Local 342, Long Island Public Service Employees, UMD, ILA, AFL-CIO v. Town Bd. of Town of Huntington

• Decision Date: 28 July 1994
• Docket Number: D,AFL-CIO,No. 1186,1186
• Citation: 31 F.3d 1191
• Parties: LOCAL 342, LONG ISLAND PUBLIC SERVICE EMPLOYEES, UMD, ILA,; Local 342 Insurance Trust, by Harry Hennessey and Sal Fabbrocino, Its Trustees; all Present and Former Employees of the Town of Huntington Represented by Local 342, individually; Harry Hennessey, Sal Fabbrocino, individually, Plaintiffs-Appellants, v. TOWN BOARD OF the TOWN OF HUNTINGTON; Stephen C. Ferraro, as Town Supervisor and individually; Anne Hurley, as Councilman and Individually; Kenneth Christensen, as Councilman and Individually; Josephine L. Gambino, as President of the New York State Department of Civil Service; New York State Department of Civil Service, Defendants-Appellees. ocket 93-9073.
• Court: U.S. Court of Appeals — Second Circuit

Page 1191

31 F.3d 1191

LOCAL 342, LONG ISLAND PUBLIC SERVICE EMPLOYEES, UMD, ILA AFL-CIO; Local 342 Insurance Trust, by Harry Hennessey and Sal Fabbrocino, Its Trustees; all Present and Former Employees of the Town of Huntington Represented by Local 342, individually; Harry Hennessey, Sal Fabbrocino individually, Plaintiffs-Appellants, v. TOWN BOARD OF the TOWN OF HUNTINGTON; Stephen C. Ferraro as Town Supervisor and individually; Anne Hurley, as Councilman and Individually; Kenneth Christensen, as Councilman and Individually; Josephine L. Gambino, as President of the New York State Department of Civil Service New York State Department of Civil Service, Defendants-Appellees.

No. 1186, Docket 93-9073.

United States Court of Appeals, Second Circuit.

Argued April 14, 1994.

Decided July 28, 1994.

Leo P. Davis, East Moriches, NY (Benjamin D. Russo, Patchogue, NY, of counsel), for plaintiffs-appellants.

Thomas C. Greble, New York City (Andrew P. Marks, Roberts & Finger, of counsel), for defendants-appellees.

Before: LUMBARD, FEINBERG and MINER, Circuit Judges.

MINER, Circuit Judge:

Appellants appeal from a judgment entered on September 21, 1993 in the United States District Court for the Eastern District of New York (Platt, J.) denying their motion for a preliminary injunction to enjoin appellee municipality from terminating plaintiff-appellant Local 342 Insurance Trust ("Trust") as health benefits provider for its employees and dismissing the complaint. According to the complaint, the termination of the Trust as health benefits provider violated the Contracts Clause of the United States Constitution and deprived appellants of their rights to procedural and substantive due process as guaranteed by the Fourteenth Amendment. The district court determined that it lacked subject matter jurisdiction over the action because the complaint failed to state a colorable claim under the pertinent provisions of the Constitution.

For the reasons that follow, the judgment of the district court is affirmed.

BACKGROUND

For a number of years prior to February of 1990, defendant-appellee the Town Board of the Town of Huntington ("Town" or "Town Board") provided health and hospital insurance coverage to all of its employees and retirees through the "Empire Plan," a state-run insurance program that provides health insurance coverage to municipal employees. In December of 1989, the Town and plaintiff-appellant Local 342 ("Local 342" or "Union") became parties to a collective bargaining agreement ("CBA") that was made retroactive to January of 1989. The CBA expired on December 31, 1991. The Town's arrangement with the Empire Plan was reflected in Article 13 of the CBA, which obligated the Town to remit all necessary payments in order to maintain the plan for its employees.

In late 1989, shortly before the signing of the CBA, the Town administration acceded to Local 342 lobbying efforts and agreed to switch health benefits providers. The new provider of benefits to Town employees and their families was the Trust, an entity that had never provided health benefits of any kind. ¹ The changeover was to become effective February 1, 1990.

The switch to the Trust was subject to two significant conditions, both of which were expressed in the CBA. First, the Trust's health benefits program was to be administered by the Provident Casualty Insurance Company, a large, experienced company in the field of medical insurance. Thus, Section A of Article 13 of the CBA provided that "[e]ffective February 1, 1990 the EMPLOYER and the UNION agree to implement a plan of insurance to be administered by Provident Life and Casualty Insurance Company. Said plan will cover all incumbent workers and retirees." The second proviso was that the change to the Trust as benefits provider was to be on a trial basis only. This was reflected by a "sunset clause" in Article 13 of the CBA providing that "said plan will be in effect concurrently with the collective bargaining Agreement."

