Hutto v. S.C. Ret. Sys.

• Decision Date: 04 April 2013
• Docket Number: Civil Action No. 4:10–cv–02018–JMC.
• Citation: 899 F.Supp.2d 457
• Court: U.S. District Court — District of South Carolina
• Parties: Gail M. HUTTO, Debra J. Andrews, Elizabeth W. Hodge, Margaret B. Lineberger, Lynn R. Rogers, Nancy G. Sullivan, Jane P. Terwilliger, Julian W. Walls, and all others similarly situated, Plaintiffs, v. The SOUTH CAROLINA RETIREMENT SYSTEM, the Police Officers Retirement System, the South Carolina Retirement Systems Group Trust, Mark Sanford, Governor of South Carolina, in his official capacity as ex officio Chairman 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 House of Representative s Ways and Means Committee, in his official capacity as an ex officio member of the South Carolina Budget and Control Board, Daniel T. Cooper, Chairman of the South Carolina Ways and Means Committee, in his official capacity as Executive Director of the South Carolina Budget and Control Board, and Peggy G. Boykin, in her official capacity as Director of the Retirement Division of the South Carolina Budget and Control Board, Defendants.

899 F.Supp.2d 457

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

v.The SOUTH CAROLINA RETIREMENT SYSTEM, the Police Officers Retirement System, the South Carolina Retirement Systems Group Trust, Mark Sanford, Governor of South Carolina, in his official capacity as ex officio Chairman 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 House of Representative s Ways and Means Committee, in his official capacity as an ex officio member of the South Carolina Budget and Control Board, Daniel T. Cooper, Chairman of the South Carolina Ways and Means Committee, in his official capacity as Executive Director of the South Carolina Budget and Control Board, and Peggy G. Boykin, in her official capacity as Director of the Retirement Division of the South Carolina Budget and Control Board, Defendants.

Civil Action No. 4:10–cv–02018–JMC.

United States District Court,

D. South Carolina,

Florence Division.

Sept. 27, 2012.

Order Denying Reconsideration April 4, 2013.

Arthur Camden Lewis, James Mixon Griffin, Margaret Nicole Fox, Lewis Babcock and Griffin, Peter D. Protopapas, Rikard and Protopapas, Richard A. Harpootlian, Graham Lee Newman, Richard A. Harpootlian Law Office, Columbia, SC, for Plaintiffs.

Robert Erving Stepp, Tina Marie Cundari, Sowell Gray Stepp and Laffitte, Columbia, SC, for Defendants.

ORDER AND OPINION

J. MICHELLE CHILDS, District Judge.

Plaintiffs are retired members of a pension trust plan ¹ administered by the South Carolina Retirement Systems (“Retirement Systems”) who were rehired on or after July 1, 2005, by employers participating in the Retirement Systems. Plaintiffs bring this action, on behalf of themselves and others similarly situated, challenging the constitutionality of South Carolina's State Retirement Systems Preservation and Investment Reform Act (“Act 153”). They specifically allege Act 153 violates their constitutional rights under the Fifth and Fourteenth Amendments to the United States Constitution by requiring them to contribute to the Retirement Systems upon their rehiring without providing them with any additional benefits or service credit. Currently before the court is Defendants' Supplemental Motion to Dismiss [ Dkt. No. 32] under Federal Rules of Civil Procedure 12(b)(1), (3), and (6). Defendants contend in their motion that, among other things, Plaintiffs' action is barred in federal court by the doctrine of sovereign immunity. For the reasons set forth below, the court grants Defendants' motion.

FACTUAL AND PROCEDURAL BACKGROUND

Prior to July 1, 2005, all South Carolina State employees were eligible to retire, collect their pension benefits, and later return to work for the State. After returning to work, the employees would be paid a salary and continue to receive pension benefits from their retirement. These “working retirees” were not required to contribute any further to the Retirement Systems upon their return to work.² However, the General Assembly enacted Act 153, which became effective on July 1, 2005, amending several statutes relating to the operation of the SCRS and the PORS. The relevant statutes affected by Act 153 require:

A retired member [to] pay to the [retirement] system the employee contribution as if the member were an active contributing member if an employer participating in the system employs the retired member. The retired member does not accrue additional service credit in the system by reason of the contributions required ....

S.C.Code Ann. §§ 9–1–1790(C), 9–11–90(4)(c) (2012).³

This change in the law spawned two lawsuits in the South Carolina state courts. The first, Layman v. State of South Carolina, 368 S.C. 631, 630 S.E.2d 265 (2006), involved retired State employees who had returned to work for the State prior to July 1, 2005. Each Layman plaintiff participated either in the TERI retirement program, the SCRS, or the PORS. The Layman plaintiffs alleged Act 153 was facially invalid for violating the Takings and Due Process Clauses of the South Carolina and United States Constitutions. They also alleged Act 153 was invalid as applied to them because the amendments constituted a breach of the terms of their employment contracts formed when they returned to work under the old version of the laws governing the Retirement Systems. The Layman plaintiffs therefore requested that South Carolina be estopped from applying Act 153 to the plaintiffs who had relied on the previous versions of the laws.

