Hutto v. S.C. Ret. Sys.

• Citation: 773 F.3d 536
• Decision Date: 05 December 2014
• Docket Number: No. 13–1523.,13–1523.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)
• Parties: Gail M. HUTTO; Elizabeth W. Hodge; Margaret B. Lineberger; Lynn R. Rogers; Nancy G. Sullivan; Jane P. Terwilliger; Julian W. Walls; Debra J. Andrews, and all others similarly situated, Plaintiffs–Appellants, v. The SOUTH CAROLINA RETIREMENT SYSTEM; The Police Officers Retirement System; The South Carolina Retirement Systems Group Trust; Nikki R. Haley, Governor of South Carolina, in her official capacity as ex officio Chairwoman of the South Carolina Budget and Control Board; Curtis M. Loftis, Jr., Treasurer of the State of South Carolina, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; Richard Eckstrom, Comptroller General of the State of South Carolina, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; Hugh K. Leatherman, Chairman of the South Carolina Senate Finance Committee, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; W. Brian White, Chairman of the South Carolina House of Representatives Ways and Means Committee, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; Marcia S. Adams, in her official capacity as Executive Director of the South Carolina Budget and Control Board; David K. Avant, in his official capacity as Executive Director of the South Carolina Public Employee Benefit Authority, Defendants–Appellees.

773 F.3d 536

Gail M. HUTTO; Elizabeth W. Hodge; Margaret B. Lineberger; Lynn R. Rogers; Nancy G. Sullivan; Jane P. Terwilliger; Julian W. Walls; Debra J. Andrews, and all others similarly situated, Plaintiffs–Appellants,

v.The SOUTH CAROLINA RETIREMENT SYSTEM; The Police Officers Retirement System; The South Carolina Retirement Systems Group Trust; Nikki R. Haley, Governor of South Carolina, in her official capacity as ex officio Chairwoman of the South Carolina Budget and Control Board; Curtis M. Loftis, Jr., Treasurer of the State of South Carolina, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; Richard Eckstrom, Comptroller General of the State of South Carolina, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; Hugh K. Leatherman, Chairman of the South Carolina Senate Finance Committee, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; W. Brian White, Chairman of the South Carolina House of Representatives Ways and Means Committee, in his official capacity as an ex officio member of the South Carolina Budget and Control Board; Marcia S. Adams, in her official capacity as Executive Director of the South Carolina Budget and Control Board; David K. Avant, in his official capacity as Executive Director of the South Carolina Public Employee Benefit Authority, Defendants–Appellees.

No. 13–1523.

United States Court of Appeals, Fourth Circuit.

Argued: Oct. 29, 2014.

Decided: Dec. 5, 2014.

ARGUED:Richard Harpootlian, Richard A. Harpootlian, PA, Columbia, South Carolina, for Appellants. Tina Marie Cundari, Sowell, Gray, Stepp, & Laffitte, LLC, Columbia, South Carolina, for Appellees. ON BRIEF:Graham L. Newman, Christopher P. Kenney, Richard A. Harpootlian, PA, Columbia, South Carolina; James M. Griffin, Margaret N. Fox, LEWIS, Babcock & Griffin, LLP, Columbia, South Carolina, for Appellants. Robert E. Stepp, Sowell, Gray, Stepp, & Laffitte, LLC, Columbia, South Carolina, for Appellees.

Before NIEMEYER, WYNN, and THACKER, Circuit Judges.

Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Judge WYNN and Judge THACKER joined.

NIEMEYER, Circuit Judge:

South Carolina public employees commenced this class action challenging the constitutionality of the South Carolina State Retirement System Preservation and Investment Reform Act, 2005 S.C. Acts 1697 (“the 2005 Act”). That Act amended South Carolina's retirement laws by requiring public employees who retire and then return to work to make, beginning on July 1, 2005, the same contributions to state-created pension plans as pre-retirement employees but without receiving further pension benefits. The plaintiffs claimed that the 2005 Act effected a taking of their private property, in violation of the Takings Clause of the Fifth Amendment and the Due Process Clause of the Fourteenth Amendment. They named as defendants two state-created pension plans, in which they are participants; the South Carolina Retirement Systems Group Trust (“the Trust”), which holds the pension plans' assets; and state officials serving as trustees and administrators of the pension plans. For relief, they sought repayment of all contributions withheld since July 1, 2005, and injunctive relief prohibiting the future collection of such contributions.

Pursuant to the defendants' motion, the district court dismissed the complaint on the ground that all of the defendants are entitled to sovereign immunity.

