Donohue v. Cuomo

• Decision Date: 06 November 2020
• Docket Number: Docket No. 18-3193-cv,August Term, 2019
• Citation: 980 F.3d 53
• Parties: Danny DONOHUE, as President of the Civil Service Employees Association, Inc., Local 1000, AFSCME, AFL-CIO, Civil Service Employees Association, Inc., Local 1000, AFSCME, AFL-CIO, Milo Barlow, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Thomas Jefferson, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Cornelius Kennedy, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Judy Richards, on Behalf of Herself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Henry Wagoner, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Plaintiffs-Appellants, v. Andrew M. CUOMO, in His Official Capacity as Governor of the State of New York, Patricia A. Hite, Individually and in Her Official Capacity as Acting Commissioner, New York State Civil Service Department, Caroline W. Ahl, in Her Official Capacity as Commissioner of the New York State Civil Service Commission, J. Dennis Hanrahan, in His Official Capacity as Commissioner of the New York State Civil Service Commission, Robert L. Megna, Individually and in His Official Capacity as Director of the New York State Division of the Budget, Thomas P. DiNapoli, in His Official Capacity as Comptroller of the State of New York, Jonathan Lippman, in His Official Capacity as Chief Judge of the New York State Unified Court System, Defendants-Appellees, The State of New York, New York State Civil Service Department, New York State and Local Retirement System, New York State Unified Court System, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

980 F.3d 53

Danny DONOHUE, as President of the Civil Service Employees Association, Inc., Local 1000, AFSCME, AFL-CIO, Civil Service Employees Association, Inc., Local 1000, AFSCME, AFL-CIO, Milo Barlow, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Thomas Jefferson, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Cornelius Kennedy, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Judy Richards, on Behalf of Herself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Henry Wagoner, on Behalf of Himself, on Behalf of Retirees of the State of New York Formerly in the CSEA Bargaining Units, Plaintiffs-Appellants,

v. Andrew M. CUOMO, in His Official Capacity as Governor of the State of New York, Patricia A. Hite, Individually and in Her Official Capacity as Acting Commissioner, New York State Civil Service Department, Caroline W. Ahl, in Her Official Capacity as Commissioner of the New York State Civil Service Commission, J. Dennis Hanrahan, in His Official Capacity as Commissioner of the New York State Civil Service Commission, Robert L. Megna, Individually and in His Official Capacity as Director of the New York State Division of the Budget, Thomas P. DiNapoli, in His Official Capacity as Comptroller of the State of New York, Jonathan Lippman, in His Official Capacity as Chief Judge of the New York State Unified Court System, Defendants-Appellees,The State of New York, New York State Civil Service Department, New York State and Local Retirement System, New York State Unified Court System, Defendants.

Docket No. 18-3193-cv

August Term, 2019

United States Court of Appeals, Second Circuit.

Argued: June 22, 2020

Decided: November 6, 2020

Eric E. Wilke, Of Counsel, Civil Service Employees Association, Inc., Albany, NY (Daren J. Rylewicz, Jennifer C. Zegarelli, on the brief), for Plaintiffs-Appellants.

Frederick A. Brodie, Assistant Solicitor General of Counsel, Albany, NY (Letitia James, Attorney General, State of New York, Barbara D. Underwood, Solicitor General, Andrea Oser, Deputy Solicitor General on the brief), for Defendants-Appellees.

Before: Newman, Hall, and Lynch, Circuit Judges.

Gerard E. Lynch, Circuit Judge:

This case arises from the State of New York's 2011 reduction, through the amendment of a state statute and regulation, of its rate of contribution to certain retired former employees’ health insurance premiums for the first time in almost twenty-nine years, from 90% to 88% for individual coverage and from 75% to 73% for dependent coverage. The Civil Service Employees Association ("CSEA"), the union representing the largest bargaining unit of employees of New York State ("the State"), joined by certain officers and retired former members of CSEA, brought suit on behalf of themselves and retired former members of that bargaining unit. They contend that the State's reduction of its contribution rate contravenes its contractual obligations, under CSEA's past collective-bargaining agreements ("CBAs") with the State, to pay a fixed percentage of retirees’ health insurance premiums throughout their retirements. They seek relief for breach of contract under New York State law and for impairment of the obligations of contract in violation of the Contract Clause of the United States Constitution.

In order to prevail on either claim, Plaintiffs must establish that the relevant CBAs provide for a vested right to health-insurance coverage at fixed contribution rates for the life of the retiree. It is beyond dispute that the CBAs do not expressly provide for a vested right to coverage at fixed contribution rates. As a result, Plaintiffs’ suggested interpretation of the CBAs is tenable only if a vested right – or, at minimum, ambiguity with respect to such a right, as is necessary for the consideration of extrinsic evidence of the meaning of the CBAs – may be inferred under the circumstances. Moreover, even if Plaintiffs can establish that the State's reduction of its contribution rates to retiree health-insurance premiums breached a contractual obligation, the resolution of both of their claims depends on whether the State, in reducing its contribution rates, merely breached its contract, permitting a remedy for breach under state law, or completely negated any such obligation so as to preclude plaintiffs from recovering damages under state law. Both of these issues depend on aspects of New York law on which the State's courts have not conclusively ruled and that meet our other criteria for certification. We therefore reserve decision and certify two questions to the New York Court of Appeals.