The Supreme Court of South Carolina held Act 153 unconstitutional only as applied to the retirees who participated in the TERI retirement program. Id. at 642, 630 S.E.2d at 271. In doing so, it ruled that the South Carolina General Assembly created a binding employment contract through the old version of the TERI statute; therefore, the Act 153 amendments breached that contract by retroactively changing the terms of employment to require a retiree participating in the TERI program to pay additional sums into the Retirement Systems. Id. at 268–71. The South Carolina Supreme Court additionally held that working retirees under the SCRS and the PORS had no such similar contract created by the retirement statutes. Id. However, because some working retirees may have had written contracts that specifically promised that they would not have to make further contributions to the Retirement Systems, the breach of contract issue was remanded for specific factual determinations. Id. at 271–72. The Layman Court declined to address the facial challenges to Act 153, but it did recognize that the Act 153 amendments to the retirement statutes “continue[ ] to be valid and all those participants joining after July 1, 2005, are subject to the entirety of the requirements outlining the new [working retiree programs]. It is fully within the power of the legislature to make changes to laws that impact future participants ....” Id. at 272.

On remand, the action continued under the caption Ahrens v. State of South Carolina, 392 S.C. 340, 709 S.E.2d 54 (2011), and only involved working retirees in the SCRS and the PORS who were rehired before July 1, 2005. There, the South Carolina Supreme Court held that there was no contract between the SCRS or the PORS and the working retiree plaintiffs. Id. at 58–60. It found this in part because, even if there was a contract formed, the Retirement Systems did not have the authority to enter into such a contract. Accordingly, any contract that may have been formed was found to be invalid. Id. at 60–61.

The Ahrens Court further held that South Carolina could not be estopped from requiring the plaintiffs to contribute to the SCRS or the PORS, despite the plaintiffs having retired prior to the effective date of the Act 153 amendments. Id. at 60–64. In making this determination, the South Carolina Supreme Court observed that a working retiree did not incur a substantial economic burden from the additional contributions. The Court calculated the lifetime pension benefits received by two different State employees. Id. at 62. One, Employee A, was a working retiree who did not accrue any additional service credit once he returned to work but who did receive his full pension benefits from his original retirement while working his new job. Id. The other, Employee B, was an employee who accrued service credit until Employee A retired for a second time. Id. The Court concluded it would take at least twenty-five (25) years for Employee B to receive a higher lifetime benefit than Employee A, despite accruing more service credit. Id. at 62–63.

Again, the South Carolina Supreme Court did not discuss the constitutional issues, but it did affirm the lower court's grant of summary judgment denying relief on the takings and due process claims. Id. at 63 (“Accordingly, we conclude that summary judgment was proper as to the constitutional issues raised by” the plaintiffs.); see also Ahrens v. South Carolina, No. 05–CP–40–2785 (S.C.Ct.C.P. 15th Jud. Cir. Sept. 3, 2009) (amending its order because “Defendants argued that the existing Orders on the merits did not expressly rule on the theories of relief pleaded by Plaintiffs other than breach of contract and estoppel. The Court agrees with the Defendants' position as to [the takings and due process] claims and, therefore, denies relief to Plaintiffs on all theories other than estoppel.”).

Despite the unfavorable rulings in Layman and Ahrens with respect to the constitutional claims, Plaintiffs pursued this federal lawsuit making substantially similar claims. To contrast this action with the state court actions, the court notes that the Layman and Ahrens plaintiffs retired prior to Act 153's enactment and were nonetheless required to pay additional money into the Retirement Systems without accruing additional service credit. Here, Plaintiffs are employees who retired after July 1, 2005, the effective date of the Act 153 amendments, and therefore should have known that the South Carolina retirement laws mandated the controverted payment for those who chose to return to work for the State.⁴

In the instant case, Plaintiffs assert that they have suffered a taking ⁵ and an infringement of their due process rights in violation of the Fifth and Fourteenth Amendments. They assert that the differences in the date they retired as opposed to the Layman and Ahrens plaintiffs raise different constitutional issues that were not decided at the state court level. [Dkt. No. 33, at 10; Dkt. No. 16, at 7]. Plaintiffs seek declaratory and injunctive relief requesting this court to (1) determine that the statutes in question are unconstitutional; (2) order Defendants to...