In late 1991, the Trust unilaterally terminated its relationship with Provident and informed the Town that the Trust would be self-administered. Although the Town took the position that this was a material breach of the CBA and that it was very concerned about the Trust's ability adequately to administer the benefits without Provident as administrator, it continued to maintain the Trust as its benefits provider for approximately eighteen months following the December 31, 1991 expiration of the CBA. During this period, the Town continued to negotiate with the Union regarding health benefits coverage. For a substantial period of time, these negotiations were conducted under the direction of an independent mediator appointed by the Public Employment Relations Board ("PERB").

Despite repeated attempts by the Town to obtain information regarding the maintenance and implementation of health benefits by the Trust, the Union apparently was less On or about April 15, 1993, the Town, through its special labor counsel, informed the Union that it was unwilling to continue the status quo. Local 342 President Hennessey immediately responded by arguing against a switch from the Trust as health benefits provider and threatening legal action if the Town altered the arrangement with the Trust.

                than cooperative in providing the requested information.  As a result, the Town filed an improper practice charge with PERB over the Union's failure to disclose information.  According to the Town, the alleged stone-walling by the Union, coupled with increasing employee complaints about reduced benefits, increased deductibles and late claim payments, made the situation "intolerable."   The Town, therefore, began to examine its options regarding health insurance for its employees
                

Thereafter, a number of Town Board meetings were held to discuss the matter of health insurance. During these meetings, Hennessey addressed the Town Board both in person and in writing. By Resolution dated May 7, 1993, the Town Board decided to cease contributions to the Trust for health and medical benefits and determined to return to the Empire Plan, effective July 1, 1993. ² Local 342 was notified of the Town's decision by letter dated May 11, 1993.

In response to the Town's decision to revert to the Empire Plan, Local 342 immediately filed an improper practice charge with PERB alleging a violation of provisions of New York's Taylor Law, N.Y.Civ.Serv.Law Secs. 209-a.1(d), (e) (McKinney 1983 & Supp.1994). The gravamen of the Union's charge was that, according to section 209-a.1, the Town was obligated to negotiate in good faith with the Union and was required to continue payments to the Trust until a new CBA had been negotiated. Additionally, by letter dated June 3, 1993, the Union filed a grievance against the Town and subsequently served a Demand for Arbitration of the grievance on June 19. ³

On June 25, 1993, the Union commenced the action that gives rise to this appeal. In its complaint, the Union alleged that the Town's unilateral termination of the Trust as benefits provider was violative of the Contracts Clause of the United States Constitution and that the termination deprived the Union of substantive due process rights guaranteed by the Fourteenth Amendment. The Union also moved in the district court for a preliminary injunction restraining the Town from changing health benefits providers. On September 15, 1993, the district court denied the motion for a preliminary injunction and dismissed the complaint, finding that the "complaint fails to state a claim arising under the provisions of the United States Constitution and that, as such, this Court does not have subject matter jurisdiction to hear the matter." The district court specifically decided that the Union "ha[d] failed to state a claim for the deprivation of substantive due process pursuant to the Fourteenth Amendment."

On this appeal, the Union has abandoned its Contracts Clause claim, choosing instead to advance only the argument that the Town's decision to terminate the Trust as health benefits provider was violative of its due process rights.

DISCUSSION

At the outset, we note that there appears to be some confusion surrounding the type of due process deprivation the Union claims to have suffered. In the complaint in this action, Count II is captioned "THE SUBSTANTIVE DUE PROCESS CLAIM AGAINST EACH AND EVERY DEFENDANT." However, notwithstanding this label, the Union combines notions of both procedural and substantive due process in Count II 44. Based upon the contract between the Town and Local 342, plaintiffs acquired under New York State Law a legitimate claim of entitlement to the payments the Town is required to deposit into the Trust and in the benefits to be derived from the sums so deposited.

* * * *

* * *

46. The Town Board's May 7, 1993 resolution and defendants' conduct subsequent thereto unequivocally expresses defendants' intention to imminently deprive plaintiffs of their entitlement to the payments to the Local 342 Insurance Trust without due process of law.

47. Defendants' conduct and imminent conduct constitute arbitrary, capricious, irrational, despotic exercise of governmental power unredeemed by any legitimate governmental interest....

The blending of these two doctrines carried over to the decision of the district court. In its Memorandum and Order of September 15, 1993, the district court disposed of the Union's due process claim through an analysis of the procedure surrounding the Town's termination of the Trust as insurance carrier. Specifically, it discussed the pre- and post-deprivation remedies available to the Union. The district court then concluded that "[p]laintiffs have failed to state a claim for the deprivation of substantive due process." (emphasis added)

On appeal, the Union contends that the district court "applied the wrong test in analyzing plaintiffs' substantive due process claim." We decline to address...