BACKGROUND

In 1956, the State established the New York State Health Insurance Plan ("NYSHIP"), an optional health-benefit plan for active and retired State employees. Since the inception of NYSHIP, the State has contributed to both active employees’ and retirees’ NYSHIP premium costs. Prior to 1983, the State, pursuant to a State statute, paid 100% of both employees’ and retirees’ costs for individual coverage and 75% of their costs for dependent coverage. In 1982, the State and the unions representing State employees negotiated a reduction of the State's contribution rate for individual coverage from 100% to 90%, effective January 1, 1983. Among the unions with which the State negotiated was CSEA, which represents the largest bargaining unit of State employees. Members of that bargaining unit include employees of the Administrative Services Unit, Operational Services Unit, Institutional Services Unit, Division of Military & Naval Affairs Unit, and some employees of the Unified Court System.

CSEA's and the State's memorandum of understanding, which they entered into in November 1982, provided that the State would pay 90% of the cost of premium charges "for the coverage of State employees" and 75% of the cost of premium charges "for the coverage of dependents of such State employees." J. App'x 1450. It did not expressly address the State's contribution rates for retirees or define the term "employee[ ]." The State legislature thereafter amended New York Civil Service Law § 167 to codify the negotiated contribution rates. As amended in 1983, Civil Service Law § 167(1) provided, in part, that:

The full cost of premium or subscription charges for the coverage of retired state employees who are enrolled in the basic, statewide health insurance plan established pursuant to this article and who retired prior to [January 1, 1983] shall be paid by the state. Nine-tenths of the cost of premium or subscription charges for the coverage of state employees and retired state employees retiring on or after [January 1, 1983] who are enrolled in such basic, statewide health insurance plan shall be paid by the state. ... [T]hree-quarters of the cost of premium or subscription charges for the coverage of dependents of such state employees and retired state employees shall be paid by the state.

N.Y. Civ. Serv. Law § 167(1), eff. 1983. The substance of this portion of the statute has remained largely unchanged to this day. See id . § 167(1). Between 1982 and 2011, CSEA and the State entered into eight successive collective-bargaining agreements. Beginning in 1985, each of these agreements provided, in identical or substantially similar language, that "[t]he State agrees to pay 90 percent of the cost of individual coverage and 75 percent of the cost of dependent coverage" under NYSHIP. J. App'x 918; see also id . at 943, 966, 993-94, 1013-14, 1034, 1051.¹ These provisions did not specify the duration of the State's agreement to contribute at these rates. Each of the eight agreements also provided, in identical or substantially similar language, that "[e]mployees covered by [NYSHIP] have the right to retain health insurance after retirement upon completion of ten years of service." Id . at 923; see also id . at 946, 972, 997, 1018, 1038, 1055, 1069. Each of the eight CBAs contained a duration clause, specifying the term of the CBA itself to be either three or four years, depending on the CBA. See J. App'x 931, 949, 980, 1004, 1026, 1044, 1061, 1074.

Between January 1, 1983 and September 30, 2011, the State contributed to the NYSHIP premium costs of eligible retired former State employees who had retired on or after January 1, 1983 at the rates of 90% (for individual coverage) and 75% (for dependent coverage).

Beginning in December 2007, the United States economy (as well as other economies around the world) was plagued by a severe financial crisis that has become known as the "Great Recession." In the wake of that crisis, the State faced significant budget deficits for fiscal years 2009-2010, 2010-2011, and 2011-2012. In 2011, the State attempted to close its $10 billion budget gap for fiscal year 2011-2012 through a variety of cost-reducing measures, including a $1.5 billion cut to state agency operations. The State budgeted for $450 million of that operational reduction to come from workforce-related reductions and asked all state agencies to submit proposals for such reductions. The Department of Civil Service proposed, among other contemplated reductions, a reduction to the State's contribution rates to NYSHIP premiums.

In June 2011, CSEA and the State agreed to the terms of a five-year CBA, covering 2011-2016. Under the negotiated agreement, the State reduced its rates of contribution to the NYSHIP premium costs of employees represented by CSEA, with two sets of rates based on employees’ salary grades. According to the CBA, "[e]ffective October 1, 2011 for employees in a title Salary Grade 9 or below or an employee equated to a position title Salary Grade 9 or below ... the State agrees to pay 88 percent of the cost of individual coverage and 73 percent of the cost of dependent coverage," and "for employees in a title Grade Salary 10 or...