Efreom v. McKee

• Decision Date: 15 April 2021
• Docket Number: C.A. No. WES 20-122
• Parties: BINYAMIN I. EFREOM, et al., Plaintiffs, v. DANIEL J. MCKEE, in his capacity as Governor of Rhode Island, et al., Defendants.
• Court: U.S. District Court — District of Rhode Island

BINYAMIN I. EFREOM, et al., Plaintiffs, v. DANIEL J. MCKEE, in his capacity as Governor of Rhode Island, et al., Defendants.

C.A. No. WES 20-122

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

April 15, 2021

MEMORANDUM AND ORDER

WILLIAM E. SMITH, District Judge.

49 members of the Employees' Retirement System of the State of Rhode Island claim that reductions in their pension benefits are unconstitutional. Defendants seek dismissal, arguing, inter alia, that the claims are barred by res judicata and the Rooker-Feldman doctrine. For the reasons that follow, Defendants' Motion to Dismiss, ECF No. 9, is GRANTED.

I. BACKGROUND¹

The Employees' Retirement System of the State of Rhode Island ("ERSRI") provides retirement benefits to various state and municipal employees in Rhode Island. See Compl. ¶¶ 27, 29, 30,ECF No. 1. Employees make mandatory contributions and receive benefits after retirement. See id. ¶¶ 29-31. Prior to 2011, retirees received a yearly, three-percent, compounded cost-of-living adjustment ("COLA"). Id. ¶ 32. Plaintiffs allege that the State had promised to pay this COLA for the rest of their lives. Id. ¶ 32.

In 2011, the Rhode Island General Assembly passed the Rhode Island Retirement Security Act ("RIRSA"). Compl. ¶ 39. RIRSA provided that, until ERSRI and other retirement funds reached eighty-percent funding (based on actuarial estimates of future revenue and liability), the fund would provide a COLA once every five years (instead of yearly). Id. ¶ 44. When eighty-percent funding was reached, retirees would receive a yearly non-compounded COLA, ranging between zero and four percent, applicable only to the first $25,000² of each retiree's yearly benefit. Id. ¶ 45; R.I. Gen. Laws § 36-10-35(g)(1).

Several lawsuits were filed. See R.I. Pub. Emples. Retiree Coal. v. Raimondo, No. PC 15-1468, 2015 WL 3648161, at *3-4 (R.I. Super. June 9, 2015) ("RIPERC II") (describing various actions).³One suit, the so-called Clifford case, was filed by a group that included all Plaintiffs here. See Fourth Am. Compl. at 4-22, Clifford v. Raimondo, No. KC 14-0345, (R.I. Super. Jan. 14, 2015) (filed here as ECF No. 10-1).⁴ These suits claimed that RIRSA's COLA reductions violated the rights of ERSRI members under the Rhode Island Constitution. See id. at 38-42; RIPERC II, 2015 WL 3648161, at *3-4. A global settlement agreement was reached between many parties in the various actions (but not Plaintiffs here), and a class action complaint was filed for settlement purposes. See RIPERC II, 2015 WL 3648161, at *2.⁵ The court certified the following class:

All persons (and/or their beneficiaries) who, on or before July 1, 2015, are receiving benefits or are participating in the State Employees, Teachers, or Municipal Employees retirement systems administered byERSRI and all future employees, excepting only those individuals who on July 1, 2015, are participating in a municipal retirement system administered by ERSRI for municipal police officers in any municipality and/or for fire personnel of the City of Cranston.

R.I. Pub. Emples. Retiree Coal. v. Raimondo, No. PC 15-1468, 2015 WL 1872189, at *2 (R.I. Super. April 16, 2015) ("RIPERC I"). Every Plaintiff here was a member of that class. See Compl. ¶ 1. Furthermore, because the class was certified pursuant to Rule 23(b)(2) of the Rhode Island Superior Court Rules of Civil Procedure, class members did not have the ability to opt out. RIPERC II, 2015 WL 3648161, at *14 (citing DeCesare v. Lincoln Benefit Life Co., 852 A.2d 474, 490 (R.I. 2004)). A condition precedent of the agreement was the passage by the Rhode Island General Assembly of legislation set out in the agreement. See Settlement Agreement 5, ECF No. 10-12, at 10. The Superior Court summarized the legislation as follows:

A one-time COLA payment of 2% applied to the first $25,000 of the pension benefit and that amount added to the base benefit will be paid to retirees (or their beneficiaries) who participate in a COLA program and who retired on or before June 30, 2012 as soon as administratively reasonable following the passage of the legislation based on the amount of benefit payable on the effective date of the legislation.

For funds that are not already funded, the settlement shortens the time intervals between suspended COLA payments from once every five years to once every four years. The settlement also improves the COLA limitation for current retirees whose COLA is suspended. The settlement also requires a more favorable indexing of COLA Cap for all current and future retirees. The settlement also changes the COLA calculation to one morelikely to produce a positive number and dictates that the COLA formula will be calculated annually, regardless of funding level, and when paid, the COLA will be compounded for all receiving a COLA.

