an option under § 2–418, thereby receiving his/her pension in the form of a single life annuity. Upon the retiree's death, his/her spouse would then receive 50% of that monthly payment for the rest of said spouse's life as a death benefit. Notwithstanding Defendant City of Chattanooga's contention that this benefit was a "gratuitous" subsidy to which Plaintiff "was never entitled," (Doc. 37 at 3), the plain terms of the City Code created the above-described loophole⁵ by which a retiree could receive the full amount of his/her pension in the form of a single life annuity, then have his/her spouse receive a generous death benefit paid in monthly installments, rather than electing a Joint and Survivor option (and thereby receiving a reduced "actuarial equivalent" of a single life annuity under § 2–418).⁶

After the stock market crash of 2008, the Fire and Police Pension Fund ("the Pension Fund") suffered a reduction in value of 34%. (Doc. 43–7 at 4). In an attempt to maintain the actuarial soundness of the Pension Fund, Defendants began exploring opportunities to cut costs. One such cost was the Default Death Benefit, which Defendants believed to be "unnecessary ... because the Plan already provides for survivor benefits under Section 2–418."⁷ (Doc. 44 at 10). Accordingly, on December 11, 2012, the City Council passed Ordinance 12674, which was signed into law on December 13, 2012. Therein, the City Council amended § 2–411(c) to eliminate the Default Death Benefit for those employees not eligible to retire on January 1, 2013. The text of the changes to § 2–411(c) reads, in relevant part,

BE IT FURTHER ORDAINED, That Chattanooga City Code, Part II, Chapter 2, Sec. 2–411, Subsection (c) be and is hereby amended by deleting said subsection in its entirety and substituting in lieu thereof the following:

Effective January 1, 2013, upon the death of such member who is eligible for benefits under this Section, there shall be paid to said member's beneficiary a death benefit of $10,000.00, and the benefits, if any, elected by the member under Section 2–418. If the member has not elected any option prior to his or her death, a benefit shall be payable to the deceased's surviving spouse, if any, as though he or she had elected Option D., Section 2–418. Notwithstanding the foregoing, if a member who is employed on November 3, 1992, but is not eligible for benefits under this Section on January 1, 2013 ... shall die after retirement, there shall be paid to his or her beneficiary or beneficiaries the benefit of $10,000.00 and such benefits elected under Section 2–418.

Chattanooga, Tenn. Ordinance 12674 (emphasis added).⁸ Because it is uncontested that Plaintiff was not eligible to retire under § 2–411 on January 1, 2013, Ordinance 12674 eliminated the Default Death Benefit as to Plaintiff.⁹

Upon his retirement in late 2013, Plaintiff was informed that, in order for his spouse to receive continued payments upon his death, Plaintiff would have to elect a Joint and Survivor option under § 2–418. Plaintiff elected Option D. To provide the "actuarial equivalent" of a single life annuity, an adjustment factor was applied to Plaintiff's monthly pension payment. This resulted in Plaintiff receiving a 5% reduction in monthly payments to be paid over his lifetime, so that his wife could continue to receive 50% of those payments after his death. Had Ordinance 12674 not affected Plaintiff, he could have chosen to not elect an option under § 2–418, and his wife would have received 50% of Plaintiff's monthly pension payment after Plaintiff's death as a "death benefit," even though Plaintiff would have already received the full amount of his pension in the form of a single life annuity.¹⁰

Plaintiff claims that this 5% reduction in his monthly pension payment has effectively lowered the value of his pension, and has stripped him of his vested rights in violation of the Contracts, Due Process and Takings clauses of the United States Constitution, as well as the Law of the Land clause of the Tennessee Constitution. (Doc. 24 at 4–5). Defendants claim that the value of Plaintiff's pension has not been reduced at all, but rather that the 5% adjustment is necessary to provide Plaintiff with the actuarial equivalent of a single life annuity, as has always been mandated by § 2–418. (See, e.g. , Doc. 44 at 8–9). Furthermore, Defendants argue that Plaintiff did not have a vested right with respect to the Default Death Benefit, and that Ordinance 12674 therefore validly eliminated a benefit in order to maintain the actuarial stability of the Pension Fund. (See, e.g. , Doc. 59 at 2–6). On December 22, 2015, the Parties filed cross-motions for summary judgment. (Docs. 37, 41, 43). The Parties submitted responses in opposition (docs. 47, 48, 49), and replies (docs. 55, 56, 57), and this matter is now ripe for the Court's review.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 56 instructs the Court to grant...