We affirm, albeit on reasoning slightly different from that given by the district court. We conclude, as did the district court, that the pension plans and the Trust are arms of the State of South Carolina and therefore have sovereign immunity. Likewise, we conclude that the state officials sued in their official capacities for repayment of pension-plan contributions have sovereign immunity. Finally, we conclude that the state officials sued in their official capacities for prospective injunctive relief have sovereign immunity because their duties bear no relation to the collection of the public employees' contributions to the pension plans, precluding application of Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). In reaching these conclusions, we reject the plaintiffs' argument that their claims under the Takings Clause of the Fifth Amendment are exempt from the protection of the Eleventh Amendment.

I

The plaintiffs are public employees and participants in two pension plans created by South Carolina in 1962—the South Carolina Retirement System and the South Carolina Police Officers Retirement System (collectively, “the Retirement System”).¹SeeS.C.Code Ann. §§ 9–1–20, 9–11–20(1). In their complaint, they alleged that they and others similarly situated are “retired contributing members” of the Retirement System, who returned to work on or after July 1, 2005, when the 2005 Act went into effect, and who are, by reason of the 2005 Act, required “to contribute a portion of their gross earnings” to the Retirement System “without receiving any additional service credit or interest on their retirement accounts.” Before July 1, 2005, retired participants could return to work for a salary of up to $50,000 without forfeiting the right to receive retirement benefits and without having to make further contributions to the Retirement System.See Ahrens v. State, 392 S.C. 340, 709 S.E.2d 54, 56–57 (2011). But this changed with the enactment of the 2005 Act, and retired participants who return to work are now required to make the same contributions to the Retirement System as pre-retirement employees but without accruing additional service credit for pension benefits. SeeS.C.Code Ann. §§ 9–1–1790(C), 9–11–90(4)(c). The South Carolina General Assembly made the change to help fund the Retirement System and, in particular, to secure future cost-of-living adjustments.

The plaintiffs commenced this class action in August 2010 on behalf of themselves and all other participating employees who returned to work on or after July 1, 2005, alleging that, by enforcing the 2005 Act, the defendants “confiscated their private property,” in violation of the Takings Clause of the Fifth Amendment and their procedural due process rights under the Fourteenth Amendment. In addition to naming as defendants the two pension plans, the plaintiffs named the Trust, which holds the assets of the Retirement System, and a number of state officials in their official capacities who, as members or executive directors of the State Budget and Control Board and the Public Employee Benefit Authority, serve as trustees and administrators of the Retirement System. The State Budget and Control Board and the Public Employee Benefit Authority are the statutorily designated co-trustees of the Retirement System. S.C.Code Ann. § 9–1–1310(A).

For relief, the plaintiffs sought (1) a declaratory judgment that the 2005 Act is unconstitutional; (2) an injunction against its enforcement; (3) an accounting of all contributions they made to the Retirement System since July 1, 2005; (4) an injunction compelling the return of all such contributions; and (5) an order awarding them attorneys fees and costs.²

The Retirement System, the Trust, and the state officials filed a motion to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(3), and 12(b)(6), asserting numerous grounds for their motion, including sovereign immunity, claim and issue preclusion based on the prior state litigation, discretionary abstention, and failure to state a claim upon which relief can be granted. The district court granted the motion and dismissed the complaint, relying only on the defendants' sovereign immunity under the Eleventh Amendment. With respect to the institutional defendants, the court determined that “the Retirement Systems should be considered an arm of the State such that Eleventh Amendment immunity applies to bar [a federal] court from hearing the claim.” Hutto v. S.C. Ret. Sys., 899 F.Supp.2d 457, 473 (D.S.C.2012). And “[b]ecause Plaintiffs seek monetary damages,” it held that the claims against the individual defendants were similarly barred. Id. at 475 n. 14. Having found that all of the defendants were immune by reason of sovereign immunity, the court declined to address the defendants' remaining grounds for seeking dismissal of the action.

The plaintiffs filed a motion for reconsideration under Rule 59(e), asserting that the district court erred in dismissing their claims for a declaratory judgment and injunctive relief against the state officials serving in their official capacities. They relied on Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), which created an exception to Eleventh Amendment immunity with respect to claims for prospective injunctive relief to remedy ongoing violations of federal law. The district court denied the motion because, “in seeking to bar the enforcement of [the 2005 Act], which requires Plaintiffs to pay into the Retirement System, Plaintiffs' requested relief is undeniably monetary” and because an injunction ordering the return of the contributions already withheld “would ultimately impact the State treasury.”

This appeal followed.

II

The Eleventh Amendment shields a state entity from suit in federal court “if, in [the entity's] operations, the state is the real party in interest,” in the sense that the “named party [is] the alter ego of the state.” Ram Ditta v. Md. Nat'l Capital Park & Planning Comm'n, 822 F.2d 456, 457 (4th Cir.1987).

The plaintiffs contend that the Retirement System and the Trust do not have the sovereign immunity afforded a State under the Eleventh Amendment because they are “non-state entit[ies]” and that the district court's contrary conclusion was based on an erroneous application of the factors articulated in Ram Ditta for determining whether an entity is an alter ego of the...