Current retirees (or their beneficiaries) who have or will have retired on or before June 30, 2015 will receive two payments: (1) a one-time $500.00 stipend (not added to the COLA base) within sixty days of the enactment of the legislation approving the terms of the settlement and (2) a one-time $500 stipend payable one year later.

For State Workers, Teachers, and General MERS, the settlement (1) adds another calculation to reduce the minimum retirement age; (2) improves the available accrual rate for employees with twenty years or more of service as of June 30, 2012; (3) requires increased contributions by the employer to the Defined Contribution Plan for employees with ten or more years of service (but less than twenty) as of June 30, 2012; (4) waives the administration fee for any employees participating in the Defined Contribution Plan who make $35,000 or less; and (5) adds another calculation designed to limit the impact of the "anti-spiking" rule imposed by the RIRSA on part-time employees.

For MERS Firefighters (excluding Cranston Firefighters), the settlement (1) lowers the age and service requirements for retirement; (2) increases the accrual rate for Firefighters who retire at age fifty-seven with thirty years of service.

For State Correctional Officers, the settlement increases the accrual rate for correctional officers with fewer than twenty-five years of service as of June 30, 2012.

The settlement reduces the impact of an early retirement.

The settlement allows Municipalities to "re-amortize"; that is, partially refinance, to be able to pay for the increased cost of the settlement.

Otherwise, the terms of the RIRSA remain the same.

RIPERC I, 2015 WL 1872189, at *3-4. The agreement also provided that "each of the Parties covenant and agree that from and after the date hereof through and including final approval of the settlement and enactment of the Legislation and entry of judgment . . . [t]hey will not, directly or indirectly, propose, support, encourage or advocate for any legislative action concerning or relating to retirement benefits other than the adoption of the Legislation." Settlement Agreement 6, ECF No. 10-12, at 11.

The court held a five-day fairness hearing, during which many objections were presented. RIPERC II, 2015 WL 3648161, at *8-13. Following the hearing, the court rejected various contentions that the settlement was procedurally or substantively deficient. Id. at *13-31. The court approved the settlement, finding it to be "fair, adequate, and reasonable." Id. at *31. Shortly thereafter, the Rhode Island General Assembly passed the legislation contemplated by the settlement. See R.I. Public Laws 2015, art. 141, ch. 21. The court then entered judgment, stating:

This Judgment is final and shall be binding on all parties and all class members in the above-referenced class action case for settlement purposes. Additionally, all class members are forever and completely barred from ever asserting any claims or causes of action that were alleged or brought or that could have been alleged or brought with respect to the various challenges to the Rhode Island pension statutes made and asserted in the above-captioned action and in each of the following matters, C.A. Nos. 10-2859, 12-3166, 12-3167, 12-3168, 12-3579, KC 14-0345, as theCourt has previously found, determined and ruled that the terms and conditions of the Settlement Agreement, as now implemented and made effective by the Pension Legislation, are fair and reasonable.

R.I. Pub. Emples. Retiree Coal. v. Raimondo, No. PC 15-1468, 2015 WL 4501873, at *1 (R.I. Super. July 8, 2015) ("RIPERC III"). On the same date, the court also entered the following judgment in the Clifford case: "The claims and defenses asserted herein having been foreclosed by the entry of Final Judgment entered in Rhode Island Public Employees' Retiree Coalition, et al. v. Raimondo, et al., CA. No. PC 15-1468, the complaint, as amended, is dismissed with prejudice." Final J., Clifford v. Raimondo, No. KC 14-0345 (R.I. Super. July 8, 2015) (filed here as ECF No. 10-9). Certain class members, including all Plaintiffs here, appealed both judgments to the Rhode Island Supreme Court. See Clifford v. Raimondo, 184 A.3d 673 (R.I. 2018); Joint Notice of Appeal at 1-3, R.I. Pub. Emples. Retiree Coal. v. Raimondo, No. PC 15-1468 (R.I. Super. July 27, 2015) (listing all Plaintiffs here) (filed here as ECF No. 10-111). In a consolidated opinion, the court affirmed the judgments in all respects, determining that the judge "did not abuse her discretion in concluding that the settlement was fair, reasonable, and adequate." Clifford, 184 A.3d at 695 (citation omitted).

Two years later, Plaintiffs filed their Complaint in this Court, and Defendants responded with the instant Motion to Dismiss.

II. DISCUSSION

Plaintiffs' Complaint alleges violations of the following provisions of the United States Constitution: the Due Process Clauses of the Fifth and Fourteenth Amendments (Count I), the Contract Clause of Article I, Section 10 (Count II),⁶ the Takings Clause of the Fifth Amendment (Count III), and the First Amendment's guarantees of freedom of speech...